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.£40m of cumulative in-year cost savings at the previously guided in-year cost of £15m
· 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 £4m.
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.£4m 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.£40m of cumulative in-year cost savings, with direct costs associated with Project Helix in FY 18/19 to be c.£15m.
It remains our expectation that the Helix programme will deliver c.£50m 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.£40m higher than last year's 1H level of £278m. Closing net debt at 30 September 2018 is expected to be in the range of £230m to £250m 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 |
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Head of Investor Relations |
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T: +44 (0) 203 123 8675 |
M: +44 (0) 738 443 9112 |
E: [email protected] |
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Claire Lovegrove |
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Head of Media Relations, Corporate Affairs |
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T: +44 (0)203 123 8716 |
M: +44 (0)790 027 6400 |
E: [email protected] |
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.
