Mitie Group plc forecasts full year operating profit of circa £190 million

Revenue increased by 11% to £2,132 million (H1 FY23: £1,923 million), duly reflecting contract re-pricing, continued growth in key accounts, projects upselling and infill M&A and partially offset by contract scope reductions.

Total contract value of £2.4 billion includes wins, renewals and extensions. The renewal rate stands at 88%, with a book-to-bill ratio of 111%.

Operating profit before other items increased 24% to £85 million (H1 FY23: £68 million). Operating profit margin increased 50 bps to 4.0% (H1 FY23: 3.5%). Operating profit after other items is £57 million (H1 FY23: £51 million).

Other items increased to £28 million (H1 FY23: £18 million) reflecting costs to deliver margin enhancement initiatives and acquisition costs. Free cash inflow is reported as £48 million (H1 FY23: £5 million outflow).

Five acquisitions were completed for a net cash consideration of £46 million, in turn extending Mitie’s capabilities in high growth markets.

Average daily net debt is recorded at £156 million (H1 FY23: £62 million), reflecting M&A spend and ongoing shareholder returns. Closing net debt is £113 million (H1 FY23: £64 million).

As stated, the Mitie Group remains on track to deliver recently raised guidance for operating profit before other items of at least £190 million in FY24 (FY23: £162 million).

Good first half

Phil Bentley, Group CEO at Mitie, said: “We had a good first half with revenue, profits and earnings per share all up strongly. Our strategy of focusing on key accounts growth and projects upsell, combined with contract re-pricing and infill M&A, has driven an 11% increase in revenue. The Group’s operating margin before other items increased by 50 bps to 4.0% as a result of the ongoing delivery of margin enhancement initiatives and careful management of inflation.”

Bentley continued: “Our divisions are performing well, and I’m particularly encouraged by our performance in Technical Services and Central Government and Defence. My appreciation goes to our 65,000 colleagues for their amazing commitment. Through their hard work, allied to our technology-led approach, Mitie is transforming the built environment and the lived experience for our circa 3,000 customers.”

At its Capital Markets Event held in October, Mitie Group introduced its new Three-Year Plan (FY25-FY27) entitled ‘From Facilities Management to Facilities Transformation’, which sets out ambitious financial targets.

“Our Facilities Transformation strategy,” noted Bentley, “will enhance the built environment of our customers by improving security, productivity, working environments and cleanliness, while also reducing carbon intensity. This strategy will extend Mitie’s market leadership positions in the UK – itself the largest and most dynamic FM market in Europe – and enable us to reach our full potential, both financially and through our positive contribution to the environment and society.”

Business Services division

Mitie’s Business Services division delivers technology-led security and cleaning and hygiene services alongside landscaping and waste management across circa 2,000 contracts, with particular sector expertise in retail, transport, central Government and financial and professional services.

For this reporting period, revenue increased by 2% to £719 million (H1 FY23: £708 million), in turn reflecting increased projects and variable works, acquisitions and contract re-pricing (offset by scope reductions), the completion of COVID-19 pandemic-related projects and net contract losses.

Operating profit before other items increased by 3% to £41.7 million (H1 FY23: £40.5 million). There was a £1.1 billion total contract value recorded including contract wins and renewals/extensions.

On that note, the contract wins included Amazon, ASDA, Heathrow Airport, the National Portrait Gallery, the Phoenix Group, Reach plc and Thales. The largest extension was for four years with Network Rail, while other renewals and extensions included contracts with the British Broadcasting Corporation, the Civilian Guard Force, the Lloyds Banking Group and Sky.

Five acquisitions were completed (including two after the period end), duly building on the division’s position in the UK intelligence and technology-led security and fire markets and expanding its security offer in Spain.

Mitie was Highly Commended in both the Security Installation Company of the Year and Security Team of the Year categories at the Fire and Security Matters Awards 2023.

Retail sector

Retail is the Business Services division’s largest sector with circa £300 million in core revenue annually, over 7,000 Mitie colleagues and a blue chip customer base of national retailers and flagship Shopping Centres.

Retail customers are facing unprecedented pressures, driven by changing buying behaviours, rising costs and intense competition, while at the same time being impacted by well publicised increases in crime. They’re having to deal with an estimated £1 billionn annual loss due to in-store customer theft.

Mitie has created a connected security model including bespoke Security Operations Centres, the dynamic risk-based deployment of resources and end-to-end crime management solutions delivered through dedicated crime analyst teams.

Summarising the overall picture for Mitie Group plc, Phil Bentley concluded: “Looking ahead, we are encouraged by new key account wins, increased revenues from projects upsell and the positive momentum from cost savings initiatives implemented in the first half. As mentioned, the Group remains on track to deliver recently raised guidance for operating profit before other items of at least £190m in FY24.”