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Q1 trading: Mitie ‘more resilient than expected’

Mitie Group’s trading update for the three-month period ended 30 June 2020 has revealed that although the Covid-19 situation impacted the performance of the business in the first quarter, the company has proved to be “more resilient than expected“, particularly across its fixed technical services contracts, cleaning and security services and public sector contracts.

Mitie has over 37,500 employees working daily on the front line, and has recently brought over 40% of its 7,000 furloughed colleagues back to work as its customers begin to resume operations.

Group revenue from continuing operations for the period was £458.3 million, which was 11% lower than the same period in the prior year with June’s performance slightly better than the previously announced April and May result. This revenue decline includes the known loss of the Ministry of Justice contract and the reduced scope of the NHS Properties contract which together represented 3 percentage points of the decline.

However, Mitie stated that due to the seasonality of its business, the first quarter is “generally its lowest quarter” in the fiscal year.

Business Services
Business Services – representing 53% of group revenue – reported revenue of £243 million, 1% lower than the same period last year. Excluding the MoJ contract which ended on 31 March 2020, Business Services reported a 2% increase in revenue as the division has benefited from customers requesting additional cleaning and security as well as new Government contracts for Covid-19 testing centres and NHS Nightingale Hospitals.

After a significant decline in revenue from Mitie’s transport and logistics customers, Business Services are starting to see some airports reopening and Eurostar is increasing the number of services required.

Technical Services
As indicated in Mitie’s recent Preliminary results update, Technical Services – representing 35% of group revenue – has seen the greatest impact from Covid-19 as discretionary variable work and demand for engineering projects have significantly reduced.

Reported revenue was £163 million, down 24% against the same three-month period last year. Whilst this represents a significant decline, Mitie said the fixed maintenance element, excluding lost contracts, only declined 1% year-on-year reflecting strong relationships and the vital services it provide to its customers. However discretionary variable works and projects contracted 37% and 49% respectively in the three-month period. Fixed, variable and project work currently represent 60%, 23% and 17% respectively of Technical Services revenue.

Specialist Services
Specialist Services – representing 11% of group revenue – reported revenue of £52.4 million, 10% lower than the same period last year. Care & Custody reported revenue of £25.9 million, down 7% due to expired contracts. Waste reported a 14% decline in revenue to £16.9 million, as customers within the finance and professional, leisure and transport sectors had less need for their services. Landscaping saw an 8% revenue decline to £9.6 million as property managers, leisure and transport & logistics customers reduced services.

Interserve Facilities Management
Integration plans for the acquisition of Interserve Facilities Management have commenced with the appointment of a full-time Integration Programme Director.

Subject to shareholder approval and other conditions precedent, the transaction is expected to close in the fourth quarter of 2020.

 

 

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