Greater economic uncertainty and rising labour costs compelled companies to outsource less work to Mitie (MTO) in the reported period. Lower sales and higher costs resulted in a 39 per cent drop in adjusted operating profits to £35.4m, prompting management to warn that full-year underlying earnings could miss expectations.
Underlying operating profits shrank by almost a third in the main facilities management business, as robust demand for security was offset by fewer higher-margin projects and reduced spending on services such as cleaning. And they nearly halved in the property management division, as new legislation requiring social housing authorities to lower rents by 1 per cent a year for four years caused them to delay projects and reassess their medium-term budgets.
The healthcare division's losses widened due to higher costs and a dearth of economical work, leading management to withdraw from the home healthcare market, stomach a £117m impairment and place the business under review.
Mitie penned a major security contract with Sainsbury's and inked over £170m-worth of contracts with Network Rail, Manchester Airports Group and others. It expects those contracts, more project work and an additional £10m in savings from restructuring to underpin better trading in the second half.
Broker UBS slashed its forecasts and now expects cash profits of £116m for the March 2017 year-end, giving EPS of 17.8p, down from £150m and 25.7p in 2016.
| MITIE (MTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 194.9p | MARKET VALUE: | £700m | |
| TOUCH: | 194.8-195p | 12-MONTH HIGH: | 325p | LOW: 165p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 62p* | NET DEBT: | 103% | |
| Half-yearto 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.12 | 45 | 9.9 | 5.4 |
| 2016 | 1.09 | -100 | -29.5 | 4.0 |
| % change | -3 | - | - | -26 |
Ex-div: 16 Dec Payment: 1 Feb *Includes intangible assets of £421m, or 117p a share | ||||
