Join our community of smart investors

Mitie buys Interserve arm

The outsourcer will acquire Interserve Facilities Management for a total consideration £271m
June 25, 2020

Mitie (MTO) is set to acquire Interserve Facilities Management for a total consideration of £271m, supported by a £201m rights issue. The deal will significantly expand the group’s industry footprint, creating what chief executive Phil Bentley describes as “the UK’s largest facilities management company”. 

IC TIP: Hold at 85p

News of the deal was accompanied by full-year figures showing an 8 per cent rise in adjusted operating profit to £86.1m. A 20-basis point increase in the underlying margin was supported by savings in Business Services, while additional cost synergies were generated from the integration of Vision Security Group (VSG). Overall profitability was constrained by an unfavourable sales mix and contract resets, though the group has also secured new high-profile customers in the shape of GlaxoSmithKline (GSK) and BMW (ETR:BMW). 

Revenue in April and May 2020 was down by over a tenth compared with the same period last year, although management said that the impact of coronavirus was not as severe as expected. The majority of the decline came from its Technical Services division, where revenue dropped by almost a quarter to £105m compared with the same two-month period in 2019. Its Business Services segment, which generated just over half of group turnover, held up better, with revenues down by a relatively modest 3 per cent. 

FactSet-compiled forecasts show EPS of 11.6p and pre-tax income of £44m for March 2021.

MITIE (MTO)    
ORD PRICE:85pMARKET VALUE:£ 311m
TOUCH:81-92p12-MONTH HIGH:170pLOW: 57p
DIVIDEND YIELD:1.6%PE RATIO:3
NET ASSET VALUE:21p*NET DEBT:£168m**
Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162.1591.920.111.7
20172.12-58.2-14.712.1
20182.03-15.4-4.94.00
2019 †2.0928.06.34.00
20202.1748.411.21.33
% change+4+73+78-67
Ex-div:na   
Payment:na   
*Includes intangible assets of £330m, 90p a share **Includes lease liabilities of £93.8m † Re-presented to classify the Catering business as discontinued operations