Profits fell at MITIE Group PLC (LON:MTO) last year but the outsourcer said it is on the right track after one year of its transformation programme.
Mitie, like its peers such as the now-defunct Carillion, has suffered in recent years given the “challenging” market conditions.
READ: Mitie expects modest revenue growth in wake of Carillion collapse
To try to offset industry headwinds, the company implemented its Project Helix turnaround strategy, which is designed to reduce operating costs and increase productivity.
Helix is “progressing well”, Mitie said, although the restructuring cost the firm £47.3mln last year.
That meant Mitie fell to a loss of £24.7mln in the 12 months ended March 2018, despite revenues growing 3% to £2.2bn (2017: £2.1bn) thanks to new contract wins with the UK government and the NHS, among others.
Adjusted for one-off costs, which also included a £3.3mln charge related to the settlement of a contractual dispute, MITIE turned a profit of £77.1mln – an 8% fall from the £82.0mln it posted last year.
'Where we need be'
Mitie’s order book rose 2.4% during the year to £4.5bn.
The final dividend will be kept steady at 2.67p, making the total full-year pay out 4.0p per share (2017: 4.0p).
“We are one year into our transformation programme and we are where we need to be,” said chief executive Phil Bentley.
“It has been a year of discovery, simplification and significant change, all set against a challenging market.
He added: “With an uptick in revenue, a normalising balance sheet, a good order book, a focused execution plan, significant investment in technology and a settled management team, I believe Mitie is well positioned for growth.”
Cash flows improving
“With brokers watching cash flows (remember Carillion?) as the most important driver of Mitie Group’s share price, markets were rewarding the company for improving its supplier payment performance, as well as reducing invoice discounting practices, which should track well with the company’s goal of improving solvency going forward,” said Accendo Markets analyst Artjom Hatsaturjants.
“The past year has been challenging for Mitie Group, but it has managed to pass the test of improving financial stability with flying colours, with benefits of the multi-year transformation programme already apparent in cost savings and improved service delivery due to better engineer workflows.”
Mitie shares rose 4.8% in early deals in London.
--Updates for analyst comment--