Mitie reports solid revenue growth in first quarter

23rd Jul 2024 07:19

(Sharecast News) - Mitie Group reported strong trading momentum in its first quarter on Tuesday, with revenue rising 10.5% to £1.16bn, compared to £1.05bn a year earlier.

The FTSE 250 outsourcing specialist said that growth was driven by prior year acquisitions, increased projects and variable work, and favourable pricing, offsetting some net contract losses and the completion of short-term public sector contracts.

It said the period saw significant contract wins and renewals, totaling £2bn in total contract value (TCV), up from £1.1bn in the same period last year.

Notable new 'marquee' contracts included security services for Aldi, British Airways, and Lidl, as well as cleaning and security for community health partnerships, and engineering services for Dublin City University.

Additionally, Mitie secured a three-year extension with its largest private sector customer, Lloyds Banking Group, among other notable renewals.

Mitie also announced a strategic acquisition post-period, agreeing to acquire ESM Power for £5.5m.

The board said that acquisition was expected to enhance the company's capabilities in the high voltage power connections market, supporting customer needs in power upgrades and decarbonization.

It also launched a £50m share buyback programme in April, purchasing 21 million shares at an average price of 119p.

Of those, 11 million had been held in treasury for the 2021 save as you earn scheme, with the remainder cancelled.

Net debt increased to £182m at the end of June, up from £81 million in March.

The rise was attributed to seasonal working capital outflows, ongoing project investments, lease obligations, and share buybacks.

Mitie's average daily net debt during the quarter was £173 million.

In its divisions, business services saw a revenue increase of 11.9% to £403m, driven by contract pricing and acquisitions.

Technical services revenue grew 5.2% to £326m, largely due to the acquisition of JCA Engineering and increased project work.

Central government and defence reported a 4.3% revenue increase to £217m, supported by a new UK Army base contract in Germany and consolidation of Landmarc.

The communities division experienced a 24.2% revenue surge to £218m, primarily from the immigration escorting services contract.

Mitie said it remained focussed on margin enhancement, targeting around £20m in cost savings for the 2025 financial year.

The firm said it had initiated improvements in account structures, reduced third-party contractor use, and prioritised operational efficiencies across key accounts.

"The good trading momentum from last year has continued into the first quarter of the 2025 financial year, with double digit revenue growth from our projects business, including the benefit from the previous year's acquisitions," said chief executive officer Phil Bentley.

"Contract wins and renewals also remained high, following a record final quarter in 2024, reinforcing the strength of our market leading, technology and data-rich capabilities."

Bentley said it would be a "year of investment" in its new facilities transformation three-year plan, through which Mitie expected to accelerate growth and deliver superior financial returns, from adding further key accounts, growth in projects and infill mergers and acquisitions.

"We have made a good start to our new programme of margin enhancement initiatives which will raise the operating margin over the medium-term, and we remain on track to deliver our high-single digit revenue growth expectations for the year."

At 0801 BST, shares in Mitie Group were down 0.49% at 122p.

Reporting by Josh White for Sharecast.com.