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Phase one of the company’s transformation is almost complete with annual savings of c£45m being delivered. Mitie has sold non-core assets to focus on larger businesses where it can deploy technology-led customer services, a key differentiator for the company.
Over the last two years Mitie has sold its Pest Control and Social Housing businesses while also acquiring the Vision Security Group (VSG). This strengthens the company’s position as one of the UK’s largest providers of security services to businesses.
Central management costs have been removed at the group level and within divisions, leading to centralised IT, HR and Finance functions. The company expects to put the final elements of the cost-saving plan into effect, projecting c£50m of yearly savings by March 2020.
The final stage of the transformation is aimed at changing the processes at the largest division, Engineering Services. The group will roll out a dynamic scheduling and deployment system and implement a new case-management and billing application.
Project Forte is a two-year programme with estimated gross annual cost benefits of c£30m by March 2021, and a one-off cost of around £30m.
Drivers of Performance
Engineering Services reported solid revenue growth at major accounts, resulting in a 9% uplift to profits to £58.7m, while also improving productivity, boosting the operating margin by 0.4%.
The Security Services division delivered a year of strong growth, with profits up 11.6%. VSG has made significant progress since it was acquired in October 2018. The group sees technology solutions playing a greater role in the overall future profit growth.
Mitie expects organic revenue growth in the 3-4% range over the medium term, with operating profit growth in the mid-single digits next year.
Project Forte is expected to result in an improvement in the profitability of the group, pushing it towards its medium-term target of 4.5%-5.5% compared with the 4% reported today.
The company is proposing a 2.67p final dividend, giving a 4p full year pay-out, the same as last year.