Mortice Limited (LON:MORT) the AIM listed security and facilities management company, announced today its audited results for the financial year ended 31 March 2015.
Financial results highlights:
· Revenues grew by 19% to $88.4million (FY 2014: $74.4m)
o Security services revenue increased 20% to $63.6m (FY 2014: $52.9m)
§ Accounting for 72% of group revenues
o Facilities Management services revenue grew 16% to $24.4m (FY 2014: $21.0m).
§ Key client win with online retailer Amazon
· EBITDA $4.13m (FY 2014 $3.45m)
· Profit before taxation up 22% to $2.2m (FY 2014: $1.8m)
· 25 new clients added during the period including Welcome Group of Hotels, ABN AMRO Bank and Amazon
· 73 additional staff employed
· More than 90% of income came from repeat business
· Cash generated from operations increased significantly due to aggressive working capital management
· Proactive security surveillance company, Soteria, went operational with the support of IBM in July 2014
· Developed international presence via joint venture agreement with Tanami Holding Co., a leading Saudi Arabian multinational with a view to increasing the Group’s presence in the Middle East
· Launched operations in Sri Lanka through Tenon Property Services (Lanka) Private Limited
Post-period end highlights:
· Proposed acquisition of the entire issued share capital of UK based property service company Office & General Limited for a total consideration of up to £6.5m in cash and shares
Major Manjit Rajain, Executive Chairman of Mortice Limited, said: “High levels of repeat business ensure that visibility remains strong while a growing pipeline of potential new business is encouraging as far as future scalability is concerned. We felt it key to invest in our sales and marketing function and look forward to benefiting from a strengthened presence both in India and internationally. Given market fundamentals and our performance to date we are confident that investment made during the period will benefit trading during the current year. Our business performance is progressing very well, aided by our robust business pipeline.”
This was a productive period for the Group with sales and profits growing at the same time as increased investment in the business. Investment focused on laying the foundations for increased organic growth which, as previously stated, will be complemented by an acquisitive strategy with a view to expanding geographic reach. Importantly, more than 90% of our income came from repeat business with the rest coming from new customer wins during the period. Cash generated from operations increased significantly due to aggressive working capital management.
The backdrop in India is improving, with the new government in place and projected GDP growth being favourable. While there is business optimism, we are aware that more needs to be done. That said, the wider environment provides scope for us to build on the momentum achieved during the period. As such we invested in capacity building and making the business scalable given the improving sentiment in India with the government’s strong focus on infrastructure offsetting the continued malaise in real estate.
In order to maximize potential benefits, we invested in our sales and marketing function, hiring an additional 73 staff, ensuring that we remain highly competitive. In addition, due to competitive pressures, the Company focused on achieving increased efficiency through further automation and improved processes. While this impacted cash consumption during the period, it leaves us well placed to grow all key metrics in the year ahead.
Revenues grew by 19% to $88.4m (FY 2014: $74.4m) during the period with profits up 22% to $2.2m (FY 2014: $1.8m). We added 25 new clients during the period and continued to benefit from high levels of repeat business. While the decision to invest in staff and infrastructure impacted cash balances, which were $539,204 as at 31 March 2015, compared to $1,064,942 as at 31 March 2014, we do not anticipate similar levels of investments during the current financial year.
Our guarding services division, Peregrine Guarding, remained the key driver for growth, with sales increasing 20% to $63.6m (FY 2014: $52.9m), accounting for72% of group revenues. Key Peregrine clients include two major telecom companies, two major ITES businesses, one leading financial institution, one BPO company, two power companies and two hospitality companies.
Sales from Tenon, our facilities management business, grew 16% to $24.3m (FY 2014 $21.0m). A number of contracts were signed during the period including key wins with online retailer Amazon for the provision of services in Ahmadabad, Hyderabad and Ludhiana and with Subhash Projects and Marketing Limited (SPML), a leading infrastructure development company with operations all over India.
With a view to building on an increasing number of opportunities, Tenon launched proactive security surveillance company Soteria with the support of IBM in July 2014. Based in Gurgaon, India, Soteria has the capability of providing its clients in India and around the world with an active surveillance service capable of stopping or preventing unwanted events rather than simply monitoring them passively. A number of banks have visited the centre and it is expected that this division will be cash positive during the current financial year.
Meanwhile, Tenon’s mechanical and engineering services subsidiary, Rotopower, continued to perform in line with expectations.
The key to the period was setting the stall to take advantage of the improved economic outlook in India while also exploring avenues for geographic growth. As such, we grew our potential reach within in India with Peregrine Guarding signing a memorandum of understanding with the Government of Meghalaya State in North Eastern India for the training of candidates into the security and guarding industry.
Furthermore, we continued to develop our international presence, signing a joint venture agreement with Tanami Holding Co (“Tanami”), a leading Saudi Arabian multinational with a view to increasing the Group’s presence in the Middle East. This is expected to commence operations in the current financial year. We also launched of operations in Sri Lanka through its subsidiary Tenon Property Services (Lanka) Private Limited (“Tenon Lanka”).
High levels of repeat business ensure that visibility remains strong while a growing pipeline of potential new business is encouraging as far as future scalability is concerned. We felt it key to invest in our sales and marketing function and look forward to benefiting from a strengthened presence both in India and internationally. We will also benefit from the implementation of our new enterprise resource planning system, during the current financial year which will bring cost as well as operational efficiency.
Geographic growth will be aided by the proposed acquisition of the entire issued share capital of UK based property service company Office & General Group Limited (“O&G Group”) for a total consideration of up to £6.5m in cash and shares as announced at the beginning of this month. This is expected to be completed in early September and is in line with our stated strategy of growing our geographical footprint and the business through targeted acquisitions, as well as organically.
We also remain focused on expanding our facilities management business base fairly quickly and continue to approach large institutional clients who are open to completion. In order to win this type of business, the Company needs to use a more aggressive pricing strategy which creates pressure on margin in this area of the business. As a result, whilst this type of businesses continues to be profitable, it is less profitable compared to relatively smaller projects. Once the Company reaches its desired level we will adjust our pricing strategy to achieve a higher level of profit.
Given market fundamentals and our performance to date we are confident that investment made during the period will benefit trading during the current year. Our business performance is progressing very well, aided by our robust business pipeline.
28 August 2015