RNS Number:9505S
MITIE Group PLC
08 December 2003
EMBARGO: THE CONTENTS OF THIS RELEASE
ARE SUBJECT TO EMBARGO UNDER STOCK
EXCHANGE REGULATIONS UNTIL 0700 AM
8 DEC 2003
MITIE Group PLC
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
"We have produced another good performance in the first six months and we are
confident that MITIE will have a successful year." Ian R Stewart, Chief
Executive.
* Turnover growth driven by expansion in support services
* Consistent profit margins
* Successful integration of acquisitions
* 38% increase in dividend
* High levels of contract retentions and awards
FINANCIAL HIGHLIGHTS 2003 2002
Turnover #316.3m #277.1m up 14%
Profit before tax - pre goodwill # 18.5m # 16.0m up 16%
Profit before tax # 17.6m # 15.4m up 14%
Earnings per share - pre goodwill 3.7p 3.5p up 6%
Earnings per share 3.4p 3.3p up 3%
Dividend per share 1.1p 0.8p up 38%
Notes:
MITIE: Management Incentive Through Investment Equity
ACTIVITY: MITIE, the services company, maintains, manages and improves buildings
and infrastructure for its customers.
FOR FURTHER INFORMATION:
On 8 December 2003:
Ian Stewart, Chief Executive, MITIE Group PLC Mobile: 07979 701002
Ruby McGregor-Smith, Finance Director, MITIE Group PLC Mobile: 07979 701004
John Telling, Corporate Affairs, MITIE Group PLC Mobile: 07979 701006
at UBS Investment Bank, 1 Finsbury Avenue Press Room: 020 7568 8737
Switchboard: 020 7567 8000
Subsequently:
MITIE Group PLC, Head Office 01934 862006
Chief Executive's Review
David Telling
This review takes place at a time of great sadness throughout MITIE and beyond.
Our founder, David Telling, died on 31 October 2003 after a long illness. Many
tributes have already been paid by a host of luminaries to the amazing
commercial and entrepreneurial abilities of David. I would like to take this
opportunity to pay my own tribute.
I first met David in 1973 when his former company HAT acquired ICC Cleaning
Services for whom I then worked. Life was never dull working for David in those
days but nothing was to compare with the fireball of energy that was released
after the hostile acquisition of HAT by BET in 1986.
That event proved to be the catalyst that brought together two fundamental
elements in David's philosophy - Opportunity and Ownership. The opportunity to
become successful and an environment that allowed you to own that success and
not to have it snatched from you by people and events outside your control.
Underpinning the concept of MITIE was David's innate belief in fairness and
justice. A belief that you could structure a highly successful company that
could decide its own future free from the pain, the grief and the traumas caused
by commercial predators. Without David's drive and focus MITIE would not exist.
His vision was to form a Group in which the employees were given the opportunity
to acquire equity in their own companies which on earn-out would provide them
with wealth far and away beyond their wildest dreams. He was selfless and an
inspirational leader. The words "thank you" and gratitude just do not convey the
depth of appreciation the employee shareholders of MITIE have.
The best tribute we can ever pay to David is to keep his vision burning
brightly. To make sure that his legacy lives on not just for this, but also for
succeeding generations of MITIE entrepreneurs.
Operational Review
Our results for the period show a consistent level of growth and I am pleased
with our performance. We have maintained margins across all of our services. The
two acquisitions, Trident Safeguards Ltd and Eagle Pest Control Services UK Ltd,
are being successfully integrated and four traditional MITIE start-up companies
have commenced trading.
We have continued to increase our market share and have made particularly good
progress in Catering Services and Security.
Financial results
MITIE has performed well over the six months to 30 September 2003. We have
maintained the growth in profit and turnover at rates in excess of 10%.
* Turnover was #316.3m, an increase of 14.2% over last year.
* Profit before tax (pre goodwill) increased by 15.7% to #18.5m.
* Earnings per share (pre goodwill) rose by 5.7% to 3.7p.
At 30 September 2003, our cash balance was #38.2m. This is #16.8m lower than our
March 2003 figure. #11.4m of this change relates to the acquisitions of Trident
Safeguards and Eagle Pest Control and the remainder relates to the increased
working capital requirements of MITIE in the period.
Subsequent to 30 September 2003, we acquired Executive Holdings Ltd for #9.99m
(see note 6).
As we have previously stated, we recognise that cash ultimately belongs to our
Shareholders and that it is our responsibility to ensure that they receive the
maximum long term return on their assets. We intend to maintain a reasonable
level of cash within the business. This will ensure that we have a solid Balance
Sheet that will give our customers continued assurance about MITIE's financial
stability. We also intend to continue with strategic bolt on acquisitions where
appropriate.
Dividend
The Board has declared an interim dividend of 1.1p per share (2002:0.8p), an
increase of 38%. Historically MITIE has increased dividends in line with
earnings. The Board has decided that, in recognition of the cash generative
nature of our business and the reduction in emphasis on capital-intensive
activities, the dividend cover can now be reduced.
Revenue visibility
Our forward visibility of revenue continues to increase as contract terms
lengthen. As a result, 54% of next year's revenue is already committed.
Market sectors
MITIE has a broad mix of customers and performs over 22,000 contracts each year.
We source our work from the majority of market sectors. In the first half of the
year, 67% of our work came from the private sector and 33% from the public
sector.
Operational Performance
Support Services
Support Services has continued to make good progress. The companies continue to
work together to deliver combinations of our services. Examples of bundled
contract awards in the past six months include: Brent Cross Shopping Centre,
which had been a maintenance contract but is now a full FM contract where we are
delivering management, cleaning, security, maintenance and waste management;
Dell Computer Corporation, where we are delivering cleaning and security; and
Newcastle City Airport, where we are providing cleaning and maintenance
services. Support Services is becoming an increasingly important part of MITIE
and will be our main focus for future growth.
Cleaning
Cleaning has performed satisfactorily in the period and has been successful in
securing contract extensions and renewals with the Palace of Westminster and
BNFL Magnox in Oldbury (South West). Contract awards included Clifford Chance,
Del Monte and Computacenter. We started MITIE Industrial Cleaning (North) Ltd
and MITIE Services (Retail) Ltd which has secured contracts with Tesco and the
John Lewis Partnership.
Catering Services
Catering has developed well. It has completed the mobilisation of the
Rolls-Royce contract and has renewed and doubled the size of its contract with
the MoD for the Cotswolds and Gloucestershire Garrisons.
Landscaping Services and Pest Control Services
Landscaping continues to gain further business and expand geographically with a
new landscape company in the North.
Our pest control acquisition, Eagle Pest Control, has produced initial results
in line with targets and we are pleased with the way the business is being
integrated.
Security Services
The acquisitions of Trident Safeguards and post period end Executive Holdings
Ltd have taken our security business to a different level. We now have a
business that is of sufficient critical mass that we can service our customers
nationally. The Trident team has integrated well and the initial results are
encouraging.
Managed Services
Managed Services has had an excellent period of trading. The National Probation
Service contracts are now fully mobilised and we have been awarded additional
work with Land Securities Trillium for Employment Services. In addition, a
number of FM contracts have been secured to deliver services to PFI projects
over the next 25 years.
Business Services
Business Services is carving a niche in London providing post room, telephony,
document handling, and reception services to law firms and financial
institutions. Contract awards in the period include The Financial Services
Authority and Rolls-Royce in Derby.
Engineering Maintenance
Engineering Maintenance has produced solid results and increased its national
contracts base with awards which include Ashworth Hospital and the National
Blood Transfusion Service. The rate of contract renewals has been high and we
are seeing the benefit of its focus on providing a first class quality service
with well trained competent employees.
Building Services
Building Services is more exposed to the cyclical nature of the construction
market and has not been growing at its historic rates. There are some
encouraging signs but a consistent picture has yet to emerge.
Engineering Services
Engineering has suffered due to contract start dates being deferred, but I am
pleased to say that during the last two months of the period under review, there
were signs that this situation was beginning to ease.
The South East is still showing few signs of a private sector recovery and the
business has diversified into a higher number of public sector contracts. The
regions, however, remain strong, particularly the South West, Wales and the
North of England. Contract awards include a significant contract with Annington
Homes for utilities and infrastructure maintenance. Our company which
specialises in social housing has extended its contract with Rochdale City
Council. We have started two new companies to extend our regional coverage,
MITIE Engineering Services (North East) Ltd and MITIE Engineering Services
(Edinburgh) Ltd.
Property Services
Property Services has had a slower start to the year than was anticipated. The
South East region has experienced a difficult first six months. Although, orders
are now beginning to flow in and we are looking forward to a better second half
of the year.
The major contract award has been with Royal Sun Alliance to perform maintenance
and repair works in Scotland and the South of England. Other significant
contracts include a roofing project with Halifax Schools and a repair and
painting term contract with Warwick County Council. A contract to fit out the
Superstar Dressing Rooms at the BBC TV Centre in White City has been won,
together with work for Arcadia.
Generation
Generation has performed steadily during the first six months. A new branch has
been opened in Northampton to increase national coverage. Generation has now
started to supply equipment to the film industry.
Outlook
MITIE has had a history of continuous growth for over sixteen years. We have a
business that is sufficiently flexible to be able to respond to change and
produce good results. As the needs of our customers change we will always ensure
that we are in a position to react to their demands. We have a loyal and highly
skilled workforce together with motivated management who respond to the
increasing demand for integrated, self delivered services, nationally. The Board
remains confident that this trend will continue and we will have another
successful year.
Ian R Stewart
Chief Executive
8 December 2003
Summary Group Profit & Loss Account
--------------------------------------------------
Six months to 30 September Year to
31 March
2003 2002 2003
(unaudited) (unaudited) (audited)
#'000's #'000's #000's
-------- -------- --------
Turnover - Continuing 316,321 273,503 562,288
operations
- Discontinued - 3,552 3,552
operations -------- -------- --------
316,321 277,055 565,840
---------------------------- -------- --- -------- --- -------- ---
Operating
profit (before
goodwill
amortisation) 17,529 15,289 32,648
Goodwill
amortisation (885) (577) (2,324)
---------------------------- -------- --- -------- --- -------- ---
Operating Profit
- Continuing 16,644 14,434 30,046
operations
- Discontinued - 278 278
operations -------- -------- --------
16,644 14,712 30,324
Interest
receivable 932 668 1,465
-------- -------- --------
Profit before
tax 17,576 15,380 31,789
Tax (5,748) (4,731) (10,188)
-------- -------- --------
Profit after
tax 11,828 10,649 21,601
Minority
interest (1,621) (933) (2,125)
-------- -------- --------
Profit for the
period 10,207 9,716 19,476
Dividend (3,327) (2,392) (5,736)
-------- -------- --------
Retained
profit 6,880 7,324 13,740
-------- -------- --------
Earnings per share
- Basic 3.4p 3.3p 6.5p
- Diluted 3.4p 3.3p 6.5p
- Basic before
goodwill
amortisation 3.7p 3.5p 7.3p
-------- -------- --------
Profit on ordinary activities
before taxation and goodwill
amortisation and impairment 18,461 15,957 34,113
Summary Group Balance Sheet
--------------------------------------------------
At At At
30 30 31
September September March
2003 2002 2003
(unaudited) (unaudited) (audited)
#000's #000's #000's
-------- -------- ---------
Fixed assets
Intangible
assets 37,108 23,092 24,291
Tangible
assets 40,625 37,921 37,277
-------- -------- ---------
77,733 61,013 61,568
-------- -------- ---------
Cash at bank
and in hand 38,157 48,098 54,960
Current asset
investments 6,344 3,931 3,880
Other current
assets 143,692 99,810 117,588
Creditors -
due within one
year (135,947) (107,978) (122,381)
-------- -------- ---------
Net current
assets 52,246 43,861 54,047
-------- -------- ---------
Total assets
less current
liabilities 129,979 104,874 115,615
Creditors -
due after more
than one year (3,417) - (29)
Provision for
liabilities
and charges (5,262) (1,145) (3,022)
-------- -------- ---------
121,300 103,729 112,564
-------- -------- ---------
Capital and
Reserves
Called up
share capital 7,561 7,474 7,556
Share premium
account 42,278 39,221 42,048
Other reserves 486 (497) 486
Profit & loss
account 61,690 51,476 54,810
-------- -------- ---------
Equity
Shareholders'
funds 112,015 97,674 104,900
Minority
interest 9,285 6,055 7,664
-------- -------- ---------
121,300 103,729 112,564
-------- -------- ---------
Summary Group Cash Flow
--------------------------------------------------
Six months to 30 September Year to
31 March
2003 2002 2003
(unaudited)(unaudited)(audited)
#'000's #'000's #'000's
Net cash inflow from operating activities 13,562 21,800 48,474
Returns on investments and servicing of finance 793 668 1,495
Tax paid (5,630) (4,823) (10,655)
Capital expenditure (8,444) (5,836) (8,007)
Acquisitions (11,375) (961) (4,766)
Disposals - 12,919 11,380
Equity dividends paid (3,423) (2,154) (7,035)
-------- -------- ---------
Net cash inflow before financing (14,517) 21,613 30,886
Management of liquid resources (2,464) - (3,880)
Financing
Issue of share capital 235 2,170 2,862
Cash outflow from decrease in debt (57) (791) (14)
-------- -------- ---------
(Decrease)/increase in cash in the period (16,803) 22,992 29,854
-------- -------- ---------
Reconciliation of net cash flow to movements in net
funds:
(Decrease)/increase in cash in the period (16,803) 22,992 29,854
Cash inflow from movement in debt and lease
financing 69 791 765
Cash inflow from movement in liquid resources 2,464 - 3,880
-------- -------- ---------
Movement in net funds in the period (14,270) 23,783 34,499
Opening net funds 58,799 24,300 24,300
-------- -------- ---------
Closing net funds 44,529 48,083 58,799
-------- -------- ---------
Reconciliation of operating profit to operating
cash flows :
Operating profit 16,644 14,712 30,324
Depreciation 6,173 5,301 10,845
Amortisation of goodwill 885 577 2,324
Profit on sale of tangible fixed assets (499) (283) (525)
(Increase)/decrease in working capital (9,641) 1,493 5,506
-------- -------- ---------
Net cash inflow from operating activities 13,562 21,800 48,474
-------- -------- ---------
Notes
1 Basis of preparation
The Interim Financial Statements have been prepared on the basis of accounting
policies consistent with those set out in the Group's Annual Report & Accounts
for the year ended 31 March 2003 and were approved by the Board of Directors on
5 December 2003. The accounting information contained in the Interim Report for
2004 does not comprise a full set of accounts within the meaning of Section 240
of the Companies Act 1985. The interim results for the periods to 30 September
2002 and 2003 are unaudited and unreviewed by our auditors. The financial
information for the year ended 31 March 2003 has been extracted from the Annual
Report & Accounts which received an unqualified auditors' report and has been
delivered to the Registrar of Companies.
2 Segmental analysis
-------- ------- -------- -------- -------
Activity TURNOVER PRE-TAX PROFIT PROFIT BEFORE PRE-TAX
PROFIT BEFORE TAX INTEREST, TAX PROFIT
AND AND GOODWILL MARGIN
GOODWILL
#'000 #'000 #'000 #'000 %
-------- ------- -------- -------- -------
Six months to 30
September 2003
Support
Services 159,611 10,333 10,751 10,433 6.5%
Building
Services 156,710 7,243 7,710 7,096 4.6%
-------- ------- -------- -------- -------
------------------- -------- ------- -------- -------- -------
Total 316,321 17,576 18,461 17,529 5.6%
------------------- -------- ------- -------- -------- -------
Six months to 30
September 2002
Support
Services 126,223 7,878 8,075 7,910 6.2%
Building
Services 150,832 7,502 7,882 7,379 5.0%
------------------- -------- ------- -------- -------- -------
Total 277,055 15,380 15,957 15,289 5.6%
------------------- -------- ------- -------- -------- -------
Included within the Support Services segment above are amounts that relate to
companies acquired in the year. These include turnover of #7,135,000 (2002:
#nil) and pre-tax profit of #406,000 (2002: #nil).
Included within the Building Services segment above are amounts that relate to
discontinued activities. These include turnover of #nil (2002: #3,552,000) and
pre-tax profit of #nil (2002: #202,000).
----------- ---------- --------- --------
Turnover 2003 2002 2002 TOTAL
CONTINUING CONTINUING DISCONTINUED
ACTIVITIES* ACTIVITIES OPERATIONS
#'000 #'000 #'000 #'000
----------- ---------- --------- --------
Support
Services
Cleaning 74,510 66,764 - 66,764
Catering
Services 4,448 1,914 - 1,914
Landscaping
and Pest
Control 1,408 - - -
Security 11,175 3,003 - 3,003
Managed
Services 39,018 31,882 - 31,882
Engineering
Maintenance 29,052 22,660 - 22,660
---------------- ----------- ---------- --------- --------
Total 159,611 126,223 - 126,223
---------------- ----------- ---------- --------- --------
Building
Services
Engineering 82,746 74,245 - 74,245
Property
Services 58,603 59,749 - 59,749
Generation 15,361 13,286 3,552 16,838
---------------- ----------- ---------- --------- --------
Total 156,710 147,280 3,552 150,832
---------------- ----------- ---------- --------- --------
*There are no discontinued activities in the period
3 Dividend
The interim dividend of 1.1p per Ordinary Share will be paid on 31 March 2004 to
Shareholders on the Register on 5 March 2004.
4 Earnings per share
The calculation of earnings per share is based upon the profit for the period
attributable to holders of Ordinary Shares. The weighted average number of
Ordinary Shares in issue for the period was 302,302,600 (30 September 2002 -
295,922,364; year to 31 March 2003 - 297,979,470). The calculation of diluted
earnings per share using the principles of FRS14 is based on a weighted average
number of shares, allowing for the exercise of outstanding share options, of
302,513,600 (30 September 2002 - 297,572,232; year to 31 March 2003
-298,190,470). The calculation of earnings per share before goodwill
amortisation follows the guidelines set down by the Institute of Investment
Management and Research (IIMR) and is based on the profit after deduction of tax
and minority interest but before goodwill amortisation of #885,000 (2003 -
#577,000; year to 31 March 2003 - #2,324,000).
5 Purchase of subsidiary undertakings
----------- --------- ---------
Eagle Pest Trident Total
Control Safeguards
Services UK Ltd Ltd
#'000 #'000 #'000
----------- --------- ---------
Fixed assets 472 109 581
Work in
progress and
stocks 77 - 77
Debtors 1,024 3,965 4,989
Bank and cash 197 (275) (78)
Creditors (630) (2,717) (3,347)
Tax (107) (320) (427)
----------------------------- ----------- --------- ---------
1,033 762 1,795
Goodwill 3,039 10,663 13,702
----------------------------- ----------- --------- ---------
Total purchase
consideration 4,072 11,425 15,497
Contingent
consideration (1,200) (3,000) (4,200)
----------------------------- ----------- --------- ---------
Cash
consideration 2,872 8,425 11,297
Bank and cash
acquired (197) 275 78
----------------------------- ----------- --------- ---------
Cash outflow
in the period 2,675 8,700 11,375
----------------------------- ----------- --------- ---------
The book values which also equate to the provisional fair values of the assets
and liabilities acquired are noted above.
The effects of the acquisitions on the results for the Group for the half year
to 30 September 2003 are not material and therefore are not shown separately on
the Profit & Loss Account and Summary Group Cash Flow.
Trident Safeguards was acquired on 2 July 2003. The company's profit before
taxation was #303,000 in the period from acquisition to 30 September 2003 (year
ended 31 March 2003: #812,000).
Eagle Pest Control was acquired on 3 July 2003. The company's profit before
taxation was #103,000 in the period from acquisition to 30 September 2003 (year
ended 31 March 2003: #447,000).
6 Subsequent events
On 7 October 2003, MITIE acquired minority shareholdings of the following four
subsidiary companies in accordance with their Shareholders' Agreements:
MITIE Engineering Maintenance Ltd ("MEM");
MITIE Property Services (Midlands) Ltd ("MPS Midlands");
MITIE Engineering Services (Peninsula) Ltd ("MES Peninsula"); and
MITIE Greencote Ltd ("Greencote").
The total consideration for all four acquisitions amounted to #8,339,000
satisfied as to #211,000 in cash and as to the remaining #8,128,000 by the issue
of 6,608,203 new Ordinary Shares of 2.5p each in MITIE, valued at #1.23 per
share (being the mid market price per MITIE share on 2 October 2003). As a
result of these acquisitions MITIE now owns 100% of MEM, MPS Midlands and MES
Peninsula and 96.9% of Greencote.
On 4 November 2003, MITIE acquired 100% of the issued share capital of Executive
Holdings Ltd ("Executive"), a security and cleaning business, for #9.99m.
Executive's unaudited accounts for the 52 weeks to 6 October 2003 showed
turnover of #39.3m and operating profit before amortisation of #638,000. There
will be limited synergy benefit in the current financial year, but targeted cost
savings of #1.25m are expected in 2004/2005. The last audited accounts for
Executive are for the 32 weeks ending 6 October 2002 and show turnover of
#23.8m, operating profit before amortisation of #180,000, loss before tax of
#923,000 and net assets of #3.8m. Included in the loss before tax was an amount
of #660,000 for the goodwill impairment of a business in which Executive no
longer has an interest. Included in the net assets was an amount of #5.6m of
goodwill.
Copies of this statement will be posted to all Shareholders and will be
available to the public from the Company's Head Office at The Stable Block,
Barley Wood, Wrington, Bristol BS40 5SA.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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