Mite Group Half Yearly

[idpickering]

Some here might hold these so may be of interest.

" Operating profit before other items of £35.4m (HY16: £58.1m)

• The board has decided to withdraw from the domiciliary healthcare market and has placed the group's domiciliary healthcare business under strategic review. Our healthcare businesses will continue to fulfil all obligations but there will be no investment in new areas of this market. Mitie will manage its withdrawal in an orderly and responsible manner. The board has changed its long-term view of this market. All healthcare goodwill and intangibles have been written off

"• Loss before tax of £(100.4)m (HY16:£45.1m) is stated after other items of £128.1m, including full impairment and write off of Healthcare goodwill and acquisition-related intangible of £117.2m and restructuring costs of £6.0m

• Dividend declared at 4.0p (HY16: 5.4p) (1.6x cover; HY16: 2.1x cover)

• Rolling 12 month cash conversion of 107.9% (HY16: 91.4%)

• Net debt at 30 September 2016 was £231.7m or 1.9 x EBITDA (HY16: £221.8m or 1.5x EBITDA)

• Healthy sales pipeline at £9.3bn (March 2016: £9.1bn) and order book at £7.7bn (March 2016: £8.5bn)

• 94% of 2016/17 budgeted revenue secured (HY16: 97%) and 65% of 2017/18 forecast revenue secured (HY16: 68%)"

And later;

Dividend



"The group has a strong track record of dividend growth and it is the Board's policy to set dividends at least in line with the development of the underlying earnings of the group, whilst maintaining dividend cover at a prudent level.



The interim dividend declared by the Board of 4.0p per share (HY16: 5.4p per share) represents a decrease of 25.9% on the prior year. The dividend represents a cover of 1.6 times earnings before other items per share. The reduction in interim dividend is reflective of current underlying performance.



During the first half, cash dividends of £23.3m were paid to shareholders (HY16: £23.1m). The proposed interim dividend for the six months ended 30 September 2016 was approved by the Board on 21 November 2016 and will be paid on 1 February 2017 to shareholders on the register at close of business on 16 December 2016."

http://www.investegate.co.uk/mitie-grou ... 00106522P/

[Arborbridge]

Another example of management spin:

"The group has a strong track record of dividend growth

This is immediately contradicted by the next sentence:

The interim dividend declared by the Board of 4.0p per share (HY16: 5.4p per share) represents a decrease of 25.9% on the prior year.

I think they meant "had" a strong record.... but then some people can rationalise anything.

On the bright side, Mitie has always been a well run company, so I expect it will get over the pot-hole and continue to so the business in the long run.

[funduffer]

Oh how the Mitie have fallen!

[idpickering]

Oh how the Mitie have fallen!

Down 1o% currently. A buying opportunity for those so inclined. Forward yield according to digitallook is 5.6%, on a pe of 10, and cover of 1.7. On the face of it nice, but eps -19% for next year. To much uncertainty for me, so no thanks.

Ian.

[epo1]

I have a sense of déjà vu after Capita's reporting a few weeks ago. As with Capita, a glimpse at the financials is very sobering, the book value attributed to intangible assets exceeds the total equity, i.e. if you disregard the intangibles then the company is insolvent. In my view the book value of this company is an accountant's fantasy.

Todays news is the best possible spin and I'll bet there is worse to come. As with Capita, 'strategic ignorance' has to balanced by basic common sense. We don't know what the future holds but the present and immediate past give no cause for optimism. One for gamblers.

[Dod1010]

I do not hold Mitie but I agree with epo1. Again Mitie is about to have a new chief and there is at least a risk that he too will 'kitchen sink' the next results, following another strategic review. These troubles seldom come singly. In this case, there have been warnings aplenty.

[Ivyrobert]

Sadly, I bought into both companies in recent months on the back of a price drop/profits warning. This is after watching for several years but not quite trusting their market place. I did the same with supermarkets, Pearson, Cobham, oil companies and others following a dividend reputation rather than current reality. I was never interested in stamp collecting but there have been quite a number of "blue chip" dividend casualties in the last couple of years.
The goodwill capitalisation issue reminds me of the 2003-2005 era when I was informed that a brand "is worth something" and so should be valued by "experts" and included on the balance sheet rather than written off, which is what I wanted to continue to do. It was a new fashion to adopt to hide gearing and enhance results. It is accepted practice now and creates another pothole when plans change.

[idpickering]

TMF put this out today regarding this matter;

"Shares in struggling outsourcer Mitie Group (LSE: MTO) have slumped in early deals after the company issued yet another profit warning this morning.

After warning investors back in September that operating profits for 2016 would be “very significantly lower” than the previous year, the company has revealed today that it’s writing off £117.2m relating to its home care business and the group will take a charge of £6m for restructuring. Losses before tax for the six months to the end of September total £100.4m compared to a profit of £45.1m in the year-ago period.

Even after stripping out exceptional items, Mitie struggled to grow earnings per share for the period. Adjusted earnings per share declined 44.1% to 6.2p from 11.1p the previous year. Group revenue for the period fell 2.6%, and net debt at the end of September totalled £231.7m up from £221.8m the year before."

http://www.fool.co.uk/investing/2016/11 ... e-trusted/

[Gengulphus]

Another example of management spin:

"The group has a strong track record of dividend growth

This is immediately contradicted by the next sentence:

The interim dividend declared by the Board of 4.0p per share (HY16: 5.4p per share) represents a decrease of 25.9% on the prior year.

I think they meant "had" a strong record.... but then some people can rationalise anything.

No, they still have a strong track record: a dividend that grew from 1p in 2000 to 12.1p in 2016 is a strong track record, and if the corresponding growth in 2017 is only from 1p to about 9p (which is roughly what the ratio that the interim was reduced by indicates). it will still be a strong track record.

As is common with 'spin', it's more subtle than saying something that isn't true. It's instead saying something that is true and sounds good, but is somewhat off-target for the current situation. What investors care about is what happens to the dividend in the future - whether this a bit of a stumble that will be recovered from or a sign that the company has run its course and isn't good for much more. The good track record is relevant, as an indicator that the management know what they're doing, but there are many other more important indicators...

Gengulphus

[NeilW]

" the book value attributed to intangible assets exceeds the total equity"

That's not how you value service businesses. The accounts don't include the main asset - the people that work for the business.

The problem MITIE have got into is that they have tried to maintain their valuation as a 'growth' stock, long after they should have consolidated as a cash cow. Hopefully now they have got shut of the CEO, the new one will consolidate on delivering excellent service for customers and throwing off cash for shareholders and employees.

[Arborbridge]

An interesting situation, often faced by HYPers.

Continue to have faith in the company, which for many years has been a consistent performer? or dump it owing to the obvious potholes?

There's no simple answer, naturally. Topping up would appeal to those "having faith" but could be a little early yet.

Having owned MITIE since 1998, I'm initially more for staying than folding. The share price has roughly halved previously and recovered, although it may not do so as readily this time, as the PE in my view, has had a paradigm shift since the company has most likely left its growth stage behind.
I would have ample reason for dumping, BTW, as this is part of the ArbsWyHYP which was intended to consist of boring stalwarts - MITIE was in there simply because it already existed in her broker account.

Arb.

[jackdaww]

:

... but then some people can rationalise anything.

On the bright side, Mitie has always been a well run company, so I expect it will get over the pot-hole and continue to so the business in the long run.

======================================

but is it a well run company NOW ?

it may just as likely fall further down the pothole !

perhaps get taken over , but at what price ?

gladly , MITIE is not one of my many failures.

.

[toofast2live]

We all know what new chief executives do (see my comments on how to predict a cutter.) They slash the dividend and kitchen sink the financials to give themselves a startling 5 year history when leaving.

Interserve (same Industry) is also appointing a new CEO in the new year. Don't hold your breath on dividends there, either.

I hope to be proved wrong.

[epo1]

That's not how you value service businesses. The accounts don't include the main asset - the people that work for the business.

They're contract cleaners! Unless they've got Kate Moss signed up to come round and empty the bins I doubt there is any real 'people' valuation here.

The problem with intangibles is the valuation is "take our word for it".

[Arborbridge]

I doubt there is any real 'people' valuation here.

Well, that's not quite correct. The "value" is in the aethos of the business - what Dod would call the Culture - and this is a sum of all the people, their knowledge and effort. In my own business, there was some value in the hard assetts, but the real value was always in the people and what they could accomplish.

However, naturally this gives us a problem since you cannot put a number on it. Here one has to admit that Dod's way of looking at things can come to a better view than looking at the numbers. The trouble is, it is all down to someone's value judgement.
It doesn't mean it is a worthless business or even a risky one: just that you cannot really know. That being so, you either trust them or move on to a different type of business.

In my case I've decided to move on and buy something more mainstream for the ArbsWyfHYP. This will probably prove to be an error - it usually is, I find.

Arb.

[jackdaww]

The SP recovered a bit today , after the incoming boss phil bentley spent £several million on the shares.

.

[kempiejon]

The SP recovered a bit today , after the incoming boss phil bentley spent £several million on the shares.

.

Well the shares are cheap. I bought Mitie this year, as is often the case not long after I pick something the doo doo comes