Saturday, September 14, 2019
MITIE plc is a UK FTSE 250 business Essay
There are three main business divisions of the group which are: 1) strategy & consultancy, 2) facilities and project management and 3) services. The facilities management group includes business services, catering services, cleaning, facilities management, landscaping, Pest control, PFI, and security. Under the property management division the company offers building refurbishment, fit-out, roofing and maintenance. Under the asset management division the company offers services such as mechanical and electrical engineering & maintenance, energy generation and management, ICT and infrastructure. Strategy Review of the Company. In 2009 the companyÃ¢â¬â¢s business had a 59% and 41% ratio of private and public clients respectively. This split is in terms of revenues and the company believes as the government expenditure is a major proportion of the total GDP therefore this split might change in the short-run. The company believes that the next 12-18 months would be a difficult time as the world economic situation remains uncertain. However, the major focus of companies (clients) is on cost cutting and cost optimization. (Annual Report MITIE, 2009) In the transport and logistics sector the companyÃ¢â¬â¢s main client base includes BAA, FirstGroup and Euro-star. The size of the target market is 11 billion Pound Sterling and the companyÃ¢â¬â¢s share is 0. 7%, social housing is another sector which offers great amount of opportunities this is because the government has a number of programmes to provide better housing facilities and maintenance facilities. The government has a number of plans in partnership with the Homes and Communities Agency to support communities and the local governments. Healthcare is also an important market for the company as the higher levels of ageing population of UK will spend a lot on healthcare facilities and create opportunities for outsourcing. The market share was 0. 8% in 2009 for the company out of a total market size of 11 billion pounds. (Annual Report MITIE, 2009) Financial Analysis for 2008, 2009 of MITIE The revenue of the company in 2008 was 1. 4 billion pounds and it increased to 1. 521 billion in 2009 which is an 8. 2% rise on a year on year (YoY) basis. In terms of the business segments the highest revenues were recorded in the facilities management sector in both 2008 and 2009 with 2008 revenues exceeding 820. 4 million pounds and 2009 revenues for the facilities division topping 942 million pounds. A major change was the increase in margin contribution from property management services from 5. 3% in 2008 to 6% in 2009. From the total revenues of 1. 52 billion pounds, 297. 9 million were from property management and 281. 8 million were from asset management in 2009. The net profit margin for the year 2009 was 3. 57% whereas the net profit margin for 2008 was 3. 4%. The operating profit for the company increased from 70. 3 million pounds in 2008 to 78. 6 million pounds in 2009. This represented an increase of 11. 8% in the operating profits of the company. It is an indication of the higher level of productive efficiency at the company. The basic EPS (Earning per Share) increased by 16. 8% from 2008 to 2009. In 2009 the basic EPS was 16. 7p. The dividend per share in 2008 was 6. 0p and it increased to 6. 9p in 2009. The current ratio for 2008 was 1. 007 which meant that on aggregate there were more current assets available to pay off current liabilities. But an important thing that was noticed the fact that trade and receivables in 2008 were 314. 4 million pounds which is about 87. 5% of the total current assets. This means that the company is dependent on the timely payment from debtors in order to pay off creditors and other short-term liabilities. The 2009 current ratio for the company stood at 1. 09 which represents a slight improvement from the previous year. One of the main reasons for the slight improvement was that trade payables declined slightly in 2009 compared with the year end 2008 figure. In 2008 long-term liabilities as a percentage of total assets stood at 6. 2% which means that a very small amount of assets were being financed by long-term liabilities this also implies that the company has a potential to leverage its position and benefit from cheaper capital and ensure tax savings. In 2009 the long-term liabilities to total assets ratio decreased to about 5% which again implies a declining trend toward a long term borrowing regime. The company follows certain guidelines to ensure best practices in the finances of the company. It follows a number of key performing indicators (KPI); the conversion of EBITDA to cash is another financial KPI. This is an important indicator of a companyÃ¢â¬â¢s success because the long-run sustainability of operations is dependent on positive cash flows that the company will ultimately generate. The company converted 97. 5% of its EBITDA (Earnings before interest, tax, depreciation and amortization) to cash for the year ended 31st March 2009. The same conversion rate was 90. 3% in the year 2008. The company also reported operating cash of 94. 4 million pounds in 2009 which represents an increase of 20. 7% in operating cash from previous year levels. This also shows that the company has improved its ability to meet its debt obligations throughout the two years and it has reduced its interest costs in the process.