Mitie, Auto Trader and OnTheMarket

“After an hour’s delay to opening the market, the FTSE 100 rises 0.4% to 7,744 thanks to yet another good day for the miners plus strength among financial companies,” says AJ Bell Investment Director Russ Mould.

Mitie

“The outsourcing industry is doing its best to fight back after developing a terrible reputation for issuing profit warnings and having questionable accounting practices.

“Mitie’s full year results don’t contain any shocks but you have to remember that it had already told the market in March that its numbers would be slightly below market expectations due to higher investment costs.

“Three months ago chief executive Phil Bentley said the liquidation of Carillion has raised some ‘fundamental questions’ about the outsourcing industry. Mitie has a plan to transform its business and prove to the world that it isn’t going the same way as Carillion, yet it is going to take some time for these efforts to feed through.

“Mitie is trying to simplify its business and has a plan for major cost savings. However, it still needs to deal with the issue of large average net debt (albeit this is falling), lacklustre organic growth and execution risks for its transformation project.

“Its failure to sell the property services business last year makes efforts to deleverage much harder but it still has other assets which it can try and sell.”

Auto Trader

“The key number to look at in results from car listings website Auto Trader is average revenue per retailer (ARPR).

“This shows how much the business makes every month on average from the car retailers which use its services.

“In the 12 months to 31 March ARPR was up nearly 10% as its clients took more premium products and ancillary services such as a new dealer finance product.

“ARPR growth is expected to be more modest in the year ahead as the number of vehicles sold on its website falls – reflecting a weaker new and used car market over the past year.

“This will put a greater onus on the company to bolster returns by cross-selling and upselling services to existing clients.

“However, there are some positive signs for the broader market as May was the second consecutive market of growth in new car registrations following 12 months of declines, which could encourage dealers to spend more money on advertising.”

OnTheMarket

“Maiden full year results from online property portal OnTheMarket are a bit of a mixed bag. The company, which was initially launched by estate agents, is looking to challenge the dominance of Rightmove and Zoopla.

“Since its IPO in February, the company has signed up 3,000 more branches taking the total to 8,500 and traffic to the site nearly doubled year-on-year between the end of January and end of May.

“This follows heavy investment in marketing using funds raised alongside its listing. Revenue for the 12 months to January was down 10%.

“When it first launched in 2015, the company had a rule that estate agents could only use one other portal (i.e. Rightmove or Zoopla), but it has since abandoned this stipulation.

“The property listings space conveys significant advantages to the leading players which could make it a difficult nut to crack for OnTheMarket which is considerably smaller than its two larger rivals.

“The websites with the most listings will be the ones which prospective property buyers will go to when looking for their next home.

“This reinforces their position as a must-have product for estate agencies and generates significant pricing power and stickiness.”

These articles are for information purposes only and are not a personal recommendation or advice.