Mitie reports a ‘strong financial performance’ in FY22 results

Mitie has released its full year results for the period ending 31 March 2022 which show strong financial performance and good underlying growth.

Revenue including share of joint ventures and associates from continuing operations was £3,997m, an increase of 58% compared with the same period last year (FY21: £2,529m). This was boosted by new contract wins, renewals/extensions and projects of approximately £3.8bn total contract value, as well as good growth at Interserve Facilities Management (Interserve) with 90% of contracts renewed in the period and cost synergies of £30m, and £448m from flexible rapid-response Covid-related contracts.

Operating profit before other items, from continuing operations was £167m in FY22, up 184% (FY21: £59m) with higher operating profit margin of 4.2% (FY21: 2.3%) due to the contribution from the higher margin, short-term Covid contracts. Operating profit after other items was £72m (FY21: £4m), reflecting the stronger performance this year.

The group also reported acquisitions of £27m in fast growing, high return businesses and the disposal of Mitie Document Management to Swiss Post Solutions Limited (SPS) for £40m.

Commenting on the FY22 results, Phil Bentley, Group Chief Executive, said: “Through our investment-led strategy, Mitie has reached an inflection point earlier than anticipated. We delivered a strong financial performance in FY22, with good underlying growth. The Group is now able to leverage its capital base to focus on long-term value creation, accelerating investment in growth and delivering enhanced shareholder returns.

“Thanks to the hard work of our 72,000 colleagues, Mitie has recovered strongly from the pandemic, delivering a record £4bn of revenue in FY22, operating profit of £167m and free cash flow of £133m. The Interserve business is performing strongly under our stewardship and our ability to rapidly mobilise flexible contracts led to robust Covid-related business. Our underlying business performed well in the year, growing 14%.

“Our strategy – focused on accelerating growth, enhancing margins and improving cash generation – is creating a strong platform to further improve earnings. Our robust balance sheet and significant free cash flow allowed for continued investment in high return acquisitions across decarbonisation (Rock Power Connections and Biotecture), telecoms maintenance (DAEL Ventures UK), and intelligent security (Esoteric). Two further telecoms maintenance businesses (P2ML and 8point8) were acquired early in FY23 and we have entered into a Sale & Purchase Agreement (SPA) for Custom Solar, a solar power solutions company.

“Underpinning our strategy is our ‘Science of Service’ offering, which we launched in the final quarter of FY22. This provides a solution to our customers whose workspaces require greater hygiene, intelligent security, and critical asset monitoring backed by data analytics, whilst our internal technology is driving productivity gains and cost efficiencies, supporting our margin enhancement strategy. Our technology is a key driver of both our new contract wins including projects – up to £2.1bn TCV in the year – and our high renewals rates – 90% in the period.

“As part of our strategic focus on long-term value creation, our revised medium term capital allocation policy will focus on investments in high margin bolt-on acquisitions, whilst increasing shareholder returns. The Board is recommending a reinstatement of the final dividend of 1.4p and Mitie will now commence an initial £50m share buyback programme.

“The current year has started well, with significant contract wins from Hammerson, Netflix, Poundland, and Primark as well as renewals/extensions of our contracts to support military bases in Cyprus, Ascension Islands, and the Falklands. This new business momentum, together with a full year’s contribution from significant contract wins including FDIS and BAE and the uptick in Government projects and variable works (as our customers experience higher utilisation rates across their buildings), gives us confidence in our growth outlook. The impact of inflation on our business continues to be well managed and we will see further benefits this year from our margin enhancement initiatives. As a result, in FY23, after excluding the £448m Covid related contract work that was delivered in FY22, we expect to deliver mid to high single digit revenue growth, together with good operating margin progress.”