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Mitie sees flat to lower annual profit as order book declines

Mitie is investing to drive growth - it expects its business transformation plan to deliver around £40mln of in-year cost savings, at a cost of £15mln

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Mitie is maintaining its full-year guidance as project work increases

Mitie Group PLC (LON:MTO) said it expects its full-year operating profit to be “flat to slightly down” and that its order book had declined in recent months.

The outsourcing group said its profit had been dented by a soft performance in its social housing unit, an unfavourable contract mix in its cleaning business and the write-off of some mobilisation costs in its care and custody division.

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The facilities management group said that its order book had declined slightly since the end of its fiscal year-end, with the delivery of long-term contracts being partly counterbalanced by contract wins and retentions.

However, Mitie said it had also secured a number of significant contract wins across a mix of local authority, banking, industrial, transport, NHS and retail clients during the period.

The FTSE 250 group said it expected Project Helix, its business transformation programme, to deliver around £40mln of cumulative in-year cost savings at a cost of £15mln.

Guidance maintained

Mitie said it was maintaining its full-year guidance as project work volume was increasing, along with its like-for-like revenue growth, which strengthened in the second quarter.

"The majority of our businesses are performing well and our larger contracts are delivering solid growth in volumes and profitability. Our Pan-Mitie initiatives to re-engineer our processes - Project Helix - are on track and delivering in-year and run-rate savings as previously guided,” CEO Phil Bentley said in a statement.

"The environment in our industry remains highly competitive, especially when it comes to contract renewals. We see technology, especially in our core businesses, playing an increasingly important part in differentiating our service delivery and improving margins, and therefore we are continuing to invest in the "Connected Workspace" to accelerate growth,” he added.

In a note to clients analysts at Liberum said “financial risks should fade, albeit only slowly” and said there was scope for more positive news on contract wins.

Shares in Mitie were 5.5% down at 145.50p in early trade.

Quick facts: MITIE Group PLC

Price: 64.65 GBX

LSE:MTO
Market: LSE
Market Cap: £236.58 m
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