Mitie Group H2 24/25 Earnings Report

Mitie Group EPS Results

• Actual EPS: GBX 12.70
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Mitie Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Mitie Group Announcement Details

• Quarter: H2 24/25
• Date: 6/5/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, June 5, 2025
• Conference Call Time: 4:30AM ET

Mitie Group (LON:MTO), together with its subsidiaries, provides facilities management and professional services in the United Kingdom and internationally. The company operates in four segments: Business Services, Technical Services, Central Government & Defense (CG&D), Communities. The company provides decarbonization, electrical grid connections, emission intelligence, energy and carbon, EV fleets, and heat solutions, as well as solar energy; cleaning and hygiene, engineering maintenance, integrated facilities management, landscape, and waste management services; project and workplace services; and Fire & security systems, front of house, intelligence, vetting, and security guarding service. It serves to financial, professional, life science, manufacturing, media, telecom and tech, retail, shopping centres, transport, utilities, central and local government, critical environment, defence, education, healthcare, and justice and immigration sectors. The company was incorporated in 1936 and is headquartered in London, the United Kingdom.

Mitie Group H2 24/25 Earnings Call Transcript

Key Takeaways

• FY25 revenue grew 12.9% to £5.1 billion, operating profit rose 11.4% and EPS increased 3.3%, with margins stable at 4.6% and a final dividend up 7.5%.
• In the foundation year of its three-year plan, the company delivered double-digit revenue and profit growth, record contract wins and renewals, and built a record order book and pipeline.
• Mighty agreed to acquire Marlowe PLC for £366 million via shares and debt, expecting £30 million of cost synergies, high-single-digit EPS accretion by FY28 and a return on invested capital well above its cost of capital.
• A 6.7% increase in the national living wage and a 30% rise in employer’s National Insurance will add roughly £50 million of costs in FY26, only partially recoverable through pricing and efficiency initiatives.
• Strong cash flow generation continued with £143 million of free cash inflow in FY25 and guidance to deliver over £120 million in FY26, while maintaining leverage at the bottom of its target range.

Presentation

[Phil Bentley, CEO & Director at Mitie Group]

good morning, everyone, and welcome to MITRE's FY twenty twenty five results presentation for the year ended 03/31/2025, which we are broadcasting as usual live from MITEI's headquarters here in the chart.

[Phil Bentley, CEO & Director at Mitie Group]

We've a lot of ground to cover with our financial results and our 2.7 announcement for Marlowe PLC this morning, so let me get cracking. As you know, FY 2025 was the foundation year of our new facilities management three year plan. And as we say here on the slide, we've made a good start. And in case you're wondering what the weave effect is on the side of the slide, it's our new corporate visual identity, which represents the threads that connect people to the places they depend on, and how mighty with our national footprint and 76,000 employee colleagues is woven into the fabric of society as it were through our strapline of the future of high performing places. But enough of our sales and marketing pitch.

[Phil Bentley, CEO & Director at Mitie Group]

I know you're all far more interested in our numbers. So looking at the highlights of our first year, we delivered double digit revenue growth, significantly outpacing the wider market. We delivered double digit operating profit growth, record contract wins and renewals, and have built an order book and pipeline both at record levels. We bought three infill businesses in power and grid connections, fire and security, and a security business in Spain. Cash flow generation was strong, which funded record shareholder capital returns and we remain on track to deliver our ambitious three year plan pivoting Mighty from being The U.

[Phil Bentley, CEO & Director at Mitie Group]

K. Leader in facilities management to The U. K. Leader in facilities transformation. And we've taken a further step today in that journey in our 2.7 announcement to become the leader a leader in facilities compliance as I'll get into shortly.

[Phil Bentley, CEO & Director at Mitie Group]

Now this slide simply shows that over a four year period and over a wide number of measures, we've been building momentum at Mighty. We've been building momentum in financial momentum, in growth momentum and shareholder returns momentum. And the Marlowe deal, which has been unanimously agreed by both boards, will continue this momentum. Marlowe shareholders will receive $2.90 pence in cash and 1.1 new Mighty shares for each Marlowe share equating to $4.66 pence per share, 26.5% premium to the undisturbed closing share price on Tuesday, the June 3. Marlowe shareholders can opt to vary their mix of cash and shares, but only within the parameters of the overall offer.

[Phil Bentley, CEO & Director at Mitie Group]

The total consideration of $366,000,000 will be funded through the issue of 86,600,000.0 New Mighty shares, equating to 6.4% of our issued share capital and through £228,000,000 of debt backed by a new bridge facility from our core relationship banks. In return, we acquire a leader in facilities compliance and in a higher margin category. By FY 2028, we expect to generate high single digit EPS accretion through £30,000,000 of cost synergies and a return on invested capital at 50% higher than our existing cost of capital with leverage remaining within our prescribed targets. As I show, importantly, these numbers are based on quantified financial benefit statement in the 2.7 and do not include any revenue or growth synergies. Under a court approved scheme of arrangement led by the Marlowe Board, we expect the transaction to close over this summer.

[Phil Bentley, CEO & Director at Mitie Group]

So let me hand over to Simon at this point to take us through our FY 2025 results and then I'll get back to Mighty's strategy and show how Marlow fits into this thinking.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Thanks, Phil. Good morning, everybody. Let's start with the headline numbers. As Phil said, we've reported a good set of results for FY 'twenty five. Revenue is up 12.9% to £5,100,000,000 driven by strong organic growth of 8.5%.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Operating profit's grown by 11.4% to £234,100,000 and we've maintained margins broadly flat at 4.6% despite significant investments in the first year of our three year plan. EPS is up 3.3% to 12.7p a share with profit growth and share buybacks offset by a higher effective tax rate and interest costs. As Phil said, the Board's proposed a final dividend of 3p a share, taking the total dividend to 4.3p, up 7.5% on FY 'twenty four. And finally, we've had a free cash inflow of £143,000,000 with average daily net debt of £264,000,000 Moving on then to cover the performance in more detail and turning firstly to revenue. All divisions contributed positively to the 12.9% growth in the year.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Business services grew by 13.5% to GBP 2,200,000,000.0 through new wins, search response, security work, acquisitions and pricing. These upsides more than offset the headwind from completion of the Afghan relocations and DEFRA contracts in FY 'twenty four. Technical services revenue grew by 8.8% to £2,000,000,000 underpinned by new wins, scope increases and acquisitions. And finally, Communities grew by 21.3% to GBP $870,000,000 as a result of increased immigration work, new wins and project growth. My next slide shows the key drivers of the revenue growth for FY 'twenty five with the good momentum from FY 'twenty '4 continuing both organically and inorganically.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

The first block of the chart shows GBP $251,000,000 of growth in core FM from wins and losses and incremental growth on existing contracts. Wins exceeded losses in this block despite a headwind from the contracts lost in FY 'twenty four. Organic projects growth of £11,000,000 was driven by good growth in Business Services and Communities, offset by a slowdown in defense projects driven by the change in government as well as the closure of the roofing business and contract exits in telecoms, two decisions that will enhance future profitability. Pricing accounts for £121,000,000 of additional revenue. And when we combine these three blocks of core FM projects and pricing, total organic growth for the year is 8.5%.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Finally, acquisitions contributed 4.4% of growth in FY 'twenty five. This block includes the acquisitions we've made in the last eighteen months, including Argus Fire, GBE and JCA as well as the Landmark Step acquisition, which added GBP 53,000,000 of revenue in FY 'twenty five. Moving on to operating profit, which has increased by 11.4% to GBP 2 and 34,100,000.0, with all divisions making a good contribution. Business Services profit grew by 8.8% to GBP 163,000,000, with the surge response security work, new wins and margin enhancement initiatives more than offsetting the headwind from completion of the two public sector contracts last year. In Technical Services, profit increased by 5.5% to GBP 79,000,000, with profit from wins, margin enhancement initiatives and acquisitions outweighing one large private sector contract loss.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Technical services includes an 11,000,000 loss in the telecoms business, which is now back to a breakeven run rate. Communities profit grew significantly in FY 'twenty five, up 31.6% to GBP 47,500,000.0, with the improvement driven by new wins, increased immigration work and project growth. And finally, corporate costs increased in line with the growth in the business, with ongoing functional savings and the offshoring of back office activity offsetting investments in sales, technology and marketing. Next, we pick up the key financial themes for the year on a bridge. This bridge highlights the resilience of our business model with our strategic profit growth of GBP 50,100,000.0 more than outweighing GBP 26,200,000.0 of investments and inflation.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

As we set out the capital markets event in 2023, our growth strategy is focused on Core FM, projects and acquisitions underpinned by margin enhancement initiatives. Core FM and projects profit growth was £12,200,000 in the year, with the margins on the surge response security work and new wins more than outweighing losses and the completion of the higher margin public sector contracts last year. This block includes the benefit of a one off legal settlement as well as the loss in the telecoms infrastructure business. Next, we added GBP 12,700,000.0 of incremental profit from acquisitions, including GBP 6,400,000.0 of profit from the Landmark Step acquisition. As we show in the final strategic block and we show in the final strategic block that we've made good progress with margin enhancement initiatives, delivering GBP 25,200,000.0 of incremental profit.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

This profit has come from further offshoring, streamlining of help desks and admin functions, simplification and standardization of account structures and continued consolidation of third party spend. Moving across to the investments and inflation. FY 'twenty five is the first year of our three year plan, and we've been investing in sales to drive growth, in IT to underpin our technology leadership and in our projects' capabilities. These investments, combined with the impact of the mill site mobilization, gave us a GBP 17,300,000.0 headwind in FY 'twenty five. The final headwind that we show on the bridge is from inflation and National Insurance, which I'll cover now.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Once again, we were successful in managing inflationary pressures in FY 'twenty five. Our contractual protections and strong customer relationships enabled us to pass on 95% of the cost increase to our customers, resulting in only a GBP 6,800,000.0 reduction in profit. Looking ahead to FY 'twenty six, the national living wage will increase by 6.7%. We're confident that our contractual protections and strong relationships will enable us to price the vast majority of this increase through to customers as we've done in previous years. The increase to Employers National Insurance, however, is a new challenge and has had a small impact on FY 'twenty five as well as the expected impact on FY 'twenty six.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Dealing first with FY 'twenty five, we've incurred £2,000,000 of incremental National Insurance costs in the year as a result of the changes made in the autumn budget. Payrolls are taxed at the point of payment, meaning we've been taxed on the March payrolls that were paid in arrears in April. Looking ahead to FY 'twenty six, we expect our employers' national insurance bill to go up by around GBP 50,000,000 to GBP $225,000,000, which is a 30% increase. We have a slightly lower level of contractual protection for NI costs than we have for national living wage increases, but discussions with customers have progressed well, and our current estimate is that we'll be able to recover at least GBP 35,000,000 through pricing. We're confident of mitigating the residual GBP 15,000,000 through margin enhancement initiatives and other management actions.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Turning now to cash. We generated a free cash inflow of £142,800,000 in FY 'twenty five, with the key driver being the operating profit of GBP 234,100,000.0. Other items was a GBP 34,300,000.0 outflow of cash and was largely made up of acquisition related costs as well as the costs of delivering our margin enhancement initiatives. Next, we have a cash outflow from working capital of £37,000,000 driven by the growth in the projects business, which consumes more working capital than FM and the longer payment terms now being demanded by some of our private sector retail customers. Offsetting these outflows, we've made some incremental process improvements and renegotiated some customer payment terms.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

As the balance of project work in our portfolio increases, retail growth continues and the new Procurement Act takes effect, we expect to see an ongoing working capital outflow. CapEx, leases, interest and tax was GBP 105,800,000.0 cash outflow, GBP 33,300,000.0 higher than in FY 'twenty four. The increase was driven by higher tax payments, growth in lease payments and a year on year reduction in dividends from joint ventures now that Landmark is a subsidiary. Our capital deployment actions account for GBP 2 and 36,500,000.0 of cash outflow, which Phil will come back to shortly, and lease liabilities increased by GBP 24,500,000.0 as we continued to transition to EVs and grew the fleet through acquisitions. Finally, at the bottom of the page, we see the overall increase in net debt of GBP 118,200,000.0.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

This increase results in a closing net debt of GBP 199,000,000 and an average daily net debt of GBP $264,000,000, with the average leverage ratio of 0.8x remaining at the bottom end of our targeted range. Debtor days and creditor days were consistent with FY 'twenty four. ROIC was 24.5% and net assets decreased to £428,000,000 after distributing £179,000,000 of dividends, share buybacks and market purchases for employee share schemes. So in summary, we've made a good start to our three year plan. Revenue growth has been higher than we expected and margins have been stable despite the investments we've made and the headwinds from telecoms and inflation.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

We made another step forward in EPS despite the significant increase in the effective tax rate and the higher interest costs. Free cash flow has exceeded our expectations, and ROIC has remained well above 20%. As we look ahead at the performance of our existing business, excluding the potential new acquisition, we expect our good growth momentum to continue into FY 'twenty six. Margins will benefit from margin enhancement initiatives and projects growth, but will face headwinds from national insurance and cost inflation as well as the higher margin contracts lost in FY 'twenty five and the competitive pricing environment. We're continuing to invest in the business, in technology and AI to maintain our competitive advantage in our project center of excellence as projects grows towards £1,500,000,000 of revenue and into our ESG capabilities.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Completing the FY 'twenty six outlook, our effective tax rate will remain at around 25%, but EPS will be affected by higher finance costs as our leverage increases. We'll face working capital headwinds, but we still expect to generate free cash flow of more than GBP 120,000,000, and ROIC will remain well above our 20% target. And on that note, I'll hand back to Phil.

[Phil Bentley, CEO & Director at Mitie Group]

Okay. Very good. Thank you, Simon. I think as Simon said, I think we've made a strong start in our foundation year of the three year plan, but one year of financials doesn't really make a three year strategy. So I want to take you back to our Capital Markets event here in the Shard that we held in October 23 when our new strategy was launched, as a reminder, and where we introduced you to the Mightyverse.

[Phil Bentley, CEO & Director at Mitie Group]

The Mightyverse was a mighty digital platform underpinned by technology and AI with our leading capabilities in engineering, security, hygiene, and projects. But the built environment doesn't stand still. New new legislation and new regulations are raising the bar in compliance. New fire safety regulations in the wake of Grenfell, new security legislation in the aftermath of the Manchester Arena bombing, new environmental requirements, greater energy efficiency and energy disclosures, regulations relating to water and waste and to gas emissions, all under the umbrella of improving sustainability. These compliance regulations affect every sector in which we operate at Mighty.

[Phil Bentley, CEO & Director at Mitie Group]

Retailers, for example, one of our b sectors must comply with fluorinated gas regulate regulations for their refrigeration. Food manufacturers are required to manage their wastewater effluents and reduce overall water consumption. Schools must ensure their buildings are compliant with the latest fire regs and be free from hazardous asbestos fibers. Hospitals must maintain sanitization and air and water quality. As for compliance against across central government buildings, well, this FTA headline at the bottom of a recently recently published national audit report somewhat says it all.

[Phil Bentley, CEO & Director at Mitie Group]

So from the Mightyverse and our three year plan, we set out to become not only the leader in facilities management, but also the leader in facilities transformation and add over 1,200,000,000 of growth from our FY 2024 position. Might is a strategy centered on growth, growth over three key pillars. At the foundation of our strategy, pillar one covers key account growth and scope increases through condition based maintenance, risk based security, demand led hygiene. This is a heartland of facilities management in Mighty, underpinned by our unique technology. But our growth strategy doesn't stop there.

[Phil Bentley, CEO & Director at Mitie Group]

Through our projects capabilities and our infill acquisitions, we set out to transform the built environment, better working places, higher security, greater energy efficiency. This is the heartland of facilities transformation in Mighty. And the third pillar of growth was M and A, responding again to our evolving customers' needs in sustainability, fire and security and environmental compliance. And this is where Marlowe fits in creating a leader in facilities compliance. So turning first to Pillar one, let me recap on the progress we've made in FY 2025 of key account growth and scope increases in facilities management.

[Phil Bentley, CEO & Director at Mitie Group]

And as the chart show, the growth foundations of Pillar one in Mighty are very strong. In FY 2025, we added £370,000,000 of incremental revenues, almost two thirds of our £600,000,000 3 year target for pillar one key account growth. New wins were up 14% year on year to £5,000,000,000 total contract value TCV with significant wins in retail and in the public sector. This included the award of a £1,000,000,000 TCV security contract with the Department for Work and Pensions, our biggest ever contract win. We had a strong year for renewals, growing 39% year on year, adding 2,500,000,000.0 TCV, and that was despite not retaining two large public sector contracts.

[Phil Bentley, CEO & Director at Mitie Group]

And our order book increased by 35% to 15,400,000,000.0 with our bidding pipeline of opportunities up 27% to a record £23,700,000,000, of which over £17,000,000,000 will be contracted in the next eighteen months. So as I said, our Pillar one performance gives me huge confidence that we will exceed our £600,000,000 core facilities management growth target over our three year plan. Projects upsell through Facilities Transformation is our second growth pillar. In year revenue for projects in FY 2025 was £1,200,000,000 up 14%, and we added £139,000,000 of organic and infill acquisition led projects growth against our £200,000,000 3 year target for Pillar 2. This included the design and installation of 140 kilowatt roof mounted solar PV system at the Eden Project, being the principal design contractor at a state of the art data center, deploying the latest technology in power efficiency, liquid cooling, and water recycling systems.

[Phil Bentley, CEO & Director at Mitie Group]

We installed the majority of the fire suppression systems at Battersea Power Station. At DWP, we're starting to upgrade critical security infrastructure across their national estate. These are all examples of complex engineering projects often delivered at iconic buildings and across critical national infrastructure, the heartland of Knighted's client base. And what's been encouraging for me in FY 2025, Facilities Transformation Project upsell, is that the average job size of each project was up 65% now to 250,000 average transaction value. And that our order book in projects grew by 40% year on year to £2,800,000,000 and our projects bidding pipeline grew 45% to 4,800,000,000 As we laid out in our Facilities Transformation three year plan, our ambition was to grow mighty projects into a £1,500,000,000 plus business.

[Phil Bentley, CEO & Director at Mitie Group]

I'm confident that we're well on our way to beating this. And of course, the third strategic growth pillar is value creating M and A, and hence, our announcement about the acquisition of Marlowe this morning. So let me first put this transaction into context. Across The UK, there are over 1,500,000 commercial and public buildings with compliance obligations. And therefore, there is there are significant growth opportunities in the £7,600,000,000 testing, inspection and certification, the tick market, collectively what we call facilities compliance that requires an expertise outsourced to specialists such as Marlowe.

[Phil Bentley, CEO & Director at Mitie Group]

For the legislative and regulatory reasons I've already outlined, alongside growing insurance demands, growth rates in facilities compliance are strong. These mandatory requirements requiring regular certification, driving high recurring revenues and higher margins for such specialist providers, which brings me to Marlowe, notwithstanding what was released yesterday by the the leak the leak area, but through no one knows why they did that. But £300,000,000 of revenue from TIC and compliance services with blue chip company customers such as Boots and Tesco in retail. King's College and Cambridge University won't have hold that against them in education. Walkers Crisps in food manufacturing and many more, all sectors where is already present.

[Phil Bentley, CEO & Director at Mitie Group]

Now Mighty already has a 250,000,000 compliance business, primarily in fire and security, but with limited water, air, and asbestos capabilities. Our revenue today is primarily derived from one off project work, part of our facilities transformation offer offering through the infill acquisitions of RHI, GBE, and Argus Fire. But hitherto, we have not sought to provide recurring compliance services, instead outsourcing the specialist work to specialist companies such as Marlowe when our clients request them. In fact, today, we only deliver tick services to around 20% of our accounts. Lloyd's Bank and Exchange has been two of the largest, and most of that is outsourced to the supply chain.

[Phil Bentley, CEO & Director at Mitie Group]

But that is set to change with the acquisition of Marlowe. Putting our two businesses together creates a compelling opportunity to cross sell these regulatory driven services nationally across our combined customer base and capturing additional margin from self delivery. The acquisition positions Mighty as a leader in facilities compliance with an ambition to grow to £1,000,000,000 per annum in the medium term, offering a differentiated total fire solution with a suite of active fire, that's detection and alarms, as well as passive fire, that's suppression and fire stopping solutions in a fast growing £3,900,000,000 market as well as creating a leader in the £1,100,000,000 security systems market, servicing clients in mighty stronghold sectors such as retail, health care, and critical national infrastructure. And as you saw from the earlier list of new legislation regulations, environmental compliance is a growing opportunity with a market size now approaching £3,000,000,000. Across this broader sustainability category, today at Mighty, we do have a presence with a really strong energy business buying, metering, saving, and reporting energy for our clients.

[Phil Bentley, CEO & Director at Mitie Group]

We have a smaller but growing waste and recycling business and an even smaller water business, but we are already today one of only 20 licensed water retailers for our clients. And we operate complex effluent treatment services for our pharmaceutical and our food manufacturing clients, something that not everyone is aware of. But the Marlowe acquisition brings much greater scale and much wider specialist services. So together, we will create a leading total managed water offering from water supply treatment, water consumption reduction through to effluent management, what we catchily refer to as from rain to drain. And Marlowe doesn't just test for Legionella and other hygiene factors, but provides real time monitoring and predictive maintenance playing to MITRE's existing remote monitoring strengths.

[Phil Bentley, CEO & Director at Mitie Group]

Now in any deal like this, cost synergies are, of course, vitally important, and we have a good track record hit good track record at Mighty in this space starting with VSG and then IntoServe. As you're probably aware, in 2.7 announcements, cost synergies need to be independently verified by a professional accounting firm in a QFBS, Quantified Financial Benefit statement. The QFBS in our 2.7 announcement indicates 30,000,000 of third party validated cost synergies. Over half of these synergies are in support functions, removing duplicate corporate, administrative, and other central management support. 20% of the savings come from procurement, leveraging our leading digital supply chain functionality in Mighty and delivering higher supplier volume based discounts.

[Phil Bentley, CEO & Director at Mitie Group]

And a further 15% of savings will come from route density efficiencies and increased self delivery. Finally, property rationalization through quite a number of adjacent locations to mighty locations will generate 10% of savings. We expect to exit FY twenty twenty seven eighteen months post completion at at least 100% of the cost synergy run rate identified in the QFSB with an estimated cost to achieve of £27,000,000 But again, remember, we can't include any revenue synergies in the QFBS even though it's top line growth that drove the logic of this transaction. Now before I get on to the impact of the Marlowe acquisition on our overall Mighty Group targets, let me just address any concerns about the size of this deal, which at £360,000,000 is the largest one we've negotiated at Mighty, but not the largest one that I've been involved in by a long way. At the capital markets event in October 23, we said we'd look to spend around £75,000,000 per annum on infill acquisitions.

[Phil Bentley, CEO & Director at Mitie Group]

So including FY '24, that took us to a hypothetical overall spend of £300,000,000 Since the capital markets event, we've only bought five businesses for a total of £74,000,000 bringing in £120,000,000 of revenue in FY '25, but at an average transaction size of £15,000,000. All these acquisitions were private companies with owner founders and a degree of earn out. The Marlowe transact transaction is totally different to these infill deals. Firstly, it's a public to public deal. Secondly, it's a far more material deal, bringing an immediate top five market leadership position from the get go, competing with market leaders such as Chubb and PTSG, U.

[Phil Bentley, CEO & Director at Mitie Group]

S.-listed, USP owned, respectively. Thirdly, Marlowe has a much wider set of specialist capabilities built up through over 50 acquisitions in specialist fire and security and specialist environmental services. And whereas all our previous infill acquisitions brought facilities transformation capabilities for projects, with Marlowe, over 75% of revenue is built on recurring, testing, inspection and maintenance under long term contracts. Thus, Marlowe brings intrinsically higher margins, which combined with MITRE's Fire and Security and Environmental Project Services creates a leading facilities compliance provider and opening up MITRE's existing clients to this capability. Just on Monday this week, for example, we mobilized a new high profile FTSE one hundred, I won't say it was, IFM account.

[Phil Bentley, CEO & Director at Mitie Group]

As part of our standard asset condition survey, we found that over 50% of our new clients' estate needed investment to bring current building regs in up to compliance. That's the opportunity in facilities compliance. And this is why we're excited about acquiring this unique asset and welcoming the leading edge talent that it brings. Together, the transaction accelerates our progress towards our FY twenty twenty seven three year plan targets, adding £300,000,000 of revenue immediately, increasing margin to over 5%, contributing free cash flow. And whilst Marlowe's ROIC after synergies is not as high as the rest of Mighty, the Enlarge group will still be above our 20% target.

[Phil Bentley, CEO & Director at Mitie Group]

With the additional EBITDA of Marlow and capturing the validated cost synergies from this deal, we expect our leverage to be below our 1.5 times upper range at the end of this year. And we will quickly delever afterwards, allowing us to continue with our progressive dividend policy and returning to repaying surplus cash by resumption of our suspended buyback program in FY twenty seven. I know I sound like a bit of a broken record, but remember, all these financial estimates do not include any revenue synergies. So in summary, in the foundation year of our three year plan, we've delivered good strategic progress and strong financial performance with good revenue and profit growth, record wins and renewals, expanded facilities transformation project capabilities through three infill acquisitions. Our strong cash generation and strong balance sheet has provided the capacity to fund the acquisition of Marlowe, and this is the next step on our journey From leading in facilities management to leading in facilities transformation, we now look to be a leader in facilities compliance.

[Phil Bentley, CEO & Director at Mitie Group]

In short, with two more years to go, we're confident in reaching our ambitious three year plan targets. Thank you for your patience. I'm sorry this is a longer presentation than usual, but let's now turn it over to Q and A. Thank you. We must have some mics.

[Phil Bentley, CEO & Director at Mitie Group]

We must have some people. We must have some questions. James?

[James Beard, Director - Support Services Research at Numis]

Thanks. Morning. It's James Byrd from Deutsche Numis. I have three questions on the deal please. Firstly, on you mentioned that Molla has sort of a good solid contract base.

[James Beard, Director - Support Services Research at Numis]

Can you give us an idea of sort of typical contract duration within their base? Secondly, obviously they've got a lot of predominantly smaller customers. What is the risk that we see some revenue dis synergies on that side of the post combination? And then thirdly, can you give us a little bit more sort of color around their IT systems? I'm guessing that because they've obviously been built quite heavily through acquisitions, there's probably quite a disparate sort of IT landscape on that side of things.

[James Beard, Director - Support Services Research at Numis]

So just any color on that and how you sort of plan to manage that through the integration process, please?

[Phil Bentley, CEO & Director at Mitie Group]

Yeah. Good, good questions there. On their on their contract base, a fair proportion is five five year contracts, but quite a number are just rolling renewals. And you'd be surprised how long they've had rolling renewals without a five year contract. They might have had a rolling renewal for over ten years.

[Phil Bentley, CEO & Director at Mitie Group]

So I don't see any major shift in that way of contracting. I think we're more likely to get tied into an IFM contract when we get going, a level that synchronizes with an IFM contract, Mark's heading at the back because we've got quite a big one we're bidding on at the moment, and we'll be telling them about our new capability there. Because it's not usually included in an IFM contract. Very few are included in an IFM contract. They're often we're asked to provide it, but we don't provide it ourselves.

[Phil Bentley, CEO & Director at Mitie Group]

We then go out and get it. And over, I think, pounds 75,000,000 spend with third party supply chain in Mighty for tick services. Do want to add to that before you

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

go Yes. Actual contracts themselves, James, will typically specify an average of something like three years. But to Phil's point, there's a high proportion of the contracts across the group, where they've had a customer relationship for more than ten years.

[Phil Bentley, CEO & Director at Mitie Group]

And that evergreen rollover, Matt, is it actually point about the smaller customers as well. And I sort of euphemistically refer to them as fire extinguishers in scout huts. But if you can get to 15 fire extinguishers in 15 scout huts in a day, can make money. And that's actually, I think, one of the things we've got to rethink because it's about density. It's all about route density and efficiency.

[Phil Bentley, CEO & Director at Mitie Group]

And the one thing I think where Mighty can know there will be many things we learn at Mighty from Marlowe, but one of them is that they think of their technicians as fee earners. They call them fee earners. We think of our technicians as maintenance providers. And the difference in the mindset there is that a fee earner walks into a building and looks for other opportunities. A maintenance engineer looks at his PDA, completes the job and walks out.

[Phil Bentley, CEO & Director at Mitie Group]

And that's, I think, one of the big cultural opportunities that we have. And so I'm less worried about smaller customers, but it is something I know you've, through due diligence, but Simon spent quite a lot of time on. As we did on IT, I haven't got c we've got CJ here maybe jump in, but so the the it's a really good question. The answer is there's quite a bit of work to do. Let's call it that.

[Phil Bentley, CEO & Director at Mitie Group]

And that's why we've included in our cost to achieve some investment in IT. I'll ask CJ to speak about it. But the one thing they have a system called CASH, which we have used. It's not a CASH system. It's a system for deployment of fire and security technicians.

[Phil Bentley, CEO & Director at Mitie Group]

So it's a system we have been using, but we've moved we're moving everything to what we call MaaS 9.19 MaaS nine point zero, which is an IBM Maximo system. And the advantage of that is that we'll have all of the workflow in one system and all of that MaaS nine is AI enabled. And we've already started to roll out MaaS against with cleaning, security and engineering. No other company's done this in MaaS nine. And so the ultimate target will be quickly to move on to MaaS nine. CJ, do want to comment on that?

[Cijo Joseph, Chief Technology and Digital Officer at Mitie Group]

Thanks, Phil. Just to build upon what Phil said, we did an initial mapping of the Marlowe systems and MIT IT systems. So we have a good view, the approach what we are going to take. And it comes down to three approach. One, we move their infrastructure into MIT infrastructure that gives us the necessary cyber protection, which we which are which we are proud about.

[Cijo Joseph, Chief Technology and Digital Officer at Mitie Group]

And the second one, which we were alluding to, where we have our IBM maximum, which is our computer aided facility management system, which is on version nine point zero, we are enabling it. And we are already having a journey where we are doing it for our foreign security business, and we follow the same pattern. And don't forget, throughout the acquisitions in the last four years, we collapsed roughly around 26 various platforms into our maximum solution. So we we have a good pattern and a good methodology of we do it. And the third one is their finance systems.

[Cijo Joseph, Chief Technology and Digital Officer at Mitie Group]

Again, we collapse almost around 20 to 30 various finance systems into our SAP system. Again, we have got a very well proven track record how we approach. So this is the three approach we are taking on this particular acquisition.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And and and, James, I'll just build on those two points with one final thing on the IT systems, which is to say there's a risk and an opportunity here. And CJ has just outlined how we've dealt with all of this before and, therefore, why we should be able to deal well with the risk side of the equation in terms of integrating their systems into ours. But there's an opportunity side, here for us as well in terms of their disparate systems and folding that into our more efficient, systems and processes and therefore driving those £30,000,000 worth of synergies that we've spoken about before.

[Phil Bentley, CEO & Director at Mitie Group]

And it's fair to say when the QFBS was done, a lot of that wasn't included, was it? Because it's harder to demonstrate the certainty around it to convince an audit firm.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And so you'll see some of those are some of the sort of lower end of the synergies in terms of the numbers that we're delivering from those areas. That's right.

[Phil Bentley, CEO & Director at Mitie Group]

Tom? Is it Tom? Yes. Tom?

[Tom Callan, Equity Analyst at Investec]

Tom Callan, Investor. Just building on one of James' questions actually. So thinking about the go to market strategy once you've completed on the deal, what is the plan there in terms of how long will it take you to transition away from the Marlowe brand? Will it be a day one thing or will it be more gradual?

[Tom Callan, Equity Analyst at Investec]

And do you see any, again, sort of revenue desynergies from losing potentially that Marlowe brand in that's got quite strong customer resonance?

[Phil Bentley, CEO & Director at Mitie Group]

I'll I'll ask Jason to talk about the on the go to market and just think about the operations more widely. We don't generally rebrand. We're not a rebrander despite our nice fancy corporate branding. You know, we've still got JCA brand, powerful in data centers, GBE, powerful in in high high-tech security, RH Irvin, physical security. We haven't rebranded anything.

[Phil Bentley, CEO & Director at Mitie Group]

And so we're not gonna we've bought model, and I think some companies make mistakes about one size fits all. That's not where we operate. We just simply say it's a a mighty company. So we have Cleaningways. They pick up single use plastics from hospitals and steam clean it and and bale it and sell it for for to plastics companies on recycling.

[Phil Bentley, CEO & Director at Mitie Group]

It's all cleaning waste. If we call that mighty, they'd they'd mix it up with the, you know, the cleaner down the road. So so we we are these are specialist technicians, and we've no no no desire or plans to put Mighty anywhere near it, but they will be a Mighty company. They'll be known to be a Mighty company. And I think on what they have done on water so the reason why I pushed the point about water, and it's not well known that we do look after treatment plants for some of our clients.

[Phil Bentley, CEO & Director at Mitie Group]

They have a lot more. And they've built it up through a number of acquisitions and have created a sort of mother brand, WSH or WSAHS or something, one or the other, bits of letters anyway, which is quite well respected in that space. And again, in Fire and Security, they've built up, but there are, you're right, Tom, quite a number of small acquisitions. That also goes to the go to market because some of them are regional and it's back to my ScoutHut's analogy. Sometimes they need to be regional.

[Phil Bentley, CEO & Director at Mitie Group]

They need to be is operating in an area. What we can do and again picking up CJ's point is in Maximo, MAZ9, we'll have you know, our scheduled optimizer, but with all the AI over it. You know, when Simon's asked them, you know, time time on tools, time to, you know, driving distances, they haven't got that data. It's not because it's not holding it back. It's just they haven't got the systems to provide that readily.

[Phil Bentley, CEO & Director at Mitie Group]

Jason, do you want to so the way the within the organization we would fit the company, we already have an existing Fire and Security business, but the Water business will again report directly to Jason who runs all our business services. So, security and cleaning, our waste business, our Fire and Security business, some of those acquisitions. So, it will fit under Jason. So why don't you just give us a view on that, Jason?

[Jason Towse, Managing Director of Business Services at Mitie Group]

Yes. Thanks, Phil. I think you've already seen the fact this is the coming together of two great companies and we've got a piece of work to do around how we consolidate some of those services. What it does do for us, sorry, cements our capability in relation to Total Fire, which is a new proposition in the market. You won't see that today.

[Jason Towse, Managing Director of Business Services at Mitie Group]

You'll see the three key elements around passive, mechanical and active, whereas this is a Total Fire value proposition. You see the total water proposition that Phil alluded to from rain to drain or from retail through to water disposal. That's a new proposition that doesn't feature in the market today. And then you've the overall consolidation of test and inspection and compliance. And whilst we do offer some of those services today, it's relatively fragmented across our customer base.

[Jason Towse, Managing Director of Business Services at Mitie Group]

So from a distribution point of view, there's huge opportunity there for us as well. But I say, ultimately, where we want to get to is following research we've conducted with our customers is we want a van, a person to be visiting our customers delivering all of these tick services to our customer in a consolidated perspective rather than four or five vans at four different times of the week. So we've got to work it through, but in summary, we've got to consolidate those tick services and really build a value proposition around Total Fire and Total Water, which are two really exciting elements for us to take to market.

[Phil Bentley, CEO & Director at Mitie Group]

Do you want to add something around go to market in terms of sales? Because their sales approach is quite, again, localized, isn't it? I don't know if you want to touch on that.

[Jason Towse, Managing Director of Business Services at Mitie Group]

Yes. Phil also mentioned the figures.

[Phil Bentley, CEO & Director at Mitie Group]

We're bidding big FM contracts and big national contracts with almost a single service. They have a big sales force, Simon, don't they? Mean it's a lot of people there.

[Cijo Joseph, Chief Technology and Digital Officer at Mitie Group]

You okay?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

You go.

[Jason Towse, Managing Director of Business Services at Mitie Group]

Yes. I think sales through Marlowe is delivered across sales teams and key account managers And that really features into what Phil mentioned in relation to fee earners, which is a very, very different approach to how we sell. So we're going have to focus heavily on our routes to market, which will be different to today. And we have to preserve the credibility of what Marlowe or the integrity of the routes to market that Marlowe have and we need to learn from that to install that into our business. But ultimately from a sales perspective, we need to make sure that we are fit in relation to IFAM because integrated and facilities account management don't necessarily buy services in this way.

[Jason Towse, Managing Director of Business Services at Mitie Group]

They buy them in a fragmented way, which is why we sort of pick up the contracts and we have traditionally outsourced them. So this is a new proposition relation to integrated FM. So that's an opportunity for us today within Mighty. But I think we've got some things we have got some things to learn in terms of routes to market. We've already seen the number of buildings that need addressing in this space.

[Jason Towse, Managing Director of Business Services at Mitie Group]

And if you look at us as an organization we're nowhere near those numbers today. So big opportunities for us in terms of revenue synergies, is where we need to focus through. Once we've got the integration plan underway, revenue synergies is key for us for the future.

[Phil Bentley, CEO & Director at Mitie Group]

There was one here Alex. Was it Alex?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Alex.

[Phil Bentley, CEO & Director at Mitie Group]

Yes.

[Alex Smith, Equity Research Analyst at Berenberg]

Just on back to the projects business and traditional kind of is the average project is up 65%. It seems like the pipeline and the order book is growing. That was also kind of a key element of growth. It actually looks like you're well ahead of expectations from the three year plan. Kind of what's driving that quite significant increase in the project work?

[Alex Smith, Equity Research Analyst at Berenberg]

And is that expected to continue in going forward? And then second one just on the telecoms business. I think you mentioned in results that you're handing back some unprofitable work still expectations for that through 2026?

[Phil Bentley, CEO & Director at Mitie Group]

You, Alex, for bringing us back to FY 2025 because some of them said to me, we're Marlowe is 3,500 employees. A year ago, we had 62,000 employees, now we've got 76. So we have mobilized 14,000 employees in the last twelve months. And that doesn't include the three and a bit thousand employees we're mobilizing at the moment with DWP. I only say that because that's the same number of employees in the Holder Model.

[Phil Bentley, CEO & Director at Mitie Group]

So I'm glad that you've got a question about about the, you know, the mothership because I think the whole market, you know, they're focusing on the deal, but don't forget the mothership is a big part of our story. This is not this is an you know, this is part this is pillar three of a three pillar plan. Mark, do you want to pick up projects? Let me deal with telco and then maybe you just talk a little bit about general projects and ATVs going up. But you're right.

[Phil Bentley, CEO & Director at Mitie Group]

We handed back quite a lot of work telco. We bought a business, you've heard me say this before, from PE where they'd signed up on frameworks and it looked like they had a good order book, but we weren't able to deliver them when we took over the business profitably. And B operators had funnily enough had handed back work, which we then took on. It might have given us a bit of a clue there. So we've sort of had to base baseline the business and that has meant variabilizing more of our cost base.

[Phil Bentley, CEO & Director at Mitie Group]

So not having fixed resources all the time, but variabilizing it with an outsourced supply chain to meet demand. But we are on some quite you can add on to this, but we're just getting close now. And I'm not gonna give away the names, but there's some big there's a couple of big clients we're now back talking to where where it was fair to say two years ago, if they'd asked if we knocked on their door and asked for more work, would have told us where to get off. But today, I think we're seem to be doing a good job, albeit on a lower smaller footprint. But, you know, you've only got to look at you know, the big transaction between a large, you know, red company and and another one to know that there's gonna be a lot of work going on there because it's not just putting in the five g, but it's also there's a lot of redundant sites that can be removed.

[Phil Bentley, CEO & Director at Mitie Group]

So there's a there's an eight if you read the CMA report, there's an 8,000,000,000 they have an £8,000,000,000 network upgrade commitment as part of their c m r CMA release as it were. So I can assure you there's plenty that if we go on act together, there's plenty of work out there. But do you want to just talk bigger picture on projects to start with, Mark? Maybe talk about which clients have been spending money year on think about the year on year growth and what and the other thing around the order book and the the pipeline, some of our pipeline is our order book is five year money, ten year money. Most projects are unique and isolated individuals.

[Phil Bentley, CEO & Director at Mitie Group]

So to have a 4,000,000,000 pipeline, that's all near here and now. No one's asking us to quote for a project in four years' time. It's all here and now.

[Mark Caskey, Managing Director of Mitie Projects at Mitie Group]

Yeah. So well, thank you, Phil. So we're seeing I mean, the major trends we continue see, I mean, one is building on the fire and security and all the information you heard with Phil around if we think about facilities compliance. You've got the consistent trends around net zero energy compliance and many all of our clients are really focusing on that sustainability drive. You've got workplaces.

[Mark Caskey, Managing Director of Mitie Projects at Mitie Group]

You've got the return to work that we're seeing a lot more around our client base. And then also, you've got the constant modern modernization of buildings and assets. Now if you go back to Capital Markets Day, we talked about our projects upsell strategy was deploying project teams across all of our key accounts. And that's really what's driving a lot of the, I guess, connection now between our projects business and our client businesses. And what we're seeing is they're investing in their assets more.

[Mark Caskey, Managing Director of Mitie Projects at Mitie Group]

We're seeing the natural increase, one in terms of pipeline size, but also two in terms of project value itself. And at 250,000, I mean, are still fairly modest projects. I mean, there's a high volume. They're quick projects that we're delivering in the buildings. As we've deployed the teams, as we've scaled up our capabilities, we're able to connect that facility's transformation better to our facilities management story.

[Mark Caskey, Managing Director of Mitie Projects at Mitie Group]

But the big trends are really around power, grid, energy, net zero, workplace and the facilities upgrade. Through our acquisitions as well because you think about JCA and one of the slides Phil had was around data centers. The investments that's going into the data center market is pretty exciting. And our pipeline today is more than 1,000,000,000 pounds of longer term data center opportunities. Similarly, as we've scaled up our renewables capability and also connections with power and grids, again, the pipeline sizes there are growing as well.

[Mark Caskey, Managing Director of Mitie Projects at Mitie Group]

So it's quite an exciting time. Pipelines are growing as as Phil and Simon have alluded to. But really, it's that connection point between our project teams and our facilities teams that's really driving that upsell capability.

[Phil Bentley, CEO & Director at Mitie Group]

Think the other thing, mean, you mentioned, Mark, power and grid because we're now on much bigger frameworks as well. We've just got on the national grid framework, which we weren't on before, and we're on Lloyds Bank's major projects framework that we weren't on before. So we're we're adding there's a lot and there's a lot of public sector project frameworks that we're on now. Did you want to just talk about that?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Yeah. Just just Alex, just building on, Mark's points. You asked sort of retrospectively about FY 'twenty five. And actually, to the conversation we're having here around Marlowe, fire and security is a key driver of the revenue growth in projects in FY 'twenty five. So that illustrates the trend that Mark's talking about looking forward.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

But I just wanted to briefly pick up on your point around the sort of 02/50000 size of the projects as well. Because whilst it's gone up a little, to Mark's point, it's still fairly small. So it's still a high number of relatively low value transactions, if you like, in the project space. And therefore, a risks perspective, which is the hat I'm sort of wearing thinking about this, it's relatively well dispersed. And when we look at the top end of our projects work and the larger projects that we're doing, we're typically doing those projects for customers that we've got a long standing relationship for with and we're working in buildings that we've been in and involved with for a long period of time.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And therefore, we understand those buildings. And as a result of those customer relationships, we've got good contractual terms with those customers. And therefore, we're not taking undue risk onto our side. It's a sensible contracting relationship, which enables us to make good money from those larger projects as well.

[Phil Bentley, CEO & Director at Mitie Group]

One behind, I think. Is it behind that? I'm sorry.

[Ryan Flight, Equity Research Analyst at Jefferies]

Morning. Ryan Fly from Jefferies here. Just three from me, if I may. The first one on Marlowe. So on Facilities Compliance, you said here kind of 80% at the moment you're subcontracting.

[Ryan Flight, Equity Research Analyst at Jefferies]

I wondered if you could give us some color on how much of that is to Marlowe? And specifically kind of a broader comment on revenue synergies that you think you can deliver outside of that? And then the second, going back to Maiti's FY 2025, you've got cost inflation and National Insurance headwinds going into FY 2026. I wonder if you can give us some color on where you think you can't pass through those additional costs? And then just the third one on the working capital outflow, wonder if you could give us some guidance and color going forward as well on projects and the trend in retail payments, please.

[Phil Bentley, CEO & Director at Mitie Group]

So they're not those latter two questions are broader questions than than Marlo, aren't they?

[Ryan Flight, Equity Research Analyst at Jefferies]

Yes.

[Phil Bentley, CEO & Director at Mitie Group]

Yes. Just checking. Let me take the first one.

[Phil Bentley, CEO & Director at Mitie Group]

And then, Sam, you deal with the NIC Yeah. For Mighty.

[Ryan Flight, Equity Research Analyst at Jefferies]

Mhmm.

[Phil Bentley, CEO & Director at Mitie Group]

Whatever that third question, which I've forgotten now.

[Ryan Flight, Equity Research Analyst at Jefferies]

Working capital. Yep.

[Phil Bentley, CEO & Director at Mitie Group]

Look, I'm not going go into numbers in detail because that's part of our upside story. But what I will say to you is that we do I mean, I've got I've a list of all the companies we pay away to. PTSG, we pay a lot to Hall and K, we pay a lot to Securitas, Chubb. You know, we're paying a lot away.

[Phil Bentley, CEO & Director at Mitie Group]

And what but this year, you can't see it fortunately, but this where the yellows are is is where we are and where Marlow are and the rest is the rest of the market and that stuff we're paying away. So I think the the opportunity to to and that's what we do today because my point here is that we're scratching the surface of facilities compliance today. Just as if you look back in my mind five years ago, our projects business was probably no more than 200,000,000. So we were scratching the surface of projects because we didn't have a projects capability. We're scratching the surface of compliance today.

[Phil Bentley, CEO & Director at Mitie Group]

It's a £7,600,000,000 market. And, you know, I mean, I'm not really gonna show you all our, This is all the market research we've done on this market. We know, you know, every competitor, every this is this is what we pay for before we buy a business. You know? We've done a lot of work on this opportunity, and it's something that we've been looking at for well over a year.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Shall I pick up the other two questions? So Ryan, on your question on inflation and National Insurance. So we've got a good track record of passing inflation through, typically well over 90% of passing inflation through to our customers. To your specific question on where does that sort of inefficiency come from, and we're talking about sort of GBP 140,000,000 of cost inflation next year versus GBP 130,000,000 that we're saying will pass through, around half of that, in fact, just over half of that comes from corporate because we've obviously got no customer relationship within our overheads, if you like, to be able to pass that cost through. And then there's bits and pieces elsewhere in pockets and geographies and contracts where we're not able to, but the vast majority of it goes through to our customers.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And then on the National Insurance, it's a little bit more disparate. So that £15,000,000 of NIC that we're saying we're not going to be able to pass through, that's public and private. It's large and small customers. There isn't really a trend to pull out there to say it's exactly here or here. It's on the contracts effectively where we don't have the contractual protection, which as I've said is a little bit less than we've got from an inflationary perspective where the where we're having the conversations with the customers and they're more difficult than some of the others.

[Phil Bentley, CEO & Director at Mitie Group]

I mean, Jason, I thought you might jump in because, you're our king negotiator on this. But, obviously, if it's overhead, like my salary, my NIC, we can't pass that any on to anybody. But if it's a security guard in a retailer Yeah. We wanna have a conversation without irrespective of what's in a contract. And, Jason, you've had you've had if you remember, the numbers we gave you to begin with, we thought it was gonna be 60,000,000, then we thought it might be it was gonna be less.

[Phil Bentley, CEO & Director at Mitie Group]

And then of the recovery, we thought we'd get more. And he's the reason why we're getting more because he's sitting down with clients in a in a fair dialogue and saying, look, if you find somebody else, they're going to be charging you for it.

[Jason Towse, Managing Director of Business Services at Mitie Group]

Yes. I think it sort of it comes back a little bit to the acquisition we're talking about in terms of really valuing the services that we deliver to customers. We all know what landscape we're facing out there today with if you just take Business Chrome as an example. If we don't take these services seriously and we negotiate with our customers to really preserve the integrity of the services we deliver to keep their people safe it's not just about paying our people more money it's about creating the value in the conversation and we've been really successful at that not only in the private sector. We've also been successful in the public sector.

[Jason Towse, Managing Director of Business Services at Mitie Group]

And most contracts will state there is probably no change in law clauses. The public sector are starting to take a little bit more seriously now particularly as we say, talk about bullying compliance, talk about the risks associated to our customers and our businesses. Actually, regretted attrition these days is really low for us and that's about really keeping people with us to deliver a great service to our customers. And I think on the basis of great people, great service, think we're on a really good foundation to have those conversations and we shouldn't be and we're not actually. We're not reticent to have those conversations with customers anymore.

[Jason Towse, Managing Director of Business Services at Mitie Group]

So we can stick our elbows out a little bit and say, this is about value. This is not about just a number and just money. It's about preserving the value and the safety of our people and our customers' people. And that's driven some a change in the trend, guess, Phil, in relation to previous years.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And actually, just one final point building on what Jason's saying. It's not just about the regretted attrition going out of the door, but coming back in the other way, we're seeing increasing numbers of applications per vacancy we're advertising externally. So if you sort of cast your mind back maybe three years or so, we were getting low single digit numbers of applications per vacancy that we're advertising, and now we're well into double digits, which is helping, to Jason's point.

[Phil Bentley, CEO & Director at Mitie Group]

Sam?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Can I should I just come back to the final point

[Phil Bentley, CEO & Director at Mitie Group]

on the Sorry? Yeah.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Ryan, I I I I'd see FY twenty five as a relatively typical year going forward from a working capital perspective. So I'm expecting something in the region of GBP 30,000,000 to GBP 40,000,000 worth of working capital outflow going forward. And that's driven by, to your point, the business growth and a decent portion of that growth coming from projects and from, as I said, the retail sector in my presentation, which compound the issue slightly.

[Ryan Flight, Equity Research Analyst at Jefferies]

Thank you.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Okay.

[Phil Bentley, CEO & Director at Mitie Group]

Sam?

[Sam Dindol, Director at Stifel Financial Corp]

Morning. Sam Newman from Stifel. Two questions from me, please. Firstly, on the mothership, as you say, I think you highlighted more investment in sales and marketing, which is clearly working with the record wins. Can you just give some color on what you're doing there?

[Sam Dindol, Director at Stifel Financial Corp]

And should we expect that sort of investment, increase investment to be ongoing? And then secondly, given the deal, should we expect a pause in bolt on M and A on the project side? Or is that still something you'd look to do?

[Phil Bentley, CEO & Director at Mitie Group]

Yes. Why don't I do the bolt on? I thought, Catherine, you might have a go on the sales and marketing. You were at the sales conference that we set up. We we launched a couple of weeks ago.

[Phil Bentley, CEO & Director at Mitie Group]

Maybe talk a little bit about the sales training, the Ignite Academy, and all the things we're doing. I mean, funnily enough, I just bumped into somebody yesterday, and he's their ISS's top salesperson. He just joined us. So we're not short of bringing good people in to MITE. And I thought maybe, Catherine, you might have a say a few words about the sales and marketing academies that we're doing.

[Phil Bentley, CEO & Director at Mitie Group]

On the bolt on, we're not gonna say I think you will what I would say is the bolt ons, it's not like we won't do any, but I think we'll be we'll be doing less now inevitably. And this has been you know, this is our big move, we spent more than, you know, we would have indicated to the market at 300 plus what we've already spent. We've, you know, we spent 400. I mean, again, the deal looks more expensive because our share price has been going up. I mean, if I'm not telling you when the deal was struck, but if it was struck when the shares were a pound, you could understand why the deal would have looked a lot cheaper.

[Phil Bentley, CEO & Director at Mitie Group]

So when our shares because we're paying 1.1 ship shares per per Marlowe share. So don't get fooled by the headline number because six months ago, it would have been it would have been the same deal with the same dilution, but it would just had a different head headline number. So all these calculations about PE and EBITDA multiples are really are meaningless. You've got to you've got to look at the way we've structured that deal, but that's me being defensive. We do have a couple of bolt ons.

[Phil Bentley, CEO & Director at Mitie Group]

We're looking at something in small deal in Spain at the moment. Peter's looking at in hard services. We've got bits but the the single digit stuff. Single digit stuff. We're not doing anything big again.

[Phil Bentley, CEO & Director at Mitie Group]

Not not until so you hear heard me say that now, so I better be held accountable. We're not going do anything big now until we get the leverage back, you know, back to where we want it to be. But you'd be surprised how quickly it de levers because you've got the revenue you've got their their EBITDA added in, their cash flow and our cash flow, and it comes down quite quickly by do we give a target FY twenty seven k?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Yeah.

[Phil Bentley, CEO & Director at Mitie Group]

Would are we allowed to say that?

[Phil Bentley, CEO & Director at Mitie Group]

FY twenty seven, we'll be thinking back at 0.9 or something, 0.1?

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

So we we we should be within our leverage range, give or take, at the end of FY twenty six, and that will then rapidly delever into FY '20 '7 onwards as the EBIT comes through from the acquisition plus, plus the synergies.

[Phil Bentley, CEO & Director at Mitie Group]

And that's why we see so I think without any buybacks, Kate, the leverage is about point nine. So that's why I think we're confident to restart that. Catherine, do want to

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

A little bit higher than that, but within the range.

[Phil Bentley, CEO & Director at Mitie Group]

Say hello?

[Kathryn Dolan, Chief People Officer at Mitie Group]

Yes.

[Phil Bentley, CEO & Director at Mitie Group]

So Catherine is our new come to the front, Catherine. Catherine is our new HR CPO, chief people officer.

[Phil Bentley, CEO & Director at Mitie Group]

Catherine was the CPO of Bureau Veritas. Bureau Veritas is an 80,000 engineering tick business based in France with a global footprint. So you're very happy you're not on the plane five days a week now, aren't you? Because you just gotta come down from Birmingham. But talk us a little bit about sales and marketing and everything there.

[Kathryn Dolan, Chief People Officer at Mitie Group]

Yes. And if I could just comment on Marlowe, if I May. So I've spent the last seven years in the tick industry. And so for me, we were seeing absolutely as part of Bureau Veritas major consolidation in the market and the margin profiles obviously are different to Mighty. So I think from a cultural point of view, from an adjacency point of view, it's a massive opportunity for us and certainly feel positive about that integration and the acquisition.

[Kathryn Dolan, Chief People Officer at Mitie Group]

Just on sales and marketing, so we are absolutely driven to create an industry leading sales and marketing capability within the organization. And in May, we launched a significant investment in all different employees involved in the customer life cycle. So the infill acquisitions, our sales team, bids, strategic account managers so that we can really create a highly powered growth engine and synergies around cross selling, working collaboratively on bids, understanding the different sides of the account management, but also sales. So we had 250 people together in in May, and it's the first time that we've done it as an organization. But the feedback is that this will really unlock the collaboration across the organization to to to power that growth.

[Phil Bentley, CEO & Director at Mitie Group]

And the sales academy, that's a whole range of training modules, isn't it, under the igniting growth?

[Kathryn Dolan, Chief People Officer at Mitie Group]

Yes. So we've been partnering externally and internally where we've got best practice. And the idea is that it will be really concrete where we're taking live opportunities, live bids and working across the entire the customer facing teams to make sure that we are absolutely pulling all the strengths that Mighty has across the organization.

[Phil Bentley, CEO & Director at Mitie Group]

And I used to say every bid started with a blank page of paper in Mighty, but it doesn't anymore. There's a lot more content that we're bringing through in a consistent way of

[Kathryn Dolan, Chief People Officer at Mitie Group]

bidding Yes, exactly. Professionalizing the function and just absolutely making sure we're getting the return on that investment.

[Phil Bentley, CEO & Director at Mitie Group]

Yes. Thanks, Catherine. Thanks. Chris?

[Christopher Bamberry, Equities Analyst at Peel Hunt]

Morning. Chris Bambury, Peel Hunt. Couple of questions, please. Could you give us an idea of the breakdown of the 24,000,000 pipeline, opportunity pipeline by end market as opposed to activity? Just maybe some of major

[Phil Bentley, CEO & Director at Mitie Group]

There's a slide actually at the back, Chris. I can answer that 27, page 27, we put it in the appendix. So we don't have to worry about that. The one thing, I'd like to watch to know not to watch out for, to know is the idea that two thirds of the pipeline is gonna be awarded in the next two years. That's the key for me.

[Christopher Bamberry, Equities Analyst at Peel Hunt]

And thank you. Second question, looking at the competitive landscape across your three main service lines, have you seen any significant changes over the last twelve months in terms of competitive intensity or the way your competitors are approaching the markets? Thank you.

[Phil Bentley, CEO & Director at Mitie Group]

I never sort of publicly comment on competitors. I mean, what they do is up to them, isn't it? I mean, who am I to comment on them? You know, we've got there's a there's a I'm not gonna name them. There's a bottom fisher out there that's always there's always a bottom fissure.

[Phil Bentley, CEO & Director at Mitie Group]

You've got PE, in some spaces that have gone a bit to sleep in our view, so that's good. No. I mean, I wouldn't make a big thing about it. I think the one thing I would say, and this point made to the board this week, there if if there's a bid today in facilities management, facilities transformation, and tomorrow facilities compliance, I'll bet you, MITRE is on the list. Whereas in the old days, we might have been on one in every bid list. There isn't a bid list we're not on today.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

And just to build just to build on Phil's point, thinking about it the the other way around, we've got a good internal process, Chris, around bids that feeds up all the way from the bottom of the organization up to us who sit on a what we call bidco meeting, every week where we sign off on every bid, every significant bid that comes through, including the key terms, that, that are sitting on that, on that particular bid. So we might make a strategic decision in some instances to bid a little bit higher or bid a little bit lower depending on whether it's a market we particularly want to get into, but it gives us good visibility of what's coming through. And you might say that the proof is in the pudding in that he says, touch wood. We have very, very few loss making contracts across the organization as a result of the strength of that governance process that we've got in place.

[Phil Bentley, CEO & Director at Mitie Group]

And if anything else, I'm conscious we've held you here for an hour and a bit. So thank you for your time. If there aren't any more follow ups, obviously Kate's around. We're talking to one or two shareholders this afternoon, Kate, aren't we? But yes, we'll be out on the road.

[Phil Bentley, CEO & Director at Mitie Group]

And thank you for your support and thank you for coming. Thank you.

[Simon Kirkpatrick, CFO & Executive Director at Mitie Group]

Thanks, everyone.

Participants

Executives

• Phil Bentley, CEO & Director
• Simon Kirkpatrick, CFO & Executive Director
• Cijo Joseph, Chief Technology and Digital Officer
• Jason Towse, Managing Director of Business Services
• Mark Caskey, Managing Director of Mitie Projects
• Kathryn Dolan, Chief People Officer

Analysts

• James Beard, Director - Support Services Research at Numis
• Tom Callan, Equity Analyst at Investec
• Alex Smith, Equity Research Analyst at Berenberg
• Ryan Flight, Equity Research Analyst at Jefferies
• Sam Dindol, Director at Stifel Financial Corp
• Christopher Bamberry, Equities Analyst at Peel Hunt