MITIE Group PLC · LSE:MTO
MITIE — H1 FY24 Earnings Presentation
29 slides from MITIE's earnings presentation, Nov 23, 2023
Slide 1: From Facilities Management to Facilities Transformation
From Facilities Management… …to Facilities Transformation Good H1 performance; on track to deliver >£190m operating profit in FY24 H1 FY24 interim results presentation – 23 November 2023 THE EXCEPTIONAL, EVERY DAY
Slide 2: Good financial momentum; encouraging sales performance; continued shareholder returns
Good financial momentum; encouraging sales performance; and continued shareholder returns +11% +60% £46m Revenue: £2.1bn Wins/renewals2: £2.4bn M&A spend +24% +3% £61m Op. profit1: £85m Order book: £9.9bn Shareholder returns3 +39% +38% 1.0p Basic EPS1: 5.0p Pipeline: £18bn Interim dividend 1. Operat
Slide 3: Financial Update
Financial Update Simon Kirkpatrick Chief Financial Officer THE EXCEPTIONAL, EVERY DAY
Slide 4: Headlines: Strong revenue growth and higher margins boost earnings per share
Headlines: Strong revenue growth and higher margins boost earnings per share Headlines (£m) H1 FY24 H1 FY23 % change • Revenue growth of 10.9% driven by strong organic growth of 9.2% Revenue1 2,132 1,923 +10.9 • Ongoing margin enhancement Operating profit before other items 84.6 68.0 +24.4 initiativ
Slide 5: Revenue: Good revenue growth across all divisions
Revenue: Good revenue growth across all divisions • BS growth, despite Revenue1 (£m) H1 FY24 H1 FY23 % change completion of Covid work and wind down in Afghan Business Services (BS) 719 708 +1.5 Relocations contract, driven Technical Services (TS) 636 526 +20.8 by variable works, pricing and acquisi
Slide 6: Revenue: Strong organic growth supplemented by strategic acquisitions
Revenue: Strong organic growth supplemented by strategic acquisitions 32 2,132 93 £m 1.7% 97 4.8% 1,923 (13) 5.1% (0.7%) Organic growth 9.2% 10.9% H1 FY23 Covid Net wins, Pricing Strategic H1 FY24 contracts projects and acquisitions other trading 6
Slide 7: Operating profit: 24.4% profit improvement driven by all divisions except Communities
Operating profit: 24.4% profit improvement driven by all divisions except Communities Operating profit1 (£m) H1 FY24 H1 FY23 % change • BS scope reductions (e.g. Afghan Relocations contract) recovered by Business Services (BS) 41.7 40.5 +3.0 MEIs, acquisitions, and variable works Technical Services
Slide 8: Operating profit: Contract wins and margin enhancement drive underlying improvement
Operating profit: Contract wins and project work, combined with delivery of margin enhancement initiatives, drive underlying profit improvement 20.7 (3.0) £m (6.0) (4.7) 84.6 12.2 68.0 (2.6) H1 FY23 Covid Net wins, Margin Net Afghan Communities H1 FY24 contracts projects and enhancement inflation Re
Slide 9: EPS: 38.9% improvement from operating profit, reduced financing costs, buybacks
EPS: 38.9% improvement from increase in operating profit, reduced financing costs, and share buybacks • Uplift in operating profit of 24.4% £m H1 FY24 H1 FY23 % change Operating profit 84.6 68.0 +24.4 • Improved terms on USPP and termination of CID facility drive Net finance costs (4.5) (7.4) £2.9m
Slide 10: Inflation: 97% of cost inflation passed through to customers
Inflation: 97% of cost inflation passed through to customers in H1 FY24 H1 FY24 cost inflation impact vs H1 FY23 Total cost inflation £(96)m H1 FY24 inflation Revenue pricing £93m H1 FY24 net P&L impact (£3m) Blended cost inflation of c.6.5% Inflation recovery % 97% largely in line with headline CPI
Slide 11: Cash flow: Free cash inflow boosted by lower capex, interest and tax
Cash flow: Free cash inflow boosted by lower capex, interest and tax, with a working capital outflow Cash flow (£m) H1 FY24 H1 FY23 • Strong profit generation in H1 Operating profit before other items 84.6 68.0 • Cash other items of £12.2m relating to Add back: depreciation, amortisation and impairm
Slide 12: Balance sheet: Strong and stable balance sheet underpins shareholder returns
Balance sheet: Strong and stable balance sheet underpins ongoing shareholder returns, and strategic acquisitions £m H1 FY24 FY23 • Increase in net debt due to capital allocations in H1 FY24 (£106.6m) Closing net (debt) (113) (44) Average daily net (debt) (156) (84) • Covenant leverage remains at zer
Slide 13: Summary: Strong H1 performance underpinning FY outlook
Summary: Strong H1 performance underpinning FY outlook H1 performance FY24 outlook • High single digit revenue • Double digit revenue growth (including inflation) growth • Operating profit to be at • Margin enhancement least £190m, underpinned initiatives boost profit and by delivery of margin margi
Slide 14: Strategic Update – Facilities Transformation
Strategic Update – Facilities Transformation Phil Bentley Chief Executive THE EXCEPTIONAL, EVERY DAY
Slide 15: Our Facilities Transformation strategy and financial targets
Our Facilities Transformation strategy is based upon satisfying our customers’ evolving needs, delivering the pillars of growth and meeting our financial targets Evolving customer needs Key pillars of growth Financial targets Strong financial performance High single digit revenue growth Infill M&A O
Slide 16: Key Accounts growth: Strong contract wins, renewals and extensions in H1
Key Accounts growth: Strong contract wins, renewals and extensions in H1; entering H2 with a record order book and pipeline £1.3bn TCV new contract wins1 £1.1bn TCV contract renewals/extensions1 1.5 1.5 1.0 1.0 £bn £bn 0.5 0.5 0.0 0.0 H1 FY20 H1 FY21 H1 FY22 H1 FY23 H1 FY24 H1 FY20 H1 FY21 H1 FY22 H
Slide 17: Projects upsell: Continued good momentum across transformational projects
Projects upsell: Continued good momentum across a broad range of transformational projects for our core customers M&E, HVAC, Projects profile H1 Projects revenue by division Ongoing upgrade programme Building fabric £0.4bn Revenue in H1 (+45% yoy) Fire & Security 78% Revenue core HV / Electrical Mit
Slide 18: Infill M&A: £46m invested in five strategic acquisitions in H1
Infill M&A: £46m invested in five strategic acquisitions in H1; £21m invested in two further acquisitions in H2 Buildings Infrastructure Sustainability Fire & Security £12bn market opportunity £3bn market opportunity £3bn market opportunity • Lifecycle upgrades to buildings to improve • 40% UK carbo
Slide 19: Margin enhancement initiatives: £21m of cost savings delivered in H1 FY24
Margin enhancement initiatives: £21m of cost savings delivered in H1 FY24; expectation for £35m (previously £30m) of cost savings in FY24 • Outsourcing back-office HR & Payroll FY24 total cost savings - £35m Target • Centralising transactional finance teams Op Model £12m Target Operating Model - £25
Slide 20: Capital allocation: increase in infill M&A and shareholder returns
Capital allocation: Facilities Transformation strategy enables an increase in strategic infill M&A and shareholder returns whilst maintaining low leverage H1 FY24 FY24 FY25-27 1/3rd FY23 dividend c.30-35% Increase payout ratio 1 Progressive dividend policy (1.0p; 43% growth) pay-out ratio to 30-40%
Slide 21: Summary: Good H1 performance; on track for at least £190m operating profit
Summary: Good H1 performance; on track to deliver recently raised guidance for at least £190m operating profit in FY24 Revenue +11% in H1 FY24, ahead of market and driven by contract re- pricing, Key Accounts growth, Projects upsell and infill M&A EPS +39% reflecting margin progression, debt ref
Slide 22: Q&A
Q&A THE EXCEPTIONAL, EVERY DAY
Slide 23: Appendices
Appendices
Slide 24: Business Services
Business Services Increase / £m H1 FY24 H1 FY23 % change (decrease) Security 408 398 10 +3 Cleaning 194 194 - - Spain 51 54 (3) (6) Waste 38 37 1 +3 Landscapes 28 25 3 +12 Total revenue 719 708 11 +2 Operating profit before other items 41.7 40.5 1.2 +3 Operating margin before other items, % 5.8% 5.7
Slide 25: Technical Services
Technical Services Increase / £m H1 FY24 H1 FY23 % change (decrease) Maintenance 411 388 23 +6 Projects¹ 225 138 87 +63 Total revenue 636 526 110 +21 Operating profit before other items 19.5 14.1 5.4 +38 Operating margin before other items, % 3.1% 2.7% +0.4ppt Total order book £1.5bn £1.7bn £(0.2)bn
Slide 26: Central Government & Defence
Central Government & Defence Increase / £m H1 FY24 H1 FY23 % change (decrease) Central Government 218 198 20 +10 Defence 188 157 31 +20 Total revenue 406 355 51 +15 Operating profit before other items 34.0 25.5 8.5 +33 Operating margin before other items, % 8.4% 7.2% +1.2ppt Total order book £2.6bn
Slide 27: Communities
Communities Increase / £m H1 FY24 H1 FY23 % change (decrease) Local Government & Education 142 130 12 +9 Healthcare 135 124 11 +9 Care & Custody 94 80 14 +18 Total revenue 371 334 37 +11 Operating profit before other items 13.8 15.8 (2.0) (13) Operating margin before other items, % 3.7% 4.7% (1.0)pp
Slide 28: Return on invested capital (ROIC)
Return on invested capital (ROIC) £m H1 FY24 FY23 % change Operating profit before Other Items1 178.7 162.1 +10 Tax2 (30.3) (24.3) +25 Operating profit before other items after tax 148.4 137.8 +8 Invested capital3 602.8 543.1 +11 ROIC %4 24.6% 25.4% (0.8)ppt 1Operating profit before Other items for
Slide 29: Invested capital (for ROIC)
Invested capital (for ROIC) Increase / £m H1 FY24 FY23 % change (decrease) Net assets 411.6 421.7 (10.1) (2) Add: Non-current liabilities 333.4 335.9 (2.5) (1) Current provisions 57.7 54.2 3.5 +6 Deduct: Non-current deferred tax assets (19.7) (20.4) 0.7 (3) Cash and cash equivalents (180.2) (248.3)