An almost uninterrupted decline in the second half of 2017 saw Mitie enter 2018 at £1.87, its worst price in around a year. Things only become worse as the first quarter progressed, the stock slumping to a 13 year low of £1.48 towards the end of March. Yet the outsourcing firm has perked up since then, briefly striking a 5 month peak of £1.98 in late May. Mitie Group PLC now sits at a current trading price of £1.78.
It’s not a fund time to be in the outsourcing industry, something Mitie CEO Phil Bentley admitted as much in the firm’s pre-close statement back in March, arguing that Carillion’s collapse raises ‘fundamental questions’ about the sector.
Mitie said it is expecting a 2% to 2.5% rise in annual revenue to £2.2 billion, with a solid order book boosted by the £525 million detention and escorting contract signed in the Care & Custody division.
However, investors were disappointed with the news that the cost of Project Helix, its transformation programme designed to deliver savings of around £50 million by 2020, would cost £35 million in 2017/18, up from the £24 billion previously forecast. Net debt levels are also estimated to have risen by £50 million to £70 million year-on-year.
The firm also said that operating profit would be ‘slightly down on the previous year’ due to ‘investment in customers, IT and capability’. Given that FY 16/17 saw a 13.9% decline in operating profit to £82 million, investors will be hoping that the drop is only marginal.
Mitie Group (LON:MTO) has a consensus rating of ‘Buy’ alongside an average target price of £2.20.
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