MITIE Group PLC · LSE:MTO
MITIE — H1 2011/12 Earnings Presentation
45 slides from MITIE's earnings presentation, November 2011
Slide 1: MITIE Group PLC
MITIE Group PLC Ruby McGregor-Smith Suzanne Baxter Chief Executive Group Finance Director
Slide 2: Strong financial performance
Strong financial performance Revenue 2012 budgeted revenue secured +5.8% 97% £971.7m jor year: 95%) (2010: £918.7m) Operating profit before other items Order book +6.6% £8.0bn £51.6m (March 2011: £6.8bn) (2010: £48.4m) Earnings per share before other items Sales pipeline +5.1% £11.7bn 10.4p (March 2
Slide 3: Highlights of the period
Highlights of the period + Delivered on our strategy with a series of transformational contract awards + Total potential value of the five major contracts awarded ranges from £740m to £1.3bn * Order book up by 17.6% to £8.0bn + Good progress in revenue growth - first half 5.8% + Margins consistent a
Slide 4: Enablers for growth
Enablers for growth + Enhanced order book and sales pipeline - 97% of 2012 budgeted revenues secured (prior year: 95%), 68% of 2012/13 forecast revenue secured (prior year: 62%) + £8.0bn order book (up £1.2bn from March 2011) + £11.7bn sales pipeline (up £0.3bn from March 2011) + Investments in inte
Slide 5: Private sector awards and renewals
Private sector awards and renewals - Key contracts retained and expanded Cumbrian Collaboration: £200m to £280m over 5-7 years Integrated facilities and energy management Builds on our 11-year relationship with Sellafield Ltd 500 buildings across a range of sites employing >500 people Expanded contr
Slide 6: Private sector opportunities
Private sector opportunities * Opportunity to repeat the growth achieved with Rolls-Royce, Vodafone and Diageo with a number of existing major clients over the next 2-3 years + Financial services + Majority of clients within financial services currently operate with single-service contracts + Next r
Slide 7: Public sector awards and renewals
Public sector awards and renewals - Key contracts awarded and retained/expanded Ministry of Justice: £200m to £455m over 5-7 years Total facilities management contracts for HMCTS in the South of England + Brixton and Isis Prisons Appointed to the MoJ's Minor Works Framework in April 2011 Essex Count
Slide 8: Public sector opportunities
Public sector opportunities + Justice + MoJ pipeline of up to £1bn, markets include: - Total facilities management, prisons management, electronic monitoring, community payback, probation trusts + Home Office market opportunities: police services and immigration removal centres + Health + Energy ser
Slide 9: International strategy progress
International strategy progress + Rolls-Royce pan-European contract to deliver total facilities and energy management continues to develop + Total in-year revenues expected to be around £80m + Acquired the remaining 50% of the equity share capital of Service Management International (SMI) in July 20
Slide 10: Following our clients overseas
Following our clients overseas Top 100 clients 72% EMEA 43% International clients 57% UK clients 20% Americas 8% Asia Pacific
Slide 11: International offering
International offering MITIE International - MiWorld data management & reporting platform et ee ee ee | Oe + Cleaning Masters 3 3 4 3 E Z = 3 = a ing a
Slide 12: The converging forces are well established in the market
The converging forces are well established in the market Low carbon
Slide 13: The drivers are in place
The drivers are in place Energy Services Evolution * Climate Change Act * CRC Energy Efficiency Scheme * EU regulations 1233/2010 * CERT/CESP/CCL/CSH * Building Regulations Carbon Legislation + Renewable Heat Incentive + Feed in Tariffs Anew * Green Gas Certificate . * Renewable Obligation Generatio
Slide 14: The UK energy services market is forecast to grow rapidly
The UK energy services market is forecast to grow rapidly Ebon 7 > | Energy Consultancy & Compliance 6- | Utility Procurement 5 5 & Data Management _| Energy Retrofit 4 a (incl. renewables) 37 Hl Supply & Performance 2 - Contracting 1- | Total Market 0) 4 2011 2014 2020
Slide 15: Our energy services proposition
Our energy services proposition Energy supply contracting Solar Decentr: thermal Performance contracting consumption Energy reduction retroft BEMS Demand-side management Carbon compliance Biomass Energy from waste Influencing and lobbying He: Raising ‘and minds awareness Energy efficiency — consulti
Slide 16: Energy awards and renewals
Energy awards and renewals - Key development NHS Carbon and Energy Fund: £200m framework Accepted as a partner in the capital fund Enables trusts to upgrade their energy infrastructure to save energy, carbon, money - Key contract awards O-Gen Plymtrek - 10 years Waitrose Developing an energy centre
Slide 17: Order book
Order book +£1.2bn A series of transformational contract awards and retentions this period have increased yN our secured order book by: +17.6% to £8.0bn af /
Slide 18: Sales pipeline of £11.7bn
Sales pipeline of £11.7bn Financial and 17% Professional services Retail Property Management Manufacturing Technology and Communications Utilities Transport and Logistics Leisure Construction 3% 5% 4% 2% 2% 3% 3% 2% FJ 7, Private 41% || || Public 59% 10% 20% 2% 17% 8% 2% Central Government Local Gov
Slide 19: Revenue by market sector
Revenue by market sector Financial and Professional services Retail Property Management Manufacturing Technology and Communications Utilities Transport and Logistics Leisure Construction 13% 11% 9% 9% 7% 6% 5% 3% 2% Private 65% _ wy BB puntic 35% 11% Government 11% Social Housing 5% Health 8% Educat
Slide 20: Real time information accessible 24/7
real time information accessible 24/7 Recent investment has been focused on: Remote monitoring hub in Northern Ireland Client-facing management information suite that provides comprehensive asset performance data and enables the most efficient, tailored FM solution
Slide 21: Ss
Ss
Slide 22: New MITIE model businesses
New MITIE model businesses - Technical Facilities Services - Ireland - Business Services outside London
Slide 23: Strong financial performance
Strong financial performance Revenue 2012 budgeted revenue secured +5.8% 97% £971.7m (Prior year: 95%) (2010: £918.7m) Operating profit before other items Order book +6.6% £8.0bn £51.6m (March 2011: £6.8bn) (2010: £48.4m) Earnings per share before other items Sales pipeline +5.1% £11.7bn 10. 4p (Mar
Slide 24: Continuing track record of growth
Continuing track record of growth Revenue (£m) EPS before other items* (p) p 2000 4 1,891.4 255 126 1800 1,720. 4 1,521.9 4 19.5 1600 ’ 20 1,407.2 17.2 149 15> 10> 07/08 08/09 09/10 10/11 11/12 | en | an *Other items are restrucruting and FY acquisition related items as set out in the slide "Other i
Slide 25: Summary financial results
Summary financial results 30 September H1 11/12 H1 10/11 Growth % Revenue (£m) 971.7 Operating profit before other items (£m)* 51.6 Operating margin 5.3% Profit before tax and other items (£m)* 47.9 Effective tax rate before other items* 24.0% Basic EPS before other items (p)* 10.4 Basic EPS (p) 94
Slide 26: Financial indicators
Financial indicators KPI Target H1 11/12 H1 10/11 FY 10/11 Secured revenue Current year 97% Next year 68% Group operating profit Maintain operating margins 5.3% margin before other items between 5.0% - 6.0% Dividend growth At least in line with underlying 7.3% earnings growth at 2.5 times adjusted e
Slide 27: £1.2bn growth to £8bn
£1.2bn growth to £8bn Strong order book 6-4 5 4- 34 275 4.4 49 6.4 _ ) T T T T FY 07/08 FY 08/09 FY09/10 FY 10/11 H1 11/12 Bry | ae + Disclosing order book at half year for the first time due to exceptional levels of organic growth * Growth of 17.6% since FY 10/11
Slide 28: Strong growth of 5.8%
Strong growth of 5.8% Segmental revenue Revenue (£m) H1 11/12 H1 10/11 Growth % Facilities Management Technical Facilities Management Property Management Asset Management Total group
Slide 29: Strong growth of 6.6%
Strong growth of 6.6% Segmental operating profit Operating profit (£m)* H1 11/12 H1 10/11 Growth % Facilities Management Operating profit Margin % 6.0% Technical Facilities Management Operating profit Margin % 5.0% Property Management Operating profit Margin % 4.6% Asset Management Operating profit
Slide 30: Consistently within target range
Consistently within target range Operating profit margin % | 6.04 i ry 5.5 7 5.0 4 4.57 fo" 07/08 08/09 09/10 10/11* 11/12 + Target margin range 5% to 6% * Operating profit margin for FY 10/11 was 5.5% excluding the impact of the change from RP! to CPI on past service pension cost
Slide 31: Finance costs
Finance costs Investment revenue (£m) H1 11/12 H1 10/11 FY 10/11 Interest on bank deposits Other Total investment revenue Finance costs (£m) H1 11/12 H1 10/11 FY 10/11 Interest on bank loans Interest on PP Facility fees Impact of forex and derivatives Other Total finance costs before other items Imp
Slide 32: Other items
Other items Amortisation (acquisition related) Integration and acquisition costs Restructuring cost of Property Management businesses Total Other items included in operating profit 46 Unwinding of discount on deferred contingent consideration Total Other items included in profit before tax 4.6 + No
Slide 33: Acquisitions
Acquisitions - Earn out of five minority companies for £14.0m, paid in 5.0m MITIE shares and £2.0m cash. New shares issued were offset by a 4.1m share buyback - Increased stake in Service Management International Limited to 100% for total cash consideration of £1.5m
Slide 34: Robust balance sheet
Robust balance sheet Goodwill and other intangible assets 395.9 Other non-current assets 87.7 Current assets* 484.5 Current liabilities* (426.8) Non-current liabilities* (32.4) Net debt (119.3) Net assets 389.6 * Excluding cash and funding balances
Slide 35: Movement in net assets
Movement in net assets £m H1 11/12 Net assets at 1 April 2011 398.0 Total comprehensive income 25.0 Shares issued 13.4 Dividends paid (17.3) Purchase of own shares (held in EBT) (7.4) Share buybacks (shares cancelled) (9.1) Share-based payments 1.0 Acquisitions and other movements in non-controlling
Slide 36: Provisions
Provisions Deferred contingent Insurance consideration reserve At 1 April 2011 4.5 8.2 12.7 Amounts charged to the income statement - 0.2 0.2 Deferred contingent consideration settled (3.8) - (3.8) during the period Utilised within the captive insurance subsidiary - (1.2) (1.2) Amounts recognised th
Slide 37: No significant pension deficit
No significant pension deficit Group scheme Other schemes Pension assets 110.6 Pension obligations (123.1) (132.0) Contract adjustment - Deficit (12.5) % of group net assets 3.2% + Group scheme triennial valuation due as at 1 April 2011
Slide 38: Mobilisation costs
Mobilisation costs Investment in organic growth £m FY 10/11 Costs capitalised Costs amortised H1 11/12 15.4 2.8 (2.6) 15.6 Ageingiem H111/12 FY 10/11 + Treated in many ways across the sector + MITIE defines mobilisation costs as those costs <1 year 4] 46 incurred after appointment of preferred bidde
Slide 39: Cash conversion
Cash conversion Ahead of target * Excellent performance continued with cash conversion of 81%, above the stated KPI of 80% conversion - As stated previously, the planned movement in headline cash KPI reflects our positive decision to invest working capital into projects which deliver a strong return
Slide 40: Cash flow and net debt movement
Cash flow and net debt movement Opening net debt (76.5) Operating cash flows 61.7 Movement in working capital (26.7) Cash generated by operations 35.0 Tax and other operating items (18.3) Acquisitions (7.6) Other investing activities (15.4) Financing activities* (36.3) (Increase)/decrease in net deb
Slide 41: Facilities in place to fund growth
Facilities in place to fund growth Funding Average net debt (£m) Amount Cost Repayment im 200 4 Core banking facilities —to July 2011 £230.0m LIBOR +40-80bp Jan 2012 150 >| — from July 2011 £250.0m LIBOR +130-225bp Sept 2015 100 4 Overdraft £40.0m Base rate + 100-225bp = Ondemand 147 148 US private
Slide 42: Strong sustainable profitable growth
Strong sustainable profitable growth Revenue (£m) EPS before other items* (p) &m p 2000 4 1,891.4 257 1800 4 1,720. 22.6 20>] ae 17.2, 14.9 1874 10> 5 A B | a a 08/09 09/10 10/11 or 07/08 08/09 09/10 10/11 1/2 Operating profit* (£m) Dividend per share (p) im p 12575 105 108.3 of 100 93.0. 8- 78 69 s
Slide 43: Outstanding track record of growth
Outstanding track record of growth zm 2000 1500 1000 500
Slide 44: Highlights of the period
Highlights of the period + Delivered on our strategy with a series of transformational contract awards + Total potential value of the five major contracts awarded ranges from £740m to £1.3bn * Order book up by 17.6% to £8.0bn + Good progress in revenue growth - first half 5.8% + Margins consistent a
Slide 45: Outlook
‘4 r =m» = —_ = . ~ > Outlook + Well-positioned to increase market share in outsourcing and energy services + Market-leading integrated FM capabilities will drive further growth with existing client base + Energy proposition supports every key energy issue faced by our clients * Selective internatio