June 6, 2019 / 6:50 AM / 4 months ago

Mitie sees further growth after beating 2018 forecasts

(Reuters) - Mitie Group Plc surpassed its guidance for full-year profit on Thursday and predicted solid growth this year after weathering a tough period for British outsourcers by cutting costs and focusing on its core businesses.

Shares rose almost 9% after full-year adjusted operating profit came in at 88.2 million pounds, around 3 million pounds above the company’s own expectations.

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

Bentley said the company did a “fair bit better” in the year. The company, which had warned in March that its order book would fall 10%, in the event posted a mere 1% decline after winning a number of new contracts after the warning.

Overall revenue rose 9.4% on the year, beating the company’s own guidance of 7% to 8% growth.

The provider of pest control, cleaning, security and healthcare services has spent the past two years cutting costs and selling assets to focus on its main engineering and security businesses.

Mitie 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.

“We are almost done with phase one, which is stabilize the business, get some cost-savings from (Project) Helix, reinvest and get the business on a good footing - which is what we’ve done,” Bentley, who took charge three years ago amid a series of profit warnings, told Reuters after the results.

“If we can add more technology to our clients we can get more margins out of them.. and interestingly our top 10 clients, who haven’t changed in two years, have grown 21% in revenue.”

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Mitie, founded in 1987 in the western English city of Bristol, made its London market debut a year later. It now employs 49,000 people across Britain and provides engineering, security and cleaning services to clients including Sainsbury’s, Vodafone and Rolls-Royce.

Phase two of his programme will focus on investing in technology that improves the company’s services for its biggest clients, Bentley added.

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

Bentley’s “Project Helix” programme delivered the planned 45 million pounds in run rate benefits in 2018.

The company also benefitted from growth in its engineering and security businesses and its recently acquired Vision Security division.

Net debt fell to 141 million pounds compared to an earlier estimate of 170 million pounds and the 187 million pounds Mitie was carrying at the end of the first half of the year.

“Transformation on track,” analysts from Canaccord Genuity wrote in a note to clients.

Reporting by Justin George Varghese in Bengaluru; editing by Patrick Graham/Keith Weir

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