Operating profit up as Mitie cruises towards revenue growth

Outsourcing company Mitie Group reported a marginal rise in operating profit before other items for the year on Monday, to £128.9m from £128.6m, generating a margin of 5.8% - up from 5.7%.

The FTSE 250 firm said in the year to 31 March, total operating profit grew 100.9% to £112.5m, with basic earnings per share growth of 119.6%.

During the year, its cash conversion rate was 75.2%, down from 126.%, with net debt broadly flat at £178.3m or 1.2x EBITDA.

The company’s board declared a 3.4% rise in the dividend to 12.1p per share.

"Mitie has had a good year, with strong margins and profits,” said chief executive Ruby McGregor-Smith.

“I am delighted that the dividend is increasing for the 27th consecutive year.”

The board said performance in the facilities management division was strong, accounting for 84% of group revenues with an operating profit margin of 6.3%.

Its revenue growth during the year was impacted by lower discretionary and project spend, it added, as well as some delayed starts on new contracts.

Mitie assured that a recent flow of new contracts in the division will see a return to modest revenue growth in the current financial year.

Its property management business, accounting for 13% of group revenues, delivered what the board described as “good growth”, with substantial margin improvements.

Mitie’s healthcare business, bringing in 3% of group revenues, was said to be in “recovery”.

"We are a pure services business with a strong position in our chosen markets. We operate long-term contracts for a blue chip client base and are well diversified across the private and public sectors,” Baroness McGregor-Smith explained.

She said the business model is flexible, resilient, low risk and has been responsive to client needs and market conditions over three decades.

"We continue to see a range of good outsourcing opportunities across our key markets and anticipate modest growth in the coming year,” she added.

“We remain positive about the group's prospects for the future.”

Looking at that future, Mitie’s board said it has 82% of budgeted revenue for the current year secured - that figure was at 85% at the same time last year.

Its sales pipeline was also down slightly at £9.1bn, against £9.7bn a year ago, with the order book reducing to £8.5bn from £9bn in 2015.