REG - MITIE Group PLC - Q4 Trading Update

MITIEAnnouncement

16/04/2025 07:00

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RNS Number : 1854F  MITIE Group PLC  16 April 2025

16 April 2025

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

 

FY25 Trading Update

 

Continued good momentum in fourth quarter

Full year operating profit guidance upgraded to c.£230m

£125m share buyback programme launched today

 

Mitie Group plc ("Mitie" or "the Group"), the UK's leading Facilities
Transformation company, today provides a scheduled trading update for the year
ended 31 March 2025 ("FY25").

 

FY25 Highlights

 •    Record revenue: 1  (#_ftn1) up c.13% to c.£5.1bn (FY24: £4.5bn), including
      c.9% organic growth; Q4 revenue growth of c.9%, ahead of guidance, reflecting
      good projects demand
 •    Significant contract award: (£136m p.a. for 7+3 years) from the Department
      for Work and Pensions (DWP) in Q4, for security services commencing in October
      2025
 •    Operating profit guidance upgraded: 2  (#_ftn2) expected to be c.£230m (FY24:
      £210m)
 •    Operating margin(3): down 20bps to c.4.5% (FY24: 4.7%), reflecting investments
      in our 3-Year Facilities Transformation Plan and a loss in our telecoms
      projects business
 •    Good free cash flow generation: c.£135m in FY25; well ahead of guidance for
      >£100m
 •    Strong financial position: Post-IFRS 16 average net debt of c.£265m and
      leverage of c.0.9x, at the lower end of our 0.75-1.5x target range; pre-IFRS
      16 leverage of c.0.3x
 •    Three strategic acquisitions: completed for c.£50m, contributing to c.4% of
      inorganic revenue growth and adding key projects capabilities
 •    New share buyback programme: FY25 £100m programme completed; FY26 £125m
      programme launched today, bringing cumulative total programmes since FY23 to
      £325m
 •    National Insurance: FY26 gross cost impact lower than expected; higher
      recovery being achieved; balance to be mitigated via margin enhancement
      initiatives

 

Commenting on the results and the outlook, Phil Bentley, CEO, said:

"FY25 was the foundation year of our new Three-Year Plan, improving the
strength of the Mitie platform and investing in our capabilities to accelerate
Facilities Transformation for our customers.

 

"These investments contributed to the delivery of good revenue and operating
profit growth. I'm also pleased that our telecoms projects business, which has
negatively impacted margins, returned to breakeven in Q4. Our good underlying
cash generation and low leverage has enabled us to sustain a proactive capital
deployment policy with our largest share buyback programme now complete and a
new £125m programme launched today.

 

"We are entering FY26 with good sales momentum, including the new security
contract win with DWP, a record pipeline of opportunities and a strategic
focus on how AI and intelligent process automation can help to deliver margins
above 5% by FY27. We continue to evaluate strategic M&A opportunities in
our targeted sectors. With this positive outlook, we remain confident in
delivering our Facilities Transformation 3-Year Plan targets."

 

An encouraging finish to the year

Q4 FY25 revenue was up by c.9% yoy to £1,350m (Q4 FY24: £1,233m), against a
strong prior year comparative for projects work. As a result of this good
trading performance, we expect FY25 revenue to grow by c.13% yoy to c.£5,100m
(FY24: £4,511m).

 

This increase reflects organic growth of c.9% from key accounts, scope
increases and projects upsell, inclusive of c.3% pricing. Inorganic growth
contributed a further c.4%, including the three strategic acquisitions of
Argus Fire, ESM Power and Grupo Visegurity completed in the year.

 

The uplift in Group revenue, combined with our extensive programme of margin
enhancement initiatives, has offset investments in the business and a loss in
our telecoms projects business, which returned to breakeven in Q4 following a
series of actions taken to address underperformance.  As a result, we now
expect operating profit before other items to be c.£230m (FY24: £210m) with
an operating margin of c.4.5% (FY24: 4.7%).

 

During Q4 we secured several notable wins and renewals, resulting in a record
c.£7bn Total Contract Value (TCV) of wins/renewals/extensions in FY25 (FY24:
£6.2bn). This included a £136m p.a. 7-year initial term contract with a
3-year extension, alongside a £3m p.a. Security Control Centre 5-year
contract, to deliver security services across the DWP's national estate from
October 2025. We are entering FY26 with a strong order book and £24bn
pipeline.

 

Strong financial position

Free cash flow generation of c.£135m (FY24: £158m) is well ahead of guidance
of 'at least £100m'. After funding proactive capital deployments of c.£235m
(see below) and a c.£25m increase in vehicle lease obligations, closing net
debt (post-IFRS 16) at 31 March 2025 was c.£205m (FY24: £81m), inclusive of
c.£200m of lease obligations.

 

FY25 average daily net debt was c.£265m (FY24: £161m) and our average net
debt / EBITDA leverage was c.0.9x (FY24: 0.6x), at the lower end of our
0.75-1.5x target leverage range. Excluding lease obligations, our pre-IFRS 16
leverage was c.0.3x (FY24: nil).

 

Proactive capital deployment

Our capital deployments are determined by the best use of capital to deliver
attractive returns to shareholders and drive growth in the business, whilst
maintaining a strong financial position, and leverage within our 0.75-1.5x
target range (post-IFRS 16).

 

In this context, the Board's policy prioritises strategic M&A at returns
materially above our weighted average cost of capital; a progressive dividend
policy (30-40% payout ratio); and the purchase of all shares to fulfil
employee incentive schemes (c.15m shares p.a.). Surplus funds are returned to
shareholders via share buybacks to remain within our target leverage range.

 

During FY25, we invested c.£50m in three strategic acquisitions and completed
our largest share buyback programme to date of £100m, purchasing 89m shares
(of which 79m were cancelled). With a strong balance sheet, and leverage at
the lower end of our targeted range, we have today launched a new £125m
programme for FY26, which will bring the cumulative total undertaken since
FY23 to £325m. The Board will keep the share buyback programme under review
in light of the timing of value-creating acquisitions, and in order to
maintain leverage within our target range.

 

National Insurance Contributions

Our latest estimate of the cost increase from the rise in Employers' National
Insurance Contributions in FY26 is c.£50m (down from an initial estimate of
c.£60m). Contractual recoveries from customers are expected to be at least
£35m, with the balance mitigated through new margin enhancement initiatives.

 

FY25 results and analyst presentation

Mitie's results for the year ended 31 March 2025 will be released on Thursday,
5 June 2025.  A presentation for analysts will be held at 9.30am.

 

- END -

 Full Year Summary                                FY25        FY24

                                                  Expected    Actual
 Revenue (including share of JVs and associates)  c.£5,100m   £4,511m

 Operating profit before other items              c.£230m     £210m
 Average daily net debt                           c.£265m     £161m

 Closing net debt                                 c.£205m     £81m

 

FY25 financials disclosed in the above trading update are unaudited.

 

For further information

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

 Group IR and Corporate Finance Director

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

 Director of Corporate Affairs

 Neil Bennett                              M: +44 (0)790 000 0777  E: mitie@h-advisors.global (mailto:mitie@h-advisors.global)

 H/Advisors Maitland

 

About Mitie: "Better Places; Thriving Communities"

Founded in 1987, Mitie employs 72,000 colleagues and is the leading
technology-led Facilities Transformation company in the UK.  We are a trusted
partner to around 3,000 blue chip customers across the public and private
sectors, working with them to transform their built estates, and the lived
experience for their colleagues and customers, as well as providing
data-driven insights to inform better decision-making.

In each of our core services of engineering (hard services) and security and
hygiene (soft services) we hold market leadership positions.  We also deliver
projects capabilities in the areas of power and grid connections, building fit
outs & modernisation, decarbonisation, fire & security, and telecoms
infrastructure.  Our sector expertise includes central government, critical
national infrastructure, defence, financial services, healthcare & life
sciences, local government & education, retail & logistics and
transport & aviation.

We hold industry-leading ESG credentials, including a place on the CDP Climate
change A List, and we have received multiple industry awards recently
including B2B Marketing Team of the Year, Best Low Carbon Solution and Net
Zero Carbon Strategy of the year. Targeting Net Zero by the end of 2025, our
ambitious emissions reduction plans have been validated by the Science Based
Targets initiative (SBTi).  We have been recognised as a UK Top Employer for
the seventh consecutive year and Most Admired Company in the Support Services
sector. Find out more at www.mitie.com (http://www.mitie.com/) .

 1  (#_ftnref1) Including share of joint ventures and associates

 2  (#_ftnref2) Before other items

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