REG - MITIE Group PLC - Q3 Trading Update

MITIEAnnouncement

23/01/2025 07:00

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RNS Number : 3626U  MITIE Group PLC  23 January 2025

23 January 2025

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

 

Q3 FY25 Trading Update

 

Record quarterly revenue, growth +15% yoy

£59m free cash flow generated Q3 year-to-date

Full year guidance for operating profit of c.£225m

 

Mitie Group plc ("Mitie" or "the Group") (LSE: MTO), the UK's leading
facilities transformation company, today provides a trading update for the
three-month period ("Q3 FY25") and the nine-month period ("Q3 YTD") ended 31
December 2024.

 

Q3 FY25 and Q3 YTD highlights

 ·         Record quarterly revenue 1  (#_ftn1) in Q3, up 15% yoy to £1,317m (Q3 FY24:
           £1,146m), reflecting strong operational delivery and continued execution of
           our strategic initiatives
 ·         Good trading momentum, with Q3 revenue 4% above Q2 and 13% above Q1
 ·         TCV 2  (#_ftn2) of wins/renewals/extensions in Q3 YTD up 37% to £4.8bn (FY24
           YTD: £3.5bn)
 ·         Q3 YTD free cash flow generation of £59m (FY24 YTD: £62m), supporting
           proactive capital deployments
 ·         £100m share buyback programme nearing completion (£90m spent to date at
           c.117p)
 ·         Two strategic infill acquisitions completed in Q3; total YTD investment in
           higher growth, higher margin infill M&A of £49m 3  (#_ftn3)
 ·         Closing net debt of £246m (31 March 2024: £81m). Excluding £196m of mainly
           vehicle lease obligations, pre-IFRS 16 closing net debt was £50m (31 March
           2024: £91m cash)
 ·         Issued £60m of US Private Placement (USPP) notes fixed at 5.71% for 7-years,
           following the maturity of a £30m USPP note in December 2024
 ·         The Group is on track to deliver operating profit before other items of
           c.£225m (FY24: £210m) and free cash flow of at least £100m (FY24: £158m)
           in FY25

 

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

"In the foundation year of our new Facilities Transformation Three-Year Plan
(FY25 - FY27), we have continued to make good strategic, operational and
financial progress, reflecting our focus on growth markets and underpinned by
attractive macro trends.

 

"Revenue growth in Q3 was slightly ahead of the half year outturn, and
included the benefits from transformational projects work, scope increases and
record new contract wins in earlier periods. Our contract wins and
extensions/renewals are a leading indicator of future growth, and our strong
performance once again in Q3 is therefore encouraging.

 

"Looking ahead, the investments we are making will enhance our growth and
resilience by strengthening our market leading position, expanding our £25bn
pipeline (+36% year-to-date) and driving cross-sell opportunities. We are
confident in both the outlook for the full year, as well as our progress
towards our ambitious medium-term targets."

 

Revenue growth

Mitie delivered another record revenue performance in Q3 FY25 with revenue up
15% to £1,317m (Q3 FY24: £1,146m). This reflected strong organic growth of
11% - inclusive of 2% contract pricing - through key account growth, scope
increases and projects upsell.

 

Infill M&A contributed a further 4% of inorganic growth, including two
strategic acquisitions completed during the period: Argus Fire - a leading
fire systems business, for £37m; and Grupo Visegurity - a leading Spanish
security business, for €9m.

 

Revenue also grew sequentially quarter-on-quarter, reflecting good trading
momentum and the benefits from investments in the foundation year of our
Three-Year Plan. Q3 FY25 revenue was 4% ahead of Q2 FY25 (£1,266m), and 13%
ahead of Q1 FY25 (£1,164m).

 

In Q3 YTD revenue of £3,747m was 14% ahead of the same period last year
(£3,278m).

 

New contract wins and renewals/extensions

During the quarter we won, extended or renewed a number of significant
contracts worth up to £1.1bn TCV (Q3 FY24: £0.9bn). Contract wins and
extensions or renewals in the nine months to 31 December 2024 increased by 37%
to £4.8bn (FY24 YTD: £3.5bn).

 

Notable Q3 FY25 wins included security for DVLA and Walgreens Boots Alliance,
engineering for First Group, IFM for HMRC and cleaning for Pladis Global.
Notable contract renewals and extensions included security for Byte Dance,
Deutsche Bank and Marks & Spencer, IFM for St George's Hospital and
Thales, and cleaning and landscaping for the Co-operative Group.

 

Q3 FY25 Divisional performance

 

Business Services

Revenue up 15% to £577m (Q3 FY24: £501m), benefiting from net contract wins,
recent acquisitions (including Argus Fire and Grupo Visegurity), 'surge
response' security work for the Home Office (which ended in October), and
pricing. This more than offset the completion of the Afghan Relocations &
Assistance Programme, the Inland Border Force contract and one notable Central
Government contract that was not renewed at the end of FY24.

 

Technical Services

Revenue up 12% to £521m (Q3 FY24: £464m), benefiting from net contract wins,
scope increases on existing contracts, acquisitions (including ESM Power) and
projects. This more than offset one notable private sector contract that
transitioned from Mitie to a global provider at the end of FY24 (although
Mitie continues to deliver higher margin projects work).

 

Communities

Revenue up 21% to £219m (Q3 FY24: £181m), driven by pricing and a further
increase in Immigration Escorting Services.

 

 

 

Share buyback programme

Our current £100m share buyback programme is nearing completion. In the
year-to-date, 77m shares have been purchased at an average price of 117p and a
cost of £90m. This includes c.11m shares held in treasury to satisfy Mitie's
2021 SAYE scheme, vesting in February 2025.

 

Liquidity and funding

In December 2024, Mitie issued £60m of USPP notes with a seven-year maturity
at an interest rate fixed at 5.71%. This issuance followed the maturity of a
£30m 12-year USPP note with a fixed interest rate of 4.04% in the same month.
As a result, Mitie now has £430m of committed funding, comprising £180m of
USPP notes with long-dated maturities between 2030 and 2034 at a blended
average interest rate of 3.86%, alongside a £250m Revolving Credit Facility
(RCF) maturing in October 2028.

 

Net debt

Period end net debt (post-IFRS 16) was £246m, an increase of £165m from 31
March 2024. Excluding lease liabilities of £196m, which largely relate to
vehicles, period end covenant net debt (pre-IFRS 16) was £50m (31 March 2024:
£91m net cash).

 

The YTD increase in net debt reflects £202m of proactive and growing capital
deployments through dividends, buybacks, share purchases for incentive schemes
and M&A, alongside a £22m increase in lease obligations as we continue to
transition the fleet to EV. These cash investments and returns were funded by
good Q3 YTD free cash flow generation of £59m (FY24 YTD: £62m), as well as
additional debt funding in line with our medium-term leverage targets.  Q3
YTD average daily net debt was £249m (FY24 YTD: £158m).

 

Outlook

We expect good revenue momentum to continue in Q4 (typically our strongest
quarter), albeit against a strong prior year comparative for projects work,
and with a reduced contribution from 'surge response' security work and
M&A. As such, we expect Q4 revenue growth to moderate, resulting in low
double-digit growth in FY25 - comfortably ahead of the wider FM market and our
annual high single digit revenue growth target.

 

The acceleration we typically see in public sector projects work in the final
quarter of each year means that our annual free cash flow generation also
tends to be weighted towards this period, as we often receive the cash from
our customers towards the end of the year and pay suppliers early in the
following year under our standard payment terms.

 

The good performance in Q3 underpins our confidence in delivering operating
profit before other items of c.£225m and free cash flow of at least £100m in
FY25.

 

Looking ahead to FY26, our contractual protections and strong customer
relationships, alongside our track record of managing inflation and delivering
cost saving programmes, position us well to manage the Autumn Budget National
Insurance headwind. Discussions with customers to date have been encouraging,
and we continue to expect to pass through or mitigate the impact of the
additional costs, in line with the guidance in our H1 FY25 results.

 

- END -

 Revenue (including share of JVs and associates), £m   Q3: 3 months to 31 Dec 2024  Q3: 3 months to 31 Dec 2023  % Increase /(decrease)  Q2: 3 months to 30 Sept 2024  % Increase/ (decrease)

                                                                                    Restated*                                                                          Q3 v Q2 FY25

 Business Services                                     577                          501                          15.2%                   566                           1.9%
    Cleaning and Security                              401                          325                          23.4%                   402                           (0.2)%
    Central Government                                 91                           111                          (18.0)%                 86                            5.8%
    Landscapes                                         19                           17                           11.8%                   16                            18.8%
    Spain                                              44                           28                           57.1%                   40                            10.0%
    Waste                                              22                           20                           10.0%                   22                            0.0%
 Technical Services                                    521                          464                          12.3%                   469                           11.1%
    Engineering                                        377                          337                          11.9%                   339                           11.2%
    Defence                                            144                          127                          13.4%                   130                           10.8%
 Communities                                           219                          181                          21.0%                   231                           (5.2)%
   Local Government &                              158                          135                          17.0%                   167                           (5.4)%

   Education and Healthcare
    Care & Custody                                     61                           46                           32.6%                   64                            (4.7)%
 Mitie Group                                           1,317                        1,146                        14.9%                   1,266                         4.0%

*Restated to reflect the changes to divisional reporting from the start of
FY25 (as reported in the H1 FY25 results)

For further information

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

 Group IR & 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

 Emma Burdett                                M: +44 (0)797 331 9593

 H/Advisers Maitland

 

About Mitie

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 JVs and associates

 2  (#_ftnref2) Total Contract Value, including estimates for projects and
variable works

 3  (#_ftnref3) Net of cash acquired and excluding performance-linked earnouts

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