Mitie Group (MTO) 140p

Gain to date: 33%

Since we recommended facilities management specialist Mitie Group (MTO) in April 2024, the firm, under the leadership of chief executive Phil Bentley and his team, has gone from strength to strength.

One year into its three-year plan for ‘facilities transformation’, the business is already reaping the rewards of the hard work it put in with double-digit growth in revenue and operating profit and a return on investment well above its weighted average cost of capital.

On 5 June it announced the acquisition of Marlowe (MRL:AIM), describing it as ‘a strategically and financially compelling opportunity to create a leader in ‘Facilities Compliance’’ while accelerating its three-year plan.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Mitie is already the UK’s largest integrated facilities management company, providing security, engineering, decarbonisation and hygiene services across the public and private sector, in offices, schools, hospitals, shopping centres, supermarkets, banks, government buildings and critical national infrastructure.

In the year to March 2025, it has increased its revenue by 13% mostly thanks to organic growth through new contract wins, scope increases, price rises and project upsell, with a small contribution from acquisitions.

During the period it took in total contracts with a value of £7.5 billion, including renewals and extensions, a 21% increase on the previous year and a new company record.

The total order book at the end of March amounted to £15.4 billion, a 35% increase and also a new company record, taking the book-to-bill ratio to just under 1.5 times.

The firm’s order pipeline of potential projects grew 27% to £23.7 billion, of which over 70% is due to awarded over the next 18 months.

To bolster growth, management this month agreed the takeover of fire safety, inspection and certification firm Marlowe in a cash and shares deal worth £366 million, which we believe is a smart move at an attractive price.

WHAT SHOULD INVESTORS DO NOW?

We would use the 12% fall in the share price, which was in reaction to the new shares issued as part of the bid and the cancellation of the buyback, to increase positions.

In our view, the combination with Marlowe makes Mitie an even more compelling proposition for investors and potential customers.

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