Buoyant Mitie lifts pre-tax profits 8.9%

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Mitie has demonstrated that recession and austerity can be good for business.

The support services group, with operations stretching from baggage screening at Heathrow airport to the cleaning and maintenance of courts and prisons, reported a 26 per cent increase in its order book to £8.6bn in the year to end March as the private and public sectors sought efficiency savings.

Buoyed by the results, the FTSE 250 company, which employs more than 63,000 people in the UK, said the pressure on private sector and government budgets was creating “exciting opportunities” that were expected to fuel further growth in the year ahead.

“What is different now is the speed of change and the scale of contracts – more clients are asking more and more of us,” said Ruby McGregor-Smith, chief executive, who was recently named as one of the Financial Times’ top 50 women in world business.

In the private sector, which accounts for 65 per cent of revenues, significant wins included a security contract with BT and an agreement to clean Odeon Cinemas. Mitie also agreed a six-year £775m contract to provide Lloyds Banking Group with everything from office space management to catering and reception, in one of the largest private sector deals of its kind.

Public sector work is also growing as schools and hospitals outsource their facilities management. With the Ministry of Justice seeking 25 per cent savings by 2015, Mitie has a further £1bn of contracts from the department in the pipeline.

Mitie, which already provides facilities management for the south of England courts, is bidding to run electronic monitoring services and probation trusts and has formed a joint venture with Her Majesty’s Prison Service to compete to run each of nine prisons that are being handed to the private sector this year – a first for the company.

Nevertheless, some uncertainty around public sector contracts remained. The company was appointed preferred bidder to provide Edinburgh Council with integrated facilities management, a deal later retracted amid opposition from council members. Despite this the company said: “The pipeline of outsourcing opportunities for the delivery of local public services remains strong across the UK.”

Under Ms McGregor-Smith’s direction Mitie has also been growing its energy services division, which accounts for 34 per cent of revenues. It is helping NHS trusts to upgrade their infrastructure and companies including Waitrose to develop biomass centres.

Earlier this year it acquired the privately owned energy consultancy Utilyx, which helps businesses buy and manage power, in a deal worth £16.2m. Mitie said it would continue to make smaller acquisitions.

The company is also seeking to expand in Europe, riding on the coat-tails of multinational clients. In the past year it has supported UK clients such as Rolls-Royce overseas and acquired an Irish facilities management business.

Underlying profit before tax and other items for the year to March 31 was £104.5m, down 1.1 per cent from last year and broadly in line with analyst forecasts. Excluding the impact of other items, such as acquisition and reorganisation costs, profit before tax rose 8.9 per cent to £94.5m, on revenues that increased 5.9 per cent to just over £2bn. Operating profit margins nudged upwards from 5.5 per cent a year earlier to 5.6 per cent.

Andrew Gibb, analyst at Investec, retained a buy recommendation. He said: “With the core divisions of facilities management and technical facilities management continuing to trade well, an order book of £8.6bn and the pipeline of potential bid activity standing at £11.2bn, we remain very comfortable with the outlook for Mitie.”

A final dividend of 5.2p (4.9p) raises the full-year total by 6.7 per cent to 9.6p.

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