Brian Sims

“Strong performance” detailed by Mitie Group plc at 2021 AGM

UK GOVERNMENT projects have contributed to a strong financial performance in the first quarter at Mitie Group plc, the facilities management company. The business held its Annual General Meeting at The Shard in central London on Tuesday 27 July and duly provided an update on trading for the three-month period ended 30 June 2021.

Group revenue stands at £930 million (including its share of joint ventures and associates). That’s 104% ahead of the same period last year (Q1 FY21 £455 million). Revenue excluding Interserve Facilities Management (Interserve) stands at £618 million which is 36% ahead of the same period last year.

Revenue from COVID-19 related UK Government contracts realised £110 million in the quarter, while new contract wins and renewals are worth a total value of £1.4 billion. Average daily net debt for the three months ended 30 June 2021 was £69 million.

The Interserve integration is said to be “progressing well”. Its completion and the move to ‘business as usual’ is expected by December this year. “Good progress” is being made with synergy delivery.

During the quarter, Mitie announced a new contract with Future Defence Infrastructure Services (Scotland and Northern Ireland) worth up to £646 million and renewed its COVID-19 Test Centres contract with the UK Government, which is expected to have a total contract value of up to £365 million. 

Additional wins were secured with the Home Office, the Future Maritime Services Programme (Clyde) and Swansea University. Renewals were signed with Amazon, the Department for Work and Pensions, the Department for Transport and Southwark Council. In aggregate, contracts valued at up to £1.4 billion were either won or renewed in the quarter. Mitie has also renewed or extended 99% of the former Interserve contracts that were bid in the quarter. 

Business Services results

Revenue of £357 million was 47% ahead of the same quarter last year, primarily due to the ongoing delivery of COVID-focused UK Government contracts. Excluding COVID-related projects, Business Services’ performance was strong due to the full year effect of new wins, additional services on existing contracts and the gradual return of project and variable works.

During the period, Business Services won or renewed contracts with a total value of up to £500 million. This includes an enlarged and extended Test Centres contract with the DHSC, COVID-related Quarantine Services contracts and new contracts with Her Majesty’s Revenue and Customs, Springfield Fuels and the Ministry of Justice.

The former Interserve business reported revenues of £312 million for the first quarter of the year. This performance is an improvement on Q1 FY21 and, encouragingly, reflects increased project work in the Central Government and Defence business. The Communities division was flat in the quarter as the increase in revenue from projects was offset by contract losses prior to Mitie’s ownership. The Business and Industries division reported a small decline in revenue, which was also a result of contracts lost prior to Mitie’s ownership. 

The technology integration is “making excellent progress” with the transitional services arrangements between Mitie and the Interserve Group scheduled to end on 30 November. Mitie will shortly cease to provide transitional services to the remaining Interserve Group. Mitie has continued to move Interserve applications and data into its cyber-protected cloud, and the Group has now been CE+ accredited, including all of the migrated systems and applications. 

Net debt

Average daily net debt for the Mitie Group post-IFRS16 for the three months ended 30 June 2021 was £69 million. This shows an improvement over both the previous quarter (Q4 FY21 £82 million) and the same period last year (Q1 FY20 £164 million). In contrast to prior years, the Q1 performance in FY22 has not been adversely affected by an unwind of prior year-end positions. This reflects the organisation’s improved management of working capital. 

In terms of the outlook for the business, although the performance in the first quarter was boosted by shorter-term COVID-related contracts, recent high-quality wins, the re-opening of customers’ premises and the gradual recovery of the economy provide a strong underlying trading momentum which gives the Mitie Group plc Board “considerable confidence” for the second half and delivery of its full year expectations. 

The company’s statement reads: “Our growth, margin enhancement and cash generation strategy, allied with improving sales performance and the accelerated uptake of our Connected Workplace and Science of Service offering, are expected to position the company strongly for the future.”

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