Mitie reveals £500m buyback after posting record £4bn revenues

Mitie Group has unveiled a £500million share buyback scheme after the outsourcing giant posted record revenues of £4billion. 

The FTSE 250 firm has also put cash to work through the acquisition of the UK’s leading solar power design, installation and maintenance contractor for public and private sector clients.  

Mitie will initially pay £8million for Custom Solar, followed by a second payment of up to £4.4million.

The fresh spending plans came as Mitie posted a bumper set of annual results, which saw the firm’s operating profit reach £167million in the year to 31 March.  

Mitie shares rose sharply today and were up 11.53 per cent or 7.10p to 68.70p in early morning trading, having dipped around 3 per cent over the past year.

The group has reinstated its final dividend, recommended at 1.4p per share, taking the total dividend for the year to 1.8p a share – against zero the year before.

Mitie revenues were bolstered by new contract wins, ‘good growth’ at Interserve Facilities Management, and £448million from flexible rapid-response Covid-related contracts.

The group’s average daily net debt for the year ending 31 March fell from £47million to £25million, and it had £27million in cash at the end of its financial year. 

Phil Bentley, chief executive of Mitie, said: ‘Through our investment-led strategy, Mitie has reached an inflection point earlier than anticipated. 

‘We delivered a strong financial performance in FY22, with good underlying growth. The Group is now able to leverage its capital base to focus on long-term value creation, accelerating investment in growth and delivering enhanced shareholder returns.’

He added: ‘Underpinning our strategy is our “Science of Service” offering, which we launched in the final quarter of FY22. 

‘This provides a solution to our customers whose workspaces require greater hygiene, intelligent security, and critical asset monitoring backed by data analytics, whilst our internal technology is driving productivity gains and cost efficiencies, supporting our margin enhancement strategy. 

‘Our technology is a key driver of both our new contract wins including projects – up to £2.1billion TCV in the year – and our high renewals rates – 90 per cent in the period.

‘As part of our strategic focus on long-term value creation, our revised medium term capital allocation policy will focus on investments in high margin bolt-on acquisitions, whilst increasing shareholder returns.’

Mitie expects to deliver mid-to-high single-digit revenue growth in fiscal 2023. The year has started well and the effect of inflation continues to be well-managed, it added. 

Commenting on its deal to buy Custom Solar, Mitie said it had seen a gap in the market for integrated solar solutions.

In the year to March, Custom Solar generated revenues of £15million and a pre-tax profit of £2million.  

Simon Venn, managing director of technical services at Mitie, said: ‘The acquisition of Custom Solar continues Mitie’s strategy of investing in high growth, high return businesses within the energy and decarbonisation market to help our customers accelerate their path to Net Zero.

‘With our client base including national brands, public sector organisations and critical infrastructure providers, this is yet another element of our support to help decarbonise Britain.’

Analysts at Peel Hunt, said: ‘Mitie delivered a strong performance in FY22,with underlying revenue growth of 14 per cent and average leverage of only 0.1x. 

‘Mitie is returning excess cash to shareholders through an initial share buyback of £50million (c.5 per cent enhancing to EPS). Management remains confident in its inflation guidance for FY23E. 

‘We believe the shares should re-rate from the current 9.4x2023E EPS as execution risk on the Interserve acquisition subsides further and the company continues to deliver strong cash generation. We confidently reiterate our 92p TP and Buy rating.’

Mitie shares are down by around 3 per cent over the past year