Mitie Group Plc · LSE:MTO
Mitie — H1 2018/19 Earnings Presentation
39 slides from Mitie's earnings presentation, Nov 22, 2018
Slide 1: Mitie Group plc Analyst Presentation H1 18/19
Mitie Group plc The UK’s leading Facilities Management business Analyst Presentation H1 18/19 22 November 2018
Slide 2: Disclaimer
Disclaimer This presentation may contain certain forward-looking statements, beliefs or opinions, including statements with respect to Mitie business, financial condition and results of operations. These forward-looking statements can be identified by the use of words such as 'anticipate', 'expect',
Slide 3: Agenda
Agenda H1 18/19 Strategic and operational review Phil Bentley, CEO H1 18/19 Financial review Paul Woolf, CFO Outlook Phil Bentley, CEO Q&A 3
Slide 4: Strategic and operational overview
Strategic and operational overview Phil Bentley, CEO
Slide 5: 3-Year Strategic Plan: 2017 – 2020
3-Year Strategic Plan: 2017 – 2020 Reduce our Cost Base Invest in Customer Service Improve Employee Engagement Use Connected Workspace Technology to add value and margin Focus on Core Businesses and Core Clients 5
Slide 6: Overview – H1 18/19
Overview – H1 18/19 • Positive growth momentum • Revenues on continuing basis up 4.0% to £1,040.9m • Larger contracts delivering 8% growth • Project Helix on track for cost savings with IT, Finance, Commercial, & HR completed • Connected Workspace solutions in multiple sites, backed by new marketing
Slide 7: H1 18/19 financial highlights show steady progress
H1 18/19 financial highlights show steady progress REVENUE1 ORDER BOOK1 £1,040.9m +4.0% £3,931m -6.1% (H1 17/18: £1,001.1m) (FY 17/18 : £4,186m) O P E R AT I N G P R O F I T 1 , 2 NET DEBT LEVERAGE £38.4m -4.2% Period end £186.7m Average £317.4m 1.99x Within covenant of 3.0x (H1 17/18 : £40.1m) (FY
Slide 8: Customer highlights
Customer highlights R E V E N U E G ROW T H TO P C U S TO M E R AC T I V I T Y £700m AGREED SERVICE SCOPE NEW SERVICE £650m +32 (30) +48 NEW TERMS INCREASE ADDITIONS TOP 50 £600m 3 3 3 CUSTOMERS: 626 676 8% GROWTH £550m £500m H1 17/18 New Lost Underlying H1 18/19 Top 50 customers customers growth To
Slide 9: Although order book has fallen, pipeline is strong
Although order book has fallen, pipeline is strong • Improved bidding governance, structure & process • New commercial structure established over last 6 months Early-stage engagement • Weekly Bid Committee focused on quality of tenders, including margins, cash flows and commercial terms • Salesforce
Slide 10: Project Helix remains on track, despite workflow transformation delays
Project Helix remains on track, despite workflow transformation delays 18/19 cumulative savings In-year cost of change Cumulative cost of change* HI FY Exit run-rate Capex Opex Capex Opex Project Helix 17 40 45 (11) (15) (24) (50) • FY 18/19 in-year benefits on target for c.£40m, with the exit run-r
Slide 11: Momentum is building behind the Connected Workspace
Momentum is building behind the Connected Workspace 3 Major IFM 18 Projects 10K Sensors 1m Square feet 100 Contracts contracts underway installed covered managed by ROC* INVESTMENTS: £7m p.a. SOLUTION DATA LAKE THE SHARD BRACKNELL MARKETING COMMERCIAL DESIGNERS ANALYTICS * Remote Operating Centre 11
Slide 12: The Digital Transformation of Facilities Management
The Digital Transformation of Facilities Management PHASE 1 PHASE 2 PHASE 3 PHASE 4 STRATEGIC DECISION-MAKING SINGLE SERVICE FM INTEGRATED FM CONNECTED FM DEMAND-LED FM Disparate, siloed Partially integrated Technology-enabled FM systems and processes systems and processes Real-time data DATA & INSI
Slide 13: Our cultural transformation is underway
Our cultural transformation is underway The exceptional, every day • Single HR system: ‘People Hub’ • Strategic approach to Learning & Development Our Our diversity customers’ • New Mitie Values makes us business, • New Rewards & Recognition stronger is our business • Single portal for Temps and Per
Slide 14: We are sharpening our focus on core businesses
We are sharpening our focus on core businesses Rationale: Pest Control disposal: • Simplifies Mitie Group • Leverages subcontractor expertise • Deleverages the balance sheet Social Housing disposal: • Strengthens our core businesses • Low uptake of technology 3 transactions: • Few cross-selling oppo
Slide 15: Financial review
Financial review Paul Woolf, CFO
Slide 16: H1 18/19 financial highlights
H1 18/19 financial highlights • H1 18/19 results in line with expectations • Revenue grew by 4.0% to £1,041m driven by Care & Custody • Operating profit marginally down due to mobilisation costs • Net debt reduced to £187m (FY 17/18: £194m) as further steps taken to normalise and strengthen balance
Slide 17: Financial summary
Financial summary H1 18/191 H1 17/181,2 Movement £m £m £m % Revenue 1,040.9 1,001.1 39.8 4.0 Operating profit 38.4 40.1 (1.7) (4.2) Operating profit margin 3.7% 4.0% (0.3 ppt) Profit before tax and other items 30.9 31.6 (0.7) (2.2) Other items (11.9) (13.9) 2.0 Profit before tax 19.0 17.7 1.3 7.3 EP
Slide 18: Revenue
Revenue H1 18/191 H1 17/181,2,3 Movement • Revenue growth of 4.0% • Top 50 customers grew ~8% £m £m £m % • Exited several low margin contracts and contract losses Engineering Services 427.7 435.8 (8.1) (1.9) last year partly offset by top customers and projects business performing well • Strong grow
Slide 19: Operating profit
Operating profit H1 18/191 H1 17/181,2,3 Movement £m £m £m % • Strong performance from top customers; improved Engineering Services 27.4 22.9 4.5 19.7 profitability through managing the tail, and operational efficiencies from Project Helix • Good profit growth across all businesses driven by Securit
Slide 20: Operating profit margin %
Operating profit margin % H1 18/191 H1 17/181,2,3 Movement • Engineering Services, Security and Engineering Services 6.4% 5.3% 1.1 ppt Professional Services each grew between 0.6 and 1.1 ppt although overall margin Security 6.3% 5.7% 0.6 ppt declined 0.3 ppt Professional Services 4.3% 3.2% 1.1 ppt •
Slide 21: Operating profit bridge
Operating profit bridge Investments 1,2 1 1 Continuing operations before other items 2 H1 17/18 restated for IFRS 15 and other adjustments per Note 1 of half-year financial statements 21
Slide 22: Cash flow
Cash flow H1 18/19 H1 17/181 H1 18/19 H1 17/181 Cash Flow EBITDA £m £m £m £m 2 EBITDA 45.9 38.1 Continuing operations: Pension payments (2.6) (0.9) Operating profit before other items 38.4 40.1 Other adjusting items (inc. £27.5m Pest disposal gain) (22.7) 2.7 Other items (11.9) (13.9) Operating cash
Slide 23: Net debt bridge
Net debt bridge Working Capital Cycle H1 18/191 FY 17/181,2 Movement H1 18/191 FY 17/181,2 Movement Debtor days 28 28 - Ancillary facilities (£m) Creditor days (65) (59) (6) Invoice discounting 75.8 76.3 (0.5) Supply chain financing 24.4 45.1 (20.7) Average net debt (£m) (317.4) (286.1) (31.3) Conti
Slide 24: Other items
Other items H1 18/19 Other items £m £m £m Redundancy payments (2.7) Cost of change team (0.5) Expenditure and provision in respect of property closures (0.1) Dual running; outsourcing costs of change; retention (5.1) Restructuring costs (8.4) Acquisition related costs (2.7) Other exceptional items (
Slide 25: Financial scorecard
Financial scorecard Revenue +4% P Helix +£12m P Operating profit – Reported (4%) ~ Operating profit - Excluding D&E +4% P Balance sheet normalisation Invoice discounting P Supply chain finance P Successful disposals 2 P Net debt (closing) (£187m) ~ Working capital (£34m) O 25
Slide 26: Outlook
of 4 : ] | ‘a N if) Outlook \ \ 1 Phil Bentley, CEO \ Mitie Group plc» The exceptional, every day
Slide 27: The market backdrop is competitive, but consolidation is welcome
The market backdrop is competitive, but consolidation is welcome • UK FM market is large at £83bn, expected to grow at 5% and underpenetrated for outsourcers (14%) • Despite almost 500 completed deals in the last 4 years in FM sector, the industry remains fragmented and competitive • Customer expect
Slide 28: Outlook is improving, but Mitie's complexity remains a challenge
Outlook is improving, but Mitie’s complexity remains a challenge • Firmly in the delivery and execution phase • 18 months into three-year programme • c.£50m gross run-rate savings expected by March 2020 • Sharper strategic focus on core businesses and clients • Addressing our complexity and lack of
Slide 29: Q&A
mitie.com at | Mitie Group ple | Tne exceptional every tay |
Slide 30: Appendices
Appendices mitie.com
Slide 31: Engineering Services
Engineering Services H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 427.7 435.8 (8.1) (1.9) Operating profit 27.4 22.9 4.5 19.7 Operating profit margin 6.4% 5.3% 1.1 ppt M A I N S E RV I C E LINES • Revenue impacted by contracts lost last year but also due to proactively exiting • Maint
Slide 32: Security
Security H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 226.2 213.9 12.3 5.8 Operating profit 14.3 12.1 2.2 18.2 Operating profit margin 6.3 % 5.7 % 0.6 ppt M A I N S E RV I C E LINES • Revenue increase bolstered by greater project work • Security • Document Management • Operating profi
Slide 33: Professional Services
Professional Services H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 64.7 63.3 1.4 2.2 Operating profit 2.8 2.0 0.8 40.0 Operating profit margin 4.3 % 3.2 % 1.1 ppt M A I N S E RV I C E LINES • Revenue increased on the back of growth in Waste, Connected Workspace and • Waste management
Slide 34: Cleaning
Cleaning H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 200.6 186.7 13.9 7.4 Operating profit 6.2 9.5 (3.3) (34.7) Operating profit margin 3.1 % 5.1 % (2.0 ppt) M A I N S E RV I C E LINES • Revenue increased on the back of contract wins in prior period • Cleaning • Landscaping • Operati
Slide 35: Care & Custody
Care & Custody H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 52.4 28.7 23.7 82.6 Operating profit - 1.5 (1.5) (100.0) Operating profit margin - 5.2 % (5.2 ppt) M A I N S E RV I C E LINES • Revenue increase mainly attributable to new Home Office Detention & • Immigration detention Escor
Slide 36: Catering
Catering H1 18/191 H1 17/181,2,3 Movement Summary £m £m £m % Revenue 69.3 72.7 (3.4) (4.7) Operating profit 2.9 3.1 (0.2) (6.5) Operating profit margin 4.2 % 4.3 % (0.1 ppt) M A I N S E RV I C E LINES • Gather & Gather, our core workplace catering brand, is delivering broadly flat • Catering revenue
Slide 37: Balance sheet
Balance sheet H1 18/19 FY 17/18 Movement £m £m £m Working capital assets 415.7 395.1 20.6 Working capital liabilities (547.2) (561.8) 14.6 Note Working capital balances (131.5) (166.7) 35.2 • H1 18/19 and FY17/18 individual balances Goodwill and intangibles 326.7 347.9 (21.2) are not directly compar
Slide 38: Daily net debt
Daily net debt H1 17/18 H1 18/19 Average H1 17/18 Average H1 18/19 Average FY 17/18 (£400m) (£350m) (317.4) (£300m) (286.1) (277.7) (£250m) Gap widened following finance offshoring (£200m) (186.7) (172.7) (£150m) Apr May Jun Jul Aug Sep 38
Slide 39: mitie.com
mitie.com