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Mitie to sell its property business

The support services company is still working on cutting costs and restructuring
November 21, 2017

Mitie’s (MTO) half-year results announcement was accompanied by a two-pronged release from the Financial Reporting Council (FRC). The FRC has concluded its investigation of Mitie’s 2016 full-year results, with its concerns – including issues related to the testing of impairments in its healthcare division – having been addressed. It is opening a new case related to the conduct of the audit itself, rather than Mitie as a company. Bosses were quick to clarify the FRC was not looking at “any current directors of Mitie, any former non-executive directors of Mitie or Sandip Mahajan”, who recently stepped down from the chief financial officer role.

IC TIP: Sell at 226p

In the business itself, the recovery effort is ongoing. Underlying operating profit grew 5.8 per cent to £32.6m, giving some cause for optimism, but a movement in working capital pushed net debt to £172.6m, up 17 per cent since the financial year-end in March. It was, however, lower than the level at the end of September 2016.

As part of its ongoing restructuring programme, the group is looking to get rid of its property management business. As well as removing an underperforming division, analysts expect the disposal to raise between £75m and £90m, which could be used to improve the balance sheet. Still, losing the division led analysts at Liberum to reduce full-year EPS estimates by more than a quarter to 11.3p for the year to March 2018 (from 20.7p in FY2017), from adjusted pre-tax profit of £52m.

MITIE (MTO)    
ORD PRICE:226pMARKET VALUE:£827m
TOUCH:225.8-226.2p12-MONTH HIGH:314pLOW: 165p
DIVIDEND YIELD:0.6%PE RATIO:

na

NET ASSET VALUE:27p*NET DEBT:173%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016 (restated)92315.83.304.00
20179606.11.201.33
% change+4-61-64-67
Ex-div:21 Dec   
Payment:7 Feb   
*Includes intangible assets of £323m, or 88p a share