Trading update
MITIE has made good progress during the year to date, securing new contracts as well as retaining and extending the scope of work with existing clients. Earnings for the full year are expected to be in line with management’s expectations.
Both our facilities management (FM) and technical FM divisions have performed well in the private sector and we expect to see increasing public sector opportunities over the next twelve months. The level of contract awards across the Group has increased since October. However, we have seen little recovery in our more cyclical markets within Property Management and there is risk of some delay in delivering both secured and prospective project work before the year end. We are pleased with the progress in our Asset Management division where we are seeing a strong pipeline of energy and technical infrastructure projects.
In December 2010, we successfully mobilised our re-secured and extended contract with Rolls-Royce. We now support Rolls-Royce in Norway, Finland, Sweden, Germany, France and Poland, and have extended our work in the UK. This new contract, along with the acquisition of an FM business in Ireland, is indicative of the significant progress we have made in the development of our international strategy this year. We continue to see opportunities to expand our business into overseas markets and expect further developments in the future.
In November 2010, we mobilised our new contract with Vodafone, a five year agreement (with two potential one year extensions) to provide integrated FM services throughout the Vodafone estate in the UK. In addition to mobilising these two strategically important contracts, we have continued to win and retain new work across a range of sectors. Examples of new contracts include:
- A contract to design and develop a data centre which will be used by a major bank. Commencing in January 2011 for a 16 month period, the contract has an estimated value of £34m.
- A five year contract to provide technical FM services to the Transport for London head office portfolio. With a total value of £15m over a five year period, the contract is being mobilised for an April 2011 start.
- Following our appointment to the Office of Government Commerce (Buying Solutions) framework agreement, we have been awarded four FM contracts, including one with the Department for International Development, worth £4m in total.
- A £110m partnering contract to deliver reactive repairs, voids and planned improvement works to 14,000 homes for Orbit Group across East Anglia, London and the South East. The contract, due to start in April 2011, is for ten years and has an optional five year extension period.
- For Hull and East Yorkshire Hospitals NHS Trust, we have renewed a cleaning services contract we were awarded in 2006, for a further five year term.
- A contract with the Home Office through the UK Border Agency for Campsfield House Immigration Removal Centre, where we will deliver a full custody and detention service including all aspects of hard and soft facilities management, catering and energy management. This contract is our first for an immigration centre and is for five years with a total value of £25m.
- The Royal Free Hospital in Hampstead opened its energy centre in January 2011. The energy centre was designed, built and is operated by MITIE as part of a 15 year contract that will provide the hospital with an independent off-grid energy source and will deliver significant energy savings.
- The Welsh Assembly Government has awarded us a five year contract with an option for a further two years, with a total value of £11m. The Government occupies over 65 buildings in Wales where we will provide a variety of facilities management services including energy management, project works, estates management, planned and reactive mechanical and electrical maintenance.
- Following a re-tender exercise, we have significantly extended our cleaning contract for Telereal Trillium, however our technical FM contract was not renewed. The net reduction in contracted revenue is around £9m per annum, although there is the potential to offset this with future project works as part of an existing property management framework arrangement.
Pipeline
The Group continues to see a positive trend in its sales pipeline. There has been an increase in framework contracts across many of our markets. A recent example of our success is our appointment to the NHS Building and Engineering Maintenance Services framework agreement, where we will supply technical FM services to the NHS. We have also been appointed to two framework agreements within the justice sector. There is a growing pipeline of energy opportunities in the health sector and local authority opportunities are also increasing as they seek to generate efficiencies through transformational outsourcing contracts.
Development of MITIE’s entrepreneurial investment model
On 17 January 2011, we launched a £10m Entrepreneurial Fund to back management teams with innovative ideas to start up mutually owned businesses in the United Kingdom. MITIE has a long history of partnering with management teams to start-up businesses, having participated in over 80 successful start-ups using the 'MITIE model' in our 22 year history. The new fund will be open to dynamic management teams that want to run a business with MITIE’s support. With a rapidly changing landscape in the UK public sector, the fund will be particularly targeted at teams that have considerable public sector experience and innovative business ideas to support the Government's focus on efficiency and deficit reduction.
Funding
On 16 December 2010, MITIE successfully completed an issue of US private placement loan notes with institutional investors for a value of £100m. The issue consists of £40m of notes denominated in sterling and fixed at 4.38% maturing in 9 years and £60m of notes denominated in US dollars ($96m) maturing in 7 years. The US dollar denominated private placement proceeds have been swapped into sterling debt, with half fixed at 3.88% and half with a floating sterling interest rate of LIBOR + 1.26%. The proceeds were used to repay shorter dated bank facilities which expire in 2012. The Group is in the process of refinancing these facilities and expects to complete this exercise prior to the announcement of its results for the year ending 31 March 2011 in May 2011. The Group continues to have a strong balance sheet which will allow it to take advantage of organic growth and value creating acquisitions as they arise.
Outlook
Our extensive capabilities and resources make MITIE a very attractive strategic outsourcing partner for our clients. Budgetary pressure in the public sector is beginning to create substantial opportunities for outsourcing and this is evident in both the increasing use of framework agreements and in our growing sales pipeline. Within the private sector, we see increasing opportunities to follow our clients overseas. Following the successful integration of our Irish FM acquisition, we are looking for further opportunities to extend our overseas capabilities. Across the business, the high level of both our order book and pipeline of contract opportunities makes us confident that MITIE is well positioned for sustainable, profitable growth.
-ENDS-
Conference call
MITIE Group PLC will be holding an investor / analyst conference call today at 09.30am.
Dial in numbers: +44 (0) 20 3003 2666 - Standard International Access 0808 109 0700 - UK Toll Free
Conference name: MITIE Interim Management Statement Analyst & Investor Call
Password: MITIE
Future reporting dates
MITIE Group PLC will announce its full year results on Monday 23 May 2011.
For further information, contact:
John Telling, Group Corporate Affairs Director, MITIE Group PLC
T: 0203 123 8673 M: 07979 701 006 E: john.telling@mitie.com
Erica Lockhart, Investor, Public & Media Relations Manager, MITIE Group PLC
T: 0203 123 8675 M: 07979 784 488 E: erica.lockhart@mitie.com
Notes for editors
What is MITIE?
We’re the strategic outsourcing company. What does that mean in practice? We manage facilities, properties and assets for our clients across the UK and beyond.
We work with our clients in three ways; some take full advantage of our whole range of expertise, others may only need one aspect of what we do:
Strategy and consultancy
+ Facilities and project management
+ Service delivery
Our strategic input can add value at the highest level by helping clients to manage their assets, while our practical management expertise can save customers money and reduce their carbon emissions. We work with a vast number of clients in every industry across both the public and private sectors and deliver the broadest range of services that can be found in one place: from integrated facilities management to engineering maintenance to lifecycle energy management and much more.
There’s a lot more to MITIE than you probably think. We’re a big company with big ambitions – a leading FTSE 250 support services business, with more than 56,000 people, revenues in excess of £1.7bn, and a reputation for being the best.
Visit us at www.mitie.com
