Mitie Group plc, the facilities management and professional services company, has announced its financial and operational results for the six months ended 30 September 2019 during a live webcast broadcast from the company’s headquarters at The Shard in central London. Revenue from continuing operations is up 11% to £1,078.0m against H1 2018-2019, driven in the main by the Vision Security Group (VSG) acquisition and continued growth in strategic accounts (4%). Operating profit before other items from continuing operations is up 5.4% to £33m due to improved contributions from the Detention & Escorting Services contract as well as the VSG acquisition, and partly offset by lower renewal margins in certain contracts.
The Group’s Security and Cleaning divisions have been consolidated under a single Business Services management team. These businesses provide workplace services related to the upkeep and security of buildings and, with 40,000 employees, require tight workforce management. There are “good opportunities” to sell bundled services more efficiently to clients and, with shared operating platforms, the company anticipates further opex savings.
The newly-created Technical Services division now incorporates both engineering maintenance and projects related to the physical upkeep of buildings, as well as ‘smart building’ management services including occupier services and water and energy management.
Care & Custody, Waste and Landscapes have been consolidated into a single Specialist Services division.
Secured order book
Mitie’s secured order book is up 1% at £4.1 billion since FY 2018-2019 (the reported order book includes only secured fixed-term contracted work and excludes variable work), while the average daily net debt has been reduced by £54.1 million versus H1 2018-2019. Interim dividend is maintained at 1.33p in line with company policy.
Phil Bentley, CEO at Mitie Group plc, commented: “Our strategy remains to focus on our core businesses and our strategic accounts, where our investment in technology distinguishes our offer and improves customer service and margins. During the last six months, we’ve seen modest organic revenue growth with a higher level of extensions and significant new wins, including our largest Integrated Facilities Management (IFM) account win for several years and our largest IFM account extension.”
As a business, Mitie is now deeply engaged with its planned five-year transformation programme. “Steady progress” has been made, particularly so in terms of strengthening the balance sheet and simplifying the business model.
For its part, Project Helix delivered savings that were required for reinvestment into customer service, capabilities and technology.
Transformation process progressing
Phase II of the transformation focuses on delivering accelerated growth in shareholder returns through market leadership in Technical Services and Business Services in tandem with margin protection in Specialist Services. There’s a desire for strategic account management to yield faster growth from distinctive technology. Cultural transformation is to be cemented under ‘The Mitie Way’ and there will be continued deleveraging.
The Group explained: “There’s no doubt that we continue to operate in a challenging industry of rising labour costs and margin pressures. In addition, there’s short-term economic and political uncertainty across our markets. The way forward is to secure market leadership through outstanding service and technology innovation, allied with lowest cost to serve.”
The company’s statement added: “For FY 2019-2020, we expect organic revenue growth to be broadly in line with H1 2019-2020. While we’ve seen good account wins in H1 2019-2020 which have now mobilised, or we are close to mobilising, revenue growth will be held back by the broader economic uncertainty which will impact our variable works and projects business. We expect mid-single digits growth for operating profit before other items, with lower net debt as operating cash flow in H2 2019-2020 is expected to be positively driven by working capital improvements. For FY 2020-2021, we expect growth in revenue to be in line with growth in FY 2019-2020 and operating profit before other items to grow at mid-single digits.”