"Does this Â£3.2 billion engineering services group have intrinsic strengths to overcome weak sentiment, or is yet another example among outsourcers and utilities, to avoid "recovery plays?" Shares in LSE:BAB:Babcock InternationalÂ has halved to ..."
With the demise of Carillion and the rest of the infrastructure services sector strugging to stay alive ( interserve G4S, ISS Serco etc) there's only one way for this outfit (down). They made their money by aggresively aquiring successful FM providers, stripping out the expensive labour , repopulating with cheap unskilled overseas labour and selling the reduced cost and skill service back to the market. And they were very good at it up until a few years ago - the management team under Ruby McGregor amassed small fortunes.
Well before the collapse of Carillion however disillusionment had set in amongst many customers and the market started to change. All of a sudden no one wanted to pay premium rate for a mediocre service and successive contract renegotiations became the norm. But it needed the collapse of Carillion to burst the bubble. No soft landing for this one unfortunately as Brexit approaches.
"Is this another case of irony, how a heavily-shorted stock has enhanced upside potential as a new management steadily delivers on turnaround targets, while upsets fade?There have been various companies - Home Retail Group, now owned by ..."
"After just three months on the market, serial profits warner LSE:MTO:Mitie has managed to sell its loss-making healthcare businesses for a quid each, although it must also help fund its turnaround. After plunging to 2008 lows in November, this ..."
Mitie Group plc ("Mitie"), the facilities management and consultancy business, today issues the following trading update.
The Board has met for the past two days to review strategy and to consider the Group's trading outlook for the year as a whole. Property Management and Technical FM divisions have been impacted by client deferrals and investment plan delays, respectively, which are now expected to be fulfilled in 2Q 2017. Separately, it is clear that our Cleaning division is underperforming; management changes are being implemented.
In addition, the Board is undertaking a balance sheet review, and has taken a more conservative judgement on contractual positions, identifying an additional £14m of one-off charges in the year.
As a consequence of the above, we now expect underlying operating profit for the full year to 31 March 2017 to be in the range of £60m to £70m (including ongoing healthcare losses, but before the previously disclosed £10m one-off costs of change).
Despite these lower forecast earnings, we expect to continue operating within our contractual banking covenants.
The balance sheet review will also consider the potential impact of IFRS 15. Full year results for the twelve months ending 31 March 2017 and an update on our strategy will be announced on 24 May 2017.
Yes, that was the only news I could find. But having bought in at £1.93 on the dip after the first profit warning and having missed out on previous opportunities to take a profit that'll do for me, and I'm out. I'm painfully aware of the old saying that profit warnings come in threes, and that a new CEO may want to do a Tesco and get all the bad news out at once, causing a further drop in the SP.
In which case I'll be back in!
Good luck to all those who disagree with my sceptical view.
"RBC Capital Markets downgraded outsourcing company Mitie 'underperform' from 'sector perform' and cut the price target to 160p from 195p ahead of first-half results.
"We already know H1 will not be good. However, the key question is whether the trading and outlook has improved.
"In our view (and given recent market developments), it is difficult to foresee any real improvement. Ahead of the new CEO being introduced to the market, we therefore make a pre-emptive cut to both forecasts and dividends and move to underperform."
The Canadian bank highlighted the fact that the outlook for UK outsourcers has deteriorated significantly in the last 12 months, with clients looking to transfer more risk to the service provider and margin pressure growing.
"Mitie has already warned, Capita has since followed suit and in our view, it is only a matter of time before this sector is once again under scrutiny for the wrong reasons."
As far as expectations for the first-half numbers are concerned, RBC said revenue is likely to be modestly lower than last year, down 2.5%, while operating profit is likely to be at least 20% lower due to the absence of higher margin work and discretionary spend, and general pricing pressure.
Back in September, Mitie shares tumbled after it issued a surprise profit warning, cutting its profit outlook following the Brexit vote and due to other economic pressures."
"Mitie has a strong core business in facilities management and has just won its biggest contract in security, with a large unnamed retailer. Still, I would not be buying the shares in the immediate future, though up 5p at 199p they trade on less than ten times earnings and, superficially, look cheap.
Phil Bentley, the new chief executive, arrives in December and will need to take three key decisions. Plainly, he will have some input into the halfway numbers that are out on November 21 and those decisions may even be made then. They are the review of the healthcare business, which is losing about £4 million a year, the dividend policy and whether to continue with the £20 million share buyback, now about halfway through.
A writedown of some or all of the £111 million spent on Enara, which took Mitie into the provision of healthcare in 2012, looks to be on the cards. A cut in the dividend looks likely, given last months profit warning. A new chief executive would have carte blanche to reset the payment in accordance with those expected lower earnings. The suspension of the share buyback would be mere collateral damage.
For much of the past year the shares were trading in the 300p area. Mitie is not the only outsourcer to be hit with headwinds from the uncertain economic environment and there seems to be no reason why they should not regain that 300p level in due course. Still, there looks to be further turbulence ahead as those hard decisions are taken.
My advice - Avoid
Why - There looks to be further bad news to come"
Lady MS has quit as predicted. This really is a strong sell now, because now the new team will have to unwind all her over optimistic revenue recognition built into the balance sheet. Prepare for some very big profit warnings. Share price 194p now ,. Just watch it go down over the next 6 months . Bale out while you can is my advice.
"So is it onwards and upwards for the asset party? The US Federal Reserve has not only stood pat on interest rates; it has effectively guided up expectations for loose monetary policy by saying it wants to exceed its inflation target and ..."
"The Questor Column:
Outsourcers face spending threats despite solid pipelines:
An unexpected profit warning has caused shares in outsourcer Mitie to plunge, as the company warned that economic uncertainty and a slowdown in awarding contracts from local authorities would result in very significantly lower operating profits this year. But investors will be wondering how much of a turnaround can be effected while public sector spending remains low. Mitie needs to take some action to stabilise the business. Investors reacted badly to the announcement, with shares declining by 29%. Mities lower expectations reflect a wider uncertainty that is affecting the spending power of its clients. Mities property management business has been particularly hit by financial pressures within local government and delays in projects.
But Mitie has begun to implement a series of cost-saving measures, including integrating some of its management and back office functions for its 12 divisions, in order to shore up the business. In total this will cost around £10 million over the year and add to the profit shortfall. Mities current pipeline can give some confidence: it has won a large security contract with a major U.K. retailer, which will start shortly and is worth £150 million over three years, with potential for a two-year £110 million extension.
Ms McGregor-Smith was confident that the companys second half will be stronger than the first as the economy begins to stabilise and companies begin to make decisions about larger contracts. Disregarding the drop after the results, shares in the company have been steady and confidence in the rest of the year should mean that continues.
As predicted the meltdown has started. Mrs MS has I suspect been over declaring revenue for years and building up a false balance sheet net asset value as Serco did with over optimistic revenue recognition , that needs to be unwound now. I suspect she is getting ready to depart. She said the living wage was an opportunity some time ago now its not.........
During the trading period from 1 April 2016 to date, Mitie has secured some important new contracts in its core Facilities Management business, where our long term strategic positioning, order book and pipeline remain strong.
However, in the short term we continue to experience the effects of significant economic pressures. These include lower UK growth rates, changes to labour legislation and further public sector budget constraints, and uncertainty both pre and post the EU referendum. We have taken strong action to counter the impact of these pressures by making changes now to the way we operate and initiating cost efficiency programmes across the group. These positive changes will help to ensure the long term competitiveness of the group and its service offering.
Whilst we have seen some positive trends and contract awards in the year to date, it is our expectation that the pressures we are facing in our markets will impact our trading results during this financial year ending 31 March 2017, most significantly in the first half.
When compared to the same period last year, in the first half we expect revenue to be modestly lower and operating profit to be very significantly lower. This is specifically due to a reduction in higher margin project work volumes and discretionary spend by clients, pricing and cost pressure, a deterioration in the trading performance of our local government facing Healthcare and Property Management businesses, and the in-period costs of implementing efficiency programmes of up to £5m.
For the full year, we continue to expect group revenues to show a small amount of growth compared to the prior year, in line with previous guidance. This is a result of the commencement of new contracts and seasonal factors in the second half offsetting revenue declines in the first half. For the year as a whole, we expect modest growth in the Facilities Management business which will be offset by contraction in Property Management and Healthcare.
Operating profit for the full year is now expected to be materially below management's previous expectations as a result of a continuation of the pressures experienced in the first half and further one-off costs of organisational change associated with our cost efficiency programmes, which are expected to total up to £10m in the year.
Operating profit in the second half will reflect the expected improvement in revenue and associated gross margin in that period driven by factors such as the impact of contracts secured in the last 12 months and by seasonal services and maintenance programmes. It will also reflect the expected benefit of gross cost savings which we currently estimate to be in the region of £15m in the second half based on our detailed plans. These savings will result from the combination of our hard and soft facilities management businesses and a number other efficiency programmes initiated across the group.
Current market conditions
Our core Facilities Management business represents 84% of our revenue. There has been a good level of activity in our single service businesses and we are successfully securing a good flow of new contracts. The pipeline of opportunities for new integrated facilities management and single service and bundled contracts remains strong.
However, we are finding that the recent economic uncertainty is currently driving clients to renew or extend larger contracts with existing suppliers including Mitie, a trend we have seen over the last 18 months, and to defer investment decisions. This has impacted growth in the first half.
We are making good progress in combining areas of our hard and soft facilities management infrastructure. This activity has been designed to enhance the efficiency of our FM delivery model, driving cost efficiency across our operational and back office functions. This programme of change has been designed to eliminate duplication, standa
"Mitie Group's 'buy' rating was reiterated by Canaccord Genuity despite the company warning that full year revenues will be below the current range of market expectations of £2.35bn.
The outsourcing firm said it has experienced revenue shortfalls in the second half of the year as some work has been delayed or cancelled due to increased economic pressures and uncertainty.
Still, Mitie has been managing its cost based and focusing on maintaining margins while continuing to invest for the long term, so profits will be in line with consensus forecasts of between £125m to £133m.
Canaccord said the stock "remains at discount to sector peers having been hindered by several years of weak earnings momentum".
"A more cautious tone through full year 2017 may allow for a period of more steady delivery against expectations and the opportunity for the shares to re-rate."
The broker cut its target to 300p from 320p. It also said its forecasts for 2016 results were in line with the Mitie's statement, resulting in an EPS reduction of 3%. Canaccord also moved expectations for 2017 earnings down by 8% to reflect the "likelihood of lower organic growth".
"Whilst the space continues to present attractive opportunities, organic growth has been under some pressure in the latest reporting season and contracts continue to require a greater working capital commitment," Canaccord added."
Just bought some on the back of that. Every year, brokers downgrade this stock, and a few months later one is normally in healthy profit. Having just been awarded a 3 year £100m NHS property services contract and with div yield around 4.4% MTOlooks like another good buying op IMO. Hoping for > 300p.
"So is the economic cycle turning? Listening to an ebullient George Osborne relish the Office for Budget Responsibility's prediction - for UK growth to ease only about 0.1% to 2.4% towards 2020 - the future sounds secure.There are also City ..."
Outsourcing and energy services company Mitie (MTO) reported weaker-than-expected interim results yesterday that sent its shares sliding 9% to 302p.
Liberum analyst Joe Brent retained his hold recommendation and target price of 286p on the shares, commenting: Interim results a little weaker than we had expected due to healthcare (down 20% due to branch closures), but no exceptionals, he said.
Estimates left unchanged, despite H1 loss in healthcare. Order book and pipeline down slightly, with less ad hoc work, but 97% of work secure.
Margins were also down in facilities management but Brent said there was no plan to change forecasts.
Mitie currently trades at a current year 2016 price/earnings ratio of 12.8x and a EV/EBIT of 10.1x which represents a discount to the sector excluding Serco of 13% and 19% respectively. We believe that it is encouraging that Mitie is focused on its core facilities management business, where it has a strong market position, he said. "
"Since major central banks began cutting interest rates in 2008, investors have been desperately searching for decent income from their investments. It's not been easy. And nowhere is that hunt for yield more evident than in the UK. Rates were at ..."
Over last 5 years intangibles up from £397m to £541m
Borrowings up by £100m+ over 5 years
Net Profit Margin £55m on £2273m revenue= 2.4%
A stoke of the pen or spreadsheet on a desk can create £55m profits from that level of intangibles.
This business is not making any money, cash or profits. Checkout links to Serco in the management team.
Living wage impact?
The crash will come , they will be found out, I predict.
Outsourcing group Mitie [LON:MTO] issued a profit warning as increased competition for local authority housing maintenance contracts and a tough homecare market meant profits are now lower than expected, sending shares more than 8% lower at one point. The FTSE 250-listed company also said in its pre-close update that the cost of closing its mechanical and electrical engineering business could reach a maximum of £16 million during the year to the end of March Broker Peel Hunt expects overall pretax profits of £95.2 million on revenue of £2.3 billion, giving 20p in earnings per share for the year to the end of March. Market consensus in November last year was for £118 million in pretax profits. The company still has a stable and cash-generative business in long-term maintenance contracts with blue chip clients such as Lloyds Banking Group and hospital trusts. These contracts generate about 85% of group revenue. However, growth could be slow as the half year results showed the order book was down to £8.5 billion from £8.7 billion.
Mitie should be able to ride out this tough trading over the long term, but the shares, on 13 times forecast earnings and paying a prospective dividend yield of 4%, hold few attractions. We said avoid the shares back in August 12, at 305.8p, since when they have fallen by 9%. The update showed few signs of a turnaround, so the recommendation remains avoid. Mitie at 276p-16.4p. Questor Says Avoid.
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