Interim results highlight 14% revenue increase at Mitie Group plc

The highlights of the financial report are as follows

*Revenue up 14% to £2,430 million (H1 FY24: £2,132 million)

*Record contract wins and renewals, up 54% to £3.7 billion TCV (H1 FY24: £2.4 billion)

*Operating profit before other items up 14% to £101 million (H1 FY24: £89 million)

*Operating profit margin before other items maintained at 4.2% (H1 FY24: 4.2%)

*Basic EPS before other items up 2% to 5.4 pence (H1 FY24: 5.3 pence), with the benefits of higher operating profit and the share buyback programme offsetting a higher effective corporation tax rate and finance costs

*Free cash flow generation of £34 million (H1 FY24: £48 million)

*Three acquisitions completed year-to-date for £49 million, including a power connections business in H1 (£4.3 million), a UK fire systems business (£36.9 million) and a Spanish security business (£7.5 million) post-period end

*Strong balance sheet with continued low leverage of 0.7x average net debt/EBITDA (FY24: 0.6x)

*Interim dividend up 30% to 1.3 pence per share (H1 FY24: 1.0 pence)

Foundation year

Commenting on the first six months and the outlook, Phil Bentley (Group CEO at Mitie Group plc) said: “We are in the foundation year of our new Facilities Transformation Three-Year Plan (FY25-FY27); a year in which we are making investments in technology, sales and marketing and our projects’ capabilities. These investments will enhance our growth by strengthening our market-leading position, increasing our pipeline and driving cross-sell opportunities.”

Bentley continued: “During the first six months of our new Facilities Transformation Plan, we’ve delivered good strategic progress and financial performance as our investments start to bear fruit. We have delivered high single-digit organic growth, in part driven by our ability to stand up a ‘surge response’ team to protect public safety, progressed our programme of margin enhancement initiatives, continued to build our capabilities through targeted acquisitions and achieved record contract wins and renewals/extensions.”

Further, Bentley noted: “Growth over the Facilities Transformation Plan period is underpinned by highly attractive macro trends. Across both the public and private sectors, our customers are increasingly looking to Mitie to reduce their carbon footprint, modernise their buildings, implement power upgrades and grid connections and support their growing Data Centre and other critical environment requirements as the Building Regulations change. We are also well positioned to support the Government in its commitment to invest in the UK’s defence capabilities and the modernisation of its built estate, alongside significant capital funding for schools and the NHS.”

Bentley is grateful to Mitie’s 72,000 colleagues who provide “outstanding service” for its customers. £Through their hard work and by deploying Mitie’s advanced technologies – harnessing real-time data and intelligence, advanced analytics and Artificial Intelligence – we continue to lead our industry.”

Importantly, Bentley said: “We have reflected on the changes to employers’ National Insurance announced in the Autumn Budget, which take effect from April 2025. We have a strong track record of managing inflationary costs, including annual increases in the National Living Wage, contractual protections in place on many of our contracts and strong customer relationships where negotiations are necessary. Our current estimate is a circa £25 million impact of additional costs in FY26, after contractual and commercial recovery through pricing, which we plan to mitigate through new margin enhancement initiatives and other management actions.”

Bentley concluded: “Returning to H1 FY25 – the foundation year of our new Facilities Transformation Three-Year Plan – our financial and operational performance has been good. I’m pleased that this momentum has continued into the second half of the year. This underpins our confidence that we will deliver the Board’s expectations for the full year as we progress towards our ambitious medium-term targets.”

Business Services division

Performance highlights for the Business Services division (which, of course, encompasses the organisation’s security operation) are as follows:

*Revenue: +13% to £1,079 million (H1 FY24: £956 million). Reflects good new wins, the provision of ‘surge response’ security services, growth in projects, pricing and acquisitions, offset by the completion of certain public sector contracts

*Operating profit before other items: +6% to £72.8 million (H1 FY24: £68.4 million. Reflects improved trading and MEIs, offset by the higher margin public sector contracts that have ended and a £3 million debt provision relating to ISG work

*£1.9 billion TCV of wins and extensions/renewals, primarily in the healthcare, financial services and retail sectors, resulted in a 21% increase in the total order book to £4.0 billion (FY24: £3.3 billion)

*Mitie’s position as a leading integrated security and fire systems provider has been enhanced through the acquisition of Argus Fire for £36.9 million post-period end

*Spanish security capability expanded through the acquisition of Grupo Visegurity for €9 million (£7.5 million) post-period end

Operational performance

Business Services delivered a “resilient” performance in H1 FY25, with revenue benefiting from new wins, the provision of short-term ‘surge response’ security services to the Home Office during the summer, projects and variable works, pricing and the contribution from acquisitions.

This growth was partially offset by the completion of higher margin, short-term public sector works, such as the Afghan Relocations and Assistance contract and Inland Border Forces, and one notable central Government contract that was not renewed in the prior year and ended in March.

The division secured £1.9 billion TCV of contract wins, scope increases and extensions/renewals primarily in the healthcare, financial services and retail sectors. The largest win was for the provision of security and hygiene services to surgeries and local hospitals for Community Health Partnerships.

Retail is one of the division’s largest operational sectors, with circa £400 million of annual revenue and a blue chip customer base of national retailers and flagship Shopping Centres. Alongside the continued growth in existing accounts, the division won new contracts to deliver security services for Aldi and Lidl and fire maintenance work for Halfords.

Business Services continued to expand its presence in the London financial services market through a new contract with EY, and was also successful in completing a two-year contract extension for Deutsche Bank.

Elsewhere, other notable extensions and renewals included AS Watson, the Bank of Ireland and Bellway.