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MITIE Group PLC - Pre-close Statement

RNS Number : 9148H
MITIE Group PLC
16 March 2018
 

16 March 2018

Mitie Group plc

Pre-close Statement

Mitie Group plc ("Mitie" or "the Group"), the UK's leading facilities management business, today publishes its pre-close statement for the financial year ending on 31 March 2018 ("FY17/18"). Mitie will be in a close period between 1 April 2018 and the scheduled publication of its financial and operational results for FY17/18, on Thursday, 7 June 2018.

Highlights

Modest growth in overall sales

Debt levels comfortably within banking covenants

Operating profit in line with our expectations, slightly down on previous year due to investment in customers, IT and capability

Cash generation impacted by higher costs of change, reduced reliance on invoice discounting and normalisation of our balance sheet

Higher total cost savings expected from Transformation Programme, with associated higher cost of change

Technology-led Connected Workspace strategy helping to drive top-line growth

Improving operational delivery to clients, with better year-on-year Net Promoter Scores

 

Project Helix

On track to exceed 3-year cost targets

Finance transformation largely concluded, with back-office operations outsourced

Investments made in customer service and sales capability; commercial reorganisation complete

Cleaning workflow programme concluded with new IT solution in operation

HR transformation launched across Group with IT provider mobilised

New Group legal structure with effect from 1 April

Engineering transformation scoping begun, focused on Asset & Workflow Scheduling

 

Phil Bentley, CEO, said:

"We are one year into our Transformation Programme and we are making progress. Our order book is solid and revenue is up year-on-year. Project Helix is starting to deliver cost savings.  We have upgraded our sales and customer service capability, and we continue to invest in talent and technology. 

"The liquidation of Carillion has raised some fundamental questions about the outsourcing industry. Managing the buildings and the workplaces of our clients is a complex business, but our expertise, scale and focus continue to be valued by our clients.

"We remain focused on delivering exceptional FM services and rolling out our Connected Workspace technology to provide advanced analytics, delivering trusted advice and valued insights. The year ahead will remain challenging as we continue to transform Mitie, but we expect to see modest revenue growth with improved profits and cash flow generation."

 

Trading update

Revenue

Revenue growth is expected to be in the range of 2.0-2.5% at £2.2 bn. This includes the Property Management division, which has been re-incorporated into the Group figures after the withdrawal from sale announced on 5 December 2017.

This year-on-year organic growth has been driven by solid performances across all divisions. In particular, strong project work volumes in Engineering Services, increasing technology content in Security and new business wins in Care & Custody have contributed. Cleaning revenues have stabilised, having recently declined. This has been partially offset by weak performances in Property Management and contracts losses early in 2017 in Waste, part of Professional Services.

Order book

The most significant win in recent months was the detention and escorting contract in Care & Custody, valued at £525 million over 10 years - doubling the size of the division. The division was also successful in securing a number of other significant wins, in custodial services and forensic medical examiner services.  

In Cleaning, we won a significant contract with an NHS Trust, and added services at Heathrow Terminal 5.

Engineering Services won a multi-year contract with a major food retailer, a 3-year extension with Heathrow Airport, and further work with the Scottish Government. We also retained a significant contract with an NHS Trust. This offsets the previously announced loss of a top 20 contract and of another due to a merger of a client.

In Security, we have recently won a new customer in the Royal Academy, as well as a technology-led contract at a global financial organisation.  Our Fire and Security Systems, Document Management and Vetting businesses have experienced a solid stream of business opportunities.

Professional Services continues to win consultancy and project management work, as our Connected Workspace offer moves from pilot phase into deployment. We opened our Technology Centre in Bracknell and continue to work with various world-class technology partners.

Catering has won a contract with a major online retailer in Ireland and a contract for a major music festival in the UK, which will partially offset the loss of a contract with a UK retailer.

Property Management, despite facing difficult trading conditions, has won a large multi-year contract for social housing maintenance and a number of contracts within its painting business.

 

Transformation Programme (Project Helix)

We remain focused on reducing operating costs, increasing productivity and efficiency through simplification, rationalisation and automation. While the transformation of a large people-led organisation such as Mitie is not linear, we are making solid progress and the medium-term opportunities are significant.

We expect the Helix programme to conclude by summer 2020, delivering c.£50m of overall run-rate savings (c. 10% uplift on previous guidance), by March 2020.

We expect costs associated with Project Helix in FY17/18 to be c. £35m, compared with our previous guidance of £24m. The main drivers of uplift are acceleration of our property portfolio consolidation and higher transformation-related consultancy support. Incremental costs include those associated with de-risking the year-end in our finance transformation, retaining on-shore capabilities for longer than originally anticipated. 

Cash and Covenants

We expect average daily net debt to be down £50m year-on-year and we continue to reduce our reliance on period-end invoice discounting. As a result of our more conservative approach and our commitment to normalising our balance sheet by reducing the company's reliance on non-committed facilities, we expect period end net debt to be £50-£70m higher than last year.  We expect to continue to comfortably operate within our banking covenants.

 

Sector backdrop

The Facilities Management sector has been in the spotlight in the last few months. Mitie has actively engaged with its customers and stakeholders during this period, providing context and assurances. We have seen limited impact on our operational business as a result of competitor or industry activity, and we remain fully focused on our transformation programme and the execution of our strategy.  Potential Brexit impacts are expected to be minimal, though could be felt in wage inflation and we have budgeted for increasing remuneration costs in FY18/19.  

 

Full year results

The Group will announce its full-year 2018 results on 7 June 2018.

The full impact of IFRS15 is still being assessed: further analysis will be provided at the year end.

 

Analysts and investors conference call

Mitie will be hosting a conference call at 08:00am GMT on Friday, 16 March 2018 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: 67151754#

 

Playback details:

UK +44 (0) 333 300 0819

Access code: 301224181#

 

For international dial-in and playback numbers please contact Anna Gavrilova on [email protected].

 

 

For further information please contact:

 

Tori Cowley

Group Director of Investor Relations & Corporate Affairs

T: +44 (0) 203 123 8705

M: +44 (0) 781 852 8110

E: [email protected]

 

Anna Gavrilova

Head of Investor Relations

T: +44 (0) 203 123 8675

M: +44 (0) 738 443 9112

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 Security, Engineering Services, Catering, Cleaning, Pest Control, Landscaping, Energy and Property Consultancy, Property Maintenance, and Custody Support Services.

Mitie employs 53,000 people across the UK, looking after a large, diverse large 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. We are pioneers in 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


This information is provided by RNS
The company news service from the London Stock Exchange
 
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