MITIE : Annual Report and Accounts 2020

Mitie Group plc

Annual Report and Accounts 2020

Dear Shareholders,

I am writing to you in the middle of the COVID-19 crisis when our company is focused on protecting the health and safety of colleagues, customers, other business partners and the communities we serve. While, at the same time, we are ensuring that our businesses are able to continue with minimal disruption and to deliver the essential services we provide to our customers.

As part of our response to COVID-19, we have cut many costs including those associated with producing a glossy brochure style annual report and accounts. Inside you will find all the information you have come to expect from Mitie, just presented in a plain text format. For those of you who opt to receive a hard copy, this document will be printed out and posted to you. My traditional letter to shareholders appears on page 7.

I thank you for your support and understanding.

Derek Mapp

Chairman

About Mitie

We are the UK's leading facilities management and professional services company, providing a range of services to a large, diverse customer base, which includes blue-chip organisations and the public sector. Our expertise, care, technology and insight create amazing work environments, helping our customers be exceptional, every day.

Exceptional, every day for our customers

Our customers range from banks and retailers, to hospitals, schools and government entities. We received a net promoter score of +30 this year. We have an order book of £4.3bn and a pipeline of opportunities of £7.9bn.

Read more on page4.

Exceptional, every day for our employees

Our 47,500 employees go the extra mile for our customers and each other to deliver basics brilliantly. We are driven by our vision of 'The Exceptional, Every Day' and our vision and values. We are One Mitie.

Read more on page 49.

Exceptional, every day for our environment

In 2010, we committed to reduce our emissions intensity by 35% by 2020. By rationalising our estate, restricting business travel and improving fleet efficiency, we achieved this a year early. We have now set an even more ambitious target to reach net zero carbon by 2025.

Read more on page 67.

12BStrategic report

Governance

Financial statements

13B02

14B03

15B04

16B07

17B11

About MitieFinancial highlightsGroup information Chairman's statement Business model Market review

• 95 Chairman's introduction to governance and the Board

• 97 Board biographies

  • 174 Independent auditor's report to the members of Mitie Group plc

• 103 Governance at a glance

• 103 Board leadership and company purpose

  • 185 Consolidated income statement

    18B14

    19B16

    20B17

    Our strategy in action Chief Executive's strategic review

• 113 Division of responsibilities

  • 186 Consolidated statement of comprehensive income

• 118 Composition, succession and evaluation

  • 187 Consolidated balance sheet

    21B24

    2B27

    Key performance indicators Operating review

• 122 Audit, risk and internal control Remuneration

  • 189 Consolidated statement of changes in equity

    23B37

    24B45

    25B47

    Finance review Stakeholder engagement Non-financial information statement

• 127 Nomination Committee

  • 190 Consolidated statement of cash flows

• 128 report

  Audit Committee report

  • 192 Notes to the consolidated financial statements

• 131 Directors' remuneration

  • 247 Company balance sheet

    26B48

    Mitie Social Value and Responsible Business Charter Our people

• 141 report

  Social Value & Responsible

  • 248 Company statement of changes in equity

    28B49

    Delivering social value

• 162 Business Committee report Disclosure Committee report

  • 249 Notes to the Company financial statements

    29B55

    30B61

    Focus on Environment, Social and Governance

• 164 Directors' report

• 165 Statement of Directors'

  31B67

  32B70

  3B74

  34B77

  Plan Zero/Environment Section 172(1) statement Effective risk management Principal risks and uncertainties Viability statement

• 172 responsibilities

• 253 Appendix - Alternative Performance Measures (APMs)

• 255 Shareholder information

35B92

Financial Highlights (for the year ended 31 March 2020)

Fur financial otnotes

0B£2.2bn 48BRevenue 49B(FY 18/19: £2.1bn)

1B£86.1m

Operating profit before other items

• • Revenue1 of £2,174m was 4% ahead of the prior year with flat organic revenue growth

  0F

  (FY 18/19: £79.6m)

• • Operating profit before other items1,2 F1 of £86.1m is 8% ahead of the prior year (FY 18/19 £79.6m)

  1F

  2B16.0p 50BBasic earnings per share before other items

  3B1.33p

  Dividends per share (FY 18/19: 4.0p)

  51B

  52B(FY 18/19: 14.7p)

• • Operating profit increased 55% to £64.6m (FY 18/19 £41.7m), with the higher growth due to lower levels of other items in FY 19/20

  4B£74.9m 53BNet debt (at period-end pre-IFRS 16)

  5B£239.6m

  Daily average net debt (pre-IFRS 16)

• • Basic earnings per share before other items1,2 of 16.0p, 9% ahead of the prior year (FY 18/19 14.7p)

• • Free cash flow of £10.8m (FY 18/19 £21.4m)

  54B(FY 18/19: £140.7m)

  (FY 18/19: £302.0m)

  6B£4.3bn

  £7.9bn

  7B

  Secured order book (FY 18/19: £4.1bn)

  Pipeline of opportunities (FY 18/19: £9.6bn)

• • Continued improvement in period-end net debt to £74.9m (FY 18/19 £140.7m) and lower leverage to 0.7x (FY 18/19 1.33x) on a pre-IFRS 16 basis

• • Order book1 increased 4% to £4.3bn (FY 18/19 £4.1bn)

• • Net Promoter Score (NPS) increased to +30 (FY 18/19 +12)

Financial Summary

FY 19/20

FY 18/19

£m unless otherwise specifiedBefore other items2

TotalBefore other items2

Total

Revenue1 Operating profit1 Operating profit margin1 Profit before tax1 Profit for the year Basic earnings per share Full year total dividends per share	2,173.7	2,173.7	2,085.3 2,085.3 79.6 3.8% 65.9 63.7 14.7p1 41.7 2.0% 28.0 30.9 8.6p 4.0p
	86.1 4.0%	64.6 3.0%
	69.9	48.4
	60.3	90.5
	16.0p1	25.0p
	1.33p

FY 19/20

FY 18/19

Period-end net debt (pre-IFRS 16)3 Average daily net debt (pre-IFRS 16) Period-end net debt (post-IFRS 16)3 Order book1

74.9

239.6

167.9

4,294.4

140.7 302.0

n/a 4,120.8

Reconciliation of the Group's performance measures to its statutory results is provided in the Appendix - Alternative Performance Measures

• 1 From continuing operations

• 2 Other items are as described in Note 4 to the consolidated financial statements

• 3 Note 25 to the consolidated financial statements for analysis of net debt

Group Information

Mitie is the UK's leading facilities management and professional services company. We offer a range of services including Technical Services (engineering services, energy, water and real estate services), Business Services (security, cleaning and office services) and Specialist Services (Care & Custody, Landscapes and Waste Management).

Our Vision The Exceptional, Every Day.

Our purpose Our expertise, care, technology and insight create amazing work environments, helping our customers be exceptional, every day.

What we do

We are the UK's leading facilities management (FM) and professional services company, employing 47,500 people. We manage and maintain some of the nation's most recognised landmarks and work with a wide range of blue-chip organisations and public sector customers. We have scale and nationwide reach as well as breadth and depth of facilities management services, which we deliver in a flexible, tailored proposition through self-delivery or strategic partnerships.

We work in partnership with our customers to grow customer lifetime value by offering technology-backed solutions; our technology is a true differentiator. We are ambitious for the future of the FM industry, our customers and our employees.

We deliver the exceptional through a range of services

Mitie operates through three principal divisions: Technical Services, Business Services and Specialist Services.

Technical Services

The Technical Services division provides public and private sector customers with a broad range of crucial project and maintenance services that keep their organisations running. The division incorporates a range of key engineering, maintenance, repair and project services, energy and carbon management services and water and real estate services.

Maintenance: Mitie has extensive knowledge of, and experience in, maintaining and repairing buildings and assets in various industries and sectors. Maintenance areas include electrical, mechanical, controls, water, HVAC, lighting systems and building fabric, such as repair, decoration and painting works. Across these areas, Mitie offers a flexible and proactive suite of services, which include mobile and site-based maintenance, maintenance and repair, remote monitoring, data analytics and remote intervention. Mitie's maintenance services utilise technologically-advanced data-driven capabilities, in-house expertise and mobile engineering with a national presence, to deliver a comprehensive range of services tailored to customer needs, with a focus on up-time, energy efficiency, carbon impact and whole-life cost of the relevant asset or facility.

Engineering Projects: Mitie's engineering project capabilities deliver end-to-end services across a comprehensive range of maintenance, engineering and refit works. These services include design and planning of building projects and systems, as well as highly skilled contracting works. An experienced principal contractor, Mitie manages project-based services across the commercial, retail, industrial, social, education, leisure and domestic property sectors.

Business Services

The Business Services division keeps some of the UK's biggest companies and most iconic buildings running, across a variety of diverse sectors including: transport and aviation, retail and distribution, government and public sector, critical national infrastructure, manufacturing, and corporate and iconic buildings.

'Soft Services' such as security, cleaning, front of house, and document management are often intrinsically linked in their delivery. Customers are increasingly coming to market with 'soft services' tenders, as they look to bundle these together to achieve maximum efficiency, which Mitie is uniquely positioned to deliver.

The formation of the Business Services division, led by a senior leadership team unrivalled in the industry, has created obvious synergies in back-office support and frontline operations, and ensures that we deliver the exceptional every day to our business services customers.

Security: Mitie Security is the UK's largest intelligence-led security business. It provides safe and secure environments for its customers, by combining the deep expertise of its people, harnessing the power of its systems, and deploying the best technology. Translating operational data into meaningful insights gives its people the actionable intelligence to deliver effective security solutions, in the right place and at the right time.

Providing integrated, risk-based solutions, Mitie Security delivers a range of services, including manned guarding using its unique intelligence-led approach to security personnel, fire and security services. Mitie Security is now the UK's fifth largest integrator and its 24/7 proprietary business intelligence software helps customers better protect their people assets and environments.

Cleaning: Mitie Cleaning & Environmental Services is a people-centric business, supplemented by industry-leading technology, providing quality cleaning services through safe and secure practices to a wide range of sectors in both the public and private space. It delivers specialist services through an innovation-led approach, utilising sector-specific capabilities. Its specialist offering to the public sector includes providing general cleaning and specialist services to the NHS, including some of the UK's largest hospitals, via its healthcare division, a large footprint in the education sector, including schools and universities, and services for a wide range of public sector and government organisations.

In the private sector, its clients range from diverse industries such as distribution, automotive and the industrial sector, large corporate organisations and iconic buildings in London, to leading pharmaceutical clients with specific clean room environment requirements.

Specialist Services

Specialist Services incorporates a number of specialised services, including Mitie's Care & Custody, Waste Management and Landscapes businesses.

Care & Custody provides high-quality, critical public services in immigration, criminal justice and healthcare. A range of its services are delivered to vulnerable adults in secure environments, including immigration removal centre management and detention and escorting services on behalf of the Home Office. Care & Custody also provides forensic medical examination and custody support services for police forces across England and Wales.

Mitie Waste Management is a leading national waste management business providing innovative waste reduction and treatment solutions. The business views waste as a resource; an opportunity to save money for clients, as well as benefit the environment. Waste Management extracts the value of redundant materials instead of relinquishing it to the waste industry, sharing the gains with clients so that waste reduction and changes in behaviour are incentivised. Mitie Waste Management is focused on waste prevention, reduction, reuse and recycling.