TIDMMTO
RNS Number : 2226R
MITIE Group PLC
20 September 2017
20 September 2017
Mitie Group plc
1H 17/18 Pre-close Statement
Mitie Group plc ("Mitie" or "the Group"), today issues its
pre-close statement for the half year ended 30 September 2017 ("H1
17/18"). Mitie is one of the UK's leading facilities management,
connected workspace and professional services businesses.
Strategic progress
-- Restoring balance sheet strength and transforming our cost base - on track
-- Investing in technology and Connected Workspace capabilities - ahead of plan
-- Enhancing customer and relationship management programme - on track
-- Improving employee engagement and driving productivity - behind plan
-- Finance, HR, IT, Group structure reviews and cost reduction programmes - on track
Peter Dickinson, Acting CEO of Mitie, said: "Overall we are
making steady progress in the transformation of Mitie. Top line
growth in the first 6 months has been encouraging, our dedicated
focus on putting customers at the heart of our business and
identifying cost savings is beginning to deliver and we are
investing at pace in talent, capabilities and systems. Transforming
a large, diverse business such as Mitie is neither linear nor
without challenges, but the programme remains on track. I expect to
see the positive impact of our endeavours as we move into the
second half of the year."
Trading performance
The Group's order book is up 3% against 31 March 2017, at
GBP6.7bn. This includes new contract awards from a multi-national
grocery retailer, an e-commerce and cloud computing company, and a
major homewares and household goods retailer. This has been in part
been off-set by the loss of a top 20 contract which was not due for
retendering until 2019. This lost contract will result in a one-off
non-cash write-off of GBP6m. We anticipate receipt of a termination
payment of GBP2m.
Revenue for the Group year-to-date has been better than
anticipated and is expected to be c. GBP1.1bn for the half-year, 4%
ahead of the FY2017 comparable period. This revenue trend is
expected to continue for the full year.
We continue to invest with discipline in our core capabilities
and infrastructure to deliver on our strategy. However,
cost-to-serve and general overhead is running marginally ahead of
last year, and earlier expectations. We expect this level of spend
to continue for the remainder of the year. A focus on enhanced
customer delivery, recruitment of experienced new talent into
Sales, IT and data analytics and the further development of our
Professional Services and Connected Workspace capabilities have all
contributed to the uplift in costs. Upgrading elements of our risk,
control, finance and corporate functions' expertise have also been
contributory factors.
Transformation programme: Project Helix
We continue to make progress with the implementation of Project
Helix, our Group wide cost transformation programme. As previously
stated, this will see a reduction in Group operating costs on an
annualised basis of GBP40m by FY2020.
We have commenced a process to rationalise and simplify our
corporate structure which will eliminate over 50 entities and
includes the proposed acquisition of minority shareholder interests
in the remaining 'Mitie Model' companies. We anticipate the buy-out
of all minority shareholder interests will be completed by the end
of October 2017. The consideration will be satisfied by the issue
of Mitie shares, representing 0.7% of the current issued share
capital of Mitie. It is expected that the dilutive impact of the
share issue will be off-set by a claw-back of certain shares issued
pursuant to an earlier buy-out of minority shareholders in a "Mitie
Model" company, due to the restatement of that company's FY2016
accounts.
The proposal to transition certain accounting and finance
processes to an outsourced solution is on track and, subject to
employee consultation, is expected to be implemented by the final
quarter of FY2018. Our HR transformation (which includes the
automation of many administrative activities) is also making very
good progress and is due to conclude by December 2017.
As part of our work-flow transformation, a simplification of the
spans and layers of management within our Engineering and Cleaning
divisions has now commenced - ahead of schedule - to improve
management accountability and visibility of contract
profitability.
These initiatives and other aspects of the transformation
programme are expected to result in headcount reduction of
approximately 480 by the end of the current financial year.
In addition, we have now commenced a Group-wide IT
transformation programme. This will simplify the Group's IT
architecture and centralise monitoring, system controls and
maintenance, all with greater 3(rd) party automation.
As result of this broad programme of upgrades, costs associated
with the Helix programme are greater than previously anticipated.
In particular, this is due to the acceleration of our IT
transformation activities, dual occupation costs as we consolidate
our London operations from three buildings into one, and costs
related to a work-flow management re-design exercise. Estimated
implementation costs which will be incurred in the current
financial year currently stand at GBP24m (of which c. GBP21m will
be cash) against the previous estimate of GBP15m.
Strategic Review of Property Management Business
As part of the wider strategic review of the Group's operations,
Mitie is continuing to examine options for its Property Management
business. Mitie has now instructed Evercore Partners International
LLP to explore a potential sale of the business, having received
expressions of interest from third parties.
Defined benefit pension scheme
The consultation process relating to the closure of Mitie's
defined benefit pension scheme is due to be completed by 14
November 2017. It is expected that the scheme will close to future
accruals with effect from that date. The annualised savings to the
Group are expected to be in the region of GBP850,000 per annum.
Cash and Covenants
Our half-year net debt position is expected to be in the range
of between GBP160m and GBP180m (2016: GBP230m) and we currently
expect to comply with our debt covenants as measured at that
point.
Change of Auditor
The Board has recently carried out a competitive tender process
for the provision of audit services and, as a result, Deloitte LLP
has resigned as Mitie's auditor with effect from 19 September 2017,
and the Board has appointed BDO LLP to fill the casual vacancy
until Mitie's next Annual General Meeting, in 2018, when
shareholders will have the opportunity to vote on their
appointment.
In the 2017 Annual Report and Accounts, the Audit Committee
confirmed that it would commence an audit tender process such that
a new external auditor could be appointed during the financial year
ended 31 March 2018. BDO LLP will immediately review the financials
for the half-year, 30 September 2017, and audit the full year ended
31 March 2018.
There are no matters in connection with Deloitte's resignation
as auditors which, in the view of the Board, need to be brought to
the attention of shareholders.
Analysts and investors conference call
Mitie will be hosting a conference call at 0900 on Wednesday 20
September for analysts and investors. Dial-in details are as
follows:
UK Toll Number: +44 3333000804
UK Toll-Free Number: 08003589473
International dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
Pin code: 11320561#
For further information, contact:
Peter Dickinson
Acting CEO, General Counsel and Company Secretary, Mitie Group
plc
T: +44 (0) 203 123 8157 M: +44 (0)776 821 5013 E: peter.dickinson@mitie.com
Anna Chen
Investor Relations Manager, Mitie Group plc
T: +44 (0) 203 123 8675 M: +44 (0)781 852 7265 E: anna.chen@mitie.com
Notes for editors
About Mitie Group
Mitie is a FTSE 250 business providing a wide range of
facilities management and professional services, from real estate
consultancy, project management, energy consultancy, compliance,
risk assessment and security systems to cleaning, catering,
engineering, technical and environmental services and a range of
specialist services.
We work in partnership with organisations to deliver long-term
savings, managing and maintaining some of the nation's most
recognised landmarks for a range of blue-chip public and private
sector customers.
We are the UK's largest facilities management company employing
some 53,000 people across the country.
Find out more at www.mitie.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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