REG - MITIE Group PLC - FY23 trading update

MITIEAnnouncement

18/04/2023 07:00

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RNS Number : 5035W  MITIE Group PLC  18 April 2023

18 April 2023

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

 

 

Mitie Group plc: FY23 trading update

"Continued momentum in Q4; FY23 operating profit expected to exceed current
guidance, and new £50 million share buyback programme announced"

 

Following the closure of Q4 trading, Mitie Group plc ("Mitie" or "the Group")
(LSE: MTO), the UK's leading facilities management company, today provides a
trading update for the year ended 31 March 2023 ("FY23").

 

Highlights

 •    Group revenue 1  (#_ftn1) expected to be slightly above the prior year (FY22:
      £3,997 million), having successfully replaced all short-term Covid-related
      contract revenue
 •    Operating profit before other items expected to be at least £155 million
      (current guidance for 'at least £145 million')
 •    Average daily net debt expected to be c.£85 million (FY22: £25 million),
      reflecting the capital allocation policy announced last year.  Closing net
      debt c.£50 million (FY22: £27 million net cash)
 •    Board decision to purchase shares for all employee incentive schemes, to
      eliminate the otherwise dilutive effect of issuing new shares to fulfil the
      schemes
 •    New £50 million share buyback programme announced, with £25 million first
      tranche launched today
 •    Momentum from margin enhancement initiatives expected to continue in FY24

 

Trading update

The encouraging performance that we have reported during FY23 has continued
over the balance of the year, with fourth quarter revenue growing by c.10%
compared with the same period last year, excluding Covid-related contract
revenue in Q4 FY22.  In the final quarter, we have continued to benefit from
contract re-pricing, new contract wins, and higher project revenues, alongside
the contribution from recent acquisitions.

 

We expect FY23 Group revenue to be slightly ahead of the prior year (FY22:
£3,997 million), having successfully replaced all revenue from short-term
Covid-related contracts (FY22: £448 million).

 

As a result of this encouraging performance, and our ongoing programme of
margin enhancement initiatives, we expect FY23 operating profit before other
items to be at least £155 million (current guidance for 'at least £145
million').

 

In our Q3 update, we highlighted that we were the preferred bidder for two
large Strategic Accounts with NATS (TCV of £132 million) and National Grid
(TCV of £120 million), and both contracts were awarded in the final quarter.
 Following a full and extensive re-tender process, Mitie has been retained as
strategic partner to the Ministry of Defence for its overseas military base in
Cyprus (TCV of up to £643 million), and a further substantial public sector
contract is at an advanced stage (TCV of up to £552 million).  We also
recently signed a new contract with Eurostar (TCV of £40 million) and renewed
a contract with a large critical infrastructure organisation (TCV of up to
£497 million).

 

We are entering the new financial year with a strong order book and a healthy
pipeline. We will provide further details on all our new wins and renewals 2 
(#_ftn2) when we report our full year results.

 

Net debt

We expect to end the year with average daily net debt of c.£85 million (FY22:
£25 million).  Closing net debt at 31 March 2023 was c.£50 million, an
increase of c.£77m million during the year (FY22: £27m net cash).  This
increase in net debt since 31 March 2022 reflects the capital allocation
policy announced last year, including share buybacks (£50 million), dividends
paid (£29 million), share purchases for incentive schemes (£37 million), the
acquisition of 8Point8, P2ML and Custom Solar (£20 million), and the closure
of the customer invoice discounting facility (£45 million) - an outlay in
aggregate of £181 million.

 

Purchase of shares for employee incentive schemes

The Board has taken the decision to purchase shares for all employee incentive
schemes, to eliminate the otherwise dilutive effect to shareholders of issuing
new shares to fulfil the schemes.  The majority of our share schemes are
satisfied through the company's Employee Benefit Trust ("EBT"), whilst Save As
You Earn ("SAYE") schemes are satisfied through Treasury shares, in order to
mitigate unnecessary stamp duty costs for the employee.

 

In FY23, 50 million shares were purchased through the EBT, including c.4
million shares for our employee Winter Support package, at a total cost of
£37 million.  The 50 million shares include a 'catch up' for schemes that
have already been running for two or three years, and as a result, the amount
required to be purchased in FY24 will reduce significantly to c.20 million
shares.  Share purchases in FY25 are expected to be lower again, as specific
incentives put in place in respect of the Interserve acquisition mature in
FY24.

 

Launch of share buyback programme

The Board also announces a new £50 million share buyback programme, with the
first £25m tranche being launched today. This follows on from an initial £50
million share buyback programme that was executed in FY23.  The timing of the
second tranche of the current programme will be dependent upon M&A
opportunities.

 

Within the £25 million tranche launched today, 15 million of the shares
purchased will be held in Treasury to satisfy our 2020 SAYE scheme, which
vests in December 2023 (30 million shares are required in total for this
scheme, so the remainder will be purchased in the second tranche).  This
scheme had an unusually high take up due to the 28p discounted option price
(payable by the employee) at the time of launch.  All remaining shares
purchased into Treasury as part of the current buyback programme will be
cancelled.

 

 

Capital allocation

Alongside our commitment to purchasing shares for all employee incentive
schemes, we continue to focus on increasing shareholder returns and investing
in bolt-on acquisitions to drive future growth, whilst maintaining leverage
within our long-term target of less than 1.0x average net debt / EBITDA.  We
expect the FY23 dividend to progress towards our 30% - 40% target payout ratio
(FY22: 20% payout).

 

Outlook

We have entered the new financial year in a good position, having made solid
progress on our strategic priorities in FY23.  Momentum from margin
enhancement initiatives, including increased synergies from the Interserve
acquisition, and efficiencies across our labour, third party and overhead cost
base, is expected to continue in FY24.  We will also maintain a disciplined
approach to bidding for new and renewing contracts.  Detailed guidance for
FY24, alongside a full update on capital allocation, will be provided with our
full year results in June.

 

Full year results release and presentation

Mitie's full year results for the year ended 31 March 2023 will be released on
Thursday 8 June 2023.  A presentation will be held for analysts at 9.30am.

 

 Full year summary (£m)               FY23                    FY22

                                      Expected                Actual
 Group Revenue                        Slightly ahead of FY22  3,997

 Covid-related contract revenue       c.13                    448

 Operating profit before other items  At least 155            167 3  (#_ftn3)
 Average daily net cash / (debt)      c.(85)                  (25)

 Closing net cash / (debt)            c.(50)                  27

 

FY23 financials disclosed in the above trading update are unaudited.

 

 

-     END -

For further information

 Kate Heseltine                  M: +44 (0)738 443 9112  E: kate.heseltine@mitie.com (mailto:kate.heseltine@mitie.com)

 Group IR Director

 Claire Lovegrove                M: +44 (0)790 027 6400  E: claire.lovegrove@mitie.com (mailto:claire.lovegrove@mitie.com)

 Director of Corporate Affairs

 Richard Mountain                M: +44 (0)790 968 4466

 FTI Consulting

 

 

 

About Mitie

Founded in 1987, Mitie's job is to look after places where Britain works and
is the leading facilities management company in the UK. We offer a range of
services to the Public Sectors in Central Government and Defence and
Communities (Healthcare, Education and Campus & Critical). Our Technical
Services (Engineering Services, Energy, Water and Real Estate Services) and
Business Services (Security, Cleaning and Office Services) divisions serve
private sector customers in Telecoms, Financial & Professional Services,
Transport and Industrials and increasingly to the public sector. Finally, our
Specialist Services (Care & Custody, Landscapes, Waste Management and
Spain) division serves both the public and private sectors.

Mitie employs 68,000 people. We are the champion of the 'Frontline Heroes' who
have kept Britain working during the COVID pandemic. We take care of our
customers' people and buildings, through the 'Science of Service', and we are
transforming facilities to be more flexible, safe, sustainable, and attractive
to all. The business continues to execute its technology-led strategy and in
the past twelve months has received multiple awards. Find out more at
www.mitie.com (http://www.mitie.com) .

 1  (#_ftnref1) From continuing operations and including share of JV and
associates

 2  (#_ftnref2) TCVs for wins and renewals include estimates for variable and
project works

 3  (#_ftnref3) FY22 Operating profit before Covid-related contracts and other
items: £107m

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