Mitie : FY21 Preliminary Results Statement

10 June 2021

Mitie Group plc

Full Year results for the twelve months to 31 March 2021

"A defining year of strategic progress and financial resilience"

• Good trading resilience through COVID-19: revenue including share of joint ventures and associates of £2,589m1, up 19.1%; excluding the contribution from Interserve, revenue was 1.6% lower
• Group revenue1 of £2,560m (FY20 £2,174m)
• Operating profit before other items4 of £63.4m (FY20 £86.1m) - impacted by revenue mix and reduced project work due to COVID-19
• Stronger second half with revenue growth of 6.5% versus previous year
• Interserve Facilities Management ("Interserve") acquisition performing better than expected, accelerating value creation. £6.2m cost and revenue synergies achieved in FY21. Cost synergies raised to £42m (from £35m) achieved by FY23 - at same cost
• Market leadership in our three core markets: Cleaning, Security and Technical Services
• Strengthened balance sheet: £190m rights issue; £250m RCF refinanced; and BBB Investment Grade credit rating achieved
• Average daily net debt significantly reduced to £47.1m (FY20 £327.6m) post-IFRS 16
• Outlook for FY22 anticipated to be materially ahead of our prior expectations

Results for the twelve months ended 31 March 2021

	Twelve months to 31 March 2021	Twelve months to 31 March 2020
£m unless otherwise specified	Before other			Before other	Other
	items2	Other items2	Total	items2	items2	Total
Revenue including share of JVs & associates1	2,589	-	2,589	2,174	-	2,174
Group revenue1	2,560	-	2,560	2,174	-	2,174
Revenue excluding Interserve3	2,139	-	2,139	2,174	-	2,174
Operating profit4	63.4	(55.1)	8.3	86.1	(21.5)	64.6
Operating profit margin4	2.4%		0.3%	4.0%		3.0%
Profit/(loss) before tax1	46.0	(55.1)	(9.1)	69.9	(21.5)	48.4
Profit/(loss) for the year1	37.5	(47.6)	(10.1)	58.0	(17.5)	40.5
Basic earnings/(loss) per share1,5	3.5p		(0.9)p	8.3p		5.8p
Dividend per share6			-			0.69p
Average daily net debt (post-IFRS 16)			(47.1)			(327.6)
Closing net debt (post-IFRS 16)7			(86.7)			(153.0)
Secured order book			7,202			4,294

Commenting on FY21 results, Phil Bentley, Group Chief Executive, said:

"FY21 was a defining year for Mitie and completes our four year transformation. The Group showed great resilience during the COVID pandemic; we strengthened our balance sheet; and the Interserve acquisition is performing well. Mitie is now the market leading provider of intelligent technology-led facilities management, with a clear pathway to deliver growth and sustainable free cash flow.

Notes:

1. From continuing operations.
2. Other items are as described in Note 4 to the condensed consolidated financial statements.
3. Group revenue from continuing operations adjusted to exclude revenue from Interserve Facilities Management.
4. Operating profit from continuing operations includes share of profit after tax from joint ventures and associates.
5. Earnings per share from continuing operations for FY20 have been restated for the bonus element of the rights issue.
6. Interim dividend for FY20 was 1.33p; the subsequent 11 for 5 rights issue adjusts the dividend to 0.69p.
7. FY20 closing net debt has been restated for a change in accounting policy see Note 1 to the condensed consolidated financial statements.

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"I am so proud of our 65,000 front-line heroes who have gone to work every day throughout the pandemic, delivering exceptional customer service and keeping Britain's vital infrastructure - hospitals, schools, supermarkets, manufacturing plants and some of Britain's most strategic assets - clean, safe and properly maintained. An unprecedented 30,000 of our colleagues recently completed our annual employee engagement survey which saw an impressive 9ppt improvement.

"Although COVID has challenged us all, our business has been far more resilient than we originally expected, with revenue, excluding the contribution from Interserve, just 1.6% lower than the prior year. The second half of the year was significantly better than the first half, with 6.5% year on year growth, as variable projects and discretionary spend works picked up and cleaning and security demand increased.

"Interserve is performing strongly as part of Mitie and we have successfully renewed or extended all major Interserve contracts that were due for renewal. We have also realised £6.2m of synergies in FY21 and have identified additional cost synergies to take our forecast run rate from £35m to £42m by end FY23.

"Mitie has been transformed over the last four years. Our focus on delivering great service, backed by our technology offering, has resulted in our highest ever customer net promoter score of +50 ppts and all-time high contract renewal rates of 96%, complemented by significant new customer wins.

"As businesses slowly start to reopen and our customers' employees return to offices, we are starting to see some green shoots of recovery in the variable project and discretionary spend works and we anticipate this continuing as reoccupation plans solidify. With some high-quality new contract wins, short-term support to the public sector and additional synergies from the integration of Interserve, we now anticipate FY22 will be materially ahead of our prior expectations.

"The transformation of Mitie and the acquisition of Interserve has created a strong base from which Mitie is well positioned to prosper. Our new strategy will focus on increasing growth, margin enhancement and cash generation. The new Mitie will target, over the medium term, mid single digit revenue growth, margins of 4.5-5.5%, sustainable free cash flow and ROIC in excess of 20%."

- END -

The Chief Executive's Review, Operating Review and Finance Review follow from page 4.

Analyst Presentation and Q&A

Phil Bentley (CEO) and Simon Kirkpatrick (CFO) will host a presentation and Q&A session today (10 June 2021) at 9.30am via Zoom. For dial in details please contact [e-mail]. A copy of the presentation will be available on the Company website in advance of the live presentation. www.mitie.com/investors.

For further information please contact:

Fiona Lawrence

Group IR Director

1. [phone] (D) [e-mail]

Claire Lovegrove

Head of Media Relations

1. [phone]

1. [phone] [e-mail]

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About Mitie

Founded in 1987, Mitie's job is to look after the places where Britain works and is the leading facilities management company in the UK.

We offer a range of services in the Public Sector to Central Government and Defence customers; and to Communities (Healthcare, Education and Local Authorities) customers; and Technical Services (Engineering Services, Energy, Water and Real Estate Services) and Business Services (Security, Cleaning and Office Services) to Private Sector clients in Financial Services, Manufacturing, Transport, Retail and Telecoms and increasingly to the public sector. Finally, our Specialist Services (Care & Custody, Landscapes and Waste Management) division serves both the public and private sector in higher margin niche businesses.

Mitie acquired Interserve's Facilities Management business on 30 November 2020 and now employs 75,000 people. We are the champion of the 'Front-Line Heroes' who have kept Britain working during the COVID-19 pandemic. We take care of our customers' people and buildings, through the 'Science of Service', delivering essential services and deploying industry leading technology to create safe and effective workspaces.

The business continues to execute its technology-led strategy has received multiple awards for the progress it has made.

Find out more at www.mitie.com.

The business continues to execute its technology-led investment strategy and has received multiple awards for the progress it has made:

Corporate

• Armed Forces Covenant signatory
• Best Website, UK Digital Experience Awards
• Bronze Award, Fleet Operator Recognition Scheme
• CIPS Procurement Excellence Award
• Gold Award, Defence Employer Recognition Scheme
• Inhouse Legal Team of the Year, LexisNexis Legal Awards
• Institute of Internal Communications National Awards for Best News Magazine and Best Video Animation
• IWFM COVID-19 Response Award: Keeping Good Work Going
• Best Corporate Magazine, Corporate and Financial Awards

Technology

• UK IT Industry award for the Artificial Intelligence/ Machine Learning project of the year with Esme Chatbot
• Computing Digital Technology Leaders Award for Big Data / IoT Project of the Year
• Data Into Insight and Artificial Intelligence & Machine Learning Project of the Year, Real IT Awards
• Mitie Fire & Security Systems - Outstanding Security Installer/Integrator
• Merlin Protect 24/7 - Mitie Security - Outstanding New Security Product
• Mitie Security - Outstanding Contract Security Company
• National British Security Awards: Best use of Technology
• Verdantix Smart Building Innovation Award for Facilities Management Services
• Lockdown Hero of the Year - Mitie Security, Security and Fire Excellence Awards
• Outstanding Security Team - Mitie Security, Outstanding Security Performance Awards

ESG

• A- 'Leadership' rating for Climate Change, CDP
• 9.8 'Negligible Risk' ESG score, Sustainalytics
• AA 'Leadership' rating, MSCI
• FTSE4Good Developed Index
• Green Fleet of the Year, Business Car Awards
• Green Fleet Private Sector Fleet of the Year, Green Fleet Awards
• 'Most Inclusive' Top 50 Company
• RE100, EP100 and EV100, The Climate Group
• RoSPA Gold - Royal Society for the Prevention of Accidents
• Top Employer, recognised by Top Employers' Institute
• Gold Award, Sustainable FM Index

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Chief Executive's strategic review

Mitie's strategic transformation

Mitie has been transformed over the last four years. Our focus on delivering great service, delivered cost- efficiently by great people, and backed by our technology, has resulted in our highest ever customer Net Promoter Score (NPS) of +50 ppts and all-time high contract renewal rates of 96%, complemented by significant new customer wins.

Mitie's strategy has been based around the four pillars of Customer, People, Technology and Balance Sheet/Cost. We are focused on becoming the market leader in the three core facilities management services of Cleaning, Security and Technical Services and achieving a best-in-class customer NPS. The acquisition of Interserve Facilities Management ("Interserve") on 30 November 2020 has bolstered Mitie's Public Sector standing, gaining leadership positions across Central Government and Defence, Healthcare and critical infrastructure.

Customer

Reflecting our focus on putting our customers at the heart of our business, Mitie's NPS has increased to +50ppts from -27ppts four years ago. This is largely due to the introduction of award-winning marketing campaigns and Strategic Account Managers (SAMs) empowered to deliver exceptional customer service, backed by leading technology. The creation of SAM accounts has also supported an increase in cross- selling and upselling, benefiting revenue growth.

People

Four years ago Mitie set out to create a 'Great place to work' and to be the 'Employer of choice' in the facilities management industry. Significant progress has been made on both counts with our Employee Engagement score increasing from 33% to 55% and employee retention rates significantly improving. We have continued to invest in our colleagues, whether it be through an additional day's holiday for our front- line, an enhanced benefits package including Salary Finance, life assurance, a Virtual GP service, or learning and development to help colleagues build on their skills. Uniquely all Mitie colleagues have been granted free shares and will therefore share in the value they are helping to create. All Mitie benefits were put in place for Interserve colleagues from 1 December 2020.

Technology

A third strategic imperative was to embed technology to differentiate Mitie's offering across all service lines. The Group now has an advanced cyber-resilient,cloud-based IT platform to run the business, largely automating our systems supporting workforce management (Workplace+); workflow management systems (Forté); our HR/payroll processes (SAP Success Factors); and our back-office finance and procurement processes. COVID has highlighted the strength of Mitie's technology. Digital Workplace and Monitoring have allowed customers to manage their building capacity, utilise cleaning more efficiently and keep buildings secure during periods of closure or semi-occupation. There are now 34 customers automatically served by 'chatbots' and 94 customers receiving real time management information (MI). Mitie leads the industry in cyber resiliency. Straight-through processing in HR and Finance have advanced considerably. The roll out of Mitie technology to Interserve customers is a priority, with 26 customers expected to move onto our chatbot or MI platforms, with half due to be delivered between now and September. This is a key driver to improve Interserve customers' NPS.

Balance Sheet/Cost

The fourth element of our strategy was to strengthen our balance sheet and reduce costs. Our balance sheet today is significantly stronger with net assets of £362m at 31 March 2021, compared to £81m at the prior year end, with sustainable leverage of less than 1x our EBITDA and a significant reduction in

off balance sheet financing. £45m total savings were achieved from Project Helix (IT/Finance/HR/Management) and reinvested for long-term growth in SAMs, sales and marketing,

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modernising IT and investment in technology. Project Forté is expected to deliver net savings of £15- 20m as it seeks to drive efficiency and productivity across Technical Services. The experience gained from rolling out WorkPlace Plus and Forté, as well as from the integration of VSG in 2019, will help to deliver a successful integration of Interserve.

COVID-19 ("COVID")

Mitie has provided critical and essential support to customers and to the wider British public during the pandemic through its delivery of additional security and specialist cleaning services, mobilising three Nightingale Hospitals and standing up over 200 COVID testing centres. Mitie has played an important role keeping Britain working during the pandemic, although profitability has been impacted from the reduced demand for core facilities management, and the drop off in variable project and discretionary work. Customers have also delayed procurement decisions and offered short-term extensions for contracts which would normally have renewed for a longer period, thus resulting in a slightly reduced order book.

Mitie established three overriding priorities in response to the COVID crisis: protecting the health and safety of colleagues, customers, and the communities that Mitie serves; ensuring the Group could continue to operate and deliver essential services to customers; and finally, preserving financial strength through cost saving initiatives, delaying certain tax payments and utilising the Coronavirus Job Retention Scheme.

Pay rises for staff were deferred and the Board took voluntary pay cuts of up to 30% to preserve cash.

As trading performance improved in the second half of FY21, the financial benefits offered by Government were repaid, including HMRC's 'Time to Pay' initiative and those furlough payments relating to colleagues employed directly at Mitie's own operations.

Outlook

Although the world of work in a post-COVID environment is changing, Mitie's investments in customer- facing technology, as well as in the efficiencies by which we manage our 'workflow' and our 'workforce' - collectively what we call 'The Science of Service' - positions Mitie well to prosper from its industry-leading NPS and E-ENG scores, with good performance in retention and new business wins. New working environments require improved standards of assurance and monitoring with employee well-being at their heart. This plays to Mitie's strategy of building leading technical skills at its Cleaning, Security and Technical Services' Centres of Excellence.

As businesses slowly start to reopen and our customers' employees return to offices, we are starting to see some green shoots of recovery in the variable project and discretionary spend works and we anticipate this continuing as re-occupation plans solidify. With some high-quality new contract wins, short-term support to the public sector and additional synergies from the integration of Interserve, we now anticipate FY22 will be materially ahead of our prior expectations.

The transformation of Mitie and the acquisition of Interserve has created a strong base from which Mitie is well positioned to prosper. Our new strategy will focus on increasing growth, margin enhancement and cash generation. The new Mitie will target, over the medium term, mid single digit revenue growth, margins of 4.5-5.5%, sustainable free cash flow and ROIC in excess of 20%.

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