Mitie Group PLC (MTO) Optimistic Despite 10% Fall In The Order Book

  • Apr 02, 2019 BST
  • Team Kalkine
Mitie Group PLC (MTO) Optimistic Despite 10% Fall In The Order Book

Mitie Group PLC is a provider of facilities management, project management, consultancy services, strategic outsourcing and a wide range of special services. The company is expected to start picking up work from the exit of the competitor outsourcers like Interserve and Carillion as the company’s order book fell by 10 per cent.

According to Phil Bentley, chief executive disputed reports that the company was poised to launch a £100 million bid for the support services arm of Interserve, which was rescued from the administration this month, but admitted Mitie was keeping a close watch for opportunities. They are into the same business are the company is. It would be foolish if the company doesn’t look at what is going on and not keep in touch with people, but the company had no plan to launch anything. The company will observe and see how this settles down and what makes sense. 

On balance, the company will be picking up some work from those frameworks which they have never used before, particularly when Carillion and Interserve are not there anymore to interfere.

Mitie Plc currently employs nearly 49,000 people all across the Britain. The company is providing security, catering and cleaning at banks, retailers, hospitals, schools and government offices. It is one of the largest managers of prisoner escorting and immigration detention centres for the UK government.

Company’s shares declined by 8 per cent to 137.7p on Thursday 28th March, after it warned of an expected decline of about 10 per cent in its order book for the year to March 31, citing a challenging backdrop in the industry and political uncertainty.

Investors are wary of an outsourced services market in which Carillion has gone bust, Interserve has been taken into the hands of its creditors and Serco and Capita are both recovering following multiple profit warnings.

Mr Bentley, who joined Mitie in 2016 after the group’s financial crisis, has been seeking to narrow the company’s focus, with the acquisition of security services provider Vision Security Group from Compass last year, and the sale of its social housing division.

Mitie said that despite the fall in orders, full-year revenue was expected to be up by 7 to 8 per cent on the £2.03 billion it made in the previous financial year. Stripping out acquisitions, organic revenue growth was likely to be about 4 per cent, while operating profit was expected to be £84 million to £87 million, just above £83.2 million previously.

Although Mitie had successfully renewed a significant number of contracts during the year, these were at lower margins in their first year of operation. Despite this, according to Mr Bentley, the second year of transformation had made steady progress. The company is in full control and they know what they are doing. Clients are liking the work the company is doing.

According to an analyst at Applied Value, Mitie’s business is still in transformation, but the message is that it’s improving. The bears will pick on the order book being down 10 per cent across the year as a whole and the margins being still below par. It is still a work in progress and order books do fluctuate.

Despite the fall in orders, the company is expecting that its full-year revenue will be up by 7 to 8 per cent. But currently, the margins of the company are below par. The company is in a transformation phase and is growing. The company is getting support from its clients and will shortly be able to recover from the downfall of orders.

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