Mitie enjoys another quarter of strong growth

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Mitie Group PLC (LON:MTO) shares rose in early deals on Wednesday as it said trading continues to be more resilient than expected.

Revenue in the second quarter of the company’s fiscal year (i.e. July-September) was up 12% quarter-on-quarter at £514mln, with monthly sequential improvements in sales particularly across Cleaning, Security and fixed Technical Services contracts.

The outsourcing specialist said its public sector contracts have shown “good resilience during this challenging period”, while it has also seen strong performances from its food retail, online retail, healthcare and pharmaceuticals customers; however, demand from its property and finance & professional services clients remained weak, although the second quarter was somewhat better than the first quarter as office space reopened.

Average daily net debt in the six months to the end of September 2020 was £69.3mln, which represents a big improvement on the £351mln of debt over the same period of 2019 after the company raised £201mln in a heavily discounted rights issue.

READ Mitie shares slide post rights issue

Net cash at the end of September was £89.7mln, compared to net debt six months earlier of £167.9mln.

The aforementioned rights issue gave the company the firepower to acquire the facilities management business of erstwhile rival Interserve, and Mitie announced today it had renegotiated the terms of the acquisition.

The assets will now be acquired for £120mln in cash plus 248mln Mitie shares, representing roughly 17.5% of the enlarged share capital of Mitie.

The terms value Interserve’s facilities management business at about £190mln, based on the share price of Mitie on Friday. At the time the acquisition was announced, the purchase tag was calculated at £271mln.

“Reassuringly both Mitie and Interserve Facilities Management have traded better than expected during the COVID crisis,” said Phil Bentley, the chief executive officer of Mitie in a statement.

“However, Mitie, in particular, has been successful at renewing strategic contracts and winning new business during this period. Recognising this momentum, we have renegotiated the terms of the Interserve facilities management transaction, reducing the vendor’s consideration shares by 31%,” he added.

“Mitie’s existing shareholders will therefore hold a greater proportion (82.5%) of the enlarged group and enjoy a greater share of the benefits of the transaction,” Bentley noted.

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