“Good trading momentum continues” at security solutions provider Mitie

Revenue is expected to increase by circa 13% to circa £2.4 billion, including somewhere in the region of 7% organic growth driven by new contract wins and scope increases, pricing and projects.

Q2 year-on-year revenue growth (circa 16%) is expected to exceed Q1 (10.5%) as a direct result of good Q1 wins and the provision of ‘surge response’ security services.

Record contract wins and extensions/renewals are up circa 45% to circa £3.5 billion total contract value, despite the business not renewing two public sector contracts ending in FY26.

The FY25 share buyback programme doubled to £100 million in July. 45 million shares totalling £54 million were purchased in the period at an average price per share of 120 pence. 34 million shares have been cancelled.

The closing net debt of circa £195 million (31 March 2024: £81 million) reflects shareholder returns, investments and increased lease obligations, all offset by good free cashflow generation.

Average H1 FY25 net debt stands at circa £220 million (H1 FY24: £156 million).

Facilities transformation

Commenting on the H1 results and outlook for FY25, Phil Bentley (CEO at Mitie Group plc) said: “This is the foundation year of our new Three-Year Plan (FY25-FY27). We’re making investments in the business to develop our facilities transformation offering and to drive growth throughout the period. We’re investing in technology to strengthen our market leading position, in sales and marketing to drive greater wins and renewals and in our project capabilities in order to enhance upsell opportunities.”

Bentley added: “These investments are already starting to deliver tangible results, including a record performance in new contract wins and contract extensions/renewals in the period, ensuring continued growth momentum.”

Further, Bentley observed: “Overall, we’ve made good progress against our strategic objectives, with revenue growth of circa 13% in H1, at least £20 million of full year cost savings identified from margin enhancement initiatives and the completion of two acquisitions. We remain confident in meeting expectations for the current year and delivering on our Three-Year Plan targets.”

Revenue growth

Mitie delivered a strong performance in H1 FY25, with revenue increasing by circa 13% to circa £2.4 billion (H1 FY24: £2.1 billion), of which circa 7% was organic and circa 6% inorganic (the latter mainly from the Landmarc consolidation and the JCA and GBE Converge acquisitions in FY24).

Organic growth was driven by new contract wins and scope increases, pricing and projects. This includes higher volumes for the Immigration Escorting Services contract in Care and Custody, as well as the provision of ‘surge response’ security services for the Home Office during the summer. This emergency provision of services more than offsets the one-off benefit in H1 FY24 from the provision of temporary services in respect of Afghan relocations.

Project growth continues to be driven by the macro trends of decarbonisation, grid connections, the modernisation of the built environment, Data Centre expansion and regulatory changes, although Mitie’s telecoms business continues to face structural challenges.

Notable projects undertaken during the period included the fit out of fire safety systems within a new Data Centre in Slough, solar PV installations for David Lloyd Sports Centres and NATS, a waste composter installation for Sky and a major laboratory refurbishment for Defra.

Contract wins and extensions/renewals

During the period, Mitie either won or extended a number of significant new contracts with a record total contract value of up to circa £3.5 billion (H1 FY24: £2.4 billion). Notable new wins included security and cleaning services for Community Health Partnerships and Land Securities, building maintenance for the Coventry and Rugby Hospital, integrated facilities management and projects for EY, engineering services for the Metropolitan Police Authority and the £400 million Millsike Prison contract awarded by the Ministry of Justice.

Mitie Group plc secured a further three-year extension with Lloyds Banking Group, its largest private sector customer, with other extensions/renewals including engineering and cleaning for Amazon, cleaning for the Bank of Ireland, security for Fedex and integrated facilities management for a major airport. Two public sector contracts were not renewed during the period and will end during FY26.

Acquisitions trail

Mitie continues to pursue ‘infill’ M&A to deepen its capabilities in the areas of security, fire safety, buildings infrastructure, decarbonisation and grid connections.

During the period, the organisation completed the acquisition of ESM Power, a leading high voltage electrical engineering business, for an initial cash consideration of £5.5 million. This acquisition enhances Mitie’s expertise in the growing high voltage power connections market.

Shortly after the period end, Mitie acquired Grupo Visegurity, a leading security business in Spain, for a £7.5 million initial cash consideration. This, alongside the recent acquisition of Biservicus, supports the strategic expansion of Mitie’s security service capabilities in the highly fragmented Spanish market. 

Net debt

Closing net debt (post-IFRS 16) at 30 September 2024 was circa £195 million, an increase of circa £115 million from 31 March. This increase since the year end reflects capital returns to shareholders and investments (£122 million) and increased vehicle lease obligations (circa £20 million), offset by good free cash flow generation (circa £30 million).

Capital returns to shareholders and investments included dividends (£45 million), share buybacks (£54 million), share purchases for incentive schemes (£9 million), acquisitions (£5.5 million) and payments for acquisition related earnouts/completion accounts (£8 million).  H1 FY25 average daily net debt was circa £220 million (H1 FY24: £156 million).

Share buyback programme

On 24 July this year, Mitie announced the doubling of its Share Buyback Programme from £50 million to £100 million. During H1, the company  purchased 45 million shares at an average price of 120p per share, of which 34 million shares were cancelled.

The balance of 11 million shares is being held in treasury to satisfy Mitie’s 2021 Save As You Earn (SAYE) scheme.

Interim results and presentation

Mitie's interim results for the six months ended 30 September 2024 will be released on 21 November.  A presentation for analysts will be held at 9.30 am.

*H1 FY25 financials disclosed in the above trading update (and in the H1 FY25 results announced on 21 November 2024) are unaudited