MITIE has made “significant progress” in each of its key target markets during the year to date, with the company witnessing good levels of organic growth in the early months of 2011.
Revenues and earnings are developing in line with management’s expectations. At 30 June 2011, 85% (30 June 2010: 78%) of budgeted revenues for this financial year had already been secured.
MITIE continues to see good opportunities for growth across its markets and for the development of its international strategy. The order book is “at record levels” while the pipeline of opportunities remains “very strong”.
According to the official press statement, MITIE’s ability to achieve good growth is underpinned by the following factors:
- excellent client relationships across the public and private sector in the UK extending to a growing international portfolio
- resilient business model with a well-diversified portfolio of sector exposures
- energy services capability that is transforming the outsourcing model
- market-leading technology providing a competitive edge, operational excellence and market differentiation
- significant potential for overseas growth
- incentives at all levels to support an entrepreneurial culture
- committed long term funding, a strong balance sheet with low gearing and no material pension deficit
Public sector activities in focus
In the public sector, there has been a steady flow of contract awards and retentions during the period. MITIE remains focused on the justice, health, local authority and social housing markets which are showing a very encouraging pipeline of opportunities.
Developments include the company’s appointment to the Ministry of Justice’s Total Facilities Management Framework, providing the route to bid for facilities management at courts in various regions of the country as well as two prisons
It has also been awarded two new technical facilities management contracts with the Royal Berkshire NHS Foundation Trust and St George’s Healthcare NHS Trust following MITIE’s appointment to the Office of Government Commerce NHS framework agreement.
The contract with Royal Berkshire NHS Foundation Trust hospital has a total value of GB pound 6 million over three years, and the contract with St George’s Healthcare NHS Trust is for five years with a total value of GB pound 10 million. This adds to MITIE’s existing portfolio of services at St George’s Healthcare NHS Trust, which includes cleaning, catering and Helpdesk activities (bringing total current revenues to approximately GB pound 15 million per annum).
MITIE has also secured a minor works and maintenance contract with the West Midlands Construction Framework for all non-housing capital expenditure and maintenance, primarily within the Birmingham City Council South Area.
The contract is also available to 13 other local authorities within the West Midlands and has a four-year term with the possibility of a further two-plus-two years’ extension.
The total overall contract value is anticipated to be within the range of GB pound 160 million-350 million.
Meantime, Lewisham Homes has appointed MITIE to deliver GB pound 40 million of home improvement works to over 13,000 social housing tenants as part of a five-year Major Works Programme.
The company has also been awarded a contract to provide cleaning and environmental services at the offices of the City of London, with a total value of GB pound 4 million over a three-year period.
Private sector activities: what’s happening?
In the private sector, MITIE has continued to win and retain work across a range of sectors.
The pipeline of work remains buoyant, particularly in the financial services and retail sectors.
The facilities and energy management contract with Rolls Royce continues to develop and now includes additional space planning, move management and project works which MITIE estimates to have an in-year value of GB pound 20 million (“We now estimate that total revenues this year are to be around GB pound 80 million”)
For the Airline Operators Committee at Heathrow Airport, MITIE has secured a three-year contract to provide hold baggage screening services at Terminals 1, 2, 3 and 4, with a total value of GB pound 17 million.
There’s a security services contract including keyholding and response work for BT Group with a total estimated value of GB pound 9 million over three years.
MITIE has retained and expanded its contract to provide integrated FM to Channel Four Television, with a total contract value of GB pound 8 million over three years.
The company has also secured a technical facilities management contract for WorldPay, with a total value of GB pound 6 million over three years.
For Primark stores, MITIE has been awarded a variety of engineering services retail fit-out projects for stores across the UK valued at GB pound 5 million.
Activities in the energy services sector
The energy services market is significant for MITIE. The company is ranked as the second largest energy services concern in the UK, with 34% of the Group’s revenues derived in this area.
Its energy services proposition supports all the key energy issues faced by the client base. These include:
- business continuity through security of supply (for example, for Waitrose and the Royal Free Hospital)
- value through cost reduction (for example, work for the GLA)
- reduction of carbon emissions (for example at Ofcom)
- renewable energy (for example for A2 Dominion)
The company has enjoyed a number of recent successes in this market. These include:
- being accepted as a partner in the NHS Carbon and Energy Fund, a GB pound 200 million capital fund which enables NHS Trusts to upgrade their energy infrastructure to save energy, carbon and money (MITIE is currently bidding on the first projects to be let through
- the framework, and is one of only two companies who have been successfully selected to bid for the first four programmes)
- subject to final legal agreements (due to be completed within the next month) MITIE, Investec and Savills are to enter into a joint venture to install photovoltaic panels across social housing residences, with an initial installation of 5,000 panels and
- expected revenues of GB pound 35 million for MITIE (the initial installations are expected to be completed by the end of February 2012, and this will be one of the largest social housing PV schemes undertaken in the UK
- for the London Borough of Camden, MITIE has developed an innovative energy scheme to supply up to 1,500 council tenants with surplus heat from our energy plant at the Royal Free Hospital in Hampstead (the contract runs for a period of 15 years)
- awarded a contract to design, develop and maintain a combined heat and power decentralised energy centre for The Royal Marsden NHS Foundation Trust
- following on from its work with the John Lewis Partnership to develop and operate a biomass energy centre at the Waitrose East Cowes store, MITIE has been awarded another contract by Waitrose to undertake a decentralised energy project at its Bracknell store
International strategy developments: the latest news
MITIE has made further developments in its international strategy.
On 29 July, for example, it acquired the remaining 50% of the equity share capital of Service Management International (SMI) from Kluh Service Management, based in Germany, for GB pound 1.5 million.
The acquisition of SMI is part of the strategy to develop MITIE’s ability to support its clients overseas and give an improved ability to compete for pan-European integrated FM contracts.
In August, SMI was appointed as a preferred bidder for a contract with Givaudan to provide integrated FM across several European countries, including Switzerland and Germany, for a four -year period at a total value of GB pound 23 million.
Other SMI clients include Motorola, Honeywell, Brittany Ferries, Life Technologies and Computer Associates.
Entrepreneurial Fund: where does it stand now?
MITIE remains fully committed to supporting growing businesses through its GB pound 10 million Entrepreneurial Fund launched in January this year. The company sees a growing opportunity to support the agenda for social enterprise and mutual share ownership structures.
In July, MITIE joined a roster of leading companies as a founding sponsor of StartUp Britain, a Government-supported initiative to help aspiring entrepreneurs in the UK.
StartUp Britain is in line with MITIE’s own efforts to encourage and support enterprise in the UK. MITIE has pledged its support and commitment to back British start-ups as part of its direct response to the Government’s call for an ‘enterprise-led’ recovery.
Over the last 23 years, MITIE has participated in over 80 successful start-ups.
Financial position since 31 March
There has been no material change in the Group’s financial position since 31 March 2011. In July 2011, as planned MITIE completed the transition to its new banking facilities and now has in place GB pound 250 million of secured banking facilities which will fall due for renewal in
September 2015 (with the potential to extend that facility through an accordion arrangement to GB pound 400 million).
MITIE is also funded by a further GB pound 100 million of US Private
Placement loan notes that were issued in December 2010 and fall due for repayment between December 2017 and 2019.
The company’s current low debt levels and strong balance sheet continue to provide us with capacity for the development of organic growth and for value creating acquisitions should they arise.
On 25 May 2011, MITIE commenced a programme to purchase its shares in the market in order to offset the planned issue of shares in late August 2011 to satisfy the consideration payable for the purchase of minority interests under the MITIE Model.
Between 25 May 2011 and the close of trading on 12 August 2011, MITIE had purchased 3,560,000 shares in the market for a total consideration of GB pound 7,935,123 representing an average price of 222.9 pence per share.
The highest price paid was 233.0 pence per share and the lowest price paid was 208.6 pence per share.
It is not MITIE’s current intention to operate a formal share purchase programme outside of this arrangement, although it may purchase shares to offset share scheme exercise activity at its discretion.
The short term outlook
MITIE states that: “The financial year has started well and as expected. While the global economic uncertainties continue to exist, we remain extremely positive about the range of outsourcing
and energy services opportunities across all our key markets and continue to see a record order book and strong pipeline of sales opportunities.”
In conclusion, today’s statement reads: “The Group is on track to continue its record of sustainable profitable growth.”