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Brian Sims
Editor
Brian Sims
Editor
MITIE GROUP plc has released its full-year results for the year ended 31 March 2024. The organisation’s strong track record of delivery continues, with revenues rising by 11%, operating profit increasing by 30% and earnings per share up 29%.
Revenue is reported as £4,511 million (FY23: £4,055 million). Operating profit before other items is £210 million (FY23: £162 million). Operating profit margin before other items is up 0.7 ppt to 4.7% (FY23: 4.0%). The stated rise in earnings per share reflects the increase in operating profit, a reduction in net finance costs and the benefit derived from share buybacks.
The total contract value is £6.2 billion wins/renewals (FY23: £4.3 billion) and there’s a strong free cash flow generation of £158 million (FY23: £66 million). Mitie has also noted a strong balance sheet with leverage of 0.6x average net debt/EBITDA (FY23: 0.4x). The recommended final dividend is 3.0p per share, while the total dividend is up 38% to 4.0p per share (FY23: 2.9p per share).
Strong performance
Commenting on the year passed and the immediate outlook, Phil Bentley (pictured, Group CEO) explained: “We are pleased with our strong performance in FY24, having delivered record revenue, operating margin expansion and a good return on invested capital. Mitie is a cash generative business with a robust balance sheet. We’re committed to investing in accelerated growth, as well as returning surplus funds to shareholders via share buy-backs.”
Bentley continued: “Our divisions are all performing well, with Technical Services, Central Government and Defence and Communities delivering double digit revenue growth, with Business Services more than replacing all of the revenue from certain short-term public sector contracts.”
Further, Bentley noted: “As a result of this positive outturn, we have met or significantly exceeded all of the financial targets set out in the previous yhree-year plan (FY22-24) and this has been reflected in Mitie’s total shareholder return over the period.” (80% TSR: #10 in FTSE 250)
The organisation has now begun to execute its new ‘Facilities Transformation’ three-year plan (FY25-FY27), through which it expects to accelerate growth and extend Mitie’s market leadership position. Confidence in achieving this is underpinned by a record £19 billion pipeline of opportunities, through which Mitie will add further key accounts and deliver transformational projects in higher growth categories, as well as by strategic M&A, which will then add to existing projects-centred capabilities.
Bentley added: “We have secured a number of new contracts and projects in the fourth quarter of FY24 and the first quarter of FY25, which give us good business momentum. In the medium-term, we expect to offset the contracts lost and those ending in FY24. Margin enhancement initiatives are also expected to deliver further benefits in the current year, while we will continue to generate strong cash flows and enhanced shareholder returns.”
Bentley has thanked all 68,000 Mitie colleagues. “Through their hard work, allied to our technology-led approach, Mitie is transforming the built environment and the lived experience for thousands of public and private sector customers and their colleagues. FY25 will be another year of delivery towards our medium-term targets and meeting our high single-digit revenue growth expectations for the year.”
Business Services
Mitie’s Business Services division is the UK’s largest provider of technology-led security and cleaning and hygiene services across circa 2,000 contracts, with sector expertise in retail, transport, central Government and financial and professional services.
Revenue increased by 5% to £1,490 million (FY23: £1,414 million), duly reflecting contract re-pricing, acquisitions, increased projects work and net wins, partially offset by the completion of higher margin short-term public sector works.
Operating profit before other items increased by 5% to £97.0 million (FY23: £92.3 million), largely reflecting margin enhancement initiatives and the contribution from acquisitions.
There has been £2.2 billion’ worth of total contract value in terms of contract wins, scope increases and extensions/renewals (FY23: £1.3 billion) resulting in a 39% increase in the total order book to £2.5 billion (FY23: £1.8 billion).
Five acquisitions were completed in the review period, building on the division’s leading position in the UK’s intelligence and technology-led security and fire markets and expanding the security offer in Spain.
Business Services delivered a “resilient performance” in FY24, with revenue benefiting from contract re-pricing, the contribution from acquisitions, increased project works and net wins. 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 residual COVID-19 works.
Contract wins, scope increases and extensions/renewals were primarily in the Critical National Infrastructure, financial services and retail sectors. Wins and scope increases included those for Aena in Spain, further Amazon sites, expanded security provision for the Home Office, expanded cleaning and security services across Landsec’s estate, Lloyds Banking Group projects work, London South Bank University and Phoenix Group. Other notable renewals and extensions included His Majesty’s Revenue and Customs, JLL and Sky.
Margin enhancement initiatives continued at pace and offset the impact of the completion of the higher margin, short-term public sector works. The initiatives primarily focused on operational excellence and productivity improvements, including enhancing the Workplace+ workforce management app in order to optimise workforce productivity and improve workflows across core services.
Retail sector
Retail is the division’s largest sector, with circa £320 million of annual revenue, over 8,500 Mitie colleagues involved and a blue chip customer base of national retailers and flagship Shopping Centres.
Retailers are facing unprecedented levels of crime, with the estimated cost to the sector having almost doubled over the past year to £3.3 billion per annum. In response, Mitie has created an intelligence and technology-led security model, which includes bespoke Security Operations Centres, the risk-based deployment of resources and end-to-end crime management solutions delivered through dedicated crime analyst teams.
Cutting-edge technologies are being integrated, including Artificial Intelligence video analytics, biometrics, cloud-based systems and centralised management software aimed towards streamlining operations.
Two pivotal initiatives that gathered momentum during the year and demonstrate the Business Services division’s transformative approach are Operation Alliance (the UK’s first direct data sharing agreement, allowing Mitie to aggregate evidence from retailers against offenders and disrupt organised gangs) and Project Pegasus. Here, Mitie took the lead in securing funding from retailers and the Home Office to establish the first policing unit dedicated to combating retail crime.
Mitie’s Fire and Security business has further strengthened its position as a leading integrated systems provider through organic growth and the acquisitions of RHI Industrials (May 2023) and GBE Converge (November 2023). These businesses have broadened the scope of the division’s fire protection, electronic security and remote monitoring services to encompass perimeter security, civil engineering and IT networking & managed services capabilities. They have also boosted the division’s projects pipeline in Critical National Infrastructure growth markets, including numerous perimeter security projects for the National Grid and National Gas and circa £30 million of Data Centre fit-out projects.