As management battles to turn Mitie (MTO) around, it has been selling off some of the more troubled parts of the business and bulking up its core offerings. To this end, the group has sold its pest control business to Rentokil Initial (RTO) and bought Vision Security Group to strengthen its security division. Most recently, management announced the sale of parts of its long-troubled property management division to Mears (MER), which provided a positive beat ahead of the half-year numbers, although it is still struggling to restore faith after a succession of profit warnings.
Exiting contracts and tighter bidding criteria have led to margin improvements in the security, professional services and engineering divisions, but the group has been unable to replace work at the same rate it is losing it. Engineering revenues slipped 2 per cent, and Mitie's's order book fell 6 per cent. Management highlighted a “significant increase” in the pipeline, but this is essentially meaningless until contracts are secured.
Transactions have diluted the operating margin by 30 basis points to 3.7 per cent, but this is expected to reverse as cost savings come through. Project Helix, the group’s efficiency plan, is on track to deliver £40m of cumulative savings in the year, rising to £50m next year.
Analyst Peel Hunt trimmed forecasts, and now expects adjusted EPS of 16.5p in 2019 (2018: 16.7p).
| MITIE (MTO) | ||||
| ORD PRICE: | 152p | MARKET VALUE: | £556m | |
| TOUCH: | 152-152.5p | 12-MONTH HIGH: | 214p | LOW: 134p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | na | |
| NET ASSET VALUE: | 0p* | NET DEBT: | £187m | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 (restated) | 1.00 | 17.7 | 3.80 | 1.33 |
| 2018 | 1.04 | 19.0 | 4.10 | 1.33 |
| % change | +4 | +7 | +8 | - |
| Ex-div: | 20 Dec | |||
| Payment: | 12 Feb | |||
| *Mitie's total shareholder equity is £200,000 | ||||
