Mitie Group issues full year financials for 12 months to 31 March 2022

Operating profit stands at £167 million, which is up 184% from £59 million in 2021, with a higher operating profit margin of 4.2% (from 2.3%). Operating profit after other items is £72 million, duly reflecting the business’ stronger performance this year.

As stated, the legacy Interserve business has “performed well” with 90% of contracts renewed in the period and cost synergies of £30 million.

New contract wins, renewals/extensions and projects totalling approximately £3.8 billion in terms of contract value, with renewal rates reported at 90%.

Average daily net debt for the year ended 31 March 2022 fell to £25 million £47 million. Net cash at the end of the year totals £27 million.

Further, an initial £50 million share buy-back programme has been launched as part of a strategy that’s designed to increase returns for shareholders.

Business Services performance

Mitie’s Business Services division encompasses the security offer and has been responsible for Mitie’s rapid response COVID-related UK Government contracts across Testing Centres and quarantine services in addition to providing security for hotels accommodating Afghan refugees.

In early April last year, Business Services integrated several hundred contracts from the former Business and Industry division of Interserve, including sizeable contracts with the BBC, B&Q and Transport for London.

The division has posted revenue growth of 49% to £1,522 million (FY21: £1,023 million) including £429 million of rapid response, flexible COVID-related revenue (FY21: £132 million). Underlying revenue growth is 11%.

Operating profit stands 125% ahead of FY21 at £108 million, boosted by higher margin, short-term, flexible COVID-related contracts. Up to £1.3 billion of total contract value has been realised through new, renewed or extended contracts including those with the BBC, Transport for London, JLL, AS Watson, Broadway Bradford and Stansted Airport.

In November last year – and as reported by Security Matters – the Business Services division moved to acquire counter surveillance specialist Esoteric. Earlier this year, the division picked up the Outstanding Contract Security Company (Guarding) Award at the Outstanding Security Performance Awards, as well as the Security Guarding Company of the Year Award at the Fire & Security Matters Awards run by Security Matters and its sister Western Business Media title Fire Safety Matters.

Strong year

Business Services enjoyed a “very strong year” supporting the UK Government during the COVID pandemic. COVID-related contracts contributed revenues of £429 million in the year (versus the FY21 figure of £132 million).

Mitie mobilised almost 300 Testing Centres and mobile sites, assisting in the testing of 12 million members of the public and employing 10,000 individuals in the process. In addition, Mitie provided security services to ‘Red list’ hotels, securing 70 hotels at the peak of the pandemic. The contracts for these specialist services have now come to an end.

New contracts and projects won by the Business Services division across the last year include those with BAE, Hitachi Rail, Westfield Shopping Centres, the WPP Group and Hyundai. Marks & Spencer, AS Watson and NFU Mutual are among myriad companies who’ve renewed their contracts.

In line with the Mitie Group’s strategy of leading in the ‘Science of Service’, in the second half of the year, Business Services launched ‘Mitie Intelligence Services’, which is a risk assurance solution that integrates intelligence, technology and people. Intelligence Services supports customers to build risk-based security strategies that protect their businesses.

Inflection point

Commenting on the FY22 results, Phil Bentley (Group CEO at Mitie) observed: “Through our investment-led strategy, Mitie has reached an inflection point earlier than anticipated. We delivered a strong financial performance in FY22, with good underlying growth. The Group is now able to leverage its capital base to focus on long-term value creation, accelerating investment in growth and delivering enhanced shareholder returns.”

Bentley continued: “Thanks to the hard work of our 72,000 colleagues, Mitie has recovered strongly from the pandemic, delivering a record £4 billion of revenue in FY22, operating profit of £167 million and free cash flow of £133 million. The Interserve business is performing strongly under our stewardship, while our ability to rapidly mobilise flexible contracts led to robust COVID-related business.”

In addition, Bentley noted: “Our underlying business performed well in the year, growing by 14%. Our strategy, which is focused on accelerating growth, enhancing margins and improving cash generation, is creating a strong platform to further improve earnings. Our robust balance sheet and significant free cash flow allowed for continued investment in high return acquisitions, including that of Esoteric.”

Underpinning the Group’s strategy is the aforementioned ‘Science of Service’ offer, which was launched in the final quarter of FY22. “This provides a solution for our customers whose workspaces require greater hygiene, intelligent security and critical asset monitoring backed by data analytics,” explained Bentley, “while our internal technology is driving productivity gains and cost efficiencies, supporting our margin enhancement strategy.”

As part of Mitie’s strategic focus on long-term value creation, its revised medium term capital allocation policy will focus on investments in high margin bolt-on acquisitions. The Board is recommending a reinstatement of the final dividend of 1.4p and, as stated, Mitie will now commence an initial £50 million share buy-back programme.

According to Bentley, new business momentum, together with a full year’s contribution from significant contract wins, gives Mitie “confidence” in its growth outlook. “In FY23, after excluding the £448 million COVID-related contract work that was delivered in FY22, we expect to deliver mid-to-high single digit revenue growth, together with good operating margin progress.”