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Investing.com -- Mitie Group (LON:MTO) saw its shares tumble more than 10% on Thursday after the U.K. outsourcer announced it will buy peer Marlowe PLC (LON:MRLM) for around 366 million pounds ($496 million) in a cash-and-stock deal.
Marlowe shares popped nearly 8% on the news in London trading.
Marlowe shareholders will receive 1.1 new Mitie shares and 290 pence in cash for each share they own, valuing the offer at 466 pence per share. The offer represents a 26.5% premium to Marlowe’s closing price on June 3, the day before news of the talks emerged.
Mitie on Thursday also reported a strong set of full-year results for the twelve months ended 31 March 2025, demonstrating progress in the first year of its 2025-2027 Facilities Transformation Plan.
Revenue rose 13% year-on-year to £5.1 billion, with 9% organic growth driven by new contracts, pricing, and upsell activity.
Operating profit before exceptional items increased 11% to £234 million, while free cash flow came in at £143 million. Operating margin before other items held at 4.6% despite investments and telecoms-related losses.
Basic EPS before other items grew 3% to 12.7p, while reported EPS fell to 8.2p due to higher non-cash costs.
Return on invested capital remained high at 24.5%.
The company achieved record levels of contract awards (£7.5 billion TCV), a £15.4 billion order book, and a £23.7 billion pipeline. Notable wins included a £1 billion seven-year security contract with the Department for Work and Pensions and a £400 million 10-year deal to operate the UK’s first zero-carbon prison.
Marlowe, valued at around £318 million, operates in areas such as regulatory compliance, health and safety, and risk mitigation.
Analysts at Jefferies estimate the acquisition could boost Mitie’s core profit by about 9%.
In the last year, Mitie completed three acquisitions totaling £48 million, including Argus Fire and ESM Power in the U.K. and Visegurity in Spain.
Total (EPA:TTEF) net debt increased to £199 million, mainly due to share buybacks and acquisitions, though leverage remained low at 0.8x EBITDA.
The final dividend was raised to 3.0p per share, taking the full-year payout to 4.3p, up 8%.
“The investments we made in the foundation year of our Plan contributed to the delivery of double-digit revenue and operating profit growth,” said Miti Group CEO Phil Bentley.
He added that the business enters fiscal year 2026 (FY2026) “with good sales momentum, and a record order book and pipeline,” supporting confidence in achieving margin and growth targets through FY27.