Outsourcer Mitie (MTO) first announced its intention to axe various loss-making businesses two years ago. But a significant deterioration in the forecast performance of three remaining contracts and the termination of another prompted management to post a £45.7m exceptional charge, sending statutory profits plummeting - and the shares down 5 per cent.
Strip out this charge and the outsourcer's performance looks better, with underlying pre-tax profits rising 3 per cent to £57m. That was mainly thanks to 6 per cent organic top-line growth in the facilities management business, which provides cleaning, catering, maintenance and the like. The division was also buoyed by some sizeable contract wins, such as a £180m deal with the Home Office to run two immigration centres at Heathrow.
Margins suffered slightly, which management attributed to staff costs associated with the bidding process. Finance director Suzanne Baxter told us the group expects some of the work in question to come through before the year-end.
The group has also had to spend more time and money than initially expected upgrading its recently acquired Enara and Complete Group healthcare businesses. These were not focused on "large-scale organic growth opportunities," says Baxter. However, the group expects growth of 10 per cent a year in this division over the longer term.
Broker Liberum expects adjusted EPS of 25.2p this year, up from 23.6p in 2013-14.
MITIE GROUP (MTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 276p | MARKET VALUE: | £1.0bn | |
| TOUCH: | 275.5-275.7p | 12-MONTH HIGH: | 346p | LOW: 267p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 77 | |
| NET ASSET VALUE: | 101p* | NET DEBT: | 62% | |
| Half-year to 30 Sept | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 1.09 | 42.8 | 8.8 | 4.9 |
| 2014 | 1.10 | -1.3 | -1.0 | 5.2 |
| % change | +1 | - | - | +6 |
Ex-div: 18 Dec Payment: 2 Feb *Includes intangible assets of £532m, or 144p | ||||
