Mitie set to benefit as firms look to cut costs

The FTSE 250 company, which employs more than 62,000 people across the United Kingdom and Europe, of which more than 11,500 are based in the North of England, said yesterday profit before tax and other items for the six months to the end of September was up 0.8 per cent to £48m on revenue up 5.8 per cent to £971.1m.

Mitie, whose customers include Tesco and London’s Royal Opera House, works on contracts in the Northern region including catering and cleaning services for Yorkshire Water and providing planned and reactive building maintenance services throughout the Mersey Care NHS Trust estate.

Ruby McGregor-Smith, chief executive officer of Mitie Group, said: “The first half of this year has seen us deliver a strong set of financial results and a number of transformational contract awards which demonstrate the success of our integrated facilities and energy management capability.

“Looking ahead, our focus is on retaining our margins, building on existing relationships, exploiting opportunities in energy services and providing a great value service that has clients coming back for more, both in the UK and overseas.

“We are mindful of the challenging economic environment. However, the search for greater cost and energy efficiency is central to the strategies of governments and businesses in all our markets – and better quality services, more innovation and more efficiency lies right at the heart of what we do.

“With a record order book and a strong pipeline of sales opportunities, I am confident that the group will continue its track record of sustainable profitable growth.”

The firm, whose services include maintenance and cleaning as well as baggage screening at London’s Heathrow airport, said its pipeline of potential bid activity stood at £11.7bn, with 65 per cent of it coming from the public sector.

The company is currently bidding on a facilities management deal with Edinburgh Council worth around £280m, as well as justice sector work which could include electronic tagging and prison management.

While rival outsourcers have turned to acquisitions to help offset a lack of organic growth this year, blaming contract delays and budget cuts, Mitie has won a number of deals including facilities management work with south England courts, two prisons, Essex Council and spirits group Diageo.

Ms McGregor-Smith believes that its energy management business, supported by the 2009 acquisition of Dalkia, has helped the firm win contracts and has also allowed it to offer existing clients more higher margin services.

She said: “I believe there are growth opportunities for all the outsourcers as the market grows and I think our particular differentiation around energy, which others do not have, is incredibly important. That is what is driving our organic growth.”

Mitie said its order book had risen 17.6 per cent to £8bn, effectively securing 97 per cent of this year’s revenue and 68 per cent of forecast revenue for 2012/13. The group upped its interim dividend by 7.3 per cent to 4.4p.

UBS analysts, who have a ‘buy’ rating on Mitie, said the firm’s outlook was rightly confident and that it was well positioned to benefit from future work. “In the next 12 months there are more contract decisions due in public and private sector work as more customers work towards saving costs by moving towards integrated facilities management models. Mitie is very well positioned in that environment,” a UBS note read.

Richard Curr, head of dealing at Prime Markets, said after “the market mayhem inspired price crash in August, Mitie shares have recovered strongly in the run-up to the half year results, which illustrate solid all round growth in profits, revenues, forward order book and dividend”.

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