25th Jun 2020 11:30
(Alliance News) - Facilities management firm MITIE Group PLC on Thursday pulled out of a final dividend in order to preserve cash, despite reporting stronger results for its recently ended financial year.
Also on Thursday, MITIE announced the signing of a conditional agreement to acquire Interserve's Facility Management business for GBP271 million in cash and shares.
The group said it will fund the acquisition with GBP151 million raised through the issue of 358 million shares, at a price of 42.2 pence each as well as a cash payment of GBP120 million.
In addition, MITIE will launch a rights issue to raise GBP201 million, through the issue of up to 805.1 million shares to qualifying shareholders at 25 pence per share, on the basis of one new share for every five existing shares held.
The issue price reflects a 69% discount to MITIE's closing price on Wednesday at 80.00p.
Shares in the group were 13% higher at 90.60p on Thursday in London.
Of the proceeds from the rights issue, GBP80 million will go towards funding the Interserve Facilities Management acquisition, while the rest is for supporting a reduction of MITIE's leverage, thus providing more liquidity and strengthening its balance sheet.
The rights issue is underwritten by Jefferies International Ltd and JP Morgan Cazenove, both of which are acting as joint global coordinators and joint bookrunners, while Barclays Bank PLC and Banco Santandar SA act as joint bookrunners alone.
The acquisition is conditional on shareholder approval of the rights issue at an upcoming general meeting on July 13, as well as approval for the acquisition itself in a meeting scheduled for the fourth quarter of 2020. MITIE expects the acquisition to be completed within the same quarter.
The group said the acquisition will give the enlarged business established positions across key service lines including engineering, security and cleaning services, as well as a balanced exposure between public and private sectors.
In addition, MITIE said it has agreed with its lending banks to extend its GBP250 million revolving credit facility by 17 months to December 16, 2022.
For the year to the end of March, MITIE reported a pretax profit of GBP48.4 million, up 73% from GBP28.0 million the year before, on revenue that grew by 4.2% to GBP2.17 billion from GBP2.09 billion.
Revenue growth was driven by a 10% increase from the Business Services segment, with the securing of new contracts and extensions during the year and contributions from recent acquisitions, including VSG and Global Aware International Group.
This more than offset a 2.8% decline in revenue in Technical Services to GBP947.2 million, as Mitie was forced to manage an exit from loss-making continental European contracts, and economic uncertainty in the second half of the year.
The group recommended no final dividend in order to conserve cash, meaning the total dividend came up to 1.33p per share, down 67% from 4.0p the year before.
Looking ahead, revenue for the months of April and May was GBP301.4 million, down 12% from the same period the prior year, as a result of reduced discretionary project work and contract maturities, partly as a result of the Covid-19 outbreak.
However, MITIE said that there were early indications that trading for June would be better than expected.
"Mitie has delivered another year of solid results making good progress against our strategy. Today's announcement of a GBP201 million rights issue will strengthen our balance sheet against an extended Covid-19 impact, secure Bank refinancing and provide a platform for growth opportunities," said Chief Executive Officer Phil Bentley.
"We are pleased to have signed a sale and purchase agreement to acquire Interserve's Facilities Management. This will be a transformative acquisition, expanding the scale and footprint of our business to create the UK's largest facilities management company and accelerate the delivery of Mitie's long-term technology-led, vision," Bentley added.
By Dayo Laniyan; [email protected]
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