Director, RaaS Advisory, Research as a Service (RaaS)

Research as a Service (RaaS)

Director, RaaS Advisory

Insightful Financial Models and Research Analysis

Connect to the right investors through smart and insightful financial models and research analysis.

Equity Bottom-Up

Millennium Services Group Ltd / Equity Bottom-Up

<div>
<div>
<div>
<div>
<h2>Millennium Services Group Ltd</h2>
<h3>Secure balance sheet, positioned for growth</h3>
<div>
<div>
<div>
<div>
<div class="content-highlight">
<p>Millennium Services Group Ltd (ASX:MIL) is a market leading provider of cleaning &amp; security services, predominantly to tier-1 property trusts and retailers (~75% of revenue in FY20). The business employs more than 5,000 people and it is the coordination and utilisation of these people across the group’s contracted facilities that determines group profitability. Between FY16 and FY18 the fundamentals of people management slipped, resulting in labour inefficiencies, poor tendering practices, a bulging cost structure and higher debt via an acquisition which ultimately failed to deliver on acquired metrics. In November 2018, these problems were acknowledged, and new management installed to fix them. Fast forward 18-months and significant progress has been made, albeit a little muddied (and aided) by COVID. Debt has been refinanced and reduced by $20m since June 30, $7m has been reduced from the cost base (with $4m to come) and ~70% of the workforce migrated to new rostering technology. The entire workforce has been moved to modern award wages, and compliance and disclosure (including financial) has improved markedly. Legacy contracts have been renewed at more sustainable rates or discontinued and relationships within new sectors being formed for future opportunities. Key financial metrics such as GP% are improving as a result with more gains expected over FY21.</p>
</div>
<div>
<div>
<div>
<div>
<p><strong>Business model<br></strong>MIL is essentially a human services business, bidding for predominantly fixed rate contracts, with opportunities for volume gains and adhoc services, across the essential services of cleaning &amp; security for durations of 3-5 years with large corporates. Satisfying contractual obligations utilising a vast workforce and procuring consumables for the jobs within the contacted price is the key to profitability. Historically focusing on cleaning and security services within major shopping centres, MIL is looking to de-risk the retail exposure by moving into new sectors including Aviation, Aged care, Education and Government.</p>
<p><strong>Cleanup largely complete<br></strong>It is said that a problem cannot be dealt with until a problem is acknowledged, and in November 2018 widespread legacy issues were acknowledged by a new MIL board and senior management with a view to resolving them. They ranged from a lack of accountability across all layers of the business, an overhead cost structure that was too high, the bidding/winning of tenders at lower than historical gross profit margins, rostering and labour inefficiencies leading to non-recoverable overtime payments and the incorrect application of some EBA allowances. Overlay high debt levels and an earnings hole was created. Fast forward 18-months and overhead costs have been reduced by $7m, contracts have been renewed with all but $20m (5%-6%) in business retained (with most of the business foregone low margin or loss-making), new technology is being employed across the group to improve labour management which incorporates compliance with all modern awards, and mostly importantly debt has been reduced by $20m and facilities refinanced since June 30. Despite COVID (which has been a cashflow benefit but a business disruption), underlying gross margins and EBITDA improved in FY20, with further progress forecast for FY21.</p>
<p><strong>Look to people heavy businesses for peer comparison<br></strong>Millennium is a people intensive business which marks up labour costs to cover group overheads and achieve a targeted return. This is no different to human services businesses providing accounting, legal, construction or mining services. Key differences between these industries and firms that service them will centre around cyclicality, the level of “value add” or “differentiation” and the base salary from which the service is being marked-up. ASX listed peers we look to include electrical &amp; facilities manager Tempo Australia (ASX:TPP), workforce management group People Infrastructure (ASX:PPE), contractors such as Decmil (ASX: DCG) and engineering services company Logicamms (ASX:LCM).</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>





Millennium Services Group Ltd
Secure balance sheet, positioned for growth





Millennium Services Group Ltd (ASX:MIL) is a market leading provider of cleaning &amp; security services, predominantly to tier-1 property trusts and retailers (~75% of revenue in FY20). The business employs more than 5,000 people and it is the coordination and utilisation of these people across the group’s contracted facilities that determines group profitability. Between FY16 and FY18 the fundamentals of people management slipped, resulting in labour inefficiencies, poor tendering practices, a bulging cost structure and higher debt via an acquisition which ultimately failed to deliver on acquired metrics. In November 2018, these problems were acknowledged, and new management installed to fix them. Fast forward 18-months and significant progress has been made, albeit a little muddied (and aided) by COVID. Debt has been refinanced and reduced by $20m since June 30, $7m has been reduced from the cost base (with $4m to come) and ~70% of the workforce migrated to new rostering technology. The entire workforce has been moved to modern award wages, and compliance and disclosure (including financial) has improved markedly. Legacy contracts have been renewed at more sustainable rates or discontinued and relationships within new sectors being formed for future opportunities. Key financial metrics such as GP% are improving as a result with more gains expected over FY21.





Business model MIL is essentially a human services business, bidding for predominantly fixed rate contracts, with opportunities for volume gains and adhoc services, across the essential services of cleaning &amp; security for durations of 3-5 years with large corporates. Satisfying contractual obligations utilising a vast workforce and procuring consumables for the jobs within the contacted price is the key to profitability. Historically focusing on cleaning and security services within major shopping centres, MIL is looking to de-risk the retail exposure by moving into new sectors including Aviation, Aged care, Education and Government.
Cleanup largely complete It is said that a problem cannot be dealt with until a problem is acknowledged, and in November 2018 widespread legacy issues were acknowledged by a new MIL board and senior management with a view to resolving them. They ranged from a lack of accountability across all layers of the business, an overhead cost structure that was too high, the bidding/winning of tenders at lower than historical gross profit margins, rostering and labour inefficiencies leading to non-recoverable overtime payments and the incorrect application of some EBA allowances. Overlay high debt levels and an earnings hole was created. Fast forward 18-months and overhead costs have been reduced by $7m, contracts have been renewed with all but $20m (5%-6%) in business retained (with most of the business foregone low margin or loss-making), new technology is being employed across the group to improve labour management which incorporates compliance with all modern awards, and mostly importantly debt has been reduced by $20m and facilities refinanced since June 30. Despite COVID (which has been a cashflow benefit but a business disruption), underlying gross margins and EBITDA improved in FY20, with further progress forecast for FY21.
Look to people heavy businesses for peer comparison Millennium is a people intensive business which marks up labour costs to cover group overheads and achieve a targeted return. This is no different to human services businesses providing accounting, legal, construction or mining services. Key differences between these industries and firms that service them will centre around cyclicality, the level of “value add” or “differentiation” and the base salary from which the service is being marked-up. ASX listed peers we look to include electrical &amp; facilities manager Tempo Australia (ASX:TPP), workforce management group People Infrastructure (ASX:PPE), contractors such as Decmil (ASX: DCG) and engineering services company Logicamms (ASX:LCM).













Millennium Services Group Ltd Secure Balance Sheet, Positioned for Growth

Australia

Millennium Services Group Limited provides cleaning and security services. The Company offers guard and protection, planned preventative maintenance, contractor management, facilities, and maintenance services. Millennium Services Group serves customers in Australia and New Zealand.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Millennium Services Group Ltd (MIL AU)

Millennium Services Group Ltd Secure Balance Sheet, Positioned for Growth

Millennium Services Group Ltd Secure balance sheet, positioned for growth Millennium Services Group Ltd (ASX:MIL) is a market leading...

Research as a Service (RaaS)

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)