Thursday,
25 January 2024
LEI
number: 213800MTCLTKEHWZMJ03
Mitie
Group plc: Q3 FY24 trading update
Record quarterly revenue with
growth +14% yoy
£62m free cash
flow generated Q3 year-to-date vs £25m in prior
period
Full year guidance for
operating profit of at least £190m reiterated
Mitie Group plc ("Mitie" or "the
Group") (LSE: MTO), the UK's leading facilities transformation
company, today provides a trading update for the three-month period
ended 31 December 2023 ("Q3 FY24").
Q3 Highlights
·
|
Record revenue[1] of £1,146m, an increase of 14%
on Q3 FY23, reflecting continued growth in Key Accounts and
Projects upsell, contract re-pricing and infill M&A
|
·
|
Good sequential trading momentum,
with Q3 revenue 6% above Q2 and 9% above Q1
|
·
|
Total contract value ("TCV") of
£0.9bn wins/renewals/extensions in Q3; TCV of £3.5bn in the first
nine months of the year, 46% ahead of the same period last
year
|
·
|
Two strategic acquisitions completed
for a consideration of £21m, taking the total year-to-date
investment in higher growth, higher margin infill M&A to
£65m[2]
|
·
|
Closing net debt of £122m (31 March
2023: £44m), with strong free cash flow of £62m supporting planned
capital deployment actions, including £73m of shareholder
returns
|
·
|
£50m share buyback programme nearing
completion; up to c.£8m of exercise receipts from the 2020 SAYE
scheme (vested Dec 2023) to be applied to further share
buybacks
|
·
|
The Group remains on track to
deliver guidance for operating profit before other items of at
least £190m in FY24 (FY23: £162m)
|
Mitie delivered a strong performance
in Q3 FY24 with revenue increasing 14% year-on-year to a record
£1,146m (Q3 FY23: £1,005m). This increase reflected organic growth
of 10.0%, inclusive of 4.1% contract re-pricing, through Key
Accounts (net contract wins and losses and contract growth) and
Projects upsell. Infill M&A completed since 1 October 2022
contributed a further 4.0% of inorganic growth.
Revenue has also grown sequentially
in each quarter, reflecting good trading momentum and the
increasing contribution from strategic growth initiatives. Q3 FY24
revenue of £1,146m was 6% ahead of Q2 FY24 (£1,079m), and 9% ahead
of Q1 FY24 (£1,053m).
In the nine months to 31 December
2023 revenue of £3,278m was 12% ahead of the same period last year
(£2,928m).
New contract wins and
renewals
During the quarter we won and
extended or renewed a number of significant contracts worth up to
£0.9bn TCV[3] (Q3 FY23: £0.3bn). Contract wins
and extensions or renewals in the nine months to 31 December 2023
increased by 46% to £3.5bn, compared with the same period of the
prior year (£2.4bn).
Notable Q3 FY24 wins included Aena
in Spain, Department for Work and Pensions (DWP) projects work,
increased security provision for the Home Office, expanded cleaning
and security services across Landsec's estate, and additional
station guarding for Network Rail. The renewal rate of 84%
reflected the loss of two significant contracts, as previously
communicated. Notable contract renewals and extensions in the
quarter included Facebook, Home Office and Ministry of Justice,
King George Hospital, Landsec and Network Rail.
Acquisitions
We completed the strategic
acquisitions of Cliniwaste (October), a specialist in treating
plastic waste in healthcare environments, and GBE Converge Group
(November) in Q3 FY24 for a total consideration of £21m. GBE is a
leading independent provider of fire and security solutions in the
construction, data centre and Information and Communications
Technology (ICT) sectors and complements our recent acquisition of
JCA Engineering.
Q3 FY24 Divisional
performance
Business Services
Revenue of £381m was 7% ahead of the
same quarter last year (Q3 FY23: £356m), benefiting from contract
re-pricing, recent acquisitions including GBE, Linx International
and RHI Industrials, projects and variable works (largely driven by
our intelligence-led approach to tackling elevated levels of crime
in the retail sector) and net wins, partially offset by scope
reductions on contracts such as the Afghan Relocations and
Assistance Programme.
Technical Services
Revenue of £337m was 17% ahead of
the same quarter last year (Q3 FY23: £287m), benefiting from the
growth in businesses acquired in prior periods (including Rock and
JCA Engineering), net wins, and continued growth in projects and
variable works across IFM contracts, including for the National Air
Traffic Services (NATS) contract won in late FY23.
Central Government and Defence
(CG&D)
Revenue of £237m was 19% ahead of
the same quarter last year (Q3 FY23: £199m), primarily driven by
projects work across a number of the largest CG&D contracts,
such as FDIS and DWP, and due to the consolidation of the Landmarc
military training estate as a
subsidiary[4] (c.£11m
additional revenue in Q3).
Communities
Revenue of £191m was 17% ahead of
the same quarter last year (Q3 FY23: £163m), driven by contract
re-pricing and an increase in the provision of services for the
Immigration Escorting Services contract.
Share buyback programme
Our current £50m share buyback
programme is nearing completion. In the nine months to 31 December
2023, 45m shares were purchased at an average price of 98p and a
cost of £44m, including c.30m shares to satisfy the 2020 SAYE
scheme that vested in December 2023.
The 2020 SAYE scheme has been our
most successful yet, with over 1,600 predominantly frontline
colleagues gaining an average of £13,000 each from their savings
plans. Since the scheme vested, 24m shares have been exercised by
employees, and Mitie has received £6.5m from the 27.3p discounted
option price paid by employees towards each share. Once all
of the shares have been exercised, cash receipts will increase to
c.£8m.
It is Mitie's intention to use the
c.£8m of exercise receipts for further share buybacks within the
current programme. The net spend by the Group of £50m is unchanged
by this (reducing the average price to c.85p) and all shares
purchased using the c.£8m will be cancelled.
Net debt
Period end net debt (post-IFRS 16)
was £122m (including £30m cash acquired on the consolidation of
Landmarc), an increase of £9m from 30 September 2023, and £78m from
31 March 2023.
The increase in net debt since 31
March 2023 reflects the capital allocation policy that we set out
at our Capital Markets Day in October 2023, with strong free cash
flow generation of £62m (nine months to 31 December 2022:
£25m[5]) being reinvested into planned capital
deployment actions. Total capital deployment spend of £152m
included the share buyback programme (£44m), share purchases for
employee incentive schemes (£20m), acquisitions (£65m), and
dividend distributions (£29m), partially offset by cash receipts
from the 2020 SAYE scheme (£6m). There has also been an £18m
increase in lease obligations in FY24 as we continue to transition
our fleet to electric vehicles. Q3 FY24 average daily net
debt was £162m (Q3 FY23: £103m).
Outlook
Our strategy of focusing on Key
Accounts growth (supported by a record £19bn pipeline of
opportunities), Projects upsell and infill M&A drove a strong
performance in the third quarter. We expect good revenue momentum
to continue into the fourth quarter, albeit against a very strong
prior year comparative for Projects work. As such, Q4 revenue
growth is expected to moderate to mid-single digits, still
comfortably ahead of the wider FM market.
Our strong performance, combined
with the ongoing delivery of margin enhancement initiatives, means
that the Group remains on track to deliver operating profit before
other items of at least £190m in FY24.
- END
-
Revenue (including share of JVs and
associates), £m
|
Q3: 3
months to 31 Dec 2023
|
Q3: 3
months to 31 Dec 2022
|
%
Increase /(decrease)
|
Q2: 3
months to 30 Sept 2023
|
%
Increase/ (decrease)
Q3 v Q2
FY24
|
Business Services
|
381
|
356
|
7.0
|
359
|
6.1
|
Cleaning and
Security
|
316
|
295
|
7.1
|
299
|
5.7
|
Landscapes
|
17
|
18
|
(5.6)
|
14
|
21.4
|
Spain
|
28
|
24
|
16.7
|
27
|
3.7
|
Waste
|
20
|
19
|
5.3
|
19
|
5.3
|
Technical Services
|
337
|
287
|
17.4
|
326
|
3.4
|
CG&D
|
237
|
199
|
19.1
|
199
|
19.1
|
Communities
|
191
|
163
|
17.2
|
196
|
(2.6)
|
Local Government &
Education and Healthcare
|
135
|
118
|
14.4
|
147
|
(8.2)
|
Care &
Custody
|
56
|
45
|
24.4
|
49
|
14.3
|
Mitie Group
|
1,146
|
1,005
|
14.0
|
1,079
|
6.2
|
For
further information
About Mitie
Founded in 1987, Mitie looks after
the places where Britain works, and is the leading facilities
transformation company in the UK. We offer a range of services to
the public sector through our Central Government & Defence and
Communities (Local Government & Education, Healthcare and Care
& Custody) divisions. Our Technical Services (Engineering
Services) and Business Services (Security, Cleaning, Landscapes,
Spain and Waste) divisions serve private sector customers in areas
such as Financial & Professional Services, Industrials, Retail
and Transport, and increasingly the public sector.
Mitie employs 65,000 people. We take
care of our customers' people and buildings, through the 'Science
of Service', and we are transforming facilities to be more
flexible, safe, sustainable, and attractive to all. Mitie continues
to execute its technology-led strategy and in the past twelve
months has received multiple industry awards including B2B
Marketing Team of the Year, Best Low Carbon Solution and Net Zero
Carbon Strategy of the Year. Targeting Net Zero by the end of 2025,
our ambitious emissions reduction plans have also been validated by
the Science Based Targets initiative (SBTi). We have been
recognised as a UK Top Employer for the sixth consecutive year.
Find out more at www.mitie.com.