Mitie Group Plc · LSE:MTO
Mitie — FY2019/20 Earnings Presentation
30 slides from Mitie's earnings presentation, June 2020
Slide 1: Mitie Group plc: The UK's leading Facilities Management business
Mitie Group plc The UK’s leading Facilities Management business Investor Presentation FY19/20 June 2020
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 Strategic Update Phil Bentley, CEO FY19/20 Financial Review & Current Andrew Peeler, CFO Trading Summary & Q&A Phil Bentley, CEO 3
Slide 4: Strategic Update
Phil Bentley, CEO Strategic Update 4
Slide 5: Phase I of our transformation has created a much stronger, stable business
Phase I of our transformation has created a much stronger, stable business… From FY16/17… … To FY19/20 Our transformation Revenue1 £1.8bn £2.2bn Mitie has become a better run Revenue1 growth (3-year CAGR) -1% 5.8% business: EBIT1 before other items £76m £86m • Improving financial strength EBIT
Slide 6: Phase II 'Accelerated Value Creation' is delivering results
… and Phase II ‘Accelerated Value Creation’ is delivering results… Strategic Pillar Accelerated Value Creation FY19/20 Achievement Customer • Market leadership and SAM1 • NPS increased 18 points to +30 growth in core • 5% revenue growth from top 50 customers • New SAMs won: GSK, BMW • VSG acquisitio
Slide 7: However COVID-19 is impacting our business
… However COVID-19 is impacting our business… Implications Responses • Short term trading impact • c.7,000 staff furloughed • Delaying of transformation investment • Functional support and back office operating without disruption • Potential increase in bad debts and late payments • c.£25m new cost
Slide 8: New equity and debt financing package
… requiring a new equity and debt financing package to support the delivery of our long term vision Fully Underwritten Rights Issue RCF Extension and Covenants • Gross proceeds of £201m • Agreement with lending banks for an extension of Mitie’s • 11 new shares for every 5 existing shares £250m RCF t
Slide 9: The new financing package will lead to a stronger Mitie with greater strategic options
The new financing package will lead to a stronger Mitie with greater strategic options • Phase I – Built Foundations • Phase II – Accelerated Value Creation • Portfolio re-shaping – Hard/Soft Core FM Leadership • Technology investments can now be scaled up • Project Harlequin: transformational trans
Slide 10: Project Harlequin: the acquisition of Interserve's Facilities Management division
Project Harlequin: the acquisition of Interserve’s Facilities Management division Mitie to acquire Interserve Facilities Management for £271m1 Key Terms • c.358m ordinary shares representing 23.4% of Mitie share capital post rights issue, currently valued at c.£151m1 • £120m cash consideration to re
Slide 11: Timetable / process
Timetable / process Expected Timetable Transaction Conditions Dates Key event • Completion of the Acquisition is subject to certain conditions, including: • Rights Issue and Acquisition 25 June 2020 Announcement a) Completion of the Rights Issue (underwritten); b) The approval of the Class 1 transac
Slide 12: Interserve FM: a leading UK Integrated Facilities Management provider
Interserve FM: a leading UK Integrated Facilities Management provider Overview Core Business Divisions FY19A Revenue: FY19A EBITDA: Central Government & Defence (44% of FY19A Revenue) £1.4bn1 £43m1 • Provision of estate and infrastructure services, defence installations including power generation, p
Slide 13: Project Harlequin: a unique opportunity to accelerate value creation
Project Harlequin: a unique opportunity to accelerate value creation and delivery of our long term strategic vision … Leader across services … Accelerating Mitie’s transformation A more balanced business with scale… and sectors… towards its “1-2-3” vision (FM)1 Technical Services #1 Market Share Rev
Slide 14: FY19/20 Financial Review & Current Trading
Andrew Peeler, CFO FY19/20 Financial Review & Current Trading 14
Slide 15: FY19/20 further progress against our strategy
FY19/20 further progress against our strategy • Revenue of £2,173m is 4% ahead of the prior year with flat organic revenue growth • Revenue growth from top 50 customers is 5% • Significant new customer wins including GSK and BMW • Operating profit of £86.1m is 8% ahead of the prior year (FY18/19 £79
Slide 16: Modest growth in revenue despite economic uncertainty
Modest growth in revenue despite economic uncertainty Movement Top 50 customers reported growth of 5% £m FY19/20 FY18/19 £m % Technical Services • Maintenance 762.9 762.2 0.7 0.1 • Economic uncertainty led to an H2 revenue decline from • Engineering Projects 161.7 173.9 (12.2) (7.0) discretionary va
Slide 17: Improved operating profit from Business Services and Specialist Services
Improved operating profit from Business Services and Specialist Services… £m Movement • Technical Services FY19/20 FY18/19 £m % • Reduced variable projects revenue and contract resets • Maintenance 42.7 43.8 (1.1) (2.5) impact margin for Maintenance and Engineering projects • Engineering Projects 13
Slide 18: Continued investment in strategic capabilities
… with continued investment in strategic capabilities Operating profit waterfall – FY18/19 Actual to FY19/20 Actual £100m £12.7 £90m £6.7 £86.1 £79.6 £2.7 (£5.7) £80m (£9.9) £70m £60m £50m £40m £30m £20m £10m £0m FY18/19 Trading Resets C&C Overhead Investments FY19/20 Actual performance Mobilsation
Slide 19: Positive net assets and lower net debt
Positive net assets and lower net debt FY19/20 IFRS 16 impact on £m Post-IFRS 16 FY19/20 FY18/19 Pre-IFRS 16 Goodwill and intangible assets 329.5 344.5 Property, plant and equipment 110.8 87.0 29.0 Working capital balances (176.0) 4.1 (216.9) Net debt (167.9) (93.0) (140.7) Retirement benefit liabil
Slide 20: Continued cash flow generation
Continued cash flow generation FY19/20 FY18/19 £m £m Operating cash flow before WC1 105.0 39.5 Working capital movements (33.2) 8.0 Cash generated in operations1 71.8 47.5 Lease payments including interest paid (reclassified under IFRS 16) (23.7) - Capital expenditure (19.0) (18.6) Interest and tax2
Slide 21: Continued working capital normalisation
Continued working capital normalisation 2020 2019 £m £m Movement in Reported working capital (33) 8 Invoice discounting reduced as part of our strategy to Reduced invoice discounting (12) (3) reduce off-balance sheet finance Deferred income (24) 5 Deferred income reduced as less early payments i
Slide 22: Consistently good performance in delivery of average net debt reduction
Consistently good performance in delivery of average net debt reduction… Average daily net debt (pre-IFRS 16) £375m 2.94x 2.25x Net debt / EBITDA £325m 317 302 287 £275m 263 240 £225m 216 £175m £125m H1-19 H2-19 H1-20 H2-20 FY19 FY20 22
Slide 23: Total financial obligations continue to reduce
… and total financial obligations (TFO1) continue to reduce and consistent performance on other metrics Tracking materially head of key covenants: FY FY Cove- Debt covenants 19/20 18/19 nant2 Leverage 0.7x 1.3x <3.0x Interest cover 9.3x 8.8x >4.0x Working capital FY19/20 FY18/19 Trade debtor days 28
Slide 24: Current trading – 12% YoY revenue decline but tracking towards a more positive outturn
Current trading – 12% YoY revenue decline but tracking towards a more positive outturn 2 months Ended • Public sector contracts performing well Group results, % 31 May FY20/21 Revenue Drop • Non-COVID impact of MOJ and NHS Property growth, % through to profit was a quarter of the revenue decline Gro
Slide 25: A broad package of management actions being rolled out
A broad package of management actions being rolled out to prepare Mitie for the longer term Management actions as a result of COVID-19 • Salary reductions of £2.5m for three months – fees and salaries of the Board and CEO, and the Executive team reduced by 30% and 20% respectively • Deferral of pay
Slide 26: £201m rights issue ensures the business is suitably capitalised
£201m rights issue ensures the business is suitably capitalised to deliver strategic ambitions post transformational acquisition of Interserve FM Illustrative leverage impact (FY 19/20 basis)1 • Mitie standalone and prospective enlarged group on 2.5x strong financial footings and well positioned for
Slide 27: Summary & Q&A
Phil Bentley, CEO Summary & Q&A 27
Slide 28: Summary
Summary • Mitie has completed its third year of transformation • FY19/20: continued financial progress • Major improvement in customer service and product development • Continued de-leveraging • Improving sector focus – and good SAM wins • Strong business resilience through COVID-19 with better trad
Slide 29: Appendix
Appendix 29
Slide 30: Project Harlequin: unlock significant cost synergies
Project Harlequin: unlock significant cost synergies Run rate synergies of c.£30m expected to be achieved by end of second full year of ownership (FY22/23) £30m Cost Synergies Rationalisation of overlapping Integration of supporting 1 headcount: £15m 2 Improved supplier terms: £10m 3 infrastructure