REG - MITIE Group PLC - Q1 FY25 Trading Update

MITIEAnnouncement

23/07/2024 07:00

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RNS Number : 3554X  MITIE Group PLC  23 July 2024

23 July 2024

Mitie Group plc

 

Q1 FY25 Trading Update

 

Good trading momentum continues with Q1 revenue up 10.5%

Significant contract wins and renewals across public and private sectors

 

Mitie Group plc ("Mitie" or "the Group") (LSE: MTO), the UK's leading
Facilities Transformation company, provides a trading update for the
three-month period ended 30 June 2024 ("Q1 FY25" or the "period").

 

Q1 Highlights

 ·         Revenue 1  (#_ftn1) grew by 10.5% to £1,164m (Q1 FY24: £1,053m), benefiting
           from prior year acquisitions, an increase in projects and variable work and
           pricing
 ·         £2.0bn TCV 2  (#_ftn2) (Q1 FY24: £1.1bn) of contract wins and
           extensions/renewals, including a three-year extension with one of our largest
           customers and several 'marquee' Key Account wins
 ·         Good start to new three-year programme of margin enhancement initiatives; on
           track to deliver c.£20m of cost savings in FY25
 ·         FY25 share buyback programme of £50m commenced in April 2024; 21m shares
           purchased to date at 119p average price (of which 10m shares have been
           cancelled)
 ·         Closing net debt of £182m (31 March 2024: £81m), reflecting a seasonal
           working capital outflow, leases and capital allocations. Average daily net
           debt of £173m (Q4 FY24: £168m)
 ·         ESM Power acquired after the period end for £5.5m initial cash consideration,
           enhancing the Group's presence in the growing high voltage power connections
           market

 

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

"The good trading momentum from last year has continued into the first quarter
of FY25, with double digit revenue growth from our Projects business,
including the benefit from the previous year's acquisitions. Contract wins and
renewals also remained high, following a record final quarter in FY24,
reinforcing the strength of our market leading, technology and data-rich
capabilities.

 

"This will be a year of investment in our new Facilities Transformation
Three-Year Plan (FY25 - FY27), through which we expect to accelerate growth
and deliver superior financial returns, from adding further Key Accounts,
growth in Projects and infill M&A.

 

"We have made a good start to our new programme of margin enhancement
initiatives which will raise the operating margin over the medium-term, and we
remain on track to deliver our high-single digit revenue growth expectations
for the year."

 

Revenue growth

Revenue for the period (including share of joint ventures and associates)
increased by 10.5% to £1,164m compared with the same quarter last year (Q1
FY24: £1,053m). This good performance was driven by the contribution from
prior year acquisitions, an increase in projects and variable work, and
pricing, which more than offset net contract losses and the completion of
certain short-term public sector contracts in the prior year.

 

The increase included organic growth of 4.4%, inclusive of 3.2% pricing, with
infill M&A contributing a further 6.1% of inorganic growth.

Contract wins and extensions/renewals

During the quarter we won or extended/renewed a number of significant
contracts with up to £2.0bn TCV (Q1 FY24: £1.1bn TCV), following on from a
record final quarter in the prior year.

 

Notable new 'marquee' Key Account wins included security services for Aldi,
British Airways and Lidl, Community Health Partnerships cleaning and security,
Dublin City University engineering services, EY IFM and projects, Halfords
engineering and Fire & Security services, Home Office scope increases, and
the Ministry of Justice Millsike Prison contract.

 

We secured a further three-year extension with Lloyds Banking Group, our
largest private sector customer. Other notable renewals/extensions included
Bank of Ireland, Bellrock, Marsh & McLennan Companies, NHS Property
Services and Royal London Mutual Insurance.

 

Acquisitions

Shortly after the period end, we exchanged contracts to acquire ESM Power, a
leading high voltage electrical engineering business, for £5.5m initial cash
consideration. ESM Power will enhance Mitie's expertise in the growing high
voltage power connections market, adding design capabilities, private network
solutions and maintenance to support our customers in the upgrade and
decarbonisation of their power requirements. Completion is expected on 31 July
2024.

 

We continue to target higher growth, higher margin infill M&A to deepen
our capabilities in the areas of Buildings Infrastructure, Decarbonisation and
Fire & Security.

 

Margin Enhancement Initiatives

We have made a good start to our new three-year programme of margin
enhancement initiatives, shifting our focus from general overheads to
operations and in-contract efficiencies. In Q1 we identified, and started to
implement, improvements to account structures across our top 10 Key Accounts,
reduced the use of third-party contractors in Waste, Landscapes and Fire &
Security and prioritised workstreams to improve first time fix rates for
assets.  We remain on track to deliver c.£20m of cost savings through margin
enhancement initiatives in FY25.

 

Divisional performance

 

Business Services

Revenue of £403m was 11.9% better than the same quarter last year (Q1 FY24:
£360m), driven by contract pricing and the contribution from prior year
acquisitions, which more than offset the completion of certain short-term
public sector contracts in FY24.

 

Technical Services

Revenue of £326m was 5.2% better than the same quarter last year (Q1 FY24:
£310m), primarily driven by the acquisition of JCA Engineering in the prior
year and an increase in projects work on IFM contracts, including for the BBC
and BAE.  This more than offset the loss of one notable private sector
contract that completed at the end of FY24.

 

Central Government & Defence

Revenue of £217m was 4.3% ahead of the same quarter last year (Q1 FY24:
£208m), largely driven by a new contract to maintain the UK Army base estate
in Germany (mobilised 1 June 2024), an increase in projects work, contract
pricing and the consolidation of Landmarc. This more than offset the loss of
one notable public sector contract at the end of FY24.

 

Communities

Revenue of £218m was 24.2% ahead of the same quarter last year (Q1 FY24:
£175m), largely due to further increases in the provision of services for the
Immigration Escorting Services contract within Care & Custody, pricing,
and net contract wins.

 

Share buyback programme

As part of our continued Capital Allocation policy, in April 2024 we announced
a £50m share buyback programme for FY25.  To date, 21m shares have been
purchased at an average price of 119p, of which 11m shares have been held in
treasury to satisfy the 2021 Save As You Earn scheme (vesting in January
2025), with all shares purchased in excess of this being cancelled.  We will
continue to return excess funds to shareholders via share buybacks, increasing
leverage towards our targeted leverage range of 0.75x to 1.5x (average net
debt / EBITDA). At 30 June 2024, our trailing 12-month leverage was 0.6x.

 

Net debt

Net debt at 30 June 2024 was £182m, an increase of £101m from 31 March 2024.
 This increase in net debt reflects an expected working capital outflow, as
we pay our supply chain for the increased volume of project works undertaken
in the final quarter of the prior year, as well as the ongoing investment into
the projects business, and some longer customer payment terms.

There has also been an £11m increase in lease obligations in the quarter as
we continue to transition our fleet to EV. Finally, £14m of share purchases
for the buyback programme and £9m of share purchases for the Employee Benefit
Trust were completed, a £4m dividend was paid to the Landmarc minority
shareholder, and £8m of payments for employment-linked earnouts/completion
accounts on acquisitions were paid out.  Average daily net debt in Q1 FY25
was £173m (Q4 FY24: £168m).

Financial Calendar

The Group will report future results on the following dates:

·    H1 FY25 Results - 21 November 2024

·    Q3 FY25 Trading Update - 23 January 2025

 

 

END

 Revenue (including share of joint ventures and associates), £m   3 months to 30 June 2024  3 months to 30 June 2023  % Increase/(decrease)

 Business Services                                                403                       360                       11.9
    Cleaning and Security                                         329                       302                       8.9
    Landscapes                                                    15                        14                        6.2
    Spain                                                         39                        25                        56.6
    Waste                                                         20                        19                        5.2
 Technical Services                                               326                       310                       5.2
 CG&D                                                             217                       208                       4.3
 Communities                                                      218                       175                       24.2
    Local Government & Education                                  66                        63                        6.8
    Healthcare                                                    77                        68                        12.3
    Care & Custody                                                75                        44                        68.9
 Mitie Group                                                      1,164                     1,053                     10.5

 

 

 

 

 

 

 

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

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

 FTI Consulting

About Mitie

Founded in 1987, Mitie employs 68,000 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
Cleaning & Hygiene (Soft Services) we hold market leadership positions. We
also upsell Projects capabilities in the areas of building fitouts and
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.

Over the previous Three-Year Plan (FY22 - FY24) Mitie delivered a Total
Shareholder Return (TSR) of 80% (#10 in FTSE 250). Our new Facilities
Transformation Three-Year Plan (FY25 - FY27) will extend Mitie's market
leadership position through accelerated growth and deliver enhanced
shareholder returns.

We hold industry-leading ESG credentials, including a place on the CDP Climate
change A List, and in the past 12 months we have received multiple industry
awards 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 sixth consecutive year. Find out more at www.mitie.com
(http://www.mitie.com/) .

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

 2  (#_ftnref2) Total Contract Value (TCV); including estimates for projects
and variable work

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