In its half-yearly financial report, outsourcing firm Mitie has reported revenue from continuing operations for the six months ended 30 September 2018 was £1,040.9m, up 4.0% on the comparable period in the previous year. Strong growth in Security, Cleaning & Environmental services and Care & Custody divisions, and good momentum from its top integrated accounts, all contributed to the top-line growth.
Operating profit from continuing operations before other items decreased 4.2% to £38.4m. Mitie stated it delivered strong performances across Engineering Services, Security and Professional Services due to good momentum across its top integrated accounts, higher levels of project work, and improved operating efficiencies. The Cleaning & Environmental Services division’s operating profit margin was impacted by an adverse contract mix change in the prior year, highlighted at FY 17/18 results; while profitability of the Catering division declined in line with revenue. Care & Custody incurred mobilisation-related costs of net £3.3m. Excluding these costs, the underlying profitability of the Care & Custody division more than doubled.
The Group is currently 18 months into its three-year transformation programme ‘Project Helix’, which remains on track to deliver c.£40m of cumulative in-year benefits and c.£50m of run-rate benefits by the end of FY 19/20. Mitie remains remain confident in achieving its medium-term target of 4.5%-5.5% operating profit margin as more Project Helix benefits are delivered to the bottom line – rather than being reinvested – and as its portfolio of contracts shifts to higher margin, technology-led services.
Whilst Mitie won new contracts across its businesses, renewed or extended a significant number of contracts, and renegotiated terms with a number of large customers, it was also more disciplined in its bidding process. In H1 18/19, Mitie did not fully replace revenue billed from the order book and, consequently, the secured order book declined by £255m to £3.9bn.
In terms of wins and extensions, Mitie extended its contract with Vodafone for a further two years, commencing from 1 April 2020, to provide FM services across c.1,250 properties. Mitie also won an FM contract with Yorkshire Building Society and extended a Security contract with a major UK retailer into multiple service lines and more locations. Security grew its order book on the back of several contract wins, including a major furniture retailer, and a high retention rate, whereas all other divisions experienced the unwinding of multi-year large contracts and reported lower order books as at 30 September 2018. However, Mitie says it now has a much larger pipeline reflecting its inclusion on the Government’s procurement framework and its Connected Workspace customer proposition. Mitie has recently won large contracts in retail, real estate, automotive and healthcare sectors.
As part of the wider strategic review of the Group’s operations, which focuses on its core businesses, Mitie completed the sale of Mitie Pest Control Limited (“Pest Control”) to Rentokil Initial plc for a consideration of £40 million in cash.
Post the reporting period, Mitie completed the acquisition of Vision Security Group Limited (“VSG”) from Compass Group PLC on 26 October 2018 for a consideration of £14 million which was paid in cash.
On 19 November 2018, Mitie signed an agreement to sell our Social Housing business to Mears Group plc (“Mears”) for a consideration of £22.5 million in cash plus an earnout of up to £12.5 million.
Commenting on the results, Phil Bentley, Chief Executive, Mitie Group plc, commented: “We continue our strategic focus on our core businesses and core clients. We are enhancing service delivery and margin by reducing our cost base, investing in customer services and deploying the distinctive technology our clients increasingly demand from their ‘Connected Workspace’.
“We are making steady progress on all fronts. With recent disposals and acquisitions, we have begun the process of sharpening our focus on those business lines where we can secure a leading market position, underpinned by technology. This approach is already gaining traction.
“Our industry remains competitive and challenging, but with the actions we are taking, we see improving prospects for growth ahead of us.”