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Mitie is looking for new business particularly in the public sector – hospitals, schools, local government and defence, as it anticipates a structural shift as companies move to agile working and reduce their office estates. As for what that might mean for building services demand, the firm expects spend per occupied building on facilities management to increase in cleaning, remote monitoring and waste and energy optimisation as companies look to lower ‘total cost of ownership’ of a building.
That’s according to the latest financial results from Mitie, for the first half of the financial year, to September 30. The FM (Facilities Management) contractor Mitie’s acquisition of Interserve Facilities Management is due for completion on November 30 subject to shareholder approval; and the company received Competition and Markets Authority (CMA) approval on November 17.
The plc points to new contract wins with Marks & Spencer, Co-op and HMRC. On the security side, Mitie says it has ‘continued to remove costs through the combination of Security and Cleaning’, by integrating the Northampton-based manned guarding and monitoring company it owned, VSG, and a ‘programme to reduce divisional and group overheads’. The firm has decided not to declare an interim dividend for the first half of the financial year. As for financial results, security revenue grew 6.7pc, ‘due to the provision of public services in support of the DHSC and NHS and more traditional wins’. Cleaning revenues were ‘broadly flat’.
Phil Bentley, Chief Executive of Mitie, said: “Although COVID-19 continues to challenge us all, I am incredibly proud of how our business has responded and I am in awe of our 37,500 front-line heroes who have ensured we continued to deliver our exceptional customer service throughout the pandemic, keeping Britain’s vital infrastructure open, supporting hospitals and food retailers and rapidly adapting to changes in customer requirements.
“Our financial performance in the first six months of the year proved more resilient than expected with a much improved second quarter. Revenue of £972m was 9.8 per cent lower than the prior year as discretionary variable works and engineering projects significantly reduced offset partially by growth in Business Services. Operating profit of £21.5m benefitted from management action to reduce costs at the start of the crisis.
“With COVID-19 changing the way we work our industry-leading technology of remote monitoring, risk analytics, and deep cleaning has created opportunities to win some important new customers, including Marks & Spencer, Morrisons and Royal London which are included within the £500m worth of new or renewed contracts in the period.
“Strategically we continue to make good progress against our Phase 11 transformation, ‘Accelerated Value Creation’. Strengthening our balance sheet with the Rights Issue and refinancing of the revolving credit facility in June placed us in a strong financial position to acquire Interserve Facilities Management. With completion of this acquisition at the end of the month – subject to Mitie is shareholder approval – we can drive faster growth and greater cost synergies, despite the challenges of COVID-19.”
Like other contractors, Mitie said that COVID-19 has had a ‘varying impact’ on each sector and on each customer. Demand from some customers has proven to be ‘remarkably resilient’, while others such as aviation have been hit hard. Of its roughly 48,500 employees, 7,196 employees were furloughed and 79pc of employees have now returned to work. Demand for engineering projects has ‘significantly reduced’.
As for the medium-term, the firm says that the impact of COVID-19 is ‘as yet uncertain’. It forecasts that many clients will experience a slow return to office occupation. Aviation and transport will also have a slow recovery as confidence takes time to rebuild; while the public sector will be ‘resilient’ (and the contract firm is looking to develop ‘opportunities’ there). As the firm pointed out in an earlier trading update, its COVID-19-related public services have included NHS Nightingale hospitals.
Meanwhile, Mitie reports a ‘greater presence on Government Frameworks’; such as, it’s been named as a supplier on two more Crown Commercial Service (CCS) agreements: Vehicle Charging Infrastructure Solutions (VCIS) and Heat Networks and Electricity Generation Assets (HELGA). The company has been making much of its sustainability efforts and services; such as its own electric vehicle (EV) rollout towards a ‘zero emissions fleet’. Mitie reports it now has over 790 electric vehicles on the road.
Image, engineer’s van at electric charging point; courtesy of Mitie.