MITIE a 'buy' - analyst

MITIE Group has been given the thumbs up from analysts after posting a strong interim management statement.

The outsourcing company revealed good levels of organic growth, new contracts secured over the last few months and trading in line with expectations.

MITIE revealed 98% of budgeted revenues for the current financial year to 31 March were secured by 30 September. The firm said it continues to expect total revenue growth to be higher in the second half than the first as a result of both the organic revenue contribution, including LSE:LLOY:Lloyds Banking Group; and its healthcare acquisition, Enara Group.

Analyst view

Investec analyst Andrew Gibb had a positive stance on the company, commenting: "We remain confident in our forecasts. The share price has continued to struggle (-11% relative to the FTSE All Share in the past three months) and we see current levels as a decent buying opportunity."

Analysts at Panmure Gordon were similarly optimistic, retaining a 'buy' rating: "The opportunities from driving efficiency gains for its clients through the outsourcing model remains in place. Contract momentum has been positive and its international presence continues to make good progress."

Public sector opportunities

In healthcare, MITIE purchased Enara for £110.8 million in October. Enara provides home care to people who require help and support due to illness, disability or infirmity and is the fourth-largest provider of home-care services in the UK.

The opportunities in UK healthcare remain significant. MITIE said it was already experiencing increased client demand for integrated home-care services and expected Enara's revenue and operating profit before other items for the full year ending 31 March to be £93 million and £10.1 million respectively.

Other opportunities remain in the public sector in the health, justice and social housing segments, and the firm has announced some good contract wins in these sectors. Opportunities in the private sector are described as "significant" and the recent contract success of the group backs this up.

MITIE should be well set up financially after it successfully completed a US private placement for a value of £151.6 million, which repaid the bridging facility put in place for the acquisition of Enara.

Management has also reiterated its commitment to sell its more cyclical businesses, which do not satisfy its returns profile. This should provide a level of stability that will be welcomed by investors.