Mitie Group Plc · LSE:MTO
Mitie — H1 2016 Earnings Presentation
58 slides from Mitie's earnings presentation, Nov 23, 2015
Slide 1: Interim results presentation
Interim results presentation for the six months ended 30 September 2015 23 November 2015
Slide 2: Ruby McGregor-Smith CBE
Ruby McGregor-Smith CBE Chief Executive 2
Slide 3: Agenda
Agenda • Highlights • Finance update • Business update • Outlook 3
Slide 4: Highlights
Highlights • Good H1 growth, with positive momentum going into H2 and beyond • Excellent cash conversion of 101.2% • Facilities management business in a strong position – the clear UK market leader • 100% contract retention rate in our integrated FM portfolio • Retained/extended major contracts incl
Slide 5: Suzanne Baxter
Suzanne Baxter Group Finance Director 5
Slide 6: Headline financial performance
Headline financial performance Revenue Cash conversion £1,123.1m 101.2% 𐰹2.6% (HY15: £1,095.0m) (HY15: 80.3%) Operating profit Dividend per share £58.1m 5.4 pence 𐰸9.5% (HY15: £64.2m) 𐰹3.8% (HY15: 5.2p) Operating profit margin 2016 budgeted revenue secured 5.2% 97% 𐰸0.7ppts (HY15: 5.9%) (Prior…
Slide 7: Financial highlights
Financial highlights • Revenue growth of 2.6% Growing revenues • Organic revenue growth of 2.1% • 97% of budgeted revenues for FY16 already secured Strong secured revenue • 68% of forecast revenue for FY17 secured Excellent cash • EBITDA to cash conversion 101.2% conversion • Gearing 1.5x net debt:E
Slide 8: Group performance
Group performance 2016 HY 2015 HY Movement Revenue £m 1,123.1 1,095.0 2.6% Organic growth 2.1% 3.9% (1.8)ppt Operating profit £m 58.1 64.2 (9.5)% Operating profit margin 5.2% 5.9% (0.7)ppt Basic EPS 11.1p 12.4p (10.5)% Statutory EPS 9.9p (1.0)p n/a Dividend per share 5.4p 5.2p 3.8% * All numbers sta
Slide 9: Facilities Management
Facilities Management £m 2016 HY 2015 HY Movement Revenue Soft FM 635.7 622.7 2.1% Hard FM 310.5 300.8 3.2% Total FM 946.2 923.5 2.5% Operating profit Soft FM 42.4 40.3 5.2% Hard FM 10.5 13.9 (24.5)% Total FM 52.9 54.2 (2.4)% Operating profit margin Soft FM 6.7% 6.5% +0.2ppt Hard FM 3.4% 4.6% (1.2)p
Slide 10: Property Management
Property Management £m 2016 HY 2015 HY Movement Revenue 137.9 123.3 11.8% Operating profit 7.3 5.5 32.7% Operating profit margin 5.3% 4.5% +0.8ppt % of Mitie headline revenue 12.3% 11.3% +1.0ppt • Strong organic revenue, profit and margin growth from key social housing contracts 10
Slide 11: Healthcare
Healthcare £m 2016 HY 2015 HY Movement Revenue 39.0 48.2 (19.1)% Operating profit (2.1) 4.5 nm Operating profit margin (5.4%) 9.3% nm % of Mitie headline revenue 3.5% 4.4% (0.9)ppt Revenue is down 19% • c50% of reduction in revenue is from closing and consolidating branches • Remainder from loss of
Slide 12: Other items
Other items £m 2016 HY 2015 HY Trading losses business being exited - (6.9) Exceptional charges in relation to design and build contracts - (45.7) Restructuring costs - (0.4) Acquisition costs - (0.2) Amortisation of acquisition related intangibles (5.0) (5.1) Total other items pre-tax (5.0) (58.3)
Slide 13: Dividend
Dividend 11.7p 11.0p 10.3p 9.6p 9.0p 7.8p 6.5p 6.9p 6.1p 5.7p 6.0p 5.2p 4.9p 5.1p 4.1p 4.3p 3.6p 3.2p 2.7p 2.7p 5.2p 5.4p 4.4p 4.6p 4.9p 3.7p 4.1p 2.8p 3.3p 2.4p 1.6p 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Interim Dividend per Share Final Dividend per Share • Current dividend cover 2
Slide 14: Robust balance sheet
Robust balance sheet £m Sept 15 Sept 14 March 15 Goodwill and other intangible assets 533.1 532.2 541.0 Other non-current assets* 136.7 126.7 127.5 Current assets* 470.0 504.8 432.4 Total assets 1,139.8 1,163.7 1,100.9 Current liabilities* (479.2) (508.1) (486.1) Pensions (32.8) (27.4) (35.8) Non-cu
Slide 15: Working capital
Working capital £m Sept 15 Sept 14 March 15 Non-current assets Trade and other receivables 68.3 50.9 58.5 Current assets and liabilities Inventories 9.9 8.4 11.0 Trade and other receivables 460.1 496.4 421.4 Current assets* 470.0 504.8 432.4 Trade and other payables (461.1) (493.2) (476.0) Provision
Slide 16: Excellent cash conversion
Excellent cash conversion £m 2016 HY 2015 HY Movement 2015 FY Headline operating profit 58.1 64.2 (6.1) 128.6 Other items (5.0) (58.3) 53.3 (72.6) Depreciation and amortisation 17.1 16.6 0.5 33.5 Statutory EBITDA 70.2 22.5 47.7 89.5 Movement in working capital (63.5) (46.5) (17.0) (2.6) Tax (3.1) (6
Slide 17: Net debt
Net debt £m Sept 15 Sept 14 March 15 Cash and cash equivalents 53.0 41.6 96.4 Bank loans (14.5) (15.6) (13.9) Private placement notes (259.9) (249.4) (263.6) Derivative financial instruments 2.9 (6.5) 6.8 hedging private placement notes Finance leases (3.3) (3.9) (3.5) Net debt (221.8) (233.8) (177.
Slide 18: Capital allocation
Capital allocation 1. Reinvest for Invest in our business using working capital to support growth organic growth Organic revenue growth target of 3 to 8% Limited to small, bolt-on businesses that add capability to FM offering 2. Complementary EPS accretive acquisitions Delivers ROCE in excess of WAC
Slide 19: Ruby McGregor-Smith CBE
Ruby McGregor-Smith CBE Chief Executive 19
Slide 20: The shape of our business
The shape of our business Facilities Management £946m Soft FM Hard FM Revenue £636m £310m £1.1bn Property Management 60% of our revenues £138m are bundled or integrated contracts Healthcare £39m 20
Slide 21: Services and brands
Services and brands Services to buildings and facilities Services to people Property Justice Facilities management Management Cleaning Landscaping Waste Pest control Social housing Security Front of house Maintenance, repair and Healthcare Catering Hard FM painting 21 21
Slide 22: Strategic consulting
Strategic consulting • Strategic ‘thought leadership’ and insight • Advisory services built from Mitie’s expertise in: Source8 Compliance & Energy & People MiWorld Research Consultancy Lifecycle Sustainability Executive International Energy Data Direct Vetting relationship advice and consulting ware
Slide 23: Mitie's strategic model
Mitie’s strategic model Our clients’ business strategy Our client Strategic consulting and services Technology platforms and data Integrated management Subject matter expertise and service line management Service delivery 23 23
Slide 24: High quality client base
High quality client base @ mitie BANKING , THALES GROUP | sky an a Rolls-Royce’ Home Office a” 1) Jones LANG ye Heathrow 2. (in intel LASALLE’ Linked ‘in| Making every journey better >< , ye NetworkRail re ios RBS Ladbrokes a /| ia. — The Royal Bank of Scotland The Scottish ABInBev Government oo vs
Slide 25: Why Mitie
Why Mitie 1. Excellent long-term relationships as a trusted partner supporting clients’ strategies 2. Strong reputation for high quality, efficient services and delivery capability 3. Entrepreneurial people who are totally focused on clients and our values • Excel • Challenge • Inspire 4. Innovative
Slide 26: Diversified revenue base
Diversified revenue base HY 2016 Revenue by sector Private sector 62% Public sector 38% Finance and 17% 11% Social housing professional services 7% Local government Retail 12% Manufacturing 8% 7% Central and other government Transport and 8% logistics 7% Health Technology and 6% 6% Education communi
Slide 27: Healthy order book of £8.5bn and sales pipeline of £9.2bn
Healthy order book of £8.5bn and sales pipeline of £9.2bn Sales pipeline by sector Private sector 44% As at 30 September 2015 Public sector 56% Finance and 14% 23% Social housing professional services 11% Local government Retail 6% 7% Central and other Manufacturing 3% government Transport and 12% l
Slide 28: Good long-term partnering opportunities
Good long-term partnering opportunities • Private sector – continued growth with existing clients and awarded a number of new integrated FM contracts, which include: • Deloitte: a wide range of services across 34 sites and over 1.3m square feet of office space • High street bank: services to over 30
Slide 29: Facilities Management
Facilities Management 19 November 2015 29 29
Slide 30: The UK's leading FM brand
The UK’s leading FM brand Mitie voted #1 overall service provider in UK FM for 3 years running We were voted most customer focused and innovative We are now top 3 in every service category Rankings 2013 2014 2015 Direction of Travel Overall FM provider #1 #1 #1 Maintain lead Integrated FM #1 #1 #1 M
Slide 31: Consistent growth
Consistent growth • Overall FM organic revenue growth of 1.8% • Market leading portfolio of long-term contracts with quality clients • Integrated FM offering differentiated by • Self-delivery capability • Breadth of services • Technology and data insight • 100% contract retention rate in integrated
Slide 32: Very strong performance on contract retentions/extensions
Very strong performance on contract retentions/extensions • Successfully extended all our major private sector IFM contracts over the last 12 months; there are no significant re-bids in this portfolio over the medium term • Rolls-Royce: retained our contract to deliver pan-European IFM, our largest
Slide 33: Property Management
Property Management 33 33
Slide 34: Strong growth in social housing
Strong growth in social housing • Social housing market continues to provide opportunities • Over a third of our revenues are from ongoing ten year strategic partnerships, including the London Borough of Hammersmith & Fulham and Orbit • Continue to extend the range of services • Call centre manageme
Slide 35: Market opportunities
Market opportunities • Painting and repair services • We are the largest painting and decorating contractor in the UK • Cross-selling to an increasing range of clients in social housing and across the FM business • Will benefit from trend to bundled/integrated contracts • Private sector housing • In
Slide 36: Healthcare
Healthcare 36 36
Slide 37: Healthcare turnaround
Healthcare turnaround Challenges 1. Pricing pressures led to unsustainable procurements 2. Increased regulation 3. Challenges around recruiting and retaining staff; increased agency spend Actions taken 1. Closed and consolidated branches, exited unprofitable contracts 2. Invested in additional quali
Slide 38: Healthcare market
Healthcare market • The long-term opportunities in the homecare market are significant • Market pressures will drive change • Need to reduce hospital admissions and increase care at home • Consensus across political spectrum to combine health and social care budgets • Starting to see local authoriti
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Slide 40: Positive about the National Living Wage
Positive about the National Living Wage • We are very supportive of the NLW • Wages at this level have not improved with the UK economy • This will help to motivate and retain people – better for us and our clients • We believe this is part of a medium-term trend that will see higher wage inflation
Slide 41: NLW: no material impact on earnings
NLW: no material impact on earnings • Since the minimum wage was introduced in 1999, we have managed the impact from its annual change as part of the normal course of our business, including in October 2015 (£6.50 to £6.70/hour) • The introduction of the NLW will increase rates for over 25s from £6.
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Slide 43: Mitie strengths
Mitie strengths • Business purely focused on services • Ability to attract great, entrepreneurial people • Market leader in UK facilities management • Proposition differentiated through innovation and technology • Long-term, strategic relationships with a high quality client base in diversified end
Slide 44: Looking ahead with confidence
Looking ahead with confidence • Focused on organic growth • Strong order book and excellent revenue visibility • Further FM market share growth from a UK market-leading position • Consistent, strong cash generation and balance sheet underpin profits and future dividends • We are in a good position t
Slide 45: Questions
Questions
Slide 46: Appendix
Appendix 46
Slide 47: 60% of our work is bundled or integrated contracts
60% of our work is bundled or integrated contracts Group revenue by contract type Single 31% Bundled 40% Integrated 29% 47
Slide 48: FM revenue breakdown by business
FM revenue breakdown by business Cleaning and environmental services £191m Integrated FM £355m FM* Security revenue £120m £0.9bn Catering and front of house £58m Hard FM £221m *FM business comprises two divisions: Soft FM (HY16 revenue: £635.7m), which includes cleaning and environmental services, s
Slide 49: Introduction of the National Living Wage (NLW)
Introduction of the National Living Wage (NLW) • New NLW announced by George Osborne in the Summer Budget • The NLW represents a premium to the National Minimum Wage (NMW), for people aged over 25 • The NMW was introduced in 1999, to raise pay and tackle exploitation • The Low Pay Commission’s (LPC)
Slide 50: Inflation has outstripped minimum wage growth for five of the last six years
Inflation has outstripped minimum wage growth for five of the last six years Inflation (CPI overall) Uplift in minimum wage % 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2009 2010 2011 2012 2013 2014 50
Slide 51: Medium-term trend to higher overall wage inflation
Medium-term trend to higher overall wage inflation Automatic enrolment in workplace pension schemes £9.50 £9.00 Government tax relief 9.0% £9.00 c6% annual Individual pays 8.0% £8.50 growth Employer pays 7.0% £8.00 £7.50 6.0% £7.00 £6.70 5.0% 4.0% £6.50 4.0% £6.00 3.0% 2.4% £5.50 2.0% £5.00 0.8% 3.0
Slide 52: Statutory summary
Statutory summary £m 2016 HY 2015 HY Movement Statutory revenue 1,123.1 1,098.8 2.2% Headline revenue 1,123.1 1,095.0 2.6% Headline operating profit 58.1 64.2 (9.5)% Other items (5.0) (58.3) (91.4)% Statutory operating profit 53.1 5.9 800.0% Net finance costs (8.0) (7.2) 11.1% Profit before tax 45.1
Slide 53: EPS – key data
EPS – key data Headline Statutory Earnings per share 2016 HY 2015 HY Movement 2016 HY 2015 HY Movement Earnings attributable to ordinary 39.3 44.6 (5.3) 35.2 (3.7) 38.9 shareholders £m Weighted average number of basic 355.4 359.9 (4.5) 355.4 359.9 (4.5) shares (m) Basic EPS 11.1p 12.4p (1.3)p 9.9p (
Slide 54: Cash conversion
Cash conversion H1 2016 H2 2015 Rolling 12 months £m Headline Other Statutory Headline Other Statutory Headline Other Statutory Operating profit 58.1 (5.0) 53.1 64.4 (14.3) 50.1 122.5 (19.3) 103.2 Depreciation 8.3 - 8.3 10.7 - 10.7 19.0 - 19.0 Amortisation 3.8 5.0 8.8 1.2 5.0 6.2 5.0 10.0 15.0 EBITD
Slide 55: Mobilisation costs and accrued income
Mobilisation costs and accrued income £m Sept 2015 Sept 2014 March 2015 Non-current trade and other receivables Mobilisation costs 17.6 21.3 18.2 Accrued income 50.7 29.6 40.3 Total 68.3 50.9 58.5 £m Sept 2015 Sept 2014 March 2015 Mobilisation costs Opening balance 30.6 30.3 30.3 Costs capitalised 6
Slide 56: Provisions
Provisions Deferred Insurance £m contingent Total reserve consideration At 1 April 2015 11.4 0.9 12.3 Settled in cash during the period (4.6) - (4.6) Utilised within the captive insurance - (0.2) (0.2) subsidiary At 30 September 2015 6.8 0.7 7.5 Included in current liabilities 6.8 Included in non-cu
Slide 57: Legal disclaimer
Legal 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 connec
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