Mitie warns on profits but optimism grows for de-risked future
Although it had encouraging news about several sizeable contract wins, outsourcing services group Mitie has warned that it expects full year profits to be pushed slightly lower than forecast by margin pressures in the homecare and social housing businesses.
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In a broadly positive statement, Mitie, which provides companies with outsourced facilities management (FM), cleaning, catering and IT services, said it felt it was in a "strong position" having repositioned the business and lowered its risk profile with the exit from its loss-making mechanical and electrical engineering constructing and asset management businesses.
This exit is now complete, the company confirmed, with total losses for the year expected to range between £15m and £16m, but with no further exceptional items beyond this.
As a result, FM now represents around 85% of group revenue, property management roughly 10% and homecare around 5%.
"Looking forward, our focus is on generating profits backed by strong cash conversion, maintaining margins in our target range and continuing to grow the dividend," Mitie said.
Following December's FM partnership extension with Lloyds Banking Group, the financial and professional services arm has won a new, three-year cleaning contract with Santander, and expanded its bundled FM contract with Standard Life.
There has been another FM wins with Jones Lang LaSalle, with an estimated value of £24m per year over a three-to-five year period.
In the technology and communications sectors, developments have included a new contract awards to provide FM for BBC Worldwide and Turner Broadcasting, while the catering business won what it called a "landmark" new contract with Intel in Ireland, with total contract values expected to range between €30m to €40m over five years.
Management pointed to a balance sheet that remains robust and net debt at a "comfortable level", saying it is confident of continuing to generate further sustainable profitable growth.
Broker Investec said while the profit warning was a "marginal negative", longer term, it continued to believe the group is well positioned.
While making no changes to underlying revenue forecasts, at the headline level, analysts moved 2015 EBITA down to £126.5m and 2016 EBITA to £132.8m.
"We expect the pricing pressure in homecare and social housing to be short lived and it should not detract from the clear strength of the core FM offering, or the significant de-risking of the group over the past 18 months," Investec concluded.