23rd Jul 2024 11:47
(Alliance News) - Mitie Group PLC's "positive" trading update left analysts confident the company is on track to deliver on its financial objectives.
On Tuesday, the London-based outsourcing specialist said revenue grew in its first quarter boosted by recent acquisitions, an increase in projects and variable work and pricing.
Revenue in the three months to June 30 increased by 11% to GBP1.16 billion from GBP1.05 billion a year prior.
Chief Executive Phil Bentley said the good trading momentum from last year has continued into the first quarter of financial 2025.
"We remain on track to deliver our high-single digit revenue growth expectations for the year," he added.
He noted double digit revenue growth from the Projects business, including the benefit from the previous year's acquisitions.
"Contract wins and renewals also remained high, following a record final quarter in [financial 2024], reinforcing the strength of our market leading, technology and data-rich capabilities," Bentley added.
This progress more than offset net contract losses and the completion of certain short-term public sector contracts in the prior year, the company added.
Revenue in Business Services rose 12% to GBP403 million from GBP360 million a year befpre; in Technical Services by 5.2% to GBP326 million from GBP310 million; in Central Government & Defence by 4.3% to GBP217 million from GBP208 million; and in Communities by 24% to GBP218 million from GBP175 million.
CEO Bentley hailed a programme of margin enhancement initiatives which "will raise the operating margin over the medium-term".
This three-year programme is on track to deliver around GBP20 million of cost savings in financial 2025, Mitie said.
Peel Hunt left its financial 2025 pretax profit forecast unchanged and said Mitie remains "on track" to deliver high-single-digit revenue growth in the year.
"As the margin continues to progress towards the [financial 2027] target of 5%, and with the planned allocation of capital in GBP75 million of targeted M&A activities and additional share buybacks, we anticipate a re-rating of the shares," the broker added.
"We confidently reiterate our 'buy' rating", Peel Hunt said.
Analysts at Stifel also were positive on Mitie.
"Overall, we view this as positive update which highlights the strong momentum from [financial 2024] has continued. We remain buyers with a 145p target price, and view the current valuation as attractive for a business which can consistently turn profit into [free cash flow] over the medium term, providing strategic options."
Shares in Mitie eased 1.3% to 121.00p in London on Tuesday.
By Jeremy Cutler, Alliance News reporter
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