Company Announcements

27 July 2021

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

Mitie Group plc: AGM Q1 trading update

UK Government projects contribute to strong performance in first quarter

Mitie Group plc ("Mitie" or "the Group") (LSE MTO), the UK's leading facilities management company is holding its Annual General Meeting at 11.30am this morning and will provide the following update on trading for the three-month period ended 30 June 2021 ("Q1 FY22").

Highlights                                                                                               

·     Group revenue of £930m including our share of joint ventures and associates, is 104% ahead of the same period last year (Q1 FY21 £455m)

·     Revenue excluding Interserve Facilities Management (Interserve) of £618m, is 36% ahead of the same period last year (Q1 FY21 £455m)

·     Revenue from COVID-19 (COVID) related UK Government contracts of £110m in the quarter (Q1 FY21 £11m)

·     New contract wins and renewals in the quarter of up to £1.4bn total contract value

·     Average daily net debt for the three months ended 30 June 2021 was £69m (Q1 FY21 £164m)

·     Interserve integration progressing well - completion and move to 'business as usual' expected by December 2021, and good progress made with synergy delivery

·     Encouraging take up of Science of Service growth opportunities as the economy begins to re-open

Mitie has made a strong start to FY22, delivering revenue including share of joint ventures and associates of £930m, more than double that of the same quarter last year (Q1 FY21 £455m).  Revenue excluding Interserve increased by 36% to £618m (Q1 FY21 £455m).  This increase is a result of the delivery of £110m of revenue from short-term COVID related projects supporting the UK Government, new wins, and the gradual re-opening of UK businesses, which has had a positive effect on discretionary projects and variable works. 

During the quarter Mitie announced a new contract with Future Defence Infrastructure Services (FDIS) - Scotland & Northern Ireland worth up to £646m, and renewed its Test Centres contract with the UK Government, which is expected to have a total contract value of up to £365m.  Additional wins were secured with the Home Office, Future Maritime Services Programme (FMSP) Clyde, and Swansea University, and renewals with Amazon, DWP, DfT and Southwark Council.  In aggregate, contracts valued at up to £1.4bn were won or renewed in the quarter.  Mitie has also renewed or extended 99% of the former Interserve contracts that were bid in the quarter.

Business Services

Revenue of £357m was 47% ahead of the same quarter last year, primarily due to the ongoing delivery of COVID related UK Government contracts.  Excluding COVID related projects, Business Services' performance was strong due to the full year effect of new wins, additional services on existing contracts, and the gradual return of project and variable works.

During the period Business Services won or renewed contracts with a total value of up to £500m.  This includes an enlarged and extended Test Centres contract with the DHSC, COVID related Quarantine Services contracts, and new contracts with HMRC, Springfield Fuels and the MOJ.

Technical Services

Technical Services was the division hardest hit by COVID in FY21, and it has therefore been encouraging to see an increase in revenues from discretionary projects and variable works.  Its largest customers, which include major airports and office-based businesses, were significantly impacted by the pandemic, and therefore may not fully 'recover' to pre-COVID levels during this fiscal year.

Revenue of £204m was 28% ahead of the same quarter last year, driven largely by a recovery in discretionary projects and variable works, but also the full year effect of FY21 wins from 'blue chip' customers such as Magnox and Royal London.  During the quarter £28m of contracts were won or renewed, including a new contract with the City of Edinburgh Council and the renewal of Network Rail.

Project Forte, our project to implement a new workflow management automation and billing system, is moving into integrated product testing and is on track to go live by this calendar year end.

Specialist Services

The Specialist Services division, comprising Mitie's Care & Custody, Waste and Landscapes businesses, reported revenue of £57m for the quarter, 10% ahead of the prior year.

The primary driver of growth was from Care & Custody, which secured new contracts to deliver forensic medical services to three police forces, and has seen an increase in activity for immigration services.  During Q1, Care & Custody also secured contracts to operate the new Derwentside Immigration Removal Centre (IRC) and the Dungavel IRC, which are scheduled to go live later this year.  During the quarter, Specialist Services has added £152m from new contract wins and renewals.

Interserve

The former Interserve business reported revenue of £312m for the first quarter of the year.  This performance is an improvement on Q1 FY21, and encouragingly, reflects increased project work in the Central Government & Defence (CG&D) business.  The Communities division was flat in the quarter as the increase in revenue from projects was offset by contract losses prior to Mitie's ownership.  The Business & Industries (B&I) division reported a small decline in revenue, which was also a result of contracts lost prior to Mitie's ownership.

During the quarter new contracts were won with FDIS, FMSP (Clyde) and Swansea University, and a renewal signed with Southwark Council.  The total contract value for all wins, renewals and extensions in the quarter was up to £675m.

Mitie's integration of Interserve continues to progress well, with the project expected to move into 'business as usual' by December 2021.  The technology integration is making excellent progress, with the transitional services arrangements between Mitie and the Interserve Group scheduled to end on 30 November 2021.  Mitie will shortly cease to provide transitional services to the remaining Interserve Group. Mitie has continued to move Interserve applications and data into its cyber protected cloud, and the Group has now been CE+ accredited, including all of the migrated systems and applications. The migration from Interserve's ERP System to Mitie's SAP environment will be completed by September 2021, and we are making good progress implementing 'Connected Workplace' technologies at former Interserve customers' premises.  Transitioned Interserve IT help desk and applications maintenance performance has significantly improved, and consultation has commenced for the move of finance back-office processes to India.

The transfer of former Interserve colleagues to Mitie's Payroll and HR systems continues, with the third and largest cohort of colleagues (9,000+) due to transfer at the beginning of August.  A new Birmingham office is being fitted out to consolidate Mitie and former Interserve activities in the Midlands, with a total of nine properties now closed or in the process of closing.  We continue to focus on synergies and remain confident of our ability to deliver a run rate of £42m of synergies by the end FY23, at the same cost to achieve (£33.4m) as originally identified. 

Our half year results to 30 September 2021 will be reported in line with the new divisional structure, with CG&D and Communities (including Mitie's PFI schools and hospital contracts), and B&I incorporated into Mitie's Business Services and Technical Services divisions.

Net debt

Average daily net debt post IFRS16 for the three months ended 30 June 2021 was £69m, an improvement over both the previous quarter (Q4 FY21 £82m) and the same period last year (Q1 FY20 £164m).  In contrast to prior years, the Q1 performance in FY22 has not been adversely affected by an unwind of prior year-end positions.  This reflects our improved management of working capital.

Outlook

Although the performance in the first quarter was boosted by shorter-term COVID related contracts, recent high-quality wins, the re-opening of customers' premises and the gradual recovery of the economy provide a strong underlying trading momentum which gives the Board considerable confidence for the second half and delivery of its full year expectations. 

Our growth, margin enhancement and cash generation strategy, allied with improving sales performance, and the accelerated uptake of our Connected Workplace and Science of Service offering, are expected to position the company strongly for the future.

The Annual General Meeting of Mitie Group plc is being held today at 11.30am at Level 12, The Shard, 32 Bridge Street, London SE1 9SG.

-    END -

For further information please contact:

Fiona Lawrence

Group IR Director

M +447384439112 (D)

fiona.lawrenceIR@mitie.com

Claire Lovegrove

Head of Media Relations

T +44 (0)203 123 8716

M +44 (0)790 027 6400

claire.lovegrove@mitie.com

About Mitie

Founded in 1987, Mitie's job is to look after the places where Britain works and is the leading facilities management company in the UK.

We offer a range of services in the Public Sector to Central Government and Defence customers; and to Communities (Healthcare, Education and Local Authorities) customers; and Technical Services (Engineering Services, Energy, Water and Real Estate Services) and Business Services (Security, Cleaning and Office Services) to Private Sector clients in Financial Services, Manufacturing, Transport, Retail and Telecoms and increasingly to the public sector.  Finally, our Specialist Services (Care & Custody, Landscapes and Waste Management) division serves both the public and private sector in higher margin niche businesses.

Mitie acquired Interserve's Facilities Management business on 30 November 2020 and now employs 75,000 people.  We are the champion of the 'Front-Line Heroes' who have kept Britain working during the COVID-19 pandemic. We take care of our customers' people and buildings, through the 'Science of Service', delivering essential services and deploying industry leading technology to create safe and effective workspaces.

Find out more at www.mitie.com.

The business continues to execute its technology-led investment strategy and has received multiple awards for the progress it has made.

ESG

Corporate

·    Armed Forces Covenant signatory

·    Best Website, UK Digital Experience Awards

·    Bronze Award, Fleet Operator Recognition Scheme

·    CIPS Procurement Excellence Award

·    Gold Award, Defence Employer Recognition Scheme

·    Inhouse Legal Team of the Year, LexisNexis Legal Awards

·    Institute of Internal Communications National Awards for Best News Magazine and Best Video Animation

·    IWFM COVID-19 Response Award Keeping Good Work Going

·    Best Corporate Magazine, Corporate and Financial Awards

·    National British Security Awards Best Newcomer, Service to the Customer, Security Manager of the Year, Contribution to the Industry

·    Peoples' Choice Award, Government Property Awards.

·    2020 ACT Medium Treasury Team of the Year

Technology

·    UK IT Industry award for the Artificial Intelligence/ Machine Learning project of the year with Esme Chatbot

·    Computing Digital Technology Leaders Award for Big Data / IoT Project of the Year

·    Data Into Insight and Artificial Intelligence & Machine Learning Project of the Year, Real IT Awards

·    Mitie Fire & Security Systems - Outstanding Security Installer/Integrator

·    Merlin Protect 24/7 - Mitie Security - Outstanding New Security Product

·    Mitie Security - Outstanding Contract Security Company

·    National British Security Awards Best use of Technology

·    Verdantix Smart Building Innovation Award for Facilities Management Services

·    Lockdown Hero of the Year - Mitie Security, Security and Fire Excellence Awards

·    Outstanding Security Team - Mitie Security, Outstanding Security Performance Awards