Hard to believe, but UK outsourcers were exciting growth stocks in the early 2000s. Under New Labour, a host of state services fell into private sector hands, and the likes of Serco (SRP), Capita (CPI) and G4S were riding high. Then came the 2010s, and things came tumbling down. Profit warnings, accounting scandals and high-profile bankruptcies shattered share prices and bred mistrust among investors. Several years down the line, however, some interesting opportunities have returned.
- Earnings momentum
- Resilient profit margins
- Improved balance sheet
- Volatile workload
- Lossmaking contracts
- Inflationary pressures
Mitie (MTO) handles everything from cleaning and catering to recycling and background screening. Like many of its peers, it has a chequered past. Two decades of strong trading quickly unravelled in 2017, when a series of profit warnings culminated in a £183mn loss and a big share price drop.