July 30, 2019 / 11:29 AM / 22 days ago

Mitie posts higher first-quarter revenue on contract wins

(Reuters) - British outsourcer Mitie (MTO.L) reported a 14% rise in first-quarter revenue on Tuesday, boosted by new contracts and a recent acquisition in its security business, but said higher-than-planned costs weighed on profits.

Mitie shares jumped as much as 6% to a one-year high immediately after the update. By 1236 GMT, they were the second biggest boost to the FTSE small-cap index FTSC with a 3% rise.

Mitie is in the midst of a cost-saving drive to revive its fortunes under Chief Executive Officer Phil Bentley, who took over at the end of 2016. The provider of cleaning, security and healthcare services had reviewed its strategy and accounts after a string of profit warnings in 2016.

The collapse of rival Carillion and Interserve’s slide into administration have hurt sentiment towards UK contractors and outsourcing groups, but Bentley has been optimistic that Mitie would emerge well placed from the shakeout.

Mitie, which is less dependent than its rivals on public sector work, said it was appointed to a framework for providers of commercial services to the public sector, leading it to win a high-profile contract.

Mitie, which manages and maintains London’s landmarks, high street buildings and homes, also said it was awarded a place on the prison operator services framework, adding a further 1.5 billion pounds ($1.83 billion) worth of work to its pipeline.

It was recently deemed an approved government supplier, and had expected to win more government contracts in 2019.

Mitie said first-quarter average daily net debt was about 55 million pounds lower than a year earlier.

ON TRACK FOR GROWTH

Mitie said its expectations for the year remain unchanged. It had predicted solid growth this year after weathering a tough period for British outsourcers by cutting costs and focusing on its core businesses.

Mitie has said it expects earnings growth in the mid-single figures this year as it moves on to the next phase of its cost-saving exercise - an overhaul of IT systems at its top engineering services business.

Dubbed Project Forte, the two-year programme is expected to deliver gross run-rate cost benefits of about 30 million pounds by March 2021.

The first phase of the cost saving drive, “Project Helix” programme delivered the planned 45 million pounds in run rate benefits in 2018.

The company employs 52,500 people across Britain, looking after a large, blue-chip customer base including banks, retailers, hospitals, schools and government offices.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and Kirsten Donovan

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