Mitie Group Plc · LSE:MTO
Mitie — Investor Day (September 2013)
51 slides from Mitie's investor day presentation, Sep 24, 2013
Slide 1: Capital Markets Update
24th September 2013 Capital Markets Update
Slide 2: Welcome and purpose
Welcome and purpose Objectives • Insight into our business strategy • Opportunity to meet some of our people • Specific focus on Facilities Management (FM) and Healthcare markets • Business capabilities • Competitive landscape • Growth opportunity
Slide 3: Business Strategy
Ruby McGregor-Smith Business Strategy
Slide 4: Overview
Overview • MITIE is a strategic outsourcing company – we help clients to run more efficient and effective businesses by looking after their facilities, their energy needs and the people they’re responsible for • Market-leading FTSE 250 support services business • Headline revenue of £2.0bn and opera
Slide 5: The shape of our business
The shape of our business Facilities Healthcare Management £43m FY pro-forma: Integrated FM: £510m £93m Security: £246m Cleaning & environmental: £314m Engineering maintenance: £308m Catering & front of house: £165m TOTAL: £1,543m Energy Property Solutions Management £46m Social housing: £229m Niche
Slide 6: Focus on higher margin, growth markets
Focus on higher margin, growth markets Long-term organic Acquisition Division Strategy growth opportunity potential • Remain the UK’s market leader in integrated FM and continue to grow in this market with existing No acquisitions of scale Facilities clients 5-10% required – niche/bolt-on Management
Slide 7: Sustainable profitable growth delivered through a focus on
Sustainable profitable growth delivered through a focus on: 1 Clients Provide excellent services to develop strategic relationships 2 People Attract, retain and develop the best talent in our industry 3 Operational Excellence Improve the operational efficiency of everything we do 4 Risk Protect our
Slide 8: Organic growth strategy
Organic growth strategy Clients People Operational Excellence Service excellence Key to delivering growth Improve operational efficiency • Retention • Recruit • Contract • Motivate • Industry leading best growth/extension • Train and develop practice • New contracts • Incentivise • Management expert
Slide 9: Private sector has driven our organic growth
Private sector has driven our organic growth £m 1,600 1,400 1,200 1,000 800 600 400 200 0 2009 2010 2011 2012 2013* Private, CAGR 8.5% Public, CAGR 3.1% *2013 revenue excludes Enara revenues from public sector and includes non-core engineering revenue, for like-for-like comparison
Slide 10: Public sector remains an attractive long term growth market
Public sector remains an attractive long term growth market • Public sector focus remains on Justice, Local Authorities, Social Housing and Healthcare • Justice: market continues to see significant procurement delays but we remain confident in the long term prospects for this market • Social Housing
Slide 11: Shift in business mix has fundamentally changed our revenue visibility
Shift in business mix has fundamentally changed our revenue visibility Order book Secured revenue £bn % Order book Secured revenue 10.0 9.2 100 9.0 8.6 96 8.0 92 6.8 7.0 6.4 88 6.0 85 84 4.9 83 5.0 81 80 4.0 75 76 74 3.0 72 2.0 68 1.0 64 0.0 60 2009 2010 2011 2012 2013
Slide 12: Energy capability supports our clients
Energy capability supports our clients • The energy market continues to be defined by: • Rising cost of energy • Complex solutions • Confusing landscape of obligations and policy development • Utilyx is our strategic energy consultancy which helps clients to: • Procure Buy energy better and smarter
Slide 13: Track record of successful strategic acquisitions
Track record of successful strategic acquisitions • Track record of value creation by adding strategic capability enabling us to grow • History of acquiring large scale platform acquisitions and smaller niche bolt-on acquisitions • Successful integration delivering operational synergies and enabling
Slide 14: Future acquisitions will add strategic capability
Future acquisitions will add strategic capability • Acquisitions seen as a key component to add strategic capability and drive long term organic growth • Focus remains: • High quality businesses – service excellence, strong management, cultural fit • High growth markets • Selective financial criteri
Slide 15: International strategy
International strategy • Continue to work overseas with selected large clients • Expansion into Ireland and growth of business has been successful, with several recent significant contract awards • Niche acquisition in Norway provides a growing presence • Risk in the Eurozone and return metrics in t
Slide 16: Finance
Suzanne Baxter Finance people + passion MIATIE
Slide 17: Financial strategy underpins business strategy
Financial strategy underpins business strategy Strong organic revenue Long-term target of 5-10% per annum growth Target operating profit margins >6% - Achieve cost efficiency through scale Grow operating profit margin - High quality contracts and a selective bid process - Acquisitions to be margin e
Slide 18: Strong organic growth
Strong organic growth Exceptional record of generating organic growth with minimal investment - £15m of working capital investment over five years of organic revenue growth £m 10% 30.0 20.0 8% 7.2% £25m 6.8% 10.0 6% - 5.6% 5.4% 5.3% 5.0% 0.0 (£6m) (£10m) 4% 3.9% -10.0 3.5% 2.7% 2% (£23m) -20.0 0.5%
Slide 19: Continued growth of operating profit margin
Continued growth of operating profit margin • Long-term margin improvement • Entry into higher margin markets, e.g. energy consulting and healthcare • Exit from lower margin businesses e.g. M&E engineering • Add niche capability within existing core businesses to protect/enhance margin • Using scale
Slide 20: Business focus on cash management
Business focus on cash management • Cash management embedded in the business • Operational and financial management teams focused on and incentivised by cash performance • Improved working capital management – contract specific approach • Continued focus on payment terms and funding of mobilisation
Slide 21: Focused on delivering strong cashflows
Focused on delivering strong cashflows Cash conversion and cashflow 200% £150m £131m £110m 150% £98m £103m £100m £94m £88m £63m 100% £53m £50m £50m £49m 126% 98% 95% 87% 84% 50% - 2009 2010 2011 2012 2013 Cash conversion % Cash generated from operations Free cashflow
Slide 22: Selective financial criteria for acquisitions
Selective financial criteria for acquisitions • Acquisitions seen as a key component to add strategic capability • Highly selective with a thorough due diligence process • Focus on: • Opportunity to generate strong organic growth • Underlying margins delivered by the business • Cash conversion in li
Slide 23: Long term, low cost funding in place to support business growth
Long term, low cost funding in place to support business growth £600m £40m £500m £400m Headroom £310m £350m £300m £200m £100m £162m Net Debt £192m - £30m Facilities 2013 FY >10yr 5-10yr 1-5yr Uncommitted overdrafts
Slide 24: Generate stable ROCE in line with the sector
Generate stable ROCE in line with the sector Post-tax ROCE 25% Pro forma impact of Enara would increase MITIE ROCE to 16.4% in 2013 20% 17.3% 17.0% 15.7% 16.4% 15% 13.7% 22.6% 10% 15.2% 16.7% 16.4% 15.8% 5% 0% 2009 2010 2011 2012 2013 MITIE Sector Average
Slide 25: Sustainable and progressive shareholder returns
Sustainable and progressive shareholder returns £154m returned to shareholders in the last five years Circa 50% of free cashflow paid as dividend 12pps £60m 10pps 10.3pps £50m 9.6pps 9.0pps 8pps 7.8pps £12.4m £40m 6.9pps 6pps £30m 4pps £20m £32.6m £34.9m £28.9m £24.7m 2pps £20.8m £10m - £0m 2009 201
Slide 26: Healthcare Strategy
John Telling Healthcare Strategy
Slide 27: Agenda
Agenda • What we bought and why? • What have we done with the business so far? • What is going on in the healthcare market? • How will we grow our healthcare business ?
Slide 28: Acquired a market leader in homecare
Acquired a market leader in homecare • Fourth largest provider of homecare in the UK and the market leader in the South of England • Operates over 60 branches in England and Wales • Provides approximately 120,000 hours of care per week • 6,000 employees supporting over 10,000 people with care needs
Slide 29: The future of healthcare is consolidation
The future of healthcare is consolidation • Market resembles the early days of FM outsourcing and we anticipate significant growth opportunities • Very fragmented, complex administration, multiple layers • Opportunity for consolidation and technology • Develop telehealth and telecare into our servic
Slide 30: Integration: branches to business
Integration: 62 branches to 1 business • Rebranded - MiHomecare • Streamlined corporate structure • Re-designed operational structure • Management teams • Branch structure • Back office integrated into MITIE • Investment in business development capability
Slide 31: Long-term care is an increasing proportion of GDP
Long-term care is an increasing proportion of GDP 3.0 2.5 Percentage of GDP 2.0 1.5 1.0 0.5 0.0 Year OBR Old Age Young Age High migration Zero net Migration Source: OBR (2012) Note: Figures for 2011/12 to 2015/16 are estimates; future projections start from 2016/17
Slide 32: Homecare is publicly funded and privately delivered
Homecare is publicly funded and privately delivered 250 200 No. of Hours (millions) 150 100 50 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year All sectors t providers Independend Direct (local authority) provision Source: Department of Healt
Slide 33: Where the money is spent
Where the money is spent Clinical Commissioning Integration (£3bn+) Adult Social Care Groups £17.2bn £64.7bn Acute Sector Community Services Out of Hospital Assessment & Care Residential Care Domiciliary Care Management Prescribing £7.57bn £7.74bn £1.89bn Running Costs Social Care Funding
Slide 34: Local authority type of spend
Local authority type of spend Adult Social Care £17.2bn Older People Learning Disabilities Physical Disabilities Mental Health Other Services £8.9bn £5.17bn £1.58bn £1.15bn £0.40bn
Slide 35: Evolution & integration of healthcare market
Evolution & integration of healthcare market Funding Services Complexity Delivery Homecare Private/3rd sector Local Authority Complex Care Supported Living Level of Acuity Care Pathways Community Services Hospital to Home Public Sector Reablement Services Clinical Rapid Response Commissioning Hospit
Slide 36: Long-term potential development of the homecare proposition
Long-term potential development of the homecare proposition • Reablement • Complex care • Community services • Integrated care pathways
Slide 37: Summary
Summary • Healthcare is a hugely attractive market • Ageing population – market growth • Economic environment – requirements for cost savings and efficiencies • Fragmented current delivery model – opportunity for consolidation • Market entry through a strategic platform acquisition of scale allows u
Slide 38: Facilities Management Strategy
Martyn Freeman Facilities Management Strategy
Slide 39: UK FM marketplace currently c£92bn in size
UK FM marketplace currently c£92bn in size Source: MTW Research, Facilities Management Market Research & Analysis 2012
Slide 40: Key market trends are favourable for MITIE
Key market trends are favourable for MITIE Independent market research supports our business strategy • Largest 120 FM providers dominate the market (c£60bn in revenues) • Overall market remains fragmented, with the remaining £30 billion spread across c20,000 providers • Market growth between 2013 a
Slide 41: How & where we compete in a diverse market
How & where we compete in a diverse market SINGLE SERVICES BUNDLED SERVICES INTEGRATED SERVICES 1 (Traditional Model) 2 (Multi-services) 3 (Total FM Provider) CLIENT CLIENT CLIENT SINGLE SINGLE SINGLE SINGLE SELF- BUNDLED SERVICES SINGLE SERVICE SERVICE SERVICE SERVICE SELF- TOTAL SERVICE DELIVERY W
Slide 42: Technology enabling integration and driving competitive advantage
Technology enabling integration and driving competitive advantage • Importance of data and information is increasing • Service integration • Client sophistication and developing service requirements • Integrated information systems are essential in a competitive market • Client reporting requirement
Slide 43: Which FM provider is the most customer focused?
Which FM provider is the most customer focused? Source: IFM Survey 2013
Slide 44: Which FM provider is the most innovative?
Which FM provider is the most innovative? Source: IFM survey 2013
Slide 45: Which FM provider offers the best value for money?
Which FM provider offers the best value for money? Source: IFM Survey 2013
Slide 46: Who do you regard as the top FM service provider?
Who do you regard as the top FM service provider? Source: IFM survey 2013
Slide 47: Summary
Ruby McGregor-Smith Summary
Slide 48: Summary
Summary • Focus on higher margin, growth markets • Sustainable profitable growth delivered through a focus on • Clients • People • Operational excellence • Private sector has driven our organic growth • Public sector remains an attractive long term growth market • Track record of successful strategi
Slide 49: Healthcare
Healthcare • Healthcare is a hugely attractive market: • Aging population – market growth • Economic environment – cost savings and efficiencies • Fragmented current delivery model – consolidation • Market entry through a strategic platform acquisition of scale allows us to shape market developments
Slide 50: Facilities Management
Facilities Management • The UK FM market continues to grow and evolve, creating significant opportunities for us to grow organically and win market share • Our unique self-delivery capability enables us to offer value to our clients across single, bundled and integrated FM propositions • Our IFM pro
Slide 51: MITIE Investment Case
MITIE Investment Case • Diversified portfolio with high quality blue chip client base • Core exposure is to growth markets and we are well-positioned to increase market share, deliver organic growth and improve margins • Market-leading integrated FM capabilities • Comprehensive energy proposition wi