Mitie Regulatory News (MTO)

28 July 2020

LEI number: 213800MTCLTKEHWZMJ03

Mitie Group plc: Q1 trading update

Resilient performance and continued strategic progress

Mitie Group plc ("Mitie" or "the Group") (LSE: MTO), the UK's leading facilities management and professional services company, today provides a trading update for the three-month period ended 30 June 2020 ("Q1 FY21").

Although the COVID-19 situation has impacted the performance of our business in the first quarter, our business has proved to be more resilient than expected, particularly across our fixed Technical Services contracts, Cleaning and Security services and our public sector contracts. We have over 37,500 employees working daily on the front line reflecting the critical services we provide to our customers. We have recently brought over 40% of our 7,000 furloughed colleagues back to work as we see our customers resuming operations.

In the first three months of the year we have won new contracts relating to COVID-19 testing centres, renewed the Groupe PSA contract with additional services and won a new integrated (IFM) contract with Royal London Group. In addition, of the nine strategic accounts referred to in the recent prospectus as being renewed this year, seven have already been extended with the final two under discussion where we are confident of extending.

Group revenue from continuing operations for the three months ended 30 June 2020 was £458.3m, which was 11% lower than the same period in the prior year with June's performance slightly better than the previously announced April and May result. This revenue decline includes the known loss of the MOJ contract and the reduced scope of the NHS Properties contract which together represented 3ppts of the decline.

Due to the seasonality of our business, the first quarter is generally our lowest quarter in our fiscal year.

Business Services

Business Services - representing 53% of group revenue - reported revenue of £243m, 1% lower than the same period last year. Excluding the MOJ contract which ended on 31 March 2020, Business Services reported a 2% increase in revenue as the division has benefited from customers requesting additional cleaning and security as well as new Government contracts for COVID-19 testing centres and NHS Nightingale Hospitals. The launch of our specialist cleaning product - 'Citrox Protect' - will also mitigate some of the lower revenues from customers whose offices are closed or where services are being reduced. After a significant decline in revenue from our transport and logistics customers, Business Services are starting to see some airports reopening and Eurostar is increasing the number of services required.

Technical Services

As indicated at our recent Preliminary results update, Technical Services - representing 35% of group revenue - has seen the greatest impact from COVID-19 as discretionary variable work and demand for engineering projects have significantly reduced. Reported revenue was £163m, down 24% against the same three-month period last year. Whilst this represents a significant decline, the fixed maintenance element, excluding lost contracts, only declined 1% year on year reflecting strong relationships and the vital services we provide to our customers. However discretionary variable works and projects contracted 37% and 49% respectively in the three-month period. Fixed, variable and project work currently represent 60%, 23% and 17% respectively of Technical Services revenue.

Specialist Services

Specialist Services - representing 11% of group revenue - reported revenue of £52.4m, 10% lower than the same period last year. Care & Custody reported revenue of £25.9m, down 7% due to expired contracts. Waste reported a 14% decline in revenue to £16.9m, as customers within the finance and professional, leisure and transport sectors had less need for their services. Landscaping saw an 8% revenue decline to £9.6m as property managers, leisure and transport & logistics customers reduced services.

Net debt and working capital

Average daily net debt, pre-IFRS 16, for the three months ended 30 June 2020 was much reduced, at £71m (30 June 2019 of £240m). During the three-month period we deferred an additional £133m of HMRC 'time to pay' taxes which benefitted our average daily net debt by £103m. From July 2020 to March 2021 we will repay £65m with the final repayment of £101m on 1 April 2021.

Rights Issue

At the General Meeting on 13 July 2020 the resolution to approve the Rights Issue was overwhelmingly voted in favour by our shareholders. Dealings in new shares will commence at 0800 on 29 July 2020 and receipt of the total Rights Issue proceeds of £190m is expected by no later than 3 August 2020. 

Revolving Credit Facility

Our new £250m Revolving Credit Facility - including the revised covenants - commences on 3 August 2020 and matures on 16 December 2022.

Interserve Facilities Management

Integration plans for the acquisition of Interserve Facilities Management have commenced with the appointment of a full-time Integration Programme Director and the standing up of the integration team. Subject to shareholder approval and other conditions precedent, the transaction is expected to close in the fourth quarter of 2020.

As stated in the trading update of 27 March 2020, due to the ongoing uncertainties of the COVID-19 pandemic, we will not be providing guidance for the year ending 31 March 2021 at this time.

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About Mitie

Founded in 1987, Mitie is one of the UK's leading facilities management and professional services company. It offers a range of services including Technical Services (Engineering Services, Energy, Water and Real Estate Services), Business Services (Security, Cleaning and Office Services) and Specialist Services (Care & Custody, Landscapes and Waste Management).

Mitie employs 47,500 people across the country, looking after a large, diverse, blue-chip customer base, from banks and retailers, to hospitals, schools and critical government strategic assets. It takes care of its customers' people and buildings, by delivering the basics brilliantly and by deploying advanced technology. It is pioneering technology, using smart analytics to provide valuable insight and deliver efficiencies to create outstanding work environments for customers.

Find out more at www.mitie.com.