• Going For Growth

     

    The current economic climate brings opportunities as well as challenges - and for strategic outsourcing and energy services company MITIE, the focus is very much on the opportunities.

    "Outsourcing took off in the UK in the 1980s, very much as a response to recessionary times,” observes Ruby McGregor-Smith, MITIE’s chief executive. “In tougher markets, clients in both the private and public sector focus on saving money and therefore increasingly look to experts to help deliver what they regard as non-core services."

    Today, outsourcing is one of the UK's key industries, employing 12% of the country’s workforce and accounting for 8% of GDP – second only to the financial services sector. As demand for outsourcing services has soared in recent years, MITIE has experienced enviable growth: in the last decade, the company’s revenues have almost quadrupled, from £519m in 2002 to over £2bn in 2012.

    MITIE was founded 25 years ago and is now a FTSE 250 company which prides itself on having a uniquely passionate and energetic culture. The group’s success owes much to the innovative approach it takes to developing new business.

     

    MITIE, which stands for Management Incentive Through Investment Equity, has a £10m entrepreneurial fund which focuses on supporting new outsourcing start-ups. Under this model, a management team takes an equity stake of up to 49% in the start-up business and MITIE takes 51%, then MITIE subsequently acquires it in full following five to ten years of development.

    “If we work with a start-up business, what they get is a supportive parent who has a huge amount of know-how about the industry,” says McGregor-Smith. “To be able to have equity in the business for our people is really important and gives a young, refreshing, innovative feel to what is quite a large company.” To date more than 100 businesses have been developed in this way, including access and disability consultancy Direct Enquiries and MITIE’s Care & Custody and Client Services businesses.

    In May 2012, MITIE hosted MITIE Millions, a Dragon’s Den-style pitching event during which talent-matching website ProFinda was selected for a £300,000 investment.

     

    STRATEGIC ACQUISITIONS

    As well as developing start-up businesses, MITIE has followed a proactive M&A programme with the intention of taking a bigger market share in key markets. MITIE has made a number of strategic acquisitions in the last few years, including the £75m acquisition of security business Initial Security in 2006 and the purchase of Dalkia Facilities Management for £120m in 2009. The Dalkia deal was one of MITIE’s largest purchases to date and has proved strategically successful, enabling the group to take on a considerable volume of new business over the last three years.

    To date, 2012 has seen MITIE make two key acquisitions: the group bought a 51% stake in specialist food and drinks company Creativevents in August 2012, followed two months later by the £110.8m purchase of home care provider Enara.

    McGregor-Smith says that the recent Enara deal was strategically important: “As you take a look at the ageing profile of the UK’s population, there are some big opportunities for organisations such as ours to help support and achieve better quality of services, which we are very keen on doing as we grow.”

     

    Achieving growth in the current market can be challenging, particularly where funding is concerned. “Some of the bigger opportunities are more complex to finance, and therefore funding becomes more of a challenge as you grow,” says McGregor-Smith.

    “But I think that the same is probably true for most markets – not just the outsourcing market.”

    The Enara acquisition was funded with a £150m bridging loan provided jointly by Lloyds Bank and one other bank, with the intention of refinancing this facility into longer-term debt when appropriate. This came as the latest step in a relationship which has developed considerably since Lloyds Bank was appointed as a junior member of MITIE’s syndicate six years ago.

     

    "Lloyds Bank is MITIE’s lead bank and during our growth they have absolutely supported us in terms of raising funding and supporting our long-term debt profile," comments McGregor-Smith.

    A WIDER AIM

    As a further driver for growth, MITIE is also driving higher revenues by moving its focus from multiple single-service contracts to larger integrated facilities management contracts. In April, MITIE signed a five-year contract with Lloyds Bank to provide facilities management services to the Bank’s branches and offices across the UK. Under the contract, MITIE will provide a range of services including catering, reception, waste management and security as well as managing utilities expenditure.

    Clive Hetherington, Area Director, South West, Lloyds Bank, and his mid markets team have responsibility for the MITIE relationship. Clive commented “Working with MITIE has been very exciting. The business has a very clear and defined culture and this has enabled them to achieve fantastic yet controlled growth over the last few years. The Bank has moved from being MITIE’s newest bank to its core banking partner and I must thank a significant number of colleagues who have delivered a variety of first class solutions to the team at MITIE during this transformation.”

    Looking forward, MITIE is set to continue focusing on growth opportunities, some of which could be more internationally focused going forward. While MITIE is primarily focused on opportunities in the UK, as the company expands it is increasingly working with multinational clients, which could in turn facilitate the development of MITIE’s operations in Europe and beyond in the coming years.

     

     

7/23/2019 4:51:23 PM