Join our community of smart investors

Homecare saps Mitie's earnings

Outsourcer Mitie if facing difficulties in its homecare and facilities management divisions as government spending and margin erosion bite
November 23, 2015

It is not hard to see why shares in outsourcer Mitie (MTO) fell on release of these weak first-half results. Tightening government spending on homecare services meant the group was forced to shut some of its healthcare branches, while margins for the 'hard' facilities management (FM) segment, which provides maintenance and specialist services, took a hit as some rebid contract work came with less favourable terms. Strip out the effect of contract provisions incurred last year and the group's operating profit fell 9.5 per cent to £58.1m.

IC TIP: Sell at 314p

There were some brighter spots, notably in the 'soft' FM business, which provides services including cleaning, waste management and security. Operating profit grew 5.2 per cent to £42.4m, while new business included security contracts with E.ON and Belfast City Airport and cleaning contracts with Westfield Shopping Centre and Santander.

Broker Investec Securities expects adjusted EPS of 25p for the March 2016 year-end, up from 24.2p in 2015.

 

MITIE GROUP (MTO)

ORD PRICE:314pMARKET VALUE:£1.14bn
TOUCH:313-314p12-MONTH HIGH:341pLOW: 264p
DIVIDEND YIELD:3.8%PE RATIO:15
NET ASSET VALUE:106p*NET DEBT:57%

Half-year to 30 SeptTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.10-1.3-1.05.2
20151.1245.19.95.4
% change+2--+4

Ex-div: 17 Dec

Payment: 1 Feb

*Includes intangible assets of £533m, or 147p a share