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This is why the Mitie Group share price is rocketing right now!

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It’s been another hard day on UK share markets. On Thursday, the FTSE 100 and FTSE 250 have kept sliding on continuing fears over Covid-19 and the state of the economic recovery. A downbeat assessment of the US economy from the Federal Reserve hasn’t done much to clear the gloom of recent days either. One share that’s not suffering on Thursday, however, is Mitie Group (LSE: MTO).

This UK support services share has actually surged 7% in value today thanks to a positive reception to its latest financials. At 46p per share its shares are now at their most expensive levels since June 2020.

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Full-year guidance rises

In a strong third-quarter update Mitie said that organic revenues rose 6.7% to £573.9m. The business  said that sales rose as “Covid-19 lockdown measures were eased, customers responded positively to [our] ‘Getting back to business’ initiative and revenue from providing critical services supporting the UK’s battle against Covid-19 increased”.

For the nine months to December, organic revenues were down 4.3% year on year at £1.55bn, the UK share said. The lion’s share of this reversal was because of the loss of a Ministry of Justice contract and the reduced scope of an NHS Properties contract.

Those sales numbers for quarter three came in better than expected. And as a consequence Mitie Group said that it expected operating profit for the full fiscal year (ending March 2021) to come in at between £57m and £61m. This is above the current market consensus of £56m.

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The support services provider chalked up £770m worth of new contracts in the nine months to December, it said. Mitie also noted that it had swung to an average net cash position of £31.4m in the third quarter. This compares with net debt of £313.6m in the same 2019 period.

Mitie expects sales to flatten

At Mitie’s core business services division revenues boomed 14.8% year on year in quarter three, the company said. This unit — which is responsible for half of the UK share’s total organic turnover — enjoyed extra demand for its security and cleaning services.

Demand was particular strong among food retail, non-aviation transport, and logistics, Mitie said. The division also benefitted from its work with the Department of Health and Social Care to combat Covid-19, as well as support provided to HM Revenues and Customs at ports in the run-up to the end of the Brexit transition period on 31 December.

Roaring revenues here more than offset a 0.6% sales fall at Mitie’s Technical Services arm. Meanwhile third-quarter turnover at Specialist Services rose 0.8% year on year.

Mitie doesn’t expect a strong performance in the final quarter of the year, however. The UK share predicts that second-half performance will be stronger than that of the first. But it reckons that “the new national lockdown measures currently in place are likely to result in flat growth in the fourth quarter.”

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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