The facilities management (FM) contractor Mitie has hailed record revenue that has topped £4 billion for the first time. In the plc’s results for the year to March 2023, the company says that contract wins, renewals and acquisitions more than offset contracts that were not renewed, and an end to covid pandemic-related work such as at vaccination centres.
Phil Bentley, Group Chief Executive, pictured, said: “Mitie’s performance in FY23 has surpassed the board’s expectations. We entered the year with the challenge of replacing almost £450m of short-term and higher margin covid-related contract revenue. Thanks to the hard work of our 64,000 colleagues and our technology-led approach, we have achieved this, and more.”
The numbers in the ‘business services’ arm of Mitie, namely security and cleaning, are down on the year before largely due to the end of pandemic-related contracts. Security revenue last year was down 31 per cent, to £782m. Profit, and profit margin, were down on the year before, as was the order book, down from £1.7 billion to £1.5 billion. The company pointed also to a reduced scope of its Brexit security contract at UK ports.
He said that the firm will continue a ‘disciplined approach’ to bidding for contracts, ‘even if it is challenging to maintain renewal rates’. He added that the company will continue to seek growth opportunities, organically and through ‘strategic bolt-on’ acquisitions in the decarbonisation, security technology and telecoms infrastructure sectors. Its two recent acquisitions have been of the security training and consultancy business Linx International, which includes Tavcom; and the security installer R H Irving Industrials. A larger acquisition was of the rival FM firm Interserve, in 2020; which has made Mitie the largest facilities management business in the UK, it says. It’s aim is for ‘mid-to-high single digit revenue growth’; and an operating margin before other items of 4.5 per cent to 5.5pc. Cleaning, security and ‘technical services’ (such as heating and ventilation maintenance; telecoms support services and ‘de-carbonisation’ such as solar panels and air source heat pump installation, and electric vehicle charging) are described as its three core business areas; and ‘security technology’ is rated as one of the firm’s three ‘high-growth’ areas.
Bentley said: “Group revenue in FY23 exceeded £4bn for the first time, reflecting good momentum from our new contract wins, renewals and extensions, alongside contributions from contract re-pricing and acquisitions. Basic earnings per share grew by 3.3 per cent to 9.5p, benefiting from the refinancing of debt instruments and share buybacks, despite operating profit being slightly lower than last year due to the completion of the higher margin Covid work.
“When we exclude short-term Covid work, revenue and operating profit before other items increased by 14 per cent and 44pc respectively. Our operating margin excluding Covid work of 3.8pc (FY22: 3.0pc) reflects growth in projects work and the focus on margin enhancement initiatives. We expect to deliver an additional £5m of Interserve synergies, and therefore increase our guidance for total synergies to £55m by the end of FY24, significantly ahead of our initial expectation of £30m at the time of acquisition.
“Mitie has been transformed over the last six years, and we have made further significant progress this year against each of our strategic pillars. We are now the largest facilities management business in the UK, and our unrelenting ambition is to drive the business to reach its full potential, not just financially but also through its positive contribution to the environment and society.”
As for this financial year, Bentley spoke of winning and extending a number of significant new contracts and ‘a healthy pipeline of new opportunities’. The firm reports a renewal rate of over 90pc. Customers include UK Government departments such as the MoD and the Home Office; airports, the BBC and Deloitte, Sellafield, Eurostar and Ofcom; and in retail, John Lewis & Partners, Amazon, Co-op and Poundland.
A recent security services renewal the FM contractor announced was with Westinghouse Springfields Fuels Ltd, a nuclear fuel production facility.
