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The
Exceptional,
Every Day
Mitie Group plc
Annual Report
and Accounts 2021
Welcome to Mitie
Annual Report and Accounts 2021
We are the UK’s leading
facilities management company,
providing a range of services
to a large, diverse, blue-chip
client base. Our expertise, care,
technology and insight create
amazing work environments,
helping our customers be
exceptional, every day.
During this year,
we have worked hard to be…
The voice of
the frontline
A standard
bearer of
the industry
A technology
leader
Our people give their best
when we show them that
we care. We are creating a
great working environment.
We are seeking to be the
employer of choice.
We work best with our
customers when we
collaborate. We aim to be
the trusted partner for our
customers, helping them
create exceptional workplaces.
Technology is changing our
industry. Mitie’s vision is to
harness its ‘science of service’
to generate social value
through everyday operations.
Strategic report
Governance
Financial statements
Chief Executive’s strategic review
02 Financial highlights
04 At a glance
06 Chairman’s statement
08 Our business model
10 Market review
12 Strategy
14 Key performance indicators
18 Spotlight: Interserve Facilities Management
19
22 Operating review
26 Finance review
30 Environmental and Social Value Summary
32 Non-financial information statement
33 Spotlight: Plan Zero
34 Environment and Social Value
42 Section 172 statement
46 Operating responsibly
48 Stakeholder engagement
54
66 Viability statement
Principal risks and uncertainties
68
Chairman’s introduction to governance and
the Board
Board of Directors
69
72 The Code: Board leadership and company
purpose
82 The Code: Division of responsibilities
85 The Code: Composition, succession and
evaluation
87 The Code: Audit, risk and internal control
90 The Code: Remuneration
91 Nomination Committee report
94 Audit Committee report
99 Directors’ remuneration report and policy
121 Social Value & Responsible Business
Committee report
123 Disclosure Committee report
124 Directors’ report
128 Statement of Directors’ responsibilities
130 Independent auditor’s report to the
members of Mitie Group plc
139 Consolidated income statement
140 Consolidated statement
of comprehensive income
141 Consolidated balance sheet
143 Consolidated statement of changes in equity
144 Consolidated statement of cash flows
146 Notes to the consolidated
financial statements
204 Company balance sheet
205 Company statement of changes in equity
206 Notes to the Company financial statements
211 Appendix – Alternative Performance
Measures (APMs)
214 Shareholder information
Mitie Group plc | Annual Report and Accounts 2021
01
Strategic reportGovernanceFinancial statements Financial highlights
Financial
highlights
(for the year ended 31 March 2021)
—
£2,589m
Revenue including share of joint ventures
and associates1
19.1% higher than the prior year
—
£2,560m
Group revenue1
(FY20 £2,174m)
—
£63.4m
Operating profit before other items1,2,3
(FY20 £86.1m)
—
£8.3m
Operating profit1,3
(FY20 £64.6m)
—
£47.1m
Average daily net debt
(FY20 £327.6m)
02
Mitie Group plc | Annual Report and Accounts 2021
• Good trading resilience through COVID-19:
revenue including share of joint ventures and
associates1 of £2,589m, up 19.1%; excluding
the contribution from Interserve, revenue
was 1.6% lower
• Group revenue1 of £2,560m
(FY20 £2,174m)
• Operating profit before other items1,2,3
of £63.4m (FY20 £86.1m) – impacted
by revenue mix and reduced project
work due to COVID-19
• Operating profit1,3 of £8.3m, reflecting the
additional impact of other items for the year
• Order book now stands at £7,202m
(FY20 £4,294m)
• Interserve Facilities Management
(“Interserve”) acquisition performing
better than expected, accelerating value
creation. £6.2m cost and revenue synergies
achieved in FY21. Cost synergies raised to
£42m (from £35m) achieved by FY23 –
at same cost
• Strengthened balance sheet: £190m rights
issue; £250m RCF refinanced; and BBB
Investment Grade credit rating achieved
• Average daily net debt significantly reduced
to £47.1m (FY20 £327.6m) post-IFRS 16
1 From continuing operations.
2 Other items are as described in Note 4 to the consolidated financial statements.
3 Operating profit includes share of profit after tax from joint ventures and associates.
The voice
of the
frontline
Our people give their best when we
show them that we care. We are creating
a great working environment. We are
seeking to be the employer of choice.
—
55%
Employee engagement
—
+50
Net Promoter Score (NPS)
Strategic report
Chief Executive’s strategic review
02 Financial highlights
04 At a glance
06 Chairman’s statement
08 Our business model
10 Market review
12 Strategy
14 Key performance indicators
18 Spotlight: Interserve Facilities Management
19
22 Operating review
26 Finance review
30 Environmental and Social Value Summary
32 Non-financial information statement
33 Spotlight: Plan Zero
34 Environment and Social Value
42 Section 172 statement
46 Operating responsibly
48 Stakeholder engagement
54
66 Viability statement
Principal risks and uncertainties
Mitie Group plc | Annual Report and Accounts 2021
03
Strategic reportGovernanceFinancial statements Our customers range
from banks and retailers,
to hospitals, schools
and government entities.
We have an order book
of £7.2bn and a pipeline of
opportunities of £12.9bn.
At a glance
Group
information
Our vision
The Exceptional, Every Day.
Our purpose
Our expertise, care, technology
and insight create amazing work
environments, helping our customers
be exceptional, every day.
What we do
Mitie is the UK’s leading facilities management
company. Mitie offers a range of services
to the public and private sectors including
engineering services, energy, security, cleaning
and specialist services including immigration
and healthcare services, landscaping services
and waste management services.
Following the acquisition of Interserve on
30 November 2020, from 1 April 2021,
Mitie is transitioning towards a five-division
business model: Business Services, Central
Government & Defence, Communities,
Technical Services and Specialist Services.
Central Government & Defence and
Communities are divisions acquired from
Interserve. The contracts within the Business
& Industry division acquired from Interserve
have been incorporated into Business
Services and Technical Services.
04
Mitie Group plc | Annual Report and Accounts 2021
We deliver the exceptional through a range of services
Business Services
The Business Services division keeps some of the UK’s biggest
companies across a variety of diverse sectors (including transport,
retail, government, critical national infrastructure and manufacturing),
secure, clean and with Front of House provision.
Central Government & Defence (CG&D)
CG&D is a market leader in the provision of facilities management
services to central government departments in the United Kingdom
and Europe, and the Ministry of Defence in the United Kingdom and
deployments overseas.
Communities
Communities is a leading provider of mostly integrated facilities
management services to devolved public sector customers, with
a focus on community environments in healthcare, schools and
universities, emergency services, and local authorities.
Technical Services
Technical Services provides the full range of key technology backed
engineering, maintenance, repair and mechanical and electrical systems
project activities, energy, carbon and water management services, air
conditioning/disinfection solutions and digital workplace services.
Specialist Services
Care & Custody
Care & Custody provides high-quality,
critical public services in immigration,
criminal justice and secure healthcare.
Landscapes
Mitie Landscapes is a top five UK provider
of landscaping, focused on both horticultural
and winter services.
Waste Management
Mitie Waste is a leading national waste
management business providing innovative
waste reduction and treatment solutions.
Read more on our divisional performance from pages 22 to 25.
Customer type
Forward order book
%
Government
Non-government
FY21
43
57
FY21
Revenue
from continuing
operations
FY21
Total secured
revenue for
continuing
operations
£m
Less than 1 year
More than 1 year
FY21
2,090
5,112
Revenue including share of joint ventures and associates
FY20
Revenue
from continuing
operations
by division
£m
Technical Services
Cleaning
Security
Office Services
Care & Custody
Landscapes
Waste
FY20
947
340
563
84
110
48
82
FY21
Revenue
from continuing
operations
by division
£m
Technical Services
Cleaning
Security
Office Services
Care & Custody
Landscapes
Waste
Interserve
FY21
821
349
669
67
109
50
74
450
Mitie Group plc | Annual Report and Accounts 2021
05
Strategic reportGovernanceFinancial statements Chairman’s statement
Shaping Mitie
for the future
—
£2,560m
Group revenue1
—
£63.4m
Operating profit before
other items1,2
—
3.5p
Basic EPS before
other items1,2
—
1,080
Electric vehicles
1 From continuing operations.
2 Other items are as described in Note 4 to the
consolidated financial statements.
06
Mitie Group plc | Annual Report and Accounts 2021
I am so proud of the Mitie
team, and pay special tribute
to our 65,000 front-line heroes
who have gone to work every
day throughout the pandemic,
delivering exceptional customer
service, keeping the places
where Britain works – hospitals,
schools, food retailers,
manufacturing plants and
many strategic assets – clean,
safe and secure. A heartfelt
thank you to everyone.
Derek Mapp
Chairman
Dear Mitie Shareholder,
Many company Chairs’ letters to shareholders end by thanking the staff.
In an unprecedented year, I want to start my letter by thanking all our
75,000 Mitie colleagues for all they have done for our Company, for
our clients and indeed for our Country. They have been magnificent.
I am so proud of the Mitie team, and pay special tribute to our 65,000
front-line heroes who have gone to work every day throughout the
pandemic, delivering exceptional customer service, keeping the places
where Britain works – hospitals, schools, food retailers, manufacturing
plants and many strategic assets – clean, safe and secure. A heartfelt
thank you to everyone.
When I wrote to you this time last year we were in unprecedented
times. We were concerned for the safety of our people, and our ability
to deliver essential services to our customers.
Our main aim during COVID-19 was to ensure all colleagues felt safe,
supported, and recognised for their efforts. We created regular
communications to all and we introduced new benefits ranging from
an extra day’s holiday for front line employees, Life Assurance and
access to a virtual GP. More recently we gave free shares to everyone
so that all colleagues can share in the future success of Mitie.
Our investment in our people has seen lower staff turnover, more
investment in apprentices, more uptake of Learning & Development
modules, and more recognition awards. Some 30,000 of our colleagues
recently completed an employee engagement survey, which showed that
the number of colleagues feeling fully engaged rose by 9ppts to 55%.
Engaging and supporting our stakeholders
As a board we are committed to stakeholder engagement, ensuring that
all stakeholder interests are considered when making decisions.
The COVID pandemic required a significantly higher level of engagement
between the Board, Executive Directors and Senior Management. The
Board received regular updates to help monitor the performance of the
Group and the morale of colleagues.
Furthermore there was increased engagement with our shareholders
and with our largest clients – particularly Central Government
departments and the Cabinet Office. We also supported our supply
chain – especially small and medium sized enterprises – ensuring they
were paid sooner than the previous year.
Dividend
In light of the unprecedented events caused by the COVID-19 pandemic
in FY21, the Board does not recommend the payment of a final
dividend for the year. The Board will keep under review the possibility
of a resumption of dividends in FY22 as confidence in the delivery of
free cash flow and acquisition synergies grows.
AGM
Mitie’s Annual General Meeting (AGM) will be held on 27 July 2021
at 11.30am at Level 12, The Shard, 32 London Bridge Street, London
SE1 9SG and on an electronic platform.
Mitie is closely monitoring the impact of the COVID-19 pandemic and
public health concerns and will review attendance restrictions if the
UK Government’s guidance has changed by the date of the meeting.
Shareholders should carefully consider whether to attend the physical
meeting in the current circumstances.
The Board recognises that the AGM is an important event in the
Company’s corporate calendar, providing an opportunity to engage with
shareholders. Therefore, to maximise engagement whilst respecting any
restrictions and guidance on public gatherings, the Company will for the
first time hold the AGM as a combined physical and electronic meeting
(a hybrid meeting). This will enable shareholders to attend the AGM
remotely and to vote and ask questions in real time. Shareholders will
be able to attend and vote at the AGM using electronic facilities and ask
questions using either the telephone or electronic facilities – instructions
on how to do this are set out in the Notice of AGM.
The Board also encourages shareholders to appoint the chairman
of the AGM as their proxy and provide voting instructions in advance
of the meeting in accordance with the instructions set out in the
Notice of AGM.
Derek Mapp
Chairman
And despite the pandemic, I’m delighted to say that customer service
improved to world class levels, with a net promoter score of +50.
We won some significant contracts this year including HMRC,
Department of Health & Social Care, Heathrow Airport, MBNA,
Bravissimo, Magnox Ltd, East & North Herts NHS Trust and many
others. And we renewed some of our largest accounts including
Cornerstone Telecommunications, Rolls Royce, Deloitte and the
Scottish Government and losing none of note.
The last 12 months also gave us the opportunity to showcase our
technology solutions of remote monitoring and sensors for building
efficiency and workplace Apps and anti-viral cleaning methods to instil
confidence for those returning to work.
In addition, we made two important strategic moves. Last summer
we strengthened our balance sheet through a rights issue and
on 30 November 2020 we acquired Interserve. I am personally grateful
for the support all our shareholders gave to these transactions.
The acquisition of Interserve is transformational in creating the UK’s
largest Facilities Management company and accelerates the delivery of
shareholder value. In the first four months of ownership, good progress
was made.
Financial performance
Revenue including joint ventures and associates and including
a four-month contribution from Interserve, was £2,589m and
represented an increase of 19.1% when compared to the same period
last year. Excluding the contribution from Interserve, revenue was
£2,139m, only 1.6% lower than last year despite the impact of COVID-19.
Operating profit before other items was £63.4m (FY20 £86.1m) 26%
lower than the prior year as the additional profit from contract wins,
Interserve and associated synergies was offset by the COVID impact on
trading, and the reinstatement of incentives and share based payments.
Operating margin before other items reduced to 2.4% (FY20 4.0%).
Earnings per share for FY20 has been restated for the bonus element
of the rights issue. Basic earnings per share before other items from
continuing operations, decreased by 58% to 3.5p (FY20 restated: 8.3p).
This is a result of the decline in profits combined with a higher weighted
average number of shares in issue following the rights issue and shares
issued as part of the acquisition of Interserve.
Board composition
The Board met significantly more than usual during COVID-19, and to
discuss the merits of the Rights Issue and the acquisition of Interserve.
The balance of skills and experience stood the Board in good stead
during this challenging time. The Board is balanced with 50% male/female
representation.
On 17 March 2021, we announced the appointment of Simon Kirkpatrick
as Chief Financial Officer. Simon, who held the position of Director of
Group Finance prior to his appointment, joined the Board with effect
from 1 April 2021. Further details on Simon’s appointment can be found
on page 93.
Environment, social value and Governance
Environmental, Social and Governance (ESG) considerations are a key
part of the way we do business.
We are making progress against our ambitious 2025 net zero
emissions target, with a 29% reduction in carbon emissions in the year.
Mitie operates the largest electric vehicle fleet in the UK with over
1,200 vehicles on the road. We have signed up to EV/EP/RE100; and
are committed to science-based targets to decarbonise our supply
chain by 2035.
Our focus on ESG this year has resulted in improved ESG ratings
from CDP to A-, MSCI to AA and Sustainalytics to 9.8, positioning
Mitie as a global leader and the highest ranked facilities management
company globally.
Reflecting the importance of ESG there are now targets relating
to ESG in the senior management’s long term incentive plan.
Mitie Group plc | Annual Report and Accounts 2021
07
Strategic reportGovernanceFinancial statements Our business model
Creating value for
all our stakeholders
Our vision
‘The Exceptional, Every Day’
Our purpose
We exist to create exceptional work
environments. We are the UK’s leading
facilities management company, providing
a range of critical engineering, security,
cleaning, and sustainability services to
customers across government and the
private sector.
Our people’s expertise and insight,
combined with our innovative and
technology-led approach, enables
tailored solutions that anticipate and
meet our customers’ needs to create
safe, secure and sustainable work
environments for colleagues,
customers and communities.
Our values
• We are One Mitie
• We are built on integrity and trust
• We go the extra mile
• Our diversity makes us stronger
• Our customers’ business
is our business
08
Mitie Group plc | Annual Report and Accounts 2021
Customer expectations
Our customers expect us to deliver exceptional working
environments. We are a trusted partner offering
value-added, innovative and cost-effective solutions that
build enduring relationships.
Our inputs
We have created a One Mitie approach to everything we
do to deliver a seamless, unrivalled service. We offer a
breadth of services underpinned by exceptional people,
expertise, a flexible approach and proprietary
market-leading technology.
1. Our people
Our success is underpinned by the way Mitie leads and
engages with its people, who in turn deliver exceptional
service to our customers. We are flexible and adaptable to
our customers’ needs with a personal pride in our work.
2. Our technology
Smart technology delivers benefits when it is used
intelligently, kept simple and embedded into everything
we do. Our technology suite includes MiTec, service
operations centre (SOC) and global security operations
centre (GSOC).
3. Our expertise
We have been delivering exceptional service for our
customers for decades which more recently, has been
backed by technology driven data analytics enhancing
a personalised service. By applying our experience to
improve efficiency and make a valuable, measurable
difference, we support our customers to run their
businesses more smoothly and effectively.
4. Our scale
The scale of our operations allows us to self-deliver most
services, including some specialist services. We also partner
with third parties to deliver additional specialist services.
5. Our nationwide reach
Our nationwide reach allows us to service large customers
with a presence all over the UK.
Creating
stakeholder
value
Shareholders and debt holders
We seek to create value through
growth, cash generation and the
efficient allocation of capital.
Customers
We work best with our customers
when we collaborate. We aim to
be a trusted partner for our
customers, helping them create
exceptional workplaces.
People
Our people give their best when
we show them that we care. We are
creating a great working environment
and learning and development
opportunities for our employees.
We empower our people and
recognise great work, in seeking
to be the employer of choice.
Suppliers
We are committed to ensuring a
responsible supply chain that benefits
the wider community in which we
work. We only trade with suppliers
that comply with our Procurement
Policy and Supplier Social Value Policy.
Communities and
environment
Technology is changing our industry.
Mitie’s vision is to harness its ‘science
of service’ to generate social value
through everyday operations, leaving
a legacy for the communities in which
we work to support a brighter future
for both people and the planet.
What we do
At Mitie, our main job is to look after the places where UK works. In a post-COVID
world this has never been more important, as our clients are seeking reassurance
around the safety and efficiency of their work spaces. We deliver exceptional service
and there is a ‘Science’ to the service we offer. We provide our customers with
integrated, bundled or single service facilities management across services where we
are the market leader.
Technical Services | Cleaning | Security | Landscaping | Waste |
Care & Custody
Recognising that every customer is different, our approach is tailored to each
customer’s unique needs and is designed to deliver continual improvements
throughout the life of the contract.
1. Diligence and design
We start by engaging with new or existing customers to understand their needs
or any changes to requirements. We design a solution using our expertise,
knowledge and technology.
2. Mobilisation and running operations
We look to mobilise our contracts in the most efficient way. Once in operation, we
are continually looking for opportunities to remove cost, expand our offering where
it would be of benefit to customers and become a valued strategic partner.
3. Insights to drive value
Using our proprietary technology, data analysis and open source data lake, as well
as traditional methods, we collate information on customers’ buildings and assets
and the activities of their employees. We convert data and feedback into actionable
recommendations for our customers, enabling them to improve the environments
in which their employees work and improve their wellbeing.
One Mitie – How we do it
We are One Mitie
We work as one to deliver a seamless, unrivalled service. We are all in it together,
if we can help a customer or colleague in any way, we will. We are One Mitie.
Our diversity makes us stronger
We are very proud of our rich and diverse culture and backgrounds. Our diversity
creates ideas and insights. Everyone at Mitie has a voice and is treated as an equal.
We are built on integrity and trust
Integrity and trust are at the heart of all we do. We are the face of the company.
We treat others as we would like to be treated. We are proud to work for Mitie.
Our customers’ business, is our business
We are a partner, trusted for our expertise and for putting our customers at the
heart of everything we do.
We go the extra mile
Whether it’s keeping things running smoothly in a safe environment, looking for new
ways to do things better or fixing problems, going the extra mile for our colleagues
and customers and keeping our promises is in our DNA.
Mitie Group plc | Annual Report and Accounts 2021
09
Strategic reportGovernanceFinancial statements Market review
Key market drivers –
Opportunities in a rapidly
changing FM industry
How we are responding
Mitie has proactively and quickly adapted to the new emerging post
COVID-19 normal. Mitie’s constant focus on improving the customer
experience has recently delivered a +50 NPS score which is a substantive
+77 increase over the last four years and puts Mitie in the top NPS
quartile. It has refinanced its business, acquired Interserve to significantly
increase its presence in the public sector, created a more efficient
business, built industry leading technology and developed sustainability
products and propositions. As a result, Mitie has a very differentiated set
of services, a very efficient business model and products and services set
to capture the future opportunities within a fast changing FM sector.
Sector focus
Mitie is continuing to target specific sectors for growth and build sector
focused differentiation and services. Its customer strategy continues to
focus on large and/or multi-service customers where we can leverage
our competitive advantages of national scale, service line breadth,
self-service capability, technology leadership and low cost-to-serve. The
Interserve acquisition has significantly strengthened these advantages.
Mitie is focusing on building a material presence in specific sectors and
creating tailored propositions for those sectors. The Interserve
acquisition materially improved our presence in public sector – Defence,
Central Government, Healthcare and Education – all resilient sectors
which Mitie believe have significant growth potential. The acquisition has
significantly strengthened our public sector advantages as it has
broadened our framework access, deepened public sector capabilities
and is delivering strong cost efficiencies. This has complemented Mitie’s
private sector focus on Financial & Professional Services, Retail,
Manufacturing and Transport & Logistics. Leveraging our recent GSK and
Cornerstone success, Pharma and Telecom will become an increasing
focus for the business.
Over the past year, two fundamental events
have changed the opportunities and
competitive dynamic within the UK FM
industry – COVID-19 and its medium and
long-term impact on FM, and Mitie’s acquisition
of Interserve. COVID-19 has shifted the short
term opportunities within FM from the private
to public sector and, within the private sector,
from hard hit sectors such as high street retail
and hospitality to more robust sectors such as
telecoms, supermarkets and distribution. While
the overall business mix has been impacted by
COVID-19, the broader set of opportunities
remains positive in the medium and long term.
With the acquisition of Interserve, Mitie is the
undisputed industry leader and the UK’s
largest facilities management (FM) company
across many service lines (Engineering,
Security, Cleaning) and many sectors
(central government, defence) and is well
placed within the industry to capture these
emerging opportunities.
The UK has a large and established outsourced FM market. Prior to
COVID-19, it was forecast to grow at moderate levels c.2% as the
market continued to move slowly from insourcing to outsourcing.
COVID-19 has had a significant short-term impact across the market
with an estimated 2020 decline of c.15%. The market is expected to
rebound to its pre-COVID-19 levels in 2022. There is an emerging
confidence in the industry as evidenced by accelerated hiring and new
COVID-19 oriented services with higher margins. There has also been
a shift within the industry. Short term project works have been put on
hold while cleaning services have significantly increased. In the medium
term we believe project works will still need to be done, while the new
expectations of employees for safe and secure work environments will
remain. Similarly, public sector work associated with COVID-19 has been
robust. Equally significant is an emerging fundamental shift in employers’
views of FM – from a necessary but ancillary activity to a service that is
fundamental to the safety and health of their employees. This shift will
be one of the underlying drivers positively impacting the industry in the
medium and long term. Customers’ focus continues to be on cost,
efficiency and service quality, but with the COVID-19 impact there is
also a very substantive and fast-increasing focus on employee wellbeing
and sustainability.
10
Mitie Group plc | Annual Report and Accounts 2021
Technical Services
Security
Cleaning
Mitie’s Technical Services division operates in the largest market
within the FM industry. The acquisition of Interserve has significantly
improved Mitie’s market share enabling Mitie to increasingly
leverage its larger scale, breadth of expertise, national footprint,
self-delivery capacity and its technology platforms for large
customers. These attributes are reflected in Mitie’s very strong
Technical Services customer NPS score of +51, which is a +20
increase versus last year. Mitie is complementing its core
engineering maintenance and projects businesses with higher
growth, higher margin businesses – energy, sustainability, workplace
solutions – all of which are underpinned by robust technology
platforms. Driven by cost reduction pressures and ESG targets,
customers are increasingly demanding energy and sustainability
solutions. Mitie’s projects business will leverage this future demand
as well as the strong growth in the construction industry and in
particular project repairs and maintenance. COVID-19 has
materially accelerated the demand for workplace solutions to
ensure that employers have safe, secure and attractive work
environments for their employees. Mitie workplace service
offerings are poised to capture this opportunity as evidenced by
NPS data which indicated that 80% of customers see workplace
refits as a key priority.
Mitie Security continues to lead the FM security market, by
leveraging its industry leading position, strong operational efficiency
and technology platforms (GSOC, Merlin, remote monitoring).
It is unique in the industry as a specialist FM security provider which
enables our security business to provide added value services to
its customers. This is reflected in Mitie Security’s customer NPS
score reaching +52 which is a + 25 increase versus last year. The
Interserve acquisition further strengthened Mitie’s market share
from 14.1% to 16.8%. Mitie Security continues to leverage its scale,
UK coverage, self-delivery and unique service offerings. Although
Mitie Security continues to focus on the private sector – Retail,
Transportation & Logistics, Financial and Professional Services,
it is increasingly focused on the public sector, following the
Interserve acquisition.
With the Interserve acquisition, Mitie Cleaning has become the
leading cleaning provider within the UK FM market. Mitie’s market
share has increased from 5.0% to 8.8%. The COVID-19 situation
has reframed the importance of cleaning for our customers to
a critical activity that provides safety and confidence for their
employees. In the new post COVID-19 world it will become an
increasingly essential part of Mitie’s IFM offering. Mitie Cleaning
is delivering an exceptionally strong customer experience as
evidenced by a +56 NPS which is an increase of +41 versus last
year. Historically, the Cleaning sector has experienced slow growth
but this is changing with the impact of COVID-19. Specialty and
Environmental Cleaning will continue to outpace the market.
Mitie Group plc | Annual Report and Accounts 2021
11
Strategic reportGovernanceFinancial statements Strategy
Our strategy
in action
Our strategy is to be the
‘partner of choice’ to create
exceptional workplaces in the
UK. We focus on partnership
with our customers where
our technology offering is a
true differentiator. This will
ensure long-term sustainable
growth, delivery of our vision
of ‘The Exceptional, Every
Day’ and value creation for
all our stakeholders.
The acquisition of Interserve
has accelerated the delivery
of our strategy, which focuses
on four key pillars highlighted
below. Further details are
outlined within the Spotlight
on Interserve on Page 18.
Page 72 sets out our
governance framework
which underpins the delivery
of our strategy.
Our four strategic pillars
1. Customer: Build market-leading
positions in higher growth sectors,
deliver best in class customer services
(as evidenced by industry leading NPS)
and focus on extending the lifetime value
of strategic clients
2. People: Create a ‘Great Place to Work’,
be the ‘Employer of Choice’ generating
social value and becoming known
as a leading ESG company
3. Technology: Embed intelligent technology
into the heart of our offering, reduce cost
to serve and lead the industry in digital
transformation and decarbonisation
4. Cost: Strengthen our balance
sheet and maintain cost discipline
to remain competitive
Customer
Build market-leading positions
in higher growth sectors,
deliver best in class customer
services (as evidenced by
industry leading NPS) and
focus on extending the lifetime
value of strategic clients
Achievements
• Market leadership positions
in Technical Services and
Business Services
• Growth in MOD, Healthcare,
Communities, non-food, logistics
• NPS increased 20 points to +50
• Contract renewal rates of 96% and
new bid win rate of 80%
• Launched Mitie First to increase the
proportion of services which are
self-delivered and to create more
value for our customers
• Expanded presence on public sector
contracts and frameworks
KPIs
Organic revenue growth, operating
profit margin, order book, NPS
Medium term vision
• Sustainable contract renewal rates
above 90%
• Growth in strategic accounts
share of wallet including projects
or bundled offering
• Expand in high growth sectors
• Increase number of new large
transformational clients
• Sustained NPS of +60 across
all divisions
+50
Net promoter score
People
Create a ‘Great Place to
Work’, be the ‘Employer
of Choice’ generating social
value and becoming known
as a leading ESG company
Achievements
• Number 10 of the Top 50
Inclusive Employers
• Improved colleague gender and
ethnicity diversity to 21% of
women and 8% of BAME in senior
leadership roles
• Improved employee engagement
to 55%
• Staff turnover reduced to 15.4%
• 1,172 apprentices
• Extra day’s holiday for all
front-line employees
• Lost time injury rate reduced
• Learning Hub launched to
all colleagues to upskill
• Launched life assurance and virtual
GP benefits to all colleagues
• Through Mitie’s partner, Salary
Finance, provided all colleagues
with access to low interest loans
and pay advances
KPIs
Staff turnover, employee engagement,
lost time injury
Medium term vision
• Continued improvement of employee
engagement score
• Gender and ethnic diversity in senior
leadership roles to target 40% women
and 20% BAME by 2025
• Improve retention rates by continuing
to enhance benefit offering, deploying
a career banding framework and
improving overall employee experience
55%
Employee engagement
12
Mitie Group plc | Annual Report and Accounts 2021
Technology
Embed intelligent technology into the heart of our
offering, reduce cost to serve and lead the industry
in digital transformation and decarbonisation
Achievements
• Increased rollout of Security technology (GSOC and remote
monitoring) services to customer base with Mitie’s SOC
connected to customers, reducing alarm incidence by 98%
• Aria, Mozaic and digital monitoring have been key drivers in
IFM wins whilst customer retention rates increased to 98%
• Project Forte delivered £4.4m cost savings from efficiencies
and simplification
• Increased adoption of ESME chat box with 34 customers
using ESME
• 29% reduction in carbon emissions to 19,205 tonnes and
over 1,200 electric vehicles on the road, the largest pure
electric fleet in the UK
KPIs
Organic revenue growth, order book, NPS, employee
engagement, staff turnover, carbon emissions
Medium term vision
• Increase demand-led services using intelligent technology
(for example, remote monitoring sensors) to improve value
to customers, productivity and efficiency
• Completion of Project Forte to deliver increased technician
productivity, automated workforce management and improved
supply chain management
• Net zero carbon by 2025 for operational emissions
• Fleet fully electric by 2025 wherever technology available
34
customers using ESME
Cost
Strengthen our balance sheet and maintain
cost discipline to remain competitive
Achievements
• Operating profit before other items1,2 of £63.4m (FY20 £86.1m)
• Order book now stands at £7,202m (FY20 £4,294m)
• Strengthened balance sheet: £190m rights issue; £250m
RCF refinanced;
• Average daily net debt significantly reduced to £47.1m
(FY20 £327.6m) post-IFRS 16
KPIs
Organic revenue growth, Operating profit margin before other
items, basic EPS before other items, net debt/EBITDA ratio,
average daily net debt
Medium term vision
• Mid single digit revenue growth with operating profit
margin target of 4.5%-5.5%
• Achieve competitive excellence focusing on costs and
efficiencies
• Growth in free cash flow and ROIC
• Maintain net debt / EBITDA ratio (pre-IFRS 16) of below 1x
£47m
Average daily net debt
1 From continuing operations.
2 Other items are as described in Note 4 to the consolidated financial statements.
Mitie Group plc | Annual Report and Accounts 2021
13
Strategic reportGovernanceFinancial statements
Key performance indicators
Monitoring
our progress
Mitie’s key performance indicators (KPIs)
are reviewed by the Board to monitor
performance against the Group’s most
important priorities. These include measures
for evaluating financial and non-financial
performance balancing the interests of all our
stakeholders including customers, shareholders,
colleagues, and our local communities.
Our FY21 financial performance has been negatively impacted by the
COVID-19 (COVID) pandemic partially offset by the Rights Issue in
July 2020 and the acquisition of Interserve Facilities Management
(“Interserve”) which completed on 30 November 2020.
All financial KPIs have been reported including Interserve however
the non-financial KPIs are reported for Mitie excluding the Interserve
business. A detailed review of performance can be found within the
Chief Executive’s Strategic Review and the Finance Review sections
on pages 26 to 29.
Link to remuneration
Our strategic pillars
Customer: Build market-leading positions in
higher growth sectors, deliver best in class
customer services (as evidenced by industry
leading NPS) and focus on extending the lifetime
value of strategic clients
People: Create a ‘Great Place to Work’, be the
‘Employer of Choice’ generating social value and
be known as a leading ESG company
Technology: Embed intelligent technology into
the heart of our offering, reduce cost to serve
and lead the industry in digital transformation
and decarbonisation
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
14
Mitie Group plc | Annual Report and Accounts 2021
Financial KPIs
Organic revenue growth (£m)
from continuing operations
Description
Revenue growth from continuing operations reflects the health of the order
book, the ability to upsell and cross-sell, the pipeline of potential opportunities,
and win and retention rates alongside Mitie’s broader reputation in the sector.
A reconciliation of organic revenue growth from continuing operations to the
equivalent statutory measure for FY21 and FY20 is provided in Appendix –
Alternative Performance Measures on pages 211 to 213.
FY21
FY20
FY19
FY18
£1,995m
£2,002m
£2,006m
£1,894m
1.7%
CAGR over
three years
Our achievement
During the last four years Mitie has acquired Interserve, VSG and Global
Aware. Excluding all three acquisitions, organic revenue compound average
growth rate (CAGR) was 1.7%.
Order book (£m)
from continuing operations
Description
The reported order book includes only secured fixed-term contracted
work and excludes variable and project work. The order book reflects
Mitie’s success at retaining customers, upselling and winning new customers.
Improved customer service, increasing market share, alongside qualifications
on frameworks, are expected to lead to increases in the order book in the
medium term.
FY21
FY20
FY19
FY18
£7,202m
68%
increase from
previous year
£4,294m
£4,147m
£4,151m
Our achievement
Mitie’s order book for continuing operations increased by 68% primarily due to
the addition of the Interserve order book of £3,157m. Excluding this, the order
book was £249m lower than the prior year as a number of contracts that were
due to renew in FY21 were extended for between 12-18 months rather than
longer periods.
Customer renewal rates improved to 96% and customer win rates were 70%.
Operating profit margin before other items (%)
from continuing operations
Description
Operating profit margin reflects winning quality contracts and delivering
efficient, exceptional service. Profitability on contracts improves as the Group
enhances the efficiency of operations throughout the life of the contract.
Whilst the COVID pandemic and the acquisition of Interserve will result in
lower operating profit margins in the near term, Mitie’s goal is to achieve
margins of 4.5%-5.5% in the medium term.
A reconciliation of operating profit before other items from continuing
operations to the equivalent statutory measure for FY21 and FY20 is provided
in Appendix – Alternative Performance Measures on pages 211 to 213.
FY21
FY20
FY19
FY18
2.4%
1.6ppts
lower than the
previous year
4.0%
3.8%
3.9%
Our achievement
Operating margin reduced to 2.4%. This margin decline largely reflects the
addition of COVID-related revenue at lower margins in FY21 (supporting UK
Government contracts) and temporarily lost revenue from higher margin
variable and project works, combined with some higher margin contracts
completed in FY20.
Return on invested capital (%)
(ROIC)
Description
Return on invested capital (ROIC) is a measure of how efficiently the Group
utilises its invested capital to generate profits. ROIC is calculated as Operating
profit before other items and after tax from continuing operations divided by
invested capital.
The calculation of ROIC and a reconciliation of the Group’s net assets to
invested capital for FY21 and FY20 are provided in Appendix – Alternative
Performance Measures on pages 211 to 213
FY21
FY20
FY19
FY18
8.9%
24.2%
24.5%
32.7%
15.3ppts
reduction from
previous year
Our achievement
Return on invested capital was 8.9% as compared to 24.2% in FY20. The year
on year decline is primarily due to lower profitability in the year and significantly
higher invested capital as a result of the acquisition of Interserve.
Free cash flow (£m)
Description
Free cash flow represents how much cash we generate to re-invest in our
business for future growth or to deploy in other ways such as M&A and
dividends. The Group’s strategy focuses on delivering sustainable free cash flow
in the medium term.
A reconciliation of free cash flow to the equivalent statutory measure for
FY21 and FY20 is provided in Appendix – Alternative Performance Measures
on pages 211 to 213.
FY21
FY20
FY19
FY18
-24.5
-31.6
+30.5
+30.9
£55.0m
reduction from
previous year
Our achievement
Free cash outflow of £24.5m is as a result of the lower profitability when
compared to last year and the higher cash outflow from other items.
Basic EPS before other items (p)
from continuing operations
Description
Basic earnings per share before other items represents the profitability of the
Group. Improving earnings per share reflects the improving profitability of the
Group. The Group’s strategy focuses on creating value for shareholders and is
expected to improve EPS in the medium term with the Interserve acquisition
being EPS accretive after the first year of ownership.
A reconciliation of basic EPS before other items to the equivalent statutory
measure for FY21 and FY20 is provided in Appendix – Alternative
Performance Measures on pages 211 to 213. EPS for FY20 and earlier years
has been restated for the bonus element of the Rights Issue.
FY21
FY20
FY19
FY18
3.5p
57.8%
decline from
previous year
8.3p
7.6p
6.8p
Our achievement
Basic earnings per share before other items from continuing operations,
decreased by 57.8% to 3.5p (FY20 restated: 8.3p). This is as a result of the
lower profit before tax, driven by the lower operating profit noted above,
combined with a higher weighted average number of shares in issue following
the Rights Issue and shares issued as part of the acquisition of Interserve.
Mitie Group plc | Annual Report and Accounts 2021
15
Strategic reportGovernanceFinancial statements Key performance indicators continued
Monitoring our progress
continued
Covenant net debt/EBITDA ratio (x)
(pre-IFRS 16)
Description
Period end net debt/EBITDA ratio or leverage ratio is one of the two debt
covenants used to assess Mitie’s financial position. Calculated on a pre-IFRS16
basis, for the leverage covenant the ratio of net debt to EBITDA should be no
more than 3x. The other covenant ratio is interest cover (ratio of EBITDA to
net finance costs to be no less than 4x). Following the COVID-related
amendments agreed in June 2020, the covenant thresholds on these ratios vary
until September 2022. Mitie intends to keep the period end net debt/EBITDA
ratio below 1x excluding short term exceptional activity.
Covenant ratio calculations for FY21 and FY20 are provided in the Finance
Review on page 29.
<0x
FY21
FY20
FY19
FY18
0.7x
1.3x
2.0x
<0x
improvement from 0.7x
previous year
Our achievement
Mitie was operating with <0 leverage as at 31 March 2021 (FY20: 0.7x) as the
net proceeds from the Rights Issue strengthened the balance sheet.
Non-financial KPIs
Staff turnover
Description
Mitie measures the number of employees leaving voluntarily over a 12-month
period against overall headcount. The data is for Mitie prior to the acquisition
of Interserve.
FY21
FY20
FY19
FY18
15.4%
16.8%
19.7%
16.8%
1.4ppts
reduction from
previous year
Our achievement
Voluntary attrition has been a focus area for a number of years as Mitie strives
to become the ‘Employer of Choice’ in the FM industry. Exit interviews and the
annual engagement survey results inform our thinking and a number of
improvements have been deployed to increase colleague engagement and
loyalty during FY21. Our people give their best when we show them that we
care, that’s why we have deployed market leading new benefits including virtual
GP access for all colleagues and those in their household, life assurance for all
colleagues, salary advance (the ability to access pay before pay day) and, most
recently, the free share plan where free shares have been gifted to all
colleagues, focusing more shares on Mitie’s front line heroes.
Average daily net debt (£m)
(post-IFRS 16)
Description
Mitie’s balance sheet health is of paramount importance to the long-term
sustainability of its business. Average daily net debt reflects working capital and
bill-to-collect management. Over the medium term, Mitie will continue to
reduce average daily net debt through proactive cash management and reduce
the peaks/troughs to closing net debt.
FY21
FY20
47
328
£281m
improvement
from previous year
Data is not presented for FY19 and FY18, as the financials for these years
were prepared on a pre-IFRS 16 basis.
Our achievement
£190m of net proceeds were received from the Rights Issue and the Group
benefited from £166m of taxes deferred under the Time to Pay (TTP) scheme,
which were fully repaid by January 2021. Together, these two items improved
average net debt by c.£220m compared to FY20 with the remaining
improvement due to the underlying improvement in working capital. The
peak/trough to closing net debt has reduced to £160m from £240m.
Employee engagement (%)
Description
The Group’s success is underpinned by the way Mitie leads and engages with
its people. The Employee Engagement survey asks colleagues at Mitie how they
feel about working with the organisation, and what improvements could be
made. This is followed by the ‘You Said, We Did’ campaign to demonstrate
actions undertaken in response to feedback. Beyond the annual survey, senior
management meet employees throughout the year at roadshow conferences
across the UK and members of the Group Leadership Team go ‘back to the
floor’ to engage with frontline colleagues. The survey also contains the scores
of Interserve colleagues.
FY21
FY20
FY19
FY18
55%
46%
45%
9ppts
increase from
previous year
33%
Our achievement
Mitie’s employee engagement score of 55% is 9ppts ahead of the prior year
and reflects a score in line with the UK companies in the Services sector which
is a significant improvement on the prior year when Mitie was below average.
The improvement in the score is a reflection of the significant communications
to all our employees throughout the pandemic and our ability to reach all
75,000 employees.
16
Mitie Group plc | Annual Report and Accounts 2021
Net promoter score
(index)
Description
Customer net promoter score (NPS) continues to be an important metric
for Mitie in understanding a customer’s overall satisfaction with the quality of
services provided and a willingness to recommend our products and services
to others.
FY21
FY20
FY19
FY18
+50
+30
20point
increase from
previous year
+12
-10
Our achievement
Mitie’s overall NPS score for FY21 is up 20 points to +50, this is a
transformational move from the low base of -27 in FY17. From establishing
processes and baselines in year one, to triaging accounts and fixing the basics
during year two, years three and four have been the transformative years,
bringing new ideas, innovation, technology and implementing our SAM
programme. This has really made a difference to the overall satisfaction
of customers as evidenced in Mitie’s FY21 score.
Carbon emissions
(tonnes CO2e)
Description
In February 2020 Mitie set an ambitious, industry-leading pledge to reach net
zero operational carbon emissions by the end of the calendar year 2025 –
a full 25 years ahead of the UK Government’s 2050 target. Mitie will eliminate
carbon emissions from power and transport, eradicate non-sustainable waste
and enhance inefficient buildings to meet the highest environmental standards
FY21
FY20
FY19
19,205
27,072
28,912
29%
reduction from
previous year
Our achievement
Mitie’s electric fleet continues to develop, with over 1,200 electric vehicles
(EVs) on the road and more than 850 EV charge points installed at 31 March
2021, making Mitie the largest pure electric fleet in the UK based on publicly
available information. All electricity that Mitie buys for its operated sites is 100%
renewable. Energy optimisation surveys and infrastructure plans completed
across 15 largest Mitie sites.
Lost time injury frequency rate
(per million manhours worked)
Description
Mitie’s efforts to keep its people safe are of greatest importance and the
Group continues to focus on improving safety performance. Our injury rate is a
key measure to monitor our progress towards zero harm and includes all injury
severities, from first aid to fatality.
FY21
FY20
FY19
FY18
2.85
3.94
28%
reduction from
previous year
6.08
6.13
Our achievement
Mitie’s commitment to ensuring near misses and hazardous conditions are
reported has helped lower the number of injuries. It means potential accidents
are caught before things escalate, enabling risks to be mitigated.
Mitie Group plc | Annual Report and Accounts 2021
17
Strategic reportGovernanceFinancial statements Spotlight
Spotlight on our acquisition
of Interserve Facilities Management
The acquisition of Interserve Facilities Management accelerates the delivery
of our technology-led strategy, expanding our scale and footprint to create
the UK’s largest facilities management company. The combination of
these two businesses will transform our competitive positioning, unlock
significant growth opportunities for both our business and our colleagues
and strengthen our financial profile, better balancing our public and private
sector divisions and driving greater returns from the investments we have
made in technology, systems and customer service over the past three years.
Phil Bentley
Chief Executive Officer
4 November 2020
Strategic
pillar
Mitie
Strategy
Customer
People
Technology
Cost
Build market-leading
positions in higher growth
sectors, deliver best in class
customer NPS and focus on
extending the lifetime value
of strategic clients
Create a ‘Great Place
to Work’ and be the
‘Employer of Choice’
Embed technology into
the heart of our offering,
reduce cost to serve and
lead the industry in digital
transformation
Long-term profitable growth,
with sustainable positive
cashflow and a strong,
flexible balance sheet
Strategic
rationale for
acquisition
Enhances competitive
positioning with customers
balancing public/private
sectors
Unlocks significant growth
through Strategic Account
Management and developing
our people
Leverages technology to
deliver Digital Transformation
and improved service
Generates cost synergies
Increases free cash flow, margin
and balance sheet strength
Integration
progress in
FY21
• All major contracts
renewed or extended
• Launched Mitie First to
increase self-delivery
• Cross-selling opportunities
identified for Landscapes
and Waste with £1.2m
delivered in FY21
• All transferring colleagues
offered life assurance,
access to virtual GP
Service and Mitie’s
Employee Assistance
Programme.
• Phased move of
transferring colleagues to
Mitie’s suite of HR systems
and in-house payroll
underway with the first of
4 cohorts successfully
transitioned with 93%
agreeing the transition
went smoothly.
• Roll out of Mitie laptops
• Synergy identification and
to transferring colleagues
underway
• Cyber enhancement
projects progressing well
• CAFM “Lift and Shift” on
track for completion in
May, with the migration of
email, SharePoint data, and
file shares due to complete
by June 2021
• Transition from Interserve
ERP System, AX12, to
Mitie’s SAP environment
progressing at pace
• Piloting 2 customers with
Aria/Esme and 7 customers
Mozaic dashboards
configuration underway
realisation has been
accelerated within year
FY21 incremental saving of
£6.2m across headcount
and procurement
• Significant progress made
on negotiations with
Supply Chain partners
• Supplier payments,
customer invoices and cash
collection continue in line
with forecasts and year to
date averages
• 5 properties exited with a
further 5 identified for exit
18
Mitie Group plc | Annual Report and Accounts 2021
Chief Executive’s strategic review
Strengthening
the business in a
challenging market
—
£2,139m
Revenue excluding
Interserve1
—
£7,202m
Order book
—
+50
Net promoter score
—
55%
Employee engagement
1 From continuing operations.
FY21 was a defining year for
Mitie and completes our four
year transformation. The Group
showed great resilience during
the COVID pandemic; we
strengthened our balance sheet;
and the Interserve acquisition
is performing well. Mitie is now
the market leading provider
of intelligent technology-led
facilities management, with a
clear pathway to deliver growth
and sustainable free cash flow.
Phil Bentley
Chief Executive Officer
Mitie’s strategic transformation
Mitie has been transformed over the last four years. Our focus on
delivering great service, delivered cost-efficiently by great people, and
backed by our technology, has resulted in our highest ever customer
Net Promoter Score (NPS) of +50ppts and all-time high contract
renewal rates of 96%, complemented by significant new customer wins.
Mitie’s strategy has been based around the four pillars of Customer,
People, Technology and Balance Sheet/Cost. We are focused on
becoming the market leader in the three core facilities management
services of Cleaning, Security and Technical Services and achieving
a best-in-class customer NPS. The acquisition of Interserve on
30 November 2020 has bolstered Mitie’s Public Sector standing,
gaining leadership positions across Central Government and Defence,
Healthcare and critical infrastructure.
Customer
Reflecting our focus on putting our customers at the heart of our
business, Mitie’s NPS has increased to +50ppts from -27ppts four years
ago. This is largely due to the introduction of award-winning marketing
campaigns and Strategic Account Managers (SAMs) empowered to
deliver exceptional customer service, backed by leading technology.
The creation of SAM accounts has also supported an increase in
cross-selling and upselling, benefiting revenue growth.
Mitie Group plc | Annual Report and Accounts 2021
19
Strategic reportGovernanceFinancial statements
Chief Executive’s strategic review continued
People
Four years ago Mitie set out to create a ‘Great place to work’ and
to be the ‘Employer of choice’ in the facilities management industry.
Significant progress has been made on both counts with our Employee
Engagement score increasing from 33% to 55% and employee retention
rates significantly improving. We have continued to invest in our
colleagues, whether it be through an additional day’s holiday for our
front-line, an enhanced benefits package including Salary Finance, life
assurance, a Virtual GP service, or learning and development to help
colleagues build on their skills. Uniquely all Mitie colleagues have been
granted free shares and will therefore share in the value they are helping
to create. All Mitie benefits were put in place for Interserve colleagues
from 1 December 2020.
Technology
A third strategic imperative was to embed technology to differentiate
Mitie’s offering across all service lines. The Group now has an advanced
cyber-resilient, cloud-based IT platform to run the business, largely
automating our systems supporting workforce management
(Workplace+); workflow management systems (Forté); our HR/payroll
processes (SAP Success Factors); and our back-office finance and
procurement processes. COVID-19 has highlighted the strength of
Mitie’s technology. Digital Workplace and Monitoring have allowed
customers to manage their building capacity, utilise cleaning more
efficiently and keep buildings secure during periods of closure or
semi-occupation. There are now 34 customers automatically served by
‘chatbots’ and 94 customers receiving real time management information
(MI). Mitie leads the industry in cyber resiliency. Straight-through
processing in HR and Finance have advanced considerably. The roll
out of Mitie technology to Interserve customers is a priority, with
26 customers expected to move onto our chatbot or MI platforms,
with half due to be delivered between now and September. This is a
key driver to improve Interserve customers’ NPS.
Balance Sheet/Cost
The fourth element of our strategy was to strengthen our balance sheet
and reduce costs. Our balance sheet today is significantly stronger with
net assets of £362m at 31 March 2021, compared to £81m at the prior
year end, with sustainable leverage of less than 1x our EBITDA and a
significant reduction in off balance sheet financing. £45m total savings
were achieved from Project Helix (IT/Finance/HR/Management) and
reinvested for long-term growth in SAMs, sales and marketing,
modernising IT and investment in technology. Project Forté is expected
to deliver net savings of £15-20m as it seeks to drive efficiency and
productivity across Technical Services. The experience gained from
rolling out WorkPlace Plus and Forté, as well as from the integration of
VSG in 2019, will help to deliver a successful integration of Interserve.
COVID-19
Mitie has provided critical and essential support to customers and to
the wider British public during the pandemic through its delivery of
additional security and specialist cleaning services, mobilising three
Nightingale Hospitals and standing up over 200 COVID-19 testing
centres. Mitie has played an important role keeping Britain working
during the pandemic, although profitability has been impacted from the
reduced demand for core facilities management, and the drop off in
variable project and discretionary work. Customers have also delayed
procurement decisions and offered short-term extensions for contracts
which would normally have renewed for a longer period, thus resulting
in a slightly reduced order book.
Mitie established three overriding priorities in response to the COVID-19
crisis: protecting the health and safety of colleagues, customers, and the
communities that Mitie serves; ensuring the Group could continue to
operate and deliver essential services to customers; and finally, preserving
financial strength through cost saving initiatives, delaying certain tax
payments and utilising the Coronavirus Job Retention Scheme.
Pay rises for staff were deferred and the Board took voluntary pay cuts
of up to 30% to preserve cash.
As trading performance improved in the second half of FY21, the
financial benefits offered by Government were repaid, including HMRC’s
‘Time to Pay’ initiative and those furlough payments relating to colleagues
employed directly at Mitie’s own operations.
Outlook
Although the world of work in a post-COVID-19 environment is
changing, Mitie’s investments in customer-facing technology, as well as in
the efficiencies by which we manage our ‘workflow’ and our ‘workforce’
– collectively what we call ‘The Science of Service’ – positions Mitie
well to prosper from its industry-leading NPS and E-ENG scores, with
good performance in retention and new business wins. New working
environments require improved standards of assurance and monitoring
with employee well-being at their heart. This plays to Mitie’s strategy of
building leading technical skills at its Cleaning, Security and Technical
Services’ Centres of Excellence.
As businesses slowly start to reopen and our customers’ employees
return to offices, we are starting to see some green shoots of recovery
in the variable project and discretionary spend works and we anticipate
this continuing as re-occupation plans solidify. With some high-quality
new contract wins, short-term support to the public sector and
additional synergies from the integration of Interserve, we now
anticipate FY22 will be materially ahead of our prior expectations.
The transformation of Mitie and the acquisition of Interserve has created
a strong base from which Mitie is well positioned to prosper. Our new
strategy will focus on increasing growth, margin enhancement and cash
generation. The new Mitie will target, over the medium term, mid single
digit revenue growth, margins of 4.5-5.5%, sustainable free cash flow and
ROIC in excess of 20%.
20
Mitie Group plc | Annual Report and Accounts 2021
Financial performance
Revenue
Revenue, including share of joint ventures and associates, from continuing
operations and, including a four-month contribution from Interserve,
was £2,589m, an increase of 19.1% compared to the prior year. Excluding
the contribution from Interserve, revenue was £2,139m, 1.6% lower than
the prior last year as variable and discretionary projects declined due to
building closures or lower occupancy.
Revenue growth in the second half of the year, excluding the
contribution from Interserve, was 6.5% (H1 decline of 9.8%) as a result
of a stronger performance from Technical Services – where projects and
variable works saw an uplift in demand – combined with a very strong
final quarter of the year from Business Services.
Operating profit
Operating profit from continuing operations, before other items was
£63.4m (FY20 £86.1m), 26% lower than the prior year as the additional
profit from contract wins, inclusion of Interserve and associated
£6.2m of synergies was more than offset by the impact of COVID-19 on
trading, the ending of certain profitable contracts in the prior year and
the reinstatement of incentives and share based payments (which were
waived last year to preserve our financial strength). Operating margin
reduced to 2.4% (FY20 4.0%). This margin decline largely reflects the
lower margin mix of revenues related to contracts supporting the
Government’s fight against COVID-19, lost revenue from higher margin
variable and project works and the higher margin contracts which
ended in FY20. Further margin declines were mitigated by tight
cost management.
Cost management
Managing costs and improving operational efficiency remains an
important focus and whilst the short-term pay cut measures of up to
30% taken in the early months of the COVID-19 pandemic have been
reversed, the opportunity to remove costs through property portfolio
rationalisation, procurement controls and our fixed cost base – including
the creation of a single management team in Cleaning and Security – all
resulted in cost savings. Project Forté is making good progress, with
additional savings delivered in FY21, and is on track to go live in
December 2021.
Order book
The order book, as at 31 March 2021, was £7,202m, including £3,157m
from Interserve. Across the industry, many contracts due to renew in
FY21 were extended temporarily, reducing the number of new, longer
term opportunities. However, overall win rates were at 70%, the highest
level in the last four years, with retenders and extensions at 96%.
Whilst sales activity is picking up it continues to be lower than
pre-COVID-19 levels. Mitie has won or renewed contracts worth
c.£1.3bn, with Business Services winning or renewing £720m and
Technical Services winning or renewing £427m. New wins included
Magnox, MBNA, Marks & Spencer, East & North Hertfordshire NHS
Trust, Essex County Council, Department of Health and Social Care,
Co-Op and Cornerstone. New contract extensions from longstanding
clients such as Rolls Royce, Linklaters, Deloitte, Tesco and the Scottish
Government helped our renewal rates.
The majority of the Interserve order book relates to the Communities
division, where longer contracts (average 15 years) are prevalent. All the
major Interserve contracts that came up for renewal in the four-month
period under Mitie have been renewed or extended.
Integration of Interserve Facilities Management
Mitie acquired Interserve on 30 November 2020 and the integration has
been proceeding smoothly and at pace with the early delivery of £6.2m
cost and revenue synergies from headcount reductions, procurement
savings and offices which were closed before the end of FY21.
Total cost synergies are now expected to be £42m (previously £35m)
to be delivered by end FY23 and for the same costs to achieve of
£33.4m as originally identified. Additional synergies have been identified
across headcount, additional property exits and further procurement
savings. To drive revenue synergies a ‘Mitie First’ policy was implemented
to increase self-delivery particularly in Fire & Security, Landscapes
and Waste.
All transferred Interserve colleagues received access to Life Assurance,
Virtual GP Service and Mitie’s Employee Assistance Programme from
1 December. Two cohorts of ex-Interserve employees have already
been migrated to Mitie’s HR and payroll systems providing access to
additional benefits, such as the employee discount site and Salary
Finance. The remaining transferring Interserve colleagues will be
transitioned by October.
Five transferring Interserve properties have been exited with leases
ending or being made onerous and a further two Mitie properties have
been exited through the integration property rationalisation. Two
further properties have been identified for closure within the next six
months. Ingenuity House will be exited and replaced with a smaller
Midlands hub by November.
Technology integration has made excellent progress with key deliverables
including; the roll out of Mitie laptops; Microsoft Teams roll out to all
Central Government & Defence customer support teams; completion
of a number of Cyber enhancement projects; and the transition from the
Interserve ERP system AX12 to Mitie’s SAP environment. For the roll
out of customer-facing technology, 26 former Interserve customers have
been prioritised. The ‘Mozaic’ MI dashboard is being configured with the
first customers live in July and ‘Aria’ and ‘Esme’ is being piloted for
2 customers. Proactive engagement with customers is ongoing around
Connected Engineer, Digital Maintenance and Monitoring as a Service.
As technology integration progresses, elements of the transitional IT
support provided by Interserve Group Ltd have been exited, with the
remainder to be terminated on schedule by the end of November.
From 1 April 2021 all contracts previously managed under the Interserve
Business & Industry division have been moved to Technical Services or
Business Services thus allowing the B&I management team to be exited.
CG&D will operate as a standalone division, as will the Communities
division which now includes all the PFI and Healthcare contracts formerly
within Mitie. Mitie will report in line with the new divisional structure for
the first six months of FY22 in November 2021.
Since taking over Interserve it is clear that there is greater opportunity
to create value through additional cost and revenue synergies than first
thought. Whilst there remains considerable work to be done, we are
optimistic that there is significant additional value to be gained over the
next three years. To align the senior leadership team with delivering
greater benefits from the acquisition and to incentivise accelerated
delivery of shareholder value, the Board intends to seek approval for a
one-off conditional share award (Enhanced Delivery Plan) at this year’s
Annual General Meeting. The award will only crystallise with the delivery
of superior returns on invested capital and exceptional cost and revenue
synergies measured over three years.
Phil Bentley
Chief Executive Officer
Mitie Group plc | Annual Report and Accounts 2021
21
Strategic reportGovernanceFinancial statements Operational performance
Working with customers to keep their workspaces safe, clean and
operating during the COVID-19 pandemic has been the priority.
COVID-19 has accelerated the demand for Mitie’s intelligent technology
solutions in Cleaning and Security as the transition to remote working
and flexible office occupation is managed alongside creating a safe and
secure environment.
Financial performance
Business Services increased revenue by 9.9% to £1,085.0m (FY20
£986.9m), boosted by a 17.9% increase in the second half compared
with the second half of the prior year. Whilst work supporting the
UK Government in testing centres was the primary factor, the division
also secured a number of new contract wins. Office Services reported
a decline in revenue of 20.3% with a slightly better second half
performance, influenced largely by the aviation sector in the Vetting
(Procius) business.
Operating profit before other items was up by 17.1% to £49.4m
(FY20 £42.2m) reflecting both increased sales and the benefits of
combining the Cleaning and Security management teams. Despite
adding lower margin COVID related revenues, margin increased to
4.6% (FY20 4.3%) due to an increase in higher margin specialist cleaning.
Business Services has won, renewed or extended £720m of contracts
this year including Co-Op, East & North Hertfordshire NHS Trust,
Hogan Lovells International, and North West Anglia NHS Foundation
Trust. Key retentions in the period included Heathrow Airport, Kellogg’s
and the Scottish Government.
Business Services has started FY22 strongly with a number of new or
expanded COVID-19 contracts being mobilised from June. New contract
wins with Associated British Ports and Amazon alongside contract
renewals from existing key customers, including Co-Op, Heathrow
Airport, Network Rail and SSE, will all contribute to a strong divisional
performance in FY22.
Operating review
Our divisional
performance
Business Services
£m
Revenue
Cleaning
Security
Office Services1
Operating profit
before other items
Operating profit margin
before other items, %
Order book
FY21
1,085.0
349.5
668.8
66.7
FY20
986.9
340.5
562.7
83.7
Change, %
9.9%
2.6%
18.9%
(20.3)%
49.4
42.2
17.1%
4.6%
1,633
4.3%
1,835
0.3ppt
(11.0)%
10.3%
Number of employees
37,858
34,321
1 Office Services comprises Document Management, Vetting and Front
of House
Performance highlights
• Revenue growth of 9.9% as a result of new Government
contracts from DHSC and HMRC and the demand for
additional hygiene services
• Single management team for Cleaning and Security delivered
cost savings and productivity improvements contributing to
margin improvement to 4.6%
• £720m worth of new, renewed or extended contracts
• Net promoter score of +47 (FY20 +28)
• 4,725 additional employees joined during the pandemic
Business Services
The Business Services division keeps some of the UK’s biggest companies
and most iconic buildings secure and clean across a variety of diverse
sectors, including transport and aviation, retail and distribution, government
and public sector, critical national infrastructure and manufacturing.
Security encompasses manned guarding and technology-backed
monitoring solutions, together with fire and security systems installations.
Cleaning focuses on general, specialist and technical cleaning services that
include clean rooms, high-security environments and window cleaning.
Office Services comprises Document Management, Vetting (Procius) and
Front of House.
22
Mitie Group plc | Annual Report and Accounts 2021
Project Forté is a complex project focused on re-engineering Technical
Services’ workflow processes. The Project continues to make good
progress and we remain confident of a ‘Go Live’ in December 2021. In
FY21 Project Forté has delivered £4.4m of benefits, £1.3m ahead of
schedule, and remains on budget and on track to deliver a £15-20m net
benefit by FY23.
The sector focused approach has continued to deliver new customer
wins and, with a renewals rate of 99%, £427m has been added to the
order book. Although many bids were delayed due to COVID-19, new
deals were secured with key customers such as Magnox, QBE Insurance,
MBNA, Bravissimo and Hain Daniels. Mitie Energy has delivered £72m in
renewable projects and services including installing ground source heat
pumps at one of our largest clients.
Financial performance
Technical Services reported revenue of £820.7m, a decrease of 13.4%
in the year (FY20 £947.2m). Excluding the contracts which ended in
FY20 (MOJ and a portion of NHS Properties), revenue decline was 8%.
The broader economic impact from the pandemic was manifested in
reduced office occupancy and retail footfall with significant reductions in
the travel, automotive and leisure sectors. Performance in the second
half reflected some improvement as customers increased spend on
getting ‘Back to Business’.
Operating profit before other items decreased by 52.8% to £26.4m
(FY20: £55.9m). This is primarily due to the impact of COVID-19 on
higher margin discretionary spend works and engineering projects, and
contracts which ended in FY20. Technical Services was quick to respond
with a 17% reduction year on year in overheads including headcount,
overtime and property reductions. The benefits from these actions, and
a contribution from better supply chain rates, resulted in an improved
second half performance. Operating profit margin for the second
half was 3.9%, resulting in a full year operating profit margin of 3.2%
(FY20 5.9%).
Technical Services has started to see some early signs of a recovery in
variable project and discretionary spend works as businesses slowly start
to reopen and our customers’ employees return to offices. We anticipate
this continuing as re-occupation plans solidify. This, in combination with
some quality new wins and renewals, including the Scottish Government,
make for an encouraging start to FY22.
Technical Services
£m
Revenue
Maintenance
Engineering Projects
Operating profit
before other items
Operating profit margin
before other items, %
Order book
Number of employees
FY21
820.7
697.0
123.7
FY20
947.2
789.7
157.5
Change, %
(13.4)%
(11.7)%
(21.5)%
26.4
55.9
(52.8)%
3.2%
1,884
8,162
5.9%
1,914
9,102
(2.7)ppt
(1.6)%
(10.3)%
Performance highlights
• Strong retention rate of 99% throughout a challenging year and
extended key relationships with a number of top customers
• Productivity improved with jobs per day up 13%; self-delivery
increased to 87% (FY20 84%)
• Project Forté delivered £4.4m of savings, £1.3m ahead of
expectations, through the early introduction of supply chain
management, RPA technologies and call centre efficiencies
• £427m worth of new, renewed or extended contracts
• Delivered £72m in renewable projects and services
(FY20 £81m)
• Net promoter score increased to +51, a record high (FY20 +31)
Technical Services
Mitie’s Technical Services division provides the full range of key
technology-backed engineering, maintenance, repair and M&E project
activities, energy, carbon and water management services, air
conditioning/disinfection solutions and digital workplace services.
Project Forté is further differentiating Technical Services into one
of the industry’s leading providers of engineering services.
Operational performance
Mitie responded quickly to the challenge of COVID-19 and worked to
renegotiate contracts and repurpose team members to support
customers in a flexible manner.
During COVID-19, Mitie’s technology ensured customers’ buildings were
safely maintained during long periods of closure. The remote monitoring
platform monitored 125% more data points (desk sensors, room
sensors) compared to the prior year. On five key contracts where Mitie
deployed Monitoring as a Service, c.7,000 call outs / jobs were avoided,
representing a reduction of 16% in the total jobs in the period for those
contracts, reducing cost and carbon emissions and minimising onsite risk
from COVID-19.
Mitie’s Digital Workplace platform has supported customers to safely
manage their workspace through the booking of desks and meeting
rooms, and monitoring the occupancy and CO2 changes to support a
safe return to work. Our Luxibel UVC air purification product has been
installed at four customers.
Mitie Group plc | Annual Report and Accounts 2021
23
Strategic reportGovernanceFinancial statements Landscapes revenue increased by 5.0% to £50.2m (FY20 £47.8m) as
growth returned strongly in the final quarter of the year. Operating
profit before other items was slightly lower at £8.4m (FY20 £8.6m) as
a result of higher costs relating to winter services, partially offset by cost
savings. Landscapes has renewed its two largest customer contracts and,
as part of a broader Mitie bundled offering secured £10.4m of new work.
Waste revenue decreased by 8.6% to £74.6m (FY20 £81.6m), as volumes
reduced due to lower occupancy or footfall in travel, industrial, financial
and commercial sectors. Revenue has also reduced due to operational
efficiencies being passed back on the NHS clinical waste contract, offset
by additional work for waste removal at our Testing Centres and
Nightingale Hospitals. Operating profit before other items has fallen by
25.6% to £6.7m (FY20 £9.0m) with an operating profit margin of 9.0%
(FY20 11.0%) as profitability declines were partially offset by savings from
headcount reductions.
FY22 has started well as Landscapes and Waste benefit from businesses
slowly starting to reopen and our customers’ employees returning to
offices. Care & Custody has continued to see growth from Police
Healthcare services and a small increase in detention escorting services.
Operating review continued
Our divisional performance
continued
Specialist Services
£m
Revenue
Care & Custody
Landscapes
Waste
Operating profit
before other items
Operating profit margin
before other items, %
Order book
Number of employees
FY21
233.6
108.8
50.2
74.6
FY20
239.6
110.2
47.8
81.6
Change, %
(2.5)%
(1.3)%
5.0%
(8.6)%
22.5
25.3
(11.1)%
9.6%
528
3,058
10.6%
545
2,977
(1.0)ppt
(3.1)%
2.7%
Performance highlights
• During the year Care & Custody won a new contract at
Hassockfield IRC
• Waste was successful in being added to two additional
framework agreements for NHS Trusts to support future
revenue growth
• Landscapes renewed its two largest customer contracts JLL
and CBRE
Specialist Services
Care & Custody, Landscapes and Waste Management businesses are
aggregated and categorised as Specialist Services, as these fall outside the
traditional FM offering of ‘Hard’ and ‘Soft’ services. They are generally
higher growth businesses with operating profit margins above the
Group’s average.
Care & Custody provides high-quality, critical public services in
immigration, criminal justice and healthcare. Landscapes is a top five
UK provider of landscaping, focused on both horticultural and winter
services. Mitie Waste is a leading national waste management business
providing innovative waste reduction and treatment solutions.
Specialist Services revenue declined 2.5% to £233.6m (FY20 £239.6m)
with operating profit of £22.5m, 11.1% below the prior year (FY20
£25.3m), and operating profit margin of 9.6% (FY20 10.6%).
Care & Custody’s revenue declined to £108.8m (FY20 £110.2m).
A reduction in variable escorting services activity and the closure of
the Campsfield Immigration Removal Centre in FY20 were largely
offset by the continued growth in revenue from Police services.
Operational improvements have continued through the integration of
Care & Custody’s Workforce IT system with the bespoke detention and
escorting ‘MEDS’ case management system. Cost reductions have been
achieved as IT developments have enabled Care & Custody to reduce
the number of call handlers and to consolidate the Police Health Control
Centre activity into a single office. Operating profit before other items
and operating profit margin were both slightly reduced to £7.4m
(FY20 £7.7m) and 6.8% (FY20 7.0%).
24
Mitie Group plc | Annual Report and Accounts 2021
Financial highlights
Revenue of £450.0m for the four months to 31 March 2021 was an
improvement on the comparative period last year due to additional
COVID-19 and non-COVID-19 project works in CG&D and extra
COVID-19 related work in the Communities Healthcare portfolio.
However, this was offset by COVID related downsides due to site access
restrictions impacting catering and parking in Communities, and shopping
centres in B&I in particular.
Operating profit before other items for the four-month period was
£13.3m and includes £3m upside from Interserve’s share of synergies,
largely relating to headcount reductions. Profitability benefited from
additional project works towards the end of the year which, when
combined with the synergies, delivered an operating profit margin
of 3.0%.
Following the strong fourth quarter of FY21, FY22 has started well
for CG&D with the continued pick up in project work. Interserve has
renewed or extended a further 13 contracts, with all divisions reflecting
a promising start to FY22.
Corporate overheads
Corporate overheads represent the costs of running the Group and
include costs for the head office commercial and business development,
financial, marketing, legal and HR teams. Corporate overhead costs
have increased to £48.2m in the year (FY20 £37.3m). The increase
includes the additional costs incurred in providing all staff with Personal
Protective Equipment (PPE) and making properties COVID-19
compliant, the repayment of £4.1m of furlough monies, and the
re-instatement of management incentives, which were put on hold
last year due to COVID-19.
Interserve Facilities
Management
£m
Revenue inc. share of JV&A
CG&D
Communities
Business & Industry (B&I)
Operating profit before other items
Operating profit margin before other items, %
Order book
Number of employees
FY21
450.0
230.4
95.8
123.8
13.3
3.0%
3,157
25,287
Performance highlights
• Strong performance from CG&D in the UK with increased
projects in the final quarter
• Early delivery of synergies of £3m contributed to £13.3m
operating profit
• Three new contract wins and 10 renewals or extensions
• Project works won across schools and hospitals, including at
King George’s Hospital, Ilford
Interserve Facilities Management
Interserve was acquired by Mitie on 30 November 2020 and contributed
four months of trading from 1 December 2020 to 31 March 2021 to
Mitie’s FY21 results. During this period, Interserve operated through
three principal business divisions: Central Government & Defence
(“CG&D”) which provides facilities management services to central
government departments in the United Kingdom and Europe, and the
Ministry of Defence in the United Kingdom and overseas; Communities
which provides services to devolved public sector customers, with a
focus on community environments in healthcare, schools and universities,
emergency services, and local authorities; and Business & Industry
(“B&I”) which provides services to private sector and other customers,
including regulated businesses, shopping centres, transport providers and
manufacturing and industrial companies.
Operational performance
Since the acquisition focus has been on the early delivery of synergies,
contract wins and renewals, and improving customer service. Interserve
employees are in the process of transferring onto Mitie’s payroll and HR
systems, and strategic account managers are being trained in the Mitie
SAM Programme to improve cross-selling and upselling capabilities.
Customer relationships are largely positive with 10 renewals or
extensions in the four-month period. In addition, Communities won
its first new contract under the Mitie brand with East and North
Hertfordshire NHS Trust awarding a soft services contract for 10 years.
Early customer feedback recognises the benefits that the introduction
of Mitie’s technology will bring, alongside enhanced data quality and
operational excellence.
Mitie Group plc | Annual Report and Accounts 2021
25
Strategic reportGovernanceFinancial statements Finance review
We are continuing to
simplify our business
and de-lever our
balance sheet.
—
£47.1m
Average daily net debt
—
£362m
Net assets
—
£86.7m
Closing net debt
—
8.9%
Return on invested capital
26
Mitie Group plc | Annual Report and Accounts 2021
Although COVID has challenged
us all, our business has been
far more resilient than we
originally expected.
Simon Kirkpatrick
Chief Financial Officer
Alternative Performance Measures
The Group presents its results as those of continuing operations, before
other items. Management believes this is useful for users of the financial
statements, providing both a balanced view of the financial statements,
and relevant information on the Group’s underlying financial
performance. Accordingly, the Group separately reports impairment
of goodwill, cost of restructuring programmes, acquisition and disposal
related costs (including the impairment and amortisation of acquisition
related intangible assets), gains or losses on business disposals and other
exceptional items as ‘Other Items’.
Financial performance
The reported Income Statement from continuing operations is set
out below:
Continuing operations,
£m unless otherwise specified
Revenue including share of joint ventures
and associates
Group revenue
Operating profit before other items
Other items
Operating profit
Net finance costs
Tax
(Loss)/profit after tax
Basic earnings per share before other items1
Basic (loss)/earnings per share1
FY21
FY20
2,589
2,560
63.4
(55.1)
8.3
(17.4)
(1.0)
(10.1)
3.5p
(0.9)p
2,174
2,174
86.1
(21.5)
64.6
(16.2)
(7.9)
40.5
8.3p
5.8p
1 Earnings per share for FY20 have been restated for the bonus element of the
FY21 rights issue.
Revenue
Revenue from continuing operations of £2,589m, including share of
revenue from joint ventures and associates, and including a four-month
contribution from Interserve, represented an increase of 19.1% when
compared to the prior year. Excluding the contribution from Interserve,
revenue was £2,139m, 1.6% lower than the prior year. Group revenue
from continuing operations (which excludes revenue from joint ventures
and associates) increased 17.8% to £2,560m, also including the
post-acquisition contribution from Interserve.
Operating profit
Operating profit from continuing operations before other items was
£63.4m (FY20: £86.1m), which was 26.4% lower than the prior year as
the additional profit from contract wins and the four-month contribution
from Interserve, including the associated £6.2m of synergies, was more
than offset by the COVID impact on trading, completed contracts, the
reinstatement of incentive payments and an increase in share-based
payments. Operating margin reduced to 2.4% (FY20: 4.0%), largely
reflecting the addition of COVID-related revenue at lower margins
(supporting UK Government contracts) and temporarily lost revenue
from higher margin variable and project works, combined with some
higher margin contracts completed in FY20.
Operating profit was £8.3m, reflecting the additional impact of other
items for the year.
Government support
The Group took advantage of UK Government support offered under
the Time to Pay (TTP) scheme, allowing Mitie to defer payment of
£133.2m of tax (PAYE and VAT) which would have been due in the
period April to June 2020. Together with the £33.0m deferred in March
2020, the total amount deferred by Mitie under TTP was £166.2m.
These deferred taxes were repaid in instalments, with the final payment
made in January 2021, earlier than the April 2021 deadline. In addition,
Interserve held an £18.5m deferred payment balance under TTP on
the balance sheet at the date of the acquisition, which was repaid in
December 2020, bringing the net repayment during the year to £51.5m.
During the year the Group made use of the Government’s Coronavirus
Job Retention Scheme. The Group has subsequently repaid £4.1m to the
Government relating to furloughed colleagues employed directly at
Mitie’s own operations2.
Other items
Other items, £m
Interserve acquisition related costs
Interserve integration costs
Interserve amortisation of acquisition related intangible assets
Sub-total – Interserve related other items
Project Forté
Property transformation
Amortisation of non-Interserve acquisition related
intangible assets
Other acquisition and disposal related costs
Other
Sub-total – Non-Interserve related other items
Total other items from continuing operations
before tax
Other items from discontinued operations
Total other items before tax
Tax
Total other items after tax
FY21
(14.8)
(8.8)
(6.7)
(30.3)
(10.6)
(11.3)
(2.2)
(0.6)
(0.1)
(24.8)
(55.1)
3.2
(51.9)
7.1
(44.8)
Other items in FY21 resulted from the Group’s ongoing transformation
and M&A activity, which includes Project Forté, the property
transformation programme, and the costs associated with the Interserve
acquisition and integration.
The acquisition and integration of Interserve is significant in terms of
both size and complexity, and the costs incurred reflect this. The
acquisition related costs largely relate to the one-off professional fees
for the transaction, whereas the integration costs primarily relate to the
resources being deployed to implement integration and redundancies.
The amortisation charge of £6.7m relates to the reduction in the
intangible asset value of the acquired customer contracts and
relationships, reflecting the passage of time towards the contracts’
forecast expiry dates.
The total cost before tax of the Group’s other transformation activity
was £24.8m, of which £10.6m related to Project Forté. Project Forté
is focused on re-engineering Technical Services’ workflow processes.
A further £11.3m related to the Group-wide property portfolio
rationalisation, including impairments to right-of-use leased assets and
provisions associated with related onerous contracts. This reflects the
closure of seven offices.
The amortisation of non-Interserve acquisition related intangible assets
is primarily associated with Vision Security Group, which was acquired in
FY19, and Other Items relating to discontinued operations includes the
partial release of provisions relating to the disposal of the Social Housing
business, which are no longer required.
Net finance costs
Net finance costs were £17.4m (FY20: £16.2m), an increase of 7.4%
compared to the prior year. The increased costs were principally driven
by debt arrangement and amendment fees associated with the June 2020
refinancing and the securing of a relaxation of covenant thresholds until
September 2022 (as discussed below).
Tax
Profit before other items and tax of £46.0m from continuing operations
(FY20: £69.9m) resulted in a tax charge of £8.5m (FY20: £11.9m),
representing an effective tax rate of 18.5% (FY20: 17.0%). Including other
items, the tax charge for continuing operations was £1.0m (FY20: £7.9m).
Mitie is a significant contributor of revenues to the UK Exchequer,
paying £640.0m in the year (FY20: £504.9m). Of this total, £116.6m
relates to taxes borne by Mitie (principally employer’s National Insurance
contributions) and £523.4m relates to taxes collected by Mitie on behalf
of the UK Exchequer (principally VAT, income tax under PAYE and
employees’ National Insurance contributions).
Joint ventures and associates
Operating profit includes Mitie’s share of the results net of tax of joint
ventures and associates that were acquired as part of the Interserve
transaction. £1.9m was reported within operating profit before other
items and a charge of £1.2m for amortisation of acquired intangible
assets was reported within other items.
Earnings per share
Basic earnings per share before other items from continuing operations,
decreased by 57.8% to 3.5p (FY20 restated: 8.3p). This is as a result of
the lower profit before tax, driven by the lower operating profit noted
above, combined with a higher weighted average number of shares in
issue following the rights issue and shares issued as part of the acquisition
of Interserve. Earnings per share for FY20 has been restated for the
bonus element of the FY21 rights issue.
Basic earnings per share was (0.9)p (FY20 restated: 5.8p), with the
reduction reflecting the factors outlined above, plus the impact of a
higher level of other items in FY21.
2 Further details can be found in Note 7 to the consolidated financial statements.
Mitie Group plc | Annual Report and Accounts 2021
27
Strategic reportGovernanceFinancial statements Finance review continued
Balance sheet
£m
Goodwill and intangible assets
Property, plant and equipment
Interest in joint ventures and associates
Working capital balances1
Provisions
Net debt1
Net retirement benefit liabilities
Deferred tax
Other net assets
Total net assets
FY21
548.4
117.9
11.0
(165.7)
(116.4)
(86.7)
(42.5)
19.8
76.0
361.8
Restated1
FY20
329.5
110.8
–
(137.7)
(53.2)
(153.0)
(46.7)
29.7
1.1
80.5
Retirement benefit schemes
Net retirement benefit liabilities have reduced to £42.5m, compared
with £46.7m at 31 March 2020, principally due to contributions and
returns on plan assets, partially offset by a decrease in the discount rate
reflecting a decrease in yields on high-quality corporate bonds. The net
liabilities at 31 March 2021 included a net accounting surplus of £3.0m
related to a scheme acquired with the Interserve business. There is also
an accounting surplus related to a joint venture acquired with Interserve,
Mitie’s £2.2m share of which is reported within interest in joint ventures
and associates on the balance sheet.
The latest funding valuation of the Mitie Group defined benefit
scheme as at 31 March 2020, indicated an actuarial deficit of £92.1m.
The Group has negotiated, subject to final approval, a deficit recovery
plan with the trustees totalling £93m over seven years, of which £11m
was paid in FY21.
Cash flow and net debt
£m
Operating profit before other items
(continuing operations)
Add back: depreciation, amortisation & impairment
Other movements (including other items)
Working capital movements1
Cash generated from operations
Capex, capital leases, dividends from
JVs, interest & tax
Free cash (outflow)/inflow
Rights issue
Acquisitions & disposals
Dividends & other2
Decrease in net debt during the year
Closing net (debt)
Average net (debt)
Leverage covenant
Interest cover covenant
FY21
63.4
46.9
(34.1)
(36.4)
39.8
(64.3)
(24.5)
190.4
(84.0)
(15.6)
66.3
(86.7)
(47.1)
< 0x
8.5x
Restated1
FY20
86.1
43.9
(25.0)
(12.9)
92.1
(61.6)
30.5
–
64.2
(14.1)
80.6
(153.0)
(327.6)
0.7x
9.3x
1 Working capital balances for FY20 have been restated due to a change in
accounting policy related to BACS payments with an increase in cash generated
from operations of £20.3m for FY20 and a reduction of £14.9m in net debt at
31 March 2020 (see Note 1 to the consolidated financial statements)
2 Dividends & other for FY21 includes lease liabilities of £14.2m acquired with
Interserve, and for FY20 includes dividends paid of £14.4m
The lower cash generated from operations is largely driven by the
reduced operating profit before other items, due to the factors noted
above, combined with the cash outflow from the increased level of other
items, and higher adverse movements in working capital (see below).
Other movements within cash generated from operations include
pension deficit payments and non-cash adjustments relating to
share-based payments.
Capex, capital leases, dividends from JVs, interest and tax resulted in
a cash outflow of £64.3m, and there was a net Free Cash Outflow of
£24.5m in FY21. Within this outflow there have been £98.0m of one-off
working capital outflows in the year, which are explained further below.
Excluding these one-off items, the Group would have had a Free Cash
Inflow of £73.5m.
The Group received £190.4m of net proceeds from the Rights
Issue, and the net cash outflow to acquire Interserve was £84.0m,
reflecting £105.0m of consideration paid less cash on the balance sheet
(excluding restricted cash of £19.4m). No dividends were paid in the
year (FY20: £14.4m).
1 Working capital and net debt balances for FY20 have been restated due to a change
in accounting policy related to BACS payments (see Note 1 to the consolidated
financial statements)
Overall, the Group reported net assets of £361.8m at 31 March 2021,
which is an increase of £281.3m compared with 31 March 2020. The
increase is primarily the result of the £190.4m net proceeds from the
rights issue plus £138.7m of net assets acquired related to the Interserve
transaction and the £57.6m receivable related to the provisional
adjustment to consideration (see below), partially offset by the £105.0m
cash consideration paid.
Acquisition of Interserve
The acquisition of Interserve has added the provisional values of
£3.3m for goodwill and £138.7m for the acquired identifiable net assets
and liabilities to the balance sheet, in return for total consideration
of £142.0m.
The net assets acquired of £138.7m include £219.3m attributed to
acquired intangible assets, recognising the value associated with the
customer contracts and relationships, £66.7m of provisions, and a £13.9m
net liability from other assets and liabilities such as deferred tax, leases
and joint ventures. Provisions include £13.0m for onerous contracts,
mainly related to certain PFI contracts, and £37.2m for rectification
works associated with pre-acquisition issues.
The total consideration of £142.0m comprises £199.6m of consideration
already settled (£105.0m cash paid and £94.6m shares issued) less a
provisional adjustment to consideration of £57.6m related to a
completion accounts process, which is included as a receivable in the
balance sheet as at 31 March 2021 (within Other net assets in the table
above). The outcome of the completion accounts process is inherently
uncertain, given that this is subject to a commercial negotiation and
potentially expert determination, and the final adjustment agreed
could therefore be materially different from this estimate.
Change in accounting policy
The Group has changed its accounting policy in relation to the
recognition of BACS payments, whereby BACS payments are
now recognised at the settlement date, rather than when they are
initiated. This change was implemented as part of the alignment of
accounting policies with Interserve and will provide operational benefits
including simplifying the cash management process and accelerating
period end reporting.
As a result of the change in accounting policy the balance sheet for
FY20 has been restated to reclassify amounts between cash and
working capital, which has had the result of reducing net debt by £14.9m
at 31 March 2020 and increasing net debt by £5.4m at 1 April 2019.
The impact of the new accounting policy for FY21 was an increase in
net debt of £5.6m at 31 March 2021. As a consequence of the accounting
policy change, cash generated from operations for FY21 is lower by
£20.5m, but for FY20 the restated amount is better by £20.3m.
There has been no impact on the income statement, earnings per share
or net assets as a result of this restatement.
28
Mitie Group plc | Annual Report and Accounts 2021
Working capital
Working capital movements resulted in an outflow for the year of
£36.4m after the repayment of £51.5m of tax previously deferred under
the HMRC TTP scheme, a further reduction in the invoice discounting
programme of £19.0m and paying our suppliers faster over the year end
period (impact estimated at £27.5m). Adjusting for these items, the
underlying working capital showed an improvement of £61.6m, which
was driven by strong working capital management, including billing
process efficiencies.
Net debt
Average daily net debt of £47.1m for FY21 decreased by £280.5m in
comparison to FY20, primarily as a result of the £190.4m net proceeds
from the rights issue, and the benefit, at the maximum point, from the
£166.2m of taxes deferred under the TTP scheme, which have since
been fully repaid. Together, these two items improved average net debt
by c.£220m compared to FY20, with the remaining improvement due
to the underlying improvement in working capital referenced above.
Closing net debt on a post-IFRS 16 basis as at 31 March 2021 was
£86.7m (compared with the restated £153.0m at 31 March 2020),
reflecting the strengthened balance sheet following the rights issue.
Total Financial Obligations (TFO)
£m
Net (cash)/debt1 pre-IFRS 16
Lease liabilities (IFRS 16)
Net debt1 post-IFRS 16
Supply chain finance
Customer invoice discounting
Pension deficit
FY21
(19.7)
106.4
86.7
–
51.7
42.5
60.0
93.0
153.0
16.0
70.7
46.7
Total Financial Obligations (TFO)
180.9
286.4
1 Net debt balance for FY20 has been restated due to a change in accounting policy
related to BACS payments (see Note 1 to the consolidated financial statements)
Mitie closed its supply chain finance programme in December 2020.
Period-end TFO have continued to decrease significantly, reflecting
Mitie’s strategy to strengthen the balance sheet and decrease leverage.
Liquidity and covenants
As at 31 March 2021, the Group had £401.5m of committed funding
arrangements. These comprised a £250m Revolving Credit Facility
maturing in December 2022, and £151.5m of US Private Placement notes
spread over two maturities: December 2022 (£121.5m); and December
2024 (£30.0m).
With effect from 10 June 2021, DBRS Morningstar assigned a credit
rating of BBB with a stable outlook to Mitie. The Group intends to
refinance its existing facilities over the course of the next year.
£m
Operating profit before
other items2
Restated1
FY20
Add: depreciation, amortisation
& impairment
Mitie’s two key covenant ratios are calculated on a pre-IFRS 16 basis.
These are leverage (ratio of consolidated total net borrowings to
adjusted consolidated EBITDA) and interest cover (ratio of
consolidated EBITDA to consolidated net finance costs). Following
the COVID-related amendments agreed in June 2020, the covenant
thresholds on these ratios vary each period until September 2022, as
set out in the table below:
Covenant
Mar-20
Mar-21
Sep-21
Mar-22
Sep-22
Interest
cover
Leverage
> 4.0x
< 3.0x
> 1.0x
< 4.0x
> 2.5x
< 3.5x
> 3.5x
< 3.0x
> 4.0x
< 3.0x
As at 31 March 2021, the Group was operating well within these ratios at
< 0x leverage and 8.5x interest cover. A reconciliation of the calculations
is set out in the table below:
FY21
(R12M)
Restated1
FY20
(R12M)
63.4
88.9
46.9
110.3
22.2
(28.0)
104.5
23.4
127.9
17.4
(1.8)
(3.3)
12.3
8.5x
86.7
2.8
(106.4)
43.9
132.8
0.3
(24.8)
108.3
(1.7)
106.6
16.4
(1.7)
(3.1)
11.6
9.3x
153.0
2.3
(93.0)
(5.6)
14.9
(d)
(22.5)
< 0x
77.2
0.72x
Headline EBITDA
Add: covenant adjustments
IFRS 16 EBITDA adjustment
Consolidated EBITDA
Full-year effect of acquisitions
& disposals
Adjusted consolidated EBITDA
Net finance costs
Less: covenant adjustments
IFRS 16 finance costs adjustment
(a)
(b)
Consolidated net finance costs
(c)
Interest cover (ratio of (a) to (c))
Net (cash) / debt
Impact of hedge accounting
& upfront fees
IFRS 16 net debt adjustment
Accounting policy change for
recognition of BACS
Consolidated total net
(cash) / borrowings
Leverage (ratio of (d) to (b))
1 Net debt balance for FY20 has been restated due to a change in accounting
policy related to BACS payments (see Note 1 to the consolidated financial
statements), however consolidated total net borrowings for covenant purposes
remains unchanged
2 Continuing and discontinued operations
Simon Kirkpatrick
Chief Financial Officer
Mitie Group plc | Annual Report and Accounts 2021
29
Strategic reportGovernanceFinancial statements Environmental and Social Value Summary
Environmental and
Social Value Summary
Environmental, Social and Governance (ESG)
is a key part of our two ‘Technology’ and
‘People’ strategic pillars as we look to achieve
net zero carbon by 2025, generate increased
social value and become recognised as a leading
ESG company.
Mitie will continue to review its targets and approaches to the economic,
social and environmental aspects of Social Value to ensure it leads the
FM sector. Mitie will consider ways in which it can maximise social
value in both day-to-day business operations and every partnership
that it creates, to benefit individuals, communities, supply chains and
the environment.
Mitie’s vision is to lead the facilities management (FM) sector in creating
social value through everyday operations, leaving a legacy for the
communities in which it works, to support a brighter future for all.
Mitie will do this by having clear targets across its pillars of social value,
which are Environment, People, Community, Responsible supply chain
and Innovation, each of which is backed up with a delivery plan. Mitie’s
fifth pillar, Innovation, is embedded within the four other pillars and,
therefore, instead of specific targets, this important pillar is used to
ensure all other areas are performing innovatively, so that operations
run efficiently and Mitie remains industry leading. We will embed ESG
considerations in every aspect of Mitie’s business from strategy to supply
chain management to delivering for our customers.
Increasingly, customers expect Mitie not just to have clear targets on all
aspects of Social Value, especially the environment, but to be able to
support them in delivering their own challenging targets in areas such
as decarbonisation, reduction of energy usage and waste management.
Mitie’s expertise is demonstrated by its leadership in the transition to
electric vehicles, as well as its Group-wide certification for ISO14001
(Environmental Management System) and ISO9001 (Quality
Management System). Subject matter expertise is further evidenced
by Mitie Energy’s ISO50001 (Energy Management System) and Mitie
Waste’s BS8001 (Circular Economy) certification, as well as Mitie’s
industry-leading Plan Zero commitment to net zero carbon by 2025.
Oversight and governance are provided by the Social Value &
Responsible Business Committee, chaired by Baroness Couttie. For
more information on our Business Conduct, please see pages 46 to 47.
As of January 2021, Mitie had received improved ESG ratings from three
of the leading ESG rating organisations: CDP of Leadership A-; MSCI of
AA; and Sustainalytics of 9.8 Negligible Risk, positioning Mitie as a global
leader in ESG matters and the highest ranked facilities management
company globally.
We have the largest electric fleet vehicle in Britain, have signed up to
Business Ambition for 1.5°C, the Race to Zero, RE100/EV100/EP100,
and we are committed to science-based targets to decarbonise our
supply chain by 2035.
Phil Bentley
Chief Executive Officer
30
Mitie Group plc | Annual Report and Accounts 2021
Pillars
Environment
2025 Target: Net Zero Carbon Emissions by eliminating
carbon emissions, eradicating non-sustainable waste
and enhancing efficient buildings.
Commitments, targets and performance
FY21 achievement
Carbon emissions (2025 Target – Net Zero Carbon Emissions)
• 232% increase in electric vehicles (from 325 at end of FY20
19,205
27,072
28,912
7,867 tCO2e
improvement from
previous year
People
2025 Target: 40% female and 20% BAME in Senior
Leadership Team roles and 5% of employees through
an apprenticeship scheme
Community
2025 Target: 16,000 volunteer paid hours, 2.34%
of employees from an Armed Forces background
(0.5% above average of UK population) and 10,000 hours
of training delivered on improving health and wellbeing.
Responsible supply chain
2025 Target: 33% spend with Small and Medium-sized
Enterprises (SMEs), £2.25m spend with Voluntary,
Charitable, and Social Enterprises (VCSEs), 40% spend
under Supplier Management Framework (SMF)
to 1,080 at end of FY21)
• 184 tonnes of waste diverted from landfill
• ‘Bin the bag’ initiative launched to remove single use plastic bin
liners by 40,000 per annum
• 49 building surveys conducted to develop a phased approach to
the decarbonisation of heating systems
Link to page 33
• Employee engagement increased to 55%
• 3ppts increase in females and 5ppts of BAME in Senior
Leadership Team roles
• Mitie named in the top ten in the Inclusive Top 50 UK Employer’s
list for three consecutive years.
• New Diversity and Inclusion strategy launched, involving self-
assessment activities invoking thinking and conversation.
• 1,269 employees through an apprenticeship scheme, which
represents a 122% increase from the previous year.
Link to page 38
• Mitie’s volunteers gave over 8,000 hours to charities in need
with over £53,000 raised for some amazing charities.
• An initiative to recruit from an Armed Forces community has
led to an increase in recruitment, with 2.9% of employees at
testing centres from an Armed Forces background
• Over 2,000 hours proactive training for employees around
Health and Wellbeing
Link to page 41
Females in Senior Leadership Team (2025 Target – 40%)
Not measured prior to FY20
21%
18%
3ppts
improvement from
previous year
BAME on Senior Leadership Team (2025 Target – 20%)
3%
Not measured prior to FY20
8%
5ppts
improvement from
previous year
Volunteer hours (2025 Target – 16,000)
3,032
Not measured prior to FY20
8,064
166%
improvement from
previous year
Employee training hours around Health & Wellbeing
(2025 Target – 10,000)
FY21
Not measured previously
2,338 2,338
Actual performance in
FY21 first measurement
FY21
FY20
FY19
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY19
FY18
FY21
FY20
Small and Medium Enterprises (SMEs) (2025 Target – 33%)
• Engaging with potential providers to continuously grow our
1ppt
29%
28%
27%
improvement from
previous year
Not measured
• Dramatically exceeding our VCSE spend milestone by nearly
• Surpassing our SME spend target with 30%, with this figure
significantly increasing to 45% under Government and public
Supplier Management Framework (SMF)
(2025 Target – 40%)
• A 10ppts increase in the proportion of spend under SMF
• Scope 3 – Make sure our suppliers are doing the right thing
VCSE supplier list
50%, at £447,502
sector contracts
Link to page 41
30%
10ppts
20%
improvement from
previous year
SMF did not exist previously
Pillars
Environment
2025 Target: Net Zero Carbon Emissions by eliminating
carbon emissions, eradicating non-sustainable waste
and enhancing efficient buildings.
People
2025 Target: 40% female and 20% BAME in Senior
Leadership Team roles and 5% of employees through
an apprenticeship scheme
Community
2025 Target: 16,000 volunteer paid hours, 2.34%
of employees from an Armed Forces background
(0.5% above average of UK population) and 10,000 hours
of training delivered on improving health and wellbeing.
Responsible supply chain
2025 Target: 33% spend with Small and Medium-sized
Enterprises (SMEs), £2.25m spend with Voluntary,
Charitable, and Social Enterprises (VCSEs), 40% spend
under Supplier Management Framework (SMF)
Commitments, targets and performance
FY21 achievement
Carbon emissions (2025 Target – Net Zero Carbon Emissions)
FY21
FY20
FY19
7,867 tCO2e
19,205
27,072
28,912
improvement from
previous year
Females in Senior Leadership Team (2025 Target – 40%)
FY21
FY20
3ppts
21%
18%
Not measured prior to FY20
improvement from
previous year
BAME on Senior Leadership Team (2025 Target – 20%)
FY21
FY20
5ppts
8%
3%
Not measured prior to FY20
improvement from
previous year
Volunteer hours (2025 Target – 16,000)
FY21
FY20
8,064
3,032
Not measured prior to FY20
166%
improvement from
previous year
Employee training hours around Health & Wellbeing
(2025 Target – 10,000)
FY21
2,338 2,338
Not measured previously
Actual performance in
FY21 first measurement
Small and Medium Enterprises (SMEs) (2025 Target – 33%)
FY21
FY20
FY19
FY18
improvement from
previous year
29%
28%
27%
1ppt
Not measured
Supplier Management Framework (SMF)
(2025 Target – 40%)
FY21
FY20
10ppts
30%
20%
SMF did not exist previously
improvement from
previous year
• 232% increase in electric vehicles (from 325 at end of FY20
to 1,080 at end of FY21)
• 184 tonnes of waste diverted from landfill
• ‘Bin the bag’ initiative launched to remove single use plastic bin
liners by 40,000 per annum
• 49 building surveys conducted to develop a phased approach to
the decarbonisation of heating systems
Link to page 33
• Employee engagement increased to 55%
• 3ppts increase in females and 5ppts of BAME in Senior
Leadership Team roles
• Mitie named in the top ten in the Inclusive Top 50 UK Employer’s
list for three consecutive years.
• New Diversity and Inclusion strategy launched, involving self-
assessment activities invoking thinking and conversation.
• 1,269 employees through an apprenticeship scheme, which
represents a 122% increase from the previous year.
Link to page 38
• Mitie’s volunteers gave over 8,000 hours to charities in need
with over £53,000 raised for some amazing charities.
• An initiative to recruit from an Armed Forces community has
led to an increase in recruitment, with 2.9% of employees at
testing centres from an Armed Forces background
• Over 2,000 hours proactive training for employees around
Health and Wellbeing
Link to page 41
• Engaging with potential providers to continuously grow our
VCSE supplier list
• Dramatically exceeding our VCSE spend milestone by nearly
50%, at £447,502
• Surpassing our SME spend target with 30%, with this figure
significantly increasing to 45% under Government and public
sector contracts
• A 10ppts increase in the proportion of spend under SMF
• Scope 3 – Make sure our suppliers are doing the right thing
Link to page 41
Mitie Group plc | Annual Report and Accounts 2021
31
Strategic reportGovernanceFinancial statements Non-financial information statement
Non-financial
information statement
We continually look for ways to make Mitie a responsible business and we actively engage with stakeholders to improve the Group’s impact. In FY 21,
Mitie met or exceeded all 13 of its social value targets within its social value framework and extended Plan Zero beyond its ambitious, industry-leading
pledge to reach net zero carbon emissions by 2025 to include its Scope 3 emissions becoming net zero by 2035.
Mitie’s leadership position across all aspects of ESG has been shown by the significant improvement in ratings from major ESG rating agencies including
CDP, MSCI and Sustainalytics during FY21.
Mitie’s emissions have reduced by 29% versus prior year and 35% over the last two years, as a result of its Plan Zero decarbonisation approach, energy
optimisation across its sites and continued switch to electric vehicles. Progress across the 13 social value targets is published monthly in the Social Value &
Responsible Business Dashboard available on www.mitie.com/esg and Mitie’s employee engagement has increased significantly from 33% to 55% in 3 years.
We use a variety of tools to track and measure our performance against strategic objectives. Our business model encompasses the non-financial value
created for our stakeholders from our resources, human capital, expertise and relationships. Through our business model, we deliver value for our
employees, suppliers, communities, shareholders and customers.
9B Reporting requirement
10B Relevant policies1
11B Annual Report page reference
Environmental matters
Sustainability policy
Procurement policy
Employees
Employee Handbook
People policy
Equality diversity and inclusion policy
Health and safety policy
Ethical business practice policy
Sustainability policy
Quality policy
Social matters
Sustainability policy
Human rights
Employee Handbook
Ethical business practice policy
Stakeholder engagement pages 48 to 53
Plan Zero / Environment pages 34 to 35
Operating responsibly pages 46 to 47
Chief Executive’s strategic review pages 19 to 21
Stakeholder engagement pages 48 to 53
Our people pages 38 to 40
Operating responsibly pages 46 to 47
Chief Executive’s strategic review pages 19 to 21
Operating responsibly pages 46 to 47
Stakeholder engagement pages 48 to 53
Operating responsibly pages 46 to 47
Anti-bribery and anti-corruption
Employee Handbook
Ethical business practice policy
E-learning module available for employees through
the process repository (BMS) and Learning Hub
Operating responsibly pages 46 to 47
Our people pages 38 to 40
Stakeholder engagement pages 48 to 53
Procurement Policy
Supplier Social Value Policy
Suppliers
Business model
Non-financial KPIs
Principal risks
1 Policies, statements and codes are available at www.mitie.com
Business model pages 8 to 9
KPIs pages 14 to 17
Principal risks and uncertainties pages 54 to 65
Viability statement page 66
Audit Committee report pages 94 to 98
The Board pages 68 to 98
32
Mitie Group plc | Annual Report and Accounts 2021
Spotlight
Spotlight on Plan Zero
Do, Lead, Deliver
Working with our customers to support their
sustainability targets
In FY21 over 500 carbon and waste management experts within
Mitie have achieved the following for our customers:
• Delivered 14 Plan Zero Pathways addressing over 375,000 tonnes
of carbon
• Saved our customers a further £19m through optimisation
• Procured 1.1TWh of supply contracts, 96.78% of which we
REGO backed for power
• Delivered 2,836 energy surveys
• Managed 68,000 meters across all energy services
To date, we have saved our customers over 353,000 tonnes of carbon
and installed over 850 EV charge points for our clients.
One great example of Mitie delivering for clients is with Vodafone, and
our Zero Carbon for Zero Cost service. This involved Carbon
Compliance and Certification, Smart Energy Procurement, Reducing
Carbon and Energy, and Remote Connectivity. In just three years we
have saved 100GWh, £10m in cost avoidance, and 24,842tCO2e.
Alongside these amazing results, cost neutral was achieved within
three months of this project going live, showing the unlimited benefits
of going green.
Mitie Waste has successfully achieved a 90% recycling and recovery rate
with our clients, by aligning to the waste hierarchy they have ensured that
disposal is the last option explored. They have also been developing the
reusable bags seen below, for activities such as litter picking, offered
through our City Landscaping service. This re-usable range includes
a PP satchel, PP bulk bags, and rack sacks, and disposes of the waste
through either a Material Recovery Facility, anaerobic digestion, or
Energy from Waste, ensuring zero sent to landfill.
Further examples
Mitie’s integrated FM model provides multiple services for a UK council,
many of these from Mitie Energy. After conducting energy audits, many
initiatives were implemented, including major LED lighting upgrade works
carried out at 13 sites, leading to a saving of over 375,000 kWh or 200
tonnes of carbon annually; and three solar panel instillations carried out
at various locations, producing green energy at the host sites. These
develop 171,000kWh of energy and save 48 tonnes of carbon annually.
Mitie Landscapes has also successfully delivered for its clients, improving
the local environment for both wildlife, and the community. This year has
been packed with innovative solutions, including the first electric gritter,
Gritter Thunberg, launched in Nottingham in February 2021, providing
the first zero-emissions gritting service. Mitie’s City Landscaping service
has also been developed, designed to reduce emissions in high-pollution
areas. This service is sustainable and carbon-free, from using electric
vehicles and battery-powered equipment; to ensuring zero plastic waste
and eliminating both pesticides and chemicals.
Mitie’s work with the Cumbrian Collaboration (which includes Sellafield,
Nuclear Decommissioning Authority, DRS and INS) incorporates its
electric vehicle (EV) transition service, improving buildings efficiency, and
moving towards renewable energy sources. This has produced significant
results, including currently being at the final stages of design and build for
solar energy generation, which will generate 800kWH and has a social
enterprise attached. Air Source Heat Pumps have also been installed,
removing a previous gas heating system and allowing for zero Scope
1 emissions, with the addition of calorifiers to the Air Source Heat
Pumps at one location, which will increase their efficiency by 75%
coupled with reduced operating and maintenance costs. Mitie is also in
the process of supporting Sellafield’s EV charging network infrastructure,
and advising on EV selection options.
Mitie Waste’s work with Lloyds has produced some impressive results.
Mitie Waste facilitated the provision of over 150,000 Keep cups and
water bottles, to the banking group’s staff, with the aim of reducing
single-use plastics, and the associated waste volumes produced from
vending machines, water fountains and catering outlets. This alone
reduced the amount of single use items being procured and disposed of
by over 35 million annually. Waste audits were also carried out, changing
Lloyd’s supply chain packaging from plastic straps of paper and business
cards, to now being delivered in cardboard boxes, reducing over 30,000
plastic boxes annually. Over 1,200 items of furniture were reused or
relocated in just one year, saving disposal costs, purchase of new items,
and further carbon emissions.
Mitie Waste also helped facilitate the reuse of 210 surplus chairs from
NPower to another organisation. Although a seemingly small amount,
this transaction alone saved over 15 tonnes of carbon, along with disposal
costs, and new furniture purchasing costs.
Mitie Group plc | Annual Report and Accounts 2021
33
Strategic reportGovernanceFinancial statements Environment and Social Value
Environment
Ambition: Net Zero Carbon Emissions by
eliminating carbon emissions, eradicating
non-sustainable waste and enhancing
efficient buildings by 2025.
—
-7,867 T CO2e
(YOY Carbon Emissions saving versus FY20)
Reduced by 29% to 19,205
In February 2020, Mitie launched Plan Zero, the Group’s commitment
to reach net zero carbon by 2025, some 25 years earlier than the UK
Government’s target. To ensure this is achieved, the initiative is focused
around three key target areas communicated to colleagues and
customers through webinars focusing on how to make a green return
to the workplace, and how acting now can deliver immediate cost and
carbon savings.
Eliminate carbon emissions from power and transport
Site surveys have been conducted at 15 Mitie sites with desktop surveys
completed on a further 45 Mitie sites, as part of a three-phase approach
to decarbonise the Group’s heating systems. These surveys identified
many carbon-saving opportunities, which have been implemented,
including optimising building management systems and installing LED
lighting. These changes will reduce the Group’s emissions by an estimated
300tCO2e per annum.
Mitie has the largest fully electric vehicle (EV) fleet in the UK, with 1,080
pure EVs at the 31 March 2021, and has installed over 850 charge points
at both residential and commercial locations. Mitie has partnered with
Mina, to enable direct payment for EV charging at home, further
supporting the Group’s EV transition.
The Group’s EV fleet is growing exponentially, with Mitie constantly
analysing the market for models to suit its varied fleet requirements.
The initial focus was on cars and small vans, but with manufacturers
now responding to the demand for fully electric commercial vehicles,
Mitie has over 660 Vivaro-e’s vans on order. Included in Mitie’s EV fleet
is Gritter Thunberg, launched in Nottingham in February 2021, providing
the first commercial zero-emissions gritting service. By removing diesel
vehicles from its fleet, Mitie saves an average of 5 tonnes of CO2 per
vehicle per annum, so the Group impact is vast.
Eradicate non-sustainable waste
Through analysing Mitie’s inbound waste streams, and contacting
suppliers to discuss alternative waste disposal, more than 184 tonnes
of waste, from 11 offices, have been successfully diverted from landfill
including over 130 tonnes to recycling and 50 tonnes to ‘Energy from
waste’ in FY21. This led to a reduction in the Group’s waste sent to
landfill in FY21 to 12 tonnes, over 90% below the baseline of 376 tonnes.
Mitie’s drive to reduce its impact on the environment sparked the
development of its ‘Bin The Bag’ initiative, which will be trialled at 15 sites
in FY22. This reduces single-use plastic liners by 40,000 per annum,
removing a total of 600kg of plastic waste, and saving £6,000 per annum.
This re-usable range includes a PP satchel, PP bulk bags, and rack sacks,
and disposes of the waste through either a material recovery facility,
anaerobic digestion, or Energy from Waste, ensuring zero sent to landfill.
Eliminate carbon emissions
from power and transport
Eradicate
non-sustainable waste
Enhance inefficient buildings
to meet the highest
environmental standards
Convert the Group’s fleet to zero
emissions and power the Group’s EV
charge points with green energy
Decarbonise the Group’s heating systems
and use 100% renewable energy for
Group sites via a subsidy-free Power
Purchase Agreement
Increase the Group’s use of technology
to reduce work travel to a minimum.
Where travel is necessary, Mitie will
choose low carbon methods
Eliminate single-use materials by
embracing the circular economy,
such as through a closed-loop paper
recycling system
Reduce the Group’s use of natural
resources, with only items which fit
the Group’s circular economy approach
allowed on site
Use natural, non-toxic, and biodegradable
cleaning products, and champion the use
of new innovations wherever possible,
such as microfibre and surface coatings
Always choose new offices with at least an
‘Excellent’ BREEAM rating and only re-sign
leases on offices with an A EPC rating
Enhance energy optimisation and use
the Group’s smart building technology
to achieve maximum energy efficiency
at all Group sites
Improve biodiversity at all Group sites
using initiatives that help ecosystems
flourish, such as choosing plants which
attract wildlife or establishing bug hotels
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Mitie Group plc | Annual Report and Accounts 2021
Enhance inefficient buildings to meet the highest environmental standards
A Carbon Conscious Building Selection Guide has been developed to ensure that any new properties that Mitie leases meet the high building efficiency
and low-carbon guidelines laid out in Plan Zero.
To support the Group’s energy optimisation approach, a comfort policy has been created, ensuring that the environments within the Group’s buildings,
including temperature and humidity, are at an optimum level for both occupants’ comfort and productivity, and also environmentally.
Three sites have been identified for the installation of bird boxes and bug hotels, with the work completed at two sites.
Greenhouse gas emissions
The planet is facing a climate emergency. In February 2020, Mitie launched Plan Zero, its commitment to reach net zero operational carbon emissions by
2025, 25 years ahead of the UK Government’s target. Mitie has now expanded its Plan Zero commitment to include its supply chain.
This commitment has also been expanded by signing up to a science-based target initiative (SBTi) to incorporate Scope 3 non-operational carbon
emissions, for which the targets are an 80% reduction by 2030, followed by net zero by 2035.
Absolute Emissions
Emissions
Total Scope 1 (tCO2e)*
Emissions from fuel combustion across our fleet
Emissions from gas combustion in our occupied buildings
Total Scope 2 (tCO2e)
Emissions from the purchase of electricity across occupied buildings (Location Based)
Emissions from electricity consumption across our EV fleet
Total Scope 1 & 2 (Location Based)
Total Scope 1 & 2 (Market Based)
FY21
18,719
18,557
162
486
464
22
19,205
18,741
FY20
26,441
26,162
279
631
613
18
27,072
26,459
Change from
prior year
% Change from
prior year
(7,722)
(7,605)
(117)
(145)
(149)
4
(7,867)
(7,718)
(29%)
(29%)
(42%)
(23%)
(24%)
22%
(29%)
(29%)
Mitie has now expanded its Plan Zero commitment to include its supply chain. Mitie has signed up to a Science-based target initiative (SBTi) to achieve an
80% reduction in Group Scope 3 emissions by 2030, followed by achieving net-zero Scope 3 emissions by 2035. Therefore by 2035, Mitie will have
reached net-zero across all three Scopes. Achieving as close to real zero is the goal, however, as there will be some unavoidable emissions, nature-based
solutions will be used to offset these. Through this SBTi target, Mitie has also aligned to the “Business Ambition for 1.5ºC” campaign, committing to
targets and plans that contribute to the global temperature increase not exceeding 1.5ºC, a critical boundary. Mitie is also supporting Race to Zero, a
campaign supporting a resilient, health, zero carbon recovery that prevents future threats, creates decent jobs, and unlocks inclusive, sustainable growth.
Intensity – Emissions Ratio
tCO2e/£m Revenue (Scope 1&2)
FY21
8.98
FY20
12.45
Change from
prior year
% Change from
prior year
(3.47)
(28%)
* Reported data covers company emissions and energy consumption that occurs within the UK for Mitie excluding Interserve, Interserve data will be included from FY22 onwards
* Refrigerant data has been excluded due to challenges obtaining accurate data on landlord managed sites, this is considered immaterial.
* Total greenhouse gas (GHG) emissions are reported using the financial control approach
* Mitie’s methodology aligns with Defra’s Environmental reporting guidelines and uses the government’s greenhouse gas reporting conversion factors to quantify emissions.
Mitie Group plc | Annual Report and Accounts 2021
35
Strategic reportGovernanceFinancial statements Environment and Social Value continued
Taskforce on Climate-Related
Financial Disclosures (TCFD)
Governance
Strategy
Describe the Board’s oversight of climate-related
risks and opportunities.
Mitie’s Social Value & Responsible Business (SVRB) Committee
meets bi-monthly, and is chaired by independent Non-Executive
Director, Baroness Couttie. Baroness Couttie then provides
updates to the Board, at each Board meeting. The Board has
reviewed climate-related risks and opportunities, as part of
its principal risks and business strategy considerations.
Describe management’s role in assessing and
managing climate-related risks and opportunities.
A significant proportion of the SVRB Committee are within
management, as this is an action-oriented group. Mitie’s Plan Zero
steering group (PZSG) meets quarterly and feeds up to the SVRB,
with the Plan Zero working group (PZWG) meeting monthly and
reporting to the PZSG. The PZSG’s task is to oversee and
approve actions to mitigate risks and realise opportunities and
measure the results.
Mitie’s Climate Change risk assessment document is maintained by
Jason Roberts, Head of Sustainability, and is approved 6 monthly
by the SVRB Committee and the PZSG. The document is shared
by the Financial Leadership Team and Financial Directors to all
business areas to review any business or operation-specific risks and
opportunities, which are then updated into the central document.
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium, and long term.
Some of the climate-related risks Mitie has identified include the
increased costs associated with a pre diesel fleet.
Some of the climate-related opportunities identified include the
delivery of sustainable services from across the business; switching
from fossil fuels to low-carbon alternatives for fleet operations,
e.g. EVs, trialling these solutions and leading industry behavioural
shift. In the 0-5 year horizon Mitie’s Plan Zero focus is on net zero
operational emissions by 2025 with Scope 3 to net zero by 2035
in the 10-15 year horizon.
Describe the impact of climate-related risks and
opportunities on the organisation’s business, strategy,
and financial planning.
Continuing with a diesel fleet would have significant cost
implications. As its fleet is a significant cost to Mitie, the increased
costs that are projected, including diesel prices and tariffs, could
have a material impact on its business.
The impact of the opportunity to deliver sustainable services
enables Mitie to expand its service offering and client base,
maximising the positive impact of its work and leading the
industry with innovative solutions.
The impact of switching from fossil fuels to low-carbon
alternatives for fleet operations are an initial higher cost than
standard diesel replacement vehicles, followed by long term fuel
savings, tax relief and additional work based on a more
responsible image.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
The opportunities identified within Mitie outweigh the risks, due
to its industry leading strategy, including its Net Zero approach
which comprises EV fleet transition, decarbonising its estate, and
delivering these services clients. Therefore, Mitie is considered
resilient to climate-related scenarios including 2°C.
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Mitie Group plc | Annual Report and Accounts 2021
The TCFD was established by the Financial Stability Board as a means of co-ordinating improved
disclosures by companies in relation to the impact of climate change. TCFD published a series
of recommendations on the disclosures which organisations should include in their reports,
Mitie is covering the 11 areas below, and Mitie’s Group Climate Change Risks and Opportunities
document has been completed with all Business Units knowledge and input, to produce a
thorough document.
Risk management
Describe the organisation’s processes for identifying
and assessing climate-related risks.
To identify and assess climate-related risk and opportunities each
part of the business and its operations is considered, with risks
categorised into transitional and physical. These risks and
opportunities are then rated on likelihood, and financial and
reputational severity. These numbers are multiplied together to
produce the financial and reputational impact which forms the
basis of Mitie’s Climate Change risk assessment document.
Describe the organisation’s processes for managing
climate-related risks.
If the financial and reputational impact figure is smaller than 12,
then the risk and/or opportunity is managed through the PZSG,
who evaluate the action needed, and the PZWG, who then take
that action to manage the risk and/or opportunity. Where risk is
higher than this it feeds into Mitie’s Group risk approach as
described below.
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Mitie has identified the significance of climate change and as
shown within the Principal Risks and Uncertainties disclosure,
climate change has been identified as a Principal Risk by the Board.
This principal risk is underpinned by a series of linked principal
risks, which in the main are located within the Climate Change
risk assessment document, unless rated as 12 or above. Where
this occurs the risk then feeds up into the Group risk register,
overseen by the Mitie Risk Management Team (MRT).
Throughout the year, the MRT are responsible for overseeing an
ongoing review of both the internal and external environment as
part of the principal risk management review; this includes any
trends that emerge such as changes to the either the internal or
external landscape relating to climate change which impact the
Group. Twice yearly, there is a formal review of principal risks
by the Board, and such changes are fed up for consideration.
Metrics and targets
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in line
with its strategy and risk management process.
Having reviewed the nature of Mitie’s business, its most important
metrics are:
• Percentage of fleet that is zero carbon
• CO2 emissions (tonnes)
• Waste sent to landfill (tonnes)
The following targets have been set in these areas, to be achieved
by FY25:
85% of fleet that is zero carbon
4,400 tonnes CO2 emissions
0 tonnes of waste sent to landfill
For full milestone targets please see the Social Value Targets
section of www.mitie.com/esg
Disclose Scope 1, Scope 2, and if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.
The following Scope 3 emissions that relate to operational
emissions are disclosed:
• Waste
• Water
• Business travel
• Landlord leased energy
The extra information from the remaining Scope 3 emissions will
be captured in the coming year, and will be included in the Annual
Report and Accounts for FY22.
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
Mitie is committed to achieving net-zero operational emissions
by 2025, with the following milestone targets:
FY21 = 25,000 tonnes
FY22 = 21,750 tonnes
FY23 = 17,500 tonnes
FY24 = 11,500 tonnes
FY25 = 4,400 tonnes
This has been expanded to achieving an 80% reduction in Scope 3
emissions by 2030, with a target of net-zero by 2035.
Mitie’s emissions are internally verified by the Mitie Sustainability
Team, and are currently in the process of achieving third-party
verification.
Mitie Group plc | Annual Report and Accounts 2021
37
Strategic reportGovernanceFinancial statements Environment and Social Value continued
People
Ambition: 40% females and 20% BAME on
Senior Leadership team and 5% employees
through an apprenticeship scheme.
Mitie is the largest facilities management employer in the UK, with
75,000 colleagues, including 65,000 frontline heroes, across 167 different
nationalities. The Group’s rich culture allows it to deliver exceptional
services to a diverse range of customers and communities. Mitie’s
priority is its people, and that is recognised – the Group would be
nothing without their efforts.
FY21 has been one of the most important years in Mitie’s history, as the
Group acquired Interserve on 30 November 2020, welcoming 27,500
new colleagues to Mitie, and played a leading role in the UK’s response
to the COVID-19 pandemic.
During FY21, there has been a shift in the perception of facilities
management services and the critical roles of Mitie’s people. Colleagues
have been at the forefront of the response to the pandemic, working to
keep the country running, and customer workplaces clean, safe and
looked after.
Mitie’s role as an employer during this time has been to help colleagues
navigate the challenging circumstances encountered during the pandemic,
by empowering them to adapt through training and new opportunities,
recognising and rewarding their efforts through the Group’s recognition
schemes, providing new benefits (such as life assurance and an on-line
Virtual GP service for all colleagues), and looking after their health and
wellbeing. Mitie is committed to acting as the voice of the frontline,
championing employees and leading the way as standard bearer of the
facilities management industry.
Employee engagement
Each year, Mitie runs an employee engagement survey, Upload, to find
out what colleagues really think about working at Mitie. Mitie then uses
this feedback to make targeted improvements as part of its ‘You Said,
We Did’ campaign, to make Mitie an even better place to work.
In April 2021, Upload was run for the fourth time, with 40% of the
Group people taking part in the survey. Mitie’s employee engagement
an increase of 9ppts .
The below engagement figures for FY21 are from the Group combined
organisation, including responses from the Group and former Interserve
colleagues who joined Mitie in December 2020.
FY21
FY20
FY19
FY18
55%
46%
45%
33%
Employee listening
While Upload is Mitie’s benchmark for employee engagement, Mitie
actively listens to its employees using a number of different channels.
These include the ‘Grill Phil’ dedicated email inbox, which provides a
direct line to Phil Bentley, Mitie’s Chief Executive Officer, as well as
‘Back to the Floor’ employee listening sessions hosted by Non-Executive
Director, Jennifer Duvalier, who is responsible for representing the
employee voice at Board discussions.
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Mitie Group plc | Annual Report and Accounts 2021
In response to the unique set of circumstances faced in FY21, Mitie also
implemented several bespoke activities, including pulse surveys, focus
groups and 1-2-1 listening sessions, which provided valuable insights to
help it better support its people.
Gender breakdown
At 31 March 2021
Male
Female
Total
% male % female
Board
Senior leadership
team1
4
69
4
18
8
87
Employees
44,812
30,367
75,179
50%
50%
79%
60%
21%
40%
1 Senior leadership team comprises members of the Mitie Management Executive
(MGX) and the Mitie Leadership Team (MLT)
Real living wage
Mitie works with the Living Wage Foundation to promote the Real Living
Wage. Mitie believes in paying a decent wage to all its colleagues, who
carry out vital work for many organisations, and is committed to paying
all its Group head office colleagues the Real Living Wage whilst also
campaigning for its widespread uptake within client contracts.
Mitie always incorporates Real Living Wage costing in bids submitted to
prospective and current clients. This means clients have the option to
choose the Real Living Wage at the point of tender and ensure that
employees working on that contract are paid a fair wage for the work
they do.
Our diversity makes us stronger
In FY21 Mitie hosted two Equality at Mitie Summits led by Chief
Executive Officer, Phil Bentley. During these Group-wide calls, colleagues
provided feedback about how Mitie could become a more inclusive place
to work.
The feedback provided during these sessions led to the launch of Mitie’s
Diversity & Inclusion strategy in September 2020. Mitie committed to
nurturing and developing by 2030 a workforce, from the frontline to the
Boardroom, that is representative of the communities and customers
served. To achieve this, the Group is making improvements to the way
Mitie hires, develops, listens to and rewards its colleagues.
Mitie has six established employee networks which focus on: women
in the workplace; race and ethnicity; disability; sexuality; age diversity;
and ex-military personnel. During FY21, Mitie identified the need for a
parent and carers network, due to the additional pressures on them
during the COVID-19 pandemic. The employee networks are available
for any colleagues to join and influence positive change across the Group.
In FY21 the number of colleagues registered in employee networks grew
by 500%.
Highlights from FY21 include:
• Onboarding BAME Recruitment Limited, a specialist recruitment
partner focused on increasing the diversity pool of candidates.
• Signing up to the Race at Work charter.
• Becoming a Disability Approved employer.
• Launching Mitie’s ‘Count Me In’ programme, a bespoke Diversity &
Inclusion learning programme, which replaced traditional unconscious
bias training.
Gender pay gap
As at 4 April 2020, the median gender pay gap for Mitie was 7.7% (versus
4.6% at 4 April 2019) which compares favourably with the UK national
median gender pay gap of 15.5%. Mitie’s mean gender pay gap
has decreased to 6.4% (versus 10.4% at 4 April 2019).
Whilst this is an improvement, Mitie is not complacent and is committed
to continuing its efforts to further reduce the gender pay gap by focusing
on programmes that can really make a difference. During FY21, efforts
have centred around four areas. These continue to form part
of a long-term, sustainable approach focused on improving the
representation of females, and all under-represented groups, across
all organisational levels:.
1. Leadership: Enabling more females into leadership positions through
targeted development interventions for female talent.
2. Resourcing: Ensuring the Group resourcing is fully inclusive and
Mitie is hiring from a diverse talent pool.
3. Career Development: Taking action that supports the career
progression of under-represented groups.
4. Reward & Recognition: Creating a powerful and engaging reward
& recognition proposition that rewards the right behaviour and
celebrates inclusion.
Attracting and retaining the best talent
Leadership development programmes
During FY21 Mitie introduced targeted development programmes
for the Group’s leaders. Mitie adopted an approach that allowed the
Group’s leaders to tailor their development journey to their specific
learning requirements.
The Group’s leaders first had to assess themselves against a competency
framework to establish their strengths and how they could optimise
these as well as areas for further development or improvement.
They were then supported to build a bespoke personal development
plan, adopting an 80:20 approach to personal objective setting and
encouraging reflective practice.
Mitie provided these leaders with dedicated learning portals that enabled
them to access learning resources and development suggestions,
categorised into things they could do – learning in the flow of work,
things they could watch and things they could read. This included access
to handpicked internal learning materials and access to industry leading
external resources.
At the end of the year they were given access to a 360-review tool,
which allowed them to review their progress and reset their
development focus for the next year.
Career pathways
In FY22 Mitie will be working on establishing clear career pathways to
help its people understand how they can progress in their careers by
recognising key competencies and identifying transferable skills.
Mitie believes that by understanding their strengths its people will
be able to progress in roles that play to their strengths. This will enable
Mitie to build a stronger workforce which is more career mobile,
multi-skilled, with a greater breadth of knowledge about the Group’s
business and industry.
Apprenticeships
Mitie provides a huge variety of apprenticeships and at 31 March 2021
had 1,172 employees working through an apprenticeship scheme across
the Group’s portfolio of contracts.
Mitie takes pride in partnering with a network of high-quality
apprenticeship providers to deliver training to the right people in the
right way, supporting social mobility and enabling skills development to
support participants’ careers and progression.
Mitie paid £2m into the Apprenticeship Levy scheme in FY21 and gifted
£150,000 to organisations which need support to take on apprentices.
Mitie is looking to expand its levy gifting strategy further in FY22.
Supporting employees
during COVID-19
The Group’s main aim during the COVID-19 pandemic
was to ensure all colleagues felt well informed,
supported and recognised for their efforts.
In April 2020, Mitie opened its own PPE warehouse in response
to the COVID-19 crisis. From this warehouse, Mitie distributed
face masks, coveralls, over-shoes, wipes, disposable gloves and
more. In total, Mitie sent more than 1.1 million items of PPE to
keep front-line colleagues safe during the pandemic.
In addition, as part of the Group’s efforts to keep all its colleagues
safe, Mitie sent four reusable face masks to their home address,
whether they were on the frontline or working from home.
In conjunction with the UK Government, Mitie offered
asymptomatic testing for colleagues in high contact roles,
such as security guards and cleaning operatives, to help limit
the spread of the virus.
To keep colleagues informed, Mitie issued regular communications
to line managers, including briefing documents to keep their teams
up to date on the latest news. Mitie also launched an external
website to give colleagues access to important information and
useful resources, and hosted regular virtual town hall meetings
with the Chief Executive Officer and other senior leaders.
Supporting the fight against COVID-19
Mitie has been supporting the country directly in its COVID-19
response since the beginning of the pandemic, through the
operation of community and mobile testing centres, and the
provision of essential services for hospitals, including the
Nightingale hospitals in London and Manchester, and the Ysbyty
Calon y Ddraig or Dragon’s Heart Hospital in Cardiff. Mitie now
operates over 150 testing sites for public and private sector
clients, and its colleagues have continued to provide key services
at critical sites, such as ports and airports, across the country.
The Armed Forces community has played a critical role in
the running of the COVID-19 testing centres, with 102 of
Mitie’s colleagues working at testing sites coming from
Armed Forces backgrounds.
Apprenticeship Strategy Pillars
Skilling
We will focus on attracting and onboarding young external
talent, such as; school leavers and first jobbers, etc. on
apprenticeship programmes, work placements and kick start
initiatives to develop a pipeline of core skills to support the
long-term growth of our business and address the challenge
of an aging population.
Up-skilling
We will continue to offer apprenticeship programmes to our
people internally, allowing us to grow our own talent, offer
ongoing development with recognised qualifications and
demonstrate career progression opportunity.
Re-skilling
We will support UK economic recovery by creating
opportunities for people in the external job market to
re-train, gaining new skills and qualifications in professions
fundamental to our business in the short to medium term.
Mitie Group plc | Annual Report and Accounts 2021
39
Strategic reportGovernanceFinancial statements Environment and Social Value continued
People continued
Health & Wellbeing
Mitie is passionate about employee health and happiness at work. Safety
is the Group’s number one priority, and the goal is simple… zero harm
– to our people, our customers, and to members of the public passing
through the facilities Mitie takes care of. LiveSafe, the Group’s QHSE
culture change programme gives the Group people ten rules to live by.
The rules are mandatory and are supported by training delivered
through Mitie’s Learning Hub.
Regular LiveSafe ‘alerts’ are shared via the QHSE advisor network
and Mitie has recently launched the LiveSafe challenge through which
managers are challenged to reduce the incident rate each month in the
particular area that led to the most incidents in the same month of the
preceding year.
Mitie has continued to promote its wellbeing services, such as the Virtual
GP, Employee Assistance Programme and Occupational Health services,
regularly through the Group’s internal communication channels, including
messages from the Group People Director with the sentiment that ‘It’s
ok not to be ok’. Mitie has made Mental Health First Aid training
available, with 40 colleagues completing over 2,000 hours of training in
FY21. Mitie has also put in place a robust plan of wellbeing campaign
activity which has focused on a particular topic each month including
stress, physical health, mental health and bereavement.
Celebrating The Exceptional, Every Day
Recognition
Recognising colleagues for a job well done is key to the Group’s success.
In the last 12 months:
• Over 14,500 Mitie Star nominations.
• 5,000 COVID Star nominations – a new award to recognise colleagues
who have gone the extra mile during the pandemic.
• More than £95,000 awarded in cash prizes.
Reward
In FY21, Mitie introduced several new benefits and initiatives to support
the health, financial and mental wellbeing of its colleagues.
• A Virtual GP Service, to ensure our colleagues could continue to
access medical services without having to leave their home.
• Life Assurance for all, to give our colleagues and their loved ones
peace of mind and financial stability should the worst happen.
• An extra day of holiday to all frontline non-management employees as
a thank you for their exceptional service during the COVID-19
pandemic and to enable them to rest and recuperate.
• Salary Advance, which enhanced the Group’s existing financial
wellbeing package of financial education and debt consolidation loans.
To ensure all colleagues were aware of the benefits and support available
to them during the pandemic, Mitie produced a dedicated benefits guide,
which it publicised throughout FY21.
40
Mitie Group plc | Annual Report and Accounts 2021
Communities
Responsible
supply chain
Mitie is an active part of the communities in
which it operates, helping to deliver social value
commitments not only for Mitie, but for our
customers. Mitie is committed to supporting
charities and voluntary organisations, as well as
Armed Forces veterans and their dependents.
Armed Forces
Mitie achieved the Gold Award standard in the Defence Employer
Recognition Scheme and has been a proud signatory of the Armed
Forces Covenant since 2017. To continue the Group’s commitment to
this community, in FY21 Mitie introduced 10 days’ paid leave for
Reservists, building on the previous five days’ unpaid leave policy.
The Mitie Foundation
The Mitie Foundation exists to break down perceived barriers to
employment for disadvantaged groups within the communities in
which Mitie operates. In doing so, Mitie attracts the very best potential,
enriching the diversity of its workforce as well as that of its clients.
In FY21, The Mitie Foundation relaunched its strategy and purpose and
changed from face-to-face delivery to virtual. Supporting candidates
through the Group’s referral partners and in partnership with Mitie
clients, 92 Mitie volunteers delivered nine virtual Employability
Workshops, with over 100 candidates benefiting from the sessions.
To support Mitie’s wider Social Value and Diversity & Inclusion agendas,
The Mitie Foundation’s Ready2Work candidates have been encouraged
to apply for Mitie opportunities, with over 145 gaining employment
within the Business Services division.
Giving back
In FY21, Mitie introduced a paid volunteering day for all
non-frontline staff.
• 8,064 volunteer paid hours, of which over 5,700 hours were
completed by the Care & Custody team
• Over £43,000 raised for great causes across the business, of which
almost £24,000 was raised by the Technical Services team who
walked, ran, and cycled over 12,000 miles to raise money for a few
charities, including Barnados and The Salvation Army.
In FY21 colleagues have continued to go the extra mile to support the
communities Mitie serves through numerous ‘Giving Back’ initiatives.
Mitie shares expectations with suppliers
through its ‘Social Value for Suppliers Policy’.
New suppliers must commit to this policy,
alongside other contractual and legislative
requirements. All internal policies were
updated in January 2021, and added to the
company-wide Integrated Management System
(IMS), an online platform making all relevant
documents easier to access and locate.
Voluntary Community and Social Enterprises (VCSE)
The Group milestone of spending £300,000 with VCSEs in FY21 has
been surpassed by nearly 50% with a fantastic £447,502. This has been
achieved by Mitie signing up to Social Enterprise UK’s (SEUK) ‘Buy Social
Corporate Challenge’, allowing supplier details to be verified within the
Group database and flagged when appropriate. Several suitable VCSE
suppliers have also been added to Mitie’s e-tendering tool, enabling the
Procurement team to constantly review and engage with VCSEs and
select them for inclusion in relevant tenders. Mitie attends quarterly
meetings arranged by SEUK to discuss initiatives and meet potential new
VCSE suppliers.
Small Medium Enterprises (SME)
High levels of interaction with SME suppliers have been maintained
throughout the COVID-19 pandemic, with 30% of supplier spend with
SMEs achieved in FY21 against Mitie’s milestone of 29%. This figure rises
to over 45% on government and public sector contracts, a great
achievement during an uncertain year. To encourage SMEs to participate
in bids and broaden the supplier pool, opportunities are often advertised
on LinkedIn and training is provided on Mitie’s e-tendering system. To
highlight best practice and explain how larger organisations can work
more closely with SMEs, Mitie contributed to a working group run by the
Business Services Association.
In the early stages of the COVID-19 pandemic, many SMEs helped Mitie
to support the nation by providing PPE when the Group’s traditional
supply chain became overstretched. Mitie changed its PPE procurement
strategy from large distributors to over 30 smaller organisations by
31 March 2020. Most were privately owned SMEs spread across the UK,
including one that continues to provide warehouse space for stock to be
controlled, stored, and distributed.
Supplier Management Framework (SMF)
Mitie’s SMF monitors strategic supplier performance across key areas,
including ethical procurement, social value, and carbon reduction. The
Procurement team ensures that these areas are evaluated as part of
a balanced scorecard for all complex, high-value tenders, and have a
minimum weighting of 15%. Comparing this to the UK Government’s
10% weighting on Social Value published in PPN06 in January 2021,
shows Mitie’s ambition and commitment to this area. This commitment
has led to Mitie over-achieving on its milestone of 28% spend under
SMF management in FY21.
Mitie Group plc | Annual Report and Accounts 2021
41
Strategic reportGovernanceFinancial statements Section 172 statement
Section 172
statement
The Board acknowledges the importance of
forming and retaining constructive relationships
with all stakeholder groups. Effective
engagement with stakeholders enables the
Board to ensure stakeholder interests are
considered when making decisions and is
crucial for achieving the long-term success
of the Company. Details of Mitie’s key
stakeholders, how the Group has engaged
with them during FY21 and the outcomes of
that engagement, are set out on pages 48
to 53. Engagement activities specifically carried
out by the Board collectively and individually
can be found on pages 74 to 75.
In addition to the formal scheduled Board and Committee meetings held
during FY21, the Board held weekly meetings from the outbreak of the
pandemic right through to beyond the release of Mitie’s FY20 results.
These discussions included monitoring the impact of the COVID-19
pandemic on the business, employees and other stakeholders, detailed
analysis of the proposed Rights Issue and Re-financing, and the proposal
to acquire Interserve.
The following disclosure describes how the Board has had regard to the
matters set out in Section 172(1) (a) to (f) during FY21 and forms the
Directors’ statement required under Section 414CZA of the Companies
Act 2006. Three principal decisions made by the Board are shown,
illustrating how the Board considered Mitie’s stakeholders during
the decision process and the actions taken approved by the Board as
a consequence.
Details of the Company’s policies and practices in relation to ethical
business and acting fairly between members of the Company are set out
on pages 46 to 47.
Read more on Maintaining a high standard of business conduct:
pages 46 to 47
Decision
Overview:
Acquisition of Interserve Facilities Management (Interserve)
In December 2019, Mitie presented its Customer, Technology, Cost and People strategy to enable Mitie to achieve the
Board’s long-term vision of market leadership through enhanced scale, improved financial performance and stability.
Detailed due diligence on the potential acquisition of Interserve began in early 2020. The Board confirmed its
approval to proceed in May 2020 and on 25 June 2020, the Company announced that it had entered into a
conditional sale and purchase agreement to acquire Interserve, such acquisition being conditional on, inter alia,
completion of the Rights Issue and shareholder approval. The sale and purchase agreement provided that between
the entering into of the sale and purchase agreement and completion (which occurred on 30 November 2020), the
vendor would procure that, subject to customary exceptions, the business of Interserve would be carried out in the
normal course and that certain specific actions would not be taken without Mitie’s consent.
42
Mitie Group plc | Annual Report and Accounts 2021
Decision
Acquisition of Interserve Facilities Management (Interserve)
Stakeholder considerations:
Actions taken approved
by the Board:
Employees:
• Mitie and Interserve employees becoming part of a larger, more profitable company;
• Interserve employees benefitting from Mitie’s established engagement mechanisms, culture and values,
substantial learning and development opportunities, technology and innovation, benefits, and rewards;
• Potential employee synergies on consolidation;
• Talent flight risk from Interserve employees; and
• Organisational capacity/current team resource and bandwidth.
Customers and suppliers:
• Mitie’s performance in NPS survey demonstrating consistent improvement in customer experience;
• Proposed roll out of Mitie’s technology to Interserve customers;
• Risk of renegotiation or early termination of customer contracts;
• Consolidation of supplier base; and
• Increase in public sector contracts.
Shareholders:
• Impact on EPS and return on invested capital and timeline for expected improved profit margins and
enhanced free cash flow generation;
• Significant benefit from cost synergies;
• Expected stronger financial profile offering the opportunity to resume dividends;
• Issue of consideration shares diluting existing shareholdings (in addition to the dilution arising from the
Rights Issue) and the future influence of the vendor as a significant shareholder;
• Possibility of unexpected liabilities and costs or inaccurate assumptions and estimates relating to benefits
and synergies;
• Possible difficulties integrating the two businesses;
• Possible exposure to funding risks in relation to defined benefit pension schemes; and
• Potential risk to the recovery of sums which might become due from the vendor (by way of a reduction
in the consideration) as a consequence of the completion account process contained in the sale and
purchase agreement.
Community and environment:
• Impact on Mitie’s overall social value agenda and Plan Zero in relation to targets and milestones; and
• Expansion of the Mitie Foundation agenda to include Interserve geographical areas.
• Frequent meetings to discuss financial modelling and scenarios including consideration of detailed Board
papers prepared both internally and in conjunction with brokers and advisors;
• Extensively tested forecasting/financial modelling prepared, including several different scenarios based on
due diligence to ensure Board was comfortable with sustainability and viability of the enlarged Group;
• Approved the circular to shareholders and prospectus dated 4 November 2020;
• Experienced integration team established and robust governance structure (reporting to each Board
meeting) implemented to ensure all aspects of the integration plan are closely managed and measured. Risk
areas highlighted and escalated as appropriate;
• Extensive employee communications plan approved for all Interserve and Mitie employees. The Board also
reviewed the results of ad hoc pulse surveys to determine employee sentiment on the transaction;
• Detailed customer communication plan to build relationships and keep customers informed throughout
the transaction and beyond;
• The Board, through the Social Value & Responsible Business Committee, agreed the integration of
Interserve into Mitie’s Social Value strategy, with the effect of the acquisition on Mitie’s Social Value targets
analysed and new targets, still ambitious, yet practical, agreed; and
• New digital supplier platform will be deployed that will enable a more strategic approach to surveying the
Group’s suppliers on a proactive basis.
Mitie Group plc | Annual Report and Accounts 2021
43
Strategic reportGovernanceFinancial statements Section 172 statement continued
Decision
Acquisition of Interserve Facilities Management (Interserve)
Consequences of the
decision in the long term:
The Board concluded that the acquisition of Interserve would deliver the following key strategic and financial
benefits to all key stakeholders, consistent with the Group’s strategic pillars::
Outcome:
Decision
Overview:
Stakeholder considerations:
• Enhancement of competitive positioning, diversification, resilience, significant growth opportunities;
• Significant broadening of Mitie’s exposure to the public sector;
• Significant cost synergies;
• Further strengthening of Mitie’s financial position, enhancing its ability to secure long term financing and
deliver sustainable growth, margin accretion and generate enhanced free cash flow;
• Strengthening of Mitie’s management team and culture of excellence with high performing and experienced
individuals focused on promoting employee engagement and corporate social responsibility; and
• Accelerated delivery of Mitie’s technology-led strategy.
With full support from the Board, shareholder approval was obtained at a General Meeting on 23 November 2020,
with completion of the acquisition taking place on 30 November 2020.
Rights Issue and Re-financing
Mitie utilised UK Government initiatives and implemented a number of self-help measures (see decision below) in
response to the deterioration of trading conditions at the start of FY21. However, in addition to these measures, the
Board believed the proposed Rights Issue to be a prudent measure to further strengthen Mitie’s balance sheet,
working capital and liquidity position.
Mitie also reached an agreement (the Re-financing) with the holders of its US private placement notes and lenders
to its Revolving Credit Facility for covenant amendments and an extension to the Revolving Credit Facility, both
conditional on completion of the Rights Issue.
On 25 June 2020, following approval by the Board, the Company announced the Rights Issue.
Shareholders:
• Additional funds to strengthen Mitie’s balance sheet against the COVID-19 impact and enable Mitie to secure
the Re-financing, with some of the funds utilised in connection with the proposed acquisition of Interserve;
• Shareholders not taking up their rights, and overseas shareholders unable to take up their rights, may be
subject to a dilution of their ownership upon the issue of the new shares; and
• Future proposed issue of consideration shares for the acquisition of Interserve to further dilute ownership.
Employees:
• Additional funds strengthening Mitie’s financial position during a period of uncertainty for employees; and
• Funds to be utilised in connection with the proposed acquisition of Interserve with its associated benefits
for Mitie’s workforce.
Actions taken approved
by the Board:
• Frequent meetings to discuss financial modelling and scenarios including consideration of detailed Board
papers prepared both internally and in conjunction with brokers and advisors;
• Consideration of different mechanisms available to raise equity including, quantum, capacity, appetite of the
Consequences of the
decision in the long term:
market, issue price and execution;
• Approved the circular to shareholders and prospectus dated 25 June 2020; and
• Agreement of the Board to each fully take up their individual rights to subscribe for New Shares under the
Rights Issue in respect of their existing shareholdings.
The Board concluded that the Rights Issue and Re-financing would:
• Enable Mitie to further leverage the benefits of the first phase of its transformation programme and to
support the continued implementation of phase II initiatives to drive continued growth, cost savings and
free cash flow across the business;
• Mitigate indebtedness risks;
• Provide Mitie with a strong financial position and liquidity to trade through the COVID-19 pandemic; and
• Enable Mitie to capture opportunities to support the Group’s long-term growth prospects.
Outcome:
With full support from the Board, shareholder approval was obtained at a General Meeting on 13 July 2020, with
the Rights Issue closing on 28 July 2020.
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Mitie Group plc | Annual Report and Accounts 2021
Decision
Overview:
Use of UK Government initiatives and implementation of self-help measures
Following the outbreak of the COVID-19 pandemic, and in response to a deterioration of trading conditions across the
business, the Board chose to utilise UK Government initiatives where available, alongside several self-help measures.
Stakeholder considerations:
Actions taken approved
by the Board:
Employees:
UK Government’s Coronavirus Job Retention Scheme (Furlough):
• The prevention of redundancies amongst Mitie’s employees;
• The wellbeing of, and ongoing communication with, furloughed employees; and
• Procedures for extremely vulnerable employees and employees vulnerable to COVID-19.
Reduction of salaries:
• Level of salary above which salary cut to be implemented, along with percentage of salary cut and
duration of cut;
• Impact of cuts on employee morale and ongoing commitment to Mitie; and
• Wellbeing and potential impact on personal financial commitments.
Shareholders:
• Possible impact/shareholder perception of not recommending a final dividend for FY20 and not declaring
an interim dividend for FY21;
• The level of necessary actions required to reduce costs to support Mitie in unprecedented times; and
• Required measures to demonstrate adequate self-help ahead of seeking shareholder support for the
Rights Issue.
Customers:
• Ability to identify and re-deploy staff, where possible, quickly and efficiently, to meet customer demand
where an increase in volume experienced, for example, in Security.
UK Government’s Coronavirus Job Retention Scheme (Furlough):
• Regular communication plan for furloughed employees, with dedicated furlough website;
• Mechanism introduced for efficient re-deployment of furloughed employees where possible;
• Provided extremely vulnerable employees with the right to be furloughed;
• Employees vulnerable to COVID-19 prioritised when identifying colleagues to offer furlough opportunities;
• Dedicated health and wellbeing website including information on Mitie’s Virtual GP service and Employee
Assistance Programme; and
• Repayment of furlough relating to colleagues employed directly at Mitie’s own operations.
Reduction of salaries:
• Phased restoration of pay earlier than originally planned;
• Employees’ holiday pay was “topped-up” to 100% of their normal pay during the period of salary
reduction; and
• Mitie continued to make employer pension contributions based on 100% of employees’ salaries during
the period of salary reduction.
Non-payment of dividend:
• Recognising the importance of dividends to all shareholders, the Board committed to keep under review
the possibility of a resumption in dividends in FY21, but only in the event overall trading improved materially
during the second half of the year.
Consequences of the
decision in the long term:
The Board concluded that all reasonable steps should be taken to preserve Mitie’s financial strength in light of the
unprecedented uncertainty due to the COVID-19 pandemic.
Outcome:
The Board approved the utilisation of UK Government assistance where available, including furlough, and the
implementation of several self-help measures, including a temporary reduction in salary of between 10% and 30%
for employees earning more than £40,000 per year, deferral of pay rises and a commitment not to recommend a
final dividend for FY20. The Board subsequently decided not to declare an interim dividend for FY21 and the Group
has repaid £4.1m to the Government relating to furloughed colleagues employed directly at Mitie’s own operations.
Mitie Group plc | Annual Report and Accounts 2021
45
Strategic reportGovernanceFinancial statements Operating responsibly
Maintaining a high standard
of business conduct
Ethical business practice
Mitie has a duty to act responsibly and to show the highest levels of
ethical and moral stewardship. Mitie’s ethical business practice policy is in
place and applies to all employees in relation to dealings with its people,
agents, customers, suppliers, subcontractors, competitors, government
officials, the public and investors.
Employee Handbook
Mitie’s Values form the basis of its culture and show the outside world
what Mitie is all about and how Mitie does things. Mitie issues an
Employee Handbook to all employees on commencement of their
employment. The handbook helps Mitie’s people to really understand
their role in the business and what value they can add. It also explains
how Mitie expects its people to act as Mitie employees. The handbook
includes information on Mitie’s policies and procedures on bribery and
corruption, conflicts of interest, gifts and hospitality and responsible
partnerships with suppliers.
Culture
Mitie’s Values help define the behaviours of its people and underpin its
vision of The Exceptional, Every Day. An important element of Mitie’s
culture is establishing a ‘One Mitie’ way of operating across the business.
The ‘One Mitie’ way leads to consistent, high quality and relevant
information flows across the business. Having a culture embraced
and supported by employees, leads to a motivated and high
performing workforce to deliver the strategy and outcomes needed
for long-term success.
Whistleblowing, fraud and bribery
Mitie has an independent whistleblowing service to enable employees,
suppliers and third parties to report any concerns or wrongdoing
anonymously without any fear of retaliation. The service, which is
managed by an independent service provider, can be accessed via a
freephone number, a free online app or through the service provider’s
website. Details of the service are made available to employees via Mitie’s
Employee Handbook and are displayed on Mitie’s intranet and workplace
posters. Details of the service are also communicated to suppliers via
Mitie’s sourcing portal and to other third parties via www.mitie.com.
The whistleblowing service and related internal procedures are
structured to ensure that all reports are reviewed and investigated
independently from the area of the business to which they relate,
thereby minimising the risk of conflicts arising. All reports are copied
to the Deputy General Counsel, to ensure transparency and enable
any trends across different divisions and functions to be identified
and addressed. An update on whistleblowing activity is provided to the
Board at every Board meeting and to the Mitie Group Executive (MGX)
as appropriate.
The Board update includes details of incident reports received in the
period between meetings, together with aggregated details of all reports
received since the launch of the service in September 2017.
46
Mitie Group plc | Annual Report and Accounts 2021
Human rights
Over and above the requirements of the Modern Slavery Act, Mitie
endorses the tenets of the Global Compact principles, International
Labour Organisation Declaration on Fundamental Principles and Rights
at Work and the Ethical Trading Initiative ‘Base Code’ and will ensure
that: employment is freely chosen; freedom of association is respected;
working conditions are safe and hygienic; child labour is not used; wages
are not lower than minimum wage; working hours are not excessive;
no discrimination is practised; regular employment is provided; and no
harsh or inhumane treatment is allowed. Compliance with these rules
is a prerequisite for any business engagement.
Good governance
Details of how Mitie complies with the UK Corporate Governance Code
can be found in the Governance report, starting on page 68.
Training
There are a number of training modules available to Mitie employees
including, modern slavery, whistleblowing, anti-bribery and
anti-corruption, business expenses and entertaining.
Procurement Code of Conduct
Mitie has a compulsory code of conduct for all employees involved in
making any purchases on behalf of Mitie which highlights the need to
declare formally any conflict of interest that may exist in purchase
decisions being made.
SMEs
Mitie’s Responsibility targets are focused on increasing the percentage
of Mitie’s spend that goes to small and medium-sized enterprises (SMEs),
and voluntary, charity and social enterprise (VCSE) suppliers. Mitie’s
Supplier Management Framework (SMF) measures performance across
a range of metrics, including ethical and sustainable supply, with action
plans in place to improve outcomes. Milestone targets are in place for
each financial year.
Mitie continues to leverage and improve its SMF to develop its
partnership with key suppliers. The framework provides a mechanism
for scoring a supplier’s performance and jointly reviewing it to create
action plans which unlock new value for both parties. The SMF scores
six areas of delivery: ways of working, innovation, service, ethical and
sustainable supply, quality and cost. As the SMF develops, a greater
percentage of Mitie’s spend is being brought into scope. As part of the
ethical and sustainable supply metrics, all SMF-managed suppliers will be
scored and have their performance reviewed on meeting Mitie’s social
value policy, their carbon reduction plans, actions to reduce
environmental impact, Modern Slavery Act compliance and innovations
to support Mitie’s Plan Zero and social value initiatives. In FY21, SMF
incorporated 30% of Mitie’s spend. This will increase year-on-year,
cementing improvements in ethical and sustainable supply. In addition,
all tenders run by the Procurement function now have a minimum
15% ethical and sustainable supply requirement.
The acquisition of Interserve has led to Mitie’s supply chain spend
exceeding £1bn per annum and increased Mitie’s supplier base to over
10,000 suppliers. This increased leverage has led to a root and branch
review of the Group’s procurement and supply chain operating policies,
systems and processes. The MGX has recognised the increased
opportunity to leverage Mitie’s increased scale and influence in the supply
chain to not only remove cost but to influence supplier diversity and
environmental stewardship across the now larger supplier base. This
recognition has led to an investment in improved digital systems to
manage suppliers.
Modern slavery
Mitie is committed to ensuring that slavery, trafficking, bonded labour,
forced or servile marriage, descent-based slavery and domestic work and
slavery does not take place in its business or any part of its supply chain.
Mitie seeks to ensure its recruitment processes are transparent and
reviewed regularly, with robust processes in place for the vetting of and
appointment of its people, raise awareness of the issue amongst its
people and suppliers to combat the hidden nature of modern slavery,
challenge and support its suppliers in the effort to drive out modern
slavery and human trafficking and apply the spirit as well as the letter
of the law to its internal practices.
Mitie’s latest statement on Modern Slavery can be found at
https://www.mitie.com/legal/modern-slavery-act/.
Impact of Brexit and COVID-19 on the supply chain
Mitie’s supply chain was not immune to the impacts of the UK’s exit from
the European Union (Brexit) and COVID-19, however, by adopting a
flexible and responsive attitude the Procurement function managed the
inherent risks so that the impact was low. In the early stages of the
COVID-19 pandemic, when there was a major impact on PPE suppliers
under pressure from central Government and other customers, Mitie’s
response was to set up a completely new supply chain, storage and
distribution solution. This benefited the whole Mitie business and
customer base and continues to play a strategic part in Mitie’s COVID-19
response. The impact of Brexit has been minimal to date, with Mitie
continuing to monitor suppliers who provide critical spares sourced
from the European Union and implementing contracts and policies to
identify any future issues. This situation continues to be monitored at
a supplier level.
Cyber security
Data and information is at the heart of Mitie. It plays a massive role in
everyone’s daily lives. Mitie takes the protection and integrity of data very
seriously, and recognises that customers want clarity and transparency
about how their data is used, managed and protected.
Mitie’s information and, cyber security policies and associated standards
guide its people on how to keep data and information safe; which are
continually kept under review to ensure that they remain aligned with
industry best practice and keep abreast of emerging threats. Awareness
of these policies is raised through ongoing communication and training
delivered to all Mitie colleagues. The Mitie Board receives regular
updates at Board meetings on cyber security, resilience and the progress
of security initiatives.
Mitie is certified to Cyber Essentials Plus for the entire organisation
and ISO27001 for the critical business units. Mitie has a continuous
improvement-based approach to further the security of the data and
information processed. Mitie works in close partnership with leading
industry bodies, National Cyber Security Centre and partners to ensure
the Group stays stay on top of emerging threats and security trends.
Acting fairly between members
A range of direct shareholder engagements are undertaken during the
year, including; roadshows, the AGM and one-to-one meetings with the
Company’s largest shareholders, and indirectly through investor relations
reports prepared for every Board meeting with regular share register
updates. Topics discussed with investors include corporate governance
matters, environment, human capital, corporate culture and the Board’s
long-term views on the business. More details on this stakeholder
engagement can be found on pages 48 to 53.
Interests of investors are considered as part of the decision-making
relating to M&A activity, declaration of dividends and strategy.
Mitie operates robust share dealing processes and procedures to ensure
compliance with the UK’s Market Abuse Regulations, including a training
module which all relevant employees are requested to complete on a
regular basis. This ensures the release of price sensitive information is in
line with the regulations and that no individual or group of shareholders
can gain an unfair advantage.
Mitie Group plc | Annual Report and Accounts 2021
47
Strategic reportGovernanceFinancial statements Stakeholder engagement
Stakeholder
engagement
Key stakeholder
How we engage
Reason for engagement
Important issues discussed/outcomes
Action taken
Equity shareholders
• Institutional investors
• Retail investors
• Investment banks (sales desks and equity
research analysts)
• Annual report and accounts;
• Annual General Meeting;
• Investor sector of the corporate website www.mitie.com;
• Results presentations and post-results engagement (roadshows);
• Capital market events or site visits;
• Stock exchange announcements and press releases;
• Regular and ad hoc analyst and investor inter-actions; and
• Project-specific consultations.
Debt holders
• Banks
• USPP holders
• Credit insurers
Customers
• Annual report and accounts;
• Capital market events or site visits;
• Results presentations and post-results engagement (roadshows);
• Stock exchange announcements and press releases; and
• Responding to ad hoc creditor enquiries.
• Management of ongoing customer relationships by senior leadership;
• Customer satisfaction score (NPS) programme;
• Customer experience programmes;
• Commercial/performance reporting;
• Participation in industry forums and events;
• Annual reporting and accounts;
• The Mitie Foundation;
• Customer communications;
• Press releases;
• Website and social media platforms; and
• Meetings and briefings.
• Vital to Mitie’s long-term strategy and
performance to have supportive long-
term shareholders;
• Shareholders and investment analysts
should have a strong understanding of
Mitie’s strategy, performance and culture;
• Support required for Rights Issue to
further strengthen Mitie’s balance sheet,
working capital and liquidity position; and
• Directors have a duty to promote
the success of Mitie for the benefit of
its shareholders.
• Industry trends and outlook;
• Financial performance;
• COVID-19 response;
• Rights Issue;
• Acquisition of Interserve;
• Remuneration policy and executive
remuneration;
• Non-Executive Director shareholdings;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
• Vital to Mitie’s long-term performance
to have access to a variety of sources of
liquidity and other banking services; and
• Re-financing of Mitie’s Revolving Credit
Facility (RCF) required, along with Rights
Issue, to further strengthen Mitie’s balance
sheet, working capital and liquidity position.
• Understanding customer needs and
identifying opportunities and challenges
to build compelling value propositions;
• Informing customers – ‘Why Mitie’ –
so they understand Mitie’s strategy,
performance and culture;
• Improving customer loyalty, advocacy,
growth potential and lifetime value (LTV);
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships
with customers, supply chain and
communities; and
• Demonstrating operational efficiencies/
gaps/opportunities.
• Industry trends and outlook;
• Financial performance;
• COVID-19 response;
• Rights Issue;
• Acquisition of Interserve;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
• COVID-19 response;
• Acquisition of Interserve;
• Customer satisfaction;
• Performance and efficiency;
• Research and innovation;
• Sustainability performance;
• Cost/value;
• Reputation;
• Growth;
• Brand;
• Governance and transparency;
• Operational efficiency;
• Technology;
• Social values;
• Vision and values; and
• People and culture.
• 100+ 1-1 shareholder meetings;
• Six presentations or conference
calls between management, analysts
and shareholders;
• Frequent press releases covering
ESG, contract wins and renewals;
• Consultations with regards to the
Rights Issue and acquisition of Interserve,
which closed on 28 July 2020 and
30 November 2020;
• Consultations with major shareholders
on proposed remuneration policy
(see more on page 119) and executive
remuneration; and
• Implementation of a Non-Executive
Director shareholding policy.
• Consultations with the holders of the US
private placement notes and lenders to
the RCF on covenant amendments and an
extension to the RCF, which took effect
on completion of the Rights Issue.
• Group-wide COVID-19 response
communications executed by Group
QHSE Director to inform business
continuity plans;
• Annual NPS programme (95% aggregate
revenue covered) to establish customer
satisfaction, and identify risk and
opportunities;
• Interserve customer survey to establish
baseline score and execute action plan to
level up;
• Campaign launches: Plan Zero,
Landscaping, Technical Services (air quality,
safe return to work);
• SAM programme driving improved
customer loyalty and LTV; and
• Raising awareness of and evidencing
Mitie’s commitment to diversifying its
workforce through bids, communications,
round table events, ready to work
schemes, apprenticeships, upskilling,
inclusive recruitment programmes.
48
Mitie Group plc | Annual Report and Accounts 2021
Key stakeholder
How we engage
Reason for engagement
Important issues discussed/outcomes
Action taken
Equity shareholders
• Institutional investors
• Retail investors
• Investment banks (sales desks and equity
research analysts)
• Annual report and accounts;
• Annual General Meeting;
• Investor sector of the corporate website www.mitie.com;
• Results presentations and post-results engagement (roadshows);
• Capital market events or site visits;
• Stock exchange announcements and press releases;
• Regular and ad hoc analyst and investor inter-actions; and
• Project-specific consultations.
Debt holders
• Banks
• USPP holders
• Credit insurers
Customers
• Annual report and accounts;
• Capital market events or site visits;
• Results presentations and post-results engagement (roadshows);
• Stock exchange announcements and press releases; and
• Responding to ad hoc creditor enquiries.
• Management of ongoing customer relationships by senior leadership;
• Customer satisfaction score (NPS) programme;
• Customer experience programmes;
• Commercial/performance reporting;
• Participation in industry forums and events;
• Annual reporting and accounts;
• The Mitie Foundation;
• Customer communications;
• Press releases;
• Website and social media platforms; and
• Meetings and briefings.
• Vital to Mitie’s long-term strategy and
performance to have supportive long-
term shareholders;
• Shareholders and investment analysts
should have a strong understanding of
Mitie’s strategy, performance and culture;
• Support required for Rights Issue to
further strengthen Mitie’s balance sheet,
working capital and liquidity position; and
• Directors have a duty to promote
the success of Mitie for the benefit of
its shareholders.
• Industry trends and outlook;
• Financial performance;
• COVID-19 response;
• Rights Issue;
• Acquisition of Interserve;
• Remuneration policy and executive
remuneration;
• Non-Executive Director shareholdings;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
• Vital to Mitie’s long-term performance
to have access to a variety of sources of
liquidity and other banking services; and
• Re-financing of Mitie’s Revolving Credit
Facility (RCF) required, along with Rights
Issue, to further strengthen Mitie’s balance
sheet, working capital and liquidity position.
• Understanding customer needs and
identifying opportunities and challenges
to build compelling value propositions;
• Informing customers – ‘Why Mitie’ –
so they understand Mitie’s strategy,
performance and culture;
• Improving customer loyalty, advocacy,
growth potential and lifetime value (LTV);
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships
with customers, supply chain and
communities; and
• Demonstrating operational efficiencies/
gaps/opportunities.
• Industry trends and outlook;
• Financial performance;
• COVID-19 response;
• Rights Issue;
• Acquisition of Interserve;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
• COVID-19 response;
• Acquisition of Interserve;
• Customer satisfaction;
• Performance and efficiency;
• Research and innovation;
• Sustainability performance;
• Cost/value;
• Reputation;
• Growth;
• Brand;
• Governance and transparency;
• Operational efficiency;
• Technology;
• Social values;
• Vision and values; and
• People and culture.
• 100+ 1-1 shareholder meetings;
• Six presentations or conference
calls between management, analysts
and shareholders;
• Frequent press releases covering
ESG, contract wins and renewals;
• Consultations with regards to the
Rights Issue and acquisition of Interserve,
which closed on 28 July 2020 and
30 November 2020;
• Consultations with major shareholders
on proposed remuneration policy
(see more on page 119) and executive
remuneration; and
• Implementation of a Non-Executive
Director shareholding policy.
• Consultations with the holders of the US
private placement notes and lenders to
the RCF on covenant amendments and an
extension to the RCF, which took effect
on completion of the Rights Issue.
• Group-wide COVID-19 response
communications executed by Group
QHSE Director to inform business
continuity plans;
• Annual NPS programme (95% aggregate
revenue covered) to establish customer
satisfaction, and identify risk and
opportunities;
• Interserve customer survey to establish
baseline score and execute action plan to
level up;
• Campaign launches: Plan Zero,
Landscaping, Technical Services (air quality,
safe return to work);
• SAM programme driving improved
customer loyalty and LTV; and
• Raising awareness of and evidencing
Mitie’s commitment to diversifying its
workforce through bids, communications,
round table events, ready to work
schemes, apprenticeships, upskilling,
inclusive recruitment programmes.
Mitie Group plc | Annual Report and Accounts 2021
49
Strategic reportGovernanceFinancial statements Stakeholder engagement continued
Key stakeholder
Employees
How we engage
Reason for engagement
Important issues discussed/outcomes
Action taken
• Employee survey;
• You said, we did;
• All colleague / line manager emails;
• Monthly Download;
• Weekly Recap;
• The Exceptional, company magazine;
• Key topic webinars (e.g. D&I, Plan Zero)
• Letters to home addresses for key benefits (e.g. Salary Advance);
• MitiePeople.com;
• Payslip messages;
• MiNet and social media platforms;
• Annual report and accounts;
• Townhall meetings;
• Annual roadshow;
• Grill Phil;
• MLT back to the floor;
• Annual individual performance reviews; and
• Designated Non-Executive Director (Jenny Duvalier).
• People are Mitie’s greatest assets and
Mitie has a duty of care to ensure they
are equipped to make the best decisions;
• One of Mitie’s core promises to its
employees is to provide a place of work
where they can thrive and be their best
• Creating a diverse and inclusive workplace
where every employee can reach their
every day;
full potential;
• Ensuring that Mitie is delivering to
employees’ expectations;
• Supporting employee wellbeing and in
making the right business decisions;
• Ensuring that Mitie retains and develops
the best talent;
• Ensuring that employees feel informed,
connected and supported; and
• Ensuring that employees understand what
Mitie does and its strategy and engaging
them in the future of the business.
• COVID-19 response;
• Dedicated COVID-19 emails and
• Acquisition and integration of Interserve;
pulse surveys;
• Financial performance;
• Rights Issue;
• Communication & Culture;
• Reward & Recognition;
• Systems, Processes & Technology;
• Health, Safety & Wellbeing;
• Diversity & inclusion; and
• Talent pipeline and retention.
Suppliers
• Supplier conferences and workshops
• Global supplier portal and notices to suppliers;
• www.mitie.com;
• Annual report and accounts;
• The Mitie Foundation; and
• Supplier Management Framework (SMF) 1:1 supplier engagement with
55 strategic partners.
• Suppliers make a vital contribution to
Mitie’s performance;
• Mitie encourages suppliers to work
collaboratively to ensure continual
improvement in operations and to deliver
mutual benefit; and
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships with
customers, supply chain and communities.
• COVID-19 response
• Brexit response
• Acquisition of Interserve
• Responsible procurement;
• Trust and ethics; and
• Operational improvement.
50
Mitie Group plc | Annual Report and Accounts 2021
• Launched a new Group-wide Agile
Working Policy;
• Rolled out a new Diversity & Inclusion
strategy and plans to make Mitie inclusive
for everyone;
• Launched www.mitiepeople.com,
a new platform to ensure colleagues
on the frontline can easily access news
and information about Mitie;
• Rolled out ‘The Mitie Way’ of working,
to ensure a ‘One Mitie’ approach to
managing people and customers;
• Made LiveSafe training available to all
colleagues;
• Made Diversity & Inclusion training
available to all colleagues;
• Integrated Mitie systems to remove
the need for multiple usernames
and passwords;
• Moved a number of core applications
to the Cloud to improve performance,
disaster recovery and resilience;
• Enabled multifactor authentication for
everyone to safeguard Mitie’s network
and systems from cyber-attacks;
• Optimised Microsoft Teams to enable
virtual collaboration across Mitie;
• Improved telephony platforms to improve
user experience and resilience; and
• Launched ‘One Mitie’ Occupational
Health and Wellbeing Strategy and digital
wellbeing platform.
• Supplier communications and engagement
with Interserve supplier base;
• Regular reviews of COVID-19 impact on
• Regular review of Brexit impact on high-
high-risk suppliers;
risk suppliers;
• 260 meetings with SMF strategic suppliers;
• Focused supplier engagement
communications on the changes coming
from Project Forte; and
• Engaged top 100 spend suppliers in rapid
renegotiation programme to leverage
the Group’s greater spend following the
acquisition of Interserve.
Key stakeholder
Employees
• Letters to home addresses for key benefits (e.g. Salary Advance);
How we engage
• Employee survey;
• You said, we did;
• All colleague / line manager emails;
• Monthly Download;
• Weekly Recap;
• The Exceptional, company magazine;
• Key topic webinars (e.g. D&I, Plan Zero)
• MitiePeople.com;
• Payslip messages;
• MiNet and social media platforms;
• Annual report and accounts;
• Townhall meetings;
• Annual roadshow;
• Grill Phil;
• MLT back to the floor;
• Annual individual performance reviews; and
• Designated Non-Executive Director (Jenny Duvalier).
Reason for engagement
Important issues discussed/outcomes
Action taken
• COVID-19 response;
• Acquisition and integration of Interserve;
• Financial performance;
• Rights Issue;
• Communication & Culture;
• Reward & Recognition;
• Systems, Processes & Technology;
• Health, Safety & Wellbeing;
• Diversity & inclusion; and
• Talent pipeline and retention.
• People are Mitie’s greatest assets and
Mitie has a duty of care to ensure they
are equipped to make the best decisions;
• One of Mitie’s core promises to its
employees is to provide a place of work
where they can thrive and be their best
every day;
• Creating a diverse and inclusive workplace
where every employee can reach their
full potential;
• Ensuring that Mitie is delivering to
employees’ expectations;
• Supporting employee wellbeing and in
making the right business decisions;
• Ensuring that Mitie retains and develops
the best talent;
• Ensuring that employees feel informed,
connected and supported; and
• Ensuring that employees understand what
Mitie does and its strategy and engaging
them in the future of the business.
Suppliers
• Supplier conferences and workshops
• Global supplier portal and notices to suppliers;
• www.mitie.com;
• Annual report and accounts;
• The Mitie Foundation; and
55 strategic partners.
• Supplier Management Framework (SMF) 1:1 supplier engagement with
• Suppliers make a vital contribution to
Mitie’s performance;
• Mitie encourages suppliers to work
collaboratively to ensure continual
improvement in operations and to deliver
mutual benefit; and
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships with
customers, supply chain and communities.
• COVID-19 response
• Brexit response
• Acquisition of Interserve
• Responsible procurement;
• Trust and ethics; and
• Operational improvement.
• Dedicated COVID-19 emails and
pulse surveys;
• Launched a new Group-wide Agile
Working Policy;
• Rolled out a new Diversity & Inclusion
strategy and plans to make Mitie inclusive
for everyone;
• Launched www.mitiepeople.com,
a new platform to ensure colleagues
on the frontline can easily access news
and information about Mitie;
• Rolled out ‘The Mitie Way’ of working,
to ensure a ‘One Mitie’ approach to
managing people and customers;
• Made LiveSafe training available to all
colleagues;
• Made Diversity & Inclusion training
available to all colleagues;
• Integrated Mitie systems to remove
the need for multiple usernames
and passwords;
• Moved a number of core applications
to the Cloud to improve performance,
disaster recovery and resilience;
• Enabled multifactor authentication for
everyone to safeguard Mitie’s network
and systems from cyber-attacks;
• Optimised Microsoft Teams to enable
virtual collaboration across Mitie;
• Improved telephony platforms to improve
user experience and resilience; and
• Launched ‘One Mitie’ Occupational
Health and Wellbeing Strategy and digital
wellbeing platform.
• Supplier communications and engagement
with Interserve supplier base;
• Regular reviews of COVID-19 impact on
high-risk suppliers;
• Regular review of Brexit impact on high-
risk suppliers;
• 260 meetings with SMF strategic suppliers;
• Focused supplier engagement
communications on the changes coming
from Project Forte; and
• Engaged top 100 spend suppliers in rapid
renegotiation programme to leverage
the Group’s greater spend following the
acquisition of Interserve.
Mitie Group plc | Annual Report and Accounts 2021
51
Strategic reportGovernanceFinancial statements Stakeholder engagement continued
Key stakeholder
How we engage
Reason for engagement
Important issues discussed/outcomes
Action taken
Communities
• Employee volunteering;
• The Mitie Foundation programmes (e.g. Employability Sessions);
• www.mitie.com and social media platforms;
• Annual report and accounts; and
• Local community events.
• Employment opportunities to cultivate
future talent pipeline;
• Supporting communities through ‘Giving
Back’ volunteering days;
• Local operational impact; and
• Health, safety and environment
performance.
• 8,000 volunteering hours delivered in
FY21, including delivery of food parcels to
those shielding during COVID-19; and
• Multiple Employability Sessions delivered
for customers and to charity partners.
Government
• Responses to government consultations;
• Participation in industry bodies;
• Conferences and speaking opportunities;
• Annual report and accounts;
• www.mitie.com; and
• Customer satisfaction score (NPS) programme.
• Financial performance;
• COVID-19 response;
• Reputation;
• Governance and transparency; and
• People and culture.
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships with
customers, supply chain and communities;
• Building positive relationships with local
communities is important for Mitie’s
performance and stakeholders;
• Mitie depends on its local communities to
provide the engaged and talented people
it needs to deliver great service and in
return Mitie supports them through
a wide range of initiatives; and
• Public sector contracts mandate that
at least 25% of subcontractors should
be SMEs.
• Governments set the regulatory
framework within which Mitie operates
and are often also customers;
• Engagement ensures Mitie can help in
shaping new policies, regulations and
standards, and ensure compliance with
existing legislation; and
• Governments also represent a potential
source of funding.
Media
• Press releases and stock exchange announcements;
• Annual report and accounts;
• www.mitie.com and social media platforms;
• Meetings and briefings; and
• Responding to regular press enquiries.
• The media and journalists are additional
channels for communication with
stakeholders that engage with them,
whether clients, investors, consumers
or employees;
• Key to mitigating reputational risk from
negative publicity; and
• Important to build reputation through
proactive engagement.
• COVID-19 response;
• Acquisition of Interserve;
• Reputational impact;
• Financial performance;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
52
Mitie Group plc | Annual Report and Accounts 2021
• 50+ meetings with senior government
and military stakeholders;
• Weekly meetings with the Cabinet Office;
• Close consultation regarding the Rights
Issue and acquisition of Interserve;
• Two Partnership Executive Meetings
with Cabinet Office Director for Markets
and Suppliers;
• Seven Joint Commitments agreed with
the Cabinet Office;
• Presented at the One Government Day
attended by 70+ government customers;
• Plan Zero round table with key
government stakeholders;
• Social Value & Responsible Business
Committee, chaired by Baroness Couttie,
set clear Social Value targets aligned to the
UK Government’s levelling up agenda;
• Mitie’s COVID-19 response in support of
the UK Government / DHSC testing work
and the setting up of Nightingale Hospitals.
Front line colleagues demonstrated
exceptional commitment to supporting
this work; and
• Public affairs company engaged to foster
senior stakeholder relationships and lobby
across public sector.
• Core media briefed on every major
announcement, particularly relating to
the corporate calendar;
• 30 proactive interviews/speaking
slots with Mitie spokespeople on key
campaign themes;
• Focus on background/off the record
briefing of any reactive issues to minimise
negative press coverage in the first
instance; and
• Social media activity to share corporate
announcements and sustainability progress
with stakeholders.
Key stakeholder
Communities
How we engage
• Employee volunteering;
• The Mitie Foundation programmes (e.g. Employability Sessions);
• www.mitie.com and social media platforms;
• Annual report and accounts; and
• Local community events.
Government
• Responses to government consultations;
• Participation in industry bodies;
• Conferences and speaking opportunities;
• Annual report and accounts;
• www.mitie.com; and
• Customer satisfaction score (NPS) programme.
Reason for engagement
Important issues discussed/outcomes
Action taken
• Employment opportunities to cultivate
future talent pipeline;
• Supporting communities through ‘Giving
Back’ volunteering days;
• Local operational impact; and
• Health, safety and environment
performance.
• 8,000 volunteering hours delivered in
FY21, including delivery of food parcels to
those shielding during COVID-19; and
• Multiple Employability Sessions delivered
for customers and to charity partners.
• The Mitie Foundation goes beyond
volunteering, to engaging talent and
enhancing long-term relationships with
customers, supply chain and communities;
• Building positive relationships with local
communities is important for Mitie’s
performance and stakeholders;
• Mitie depends on its local communities to
provide the engaged and talented people
it needs to deliver great service and in
return Mitie supports them through
a wide range of initiatives; and
• Public sector contracts mandate that
at least 25% of subcontractors should
be SMEs.
• Governments set the regulatory
framework within which Mitie operates
and are often also customers;
• Engagement ensures Mitie can help in
shaping new policies, regulations and
standards, and ensure compliance with
existing legislation; and
• Governments also represent a potential
source of funding.
• Financial performance;
• COVID-19 response;
• Reputation;
• Governance and transparency; and
• People and culture.
Media
• Press releases and stock exchange announcements;
• Annual report and accounts;
• www.mitie.com and social media platforms;
• Meetings and briefings; and
• Responding to regular press enquiries.
• The media and journalists are additional
channels for communication with
stakeholders that engage with them,
whether clients, investors, consumers
or employees;
• Key to mitigating reputational risk from
negative publicity; and
• Important to build reputation through
proactive engagement.
• COVID-19 response;
• Acquisition of Interserve;
• Reputational impact;
• Financial performance;
• Governance and transparency;
• Sustainability performance; and
• People and culture.
• 50+ meetings with senior government
and military stakeholders;
• Weekly meetings with the Cabinet Office;
• Close consultation regarding the Rights
Issue and acquisition of Interserve;
• Two Partnership Executive Meetings
with Cabinet Office Director for Markets
and Suppliers;
• Seven Joint Commitments agreed with
the Cabinet Office;
• Presented at the One Government Day
attended by 70+ government customers;
• Plan Zero round table with key
government stakeholders;
• Social Value & Responsible Business
Committee, chaired by Baroness Couttie,
set clear Social Value targets aligned to the
UK Government’s levelling up agenda;
• Mitie’s COVID-19 response in support of
the UK Government / DHSC testing work
and the setting up of Nightingale Hospitals.
Front line colleagues demonstrated
exceptional commitment to supporting
this work; and
• Public affairs company engaged to foster
senior stakeholder relationships and lobby
across public sector.
• Core media briefed on every major
announcement, particularly relating to
the corporate calendar;
• 30 proactive interviews/speaking
slots with Mitie spokespeople on key
campaign themes;
• Focus on background/off the record
briefing of any reactive issues to minimise
negative press coverage in the first
instance; and
• Social media activity to share corporate
announcements and sustainability progress
with stakeholders.
Mitie Group plc | Annual Report and Accounts 2021
53
Strategic reportGovernanceFinancial statements Principal risks and uncertainties
Effective risk
management
Our risk management approach
During FY21, Mitie’s enterprise risk management (ERM) framework has
been fully reviewed to ensure it remains aligned to organisational needs
as well as corporate governance requirements. Where identified,
improvements have been introduced and both policy and supporting
operating procedures have been assessed and revised.
An overview of the key features of Mitie’s ERM framework which are
pertinent to the compilation of the Group’s principal risks and
uncertainties, including emerging risks, are detailed below:
• The Board is responsible for clearly defining the level of risk exposure
Mitie is willing to take, and to ensure that the activities undertaken to
achieve its strategic objectives are commensurate with this appetite.
The Board is also responsible for monitoring the amount of risk being
taken. All principal risks have a level of appetite set which helps
determine the actions and resources required to mitigate them.
• Mitie’s risk management structure is designed to ensure a consistent
approach to the identification, assessment, monitoring and
management of risks across the business. All risks are reported against
a set of criteria, which consider the potential likelihood and
consequence should a risk be realised.
• Each business unit, function, project, and account maintains a detailed
risk register, which includes both risk controls and mitigation measures,
and is approved by respective leadership teams.
• Mitie has a rigorous risk treatment mechanism in place to facilitate the
correct management of risks where a residual risk score is identified
as being over the stipulated threshold.
• Risk registers are formally signed off biannually.
• The Insurance team plays a pivotal role is assessing key exposures and
ensuring appropriate risk transfer is in place for insurable risks.
• Risk management is approached in a proactive manner making full use
of Mitie’s Global Security Operations Centre (GSOC), which assists by
assessing threats and identifying potential issues.
• Mitie’s internal and external environments are continuously scanned
and monitored to ensure that any new or emerging risks are identified
in a timely manner and responded to appropriately. As a result of this,
three new principal risks have been introduced for disclosure
(Interserve integration, business resilience and third-party
management). In addition, one principal risk (climate change and social
impact) has been significantly updated to reflect the changing external
landscape relating to climate change.
• Mitie actively encourages and facilitates a learning culture in respect
of risk management to ensure that the Group constantly improves,
remains resilient and adapts to the continually evolving external
environment. In FY21, Mitie has taken the learnings from each
COVID-19 wave and ensured that these have been applied to
enhance its response when tackling subsequent COVID-19 waves
and associated national and international lockdowns.
• Principal risks are subject to a thorough review biannually (for the
half-year and full-year financial reporting), with quarterly updates
feeding into the Group Risk Committee for consideration. The Board
and Audit Committee are actively engaged throughout the process
and provide challenge. All outputs from this review are signed off
by the Board. The principal risks are shown on pages 56 to 65.
• In assessing Mitie’s long-term viability, consideration is always given
to the principal risks. The Viability Statement is found on page 66.
54
Mitie Group plc | Annual Report and Accounts 2021
Changes to our risk profile owing to COVID-19
and Brexit
During FY21, the external environment changed dramatically as a result
of the COVID-19 pandemic and the signing of the EU-UK Trade and
Cooperation Agreement which has applied since 1 January 2021 and
followed the UK’s departure from the European Union (Brexit). Whilst
both now present themselves as ‘issues’ and are actively being managed
in parallel with business as usual activities, the medium to longer terms
risks associated with them continue to be subject to ongoing review to
minimise any potential impact on the business. At the date of this report,
both the Group-led COVID-19 and Brexit Readiness working groups
were still operational.
Where there is the prospect for risks linked to either COVID-19 or the
post-Brexit landscape to have a detrimental effect on the new or existing
principal risks, specific controls have been disclosed against the respective
principal risk.
The points below detail some of the immediate control actions taken
during FY21 to manage the immediate risks posed by both COVID-19
and Brexit:
COVID-19
• Crisis and Business Continuity Management (BCM) frameworks
invoked and fully implemented throughout the Group and in
collaboration with clients.
• Group-led COVID-19 Working Group continued to monitor
developments and advise on the course of action to be taken by
Mitie in response to the ongoing pandemic.
• Increased meeting frequency at Mitie Group Executive (MGX) level
to monitor ongoing impacts and direct actions.
• Close working relationship maintained with the UK Government
through the Cabinet Office.
• Coordinated support to critical infrastructure throughout
the pandemic.
• Ongoing dialogue with clients to understand their requirements.
• Close monitoring of supply chain to ensure continuity of
critical supplies.
• Use of UK Government support schemes.
• Regular forecasting and reviews of revenue and cash.
• Implementation of self-help measures, including overhead cost
reduction programme, deferral of non-essential and uncommitted
capital expenditure and a reduction in salaries of between 10% and
30% in relation to all employees earning £40,000 or more during the
period 1April 2020 until 30 September 2020.
• Decision not to recommend a final dividend in respect of FY20 or to
pay an interim dividend in respect of FY21.
Brexit
• Executive level sponsor appointed to lead organisational response.
• Group-led Brexit Readiness Working Group established.
• Full review of EU-UK Trade and Cooperation Agreement undertaken,
and control plan adopted.
• Close working relationship maintained with the UK Government
to ensure continuity of service.
• On-going dialogue with clients to understand requirements.
• Close monitoring of supply chain to ensure continuity of critical
supplies – Procurement Brexit lead appointed.
• Review of overseas insurance to ensure compliance.
• Ongoing review of Settlement Status compliance and implications
of non-tariff measures.
Our risk management framework
Internal Reporting
Group Level Risks
• Collection of risks which could affect the performance, future-prospects or reputation of the
Group and are subject to ongoing reviews
• Complementary framework in place for the management and ongoing review of Principal
Risks and Uncertainties as agreed by the Mitie Board
• Risk appetite and associated parameters established for all risks and subject to ongoing review
External Reporting
Principal Risks & Uncertainties
• Condensed version of Principal Risks and
Uncertainties, which has been reviewed
and approved by the Mitie Board and
Audit Committee
MB, MGX, AC, RT, RC
MB, MGX, AC, RT, RC
Contributors key:
New & Emerging Risks
• Ongoing review of internal and external
environment encapsulating new risks in
known context, known risks in new
context and new risks in new context
Business Unit, Function
& Project Risks
• Identify, evaluate and mitigate risks
recorded in risk register
• Report on current and emerging risks
AC, RT, RC, GSOC, BUL, BFL, PL, AL
BUL, BFL, PL
Account Level Risks
• Identify, evaluate and mitigate operational risks recorded in risk register
• Report on current and emerging risks
AL
Audit Committee
Risk Team
Risk Committee
Mitie Board
MB
MGX Mitie Group Executive
AC
RT
RC
GSOC Global Security Operations Centre
BUL
BFL
PL
AL
Business Unit Leadership Team
Business Function Leadership Team
Project Leadership Team
Account Leadership Team
Mitie Group plc | Annual Report and Accounts 2021
55
Strategic reportGovernanceFinancial statements Principal risks and uncertainties continued
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Continue to review progress of
workstreams and performance
against savings target.
1 Interserve integration
Failure to manage activities associated with the integration of
Interserve whilst also giving due consideration to the carry-over of
risk(s), in particular those pertaining to the transaction phase of the
acquisition, as well as the day to day impact on employees, customers,
and other third parties involved in the Mitie business, could hinder the
Group’s ability to adopt common processes, systems and ways of
working and ultimately result in Mitie failing to meet its £43m savings
target through synergies, and cause damage to its reputation.
Impacts on strategic pillars:
Change in year:
New risk
also incorporates the structural
complexity risk
On 30 November 2020, Mitie completed the acquisition of Interserve,
creating the UK’s largest facilities management company. As with any
acquisition, Mitie will pick up a number of risks in relation to the
Interserve acquisition, including risks which remained ‘live’ and were
carried across from the transaction phase e.g. risks relating to the
operating environment, risks relating to financial information and risks
relating to the acquisition, as well as those relating to the integration
phase of the project, most notably a failure to deliver on the £43m
savings target.
An inability to effectively manage all associated Interserve FM risks
could delay the delivery of expected benefits from the acquisition and
consequently have a detrimental impact on Mitie’s business performance.
In order to make sure these risks are managed effectively it is
important that Mitie maintains its stringent integration framework
and continues to deliver on time and to the high-quality standard
expected. Mitie also needs to communicate changes effectively and
deliver regular and relevant updates to all key stakeholders.
• Integration leadership
team established with
MGX sponsorship.
• Workstreams established with
appropriate representation
at business unit, function, and
executive level.
• Experienced programme
managers in place and
governance frameworks
embedded to monitor ongoing
impacts and direct actions,
including Board meetings.
• Experienced staff members
dedicated to the programmes
to allow focus on the
improvement activity.
• Integration of system rollouts
underway – HR and IT systems
due to conclude Autumn 2021
• Risks identified as part
of the transaction phase
reviewed and incorporated
in Group risk register with
documented controls.
• Integration Pulse surveying being
undertaken at agreed milestones.
• Regular dialogue with staff and
clients to understand their
requirements and update on
pertinent milestones.
• Regular monitoring of
change projects.
• Continued investment in and
benefits delivery from the
Quality Improvement Council
(QIC) programme.
• Dedicated risk management and
assurance procedures within the
programmes to ensure internal
controls are operating effectively.
• Amalgamated approaches
adopted to address ongoing
COVID-19 and Brexit associated
risks and issues.
56
Mitie Group plc | Annual Report and Accounts 2021
Our strategic pillars
Customer: build market-leading positions
in higher growth segments and increase
customer NPS
People: create a ‘Great Place to Work’
for our employees
Technology: embed technology
into the heart of our offering
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
Change in year
Decreased
Stayed
the same
Increased
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Continue to work with a range
of financial institutions to ensure
that affordable finance sources
can be accessed.
• Maintenance of strong banking,
debt, and equity relationships.
• Regular forecasting of cash flow
and net debt.
• Thorough focus on working
capital cycles with a clear set
of KPIs.
• Clear policy on provisions.
• Strong focus on and monitoring
of cash collection.
• Regular reviews of payment
terms with customers and
supply chain.
• Focus on working capital
processes to reduce cycle times
and average net debt.
2 Funding
Inability to maintain access to and renew suitable sources of
funding due to a perceived risk in Mitie’s business and/or the sector
as a whole may impact the Group’s ability to maintain profitable
business performance.
Impacts on strategic pillars:
Change in year:
In order to be able to meet its financial commitments, Mitie needs
access to a number of affordable sources of finance. Mitie’s core debt
facilities include a revolving credit facility and private placement loan
notes. Mitie needs to have sufficient liquidity to be able to pay suppliers
and staff, whilst also investing in the business and ensuring it has enough
resources for profitable growth.
During FY21, Mitie raised £190m through the Rights Issue and
extended its revolving credit facility of £250m to December 2022,
strengthening the financial position of the Group and decreasing the
impact of this risk. Mitie has focused on maintaining strong financial
discipline in the management of its working capital and investment
decisions and on minimising its funding requirements. This has included
working with the Group’s back-office outsource partner to improve
processes and efficiency.
During the year, COVID-19 has not impacted the availability of the
Group’s existing committed facilities but there is a risk that it affects
Mitie’s ability to raise further funding should the need arise.
Any actual or perceived weaknesses in Mitie’s financial position could
restrict the Group’s access to finance or attract high interest rates.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements
Principal risks and uncertainties continued
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Continued delivery of Plan
Zero to meet both 2025 and
2035 targets.
• Gifting funds for apprenticeships
to SMEs to support the
UK Government’s Levelling
Up agenda.
• Partnering clients to develop
employability skills within
the community, through
the Mitie Foundation.
• Proactively targeting under-
represented groups to employ
within the communities in which
Mitie operates.
• Proactively driving Mitie’s
Diversity and Inclusion strategy .
3 Climate change and social impact
An inability to quickly identify and effectively respond to the challenges
posed by climate change could hinder Mitie’s transition to a
lower-carbon business and result in significant business interruption
and missing new opportunities for growth. Furthermore, a failure to
appropriately consider the environmental and social impact of Mitie’s
business and its activities may create a negative perception with
employees, clients, investors, government, and the general public. This
could lead to failures in securing and/or retaining contracts and sources
of funding, as well as impacting negatively on Mitie’s reputation.
Impacts on strategic pillars:
Change in year:
New risk
also incorporates the Social
Impact risk
Climate change remains a significant crisis facing the global community.
The implications are broad and cover a number of risk topics,
including but not limited to infrastructure, insurance (e.g. longer-term
accessibility and impact on premiums), climate action failure and
extreme weather conditions. Furthermore, there are also
ramifications which could arise in the form of social unrest,
political fragmentation and geopolitical tensions in turn shaping
the effectiveness of responses within Mitie’s external landscape
moving forward.
As well as the obvious mandatory requirements for managing the risks
associated with climate change, combined with there being a moral
obligation, a failure to successfully drive forward a business, which
demonstrates and delivers carbon reductions, would significantly
hinder Mitie’s operating model, and ultimately stop it from winning
and retaining business. The ability to be a market leader in this field
provides extensive opportunity and ultimately takes Mitie and its
clients, as well as others associated with its business activities on the
required journey.
It is very important that Mitie continues to understand and monitor
the social and environmental impact of its business activities, and takes
into consideration the views of employees, clients, suppliers, investors,
and the wider public on these matters. The role that businesses play in
society is now, more than ever, being closely monitored by a number
of groups and several measures have begun to be utilised. These are
increasingly being used in decisions to award contracts, and to drive
investment and funding decisions.
As a business Mitie needs to make sure it is a valued member of
society and minimises its impact on the environment. Failure to do so
may affect its reputation and financial performance, through inability to
attract suitably skilled employees, failure to maintain and grow the
business and fines for non-compliance with relevant legislation.
• Plan Zero – to reach net zero
Scope 1&2 operational carbon
emissions by 2025 – ongoing.
Recently extended pledge to
reach net zero for Scope 3
emissions by 2035 – suppliers,
employee commuting and
working from home.
• Ongoing conversion of fleet
vehicles to electric – as at 31
March 2021, Mitie had 1,080
electric vehicles, with a further
1,000 electric vehicles on order.
Also trialling electric solutions
for specialist fleet, such as the
electric gritter, which was
launched in January 2021 by
Mitie Landscapes.
• Social Value & Responsible
Business (SVRB) Committee
held seven meetings in FY21,
chaired by Non-Executive
Director Philippa Couttie.
• Climate change risk assessment
maintained and approved by the
SVRB Committee
• Key policies and associated
operating procedures in place.
• Use of inhouse subject matter
experts specialising in an array
of topics including energy, waste
and fleet.
• Regular testing of crisis
management and business
continuity plans.
• Insurance cover in place to
cover property damage and
business interruption.
• Winter and Summer
preparedness planning at
account level.
• Ongoing reviews of planned
preventative maintenance
(PPM) lifecycles.
• Targets in place for four
of Mitie’s five social value
framework pillars.
• Active apprenticeship scheme
across the Group.
• Learning and People Hubs
to support employees’
development and wellbeing.
• Continuous horizon scanning
via GSOC, with regular alerts to
teams on potential threats and
significant events.
58
Mitie Group plc | Annual Report and Accounts 2021
Our strategic pillars
Customer: build market-leading positions
in higher growth segments and increase
customer NPS
People: create a ‘Great Place to Work’
for our employees
Technology: embed technology
into the heart of our offering
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
Change in year
Decreased
Stayed
the same
Increased
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Wipro Security Operations
Centre will provide Mitie with
an enhanced level of information
security monitoring and alerting.
• Security assessments by a leading
firm of cyber security experts
and the National Cyber Security
Centre, to conduct phased
threat assessments and stress
tests on the Mitie network
4 Cyber security and data management
In the normal course of business, Mitie collects, processes, and retains
sensitive and confidential information about its customers, employees,
and operations. Hacking, phishing attacks, ransomware, insider threats,
physical breaches or other actions may cause this confidential
information to be lost or misused. Any data loss could affect client
delivery operations and may result in a major data breach leading to
fines, remediation costs and reputational damage.
Impacts on strategic pillars:
Change in year:
title updated to highlight
cyber security
The data held by Mitie is one of its most important assets and includes
information concerning its business operations, employees, clients,
suppliers, and others. Mitie needs to maintain adequate controls to
mitigate risks associated with loss or theft of data which would
damage its reputation with clients and potentially result in significant
fines from regulators.
During FY21, the general level of threat posed from cyber-attacks has
heightened. Alongside an increase in phishing and ransomware attacks,
which were linked to COVID-19, Mitie has had to actively control the
increases in risk arising from the rapid transition to remote working at
the start of the COVID-19 pandemic, and more recently any
associated risks from the acquisition of Interserve, including limited
impacts from its cyber incident.
Mitie is continuing to invest in technology to improve the security of its
business through alerting users to possible cyber-attacks or phishing
attempts. Mitie continues to maintain formal technical and procedural
controls to ensure confidential and sensitive data is processed,
transmitted, and stored securely. These controls are deployed across
the Group’s IT systems and are subject to regular review and testing
and help maintain compliance with the requirements of the General
Data Protection Regulation and the UK Data Protection Act 2018.
• Continued alignment
with CE+ requirements,
and Information Security
Management System (ISMS)
in place, processes consistent
with ISO 27001 standards.
• Internal processes and controls
for all systems changes to
ensure cyber best practice and
compliance with data protection
laws and regulations.
• Rationalisation and upgrade of
ERP systems and infrastructure.
• Centralised information security
team and dedicated data privacy
officers in place.
• Outsourcing of routine
IT operations to a highly
skilled partner organisation,
Wipro, to improve IT
resilience and controls.
• Adoption of Microsoft and
Wipro cyber toolsets and
proactive monitoring and
management of cyber threats.
• Clear strategy to utilise leading
edge cloud technology, delivering
disaster recovery and business
continuity improvements.
• Crisis management and business
continuity testing led by the
MGX, including a cyber-attack
simulation which took place in
May 2021.
• Regular communications to
employees to highlight IT risks
and expected behaviours.
• Upgrades to legacy systems to
reduce complexity and improve
management information.
• Cyber insurance policy.
• Ongoing monitoring of Brexit
decisions relating to data
protocol adequacy.
Mitie Group plc | Annual Report and Accounts 2021
59
Strategic reportGovernanceFinancial statements
Principal risks and uncertainties continued
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Introduction of Quality Culture
programme looking into Cost
of non-Quality and ensuring
the right person is in the right
place at the right time. This will
include key principles, good
habits, and tools to ensure
Mitie has a reliable investigation
process and drive continual
improvement in health, safety
and environmental management.
• Development of enhanced
environmental e-Learning
awareness training.
5 Health, Safety and Environment
Failure to maintain appropriately high standards in health, safety and
environmental management may result in catastrophic events, harm to
employees, client staff or members of the public, consequential fines,
prosecution, and reputational damage.
Impacts on strategic pillars:
Change in year:
Note: this change in status is
linked purely to the COVID-19
pandemic. In terms of business
as usual activities, Mitie’s HSE
indicators have continued
to show year on year
improvements in all areas
During FY21, the risk posed to the health and safety of Mitie’s
employees owing to COVID-19 has increased, particularly in relation
to front-line workers who have played an essential role throughout the
pandemic by physically attending site to keep clients’ businesses and
critical infrastructure operational. Mitie has actively controlled any
potential increase in risk through an array of measures, including but
not limited to: employees having access to adequate PPE to enable
them to perform their duties safely; the introduction of a rigorous
COVID-19 risk assessment and technical compliance process, which
included the use of regular temperature checks, increased cleaning
regimes, the use of Citrox Protect and more recently the introduction
of the new UVC disinfection system following Mitie’s partnership with
Luxibel (all of which has been instrumental in getting both Mitie’s and
its clients’ staff back into their work environments); and substantial
enhancements to wellbeing offerings.
At all levels in the organisation, safety is Mitie’s number one priority.
Mitie ensures that all risks are properly assessed and managed, its
staff are trained and expectations of how they perform their work
are clearly explained, and adherence to health and safety standards
is regularly monitored. If these risks are not managed appropriately,
they could lead to harm to individuals and damage to the
environment, and consequently prosecution, fines, and significant
damage to Mitie’s reputation.
Mitie is committed to maintaining the highest levels of health, safety
and environmental (HS&E) standards. The services which Mitie
delivers could potentially present an increased risk of a health and
safety incident involving its employees, client staff or even members
of the public. Mitie’s activities also carry a risk of damage to the
environment. It is essential that these risks are managed in a highly
diligent and effective manner.
• A comprehensive Quality,
Health, Safety and Environment
(QHSE) strategy in place
and under continual review
for effectiveness.
• Major cultural HS&E
programme, LiveSafe, continuing,
with clear rules, engagement,
and training for staff.
• Regular training and
communication delivered
throughout the Group, in
accordance with the LiveSafe
principles – LiveSafe e-learning
training programme launched
which sets out HS&E
expectations including ‘stop
the job’ supported by key
safety message from the Chief
Executive Officer.
• Certified H&S management
system to ISO45001 and
environmental system
to ISO14001.
• Full integration of improved
incident recording, monitoring,
and reporting system.
• Regular HS&E reviews
conducted at all levels through
the organisation.
• Clear and standardised KPIs
introduced to monitor progress.
• Targeted QHSE procedural audit
programme introduced.
• Themes and root causes
monitored from the results of
audits to target specific actions,
including training.
• QHSE function ‘Plan Zero
Champions’ as part of the Plan
Zero programme to promote
strategy and good practice in
environmental management.
• Enhanced health and wellbeing
framework integrated into
the business.
• COVID-19 risk assessment and
technical compliance processes.
• Use of new technology such as
the UVC disinfection system
and thermal imaging to mitigate
against COVID-19.
• Insurance cover in place to cover
employers’ liability, public liability
and motor fleet.
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Mitie Group plc | Annual Report and Accounts 2021
Our strategic pillars
Customer: build market-leading positions
in higher growth segments and increase
customer NPS
People: create a ‘Great Place to Work’
for our employees
Technology: embed technology
into the heart of our offering
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
Change in year
Decreased
Stayed
the same
Increased
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Establishment of Internal Control
Declaration framework to align
with impending UK legislation on
corporate governance.
• Ongoing review of IMS to update
policies and procedures.
6 Regulatory
Failure to comply with applicable laws and regulations may lead to fines,
prosecution, and damage to Mitie’s reputation.
Impacts on strategic pillars:
Change in year:
Mitie’s business is subject to a wide range of laws and regulations,
including health and safety, employment, data protection, anti-bribery
and corruption legislation and statutory wage requirements.
During FY21, there have been notable changes to Mitie’s external
environment in terms of regulatory updates, and in the main this has
been attributable to COVID-19, Brexit and corporate governance.
As a consequence, there have been a number of obligations to fulfil
in order for Mitie to remain legally compliant. COVID-19 arguably
presented the greatest challenges given the disparities in regulations
adopted by the UK countries, compounded by the pace of change
through the pandemic.
Mitie continues to ensure it has effective governance and oversight of
its compliance with applicable laws and regulations and continuously
assesses the impact of changes in relevant legislation. It is also
important that Mitie provides appropriate communications and
training for its staff to make sure they are aware of their obligations,
and that regular monitoring of compliance is undertaken.
Failure to comply with applicable laws and regulations could result
in prosecution and/or significant fines, and, from a reputational
perspective, could damage Mitie’s relationships with clients and its
success when bidding for work. As a consequence, Mitie may also
face debarment from tendering for public sector contracts.
• Specialist legal and QHSE
expertise aligned to
business units.
• Code of Conduct for
all employees.
• Independent whistleblowing
system available to all employees
to report any concerns.
• Group-wide policies updated for
changes to laws and regulations
and maintained in the online
Information Management
System (IMS).
• Regular and thorough internal
and external regulatory audits.
• Training and awareness
materials communicated to
employees via Mitie’s digital
Learning Hub and monitoring
of completion performed.
• Regular monitoring of legal and
regulatory changes by Group
functions including Company
Secretariat, Legal and QHSE.
• Financial governance and
controls in place.
• Commercial governance and
controls in place.
• Legal representation on both
COVID-19 and Brexit Readiness
working groups.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements
Principal risks and uncertainties continued
Principal risks and uncertainties
Controls and mitigating actions
Future plans
7 Competitive advantage
A failure to maintain competitive advantage resulting in the loss of
key clients, an over-reliance on a particular sector, or a failure to
produce bids which are financially viable and have a balanced approach
to risk, could have a significant impact on Mitie’s financial performance
and reputation
Impacts on strategic pillars:
Change in year:
combines portfolio, market
share and contract losses risks
During FY21, Mitie has continued to improve its financial strength,
customer service and employee engagement, as well as growing its
market share, all of which have been against a backdrop of significant
disruption arising from the COVID-19 pandemic. Notable
achievements included the acquisition of Interserve resulting in
significant growth to Mitie’s public sector portfolio as well as Mitie’s
involvement in support of the UK’s strategy to combat COVID-19,
including operating over 150 testing sites.
It is imperative that Mitie does not become complacent and maintains
awareness of competitors’ offerings, the changing external
environment as well as market coverage. Furthermore, the
importance attached to the development and delivery of competitive
bids, along with meeting obligations through the delivery of a quality
service for existing clients, should not be underestimated. Failure to
deliver the services agreed in contracts could negatively impact the
Group’s customer relationships and reputation, and lead to legal
disputes and the termination of key contracts.
• Sales Academy being relaunched
to improve skillsets and
competencies around bidding
and commercial sales.
• Continue to pursue suitable
opportunities on the Crown
Commercial Services
frameworks.
• Implementing the Mitie way
of selling and retaining work
and developing and sharing
best practice.
• Accelerating value creation
through a greater understanding
of customers’ needs.
• Target emerging markets.
• Continue to engage with
opportunities that have scope
for innovative solutions.
• Continue activities around
thought leadership events.
• Executive management
bid committee approval
for complex bids minimum
annum threshold established.
• Robust risk assessment
of bids – commercial, legal
and operational.
• Detailed contracting guidelines
developed and rolled out.
• Clear delegated authorities
register.
• Strategic account management
programme.
• KPI/SLA formal reviews
with customers.
• Sales and CRM teams focused
on developing pipeline across all
major sectors.
• Improved CRM capabilities with
active relationship management.
• Focus on Customer Satisfaction
Net Promoter Score and
soliciting feedback.
• Review of any loss-making
contracts to ensure learnings
are identified and applied to
future bids.
• Improved sales and pipeline
management information to
track and measure growth,
wins and losses.
• Win/loss debriefing process
to take learnings for future
bidding activities.
• Appointment to Crown
Commercial Services
frameworks FM RM3830 and
Security RM6089
• Appointment to the Prison
Operator Services framework.
• Chief Government
& Strategy Officer to
coordinate all interfaces
with the Cabinet Office.
• Focus on high-margin
opportunities with growth
potential, for example
technology-led solutions.
• Development of new and
innovative service offerings.
• Review of contractual terms
relating to Interserve business
areas ongoing for both sales
and renewals.
62
Mitie Group plc | Annual Report and Accounts 2021
Our strategic pillars
Customer: build market-leading positions
in higher growth segments and increase
customer NPS
People: create a ‘Great Place to Work’
for our employees
Technology: embed technology
into the heart of our offering
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
Change in year
Decreased
Stayed
the same
Increased
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Seeking certification to validate
operating in accordance with ISO
22301-2019.
• Ongoing contingency planning
for managing the COVID-19
impacts on both the business
and its suppliers and the post-
Brexit landscape through the
COVID-19 and Brexit Readiness
working groups.
• Continuous horizon scanning
via GSOC with regular alerts to
teams on potential threats and
significant events.
• Key policies and associated
operating procedures in place.
• Dedicated Risk team and GSOC.
• Regular testing of crisis
management and business
continuity, including MGX-led
simulations.
• Stringent governance controls
including oversight from Risk
Committee, with regular
reporting to the Audit
Committee and Board.
• Close monitoring of supply
chain to ensure continuity
of critical supplies.
• Internal and external
compliance audits.
• Critical Engineering and
Technical Assurance programme
implemented in Technical
Services to help manage
high-risk contracts.
• Technical Appointments
framework used in Technical
Services to ensure that correct
capability/resources are deployed
on customer sites/contracts to
help mitigate risks.
• Insurance cover is in place to
cover business interruption.
• Themes and root causes
monitored from the results
of audits to target specific
actions, including training.
8 Business resilience
An inability to effectively respond to global events, such as a pandemic
or supply chain disruption and/or a catastrophic event at a key business
location could result in significant business interruption. The effect on
employees, customers, and the supply chain, could result in severe
consequences for the financial health and reputation of Mitie’s business
Impacts on strategic pillars:
Change in year:
New risk
also incorporates incident
at client site risk
Whilst COVID-19 is now very much part of daily routine, there
remains a high possibility of another pandemic, given that four have
already occurred within the last century. Therefore, it would be remiss
to remove the threat of a pandemic altogether from Mitie’s risk profile.
Similarly, external assessments relating to: the threats posed from
terrorist attacks, either physical or cyber related; climate challenges;
and the ongoing position relating to the post Brexit landscape
combined with the consequences of COVID-19, highlight the
importance of Mitie managing any disruptive risks which could
negatively impact its organisational resilience.
Mitie delivers services to clients at a number of important and
high-profile sites across the country. These include locations with
substantial historical and cultural significance and high level of scrutiny
by governmental bodies, media organisations and the general public.
If a major incident occurred at one of these sites, whether through the
negligent or deliberate act of Mitie staff, it would attract a large amount
of publicity and have a highly negative impact on Mitie’s reputation.
It would also be likely to limit the Group’s chances of winning future
contracts and potentially maintaining current clients.
In order to make sure this risk is managed, it is important that Mitie
has appropriate policies and processes in place, which clearly set out
its expectations of staff and ensure that its business remains resilient.
Mitie also needs to communicate these effectively and deliver regular
and relevant training to staff. In addition, it is important that Mitie
ensures staff have been appropriately vetted to determine who is
eligible to work on particular contracts and sites, so that the specific
requirements of clients are met.
It is also necessary to have effective business continuity plans in place
for its operations, including its services outsourced to companies based
in India, so that Mitie is able to continue to deliver a high-quality service
to clients in the event of a disruptive incident. Should an incident occur,
a comprehensive and tested crisis response plan is essential to minimise
the impact to staff, clients, the public and the environment.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements
Principal risks and uncertainties continued
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Attraction strategy to be
developed and deployed
centred around employee
‘deal’ promoting benefits and
development opportunities.
• Grading framework to be
deployed to allow employees to
understand where they fit in the
business and their potential for
career development.
• Benefit enhancement
plan in development with
frontline focus.
9 Employees
Inability to recruit, retain and reward suitably talented employees,
as well as failure to implement appropriate development plans and
simple, consistent processes across the business and cultivate a
One Mitie culture, could result in employees being disengaged and
negatively impact the Group’s operational and financial performance.
Impacts on strategic pillars:
Change in year:
During FY21, the COVID-19 pandemic, Brexit (specifically changes
relating to the Right to Work/Settlement Scheme), and the acquisition
of Interserve with its 27,500 employees joining Mitie, have reinforced
the importance of managing the Group’s employees effectively. Its
people are Mitie’s biggest asset and underpin everything it does. For
the success of the business it is important that Mitie continues to
recruit, develop, motivate, and retain talented individuals. An inability
to do this would have an adverse impact on the profitability of
contracts as well as their successful delivery.
Mitie needs to have the right level of experience and expertise
available and be able to develop a culture of high standards of
achievement, compliance to the Mitie values and good governance
and control. In order to achieve this, Mitie also needs to provide
development opportunities for its employees to enable them to
reach their full potential.
For a successful integration of Interserve, it is important that Mitie
maintains stability and consistency particularly around its senior
leadership team to provide high-quality direction for the business, and
actively seek to promote the ‘One Mitie’ way of operating across the
business to ensure greater consistency in processes and controls,
guarantee all employees respond positively to the implementation of
forthcoming change initiatives, and facilitate seamless movement of
staff across the Group. It is also vital in the short term that the changes
associated with Brexit, specifically the Settlement Scheme, are
managed both effectively and efficiently.
• Consistent HR resourcing
process and system across the
Group for both temporary and
permanent recruitment.
• Process in place for online
training and development.
• Training and development
programmes for senior
leadership.
• Developed talent identification,
management, and development
framework.
• Clear performance management
framework.
• HR structure streamlined
and partially devolved to
business units.
• Launch of new induction
programme, mandatory
for new starters.
• Regular communications from
leadership team – including MGX
country-wide roadshows.
• Specific plans developed
to address results of
employee survey.
• Competitive remuneration,
terms, and conditions.
• Regular employee offers.
• Succession plans in place
for critical roles, especially
for senior leadership.
• Established Brexit fora for
overseeing compliance with
the Settlement Scheme, as
well as other mandatory
people related changes.
64
Mitie Group plc | Annual Report and Accounts 2021
Our strategic pillars
Customer: build market-leading positions
in higher growth segments and increase
customer NPS
People: create a ‘Great Place to Work’
for our employees
Technology: embed technology
into the heart of our offering
Cost: strengthen our balance sheet and
maintain cost discipline to remain competitive
Change in year
Decreased
Stayed
the same
Increased
Principal risks and uncertainties
Controls and mitigating actions
Future plans
• Implementation of
Digital Supplier Platform
recommendations
following review.
• Ongoing delivery of Project
Forte initiatives.
10 Third-party management
Failure to successfully manage strategic third-party relationships or a
catastrophic event and/or failure involving a third-party partner, could
impact Mitie’s ability to deliver contractual outcomes, resulting in
financial losses and in some circumstances leading to fines and
significant reputational damage.
Impacts on strategic pillars:
Change in year:
New risk
Mitie maintains a number of third-party relationships and spends
c:£1.35bn on an array of supplies and services. A number of these
supplies and services are critical to ensuring that clients continue to
deliver their respective operations.
The scale and impact of both COVID-19 and Brexit, both in the UK
and internationally, has heightened the possibility of disruption or
failure to some of Mitie’s key third-party partners occurring. This risk is
compounded by transitional activities following the acquisition of
Interserve, which involve the amalgamation of supplier frameworks.
An inability to effectively manage risks related to third-party
management could have serious financial and reputational ramifications
for Mitie. Furthermore, due to there being significant dependencies in
this area, the consequences of not managing third parties effectively
and efficiently could also have serious implications on the management
of Mitie’s other principal risks. As a result, it is vital that Mitie maintains
a rigorous framework for managing both its subcontractors and
suppliers, and that this is systematically reviewed.
• Key policies and associated
operating procedures.
• Dedicated Procurement and
Commercial teams.
• Mitie First approach adopted.
• Project Forte driven
improvements under
Supply Chain Management
workstream, including enhanced
supplier audits, improved
invoicing capabilities, MSAs
and job automation.
• Rigorous on-boarding
framework.
• Defined SLAs and key
performance indicators.
• Ongoing spending review.
• Dedicated risk management and
assurance procedures including
targeted QHSE assurance
programme and Internal Audit
to ensure internal controls are
operating effectively.
• Appointment of COVID-19 and
Brexit Procurement leads.
• Ongoing review of third-
party business continuity
arrangements, with regular
reporting to the Group Risk
Team as well as COVID-19 and
Brexit Readiness working groups.
Mitie Group plc | Annual Report and Accounts 2021
65
Strategic reportGovernanceFinancial statements
Viability statement
Viability
statement
The UK Corporate Governance Code requires the Board to explain
how it has assessed the prospects of the Group and state whether it
has a reasonable expectation that the Group can continue to operate
and meet its liabilities, taking into account its current position and
principal risks.
The Group’s principal markets and strategy are described in detail
in the Strategic Report (pages 10 to 12).
The key factors affecting the Group’s prospects are:
• Mitie is the leading UK facilities management business with c.7%
of the market;
• The outsourcing market is relatively insensitive to economic cycles;
• Mitie has a clear vision for its technology-centric growth strategy;
• Mitie is making good progress on its transformation and integration
programmes; and
• Mitie has a diverse portfolio of blue-chip and public sector clients,
the largest of which constitutes <5% of revenue.
The Directors believe that a three-year period is appropriate for their
viability assessment as it is supported by Mitie’s strategic, budgeting and
business planning cycles and is relevant to the duration of the Group’s
existing contracts with customers which is around three years on
average. It therefore represents a timeframe over which the Directors
believe they can reasonably forecast the Group’s performance.
In making this statement, the Directors have carried out a robust
assessment of the emerging and principal risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity. This includes the availability and effectiveness of
mitigating actions that could realistically be taken to avoid or reduce the
impact or occurrence of the underlying risks. In considering the likely
effectiveness of such actions, the conclusions of the Board’s regular
monitoring and review of risk management and internal control systems,
as described on pages 54 to 65, are considered.
As set out in the Chief Executive’s strategic review (pages 19 to 21),
the Covid-19 pandemic has had an impact on Mitie’s business, with
reduced discretionary activities in some areas balanced by new
business in other areas. The rights issue in July 2020 and subsequent
acquisition of Interserve have significantly strengthened Mitie’s
business and future prospects.
Base case projections for viability purposes have been made using
prudent assumptions:
• Modest revenue and margin growth beyond FY22;
• No major changes in working capital;
• Future dividends in line with current policy;
• Settlement of existing provisions according to best estimates together
with funding costs for ongoing transformation activities; and
• No changes to group structure.
The resulting financial model assesses the ability of the Group to remain
within the financial covenants and liquidity headroom of its existing
committed facilities.
The Group’s £250m revolving credit facility and £121.5m of US Private
Placement notes mature in the forecast period. The Directors consider
it reasonable to assume that the revolving credit facility, operated for
general business purposes, will be refinanced on materially similar terms.
The Group also utilised £51m of invoice discounting at 31 March 2021,
which the Group is not dependent upon for liquidity, covenant
compliance or viability purposes in the base case scenario.
66
Mitie Group plc | Annual Report and Accounts 2021
A range of scenarios that encompass the principal risks were applied
to the base case and are set out in the table below. The analysis also
considered a reverse stress-test scenario to illustrate the revenue
reduction required to cause a breach of the interest cover covenant.
Scenario
Principal risks
Major client insolvency – lost revenue,
operating profit and cashflow
No incremental integration synergies
beyond those already achieved
10
1
5% year-on-year revenue reduction
3, 4, 5, 6, 8
2% gross margin erosion
No refinancing in the forecast period
Reverse stress test
3, 7, 9
2
n/a
1
2
3
4
5
6
In each of scenarios 1-5 the Group was able to continue operating
within debt covenants and liquidity headroom. Scenario 6 required such
an extreme reduction in revenue that it is considered to be a remote
likelihood and therefore does not represent a realistic threat to the
viability of the Group. In reaching the conclusion of remote, the
Directors considered the following:
• Reviewing how the Group has traded since the impact of COVID-19
started, up to the end of May 2021 and in light of the continued easing
of UK lockdown measures and anticipated economic recovery.
• Revenue would need to decline by approximately 20% in the year
ending 31 March 2022 compared to the base case, which is
considered to be very severe given the high proportion of Mitie’s
revenue that is fixed in nature and the fact that in a COVID-hit year,
Mitie’s revenue excluding Interserve declined by only 1.6% in the year
ending 31 March 2021.
• In the event that results started to trend significantly below those
included in the Group cash flow model, additional mitigation actions
have been identified that would be implemented, which are not
factored into the reverse stress test scenarios. These include
cancellation of discretionary bonuses and reduced discretionary
spend, including capital investments.
The Directors considered mitigating factors that could be employed
to counter the negative effects of the crystallisation of each of these
risks. The main actions included the short-term scaling down of
capital expenditure, overhead efficiency measures, asset disposals,
and reductions in cash distributions or raising equity. These mitigating
factors ensure the Group can continue to operate, even without a
successful refinancing.
Based on this assessment, the Directors have concluded that there is
a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the three-year
period to 31 March 2024.
The Strategic Report on pages 2 to 66 of Mitie Group plc, company
registration number SC019230, was approved by the Board of
Directors and authorised for issue on 10 June 2021.
It was signed on its behalf by
Phil Bentley
Chief Executive Officer
Simon Kirkpatrick
Chief Financial Officer
Governance
68
Chairman’s introduction to governance and
the Board
Board of Directors
69
72 The Code: Board leadership and company
purpose
82 The Code: Division of responsibilities
85 The Code: Composition, succession and
evaluation
87 The Code: Audit, risk and internal control
90 The Code: Remuneration
91 Nomination Committee report
94 Audit Committee report
99 Directors’ remuneration report and policy
121 Social Value & Responsible Business
Committee report
123 Disclosure Committee report
124 Directors’ report
128 Statement of Directors’ responsibilities
A standard
bearer of
the industry
We work best with our customers when
we collaborate. We aim to be the trusted
partner for our customers helping them
create exceptional workplaces.
—
50%
Male/Female on Board
—
21%
Senior Leadership Team
are Female
Mitie Group plc | Annual Report and Accounts 2021
67
Strategic reportGovernanceFinancial statements CCoorrppoorraattee GGoovveerrnnaannccee
Chairman’s introduction
to governance and the Board
Jennifer Duvalier continues to act as the Company’s designated Non-
Executive Director responsible for oversight of the Board’s engagement
with the workforce. Jennifer has participated in Employee Listening
Events during FY21, predominantly virtually due to the pandemic,
thereby maintaining communication channels with the workforce
and ensuring that the views of those on the frontline are heard and
understood. Jennifer provides the Board with an update at each Board
meeting so that these views are regularly voiced at Board level and can
be incorporated into the Board’s decision-making process. Between
meetings, notes from Jennifer’s communications are made available to
the Board via an electronic board portal. Further detail on Jennifer’s
role and activities is included on pages 80 to 81.
BBooaarrdd ccoommppoossiittiioonn
On 17 March 2021, Mitie announced the appointment of Simon
Kirkpatrick as Chief Financial Officer. Simon, who held the position of
Director of Group Finance prior to his appointment as Chief Financial
Officer, joined the Board with effect from 1 April 2021. Further details
on Simon’s appointment can be found on page 93.
The Board considers the balance in its members’ skills and experience
appropriate both from an overall Board composition perspective and
based on individual contribution. The biographies of the current
members of the Board and the Chief of Staff, General Counsel &
Company Secretary are set out on the following pages.
EExxtteerrnnaall BBooaarrdd eevvaalluuaattiioonn
The Board is committed to ensuring upmost effectiveness and engaged
an independent consultant, Belinda Hudson, to conduct an external
Board evaluation during FY21.
Further details on the evaluation, including the outcomes and future
objectives from the evaluation can be found in the Nomination
Committee report on page 92.
DDeerreekk MMaapppp
Chairman
OOvveerrvviieeww
Good governance is fundamental to creating and maintaining an effective
sustainable business. Accordingly, the Board remains committed to
reviewing, adapting and developing its governance processes and
procedures to ensure it meets its responsibilities to shareholders and
wider stakeholders for the Group’s activities and long-term success.
To support this, the Board receives regular updates on the latest
governance advice and guidance. This is facilitated in numerous ways
including reports prepared by the Company Secretary for each Board
meeting, communication with members of the Company Secretariat
team when required and relevant papers and publications uploaded to
a dedicated area of Mitie’s electronic board portal which is accessible
by all Board members.
UUKK CCoorrppoorraattee GGoovveerrnnaannccee CCooddee aanndd ssttaatteemmeenntt
ooff ccoommpplliiaannccee
The Company is subject to the July 2018 edition of the UK Corporate
Governance Code (the Code), a copy of which can be found on the
Financial Reporting Council’s website at www.frc.org.uk. The structure
of the governance section of this Annual Report follows that of the
Code. Pages 72 to 90 provide details of Mitie’s governance framework
and how we have applied the Code’s principles and complied with its
provisions. Additional details can be found throughout this Annual
Report. Relevant sections of the Code are applied to Mitie’s subsidiary
companies where appropriate.
I confirm on behalf of the Board that throughout the year ended
31 March 2021 the Company complied with all the requirements
of the Code.
SSttaakkeehhoollddeerr eennggaaggeemmeenntt
As a Board, we remain committed to best practice corporate
governance, stakeholder engagement and the long-term delivery
of sustainable shareholder value. Effective engagement enables the
Board to ensure stakeholder interests are considered when making
strategic decisions.
The Board spent time in FY21 discussing key stakeholders, engagement
mechanisms and the issues that matter to those stakeholders. The
Board’s stakeholder map has been reviewed and updated to include
specific actions taken in response to feedback received. More
information on this can be found on pages 48 to 53.
The stakeholder map has supported the Board’s inclusion of the
required Section 172(1) statement within this Annual Report. This year’s
statement focuses on several key decisions made by the Board during
FY21, the Board’s consideration of their impact on key stakeholders, the
consequences of the decisions in the long term, and actions the Board
has taken, and endorsed, in response to their discussions. The Section
172(1) statement can be found on pages 42 to 45.
The Board also discussed the wider stakeholder governance landscape,
specifically considering how the reporting and review of stakeholder
metrics could be enhanced to ensure the Board remains abreast of
stakeholder perception of the Group. Ensuring these measures are
discussed and reviewed regularly allows the Board to react quickly and
efficiently to any change in stakeholder sentiment.
68
Mitie Group plc | Annual Report and Accounts 2021
BBooaarrdd ooff DDiirreeccttoorrss
An experienced
Board of Directors
DDeerreekk MMaapppp
Non-Executive Chairman
PPhhiill BBeennttlleeyy
Chief Executive Officer
SSiimmoonn KKiirrkkppaattrriicckk
Chief Financial Officer
BBooaarrdd CCoommmmiitttteeeess
Chairman of the Nomination Committee
BBooaarrdd CCoommmmiitttteeeess
None
BBooaarrdd CCoommmmiitttteeeess
None
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
9 May 2017
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
1 November 2016
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
1 April 2021
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Derek is a director of private companies
Imagesound Limited and Woodall Group
Limited. Derek also has several other private
business interests.
PPaasstt rroolleess
Derek was Chair of Informa plc from March
2008 until his retirement on 3 June 2021.
He was also Chair of Huntsworth plc from
December 2014 to March 2019. Previously he
was Chief Executive Officer of Tom Cobleigh
plc and Executive Chair of Leapfrog Day
Nurseries Limited. Historically he was Chair
of East Midlands Development Agency, Sport
England and British Amateur Boxing Association
Limited. He continues to have business interests
in hospitality in Cornwall and Derbyshire.
SSkkiillllss aanndd eexxppeerriieennccee
• Experienced chairman and entrepreneur
• Extensive career in ownership, managerial,
operational and commercial roles in
service industries
• Wealth of commercial and governance
experience within various sectors
• Promotes robust debate and an open
and engaged culture
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
None
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
None
PPaasstt rroolleess
Simon joined Mitie in July 2019 from Balfour
Beatty plc where he held a number of senior
finance roles including Finance Director for
Major Projects and Group Head of Financial
Planning & Analysis. Simon began his professional
career with Ernst & Young where he was a
director in the Energy practice.
SSkkiillllss aanndd eexxppeerriieennccee
• Significant UK and international plc experience
• Proven track record in transforming complex
contracting businesses
• Extensive financial, strategic and commercial
experience across a number of sectors
• Chartered accountant, with a law degree
from the University of Exeter
PPaasstt rroolleess
Phil was Group Chief Executive Officer of Cable
& Wireless Communications plc from January
2014 until its sale to Liberty Global plc in May
2016. Prior to this he was a member of the
board of Centrica plc from 2000 to 2013 whilst
also Managing Director of British Gas from 2007
to 2013, Managing Director, Europe from 2004
to 2007 and Group Finance Director from 2000
to 2004. Phil’s prior non-executive directorships
include IMI plc from 2012 to 2014 and Kingfisher
plc from 2002 to 2010. His earlier career was in
international roles with BP and with Diageo.
SSkkiillllss aanndd eexxppeerriieennccee
• Executive and non-executive experience with
FTSE 100 companies for over 20 years
• Significant strategic and commercial
experience at both national and global level
• Extensive executive and leadership
experience from across industry
• Extensive financial, audit and risk management
systems experience
• Accountant by profession, with a master’s
degree from Oxford University and an MBA
from INSEAD, Fontainebleau
Mitie Group plc | Annual Report and Accounts 2021
69
Strategic reportGovernanceFinancial statements BBooaarrdd ooff DDiirreeccttoorrss continued
AAnn eexxppeerriieenncceedd
BBooaarrdd ooff DDiirreeccttoorrss ccoonnttiinnuueedd
NNiivveeddiittaa KKrriisshhnnaammuurrtthhyy
BBhhaaggaatt
Independent Non-
Executive Director
BBooaarrdd CCoommmmiitttteeeess
Member of the Audit Committee
Member of the Nomination Committee
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
1 June 2017
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Nivedita is Chief Executive Officer, Global Cloud
Infrastructure Services at Capgemini SA, a
French publicly listed multinational corporation.
She is also a member of its Group Executive
Committee and a director of three of its group
companies: Capgemini UK plc and CGS Holdings
Ltd (both unlisted) and Capgemini Outsourcing
Services GmbH.
PPaasstt rroolleess
Nivedita has held several leadership roles
in Capgemini and was Head of Enterprise
Solutions, EMEA and Head of London
Development Centre at Infosys Technologies
Ltd from 1998 to 2010. Prior to this she was
a consultant in the corporate finance division
at KPMG India.
SSkkiillllss aanndd eexxppeerriieennccee
• Significant international management
experience having worked across the UK,
Europe, US and India
• Experience in advising clients on technology
solutions with a view to enabling them to
increase shareholder value
• Several years of IT consulting and IT
outsourcing experience managing large
complex contracts
• Strong sales orientation having sold
global technology and digital solutions
to global clients
• Deep P/L management with a focus on
top and bottom line
• Qualified as a chartered accountant, with
a degree in Economics
BBaarroonneessss CCoouuttttiiee
Independent Non-
Executive Director
JJeennnniiffeerr DDuuvvaalliieerr
Independent Non-
Executive Director
BBooaarrdd CCoommmmiitttteeeess
Chair of the Social Value & Responsible Business
Committee
Member of the Audit Committee
Member of the Nomination Committee
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
15 November 2017
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Philippa is a member of the House of Lords
European Union Committee and EU Financial
Affairs Sub-Committee. Philippa is also a
Commissioner with the Guernsey Financial
Services Commission and a member of their
Investment Committee and Audit Committee.
PPaasstt rroolleess
Philippa led Westminster City Council from
2012 to 2017. She was a member of the Polling
and Digital Media Select Committee from 2017
to 2018, and a member of the Greater London
Authority Crime Reduction Board from 2012
to 2014.
Prior to progressing her career in public service,
Philippa was a director at Citigroup. She was also
previously Chief Executive of both Cornerstone
Communications and PR Consultants.
Philippa has served as a non-executive director
on several boards, including Royal Parks and the
London Local Enterprise Partnership.
SSkkiillllss aanndd eexxppeerriieennccee
• Extensive experience of the financial sector,
developing corporate strategy and executing
change management
• Vast experience in both public and private
sector at the most senior level
• Ennobled and joined the House of Lords
in 2016
BBooaarrdd CCoommmmiitttteeeess
Chair of the Remuneration Committee
Member of the Nomination Committee
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
26 July 2017
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Jennifer is Non-Executive Director and Chair of
the Remuneration Committee of Guardian
Media Group plc, Non-Executive Director and a
member of the Remuneration, Nomination and
Cyber Security Committees of NCC Group plc
and Senior Independent Director and a member
of the Audit and Risk, Nomination and
Remuneration Committees of Trainline plc.
Jennifer is also Director of The Cranemere
Group Limited where she is also Chair of the
Sustainability, People & Diversity Committee,
and a member of the Council of the Royal
College of Art where she is also Chair of the
Remuneration Committee.
PPaasstt rroolleess
Jennifer was Executive Vice President, People,
for ARM Holdings plc, a global technology
business, from September 2013 to March 2017
and was also an executive committee member
with responsibility for people and internal
communications activity.
SSkkiillllss aanndd eexxppeerriieennccee
• Leadership development, talent acquisition
and management and succession planning
• Mentoring and coaching
• People strategy, organisation development
and change management
• Employee engagement and internal
communications
• Corporate social responsibility
• Executive remuneration and performance
• An honours degree from the University
management
of St Andrews in Psychology
• Executive team and Board effectiveness
• MA (Hons) from the University of Oxford in
English and French
70
Mitie Group plc | Annual Report and Accounts 2021
MMaarryy RReeiillllyy
Independent Non-
Executive Director
RRooggeerr YYaatteess
Senior Independent
Director
BBooaarrdd CCoommmmiitttteeeess
Member of the Nomination Committee
Member of the Audit Committee
Member of the Remuneration Committee
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
1 March 2018
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Roger is a Non-Executive Director and Chair of
the Remuneration Committee of Jupiter Fund
Management plc. He is also Senior Independent
Director and Chair of the Remuneration
Committee of St James’s Place plc.
PPaasstt rroolleess
Roger started his career in asset management at
GT Management in 1981 and held positions of
increasing seniority at Morgan Grenfell, LGT
and Invesco. He served as Chief Executive of
Henderson Group plc from 1999 to 2008 and as
Chief Executive of Unicredit’s asset management
arm, Pioneer Investments.
Roger’s non-executive roles have included F&C
Investments, IG Group plc, Electra Private Equity
plc and JPMorgan Elect plc.
SSkkiillllss aanndd eexxppeerriieennccee
• Substantial board experience
• Strong business track record
• Extensive knowledge of the finance and
investment community
BBooaarrdd CCoommmmiitttteeeess
Chair of the Audit Committee
Member of the Remuneration Committee
Member of the Nomination Committee
DDaattee ooff aappppooiinnttmmeenntt ttoo tthhee BBooaarrdd
1 September 2017
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
Mary is Non-Executive Director and Chair
of the Audit Committee of Essentra plc, an
international supplier of specialist plastic, fibre,
foam and packaging products. She is also Non-
Executive Director and Chair of the Audit
Committee of Travelzoo and Independent Non-
Executive Director of Gemfields Group Limited.
Her current trusteeships include the Invictus
Games Foundation and PDSA.
PPaasstt rroolleess
Mary was Non-Executive Director and Chair of
the Audit Committee of Ferrexpo plc, an iron
ore mining company, from 2015 to 2019. She
was also Non-Executive Director and Chair of
the Audit & Risk Committee of the UK
Department of Transport and of Crown Agents
Limited, an international development company,
from 2013 to 2017. Prior to this Mary was Non-
Executive Director of Cape plc, a global
industrial services company, from 2016 to 2017.
She has served as a non-executive director on
several other boards since 2000. Mary was a
partner in Deloitte LLP (and predecessor firms)
for over 25 years. Mary was an Audit Partner in
the UK specialising in manufacturing, luxury retail
and business services. She also headed a unit
offering outsourcing capability.
SSkkiillllss aanndd eexxppeerriieennccee
• Accounting, finance and international
management experience
• Chartered accountant, with a degree from
University College London in History
PPeetteerr DDiicckkiinnssoonn
Chief of Staff, General
Counsel & Company
Secretary
BBooaarrdd CCoommmmiitttteeeess
Member of the Social Value & Responsible
Business Committee
DDaattee ooff aappppooiinnttmmeenntt
6 March 2017
OOtthheerr ccuurrrreenntt aappppooiinnttmmeennttss
None
PPaasstt rroolleess
Peter was a partner at the global law firm Mayer
Brown International LLP (and its predecessor
firm) between 1995 and March 2017. From
2015 until March 2017, Peter co-headed Mayer
Brown’s global Technology Transactions practice.
Between 2005 and 2015, Peter was the head of
Mayer Brown’s Corporate practice in London. In
addition, between 2008 and 2015, Peter was the
cohead of Mayer Brown’s global Corporate
practice, with specific responsibility for strategy.
SSkkiillllss aanndd eexxppeerriieennccee
• Substantial experience advising on corporate
advisory, mergers and acquisitions, joint
ventures and other significant commercial
transactions including large scale multi-
jurisdictional outsourcing projects
• Qualified solicitor, with a degree in law
from the University of Southampton
Mitie Group plc | Annual Report and Accounts 2021
71
Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
The Code: Board leadership
and company purpose
Governance at a glance
CCoommppaannyy ppuurrppoossee
As detailed on page 4 of the Strategic report, the purpose of the
Company is to create exceptional work environments.
PPuurrppoossee ooff tthhee BBooaarrdd
The purpose of the Board is to provide leadership and direction to the
Group’s management within a framework of controls which enable risk
to be adequately assessed and managed. The Board is responsible and
accountable to shareholders for the sustainable long-term success of the
Company. Subject to UK company law and the Articles of Association,
the Directors may exercise all the powers of the Company, may
delegate authorities to Committees, and may delegate day-to-day
management and decision-making to individual Executive Directors. The
purpose of each Committee to which the Board has delegated parts of
its responsibilities is summarised below and set out in more detail in the
Committee report.
GGoovveerrnnaannccee ffrraammeewwoorrkk
The Company’s formal governance framework underpins the
Company’s operations. In addition to the four Board Committees
detailed below, the Board has a Disclosure Committee which meets
on an ad hoc basis (further detail can be found on page 123) and an
informal Bid Committee. The Bid Committee comprises the Chief
Executive Officer, Chief Financial Officer, Chief of Staff, General
Counsel & Company Secretary, Chief Government & Strategy Officer
and members of the sales team. The Bid Committee meets weekly to
consider any material bid submissions and to determine whether such
bids meet the Group’s financial, commercial and legal objectives.
Terms of Reference for the Company’s Board Committees are available
at www.mitie.com/investors/corporate-governance.
BBooaarrdd
NNoommiinnaattiioonn CCoommmmiitttteeee
Purpose: to evaluate and make
recommendations regarding the
composition, diversity, experience,
knowledge, skills and independence
of the Board and its Committees.
AAuuddiitt CCoommmmiitttteeee
Purpose: to monitor the integrity of
the Group’s financial reporting,
review the effectiveness of the
Group’s internal controls and
evaluate the performance of the
internal audit function and external
auditor.
RReemmuunneerraattiioonn CCoommmmiitttteeee
Purpose: to determine and review
the Company’s remuneration policy
and monitor its implementation.
SSoocciiaall VVaalluuee && RReessppoonnssiibbllee
BBuussiinneessss CCoommmmiitttteeee
Purpose: to drive the Group’s social
value and responsible business
agenda and ensure the Group’s
conducts its business in a
commercially responsible way.
MMiittiiee GGrroouupp EExxeeccuuttiivvee ((MMGGXX))
Members of the executive team, who include senior members of management from each business unit and central group functions,
meet weekly to discuss and implement the Group’s strategic objectives.
BBuussiinneessss ddiivviissiioonnss
Business Services, Central Government & Defence, Communities,
Technical Services and Specialist Services.
Board
Nomination Committee
Audit Committee
Remuneration Committee
Social Value & Responsible Business Committee
72
Mitie Group plc | Annual Report and Accounts 2021
RReeaadd mmoorree::
pages 72 to 90
pages 91 to 93
pages 94 to 98
pages 99 to 120
pages 121 to 122
MMeemmbbeerrsshhiipp ooff BBooaarrdd CCoommmmiitttteeeess
PPoossiittiioonn
CChhaaiirrmmaann
EExxeeccuuttiivvee DDiirreeccttoorrss
NNaammee
Derek Mapp
Phil Bentley
Simon Kirkpatrick**
Andrew Peeler**
NNoommiinnaattiioonn
CCoommmmiitttteeee
AAuuddiitt
CCoommmmiitttteeee
RReemmuunneerraattiioonn
CCoommmmiitttteeee
SSoocciiaall VVaalluuee &&
RReessppoonnssiibbllee
BBuussiinneessss
CCoommmmiitttteeee**
Chair
–
–
–
–
–
–
–
–
–
–
–
–
–
Chair
–
Member
Member
–
–
–
–
–
Chair
–
–
–
–
IInnddeeppeennddeenntt NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss
Nivedita Krishnamurthy Bhagat
Member
Member
Baroness Couttie
Jennifer Duvalier
Alan Lovell***
Mary Reilly
Roger Yates
Member
Member
–
Member
Member
Member
–
–
Chair
Member
* Membership of the Social Value & Responsible Business Committee includes senior management as detailed on page 121.
** Simon Kirkpatrick was appointed to the Board on 1 April 2021 and replaced Andrew Peeler who resigned from the Board on 31 March 2021.
*** Alan Lovell, Chairman of Interserve Group Limited, was appointed to the Board on 1 January 2021 following Mitie’s acquisition of Interserve Facilities Management from How Group Limited (a
subsidiary of Interserve Group Limited) on 30 November 2020. Alan Lovell resigned from the Board on 5 March 2021 following the sale by How Group Limited of shares representing 10.5% of
the Company’s issued share capital.
Gender diversity
as at 31 March 2021
Director age range
as at 31 March 2021
Female
Male
4
4
41-50
51-60
61-70
1
3
4
Mitie Group plc | Annual Report and Accounts 2021
73
Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
SSeettttiinngg ssttrraatteeggyy
The Board reviews and agrees the strategy for the Group on an annual basis and reviews aspects of strategy at Board meetings during the year.
The Board considers a wide range of matters when setting Group strategy including, but not limited to:
• Market overview
• Customer trends
• Competitor environment
• Investor sentiment and shareholder returns
• Divisional business strategies
• Environmental, Social and Governance (ESG) and sustainability
• Finance
• People and talent
A strategy day was held in September 2020 which all Directors attended. On the day, the Board discussed the impact of COVID-19 on Mitie’s business
model, Interserve Facilities Management (Interserve) integration strategy including measures of integration success, wider Group strategic methodology
and recommendations, target operating model and execution risks.
HHooww ggoovveerrnnaannccee ccoonnttrriibbuutteess ttoo tthhee ddeelliivveerryy ooff ssttrraatteeggyy
Details of how opportunities and risks to the future success of the business have been considered and addressed, and the sustainability of the
Company’s business model can be found in the Strategic report on pages 8 to 9. Mitie’s governance framework underpins the delivery of strategy and
can be found on page 72. An overview of Mitie’s strategy in action can be found on pages 12 to 13.
BBooaarrddrroooomm ddiissccuussssiioonnss
The Board held ten formal scheduled meetings during FY21. Individual Director attendance at each meeting and a timeline setting out stakeholder
related events attended by members of the Board can be found on pages 83 and 74 respectively.
Between March 2020 and the end of June 2020 the Board also held weekly calls focused on:
• The operational impacts of COVID-19 and the measures needed to ensure Mitie’s businesses were able to continue to operate with minimal
disruption and deliver essential services to clients
• The impacts of COVID-19 on employees, including on their health and safety, and employee views communicated through ‘Grill Phil’, Jennifer Duvalier
as Designated NED and other employee communication channels
• Measures to be taken to preserve the financial strength of the Group in light of developments in the COVID-19 pandemic
Other Board activities during FY21 included those set out below. In undertaking their duties, the Directors act in a way they consider, in good faith, will
be most likely to promote the success of the Company for its shareholders as a whole, having regard also to other stakeholders.
Board activities:
Stakeholder engagement
Members of the Board attended several
stakeholder events during FY21.
June 2020
Held a virtual Town Hall event and
The Big Equality at Mitie Summit,
with all colleagues invited to join
June 2020
Employee engagement survey
responses discussed by the Board
June and July 2020
Held 1-1 meetings with institutional
investors following publication of
the FY20 results and in connection
with the rights issue
June to November 2020
Held 1-1 meetings with institutional
investors in connection with the
acquisition of Interserve
74
Mitie Group plc | Annual Report and Accounts 2021
SSttrraatteeggiicc ppiillllaarr::
CCuussttoommeerr:: BBuuiilldd mmaarrkkeett--lleeaaddiinngg ppoossiittiioonnss iinn hhiigghheerr ggrroowwtthh sseeccttoorrss,, ddeelliivveerr bbeesstt iinn ccllaassss ccuussttoommeerr sseerrvviicceess ((aass eevviiddeenncceedd bbyy iinndduussttrryy lleeaaddiinngg NNPPSS)) aanndd ffooccuuss oonn eexxtteennddiinngg tthhee
lliiffeettiimmee vvaalluuee ooff ssttrraatteeggiicc cclliieennttss
IInntteerrsseerrvvee aaccqquuiissiittiioonn aanndd iinntteeggrraattiioonn
NNeett PPrroommootteerr SSccoorree
UUKK eexxiitt ffrroomm EEuurrooppeeaann UUnniioonn ((BBrreexxiitt))
The Board debated and approved the acquisition of Interserve which completed on 30 November 2020. Regular updates
on integration activities were provided to the Board and discussed at meetings.
Further detail on Boardroom discussions relating to the acquisition can be found in the Section 172(1) statement on
pages 42 to 45
A Net Promoter Score survey was conducted, the results of which were discussed by the Board at its March 2021 meeting.
The survey involved 959 customers from Mitie’s top 442 accounts being asked how likely they were to recommend Mitie to
a friend or colleague and for feedback on Mitie’s COVID-19 response. Further detail can be found on page 17.
The Board was regularly updated on the operational and commercial impacts of Brexit on Mitie's business, including on
general preparations with key strategic and business critical suppliers, and contingency planning owing to uncertainty as to
future trading relationships with the European Union.
PPeeooppllee:: CCrreeaattee aa ‘‘GGrreeaatt PPllaaccee ttoo WWoorrkk’’,, bbee tthhee ‘‘EEmmppllooyyeerr ooff CChhooiiccee’’ ggeenneerraattiinngg ssoocciiaall vvaalluuee aanndd bbeeccoommiinngg kknnoowwnn aass aa lleeaaddiinngg EESSGG ccoommppaannyy
EEmmppllooyyeeee eennggaaggeemmeenntt
DDiivveerrssiittyy
EEmmppllooyyeeee vvooiiccee iinn tthhee BBooaarrddrroooomm
SSoocciiaall vvaalluuee
CCOOVVIIDD--1199
IInntteerrsseerrvvee iinntteeggrraattiioonn
The Board received and discussed the results of the March 2020 employee engagement survey, Upload, and agreed actions
to be taken in FY21. Regular updates on employee related matters, including learning and development, rewards and
benefits, employee appraisal outcomes and talent and recruitment, were also received and discussed.
The Board was updated on Mitie’s bespoke conscious inclusion programme, Count Me In. Approx. 6,000 employees took
part in the programme’s introductory exercise.
Jennifer Duvalier voiced what she heard and learnt from frontline employees at Employee Listening Events and discussed
key themes with the Board. After each employee event Jennifer also shared a summary of specific items of feedback with
the Board via an electronic board portal ‘Reading Room’.
Jennifer Duvalier is Mitie’s designated Non-Executive Director responsible for oversight of the Board’s engagement with the
workforce. Further information on Jennifer Duvalier’s activities in this role can be found on pages 80 to 81
The Board was updated on progress in Mitie’s social value initiatives including:
• Launch of Mitie’s ‘Giving Back’ programme for employee volunteering
• Plan Zero education initiatives for employees
The Board regularly discussed the impacts of COVID-19 on employees, including on their health and safety and employee
views communicated through pulse surveys, ‘Gill Phil’ and other channels.
The Board was also updated on employees’ response to initiatives taken in response to COVID-19 including:
• Access to a virtual GP service for all employees
• An extra day of holiday in FY21 for all frontline employees
• Life assurance for all permanent and fixed term employees
• Implementation of an Agile Working Policy
The Board was updated on employee sentiment and feedback on the integration of Interserve, including on the thematic
outcomes of a pulse survey conducted in January 2021 in which nearly 2,000 employees shared how they were feeling
about the integration.
July 2020
General Meeting to approve the
rights issue and 2020 Annual
General Meeting
October 2020
Virtually held Mitie’s Big Equality
Summit #2 with all colleagues
invited to join
October 2020
Cabinet Office Strategic Supplier
Annual Review
November 2020
General Meeting to approve the
acquisition of Interserve
February 2021
Plan Zero anniversary call with all
colleagues invited to join
March 2021
Cabinet Office Partnership
Executive Meeting
December 2020
Held a “New Mitie Day 1” virtual
meeting with all colleagues from
across Mitie and Interserve invited
to join
February and March 2021
Engagement with a significant
proportion of major shareholders
on remuneration policy matters
March 2021
Government Customers: One
Government Day
March 2021
Client Net Promoter Score survey
responses discussed by the Board
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
SSttrraatteeggiicc ppiillllaarr::
TTeecchhnnoollooggyy:: EEmmbbeedd iinntteelllliiggeenntt tteecchhnnoollooggyy iinnttoo tthhee hheeaarrtt ooff oouurr ooffffeerriinngg,, rreedduuccee ccoosstt ttoo sseerrvvee aanndd lleeaadd tthhee iinndduussttrryy iinn ddiiggiittaall ttrraannssffoorrmmaattiioonn aanndd ddeeccaarrbboonniissaattiioonn
PPrroojjeecctt FFoorrttee
SSAAPP iimmpplleemmeennttaattiioonn
The Board was regularly updated on Project Forte, the digital transformation and modernisation of the technology
infrastructure for Engineering Services.
The Board was regularly updated on the project to move Engineering Services off the Oracle finance platform and
Interserve off the AX12 finance platform onto SAP. Implementation of SAP is expected to bring better control as it allows
greater automation and control of transaction processes.
AArriiaa // EESSMMEE
The Board was regularly updated on Aria product development and roll out.
Aria allows for the reporting of facilities management issues through ESME, Mitie’s chatbot, which links to client Computer-
Aided Facilities Management systems to raise and process jobs.
CCoosstt:: SSttrreennggtthheenn oouurr bbaallaannccee sshheeeett aanndd mmaaiinnttaaiinn ccoosstt ddiisscciipplliinnee ttoo rreemmaaiinn ccoommppeettiittiivvee
RRiigghhttss iissssuuee
RRee--ffiinnaanncciinngg
CCOOVVIIDD--1199
RReessuullttss
BBuuddggeett
The Board debated and approved the decision to seek shareholder approval for the 11 for 5 rights issue announced on 25
June 2020 (the Rights Issue). Further detail on Boardroom discussions relating to the Rights Issue can be found in the Section
172(1) statement on pages 42 to 45.
The Board debated and approved an agreement with holders of its US Private Placement Notes and lenders to its
Revolving Credit Facility to grant covenant amendments and an extension to the Revolving Credit Facility, conditional upon
completion of the Rights Issue. Further detail on Boardroom discussions relating to the re-financing can be found in the
Section 172(1) statement on pages 42 to 45.
The Board discussed measures taken to preserve the financial strength of the Group in light of developments in the
COVID-19 pandemic, including self-help measures and the use of certain Government initiatives.
Further detail on Boardroom discussions relating to self-help measures and the use of Government initiatives can be found
in the Section 172(1) statement on pages 42 to 45.
The Board reviewed and approved the half-yearly financial report and Annual Report and Accounts.
The Board had delayed the review and approval of the Group’s budget for FY21 from its March 2020 meeting to allow the
impacts of COVID-19 to be more fully considered. The Board reviewed the Group’s FY21 budget at its June 2020 meeting
and further reviewed and approved the Group’s FY21 budget at its July 2020 meeting. The Board reviewed and approved
the Group’s budget for FY22 at its March 2021 meeting.
76
Mitie Group plc | Annual Report and Accounts 2021
SSttaannddiinngg aaggeennddaa iitteemmss::
CCoommmmiitttteeee uuppddaatteess
At every Board meeting a verbal update was provided by the chair of each Board Committee. Updates included an
overview of the Committee meeting and any recommendations from the Committee requiring approval by the Board.
CChhiieeff EExxeeccuuttiivvee OOffffiicceerr’’ss uuppddaattee
At every Board meeting the Chief Executive Officer presented a paper on topics such as:
• Financial highlights
• Business development
• Sector considerations
• Customers
• Sales
• Information systems and technology
• Key project and divisional updates
CChhiieeff FFiinnaanncciiaall OOffffiicceerr’’ss uuppddaattee
At every Board meeting the Chief Financial Officer presented a paper on topics such as:
CChhiieeff ooff SSttaaffff,, GGeenneerraall CCoouunnsseell
&& CCoommppaannyy SSeeccrreettaarryy’’ss uuppddaattee
• Financial performance of the Group
• Finance modernisation
At every Board meeting the Chief of Staff, General Counsel & Company Secretary presented a paper on topics such as:
• COVID-19 response
• QHSE performance, strategy and indicator statistics
• Any significant incidents/accidents
• Reportable and recordable events
• Fleet road safety and electric vehicle numbers
• HR and employee matters
• Procurement
• Internal communications and engagement
• External communications and public affairs
• Whistleblowing
• Material litigation
• Governance and regulatory matters
IInnvveessttoorr rreellaattiioonnss
At every Board meeting an investor relations report was presented on topics such as:
• Share price performance
• Investor engagement and feedback
• ESG ratings
• Analyst research and consensus
• Share register analysis
• Sector news
Mitie Group plc | Annual Report and Accounts 2021
77
Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
CCuullttuurree
aatt MMiittiiee
Culture at Mitie is underpinned by its purpose: to create exceptional
work environments.
Mitie is the UK’s leading facilities management company, providing a
range of critical engineering, security, cleaning, and sustainability services
to customers across government and the private sector.
Mitie's people’s expertise and insight combined with its innovative and
technology-led approach, enables tailored solutions that anticipate and
meet customers’ needs to create safe, secure and sustainable work
environments for colleagues, customers and communities.
All Directors lead by example and promote the desired culture.
HHooww tthhee BBooaarrdd aasssseesssseess aanndd mmoonniittoorrss ccuullttuurree
Mitie’s core values help define the behaviours of its people and underpin
its vision of TThhee EExxcceeppttiioonnaall,, EEvveerryy DDaayy. An important element of
Mitie’s culture is establishing a ‘One Mitie’ way of operating across the
business. The ‘One Mitie’ way leads to consistent, high quality and
relevant information flows across the business (see more on Mitie’s
values on page 8).
These information flows together with direct engagement from each
business are key to the Board’s oversight of cultural matters. Set out
below are examples of how the Board monitors culture:
EEtthhiiccss,, wwhhiissttlleebblloowwiinngg,, ffrraauudd aanndd bbrriibbeerryy
Mitie has an independent whistleblowing service to enable employees,
suppliers and third parties to report any concerns or wrongdoing
anonymously without any fear of retaliation. The service, which is
managed by an independent service provider, can be accessed via
a freephone number, a free online app or through the service
provider’s website.
Details of the service are made available to employees via Mitie’s
Employee Handbook and are displayed on Mitie’s intranet and
workplace posters. Details of the service are also communicated to
suppliers via Mitie’s sourcing portal and to other third parties via
wwwwww..mmiittiiee..ccoomm.
The whistleblowing service and related internal procedures are
structured to ensure that all reports are reviewed and investigated
independently from the area of the business to which they relate,
thereby minimising the risk of conflicts arising.
All reports are copied to the Deputy General Counsel, to ensure
transparency and enable any trends across different divisions and
functions to be identified and addressed. An update on whistleblowing
activity is provided to the Board at every Board meeting and to the
MGX as appropriate. The update to the Board includes details of
incident reports received in the period between meetings, together with
aggregated details of all reports received since the launch of the service
in September 2017.
QQHHSSEE//LLiivveessaaffee
The health and safety of its people is the highest priority for Mitie as a
business. Mitie is constantly striving to develop a zero-harm workplace.
Coordinated by Mitie’s QHSE team, the LiveSafe programme was
launched in December 2018. This highlights the importance of
workplace safety and was developed out of the need to constantly
improve QHSE performance across the business. A non-financial QHSE
KPI is included in the Group’s reporting; the lost time injury frequency
rate (read more on page 17).
MMeeaassuurriinngg ccuullttuurree
Board members were not able to attend Mitie sites and speak to
employees face to face during FY21 due to the COVID-19 pandemic,
however all-employee calls were held by Phil Bentley and the MGX
throughout the year. The calls included the ability for employees to ask
questions of management via a chat box (anonymously if preferred).
Whilst using this method alone as a way of assessing culture may not be
considered the most effective, it demonstrates the use of alternative
methods for Board and senior management interaction with the
workforce during the COVID-19 pandemic. It is intended that members
of the Board resume site visits once the UK Government’s guidelines on
social distancing allow.
Mitie also measures a number of non-financial KPIs such as staff
turnover, employee engagement, Net Promoter Score and lost time
injury frequency rate which allow trends and changes to be identified
and monitored.
AAlliiggnnmmeenntt ooff rreemmuunneerraattiioonn aanndd ccuullttuurree
Successful people and organisations are clear about what they want to
achieve, how they are going to get there and their progress along the
way. The annual employee appraisal (MiReview) process allows Mitie to
set quality objectives in areas that really add value to the business, build
development plans that help colleagues achieve their objectives and
ensure pay reviews are carried out in a transparent way, related directly
to individual performance.
Details on Mitie’s approach to investing in and rewarding its workforce
are set out on pages 38 to 40 and Mitie’s Real Living Wage commitment
on page 38.
VViieewwss ooff eemmppllooyyeeeess
Jennifer Duvalier is Mitie’s designated Non-Executive Director
responsible for oversight of the Board’s engagement with the
workforce. Jennifer champions the voice of Mitie employees at Board
discussions and participates directly in employee engagement initiatives,
providing the benefit of further employee feedback for the Board.
Mitie’s annual employee engagement survey, Upload, provides feedback
that can be acted upon by management to improve the experience of
working at Mitie. The results of the survey provide the Board with a
Group-wide snapshot of how employees rate Mitie’s culture and
employee engagement. A timeline with details of how this information
reaches and is considered by the Board can be found below.
78
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
DDaattee
MMaarrcchh 22002200
JJuunnee 22002200
JJuullyy 22002200
AAuugguusstt 22002200 –– MMaarrcchh 22002211
AAccttiioonn
The 2020 Upload engagement survey was launched. The survey was open to all employees and could be completed
through several different mediums to enable maximum participation.
Survey results were presented to the Board at its June 2020 meeting. The Board agreed next steps and a plan to address
matters raised.
As Mitie’s designated Non-Executive Director for workforce engagement, Jennifer Duvalier worked closely with
management to analyse the results of the survey. Further detail on Jennifer’s activities in this role can be found on
pages 80 to 81.
The ‘You Said, We Did’ campaign was launched to highlight the work of management in addressing four key areas of focus
identified from the 2020 Upload survey results.
The campaign identified initiatives introduced in direct response to employee feedback including: the launch of monthly ‘all
manager’ calls to update on Mitie’s short-term and long-term goals; implementation of a career band framework to facilitate
a consistent, transparent and objective approach to managing benefits and reward; integration of SmartRecruiters,
SuccessFactors, SAP, WorkPlace+, Learning Hub and Concur to save the need for data rekeying and to remove the need
for multiple usernames and passwords; and the roll out of LiveSafe training for all employees.
The campaign was communicated to employees through several different mediums.
Periodic updates on ‘You Said, We Did’ initiatives were communicated to employees.
Employees were actively encouraged to respond with further feedback on how the initiatives were progressing and their
thoughts on the impact that the initiatives were having, both positive and negative. This additional feedback allowed
management to review, consider and shape the initiatives to ensure that they continued to effectively address the matters
raised in the Upload survey.
SSttaakkeehhoollddeerr eennggaaggeemmeenntt mmeecchhaanniissmmss aanndd SSeeccttiioonn 117722((11))
ssttaatteemmeenntt
The Board acknowledges the importance of forming and retaining sound
relationships with all stakeholder groups. Accordingly, the Board
reviewed and discussed the Group’s key stakeholders along with the
engagement mechanisms in place to ensure that they support effective,
two-way communication. These are kept under periodic review to
ensure on-going effectiveness. The Board maintains a stakeholder map
which is used to support the Board’s reporting requirements under
Section 172(1) of the Companies Act 2006. More details on the Group’s
stakeholder engagement mechanisms can be found on pages 48 to 53.
Details of stakeholder activities undertaken by the Board can be found
on pages 74 to 75. Details of activities undertaken by Jennifer Duvalier in
her role as designated Non-Executive Director responsible for oversight
of the Board’s engagement with the workforce can be found on pages
80 to 81.
Mitie's Section 172(1) statement detailing how the Board has engaged
with the Group’s stakeholders and approached decisions made during
the year can be found in the Strategic report on pages 42 to 45.
DDiiaalloogguuee wwiitthh sshhaarreehhoollddeerrss
The Board is committed to ongoing and proactive dialogue with
shareholders. A full programme of formal and informal events,
institutional investor meetings and presentations is held throughout the
year. This programme of shareholder engagement aims to ensure that
the performance, strategies and objectives of the Group are clearly
communicated to the investment community and provides a forum for
institutional shareholders to address any issues. Mitie engages pro-
actively with the investment community, sell-side and buy-side analysts
and accommodates requests for meetings and calls with senior
management from existing and potential institutional investors. The
programme is led by the Executive Directors with support from the
Investor Relations team.
In June, following publication of the FY20 results, 1-1 meetings were
held with institutional investors.
In June and July, 1-1 meetings were held with institutional investors in
connection with the rights issue.
In July, a General Meeting and the 2020 Annual General Meeting were
held in London. Due to the UK Government’s guidance on social
distancing and prohibitions on public gatherings at the time, shareholders
were not able to attend these meetings in person. Shareholders were
encouraged to submit any questions to the Board in advance of the
meetings via email. At the General Meeting the resolution authorising
the Directors to allot ordinary shares in connection with the Rights Issue
passed with more than 99% of the votes cast in favour. At the 2020
Annual General Meeting all resolutions passed with more than 91% of
the votes cast in favour.
Between June and November, 1-1 meetings were held with institutional
investors in connection with the acquisition of Interserve.
In November, following publication of the HY21 results, meetings were
held with institutional investors.
In November, a General Meeting was held in London. As with the July
meetings, shareholders were not able to attend the meeting and were
encouraged to submit any questions to the Board in advance of the
meeting via email. At the General Meeting all resolutions, which related
to the acquisition of Interserve, passed with more than 86% of the votes
cast in favour.
In February and March, Mitie engaged with a significant proportion of its
major shareholders on remuneration policy matters. Engagement on
remuneration policy matters continued into FY22.
Ad hoc meetings were also held with institutional and retail investors
throughout the year.
The Board is regularly kept informed of investor feedback, stockbroker
updates and detailed analyst reports. A Board report is prepared by the
Group IR Director for every Board meeting as set out under
Boardroom discussions on page 77. The Chairman is responsible for
ensuring that the Board is made aware of any issues or concerns of
major shareholders, and the Chairman and Senior Independent Director
are available to meet with shareholders upon request. Committee chairs
seek engagement with shareholders on significant matters related to
their area of responsibility. In the early part of FY22 the Chairman,
accompanied by a non-executive Director, met all top ten shareholders
as part of an annual roadshow.
22002211 AAnnnnuuaall GGeenneerraall MMeeeettiinngg
Mitie's Annual General Meeting (AGM) will be held on 27 July 2021
at 11.30am at Level 12, The Shard, 32 London Bridge Street, London
SE1 9SG and on an electronic platform.
Mitie is closely monitoring the impact of the COVID-19 pandemic and
public health concerns and will review attendance restrictions if the UK
Government's guidance has changed by the date of the meeting.
Shareholders should carefully consider whether to attend the physical
meeting in the current circumstances.
The Board recognises that the AGM is an important event in the
Company’s corporate calendar, providing an opportunity to engage with
shareholders. Therefore, to maximise engagement whilst respecting any
restrictions and guidance on public gatherings, the Company will for the
first time hold the AGM as a combined physical and electronic meeting
(a hybrid meeting). This will enable shareholders to attend the AGM
remotely and to vote and ask questions in real time. Shareholders will be
able to attend and vote at the AGM using electronic facilities and ask
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
79
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Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
questions using either the telephone or electronic facilities – instructions
on how to do this are set out in the Notice of AGM.
JJeennnniiffeerr’’ss tthhoouugghhttss
The Board also encourages shareholders to appoint the chairman of
the AGM as their proxy and provide voting instructions in advance of
the meeting in accordance with the instructions set out in the Notice
of AGM.
RReessoouurrcceess ffoorr sshhaarreehhoollddeerrss aanndd ootthheerr ssttaakkeehhoollddeerrss
Mitie has a specific area dedicated to investor relations on its website
((wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss)) where the information detailed below
can be found:
• Latest results including half-year and full-year results presentations
• Financial reports and calendar
• Shareholder information
• Share price tools
• Corporate governance information
• Regulatory announcements
DDeessiiggnnaatteedd NNEEDD ffoorr wwoorrkkffoorrccee eennggaaggeemmeenntt
Jennifer Duvalier is Mitie’s designated Non-Executive Director
responsible for oversight of the Board’s engagement with the
workforce. Jennifer carried out a full programme of activities during
FY21 to encourage employees to share their views.
WWhhyy JJeennnniiffeerr
Prior to joining the Board in 2017, Jennifer had a long career in HR
working in several large, people driven companies going through real
transformation. Jennifer brings this wealth of experience to Mitie and
therefore the Board considered Jennifer to be the Board member most
suited to becoming Mitie’s Designated Non-Executive Director for
workforce engagement.
BBooaarrdd eexxppeeccttaattiioonnss
The Board is at the forefront of the journey to make Mitie a great place
to work and is keen to understand the views of all employees and the
impact its decisions have on them.
Jennifer engages with the workforce on behalf of the Board and
provides a channel for employees in the boardroom. At regular Board
meetings, Jennifer shares what she has heard and learnt with the Board,
using her insights to add an important perspective to discussions and
decisions. This ensures employee voices are heard and considered as the
Board makes decisions that influence the future of Mitie.
A summary of Jennifer’s discussions is also shared with the Board ahead
of meetings and, where there are specific matters raised, with members
of senior management to ensure those matters are considered and
appropriately addressed.
I have always come away from my visits, in
person and virtual, with a very strong and
positive impression of how dedicated our
frontline colleagues are to supporting our
customers, in very challenging circumstances,
and I emphasise this to my Board colleagues
in my reports back to them.
Given that Mitie is the sum total of our
people, this commitment is such a source
of strength, and is to be valued as highly as
our other assets.”
SSiittee vviissiittss
Jennifer’s role as Designated Non-Executive Director for workforce
engagement is supported by members of Mitie’s HR team. The team
approaches account directors and managers from across the Mitie
business to ask if they would like to host Jennifer at their site.
Following each visit (in person and/or virtually) the HR team prepares an
article which is shared across Mitie’s internal communication channels
including MiNet and Recap newsletter. With each of these articles the
team encourages people to get in touch if they would like to arrange a
visit with Jennifer for their site.
Whilst each event varies in structure, generally Jennifer has a tour or
receives an overview of the site and a 1-1 meeting with managers
followed by an informal session with the site teams without managers
present. No specific topics for discussion are provided in advance,
though site teams are advised that Jennifer would like to hear from them
about their experience of working at Mitie, whether they have any
challenges, concerns or ideas for improvement, and the things that they
consider Mitie does well.
AAccttiivviittiieess
The Board considers it important that employee views are heard
through several mediums including, great people management, surveys,
internal communications, and digital channels (such as Yammer) to
develop a positive culture across the business.
Therefore, as well as the site visits noted above, Jennifer is fully involved
in a range of other activities including, analysing the feedback from
Mitie’s Upload surveys, championing Back to the Floor events for the
Board and senior management, spending time with HR teams, attending
listening and virtual Q&A events, and inviting employees to contact her
directly via her Mitie email address.
During the COVID-19 pandemic Jennifer continued her work by hosting
numerous virtual meetings with employees.
Designated NED for
workforce engagement
Jennifer Duvalier’s activities during FY21
April 2020
Virtual meeting with team at LBG
Edinburgh. Jenny virtually met the
Campus Manager and then met
1:1 with a member of the
frontline team.
May 2020
Virtual employee listening
event with Security team at
British Airways.
80
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EEmmppllooyyeeee ffeeeeddbbaacckk oonn DDeessiiggnnaatteedd NNoonn--EExxeeccuuttiivvee
DDiirreeccttoorr rroollee::
We were very fortunate to meet Jenny when
she visited The Bank of Ireland Temple Quay
this time last year. We found Jenny to be a
very pleasant lady, a good listener and very
engaging. A great strategy and idea to come
and visit the everyday people who are the
backbone of Mitie. I think this should be more
of a regular event. The front of shop people
and at lower levels, often feel that they are not
noticed, left behind and don’t have a voice that
can be heard in the higher places. Three
cheers for Jenny Duvalier!”
VViinncceenntt CCoossttiiggaann
Electrician, Integrated Facilities Management
21 January 2021
WWhhyy tthhee rroollee aaddddss vvaalluuee ((oovveerr aanndd aabboovvee ootthheerr eemmppllooyyeeee
eennggaaggeemmeenntt mmeecchhaanniissmmss))
In carrying out her role, Jennifer travels out across the business, meeting
people face to face and listening to their views and experiences to
understand first-hand what they value about Mitie and what they would
like to be different. Being a member of the Board, Jennifer is also able to
instil confidence that employees’ views are being heard at the highest
level of the organisation. In analysing the feedback received from
Jennifer, the Board can quickly identify any recurring concerns across the
business and provide assurance that these will be managed effectively
and efficiently.
CCoonnfflliiccttss ooff iinntteerreesstt
The Board has a policy on the declaration and management of Directors’
conflicts of interests. Any potential situation or transactional conflict
must be reported as soon as possible to the Chairman, Chief Executive
Officer and Chief of Staff, General Counsel & Company Secretary.
Where a potential conflict is authorised under statutory powers and
powers granted under the Company’s Articles of Association, such
conflict is kept under ongoing review.
Executive Directors are permitted to accept external appointments
provided these do not interfere with the Director’s ability to discharge
his/her duties effectively and permission is sought from the Board.
Executive Directors are entitled to retain fees earned from any external
appointments. Phil Bentley did not hold any external positions during
FY21. Andrew Peeler, who resigned from the Board on 31 March 2021,
was a director and chair of the Finance Committee of Fair Finance, a
micro finance social enterprise. Simon Kirkpatrick, who was appointed to
the Board on 1 April 2021 does not hold any external positions.
External positions held by the Chairman and current Independent Non-
Executive Directors are detailed in their biographies on pages 69 to 71.
NNoottiinngg ooff DDiirreeccttoorrss’’ ccoonncceerrnnss
The Chairman encourages openness and debate at Board meetings.
Should a Director have concerns about the operation of the Board or
management of the Company that cannot be resolved, such concerns
would be recorded in the minutes of the relevant meeting. If, on
resignation, a Non-Executive Director had any such concerns they
would be invited to provide a written statement to the Chairman that
would be circulated to the Board.
July 2020
Back to the Floor at Heathrow IRC
with the Care & Custody team.
Jenny met with the Centre
Manager and dialled into the daily
operational meeting with the entire
team. Jenny was then taken on a
tour of the Harmondsworth site
before returning to the Colnbrook
site where she worked with a
Detention Custody Officer.
October 2020
Virtual meeting with Amazon team
at BHX1. Jenny met some of the
management team and then held
conversations with frontline team
members. They discussed what
was working well for them on
the contract and what could
be improved.
November 2020
Virtual colleague listening session
with Co-op team in Manchester.
Interactive discussions with the
SAM, contract senior leadership
team and groups of frontline team
members from Cleaning, Security
and 1AS/IFM.
January 2021
Virtual Back to the Floor with
members of the Landscapes team.
Jenny heard views on what drives
Mitie colleagues to show up to
work each day and empowers them
to perform. It was an open and
honest conversation, which gave
Jenny great insight into the culture
of Landscapes and the work Mitie’s
teams do across the UK.
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81
8811
Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
The Code:
Division of responsibilities
BBooaarrdd ccoommppoossiittiioonn
CChhaaiirrmmaann
Derek Mapp
EExxeeccuuttiivvee DDiirreeccttoorrss
Phil Bentley
Andrew Peeler (until 31 March 2021)
Simon Kirkpatrick (from 1 April 2021)
SSeenniioorr IInnddeeppeennddeenntt
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorr
Roger Yates
IInnddeeppeennddeenntt NNoonn--
EExxeeccuuttiivvee DDiirreeccttoorrss
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Jennifer Duvalier
Alan Lovell (from 1 January 2021
until 5 March 2021)
Mary Reilly
Biographies of the current Directors can be found on pages 69 to 71.
All Non-Executive Directors are considered independent when
assessed against the circumstances set out in Provision 10 of the Code.
The Chairman was considered independent against these circumstances
on appointment.
The Board continues to support separation of the roles of Chairman
and Chief Executive Officer and considers itself to have an appropriate
balance of Executive Directors and Independent Non-Executive
Directors. No one individual or small group of individuals dominates
Board decision-making.
There is a clear division of responsibilities between leadership of the
Board and executive management leadership of the Company’s business.
Key responsibilities of the Board, its Committees and its members are
agreed by the Board and documented in writing.
These responsibilities are summarised below. Further detail is publicly
available at wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--ggoovveerrnnaannccee where
the following documents are published:
• Matters reserved for the Board
• Terms of Reference for each Committee of the Board
• Division of Responsibilities between the Chairman and Chief
Executive Officer
Director independence
as at 31 March 2021
Chairman
Executive
Independent
1
2
5
MMaatttteerrss rreesseerrvveedd ffoorr tthhee BBooaarrdd
A schedule of key matters and responsibilities that are to be dealt with
exclusively by the Board is maintained and regularly reviewed. The
schedule was last updated in January 2021.
The key responsibilities of the Board include:
• Approve the Group’s long-term objectives and commercial strategy
• Establish the Group’s purpose and values and satisfy itself that these,
its strategy and culture are aligned
• Review performance in light of the Group’s strategy, objectives,
business plans and budgets
• Approve the half-yearly financial report and Annual Report
and Accounts
• Approve the annual budget, treasury policies and dividend policy
• Review the effectiveness of the Group’s risk and control processes
• Approve all material acquisitions, material disposals, material
contractual and other operational matters
• Ensure adequate succession planning for the Board and
senior management
• Undertake a formal and rigorous review annually of its own
performance and that of its Committees and individual Directors
• Make arrangements for dialogue with shareholders, canvassing
shareholder opinion and engagement with shareholders in relation
to any shareholder resolution which is opposed by more than 20%
of the votes cast
BBooaarrdd CCoommmmiitttteeeess
The responsibilities of each formal Committee of the Board are set out
in its Committee report.
Nomination Committee
Audit Committee
Remuneration Committee
pages 91 to 93
pages 94 to 98
pages 99 to 120
Social Value & Responsible Business Committee
pages 121 to 122
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DDiirreeccttoorr aatttteennddaannccee aatt mmeeeettiinnggss ooff tthhee BBooaarrdd aanndd iittss CCoommmmiitttteeeess
PPoossiittiioonn
CChhaaiirrmmaann
EExxeeccuuttiivvee DDiirreeccttoorrss
NNaammee
Derek Mapp
Phil Bentley
Andrew Peeler*
IInnddeeppeennddeenntt NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Jennifer Duvalier
Alan Lovell**
Mary Reilly
Roger Yates
NNoommiinnaattiioonn
CCoommmmiitttteeee
AAuuddiitt
CCoommmmiitttteeee
RReemmuunneerraattiioonn
CCoommmmiitttteeee
SSoocciiaall VVaalluuee
&& RReessppoonnssiibbllee
BBuussiinneessss
CCoommmmiitttteeee
3/3
–
–
3/3
3/3
2/3
–
3/3
3/3
–
–
–
11/11
11/11
–
–
11/11
10/11
–
–
–
–
–
7/7
–
7/7
7/7
–
–
–
–
7/7
–
–
–
–
BBooaarrdd
10/10
10/10
10/10
10/10
10/10
10/10
1/1
10/10
10/10
* Andrew Peeler resigned from the Board on 31 March 2021 and was replaced by Simon Kirkpatrick on 1 April 2021.
** Alan Lovell, Chairman of Interserve Group Limited, was appointed to the Board on 1 January 2021 following Mitie's acquisition of Interserve Facilities Management from How Group Limited (a
subsidiary of Interserve Group Limited) on 30 November 2020, and resigned from the Board on 5 March 2021 following the sale by How Group Limited of shares representing 10.5% of the
Company’s issued share capital.
In addition to the formal scheduled Board and Committee meetings held during the year, attendance at which is reported above, the Board held weekly
calls from the start of the COVID-19 pandemic in March 2020 until the end of June 2020.
DDiivviissiioonn ooff rreessppoonnssiibbiilliittiieess
CChhaaiirrmmaann
In his role as Chairman, Derek Mapp’s responsibilities include:
• Lead and chair the Board, Nomination Committee and shareholder
general meetings
• Ensure overall effectiveness of the Board in all aspects of its role
• Ensure regularity and frequency of Board meetings
• Set Board agendas, taking into account the issues and concerns
of all Board members
• Ensure appropriate delegation of authority from the Board to
executive management
• Demonstrate objective judgment
• Promote a culture of openness and debate
• Ensure that Directors receive accurate, timely and clear information
• Manage the Board to ensure 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
• Facilitate the effective contribution of Non-Executive Directors and
encourage active engagement by all members of the Board
• Ensure constructive relations between the Executive Directors and
Non-Executive Directors
• Hold meetings with the Non-Executive Directors without the
Executive Directors present
• Ensure that new Directors participate in a full, formal and tailored
induction programme
• Ensure that the performance of the Board, its Committees and
individual Directors is evaluated at least once a year and act on the
results of such evaluation
• Maintain sufficient contact with major shareholders to understand
their issues and concerns
• Ensure that the views of shareholders are communicated to the Board
SSeenniioorr IInnddeeppeennddeenntt DDiirreeccttoorr
In his role as Senior Independent Director, Roger Yates’
responsibilities include:
• Act as a sounding board for the Chairman
• Serve as an intermediary for other Directors when necessary
• Conduct the Chairman’s annual performance evaluation (without the
Chairman present)
• Lead the appointment process for any new Chairman
• Act as chairman of the Board in the absence of the Chairman
• Be available as an alternative point of contact for shareholders if
they have concerns which have not been resolved through the
normal channels, or for which such contact is inappropriate in
the circumstances
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss
The responsibilities of the Board’s Non-Executive Directors include:
• Hold a prime role in appointing and removing Executive Directors
when necessary
• Scrutinise and hold to account the performance of management and
individual Executive Directors against agreed performance objectives
• Exercise independent skill and judgement
• Constructively challenge proposals based on relevant individual
experience, knowledge and skills
• Contribute to the formulation and development of strategy
• Monitor corporate reporting to ensure integrity of
financial information
• Oversee the Group’s principal risks and assurance in place relating
to those risks, including internal audit programmes
• Play a key role in determining the remuneration policy for the
Chairman, Executive Directors, Chief of Staff, General Counsel
& Company Secretary and members of senior management
• Hold a primary role in Board succession planning
CChhiieeff EExxeeccuuttiivvee OOffffiicceerr
In his role as Chief Executive Officer, Phil Bentley’s
responsibilities include:
• All aspects of the operation and management of the Group within the
authorities delegated by the Board
• Develop Group objectives and strategy, having regard to the Group’s
responsibilities to its shareholders, customers, employees and other
stakeholders
• Successful achievement of objectives and execution of strategy
following presentation to, and approval by, the Board
• Recommend to the Board an annual budget and long-term business
plan and ensure their achievement following Board approval
• Optimise the use and adequacy of the Group’s resources
• Manage the Group’s risk profile, including the health and safety
performance of the business
• Make recommendations to the Remuneration Committee on
remuneration policy, executive remuneration and terms of
employment of the senior executive team
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8833
Strategic reportGovernanceFinancial statements The Chairman ensures that all Directors feel they can voice their
opinion, be listened to, and contribute to the decision-making process.
Function heads and members of management are invited to
attend Board meetings to present their items to the Board and
answer questions.
During FY21 most Board meetings were held virtually due to
UK Government social distancing requirements.
AAddvviiccee ooff tthhee CCoommppaannyy SSeeccrreettaarryy
All Directors have access to the advice of the Company Secretary
through various channels including the Chief of Staff, General Counsel &
Company Secretary’s Board report which is presented at every Board
meeting, and a secure electronic board portal which is kept up to date
with the latest governance-related information and guidance. The Chief
of Staff, General Counsel & Company Secretary and Company
Secretariat team are also available to the Directors on an ad hoc basis as
required. The Chief of Staff, General Counsel & Company Secretary
helps the Board ensure it has the appropriate policies, processes,
information, time and resources it needs in order to function effectively
and efficiently.
The Board is responsible for the appointment and, where applicable,
removal of the Company Secretary.
DDiirreeccttoorr eexxtteerrnnaall aappppooiinnttmmeennttss aanndd ttiimmee ccoommmmiittmmeennttss
Directors are permitted to accept additional external appointments but
must seek approval from the Board in advance. If a Director held
significant additional external appointments, the reasons for permitting
such appointments would be explained in the annual report. The Board
remains confident that all Board members continue to have sufficient
time to dedicate to their duties.
When considering the appointment of a new Director, the Board
reviews other demands on the candidate’s time. Prior to appointment,
the candidate must disclose any significant commitments and provide an
indication of the time involved. The Board fully considered the time
commitments of Simon Kirkpatrick prior to his appointment as Chief
Financial Officer and no concerns were raised.
Alan Lovell, Chairman of Interserve Group Limited, was appointed as a
Non-Executive Director of Mitie on 1 January 2021 following Mitie’s
acquisition of Interserve Facilities Management from How Group
Limited (a subsidiary of Interserve Group Limited) on 30 November
2020. Alan Lovell resigned from the Board on 5 March 2021 following
the sale by How Group Limited of shares representing 10.5% of the
Company’s issued share capital, thereby reducing their shareholding
from 17.5% to 7%.
The Nomination Committee conducts an annual review of Directors’
time commitments, further details of which can be found on page 93.
CCoorrppoorraattee ggoovveerrnnaannccee continued
CChhiieeff FFiinnaanncciiaall OOffffiicceerr
In his role as Chief Financial Officer, Simon Kirkpatrick’s
responsibilities include:
• Lead, direct and oversee all aspects of the finance and accounting
functions of the Group
• Evaluate, approve and advise on the financial and commercial impact
of material contracts and transactions (including mergers and
acquisitions), technology investments, long-range planning assumptions,
investment return metrics, risks and opportunities and the impact of
changes in accounting standards
• Manage relationships with the external auditor and key financial
institutions and advisors
• Ensure effective internal controls are in place and compliance
with appropriate accounting regulations for financial, regulatory
and tax reporting
• Lead, direct and oversee the Group's Finance, Treasury, Tax and
Internal Audit functions
Simon Kirkpatrick replaced Andrew Peeler as Chief Financial Officer
on 1 April 2021.
CChhiieeff ooff SSttaaffff,, GGeenneerraall CCoouunnsseell && CCoommppaannyy SSeeccrreettaarryy
In his role as Chief of Staff, General Counsel & Company Secretary,
Peter Dickinson’s responsibilities include:
• Advise the Board on governance matters and the Directors on
their duties
• Ensure compliance with corporate legislation and the Company’s
Articles of Association
• Support the Board in ensuring it has the policies, processes,
information, time and resources needed to function effectively
and efficiently
• Lead, direct and oversee the Group’s Legal, Company Secretarial, HR,
Pensions, Property, Procurement, Insurance, Health & Safety, Risk &
Compliance, Sustainability and Fleet functions
• Identify and recommend to the Board acquisitions and disposals
• Drive projects relating to mergers and acquisitions within the Group
in line with authorities delegated by the Board
• Lead, direct and oversee the integration of Interserve
• Oversight of the Specialist Services division
• Provide an underpin to all aspects of the Group’s governance
framework and the application of its delegated authorities
BBooaarrdd mmeeeettiinngg pprroocceessss
The Chairman is responsible for setting the Board meeting agenda and
for ensuring that the style and tone of Boardroom discussions promote
effective decision making and constructive debate.
Each Board meeting agenda is produced in consultation with the
Chairman using items from a yearly meeting planner, actions arising from
prior meetings, project progress updates and any relevant governance
and regulatory matters. Items may also be added to the agenda at the
request of a Board member or in response to emerging issues.
Attention is given to timings for each agenda item to ensure that
adequate time is allocated for effective discussion and debate.
To allow sufficient time for the Directors to review Board meeting
materials and seek any clarification needed ahead of the meeting, Board
meeting materials are distributed to the Directors not less than five clear
calendar days prior to the meeting via a secure electronic board portal.
To ensure that Board meeting materials are of a consistent high
standard, Board paper guidelines and templates are issued to authors
of those materials.
An important element of Mitie’s culture is that the Group operates as
‘One Mitie’ and collaborates effectively across business areas. Mitie’s
culture facilitates greater consistency in processes and information
control which in turn facilitates the preparation of consistent, high quality
and relevant Board meeting materials. Authors of those materials seek
to appropriately consider the impact, views and needs of key
stakeholder groups as well as the likely consequences of decisions in the
long term, helping to aid Board discussions and decision making.
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The Code: Composition,
succession and evaluation
BBooaarrdd eeffffeeccttiivveenneessss
The performance of the Board is an essential component of the Company’s success. The Board undertakes a formal and rigorous evaluation of its own
performance and that of the Board Committees, Chairman and individual Directors annually. The evaluation considers composition, diversity and how
effectively members work together to achieve objectives. The evaluation provides an opportunity for the Board to enhance its effectiveness and identify
any areas for improvement. All Directors fully engage in the evaluation process and take appropriate action if development needs are identified. The
evaluation is externally led every three years and internally led in other years. In years in which the evaluation is led internally, the Chairman leads this for
the Independent Non-Executive Directors and Executive Directors, and the Senior Independent Director facilitates the evaluation for the Chairman.
The Board engaged an independent consultant, Belinda Hudson, to conduct the FY20 Board evaluation. This external Board evaluation was delayed due
to the COVID-19 pandemic and took place during FY21. The external Board evaluation was completed by Belinda Hudson in December 2020 and
discussed by the Board and Nomination Committee at their March 2021 meetings. Outcomes and actions from the external evaluation are detailed in
the Nomination Committee report on page 92. Belinda does not have any known connection with the Company or any individual Directors.
IInnddiivviidduuaall DDiirreeccttoorr ccoonnttrriibbuuttiioonn
The individual skills and experience of each Director contribute to the overall effectiveness of the Board in promoting the long-term sustainable success
of the Company. The table below sets out how each Director’s individual skills and experience contribute to the balance required by the Board to
deliver the Group’s strategy and manage risk.
Further details of each Director’s skills and experience is set out in their biographies on pages 69 to 71.
DDeerreekk
MMaapppp
PPhhiill
BBeennttlleeyy
SSiimmoonn
KKiirrkkppaattrriicckk
NNiivveeddiittaa
KKrriisshhnnaammuurrtthhyy
BBhhaaggaatt
BBaarroonneessss
CCoouuttttiiee
JJeennnniiffeerr
DDuuvvaalliieerr
MMaarryy
RReeiillllyy
RRooggeerr
YYaatteess
Corporate governance
Exceptional
Exceptional
Exceptional
P
Exceptional
P
P
SSkkiillllss // eexxppeerriieennccee aarreeaa
Leadership and business
operations
Strategy development
Audit/risk management and
assurance
Remuneration/HR
Commercial
Technology/digital
Finance
Investment community
Government/ public sector
experience
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Exceptional
P
P
P
P
P
Exceptional
Exceptional
P
P
P
P
P
P
P
P
P
P
P
P
Exceptional
P
Exceptional
Exceptional
Exceptional
Exceptional
P
Exceptional
P
The collective skills and experience of individual Directors support the work of the Board and there is clear alignment between their respective
competencies and the Group’s strategy. Board discussions further benefit from the diversity of approach taken by each Director due to their individual
background, career development and training.
DDiirreeccttoorr tteennuurree
The Board considers tenure when determining a Non-Executive Director’s independence. No Non-Executive Director has served more than four years
on the Board.
Director tenure
as at 31 March 2021
0-2 years
2-4 years
4-6 years
1
6
1
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Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
RRee--eelleeccttiioonn ooff DDiirreeccttoorrss
In accordance with the Code and the Company’s Articles of Association,
all Directors are subject to election or re-election by shareholders. At
the 2020 AGM each Director in post at the time stood for re-election
and was re-appointed by shareholders. At the 2021 AGM Simon
Kirkpatrick will stand for election and all other Directors will stand
for re-election.
The rules governing the appointment and replacement of Directors
are set out in the Articles, The UK Corporate Governance Code
(July 2018), Companies Act 2006 and other related legislation.
The terms of appointment for Non-Executive Directors and service
contracts for Executive Directors are available for inspection at the
Company’s registered office and head office and will be available at the
2021 Annual General Meeting.
DDiirreeccttoorr iinndduuccttiioonn pprroocceessss
On joining the Board, all Directors receive a personally tailored
induction which includes:
• Meetings with Executive Directors, the Chief of Staff,
General Counsel & Company Secretary and other members of senior
management
• An overview of the Group’s governance policies, corporate structure
and business functions
• Details of risks and operating issues facing the Group
• Visits (in person and/or virtually) to divisional offices
• A briefing on key contracts
Alan Lovell’s induction included the above as well as virtual meetings
with the Non-Executive Directors. Simon Kirkpatrick joined Mitie in July
2019 and has received a detailed hand-over from Andrew Peeler who
will leave Mitie on 30 June 2021.
BBooaarrdd ttrraaiinniinngg aanndd ddeevveellooppmmeenntt
Mitie is committed to the continual professional development of
its Directors.
All Directors have access to Mitie’s Board Handbook on the electronic
board portal which includes:
• Schedule of matters reserved for the Board
• Committee terms of reference
• Articles of Association
• Guidance on directors’ statutory duties
• An overview of the Group’s directors’ and officers’ liability insurance
arrangements
• Delegated authorities register
• Share dealing procedures
• Corporate governance and regulatory guidelines
• Key corporate documents and policies
The Board Handbook is subject to regular review and was last updated
in early 2021.
EEqquuaalliittyy,, ddiivveerrssiittyy aanndd iinncclluussiioonn
One of Mitie’s strategic pillars is to create a ‘Great Place to Work’
for employees, and one of Mitie’s values is ‘Our diversity makes
us stronger’.
Female employees accounted for 40% of the workforce and 21%
of senior management and their direct reports (MGX and Mitie
Leadership Team combined) at 31 March 2021.
The Group’s approach to business is underpinned by a belief that
all individuals should be treated fairly and have access to equal
opportunities. To attract, recruit, develop and retain the very best
people at all levels, Mitie is committed to respecting and embracing
talent and working to support a culture that is inclusive and reflective of
Mitie’s visions and values. In recognition of the Group’s diversity-related
initiatives and achievements, Mitie has won several awards
and accreditations.
Mitie has a Group-wide Equality, Diversity & Inclusion Policy, the
requirements of which include that:
• No job applicant or employee will receive less favourable treatment
on the grounds of sex, race, age, ethnic origin, marital status,
pregnancy and maternity, civil partnership status, any gender
re-assignment, religion or belief, sexual orientation, disability
or part-time/fixed-term work
• Inclusion, equality and diversity will be promoted within the workplace
• An environment will be created where anyone believing they
have been subjected to discrimination, victimisation, bullying or
harassment in the workplace, is entitled and feels safe to raise
such concerns
In implementing the policy, Mitie:
• Ensures that all policies, processes, procedures and practices underpin
delivery of the Equality, Diversity & Inclusion policy
• Cascades inclusion lessons learned and shares best practice
throughout the business
• Identifies key issues and recommends any changes
Mitie has six employee diversity networks, details of which can be
found on page 38. The networks host a variety of face-to-face and
virtual events and contribute to online platforms designed to interact
and share ideas.
In connection with the Group’s wider diversity initiatives and its Equality,
Diversity & Inclusion Policy, Mitie is committed to:
• Giving full and fair consideration to applications for employment
by disabled persons, having regard to their particular aptitudes
and abilities
• Continuing the employment of, and arranging appropriate training
for, employees who have become disabled during their employment
• The training of, career development and promotion of
disabled employees
Briefing notes on changes in the regulatory and governance environment
are circulated to Directors on an ad hoc basis.
Mitie is a signatory of the Disability Confident scheme with the
Department for Work and Pensions.
Further details of the Group’s commitment to diversity can be found
on page 38 and on the website:: wwwwww..mmiittiiee..ccoomm.
Online training is also available to all Directors on topics such as the
Bribery Act 2010, GDPR, Criminal Finance Act 2017 and anti-slavery.
Additionally, Mitie’s Licence to Operate training is available to all
Directors, and Licence to Lead training is available to the Chairman and
Executive Directors. Further detail on Mitie’s Learning & Development
core offering can be found on page 39.
Visits (in person and/or virtually) to different business sites and
offices are arranged for Directors to facilitate a deeper understanding
of the business.
NNoommiinnaattiioonn CCoommmmiitttteeee
The Nomination Committee Report on pages 91 to 93 contains
information on the Company’s compliance with Provision 23 of
the Code.
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The Code: Audit, risk
and internal control
RRiisskk ccuullttuurree
It is recognised that the risk management culture within the business
is equally as important as an effective risk management framework.
In support of this, the ‘One Mitie’ Vision and Values have an important
role to play. As well as helping to achieve common ways of working and
clarity of approach for customers and employees, they also help set out,
together with the code of conduct, the framework upon which Mitie’s
risk culture is built. Emphasis is placed on the importance of embedding
risk management into all key decisions, such that opportunities to grow
the Group are effectively balanced with effective risk management
decision making. This means that opportunities may continue to be
exploited, provided risks have been properly identified and the
appropriate controls and mitigation plans established, or, in some
cases, potential opportunities are declined if they sit outside the
Group’s risk appetite.
The Employee Handbook sets out the expected behaviours for all
employees and supply chain partners and establishes zero tolerance
in specific areas as part of an established ethical business framework.
The Group continues to review and reaffirm its ethical business practice
policies with employees and supply chain partners to ensure awareness
of the vision, values and expected behaviours is maintained.
In addition, in the past year the response to the COVID-19 pandemic
has served to provide valuable learning points to enhance the risk
management and continuity processes.
RRiisskk mmaannaaggeemmeenntt pprroocceessss
The Group’s risk management framework provides a flexible and
adaptable approach to the identification of risk across all areas of
the business, to meet the demands of the dynamic and fast evolving
environment in which the Group continues to operate. Ultimate
responsibility for risk management lies with the Board, delegated to
the Chief Executive Officer, who further delegates it to the MGX,
with accountability and responsibility assigned to specific risk owners.
The Group risk profile is reviewed by the Chief Executive Officer,
Chief Financial Officer and Chief of Staff, General Counsel & Company
Secretary in advance of formal review and approval by the Board. This
information is captured in risk registers at business unit and functional
level, as well as for large contracts, which are subsequently consolidated
into strategic, operational, financial and regulatory risk categories and
detailed together with any emerging or disruptive risks within the overall
Group risk register.
BBooaarrdd aaccccoouunnttaabbiilliittyy aanndd aassssuurraannccee
RRiisskk mmaannaaggeemmeenntt aapppprrooaacchh
Mitie has continued to develop and improve its approach to governance,
risk management and internal control during FY21. During the year, the
risk management framework has been reviewed to make sure it is
aligned to the organisational processes and strategy as well as helping
to support corporate governance requirements. The risk management
policy and supporting processes have been assessed and revised, and
a Group Risk Committee has been introduced, which helps coordinate
the risk processes across the Group. This also allows better coordination
of reporting of risks to the MGX, the Audit Committee and the Board.
The impact of the COVID-19 pandemic, as well as the Rights Issue and
acquisition of Interserve Facilities Management (Interserve) have also
served as valuable learning points to help improve the consistency of risk
processes and ensure risk is managed effectively.
The Board considers the nature and extent of significant risks in setting
the Group’s strategy. The Group's delegated authority register (DAR),
which sets out the accountabilities and authority to take decisions on
specific matters within defined financial limits, has been revised during
the year and authority limits are being aligned at divisional level as part
of the integration of Interserve. This approach helps to disseminate
clearly the appetite of the Board to key risks. This structure ensures a
consistent approach to acceptance and management of risk across the
business and provides the Board with greater visibility of how effectively
risks are being managed.
IT operational and financial systems improvement projects have been
continuing in the Technical Services division and have commenced in
Interserve in order to bring the business onto consistent platforms.
The review and documentation of key internal controls in the internal
control framework has also continued during the year. These
programmes will help ensure further the reliability and accuracy of
management information as well as providing greater visibility of the
effectiveness of internal controls. The work of the Internal Audit
function targets areas of the business where risk management and
internal controls are suspected of requiring improvement, which
has helped to improve the risk management and internal control
frameworks. The Group has an externally hosted whistleblowing
line, and all reports are reviewed, investigated and action taken
as appropriate.
The Group’s approach to risk is set out in more detail below. The
approach to risk management is regularly reviewed by the Board and
MGX and continues to evolve in line with the business structure and risk
profile. The Board understands that effective risk management and a
sound system of internal control are essential to the achievement of the
Group’s strategy and supporting objectives. The Group Risk Committee
focuses on the risk management framework to increase understanding
of the nature of the risks faced by the Group and the actions and
controls in place to mitigate them. The Audit Committee monitors the
effectiveness of this process.
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The Board is responsible for maintaining an effective internal control
framework. Mitie’s system of internal control consists of financial,
operational and compliance controls.
The system covers both monitoring and oversight controls at business
unit level, comprising business leadership review and direction, and
detailed process controls and control activities, which are embedded
in business processes. A comprehensive internal control framework
is being developed which has involved reviewing, improving and
documenting internal controls across the Group and helping to raise
awareness at all levels within the organisation of the importance of
effective controls. The framework will also help to ensure compliance
with impending UK legislation on corporate governance, specifically the
internal control reporting requirements.
Mitie’s policies and procedures are documented in the Integrated
Management System (IMS) and are available to management and
employees through an intranet portal. Divisional and functional
leadership teams ensure that controls are operating within the processes
and procedures, and that risks are being appropriately managed. The
process of integrating Interserve is ensuring that policies and procedures,
as well as internal controls, are harmonised across the Group.
The Audit Committee conducts a review of the effectiveness of the
systems of risk management and internal control annually. This review
is supported by a report from the Head of Internal Audit and includes
a control assessment exercise undertaken by the Internal Audit function
in conjunction with the business leadership teams. The review focuses
on the key internal controls which manage the risks faced by the
business. The Audit Committee also considers the results of the work
completed by the Internal Audit team, which are reported to it in
regular updates. The internal audit work plan is targeted at areas known,
or suspected to have, weak or ineffective internal controls. Remedial
action plans developed by management to address any control
weaknesses found are monitored by the Audit Committee to ensure
timely closure of the actions. Further detail on this can be found in the
Audit Committee report on pages 94 to 98.
IInntteerrnnaall AAuuddiitt
The Internal Audit function’s authority and responsibilities are defined in
its charter, which is reviewed regularly by the Audit Committee. The
Internal Audit function operates independently and reports directly to
the Audit Committee (administratively to the Chief Financial Officer).
This reporting line offers independence from audited activities and
allows the Internal Audit function to achieve objectivity.
The work of the Internal Audit function helps to provide assurance
over the effectiveness of the Group’s governance, and risk management
and internal control frameworks. The Chair of the Audit Committee
oversees the appointment and removal of the Head of Internal Audit
and assesses the Internal Audit function’s performance against internal
audit objectives. The annual internal audit plan is approved by the Audit
Committee. All amendments to the approved annual internal audit plan
are communicated to the Audit Committee through periodic update
reports. The results of each internal audit, and any remedial action
plans developed by management in response, are documented in an
audit report.
The Chair of the Audit Committee and the Company’s external auditor,
BDO LLP, have access to all internal audit reports issued during the year.
The Audit Committee also receives a quarterly report on internal audits
completed in the period, and reports from BDO LLP arising from its
audit work. These provide an independent perspective on the Group’s
internal financial control systems.
CCoorrppoorraattee ggoovveerrnnaannccee continued
RRiisskk iiddeennttiiffiiccaattiioonn aanndd aasssseessssmmeenntt
The Board carries out robust assessments of the Company’s principal
risks, including emerging risks. In doing so, the Board takes both internal
and external perspectives into account to ensure the risk identification
process is thorough. The internal perspective takes into account factors
such as the changing and developing business profile, operational
processes, technology and people, while the external perspective
includes the economic environment, political factors and sector and
geographical risks. During FY21, the MGX and Board have regularly
reviewed the impact on the business of the risks associated with the
COVID-19 pandemic and the associated disruption to the Group’s
operations and strategy. In addition, the risks associated with the Rights
Issue and the acquisition of Interserve were specifically reviewed and
disclosed as part of those transactions. A top-down and bottom-up
approach ensures the systematic identification of significant risks to
the business. Once identified, risks are assessed using standard impact
and likelihood ratings to quantify the risk to the achievement of
business objectives.
Risk assessments are based on a ‘5 x 5’ scale ranging from minimal to
catastrophic, with any risks falling into the Group’s upper limits having
mandatory mitigation plans with the expectation that these risks are
managed down to acceptable levels.
RRiisskk mmiittiiggaattiioonn
Each identified risk has a defined control owner who is responsible for
developing and implementing a risk mitigation plan. As part of the risk
review process, each action and control is required to be reviewed and
formally assessed for its effectiveness in mitigating risk. The Group Risk
Committee provides oversight of the risk processes and monitors risk
mitigation actions.
In addition, audit and risk governance meetings occur at a business unit
level, the terms of reference for which are aligned with the objectives
of the Group Risk Committee and the Audit Committee. The agenda
requires business units to review their top-level risks and the progress of
associated mitigation plans, as well as assess any changes to the external
environment and their consequent impact on business units’ risk profile.
In addition, reports from the Internal Audit function and other internal
or external assurance providers are discussed, with the objectives to
share best practice and identify common or emerging risk themes.
Assessment of the effectiveness of the control environment is
undertaken at both business and Group level, led by the Head of
Internal Audit. The Audit Committee formally reviews performance
throughout the year and advises on the effectiveness of the risk
management system in place.
RRiisskk mmoonniittoorriinngg aanndd rreevviieeww
Risk registers are formally reviewed twice a year. Principal risks to the
business and associated mitigation plans are reviewed by the Group Risk
Committee and then presented to the Board and are monitored on an
ongoing basis. In doing so, the Board considers the level of exposure for
each risk against an agreed appetite to the level of risk. During FY21, the
Principal Risks were also reviewed for the Rights Issue and the proposed
acquisition of Interserve, and were published in the associated
prospectuses along with specific risks associated with the transactions.
The risk management framework is designed to manage, rather than
eliminate, the risk of failing to achieve the objectives and strategy of the
Group and can therefore only provide reasonable, and not absolute,
assurance against material risk and loss. Details of the principal risks of
the Group are set out on pages 56 to 65. It should be noted that other
risks are identified as part of the risk management process, but these are
not considered to have a material impact on the Group’s overall ability
to achieve its business objectives.
The Audit Committee confirms that this risk management process has
been in place throughout FY21 and remains in place up to the date of
approval of the Annual Report. The process is continuing to evolve and
will be subject to review and improvement.
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GGooiinngg ccoonncceerrnn ssttaatteemmeenntt
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the Group’s business
activities as set out on pages 8 to 29 as well as the principal risks and
uncertainties as set out on pages 56 to 65 and the reverse stress testing
outlined on page 66.
Based on the Group’s forecasts for the going concern assessment
period, which include the benefit of the Rights Issue and amendment
to the terms of the revolving credit facility, the Board is satisfied that
the Group will be able to operate within the level of its facilities for the
foreseeable future. For this reason, the Board considers it appropriate
for the Group to adopt the going concern basis in preparing its
financial statements.
Further details of the going concern assessment are set out in Note 1
to the financial statements on page 146.
VViiaabbiilliittyy ssttaatteemmeenntt
The statement is detailed in full on page 66.
In accordance with the Code, the Directors have assessed the viability
of the Group over the three-year period to 31 March 2024 taking into
account its current position and the potential impact of the principal
risks set out in the Strategic report. Based on this assessment the
Directors have concluded that there is a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they
fall due over the three-year period to 31 March 2024.
FFaaiirr,, bbaallaanncceedd aanndd uunnddeerrssttaannddaabbllee
In accordance with Provision 27 of the Code, the Directors confirm that
they consider the Annual Report and Accounts, taken as a whole, to be
fair, balanced and understandable and that it provides the information
necessary for shareholders to assess the Group’s position, performance,
business model and strategy. When arriving at this position the Board
was assisted by various processes including the following:
• The Annual Report and Accounts was drafted by senior management
with overall coordination by Group Finance to ensure consistency
across the relevant sections
• A review was undertaken to assess the consistency of the Annual
Report and Accounts with internally reported information and
investor communications, and to assess the balance between reported
measures and alternative performance measures
• Reviews of drafts of the Annual Report and Accounts were
undertaken by the Executive Directors, Chief of Staff, General
Counsel & Company Secretary, other senior management and
external advisors
• The final draft is reviewed by the Audit Committee prior to
consideration by the Board
Details of the basis on which the Company generates and preserves
value over the longer term and the strategy for delivering the
Company’s objectives are set out in the Strategic report. An explanation
by the Directors of their responsibility for preparing the Annual Report
and Accounts can be found on page 128.
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Strategic reportGovernanceFinancial statements CCoorrppoorraattee ggoovveerrnnaannccee continued
The Code:
Remuneration
RReemmuunneerraattiioonn ppoolliicciieess aanndd pprraaccttiicceess
The Company’s remuneration policies and practices are designed
to support strategy and promote long-term sustainable success.
The Remuneration Report on pages 99 to 120 contains information
on the Company’s compliance with the Code provisions relating
to remuneration.
90
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NNoommiinnaattiioonn CCoommmmiitttteeee rreeppoorrtt
Report from the
Nomination
Committee Chair
NNoommiinnaattiioonn CCoommmmiitttteeee mmeemmbbeerrss
At the date of this report and throughout FY21 the Nomination
Committee comprised:
CChhaaiirrmmaann**
Derek Mapp
CCoommmmiitttteeee mmeemmbbeerrss
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Jennifer Duvalier
Mary Reilly
Roger Yates
* The Senior Independent Director chairs the Committee in circumstances where it
would be inappropriate for the chairman of the Board to chair the Committee.
All members of the Nomination Committee are considered
independent in accordance with the Code.
NNoommiinnaattiioonn CCoommmmiitttteeee mmeeeettiinnggss
The Nomination Committee met three times during FY21.
The attendance of individual Committee members can be found
on page 83.
KKeeyy ppuurrppoossee ooff tthhee NNoommiinnaattiioonn CCoommmmiitttteeee
The Nomination Committee evaluates the skills and characteristics
required by the Board and its Committees. In doing so, the
Committee considers the challenges and opportunities facing the
Group and the expertise and diversity required for the future. This
ensures membership of the Board and its Committees continue to
remain appropriate.
KKeeyy rreessppoonnssiibbiilliittiieess ooff tthhee NNoommiinnaattiioonn CCoommmmiitttteeee
The key responsibilities of the Nomination Committee include:
• Regularly review the structure, size and composition (including the
skills, experience and knowledge required) of the Board compared
to its current position and make recommendations to the Board
with regard to any changes
• Ensure plans are in place for an orderly succession to Board and
senior management positions and oversee the development of
a diverse pipeline for succession
• Consider the length of service of the Board as a whole so that
membership of the Board is regularly refreshed
• Identify and nominate, for approval by the Board, candidates to
fill Board vacancies as and when they arise
• Keep under review the number of external directorships held by
each Non-Executive Director
• Review the results of the Board performance evaluation process
that relate to the composition of the Board
• Keep the Board Inclusion Policy under review to ensure its
effectiveness and alignment with best practice
The Nomination Committee’s Terms of Reference are available at
wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--ggoovveerrnnaannccee.
KKeeyy aaccttiivviittiieess dduurriinngg tthhee yyeeaarr
CCoommppoossiittiioonn
As it does annually, the Nomination Committee reviewed the
composition and leadership of the Board and each of its Committees
during FY21. The Nomination Committee is satisfied that the Board’s
composition and diversity has been appropriate throughout the year,
having regard in particular to the integrity, skills, knowledge and
experience of its Directors and the size and nature of the business.
A skills matrix can be found on page 85.
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NNoommiinnaattiioonn CCoommmmiitttteeee rreeppoorrtt continued
EExxtteerrnnaall BBooaarrdd eevvaalluuaattiioonn pprroocceessss
Outcomes from the externally led evaluation conducted for FY20, were reviewed at the March 2021 Nomination Committee meeting and Board
meeting and are set out below.
PPrroocceessss ffoolllloowweedd ffoorr FFYY2200 eevvaalluuaattiioonn
OOuuttccoommeess//ssuuggggeessttiioonnss
AAccttiioonnss uunnddeerrttaakkeenn oorr ppllaannnneedd
MMaarrcchh 22002200
Engagement, scope and focus of review agreed
To review any gaps in experience of the Board.
The Nomination Committee reviewed and discussed
the Board skills matrix (see page 85) at its March 2021
meeting.
MMaayy 22002200
A review of the previous 12 months’ minutes and
papers for Board and Committee meetings, output
from previous evaluation, terms of reference,
matters reserved for the Board and other
related governance material was conducted by
Belinda Hudson
SSeepptteemmbbeerr 22002200
List of interviewees confirmed, and interview
slots diarised
OOccttoobbeerr--NNoovveemmbbeerr 22002200
Belinda Hudson conducted confidential interviews
with Board members and senior management
NNoovveemmbbeerr 22002200
Belinda Hudson attended and observed Board
and Board Committee meetings
NNoovveemmbbeerr--DDeecceemmbbeerr 22002200
Findings were collated and evaluated by
Belinda Hudson
To ensure the Chairman shares his thinking and insights
to a greater extent and to hold Non-Executive
Director only sessions.
Two Non-Executive Director only sessions have been
diarised for FY22.
To encourage the Non-Executive Directors to provide
a better balance of constructive challenge, support and
recognition.
Non-Executive Directors have been encouraged to
undertake without compromising depth of questioning.
To undertake a regular review of the CEO and MGX
members both in performance and behaviour.
To be undertaken at the two Non-Executive Director
only meetings. CEO to be invited to attend in part.
To encourage the CEO to have regular sessions with
each individual Non-Executive Director.
NED/CEO meetings to be diarised.
To encourage the Board to plan longer term strategic
options.
To be undertaken at annual strategy day in September
2021 and updated at each Board meeting.
DDeecceemmbbeerr 22002200
Belinda Hudson provided a report to the Board
The Board to regularly review the culture within the
Board, MGX and across the Group for consistency
with the Purpose, Values and Strategy.
Is already assessed via several mechanisms such as the
Designated Non-Executive Director, through the NPS
and Upload Survey. Will be enhanced by the whole
Board through site visits when COVID-19 permits.
MMaarrcchh 22002211
Outcomes of the external Board evaluation were
established, and actions agreed
To include broader management team members at
Board dinners.
To be planned when appropriate, subject to COVID-
19 restrictions.
SSuucccceessssiioonn ppllaannnniinngg
The Board recognises the importance of succession planning and Board refreshment and maintains succession plans for the Board and
senior management.
During FY21, the Nomination Committee discussed succession planning at two of its meetings.
The Board considered both the Board skills matrix and the Board Diversity and Inclusion Policy in the context of succession planning as tools to help
identify potential composition needs for the future, and to ensure that plans are pro-active, and not just reactive in nature.
The tenure of members of the Board is relatively short. The Chairman was appointed in May 2017 and, except for the Chief Executive Officer, all other
Directors have been appointed subsequently. All Non-Executive Directors had served for less than four years at 31 March 2021. While no immediate
changes to the Board are anticipated, there may be some changes in Committee membership in order to ensure that all Non-Executive Directors
receive experience and exposure on all main Board committees.
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The meetings also focused on succession planning for the position of Chief Financial Officer to replace Andrew Peeler. All appointments to the Board
are subject to a formal, rigorous, and transparent appointment process, and are made based on merit and objective criteria. The appointment process
followed for the position of Chief Financial Officer is detailed below.
11
22
33
CCaannddiiddaattee rreeqquuiirreemmeennttss
SSeeaarrcchh
AAsssseessssmmeenntt ttoooollss
44
IInntteerrvviieewwss && pprreesseennttaattiioonn
55
AAnnnnoouunncceemmeenntt
A detailed candidate profile setting out required capabilities and experience was agreed. The Lygon Group was
appointed to facilitate the process*
The process to appoint the new Chief Financial Officer was led by the Chief Executive Officer who considered a
list of diverse candidates. A shortlist of candidates was invited for interview.
To deliver an objective, well founded assessment of capability and potential, the candidates were also invited to
complete a short round of occupational tests and questionnaires aimed at measuring key personal competencies
according to success factors already identified.
The first round of interviews was conducted by The Lygon Group to assess the candidates’ fit with the role and
key competencies, and to allow a discussion of the highlights from the psychometric tests. A written report was
then submitted to the Chief Executive Officer.
Subsequent interviews were held with the Chief Executive Officer and other members of the Board.
Shortlisted candidates were asked to perform a set exercise involving a presentation to the Chairman and Chair
of the Audit Committee. They also met with members of the MGX.
The relative merits of each candidate were discussed, and it was agreed that Simon Kirkpatrick should be
proposed to the Board for appointment. The Board approved Simon’s appointment as Chief Financial Officer
effective 1 April 2021.
* The Lygon Group had no other connection with the Company or individual Directors.
Mitie's other succession planning measures include Leadership Team Development Programmes and Strategic Account Manager Academy, the latter
now also including Strategic Account managers from Interserve Facilities Management. These help to ensure the business develops a diverse pipeline of
talented individuals ready to step up to senior and business-critical roles. Further detail can be found on page 39.
DDiirreeccttoorr eexxtteerrnnaall aappppooiinnttmmeennttss aanndd ttiimmee ccoommmmiittmmeennttss
The Nomination Committee reviewed the time commitments of Non-Executive Directors to ensure that there were no concerns regarding
overcommitment. This review considered the number of appointments, their scope and the size and type of company in which the role is held, the
views of major shareholders and the latest published guidelines and recommendations.
DDiivveerrssiittyy aanndd iinncclluussiioonn
Mitie has a Board Inclusion Policy which recognises the importance of the Board’s membership reflecting diversity in its broadest sense. At its meeting
in March 2021, the Nomination Committee agreed an additional objective should be added to the policy with regard to ethnicity, and in line with the
Parker Review, to ensure there is at least one Director from Black, Asian and Minority Ethnic communities, provided this remains consistent with the
skills and diversity requirements when seeking a new appointment to the Board.
The policy also sets diversity objectives including to:
• Ensure the Board's membership reflects a combination of demographics, skills, experience, race, age, gender, educational and professional
backgrounds which provides a range of perspectives, insights and challenges needed to support good decision making and reflects the diverse
workforce at Mitie
• Maintain a balance so that a minimum of 30% of the Directors are women, provided this remains consistent with the skills and diversity requirements
when seeking a new appointment to the Board
• Support and monitor activities to increase the percentage of senior management roles held by women and other under-represented groups
across Mitie
It is the Board’s intention that female representation on the Board be maintained at a level higher than the 33% recommended by the Hampton-
Alexander review, although it is recognised that there may be periods of time when the balance falls below this during the search and recruitment
process. The Committee is pleased to report that 50% of the Directors are women. A breakdown of the gender balance of those in senior
management and their direct reports can be found on page 86.
Mitie’s Board Inclusion Policy is available at wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--ggoovveerrnnaannccee.
DDeerreekk MMaapppp
Chair of the Nomination Committee
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AAuuddiitt CCoommmmiitttteeee rreeppoorrtt
Report from the
Audit
Committee Chair
AAuuddiitt CCoommmmiitttteeee mmeemmbbeerrss
Mary Reilly was appointed as Chair of the Audit Committee on
31 July 2018, having been a member of the Committee since
1 September 2017. Mary has a wealth of experience as a non-
executive director and chairing audit and risk committees.
She has extensive relevant and recent accounting, finance and
management experience. Mary’s full biography can be found
on page 71.
At the date of this report, and throughout FY21, the Audit
Committee comprised independent Non-Executive Directors
who are all considered appropriately experienced to fulfil their
duties, having held senior finance roles across a number of sectors.
Their full biographies can be found on pages 69 to 71.
CChhaaiirr
Mary Reilly
CCoommmmiitttteeee mmeemmbbeerrss
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Roger Yates
FFrreeqquueennccyy ooff AAuuddiitt CCoommmmiitttteeee mmeeeettiinnggss
The Audit Committee met 11 times during FY21. For the
Directors’ attendance, see table on page 83. Invitations to attend
meetings are normally extended to the Group’s external auditor,
the Chairman, the Chief Executive Officer, the Chief Financial
Officer, other members of the Board, the Chief of Staff, General
Counsel & Company Secretary, the Director of Group Finance,
the Group Financial Controller and the Head of Internal Audit.
The Audit Committee also meets with the external auditor
and the Head of Internal Audit without the Executive
Directors present.
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RReeppoorrtt ffrroomm tthhee AAuuddiitt CCoommmmiitttteeee CChhaaiirr
As Chair of the Audit Committee, I am pleased to present my report
to shareholders.
It has been an intensive year for the business, and therefore also for the
Audit Committee. The COVID-19 pandemic has presented an evolving
risk environment, the rights issue and refinancing have brought technical
challenges, and the acquisition of Interserve Facilities Management
(Interserve) has added opportunity but also complexity to the business.
The business also appointed a new Chief Financial Officer on 1 April
2021, following an extensive search.
Given this complex environment, I have made a conscious effort to
increase the frequency of contact with senior finance staff throughout
the year, which gave me an opportunity to gauge the extent of any
significant issues that emerged and monitor progress.
Despite the challenges, good progress has been made by the Group
during the year to standardise processes and controls across the
enlarged business, manage the associated risks and ensure rigour around
the related financial reporting, including:
• The adoption of a new risk framework (ISO31000) and establishment
of a plan to drive improvements in risk management. One of the key
steps was the creation of the Group Risk Committee to facilitate and
ensure alignment with corporate deliverables and drive the risk
management process across Mitie.
• The review of Interserve’s balance sheet, accounting policies,
processes and controls as part of the acquisition accounting and
integration processes. Training has been provided to the Interserve
FM finance teams to ensure consistent application of Mitie’s
accounting policies, and areas of good practice have been identified
within the Interserve processes which have been retained.
• The annual Internal Audit plan was kept under continual review to
adapt to the changing risk environment facing the business, mainly
the impact of the COVID-19 pandemic and the acquisition of
Interserve. This resulted in multiple changes to the plan with a focus
on supporting the business teams in maintaining effective internal
controls throughout the period of disruption and integration. The
development of the internal control framework has also continued,
which will ensure Mitie is able to comply with impending UK legislation
in this area.
• The divisional finance teams were also guided through the impacts
of the COVID-19 pandemic on complex areas such as revenue
recognition and the UK Government’s job retention (furlough)
scheme, to ensure compliance with laws and regulations and
consistent application of Mitie’s accounting policies.
The COVID-19 pandemic continued to have an impact in FY21 on
Mitie’s business, both in terms of the delivery of services to customers
and the way in which the Group has operated. However, through
rigorous planning and regular communication both between Mitie’s
finance teams and with the external audit teams, we were able to
overcome the challenges of social distancing restrictions and working
remotely, with no major impacts to systems, financial reporting, internal
controls or the external audit. The FY21 financial reporting process
was conducted in this environment and I am pleased to say that this
reporting has maintained the high standards required and has been
delivered in a robust and transparent manner.
In a letter dated 19 January 2021, the Financial Reporting Council (FRC)
informed Mitie that it had carried out a review of Mitie’s Annual Report
and Accounts (ARA) for the year ended 31 March 2020 (FY20). I am
pleased to report that in that letter, the FRC noted that it had no
questions or queries that it wished to raise. The FRC did highlight a
number of matters to be considered during preparation of the FY21
ARA, to the extent that users of the accounts would benefit from
enhanced disclosure, which have been duly incorporated.
Matters presented to the Audit Committee related to the acquisition
of Interserve were often complex and judgemental. These included
matters in relation to the shareholder circular on the proposed
acquisition, such as the historic financial information, the pro forma
financial information and risk factors. Subsequent to completion of
the acquisition on 30 November 2020, matters in relation to year-end
reporting of the acquisition were also challenged by the Audit
Committee including judgements on the opening balance sheet, and
in particular the valuation of acquired intangible assets.
The business continues to progress its transformation programme,
which was reflected in the nature of some of the matters presented
for consideration by the Audit Committee. These judgements also had
to be assessed in the context of the COVID-19 pandemic, which
added another layer of complexity in some areas. This transformation
programme was scheduled to complete by the end of FY21. However,
the COVID-19 pandemic caused some workstreams to be put on hold
and, as a result, the programme is now expected to complete in FY22.
In addition to fulfilling its normal programme of activities this year, the
areas of focus for the Audit Committee in relation to the FY21 financial
statements have been:
• Assessing the judgements made by management in respect of
acquisitions and disposals made by the Group. In particular the Audit
Committee has assessed and challenged management’s judgements
related to the acquisition of Interserve, including the determination
of fair values of assets and liabilities on the opening balance sheet,
and valuation of the consideration paid. The Audit Committee also
considered and questioned judgements related to prior year disposals,
such as the retained liabilities related to the Social Housing business.
• Considering the appropriateness of disclosures made in relation to the
Interserve acquisition.
• Challenging management’s judgements in relation to areas potentially
impacted by the COVID-19 pandemic, such as the estimate of
deferred contingent consideration for the Catering business disposal,
the testing of the carrying value of goodwill for impairment, the
adequacy of provisions for the recoverability of debtors, the
recoverability of deferred tax assets in relation to losses and the
evaluation of potential onerous contract provisions.
• Considering the classification of certain costs within Other Items and
associated disclosure, by reviewing the framework of controls around
the assessment by management, and challenging the nature of the
costs, to ensure the result is that a reader of the Annual Report and
Accounts is provided with an improved understanding of the
underlying results of the business.
• Challenging the approach taken by management to support the
going concern and viability statements set out on pages 146 and 66
respectively, taking into account the potential impacts of the
COVID-19 pandemic.
Further detail regarding the Audit Committee and its work can be found
on pages 94 to 98.
In conclusion, the Audit Committee can provide positive assurance to
the Board that the Annual Report and Accounts 2021, when taken as a
whole, are fair, balanced, and understandable, and provide shareholders
with sufficient and appropriate information to enable shareholders to
assess the Group’s position and performance, business model and
strategy. As Chair of the Audit Committee, I will be available at the 2021
AGM to answer any questions about the work of the Audit Committee.
MMaarryy RReeiillllyy
Chair of the Audit Committee
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Strategic reportGovernanceFinancial statements AAuuddiitt CCoommmmiitttteeee rreeppoorrtt continued
KKeeyy ppuurrppoossee ooff tthhee AAuuddiitt CCoommmmiitttteeee
The Audit Committee provides effective governance of the
appropriateness of the Group’s financial reporting and the performance
of both the Internal Audit function and the external auditor. The Audit
Committee also supports the Board in meeting its responsibilities in
respect of overseeing the Group’s internal control systems, business risk
management, and related compliance activities.
The Audit Committee’s Terms of Reference are available at
wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--ggoovveerrnnaannccee.
KKeeyy rreessppoonnssiibbiilliittiieess ooff tthhee AAuuddiitt CCoommmmiitttteeee iinn rreellaattiioonn
ttoo ffiinnaanncciiaall rreeppoorrttiinngg
The primary role of the Audit Committee in relation to financial
reporting is to review, with both management and the external auditor,
the appropriateness of the half-yearly financial report and the Annual
Report and Accounts, concentrating on, amongst other matters:
• The consistency of, and any changes to, significant accounting policies
and practices both on a year-on-year basis and across the Group
• The clarity and completeness of disclosures and the context in which
statements are made
• The methods used to account for significant or unusual transactions
where different approaches are possible
• Whether the Annual Report and Accounts, taken as a whole, is fair,
balanced, and understandable and provides the information necessary
for shareholders to assess the Group’s position and performance,
business model and strategy
To aid the review, the Audit Committee considers reports from the Chief
Financial Officer on judgemental areas, and also reports from the external
auditor on the outcomes of the half-year review and year-end audit.
SSiiggnniiffiiccaanntt iissssuueess ccoonnssiiddeerreedd bbyy tthhee AAuuddiitt CCoommmmiitttteeee dduurriinngg
tthhee yyeeaarr
The Audit Committee gives attention to matters it considers to be
important by virtue of their size, complexity, level of judgement
required, or potential impact on the financial statements and wider
business model, and matters pertaining to governance. Identification of
the issues deemed to be significant takes place following open, frank and
challenging discussion between the Audit Committee members, with
input from the Chief Financial Officer, the external auditor, the Head
of Internal Audit, the Director of Group Finance, the Group Financial
Controller and other relevant Mitie employees.
The Audit Committee considered the significant matters set out below,
and in all cases considered to what extent these judgements could be
impacted by the COVID-19 pandemic. Papers were presented to the
Audit Committee by management, setting out the relevant facts,
material accounting estimates, and the judgements associated with each
item. The external auditor provided a paper setting out its views on each
area of judgement.
The Audit Committee discussed the papers with management,
challenged the underlying assumptions and sought the views of the
external auditor on each matter. For each area of judgement, the Audit
Committee concurred with the treatment adopted by management and
any relevant disclosure presented in the Annual Report and Accounts.
IInntteerrsseerrvvee aaccqquuiissiittiioonn
The Audit Committee considered and questioned papers prepared by
management in relation to the proposed acquisition of Interserve. These
papers included judgements made in the shareholder circular, including
those related to the historic financial information, the pro forma financial
information and the assessment of risk factors. Subsequent to
completion of the acquisition on 30 November 2020, the Audit
Committee has also challenged papers on the opening balance sheet
process, including the determination of fair values assigned to assets
acquired and liabilities assumed, and also the fair value of consideration.
As part of this the Audit Committee sought to understand the approach
taken to the valuation of the acquired intangible assets, which included
the involvement of an external valuations specialist, and the Audit
Committee discussed the methodology used and assumptions applied.
The Audit Committee is satisfied that the disclosures made within
the FY21 financial statements in relation to the Interserve acquisition
are sufficient.
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EEvvaalluuaattiioonn ooff tthhee ggaaiinn oonn ddiissppoossaall ooff tthhee CCaatteerriinngg bbuussiinneessss
The Group disposed of its Catering business in FY20, which resulted in
a gain on disposal. The Audit Committee has considered papers
prepared by management explaining the judgments made to remeasure
the gain on disposal in FY21. This remeasurement involved the
estimation of the deferred contingent consideration receivable, which
the Audit Committee questioned in the context of the impact that the
COVID-19 pandemic is having on the catering sector. Following this
assessment, the Audit Committee concurred with management's view
on the associated impairment.
PPrroovviissiioonniinngg ffoorr lleeggaaccyy ccoonnttrraaccttuuaall lliiaabbiilliittiieess
Under the terms of the disposal of the Social Housing business, the
Group retained liability for certain contractual issues for completed
contracts. Management has made judgements to arrive at the provisions
recorded in the financial statements, and the Audit Committee
considered papers prepared by management setting out the basis for
these judgements.
RReevveennuuee rreeccooggnniittiioonn
Due to the complexity and scale of many of the Group’s contracts, and
the impact of the COVID-19 pandemic, revenue recognition continues
to be an area of focus for the Audit Committee. The Audit Committee
has received updates from management throughout the year and has
also reviewed and discussed papers by management on specific areas of
revenue recognition where judgement is required, including long-term
private finance initiative (PFI) lifecycle contracts. In particular
management presented papers covering a revenue recognition review
performed in relation to the contracts acquired with the Interserve
business, which the Audit Committee discussed and challenged.
VVaalluuaattiioonn ooff ggooooddwwiillll
The Group carries goodwill as an intangible asset on its balance sheet in
respect of businesses it has acquired (see Note 12 to the consolidated
financial statements).
The Group considers the carrying value of all goodwill on at least an
annual basis, or when an indicator of impairment has occurred. The
valuation and impairment review of goodwill is assessed for each
individual cash-generating unit (CGU) and considers the balance sheet
value of the goodwill compared to the net present value of the post-tax
cash flows that are expected to be generated by that CGU. The
approach involves an estimation of the future cash flows expected to be
derived from each CGU and the selection of appropriate discount rates,
which are then applied to the cash flows to calculate a net present value.
The cash flow forecasts used in the review were derived from the most
recent strategic forecast, which was updated to reflect the expected
impacts of the COVID-19 pandemic on the business and was reviewed
and approved by the Board.
Management concluded that there was no impairment using either
the updated forecast or the downside scenario. The Audit Committee
has considered papers prepared by management and has challenged
the assumptions and methodology applied to assess the carrying value
of goodwill.
TThhee nneeeedd ffoorr pprroovviissiioonnss iinn rreessppeecctt ooff ppootteennttiiaallllyy
oonneerroouuss ccoonnttrraaccttss
As part of the year-end process, management performs a review of
contracts to assess whether any contracts may be onerous over the
remaining term of the contract, and therefore may require an onerous
contract provision. The COVID-19 pandemic was specifically considered
as part of this review, both in terms of the short-term impacts, but also
the potential longer-term effects.
The Audit Committee has reviewed the information provided by
management, as well as the views expressed by the external auditor,
and has challenged the bases for conclusions on key contracts.
The Audit Committee also specifically challenged management's
assessment of the requirement for the recognition of a liability,
or disclosure of a contingent liability, for the potential Information
Commissioner's Office (ICO) fine related to the Interserve
cyber incident.
OOtthheerr mmaatteerriiaall aaccccoouunnttiinngg jjuuddggeemmeennttss
Management has continued to operate the structured process for the
identification of material accounting judgements made, which are
assessed at both a divisional and Group level, in arriving at the results.
The judgements with a significant actual or potential impact on the
Group’s results are presented to the Audit Committee for consideration.
In addition to the matters outlined above, the Audit Committee has
also considered papers prepared by management in respect of the
following matters:
• The recoverability of trade receivables and accrued income, with
specific challenge from the Audit Committee related to the potential
impacts of the COVID-19 pandemic
• Provisioning for, and disclosure of contingent liabilities related to,
the Group’s participation in multi-employer pension schemes
• The recoverability of deferred tax assets, in particular in relation to
losses, where recoverability may be impacted by the effects of the
COVID-19 pandemic
• Provisioning for commercial settlements, disputes and other
contractual liabilities
AAlllleeggaattiioonnss ooff ffrraauudd
In instances where allegations of fraud have been reported, these
were investigated as a matter of priority by the Internal Audit function
and reported to the Audit Committee. The Internal Audit reports
summarising the issues, conclusions and recommendations, were
reviewed and discussed by the Audit Committee. The Audit Committee
then supported the implementation of any required actions, aimed at
preventing future occurrence of similar issues and enhancing internal
processes and controls.
UUssee ooff AAlltteerrnnaattiivvee PPeerrffoorrmmaannccee MMeeaassuurreess ((AAPPMMss))
The Group’s performance measures continue to include some measures
which are not defined or specified under IFRS. The Audit Committee
has considered presentation of these additional measures in the
context of the guidance issued by the European Securities and Markets
Authority (ESMA) and the Financial Reporting Council (FRC) in relation
to the use of APMs, challenge from the external auditor, and the
requirement that such measures provide meaningful insight for
shareholders into the results and financial position of the Group.
In particular the Audit Committee challenged the classification of certain
costs within Other Items, ensuring that there is a robust framework of
controls around the assessment, and that the classification and disclosure
is appropriate, with the aim of providing a reader of the Annual Report
and Accounts with an improved understanding of the underlying results
of the business. This was achieved through the review by the Audit
Committee of detailed papers prepared by management throughout
the year, setting out each category of Other Items, analysing the costs
reported within each category and documenting the rationale as to
why these costs were both incremental to business as usual and directly
related to the category.
The Audit Committee challenged as to whether any costs had been
rejected from the Other Items category, based on the framework of
controls around the reporting of Other Items. Management confirmed
that the divisions continued to engage proactively with Group Finance to
discuss whether potential costs would qualify as Other Items.
The Audit Committee concurred with the judgements made by
management in respect of the presentation of the APMs. Furthermore,
the Audit Committee concluded that clear and meaningful descriptions
have been provided for the APMs used, that the relationship between
these measures and the equivalent IFRS measures is clearly explained,
that the IFRS measures are afforded equal prominence to the APMs,
and that the APMs support understanding of the financial statements.
A reconciliation of the APMs to the equivalent IFRS measures is
provided in the Appendix – Alternative Performance Measures on
pages 211 to 213.
RReevviieeww ooff tthhee GGrroouupp’’ss ggooiinngg ccoonncceerrnn aanndd vviiaabbiilliittyy ssttaatteemmeennttss
The Audit Committee has reviewed the Group’s assessment of going
concern. The base case forecast used for this assessment includes the
ongoing impact of the COVID-19 pandemic on each of the Group’s
operations. The Audit Committee also reviewed the Group’s viability
assessment over a period of three years to 31 March 2024, which
considered a range of scenarios that were based on the potential
financial impact of the Group’s principal risks and uncertainties.
After due consideration, the Committee concluded that the assumptions
used in both these assessments were appropriate, and reflected the
Group’s principal risks and uncertainties. The Committee has also
reviewed the Group’s reverse stress tests and challenged management
as to the likelihood of any such scenario occurring, to assess whether it
was reasonable to assume that the likelihood of any such scenario was
remote. Factors that were considered include the current trading
performance compared with the base case, the severity of the downside
scenarios considered in the context of how the Group has traded since
the impact of the COVID-19 pandemic commenced, and further
mitigation actions available to management.
Given that the Group’s £250m revolving credit facility and £121.5m
of US Private Placement notes mature during the forecast period, the
Committee questioned management to test the assumption that the
facilities will be refinanced on materially similar terms.
As a result of these discussions, the Committee concurred with
management that no material uncertainty existed.
The more detailed assessment of the Group’s long-term viability is set
out in the Viability Statement on page 66.
IInntteerrnnaall AAuuddiitt
The COVID-19 pandemic and the acquisition of Interserve had a
significant impact on the risk profile of the business during the year, and
consequently the Internal Audit plan for FY21 was subject to greater
review and change than in previous years. The initial plan was presented
to and approved by the Audit Committee in March 2020, prior to the
initial lockdown period for the pandemic. All changes to the plan were
discussed with the Chair of the Audit Committee and approved by the
Audit Committee.
During the initial months of FY21, which coincided with the first
COVID-19 lockdown, the Internal Audit team concentrated their efforts
on helping to advise the business units on internal control and business
continuity enhancements, to ensure that a robust control environment
was maintained throughout this period. Subsequently, the focus moved
to delivery of the annual Internal Audit plan.
The audit plan considered the effectiveness of internal processes and
controls, Group-wide and functional processes, major contracts,
individual divisional processes and strategic processes; as described, the
impact of the COVID-19 pandemic and the Interserve acquisition have
also been major considerations.
Some key areas of focus in the FY21 audit plan have included:
• A review of the internal controls in the ‘purchase to pay’ processes
across the Group;
• A post-implementation review of a time and attendance system
introduced into the Cleaning business within the Business
Services division;
• An audit of the contract management processes in a major account
focusing on governance, reporting and ongoing contract management
processes; and
• An audit of compliance with the furlough scheme.
Regular updates were provided to the Audit Committee throughout
FY21 by the Head of Internal Audit. These covered the results of the
audit work undertaken and developments in the internal control
environment, highlighting areas where improvements in risk, governance
and control processes were required. In addition, progress on the
development of the internal control framework, in which the key
internal controls across the business are being reviewed and
documented, was presented to the Audit Committee. As well as
improving the awareness of the importance of internal controls in
the business, the framework will ensure Mitie is able to comply with
impending UK legislation on corporate governance.
Through the updates from the Head of Internal Audit, the Audit
Committee also monitored the progress by management in completing
actions to address the findings from Internal Audit reports. There has
been good progress in ensuring the actions are closed by the agreed
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completion date, however this remains an important area of focus for
the Audit Committee, and management is required to provide an
explanation if planned closure dates are missed.
SSeenniioorr AAccccoouunnttiinngg OOffffiicceerr uuppddaattee
The Chief Financial Officer presented a paper to the Audit Committee
detailing the processes in place to ensure that the relevant controls had
operated effectively during FY21, thereby supporting signature of the
Senior Accounting Officer certificate. The Audit Committee considered
this paper and was satisfied with the approach taken by management.
EExxtteerrnnaall aauuddiitt
The Audit Committee is committed to ensuring the independence,
effectiveness, and objectivity of the external auditor, and reviews the
performance of the external auditor in respect of audit related services
and non-audit services every year.
EExxtteerrnnaall aauuddiittoorr eeffffeeccttiivveenneessss
The Audit Committee monitored the conduct and effectiveness of the
external auditor through its assessment of:
• The experience, expertise, and perceptiveness of the auditor
• The planning and execution of the agreed audit plan and quality
of reports from the auditor
• The conduct of the auditor, including the Audit Committee’s
experience of interaction with the auditor.
In addition to receiving written reports from the external auditor and
from management, the Audit Committee also conducted private
meetings with the external auditor and separately with management.
These meetings provided the opportunity for open discussion and
feedback on the audit process, the responsiveness of management,
and the effectiveness of both the internal and external audit teams.
The Audit Committee is aware that the external auditor (BDO) has been
subject to a review by the FRC’s Audit Quality Review (AQR) team in
respect of the audit for the year ended 31 March 2020. The Audit
Committee Chair shared the AQR Inspection Report with the Audit
Committee, and also discussed the findings directly with the BDO partner.
The Audit Committee noted the scope of the review, the key findings
raised, and an area of good practise identified, together with BDO’s
proposed plan to address the findings. The Audit Committee was satisfied
with BDO’s response to address the findings raised, and the BDO plan was
implemented as part of the audit for the year ended 31 March 2021.
NNoonn--aauuddiitt sseerrvviicceess pprroovviiddeedd bbyy tthhee eexxtteerrnnaall aauuddiittoorr
The Group has a non-audit services policy, approved by the Audit
Committee, that ensures the external auditor remains independent and
objective throughout the provision of its independent audit services and
when formulating its audit opinion. This non-audit services policy is
underpinned by principles that ensure that the external auditor does not:
• Audit its own work
• Make management decisions for the Group
• Create a conflict of interest
• Find itself in the role of advocate for the Group
The Group non-audit services policy has been updated to reflect the
requirements of the FRC’s Revised Ethical Standard 2019, which
became effective from 15 March 2020 and further limits the types of
non-audit services that external auditors can provide. Under the revised
requirements, permitted services are largely those required by law or
regulation, loan covenant reporting, other assurance services closely
related to the audit or annual report, and reporting accountant services.
The Audit Committee confirms that the updated Group non-audit
services policy is consistent with the FRC’s Revised Ethical Standard 2019.
Under this policy, prior to the appointment of the external auditor to
provide any permitted non-audit services, approval must be obtained
from the Chair of the Audit Committee. A report of all non-audit
services performed by the external auditor during FY21, irrespective
of value, was submitted to the Audit Committee.
A summary of the fees paid to the external auditor for FY21 is set out in
Note 6 to the financial statements. Fees for other audit-related services
of £115,000 primarily related to the review of the half-yearly financial
report, fees for reporting accountant services of £1,875,000 related to
the rights issue and Interserve acquisition, which were permitted under
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the Group non-audit services policy, and fees for other non-audit
services of £9,000. The Audit Committee considered reports from both
management and the external auditor, which included monitoring of
fees for permitted non-audit services compared with the FRC fee cap,
none of which raised concerns about external auditor independence.
AAppppooiinnttmmeenntt aanndd rreeaappppooiinnttmmeenntt ooff tthhee eexxtteerrnnaall aauuddiittoorr
The Group undertook a competitive external audit tendering process in
2017 and BDO LLP (BDO) was selected as the Company’s external
auditor with effect from 19 September 2017.
Scott McNaughton was the lead partner for BDO on the audit of Mitie
for the year ended 31 March 2021 and was the lead partner for the
previous three years.
For FY21, BDO continued to provide external audit services to the
Group. However, BDO acting as the Group auditor utilised the services
of Grant Thornton who acted as component auditors for Interserve.
The Audit Committee considers annually the need to tender the audit
for audit quality or independence reasons. There are no contractual
obligations in place that restrict the Group’s choice of statutory auditor.
The Audit Committee confirms that the Group is in compliance with the
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014.
AAssssuurraannccee
In accordance with the FRC’s Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting and the Code,
the Board performs a formal annual assessment of the operation and
effectiveness of the Group’s internal control framework, covering all
material controls including financial, operational and compliance controls,
and updates this assessment prior to the signing of the Annual Report
and Accounts.
These activities are monitored at executive and divisional leadership
level to ensure that control improvements are implemented
appropriately and that they are effective. The Head of Internal Audit
assesses the application of control environment improvements and
attends Audit Committee meetings to provide regular updates on the
effectiveness of the Group’s internal control framework and the results
of the internal audit work undertaken.
Features of the internal control and risk management frameworks that
ensure accuracy and reliability of financial reporting include:
• A culture of good governance, integrity, competence, fairness,
and responsibility
• Group policies and procedures to support and ensure consistency
throughout the business
• Clearly defined responsibilities, delegated in accordance with the
Group’s delegated authority register
• A defined and agreed approach and appetite to managing risks facing
the business
• The identification of key internal controls and clearly defined
responsibility for their effective functioning
Accountability for internal control and risk management systems is
devolved into each division and any control weaknesses within divisions
are investigated and resolved. Management and the Audit Committee
seek to ensure that their cause is understood, and mitigating actions are
taken to limit the potential for recurrence. In view of the work of the
Internal Audit function, management and the external auditor, it is
considered unlikely that a weakness within a particular division would
have a material impact on the Group.
RReevviieeww ooff wwhhiissttlleebblloowwiinngg pprroocceesssseess
Part of the Audit Committee’s role is to ensure that appropriate
procedures are in place in relation to whistleblowing. Mitie has
continued to operate its independent whistleblowing service via an
independent third-party provider. An update on whistleblowing activity
is provided to the Board at every Board meeting.
DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt
Statement from
the Remuneration
Committee Chair
FY21 was a transformative year for Mitie.
Following the acquisition of Interserve
Facilities Management, the Remuneration
Committee has reviewed the remuneration
policy to ensure that it continues to
support the Group's strategy and
promotes the long-term sustainable
success of Mitie.
On behalf of the Board, I am pleased to present the Directors’
remuneration report for the year ended 31 March 2021.
The report is split into three main parts:
• EExxeeccuuttiivvee rreemmuunneerraattiioonn aatt aa ggllaannccee.. This sets out a summary of
our approach, including how we intend to operate under our policy
and remuneration outcomes for the year,
• TThhee AAnnnnuuaall RReeppoorrtt oonn RReemmuunneerraattiioonn.. This provides more detail
on the above, as well as setting out other remuneration-related
disclosures,
• TThhee rreemmuunneerraattiioonn ppoolliiccyy.. Our existing policy has been in place since
it was approved by 99.7% of shareholders at the 2018 AGM. In
accordance with the normal three-year cycle we are presenting a new
policy for approval at the 2021 AGM. The policy review and the main
changes are summarised below.
The Remuneration Committee has addressed a number of issues during
the year. I have described below the approach the Committee has
taken, together with the context in which key decisions were made.
RReessppoonnssee ttoo CCOOVVIIDD--1199
Mitie’s main aim during the COVID-19 pandemic was to ensure its
colleagues felt informed, supported and recognised for their efforts.
Mitie introduced new benefits to support the health, financial and mental
wellbeing of colleagues, and produced a dedicated benefits guide, which
was publicised throughout the year. More information is available in the
People Section on pages 38 to 40.
As part of the Group’s cost-saving measures in response to the COVID-
19 pandemic the Non-Executive Directors and Chief Executive Officer
(CEO), and members of the Mitie Group Executive (MGX) (including
the Chief Financial Officer (CFO)) volunteered 30% and 20%
reductions to their fees/salaries respectively for a period of five months
from April 2020. Salaries and fees returned to their normal level in
September 2020.
In addition, taking into account the impact of the COVID-19 pandemic
and the decision to not recommend a final dividend for FY20, Phil
Bentley waived his FY20 bonus, for which the formulaic outcome was
65% of the maximum. This is consistent with how all senior executives
at Mitie were treated, in that no FY20 bonuses were paid.
RReemmuunneerraattiioonn rreevviieeww aanndd nneeww ppoolliiccyy
Over the last year, the Committee has reviewed the remuneration
arrangements for Executive Directors and the management team, to
make sure they best support the Group’s business strategy, reflect best
practice and are aligned with shareholders’ interests. As part of our
review of the policy we consulted with major shareholders. We have
taken into account the feedback we received and incorporated it into
the development of the new policy.
Our review concluded that our existing policy was generally aligned with
Mitie’s underlying purpose and values. However, taking into account the
acquisition of Interserve Facilities Management ('Interserve'), the
Committee identified an opportunity to improve the alignment of the
policy with the long-term strategy through the introduction of the one-
off Enhanced Delivery Plan. Other than the addition of the Enhanced
Delivery Plan, the current policy is largely being rolled forward with a
small number of changes to reflect emerging views on executive pay and
the requirements of the updated UK Corporate Governance Code.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
• PPeennssiioonnss.. For any new Executive Director appointments, including
the new CFO, Simon Kirkpatrick, pension benefits offered will be in
line with the wider workforce. We will also be reducing the existing
pension benefits of the CEO, Phil Bentley, to this rate by 1 January
2023. In light of the Interserve acquisition, we are in the process of
reviewing pension arrangements across the Group and will disclose
details of the workforce pension rate once this review has taken place.
• PPoosstt--eemmppllooyymmeenntt sshhaarree oowwnneerrsshhiipp rreeqquuiirreemmeennttss.. In line with
evolving market practice Executive Directors will be expected to
maintain a shareholding in Mitie post departure.
• IInnttrroodduuccttiioonn ooff tthhee EEnnhhaanncceedd DDeelliivveerryy PPllaann.. This is a one-off
plan for the three-year performance period ending 31 March 2024,
which will sit alongside our usual framework and is described in more
detail below.
Further detail on the changes to the policy are provided in the
Executive remuneration at a glance section following this statement.
The new policy is set out in full in our policy report.
EEnnhhaanncceedd DDeelliivveerryy PPllaann ((EEDDPP))
In November 2020, shareholders approved Mitie's acquisition of
Interserve. This is a transformative acquisition for Mitie, expanding its
scale, footprint and penetration of key segments, creating the UK’s
largest facilities management company and accelerating the delivery of
the Group's long-term technology-led strategy. The acquisition enhances
Mitie’s competitive positioning with customers, unlocks significant growth
opportunities through strategic account management. We set our aim to
generate cost synergies at a monthly run rate equivalent to £35m per
annum by end of FY24, while strengthening its balance sheet and margin
accretion. It also provides a broader platform for Mitie’s ESG activities,
including its Plan Zero commitment, and for developing its people,
creating a great place to work.
To incentivise Mitie's senior leadership team to deliver the benefits
from the acquisition and the generation of superior shareholder value,
the Committee is proposing the introduction of a one-off share plan,
the EDP.
The EDP will be linked to superior Return on Invested Capital
performance, as well as exceptional cost and revenue synergy targets,
measured over the three years ending 31 March 2024.
Phil Bentley and Simon Kirkpatrick will be granted core awards of
160% and 65% of base salary respectively, which are subject to the
achievement of stretching performance measures. They will have the
opportunity to earn up to 4x the core award for truly exceptional
performance. The Committee has adopted a number of safeguards to
ensure that out-turns are commensurate with performance. Awards will
be subject to a cap so that the maximum share price growth delivered at
vesting cannot exceed 200% growth in the face value of the award at
grant. The vesting of awards will also be subject to both an absolute
share price underpin and a net debt underpin.
The Committee believes that the EDP is the right plan for Mitie to
support the business at a key stage in its transformation and in a
competitive market will work to secure the management team for the
next three years in generating superior shareholder value. The detailed
features of the plan, including the performance measures and underpins,
have been developed following an extensive shareholder consultation
process and I would like to thank those shareholders who took the time
to engage with us and to provide input.
Further details on the EDP are set out on pages 110 and 116.
RReemmuunneerraattiioonn ddeecciissiioonnss aanndd oouuttccoommeess iinn rreessppeecctt ooff FFYY2211
SSaallaarryy aanndd ffeeeess
In recognition of the impact of COVID-19 the Committee decided to
freeze the salary for the CEO, Phil Bentley, for FY22. The CEO's salary
will therefore remain at £900,000. The CEO's salary has been
unchanged since his appointment in 2016. The salary of Andrew Peeler,
who was interim CFO until 31 March 2021, was £400,000 per annum
since his appointment in 2019 and has remained unchanged.
100
110000
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
FFYY2211 bboonnuuss
Phil Bentley's annual bonus for FY21 was based on profit, revenue and
strategic/individual performance. At the end of the year the Committee
assessed performance against the targets and was mindful of the latest
shareholder guidance and market sentiment. As such the Committee
gave careful consideration to the year's context taking into account the
experience of colleagues, stakeholders and shareholders.
FY21 was an exceptional year. The Company continued its swift and
decisive response to the COVID-19 pandemic protecting the business,
colleagues and customers from unprecedented levels of uncertainty.
Mitie management recognised the importance of caring for colleagues
and the great work they do, providing critical services to Mitie's clients
and keeping the country running. During the year Mitie has been able to
enhance the reward offering for all colleagues as detailed below and has
recruited more than 15,000 people since the start of the pandemic
many of whom are frontline workers or directly supporting the fight
against COVID-19 by working in test centres.
Despite the challenges of the pandemic, during the year management
were also able to recognise a significant opportunity for Mitie shareholders
in the form of the acquisition of Interserve. This transformative
acquisition required the raising of capital which the management team
were also able to successfully deliver through the rights issue which was
supported by a significant majority of shareholders.
As well as successfully completing the Interserve acquisition and caring
for colleagues, Mitie management maintained a focus on the core
business and delivered resilient financial performance exceeding targets
set at the start of the year. Revenue for the year was £2,589m, including
the impact of Interserve. Strong cash management in the year has also
resulted in a closing net debt of £86.7m which exceeded expectations.
Taking into account the robust financial performance, management
made a decision to repay the furlough support received in respect of
colleagues employed directly by Mitie's operations as well as the
amounts in respect of PAYE and VAT deferral.
As a result of the exceptional efforts of the management team Mitie has
entered FY22 in a robust position with a major opportunity to deliver
significant benefits for colleagues, shareholders and other stakeholders.
As such the Committee determined that it would be appropriate for
executives to receive an annual bonus in respect of FY21. In making
this decision the Committee also took into account the leadership
shown by Phil Bentley since his appointment and the fact that he has
voluntarily waived annual bonus payments in respect of FY17, FY18
and FY20 totalling £1,656,000. Following their assessment, the
Committee has determined that Phil Bentley will receive an annual
bonus of 78.6% of maximum. Further details are provided in the
Annual Report on Remuneration.
Andrew Peeler’s bonus arrangement which was capped at 50% of
base salary and tied to role-specific objectives for FY21 was paid in
part in January 2021 (£125,000) and the remainder (£75,000) is not
due for payment until the end of his assignment which was extended to
30 June 2021.
22001188 LLTTIIPP
The Committee assessed the outcome of the August 2018 LTIP awards
granted under the plan against two performance measures: Adjusted
Earnings per Share (EPS) growth; and cash conversion. Following a
review of performance against targets, the Committee determined that
50% of the award would vest in August 2021. This is described in more
detail in the Annual Report on Remuneration.
The Committee challenged itself to ensure that bonus and LTIP
outcomes were appropriate in the round and was comfortable that the
outcomes were appropriately commensurate with both organisational
and individual performance. The Committee therefore considers that
the policy operated as intended.
TThhee RReemmuunneerraattiioonn CCoommmmiitttteeee
The members of the Remuneration Committee are all Non-Executive
Directors and are listed in the table on page 83. During the year ended
31 March 2021, the Committee met seven times. For the Directors’
attendance, see the table on page 83.
The Committee has responsibility for determining the remuneration
of Mitie’s Executive Directors and the Chairman, taking into account
the need to ensure Executive Directors are properly incentivised to
perform in the interests of the Company and its shareholders. The
Committee is also responsible for setting the remuneration for other
senior executives, including the Mitie Group Executive.
The Committee’s Terms of Reference are available at
www.mitie.com/investors/corporate-governance.
The Committee regularly consults with the CEO and key HR executives
on various matters relating to the appropriateness of rewards for the
Executive Directors. However, the CEO and other Executive Directors
are not present when matters relating directly to their own
remuneration are determined. This is also the case for other executives
attending Committee meetings. The Company Secretary attended the
meetings as Secretary to the Committee. The CEO and HR executives
attended the meetings by invitation only.
SShhaarree ppllaann rreenneewwaallss
Our all-employee share plan rules are due to expire in 2021 and we are
therefore asking shareholders to approve renewed plan rules along with
new rules for the LTIP which is not due to expire until 2025. The
majority of existing plan rules have broadly been rolled forward with
minor updates to reflect the latest market practice. At the 2021 AGM
shareholders will be asked to approve the Mitie Group plc Long Term
Incentive Plan, the Mitie Group plc Savings Related Share Option
Scheme and the Mitie Group plc Share Incentive Plan.
CCoonncclluussiioonn
In addition to the approval of the renewed plan rules mentioned above,
we will be seeking approval for the Directors’ remuneration report
(advisory vote), the policy report (binding vote) and the plan rules for
the Enhanced Delivery Plan (binding vote) at the 2021 AGM. I welcome
your views and feedback on any item.
JJeennnniiffeerr DDuuvvaalliieerr
Chair of the Remuneration Committee
jennifer.duvalier@mitie.com
IInncceennttiivveess aapppprrooaacchh ffoorr FFYY2222
For FY22 the Committee is intending to operate the annual bonus and
LTIP using the same broad framework that was used for FY21. Phil
Bentley’s maximum bonus and LTIP opportunity will be unchanged at
160% and 200% of base salary respectively. The annual bonus will be
based on financial and strategic targets with the mix of measures as
follows: revenue (35%); profit (35%); free cash flow (10%); individual
objectives (10%); and other strategic targets (10%). Following a review
of the performance measures used under the LTIP the Committee is
intending to introduce a measure linked to ESG performance. The
introduction of this measure recognises the importance of sustainability
to the business and supports and aligns with Mitie's Social Value
Framework. The LTIP will be based on performance against: adjusted
EPS (50%), cash conversion (35%) and ESG targets (15%).
Andrew Peeler will receive the remainder of his FY21 bonus (£75,000)
and will not participate in the annual bonus plan or LTIP for FY22.
Andrew receives a cash allowance of 3% of base salary in lieu of
pension, which is in line with the rate currently available to the majority
of the workforce.
CCFFOO aappppooiinnttmmeenntt
On 17 March 2021 the Company announced the appointment of Simon
Kirkpatrick as CFO with effect from 1 April 2021. Simon’s remuneration
arrangements have been set in line with the shareholder-approved
remuneration policy. Simon will receive a pension cash allowance
equivalent to 3% of base salary, which is in line with the rate currently
available to the majority of the workforce. He will be eligible for
a maximum annual bonus of 130% of base salary and a maximum
LTIP award of 150% of base salary. Simon’s annual bonus and LTIP
will be subject to the same framework set out above for Phil Bentley.
Recognising that this will be Simon’s first executive director
appointment, his salary has been set at £350,000, which is at the lower
end of the market and more than 18% lower than the salary of the
previous CFO to serve on a non-interim basis (Paul Woolf at £430,000).
Over the coming years, as Simon develops in the role, the Committee
expects to increase his salary to be in line with the market. As a result,
we anticipate awarding salary increases that are above the rate received
by the wider workforce, subject to his performance and development.
The Committee acknowledges that proxy advisory bodies may highlight
these phased salary increases as a repeated annual area of concern.
However, the Committee considers that this is the most appropriate
approach in the circumstances and provides Simon with the opportunity
to develop in the role. Simon will participate in the EDP and will be
granted a core award of 65% of base salary.
WWoorrkkffoorrccee rreemmuunneerraattiioonn
The Interserve acquisition is transformative for Mitie and the
Committee considers that it also presents a significant opportunity for
the wider Mitie workforce to contribute to the success of the combined
business. The Committee has finalised proposals to reward colleagues
and to encourage wider share ownership through enhancements to the
Share Incentive Plan (SIP). In April 2021 the Company launched Mitie
Free Shares, which focus on rewarding the Group's frontline heroes.
Those colleagues earning under £30,000 per annum will be given 100
free shares, and there is a sliding scale up to colleagues earning in excess
of £60,000 per annum who will be given 25 free shares. The Company
has also announced that the current One-for-Ten matching share offer
under the SIP will be enhanced through the One-for-Two Share Plan
that will be launched in summer 2021.
Within the wider workforce there was an annual pay review in April
2021, which for salaried colleagues received increases of between 0%
and 4% depending on performance rating (the overall cost being 2.5% of
the salary budget) and for hourly colleagues was in line with obligations
through the Real Living Wage and National Living/Minimum Wage. The
Group Annual Bonus Plan for FY21 paid out for eligible colleagues. In
FY21 enhancements to the benefits package were rolled out to all
frontline colleagues, including those who were formerly with Interserve,
and a review is planned of pension arrangements.
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
Summary of
remuneration policy
Excluding the one-off awards to be made under the Enhanced Delivery Plan for FY22, the Executive Directors’ standard remuneration approach is
made up of the following elements:
Fixed
Variable
Base salary
Benefits
Pension
Annual bonus
LTIP
Total
EExxeeccuuttiivvee iinncceennttiivveess aanndd lliinnkk ttoo ssttrraatteeggyy
The following table sets out how the intended measures across the incentive plans for FY22 support the Group’s strategy and KPIs:
SSuussttaaiinneedd aanndd
rreenneewweedd pprrooffiitt ggrroowwtthh
QQuuaalliittyy cclliieenntt bbaassee
SSttrroonngg ccaasshh--
ggeenneerraattiivvee bbuussiinneessss
SSttrraatteeggiicc ttaarrggeettss
Annual bonus
35% profit
35% revenue
10% free cash flow
20% strategic objectives
(inc. ESG)
LTIP
EDP
50% adjusted EPS
35% cash conversion
15% ESG measures
25% synergies
75% ROIC
Note: details of the FY22 annual bonus targets will be disclosed in the FY22 remuneration report.
102
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UUKK CCoorrppoorraattee GGoovveerrnnaannccee CCooddee:: PPrroovviissiioonn 4400
The following table sets out how the revised Remuneration Policy addresses the factors set out in the UK Corporate Governance Code:
Clarity
Simplicity
The Committee considers that Mitie's remuneration structures are transparent and welcomes open
and frequent dialogue with shareholders on its approach to remuneration. Major shareholders have
been consulted on the Committee's approach to remuneration, including the proposed changes to the
Remuneration Policy and introduction of the Enhanced Delivery Plan which are subject to approval by
shareholders at the 2021 AGM.
The overall remuneration policy is designed to be comprehensive without becoming overcomplicated
and to encourage Executive Directors to concentrate on the profitable growth of the business. When
developing the remuneration arrangements, the Committee was conscious of ensuring the
overarching structure remained simple and easy to understand for both shareholders and participants.
Risk
The Committee considers that the structures of the incentive arrangements do not encourage
inappropriate risk-taking. The following best-practice measures are in place to minimise risks:
Predictability
• Deferral under the Annual Bonus, the LTIP holding period, the EDP holding period and the shareholding
requirement, including post-cessation, provide a clear link to the ongoing performance of Mitie's business and the
experience of shareholders;
• The Committee has discretion to adjust the formulaic outcomes if it considers that they are not reflective of the
underlying performance of Mitie or the individual;
• Malus and clawback provisions apply to the Annual Bonus, LTIP and EDP.
One of the Committee’s principles is that the majority of reward opportunity for Executive Directors
should be provided through performance-related incentives linked to the Group’s strategic goals and
taking account of the Group’s attitude to risk; reward under these incentives is linked to both individual
and Group performance. Page 118 sets out four illustrations of the application of the proposed
remuneration policy including the potential opportunity levels resulting from threshold, target and
maximum performance under the Annual Bonus, LTIP and EDP.
Proportionality
Performance measures and target ranges under the Annual Bonus, LTIP and EDP are designed to be
sufficiently stretching in order to ensure out-turns are fully aligned with Mitie's performance.
As above, the Committee has discretion to override formulaic outcomes in order to ensure
performance is reflective of Mitie’s underlying performance.
Alignment
to culture
The Committee believes in an approach to executive pay which is commensurate with value creation
for shareholders. The proposed remuneration policy and the Company's incentive schemes have been
designed to drive appropriate behaviours consistent with Mitie’s purpose, values and strategy.
AAllll eemmppllooyyeeee iinncceennttiivvee aarrrraannggeemmeennttss
The Company also operates SAYE share option and Share Incentive Plan arrangements, including Mitie Free Shares, allowing employees to participate in
share ownership and to share in corporate success over the medium term.
WWoorrkkffoorrccee eennggaaggeemmeenntt oonn eexxeeccuuttiivvee rreemmuunneerraattiioonn
In addition to her role as the Chair of the Remuneration Committee, Jennifer Duvalier acts as the Company’s designated Non-Executive Director
responsible for oversight of the Board’s engagement with the workforce. In this role Jennifer has engaged regularly with the workforce on a broad range
of topics including reward and benefits. The Company also undertakes an annual engagement survey which includes a range of specific questions on the
Company’s pay practices. This survey also presents the workforce with the opportunity to ask its own questions about employee or executive reward.
Through the feedback from the engagement survey, supplemented with Jennifer’s findings from her regular direct engagement with the workforce, the
voice of Mitie employees is heard at Remuneration Committee meetings. This enables the Remuneration Committee to take into account the views of
employees when considering executive remuneration and the pay and employment conditions throughout the wider workforce.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
Executive remuneration
at a glance
HHooww wwee iinntteenndd ttoo ooppeerraattee oouurr ppoolliiccyy ffoorr FFYY2222
This table summarises the approach for remuneration arrangements for Phil Bentley as CEO for FY21 under the current policy approved by
shareholders at the 2018 AGM, alongside how the Committee intends to apply the new policy in FY22 for Phil Bentley as CEO and Simon Kirkpatrick
as CFO, subject to shareholder approval at the 2021 AGM. Andrew Peeler’s remuneration arrangements as interim CFO are set out separately on
page 106.
AAtt aa ggllaannccee
FFYY2211
Base salary
CEO: £900,000
As part of the Group’s COVID-19 cost saving measures
the CEO volunteered a 30% reduction in his salary for
five months from April 2020.
Pension cash allowance
CEO: 20% of base salary
CEO: 160% of base salary
FFYY2222
CEO: £900,000
CFO: £350,000
CEO: 20% of base salary
CFO: 3% of base salary
CEO: 160% of base salary
CFO: 130% of base salary
Maximum bonus
opportunity
Bonus deferral
Bonus performance
measures – mix
Bonus performance
measures – metrics
Maximum LTIP
opportunity
LTIP performance
measures
LTIP holding period
of two years after vest
Enhanced Delivery
Plan opportunity
Enhanced Delivery Plan
performance measures
50% of bonus deferred into shares which vest after at
least two years
50% of bonus deferred into shares which vest after at
least two years
70% financial, 30% strategic
70% financial, 30% strategic
Revenue (35%), profit (35%), and strategic targets (30%) Revenue (35%), profit (35%), and strategic targets (30%)
CEO: 200% of base salary
CEO: 200% of base salary
CFO: 150% base of salary
Adjusted EPS (50%), and cash conversion (50%)
Adjusted EPS (50%), cash conversion (35%), and ESG
measures (15%)
Shares released after at least five years (vesting after
three years plus two-year holding period)
Shares released after at least five years (vesting after
three years plus two-year holding period)
N/A
N/A
CEO: core award of 160% of base salary
CFO: core award of 65% of base salary
Awards are subject to a multiplier of up to 4x based on
stretching performance measures
Return on invested capital (75%) and synergies (25%)
Vesting is also subject to both an absolute share price
underpin and a net debt underpin
104
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
AAtt aa ggllaannccee
Enhanced Delivery Plan
holding period of two
years after vest
FFYY2211
N/A
Share ownership
requirements
200% of base salary
FFYY2222
Shares released after at least five years (vesting after
three years plus two-year holding period)
200% of base salary
Executive Directors will be expected to maintain their
shareholding at 100% of their ownership requirement
for one year post departure, reducing to 50% for the
second year post departure, or in either case the actual
shareholding on departure if lower
Malus and clawback
provisions
As per policy approved by shareholders at 2018 AGM As per policy approved by shareholders at 2021 AGM
SSiinnggllee ffiigguurree ffoorr FFYY2211
The table below reports a single figure of total remuneration for each of the Executive Directors for the financial year ended 31 March 2021 and their
comparative figures for the financial year ended 31 March 2020.
Note: Andrew Peeler joined the Board as interim Chief Financial Officer on 2 January 2020 and the information in the single figure of total
remuneration for FY20 only reflects his period as an Executive Director. The LTIP figure disclosed for Phil Bentley for FY20 is in respect of the 2016
and 2017 LTIPs and has been adjusted from the figure included in the FY20 remuneration table to reflect the actual valuation based on the closing share
price on the first date of vesting of the awards, being 3 August 2020 (32.35p) and includes dividend equivalents accrued until the first vesting date.
Phil Bentley
Andrew Peeler
£
Salary
Benefits
Pensions
Bonus
LTIP
Total
£
Salary
Benefits
Pensions
Bonus
LTIP
Total
2021
787,500
20,625
180,000
1,131,186
622,086
2,741,397
2021
366,666
997
12,000
200,000
–
579,663
Further information on the above is provided in the Annual Report on Remuneration.
£
Salary
Benefits
Pensions
Bonus
LTIP
Total
£
Salary
Benefits
Pensions
Bonus
LTIP
2020
900,000
27,508
180,000
–
922,348
2,029,856
2020
98,551
–
2,957
–
–
Total
101,508
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
Annual Report
on Remuneration
EExxeeccuuttiivvee DDiirreeccttoorr rreemmuunneerraattiioonn ((ssuubbjjeecctt ttoo aauuddiitt))
The table below reports a single figure of total remuneration for each of the Executive Directors for FY21 and their comparative figures for FY20.
YYeeaarr
SSaallaarryy22
BBeenneeffiittss33
PPeennssiioonn44
TToottaall
ffiixxeedd ppaayy
AAnnnnuuaall
bboonnuuss55
LLTTIIPP66
TToottaall
vvaarriiaabbllee ppaayy
TToottaall
Phil Bentley
22002211
££778877,,550000
££2200,,662255
££118800,,000000
££998888,,112255 ££11,,113311,,118866
££662222,,008866 ££11,,775533,,227722 ££22,,774411,,339977
2020
£900,000
£27,508
£180,000 £1,107,508
£0
£922,348
£922,348
£2,029,856
Andrew Peeler1
22002211
££336666,,666666
££999977
££1122,,000000
££337799,,666633
££220000,,000000
2020
£98,551
£0
£2,957
£101,508
£0
££00
£0
££220000,,000000
££557799,,666633
£0
£101,508
Notes:
1 Andrew Peeler was appointed to the Board as interim Chief Financial Officer on 2 January 2020 and the information in the table in respect of FY20 sets out his earnings as an Executive Director
from that date to 31 March 2021 when he resigned from the Board.
2 To mitigate the impact of the COVID-19 pandemic Phil Bentley and Andrew Peeler volunteered a 30% and 20% reduction respectively in their salaries for a five-month period from 1 April 2020.
3 Benefits are calculated in terms of UK taxable values and relate to the cost of private medical cover, car allowance and financial/tax planning advice. Phil Bentley has received the use of an electric
car for a period of eight months during FY21, which attracts 0% benefit in kind tax.
4 The pension benefit disclosed above comprises cash allowances in lieu of pension contributions for Phil Bentley and Andrew Peeler of 20% and 3% of base salary respectively. Due to an
administrative error, Andrew Peeler's pension cash allowance of £2,957 in respect of FY20 was omitted from the FY20 remuneration table.
5 Annual bonus payable in respect of the financial year includes any deferred element at face value at the date of award. Further information about how the level of the award for FY21 was
determined is provided on pages 107 and 108.
6 The LTIP figure disclosed for Phil Bentley for FY21 is in respect of the 2018 LTIP and has been valued, in line with the regulations, using the average share price of the last three months of FY21
(51.74p) and includes dividend equivalents accrued over this period. This share price is below the share price at the grant date and therefore none of the amount in the table above is attributable
to share price appreciation. Further information about how the level of vesting was determined is provided on page 110. The LTIP figure disclosed for Phil Bentley for FY20 is in respect of the
2016 and 2017 LTIPs and has been adjusted from the figure included in the FY20 remuneration table to reflect the actual valuation based on the closing share price on the first date of vesting of
the awards, being 3 August 2020 (32.35p) and includes dividend equivalents accrued until the first vesting date.
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorr rreemmuunneerraattiioonn ((ssuubbjjeecctt ttoo aauuddiitt))
The fees for the Non-Executive Directors for FY21 and their comparative figures for FY20 are set out below:
Derek Mapp
Nivedita Krishnamurthy Bhagat
Baroness Couttie2
Jennifer Duvalier
Mary Reilly
Roger Yates
Alan Lovell3
Total
Notes:
2200221111
££’’000000
119977
4466
5522
5522
5522
5522
1100
2020
£’000
225
52
59
60
60
59
–
446611
515
1 To mitigate the impact of the COVID-19 pandemic the Non-Executive Directors volunteered 30% reductions in their fees for a five-month period from April 2020.
2 All amounts were paid in cash and no other UK taxable benefits were received in either year.
3 Alan Lovell, Chairman of Interserve Group Limited, was appointed to the Board on 1 January 2021 following Mitie's acquisition of Interserve Facilities Management from How Group Limited, a
subsidiary of Interserve Group Limited, on 30 November 2020. Alan resigned from the board on 5 March 2021 following the sale by How Group Limited of shares representing 10.5% of the
Company's issued share capital.
106
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
BBaassee ssaallaarryy aanndd bbeenneeffiittss
Since his appointment on 1 November 2016, Phil Bentley’s annual base salary has been £900,000. Taking into account the impact of COVID-19 the
Committee has decided to freeze the salary for the CEO for FY22.
Commencing 9 December 2019, with no review planned, the annual base salary for Andrew Peeler was £400,000. Andrew resigned from the Board
on 31 March 2021 and will leave the Company on 30 June 2021.
Simon Kirkpatrick was appointed as Chief Financial Officer and to the Board with effect from 1 April 2021 and his annual base salary for FY22 will
be £350,000.
Benefits are as described in the notes to the Executive Director remuneration table on page 106. No changes in benefits are planned for FY22.
The Non-Executive Director fees were last reviewed by the Board in March 2019. Taking into account the impact of COVID-19 no increases are
proposed for FY22 which will therefore be in line with FY21 as follows:
Chairman fees2
Non-Executive Director core fees3
AAddddiittiioonnaall ffeeeess::
Senior Independent Director
Chair of a Committee
Notes:
2200221111
££’’000000
222255
5522
77
88
2020
£’000
225
52
7
8
1 The core fees of £52,000 per annum paid to each Non-Executive Director (including the Chairman) would ordinarily total £312,000 for FY22. Total fees including additional duties would
ordinarily amount to £516,000 for FY22 (£461,109 actual for FY21).
2 The Chairman’s fee is inclusive of the Non-Executive Director core fee and no additional fees are paid to the Chairman where he is chairman or a member of other Committees.
3 For Non-Executive Directors, individual fees comprise the core fee and additional supplemental fees for the Senior Independent Director and for chairing Committees to reflect the greater
responsibility and time commitment required.
AAnnnnuuaall BBoonnuuss PPllaann FFYY2211
Awards in respect of FY21 were considered under the ABP. Phil Bentley was eligible for a maximum bonus opportunity of 160% of base salary. Andrew
Peeler was eligible for a maximum bonus opportunity of 50% of base salary.
Phil Bentley’s award was structured by reference to performance against a blend of financial (70% of the bonus opportunity) and strategic targets (the
remaining 30%). At the threshold level of performance for financial targets, 25% of the maximum bonus opportunity is due, with 50% of the maximum
bonus opportunity due at the target level and 100% at the maximum level. Between these points the out-turn is determined on a linear sliding scale basis.
As set out in the Remuneration Committee Chair's statement, FY21 was a transformative year for Mitie. Although the business was negatively impacted
by the COVID-19 pandemic, the response was strong, both in terms of ensuring the health and wellbeing of frontline colleagues, but also in terms of
refinancing of the RCF and completing the acquisition of Interserve to position Mitie strongly for the future.
The Remuneration Committee gave careful consideration to the annual bonus out-turn for FY21 and took into account the experience of Mitie
shareholders, colleagues and other stakeholders. Recognising the exceptional performance of management in balancing the many challenges of the year,
the Committee considered that it would be appropriate to pay an annual bonus.
The Group performed strongly in respect of FY21. As set out in the table below the formulaic outcome for the annual bonus for Phil Bentley was
78.6% of the maximum.
PPeerrffoorrmmaannccee mmeeaassuurree
WWeeiigghhttiinngg
PPeerrffoorrmmaannccee rraannggee33
PPeerrffoorrmmaannccee
OOuutt--ttuurrnn ((%% ooff bboonnuuss ooppppoorrttuunniittyy))
Operating profit1
35% of the award
Revenue2
35% of the award
Free cash flow
10% of the award
£59.1m threshold
£65.7m target
£72.2m maximum
£2,251m threshold
£2,370m target
£2,488m maximum
-£112m threshold
-£92m target
-£72m maximum
Other strategic targets
10% of the award
N/A
Individual objectives
10% of the award
N/A
£63.4m
14.6%
£2,589m
-£24.5m
The Committee considered performance
against the strategic objectives set out
below and determined that the out-turn
was 90% of the maximum for the CEO.
The Committee considered performance
against the strategic objectives set out
below and determined that the out-turn
was 100% of the maximum for the CEO.
35%
10%
9%
10%
Notes:
1 Operating profit before other items from continuing operations.
2 Revenue including share of joint ventures and associates from continuing operations.
3 Performance targets have been increased to reflect the contribution of Interserve for the period following the acquisition. The Committee Is comfortable that the adjusted figures are appropriate
and are no less stretching than the original targets.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
The strategic targets and individual objectives set for Phil Bentley were as follows:
SSttrraatteeggiicc ttaarrggeettss
Strategy
IInnddiivviidduuaall oobbjjeeccttiivveess
Mobilise integration PMO,
comprising external change
experts and combination of
Mitie/Interserve resources
Develop plan to deliver
synergies from Interserve
transaction
Enhance net promoter
score
Enhance employee
engagement
Launch Plan Zero and gain
ESG accreditation
• £200m rights issue fully underwritten and supported by existing shareholders
• Extension of Revolving Credit Facility, to December 2022 supported by existing bank syndicate
•
• Accelerated acquisition synergies, delivering more than £4m in-year synergies
Interserve acquisition cleared by the Competition and Markets Authority and approved by shareholders
Integration PMO successfully mobilised
•
• Composition of Integration PMO transitioned from majority external resources to majority Mitie/Interserve resources
• Specialist external resource in Procurement assisting in transformation of procurement function, leveraging the enlarged Mitie Group's
approximately £1.5bn of spend with suppliers
• Multiple synergies identified and plan developed to deliver synergies by end of FY23
• Net Promoter Score increased by 20ppt to +50
• Employee engagement increased by 9ppt to 55%
• Successfully launched Plan Zero Playbook
• Secured Industry recognition of Mitie's ESG focus, as evidenced by:
- Increase in Carbon Disclosure Project rating to A- in December 2020, making Mitie the only UK-based FM provider
with a Leadership rating
- Ranked number 1 Business Support Services company globally by Sustainalytics
- MSCI rating increased to AA in December 2020
- SFMI Gold Award (Sustainable Facilities Management Index)
Increase MGX diversity
Maintain talent pipeline
• MGX gender diversity increased from 0% to 20%
• MGX BAME diversity increased from 0% to 10%
• Led two Big Equity summits and mentored several BAME employees
• Simon Kirkpatrick announced as Group CFO on 17 March 2021
The bonus structure and assessment was as follows:
Financial performance
Non-financial performance
Total bonus payable
% of salary
payable at
threshold
% of salary
payable at
target
% of salary
payable at
maximum
% of salary
payable
% of salary
payable at
threshold
% of salary
payable at
target
% of salary
payable at
maximum
% of salary
payable
Total bonus
£’000
Phil Bentley
28%
56%
112%
79.4%
0%
24%
48%
46.4%
1,131
Cash
£’000
566
Deferred
shares
£’000
565
Andrew Peeler’s award was structured by reference to performance against objectives specific to his roles as Chief Financial Officer, as detailed below.
BBoonnuuss oobbjjeeccttiivveess
• To mentor and develop internal Finance heads with a view to establishing their candidacy for the Group role
• To achieve Group Centre cost savings
• To successfully complete the refinancing of the Company's Revolving Credit Facility
The Committee considered the objectives set for Andrew Peeler and were satisfied that they had been successfully achieved during his role
as interim CFO.
AAnnnnuuaall BBoonnuuss PPllaann FFYY2222
The ABP will be operated on similar terms for FY22. The maximum bonus opportunity for FY22 for Phil Bentley and Simon Kirkpatrick will be
160% and 130% of base salary respectively.. Their awards will be payable by reference to performance against a blend of financial (70% of the
bonus opportunity) and strategic targets (the remaining 30%). However, if none of the financial targets have been achieved, no bonus will be payable
by reference only to the strategic targets. 50% of any bonus entitlement will be deferred.
Details of the targets will be disclosed in the FY22 remuneration report.
LLTTIIPP aawwaarrddss ggrraanntteedd iinn FFYY2211 ((ssuubbjjeecctt ttoo aauuddiitt))
On 11 August 2020, the following conditional LTIP awards were granted to the Executive Directors:
Award
Type
Performance
LTIP Aug 20
Nil-cost
options
Number
of shares1
Face value
(£’000)
% of base
salary
Performance
conditions
Performance
period
% vesting at
threshold
5,278,592
£1,800,000
200%
Performance
conditions are
set out in the
table below
25%
Three financial
years ending
31 March 2023
Phil Bentley
Notes:
1 Number of shares was calculated based on the average closing middle market price of 34.1p for the last five trading days before the date of grant.
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
LTIP awards granted in FY21 are subject to two performance measures, adjusted EPS and cash conversion. These awards will vest in 2023 conditional
on performance against the following measures:
Performance measure
Weighting
Performance range
Vesting of portion of the award (performance period three years ending 31 March 2023)
Adjusted Earnings per
Share (EPS) growth
50% of the award
6% – 12% pa
Cash conversion
50% of the award
80% – 90% pa
Zero vesting if EPS growth, as adjusted by the Committee as appropriate, is less than
6% pa. If EPS growth is equal to 6% pa, 25% of the award will vest. If EPS growth of 9%
pa is achieved, 70% of the award will vest. Full vesting for this portion will occur if EPS
growth of 12% pa or more is achieved. Between 6% and 9% and 9% and 12%, the
proportion of awards vesting will be determined on a linear sliding scale basis.
Zero vesting if cash conversion is less than 80% pa. At 80% pa cash conversion, 25% of
the award will vest. 70% of the award will vest if 85% pa cash conversion is achieved.
Full vesting for this portion will occur if 90% pa cash conversion is achieved. Between
80% and 85% and 85% and 90%, the proportion of awards vesting will be determined
on a linear sliding scale basis.
At vesting the Committee will take into account the impact of the Rights Issue and the Interserve acquisition on the performance measures set and the
Company’s performance. The Committee will make any necessary adjustments to ensure that the targets are appropriate and not materially easier or
harder to satisfy than originally intended.
The Committee has the discretion to determine the performance measures and how the performance ranges applicable to the award are applied,
including discretion to adjust them in the event of changes in IFRS accounting standards, while ensuring that they are not materially easier or harder to
satisfy than the original performance measures and ranges.
LLTTIIPP FFYY2222
Phil Bentley and Simon Kirkpatrick will be granted LTIP awards of 200% and 150% of base salary respectively in respect of FY22.
The Committee has reviewed the performance measures used under the LTIP and, recognising the importance of Mitie’s Social Value Framework,
determined that it would be appropriate to introduce a third measure linked to the achievement of ESG targets. The performance measures will be:
Adjusted EPS (50%); cash conversion (35%); and ESG targets (15%). Recognising that this is the first year that ESG targets have been used for the LTIP
the Committee will determine the vesting in respect of this element based on an assessment of progress against six ESG metrics for which aspirational
targets have been set which the Committee will take into account when assessing overall performance. In recognition of the volatility impacting FY21
given the impact of COVID-19 and the Interserve acquisition, the Committee determined that the EPS performance targets would be set as absolute
targets instead of growth targets.
The awards will vest in 2024 conditional on performance against the following measures:
Performance measure
Weighting
Performance range
Vesting of portion of the award (performance period three years ending 31 March 2024)
Adjusted Earnings
per Share (EPS)
50% of the award
6.9p – 7.8p
Cash conversion
35% of the award
80% – 90% pa
Zero vesting if EPS, as adjusted by the Committee as appropriate, is less than 6.9p. If
EPS is equal to 6.9p, 25% of the award will vest. If EPS of 7.4p Is achieved, 70% of the
award will vest. Full vesting for this portion will occur if EPS of 7.8p or more is achieved.
Between 6.9p and 7.4p and 7.4p and 7.8p the proportion of awards vesting will be
determined on a linear sliding scale basis.
Zero vesting if cash conversion is less than 80% pa. At 80% pa cash conversion, 25% of
the award will vest. At 85% pa cash conversion, 70% of the award will vest. Full vesting
for this portion will occur if 90% pa cash conversion is achieved. Between 80% and
85% and 85% and 90%, the proportion of awards vesting will be determined on a
linear sliding scale basis.
ESG targets
15% of the award
• Greenhouse gas emission reduction: 60% reduction in Scope 1 and 2 net emissions versus the FY20 baseline
• Fleet zero carbon: 65% of Mitie’s total fleet is zero tailpipe emissions
• Employee engagement: improve employee engagement by 6ppt
• Customer engagement: improve net promoter score (NPS) by 6ppt
• Gender diversity: increase percentage of women holding senior leadership roles to 30%
• Ethnic diversity: increase percentage of BAME colleagues holding senior leadership roles to 10%
The Committee has full discretion to ensure that the level of any vesting outcome is appropriate based on the overall performance of the Group and
the shareholder experience.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
DDeettaaiillss ooff AAuugguusstt 22001188 LLTTIIPP aawwaarrdd vveessttiinngg iinn FFYY2222
The Committee assessed the outcome of the August 2018 LTIP awards (based on FY21 results) granted under the plan against a basket of
performance measures:
Performance
measure
Adjusted
Earnings per
Share (EPS)
growth
Weighting
50% of the
award
Cash
conversion
50% of the
award
Performance
range
Vesting of portion of the award
(performance period three years ending 31 March 2021)
5% – 12% pa
Zero vesting if EPS growth, as adjusted by the Committee as appropriate, is less
than 5% pa. If EPS growth is equal to 5% pa, 25% of the award will vest. If EPS
growth of 8.5% pa is achieved, 70% of the award will vest. Full vesting for this
portion will occur if EPS growth of 12% pa or more is achieved. Between 5% and
8.5% and 12%, the proportion of awards vesting will be determined on a linear
sliding scale basis.
Mitie
performance
Vesting
(% of max)
less than 5% pa 0%
75% – 85% pa Zero vesting if cash conversion is less than 75% pa. At 75% pa cash conversion,
117.4% pa
50%
25% of the award will vest. At 80% pa cash conversion, 70% of the award will vest.
Full vesting for this portion will occur if 85% pa cash conversion is achieved.
Between 75% and 80% and 80% and 85%, the proportion of awards vesting will be
determined on a linear sliding scale basis.
As part of their assessment the Committee took into account the wider context. Following their assessment of performance, the Committee
determined that the formulaic outturn of 50% of maximum was appropriate for the July 2018 LTIP awards. Awards to Executive Directors will vest in
August 2021 and are subject to a two-year post-vesting holding period.
EEnnhhaanncceedd DDeelliivveerryy PPllaann
As set out in the Statement from the Remuneration Committee Chair, following the acquisition of Interserve the Committee has proposed the
introduction of a one-off share plan in FY22. Developed in conjunction with a significant shareholder consultation process the EDP has been introduced
in order to incentivise and reward management for successfully unlocking the growth opportunities presented by the Interserve acquisition. The EDP
operates alongside the existing framework and directly measures the success of the acquisition over the next three years. Stretching performance
targets have been set with maximum payouts under the plan requiring truly exceptional performance and resulting in superior returns for shareholders.
In addition, the plan incorporates several best practice features to ensure that executives are aligned with shareholders, including the following:
• AAwwaarrdd ccaapp:: the maximum share price growth delivered at vesting cannot exceed 200% growth in the face value of the award at grant.
• HHoollddiinngg ppeerriioodd:: To provide additional alignment with shareholders, awards to Executive Directors will be subject to a two-year post-vesting holding
period so that the total time horizon is five years.
• SShhaarree pprriiccee uunnddeerrppiinn:: The vesting of awards will be subject to an absolute share price underpin. The Committee's intention is that awards will be
granted shortly after the approval of the EDP by shareholders at the 2021 AGM, with the number of shares under award determined using the
average closing share price for the five dealing days prior to the start of the financial year on 1 April 2021 (being 60.5p), to provide direct alignment
with the performance period. If the average closing share price for the five days prior to 31 March 2024 does not exceed 60.5p, awards would lapse
in full.
• NNeett ddeebbtt uunnddeerrppiinn:: Following direct feedback from the shareholder consultation, at vesting the Committee shall also have reference to a net debt
underpin that the average daily net debt for FY24 does not exceed 1x EBITDA when determining whether remuneration outcomes under the EDP
remain appropriate. This is intended as an additional safeguard rather than a performance hurdle.
Phil Bentley and Simon Kirkpatrick will be granted a core award of 160% and 65% of salary respectively with the opportunity to earn up to 4x this level
for delivering truly exceptional performance.
The awards will vest in 2024 conditional on performance against the following measures:
Performance measure
Weighting
Threshold (1x multiplier)
Maximum (4x multiplier)
Return on invested capital
(ROIC)
75% of the award
20.5%
This is 1,140 bps above Mitie's WACC at 31 March 2021
of 9.1%.
24.5%
This is 400 bps above the threshold level
Synergies split as cost-saving
synergies (85%) and cross-
selling revenues (15%)
25% of the award
Cost-saving synergies of £35m, in line with the enhanced
synergies set out in the November 2020 acquisition
announcement.
Cross-selling revenues into the Interserve customer base
of £50m (Measured as revenue from services not
currently provided by Interserve to its clients).
Cost-saving synergies of £56m, representing over-
performance of 60% against the £35m threshold
(Interserve total overheads are c.£80m).
Cross-selling revenues into the Interserve customer base
of £100m.
For performance between threshold and maximum the proportion of awards vesting will be determined on a linear
sliding scale basis.
LLoossss ooff ooffffiiccee ppaayymmeennttss ((ssuubbjjeecctt ttoo aauuddiitt))
There have been no loss of office payments to past Directors during FY21.
PPaayymmeennttss ttoo ppaasstt DDiirreeccttoorrss ((ssuubbjjeecctt ttoo aauuddiitt))
There have been no payments to past Directors during FY21 that relate to their period as a Director.
110
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
PPeerrcceennttaaggee cchhaannggee iinn rreemmuunneerraattiioonn ooff DDiirreeccttoorrss aanndd eemmppllooyyeeeess
The table below sets out the change in remuneration of the directors who served on the Board and Mitie’s UK employees, which is considered the most
appropriate group for comparison purposes.
Average pay based on Mitie’s UK employees1
EExxeeccuuttiivvee DDiirreeccttoorrss
Phil Bentley4
Andrew Peeler5
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss
Derek Mapp
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Jennifer Duvalier
Mary Reilly
Roger Yates
Alan Lovell6
Notes:
SSaallaarryy22
BBeenneeffiittss33
BBoonnuuss
2.5%
(20.8)%
(23.9)%
(12.5)%
(8.3)%
(12.5)%
(12.5)%
(10.5)%
(12.5)%
(12.5)%
(12.5)%
N/A
(25.0)%
N/A
N/A
N/A
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Reflects the change in average annual pay for UK employees employed throughout FY20 and FY21. Employees who have been on furlough during FY21 have been excluded for the purposes
of this analysis.
2 As part of Mitie's actions to mitigate the impact of COVID-19, the Non-Executive Directors and Phil Bentley, and Andrew Peeler volunteered 30% and 20% reductions in their fees/salaries
respectively for five months from 1 April 2020.
3 Includes taxable benefits such as car/car allowance, private medical benefit and private fuel. The increase in the number of electric vehicles, due to Mitie's commitment to Plan Zero, has impacted
the benefit figure.
4 Phil Bentley's FY20 bonus was £nil as he waived it.
5 Andrew Peeler was appointed to the Board on 2 January 2020 and resigned from the Board on 31 March 2021. Andrew's percentages have been calculated by comparing his FY21 salary to an
annualised figure for FY20 based on the figures for his period as a Director during that year; his FY20 benefits and bonus were £nil.
6 Alan Lovell was appointed to the Board on 1 January 2021 and resigned from the Board on 5 March 2021.
CCEEOO ppaayy rraattiioo
The table below sets out the CEO pay ratio in respect of FY21. The previous year’s CEO pay ratio data, as published in the FY20 remuneration report,
is provided for reference.
Year
FY21
FY20
Method
Option B
Option B
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
143:1
154:1
122:1
139:1
110:1
108:1
The pay ratios set out above were calculated using the Group’s FY21 gender pay data based on employees as at 5 April 2020 under method B. Method
B was selected because it made use of robust, readily available data and did not require additional analysis into the more than 45,500 UK employees
employed by the Group. Total pay was calculated for a sample of employees at each quartile in order to ensure that the three identified employees
were suitably representative of their quartile. A full-time equivalent total pay figure was calculated for each identified employee using the single
figure methodology. The hourly pay rates were converted into full-time equivalents based on an assumed 40 working hours per week and excluding
overtime payments.
The CEO pay ratio figures for FY21 are broadly comparable to the figures reported for FY20. The ratios at the 25th and 50th percentile have
decreased slightly. The CEO's single figure has increased year on year, primarily as a result of an annual bonus being payable in respect of FY21 whereas
the bonus for FY20 was waived. As a Real Living Wage service provider, Mitie continues to increase pay levels amongst Its various contracts and invest
in competitive pay for all employees. Given that Mitie's workforce profile is made up of predominantly frontline customer-facing roles, the employees
at each quartile used to compare Mitie's CEO's remuneration all operate within a frontline role. The Committee is comfortable that the pay ratios are
consistent with the pay, reward and progression policies at Mitie.
The following table sets out the base salary and total pay figures for the employees identified at each quartile.
Year
FY21
Element of pay
25th percentile
employee
Median
employee
75th percentile
employee
Base salary (FTE)
Total pay (FTE)
£18,781
£19,206
£20,304
£22,484
£24,347
£24,973
RReellaattiivvee ssppeenndd oonn ppaayy
The table below shows the total cost of remuneration in the Group, compared with dividends distributed.
Aggregate employee remuneration
Equity dividends
YYeeaarr eennddeedd
3311 MMaarrcchh
22002211
££mm
Year ended
31 March
2020
£m
11,,447733
00
1,269
14
Change
16.1%
(100)%
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
111
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
AAsssseessssiinngg ppaayy aanndd ppeerrffoorrmmaannccee
The table below provides a summary of the Chief Executive Officer’s single figure remuneration over the past ten years, as well as the pay-out and
vesting levels of variable pay plans in relation to the maximum opportunity. The chart below shows the historical TSR performance over the same
period, with Mitie's TSR restated for the bonus element of the 2020 rights issue. Three indices (FTSE 250, FTSE 350 Support Services and FTSE 350)
have been chosen as they are widely recognised and Mitie has been a member of these indices during the period:
TSR (Rebased to 100)
350
300
250
200
150
100
50
0
March 11
March 12
March 13
March 14
March 15
March 16
March 17
March 18
March 19
March 20
March 21
Mitie
FTSE 250
FTSE 350 Support Services
FTSE 350
FY12
FY13
FY14
FY15
FY16
FY17
Ruby
McGregor
Smith1
FY17
Phil Bentley1
FY18
FY19
FY20
FFYY2211
£2,431,773 £2,105,131 £1,447,266 £1,525,824 £2,448,161 £530,628
£479,073 £1,102,54 9 £2,248,948 £2,029,8562 ££22,,774411,,339977
100%
85%
90%
50%
73%
0%
waived
waived
79%
waived
7788..66%%
87.2%
57.2%
0%
25%
69.5%
0%
n/a
n/a
n/a
79.7%2
5500%%
Single figure
remuneration
Annual bonus element
(actual as a % of max)
LTIP element (actual
vesting as a % of max)
Note:
1 Ruby McGregor-Smith stepped down as Chief Executive Officer on 12 December 2016. Phil Bentley joined the Board on 1 November 2016 and assumed the position of Chief Executive Officer
on 12 December 2016. The figures above include Phil Bentley’s remuneration from 1 November 2016.
2 This figure includes two LTIP awards that vested based on performance to 31 March 2020 which vested at 100% and 53% respectively, and share price has been adjusted to the share price on the
first vesting date, 3 August 2020.
SShhaarree oowwnneerrsshhiipp ((ssuubbjjeecctt ttoo aauuddiitt))
NNuummbbeerr ooff
sshhaarreess oowwnneedd
aass aatt 3311 MMaarrcchh
2200221111
VVaalluuee ooff
ttaarrggeett hhoollddiinngg
TTaarrggeett
sshhaarreehhoollddiinngg
PPeerrcceennttaaggee
ooff ssaallaarryy hheelldd
aass aatt 3311 MMaarrcchh
22002211
PPeerrcceennttaaggee ooff
ttaarrggeett aacchhiieevveedd
aass aatt 3311 MMaarrcchh
22002211
CCoommpplliiaannccee wwiitthh
SShhaarree oowwnneerrsshhiipp
gguuiiddeelliinneess
Phil Bentley2
Notes:
1 Includes shares owned by connected persons.
99,,115544,,449966
££11,,880000,,000000
22,,884499,,990055
664422%%
332211%%
AAcchhiieevveedd
2 Value of target holding is 200% of base salary for Phil Bentley. Historically the target shareholding was calculated by reference to the share price on Phil's appointment as CEO. In order to align with
typical market practice and the approach that applies to other members of the MGX, the target shareholding will now be calculated using the average share price for the five business days prior to
the end of FY20 (63.16p).
Andrew Peeler is not subject to the shareholding guidelines.
112
Mitie Group plc | Annual Report and Accounts 2021
DDiirreeccttoorrss’’ oouuttssttaannddiinngg sshhaarree iinntteerreessttss ((ssuubbjjeecctt ttoo aauuddiitt))
The following tables provide the outstanding share interests for the Executive Directors:
DDiirreeccttoorrss’’ iinntteerreessttss ggrraanntteedd uunnddeerr tthhee LLTTIIPP
Options
outstanding
as at 31 March
20206
Year of
grant
Nov 2016¹
1,700,370
Jul 20172
1,294,783
Aug 20183
2,283,069
June 20194
Aug 20205
2,275,608
Granted
in year
Lapsed
in year
Exercised
in year
–
–
–
–
–
(1,275,276)
(608,549)
(343,117)
–
–
–
–
–
–
OOppttiioonnss
oouuttssttaannddiinngg
aass aatt 3311 MMaarrcchh
2200221177
442255,,009944
334433,,111177
22,,228833,,006699
22,,227755,,660088
55,,227788,,559922
Exercise
price
Earliest normal
exercise date8
Nil-cost
May 2020
Nil-cost
Jul 2020
Nil-cost
Aug 2021
Nil-cost
Nil-cost
June 2022
Aug 2023
–
5,278,592
Phil Bentley
Notes:
1 The performance criteria applicable to the November 2016 award were provided on pages 154 and 155 of the FY20 remuneration report.
2 The performance criteria applicable to the 2017 awards were provided on pages 155 and 156 of the FY20 remuneration report, and 47% of the award is shown as lapsed in FY21.
3 The performance criteria applicable to the 2018 awards were disclosed on page 110 of this FY21 remuneration report.
4 The performance criteria applicable to the 2019 awards were provided on page 154 of the FY20 remuneration report.
5 The performance criteria applicable to the 2020 awards are disclosed on pages 108 and 109 of this FY21 remuneration report.
6 For all awards prior to August 2020, the number of options has been adjusted for the bonus element of the Rights Issue (x1.93426825).
7 The closing market price of the Company’s shares as at 31 March 2021 was 62.9p. Adjusting for the bonus element of the Rights Issue the highest and lowest closing market prices during FY21
were 62.9p and 27.25p respectively.
8 Awards are subject to an additional two-year holding period.
DDiirreeccttoorrss’’ iinntteerreessttss ggrraanntteedd uunnddeerr tthhee DDeeffeerrrreedd BBoonnuuss PPllaann
Options
outstanding
as at 31 March
20201
Year of
grant
Phil Bentley
June 2019
722,847
Notes:
Granted
in year
–
Lapsed
in year
–
OOppttiioonnss
oouuttssttaannddiinngg
aass aatt 3311 MMaarrcchh
22002211
Exercised
in year
Exercise
price
Earliest normal
exercise date
–
772222,,884477
Nil-cost
June 2021
1 Granted as part of the ABP 2019 and the number of options has been adjusted for the bonus element of the Rights Issue.
DDiirreeccttoorrss’’ sshhaarree oowwnneerrsshhiipp
NNuummbbeerr ooff oorrddiinnaarryy sshhaarreess bbeenneeffiicciiaallllyy oowwnneedd
aass aatt 3311 MMaarrcchh 22002211 ((oorr ddaattee ooff cceessssaattiioonn iiff eeaarrlliieerr)) 33
Number of ordinary shares beneficially owned
as at 31 March 2020 (or date of cessation if earlier)2
EExxeeccuuttiivvee DDiirreeccttoorrss
Phil Bentley
Andrew Peeler
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss
Derek Mapp
Nivedita Krishnamurthy Bhagat
Baroness Couttie
Jennifer Duvalier
Mary Reilly
Roger Yates
Alan Lovell1
Notes:
99,,115544,,449966
00
449944,,880066
7755,,110088
7700,,558822
6677,,558811
7799,,669988
116600,,000000
00
3,905,551
0
270,798
0
0
35,724
22,646
96,713
0
1 Alan Lovell was appointed to the Board on 1 January 2021 and resigned from the Board on 5 March 2021.
2 Number of shares owned as at 31 March 2021 has been adjusted for the bonus element of the Rights Issue.
3 The number of shares beneficially owned since 31 March 2021 has changed due to a planned purchase that took place on 1 April 2021. The revised figures are as follows; Derek Mapp – 510,605
shares, Nivedita Krishnamurthy Bhagat – 78,925, Baroness Couttie – 74,691, Jennifer Duvalier – 70,464 and Mary Reilly – 83,204.
There have been no changes in Director share ownership between 2 April 2021 and 8 June 2021, the last practicable date prior to the date of this report.
Mitie Group plc | Annual Report and Accounts 2021
113
Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn rreeppoorrtt continued
SShhaarree ddiilluuttiioonn
The Company manages dilution rates within the standard guidelines of 10% of issued ordinary share capital in respect of all employee schemes and 5%
in respect of discretionary schemes. 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 and deferred bonus awards are satisfied through the market purchase of shares held by the Mitie Group plc Employee Benefit Trust. The potential
dilution of the Company’s issued share capital is set out below in respect of all awards granted in the last ten years under the Company’s equity-based
incentive schemes which are being satisfied through the allotment of new shares or treasury shares.
Share dilution at 31 March 2021
All share plans (maximum 10%)
Discretionary share plans (maximum 5%)
Dilution
8.1%
3.9%
SShhaarreehhoollddeerr vvoottiinngg
Mitie remains committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where there are substantial votes against
resolutions in relation to Directors’ remuneration, the Group seeks to understand the reasons for any such vote, and will detail here any actions in
response to it.
A resolution to approve the Directors’ remuneration policy as set out in the Annual Report and Accounts 2018 was passed at the Company’s 2018
AGM. At the Company’s 2020 AGM, a resolution was passed to approve the 2020 Directors’ remuneration report (excluding the summary of the
Directors’ remuneration policy). The results of the votes on these resolutions were as follows:
Number of votes
2018 Directors’ remuneration policy – 2018 AGM
2020 Directors’ remuneration report – 2020 AGM
Votes in favour
Votes against
Withheld¹
276.8m
99.7%
242.9m
96.1%
0.8m
0.3%
9.8m
3.9%
0.1m
–
0.0m
–
Note:
1 Votes withheld are not counted in the calculation of the proportion of votes for or against a resolution.
RReemmuunneerraattiioonn CCoommmmiitttteeee aanndd iittss aaddvviissoorrss
The Remuneration Committee seeks and considers advice from independent remuneration advisors where appropriate.
Deloitte LLP has acted as independent remuneration advisors to Mitie since September 2017. The advisors attended Committee meetings and provided
advice and analysis of executive remuneration. During their tenure, the advisors provide no other services to the Company (save in relation to services
connected to executive remuneration and share plans) and also comply with the Code of Conduct for Remuneration Consultants. The advisors’ total
cost of advice to the Committee for the year was £58,093 (such fees being charged in accordance with their standard terms of business).
The Committee specifically considered the position of the advisors and was satisfied that the advice the Committee received from them was objective
and independent, given that they provided no other services to the Company.
114
111144
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
DDiirreeccttoorrss’’ rreemmuunneerraattiioonn ppoolliiccyy rreeppoorrtt
DDeecciissiioonn--mmaakkiinngg pprroocceessss aanndd cchhaannggeess ttoo tthhee ppoolliiccyy
The following tables and accompanying notes in this section of the report set out the remuneration policy for Executive Directors and Non-Executive
Directors. The policy is intended to apply, subject to approval by shareholders, for three years from the 2021 AGM.
Following a considered decision-making process, changes have been made to the policy approved by shareholders at the 2018 AGM, as detailed in the
Statement from the Remuneration Committee Chair on pages 99 to 101. These include the introduction of post-employment shareholding
requirements, the reduction of pension contribution rates for new Executive Directors in line with the wider workforce rate and (for 2021 only) the
introduction of the one-off Enhanced Delivery Plan. Minor drafting changes have also been made to clarify the Committee’s intentions for the operation
of the policy.
As part of its review the Committee consulted with Mitie's major shareholders and took into account their views when considering changes to the
policy. In addition, the Committee considered the input of the Mitie Group Executive (MGX) (whilst ensuring conflicts of interest were appropriately
mitigated) and its independent advisors (Deloitte LLP).
TThhee ppoolliiccyy
The key elements of the policy, to be approved at the 2021 AGM, are set out below.
PPuurrppoossee aanndd lliinnkk ttoo ssttrraatteeggyy
OOppeerraattiioonn
OOppppoorrttuunniittyy
PPeerrffoorrmmaannccee mmeettrriiccss
BBaassee ssaallaarryy
Set at levels to attract and
retain individuals of the
calibre required to drive the
vision and direction of Mitie.
BBeenneeffiittss
To aid retention and be
competitive within the
marketplace.
AAllll EEmmppllooyyeeee SShhaarree
SScchheemmeess
To provide opportunities
for the Directors to
voluntarily invest in the
Company on the same terms
as other employees.
PPeennssiioonn
To aid retention and
be competitive within
the marketplace
Salaries are generally reviewed annually,
effective from 1 April. The review may
be influenced by:
• the individual’s role, experience and
performance;
• business performance and the wider
market and economic conditions;
• the range of increases across the
Group; and
• an external comparator group
comprised of sector comparators and
size adjusted comparator organisations.
The Group provides a range of benefits
which may include a company car/car
allowance, private fuel, private health
insurance, life assurance and annual leave.
Benefits are reviewed periodically against
market and new benefits may be added
and/or amended as required to support
the attraction and retention of key talent.
Additional benefits may be awarded in
certain recruitment circumstances which
may include relocation expenses and
housing allowance. Other benefits may be
offered if considered appropriate and
reasonable by the Committee.
N/A
Base salary increases will normally be in line
with the average increase for the salaried
non-contract UK employees whose salaries
Mitie determines, although on occasion
other specific circumstances such as
changes of responsibilities, progression in
role, experience or a significant increase
in the scale of the role and/or size, value
and/or complexity of the Group may also
be taken into consideration.
Benefits are set at a level which the
Committee considers:
•
is appropriately positioned against
comparable roles in companies of
a similar size and complexity in the
relevant market; and
• provides a sufficient level of benefit
based on the role and individual
circumstances (e.g. relocation).
The Committee retains discretion to
approve a higher cost than currently
incurred where factors outside the
Company’s control have changed materially
(e.g. medical inflation) or in exceptional
circumstances (e.g. relocation).
Executive Directors are eligible to
participate in any all-employee share plan
operated by the Company, in line with
prevailing HMRC guidelines (where
relevant), on a basis consistent with other
eligible employees.
N/A
Executive Directors are eligible to
participate in the defined contribution
pension scheme or to receive a cash
allowance in lieu of a pension contribution.
The maximum pension contribution or
cash allowance for any newly appointed
Executive Director will be aligned with the
rate available to the wider workforce.
The maximum pension cash allowance for
the incumbent Chief Executive Officer is
currently 20% of base salary and will be
aligned with the rate of the wider
workforce by 1 January 2023. The
maximum pension contribution or cash
allowance for the incumbent Chief Financial
Officer is 3% of base salary, and is aligned
with the wider workforce.
N/A
N/A
N/A
111155
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
Mitie Group plc | Annual Report and Accounts 2021
115
Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn ppoolliiccyy rreeppoorrtt continued
PPuurrppoossee aanndd lliinnkk ttoo ssttrraatteeggyy
OOppeerraattiioonn
OOppppoorrttuunniittyy
PPeerrffoorrmmaannccee mmeettrriiccss
Maximum bonus opportunity is 160% of
base salary for the Chief Executive Officer
and up to 135% of base salary for any
other Executive Director.
Awards may be made up to a maximum
level of 200% of base salary for any
Executive Director.
Bonuses are based on stretching financial
and strategic objectives assessed by the
Committee at the end of the year, with the
underlying aim of encouraging and
rewarding the generation of sustainable
returns to shareholders.
The Committee has discretion to
determine the appropriate weightings each
year depending on business priorities. The
financial measures will represent the
majority of the bonus, with any strategic
objectives representing the balance.
These elements are measured
and calculated independently of
each other.
For the financial element no more than
25% of maximum is normally payable for
threshold performance.
Performance over at least three financial
years is measured against stretching
objectives which have the underlying aim of
encouraging and rewarding the generation
of sustainable returns to shareholders.
Vesting under the LTIP depends on the
achievement of performance conditions.
Awards attributable to each performance
condition vest at 25% on achievement of
the minimum performance threshold, rising
to 100% for achievement of a defined
upper performance level.
Maximum award of up to 640% of base
salary for the Chief Executive Officer and
up to 260% of base salary for the Chief
Financial Officer.
Awards are to be structured as a core
award (up to 160% of base salary for the
Chief Executive Officer and up to 65% of
base salary for the Chief Financial Officer)
with a performance multiplier of up to
four times.
The value of vested shares from this award
will be limited to three times the face value
of these shares at grant.
Awards will vest based on performance
over three years against the following
measures:
• Synergies
• Return on Invested Capital
The vesting of awards is also subject to a
net debt underpin and an absolute share
price underpin.
These measures have the underlying aim of
encouraging and rewarding the generation
of sustainable returns to shareholders.
For achievements at threshold levels of
performance, up to 25% of maximum
under each element may vest, rising to
100% for achievement of exceptional
performance.
N/A
N/A
AAnnnnuuaall BBoonnuuss PPllaann ((AABBPP))
To incentivise and recognise
execution of the Company’s
strategy on an annual basis.
Rewards the achievement
of annual financial and
strategic goals.
Deferral provides alignment
with shareholder interests.
LLoonngg TTeerrmm IInncceennttiivvee PPllaann
((LLTTIIPP))
To motivate and incentivise
delivery of sustained
performance and provide
alignment with shareholder
interests.
EEnnhhaanncceedd DDeelliivveerryy PPllaann
((EEDDPP))
To incentivise and reward the
delivery of benefits from the
acquisition of Interserve
Facilities Management and the
accelerated delivery of
shareholder value.
SShhaarree oowwnneerrsshhiipp
To ensure alignment of
interests between Executive
Directors and shareholders.
Measures and targets are set annually and
pay-out levels are determined by the
Committee after the year-end based
on performance against those targets.
The Committee may, in exceptional
circumstances, amend the bonus pay-out
should this not, in the view of the
Committee, reflect overall business
performance or individual contribution.
50% of the bonus is normally deferred into
shares which vest after a minimum of two
years (subject to continued employment).
Dividend equivalents are paid in cash on
deferred shares which vest.
Malus and clawback provisions apply as
detailed below this table.
Annual awards (in the form of nil-cost
options, conditional share awards or cash
settlements) are made with vesting
dependent upon the achievement of
performance conditions over three years.
Award levels and the framework for
determining vesting are reviewed annually
to ensure they continue to support the
Group’s strategy.
The Committee has the discretion to
decide whether, and to what extent,
targets have been met, and, if an
exceptional event occurs that causes the
Committee to consider that the targets are
no longer appropriate, the Committee may
adjust them.
Awards will normally be subject to
an additional holding period of at least
two years.
Dividend equivalents may be paid on shares
that vest.
Malus and clawback provisions apply as
detailed below this table.
One-off award (in the form of conditional
share awards) to be granted in 2021
subject to approval of the EDP at the
AGM, with vesting dependent upon the
achievement of performance conditions
measured over three years.
Awards will be subject to an additional
holding period of two years.
Dividend equivalents may be paid on shares
that vest.
Malus and clawback provisions apply as
detailed below this table.
Executive Directors are required, over
time, to build and maintain a minimum
shareholding in the Company worth 200%
of base salary.
They are required to retain half of the
post-tax shares vesting under the LTIP
and other share schemes until the guideline
is met.
Executive Directors are normally expected
to maintain a shareholding for two years
following stepping down from the Board,
as described on page 105.
116
111166
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
PPuurrppoossee aanndd lliinnkk ttoo ssttrraatteeggyy
OOppeerraattiioonn
OOppppoorrttuunniittyy
PPeerrffoorrmmaannccee mmeettrriiccss
CChhaaiirrmmaann aanndd NNoonn--
EExxeeccuuttiivvee DDiirreeccttoorr ffeeeess
To attract and retain high-
calibre individuals.
Non-Executive Directors do
not participate in any
incentive schemes.
N/A
Fees are normally reviewed every
three years.
The fee structure is as follows:
• the Chairman is paid an all-inclusive
single fee for all Board responsibilities;
• the Non-Executive Directors are paid a
basic fee, plus additional fees for further
responsibilities, such as the chairing of
Board Committees;
• fees are currently paid in cash but the
Company may choose to provide some
of the fees in shares; and
• benefits, including expenses, can be
provided if considered necessary on
a case-by-case basis.
Fees are set at a level which:
• reflects the commitment and
•
contribution that is expected from the
Chairman and the Non-Executive
Directors; and
is appropriately positioned against
comparator roles in companies of
a similar size and complexity in the
relevant market.
Actual fees are disclosed in the Directors’
remuneration report for the relevant
financial year.
Aggregate fees/value of benefits are
capped at the amount set out in the
Company’s Articles of Association.
MMaalluuss aanndd ccllaawwbbaacckk pprroovviissiioonnss
The malus and clawback provisions under the ABP, the LTIP and the EDP may be operated if it comes to light within two years from vesting that
information used to determine performance was materially inaccurate and resulted in a material overstatement of an award or in the event of any
act/omission by an individual that would give grounds for summary dismissal (with no time limit). For the avoidance of doubt, the clawback provisions
apply to any cash payments made and/or any shares into which bonus is deferred in relation to the ABP, LTIP awards made after the 2021 AGM and/or
the Enhanced Delivery Plan awards.
Clawback provisions are such that:
• cash payment in relation to the ABP can be reclaimed for a period of up to two years after payment; and
• vested share awards under the deferred element of the ABP, LTIP and the EDP can be reclaimed for a period of up to two years after vesting
(effected through the operation of malus provisions during the holding period).
Malus and clawback will apply in four main circumstances:
• misstatement of results or an error in the calculation of performance;
• misconduct;
• reputational damage; or
• failure of risk management or control.
DDiissccrreettiioonnss rreettaaiinneedd iinn ooppeerraattiinngg tthhee iinncceennttiivvee ppllaannss
The Committee will operate the ABP, LTIP and EDP according to their respective rules and the above policy table. The Committee retains discretion,
consistent with market practice, in a number of respects, in relation to the operation and administration of these plans.
These discretions include, but are not limited to, the following:
• the selection of participants;
• the timing of grant of an award/bonus opportunity;
• the size of an award/bonus opportunity subject to the maximum limits set out in the policy table;
• the determination of performance against targets and resultant vesting/bonus pay-outs;
• discretion required when dealing with a change of control or restructuring of the Group;
• determination of the treatment of leavers based on the rules of the plan and the appropriate treatment chosen;
• adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events and special dividends); and
• the annual review of performance measures, weightings and targets.
In relation to the ABP, the LTIP and the EDP, the Committee retains the ability to adjust the targets and/or set different measures if events occur
(e.g. material acquisition and/or divestment of a Group business) which cause it to determine that the conditions are no longer appropriate and the
amendment is required so that the conditions achieve their original purpose and are not materially less difficult to satisfy. Any use of these discretions
would, where relevant, be explained in the Directors’ remuneration report and may, where appropriate and practicable, be the subject of consultation
with the Company’s major shareholders.
LLeeggaaccyy ccoommmmiittmmeennttss
The Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available
to it in connection with such payments) notwithstanding that they are not in line with the policy set out in this report where the terms of the payment
were agreed (i) before the date Mitie’s first shareholder-approved Directors’ remuneration policy came into effect; (ii) before the policy set out in this
report comes into effect, provided that the terms of the payment were consistent with the shareholder-approved Directors’ remuneration policy in
force at the time they were agreed or were otherwise approved by shareholders; or (iii) at a time when the relevant individual was not a Director (or
other person to whom this policy applies) and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a
Director or such other person. For these purposes ‘payments’ includes the Committee satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are ‘agreed’ at the time the award is granted. This policy applies equally to any individual who is required
to be treated as a Director under the applicable regulations.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
117
111177
Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn ppoolliiccyy rreeppoorrtt continued
RReemmuunneerraattiioonn sscceennaarriiooss ffoorr EExxeeccuuttiivvee DDiirreeccttoorrss
Under the Company’s policy, a significant proportion of remuneration is linked to performance. The charts below show how much the Executive
Directors could earn under Mitie’s remuneration policy (as detailed above) under different performance scenarios. The following assumptions have
been made:
• minimum performance (below threshold) – fixed pay only, comprising base salary effective as at 1 April 2021 and the full year effect of ongoing
benefits and cash allowances in lieu of pension contributions;
• on-target performance – fixed pay plus an on-target bonus and 25% of the maximum possible LTIP award vesting and a multiplier of 1x for the EDP
award vesting. On-target bonus for FY22 represents 50% of the maximum bonus; and
• maximum performance – fixed pay plus maximum bonus for FY22 of 160% of base salary for the Chief Executive Officer and 130% for the Chief
Financial Officer (structured 70% financial targets and 30% strategic/other), maximum LTIP awards (of 200% of base salary for the Chief Executive
Officer and 150% for the Chief Financial Officer) and the maximum multiplier of 4x for the EDP award vesting (i.e. 640% of base salary for the Chief
Executive Officer and 260% of base salary for the Chief Financial Officer).
• maximum performance with share price appreciation – as per maximum performance with illustrative share price appreciation of 50% on the LTIP
and EDP elements.
The scenarios do not include dividend assumptions.
PPhhiill BBeennttlleeyy,, CChhiieeff EExxeeccuuttiivvee OOffffiicceerr ((££’’000000))
SSiimmoonn KKiirrkkppaattrriicckk,, CChhiieeff FFiinnaanncciiaall OOffffiicceerr ((££’’000000))
Minimum
1,101
On-target
1,101
720 450 1,440
Maximum
Minimum
372
On-target
372
228
131 228
Maximum
1,101
1,440
1,800
5,760
372
455
525
910
Maximum with share price appreciation
Maximum with share price appreciation
1,101
1,440
2,700
8,640
372
455
788
1,365
0
3,000
6,000
Fixed
Bonus
LTIP
9,000
EDP
12,000
15,000
0
500
1,000
1,500
2,000
2,500
3,000
Fixed
Bonus
LTIP
EDP
Composition of
package (%)
Minimum
On-target
Maximum
Maximum with
share price
appreciation
Fixed
ABP
LTIP
EDP
TToottaall
Composition of
package (%)
Fixed
ABP
LTIP
EDP
TToottaall
100%
30%
11%
8%
–
19%
14%
10%
–
12%
18%
20%
–
39%
57%
62%
110000%%
Minimum
110000%%
On-target
110000%%
Maximum
110000%%
Maximum with
share price
appreciation
100%
39%
17%
13%
–
24%
20%
15%
–
13%
23%
26%
–
24%
40%
46%
110000%%
110000%%
110000%%
110000%%
Value of
package (£’000)
Fixed
Minimum
1,100,625
ABP
–
LTIP
–
EDP
TToottaall
Value of
package (£’000)
Fixed
–
11,,110000,,662255
Minimum
372,070
ABP
–
LTIP
–
EDP
TToottaall
–
337722,,007700
On-target
1,100,625
720,000
450,000
1,440,000
33,,771100,,662255
On-target
372,070
227,500
131,250
227,500
995588,,332200
Maximum
1,100,625
1,440,000
1,800,000
5,760,000 1100,,110000,,662255
Maximum
372,070
455,000
525,000
910,000
22,,226622,,007700
Maximum with
share price
appreciation
1,100,625
1,440,000
2,700,000
8,640,000 1133,,888800,,662255
Maximum with
share price
appreciation
372,070
455,000
787,500
1,365,000
22,,997799,,557700
EExxeeccuuttiivvee DDiirreeccttoorrss’’ sseerrvviiccee ccoonnttrraaccttss
All Executive Directors are appointed on rolling service contracts but are subject to annual re-election at the AGM in accordance with the Code.
Under the service contracts, the Company is required to give 12 months’ notice of termination of employment; Phil Bentley and Simon Kirkpatrick are
required to give 12 months’ notice.
For Executive Directors, if notice is served by either party, the Executive Director can continue to receive base salary, benefits and pension cash
allowance for the duration of their notice period during which time the Company may require the individual to continue to fulfil their current duties or
may assign a period of garden leave.
The Company has the right to make a payment in lieu of notice equivalent in value up to 12 months’ base salary payable either in monthly instalments or
as a lump sum. The Company may also pay for any benefits, pension contributions or cash allowances for which the individual would have been eligible
until the date of cessation had full notice been given.
The Executive Directors’ service contracts are available for inspection at Mitie’s registered office, Mitie’s head office and at the 2021 AGM. There are no
other provisions for compensation on termination of employment set out within the contracts of the Executive Directors.
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For any newly appointed Executive Directors, notice periods will not exceed 12 months, save in exceptional circumstances; should a notice period
longer than 12 months be necessary the Committee would expect this to reduce to 12 months over time.
The effective dates of the service contracts of the current Executive Directors are set out below:
Phil Bentley
Simon Kirkpatrick
Date of agreement
9 October 2016
1 April 2021
EExxtteerrnnaall aappppooiinnttmmeennttss
The Board recognises that the appointment of Executive Directors to non-executive positions at other companies can be beneficial for both the
individual director and the Group through the broadening of their experience and knowledge, and individuals are entitled to retain any fees earned in
respect of these appointments.
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss’’ rreemmuunneerraattiioonn aanndd aappppooiinnttmmeenntt tteerrmmss
The Chairman and Non-Executive Directors receive an annual fee which is paid in monthly instalments. The Chairman’s fee is set by the Remuneration
Committee and the fees for the Non-Executive Directors are approved by the Board, on the recommendation of the Chairman and the Chief
Executive Officer. The Non-Executive Directors are paid a basic fee with an additional fee for the Senior Independent Director, for chairing a
Committee, and for being the Designated Non-Executive Director responsible for oversight of the Board's engagement with the workforce, 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, ABP or the pension scheme. They do not receive any ancillary benefits.
The terms of appointment of the Non-Executive Directors are available for inspection at Mitie’s registered office, Mitie’s head office and at the 2021
AGM. The Non-Executive Directors are engaged for an initial term of three years which is terminable on three months’ notice and thereafter on a
rolling term. They are also subject to annual re-election at the AGM in accordance with the Code.
NNoonn--EExxeeccuuttiivvee DDiirreeccttoorrss’’ eennggaaggeemmeenntt tteerrmmss
The engagement terms of the current Non-Executive Directors are set out below:
Derek Mapp
Roger Yates
Jennifer Duvalier
Mary Reilly
Nivedita Krishnamurthy Bhagat
Additional duties
Chairman; Chairman of Nomination Committee
Senior Independent Director
Chair of Remuneration Committee
Chair of Audit Committee
Date of
commencement
Initial contract
term
Notice
period
9 May 2017
1 March 2018
26 July 2017
1 September2017
1 June 2017
3 years
3 years
3 years
3 years
3 years
3 years
3 months
3 months
3 months
3 months
3 months
3 months
Baroness Philippa Couttie
Chair of Social Value and Responsible Business Committee
15 November 2017
HHooww tthhee eexxeeccuuttiivvee ppaayy ppoolliiccyy ddiiffffeerrss ffrroomm tthhaatt ffoorr ootthheerr MMiittiiee eemmppllooyyeeeess
The remuneration policy for the Executive Directors is significantly more heavily weighted towards variable pay than for other employees, ensuring that
the greater part of their pay is conditional on the successful delivery of the Group’s business strategy. This helps create a clear link between the value
created for shareholders and the remuneration received by the Directors. Awards under the LTIP and EDP are limited to those in the most senior
leadership roles. For employees below this level, variable pay may consist of share-based awards and annual bonus (both of which will be based on role).
UK-based employees (and Ireland-based employees in the case of the SAYE) have the opportunity to participate in the SAYE and SIP share schemes
and become shareholders in Mitie. From summer 2021 the offering of the SIP share scheme will be enhanced to provide employees with a greater
incentive to invest in Mitie shares, and free shares have been awarded to UK-based employees. Mitie is currently reviewing extending the free shares
principle to employees in other countries.
HHooww eemmppllooyymmeenntt ccoonnddiittiioonnss eellsseewwhheerree iinn tthhee GGrroouupp aarree ttaakkeenn iinnttoo aaccccoouunntt
The Committee is responsible for overseeing the remuneration policy for the Group as a whole and is mindful of pay and employment conditions in
the wider workforce within the Group and externally when determining executive remuneration. When considering base salary increases, benefits
and pension provision, the Committee reviews overall levels and increases offered to employees across the Group. The Committee also reviews
information with regard to share awards made to other senior management of the Group, noting that: (i) all UK-based employees (and Ireland-based
employees in the case of the SAYE) can participate in the SAYE and SIP share schemes; and (ii) participation in the LTIP and EDP is limited to a selection
of senior executives.
HHooww sshhaarreehhoollddeerr vviieewwss aarree ttaakkeenn iinnttoo aaccccoouunntt
The Committee is committed to a continuing discussion with major shareholders and obtains their views when any significant changes to remuneration
arrangements are being proposed. The Committee has undertaken an extensive two-stage consultation process to discuss the proposed changes to the
Remuneration Policy, including the introduction of the EDP. Initially the Committee discussed the proposals with the Company’s largest shareholders
and, after refining them taking into account the feedback from this initial consultation, returned to a larger group of shareholders to obtain a wider
range of views. The Committee was pleased that shareholders were broadly supportive of the proposals.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreemmuunneerraattiioonn ppoolliiccyy rreeppoorrtt continued
PPoolliiccyy oonn lloossss ooff ooffffiiccee
The rules of the ABP, LTIP and EDP set out what happens to awards if a participant ceases to be an employee or Director of Mitie before the end of
a vesting period, with the relevant service contracts also determining the general treatment of Executive Directors on cessation.
Regarding the ABP, in the event that the participant ceases to be an eligible employee before the date the bonus is paid or is subject to notice of
termination of employment on the bonus date, all entitlement to the bonus in respect of that financial year would be forfeited, unless the Committee in
its absolute discretion determines otherwise. Deferred shares would vest in full on the date of cessation for ‘good leaver’ reasons, but otherwise the
shares lapse on cessation of employment.
Generally, any outstanding LTIP and EDP awards would lapse on cessation of employment, except in certain circumstances. Specifically, if the participant
ceases to be an employee or Director of Mitie as a result of death, injury, disability, redundancy, retirement, the sale of the business or company that
employs the individual or any other reason at the discretion of the Committee, then they would be treated as a ‘good leaver’ under the LTIP and EDP
rules in which case awards subsist subject to any performance conditions and any applicable holding period and, if the Committee determines, a pro-rata
reduction. A good leaver has a 12-month period following the cessation of employment or the end of the holding period if applicable, in which to
exercise their vested awards.
In addition, and consistent with market practice, in the event of termination of an Executive Director’s employment, the Company may settle any claims
that may arise and pay a contribution towards the individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such
fees would be disclosed as part of the detail of termination arrangements. Should it become necessary to make additional payments in respect of such
professional fees that were not ascertained at the time of reporting, the Company may do so up to a level of a further £10,000. For the avoidance of
doubt, the policy does not include an explicit cap on the cost of termination payments.
PPoolliiccyy oonn tthhee rreeccrruuiittmmeenntt ooff aa nneeww DDiirreeccttoorr
For a new hire, the Committee will typically align the Executive Director’s remuneration package to the above remuneration policy. However, where
appropriate, the Committee retains discretion to make decisions outside of policy to facilitate hiring key talent as set out below.
Base salary will be set based on the individual’s role and experience, with consideration given to internal equity.
Benefits will be provided in line with those offered to other employees at a similar level, with relocation expenses/arrangements provided if necessary.
Individuals will be given a choice of either participation in a defined contribution pension scheme or a cash allowance in lieu of pension, with a maximum
pension contribution or cash allowance set in line with the rate available to the wider workforce.
The maximum level of variable pay that may be offered on an ongoing basis and the structure of remuneration will be in accordance with the approved
policy detailed above (i.e. for the Chief Executive Officer an aggregate maximum of 360% of base salary – 160% annual bonus and up to 200% for LTIP
awards; and, for any other Executive Director an aggregate maximum of 335% of base salary – 135% annual bonus and up to 200% for LTIP awards).
This limit does not include the value of buyout arrangements.
The above policy applies to both internal promotions to the Board and external hires. For external hires, if it is necessary to buy out existing incentive
pay or benefit arrangements (which would be forfeited on leaving their previous employer), this would be provided taking into consideration relevant
factors such as the commercial value of the amount forfeited from the previous employer, the performance conditions (i.e. the likelihood of achieving
those) and timing (i.e. where the award is in the vesting cycle). Buyout awards, if used, would be granted under Mitie’s existing share plans, although, if
necessary, additional buyout awards may be made on more bespoke terms regarding matters such as vesting and performance conditions as permitted
under Listing Rule 9.4.2.
In the case of an internal promotion to the Board, any outstanding variable pay awarded in relation to the individual’s previous role will be allowed to
pay out according to its terms of grant.
On appointment of a new Chairman or Non-Executive Director, his or her fee will be set taking into account the existing fee structure.
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
SSoocciiaall VVaalluuee && RReessppoonnssiibbllee
BBuussiinneessss CCoommmmiitttteeee rreeppoorrtt
Report from the
Social Value &
Responsible Business
Committee Chair
SSoocciiaall VVaalluuee && RReessppoonnssiibbllee BBuussiinneessss CCoommmmiitttteeee
mmeemmbbeerrss
At the date of this report and throughout FY21, the Social Value &
Responsible Business Committee comprised:
CChhaaiirr
Baroness Couttie
CCoommmmiitttteeee mmeemmbbeerrss
Peter Dickinson, Chief of Staff,
General Counsel & Company
Secretary
Colin Dobell, Managing Director of
Care & Custody
(until 22 September 2020)
Kath Fontana, Managing Director,
Public Sector, Critical Infrastructure
& Projects
Jasmine Hudson, Group HR Director
Simon King, Director of Sustainability
& Social Value
Claire Lovegrove, Head of Media
Relations
Jason Towse, Managing Director,
Business Services
Simon Venn, Chief Government
& Strategy Officer
SSoocciiaall VVaalluuee CCoommmmiitttteeee && RReessppoonnssiibbllee BBuussiinneessss
CCoommmmiitttteeee mmeeeettiinnggss
The Social Value & Responsible Business Committee met seven
times during FY21. Baroness Couttie attended all meetings as
detailed on page 83.
KKeeyy ppuurrppoossee ooff tthhee SSoocciiaall VVaalluuee && RReessppoonnssiibbllee
BBuussiinneessss CCoommmmiitttteeee
The purpose of the Social Value & Responsible Business Committee is
to provide oversight and governance for all of Mitie’s social value and
responsible business initiatives, ensuring they are aligned to Mitie’s
Purpose, Promises and Values.
KKeeyy rreessppoonnssiibbiilliittiieess ooff tthhee SSoocciiaall VVaalluuee && RReessppoonnssiibbllee
BBuussiinneessss CCoommmmiitttteeee
The key responsibilities of the Social Value & Responsible Business
Committee include:
• Drive the social value and responsible business agenda on behalf
of the Group
• Ensure that the Group conducts its business in a commercially
responsible way to achieve maximum positive impact on the
communities, people and the environment in which it works
• Benefit Mitie’s customers, staff and shareholders
The Social Value & Responsible Business Committee
Terms of Reference are available at
wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--ggoovveerrnnaannccee.
KKeeyy aaccttiivviittiieess dduurriinngg tthhee yyeeaarr
EEmmbbeeddddeedd ggoovveerrnnaannccee ssttrruuccttuurreess
The Social Value & Responsible Business Committee met more
frequently during FY21 reflecting the importance of this area to Mitie’s
business. The bi-monthly meetings also support effective updates on
progress from Baroness Couttie at each Board meeting.
The Committee reviewed the progress of the Plan Zero Steering Group
and Plan Zero Working Group which were created to oversee the
successful implementation of the three aspects of Plan Zero of ‘doing it
ourselves’, ‘leading the industry’ and ‘delivering for clients’. In addition, at
two meetings the Committee reviewed Mitie’s Climate Change Risk
Assessment document, which captures climate-related risks and
opportunities in line with the Taskforce on Climate-related Financial
Disclosures (TCFD) recommendations.
DDeevveellooppeedd EEnnvviirroonnmmeennttaall,, SSoocciiaall aanndd GGoovveerrnnaannccee
((EESSGG)) ppeerrffoorrmmaannccee
During FY21 the Committee reviewed proposed activities to improve
Mitie’s ESG scores from a number of ESG rating agencies. These
activities when implemented successfully improved Mitie’s scores with
several agencies. This includes Sustainalytics whose rating for Mitie
moved to ‘Negligible’ risk and resulted in Mitie ranking as the Number 1
in the Business Support Services sector business globally in the January
2021 report. Mitie's CDP rating improved from C to an A- Leadership
rating in December 2020 and MSCI also increased its score from A to
AA in the same month.
Integral to the ESG development activities was internal and external
communication of Mitie’s strategy and approach to social value and
Plan Zero. Webinars for both employees and external attendees have
been run as well as sessions with clients to share Mitie’s performance
and plans.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements SSoocciiaall VVaalluuee && RReessppoonnssiibbllee BBuussiinneessss CCoommmmiitttteeee rreeppoorrtt continued
The Committee has overseen significant progress across all aspects
of ESG, including Mitie’s Social Value Framework and Plan Zero.
Details of the progress made is included in the ESG section of the
Annual Report on pages 30 to 41 as well as being referenced in the
Chairman's statement and Chief Executive's strategic review on
pages 7 and 20 respectively.
PPrrooggrreessss oonn PPllaann ZZeerroo
During FY21, Mitie made significant progress on transitioning its fleet to
electric vehicles (EV) with its 1,000th EV being delivered, making Mitie’s
the largest pure electric fleet in the UK. Mitie also completed a desktop
analysis of all sites and a physical survey of the 15 main sites, resulting in
energy optimisation interventions which will reduce emissions by an
estimated 300 tonnes of CO2 annually. In addition to carbon emission
savings, 228 tonnes of waste was diverted from landfill to energy from
waste during FY21.
Mitie’s leadership position has been recognised by winning both the
GreenFleet Private Sector Fleet of the Year (medium/large) and
Business Car Green Fleet of the Year awards, as well as being shortlisted
for the Business of the Year award at the edie Sustainability Leader
Awards. Mitie was also invited to join Aldersgate Group, one of the UK’s
leading sustainability organisations, driving policy and debate regarding
environmental issues in the UK.
The Committee reviewed and approved the Plan Zero Playbook which
lays out the ‘A to E’ methodology Mitie uses to deliver Plan Zero
solutions for its clients. The delivery of Plan Zero has grown throughout
the year with a pipeline of over £60m as at 31 March 2021.
On the anniversary of Plan Zero in February 2021 at a Group-wide
celebration event Plan Zero was extended to encompass a target of net
zero for Mitie’s relevant scope 3 emissions by 2035. This commitment is
part of Business Ambition for 1.5°C aligned with the Science Based
Targets initiative and Race to Zero.
SSttrroonngg pprrooggrreessss oonn SSoocciiaall VVaalluuee ttaarrggeettss
Building on the four social value targets set in Spring 2020 a total of
13 social value targets have now been agreed and published. Strong
progress has been made across these targets in FY21 including 3.6% of
employees either on or having completed an apprenticeship (compared
to a 2.3% baseline), over 8,000 volunteering hours achieved (compared
to 3,032 hours baseline) and emissions for Mitie (excluding Interserve
Facilities Management) down 29% versus baseline, all of which is
captured in the Mitie Social Value & Responsible Business Dashboard
which was first published in December 2020. This dashboard shows
Mitie’s progress against these 13 targets and is published monthly
on www.mitie.com/esg providing public transparency on targets
and performance.
The Mitie Foundation relaunched its strategy & purpose and embraced
a change from face-to-face delivery to virtual delivery programmes to
maintain employability and development sessions during the COVID-19
pandemic. Supporting candidates through its referral partners and in
partnership with Mitie clients, the Foundation has delivered nine Virtual
Employability Workshops with over 100 candidates benefiting from the
sessions. In addition, Mitie’s Giving Back programme has surpassed its
FY21 target of 8,000 hours volunteered to causes by Mitie colleagues.
To support the wider Social Value and Diversity & Inclusion Agenda
within Mitie, Foundation candidates have been encouraged to apply
for Mitie opportunities, with over 145 gaining employment within
Business Services.
In September 2020, the second Mitie Social Value Report was published,
setting out the social value targets for FY21 and milestones by year until
FY25 and reporting significant progress over the previous 12 months.
BBaarroonneessss CCoouuttttiiee
Chair of the Social Value & Responsible Business Committee
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
DDiisscclloossuurree CCoommmmiitttteeee rreeppoorrtt
Report from the
Disclosure
Committee Chair
DDiisscclloossuurree CCoommmmiitttteeee mmeemmbbeerrss
At the date of this report and throughout FY21, the Disclosure
Committee comprised:
CChhaaiirr
Phil Bentley
CCoommmmiitttteeee mmeemmbbeerrss
Derek Mapp
Simon Kirkpatrick
(from 1 April 2021)
Peter Dickinson
Andrew Peeler
(until 31 March 2021)
Katherine Woods, Deputy
General Counsel
DDiisscclloossuurree CCoommmmiitttteeee mmeeeettiinnggss
The Disclosure Committee meets on an ad hoc basis. During
FY21, the Disclosure Committee met twice.
KKeeyy ppuurrppoossee ooff tthhee DDiisscclloossuurree CCoommmmiitttteeee
The Disclosure Committee assists and informs the decisions of the
Board concerning the identification of inside information and makes
recommendations about how and when the Company should disclose
that information in accordance with the Company’s disclosure policy.
KKeeyy rreessppoonnssiibbiilliittiieess ooff tthhee DDiisscclloossuurree CCoommmmiitttteeee
The key responsibilities of the Disclosure Committee include:
• Monitor whether there are changes in circumstances that may require
an announcement
• Make recommendations to the Board concerning the identification
of inside information
• Make recommendations to the Board regarding how and when
the Company should disclose inside information
• Maintain a record of matters considered for disclosure but
not disclosed
• Maintain a record of the Company’s public disclosures
KKeeyy aaccttiivviittiieess dduurriinngg tthhee yyeeaarr
The Committee met twice during the year in connection with the
acquisition of Interserve Facilities Management.
PPhhiill BBeennttlleeyy
Chair of the Disclosure Committee
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
123
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreeppoorrtt:: ootthheerr ddiisscclloossuurreess
Directors’
report
The Directors present their Annual Report, together with the audited financial statements of the Company and the Group, for the year ended
31 March 2021.
The Directors’ report required under the Companies Act 2006 comprises the corporate governance statement on pages 68 to 93. The corporate
governance statement on pages 68 to 93 fulfils the requirement under Disclosure Guidance and Transparency Rules of the Financial Conduct Authority
(DTR) 7.2.1.
For the purposes of DTR 4.1.8R, the management report for the year ended 31 March 2021 comprises the Strategic report and this Directors’ report.
CCrroossss--rreeffeerreenncceess
EEmmppllooyyeeee eennggaaggeemmeenntt
Details of how Mitie encourages employee involvement can be found in the Strategic report
on pages 38 to 40.
DDiivveerrssiittyy aanndd iinncclluussiioonn ((iinncclluuddiinngg eemmppllooyymmeenntt
ooff ddiissaabblleedd ppeerrssoonnss))
Details of Mitie’s commitment to diversity and inclusion, including in relation to the employment
of disabled persons, can be found on page 38.
BBuussiinneessss rreellaattiioonnsshhiippss
Details of how the Directors have had regard to the need to foster Mitie's business relationships with
suppliers, customers and others, and the effect of this on the principal decisions taken by the Company
during the year can be found in the Strategic report on pages 42 to 45.
The information required to be disclosed by Listing Rule 9.8.4 can be found in the following locations:
DDeettaaiillss ooff aannyy lloonngg--tteerrmm iinncceennttiivvee sscchheemmeess
Directors’ remuneration report on pages 99 to 120 and Note 31 to the consolidated financial statements
DDeettaaiillss ooff aannyy aarrrraannggeemmeennttss uunnddeerr wwhhiicchh aa DDiirreeccttoorr
hhaass wwaaiivveedd oorr aaggrreeeedd ttoo wwaaiivvee aannyy eemmoolluummeennttss oorr
ffuuttuurree eemmoolluummeennttss
Directors’ remuneration report on page 112
SShhaarreehhoollddeerr wwaaiivveerr ooff ddiivviiddeennddss aanndd ffuuttuurree ddiivviiddeennddss
Directors’ report on page 127
No shareholder is considered a controlling shareholder as defined in the Financial Conduct Authority Handbook.
The remaining disclosures required by LR 9.8.4 are not applicable to the Company.
PPrriinncciippaall GGrroouupp aaccttiivviittiieess
The Company is the holding company of the Group and its principal activity is to provide management services to the Group. The Group’s activities are
focused on the provision of strategic outsourcing services, further details of which can be found on pages 4 to 5 of the Strategic report.
The Company does not have any branches registered overseas, but certain subsidiaries of the Company have registrations/branches across the United
Kingdom, Republic of Ireland, Guernsey, Jersey, Isle of Man, Ascension Island, Austria, Belgium, Cyprus, Czech Republic, Denmark, Falkland Islands,
Finland, France, Germany, Ghana, Gibraltar, Hungary, Kenya, Luxembourg, the Netherlands, Nigeria, Norway, Oman, Poland, Saudi Arabia, Singapore,
Slovakia, Spain, Sweden, Switzerland and the United Arab Emirates. Details of the Company’s subsidiaries are set out in Note 37 to the consolidated
financial statements.
Given the nature of its activities, no material research and development work is carried out by the Group.
The Board’s view on the likely future development of the Group is set out in the Strategic report on pages 12 to 13.
AArrttiicclleess ooff AAssssoocciiaattiioonn
The Company’s Articles of Association (the Articles) were adopted at the 2017 AGM. Amendments to the Articles must be approved by at least 75%
of those voting in person or by proxy at a general meeting of the Company. The Articles are available at wwwwww..mmiittiiee..ccoomm//iinnvveessttoorrss//ccoorrppoorraattee--
ggoovveerrnnaannccee. A resolution to update the Articles will be put to shareholders at the 2021 AGM. Further details can be found in the notes to the relevant
meeting notice which will be published on Mitie's website www.mitie.com.
SSiiggnniiffiiccaanntt aaggrreeeemmeennttss –– cchhaannggee ooff ccoonnttrrooll
There are a number of agreements with provisions that take effect, alter or terminate upon a change of control of the Company (including following
a takeover bid), such as bank facility agreements and other financial arrangements and employee share scheme rules. None of these are considered to
be significant in terms of their likely impact on the normal course of business of 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 change
of control.
GGrreeeennhhoouussee ggaass eemmiissssiioonnss,, eenneerrggyy ccoonnssuummppttiioonn aanndd eeffffiicciieennccyy
Details of Mitie’s absolute emissions and emissions ratio can be found in the ESG report within the Strategic report on pages 30 to 41. Further
information on the calculations can be found in the Greenhouse gas (GHG) methodology statement available on Mitie's website at www.mitie.com/esg.
124
Mitie Group plc | Annual Report and Accounts 2021
EEnnvviirroonnmmeennttaall ddaattaa
Details on the Group’s environmental performance, including landlord sites, can be found in the table below:
FY20
FY21
Change from
previous year
% Change against
FY20
EEnneerrggyy
Electricity consumed across occupied buildings (kWh)
Gas consumed across occupied buildings (kWh)
Fuel used by fleet for business travel (kWh)
Electricity used by EV fleet for business travel (kWh)
4,017,361
3,508,404
2,995,119
-1,022,242
2,704,585
-803,819
113,332,840
85,980,058
-27,352,782
195,356
259,495
64,139
TToottaall oorrggaanniissaattiioonnaall eenneerrggyy ccoonnssuummppttiioonn ((kkWWhh))
112211,,005533,,996611
9911,,993399,,225577
--2299,,111144,,770044
WWaatteerr
-25%
-23%
-24%
33%
--2244%%
Water consumed across occupied buildings (m3)
34,591
26,699
-7,892
-23%
WWaassttee
Total waste to landfill (tonnes)
Energy from waste (tonnes)
Total waste recycled (tonnes)
TToottaall wwaassttee ggeenneerraatteedd aaccrroossss ooccccuuppiieedd bbuuiillddiinnggss ((ttoonnnneess))
Recycling rate
376
–
366
774422
49%
12
85
224
332211
70%
-364
85
-142
--442211
-97%
-39%
--5577%%
• Reported data covers company emissions and energy consumption that occurs within the UK for Mitie excluding Interserve, Interserve data will be
included from FY22 onwards.
• Refrigerant data has been excluded due to challenges obtaining accurate data on landlord managed sites, this is considered immaterial.
• Total greenhouse gas (GHG) emissions are reported using the financial control approach.
• Mitie's methodology aligns with Defra's Environmental reporting guidelines and uses the government’s greenhouse gas reporting conversion factors
to quantify emissions.
DDiirreeccttoorrss
The names of all persons who served as Directors of the Company at any time during FY21 are set out on page 82. Full biographical details of the
current Directors, including Committee membership and external appointments, are set out on pages 69 to 71.
DDiirreeccttoorr iinnddeeppeennddeennccee
The Board considered the independence of all Non-Executive Directors during FY21 and determined that, as at 31 March 2021, all Non-Executive
Directors continued to be independent in mind and judgement, and free from any material relationship that could interfere with their ability to
discharge their duties effectively.
IInnddeemmnniiffiiccaattiioonn ooff DDiirreeccttoorrss aanndd iinnssuurraannccee
The Directors and the Company Secretary benefit from an indemnity provision under the Articles. Additionally, all Directors and the Chief of Staff,
General Counsel & Company Secretary have been granted a qualifying third-party indemnity provision (as defined by Section 234 of the Companies Act
2006) which has been in force throughout FY21 and remains in force as at the date of this report.
Certain subsidiary directors have also been granted a qualifying third-party indemnity provision which has been in force throughout FY21 and remains in
force as at the date of this report.
The Group maintains directors’ and officers’ liability insurance which provides appropriate cover for any legal action brought against the Group’s
directors and/or officers. The Group also maintains Pension Trustees Liability insurance which provides cover in respect of legal action brought against
the trustees of Mitie's pension schemes.
SShhaarree ccaappiittaall
The Group is financed through equity share capital and debt instruments. Details of the Company’s share capital are given in Note 28 to the
consolidated financial statements. Details of the Group’s debt instruments are set out in Note 24 to the consolidated financial statements. Throughout
the year, the Company's issued share capital was publicly listed on the London Stock Exchange and it remains so as at the date of this report.
The Company has a single class of shares divided into ordinary shares of 2.5 pence each (Ordinary Shares). The Ordinary Shares are entitled to one
vote each per share at general meetings and have no right to any fixed income.
In accordance with 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 to shareholders for approval at an AGM. A final dividend
may be declared by the shareholders at an AGM by ordinary resolution, but such dividend cannot exceed the amount recommended by the Board.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreeppoorrtt:: ootthheerr ddiisscclloossuurreess continued
PPoowweerrss ooff tthhee CCoommppaannyy ttoo iissssuuee oorr bbuuyy bbaacckk iittss oowwnn sshhaarreess
During FY21 the Company allotted 1,053,465,954 new Ordinary Shares as detailed below.
• As approved by the Company's shareholders at a General Meeting held on 13 July 2020, 805,069,771 new Ordinary Shares were issued on 29 July
2020 in connection with the rights issue offered to existing shareholders on the basis of 11 new shares for every 5 fully-paid Ordinary Shares held.
• As approved by the Company's shareholders at a General Meeting held on 23 November 2020, 149,017,301 new Ordinary Shares were issued to
How Group Limited and 99,378,882 new Ordinary shares were issued to Project County SPV I Designated Activity Company on 1 December 2020
in connection with, and as part consideration for, the acquisition of Interserve.
The Company did not undertake any market purchases of its own shares or distribute any shares from treasury during FY21. Exercisable awards under
the Mitie Group plc 2011 SAYE scheme and Mitie Group plc 2001 and 2011 Executive Share Option schemes were underwater during FY21 and no
awards were exercised.
The total number of Ordinary Shares held by the Company in treasury as at 31 March 2021 was 7,744,359, representing 0.5% of the issued share capital
of the Company (2020: 7,744,359, representing 2.1% of the issued share capital of the Company).
At the AGM held on 28 July 2020, shareholders authorised:
• The Directors to allot Ordinary Shares up to an aggregate nominal amount of £914,852.01, equating to 10% of the issued share capital of the
Company (excluding treasury shares) as at 22 June 2020
• The dis-application of pre-emption rights over allotted shares up to an aggregate nominal value of £457,426.01, equating to 5% of the issued share
capital (excluding treasury shares) and 4.9% of the issued share capital (including treasury shares) of the Company, each as at 22 June 2020
• The dis-application of pre-emption rights over allotted shares up to an aggregate nominal value of £457,426.01, equating to 5% of the issued share
capital (excluding treasury shares) and 4.9% of the issued share capital (including treasury shares) of the Company, each as at 22 June 2020, in
connection with the financing (or refinancing, if the authority is to be used within six months after the original transaction) of an acquisition or
specified capital investment which is announced contemporaneously with the allotment or which has taken place in the preceding six month period
and is disclosed in the announcement of the allotment
• The Company to make market purchases of its own shares up to a total of 36,594,081 Ordinary Shares, equating to 10% of the issued share capital
(excluding treasury shares) of the Company as at 22 June 2020
These authorities will expire on the earlier of 30 September 2021 or the conclusion of the 2021 AGM. A renewal of these authorities will be put to
shareholders at the 2021 AGM. Further details can be found in the notes to the relevant meeting notice which can be found on Mitie’s website.
RReessttrriiccttiioonnss oonn tthhee ttrraannssffeerr ooff sshhaarreess
The Ordinary Shares held by Project County SPV I Designated Activity Company are subject to the terms of the Share Box Agreement (as further
described in the circular issued to shareholders on 4 November 2020 in connection with the acquisition of Interserve by the Company), pursuant to
which the voting rights attaching to the Ordinary Shares held by Project County SPV I Designated Activity Company are to be exercised by How Group
Limited and How Group Limited will be able to extract amounts in respect of dividends attaching to such Ordinary Shares (subject to certain
restrictions under the Share Box Agreement) for such time as the Ordinary Shares are held by Project County SPV I Designated Activity Company.
The Company is not aware of any other agreements between holders of its securities which may result in restrictions on the transfer of securities or
voting rights. No person has any special rights of control over the Company’s share capital.
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.
Under Mitie’s Rules on Share Dealing, persons with access to certain confidential company information or inside information are required to follow a
clearance to deal procedure and may be restricted from dealing in the Company’s shares. Persons subject to these requirements are notified individually
and appropriately informed of the rules.
SSiiggnniiffiiccaanntt iinntteerreessttss iinn tthhee CCoommppaannyy’’ss sshhaarree ccaappiittaall
As at 31 March 2021 insofar as it is known to the Company by virtue of notifications made pursuant to the Companies Act 2006 and/or Chapter 5 of
the Disclosure Guidance and Transparency Rules or otherwise, the following persons were directly or indirectly, interested (within the meaning of the
Companies Act 2006) in 3 per cent. or more of the Company's issued share capital (being the threshold for notification that applies to shareholders
pursuant to Chapter 5 of the Disclosure Guidance and Transparency Rules):
Silchester International Investors LLP
FIL Limited
Brandes Investment Partners LP
How Group Limited
Heronbridge Investment Management
Schroders plc
FMR LLC
BlackRock Inc
Harris Associates L.P.
Number of Ordinary
Shares
% of voting rights
210,021,726
143,023,644
105,625,101
99,378,882
82,698,499
73,762,890
57,841,059
48,794,883
43,421,477
14.80%
10.08%
7.44%
7.00%
5.83%
5.20%
4.07%
3.44%
3.06%
No changes have been notified to the Company pursuant to Chapter 5 of the Disclosure Guidance and Transparency Rules between the end of the
period under review and 8 June 2021, the latest practicable date prior to the date of this report.
Directors’ interests in the Company’s share capital are set out in the Directors’ remuneration report on page 113.
126
Mitie Group plc | Annual Report and Accounts 2021
FFiinnaanncciiaall rreessuullttss
A detailed commentary on the operational and financial results of the Group for the year is contained within the Strategic report, including the
Finance review on pages 26 to 29.
The Group’s loss before tax from continuing operations for the year ended 31 March 2021 was £9.1m (2020: £48.4m profit).
DDiivviiddeennddss
No interim dividend was paid (2020: 1.33p, restated to 0.69p for the bonus element of the Rights Issue) and no final dividend is recommended
(2020: nil).
Total dividends per Ordinary Share for the year ended 31 March 2021 are nil (2020: 1.33p, restated to 0.69p for the bonus element of the
Rights Issue).
As at 31 March 2021, the Company had distributable reserves of £86.6m (2020: £86.4m).
Mitie operates a Dividend Re-Investment Plan (DRIP) which allows shareholders to use their cash dividend to purchase additional Ordinary Shares.
Further details on the operation of the DRIP and how to apply are available from Mitie’s Registrar, Link Group.
The trustees of the Company’s Employee Benefit Trust have agreed to waive dividends payable on Ordinary Shares held by the trust in respect of the
year ended 31 March 2021.
In accordance with Section 726 of the Companies Act 2006, no dividends are paid on Ordinary Shares held in treasury.
FFiinnaanncciiaall iinnssttrruummeennttss
The Group’s financial instruments include bank borrowing facilities, lease liabilities, overdrafts, US private placement loan notes and derivatives which
are used to manage interest, currency and other risks 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 25 to the consolidated financial statements.
DDiisscclloossuurree ooff iinnffoorrmmaattiioonn ttoo tthhee aauuddiittoorr
Each Director in office as at the date of this Directors’ report confirms that:
• So far as he/she is aware, there is no relevant audit information of which the Company’s auditor is unaware
• He/she has 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 auditor is aware of that information
This confirmation is given and should be interpreted in accordance with Section 418 of the Companies Act 2006.
By order of the Board
PPeetteerr DDiicckkiinnssoonn
Chief of Staff, General Counsel & Company Secretary
10 June 2021
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements DDiirreeccttoorrss’’ rreeppoorrtt:: ootthheerr ddiisscclloossuurreess continued
SSttaatteemmeenntt ooff DDiirreeccttoorrss’’ rreessppoonnssiibbiilliittiieess iinn rreessppeecctt ooff tthhee AAnnnnuuaall RReeppoorrtt,,
RReemmuunneerraattiioonn rreeppoorrtt aanndd ffiinnaanncciiaall ssttaatteemmeennttss
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the
Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and
with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and
have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards) and applicable law including FRS 101 Reduced Disclosure Framework.
Under company law, the Directors must not approve the financial statements unless they are satisfied that these give a true and fair view of the state
of affairs of the Group and Company and of their profit or loss for the period.
In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and apply them consistently
• Make judgements and accounting estimates that are reasonable, relevant, reliable and prudent
• For the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements
• For the Company financial statements, state whether applicable United Kingdom Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements
• Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group or Company will continue in business
• Prepare a Directors’ report, Strategic report and Directors’ remuneration report which comply with the requirements of the Companies Act 2006
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the
assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.
DDiirreeccttoorrss’’ rreessppoonnssiibbiilliittiieess ppuurrssuuaanntt ttoo DDTTRR44..11..1122
The Directors confirm that to the best of their knowledge:
• The Group financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole
• The management 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 a description of the principal risks and uncertainties that they face
WWeebbssiittee ppuubblliiccaattiioonn
The Directors are responsible for ensuring that the Annual Report and the financial statements are made available on a website. Financial statements are
published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the
Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
By order of the Board
PPhhiill BBeennttlleeyy
Chief Executive Officer
10 June 2021
SSiimmoonn KKiirrkkppaattrriicckk
Chief Financial Officer
10 June 2021
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Mitie Group plc | Annual Report and Accounts 2021
Financial statements
130 Independent auditor’s report to the
members of Mitie Group plc
139 Consolidated income statement
140 Consolidated statement
of comprehensive income
141 Consolidated balance sheet
143 Consolidated statement of changes in equity
144 Consolidated statement of cash flows
146 Notes to the consolidated
financial statements
204 Company balance sheet
205 Company statement of changes in equity
206 Notes to the Company financial statements
211 Appendix – Alternative Performance
Measures (APMs)
214 Shareholder information
A technology
leader
Technology is changing our industry.
Mitie’s vision is to harness its ‘science
of service’ to generate social value
through everyday operations.
—
34%
Customers using chatbots
—
94%
Customers using real time MI
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements Independent auditor’s report
Independent auditor’s report
to the members of Mitie Group plc
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2021 and of the
Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union;
• the Parent Company financial statements have been properly prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’ (United
Kingdom Generally Accepted Accounting Practice); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Mitie Group Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 March 2021,
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 notes to the consolidated financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
The Parent Company financial statements comprise the Company Balance Sheet, the Company Statement of Changes in Equity and notes to the
company financial statements, including a summary of significant accounting policies. The financial reporting framework applied is applicable law and FRS
101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to
the Audit Committee.
Independence
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 19 September 2017 to audit the financial
statements for the year ended 31 March 2018 and subsequent financial periods. In respect of the year ended 31 March 2021, we were reappointed by
the members on 28 July 2020. The period of total uninterrupted engagement including reappointments is four years, covering the years ended 31 March
2018 to 31 March 2021.
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Following the acquisition of Interserve Facilities Management (“Interserve component”) on 30 November 2020, we undertook procedures, in
cooperation with the management of Mitie Group Plc, to identify and evaluate any current or recent interests or relationships, including any non-audit
services provided to the Interserve component. As a result of this exercise, we identified certain relationships and services which, taking into account
available safeguards, could compromise our integrity, objectivity or independence. As required by the FRC’s Ethical Standard we proceeded to terminate
these services within three months of the acquisition date.
Subsequent to this, three additional non-audit services were identified. These services are not included within the FRC Ethical Standard’s permitted list of
services to public interest entities and, although they were terminated at the earliest opportunity, this constituted a breach of the FRC’s Ethical Standard
as they were terminated outside of the three-month timeframe.
The services were provided by overseas member firms of the BDO network and constituted certain payroll, bookkeeping and tax services; in total, the
fees during the period when the services were prohibited were insignificant in comparison to the audit fee and amounted to £9,000.
We have assessed the threats to independence as a result of the provision of these services and, in our opinion, we do not consider that our
independence has been compromised as a result of the breach of the FRC’s Ethical Standard.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
• Evaluated the further potential impact of COVID-19, including consideration of risks and uncertainties identified by the Directors that are associated
with the Group’s customers, suppliers and workforce. We assessed this against our own views on the risks based on our understanding of the business
as well as the roll-out of the vaccination and the impact of Government restrictions, the wider sector and the business’ performance in the 2021
financial year;
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Mitie Group plc | Annual Report and Accounts 2021
• We obtained the Directors’ cash flow forecasts and challenged the key assumptions in respect of revenue growth, gross profit margins, cash
generation and the potential impact of key provisions and contingent liabilities with reference to our knowledge of the business, its historical
performance and results. We evaluated whether the Directors had considered appropriate risks and uncertainties in the preparation of the cash flow
forecasts based on our assessment of the risks and issues relating to the business;
• We tested the integrity of the forecast model and assessed its consistency with approved budgets;
• We obtained and critically reviewed the Directors’ reverse stress test analysis, performed to determine the point at which:
– a further downturn in revenues
– a deterioration of gross margin
– a lack of planned overhead savings
– net debt deterioration due to working capital outflows
would result in a covenant breach or liquidity shortfall and without further mitigation would potentially impact the going concern of the business. Our
consideration included an assessment of whether the reverse stress test analysis appropriately related to the key risks and issues to which the models
were sensitive;
• We considered the potential impact of contingent liabilities and provisions falling due within the going concern period, and the impact on sensitivities
and covenant headroom;
• We considered and challenged the nature and feasibility of the mitigating actions available to the business;
• We challenged the Directors conclusion that the downside sensitivities required for either a covenant breach or liquidity shortfall was remote by
reference to our knowledge of the business, and the wider environment in which it operates. This included an assessment of reserve stress test
sensitivities, COVID-19 factors, as well as current trading performance;
• We obtained the new financing agreements entered into by the Group during the year and confirmed that the facility was extended to December
2022 and covenant relaxed;
• We evaluated forecast covenant compliance and headroom calculations with reference to the covenants stated in the relevant lender agreements;
• We assessed covenants during the year and at year end, confirming that the Group were compliant under the terms of the lender agreements and
waiver received; and
• We reviewed the adequacy of disclosures in the financial statements in respect of going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group and Company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Overview
Coverage1
100% (2020: 97%) of Group revenue
99% (2020: 98%) of Group total assets
Key audit matters (“KAM”)
1) Revenue recognition and cut-off of accrued income – consistent with prior year
2) Presentation of Other Items–consistent with prior year
3) Accounting for the acquisition of the Interserve component – new KAM due to significance of
acquisition in the year
4) Provisions and contingent liabilities – new KAM due to the key judgements made over specific
claims, potential claims and onerous contracts arising within the acquired Interserve component
The prior year KAMs also included recoverability of trade receivables and accrued income. Whilst
the Group continues to have provisions in place for these balances, based on collection of
receivables during the current and prior year, this is no longer considered a KAM.
Materiality
Group financial statements as a whole
£3.8m (2020: £3.5m) based on 5% of 3-year normalised average continuing profit before tax and
other items (2020: 5% of continuing profit before tax and other items)
1 These are areas which have been subject to a full scope audit or specific audit procedures
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
The Group operates through a number of legal entities, which form reporting components, consistent with the segmental analysis as disclosed in Note 3
to the financial statements. Technical Services, Business Services (incorporating Security and Cleaning), the Parent Company and the Interserve
component were considered to be significant components subject to full scope audits.
Specialist Services (incorporating Landscapes, Waste and Care & Custody) and Corporate Centre were considered to be non-significant components,
where we performed specific audit procedures on discrete financial statement areas that we considered presented risks of material misstatement to the
Group financial statements. The remaining areas were subject to desktop review procedures.
BDO, through either Group or Component teams completed all audits and desktop review procedures, with the exception of the Interserve
component, which was audited by a non-BDO firm.
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Strategic reportGovernanceFinancial statements
Independent auditor’s report continued
Our involvement with component auditors
For the work performed by the BDO and non-BDO component auditors, the Group team determined the level of involvement needed in order
to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements
as a whole.
Based on the identified risk of misstatement within the Interserve component it was determined that significant involvement was required by the
Group audit team. The scope of work performed by the non-BDO component auditor was a full scope audit of the acquisition balance sheet at
30 November 2020 and the audit of the 4-month period ended 31 March 2021.
Our involvement with component auditors for both reporting periods included the following:
• Issue of detailed Group reporting instructions, which included the significant areas to be covered by their audit (including applicable key audit matters
as detailed below), and set out the information required to be reported to the Group audit team;
• Regular communication with the component auditors throughout the planning, execution and completion phases of the audit;
• Members of the Group audit team virtually attended the key meetings and had detailed discussions with the component auditors and component
management throughout the audit process in respect of significant risk areas; and
• Remote review of their working papers with additional challenge and specific work requests to ensure alignment with conclusions drawn.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which
had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matter
Revenue
recognition in
respect of new
and modified
contracts and
cut-off of
accrued income
The accounting policies
and critical judgements
applied are disclosed in
Notes 1 and 2.
The accounting for new and modified contracts
needs to be assessed to ensure compliance with
accounting standards.
The Group holds material levels of accrued
income, there is risk that cut-off has not been
correctly applied and that revenue has not been
appropriately recognised.
How the scope of our audit addressed the key audit matter
The audit procedures completed included the following:
• Tested a sample of new and modified contracts in the year by
evaluating Management’s IFRS 15 contract assessments, testing details
to contracts and invoices, and assessing that the related revenue
recognition was in accordance with the requirements of applicable
accounting standards.
• For specific divisional revenue streams, tested the operating
effectiveness of key controls including the testing of IT controls over
key operating and financial reporting systems relevant to revenue, and
manual controls relating to monthly reviews of contract revenues.
• Tested a sample of accrued income balances at the year end to
supporting documentation to confirm cut-off had been correctly
applied, which included procedures such as: agreeing to proof of
works, agreeing to contractual terms, confirming customer acceptance
and subsequent invoicing, reviewing relevant customer
correspondence regarding the specific accrued income balances.
Key observations:
We found management’s revenue recognition policy to be in line with
the requirements of applicable accounting standards and the recognition
and measurement of revenue in the year to be appropriate.
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Mitie Group plc | Annual Report and Accounts 2021
Key audit matter
Presentation
of Other items
A breakdown of
Other Items together
with explanations is
included in Note 4.
The Group’s
accounting policy for
Other items is
described in Note 1
and the critical
judgements applied
is in Note 2.
The Group continues to present certain income
and expenses within ‘other items’ on the face of
the consolidated income statement.
The presentation is intended to show the financial
results in a way that reflects the underlying
profitability of the Group, which the Directors
consider to be a key performance indicator from
an internal and external perspective. This
measure therefore excludes the results of items
such as restructuring, acquisition and disposal
related costs and other costs and income
considered exceptional in nature. The risk is also
heightened due to the Interserve component
acquisition and integration costs recognised in the
year, and the extension of certain internal
transformation projects due to COVID-19.
There is judgement in evaluating whether a
transaction meets the definition as described in
the Group’s accounting policy and whether its
presentation is ‘fair, balanced and understandable’.
Failure to disclose clearly the nature and impact
of other items on earnings may distort the
reader’s view of the financial results for the year.
How the scope of our audit addressed the key audit matter
We have benchmarked the items included within Other Items by
reference to:
• The requirements of IAS 1
• Industry peer group
• The guidance published by the Financial Reporting Council (FRC)
• The guidance included in the “Guidelines on Alternative
Performance Measures”, issued by the European Securities
and Markets Authority (ESMA)
• Consistency with the treatment in prior periods
With regard to the benchmarking we have:
• Obtained an understanding of the composition of Other Items and
the controls and processes in place.
• Obtained an understanding of the specific Interserve acquisition and
integration related costs incurred and the extension of certain internal
transformation projects during the year.
• Agreed a sample of items to supporting documentation.
• Challenged management’s rationale for the inclusion of certain items
within Other Items particularly in areas of higher judgement such as
restructuring and dual running costs.
• Determined whether the costs recognised as Other Items meet the
criteria of the Group’s accounting policy and are consistent with the
prior year.
• Reviewed the consolidated income statement for any material credits
that are considered to meet the Group’s accounting policy for being
classified as an Other Item.
• Challenged the appropriateness of disclosure of these balances both
in Note 4 and in the remainder of the annual report with reference
to the Group’s accounting policy and guidance published by the FRC
and ESMA.
Key observations:
We found that the presentation and disclosure of Other Items meets the
criteria of the Group’s accounting policy and is consistent with issued
guidance and market practice.
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Strategic reportGovernanceFinancial statements Independent auditor’s report continued
Key audit matter
Accounting for
the acquisition
of the Interserve
component
The accounting policies
and critical judgements
applied are disclosed in
Notes 1 and 2.
The acquisition
balances are disclosed
in Note 30.
The Group completed the acquisition of the
Interserve component on 30 November 2020 for
cash consideration of £105m and issuance of
248.4m shares of the Parent Company valued at
£94.6m, for total consideration of £199.6m.
The consideration is subject to working capital
and net debt adjustments under the terms of the
SPA and consequently the Group recorded a
provisional receivable from the seller of £57.6m
to reduce consideration with a corresponding
reduction to goodwill. The adjustment to
consideration is subject to agreement by the
seller. The fair value of consideration was
therefore £142.0m.
The accounting for the acquisition balance
sheet at 30 November 2020 and the
subsequent Purchase Price Allocation (“PPA”)
assessment, including the fair value of
consideration, identification and valuation of
intangible assets at acquisition date and
subsequent residual goodwill, is complex and
involves significant judgement. Management
engaged an external expert to undertake the
PPA assessment.
The acquired Interserve component also has
certain specific loss-making contracts and legal
and contractual issues (as described within a
separate KAM).
How the scope of our audit addressed the key audit matter
We completed the following audit procedures:
• Obtained an understanding of the transaction and reviewed the
Share Purchase Agreement (“SPA”) and subsequent amendments
to the agreement.
• Engaged with our own internal valuation specialists to challenge the
PPA, including the identification of amounts related to customer
relationships and other intangibles.
• Critically evaluated the capabilities, competence and objectivity of
the external valuation experts engaged by Management for the
PPA assessment.
• Evaluated and concluded on the appropriateness of external
valuation expert’s conclusions by comparing them to our knowledge
of the industry.
• Tested the cash flow forecasts, including inputs and assumptions used
to assess the fair value of the intangible assets acquired by comparing
to actual and historical results and reasonableness of underlying
information used.
• Tested the fair value of the consideration paid by vouching to
supporting documentation and quoted market prices. We involved
our forensic specialists in assessing the reasonableness of the
adjustments made to the consideration with reference to refundable
working capital adjustments and the terms of the SPA.
• We issued group audit instructions to the non-BDO component
auditor in respect of their audit of the 30 November 2020 acquisition
balance sheet, including specific procedures that were designed to
ensure identified risks were appropriately tested.
• We reviewed the non-BDO component auditor’s work on the
30 November 2020 balance sheet and work on all significant risks
identified including specific focus on the balance sheet impact
of revenue recognition and application of IFRS 15; this included
inspecting the sample work performed by the non-BDO component
auditor over the portfolio of customer contracts and assessed
whether revenue and hence the balance sheet positions were
appropriately recognised
• We specifically considered whether the audit work identified any
further areas relevant to Mitie’s assessment of fair values in the
acquired balance sheet.
• We challenged and tested Management’s assessment of the fair value
of the assets acquired, including accounting policy alignment and fair
value adjustments.
• We reviewed the adequacy of the Group’s disclosures in respect of
the business combination by checking its appropriateness based on
our workings and its compliance with the requirements of the
accounting standards.
Key observations:
We found that Management’s assessment of the fair value of the net
assets and intangible assets acquired to be in line with its policy and
applicable accounting standards.
We found the fair value adjustments made to purchase consideration
by Management to be reasonable.
We found the disclosure in the Group financial statements, including the
key judgements and estimates relating to these matters to be appropriate.
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Mitie Group plc | Annual Report and Accounts 2021
Key audit matter
Provisions and
contingent
liabilities relating
to the Interserve
component
The accounting policies
and critical judgements
applied are disclosed in
Notes 1 and 2.
Provisions are
disclosed in Note 21
and contingent
liabilities in Note 34
Material onerous contract provisions are
recognised within the Interserve component.
The calculation of these provisions involved
Management estimate and judgement.
As described above, we were involved in the non-BDO component
audit of the Interserve component, which included directing and
reviewing procedures completed over their audit of provisions and
contingent liabilities.
How the scope of our audit addressed the key audit matter
There are also two potential claims against the
Group, which involve significant Management
judgement and the use of experts. One has been
provided against and the other, relating to a
cyber-security breach and ICO investigation is
disclosed as a contingent liability.
The following audit procedures were performed in relation to onerous
contract provision:
• Development of independent estimates of each provision and
considered the individual and aggregate differences between those
and Management’s positions.
• Assessment of completeness of onerous contract provisions through
review of a sample of contracts, including attending Management’s
contract review meetings, to assess contract performance and identify
any loss making or potentially loss making contracts for which a
provision had not been considered.
• Assessment of the appropriateness of source data use for each
by reviewing the allocation to contracts for a sample of revenue
and costs.
• Obtaining an understanding of, and challenged, Management’s
assumptions used within the calculations.
• Review of actual results for each contract for the period since
acquisition against forecast for the same period.
• Review of the adequacy of the Group’s disclosures in respect
of this area and its compliance with the requirements of the
accounting standards.
The following audit procedures were performed in relation to the
potential claim and the cyber security breach:
• Obtaining an understanding of each matter through discussion with
senior management and the Group’s internal legal counsel.
• Review of relevant communications with third parties where available.
• In respect of the potential claim, review of reports issued by
experts engaged by Management and challenged assumptions
used within them.
• Consideration of the competence and independence of the experts
engaged by Management.
• Review of the adequacy of the Group’s disclosures in respect
of this area and its compliance with the requirements of the
accounting standards.
Key observations:
We found that the positions taken by management for provisions and
contingent liabilities were reasonable and in line with the requirements
of the applicable accounting standards.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to
be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of
the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as
we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the
financial statements as a whole.
Mitie Group plc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements Independent auditor’s report continued
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
Basis for determining materiality
Rationale for the benchmark applied
Group
2021
£m
3.8
2020
£m
3.5
Parent company
2021
£m
2.7
2020
£m
2.4
Materiality was capped at 70% of group materiality
The Parent Company does not trade and
materiality was capped at a percentage of
Group materiality.
5% of continuing profit
before tax and other
items
We consider this to be
the most appropriate
threshold since this
removes the impact of
certain one-off or
exceptional items on the
underlying profit of the
Group and is also a key
measure for
stakeholders based on
market practice and
investor expectations.
5% of continuing 3-year
normalised average
profit before tax and
other items
We consider the use of
a 3-year average to be
the most appropriate
benchmark given the
impact of COVID-19 on
profits and also the
impact of the Interserve
component acquisition.
Using profit before
other items and tax
removes the impact of
certain one-off or
exceptional items and is
also a key measure for
stakeholders based on
market practice and
investor expectations.
Performance materiality
Basis for determining performance
materiality
2.5
2.3
1.7
1.6
65% of materiality
The level of performance materiality was set after considering a number of factors including significant
transactions in the year, the expected value of known and likely misstatements, and management’s attitude
towards proposed misstatements.
The application of materiality at the individual account or balance level is set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality.
Component materiality
We set materiality for each component of the Group based on the size and our assessment of the risk of material misstatement of that component.
Component materiality ranged from £1.0m to £2.5m (2020: £0.9m to £2.7m). In the audit of each component, we further applied performance
materiality levels of 65% (2020: 65%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality
was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £133k (2020: £175k). We also agreed
to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report and accounts
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Statement specified for
our review.
136
Mitie Group plc | Annual Report and Accounts 2021
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term viability
• The Directors’ statement with regards to the appropriateness of adopting the going concern
Other Code provisions
basis of accounting and any material uncertainties identified set out on page 89; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the period this
assessment covers and why the period is appropriate set out on page 89.
• Directors’ statement on fair, balanced and understandable set out on page 89;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 88;
• The section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 88; and
• The section describing the work of the audit committee set out on page 96.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and
ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
In our opinion, the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Directors’ remuneration
Matters on which we are required
to report by exception
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities within the Directors’ report set out on page 128, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend
to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Mitie Group plc | Annual Report and Accounts 2021
137
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, through discussion
with management and the Audit Committee and our knowledge of the industry. We focussed on significant laws and regulations that could give rise
to a material misstatement in the financial statements, including, but not limited to, the Companies Act 2006, the UK Listing Rules, IFRSs as adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, Health and Safety, the Bribery Act 2010 and tax legislations.
• We considered compliance with these laws and regulations through discussions with management, in-house legal counsel, the company secretary,
reviewing internal audit reports and the Audit Committee. Our procedures also included reviewing minutes from board meetings of those charges
with governance to identify any instances of non-compliance with laws and regulations.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur. In addressing the risk
of fraud including management override of controls and improper revenue recognition, we tested the appropriateness of journal entries made
throughout the year by applying specific criteria.
• We performed a detailed review of the Group’s year end adjusting entries and journals throughout the year, investigated any that appeared unusual as
to nature or amount; assessed whether the judgements made in accounting estimates were indicative of a potential bias and tested the application of
cut-off and revenue recognition (refer to Appropriateness of revenue recognition KAM).
• We identified areas at risk of management bias, particularly in respect of the Interserve component and it’s acquisition, and reviewed key estimates
and judgements applied by Management in the financial statements to assess their appropriateness (refer to Accounting for the acquisition of the
Interserve component and Provisions and contingent liabilities relating to the Interserve component KAMs);
• We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and component auditors,
and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed
non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become
aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent
Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Scott McNaughton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
10 June 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
138
Mitie Group plc | Annual Report and Accounts 2021
CCoonnssoolliiddaatteedd iinnccoommee ssttaatteemmeenntt
For the year ended 31 March 2021
BBeeffoorree
ootthheerr iitteemmss
££mm
OOtthheerr
iitteemmss11
££mm
Notes
22002211
TToottaall
££mm
Before
other items
£m
Other
items1
£m
CCoonnttiinnuuiinngg ooppeerraattiioonnss
Revenue including share of joint ventures and associates
Less: share of revenue of joint ventures and associates
GGrroouupp rreevveennuuee
Cost of sales
GGrroossss pprrooffiitt
Administrative expenses
Share of profit/(loss) of joint ventures and associates
OOppeerraattiinngg pprrooffiitt//((lloossss))22
Finance income
Finance costs
NNeett ffiinnaannccee ccoossttss
PPrrooffiitt//((lloossss)) bbeeffoorree ttaaxx
Tax
PPrrooffiitt//((lloossss)) ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss aafftteerr ttaaxx
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
Profit from discontinued operations before tax
Tax
PPrrooffiitt ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss aafftteerr ttaaxx
PPrrooffiitt//((lloossss)) ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo
oowwnneerrss ooff tthhee ppaarreenntt
EEaarrnniinnggss//((lloossss)) ppeerr sshhaarree ((EEPPSS)) aattttrriibbuuttaabbllee ttoo
oowwnneerrss ooff tthhee ppaarreenntt
From continuing operations:
Basic3
Diluted3
Total Group:
Basic3
Diluted3
15
3
15
3, 6
8
9
5
9
5
11
11
11
11
2020
Total
£m
2,173.7
–
2,173.7
(1,886.2)
287.5
22,,558899..33
((2299..88))
22,,555599..55
((22,,227744..99))
228844..66
((222233..11))
11..99
6633..44
00..88
((1188..22))
((1177..44))
––
––
––
––
––
((5533..99))
((11..22))
((5555..11))
––
––
––
22,,558899..33
((2299..88))
2,173.7
–
22,,555599..55
2,173.7
((22,,227744..99))
(1,886.2)
228844..66
287.5
–
–
–
–
–
((227777..00))
(201.4)
(21.5)
(222.9)
00..77
88..33
00..88
((1188..22))
((1177..44))
–
86.1
0.4
(16.6)
(16.2)
–
(21.5)
–
–
–
–
64.6
0.4
(16.6)
(16.2)
4466..00
((5555..11))
((99..11))
69.9
(21.5)
48.4
((88..55))
3377..55
77..55
((4477..66))
((11..00))
((1100..11))
(11.9)
58.0
4.0
(17.5)
––
––
––
33..22
((00..44))
22..88
33..22
((00..44))
22..88
2.6
(0.3)
2.3
49.0
(1.3)
47.7
(7.9)
40.5
51.6
(1.6)
50.0
3377..55
((4444..88))
((77..33))
60.3
30.2
90.5
33..55pp
33..55pp
33..55pp
33..55pp
((00..99))pp
((00..99))pp
((00..66))pp
((00..66))pp
8.3p
8.1p
8.6p
8.4p
5.8p
5.6p
12.9p
12.6p
Notes:
1 Other items are as described in Note 4.
2 Including impairment losses on trade receivables and accrued income of £6.2m (2020: £4.4m gains).
3 Earnings per share for the year ended 31 March 2020 have been restated for the bonus element of the 2020 rights issue. See Note 33.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
139
113399
Strategic reportGovernanceFinancial statements
CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccoommpprreehheennssiivvee iinnccoommee
For the year ended 31 March 2021
((LLoossss))//pprrooffiitt ffoorr tthhee yyeeaarr
IItteemmss tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss iinn ssuubbsseeqquueenntt yyeeaarrss
Remeasurement of net defined benefit pension liability
Share of other comprehensive income of joint ventures
Tax credit/(charge) relating to items that will not be reclassified to profit or loss in subsequent years
IItteemmss tthhaatt mmaayy bbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss iinn ssuubbsseeqquueenntt yyeeaarrss
Exchange differences on translation of foreign operations
Net (losses)/gains on cash flow hedges taken to equity1
Tax credit/(charge) relating to items that may be reclassified to profit or loss in subsequent years
Notes
32
15
9
9
22002211
££mm
((77..33))
((55..44))
00..44
11..00
((44..00))
((00..99))
((11..11))
00..11
((11..99))
2020
£m
90.5
9.2
–
(1.3)
7.9
0.2
5.7
(0.7)
5.2
OOtthheerr ccoommpprreehheennssiivvee ((eexxppeennssee))//iinnccoommee ffoorr tthhee yyeeaarr
((55..99))
13.1
TToottaall ccoommpprreehheennssiivvee ((eexxppeennssee))//iinnccoommee ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo oowwnneerrss ooff tthhee ppaarreenntt
((1133..22))
103.6
Note:
1 Net (losses)/gains on cash flow hedges taken to equity include a fair value loss of £13.7m (2020: £11.8m gain) on derivative financial instruments used for hedging private placement notes
(See Note 25). This loss is netted against reclassifications related to foreign exchange gains on private placement notes of £12.6m (2020: £6.0m losses) and interest costs of £nil (2020: £0.1m).
140
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
CCoonnssoolliiddaatteedd bbaallaannccee sshheeeett
As at 31 March 2021
NNoonn--ccuurrrreenntt aasssseettss
Goodwill
Other intangible assets
Property, plant and equipment
Interest in joint ventures and associates
Derivative financial instruments
Other receivables
Contract assets
Retirement benefit assets
Deferred tax assets
TToottaall nnoonn--ccuurrrreenntt aasssseettss
CCuurrrreenntt aasssseettss
Inventories
Trade and other receivables1
Contract assets
Derivative financial instruments
Current tax receivable
Cash and cash equivalents1
TToottaall ccuurrrreenntt aasssseettss
TToottaall aasssseettss
CCuurrrreenntt lliiaabbiilliittiieess
Trade and other payables1
Deferred income
Current tax payable
Financing liabilities
Provisions
TToottaall ccuurrrreenntt lliiaabbiilliittiieess
NNeett ccuurrrreenntt aasssseettss//((lliiaabbiilliittiieess))
NNoonn--ccuurrrreenntt lliiaabbiilliittiieess
Trade and other payables
Deferred income
Financing liabilities
Provisions
Retirement benefit liabilities
Deferred tax liabilities
TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess
TToottaall lliiaabbiilliittiieess
NNeett aasssseettss
Notes
12
13
14
15
25
16
17
32
22
18
16
17
25
23
19
20
24
21
19
20
24
21
32
22
22002211
££mm
228822..22
226666..22
111177..99
1111..00
1144..66
88..33
22..44
33..00
3322..00
773377..66
1122..77
668833..66
11..55
––
33..55
119966..22
889977..55
Restated1
2020
£m
278.9
50.6
110.8
–
28.0
3.3
3.2
–
32.6
507.4
4.8
414.6
1.6
0.2
1.1
139.5
561.8
11,,663355..11
1,069.2
((770011..55))
((8844..55))
((33..88))
((2288..77))
((4488..33))
(513.4)
(35.9)
–
(24.3)
(41.4)
((886666..88))
(615.0)
3300..77
(53.2)
((00..55))
((3300..11))
(0.3)
(15.6)
((225500..11))
(296.4)
((6688..11))
((4455..55))
((1122..22))
(11.8)
(46.7)
(2.9)
((440066..55))
(373.7)
((11,,227733..33))
(988.7)
336611..88
80.5
Note:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
Mitie Group plc | Annual Report and Accounts 2021
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141
114411
Strategic reportGovernanceFinancial statements
CCoonnssoolliiddaatteedd bbaallaannccee sshheeeett continued
As at 31 March 2021
EEqquuiittyy
Share capital
Share premium account
Merger reserve
Own shares reserve
Other reserves1
Hedging and translation reserve
Retained losses
EEqquuiittyy aattttrriibbuuttaabbllee ttoo oowwnneerrss ooff tthhee ppaarreenntt
Notes
22002211
££mm
2020
£m
28
28
29
29
29
29
3355..66
113300..66
335588..66
((2288..88))
1144..55
((22..33))
((114466..44))
336611..88
9.3
130.6
99.9
(34.2)
9.5
(0.4)
(134.2)
80.5
Note:
1 Other reserves include the share-based payments reserve, the revaluation reserve and the capital redemption reserve. See Note 29.
The consolidated financial statements of Mitie Group plc, company registration number SC019230 were approved by the Board of Directors and
authorised for issue on 10 June 2021. They were signed on its behalf by:
PPhhiill BBeennttlleeyy
Chief Executive Officer
SSiimmoonn KKiirrkkppaattrriicckk
Chief Financial Officer
142
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff cchhaannggeess iinn eeqquuiittyy
For the year ended 31 March 2021
At 1 April 2019
Profit for the year
Other comprehensive income
TToottaall ccoommpprreehheennssiivvee iinnccoommee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Dividends paid
Share-based payments
Realised merger reserve
TToottaall ttrraannssaaccttiioonnss wwiitthh oowwnneerrss
AAtt 3311 MMaarrcchh 22002200
At 1 April 2020
Loss for the year
Other comprehensive expense
TToottaall ccoommpprreehheennssiivvee eexxppeennssee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Issue of shares2
Rights issue expenses3
Share-based payments
TToottaall ttrraannssaaccttiioonnss wwiitthh oowwnneerrss
AAtt 3311 MMaarrcchh 22002211
Share
capital
£m
Share
premium
account
£m
Merger
reserve
£m
Own shares
reserve
£m
Other
reserves1
£m
Hedging and
translation
reserve
£m
Retained
losses
£m
TToottaall
eeqquuiittyy
££mm
9.3
130.6
104.2
(38.1)
10.3
(5.6)
(223.1)
((1122..44))
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9.3
130.6
–
–
–
–
–
(4.3)
(4.3)
99.9
–
–
–
–
3.9
–
3.9
(34.2)
–
–
–
–
(0.8)
–
(0.8)
9.5
–
5.2
5.2
–
–
–
–
90.5
7.9
98.4
9900..55
1133..11
110033..66
(14.4)
((1144..44))
0.6
4.3
33..77
––
(9.5)
((1100..77))
(0.4)
(134.2)
8800..55
9.3
130.6
99.9
(34.2)
9.5
(0.4)
(134.2)
–
–
–
26.3
–
–
26.3
35.6
–
–
–
–
–
–
–
130.6
–
–
–
261.7
(3.0)
–
258.7
358.6
–
–
–
–
–
5.4
5.4
(28.8)
–
–
–
–
–
5.0
5.0
14.5
(11.3)
((1133..22))
–
(1.9)
(1.9)
–
–
–
–
(7.3)
(4.0)
–
–
(0.9)
(0.9)
(2.3)
(146.4)
8800..55
((77..33))
((55..99))
228888..00
((33..00))
99..55
229944..55
336611..88
Notes:
1 Other reserves include the share-based payments reserve, the revaluation reserve and the capital redemption reserve. See Note 29.
2 As part of consideration for the acquisition of Interservefm (Holdings) Limited (Interserve), 248.4 million shares were issued with premium of £88.4m arising (see Note 30). In addition,
805.1 million shares were issued with premium of £173.3m arising in connection with the rights issue which utilised a cash box structure (see Note 33). These share issues qualified for merger
relief under Section 612 of the Companies Act 2006, so that total premium arising of £261.7m was not required to be credited to the share premium account.
3 Under the cash box structure, the Group received £193.4m from the rights issue, after deduction of issue costs of £7.9m. The remaining £3.0m of rights issue expenses are payable by the Group
and have been charged against the merger reserve (see Note 33).
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements
CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccaasshh fflloowwss
For the year ended 31 March 2021
Continuing operations – operating profit before other items
Continuing operations – other items
Discontinued operations – operating (loss)/profit after other items
Adjustments for:
Share-based payments expense
Defined benefit pension costs
Defined benefit pension contributions
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of customer contracts and relationships for joint ventures arising on business combinations
Share of profit of joint ventures and associates
Amortisation of contract assets
Impairment of non-current assets
Loss on disposal of property, plant and equipment
Gain on disposal of businesses
Research and development tax credits
Other
OOppeerraattiinngg ccaasshh fflloowwss bbeeffoorree mmoovveemmeennttss iinn wwoorrkkiinngg ccaappiittaall
Increase in inventories
(Increase)/decrease in receivables1
Increase in contract assets
Increase/(decrease) in deferred income
Decrease in payables1
Decrease in provisions
CCaasshh ggeenneerraatteedd ffrroomm ooppeerraattiioonnss
Income taxes paid
Interest paid
NNeett ccaasshh ggeenneerraatteedd ffrroomm ooppeerraattiinngg aaccttiivviittiieess
IInnvveessttiinngg aaccttiivviittiieess
Acquisition of businesses, net of cash acquired2
Disposal of businesses, net of cash disposed3
Interest received
Purchase of property, plant and equipment
Dividends received from joint ventures and associates
Purchase of other intangible assets
Disposal of property, plant and equipment
NNeett ccaasshh ((uusseedd))//ggeenneerraatteedd ffrroomm iinnvveessttiinngg aaccttiivviittiieess
Notes
3
4
5
31
32
32
14, 26
13
15
15
17
13, 14, 26
5
30
5
14
15
13
22002211
££mm
6633..44
((5555..11))
33..22
99..55
22..00
((1122..22))
3344..44
1177..55
11..22
((11..99))
11..77
1133..77
––
((11..22))
––
––
7766..22
((11..77))
((44..33))
((00..88))
66..77
((3344..99))
((11..44))
3399..88
((11..00))
((1155..99))
2222..99
((6644..66))
––
00..88
((77..66))
00..88
((1155..00))
11..00
((8844..66))
Restated1
2020
£m
86.1
(21.5)
51.8
3.7
1.3
(10.7)
33.3
11.4
–
–
1.5
0.8
0.3
(50.3)
(0.8)
(1.9)
105.0
(1.2)
24.9
(0.5)
(23.6)
(8.5)
(4.0)
92.1
(6.4)
(15.4)
70.3
(1.0)
65.2
0.4
(8.2)
–
(11.2)
0.4
45.6
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (See Note 1). As a result the comparatives on the consolidated statement of cash flows for the year
ended 31 March 2020 have been restated, with an overall increase in net cash inflow of £20.3m due to an increase in payables of £16.3m and a decrease in receivables of £4.0m.
2 Acquisition of businesses is net of cash acquired of £40.4m (2020: £0.5m).
3 Disposal of businesses for the year ended 31 March 2020, is net of cash disposed of £4.5m and transaction costs paid for disposals of £3.0m.
144
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
CCoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccaasshh fflloowwss continued
For the year ended 31 March 2021
FFiinnaanncciinngg aaccttiivviittiieess
Proceeds from issue of ordinary shares, net of issue costs
Rights issue expenses paid
Capital element of lease rentals
Repayment of bank loans
Private placement notes repaid
Payment of arrangement fees
Equity dividends paid
NNeett ccaasshh ggeenneerraatteedd//((uusseedd)) iinn ffiinnaanncciinngg aaccttiivviittiieess
Net increase in cash and cash equivalents
Net cash and cash equivalents at beginning of the year1
Effect of foreign exchange rate changes
NNeett ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt eenndd ooff tthhee yyeeaarr
Notes
22002211
££mm
Restated1
2020
£m
33
33
26
10
23
119933..44
((33..00))
((2288..11))
((4400..55))
––
((22..88))
––
111199..00
5577..33
113399..55
((00..66))
119966..22
–
–
(21.2)
(3.9)
(40.0)
–
(14.4)
(79.5)
36.4
103.0
0.1
139.5
Note:
1. The Group has changed its accounting policy in relation to the recognition of BACS payments (See Note 1). As a result the comparatives on the consolidated statement of cash flows for the year
ended 31 March 2020 have been restated, with an overall increase in net cash inflow of £20.3m due to an increase in payables of £16.3m and a decrease in receivables of £4.0m.
The above statement of consolidated cash flows includes cash flows from both continuing and discontinued operations. Further details of the cash flows
relating to discontinued operations are shown in Note 5.
RReeccoonncciilliiaattiioonn ooff nneett ccaasshh ffllooww ttoo mmoovveemmeennttss iinn nneett ddeebbtt
Notes
Net increase in cash and cash equivalents
Less: increase in restricted cash
Net increase in unrestricted cash and cash equivalents
CCaasshh ddrriivveerrss
Repayment of bank loans
Private placement notes repaid
Payment of arrangement fees
Capital element of lease rentals
NNoonn--ccaasshh ddrriivveerrss
Non-cash movement in bank loans
Non-cash movement in private placement notes and associated hedges
Non-cash movement in lease liabilities2
Effect of foreign exchange rate changes
Decrease in net debt during the year
Opening net debt
CClloossiinngg nneett ddeebbtt
22002211
££mm
5577..33
((1188..77))
3388..66
4400..55
––
22..88
2288..11
((11..11))
((11..11))
((4411..11))
((00..44))
6666..33
Restated1
2020
£m
36.4
–
36.4
3.9
40.0
–
21.2
(0.4)
5.7
(26.1)
(0.1)
80.6
((115533..00))
((8866..77))
(233.6)
(153.0)
27
Note:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (See Note 1). As a result, the comparative net debt as at 31 March 2020 and 31 March 2019 have
been restated leading to a decrease in net debt of £14.9m and an increase in net debt of £5.4m respectively.
2 Included within the non-cash movement in lease liabilities is £14.2m (2020: £nil) of lease liabilities arising on acquisition of Interserve. See Notes 26 and 30.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss
For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess
((aa)) BBaassiiss ooff pprreeppaarraattiioonn
Mitie Group plc (the Company) is a company incorporated in the United Kingdom and registered in Scotland. It was incorporated on 16 July 1936
under the Companies Act 1929. The Company’s registered office is at 35 Duchess Road, Rutherglen, Glasgow, G73 1AU. The Group comprises the
Company and all its subsidiaries. The Group’s consolidated financial statements are presented in pounds Sterling, which is the Company’s functional
and presentational currency. All amounts have been rounded to the nearest one hundred thousand pounds, unless otherwise indicated.
The Group’s principal activities are focused on the provision of strategic outsourcing, including the management and provision of business support
services and ancillary activities.
The Group’s consolidated financial statements for the year ended 31 March 2021 have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and with International Financial Reporting Standards (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
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.
GGooiinngg ccoonncceerrnn
The financial statements have been prepared on a going concern basis. In adopting the going concern basis, the Directors have considered the Group’s
business activities as set out on pages 8 to 29 and the principal risks and uncertainties as set out on pages 54 to 65.
The Directors have carried out an assessment on the Group’s ability to continue as a going concern for the period of at least 12 months from the date
of approval of the financial statements. This assessment has involved the review of medium-term cash forecasts using the Group’s cash flow model,
based on the Board approved budget. This includes the ongoing impact of COVID-19 on each of the Group’s operations. These base case forecasts
indicate that the debt facilities currently in place are adequate to support the Group over the going concern assessment period.
The Group’s principal debt financing arrangements are a £250m revolving credit facility, which expires on 16 December 2022 and of which £241.4m
was undrawn at 31 March 2021, and £151.5m of US private placement notes (being the repayment amount after taking account of the cross-currency
swaps hedging the principal amount), of which £121.5m are repayable in December 2022 and the remaining £30.0m in December 2024. These
financing arrangements are subject to certain financial covenants which are tested every six months on a rolling 12-month basis, as set out in the finance
review on pages 26 to 29. Mitie currently operates within the terms of its agreements with its lenders, with net cash as at 31 March 2021 on a pre IFRS
16 basis of £19.7m and liquidity headroom in excess of £400m. The base case forecasts indicate that the Group will continue to operate within these
terms and that the headroom provided by the Group’s strong cash position and the debt facilities currently in place is adequate to support the Group
over the going concern assessment period.
The Directors have also completed reverse stress tests using the Group cash flow model to assess the point at which the covenants, or facility
headroom, would be breached. The sensitivities considered have been chosen after considering both the Group’s principal risks and uncertainties and
the Viability Statement.
The primary financial risks from adverse changes in the economic environment and / or a deterioration in commercial or operational conditions are
listed below. These risks have been considered specifically in the context of the potential further impact of COVID-19, taking into account the recent
success of the vaccine roll-out, easing of restrictions and improvements in the economy:
• A downturn in revenues: this reflects the risks of not being able to deliver services to existing customers, or contracts being terminated or
not renewed;
• A deterioration of gross margin: this reflects the risks of contracts being renegotiated at lower margins, or planned cost savings not being delivered;
• Lack of planned overhead savings: this reflects the risks of planned overhead cost savings, including the integration synergies identified as a result of
the Interserve acquisition, not being delivered;
• Downturn in cash generation: this reflects the risks of customers delaying payments due to liquidity constraints, or the removal of ancillary
debt facilities.
As a result of completing this assessment, the Directors considered the likelihood of the reverse stress scenarios arising to be remote. In reaching the
conclusion of remote, the Directors considered the following:
• Reviewing how the Group has traded since the impact of COVID-19 started, up to the end of May 2021 and in light of the continued easing of UK
lockdown measures and anticipated economic recovery.
• All reverse stress test scenarios would require a very severe deterioration compared to the base case. Revenue is considered to be the key risk, as
this is less within the control of management. Revenue would need to decline by approximately 20% in the year ending 31 March 2022 compared to
the base case, which is considered to be very severe given the high proportion of Mitie’s revenue that is fixed in nature and the fact that in a COVID-
hit year, Mitie’s revenue excluding Interserve declined by only 1.6% in the year ending 31 March 2021.
• In the event that results started to trend significantly below those included in the Group cash flow model, additional mitigation actions have been
identified that would be implemented, which are not factored into the reverse stress test scenarios. These include cancellation of discretionary
bonuses and reduced discretionary spend, including capital investments.
Based on these assessments, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for a period of no less than 12 months from the date of approval of these financial statements. In addition, in respect of material uncertainty, the
Directors consider that this is remote.
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
AAccccoouunnttiinngg ssttaannddaarrddss tthhaatt aarree nneewwllyy eeffffeeccttiivvee iinn tthhee ccuurrrreenntt yyeeaarr
None of the new standards and amendments that are effective for the first time in these consolidated financial statements for the year ended 31 March
2021 have had a material effect on the Group.
The accounting policies and methods of calculation adopted in the preparation of these Group consolidated financial statements are consistent with
those followed in the preparation of the Group’s consolidated financial statements for the year ended 31 March 2020, which were prepared in
accordance with IFRS as issued by the International Accounting Standards Board and as adopted for use in the European Union.
AAccccoouunnttiinngg ssttaannddaarrddss tthhaatt aarree nnoott yyeett mmaannddaattoorryy aanndd hhaavvee nnoott bbeeeenn aapppplliieedd bbyy tthhee GGrroouupp
None of the new standards and amendments that are not yet effective are expected to have a material effect on the Group.
((bb)) AAccccoouunnttiinngg ppoolliiccyy cchhaannggee
On 30 November 2020, the Group acquired Interserve and undertook a review to align accounting policies across the enlarged Group. It was identified
that Mitie’s accounting policy in relation to accounting for Banker’s Automated Clearing System (BACS) payments was different to that historically
applied by Interserve. Mitie’s accounting policy was to recognise BACS payments and receipts at the initiation date, whereas Interserve’s was to
recognise BACS payments and receipts at the settlement date. Following a review, it was decided to change Mitie’s accounting policy and recognise
BACS payments and receipts at the settlement date, as this would have operational benefits including simplifying the cash management process and
accelerating period end reporting.
The change in accounting policy has been accounted for retrospectively, and accordingly, the comparative information for 31 March 2020 has been
restated which has resulted in a reclassification between trade receivables, trade payables and cash and cash equivalents. As a consequence, net debt
has also been restated (as set out in the table below) and cash generated from operations has also been restated (as set out in the footnotes to the
Statement of consolidated cash flows). There has been no impact on the income statement, earnings per share or net assets.
The impact of the restatement on the consolidated balance sheet at 31 March 2020 and 1 April 2019 is shown below.
3311 MMaarrcchh 22002200
Cash and cash equivalents
Current trade and other receivables
Current trade and other payables
Net current liabilities
Net assets
Net debt
11 AApprriill 22001199
Cash and cash equivalents
Current trade and other receivables
Current trade and other payables
Net current liabilities
Net liabilities
Net debt
As reported
£m
Reclassification
£m
AAss rreessttaatteedd
££mm
124.6
403.1
14.9
11.5
113399..55
441144..66
(487.0)
(26.4)
((551133..44))
(53.2)
80.5
–
–
((5533..22))
8800..55
(167.9)
14.9
((115533..00))
As reported
£m
Reclassification
£m
AAss rreessttaatteedd
££mm
108.4
435.2
(533.9)
(129.6)
(12.4)
(228.2)
(5.4)
15.5
(10.1)
–
–
110033..00
445500..77
((554444..00))
((112299..66))
((1122..44))
(5.4)
((223333..66))
((cc)) SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess
The significant accounting policies adopted in the preparation of the Group’s IFRS financial information are set out below.
BBaassiiss ooff ccoonnssoolliiddaattiioonn
The Group’s consolidated financial statements comprise the financial statements of Mitie Group plc and all its subsidiaries. The Company’s separate
financial statements are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under FRS 100
issued the Financial Reporting Council (FRC). Accordingly, for the year ended 31 March 2021, the Company reported under FRS 101 as issued by the
FRC. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard.
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.
All inter-company balances and transactions, including unrealised profits arising from inter-group transactions, have been eliminated in full.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
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 equity holders of the parent.
JJooiinntt vveennttuurreess aanndd aassssoocciiaatteess
Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets of the entity, rather
than rights to its individual assets and obligations for its individual liabilities.
Associates are those entities over whose financial and operating policies the Group has significant influence, but not control or joint control.
The results, assets and liabilities of joint ventures and associates are incorporated in the Group’s financial statements using the equity method of
accounting except when classified as held for sale.
Under the equity method, an investment in a joint venture or associate is initially recognised in the consolidated balance sheet at cost and adjusted
thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the joint venture or associate. Any excess of the
cost of acquisition over the Group’s share of net fair value of the identifiable assets, liabilities and contingent liabilities of the joint venture or associate
at the date of acquisition is recognised as goodwill. Where the Group entity transacts with a joint venture or associate, profits and losses are eliminated
to the extent of the Group’s interest in the joint venture or associate.
JJooiinntt ooppeerraattiioonnss
A joint operation is a joint arrangement whereby the parties that have joint control have the right to the assets, and obligations for the liabilities,
relating to the arrangement or other facts and circumstances indicate that is the case. The Group’s share of the results, assets and liabilities of contracts
carried out in joint operations with another party are included under each relevant heading in the consolidated income statement and consolidated
balance sheet.
SSttaattuuttoorryy aanndd nnoonn--ssttaattuuttoorryy mmeeaassuurreess ooff ppeerrffoorrmmaannccee
The financial statements contain all the information and disclosures required by the relevant accounting standards and regulatory obligations that apply
to the Group.
In the financial statements, the Group has elected to provide some further disclosures and performance measures, reported as ‘before other items’, in
order to present its financial results in a way that demonstrates the performance of continuing operations.
Other items are items of financial performance which management believes should be separately identified on the face of the income statement to
assist in understanding the underlying financial performance achieved by the Group. The Group separately reports impairment of goodwill, impairment
and amortisation of acquisition related intangible assets, acquisition and disposal costs, gain or loss on business disposals, cost of restructuring
programmes and other exceptional items and their related tax effect as other items. Should these items be reversed, disclosure of this would also be
as other items.
Separate presentation of these items is intended to enhance understanding of the financial performance of the Group in the period and the extent to
which results are influenced by material unusual and/or non-recurring items. Further detail of other items is set out in Note 4.
In addition, following the guidelines on Alternative Performance Measures (APMs) issued by the European Securities and Markets Authorities (ESMA),
the Group has included an APM appendix to the financial statements on pages 211 to 213.
RReevveennuuee rreeccooggnniittiioonn ppoolliiccyy
The Group operates contracts with a varying degree of complexity across its service lines, so a range of methods is used for the recognition of revenue
based on the principles set out in IFRS 15. Revenue represents income recognised in respect of services provided during the period based on the
delivery of performance obligations and an assessment of when control is transferred to the customer.
IFRS 15 provides a single, principles based five-step model to be applied to all sales contracts as outlined below. It is based on the transfer of control of
goods and services to customers and replaces the separate models for goods, services and construction contracts.
Step 1 – Identify the contract(s) with a customer
For all contracts with customers, the Group determines if the arrangement creates enforceable rights and obligations. This assessment results in certain
Framework arrangements or Master Service Agreements (MSAs) not meeting the definition of contracts under IFRS 15 unless they specify the
minimum quantities to be ordered. Usually the work order and any change orders together with the Framework or MSA will constitute the IFRS 15
contract.
Duration of contract
The Group frequently enters into contracts with customers which contain extension periods at the end of the initial term, automatic annual renewals,
and/or termination for convenience and break clauses that could impact the duration of the contract. Judgement is applied to assess the impact that such
clauses have in determining the relevant contract term. The term of the contract affects the period over which amortisation of contract assets and
revenue from performance obligations is recognised. In forming this judgement, management considers certain influencing factors including the amount
of discount provided, the presence of significant termination penalties in the contract, and the relationship, experience and performance of contract
delivery with the customer and/or the wider industry, in understanding the likelihood of extension or termination of the contract.
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11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
Contract modifications
Where the Group’s contracts are amended for changes to customer requirements, such as change orders and variations, a contract modification takes
place when the amendment creates new enforceable rights and obligations or changes the existing price or scope (or both) of the contract, and the
modification has been approved. Contract modifications can be approved in writing, by oral agreement, or implied by customary business practices.
If the parties to the contract have not approved a contract modification, revenue is recognised in accordance with the existing contractual terms. If a
change in scope has been approved but the corresponding change in price is still being negotiated, change to the total transaction price is estimated.
Contract modifications are accounted for as a separate contract if the contract scope changes due to the addition of distinct goods or services and the
change in contract price reflects the standalone selling price of the distinct goods or services. If the price of additional distinct goods or services is not
commensurate with the standalone selling prices for those goods or services, then this is considered a termination of the original contract and the
creation of a new contract which is accounted for prospectively from the date of modification. Where new goods or services are not distinct from
those in the original contract, then these are considered to form part of the original contract with any update to pricing recognised as a cumulative catch
up to revenue. The facts and circumstances of any modification are considered in isolation as these are specific to each contract and may result in
different accounting outcomes.
Step 2 – Identify the performance obligations in the contract
Performance obligations are the contractual promises by the Group to transfer distinct goods or services to a customer. For arrangements with multiple
components to be delivered to customers such as in the Group’s integrated facilities management contracts, judgement is applied to consider whether
those promised goods or services are:
i.
ii.
iii. part of a series of distinct goods or services that are substantially the same and have the same pattern of transfer over time i.e. where the customer
distinct and accounted for as separate performance obligations;
combined with other promised goods or services until a bundle is identified that is distinct; or
is deemed to have simultaneously received and consumed the benefits of the goods or services over the life of the contract, the Group treats the
series as a single performance obligation.
Step 3 – Determine the transaction price
At contract inception, the total transaction price is determined, being the amount to which management expects the Group to be entitled and has rights
under the contract. This includes the fixed price stated in the contract and an assessment of any variable consideration, up or down, resulting from
e.g. discounts, rebates, service penalties. Variable consideration is typically estimated based on the expected value method and is only recognised to the
extent it is highly probable that a subsequent change in its estimate would not result in a significant revenue reversal.
Step 4 – Allocate the transaction price to the performance obligations in the contract
The Group allocates the total transaction price to the identified performance obligations based on their relative stand-alone selling prices. This is
predominantly based on an observable price or a cost plus margin arrangement. It is necessary to estimate the stand-alone selling price when the Group
does not sell equivalent goods or services in similar circumstances on a stand-alone basis. When estimating the stand-alone selling price, the Group
maximises the use of external inputs by observing the stand-alone selling prices for similar goods and services using an industry recognised price list or
cost indices in applying a cost-plus reasonable margin approach.
Step 5 – Recognise revenue when or as the entity satisfies its performance obligations
For each performance obligation, management determines if revenue will be recognised over time or at a point in time. Where revenue is recognised
over time, the Group applies the relevant output or input revenue recognition method for measuring progress that depicts the Group’s performance in
transferring control of the goods or services to the customer.
Certain long-term contracts use output methods based upon surveys of performance completed, appraisals of results achieved, or milestones reached
which allow the Group to recognise revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to
date relative to the remaining goods or services under the contract.
Under the input method, measured progress and revenue are recognised in direct proportion to costs incurred where the transfer of control is most
closely aligned to the Group’s efforts in delivering the service.
Where deemed appropriate, the Group will utilise the practical expedient within IFRS 15, allowing revenue to be recognised at the amount which the
Group has the right to invoice, where that amount corresponds directly with the value to the customer of the Group’s performance obligations
completed to date.
If performance obligations do not meet the criteria to recognise revenue over time, revenue is recognised at the point in time when control of the
goods or services passes to the customer. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer
obtains control of an asset or service in a contract with customer-specified acceptance criteria. Sales of goods are recognised when goods are delivered
and control has passed to the customer.
LLoonngg--tteerrmm ccoommpplleexx ccoonnttrraaccttss
The Group has a number of long-term complex contracts which are predominantly integrated facilities management arrangements. Typically, these
contracts involve the provision of multiple service lines, with a single management team providing an integrated service. Such contracts tend to be
transformational in nature where the business works with the customer to identify and implement cost saving initiatives across the life of the contract.
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For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
Management considers the majority of services provided within integrated facilities management contracts meet the definition of a series of distinct
goods or services that are substantially the same and have the same pattern of transfer over time. The series constitutes services provided in distinct
time increments (e.g. monthly or quarterly) and therefore the Group treats the series of such services as one performance obligation.
The Group also delivers major project-based services under long-term complex contracts that include performance obligations under which revenue is
recognised over time as value from the service is transferred to the customer. This may be where the Group has a legally enforceable right to
remuneration for the work completed to date, and therefore revenue will be recognised in line with the associated transfer of control.
The Group has a number of long-term PFI lifecycle contracts to maintain properties over periods of up to 30 years. A fund is established at the start of
the contract and amounts are drawn down by the Group as maintenance work is performed. For certain contracts the Group is also entitled to share in
any surplus left in the fund. Revenue is recognised over time to reflect the rendering of the service including an assessment of the appropriate
proportion of the likely surplus in the fund, subject to being highly probable not to reverse. The amount of surplus available is dependent on the rate of
wear and tear of the assets, which is substantially outside the control of the entity and the customer. As such the Group does not deem there to be a
significant financing component.
RReeppeeaatt sseerrvviiccee--bbaasseedd ccoonnttrraaccttss ((ssiinnggllee aanndd bbuunnddlleedd ccoonnttrraaccttss))
The Group operates a number of single or joint-service line arrangements where repeat services meet the definition of a series of distinct services that
are substantially the same (e.g. the provision of cleaning, security, catering, waste, and landscaping services). They have the same pattern of transfer of
value to the customer as the series constitutes core services provided in distinct time increments (e.g. monthly or quarterly). The Group therefore
treats the series of such services as one performance obligation.
SShhoorrtt--tteerrmm sseerrvviiccee--bbaasseedd aarrrraannggeemmeennttss
The Group delivers a range of other short-term service-based performance obligations and professional services work across certain reporting
segments for which revenue is recognised at the point in time when control of the service has transferred to the customer. This may be at the point
when the customer obtains control of the service in a contract with customer-specified acceptance criteria e.g. the delivery of a strategic operating
model or report.
GGoovveerrnnmmeenntt ggrraannttss
Government grants are recognised where there is reasonable assurance that the grant will be received and all conditions attaching to the grant will be
complied with. Government grants that compensate the Group for expenses incurred are recognised in the income statement as a deduction against
the related expense for which the grant is intended to compensate, over the periods necessary to match the grant with the related costs. Any
repayment of grants is charged to the income statement to reverse the deduction against the related expense, at the point when management has
taken the decision to repay the amount to the government and the intention to repay has been communicated to the government.
OOtthheerr rreevveennuuee
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.
CCoonnttrraacctt ccoossttss
The Group incurs pre-contract expenses (e.g. legal costs) when it is expected to enter into a new contract. The incremental costs to obtain a contract
with a customer are recognised within contract assets if it is expected that those costs will be recoverable. Costs to obtain a contract that would have
been incurred regardless of whether the contract was obtained are recognised as an expense in the period.
CCoonnttrraacctt ffuullffiillmmeenntt ccoossttss
Costs incurred to ensure that the project or programme has appropriate organisational, operational and technical infrastructures, and mechanisms in
place to enable the delivery of full services under the contract target operating model, are defined as contract fulfilment costs. Only costs which meet
all three of the criteria below are included within contract assets on the balance sheet:
i.
ii.
iii.
Contract fulfilment costs covered within the scope of another accounting standard, such as inventories, intangible assets, or property, plant and
equipment are not capitalised as contract fulfilment assets but are treated in accordance with the other standard.
the costs directly relate to the contract (e.g. direct labour, materials, subcontractors);
the Group is building an asset that will subsequently be used to deliver contract outcomes; and
the costs are expected to be recoverable i.e. the contract is expected to be profitable after amortising the capitalised costs.
AAmmoorrttiissaattiioonn aanndd iimmppaaiirrmmeenntt ooff ccoonnttrraacctt aasssseettss
The Group amortises contract assets (pre-contract costs and contract fulfilment costs) on a systematic basis that is consistent with the entity’s transfer
of the related goods or services to the customer. The expense is recognised in the income statement in the period.
A capitalised pre-contract cost or contract fulfilment cost is derecognised either when it is disposed of or when no further economic benefits are
expected to flow from its use.
Management is required to determine the recoverability of contract related assets at each reporting date. An impairment exists if the carrying amount
of any asset exceeds the amount of consideration the entity expects to receive in exchange for providing the associated goods and services, less the
remaining costs that relate directly to providing those goods and services under the relevant contract. In determining the estimated amount of
consideration, management uses the same principles as it does to determine the contract transaction price. An impairment is recognised immediately
where such losses are forecast.
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AAccccrruueedd iinnccoommee aanndd ddeeffeerrrreedd iinnccoommee
The Group’s customer contracts include a diverse range of payment schedules which are often agreed at the inception of long-term contracts under
which it receives payments throughout the term of the arrangement. Payments for goods and services transferred at a point in time may be at the
delivery date, in arrears or part payment in advance.
Where revenue recognised at the period end date is more than amounts invoiced, the Group recognises accrued income for the difference. Where
revenue recognised at the period end date is less than amounts invoiced, the Group recognises deferred income for the difference.
Where price step-downs are required in a contract and output is not decreasing, revenue is deferred from initial periods to subsequent periods in
order for revenue to be recognised on a consistent basis.
Providing the option for a customer to obtain extension periods or other services at a significant discount may lead to a separate performance
obligation where a material right exists. Where this is the case, the Group allocates part of the transaction price from the original contract to deferred
income which is then amortised over the discounted extension period or recognised immediately when the extension right expires.
FFoorreeiiggnn ccuurrrreennccyy
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. Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary items, are included in the income statement for the period.
Non-monetary items are measured in terms of historical cost in a foreign currency and are not retranslated.
On consolidation, the assets and liabilities of the Group’s foreign 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 is recognised in the income statement.
FFiinnaannccee ccoossttss
Finance costs consist of interest and other costs that are incurred in connection with the borrowing of funds. Finance costs are recognised in the income
statement in the period in which they are incurred, with the finance charges relating to the direct cost of debt issue spread over the period to
redemption using the effective interest method. The Group has elected to classify cashflows from interest paid as operating activities and interest
received as investing activities. Interest paid includes the interest portion of the lease liabilities.
TTaaxxaattiioonn
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 taxable 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; or 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.
OOppeerraattiinngg sseeggmmeennttss
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The
CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.
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For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
BBuussiinneessss ccoommbbiinnaattiioonnss
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 identifiable assets, liabilities and contingent liabilities of the acquiree 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. Negative goodwill representing a gain from a
bargain purchase, is recognised directly in the income statement.
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 the income statement, in accordance with IFRS 9.
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.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as
equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between: (i) the aggregate
of the fair value of the consideration received and the fair value of any retained interest; and (ii) the previous carrying amount of the assets (including
goodwill) and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation
to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary i.e. reclassified to profit or
loss or transferred to another category of equity as specified/permitted by applicable IFRSs. The fair value of any investment retained in the former
subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9, when applicable, of
an investment in an associate or a joint venture.
The Group measures the lease liability for acquired leases at the present value of the remaining lease payment discounted using an appropriate discount
rate. As permitted by IFRS 3 Business Combinations, the Group treats acquired leases as new leases, thereby recording the right-of-use asset as equal to
the lease liability.
GGooooddwwiillll
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,
liabilities and contingent 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 the income statement for the period and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs) expected to benefit from the synergies
of the combination. CGUs 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 CGU 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. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
When a business reorganisation results in changes to the composition of CGUs, goodwill is reallocated to updated CGUs. The goodwill allocated to a
prior CGU is wholly reallocated to an updated CGU, where the goodwill wholly arose on the acquisition of businesses comprised within the updated
CGU. Where this is not possible, a relative value approach is taken to allocate goodwill to updated CGUs.
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OOtthheerr iinnttaannggiibbllee aasssseettss
Other intangible assets identified in a business acquisition are capitalised at fair value as at the date of acquisition.
Customer contracts and relationships are amortised over their useful lives based on the period of time over which they are anticipated to generate
benefits. Other acquisition related intangibles include acquired software and technology which are amortised over their useful lives.
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. Software and development expenditure
includes internally generated intangible assets and is amortised over its useful life once it has been brought into use.
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 as follows:
Customer contracts and relationships
Acquired software and technology
5–15 years
3–10 years
PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
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:
Land and buildings
Plant and vehicles
50 years or lease term if shorter
3–10 years
The Group reviews the carrying amounts of its tangible 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 any impairment loss.
Where the asset does not generate cash flows that are independent from other assets, management estimates the recoverable amount of the CGU 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 CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) 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 CGU) 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 CGU) in prior years. A reversal of an impairment loss is recognised as income immediately.
IInnvveennttoorriieess
Inventories are stated at the lower of cost and net realisable value and are mainly consumables in nature.
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.
FFiinnaanncciiaall iinnssttrruummeennttss –– ccllaassssiiffiiccaattiioonn aanndd mmeeaassuurreemmeenntt
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 transferred, discharged or expire.
Financial assets comprise cash and cash equivalents, trade and other receivables from customers, derivative financial instruments, and contingent
consideration receivable. The classification of financial assets is generally based on the business model in which a financial asset is managed and its
contractual cash flow characteristics.
Cash and cash equivalents include cash in hand, 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. Cash that can only be used for a specific purpose or where access is
constrained is classified as restricted cash. All of the Group’s cash flows from customers are solely payments of principal and interest, and do not contain
a significant financing component. Financial assets generated from all of the Group’s revenue streams are therefore initially measured at their transaction
price and are subsequently remeasured at amortised cost.
Financial liabilities comprise trade and other payables, financing liabilities, and contingent consideration payable. These are measured at initial recognition
at fair value and subsequently at amortised cost with the exception of contingent consideration payable which is measured at fair value through profit or
loss. Financing liabilities 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 Group are recorded at the proceeds received, net of direct issue costs.
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For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
IInnvvooiiccee ddiissccoouunnttiinngg
The Group uses a non-recourse customer invoice discounting facility (CID facility) under which certain trade receivable balances are sold to the Group’s
relationship banks. The arrangement with the banks is such that the customers remit cash directly to the Group and the Group transfers the collected
amounts to the banks. The trade receivables are sold without recourse to the Group, and therefore the trade receivable balance is derecognised from
the Group’s balance sheet at the point of sale to the bank.
FFiinnaanncciiaall iinnssttrruummeennttss –– iimmppaaiirrmmeenntt ooff ffiinnaanncciiaall aasssseettss
The Group recognises a loss allowance for expected credit losses (ECLs) on all receivable balances from customers measured at amortised cost, using
the simplified approach. Under this approach, the Group recognises a loss allowance based on lifetime ECLs at each reporting date. ECLs are calculated
on the basis of historic and forward-looking data on default risk which is applied to customers with common risk characteristics such as sector type
(e.g. government or non-government).
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss aanndd hheeddggee aaccccoouunnttiinngg
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 the income statement
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the income
statement depends on the nature of the hedge relationship.
The Group presents derivative financial instruments as a non-current asset or a non-current liability if the remaining maturity of the instrument is more
than 12 months and it is not expected to be realised or settled within 12 months. Derivatives, which are set to mature or are expected to be realised or
settled within 12 months, are presented as current assets or current liabilities.
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. On adoption of IFRS 9, the Group
elected to continue to apply the hedge accounting guidance in IAS 39 ‘Financial Instruments: recognition and measurement’.
At the inception of the hedge relationship, the Group 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.
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 the income statement.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the income statement in the periods when
the hedged item is recognised in the income statement, in the same line 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 the income statement. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in
equity is recognised immediately in the income statement.
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 the income statement. Gains or losses on the hedging
instrument relating to the effective portion of the hedge accumulated in equity are reclassified to the income statement in the same way as exchange
differences relating to the foreign operation.
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11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
LLeeaasseess
The Group has various lease arrangements for properties (e.g. office buildings and storage facilities), vehicles, and other equipment including IT
equipment and machinery. At inception of a lease contract, the Group assesses whether the contract conveys the right to control the use of an
identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for
consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is a lessee,
except low-value leases and short-term leases of 12 months or less, costs for which are recognised as an operating expense within the income
statement as they are incurred.
A right-of-use asset is capitalised on the balance sheet at cost which comprises the present value of future lease payments determined at the inception
of the lease adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred in addition to an estimate
of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is offset against the right-of-use asset at inception.
Right-of-use assets are depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term and are reviewed
for impairment to account for any loss when events or changes in circumstances indicate the carrying value may not be fully recoverable.
The lease liability is initially measured at amortised cost using the effective interest rate method to calculate the present value of future lease payments
and is subsequently increased by the associated interest cost and decreased by lease payments made. The effective interest rate is based on estimates of
relevant incremental borrowing costs. Lease payments made are apportioned between an interest charge and a capital repayment amount which are
disclosed within the financing activities and the operating activities sections of the consolidated statement of cash flows respectively. Lease payments
comprise fixed lease rental payments only, with the exception of property leases for which the associated fixed service charge is also included. Lease
liabilities are classified between current and non-current on the balance sheet.
The lease term comprises the non-cancellable period in addition to the determination of the enforceable period which is covered by an option to
extend the lease, where it is reasonably certain that the option will be exercised, and the period covered by the option to terminate the lease to a point
in time where no more than an ‘insignificant penalty’ is incurred. The Group assesses an insignificant penalty with reference to the wider economics of
the lease including any investment in non-transferable leasehold improvements which may result in an impairment charge should the lease be terminated.
A modification to a lease which changes the lease payment amount (e.g. due to a renegotiation or market rent review) or amends the term of the lease,
results in a reassessment of the lease liability with a corresponding adjustment to the right-of-use asset.
PPrroovviissiioonnss aanndd ccoonnttiinnggeenntt lliiaabbiilliittiieess
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 management 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.
Onerous contract provisions (OCPs) arise when the unavoidable costs of meeting contractual obligations exceed the remuneration expected to be
received. Unavoidable costs include total contract costs together with a rational allocation of shared costs that can be directly linked to fulfilling
contractual obligations which have been systematically allocated to OCPs on the basis of key cost drivers, except where this is impracticable and contract
revenue is used as a proxy for activity. The provision is calculated as the lower of the termination costs payable for an early exit and the expected net
cost to fulfil the Group’s unavoidable contract obligations. Where a customer has an option to extend a contract and it is likely that such an extension
will be made, the expected net cost arising during the extension period is included within the calculation. However, where a profit can be reasonably
expected in the extension period, no credit is taken on the basis that such profits are uncertain given the potential for the customer to either not
extend or offer an extension under lower pricing terms.
No provisions are recognised and only a disclosure in the financial statements is made for contingent liabilities. Contingent liabilities are possible
obligations dependent on whether some uncertain future event occurs, or where a present obligation exists but payment is not probable, or the
amount of payment cannot be measured reliably.
CCoonnttiinnggeenntt aasssseettss
No assets are recognised and only a disclosure in the financial statements is made for contingent assets where an inflow of economic benefits is
probable but not virtually certain. Contingent assets are possible assets that arise from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Mitie Group plc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
11.. BBaassiiss ooff pprreeppaarraattiioonn aanndd ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
SShhaarree--bbaasseedd ppaayymmeennttss
The Group operates a number of executive and employee share option schemes. Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market based vesting conditions. For grants of share
options and awards, the fair value as at the date of grant is calculated using the Black-Scholes model or the share price at grant date, and the
corresponding expense is recognised on a straight-line basis over the vesting period based on management’s estimate of shares that will eventually vest.
At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market
based vesting conditions. 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 own shares reserve in equity includes the shares owned by the Employee Trust and treasury shares. When shares are transferred to employees
upon exercise of options and awards, the own shares reserve is reduced by the relevant cost or value.
CCoossttss iinnccuurrrreedd oonn iissssuuee ooff eeqquuiittyy
The Group has incurred costs in the period in relation to the 2020 rights issue. The transaction costs of such an equity transaction are recorded as a
deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.
RReettiirreemmeenntt bbeenneeffiitt ccoossttss
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 the related service is provided.
In addition, the Group operates and participates in a number of defined benefit schemes. In respect of the schemes in which the Group makes
contributions under Admitted Body status to clients’ defined benefit schemes in respect of certain employees who transferred to the Group under
TUPE, the Group accounts for its legal and constructive obligations over the period of its participation which is for a fixed period only.
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 by qualified actuaries. Actuarial gains and losses on obligations, the return on scheme assets (excluding
interest) and the effect of the asset ceiling (if applicable, excluding interest) are recognised in the statement of comprehensive income in the period in
which they occur.
Defined benefit pension costs (including curtailments) are recognised in the income statement, in either administrative expenses or other items, whilst
the net interest cost is recognised in finance costs.
The Group’s net liability in respect of defined benefit schemes is calculated separately for each scheme by estimating the amount of future benefit that
employees have earned in the current and prior periods, discounting that amount using the market yield on a high-quality corporate bond and deducting
the fair value of any scheme assets. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds from the scheme, where the Group has the unconditional right to the surplus, or
reductions in future contributions to the scheme.
The Group participates in four multi-employer defined benefit pension schemes. For three of these schemes the Group’s share of the assets and
liabilities is minimal. The fourth scheme is the Plumbing & Mechanical Services (UK) Industry Pension Scheme (the Plumbing Scheme), a funded multi-
employer defined benefit scheme. The Plumbing Scheme was founded in 1975 and to date has had over 4,000 employers, with circa 400 remaining.
Historically, the size and complexity of the Plumbing Scheme has meant the trustee has been unable to identify the assets and liabilities of the scheme
which are attributable to the Group. The Plumbing Scheme trustee has issued Section 75 employer debt notices in respect of the participation of
Robert Prettie & Co Limited and Mitie FM Limited (formerly Interserve (Facilities Management) Limited) in the Plumbing Scheme (refer to Notes 21
and 32). Another Group company, Mitie Property Services (UK) Limited, continues to participate in the Plumbing Scheme and the Group accounts for
its contributions as if they were paid to a defined contribution scheme. For schemes where sufficient information is not available to use defined benefit
accounting, no liability is recognised on the balance sheet, however, the obligations are disclosed as contingent liabilities in Note 34.
DDiivviiddeennddss
Interim dividends are recognised as a liability when they are paid and final dividends are recognised as a liability when authorised in a general meeting by
shareholders. Dividend income, including from joint ventures and associates, is recognised on receipt.
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22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss aanndd kkeeyy ssoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy
The preparation of consolidated financial statements under IFRS requires management to make judgements, estimates and assumptions that affect
amounts recognised for assets and liabilities at the reporting date and the amounts of revenue and expenses incurred during the reporting period.
Actual results may differ from these judgements, estimates and assumptions.
CCrriittiiccaall jjuuddggeemmeennttss iinn aappppllyyiinngg tthhee GGrroouupp’’ss aaccccoouunnttiinngg ppoolliicciieess
The following are the critical judgements, made by management in the process of applying the Group’s accounting policies, that have the most significant
effect on the amounts recognised in the Group’s financial statements.
Revenue recognition
The Group’s revenue recognition policies, which are set out under Revenue recognition in Note 1, are central to how the Group measures the work it
has performed in each financial year.
Due to the size and complexity of the Group’s contracts, management is required to form a number of key judgements in the determination of the
amount of revenue and profits to record, and related balance sheet items such as contract assets, accrued income and deferred income to recognise.
This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as
incurred or capitalised. These judgements are inherently subjective and may cover future events such as the achievement of contractual performance
targets and planned cost savings or discounts.
For certain contracts, key judgements were made concerning contract extensions and amendments which, for example, directly impact the timing of
revenue recognition in addition to the phasing of upfront payments to, or from customers which are deferred to the balance sheet and unwound over
the expected contract term. Management considers this to be an area of judgement due to the determination of whether a modification represents a
separate contract based on its assessment of the stand-alone selling price, rather than a termination of the existing contract and establishment of a new
contract for which the revised contract price would be recognised from the date of modification.
Profit before other items
‘Other items’ are items of financial performance which management believes should be separately identified on the face of the income statement to
assist in understanding the underlying financial performance achieved by the Group. Determining whether an item should be classified within other
items requires judgement as to whether an item is or is not part of the underlying performance of the Group.
Other items after tax of £44.8m were charged (2020: £30.2m credited) to the income statement for the year ended 31 March 2021. An analysis of the
amounts included in other items is detailed in Note 4.
Recoverability of trade receivables and accrued income
The Group has material amounts of billed and unbilled work outstanding at 31 March 2021. Receivables are recognised initially at cost (being the same
as fair value) and subsequently at amortised cost less any allowance for impairment, to ensure that amounts recognised represent the recoverable
amount. The Group recognises a loss allowance for expected credit losses (ECLs) on all receivable balances from customers using a lifetime credit loss
approach and includes specific allowance for impairment where there is evidence that the Group will not be able to collect amounts due from
customers, subsequent to initial recognition. Management applies judgement on specific allowances for impairment based on the information available
at each reporting date which includes information about past events, current conditions and forecasts of the future economic condition of customers.
The judgement on specific allowance for impairments on receivables as at 31 March 2021 has included an assessment of COVID-19 impacts.
IFRS 16 – Determining the lease term of contracts with renewal and termination options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease
if it is reasonably certain to be exercised, or any period covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension and termination options. Management applies judgement in evaluating whether it is
reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an
economic incentive for the Group to exercise either the renewal or termination option. After the commencement date, the Group reassesses the lease
term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to
renew or to terminate the lease.
Business combination – purchase price allocation
The Group completed the acquisition of Interserve on 30 November 2020. The provisional purchase consideration totalled £142.0m which resulted in
a provisional goodwill balance of £3.3m recognised on acquisition, after considering the provisional fair values of the identifiable net assets acquired of
£138.7m. See Note 30.
The total consideration reported of £142.0m includes a provisional value for the adjustment to consideration which relates to the completion accounts
process for this transaction. This provisional value represents management’s best estimate of the amount expected to be received through the
completion accounts process. The adjustment has reduced the fair value of consideration and therefore goodwill by £57.6m, with a corresponding
receivable being recorded. See Notes 16 and 30.
This has required management to make judgements around the outcome of the completion accounts process. The outcome of the completion accounts
process is inherently uncertain, given that this is subject to a commercial negotiation and potentially expert determination, and the final amount agreed
could therefore be materially different from the estimate.
The fair value of consideration and goodwill recognised are therefore provisional and subject to finalisation. As permitted under IFRS 3, any revisions to
the purchase consideration or to the fair value of the assets and liabilities acquired, which arise in the 12 months following the date of acquisition and
relate to conditions and information that existed at the date of acquisition, will result in an adjustment against the goodwill.
When the Group completes a business combination, the fair value of the identifiable assets and liabilities acquired are recognised through a purchase
price allocation process, the determination of which requires management judgement. The most significant fair value adjustment relates to attributing
value to the acquired intangible assets recognised (primarily customer contracts and relationships).
Mitie Group plc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss aanndd kkeeyy ssoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy ccoonnttiinnuueedd
In determining the fair value of Interserve's customer contracts and relationships, the Group used forecast customer cash flows from the contracts and
expected renewal rates and applied an appropriate discount rate specific to the asset. In determining the cash flows, management used judgement to
estimate revenue growth, profit margins, contract renewal probability and the average contract duration remaining as well as the discount rate. This
analysis indicated a provisional fair value for customer contracts and relationships of £219.3m with a corresponding provisional deferred tax liability in
relation to those intangible assets of £41.5m. This provisional deferred tax liability has been partially offset by deferred tax assets in relation to unutilised
income tax losses, accelerated capital allowances, retirement benefit liabilities and other short-term timing differences. The fair value of other intangible
assets acquired (computer software) was estimated using a cost to purchase or replace the assets. The Group used independent valuation specialists to
assist with identifying and valuing the acquired intangible assets.
Certain other judgements have been made relating to the fair value of contingent liabilities and, favourable or unfavourable leases and also to the
recognition of right-of-use assets and corresponding lease liabilities.
Landmarc joint venture
The Group holds 51% of the equity shares in Landmarc Support Services (Landmarc), a jointly-controlled entity, through its shareholding in Interserve.
The remaining 49% of the equity shares in Landmarc are held by a single third party. Management considers Landmarc to be a joint venture despite the
Group having majority voting rights. This is because, under the terms of the shareholder agreement, joint agreement is required with the other party to
pass resolutions for all significant activities. Accordingly, the Group does not exert control on Landmarc to recognise it as a subsidiary.
The Group accounts for its investment in Landmarc using the equity method. See Note 15.
KKeeyy ssoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that may 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:
Provisions and contingent liabilities
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.
Judgements are required in order to assess whether these legal proceedings and claims are probable, and the liability can be reasonably estimated,
resulting in a provision or, alternatively, whether the items meet the definition of contingent liabilities.
Provisions are liabilities of uncertain timing or amount and therefore in making a reliable estimate of the quantum and timing of liabilities, judgement is
applied and re-evaluated at each reporting date. The Group recognised provisions at 31 March 2021 of £116.4m (2020: £53.2m). Further details are
included in Note 21.
The Group has disclosed a contingent liability in relation to a cyber incident. On 13 May 2020, Interserve Group Limited (IGL) announced it was subject
to a cyber-attack which affected elements of IGL’s IT systems (including enterprise resource planning and human resource systems), including elements
related to Interserve. The Information Commissioner's Office (the ICO) has advised IGL that it considers it likely that IGL or members of IGL (which
could include Interserve) are in breach or likely to be in breach of certain articles of the UK GDPR and likely to be subject to regulatory action in
respect of the matter which could result in a remedial order or fine. Management cannot predict the results of the ICO investigation and therefore the
Group is unable to reliably estimate any meaningful settlement amount at the reporting date. It has therefore been disclosed as a contingent liability due
to uncertainty regarding the amount of the liability. Further details are included in Note 34.
Onerous contract provisions
Onerous contract provisions totalling £12.2m have been recognised at 31 March 2021 (2020: £nil). These primarily arose on the acquisition
of Interserve.
The Group assesses whether a contract is onerous on an individual basis at each reporting date. Determining the carrying value of onerous contract
provisions requires assumptions and complex judgements to be made about the future performance of the Group’s contracts. The level of uncertainty
in the estimates made, either in determining whether a provision is required, or in the measurement of a provision booked, is linked to the complexity
of the underlying contract.
The major sources of judgement when measuring the level of provision to book are:
• The level of accuracy in forecasting future variable revenue and costs to complete the contract;
• The ability of the Group to maintain or improve operational performance to ensure cost assumptions are in line with expected levels, including
contract specific KPIs;
• Identifying cost saving initiatives that are considered to be reasonably certain in terms of timing and scale; and
• Expectations around the resolution of contract specific disputes and the likelihood of incurring future costs associated with remediation or
reactive work.
The future range of possible outcomes in respect to judgements and assumptions made to determine the carrying value of the Group’s onerous
contract provisions could result in a material increase or decrease in the value of the provisions, and hence on the Group’s profitability in the next
financial year. To mitigate this, management regularly compares actual contract performance against previous forecasts used to measure the onerous
contract provisions and considers if revised judgements are required.
The Directors have assessed the range of possible outcomes on contracts requiring an onerous contract provision, based on facts and circumstances that
were present and known at the balance sheet date. To the extent that sensitivities around the major sources of judgement identified above in measuring
the provision are, in aggregate, those factors affecting the potential contract outcomes, the assessed range of possible outcomes on these contracts in the
next financial year could potentially lead to a gain of up to £11.5m or a further loss of up to £12.8m being recognised.
158
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22.. CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss aanndd kkeeyy ssoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy ccoonnttiinnuueedd
Other contract specific provisions recognised on the acquisition of Interserve
In addition to the onerous contract provisions, the Group has recognised £41.9m of contract specific provisions at 31 March 2021 (2020: £10.7m).
These have been recognised primarily to cover costs required to meet specific contractual obligations.
£14.6m of this balance relates to a significant liability risk on a certain contract, which is subject to a dispute. Management sought external assistance
to value the potential risk exposure to the Group. The actual exposure to the Group may differ to what has been provided at 31 March 2021 due
to the compounding effect of multiple variables associated with the particular issues involved in the dispute. The value of the provision represents
management's best estimate. Management considers that to the extent that it is agreed or determined that the Group is found to have a liability, a
reasonably possible set of alternative outcomes could increase the liability to £22.0m, and other possible outcomes could increase the liability further.
Management will continue to assess the provision recorded in arriving at its best estimate of any potential resolution at each subsequent reporting date.
Measurement of defined benefit pension obligations
The net pension liability at 31 March 2021 was £42.5m (2020: £46.7m), which includes a retirement benefit asset of £3.0m (2020: £nil).
The measurement of defined benefit obligations requires judgement. It is dependent on material key assumptions including discount rates, life
expectancy rates, and future contribution rates. See Note 32 for further details and a sensitivity analysis for the key assumptions.
The Group also participates in four multi-employer defined benefit pension schemes, including the Plumbing & Mechanical Services (UK) Industry
Pension Scheme (the Plumbing Scheme). The Group has recognised provisions of £21.7m at 31 March 2021 for Section 75 employer debts in
respect of the participation of Robert Prettie & Co. Limited and Mitie FM Limited (formerly Interserve (Facilities Management) Limited) in the
Plumbing Scheme.
Deferred tax assets
The Group has recognised deferred tax assets of £32.0m (2020: £32.6m), refer to Note 22. Management has assessed recovery of these assets with
reference to the Group’s medium-term forecasts. Recovery of these assets is subject to the Group generating taxable profits in future years.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
33.. BBuussiinneessss sseeggmmeenntt iinnffoorrmmaattiioonn
The Group manages its business on a service division basis. At 31 March 2021, the Group had six reportable segments; Business Services, Technical
Services, Care & Custody, Landscapes, Waste and Interserve. Care and Custody, Landscapes and Waste are aggregated and categorised as Specialist
Services, however each of these businesses individually meets the IFRS 8 ‘Operating Segments’ criteria for being a separate reportable segment.
The information, as reported, is consistent with information presented to the Board of Directors, which is the Group’s chief operating decision maker.
Revenue, operating profit before other items and operating profit margin before other items are the primary measures of performance that are
reported to and reviewed by the Board.
Segment assets have not been disclosed as they are not reviewed by the Board.
IInnccoommee ssttaatteemmeenntt iinnffoorrmmaattiioonn
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
Corporate centre
TToottaall ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss
Catering
TToottaall ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall
22002211
OOppeerraattiinngg
pprrooffiitt//((lloossss))
bbeeffoorree ootthheerr
iitteemmss22
££mm
OOppeerraattiinngg
mmaarrggiinn bbeeffoorree
ootthheerr iitteemmss22
%%
4499..44
2266..44
2222..55
77..44
88..44
66..77
1133..33
((4488..22))
6633..44
––
––
44..66
33..22
99..66
66..88
1166..77
99..00
33..00
––
22..44
––
––
22..44
RReevveennuuee11
££mm
11,,008855..00
882200..77
223333..66
110088..88
5500..22
7744..66
445500..00
––
22,,558899..33
––
––
22,,558899..33
6633..44
Operating
profit/(loss)
before other
items2
£m
2020
Operating
margin before
other items2
%
42.2
55.9
25.3
7.7
8.6
9.0
–
(37.3)
86.1
2.8
2.8
88.9
4.3
5.9
10.6
7.0
18.0
11.0
–
–
4.0
4.6
4.6
4.0
Revenue
£m
986.9
947.2
239.6
110.2
47.8
81.6
–
–
2,173.7
60.5
60.5
2,234.2
Notes:
1 Revenue includes share of joint ventures and associates.
2 Other items are as described in Note 4.
3 No single customer accounted for more than 10% of external revenue in the year ended 31 March 2021 or in the comparative period. The UK Government Is not considered a single customer.
A reconciliation of segment operating profit before other items to total (loss)/profit before tax is provided below:
22002211
££mm
6633..44
((5555..11))
((1177..44))
((99..11))
––
33..22
––
33..22
((55..99))
2020
£m
86.1
(21.5)
(16.2)
48.4
2.8
49.0
(0.2)
51.6
100.0
Operating profit before other items
Other items1
Net finance costs
TToottaall ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss
Operating profit before other items
Other items1
Net finance costs
TToottaall ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss
((LLoossss))//pprrooffiitt bbeeffoorree ttaaxx
Note:
1 Other items are as described in Note 4.
160
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
33.. BBuussiinneessss sseeggmmeenntt iinnffoorrmmaattiioonn ccoonnttiinnuueedd
GGeeooggrraapphhiiccaall sseeggmmeennttss
Revenue, operating profit and operating margin from external customers by geographical segment is shown below:
22002211
2020
OOppeerraattiinngg
pprrooffiitt bbeeffoorree
ootthheerr iitteemmss22
££mm
OOppeerraattiinngg
mmaarrggiinn bbeeffoorree
ootthheerr iitteemmss22
%%
6600..55
22..99
6633..44
––
––
––
22..44
33..11
22..44
––
––
––
RReevveennuuee11
££mm
22,,449944..44
9944..99
22,,558899..33
––
––
––
Revenue
£m
2,108.6
65.1
2,173.7
50.8
9.7
60.5
22,,558899..33
6633..44
22..44
2,234.2
Operating
profit before
other items2
£m
Operating
margin before
other items2
%
85.2
0.9
86.1
2.1
0.7
2.8
88.9
4.0
1.4
4.0
4.1
7.2
4.6
4.0
United Kingdom
Other countries
CCoonnttiinnuuiinngg ooppeerraattiioonnss
United Kingdom
Other countries
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall
Notes:
1 Revenue includes share of joint ventures and associates.
2 Other items are as described in Note 4.
The carrying amount of non-current assets, excluding interest in joint ventures and associates, derivative financial instruments and deferred tax assets, by
geographical segment is shown below:
United Kingdom
Other countries
Total
SSuupppplleemmeennttaarryy iinnffoorrmmaattiioonn
DDeepprreecciiaattiioonn ooff
pprrooppeerrttyy,, ppllaanntt
aanndd eeqquuiippmmeenntt
££mm
AAmmoorrttiissaattiioonn ooff
iinnttaannggiibbllee aasssseettss
££mm
AAmmoorrttiissaattiioonn ooff
ccoonnttrraacctt aasssseettss
££mm
33..22
00..66
11..77
00..33
00..88
00..66
00..88
2288..11
3344..44
––
––
––
––
––
11..11
00..55
––
––
––
––
00..66
1155..33
1177..55
––
––
––
––
––
––
11..00
00..77
00..77
––
––
––
––
11..77
––
––
––
––
––
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
Corporate centre
CCoonnttiinnuuiinngg ooppeerraattiioonnss
Catering
Healthcare
Pest Control
Social Housing
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall
3344..44
1177..55
11..77
Note:
1 Other items are as described in Note 4.
22002211
££mm
666688..11
1111..99
668800..00
22002211
OOtthheerr
iitteemmss11
££mm
1188..66
2222..77
44..00
11..99
00..88
11..33
77..00
22..88
5555..11
11..66
((22..11))
((00..77))
((22..00))
((33..22))
5511..99
Depreciation of
property, plant
and equipment
£m
Amortisation of
intangible assets
£m
Amortisation of
contract assets
£m
4.9
3.1
2.3
0.3
1.1
0.9
–
22.6
32.9
0.4
–
–
–
0.4
33.3
1.2
0.6
–
–
–
–
–
9.6
11.4
–
–
–
–
–
–
0.9
0.6
0.6
–
–
–
–
1.5
–
–
–
–
–
11.4
1.5
2020
£m
435.5
11.3
446.8
2020
Other
items1
£m
(0.2)
8.0
0.2
0.1
–
0.1
–
13.5
21.5
(50.7)
(0.5)
0.7
1.5
(49.0)
(27.5)
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
161
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
33.. BBuussiinneessss sseeggmmeenntt iinnffoorrmmaattiioonn ccoonnttiinnuueedd
DDiissaaggggrreeggaatteedd rreevveennuuee
The Group disaggregates revenue from contracts with customers by sector (government and non-government) and by contract duration (contracts
with a duration from inception of less than two years, and contracts with a duration from inception of more than two years). Management believes
this best depicts how the nature, timing and amount of revenue and cash flows are affected by economic factors. The following table includes a
reconciliation of disaggregated revenue with the Group’s reportable segments.
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
SSeeccttoorr11,,22 CCoonnttrraacctt dduurraattiioonn ffoorr ttiimmiinngg ooff rreevveennuuee rreeccooggnniittiioonn22
22002211
GGoovveerrnnmmeenntt
££mm
NNoonn--
ggoovveerrnnmmeenntt
££mm
TToottaall
££mm
LLeessss tthhaann
22 yyeeaarrss
££mm
MMoorree tthhaann
22 yyeeaarrss
££mm
332233..22
227722..99
114477..33
110088..88
1133..11
2255..44
337733..33
776611..88
554477..88
8866..33
––
3377..11
4499..22
7766..77
11,,008855..00
223300..11
882200..77
223333..66
110088..88
5500..22
7744..66
445500..00
9944..55
2288..33
––
1155..44
1122..99
1122..44
885544..99
772266..22
220055..33
110088..88
3344..88
6611..77
443377..66
TToottaall
££mm
11,,008855..00
882200..77
223333..66
110088..88
5500..22
7744..66
445500..00
CCoonnttiinnuuiinngg ooppeerraattiioonnss aanndd TToottaall
11,,111166..77
11,,447722..66
22,,558899..33
336655..33
22,,222244..00
22,,558899..33
Notes:
1 Sector is defined by the end customer on any contract e.g. if the Group is a subcontractor to a company repairing a government building, then the contract would be classified as government.
2 Revenue includes share of joint ventures and associates.
Sector1
Contract duration for timing of revenue recognition
2020
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
CCoonnttiinnuuiinngg ooppeerraattiioonnss
Catering
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall
Government
£m
Non-
government
£m
Less than
2 years
£m
More than
2 years
£m
Total
£m
986.9
947.2
239.6
110.2
47.8
81.6
792.9
643.5
88.2
–
35.8
52.4
Total
£m
986.9
947.2
239.6
110.2
47.8
81.6
675.1
847.2
217.5
110.2
34.9
72.4
311.8
100.0
22.1
–
12.9
9.2
433.9
8.2
8.2
1,524.6
2,173.7
57.1
57.1
60.5
60.5
1,739.8
2,173.7
52.3
52.3
60.5
60.5
652.5
1,581.7
2,234.2
442.1
1,792.1
2,234.2
194.0
303.7
151.4
110.2
12.0
29.2
649.1
3.4
3.4
Note:
1 Sector is defined by the end customer on any contract e.g. if the Group is a subcontractor to a company repairing a government building, then the contract would be classified as government.
162
116622
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
33.. BBuussiinneessss sseeggmmeenntt iinnffoorrmmaattiioonn ccoonnttiinnuueedd
TTrraannssaaccttiioonn pprriiccee aallllooccaatteedd ttoo tthhee rreemmaaiinniinngg ppeerrffoorrmmaannccee oobblliiggaattiioonnss
The table below shows the forward order book for each segment at the reporting date with the time bands of when the Group expects to recognise
secured revenue on its contracts with customers. Secured revenue corresponds to all fixed work contracted with customers and excludes the impact
of any anticipated contract extensions, and new contracts with customers.
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
CCoonnttiinnuuiinngg ooppeerraattiioonnss aanndd TToottaall
Note:
1 Forward order book includes share of joint ventures and associates.
22002211
2020
LLeessss tthhaann
11 yyeeaarr
££mm
MMoorree tthhaann
11 yyeeaarr
££mm
TToottaall
sseeccuurreedd rreevveennuuee
££mm
Less than
1 year
£m
More than
1 year
£m
Total
secured revenue
£m
777722..11
444488..99
110077..77
9999..77
00..22
77..88
776600..99
22,,008899..66
886611..00
11,,443355..00
442200..44
334455..22
6611..99
1133..33
22,,339966..11
55,,111122..55
11,,663333..11
11,,888833..99
552288..11
444444..99
6622..11
2211..11
33,,115577..00
77,,220022..11
782.9
380.3
119.9
89.9
22.3
7.7
–
1,051.8
1,533.9
425.6
391.2
18.1
16.3
–
1,834.7
1,914.2
545.5
481.1
40.4
24.0
–
1,283.1
3,011.3
4,294.4
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
163
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
44.. OOtthheerr iitteemmss
Other items are items of financial performance which management believes should be separately identified on the face of the income statement to
assist in understanding the underlying financial performance achieved by the Group.
The Group separately reports impairment of goodwill, impairment and amortisation of acquisition related intangible assets, acquisition and disposal
related costs, gain or loss on business disposals, cost of restructuring programmes and other exceptional items as other items, together with their
related tax effect:
RReessttrruuccttuurree
ccoossttss
££mm
AAccqquuiissiittiioonn &&
ddiissppoossaall
rreellaatteedd ccoossttss
££mm
GGaaiinn oonn
ddiissppoossaall
££mm
OOtthheerr
eexxcceeppttiioonnaall
iitteemmss
££mm
((2255..22))
44..88
((2200..44))
––
––
––
((2255..22))
44..88
((2200..44))
((3333..11))
33..33
((2299..88))
22..00
((00..44))
11..66
((3311..11))
22..99
((2288..22))
––
––
––
11..22
––
11..22
11..22
––
11..22
33..22
((00..66))
22..66
––
––
––
33..22
((00..66))
22..66
Restructure
costs
£m
Acquisition &
disposal
related costs
£m
Gain on
disposal
£m
Other
exceptional
items
£m
(15.7)
2.7
(13.0)
–
–
–
(15.7)
2.7
(13.0)
(3.5)
1.0
(2.5)
(1.3)
0.3
(1.0)
(4.8)
1.3
(3.5)
–
–
–
50.3
(1.6)
48.7
50.3
(1.6)
48.7
(2.3)
0.3
(2.0)
–
–
–
(2.3)
0.3
(2.0)
22002211
TToottaall
££mm
((5555..11))
77..55
((4477..66))
33..22
((00..44))
22..88
((5511..99))
77..11
((4444..88))
2020
Total
£m
(21.5)
4.0
(17.5)
49.0
(1.3)
47.7
27.5
2.7
30.2
Continuing operations
OOtthheerr iitteemmss wwiitthhiinn aaddmmiinniissttrraattiivvee eexxppeennsseess bbeeffoorree ttaaxx
Tax
Other items after tax
Discontinued operations
OOtthheerr iitteemmss bbeeffoorree ttaaxx
Tax
OOtthheerr iitteemmss aafftteerr ttaaxx
Total Group
OOtthheerr iitteemmss bbeeffoorree ttaaxx
Tax
OOtthheerr iitteemmss aafftteerr ttaaxx
Continuing operations
OOtthheerr iitteemmss wwiitthhiinn aaddmmiinniissttrraattiivvee eexxppeennsseess bbeeffoorree ttaaxx
Tax
OOtthheerr iitteemmss aafftteerr ttaaxx
Discontinued operations
OOtthheerr iitteemmss bbeeffoorree ttaaxx
Tax
OOtthheerr iitteemmss aafftteerr ttaaxx
Total Group
OOtthheerr iitteemmss bbeeffoorree ttaaxx
Tax
OOtthheerr iitteemmss aafftteerr ttaaxx
164
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
44.. OOtthheerr iitteemmss ccoonnttiinnuueedd
RReessttrruuccttuurree ccoossttss
The Group is undertaking a major transformation programme involving the restructuring of operations to reposition the business for its next phase of
growth, which includes Project Helix, Project Forte and Property. The costs are analysed below:
Group transformation programme:
Project Helix1
Project Forte2
Property3
Other transformation projects4
RReessttrruuccttuurree ccoossttss
Tax
RReessttrruuccttuurree ccoossttss nneett ooff ttaaxxaattiioonn
CCoonnttiinnuuiinngg
ooppeerraattiioonnss
££mm
DDiissccoonnttiinnuueedd
ooppeerraattiioonnss
££mm
––
((1100..66))
((1111..33))
((33..33))
((2255..22))
44..88
((2200..44))
––
––
––
––
––
––
––
22002211
TToottaall
££mm
––
((1100..66))
((1111..33))
((33..33))
((2255..22))
44..88
((2200..44))
Continuing
operations
£m
Discontinued
operations
£m
(3.6)
(10.6)
(1.5)
–
(15.7)
2.7
(13.0)
–
–
–
–
–
–
–
2020
Total
£m
(3.6)
(10.6)
(1.5)
–
(15.7)
2.7
(13.0)
Notes:
1 Project Helix was a three-year programme launched in 2017, focused on establishing a shared service centre model for key back office functions, including offshoring the majority of Finance and IT,
and centralising HR following the standardisation of systems. The project was completed by March 2020.
2 Project Forte was launched in 2019, primarily focused on re-engineering the Technical Services business to modernise the technology infrastructure. It will improve both the customer experience
and the efficiency of the internal operations. Project Forte will also drive further Group-wide organisational consolidation, automation of processes and further offshoring of back office activities.
The project is expected to complete by March 2022.
3 Programme to restructure the property portfolio to align with the new operating model, which involves the vacation of office space. This has been separated from other transformation projects
for the year ended 31 March 2021.
4 Other transformation projects focus on aligning the remaining areas of the business to the new operating model, including redundancy costs related to major restructuring as a result of COVID-19,
and simplifying the management structure.
The costs associated with the Group transformation programme include redundancy costs of £3.2m (2020: £4.4m), right-of-use asset impairments of
£6.3m (2020: £0.8m), other onerous lease costs of £2.6m (2020: £0.7m), intangible impairments of £3.4m (2020: £nil), property, plant and equipment
impairments of £1.9m (2020: £nil), consultancy costs of £3.6m (2020: £1.8m) and fixed-term staff costs of £4.2m (2020: £8.0m) to manage and
implement the changes.
AAccqquuiissiittiioonn aanndd ddiissppoossaall rreellaatteedd ccoossttss
Interserve acquisition related costs1
Interserve integration costs2
Interserve amortisation of acquisition related assets3
Total Interserve acquisition costs
Other amortisation of acquisition related intangible assets
Other transaction related projects
Other acquisition transaction costs
Other integration costs
Restricted shares issued
VSG liability release
Other disposal income/(costs)4
AAccqquuiissiittiioonn aanndd ddiissppoossaall ccoossttss
Tax
AAccqquuiissiittiioonn aanndd ddiissppoossaall ccoossttss nneett ooff ttaaxxaattiioonn
CCoonnttiinnuuiinngg
ooppeerraattiioonnss
££mm
DDiissccoonnttiinnuueedd
ooppeerraattiioonnss
££mm
((1144..88))
((88..88))
((66..77))
((3300..33))
((22..22))
((00..66))
––
––
––
––
––
((3333..11))
33..33
((2299..88))
––
––
––
––
––
––
––
––
––
––
22..00
22..00
((00..44))
11..66
22002211
TToottaall
££mm
((1144..88))
((88..88))
((66..77))
((3300..33))
((22..22))
((00..66))
––
––
––
––
22..00
((3311..11))
22..99
((2288..22))
Continuing
operations
£m
Discontinued
operations
£m
–
–
–
–
(2.3)
(1.6)
(0.1)
(0.6)
(0.8)
1.9
–
(3.5)
1.0
(2.5)
–
–
–
–
–
–
–
–
–
–
(1.3)
(1.3)
0.3
(1.0)
2020
Total
£m
–
–
–
–
(2.3)
(1.6)
(0.1)
(0.6)
(0.8)
1.9
(1.3)
(4.8)
1.3
(3.5)
Notes:
1 Comprises of professional fees of £13.6m, fixed term staff costs of £0.2m and retention costs of £1.0m.
2 Comprises of staff related integration costs of £5.3m, redundancy costs of £1.7m, right-of-use asset impairments of £1.1m and other integration costs of £0.7m.
3 Includes £5.5m amortisation on customer contracts and relationships acquired with Interserve and £1.2m related to the Group's share of the amortisation of customer contracts and relationship
assets arising on the acquisition of Landmarc Support Services Limited which has been equity accounted. See Notes 13 and 15.
4 Other disposal income in the year ended 31 March 2021 was related to the release of provisions for rectification works on property maintenance contracts associated with the disposal of the
Social Housing business. See Note 5.
GGaaiinn oonn ddiissppoossaall
A net gain on disposal of businesses of £1.2m (2020: £50.3m) has been recognised in Other items. See Note 5 for further details.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
165
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
44.. OOtthheerr iitteemmss ccoonnttiinnuueedd
OOtthheerr eexxcceeppttiioonnaall iitteemmss
Other exceptional items included in operating profit are analysed below:
Regulatory investigation1
IFRS 16/15/9 adoption and implementation projects
Net settlement of legal dispute2
Cost of equalising Guaranteed Minimum Pensions
Other exceptional items
OOtthheerr eexxcceeppttiioonnaall iitteemmss
Tax
OOtthheerr eexxcceeppttiioonnaall iitteemmss nneett ooff ttaaxxaattiioonn
CCoonnttiinnuuiinngg
ooppeerraattiioonnss
££mm
DDiissccoonnttiinnuueedd
ooppeerraattiioonnss
££mm
((00..11))
––
33..77
((00..22))
((00..22))
33..22
((00..66))
22..66
––
––
––
––
––
––
––
––
22002211
TToottaall
££mm
((00..11))
––
33..77
((00..22))
((00..22))
33..22
((00..66))
22..66
Continuing
operations
£m
Discontinued
operations
£m
(0.7)
(0.7)
(0.9)
–
–
(2.3)
0.3
(2.0)
–
–
–
–
–
–
–
–
2020
Total
£m
(0.7)
(0.7)
(0.9)
–
–
(2.3)
0.3
(2.0)
Notes:
1 Incurred £0.1m (2020: £0.7m) legal and professional costs in respect of the FRC and FCA investigations, and the Company’s own investigations into the same matters. These investigations have
now been closed.
2 Legal costs of £0.3m (2020: £0.9m) have been incurred and a settlement of £4.0m (2020: £nil) has been received, in relation to a legal dispute.
55.. DDiissccoonnttiinnuueedd ooppeerraattiioonnss aanndd ddiissppoossaall ooff ssuubbssiiddiiaarriieess
There have been no disposals of businesses or discontinued operations meeting the criteria of IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations in the year ended 31 March 2021.
The results relating to operations which were discontinued in prior periods are detailed below.
IInnccoommee ssttaatteemmeenntt ooff ddiissccoonnttiinnuueedd ooppeerraattiioonnss
Total consideration1
Net assets disposed
Release of customer liability
Release of indemnity provision
Transaction costs
Total (loss)/gain on disposal before tax
Tax
NNeett ((lloossss))//ggaaiinn oonn ddiissppoossaall ooff ddiissccoonnttiinnuueedd ooppeerraattiioonnss aass
rreeppoorrtteedd iinn ootthheerr iitteemmss ((sseeee NNoottee 44))
Profit and total comprehensive income for the year before tax
Tax
Profit and total comprehensive income for the year after tax
TToottaall ((lloossss))//pprrooffiitt ffoorr tthhee yyeeaarr
CCaatteerriinngg
££mm
PPeesstt CCoonnttrrooll
££mm
SSoocciiaall
hhoouussiinngg
HHeeaalltthhccaarree
££mm
((33..33))
00..77
––
11..77
––
––
((11..66))
––
((11..66))
––
––
––
((11..66))
––
––
––
––
00..77
––
00..77
––
––
––
00..77
––
––
––
––
––
––
––
––
22..00
((00..44))
11..66
11..66
––
––
––
22..11
––
22..11
––
22..11
––
––
––
22..11
22002211
TToottaall
££mm
((22..66))
––
11..77
22..11
––
11..22
––
11..22
22..00
((00..44))
11..66
22..88
2020
Total
£m
76.0
(20.4)
(2.6)
0.5
(3.2)
50.3
(1.6)
48.7
1.3
–
1.3
50.0
Note:
1 In the year ended 31 March 2021, contingent consideration of £3.3m in relation to the disposal of the Catering business has been remeasured to £nil and upon agreement of completion accounts
with the purchaser of Pest Control the settlement liability of £0.7m has been de-recognised.
166
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
55.. DDiissccoonnttiinnuueedd ooppeerraattiioonnss aanndd ddiissppoossaall ooff ssuubbssiiddiiaarriieess ccoonnttiinnuueedd
The profit and total comprehensive income for the year ended 31 March 2021 comprises other items of £2.0m before tax and a £0.4m tax charge in
relation to release of provision for rectification works associated with certain property maintenance contracts of the Social Housing business.
The income statement of discontinued operations for the year ended 31 March 2020 is presented below.
Catering
Pest Control
Social Housing Healthcare
Total discontinued operations
22002200
Revenue
Cost of sales
GGrroossss pprrooffiitt
Administrative expenses
OOppeerraattiinngg pprrooffiitt//((lloossss))
Net finance costs
Before
other
items
£m
60.5
(54.7)
5.8
(3.0)
2.8
(0.2)
Other
items1
£m
–
–
–
(0.3)
(0.3)
TToottaall
££mm
6600..55
((5544..77))
55..88
((33..33))
22..55
–
((00..22))
PPrrooffiitt//((lloossss)) bbeeffoorree ttaaxx
2.6
(0.3)
22..33
Tax
PPrrooffiitt aanndd ttoottaall ccoommpprreehheennssiivvee
iinnccoommee ffoorr tthhee yyeeaarr
Note:
1 Other items are as described in Note 4.
(0.3)
–
((00..33))
2.3
(0.3)
22..00
CCaasshh fflloowwss ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss
Net cash used in operating activities
Net cash generated from investing activities
IInnccrreeaassee iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
Before
other
items
£m
Other
items1
£m
TToottaall
££mm
Before
other
items
£m
Other
items1
£m
TToottaall
££mm
Other
items1
£m
–
–
–
–
–
–
–
–
–
–
–
–
(0.3)
(0.3)
–
––
––
––
((00..33))
((00..33))
––
(0.3)
((00..33))
–
––
(0.3)
((00..33))
–
–
–
–
–
–
–
–
–
–
–
–
(0.7)
(0.7)
–
(0.7)
0.3
(0.4)
––
––
––
((00..77))
((00..77))
––
((00..77))
00..33
((00..44))
––
––
––
––
––
––
––
––
––
Before
other
items
£m
60.5
(54.7)
5.8
Other
items1
£m
–
–
–
(3.0)
(1.3)
2.8
(1.3)
(0.2)
–
2.6
(1.3)
(0.3)
0.3
2.3
(1.0)
22002211
££mm
––
––
––
TToottaall
££mm
6600..55
((5544..77))
55..88
((44..33))
11..55
((00..22))
11..33
––
11..33
2020
£m
(3.3)
65.0
61.7
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
167
116677
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
66.. OOppeerraattiinngg pprrooffiitt
Operating profit has been arrived at after charging/(crediting) the following expenses/(income):
Continuing and discontinued operations
Depreciation of property, plant and equipment (Note 14 and Note 26)
Amortisation of other intangible assets (Note 13)
Amortisation of contract assets (Note 17)
Impairment of property, plant and equipment (Note 14)
Impairment of right-of-use assets (Note 26)
Impairment of other intangible assets (Note 13)
Loss on disposal of property, plant and equipment
Loss/(gain) on disposal of subsidiaries (Note 5)
Impairment loss/(gain) recognised on trade receivables (Note 25)
Impairment loss/(gain) recognised on accrued income (Note 25)
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 – current year
Fees payable to Grant Thornton and its associates for the audit of the Company’s
subsidiaries pursuant to legislation
TToottaall aauuddiitt ffeeeess –– ccuurrrreenntt yyeeaarr
Fees payable to the Company’s auditor and its associates for the audit of the Company’s
subsidiaries pursuant to legislation – prior year
TToottaall aauuddiitt ffeeeess
Audit-related assurance services to the Group
Tax advisory services
Other assurance services
Non-audit services provided by Grant Thornton
TToottaall nnoonn--aauuddiitt ffeeeess
TToottaall
22002211
££mm
3344..44
1177..55
11..77
11..99
77..44
44..44
––
11..22
11..88
44..44
22002211
££’’000000
224400
2020
£m
33.3
11.4
1.5
–
0.8
–
0.3
(50.3)
(4.0)
(0.4)
2020
£’000
240
11,,991188
1,320
886666
33,,002244
444433
33,,446677
111155
11
11,,888833
6622
22,,006611
55,,552288
–
1,560
160
1,720
71
–
5
–
76
1,796
168
116688
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
77.. EEmmppllooyyeeeess
The average number of people employed, on a full time equivalent (FTE) basis, during the financial year was:
Number of people
Technical Services
Business Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve1
Corporate centre
CCoonnttiinnuuiinngg ooppeerraattiioonnss
Catering
DDiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall GGrroouupp
Note:
1 Full year average number of FTE people employed from the date of acquisition.
The total employment costs, including Directors, were:
Aggregate remuneration comprised:
Wages and salaries1
Social security costs
Other pension costs
Share-based payments (Note 31)
Share-based payments acquisition related costs
TToottaall
Note:
22002211
88,,554488
3344,,666688
33,,004411
11,,999999
779955
224477
66,,558899
9977
5522,,994433
––
––
5522,,994433
2020
9,266
35,211
2,995
1,968
772
255
–
95
47,567
1,086
1,086
48,653
22002211
££mm
2020
£m
11,,332233..77
1,147.6
110088..11
3311..55
99..55
––
92.4
25.0
2.9
0.8
11,,447722..88
1,268.7
1 For the year ended 31 March 2021, wages and salaries have been reduced by a net amount of £49.7m (2020: £nil), which represents UK Government grants received under the Coronavirus Job
Retention Scheme of £53.8m (2020: £nil), less repayments back to the UK Government of £4.1m (2020: £nil) relating to furloughed colleagues employed directly at Mitie’s own operations.
Executive and Non-Executive Directors’ aggregate emoluments are shown below:
Short term benefits
Pension and other employment benefits
Share-based payments
TToottaall
88.. FFiinnaannccee ccoossttss
Continuing operations
Interest on bank facilities
Interest on private placement loan notes
Bank fees
Interest on lease liabilities (Note 26)
Unwinding of discounts on provisions (Note 21)
Net interest on defined benefit pension scheme assets and liabilities (Note 32)
TToottaall
22002211
££mm
11..77
00..22
22..33
44..22
22002211
££mm
44..77
66..11
33..11
33..33
00..11
00..99
2020
£m
1.8
0.3
1.1
3.2
2020
£m
3.8
7.4
0.9
3.1
–
1.4
1188..22
16.6
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
169
116699
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
99.. TTaaxx
Continuing and discontinued operations
Current tax
Deferred tax (Note 22)
Tax charge for the year
Continuing operations
Discontinued operations
Tax charge for the year
22002211
££mm
2020
£m
11..22
00..22
11..44
11..00
00..44
11..44
5.8
3.7
9.5
7.9
1.6
9.5
Corporation tax is calculated at 19% (2020: 19%) of the estimated taxable profit for the year. A reconciliation of the tax charge to the elements of
profit before tax per the consolidated income statement elements is as follows:
Continuing and discontinued operations
Profit/(loss) before tax
Tax at UK rate of 19% (2020: 19%)
Reconciling tax charges for:
Non-tax deductible charges
Share-based payments
Gain on disposal of businesses
Impact of equity accounted investments
Losses not recognised
Overseas tax rates
Impact of change in statutory tax rates
Prior year adjustments
TTaaxx cchhaarrggee//((ccrreeddiitt)) ffoorr tthhee yyeeaarr
Effective tax rate for the year
Note:
1 Other items are as described in Note 4.
BBeeffoorree
ootthheerr iitteemmss
££mm
4466..00
88..77
00..99
((00..22))
––
((00..55))
00..22
((00..22))
––
((00..44))
88..55
OOtthheerr
iitteemmss11
££mm
((5511..99))
((99..99))
22..66
00..22
((00..22))
00..22
––
––
––
––
((77..11))
22002211
TToottaall
££mm
((55..99))
((11..22))
33..55
––
((00..22))
((00..33))
00..22
((00..22))
––
((00..44))
11..44
Before
other items
£m
72.5
13.8
0.5
0.7
–
–
(0.1)
–
(2.3)
(0.4)
12.2
1188..55%%
1133..77%%
((2233..77%%))
16.8%
Other
items1
£m
27.5
5.2
0.3
0.3
(8.6)
–
–
0.6
–
(0.5)
(2.7)
(9.8%)
2020
Total
£m
100.0
19.0
0.8
1.0
(8.6)
–
(0.1)
0.6
(2.3)
(0.9)
9.5
9.5%
In addition to the amounts charged to the consolidated income statement, tax relating to retirement benefit liability remeasurements amounting to a
£1.0m credit (2020: £1.3m charge) has been taken directly to the statement of comprehensive income together with a £0.1m credit relating to hedged
items (2020: £0.7m charge).
It has been proposed that the UK corporation tax rate will increase from 19% to 25% from 1 April 2023. As this change was not substantively enacted
at the balance sheet date, it has not been incorporated into the amounts contained in this report. If the change had been substantively enacted at the
balance sheet date, deferred tax assets and liabilities would have increased by £5.2m and £6.7m respectively. The change will increase the effective tax
rate of the Group in future.
1100.. DDiivviiddeennddss
Amounts recognised as distributions in the year:
Final dividend for the prior year
Interim dividend for the current year
Proposed final dividend for the year ended 31 March
22002211
PPeennccee ppeerr
sshhaarree
22002211
££mm
2020
Pence per
share
––
––
––
––
––
––
––
––
2.67
1.33
4.00
–
2020
£m
9.6
4.8
14.4
–
Dividends per share recognised as distributions in the year ended 31 March 2020 stated above are as declared and paid to shareholders on the shares in
issue when the dividends were paid. Restating these amounts to take account of the bonus element of the 2020 rights issue using the adjustment factor
described in Note 33, would result in a final dividend for the year ended 31 March 2019 of 1.38p per share and an interim dividend for the year ended
31 March 2020 of 0.69p per share.
170
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
1111.. EEaarrnniinnggss ppeerr sshhaarree
The calculation of the basic and diluted EPS is based on the following data:
From continuing operations
Net profit before other items attributable to equity holders of the parent
Other items net of tax
Net (loss)/profit attributable to equity holders of the parent
From discontinued operations
Net profit before other items attributable to equity holders of the parent
Other items net of tax
Net profit attributable to equity holders of the parent
Total Group
Net profit before other items attributable to equity holders of the parent
Other items net of tax
Net (loss)/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 shares2
Weighted average number of ordinary shares for the purpose of diluted EPS3
22002211
££mm
3377..55
((4477..66))
((1100..11))
22002211
££mm
––
22..88
22..88
22002211
££mm
3377..55
((4444..88))
((77..33))
22002211
mmiilllliioonn
11,,008822..55
––
11,,008822..55
2020
£m
58.0
(17.5)
40.5
2020
£m
2.3
47.7
50.0
2020
£m
60.3
30.2
90.5
20201
million
699.6
17.2
716.8
Notes:
1 Restated for the bonus element of the 2020 rights issue. See Note 33.
2 The dilutive potential ordinary shares relate to instruments that could potentially dilute basic earnings per share in the future, such as share share-based payments. At 31 March 2021, 70.2 million
(2020: nil) shares have been excluded from the diluted weighted average number of ordinary shares. The diluted loss or earnings per share uses the weighted average number of shares adjusted
for potentially dilutive ordinary shares, unless it has the effect of decreasing the loss, or increasing the earnings, per share from continuing operations. The Group made a loss in the current year
from continuing operations, hence the diluted (loss)/profit per share needs to be the same amount as the basic (loss)/profit per share.
3 The weighted average number of ordinary shares in issue during the year excludes those accounted for in the own shares reserve (see Note 29).
FFrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss::
Basic earnings before other items2
Basic (loss)/earnings
Diluted earnings before other items2
Diluted (loss)/earnings
FFrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss::
Basic earnings before other items2
Basic earnings
Diluted earnings before other items2
Diluted earnings
TToottaall GGrroouupp::
Basic earnings before other items2
Basic (loss)/earnings
Diluted earnings before other items2
Diluted (loss)/earnings
Notes:
1 Restated for the bonus element of the 2020 rights issue. See Note 33.
2 Other items are as described in Note 4.
22002211
ppeennccee
ppeerr sshhaarree
20201
pence
per share
33..55
((00..99))
33..55
((00..99))
––
00..33
––
00..33
33..55
((00..66))
33..55
((00..66))
8.3
5.8
8.1
5.6
0.3
7.1
0.3
7.0
8.6
12.9
8.4
12.6
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
171
117711
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
1122.. GGooooddwwiillll
CCoosstt
At 1 April 2019
Arising on business combinations
Disposal of businesses
At 31 March 2020
Arising on business combinations
AAtt 3311 MMaarrcchh 22002211
AAccccuummuullaatteedd iimmppaaiirrmmeenntt lloosssseess
At 1 April 2019
At 31 March 2020
AAtt 3311 MMaarrcchh 22002211
NNeett bbooookk vvaalluuee
AAtt 3311 MMaarrcchh 22002211
At 31 March 2020
££mm
326.3
0.8
(15.7)
311.4
3.3
331144..77
32.5
32.5
3322..55
228822..22
278.9
AAccqquuiissiittiioonn ooff IInntteerrsseerrvvee
The goodwill arising on the Interserve acquisition was £3.3m. See Note 30. The additional CGUs which are now part of the Group comprise; Central
Government & Defence (CG&D), Communities and Business and Industry (B&I).
GGooooddwwiillll iimmppaaiirrmmeenntt tteessttiinngg
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. The Group tests goodwill at least annually for impairment or more frequently if there are indicators that goodwill may
be impaired.
A summary of the goodwill balances and the discount rates used to assess the forecast cash flows from each CGU are as follows:
Technical Services
Business Services
Landscapes
CG&D
Communities
B&I
TToottaall
PPrree--ttaaxx
ddiissccoouunntt rraattee
%%
1122..00%%
1122..00%%
1122..00%%
1155..88%%
1155..44%%
1155..44%%
GGooooddwwiillll
22002211
££mm
114466..66
112266..55
55..88
11..11
11..44
00..88
Goodwill
2020
£m
146.6
126.5
5.8
–
–
–
228822..22
278.9
KKeeyy aassssuummppttiioonnss
The recoverable amounts for each CGU are based on value-in-use which is derived from discounted cash flow calculations. The key assumptions applied
in value-in-use calculations are those regarding forecast operating profits, growth rates and discount rates.
FFoorreeccaasstt ooppeerraattiinngg pprrooffiittss
For all CGUs, the Group prepared cash flow projections derived from the most recent forecasts for the year ending 31 March 2022 and the Group’s
medium-term strategic plan to 31 March 2026, adjusted for COVID-19 impacts. Forecast revenue and direct costs are based on past performance and
expectations of future changes in the market, operating model and cost base.
GGrroowwtthh rraatteess aanndd tteerrmmiinnaall vvaalluueess
Revenue growth rates applied to the value-in-use calculations of each CGU reflect management’s strategy and a terminal value using a long-term growth
assumption of 2.0% (2020: 1.7%) based on forecast inflation.
172
117722
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
1122.. GGooooddwwiillll ccoonnttiinnuueedd
DDiissccoouunntt rraatteess
The pre-tax discount rates used to assess the forecast cash flows from CGUs are derived from the Company’s post-tax weighted average cost of
capital, which was 9.1% at 31 March 2021 (2020: 9.2%). These rates are reviewed annually with external advisers and adjusted for the risks specific
to the business being assessed and 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.
SSeennssiittiivviittyy aannaallyyssiiss
A sensitivity analysis has been performed and management has concluded that no reasonably foreseeable change in the key assumptions would result in
an impairment of the goodwill of any of the Group’s CGUs. Given the uncertainties related to COVID-19 in terms of the duration and depth of impact,
sensitivity analysis has also been performed and management has concluded that even in the downside scenario, no impairments would be required.
1133.. OOtthheerr iinnttaannggiibbllee aasssseettss
CCoosstt
At 1 April 2019
Additions
Arising on business combinations
Disposals
Disposal of businesses
At 31 March 2020
Additions
Arising on business combinations
Disposals
Effect of movements in exchange rates
AAtt 3311 MMaarrcchh 22002211
AAmmoorrttiissaattiioonn
At 1 April 2019
Charge for the year
Disposals
Disposal of businesses
At 31 March 2020
Charge for the year
Impairments
Disposals
Effect of movements in exchange rates
AAtt 3311 MMaarrcchh 22002211
NNeett bbooookk vvaalluuee
AAtt 3311 MMaarrcchh 22002211
At 31 March 2020
Acquisition related
Customer
contracts and
relationships
£m
TToottaall
aaccqquuiissiittiioonn
rreellaatteedd
££mm
Software and
development
expenditure
£m
Other
£m
103.3
10.9
111144..22
TToottaall
££mm
119944..44
1111..22
00..55
((2211..11))
((11..99))
118833..11
1155..00
222222..77
((1144..55))
((00..22))
440066..11
114433..77
1111..44
((2200..77))
((11..99))
113322..55
1177..55
44..44
((1144..44))
((00..11))
113399..99
80.2
11.2
–
(21.1)
–
70.3
15.0
–
(14.5)
(0.1)
70.7
46.6
9.1
(20.7)
–
35.0
9.8
4.4
(14.4)
–
34.8
–
0.5
–
(1.9)
101.9
–
219.3
–
(0.1)
321.1
86.8
2.1
–
(1.9)
87.0
7.6
–
–
(0.1)
94.5
226.6
14.9
–
–
–
–
10.9
–
3.4
–
–
––
00..55
––
((11..99))
111122..88
––
222222..77
––
((00..11))
14.3
333355..44
9977..11
22..33
––
((11..99))
9977..55
77..77
––
––
((00..11))
110055..11
10.3
0.2
–
–
10.5
0.1
–
–
–
10.6
3.7
0.4
223300..33
1155..33
35.9
35.3
226666..22
5500..66
Customer contracts and relationships are amortised over their useful lives based on the period of time over which they are anticipated to generate
benefits. These currently range over an average of thirteen years. Other acquisition related intangibles include acquired software and technology which
are amortised over their useful lives which currently range from three to ten years. Software and development expenditure is amortised over its useful
life of between four and ten years, once brought into use.
Following a review of the carrying amount of intangible assets, an impairment of £4.4m has been recorded (2020: £nil), of which £3.4m (2020: £nil) is
included within Other items. See Note 4.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
173
117733
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
1144.. PPrrooppeerrttyy,, ppllaanntt aanndd eeqquuiippmmeenntt
Property, plant and equipment comprise owned and leased assets.
Owned property, plant and equipment
Right-of-use assets (Note 26)
TToottaall
The table below relates to owned property, plant and equipment.
CCoosstt
At 1 April 2019
Additions
Disposals
Disposal of businesses
At 31 March 2020
Additions
Disposals
Arising on business combinations
Effect of movements in exchange rates
AAtt 3311 MMaarrcchh 22002211
AAccccuummuullaatteedd ddeepprreecciiaattiioonn aanndd iimmppaaiirrmmeenntt
At 1 April 2019
Charge for the year
Disposals
Disposal of businesses
At 31 March 2020
Charge for the year
Impairments
Disposals
Effect of movements in exchange rates
AAtt 3311 MMaarrcchh 22002211
NNeett bbooookk vvaalluuee
AAtt 3311 MMaarrcchh 22002211
At 31 March 2020
22002211
££mm
2244..33
9933..66
2020
£m
22.7
88.1
111177..99
110.8
Land and
buildings
£m
Plant and
vehicles
£m
16.3
0.4
(0.6)
–
16.1
–
(5.1)
0.8
(0.1)
11.7
9.2
1.5
(0.3)
–
10.4
1.2
1.4
(4.9)
(0.1)
8.0
3.7
5.7
64.3
7.8
(14.7)
(8.3)
49.1
7.6
(3.3)
4.3
(0.2)
57.5
44.3
7.7
(14.4)
(5.5)
32.1
7.0
0.5
(2.5)
(0.2)
36.9
20.6
17.0
TToottaall
££mm
8800..66
88..22
((1155..33))
((88..33))
6655..22
77..66
((88..44))
55..11
((00..33))
6699..22
5533..55
99..22
((1144..77))
((55..55))
4422..55
88..22
11..99
((77..44))
((00..33))
4444..99
2244..33
2222..77
Following a review of the carrying amount of property, plant and equipment, an impairment of £1.9m has been recorded (2020: £nil), which is included
within Other items.
174
117744
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
1155.. IInntteerreesstt iinn jjooiinntt vveennttuurreess aanndd aassssoocciiaatteess
As disclosed in Note 30, on 30 November 2020 the Group acquired Interserve, which included interests in joint ventures and associates. From
completion of the acquisition, Landmarc Support Services Limited (Landmarc UK) and Sussex Estates and Facilities LLP (Sussex) were equity accounted
entities that were material to the Group. All equity accounted entities provide facilities management services. Details of all joint ventures and associates
are provided in Note 37.
IInntteerreesstt iinn jjooiinntt vveennttuurreess aanndd aassssoocciiaatteess
Landmarc UK
Sussex
Other
AAtt 3311 MMaarrcchh
Arising on business combinations
Share of profit before Other items
Share of profit – Other items2
Share of other comprehensive income
Dividends
AAtt 3311 MMaarrcchh 22002211
OOwwnneerrsshhiipp
%%
NNaattuurree ooff
rreellaattiioonnsshhiipp
51
35
Joint venture
Associate
Joint ventures
22002211
££mm
99..99
00..55
00..66
1111..00
Landmarc UK1
£m
Sussex1
£m
Other1
£m
GGrroouupp sshhaarree ooff
jjooiinntt vveennttuurreess
aanndd aassssoocciiaatteess
££mm
9.9
1.6
(1.2)
0.4
(0.8)
9.9
0.3
0.2
–
–
–
0.5
0.5
0.1
–
–
–
0.6
1100..77
11..99
((11..22))
00..44
((00..88))
1111..00
TToottaall
££mm
6600..77
2299..88
((00..33))
44..66
((00..77))
33..99
00..99
44..88
TToottaall
££mm
1122..55
4422..88
((3333..22))
2222..11
Note:
1 Net assets/results of the entity multiplied by the respective proportion of the Group’s ownership.
2 Share of profit – Other items relates to the amortisation of customer contracts and relationships arising on business combinations.
SSuummmmaarriisseedd iinnccoommee ssttaatteemmeenntt ((110000%%))
22002211
Revenue
Share of revenue of joint ventures and associates
Depreciation and amortisation1
Operating profit
Tax
Profit for the period
Other comprehensive income
TToottaall ccoommpprreehheennssiivvee iinnccoommee ((110000%%))
Landmarc UK
£m
Sussex
£m
Other
£m
50.6
25.8
(0.3)
3.8
(0.7)
3.1
0.9
4.0
7.3
2.6
–
0.7
–
0.7
–
0.7
2.8
1.4
–
0.1
–
0.1
–
0.1
Note:
1 Excluding the amortisation of customer contracts and relationships arising on business combinations. The Group's share is £1.2m (2020: £nil) included within Other items. See Note 4.
SSuummmmaarriisseedd bbaallaannccee sshheeeett ((110000%%))
22002211
Landmarc UK
£m
Sussex
£m
Other
£m
Non-current assets1
Current assets
Current liabilities
NNeett aasssseettss ((110000%%))
The above includes the following:
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss ((110000%%))
12.5
29.0
(22.1)
19.4
–
6.3
(4.8)
1.5
–
7.5
(6.3)
1.2
24.1
4.6
0.3
2299..00
Note:
1 Non-current assets include customer contracts and relationships recognised as a result of the acquisition of Interserve. The Group's 51% share of these customer relationships was £3.7m on 30
November 2020, which reduced to £2.5m at 31 March 2021 following an amortisation charge of £1.2m recorded in Other items (see Note 4).
The Group is not aware of any material commitments in respect of its interests in joint ventures and associates. Landmarc Gulf Consultancy
Management LLC, an immaterial joint venture, has provided a guarantee and indemnity in the ordinary course of business in respect of performance,
issued by a financial institution on its behalf, amounting to £1.5m (AED 7.4m) as at 31 March 2021. This is not expected to result in any material financial
loss. There are no significant restrictions on the ability to transfer funds to the Group in the form of cash dividends, or to repay loans or advances made
by the Group.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
175
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
1166.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
Trade receivables
Accrued income
Prepayments
Other receivables2
TToottaall
Included in current assets
Included in non-current assets2
TToottaall
22002211
££mm
336622..44
220088..77
2277..00
9933..88
669911..99
668833..66
88..33
669911..99
Restated1
2020
£m
219.2
132.2
30.0
36.5
417.9
414.6
3.3
417.9
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
2 At 31 March 2021 other receivables included the £57.6m (2020: £nil) provisional value for the adjustment to consideration which represents management's best estimate of the amount expected
to be recovered by the Group through the completion accounts mechanism on the Interserve acquisition. The outcome of the completion accounts process is inherently uncertain, given that this is
subject to a commercial negotiation, and potentially expert determination, and the final amount agreed could therefore be materially different from the estimate. See Note 30.
Trade receivables at 31 March 2021 represent 30 days credit on sales (2020 restated: 30 days).
The Group makes use of a non-recourse customer invoice discounting facility under which certain trade receivable balances are sold to the Group’s
relationship banks. As these trade receivables are sold without recourse, the Group has derecognised them, and so they are not included within trade
receivables. The Group has reduced the amount of invoice discounting from £70.7m as at 31 March 2020 to £51.7m as at 31 March 2021.
Management considers that the carrying amount of trade and other receivables approximates their fair value.
Information about the Group’s exposure to credit risk and its loss allowance against the balance of trade receivables and accrued income, is provided in
Note 25.
1177.. CCoonnttrraacctt aasssseettss
At 1 April 2019
Additions
Disposal of businesses
Amortisation
At 31 March 2020
Additions
Amortisation
AAtt 3311 MMaarrcchh 22002211
Included in current assets
Included in non-current assets
TToottaall
Pre-contract
costs
£m
Contract
fulfilment
costs
£m
2.2
0.2
(0.1)
(0.8)
1.5
0.7
(0.8)
1.4
0.8
0.6
1.4
3.9
0.3
(0.2)
(0.7)
3.3
0.1
(0.9)
2.5
0.7
1.8
2.5
TToottaall
££mm
66..11
00..55
((00..33))
((11..55))
44..88
00..88
((11..77))
33..99
11..55
22..44
33..99
Contract assets are amortised on a straight-line basis over the contract life which is consistent with the transfer of services to the customer to which the
asset relates. Management has determined that no impairment of contract assets is required as at 31 March 2021 (2020: £nil).
1188.. IInnvveennttoorriieess
Consumables
TToottaall
22002211
££mm
1122..77
1122..77
2020
£m
4.8
4.8
176
117766
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
1199.. TTrraaddee aanndd ootthheerr ppaayyaabblleess
Trade payables
Other taxes and social security
Other payables
Accruals
TToottaall
Included in current liabilities
Included in non-current liabilities
TToottaall
22002211
££mm
113300..22
112222..66
3322..77
441166..55
770022..00
770011..55
00..55
770022..00
Restated1
2020
£m
180.6
113.0
17.0
203.1
513.7
513.4
0.3
513.7
Note:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
Trade creditors at 31 March 2021 represent 26 days credit on trade purchases (2020 restated: 59 days).
In the year ended 31 March 2021, the Group discontinued its supply chain finance arrangements. At 31 March 2020 included within the trade creditors
balance was £16.0m relating to payments due to UK suppliers which made use of bank provided supply chain finance arrangements.
Management considers that the carrying amount of trade and other payables approximates their fair value.
2200.. DDeeffeerrrreedd iinnccoommee ffrroomm ccoonnttrraaccttss wwiitthh ccuussttoommeerrss
The significant changes in deferred income are as follows:
At 1 April
Revenue recognised that was included in the deferred income balance at the beginning of the year
Increase due to cash received, excluding amounts recognised as revenue during the year
Arising on business combinations
AAtt 3311 MMaarrcchh
Included within current liabilities
Included within non-current liabilities
TToottaall
22002211
££mm
5511..55
((4455..22))
4488..99
5599..44
111144..66
22002211
££mm
8844..55
3300..11
111144..66
2020
£m
73.3
(55.7)
33.9
–
51.5
2020
£m
35.9
15.6
51.5
For any amounts which do not relate to specific contractual performance obligations, the income is deferred to the balance sheet and amortised over
the period in which the contracted services are delivered to the customer.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
177
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
2211.. PPrroovviissiioonnss
At 1 April 2019
Amounts recognised in the income statement
Unwinding of discounts
Utilised in the year
At 31 March 2020
Arising on business combinations
Charged to the income statement
Released to the income statement
Unwinding of discounts
Utilised in the year
AAtt 3311 MMaarrcchh 22002211
Included in current liabilities
Included in non-current liabilities
Total
Acquisition and
disposal of
businesses
£m
Restructuring
£m
Insurance
reserve
£m
Contract
specific
costs
£m
Pension
£m
Dilapidations
£m
5.3
(0.5)
–
(0.8)
4.0
–
–
(2.1)
–
(1.9)
–
–
–
–
–
–
–
–
–
–
2.6
–
–
(0.4)
2.2
0.6
1.6
2.2
15.0
1.5
–
(2.7)
13.8
8.5
10.0
–
(4.4)
27.9
7.1
20.8
27.9
12.7
(0.4)
–
(1.6)
10.7
50.2
–
(1.7)
–
(5.1)
54.1
13.6
40.5
54.1
20.0
–
–
–
20.0
3.8
–
–
–
–
23.8
23.8
–
23.8
5.2
(0.2)
0.1
(0.4)
4.7
1.7
–
–
0.1
(0.6)
5.9
0.7
5.2
5.9
Legal
costs
£m
0.3
–
–
(0.3)
–
2.5
–
–
–
–
2.5
2.5
–
2.5
TToottaall
££mm
5588..55
00..44
00..11
((55..88))
5533..22
6666..77
1122..66
((33..88))
00..11
((1122..44))
111166..44
4488..33
6688..11
111166..44
The provisions balance includes the following items:
The legal costs provisions relate to external legal costs in relation to parental company guarantees required. The amount is expected to be fully utilised
in the year ending 31 March 2022.
The acquisition and disposal of businesses provisions were in respect of indemnities provided following the disposal of the Healthcare and Social
Housing businesses. In the year ended 31 March 2021 the Group utilised £1.9m in respect of the Social Housing indemnity provision and released
£2.1m to the income statement with respect to the Healthcare indemnity provision.
The restructuring provision related to costs of organisational change associated with the Group’s property transformation programme and is expected
to be fully utilised over the next four years.
The insurance reserve provides for fleet and liability claims and a claim typically settles over three to five years. This includes a provision for claims that
are expected but have not yet been reported.
Included within contract specific costs provision of £54.1m at 31 March 2021 are onerous contract provisions of £12.2m (2020: £nil) and contract
specific provisions of £41.9m (2020: £10.7m).
Onerous contract provisions are made where the forecast costs of completing a contract exceed the forecast income generation over the life of the
project. As part of the identification and measurement of assets and liabilities for the acquisition of Interserve, the Group recognised onerous contract
provisions of £13.0m. The main contracts to which these provisions relate to are in relation to certain long-term PFI contracts. It is expected that the
majority of these provisions will be utilised over a number of years. Given the long term nature of these contracts, any changes to key assumptions made
when estimating their future losses might have an impact on the Group’s results. See Note 2 for discussion on key assumptions made to measure the
provision. The Group utilised £0.8m in the year with respect to onerous contract provisions.
Contract specific provisions have been made primarily to cover remedial and rectification costs required to meet clients’ contractual terms. The Group
recognised £37.2m of contract specific provisions as a result of the Interserve acquisition. £14.6m of this balance related to a significant liability risk on a
certain contract, which is subject to a dispute, £6.6m related to a commercial dispute settlement for a contract, and the remaining £16.0m relates to
other potential commercial claims and rectification work for other contracts. The Group utilised £1.1m of these provisions and charged £0.3m to the
income statement during the year with the remaining provision expected to be utilised between one to seven years.
The contract specific provisions also include £5.4m at 31 March 2021 for the estimated costs of rectification works associated with certain property
maintenance contracts of the discontinued Social Housing business, after the release of £2.0m to the income statement recorded in Other items as part
of the acquisition and disposal related costs (see Note 4) and utilisation of £3.2m during the year. This provision has been recorded as a current
provision, however, timing of outflows is dependent on when claims are received by the Group and may occur over a longer period than one year.
The pension provision balance at 31 March 2021 primarily relates to the Section 75 employer debt liabilities of Robert Prettie & Co Limited and Mitie
FM Limited (formerly Interserve (Facilities Management) Limited as a result of their participation in the Plumbing Scheme of £21.7m. The provision has
been recorded as a current provision, however timing of outflows is dependent on agreement with the trustee of the Plumbing Scheme and may occur
over a longer period than one year. See Note 32.
The provision for dilapidations relates to the legal obligation for leased properties to be returned to the landlord in the contracted condition at the end
of the lease period. This cost would include repairs of any damage and wear and tear and is expected to be utilised in the next five years.
178
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
2222.. DDeeffeerrrreedd ttaaxx
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon:
At 1 April 2019
Arising on business combinations
Disposal of businesses
(Charge)/credit to income
Charge to equity and other comprehensive income
At 31 March 2020
Arising on business combinations
(Charge)/credit to income
Credit to equity and other comprehensive income
AAtt 3311 MMaarrcchh 22002211
Accelerated
capital
allowances
£m
Retirement
benefit
liabilities
£m
Intangible
assets acquired
£m
Share
options
£m
Short-term
timing
differences
£m
5.0
(0.1)
(0.3)
1.1
–
5.7
10.9
(0.9)
–
15.7
14.2
(2.9)
–
–
(0.2)
(1.3)
12.7
0.6
(2.1)
1.0
12.2
–
–
–
–
(2.9)
(41.5)
1.5
–
(42.9)
0.8
–
–
0.3
(0.7)
0.4
–
1.7
–
2.1
1.4
–
–
0.7
–
2.1
0.9
(0.2)
0.1
2.9
Losses
£m
17.3
–
–
(5.6)
–
11.7
18.3
(0.2)
–
29.8
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 assets1
Deferred tax liabilities1
NNeett ddeeffeerrrreedd ttaaxx aasssseett
22002211
££mm
3322..00
((1122..22))
1199..88
TToottaall
££mm
3355..88
((00..11))
((00..33))
((33..77))
((22..00))
2299..77
((1100..88))
((00..22))
11..11
1199..88
2020
£m
32.6
(2.9)
29.7
Note:
1. Deferred tax liabilities related to the value attributed to the acquired intangible assets of £41.5m (2020: £nil) have been partially offset by deferred tax assets in relation to unutilised income tax
losses, accelerated capital allowances, retirement benefit liabilities and other short-term timing differences .
The Group has unutilised income tax losses of £243.8m (2020: £68.4m) that are available for offset against future profits. A deferred tax asset has been
recognised in respect of £156.3m (2020: £61.5m) of these losses to the extent that it is probable that taxable profits will be generated in the future and
be available for utilisation. Deferred tax has been calculated using tax rates that were substantively enacted at the balance sheet date. As mentioned in
Note 9 the proposed increase in the UK corporation tax rate from 19% to 25% with effect from 1 April 2023 had not been substantively enacted at
the balance sheet date and therefore has not been incorporated into the amounts contained in this report. If the change had been substantively enacted
at the balance sheet date, deferred tax assets and liabilities would have increased by £5.2m and £6.7m respectively.
2233.. CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss
Cash and cash equivalents
22002211
££mm
119966..22
Restated1
2020
£m
139.5
Note:
1. The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
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 Group
operates cash-pooling arrangements with certain banks for cash management purposes.
As at 31 March 2021, included within cash and cash equivalents is £18.7m (2020: £nil) which is subject to various constraints on the Group’s ability to
utilise these balances. These constraints primarily relate to amounts held in project bank accounts and cash held through a joint operation.
The carrying amount of the assets approximates their fair value.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
179
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
2244.. FFiinnaanncciinngg lliiaabbiilliittiieess
Bank loans – under committed facilities
Private placement notes1
Lease liabilities (Note 26)
TToottaall
Included in current liabilities
Included in non-current liabilities1
TToottaall
22002211
££mm
66..66
116655..44
110066..88
227788..88
2288..77
225500..11
227788..88
2020
£m
49.0
177.9
93.8
320.7
24.3
296.4
320.7
Note:
1 Including £0.1m (2020: £nil) of foreign exchange forward contracts included in non-current financing liabilities.
During the year ended 31 March 2021, the Group resized the bank facility from £275.0m to £250.0m and extended its maturity date from July 2021
to December 2022. The bank facility and the private placement notes are unsecured, but have financial and non-financial covenants and obligations
commonly associated with these arrangements. The Group was in compliance with these covenants as at 31 March 2021 and hence all amounts are
classified in line with repayment dates.
The Group adopted IFRS 16 ‘Leases’ with effect from 1 April 2019. The Group’s debt covenants are calculated on a Frozen GAAP basis and therefore
exclude the impact of IFRS 16. If IFRS 16 had not been adopted, operating profit, depreciation, impairment, finance costs and lease liabilities would have
been lower by £2.3m (2020: £1.2m), £25.9m (2020: £23.6m), £7.4m (2020: £0.8m), £3.3m (2020: £3.1m) and £106.4m (2020: £93.0m) respectively.
At 31 March 2021, the Group had available £241.4m (2020: £225.5m) of undrawn committed borrowing facilities in respect of which all conditions
precedent had been met.
Details of the Group’s contingent liabilities are provided in Note 34.
The weighted average interest rates paid during the year were as follows:
Bank loans
Private placement notes
22002211
%%
11..33
44..00
2020
%
1.4
4.1
PPrriivvaattee ppllaacceemmeenntt nnootteess
The Group issued US$153.0m and £55.0m of PP notes on 13 December 2012. 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 these PP notes as at
31 March 2021 are shown below.
Tranche
10 year
10 year
10 year
12 year
Maturity date
16 December 2022
16 December 2022
16 December 2022
16 December 2024
Amount
US$76.0m
US$77.0m
£25.0m
£30.0m
Interest terms
US$ fixed at 3.85%
US$ fixed at 3.85%
£ fixed at 3.87%
£ fixed at 4.00%
Swap interest
£ fixed at 4.05%
£ fixed at 4.02%
n/a
n/a
180
118800
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
2255.. FFiinnaanncciiaall iinnssttrruummeennttss
CCllaassssiiffiiccaattiioonn
The Group’s principal financial assets are cash and cash equivalents, trade receivables from customers, accrued income, contingent consideration
receivable and derivative financial instruments. The derivative financial instruments are designated as cash flow hedges and are measured at fair value.
Contingent consideration receivable is designated as ‘fair value through profit and loss’ (FVTPL). All other financial assets are held and measured at
amortised cost.
The Group’s principal financial liabilities are trade payables, contingent consideration payable and financing liabilities. Except for contingent consideration
payable, which is designated as FVTPL, all other financial liabilities are held and measured at amortised cost.
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the basis of measurement and the bases for
recognition of income and expense) for each class of financial asset, financial liability and equity instrument are disclosed in Note 1.
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;
• Level 3 fair value measurements are those derived from valuation techniques using inputs that are not based on observable market data.
The following table comprises the Group’s financial assets and financial liabilities:
HHeelldd aatt aammoorrttiisseedd ccoosstt
Cash and cash equivalents
Trade receivables
Accrued income
Financing liabilities
Trade payables
HHeelldd aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt aanndd lloossss
Other receivables2
Other payables
HHeeddggiinngg iinnssttrruummeennttss aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
Derivative financial instruments hedging private placement notes
Notes:
22002211
££mm
119966..22
336622..44
220088..77
((227788..88))
((113300..22))
5577..66
––
Restated1
2020
£m
139.5
219.2
132.2
(320.7)
(180.6)
3.3
(0.5)
1144..55
28.2
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
2 Other receivables as at 31 March 2021 relates to the provisional value for the adjustment to consideration on the Interserve acquisition. This represents management's best estimate of the amount
expected to be recovered by the Group through the completion accounts mechanism. The outcome of the completion accounts process is inherently uncertain, given that this is subject to a
commercial negotiation, and potentially expert determination, and the final amount agreed could therefore be materially different from the estimate. See Note 30. Management considers this
receivable to fall into Level 3.
The 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. All contracts are gross settled. Management considers that the Group’s derivative financial instruments fall into Level 2.
There were no transfers between levels during the year.
RRiisskk mmaannaaggeemmeenntt oobbjjeeccttiivveess
The Group’s treasury department monitors and manages the financial risks relating to the operations of the Group. These risks include those arising
from interest rates, foreign currencies, liquidity, credit and capital management. The Group seeks to minimise the effects of these risks by using effective
control measures and, where appropriate, derivative financial instruments to hedge certain risk exposures. The use of financial derivatives is governed by
Group policies and reviewed regularly. Group policy is to not trade in financial instruments. The risk management policies remain unchanged from the
previous year.
IInntteerreesstt rraattee rriisskk
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, as appropriate, enter into derivative financial instruments in order to manage interest rate risk.
IInntteerreesstt rraattee sseennssiittiivviittyy
The interest rate sensitivity has been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the
balance sheet date. All financial liabilities, other than financing liabilities, are interest free.
If underlying interest rates had been 0.5% higher and all other variables were held constant, the Group’s profit after tax for the year ended 31 March
2021 and reserves would increase by £0.2m (2020: £0.8m).
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
181
118811
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
2255.. FFiinnaanncciiaall iinnssttrruummeennttss ccoonnttiinnuueedd
FFoorreeiiggnn ccuurrrreennccyy rriisskk
The Group has limited exposure to transactional foreign currency risk from trading transactions in currencies other than the functional currency of
individual group entities and some exposure to translational foreign currency risk from the translation of its foreign operations. The Group considers
the need to hedge its exposures as appropriate and will enter into forward foreign exchange contracts to mitigate any significant risks.
In addition, the Group has fully hedged the US dollar exposure on the principal and interest payments on private placement notes into sterling using
cross-currency interest rate swaps (see Hedging activities below).
At 31 March 2021 £24.5m (2020: £5.5m) of cash and cash equivalents were held in foreign currencies. Included in bank loans were £8.6m
(2020: £9.5m) of loans denominated in foreign currency.
LLiiqquuiiddiittyy rriisskk
The Group monitors its liquidity risk 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 loans under committed facilities, which allow for appropriate headroom in the Group’s daily cash
movements, are then arranged. Details of the Group’s bank facility can be found in Note 24.
The tables below summarise the maturity profile (including both undiscounted interest and principal cash flows) of the Group’s financial liabilities:
FFiinnaanncciiaall lliiaabbiilliittiieess aatt 3311 MMaarrcchh 22002211
Trade payables
Financing liabilities
Financial liabilities
Financial liabilities at 31 March 2020 – Restated1
Trade payables
Other payables
Financing liabilities
Financial liabilities2
WWiitthhiinn
oonnee yyeeaarr
££mm
IInn tthhee sseeccoonndd ttoo
ffiifftthh yyeeaarrss
££mm
AAfftteerr
ffiivvee yyeeaarrss
££mm
113300..22
4499..44
117799..66
––
223388..22
223388..22
––
2222..66
2222..66
Within
one year
£m
In the second to
fifth years
£m
After
five years
£m
180.6
0.2
83.0
263.8
–
0.3
244.6
244.9
–
–
23.9
23.9
TToottaall
££mm
113300..22
331100..22
444400..44
Total
£m
180.6
0.5
351.5
532.6
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
2 Financial liabilities maturity profile is exclusive of the £14.5m (2020: £28.2m) derivative net assets which would naturally offset the settlement value of the maturing private placement notes
in financing liabilities.
CCrreeddiitt rriisskk
The Group’s credit risk 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 credit risk on liquid funds and derivative financial instruments is limited because the external counterparties are banks with high credit
ratings assigned by international credit rating agencies and are managed through regular review.
The maximum exposure to credit risk in relation to derivatives at the balance sheet date is £14.5m (2020: £28.2m), being predominantly the fair value
of interest rate swaps. The maximum exposure to credit risk on cash and cash equivalents at the balance sheet date is £196.2m (2020 restated: £139.5m).
The Group’s credit risk is primarily attributable to its receivable balances from customers. Before accepting a new customer, the Group uses external
credit scoring systems to assess the potential customer’s credit quality and define an appropriate credit limit which is reviewed regularly.
The maximum exposure to credit risk in relation to trade receivables and accrued income at the balance sheet date is the fair value of trade receivables
and accrued income. The Group’s customer base is large and unrelated and, accordingly, the Group does not have a significant concentration of credit
risk with any one counterparty or group of counterparties.
The amounts presented in the balance sheet in relation to the Group’s trade receivables and accrued income balances are presented net of loss allowances.
The Group performs an impairment analysis at each reporting period and measures loss allowances at an amount equal to lifetime expected credit
losses (ECLs) using both quantitative and qualitative information and analysis based on the Group’s historical experience, and forward-looking information.
182
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
2255.. FFiinnaanncciiaall iinnssttrruummeennttss ccoonnttiinnuueedd
The following tables provide information about the Group’s exposure to credit risk and ECLs against customer balances:
TTrraaddee rreecceeiivvaabblleess aatt 3311 MMaarrcchh 22002211
Current (not overdue)
1-30 days overdue
31-60 days overdue
61-90 days overdue
More than 90 days overdue
TToottaall
Trade receivables at 31 March 2020 – Restated1
Current (not overdue)
1-30 days overdue
31-60 days overdue
61-90 days overdue
More than 90 days overdue
TToottaall
GGrroossss ccaarrrryyiinngg
aammoouunntt
££mm
LLoossss
aalllloowwaannccee
££mm
NNeett ccaarrrryyiinngg
aammoouunntt
££mm
332288..22
1100..88
1177..99
44..66
66..66
336688..11
((00..88))
((00..11))
((00..11))
((00..11))
((44..66))
((55..77))
332277..44
1100..77
1177..88
44..55
22..00
336622..44
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
183.3
29.0
4.9
1.3
4.6
223.1
(1.8)
(0.5)
(0.2)
–
(1.4)
(3.9)
181.5
28.5
4.7
1.3
3.2
219.2
Note:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
Accrued income at 31 March 2021
1-30 days aged
31-60 days aged
61-90 days aged
More than 90 days aged
TToottaall
Accrued income at 31 March 2020
1-30 days aged
31-60 days aged
61-90 days aged
More than 90 days aged
TToottaall
The following table provides the movement in the allowance for impairment in respect of trade receivables and accrued income:
At 1 April
Impairment losses/(gains) recognised
Disposal of businesses
AAtt 3311 MMaarrcchh
22002211
££mm
TTrraaddee
rreecceeiivvaabblleess
AAccccrruueedd
iinnccoommee
Trade
receivables
33..99
11..88
––
55..77
55..22
44..44
––
99..66
8.0
(4.0)
(0.1)
3.9
GGrroossss ccaarrrryyiinngg
aammoouunntt
££mm
LLoossss
aalllloowwaannccee
££mm
NNeett ccaarrrryyiinngg
aammoouunntt
££mm
118800..00
1133..55
55..88
1199..00
221188..33
((22..44))
((00..33))
((00..44))
((66..55))
((99..66))
117777..66
1133..22
55..44
1122..55
220088..77
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
98.0
11.5
8.2
19.7
137.4
(3.0)
(0.1)
(0.1)
(2.0)
(5.2)
95.0
11.4
8.1
17.7
132.2
2020
£m
Accrued
income
5.6
(0.4)
–
5.2
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
183
118833
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
2255.. FFiinnaanncciiaall iinnssttrruummeennttss ccoonnttiinnuueedd
CCaappiittaall mmaannaaggeemmeenntt rriisskk
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern 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 27 and equity per the
consolidated statement of changes in equity. The Group is not subject to externally imposed regulatory capital requirements.
HHeeddggiinngg aaccttiivviittiieess
DDeerriivvaattiivvee ffiinnaanncciiaall iinnssttrruummeennttss –– ccaasshh ffllooww hheeddggeess
The Group holds a number of cross-currency interest rate swaps designated as cash flow hedges on US$153.0m of private placement notes. Biannual
fixed interest cash flows denominated in US dollars arising over the periods to December 2022 from the US Private Placement market are
exchanged for fixed interest cash flows denominated in sterling.
During the year, the Group entered into a series of forward foreign exchange contracts to hedge future US dollar cash flows arising from
amendment fees on US$153.0m of private placement notes. The fixed biannual US dollar cash flows, scheduled to the period June 2022, are matched
with the forward foreign exchange contract cash flows, designated as cash flow hedges.
A fair value loss of £13.7m (2020: £11.8m gain) was recognised in other comprehensive income during the year. All cash flow hedges were assessed
as being highly effective as at 31 March 2021 and no amounts (2020: £nil) relating to hedge ineffectiveness were recognised in profit or loss during
the year. In addition, £nil (2020: £0.1m) was reclassified from the hedging reserve to the income statement during the year.
The carrying value of derivative financial instruments at the balance sheet date was as follows:
At 1 April 2020
Movements in cash flow hedges
AAtt 3311 MMaarrcchh 22002211
At 1 April 2019
Movements in cash flow hedges
AAtt 3311 MMaarrcchh 22002200
CCrroossss--ccuurrrreennccyy
iinntteerreesstt rraattee
sswwaappss
££mm
FFoorrwwaarrdd ffoorreeiiggnn11
eexxcchhaannggee
ccoonnttrraaccttss
££mm
2288..22
((1133..66))
1144..66
––
((00..11))
((00..11))
HHeeddggiinngg
iinnssttrruummeenntt
TToottaall
££mm
2288..22
((1133..77))
1144..55
Hedging
instrument
UUSS$$ pprriivvaattee
ppllaacceemmeenntt nnootteess
££mm
((112222..99))
1122..66
((111100..33))
Cross-currency
interest rate
swaps
£m
Forward foreign1
exchange
contracts
£m
16.4
11.8
28.2
–
–
–
Total
£m
16.4
11.8
28.2
US$ private
placement notes
£m
(116.9)
(6.0)
(122.9)
HHeeddggeedd iitteemm
TToottaall
££mm
((112222..99))
1122..66
((111100..33))
Hedged item
Total
£m
(116.9)
(6.0)
(122.9)
Note:
1 Forward foreign exchange contracts are included in non-current financing liabilities on the balance sheet.
HHeeddggee ooff nneett iinnvveessttmmeenntt iinn ffoorreeiiggnn ooppeerraattiioonnss
Included in bank loans at 31 March 2021 was a borrowing of €9.5m (2020: €9.5m) which has been designated as a hedge of the net investment in the
Republic of Ireland business of Mitie Technical Facilities Management Limited, 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 other comprehensive income to offset gains or losses on the
translation of the net investment.
184
118844
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
2266.. LLeeaasseess
RRiigghhtt--ooff--uussee aasssseettss
At 1 April 2019
Additions
Impairment
Modifications to lease terms
Depreciation
AAtt 3311 MMaarrcchh 22002200
Additions
Arising on business combinations
Impairment
Modifications to lease terms
Depreciation
AAtt 3311 MMaarrcchh 22002211
LLeeaassee lliiaabbiilliittiieess
At 1 April
Additions
Arising on business combinations
Modifications to lease terms
Interest expense related to lease liabilities
Repayment of lease liabilities (including interest)
AAtt 3311 MMaarrcchh
MMaattuurriittyy aannaallyyssiiss –– ccoonnttrraaccttuuaall uunnddiissccoouunntteedd ccaasshh fflloowwss
Less than one year
One to five years
More than five years
TToottaall uunnddiissccoouunntteedd lleeaassee lliiaabbiilliittiieess
LLeeaassee lliiaabbiilliittiieess iinn tthhee ccoonnssoolliiddaatteedd bbaallaannccee sshheeeett
Current
Non-current
AAmmoouunnttss rreeccooggnniisseedd iinn tthhee ccoonnssoolliiddaatteedd iinnccoommee ssttaatteemmeenntt
Depreciation of right-of-use assets
Short-term lease expense
Low-value lease expense
OOppeerraattiinngg pprrooffiitt iimmppaacctt
Interest on lease liabilities
PPrrooffiitt bbeeffoorree ttaaxxaattiioonn iimmppaacctt
AAmmoouunnttss rreeccooggnniisseedd iinn tthhee ccoonnssoolliiddaatteedd ssttaatteemmeenntt ooff ccaasshh fflloowwss
Total cash outflow for capitalised leases1
Note:
1 Includes capital element of lease rental payments of £28.1m (2020: £21.2m) and interest payments of £3.3m (2020: £3.1m).
PPrrooppeerrttiieess
££mm
PPllaanntt aanndd
vveehhiicclleess
££mm
48.0
3.3
(0.8)
(0.6)
(6.6)
43.3
0.4
6.6
(7.4)
–
(5.7)
37.2
39.5
23.6
–
(0.8)
(17.5)
44.8
23.7
6.9
–
1.5
(20.5)
56.4
22002211
££mm
9933..88
2255..44
1144..22
11..55
33..33
((3311..44))
110066..88
22002211
££mm
3311..99
6633..33
2222..66
111177..88
110066..88
2288..77
7788..11
22002211
££mm
((2266..22))
((11..99))
((00..11))
((2288..22))
((33..33))
((3311..55))
22002211
££mm
3311..44
TToottaall
££mm
8877..55
2266..99
((00..88))
((11..44))
((2244..11))
8888..11
2244..11
1133..55
((77..44))
11..55
((2266..22))
9933..66
2020
£m
88.9
27.5
–
(1.4)
3.1
(24.3)
93.8
2020
£m
26.6
53.1
23.9
103.6
93.8
24.3
69.5
2020
£m
(24.1)
(2.9)
(0.1)
(27.1)
(3.1)
(30.2)
2020
£m
24.3
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
185
118855
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
2277.. AAnnaallyyssiiss ooff nneett ddeebbtt
Cash and cash equivalents (Note 23)
Adjusted for: restricted cash
Bank loans (Note 24)
Private placement notes2 (Note 24)
Derivative financial instruments hedging private placement notes (Note 25)
NNeett ccaasshh//((ddeebbtt)) bbeeffoorree lleeaassee oobblliiggaattiioonnss
Lease liabilities (Note 26)
NNeett ddeebbtt
22002211
££mm
119966..22
((1188..77))
((66..66))
((116655..44))
1144..66
2200..11
((110066..88))
((8866..77))
Restated1
2020
£m
139.5
–
(49.0)
(177.9)
28.2
(59.2)
(93.8)
(153.0)
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
2 Including £0.1m (2020: £nil) of forward foreign exchange contracts.
Net debt excludes amounts in respect of customer invoice discounting referred to in Note 16 and amounts in respect of supply chain financing referred
to in Note 19. In the year ended 31 March 2021, the Group discontinued its supply chain finance arrangements.
2288.. SShhaarree ccaappiittaall aanndd sshhaarree pprreemmiiuumm
At 1 April
Rights issue (see Note 33)
Interserve acquisition (see Note 30)
AAtt 3311 MMaarrcchh
OOrrddiinnaarryy sshhaarreess
SShhaarree ccaappiittaall
SShhaarree pprreemmiiuumm
22002211
NNuummbbeerr
mmiilllliioonn
337733..77
880055..11
224488..44
2020
Number
million
373.7
–
–
22002211
££mm
99..33
2200..11
66..22
11,,442277..22
373.7
3355..66
2020
£m
9.3
–
–
9.3
22002211
££mm
113300..66
––
––
2020
£m
130.6
–
–
113300..66
130.6
Each allotted and fully paid ordinary share of 2.5 pence is a voting share in the capital of the Company, is entitled to participate in the profits of the
Company and on a winding-up is entitled to participate in the assets of the Company. The Company has one class of ordinary shares, which carry no
right to fixed income.
The share premium account represents the premium arising on the issue of equity shares.
2299.. RReesseerrvveess
MMeerrggeerr rreesseerrvvee
The merger reserve represents amounts relating to premiums arising on shares issued subject to the provisions of Section 612 of the Companies Act
2006. In the year ended 31 March 2021 merger reserve increased by £261.7m , of which £173.3m related to the rights issue (See Note 33) and
£88.4m related to the issue of shares to acquire Interserve (See Note 30).
OOwwnn sshhaarreess rreesseerrvvee
The Group uses shares held in the Employee Benefit Trust to satisfy conditional awards under the Group’s LTIP, CSP and DBP share schemes and
shares held in the SIP Trust to provide matching shares under the SIP scheme. During the year the trusts distributed 3.6m (2020: 0.6m) shares at a cost
of £5.4m (2020: £1.6m) to satisfy awards under those schemes. The Employee Benefit Trust acquired 2.7 million shares through the Rights Issue by
selling nil-paid rights.
The Company uses Treasury shares to satisfy share options under the Group’s ESOS and SAYE share schemes. No Treasury shares have been issued to
satisfy options under the Group’s share schemes in the year (2020: 3,749).
The own shares reserve at 31 March 2021 represents the cost of 11.3m (2020: 12.2m) ordinary shares in Mitie Group plc held for the purposes of the
share schemes, with a weighted average of 11.3m (2020: 12.2m) shares during the year. In the year ended 31 March 2021, the £5.4m (2020: £3.9m)
movement includes: i) £1.4m (2020: £0.9m) release to the share-based payment reserve in relation to share award exercises; ii) a £4.0m (2020: £0.7m)
transfer to retained losses which represents a loss on share award exercises; and iii) £nil (2020: £2.3m) cost released in relation to maturities reflected
in the share-based payments reserve following the expiration of the required continuing employment period in relation to restricted shares.
OOtthheerr rreesseerrvveess
Other reserves comprise the share-based payments reserve of £13.6m (2020: £8.6m), the revaluation reserve of £(0.2)m (2020: £(0.2)m), the capital
redemption reserve of £0.9m (2020: £0.9m) and other reserves of £0.2m (2020: £0.2m).
The share-based payments reserve represents credits in respect of the vesting period of equity-settled share-based payment transactions (see Note 31)
and credits in respect of the vesting period of restricted shares issued as part of the acquisition of non-controlling interests.
186
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
2299.. RReesseerrvveess ccoonnttiinnuueedd
HHeeddggiinngg aanndd ttrraannssllaattiioonn rreesseerrvvee
The hedging and translation reserve of £(2.3)m (2020: £(0.4)m) includes balances in respect of the Group’s cash flow hedges (see Note 25). A net cash
flow hedge loss during the year of £1.1m (2020: £5.7m gain) is included within other comprehensive income. The hedging and translation reserve also
includes balances arising on translation of the Group’s foreign operations and in respect of net investment hedges of which the combined movement
was a loss of £0.9m during the year (2020: £0.2m gain). A tax credit of £0.1m (2020: £0.7m charge) has been recognised on these movements through
other comprehensive income.
3300.. AAccqquuiissiittiioonnss
CCuurrrreenntt ppeerriioodd aaccqquuiissiittiioonn
On 30 November 2020, the Group announced that it had completed the acquisition of the entire issued share capital of Interservefm (Holdings)
Limited (Interserve). The consideration for the acquisition comprised the issuance of 248.4 million ordinary shares, representing c. 17.5% of the
share capital of Mitie Group plc, and cash consideration of £120.0m determined on the basis that Interserve would be delivered cash-free/debt-free
and with an agreed normalised level of working capital. The actual cash payment made at completion was £105.0m, being the £120.0m cash
consideration adjusted for the estimated debt, debt like items and working capital as at the completion date (which will be validated by a completion
accounts process).
The total consideration reported of £142.0m includes a provisional value for the adjustment to consideration which relates to the completion
accounts process for this transaction. This provisional value represents management’s best estimate of the amount expected to be received through
the completion accounts process. The adjustment has reduced the fair value of consideration and therefore goodwill by £57.6m with a corresponding
receivable being recorded.
This has required management to make judgements around the outcome of the completion accounts process. The outcome of the completion accounts
process is inherently uncertain, given that this is subject to a commercial negotiation, and potentially expert determination, and the final amount agreed
could therefore be materially different from the estimate.
Interserve is a leading UK-focused facilities management business, providing services across multiple end-markets. The acquisition will allow Mitie to
develop in strategic growth areas, enhance Mitie’s position as a leading UK facilities management company, and accelerate the delivery of Mitie’s long-
term technology-led vision.
Interserve contributed £450.0m of revenue (including share of joint ventures and associates) and £13.3m of operating profit before other items (£6.3m
of operating profit after other items) to the Group’s results during the year ended 31 March 2021. Based on estimates made of the full year impact of
the acquisition of Interserve, had the acquisition taken place on 1 April 2020, Group revenue would have increased by approximately £803.6m
(including share of joint ventures and associates) and operating profit before other items would have decreased by approximately £9.0m (operating
profit after other items would have decreased by £38.4m), resulting in total Group revenue (including share of joint ventures and associates) of
£3,392.9m, total Group operating profit before other items of £54.4m, and total Group operating loss after other items of £30.1m.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
187
118877
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3300.. AAccqquuiissiittiioonnss ccoonnttiinnuueedd
The Group’s provisional assessment of the fair values of the assets and liabilities recognised as a result of the acquisition has been based on the total fair
value of the consideration. The purchase price allocation is as follows:
Customer contracts and relationships1
Other intangible assets2
Property, plant and equipment3
Right-of-use assets4
Interest in joint ventures and associates1
Deferred tax assets7
Inventories
Trade and other receivables5
Cash and cash equivalents
Trade and other payables6
Deferred income
Financing liabilities4
Current tax liabilities
Provisions
Pension assets
Deferred tax liabilities7
Net identifiable (liabilities)/assets acquired
Goodwill
Total consideration
Cash consideration
Shares consideration8
Adjustment to consideration9
Total consideration
Book
value
£m
–
3.6
4.6
16.9
7.0
19.6
6.3
214.9
40.4
(223.6)
(59.4)
(18.1)
(1.6)
(66.7)
0.3
–
(55.8)
Fair value
adjustments
£m
PPrroovviissiioonnaall
ffaaiirr vvaalluuee
££mm
219.3
221199..33
(0.2)
0.5
(3.4)
3.7
(19.6)
–
–
–
1.1
–
3.9
–
–
–
(10.8)
194.5
33..44
55..11
1133..55
1100..77
––
66..33
221144..99
4400..44
((222222..55))
((5599..44))
((1144..22))
((11..66))
((6666..77))
00..33
((1100..88))
113388..77
33..33
114422..00
110055..00
9944..66
((5577..66))
114422..00
Notes:
1 A customer contracts and relationships asset of £219.3m was recognised on acquisition of the Interserve business (see Note 13). An additional customer contracts and relationships balance
of £3.7m was recognised on acquisition of the Landmarc business which is reflected in the Group’s interest in joint ventures and associates balance (see Note 15 for further details).
2 Software assets with a book value amounting to £3.6m were fair valued using a replacement cost methodology, resulting in a £0.2m fair value reduction from the book value.
3 The value of freehold property was assessed against market sources at the acquisition date, which resulted in a fair value uplift of £0.5m.
4 An adjustment of £3.4m has been recognised to bring the balance of right-of-use assets into alignment with the Group’s accounting policies and treating acquired leases as new leases at the
acquisition date, in accordance with IFRS 16. The net difference of £0.5m measured against the £3.9m adjustment to the lease obligation included within financing liabilities, reflects offsetting
adjustments recorded to recognise lease incentives and restoration assets.
5 The trade receivables comprise gross contractual amounts due of £230.0m, of which £15.1m was expected to be uncollectable at the date of acquisition.
6 An adjustment of £1.1m to trade and other payables was recorded being a reclassification balance to move certain lease accruals into the correct classification.
7 A provisional deferred tax liability of £10.8m has been recognised, comprising of £41.5m deferred tax liability in relation to the customer contracts and relationships recognised as intangible assets,
partially offset by deferred tax assets in relation to unutilised income tax losses, accelerated capital allowances, retirement benefit liabilities and other short-term timing differences. See Note 22.
8 Shares consideration comprise 248.4m ordinary shares issued, valued using the closing share price at 30 November 2020.
9 Adjustment to consideration represents management's best estimate of the amount expected to be recovered by the Group through the completion accounts mechanism. The outcome of the
completion accounts process is inherently uncertain, given that this is subject to a commercial negotiation, and potentially expert determination, and the final amount agreed could therefore be
materially different from the estimate.
No amount of goodwill is deductible for tax purposes. Goodwill does not qualify for separate recognition and largely represents the value attributed to
the assembled workforce acquired.
Outflow of cash to acquire subsidiaries, net of cash acquired is as follows:
Cash consideration
Less: cash acquired1
Net outflow of cash – investing activities
Note:
1 £19.4m of the cash acquired is subject to restrictions.
3311 MMaarrcchh
22002211
££mm
110055..00
((4400..44))
6644..66
Costs associated with the acquisition of Interserve, which were not directly related to the issue of shares, amounted to £13.8m and are recognised as
other items in the consolidated income statement. See Note 4.
188
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3311.. SShhaarree--bbaasseedd ppaayymmeennttss
The Group has five equity-settled share schemes. The Group has also awarded performance-related bonuses for Executive Directors which are
deferred in conditional shares under the Mitie Group plc 2010 Deferred Bonus Plan (DBP) and are accounted for as a share-based payment charge.
Following the rights issue, announced on 25 June 2020, adjustments were made to the number of existing shares under option and the exercise price, in
accordance with the scheme (and where required HMRC) rules, in order to ensure that the awards granted to employees were maintained at the same
value post the rights Issue.
DDiissccrreettiioonnaarryy sshhaarree ppllaannss::
TThhee MMiittiiee GGrroouupp ppllcc LLoonngg TTeerrmm IInncceennttiivvee PPllaann ((LLTTIIPP))
The LTIP was introduced in 2007 and renewed in 2015. The conditional 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, although for awards granted
in 2015 and subsequently some are subject to a holding period of up to a further two years. If the awards remain unexercised after a period of twelve
months from the date of vesting, the awards expire. The awards may be forfeited if the employee leaves the Group. Before the awards can be exercised,
performance conditions must be satisfied which are based on movements in a range of market and non-market measures over a three-year period.
TThhee CCoonnddiittiioonnaall SShhaarree PPllaann ((CCSSPP))
The CSP was introduced in 2014. The conditional awards of shares or the 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 determined at the discretion of the Remuneration
Committee and is generally two or three years. If the awards remain unexercised after a period of ten years from the date of grant the awards expire.
The awards may be forfeited if the employee leaves the Group.
TThhee MMiittiiee GGrroouupp ppllcc EExxeeccuuttiivvee SShhaarree OOppttiioonn SScchheemmee ((EESSOOSS))
The ESOS exercise price is equal to the average market value of the shares on the business day preceding grant or, in case the Remuneration
Committee decides, the average market value of shares over a number of preceding business days (not to exceed 20). 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. No awards have been made under the ESOS since 29 June 2015.
NNoonn--ddiissccrreettiioonnaarryy sshhaarree ppllaannss::
TThhee MMiittiiee GGrroouupp ppllcc 22001111 SSAAYYEE sscchheemmee
The SAYE scheme is open to eligible UK-resident employees. The exercise price is not less than 80% of the market value of the shares determined using
either: the share price preceding the date on which invitations to participate in the scheme are issued or an average share price over five days preceding
the invitation date. 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. An equivalent scheme is open to eligible Ireland-resident employees.
TThhee SShhaarree IInncceennttiivvee PPllaann ((SSIIPP))
The SIP was introduced in 2011 and is open to 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 separate UK trust. One conditional matching share is awarded for every ten
partnership shares purchased and has a holding period of three years. Matching shares are funded by way of market purchases.
Details of the awards and share options outstanding are as follows:
Outstanding at 1 April
Granted during the year
Lapsed during the year
Exercised during the year
Outstanding at 31 March
Exercisable at the end of the year
Note:
22002211
2020
NNuummbbeerr ooff
ccoonnddiittiioonnaall
sshhaarree aawwaarrddss
((mmiilllliioonn))
Number of
conditional
share awards
(million)
NNuummbbeerr ooff
sshhaarree ooppttiioonnss
((mmiilllliioonn))
22002211
WWeeiigghhtteedd
aavveerraaggee
eexxeerrcciissee pprriiccee
((pp))
2020
Weighted
average
exercise price
(p)
Number of
share options
(million)
2299..22
4455..44
((55..66))
((33..77))
6655..33
24.8
14.3
(8.7)
(1.2)
29.2
2200..11
4477..22
((1100..66))
––
5566..77
8822
2277
7788
––
4477
16.4
11.0
(7.3)
–
20.1
98
65
94
71
82
44..66
114411
2.1
109
1 Number of shares and exercise prices have been restated for the bonus element of the 2020 rights issue.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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For the year ended 31 March 2021
3311.. SShhaarree--bbaasseedd ppaayymmeennttss ccoonnttiinnuueedd
The Group recognised the following expenses related to share-based payments:
Discretionary share plans
Non-discretionary share plans
Share-based payments acquisition related costs
22002211
££mm
88..77
00..88
––
99..55
2020
£m
3.2
(0.3)
0.8
3.7
The share-based payment related expense charged to the income statement for the year is £9.5m (2020: £3.7m). This includes £9.5m (2020: £2.9m)
of equity-settled share-based payment transactions relating to discretionary and non-discretionary share plans. There was no charge (2020: £0.8m) in
respect of the vesting period of restricted shares issued as part of the acquisition of minority interests. The share-based payments charge for the year
is net of income statement credits of £0.1m (2020: £2.3m) relating to changes in assumptions relating to the likelihood of options vesting.
In addition, there has been: i) a release of £1.5m (2020: £3.2m) in relation to maturities reflected in the own shares reserve, which relates to share
award exercises; and ii) a transfer of £3.4m (2020: £1.3m) to retained losses regarding share options that have lapsed, forfeited or cancelled in the year
ended 31 March 2021.
The weighted average share price at the date of exercise for awards and share options exercised during the year was 45p (2020 restated: 75p). The
conditional share awards and share options outstanding at 31 March 2021 had exercise prices (other than nil in the case of the LTIP, CSP, DBP and the
matching shares under the SIP) ranging from 26p – 131p (2020 restated: 64p – 131p) and a weighted average remaining contractual life of 3.4 years
(2020: 3.1 years). In the year ended 31 March 2021, options were granted in respect of the SAYE, LTIP, CSP and matching shares under the SIP. The
aggregate of the estimated fair values of those options granted was £28.3m (2020: £13.9m).
The fair value of options is measured by use of the Black-Scholes model.
The inputs into the Black-Scholes model are as follows:
Share price (p)
Exercise price (p)
Expected volatility (%)
Expected life (years)
Risk-free rate (%)
Expected dividends (%)
Note:
1 Prices have been restated for the bonus element as a result of the 2020 rights issue.
22002211
2020
3344 –– 115511
76 – 151
00 –– 113344
2255 –– 3300
33 –– 44
0 – 134
25 – 27
3 – 4
((00..77)) –– 00..66
(0.5) – 0.6
00..00 –– 22..77
0.5 – 2.7
190
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess
The Group has a number of pension arrangements for employees:
• Defined contribution schemes for the majority of its employees; and
• Defined benefit schemes which include a group scheme and other smaller schemes.
The Group operates a number of defined contribution pension schemes for qualifying employees. The Group has a defined benefit pension scheme
called the Mitie Group plc Pension Scheme (Group scheme) where Mitie Treasury Management Limited is the principal employer. The Group
participates in a number of other defined benefit schemes (Other schemes) in respect of certain employees who joined the Group under the Transfer
of Undertakings (Protection of Employment) Regulations 2006 (TUPE) or through the acquisition of subsidiary companies.
As a result of the acquisition of Interserve, the number of defined contribution and defined benefit pension schemes operated by the Group has
increased. Defined contribution schemes represent the primary pension provision for Interserve employees. The defined benefit schemes acquired
comprise the Interserve Scheme Part C (Interserve scheme) and two smaller schemes; MacLellan Group 2000 Retirement Benefit Scheme and THK
Insulation Limited Retirement Benefits Scheme. Due to the size of the smaller schemes, the Directors present the results and position of these schemes
within this note combined with Other schemes. In addition, a fourth pension arrangement, Interserve Scheme Part B (Landmarc), is held within interest
in joint ventures and associates.
The Group, through the acquired Interserve subsidiaries, has also increased the number of defined benefit schemes under Admitted Body status and
number of participations in Multi-employer schemes. The Admitted Body schemes are largely sections of the Local Government Pension Scheme.
DDeeffiinneedd ccoonnttrriibbuuttiioonn sscchheemmeess
A defined contribution scheme is a pension scheme under which the Group pays contributions to an independently administered fund; such
contributions are based upon a fixed percentage of employees’ pay. The Group has no legal or constructive obligations to pay further contributions to
the fund once these contributions have been paid. Members’ benefits are determined by the amount of contributions paid, together with investment
returns earned on the contributions arising from the performance of each individual's chosen investments and the type of pension the member chooses
to take at retirement. As a result, actuarial risk (that pension will be lower than expected) and investment risk (that the assets invested in do not
perform in line with expectations) are borne by the employee.
The Group’s contributions are recognised as an employee benefit expense when they are due.
The Group operates four separate schemes: a stakeholder defined contribution plan, which is closed to new members; a self-invested personal pension
plan, which is closed to new members; and two group personal pension (GPP) plans. Employer contributions are payable to each on a matched basis
requiring employee contributions to be paid. Employees have the option to pay their share via a salary sacrifice arrangement. The scheme used to satisfy
auto-enrolment compliance is a master trust, The People’s Pension.
During the year, the Group made a total contribution to the defined contribution schemes of £11.9m (2020: £8.4m) and contributions to the auto-
enrolment scheme of £17.8m (2020: £15.3m), which are included in the income statement charge. The Group expects to make contributions of a
similar amount in the year ending 31 March 2022.
DDeeffiinneedd bbeenneeffiitt sscchheemmeess
GGrroouupp sscchheemmee
The Group scheme provides benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided depends
on members’ length of service and their final pensionable pay.
The Group scheme closed to new members in 2006, with new employees able to join one of the defined contribution schemes. The main Group
scheme was closed with effect from October 2017.
Pensions in payment are generally increased in line with RPI inflation, subject to certain caps and floors. Benefits are payable on death and other events
such as withdrawal from active service.
The Group scheme is operated under the UK regulatory framework. Benefits are paid to members from the trust-administered fund, where the
Trustee is responsible for ensuring that the scheme is sufficiently funded to meet current and future benefit payments. Plan assets are held in trust and
are governed by pension legislation. If investment experience is worse than expected or the actuarial assessment of the scheme’s liabilities increases, the
Group’s financial obligations to the scheme rise.
The nature of the relationship between the Group and the Trustee is also governed by regulations and practice. The Trustee must agree a funding plan
with the sponsoring company such that any funding shortfall is expected to be met by additional contributions and investment outperformance. In order
to assess the level of contributions required, triennial valuations are carried out with the scheme’s obligations measured using prudent assumptions
(which are determined by the Trustee with advice from the scheme actuary). The most recent triennial valuation was carried out as at 31 March 2020,
for which the results are at an advanced stage of being finalised.
The Trustee’s other duties include managing the investment of the scheme’s assets, administration of plan benefits and exercising of discretionary
powers. The Group works closely with the Trustee to manage the scheme.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
IInntteerrsseerrvvee SScchheemmee PPaarrtt CC ((IInntteerrsseerrvvee sscchheemmee))
The Interserve scheme was formed to take Support Services members transferred out of the Interserve Group Pension Scheme as part of the
acquisition arrangements. The transfer was completed on 28 February 2020 via a Flexible Apportionment Arrangement, which was approved by
The Pensions Regulator.
There are 182 active members within the Interserve scheme, with no deferred or pensioner members. Contributions are set based upon funding
valuations carried out every three years. Following the Flexible Apportionment Arrangement, the first triennial valuation will be carried out at
31 December 2020. If there is a shortfall in scheme assets against the funding target, then the Group and Trustees will agree on deficit contributions
to meet this deficit over a period. The estimated total of employer contributions to be paid during the year ended 31 March 2022 is £0.4m.
The Company has an unconditional right to refund of surplus assuming the gradual settlement of the Interserve scheme liabilities over time until all
members have left the section. Accordingly, there Is no restriction on the surplus.
OOtthheerr ddeeffiinneedd bbeenneeffiitt sscchheemmeess
Grouped together under Other schemes are a number of schemes to which the Group makes contributions under Admitted Body status to clients’
(generally local government or government entities) defined benefit schemes in respect of certain employees who transferred to the Group under
TUPE. The valuations of the Other schemes are updated by an actuary at each balance sheet date.
For the Admitted Body schemes, which are largely sections of the Local Government Pension Scheme, the Group will only participate for a finite period
up to the end of the relevant contract. The Group is required to pay regular contributions, as decided by the relevant scheme actuaries and detailed in
each scheme’s Contributions Certificate, which are calculated every three years as part of a triennial valuation. In a number of cases contributions
payable by the employer are capped and any excess is recovered from the entity 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 assessed for its notional section of
the scheme.
MMuullttii--eemmppllooyyeerr sscchheemmeess
As a result of acquisition activity and staff transfers following contract wins, the Group participates in four multi-employer pension schemes. The total
contributions to these schemes for the financial year ending 31 March 2022 are anticipated to be £0.1m. For three of these schemes, the Group’s share
of the assets and liabilities is minimal.
The fourth scheme is the Plumbing & Mechanical Services (UK) Industry Pension Scheme (the Plumbing Scheme), a funded multi-employer defined
benefit scheme. The Plumbing Scheme was founded in 1975 and to date has had over 4,000 employers. The Group has received a Section 75 employer
debt notice for £20.0m in respect of the participation of Robert Prettie & Co Limited in the Plumbing Scheme.
As a result of the Interserve acquisition, the Group increased its participation in the Plumbing Scheme and the Group has received a Section 75
employer debt notice for £1.7m in respect of the participation of Mitie FM Limited (formerly Interserve (Facilities Management) Limited).
Provisions of £21.7m were held at 31 March 2021 for Section 75 employer debts in respect of the participation of Robert Prettie & Co. and Mitie FM
Limited in the Plumbing Scheme. See Note 21.
One Group company, Mitie Property Services (UK) Limited, continues to participate in the Plumbing Scheme. The trustee has provided an estimate of
£2.4m for the potential Section 75 debt in respect of the participation of Mitie Property Services (UK) Limited in the Plumbing Scheme, however no
event has occurred to trigger this debt. As set out in Note 34, this potential exposure has been disclosed as a contingent liability.
192
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
FFuurrtthheerr iinnffoorrmmaattiioonn iinn rreessppeecctt ooff tthhee GGrroouupp sscchheemmee aanndd OOtthheerr sscchheemmeess
The table below sets out the details of the latest funding valuation of the Group scheme as at 31 March 2020.
Following the £23.0m payments made during the period from November 2017 to 31 March 2020, the Group paid additional contributions of £10.6m
to the Group scheme during the year ended 31 March 2021.
The Group has negotiated, subject to final approval, a deficit recovery plan. A further £82.2m is payable in instalments by 31 March 2027, which, if the
assumptions above are borne out in practice, should eliminate the deficit by 31 March 2027.
The Group made contributions to the Other schemes of £0.3m in the year (2020: £0.3m). The Group expects to make contributions of around £0.4m
to the Other schemes in the year ending 31 March 2022.
DDeettaaiillss ooff llaatteesstt ffuunnddiinngg vvaalluuaattiioonn
Date of latest funding valuation
Assets at valuation date
Funding liabilities at valuation date
Deficit at valuation date
Group scheme
31 March 2020
£190.0m
£282.1m
£92.1m
The total contribution rate was set at between 40.1% and 45.0% of annual pay for the remaining active members. The employer contribution rate is the
balance of the total cost after deducting the employee rate, which ranges depending on status and earnings. The total contribution excludes any
allowances for expenses met by the scheme.
The following table sets out details of the membership of the Group scheme at 31 March 2020:
Active members – by number
Active members – by proportion of funding liability
Total pensionable salary roll p.a.
Deferred members – by number
Deferred members – by proportion of funding liability
Total deferred pensions p.a. (at date of leaving scheme)
Pensioner members – by number
Pensioner members – by proportion of funding liability
Total pensions in payment p.a.
Group scheme
29
1.4%
£0.8m
823
65.2%
£5.3m
757
33.4%
£3.6m
AAccccoouunnttiinngg aassssuummppttiioonnss
The assumptions used in calculating the accounting costs and obligations of the Group’s defined benefit pension schemes, as detailed below, are set after
consultation with independent, professionally qualified actuaries.
The discount rate used to determine the present value of the obligations is set by reference to market yields on high-quality corporate bonds. The
assumptions for price inflation are set by reference to the difference between yields on longer-term conventional government bonds and index-linked
bonds. The assumption for increases in pensionable pay takes into account expected salary inflation, the cap at CPI, and how often the cap is likely to
be exceeded.
A UK High Court judgment was issued on 26 October 2018 relating to Guaranteed Minimum Pensions (GMP). Although the ruling related to Lloyds
Banking Group pension schemes, it is expected to create a precedent for other UK defined benefit pension schemes. The ruling requires the
equalisation of member benefits earned between 1990 and 1997 to address gender inequality in instances where GMP benefits are currently unequal.
Whilst there remains some uncertainty, the Group made a provision for the estimated financial impact of this ruling on the Group scheme, based on
a comparison of the cumulative value of members’ benefits with the benefits of a notional member of the opposite gender (method C2 under the
terminology of the High Court Judgment).
On 20 November 2020, a further UK High Court judgement ruled that pension schemes will need to revisit individual transfer payments made since
17 May 1990 to check if an additional top-up is needed. A past service cost of £0.2m for additional obligations was recognised within Other items in the
year ended 31 March 2021.
The assumptions for life expectancy have been set with reference to the actuarial tables used in the latest funding valuations, with a lower ‘best-
estimate’ allowance for future improvements to mortality. The Group is monitoring the impact of COVID-19 on the Group’s defined benefit pension
schemes and no impact of COVID-19 has been factored into the life expectancy assumptions as at 31 March 2021.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
PPrriinncciippaall aaccccoouunnttiinngg aassssuummppttiioonnss aatt bbaallaannccee sshheeeett ddaattee
Key assumptions used for IAS 19 valuation:
Discount rate
Expected rate of pensionable pay increases
Retail price inflation
Consumer price inflation
Future pension increases
Post retirement life expectancy:
Current pensioners at 65 – male
Current pensioners at 65 – female
Future pensioners at 65 – male
Future pensioners at 65 – female
Group scheme
22002211
%%
2020
%
Interserve
scheme
22002211
%%
Other schemes
22002211
%%
2020
%
22..1100
22..5500
33..2255
22..5500
33..2255
2.35
2.50
2.50
1.70
3.20
22..1100
22..5500
33..2255
22..5500
33..3300
22..1100
22..5500
33..2255
22..5500
33..2255
2.35
2.50
2.50
1.70
3.20
Group scheme
22002211
YYeeaarrss
2020
Years
Interserve
scheme
22002211
YYeeaarrss
8877..66
8888..99
8888..66
9900..11
88.0
89.0
89.0
90.0
8866..33
8888..33
8877..33
8899..66
Life expectancy for the other schemes is that used by the relevant scheme actuary.
SSeennssiittiivviittyy ooff ddeeffiinneedd bbeenneeffiitt oobblliiggaattiioonnss ttoo kkeeyy aassssuummppttiioonnss
The sensitivity of defined benefit obligations to changes in principal actuarial assumptions is shown below.
Increase in discount rate
Increase in retail price inflation*
Increase in consumer price inflation (excluding pay)
Increase in life expectancy
Change in
assumption
0.1%
0.1%
0.1%
1 year
Impact on defined benefit obligations
Increase/(decrease)
in obligations
%
Increase/(decrease)
in obligations
£m
(2.1%)
1.6%
1.0%
4.5%
(6.7)
5.0
3.0
14.4
*
Including other inflation-linked assumptions (consumer price inflation, pension increases and salary growth)
The sensitivity information shown above has been prepared using the same method as adopted when adjusting the results of the latest funding valuation
to the balance sheet date.
Some of the above changes in assumptions may have an impact on the value of the scheme’s investment holdings. For example, the Group scheme holds
a proportion of its assets in UK corporate bonds. A fall in the discount rate as a result of lower UK corporate bond yields would lead to an increase in
the value of these assets, thus mitigating the increase in the defined benefit obligation to some extent. The duration, or average term to payment for the
benefits due, weighted by liability, is around 20 years for the Group scheme and around 18 years for the Interserve scheme.
194
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
AAmmoouunnttss rreeccooggnniisseedd iinn ffiinnaanncciiaall ssttaatteemmeennttss
Amounts recognised in the income statement are as follows:
Current service cost
Total administration expense
Amounts recognised in operating profit
Past service cost (including curtailments)
Net interest cost
Amounts recognised in profit/(loss) before tax
GGrroouupp
sscchheemmee
££mm
IInntteerrsseerrvvee
sscchheemmee
££mm
OOtthheerr
sscchheemmeess
££mm
((00..22))
((00..88))
((11..00))
((00..22))
((11..00))
((22..22))
((00..33))
––
((00..33))
––
00..11
((00..22))
((00..55))
––
((00..55))
––
––
((00..55))
22002211
TToottaall
££mm
((11..00))
((00..88))
((11..88))
((00..22))
((00..99))
((22..99))
Group
scheme
£m
Other
schemes
£m
(0.3)
(0.7)
(1.0)
–
(1.4)
(2.4)
(0.3)
–
(0.3)
–
–
(0.3)
2020
Total
£m
(0.6)
(0.7)
(1.3)
–
(1.4)
(2.7)
The past service cost (including curtailments) of £0.2m (2020: £nil) was a cost in respect of equalising Guaranteed Minimum Pensions and is recognised
within Other items. See Note 4.
Amounts recognised in the consolidated statement of comprehensive income are as follows:
Actuarial (losses)/gains arising due to changes
in financial assumptions
Actuarial gains/(losses) arising from liability experience
Actuarial gains due to changes in demographic assumptions
Movement in asset ceiling
Return on scheme assets, excluding interest income
Amounts recognised in consolidated statement of
comprehensive income
IInntteerrsseerrvvee
sscchheemmee
££mm
OOtthheerr
sscchheemmeess
££mm
22002211
TToottaall
££mm
00..66
((11..77))
((3366..00))
Group
scheme
£m
17.4
((00..11))
00..33
99..66
(1.6)
––
––
((11..77))
((11..22))
00..44
((11..00))
33..22
11..22
44..44
((11..00))
1177..66
((55..44))
–
–
(7.7)
8.1
GGrroouupp
sscchheemmee
££mm
((3344..99))
99..44
44..00
––
1166..11
((55..44))
Other
schemes
£m
1.1
1.5
0.2
0.1
(1.8)
1.1
The amounts included in the consolidated balance sheet are as follows:
Fair value of scheme assets
Present value of defined benefit obligations
Net pension (liability)/asset
All figures above are shown before deferred tax.
GGrroouupp
sscchheemmee
££mm
221155..33
((225566..77))
((4411..44))
IInntteerrsseerrvvee
sscchheemmee
££mm
OOtthheerr
sscchheemmeess
££mm
3300..77
((2277..77))
33..00
3355..33
((3399..44))
((44..11))
22002211
TToottaall
££mm
228811..33
((332233..88))
((4422..55))
Group
scheme
£m
191.1
(236.4)
(45.3)
Other
schemes
£m
11.8
(13.2)
(1.4)
2020
Total
£m
18.5
(0.1)
0.2
0.1
(9.5)
9.2
2020
Total
£m
202.9
(249.6)
(46.7)
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
195
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Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
Movements in the present value of defined benefit obligations in the year were as follows:
At 1 April
Arising on business combinations
Current service cost
Interest cost
Contributions from scheme members
Actuarial losses/(gains) arising due to changes in financial
assumptions
Actuarial (gains)/losses arising from experience
Actuarial gains due to changes in demographic assumptions
Movement in asset ceiling
Benefits paid
Past service cost (including curtailments)
AAtt 3311 MMaarrcchh
IInntteerrsseerrvvee
sscchheemmee
££mm
OOtthheerr
sscchheemmeess
££mm
GGrroouupp
sscchheemmee
££mm
223366..44
––
00..22
55..55
––
––
2277..99
00..33
00..11
––
3344..99
((00..66))
((99..44))
((44..00))
––
((77..11))
00..22
225566..77
00..11
––
––
((00..11))
––
2277..77
22002211
TToottaall
££mm
224499..66
5511..88
11..00
66..00
00..11
Group
scheme
£m
251.9
–
0.3
6.0
–
Other
schemes
£m
15.5
–
0.3
0.3
0.2
2020
Total
£m
267.4
–
0.6
6.3
0.2
3366..00
(17.4)
(1.1)
(18.5)
((99..66))
((44..44))
11..00
((77..99))
00..22
1.6
–
–
(6.0)
–
332233..88
236.4
(1.5)
(0.2)
(0.1)
(0.2)
–
13.2
1133..22
2233..99
00..55
00..44
00..11
11..77
((00..33))
((00..44))
11..00
((00..77))
––
3399..44
The defined benefit obligations of the Group scheme are analysed by participant status as at the 31 March 2020 funding valuation date below:
Active
Deferred
Pensioners
AAtt 3311 MMaarrcchh
Movements in the fair value of scheme assets were as follows:
At 1 April
Arising on business combinations
Interest income
Actuarial gains/(losses) on assets
Contributions from the sponsoring companies
Contributions from scheme members
Expenses paid
Benefits paid
AAtt 3311 MMaarrcchh
GGrroouupp
sscchheemmee
££mm
119911..11
––
44..55
1166..11
1111..55
––
((00..88))
((77..11))
221155..33
IInntteerrsseerrvvee
sscchheemmee
££mm
OOtthheerr
sscchheemmeess
££mm
––
3311..99
00..22
((11..77))
00..44
––
––
((00..11))
3300..77
1111..88
2200..22
00..44
33..22
00..33
00..11
––
((00..77))
3355..33
22002211
TToottaall
££mm
220022..99
5522..11
55..11
1177..66
1122..22
00..11
((00..88))
((77..99))
Group
scheme
£m
190.5
–
4.6
(7.7)
10.4
–
(0.7)
(6.0)
228811..33
191.1
22002211
££mm
33..66
116677..44
8855..77
225566..77
Other
schemes
£m
13.1
–
0.3
(1.8)
0.3
0.1
–
(0.2)
11.8
196
119966
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
0.1
(0.2)
(0.1)
(6.2)
–
249.6
2020
£m
48.2
122.9
65.3
236.4
2020
Total
£m
203.6
–
4.9
(9.5)
10.7
0.1
(0.7)
(6.2)
202.9
3322.. RReettiirreemmeenntt bbeenneeffiitt sscchheemmeess ccoonnttiinnuueedd
Fair values of the assets held by the schemes were as follows:
Equities
Government bonds
Corporate bonds
Property
Diversified growth fund
Cash
TToottaall ffaaiirr vvaalluuee ooff aasssseettss
GGrroouupp
sscchheemmee
££mm
IInntteerrsseerrvvee
sscchheemmee
££mm
6688..11
5544..22
2288..77
1166..77
4433..99
33..77
––
1144..55
33..33
22..11
99..99
00..99
OOtthheerr
sscchheemmeess
££mm
2211..22
22..00
77..44
22..22
11..88
00..77
22002211
TToottaall
££mm
8899..33
7700..77
3399..44
2211..00
5555..66
55..33
Group
scheme
£m
Other
schemes
£m
54.4
53.7
28.8
16.6
32.9
4.7
6.0
0.5
3.5
1.4
–
0.4
2020
Total
£m
60.4
54.2
32.3
18.0
32.9
5.1
221155..33
3300..77
3355..33
228811..33
191.1
11.8
202.9
The investment portfolios are diversified, investing in a wide range of assets, in order to provide reasonable assurance that no single asset or type of
asset could have a materially adverse impact on the total portfolio. To reduce volatility, certain assets are held in a matching portfolio, which largely
consists of government and corporate bonds, designed to mirror movements in corresponding liabilities.
Around 59% (2020: 55%) of the assets are held in equities, property and pooled investment vehicles which seek a higher expected level of return over
the long term.
The property assets represent quoted property investments.
RRiisskkss aanndd rriisskk mmaannaaggeemmeenntt
The Group scheme, in common with the majority of UK plans, has a number of risks. These areas of risk and the ways in which the Group has sought
to manage them, are set out in the table below.
The risks are considered from both a funding perspective, which drives the cash commitments of the Group, and from an accounting perspective,
i.e. the extent to which such risks affect the amounts recorded in the Group’s financial statements:
Risk
Description
Asset
volatility
The funding liabilities are calculated using a discount rate set with reference to government bond yields, with allowance for additional return to be generated
from the investment portfolio. The defined benefit obligation for accounting is calculated using a discount rate set with reference to corporate bond yields.
The Group scheme holds a large proportion of its assets (60%) in equities and other return-seeking assets (principally diversified growth funds (DGFs) and
property). The returns on such assets tend to be volatile and are not correlated to government bonds. This means that the funding level has the potential to
be volatile in the short term, potentially resulting in short-term cash requirements, or alternative security offers, which are acceptable to the Trustee, and an
increase in the net defined benefit liability recorded on the Group’s balance sheet. Equities and DGFs are considered to offer the best returns over the long
term with an acceptable level of risk and hence the scheme holds a significant proportion of these types of asset. However, the scheme’s assets are well-
diversified by investing in a range of asset classes, including property, government bonds and corporate bonds. The Group scheme holds 20% of its assets in
DGFs which seek to maintain high levels of return whilst achieving lower volatility than direct equity funds. The allocation to return seeking assets is monitored
to ensure it remains appropriate given the scheme’s long-term objectives. The investment in bonds is discussed further below.
Changes in
bond yields
Falling bond yields tend to increase the funding and accounting obligations. However, the investment in corporate and government bonds offers a degree of
matching, i.e. the movement in assets arising from changes in bond yields partially matches the movement in the funding or accounting obligations. In this way,
the exposure to movements in bond yields is reduced.
Inflation risk The majority of the Group scheme’s benefit obligations are linked to inflation. Higher inflation will lead to higher liabilities (although caps on the level of
inflationary increases are in place to protect the plan against extreme inflation). The majority of the Group scheme’s assets are either unaffected by inflation
(fixed interest bonds) or loosely correlated with inflation (equities), meaning that an increase in inflation will also increase the deficit.
Life
expectancy
The majority of the Group scheme’s obligations are to provide a pension for the life of the member, so increases in life expectancy will result in an increase in
the obligations.
AArreeaass ooff rriisskk mmaannaaggeemmeenntt
Although investment decisions in the Group scheme are the responsibility of the Trustee, the Group takes an active interest to ensure that pension plan
risks are managed efficiently. The Group and Trustee have agreed a long-term strategy for reducing investment risk where appropriate.
Certain benefits payable on death before retirement are insured.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
197
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3333.. RRiigghhttss iissssuuee
On 25 June 2020, the Company announced a fully underwritten 11 for 5 rights issue at a subscription price of 25p per new ordinary share. The rights
issue was approved by the holders of the Company’s ordinary shares at a general meeting on 13 July 2020 and the rights issue closed on 28 July 2020.
805,069,771 new ordinary shares were issued, raising £190.4m after issue costs and expenses of £10.9m.
The rights issue utilised a cash box structure that qualified for merger relief under Section 612 of the Companies Act 2006 so that the premium arising
was not required to be credited to the Company’s share premium account. The cash box entity, Project Orion Ltd, issued redeemable preference
shares in consideration for the receipt of £193.4m, representing the subscription amount of £201.3m net of £7.9m of issue costs arising from the rights
issue. The Company’s new ordinary shares were issued as consideration for the transfer to it of the shares in Project Orion Ltd which it did not already
own. As a result, the issue qualified for merger relief under Section 612 of the Companies Act 2006 so that the £173.3m excess of the value of the
acquired shares in Project Orion Ltd over the £20.1m nominal value of the ordinary shares issued by the Company was credited to the Company’s
merger reserve. The remaining £3.0m of rights issue expenses have been charged against the merger reserve.
As a result of the rights issue, earnings per share and dividends per share for earlier periods have been restated for the bonus element of the rights
issue. The adjustment factor has been calculated by dividing the share price immediately before the shares were quoted ex-rights (84.05p) with the
theoretical ex-rights price (43.45p), giving an adjustment factor of 1.93426825.
3344.. CCoonnttiinnggeenntt lliiaabbiilliittiieess aanndd aasssseettss
CCoonnttiinnggeenntt lliiaabbiilliittiieess
CCyybbeerr iinncciiddeenntt
On 13 May 2020, Interserve Group Limited (IGL) announced that it was subject to a cyber-attack. The attack affected elements of Interserve’s
IT systems (including enterprise resource planning and human resource systems), including elements related to Interserve. Once the cyber-attack
was discovered, IGL commenced work with the National Cyber Security Centre and strategic response team to investigate, contain and remedy
the situation.
The attack was reported to the ICO on 5 May 2020. The ICO has advised IGL that it considers it likely that IGL or members of the Interserve
Group (which could include Interserve) are in breach or likely to be in breach of certain articles of the UK GDPR and that IGL or members of
the Interserve Group (which could include Interserve) are likely to be subject to regulatory action in respect of the matter which could result in
a remedial order or fine.
The share purchase agreement (SPA) entered into for the acquisition of Interserve gives Mitie the benefit of indemnity protection provided by How
Group Limited, a subsidiary of IGL, for a two-year period from the Interserve acquisition date. This is expected to be sufficient to cover any penalty
imposed by the ICO in relation to Interserve entities, however, the results of the ICO investigation cannot be predicted and the Group may be liable
to pay a penalty that exceeds the level of indemnity cover of £40 million.
Management understands that the ICO investigation is ongoing. However, whilst any fine is likely to be issued within the two-year period covered by the
SPA indemnity, the Group is unable to reliably estimate the amount of any potential fine at the reporting date.
CCoonnttrraaccttuuaall ddiissppuutteess,, gguuaarraanntteeeess aanndd iinnddeemmnniittiieess
The Group is, from time to time, party to contractual disputes that arise in the ordinary course of business. Management does not anticipate that the
outcome of any of these disputes will have a material adverse effect on the Group’s financial position, other than as already provided for in the financial
statements. In appropriate cases, a provision is recognised based on best estimates and management judgement but there can be no guarantee that
these provisions (which may be subject to potentially material revision from time to time) will result in an accurate prediction, due to the uncertainty
of the actual costs and liabilities that may be incurred.
The Group is currently aware of potential liabilities relating to certain of the PFI contracts in the Interserve business. Management is in the process of
investigating the extent to which a liability to provide rectification works exists, the result of which may or may not involve legal proceedings. Whilst
management is collating the required information to assess the potential exposure, no reliable estimate of the contingent liability, or the likely timing
of any settlement amount, can be made at the reporting date.
Management will continue to monitor events as matters progress.
In addition, the Company and its subsidiaries have provided performance and financial guarantees, issued by financial institutions on its behalf, amounting
to £27.2m (2020: £20.6m) in the ordinary course of business. These are not expected to result in any material financial loss.
MMuullttii--eemmppllooyyeerr ppeennssiioonn sscchheemmeess
When the Group (or a subsidiary of the Group) exits multi-employer pension schemes (typically by ceasing to have any active employees in the
scheme), pension legislation may require the Group to fund the Group’s share of the total amount of net liabilities with a one-off cash payment
(a Section 75 debt under the Pensions Act 1995).
The Group continues to have an exposure to Section 75 employer debts in respect of the participation of Mitie Property Services (UK) Limited in the
Plumbing Scheme, which have been estimated at £2.4m by the trustee, however no event has occurred to trigger this debt as Mitie Property Services
(UK) Limited still employs active members of the Plumbing Scheme.
EEmmppllooyymmeenntt ccllaaiimmss
The Group is, from time to time, party to employment disputes, claims, and other potential liabilities which arise in the ordinary course of business.
Management does not anticipate that any of the current matters will give rise to settlements, either individually or in aggregate, which will have a material
adverse effect on the Group’s financial position.
CCoonnttiinnggeenntt aasssseettss
Management is working to ensure that, through a combination of insurance claims and recourse to suppliers, a proportion of the £14.1m costs incurred
in respect of rectification works for the Social Housing property maintenance contracts, including the £5.4m recorded in provisions at 31 March 2021 in
Note 21, are recovered. At 31 March 2021, £1.8m recovery from insurers had been agreed and has been recognised as a receivable. The amount and
timing of further recoveries is yet to be determined.
198
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MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3355.. RReellaatteedd ppaarrttyy ttrraannssaaccttiioonnss
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in
this Note.
Mitie Group plc has a related party relationship with the Mitie Foundation, a charitable company. During the year, the Group made donations and gifts
in kind of £0.2m (2020: £0.3m) to the Foundation.
During the financial year there were £0.6m transactions with joint ventures or associates. The amounts due from or to joint ventures and associates at
the year end is £0.3m.
The Group’s key management personnel include the Executive Directors, Non-Executive Directors and members of the Mitie Group Executive (MGX).
Details of the Directors’ remuneration are included in Note 7. The remuneration for members of the MGX, including the share-based payments charge,
is £6.3m (2020: £2.8m). No 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.
Short-term employment benefits
Post-employment benefits
Share-based payments
AAtt 3311 MMaarrcchh
22002211
££mm
33..44
00..22
22..77
66..33
2020
£m
1.9
0.3
0.6
2.8
During the year ended 31 March 2021, the Group generated revenue of £0.1m (2020: £0.2m) relating to Informa plc, a company whose chairman is
also Mitie Group plc’s non-executive chairman. There were no outstanding balances at the year end (2020: £nil).
During the year ended 31 March 2021, the Group generated revenue of £0.6m (2020: £nil) relating to SIG plc, £0.2m (2020: £nil) relating to St James'
Place plc and, £0.1m (2020: £nil) relating to Essentra plc, companies whose non-executive directors are also Mitie Group plc non-executive directors.
The outstanding balances at the year ended 31 March 2021 are £0.5m (2020: £nil), £0.1m (2020: £nil) and £nil (2020: £nil) respectively.
All transactions with these related parties were made on terms equivalent to those that prevail in arm’s length transactions. No expense has been
recognised in the year for bad or doubtful debts in respect of the amounts owed by related parties.
3366.. EEvveennttss aafftteerr tthhee rreeppoorrttiinngg ppeerriioodd
There are no material post balance sheet events that require adjustment or disclosure in the annual report.
3377.. RReellaatteedd uunnddeerrttaakkiinnggss
SSuubbssiiddiiaarriieess
The companies set out below are those subsidiaries which were part of the Group at 31 March 2021.
Country of incorporation
22002211
%% vvoottiinngg rriigghhttss aanndd
oowwnneerrsshhiipp iinntteerreesstt
22002211
%% nnoommiinnaall
vvaalluuee oowwnneedd
Company
Bateman’s Cleaning Services Limited
Broadreach Group Limited
Building & Property Trustees Limited*
Care & Custody (Health) Limited
Central Window Cleaning Company Limited*
Cole Motors Limited*
Direct Enquiries Holdings Limited*
First Security Group Limited
Global Aware International Group Limited*
Global Aware International Ltd‡
Hi-tech Cleaning Solutions Limited* (in liquidation)
Industrial Services International Limited
Insitu Cleaning Company Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Interserve Saudi Arabia LLC (in liquidation)
Kingdom of Saudi Arabia
Jabez Holdings Limited‡
Knightsbridge Guarding Holdings Limited
Knightsbridge Guarding Limited
Lancaster Office Cleaning Company Limited*
MacLellan Group Limited
MacLellan Integrated Services Limited
MacLellan International Airport Services Limited
MacLellan International Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
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NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3377.. RReellaatteedd uunnddeerrttaakkiinnggss ccoonnttiinnuueedd
Country of incorporation
22002211
%% vvoottiinngg rriigghhttss aanndd
oowwnneerrsshhiipp iinntteerreesstt
22002211
%% nnoommiinnaall
vvaalluuee oowwnneedd
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Belgium
Belgium
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Spain
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Jersey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Spain
United Kingdom
Ireland
Spain
United Kingdom
United Kingdom
France
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
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110000%%
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110000%%
110000%%
110000%%
110000%%
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110000%%
Company
MacLellan Limited*
MacLellan Management Services Limited
Mitie (Defence) Limited
Mitie (Facilities Services) Limited
Mitie (Facilities Services-Slough) Limited
Mitie Aviation Security Limited X
Mitie Belgium BVBA
Mitie Belgium Security BVBA
Mitie Building Services (UK) Limited*
Mitie Built Environment Limited‡
Mitie Business Services Limited
Mitie Business Services UK Limited‡
Mitie Care and Custody Limitedx
Mitie Catering Services Limited
Mitie Centro Especial de Empleo, S.L.
Mitie Cleaning & Environmental Services Limited
Mitie Cleaning Services Limited‡
Mitie Client Services Limited
Mitie Company Secretarial Services Limited*
Mitie Compliance Ltd*
Mitie Deutschland GmbH
Mitie Document Solutions Limited*
Mitie Dormant (No. 1) Limited*
Mitie Engineering Limited* X
Mitie Engineering Services (Bristol) Limited*
Mitie Engineering Services (Guernsey) Limited
Mitie Engineering Services (Jersey) Limited
Mitie Engineering Services (Northern Region) Limited‡
Mitie Engineering Services (Wales) Limited*
Mitie Engineering Services Limited*
Mitie Environmental Limited*
Mitie Environmental Services Limited
Mitie España, S.L.
Mitie Events & Leisure Services Limited‡^
Mitie Facilities Management Limited^
Mitie Facilities Services, S.A
Mitie Fire Services Limited*
Mitie FM Limited
Mitie France SAS
Mitie FS (UK) Limited
Mitie Group Pension Scheme Trustee Company Limited*
Mitie Holdings Limited
Mitie Hospital Services Limited*
Mitie Infrastructure Limited‡^
200
220000
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3377.. RReellaatteedd uunnddeerrttaakkiinnggss ccoonnttiinnuueedd
Company
Mitie Integra S.L.
Mitie Integrated Facilities Management Limited*
Mitie Integrated Services Limited
Mitie International Limited‡
Mitie Investments Limited‡
Mitie Justice Limited*
Mitie Landscapes Limited
Mitie Limited
Mitie Local Services Limited*
Mitie Managed Services Limited*
Mitie Nederland B.V.
Mitie NI Limited
Mitie Norge Aksjeselskap
Mitie PFI Limited
Mitie Polska Sp. z o.o.
Mitie Project Services Limited
Mitie Property Services (UK) Limited+
Mitie Resources Limited*
Mitie Schweiz GmbH
Mitie Scotgate Limited*
Mitie Security (Fire & Electronics) Limited
Mitie Security (First) Limited
Mitie Security (Knightsbridge) Limited
Mitie Security (London) Limited*
Mitie Security Holdings Limited‡
Mitie Security Limited
Mitie Security Services Limited
Mitie Services (Retail) Limited*
Mitie Shared Services Limited
Mitie Specialist Services (Holdings) Limited
Mitie Suomi Oy
Mitie Sverige AB
Mitie T S 2 Limited*^
Mitie Technical Facilities Management Holdings Limited‡
Mitie Technical Facilities Management Limited
Mitie Technical Services Limited
Mitie Tilley Roofing Limited+
Mitie Transport Services Limited*
Mitie Treasury Management Limited+
Mitie Trustee Limited*
Mitie Waste & Environmental Services Limitedx
Mitie Work Wise Limited*
Mitiefm (Holdings) Limited
Mitiefm Services Limited
Parkersell Limited*
Country of incorporation
22002211
%% vvoottiinngg rriigghhttss aanndd
oowwnneerrsshhiipp iinntteerreesstt
22002211
%% nnoommiinnaall
vvaalluuee oowwnneedd
Spain
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Netherlands
United Kingdom
Norway
United Kingdom
Poland
United Kingdom
United Kingdom
United Kingdom
Switzerland
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Finland
Sweden
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
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110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
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110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
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110000%%
110000%%
110000%%
110000%%
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110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
201
220011
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
3377.. RReellaatteedd uunnddeerrttaakkiinnggss ccoonnttiinnuueedd
Company
Phoenix Fire Services Limited
Phonotas Services Limited*
Procius Limited‡
Project Orion Ltd+
R & D Holdings Limited
Ramoneur Cleaning and Support Services Limited
Retail Cleaning Services Limited*
Robert Prettie & Co Limited
Service Management International Asia Pacific PTE. Ltd.
Source Eight Limited‡X
Source8 Africa Limited‡
Source8 Delivery (Nigeria) Limited
Source8 Services FZLLC
SSD UK Limited
Tass (Europe) Limited
Translimp Contract Services SA
UK CRBS Limited‡
Unique Cleaning Services Limited
Utilyx Asset Management Limited‡
Utilyx Asset Management Projects Limited‡
Utilyx Broking Limited*
Utilyx Healthcare Energy Services Limited
Utilyx Holdings Limited*
Utilyx Limited
Utilyx Risk Management Limited‡
Vision Security Group Limited
Vision Security Group Systems Limited*
VSG Payroll Services Limited*
VSG Staff Hire Limited*
VSG Systems Direct Limited*
Wealthy Thoughts Limited‡
Country of incorporation
22002211
%% vvoottiinngg rriigghhttss aanndd
oowwnneerrsshhiipp iinntteerreesstt
22002211
%% nnoommiinnaall
vvaalluuee oowwnneedd
United Kingdom
United Kingdom
United Kingdom
Jersey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Singapore
United Kingdom
United Kingdom
Nigeria
United Arab Emirates
United Kingdom
United Kingdom
Spain
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
110000%%
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110000%%
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110000%%
110000%%
* These entities were dormant during the year ended 31 March 2021 and will take the exemption from preparing and filing financial statements for the year ended 31 March 2021 (by virtue of
Section 480 of the Companies Act 2006).
‡ These subsidiaries have taken advantage of the audit exemption under Section 479A of the Companies Act 2006 for the year or period ended 31 March 2021. As such, Mitie Group plc has
provided a guarantee against all debts and liabilities in these subsidiaries as at 31 March 2021.
+ Held directly by the Company.
x The Company holds direct minority interest in these companies.
^ The Company has voting control of these companies through direct interests in a class of shares representing fewer than 50% of the total issued share capital of the companies.
202
220022
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
3377.. RReellaatteedd uunnddeerrttaakkiinnggss ccoonnttiinnuueedd
The registered office of all subsidiaries is The Shard, Level 12, 32 London Bridge Street, London, SE1 9SG with the exception of the following:
Company
Registered office address
Hi-tech Cleaning Solutions Limited (in liquidation)
15 Canada Square, Canary Wharf, London, E14 5GL
Interserve Saudi Arabia LLC (in liquidation)
PO Box 26982, Riyadh, 11595, Kingdom of Saudi Arabia
Mitie Belgium BVBA
Regus Brussels South Station, Marcel Broodthaersplein 8 (box 5), 1060 Brussels (Sint-Gillis), Belgium
Mitie Belgium Security BVBA
Regus Brussels South Station, Marcel Broodthaersplein 8 (box 5), 1060 Brussels (Sint-Gillis), Belgium
Mitie Centro Especial De Empleo SL
Calle San Miguel 25, Bajo 1, Azuqueca de Henares, Guadalajara, 19200, Spain
Mitie Deutschland GmbH
Meßstetter Straße 8, 70567, Stuttgart, Germany
Mitie Engineering Services (Guernsey) Limited
Martello Court, Admiral Park, St Peter Port, GY1 3HB, Guernsey
Mitie Engineering Services (Jersey) Limited
13 Castle Street, St Helier, JE4 5UT, Jersey
Mitie España, S.L.
Osborne Clarke, Avenida Diagonal, 477, Planta 20, 08036, Barcelona, Spain
Mitie Facilities Management Limited
108 Q House, Furze Road, Sandyford, Dublin 18, Ireland
Mitie Facilities Services SA
Calle Juan Ignacio Luca de Tena, 8, Madrid, 28027, Spain
Mitie France SAS
Mitie Integra SL
Mitie NI Limited
Mitie Nederland B.V.
Mitie Norge Aksjeselskap
Mitie Polska Sp. z o.o.
Mitie Schweiz GmbH
Mitie Suomi Oy
Mitie Sverige AB
Project Orion Ltd
259 rue St Honore, 75001, Paris, France
Carretera Santa Creu do Calafell 81, Gava, Barcelona, 08850, Spain
Clara House, Office B5, Dunmurry Office Park, 37A Upper Dunmurry Lane, Belfast, Northern Ireland,
BT17 0AA, United Kingdom
Hoofdweg 52A, 3067 GH Rotterdam, P.O. Box 8540, 3009 AM Rotterdam, 3009 AM Rotterdam, Netherlands
Kongensgate 9, 0153, Oslo, Norway, Norway
Solec 22, 00-410, Warsaw, Poland
Brandschenkestrasse 90, CH-8027, Zurich, Switzerland
c/o Ov Visma Services Infocon Ab, Pormestarinrine 8, 00160 Helsinki, Finland
Kungsgatan 55, 111 22 Stockholm, Sweden, Sweden
3rd floor, Esplanade Street, St Helier, Jersey, JEP 9WG
Service Management International Asia Pacific PTE. Ltd.
65 Chulia Street, #38-02/03, OCBC Centre, Singapore, 049513
Source8 Delivery (Nigeria) Limited
235 Ikorodu Road, Ilupeju, Lagos, Nigeria
Source8 Services FZLLC
17 The Iridium Building, Um Suqueim Road, Al Barsha, Dubai, PO BOX 391186, United Arab Emirates
Translimp Contract Services SA
Calle Juan Ignacio Luca de Tena, 8, Madrid, 28027, Spain
No subsidiaries have non-controlling interests that are material to the Group.
JJooiinntt vveennttuurreess aanndd aassssoocciiaatteess
The Group has the following joint ventures and associates:
Company
Registered office address
Landmarc Gulf Consultancy Management LLC No.104, Arjan Emirates Real Estate – Branch 1, PO Box 129354,
Al Hilal Building, Al Falah Road, Abu Dhabi, United Arab Emirates
Landmarc Support Services Limited
The Shard, Level 12, 32 London Bridge Street, London, SE1 9SG
Mitie Rezayat Company LLC
Unit 6 and 7, Al Amani Center, Anas Bin Malik Road, Building
Number 2727, Riyadh, Saudi Arabia
PriDE (SERP) Limited
The Shard, Level 12, 32 London Bridge Street, London, SE1 9SG
Sussex Estates and Facilities LLP
The Shard, Level 12, 32 London Bridge Street, London, SE1 9SG
JJooiinntt ooppeerraattiioonnss
The Group has the following joint operations:
Company
OneAim
Country of incorporation
United Kingdom
22002211
%% vvoottiinngg rriigghhttss aanndd
oowwnneerrsshhiipp iinntteerreesstt
22002211
%% nnoommiinnaall
vvaalluuee oowwnneedd
2255%%
5511%%
5500%%
5500%%
3355%%
2255%%
5500%%
5500%%
5500%%
3355%%
PPrriinncciippaall aaccttiivviittyy
SSiitteewwoorrkkss
22002211
PPeerrcceennttaaggee
iinntteerreesstt
5500%%
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
203
220033
Strategic reportGovernanceFinancial statements
CCoommppaannyy bbaallaannccee sshheeeett
as at 31 March 2021
NNoonn--ccuurrrreenntt aasssseettss
Investments in subsidiaries
Trade and other receivables
Deferred tax asset
TToottaall nnoonn--ccuurrrreenntt aasssseettss
CCuurrrreenntt aasssseettss
Cash and cash equivalents
Trade and other receivables
Corporation tax receivable
TToottaall ccuurrrreenntt aasssseettss
TToottaall aasssseettss
CCuurrrreenntt lliiaabbiilliittiieess
Trade and other payables
Provisions
TToottaall ccuurrrreenntt lliiaabbiilliittiieess
NNeett ccuurrrreenntt aasssseettss//((lliiaabbiilliittiieess))
NNoonn--ccuurrrreenntt lliiaabbiilliittiieess
Provisions
TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess
TToottaall lliiaabbiilliittiieess
NNeett aasssseettss
EEqquuiittyy
Share capital
Share premium account
Merger reserve
Own shares reserve
Other reserves
Retained earnings1
TToottaall eeqquuiittyy
Note:
Notes
22002211
££mm
2020
£m
3
4
5
4
6
7
7
8
8
557799..55
525.6
00..55
11..44
3.3
0.3
558811..44
529.2
00..99
225555..11
1111..00
226677..00
–
35.7
14.1
49.8
884488..44
579.0
((2211..11))
((44..22))
((2255..33))
(46.1)
(9.3)
(55.4)
224411..77
(5.6)
((66..44))
((66..44))
–
–
((3311..77))
(55.4)
881166..77
523.6
3355..66
113300..66
335588..66
((2288..88))
1144..55
330066..22
881166..77
9.3
130.6
99.9
(34.2)
9.5
308.5
523.6
1 The Company reported a loss for the financial year ended 31 March 2021 of £1.4m (2020: £14.6m profit).
The accompanying notes on pages 206 to 210 form an integral part of the financial statements.
The financial statements of Mitie Group plc, company registration number SC019230, were approved by the Board of Directors and authorised for
issue on 10 June 2021. They were signed on its behalf by:
PPhhiill BBeennttlleeyy
Chief Executive Officer
SSiimmoonn KKiirrkkppaattrriicckk
Chief Financial Officer
204
220044
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
CCoommppaannyy ssttaatteemmeenntt ooff cchhaannggeess iinn eeqquuiittyy
For the year ended 31 March 2021
At 1 April 2019
Profit for the year
Dividends paid1
Share-based payments
Realised merger reserve
At 31 March 2020
Loss for the year
Issue of shares
Rights issue expenses
Share-based payments
AAtt 3311 MMaarrcchh 22002211
Note:
Share
capital
£m
9.3
–
–
–
–
9.3
–
26.3
–
–
Share
premium
account
£m
130.6
–
–
–
–
130.6
–
–
–
–
35.6
130.6
Merger
reserve
£m
104.2
Own shares
reserve
£m
(38.1)
–
–
–
(4.3)
99.9
–
261.7
(3.0)
–
358.6
–
–
3.9
–
(34.2)
–
–
–
5.4
(28.8)
Other
reserves
£m
23.3
–
–
(13.8)
–
9.5
–
–
–
5.0
14.5
Profit
and loss
account
£m
290.4
14.6
(14.4)
13.6
4.3
308.5
(1.4)
–
–
(0.9)
306.2
TToottaall
££mm
551199..77
1144..66
((1144..44))
33..77
––
552233..66
((11..44))
228888..00
((33..00))
99..55
881166..77
1 Details of dividends paid to shareholders are given in Note 10 to the consolidated financial statements.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
205
220055
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee CCoommppaannyy ffiinnaanncciiaall ssttaatteemmeennttss
For the year ended 31 March 2021
11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess
((aa)) BBaassiiss ooff aaccccoouunnttiinngg
The separate financial statements of the Company are drawn up in accordance with the Companies Act 2006 and Financial Reporting Standard 101
Reduced disclosure framework (“FRS 101”). The Company will continue to prepare its financial statements in accordance with FRS 101 on an ongoing
basis until such time as it notifies shareholders of a change to its chosen accounting framework.
The Company financial statements have been prepared using the historical cost convention and have been prepared on a going concern basis.
As permitted by FRS 101, the following exemptions have been applied:
• Paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based payment (details of the number and weighted-average exercise prices of share options, and
how the fair value of goods or services received was determined);
• IFRS 7 Financial Instruments: Disclosures;
• Paragraph 91 to 99 of IFRS 13 Fair value measurement (disclosure of valuation techniques and inputs used for fair value measurement of assets
and liabilities);
• The following paragraphs of IAS 1 Presentation of financial statements:
– 10(d) (statement of cash flows);
– 16 (statement of compliance with all IFRS);
– 38A (requirement of minimum of two primary statements, including cash flows statements);
– 38B-D (additional comparative information);
– 111 (cash flow statement information); and
– 134-136 (capital management disclosures).
• IAS 7 Statement of cash flows; and
• The requirements in IAS 24 Related party disclosures to disclose related party transactions entered into between two or more members of a group.
As permitted by Section 408(3) of the Companies Act 2006, the statement of comprehensive income (including the profit and loss account) of the
Company is not presented in this Annual Report. The Company has not published its individual cash flow statement as its liquidity, solvency and financial
adaptability are dependent on the Group rather than its own cash flows.
CCrriittiiccaall aaccccoouunnttiinngg jjuuddggeemmeennttss aanndd kkeeyy ssoouurrcceess ooff eessttiimmaattiioonn uunncceerrttaaiinnttyy
The preparation of Company financial statements in accordance with FRS 101 requires management to make judgements, estimates and assumptions
that affect amounts recognised for assets and liabilities at the reporting date and the amounts of revenue and expenses incurred during the reporting
period. Actual results may differ from these judgements, estimates and assumptions.
The key area of judgement that has the most significant effect on the amounts recognised in the financial statements is the review for impairment of
investment carrying values. See Note 3.
((bb)) PPrriinncciippaall aaccccoouunnttiinngg ppoolliicciieess
The principal accounting policies are summarised below. They have been applied consistently throughout the year and the preceding year.
IInnvveessttmmeennttss
Fixed asset investments in subsidiaries are shown at cost less any provision for impairment.
Investments in subsidiaries are reviewed on an ongoing basis for any indication of impairment and, if any such indication exists, the investment’s
recoverable amount is estimated. An impairment loss is recognised in the income statement whenever the carrying value of an asset exceeds its
recoverable amount.
206
220066
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
11.. SSiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ccoonnttiinnuueedd
PPrroovviissiioonnss aanndd ccoonnttiinnggeenntt lliiaabbiilliittiieess
Provisions are recognised when the Company 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 management 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.
No provisions are recognised and only a disclosure in the financial statements is made for contingent liabilities. Contingent liabilities are possible
obligations dependent on whether some uncertain future event occurs, or where a present obligation exists but payment is not probable, or the
amount of payment cannot be measured reliably.
TTaaxxaattiioonn
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 temporary 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. Temporary 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 unremitted earnings of subsidiaries, joint ventures 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.
FFiinnaanncciiaall iinnssttrruummeennttss
Intercompany loans are all assessed as being repayable on demand. The assessment of impairment of receivables is in accordance with IFRS 9. A loss
allowance for expected credit losses (ECL) on receivable balances is recognised and subsequently measured at amortised cost, using the ‘general
approach’ permitted under IFRS 9.
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.
SShhaarree--bbaasseedd ppaayymmeennttss
Details of the Company’s equity-settled share schemes are provided in Note 31 to the consolidated financial statements. The costs of options and
conditional awards over the Company’s shares granted to employees of the Company’s subsidiaries are accounted for as a capital contribution
within the carrying value of investments in subsidiaries.
DDiivviiddeennddss
Dividends are recognised in the financial statements in the period in which the shareholder’s right to receive payment of the dividend
became unconditional.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
207
220077
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee CCoommppaannyy ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
22.. PPrrooffiitt ffoorr tthhee yyeeaarr
As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own statement of comprehensive income
(including the profit and loss account) for the year.
The Company had no employees throughout the year (2020: no employees)
The auditor’s remuneration for audit services to the Company is disclosed in Note 6 to the consolidated financial statements.
33..
IInnvveessttmmeennttss iinn ssuubbssiiddiiaarriieess
SShhaarreess aatt ccoosstt
At 1 April 2019
Capital contribution re share-based payments
Disposals
At 31 March 2020
Additions1
Capital contribution re share-based payments
AAtt 3311 MMaarrcchh 22002211
PPrroovviissiioonn ffoorr iimmppaaiirrmmeenntt
At 1 April 2019
Charged to income statement
At 31 March 2020
Charged to income statement
AAtt 3311 MMaarrcchh 22002211
NNeett bbooookk vvaalluuee
AAtt 3311 MMaarrcchh 22002211
At 31 March 2020
££mm
559955..22
33..77
((44..77))
559944..22
4499..22
55..55
664488..99
6666..99
11..77
6688..66
00..88
6699..44
557799..55
525.6
Notes:
1 Relates to an increase in investment in Mitie Treasury Management Limited.
Details of the Company's subsidiary undertakings is given in Note 37 to the consolidated financial statements.
The carrying value of the Company’s investments in subsidiary undertakings has been tested for impairment in accordance with IAS 36 Impairment of
Assets. The carrying value is compared to the asset’s recoverable amount and has been assessed by reference to value in use. The value in use has been
calculated based upon a discounted cash flow methodology using the most recent forecasts prepared by management.
These forecasts cover the next five years with a terminal growth rate of 2% (2020: 2%) and are consistent with those used for Group's going
concern assessment.
The key assumptions for the value in use calculation are forecast revenue, direct costs, expectation of future changes in the market and discount
rates. Management estimates discount rates that reflect current market assessments of the time value of money and the rate of return a market
participant would require. The rate used to discount the forecast cash flows reflects the individual businesses in the Group and is 9.1% post-tax
(2020: 9.2% post-tax).
As a result of this analysis, the Directors have determined an impairment of £0.8m (2020: £1.7m) was required to the Company's Investment in
Source Eight Limited. All other investments had significant headroom and required no impairment. This is reflective of the Group's market capitalisation
of £893m at 31 March 2021, which significantly exceeds the carrying value of the Company's investments of £579.5m.
An increase in the post-tax discount rate from 9.1% to 11% would still not result in an impairment to any of the Company’s investments, both in
isolation or in totality.
208
220088
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
44.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
Amounts owed by subsidiaries
Other receivables
Prepayments and accrued income
TToottaall
Included in current assets
Included in non-current assets
TToottaall
22002211
££mm
118888..88
6666..22
00..66
225555..66
225555..11
00..55
225555..66
2020
£m
35.2
3.7
0.1
39.0
35.7
3.3
39.0
Notes:
1 At 31 March 2021 other receivables included the £57.6m (2020: £nil) provisional value for the adjustment to consideration which represents management's best estimate of the amount expected
to be recovered by the Group through the completion accounts mechanism on the Interserve acquisition. The outcome of the completion accounts process is inherently uncertain, given that this is
subject to a commercial negotiation, and potentially expert determination, and the final amount agreed could therefore be materially different from the estimate. See Note 30 to the consolidated
financial statements.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. The expected credit loss model was
applied to amounts owed by subsidiaries and the impact was not material.
55.. DDeeffeerrrreedd ttaaxx
Deferred tax asset at 1 April 2020
Credit to profit and loss account
DDeeffeerrrreedd ttaaxx aasssseett aatt 3311 MMaarrcchh 22002211
66.. TTrraaddee aanndd ootthheerr ppaayyaabblleess
Overdrafts
Trade payables
Amounts owed to subsidiaries
Other taxes and social security
Accruals and deferred income
AAcccceelleerraatteedd
ccaappiittaall aalllloowwaannccee
££mm
SShhaarree--bbaasseedd
ppaayymmeenntt ttiimmiinngg
ddiiffffeerreennccee
££mm
–
0.4
00..44
0.3
0.7
11..00
22002211
££mm
––
22..99
44..55
00..44
1133..33
2211..11
TToottaall
££mm
0.3
1.1
11..44
2020
£m
21.6
1.9
14.8
0.6
7.2
46.1
Amounts owed to subsidiaries are repayable on demand. The Directors consider that the carrying amount of trade and other payables approximates
their fair value.
For details of Group borrowings, see Note 24 to the consolidated financial statements.
77.. PPrroovviissiioonnss
At 1 April 2019
Amounts recognised in the profit and loss account
Utilised in the year
At 31 March 2020
Amounts recognised in the profit and loss account
Utilised in the year
AAtt 3311 MMaarrcchh 22002211
Included in current liabilities
Included in non-current liabilities
TToottaall
£m
1111..33
00..44
((22..44))
99..33
44..66
((33..33))
1100..66
44..22
66..44
1100..66
Majority of the provisions and related movements in the year are in respect of the insurance reserve. The insurance reserve provides for fleet and
liability claims and a claim typically settles over three to five years. This includes a provision for claims that are expected but have not yet been reported.
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
209
220099
Strategic reportGovernanceFinancial statements
NNootteess ttoo tthhee CCoommppaannyy ffiinnaanncciiaall ssttaatteemmeennttss continued
For the year ended 31 March 2021
88.. SShhaarree ccaappiittaall aanndd sshhaarree pprreemmiiuumm
At 1 April
Rights issue (see Note 33)
Interserve acquisition (see Note 30)
AAtt 3311 MMaarrcchh
OOrrddiinnaarryy sshhaarreess
SShhaarree ccaappiittaall
SShhaarree pprreemmiiuumm
22002211
NNuummbbeerr
mmiilllliioonn
337733..77
880055..11
224488..44
2020
Number
million
373.7
–
–
22002211
££mm
99..33
2200..11
66..22
11,,442277..22
373.7
3355..66
2020
£m
9.3
–
–
9.3
22002211
££mm
113300..66
––
––
2020
£m
130.6
–
–
113300..66
130.6
Notes:
1 During the year ended 31 March 2021 the Company completed a rights Issue. Refer to Note 33.
Each allotted and fully paid ordinary share of 2.5 pence is a voting share in the capital of the Company, is entitled to participate in the profits of the
Company and on a winding-up is entitled to participate in the assets of the Company. The Company has one class of ordinary shares, which carry no
right to fixed income.
The share premium account represents the premium arising on the issue of equity shares.
99.. CCoonnttiinnggeenntt lliiaabbiilliittiieess
The Company enters into financial guarantee arrangements to guarantee the indebtedness of other companies within its Group. In this respect the
Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a
payment under the guarantee.
In addition, the Company and its subsidiaries have provided performance and financial guarantees, issued by financial institutions on its behalf, amounting
to £27.2m (2020: £20.6m) in the ordinary course of business. These are not expected to result in any material financial loss.
Per Note 37 to the consolidated financial statements, Mitie Group plc has taken the audit exemption for a number of subsidiaries by virtue of Section
479A of the Companies Act. A parent company guarantee has been provided for these entities under Section 479C of the Companies Act.
1100.. SShhaarree--bbaasseedd ppaayymmeennttss
The Company has five equity-settled share schemes as described in Note 31 to the consolidated financial statements.
The Company recognised no expense related to the share-based payment charge for discretionary share option schemes as it has no employees
1111.. RReellaatteedd ppaarrttiieess
The Company makes management charges to 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 the Group’s related party transactions have been given in Note 35 to the
consolidated financial statements.
The Directors are remunerated for their services to the Group as a whole. No remuneration was paid to the Directors specifically in respect of their
services to Mitie Group plc for the year ended 31 March 2021 or 31 March 2020. Detailed disclosures of Directors’ remuneration and share interests
are given in the audited section of the Directors’ remuneration report on pages 99 to 120. The Company had no employees throughout the years
ended 31 March 2021 and 31 March 2020.
Under FRS 101 the Company is exempt from disclosing key management personnel compensation and transactions with other companies wholly
owned by Mitie Group plc. The Company had no other related party transactions during the year ended 31 March 2021 (2020: £nil).
210
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
AAppppeennddiixx –– AAlltteerrnnaattiivvee PPeerrffoorrmmaannccee MMeeaassuurreess
The Group presents various Alternative Performance Measures (APMs) as management believes that these are useful for users of the financial
statements in helping to provide a balanced view of, and relevant information on, the Group’s financial performance.
In assessing its performance, the Group has adopted certain non-statutory measures which, unlike its statutory measures, cannot be derived directly
from its financial statements. The Group commonly uses the following measures to assess its performance:
PPeerrffoorrmmaannccee bbeeffoorree ootthheerr iitteemmss
The Group adjusts the statutory income statement for other items which, in management’s judgement, need to be disclosed separately by virtue of their
nature, size and incidence in order for users of the financial statements to obtain a proper understanding of the financial information and the underlying
performance of the business.
These other items include impairment of goodwill, impairment and amortisation of acquisition related intangible assets, acquisition and disposal related
costs, gain or loss on business disposals, cost of restructuring programmes and other exceptional items. Further details of these other items are provided
in Note 4.
OOppeerraattiinngg pprrooffiitt
Operating profit from continuing operations
Statutory measures
Adjust for: restructure costs
Adjust for: acquisition and disposal related costs
Adjust for: other exceptional items
Note 4
Note 4
Note 4
Operating profit before other items from continuing operations
Performance measures
Operating profit from discontinued operations1
Statutory measures
Adjust for: acquisition and disposal related costs
Adjust for: gain on disposal
Note 4
Note 4
Operating profit before other items from discontinued operations
Performance measures
Operating profit before other items – Group
Performance measures
22002211
££mm
88..33
2266..33
3322..00
((33..22))
6633..44
33..22
((22..00))
((11..22))
––
6633..44
Notes:
1 Operating profit from discontinued operations comprises the profit before net finance costs and tax of £2.0m (2020: £1.5m) and gain on disposal before tax of £1.2m (2020: £50.3m).
Reconciliations are provided below to show how the Group’s segmental reported results are adjusted to exclude other items.
22002211
££mm
2020
£m
64.6
15.7
3.5
2.3
86.1
51.8
1.3
(50.3)
2.8
88.9
2020
£m
OOppeerraattiinngg pprrooffiitt//((lloossss))
SSeeggmmeenntt
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
Corporate centre
TToottaall ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss
Catering
Healthcare
Pest Control
Social Housing
TToottaall ffrroomm ddiissccoonnttiinnuueedd ooppeerraattiioonnss
TToottaall –– GGrroouupp
RReeppoorrtteedd
rreessuullttss
AAddjjuusstt ffoorr::
OOtthheerr iitteemmss
((NNoottee 44))
PPeerrffoorrmmaannccee
mmeeaassuurreess
Reported
results
Adjust for:
Other items
(Note 4)
Performance
measures
3300..88
33..77
1188..55
55..55
77..66
55..44
66..33
((5511..00))
88..33
((11..66))
22..11
00..77
22..00
33..22
1111..55
1188..66
2222..77
44..00
11..99
00..88
11..33
77..00
22..88
5555..11
11..66
((22..11))
((00..77))
((22..00))
((33..22))
5511..99
4499..44
2266..44
2222..55
77..44
88..44
66..77
1133..33
((4488..22))
6633..44
––
––
––
––
––
6633..44
42.4
47.9
25.1
7.6
8.6
8.9
–
(50.8)
64.6
53.5
0.5
(0.7)
(1.5)
51.8
116.4
(0.2)
8.0
0.2
0.1
–
0.1
–
13.5
21.5
(50.7)
(0.5)
0.7
1.5
(49.0)
(27.5)
42.2
55.9
25.3
7.7
8.6
9.0
–
(37.3)
86.1
2.8
–
–
–
2.8
88.9
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
211
221111
Strategic reportGovernanceFinancial statements
AAppppeennddiixx –– AAlltteerrnnaattiivvee PPeerrffoorrmmaannccee MMeeaassuurreess continued
In line with the Group’s measurement of profit from operations before other items, the Group also presents its basic earnings per share before other
items for continuing operations. The table below reconciles this to the statutory basic earnings per share.
EEaarrnniinnggss ppeerr sshhaarree
Statutory basic (loss)/earnings per share
Statutory measures
Adjust for: earnings per share from discontinued operations
Statutory basic (loss)/earnings per share from continuing operations
Adjust for: other items per share from continuing operations
Basic earnings per share before other items from continuing operations
Performance measures
22002211
ppeennccee
((00..66))
((00..33))
((00..99))
44..44
33..55
Restated1
2020
£m
12.9
(7.1)
5.8
2.5
8.3
Note:
1 Restated for the bonus element of the 2020 rights issue. See Note 33.
OOrrggaanniicc rreevveennuuee
The Group adjusts revenue from continuing operations for the impact of acquisitions to show organic revenue in order for users of the financial
statements to obtain a proper understanding of the underlying movements in these business measures.
RReevveennuuee ffrroomm ccoonnttiinnuuiinngg ooppeerraattiioonnss
SSeeggmmeenntt
Business Services
Technical Services
Specialist Services
Care & Custody
Landscapes
Waste
Interserve
TToottaall ffoorr ccoonnttiinnuuiinngg ooppeerraattiioonnss
22002211
££mm
2020
£m
SShhaarree ooff
rreevveennuuee ooff
jjooiinntt vveennttuurreess
aanndd
aassssoocciiaatteess
GGrroouupp
rreevveennuuee
AAddjjuusstt ffoorr
aaccqquuiissiittiioonn ooff
bbuussiinneesssseess11
PPeerrffoorrmmaannccee
mmeeaassuurreess
Group
revenue
Adjust for
acquisition of
businesses1
Performance
measures
11,,008855..00
882200..77
223333..66
110088..88
5500..22
7744..66
442200..22
22,,555599..55
––
––
––
––
––
––
2299..88
2299..88
((114444..00))
––
––
––
––
––
((445500..00))
994411..00
882200..77
223333..66
110088..88
5500..22
7744..66
––
986.9
947.2
239.6
110.2
47.8
81.6
–
(172.2)
–
–
–
–
–
–
814.7
947.2
239.6
110.2
47.8
81.6
–
((559944..00))
11,,999955..33
2,173.7
(172.2)
2,001.5
Note:
1 Comprises revenue of £450.0m (2020: £nil), £143.2m (2020: £171.7m) and £0.8m (2020: £0.5m) in relation to the acquisitions of Interserve, VSG and GAIG respectively.
NNeett ddeebbtt
Net debt is defined as the excess of total borrowings over cash and cash equivalents. It is a measure that provides additional information on the
Group’s financial position. The Group includes the carrying value of its derivative financial instruments in its reported net debt measure as this
carrying value represents the fair value of cross-currency interest rate swaps on the US$ private placement notes which form part of the
Group’s financing liabilities. In addition, restricted cash which is subject to various constraints on the Group’s ability to utilise these balances, has been
excluded from the net debt measure.
A reconciliation from reported figures is presented below:
NNeett ddeebbtt
Cash and cash equivalents1
Adjusted for: restricted cash
Financing liabilities
Note 23
Note 24
Derivative financial instruments hedging private placement notes
Net debt
Performance measures
22002211
££mm
119966..22
((1188..77))
((227788..88))
1144..66
((8866..77))
Restated1
2020
£m
139.5
–
(320.7)
28.2
(153.0)
Note:
1. The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with a
reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
The Group uses an average net debt measure as this reflects its financing requirements throughout the period. The Group calculates its average net
debt based on the daily closing figures, including its foreign currency bank loans translated at the closing exchange rate for the previous month end. The
average net debt includes the fair value of the derivative financial instruments which are used to hedge the US$ private placement notes. This measure
showed average net debt of £47.1m for the year ended 31 March 2021, compared with £327.6m for the year ended 31 March 2020.
212
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Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
FFrreeee ccaasshh ffllooww
Free cash flow is a measure representing the cash that the Group generates after accounting for cash flows to support operations and maintain its
capital assets. It is a measure that provides additional information on the Group’s financial performance as it highlights the cash that is available to the
Group after operating and capital expenditure requirements are met. The table below reconciles net cash generated from operating activities to free
cash inflow.
FFrreeee ccaasshh ffllooww
Net cash generated from operating activities1
Statutory measures
Add: net decrease in restricted cash2
Interest received
Dividends received from joint ventures and associates
Purchase of property, plant and equipment
Purchase of other intangible assets
Disposal of property, plant and equipment
Capital element of lease rentals paid
Free cash (outflow)/inflow
Performance measures
22002211
££mm
2222..99
00..77
00..88
00..88
((77..66))
((1155..00))
11..00
((2288..11))
((2244..55))
Restated1
2020
£m
70.3
–
0.4
–
(8.2)
(11.2)
0.4
(21.2)
30.5
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (See Note 1). As a result, the comparatives on the consolidated statement of cash flows for the
year ended 31 March 2020 have been restated, with an overall increase in net cash generated from operations of £20.3m due to an increase in payables of £16.3m and a decrease in receivables
of £4.0m.
2 Restricted cash on date on acquisition of Interserve was £19.4m (see Note 30) which decreased to £18.7m at 31 March 2021 (see Note 23).
RReettuurrnn oonn iinnvveesstteedd ccaappiittaall
Return on invested capital (ROIC) is a measure of how efficiently the Group utilises its invested capital to generate profits. The table below reconciles
the Group’s net assets to invested capital and summarises how the ROIC is derived.
Net assets
AAdddd::
Non-current liabilities
Current provisions
Statutory measures
Amortisation of acquisition related intangibles including joint ventures
and associates related to the Interserve acquisition2
DDeedduucctt::
Non-current derivative financial assets
Current derivative financial assets
Non-current deferred tax assets
Cash and cash equivalents1
IInnvveesstteedd ccaappiittaall
Performance measures
CCoonnttiinnuuiinngg ooppeerraattiinngg pprrooffiitt bbeeffoorree ootthheerr iitteemmss
Tax3
CCoonnttiinnuuiinngg ooppeerraattiinngg pprrooffiitt bbeeffoorree ootthheerr iitteemmss aafftteerr ttaaxx
RROOIICC %%
Performance measures
22002211
££mm
336611..88
440066..55
4488..33
66..77
((1144..66))
––
((3322..00))
((119966..22))
558800..55
6633..44
((1111..77))
5511..77
88..99%%
Restated1
2020
£m
80.5
373.7
41.4
–
(28.0)
(0.2)
(32.6)
(139.5)
295.3
86.1
(14.6)
71.5
24.2%
Notes:
1 The Group has changed its accounting policy in relation to the recognition of BACS payments (see Note 1). As a result, the comparatives as at 31 March 2020 have been restated with
a reclassification between trade and other receivables, trade and other payables and cash and cash equivalents as set out in Note 1. There has been no change in net assets.
2 The amortisation of acquired intangible assets related to the Interserve acquisition has been added back on the basis that this would otherwise erode invested capital to a significant extent.
3 Tax charge has been calculated at the effective tax rate for the year for continuing operations of 18.5% (2020: 17.0%).
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
213
221133
Strategic reportGovernanceFinancial statements
SShhaarreehhoollddeerr iinnffoorrmmaattiioonn
OOvveerrvviieeww
HY 22 half-yearly results
18 November 2021
DDiivviiddeennddss
No final dividend recommended for FY21.
AAnnnnuuaall GGeenneerraall MMeeeettiinngg
2021 Annual General Meeting
27 July 2021
RReeggiisstteerreedd ooffffiiccee
Mitie Group plc
35 Duchess Road
Rutherglen
Glasgow
G73 1AU
Telephone: 0117 322 1322
Email: info@mitie.com
Website: www.mitie.com
Registered in Scotland under company number: SC019230
RReeggiissttrraarrss
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone: 0871 664 0300*
* Calls cost 12p a minute plus network extras, lines are open 9.00 am –5.30 pm
Monday – Friday, excluding bank holidays
MMiittiiee oonnlliinnee sshhaarree ppoorrttaall
Mitie has a portal where shareholders can register and can then
login to:
• Access information on shareholdings 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
CCoorrppoorraattee wweebbssiittee
This report can be downloaded in PDF from the Mitie website,
which also contains additional general information about Mitie.
Please visit www.mitie.com
214
221144
Mitie Group plc | Annual Report and Accounts 2021
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
CCaauuttiioonnaarryy ssttaatteemmeenntt
Certain statements contained in this document constitute or may constitute ‘forward-looking statements’.
In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms ‘believes’, ‘estimates’,
‘projects’, ‘aims’, ‘plans’, ‘predicts’, ‘prepares’, ‘anticipates’, ‘expects’, ‘intends’, ‘may’, ‘will’ or ‘should’ or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Group to be
materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-
looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the
Group will operate in the future. These forward-looking statements speak only as at the date of this document. Except as required by applicable law,
rule or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking
statements contained in this document to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances
on which any such statement is based. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and
depend on circumstances that may or may not occur in the future or are beyond the Group’s control. Forward-looking statements are not guarantees
of future performance. Mitie’s actual results of operations, financial condition and the development of the business sector in which the Group operates
may differ materially from the expectations disclosed or implied by the forward-looking statements contained in this document. In addition, even if the
Group’s actual results of operations, financial condition and the development of the business sector in which the Group operates are consistent with the
forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent
periods. The forward-looking statements contained in this document speak only as at the date of this document.
This report is printed on Galerie Art Satin which is
made of FSC® certified and other controlled material.
Printed sustainably in the UK by Pureprint, a
CarbonNeutral® company with FSC® chain of custody
and an ISO 14001 certified environmental management
system recycling over 100% of all dry waste.
Designed and produced by MerchantCantos
www.merchantcantos.com
MMiittiiee GGrroouupp ppllcc | Annual Report and Accounts 2021
221155
Mitie Group plc
Registered Office
35 Duchess Road
Rutherglen
Glasgow
G73 1AU
UK
Head Office
The Shard
Level 12
32 London Bridge Street
London
SE1 9SG
UK
T: +44 (0) 330 678 0710
E: info@mitie.com
Registration number: SC19230
More information
Visit our corporate website:
www.mitie.com/investors
Follow us on twitter:
@wearemitie
Visit our LinkedIn page:
www.linkedin.com/company/mitie/
Watch our latest content:
www.youtube.com/user/mitiegroupplc
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