Mitie reduction in shares
After last weeks earnings announcement(which on the surface was ok), I had a chance to watch the webinar and the subsequent Q&A. There were a few things which worried me a little bit so since then I have trimmed my position by 50%. Still a reasonable holding but towards the lower middle of the pack in my portfolio. The things that worried me(in no particular order).
- There was a question about the loss of a large goverment contract(very profitable for them as they had it for 10yrs). The CEO indicated that while they bid at the floor(i.e very price competitive) and same pricing as the winning bid, they lost the bid. A little while later they did win another reasonable contract from the same goverment department. Phil(CEO) spoke that the relationship is good and while he can’t be certain he suspects that within the goverment they don’t want to put all their eggs in one basket post the Carillion collapse. I.e wherever there are similar contracts go with someone they don’t use. WHile it all make sense from the clients point of view, it doesn’t bode so well for Mitie as they have gained a significant portfion of the UK market.
- There were a lot of senior changes in the technical services division due the engineering shortcomings. Again, whenever there are significant changes at the top this could lead to a period of instability.
- Phil Bentley is retiring in the coming year or so. While this is no new news, it adds to the uncertainty in direction in the short term.
- Parallel to the reduction in Mitie, I have been investigating a US competitor to theirs which might absorb the reduction in this sector. Stay tunned in the coming weeks if I end up deciding to invest in them.
Having said all that, I still think it is a well run company and I have a reasonable position which I will likely maintain until anything meaningful comes up.