3rd Feb 2014 10:21
LONDON (Alliance News) - Mitie Group PLC Monday said it has it experienced "good" organic growth since the start of October last year, driven by new and expanded contracts.
But Mitie said it expects losses from the closure of its cyclical mechanical and electrical engineering contracting businesses to cost more in the second half than in the first, reversing its previous guidance that these losses would ease.
"The exit from our cyclical mechanical and electrical engineering contracting businesses continues, although is taking slightly longer than anticipated. As a result, we now anticipate that losses in the second half of the year will be around GBP3-5 million higher than those reported in the first half of the year," Mitie said in a statement.
In November, Mitie Group reported a GBP42.8 million pretax profit for the six months to the end of September, up from GBP36.6 million a year earlier, as revenues rose to GBP1.09 billion from GBP1.03 billion. It said at the time that it anticipated the closure of the mechanical and electrical engineering contracting businesses would bring fewer losses in the second half of the financial year when compared to the GBP4.3 million loss in the first half.
In a statement Monday covering the third quarter and trading from October 1 to date, the FTSE 250 outsourcing company said it is continuing its move to target higher growth and profit margin businesses, as it turns its long-term strategy towards growing its core markets of facilities and property management.
Mitie said it is "well positioned" to deliver good organic growth, particularly in facilities management and healthcare, and maintain strong margins.
"We are confident that we will continue to build on our long track record of sustainable profitable growth," Mitie said in a statement.
The company said its Facilities Management division is continuing to deliver strong organic growth, with an uplift in the level of bid activity across its businesses in both the public and private sectors.
It said the division has a "robust" sales pipeline and has increased potential to benefit from the trend of bundling and integrating more services.
"This division has a number of exciting growth opportunities and is well positioned to deliver further growth," Mitie said.
However, some new contracts in the Property Management division have seen delays, but the division has experienced "improving" market conditions in recent months, according to Mitie.
"In the social housing market we are seeing an increasing trend towards longer-term, larger, bundled contracts incorporating more service lines across larger portfolios," Mitie said.
"Our housing repairs and maintenance contract with Hammersmith & Fulham Council commenced successfully in November - this contract together with our painting contract, have a total value of GBP28m per annum over ten years," it said, adding that it has been awarded a contract worth about GBP10 million over the next year with Southampton City Council to deliver energy-efficiency measures to council properties.
"Despite the recent government announcement relating to the reduction in ECO funding, these works will still proceed and the contract is likely to provide GBP10m of revenue over the next 12 months," it said of the Southampton City Council contract.
Meanwhile, Mitie said its Energy Solutions division has continued to perform well, driven by an increasing interest in energy consultancy from existing facilities management clients. However, it said that the Asset Management business within the division has seen project delays, which together with one-off costs associated with exiting a few sizeable contracts, is resulting in continued underperformance in that area of the business.
The integration of MiHomecare into Mitie's Healthcare Division is on track, it said, with the business performing to plan with a growing pipeline of opportunities.
"We are confident as we reach the end of the integration of MiHomecare, together with the acquisition of Complete Care which further strengthens our proposition in the healthcare market, that significant growth opportunities exist in this division," Mitie said.
The company's results for the full year to the end of March will be published on May 19.
Mitie shares were Monday quoted at 321.00 pence, up 2.00 pence, or 0.6%.
By Samuel Agini; [email protected]; @samuelagini
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