Mitie Group Plc · LSE:MTO
Mitie — H1 2017/18 Earnings Presentation
37 slides from Mitie's earnings presentation, Nov 20, 2017
Slide 1: Mitie Group plc Half Year Results 2017/18
Mitie Group plc Half Year Results 2017/18 20 November 2017
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
• 1H 17/18 Summary (Phil Bentley, CEO) • 1H 17/18 Financial review (Paul Woolf, CFO) • Outlook (Phil Bentley, CEO)
Slide 4: Overview – 1H 17/18
Overview – 1H 17/18 • Solid 6 months building platform for success – 1H delivery in line with market expectations - 1H 17/18 Revenue up 3.9% to £959.7m1 (£923.7m2) - 1H 17/18 Operating profit up 5.8% at £32.6m1 (£30.8m2) • Transformation programme on target - Project Helix fully mobilised - Mitie Ea
Slide 5: Numbers at a glance
Numbers at a glance LIKE-FOR-LIKE REVENUE ORDER BOOK £959.7m1 | +3.9% £5,930m1 | +1.0% (1H 16/17 £923.7m2) (FY2017 £5,869m2) Adjusted EPS (continuing) LIKE-FOR-LIKE OP. PROFIT 5.2p | +6.1% (1H 16/17 4.9p) £32.6m1 | +5.8% Reported EPS (continuing) 1.2p | (63.6)% (1H 16/17 £30.8m2) (1H 16/17 3.3p) 1.
Slide 6: New strategy in action
New strategy in action FOUR STRATEGIC PILLARS Grow 1 Customer customer lifetime • New Sales & Commercial model value • Unitary management Become long term Offer • 62 Connected Workspace live pilots & engagements partner compelling with propositions clients 2 Cost • New Group unitary HR structure wen
Slide 7: Customer: integrated commercial function
1 Customer: integrated commercial function NEW TEAM NEW MITIE • Head of Group Commercial appointed, previously led ISS UK sales, COMMERCIAL DISCIPLINE to drive our growth strategy • New sales talent recruited • Bringing capabilities to integrated sales, CRM, prospecting • Driving commercial excellen
Slide 8: Customer: injecting momentum for growth
1 Customer: injecting momentum for growth NEW SALES ORGANISATION THE MITIE WAY OF SELLING NPS Sector Aerospace / Defence New Sales Tech/Telco Finance Retail … Customer Development Commercial Intelligence Commercial Excellence • Capacity aligned with growth • Building strategic long-term relationship
Slide 9: Cost: roadmap
2 Cost: roadmap FY2017 FY2018 FY2019 Wave 3: Process Wave 1: ‘T200’ Wave 2: Quick wins re-engineering Initial cost savings Review of all Re-engineering ✓ realised in FY2017 overhead costs our DNA ✓ • Reduce legal entities • New HR/payroll transformation • Simplify intercompany charging • New Finance
Slide 10: Cost: example quick wins
2 Cost: example quick wins LEGAL ENTITIES & INTERCOMPANY PROPERTY PORTFOLIO • Rationalise legal entity structure to a single trading entity ~25% • Initial focus on entities that account for 75% of revenue - completion end 2H 17/18 Includes new Shard office and • Simplify intercompany process and red
Slide 11: Cost: process re-engineering
2 Cost: process re-engineering FINANCE – HR – ENGINEERING – FY2019 COMPLETION FY2019 COMPLETION FY2020 COMPLETION • Strategic partner selected for • New ‘People Services’ function • Introduced daily performance metrics transactional processes – Genpact created for every team/engineer • Letter of int
Slide 12: Cost: summary guidance table
2 Cost: summary guidance table FY2018 forecast FY2019 plan £m Run Opex Run Opex In year Cost of In year Cost of rate invest- Capex rate invest- Capex savings change savings change savings ment savings ment Project Helix HR transformation 3 - (2) (3) 3 3 - - - Finance 3 10 - (2) (10) 10 10 - - - tran
Slide 13: People
3 People • HR transformation - Reorganisation complete and headcount reduced by 20% - Investment in ‘SAP SuccessFactors’ system approved for deployment - Further work on recruitment and training will be focus in 2H 17/18 • Talent - Continued focus on hiring senior talent - Executive team review of t
Slide 14: Technology
4 Technology • Group IS focus – digitally enabling organisation - 110+ Group technology projects live or in planning - Enterprise architecture team created • Connected Workspace apps in development - Strategic customer intelligent portal – initial release in January 2018 - 4 new Connected Workspace
Slide 15: Mitie transformation on track
Mitie transformation on track Full accounting review completed Helix cost programme underway and on track Talent acquisition & development programme rolled out Employee consultation in HR, Finance, Engineering, Sales completed or near completion Technology, Workflow, Cleaning programmes identified a
Slide 16: Agenda
• 1H 17/18 Summary (Phil Bentley) • 1H 17/18 Financial review (Paul Woolf) • Outlook (Phil Bentley)
Slide 17: 1H 17/18 Financial review summary
1H 17/18 Financial review summary • Like-for-like revenues up 3.9% to £959.7m1 (1H 16/17: £923.7m2) • Like-for-like operating profit up 5.8% at £32.6m1 (1H 16/17: £30.8m2) • Property Management business held for sale – shown as discontinued operations • Net debt £172.6m (FY2017: £147.2m) – covenant
Slide 18: Operating profit bridge
Operating profit bridge £m 45 Discontinued Restatement adjustments 40 Healthcare 4.2 Property Discontinued 35 APM adjustments Underlying trading 35.4 (8.9) (1.1) 1.8 30 Property 31.9 32.6 Continuing 30.8 (4.4) 5.6 25 26.3 20 15 10 5 - 1H 16/17 1H 16/17 1H 16/17 1H 16/17 1H 17/18 Reported Restated Re
Slide 19: Underlying income statement
Underlying income statement 1H 16/17 YoY change £m 1H 17/18 (restated, post APM) £m % Underlying revenue 959.7 923.7 36.0 3.9 Cost of sales (847.0) (815.8) (31.2) (3.8) Underlying gross profit 112.7 107.9 4.8 4.4 Gross profit margin 11.7% 11.7% Business overheads (72.5) (68.4) (4.1) (6.0) Corporate
Slide 20: Like-for-like revenue – divisional analysis
Like-for-like revenue – divisional analysis 1H 16/17 YoY change £m 1H 17/18 (restated, post APM) £m % Cleaning & Environmental Services 197.2 199.3 (2.1) (1.1) Security 213.7 194.4 19.3 9.9 Catering 72.7 71.1 1.6 2.3 Engineering Services 404.3 389.7 14.6 3.7 Professional Services & Connected Workpla
Slide 21: Like-for-like operating profit – divisional analysis
Like-for-like operating profit – divisional analysis 1H 16/17 YoY change £m 1H 17/18 (restated, post APM) £m % Cleaning & Environmental Services 9.4 8.7 0.7 8.0 Security 11.8 9.7 2.1 21.6 Catering 2.9 3.2 (0.3) (9.4) Engineering Services 15.1 12.5 2.6 20.8 Professional Services & Connected Workplace
Slide 22: Cleaning & Environmental Services
Cleaning & Environmental Services 1H 17/18 financials Key facts Key stats 1H YoY change • ~26,500 employees 1H 16/17 £m • ~1,500 corporate clients 17/18 (restated, post APM) £ % • ~14,000 cleaning sites • #2 market share Underlying revenue 197.2 199.3 (2.1) (1.1) Operational highlights Underlying gr
Slide 23: Security
Security 1H 17/18 financials Key facts Key stats 1H YoY change 1H • ~14,000 total employees £m 16/17 17/18 (restated, • No. of clients: ~1,100 post APM) £ % • Client sites: ~11,000 Underlying revenue 213.7 194.4 19.3 9.9 • #2 market share Operational highlights Underlying gross profit 24.4 22.5 1.9
Slide 24: Catering
Catering 1H 17/18 financials Key facts Key stats 1H YoY change 1H • ~2,500 total employees £m 16/17 17/18 (restated, • No. of clients: ~90 post APM) £ % • Client sites: ~300 Underlying revenue 72.7 71.1 1.6 2.3 • #6 market share Underlying gross profit 7.2 7.6 (0.4) (5.3) Operational highlights Gros
Slide 25: Engineering Services
Engineering Services 1H 17/18 financials Key facts Key stats 1H YoY change • ~8,000 total employees 1H 16/17 £m • No. of clients: ~1,000 17/18 (restated, post APM) £ % • Client sites: ~12,000 Underlying revenue 404.3 389.7 14.6 3.7 • #2 market share • Public sector <20% Underlying gross profit 40.4
Slide 26: Professional Services & Connected Workspace
Professional Services & Connected Workspace 1H 17/18 financials Key facts Key stats 1H YoY change 1H • ~500 total employees £m 16/17 17/18 (restated, • No. of clients: ~350 post APM) £ % • Client sites: ~8,000 Underlying revenue 43.0 46.8 (3.8) (8.1) Key hires • Head of Commercial, Head of Underlyin
Slide 27: Care & Custody
Care & Custody 1H 17/18 financials Key facts Key stats 1H YoY change 1H • ~1,000 total employees £m 16/17 17/18 (restated, • No. of clients: ~20 post APM) £ % • Client sites: ~60 Underlying revenue 28.8 22.4 6.4 28.6 • #1 market share in addressable market Underlying gross profit 3.3 3.0 0.3 10.0 Op
Slide 28: Property Management – discontinued
Property Management – discontinued 1H 17/18 financials Key facts Key stats 1H YoY change • ~2,500 total employees 1H 16/17 • No. of clients: ~1,000 £m 17/18 (restated, • ~300,000 homes serviced pa post APM) £ % • #1 painting contractor in the UK • Revenues split evenly across Underlying revenue 120.
Slide 29: Cash flow
Cash flow YoY change 1H 16/17 £m 1H 17/18 (restated) £ % Opening net debt (147.2) (178.3) 31.1 17.4 EBITDA 27.9 28.0 (0.1) (0.4) Other non-cash items 0.9 3.9 (3.0) (76.9) Operating cash flow before movements in 28.8 31.9 (3.1) (9.7) working capital Working capital movement (35.5) (33.5) (2.0) (6.0)
Slide 30: Net debt and leverage
Net debt and leverage Net Debt (£m) Receivables Purchase Agreement (£m) 500 120 111 1H Average 103 17/18: £278m 16/17: £338m 100 400 82 80 300 59 60 200 45 40 33 1H Closing 100 17/18: £173m 16/17: £232m 20 - - Mar Apr May Jun Jul Aug Sep FY2013 FY2014 FY2015 FY2016 FY16/17 1H 17/18 • Balance sheet d
Slide 31: Balance sheet
Balance sheet YoY change FY 16/17 £m 1H 17/18 FY 16/17* (as reported) £ % Goodwill 273.9 273.7 0.2 0.1 343.9 Acquisition related intangibles 4.6 6.2 (1.6) (25.8) 6.3 Software and development intangibles 44.1 43.6 0.5 1.2 46.9 Property, plant and equipment 28.3 31.6 (3.4) (10.6) 32.3 Other non-curren
Slide 32: EPS and DPS
EPS and DPS 1H 16/17 YoY change 1H 17/18 (restated, post APM) % Weighted avg. share count for basic EPS, m 355.6 348.7 6.9 2.0 Adjusted basic earnings per share, p 5.2 4.9 0.3 6.1 DPS, p 1.33 4.0* (2.67) (66.8) • Adjusted EPS from continuing operations was up 6.1% from previous year • DPS of 1.33p d
Slide 33: 1H 17/18 forward order book
1H 17/18 forward order book £m 1H 17/18 FY2017 Cleaning & Environmental Services 803 811 Security 798 876 Catering 428 458 Engineering Services 3,443 3,259 Professional Services & Connected Workspace 237 221 Care & Custody 221 244 Total continuing 5,930 5,869 Property Management 657 663 Total Group
Slide 34: Agenda
• 1H 17/18 Summary (Phil Bentley) • 1H 17/18 Financial review (Paul Woolf) • Outlook (Phil Bentley)
Slide 35: Outlook
Outlook • Market remains competitive and fragmented • Encouraging progress on transformation programme • Revenue growth expected to continue in the range of 3%-4% • Medium term margin recovery expectations unchanged at 4.5%-5.5% • Improved balance sheet management, continuing to target 2x average ne
Slide 36: Appendix
Appendix
Slide 37: Detailed EPS and DPS Table
Detailed EPS and DPS Table 1H 16/17 YoY change 1H 17/18 (restated, post APM) pps % Weighted avg. share count for basic EPS, m 355.6 348.7 6.9 2.0 Adjusted basic earnings per share, p 5.2 4.9 0.3 6.1 Adjusted basic earnings per share after other items, p 1.2 3.0 (1.8) (60.0) Basic earnings per share,