Mitie issues financial results for “defining year of strategic progress”

Operating profit before other items is £63.4 million (FY20 £86.1 million). This has been impacted by revenue mix and reduced project work due to COVID-19. The company has signalled a stronger second half with revenue growth of 6.5% versus the previous year.

The Interserve Facilities Management acquisition that occurred last November is said to be performing “better than expected” and accelerating value creation. £6.2 million worth of cost and revenue synergies have been achieved in FY21. Cost synergies raised to £42 million (from £35 million) are targeted by FY23 at the same cost.

Mitie continues to enjoy market leadership in three core markets: security, cleaning and technical services. The business has a strengthened balance sheet on the back of a £190 million rights issue while the BBB Investment Grade credit rating has been achieved. Average daily net debt is significantly reduced to £47.1 million (FY20 £327.6 million). Further, the outlook for FY22 is “anticipated to be materially ahead” of the company’s prior expectations.

The Business Services division (which encompasses Mitie’s security operation) has reported revenue growth of 9.9% as a result of new Government contracts from the Department of Health and Social Care and Her Majesty’s Revenue and Customs and the ongoing demand for additional hygiene services. In fact, the business has secured £720 million worth of new, renewed or extended contracts.

The formation of a single management team for security and cleaning has delivered cost savings and productivity enhancements that have duly contributed to a margin improvement of 4.6%. In addition, some 4,725 new employees have joined the company during the pandemic.

Four-year transformation complete

Phil Bentley (pictured), CEO of Mitie, commented: “FY21 was a defining year for Mitie and completes our four-year transformation. The Group has showed great resilience during the COVID pandemic. We strengthened our balance sheet and the Interserve acquisition is performing well. Mitie is now the market-leading provider of intelligent technology-led facilities management, with a clear pathway to deliver growth and sustainable free cash flow.”

Bentley continued: “I’m so proud of our 65,000 front line heroes who have gone to work every day throughout the pandemic, delivering exceptional customer service and helping to keep Britain’s vital infrastructure such as hospitals, schools, supermarkets, manufacturing plants and some of Britain’s most strategic assets clean, safe and properly maintained. An unprecedented 30,000 colleagues recently completed our annual employee engagement survey.” 

Further, Bentley observed: “Although COVID has challenged us all, our business has been far more resilient than we originally expected, with revenue, excluding the contribution from Interserve, just 1.6% lower than for the prior year. The second half of the year was significantly better than the first half, with 6.5% year-on-year growth as variable projects and discretionary spend works picked up and cleaning and security demand increased.”

Focusing on the Interserve deal and its aftermath, Bentley stated: “Interserve is performing strongly as part of Mitie and we’ve successfully renewed or extended all major Interserve contracts that were due for renewal. We have also realised £6.2 million of synergies in FY21 and identified additional cost synergies to take our forecast run rate from £35 million to £42 million by the end of FY23.”

Net promoter score

According to Bentley, Mitie has been transformed over the last four years. “Our focus on delivering great service, backed up by our technology offer, has resulted in our highest-ever customer net promoter score of +50 ppts and all-time high contract renewal rates of 96% complemented by significant new customer wins.”

As businesses slowly start to re-open their doors and customers’ employees return to offices, Mitie is starting to see some green shoots of recovery in the variable project and discretionary spend works. “We anticipate this continuing as re-occupation plans solidify,” urged Bentley. “With some high-quality new contract wins, short-term support to the public sector and additional synergies from the integration of Interserve, we now anticipate FY22 will be materially ahead of our prior expectations.”

In conclusion, Bentley informed Security Matters: “The transformation of Mitie and the acquisition of Interserve has created a strong base from which the company is well positioned to prosper. Our new strategy will focus on increasing growth, margin enhancement and cash generation. Over the medium term, the new Mitie will target mid-single digit revenue growth, margins of 4.5-5.5%, sustainable free cash flow and ROIC in excess of 20%.”