TIDMMTO
RNS Number : 9202B
MITIE Group PLC
26 September 2018
26 September 2018
Mitie Group plc
LEI number: 213800MTCLTKEHWZMJ03
Half-year 18/19 pre-close statement
Mitie Group plc ("Mitie" or "the Group"), the UK's leading
facilities management business, today publishes a pre-close
statement on the Group's expected performance in the six months
ending 30 September 2018, ahead of reporting 1H 18/19 results on 22
November 2018.
Highlights
-- Revenue growth in 1H 18/19 expected to be up 2-3%
-- Majority of divisions performing well
-- Operating profit in the period is expected to be in line with
management's expectations, flat to slightly down on prior year, due
to ongoing investment to drive faster top-line growth
-- Project Helix progressing to plan and expected to deliver
c.GBP40m of cumulative in-year cost savings at the previously
guided in-year cost of GBP15m
-- Management's full-year 18/19 expectations and commitment to
the "Connected Workspace" remain unchanged.
Phil Bentley, CEO, commented:
"The majority of our businesses are performing well and our
larger contracts are delivering solid growth in volumes and
profitability. We are maintaining our full-year guidance as project
work volume is increasing, our in-year sales wins are growing and
like-for-like revenue growth has strengthened in the second
quarter. Our Pan-Mitie initiatives to re-engineer our processes -
Project Helix - are on track and delivering in-year and run-rate
savings as previously guided.
"The environment in our industry remains highly competitive,
especially when it comes to contract renewals. We see technology,
especially in our core businesses, playing an increasingly
important part in differentiating our service delivery and
improving margins, and therefore we are continuing to invest in the
"Connected Workspace" to accelerate growth."
Trading update
Group revenue is expected to grow at around 2-3% in 1H 18/19
with solid performance across the majority of our divisions.
Operating profit in 1H 18/19 is likely to be flat to slightly
down on prior year with good underlying progress held back by a
softer performance in Social Housing, unfavourable contract mix in
Cleaning and the write-off of billed mobilisation costs in Care
& Custody. In addition, we continue to invest in customer
service, commercial capabilities to drive growth, and the
"Connected Workspace".
In Engineering Services revenue is expected to be down due to
contracts lost in the prior year and a softer performance in the
Social Housing business. However, profit is expected to be slightly
ahead. In the comparable period last year, the Property Management
operating profit - which had previously been reported as
discontinued - included a litigation settlement charge of
GBP4m.
Security continues to perform well across all its segments due
to prior year wins and good growth in project and variable
works.
Professional Services is expected to show improved profitability
due to the re-balancing of revenue to higher margin activities and
good cost discipline.
Cleaning has continued to see good revenue momentum in 1H 18/19,
driven by the impact of prior year wins. Operating profit is
expected to be lower however, due to unfavourable contract mix
versus last year.
Care & Custody revenues have grown as a result of contract
wins in the prior year, including the significant Home Office
Detention & Escorting contract. The underlying trading
profitability of the division has significantly improved in 1H
18/19 versus last year, but is impacted by expensing c.GBP4m of
mobilisation costs for the D&E contract. These have been billed
and settled by the client.
Catering is expected to be slightly down in the first half of FY
18/19, mainly due to weaker sales in outdoor events.
Central Overheads have increased as we continue to invest in the
foundations to deliver "The Exceptional, Every Day", leadership in
the "Connected Workspace" and accelerated growth.
Order book
The Group has secured a number of significant wins - underpinned
by our technology offering - across a mix of local authority,
banking, industrial, transport, NHS and retail clients. The overall
order book has declined slightly since the financial year-end, with
delivery of long-term contracts being partly counterbalanced by
contract wins and retentions.
We have been successful in qualifying as a supplier on the Crown
Commercial Service (CCS) Framework, which we hope, in time, will
lead to an increase in our public sector business.
Transformation Programme (Project Helix)
Project Helix is progressing to plan in its second year of
implementation. As guided previously, we expect to deliver c.GBP40m
of cumulative in-year cost savings, with direct costs associated
with Project Helix in FY 18/19 to be c.GBP15m.
It remains our expectation that the Helix programme will deliver
c.GBP50m of overall run-rate savings. These savings are allowing us
to make significant investments to enhance our capabilities,
develop our technology-led offering, and improve our customer
service.
We have re-phased the technology-led workflow transformation
project in Engineering Services to ensure it has no impact on our
service delivery capabilities. This will potentially lead to a
delay in the realisation of benefits in outer years, which will be
balanced by the benefits of integrating Property Management into
Engineering Services and other IT savings. Other elements of the
Engineering Services transformation are progressing to plan.
Cash and Covenants
Since the start of the 18/19 financial year, we have held the
use of invoice discounting at around the 17/18 year-end level. At
the same time, we have also taken steps to reduce the level of
uptake in our supply chain finance scheme by paying some of our
suppliers more quickly.
As a result, we expect average daily net debt to be c.GBP40m
higher than last year's 1H level of GBP278m. Closing net debt at 30
September 2018 is expected to be in the range of GBP230m to GBP250m
reflecting the normal seasonal increase from March to September. We
expect to continue to operate within our banking covenants.
Outlook
Management's outlook for the FY 18/19 performance is unchanged.
We expect to deliver modest top-line growth this year and are
making good progress in the second year of our transformation. We
remain committed to our medium-term target of improving operating
profit margins to 4.5%-5.5%.
Half-year 18/19 results
Mitie expects to publish its financial and operational results
for the period ending on 30 September 2018 on Thursday, 22 November
2018. Financial results, including for the comparable period, will
be reported under IFRS 15.
For further information please contact:
Anna Gavrilova
Head of Investor
Relations
T: +44 (0) 203 123 M: +44 (0) 738 443 E: Anna.Gavrilova@mitie.com
8675 9112
Claire Lovegrove
Head of Media Relations, Corporate Affairs
T: +44 (0)203 123 M: +44 (0)790 027 E: Claire.Lovegrove@mitie.com
8716 6400
Notes for editors
About Mitie Group
Founded in 1987, Mitie is the UK's leading facilities management
and professional services company. We offer a range of specialist
services including Engineering Services, Security, Energy and
Property Consultancy within Professional Services, Catering,
Cleaning, Pest Control, Landscaping, Custody Support Services, and
Social Housing maintenance.
Mitie employs 49,000 people across the UK, looking after a
large, diverse blue-chip customer base, from banks and retailers,
to hospitals, schools and government departments. We take care of
our customers' people and buildings, by delivering the basics
brilliantly and by deploying advanced technology to reduce the key
cost drivers of our customers. We are pioneers in the Connected
Workspace, using smart analytics to provide valuable insight and to
create outstanding work environments for our customers.
Find out more at www.mitie.com.
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END
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