Mitie has had a positive start to the year with good organic revenue growth driven by new and expanded contracts. At 30 June 2014, 90% of budgeted revenues for this financial year had already been secured (30 June 2013: 89%), with phasing on a number of contracts expected to result in overall performance being weighted towards the second half of the financial year.
Continued organic growth
We remain focused on our long-term strategy of growing in our core market of facilities management and in healthcare, where we are concentrating on the homecare market.
In May we successfully extended our integrated facilities management (FM) contract with Vodafone for a further five years, which, valued at £250m over the period, is one of the largest contracts in the group. Mitie will continue to deliver services across Vodafone’s UK property portfolio of around 1,500 sites.
We have also been awarded, retained and expanded other new and existing contracts across all our divisions. In the private sector these include:
- Heathrow Airport: a new contract to deliver hard FM services to Terminals
- 3, 4 and 5 and the Heathrow Express valued at £19m over three years, which includes an extension of our existing airside and landside contract; we also secured a three year £18m contract extension to provide hold baggage screening and immigration presentation services at Heathrow Terminals
- 1, 2, 3 and 4
- Arriva: appointed preferred bidder to clean buses in a number of regions, valued at £12m over three years
- Virgin Money: a new contract delivering soft FM at its Gosforth office and Camperdown sites
- Tesco: a four year, multi-million pound lighting maintenance contract, the largest contract of its kind in the UK
In the public sector these include:
- Royal Cornwall Hospitals NHS Trust: a new, seven year contract to deliver soft FM services, for a total value in excess of £90m, with scope for a three year extension
- Epsom and St Helier University Hospitals NHS Trust: a £33m contract to deliver soft FM for an initial five years, with the possibility of extending this by up to two years
- Our painting business has been awarded a number of new contracts, including those with Unite Students, Derwent Living and Gloucester City Homes, which have a combined value of over £4m
- London Borough of Brent: a homecare contract, valued at £4m over two years.
Our strategy is to focus on markets where we see potential for growth and which meet our margin targets. Our exit from the loss-making mechanical and electrical engineering construction business remains on schedule to be completed this financial year.
We are also continuing to reduce our exposure to the design and build element of our asset management business. As previously highlighted, design and build risk remains on a small number of material energy contracts and their financial returns remain uncertain. We continue to closely monitor their operational and financial performance, and will provide a more detailed update in our interim results announcement.
There has been no material change in the group’s financial position since 31 March 2014.
On 23 July 2014, we announced the extension of our multi-currency revolving credit facility. We now benefit from a committed facility of £275m, which will mature in July 2019. The previous revolving credit facility of £250m was due to expire in September 2015 and was renegotiated as part of the normal course of business.
Our balance sheet remains strong and enables us to invest in organic growth and take advantage of value creating opportunities as they arise.
Bill Robson stepped down as an Executive Director of the Board on 31 July 2014. We thank him for his contribution to the Board and are delighted that he remains as part of the executive team, as Managing Director of our Property Management division.
On 1 October 2014, Crawford Gillies will step down from his role as Chairman of the Remuneration Committee; however he will remain as a Non-Executive Director of the Board. Jack Boyer, Non-Executive Director, will take on the role of Chairman of the Remuneration Committee from 1 October 2014.
The financial year has started well. We have a substantial order book as well as a strong pipeline of sales opportunities, giving us confidence that we will deliver good full-year organic revenue growth. We are positive about the range of outsourcing opportunities across our key markets and are confident that we will continue to build on our long track record of sustainable profitable growth.