LONDON (ShareCast) - (Sharecast News) - Outsourcer Mitie warned that its order book had weakened last year but that reveues were growing as it makes progress with its long-term transformation.
Updating investors at the end of its financial year, the company said its committed order book had remained "broadly flat" in the second half, helped by the acquisition of Vision Security Group, which it bought from Compass in 2018.

But overall, the firm said the order book was expected to have declined by around 10% during the full year.

Shares in Mitie, which provides catering, cleaning and security services for a range of clients, including Gatwick Airport and the Welsh Assembly, were trading 9% lower at 137p by 1015 GMT.

Phil Bentley, chief executive, said Mitie was making "steady progress" in its long-term transformation plans and that revenues were growing.

"This is against a backdrop of undoubted challenges for the outsourcing sector, and some short-term economic uncertainty impacting clients' capital programmes and willingness to enter into longer term integrated contract commitments.

"Although our order book has softened, we have focussed on adding more value and services to our top clients and as a result we have seen continued growth these accounts throughout 2018-19."

The outsourcing sector has come under close scrutiny recently, following the high-profile collapse of Carillion last year and more recently Interserve. The turmoil surrounding Brexit also means many companies are also increasingly reining in spending.

Two years ago Mitie launched a turnaround programme, dubbed Project Helix, under which it has disposed of non-core units and reinvested in the central business. Mitie said on Thursday that Project Helix was now "largely complete" and had delivered the planned £45m of cost savings in the year to 31 March 2019

Group revenues for the year to were expected to be between 7% and 8% higher than the previous year's £2.03bn, with organic growth of 4%.

Operating profit before other items is forecast to be between £84m and £87m, a marginal improvement on the previous year's £83.2m, due to "revenue growth, cost savings and a positive contribution from VSG, partly offset by continued reinvestment into the business", but lower than the £89m average analyst forecast.

Looking forward, Mitie said it was "well-positioned" for future growth, despite external challenges and "political uncertainty". Revenue is expected to grow organically at 3% to 4% with Mitie meeting its margin target of 4.5% to 5.5% over the medium term. Operating profit was likely to show "moderate growth" in 2019-2020, the company added.

RBC Capital analysts said it was "slightly disappointing that numbers will have to be reset; expect consensus to move by around 5% to 7% for this year and the next.

"But this was never going to be a straight line recovery, and we continue to believe management are doing the right things against end markets with limited tailwinds at present."

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