MITIE Group PLC · LSE:MTO
MITIE — FY2022 Earnings Presentation
39 slides from MITIE's earnings presentation, Jun 9, 2022
Slide 1: Mitie Group plc Full Year Results Presentation
Mitie Group plc The UK’s Leading Facilities Management Company “Increased returns to shareholders from strong financial performance” Full Year Results Presentation 9 June 2022
Slide 2: FY22: Increased returns to shareholders from strong financial performance
FY22: Increased returns to shareholders from strong financial performance • Revenue growth of 58% to £3,997m with good growth in underlying business of 14% • Interserve performing strongly with cost synergies ahead of expectations • Strong profit performance of £167m with margins of 4.2% – flexible,
Slide 3: Financial update
Financial update Simon Kirkpatrick Chief Financial Officer
Slide 4: £4bn of revenue drives strong earnings growth and significant free cash flow
£4bn of revenue drives strong earnings growth and significant free cash flow Headlines (£m) FY22 FY21 Change % Revenue1 3,997 2,529 +58 • Underlying growth supplemented Mitie standalone revenue2 2,638 2,079 +27 by Covid contracts and ISV Operating profit before other items 167 59 +184 • Operating pr
Slide 5: Record revenue across all divisions, boosted by full year of Interserve
Record revenue across all divisions, boosted a by full year of Interserve… Revenue (£m) FY22 FY21 Change % • Business Services benefited from rapid Business Services 1,522 1,023 +49 response COVID contracts Central Government & Defence 669 226 +196 • CG&D: strong performance from project work and ne
Slide 6: Drove significantly higher profitability across all divisions
… drove significantly higher profitability across all divisions Operating profit (£m) FY22 FY211 Change % • Business Services good underlying trading, boosted by higher margin COVID contracts Business Services 107.5 47.6 +126 • CG&D performance due to additional Central Government & Defence 38.4 10.
Slide 7: Operating profit: Strong underlying trading performance and higher Interserve contribution
Operating profit: Strong underlying trading performance and higher Interserve contribution, boosted by COVID-related contracts £m Underlying trading +49.5 NB: Before ‘Other Items’ from continuing operations 7
Slide 8: We remain confident in our inflation guidance for FY23
We remain confident in our inflation guidance for FY23, and have the tools to monitor it in ‘real time’ FY22 cost inflation impact ‘Live’ monitoring from the Data Lake FY22 inflation of only c.2% Labour cost £(33)m Wage cost inflation below headline Non-labour cost £(38)m inflation rates Total cost
Slide 9: Key financial metrics continue to strengthen, underpinning BBB stable outlook
Our key financial metrics have continued to strengthen, underpinning our BBB ‘stable’ outlook £m FY22 FY21 • Net assets stronger as a result of profit generation Net assets1 426 358 • Average daily net debt improvement of £113m Average daily net (debt) / cash2 (25) (138) Closing net cash / (debt) 27
Slide 10: Structural average net debt is now zero after 4 years of improvement
Structural average net debt is now zero after 4 years of continuous improvement • Average net debt reduced year on year for 4 years • Group in net cash position of £27m at FY22 Net debt (£m) FY22 FY21 Closing net cash / (debt) 27 (87) Headline average net (25) (47) debt Rebased average* (19) (135) F
Slide 11: Significant free cash flow driven by improved profitability and working capital
Significant free cash flow driven by improved profitability and disciplined working capital management Cash flow (£m) FY22 FY214 • Strong free cashflow from increased profits and disciplined working capital Operating profit before Other Items1 166.9 58.8 management Add back: depreciation, amortisati
Slide 12: £60m cash inflow from good working capital management in FY22
£60m cash inflow from good working capital management in FY22 • Reduction in DSO by 2 days to 28 days • Incentive accrual increase due to strong performance and improved outlook • Growth led to small cash inflow • Reduction in CID to £44.5m; will terminate in H1 FY23 DSO Incentive accrual Growth and
Slide 13: Interserve acquisition has outperformed expectations, projected ROIC of 32%
The Interserve acquisition has outperformed our expectations, with a projected ROIC of 32% and payback of c.3 years FY20 ‘Acquisition Case’ Performance delivered What we paid (£m) Cash 105 Target £30m of cost synergies with a On track to deliver £45m of synergies Shares 95 £33m cost to achieve for a
Slide 14: Our capital allocation policy
Our capital allocation policy is focused on maintaining a strong balance sheet whilst supporting bolt-on acquisitions and increasing shareholder returns Maintain our strong and efficient balance sheet Target structural leverage below 1x EBITDA Maintain our investment grade credit rating Annual divid
Slide 15: Financial summary: Increased returns to shareholders
Financial summary: Increased returns to shareholders from robust financial performance FY22 performance • Double digit revenue growth, and cash-backed profits • Return to pre-COVID profitability • Good working capital performance and strong free cashflow generation • EPS growth and dividend resumed
Slide 16: Strategic update
Strategic update Phil Bentley Chief Executive
Slide 17: We have four clear strategic drivers
We have four clear strategic drivers Accelerate growth Enhance margins Generate cash Capability enablers • New wins • ISV synergies • Improved profitability • “Science of Service” • Retention • Fix ISV healthcare • Working capital • “Great Place to Work” • Upsell/cross sell contracts management • ES
Slide 18: Accelerate growth: Record £2.1bn of new contract wins in FY22
Accelerate growth: Record £2.1bn of new contract wins in FY22, strong pipeline and good retention performance give momentum for FY23 £2.1bn TCV new contract wins1 £1.7bn TCV contract retentions/extensions1 2,000 • FY22 new wins translate to an 100 £1.4bn £1.0bn £1.7bn • 90% renewal/extension rate FD
Slide 19: Accelerate growth: Targeted M&A to enhance customer offering
Accelerate growth: Targeted M&A to enhance customer offering, create market leading positions, and accelerate returns Telecoms construction & maintenance – Energy and sustainability – driven by Technology – driven by Science of Service driven by 5G rollout decarbonisation Creating a market-leading c
Slide 20: Accelerate growth: Each division has good momentum heading into FY23
Accelerate growth: Each division has good momentum heading into FY23 Business Services • Increased customer demand for safe & secure FY22 wins Awards environments • Customer emphasis on cleaning & hygiene assurance, £0.5bn service quality and flexibility Technical Services FY22 wins Awards • Sector
Slide 21: Enhance margins: Interserve cost synergies
Enhance margins: Interserve cost synergies - £30m in year FY22 with exit rate of £40m, and on track for £45m in FY23 Headcount Property & IT Procurement Further 275 roles removed 11 properties exited Leverage buying power FY23: Total 459 headcount synergies Exited Ingenuity House Integrated supplier
Slide 22: Enhance margins: Interserve healthcare turnaround
Enhance margins: Interserve healthcare – good progress in challenging contracts; more to do in FY23 to reduce £15m losses Turnaround plan • New management team in place across division and on key Statutory maintenance >80% reduction in up to 99% backlog contracts to drive improvements • Challenging
Slide 23: Enhance margins: Operational Excellence
Enhance margins: Operational Excellence – standardising our operations, with £10m savings targeted over next two years Substantial savings identified on ‘pilot’ Efficiency priorities identified for SAM Average saving required of £80k per contracts accounts SAM contract Contract 1 – Public Sector Lev
Slide 24: Enhance margins: Digital Supplier Platform (DSP)
Enhance margins: Digital Supplier Platform (DSP) – identified £10m of procurement savings to deliver over next two years Improved transparency Smart ‘purchasing’ Data insights driving efficiencies Supplier health and performance now Structured & formal process The new DSP went live in March and
Slide 25: Enhance margins: Workflow automation
Enhance margins: Workflow automation – Forté, WorkPlace Plus and corporate overhead savings will release £15m by FY24 Forte is now live Current STP performance Oracle to SAP OTC P2P RTR H2R Automated Help Desk 19% 36% 12% 10% “Click” Dynamic Scheduler Further automation opportunities IBM Maximo 7.6
Slide 26: Capability enablers: Science of Service
Capability enablers: “Science of Service” targets growth and higher margins Innovation Intelligence Impact Finding new ways to identify, From reactive to proactive Delivering better, more measurable prevent and solve problems guided by real-time insights enabling outcomes and experiences in tune usi
Slide 27: Capability enablers: Creating a Great Place to Work
Capability enablers: Creating a “Great Place to Work” Supporting our people to gain valuable Industry flag bearers for frontline reward qualifications and skills Life assurance 24/7 virtual GP Free Shares to all UK employees Share Incentive Plan – increased the matching offer to “buy 2 get 1 free” (
Slide 28: Capability enabler: Leading in ESG
Capability enabler: Leading in ESG – a driver of new business Leveraging Mitie’s To deliver significant decarbonisation savings for our customers in-house expertise Zero Carbon Capital projects EV charging projects Sustainability Strategy Delivered 24 Plan Zero Pathways across VICS and HELGA framewo
Slide 29: Summary: We have reached our strategic inflection point
Summary: We have reached our strategic inflection point sooner than anticipated 1 3 Capability Accelerated growth: FY23 enablers: momentum “Science of with mid- Service”, 2 4 high single “GPTW”, ESG digit growth Margin Increased enhancement: shareholder underpinning returns: capital 4.5-5.5% allocat
Slide 30: Mitie Group plc
Mitie Group plc The UK’s Leading Facilities Management Company Full Year Results Presentation 9 June 2022
Slide 31: Appendices
Appendices
Slide 32: Total financial obligations
Total financial obligations THE EXCEPTIONAL, EVERY DAY 32
Slide 33: Business Services
Business Services £m FY22 FY21 Change £m Change % Security 1,127 709 418 +59 Cleaning 395 314 81 +26 Total revenue 1,522 1,023 499 +49 Operating profit before other items 108 48 60 +125 Operating margin 7.1% 4.7% +2.4ppt THE EXCEPTIONAL, EVERY DAY 33
Slide 34: Central Government & Defence
Central Government & Defence £m FY22 FY21 Change £m Change % Central Government 379 127 252 +198 Defence 290 99 191 +193 Total revenue 669 226 443 +196 Operating profit before other items 38 10 28 +280 Operating margin 5.7% 4.4% +1.3ppt THE EXCEPTIONAL, EVERY DAY 34
Slide 35: Communities
Communities £m FY22 FY21 Change £m Change % Healthcare 225 119 106 +89 Education 129 100 29 +29 Campus & Critical 106 46 60 +130 Total revenue 460 265 195 +74 Operating profit before other items 20 16 4 +25 Operating margin 4.3% 6.0% (1.7)ppt THE EXCEPTIONAL, EVERY DAY 35
Slide 36: Technical Services
Technical Services £m FY22 FY21 Change £m Change % Maintenance 829 619 210 +34 Projects 144 132 12 +9 Total revenue 973 751 222 +30 Operating profit before other items 30 11 19 +173 Operating margin 3.1% 1.5% +1.6ppt THE EXCEPTIONAL, EVERY DAY 36
Slide 37: Specialist Services
Specialist Services £m FY22 FY21 Change £m Change % Care & Custody 136 109 27 +25 Landscapes 55 50 5 +10 Spain 105 31 74 +239 Waste 77 74 3 +4 Total revenue 373 264 109 +41 Operating profit before other items 33 24 9 +37 Operating margin 8.8% 9.1% (0.3)ppt THE EXCEPTIONAL, EVERY DAY 37
Slide 38: Return on invested capital (ROIC)
Return on invested capital (ROIC) £m FY22 FY211 Change % Operating profit before Other Items 166.9 58.8 +184 Tax2 (21.5) (11.3) (47) Operating profit before other items after tax 145.4 47.5 +206 Invested capital 486.6 576.7 (16) ROIC3 29.9% 8.2% +21.7ppt 1 FY21 re-presented for discontinued operatio
Slide 39: Capability Enablers: Leadership in ESG
Capability Enablers: Leadership in ESG - Climate action, quality job creation, and a responsible supply chain is at the core of our ESG strategy Innovation Reversing the effects Promoting levelling Creating quality jobs Shaping the future of climate change up agendas and improving skills delivery of