Mitie prospers as customers cut back

BIG contract wins with cost-conscious banks, councils and Government departments helped outsourcing giant Mitie to higher annual profits, sales and a record order book.

The FTSE 250-listed group said the spending squeeze is sending companies and public sector bodies its way as they look to cut costs and streamline.

Excluding the impact of items such as acquisition and reorganisation costs, profits before tax rose 8.9 per cent to £94.5m in the year to the end of March, on revenues which were up 5.9 per cent to just over £2bn.

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Mitie, which acquired energy and carbon consultancy Utilyx early this year, said energy services generated 34 per cent of revenues in 2012.

“This has been a transformational 25th year for Mitie,” said chief executive Ruby McGregor-Smith.

“We have made excellent progress on all of our key strategic objectives, achieved sector-leading organic growth and been awarded a number of significant contracts that are enhancing our business.

“Financially robust, we have a clear strategy for the development of our business, supported by a buoyant sales pipeline and an order book that stands at record levels.”

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The firm is bidding to run nine prisons in a joint venture with Britain’s prison service. Mitie said its outlook was robust and it expected growth to continue as cost-saving pressures bring more public sector opportunities to the table.

The group said its order book stood at £8.6bn, up 26 per cent from 2011’s £6.8bn, while its pipeline of bid opportunities slipped to £11.2bn from £11.4bn a year ago.

Shares in Mitie gained 3.3p to close at 275p.

The group last month signed a five-year contract with Lloyds Banking Group worth up to £930m to manage facilities and energy use across its entire estate. Services include catering, reception, cleaning and security.

It has also won deals to manage courts and tribunals in the South of England, plus a property management contract with Essex County Council.

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Corporate affairs director John Telling said: “What we’ve seen over the last few years is that customers are looking to be more efficient. Lloyds had 190 suppliers and they have consolidated to just us.”

The group has contracts across Yorkshire, including painting, roofing, catering and cleaning arrangements with Yorkshire Water.

It also has a catering deal with Bradford’s Hallmark Cards, plus a cleaning contract with Hull and East Yorkshire Hospitals NHS Trust.

In total it employs 14,000 of its 63,600-strong workforce in the North of England.

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Mr Telling said the group’s construction arm is witnessing tough conditions, while work at its facilities management (FM) division is booming,

“We have roughly 20 per cent of the business working in construction and that’s very tough,” he said.

“Margins are tight, but the FM side which is now over three-quarters of the group is doing very well.”

Margins in its property management arm dipped to 3.9 per cent from 4.2 per cent a year earlier.

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Margins in its FM arm rose to 6.6 per cent from 6.4 per cent.

The group, founded in 1987, said it is optimistic about opportunities ahead.

“Mitie is very well positioned to capitalise on the momentum in growth we have seen over the past year,” it said. “There are exciting opportunities in our markets as organisations look for greater operating and energy efficiencies.”

Mr Telling said energy efficiency remains a big driver for Mitie, which is the country’s second-biggest energy services firm. The UK must spend £450bn on energy efficiency and supply by 2015, it estimates.

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“Cost reduction, whether it’s through stricter procurement, operating buildings more efficiently or changing the equipment and lighting, that’s going in one direction,” said Mr Telling.

Mitie expects energy service contracts across the European Union to grow to 25bn euro by 2020 from about 6.7bn euro, driven by cost, environment and regulatory concerns.

Mr Telling added Mitie has not been hit by the wave of retail administrations in the UK, which recently swept up card retailer Clinton Cards.

“We target stronger ones and tend to work with national chains which are easier to credit check,” he said.

Mitie lifted its final dividend by 6.1 per cent to 5.2p per share.