REG - MITIE Group PLC - Q1 trading update

MITIEAnnouncement

25/07/2023 07:00

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RNS Number : 0278H  MITIE Group PLC  25 July 2023

 

25 July 2023

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

 

 

Q1 trading update

A good start in Q1 FY24 with double digit revenue growth

 

Mitie Group plc ("Mitie" or "the Group") (LSE: MTO), the UK's leading
facilities management company, today provides a trading update for the
three-month period ended 30 June 2023 ("Q1 FY24" or the "period").

 

Q1 Highlights

 ·         Group revenue 1  (#_ftn1) grew by 11.4% to £1,053m (Q1 FY23: £945m),
           benefiting from an increase in projects and variable work, contract re-pricing
           and prior year acquisitions
 ·         £1.1bn total contract value 2  (#_ftn2) ("TCV") of new contract wins and
           extensions/renewals added, one c£35m per annum contract not renewed in the
           quarter
 ·         Two acquisitions completed for a total consideration of £21m, building on our
           market leading position in the intelligence and technology-led security market
 ·         £16m of shares purchased as part of second £50m share buyback programme
 ·         Average daily net debt of £137m (Q4 FY23: £111m); closing net debt at 30
           June 2023 increased to £99m (31 March 2023: £44m), reflecting our capital
           allocation strategy
 ·         Mitie's ambitious Net Zero carbon emissions targets validated by the Science
           Based Targets Initiatives ("SBTi"); MSCI ESG rating for Mitie reaffirmed as AA

 

Revenue growth

Group revenue for the period (including share of joint ventures and
associates) increased by 11.4% to £1,053m compared with the same quarter last
year (Q1 FY23: £945m).  This good performance was driven by an increase in
projects and variable work, particularly in Central Government & Defence
("CG&D") and Technical Services, as well as contract re-pricing and the
contribution from prior year acquisitions.

 

Contract wins and extensions/renewals

During the quarter we won or extended a number of significant new contracts
with up to £1.1bn TCV (Q1 FY23: £0.8bn TCV).  Notable new wins included the
Defence Infrastructure Organisation ("DIO") in Germany and nearby, the Home
Office, and Phoenix Group. Notable renewals/extensions included the Foreign,
Commonwealth and Development Office ("FCDO"), Lloyds Banking Group, the
Ministry of Justice, Network Rail and Stellantis.

 

One c£35m per annum government contract in CG&D was not renewed in the
quarter and will be handed over at the end of Q4 FY24.  This is the only
significant CG&D contract that has not been successfully renewed or
extended since Interserve FM was acquired in 2020.

 

 

 

 

Acquisitions

We have continued our strategy to be the market leader in intelligence and
technology-led security through the acquisitions of Linx International Group
(April 2023), a leading risk management and consulting business, and RH Irving
Industrials (May 2023), a leading installer of high-tech security and access
controls, for a total consideration of £21m. These businesses will enhance
our ability to support customers preparing to meet the requirements of
Martyn's Law (formerly the 'Protect' Duty).

 

Over the past two years we have completed nine bolt-on acquisitions in the
targeted higher growth, higher margin sectors of decarbonisation, security
technology, and telecoms infrastructure. Acquisitions contributed 1.4% 3 
(#_ftn3) to group revenue growth in Q1 FY24 compared with the same period last
year.

 

Margin Enhancement Initiatives

We have made further progress with our programme of margin enhancement
initiatives in the period. In Mitie Shared Services ("MSS") we have outsourced
various HR support functions, including 'right to work' vetting and
joiners/leavers processing, with the transferred services already delivering
productivity improvements. Finance transactional services continue to be
streamlined.  Within Group Operations, analytical tools and operational
excellence activities are delivering productivity benefits to our contracts,
and technology solutions are being rolled out to our Helpdesk to drive
efficient workforce management.

 

Cost savings delivered in the period are in line with our expectations and, as
previously communicated, we expect to deliver c.£30m of savings in FY24.

 

Divisional performance

 

Specialist Services - change in divisional reporting

As previously announced, from the start of FY24 Landscapes, Spain and Waste
are reported within the 'Business Services' division and Care & Custody is
reported within the 'Communities' division.

 

Business Services

Revenue of £360m was broadly in line with the same quarter last year (Q1
FY23: £361m), with contract re-pricing, increased variable works and the
contribution from the two most recent acquisitions being offset by the
completion of Covid-related contracts, the winding down of the Afghan
Relocations and Assistance contract and the reduction in scope of the Brexit
security contract at UK ports.

 

Technical Services

Revenue of £310m was 21% ahead of the same quarter last year (Q1 FY23:
£257m), driven by the growth in prior year acquisitions, new contract wins
secured or commencing in FY23 (including for BAE Systems and NATS), and the
continued steady recovery in projects.  During the quarter, Technical
Services secured a new five-year contract with Phoenix Group to provide
integrated facilities management (IFM) services across its UK sites.

 

Central Government & Defence

Revenue of £208m was 24% ahead of the same quarter last year (Q1 FY23:
£168m), largely due to a sustained higher level of customer spending on
projects and variable work and contract re-pricing.  During the quarter
CG&D extended its contract with the FCDO and won a new contract with the
DIO to provide FM services for UK Armed Forces in Germany and nearby. This is
the third contract awarded to Mitie under the DIO's new Overseas Prime
Contracts programme, following on from Cyprus and Gibraltar in FY23.

Communities

Revenue of £175m was 10% ahead of the same quarter last year (Q1 FY23:
£159m), driven by an increase in Escorting services within Care &
Custody, contract re-pricing and an increase in lifecycle and projects work.

 

Share buyback programme

As part of our capital allocation strategy, the Board announced a second £50m
share buyback programme for FY24, and £16m of shares were purchased in the
period. In total, 30m shares will be held in treasury to satisfy the 2020 Save
As You Earn scheme vesting in December 2023, with the remaining shares being
cancelled.

 

Net debt

Average daily net debt in Q1 FY24 was £137m, a £26m increase compared to Q4
FY23 (£111m).  Net debt at 30 June 2023 was £99m, an increase of £55m from
31 March 2023. These increases in net debt reflect the two acquisitions
completed in the period (£21m), shares purchased for the buyback programme
(£16m) and Employee Benefit Trust (£2m), and a working capital outflow. We
typically experience a cash outflow from working capital in the first quarter
of the year, as we pay our supply chain for the higher seasonal project works
undertaken in the fourth quarter of the previous year.

Outlook

Traditionally Q1 is the quarter with the lowest revenue for the Group. Given
the good growth achieved, the Board remains confident in the Group's ability
to meet its growth expectations for FY24, particularly as margin enhancement
initiatives continue to be delivered.

 

END

 

 Revenue (including share of joint ventures and associates), £m   3 months to 30 June 2023  3 months to 30 June 2022  % Increase/(decrease)

 Business Services                                                360                       361                       (0.4)
    Cleaning and Security                                         302                       304                       (0.6)
    Landscapes                                                    14                        12                        11.3
    Spain                                                         25                        27                        (6.7)
    Waste                                                         19                        18                        3.8
 Technical Services                                               310                       257                       20.8
 CG&D                                                             208                       168                       24.0
 Communities                                                      175                       159                       10.3
    Education, Healthcare, Campus & Critical                      131                       120                       8.8
    Care & Custody                                                44                        39                        15.0
 Mitie Group                                                      1,053                     945                       11.4

 

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
it is the leading facilities management company in the UK. We offer a range of
services to the public sector through our Central Government & Defence and
Communities (Healthcare, Education, Campus & Critical and Care &
Custody) divisions. Our Technical Services (Engineering Services, Energy,
Water and Real Estate Services) and Business Services (Security, Cleaning,
Landscapes, Spain and Waste) divisions serve private sector customers in areas
such as Financial & Professional Services, Industrials, Retail and
Transport, and increasingly the public sector.

Mitie employs 64,000 people. 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.
Mitie continues to execute its technology-led strategy and in the past twelve
months has received multiple awards and validation for its ambitious near and
long-term science-based emissions reduction targets from the Science Based
Targets initiative (SBTi). Find out more at www.mitie.com
(http://www.mitie.com) .

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

 2  (#_ftnref2) Including estimates for projects and variable work

 3  (#_ftnref3) Excludes acquisitions owned for a full financial year

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