Mitie Group Annual Report 2012

← All annual reports

FY2012 Annual Report · Mitie Group

Loading PDF…

MITIE Group PLC
Annual Report and Accounts 2012

The strategic outsourcing
and energy services company

25 years…
never stop looking forward.

Over the last 25 years
our entrepreneurial spirit
and passionate people
have been a constant
force driving us forward.

We’ve certainly adapted
and changed over the
years, and will continue
to do so for years to come.

Keeping in-step with
what our customers need,
and delivering beyond
their expectations is what
makes us special…

it’s what makes us MITIE.

To mark the 25th year of MITIE, we asked
photographer Ed Robinson to document
how far we’ve come and what we stand
for today through a series of 25 images…

You can keep up to date with all things
MITIE during our milestone year by following
us across our social media channels.

facebook.com/mitiepeople
twitter.com/mitie_group_plc
youtube.com/user/MITIEGroupPLC

#25mitie

MITIE Group PLC
Annual Report and Accounts 2012

Introduction

This year…

More on our
work with Essex
County Council

Accounts

Independent auditor’s report
to the members of MITIE Group PLC

Consolidated income statement

Consolidated statement
of comprehensive income

Consolidated balance sheet

Consolidated statement
of changes in equity

Consolidated statement of cash ﬂows

Notes to the consolidated
ﬁnancial statements

Independent auditor’s report
to the members of MITIE Group PLC

Company balance sheet

Notes to the Company
ﬁnancial statements

Shareholder information

our work
with Diageo

22More on

Governance

Directors’ report: Board of Directors

Directors’ report: corporate
governance statement

Directors’ report: statement
of Directors’ responsibilities

Directors’ remuneration report

36More on our

work with NMK

Overview

MITIE at a glance

Chairman’s statement

Business review

Chief Executive’s strategy overview

Key performance indicators

Other ﬁnancial targets

New contract summary

Marketplace overview

Operating review

Sustainability overview

Financial review

Factors that could affect our business

Directors’ report
The Directors present the Annual Report and Accounts for the year ended 31 March 2012. References to ‘MITIE’, the ‘Group’,
the ‘Company’, ‘we’, or ‘our’ are to MITIE Group PLC or to MITIE Group PLC and its subsidiary companies where appropriate. The Directors’
Report that has been prepared, and is published, in accordance with, and in reliance upon, applicable English company law and the
liabilities of the Directors in relation to that report are subject to the limitations and restrictions provided by such law.

Legal disclaimer
The Annual Report and Accounts contains forward-looking statements. Such statements do not relate strictly to historical facts and can
be identiﬁed by the use of words such as ‘anticipate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’, and ‘believe’ and other words of similar
meaning in connection with any discussion of future events. These statements are made by the Directors of MITIE in good faith based on
the information available to them as at the date of approval of the Annual Report and Accounts for the year ended 31 March 2012 and
will not be updated during the year. These statements, by their nature, involve risk and uncertainty because they relate to, and depend
upon, events that may or may not occur in the future. Actual events may differ materially from those expressed or implied in this document
and accordingly all such statements should be treated with caution. Nothing in this document should be construed as a proﬁt forecast.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

121

122

123

IBC

MITIE Group PLC
Annual Report and Accounts 2012

MITIE Entrepreneurs

We have never lost sight of
our entrepreneurial culture

At MITIE, entrepreneurialism has always been at the heart
of our organisation. MITIE stands for Management Incentive
Through Investment Equity. Since we started 25 years ago,
we’ve been partnering with entrepreneurs to grow businesses and
we’re as passionate about this today as we were when we started.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

The ‘MITIE Model’ is for entrepreneurial
management teams who have an idea
for growing a business as a part of MITIE.
It’s structured so that the management
team takes an equity stake of up to 49%
in a business which they grow over a
ﬁve to ten year period, and is eventually
acquired by MITIE in full.

MITIE has supported over 100 start-up
businesses to grow using the MITIE
Model, with a 95% success rate. It has
shaped our entrepreneurial culture,
supported our excellent track record
of growth, and provided the basis
for hundreds of people to develop
successful careers in outsourcing.

In 2011 we launched a £10m fund to
encourage more entrepreneurs to join
us. We have spent nearly half of that
fund and have plans to launch another
one soon. We’re looking to start
businesses that expand the range of
services we offer to our existing clients,
or that will lead us into new markets.
Our range of services is incredibly broad
and we’re open to all ideas that ﬁt with
MITIE’s strategy and have the potential
to attract a growing client base.

We are always looking to enter rapidly
growing markets that have huge
potential for outsourcers to provide
new and innovative solutions.

Care and Custody
After working in the Justice
sector for many years, Colin,
Paul and Alex started MITIE’s
Care and Custody. business
three years ago. The business
supports a core part of MITIE’s
justice strategy.

event
MITIE Millions event
reneurs
In May, six entrepreneurs
hare of our
pitched for their share of our
urial fund.
£10m entrepreneurial fund.

www.mitie.com/entrepreneurs
entrepreneurs

MITIE has supported over 100 start-up businesses

100+
95%
£10m

The MITIE model has a 95% success rate

Entrepreneurial fund launched in 2011

Client Services
Debra and David started
MITIE’s Client Services business
ﬁve years ago. They now
create exceptional, memorable
experiences at their clients’ sites
across the UK.

MITIE Group PLC
Annual Report and Accounts 2012

Our business

Shaping our business
to meet the needs of
our customers…

We specialise in
strategic outsourcing and energy services,
bringing together the expertise and capabilities of
MITIE to help our clients achieve their organisations’ goals
and make their property portfolios more efﬁcient.

We operate through our four divisions…

u n d l e s o f services
n t m a n a g e m e nt and reprographics
a g e m e n t Environmental servic
c c e s s c o nsulting and auditin
d a

Facilities
management
37.3m
£937.3m

e s o r b
cialist servic
a ste m
atering
W
Dis a
use
ntrol
o
nt of h
o
st c

a
b l e

gle sp

C
g
nin
a
e
C

n
i
S

ro
f
d
n
a
n
o

p
e
c

e
P

g
n
p
a
c

s
d
n

y
t
i
r
u
c
e
S

i e s management and a ra

d f a c i
e r g y m a n a gement Mechanical a
a l m o b il e s e r v ices Specialist tec
n , p r o j e c t s and maintenanc
e si g

d ele
al s

nic

g r a t e

a tio

Inte
Lightin g d

Technical
facilities
management
£472.8
£472.8m

t
ri

f
t

uil

r
v
i

m
e
n

n
C
a

m
a

n
d

n
t

e
n
a
n
c
e

e
n
e
r

g
y
s
e
r
v
ic
e
s

e
n
e
r
g
y
s
e
r
vic
e
s

s
y
s
t
e
m
s
a
n
d c
o
ntrols

evenue
revenue

revenu
revenue

operty
Property
agement
management
24.3m
£524.3m

Asse
Asset
manage
management
£68.1
£68.1m

revenue

a irs

stering an d d ry-li n i n
ation an d re
use ﬁ t-out

o
w h

alid
s
e
s v
vic
Pla
laim
g
n
i
r
e
e
n
g
n
e

c
e
c
n
a
u
s
n

r
e
s
y
t
r
e
p
o

e
n
d
n
a

n
e

a
c

ﬁ

i
r

i
t

Fire p

Painting and repairs
ty maintenance Building refurbis
Plumbing and heating
A full suite of proje

o
ﬁ ng
Proper

a
ce contracting
omp
any management
ntre development
cture
ate secure

n
e

v
e

o
p
m
e
n
t

o
f
e

a
n
d
s
u
s
t
a
in
a

ffi cie
ble e
nt te

f
r

g
y
g
e
n
e
r
a
tio
n
E
n

a
s
t
r
u
c
t
u
re
E
n

d
e
v
e
o
p
m
e
nt
Lo
n

ergy perform
ergy services c
w-carbon data c
ergy infrastru
chnologies to cre

…where there is a growing shift in focus towards
Energy Services
which currently contribute around
34% of group revenue.

More detail in our Operating Review:
30—31

…underpinned by a model
designed to generate
value through efﬁciency

In simple terms what we do is to
ﬁnd out what our clients want and use
our people and technology to help them
get it as efﬁciently as possible.

Whether that is lower occupancy costs,
energy performance improvements or
international outsourcing solutions.

Organising people
Our core skill is efficiently
managing and motivating a large
and diverse skilled workforce.

Technology
We integrate, analyse and
then act upon our own and
our clients’ data to make sure
we provide the best service,
at the appropriate time,
for the right cost.

Client strategy
We listen to our clients to
ﬁnd out what is really important
to their organisations and
help them achieve it.

Driven by market expertise
All of our markets have a unique set of requirements and these
requirements are continually changing as clients respond to
what is going on around them. Our teams make it their job
to know what is happening and make sure that the advice
and services we provide are the best they can be.

More detail in our Marketplace Overview:
28—29

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Chairman’s statement

A transformational year…
and strong organic growth

This has been a transformational 25th year for MITIE,
with excellent progress on all of our key strategic objectives,
and sector-leading organic growth.

Overview
Our strategy to focus on organic growth
and develop our integrated facilities
and energy management capabilities
is progressing exceptionally well.
This is a reﬂection of the signiﬁcant and
continuous investments we have made
in key sectors over the last few years.
During the year we saw the award of
a number of transformational contracts
which have enhanced our business.
Our energy capability is now a core
part of our client proposition and we
are the second largest energy services
company in the UK.

This has resulted in strong organic
revenue and operating proﬁt growth
during the year. More importantly,
we are well placed to deliver further
organic growth in these key areas
going forward, as is evident in both our
record order book and large pipeline
of sales opportunities.

We have also made a number of
niche acquisitions which will help us
to enter new and specialist markets.
Utilyx provides a specialist energy
and carbon consultancy and Direct
Enquiries is the UK’s leading access
and disability consultancy. True to
our entrepreneurial roots, we continue
to use the original MITIE Model to
start and grow innovative businesses
and it remains a key differentiator for
the group.

These developments leave us in a
strong position as we enter the new
ﬁnancial year.

Revenue
£m

+5.9%

Operating proﬁt before
other items* £m

+7.2%

Proﬁt before tax
£m

+8.9%

5
.
2
0
0
2

4
.
1
9
8
1

1
.
0
2
7
1

9
1
2
5
,
1

2
.

7
0
4

5
.

0
8

2
7

7
1
1
1

2
.
4
0
1

0
.
3
9

5
.
4
9

.
6
8

9
.
5
7

.
9
7

9
.

7
6

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Results
During the year, revenues grew by
5.9% to £2,002.5m (2011: £1,891.4m).
Operating proﬁt before other items*
increased by 7.2% to £111.7m (2011:
£104.2m excluding the pension credit
of £4.1m), reﬂecting a margin* of 5.6%
(2011: 5.5%). Proﬁt before tax increased
by 8.9% to £94.5m (2011: £86.8m).
Basic earnings per share increased by
10.2% to 20.5p (2011: 18.6p) and earnings
per share before other items remained
ﬂat at 22.6p (2011: 22.6p).

We have retained our strong focus
on cash, reporting cash inﬂows from
operations of £110.2m (2011: £102.5m)
for the year, which represents
excellent conversion of EBITDA to cash
of 83.7% (2011: 86.7%). The balance
sheet remains extremely robust with
net debt at the year end at 0.81x
EBITDA at £106.9m (2011: £76.5m).

We have committed bank facilities
of £250m until September 2015 along
with £100.2m equivalent of US Private
Placement debt. Both of these facilities
leave us in a strong position to take
advantage of value-creating
acquisition opportunities as they arise.

We have seen strong growth in our
order book, which increased by 26%
during the year and now stands at
a record £8.6bn (2011: £6.8bn).

Our sales pipeline currently stands
at £11.2bn (2011: £11.4bn) and
our forward revenue visibility is
excellent, with contracted revenue
for the year ending 31 March 2013
at 83% of budgeted revenue
(prior year: 81%).

* Excludes non recurring pension credit of £4.1m in 2011

Dividend
It is now the Board’s policy to grow
the dividend broadly in line with the
underlying earnings of the group.
The ﬁnal dividend proposed by the
Board has increased by 6.1% to 5.2p per
share (2011: 4.9p per share). This brings
the full year dividend to 9.6p per share
(2011: 9.0p per share), an increase of
6.7%. The dividend cover is 2.4 times
adjusted earnings per share.

Subject to shareholder approval
at the Annual General Meeting, the
dividend will be paid on 7 August 2012
to shareholders on the register at
22 June 2012.

Board and corporate
governance
Corporate governance remains an
important and committed area of
focus for the Board. The priorities in 2012
were the continued execution of our
growth strategy, the ongoing review
of performance and risk and the
composition of the Board. We also
focused on the senior talent pipeline,
which will ensure we have the skills,
experience and diversity to deliver our
ambitious plans. This strong culture of
governance is explained further in our
Corporate Governance Statement.

Ian Stewart retired as a Non-Executive
Director and Deputy Chairman
on 21 May 2012. In 1987, Ian co-founded
MITIE with David Telling. Throughout
those 25 years, Ian has been instrumental
in building and growing the business
that MITIE is today. We thank him for
his invaluable contribution to the Board
and the Company, and wish him well
for the future.

People
We would like to extend a huge thank
you to all of our people and welcome
those who joined us during the year.
We are one of the UK’s largest private
sector employers with 63,569 people
and remain focused on providing
opportunities for all of our people
to succeed in their careers.

Outlook
MITIE is very well positioned to
capitalise on the momentum in
growth we have seen over the past
year. There are exciting opportunities
in our markets as organisations
look for greater operating and
energy efficiencies. We have strong
relationships with our diverse, high-
quality client base in both the public
and private sectors and we are
committed to continually providing
them with better quality services,
innovation and efficiencies.

Our focus remains on achieving
organic growth in our primary
market of the UK, supplemented
by selective acquisitions and the
development of our integrated
business model overseas. We will
continue to invest in our people,
technology and new markets, all of
which differentiate us as a business.

Financially robust, we have a
clear strategy for the development
of our business, supported by a record
order book and buoyant sales pipeline.
We are conﬁdent that we will continue
to build on what is an exceptional
track record.

Roger Matthews
Chairman

Basic earnings per share
before other items p

+0.0%

Basic earnings per share
p

+10.2%

Dividend per share
p

+6.7%

.
2
2

5
.
9
1

5
.
0
2

.
8
1

7
.
6
1

9
.
6
1

4
1

2
.
7
1

4
1

8
7

6
.
9

0
9

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

MITIE Group PLC
Annual Report and Accounts 2012

Chief Executive’s strategy overview

Looking to
the future

The last 25 years have been quite a journey... one that’s seen MITIE
grow from a start-up to an established company with a leading market
position and over 63,000 employees.

Ruby McGregor-Smith looks back on the factors that have driven MITIE
to continued success – and ahead to the opportunities of the future.

1987

MITIE is formed
by David Telling
and Ian Stewart

1988

MITIE Group PLC is
listed on the London
Stock Exchange

1989-
1995

MITIE develops the
cleaning, engineering
and property
services businesses
into national
companies through
MITIE Model start-ups

1996-
2000

MITIE established
facilities
management,
maintenance,
security and
document
management
businesses

2001

Ian Stewart
is appointed
Chief Executive.
Catering,
landscaping
and PFI businesses
established

2003

Acquisitions
in cleaning,
security and pest
control MITIE Model
businesses

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

1bn

2007

Ruby McGregor-Smith
is appointed
Chief Executive.
Surpass £1bn annual
revenues for the
ﬁrst time

2009

2010

Acquired Dalkia FM –
a UK-wide technical
facilities management
business, and
subsequently
launched
CarbonCare

The award of our
ﬁrst pan-European
integrated FM
contract with Rolls-
Royce, operating
across the UK and in
six European countries

2005-
2006

Acquisition of three
further security
companies,
including the largest
acquisition to that
date of Initial Security,
creating nationwide
security coverage

2bn

2011

Awarded a series
of transformational
contracts with a
total value between
£0.7bn and £1.3bn.
Launched a £10m
Entrepreneurial Fund

Ruby McGregor-Smith
named Business Leader
of the Year at the
Orange UK National
Business awards

2012

The award of our
largest ever contract
with Lloyds Banking
Group

Market capitalisation
reaches £1bn and
revenues surpass £2bn

Ruby McGregor-Smith
honoured with
a CBE for services
to business and
diversity in business

MITIE Group PLC
Annual Report and Accounts 2012

Chief Executive’s strategy overview

What drives MITIE’s success,
year after year?
I don’t think of MITIE as 25 years old, but
as a young dynamic company. We are
still keen on breaking barriers, pushing
against ‘no can do’ attitudes and are
as enthused and energised as ever by
the opportunities around us. We are
driven by the same thing now as we
were at the very beginning – a passion
for the innovative thinking that can help
clients to get where they want to be,
quickly and cost-efficiently.

By taking on those services which are
not core to our clients’ operations,
we improve standards and save them
money, giving our clients more choices
over how to spend their budgets.
Getting the speciﬁcation and agreed
service levels absolutely right are the
keys to a successful contract. Our skill
base lies in mobilising teams and
transferring people from the client’s
organisation to ours, no matter how
large or small the contract. We also
deliver what we say we’ll deliver,
precisely when we say we’ll deliver it.
To some extent, we can do this by
drawing on experience and know-
how developed over the last quarter-
century. However, our success is also
down to continually investing in
innovative IT solutions that transform
the notion of customer service.

Whether we are delivering integrated
facilities management or any of our
specialist single services, clients
appreciate what we do and come
back for more – which is why we’ve
grown every year since 1987.

Price

1980
In-house

2000
Bundled services
Broader cost savings
Single point contact
Standardised provision
Best practice

2015
Strategic outsourcing
Buildings management
and services
BPO
Technology
Data management
Asset investment
Energy/carbon

Value

Ten year share price performance against the FTSE 100 and FTSE 250
April 2002 – April 2012

1990
Single service
Security
M&E
Catering
Cleaning
Maintenance
Pest control

2010
Integrated FM
Integrated delivery
Management information systems
Property management
Overseas
Add-on specialist services:
Consultancy
Supply chain
Project management

Outsourcing
market evolution
Each of our clients is at a
different stage of this journey
above. They all have different
needs which are changing
at their own individual pace –
it’s our job to meet those needs
as and when they change.

350.0

300.0

250.0

200.0

150.0

100.0

MITIE Group PLC FTSE 100 FTSE 250

1,720.1

)
2
0
/
4
0
/
1
0
m
o

r
f
E
I
T
I

M
o
t

d
e
s
a
b
e

r
E
S
T
F
(
p
£

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

MITIE Group PLC
Ann
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Evolving markets and
client relationships
We have continued to build on
the excellent client relationships
we have in our key markets
during the year.

Find out more about some of our developing customer relationships:

Sellaﬁeld:
38

Diageo:
22

Ministry of Justice:
34

Essex County Council:
20

Are your markets changing,
and if so how?
Our markets are changing at the fastest
rate we have seen in over two decades.

As the graphic on the previous page
illustrates, there has been a general
shift in outsourcing, from the time in
the 1980s when most services were
carried out by in-house teams to the
early years of this century which saw
a rise in bundled services, integrated
facilities management (FM) and
strategic outsourcing.

What is new is the pace of change.
Our clients’ business models are
changing, and they are changing fast.
Clients have always wanted more for
less, but now they want a lot more for a
lot less, driven by pressures to transform
their infrastructure, reduce their energy
consumption and save money at the
same time. Many clients do not want
to be concerned with delivering
services beyond their core businesses,
so this is creating increased
opportunities for us, particularly with
large organisations. Equally, many of
our clients still rely on us for our specialist
single services and we remain
focused on helping all our clients,
whatever their needs.

The New contract summary on page 25
shows how these opportunities have
translated into contracts during the
year, a number of which are particularly
signiﬁcant in terms of the scope and
scale of services they offer.

In April this year we signed a £775m,
ﬁve year contract to deliver integrated
facilities and energy management for
Lloyds Banking Group (LBG). The LBG
estate encompasses over 3,000
buildings and as part of the contract
we will welcome an extra 3,000 people
to the MITIE team. Our relationship with
LBG began as a single service cleaning
contract in 1987 when we ﬁrst started,
so this is a ﬁne example of how a good
working relationship can blossom into a
great and much more extensive one.

In addition, the year saw a successful
rebid with the Cumbrian Collaboration,
with the new expanded contract to
provide integrated FM and energy
services valued at over £200m over
ﬁve years. Our new contract with
Diageo is another example of how
a single service contract can grow into
an expanded deal that could be worth
over four times the original amount.

In the public sector, we were proud
to secure some similarly signiﬁcant
contracts in the last 12 months.
In January, we entered into a new
partnership agreement with the Prison
Service to bid for the management
of nine prisons. It’s an agreement that
signals a new approach to competition
for the Prison Service and will harness
the expertise and experience of both
organisations to compete for and
manage 15-year prison contracts.
During the year, we were appointed
to the Ministry of Justice’s (MoJ) Total
Facilities Management Framework
and subsequently awarded two major
contracts: for Her Majesty’s Courts and
Tribunal Service in the South of England;
and for Brixton and Isis prisons.

The total value will be £200m-£455m
over ﬁve to seven years. Furthermore,
we formed a ten year partnership
with Essex County Council to service
over 350 sites, with a total value of up
to £100m.

In energy services, which provides some
34% of our revenues, among several
other important projects we were
appointed to deliver a landmark £35m
energy centre in Scotland. More than
1,200 homes in Fife will receive all their
heat and hot water from a new energy
centre powered by MITIE enterprise
and 38,000 tonnes of waste wood.

Following our appointment to the NHS
Carbon and Energy Fund, which will
enable NHS Trusts to upgrade their
energy infrastructure and save energy,
we have been appointed preferred
bidder to develop a new energy
centre at Addenbrooke’s Hospital in
Cambridge. The innovative centre
will save £4.6m in annual energy costs,
which is equivalent to hiring 217 extra
nurses each year. It will also save almost
30,000 tonnes of CO2 each year and
help the Cambridge NHS Trust to surpass
their sustainability targets.

However, this doesn’t mean we are
focused only on new or large clients.
Every contract is important to us,
none more so than repeat business
from existing clients. We value our
smaller clients enormously, many
of whom are at an early stage in
the journey towards large-scale
outsourcing – and we are the perfect
partners to help them take the next
steps in line with their chosen strategies.

MITIE Group PLC
Annual Report and Accounts 2012

Chief Executive’s strategy overview

Our strategy
A strategy to deliver stakeholder
value through a focus on
sustainable, proﬁtable growth
lies at the heart of our business.
The strategy has worked well and
is largely unchanged, although
each year the areas of focus
can change.

Clients
Provide world-class
services to attract new
clients and retain and
expand contracts with
existing clients

Responsibility
Act responsibly and
build a reputation that
enhances our brand to
all stakeholders

New markets
Expand our capabilities in
complementary markets
and different countries
and increase the
proportion of our energy
services revenues

Operational
excellence
Improve the operational
efficiency of everything
we do

Acquisitions
Support our growth with
selective acquisitions

Risk
Take a long-term view
to protect our business
and manage risk

’
Does this mean you’re
changing strategy?
Although the size of contracts have
changed, the fundamentals of our
strategy remain the same – to provide
value for all our stakeholders through a
focus on sustainable, proﬁtable growth.
As the graphic explains, we continue
to focus on clients, people, risk,
responsibility, new markets, operational
excellence and acquisitions.

However, it’s fair to say that as
markets and opportunities evolve we
will ﬁne-tune the strategy to meet new
challenges as they arise. Energy services
will be a strong focus for us in the years
ahead and international opportunities
will also continue to be central to our
plans. We go wherever our clients need
us to go, and in more and more
instances they are asking us to provide
the same high quality services overseas
that they already access in the UK.

In terms of acquisitions, we purchased
two companies during the year:
Utilyx, the leading energy and
carbon specialists; and Direct Enquiries,
the UK’s leading access and disability
consultants. Both acquisitions bring
great expertise into MITIE and we
were delighted to welcome all the
people into MITIE.

Case studies of our acquisitions:
18

People
Recruit, motivate,
retain, train and develop
the best talent in
the industry

H
How can a company as large as
MITIE still be entrepreneurial?
MITIE stands for Management Incentive
Through Investment Equity and the spirit
of entrepreneurialism has always been
at the heart of our organisation.

Of course, that’s a lot easier for a
company with a few dozen employees
than it is for one the size we are today,
but we’re still as passionate about
entrepreneurialism as we were on day
one. Over the years, we’ve supported
over 100 start-up businesses to grow
using the MITIE Model, which helps
talented management teams turn
ideas into reality. Start-ups keep you
young, fresh and innovative, and the
teams have huge amounts of energy.
It’s structured so that the management
team takes an equity stake of up to 49%
in a business which they grow over a ﬁve
to ten year period before being
acquired by MITIE in full.

In 2011, we launched a £10m fund
to encourage more entrepreneurs
to start-up businesses and during
2011 we invested nearly half of that
money. In order to encourage another
group of entrepreneurs to come to us
with ideas, in May 2012 we hosted a
‘Dragons’ Den’ style event where
entrepreneurs pitched their ideas to a
panel of expert judges. The entrepreneur
with the best pitch on the day secured
an investment to start a business.
As always, we look to start businesses
that expand the range of services we
offer to our clients, or that will lead us
into new markets. Our entrepreneurial
model is one of the best ways to do this,
as well as being core to our culture.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

We know what capabilities we need
to grow our business and are very
focused on spotting and developing
the potential talent we have within our
organisation. We have a very clear view
of our talent pipeline for key roles across
the business and have put processes in
place to ensure our key talent is in the
right place at the right time.

We’ve always prided ourselves on
being different and one step ahead
in the way we communicate with our
people. Social media frightens some
organisations but we embrace it
wholeheartedly – Facebook and
Twitter are how our people choose to
communicate. So it makes absolute
sense for us to communicate with them
via these channels. The use of social
media is just one of the things that strike
people when they join MITIE, especially
if they’ve transferred in from another
organisation. It is also one of the many
reasons we are an employer of choice
for Generation Y. If you tweet, please
join in at #25mitie!

This year we have continued to grow
our use of social media to strengthen
our brand and connect with customers,
our people and other stakeholders.
We have introduced a new Facebook
page aimed at our people and have
seen our followers triple on Twitter.

Along with our You Tube channel which
has featured our MITIE’s Got Talent and
Stars competitions along with a range
of corporate videos, our social media
channels have helped us to break
down communication barriers allowing
us to communicate, engage and build
relationships with people across the
industries we work in and we can only
see them becoming more and more
important. We are also using an
enterprise social network which is
allowing our sales teams to work smarter
and collaborate across the country.

On the subject of people, one of the
most important things for any business
to succeed is to have inspirational
leaders. For people to develop and
succeed in their careers, they need
mentors who will support and believe
in them. Ian Stewart has stepped
down from the Board after 25 years
of dedicated service to MITIE. For me
personally, the support, encouragement
and advice I have had from Ian
throughout my time at MITIE has been
invaluable. I would like to thank him for
being an inspiration and mentor to me
and so many others. His is a shining
example of leadership.

How do you motivate over
63,000 people?
As we grow as a business, we are
dedicated to creating an environment
in which each and every individual
can ﬂourish – recognising and rewarding
g
performance, nurturing talent and
providing career opportunities.

We understand what makes people
tick and we know how important it is
that they feel valued. Equity participation
has always been at the heart of our
business and is in place to varying
degrees across the organisation –
share schemes certainly promote
loyalty because they align people
with the objectives of the business.
During the year we launched a new
voluntary all-employee share plan,
which will run alongside the existing
Save as You Earn Scheme we currently
offer. This gives everyone another
chance to invest in our company and
save for their future. We also continue
to grow and enhance MITIE Rewards,
a fantastic beneﬁts scheme for all our
people that is a gateway to making
savings and gaining discounts at over
2,500 retailers.

An environment where
hard work is rewarded
‘MITIE Rewards’ is open to all
our people and is one of the
many ways they are rewarded.
It’s a gateway to making
savings and gaining discounts
at over 2,500 retailers across
the UK. From chain stores and
niche retailers, to everyday
expenses like mobile phone
and utility bills, the savings
potential is endless.

Ian Stewart retirement
Ian co-founded MITIE
with David Telling in 1987.
Throughout those 25 years,
Ian has been instrumental
in building and growing the
business that MITIE is today.

MITIE Group PLC
Annual Report and Accounts 2012

Chief Executive’s strategy overview

How do technology and
innovation play a part at MITIE?
Technology and innovation are real
points of difference for us. We have
made signiﬁcant investments in
innovative IT solutions that transform
the notion of customer service and
are fundamental to our ability to
deliver the most efficient services.

In particular, MiWorld, our web based
management information platform,
gives clients ‘live’ visibility over exactly
what we’re doing for them, when and
how well. MiWorld presents an overview
of the client’s portfolio in one centralised
location, whether that’s a PC, laptop or
tablet, it helps them identify asset and
facility performance issues which can be
acted upon to improve efficiencies and
reduce costs. MiWorld helps to support
our clients’ strategies, by combining
the FM service costs with their property
related expenditure such as utility
expenditure and leases, and presenting
the total costs of occupancy across their
entire portfolios, which can be used
to benchmark performance.

Our use of PDAs (personal digital
assistants) across the majority of our
contracts has enabled us to introduce
vastly different working practices.
PDAs help us to schedule our mobile
workforce much more efficiently,
making sure our people are always
focusing on doing what they do best –
delivering great service.

To date, we’ve invested signiﬁcantly
in MiWorld, PDAs and other service
enhancing technologies. During 2012
that will increase further, and there is
a lot more to come in future years too.

The role of technology
Technology is a real point of
difference for us. For example,
MiWorld gives clients real time
control over exactly what
we’re doing for them, when
and how well.

We have also recently launched
Operation Exodus which aims to re-
engineer all of our processes to
make them electronic over the next
two years. Delivering an efficient and
cost effective operation to our clients
is a top priority. Using the beneﬁts
of technology, we want to make all of
our processes simpler and more efficient
for our people, our customers and our
supply chain.

Working more collaboratively with our
suppliers is also really important when
it comes to innovation. In many cases
we work in close consultation with our
suppliers, involving them in our process
to create tailored solutions for our clients.
Our suppliers are also using us to test
new and pioneering products that they
are bringing to the market, for example
through our supplier innovation days.
In partnership with our supply chain,
we can offer our clients even more
forward-thinking solutions.

In what direction do you
see outsourcing going –
and how is MITIE placed
to meet the challenge?
In a business climate like we have
today, it’s not easy to predict market
trends. But one thing is crystal clear –
we’re going to see a lot more about
‘intelligent’ outsourcing. Of course,
service delivery remains an absolute
essential, and self-delivery across a
broad platform creates advantages
in terms of integration and added
value, not only in price but also
in service quality. But we see the
future lying in assembling data and
understanding how the separate
strands of corporate real estate
functions interact.

Until now, this is an area that has not
been exploited – but there are new
‘linkages’ emerging on many levels...
between FM costs and energy
provision, for example, as well as
between projects and FM, energy
and projects, agile working regimes
and property costs (such as leases,
rates and valuations), and between
all these elements of real estate cost
and the increasing economic and
legislative demands.

How can we exploit this situation for our
clients? By developing new models for
outsourcing that are based on synergies
between cost centres and a new, deep
understanding of the effect that each
one has on all the others. This approach
will be built on the intelligent
aggregation of data and real
knowledge of Total Operating Costs,
and will be driven by new technologies.

We’re well placed to assist clients
with such an exciting development.
We already have extensive service
delivery capability – and we’re investing
in skills and technology to expand this
even further. As always, the thing that
will set us apart is our ability to create
opportunity for our clients in different
and often ground-breaking ways.

And what about the next
few years?
The world is a very different place
today compared to how it was in 1987.
Our markets and clients are evolving
at an unprecedented speed, and this
is changing both the nature and the
scale of the opportunities we face.

The last 12 months have seen the
award of a number of contracts
that are transforming our business.
This success is an endorsement of
our strategy to invest in our integrated
facilities and energy management
capabilities, which will underpin the
continued growth of our business.

Our sales pipeline is strong and our
order book stands at record levels.
We are optimistic about the
opportunities for growth, but recognise
the wider uncertainties in the global
economy and in some of our more
cyclical markets. As governments
and businesses seek cost and energy
efficiencies, our track record for service
delivery, innovation and efficiency
will continue to differentiate us.

Times change but quality endures.
Looking ahead, I am conﬁdent
that the track record of sustainable,
proﬁtable growth that we have
maintained for 25 years will continue.
We are more passionate and excited
about the future than we have
ever been.

Ruby McGregor-Smith CBE
Chief Executive

@RUBYMS

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MiTec
Our approach to total security management is
driven by technology, risk resilience and future-
proofed solutions. We designed and built MiTec,
our industry leading technology centre, to offer
a highly secure communications hub. It is the
central point of our technology operations,
linking our security personnel with electronic
security and response services.

#01 25

#03 25

#02 25

MITIE Group PLC
Annual Report and Accounts 2012

Non-ﬁnancial key performance indicators

Monitoring
and managing
performance

We look at a range of indicators
to assess our performance
against our stated strategy.
These include KPIs that are
aligned to each of the elements
of our strategy, as well as the
ﬁnancial indicators that we as
a business are focused on.

Our strategy
Clients

Retention of existing contracts
within Facilities Management %

Multi-service and integrated contacts
% of revenue

0
.
6
8

0
.
8
8

0
.
7
8

2
.
4
8

0
.
4
9

7
5

8
5

9
5

3
3

8
2

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Description:
In order to achieve sustainable, proﬁtable growth,
we monitor the percentage of existing contracts
retained in our Facilities Management division on
a rolling 12-month basis.

Target:
Achieve contract retention rates in excess of 90%.

Comment:
Our contract retention rate in our Facilities
Management division stands at a record 94.0%

Description:
As a substantial portion of our revenue was historically
generated through single service contracts, one of
our opportunities for growth is through expanding
our relationships with existing clients by providing
other services. We have seen a trend in the markets
towards multi-service and FM contracts over the past
few years and we are well positioned to meet the
demands of this trend due to our broad range of
services. We measure the percentage of revenue that
is generated by these types of contracts in order to
measure how well we are performing in this arena.

Comment:
59% of revenues are now attributable to multi-service
and integrated FM contracts

Our strategy
Risk

Our strategy
Responsibility

Our strategy
New Markets

Reportable accidents
per 1,000 employees

Carbon dioxide emissions
tonnes per employee

Energy services
% of revenue

0
.
4

9
.
3

5
.
3

4
.
3

1
.
3

7
8
.
0

2
8
.
0

5
7
.
0

d
e
u
s
a
e
m

t
o
N

d
e
u
s
a
e
m

t
o
N

d
e
u
s
a
e
m

t
o
N

d
e
u
s
a
e
m

t
o
N

d
e
u
s
a
e
m

t
o
N

4
3

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Description:
Reportable accidents are deﬁned as fatalities, major
injuries and injuries resulting in absence from work of
over three days. Our people are our greatest asset.
Providing them with a safe environment in which to
work is of paramount importance to us, so we use a
KPI for reportable accidents to assess our performance.

Objective:
Retain focus on reducing the risk of accidents in
our business.

Comment:
Reportable accidents were 3.4 per 1,000 employees
during the year.

Description:
Emissions are calculated using the Defra guidance on
how to measure and report GHG emissions and apply
the 2010 guidelines for company reporting. Last year’s
total CO2 emissions have been recalculated using
CO2e for Scope 1 (direct emissions, gas and transport)
and Scope 2 (indirect energy, purchased electricity)
but excludes landlord managed energy and
expensed business fuel (part of Scope 3). We have
also restated the 2010 data to allow for changes to the
property portfolio and acquisitions. The rate of CO2e
emissions per MITIE employee is calculated using the
average number of people employed during the year.

Objective:
Understand and minimise the environmental impact
of our operations.

Comment:
Emissions per employee are lower than the prior year.

Description:
Sustainability will be an increasingly competitive
advantage for us going forward as our clients look
to us to help them improve their performance and
reduce their costs.

Target:
Energy services related revenue in excess of 30%
each year.

Comment:
Energy services accounted for 34% of revenues
during the year.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Our strategy
People

Secured revenue
%

Order book
£bn

Management retention
%

8
7

4
7

5
7

1
8

3
8

6
.
8

0
.
2
9

0
.
3
9

0
.
2
9

5
.
9
8

5
.
2
8

4
.
6

8
.
6

9
.
4

4
.
4

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Description:
We are focused on long-term recurring revenue
streams. At the start of each ﬁnancial year,
we calculate the percentage of our budgeted
revenues that are already contracted.

Comment:
At the start of the ﬁnancial year 2013, 83% of budgeted
revenues were secured, our highest level ever and a
reﬂection of the impact of our success in contract bids
in 2012.

Description:
Our forward order book shows the total value of
future revenues secured by contractual agreements
and it is a key part of our focus on building long-term
recurring revenues.

Target:
We aim to grow our order book at least in line with
revenue growth.

Comment:
Our order book grew by 26% during the year to a
record level of £8.6bn.

Description:
MITIE is a people business and we pride ourselves
in creating and nurturing outstanding managers.
Monitoring how successful we are in retaining our
people is an important measure for us.

Target:
Enhance focus on the development and retention
of management to maintain a retention rate of
over 80%.

Comment:
Our management retention rate was 82.5% for
the year.

International
% of revenue

a
/
n

4
.
2

3
.
1

2008

2009

2010

2011

2012

Description:
We see increasing opportunities in international
markets as our clients look to expand procurement
and we beneﬁt from diversifying our revenue base.

Target:
Increase our proportion of international revenues.

Comment:
Our international revenues were 2.4% of the total
group revenue.

Our strategy
Operational efﬁciency

Our strategy
Acquisitions

More detail in our Divisional Review:
20—29

All of our divisions are focused on operating more
efficiently, and use many different measures to
assess performance.

From a group perspective, the best way to assess
our productivity is our group operating proﬁt margin,
which is also one of our key ﬁnancial performance
indicators and found on the following page.

This year we invested £16.6m in the acquisitions of
Utilyx and Direct Enquiries, and £14.6m in minority
interest acquisitions in ﬁve companies under the
MITIE Model.

Our strong cash ﬂows, committed ﬁnancing facilities
and strong balance sheet have ensured that these
investments can be made against a backdrop of
limited gearing, with net debt to EBITDA at 31 March
2012 at 0.81.

MITIE Group PLC
Annual Report and Accounts 2012

Non-ﬁnancial key performance indicators

Utilyx
Utilyx was acquired by MITIE in January 2012.
It provides services that manage the business
impact of energy consumption and rising
energy costs, including strategic planning,
procurement and risk management. Established
in 2000, Utilyx purchases a signiﬁcant proportion
of the UK corporate energy market on behalf
of its clients, which come from the industrial,
commercial and public sectors. The business
has a reputation for excellence and innovation,
having introduced products and concepts
to the market such as ﬂexible risk managed
electricity purchasing, open-book agreements
and end-user Power Purchase Agreements.
Utilyx also provides specialist services to
generators and developers of renewable
energy projects.

#04 25

Direct Enquiries
MITIE acquired a majority stake of Direct
Enquiries in December 2011. It is the UK’s leading
access and disability consultancy company
and provides a range of services to major
companies and public sector organisations,
which allow them to minimise their risk and
maximise the beneﬁts of embracing equality.
It provides audits around access for disabled
people, supported by compliance reviews
covering ﬁre risk as well as health and safety.
The company also operates free to use online
directories, Directenquiries.com, Inclusivebritain.
com and Inclusivelondon.com – the Mayor of
London’s official information portal for the 2012
games and its legacy. These sites provide access
information for people with speciﬁc access
requirements such as disabled and older
people and parents with children.

#05 25

Financial key performance indicators

Delivering sustained
proﬁt growth

Our ﬁnancial KPIs are focused on the quality of our earnings and
cash ﬂows, the control of capital expenditure and the sustainability
of dividends. We have performed strongly against these measures
again this year.

Operating proﬁt margin
before other items* %

Conversion of EBITDA
to cash %

1
.
5

0
.
0
0
0

3
.
5

0
.
0
0
0

4
.
5

0
.
0
0
0

^
5
.
5

0
0
0
0

0
6
.
.
0
5
0
0

5
.
7
9

2
.
5
9

3
.
0
9

0
.
0
0
0

7
.
3
8

7
.
6
8

0
0
0
0

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Description:
Our operating proﬁt margin before other items*
provides us with a good indicator of the proﬁtability
of our business. Where we have material restructuring
and acquisition related items, such as non-recurring
integration costs, we exclude these from our measure.

Target range:
Maintain operating proﬁt margins between 5.0%
and 6.0% per annum.

Comment:
We have maintained our margin within the target
range, at 5.6%.

* other items are restructuring and acquisition related items

^ excludes non recurring pension credit of £4.1m in 2011

Description:
The efficiency with which we manage the generation
of cash is an important indicator for our business.
MITIE is built on a sound understanding of the
importance of cash and working capital management
and that ethos remains critical to our business.
The conversion of earnings before interest, tax,
depreciation and amortisation (EBITDA) to cash is
one of the signiﬁcant cash ﬂow indicators for MITIE.

Target range:
Over 80.0% of EBITDA converted to cash.

Comment:
We have achieved our target this year with 83.7%
of EBITDA being converted to cash.

Capital expenditure
as a % of revenue

Dividend per share
p

5
.
1

0
.
0
0
0

0
0
0
3
0
.
1

4
.
1

0
.
0
0
0

9
.
6

0
.
6

0
6
.
.
0
9
0
0

8
.
7

0
.
9

0
.
0
0
0

4
.
1

0
.
0
0
0

1
.
1
0
.
0
0
0

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Description:
Our strength lies in the management of people and
in the provision of suitable assets to support their work,
but our business is not capital intensive. We continue
to monitor and control capital expenditure, and target
growth and acquisitions in areas that do not require
substantial capital expenditure.

Target range:
Maintain below 2.0% of revenue.

Comment:
Capital expenditure was 1.3% of revenue.

Description:
It is now the Board’s policy to grow the dividend
broadly in line with the underlying earnings of the
group. The ﬁnal dividend proposed by the Board has
increased by 6.1% to 5.2p per share (2011: 4.9p per
share). This brings the full year dividend to 9.6p per
share (2011: 9.0p per share), an increase of 6.7%.
The dividend cover is 2.4 times adjusted earnings
per share.

Target range:
Broadly in line with underlying earnings growth.

Comment:
Our dividend growth for the year was 6.7%, broadly
in line with underlying earnings growth.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Essex County Council
In December, MITIE signed a ten year
contract with Essex County Council, to deliver
transformational outsourcing services which
include facilities, property and energy
management. MITIE will be working in
partnership with Lambert Smith Hampton to
provide estate management services to the
Council including strategic asset management
and new ways of working that deliver
sustainable improvements for Essex.

#06 25

Revolutionising
local authority
outsourcing

Overview of services provided
Under the new contract MITIE will
employ more than 500 people
to service over 350 sites including
Essex County Hall, offices, libraries,
community centres and depots across
145,000 square metres. MITIE’s
integrated delivery model will provide
a wide range of services across the
Council’s portfolio including:
maintenance, cleaning, security,
catering, waste management
and mail and distribution services.

A partnership model
Essex County Council awarded MITIE
the contract because of its strategic,
efficient and sustainable service
model that will deliver signiﬁcant
savings compared to its historic cost
of service delivery. MITIE’s technology
platform, MiWorld, will provide the
Council with a business intelligence
solution that integrates their
management information across the
estate. MITIE’s sustainable solution also
includes guaranteed reductions in
energy consumption within three years.
MITIE is fully committed to investing in
the development of Essex by employing
apprentices and ensuring at least 25%
of sub-contracted work is placed with
local SMEs.

total contract value

£80-100m
10

year partnership

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

#07 25

#08 25

MITIE Group PLC
Annual Report and Accounts 2012

Diageo
In September, we were awarded a contract
with the world’s leading premium drinks
business, Diageo. MITIE will work with Diageo
to provide integrated facilities management
and hospitality services throughout its entire
UK and Irish property portfolio.

#09 25

A tailored mix
of specialist
services that
is just the tonic
for Diageo

Overview of services provided
MITIE’s integrated facilities management
services will be delivered at over
70 sites across the UK and Ireland
including all Diageo’s manufacturing,
packaging and distillery sites, and its
global headquarters in London. The FM
services include: cleaning, catering,
security, front of house, reception,
porterage, and mechanical and
electrical engineering maintenance.

total contract value

£100-120m
5

year partnership

A shift in strategy
MITIE has been providing integrated
FM to Diageo’s Irish operations since
it acquired Dalkia FM in Ireland in
June 2010. Diageo recently conducted
a strategic review and decided to
move to a fully integrated, self-delivered
outsourcing model across the UK
and Ireland. Following this review,
Diageo awarded MITIE this
transformational contract because
of MITIE’s international coverage,
technology platform and energy
services capabilities, all of which have
been tailored to ﬁt Diageo’s unique
requirements.

We will continue to work closely
with Diageo to explore the potential
opportunities in Europe, in addition
to these two important territories.

#10 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

#11 25

MITIE Group PLC
Annual Report and Accounts 2012

Royal Opera House
MITIE delivers integrated facilities management
for the Royal Opera House, bringing together
all of our service capabilities at the world
famous Covent Garden venue, home to the
Royal Opera and the Royal Ballet. Over 100
MITIE staff members operate around the clock
to deliver services which include engineering
maintenance, cleaning, security, telephony,
mail and reprographics.

#12 25

#13 25

#14 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

New contract summary

Some more of our
recent successes

We have continued to build on the excellent client relationships
we have in our key markets. This summary shows a selection of
contracts that we have retained, expanded and been awarded
during the year.

Private sector
Finance and professional services

Client

Contract

Lloyds Banking Group

Friends Life

LV=

Awarded a transformational contract to deliver integrated facilities and energy
management, providing services across the bank’s entire UK branch and office estate.
Services to be delivered include catering, reception, reprographics, engineering
maintenance, cleaning, security, minor capital reactive works, office space management
and a range of other services

Total facilities management including all hard and soft FM services as well as energy
management, all supported by an innovative technology platform

Manage and deliver building repair services as part of a dual-supplier solution for the UK’s
largest friendly society and provider of insurance. Services include plastering, decorating
and replacing damaged kitchens and bathrooms

Timeframe

Total value

5 years +
1 year

£775m -
£930m

5 years

£28m

4 years

£20m

Allianz Insurance

Secured a contract to provide building repair services to Allianz insurance customers
nationwide, managing and delivering domestic and commercial property insurance claims

3 years

Technology and communications

Client

BT Group

Channel 4

Worldpay

Retail

Client

Diageo

Primark

Transport

Client

Airline Operators Committee
at Heathrow Airport

Birmingham Airport

Contract

Security services contract including keyholding and response work

Expanded our contract and now provide integrated facilities management,
with services including reception, reprographics, cleaning, waste, landscaping,
security and engineering maintenance

Integrated facilities management contract to run across Worldpay’s four UK sites, including
its headquarters in London, including maintenance and engineering, fabric maintenance,
security, helpdesk, catering, cleaning, pest control, waste management, reception and
post room

Timeframe

Total value

3 years

£9m

£8m

3 years

£6m

Contract

Expanded our technical FM contract to provide integrated facilities management
and hospitality services across Diageo’s UK and Irish property portfolio

Awarded a variety of engineering services retail ﬁt-out projects for stores across the UK

Timeframe

Total value

5 years

£100m -
£120m

£6m

Contract

Hold baggage screening services at Terminals 1, 2, 3 and 4

Timeframe

Total value

3 years

£17m

Awarded a contract to provide soft facilities management services including airport cleaning,
pest control, waste management and window cleaning

3 years

£6m

ND = Not disclosed

MITIE Group PLC
Annual Report and Accounts 2012

New contract summary

Private sector continued
Utilities

Client

Contract

Cumbrian Collaboration

Retained and signiﬁcantly expanded an integrated FM and energy services contract with
the Cumbrian Collaboration (includes Sellaﬁeld Limited, the Nuclear Decommissioning
Authority, Direct Rail Services, Low Level Waste Repository Limited and International
Nuclear Services)

Timeframe

Total value

5-7 years

£200m -
£280m

Contract

Awarded a contract to provide cleaning and environmental services for Odeon’s chain of
over 100 cinemas nationally

Timeframe

Total value

3 years

£14m

Contract

A design and build project to provide high quality office space with a complete refurbishment
including new reception and entrance facing Clerkenwell Green

Timeframe

Total value

8 months

£11m

Contract

Awarded a property services contract to deliver a range of rooﬁng services and carry out an
internal refurbishment of the Flowserve offices and canteen

Timeframe

Total value

1 year

£3m

Leisure

Client

Odeon

Property management

Client

Derwent London

Manufacturing

Client

Flowserve

Public sector
Central government

Client

Contract

Timeframe

Total value

Ministry of Justice

Awarded total facilities management contracts for Her Majesty’s Courts and Tribunal Service
(HMCTS) in the South of England, and two prisons at Brixton and Isis

5-7 years

£200m -
£455m

Local government

Client

Contract

West Midlands Construction
Framework

Minor works and maintenance contract for all non-housing capital expenditure and
maintenance primarily within the Birmingham City Council South area. This contract is
also available to 13 other local authorities within the region

Essex County Council

Transformational outsourcing contract which includes facilities and property management
as well as energy services, working in partnership with Lambert Smith Hampton to provide
estate management services

Timeframe

Total value

4-8 years

10 years

£160m -
£350m

£80m -
£100m

City of London

Awarded a contract providing cleaning and environmental services at the offices of
City of London

3 years

£4m

Education

Client

Cambridge University

Contract

Awarded a contract to provide mechanical, electrical, public health and specialist
services for a new 10,000m2 building for the Department of Materials, Science and Metallurgy
in Cambridge

Coventry University Enterprises Awarded a contract to provide total security management

University of Greenwich and
the Greenwich Foundation

Selected to provide security services at the University and Foundation’s various campuses
and heritage attractions

Timeframe

Total value

18 months £11m

3 years

£5m

ND = Not disclosed

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Timeframe

Total value

5 years

£10m

Public sector continued
Health

Client

Contract

St George’s Healthcare
NHS Trust

Birmingham Primary
Care Trust and Birmingham
Community Healthcare
NHS Trust

Midland Heart

Awarded a technical facilities management contract to provide specialist maintenance
services across the hospital including M&E, fabric maintenance and projects services to
the 20 buildings in the Trust’s estate. This adds to our existing portfolio of services, which
includes cleaning, catering and helpdesk activities, bringing total annual revenues to
approximately £15m

Retained a contract to provide cleaning and environmental services for both Trusts

3 years

£8m

Awarded a contract to provide security response services across its Midlands property portfolio,
offering an out of hours mobile caretaker service to residents in over 32,000 properties

3 years

Social housing

Client

Contract

Lewisham Homes

A contract to deliver home improvement works to over 13,000 social housing tenants as part of
a major works programme, including kitchen and bathroom improvements, boiler and system
replacements and upgrades for disabled access

Milton Keynes Council

Retained a contract to provide responsive repairs and voids

Barnet Homes

Awarded a contract to provide gas services, boiler installations and maintenance of
commercial heating systems on 8,800 properties

Timeframe

Total value

5 years

£40m

5 years

10 years

£26m

Energy services
Private and public sector contracts

Client

Contract

NHS Carbon and
Energy Fund

Accepted as a partner in the £200m capital fund which enables NHS Trusts to upgrade their
energy infrastructure to save energy, carbon and money

Cambridge University Hospitals
NHS Foundation Trust

Appointed preferred bidder to develop a major new innovation centre to power the world
famous Cambridge Biomedical Campus (Addenbrooke’s Hospital)

Timeframe

Total value

£200m
framework

£35m

Ore Valley
Housing Association

O-Gen Plymtrek

Camden Council

Appointed to deliver an energy centre in Cardenden, Fife, which will create Scotland’s
largest energy self-sufficient community, where more than 1,200 homes will receive all their
heat and hot water from an energy centre powered by 38,000 tonnes of waste wood

Energy services company formed by MITIE, O-Gen UK and the Una Group, to develop an
energy centre in Plymouth which will convert waste wood into renewable heat and power

10 years

Innovative energy scheme to provide surplus heat from a hospital energy plant to 1,500 council
tenants in Camden Council

15 years

Royal Marsden Hospital

Awarded a contract to design, install and operate a new energy centre which will almost
halve annual carbon emissions

Waitrose

Contracts to develop and operate biomass energy centres at the East Cowes and
Bracknell stores

South West Water

Selected to install 30 photovoltaic systems on clean and waste water treatment plants

3 months

£3m

ND = Not disclosed

MITIE Group PLC
Annual Report and Accounts 2012

Marketplace overview

Exciting opportunities
in changing markets

We work closely with clients in both the private and
public sectors, primarily in the UK but increasingly in other
European countries too. The trend towards integrated services
is a long-term one, and has been clearly identiﬁed in previous
Annual Reports. What is different now is the speed of change
and the scale of contracts – more clients are asking more
and more of us.

In addition to helping them improve efﬁciency while reducing
costs by outsourcing non-core services to us, we also enable
clients to reduce the amount of energy they use as well as the
price they pay for it.

The current value of our secured order book

£8.6bn
34%
£450bn

UK’s total energy efficiency spend by 2025

Current revenue we generate from energy services

Private sector
As companies continue to seek cost
reductions in order to compete in tough
market conditions, they are focusing
on the further outsourcing of non-core
services. Increased demand is
being driven by integrated Facilities
Management (FM) and energy services.

Our organic growth is based on excellent
client relationships. We have worked
alongside many of our clients for a number
of years, building trust and mutual respect
that has translated into increased
business. There are many opportunities
for us to repeat the growth achieved
with existing clients such as Rolls-Royce,
Vodafone and Diageo while also exploring
the potential of new relationships.

We see signiﬁcant integrated FM
opportunities in the ﬁnancial services
and retail sectors, and were pleased
to see potential become reality with
our appointment to service a £775m
transformational contract for Lloyds
Banking Group.

The majority of ﬁnancial and retail
sector clients operate with single-service
contracts and we anticipate that the
next phase of outsourcing is likely to see
a shift towards integrated property and
energy management.

Public sector
The public sector remains under
pressure, with central government and
local authorities in the UK streamlining
their cost bases in a trend that is
likely to continue for the foreseeable
future – and this is creating signiﬁcant
opportunities for outsourcing. The UK
Government’s 2011 Parliamentary
White Paper on Open Public Services
made clear that there remains a strong
political will to introduce greater
competition and reform into more
areas of public services.

We remain predominantly focused
on the justice, social housing, education
and health sectors.

The Home Office and Ministry of Justice
(MoJ) have a ﬁve year strategic plan
which runs from 2010 to 2015. As part of
this, they have savings targets of 25% over
four years and have initiated a number
of programmes to meet that goal.

Our own MoJ pipeline stands at some
£1bn, with many key contracts due to
be decided during 2012. Against a
backdrop of full prisons and the rising
costs of the justice process, there are
speciﬁc and extensive outsourcing
opportunities in areas such as FM,

prisons management, electronic
monitoring, community payback and
probation trusts. Home Office market
opportunities include police services
and immigration removal centres.

In the health sector, we are seeing
a range of opportunities, including
a growing portfolio of energy services
work to upgrade ageing infrastructure.
Increasingly, there is also a strong
community element to these projects.
For example, for Camden Council,
we developed an innovative energy
scheme to supply up to 1,500 council
tenants with surplus heat from
our energy plant at the Royal Free
Hospital in Hampstead.

To date, we have seen limited
momentum within local authorities
to combine more services and
rationalise their estates.

However, the pipeline of outsourcing
opportunities for the delivery of local
public services remains strong across
the UK.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Major markets:
Revenues

13 14 15

Sales pipeline
£11.2bn

In January 2012, the City of Edinburgh
Council recommended MITIE as the
preferred bidder for its integrated facilities
management contract, a proposed
seven year partnership which would
have generated signiﬁcant beneﬁts
to Edinburgh creating 200 new jobs,
50 apprenticeships and with guaranteed
savings of between £51m and £114m.
Members of the City of Edinburgh
Council subsequently voted not to
approve the proposed contract.
Whilst a disappointing outcome, our
proposal offered a model of the future of
outsourcing and we will continue to invest
in this area to support its future growth.

Energy services
Our energy services business already
accounts for 34% of our revenue and
may rise even further as demand grows
in both the public and private sectors
for energy and carbon strategies, driven
by macroeconomic, environmental
and legislative factors.

Reduced consumption and diversiﬁed
energy supply are major objectives for
all clients. The UK alone must spend
£450bn on energy efficiency measures
and supply infrastructure by 2025.

MITIE Group PLC
Annual Report and Accounts 2012

Public sector
35% | £0.7bn
1. Central government

2. Local government

3. Other government

4. Social housing

5. Health

6. Education

Private sector
65% | £1.3bn

7. Finance & professional services

8. Retail

9. Manufacturing

11%

10. Transport & logistics

11. Property management

12. Technology & communications

13. Utilities

14. Leisure

15. Construction

16%

10%

Public sector
60% | £6.7bn
1. Central government

2. Local government

3. Other government

4. Social housing

5. Health

6. Education

Private sector
40% | £4.5bn

7. Finance & professional services

10%

21%

18%

8. Property management

9. Transport & logistics

12%

10. Retail

11. Manufacturing

12. Construction

13. Technology & communications

14. Utilities

15. Leisure

Across the EU, there are an estimated
700-1040 active energy service contracts
with a market value of €6.7bn to €8.5bn.
This is expected to grow to around
€25bn by 2020. Energy management is
now accepted as central to an effective
FM service – in fact our energy services
capability is part of every contract we
operate and is absolutely fundamental
to our larger bids.

Already the second largest energy
services company in the UK, we are well-
positioned for rapid growth. Our strengths
are based around six core capabilities:
decentralised energy; renewable
energy; energy consumption reduction;
carbon compliance; data management;
and the introduction of innovative ideas
and initiatives that raise awareness.

International and new markets
We go where our clients need us
to go, and as they increasingly take
a pan-European approach to
procurement we have expanded
our services beyond the UK.

Our work with Rolls-Royce now spans
the continent and demonstrates our
ability to provide integrated FM and
energy services across borders.

The opportunity is clear: 43% of our top
100 clients have international operations –
and we are positioned to help them
access the same efficiencies they enjoy
in the UK.

Our European capability was initially
provided via a partnership with Service
Management International (SMI). During
2011 we acquired the remaining 50% of
SMI’s equity capital. The SMI platform
self-delivers and supply-chain manages
FM portfolio services to multinational
blue-chip clients across 23 countries.
SMI’s established supply chain of affiliates
have an annual collective turnover of
US$8.5bn and employ 280,000 people
worldwide. In August, SMI was appointed
as a preferred bidder for a contract with
Givaudan to provide integrated FM in
several European countries.

We currently have direct delivery
capability in France, Germany, Poland
and Norway – and are targeting further
growth in Europe as we see further
opportunities emerge in this market.

In the UK, we are constantly looking at
ways to expand our range of services,
not only by using our entrepreneurial
model to enter new markets but also
through value-creating acquisitions
where appropriate.

MITIE Group PLC
Annual Report and Accounts 2012

Operating review

Good opportunities
in existing markets
and beyond

As the outsourcing market evolves, our business has had to
remain ﬂexible and grow with the market.

We offer the largest range and broadest coverage of facilities
and energy management services in the UK. Those services
are delivered through our four operating divisions. We remain
focused on being specialists in every service that we provide,
so that our clients receive the highest quality, whether it is
one or 100 things we do for them.

The demand for integrated facilities management is a key driver
for our business, and these contracts bring together specialist
services from all of our divisions.

Divisional performance summary

Facilities Management

Revenue

Operating proﬁt before other items

Operating proﬁt margin

Order book

Technical Facilities Management

Revenue

Operating proﬁt before other items

Operating proﬁt margin

Order book

Property Management

Revenue

Operating proﬁt before other items

Operating proﬁt margin

Order book

Asset Management

Revenue

Operating proﬁt before other items

Operating proﬁt margin

Order book

Facilities Management
Our FM division is responsible for
delivering the following specialist
single services, either individually or
in multi-service, bundled contracts:

Security; Cleaning; Catering; Document
management and reprographics; Reception
and front of house; Waste management;
Environmental services; Landscaping;
Pest control; Disabled access consulting
and auditing

Clients include:

We have continued to win new
business and have improved our
client retention rate to a very strong 94%.
We have performed particularly well
in the ﬁnancial services, transport
and retail sectors, where we see
signiﬁcant opportunities.

Our investments in customer service
remain a key differentiator. In our
cleaning and environmental services
business, we have a Lean Six Sigma
team which is helping to make our
processes more efficient. Our Total
Security Management business has
added new service lines such as
employee screening, electronic
locking and unlocking and lone worker
monitoring and protection. Having
successfully positioned the business as
a risk-based security provider, we are
increasingly working with our clients to
consult on their enterprise wide security
risk – incorporating technology, remote
monitoring and manned guarding into
a holistic solution.

We are differentiated by our ability to
self-deliver the majority of FM services,
and always look at adding new services
to our portfolio and develop our existing
businesses. Our size, scale, high street
and national presence and broad
range of services enables us to deliver
substantial cost savings and sustainable,
innovative solutions to organisations of
all sizes.

Growth

+6.2%

+10.1%

+0.2pp

+19.5%

Growth

+8.2%

+9.3%

+0.1pp

+50.0%

Growth

+2.9%

-5.6%

-0.3pp

+16.7%

Growth

+9.1%

+35.0%

+0.8pp

2012

2011

£937.3m £882.2m

£61.9m

£56.2m

6.6%

£4.9bn

6.4%

£4.1bn

2012

2011

£472.8m

£437.1m

£26.9m

5.7%

£2.1bn

£24.6m

5.6%

£1.4bn

2012

2011

£524.3m

£509.7m

£20.2m

3.9%

£1.4bn

£21.4m

4.2%

£1.2bn

2012

2011

£68.1m

£62.4m

£2.7m

4.0%

£0.2bn

£2.0m

3.2%

£0.1bn

+100.0%

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Technical Facilities Management
Our TFM division focuses on
delivering integrated facilities
management and a range of
technical and energy services:

Energy management; Mechanical and
electrical engineering maintenance;
National mobile services; Specialist technical
services; CarbonCare energy services;
Lighting design, projects and maintenance;
Building management systems and controls

Property Management
Our PM division provides a full
suite of project management
and property services:

Property maintenance; Building refurbishment;
Interior ﬁt-out; Insurance claims validation
and repairs; Rooﬁng; Plumbing and heating;
Mechanical and electrical engineering
contracting; Plastering and dry-lining;
Painting and repairs; Fire protection;
Residential and new house ﬁt-out

Asset Management
Our AM division deploys efficient
technologies to develop secure
and sustainable decentralised
energy infrastructure:

Energy centre development; Low-carbon
data centre development; Renewable
energy generation; Energy services company
management; Community infrastructure;
Energy performance contracting

Clients include:

Several of the services provided by
the Property Management division
are exposed to highly cyclical markets
and face ongoing challenges as
a result of the difficult economic
environment in the UK.

Our Built Environment business
provides mechanical and electrical
engineering contracting services
along with interior ﬁt-out, combining
a consult and build solution that gives
clients assurance of costs and
operational certainty.

Our social housing business is
developing well, with an integrated
property maintenance solution which
provides consistency, stability and
value for money.

The focus for our niche businesses
and projects will remain on providing
core trades for both ﬁxed-term and
one-off projects as well as working with
other parts of MITIE on multi-discipline
project work.

We are now an established investor in
and developer of decentralised energy
assets and strategies. In a market which
still offers signiﬁcant potential for future
growth, our clients are reaping the
economic, social and environmental
beneﬁts of decentralised energy.
The ability to achieve sustainability
targets whilst retaining funding for core
services, and without upfront capital
investment, is a compelling argument
in the current economic climate.

We are currently working on major
decentralised energy projects,
operating an end-to-end service
from the design and development of
energy assets and strategies through
to the longer term operation of them.
We continue to see opportunities
in the data centre market and have
completed several major data centre
projects during the year.

We are recognised as one of the few
providers in the UK that has the track
record, scale and expertise to deliver
substantial decentralised energy
strategies that will guarantee availability
over a sustained contract term.

Energy reduction is one of the
key drivers of MITIE’s growth.
Our CarbonCare offering forms a
fundamental part of MITIE’s overall
energy services capabilities and has
helped successfully establish MITIE
as a leading energy services business.
A signiﬁcant number of CarbonCare
services are provided by TFM and this
has been further strengthened by
the acquisition of Utilyx. The ongoing
demand in this area is driving continued
strong performance within TFM.

The market move towards integrated
FM is also a major driver for TFM as the
technical maintenance of critical
infrastructure for our clients is key to their
operations. Consequently, our technical
expertise underpins the overall
integrated FM offering and the delivery
of these contracts is undertaken
predominantly through our TFM division.

We have made further investments in
our national mobile services offering,
which delivers a fast and responsive
mobile technical FM service across
the UK and is developing well. We have
also been working with leading lighting
manufacturers to create a new service
model that embraces the initial design
of LED installations, LED retro-ﬁt projects
capability and ongoing support for
LED installations. The growth of cloud
computing and increase in data-
intensive sites is also providing signiﬁcant
opportunities to monitor and maintain
this plant and equipment.

MITIE Group PLC
Annual Report and Accounts 2012

125 Old Broad Street
125 Old Broad Street is a 26 ﬂoor tower in the
heart of the square mile in the City of London.
The team prides itself on its exceptional service
whilst managing a busy complex, delivering
security personnel, access and egress control
and front of house concierge.

#15 25

#16 25

#17 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Operations in Norway
#18

MITIE Group PLC
Annual Report and Accounts 2012

#19 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Overview of services provided
The contracts are for fully integrated
facilities management and
commenced in February. They
encompass security, cleaning,
maintenance and project works.

A focus on justice
MITIE has made signiﬁcant investments
in the justice sector, focusing solely
on opportunities with the MoJ, the UK
Border Agency and the police market.
The contract to provide total facilities
management for the courts in the South
of England is MITIE’s most strategically
important with the Government and
is also its largest in the public sector.
We have a long track-record of
supporting the MoJ and its estate
and look forward to building on this
relationship further in the coming years.

Ministry of Justice
MITIE was awarded two contracts with the
Ministry of Justice (MoJ) in October 2011,
following its appointment to the MoJ’s Total
Facilities Management Framework in
September 2011. The total facilities management
contracts are for Her Majesty’s Courts and
Tribunal Service (HMCTS) in the South of
England, and for two prisons, Brixton and Isis.
This is the most that could have been awarded
to MITIE through this tender process.

#20 25

Supporting
the Ministry
of Justice across
its estate

minimum contracted revenue over ﬁve years

£210m
5

year contract with a possible two year extension

MITIE Group PLC
Annual Report and Accounts 2012

NMK, Norway
The Nordic Maritime Competence Centre
(NMK) in Alesund, Norway, is a world-leading
marine training centre, which occupies ﬁve
ﬂoors over 23,000m2 and accommodates up
to 900 people. Delegates from all over the world
visit the site every day to attend training courses.
MITIE delivers integrated FM at the facility,
as well as a commercial catering solution that
includes a restaurant, coffee bar, hospitality
and event catering.

#2125

#22 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

#23 25

MITIE Group PLC
Annual Report and Accounts 2012

Cumbrian Collaboration
During the year we were successful in retaining
and expanding a contract to provide integrated
facilities management and energy services to
the Cumbrian Collaboration. The Cumbrian
Collaboration includes Sellaﬁeld Limited, the
Nuclear Decommissioning Authority (NDA),
Direct Rail Services, Low Level Waste Repository
Limited and International Nuclear Services.

#24 25
A growing
partnership
in Cumbria

Overview of services provided
The expanded contract covers over
500 buildings across a range of sites in
the UK, with major activity in Sellaﬁeld,
Cumbria and Cheshire. Over 500
people are employed as part of the
contract and the services provided will
include: facilities management, building
maintenance; security; cleaning; waste
management; catering and other FM
and energy services.

A long lasting partnership
This award builds on MITIE’s 11-year
relationship with both Sellaﬁeld Limited
and the NDA and is a testament to
the quality of service and strong
health and safety record that has
been delivered by the MITIE team.
The contract was tendered through
the Government Procurement Service
(formerly the Office of Government and
Commerce Buying Solutions) Facilities
Management Framework Agreement.

£200-
280m
5

total contract value

year partnership with a possible
two year extension

Sustainability overview

Committed to addressing
the key issues

Everyone expects more of companies now – higher standards of
business ethics, more attention to social issues like fairness in the
workforce, and real evidence of a commitment to tackling climate
change. This is a challenge, there’s no doubt about that, but it’s one
that MITIE is more than ready to meet.

gic driver:
ning our
erpin
Risk
group strate
nd
U

ctive:
bje
bility o
Sustaina

Enabling our people
and go home safe
to work safe,

i
l
i
t

’

t
i

r
i

Underpinning our
group strategic driver:
Clients

Sustainability objective:

Looking after our
clients properly

ﬁ

r
i

i
l
i
t

t
i

ctive:
bje
bility o
Sustaina

natural resources
Using fewer

gic driver:
ning our
Responsibility
erpin
group strate
nd
U

OOOOuurr
Our
iintegratedd
integrated
ssustainabilityy
sustainability
approach
approach

Sustainability objective:
Doing more for our
clients with less,
wherever they are
in the world

Underpinning our
group strategic driver:
New markets

FM Skills Centre
The Skills Centres provide students with the
opportunity to combine class-based learning
with practical work experience, whilst working
towards a vocational qualiﬁcation in Facilities
Services. At the Leeds Co-operative Academy,
a multi-service MITIE support team has been in
place since September 2011 to support and
mentor students to reach their potential and
enhance their employability.

#25 25

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

We’ve always believed that a
more sustainable business is a better
business, and we have plenty to
show for that in terms of what we’ve
achieved. We’ve helped bring about
big improvements in the sustainability
standards of our supply chain,
reached some of our environmental
impact targets one year early,
initiated genuinely valuable and
multi award-winning community
projects, and we’ve developed
the single biggest competitive
advantage we have – our own
people – by creating some of the
best training programmes you’ll ﬁnd
anywhere in our industry.

Last year, we re-aligned our
sustainability strategy behind six
key areas, directly aligned with our
corporate strategy drivers; because
everything we do to make MITIE a
more successful business should also
help make it a more sustainable one –
and vice versa.

MITIE Group PLC
Annual Report and Accounts 2012

Sustainability overview

Looking after our
clients properly
Make sure we have the right
processes and systems in place to
nurture relationships with clients
and add the most value possible.

What we’ve focused on
Satisfaction surveys
Regular key client surveys to measure our
performance and our Net Promoter score,
recording responses into our CRM system
for maximum knowledge sharing.

Industry trend surveys
Strategic client surveys to monitor key
industry trends.

Enriching partnerships
Extend both our own and our clients’
community footprints via the Real Apprentice
and our FM and Construction Skills Centres.

What we achieved

9.3%

Our Net Promoter score is 9.3% – and
we’ve updated our CRM system with the
survey results.

100%

100% of the clients surveyed told us cost
certainty and service quality were top of
their agenda.

We ran four Real Apprentice programmes
and opened the Co-operative Academy
of Leeds FM Skills Centre.

What we’ve noticed

We’re building longer term relationships
with most of our clients – by helping them
extend their reach in the community
and making sure we listen to them when
it comes to their priorities.

But our Net Promoter score shows there’s still
work to be done.

Using fewer
natural resources
Make sure our people understand
MITIE’s environmental impact in
terms of natural resource use and
how important the reduction of
this is – both from our own internal
perspective and from that of external
stakeholders, as well as the role they
can play in improving it.

What we’ve focused on
Transport optimisation
Reduce average fuel consumption by 10%
by 2013.

Utility management
Reduce our office energy consumption by
15% by 2013.

Waste management
Reach 80% recycling rate across our office
estate by 2013.

What we achieved

130g CO2/km

Our average car ﬂeet emission is 130g CO2/km,
down from 140g CO2/km.

72%

We’ve increased our tracking ability to 72%
of our ﬂeet.

16%

We’ve achieved 16% reduction in office energy
consumption, which means we’ve reached
our 2013 target one year early.

What we’ve noticed

We’re really proud to have hit two out of
three targets a full year ahead of our deadline.
But we still need to carry on challenging
our ways of doing things – especially
engaging our people to raise awareness
of how everyone can make a difference.

Operating our
contracts smarter
Make sure all our people, and as
many of the suppliers we work with as
possible, understand the commercial
impact of operating as efficiently as
possible so that we can maximise
value for all stakeholders.

What we’ve focused on
Employee participation
Raise awareness on fuel consumption across
the organisation to help achieve 10% fuel
reduction by 2013. Increase management
awareness of, and participation in, sustainable
practices via e-learning programmes and
interactive workshops.

Supply chain management
Audit 40 major suppliers a year requiring
100% to meet or exceed our sustainability
audit targets within 12 months.

What we achieved

13%

We’ve achieved 13% fuel reduction through
proactive ﬂeet management and targeted
communication campaigns, which means
we’ve achieved our 2013 target one year early.

8% of our employee population has
participated in courses and e-learning
on sustainability topics.

We audited 55 suppliers across the group and,
working with Trucost, analysed 90% of our
spend to identify hot spots in carbon emissions.

What we’ve noticed

General awareness of our sustainability
capabilities is relatively high throughout
the organisation, but participation could
be improved. While all our efforts so far have
produced great results, we know that the
next part will be the toughest and we will
look to concentrate on changing people’s
behaviours and mind sets to improve
long-term performance.

Resource

Units

Scope 1

Scope 2

Gas and ﬂeet transport fuel

Tonnes of CO2e

Electricity

Tonnes of CO2e

Scope 1 and 2 Intensity

Tonnes of CO2e/employee

Intensity

Tonnes/£m

Energy and business car travel

Tonnes of CO2e

Water

Created waste

Intensity

General waste

Recycled waste

% Recycled

Tonnes of CO2e

Tonnes

Kg/employee

Tonnes

Scope 3
Upstream

2010 restated
baseline*

42,779

3,870

0.87

27.12

13,399

1,436

989

447

31%

2011

44,093

3,587

0.81

25.21

12,807

994

606

388

39%

2012

43,310

3,765

0.75

23.50

12,991

1,336

859

477

36%

% change
against baseline

1.2%

-3%

-14%

-13%

-3%

22%

-7%

-22%

-13%

16%

Doing more for our
clients with less, wherever
they are in the world
Make sure all our businesses
understand our high sustainability
standards – including the use of
innovative low carbon technologies –
so our clients can beneﬁt from them.

Nurturing our
people’s talents
Make sure we have the right talent
pipeline to fulﬁl all the business’
future needs.

What we’ve focused on
Client awareness
Measure in what percentage of our markets
around the world we are recognised as
a ‘green’ brand.

What we’ve focused on
Performance management
Setting clear behavioural expectations
via an updated performance
management framework.

Leadership programme
Understand what the vital steps are for
leadership and management development,
deﬁning what support is required at each level.

Engagement
Create a year-round people engagement
plan that will establish a core set of
measures pan-MITIE, against which future
progress will be tracked.

What we achieved

One new performance review process –
designed with one very simple and clear goal:
a great review is all about the discussion.

100% achieved

Having carried out extensive research to
ﬁnd out what people at MITIE thought of our
leadership style today and how it could be
improved, we’ve achieved our target when
it comes to leadership.

3.8

Our overall engagement score is 3.8/5.

What we’ve noticed

This year was about setting baselines and
putting new processes in place. We now need
to measure progress and extend the reach
of our leadership programme and succession
planning to incorporate early career talent.
We will also be acting on the results of our
engagement survey, and reporting on
improvements regularly throughout the year.

Employee awareness
Increase employee understanding of the
group’s sustainability capabilities via internal
marketing and communications, measuring
extent of comprehension via employee surveys
to set a baseline for 2012.

What we achieved

63% of our clients saw us as a ‘green’ brand.

63%
56%

56% of our employees have a good
understanding of MITIE’s sustainability strategy.

93%

We achieved Gold status in the BiTC CR Index
and scored 93%.

What we’ve noticed

Externally, we need to enhance our
communications around our service
offering to help clients in their sustainability
agenda. Internally, we need to encourage
more participation in sustainable practices
and clearly communicate what we can
offer clients.

GHG Emissions data for 1 April 2011 to 31 March 2012 in line with
ﬁnancial accounting period.

* 2010 data has been restated in line with improved management
information and to include a full year of extrapolated Dalkia FM
and EPS acquisition data to enable year on year comparison.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Enabling our people
to work safe, and go
home safe
Make sure the well-being of our
people, and by extension our clients,
is safeguarded while at work so they
can all go home safe at the end of
the day.

What we’ve focused on
Performance management
Provide improved Management Information
through a new incident management platform
to enable more effective measurement of a
better range of health and safety-related KPIs.

Leadership
Launch the third phase of our health
and safety risk management leadership
programme to embed the correct leadership
attributes within our management.

Engagement
Launch the third phase of our Work Safe
Home Safe! campaign to deliver improved
employee engagement.

What we achieved

One new platform – we now use Airsweb to
report all accidents, incidents and near misses.

We held eight leadership workshops with
a total of 78 participants.

We introduced four new focus areas –
electrical work, working at height, driving
and slips and trips.

What we’ve noticed

We’re pretty proud of our health and safety
culture – over the last year we’ve improved
incident rates, employee awareness and
engagement, as well as health and safety
leadership; but we realise there is no place
for complacency and so we want to continue
our year on year improvement. Going forward
we’re keen to keep up the good work and
make our new systems work harder for us.

You can read more about what we’re
You can read more about what w
doing in all of these areas and see our
doing in all of these areas and see
latest performance data at:
latest performance data at:
mitie.com/sustainability201
mitie.com/sustainability2012

MITIE Group PLC
Annual Report and Accounts 2012

Financial review

Strong ﬁnancial
performance

MITIE has delivered another set of excellent ﬁnancial results, with
strong revenue growth, a record order book, good cash conversion
and the maintenance of a strong balance sheet. We are focused
on both organic and acquisitive growth but our organic growth
stands out this year and is sector-leading. The award of a number
of transformational contracts has resulted in a signiﬁcant uplift
in our order book and a record level of secured revenues for the
new ﬁnancial year.

We enter the new ﬁnancial year in a strong position with low leverage,
a strong balance sheet and long-term committed ﬁnancing facilities
which will support future growth.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Revenue
£m

+5.9%

Operating proﬁt before
other items* £m

+7.2%

Proﬁt before tax
£m

+8.9%

5
2
0
0
2

4
1
9
8
1

1
0
2
7
1

9
1
2
5
1

7
1
1
1

2
4
0
1

0
3
9

5
4
9

8
6
8

9
5
7

7
9
7

9
7
6

5
0
8

2
2
7

2
7
0
4
1

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Financial performance
Revenue
Revenue for the group increased by
5.9% in the year ended 31 March 2012
to £2,002.5m (2011: £1,891.4m) largely
driven by strong organic growth of 5.4%.
The increase in revenue during the year
is attributable to organic growth of
£102.2m, the full year impact of the prior
year acquisition of Dalkia FM in Ireland
of £6.2m, and £2.7m from the in-year
acquisitions of Utilyx Holdings Limited
(‘Utilyx’) and Direct Enquiries Holdings
Limited (‘Direct Enquiries’).

Proforma prior year revenue including
the full year effect of acquisitions made
in the year ended 31 March 2011 was
£1,897.6m.

Revenue by division:

2012
£m

937.3

472.8

524.3

68.1

2,002.5

Total
growth
%

Organic
growth
%

6.2

8.2

2.9

9.1

5.9

5.5

7.6

2.9

9.1

5.4

Facilities Management

Technical Facilities
Management

Property Management

Asset Management

Total revenue

Operating proﬁt before other items
Operating proﬁt before other items*
for the group increased by 7.2% to
£111.7m (2011: £104.2m), reﬂecting an
improvement in the operating proﬁt
margin* to 5.6% (2011: 5.5%). Operating
proﬁt before other items in the prior
year included non-recurring income
of £4.1m arising from an amendment
to the past service cost of certain
deﬁned beneﬁt pension schemes
following the change from RPI to CPI
for the valuation of certain pension
scheme liabilities. Our operating
proﬁt and related growth statistics
exclude the £4.1m from the prior year
result in order to illustrate the operational
performance of the group.

The increase in operating proﬁt before
other items* is attributable to organic
growth of £7.0m, the £0.4m full year
impact of the acquisition of Dalkia FM in
Ireland and £0.1m from the acquisition
of Utilyx and Direct Enquiries during
the current ﬁnancial year. The organic
growth in operating proﬁt before
other items* was 6.7%.

Operating proﬁt before other items
by division:

2012
£m

Margin
%

Growth
%

61.9

26.9

20.2

2.7

111.7

6.6

5.7

3.9

4.0

5.6

10.1

9.3

(5.6)

35.0

7.2

Facilities Management

Technical Facilities
Management

Property Management

Asset Management

Operating proﬁt before
other items*

Other items
Other items for the year were £10.0m
(2011: £18.8m) and comprised the
amortisation of acquisition related
intangible assets of £9.1m (2011: £8.9m)
and other acquisition related and
restructuring items of £0.9m (2011: £9.9m)
incurred during the year.

After the impact of other items, the
operating proﬁt* for the year was
£101.7m (2011: £85.4m).

* Operating proﬁt before other items in the year ended 31 March
2011 included non-recurring income of £4.1m arising from an
amendment to the past service cost of certain deﬁned beneﬁt
pension schemes following the change from RPI to CPI for the
valuation of certain pension scheme liabilities. Operating proﬁt
before other items, margin, and related growth statistics stated
exclude the £4.1m from the prior year result in order to reﬂect
the underlying operational performance of the group.

MITIE Group PLC
Annual Report and Accounts 2012

Financial review

Basic earnings per share
before other items p

+0.0%

Basic earnings per share
p

+10.2%

Dividend per share
p

+6.7%

6
2
2

5
9
1

5
0
2

6
8
1

7
6
1

9
6
1

3
4
1

2
7
1

9
4
1

8
7

9
6

0
6

6
9

0
9

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

Finance costs
Net ﬁnance costs for the year were
£7.2m (2011: £2.7m). During the year,
MITIE completed the negotiation of its
reﬁnancing activities and secured new
committed banking facilities of £250m
which are available for drawdown
until September 2015. This completed
an exercise which had seen the
introduction of £100.2m equivalent
of longer term tenure US private
placement loan notes into the group’s
funding structures in December 2010.
The general tightening of credit markets,
compared to the favourable conditions
which existed when our previous facility
was negotiated in January 2007,
resulted in a signiﬁcant increase
in the total ﬁnance costs incurred
during the year. This increase is a result
of both higher interest rates and
an increase in the fees payable
on the arrangement and utilisation
of the group’s banking facility.

Proﬁt before tax
Proﬁt before tax for the year was £94.5m
(2011: £86.8m), an increase of 8.9% on
the prior year.

Taxation
The tax charge for the year was £22.4m
(2011: £21.4m), an improvement in the
effective rate of tax to 23.7% (2011:
24.7%). The improvement in the effective
tax rate is largely attributable to the
reduction in mainstream UK corporation
tax rates.

Proﬁt after tax
Proﬁt after tax for the year was £72.1m
(2011: £65.4m), an increase of 10.2% on
the prior year.

Earnings per share
Basic EPS before other items was
unchanged compared to the prior year
at 22.6p per share (2011: 22.6p per share)
whilst basic EPS was 20.5p per share
(2011: 18.6p per share), an increase
of 10.2%. This latter measure showed
higher growth due to the absence
of material restructuring or acquisition
related items during the year.

The measures of diluted EPS are based
on a calculation which includes
unexercised share options. The
substantial increase in MITIE’s share
price during the year has led to a rise in
the number of share options included
in this calculation (2012: 9.0m shares;
2011: 6.4m shares). This measure of EPS is
sensitive to the number of share options
included within it and has caused
a marginal decline in reported EPS
on that basis.

Dividend
It is now the Board’s policy to grow the
dividend broadly in line with the
underlying earnings of the group. The
ﬁnal dividend proposed by the Board
has increased by 6.1% to 5.2p per share
(2011: 4.9p per share). This brings the full
year dividend to 9.6p per share (2011:
9.0p per share), an increase of 6.7%.
The full year dividend reﬂects a cover of
2.4 times adjusted earnings per share.

Cash ﬂow, funding and liquidity
MITIE places signiﬁcant emphasis on the
management of its cash ﬂow and the
maintenance of strong ﬁnancing
facilities. The gearing of the group has
remained low and net debt at 31 March
2012 was £106.9m (2011: £76.5m),
representing a net debt to EBITDA ratio
of 0.81 (2011: 0.65). MITIE has a diverse
range of secure funding facilities with
committed banking facilities of £250m
which are available until September
2015, and a mix of US private placement
loan notes. The notes have a total value
of £100.2m, with £60.2m US dollar
denominated notes maturing in
December 2017 and £40m sterling
denominated notes maturing in
December 2019. The group also has
further overdraft facilities of £40m.

Cash inﬂows from operations increased
by 7.5% to £110.2m during the year and
we have delivered strong conversion of
proﬁt (EBITDA) to cash at a rate of 83.7%
(2011: 86.7%), whilst continuing to invest
in the organic growth of the group.
Cash conversion measures the success
of the group in converting operating
proﬁt measured by EBITDA to cash and
underpins the quality of MITIE’s earnings
and reﬂects the effectiveness of our
cash management activities.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Key performance indicators (KPIs)
MITIE uses a set of ﬁnancial and
non-ﬁnancial KPIs to measure and
communicate critical aspects of our
performance. These KPIs are aligned
with our strategic objective of
achieving sustainable proﬁtable growth
and our ﬁnancial KPIs are speciﬁcally
focused on the level and quality of our
earnings and cash ﬂows, the control
of capital expenditure and the
sustainability of dividends.

We have performed strongly against
these measures again this year and have
demonstrated a long-term track record
of strength in each. Details of our ﬁnancial
KPIs are set out on page 19 of this report.

Pensions
Our ﬁnancial strength remains
unaffected by any signiﬁcant deﬁcit
in respect of the deﬁned beneﬁt
pension schemes to which the group
contributes. The net funding position
of all the deﬁned beneﬁt pension
arrangements included on the balance
sheet is a deﬁcit of £17.3m (2011: £3.0m).

The deﬁcit on the principal group
deﬁned beneﬁt scheme at 31 March
2012 was £17.2m (2011: £3.0m). The
increase in the deﬁcit was principally
driven by the reduction in the discount
factor applied in the valuation of
scheme liabilities. This factor, which is set
by reference to prevailing bond market
rates at the year end, moved from 5.6%
to 4.9% over the year reﬂecting the
deterioration of bond rates over the
year. The deﬁcit calculation is
particularly sensitive to changes in the
discount factor, as illustrated in note 37
to the accounts. During the year, the
group completed the triennial review

and actuarial valuation, as at 31 March
2011, of its principal deﬁned beneﬁt
pension scheme. No lump sum
contributions to the scheme are
required as the result of this valuation
exercise. Further details of this
valuation can be found in Note 37
to the accounts.

MITIE contributes to a number of
deﬁned contribution pension schemes.
The group also makes contributions
to customers’ deﬁned beneﬁt pension
schemes under Admitted Body Local
Government status as well as to other
arrangements in respect of certain
employees who have transferred to
the group under TUPE. MITIE’s net
deﬁned beneﬁt pension obligations in
respect of schemes in which it is
committed to funding amounted to
£0.1m (2011: £0.0m).

Acquisitions
On 10 January 2012, MITIE acquired the
leading energy and carbon specialist
Utilyx. Utilyx provides a number of
services relating to its clients’ energy
demands including strategic planning,
procurement and risk management, all
of which are designed to manage the
business impact of energy consumption
and rising energy costs. The acquisition
of Utilyx complements and enhances
MITIE’s CarbonCare energy services
capabilities. Utilyx has an annualised
turnover of £9.6m. The total
consideration for the acquisition will
be up to £16.4m. Initial consideration of
£15.2m was paid in cash on completion
and the balance (capped at a
maximum additional payment of
£1.2m) will be paid in cash, dependent
on future business performance.

On 6 December 2011, MITIE acquired a
majority stake in the UK’s leading access
and disability consultancy company
Direct Enquiries.

Direct Enquiries has an annualised
turnover of £1.4m. The initial consideration
was £0.2m, paid in cash on completion,
with further options to buy the remaining
equity for cash, up to a maximum
of £8.3m depending on ﬁnancial
performance over a ﬁve year period.

MITIE also increased its stake from
50% to 100% in Service Management
International for £1.5m. SMI uses a
network of FM service providers in
34 different territories to tender global
contracts in which MITIE delivers the
UK services. Further details of these
acquisitions can be found within
Note 33 to the accounts.

MITIE’s entrepreneurial
investment model
In August 2011, MITIE purchased certain
minority shareholdings of ﬁve MITIE
subsidiary companies under their
respective articles of association
and shareholder agreements in
accordance with arrangements
under our entrepreneurial investment
programme known as the MITIE Model.
The total consideration for all ﬁve
purchases amounted to £14.6m being
satisﬁed by £2.0m in cash and as to the
remaining £12.6m by the issue of 5.3m
new Ordinary shares of 2.5p each in
MITIE Group PLC valued at 238.7p per
share, being the closing market price
per share on 27 July 2011.

Suzanne Baxter
Group Finance Director

MITIE Group PLC
Annual Report and Accounts 2012

Factors that could affect our business

A summary of the
principal risks potentially
affecting our business

Following the establishment of our new Enterprise Risk function in
2011, a fundamental review of the way risks are identiﬁed, analysed
and controlled was undertaken during the year. As a result of this
comprehensive review a more streamlined approach to establishing
our principal risks has been carried out, resulting in the number
of identiﬁed risks moving from 19 in the last Annual Report to
12 currently. This improvement in our risk management approach
further enhances our ability to develop and grow our business
with the assurance that key risks are effectively managed through
robust and embedded processes, with management prioritising
their resource to address signiﬁcant areas of risk. The principal
risks and uncertainties we face are set out below.

Strategic risks

Category

Areas of risk

Mitigation

Loss of competitive
position

Utilising new technologies to drive efficiency
improvements. Infrastructure to support growth. Unclear
or inappropriate marketing strategy. Insufficient funding.

Focus on clear strategic priorities. Business case
for investment in new infrastructure/technologies.
Recruitment and retention of talented people.
Strong relationships with main funders. Funding
sources diversiﬁed.

Inadequate contract
performance

Inability to support
development
in new markets

Reputational damage
caused by employees
not working to
company values

Market conditions/
economic climate
negatively impacting
on performance

Regulatory risks

Bidding and winning large scale contracts. Incorrectly
priced tenders. Onerous contract terms and conditions.
Services and technologies do not ﬁt the needs of the
market. Loss of a material contract.

Relationship management with key targets. Focus on
strategic bids. Experienced teams who can adapt to
changing markets. Use of internal and external legal
specialists. Delegated Board Authorities.

Knowledge and familiarity of local legislature, regulations
and common practices particularly in new territories.
Political risk. Management control over operations.

Local management assigned to provide local expertise.
Delegated Board Authority for entry into overseas
markets. External specialist advice. Insurance programme
in place locally.

Inappropriate dealing with stakeholders
(employees, clients and supply chain). Inappropriate
ﬁnancial dealings. Anti-competitive behaviour. Bribery
and corruption exposure.

Management systems to prevent fraud/economic
crime. Whistleblowing and conﬁdential reporting system.
Technology solutions to review and analyse transactions.
Training in developing a responsible culture.

Customers reduce volume/value of services.
Increased price competition. Changes in public
spending. Inﬂation and interest rate uncertainty.
Customers going into administration and bad debts.
Customers face difficulty raising funds. Volatile equity
and bond market.

Spread of client base. Extensive use of credit exposure
consolidation tool. Credit insurance. Hedging against
adverse interest rate ﬂuctuations.

Category

Areas of risk

Mitigation

Non-compliance
with legislation

Lack of awareness or action outside of relevant laws
and regulations and subsequent changes thereto.

Departmental responsibility for relevant regulatory
requirements. Expert external advisors. Speciﬁc
compliance systems in place. Ongoing training and
guidance. Conformance monitoring. Internal and
external audits.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Financial risks

Category

Areas of risk

Mitigation

Inadequate liquidity
to meet requirements/
obligations

Facility maturity risk. Difficulty in re-ﬁnancing. Change of
credit terms with client and suppliers. Credit control and
cash ﬂow management. Terms of borrowing instruments.
Increased pension scheme liabilities.

Committed bank facility in place spread across
six banks and ongoing relationships with funders.
US Private Placement funds of £100m and long term
maturity. £40m of overdraft facilities in place.
Regular reporting on key indicators. Statements of
compliance with borrowing powers. Daily and weekly
monitoring of bank balances and net debt. Financial
Procedures Manual.

Crystallisation of losses
on uninsured risks

Risk of breach of insurance conditions/covenants. Failure
to log and/or provide sufficient and complete information
for each business activity/risk exposure. Exposure to self-
insurance. Failure to adequately control activities.

Group and Division Business Management System.
Co-ordination of QHSE, Business Risk and Insurance
information. Annual review of insurance cover. Use of
expert insurance and other advisers for risk assessment.

Failure of material
counterparty
or joint venture

Operational risks

Financial instability and failure risk of clients,
suppliers, advisers, insurers and funding providers
increased in current climate. Funding becomes more
expensive or is withdrawn. Breach of banking covenants.
Pension scheme counterparties may be underfunded
due to poor investment performance.

Legal review of contracts and formal, regular
counterparty status assessment. Delegated authority
for approval and review of counterparty relationships.
Diversiﬁcation of counterparty base to limit
dependencies. Governance of pension schemes.

Category

Areas of risk

Mitigation

Major health, safety or
environmental incident

Trading position
compromised due
to system, control
or process failure

Incident caused by MITIE or its sub-contractors. Working
at height. Working with electricity, gas, asbestos or other
hazardous materials. Driving and vehicle safety. Fire, water
and waste management. Food safety. Manual handling
and slips, trips and falls.

Failure of critical systems, controls, processes or
networks. Network cyber attack. Insufficient data storage.
Non-conformance with legislation. Industrial action.

Inability to attract and
retain talented people

Attraction, motivation, retention and development
of talented people. Performance Management.
Management training.

Ongoing training for all employees supported by QHSE
professionals. Provision of appropriate equipment and PPE.
Speciﬁc procedures in place for high risk areas. Internal and
external audits.

Deﬁned business management systems, policies, control
framework and delegated authorities. Malicious software
protection. Multiple network routes to data centres.
Experienced in-house IT resources. Systems support and back-
ups. Diversity and geographic spread of operations. Flexible
workforce and network access. Disaster Recovery/Business
Continuity Plans. Application of due process. Internal audit,
including the use of computer assisted techniques.

Competitive remuneration. Talent management and
personal development plans. Succession planning.
Mentoring and graduate programme. Leadership
development training.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Board of Directors

Roger Matthews

Non-Executive Chairman

Chairman of the Nomination Committee
Member of the Remuneration Committees

Roger was appointed as a Non-Executive Director of MITIE
Group PLC in December 2006 and was later appointed
as Non-Executive Chairman in July 2008. Roger previously
held the roles of Group Finance Director of J Sainsbury plc
and Group Managing Director and Group Finance Director
of Compass Group PLC. Roger is a Non-Executive Chairman
on the board of LSL Property Services PLC and was recently
appointed Chairman for Pertemps Network Group Limited.
He is also a Non-Executive Director of Zetar PLC and a
Trustee of Cancer Research UK.

Ian Stewart

Non-Executive Deputy Chairman

Ian was appointed as Chief Executive of MITIE Group PLC
in 2001 and was appointed as Non-Executive Deputy
Chairman in March 2007. Ian was a founding member of
MITIE. Ian has announced his retirement from the Board with
effect from 21 May 2012.

Ruby McGregor-Smith CBE

Chief Executive

Ruby was appointed Group Finance Director of MITIE Group
PLC in December 2002, was appointed Chief Operating
Officer in September 2005 and was appointed the Group’s
Chief Executive in March 2007. Prior to joining MITIE, Ruby
held a range of senior roles within the support services sector,
primarily at Serco Group plc. Ruby has been a Non-Executive
Director on the board of Michael Page International plc
since May 2007, is their Senior Independent Non-Executive
Director, chairs their Audit Committee, and is a member of
their Nomination and Remuneration Committees. Ruby is also
a trustee for Business in the Community (BitC), a business-led
charity focused on promoting responsible business practice
and until recently chaired Race for Opportunity, a part of the
BitC organisation with a focus on diversity in the workplace.
Last year Ruby was awarded honorary Doctorates by both
Kingston University and The University of the West of England,
followed in early 2012 with the honour of a Commander of
the Order of the British Empire for her services to business and
diversity in business. In March of this year Ruby was
announced by the Home Secretary as Chair of the Women’s
Business Council, a focused, one-year working group aiming
to ensure action by government, business and others to
maximise women’s contribution to economic growth.

Suzanne Baxter

Group Finance Director

Suzanne was appointed as Group Finance Director of
MITIE Group PLC in April 2006. Suzanne is a Chartered
Accountant. Prior to joining MITIE, she specialised in
mergers and acquisitions related transaction support
and held a number of commercial and operational roles
with Serco Group plc. Suzanne holds a seat on the
Opportunity Now Advisory Board, a part of the BitC
organisation with a focus on gender diversity in the
workplace, and during the year was a member of the
Finance and Risk Committee of BitC. She has recently

become a mentor on the ICAEW’s Women in
Leadership Programme.

Bill Robson

Executive Director

Bill joined MITIE Group PLC in January 1992 following the
acquisition of Trident Maintenance Services Limited. He was
appointed as an Executive Director in August 2001 and now
holds the position of Managing Director of the group’s
Property Management division.

Larry Hirst CBE

Non-Executive Director

Member of the Audit, Nomination and Remuneration Committees

Larry joined MITIE as a Non-Executive Director on 1 February
2010. He held the position of Chairman of IBM Europe, Middle
East and Africa until July 2010 and held a number of senior
positions during his 32 year career with IBM including General
Manager, IBM Northern Region and Chief Executive, IBM UK
and Ireland. Larry was previously appointed as Chairman of
e-skills Sector Skills Council. Larry is a Non-Executive Director
of ARM Holdings plc and is also Non-Executive Chairman
of UK Trade and Industry Technology Board. He is a trustee
of the charity Sentebale, an Ambassador to Everywoman,
International Advisor to British Airways and a Global
Ambassador to Monitise plc.

David Jenkins

Senior Independent Director

Chairman of the Audit Committee
Member of the Nomination and Remuneration Committees

David was appointed as a Non-Executive Director in March
2006. David was previously a senior partner with Deloitte LLP
in London having spent over 20 years in Assurance and
Advisory Services. David is Chairman of Development
Securities PLC and a Non-Executive Director of Renewable
Energy Systems Holdings Limited. He was a Governor of
Downe House School until completion of his term of
appointment in November 2011.

Terry Morgan CBE

Non-Executive Director

Chairman of the Remuneration Committee
Member of the Audit and Nomination Committees

Terry was appointed as a Non-Executive Director in July 2009.
He is Chairman of Crossrail and President of the Chartered
Management Institute. Terry also holds positions as
Non-Executive Chairman of the Manufacturing Technology
Centre and the National Skills Academy for Railway
Engineering. He is also a Non-Executive Director of
Boxwood Ltd, and a Trustee of the London Transport Museum.
Terry was previously Chief Executive of Tube Lines Limited and
has held positions with BAE Systems, Rover Group plc and
Lucas Girling Limited.

Graeme Potts

Non-Executive Director

Member of the Audit, Nomination and Remuneration Committees

Graeme was appointed as a Non-Executive Director in
July 2006. Graeme was formerly Chief Executive of Reg
Vardy plc, a divisional Chief Executive Officer and Executive
Director of Inchcape plc and Chief Executive of RAC
Motoring Services. He is a Non-Executive Director of BEN,
the automotive industry charity, and is Managing Director
of Eden (GM) Limited, a motor retail group.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Corporate Governance Statement
The Directors submit their report together with the audited consolidated financial statements of the MITIE group of
companies for the year ended 31 March 2012. The Directors’ Report includes the Chairman’s Statement, the Business
Review, the Corporate Governance Statement, the Remuneration Report, the Directors’ Responsibility Statement,
and those documents that are referred to within the Directors’ Report and which are available at www.mitie.com.
The Company is required to set out a fair review of the business of the group, including an analysis of the development
and performance of the group during the reporting period, the position of the group at the end of the reporting period
and the principal risks and uncertainties facing the group. This review is set out in the Business Review on pages 8 to 47
and the Chairman’s Statement on pages 6 and 7.

The Directors’ Report has been prepared, and is published, in accordance with, and in reliance upon, applicable
English company law and the liabilities of the Directors in relation to that report are subject to the limitations and
restrictions provided by such law.

Principal group activities
MITIE Group PLC is the holding company of the group. The principal activity of the Company is to provide management
services to the group. The group’s activities are focused on the provision of strategic outsourcing and energy services
in support of the buildings, facilities and infrastructure of its clients. Further details of the subsidiary undertakings of the
Company principally affecting the profits or net assets of the group in the reporting period are listed in Note 39 to the
financial statements. The group operates a registered branch office in the Isle of Man.

Governance overview
The Corporate Governance Statement, together with the Directors’ Remuneration Report, provides details of key
aspects of MITIE’s corporate governance environment and the Board has confirmed that the group has complied
with all the relevant provisions set out in the UK Corporate Governance Code 2010 (the ‘Code’) throughout the year.

Our achievements during 2012 are underpinned by a strong culture of governance. In our Corporate Governance
Statement we explain how the main principles of good governance are applied and the principal changes we have
made to our systems of assurance, risk management and control during the last financial year. The Board recognises
that the manner in which the group is governed is critical to its long term success, for which it is accountable to
shareholders.

During 2012, the Board, with the help of its committees, has continued to ensure that balanced and sufficient time
is spent reviewing and discussing strategy, risk, performance, investor engagement and key matters of governance.
This is facilitated by focused planning to ensure that the right information is provided to support the decision making
of the Board. Key areas of governance that have been reviewed during the year include:

− Board composition – the Nomination Committee has reviewed the composition of the Board and its Committees and

the refreshing of the Board to ensure the rights skills and experience are represented to support the growth of the
group. The Board continues to operate a formal Board evaluation and is mindful of the requirement under the Code
to carry out an externally facilitated Board evaluation every three years. All Directors with the exception of Ian
Stewart will be standing for re-election at this year’s Annual General Meeting (AGM).

− Board diversity – MITIE has welcomed the focus on board diversity and the Board continues to believe the issue of

diversity should be tackled in a manner that considers all areas of the diversity and inclusion agenda of which gender
forms a part.

− External audit tender – the Board took a decision to tender the provision of external audit services to the group and
carried out a rigorous review process which involved presentations and responses from four potential providers of
audit services.

− Risk and business assurance – following a review of MITIE’s risk management systems and internal audit processes,

we have introduced an Enterprise Risk Management system to enhance the way in which risk is managed, assessed
and measured throughout the group.

− Decision making – the Board has completed its review of delegated authorities to ensure that they continue to be

adequate, appropriate and sufficient to support the business in the context of the growth of the organisation and its
changing jurisdictional presence.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Board structure and leadership

The role of the Board
The Board is collectively responsible for the long-term success of the Company and accordingly reviews and agrees
the strategy for the group proposed by the Executive Directors on an annual basis. In setting the strategy, the Board
takes account of key matters such as market trends, competitive environment, private/public sector approach,
international aspects, people and talent and the MITIE Model, ensuring at all times that sufficient consideration is given
to risk and internal controls. Matters that are exclusively dealt with by the Board include: setting group objectives and
strategies, approving business plans and budgets and monitoring performance against these, approving material
acquisitions, disposals and business start-ups, including any material transactions outside of the normal course of
business, approving the group’s Half-yearly and Annual Report and Accounts, appointing and removing the Chairman,
Directors and Company Secretary, management of the group’s risk profile and monitoring the group’s corporate
governance arrangements. Decisions and approvals are managed in accordance with the group’s delegated
authorities and matters are also set out in a schedule of matters reserved for the Board which is available at
www.mitie.com/investors_corporate-governance.

Board composition
The membership of the Board as at 31 March 2012 and biographical details of the Directors (including details of
committee chairmanships and other positions held) are given on page 48. To comply with relevant provision of the
Code, all Directors, with the exception of Ian Stewart, will submit themselves for re-election at the forthcoming AGM
and details are provided in the Notice of AGM which is available at www.mitie.com/investors. After serving with MITIE
for 25 years, of which 22 have been on the PLC Board, Ian Stewart resigned as a Non-Executive Director with effect
from 21 May 2012.

During the year, Non-Executive Director independence was considered by the Board. The Board determined that
all Non-Executive Directors as at 31 March 2012, with the exception of the Deputy Chairman Ian Stewart, were
independent in mind and judgement, and free from any material relationship that could interfere with their ability
to discharge their duties effectively.

The Board is comprised of four independent Non-Executive Directors; a Non-Executive Director deemed non-
independent as a result of his prior role as Chief Executive of the group, the Non-Executive Chairman and three
Executive Directors. The Board has five formally constituted committees: the Audit Committee, the Nomination
Committee, the Remuneration Committee, the Investment Committee and the Results Committee for which the duties
and responsibilities of each are set out in the terms of reference available on the Investor section of MITIE’s website:
at www.mitie.com/investors_corporate-governance. The work of the Committees is explained on pages 51 and 52.

The division of responsibilities and leadership
There is a clear division of responsibility between the roles of Chairman and Chief Executive as formally set out in the
terms of reference for each of these roles.

The Chairman is a Non-Executive Director and is responsible for the effective running and leadership of the Board,
ensuring its effectiveness. He liaises with the Company Secretary on the annual Board plan and agrees and sets the
Board agendas. Key matters covered at each Board meeting include: strategy, enterprise risk management, financial
and management reporting, investor relations and corporate governance, with updates received from each of the
Committee Chairmen. He ensures that sufficient time is allocated to promote healthy discussion and open debate,
supported by the right level and quality of information to assist the Board in reaching its decisions. The Chairman
encourages openness and fluid communication between Executive and Non-Executive Directors, a culture which has
been facilitated by meetings between the Chairman and individual Directors. The Chairman ensures that the Non-
Executive Directors contribute effectively and that the Executive and Non-Executive Directors are aware of the views
of major shareholders. He is also responsible for ensuring that the Board addresses major challenges faced by MITIE and
for the effective performance of the Board and its committees. The Chairman is available to consult with shareholders
throughout the year and will be available at the AGM.

The Chief Executive is responsible for all aspects of the operation and management of the group and its business
within the authorities delegated by the Board. She is responsible for developing and effectively implementing strategy
following approval of the strategic and financial plan by the Board. The Chief Executive’s remit includes proposing
investment into new business and geographical areas and ensuring at all times that the group’s risk profile is
appropriately considered. She ensures the timely and accurate disclosure of information to the Board and to
shareholders. She leads the Executive Directors and senior management team in the day-to-day running of the group’s
business under clear delegation of authority from the Board. The Chief Executive maintains regular dialogue with the
Chairman on all important Company matters and together they provide coherent leadership of the group.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

The Non-Executive Directors
Non-Executive Directors are responsible for exercising their independent skill and judgement. In reviewing the proposals
for the strategic direction of the group, the Non-Executive Directors constructively challenge and probe the Executive
Directors, offering a breadth of knowledge, experience and individual skills, and are responsible for contributing to the
formulation and development of strategy. The Non-Executive Directors monitor high level corporate reporting and
satisfy themselves as to the integrity of financial information and the operation of key financial controls. The terms of
appointment of the Non-Executive Directors’ and the Executive Directors’ service contracts are available for inspection
at MITIE’s registered office, the head office and at the AGM. The role of the Senior Independent Director is to make
himself available to shareholders should they have concerns which have not been resolved through the normal
channels of Chairman, Chief Executive or Group Finance Director or for which such contact is inappropriate in the
circumstances. The Senior Independent Director in particular reviews information on major shareholders and financial
analysis to obtain a balanced understanding of the issues and concerns of shareholders. Explained further below
is the Senior Independent Director’s role in succession planning and performance evaluation for the Chairman.

The Committees of the Board

The Audit Committee
The Company has a formally constituted Audit Committee comprised of independent Non-Executive Directors who
are all considered as being appropriately experienced to fulfil their duties, and the chairman, David Jenkins, continues
to be deemed by the Board as at the date of this report, to have significant, recent and relevant financial experience
through his qualifications and held appointments. The Committee is generally responsible for:

− monitoring and reviewing the integrity of the group’s corporate reporting which includes any formal announcements

relating to the group’s financial performance, and any significant financial reporting judgements therein;

− monitoring and reviewing the independence and objectivity of the group’s external auditors, the objectivity and
effectiveness of the audit process and the effectiveness and implementation of the group policy on the provision
of non-audit services (the Non-Audit Services Policy);

− monitoring and reviewing the integrity and effectiveness of the group’s internal financial controls environment,

internal audit function and enterprise risk management structures; and

− making recommendations to the Board on shareholder resolutions for the appointment of, and remuneration

for, external auditors.

The Chairman of the Committee will be available at the AGM to answer any questions about the work of the
Committee.

During the financial year, the Committee met three times and meetings are attended by the Company’s external
auditors, the Chairman, the Chief Executive, the Group Finance Director and the Enterprise Risk Director. The matters
under consideration at these meetings included:

− generally monitoring the group’s corporate reporting process and the statutory audit of the annual group accounts;

− the Half-yearly Financial Report and Annual Report and Accounts;

− critical accounting policies and judgements;

− the review of the external auditors’ audit plan, nature and scope of work and overall summary of key issues

and judgements;

− the tendering of external audit services for the group and the re-appointment of the external auditors;

− the effectiveness of the external auditors including the appropriateness and skills of the audit team;

− compliance with the Non-Audit Services Policy and maintenance of auditor independence;

− the approval of the group risk assurance framework and the internal audit plan;

− the review of key internal audit reports and findings; and

− generally monitoring the effectiveness of the internal control, audit and risk management systems and functions.

The Committee also meets separately with the external auditors and the Enterprise Risk Director without the presence
of the Executive Directors.

The Remuneration Committee
Information about the structure and processes for the Remuneration Committee is included on page 64 within
the Remuneration Report.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Board structure and leadership

The Nomination Committee
The Nomination Committee is responsible for identifying and nominating, for the approval of the Board, candidates
to fill Board vacancies and to consider the need to refresh the skills, experience and diversity represented on the
Board to support the growth of the business. It leads the process for appointments to the Board. On an appointment,
Directors are made aware of what is expected from them in terms of time commitment, Committee service and
involvement outside Board meetings.

All Directors receive a personally tailored induction to MITIE which includes visits to Company and key client sites and
they receive an information pack, which includes copies of MITIE’s Memorandum and Articles of Association, latest
Annual Report and Accounts, Committee terms of reference and copies of recent Board and Committee minutes and
supporting papers. Directors are given access to the virtual boardroom which, as well as holding all board reports, holds
the Board Handbook containing essential information about the Company; Board and Committee terms of reference;
Directors’ statutory duties; governance and regulatory guidelines; the group’s approved delegated authorities, and an
overview of the group’s insurance arrangements. The Handbook is reviewed and updated regularly as and when
regulatory developments arise. Training and development for Directors continues to be a key focus and additional
briefing notes are circulated on matters such as changes in the regulatory and governance environment.

In respect of changes to the membership on the Board or its Committees, the Nomination Committee makes
appropriate recommendations following a careful and considered evaluation of the balance of skills, knowledge,
experience and term served. It seeks to ensure that the Directors continue to provide the requisite skills, knowledge
and experience to support the development and needs of a growing organisation and diversity forms an important
part in this process. MITIE welcomes general principles underpinning the need to consider diversity at Board level and
sees this as an opportunity to help organisations shift their behaviour around diversity. The Board believes that setting
aspirational diversity targets could drive a different behaviour that is not necessarily in the best interests of the
organisation and the issue of Board diversity should be tackled in a manner that considers all areas of the diversity
agenda. Diversity at Board level has to be balanced against the required skills and experience and should be a natural
fit into any recruitment or succession planning and talent management process.

During the year, the Nomination Committee reviewed the composition and chairmanship of the Board and each
of its Committees and the Board has determined that all Non-Executive Directors were independent in character and
judgement. The membership of the Audit, Nomination and Remuneration Committees were widened to include all the
Non-Executive Directors and the Board has confirmed that it is satisfied that its current composition is appropriate
having regard in particular to the integrity, skills, knowledge and experience of its Directors and the size and nature
of the business.

The Investment Committee
In order to further strengthen the Company’s governance structures and facilitate the internal approvals process
the Board has approved the terms for the establishment of an Investment Committee which comprises of the Chief
Executive and Group Finance Director. The Investment Committee reviews and approves proposals on matters such
as acquisitions, disposals, capital expenditure and operational transactions, presented in accordance with the group
delegated authorities.

The Results Committee
In addition, the Board has approved the establishment of a Results Committee which comprises of the Chief Executive
and Group Finance Director. This Committee assists the Board in approving matters such as interim and final results
announcements, other routine, non-material announcements, dividend payments and shareholder communications.

MITIE Group PLC
Annual Report and Accounts 2012

Board effectiveness

Board meetings and meeting attendance
All Directors are expected to allocate sufficient time to the Company to discharge their responsibilities effectively
and, where possible, attend all Board meetings and the AGM. Any time commitment matters are addressed by the
Chairman with the Director concerned.

During the year ended 31 March 2012, there were six scheduled Board meetings. Additional unscheduled Board
meetings were held to deal with the review and approval of material contracts, acquisitions and issues relating
to shares and other administrative matters. Information contained in Board papers is generally well presented and
over the past 12 months has continued to improve to ensure effective decision making on areas critical to group’s
development. The Board has introduced an electronic boardroom and all board papers are now distributed
electronically which assists in the more efficient delivery of reports. Each year, the Board holds a dedicated
strategy meeting and a budget meeting. Directors’ attendance at scheduled Board and Committee meetings
(Audit, Remuneration and Nomination) of which they are members is shown in the following table:

Director

Number of meetings held in year:

R J Matthews

I R Stewart

R McGregor-Smith CBE

S C Baxter

W Robson

D S Jenkins

G J Potts

T K Morgan CBE

L Hirst CBE

Board

Audit1

Remuneration1

Nomination1

–

2 of 2

–

1 of 1

2 of 2

1 of 1

Note:
1 The membership of the Audit, Nomination and Remuneration Committees were widened during the year to include all the Non-Executive Directors.

To assist with the business conducted at Board and Committee meetings, all Directors are supplied with an agenda
and supporting papers for all Board meetings in a timely manner and from time to time, detailed presentations from
non-Board members on operational matters. In addition, members receive monthly reports from the Chief Executive
and Group Finance Director on the operational and financial performance of the group. During the course of the year,
the structure and content of these reports has been reviewed to help improve the quality of information and ensure
they continue to provide information that reflects the dynamics of the businesses and the markets within which the
Company operates; such reports can also include updates on post-acquisition performance, contract wins and losses,
organic growth, management accounts and results.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Board effectiveness

Director commitments
Executive Directors are permitted to accept appointments outside the group provided permission is sought from the
Chairman and the Chief Executive and that the additional appointments do not interfere with the Directors’ ability
to discharge their duties effectively. The commitments outside the group of the Executive Directors are detailed
in the Remuneration Report on page 64. Executive Directors are entitled to retain any fees earned from these
external appointments.

Directors’ interests
With regards to the appointment and replacement of Directors, the Company is governed by its Articles of Association
and the Code, the Companies Acts and related legislation. The Articles may be amended by special resolution of the
shareholders.

Director conflicts
The Board has a formal policy on the declaration and management of Director conflicts in accordance with the
Articles of Association of the Company which has operated effectively during the reporting period. Any potential
situation or transactional conflict must be reported as soon as possible to the Chairman, the Chief Executive and the
Company Secretary. Where a potential conflict is authorised (under the statutory powers and powers granted under
the Articles of Association to the Board), such conflict is kept under ongoing review.

Director indemnities
The Company maintains Directors’ and officers’ liability insurance, providing appropriate cover for any legal action
brought against its Directors and/or officers. The Memorandum and Articles of Association of the Company extend
the protection provided to Directors in respect of any litigation against Directors relating to their position as a Director
of the Company, and specifically provide that the Company may indemnify Directors against any liability incurred in
connection with any negligence, default, breach of duty or breach of trust in relation to the Company and that the
Company may fund defence costs. Individual Directors would still be liable to pay damages awarded to the Company
in any action against them by the Company and to repay their defence costs (to the extent funded by the Company)
if their defence was unsuccessful.

Board evaluation
The Board is committed to effective and rigorous review of its performance and that of the Committees and individual
Directors, and accordingly a formal evaluation of the performance and effectiveness of the Board, its Committees
and of each Director is performed annually.

The Chairman, with the Company Secretary, reviews the evaluation process and has considered the extent to which
such a process should be externally facilitated and has reported to the Nomination Committee on its conclusions.
This year, it was recommended that the Board continue with an evaluation process that uses a combination of a formal
appraisal questionnaire and one-to-one meetings. The questionnaire was separately reviewed and refreshed to ensure
that the questions remain meaningful, objective and support an open and transparent process, and focus on Board
composition and contributions, meeting processes and the performance of the Chairman (which is reviewed
separately and led by the Senior Independent Director).

The conclusions and recommendations flowing from the evaluation are reviewed by the Chairman with the Chief
Executive and shared with the Board. It is a constructive process used to improve performance and help shape
the future composition of the Board. The Board has confirmed that whilst there is an overall level of satisfaction with
the performance of the Board and that of its Committees and Directors, there was a continuing need for the Board
to focus on the implementation of the growth strategy and ensuring it has the skills, experience and diversity
to achieve it.

Director re-election
As part of the formal Board evaluation, the Board has considered the performance of each Director and is satisfied
that they continue to be effective and demonstrate clear commitment to their role. All Directors, with the exception
of Ian Stewart, will submit themselves for re-election at the forthcoming AGM.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Board accountability

Risk management and internal control
The Board is responsible for determining the level of acceptable risk that is appropriate for the group when establishing
and operating to achieve the group’s strategic objectives. It regularly reviews the effectiveness of the group’s risk
management programme and systems of internal control. Both the Board and the Audit Committee receive regular
updates from the Enterprise Risk Director for the group on potential risks that may impact upon the group and the
environment in which it operates. The system of internal control is designed to manage, rather than eliminate, the risk
of failing to achieve these objectives and strategies and it will only provide reasonable, and not absolute, assurance
against material misstatement and loss.

Internal control framework
The Board and senior management are responsible for maintaining and developing a culture of good governance and
integrity, competence, fairness and responsibility throughout the group. Essential to this is the recruitment and retention
of highly skilled individuals who promote the highest standards of integrity, competence, governance and ethical
behaviour. Group policies and procedures support the business by providing an operational internal control framework
for the group, each division and operating business to work within. This framework is designed to balance the need for
group-wide consistency and control with the autonomy that local management require to develop and manage each
operating business successfully.

Responsibilities are clearly defined and delegated in accordance with the group’s delegated authorities and
authorisation registers and ensure compliance with the matters reserved for the Board. The formal delegated authorities
matrix is issued to all operating subsidiaries that includes both financial and non-financial authorities and matters
relating to strategy, contract approval, recruitment, capital expenditure, banking transactions and specific group
policies. Periodically, the Board reviews the delegated authorities to consider the authorities in light of activities within
the organisation to ensure that they continue to facilitate the way in which the group operates. Each operating
subsidiary is headed by a managing or regional director who has authority to manage their business within this
framework of delegated authorities and group policies and procedures. To support the business further, the group
function has a team of specialist resources with individuals responsible for specific functions including legal, health
and safety, IT, insurance, human resources, tax, pensions, purchasing, finance and enterprise risk. Regular dialogue
between these functions and the operating businesses provides additional support and forms a key part of the system
of internal control.

Monitoring the system of internal control
Monitoring is carried out throughout the year via the receipt and review of various reports, presentations and discussions
with management, as set out above. Specifically, the Audit Committee supports the Board by monitoring and guiding
the activities of the internal audit function, including approving the internal audit programme and reviewing regular
internal audit reports from the Enterprise Risk function. The internal audit programme is designed to provide a level
of assurance over key risks as identified in the group risk register and is developed by the Enterprise Risk Director who
reports independently to the Audit Committee. The Audit Committee also receives regular reports from the external
auditors who contribute a further independent perspective on certain aspects of the internal financial control systems
arising from their work. As necessary, the Audit Committee will have dialogue with the Executive Directors on their
control responsibilities. To further encourage a culture of risk management within the business, the Executive Board
regularly reviews the programme of risk management undertaken across the group to demonstrate the importance
of the management and assessment of risk at a senior level.

During 2011, MITIE enhanced its approach to risk management, by bringing together existing risk management
resources into an Enterprise Risk function, led by an Enterprise Risk Director. This restructured approach allows the
Company to strengthen capability and resource through the sharing of best practice across the group.

The Board confirms that there is a continuing process for identifying, evaluating and managing significant risks faced
by the group which is monitored in accordance with the revised guidance on internal control issued by the Financial
Reporting Council. This work has focused on the assurance framework that exists within the group, the use and
compilation of risk registers and an increase in the use of computer assisted audit techniques.

The Board confirms that its risk assessment process has been in place throughout the reporting year and up to the date
of approval of the Annual Report and Accounts. The Board considers the nature and extent of the significant risks it
takes in setting strategies which are detailed further in the section regarding risk factors that could affect the business
on pages 46 and 47. The process for identifying, evaluating and managing risks requires the group and its principal
businesses to consider strategic, operational, financial and compliance risks and the effectiveness of the mitigating
controls based on a pre and post-controls risk evaluation. The principal risks identified from this process are recorded
in the group’s risk register which is maintained by the group’s Enterprise Risk function. This register is reviewed

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Board accountability
periodically by the Board and forms the basis of the internal audit programme for each year with risk areas reviewed
on an annual to triennial basis dependent upon materiality and inherent risk assessment. Reported potential economic
crimes and whistleblowing activity is communicated to the Audit Committee along with the results of investigations
carried out. These investigations have not identified any risks that result in a material, unmitigated exposure to
the group.

Reviewing the effectiveness of the system of internal control
In line with Turnbull Guidance and C.2.1 of the Code, the Board performs a formal annual assessment of the operation
and effectiveness of the system of internal control, covering all material controls including financial, operation and
compliance controls, and updates this assessment prior to the signing of the Annual Report and Accounts. The Board
also holds discussions with senior management and reviews the results of a formal internal controls review and system
effectiveness confirmation from each operating subsidiary. The Enterprise Risk Director attends each Audit Committee
meeting to provide regular updates on the effectiveness of the group’s internal controls. The Board confirms that
management has taken steps during the year to improve the system of internal control, embed effective controls
further into the operations of the group and to address improvements as they come to management’s attention.
These steps are monitored at executive level to ensure they are implemented appropriately and that they are effective.

Internal control systems: information and communication
The group maintains a number of systems and processes that report relevant information to group executive
management and the Board as necessary. This includes financial and non-financial information regarding business
performance, compliance with policy and procedure, relevant regulations and business critical matters. At an
operational level each division and business holds regular board and management meetings. To maintain and develop
relationships between separate divisions and to address specific matters, regional meetings are also held and are
attended by regional representatives of each division. Senior group management also regularly attend these meetings.

Consolidated accounts preparation and financial reporting
The consolidated accounts of the group are prepared by the Group Finance function that is responsible for the review
and compilation of reports and financial results from each of the operating divisions and subsidiaries within the group,
in accordance with the group internal control and reporting procedures. Each operating division supports its report and
results submission with a statement of compliance with the group’s principal internal controls which is subject to review
and sample audit by the internal audit function. In addition, the representations made by the Board in support of the
consolidated financial statements, including those in relation to the operating divisions, are supported by detailed
papers and cascaded reporting requirements throughout the group, which are reviewed by either the Group Finance
team or internal audit and presented to the Audit Committee and the Board for final approval as appropriate.

External auditor
Each year the Audit Committee reviews auditor performance in respect of audit services, audit related services
and non-audit services and is committed to ensuring the independence and objectivity of the external auditors.

During the year, MITIE invited tenders for its external audit services. Four audit firms were invited to participate and
a formal process of interviews and evaluations followed. The tender process included the review of the Company’s
existing auditor performance in respect of services provided, audit related services, non-audit related services and
independence and objectivity. The Audit Committee concluded that Deloitte LLP should be appointed given the
relevant experience of their London team in both the PLC environment and support services sector and their proposal
with regard to the execution of the audit plan. The Audit Committee recommended to the Board the continued
engagement of Deloitte LLP as the Company’s external auditor and has recommended their re-appointment at the
AGM. Deloitte LLP has expressed willingness to continue in office as auditors and accordingly the Board is
recommending a resolution for re-appointment for approval by shareholders at the forthcoming AGM.

The Audit Committee has approved a Non-Audit Services Policy that ensures that it has visibility over the levels of
non-audit work performed by the auditors and requires notification to the Chairman of the Audit Committee for any
non-audit spend with the auditors that, on an annual basis cumulatively exceeds 100% of the annual audit fee and/or
where any item, regardless of amount, is considered significant. The Audit Committee is satisfied that this policy provides
sufficient control over the levels of non-audit spend with the auditors whilst providing sufficient flexibility for the Group
Finance Director to approve expenditure on advice below those levels. Non-audit services provided to the group
during the year included taxation services and corporate finance services in relation to acquisitions.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

This policy also restricts the external auditors from performing work which will result in them auditing their own work,
making management decisions for the group, creating a conflict of interest, finding themselves in the role of advocate
for MITIE or creating any potential threat to their independence. Additionally, the external auditors will only be
considered for the provision of non-audit services if they are best suited to perform the work in question. Deloitte LLP
also maintains its own internal controls designed to safeguard its independence. A summary of the fees paid to the
external auditors is given in Note 6 to the financial statements. The Audit Committee confirms that the requirements
of the Non-Audit Services Policy have been met throughout the year.

Disclosure of information to the auditors
Each of the Directors in office as of the date of approval of this Annual Report and Accounts confirms that:

− so far as he/she is aware, there is no relevant audit information (being information required by the auditors in the

preparation of their report) of which the Company’s auditors are unaware; and

− he/she has each taken all the steps that he/she ought to have taken as a Director to make himself/herself aware
of any relevant audit information and to establish that the Company’s auditors are aware of such information.

This confirmation is given, and should be interpreted, in accordance with Section 418 of the Companies Act 2006.

Going concern
The Directors acknowledge the Financial Reporting Council’s Going Concern and Liquidity Risk: Guidance for Directors
of UK Companies issued in October 2009 and ‘An update for Directors of Listed Companies: Responding to increased
country and currency risk in financial reports’. The group’s business activities, together with factors likely to affect its
future development, performance and position are set out in the business review as referred to on pages 8 to 47.
The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the financial
review on pages 42 to 45. In addition, Note 27 to the consolidated financial statements includes details of the group’s
objectives, policies and processes for managing its capital, its financial risk management objectives, details of its
financial instruments and hedging activities, and its exposure to credit risk and liquidity risk.

The group benefits from a large number of long-term contracts with a broad range of public and private customers
which provide a strong forward order book of £8.6bn and high visibility of secured work (83% of budgeted revenue)
for the financial year ending 31 March 2013. As a consequence, the Directors believe that the group is well placed to
manage its business risks successfully. The group’s financial forecasts, taking into account possible sensitivities in trading
performance, indicate that the group will be able to operate within the level of its committed borrowing facilities.

The group’s committed borrowing facilities comprise £100.2m of US Private Placement Loan Notes expiring between
December 2017 and December 2019 which were issued in December 2010 and its committed banking facilities.
The group renegotiated its banking facilities in March 2011 and its committed facility of £250m will remain in place
until September 2015.

The Directors have a reasonable expectation that the group has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing
the Annual Report and Accounts.

Shareholder engagement
The Board is committed to an on-going, proactive dialogue with institutional and private investors and continues to
support the introduction of the UK Stewardship Code, applicable to institutional shareholders, to further encourage
engagement between the Company and its shareholders. A full programme of formal and informal events, institutional
investor meetings and presentations are also held following the Half‑yearly and Preliminary Results announcements
which are led by the Chief Executive and Group Finance Director.

The Chairman and Senior Independent Director are available for additional meetings with shareholders upon request.
The Board encourages the on-going dialogue between the Directors and investors and as such all Directors, with the
exception of David Jenkins were present at the 2011 AGM and made themselves available for direct discussions with
shareholders. Latest group information, financial reports, corporate governance and sustainability matters, Half-yearly
and Preliminary Results presentations, major shareholder information and all announcements are made available to
shareholders via the MITIE website (www.mitie.com) which has a specific area dedicated to investor relations.

Significant importance is attached to investor feedback on the group’s performance, and as such the Board receives
an investor relations report at each meeting detailing corporate news, share price activity, investor relations activity
and major shareholder movements. The Board is also regularly updated and provided with investor feedback, broker
updates and detailed analyst reports following the Half-year and Preliminary Results presentations. The Chairman
is responsible for ensuring that the Board is made aware of the issues and concerns of the major shareholders.
The AGM also allows shareholders to address and discuss any issues surrounding the group directly with the Executive
and Non-Executive Directors.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Shareholder engagement

Electronic communications
The Directors remain committed to improving and extending the electronic methods in which the Company
communicates with its shareholders, not only allowing the latest information on the group to be provided instantly
but recognising the environmental benefits. The Board encourages each shareholder to join the growing number
of investors electing to receive their information electronically and further details on how to register are provided
on the inside back cover of this report.

AGM
MITIE’s AGM will be held on 11 July 2012 at 2.30pm at UBS, 1 Finsbury Avenue, London, EC2M 2PP. As is required
by the Code, all Directors, with the exception of Ian Stewart, will be standing for re-election at the AGM.

Other information

Capital structure

Share capital and powers of shareholders
The group is financed through both equity share capital and debt instruments. Details of changes to the Company’s
share capital are given in Note 31 to the financial statements. The Company has a single class of shares – 2.5p Ordinary
shares – with no right to any fixed income and with each share carrying the right to one vote at general meetings of the
Company. Under the Company’s Articles of Association, holders of Ordinary shares are entitled to participate in any
dividends pro-rata to their holding. The Board may propose and pay interim dividends and recommend a final dividend
for approval by the shareholders at the AGM. A final dividend may be declared by the shareholders in a general
meeting by ordinary resolution, but such dividend cannot exceed the amount recommended by the Board.

Share capital authorisations
At the 2011 AGM shareholders authorised:

− the Directors to allot shares up to an aggregate nominal amount of £3,401,672.18 shares, representing one third of
the issued share capital plus 16,804,451 outstanding commitment in respect of options granted under MITIE’s share
schemes (such total equating to 38.0% of the issued share capital as at 31 March 2011).

− the dis-application of pre-emption rights over allotted shares up to an aggregate nominal value equal to £447,234

or a maximum 17,889,365 shares (representing 5% of the issued share capital as at 31 March 2011).

During the reporting period, the Directors utilised both these authorities (and the preceding authority) to allot 9,507,937
shares to an aggregate nominal amount of £237,698 to employees participating in MITIE’s share schemes and to
minority shareholders in consideration for MITIE Model shares.

− the Company to make market purchases of its own shares up to a total of 35,778,731 shares (representing 10%

of the issued share capital as at 31 March 2011).

On 25 May 2011, MITIE commenced a programme to purchase its shares in the market in order to offset shares
issued on 17 August 2011, to satisfy the consideration payable for the purchase of minority interests under the MITIE
Model. During the financial year to 31 March 2012 the Company purchased 5,400,000 shares (nominal value £135,000
and which equates to 1.49% of the issued share capital at year end) in the market for a total consideration of £12.3m
at an average price of 227.5p per share. The highest price paid was 255.9p per share and the lowest price paid was
208.6p per share. It is not MITIE’s current intention to operate a formal share purchase programme outside of this
arrangement, although it may purchase shares to offset share scheme exercise activity at its discretion.

Further details of these authorisations are available in the notes to the 2011 Notice of AGM and shareholders are
referred to the 2012 Notice (both are available at www.mitie.com/investors) which contains similar provisions in
respect of the Company’s share capital.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Restrictions on the trading of shares
Certain shares that are issued as consideration upon acquisition by the Company of the shares of minority shareholders
in MITIE Model companies have restrictions placed upon them that both prevent the transfer of such shares and/or
attach specific claw-back provisions for periods of up to two years following allotment. Otherwise, there are no specific
restrictions on the size of any shareholding or on the transfer of shares, which are both governed by the provisions of the
Articles of Association of the Company (available at www.mitie.com/investors_corporate-governance) and prevailing
legislation. The Directors are not aware of any agreements between Company shareholders that may result in
restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the
Company’s share capital. Details of employee share schemes are set out below and in Note 36 to the Accounts.

Recipients of MITIE Group PLC shares received under a MITIE investment model are restricted from selling the shares
received as consideration for a minimum of two years. The Board believes that this is a unique business model that
has driven MITIE’s past performance and continues to ensure a close alignment of interest between MITIE shareholders
and the management and employees of the group.

The group operates a Share Trading and Insider Dealing Policy which provides a framework to prepare and maintain
lists of those persons who have access to inside information relating to MITIE and explains to employees the rules
regarding dealing in MITIE Group PLC Shares by MITIE’s employees who have been identified as insiders. A list of insider
names is held by the Company Secretary and those identified are informed individually and asked to read, understand
and follow the procedures detailed in the policy. Lists are maintained electronically and all identified insiders receive
an email notification advising of the group’s relevant close periods.

Significant interests in MITIE’s share capital
As at 18 May 2012 the Company has been notified of the following significant holdings of voting rights in its shares under
the Disclosure and Transparency Rules:

Massachusetts Financial Services Company

Majedie Asset Management Limited

FMR LLC

AXA IM SA

Number of
Ordinary shares
of 2.5p each

Percentage
of share
capital

17,993,365

18,111,472

18,000,006

18,003,137

5.09%

5.00%

5.04%

4.99%

Details of the Directors’ interests in the share capital of the Company are detailed within the Remuneration Report on
pages 72 and 73.

Other share matters
There are a number of other agreements with provisions that take effect, alter or terminate upon a change of control
of the Company such as bank facility agreements and employee share plans. None of these are considered to be
significant in terms of their likely impact on the normal course of the business for the group. The Directors are not aware
of any agreements between the Company and its Directors or employees that provide for compensation for loss of
office or employment that occurs solely because of a takeover bid.

Employees
The Board remains committed to fostering and developing a culture of employee involvement in the business through
communication with employees and equity involvement whereby employees are enabled to build a stake in the
Company through the Company’s various equity-based incentive schemes.

Equity-based incentives
The Board believes that the group’s culture of employee equity involvement is a significant driver in the group’s growth
performance and that this assists in attracting and retaining skilled and committed employees.

During the year the group has continued to operate the MITIE Long Term Incentive Plan to incentivise and reward senior
members of the MITIE management team, the Executive Share Option Scheme for certain other employees and the
Savings Related Share Option Scheme which is open to all eligible employees of the group. In addition, following
shareholder approval at the 2011 AGM, MITIE launched a Share Incentive Plan to all eligible employees in January 2012.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Employees
The group has historically grown by giving entrepreneurial managers the opportunity to create wealth by taking the risk
of starting a new business, taking equity stakes at fair value in those new businesses in conjunction with MITIE and then,
dependent on a pre-agreed pricing structure, offering to sell that stake to MITIE predominantly in exchange for MITIE
shares, at the option of the Company. In 2011, the group launched a £10m Entrepreneurial Fund to back management
teams with innovative ideas for starting mutually owned businesses. The Board remains committed to supporting
growing businesses through the Fund which builds on a long history of partnering with management teams to start up
new business ventures. During the year, the Company has invested over £4m from the Entrepreneurial Fund, in the form
of MITIE Model start-ups, second generation equity schemes and other equity incentive based businesses.

Under the terms of certain shareholder agreements and articles of association relating to MITIE Model companies,
certain minority shareholders in such companies may provide an option for the purchase by the Company of their
minority shares. The mechanism for calculating the price to be paid in respect of such transfer is transparent, on an
arms-length basis, and in accordance with the pricing structure generally applicable for other transfers under the
MITIE Model. In consideration for these purchases, the Company generally has the option to settle payment in cash
or in MITIE shares.

On 17 August 2011 the Company announced the purchase of certain minority shareholdings in five of its subsidiary
companies: MITIE Cleaning Services Limited, MITIE Engineering Maintenance (Caledonia) Limited, MITIE Landscapes
Limited, MITIE Property Services (UK) Limited (MPSUKL) and MITIE Transport Services Limited in accordance with the
respective articles of association and shareholders’ agreements of those companies. The total maximum consideration
for all five transactions amounted to £14.6m, being satisfied as to £2.0m in cash and as to the remaining £12.6m by the
issue of 5,265,964 new ordinary shares of 2.5p each valued at 238.7p per share, being the closing market price per MITIE
share on 27 July 2011. As a result of these acquisitions, MITIE now owns 100% of the issued share capital of all five
companies with the exception of MITIE Landscapes Limited of which 89% of the issued share capital will be owned.
The selling shareholders gave certain warranties and assurances relating to past and future performance of the relevant
subsidiary companies. The shares issued in consideration are being held in safe custody for a maximum period of two
years and may be sold to meet any claims that the Company may have in the future in relation to those warranties and
assurances. Details of these structures are generally available (to the extent incorporated into the articles of association
for individual MITIE Model companies) from Companies House at www.companieshouse.gov.uk.

As part of the arrangements to purchase shares in MPSUKL the Company entered into an agreement to purchase
shares held by Kenneth Robson (a relative of William Robson, an Executive Director of the Company) in MPSUKL.
Kenneth Robson served notice on MITIE to sell 40,000 B ordinary shares in MPSUKL at the same time as other
shareholders, for a total consideration of £0.5m. This equated to 1.11% of MPSUKL’s issued share capital. Shareholders
approved the substantial property transaction at a general meeting held on 10 November 2011 and an application
was made to the UK Listing Authority and the London Stock Exchange in respect of the consideration shares due to
Kenneth Robson.

Recipients of shares under this incentive scheme are generally restricted from selling the MITIE shares received
as consideration for a minimum of two years. On 10 November 2011 shareholders also approved three new equity
participation schemes under the MITIE Model which gives entrepreneurial managers the opportunity to create wealth
by taking the risk of taking equity stakes in new businesses or more mature businesses in conjunction with MITIE and then,
dependent on a pre-agreed pricing structure, offering to sell that stake to MITIE between the fifth and tenth years from
the date of establishment of the business. Shareholders approved the introduction of the schemes allowing certain
employees to share in any additional value which they help to create. At this year’s AGM the Board is seeking a
general approval from shareholders that allows the Company to enter into such schemes pursuant to the Listing Rules.

Communication with employees
Communication with MITIE’s employees remains a high priority. The group communicates with employees through
the use of group-wide mailings, employee magazines and updates, employee-focused initiatives, media networks
and the provision of access to broadcasts of periodic financial presentations.

We are also committed to developing our use of social media tools as an effective way of communicating with
our people because we recognise that these methods can provide great ways of allowing our people to give
us feedback, share ideas and engage with the wider MITIE community.

Our social media tools are supported by a group-wide intranet system which improved communications and
information sharing across the business and includes blog updates by the Executive Board members and
functional teams.

MITIE Group PLC
Annual Report and Accounts 2012

Through the use of their own communication processes each of the group’s businesses is encouraged to ensure that
employees are kept informed on group and individual business developments and social networking sites continue
to play an important part of engagement and communication with employees.

The group continues to operate its group-wide MITIE Stars programme to recognise and reward exceptional
performance by its people. The MITIE’s Got Talent, group-wide talent contest continues to be supported and
encourages employee engagement and recognition. The group Sustainability Report contains further details
of these initiatives and is available from www.mitie.com.

Employees remain actively involved in the group’s activities via an employee forum. This year the forum held two
meetings and included presentations by senior management or functional heads as requested by the employee
representatives. The Executive Board will continue to seek increasing involvement and activity of the employee
representatives. During the year, the group launched an employee engagement survey in certain parts of the
group to gather feedback on the employee experience.

Employee diversity and inclusion
The Board remains committed to developing further a culture that encourages the inclusion and diversity of all
of the group’s employees through respecting and appreciating their differences and promoting the continuous
development of employees through skills enhancement and training programmes. The group’s employment policies
are designed to attract, retain, train and motivate the very best people, recognising that this can be achieved only
through offering equal opportunities regardless of gender, race, religion, age, disability, sexual orientation or any other
aspect of diversity. Applications from disabled persons are always fully considered, bearing in mind the aptitudes of the
applicant concerned. It is the policy of the group that the training, career development and promotion of disabled
persons (including those who become disabled whilst employees of the group) should, as far as reasonably possible,
be identical to that of other employees.

Further information can be found within the group’s dedicated Sustainability Report which can be found at
www.mitie.com.

Financial matters

Financial results and dividends
A detailed commentary on the financial results of the group for the year is contained within the financial review
on pages 42 to 45 of this report. The profit before taxation for the financial year is £94.5m (2011: £86.8m).

− The Directors declared an interim dividend of 4.4p per Ordinary share with a total value of £15.5m (2011: £14.4m)

which was paid to shareholders on 6 February 2012.

− The Directors recommend a final dividend of 5.2p per Ordinary share with a total value of £18.4m based upon the
number of shares issued as at 16 May 2012 (2011: £17.5m). The final dividend for the year will be paid on 7 August
2012, subject to shareholder approval at the AGM, to ordinary shareholders on the register on 22 June 2012.

− The total dividend per Ordinary share for the year ended 31 March 2012 is 9.6p (2011: 9.0p).

The Company operates a Dividend Re-Investment Plan (DRIP) which allows shareholders to build their holding by using
the cash dividend to purchase additional shares in MITIE. Further details on the operation of the DRIP are included at the
back of this report and are available from MITIE’s Registrar.

During the reporting period, the trustees of the Company’s Employee Benefit Trusts waived dividends on shares held.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report

Financial matters

Financial instruments
The group’s financial instruments include bank loans, finance leases, overdrafts, US private placement loan notes and
performance guarantees. In addition, various other financial instruments such as trade creditors and trade debtors arise
from its trade. The use of interest rate swaps and currency derivatives are used to manage interest and currency risk
when necessary or material. The principal objective of these instruments is to raise funds for general corporate purposes
and to manage financial risk. Further details of these instruments are given in Note 26 to the financial statements.

Events after the balance sheet date
There have not been any significant events post the balance sheet date.

Payment of creditors
The group manages its procurement and supply chain with increasing consideration of its impact on the Company’s
profitability, reputation and sustainability objectives and is committed to proactively developing mutually beneficial
and sustainable trading relationships with all of our stakeholders, based on a foundation of trust and co-operation.
The group’s Ethical Business Practices Policy provides a framework and demonstrates our values and commitment to
developing and implementing ethical business practices throughout the organisation.

The group’s policy is to comply with the terms of payment agreed with suppliers on the group’s standard purchasing
terms as notified to suppliers. Notification of these terms is issued with each generated purchase order and a copy of
the group’s standard purchasing terms can be found at www.mitie.com/suppliers. At 31 March 2012, the group had
35 days’ purchases outstanding (2011: 36 days).

Future developments
The operating review sets out the Board’s view on the future developments of the group.

Research and development
Given the nature of the group’s activities it does not carry out any material research and development work.

Donations
Donations to charity and community projects made during the year amounted to £160,648 (2011: £190,738). The total
value of community investment was £541,401 (2011: £534,015).

The Directors of MITIE Group PLC confirm that they do not and will not make political donations.

By order of the Board

Marie-Claire Haines
Company Secretary
21 May 2012

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ report: statement of Directors’ responsibilities

Statement of Directors’ responsibilities in respect of the accounts
The Directors are responsible for preparing the Annual Report and Accounts. The Directors are required to prepare
the financial statements for the group in accordance with International Financial Reporting Standards as adopted
by the EU (IFRS) and have chosen to prepare Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (UK GAAP).

In the case of International Financial Reporting Standards (IFRS) accounts, International Accounting Standard 1
requires that financial statements present fairly for each financial year the Company’s financial position, financial
performance and cash flows. This requires the faithful representation of the effects of transactions, other events
and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses
set out in the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of
Financial Statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with IFRS
where applicable. The Directors are also required to:

− properly select and apply accounting policies;

− present information, including accounting policies, in a manner that provides relevant, reliable, comparable and

understandable information;

− provide additional disclosures when compliance with the specific IFRS requirements is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance; and,

− make an assessment of the Company’s ability to continue as a going concern.

In the parent company accounts, the Directors have elected to prepare the financial statements in accordance with
UK Generally Accepted Accounting Principles. The Directors are required to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these financial statements, the Directors are required to:

− select suitable accounting policies and then apply them consistently;

− make judgements and estimates that are reasonable and prudent;

− state whether applicable accounting standards have been followed, subject to any material departures disclosed

and explained in the financial statements; and,

− prepare financial statements on the going concern basis unless it is inappropriate to presume that the Company will

continue in business.

The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at
any time the financial position of the Company, safeguarding the assets, taking reasonable steps for the prevention
and detection of fraud and other irregularities, and the preparation of a Directors’ report and Directors’ remuneration
report which comply with the relevant requirements of the Companies Acts, Listing Rules and Disclosure and
Transparency Rules (DTRs).

The Directors are also responsible for the maintenance and integrity of the Company website. Financial statements
published by the Company on this website are prepared in accordance with UK legislation which may differ from
legislation in other jurisdictions.

To the best of each Director’s knowledge the financial statements, prepared in accordance with the applicable set
of accounting standards and contained within this Annual Report and Accounts, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the group and the undertakings included in the consolidation taken
as a whole, and the management report, which is incorporated into the Directors’ report includes a fair review of the
development and performance of the business and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with the description of the principal risks and uncertainties they face.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

By order of the Board

Ruby McGregor-Smith CBE
Chief Executive
21 May 2012

Suzanne Baxter
Group Finance Director
21 May 2012

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ remuneration report

Introduction
This report has been prepared on behalf of the Board in accordance with s420 of the Companies Act 2006 and in line
with the Schedule 8 of the Large and Medium–sized Companies and Groups (Accounts and Reports) Regulations 2008
and covers all Directors who served on the Board during the reporting period. The Remuneration Committee believes
in and promotes good governance through the adoption of the Code, compliance with the Listing Rules and due
reference to other guidelines which together should provide shareholders with a practical framework and
reference point.

Certain elements of this report need to be audited by the Company’s auditors and for them to state that the audited
information has been duly prepared in accordance with the regulations. The report therefore has been arranged into
two sections; Section A: not subject to audit and Section B: subject to audit. The report will be presented for shareholder
approval at the forthcoming AGM on 11 July 2012.

Section A: The following information is not subject to audit

Remuneration policies and principles

Membership
The Remuneration Committee met five times in the year and is comprised of solely Non-Executive Directors of the
Company. The members of the Remuneration Committee are Terry Morgan CBE (Committee Chairman), David Jenkins,
Graeme Potts, Larry Hirst CBE and Roger Matthews. Ruby McGregor-Smith CBE, Chief Executive and the Group HR
director attended Committee meetings by invitation only, to provide further information on the Company’s
performance and the performance and remuneration of the Executive Directors.

Advisers to the Committee
During the year the Committee requested the attendance of and sought advice from Kepler Associates appointed
by the Committee in 2007. Kepler Associates provide no other services to the Company.

Terms of reference
The terms of reference for the Committee are available on the Company’s website and include:

− shaping and agreeing with the Board the framework of policy for the remuneration of Executive Directors

and certain aspects of the remuneration of senior management;

− determining the total individual remuneration package of each Executive Director with due regard to the

performance of the individual in line with the agreed remuneration policy;

− agreeing Executive Directors’ contractual terms;

− acting on behalf of the Board, in connection with the establishment and administration of the group’s current
and/or future share plans, including the selection of participants, the setting of option prices and the setting of
performance targets; and,

− drafting and approving the Directors’ remuneration report and any remuneration related resolutions to be put

to the shareholders at the group’s AGM.

General remuneration principles
The Committee is responsible for formulating remuneration policies and principles that promote the success of the
Company in creating value for shareholders over the longer term, are aligned to the corporate objectives
and business strategy and take into full account the associated risks. The Committee understands that it is accountable
to shareholders for the decisions made on Executive remuneration and seeks to maintain an open and constructive
dialogue where changes to remuneration policy are being proposed.

The remuneration policy for the Company’s Executive Directors and other group senior executives is shaped by
the requirement to align the interests and individual performance of the Senior Executive team with those of MITIE’s
shareholders. The policy has particular regard to the Company’s and the group’s long-standing culture of encouraging
equity ownership in order to achieve this alignment. The Committee, and the Board, continues to believe that the
principle of equity incentivisation has been a key driving force in the past success of the group. Consequently, in order
to maintain and further develop MITIE’s performance culture, the Committee believes that the remuneration packages
of the Executive Directors should continue to contain significant performance-related equity-based elements.

The Committee continues to believe that exceptional performance should be matched with appropriate remuneration
to attract, retain and motivate Directors and management and ensures that packages are linked to and support the
long-term performance of the Company.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Remuneration policy
The remuneration policy of the Company promotes and embeds the Company’s remuneration principles.
The Company’s policy is:

Performance linked

Shareholder aligned

Company performance determines a significant element of the Executive
remuneration packages. Only top-end performance can achieve the stretching
targets that are reflected in the performance-linked pay elements of the packages.

The discretionary share schemes are based on EPS growth to align the interests of the
senior executive team with those of shareholders. Bonuses are structured to reward the
attainment of the strategic target of long-term sustainable, profitable growth.

Comprehensive and simple

The overall remuneration policy is comprehensive without becoming overcomplicated
and encourages Executives to concentrate on growth of the group.

The Committee believes, and is satisfied that, the remuneration policy is appropriate and takes account of the group’s
performance and strategic objectives and will continue to use this approach and policy as a framework for the setting
of future packages, whilst having due regard for the remuneration packages offered across the group and the
external market.

Share ownership policy
The Company operates a share ownership policy to encourage the build-up of equity in the Company by both its
Executive Directors and senior executives. Under this policy, all Executive Directors are required, over time, to build and
maintain a target shareholding in the Company worth 100% of base salary (150% of salary for any Executive Director
who is granted an LTIP award of more than 100% of base salary). The Committee recognises that the principal
mechanism for building up this holding will be on the exercise of LTIP awards and accordingly, until such time as the
shareholding requirement is met, Executive Directors will be expected to retain no fewer than 50% of shares (net of
taxes) that vest under the LTIP. On the 1 May each year, the Committee reviews the expected target holding for the
Executive Directors, calculated as a percentage of salary.

Table 1: Share ownership update

R McGregor-Smith CBE

S C Baxter

W Robson

Number of ordinary
shares owned as at
31 March 2012

564,268

212,538

1,622,686

Value of target
holding at 1 May 2011
based on
% of salary as at
31 March 2012

Value of
holding as at
31 March 20121

Percentage of
target holding
achieved as at
31 March 2012

£765,000

£1,577,129

£487,500

£594,044

£320,000

£4,535,407

100%

Note:
1 Calculated at a share price of 279.5p being the closing market price on 31 March 2012.

The key elements of Executive Director remuneration
The overall package for Executive Directors consists of a fixed element (salary and certain benefits) and a variable
performance-related element (annual performance-related bonus and long-term equity-based incentives) and has
been structured to align the Executive Directors’ packages with the interests of shareholders. The Committee tests the
remuneration structure regularly to ensure that it remains aligned with business needs and is appropriately positioned
relative to the market. The balance between the fixed and variable elements of the Executive Directors’ packages is
set out below.

Base salary and other benefits
The Committee’s advisers provide an annual review of total remuneration relative to sector and size comparators and
including base salary, annual bonus, long-term incentives and pension. The Committee considers this review and also
takes account of a range of other factors when determining appropriate salary levels including market conditions
and the responsibilities and skills of the individual Directors and in the context of salary increases across the organisation
as a whole.

The Executive Directors received salary increases during the year averaging less than 4% and took account of the
range of factors described above, the continued growth and performance of the group and the performance of the
individual Executive Directors, with due consideration of the outcomes of the benchmarking exercise. For the current
year, the Remuneration Committee approved salary increases averaging 3%.

The other benefits offered to the Executive Directors consist of contributions to a pension scheme, private healthcare
and the provision of a car allowance.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ remuneration report

The key elements of Executive Director remuneration

Annual bonus
Performance-related remuneration is designed to drive MITIE’s performance and be aligned to the group strategic
objective of achieving long-term sustainable, profitable growth. The annual bonus rewards mainly short-term Company
performance but also has a link to longer-term performance through a link to strategic targets and partial delivery in
MITIE Group PLC shares.

For the 2011/2012 performance year, Executive Directors had the opportunity to earn bonuses of up to 125% of salary,
with any bonus earned above 100% of salary deferred into MITIE Group PLC shares for two years and forfeited should
the Director leave the business during this period. Up to 100% of salary is earned for the achievement of group
budgeted profit growth and the remaining 25% of salary is assessed on a series of non-financial strategic targets.
In setting the non-financial strategic targets, the Committee had due consideration of the longer-term success of
the Company and the aligning of interests with shareholders and continues to believe that the performance targets
for the annual bonus are sufficiently stretching for the maximum bonus payment.

During the year under review, MITIE achieved the profit growth target in full and 100% of base salary will be paid in
cash. The Remuneration Committee decided that significant overall progress had been achieved on the non-financial
strategic targets and therefore awarded a further 25% of base salary, deferred into MITIE Group PLC shares for
two years.

For the 2012/13 performance year, the Remuneration Committee has approved two changes to the annual bonus
scheme structure. A sliding scale has been introduced into the element of the bonus based on financial targets which
will pay out 90% of salary for threshold performance to 110% of salary at stretch. The upper end of the scale is intended
to reward the achievement of exceptional financial performance and the sliding scale in general to ensure that bonus
pay-outs are not unduly sensitive to small changes in performance. Given the extension of the financial performance
targets, the Committee feels that a modest uplift in the bonus opportunity for financial performance from 100% to 110%
of salary is appropriate. In addition, the bonus opportunity for the Chief Executive on the strategic objectives element
has been increased by 25% to 50% of salary. This increase recognises her significant influence on the achievement of
these objectives. Overall the maximum bonus opportunity for the Chief Executive will therefore increase to 160% of base
salary while the maximum opportunity for the other Executive Directors will increase to 135% of base salary. Any bonus
amount over 100% of base salary will be deferred in shares for a two year period.

Share-based incentives
The remuneration package reinforces long-term decision making and sustainable profitable growth through the use
of share-based incentives. For Executive Directors and certain senior executives, the principal tools designed to support
this ethos are the Company’s LTIP (as described on page 68) and the Share Ownership Policy (as described on page
65). Vesting of share awards under the LTIP is based on performance measured over three years which is considered
appropriate to align rewards to Executive Directors with the strategic objectives of the Company. Certain Executive
Directors still retain options granted under the ESOS (details of the holdings are set out in Table 5 of Section B below).
It is the intention of the Committee not to issue further ESOS options to Executive Directors, although ESOS continues
to be used to reward and incentivise certain other members of the senior group executive and management teams.

Details of Executive Directors participation in the Group’s share schemes are set out below.

Executive Directors’ service contracts
All Directors are appointed for an indeterminate period of office but are subject to annual re-election at the AGM in
accordance with the Code.

The Executive Directors’ service contracts are available for inspection at MITIE’s registered office, the head office
and at the AGM. All the Executive Directors have rolling service contracts which provide for a maximum of 12 months’
notice from either party. There are no provisions for compensation on termination of employment set out within the
contracts of the Executive Directors. The dates of the service contracts of the Executive Directors are set out below:

Table 2: Executive Director’s service contracts

Contract term

Date of
agreement

Notice period

Rolling contract 01-Apr-03 12 months

Rolling contract 10-Apr-06 12 months

Rolling contract 01-Apr-03 12 months

R McGregor-Smith CBE

S C Baxter

W Robson

MITIE Group PLC
Annual Report and Accounts 2012

Policy on external appointments
The Board recognises that the appointment of Executive Directors to Non-Executive positions at other companies
can be beneficial both for the individual Director and the group through the broadening of their experience and
knowledge. Ruby McGregor-Smith CBE receives fees of £51,000 per annum in respect of her role as a Non-Executive
Director of Michael Page International plc and is entitled to retain any fees earned.

Non-Executive Directors

Non-Executive Directors’ fees
The fee level is designed to recognise the contribution and responsibilities of the role and to attract individuals with the
experience and skills required to contribute to the future development of the Board and the group. The Non-Executive
Directors are paid a basic fee with an additional fee for chairing a Committee, together with expenses incurred in
carrying out their duties on behalf of the Company. Non-Executive Directors are not eligible to participate in any
of the Company’s share schemes or the annual bonus scheme, nor do they receive pension or ancillary benefits.

Following an external benchmarking exercise, the fees for Non-Executive Directors were increased from £40,000 to
£46,000 effective from the 1 April 2011. An increase from £5,000 to £7,000 per annum was also approved and paid to
Non-Executive Directors who also chair one of the Committees of the Board. This was the first increase to Non-Executive
Director fees since 2006. No increases were made in respect of the Chairman.

Further details of fees paid to Non-Executive Directors are provided in Table 1 of Section B below.

Non-Executive Directors’ engagement terms
The terms of appointment of the Non-Executive Directors are available for inspection at MITIE’s registered office, the
head office and at the AGM. The Non-Executive Directors are engaged for an initial term of three years which is
terminable on either three or six months’ notice and thereafter on a rolling term.

Table 3: Non-Executive Directors’ engagement terms

R J Matthews

I R Stewart

D S Jenkins

G J Potts

Additional duties

Chairman;
Chairman of Nomination Committee

Deputy Chairman

Senior Independent Director;
Chairman of Audit Committee

T K Morgan CBE

Chairman of Remuneration Committee

L Hirst CBE

Date of
engagement

04-Dec-06

30-Mar-07

31-Jan-06

01-Aug-06

01-Jul-09

01-Feb-10

Initial contract term Notice period

3 years

6 months

3 years

6 months

3 years

6 months

3 years

6 months

3 years

3 months

3 years

3 months

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Employee share schemes
MITIE remains committed to fostering a culture of employee involvement in the business through equity participation
whereby employees are enabled to build a stake in the Company through the Company’s various equity-based
incentive schemes. The Board believes that the group’s culture of employee equity involvement is a significant driver
in the group’s growth performance and that this assists in attracting and retaining skilled and committed employees.

Equity-based incentive schemes
The group currently operates six equity-based incentive schemes as set out below and the interests of the Executive
Directors in each of these schemes are set out in Tables 4 to 8 of Section B below.

2001 SAYE Scheme (2001 SAYE) and 2011 SAYE Scheme (2011 Scheme)
The 2001 and the 2011 SAYE Schemes are the Company’s non-discretionary option schemes open to all eligible
employees and approved for HMRC purposes. Salary deductions are made and savings are used to purchase the
options at the end of the three-year period. No options have been issued to any Directors under the 2001 SAYE Scheme.
The 2001 SAYE Scheme expired in September 2011 and future awards may only be granted under the 2011
SAYE Scheme rules following the adoption of new plan rules at the Company’s 2011 AGM.

2011 Share Incentive Plan (2011 SIP)
At the 2011 AGM shareholders approved the adoption of the 2011 SIP which allows employees to use their salary
to purchase shares in the Company. Eligible employees are offered the opportunity to buy Company shares from
pre-tax earnings as part of a regular share purchase plan. Shares are currently purchased monthly using employees’
deductions and are placed in trust. All the Executive Directors participate in this scheme with each Director
contributing the maximum permitted under the plan rules for which details are set out in Table 4 of Section B.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ remuneration report

Employee share schemes

2001 Executive Share Option Scheme (2001 ESOS) and 2011 Executive Share Option Scheme (2011 ESOS)
New 2011 ESOS Plan rules were adopted by shareholders at the 2011 AGM. The 2001 and 2011 ESOS are discretionary
schemes and therefore not open to all employees of the group. The award of options under the 2011 ESOS is focused
on employees who are below main Board level and who do not participate in the LTIP.

Currently, 2011 ESOS is used to retain, reward and motivate employees with continuous service of six months who are
part of the leadership team of the group (includes senior managers, managers and team leaders). The scheme has
been approved by HMRC and options over shares to an individual limit of £30,000 can be awarded in the approved
element of the scheme. Above £30,000, options are awarded under the unapproved (for HMRC purposes) section of
the scheme. Overall, awards in any single year are limited to 100% of an individual’s base salary. Awards made prior
to 2011 were granted with a single performance threshold for vesting of average growth in earnings per share over the
three-year vesting period in excess of inflation (measured as RPI) plus 4% per annum. In order to ensure a consistent
and aligned approach to performance criteria across other MITIE schemes, for awards granted in 2011, the Committee
approved a performance threshold based on a nominal EPS measure and accordingly, 2011 awards were granted
with a performance measure of 6% per annum compound growth over a three-year performance period. The scheme
permits the grant of share appreciation rights and the settlement of outstanding unapproved options with share
appreciation rights. No price is payable upon award in respect of 2011 ESOS. The Board continues to believe that ESOS
offers incentive and motivation to those employees nominated for awards and proposes to continue with awards on
the basis explained above.

The share options detailed in Table 5 of Section B were granted to Executive Directors prior to 2007 under the 2001
ESOS and the performance conditions that applied at the date of grant required a percentage growth in the
Company’s earnings per share equal to or in excess of 10% per annum compound over the period from the date of
grant of the option to the date on which the option first became exercisable. The performance conditions relating to
the awards to Directors detailed below are the same as for any other member of the schemes who received awards
at the same time. Since these grants to Ruby McGregor-Smith CBE and Suzanne Baxter there have been no grants to
Directors under the 2001 or 2011 ESOS (both under the unapproved part and the HMRC-approved part), and it is the
Committee’s current policy that equity-based incentives for Directors will be based solely upon LTIP awards.

Long Term Incentive Plan (LTIP)
The LTIP is a discretionary scheme rather than being open to all employees of the group, and is focused on incentivising
Executive Directors and senior management. Awards under the LTIP may be made, either through a joint-ownership
structure or through direct grants in the form of nil-cost options, conditional shares or forfeitable shares. The Committee
may also decide to grant cash-based awards of an equivalent value to share-based awards or to satisfy share-based
awards in cash, although it does not currently intend to do so. An award may not be granted under the current LTIP
after 26 July 2017, when the current scheme expires. No payment (other than in respect of any individual recipient
electing to pay income tax and national insurance, where appropriate) is required for the grant of an award.

Awards are not transferable, except on death, and are not pensionable. The scheme rules, in line with standard
industry practice, contain provision for pro-rata vesting in the event of retirement, redundancy, disability and/or death.
In the event of a change of control of the group, awards will be pro-rated both for time and performance, subject
to the discretion of the Committee.

The upper limit on the market value (as at grant) of awards that an individual Executive Director may receive in any
financial year is 200% of annual base salary. In exceptional circumstances, such as recruitment, the rules allow for
awards of up to 250% of an employee’s annual base salary.

The performance criteria for the LTIP is based on growth in the EPS of MITIE. The Committee continues to believe that
EPS is a key long-term performance measure for MITIE as it is aligned with the group’s strategy and KPIs but recognises
that measures need to be reviewed regularly to ensure that they continue to align with the group’s strategy and
are effective as an incentive. The Committee is currently reviewing the performance criteria for 2012 LTIP awards.
Any significant changes will be discussed with major shareholders in advance and disclosed in next year’s report.

Awards will normally vest after three years provided that certain performance criteria have been met. All awards
are subject to performance conditions that require adjusted EPS to exceed certain performance thresholds over
a three-year period. Where EPS growth is less than a ‘lower performance threshold’ no awards will vest. Awards vest
in full when EPS growth is equal to, or more than, an ‘upper performance threshold’. Vesting is on a straight-line basis
for performance between these levels.

At the time when the LTIP scheme was introduced, RPI growth was considered a broad proxy for underlying
economic growth in the UK. For this reason, the EPS performance measure was linked to RPI. However, the Committee
believes this is no longer a valid assumption and the correlation between the Company’s earnings growth and UK RPI
growth is increasingly limited, since RPI-linked year-on-year uplifts to contract values are not a big feature of the

MITIE Group PLC
Annual Report and Accounts 2012

MITIE business model. During the year the Committee consulted with its shareholders on this issue, and following this has
replaced the real EPS growth targets with nominal EPS growth targets for 2011 (and future) LTIP awards.

Accordingly, for LTIPs granted in 2011, the lower performance threshold (at which 25% of an award vests) is 7% per
annum and the upper performance threshold is 13% per annum. Awards to all Executive Directors during the year were
200% of salary.

During the year the Committee assessed the outcome of the 2008 LTIP awards. The vesting of these awards was
conditional on achieving performance within the following performance scale – the lower performance threshold
(at which 25% of an award vests) was RPI + 5% per annum and the upper performance threshold was RPI + 14% per
annum. The upper performance threshold applicable to the 2008 LTIP award was assessed to have been achieved
and consequently the awards granted in 2008 vested in full on 30 June 2011.

Table 6 in Section B provides details of the LTIP awards granted to, and exercised by, the Executive Directors, as well
as the performance targets governing the vesting of LTIP awards granted in prior years.

Share dilution
The Company manages dilution rates within the ABI guidelines of 10% of issued Ordinary share capital in respect of
all employee schemes (ESOS and SAYE) and 5% in respect of discretionary schemes (ESOS). In calculating compliance
with these guidelines the Company allocates available ‘headroom’ on a ten-year flat-line basis, making adjustments
for projected lapse rates and projected increases in issued share capital.

LTIP awards are satisfied through the market purchase of shares held by the MITIE Group PLC Employee Benefit Trust
2007 and the MITIE Group PLC Employee Benefit Trust 2008. The potential dilution of the Company’s issued share capital
is set out below in respect of all outstanding awards granted under the Company’s equity-based incentive schemes
which are to be satisfied through the allotment of new shares.

Table 4: Share dilution at 31 March 2012

All share plan (maximum 10%)

Discretionary share plans (maximum 5%)

Dilution %

7.2

4.4

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Total shareholder return
The graph below shows the total shareholder return performance of MITIE shares compared with the FTSE 250 and
FTSE 350 Support Services indices over a five-year period to 31 March 2012. The Committee is of the opinion that these
comparators provide a clear picture of the performance of MITIE relative to a range of companies of comparable
size as well as a specific group of companies within the same sector. Total shareholder return is calculated according
to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and assumes that
all dividends are reinvested.

The market price of the Company’s shares as at 31 March 2012 was 279.5p. The highest and lowest prices during the
year were 288.3p and 196.1p respectively.

)
7
0
/
4
0
/
1
0
m
o

r
f
E
I
T
I

M
o
t

d
e
s
a
b
e

r
E
S
T
F
(
p
£

160.0

140.0

120.0

100.0

80.0

60.0

2007

MITIE Group PLC FTSE 250 FTSE 350 Support Services

1,720.1

2008

2009

2010

2011

2012

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ remuneration report

Section B: Information subject to audit

Directors’ remuneration
Table 1 provides details of Directors’ remuneration paid to or receivable by each person who served as a Director
during the year.

Table 1: Directors’ remuneration

Executive Directors

R McGregor-Smith CBE

S C Baxter

W Robson

Non-Executive Directors

R Matthews

I R Stewart

D S Jenkins

G Potts

T K Morgan CBE2

L Hirst CBE

Total

Performance
related
bonus
earned
in year
£’000

Performance
related
bonus
deferred in
shares
£’0001

Salary
supplement
in lieu of
pension
contributions
£’000

Contributions
to pensions
schemes
£’000

Base
salary/fees
£’000

Benefits
£’000

2012
Total
£’000

2011
Total
£’000

510

325

320

140

510

325

320

128

102

–

1,279

1,229

812

813

790

778

140

1,539

1,155

289

231

3,288

3,1473

Note:
1 Deferred into MITIE Group PLC 2.5p shares.
2 The fees in consideration for the services of Terry Morgan CBE were paid to TKM Management Services Limited.
3 The prior year total remuneration has been restated to take account of the resignation of N R Goodman.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Pension
The pension benefits of Directors who are members of the MITIE Group PLC Defined Benefit Pension Scheme are set
out in Table 2 below. The transfer values of the Directors’ accrued benefits under the defined benefit pension scheme
calculated in a manner consistent with retirement benefit schemes (which do not represent a sum paid or payable
to the individual Director) are set out in Table 3.

Table 2: Defined benefit pension scheme benefits

R McGregor-Smith CBE

W Robson

Table 3: Defined benefit pension scheme transfer values

R McGregor-Smith CBE

W Robson

Accrued
pension
31 March 2011
£’000

Increase in
accrued
pension during
the year
£’000

Real increase in
accrued
pension
£’000

Accrued
pension
31 March 2012
£’000

Transfer values
31 March 2011
£’000

Contributions
made by the
Director
£’000

Increase in
accrued
pension over
the year
£’000

Transfer value
of pension
increase (after
inflation, net of
contributions)
£’000

Transfer value
31 March 2012
£’000

126

596

167

750

The benefits of the Executive Directors who are members of the MITIE Group PLC Defined Benefit Pension Scheme
are based on a pensionable salary capped at £123,600. The Company made contributions to the group’s defined
benefit scheme on behalf of the two Directors who are members of the scheme at a rate of 10% (2011: 10%) of the
value of the benefit cap of £123,600. In addition, the two Directors received a salary supplement of 20% of salary
(2011: 20%).

Suzanne Baxter is not a member of the MITIE Group PLC Defined Benefit Pension Scheme. The value of the pension
benefits provided to Suzanne Baxter mirror the value of the pension benefits provided to the other Executive Directors
under the capped defined benefit arrangements, albeit that her benefits are currently provided through a separate
defined contribution arrangement. Following an assessment of the value of her defined contribution pension scheme
assets as at 31 March 2011, no pension contributions were required for Suzanne Baxter for the year ended 31 March
2012 (2011: Nil). Suzanne Baxter received a salary supplement of 20% of base salary (2011: 20%).

Given the complexity and on-going annual cost around determining comparable values of pension benefits, the
Remuneration Committee approved the decision to allow Suzanne Baxter entrance into the MITIE Group PLC Defined
Benefit Pension Scheme, ceasing all further contributions into the defined contribution scheme. Suzanne Baxter entered
the scheme in April 2012. There is no change to the value of Suzanne Baxter's total remuneration as the result of this
change.

Share ownership
In accordance with the Register of Directors’ interests, the rights of the Directors to subscribe for, and their holdings
of shares in MITIE Group PLC are as set out in Tables 4 to 8 below:

Table 4: Directors’ interests in shares purchased under the MITIE Group PLC Share Incentive Plan 2011

R McGregor-Smith CBE

Share Incentive Plan

S C Baxter

Share Incentive Plan

W Robson

Share Incentive Plan

Shares
purchased as at
31 March 20111

Number of
partnership
shares acquired
in year2

Number of
matching shares
awarded
in year3

Total number
of shares
outstanding at
31 March 20124

–

527

579

Note:
1 The Share Incentive Plan was launched in January 2012.
2 Shares were acquired at a market price of 284.55p on 13 March 2012. Executive Directors contributed the full annual amount of £1,500 permitted under the Plan.
3 Shares were purchased in the market at a price of 284.55p on 13 March 2012. Awards of Matching Shares must in normal circumstances be held for at least three years

from the date of award and are subject to forfeiture if corresponding Partnership Shares are withdrawn during that period.

4 The market price of the Company’s shares as at 31 March 2012 was 279.5p. The highest and lowest prices during the year were 288.3p and 196.1p respectively.

MITIE Group PLC
Annual Report and Accounts 2012

Directors’ remuneration report

Share ownership
Table 5: Directors’ interests in options granted under the MITIE Group PLC 2001 Executive Share Option Scheme

R McGregor-Smith CBE

Unapproved scheme

Unapproved scheme
S C Baxter

Unapproved scheme

Approved scheme

ESOS options
outstanding at
1 April 2011

Granted
during
the year

Lapsed
during
the year

Exercised
during
the year

ESOS options
outstanding at
31 March 20121

Exercise
price
p

Exercisable between

100,000

35,000

15,000

–

100,000

35,000

15,000

162

191

06/08

06/15

06/09

06/16

06/09

06/16

06/09

06/16

Note:
1 The market price of the Company’s shares as at 31 March 2012 was 279.5p. The highest and lowest prices during the year were 288.3p and 196.1p respectively.

Table 6: Directors’ interests in nil-cost options granted under the MITIE Group PLC 2007 Long Term Incentive Plan

R McGregor-Smith

S C Baxter

W Robson

Year of
grant1

LTIP options
outstanding at
1 April 2011

Granted during
the year at
223.24p/share

Lapsed
during
the year

Exercised
during
the year2

LTIP options
outstanding at
31 March 20123

Exercise
price
p

Exercisable between

2008

2009

2010

2011

2008

2009

2010

2011

2008

2009

2010

2011

409,894

430,338

438,989

–

446,663

273,262

282,847

283,103

–

284,638

129,564

134,422

137,072

–

280,259

–

409,894

–

Nil-cost

–

430,338

Nil-cost

06/12

06/13

438,989

Nil-cost

06/13

06/14

446,663

Nil-cost

06/14

06/15

273,262

–

Nil-cost

–

282,847

Nil-cost

06/12

06/13

283,103

Nil-cost

06/13

06/14

284,638

Nil-cost

06/14

06/15

129,564

–

Nil-cost

–

134,422

Nil-cost

06/12

06/13

137,072

Nil-cost

06/13

06/14

280,259

Nil-cost

06/14

06/15

Note:
1 The performance criteria applicable to the 2008 awards are lower and upper performance thresholds of RPI+5% p.a. and RPI+14% p.a. respectively.

The performance criteria applicable to the 2009 and 2010 awards are lower and upper performance thresholds of RPI+5% p.a. and RPI+10% p.a. respectively.
The performance criteria applicable to the 2011 award are lower and upper performance thresholds of 7% p.a. and 13% p.a. respectively.
The Directors acquired a conditional joint beneficial interest with the MITIE Employee Benefit Trust 2008 in the shares awarded under the LTIP in 2008, 2009, 2010
and 2011. The full beneficial interest will transfer to the Director only if the performance criteria applicable to the award are met.

2 The Committee assessed the extent to which the performance conditions applicable to the 2008 awards had been satisfied and approved the vesting of awards
on 30 June 2011. Awards are capable of exercise from 30 June 2011 to 29 June 2012. At the date these awards vested the market price of the Company’s shares
was 238.94p. This compares to a market price on the date of award on 30 June 2008 of 212.0p.

3 The market price of the Company’s shares as at 31 March 2012 was 279.5p. The highest and lowest prices during the year were 288.3p and 196.1p respectively.

Table 7: Director share ownership

Executive Directors

R McGregor-Smith CBE

S C Baxter

W Robson

Non-Executive Directors

R Matthews

I R Stewart

D S Jenkins

G Potts

T K Morgan CBE

L Hirst CBE

MITIE Group PLC
Annual Report and Accounts 2012

Number of
Ordinary MITIE
shares
beneficially
owned as at
1 April 2011
(or date of
appointment
if later)

Number of
Ordinary MITIE
shares
beneficially
owned as at
31 March 20121

564,268

341,071

212,538

71,230

1,622,686

1,555,835

100,000

2,020,000

50,000

15,000

50,000

15,000

25,000

Note:
1 A proportion of the shares were sold on 30 September 2011 to settle tax liabilities arising from the vesting and exercise of the 2008 LTIP award.

Table 8: Directors’ interests in MITIE subsidiary companies (under the MITIE Model)

Number of
shares
31 March 2012

Number of
shares
1 April 2011

R McGregor-Smith CBE

MITIE Transport Services Ltd

C Ordinary shares of £1 each

–

900

Table 8 above details the beneficial interests of the Directors (who were in office on 31 March 2012) in the share
capital of certain of the Company’s subsidiary companies. These interests were acquired under the MITIE Model, further
details of which are given in the Corporate Governance Statement on page 60. No such interests have been acquired
by Directors since 2004 and it is the Company’s policy that Directors will not be entitled to participate in any MITIE Model
investments in the future.

On the 17 August 2011, MITIE Group PLC acquired the remaining minority interest in MITIE Transport Services Limited,
including Ruby McGregor-Smith’s holding of 900 C Ordinary shares of £1 each. The consideration of £38,106 was paid
in 11,523 MITIE Group PLC ordinary shares of 2.5p each and £10,600 cash.

This report was approved by the Board and has been signed on its behalf by:

Terry Morgan CBE
Chairman Remuneration Committee

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Independent auditor’s report to the members of MITIE Group PLC

For the year ended 31 March 2012

Opinion on other matters prescribed by the Companies
Act 2006
In our opinion the information given in the Directors’
report for the financial year for which the financial
statements are prepared is consistent with the group
financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report
to you if, in our opinion:

− certain disclosures of Directors’ remuneration specified

by law are not made; or

− we have not received all the information and

explanations we require for our audit.

Under the Listing Rules we are required to review:

− the Directors’ statement contained within the Directors’

report in relation to going concern;

− the part of the Corporate governance statement

relating to the Company’s compliance with the nine
provisions of the UK Corporate Governance Code
specified for our review; and

− certain elements of the report to shareholders by the

Board on Directors’ remuneration.

Other matters
We have reported separately on the parent company
financial statements of MITIE Group PLC for the year
ended 31 March 2012 and on the information in the
Directors’ Remuneration Report that is described as
having been audited.

Colin Hudson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
21 May 2012

We have audited the group financial statements of MITIE
Group PLC for the year ended 31 March 2012 which
comprise the Consolidated Income Statement, the
Consolidated Statement of Comprehensive Income, the
Consolidated Balance Sheet, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Cash
Flows and the related notes 1 to 39. The financial reporting
framework that has been applied in their preparation is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the Directors are responsible for the
preparation of the group financial statements and
for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on
the group financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the
overall presentation of the financial statements. In
addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements. If we
become aware of any apparent material misstatements
or inconsistencies we consider the implications for
our report.

Opinion on financial statements
In our opinion the group financial statements:

− give a true and fair view of the state of the group’s

affairs as at 31 March 2012 and of its profit for the year
then ended;

− have been properly prepared in accordance with IFRSs

as adopted by the European Union; and

− have been prepared in accordance with the

requirements of the Companies Act 2006 and Article 4
of the IAS Regulation.

Consolidated income statement

For the year ended 31 March 2012

MITIE Group PLC
Annual Report and Accounts 2012

Before
other
items*
£m

Other
items*
£m

Notes

2012

Total
£m

Before
other
items*
£m

Other
items*
£m

2011

Total
£m

3,4

2,002.5

(1,686.4)

316.1

–

2,002.5

1,891.4

(1,686.4)

(1,593.5)

316.1

297.9

–

1,891.4

(1,593.5)

297.9

4,6

(204.4)

111.7

(10.0)

(214.4)

101.7

(189.6)

108.3

(18.8)

(208.4)

89.5

0.4

(7.6)

(7.2)

104.5

(24.9)

79.6

79.4

0.2

79.6

–

(10.0)

2.5

(7.5)

–

(7.5)

0.4

(7.6)

(7.2)

94.5

(22.4)

72.1

71.9

0.2

72.1

0.4

(3.0)

(2.6)

105.7

(26.4)

79.3

79.1

0.2

79.3

–

(0.1)

(18.9)

5.0

(13.9)

–

(13.9)

0.4

(3.1)

(2.7)

86.8

(21.4)

65.4

65.2

0.2

65.4

22.6p

22.0p

(2.1)p

20.5p

19.9p

22.6p

22.2p

(4.0)p

(3.9)p

18.6p

18.3p

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Continuing operations

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

Investment revenue

Finance costs

Net finance costs

Profit before tax

Tax

Profit for the year

Attributable to:

Equity holders of the parent

Non-controlling interests

Earnings per share (EPS)

– basic

– diluted

* Other items are analysed in Note 5.

MITIE Group PLC
Annual Report and Accounts 2012

Consolidated statement of comprehensive income

For the year ended 31 March 2012

Profit for the year

Other comprehensive income/(expense):

Actuarial losses on defined benefit pension schemes

Exchange differences on translation of foreign operations

Gain/(loss) on a hedge of a net investment taken to equity

Cash flow hedges:

Losses arising during the year

Reclassification adjustment for (losses)/gains included in profit and loss

Tax credit/(charge) on items taken directly to equity

Other comprehensive expense for the year, net of tax

Notes

2012
£m

72.1

(16.3)

(0.5)

0.4

–

(0.1)

3.9

(12.6)

2011
£m

65.4

(1.1)

0.5

(0.4)

(1.4)

0.9

(0.1)

(1.6)

Total comprehensive income for the financial year

59.5

63.8

Attributable to:

Equity holders of the parent

Non-controlling interests

59.3

0.2

63.6

0.2

Consolidated balance sheet

At 31 March 2012

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Interest in joint ventures and associates

Financing assets

Trade and other receivables

Deferred tax assets

Total non-current assets

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Total current assets

Total assets

Current liabilities

Trade and other payables

Current tax liabilities

Financing liabilities

Provisions

Total current liabilities

Net current assets

Non-current liabilities

Financing liabilities

Provisions

Retirement benefit obligation

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Notes

2012
£m

2011
£m

347.7

65.8

64.1

0.4

9.1

22.6

9.6

333.0

64.7

59.3

–

11.6

9.1

519.3

477.7

5.7

507.1

60.8

573.6

5.5

470.1

130.6

606.2

1,092.9

1,083.9

(461.4)

(432.9)

(13.2)

(16.6)

(5.4)

(1.2)

(2.6)

(4.5)

(481.2)

(456.6)

92.4

149.6

(163.0)

(204.8)

(4.4)

(17.3)

(10.7)

(8.2)

(3.0)

(13.3)

(195.4)

(229.3)

(676.6)

(685.9)

416.3

398.0

MITIE Group PLC
Annual Report and Accounts 2012

Consolidated balance sheet

At 31 March 2012

Equity

Share capital

Share premium account

Merger reserve

Share-based payments reserve

Own shares reserve

Other reserves

Hedging and translation reserve

Retained earnings

Equity attributable to equity holders of the parent

Non-controlling interests

Total equity

Notes

2012
£m

9.0

92.5

93.6

5.2

2011
£m

8.9

80.6

85.1

7.5

(18.3)

(13.8)

0.3

(0.6)

230.4

412.1

4.2

416.3

0.2

(0.4)

223.8

391.9

6.1

398.0

The financial statements were approved by the Board of Directors and authorised for issue on 21 May 2012. They were
signed on its behalf by:

Ruby McGregor-Smith CBE
Chief Executive

Suzanne Baxter
Group Finance Director

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Consolidated statement of changes in equity

For the year ended 31 March 2012

Share
capital
£m

Share
premium
account
£m

Share-
based
payments
reserve
£m

Merger
reserve
£m

Own
shares
reserve
£m

Other
reserves
£m

Hedging
and
translation
reserve
£m

Attributable
to equity
holders of
the parent
£m

Non-
controlling
interests
£m

Retained
earnings
£m

Total
£m

At 1 April 2010

8.8

76.7

80.3

5.4

(8.1)

0.2

–

192.3

355.6

7.8

363.4

Total comprehensive
income

Shares issued

Dividends paid

Purchase of own shares

Share-based payments

Acquisitions and other
movements in non-
controlling interests

–

0.1

–

3.9

–

4.8

–

2.1

–

(5.7)

–

(0.4)

64.0

63.6

–

8.8

0.2

–

63.8

8.8

(28.9)

(0.2)

(29.1)

–

1.2

(5.7)

3.3

–

(5.7)

3.3

(4.8)

(1.7)

(6.5)

At 31 March 2011

8.9

80.6

85.1

7.5

(13.8)

0.2

(0.4)

223.8

391.9

6.1

398.0

Total comprehensive
income

Shares issued

Dividends paid

Purchase of own shares

Share buybacks

Share-based payments

Tax on share-based
payment transactions

Acquisitions and other
movements in non-
controlling interests

–

0.2

11.9

–

8.5

–

(0.1)

–

(2.3)

–

(7.4)

–

2.9

–

0.1

–

(0.2)

59.5

59.3

20.6

0.2

–

59.5

20.6

–

(32.6)

(0.2)

(32.8)

–

(7.4)

(12.4)

2.3

2.9

1.0

–

(7.4)

(12.4)

2.9

1.0

(11.2)

(1.9)

(13.1)

–

At 31 March 2012

9.0

92.5

93.6

5.2

(18.3)

0.3

(0.6)

230.4

412.1

4.2

416.3

MITIE Group PLC
Annual Report and Accounts 2012

Consolidated statement of cash flows

For the year ended 31 March 2012

Operating profit

Adjustments for:

Share-based payment expense

Defined benefit pension charge

Amendment to defined benefit pension scheme past service cost

Defined benefit pension contributions

Acquisition related items

Depreciation of property, plant and equipment

Amortisation of intangible assets

Loss/(gain) on disposal of property, plant and equipment

Operating cash flows before movements in working capital

Increase in inventories

Increase in receivables

Increase in payables

Decrease in provisions

Cash generated by operations

Income taxes paid

Facility arrangement fee paid

Interest paid

Net cash from operating activities

Investing activities

Interest received

Purchase of property, plant and equipment

Purchase of subsidiary undertakings, net of cash acquired

Investment in joint ventures and associates

Investment in financing assets

Purchase of other intangible assets

Disposals of property, plant and equipment

Net cash outflow from investing activities

Notes

2012
£m

101.7

2.9

2.5

–

(4.5)

0.9

18.8

11.1

0.1

133.5

(0.1)

(45.0)

25.6

(3.8)

110.2

(24.4)

(2.5)

(7.5)

75.8

0.4

(21.7)

(23.9)

(0.4)

(8.4)

(7.7)

1.7

2011
£m

89.5

3.3

3.5

(4.1)

(7.9)

–

17.9

10.8

(0.1)

112.9

(1.6)

(70.8)

62.0

–

102.5

(14.3)

–

(2.5)

85.7

0.2

(21.0)

(11.8)

–

(5.0)

3.0

(60.0)

(34.6)

Consolidated statement of cash flows

For the year ended 31 March 2012

Financing activities

Repayments of obligations under finance leases

Proceeds on issue of share capital

Repayments of loan notes on purchase of subsidiary undertakings

Bank loans repaid

Private placement notes raised

Purchase of own shares

Share buybacks

Equity dividends paid

Non-controlling interests dividends paid

Net cash (outflow)/inflow from financing

MITIE Group PLC
Annual Report and Accounts 2012

Notes

2012
£m

(3.1)

9.9

–

(39.5)

–

(7.4)

(12.4)

(32.6)

(0.2)

(85.3)

2011
£m

(3.2)

2.7

(5.8)

(3.7)

100.2

(5.7)

–

(28.9)

(0.2)

55.4

Net (decrease)/increase in cash and cash equivalents

(69.5)

106.5

Net cash and cash equivalents at beginning of the year

Effect of foreign exchange rate changes

Net cash and cash equivalents at end of the year

Net cash and cash equivalents comprise:

Cash at bank

Reconciliation of net cash flow to movements in net debt

Notes

Net (decrease)/increase in cash and cash equivalents

Effect of foreign exchange rate changes

Decrease in bank loans

Private placement notes raised

Non-cash movement in private placement notes and associated hedges

Repayments of loan notes on purchase of subsidiary undertakings

Issue of loan notes on purchase of subsidiary undertakings

Increase in finance leases

(Increase)/decrease in net debt during the year

130.6

(0.3)

60.8

2012
£m

(69.5)

(0.3)

40.2

23.7

0.4

130.6

2011
£m

106.5

0.4

3.2

–

(100.2)

(0.3)

–

(0.5)

(30.4)

(0.3)

5.8

(3.9)

(1.4)

10.1

Opening net debt

Closing net debt

(76.5)

(106.9)

(86.6)

(76.5)

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

For the year ended 31 March 2012

1. Basis of preparation and significant accounting policies

Basis of preparation
The group’s financial statements for the year ended 31 March 2012 are prepared in accordance with International
Financial Reporting Standards (IFRSs) adopted for use in the European Union and therefore the group financial
statements comply with Article 4 of the EU IAS Regulation.

As more fully detailed in the Directors’ report: Corporate Governance statement, the group’s financial statements
have been prepared on a going concern basis.

The group’s financial statements have been prepared on the historical cost basis, except for certain financial
instruments which are required to be measured at fair value.

The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those
followed in the preparation of the group’s annual financial statements for the year ended 31 March 2011.

The following amendments and interpretations are also effective for the first time in the current year but have had no
impact on the results or financial position of the group:

− IAS 24 (Revised) ‘Related Party Disclosures’;

− Amendment to IFRIC 14 ‘Prepayments of a Minimum Funding Requirement’;

− IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’; and

− Amendments resulting from May 2010 Annual Improvements to IFRSs.

The following standards and interpretations have been issued but are not yet effective (and in some cases have not yet
been adopted by the EU):

− Amendments to IFRS 7 ‘Financial Instruments: Disclosures’ – transfers of financial assets;

− IFRS 9 ‘Financial Instruments’;

− Amendments to IAS 12 ‘Income Taxes’ – recovery of underlying assets;

− IAS 27 (Revised) ‘Separate Financial Statements’;

− IAS 28 (Revised) ‘Investments in Associates and Joint Ventures’;

− IFRS 10 ‘Consolidated Financial Statements’;

− IFRS 11 ‘Joint Arrangements’;

− IFRS 12 ‘Disclosures of Interests in Other Entities’;

− IFRS 13 ‘Fair Value Measurement’;

− Amendments to IAS 19 ‘Employee Benefits’;

− Amendments to IAS 1 ‘Presentation of Financial Statements’ – presentation of items of Other Comprehensive Income;

− Amendments to IFRS 7 ‘Financial Instruments: Disclosures’ – offsetting financial assets and financial liabilities; and

− Amendments to IAS 32 ‘Financial Instruments: Presentation’ – offsetting financial assets and financial liabilities.

The Directors do not anticipate that the adoption of these standards and interpretations will have a material financial
impact on the group’s financial statements in the period of initial application except as follows:

− Amendments to IAS 19 ‘Employee Benefits’ will impact the measurement of various components representing

movements in the defined benefit pension obligation and associated disclosures, but not the group’s total obligation.
It is likely that following the replacement of expected returns on plan assets with a net finance cost in the income
statement, the profit for the period will be reduced and accordingly other comprehensive income increased.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards
and interpretations at this stage.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

1. Basis of preparation and significant accounting policies

Significant accounting policies under IFRS
The significant accounting policies adopted in the preparation of the group’s IFRS financial information are set
out below.

Basis of consolidation
The consolidated financial statements comprise the financial statements of MITIE Group PLC and all its subsidiaries.
The financial statements of the parent company and subsidiaries are prepared in accordance with UK Generally
Accepted Accounting Practice (with the exception of the acquired Dalkia companies). Adjustments are made in the
consolidated accounts to bring into line any dissimilar accounting policies that may exist between UK GAAP and IFRS.

All inter-company balances and transactions, including unrealised profits arising from inter-group transactions,
have been eliminated in full.

Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated
from the date on which control is transferred out of the group. The results, assets and liabilities of joint ventures and
associates are accounted for under the equity method of accounting. Where necessary, adjustments are made to the
financial statements of subsidiaries, joint ventures and associates to bring the accounting policies used into line with
those used by the group.

Interests of non-controlling interest shareholders are measured at the non-controlling interest’s proportion of the net fair
value of the assets and liabilities recognised. Changes in a parent’s ownership interest in a subsidiary that do not result
in a loss of control are accounted for within shareholders’ equity. No gain or loss is recognised on such transactions and
goodwill is not re-measured. Any difference between the change in the non-controlling interest and the fair value
of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.

Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the group in exchange for control of the acquiree. Acquisition costs incurred are expensed.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are
recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are
classified as held for resale in accordance with IFRS 5 ‘Non-Current Assets Held for Sale and Discontinued Operations’,
which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost
of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised. If, after reassessment, the group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognised immediately in profit or loss.

Where applicable, the consideration for an acquisition includes any assets or liabilities resulting from a contingent
consideration arrangement, measured at fair value at the acquisition date. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they result from additional information, obtained within one year from
the acquisition date, about facts and circumstances that existed at the acquisition date. All other subsequent changes
in the fair value of contingent consideration classified as an asset or liability are recognised in accordance with IAS 39,
either in profit or loss or as a change to other comprehensive income. Changes in the fair value of contingent
consideration classified as equity are not recognised.

Any business combinations prior to 1 April 2010 were accounted for using the standards in place prior to the adoption
of IFRS 3 (revised 2008) which differ in the following respects; transaction costs directly attributable to the acquisition
formed part of the acquisition costs; contingent consideration was recognised if, and only if, the group had a present
obligation, the economic outflow was more likely than not and a reliable estimate was determinable; and subsequent
adjustments to the contingent consideration were recognised as part of goodwill.

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

1. Basis of preparation and significant accounting policies

Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the group’s interest in the
fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less accumulated impairment
losses. It is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is
not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected
to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the
unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.

On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.

Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP
amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior
to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

Joint Ventures and associates
The group has an interest in joint ventures which are entities in which the group has joint control of financial and
operating policies. The group also has an interest in associates which are entities in which the group has significant
influence.

The group accounts for its interest in joint ventures and associates using the equity method. Under the equity method
the group’s share of the post-tax result of joint ventures and associates is reported as a single line item in the
consolidated income statement. The group’s interest in joint ventures and associates is carried in the consolidated
balance sheet at cost plus post-acquisition changes in the group’s share of net assets.

Intangible assets
Intangible assets identified in a business acquisition are capitalised at fair value as at the date of acquisition.

Software and development expenditure is capitalised as an intangible asset if the asset created can be identified,
if it is probable that the asset created will generate future economic benefits and if the development cost of the asset
can be measured reliably.

Following initial recognition, the carrying amount of an intangible asset is its cost less any accumulated amortisation
and any accumulated impairment losses. Intangible assets are reviewed for impairment annually, or more frequently
when there is an indication that they may be impaired. Amortisation expense is charged to administrative expenses
in the income statement on a straight-line basis over its useful life.

Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the
revenue can be reliably measured. Revenue represents income recognised in respect of services provided during
the period (stated net of value added tax) and is earned predominantly within the United Kingdom.

Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract at
the balance sheet date. Revenue from time and material contracts is recognised at the contractual rates as labour
hours and tasks are delivered and direct expenses incurred. In other cases, where services provided reflect a
contractual arrangement to deliver an indeterminate number of acts over the contract term, revenue is recognised
on a straight-line basis unless this is not an accurate reflection of the work performed. Where a straight-line basis is
not appropriate, for example if specific works on contracts represent a significant element of the whole, revenue is
recognised based on the percentage of completion method, based on the proportion of costs incurred at the balance
sheet date relative to the total estimated cost of completing the contracted work.

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

1. Basis of preparation and significant accounting policies
Revenue from long-term contracts represents the sales value of work done in the year, including fees invoiced and
estimates in respect of amounts to be invoiced after the year end. Profits are recognised on long-term contracts
where the final outcome can be assessed with reasonable certainty. In calculating this, the percentage of completion
method is used based on the proportion of costs incurred to the total estimated cost. Cost includes direct staff costs
and outlays. Full provision is made for all known or anticipated losses on each contract immediately such losses
are forecast.

Gross amounts due from customers are stated at the proportion of the anticipated net sales value earned to date less
amounts billed on account. To the extent that fees paid on account exceed the value of work performed, they are
included in creditors as gross amounts due to customers.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount.

Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of
those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs
are recognised in profit or loss in the period in which they are incurred.

Leasing
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased
item, are capitalised at the inception of the lease at the fair value of the leased item or, if lower, at the present value
of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the
lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over
the lease term. Any lease incentives are amortised on a straight-line basis over the non-cancellable period for which the
group has contracted to lease the asset, together with any further terms for which the group has the option to continue
to lease the asset if, at the inception of the lease, it is judged to be reasonably certain that the group will exercise
the option.

Foreign currency
The financial statements of each of the group’s businesses are prepared in the functional currency applicable to that
business. Transactions in currencies other than the functional currency are recorded at the rate of exchange at the
date of transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date.

Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items
carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of
non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary
items, any exchange component of that gain or loss is also recognised directly in equity.

On consolidation, the assets and liabilities of the group’s overseas operations, including goodwill and fair value
adjustments arising on their acquisition, are translated into sterling at exchange rates prevailing at the balance
sheet date. Income and expenses are translated into sterling at average exchange rates for the period. Exchange
differences arising are recognised directly in equity in the group’s hedging and translation reserve. On disposal of a
foreign operation, the deferred cumulative amount recognised in equity relating to that particular foreign operation
shall be recognised in the income statement.

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

1. Basis of preparation and significant accounting policies

Retirement benefit costs
The group operates and participates in a number of defined benefit schemes. In respect of the schemes in which the
group participates, the group accounts for its legal and constructive obligations over the period of its participation
which is for a fixed period only.

In addition, the group operates a number of defined contribution retirement benefit schemes for all qualifying employees.

Payments to the defined contribution and stakeholder pension schemes are charged as an expense as they fall due.

For the defined benefit pension schemes, the cost of providing benefits is determined using the Projected Unit
Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses
are recognised in full in the period in which they occur. They are recognised outside profit and loss and presented
in the statement of comprehensive income.

Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise
is amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit
obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in
future contributions to the plan.

Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit,
and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised, based upon tax rates and legislation that have been enacted or substantively enacted at the balance
sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends
to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Depreciation is charged so as to write off the cost less expected residual value of the assets over their estimated useful
lives and is calculated on a straight-line basis as follows:

Freehold buildings and long leasehold property
Leasehold improvements
Plant and vehicles

– over 50 years
– period of the lease
– 3–10 years

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

1. Basis of preparation and significant accounting policies
Annually the group reviews the carrying amounts of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-
generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Inventories
Inventories are stated at the lower of cost and net realisable value.

Costs represent materials, direct labour and overheads incurred in bringing the inventories to their present condition
and location. Net realisable value is based on estimated selling price, less further costs expected to be incurred to
completion and estimated selling costs. Provision is made for obsolete, slow moving or defective items where appropriate.

Financial instruments
Financial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes a party
to the contractual provisions of the instrument. The group derecognises financial assets and liabilities only when the
contractual rights and obligations are discharged or expire.

Assets that are assessed not to be individually impaired are subsequently assessed for impairment on a collective basis.
Objective evidence of impairment for a portfolio of receivables includes the group’s past experience of collecting
payments, the number of delayed payments in the portfolio past the average credit period as well as observable
changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly with the exception of trade
receivables, where the carrying amount is reduced through the use of an allowance account. When a trade
receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in the income statement.

Financial assets comprise loans and receivables and are measured at initial recognition at fair value and subsequently
at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised where there is
objective evidence that the asset is impaired. Cash and cash equivalents comprise cash in hand and demand deposits
and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.

Financial liabilities comprise certain trade and other payables and financing liabilities including bank and other
borrowings and are measured at initial recognition at fair value and subsequently at amortised cost with the exception
of derivative financial instruments which are either classified as fair value through profit and loss or may be accounted
for using hedge accounting. Bank and other borrowings are stated at the amount of the net proceeds after deduction
of transaction costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs,
are accounted for on an accruals basis in the income statement.

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

1. Basis of preparation and significant accounting policies

Derivative financial instruments and hedge accounting
The group uses derivative financial instruments including cross currency interest rate swaps and forward foreign
exchange contracts to manage the group’s exposure to financial risks associated with interest rates and foreign
exchange. Derivative financial instruments are initially recognised at fair value at the date the derivative contract is
entered into and are subsequently remeasured to their fair value, determined by reference to market rates, at each
balance sheet date and included as financial assets or liabilities as appropriate. The resulting gain or loss is recognised
in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event
the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The group may designate certain hedging instruments including derivatives as either fair value hedges, cash flow
hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are
accounted for as cash flow hedges. At the inception of the hedge relationship, the entity documents the relationship
between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the
group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting
changes in fair values or cash flows of the hedged item.

Fair value hedges
Hedges are classified as fair value hedges when they hedge the exposure to changes in the fair value of a recognised
asset or liability. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that are
attributable to the hedged risk. The change in the fair value of the hedging instrument and the change in the hedged
item attributable to the hedged risk are recognised in the line of the income statement relating to the hedged item.
Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires
or is sold, terminated, exercised, or no longer qualifies for hedge accounting. The fair value adjustment to the carrying
amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

Cash flow hedges
Hedges are classified as cash flow hedges when they hedge the exposure to changes in cash flows that are
attributable to a particular risk associated with either a recognised asset or liability or a forecast transaction. The
effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are
recognised in other comprehensive income and accumulated in equity within the group’s translation and hedging
reserve. The gain or loss relating to any ineffective portion is recognised immediately in profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or
loss in the periods when the hedged item is recognised in profit or loss, in the same line of the income statement as the
recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-
financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from
equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. Hedge
accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold,
terminated, exercised, or no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is recognised when the forecast transaction is ultimately recognised
in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in profit or loss.

Hedges of net investments in foreign operations
Hedges are classified as net investment hedges when they hedge the foreign currency exposure to changes in the
group’s share in the net assets of a foreign operation. Hedges of net investments in foreign operations are accounted
for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the
hedge is recognised in other comprehensive income and accumulated in the group’s translation and hedging reserve.
The gain or loss relating to any ineffective portion is recognised immediately in profit or loss. Gains or losses on the
hedging instrument relating to the effective portion of the hedge accumulated in equity are reclassified to profit
or loss in the same way as exchange differences relating to the foreign operation as described above.

MITIE Group PLC
Annual Report and Accounts 2012

1. Basis of preparation and significant accounting policies

Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a
provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate
asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the
income statement net of any reimbursement. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised as a borrowing cost.

Bid, mobilisation and pre-contract costs

Rendering of services
All bid costs are expensed through the income statement up to the point where contract award or full recovery of the
costs is virtually certain.

The confirmation of the preferred bidder for a contract by a client is the point at which the award of a contract is
considered to be virtually certain. Costs incurred after that point, but before the commencement of services under the
contract, are defined as mobilisation costs. These costs are capitalised and included within trade and other receivables
on the balance sheet provided that the costs relate directly to the contract, are separately identifiable, can be
measured reliably and that the future net cash inflows from the contract are estimated to be no less than the amounts
capitalised.

The capitalised mobilisation costs are amortised over the life of the contract, generally on a straight-line basis, or on a
basis to reflect the profile of work to be performed over the life of the contract if the straight-line basis is not considered
to be appropriate for the specific contract to which the costs relate. If the contract becomes loss making, any
unamortised costs are written off immediately.

Construction contracts
In the case of construction contracts, pre-contract costs that are direct costs associated with securing a contract and
which can be separately identified and measured reliably are included in the cost of the contract when the realisation
of income from the contract is virtually certain. Their treatment is as for mobilisation costs above.

Share-based payments
The group operates a number of executive and employee share option schemes. For all grants of share options and
awards, the fair value as at the date of grant is calculated using the Black-Scholes model and the corresponding
expense is recognised on a straight-line basis over the vesting period based on the group’s estimate of shares that
will eventually vest. Save As You Earn (SAYE) options are treated as cancelled when employees cease to contribute
to the scheme, resulting in an acceleration of the remainder of the related expense.

The group has taken advantage of the transitional provisions of IFRS 2 in respect of equity-settled awards and has
applied IFRS 2 only to equity-settled awards granted after 7 November 2002 that had not vested before 1 April 2005.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

2. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the group’s accounting policies
In the process of applying the group’s accounting policies, which are described in Note 1 above, management
has made the following judgements that have the most significant effect on the amounts recognised in the
financial statements.

Revenue recognition
Revenue is recognised for certain project based contracts based on the stage of completion of the contract activity.
This is measured by comparing the proportion of costs incurred against the estimated whole-life contract costs.

Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are discussed below.

Measurement and impairment of intangible assets
The measurement of intangible assets other than goodwill on a business combination involves estimation of future
cash flows and the selection of suitable discount rates. Determining whether goodwill and other intangible assets
are impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been
allocated. The value in use calculation involves an estimation of the future cash flows of cash-generating units and also
the selection of appropriate discount rates to use in order to calculate present values. The carrying value of goodwill
and other intangible assets is £413.5m (2011: £397.7m) at the balance sheet date; see Notes 13 and 14. Management
do not consider that any reasonably foreseeable change in the key assumptions would result in an impairment.

Measurement of provisions and defined benefit pension obligations
The group’s provisions (per Note 30) comprise deferred contingent consideration and insurance reserve.
The measurement of provisions and defined benefit obligations requires judgement. In particular, the calculation
of defined benefit obligations is dependent on material key assumptions including discount rates, mortality rates,
future returns on assets and future contribution rates. The present value of defined benefit obligations at the balance
sheet date is £148.5m (2011: £126.8m); see Note 37.

The sensitivity of defined benefit pension obligations to changes in principal actuarial assumptions is shown below:

Change in
assumption

+0.5%

–0.5%

+0.5%

–0.5%

+0.5%

–0.5%

+0.5%

–0.5%

+1 year

Increase/
(decrease)
in liability
£m

(12.1)

16.2

5.8

(3.0)

3.0

(3.0)

3.5

(2.8)

4.2

Discount rate

Retail Price Inflation

Consumer Price Inflation

Salary increases

Mortality rate

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

3. Revenue

Rendering of services

Construction contracts

Total revenue as disclosed in the consolidated income statement

Investment revenue (Note 8)

Total revenue as defined in IAS 18

MITIE Group PLC
Annual Report and Accounts 2012

2012
£m

2011
£m

1,766.4

1,654.5

236.1

236.9

2,002.5

1,891.4

0.4

2,002.9

1,891.8

4. Business and geographical segments

Business segments
The group manages its business on a service division basis. These divisions are the basis on which the group reports its
primary segmental information.

Operating
profit before
other items*
£m

Revenue
£m

Margin
%

2011

Profit
before tax
£m

Operating
profit before
other items*
£m

Revenue
£m

Margin
%

Facilities
Management

Technical Facilities
Management

Property
Management

Asset Management

Amendment to
defined benefit
pension scheme
past service cost
(Note 37)

937.3

61.9

472.8

26.9

524.3

68.1

20.2

2.7

2,002.5

111.7

–

Total

2,002.5

111.7

* Other items are analysed in Note 5.

6.6

5.7

3.9

4.0

5.6

–

5.6

2012

Profit
before tax
£m

60.5

15.5

16.0

2.5

94.5

882.2

56.2

437.1

24.6

509.7

62.4

21.4

2.0

1,891.4

104.2

–

94.5

–

4.1

1,891.4

108.3

6.4

5.6

4.2

3.2

5.5

–

5.7

52.6

15.5

13.0

1.6

82.7

4.1

86.8

The revenue analysis above is net of inter segment sales which are not considered significant.

No single customer accounted for more than 10% of external revenue in 2012 or 2011.

The Improvement to IFRS 8 issued in April 2009 clarified that a measure of segment assets should be disclosed only if that
amount is regularly provided to the chief operating decision maker and consequently no segment assets are disclosed.

Geographical segments

Operating
profit before
other items*
£m

Revenue
£m

United Kingdom

1,953.8

Other countries

Total

48.7

2,002.5

109.9

1.8

111.7

* Other items are analysed in Note 5.

2012

Profit
before tax
£m

93.1

1.4

94.5

Margin
%

5.6

3.7

5.6

Revenue
£m

1,866.4

25.0

1,891.4

Operating
profit before
other items*
£m

107.3

1.0

108.3

Margin
%

5.7

4.0

5.7

2011

Profit
before tax
£m

86.1

0.7

86.8

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

5. Other items
The group separately identified and disclosed restructuring and acquisition related items (termed ‘other items’).

Administrative expenses

Restructuring costs relating to integration of Dalkia FM, EPS Ltd and Dalkia FM in Ireland

Restructuring costs of Property Management businesses

Acquisition costs

Deferred consideration not paid

Amortisation of acquisition related intangibles

Finance costs

Unwinding of discount on deferred contingent consideration

Other items before tax

Tax on other items

Other items net of tax

6. Operating profit
Operating profit has been arrived at after charging/(crediting):

Depreciation of property, plant and equipment (Note 15)

Amortisation of intangible assets (Note 14)

Loss/(gain) on disposal of property, plant and equipment

Staff costs (Note 7)

A detailed analysis of auditor’s remuneration is provided below:

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts

Fees payable to the Company’s auditor and its associates for the audit of the Company’s
subsidiaries pursuant to legislation

Other audit related services to the group

Total audit fees

Tax services

Corporate finance services

Other services

Non-audit fees

Total

2012
£m

–

1.8

(0.9)

9.1

10.0

–

10.0

(2.5)

7.5

2012
£m

18.8

11.1

0.1

936.0

2012
£’000

396

–

429

161

273

2011
£m

4.8

0.3

–

8.9

18.8

0.1

18.9

(5.0)

13.9

2011
£m

17.9

10.8

(0.1)

922.5

2011
£’000

625

685

142

–

261

403

702

1,088

In addition to the amounts shown above the auditor received fees of £17,000 (2011: £19,000) for the audit of the group
pension scheme and trusts.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

7. Staff costs

Number of people

The average number of people employed during the financial year was:

Facilities Management

Technical Facilities Management

Property Management

Asset Management

Total group

The number of people employed at 31 March was:

Total group

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Other pension costs

Share-based payments (Note 36)

MITIE Group PLC
Annual Report and Accounts 2012

2012

2011

54,503

50,130

4,632

3,672

123

4,682

3,877

171

62,930

58,860

63,569

61,906

2012
£m

852.4

70.3

10.4

2.9

2011
£m

842.8

69.0

7.4

3.3

936.0

922.5

Details of Directors’ remuneration and interests are provided in the audited section of the Directors’ remuneration report
and should be regarded as an integral part of this Note.

8. Investment revenue

Interest on bank deposits

Other interest receivable

9. Finance costs

Interest on bank loans

Interest on private placement

Facility fees

Interest on obligations under finance leases

(Gain)/loss arising on derivatives in a designated fair value hedge

Loss/(gain) arising on adjustment for the hedged item in a designated fair value hedge

Fair value movement on other derivative financial instruments

Unwinding of discount on deferred contingent consideration

Total interest expense

Less: amounts included in the cost of qualifying assets

2012
£m

0.4

–

0.4

2012
£m

2.0

3.7

1.5

0.4

(2.8)

3.0

–

7.8

(0.2)

7.6

2011
£m

0.2

0.4

2011
£m

1.7

1.1

0.3

2.7

(2.9)

0.1

3.4

(0.3)

3.1

Borrowing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are
calculated by applying an average capitalisation rate of 2.7% (2011: 1.4%) to expenditure on such assets.

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

10. Tax

Current tax

Deferred tax (Note 23)

2012
£m

21.5

0.9

22.4

Corporation tax is calculated at 26.0% (2011: 28.0%) of the estimated assessable profit for the year.

The charge for the year can be reconciled to the profit per the consolidated income statement as follows:

Profit before tax

Tax at the UK corporation tax rate of 26.0% (2011: 28.0%)

Non-taxable items

Impact of changes in statutory tax rates

Overseas tax rates

Prior year adjustments

Tax charge for the year

2012
£m

94.5

24.6

(0.3)

(0.6)

(0.2)

(1.1)

22.4

2011
£m

15.7

5.7

21.4

2011
£m

86.8

24.3

0.8

(0.5)

–

(3.2)

21.4

In addition to the amount charged to the consolidated income statement, tax relating to retirement benefit costs
and hedged items amounting to £3.9m has been credited directly to the statement of comprehensive income
(2011: charge of £0.1m) and £1.0m (2011: £nil) relating to share-based payments has been credited directly to equity.

11. Dividends

Amounts recognised as distributions to equity holders in the year:

Final dividend for the year ended 31 March 2011 of 4.9p (2010: 4.1p) per share

Interim dividend for the year ended 31 March 2012 of 4.4p (2011: 4.1p) per share

2012
£m

17.1

15.5

32.6

2011
£m

14.5

14.4

28.9

Proposed final dividend for the year ended 31 March 2012 of 5.2p (2011: 4.9p) per share

18.4

17.5

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.

MITIE Group PLC
Annual Report and Accounts 2012

12. Earnings per share
Basic and diluted earnings per share have been calculated in accordance with IAS 33 ‘Earnings Per Share’.

The calculation of the basic and diluted EPS is based on the following data:

Net profit attributable to equity holders of the parent before other items*

Other items net of tax*

Net profit attributable to equity holders of the parent

Number of shares

Weighted average number of Ordinary shares for the purpose of basic EPS

Effect of dilutive potential Ordinary shares: share options

Weighted average number of Ordinary shares for the purpose of diluted EPS

Basic earnings per share – before other items*

Basic earnings per share

Diluted earnings per share – before other items*

Diluted earnings per share

* Other items are analysed in Note 5.

2012
£m

79.4

(7.5)

71.9

2012
million

351.5

9.0

360.5

2012
p

22.6

20.5

22.0

19.9

2011
£m

79.1

(13.9)

65.2

2011
million

350.5

6.4

356.9

2011
p

22.6

18.6

22.2

18.3

The weighted average number of Ordinary shares in issue during the year excludes those accounted for in the own
shares reserve (see Note 32).

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

13. Goodwill

Cost

At 1 April 2010

Acquisition of subsidiaries

Impact of foreign exchange

Change in deferred contingent consideration for subsidiaries acquired prior to 31 March 2010

At 1 April 2011

Acquisition of subsidiaries

Impact of foreign exchange

Change in deferred contingent consideration for subsidiaries acquired prior to 31 March 2010

At 31 March 2012

Accumulated impairment losses

At 1 April 2010

At 1 April 2011

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

£m

324.0

11.6

0.4

(3.0)

333.0

14.9

(0.4)

0.2

347.7

–

347.7

333.0

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that
are expected to benefit from that business combination. Goodwill has been allocated to CGUs, which align with
the business segments, as this is how goodwill is monitored by the group internally.

Cost

Facilities Management

Technical Facilities Management

Property Management

Asset Management

2012
£m

2011
£m

161.6

160.0

95.5

86.1

4.5

82.7

85.8

4.5

347.7

333.0

The group tests goodwill at least annually for impairment.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value
in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and
direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market
assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry
growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future
changes in the market.

The group prepares cash flow forecasts derived from the most recent one year financial budgets approved by the
Board, extrapolated for four future years by a growth rate applicable to each unit with a terminal value using a 2%
inflationary growth rate assumption.

The pre-tax rates used to discount the forecast cash flows from CGUs range from 8.5% to 9.0% (2011: 9.5% to 10.0%) and
are derived from the Company’s post-tax Weighted Average Cost of Capital, which was 7.0% (2011: 8.0%) at 31 March
2012, and adjusted for the risks specific to the market in which the CGU operates. All CGUs have the same access to
the group’s treasury functions and borrowing lines to fund their operations.

No reasonably foreseeable change in the key assumptions would result in an impairment of the goodwill of any
of the CGUs.

MITIE Group PLC
Annual Report and Accounts 2012

14. Other intangible assets

Acquisition related

Cost

At 1 April 2010

Additions

Impact of foreign exchange

At 1 April 2011

Additions

Impact of foreign exchange

At 31 March 2012

Amortisation

At 1 April 2010

Charge for the year

At 1 April 2011

Charge for the year

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

Customer
relationships
£m

48.2

2.4

0.1

50.7

3.6

(0.1)

54.2

9.9

6.6

16.5

6.7

23.2

31.0

34.2

Other
£m

8.9

0.6

–

9.5

1.0

–

10.5

1.0

2.3

3.3

2.4

5.7

4.8

6.2

Total
acquisition
related
£m

Software and
development
expenditure
£m

57.1

3.0

0.1

60.2

4.6

(0.1)

64.7

10.9

8.9

19.8

9.1

28.9

35.8

40.4

21.9

5.0

–

26.9

7.7

–

34.6

0.7

1.9

2.6

2.0

4.6

30.0

24.3

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Total
£m

79.0

8.0

0.1

87.1

12.3

(0.1)

99.3

11.6

10.8

22.4

11.1

33.5

65.8

64.7

Customer relationships are amortised over their useful lives based on the period of time over which they are
anticipated to generate benefits. These currently range from six to eight years. Other acquisition related intangibles
include acquired software, trade names and non-compete agreements and are amortised over their useful lives
which currently range from three to ten years. Software and development costs are amortised over their useful life
of between five and ten years, once they have been brought into use.

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

15. Property, plant and equipment

Freehold
properties
£m

Leasehold
properties
£m

Plant and
vehicles
£m

Cost

At 1 April 2010

Additions

Acquired with subsidiaries

Disposals

At 1 April 2011

Additions

Transfers

Acquired with subsidiaries

Disposals

At 31 March 2012

Accumulated depreciation and impairment

At 1 April 2010

Charge for the year

Transfers

Disposals

At 1 April 2011

Charge for the year

Disposals

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

5.1

–

(0.3)

4.8

–

4.8

0.8

0.1

–

(0.1)

0.8

0.1

–

0.9

3.9

4.0

8.5

6.1

1.7

(0.6)

15.7

0.5

(0.1)

–

(0.1)

16.0

3.7

1.3

1.1

(0.5)

5.6

1.3

(0.1)

6.8

9.2

10.1

Total
£m

97.2

25.6

–

(12.7)

110.1

25.3

–

0.1

(9.2)

83.6

19.5

(1.7)

(11.8)

89.6

24.8

0.1

(9.1)

105.5

126.3

38.2

16.5

(1.1)

(9.2)

44.4

17.4

(7.3)

54.5

51.0

45.2

42.7

17.9

–

(9.8)

50.8

18.8

(7.4)

62.2

64.1

59.3

The net book value of plant and vehicles held under finance leases included above was £9.7m (2011: £9.2m).

Additions to fixtures and equipment during the year amounting to £3.6m (2011: £4.6m) were financed by new
finance leases.

2012
£m

4.0

1.7

5.7

2011
£m

4.1

1.4

5.5

16. Inventories

Work-in-progress

Materials

MITIE Group PLC
Annual Report and Accounts 2012

17. Interest in joint ventures and associates
The group’s interests in joint ventures and associates are accounted for in the consolidated financial statements using
the equity method.

The group’s share of net assets of joint ventures and associates as at 31 March 2012 is as follows:

Non-current assets

Current assets

Current liabilities

Non-current liabilities

Interest in joint ventures and associates

2012
£m

3.6

0.4

(0.4)

(3.2)

0.4

2011
£m

–

The group’s share of result of joint ventures and associates included in the consolidated income statement was £nil
(2011: £nil).

18. Financial assets

Trade receivables (Note 19)

Amounts recoverable on contracts (Note 20)

Other debtors (Note 19)

Financing assets (Note 21)

Cash and cash equivalents (Note 22)

Included in current assets

Included in non-current assets

2012
£m

282.5

114.2

15.4

9.1

60.8

482.0

454.3

27.7

482.0

2011
£m

303.5

94.3

14.1

–

130.6

542.5

530.9

11.6

542.5

With the exception of derivative financial instruments all financial assets are classified as loans and receivables.
Amounts recoverable on contracts include applications for payment from customers which have no fixed payment
terms until invoiced.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

19. Trade and other receivables

Amounts receivable for the sale of services

Allowance for doubtful debt

Trade receivables

Amounts recoverable on contracts (Note 20)

Other debtors

Prepayments and accrued income

Included in current assets

Included in non-current assets

Ageing of trade receivables:

Neither impaired nor past due

Not impaired and less than three months overdue

Not impaired and more than three months overdue

Impaired receivables

Allowance for doubtful debt

Movement in the allowance for doubtful debt:

Balance at the beginning of the year

Impairment losses recognised

Amounts written off as uncollectable

Amounts recovered during the year

2012
£m

287.8

(5.3)

282.5

114.2

15.4

117.6

529.7

507.1

22.6

529.7

2012
£m

210.6

50.9

22.6

3.7

(5.3)

2011
£m

310.4

(6.9)

303.5

94.3

14.1

69.8

481.7

470.1

11.6

481.7

2011
£m

219.8

67.5

16.9

6.2

(6.9)

282.5

303.5

2012
£m

6.9

1.7

(2.0)

(1.3)

5.3

2011
£m

10.7

1.0

(1.9)

(2.9)

6.9

Before accepting new customers, the group uses external credit scoring systems to assess the potential customer’s
credit quality and defines credit limits by customer. Limits and scoring are updated as appropriate. The maximum
exposure to credit risk in relation to trade receivables at the balance sheet date is the fair value of trade receivables.

In determining the recoverability of a trade receivable the group considers any change in the credit quality of the
trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is
limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further
credit provision required in excess of the allowance for doubtful debt. The average credit period taken on sales of
services was 35 days (2011: 40 days).

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

100

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

20. Amounts recoverable on contracts

Contracts in progress at the balance sheet date

Amounts due from contract customers included in trade and other receivables

Amounts due to contract customers included in trade and other payables

Contract costs incurred plus recognised profits less recognised losses to date

Less progress billings

MITIE Group PLC
Annual Report and Accounts 2012

2012
£m

114.2

–

114.2

2011
£m

94.3

–

94.3

770.6

721.3

(656.4)

(627.0)

114.2

94.3

Included in current assets

Included in non-current assets

95.6

18.6

114.2

At 31 March 2012, retentions held by customers for contract work amounted to £15.6m (2011: £15.8m).

Included within Amounts recoverable on contracts are mobilisation costs as detailed below:

Mobilisation costs

At 1 April

Additions

Amounts recognised in the income statement

At 31 March

Included in current assets

Included in non-current assets

21. Financing assets

Derivative financial instruments (Note 27)

Loans to joint ventures and associates

Infrastructure assets

Included in current assets

Included in non-current assets

2012
£m

15.4

12.0

(6.4)

21.0

7.3

13.7

21.0

2012
£m

0.7

1.6

6.8

9.1

–

9.1

82.7

11.6

94.3

2011
£m

5.5

12.5

(2.6)

15.4

4.6

10.8

15.4

2011
£m

–

101

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

22. Cash and cash equivalents

Cash and cash equivalents

2012
£m

60.8

2011
£m

130.6

Cash and cash equivalents comprise cash held by the group and short-term bank deposits with an original maturity
of three months or less. The carrying amount of the assets approximates their fair value.

At 31 March 2012 £6.5m (2011: £7.0m) of cash and cash equivalents were held in foreign currencies.

Included in cash and cash equivalents are deposits totalling £7.6m (2011: £9.1m) held by the group’s insurance
subsidiary, which are not readily available for the general purposes of the group.

The credit risk on liquid funds and financial instruments is limited because the counterparties are banks with high
credit-ratings assigned by recognised international credit-rating agencies and are managed through regular review.

23. Deferred tax
The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during
the current and prior reporting period:

Accelerated tax
depreciation
£m

Retirement
benefit
obligations
£m

Intangible
assets acquired
£m

Share options
£m

Short-term
timing
differences
£m

At 1 April 2010

(Charge)/credit to income

Credit/(charge) to equity and
the statement of comprehensive
income

Acquisition of subsidiaries

Reallocation

At 1 April 2011

(Charge)/credit to income

Credit to equity and the
statement of comprehensive
income

Acquisition of subsidiaries

At 31 March 2012

(0.2)

(0.8)

–

(1.0)

–

(2.0)

2.1

(1.8)

0.1

–

0.4

0.8

(0.5)

3.9

–

4.2

(13.0)

3.2

–

(0.8)

–

(10.6)

3.1

–

(1.0)

(8.5)

1.7

(0.3)

(0.2)

–

1.2

0.3

0.5

–

2.0

8.8

(5.7)

0.1

1.3

(0.4)

4.1

(2.9)

–

1.2

Tax losses
£m

1.6

(0.3)

–

1.3

0.1

–

0.6

2.0

Total
£m

1.0

(5.7)

–

0.5

–

(4.2)

(0.9)

4.4

(0.4)

(1.1)

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances
(after offset) for financial reporting purposes:

Deferred tax assets

Deferred tax liabilities

Net deferred tax liability

2012
£m

9.6

(10.7)

(1.1)

2011
£m

9.1

(13.3)

(4.2)

The group has unutilised income tax losses of £8.2m (2011: £5.0m) that are available for offset against future profits.
In addition the group has £0.4m (2011: £0.4m) of capital losses.

The UK Government announced a reduction in the UK corporation tax rate from 26% to 24% from 1 April 2012, which
was substantively enacted on 26 March 2012. The reduction in the balance sheet carrying value of deferred tax assets
and liabilities to reflect the rate of tax at which those assets are expected to reverse has resulted in a deferred tax credit
of £0.6m to the income statement. The UK Government has indicated that it intends to enact further reductions in the
main tax rate of 1% each year down to 22% by 1 April 2014. Future rate reductions would further reduce the UK deferred
tax assets and liabilities recognised but the actual impact will be dependent on the deferred tax position at the time.

102

24. Financial liabilities

Trade creditors

Other creditors

Accruals and deferred income

Financing liabilities (Note 26)

Included in current liabilities

Included in non-current liabilities

MITIE Group PLC
Annual Report and Accounts 2012

2012
£m

218.9

21.5

153.5

168.4

562.3

399.3

163.0

562.3

2011
£m

212.3

16.2

133.1

207.4

569.0

364.2

204.8

569.0

With the exception of derivative financial instruments and the private placement notes, all financial liabilities are held
at amortised cost. The Directors estimate that their carrying value approximates their fair value. Derivative financial
instruments, which are included in financing liabilities, are initially recognised at fair value at the date the contract is
entered into and are subsequently remeasured to their fair value through profit or loss unless they are designated as
hedges for which hedge accounting can be applied (see Note 27). The carrying value of the private placement notes
at 31 March 2012 includes a fair value adjustment for interest rate and currency risk of £0.8m (2011: £2.1m). The fair
value of the private placement notes is not significantly different from their carrying value.

25. Trade and other payables

Payments received on account

Trade creditors

Other taxes and social security

Other creditors

Accruals and deferred income

2012
£m

2.5

218.9

65.0

21.5

153.5

461.4

2011
£m

3.1

212.3

68.2

16.2

133.1

432.9

Trade creditors and accruals and deferred income principally comprise amounts outstanding for trade purchases
and ongoing costs. The average credit period taken for trade purchases is 35 days (2011: 36 days).

The Directors consider that the carrying amount of trade and other payables approximates their fair value.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

103

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

26. Financing liabilities

Bank loans

Private placement notes

Loan notes

Derivative financial instruments

Obligations under finance leases (Note 28)

Included in current liabilities

Included in non-current liabilities

2012
£m

56.6

100.8

1.6

0.7

8.7

2011
£m

96.8

97.6

1.6

3.2

8.2

168.4

207.4

5.4

163.0

168.4

2.6

204.8

207.4

The banking facilities and private placement notes are unsecured but have financial and non-financial covenants
and obligations commonly associated with these arrangements.

Included in current liabilities are £3.8m (2011: £2.4m) of obligations under finance leases (see Note 28), £nil (2011: £0.2m)
of derivative financial instruments (see Note 27) and £1.6m (2011: £nil) of loan notes.

Included in bank loans are £16.6m (2011: £11.8m) of loans denominated in foreign currency.

Private placement notes
On 16 December 2010, the group issued US$96.0m and £40.0m of private placement (‘PP’) notes in the United States
Private Placement market. The PP notes are unsecured and rank pari passu with other senior unsecured indebtedness
of the group. In order to manage the risk of foreign currency fluctuations and to manage the group’s finance costs
through a mix of fixed and variable rate debt, the group has entered into cross currency interest rate swaps. The swap
contracts have the same duration and other critical terms as the borrowings and are considered to be highly effective.
The amount, maturity and interest terms of the PP notes are as shown below:

Tranche

7 year

9 year

Maturity date

18 December 2017

18 December 2019

Amount

US$48m

£40.0m

Interest terms

Swap interest

US$ fixed at 3.39%

£ fixed at 3.88%

US$ fixed at 3.39%

£ LIBOR + 1.26%

£ fixed at 4.38%

The weighted average interest rates paid during the year on the overdrafts and loans outstanding were as follows:

Overdrafts

Bank loans

Private placement notes

Loan notes

2012
%

1.9

1.8

3.6

–

At 31 March 2012, the group had available £193.4m (2011: £132.3m) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met. The facilities have an expiry date of 2015. The loans carry
interest rates which are currently determined at 1.3% over LIBOR. Details of the group’s contingent liabilities are
provided in Note 34.

104

n/a

2011
%

1.9

1.0

3.6

–

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

27. Financial risk management objectives
The group’s Treasury function monitors and manages the financial risks relating to the operations of the group.
These risks include interest rate risk, foreign currency risk, liquidity risk and credit risk. The group seeks to minimise
the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial
derivatives is governed by group policies and reviewed regularly. Group policy is not to trade in financial instruments.

Hedging activities

Cash flow hedges
The group holds a number of cross currency interest rate swaps designated as cash flow hedges. Bi-annual fixed interest
cash flows arising over the periods to December 2017 and denominated in US$ from the US Private Placement market
are exchanged for fixed interest cash flows denominated in sterling. The group also holds a number of forward
exchange currency contracts designated as hedges of highly probable forecast transactions. All cash flow hedges
were assessed as being highly effective as at 31 March 2012.

Fair value hedges
The group holds a number of cross currency interest rate swaps designated as fair value hedges. Fixed interest
cash flows denominated in US$ from the US Private Placement market are exchanged for floating interest cash
flows denominated in sterling. All fair value hedges were assessed as being highly effective as at 31 March 2012.

Hedge of net investment in foreign operations
Included in bank loans at 31 March 2012 was a borrowing of €9.5m (2011: €9.5m) which has been designated as
a hedge of the net investment in the Republic of Ireland business of Dalkia FM in Ireland and is being used to hedge
the group’s exposure to foreign exchange risk on this investment. Gains or losses on the translation of the borrowing
are transferred to equity to offset gains or losses on the translation of the net investment.

Derivative financial instruments
The carrying values of derivative financial instruments at the balance sheet date were as follows:

Cross currency interest rate swaps designated
as cash flow hedges

Cross currency interest rate swaps designated
as fair value hedges

Derivative financial instruments hedging private placement notes

Callable interest rate swaps

Forward foreign exchange contracts

Included in current assets/liabilities

Included in non-current assets/liabilities

Assets
2012
£m

Assets
2011
£m

Liabilities
2012
£m

Liabilities
2011
£m

–

0.7

–

0.7

–

0.7

–

(0.7)

(0.8)

–

(0.7)

–

(0.7)

–

(0.7)

(2.1)

(2.9)

(0.2)

(0.1)

(3.2)

(0.2)

(3.0)

(3.2)

Derivative financial instruments are measured at fair value. Fair values of derivative financial instruments are calculated
based on a discounted cash flow analysis using appropriate market information for the duration of the instruments.
Fair value measurements are classified into three levels, depending on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities;
Level 2 fair value measurements are those derived from other observable inputs for the asset or liability; and
Level 3 fair value measurements are those derived from valuation techniques using inputs that are not based
on observable market data.

We consider that the derivative financial instruments fall into level 2.

The cross currency interest rate swaps are net settled and other contracts are gross settled.

105

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

27. Financial risk management objectives

Foreign currency risk
The group has limited exposure to transactional foreign currency risk from trading transactions in currencies other than
the functional currency of individual group entities. The group considers the need to hedge its exposures appropriately
and will enter into forward foreign exchange contracts to mitigate any significant risks.

The group has some exposure to translational foreign currency risk from the translation of its operations in the Republic
of Ireland and other European territories. The group considers the need to hedge its exposures appropriately.

In addition, on 16 December 2010, the group issued US$96.0m and £40.0m of private placement (‘PP’) notes in the
United States Private Placement market and this has been fully hedged into sterling using cross currency interest rate
swaps (see Note 26).

Interest rate risk
The group’s activities expose it to the financial risks of interest rates. The group’s Treasury function reviews its risk
management strategy on a regular basis and will appropriately enter into derivative financial instruments in order to
manage interest rate risk. Having issued US$96.0m and £40.0m of private placement (‘PP’) notes in the United States
Private Placement fixed rate market on 16 December 2010, the group has swapped US$48m into floating rate debt
(see Note 26).

If interest rates had been 0.5% higher/lower and all other variables were held constant, the group’s profit after tax
for the year ended 31 March 2012 and reserves would decrease/increase by £0.5m (2011: £0.6m).

Credit risk
The group’s credit risk to all of its banks and financial counterparties is monitored on an ongoing basis and formally
reported quarterly. The value of business placed with financial institutions is reviewed on a daily basis.

The group’s principal financial assets are cash and cash equivalents and trade and other receivables.

The group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are
net of allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event
which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. In addition,
where appropriate, certain debts are subject to credit insurance.

The group has no significant concentration of credit risk, with exposure spread over a large number of counterparties
and customers.

Liquidity risk
The group monitors its risk to a shortage of funds using a cash flow projection model which considers the maturity of the
group’s assets and liabilities and the projected cash flows from operations. Bank facilities which allow for appropriate
headroom in the group’s daily cash movements are then arranged. Details of our bank facilities can be found in
Note 26.

The tables below summarise the maturity profile (including both undiscounted interest and principal cash flows) of the
group’s financial liabilities:

At 31 March 2012

Trade creditors

Other creditors

Accruals and deferred income

Financing liabilities

Financial liabilities

At 31 March 2011

Trade creditors

Other creditors

Accruals and deferred income

Financing liabilities

Financial liabilities

106

Within
one year
£m

In the second
to fifth years
£m

After
five years
£m

218.9

21.5

153.5

8.6

402.5

–

83.4

106.7

Within
one year
£m

In the second
to fifth years
£m

After
five years
£m

212.3

16.2

133.1

6.1

367.7

–

122.8

108.0

Total
£m

218.9

21.5

153.5

198.7

592.6

Total
£m

212.3

16.2

133.1

236.9

598.5

MITIE Group PLC
Annual Report and Accounts 2012

27. Financial risk management objectives
All financial liabilities, other than financing liabilities, are interest free. Details of financing liabilities are given in Note 26.
All financial assets are recoverable within one year, except for those disclosed as non-current in Note 18.

Market risk
The group’s activities expose it to the financial risks of interest rates. The group’s Treasury function reviews its risk
management strategy on a regular basis and will appropriately enter into derivative financial instruments in order
to manage interest rate risk. Group policy is not to trade in financial instruments.

Capital risk management
The group manages its capital to ensure that entities in the group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the group
consists of net debt per Note 29 and equity per the consolidated statement of changes in equity.

The group’s capital structure is reviewed regularly. The group is not subject to externally imposed regulatory capital
requirements with the exception of those applicable to the group’s captive insurance subsidiary, which is monitored
on a regular basis.

28. Obligations under finance leases

Amounts payable under finance leases:

Within one year

In the second to fifth years inclusive

After five years

Less: future finance charges

Present value of lease obligations

Less: Amount due for settlement within 12 months

Amount due for settlement after 12 months

Minimum lease payments

Present value of lease payments

2012
£m

4.0

5.4

–

9.4

(0.7)

8.7

(3.8)

4.9

2011

£m

2.7

6.2

0.1

9.0

(0.8)

8.2

(2.4)

5.8

2012
£m

3.8

4.9

–

8.7

–

8.7

(3.8)

4.9

2011
£m

2.4

5.7

0.1

8.2

–

8.2

(2.4)

5.8

The average remaining lease term is 31 months (2011: 38 months). For the year ended 31 March 2012, the average
effective borrowing rate was 3.1% (2011: 2.9%). Interest rates are fixed at the contract date. All leases are on a fixed
repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations
are denominated in sterling.

The fair value of the group’s lease obligations approximates their carrying amount. The group’s obligations under
finance leases are protected by the lessors’ rights over the leased assets.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

29. Analysis of net debt

Cash and cash equivalents (Note 22)

Bank loans (Note 26)

Private placement notes (Note 26)

Derivative financial instruments hedging private placement notes (Note 27)

Net debt before loan notes and obligations under finance leases

Loan notes (Note 26)

Obligations under finance leases (Note 28)

Net debt

2012
£m

60.8

(56.6)

(100.8)

–

(96.6)

(1.6)

(8.7)

2011
£m

130.6

(96.8)

(97.6)

(2.9)

(66.7)

(1.6)

(8.2)

(106.9)

(76.5)

107

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

30. Provisions

At 1 April 2011

Amounts recognised in the income statement

Deferred contingent consideration settled during the period

Utilised within the captive insurance subsidiary

Amounts recognised through goodwill

At 31 March 2012

Included in current liabilities

Included in non-current liabilities

At 1 April 2010

Amounts recognised in the income statement

Deferred contingent consideration settled during the period

Utilised within the captive insurance subsidiary

Amounts recognised through goodwill

At 31 March 2011

Included in current liabilities

Included in non-current liabilities

Deferred
contingent
consideration
£m

Insurance
reserve
£m

4.5

(0.9)

(3.8)

–

1.4

1.2

8.2

(1.1)

–

(2.7)

–

4.4

Deferred
contingent
consideration
£m

Insurance
reserve
£m

12.9

0.1

(8.1)

–

(0.4)

4.5

8.2

2.5

–

(2.5)

–

8.2

Total
£m

12.7

(2.0)

(3.8)

(2.7)

1.4

5.6

1.2

4.4

5.6

Total
£m

21.1

2.6

(8.1)

(2.5)

(0.4)

12.7

4.5

8.2

12.7

During the year deferred contingent consideration of £2.9m in respect of the acquisition in 2008 of MITIE Tilley Roofing
Limited (formerly D W Tilley Limited) was settled in cash due to attainment of profit targets. This was £0.2m higher than
the amount provided for at 31 March 2011 due to better than expected performance.

During the year deferred contingent consideration of £0.9m in respect of the acquisition in 2010 of Dalkia FM in Ireland
was settled in cash due to attainment of certain targets. The remaining £0.9m of deferred contingent consideration
was not payable and was recognised in the income statement in accordance with IFRS 3 (revised 2008).

The provision for insurance claims represents amounts payable by MITIE Reinsurance Company Limited in respect of
outstanding claims incurred at the balance sheet dates. These amounts will become payable as each year’s claims
are settled.

108

31. Share capital

Ordinary shares of 2.5p

Allotted and fully paid

At 1 April 2011

Issued for acquisitions

Issued under share option schemes

Share buybacks

At 31 March 2012

At 1 April 2010

Issued for acquisitions

Issued under share option schemes

At 31 March 2011

MITIE Group PLC
Annual Report and Accounts 2012

Number
million

357.8

5.3

4.2

(5.4)

361.9

353.2

3.0

1.6

357.8

£m

8.9

0.1

(0.1)

9.0

8.8

0.1

–

8.9

During the year 5.3m (2011: 3.0m) Ordinary shares of 2.5p were allotted in respect of the acquisition of non-controlling
interests at a mid-market price of 238.7p (2011: 209.2p) giving rise to share premium of £4.0m (2011: £1.6m) and a
merger reserve of £8.5m (2011: £4.8m).

During the year 4.2m (2011: 1.6m) Ordinary shares of 2.5p were allotted in respect of share option schemes at a price
between 117p and 254p (2011: 117p and 226p) giving rise to share premium of £7.9m (2011: £2.3m).

During the period 5.4m Ordinary shares of 2.5p were purchased at market prices between 208.6p and 255.9p. These
were then cancelled.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

109

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

32. Reserves

Share premium account
The share premium account represents the premium arising on the issue of equity shares (see Note 31).

Merger reserve
The merger reserve represents amounts relating to premiums arising on shares issued subject to the provisions
of Section 612 of the Companies Act 2006 (see Note 31).

Share-based payment reserve
The share-based payment reserve represents credits relating to equity-settled share-based payment transactions
granted after 7 November 2002 that have not yet fully vested (see Note 36).

Own shares reserve
The group uses shares held in the Employee Benefit Trust to satisfy options under the group’s LTIP and SIP share option
schemes. During the year 3.1m shares (2011: 2.6m) were purchased at a cost of £7.4m (2011: £5.7m). The own shares
reserve at 31 March 2012 represents the cost of 7.8m (2011: 5.9m) shares in MITIE Group PLC, with a weighted average
of 7.9m (2011: 5.3m) shares during the year.

Other reserves
Other reserves are comprised of the revaluation reserve of £(0.2)m (2011: £(0.2)m), the capital redemption reserve
of £0.4m (2011: £0.3m) and other reserves of £0.1m (2011: £0.1m). The movement on the capital redemption reserve
relates to the share buybacks that were performed during the year (see Note 31).

Hedging and translation reserve
The hedging and translation reserve represents foreign exchange differences arising on translation of the group’s
overseas operations, movements relating to cash flow hedges and movements on net investment hedges.

33. Acquisitions
During the year a net cash outflow of £23.9m arose on the acquisitions set out below:

Utilyx Holdings Limited

Direct Enquiries Holdings Limited

Acquisition costs

Non-controlling interests

Deferred consideration

Service Management International Limited

Other

Net cash outflow on acquisitions

£m

14.5

0.2

1.8

2.0

3.8

1.3

0.3

23.9

110

MITIE Group PLC
Annual Report and Accounts 2012

33. Acquisitions

Current year acquisitions

Purchase of Utilyx Holdings Limited
On 10 January 2012, MITIE acquired 100% of Utilyx Holdings Limited for total consideration of up to £16.4m.
The transaction has been accounted for by the acquisition method of accounting in accordance with IFRS 3 (2008).
Below we provide provisional information on the acquisition:

Book value
£m

Fair value
adjustments
£m

Fair value
£m

Net assets acquired

Intangible assets

Deferred tax asset/(liability)

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Net assets acquired

Goodwill

Total consideration

Satisfied by

Cash

Deferred contingent consideration

Total consideration

Net cash outflow arising on acquisition

Cash consideration

Cash and cash equivalents acquired

Net cash outflow

–

0.2

3.1

0.7

(2.7)

1.3

4.6

(0.7)

(0.4)

–

(1.2)

2.3

4.6

(0.5)

2.7

0.7

(3.9)

3.6

12.8

16.4

15.2

1.2

16.4

15.2

(0.7)

14.5

The goodwill arising on the acquisition of Utilyx Holdings Limited is attributable to the underlying profitability of the
companies in the acquired group, expected profitability arising from new business and the anticipated future operating
synergies arising from assimilation into MITIE. None of the goodwill recognised is expected to be deductible for income
tax purposes.

Provision is made for deferred contingent consideration at the Directors’ best estimate of the likely future obligation.
Deferred contingent consideration of up to £1.2m, which may become payable before January 2013 subject to certain
profit and other targets being attained, is included above.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

111

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

33. Acquisitions

Purchase of Service Management International Limited
During the period the group increased its stake in Service Management International Limited from 50% to 100% for total
cash consideration of £1.5m, which resulted in goodwill of £1.8m.

Purchase of Direct Enquiries Holdings Limited
During the period the group purchased 51% of the share capital of Direct Enquiries Holdings Limited for cash
consideration of £0.2m, which resulted in goodwill of £0.3m. There are further options to buy the remaining equity
for cash, up to a maximum of £8.3m depending on the financial performance over a five year period.

Purchase of non-controlling interests

Shares issued – MITIE Group PLC

Cash consideration

Total purchase consideration

Non-controlling interests

Retained earnings

Total recognised in equity

MITIE
Cleaning
Services Ltd
£m

MITIE
Engineering
Maintenance
(Caledonia) Ltd
£m

MITIE
Landscapes
Ltd
£m

MITIE Property
Services
(UK) Ltd
£m*

MITIE
Transport
Services Ltd
£m

1.9

0.3

2.2

0.2

2.0

2.2

–

1.1

0.3

0.8

1.1

9.2

0.5

9.7

2.7

7.0

9.7

1.5

0.1

1.6

0.2

1.4

1.6

Total
£m

12.6

2.0

14.6

3.4

11.2

14.6

* As disclosed in the Half-yearly report for the six months to 30 September 2011, the purchase of 40,000 B Ordinary shares in the capital of MITIE Property Services (UK)

Limited from Kenneth Robson (a relative of Bill Robson, a Director of MITIE) was approved for the purposes of section 190 of the Companies Act 2006 by MITIE
shareholders at a General Meeting on 10 November 2011. The acquisition was not reflected in the results to 30 September 2011 as approval was not obtained until
after the period end, but it has been included in the results to 31 March 2012 and is therefore included in the above disclosure.

The adoption of IAS 27 ‘Consolidated and Separate Financial Statements’ (revised 2008) in the year ended 31 March
2011 has resulted in the difference between the change in non-controlling interests and the consideration paid being
recognised in retained earnings. Prior to adoption of the revised standard this amount was recognised in goodwill.

Acquisition related costs included within other items (Note 5) amounted to £1.8m.

Entities acquired during the year contributed £2.7m to revenue and £0.1m to the group’s operating profit before other
items for the period. If the acquisitions had taken place at the start of the period, the group’s revenue and operating
profit before other items would have been approximately £2,011m and £112m respectively.

112

MITIE Group PLC
Annual Report and Accounts 2012

33. Acquisitions

Prior year acquisitions

Purchase of FM business of Dalkia in Ireland
On 25 June 2010, MITIE acquired 100% of DFM Providers Limited (subsequently renamed MITIE Facilities Management
Limited) and Dalkia Energy and Facilities Limited (subsequently renamed MITIE Limited), together Dalkia FM in Ireland,
for total consideration of up to €12.5m. The transaction has been accounted for by the acquisition method of
accounting in accordance with IFRS 3 (2008). Below we provide final information on the acquisition. The fair value of net
assets acquired has not changed since the provisional information presented in the Annual Report and Accounts 2011.

Net assets acquired

Intangible assets

Deferred tax (liability)/asset

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Current tax liability

Net assets acquired

Goodwill

Total consideration

Book value
£m

Fair value
adjustments
£m

Fair value
£m

8.8

(1.1)

5.4

1.5

(4.9)

(0.2)

9.5

(5.8)

0.4

(0.4)

–

(0.8)

–

(6.6)

3.0

(0.7)

5.0

1.5

(5.7)

(0.2)

2.9

7.7

10.6

During the year deferred contingent consideration of £0.9m in respect of the acquisition of Dalkia FM in Ireland was
settled in cash due to attainment of certain targets. The remaining £0.9m of deferred contingent consideration was not
payable and was recognised in the income statement in accordance with IFRS 3 (revised 2008).

34. Contingent liabilities
The Company is party with other group companies to cross guarantees of each other’s bank and other borrowings,
commitments and overdrafts of £390.8m (2011: £368.0m).

The Company and various of its subsidiaries are, from time to time, party to legal proceedings and claims that are
in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims,
either individually or in aggregate, will have a material adverse effect on the group’s financial position.

Deferred contingent consideration relating to acquisitions has been accrued at the Directors’ best estimate of the likely
future obligation of £1.2m (2011: £4.5m) per Note 30. The actual amounts payable may vary up to a maximum of £1.2m
(2011: £6.9m) dependent upon the results of the acquired businesses.

In addition, the group and its subsidiaries have provided guarantees and indemnities in respect of performance, issued
by financial institutions on its behalf, amounting to £33.2m (2011: £34.9m) in the ordinary course of business. These are
not expected to result in any material financial loss.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

113

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

35. Operating lease arrangements
The group as Lessee

Minimum lease payments under operating leases recognised in income for the year

2012
£m

13.2

At the balance sheet date, the group had total outstanding aggregate commitments for future minimum lease
payments under non-cancellable operating leases, which fall due as follows:

Within one year

In the second to fifth years inclusive

After five years

2012
£m

11.7

22.5

4.7

38.9

2011
£m

10.1

2011
£m

9.9

17.5

5.5

32.9

Operating lease payments represent rentals payable by the group for certain of its office properties and hire of vehicles
and other equipment. These leases have average durations ranging from three to ten years. No arrangements have
been entered into for contingent rental payments.

36. Share-based payments

Equity-settled share option schemes
The Company has four share option schemes:

The MITIE Group PLC Long Term Incentive Plan (LTIP)
The LTIP was introduced in 2007. The awards of shares or rights to acquire shares (the awards) are offered to a small
number of key senior management. Where offered as options the exercise price is nil. The vesting period is three years.
If the awards remain unexercised after a period of four years from the date of grant, the awards expire. The awards
may be forfeited if the employee leaves the group. Before the awards can be exercised, a performance condition
must be satisfied; the number of awards that vest is determined by a sliding scale based on growth in earnings per
share over a three-year period.

The group also awards performance-related bonuses for Executive Directors which are deferred in shares and are
accounted for as a share-based payment charge.

The MITIE Group PLC 2001 Executive share option scheme
The Executive share option scheme exercise price is equal to the average market value of the shares over the five day
period immediately preceding the date of grant. The vesting period is three years. If the options remain unexercised
after a period of ten years from the date of grant the options expire. Options may be forfeited if the employee leaves
the group. Before options can be exercised, a performance condition must be satisfied; the performance condition is
linked to the percentage growth in earnings per share over a three-year period.

The MITIE Group PLC 2001 SAYE scheme
The SAYE scheme is open to all employees. The exercise price is not less than 80.0% of the market value of the shares
on the day preceding the date on which invitations to participate in the scheme are issued. For options granted prior
to September 2008, the vesting period is five years. For options granted in September 2008 and thereafter, the vesting
period is three years. If the options remain unexercised after a period of six months from the date of vesting, the options
expire. Options may be forfeited if the employee leaves the group.

The Share Incentive Plan (SIP)
The SIP was introduced in 2011 and is a non-discretionary scheme open to all eligible UK resident employees. Under the
scheme, eligible employees are invited to invest in Partnership Shares which are purchased in the market on their behalf
and held in a UK employee benefit trust. One Matching Share is awarded for every ten Partnership Shares purchased
and have a holding period of three years. Matching Shares are funded by way of market purchases.

114

MITIE Group PLC
Annual Report and Accounts 2012

36. Share-based payments
Details of the share options outstanding during the year are as follows:

2012

Weighted
average
exercise price

(in p)

Number of
share options
(million)

2011

Weighted
average
exercise price
(in p)

Outstanding at beginning of the year

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding at the end of the year*

22.5

6.1

(1.9)

(5.5)

21.2

152

111

188

146

139

18.1

8.0

(2.0)

(1.6)

22.5

Exercisable at the end of the year

3.3

196

3.0

162

140

194

151

152

202

Included within this balance are 0.1m (2011: 0.2m) options that have not been recognised in accordance with the transitional provisions of IFRS 2 as the options
were granted on or before 7 November 2002. These options have not been subsequently modified and therefore do not need to be accounted for in accordance
with IFRS 2.

The group recognised the following expenses related to share-based payments:

Long Term Incentive Plan share options

Executive share options

SAYE share options

2012
£m

1.4

0.9

0.6

2.9

2011
£m

1.6

0.9

0.8

3.3

The weighted average share price at the date of exercise for share options exercised during the year was 243p
(2011: 206p). The options outstanding at 31 March 2012 had exercise prices (other than nil in the case of the LTIP)
ranging from 117p – 254p (2011: 117p – 254p) and a weighted average remaining contractual life of 4.6 years
(2011: 4.4 years). In the year ended 31 March 2012, options were granted in August 2011 in respect of the LTIP and
Executive share option schemes. The aggregate of the estimated fair values of the options granted on those dates
was £6.1m. In the year ended 31 March 2011, options were granted in June, July and August 2010 in respect of the LTIP,
Executive and SAYE share option schemes. The aggregate of the estimated fair values of the options granted on
those dates was £4.4m.

The fair value of options is measured by use of the Black-Scholes model. The inputs into the Black-Scholes model are
as follows:

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Share price (p)

Exercise price (p)

Expected volatility (%)

Expected life (years)

Risk-free rate (%)

Expected dividends (%)

2012

2011

191–243

191–230

0–254

28–36

3–6

0–254

28–36

3–6

1.48–5.25

1.49–5.25

2.22–4.10

2.22–3.93

Expected volatility was based upon the historical volatility over the expected life of the schemes. The expected life
is based upon historical data and has been adjusted based on management’s best estimates for the effects of
non-transferability, exercise restrictions and behavioural considerations.

115

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

37. Retirement benefit schemes

Defined contribution schemes
The group operates a number of defined contribution retirement benefit schemes for qualifying employees. The assets
of the schemes are held separately from those of the group in funds controlled by the scheme providers. The group
paid employer contributions of £7.9m (2011: £8.1m) during the year. As at 31 March 2012, contributions of £0.6m
(2011: £0.5m) due in respect of the current reporting period had not been paid over to the schemes.

Defined benefit schemes

Group defined benefit scheme
The group operates a defined benefit pension scheme called the MITIE Group PLC Pension Scheme where
MITIE Group PLC is the principal employer.

The assets of the scheme are held separately from the group. Contributions to the scheme are charged to the
income statement so as to spread the cost of pensions over the employees’ working lives with the group.

Under the scheme, the employees are entitled to retirement benefits varying between 0% and 66% of final
salary on attainment of a retirement age of 65. No other post-retirement benefits are provided. The scheme
is a funded scheme.

The most recent actuarial valuation of the group scheme’s assets and the present value of their defined benefit
obligations was carried out as at 1 April 2011 by Chris Vaughan-Williams, Fellow of the Institute of Actuaries, from
Aon Hewitt Limited. The next triennial valuation is due as at 1 April 2014.

Other defined benefit schemes
Grouped together under ‘Other schemes’ is one (2011: one) scheme in which the group is a participating employer
and a number of schemes to which the group makes contributions under Admitted Body status to our customers’
defined benefit schemes in respect of certain TUPE employees. These valuations are updated by the actuaries
at each balance sheet date. The present values of the defined benefit obligations, the related current service cost
and past service cost were measured using the Projected Unit Credit Method.

For the Admitted Body Schemes, which are all part of the Local Government Pension Scheme, the group will only
participate for a finite period up to the end of the contracts. The group is required to pay regular contributions as
decided by the relevant Scheme Actuaries and detailed in the schemes’ Schedule of Contributions. In a number
of cases contributions payable by the employer are capped and any excess is recovered from the body that the
employees transferred from. In addition, in certain cases, at the end of the contract the group will be required to
pay any deficit (as determined by the Scheme Actuary) that is remaining for its notional section of the scheme.

Assumptions
In the prior year, the UK government has announced that it will use the Consumer Price Index (CPI) measure of inflation
rather than the Retail Price Index (RPI) to determine the level of future statutory pension increases. This was treated as a
change in defined pension benefits and recognised as a negative past service cost. A credit of £4.1m was recognised
in the income statement for the year ended 31 March 2011.

Group scheme

Other schemes

2012
%

2011

2012
%

2011
%

4.90

5.60

4.90

5.60

7.50

4.50

7.00

1.00

7.50

3.70

3.20

2.20

3.20

8.00

5.00

7.50

1.50

7.00

4.50

3.50

2.70

3.50

7.50

4.50

7.00

1.00

7.50

3.20

2.20

3.20

8.00

5.00

7.50

1.50

7.00

4.00

3.50

2.70

2.80

Key assumptions used for IAS 19 valuation:

Discount rate

Expected return on scheme assets:

Equity instruments

Debt instruments

Property

Other assets

Alternative assets

Expected rate of salary increases

Retail Price Inflation

Consumer Price Inflation

Future pension increases

116

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

37. Retirement benefit schemes

Post retirement mortality:

Current pensioners at 65 – male

Current pensioners at 65 – female

Future pensioners at 65 – male

Future pensioners at 65 – female

MITIE Group PLC
Annual Report and Accounts 2012

Group scheme

2011
Years

88.0

90.0

89.0

92.0

2012
Years

88.0

89.0

91.0

Mortality for the other schemes is that used by the relevant scheme actuary.

The overall expected return on assets is calculated as the weighted average of the expected return of each asset
class. The expected return on equities is the sum of dividend growth and capital growth net of investment expenses.
The return on gilts and bonds is the current market yield on long-term bonds. The expected return on property has
been set equal to that expected on equities less a margin. The expected return on other assets is the rate earned
by the scheme on cash and alternate assets.

The sensitivity of defined benefit obligations to changes in principal actuarial assumptions is shown in Note 2.

Amounts recognised in administrative expenses in respect of these defined benefit schemes are as follows:

Current service cost

Interest cost

Expected return on scheme assets

Negative past service cost

Group scheme
£m

Other schemes
£m

(4.0)

(6.6)

8.1

–

(2.5)

(0.4)

(0.1)

0.5

–

2012

Total
£m

(4.4)

(6.7)

8.6

–

(2.5)

Group scheme
£m

Other schemes
£m

(4.1)

(6.2)

7.0

3.4

0.1

(0.3)

(0.7)

0.8

0.7

0.5

Amounts recognised in the consolidated statement of comprehensive income are as follows:

Actual return on scheme assets

Expected return on scheme assets

Actuarial (losses)/gains on liabilities

Group scheme
£m

Other schemes
£m

3.8

(8.1)

(11.6)

(15.9)

0.6

(0.5)

(0.4)

2012

Total
£m

4.4

(8.6)

(12.1)

(16.3)

Group scheme
£m

Other schemes
£m

6.3

(7.0)

(1.0)

(1.7)

(0.4)

(0.8)

1.8

0.6

2011

Total
£m

(4.4)

(6.9)

7.8

4.1

0.6

2011

Total
£m

5.9

(7.8)

0.8

(1.1)

The cumulative amount of actuarial loss recognised since 1 April 2004 in the consolidated statement of comprehensive
income is £41.0m (2011: £24.7m).

The amounts included in the balance sheet arising from the group’s obligations in respect of its defined benefit
retirement benefit schemes are as follows:

Fair value of scheme assets

120.7

10.7

131.4

114.5

9.8

124.3

Group scheme
£m

Other schemes
£m

2012

Total
£m

Group scheme
£m

Other schemes
£m

2011

Total
£m

Present value of defined
benefit obligations

(Deficit)/surplus in scheme

Contract adjustment

Net pension liability

(137.9)

(17.2)

–

(17.2)

(10.6)

(148.5)

(117.5)

0.1

(0.2)

(0.1)

(17.1)

(0.2)

(17.3)

(3.0)

–

(3.0)

(9.3)

0.5

(0.5)

–

(126.8)

(2.5)

(0.5)

(3.0)

117

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

37. Retirement benefit schemes
Movements in the present value of defined benefit obligations were as follows:

4.4

6.9

0.9

0.1

(2.6)

(4.1)

(58.9)

126.8

2011

Total
£m

162.9

7.8

(1.9)

7.9

0.9

(2.6)

(50.7)

124.3

2011

Total
£m

56.8

26.4

18.2

2.3

20.6

124.3

At 1 April

Current service cost

Interest cost

Contributions from scheme members

Actuarial gains and losses

Benefits paid

Negative past service cost

Contract transfers

At 31 March

Group scheme
£m

Other schemes
£m

117.5

4.0

6.6

0.6

11.6

(2.4)

–

9.3

0.4

0.1

0.2

0.9

(0.3)

–

2012

Total
£m

Group scheme
£m

Other schemes
£m

2011

Total
£m

126.8

108.2

71.9

180.1

4.4

6.7

0.8

12.5

(2.7)

–

4.1

6.2

0.8

1.0

(2.2)

(3.4)

2.8

0.3

0.7

0.1

(0.9)

(0.4)

(0.7)

(61.7)

9.3

137.9

10.6

148.5

117.5

Movements in the fair value of scheme assets were as follows:

At 1 April

Expected return on scheme assets

Actuarial gains and losses

Contributions from the
sponsoring companies

Contributions from scheme members

Benefits paid

Contract transfers

At 31 March

Group scheme
£m

Other schemes
£m

2012

Total
£m

Group scheme
£m

Other schemes
£m

114.5

8.1

(4.3)

4.2

0.6

(2.4)

–

120.7

9.8

0.5

0.2

0.3

0.2

(0.3)

–

10.7

124.3

101.4

8.6

(4.1)

4.5

0.8

(2.7)

–

7.0

(0.7)

5.4

0.8

(2.2)

2.8

131.4

114.5

61.5

0.8

(1.2)

2.5

0.1

(0.4)

(53.5)

9.8

The analysis of the scheme assets at the balance sheet date was as follows:

Equity instruments

Debt instruments

Property

Other assets

Alternative assets

At 31 March

Group scheme
£m

Other schemes
£m

51.6

27.7

16.8

3.1

21.5

7.3

2.3

0.6

0.5

–

2012

Total
£m

58.9

30.0

17.4

3.6

21.5

Group scheme
£m

Other schemes
£m

49.8

24.6

17.7

1.8

20.6

7.0

1.8

0.5

–

9.8

120.7

10.7

131.4

114.5

The pension schemes have invested in property occupied by the group with a fair value of £2.5m (2011: £3.9m)
generating rental of £0.3m (2011: £0.3m). At 31 March 2012 the pension schemes held nil MITIE Group PLC shares
(2011: nil). The pension schemes have not invested in any other assets used by the group. Transactions between
the group and the pension schemes are conducted at arm’s length.

118

MITIE Group PLC
Annual Report and Accounts 2012

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

37. Retirement benefit schemes
The history of experience adjustments is as follows:

Fair value of scheme assets

2012
£m

120.7

2011
£m

114.5

2010
£m

101.4

Present value of defined benefit obligations

(137.9)

(117.5)

(108.2)

(Deficit)/surplus in the scheme

(17.2)

(3.0)

(6.8)

Group scheme

2009
£m

77.3

(74.3)

3.0

2008
£m

88.6

(78.7)

9.9

Experience adjustments on scheme liabilities

Percentage of scheme liabilities

(5.3)

3.9%

(0.5)

0.4%

(0.1)

11.3

12.0

0.1%

(15.3)%

(15.2)%

Experience adjustments on scheme assets

(4.3)

(0.7)

14.5

(21.2)

(4.1)

Percentage of scheme assets

(3.6)%

(0.6)%

14.3%

(27.4)%

(4.8)%

Fair value of scheme assets

Present value of defined benefit obligations

Deficit in the scheme

2012
£m

10.7

(10.8)

(0.1)

2011
£m

9.8

(9.8)

–

Other schemes

2010
£m

61.5

(65.2)

(3.7)

2009
£m

45.8

(49.2)

(3.4)

2008
£m

52.3

(54.7)

(2.4)

Experience adjustments on scheme liabilities

0.2

0.9

(0.7)

10.9

5.2

Percentage of scheme liabilities

(2.0)%

(9.2)%

1.0%

(22.2)%

(10.0)%

Experience adjustments on scheme assets

Percentage of scheme assets

0.2

1.6%

(1.3)

11.7

(13.0)

(6.0)

(13.3)%

19.0%

(28.4)%

(11.5)%

The estimated contributions expected to be paid to the group scheme during the current financial year are £4.6m
(2011: £4.0m) and to other schemes £0.4m (2011: £0.3m).

As at 31 March 2012, contributions of £0.7m (2011: £0.8m) due in respect of the current reporting period had not been
paid over to the schemes.

38. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this Note.

During the year, the group derived £9.1m (2011: £5.6m) of construction revenue from contracts with joint ventures
and associated undertakings. At 31 March 2012 £1.5m (2011: £nil) of invoices were outstanding.

The Company purchased 40,000 B Ordinary shares in the capital of MITIE Property Services (UK) Limited from Kenneth
Robson (a relative of Bill Robson, a Director of MITIE), for a total consideration of £553,600 by the allotment of 227,482
Ordinary shares in MITIE, and £10,600 in cash. This transaction was approved for the purposes of section 190 of the
Companies Act 2006 by MITIE shareholders at a General Meeting on 10 November 2011.

No other material contract or arrangement has been entered into during the year, nor existed at the end of the year,
in which a Director had a material interest.

The group’s key management personnel are the Directors and Non-Executive Directors whose remuneration is disclosed
in the audited section of the Directors’ remuneration report. The share-based payment charge for key management
personnel was £1.0m (2011: £0.8m).

119

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the consolidated financial statements

39. Principal subsidiaries
The companies set out below are those which were part of the group at 31 March 2012 and in the opinion of the
Directors significantly affected the group’s results and net assets during the year. Principal subsidiaries are incorporated
in the United Kingdom and are held directly or indirectly by MITIE Group PLC.

Division

Activities

Principal subsidiaries

At 31 March
2012
% Voting
rights owned

At 31 March
2012
% Ownership
interest

At 31 March
2012
% Nominal
value owned

MITIE Facilities Services Ltd

100.0%

MITIE Cleaning &
Environmental Services Ltd

100.0%

MITIE Security Holdings Ltd

94.5%

99.9%

MITIE Technical Facilities
Management Ltd (formerly
Dalkia Energy & Technical
Services Ltd)

87.9%

99.8%

MITIE Property Services
(UK) Ltd

MITIE Built Environment Ltd

Environmental Property
Services Ltd

100.0%

MITIE Asset Management Ltd

100.0%

MITIE Infrastructure Ltd

100.0%

Facilities
Management

Technical Facilities
Management

Property
Management

Asset
Management

Our Facilities Management division
delivers facilities consultancy,
management and service delivery
to our clients. Services include:
security, business services,
managed services, catering, client
services, PFI, cleaning, landscaping
and pest control.

Our Technical Facilities
Management division focuses on
facilities management that is led
by technology, engineering and
energy requirements. It comprises
the integrated operations of our
Engineering Maintenance business
and Dalkia FM.

Our Property Management division
offers an integrated property
management service, including
mechanical and electrical
engineering, energy and more
general facilities management
services in addition to the
traditional services such as
maintenance, refurbishment,
painting, roofing, interior fit-out, fire
protection, plumbing and heating.

Our Asset Management
division provides the
integration, management
and maintenance of technical
assets to meet the challenges
of the low-carbon economy
including; energy design,
generation and certification,
infrastructure projects, building
services and mechanical
and electrical engineering.

The companies listed above represent the principal subsidiary companies of the group. A full list of subsidiary
companies will be annexed to the next annual return.

120

Independent auditor’s report to the members of MITIE Group PLC

MITIE Group PLC
Annual Report and Accounts 2012

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

− the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance
with the Companies Act 2006; and

− the information given in the Directors’ Report for the
financial year for which the financial statements are
prepared is consistent with the parent company
financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:

− adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or

− the parent company financial statements and the part

of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or

− certain disclosures of directors’ remuneration specified

by law are not made; or

− we have not received all the information and

explanations we require for our audit.

Other matters
We have reported separately on the Group financial
statements of MITIE Group PLC for the year ended
31 March 2012.

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Colin Hudson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
21 May 2012

We have audited the parent company financial
statements of MITIE Group PLC for the year ended
31 March 2012 which comprise the Company Balance
Sheet and the related notes 40 to 53. The financial
reporting framework that has been applied in their
preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).

This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company
and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the Directors are responsible for the
preparation of the parent company financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
parent company financial statements in accordance with
applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the parent
company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the Directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements.
If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.

Opinion on financial statements
In our opinion the parent company financial statements:

− give a true and fair view of the state of the parent

company’s affairs as at 31 March 2012;

− have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and

− have been prepared in accordance with the
requirements of the Companies Act 2006.

121

MITIE Group PLC
Annual Report and Accounts 2012

Company balance sheet

At 31 March 2012

Fixed assets

Tangible assets

Investments in subsidiary undertakings

Total fixed assets

Current assets

Debtors

Total current assets

Total assets

Creditors: amounts falling due within one year

Provisions

Total current liabilities

Net current liabilities

Total assets less current liabilities

Creditors: amounts falling due after more than one year

Provisions

Total liabilities

Net assets

Capital and reserves

Share capital

Share premium account

Merger reserve

Share-based payments reserve

Own shares reserve

Other reserves

Profit and loss account

Equity shareholders’ funds

Notes

2012
£m

2011
£m

31.0

661.4

692.4

30.2

645.4

675.6

51.6

49.3

744.0

724.9

(274.2)

(162.3)

–

(4.5)

(274.2)

(166.8)

(222.6)

(117.5)

469.8

558.1

(5.8)

(2.0)

(98.4)

(1.6)

(282.0)

(266.8)

462.0

458.1

9.0

92.5

93.6

9.1

(18.3)

0.4

275.7

462.0

8.9

80.6

85.1

7.8

(13.8)

0.3

289.2

458.1

The financial statements of MITIE Group PLC, company registration number SC 19230, were approved by the Board
of Directors and authorised for issue on 21 May 2012. They were signed on its behalf by:

Ruby McGregor-Smith CBE
Chief Executive

Suzanne Baxter
Group Finance Director

122

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the Company financial statements

For the year ended 31 March 2012

40. Significant accounting policies

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Basis of accounting
The separate financial statements of the Company are presented as required by company law. They have been
prepared under the historical cost convention and in accordance with applicable United Kingdom Accounting
Standards and law.

As more fully detailed in the Directors’ report: Corporate governance statement, the Company’s financial statements
have been prepared on a going concern basis.

The principal accounting policies are summarised below. They have been applied consistently throughout the year
and the preceding year.

Investments
Fixed asset investments in subsidiaries are shown at cost less any provision for impairment.

Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any impairment in value. Depreciation is
charged so as to write off the cost of the assets over their estimated useful lives and is calculated on a straight-line basis
as follows:

Plant and vehicles

3–10 years

Software and development costs 5–10 years

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed
the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.
The recoverable amount of tangible fixed assets is the greater of net selling price and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.

Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be
reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense relating to any provision is charged to the profit and loss
account, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognised as a borrowing cost.

Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been
enacted or substantively enacted at the balance sheet date.

Deferred tax is provided in full on timing differences that result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based upon tax rates
and legislation that have been enacted or substantively enacted at the balance sheet date. Timing differences arise
from the inclusion of items of income and expenditure in tax computations in periods different from those in which they
are included in the financial statements. Deferred tax is not provided on timing differences arising from the revaluation
of fixed assets where there is no commitment to sell the asset, or on unremitted earnings of subsidiaries and associates
where there is no commitment to remit these earnings. Deferred tax assets are recognised to the extent that it is
regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

123

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the Company financial statements

40. Significant accounting policies

Financial instruments
Trade receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable
amounts are recognised in the profit and loss account where there is objective evidence that the asset is impaired.

Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accruals basis in the profit and loss account and are added to the carrying amount of the instrument to the extent that
they are not settled in the period in which they arise.

Trade payables are measured at amortised cost.

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes
a party to the contractual provisions of the instrument.

Share-based payments
The Company operates a number of executive and employee share option schemes. For all grants of share options
and awards, the fair value as at the date of grant is calculated using the Black-Scholes model and the corresponding
expense is recognised on a straight-line basis over the vesting period. Save As You Earn (SAYE) options are treated as
cancelled when employees cease to contribute to the scheme, resulting in an acceleration of the remainder of the
related expense. Options over the Company’s shares awarded to employees of the Company’s subsidiaries are
accounted for as a capital contribution within the carrying value of Investments in subsidiary undertakings.

Pensions
Pension costs represent amounts paid to one of the group’s pension schemes. For the purposes of FRS 17 ‘Retirement
Benefits’ the Company has been unable to identify its share of the underlying assets and liabilities of the group defined
benefit pension scheme on a consistent and reasonable basis. Therefore the Company is accounting for contributions
to the scheme as if it were a defined contribution scheme. Note 37 to the consolidated financial statements sets out the
details of the IAS 19 ‘Employee Benefits’ net pension liability of £17.2m (2011: £3.0m).

41. Profit for the year
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and
loss account for the year. MITIE Group PLC reported a profit after taxation for the financial year ended 31 March 2012
of £32.8m (2011: £32.9m).

The auditor’s remuneration for audit services to the Company was £33,000 (2011: £50,000).

Detailed disclosures of Directors’ remuneration and share options are given in the audited section of the Directors’
remuneration report contained in the consolidated financial statements.

42. Dividends

Amounts recognised as distributions to equity holders in the year:

Final dividend for the year ended 31 March 2011 of 4.9p (2010: 4.1p) per share

Interim dividend for the year ended 31 March 2012 of 4.4p (2011: 4.1p) per share

2012
£m

17.1

15.5

32.6

2011
£m

14.5

14.4

28.9

Proposed final dividend for the year ended 31 March 2012 of 5.2p (2011: 4.9p) per share

18.4

17.5

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.

124

MITIE Group PLC
Annual Report and Accounts 2012

43. Tangible fixed assets

Cost

At 1 April 2011

Additions

Disposals

At 31 March 2012

Accumulated depreciation

At 1 April 2011

Charge for the year

Disposals

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

Plant and
vehicles
£m

Software and
development
costs
£m

10.5

4.4

(0.8)

14.1

4.0

2.1

(0.6)

5.5

26.3

0.4

–

26.7

2.6

1.7

–

4.3

8.6

6.5

22.4

23.7

Borrowing costs of £nil (2011: £0.3m) were capitalised during the year as part of software and development costs.

44. Investments in subsidiary undertakings

Shares at cost

At 1 April 2011

Additions

Capital contribution re share-based payments

At 31 March 2012

Provision for impairment

At 1 April 2011

Impairment

At 31 March 2012

Carrying amount

At 31 March 2012

At 31 March 2011

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

Total
£m

36.8

4.8

(0.8)

40.8

6.6

3.8

(0.6)

9.8

31.0

30.2

£m

657.0

15.5

1.3

673.8

11.6

0.8

12.4

661.4

645.4

Details of the acquisitions in the year are provided in Note 33 of the consolidated financial statements and a listing
of principal subsidiaries in Note 39. The cumulative cost of non-compete agreements included in investments is £4.6m
(2011: £4.6m).

125

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the Company financial statements

45. Debtors

Amounts owed by subsidiary undertakings

Other debtors

Prepayments and accrued income

The Directors consider that the carrying amount of debtors approximates their fair value.

46. Creditors: amounts falling due within one year

Overdraft

Loan notes

Trade creditors

Amounts owed to subsidiary undertakings

Other taxes and social security

Accruals and deferred income

Corporation tax

2012
£m

43.2

2.0

6.4

51.6

2012
£m

133.5

1.6

4.7

2011
£m

46.2

0.6

2.5

49.3

2011
£m

25.6

–

1.8

115.6

116.2

1.7

10.7

6.4

1.5

9.9

7.3

274.2

162.3

The Directors consider that the carrying amount of creditors approximates their fair value.

The Company’s bank overdrafts are part of the group’s banking arrangements and are offset against credit balances
within the group. The Company has adequate liquidity to discharge all current obligations.

47. Creditors: amounts falling due after more than one year

Loan notes

Bank loans

For details of group borrowings, see Note 26.

48. Provisions

At 1 April 2011

Utilised during the year

Other movements in the year

At 31 March 2012

Falling due within one year

Falling due after more than one year

2012
£m

–

5.8

Deferred
contingent
consideration
£m

Deferred tax
£m

4.5

(3.8)

(0.7)

–

1.6

–

0.4

2.0

2011
£m

1.6

96.8

98.4

Total
£m

6.1

(3.8)

(0.3)

2.0

–

2.0

Details of the deferred contingent consideration are provided in Note 30 of the consolidated financial statements.

126

w
e
v
r
e
v
O

w
e
v
e
r
s
s
e
n
i
s
u
B

e
c
n
a
n
r
e
v
o
G

s
t
n
u
o
c
c
A

49. Share capital

Ordinary shares of 2.5p

Allotted and fully paid

At 1 April 2011

Issued for acquisitions

Issued under share option schemes

Share buybacks

At 31 March 2012

At 1 April 2010

Issued for acquisitions

Issued under share option schemes

At 31 March 2011

MITIE Group PLC
Annual Report and Accounts 2012

Number
million

357.8

5.3

4.2

(5.4)

361.9

353.2

3.0

1.6

357.8

£m

8.9

0.1

(0.1)

9.0

8.8

0.1

–

8.9

Details of movements in share capital during the year are provided in Note 31 of the consolidated financial statements.

50. Reserves

At beginning of year

Shares issued

Purchase of own shares

Share buybacks

Share-based payments

Profit for the year

Dividends paid
to shareholders

Share
capital
£m

8.9

0.2

–

(0.1)

–

Share
premium
account
£m

80.6

11.9

–

Merger
reserve
£m

85.1

8.5

–

Share-based
payments
reserve
£m

Own shares
reserve
£m

Other
reserves
£m

Profit
and loss
account*
£m

Total
£m

7.8

(13.8)

0.3

289.2

458.1

–

1.3

–

(7.4)

–

2.9

–

20.6

(7.4)

0.1

(12.4)

–

(1.3)

32.8

(32.6)

275.7

2.9

32.8

(32.6)

462.0

Balance at 31 March 2012

9.0

92.5

93.6

9.1

(18.3)

0.4

* £192.4m is non-distributable, £187.7m having arisen from internal restructuring in the year ended 31 March 2008 and £4.7m in the year ended 31 March 2010.

51. Contingent liabilities
Details of contingent liabilities have been given in Note 34 of the consolidated financial statements.

127

MITIE Group PLC
Annual Report and Accounts 2012

Notes to the Company financial statements

52. Share-based payments

Equity-settled share option schemes
The Company has four share option schemes as described in Note 36 of the consolidated financial statements.

The Company recognised the following expenses related to share-based payments:

Long Term Incentive Plan share options

2001 Executive share options

2001 SAYE share options

2012
£m

1.3

0.2

0.1

1.6

2011
£m

1.3

0.2

0.1

1.6

The fair value of options is measured by use of the Black-Scholes model. The inputs into the Black-Scholes model are
as described in Note 36 of the consolidated financial statements.

53. Related parties
The Company makes management charges to all of its subsidiaries, whether they are wholly-owned or otherwise,
and receives dividends from its subsidiaries, according to their ability to remit them. Other details of related party
transactions have been given in Note 38 of the consolidated financial statements.

128

Shareholder information

Results

2013 Interim management statement

2013 Half-yearly results

Dividends

2012 Half-yearly dividend 4.4p paid

2012 Final dividend 5.2p (proposed)

2012 Final ex dividend date

2012 Final dividend record date

2012 Final dividend last date for receipt/
revocation of DRIP mandate

2012 Final dividend payment date

2012 Annual General Meeting

Company details

MITIE Group PLC
1 Harlequin Office Park
Fieldfare
Emerson Green
Bristol
BS16 7FN

Telephone: +44 (0) 117 970 8800
Fax: +44 (0) 117 301 4159
Email: group@mitie.com
Website: www.mitie.com

Registered number: SC 19230

Registrars

Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Telephone: +44 (0) 871 664 0300*
Website: www.mitie-shares.com

13 August 2012

19 November 2012

6 February 2012

20 June 2012

22 June 2012

13 July 2012

7 August 2012

Dividend reinvestment plan (DRIP)
MITIE has set up a dividend reinvestment
plan (DRIP) to enable you to build your
shareholding by using your cash
dividends under a standing election
to buy additional shares in MITIE. If you
would like to receive further information,
including details of how to apply, please
call Capita Registrars on 020 8639 3402
or contact them by sending an email to:
shares@capitaregistrars.com

MITIE online share portal
MITIE has launched a shareholder
portal where shareholders can register
and can:

– access information on shareholdings

11 July 2012

and movements;

– update address details;

– view dividend payments received

and register bank mandate instructions;

– sell MITIE shares;

– complete an online proxy voting form;

and

– register for e-communications allowing
MITIE to notify shareholders by email
that certain documents are available
to view on its website. This will further
reduce MITIE’s carbon footprint as well
as reduce costs.

If you wish to register, please sign up at
www.mitie-shares.com

Corporate website
This report can be downloaded in
PDF format from the MITIE website,
which also contains additional general
information about MITIE. Please visit
www.mitie.com

*calls cost 10p a minute plus network extras, lines are open 8.30am – 5.30pm Mon – Fri

Designed and produced by Radley Yeldar | www.ry.com
Photography by Ed Robinson
Printed by Park Communications on FSC® certiﬁed paper.

Park is an EMAS certiﬁed CarbonNeutral® Company and
its Environmental Management System is certiﬁed to ISO14001.
100% of the inks used are vegetable oil based, 95% of press
chemicals are recycled for further use and, on average 99%
of any waste associated with this production will be recycled.

This document is printed on think4 bright, a paper containing 50%
post consumer recycled ﬁbre and 50% virgin ﬁbre sourced from
well managed, sustainable, FSC certiﬁed forests. The carbon intensity
of the paper has been measured through the production process
and an equivalent carbon credit (offset) has been purchased.

If you have ﬁnished reading the Report and no longer wish to
retain it, please pass it on to other interested readers or dispose
of it in your recycled paper waste. Thank you.

MITIE Group PLC
1 Harlequin Office Park
Fieldfare
Emersons Green
Bristol BS16 7FN
United Kingdom

T: +44 (0) 117 970 8800
F: +44 (0) 117 301 4159
E: group@mitie.com

Over 63,000 people…
making MITIE better, everyday.

Thank you all!