Mitie Group share price jumps as profit doubles
UK outsourcer Mitie shook off a string of "unanticipated macroeconomic headwinds" to double profit in the year ended 31 March.
The figures:
Revenue from continuing operations fell 1.8 per cent to £2.2bn in the year ended 31 March, down from £2.3bn a year earlier.
But pre-tax profit rose 133 per cent to £96.8m during this period, up from £41.5m in 2015.
Shares in the company closed up six per cent to 290p per share this afternoon.
Why it's interesting:
Mitie warned central government spending cuts had led to a "multi-year squeeze" on local councils across the UK. "In the longer term, the funding crisis would be better solved by pooling health and social care budgets and redesigning the commissioning of the services," it said.
"As discussed at the time of the group's pre-close update, more modest growth is now anticipated in the forecast period and management intends to focus on profits rather than chasing top-line growth in a more challenging market," analysts at Canaccord Genuity wrote in a note.
"The pipeline (£9.1bn) and order book (£8.5bn) remain stable on the interim period and provide a longer-term underpin. With no major rebids expected before 2019, we are hopeful of a year of steady delivery whilst recognising some of the uncertainty in the group's markets," they added.
What Mitie Said:
Ruby McGregor-Smith, chief executive of Mitie, told City PM told City PM low growth and low inflation created economic headwinds for outsourcers. This has combined with the living wage, the apprentice levy, higher pension costs, continued government austerity and the EU referendum to create "an uncertain environment".
But she still sees growth opportunities for Mitie as well as the industry as a whole. "You're going against an economic environment that has fundamentally changed. Managing through that is absolutely fine for us. The industry is in a sensible place as long as nobody takes on too much risk."
In short:
The hit to sales growth was somewhat offset by stronger margins as well as good operating profit.