OUTSOURCING specialist Mitie has posted a 20 per cent rise in profits after another strong performance from its support services operation.

The group increased its dividend by almost a third as it described prospects for the future as promising. Mitie also announced it was buying back up to 30 million shares - currently worth about £38m.

Pre-tax profits rose to £38.2m in the year to March 31, while turnover was 23 per cent higher at £694.5m.

Although trading was tough in the company's building services division, the support services operation had an excellent year, with profits rising 34 per cent to £360m.

Support services, which includes cleaning and pest control, was fuelled by customers, including Nissan, demanding "bundled" services.

The group announced in March that it would be reshaping the division following an increase in demand for bundled deals in which customers receive a combination of services.

Ian Stewart, chief executive, said this one-stop shop model was becoming increasingly popular as companies found themselves under more cost pressure.

"It has been a feature of our turnover for some time, but it has become more so in recent years," he said.

Mitie's traditional function is to help management teams start up businesses while retaining a 51 per cent stake. Once the companies hit targets, Mitie buys the remaining share.

Recently, however, the group has started acquiring companies, including Eagle Pest Control and security specialist Trident Safeguards last July.

The company, which employs 28,000 staff, performs more than 22,000 contracts a year with customers including Rolls-Royce and Tesco. Revenues at its building services division remained constrained by trading conditions, which it said had been somewhat depressed during the past 18 months to two years.

Although order books were high, deferred start dates meant it was taking longer than expected for this to contribute to results.

"The indications of recovery have continued and, although not all the work was completed during this financial year, it has resulted in a healthy order book for next year," the group said.

Mitie started five companies during the past financial year and three since the year ended, including two cleaning businesses, an industrial cleaning company and a landscape business.

The total dividend was raised from 1.9p to 2p. Shares rose four per cent, or 5p, to 126p.