Facilities management group Mitie (MTO) confirmed its FY earnings guidance after positive Q3 trading. The firm said it was ‘on track’ to deliver operating profit and free cash flow in line with market expectations.
| Share price: 170p (-0.5%) | PE: 18.5x |
| Market cap: £2.2bn | Yield: 2.6% |
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Mitie provides a range of support services to private and public-sector customers in the UK and abroad. These range from ‘hard’ services like engineering to ‘soft services’ like site management, security, training, fire safety and hygiene.
The firm traded well in the third quarter to December, posting 10% growth in revenue to £1.45 billion. That included 4% like-for-like growth and came against a strong prior-year comparative.
The total value of contract wins and renewals/extensions came to £4.7 billion during the quarter., Meanwhile the pipeline of bid opportunities rose 28% to a record £30.4 billion.
After the end of the quarter, the firm was awarded a major facilities management contract from the US Navy. It also confirmed its FY targets of revenue of £5.7 billion, operating profit of over £260 million and free cash flow of at least £120 million.
‘We delivered another good trading performance in Q3 following five consecutive half year periods of double-digit revenue growth’, said CEO Phil Bentley. ‘Our pipeline and order book are at record levels, driven by long-term macro trends,’ he added.
We turned buyers of Mitie Group a couple of years ago when it was clear it had turned the corner. The facilities management sector is enjoying strong tailwinds from both the public and private sector.
Added to that, acquisitions such as Argus Fire and Marlowe have bolstered the firm’s revenue and earnings growth. It’s worth noting Q4 is the strongest in terms of revenue and earnings due to increased work and winter services.
Assuming the company meets its FY26 targets and analysts’ forecasts for FY27/28 are right, Mitie shares are cheap. We can see them trading at least 30% above their current level in the next year and potentially much higher.
Read the press release here: https://www.mitie.com/investors/
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