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MITIE Group PLC - 2012 Full year results presentation

preliminary results for the year ended 31 March 2012
by

MD Rahat

on 18 May 2016

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Transcript of MITIE Group PLC - 2012 Full year results presentation

Highlights of the year
M
anagement
I
ncentive
T
hrough
I
nvestment
E
quity
Launched a £10m Entrepreneurial Fund in January 2011 to expand the MITIE model - nearly £5m already invested:

Technical Facilities Services
Ireland
Business Services outside London
Events and Leisure
People
Launched the first MITIE graduate programme
Technology
Recent investment
has been focused on:

A project to re-engineer all of our processes to make them electronic over the next two years

Client-facing management information suite
that provides comprehensive asset performance data and enables the most efficient, tailored FM solution
Exodus


MiWorld
These developments are critical to MITIE
and differentiate us within the market place
Clients want
real time information
on the performance of their assets and estates which is online and
accessible 24/7
Track record
Basic Earnings per Share
£p
25.0
20.0
15.0
10.0
5.0
0
88
89
90
91
92
95
96
97
98
99
00
01
02
03
04
94
05
06
07
08
09
10
11
93
Sector-leading organic revenue growth of 5.4%


Delivered on our strategy with a series of transformational contract awards


Tremendous prospects for growth demonstrated by record order book and buoyant sales pipeline


Margins increased to 5.6% (within target range of 5% to 6% - 2011: 5.5%*)

Ranked as second largest energy services company in the UK


Niche acquisitions have supported entry into new and specialist markets

Significant order book and sales pipeline



Sector-leading integrated facilities and energy management proposition will underpin further organic growth



Robust balance sheet


Incentives at all levels result in better performance and entrepreneurial culture
83% of 2013 budgeted revenues secured (prior year: 81%)
£8.6bn order book (up £1.8bn from 2011)
£11.2bn sales pipeline (2011: £11.4bn)
Order book up 26%
65% of revenues from private sector

Excellent financial performance
Revenue
£2,002.5m
+5.9%
(2011: £1,891.4m)
Operating profit before other items*
£111.7m
+7.2%
(2011: £104.2m)
Earnings per share
before other items

22.6p
+0.0%
(2011: 22.6p)
Dividend per share
9.6p
+6.7%
(2011: 9.0p)
Operating profit margin before other items*
5.6%
(2011: 5.5%)
2013 budgeted revenue secured
83%
(Prior year: 81%)
Order book
£8.6bn
(2011: £6.8bn)
Sales pipeline
£11.2bn
(2011: £11.4bn)
Net debt
£106.9m
(2011: £76.5m, 0.65x EBITDA)
Cash conversion
83.7%
(2011: 86.7%)
The outsourcing market evolves
Public sector
Opportunities
Justice





Health

Local authorities
MoJ pipeline of up to £1bn, markets include:
– Total facilities management, prisons management, community payback, probation trusts
Home Office market opportunities: police services and immigration removal centres
Her Majesty's Prison Service: entered a partnership with HMPS in January 2012 to bid for the management of nine prisons
– Signals a new approach to competition for the Prison Service and will allow us to compete for and
manage 15-year prison contracts
Energy services framework agreement
Awards and renewals
Key contracts awarded and retained/expanded
Other major new contracts awarded/expanded
Ministry of Justice: £200m to £455m over 5–7 years
Total facilities management contracts for HMCTS in the South of England + Brixton and Isis Prisons
Appointed to the MoJ's Minor Works Framework in April 2011
West Midlands Construction Framework: £160m to £350m over 4-8 years
Minor works and maintenance contract for all non-housing capital expenditure and maintenance
Primarily within the Birmingham City Council South Area and available to 13 other Local Authorities
Luton Schools: £37m over 25 years
Integrated FM for schools
Office of Government Commerce NHS Framework
TFM for St George's Healthcare NHS Trust: £10m over 5 years
Essex County Council: £80m to £100m over 10 years
Strategic outsourcing including facilities, energy, property and estates management
500 people delivering services to over 350 sites across Essex
Lewisham Homes: £40m over 5 years
Home improvement works as part of a major works programme
Involves over 13,000 social housing tenants
International
International strategy progress
Rolls-Royce pan-European contract to deliver total facilities and energy management developing well


Acquired the remaining 50% of the equity share capital of Service Management International (SMI) in July 2011


SMI awarded contract for integrated FM contract with Givaudan in Europe: £23m over 4 years
Total 2012 revenues were c£80m
Provides an improved ability to compete for pan-European integrated FM contracts
Top 100 clients
57%
UK clients
72%
EMEA
20%
Americas
8%
Asia Pacific
Following our clients overseas
43%
International
clients
Private sector
Private sector opportunities
41% of the group's contracts are still single service contracts - expect a further shift to multi-service and integrated contracts

Opportunities to repeat the growth achieved with Lloyds, Rolls-Royce and others, with a number of our existing clients over the short to medium term


Energy services currently 34% of total group revenues

International development driven by private sector relationships and shift towards pan-European procurement
Private sector awards and renewals
Key contracts retained and expanded
Other major contract awards
Cumbrian Collaboration: £200m to £280m over 5–7 years
Integrated facilities and energy management
Builds on our 11-year relationship with Sellafield Ltd
500 buildings across a range of sites employing >500 people
Diageo: £100m to £120m over 5 years
Integrated facilities management, led by hospitality and catering services
Significantly expanded a technical FM contract inherited with acquisition of Dalkia FM in Ireland
70 sites across the UK and Ireland
Airline Operators Committee at Heathrow
£17m over 3 years
Hold baggage screening services
Odeon Cinemas
£14m over 3 years
Cleaning and environmental services
Friends Life
£28m over 5 years
Integrated facilities and energy management
LV=
£20m over 4 years
Manage and deliver building repair services
Trend to consolidate procurement across neighbouring authorities and use of frameworks
Bundling of adjacent services, eg. FM, utilities, estate management, work style, capital projects
Public sector opportunities
Public sector awards and renewals
Opportunities
Awards and renewals
Energy
Our energy services proposition
Order book
+£1.8bn
A series of transformational contract awards and retentions this year have increased our secured order book by:
+26% to £8.6bn
Sales pipeline of £11.2bn
Group structure
Facilities
Management
Techincal Facilities
Management
Property
Management
Asset
Management
Overseas
Services
Energy
Services
£454.0m
£27.2m
Revenue
EBITA
£230.1m
£11.6m
Revenue
EBITA
£249.7m
£11.4m
Revenue
EBITA
£37.9m
£1.4m
Revenue
EBITA
£18.2m
Revenue
35%
of group revenue
Revenue by market sector

Financial and Professional services

Retail

Property Management

Manufacturing

Technology and Communications

Utilities

Transport and Logistics

Leisure

Construction
Awarded The Times Top 50 place for women to work 2012
Formalising our people agenda, with particular emphasis on recruitment and retention, talent management, mentoring, succession planning and leadership development
Focused on strategies to keep our 61,000+ people engaged
Recognised with a series of awards throughout the year
Well-positioned to increase market share in outsourcing and energy services





Excellent visibility of revenues, record order book and substantial pipeline of opportunities
Financial strength provides platform for acquisitions to enhance capabilities

Confident of continued, sustainable profitable growth

Continuing track record of growth
Financial indicators
Segmental revenue
Other items
Acquisitions
Provisions
No significant pension deficit
Mobilisation costs
Cash conversion
Cash flow and net debt
Finance costs
Facility maturity profile
Strong sustainable profitable growth
Excellent client relationships drive organic growth
Energy services capability transforms existing outsourcing model
Market-leading technology provides competitive edge
Energy services now a core part of client proposition - accounted for 34% of group revenues in the period
Ruby McGregor-Smith CBE
Chief Executive

Suzanne Baxter
Group Finance Director

Total security management
Cleaning
Catering
Document management
Reception & front of house
Landscaping
Pest control
Waste & environment
Integrated FM
M&E engineering maintenance
CarbonCare energy services
Lighting
Mobile multi-site FM
Building management
Systems & controls
Compliance services
Property maintenance
Building refurbishment
Roofing
Painting
Interior fit-out
M&E engineering installation
Insurance claims management & repairs
Decentralised energy centre development
Low carbon data centre development
Renewable energy integration
Energy services company (ESCo) management
Community infrastructure
Our technical FM expertise underpinned serveral transformational contract awards including Rolls-Royce, Vodafone and Royal Opera House
Launched National Mobile Solutions – delivers fast and responsive mobile technical FM services across the UK
Leveraging Asset Managenment's development capabilities in the energy and low-carbon data centre market with maintenance of data intensive sites and decentralised energy infrastructure
Energy reduction remains a key growth driver
The integration of our engineering contracting business into Property Management is complete
Expanding opportunities in social housing market – significant opportunities in photovoltaic installation
Residential solutions business for new housing market
Increase confidence in UK retail and financial services sectors
Challenging conditions continued in certain construction related markets
New economic and technology initiatives enabling major improvements in performance of energy assets
Health sector opportunities in outsourced energy centres which could extend to prisons and also education
Retail sector interest in outsourcing energy centre increasing
Waste to energy plants for local authorities and private sector clients
Energy subsidy support has created more interest in these markets
Significant progress, particularly in our ability to bid for and win large national contracts
Developed niche offerings for specific sectors including retail, transport, healthcare, justice and prisons
Expanded our security business to offer total security management which includes manned guarding, response services, key holding, remote monitoring
Developing catering offering with brand refresh and new management team
Margin
6.0%
Margin
Margin
Margin
5.0%
4.6%
3.7%
Revenue (£m)
Basic EPS before other items* (p)
* Excludes non recurring pension credit of £4.1m in 2011
* Operating profit before other items in the year ended 31 March 2011 included non-recurring income of £4.1m arising from an amendment to the past service cost of certain defined benefit pension schemes following the change from RPI to CPI for the valuation of certain pension scheme liabilities. Operating profit before other items, margin, and related growth statistics stated exclude the £4.1m from the prior year result in order to reflect the underlying operational performance of the group
* Excludes non recurring pension credit of £4.1m in 2011
Acquisition of 100% of Utilyx Holdings Limited, an energy consultancy, for total consideration of up to £16.4m

Earn out of five minority companies for £14.6m, paid in 5.3m MITIE shares and £2.0m cash. New shares issued were offset by a share buyback

Increased stake in Service Management International Limited to 100% for total cash consideration of £1.5m

Acquisition of 51% of the share capital of Direct Enquiries Holdings Limited, with the option to acquire the remaining 49% for consideration of up to £8.3m
* Excluding cash and funding balances
Triennial review and actuarial valuation of the group’s principal defined benefit pension scheme was completed as at 1 April 2011; with no lump sum top up requirement
Driver of change has been the movement in discount factors driven by bond yield curves
MITIE defines mobilisation costs as those costs incurred after appointment of preferred bidder but prior to commencement of services
Costs must relate directly to the contract, be separately identifiable and reliably measured
Amounts capitalised must be less than estimated future net cash flows
Costs are amortised over the life of the contract
If the contract becomes loss making, any unamortised costs are written off immediately
Full accounting policy can be found within the Annual Report and Accounts 2012
*Cash conversion is defined as the conversion of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) to operating cash on a rolling 12-month basis
*Adjusted for movement in bank loans, private placement notes, loan notes and finance leases
FY
H1
Revenue
Basic EPS before other items*
Operating profit before other items*
Dividend per share
* Excludes non recurring pension credit of £4.1m in 2011
Record order book, up by 26%
Segmental operating profit
Summary financial results
*Excludes non recurring pension credit of £4.1m in 2011
£1.8bn growth to £8.6bn
Strong growth of 5.9%
Strong growth of 7.2%
Operating profit before other items* margin remains strong
Developing margin
Strong balance sheet
Long-term facilities to fund growth
Excellent conversion of 83.7%
The UK energy services market is forecast to grow rapidly
Energy Consultancy & Compliance
Utility Procurement
& Data Management
Energy Retrofit
(incl. renewables)
Supply & Performance Contracting
Total Market
Private 40% Public 60%
The drivers are in place for growth
The converging forces are well established in the market
Key development
Key contract awards
NHS Carbon and Energy Fund: £200m framework
Accepted as a partner in the capital fund
Enables Trusts to upgrade their energy infrastructure to save energy, carbon, money

May 2012 - appointed preferred bidder to develop a major new innovation centre to power the world famous Cambridge Biomedical Campus (Addenbrooke’s Hospital)
Camden Council – 15 years
Innovative energy scheme providing surplus heat from a hospital energy plant to 1,500 council tenants
Cambridge University Hospitals NHS Foundation Trust
Developing an energy centre at Addenbrooke's Hospital
Saving 30,000 tonnes of CO2
Low carbon and energy efficient technologies eg. biomass, CHP
O-Gen Plymtrek – 10 years
Developing an energy centre in Plymouth which will convert waste wood to renewable heat and power
Ore Valley Housing Association
Delivering an energy centre in Cardenden, Fife
Creating Scotland's largest energy self-sufficient community
More than 1,200 homes will benefit
Energy awards
International offering
0.81x EBITDA
Total potential value of six major contracts awarded ranges from £1.5bn to £2.2bn
- Includes Lloyds Banking Group - total value £775m over five years

Organic growth in operating profit before other items* 6.7%
Low gearing and no significant pension deficit
Long-term committed financing facilities will support growth
Switzerland, Germany, Holland and Spain
Market-leading integrated FM capabilities will drive further organic growth with existing client base
Energy proposition supports every key energy issue faced by our clients
Selective international expansion over the next five years
Focus on delivering better quality services, innovation and efficiency differentiates us in the marketplace

* Excludes non recurring pension credit of £4.1m in 2011
Investment in organic growth
Above the stated KPI of 80% cash conversion*
Private 65% Public 35%

16%


10%

6%

10%

6%


6%

7%


3%

1%

Central government

Local government

Other government

Social Housing

Health

Education

7%

4%

1%

11%

4%

8%

Financial and Professional services

Retail

Property Management

Manufacturing

Technology and Communications

Utilities

Transport and Logistics

Leisure

Construction

10%


5%

6%

4%

2%


2%

6%


2%

3%

Central Government

Local Government

Other Government

Social Housing

Health

Education

21%

18%

1%

12%

5%

3%
Enablers for growth
Outlook
Outstanding track record of growth
MITIE Group PLC
A transformational 25th year,
strong organic growth and a record order book

Utilyx - a specialist energy and carbon consultancy
Direct Enquiries - the UK's leading access and disability consultancy

Lloyds Banking Group: £775m to £930m over 5–6 years
Integrated facilities, property and energy management
One of our first clients in 1987
c3,000 people transferring to MITIE (total c7,000 people)
Financial services, transport and retail markets in particular
Cambridge University: £11m over 18 months
Mechanical, electrical and specialist services
The Future of Outsourcing
Developing new, more 'intelligent' outsourcing models
Assembling data and understanding how the separate strands of corporate real estate functions interact
'Linkages' emerging on many levels:




An approach driven by new technologies, built on intelligent data aggregation and real knowledge of total operating costs
Investing in skills and technology
FM costs and energy provision
Projects and FM
Energy and projects
Agile working regimes and property costs
All of these elements of real estate costs and increasing economic/legistlative demands
Equity models support growth and innovation
Acquisitions
Utilyx




Direct Enquiries
Acquired in January 2012
Manages the business impact of energy consumption and rising energy costs - including strategic planning, procurement and risk management
Purchases a significant proportion of the UK corporate energy market on behalf of clients across industrial, commercial and public sectors
Acquired a majority stake in December 2011
UK's leading access and disability consultancy - provides a range of services which allows clients to minimise the risk and maximise the benefits of embracing equality
Audits around access for disabled people, supported by compliance reviews covering fire as well as health & safety risk
Operates free online directories - directenquiries.com, inclusivebritain.com and inclusivelondon.com - information for people with specific access requirements
Basic earnings
per share

20.5p
+10.2%
(2011: 18.6p)
*excludes non recurring pension credit of £4.1m in 2011
+26%
Awarded soft FM services contracts at O2 Arena and Ascot during the year
Outstanding track record of growth
Focus on areas such as energy, healthcare and justice
The MITIE Model
Low leverage with net debt of £106.9m, at 0.81x EBITDA
Share price growth well ahead of FTSE 100
Basic EPS before other items*
Revenue
* Excludes non recurring pension credit of £4.1m in 2011
Addenbrooke's
Cardenden
O-Gen Plymtrek
Ministry of Justice
Essex County Council
West Midlands Construction Framework
Lloyds Banking Group
Cumbrian Collaboration
Diageo
Private Sector



Public Sector



Energy Services
Transformational contract awards
*excludes non recurring pension credit of £4.1m in 2011
Full transcript