Mitie Group plc (“Mitie”), the strategic outsourcing company, announces a pre-close trading update before entering a close period on 1 April 2014. Preliminary results for the financial year ending 31 March 2014 will be announced on 19 May 2014.
Since the announcement of the group’s Interim Management Statement (IMS) on 3 February 2014, Mitie has continued to perform strongly, particularly in Facilities Management (FM), and expects to deliver underlying full-year results that are in line with market expectations. We continue to successfully re-position the group to focus on higher growth and higher margin sectors.We are focused on driving our core UK FM business to its full organic growth potential and being the number one provider in our chosen markets. At the same time, we will invest and grow in adjacent markets – healthcare is a particular focus and we aim to take the leading position in the homecare market. The strength of our business in both of these areas will enable us to further build on our track record of sustainable, profitable growth.
In February, we were awarded a new contract with the Home Office to manage and maintain two immigration removal centres, valued at £180m over eight years, which has a potential further three year extension that would take the total value to £250m. We have also been successful in winning the re-tender for the Network Rail contract, to deliver integrated facilities management, valued at £75m over five years – this contract was our biggest re-bid for 2014.
As previously disclosed, we are in the process of restructuring our Asset Management business and exiting our cyclical, low margin mechanical and electrical engineering businesses. We continue to make progress in our exit from the mechanical and electrical engineering contracting businesses and the losses for the second half of the year will be in line with our indications in the January IMS, some £3m-£5m higher than those reported in the first half of the year. As indicated in the January IMS, we are also continuing to reduce our exposure to the loss-making construction element of our Asset Management business. We have existing commitments on a small number of legacy projects where we are carrying design and build risk. In the current year we will recognise a number of non-recurring, exceptional losses in relation to some of these contracts. These losses include restructuring costs as we significantly reduce the number of people working in this area, as well as the impact from reassessing the carrying value of any related assets in our accounts. We currently estimate these one-off losses in the second half of this financial year will be in the region of £10m-£15m. Going forward, design and build risk remains on a small number of material energy contracts and we continue to closely monitor their operational and financial performance.
Mitie has completed a consultation with members of its main defined benefit pension scheme regarding a proposed change to their future pension entitlement. Under the change, which has now been agreed, the pension scheme, which closed to new entrants in 2006, will remain open to future accrual but with a reduced level of future benefit increases. The deficit on the scheme at 30 September 2013 was £27.1m under IAS 19 (revised). The agreed change will have the impact of reducing the scheme’s future liabilities and therefore the deficit on the scheme, as well as mitigating a potential rise in future contributions. The reduction in scheme liabilities will result in a one-off, exceptional credit to the income statement in the current year under IAS 19 (revised), which we estimate will be in the range of £8 – 10m.
The re-positioning of Mitie has strengthened our business, enabling us to concentrate on the FM and healthcare markets that offer strong growth potential, reduce our exposure to cyclical markets and generate long-term secured revenues, underpinned by strong margins.