Mitie reinstates interim dividend, maintains full-year guidance

Facilities management and outsourcing company Mitie reported a 103% improvement in first-half revenue on Thursday, to £1.91bn, including its share of joint ventures and associates.

The FTSE 250 company said that was boosted by the inclusion of Interserve Facilities Management revenue of £629m, and £259m from short-term Covid-related contracts.

It said Mitie’s standalone revenue, excluding Interserve, rose 36%, while underlying revenue was back at pre-pandemic levels.

Operating profit before other items rocketed 367% to £85m for the six months ended 30 September, as its strong revenue growth translated into higher-margin profit.

Operating profit came in at £60m, a near-tenfold increase on the £6.6m it recorded in the first half of 2021, reflecting stronger performance in the period, partially offset by the increased investments in Project Forté and Interserve.

Mitie said Interserve was performing well, with integration largely complete, and £12.1m in cost and revenue synergies achieved in the period.

New contract wins, renewals, and projects in the first half totalled £1.8bn in total contract value, which compared well to the £500m it achieved a year ago.

Free cash flow improved to £86m from £78m year-on-year due to increased profitability, even when including the benefit of HMRC’s ‘Time To Pay’ scheme in the prior year period.

The company was still expanding in the period, with the acquisition of DAEL Ventures UK in August and Rock Power Connections and Esoteric in November, while a new revolving credit facility of £150m was in place, and forward-starting terms of a USPP worth £120m had been agreed.

The board reinstated the interim dividend by declaring a distribution of 0.4p per share, as underlying group performance returned to pre-Covid levels.

“We have delivered a strong performance in the first half across all our divisions as the addition of Interserve Facilities Management and the contribution from Covid-related contracts boosted the performance of our business,” said group chief executive officer Phil Bentley.

“We are beginning to generate good free cash flow and our new long term financing arrangements reflect our strengthened balance sheet and BBB credit rating.

“With our underlying business back to pre-Covid levels, we have reinstated our interim dividend.”

Bentley said the company’s new strategy, focusing on growth, enhancing margins, and improving cash generation, was progressing well.

“Our 'Science of Service' offering is gaining traction, as clients' workspaces require greater hygiene, intelligent security, and critical asset monitoring.

“We hope to add to the acquisitions made in decarbonisation - Rock Power Connections - telecoms maintenance - DAEL Ventures UK - and intelligent security with Esoteric.

“Our second half is traditionally a little stronger than the first half, as the final quarter attracts additional project work across the public sector.”

Excluding the company’s short-term Covid-related contracts, which it expected to “significantly reduce” in the second half, Phil Bentley said it was still expecting a stronger second half performance for the underlying business.

“This will result in an operating profit before other items for the 2022 financial year of between £145m and £155m, unchanged from our previous guidance.”

At 0855 GMT, shares in Mitie Group were up 1.44% at 72.43p.