TIDMMTO
RNS Number : 2447U
MITIE Group PLC
28 March 2019
28 March 2019
Mitie Group plc
LEI number: 213800MTCLTKEHWZMJ03
Full-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 for the fiscal year
ending 31 March 2019 (FY 18/19), subject to final audit, ahead of
reporting full-year 18/19 results on 6 June 2019.
Highlights and narrative exclude the discontinued operations of
the Pest Control and Social Housing businesses, but include the
acquisition of Vision Security Group (VSG) completed on 26 October
2018, unless otherwise stated. Prior year numbers have been
restated to exclude the discontinued operations of the Pest Control
and Social Housing businesses and are subject to final audit.
Highlights
* Revenue growth for FY 18/19 expected to be 7-8% with
underlying revenue growth (excluding the VSG
acquisition) of c.4%
* Operating profit before other items is expected to be
in the range GBP84-87m with continued profit growth
in the majority of our businesses
* Net debt continues to reduce (GBP160-180m) following
resolution of working capital issues related to
outsourcing of transaction processing earlier in FY
18/19
* Project Helix on track to deliver run-rate benefits
of c.GBP45m in FY 18/19 and c.GBP50m by the end of FY
19/20.
Phil Bentley, CEO, commented:
"The second year of our transformation has seen steady progress
in Mitie. Project Helix is now largely complete and we will be
turning our focus to the IT Platform underpinning our Engineering
Services business. We are pleased to be growing revenues and our
cost saving initiatives are allowing us to invest in the "Connected
Workspace" as a differentiator and driver of digital transformation
both for Mitie and our clients. It is therefore encouraging to see
that our Net Promoter Score (NPS) has, once again, improved
materially over the last 12 months to +12 (from -10).
"This is against a backdrop of undoubted challenges for the
outsourcing sector, and some short-term economic uncertainty
impacting clients' capital programmes and willingness to enter into
longer term integrated contract commitments. Although our order
book has softened, we have focussed on adding more value and
services to our top clients and, as a result, we have seen
continued growth in these accounts throughout FY 18/19."
Trading update
Group revenue is expected to grow 7-8% in FY 18/19 (compared to
an unaudited FY 17/18 revenue from continuing operations of
GBP2,030.6m), with organic growth of c.4%.
Operating profit before other items in FY 18/19 is expected to
be in the range GBP84-87m. This is above our restated unaudited FY
17/18 comparative from continuing operations of GBP83.2m due to
revenue growth, cost savings and a positive contribution from VSG,
partly offset by continued reinvestment into the business. The
reinvestment includes reinstating staff incentive schemes which
were suspended during the first two years of the turnaround.
Engineering Services revenue is expected to be flat with growth
in the larger strategic accounts offset by the impact of contracts
lost during the preceding year, as well as proactive exiting of
certain low margin accounts. Operating profit is expected to be up
on the back of improved sales performance in our larger contracts
and operational efficiencies.
Security has continued to perform well with good underlying
revenue and profit growth. In addition, the integration of VSG is
progressing well with synergy benefits starting to flow
through.
Professional Services revenue is expected to be slightly down
following the withdrawal from low margin international contracts.
Operating profit in FY 18/19 is expected to increase after
refocusing the business on higher margin activities and good cost
discipline.
As expected, in H2 18/19 Cleaning revenue growth has slowed
slightly. Overall FY 18/19 operating profit is expected to be lower
due to an unfavourable contract mix versus last year.
Care & Custody revenue growth has continued broadly in line
with H1 18/19 on the back of the successful mobilisation of the
Detention and Escorting Home Office contract. Full-year profits are
expected to be ahead of the prior year despite the significant
mobilisation costs incurred in H1 18/19.
Catering revenue is expected to be broadly flat with operating
margins slightly down due to lower sales in the outdoor events
business.
Central Overheads have increased as we continue to invest in our
leadership in the "Connected Workspace" to enable us to deliver
"The Exceptional, Every Day" and accelerate growth.
Order book
Our committed order book has held broadly flat in H2, including
the benefit from the acquisition of VSG; but is expected to have
declined by c.10% over the full year. In H2 18/19, we have won
several important new contracts, including a GBP10m three-year
catering contract for Edinburgh College, a five-year document
management and logistics services contract with The Law Society, a
GBP14.5m FM contract with Yorkshire Building Society and a GBP7.5m
five-year IFM contract with Connect Group. We have also been
awarded a GBP17m five-year contract extension with Gatwick
Airport.
In H1 18/19, we were successful in qualifying as a supplier on
Phase 1 of the Crown Commercial Service (CCS) FM Marketplace
Framework, which will allow us to bid for facilities management
contracts for Government departments. During H2 18/19, we have also
qualified for inclusion in Phase II of the CCS FM Marketplace
Framework, which will allow us to bid for the Defence Facilities
Management as well as for Security Services and Technical Security
contracts. We will be focusing on this area as significant wins
would materially improve our order book position.
Project Helix
Project Helix is on track to be largely completed by the
year-end with c.GBP45m of run-rate cost savings, and one-off costs
of change in FY 18/19 of c.GBP15m. As previously guided, by its
conclusion the Helix programme is expected to deliver c.GBP50m of
overall run-rate savings from the successful transformation of HR
and procurement; reduced managerial levels; the offshoring of IT
and back-office finance transaction processing; and basic
improvements in Engineering within fleet, PDA-usage, as well as
time sheet and scheduling automation.
Post Project Helix, we will now turn to the process and digital
transformation of Engineering Services - our biggest division -
replacing existing systems and better automating our workflow,
client costing and billing processes. This programme is expected to
complete during FY 20/21. The details of the expected costs and
related benefits will be provided at the time of announcing our FY
18/19 results.
Cash and Covenants
Average daily net debt in H2 18/19 is expected to be GBP20-25m
lower than in H1 18/19 (H1 18/19: GBP317.4m) as working capital
issues related to outsourcing of transaction processing earlier in
the year have been resolved. This estimate includes net M&A
proceeds of GBP40m offset by a reduction in the use of the supply
chain finance facility of c.GBP20m and improved supplier payment
performance of c.GBP20m in H2 18/19 vs H1 18/19.
Period-end net debt is expected to be in the range of
GBP160-180m (H1 18/19: GBP186.7m).
We therefore expect to continue to operate comfortably within
our banking covenants.
Strategy
Our strategy continues to evolve as we transform Mitie and focus
on those business lines where we can secure a market-leading
position. Our four strategic pillars - customer, cost, people, and
technology - underpin our strategy of growing customer lifetime
value by offering technology-backed propositions to ensure
long-term sustainable growth and deliver our vision of "The
Exceptional, Every Day" by:
-- Creating market-leading positions through focusing on our
core competencies and investing in higher growth opportunities;
-- Embedding technology into the heart of our offering and increasing customer NPS;
-- Strengthening our balance sheet and maintaining cost disciplines to remain competitive; and
-- Creating a "Great Place to Work" for our employees.
Outlook
Mitie is well-positioned for future growth despite a challenging
backdrop in the industry and political uncertainty. We remain
confident that we will emerge as an industry leader in our chosen
service lines.
We expect to continue to grow revenue organically at 3-4%. We
have successfully renewed a number of significant contracts in FY
18/19 albeit, in the first year of operation, at lower margins.
Notwithstanding these margin headwinds we still expect to achieve
our margin target of 4.5-5.5% over the medium term. For FY 19/20 we
expect operating profit to show moderate growth - with revenue
growth and cost savings partially offset by the contract renewals
and continued reinvestment in our business.
Full-year 18/19 results
Mitie expects to publish its financial and operational results
for the fiscal year ending on 31 March 2019 on Thursday, 6 June
2019.
Analyst and investor conference call
Mitie will be hosting a conference call at 9:00am GMT on
Thursday, 28 March 2019 for analysts and investors with Phil
Bentley, CEO, and Paul Woolf, CFO.
Dial-in details are as follows:
UK: +44 (0) 333 300 0804
Access code: 14850244#
Playback details:
UK: +44 (0) 333 300 0819
Access code: 301245120#
For international dial-in and playback numbers please contact
Anna Gavrilova on anna.gavrilova@mitie.com.
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. It offers a range of specialist
services, including Engineering Services, Security, Professional
Services, Cleaning and Environmental Services, Care and Custody,
and Catering.
Mitie employs 54,000 people across the country, looking after a
large, diverse, blue-chip customer base, from banks and retailers,
to hospitals, schools and government offices. It takes care of its
customers' people and buildings, by delivering the basics
brilliantly and by deploying advanced technology. It is pioneering
the Connected Workspace, using smart analytics to provide valuable
insight and deliver efficiencies to create outstanding work
environments for customers.
Find out more at www.mitie.com.
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END
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