MITIE Group PLC · LSE:MTO
MITIE — FY2015 Earnings Presentation
64 slides from MITIE's earnings presentation, May 18, 2015
Slide 1: Well positioned for growth
Well positioned for growth Presentation of preliminary results for the financial year ended 31 March 2015 18 May 2015
Slide 2: Ruby McGregor-Smith CBE, Chief Executive
Ruby McGregor-Smith CBE Chief Executive 2
Slide 3: Agenda
Agenda • Performance overview • Finance update • Business update • Outlook 3
Slide 4: Headline performance
Headline performance Revenue Cash conversion +5.8% 95.1% £2,266.2m (2014: £2,142.6m) (2014: 102.4%) Operating profit Dividend per share +0.9% +6.4% £128.6m (2014: £127.5m) 11.7p (2014: 11.0p) Operating profit margin 2016 budgeted revenue secured 5.7% 85% (2014: 6.0%) (Prior year: 84%) Basic earnings
Slide 5: Highlights
Highlights • Good headline revenue growth • 4.9% organic revenue growth and group margins at 5.7% • Profits underpinned by excellent cash conversion • Continued strong dividend growth of 6.4% • Facilities management business in a strong position • Now accounts for 84% of group revenue • Sector-leadi
Slide 6: Exit from loss-making businesses complete
Exit from loss-making businesses complete • Mechanical and electrical engineering construction business closure is complete • No remaining operational or financial risk related to our Asset Management contracts • There will be no further exceptional charges from either of these businesses • Substant
Slide 7: Suzanne Baxter, Group Finance Director
Suzanne Baxter Group Finance Director 7
Slide 8: Financial highlights
Financial highlights • Revenue growth of 5.8% Good headline results • Organic revenue growth of 4.9%, 6.1% in core FM • Headline operating profit margin of 5.7% • Charges in line with guidance Business exits complete • No further exceptional costs • Headline EPS growth of 2.1% Strong dividend growth
Slide 9: Headline performance
Headline performance £m 2015 FY 2014 FY Movement Headline revenue 2,266.2 2,142.6 5.8% Organic growth 4.9% 5.2% (0.3ppt) Headline operating profit 128.6 127.5 0.9% Headline margin 5.7% 6.0% (0.3ppt) Headline basic EPS 24.8p 24.3p 2.1% Dividend per share 11.7p 11.0p 6.4% 9
Slide 10: Soft FM
Soft FM £m 2015 FY 2014 FY Movement Headline revenue 1,280.3 1,190.8 7.5% Organic growth 7.0% 5.9% 1.1ppt Headline operating profit 81.9 74.8 9.5% Headline margin 6.4% 6.3% 0.1ppt % of Mitie headline revenue 56.5% 55.6% 0.9ppt • Strong organic revenue and profit growth 10
Slide 11: Hard FM
Hard FM £m 2015 FY 2014 FY Movement Headline revenue 621.1 595.3 4.3% Organic growth 4.3% 3.9% 0.4ppt Headline operating profit 31.4 25.6 22.7% Headline margin 5.1% 4.3% 0.8ppt % of Mitie headline revenue 27.4% 27.8% (0.4ppt) • Strong organic revenue and profit growth • Now incorporates Energy Solut
Slide 12: Revised Hard FM
Revised Hard FM £m 2015 FY 2014 FY Movement Headline revenue Hard FM 609.7 579.4 5.2% Energy Solutions 11.4 15.9 (28.3%) Hard FM (revised) 621.1 595.3 4.3% Headline operating profit Hard FM 30.0 30.0 - Energy Solutions 1.4 (4.4) - Hard FM (revised) 31.4 25.6 22.7% Headline margin Hard FM 4.9% 5.2% (
Slide 13: Total FM
Total FM £m 2015 FY 2014 FY Movement Headline revenue 1,901.4 1,786.1 6.5% Organic growth 6.1% 5.2% 0.9ppt Headline operating profit 113.3 100.4 12.8% Headline margin 6.0% 5.6% 0.4ppt % of Mitie headline revenue 83.9% 83.4% 0.5ppt • Strong organic revenue, profit and margin growth • Forward order bo
Slide 14: Property Management
Property Management £m 2015 FY 2014 FY Movement Headline revenue 273.4 264.8 3.2% Organic growth 3.2% 9.1% (5.9ppt) Headline operating profit 10.4 14.4 (27.8%) Headline margin 3.8% 5.4% (1.6ppt) % of Mitie headline revenue 12.1% 12.3% (0.2ppt) • Return to growth in H2 but with margin pressure • Forw
Slide 15: Healthcare
Healthcare £m 2015 FY 2014 FY Movement Headline revenue 91.4 91.7 (0.3%) Organic growth (13.5%) (5.5%) (8.0ppt) Headline operating profit 4.9 12.7 (61.4%) Headline margin 5.4% 13.8% (8.4ppt) % of Mitie headline revenue 4.0% 4.3% (0.3ppt) • Volume and pricing pressure affected results this year • Foc
Slide 16: Business exits completed
Business exits completed £m 2015 FY 2014 FY Trading losses business being exited (15.9) (13.6) Exceptional charges in relation to design and build contracts (45.7) (25.4) Restructuring costs (0.6) (4.4) Acquisition costs (0.3) (0.7) Amortisation of acquisition related intangibles (10.1) (11.0) Restr
Slide 17: Earnings and dividend growth
Earnings and dividend growth 2.1% increase in Headline EPS 6.4% increase in Dividend per share 2015 FY 24.8p 2015 FY 11.7p 2014 FY 24.3p 2014 FY 11.0p 2013 FY 23.1p 2013 FY 10.3p 2012 FY 22.8p 2012 FY 9.6p 2011 FY 22.6p 2011 FY 9.0p Five year Five year CAGR 4.9% CAGR 8.4% 17
Slide 18: Strong return on capital employed
Strong return on capital employed 18.6% 16.8% 16.6% 16.5% 16.9% 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY • Strong ROCE attributable to headline post tax profit growth and derisked asset base ROCE = Post Tax Headline Operating Profit/(Net Assets + Net Debt - Non Controlling Interests) Adjusted for the
Slide 19: Robust balance sheet
Robust balance sheet £m 2015 FY 2014 FY Goodwill and intangibles 541.0 538.9 Property, plant and equipment 53.3 56.7 Other non-current assets* 74.2 70.9 Current assets* 432.4 499.0 Total assets 1,100.9 1,165.5 Current liabilities* (486.1) (537.8) Pensions (35.8) (19.1) Non-current liabilities* (22.9
Slide 20: Analysis of trade and other receivables
Analysis of trade and other receivables £m 2015 FY 2014 FY Movement Non-current assets: Mobilisation costs 18.2 16.6 1.6 Accrued income 40.3 24.6 15.7 Total 58.5 41.2 17.3 Current assets: Trade receivables 193.9 252.8 (58.9) AROCC 8.1 13.0 (4.9) Mobilisation costs 12.4 13.7 (1.3) Accrued income 152.
Slide 21: Reported revenue and total debtors
Reported revenue and total debtors 25.5% 26.5% 24.9% 24.0% 21.1% 2,221 2,274 2,003 2,121 1,891 481.7 529.7 528.2 532.8 479.9 2011 2012 2013 2014 2015 Total debtors £m Reported revenue £m Total debtors as % of reported revenue 21
Slide 22: Excellent cash conversion
Excellent cash conversion £m 2015 FY 2014 FY Movement Headline operating profit 128.6 127.5 1.1 Other items (72.6) (44.9) (27.7) Depreciation and amortisation 33.5 33.1 0.4 Statutory EBITDA 89.5 115.7 (26.2) Movement in working capital (2.6) 13.6 (16.2) Tax (15.5) (18.2) 2.7 Capex (25.1) (20.8) (4.3
Slide 23: Five year cash conversion trend
Five year cash conversion trend Headline cash conversion Statutory cash conversion 2015 FY 95.1% 2015 FY 126.5% 2014 FY 102.4% 2014 FY 107.3% 2013 FY 110.0% 2013 FY 127.8% 2012 FY 84.2% 2012 FY 83.7% 2011 FY 94.2% 2011 FY 86.7% 23
Slide 24: Gearing
Gearing £m 2015 FY 2014 FY Movement Opening net debt (186.6) (192.2) 5.6 Free cash flow 57.5 72.0 (14.5) Dividend (40.5) (38.1) (2.4) Share purchases (10.7) (27.2) 16.5 Other 2.5 (1.1) 3.6 Net debt movement 8.8 5.6 3.2 Closing net debt (177.8) (186.6) 8.8 Net debt to headline EBITDA 1.2x 1.3x (0.1x)
Slide 25: Net debt
Net debt £m 2015 FY 2014 FY Movement Financing assets 6.8* - 6.8 Cash and cash equivalents 96.4 89.1 7.3 Current liabilities: financing liabilities (1.8) (2.7) 0.9 Non-current liabilities: financing liabilities (279.2) (273.0)* (6.2) Net debt (177.8) (186.6) 8.8 *Includes the derivative financial in
Slide 26: Pensions
Pensions £m Group Scheme Other Schemes Total Pension assets 162.2 9.5 171.7 Pension obligations (197.1) (10.4) (207.5) At 31 March 2015 (34.9) (0.9) (35.8) At 31 March 2014 (17.0) (2.1) (19.1) • Actuarial triennial valuation of the Mitie Group scheme completed in 2015. The scheme actuarial deficit w
Slide 27: Capital allocation
Capital allocation Acquire to Grow Maintain an Reinvest for Return cash to complement shareholder efficient growth shareholders organic growth returns balance sheet Invest in our Selected Grow dividends Maintain Modest gearing business using acquisitions in at least in line constant share up to 2.0x
Slide 28: FY2015 summary
FY2015 summary Strong organic revenue growth 4.9% Operating profit margin within target range 5.7% 2.1% growth in basic headline EPS 24.8p 6.4% growth in dividend 11.7pps Continued strong headline cash conversion 95.1% Modest headline gearing 1.2x 28
Slide 29: FY2016 guidance
FY2016 guidance • Organic growth range 3% to 8% • Operating profit margins stable; medium to long term target >6% • Cash conversion >80% • Low capex requirements 1-2% of annual revenue • Effective tax rate 20% • Maintain modest gearing • Maintain progressive dividend policy at least in line with und
Slide 30: Ruby McGregor-Smith CBE, Chief Executive
Ruby McGregor-Smith CBE Chief Executive 30
Slide 31: Mitie strengths
Mitie strengths • Business with a clear focus on services • Ability to attract great, entrepreneurial people • Market leader in UK facilities management • High quality client base in diversified end markets • Stable and predictable revenue streams • Profits underpinned by excellent cash generation •
Slide 32: The shape of our business
The shape of our business Facilities Management £1,901m Hard FM Soft FM £621m £1,280m Revenue £2.3bn Property Management £273m Healthcare £91m 32
Slide 33: High quality client base
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Slide 34: Diversified revenue base
Diversified revenue base 2015 Revenue by sector Private sector 64% Public sector 36% Finance and 17% 11% Social housing professional services 7% Local government Retail 12% Manufacturing 10% 7% Central and other government Transport and 7% logistics 6% Health Technology and 6% 5% Education communica
Slide 35: Large order book and excellent revenue visibility
Large order book and excellent revenue visibility Secured Order book Revenue* £bn % 10 87 9 85 8 85% 85% 7 84% 83 83% 6 81 5 81% 79 4 3 77 6.8 8.6 9.2 8.7 9.0 2 75 2011 2012 2013 2014 2015 * Per cent of budgeted revenues secured for the following financial year as at 31 March 35
Slide 36: £9.7bn sales pipeline
£9.7bn sales pipeline Pipeline by sector As at 31 March 2015 Private sector 56% Public sector 44% Finance and 17% 15% Social housing professional services 18% Local government Retail 7% 4% Central and other Manufacturing 6% government Transport and 10% logistics 5% Health Technology and 1% 2% Educat
Slide 37: Contract mix
Contract mix Headline group revenue £bn 2.5 2.0 32% 13% 31% 26% 1.5 58% 46% 33% 29% 30% 1.0 0.5 42% 41% 41% 40% 38% 0.0 2011 2012 2013 2014 2015 Integrated Bundled Single • >50% of revenues derived from top 100 clients (2014: 40%) • Single service contracts continue to feed strong pipeline of bundle
Slide 38: FM revenue breakdown
Facilities Management FM revenue breakdown Cleaning and environmental services £360m Integrated FM £734m FM* Security revenue £214m £1.9bn Catering and front of house £114m Hard FM £479m *FM business comprises two divisions: Soft FM (2015 revenue: £1,901m), which includes cleaning and environmental
Slide 39: Consistent growth
Facilities Management Consistent growth • We have grown our FM revenues by over 50% in the past five years • The margins in that time have grown from 5.5% to 6.0% • UK facilities management market leader • Excellent portfolio of integrated FM reference sites • Offering differentiated by • Self-deliv
Slide 40: Excellent performance in FY15
Facilities Management Excellent performance in FY15 • Revenue £1.9bn (84% of group total) • Organic revenue growth of 6.1% and margin of 6.0% • Retention rate of 96% • Current share of c£75bn outsourced FM market in the UK is c3% – potential to grow share • 2014 industry survey rated Mitie as: • #1
Slide 41: Positive private sector environment
Facilities Management Positive private sector environment • A good range of opportunities for single, bundled and integrated contracts; private sector pipeline up >50% • Extended our transformational partnership delivering integrated FM for Lloyds Banking Group; this contract now continues until 202
Slide 42: Major contracts retained
Facilities Management Major contracts retained • Secured contract extensions to several of our key integrated FM contracts • Lloyds Banking Group – 8 years • Capita – 5 years • Vodafone – 5 years • Network Rail – 5 years • These contracts jointly account for >10% group revenues 42
Slide 43: Lloyds Banking Group
Facilities Management Lloyds Banking Group • Extended our transformational partnership delivering integrated FM • Original contract commenced in 2012; the new agreement extends it for another eight years through to the end of 2022 • Deliver services across the bank’s entire UK branch and office esta
Slide 44: Vodafone
Facilities Management Vodafone • Retained our integrated FM contract with Vodafone • Dalkia FM awarded a lighting contract with Vodafone in 2004 • Added hard FM in 2006 (Dalkia FM) • Mitie awarded a fully integrated contract in 2010 • Seamless delivery model • Self deliver 95% of services on the con
Slide 45: Public sector – good pipeline, selective bidding
Facilities Management Public sector – good pipeline, selective bidding • Remain focused on justice, local government and health sectors • Ongoing opportunities to support public services, which will continue to face pressure in three key areas: 1. Growing cost of healthcare and an ageing population
Slide 46: The Home Office
The Home Office • Started Care and Custody business in Scope of services 2011 as a Mitie Model start up Hard and soft FM • Manage immigration removal centres at Security and guarding services Heathrow and Campsfield Education/recreation/sport facilities Detainee welfare • Mobilised two centres at He
Slide 47: Property Management
Property Management • Revenue £273m (12% of group total) • Acceleration in revenues in H2, however market conditions have put pressure on margins • Investing in technology, bidding and contract management • Awarded a range of new contracts, including: • A2Dominion – planned maintenance contract valu
Slide 48: London Borough of Hammersmith & Fulham
London Borough of Hammersmith & Fulham • Ten-year repairs and maintenance contract commenced November 2013 • Adds to a separate, three-year painting contract (£30m total) awarded in Jan 2013 • Part of a trend towards longer-term, bundled contracts across large social housing portfolios – potential t
Slide 49: Challenging year in Healthcare
Challenging year in Healthcare • Revenue £91m (4% of group total) • Pricing environment under pressure as a result of local authority funding cuts, leading to unsustainable procurements • Challenges around recruiting and retaining staff • Closed some branches and exited some unprofitable contracts –
Slide 50: Healthcare action taken and plan
Healthcare action taken and plan • Initiated a contractual review programme to challenge and engage on sustainable rates • Only bidding where pricing is at sustainable levels – a number of recent awards have been at higher rates • Big focus on recruitment, training and development programmes; increa
Slide 51: Backing entrepreneurs
Backing entrepreneurs • Positive environment to start and grow new businesses • Launched a £20m entrepreneurial fund to back management teams using the Mitie Model, to start new businesses or invest in and grow existing small businesses • Acquired the remaining 49% of Mitie Compliance (£5.6m conside
Slide 52: The Mitie Model
The Mitie Model • Shared ownership model: Mitie 51% / management team 49% • 112 started since Mitie started; 95% success rate • Mitie Model businesses have broadened capability in FM • Business services – document management, scanning and mail rooms • Client services – reception and front of house •
Slide 53: Looking ahead with confidence
Looking ahead with confidence • Strong organic growth focus • Share ownership ethos remains at the heart of our group; entrepreneurial start-up model will support growth • Large order book of £9bn and excellent revenue visibility of 85% • Further market share growth • FM business is market-leading –
Slide 54: Appendix
Appendix 54
Slide 55: Statutory summary
Statutory summary £m 2015 FY 2014 FY Movement Statutory revenue 2,273.8 2,221.1 2.4% Headline revenue 2,266.2 2,142.6 5.8% Headline operating profit 128.6 127.5 0.9% Other items (72.6) (44.9) 61.7% Statutory operating profit 56.0 82.6 (32.2%) Net finance costs (14.5) (14.2) 2.1% Profit before tax 41
Slide 56: EPS – key data
EPS – key data Headline Statutory Earnings per share 2015 FY 2014 FY Movement 2015 FY 2014 FY Movement Earnings attributable to ordinary 89.3 87.5 2.1% 35.0 48.3 (27.5%) shareholders £m Weighted average number of basic 359.3 359.9 (0.2%) 359.3 359.9 (0.2%) shares (m) Basic EPS 24.8p 24.3p 2.1% 9.7p
Slide 57: Dividend – key data
Dividend – key data Dividend 2015 FY 2014 FY 2013 FY 2012 FY 2011 FY Dividend per share 11.7p 11.0p 10.3p 9.6p 9.0p Growth 6.4% 6.8% 7.3% 6.7% 15.4% Dividend cover 2.1x 2.2x 2.2x 2.4x 2.5x Cash cost £m 40.5 38.1 34.9 32.6 28.9 57
Slide 58: Mobilisation costs
Mobilisation costs £m 2015 FY 2014 FY Movement Opening balance 30.3 23.2 7.1 Additions 19.6 15.7 3.9 Amortisation (19.3) (8.6) (10.7) Closing balance 30.6 30.3 0.3 58
Slide 59: Financing assets
Financing assets £m 2015 FY 2014 FY Derivative financial instruments 6.8 - Loans to JVs and associates 1.2 14.8 Infrastructure assets - 5.6 Closing balance 8.0 20.4 59
Slide 60: Provisions
Provisions Deferred contingent £m Insurance Reserve Total consideration At 1 April 2014 7.8 2.2 10.0 Movements in the year 3.6 (1.3) 2.3 At 31 March 2015 11.4 0.9 12.3 60
Slide 61: Five year headline trends
Five year headline trends Headline Revenue £m Headline Operating Profit £m 2015 FY 2,266 2015 FY 128.6 2014 FY 2,143 2014 FY 127.5 2013 FY 1,981 2013 FY 120.3 2012 FY 1,826 2012 FY 112.6 2011 FY 1,891 2011 FY 108.3 Headline Operating Profit Margin Headline Profit Before Tax £m 2015 FY 5.7% 2015 FY 1
Slide 62: Five year KPIs trend
Five year KPIs trend Organic revenue growth Headline EPS 2015 FY 4.9% 2015 FY 24.8p 2014 FY 5.2% 2014 FY 24.3p 2013 FY 5.0% 2013 FY 23.1p 2012 FY 5.4% 2012 FY 22.8p 2011 FY 2.1% 2011 FY 22.6p Headline cash conversion Dividend per share 2015 FY 95.1% 2015 FY 11.7p 2014 FY 102.4% 2014 FY 11.0p 2013 FY
Slide 63: mitie
mitie 63
Slide 64: Legal disclaimer
Legal 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 connec