Mitie books solid numbers with Scottish deals

Chief executive Ruby McGregor-Smith foresees growth in outsourcing over the next five years

The group, which ranks as one of Scotland’s biggest private-sector employers, with more than 7,000 of its 70,000-strong headcount based north of the Border, said sales had risen by 5.8 per cent to £2.26 billion in the year to the end of March.

During the period, the firm retained and expanded a contract with Standard Life Investments to provide a host of services for the fund manager, including cleaning, landscaping, pest control and catering.

It also secured a major three-year contract worth £10 million with Larchwood Care Homes to provide technical facilities management services.

Meanwhile, an extension of the group’s partnership with Lloyds Banking Group will deliver facilities management across the lender’s entire UK branch and office network for a further seven years.

Chief executive Ruby McGregor-Smith said she expected opportunities in the outsourcing market to continue to grow after the group secured 85 per cent of budgeted revenue for the year ahead.

“Outsourcing is going to grow significantly in the UK over the next five years and it tends to grow two or three times what GDP growth rates are, particularly when you’ve got big cost pressure,” she said. “Overall, there’s a really positive outlook for us.”

The latest results revealed that pre-tax profit had edged up 0.7 per cent to £114.1m, slightly ahead of what the City had been expecting the FTSE 250 firm to report. Operating profit lifted 0.9 per cent to £128.6m.

Mitie had warned in March that operating profit would be slightly shy of expectations because of market pressures in its homecare and social housing divisions.

The company, which runs services from maintenance and cleaning to baggage screening at London’s Heathrow Airport, raised its dividend by 6.4 per cent to 11.7p per share.

McGregor-Smith said: “Mitie has made good progress this year.

“We have repositioned the business and lowered our risk profile.

“Our facilities management business accounts for 85 per cent of group revenue and is a UK market leader.

“We see considerable opportunities across our markets, to provide clients with higher quality, innovative services that save them money.

“We also see this as a positive environment in which to start to grow new businesses, and we plan to back entrepreneurs to do this through our £20m ‘Mitie Model’ entrepreneurial fund.”

She added: “We are focused on generating profits backed by cash, maintaining strong margins and grow the dividend. With a substantial order book and sales pipeline, we are well placed to deliver consistently strong growth.”

Brokerage Investec Securities reiterated its “buy” recommendation on Mitie’s shares, saying the business “looks to be in a position to deliver sustainable profit growth”.

Analyst Andrew Gibb said: “Whilst market pressures (predominantly pricing) in the social housing and homecare businesses have been a headwind in [2015] and look likely to remain so in the near-term, management are confident in the long-term opportunity.”

Liberum analysts said in a note: “Management is taking a fresh approach…

“Greater focus on cash and lower future exceptionals should improve cash and support a progressive dividend covered by cash.”

Mitie, which stands for Management Incentive Through Investment Equity, claims to be one of only two FTSE 250 companies to have grown its earnings per share for more than 25 consecutive years.

Mitie’s headquarters are located in Bristol.