Mitie has issued an update in relation to the impact of the Covid-19 outbreak reporting that whilst it is unable to to predict with any accuracy the long-term operational impact of Covid-19 on its business at the present time, it is currently seeing a mixed impact on its divisions.
Across the essential services provided by Mitie to the public sector – including the NHS, Home Office, The Police, Sellafield, AWE, Bank of England, Network Rail etc – the company expects little change in demand as a consequence of Covid-19. These services represent c.30 per cent of its annual revenues.
Services to the Finance, Professional, and Banking sector, which represent c.12 per cent of revenues, are expected to continue at close to normal levels, whilst branches remain open, as will essential statutory and mandatory maintenance services to critical infrastructure such as Data Centres, Telecoms and Drug Manufacturing, which represent a further c.6 per cent of revenues.
Demand for Cleaning and Security Services from food and On-line Retailers are increasing. These services represent c.11 per cent of group revenues.
However, Mitie is starting to see discretionary project work in both Fire & Security and Technical Services (c.15 per cent of Group Revenue) being significantly deferred, alongside reduced demand from Transport & Logistics, Manufacturing, Property Managers and general office-based clients. In the latter cases (representing in aggregate a further c.26 per cent of Group Revenues) Mitie said it is seeking retainers to ring-fence ‘furloughed’ staff to ensure rapid and cost effective remobilisation, when the impact of Covid-19 has abated.
Currently almost all of Mitie’s front-line staff continue to work at client’s sites as requested to provide essential services. Where clients have reduced demand for its services, so far, Mitie has been able, in the main, to re-deploy colleagues in other areas of opportunity.
All of the company’s HR, Finance and IT support activities – including those outsourced to India – are being maintained effectively by staff working remotely. All other staff able to work remotely are also doing so, as a consequence of which its major office hubs are now shut.
Mitie has continued to trade in line with guidance provided in the trading update for the first nine months of FY19/20, issued on 30 January 2020 for both EBIT and Revenue, although in the last two weeks it has reported a material downturn in projects and non-essential maintenance spend.
Mitie anticipates that this trend will continue to accelerate in FY20/21, while the Covid-19 situation continues. This is being mitigated to some extent by increasing demand for cleaning and security services.
Due to the inherent uncertainties arising out of the Covid-19 situation, the Board has concluded that it cannot provide guidance with regard to the anticipated financial performance for FY20/21 until the outlook becomes clearer.
As a strategic supplier to the Government, Mitie is in conversations to seek additional support to bridge the downside impact on the business, as well as taking advantage of the “Coronavirus Job Retention Scheme”, which will allow the business to ‘furlough’ colleagues, if necessary, rather than laying them off.
Mitie is also implementing a number of actions to further mitigate the impact of the Covid-19:
- It has carried out a review of its overhead cost base which should deliver savings over the next 12 months of c.£25 million
- Any non-essential and uncommitted capital expenditure has been deferred
- The Board and CEO, and the Executive team have volunteered reductions in their directors’ fees and salaries of 30 per cent and 20 per cent respectively (for at least the next three months)
- And the Board has determined that unless overall trading improves materially, no final dividend will be recommended for FY19/20.
Phil Bentley, Chief Executive of Mitie, said: “I am humbled by the unstinting commitment of our front-line colleagues, who continue to provide essential services to our clients at this most challenging of times. They embody the
Mitie Value of ‘going the extra mile’ and they deserve everyone’s thanks.
“We welcome the support measures available to Mitie, as a strategic supplier to Government. The Board is therefore confident that the combination of its existing lending facilities, Government support measures and the current actions being undertaken, Mitie will be able to meet the challenges arising from Covid-19 in the near term and be well placed – as financing markets normalise – to complete its transformation programme and build an enduring business.”
Mitie expects to publish its full year results on 4 June 2020.
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