MITIE Group PLC · LSE:MTO
MITIE — FY2017/18 Earnings Presentation
43 slides from MITIE's earnings presentation, Jun 7, 2018
Slide 1: Mitie Group plc Analyst Presentation FY 17/18
Mitie Group plc The UK’s leading Facilities Management business Analyst Presentation FY 17/18 7 June 2018 The exceptional, every day Mitie Group plc | The exceptional, every day 1
Slide 2: Disclaimer
Disclaimer This announcement contains forward-looking statements. Such statements do not relate strictly to historical facts and can be identified by the use of words such as 'anticipate', 'expect', 'intend', 'will', 'project', 'plan', and 'believe' and other words of similar meaning in connection w
Slide 3: Agenda
Agenda FY 17/18 Strategic & Operational Review: Phil Bentley, CEO FY 17/18 Financial Review: Paul Woolf, CFO Outlook: Phil Bentley, CEO Q&A Mitie Group plc | The exceptional, every day 3
Slide 4: Strategic & Operational Review
Strategic & Operational Review Phil Bentley The exceptional, every day Mitie Group plc | The exceptional, every day
Slide 5: Overview – FY 17/18
Overview – FY 17/18 • Core businesses performing well, demonstrating resilience and strength in a challenging wider market • Continued positive momentum in revenue growth – revenues up 2.8% to £2.2bn1 (FY 16/17: £2.1bn2) • EBIT before other items in-line with management expectations – down 6.0% to £
Slide 6: FY 17/18 financial highlights
FY 17/18 financial highlights Revenue Order book3 £2,199.1m1 +2.8% £4,495m +2.4% (FY 16/17: £2,140.0m2) (FY 16/17: £4,392m) Op. Profit Net debt Leverage Y/E Average Within £77.1m1 -6.0% £193.5m £286.1m 1.98x covenant of 3.0x (FY 16/17: £82.0m2) (FY 16/17: (FY 16/17: (FY 16/17: 1.76x) £147.2m) £335.9
Slide 7: Market backdrop
Market backdrop • FY 2017/18 has been a challenging period for the wider sector • The market has been characterised by corporate recapitalisations and debt refinancings • The collapse of Carillion has been the catalyst for important debate, especially around public sector procurement – Not all outso
Slide 8: UK's leading FM business
UK's leading FM business • Mitie is the UK’s leading Facilities Management business Resilient business with market-leading positions – Nationwide footprint – Blue-chip client base – Delivering basics brilliantly and providing insight through technology and data analytics • One year into a major thre
Slide 9: Placing customers at the heart of our business
Customer Placing customers at the heart of our business 1 >3,000 How likely would you be to recommend Mitie to a friend or colleague? NPS score 12 months -27 48% 31% 21% ago New centralised Mitie Sales & Commercial team Current NPS -10 36% 37% 26% score Detractor Passive Promoter • One CRM system c.
Slide 10: Controlling our spend, driving efficiencies
Cost Controlling our spend, driving efficiencies • Managing our cost base to optimise 439 margins, efficiency and to deliver value • £5m reduction in fuel and fleet spend this year to our customers has been key • 85% reduction in speeding • Major Group-wide programmes as a result of new safe drive c
Slide 11: Inspiring our greatest asset
People Inspiring our greatest asset • HR transformation Supporting those on lower incomes 33% programme ongoing New dedicated people support helpline • Innovative ‘Salary Finance’ • Introduction of ‘People partnership Support’ – centralised HR • - >1,400 Mitie staff contact for all Mitie staff • Emp
Slide 12: Delivering next-generation FM
Technology Delivering next-generation FM Building the Foundations for our technology-led Pioneering technology-enabled FM offer • Our ambition is to make our customers' buildings and people • Major programmes to consolidate finance, HR and other core perform better – through: technology systems are
Slide 13: Transformation journey
Transformation journey • The first year of our Transformation Programme has been completed • We are beginning to deliver transformational outcomes with significant changes to our operating model in our journey to create ‘One Mitie’ • We have centralised key corporate functions to create Shared Servi
Slide 14: Project Helix: on track to deliver £50m of run-rate savings by March 2020
Project Helix: on track to deliver £50m of run-rate savings by March 2020 FY 17/18 FY 18/19 plan In year Run rate Cost of Change In year Run rate Cost of Change savings savings savings savings Capex Opex Capex Opex Project Helix HR Transformation 1 1 - (3) 4 4 (1) (1) Finance Transformation 1 6 (1)
Slide 15: Financial Review
Financial Review Paul Woolf The exceptional, every day Mitie Group plc | The exceptional, every day
Slide 16: FY 17/18 financial highlights
FY 17/18 financial highlights • FY 17/18 results in line with expectations – Revenue1 grew by 2.8% to £2,199m – Operating profit1 down £4.9m to £77.1m: investment in future growth more than offset benefits from transformation programme – Net debt at £193.5m (FY 16/17: £147.2m) as steps taken to norm
Slide 17: Financial summary
Financial summary YoY change £m FY 17/181 FY 16/171 £m % Revenue 2,199.1 2,140.0 59.1 2.8 2 Gross profit 292.5 284.6 7.9 2.8 Gross margin 13.3% 13.3% - Overheads2 (215.4) (202.6) (12.8) 6.3 Operating profit 77.1 82.0 (4.9) (6.0) Operating margin 3.5% 3.8% (0.3ppt) Profit before tax - pre other items
Slide 18: Revenue by division
Revenue by division YoY change £m FY 17/181 FY 16/171,2 • Revenue1 growth of 2.8%: £m % – H1 +2.5% Engineering Services 833.8 803.7 30.1 3.7 – H2 +3.0% • National Minimum Wage passthrough contributed c.0.4% increase in Security 431.7 403.7 28.0 6.9 revenue • ES: both core customers and projects busi
Slide 19: Operating profit by division
Operating profit by division YoY change £m FY 17/181 FY 16/171,2 £m % • ES: revenue growth and gross margin improvement partially offset by investment in customers Engineering Services 35.5 33.0 2.5 7.6 • Security: good performance from increased technology penetration and good performances in Docum
Slide 20: Operating profit bridge FY 16/17 to FY 17/18
Operating profit bridge FY 16/17 to FY 17/18 £110m Investments £105m £100m (7) £95m 13 £90m (10) £85m 6 £80m (6) (1) £75m 82.0 77.1 £70m FY 16/17 Contract Helix savings Customers Internal capabilities IT/technology Other FY 17/18 performance On an APM basis, before other items Mitie Group plc | The
Slide 21: Cash flow
Cash flow £m FY 17/181,2 FY 16/17 £m FY 17/181,2 FY 16/17 EBITDA 45.4 (31.0) Operating profit before other items 77.1 (6.3) Pension deficit payments (3.0) - Other items (103.0) (36.6) Other non-cash items 7.2 40.1 Discontinued operations - (135.2) Operating cash flow before working capital movements
Slide 22: Balance sheet
Balance sheet YoY change £m FY 17/181 FY 16/17 £m % Goodwill and intangibles 348.9 397.1 (48.2) (12.1) Property plant & equipment 33.8 32.3 1.5 4.6 working capital assets 482.5 452.7 29.8 6.6 working capital liabilities (566.3) (604.7) 38.4 (6.4) Working capital balances (83.8) (152.0) 68.2 (44.9) N
Slide 23: Net debt & liquidity
Net debt & liquidity Significant committed facilities for next 3 years • Comfortable liquidity headroom for next 3 years RCF USPP • Plans to continue to reduce use of invoice discounting Net debt at 31 March 2018 Average net debt in FY 17/18 • Commitment to continued improvement in supply chain £500
Slide 24: Other items
Other items FY 17/18 £m * Helix transformation costs £m Pre IFRS 15 basis Helix transformation costs* (34.7) Professional fees (13.0) Impairment of intangible assets (10.4) Outsourcing / dual running costs (8.2) Other redundancy payments (2.2) Redundancy payments (2.6) Restructuring costs (47.3) Cos
Slide 25: IFRS 15 – key headlines
IFRS 15 – key headlines Impact summary FY 17/18 Difference Early adopted IFRS 15 for y/e 31 March 2018 £m Reported Pre IFRS 15 • Cumulative retrospective methodology applied Revenue 2,203.7 2,199.1 4.6 Operating profit before other items 89.6 77.1 12.5 • Prior year not amended Net cash movement in y
Slide 26: Outlook
Outlook Phil Bentley The exceptional, every day Mitie Group plc | The exceptional, every day
Slide 27: Outlook
Outlook • Discovery is done, delivery is on track – 14 months into three-year programme – £50m full run-rate savings by March 2020 expected • UK presents considerable opportunities for Mitie as a UK specialist FM provider – Scale – Technology – Sustainability – Public sector portfolio mix • Sector r
Slide 28: Q&A
Q&A mitie.com The exceptional, every day Mitie Group plc | The exceptional, every day
Slide 29: Appendices
29 Appendices mitie.com The exceptional, every day Mitie Group plc | The exceptional, every day
Slide 30: Engineering Services
Engineering Services YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 833.8 803.7 30.1 3.7 Gross profit2 87.5 82.1 5.4 6.6 Main service lines: Gross margin 10.5% 10.2% 0.3ppt Maintenance Operating profit 35.5 33.0 2.5 7.6 Fabric repair Operating margin 4.3% 4.1% 0.2ppt Lighting Electrical and gas in
Slide 31: Security
Security YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 431.7 403.7 28.0 6.9 Gross profit2 49.2 46.3 2.9 6.3 Main service lines: Gross margin 11.4% 11.5% (0.1ppt) Operating profit 25.2 21.6 3.6 16.7 Security Document Management Operating margin 5.8% 5.4% 0.4ppt Front of House Vetting Order book3 6
Slide 32: Professional Services
Professional Services YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 90.8 96.6 (5.8) (6.0) Gross profit2 21.9 19.6 2.3 11.7 Main service lines: Gross margin 24.1% 20.3% 3.8ppt Waste management Operating profit 7.0 9.3 (2.3) (24.7) Sustainability Occupier services Operating margin 7.7% 9.6% (1.9ppt
Slide 33: Cleaning & Environmental Services
Cleaning & Environmental Services YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 405.5 399.2 6.3 1.6 Gross profit2 56.0 57.7 (1.7) (2.9) Main service lines: Gross margin 13.8% 14.5% (0.7ppt) Operating profit 19.8 20.9 (1.1) (5.3) Cleaning Landscaping Operating margin 4.9% 5.2% (0.3ppt) Pest Contro
Slide 34: Care & Custody
Care & Custody YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 62.3 46.4 15.9 34.3 2 7.2 6.2 1.0 16.1 Gross profit Main service lines: Gross margin 11.6% 13.4% (1.8ppt) Operating profit 3.2 2.9 0.3 10.3 Immigration detention& escorting Operating margin 5.1% 6.3% (1.2ppt) Forensic Medical Examiner C
Slide 35: Catering
Catering YoY change £m FY 17/181 FY 16/171,2 £m % Revenue 137.1 132.7 4.4 3.3 Gross profit2 13.8 13.4 0.4 3.0 Main service lines: Gross margin 10.1% 10.1% - Operating profit 5.0 5.3 (0.3) (5.7) Catering Hospitality Operating margin 3.6% 4.0% (0.4ppt) 3 34.7 29.4 5.3 18.0 Order book Employees: • Reve
Slide 36: Property Management
Property Management YoY change £m FY 17/181 FY 16/172 £m % Revenue 237.9 257.7 (19.8) (7.7) Gross profit2 56.9 59.3 (2.4) (4.0) Main service lines: Gross margin 23.9% 23.0% 0.9ppt Operating profit 7.9 12.3 (4.4) (35.8) Social housing maintenance Roofing Operating margin 3.3% 4.8% (1.5ppt) Painting O
Slide 37: Net debt
Net debt Year end net debt £46.3m higher than prior year: Net debt (£m) FY 17/18 FY 16/17 YoY change Closing (193.5) (147.2) (46.3) • £(34)m due to reduction in invoice discounting Average (286.1) (335.9) 49.8 • £(20)m due to improved supplier payment Covenant calculations FY 17/18 FY 16/17 Covenant
Slide 38: Daily net debt
Daily net debt Average net debt FY 17/18: £286.1m (£450m) FY 16/17: £335.9m (£400m) (£350m) (£300m) (£250m) (£200m) Year end net debt FY 17/18: £193.5m (£150m) FY 16/17: £147.2m (£100m) (£50m) - Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Mitie Group plc | The exceptional, every day 38
Slide 39: IFRS 15 – process and impact
IFRS 15 – process and impact • Impacts long-term contract accounting • More closely aligns Five-step model revenue recognition with commercial substance Allocate the Recognise • Provides greater Identify the Identify the Determine the transaction revenue when performance transparency and contract wi
Slide 40: We have a blue-chip customer base that includes…
We have a blue-chip customer base that includes… Mitie Group plc | The exceptional, every day 40
Slide 41: The Connected Workspace in Action: Red Bull Experience
The Connected Workspace in Action: Red Bull Experience “ We’re proud to have partners who share a like-minded approach to innovation. Red Bull Racing Mitie Group plc | The exceptional, every day 41
Slide 42: Our culture – our core values and how we behave
People Our culture – our core values and how we behave ‘The exceptional, every day’ We are We are built on We go the Our diversity Our customers’ one Mitie integrity and trust extra mile makes us stronger business, is our business We work as one to Integrity and trust are Whether it’s keeping We are
Slide 43: The exceptional, every day
The exceptional, every day Mitie Group plc | The exceptional, every day