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MITIE Group PLC - Annual Financial Report

RNS Number : 2758R
MITIE Group PLC
26 June 2020
 

Mitie Group plc

26 June 2020

LEI number: 213800MTCLTKEHWZMJ03

 

Mitie Group plc (the 'Company') - Annual Financial Report

 

Following the release on 25 June 2020 of the Company's final results for the year ended 31 March 2020 (the 'Final Results Announcement'), the Company announces that it has published its Annual Report and Accounts for 2020 (the 'Annual Report and Accounts'). 

The Company's 2020 Annual General Meeting will be held at Level 12, The Shard, 32 London Bridge Street, London SE1 9SG on 28 July 2020 at 11:30am.

Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting for 2020 (the 'AGM Notice') are available to view on the Company's website:
www.mitie.com.  Hard copies have been mailed to those shareholders who have elected to continue to receive paper communications. 

 

Copies of the Annual Report and Accounts, the AGM Notice and the form of proxy in relation to the AGM are being submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

The Final Results Announcement included a set of financial statements and a review of the development and performance of the Company.  In compliance with Disclosure Guidance and Transparency Rule (DTR) 6.3.5, the Company has extracted and set out below certain information from the Annual Report and Accounts.  This information is included herein solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on the Company as to how to make public its annual financial reports.  It should be read in conjunction with the Company's Final Results Announcement issued on 25 June 2020.  Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the full Annual Report and Accounts.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report and Accounts.

 

The information contained in this announcement and in the Final Results Announcement does not constitute the Group's statutory accounts but is derived from those accounts.  The statutory accounts for the year ended 31 March 2020 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

Principal risks and uncertainties

 

Risk 1: COVID-19

Failure to monitor, respond to and plan for the ongoing and any future impacts of the COVID-19 pandemic, in particular 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: Customer, People, Cost, Technology

 

Change in year: NEW RISK

 

The COVID-19 pandemic has already had an unprecedented impact on businesses and economic activity across the world. Almost every business has seen uncertainty in revenues, supplies and employee availability. In common with most other businesses, Mitie has gone through a pattern of assessing the impact of the crisis, including the government imposed lockdown measures, seeking to establish new ways of working through the first phase and then starting to look at longer term plans once the UK lockdown starts to ease and business activity returns to more normal levels.

 

Whilst the business has taken measures to continue operating throughout the initial lockdown period, including utilising government support measures such as furloughing of staff, the uncertainty over the likely economic situation and business activity over the next 12 - 18 months makes cash forecasting and risk mitigation measures difficult. Given the nature of Mitie's business, the vast majority of the Group's operations are still continuing and supporting the colleagues engaged in these frontline activities has been the main priority, especially providing access to personal protective equipment. Ensuring the physical and mental wellbeing of all colleagues has been equally important.

 

It is important that Mitie continues to follow the advice from government and health organisations, and maintains dialogues with its clients and suppliers, as well as monitoring the liquidity and health of the business. As the pandemic passes through the next phases Mitie needs to closely monitor all the risks associated with business restarting and take effective mitigation actions on a timely basis.

 

Controls and mitigating actions

Invocation of crisis management and business continuity plans

Working groups established at business unit, functions and executive level to monitor ongoing impacts and direct actions - including weekly Board meetings

Close working relationship with government through the Cabinet Office

Coordinated support to critical infrastructure across the UK

Regular dialogue with clients to understand their requirements

Close monitoring of supply chain to ensure continuity of critical supplies

Use of 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

Decision not to recommend a final dividend in respect of FY 19/20

Planned rights issue and associated agreements with the Group's lenders on covenants.

 

Future plans

Ongoing monitoring of business operations over extended period

Review of business structure and model over a variety of time frames and options

 

Risk 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: Customer, Cost, Technology

 

Change in year: INCREASED

 

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.

 

There continues to be significant concern about the financial strength and viability of companies operating in the FM sector, following a number of high-profile financial and operational difficulties experienced by Mitie's competitors. Any actual or perceived weaknesses in Mitie's financial position could restrict the Group's access to finance or attract high interest rates.

 

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.

 

The ongoing COVID-19 pandemic does not impact 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.

 

Controls and mitigating actions

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

Planned rights issue and associated agreements with the Group's lenders on covenants.

 

Future plans

Continue to work with a range of financial institutions to ensure that affordable finance sources can be accessed

Risk 3: Political

Uncertainty over the nature of the UK's future trading relationships with the European Union (EU) may adversely affect Mitie's market, as well as the availability of labour and materials.

 

Impacts on strategic pillars: Customer, People, Cost

 

Change in year: Amended risk - DECREASED

 

Mitie is exposed to uncertainties over the nature of the UK's future trading relationships with the EU following the transition period which commenced on 31 January 2020, the date on which the UK ceased to be a member of the EU. This may result in changes to the regulatory framework as well as, for example, restrictions in the supply of materials. In particular, new rules around immigration and rules around non-UK nationals working in the UK may adversely impact the supply of labour.

 

These changing relationships may also impact the decisions taken by both public and private sector clients on which activities should be outsourced and the amount of discretionary spend available for outsourcing activities. This may result in fewer opportunities for Mitie and have a consequential negative impact on the Group's financial performance.

 

It is important that Mitie is able to offer competitive, innovative and high-quality solutions to clients, and demonstrate the value it brings to them. Mitie also needs to carefully monitor and identify the most appropriate opportunities in both the public and private sectors.

 

Controls and mitigating actions

Maintain blend of public and private sector clients

Continue to leverage the most appropriate opportunities through the Crown Commercial Service frameworks to increase public sector contracts

Dedicated Chief Government and Strategy Officer and team

Regular reviews of sales opportunities by all business sales leaders

Dedicated account managers to focus on growing integrated strategic accounts

Focus on high-margin opportunities with growth potential

Drive for greater customer retention and higher Net Promoter Scores through improvements in customer service

Development of new and innovative service offerings

 

Future plans

Maintain dialogue with key public and private sector clients to demonstrate the value offered by Mitie

Invest, develop and deploy customer offerings, including technology, which can help in increasing customer retention

Risk 4: 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: Customer, Cost, Technology

 

Change in year: Combined data management & cyber risk - INCREASED

 

An important risk for many companies is how people access/consume data, configure and test systems and adhere to processes, how they react to unusual or suspicious events. Although appropriate tools may be in place, if they are not used with appropriate skill and diligence it leaves an organisation exposed.

 

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.

 

Mitie is continuing to invest in technology to improve the security of its business through alerting users of possible cyber-attacks or phishing attempts. A major step has been the upgrade of the Group's systems and hardware to meet the Government's Cyber Essentials Plus (CE+) requirements, which was achieved in June 2019. Additionally, Mitie's routine IT operations are now being undertaken by Wipro, a global and highly skilled outsource partner which has its own toolsets and experience in this area.

 

The migration of Mitie's IT systems to Microsoft Azure and Amazon Web Services cloud providers has also improved the business continuity and disaster recovery plans by leveraging their significant investments and expertise.

 

Mitie now has 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 (GDPR).

 

In general, the threat of cyber attack has increased in the UK retail and service sector due to companies adopting remote working and increased use of IT during the COVID-19 pandemic. Cyber criminals are adjusting their tactics to exploit the COVID-19 pandemic and are deliberately probing companies to find weaknesses in their IT systems and training of people. Mitie has already implemented a number of controls to further mitigate any possible system risks, for example the use of enhanced IT network monitoring tools and a new improved internet proxy, plus the people based risk has been addressed through employee education via regular communication.

 

Controls and mitigating actions

Clear strategy to utilise leading edge cloud technology, delivering disaster recovery and business continuity improvements

Outsourcing of routine IT operations to a highly skilled partner organisation, Wipro, to improve resilience and controls and maintain data standards

Adoption of Microsoft and Wipro cyber toolsets and proactive monitoring and management of cyber threats

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 GDPR compliance

Upgrades to legacy systems to reduce complexity and improve management information

Rationalisation and upgrade of ERP systems and infrastructure

Centralised information security team and dedicated data privacy officers in place

Cyber insurance policy

Regular communications to employees to highlight IT risks and expected behaviours

 

Future plans

Upgrade of the Technical Services operational and financial systems to improve security and efficiency

Continue to leverage the existing toolsets to the fullest extent across the whole of the Mitie estate, removing niche legacy solutions

 

Risk 5: Health, Safety and Environment

Failure to maintain appropriately high standards in health, safety and environmental management may result in harm to employees, client staff or members of the public, and consequential fines and reputational damage.

 

Impacts on strategic pillars: Customer, People

 

Change in year: INCREASED

 

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.

 

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.

 

The very high standards set by Mitie have been especially important during the COVID-19 pandemic, with a high focus on ensuring employees have access to personal protective equipment in performing their roles, as well as ensuring the highest health and safety standards are maintained for clients and the public.

 

Controls and mitigating actions

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

Certified H&S management system to OHSAS18001 and environmental system to ISO14001

Transition from OHSAS health and safety management system to ISO45001

Deployment of an improved incident recording, monitoring and reporting system

Regular HS&E reviews conducted at divisional and Group level

Clear and standardised KPIs introduced to monitor progress and improvements

Targeted QHSE procedural audit programme introduced

Themes and root causes monitored from the results of audits to target specific actions, including training

 

Future plans

LiveSafe e-learning training programme to be launched which sets out HS&E expectations including 'stop the job' supported by key safety message from the Chief Executive Officer, Phil Bentley

LiveSafe Managers and Supervisors course introduced which includes H&S culture development model and proactive H&S management

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

QHSE function to be 'Plan Zero Champions' as part of the Plan Zero programme to promote strategy and good practice in environmental management

Risk 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: People, Technology

 

Change in year: UNCHANGED

 

Mitie's business is subject to a wide range of laws and regulations, including, amongst others, health & safety, employment, data protection, anti-bribery and corruption legislation and statutory wage requirements.

 

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 ability to win work. Mitie may also face debarment from bidding for public sector contracts.

 

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.

 

Controls and mitigating actions

Regular monitoring of legal and regulatory changes by Group functions including Company Secretariat, Legal and QHSE

Specialist legal and QHSE expertise aligned to business units

Code of Conduct communicated to all employees

Independent Expolink 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 Business Management System (BMS)

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, especially for mandatory courses

 

Future plans

Ongoing review of BMS to update policies and procedures

 

Risk 7: Portfolio

Failure to maintain a diverse portfolio of clients and contracts. If the Group is overly reliant on a small number of contracts or exposed to a particular sector, Mitie's financial performance may be significantly adversely impacted by any business failure or disruptive events impacting a specific sector.

 

Impacts on strategic pillars: Customer, Technology

 

Change in year: NEW RISK

 

Whilst Mitie's business activities are almost exclusively located within the UK, services are offered to a wide and diverse variety of clients across both public and private sectors from central government to finance and professional services organisations. Mitie has a number of larger, and mainly IFM, contracts, where a wide variety of services are undertaken across substantial estates.

 

If Mitie has a substantial amount of revenue concentrated into a small number of large contracts, then the loss of even one of these would have a significant impact on its business. This could equally occur if Mitie's client base became focused on a particular sector that was to undergo a downturn.

 

Mitie's aim is to grow its portfolio of customers across both private and public sectors to ensure it has a balance of risk and opportunity and is not over reliant on a small number of customers from a narrow sector. Increasing the Group's exposure to activities in the public sector is a key objective for FY 20/21.

 

Controls and mitigating actions

Executive management bid committee approval for all significant new and existing bids

Sales and CRM teams focused on developing pipeline across all major sectors

Improved CRM capabilities with active relationship management

Improved sales and pipeline management information to track and measure growth, wins and losses

Win/loss analysis to improve sharing of learnings and win rates

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

Drive for greater customer retention and higher Net Promoter Scores, through improvements including customer feedback and effective action planning

Development of new and innovative service offerings

 

Future plans

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

 

Risk 8: Market share

A loss of market share through competitors improving their offering and price, and potentially targeting some of Mitie's key contracts, or from new entrants deploying new business models, could have a significant impact on the Group's revenue and profit.

 

Impacts on strategic pillars: Customer, People, Technology

 

Change in year: Combined market share and market sentiment risks - UNCHANGED

 

In the recent past, certain companies in the FM sector have experienced financial and operational difficulties, and as a result there has been a strong focus on strategy, costs, investments and business structure. For those organisations that have successfully addressed their issues there may be opportunities to increase market share through more competitive or innovative offerings, which may impact Mitie's ability to retain its current clients and win future business.

 

Additionally, there is also the possibility of a new entrant, potentially with a stable process environment and significant financial strength, disrupting the market by deploying a new low cost business model for FM, potentially through a technology platform, which would challenge the structure and approach of the existing organisations, including Mitie. This would also potentially significantly erode Mitie's market share and decrease new opportunities.

 

Some Mitie business areas are still manual process driven and inefficient. Therefore, it is important that Mitie continues to prioritise the transformation of its business, particularly improving processes and simplifying business structure, focus on minimising costs and develop innovative solutions for clients. Through such initiatives, including Project Forte, Mitie will be able to deliver genuine value for current and future clients.

 

Controls and mitigating actions

Continued focus on simplifying business processes and structure to transform business areas such as Project Forte in Technical Services

Investment in new and innovative technologies

Focus on client relationships and Net Promoter Score

Deployment of strategic account managers for key contracts

Regular reviews of the sales opportunities arising

Standard processes and tools for sales and CRM teams

 

Future plans

Successfully execute Project Forte, thereby improving IT systems and processes in Technical Services

Continue to develop public sector opportunities and portfolio

Develop new intelligence report network for key clients 

Increase activities around thought leadership events

Enhance overall company profile through the British Security Industry Association and the Security Industry Authority

 

Risk 9: Structural complexity

Mitie has traditionally not leveraged its technology, resulting in complex manual processes and an organisational model with variability in documentation and application of internal controls and a misaligned cost base. Failure to deliver major process and system improvement programmes successfully could lead to lower benefits than anticipated, higher costs and weaknesses in operational processes and controls.

 

Impacts on strategic pillars: Customer, People, Cost, Technology

 

Change in year: DECREASED

 

The historical business and organisational model adopted by Mitie has resulted in a large number of unnecessary complexities, including multiple and inconsistent processes and controls, with variable documentation, isolated IT systems, and unclear organisational and reporting structures. These complexities have required a disproportionately high cost base in order to maintain them.

 

In order to ensure that Mitie continues to simplify, standardise its business, improve performance and control costs, it has commenced programmes to replace IT systems and enhance processes, predominantly through Project Forte within Technical Services. The programmes contain a number of initiatives designed to upgrade key operating and financial systems, and improve and optimise business processes, controls and operating structures.

 

The changes being introduced are vital to the future success of Mitie's business, and failure to adequately manage the programmes of work, identify and manage interdependencies, develop appropriate solutions, implement the changes and ensure they are sustainable, could severely limit the pace at which these changes are delivered. Additionally, the investment required to introduce the projects needs to be closely monitored, to ensure the expected operational and financial benefits and savings in overheads are delivered.

 

Controls and mitigating actions

Board and Executive Leadership Team (ELT) sponsorship and regular monitoring of Project Forte and Oracle to SAP programmes

A newly created Quality Improvement Council (QIC), tasked to review and simplify end to end processes and integration of existing systems

Continued investment in and benefits delivery from the QIC programme

Experienced programme managers to establish an overall programme management office, with effective governance, controls, monitoring mechanisms and reporting

Experienced staff members dedicated to the programme to allow focus on the improvement activity

Regular communication of progress and awareness of the impact of changes being introduced to minimise business disruption

Dedicated risk management and assurance procedures within the programme to ensure internal controls are operating effectively

Integration of systems, for example SuccessFactors now integrated with WP+, Smart Recruiters, Microsoft Active Directory and Mipayslips

 

Future plans

Continued identification of additional areas of process improvements

 

Risk 10: Incident at client site

A high-profile incident or accident occurring at an FM client site, or a location operated by the Care & Custody business, as a result of negligent staff actions, inconsistent vetting or ineffective training and communications for staff, could have a significant impact on Mitie's reputation and current and future contracts.

 

Impacts on strategic pillars: Customer, People, Cost

 

Change in year: UNCHANGED

 

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 contacts and potentially maintaining current clients.

 

In order to make sure this risk is managed, it is important that Mitie has appropriate polices and processes in place, which clearly set out its expectations of staff. 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, 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.

 

Controls and mitigating actions

Custodial operations working within Standard Operations Procedures (SOP), bespoke to each site for the Care & Custody business

Contingency plans are regularly tested and compliance to SOPs regularly audited for Care & Custody sites

Health and safety strategy - LiveSafe programme continues as part of the strategy

Certified H&S management system to OHSAS18001 and environmental system to ISO14001

Transition to new ISO45001 health and safety management system

Effective vetting programme tailored to the individual risks of each client and site

Tested business continuity and crisis response plans

Comprehensive training plans on safety, security and risks

Regular updates to staff on new safety and operational requirements

Internal and external compliance audits

Standardised and comprehensive investigation process

Themes and root causes monitored from the results of audits to target specific actions, including training

Critical Engineering and Technical Assurance (CETA) team created in Technical Services to help manage high-risk contracts

Technical Appointments framework used in Technical Services to ensure the correct capability/resources are deployed on customer sites/contracts to help mitigate risks

 

Future plans

Review and enhancement of business continuity and crisis response plans, to include specific learnings from the ongoing COVID-19 pandemic response

LiveSafe e-learning training programme to be launched setting out HS&E expectations

LiveSafe Managers and Supervisors course introduced which includes proactive H&S management, driving behaviours and coaching and communication skills training

Introduction of Quality Culture programme aligned to the LiveSafe programme

Incident management process to be implemented in Technical Services

 

Risk 11: 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: People

 

Change in year: DECREASED

 

It is important for the success of its business that Mitie continues to recruit, develop, motivate and retain talented individuals. If it is unable to do so there will be an adverse impact on the profitable and successful delivery of the Group's contracts, and Mitie will be limited in its ability to win future opportunities and grow the business.

 

The Group 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.

 

In addition, it is important that Mitie maintains a stability and consistency in its senior leadership team to provide high-quality direction for the business and deliver its strategy.

 

An important element of the culture is continuing to promote a 'One Mitie' way of operating and collaborate effectively across the business. This will give greater consistency in processes and controls, ensure staff are engaged positively in change initiatives and allow for seamless movement of staff across the Group.

 

Controls and mitigating actions

HR structure streamlined and partially devolved to business units

Consistent HR resourcing process and system across the Group

Online training and development hub

Simplified approach and consistent process to both temporary and permanent recruitment

Launch of new induction programme, mandatory for new starters

Regular communications from leadership team - including ELT country-wide roadshow

Specific plans developed to address results of employee survey

Competitive remuneration, terms and conditions

Regular employee offers

Training and development programmes for senior leadership

Developed talent identification, management and development plans

Succession plans in place for critical roles, especially for senior leadership

Clear performance management framework

 

Future plans

Further enhance online HR and training systems

Salary benchmarking to be undertaken

New competency framework to be developed

A banding and grading framework to be introduced to align and integrate talent and reward management programmes across Mitie

 

Risk 12: Contract losses

Failure to produce bids for contracts which are competitive, financially viable and have a balanced approach to risk, and/or deliver on contract obligations may damage client relationships, which may lead to failure to win new work or cancellation of contracts resulting in financial losses.

 

Impacts on strategic pillars: Customer, People, Cost, Technology

 

Change in year: UNCHANGED

 

In order to deliver consistent and profitable growth, it is important that Mitie continues to bid for and secure contracts at acceptable margins. It is also essential that contracts are successfully mobilised and delivered. In order to achieve this, Mitie must monitor and control costs, deliver on its contract obligations and meet client expectations.

 

Mitie needs to develop competitive bids, which provide a fair balance of risk and reward, that is properly reflected within the contract terms and conditions. Mitie's offering needs to be compelling and innovative and provide a balance between cost and margin pressure, which is a key feature of the FM sector. It is also important to make sure Mitie has the skills and resources available to successfully execute on its contracts.

 

Once contracts have been mobilised, Mitie needs to closely monitor a relevant set of Key Performance Indicators (KPIs) to ensure it is delivering on the contract obligations and communicating with clients to understand if they are satisfied with the Group's performance. It is also important to thoroughly assess and agree any variations to the contract services and terms and amend the KPIs accordingly.

 

If Mitie is unable to deliver the services as agreed in its contracts, it could negatively impact the Group's customer relationships and reputation and lead to legal disputes and termination of contracts. This would then lead to potentially failing to retain existing clients or secure new contracts, with a detrimental effect on Mitie's financial performance.

 

Controls and mitigating actions

 

Executive management bid committee approval for complex bids

Robust risk assessment of bids

Detailed contracting guidelines developed and rolled out

Clear delegated authorities register

Sales and CRM teams focused on bidding at acceptable margins and contract terms

Sales Academy in place to train sales teams

Use of specialist mobilisation teams for complex contracts

Strategic account management

Risk registers in place for large-scale contracts

KPI/SLA formal reviews with customers

Improved CRM capabilities with active relationship management

Focus on Net Promoter Score

Review of any loss-making contracts to ensure learnings are identified and applied to future bids

 

Future plans

Develop Mitie way of selling services and retaining customers

Developing and selling new products

 

Risk 13: Social impact

Failure to consider appropriately 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 retaining contracts and sources of funding, as well as impacting negatively on the Group's reputation.

 

Impacts on strategic pillars: Customer, People, Technology

 

Change in year: NEW RISK

 

It is very important that Mitie understands and monitors 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 and indices 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.

 

Controls and mitigating actions

Launch of Plan Zero to reduce carbon emissions, with a target of Net Zero Carbon by 2025 which is 25 years ahead of the UK government's target of 2050

Conversion of fleet vehicles to electric - Mitie already has more than 350 EVs on the road and over 600 additional EVs on order

Social Value & Responsible Business Committee of the Board as well as a Plan Zero steering group

Targets in place for Mitie's four social value framework pillars

Active apprenticeship scheme across the Group

Mitie Foundation

Key policies in place including ethical business conduct and sustainability, as well as Code of Conduct

Learning and People Hubs to support employees' development and wellbeing

 

Future plans

As part of its Plan Zero commitment Mitie will continue to convert its fleet to zero carbon

Review performance against social value targets and drive for ambitious but achievable goals

 

Statement of Directors' responsibilities in respect of the Annual Report, Remuneration report and financial statements

 

The following statement is extracted from pages 172-173 of the Annual Report and Accounts and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3. This statement relates solely to the Annual Report and Accounts and is not connected to the extracted information set out in this announcement or the Final Results Announcement:

 

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 Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law 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.

 

Directors' responsibilities pursuant to DTR4.1

The Directors confirm that to the best of their knowledge:

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group

The management report includes a fair review of the development and performance of the business and the financial position of the Group and the Company, together with a description of the principal risks and uncertainties that they face

 

Website publication

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.

 

-Ends-

For further information, contact:

Claire Lovegrove

Head of Media Relations

M: +44 (0)790 027 6400

E: [email protected]

 

Fiona Lawrence

Group IR Director

M: +44 (0)7808 727 500

E: [email protected]

 

Peter Dickinson

Chief of Staff and General Counsel

M: +44 (0)776 821 5013

E: [email protected]

 

Notes for editors

About Mitie Group

Founded in 1987, Mitie is the UK's leading facilities management and professional services company. It offers a range of services including Technical Services (Engineering Services, Energy, Water and Real Estate Services), Business Services (Security, Cleaning and Office Services) and Specialist Services (Care & Custody, Landscapes and Waste Management).

 

Mitie employs 48,900 people across the country, looking after a large, diverse, blue-chip customer base, from banks and retailers, to hospitals, schools and critical government strategic assets. It takes care of its customers' people and buildings, by delivering the basics brilliantly and by deploying advanced technology. It is pioneering the Connected Workspace, using smart analytics to provide valuable insight and deliver efficiencies to create outstanding work environments for customers.

 

Find out more at www.mitie.com


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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Quick facts: Mitie Group

Price: 38

Market: LSE
Market Cap: £444.98 m
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