MITIE Group PLC COVID-19 Update (7941H)

TIDMMTO

RNS Number : 7941H

MITIE Group PLC

27 March 2020

27 March 2020

Mitie Group plc

LEI number: 213800MTCLTKEHWZMJ03

Mitie Group plc

COVID-19 UPDATE

Mitie Group plc ("Mitie" or "the Group") (LSE: MTO), the UK's leading facilities management company, issues the following update in relation to the impact of the COVID-19 outbreak.

OVERRIDING PRIORITIES

The Group has three overriding priorities in the current environment:

 
      --   Protecting the health and safety of our colleagues, 
            our clients, our other business partners and the communities 
            that we serve; 
      --   Ensuring that our businesses are able to continue to 
            operate with minimal disruption, and deliver the essential 
            services we provide to our clients; 
      --   Preserving the financial strength of the Group. 
 

OPERATIONAL IMPACT OF COVID-19 IN FY21

Although we cannot predict with any accuracy the long-term impact of Covid-19 on our business at the present time, currently we are seeing a mixed impact on our divisions:-

 
      --   Across the essential services we provide to the public 
            sector - including the NHS, Home Office, The Police, 
            Sellafield, AWE, Bank of England, Network Rail etc - 
            we expect little change in demand as a consequence of 
            Covid-19. These services represent c.30% of our annual 
            revenues. 
      --   Services to the Finance, Professional, and Banking sector, 
            which represent c.12% of revenues, are expected to continue 
            at close to normal levels, whilst branches remain open, 
            as will essential statutory and mandatory maintenance 
            services to critical infrastructure such as Data Centres, 
            Telecoms and Drug Manufacturing, which represent a further 
            c.6% of revenues. 
      --   Demand for Cleaning and Security Services from food 
            and On-line Retailers are increasing. These services 
            represent c.11% of group revenues. 
      --   However, we are starting to see discretionary project 
            work in both Fire & Security and Technical Services 
            (c.15% of Group Revenue) being significantly deferred, 
            alongside reduced demand from Transport & Logistics, 
            Manufacturing, Property Managers and general office-based 
            clients. In the latter cases (representing in aggregate 
            a further c.26% of Group Revenues) we are seeking retainers 
            to ring-fence 'furloughed' staff to ensure rapid and 
            cost effective remobilisation, when the impact of Covid-19 
            has abated. 
 

Currently almost all our front-line staff continue to work at client's sites as requested to provide essential services. Where clients have reduced demand for our services, so far, we have been able, in the main, to re-deploy colleagues in other areas of opportunity.

All of our HR, Finance and IT support activities - including those outsourced to India - are being maintained effectively by staff working remotely. All other staff able to work remotely are also doing so, as a consequence of which our major office hubs are now shut. In short, we remain fully capable of delivering our full suite of essential services, despite the challenges of the current environment.

FINANCIAL CONSIDERATIONS

We have some GBP427m of facilities available, comprising a GBP275m Revolving Credit Facility which matures 23(rd) July 2021 and GBP152m USPP, of which GBP122m matures December 2022.

We reported in our HY 2019/2020 results a closing net debt of GBP148m and average net debt of GBP263m, with peak debt of GBP355m. Peak debt in H2 was GBP273m.

The year end debt balance will benefit from a deferral of VAT and PAYE payments, agreed with HMRC, and is therefore expected to be better than previous guidance, providing that clients settle March month end invoices as due.

CURRENT TRADING FY20 AND OUTLOOK

Mitie has continued to trade in line with guidance provided in the trading update for the first nine months of FY19/20, issued on 30 January 2020 for both EBIT and Revenue, although in the last two weeks we have seen a material downturn in projects and non-essential maintenance spend.

We anticipate that this trend will continue to accelerate in FY20/21, while the COVID-19 situation continues. This is being mitigated to some extent by increasing demand for cleaning and security services.

Due to the inherent uncertainties arising out of the Covid-19 situation, the Board has concluded that it cannot provide guidance with regard to the anticipated financial performance for FY20/21 until the outlook becomes clearer.

As a strategic supplier to the Government, we are in conversations to seek additional support to bridge the downside impact on the business, as well as taking advantage of the "Coronavirus Job Retention Scheme", which will allow us to 'furlough' colleagues, if necessary, rather than laying them off.

We are also implementing a number of actions to further mitigate the impact of the COVID-19: we have carried out a review of our overhead cost base which should deliver savings over the next 12 months of c.GBP25m; we have deferred any non-essential and uncommitted capital expenditure; the Board and CEO, and the Executive team have volunteered reductions in their directors' fees and salaries of 30% and 20% respectively (for at least the next three months); and the Board has determined that unless overall trading improves materially, no final dividend will be recommended for FY19/20.

In addition, we are pro-actively managing our cash flows, by working with clients to bring settlements forward, as well as securing HMRC support to defer PAYE and VAT payments (as referred to above). We have also initiated discussions with our lenders to ensure we have their support and flexibility to assist us in responding to the challenges arising out of COVID-19.

We expect to publish our full year results on 4 June 2020, when we will update the market further.

Phil Bentley, Chief Executive of Mitie, said

"I am humbled by the unstinting commitment of our front-line colleagues, who continue to provide essential services to our clients at this most challenging of times. They embody the Mitie Value of 'going the extra mile' and they deserve everyone's thanks. We welcome the support measures available to Mitie, as a strategic supplier to Government. The Board is therefore confident that the combination of its existing lending facilities, Government support measures and the current actions being undertaken, Mitie will be able to meet the challenges arising from Covid-19 in the near term and be well placed - as financing markets normalise - to complete its transformation programme and build an enduring business."

- Ends -

For further information, contact:

Claire Lovegrove

 
 Head of Media Relations   M: [phone]   E: [e-mail] 
                            6400 
 

Fiona Lawrence

 
 Group IR Director   M: [phone]   E: [e-mail] 
                      112 
 
 

Peter Dickinson

 
 Chief of Staff and   M: [phone]   E: [e-mail] 
  General Counsel      5013 
 

Notes for editors

About Mitie Group

Founded in 1987, Mitie is the UK's leading facilities management and professional services company. It offers a range of services including Technical Services (Engineering Services, Energy, Water and Real Estate Services), Business Services (Security, Cleaning and Office Services) and Specialist Services (Care & Custody, Landscapes and Waste Management).

Mitie employs 48,900 people across the country, looking after a large, diverse, blue-chip customer base, from banks and retailers, to hospitals, schools and critical government strategic assets. It takes care of its customers' people and buildings, by delivering the basics brilliantly and by deploying advanced technology. It is pioneering the Connected Workspace, using smart analytics to provide valuable insight and deliver efficiencies to create outstanding work environments for customers.

Find out more at www.mitie.com

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March 27, 2020 03:00 ET (07:00 GMT)