Annual Report and Accounts 2022
Mitie Group plc Annual Report and Accounts 2022
The
Exceptional,
Every Day
Strategic report
01 Financial and Non-Financial highlights
02 At a glance
04 Chairman’s statement
06 Chief Executive’s strategic review
13 Reasons to invest
14 Digital transformation in healthcare
16 Key performance indicators
20 Supporting a vital role in a time of
national crisis
22 Our market drivers
26 Delivering the future of security
28 Our business model
30 Stakeholder engagement
33 Adding value to the UK’s telecoms
infrastructure
34 Transforming the UK’s defence estate
through technology leadership
36 Our environment and social value
framework
52 Working together to make zero
carbon happen
54 Operating review
59 Finance review
64 Engineering more fulfilling careers for
our apprentices
66 Principal risks and uncertainties
78 Shining a light on safer workspaces
80 Non-Financial information statement
81 Section 172 statement
83 Viability statement
The Exceptional, Every Day
We are one of the UK’s leading facilities
management companies. Our expertise, care,
technology, insight and focus on sustainability
create amazing work environments, helping
our customers to be exceptional every day.
Governance
86 Chairman’s introduction to governance
and the Board
87 Board of Directors
90 Board leadership and
Company purpose
92 Stakeholder engagement
94 Strategy and the Boardroom
96 Culture at Mitie
100 Division of responsibilities
102 Board effectiveness and evaluation
104 Nomination Committee report
107 Audit Committee report
115 Directors’ remuneration report
131 Social Value & Responsible Business
Committee report
133 Directors’ report
136 Statement of Directors’ responsibilities
Financial statements
138 Independent auditor’s report to
the members of Mitie Group plc
145 Consolidated incomestatement
146 Consolidated statement of
comprehensive income
147 Consolidated balance sheet
149 Consolidated statement of changes
in equity
150 Consolidated statement of cash flows
152 Notes to the consolidated
financial statements
214 Company balance sheet
215 Company statement of changes
in equity
216 Notes to the Company
financial statements
220 Appendix – Alternative Performance
Measures
224 Shareholder information
Strategic report Governance Financial statements
01
Mitie Group plc
Annual Report and Accounts 2022
A strong performance
Thanks to the hard work of our 72,000 colleagues, Mitie has recovered strongly from
the pandemic, delivering a record £4bn of revenue in FY22, operating profit of £167m
and free cash flow of £133m. The Interserve Facilities Management (Interserve) business
is performing strongly under our stewardship and our ability to rapidly mobilise flexible
contracts led to strong COVID-related business. Our underlying business performed well
in the year, growing 14%.
We delivered a strong financial performance in FY22, with good underlying growth.
The Group is now able to leverage its capital base to focus on long-term value creation,
accelerating investment in growth and delivering enhanced shareholder returns.
Revenue including share of joint
ventures and associates
1
£3,997m
+58%
FY21: £2,529m
Employee engagement
50%
-5ppt
FY21: 55%
Females in senior leadership team
24%
+3ppt
FY21: 21%
Operating profit
1,3
£72m
>100%
FY21: £4m
Group revenue
1
£3,903m
+56%
FY21: £2,499m
Net Promoter Score
4
+39
+15
F Y21: +24
Carbon emissions (tonnes CO
2
e)
20,596
+7%
FY21: 19,205
Average daily net debt
£25m
-£22m
FY21: £47m
Operating profit before other items
1,2,3
£167m
>100%
FY21: £59m
Financial
Non-Financial
Find out more on page 18
Find out more on page 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.
4. Customer NPS includes legacy Interserve contracts and is calculated as a weighted average. Mitie standalone NPS increased
to +51.
Free cash flow
£133m
+£158m
FY21: £(25)m
02
Mitie Group plc
Annual Report and Accounts 2022
At a glance
Our vision
The Exceptional,
Every Day.
Our purpose
Our expertise, care, technology,
insight and focus on sustainability
create amazing work environments,
helping our customers to be
exceptional, every day.
What we do
Mitie is one of the UK’s leading facilities
management companies. Mitie offers
a range of services tothe public and
private sectors including engineering
services, energy, security, cleaning
and specialist services including
custody, landscaping and waste
management services.
Our customers
Ranging from banks and retailers, to hospitals, schools and government entities.
Total order book
£9.5bn
Pipeline
£12.1bn
#1 in Retail, Logistics and Shopping Centres
#1 in Transport & Aviation
#1 in Critical Security Environments
#1 in Corporate and Iconic Buildings
#1 in Manufacturing
Customer type FY22
Revenue from continuing operations
%
Government 59
Non-government 41
Total forward order book £m
Revenue for continuing operations
£m
1 year 2,702
1–2 years 1,641
>2 years 5,138
Strategic report Governance Financial statements
03
Mitie Group plc
Annual Report and Accounts 2022
We deliver the exceptional every day through a range of business divisions and services
Business Services
We keep some of the UK’s biggest companies
across a diverse range of sectors (including
financial & professional services, manufacturing,
telecoms, retail and transport) clean, safe
and secure.
Cleaning
Security
Office services
Central Government & Defence
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.
Cleaning
Security
Office services
Engineering services
Decarbonisation
Communities
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.
Cleaning
Security
Catering
Engineering services
Decarbonisation
Portering
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.
Engineering services
Projects
Decarbonisation
Specialist Services
Care & Custody
Provides high-quality, critical public
services in immigration, criminal justice
and secure healthcare.
Landscapes
A top five UK provider of landscaping, focused
on both horticultural and winter services.
Waste management
A leading national waste management business
providing innovative waste reduction and
treatment solutions.
Spain
Provides a full range of services to customers
throughout Spain from cleaning, catering
and security.
Find out more on page 54
Find out more on page 55
Find out more on page 56
Find out more on page 57
Find out more on page 58
Revenue FY22
£1,522m
38%
Revenue FY22
£669m
17%
Revenue FY22
£460m
12%
Revenue FY22
£973m
24%
Revenue FY22
£373m
9%
04
Mitie Group plc
Annual Report and Accounts 2022
Chairman’s statement
Moving from strength to strength
Dear Mitie Shareholder,
When I wrote to you last year we were still in
the grip of the pandemic, with many restrictions
in place and the mass roll-out of vaccinations
just mobilising. A year later it is heartening to
see that we have weathered the storm and that
the worst is behind us. And it is a huge tribute
to all the Mitie colleagues who played their part
during COVID, ensuring essential services at
testing centres, red list hotels, hospitals, schools,
supermarkets, transport hubs and critical
national infrastructure were maintained.
On your behalf I thank them all. Many of these
services are now no longer required, but I am
proud that we have been able to redeploy many
of our colleagues into other roles across Mitie.
It was our ability to respond quickly to the
Government’s needs and to rapidly train and
deploy some 10,000 colleagues, providing
logistical support and operational reliability, that
has led to a year of significant progress across
Mitie with record revenue and profits, in part,
as well, due to the success of integrating the
Interserve business which we have now owned
for a year and a half.
Managing through such significant change is
never easy but I was encouraged that over
30,000 colleagues completed our recent
‘Upload’ survey, telling us what it was really like,
working for Mitie. With the rising cost of
household bills, pay is always an issue and we
have worked hard with our customers to agree
better terms, as well as providing additional
benefits including 24/7 access to medical support
and free Mitie Shares for all our people.
Meanwhile your company has gone from
strength to strength.
We have a strong platform for growth; as well
as strengthening our position as a supplier to
the Government, we have continued to invest
in our technology and our decarbonisation
offering and we have been rewarded with
new contract wins.
Looking forward, we have set out our new
strategic priorities and have completed several
strategic acquisitions, which will support us to
deliver long-term, sustainable value.
Thanks to the hard work of our 72,000
colleagues, Mitie has recovered strongly from
the pandemic, delivering a record £4bn of
revenue in FY22, operating profit of £167m
and free cash flow of £133m.
Derek Mapp
Chairman
Strategic report Governance Financial statements
05
Mitie Group plc
Annual Report and Accounts 2022
Having a strong purpose is essential to the
running of our business; it is what drives us
forward and guides the decisions we make.
Our expertise, care, technology and insight
create amazing work environments, helping
our customers to be exceptional every day.
But ‘how’ we do things is just as important as
the ‘what’.
Environmental, Social and
Governance
Environmental, Social and Governance (ESG)
initiatives form a key part of our philosophy of
the way we do business at Mitie. Our ambition
is to be Net Zero carbon by 2025; we are
committed to science-based targets to
decarbonise our supply chain by 2035, as well as
generate increased social value both internally
with our colleagues and around the country.
We are evolving our approach to equality,
diversity and inclusion (ED&I) throughout the
business, leading from the top. This year we
welcomed a new Head of ED&I to support our
drive to nurture, support and develop our truly
diverse and inclusive workforce, ensuring our
colleagues broadly represent our customers,
suppliers and the communities in which
we operate.
And good governance requires that not only
do we review our performance, we also seek
feedback from all our stakeholders including
customers, investors, third-party suppliers and
Government Agencies.
Reflecting the growing importance of ESG,
I am encouraged that we now include targets
relating to ESG in the senior management’s
long-term incentive plan.
Interserve Facilities Management
Our acquisition of Interserve on 30 November
2020 created one of the UK’s largest facilities
management companies. We are delighted with
its strong contribution in FY22. The renewal and
retention rate of former Interserve contracts is
90% as we deploy Mitie’s technology, customer
service, efficiency and innovation to these
customers; and their customer NPS has
improved from -18 to +13.
Strategy
In June 2021, we introduced our new strategy,
focused on accelerating growth, enhancing
margin and improving cash generation,
underpinned by ‘capability enablers’ of the
‘Science of Service’ (see page 10), creating a
‘Great place to work’ and leading in ESG &
decarbonisation.
I am pleased to report that we have made
progress on all fronts.
To accelerate growth, we have acquired seven
fast-growing, high-margin companies. Three
of those acquisitions enable us to create a
market-leading mobile telecoms support
services business, providing our customers
with end-to-end services. We also focused
on expanding our decarbonisation strategy,
with the acquisition of a high voltage and
electric vehicle charging points installer, a solar
canopy installer, and a designer of green (living)
walls. We have also enhanced our Intelligent
Security offering, acquiring a specialist
provider of counter espionage and specialist
surveillance services.
Margin enhancement is coming from a variety
of initiatives to drive operational efficiency and
automate processes. And I was encouraged
that we won a number of awards including
‘Top Employer’ for the fourth year running.
Financial performance
Revenue including joint ventures and associates
was £3,997m, an increase of 58% in the year.
Operating profit before other items was £167m,
up 184% versus last year.
Earnings per share was 9.2p compared with 3.1p
in the previous year.
Board composition
In April 2022, we appointed Chet Patel and
Salma Shah as our new Non-Executive
Directors, replacing Nivedita Krishnamurthy
Bhagat. We feel passionately that a diverse
balance of skills and experience on the Board is
vital for our strong governance. Chet and Salma
have both joined the Remuneration Committee,
with Chet also joining the Audit Committee and
Salma the Social Value & Responsible Business
Committee. Chet’s commercial expertise in the
B2B service environment, promoting sales and
growth strategies, will strengthen the Board’s
diverse mix of skills and experience; while
Salma brings additional public sector expertise,
reflecting Mitie’s increased public sector focus.
Stakeholder engagement
The Board values every opportunity to engage
with our stakeholders. Each year, I meet
our major shareholders to discuss Mitie’s
performance and strategy and I was delighted
that we have once more resumed this in person.
Over the past year, Jennifer Duvalier has also
held numerous ‘engaging with our Frontline
Heroes’ meetings across the country at different
client locations.
Capital allocation &
shareholder returns
As the business has recovered well from the
COVID pandemic, generating significant free
cashflows in FY22, and is making good progress
towards the delivery of its margin-accretive
growth strategy, the Board has set out a revised
medium term capital allocation policy. The policy
is focused on investing in bolt-on acquisitions to
drive future growth, and increased shareholder
returns, whilst maintaining leverage (average net
debt/EBITDA) below 1x.
The Board intends to progress steadily towards
a dividend pay-out of 30-40% and thereafter
deliver long-term dividend growth in line with
earnings growth, provided it is supported by
cash flow and underlying earnings, and is justified
in the context of our capital allocation strategy
when taking into account M&A opportunities,
and market outlook.
The Board is therefore recommending a final
dividend of 1.4 pence per share which, when
added to the dividend paid in respect of the first
six months of the year, takes the total dividend
for FY22 to 1.8 pence per share. The final
dividend will be paid on 5 August 2022.
Consistent with the Group’s capital allocation
strategy and reflecting our good cash flow
generation, robust balance sheet and the
positive outlook for the business, the Board
announced the launch of an initial £50m share
buyback programme.
In closing, this is my fifth year as Chairman
of your company and it has been our most
successful yet. I am proud of the Company’s
progress during this time. None of this could
have been achieved without the professionalism,
enthusiasm and care of all our 72,000 colleagues
who embody ‘The Exceptional, Every Day’, and
to whom we are immensely grateful.
Derek Mapp
Chairman
Annual General Meeting
Mitie intends to hold its Annual General
Meeting (AGM) on 26 July 2022 at 11.30am
at Level 12, The Shard, 32 London Bridge
Street, London SE1 9SG. This is an
important event in our corporate calendar,
providing an opportunity for our Board
to engage with shareholders. Our AGM
will be a combined physical and electronic
meeting (a hybrid meeting), enabling
shareholders to attend the AGM remotely
and to vote and ask questions virtually.
06
Mitie Group plc
Annual Report and Accounts 2022
Chief Executive’s strategic review
Strong performance in FY22 with good
underlying growth
Phil Bentley
Chief Executive Officer
Through our investment-led strategy, Mitie
has reached an inflection point earlier than
anticipated. We delivered a strong financial
performance in FY22, with good underlying
growth. The Group is now able to leverage
its capital base to focus on long-term value
creation, accelerating investment in growth
and delivering enhanced shareholder returns.
Margin-accretive growth strategy
We announced a new strategy last June which
focuses on accelerating growth, enhancing
margins, and improving cash generation. Our
strategy targets mid-single digit revenue growth,
margins of 4.5-5.5%, sustainable free cash flow,
and a return on invested capital (ROIC) in
excess of 20%, over the medium term.
Mitie’s strategy is to be the market leader in
its core businesses of Cleaning, Security and
Technical Services, deploying industry-leading
technology and skills (‘Science of Service’) in
post-COVID workspaces, as the strategic
partner of both the public and private sectors,
and be recognised as a ‘Great Place to Work’.
Accelerated growth
Our priority is to retain and grow existing
contracts alongside a focus on winning new
contracts. In FY22, we won, renewed, or
extended contracts including projects with a
total contract value (TCV) of up to £3.8bn.
We have invested in sales during the year, and
FY22 represented our most successful year of
contract wins (including projects) with up to
£2.1bn TCV, including BAE Systems, the Defence
Infrastructure Organisation (DIO) (Future
Defence Infrastructure Services contract (FDIS)
(Scotland & Northern Ireland)), Home Office,
Legal & General, FMSP Clyde, Westfield
shopping centres, City of Edinburgh Council
and Swansea University. We have already won
c.£100m TCV in FY23 including Hammerson,
Netflix, Poundland and Primark which in total
adds £56m of annualised new contract revenue
for FY23.
A total of £1.7bn TCV of contracts were
renewed or extended in the year, including
Co-op, Gibraltar, Heathrow Airport, Marks &
Spencer and Department for Transport.
Our renewal rate is 90%, which is slightly lower
than historical rates due to a small number of
contract losses and our decision not to seek the
renewal of a number of low margin contracts.
Prior to the acquisition, Interserve’s contract
renewal rates were significantly lower than
Mitie’s. It is therefore pleasing that we have
renewed or extended 90% of Interserve
contracts that have come up for renewal.
These renewals are driven by Mitie’s technology
and innovative solutions, and our improved
customer service – reflected in a 31 point
improvement in our Interserve customer net
promoter score to +13 points (from -18 points).
Strategic report Governance Financial statements
07
Mitie Group plc
Annual Report and Accounts 2022
Since the year end, we have successfully
extended the contract for the overseas military
bases in Cyprus, Ascension Islands, and the
Falklands, continuing our solid track record of
renewing former Interserve customer contracts.
As part of the Interserve acquisition, we
highlighted the opportunity to insource work
contracted to third parties by Interserve. For
the full year we have insourced £36.5m of
contracts, largely across the waste, landscapes
and security service lines.
Our total order book (secured fixed term
contract work, variable (including estimated
unsecured work) and project work) has
increased to £9.5bn (FY21: £9.3bn) driven by
new wins across the Central Government &
Defence and Technical Services divisions, and
renewals in Business Services. The book to bill
ratio (the relationship between orders received
and revenue recognised) is 105%. The pipeline is
buoyant and includes opportunities from the
latest Government framework RM6232, which
offers significant opportunities for growth.
Complementing our organic growth initiatives,
our strategy also includes expanding our
portfolio through infill acquisitions in high
growth sectors. In total, £27m was invested
in telecoms site acquisition and maintenance,
decarbonisation and intelligent security
businesses. DAEL Ventures UK was acquired
on 5 August 2021, Rock Power Connections on
1 November 2021, Esoteric on 17 November
2021 and Biotecture on 1 February 2022.
Since the year end, we have added two further
telecoms site acquisition and maintenance
companies to the telecoms division, P2ML and
8point8 and we have entered into a Sale &
Purchase Agreement (SPA) for Custom Solar, a
solar power solutions company. During the year
we sold the Document Management business
People
We’re creating a great place to
work and fostering a truly inclusive
culture at Mitie. Read more about
our people strategy and initiatives
on pages 37 to 40.
Environment
We’re protecting the
environment, improving our own
energy efficiency and transitioning
to a low carbon economy.
A detailed overview of our
approach is on page 41.
Community
Read about how we are enriching
the community by providing
employment opportunities to
underrepresented groups and
support through volunteering on
page 50.
Responsible
supply chain
By building a responsible supply
chain we can support social
enterprise and local delivery,
and adopt a circular economy.
Find out more on page 51.
Our new strategic pillars
Underpinned by our social value framework
Grow
Mitie
Winning new customers,
retaining and growing existing
customers
Investing in higher growth,
higher margin M&A
opportunities
Margin
enhancement
Delivering Interserve synergies
Turnaround loss-making
Interserve contracts
Drive operational excellence
Create a new digital supplier
platform
Harness technology efficiencies
Generate
cash
Reinvest cash for higher returns
for stakeholders
Reward shareholders
Capability
enablers
Science of Service
Create a ‘Great place to work’
Leading in ESG /decarbonisation
08
Mitie Group plc
Annual Report and Accounts 2022
Chief Executive’s strategic review
continued
for £40m. Acquisitions will be funded out of free
cash flow or from existing debt facilities, whilst
maintaining leverage below 1x average net debt
to EBITDA before other items.
Margin enhancement
Margin enhancement is a key focus of our
strategy. Our goal is to deliver margins of
between 4.5% and 5.5% over the medium term.
This will be achieved from the Interserve cost
synergies, improving the performance of the
handful of Interserve loss-making contracts,
a focus on operational excellence to improve
contract profitability, savings from automating
workflow management and better procurement
processes.
In FY22, we delivered £30m of Interserve cost
synergies, ahead of our target of £25m due
to an earlier than expected reduction in
headcount. Overall, 459 roles have been
removed, of which 275 were in this period,
and three further properties were exited taking
the total to 11 properties. The increased scale
of the Group has generated a further £5m of
procurement savings in the year. With an exit
run rate of £40m in FY22, we are on course to
achieve our newly revised higher cost synergy
target of £45m by the end of FY23.
Further margin enhancement will come from
improving the performance of the small
number of loss-making contracts acquired with
Interserve in our Communities division. A new
management team was put in place on 1 April
2021 and, utilising expertise from around the
Group and externally, good progress has been
made improving operational KPIs. This has
helped to reduce financial penalties and improve
customer NPS. While we have made good
progress in FY22, there is still further work to
be done to bring these loss-making contracts
up to and beyond the ‘break-even’ point.
Following the success of our operational
excellence initiative in the Communities division,
we have now extended this initiative more
broadly across other parts of the Group in
order to eliminate process waste, reduce the
Cost of Poor Quality, and minimise workflow
variation. Deep dive diagnostics into key
contracts have already identified up to £10m
of savings over the next two years.
The digital supplier platform went live in several
Mitie divisions in the final quarter of FY22,
providing the Group with real visibility of where
we spend our customers’, and our own, money
with our supply chain. Through this system we
control our purchases using a digital catalogue
£2.1bn TCV new contract wins
*
£1.7bn TCV contract retentions/extensions
2019 2020 2021 2022
£m
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2019 2020 2021 2022
Renewal rate
70%
80%
90%
100%
£1.7bn
£1.0bn
* Includes secured variable and project work.
Strategic report Governance Financial statements
09
Mitie Group plc
Annual Report and Accounts 2022
and ensure complete transparency over our
£1.4bn of third-party spend. We are targeting
£10m of savings over FY23 and FY24. The
transparency over our third-party spend also
highlights insourcing opportunities in those areas
where Mitie delivers equivalent services, such
as Landscaping, Waste, Cleaning and Projects.
Workflow automation, which incorporates
Workplace Plus and Forté, is expected to
release £15m from overhead savings by FY24.
Our Workplace Plus scheduling and attendance
solution and InTouch mobile app have been
rolled out to all of our frontline Cleaning and
Security workforce. This brings efficiency in
workforce management at scale, allows our
employees to access their pay details and shift
plans directly from their mobile phones, and
enables supervisors to support frontline
colleagues working on customer sites with
any queries, 24/7.
By successfully consolidating all our finance
operations including those from Interserve
into Mitie’s SAP platform, we are driving
further efficiencies in the ‘back office’ process.
A fifth (19%) of our customers’ bills are now
generated and issued automatically with Forté
enabling further automation across billing and
financial processing.
Through our industry-leading IBM computer
aided FM (CAFM) solutions we now actively
manage over one million assets for our
customers, allowing us to dynamically schedule
our engineers, ensuring they are always in the
location where the work needs to be done,
with the tools and information they need for
the job and, using Forté, linking into the billing
and financial processing.
Through our ‘big data’ solutions we can produce
real-time reporting on how buildings and their
equipment are performing. This gives us the
insights required to drive operational excellence
for our customers, as well as providing access to
MI via Mitie’s award-winning Mozaic software,
which has now been rolled out to around
150 customers. Our award winning, AI-driven
Aria app and chatbot Esme, which enable
customers and their employees to manage
their spaces and raise any issues that need
resolving through a simple app without a need
to contact call centres, are also being rolled out
to Mitie customers.
Lastly, additional cost savings are expected to
mitigate any inflationary costs which we are not
able to pass through to our customers. This is
focused particularly on a reduction in spans
and layers, and further operational automation
related to process efficiency of core functions
and outsourcing.
Cash generation
Mitie generated £133m of free cash in FY22
from increased profitability and further
improvements in working capital management.
During the year £27m was invested in four
bolt-on acquisitions in the high growth sectors
of telecoms site acquisition and maintenance,
decarbonisation and intelligent security, and
£5.7m was returned to shareholders through
the interim dividend.
Ensuring that we continue to generate good
operating cash flows is a key strategic priority,
and we have improved working capital efficiency
in FY22 by reducing overdue debt and speeding
up billing cycles. Robotic process automation
solutions for customer billing have helped us
to deliver a two-day reduction in our DSO,
and automation in our payment process has
delivered enhanced accuracy and transparency
over supplier payments, ensuring that our
suppliers are paid on time.
In addition, we are focused on reducing our
non-trading cash outflows. Our priorities are
to return capex and other items to more
normalised levels, following the integration of
Interserve and completion of Project Forté,
and to reduce our finance costs following the
renegotiation of our financing arrangements,
including more recently the planned termination
of our invoice discounting facility, and to reduce
our cash tax through the utilisation of tax losses
acquired with Interserve.
Key acquisitions in FY22
DAEL Ventures
DAEL Ventures focuses
on acquisition, design and
construction of mobile
telecoms infrastructure
Mitie Telecoms now provides
end-to-end active/passive
maintenance
Telecoms infrastructure sector
forecast to grow 5.1% CAGR
over next five years
Annualised revenue expected
to double
Rock Power Connections
Rock focuses on design and
installation of new high voltage
electricity supplies
Mitie now offers end-to-end
solutions to meet customers’
Net Zero goals
Investment to create core
public EV charging
infrastructure will be £30bn
by 2030
Annualised revenue expected
to double
Esoteric
Leading Technical Surveillance
Counter Measures specialist
Expands Mitie’s intelligence-led
security offer
The only UK company to be
accredited by the National
Security Inspectorate for
providing electronic sweeping
and covert investigations
Biotecture
A leading specialist in designing,
building and maintaining ‘living
walls’ for interior and exterior
urban landscapes
Transforms indoor and
outdoor urban spaces by
improving air quality and
biodiversity
10
Mitie Group plc
Annual Report and Accounts 2022
Chief Executive’s strategic review
continued
Science of Service – targets growth and higher margins
Finding new ways to identify,
prevent and solve problems using
the latest technology advances
and ingenuity
Cleaning & Hygiene Centre of
Excellence: demand-led cleaning,
using sensors & robotics
TSOC: monitors 1 million customer
assets remotely
ISOC: Intelligence Security
Operations
From reactive to proactive guided
by real-time insights enabling
services to be delivered with new
levels of precision and predictability
‘Click’: Matching right person, skills
and resources service
Real time incident management
8 million data points processed every
day across 525 sites (TSOC)
5 million data points collected per
month from retail customers (ISOC)
Delivering better, more measurable
outcomes and experiences in tune
with changing demands
Empowering customers with visibility
over operations
Measuring performance to drive
continuous improvement
Reduction in alarm call outs
Shrinkage reduction
Reduction in energy consumption
Capability enablers
Our growth and margin enhancement
strategy is underpinned by three capability
enablers: the Science of Service, creating a
great place to work, and leading the industry
in ESG & decarbonisation.
The Science of Service
In the past few years, we have made substantial
investments to develop cloud-based platforms
which allow us to put technology and data at
the centre of all our services to customers.
In a post-COVID world, our customers are
looking for innovation to promote reassurance
and wellbeing in the return to work, to drive
productivity, and to prioritise sustainability.
Our technology provides this reassurance
and innovation, enabling us to win and
retain customers.
Our new approach, which is called the ‘Science
of Service’, is powered by technology, driven by
data and made exceptional by our people. It is
already providing organisations with real-time
visibility using remote monitoring of critical
assets and building management systems, as well
as sensor technology and intelligence gathering.
Our Technical Service Operations Centre
(TSOC) which opened in Manchester in
December, uses cutting-edge workplace
technology to monitor thousands of pieces of
equipment remotely, from boilers to lighting
systems. It enables teams of specialist engineers
to run diagnostics, adjust settings, and to predict
when maintenance is needed. 65% of faults on
remotely monitored assets have been fixed
directly from the TSOC rather than sending
out a technician. Customers are handing over
access to their building management systems
allowing Mitie to manage their environment.
One customer alone has reduced energy
consumption by 16% since Mitie began
monitoring their sites.
As part of this new approach, in the second
half of FY22, we launched ‘Mitie Intelligence
Services’, which is a risk assurance solution that
integrates intelligence, technology and people.
Our Intelligence Services will support customers
to build robust, risk-based security strategies to
protect their businesses, both today and into the
future. This follows the opening of the Cleaning
& Hygiene Centre of Excellence in February
2022, which showcases our demand-led cleaning
and chemical free approach, using Merlin
sensors, robotics, and other new technologies.
Laboratory results from our ‘Citrox Protect’
anti-COVID product, provide cleaning and
hygiene reassurance for our customers.
Creating a ‘Great place to work’
With 72,000 colleagues at Mitie, a key enabler to
our strategy is creating a ‘Great place to work’,
and improving the skills and performance of
our workforce, to deliver improved customer
service, and empower our people to strive to
continually improve performance.
Mitie’s ambition is to be the destination
employer of choice in the facilities management
industry. During FY22, we brought together the
HR functions of Mitie and Interserve to create
a team focused on employee experience,
integrating 20,000 former Interserve employees
into our systems and ways of working.
We continue to be a market leader in the
provision of benefits to our frontline colleagues.
We launched new and enhanced benefits in
FY22, including a salary advance offering,
enabling our colleagues to draw down on the
pay that they have earned in advance of payday,
and enhanced maternity pay, adding to life
assurance and Virtual GP benefits that we
introduced in FY21. We have also introduced an
improved share incentive plan (SIP), our Mitie
Matching Share Plan, through which our people
receive a free share for every two that they buy,
and will award up to 100 free shares to all our
UK colleagues for the second year running.
Finally, listening and responding to colleagues’
feedback is a crucial part of our commitment
to becoming a ‘Great place to work’ and our
annual Upload Survey showed an increase in
participation rates to 47% with an engagement
score of 50%. This was a 5ppt decrease
compared to last year’s survey (which was
undertaken during COVID when engagement
levels across large organisations saw a positive
increase) but ahead of the 46% reported
for FY20.
Innovation Intelligence Impact
Strategic report Governance Financial statements
11
Mitie Group plc
Annual Report and Accounts 2022
Our key decarbonisation offers
Turnkey EV
charging hubs
End-to-end delivery
of EV charging
installations, from point
of connection at the
grid, to install and
commissioning of
chargers to ongoing
asset and site
maintenance
Commercial
rooftop
solar PV
Full turnkey delivery of
commercial rooftop
solar PV solutions,
targeted and optimised
to an organisation’s
estate portfolio and
paid through a fixed
£/kWh fee or capital
purchase
Consumption
optimisation
Breadth of solutions
and initiatives to
implement projects
to deliver energy
efficiency across a
portfolio of assets
to drive down
opex and support
environmental targets
Decarbonisation
pathway
An assessment of an
organisation’s required
interventions to achieve
Net Zero, through
identification, scoping and
pricing of decarbonisation
projects
Building Zero
A whole building
decarbonisation
service, providing an
end-to-end solution
to fully decarbonise
a building through
multiple initiatives and
projects, packaged into
a single service
ESG & decarbonisation
Mitie’s ESG strategy has evolved from managing
risk to become a driver of growth opportunities.
Our decarbonisation offering is focused on
reducing carbon emissions across buildings,
corporate estates, and fleet, enabling us to
focus our skills on a high growth, high margin
sector, whilst protecting the planet for future
generations. Through engineering design,
delivery, and maintenance, underpinned by
consulting and advisory support, we are
supporting our customers to deliver their
Net Zero carbon ambitions.
As part of our strategy to grow our
decarbonisation offering we acquired Rock
Power Connections, a specialist in the design and
installation of new high voltage electric supplies,
including EV charging installation, and we have
entered into a Sale & Purchase Agreement
(SPA) for Custom Solar, a solar power solutions
company, specialising in development, design,
installation and maintenance of solar systems
for corporations and public institutions.
Through our decarbonisation project work we
have supported customers to secure substantial
public funding, including Essex County Council’s
£7m grant to install air source heat pumps, solar
panels and window upgrades. At the University
of Sussex, Southwark Council, University
College London Hospitals, Lloyds Bank Group,
Vodafone, and Rolls Royce we delivered major
projects to install air source heat pumps,
solar panels, LED lighting and building fabric
improvements.
We have also won a number of awards,
including ‘infrastructure project of the year’
through Landmarc joint venture, at the
Government Opportunities Public Procurement
Awards. This was for the Net-Zero Carbon
Accommodation Programme (NetCAP), which
is transforming the lived experience for the
Armed Forces using the UK Defence Training
Estate to train whilst supporting the Ministry
of Defence with its Net Zero carbon goals.
Leveraging the Interserve
acquisition
The operational integration of Interserve is
complete. We have identified a further £3m
of cost synergies taking the new total to £45m
by the end of FY23 and we are making good
progress towards our revenue synergies target
of £10 0 m.
Our market-leading technology has been
instrumental in renewing 90% of Interserve
contracts and our ongoing investment in
customer service has helped to significantly
improve Interserve’s NPS from -18 to +13,
although with more work to do to get towards
the +51 Mitie customer NPS.
We have prioritised the roll-out of Mitie’s
customer facing technology to Interserve
customers, with the Mozaic MI dashboard now
up and running for 13 customers, and a further
seven in progress. Aria, the workplace app, is
now live or ‘in delivery’ with several Interserve
customers, with over 5,000 users able to place
service requests and manage their workspaces
through automated booking. The roll-out of
other Connected Workspace products such
as Digital WorkPlace, Digital Maintenance,
and UVC cleaning are in progress for another
12 of our strategic customers.
All former Interserve employees are now
migrated to Mitie’s HR and payroll systems.
We have rolled out Learning Hub licences,
and access to our e-learning content, and have
made apprenticeships available to 20,000 former
Interserve colleagues. In addition, all former
Interserve colleagues receive the enhanced
Mitie benefits package, including free shares,
life assurance and salary advances.
We now have a cohesive organisation and are
embedding the Mitie culture and values across
the entire workforce to provide a market-
leading service to our customers.
12
Mitie Group plc
Annual Report and Accounts 2022
Rapid response, flexible contracts
for Government
We have been at the forefront of the
Government’s strategic response to COVID,
standing up almost 300 COVID testing centres
at short notice, rapidly mobilising 10,000 people
across the UK and supporting the testing of
12m people. We trained 4,000 people to
conduct 10,000 ‘Amber list’ checks per day,
and recruited 1,500 employees to manage
security at 70 ‘Red list’ hotels.
In addition, we mobilised 1,000 people to
provide support at 84 hotels for Afghan
refugees, and mobilised a significant contract
to provide security for UK ports post-Brexit.
Financial performance
Revenue
Revenue including share of joint ventures and
associates, from continuing operations, and
including the contribution from Interserve, was
£3,997m, an increase of 58% compared with
the same period last year (FY21: £2,529m).
This strong performance has been driven by
public sector wins in Business Services and
Central Government & Defence (CG&D),
including rapidly mobilising short-term contracts
as well as longer term (7+3 year) contracts,
such as the Future Defence Infrastructure
Services contract (FDIS) for Scotland and
Northern Ireland. Project works have increased
significantly in FY22, notably in CG&D, and
whilst Technical Services remains the division
most significantly impacted by COVID due to
a reduction in variable works, revenues from
higher margin variable and project works
have improved in the second half of the year.
Excluding the revenue contribution from
Interserve of £1,359m (FY21: £450m for four
months) and the £448m from short-term
COVID-related contracts (FY21: £155m),
revenue growth in the underlying business
in FY22 was 14%.
Operating profit
Operating profit before other items, from
continuing operations, was £167m in FY22,
184% ahead of the prior year (FY21: £59m),
with margins of 4.2% (FY21: 2.3%). Excluding
COVID-related contracts, the operating
profit margin before other items from
continuing operations for FY22 was 3.0%.
This improvement reflects the strong revenue
performance, cost saving initiatives, including
£30m of Interserve cost synergies, and £59.6m
of profit from the short-term COVID-related
contracts, where the rapid mobilisation and
flexibility requirements of the customer
attracted higher margins.
Cash flow and balance sheet
Mitie has delivered free cash flow of £133m in
FY22, as a result of the good operating profits
and another good working capital performance.
We invested £27m in acquisitions in FY22,
received £40m of proceeds from disposals,
bought 22.9m shares for the Employee Benefit
Trust and £5.7m was returned to shareholders
via the interim dividend.
Average daily net debt has improved to £25m
(FY21: £47m). The FY21 average daily net debt
included £91m benefit of deferring payments
under HMRC’s Time to Pay (TTP) scheme,
which was repaid in H2 FY21. Closing net cash
was £27m (FY21: £87m net debt).
Following the refinancing announced at the half
year and the cash flow generated during the
year, we now have a balance sheet which is
strong, stable and flexible, to support future
growth opportunities and increase returns
to shareholders.
Inflation
As discussed in November 2021, 80%-90% of
our contracts contain change of law and/or
inflation clauses, enabling us to pass on the
majority of inflation cost increases through
to our customers.
With labour cost inflation currently below
headline market inflation rates, and with good
contractual protection against inflation, to date,
we have seen little impact to the bottom line
from either labour or material cost inflation.
We have encountered cost inflation ‘hot spots’
across the business, where the cost of materials
or specific areas of the labour market have
increased at accelerated rates. We remain
confident with our previous guidance of an
inflationary impact to the business of no more
than £10–20m in FY23 which we will mitigate
with our programme of cost savings.
Outlook
The current year has started well, with
significant contract wins from Poundland, Netflix
and Primark as well as renewals/extensions
from our MOD contracts in Cyprus, Ascension
Islands, and the Falklands. This new business
momentum, together with a full year’s
contribution from significant contracts won last
year including FDIS and BAE Systems and the
uptick in projects and variable works (as our
customers see higher utilisation rates across
their buildings), gives us confidence in our
growth outlook.
The impact of inflation on our business continues
to be well managed and we will see further
benefit this year from our margin enhancement
initiatives. As a result, in FY23, after excluding the
£448m COVID-related contract work that was
delivered in FY22, we expect to deliver mid to
high single digit revenue growth, together with
good operating margin progress.
Chief Executive’s strategic review
continued
Strategic report Governance Financial statements
13
Mitie Group plc
Annual Report and Accounts 2022
Reasons to invest
Mitie is one of the UK’s leading facilities management companies, differentiated by our cloud-based
‘Property Technology’ customer offering.
Our margin-accretive growth strategy is focused on delivering mid-single digit revenue growth –
outperforming the market; driving operating margins towards 4.5–5.5%; delivering sustainable
free cash flow; and delivering a Return on Invested Capital in excess of 20%.
1
4
5
6
7
2
3
Find out more
mitie.com/investors
Scale, diversification and market leadership
One of the largest providers of facilities management in
the UK
Diversified across sectors and service lines including UK
Government, retail, manufacturing, telecoms, transport
and logistics sectors
Market leader in cleaning and hygiene services, security
and technical services
Driving margin expansion to 4.5–5.5%
Driving cost synergies from the integration of Interserve
Focus on contract profitability by delivering
operational excellence
Creation of a lean overhead structure
Transformation of our strategic supply chain management
Strong, flexible balance sheet
Average daily net debt of £25m with zero covenant leverage,
free cash flow of £133m
BBB Investment grade credit rating
Long-term funding with a balanced maturity profile;
a 4 year £150m RCF and forward-starting £120m
US Private Placement notes maturing in 8, 10 and 12 years
Making a positive and lasting impact
on society
Industry-leading, ambitious targets set across all areas
of social value
We are creating a ‘Great place to work’, prioritising
the wellbeing of our people
Developing a skilled workforce to support a brighter
future for all
Target set to be Net Zero carbon by 2025
Attractive shareholder returns
Focus on delivering sustainable free cash flow and return
on invested capital in excess of 20%
Progressive dividend policy and share buybacks
Investment in M&A to drive future earnings growth
Differentiated technology offering
Unique cloud-based proprietary technology differentiates our
customer offering and drives adoption, loyalty and retention
Customers get real-time visibility of works on their site,
automated service requests and asset performance
Leading customer satisfaction scores (+39 NPS)
Sustainable revenue growth
Targeting mid-single digit revenue growth ahead of low-single
digit market growth
Winning new contracts to increase market share, retaining
and growing existing contracts
Reshaping our portfolio towards higher growth, higher
margin businesses through bolt-on acquisitions across
Telecoms Services, Decarbonisation and Intelligent Security
14
Mitie Group plc
Annual Report and Accounts 2022
Digital
transformation
in healthcare
How we’re keeping John Radcliffe Hospital
running safely
The John Radcliffe Hospital in Oxford was looking for an innovative
facilities management partner that could deliver real value and
increase efficiencies. In 2021, we won a new contract to provide
cleaning, portering services and catering for patients and staff.
The future of healthcare is evolving rapidly with advances in digital
healthcare technologies. Mitie’s approach combines a human
touch with technology to facilitate an earnest, empathetic and
efficient service.
Our 700-strong team of cleaners, porters, catering assistants and
ward hosts now play a vital role in ensuring that the hospital’s acute
medical and surgical, trauma and intensive care services are able to
keep running, and support patients and clinical staff. The contract is
worth £92.5m over five years, and has the option to extend for up
to 15 years.
Embracing intelligent healthcare
Key to winning the bid was our technology-led approach. We’re
introducing new systems across all John Radcliffe Hospital’s services,
including cutting-edge task scheduling, prioritisation and indoor
location monitoring software. For jobs such as patient transfers or
urgent cleaning, clinical teams can now alert the closest available
Mitie colleague. This will help efficiently manage clinical staff’s time
and tasks, improving the overall patient experience at the hospital.
Clever robot and sensor technology
We’re also installing sensor technology to monitor footfall, ensuring
that the busiest parts of the hospital are prioritised for cleaning,
as well as introducing autonomous scrubber-dryer robots. This
innovation frees up the team’s time to focus on specialist tasks such
as sanitising high touchpoint areas. Our catering team is introducing
an electronic meal ordering system to ensure only the correct number
of meals are prepared each day, helping to cut food waste.
£92.5m
Value of Mitie’s contract with John
Radcliffe Hospital, over five years
700
Our team of cleaners, porters,
catering assistants and ward hosts at
John Radcliffe Hospital totals 700
50%
Estimated cut in time taken to
do urgent cleans thanks to new
technology
Link to strategy
Capability enablers – Science of Service
Strategic report Governance Financial statements
15
Mitie Group plc
Annual Report and Accounts 2022
Mitie’s collaborative approach to
working in partnership with its
customers is very much aligned with
how we deliver our fundamental
activities of patient care, teaching and
research. Together, we’re working
effectively to deliver the Oxford
University Hospital NHS Foundation
Trust’s vision to be at the heart of a
sustainable and outstanding, innovative,
academic health science system.
Mark Harrison,
PFI Programme Director, Oxford University
Hospitals
16
Mitie Group plc
Annual Report and Accounts 2022
Mitie’s key performance indicators (KPIs) are reviewed by the Board and
Executive Committee 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 community.
The FY22 results include a full 12 months of Interserve Facilities Management
(Interserve) while the FY21 results include the four month period from
1 December 2020 to 31 March 2021. In addition, the COVID-19 pandemic
impacted our financial performance in FY21; however, the Rights Issue in
July 2020 and the acquisition of Interserve on 30 November 2020 have
improved all KPIs linked to measuring our financial stability. A detailed
review of performance can be found within the Chief Executive’s strategic
review and the Finance review sections on pages 6 to 12 and 59 to 63.
Key performance indicators
Monitoring our progress
Basic EPS before other items (p)
From continuing operations
197%
increase from
previous year
Description
Basic earnings per share (EPS) before other items represents the profitability
of the Group. Improving EPS reflects the improving profitability of the Group.
The strategy focuses on creating value for shareholders and is expected to
improve EPS in the medium term.
A reconciliation of basic EPS before other items to the equivalent statutory
measure for FY22 and FY21 is provided in Appendix – Alternative
Performance Measures on pages 220 to 223. EPS for FY20 and earlier
years has been restated for the bonus element of the 2020 Rights Issue.
Our achievement
Basic EPS before other items has increased significantly as a result of the
significantly stronger operating profit and a lower effective tax rate.
Find out more on page 61
Financial
Grow
Mitie
Margin
enhancement
Generate
cash
Capability
enablers
Linked to remuneration
Return on invested capital (%)
From continuing operations (ROIC)
29.9%
FY21 8 .2%
Description
Return on invested capital (ROIC) is calculated as operating profit before
other items and after tax from continuing operations divided by invested capital
and is a measure of how efficiently the Group utilises its invested capital to
generate profits.
The calculation of ROIC and a reconciliation of the Group’s net assets to
invested capital for FY22 and FY21 are provided in Appendix – Alternative
Performance Measures on pages 220 to 223.
Note that the ROIC metric used for the purposes of the Enhanced Delivery
Plan (EDP) requires further adjustments under the detailed rules agreed with
shareholders.
Our achievement
ROIC has increased to 29.9% for the Group due to a combination of the
significantly stronger operating profit before other items, the lower effective
tax rate and the lower invested capital. The lower invested capital primarily
relates to the ongoing improvements to working capital and the reduction
in the receivable related to the Interserve completion accounts process.
Find out more on page 61
Revenue (£m)
From continuing operations
58%
increase from
previous year
Description
Revenue growth from continuing operations reflects the health of the order
book, the ability to upsell and cross-sell, and our contract win and retention
rates, alongside Mitie’s broader reputation in the sector. As the world recovers
from the global pandemic, Mitie’s goal is to achieve mid-single digit revenue
growth from its continuing operations over the medium term.
Our achievement
Revenue of £3,997m is 58% ahead of the prior year due to a full 12 months of
Interserve (prior year only included four months) and COVID-related contract
revenues. Excluding these, revenue growth is 14%.
Find out more on page 59
Linked to our strategic pillars
FY21
FY19
FY20
FY18
2,528.8
2,016.7
2,103.2
1,830.2
FY22 3,996.8
FY21
FY19
FY20
FY18
8.2
25.0
22.3
22.2
FY22 29.9
FY21
FY19
FY20
FY18
3.1
7.6
7.3
6.2
FY22 9.2
Strategic report Governance Financial statements
17
Mitie Group plc
Annual Report and Accounts 2022
Operating profit (£m) and margin
(%) before other items
From continuing operations
4.2%
FY21 2 . 3%
Description
Operating profit and operating profit margin before other items reflect 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. Operating margins are expected to
move towards 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 FY22 and FY21 is provided
in Appendix – Alternative Performance Measures on pages 220 to 223.
Our achievement
Operating profit of £167m is 184% ahead of the prior year due to the full
12 months of Interserve (prior year only included four months) and the
contribution from COVID-related contracts. Margins increased to 4.2%
reflecting the mobilisation of rapid-response, flexible COVID-related contracts.
Find out more on page 60
Free cash flow (£m)
£157.3m
improvement from
previous year
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 acquisitions
and rewarding shareholders. The strategy focuses on delivering sustainable
free cash flow.
A reconciliation of free cash flow to the equivalent statutory measure for
FY22 and FY21 is provided in Appendix – Alternative Performance Measures
on pages 220 to 223.
Our achievement
Free cash flow of £133m is significantly ahead of last year due to increased
profitability and further improvements in working capital.
Find out more on page 62
Financial
FY21
FY19
FY20
FY18
2.3%
3.6%
3.7%
3.7%
FY22 4.2%
£166.9m
£58.8m
£78.1m
£73.1m
£67.6m
FY21
FY19
FY20
FY18
(24.5)
30.9
30.5
(31.6)
FY22
132.8
Total order book (£m)
Including retentions and new wins
2%
increase from
previous year
Description
Total order book includes secured fixed term contract work, variable (including
estimated unsecured work) and project work. The total order book reflects
Mitie’s success at winning new customers and additional services, retaining
customers and upselling. Improved customer service, increasing market share,
alongside qualifications on public sector frameworks, are expected to lead to
increases in the total order book in the medium term.
See Note 3 to the consolidated financial statements for analysis of the
secured order book. The secured order book includes only secured fixed
term contracted work and excludes variable and project work.
Our achievement
The total order book increased by 2% to £9.5bn driven by new wins across
the Central Government & Defence and Technical Services divisions.
Find out more on page 6
FY21
9,285
FY22 9,481
Average daily net debt (£m) and
leverage ratio (x)
Post IFRS 16
£22.4m
improvement from
previous year
Description
Average daily net debt (calculated on a post IFRS16 basis) reflects how much
we owe our debt providers, and how well we have managed our debt over
the course of the year. The leverage ratio is calculated as average daily net
debt divided by EBITDA before other items on continuing operations.
We aim to maintain average daily net debt at a leverage ratio of no greater
than 1x, through generating cash, working capital discipline and appropriate
shareholders returns.
Data is not presented for FY19 and FY18 as the financials for these years were
prepared on a pre-IFRS 16 basis.
Our achievement
Average daily net debt has improved to £24.7m (FY21: £47.1m). The FY21
average daily net debt included £91m benefit of deferring payments under
HMRC’s Time to Pay (TTP) scheme, which was repaid in H2 FY21.
Find out more on page 63
FY21
FY20
0 .5x
2.7x
FY22 0.1x
£24.7m
£47.1m
£327.6m
18
Mitie Group plc
Annual Report and Accounts 2022
Key performance indicators
continued
Lost time injury frequency rate
Per million hours worked
0.7
increase from
previous year
Description
Mitie’s efforts to keep its people safe are of great importance and Mitie
continues to focus on improving safety performance. Our overriding objective
is to make Mitie the safest place to work in the facilities management industry,
because we care, value and protect our people, the environment and society.
Our injury rate is just one measure to monitor our progress towards zero
harm and includes all injury severities.
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. As we returned
to operations post-COVID we expected to see an increase in our injury
frequency rates however the FY22 score remains below that of the last
pre-COVID score of 3.94 in FY20.
Find out more on page 71
Employee engagement (%)
50%
5ppts lower than
previous year
Description
The Group’s success is underpinned by the way Mitie leads and engages with
its people. The employee engagement (Upload) survey asks colleagues at Mitie how
they feel about working within 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 senior leadership team engage with frontline colleagues.
Our achievement
The Upload survey took place from April to May 2022. This year the participation rate
rose positively by 7% to 47%, compared with last year, with over 30,000 colleagues
taking part. The employee engagement score was 50%, which was a 5% decrease
compared to last year’s survey. This aligns to global trends where large organisations
saw a positive increase in engagement during the COVID-19 pandemic, followed by a
fall this year in engagement levels post pandemic. Engagement levels have risen overall
since FY18, when the engagement level was 33%.
Find out more on page 37
Employee turnover
Females in senior leadership team
(%)
7ppt
increase from
previous year
3ppt
improvement from
previous year
Description
Mitie measures the number of employees leaving us voluntarily over a
12-month period against our overall headcount. Voluntary attrition has been
a focus area for a number of years as we strive to become the ‘Employer of
Choice’ in the Facilities Management industry.
The data for FY21 and earlier is for Mitie prior to the acquisition of Interserve.
Our achievement
During FY22 across the UK there was a greater trend towards employees
leaving than seen in previous years. Mitie saw this too with employee turnover
increasing to 19%, which was only a little higher than pre-COVID levels of 16%.
This was helped by our great benefits package including Virtual GP access for
all colleagues and those in their household, life assurance for all colleagues and
salary advance (the ability for our people to access their pay before payday).
Find out more on page 31
Description
Mitie measures the number of females in the senior leadership team against
the total headcount of the senior leadership team. The senior leadership
team includes the MGX (Executive Committee) and those on the MLT
(Mitie Leadership Team).
Our achievement
In FY22 we have increased the number of females in the senior leadership team
to 24%.
Find out more on page 38
Non-Financial
FY21
FY19
FY20
FY18
12%
20%
16%
17%
FY22 19%
FY21
FY20
21%
18%
FY22 24%
FY21
FY19
FY20
FY18
2.85
6.08
3.9 4
6.13
FY22 3.55
FY21
FY19
FY20
FY18
55%
45%
46%
33%
FY22 50%
Strategic report Governance Financial statements
19
Mitie Group plc
Annual Report and Accounts 2022
Net Promoter Score (index)
Rebased to include Interserve
15pt
improvement
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.
This year, Interserve customers were included in the survey with the overall
score weighted by business revenue contribution. The survey captures
feedback from 1,161 customers.
Our achievement
Mitie’s overall NPS score for FY22 is +39, an improvement from the revenue
weighted +24 rebased score determined for FY21. This score reflects an
increased NPS from Mitie ‘SAM’ customers to +60 while the Interserve
customer NPS score has improved from -18 to +13.
Find out more on page 30
Carbon emissions (Scope 1 & 2)
(tonnes CO
2
e)
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.
Our achievement
Mitie’s Scope 1 and 2 carbon emissions have increased 7% in FY22 as building
occupancy recovers towards pre-COVID levels and we incorporate the
Interserve estate (approximately one third of our activities) into our portfolio.
When comparing to FY20, emissions have declined.
All Mitie buildings, accounting for 50 sites, have been optimised, identifying an
annual carbon saving of 111 tonnes, with some newly acquired buildings now
being surveyed to start this process. Mitie’s electric fleet continues to develop,
with 2,217 electric vehicles (EVs) on the road as at 31 March 2022 and more
than 2,000 EV charge points installed, 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.
Find out more on page 41
Non-Financial
FY21
FY19
FY20
19,205
28 ,912
27,072
FY22 20,596
FY21
+24
FY22 +39
7%
increase from
previous year
20
Mitie Group plc
Annual Report and Accounts 2022
Supporting a
vital role in a time
of national crisis
Creating a safe space for critical services
As a key provider to our local communities, the Department for
Work and Pensions (DWP) was committed to keeping the UK
running throughout the COVID-19 pandemic. It was determined
to operate business as usual, from processing benefits and furlough
payments, to supporting vulnerable people with internet access.
But the impact of COVID meant that the demands for DWP services
soared, and it needed to extend its opening hours and open more
sites to meet public demand.
Scaling up our work to meet exceptional demand
Despite the pandemic, Mitie recruited 2,500 additional full-time
cleaners to undertake additional touch point cleaning, full deep cleans
and other facilities management services for the DWP – a vital role
that meant the DWP could continue offering its services in a COVID-
safe environment. In addition, we supported the safety and hygiene
of the DWP’s staff and provided PPE (600,000 masks, 200,000 pairs
of gloves) and hand sanitisers (500,000 bottles). Initially working in
502 buildings, we now work across 860 of the DWP’s public-facing
buildings, providing full facilities management services.
Going above and beyond in challenging times
To deal with the rising challenges of COVID-19 and its longer-term
impact on society, the Government decided to open an additional
100 new DWP sites within just 12 months in 2021. Mitie was asked to
provide a full facilities management provision under our Rapid Estate
Expansion Programme. Since the COVID-19 restrictions have ended,
we’ve continued to provide both touch point cleaning and business-as-
usual cleaning services.
860
DWP sites where Mitie
now provides facilities
management services
600,000
masks provided to the DWP
during 2021
8,000
additional cleaning hours per day
provided by Mitie in 2021
Link to strategy
Capability enablers – Science of Service
Strategic report Governance Financial statements
21
Mitie Group plc
Annual Report and Accounts 2022
Special thanks to Mitie for
increased cleaning, provision of
hand gel, sanitiser and wipes. It’s
undertaking a vital role in keeping
our workplaces safe, protecting
our colleagues and supporting
our customers.
DWP Permanent Secretary
Thank you Mitie, for your fantastic
support during these extremely
unprecedented times. Your
response, proactivity and flexibility
has been absolutely first class
and recognised and appreciated
throughout the Department.
Craig Butler,
Head of Service Delivery, DWP Estates
22
Mitie Group plc
Annual Report and Accounts 2022
Our market drivers
In 2021, the UK facilities management market
recovered after the 13% decline recorded in
2020 when the COVID pandemic impacted
the UK. All sectors continued to suffer from
lockdown restrictions, with a particular
slowdown in construction and real estate,
manufacturing and retail. Other sectors such
as ICT and e-commerce, banking, financial
services and energy, fared better.
The UK unemployment rate was 4.2% in 2021,
with reduced spending on facilities due to
continued working from home and the increase
in hybrid working. Ongoing supply chain
disruption, as suppliers struggled to meet
changes in demand and lockdowns impeded
supplies, also affected costs.
Adopting digital technology
for next generation service
The UK facilities management market is
predicted to fully rebound in 2022 with steady
growth of 3% and is forecast by Mintel to reach
£89bn by 2025. Growth drivers include the
reopening of facilities, accelerating digitisation
and investment in critical infrastructure. The
nature of service requirements has evolved,
with sustainable workplaces and healthy
buildings taking centre stage. We also continue
to see more emphasis on employee wellbeing
and sustainability.
The facilities management industry is undergoing
major structural change, as providers shift from
problem solving to offering positive outcomes
– with an increasing focus on technology and
user experience. Facilities management
providers are evolving from a total cost of
ownership (TCO) model, to customer-centric,
service-based business models, enabled by
digital technology and the Internet of Things.
At Mitie, we are investing to create innovative
and intelligent cloud-based platforms to keep
infrastructure running; to make spaces flex to
changing needs; to keep people safe; and to
make them more productive.
Profound changes in the
structure of work
The increase in working from home and hybrid
approach to working has reduced the need for
office occupancy. The UK’s back-to-work
initiatives have focused on safe transition within
a safe working environment. While Mitie’s
exposure to traditional office workspaces isn’t
significant, this new way of working has
increased the need for general cleaning and
hygiene services, and requirements for higher
cleaning standards and sanitation will remain
critical, together with an increased focus on
indoor air quality products and services. We
forecast an uplift in demand for higher-margin
cleaning services, such as specialised cleaning,
and technology-led solutions, including robotics.
Facilities management in the
UK remains a sector that
never sleeps, as befits its scale,
and its leading role in keeping
Workspaces Working,
embracing the digital
transformation of the sector.
Phil Bentley, CEO
Decarbonisation is becoming a priority for all sectors of the economy. Facilities
management companies are diversifying when it comes to sustainability and
many have started to specialise; from offering design and technical solutions
related to Net Zero to developing sustainability consultancy services.
Environmental, Social and Governance (ESG) initiatives form a key part of the
philosophy of the way we do business. Our target is to be Net Zero carbon
by 2025 and to generate increased social value. We are also working with
our customers to help them meet their own Net Zero targets through our
customer proposition of Do, Lead, Deliver.
Decarbonisation as a service line is forecast to grow to a £5.9bn market in 2025,
driven by sustainability and decarbonisation mega-trends.
The UK Government has legislated to cut total UK emissions by 78%
compared to 1990 levels by 2035, and for the UK to be Net Zero by 2050.
The decarbonisation of the UK energy system will require c.£83bn of
investment by 2030, and OFGEM has announced over £40bn investment into
energy infrastructure and the smart grid in the period 2021–2026. Energy
management and carbon reduction are now business critical for all businesses
Public sector decarbonisation is being backed by significant government
investment, including the Public Sector Decarbonisation Scheme.
We are meeting increased client demand for decarbonisation expertise by
providing consulting and advisory services, sales and engineering design;
funding options; decarbonisation data and technology solutions; and
partnering with sustainable suppliers
Opportunities for Mitie
Our strategy is focused on growing Mitie
by winning market share, evidencing our
differentiation through our technology and our
exceptional people and expanding our portfolio
through infill acquisitions in high-growth sectors
of telecoms, decarbonisation, intelligent security
and sustainability, where we can generate a
market-leading position to offer our customers
end-to-end services.
Our acquisition of Interserve in 2020 enhanced
our presence in the public sector – defence,
central government, healthcare and education
– all resilient sectors where we believe we
have significant growth potential. We have
also strengthened our private sector focus in
retail, manufacturing, telecoms and transport
& logistics.
As we move into a world that learns to live with COVID-19, we are seeing a shift in demand for facilities
management services in the UK. There is an increasing focus on technology, service and user experience,
especially in the context of hybrid working patterns, together with elevated emphasis on decarbonisation and
sustainability, which provide plenty of opportunities for Mitie.
Find out more on page 41
Delivering sustainable impact
Strategic report Governance Financial statements
23
Mitie Group plc
Annual Report and Accounts 2022
Security
Mitie Security is the UK’s leading intelligence and technology-led security business.
We are a market leader in retail, logistics and shopping centres; critical security
environments, including critical national infrastructure, government and public sector;
transport and logistics; and corporate and iconic buildings
We are working with existing and prospective customers on technological
developments and developing our services to match their requirements, introducing
cutting edge technology such as AI CCTV and facial recognition
In 2021, we introduced an industry-first Data-Sharing Agreement, allowing retailers
to share data on shoplifters, helping to tackle prolific offenders and organised crime
groups more effectively
Digital transformation in facilities management, or ‘Prop Tech’ is
accelerating as technology is being adopted as an enabler, supporting
the return to work and the digitisation of buildings and workflow.
Employee support, safety and productivity are emerging as the focus
of technology innovation. For critical building systems we are adopting
the Internet of Things and cloud-based remote services as part of our
core offering. In Cleaning, we are integrating technology and
intelligence to deliver enhanced service, while in Security we are using
advanced technology to deliver a more effective service.
Find out more on page 14
Cleaning & Hygiene Services
Mitie is a leading cleaning provider in the UK, with more than 15,000 colleagues
We provide cleaning and hygiene services to hospitals, schools and leading retailers such
as Co-op, Sainsbury’s and AS Watson
Post COVID-19, there’s an increased customer emphasis on assurance, service quality
and flexibility, specialist cleaning and sustainability
We are focusing on reducing the environmental impact of cleaning, and using advanced
technologies and products to meet increased standards in cleaning and hygiene
Following the acquisition of Interserve in 2020,
Mitie has continued to operate across its three
key service lines (cleaning, security and technical
services) alongside the two former Interserve
divisions of Central Government & Defence
and Communities (Healthcare, Education and
Critical Services) which offer our three key
service lines of cleaning, security and technical
services alongside additional services, including
portering and catering in hospitals.
Mitie has market leadership positions across
Cleaning, Security and Technical Services as
well as providing specialist services such as
Waste, Landscapes and Care & Custody with a
growing presence across key sectors such as
Central Government & Defence, Healthcare,
Education and Telecoms.
Technical Services
This is the largest market within facilities management, covering mechanical and
engineering services
Mitie is a market leader in ‘hard services’ and technology services enabled solutions
Market drivers include the rapid growth of the telecoms sector and decarbonisation
Remote monitoring of assets including environment (air-conditioning, temperature control)
and usage (desks, meeting rooms)
We are expanding into sectors showing significant growth such as larger scale
energy projects and mobile telecoms, adding to our existing capabilities through
targeted acquisitions
Market leadership across service lines
Digital transformation in facilities management
24
Mitie Group plc
Annual Report and Accounts 2022
Our market drivers
continued
Waste
Mitie Waste & Environmental Services provides recycling and waste removal services
The UK waste market is transitioning from simple waste collection to waste reduction
and decarbonisation
Key drivers are sustainable innovations to reduce, re-use and recycle waste streams,
increased outsourcing (including municipal council contracts) and a focus on
environmental and social responsibilities
We aim to become the leading waste management and consultancy organisation,
providing our customers with a carbon neutral waste solution
Landscapes
The UK outsourced landscaping market includes horticultural, external cleansing
and winter services, and is worth an estimated £4.5bn, largely concentrated in the
public sector
We are one of the largest providers of grounds maintenance and winter services to
the commercial and public sectors in the UK. We have more than 800 staff working
on 11,500 sites across the country
The market has consolidated significantly and is benefiting from the increased focus
on wellbeing – with clean, safe, green spaces increasingly sought by building owners
and occupiers
With specific requirements for biodiversity improvements as part of the global
sustainability drive and legislative changes, the opportunities for Mitie are strong
Our strategy remains to scale the business with wide-ranging self-delivery capabilities
in the public and private sectors. As with our recent acquisition of Biotecture, a leading
specialist in Living Walls, we will expand our niche services, especially where this
supports Mitie’s wider Plan Zero and ESG programme
Care & Custody
Care & Custody focuses on the three areas of immigration, justice and police
Mitie provides just over 50% of the secure detention immigration estate and is the
leading provider and a strategic partner to the UK Home Office
We are the leading provider of forensic health and custodial support services across
14 police forces delivering 193,000 medical interventions per annum
Justice is a new area of focus for Mitie after our recent inclusion in the Prison Operator
Service Framework which includes a high value pipeline of opportunities
Alongside our core services, we offer the following complementary services to our customers.
Strategic report Governance Financial statements
25
Mitie Group plc
Annual Report and Accounts 2022
We have a strong position across public sector procurement following the acquisition of Interserve and have highlighted the
market opportunity across Central Government, Defence, Education and Healthcare below. Across the private sector, we
have strong positions across aviation, retail, transport and telecoms – our telecoms expertise is highlighted on page 33.
Central Government
The UK has one of the strongest markets for public sector
outsourcing, with growth to 2025 expected at a slightly higher rate
than the private sector
Mitie has 3,700 employees working across 30 government
departments and agencies at 3,000 locations across the UK
and overseas
These environments are highly regulated and essential for the
Government to operate effectively, requiring outstanding
standards of security, cleaning and front of house to ensure
that they remain operational
Public sector growth is focused on better management of energy
and environmental services, and physical assets through technology.
Within the public sector, government (including defence) accounts
for c.24% of the market, valuing it at c.£3.7bn
Market trends include disaggregation and regionalisation of large
facilities management contracts to support SME growth, as a policy;
consolidation and standardisation across the estate and expansion for
government departments whose budgets have been positively affected
by the pandemic
We’re well placed to maintain and expand our position due to our
scale and expertise, and our strong collaborations with industry bodies
The Government has committed to a 50% carbon reduction by 2032,
and Net Zero by 2050, signifying that government departments will
need to consider innovative approaches to reducing their carbon
footprint. We will ensure a presence on all relevant frameworks to
allow us to compete for decarbonisation-related works with existing
and new government customers
Defence
Mitie has 1,878 employees servicing 12 defence contracts, mostly with
the MOD in the UK and overseas
Defence is undergoing a period of considerable change. This was
captured in the Government’s Integrated Review in 2021, and has been
accelerated by the events in Ukraine. The implications of the latter
are yet to fully play out but an increase in defence spending is likely
Encompassing Government, Public Sector and Critical National
Infrastructure, we lead in Critical Security Environments, providing
services to the public sector including Sellafield, the Home Office
and HMRC
We aim to expand our UK and international defence support activities,
supporting the armed forces with the Defence Optimisation Estate
programme, and through our partnership with PAE (our joint venture
partner on the Landmarc contract) across the training estate. We also
want to grow our role supporting the wider defence market such as
with Babcock and BAE Systems
We are also supporting the decarbonisation agenda, helping to tackle
Zero Carbon as an advisor and implementer
Healthcare
The Healthcare facilities management sector is valued at £4.5 billion
per annum and includes NHS acute trusts (85% of the total), mental
health trusts, community trusts and ambulance trusts
We work with over 40 NHS Trusts, providing services including M&E,
catering, cleaning and portering
Market trends include the geographical merging of trusts, creating
larger organisations and covering both acute and mental health;
increasing focus on sustainability and carbon reduction to achieve
Net Zero health services; and using technology to improve patient
outcomes and efficiency/productivity improvements
There is significant opportunity for growth. Mitie Energy and Mitie
Communities are partnering to deliver Net Zero carbon projects for
customers. We’re also developing new routes to market to capitalise
on public sector sales growth, and developing strategic relationships
with funding partners – including PFI lenders and PFI intermediaries
and managers
Education
The education market remains stable as commitments from central
Government ensure the education and welfare of young and
disadvantaged students is a priority. The higher education sector
is a relatively immature market valued at approximately £2bn
Opportunities are driven by the growing energy and decarbonisation
agenda, consolidation of devolved government responsibility and
services provided to Multi Academy Trusts which include more than
1,400 schools with a revenue potential of £1bn
Universities are increasing their use of outsourcing, often starting with
a move into single service cleaning or hard facilities management with
trends increasing towards bundled/IFM services
26
Mitie Group plc
Annual Report and Accounts 2022
Delivering the
future of security
An industry-leading proposition underpinned
by intelligence, technology and people
Our new Mitie Intelligence Services group combines three of our
best-in-class businesses to create an integrated, industry-leading
security proposition providing actionable intelligence and innovative
technology solutions, which positively impact our customers’ security
decision-making, allowing them to make more informed decisions
and be more agile in their approach to protecting their people, assets
and environments. Underpinned by the three pillars of intelligence,
technology and people, this is our ‘Science of Service’ in action.
Bringing together our Intelligence Hub (formerly GSOC), Intelligence
Technology (Merlin proprietary Mitie software) and recently acquired
specialist Esoteric division, we can effectively assess our customers’
unique risk profiles, analysing the resulting insight to evaluate and
mitigate potential threats. Using outcomes to inform the decision-
making process, we can support our customers to build a robust,
risk-based security strategy to protect their businesses – both today
and into the future.
Deep technical expertise, broad sector experience
As the leading intelligence and technology led security business in
the UK, we have experts from a range of backgrounds, including the
police, military and business crime. We support an extensive range of
industries, including Government, Public Sector and Critical National
Infrastructure, Retail & Logistics, Transport & Aviation, and sectors
at high risk of espionage such as Legal. As threats evolve, we take
action to ensure our customers are protected, alongside monitoring
emerging legislation such as Protect Duty, to ensure customers always
have effective, compliant security solutions.
Link to strategy
Capability enablers – Science of Service
Strategic report Governance Financial statements
27
Mitie Group plc
Annual Report and Accounts 2022
IDENTIFY
the threats of
concern to your
assets
DISSEMINATE
the intelligence at the
right time, to the
right people
MITIGATE
the risk to your
assets
EVALUATE
your risk
management strategy
and protection
CAPTURE
reliable
intelligence on
the threats
ANALYSE
the intelligence
and make it
actionable
CLIENT
The Science of Service – Mitie’s Intelligence Methodology
28
Mitie Group plc
Annual Report and Accounts 2022
Our people
We know that our people give their best when we show them
we care. Our success is underpinned by the way Mitie inspires,
motivates and engages with its people who in turn take
personal pride in our work and deliver exceptional service
to our customers.
See page 37
Our technology
Our proprietary market-leading intelligent cloud-based
technology platform brings data insight into the heart of our
thinking to add value to our processes and interactions, creating
compelling and frictionless experiences for our colleagues and
customers that in turn drive adoption, loyalty and retention.
See page 10
Our expertise
We are a partner trusted for market leading service and
for putting our customers at the heart of our business.
We then apply our experience to improve efficiency, provide
innovative technology-led solutions and make a valuable,
measurable difference.
See page 10
Our scale and reach
We are a UK market leader across Cleaning, Security and
Technical Services with sector leadership across Central
Government & Defence, retail, manufacturing, transport
and logistics. The scale of our operations allows us to self-
deliver most services, including some specialist services.
Our nationwide reach allows us to service large customers
with a presence all over the UK.
See page 22
Our strategy
Our strategy is now firmly focused on margin-accretive growth.
We will continue to build our core business and maintain our
position as one of the UK’s leading facilities management
companies but growth will be accelerated through ‘Science of
Service’ as we increasingly leverage our world class, intelligent
cloud-based platform and decarbonisation and ESG credentials
to deliver higher returns for all our stakeholders.
See page 7
Our commitment to society
Our vision is to make a lasting impact on society by delivering
long-term benefits for the environment, developing a skilled
workforce to support a brighter future for all and leaving a
legacy for the communities in which we work.
See page 36
Our financial position
We have a strong balance sheet and low leverage with an
investment grade credit rating. We are focused on delivering
sustainable free cash flow to invest in delivering higher returns
and improved outcomes for all our stakeholders.
See page 62
Cleaning & Hygiene Services
Cleaning & Hygiene Services delivers ‘assured’
cleaning to provide a safe working environment
for our customers’ employees. Our focus is on
specialist cleaning (anti-virus), technical cleaning
(robotics, UV cleaning) and general cleaning across
offices, buildings, transport and logistics hubs and
high-security environments.
Security
Security focuses on intelligent technology-led
monitoring solutions alongside manned
guarding together with fire and security
systems installations.
Technical Services
Technical Services includes the full range of
technology-backed engineering, maintenance,
repair and M&E project activities, air-conditioning
and disinfection solutions, telecoms and
energy services. Our expertise includes the
provision of remote asset monitoring and digital
workplace solutions.
Decarbonisation
Plan Zero from Mitie is our unique end-to-end
decarbonisation solution supporting customers to
set and deliver their plans to reach Net Zero,
reducing carbon emissions and cost.
Landscapes
Landscapes provides horticultural and winter
services to private and public sector organisations,
alongside solutions to enhance biodiversity and
provide sustainable, low carbon services as an
integral part of Mitie’s Plan Zero programme,
including consultancy, re-wilding and living walls.
Waste
Mitie Waste & Environmental Services provides
sustainable waste solutions with an innovative focus
on waste elimination, reduction, recycling and
decarbonisation in support of the circular economy.
Care & Custody
Care & Custody provides high-quality, critical public
services in immigration, criminal justice and secure
healthcare.
We deliver exceptional service, every day. We provide our
customers with integrated facilities management, bundled or
single service facilities management, backed by proprietary
intelligent technology to improve efficiencies across services
and sectors where we are a market leader.
Our resources and capabilities What we do
Our business model
Our customers expect us to deliver exceptional working environments which are welcoming,
efficiently operated and safe. Buildings and workspaces are about the people within them, the
progress they enable, the environment that surrounds them, and the communities they serve.
Our business is focused on how we make things better for our customers, their people, our
people and the world we live in.
Strategic report Governance Financial statements
29
Mitie Group plc
Annual Report and Accounts 2022
Customers
We are a trusted partner for our customers,
helping them create exceptional workplaces.
See page 30
Employees
We are creating a ‘Great place to work’, showing
our colleagues that we care. We inspire, motivate
and engage with our people, providing industry-
leading benefits alongside enhanced training and
development to upskill them.
See page 31
Suppliers
We are committed to ensuring a responsible
supply chain requiring our suppliers to comply
with our Procurement Policy and Supplier Social
Value Policy. In turn, our suppliers get access to
more prestigious customers.
See page 31
Diligence, innovation
and design
We start by engaging with a new or
existing customer to understand their
needs or any changes to requirements.
Using our strategic frameworks to help link
operational objectives to the bigger picture,
we design an innovative solution using our
expertise, knowledge and technology.
Mobilisation, transition
and transformation
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.
Insights to drive value and
continuous improvement
Using our proprietary technology, collating
and analysing data gathered from our data
lake, we continually collate information on
customers’ buildings and assets and the
wellbeing of their employees to drive
greater value and continuous improvement.
Communities and environment
Mitie’s vision is to generate social value through
everyday operations, leaving a legacy for the
communities in which we work to support a
brighter future for all.
See page 32
Government
Mitie is a significant contributor of revenues to
the UK Exchequer including UK corporation
tax and employer’s National Insurance.
See pages 32 and 60
Equity shareholders
and debt holders
Creating value through our growth and
margin enhancement strategy while delivering
sustainable free cash flow will deliver higher
returns for shareholders and debt holders.
See page 30
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.
How we do it The value we create
Customer NPS
+39
Employee
engagement
50%
Supplier NPS
+14
MSCI rating
AA
ROIC
29.9%
Tax paid
£148m
30
Mitie Group plc
Annual Report and Accounts 2022
Stakeholder engagement
Equity shareholders and debt holders in Mitie
Our investors include equity shareholders, ranging from global
institutions, to small private investors including all our frontline
colleagues to whom we gifted shares. We also have debt holders
based all over the world.
Why we engage
Our shareholders are the owners of our business. Access to capital from
supportive, long-term investors is vital to delivering Mitie’s long-term
strategy and performance. We also need access to a variety of sources
of liquidity and other banking services.
Shareholders, debt holders and investment analysts should have a strong
understanding of Mitie’s strategy, performance and culture.
How we engage
Annual Report and financial statements
Annual General Meeting
Corporate website including investor section
Results presentations and post-results engagement (roadshows)
Capital market events and site visits
Stock Exchange announcements and press releases
Regular and ad hoc analyst and investor interactions
Key issues
Financial performance; growth in revenue and profit
M&A – integration of Interserve
Cash flow and shareholder returns (e.g. dividends)
Remuneration policy and executive remuneration
Governance and transparency
Sustainability (ESG) performance
Our approach to people and how it defines our culture
Action taken in FY22
80+ 1:1 shareholder meetings, including Chairman and NED meetings
Four formal presentations/conference calls between management,
analysts and shareholders to discuss financial performance
Consultations with major shareholders on proposed remuneration policy
(see more on page 130)
Extensive engagement to agree a new revolving credit facility and new
delayed funding USPP notes, securing Mitie’s main facilities for four years
(RCF) and between eight and 12 years (USPP)
Measurement (link to KPIs)
Revenue
EPS
ROIC
Operating profit and margin
Total Orderbook
Free cash flow
Average daily net debt and leverage ratio
Carbon emissions
Employee engagement
Customers
Our large, diverse, blue-chip customer base across private and
public sectors ranges from critical government infrastructure to
manufacturing, retailers, and transport and logistics organisations.
Why we engage
To grow profitably and sustainably, we need a strong customer base that
will remain loyal, spend more over time and recommend Mitie to other
organisations to facilitate our growth. Customer engagement is also an
important part of continuous improvement.
How we engage
Management of ongoing major customer relationships by senior
leadership
Customer experience programmes
Commercial/performance reporting
Participation in industry forums and events
Regular communications including press releases, website and social
media
Meetings and briefings
Key issues
Performance and efficiency
Technology and innovation
Health, safety and sustainability
Quality assurance and insights
Cost/value
Regulatory compliance, governance and transparency
ESG considerations
Action taken in FY22
Annual customer NPS programme (92% aggregate revenue covered) to
establish customer satisfaction, and identify risks and opportunities
Incorporated Cabinet Office bi-annual survey results into joint Cabinet
Office/Mitie commitments across strategic public sector accounts
VIP Strategic Conversation programme presenting insights from interviews
with 20 top customers
Customer site visits to C&HCE, Intelligence Hub (formerly GSOC)
and TSOC
Measurement (link to KPIs)
Customer satisfaction score (customer NPS)
Diversity in the workforce
Employee engagement
Average daily net debt and leverage ratio
Carbon emissions
Strategic report Governance Financial statements
31
Mitie Group plc
Annual Report and Accounts 2022
Suppliers
Mitie has a diverse and wide-ranging supply chain; from suppliers
who manage lifts, clean skyscrapers, or maintain complex solar PV
installations. We spend over £1.5bn a year with British suppliers and
actively promote SMEs, VCSE, and diverse-owned businesses.
Why we engage
Our 12,000 suppliers make a vital contribution to Mitie’s performance.
We encourage our suppliers to work collaboratively and responsibly, to
ensure continual improvement in our operations. We are committed to
ensuring a responsible supply chain.
How we engage
Annual supplier NPS survey to top 250 suppliers
Supplier Management Framework (SMF) oversees 1:1 supplier
engagement with around 200 strategic partners
Communications through various channels including email, letter and
platforms on change programmes such as Forté, Digital Supplier
Platform and SAP implementations
Ensure all suppliers adhere to our Procurement Policy, including modern
slavery and human trafficking, safety and sustainability objectives, and our
Mitie vetting standards
Key issues
Long-term engagement and mutually beneficial relationships
M&A activity and subsequent standardisation of processes within
required entities
High standards of product quality and service delivery
Continuous operational improvement and cost control
Responsibility and integrity, including ESG matters, trust and ethics
Action taken in FY22
Introduced interactive transactional supplier portal with Coupa
Launched www.mitiesuppliers.com, a new platform with information
for suppliers
Introduced regular communications with all suppliers on MiNet, including
Supply Chain Insights
Joined Minority Supplier Development UK (MSD UK) as
corporate member
Regular meetings with SMF strategic suppliers
Continued savings focused discussions to mitigate inflation increases
Measurement (link to KPIs)
Average daily net debt and leverage ratio
Carbon emissions
Supplier satisfaction score (Supplier NPS)
Diversity in the supply chain (e.g. VCSE, SME, racial diversity, disabled,
women-owned)
Colleagues
Our diverse team of 72,000 colleagues includes 155 nationalities,
working across the globe.
Why we engage
People are our greatest asset and we have a duty of care to ensure they
are equipped to make the best decisions. Our core promise is to provide
our people with a place of work where they can thrive and be their best
every day; to create a diverse and inclusive workplace where every
colleague can reach their full potential; and to ensure we are delivering
to our colleagues’ expectations.
How we engage
Regular employee engagement surveys, periodic pulse surveys and
feedback on actions taken
Communications platforms including MiNet, MitiePeople.com,
and social media
Board and management level engagement including Townhall
meetings and local site visits, and Voice of the People sessions led
by a Non-Executive Director
Global Company updates
Annual individual performance reviews and training
Confidential whistleblowing service
Direct access to the CEO
Key issues
Culture and values
Reward and recognition
Tools to do the job: systems, processes and technology
Health, safety and wellbeing
Diversity and inclusion
Learning and development
Action taken in FY22
Launched mitiepeople.com, a new external colleague platform for our
colleagues on the frontline
Grill Phil email correspondence, 17,000 per annum
Launched ‘One Mitie’ Occupational Health and Wellbeing strategy and
digital wellbeing platform
Relaunched new whistleblowing service
Company-wide Team Talk Live executive roadshows and recorded events
New People and Learning Hubs
New networks CHORD, Military and Carers
Measurement (link to KPIs)
Females in senior leadership team
Racial diversity in senior leadership team
Employee turnover
Lost time injury frequency rate
Number of apprentices
32
Mitie Group plc
Annual Report and Accounts 2022
Stakeholder engagement
continued
Communities
Our communities comprise those who live and work locally to our
operations and those who represent the needs of the communities
we operate in, including charities, independent bodies and local
government.
Why we engage
We are an active part of the communities we operate in, helping deliver
social value commitments not only for ourselves, but for our customers.
We are serious about the commitments we make to our communities; we
track the benefits and look to improve wherever we can. We also commit
to helping create safer communities for our customers and neighbours.
Building positive relationships with local communities is important for
Mitie’s performance and aids the recruitment of engaged and talented
people. We support our communities through a wide range of volunteer
and fundraising initiatives.
How we engage
Employee volunteering
The Mitie Foundation programmes (e.g. employability sessions,
Ready2Work, Career Ready)
Careers events hosted in the local communities where we work
Local charity fundraising events
Local community events
‘Giving Back’ volunteering days
Meeting local politicians
Key issues
Jobs and investment
Local operational and environmental impact
Environment Social Governance performance
Action taken in FY22
14,650 volunteering hours delivered in FY22, including delivery of food
parcels to those shielding during COVID-19
536 employability sessions delivered to charity partners, including flagship
Ready2Work programme
Careers fair for ex-military personnel
Community events including volunteering
Measurement (link to KPIs)
Carbon emissions
Volunteer hours
Community investment
Government
The UK Government is a regulator and a customer for Mitie, so
engagement ensures Mitie can help in shaping new policies, regulations
and standards.
Why we engage
Government sets the regulatory framework within which we operate and
is also our customer. The decisions of government and regulators can have
a major impact on our business.
How we engage
Responses to government consultations
Participation in industry bodies
Conferences and speaking opportunities
Annual Report and Accounts
www.mitie.com
Key issues
Financial performance
Major business updates
Environment Social Governance performance
Governance and transparency
Action taken in FY22
25+ meetings and events with senior government stakeholders
Regular executive meetings with Cabinet Office (CO) and CO Director
for Markets and Suppliers
Presented at One Government Day attended by 70+ government
customers
Bi-annual Partnership Executive Meeting (PEM)
Roundtable with key government stakeholders to discuss decarbonising
the public sector estate
Through our public affairs consultancy we seek to foster senior stakeholder
relationships and lobby across the public sector
Measurement (link to KPIs)
Customer satisfaction score (customer NPS)
Employee engagement
Average daily net debt and leverage ratio
Carbon emissions
Diversity in the workforce
Strategic report Governance Financial statements
33
Mitie Group plc
Annual Report and Accounts 2022
Adding value to
the UK’s telecoms
infrastructure
In the past year we have increased our focus on the growing UK
telecoms infrastructure market, making acquisitions and strengthening
our team to extend our services from maintenance to a full-service
offering, including site acquisition, design and construction.
Mitie Telecoms has 600 team members, including 300 field engineers,
one of the largest capacity in the UK. We have contracts with
20 major UK customers, ranging from Vodafone, EE, O2, 3 and BT
to Cellnex, Nokia, Ericsson, the Home Office and Network Rail.
We also provide secure network coverage for the MOD, police and
security services at events such as the G7 summit and COP26, as well
as temporary coverage at events and festivals.
Our ambition is to become the largest and most respected provider
of telecoms infrastructure support services in the UK by 2025.
We’re investing in every aspect of our organisation:
Apprenticeship and graduate schemes, such as the Cellular Network
Apprentice
New systems such as Site Tracker, Click, Maximo, Revit, MYX,
BIM and SAP
Digital design
Carbon reduction
Site
Management
Site
Acquisition
Site
Design
Site Build
& Power
Site
DICI
Site
Transmission
Site
Maintenance
TELECOMS
Link to strategy
Grow Mitie
34
Mitie Group plc
Annual Report and Accounts 2022
Transforming the
UK’s defence estate
through technology
leadership
A vital role in protecting the nation
In June 2021, we won a significant contract with the Ministry of
Defence, awarded by the Defence Infrastructure Organisation (DIO),
for its Future Defence Infrastructure Services (FDIS) programme
across Scotland and Northern Ireland.
The contract covers 4,400 buildings over 91 sites: from historic
military locations, such as Edinburgh Castle and Fort George; to
remote stations in Benbecula and the Shetland Islands; to operational
bases such as Aldergrove in Belfast and RAF Lossiemouth.
How we are maintaining major sites
Our role is to ensure the FDIS estates are running smoothly, so our
Armed Forces can focus on protecting the UK. Under the new
contract Mitie delivers grounds, reactive and scheduled maintenance
services. Our services also cover airfield lighting systems and critical
fuel supplies, munitions storage and single living accommodation.
Supporting strategic planning with data
Technology lies at the heart of our work with the FDIS. Our 24/7/365
helpdesk and facilities management app, ARIA, allows users on-site to
contact Mitie and raise issues, from a faulty heating system to a leaking
roof. With technology, the DIO team can keep track of progress for
each task via Maximo, Mitie’s CAFM (Computer Aided Facilities
Management) system, which provides transparent, real-time reporting
on all the works that we carry out.
Our data-led service and secure cloud-based system also help us
to support the DIO’s Net Zero journey. Our innovative approach
ensures we can easily identify what is running efficiently, where
energy is being wasted, and what needs to be discarded or
upgraded, such as replacing a consistently high energy use boiler
with a greener alternative.
1
st
leading in technology with first fully-
integrated CAFM system with DIO,
built in collaboration between Mitie
and DIO
£646m
Value of Mitie’s contract to maintain
military estates in Scotland and
Northern Ireland
4,400
MOD buildings we are maintaining,
across 91sites
Link to strategy
Capability enablers:
Science of Service; Decarbonisation
Strategic report Governance Financial statements
35
Mitie Group plc
Annual Report and Accounts 2022
Our work with the DIO and
Military Commands helps to ensure
the UK has a Defence Estate that’s
not only safe and operationally
effective, but also a great place to
live and work. It’s a real challenge,
but the combination of our great
people and technology gives us the
confidence we need to succeed.
Charlie Antelme, DSO,
MD Government and Commercial, Mitie
We’re looking forward to working
with Mitie over the next seven
years. Together, we will continue
to innovate, exploiting emerging
technology and new ways of
working, and transform the
delivery of hard FM services to
support our Armed Forces.
Jon Hewlett,
FDIS Programme Manager,
Defence Infrastructure Organisation
36
Mitie Group plc
Annual Report and Accounts 2022
Our environment and social value framework
Enhancing lives and assuring a better,
more sustainable future
Setting the ESG standard for the
facilities management industry
The increasingly urgent climate emergency,
exacerbated by the COVID-19 pandemic and
heightened social issues, as well as supply chain
crises, have made it clear that sustainability is
pivotal to our future. Our diverse stakeholders
are driving demand for sustainability services
that contribute to achievement of their own
transition plans and Net Zero targets.
Facilities management organisations have the
potential to make a significant difference in the
workplace, across communities and beyond.
Mitie’s vision is to lead the facilities management
sector in creating social value through everyday
operations, leaving a legacy for the communities
in which we work, to support a brighter future
for all. We are embedding ESG considerations
into every aspect of Mitie’s business, from
strategy to supply chain management, to
delivering decarbonisation advice and energy
transition support to our customers.
Our social value framework
Mitie’s social value framework is aligned with five
UN Sustainable Development Goals. This is our
platform for ESG, sustainability and social value
ESG oversight and governance are provided
by the Social Value & Responsible Business
Committee, chaired by Baroness Couttie. For
more information on the Committee’s activities
over FY22, please see pages 131 and 132.
throughout our value chain, from investors to
winning new business, delivering a sustainable
service and creating social value impact.
Setting ambitious targets
Mitie has set 13 industry-leading social value
and responsible business targets that relate
to its social value framework, and the focus
areas highlighted within the following pillars
of employment, responsible supply chain,
communities, and environment, underpinned
by innovation.
Our Plan Zero initiative commits us to reach
Net Zero Scope 1 and 2 emissions by 2025.
It’s focused around three key pledges,
encompassing the key areas of environmental
impact for Mitie, with specific targets to:
Eliminate carbon emissions from power
and transport
Eradicate non-sustainable waste
Enhance inefficient buildings to meet the
highest environmental standards
We’ve also committed to a science-based
target (SBT) of Net Zero supply chain (Scope 3)
emissions by 2035.
Mitie is advanced in its approach to
ESG with our approach and Group
strategy influenced by our key
stakeholders. Our ESG strategy has
evolved from just managing risk to
driving growth opportunities with
climate action and quality job
creation at its core.
Jason Roberts, Group Director for
Sustainability & Social Value
People
We’re creating a ‘Great place
to work’ and fostering a truly
inclusive culture at Mitie. Read
more about our people strategy
and initiatives on page 37.
Environment
We’re protecting the
environment, improving our own
energy efficiency and transitioning
to a low carbon economy.
A detailed overview of our
approach is on page 41.
Community
Read about how we are enriching
the community by providing
employment opportunities to
underrepresented groups and
support through volunteering
on page 50.
Responsible
supply chain
By building a responsible supply
chain we can support social
enterprise and local delivery,
and adopt a circular economy.
Find out more on page 51.
Our social value framework pillars
Innovation
Innovation pillar is embedded within the others to ensure
Mitie remains at the forefront of technology and processes.
Strategic report Governance Financial statements
37
Mitie Group plc
Annual Report and Accounts 2022
People
Putting people at Mitie’s heart
We’re a people business: we offer facilities
management services that are driven by our
people – without them Mitie wouldn’t be here.
We are one of the largest facilities management
employers in the UK, with 72,000 colleagues,
and we care about all of them – because we
know that they give their best when we show
that we care.
Our expertise, care, technology insight and
focus on sustainability create amazing work
environments and help our customers be
exceptional every day. Key to our approach is
making sure Mitie is a ‘Great place to work’,
where our people can thrive and be their best
every day, so we can engage and retain the best
talent, and deploy that talent for our customers,
drive shareholder returns and build a sustainable
Our response to COVID-19
Over the past two years, we’ve had two
very different issues facing us during the
COVID-19 pandemic. Firstly, how we
support our 65,000 ‘Frontline Heroes’, who
have been at the forefront of the response
to the pandemic, facing it every day as they
work to keep the country running, and
interact with the public; and also supporting
the health and wellbeing of our office-based
people. We are very proud of all their
commitment and achievements – 10,000 of
our people worked in testing centres in the
nation’s fight against COVID-19. During this
time, Mitie colleagues carried out 12,000,000
tests across 280 sites, mobilised to keep the
public safe from COVID-19.
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 we are
committed to paying all Group head office
colleagues the Real Living Wage, as well as
campaigning for its widespread uptake
within customer contracts. We incorporate
Real Living Wage costing when we submit
bids to prospective and current customers
so they can choose the Real Living Wage
at the point of tender and ensure that our
colleagues are paid a fair wage for the work
they do. In FY22, we’ve rolled out new
benefits including salary advance, where our
people can draw down on earnings ahead
of payday, low-cost loans and a discount
retail site.
Our vision is to be the destination
employer in the facilities
management industry, creating
a ‘Great place to work’, and a
truly inclusive culture where our
people are supported to achieve
their potential.
business. When we ask our people what
makes Mitie great, they all say: ‘the people’.
Everybody goes the extra mile, our customer’s
business is our business and we have an inclusive,
supportive culture, where our diversity makes
us stronger, and we are built on integrity and
trust. Whether we are keeping things running
smoothly in a safe environment, looking for new
ways to do things better or fixing problems,
we go the extra mile.
What makes us Mitie
To achieve our vision, we are committed to
providing an industry-leading Employee Value
Proposition, underpinned by a great employee
experience so our people feel valued and are
encouraged to stay working at Mitie for longer,
as well as providing our customers with
excellent service.
We know our people have a great employee
experience – we know from their feedback that
they are inspired to work harder. In FY22, we’ve
integrated the HR functions of Interserve and
Mitie to create one that is much more focused
on employee experience – a huge exercise as
we integrated Interserve’s 20,000 people into
our systems and ways of working. We aim
to optimise and strengthen our employee
experience, and improve the lives and wellbeing
of all our people. We show that in various ways,
from our industry-leading benefits, which we
have continued to improve over the past year,
to better access to career progression, and
building a truly inclusive culture.
As we evolved our people strategy throughout
FY22, we were delighted to welcome Sim Sian
as our new Head of Equality, Diversity and
Inclusion, and Yvonne O’Hara as Group Head
of Internal Communications and Engagement.
We are also benefiting from the extensive
experience of four new HR directors.
Employee engagement
Listening and responding to colleague feedback
and amplifying their voice is crucial to achieving
Mitie’s vision of becoming the destination
employer in the facilities management industry.
Jennifer Duvalier is Mitie’s designated Non-
Executive Director responsible for oversight of
the Board’s engagement with the workforce.
38
Mitie Group plc
Annual Report and Accounts 2022
People
Jennifer participates directly in employee
engagement initiatives and carried out a full
programme of activities during FY22, including
several Voice of the People listening sessions.
In April 2022, we ran our annual Upload
colleague engagement survey for the fifth time,
with 47% of our people taking part in the
survey – an increase of 7% on last year. Mitie’s
employee engagement score was 50%, slightly
lower than last year in line with global trends
where there was a positive increase during
COVID, but with progress over FY20. We also
run local listening focus groups, our GrillPhil
email for the Chief Executive – of which
17,000 were received this year, and ‘You Said,
We Did’ – the actions and activities that are
taken as a result of feedback from these
communication channels.
We held these sessions virtually and face-to-face,
with resoundingly positive feedback from
our employee participants who value the
opportunity to have their voices heard. Topics
ranged from pay and payroll, benefits and
rewards, and career progression, to technology
and accessibility of systems, with positive
feedback and areas to improve. During FY22,
we have developed many initiatives to address
these key themes, which will be part of our
people focus in FY23.
Equality, diversity & inclusion
at Mitie
Developing a diverse and inclusive workplace
To become the destination employer in our
industry we must proactively evolve and
adapt our approach to equality, diversity and
inclusion (ED&I), so we have an inclusive and
representative workforce, and offer all our
colleagues clear opportunities to develop and
progress. With 155 different nationalities across
our workforce, we have a racially-diverse
Team Talk Live
In June 2021, we launched a leadership
visibility campaign Team Talk Live. Taking
place virtually via Teams, we aimed to raise
the visibility of Mitie’s management team,
facilitate a two-way conversation with
colleagues across the business and provide
opportunities for two-way feedback. We
ran interactive virtual events, including
‘fireside chats’ on topics such as equality,
diversity and inclusion and live Grill Phils,
where employees could ask Mitie’s Chief
Executive Officer any question they
wanted. More than 25,000 Mitie people
took part and their feedback was
overwhelmingly positive – they really valued
the opportunity to hear from and speak
with Mitie’s leaders about what matters
most to them.
Women on senior leadership
team (S LT)
24%
FY21: 21%
Racial diversity on senior
leadership team (SLT)
8%
FY21: 8%
Health and wellbeing hours
5,503
FY21: 2,338
Net Promoter Score
+39
F Y21: +24
Employee engagement
50%
FY21: 55%
culture; we also aim to achieve an inclusive
workplace, where colleagues can be their
true selves.
Aligned to our people strategy, our ED&I
strategy will act as a key enabler to delivering
our business strategy, will contribute to
our focus on growth, and will deliver our
commitment to represent the diversity of our
communities and customers, from the frontline
to the Boardroom, by 2030. This will increase
ownership and accountability for ED&I across
the senior leadership team at Mitie.
We are committed to achieving the
following goals:
Increase % of women on the SLT to 35% by
2023, and 40% by 2025
Increase % of racially diverse colleagues on
the SLT to 10% by 2023, and 20% by 2025
5% employees through an apprenticeship
scheme
We will review our diversity goals once census
data is available, to ensure that we are setting
challenging targets beyond 2025. Since 1 April
2022, 22% of our Board is racially diverse which
compares with 19% of our workforce.
We are building transparency and trust by
listening to and responding to the voices of
our colleagues, and want to increase diverse
representation across every career band.
We hope this will also improve our ED&I
bidding capability, and support the development
of inclusive technology solutions, building
sustainable profitable growth. Over the past
year we have continued to launch award-winning
ED&I initiatives, as well as ED&I training for the
whole Group, built using our own people and
real experiences, including filmed examples.
Employee networks
We have seven established employee networks,
available for any colleagues to join and influence
positive change across Mitie. They focus on:
women in the workplace; race and ethnicity;
disability; sexuality; age diversity; carers and
ex-military personnel.
In connection with the Group’s wider
diversity initiatives and our ED&I 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.
Mitie is a signatory of the Disability Confident
scheme with the Department for Work
and Pensions.
Our environment and social value framework
continued
Strategic report Governance Financial statements
39
Mitie Group plc
Annual Report and Accounts 2022
Our award-winning diversity
and inclusion programmes
Our conscious inclusion programme
‘Count me in’ won Best Diversity, Equality
and Inclusion Initiative and Best Learning
Initiative for Business Culture at the
Business Culture Awards 2021. It’s a
bespoke, conscious inclusion training
programme, created with our partner
t-three and developed based on feedback
from Mitie colleagues regarding their
inclusion experiences.
The Mitie Foundation also won an
Award for ‘Driving Social Inclusion in the
Workplace’ category at the Employers
Network for Equality and Inclusion (enei)
Awards, for its flagship ‘Ready2Work’
programme. The scheme looks to break
barriers for those who may face difficulties
securing employment by offering a diverse
range of enthusiastic and capable individuals
the opportunity to gain work experience
across the Mitie business. To date, more
than 500 people have completed the
Ready2Work programme, with many
securing employment with Mitie after
their placement.
At 31 March 2022 Male Female Total % Male % Female
Board 4 3 7 57% 43%
Senior leadership team 65 20 85 76% 24%
Employees 42,429 29,680 72,109 59% 41%
Gender breakdown
Gender pay
We strongly believe that being transparent
about the diversity and pay of our workforce is
an important step towards creating meaningful
change. At 5 April 2021, Mitie’s median gender
pay gap was 5.4% (versus 6.4% at 5 April 2020),
which continues to compare favourably with
the UK national pay gap of 15.4%. Mitie’s mean
gender pay gap was 8.6% (versus 7.7% at
5 April 2020).
A key contributor to our gender pay gap is an
imbalance in the number of men and women at
various levels. We have fewer women than men
in our more senior positions and typically people
in more senior positions receive the highest pay.
This impacts both hourly pay and the bonus pay
figures, because bonuses tend to be paid to
those in the most senior positions to keep pace
with market practices and to ensure we can
attract and retain the best talent.
Efforts to achieve gender parity centre around
four areas. These continue to form part of
our long-term, sustainable approach to
improve the representation of females, and all
under-represented groups, across all Mitie’s
organisational levels:
1. Leadership: Enabling more females to secure
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
underrepresented groups
4. Reward and recognition: Creating a powerful
and engaging reward and recognition
proposition that rewards the right behaviour
and celebrates inclusion
Making a difference to
our people’s lives
Reward and recognition
We invest in our people to make a difference
to their lives, and offering benefits and
recognising colleagues for a job well done
is key to our success.
We have launched new and enhanced benefits
in FY22 to build on the life assurance and Virtual
GP access we introduced in FY21. We have
enhanced maternity pay for everybody. We also
recognise the changing needs of our people and
want to ensure their wellbeing and introduced
a new sabbatical policy for our colleagues who
have worked at Mitie for one year.
In FY22, we introduced an improved share
incentive plan (SIP), where our people receive
an extra free share for every two they buy.
Last year we gifted free shares to all our UK
colleagues and will do so again this year. The free
shares were well received by our colleagues
and help us all to share in Mitie’s success as a
listed business.
These benefits are all regularly promoted
through our different communications channels,
including Recap, Download and Minet.
Health & Wellbeing
In FY22, we welcomed Rebecca Eaton as our
new Head of Wellbeing. She is looking at how
we make wellbeing an integral part of everything
that we do.
Safety is our number one priority, and our
goal is simple: zero harm – to our people, our
customers, and members of the public passing
through the facilities Mitie takes care of. LiveSafe,
the Group’s QHSE culture change programme,
gives the Group’s people ten rules to live by.
The rules are mandatory and are supported by
training delivered through Mitie’s Learning Hub.
In FY22, Mitie signed the Mental Health at Work
Commitment as part of our plan to remove the
stigma associated with mental health, provide
support and improve our colleagues’ mental
wellbeing. We will increase mental health
awareness through our colleagues’ sharing
of their personal stories of mental health;
introducing line manager training; and improve
early access to support. We are also growing
our mental health first aid network, providing
them with support and helping them to be
champions of mental health across Mitie.
Our externally-run employee assistance
programme provides first line support on any
wellbeing topic through to in-depth counselling.
Through Optima (our Occupational Health
provider), we provide our people with a range
of support to meet their needs.
40
Mitie Group plc
Annual Report and Accounts 2022
In FY22, we introduced a new hybrid working
policy and deployed it for our 7,000 office-based
employees. From an office-based perspective,
it’s been well received by people, who like being
in the office collaborating – but not having to
commute every day.
Over FY22, we’ve delivered 5,503 hours of
health and wellbeing training across the Group,
including 4,368 hours of Mental Health First
Aid training.
Whistleblowing: Our independent
whistleblowing service provides our colleagues
with easy to access reporting for any concerns.
Learning & development
To support our vision to become the destination
employer in the facilities management industry,
we must ensure that we have a diverse
workforce equipped with the right skills for
the medium and long term. We aim to offer all
our colleagues clear opportunities to develop
and progress.
In FY22, we launched our learning and
development SharePoint and Mitiepeople.com
site for all colleagues to access our full learning
offer – creating the go to place for all learning
and development information and resources.
We’ve also revamped our annual talent review
process, and our MiReviews will ensure a
strong focus on career development, as well as
signposts to apprenticeships and skills builds.
We want our people to be inspired by inclusive,
collaborative and values-led leaders, who
understand our business and our customers,
and engage and empower their teams to deliver
results. We introduced our leader development
programme in FY21 and developed this further
in FY22 by adding externally-led psychometric
assessments to identify personal attributes,
motivations and values, and assess aptitude.
Results were mapped against our Mitie values
and leadership competencies, as well as external
benchmarks. Our leaders also took part in a
360-degree feedback Inclusivity Truth Teller
activity, which allowed them to seek feedback on
how inclusive they are as a leader and how they
are experienced by their people. This helped to
support their development planning and ability
to take proactive steps towards becoming
more inclusive.
We encourage and enable all our people to
progress their careers in Mitie. Over the past
year, we have developed personal Career
Pathways to enable our people to navigate
their career in Mitie and drive their own
development. Due to launch in FY23, each
colleague will be able to identify the
competencies for their role, assess themselves
and access curated learning content to support
their development, as well as identifying other
roles within Mitie that suit their skillset.
Apprenticeships
We support our people to gain valuable skills
and qualifications through apprenticeships, to
improve their social mobility and to support
our business growth. We are also focused on
accessing a more diverse group of external
candidates to meet our resourcing needs, while
supporting UK economic recovery. We offer
more than 55 sustainable apprenticeship
programmes and promote these through Group
and local channels. Our target is 3.0% of our
employees working over 30 hours and we
currently have 940 live apprenticeship courses
ensuring that we hit our target with a score
of 3.55%.
The Apprenticeship Levy is a charge introduced
by government, with the aim of increasing
apprenticeship numbers. We aim to continue
to grow our apprenticeship programmes by
supporting the development of a future talent
pipeline and to increase the utilisation of our
Apprenticeship Levy utilisation from 35% to
50% over the next few years.
Together with our external networks,
including the Business Services Association
Apprenticeship and Skills Group, and the
All-Party Parliamentary Group on
Apprenticeships, we are lobbying to remove
unnecessary barriers to learning, enabling
businesses to repurpose and optimise Levy
funds and to offer more apprenticeship-based
programmes, that are broad and inclusive.
Priorities for FY23
Our people agenda is always evolving;
magnified by external factors, including the
challenging labour market, inflation and
cost of living increases, and the escalating
situation in Ukraine. We have more to do
to become a consistently ‘Great place to
work’, and the destination employer in the
facilities management industry. We entered
FY23 with a talented HR leadership team,
ready to take on these challenges.
Our focus for FY23 centres around five
key elements beyond delivering our
overarching people strategy:
Develop our employee value
proposition to engage and retain the
right people and attract new talent,
enhance the work lives of our colleagues
and enhance our employer brand
Develop a new, one-off, bespoke, high
impact Line Manager development
programme to better equip them
with the capabilities and skills to lead
our people
Build a bespoke customer experience
development programme for all
frontline colleagues
Use PowerBI and HR data from different
sources to drill down into local data to
identify issues and target interventions
Develop and roll out our new ED&I
strategy, which will contribute
considerably to Mitie’s culture
Lobby for Apprenticeship Levy change
People
Our environment and social value framework
continued
Leaving a desk job and getting into
a hands-on problem-solving role
has been great, and just what
I hoped it would be. The variety is
my favourite part of the job, along
with getting to see what the client
does on the shop floor as they
make the cars, and ultimately
making the customer happy!
Evie Maloy, Maintenance and
Operations Engineering Technician
Apprentice, Mitie
Strategic report Governance Financial statements
41
Mitie Group plc
Annual Report and Accounts 2022
Our Plan Zero
Our Plan Zero initiative gives us a clear structure
to fight climate change and sets a defined
pathway on how we will decarbonise our
business. We are committed to reaching
Net Zero operational emissions by 2025.
In addition to this target, we have committed
to a science-based target (SBT) to achieve an
80% reduction in our Scope 3 non-operational
emissions by 2030 and full Net Zero Scope 3
emissions reduction by 2035.
Plan Zero is focused on three key pledges: to
eliminate carbon emissions from power and
transport, eradicate non-sustainable waste, and
enhance inefficient buildings to meet the highest
environmental standards.
Not only are we working hard to reduce our
own environmental impact, we also offer our
customers end-to-end sustainability solutions.
Our in-house sustainability consultancy supports
our customers’ journey in carbon reduction
through its expertise in advising on low carbon
technologies, workplace strategy, wellbeing and
environmental performance. In addition, our
landscapes business has dedicated resource
in biodiversity assessments and carbon
sequestration projects, such as living walls and
green roof installations. We also support
decarbonisation financing for our customers.
In October 2021, Mitie and Sustainable
Development Capital LLP, an investment firm
specialising in energy efficiency and decentralised
energy generation, launched a new partnership
to help both public and private sector
organisations plan their decarbonisation
roadmap and fund the low carbon equipment
and technology they need to make their sites
Net Zero.
Our environmental targets
To achieve Net Zero carbon emissions before
the Government’s target of 2050, we have the
following carbon reduction targets:
Net Zero carbon by 2025 (Scope 1 and 2)
Net Zero carbon by 2035 (Scope 3)
Eliminate all Scope 1 emissions (fossil fuels)
from our operations by 2025 and adopt
natural renewable sources for Scope 2
electricity emissions
Continually measure, report and influence
Scope 3 emissions throughout the value chain
Annual target under budget
23,661
tonnes of carbon were emitted (independently
verified by Optera) – 1,569 tonnes below our
25,230 target for FY22.
See page 45 for further information on verification
Eliminate carbon emissions from power
and transport
Convert the Group’s fleet to zero
emissions and power the Group’s EV
charge points with green energy
Decarbonise the Group’s fossil fuelled
heating systems and use 100% renewable
energy for our built estate
Increase the Group’s use of technology
to reduce work travel to a minimum.
Where travel is necessary, Mitie will
choose low carbon methods
Eradicate non-sustainable waste
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
Enhance inefficient buildings to meet
the highest environmental standards
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
Environment
As a responsible business, with
creating social value at our core,
we are committed to eliminating
our impacts on the environment
and mitigating the effects of climate
change.
42
Mitie Group plc
Annual Report and Accounts 2022
Our environment and social value framework
continued
Eliminating carbon emissions
from power and transport
Pioneering in electric vehicle fleets
Our largest carbon emissions relate to our vehicle
fleet (98% of our total Scope 1 and 2 footprint)
and our path to Net Zero target will largely be
achieved through transitioning our entire fleet
to electric vehicles (EV) by 2025. We were one
of the first major UK facilities management
providers to launch an EV fleet and we have one
of the largest EV fleets in the UK. As at 31 March
2022, 2,217 electric vehicles (33% of the fleet,
including commercial vehicles) are in operation
(FY21: 22%) and our next challenge is to reach
45% by the end of FY23, and 100% by the end
of 2025. We are doing this by replacing our
vehicles with newer more efficient EVs, and
ensuring that all commercial vehicles are installed
with speed limiters and telematics to improve
driver behaviour. We’ve also installed more than
2,000 EV charge points across the Mitie estate,
employee homes and customer sites. Our EV
charging solution – the Mina Platform – enables
direct payment for EVs across our estate,
colleagues’ homes and client sites. This makes it
possible to pay for work vehicles to be charged
at home with a single bill. In FY23, we will
recommend 100% renewable tariffs for Mitie
drivers, increasing the uptake to power not
only EVs, but homes too. Mitie is a signatory
to EV100, The Climate Group’s initiative to
commit organisations to transitioning to an
EV fleet by 2030.
100% renewable sources of energy
Mitie is committed to using renewable energy
in its offices and we purchase 100% of power
backed by Renewable Energy Guarantee of
Origin for Mitie-controlled offices. Mitie is a
member of RE100, the Climate Group’s global
corporate renewable energy initiative for
businesses to achieve 100% renewable
electricity, and have already achieved this.
We are committed to doubling our energy
productivity, through the Climate Group’s
EP100 initiative. Mitie is one of only a handful
of organisations to hold all three accreditations
(RE100, EV100, EP100). In FY22, Mitie Energy
recertified to ISO50001 Energy Management
Standard and we will be rolling this out across
the Group in FY22.
Enhancing inefficient buildings to meet
the highest environmental standards
9 Net Zero sites
Decarbonising heating systems and increasing
energy efficiency within the Mitie built estate
is crucial to achieving Net Zero operational
emissions by 2025. In FY22, our building energy
usage increased compared to FY21; however,
this was due to the previous year’s lower figures
as a result of buildings being closed during the
COVID-19 pandemic.
Across our estate, we have implemented energy
optimisation measures, identifying an annual
carbon saving of 111 tonnes, including air-source
heat pumps, electric air-conditioning systems,
and timing schedules. Transitioning to low-
carbon alternatives will improve our energy
consumption and decarbonise our heating
systems. In FY22, we started larger capital
expenditure projects, including installing LED
lighting systems and boiler replacement
programmes. Through these initiatives, we
have seen a 73% carbon reduction (Scope 1)
in natural gas for heating, and a 34% carbon
reduction from electricity (Scope 2) in our built
estate through optimisation measures. However,
we are seeing increases in our landlord
controlled sites (Scope 3) as we transition to
low carbon heat pump technology. Like for like
analysis highlights that Mitie’s absolute emissions
have slightly increased by 7%, however emissions
intensity has significantly decreased by 41%,
which is attributed to the increase in company
size and higher revenue values.
Over the past year, we have continued to work
on decarbonising our entire built estate. During
FY22 we determined that seven buildings across
our estate were gas-free – operating on green
energy (c.12% of our built estate). In a further
two sites we removed gas-fired boilers to
reduce our Scope 1 carbon emissions, and
replaced them with low-carbon heat pump
technology powered by fully natural renewable
energy. We aim to continue at the same pace
and decarbonise a further eight buildings by the
end of FY23. New buildings have been added to
our portfolio with our recent acquisitions, and
we are completing energy surveys to optimise
consumption and identify new potential energy
reduction projects. Looking forward, all new
buildings that Mitie occupies will aim to have an
Excellent BREEAM rating.
During the course of FY23, we will be working
with landlords (of sites for which they procure
energy), with the aim to ensure they procure
green energy, or transfer this procurement to
Mitie. We are helping our landlords to explore
carbon reduction projects, such as adding solar
panels, replacing gas-fired boilers with heat
pumps, and procuring other green energy
solutions. We are also implementing further
measures to continue reducing our water
consumption, including installing tap attachments
to reduce water use by up to 98%.
Eradicating non-sustainable waste
Mitie has increased recycling rates and all other
waste is diverted from landfill to produce
energy. We aim to remove all single use items
from our operations and therefore reduce our
waste and associated carbon emissions.
Waste produced by Mitie has increased by
47 tonnes in FY22 and year-on-year figures
are up 15%, due to exceptionally low figures in
the previous year because of the COVID-19
lockdown. However, there is a significant
downward trend compared to pre-COVID
numbers. 58% of the waste from Mitie sites
was recycled during FY22, with less than 6%
going to landfill. All waste controlled by Mitie
has been diverted from landfill and goes to
provide energy from waste.
Environment
Strategic report Governance Financial statements
43
Mitie Group plc
Annual Report and Accounts 2022
Carbon emissions for the year ended 31 March 2022
Environmental dashboard
Annual Total
(tCO
2
e) %
Electrici ty 1, 040.71 4.4
Gas 335 .42 1.4
Water 0.65 0.0
Transp o rt 21,554. 63 91.1
Waste 16.26 0.1
Com m uti n g 713.66 3.0
Total 23,661.33
Our Bin the Bag initiative (to reduce single-use
plastic bin liners) was deployed across 10 sites
in FY22 and should remove 600kg of plastic
and cut operational costs by £6,000 each year.
Bin the Bag uses new bins that don’t require
plastic bin liners and are made in the UK from
100% recycled materials. They have separate
compartments for recycling, general waste
and food waste.
In 2021, Mitie won Sustainable Company of the
Year at the Cleaning Excellence Awards; we
were awarded a three-star rating for our Bin
the Bag initiative at the Zero Waste awards in
early 2022 and we were also shortlisted for
three ‘edie’ Sustainability Leaders Awards in
March 2022.
In FY22, we carried out a right sizing exercise for
bins across our estate to improve our recycling
rates; reviewing our bin sizes and quantity of
different bins and adapting them according to
the waste streams. We see the number of
recycling bins increasing as we recycle more
waste and we print less.
We are also deploying biotech cleaning solutions
across our estate to remove chemical cleaning
agents from our operations, using microbes and
enzymes. As a concentrated product in recycled
packaging, this is also removing significant carbon
in production and transportation.
Reducing our carbon emissions
Mitie’s Scope 1 and 2 carbon emissions have
increased 7% in FY22 as building occupancy
recovers to pre-COVID levels and we
incorporate the Interserve estate into our
portfolio. When comparing with FY20 emissions
have continued to steadily decline.
Our carbon emissions intensity has decreased
from 8.98 to 5.28. Our FY22 carbon target was
25,230 tCO
2
and we achieved 23,661 tCO
2
.
This was independently verified by Optera in
accordance with (1) ISO 14064+1 Specification
with guidance at the organisation level for
quantification and reporting of greenhouse
gas emissions and removals, and (2) Global
Reporting Initiative’s (GRI), G4 Sustainability
Reporting Guidelines, with a certificate received
on 20 April 2022.
In FY22, there was a significant increase in
electricity emissions for our EV fleet, and
landlord electricity is rising as we convert from
gas fired heating to electric sources. Business
travel and hotel stays are starting to move
towards pre-COVID levels; however, remote
working via Teams is reducing travel overall.
This is the first year we have reported
commuting and working from home emissions,
adding 714 tonnes of carbon to our carbon
reporting. The increase in working from home
for our office-based colleagues has saved 147
tonnes of carbon.
Scope of emissions
Scope 1 – Direct emissions Scope 2 – Indirect emissions
On-site fuel combustion
Gas directly purchased for heating or generation
across leased property managed by Mitie
Company vehicles
Fuel purchased for fleet vehicles
Fugitive emissions
1
Refrigerant leaks from air-conditioning (RAC)
equipment in leased assets and fleet vehicles
Purchased electricity
Electricity directly purchased across leased
property and EVs managed by Mitie
Scope 3 – Other indirect emissions
Business travel
Expensed air, road and rail travel (inc. hotel stays)
Waste
Waste generation across leased property
Water
Water usage across leased property
Fuel and energy related activities
Electricity transmission and distribution (T&D) losses
Upstream emissions associated with the extraction of purchased fuels and gas
Upstream leased assets
Gas and electricity recharges across leased property managed by the landlord
Commuting
Commuting (all forms of transport)
Working from home
1. Fugitive emissions are currently not reported as outlined in the exclusions statement.
Mitie Scope 1 and 2 20,596
Mitie Scope 3 (excluding fleet upstream) 3,065
Total 23,661
44
Mitie Group plc
Annual Report and Accounts 2022
To date, we have not reported our supply chain
carbon emissions, which form a significant
proportion of our total carbon emissions.
We are collating supply chain emissions data
to improve our measurement, reporting and
influence of these emissions as part of our
commitment to a science based target (SBT).
In FY22, we created a Carbon Dashboard to
better understand our carbon emissions. This
incorporates our built estate, our fleet fuel, EV
charging, waste, water, rail, air, hotels, commuting
and working from home and ultimately our
supply chain. Once we have collated the relevant
data, we will use it to form our SBT plan which
will be submitted for verification in June 2022.
Data sources:
Scope 1 and 2
Gas and electricity
consumption
Information is populated from Automatic Meter Readings (AMR), invoiced data, service charge data and estimates. AMR data has
priority, followed by the supplier or service charge data. If none of this is available, then an estimate will be generated based on all
data for other sites. This is used to calculate an average kWh/m2 for the Mitie estate, and the estimate is this average multiplied
by the floor area for the site in question. For sites where, in addition to a direct supply, there is also a service charge for energy
use within the communal areas, the figures are added together.
For sites where invoiced data is only available for a partial period, the data has been apportioned based on the average kWh/day
for each site, based on the billing data that is held. Unless advised otherwise by property, sites are assumed to have all supplies in
place. This information is taken from the Mitie Property Master Site List, which is updated in real time. Data is obtained from the
data collector for HH/AMR data, the SR180 export from Optima for invoiced data, and directly from the landlords for service
charge data.
Company vehicles Data is provided by Mitie’s fuel card provider, and users then submit their monthly business and personal mileage via our Fleet
Data Platform.
As personal mileage must not be included within the report, we have undertaken a check of the data, compared total business
miles and total personal miles, and agreed that the percentage split is 77% of consumption for business purposes. Within the raw
datasets is the 100% figure, and this split is then calculated within the Consumption and Environmental tabs. This ensures that the
raw data within the report matches the files received from the Fleet team.
Scope 3
Business travel Private vehicle data with actual mileage is provided within Mitie from collation of claimed mileage expenses. For other travel
modes expense spend data is obtained, an emission factor is then applied to calculate emissions from miles travelled.
Other business travel (air, rail and hotel stays) is provided by our Corporate Travel Provider in a report from their dashboard.
Water Utility bills are verified through our internal bureau service. Any billing data is cross-referenced against meter read data where
available. Service charge bills are used for buildings where the landlord recharges utilities.
Fuel and energy
related activities
Scope 1 and 2 data is used and Defra emissions factors for Scope 3 are then applied.
Upstream leased asset Landlord recharge data is calculated from service charge bills or estimated from an anticipated energy use per square metre.
This is calculated using actual billing data received.
Waste Waste data is collated by our waste management provider.
This data is obtained from a detailed set of scenarios to ensure that we capture not only the material that MWE collects but also
more detailed information on the landlord sites. The data we have is therefore split into four scenarios –
1. Sites where Mitie Waste provides all the services (general waste, dry mixed recycling, confidential paper, food) – so we have a
complete picture of the waste types/volumes and headcount. This data is used as the basis for the other scenarios as it shows all
waste streams, and we can then apportion the waste stream by type, by headcount. This can then be used for the landlord sites.
2. Sites where Mitie Waste provides some of the services and some are provided by the landlord. For example, we provide
confidential paper, but the landlord provides general waste, dry mixed recycling, and food. For these sites we use the actual data
from the services we provide and then we do an apportionment for the services we do not cover based upon the kg/person we
have for the sites in scenario 1.
3. Sites which have all the services provided by the landlord, but we know which waste streams they collect. The data for these
sites is based upon the headcount for those buildings and the data from scenario 1 so we make an apportionment based upon
this (similar to scenario 2).
4. Sites which have all the services provided by the landlord, but we do not know which waste streams they collect currently.
For this set of sites, we use a general waste figure only and report this as landfill. There has been communication with all for
these new sites (ex Interserve buildings) to ascertain what services are provided and if the waste is landfill or EfW. After this has
been provided, we will then be able to move these sites into scenario 3.
The dashboard uses algorithms to estimate
missing data to provide a complete picture.
Built estate data (gas, electricity, water) comes
from the Bureau (Utilyx)
Fleet fuel from the Allstar fuel cards
EV charging and expensed fuel comes from
TMC (fleet data system)
Waste from Mitie Waste
Rail, air and hotel comes from CTM (business
travel partner)
Commuting and working from home comes
from an internal survey by our sustainability
consulting team
Estimations
Where leased building utility data is unavailable,
estimations are made using an anticipated
energy use per square metre. This is calculated
using a combination of half hourly meters and
actual billing data received across the estate.
For sites where invoice data is only available for
a partial period, the available data is apportioned
using an average kWh/day figure based on
known utility data from other sites. Waste data
is estimated using an average waste per desk
figure based on actual data we receive.
Our environment and social value framework
continued
Environment
Strategic report Governance Financial statements
45
Mitie Group plc
Annual Report and Accounts 2022
Absolute emissions
Mitie mainly operates in the UK, with an operation in Spain and from a small number of overseas MOD estates. In FY21 and FY22 we did not collect the
emissions data from our operations outside of the UK. The carbon impact from the overseas contracts is limited and we will be adding in the relevant
processes to incorporate these specific carbon emissions in FY23.
In FY22, our building energy usage increased compared to FY21; however, this was due to the previous year’s lower figures as a result of buildings being
closed during the COVID-19 pandemic. Our emissions were lower in FY22 than in FY20 which was the last comparable year prior to COVID.
UK emissions FY22 FY 21
% change from
previous year
Total Scope 1 (tCO
2
e) 19,414 18,719 4%
Emissions from fuel combustion across our fleet 19,371 18,557 4%
Emissions from gas combustion in our occupied buildings 43 162 -73%
Total Scope 2 (tCO
2
e) 1,182 486 143%
Emissions from the purchase of electricity across occupied buildings (location based) 307 464 -34%
Emissions from electricity consumption across our EV fleet 875 22 3,877%
Total Scope 1 & 2 (location based) 20,596 19,205 7%
Total Scope 1 & 2 (market based) 20,289 18,741 8%
Intensity – emissions ratio
tCO
2
e/£m revenue (Scope 1&2) 5.28 8.98 -41%
Mitie follows the reporting approach set out in the UK Government’s Environmental Reporting Guidance (2019) to ensure that our reporting standards are robust and transparent.
For most of our major emissions sources, we use primary data from AMR meter readings, utility bills, service charge data and expensed claims. Mitie Energy collates our emissions data
on a quarterly basis, which is restated at the end of the year to reflect any changes or to replace any estimated data with actual data (where available). Emissions figures are verified by
our Sustainability team, which has overall responsibility for ensuring the calculations and methodology are correct.
Environmental data
FY22 FY 21
% change from
previous year
Electricity consumed across occupied buildings (kWh) 4,502,916 2,995,119 50%
Gas consumed across occupied buildings (kWh) 1,554,794 2,704,585 -43%
Fuel used by vehicles for business travel (kWh) 82,848,214 85,980,058 -4%
Electricity used by EV vehicles for business travel (kWh) 4,122,667 259,495 1,489%
Total organisational energy consumption (kWh) 93,028,591 91,939,257 1%
Water consumed across occupied buildings (m
3
) 4,396 26,699 -84%
Total waste generated across occupied buildings (tonnes) 368 321 15%
Total waste to landfill (tonnes) 19 12 58%
Energy from waste 135 85 59%
Total waste recycled (tonnes) 214 224 -4%
Recycling rate 58% 70% -12ppt
FY22 FY23 FY24 FY25
CO
2
emissions (tonnes) 23,661 20,300 13,340 5,220
% of Fleet Zero Carbon 33 45 65 85
Waste to landfill (tonnes) 19 100 50 0
Actual
Priorities for FY23
As we enter FY23 we are focused on genuine progress in sustainability, especially as our Net Zero science-based target requires action across our
supply chain. We will continue to pilot new systems to improve sustainability across our business:
Improve sustainability awareness and
knowledge to our frontline colleagues
and make every job a ‘sustainable job’
Supply chain – focus more on greater
collaboration with customers and supply
chain partners to achieve aligned goals
and develop our understanding of our
Scope 3 emissions
Our fleet – in-depth analysis to better
understand our high mileage drivers – how
we can innovate to reduce their mileage
and thereby reduce the requirement for
carbon offsetting
Decarbonisation – continue to decarbonise
our built estate and remove fossil fuels from
our operations
Waste – continue to reduce our waste
streams and incorporate circular economy
thinking into our operations. Emphasis is
placed on reducing plastic as we start to
review this as a fossil fuel
Carbon offsetting – what is the future
outlook and can we develop our absolute
zero plan
Target
46
Mitie Group plc
Annual Report and Accounts 2022
Our environment and social value framework
continued
Environment
Task Force on Climate-related Financial Disclosures (TCFD)
In line with our strategic and operational focus on ESG we have been aligning our processes with the recommendations of the TCFD and will continue to
develop our policies, processes and disclosures in line with the TCFD recommendations. We have considered our ‘comply or explain’ obligations under
the UK’s Financial Conduct Authority Listing Rules and have detailed in the table below the Principles with which we fully or partially comply. We are fully
compliant with eight out of the 11 recommendations for the year ended 31 March 2022.
Principle 1: Describe the Board’s oversight of
climate-related risks and opportunities
Principle 3: Describe the climate-related
risks and opportunities the organisation
has identified over the short, medium and
long term
Principle 4: Describe the impact of
climate-related risks and opportunities
on the Company’s businesses, strategy
and financial planning
Principle 5: Describe the resilience of the
Company’s strategy, taking into consideration
different climate-related scenarios, including a
2°C or lower scenario
Principle 2: Describe management’s role in
assessing and managing climate-related risks
and opportunities
The Board has overall responsibility for climate-related risks and opportunities.
The Board is updated at each Board meeting by Baroness Couttie who chairs the Social Value &
Responsible Business Committee (SVRBC), which met five times in FY22.
The Board reviews climate-related risks and opportunities annually; the Audit Committee reviews
these twice a year.
The Company complies with Principle 1. Please refer to the SVRBC report on page 131 for
further information.
The Board has identified an overarching climate change principal risk as detailed on page 69, which
is underpinned by a series of specific climate-related threats and opportunities as documented
within the Group’s climate change risk assessment.
Mitie’s risks and opportunities (including climate-related) are categorised over the following
timescales: short term (within 12 months, to reflect the potential for immediate impact), medium
term (within ten years) and long term (ten years+).
The Group’s strategy outlines the opportunities identified in helping our customers meet their
Net Zero carbon targets.
The Company complies with Principle 3. Please refer to TCFD Risk Management section on
pages 48 to 49, the principal risk on page 69 and the Chief Executive’s strategic review on page 11.
Mitie recognises the impact that climate change may have on its strategy, operations and financial
planning and is taking action to address the implications of climate-related risks on service delivery,
physical assets, supply chain, corporate reputation and the regulatory environment.
The Company does not fully disclose the impact of climate-related risks and opportunities in the
context of its financial planning and, therefore, does not comply with Principle 4.
Specific scenarios relating to 2°C or lower will be a focus in FY23 and the results from these
assessments will be reported in next year’s Annual Report. As such the Company does not comply
with Principle 5.
The Executive Committee is responsible for managing climate-related risks and opportunities.
The SVRBC and management-led Plan Zero Working Group and Plan Zero Steering Group,
ensure that climate-related risks and opportunities are appropriately assessed and managed.
The Company complies with Principle 2. Please refer to the SVRBC report on page 131 for
further information.
Governance
Strategy
Strategic report Governance Financial statements
47
Mitie Group plc
Annual Report and Accounts 2022
Principle 6: Describe the Company’s
processes for identifying and assessing
climate-related risks
Principle 7: Describe how processes for
managing climate-related risks, including
how the company makes decisions to mitigate,
transfer, accept risks etc
Principle 8: Describe how processes
for identifying, assessing and managing
climate-related risks are integrated into
the Company’s overall risk management
Principle 10: Disclose Scope 1, Scope 2,
Scope 3, greenhouse gas (GHG) emissions,
and related risks
Principle 11: Describe the targets used by the
Company to manage climate-related risks and
opportunities and performance against targets
Principle 9: Disclose the metrics used by the
Company to assess climate-related risks and
opportunities in line with its strategy and risk
management processes
Mitie has an embedded Enterprise Risk Management (ERM) framework. During FY22, Mitie
established and implemented a new automated risk management platform for the capture of all
Group-wide risks, including the overarching climate change principal risk and the climate change
risk assessment.
At a business unit, function, project and account level, all teams maintain a risk register.
As risks are captured, an assessment in terms of the impact on Mitie’s ESG strategy is routinely
undertaken, in addition to a 5x5 assessment, which determines the significance of all risks.
The Group Risk Team has a holistic view of all climate-related risks impacting the Group,
including those captured via the Climate Change Risk Assessment and operational risk registers.
The Group Risk Team works closely with Jason Roberts, Group Director for Sustainability and
Social Value to ensure all processes relating to climate-related risks are aligned.
A series of assurance checks are undertaken as part of second and third lines of defence to
promote best practice and ensure compliance with policies and regulations in terms of managing
the risks associated with climate change.
The Company complies with Principle 6. Please refer to the principal risks on page 69.
Climate-related risks are identified and added to the appropriate risk register.
Once a risk and/or opportunity has been identified, it is rated to ensure that the high risks within
a business unit/function/account/project can be identified and prioritised, escalating upwards, if
necessary. To ensure consistency, the Mitie 5x5 scoring matrix, which covers assessments against
a number of criteria including the environment, capability and financial profile, is used.
As a minimum, all climate-related risks and opportunities must be reviewed on a quarterly basis.
All risks and/or opportunities are assigned an appetite status. Where the risk management
platform identifies a climate-related risk has exceeded the Group’s risk appetite threshold,
reviews and additional management action will be required on a more frequent basis.
The Company complies with Principle 7. Please refer to the principal risks on page 69.
Risk management
Metrics and targets
The process for managing climate-related risks is fully aligned with the Group’s overreaching
approach to managing all risks. Mitie’s risk management platform is used to capture the Group’s
risk information and provides a holistic view of Mitie’s risk management profile. The processes
followed for the capture of this information are detailed in Principles 6 and 7.
The Risk Team are the custodians of the Group risk register, including the management and
review of all principal risks. The Risk Team also oversee the associated governance processes,
which seek to ensure all risk reviews, including those pertaining to climate-related risks are
undertaken and remain up-to-date.
The Company complies with Principle 8. Please refer to the Principal Risks section on
pages 68 to 77.
The Company reports Scope 1 and 2 greenhouse gas (GHG) emissions for the UK in the
ESG Report on page 45.
The Company does not fully comply with Principle 10, as Scope 1 and Scope 2 emissions are
not collected outside of the UK at this time and Scope 3 emissions are only partially collected.
These will be fully reported in next year’s Annual Report.
The targets are all set out on page 45 of the ESG report.
The Company complies with Principle 11.
All metrics are addressed under the KPI section on page 19 and in the ESG Report on page 45.
The Company complies with Principle 9.
48
Mitie Group plc
Annual Report and Accounts 2022
TCFD Risk Management section:
Climate-related risk management
Our environment and social value framework
continued
Environment
The Group considers climate change and social
impact as a principal risk, as detailed on page 69.
This is underpinned by a series of climate-
related threats and opportunities which
are monitored via the climate change risk
assessment. This assessment is used to support
Mitie in eliminating all climate-related risks,
where possible. The categorisation of
climate-related risks and opportunities falls into
three categories, namely short term (within
12 months), medium term (up to ten years),
and long term (ten years plus), to ensure
alignment with Mitie’s overall approach to risk
management. In addition to the climate change
risk assessment, climate-related risks and
opportunities are also captured at an individual
customer account level and managed in
collaboration with customers via account level
risk registers. Using Mitie’s automated risk
management tool, the Group has access to a
holistic view of all climate-related risks at the
click of a button.
An overview of the macro level climate-related
risks as reported via the climate change risk
assessment are shown below. In FY23, the
Group will be using various scenarios to provide
assurance that all climate change uncertainties
have been accounted for, in order to minimise
disruption to the business moving forward.
Where new risks and opportunities are
identified from these scenarios, these will
be captured and reported on in the next
Annual Report.
Impacts felt universally – Mitie, customers and
subcontracting partners affected. Damage to
assets and increased travel risks as a minimum.
Cost implications if Mitie cannot meet
customer demand for evolving service
requirements (i.e. to enable customers
to meet the impact of climate change
on their businesses).
Hotter summer periods will impact colleagues,
particularly those engaged in frontline
operations. A failure to prepare could lead
to labour shortages, impact morale, hinder
service delivery and impact financial targets.
A failure by the Group to perform well in
respect of ESG and associated climate-related
regulatory targets will have significant financial
implications and impact Mitie’s reputation.
Considerable costs to operating budget.
The biggest risk relates to the management
of Mitie’s fleet and potential rises in taxation
on fossil fuels (diesel).
Enhanced health & safety standards and processes.
Operating in accordance with ISO 22301.
Planned preventative maintenance schedules aligned to seasonal changes.
Estates strategy in place and continually reviewed.
Insurance coverage.
Scenario testing taking place in FY23.
Ongoing review of customer behaviours via sustainability governance framework.
Ongoing review and development of customer propositions.
Awareness campaigns with seasonal alerts.
Embedded occupational health strategy.
Health surveillance and monitoring framework.
Planned preventative maintenance schedules aligned to seasonal changes.
Governance framework in place including SVRBC agenda, Plan Zero Working Group and
Plan Zero Steering Group.
Re-negotiation of Mitie’s revolving credit facility, linked to sustainability.
Signed up to CDP membership, S&P Global Reporting and third-party carbon verification.
Implementation of Plan Zero.
Ongoing financial review of GHG related costs.
Phasing out of diesel fleet.
Ongoing transition to EV fleet.
Extreme weather events
Changes in customer behaviours
resulting in lost opportunities
Increasing summer temperatures
leading to ill-health
Investor confidence on climate
change management
Increases in pricing of greenhouse gas
(GHG) emissions
Risk categorisations (type and duration)
Physical risk – Medium term
Risk categorisations (type and duration)
Transitional risk – Medium to long term
Risk categorisations (type and duration)
Physical risk – Medium to long term
Risk categorisations (type and duration)
Transitional risk – Medium term
Risk categorisations (type and duration)
Transitional risk – Short to Medium term
Impact
Impact
Impact
Impact
Impact
Controls and mitigation
Controls and mitigation
Controls and mitigation
Controls and mitigation
Controls and mitigation
Strategic report Governance Financial statements
49
Mitie Group plc
Annual Report and Accounts 2022
The overview of the short to medium term macro level climate-related opportunities as managed via the climate change risk assessment is
shown below:
New technologies which are later identified
as unsuitable or do not deliver against
sustainability objectives could lead to
financial and reputational damage.
Inability to perform well and/or meet
third-party expectations (public, auditors,
media etc) will result in reputational damage
and impact revenues and profitability.
Failure to comply with future carbon targets
and legislative requirements will result in fines
leading to financial and reputational damage.
Development of low emission and energy
efficiency strategy for Mitie estate.
Minimise resource use through a circular
economy embedded into our business supply
chain and operations.
Use of lower-emission sources of energy and
development/expansion of low emission
goods and services.
Encouraging agile and flexible working
through business processes.
Access to new markets.
Participation in renewable energy
programmes and energy efficient measures.
Switching from fossil fuels to low carbon
alternatives for fleet operations.
R&D framework embedded.
Governance structure in place to review all new technologies.
Escalation and review process in place.
Plan Zero initiative.
Governance framework embedded.
Ongoing Intelligence Hub monitoring.
Climate change budget in place facilitating access to ‘best in class’ resources, accreditations etc.
Subject matter experts appointed to facilitate Group compliance with requirements.
Internal and external auditing.
Horizon scanning.
Carbon Conscious Premises Selection (CCPS) Guide in place detailing minimum standard in
respect of new spaces added to Mitie estate.
CCPS checklist in development for use by managing agents to screen all new estate acquisitions.
Ongoing estates review of new climate-related projects.
Principles of BS8001 adopted.
Partnered with external knowledge share networks and organisations to help develop new
resource solutions.
Developing plan to decarbonise our estates.
Ongoing energy consumption reporting.
R&D framework in place.
Agile working procedures embedded.
Ongoing stress testing of remote working to ensure adequate coverage.
Networks established within business and technology forums.
Ongoing review of markets and trends.
Energy surveying completed on a number of Mitie sites and optimisations to achieve better
efficiencies made.
Further surveying planned for FY23 including Mitie sites which have transferred in from
recent acquisitions.
Deployment of EV charging points at Mitie and client sites as well as colleagues’ homes.
Signed up to Clean Van Commitment.
Ongoing transition to EV.
Unsuccessful investment in
new technologies
Changes in awareness negatively
impacting public opinion and
behaviours
Potential for litigation if Mitie does
not adequately consider or respond
to the impacts of climate change
Risk categorisations (type and duration)
Transitional risk – Medium term
Risk categorisations (type and duration)
Transitional risk – Medium term
Risk categorisations (type and duration)
Liability risk – Medium to long term
Impact
Impact
Impact
Controls and mitigation
Controls and mitigation
Controls and mitigation
Opportunity description Key actions being taken and/or in place
50
Mitie Group plc
Annual Report and Accounts 2022
Priorities for FY23
We aim to continue to promote the
importance of social value and sustainable
operations, not just internally but also
across all our contracts. In FY23, we aim to:
Continue to support the Mitie
Foundation to remove barriers to
employment from underrepresented
groups and implement this methodology
into our contract level hiring processes
Tackle economic inequality by placing
more emphasis on creating local
employment opportunities and training
to continue the recovery from the
COVID-19 pandemic
Further align our volunteering provision
directly with our customers’ priorities at
the community level
Support the health and wellbeing of
our frontline colleagues through our
Employee Assistance Programme
Improve workplace inequality and strive
to reduce the disability employment gap
Overview
Mitie has a big part to play in the communities
in which we operate. We work hard to deliver
social value through our own operations and
for our customers. We are continuing to
integrate the Government’s Social Value Model
throughout our business. We believe this is key
not only for public sector contracts (for which it
is a requirement), but for all our future business.
Our ability to deliver social value for customers
is a key differentiator and will deliver positive
business results – as well as positive social
change – in the future.
The Mitie Foundation
The Mitie Foundation is an independent
charity, wholly funded by the Mitie Group, that
exists to break down perceived barriers to
employment for disadvantaged groups within
the communities in which Mitie operates. Our
focus is on the long-term unemployed, disabled
people and those with learning difficulties,
veterans, ex-offenders and young people.
In FY22, we delivered four flagship Ready2Work
programmes to our charity partners, including
a bespoke security programme and an enabled
Ready2Work programme. Nearly 70% of those
that completed the programme have gone on to
gain sustainable employment. Our Ready2Work
programme won two awards: Enei’s ‘Driving
Social Inclusion in the workplace’ and UK Social
Mobility Awards ‘Recruitment Programme of
the Year’.
We have launched a new careers page on our
website, which allows people introduced by
Foundation partners to apply for Mitie
vacancies. More than 125 colleagues have joined
Mitie in various roles including management.
The Foundation also offers advice and guidance
on effective job search, as well as CV and
interview preparation where needed.
Opportunities for
ex-military personnel
Mitie continues to push for employment
opportunities for ex-service men and
women. We set a target for FY22 to employ
a minimum 2.5% of ex-service men and
women and over 4.0% of Mitie’s workforce
is ex-military today. We continue to offer
our reservist employees paid leave and
support. We supported CTP in both Cardiff
and Telford for ex-military personnel by
participating in their career transition fairs.
Community
Making a positive difference,
wherever we operate
Supporting our communities through
volunteering
Each salaried colleague has an annual
volunteering day we encourage them to use.
In FY22, we committed to delivering 12,400
hours of volunteering across communities.
We exceeded this target, with colleagues
delivering more than 14,650 hours to good
causes including the Poppy Appeal, the Career
Ready Plus Programme and more recently, the
Big Mitie Spring Clean.
In FY22, we launched our Giving Back DoIT
platform for colleagues to search a larger
number of volunteering opportunities local to
them. The digital platform acts as a one-stop-
shop for all aspects of Mitie volunteering,
including allowing colleagues to record volunteer
hours quickly and easily. Our people have
continued to show their generosity throughout
the year. In FY22, £236,550 was raised for good
causes, including Macmillan Cancer Support and
refugees from Afghanistan.
£236,550
raised for charity
14,650hrs
volunteered to good causes by our colleagues
70%
of people successfully completing the Mitie
Foundation’s Ready2Work programme have gone
on to sustainable employment
Our environment and social value framework
continued
Strategic report Governance Financial statements
51
Mitie Group plc
Annual Report and Accounts 2022
Overview
In FY22, we have transformed our supply chain
approach to align this function more closely
with the business through business partnering,
combined with a Centre of Supply Chain
Excellence, and a dedicated Reporting and
Compliance team.
We have completed integrating the Interserve
and Mitie supply chain functions, and then
started to upgrade the supply chain across the
business. We have reduced our exposure to
high-risk subcontractors, whether in terms of
financial health, risk or insurance, and now
have 88% (by spend) of subcontractors fully
accredited on the Alcumus Safe Contractor
scheme. We have also re-incorporated the
Mitie fleet under our procurement function
and rationalised our supplier base to better
manage and reduce risk in our supply chain,
which now stands at around 12,000 suppliers.
Digital procurement strategy
Our digital procurement strategy went live in
FY22, digitising our entire end-to-end supplier
journey to make it easier for our suppliers to do
business with Mitie, and this has already led to
significant efficiencies and positive feedback from
our suppliers.
Digital procurement gives us better visibility
of the payment process and allows us to fix
problems faster. That transparency works both
ways as our suppliers can see the progress of
their invoices, supporting their business planning.
We have rolled out digital purchasing for around
£500m payments in FY22 – approximately 30%
of our total spend. Currently, over 90% of issued
invoices are already being processed in this way,
and we aim to move over the outstanding spend
during FY23.
Responsible
supply chain
We aim to make it easier for
every supplier to work with Mitie,
whatever their size
Priorities for FY23
We will continue to leverage our scale
in the facilities management market,
and focus on supplier compliance, risk
management, ethical sourcing and carbon
reduction, by:
Completing the roll-out of our digital
purchaser pay system for all suppliers
across our entire spend
Leveraging volumes through our
planning and size, hedging where
necessary to try and mitigate shortages
and price inflation
Continuing our journey towards full
supplier compliance and accreditation,
rolling out our supplier health and
risk management strategy to cover
every supplier and ensure we have a
complete picture of supplier risk and
financial health
Engaging our suppliers on all ESG-related
topics and improving the environmental
reporting processes to measure, report
and influence our Scope 3 emissions
Developing our supplier management
framework
We have continued to develop our supplier
management framework (SMF) over FY22,
which manages the performance of our strategic
suppliers, building deeper engagement with
around 200 strategic partner suppliers. Over
the past year, we held more than 300 meetings
covering issues including ESG, innovation, and
health and safety. We achieved a 35% spend
with SMF management in FY22, forecast to
reach 37% in FY23, with expected savings
of £55m.
Engaging with our supply chain
We have reviewed how we engage with
suppliers to ensure more diversely-owned
businesses in the supply chain, and sustainability
in our supply chain remains a priority. We
monitor our spend with diversely-owned
suppliers and actively encourage them to
respond to RFIs and tenders. In FY22, Mitie
joined MSD UK, the UK’s leading supplier
diversity organisation and foremost
accreditation body in the UK (and affiliated
globally), which opens our access to a database
of properly accredited diverse suppliers.
We continue to communicate with our suppliers
through a variety of channels to develop our
relationships throughout our supply chain and
encourage collaborative working. In February
2022, we launched mitiesuppliers.com,
which includes details such as changes to our
procurement systems, our ESG policies and
expectations, market insight pieces and market
reviews. It also acts as a key channel into Mitie
for all new suppliers.
Net Promoter Score –
+14 for suppliers scoring Mitie
12,000
suppliers now work with us
52
Mitie Group plc
Annual Report and Accounts 2022
Working
together to make
zero carbon happen
The journey to Net Zero
Mitie and Essex County Council (ECC) are partners in fighting climate
change and reducing carbon emissions, with a focused approach on
reaching Net Zero carbon emissions in ECC’s core estate by 2030.
Over the past five years, we’ve partnered with ECC throughout its
evolving decarbonisation journey; developing and submitting detailed
government grant applications worth £7m; reviewing ECC’s estate to
identify priority sites; creating feasibility studies, securing government
funding; and providing turnkey project management services for the
installation of a range of energy efficient technology, including solar
panels, air source heat pumps and double-glazing.
Using solar to cut energy costs throughout Essex
Solar panels significantly reduce energy costs, offering a low
maintenance solution to generate greener energy. In 2021, ECC
started its first installation phase, which soon expanded to another
12 schools and 19 core council buildings, including libraries and
children’s centres. Mitie has installed remote monitoring equipment
to track the panel performance, carbon savings achieved and any
maintenance requirements. The data is sent to a portal that can
be accessed by Mitie, the ECC facilities/energy teams and the
schools themselves.
Partnering on a decarbonisation journey
The new solar panels significantly reduce carbon emissions and energy
costs for ECC, producing around 1,700,000 kWh of renewable energy
every year, equivalent to the energy needed to power 450 homes;
saving 360 tonnes of CO
2
and around £280,500, with estimated
payback times of less than 10 years.
We have also completed 45 LED lighting projects in core council
buildings, saving ECC an estimated £121,000 and 174 tonnes of
carbon a year. LED lighting can be up to 80% more energy efficient
than traditional lighting, as well as having a longer lifespan, cutting
replacement and maintenance costs.
46
solar panel installations for council
buildings including schools, libraries
and children’s centres, all managed
by Mitie
1,700,000
kWh of renewable energy
generated a year, equivalent
to powering 450 homes
180
tonnes of CO
2
a year saved
since2021
Link to strategy
Capability enablers – Decarbonisation
Strategic report Governance Financial statements
53
Mitie Group plc
Annual Report and Accounts 2022
Mitie always goes the extra mile
and delivers over and above the
day job through its commitments
to social value, innovation, digital
transformation and sustainability,
delivering greater value for money
and helping us to achieve our
wider strategic outcomes
in Everyone’s Essex – a true
partnership approach.
Paul Crick,
Director for Performance,
Investment and Delivery, ECC
54
Mitie Group plc
Annual Report and Accounts 2022
Business Services
Business Services delivers Cleaning, Security and Office Services. Business Services has also been
responsible for Mitie’s rapid-response COVID-related UK Government contracts across testing centres
and quarantine services and, more recently security for hotels accommodating Afghan refugees. On
1April 2021, Business Services integrated several hundred contracts from the former Business & Industry
division of Interserve, including sizeable contracts with the BBC, B&Q and TfL. The Business Services
healthcare (hospital) contracts were transferred to Communities from 1 April 2021 to create a focused
Healthcare business unit and are therefore excluded from the Business Services comparative figures.
Operating review
Our divisional performance
Business Services, £m FY22 FY21 Change, %
Revenue 1,522 1,023 49%
Security
1
1,127 709 59%
Cleaning 395 314 26%
Operating profit before other items 108 48 125%
Operating profit margin before
other items, % 7.1% 4.7% 2.4ppt
Total order book £1.7bn £1.7bn –
Number of employees 38,092 40,782 (7)%
1 Document Management was sold on 30 September 2021 and is excluded from
‘continuing operations’. The retained Office Services operations of Vetting and
Front of House are reported within Security
49%
Revenue growth
£1.3bn
FY22 new contract wins,
renewals and extensions
125%
Operating profit before other
items growth
Performance highlights
Revenue growth of 49% to £1,522m (FY21: £1,023m) including £429m
of rapid-response, flexible COVID-related revenue (FY21: £132m);
underlying revenue growth of 11%
Operating profit was 125% ahead of FY21 at £108m, boosted by
higher margin short-term, flexible COVID-related contracts
Up to £1.3bn TCV of new, renewed, or extended contracts including
BBC, TfL, JLL, AS Watson, Broadway Bradford and Stansted Airport
Acquisition of leading Counter Surveillance Measures specialist,
Esoteric, on 17 November 2021
Outstanding Security Performance Awards – Outstanding Contract
Security Company (Guarding) (Feb 2022); Fire & Security Matters
– Security Guarding Company of the year (April 2022); Cleaning
Excellence Awards – Sustainable Company of the Year (Nov 2021)
Operational performance
Business Services had a very strong year supporting the UK Government
with rapid response, flexible COVID-related services responding to
increased demand for deep cleans from existing customers, and winning
new contracts.
COVID-related contracts contributed revenue of £429m in the year
(FY21: £132m). Mitie mobilised almost 300 testing centres and mobile
sites, assisting in the testing of 12 million members of the public, and
employing 10,000 people. In addition, Mitie provided security services to
‘Red list’ hotels – securing 70 hotels at the peak, with 1,500 officers, and
conducted 2.5m home visits for travellers returning from ‘Amber list’
countries, training 4,000 officers. All of these contracts have now ended.
Business Services won £0.5bn TCV of new contracts and projects,
including BAE Systems, Hitachi Rail, Westfield shopping centres, WPP
Group and Hyundai, alongside £0.8bn TCV of renewals or extensions,
including Marks & Spencer, AS Watson and NFU Mutual.
In line with the Group’s strategy to lead in the ‘Science of Service’, in the
second half of the year, Business Services launched ‘Mitie Intelligence
Services’, which is a risk assurance solution that integrates intelligence,
technology and people. Intelligence Services supports customers to
build risk-based security strategies to protect their businesses. The
Cleaning & Hygiene Centre of Excellence was opened earlier this year,
showcasing demand-led cleaning through Merlin sensor technology,
new technologies, robotics and products such as ‘Citrox Protect’,
which provides cleaning and hygiene reassurance for our customers.
Performance highlights
Following the Interserve Facilities Management (Interserve) acquisition Mitie now operates under five divisions, with management expertise aligned
along customer and service delivery lines. Interserve was acquired by Mitie on 30 November 2020 and contributed a full twelve months of trading from
1 April 2021 to 31 March 2022, but only four months of trading in the year ended 31 March 2021. The Group disposed of the Document Management
business and the operations in the Nordics and Poland in the year ended 31 March 2022. The results of these operations have been removed from
Business Services and Technical Services respectively and included within discontinued operations. All financial information reported below is for
‘continuing operations’ and is stated before other items.
Strategic report Governance Financial statements
55
Mitie Group plc
Annual Report and Accounts 2022
Central Government & Defence (CG&D)
The CG&D business provides facilities management services across central government and defence
contracts. FY22 includes a full 12 months of Interserve revenue, whereas FY21 only included the
four-month period from 1 December 2020 to 31 March 2021.
CG&D, £m FY22 FY21 Change, %
Revenue including our share of
joint ventures and associates 669 226 196%
Central Government 379 127 198%
Defence 290 99 193%
Operating profit before other items 38 10 280%
Operating profit margin before
other items, % 5.7% 4.4% 1.3ppt
Total order book £1.6bn £1.2bn 33%
Number of employees 5,578 5,302 5%
196%
Revenue growth
£1.0bn
FY22 new contract wins,
renewals and extensions
280%
Operating profit, before other
items, growth
Performance highlights
Revenue of £669m benefited from in-year contract wins and good
growth in project work in the fourth quarter; the prior year reflects
the final four months of FY21, which is historically the strongest
period for CG&D
Operating profit of £38m benefited from the increase in higher
margin project works in the year, with margins improving to 5.7%
New contract wins of up to £0.7bn in the year with renewals or
extensions worth £0.3bn (100% retention rate)
CG&D won the best low carbon capital project with Landmarc
and Defence Infrastructure Organisation (DIO) at the recent
Government Outsourcing Awards. Landmarc designed and built
replacement Net Zero accommodation units reducing our customer’s
energy costs and upgrading ageing assets
The division also won the IWFM best Collaboration award with DIO
for its work on the International Defence Estate
Operational performance
CG&D employs c.5,500 employees across 22 contracts and 30
government departments and agencies, at 3,000 locations across the
UK and overseas. This includes the maintenance of the 1% of the
UK land mass that is reserved for the defence training estate.
When Interserve was acquired, our focus was on investing in technology
and people to deliver operational excellence to our customers. Mitie has
introduced Aria, Mozaic and new Azure Secure Cloud infrastructure,
and has been rewarded with 100% renewal rates for contracts across
CG&D.
CG&D won the DIO Future Defence Infrastructure Services (FDIS)
contract across Scotland and Northern Ireland; a seven-year deal
worth up to £646m TCV, providing grounds, reactive and scheduled
maintenance services.
In FY22 Mitie was awarded the Overseas Prime Contract for Gibraltar,
a 7-10 year deal worth up to £155-£200m TCV, providing maintenance
and repair to maritime, accommodation, fuel storage and logistics assets.
Since the year end Mitie has also been awarded contract extensions in
the South Atlantic Islands until 23 April 2025 (TCV £117m), and Cyprus
until 21 August 2024 (TCV £140m).
Project work across the Central Government portfolio increased in the
final quarter of the year, including for DWP, where Mitie has continued
to add services for customers looking to manage ‘back to work’
initiatives post COVID, and with decarbonisation projects to assist
the Government in achieving their 2050 decarbonisation target.
Our ‘Mitie First’ strategy, insourcing services formerly provided by third
parties, resulted in £20m of cross-sell revenue synergies.
CG&D has pre-qualified for the latest (£4bn) framework RM6232 which
offers significant opportunities for growth. A number of new bids are in
train, on which final decisions are awaited.
Performance highlights
56
Mitie Group plc
Annual Report and Accounts 2022
Communities, £m FY22 FY21 Change, %
Revenue 460 265 74%
Healthcare 225 119 89%
Education 129 100 29%
Campus & Critical 106 46 130%
Operating profit before other items 20 16 25%
Operating profit margin before
other items, % 4.3% 6.0% (1.7)ppt
Total order book £3.7bn £4.0bn (8)%
Number of employees 8,513 8,231 3%
74%
Revenue growth
£0.1bn
FY22 new contract wins,
renewals and extensions
25%
Operating profit before other
items growth
Performance highlights
Revenue of £460m increased 74% (FY21: £265m) reflecting an
uplift from a full 12 month contribution from Interserve contracts
Operating profit increased to £20m (FY21: £16m) following the
inclusion of twelve months of Interserve. However, this is at lower
margin which is reflected in the year-on-year margin decline
New wins and renewals of £0.1bn TCV across Hospitals (John
Radcliffe, Oxford) and Education (Swansea University)
Operational performance
The Communities division operates over 100 contracts. Within the
former Interserve PFI contracts there are eight underperforming
contracts, which impact the overall performance of the Communities
division. During FY22, a turnaround plan was implemented, including
new account management to oversee an improvement in underlying
trading performance alongside longer-term structural changes.
Financially these contracts are currently loss-making, and, as highlighted
in the FY21 Annual Report and Accounts, provisions have been made
for the forecast net losses over the remaining terms of the contracts,
which totalled £13m at 31 March 2022 after the utilisation of £5m in
FY22. Whilst Communities made good progress in FY22, there is
further work to be done to bring the handful of remaining loss-making
contracts up to and beyond the ‘break-even’ point.
Operationally, good progress has been made during the year, with the
Communities division focused on implementing standardised Mitie
processes into its contracts, particularly across the former Interserve
portfolio, and improving customer relationships. This investment has led
to improved operational compliance, with compliance performance now
in line with the rest of the Group while also reducing the maintenance
backlog, predominantly in the former Interserve portfolio, by almost
80%. This investment and the ability to leverage Mitie’s Technical
Services expertise to deliver operational excellence for our customers
was one of the key opportunities to add value when Interserve
was acquired.
The division has made good technological progress in FY22 through the
‘Science of Service’, implementing remote sensor technology (which
provides an IT solution for real time updates on cleaning and portering)
across five hospital contracts, and introducing robotic cleaning (Watford
Hospital) and advanced UV cleaning (Hinchingbrooke).
During the year the Communities division invested in a new leadership
team including a focus on business development and sales, with a
particular focus on experience with local authorities where there
are good growth opportunities.
Performance highlights
Operating review – Our divisional performance
continued
Communities
The Communities division comprises the former Interserve Communities division and Mitie’s Healthcare
business, Essex County Council and PFI contracts. Communities focuses on three sectors: Healthcare,
Education and Campus & Critical. A new management team was put in place at the start of the financial
year with a focus on growing the division and turning around underperforming contracts.
Strategic report Governance Financial statements
57
Mitie Group plc
Annual Report and Accounts 2022
Technical Services, £m FY22 FY21 Change, %
Revenue 973 751 30%
Maintenance 829 619 34%
Projects 144 132 9%
Operating profit before other items 30 11 173%
Operating profit margin before
other items, % 3.1% 1.5% 1.6ppt
Total order book £1.7bn £1.6bn 6%
Number of employees 9,029 10,073 (10)%
30%
Revenue growth
£1.1bn
FY22 new contract wins,
renewals and extensions
173%
Operating profit before other
items growth
Performance highlights
Revenue of £973m, up 30% as customers recovered from the impact
of COVID, the full year impact of revenue from former Interserve
Business & Industry contracts, acquisitions and new wins
Operating profit of £30m almost trebled (FY21: £11m) driven by the
increased revenue, cost savings and synergies
£0.6bn TCV new wins including projects (City of Edinburgh
Council and Legal & General); £0.5bn TCV of retentions (Network
Rail, Eaton)
The creation of one of the UK’s largest telecoms support services
companies following the successful acquisition of DAEL Ventures UK,
P2ML (April 2022) and 8point8 (May 2022)
The acquisition of Rock Power Connections, growing our presence in
the provision of electric vehicle charging points and establishing a core
competency in the connection of high voltage networks to the grid
Operational performance
Technical Services has been the division most impacted by COVID with
a significant decline in variable and project works as buildings remained
closed or underutilised. The Maintenance business is now significantly
ahead of pre-COVID levels, with a steady improvement in work
volumes during FY22 as our customers returned to their places of work
and transport providers such as airports and rail networks saw a steady
increase in passengers. As highlighted at the half year, the Projects
business remained challenging in line with the wider market. As a result,
it made slower progress than expected, as material shortages and high
material prices caused customers to delay projects meaning that the
business is not yet back to pre-COVID levels of activity.
Technical Services continues to be at the forefront of our ‘Science of
Service’ ambitions using our leading edge technology to set us apart
from our competitors by optimising employee wellbeing, enhancing
estate intelligence and providing smart decarbonisation and green
energy solutions. Connected Workspace is a critical component of our
new wins and scope expansion with existing customers as they adapt to
new, hybrid ways of working. There are now 11,000 desk sensors being
remotely monitored to book desks and 78,000 triggered alarms were
dealt with remotely – saving engineer journeys. Our UVC disinfection
system technology has been installed in ten customers ensuring a safe
working environment.
Technical Services won £0.6bn (TCV) of contracts with Costa,
BAE Systems and Legal & General, enhanced service offerings to
Amazon and Primark and extended terms with Network Rail,
Scottish Government, Sky and Red Bull.
Our strategic focus of investing in sectors focusing on high growth
businesses such as telecoms services and decarbonisation saw us
complete the acquisition of DAEL Ventures UK and Rock Power
Connections. Following the acquisition of two other telecoms services
companies in early FY23, P2ML and 8point8, Mitie is now one of the
largest Telecoms Support Services businesses in the UK, with capability
to support all aspects of cell site acquisition, design, construction, and
ongoing site maintenance.
The growth of our decarbonisation offering for our customers was
enhanced by the acquisition during the year of Rock Power Connections
– a high voltage connections and electric vehicle charging installation
company. Technical Services has also grown energy-related revenues
through decarbonisation projects for Lloyds Banking Group, Rolls–
Royce, and Royal Mail.
Performance highlights
Technical Services
Technical Services is a leading supplier of technical services and project delivery to a range of
predominantly private sector customers, with an increasing focus on providing customers with solutions
to their Green Energy, Decarbonisation, Connected Workspace and Mobile Telecoms challenges.
From 1 April 2021, Technical Services incorporated contracts from the former Business & Industry
division of Interserve, and Essex County Council and PFI contracts were transferred to Communities.
The Technical Services comparative figures have been adjusted accordingly.
58
Mitie Group plc
Annual Report and Accounts 2022
Specialist Services
The Specialist Services division encompasses Care & Custody, Landscapes and Waste, with the addition
of Interserve’s Spanish operations.
Specialist Services, £m FY22 FY21 Change, %
Revenue 373 264 41%
Care & Custody 136 109 25%
Landscapes 55 50 10%
Spain 105 31 239%
Waste 77 74 4%
Operating profit before other items 33 24 37%
Operating profit margin before
other items, % 8.8% 9.1% (0.3)ppt
Total order book £0.8bn £0.7bn 14%
Number of employees 10,118 8,892 14%
41%
Revenue growth
£0.3bn
FY22 new contract wins,
renewals and extensions
37%
Operating profit before other
items growth
Performance highlights
Revenue of £373m was 41% higher than the same period last year
(FY21: £264m) and operating profit of £33m was 37% ahead of the
prior year (FY21: £24m) including a full 12 months of Interserve’s
Spain operations and good growth across each business unit
Care & Custody revenue increased by 25%, following new
contract wins
Landscapes won £51m TCV of new contracts or renewals/extensions.
This includes £3m of contracts formerly subcontracted by Interserve
Spain revenue of £105m boosted by full year impact (as prior year
comparator only included four months of results), but also good
underlying performance due to rapid response COVID-related work
at numerous airports
Waste showed steady growth driven by contract wins and recovery
in footfall
Operational performance
Care & Custody contract wins for Dungavel Immigration Removal
Centre (IRC) (TCV £66m over eight years) and Derwentside IRC (TCV
£11m over two years) were both successfully mobilised in H1 FY22 with
service delivery commencing in H2 FY22. During H2 FY22, a contract
extension was also secured for Heathrow IRC until November 2023.
Within Police Services, in H2 FY22 new contracts were secured with
Derbyshire Police, Lincolnshire Police and South West Police consortium
(service delivery for all to commence in FY23). Contracts with British
Transport Police and Leicestershire Police were successfully renewed in
FY22, while extensions were secured for Greater Manchester Police,
Cheshire Police, South Wales Police and Staffordshire Police.
These contract wins, renewals and extensions are being driven by
our high-quality innovative service offerings which are supported by
technology, information sharing and social value offerings. Care &
Custody continues to work very closely with the Home Office to ensure
a flexible approach to help deal with the challenges in immigration
services, including the ramp up of services to deal with the increasing
volume of small boat arrivals on the South Coast.
Care & Custody is well placed to benefit from a buoyant pipeline
including prisons management, a key growth market in the Justice
sector with a total pipeline of £2.5bn. During H2 FY22, Care & Custody
commenced the submission of prisons management bid proposals on
a targeted basis.
Landscapes reported steady growth in the period, driven by both net
wins and the acquisition in the second half of Biotecture, a specialist in
designing, building and maintaining ‘living walls’ for interior and exterior
urban landscapes. Landscapes won £33m TCV of new contracts or
projects, with £18m of renewals or extensions. This included insourcing
£3m of contracts from the former Interserve business, including at
DWP and supporting CG&D on the FDIS contract, allowing expansion
into Scotland and Northern Ireland with a footprint stretching to 11,500
sites. Renewals in the period included Amazon, Co-op, West Midlands
Trains and NHS Property Services. Since joining Mitie, Biotecture has
secured £0.3m with Canary Wharf Management associated with the
opening of the Elizabeth line, with further works completed for South
West Trains, enhancing sustainability at a number of stations.
Spain performed well with revenue and margin ahead of last year
benefiting from additional rapid response COVID-related activities,
particularly at airport operator AENA.
Waste revenue was 4% ahead of prior year driven by new contract
wins for AF Blakemore, testing centres and Magnox, the insourcing of
services previously sub-contracted by Interserve, mainly Communities
and CG&D such as DEFRA, and additional recovery across contracts as
footfall improved. During the year Waste saw a rationalisation of sites
across NHS Trust contracts, however new wins with FDIS, BAE Systems,
Wincanton, NHS Nottingham and Hammerson are all being mobilised in
the first quarter of FY23, supporting future growth.
Performance highlights
Operating review – Our divisional performance
continued
Strategic report Governance Financial statements
59
Mitie Group plc
Annual Report and Accounts 2022
Finance review
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 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 FY22
Restated
FY21
1,2
Revenue including share of
joint ventures and associates 3,996.8 2,528.8
Group revenue 3,903.3 2,499.0
Operating profit before
other items 166.9 58.8
Other items (94.8) (54.8)
Operating profit 72.1 4.0
Net finance costs (19.8) (17.7)
Profit/(loss) before tax 52.3 (13.7)
Tax (21.0) (0.4)
Profit/(loss) after tax 31.3 (14.1)
Basic earnings per share
before other items 9.2p 3.1p
Basic earnings/(loss) per share 2.2p (1.3)p
1. The Group disposed of the Document Management
business and operations in the Nordics and Poland
in H1 FY22. The results of these operations are
re-presented within discontinued operations (see
Note 5 to the consolidated financial statements).
2. The comparatives for FY21 have been restated for a
change in accounting policy related to upfront configuration
and customisation costs incurred in implementing
Software as a Service (SaaS) arrangements (see Note 1
to the consolidated financial statements).
Revenue
Revenue from continuing operations for FY22
of £3,996.8m, including share of revenue from
joint ventures and associates, has increased
by 58% compared with the prior year. This
significant increase primarily relates to the
acquisition of the Interserve Facilities
Management (Interserve) business, which
contributed 12 months of revenue in FY22
(FY21: 4 months), and increased revenue from
the rapid-response COVID-related contracts.
Strong underlying trading performance and
higher Interserve contribution, boosted
by COVID-related contracts, delivered
significant free cash flow and further
strengthened our balance sheet.
Simon Kirkpatrick
Chief Financial Officer
60
Mitie Group plc
Annual Report and Accounts 2022
Finance review
continued
Excluding Interserve revenue of £1,358.7m
(FY21: £449.9m) and COVID-related contract
revenue of £448.5m (FY21: £155.3m), revenue
from continuing operations has grown by
£266.0m (14%) in FY22. This growth has been
driven by wins in Business Services and a
recovery in Technical Services, which was the
division hardest hit by the COVID pandemic
in the prior year, albeit it is not yet back to
pre-COVID levels. The rapid-response, flexible
COVID-related contracts were largely complete
by the end of FY22.
Operating profit
Operating profit from continuing operations
before other items was £166.9m (FY21:
£58.8m), an increase of £108.1m (184%) from
FY21. This increase was primarily a result of the
full year effect of the acquisition and integration
of the Interserve business, with the delivery of
£30.2m of associated cost synergies in FY22
(FY21: £5.0m), and an increased contribution
from the flexible, rapid-response COVID-
related contracts of £59.6m (FY21: £12.0m).
These improvements have been supplemented
by a growth in profit from net wins in the year,
and have been partly offset by an increase in
share-based payments charges for management
incentives, reflecting the stronger outlook for
the business now that it has emerged from the
COVID pandemic. The operating profit margin
before other items from continuing operations
increased to 4.2% in the year (FY21: 2.3%),
due to the growth in higher margin, flexible,
rapid-response COVID-related contracts,
increased delivery of project works in CG&D,
and the ongoing recovery of variable and project
works in Technical Services. Excluding COVID-
related contracts, the operating profit margin
before other items from continuing operations
for FY22 was 3.0%.
After accounting for £(94.8)m of other
items (FY21: £(54.8)m), operating profit
from continuing operations was £72.1m
(FY21: £4.0m).
Corporate overheads
Corporate overheads represent the costs of
running the Group and include costs for central
functions such as commercial and business
development, finance, marketing, legal and HR.
Corporate overhead costs have increased to
£61.4m in FY22 (FY21: £50.3m). The increase
reflects the absorption of central costs from
Interserve, higher accruals for share-based
incentive schemes based on the improved
outlook and temporary pay reductions during
COVID in the prior period being reinstated.
Other items
Other items, £m FY22 F Y21
Interserve acquisition
related costs (2.4) (14.8)
Interserve integration costs (16.2) (8.8)
Interserve settlement of
contractual disputes 9.8 –
Interserve completion accounts
adjustment to consideration (45.6) –
Interserve amortisation
of acquisition related
intangible assets (19.1) (6.7)
Sub-total – Interserve
related other items (73.5) (30.3)
Workflow optimisation
(Project Forté) (10.2) (10.6)
Property transformation (0.4) (11.3)
Digital supplier platform (4.4) –
Amortisation of non-
Interserve acquisition related
intangible assets (2.8) (2.2)
Other (3.5) (0.4)
Sub-total – Non-Interserve
related other items (21.3) (24.5)
Total other items from
continuing operations
before tax (94.8) (54.8)
Gain on disposal of the
Document Management
business 16.0 –
Other items related to
discontinued operations 1.0 2.9
Total other items before tax (77.8) (51.9)
Tax (2.0) 7.1
Total other items after tax (79.8) (44.8)
Other items in FY22 resulted from the latter
stages of the Group’s transformation programme
(primarily Project Forté and the digital supplier
platform) and acquisitions, which includes costs
associated with the Interserve acquisition and
integration, and the gain on disposal of the
Document Management business.
The Interserve related other items in FY22
include an adjustment to consideration of £45.6m
following the conclusion of the completion
accounts process, which is covered further below.
Also included are the costs of resources deployed
to implement the integration, which make up the
majority of the £16.2m of Interserve integration
costs, and the amortisation charge of £19.1m
related 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 acquisition related costs of £2.4m are
one-off professional fees. The £9.8m income
is a result of an agreement being reached
on certain contractual disputes related to
pre-acquisition activity.
Non-Interserve related other items in FY22
include the costs of implementing Project Forté
and the digital supplier platform, both of which
are critical components of the transformation
programme. Project Forté involves the
re-engineering of Technical Services’ workflow
processes, and is ready for deployment with the
data cut-over currently ongoing. Both projects
will complete in FY23.
Other items from discontinued operations in
FY22 relate to the disposal of the Document
Management business on 30 September 2021,
the disposal of operations in the Nordics and
Poland on 1 June 2021 and the settlement of
a contractual dispute related to the previous
disposal of the Social Housing business. Total
consideration for the Document Management
business (before debt-free/cash-free and
normalised working capital reductions of £3.3m)
was £40.0m, which realised a gain on disposal
of £16.0m.
Net finance costs
Net finance costs from continuing operations
increased by 12% to £19.8m in FY22 (FY21:
£17.7m). The increase was driven by a
combination of the full year effect of the
additional finance costs related to the June
2020 refinancing (which secured a temporary
relaxation of financial covenants as a result of
COVID) and the accelerated write-off of the
associated arrangement fees when this facility
was replaced by the new revolving credit facility
(RCF), which was signed in October 2021.
These higher costs were partially offset by the
part-year benefit of the improved terms of the
new RCF.
The new £150m RCF, together with the agreed
refinancing of the US Private Placement (USPP)
notes due to mature in December 2022, are
expected to reduce future interest costs by
approximately £3m on an annualised basis from
December 2022. This will add to the annual
savings of approximately £1m related to the
planned closure of the Group’s customer invoice
discounting facility.
Tax
Profit before tax and other items (from
continuing operations) of £147.1m (FY21: £41.1m)
resulted in a tax charge of £19.0m (FY21: £7.9m),
representing an effective tax rate of 12.9%
(FY21: 19.2%).
The effective tax rate for FY22 reflects the
increase in the rate of UK corporation tax from
19% to 25%, with effect from 1 April 2023,
which was substantively enacted during FY22.
As a result, deferred tax balances (including
those arising from historical Interserve losses)
have been recalculated using the higher rate
where appropriate, resulting in a £9.0m tax
credit before other items related to an increase
in net deferred tax assets. If the impact of the
Strategic report Governance Financial statements
61
Mitie Group plc
Annual Report and Accounts 2022
tax rate change was excluded, the tax charge
on profit before other items from continuing
operations would be £28.0m, representing an
effective tax rate of 19.0% which is broadly in
line with FY21. The effective tax rate is expected
to be below the headline corporation tax rate
over the next year, as tax losses are converted
into deferred tax assets.
Including other items, the tax charge from
continuing operations was £21.0m (FY21:
£0.4m), which equates to an effective tax rate
of 40.2% for FY22. The tax charge for other
items from continuing operations of £2.0m
comprises a tax credit of £6.1m related to other
items before tax, and a tax charge of £8.1m in
respect of the tax rate change resulting in an
increase in the deferred tax liabilities related to
acquired intangible assets. The tax credit related
to other items before tax represents a low
effective tax rate of 6.4%, primarily due to the
non-tax deductible nature of certain other
items charges.
Mitie is a significant contributor of revenues
to the UK Exchequer, paying £864.3m in the
year (FY21: £640.0m). Of this total, £148.0m
relates to taxes borne by Mitie (principally
UK corporation tax and employer’s National
Insurance contributions) and £716.3m relates
to taxes collected by Mitie on behalf of the
UK Exchequer (principally VAT, income
tax under PAYE and employees’ National
Insurance contributions).
The Group paid corporation tax of £16.2m in
the year (FY21: £1.0m), of which £14.1m was
paid in the UK and £2.1m overseas.
Joint ventures and associates
Operating profit for FY22 includes Mitie’s share
of the results of joint ventures and associates
that were acquired as part of the Interserve
transaction, net of tax. £6.6m (FY21: £1.9m) was
reported within operating profit before other
items, and a charge of £2.4m (FY21: £1.2m)
was reported in other items for amortisation
of acquired intangible assets.
Earnings per share
Basic earnings per share before other items
from continuing operations increased
significantly to 9.2p (FY21: 3.1p). This is as a
result of the higher profit before tax, driven by
the higher operating profit before other items
noted above, combined with the lower effective
tax rate.
Basic earnings per share from continuing
operations was 2.2p (FY21: loss per share of
(1.3)p), with the increase reflecting the factors
outlined above, partially offset by the impact of
the higher level of other items in FY22.
Return on invested capital (ROIC)
Continuing operations, £m unless
otherwise specified FY22
Restated
1
FY21
Operating profit before
other items 166.9 58.8
Tax
2
(21.5) (11.3)
Operating profit before
other items after tax 145.4 47.5
Invested capital 486.6 576.7
ROIC
3
29.9% 8.2%
1 Re-presented for discontinued operations, restated for
Software as a Service (SaaS) accounting and invested
capital for Interserve restatements.
2 Tax charge has been calculated at the effective tax rate
for the year on pre-tax profits before other items for
continuing operations of 12.9% (FY21: 19.2%).
3 The ROIC metric used for the purposes of the Enchanced
Delivery Plan (EDP) requires further adjustments under
the detailed rules agreed with shareholders.
ROIC (before other items, on continuing
operations) has increased to 29.9% in FY22
(FY21: 8.2%), with the increase due to a
combination of the significantly stronger
operating profit before other items, the lower
effective tax rate and the lower invested capital.
The lower invested capital primarily relates to
the ongoing improvements to working capital
made in FY22, and a £45.6m reduction in the
receivable related to the Interserve completion
accounts process (see below).
Balance sheet
£m FY22
Restated
1
FY21
Goodwill and intangible
assets 560.2 555.8
Property, plant and
equipment 143.9 117.9
Interests in joint ventures and
associates 11.9 11.0
Working capital balances (239.2) (166.2)
Provisions (117.0) (123.6)
Net cash/(debt) 26.7 (86.7)
Net retirement benefit
liabilities (12.2) (42.5)
Deferred tax 11.1 19.8
Other net assets 40.4 72.0
Total net assets 425.8 357.5
1. The comparatives for FY21 have been restated for
measurement period adjustments in respect of the
Interserve acquisition (see Notes 2 and 30 to the
consolidated financial statements) and a change in
accounting policy related to upfront configuration and
customisation costs incurred in implementing Software
as a Service (SaaS) arrangements (see Note 1 to the
consolidated financial statements).
Overall, the Group reported net assets of
£425.8m at 31 March 2022, which is an increase
of £68.3m compared with 31 March 2021, driven
mainly by the retained profit for the year from
continuing and discontinued operations of
£50.7m, which resulted in a significantly improved
net cash/(debt) balance, combined with a £30.3m
reduction in net retirement benefit liabilities.
Property, plant and equipment has increased by
£26.0m, primarily as a result of entering leases
for new properties, including the new Technical
Services Operations Centre (TSOC) in
Manchester. The majority of this increase were
not cash costs in FY22, as they relate to future
lease commitments which must be recorded as
lease liabilities on the balance sheet under IFRS 16,
together with the related assets. The new leases
therefore have no initial impact on net assets.
The reduction in working capital balances and net
retirement benefit liabilities, together with the
changes related to the acquisition of Interserve,
are explained below.
Acquisition of Interserve
The acquisition of Interserve was completed on
30 November 2020. At 31 March 2021, provisional
values were reported for the acquisition
accounting, including £3.3m for goodwill, which was
based on £138.7m for the acquired identifiable net
assets and liabilities on the balance sheet, and total
consideration of £142.0m.
The £142.0m comprised £199.6m of consideration
paid to the seller (£105.0m cash paid and £94.6m
shares issued) less an adjustment for management’s
best estimate of the amounts due back to Mitie of
£57.6m (subsequently revised down to £52.7m).
The £57.6m was the amount claimed by Mitie
under the completion accounts mechanism in the
Share Purchase Agreement (SPA), for which a
corresponding receivable was recognised on the
balance sheet at 31 March 2021. Given that the
SPA terms related to the completion accounts
mechanism were complex and would be the
subject of a commercial negotiation and, in the
absence of an agreement, an expert determination
process, the estimated value of the receivable was
inherently uncertain. As previously disclosed, it was
therefore recognised that the final amount agreed
could be materially different from the estimate.
Under IFRS, the value of goodwill must be finalised
within a 12-month measurement period from the
date of acquisition (the Measurement Period),
which was 29 November 2021 in the case of
Interserve. Adjustments were made during the
Measurement Period reducing the value attributed
to the net assets acquired by £7.7m, from £138.7m
to £131.0m. This change was predominantly due to
an increase in provisions for certain PFI contracts,
where new information had been received about
facts and circumstances that existed as at the
acquisition date.
62
Mitie Group plc
Annual Report and Accounts 2022
Finance review
continued
The provisional value of consideration was also
revised during the Measurement Period, reducing
the £57.6m completion accounts receivable to
£52.7m, with a corresponding adjustment of £4.9m
being made to increase the total consideration
from £142.0m to £146.9m.
As a result of these two adjustments, to reduce the
value of the net assets acquired by £7.7m, and to
increase the consideration by £4.9m, goodwill on
the acquisition of Interserve was increased by
£12.6m to £15.9m.
Subsequent to the end of FY22, the expert
determination relating to the £52.7m completion
accounts claim has concluded. Following the
expert’s determination, for which the expert
sought a legal opinion in relation to the
interpretation of the complex SPA requirements,
an agreement was reached for the seller to pay
£7.1m to Mitie, of which £1.1m was settled during
H2 FY22 and £6.0m was settled in May 2022. As
the Measurement Period had already ended, the
consequent £45.6m reduction in the receivable
could not be adjusted against acquisition goodwill,
and so has been recognised as a charge in the
consolidated income statement and classified as
other items.
Further details on the acquisition of Interserve
are set out in Note 30 to the consolidated
financial statements.
Change in accounting policy
During FY22, Mitie has changed its accounting
policy such that distinct upfront configuration
and customisation costs incurred in
implementing Software as a Service (SaaS)
arrangements are generally now recognised
as operating expenses when the services
are received, rather than capitalised as
intangible assets.
This change in accounting policy follows the
International Financial Reporting Interpretations
Committee (IFRIC) agenda decision clarifying
its interpretation of how current accounting
standards apply to these types of arrangement.
As a result of the change in accounting policy,
the income statement and balance sheet for
prior periods have been restated, resulting in
an increase in operating profit and profit after
tax of £0.5m and £0.4m respectively for FY21,
and a reduction in intangible assets of £5.7m
and £5.2m at 1 April 2020 and 31 March 2021
respectively. As a consequence of the accounting
policy change, the restated cash generated
from operations for FY21 decreased by £0.9m,
with a corresponding decrease in cash used in
investing activities.
Provisions
Provisions at 31 March 2022 largely comprise
contract specific costs of £56.3m, the insurance
reserve of £26.0m and pension provisions of
£23.7m. Provisions have reduced by £6.6m
during the year, largely reflecting the utilisation
of provisions related to contract specific costs.
Retirement benefit schemes
Net retirement benefit liabilities have reduced
to £12.2m at 31 March 2022 (31 March 2021:
£42.5m), principally due to Mitie’s contributions,
scheme investment returns and an increase in
the discount rate related to movements in
corporate bond yields.
The net liabilities at 31 March 2022 include a
net accounting surplus of £1.6m (FY21: surplus
of £3.0m) for a scheme acquired with the
Interserve business. There is also an accounting
surplus related to a pension scheme within a
joint venture acquired with Interserve, Mitie’s
£3.8m share of which is reported within
interests 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 agreed a deficit recovery plan
with the trustees totalling £92.8m over seven
years, of which £21.5m had been paid to
31 March 2022.
An initial funding valuation as at 31 December
2020 for the main scheme acquired with
Interserve was received during the year,
which indicated an actuarial deficit of £1.6m.
Government support
During FY22, the Group participated in the
UK Government’s Coronavirus Job Retention
Scheme (CJRS) until the scheme finished on
30 September 2021. However, in FY22 the
Group fully repaid sums received under the
CJRS relating to all furloughed colleagues
employed directly at Mitie’s own operations
(£4.1m), which was accrued in FY21. No further
claims were made in respect of these colleagues
during FY22.
Cash flow and net debt
£m FY22
Restated
FY21
1,2
Operating profit before
other items (continuing
operations) 166.9 58.8
Add back: depreciation,
amortisation & impairment 51.6 45.1
EBITDA before other items
(continuing operations) 218.5 103.9
Other movements (including
other items) (14.6) (28.6)
Working capital movements 60.0 (36.4)
Cash generated from
operations 263.9 38.9
Capex, capital leases, interest
& other (131.1) (63.4)
Free cash inflow/(outflow) 132.8 (24.5)
Rights issue – 190.4
Acquisitions & disposals 5.0 (84.0)
Dividend paid (5.7) –
Lease liabilities & other (18.7) (15.6)
Decrease in net debt during
the year 113.4 66.3
Closing net cash/(debt) 26.7 (86.7)
Average net (debt) (24.7) (47.1)
Leverage ratio
3
0.1x 0.5x
1. The Group disposed of the Document Management
business and operations in the Nordics and Poland
in H1 FY22. The results of these operations are
re-presented within discontinued operations.
2. The comparatives for FY21 have been restated for a
change in accounting policy related to upfront configuration
and customisation costs incurred in implementing Software
as a Service (SaaS) arrangements (see Note 1 to the
consolidated financial statements).
3. Leverage ratio is calculated as average daily net debt/
EBITDA before other items on continuing operations.
Free cash inflow for FY22 was £132.8m, an
increase of £157.3m compared with FY21. This
significant improvement was driven by operating
profit before other items, which increased by
£108.1m due to the factors noted above, and
continued improvements in working capital.
The cash inflow from working capital of £60.0m
in FY22, compares favourably with an outflow of
£36.4m in FY21. This improvement was driven
primarily by a two-day reduction in days sales
outstanding (DSO) in the year (approximately
£29m inflow), following ongoing improvements
to our application billing and aged debt reporting
processes, an increase of approximately £10m
in the accrual for incentives as a result of the
strong Group performance, and a small cash
inflow from working capital as a result of the
overall growth in the business (approximately
£8m impact). The customer invoice discounting
facility gave rise to a net £12.8m cash inflow due
to the timing of receipts, partially offset by a
reduction in utilisation as part of the wind down
to closure of the facility.
Strategic report Governance Financial statements
63
Mitie Group plc
Annual Report and Accounts 2022
These improvements within cash generated
from operations were partially offset by cash
outflows from ‘Other movements’ and ‘Capex,
capital leases, interest & other’.
Other movements of £14.6m include a cash
outflow from other items of £26.8m, which
largely relates to incremental roles and
professional fees associated with implementing
the Interserve integration, Project Forté and
the digital supplier platform, and professional
fees related to other acquisitions. This is partially
offset by the add back of the non-cash
share-based payments expense.
Capex, capital leases, interest and other resulted
in a cash outflow of £131.1m. Capex of £35.6m
is higher than in the prior year due to Interserve
integration spend and Project Forté capex.
Capital lease repayments have increased by
£5.8m to £33.9m in the year as a result of the
increase in the size of the vehicle fleet post-
acquisition of Interserve, and interest paid of
£17.5m has remained broadly flat year on year.
Tax paid in the year was £16.2m.
Capex, capital leases, interest and other also
includes a £13.8m cash outflow related to the
purchase of 22.9m of Mitie’s own shares, for
the employee benefit trust (EBT), related to
the expected future vesting of share-based
payment schemes.
The acquisitions and disposals in FY22 resulted
in a net inflow of £5.0m, with the cash
inflow from the disposal of the Document
Management business (gross proceeds of £40m
before debt-free/cash-free and normalised
working capital reductions of £3.3m) more than
offsetting the cash outflow on the acquisitions of
DAEL Ventures UK, Rock Power Connections,
Biotecture and Esoteric.
The interim dividend declared for H1 FY22
amounted to £5.7m and was paid in
February 2022.
Lease liabilities and other movements of £18.7m
for FY22 largely relate to lease liabilities for
new properties, including the new TSOC
in Manchester. Other movements in FY21
primarily comprised lease liabilities of £14.2m
acquired with the Interserve business, such as
the vehicle fleet.
In the first half of FY23, a net cash outflow is
expected as a result of unwinding the customer
invoice discounting facility (see below),
accounting for the three new acquisitions,
paying the dividend and commencing the
share buyback programme.
Net debt
Average daily net debt of £24.7m for FY22 was
£22.4m lower than in FY21, despite the £91m
benefit in FY21 of taxes deferred under HMRC’s
‘Time To Pay’ (TTP) scheme (which were repaid
by the end of FY21). Excluding the benefit of TTP,
average net debt in FY22 improved by £113m.
This resulted in a leverage ratio (average daily net
debt / EBITDA before other items on continuing
operations) of 0.1x for FY22 (FY21: 0.5x).
Average net debt will increase in FY23 as a result
of closing the customer invoice discounting facility
and implementing the acquisition, dividend and
share buyback plans.
The Group reported closing net cash of £26.7m
at 31 March 2022 (FY21: net debt of £86.7m),
reflecting strong cash generation from the
business in the year.
Total Financial Obligations (TFO)
£m FY22 F Y21
Net (cash)/debt (26.7) 86.7
Customer invoice
discounting facility 44.5 51.7
Net retirement benefit
liabilities 12.2 42.5
Total Financial Obligations
(TFO) 30.0 180.9
TFO for FY22 fell significantly, benefiting from
strong cash generation from the enlarged
business, together with a reduction in the net
retirement benefit liabilities.
Since year end, the Group has begun to wind
down its customer invoice discounting facility,
as part of its intention to simplify its financial
arrangements and ensure its facilities are used
as efficiently as possible. While TFO will remain
broadly unchanged, this is expected to increase
average net debt by approximately £45m and
reduce finance costs by approximately £1m each
year. In addition, this is expected to increase the
Group’s reported DSO by approximately 4 days.
Liquidity and covenants
At 31 March 2022, the Group had £301.5m of
committed funding arrangements. These comprised
a £150.0m RCF, which was signed in October 2021
with a maturity date of 2025, and £151.5m of
USPP notes. In November 2021, a delayed funding
agreement was entered into for the refinancing
of the £121.5m USPP notes due to mature in
December 2022, with £120.0m of new notes to be
issued on more favourable terms, with 8-12 year
maturities, commencing in December 2022. The
remaining £30m of USPP notes are due to mature
in December 2024.
With effect from 10 June 2021, DBRS Morningstar
assigned Mitie a credit rating of BBB with a
‘stable’ outlook.
Under the terms of Mitie’s new and renegotiated
facilities, Mitie’s two key covenant ratios are now
calculated on a post-IFRS 16 basis, with appropriate
adjustments for leases. The covenant ratios are
leverage (ratio of consolidated total net borrowings
to adjusted consolidated EBITDA) and interest cover
(ratio of consolidated EBITDA to consolidated
net finance costs), with a maximum of 3.0x and
minimum of 4.0x respectively.
At 31 March 2022, the Group was operating well
within these ratios at <0x covenant leverage and
16.2x interest cover. A reconciliation of the
calculations is set out in the table below:
£m FY22 F Y21
Operating profit before
other items
1
169.8 63.4
Add: depreciation,
amortisation &
impairment
1
51.8 46.9
Headline EBITDA
1
221.6 110.3
Add: covenant
adjustments
2
19.9 22.2
IFRS 16 EBITDA
adjustment
3
(FY21 only) – (28.0)
Leases adjustment
4
(FY22 onwards) (36.3) –
Consolidated EBITDA (a) 205.2 104.5
Full-year effect of
acquisitions & disposals (2.0) 23.4
Adjusted consolidated
EBITDA (b) 203.2 127.9
Net finance costs
1
19.7 17.4
Less: covenant
adjustments (3.0) (1.8)
IFRS 16 finance costs
adjustment
3
(FY21 only) – (3.3)
Leases adjustment
5
(FY22 onwards) (4.0) –
Consolidated net finance
costs (c) 12.7 12.3
Interest cover (ratio of
(a) to (c)) 16.2x 8.5x
Net (cash)/debt (26.7) 86.7
Impact of hedge
accounting and
upfront fees 1.5 2.8
IFRS 16 net debt
adjustment
3
(FY21 only) – (106.4)
Leases adjustment
6
(FY22 onwards) (122.5) –
Accounting policy
change for recognition
of BACS – (5.6)
Consolidated total net
(cash) (d) (147.7) (22.5)
Covenant leverage (ratio
of (d) to (b)) < 0x < 0x
1. Continuing and discontinued operations.
2. Covenant adjustments to EBITDA relate to
share-based payments charges, and pension
administration expenses and past service costs.
3. IFRS 16 adopted in financial covenants from
FY22 onwards.
4. Leases adjustment for EBITDA relates to
depreciation charge for leased assets and interest
charge for lease liabilities.
5. Leases adjustment for net finance costs relates
to interest charge for lease liabilities.
6. Leases adjustment for net cash relates to
lease liabilities.
64
Mitie Group plc
Annual Report and Accounts 2022
Engineering
more fulfilling careers
for our apprentices
A change of perspective
Evie was working in a helpdesk position serving one of our customers
– a global automotive manufacturer. During the first COVID-19
lockdown in 2020, her role changed and she found herself working
more closely with the engineers. She became really interested in
the problem-solving aspects of their role, and after some reflection
she decided she wanted a career change – and to become an
engineer herself.
Learning and earning
Evie put forward her idea at one of her regular MiReviews and her line
managers supported her to apply for an apprenticeship. Evie is now
a Maintenance and Operations Engineering Technician Apprentice
at Mitie – and loving her new, hands-on role. She shadows electrical
and mechanical engineers, learning how they solve a wide variety of
problems and keep customers happy. She also does formal work in
the classroom shared with other female engineering apprentices,
two of whom are also from Mitie. Evie loves being an apprentice,
and particularly values the fact that she is being paid to learn.
Investing in the future
For Mitie, stories like Evie’s are common. We recognise the vital
importance of apprentices in sectors like engineering; if we fail
to recruit them, then we miss the opportunity for experienced
engineers to pass on their skills and knowledge to a new generation.
We also see apprenticeships as a great way to bring more diversity
into sectors that have traditionally been very homogenous.
Capability enablers – ‘Great place to work’
£1.1 million
Mitie has committed to gift its surplus
Apprenticeship Levy funds to SMEs
across England
1,000+
apprentices working
across Mitie
50
different apprenticeship
programmes at Mitie
Link to strategy
Strategic report Governance Financial statements
65
Mitie Group plc
Annual Report and Accounts 2022
Leaving a desk job and getting
into a hands-on problem-solving
role has been great, and just what
I hoped it would be. The variety
is my favourite part of the job,
along with getting to see what the
customer does on the shop floor as
they make the cars, and ultimately
making the customer happy!
Evie Maloy,
Maintenance and Operations Engineering
Technician Apprentice, Mitie
66
Mitie Group plc
Annual Report and Accounts 2022
Principal risks and uncertainties
Effective risk management
Our risk management approach
During FY22, Mitie’s approach to risk
management has continued to advance.
The recent launch of Mitie’s automated risk
management tool has enabled full transparency
of risks across the Group and ensured that
a substantially enhanced approach to risk
management is adopted throughout the
business. More information is available on
page 68.
Mitie’s risk management process is simple and
aligned with the Group’s operating model. Each
business area is responsible for the continual
management of existing and emerging risks,
both in the context of threats and opportunities.
The following points are pertinent to the
compilation of the Group’s principal risks
and uncertainties:
The Board is responsible for clearly defining
the level of risk exposure Mitie is willing to
take, and for ensuring that the activities
undertaken to achieve the Group’s strategic
objectives are commensurate with the risk
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
effective mitigation 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
via Mitie’s automated risk management tool,
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 in
terms of either tolerance and/or risk appetite.
Risk registers are automated and subject to
continual management reviews.
The Insurance team plays a pivotal role in
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 Intelligence
Hub, 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.
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 FY22, Mitie has continued
to take the learnings from the evolving
COVID-19 pandemic.
The Group operates in accordance with
ISO 31000 – Risk Management Guidelines –
and will be seeking formal certification
validating this in FY23.
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 68 to 77.
In assessing Mitie’s long-term viability,
consideration is given to the emerging and
principal risks facing the Group. The Viability
Statement is found on page 83.
Changes to our risk profile
Throughout FY22, Mitie has operated against
a backdrop of continual uncertainty. The
external landscape has changed rapidly due to
the knock-on effects of COVID-19, Brexit, and
the intensifying focus on climate change, while
more recently this has been compounded by
macroeconomic and geopolitical uncertainties.
The recovery of economic activity post
COVID-19, has significantly increased inflation
levels, increased global supply chain disruption,
and in some circumstances resulted in
significant legislative changes, all of which have
the potential to impact the Group’s operations.
The following changes have been made to
Mitie’s principal risk profile owing to this
evolving external landscape:
Principal risk: Annual trend as at 1 April 2022:
Cyber security and
data management
Increased net risk exposure owing to a material increase in cyber-attacks
during FY22.
Health, safety and
environment
Increased net risk exposure owing to increased project/construction,
design and management (CDM) related activities combined with continued
uncertainty relating to COVID-19.
Employees Increased net risk exposure owing to ongoing labour market pressures
and inflation.
Third-party
management
Increased net risk exposure owing to material price rises, an increase in
the number of suppliers following the integration of Interserve Facilities
Management (Interserve), combined with issues from COVID-19 and Brexit,
which continue to compound the risk.
During FY22, Mitie has retired the principal
risk relating to the Interserve FM integration
following the successful completion of all
integration activities. In FY22 Q4, the Group
undertook a thorough review of the internal
and external landscape looking at a series of
risks and opportunities across a number of
scenarios including:
New risks that have emerged in the external
environment but are associated with the
Group’s existing strategy.
Existing risks that were already known to
the Group but have developed or been
triggered by changed circumstances.
Risks that were not previously faced by the
Group, because the risks are associated with
changes in the Group’s operations.
As a result of this review, two new principal
risks have been introduced, namely growth
through acquisitions, and political and
economic uncertainties.
Emerging risks
In addition to understanding the risks that Mitie
currently faces, there is a continual review of
emerging risks undertaken to ensure the
Group remains operationally resilient and
future strategic planning is not compromised.
This review covers both internal and external
environments.
Current emerging risks being monitored
include:
The evolving complexity and sophistication
of cyber-related attacks and ransomware
that could directly impact Mitie, customers
or third parties involved in Mitie operations.
The potential for an insolvency wave and
the impact this could have on customers and
third parties involved in Mitie operations.
The impact of regulatory changes, such as
the potential for new measures related to
audit, corporate reporting and corporate
governance.
Strategic report Governance Financial statements
67
Mitie Group plc
Annual Report and Accounts 2022
Our risk management framework
Internal reporting External 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
Principal risks
anduncertainties
Condensed version of Principal
Risks and Uncertainties, which
has been reviewed and approved
by the Mitie Board and Audit
Committee
New and 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
Account level risks
Identify, evaluate and mitigate
operational risks recorded in risk
register
Report on current and emerging
risks
Business unit, function
and project risks
Identify, evaluate and mitigate risks
recorded in risk register
Report on current and emerging
risks
RC
AC
PL
AC
AC
PL
BUL
AC
MB
AL
BUL
MB
MB
BUL
RC
RC
RC
IH
RT
RT
RT
AL
ALPLBFL
RT
MGX
BFL
MGX
MGX
BFL
IH
Contributors key:
Mitie Board Mitie Group
Executive
Audit
Committee
Risk Team Risk
Committee
Intelligence
Hub
Business Unit
Leadership
Team
Business
Function
Leadership
Team
Project
Leadership
Team
Account
Leadership
Team
Top dow n
Bottom up
68
Mitie Group plc
Annual Report and Accounts 2022
Principal risks and uncertainties
continued
Capability
enablers
Margin
enhancement
Grow
Mitie
In FY22, the Group embarked on a project to
refine risk management across the business
through the use of automated technology.
The ambition was to create software which
would support all Mitie business areas by
providing a means for colleagues to define,
maintain and manage their respective risks,
removing reliance on locally stored templates
and laborious manual intervention, as well
as provide the much-needed oversight
of Group-wide risks, enabling enhanced
monitoring and facilitation of corporate
governance requirements.
In FY22 Q4, this project concluded with the
successful launch and roll-out of Mitie’s own
automated risk management platform. This
new technology has already resulted in a
number of benefits, which are readily available
at the click of a button. These include the
ability to:
Access real time risk profiles across
the Group.
Cascade risk information to all Mitie
business areas. Similarly, business areas can
escalate risk information ensuring that the
correct management controls are put in
place as soon as reasonably practicable.
1
An inability to quickly identify and effectively respond to the risks
posed from either geopolitical or macroeconomic matters could
adversely impact Mitie. A sudden change in market conditions such
as an economic slowdown or significant political uncertainty, either
nationally or globally, could have a negative impact on the demand
for the Group’s services.
Mitie’s performance may be affected by general economic conditions
and other financial and political factors outside the Group’s control.
An economic slowdown may result in decreased project work and
discretionary spend or descoping of services by customers, which
can lead to an impact on the Group’s financial performance.
Post COVID-19, demand for goods and services and economic growth
has started to recover. However, this recovery has caused prices to
increase due to global supply and demand issues, and such pressures
may continue in the medium term. Recent political conflicts have
compounded the risk further with additional price increases being
experienced, for example in relation to fuel and energy.
Mitie drives most of its revenue from a client base in the UK, with
limited exposure to the wider global economy in respect of demand for
services; however, the costs of delivery are exposed to global inflationary
impacts. The Group continues to monitor the impact of the current
economic and political challenges on the cost of delivering its services
to ensure mitigating actions, such as using contractual protections to
pass on such cost increases, minimise the Group’s exposure to this and
associated risks.
Impacts on strategic pillars: Change in year:
Economic and political uncertainties
Controls and mitigating actions
Mix of long-term contract portfolio in both the public and
private sectors.
Continual development of new and innovative solutions via
Connected Workspace.
Focus on higher margin growth opportunities.
Regular reviews of the sales pipeline.
Increasing spread of client base, reducing reliance on
individual customers.
Strategic account management programme.
Dedicated Finance, Risk and Intelligence Hub specialists
scanning environment.
Utilising contract mechanisms to recharge cost increases.
Digital supplier platform (DSP) providing greater visibility of
and ability to manage supply chain.
Leveraging buying power to help mitigate the increase in cost
of goods and services.
Future plans
Continuous horizon scanning including via Intelligence Hub
which issues regular alerts to teams on potential threats and
significant events.
Ongoing review of market conditions.
Generate
cash
Managing risk: transforming risk management through the use of automation
Automate review of all hazard/pure risks
so that the Insurance team can ensure
appropriate coverage.
Examine all risks in line with Mitie’s risk
appetite framework. Where risks exceed
the thresholds, an automated alert will
mandate the completion of additional risk
mitigation measures.
Access climate change risks as well as all
other risks and opportunities which could
impact Mitie’s ESG agenda.
Demonstrate full compliance with legislative
requirements as well as those associated
with ISO 31000:2018 Risk Management.
Support strategic, tactical and operational
decision-making.
Facilitate risk reviews at all levels including
overarching principal risk reviews.
NEW
Strategic report Governance Financial statements
69
Mitie Group plc
Annual Report and Accounts 2022
2
An inability to quickly identify and effectively respond to the
challenges posed by climate change could hinder the Group’s
transition to a lower-carbon business, result in significant business
interruption and/or compromise 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, customers, 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.
During FY22, Mitie’s commitment to meeting its sustainability pledges
pertaining to fleet, energy use and waste continued, as well as its
commitment to setting a science-based target. The latter defines and
promotes best practice in emission reductions and Net Zero targets in
line with climate science for the Group’s Net Zero scope 3 emissions.
Information on achievements to date is detailed within the ESG section
of this Annual Report.
The Group remains committed to leading the charge on environmental
sustainability and recognises that the scale and pace of adaptation will
continue to accelerate. For FY23, the Group has highlighted three
challenges that will be confronted. Firstly, getting sustainability to the
frontline, embedding it into everything Mitie’s 72,000 colleagues do and
changing mindsets so that everyone considers sustainability in everything
they do; secondly, addressing the looming skills shortage through the
continued development of a sustainable jobs framework; and thirdly,
focusing on UK carbon nature credits, which will be limited, and tackling
any remaining carbon through the use of more direct action.
Mitie continues to monitor developments in relation to climate change
and sustainability, adopting a risk-based approach. The Group has a live
Climate Change risk register in place, which is regularly reviewed and
consulted on as detailed within the TCFD. For more information on
how the Group is responding to this risk please refer to the Social
Value & Responsible Business Committee report and ESG section of
this Annual Report.
Unchanged
Climate change and social impact
Controls and mitigating actions
Plan Zero – continued implementation of three key pillars (eliminating
carbon emissions from power and transport, eradicating non-
sustainable waste, and enhancing inefficient buildings to meet the
highest environmental standards). Mitie has nine buildings that are
decarbonised and has transitioned over 2,200 vehicles to electric
(33% of Mitie’s fleet).
Social Value & Responsible Business (SVRB) Committee – five
meetings were held in FY22, chaired by Non-Executive Director
Phillippa Couttie.
Environmental Management System ISO 14001 and Energy
Management System ISO 50001.
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, biodiversity, procurement and fleet.
Regular testing of crisis management and business continuity plans.
Winter and summer preparedness planning at account level.
Ongoing reviews of Planned Preventative Maintenance (PPM)
lifecycles.
Continuous horizon scanning via the Group’s Intelligence Hub, with
regular alerts to teams on potential threats and significant events.
Insurance cover in place to cover property damage and business
interruption.
Targets in place for Mitie’s social value framework pillars.
Mitie Foundation – launch of Giving Back, Mitie’s employee
volunteering programme.
Active apprenticeship scheme across the Group, training Mitie
colleagues to enhance operational delivery and address skills gaps.
Future plans
Promote sustainable thinking throughout the Group and increase
awareness of the climate crisis and social value.
Continue to decarbonise Mitie operations through the elimination
of fossil fuels.
Encourage the supply chain to align themselves to Mitie’s carbon
reduction journey.
Train Mitie colleagues in all aspects of sustainability and fill the
skills gap.
Capability
enablers
Grow
Mitie
Impacts on strategic pillars: Change in year:
70
Mitie Group plc
Annual Report and Accounts 2022
Capability
enablers
Grow
Mitie
Impacts on strategic pillars: Change in year:
Principal risks and uncertainties
continued
3
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.
The data held by Mitie continues to be one of its most important assets
and includes information concerning its business operations, employees,
customers, 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 customers and potentially result in
significant fines from regulators.
During FY22, there was a material increase in cybercrime nationally
and internationally as criminals sought to exploit security weaknesses
exposed by operational disruptions, with an increasing threat to
companies including Mitie. The Group continues to monitor and act on
any suspicious activity, wider trends in technology as well as information
and guidance from the National Cyber Security Centre to ensure
its resilience.
Mitie acknowledges that the risks posed by cybercrime will intensify in
response to growing digital dependency. Mitie is continuing to invest in
technology to improve the security of its business. Mitie also 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.
Increased
Cyber security and data management
Controls and mitigating actions
Continued alignment with CE+ requirements, and ISO 27001
certified Information Security Management System in place.
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.
Dedicated information security team and data privacy officers
in place.
Outsourcing of routine IT operations to a highly skilled partner
organisation, Wipro, to improve IT resilience and controls. Includes
24/7 service providing Mitie with an enhanced level of information
security monitoring and alerting. The 24/7 Cyber Defence Centre
service provided by Wipro actively monitors all alerts and incidents
raised by the various security tools.
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 focused on
cyber-attacks, a series of exercises aimed at ensuring that downtime
is minimised, and client trust is maintained.
Regular communications to employees to highlight IT risks and
expected behaviours.
Launch of new and enhanced cyber security training.
Upgrades to legacy systems to reduce complexity and improve
management information.
Cyber insurance policy.
MGX Playbook for the management of a cyber-attack.
Security assessment by a leading firm of cyber security experts,
to conduct a phased threat assessment and stress test on the
Mitie network.
Future plans
Broaden scope of ISO 27001 certification to provide all new business
areas with a consistent risk and security focus.
Information Security team to conduct penetration testing of
applications during the development phase to improve security and
reduce defects.
Phishing attack exercises to be conducted every three months across
the Group to reinforce training and highlight dangers.
Conduct quarterly simulated major security incident exercises to
ensure that the incident response process is robust.
Strategic report Governance Financial statements
71
Mitie Group plc
Annual Report and Accounts 2022
Capability
enablers
Grow
Mitie
Impacts on strategic pillars: Change in year:
4
Increased
Health, safety and environment
Controls and mitigating actions
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.
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.
During FY22, Mitie’s QHSE key performance indicators have been
broadly positive with performance either stable or improving following
the integration of Interserve. Focus is now on aligning approaches to
project type works to ensure a consistent end to end approach is
adopted, using the Group’s new automated risk management platform
and Projects Community of Practice Group.
Mitie continues to monitor developments in relation to COVID-19 to
ensure business interruptions are kept to a minimum and productivity
in a safe environment is maximised. The Group has a live COVID-19
risk register in place, which is regularly reviewed and consulted. Focus
remains on ensuring that appropriate steps are taken to safeguard
the physical and mental wellbeing of colleagues, suppliers and others
involved in Mitie operations. The recovery phase of the pandemic has
been welcomed across the Group with Mitie proactively prioritising
and supporting colleagues, customers and subcontracting partners
with getting Britain back to business, including the management of
more than 280 COVID-19 testing centres during FY22.
Mitie remains vigilant should a change in direction be required due to a
COVID variant triggering a new wave or should there be a requirement
for other courses of action relating to the pandemic. Continual horizon
scanning, reviewing and assessment via the Intelligence Hub continues to
play a pivotal role in helping to maintain the Group’s resilience.
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 sets out HS&E expectations including ‘stop the
job’ supported by key safety message from the Chief Executive,
Phil Bentley.
H&S management system certified to ISO 45001 and environmental
system to ISO 14001.
Fully integrated incident recording, monitoring and reporting system.
Regular HS&E reviews conducted at Group and Business Unit level.
Clear and standardised KPIs to monitor progress and improvements.
Targeted QHSE procedural audit programme.
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.
Health and wellbeing framework integrated into the business.
COVID-19 Working Group.
COVID-19 risk assessment and technical compliance processes in
place and regularly reviewed.
UVC disinfection system and thermal imaging in place to mitigate
against spread of COVID-19.
Insurance cover in place to cover Employers’ Liability, Public Liability
and Motor fleet insurance.
Focused zero harm weeks concentrating on pertinent subjects to
further strengthen Mitie’s QHSE culture.
Ongoing review of QHSE team ensuring maintenance of
competencies and correct provision of support and guidance across
the Group.
Future plans
Ongoing review of COVID-19 landscape.
Continuation of QHSE engagement tours, meeting and speaking to
frontline teams, gauging an understanding of safety compliance and
targeting any required improvements.
Evolution of Projects Community of Practice Group.
72
Mitie Group plc
Annual Report and Accounts 2022
Principal risks and uncertainties
continued
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.
In order to be able to meet its financial commitments, the Group 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, while also investing in the business and ensuring it has enough
resources for profitable growth.
During FY22, the Group has continued to actively manage its cash,
liquidity and debt position and focus on this remains strong. A reduced
revolving credit facility (RCF) of £150m has been refinanced on a longer
tenor (4 years + 1 year), and at an interest rate 125bps lower than the
facility it replaced.
In November, agreement was reached to refinance US private
placement (USPP) notes that mature in December 2022. £120m of
new notes will be issued under a delayed funding arrangement, avoiding
any overlap with the maturing £121.5m of notes and at an improved
average coupon of 2.94%. The new notes will have an average 10-year
maturity profile.
The Group has a balance sheet which is strong, stable and flexible,
to support future growth opportunities.
Failure to comply with applicable laws and regulations may lead to
fines, prosecution and damage to Mitie’s reputation.
Mitie 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 FY22, there were notable changes to Mitie’s external
environment in terms of regulatory updates, and in the main these
continued to be related to COVID-19 (e.g. mandatory vaccination
requirements and end of furlough), Brexit (e.g. new immigration laws),
and corporate governance requirements (e.g. mandatory TCFD
reporting). As a consequence, a number of related activities took place
throughout FY22 to ensure the Group remained legally compliant.
In FY23, the Group does not envisage the pace of legislative change
altering and will continue to proactively scan the external operating
environment as well as assess the impact of changes, as they arise.
Uncertainty still remains around legislation yet to be passed and the
impact of this on Mitie. There are still unknowns associated with both
the knock-on impact of Brexit as well as COVID-19 from a regulatory
perspective.
Mitie recognises that a failure to comply with applicable laws and
regulations could result in prosecution and/or significant fines,
and, from a reputational perspective, could damage the Group’s
relationships with customers and its success when bidding for work.
As a consequence, Mitie may also face debarment when tendering
for public sector contracts.
Controls and mitigating actions
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.
Future plans
Continue to work with a range of financial institutions to ensure that
affordable finance sources can be accessed.
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,
especially for mandatory courses.
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.
Establishment of Internal Control Declaration framework ongoing to
align with potential UK legislation requirements.
Future plans
Ongoing horizon scanning.
Ongoing review of IMS to update policies and procedures.
Grow
Mitie
Grow
Mitie
Impacts on strategic pillars:
Impacts on strategic pillars:
Change in year:
Change in year:
5
6
Reduced
Unchanged
Funding
Regulatory
Margin
enhancement
Capability
enablers
Strategic report Governance Financial statements
73
Mitie Group plc
Annual Report and Accounts 2022
A failure to maintain competitive advantage resulting in a loss in key
customers, an over-reliance on a particular sector or a failure to
produce bids which are financially viable could have a significant
impact on Mitie’s financial health and reputation.
FY22 has witnessed many achievements for the Group, including but not
limited to, the successful completion of the Interserve integration, a large
number of high-profile contract wins, the acquisition of new businesses
such as DAEL Ventures, Rock Power Connections and Esoteric, the
introduction of new centres of excellence including Cleaning and Hygiene
and the Technical Services Operations Centre, and the proactive
management to support the COVID-19 recovery, most notably through
the management of more than 280 COVID-19 testing centres.
Despite such achievements, the Group recognises the importance of
staying focused and continually reviewing ongoing challenges, such as
threats posed by new entrants, market saturation across the sectors,
growing competition as well as the ongoing effects from COVID-19.
Each of these challenges has the potential to impact profit margins and
disrupt Mitie operations.
In FY23, the Group will continue to monitor the changing external
environment as well as market coverage. Furthermore, Mitie will
continue to develop and deliver competitive bids, along with
maintaining obligations towards the delivery of a quality service
for existing customers.
Controls and mitigating actions
Bid Committee approval for complex bids.
Robust risk assessment of bids – Commercial, Legal and Operational.
Detailed contracting guidelines in place.
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.
Sales and pipeline management information to track and measure
growth, wins and losses.
Win/loss debriefing process to take learnings for future bidding
activities.
Chief Government & Strategy Officer coordinating 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.
Sales Academy.
Future plans
Continue to pursue suitable opportunities through the Crown
Commercial Services frameworks.
Continue to target emerging markets.
Continue to engage with opportunities that have scope for
innovative solutions.
Grow
Mitie
Impacts on strategic pillars: Change in year:
7
Unchanged
Competitive advantage
Margin
enhancement
Generate
cash
74
Mitie Group plc
Annual Report and Accounts 2022
Principal risks and uncertainties
continued
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.
During FY22, Mitie’s commitment to ensuring its organisational resilience
and viability has continued, despite uncertainty relating to COVID-19,
post Brexit issues, increasing cyber-threats and more recent geopolitical
events and the associated implications. During FY22, the Group has
taken additional steps to ensure its ability to respond to disruptive events
is not hindered by a failure to plan. Extra controls have been rolled out
to tackle the Group’s response to a sustained period off-line owing to a
cyber-attack and additional measures have been introduced to safeguard
operational practices which could be compromised owing to an issue
with one or more of Mitie’s major suppliers and/or service providers.
Mitie has utilised learnings from previous incidents to develop a series of
manual operating procedures to support business activities in the event
of a cyber-attack on its operations.
The Group remains committed to enhancing its planning and response
capability to minimise the impact from any significant business
interruption and improve the speed of recoverability. Mitie recognises
that as the business grows, the risks associated with a sustained period
of downtime increase. In FY23, Mitie will be launching a series of
targeted training modules to all business area leads with responsibility
for critical and business continuity management. As well as reinforcing
the importance of planning in order to prevent panic, the modules
will also focus on the need to plan for disruptive events associated
with sustainability risk management, ensuring that Mitie colleagues are
prepared for all eventualities and are well placed to support customers
and other third parties engaged in Mitie activities, as required.
The Group will continue to work closely with both supply chain and key
service providers to ensure improvements in this area. This includes
being proactive and vigilant of the changing environment and ensuring
business continuity plans remain fit-for-purpose.
Controls and mitigating actions
Key policies and associated operating procedures in place.
Dedicated specialist teams including Risk, Information Systems,
Finance, Occupational Health, Supply Chain and Intelligence Hub.
Maintained and updated crisis and business continuity plans for key
activities across all Mitie operations, including key service providers.
Disaster recovery framework embedded and managed.
Regular testing of crisis management and business continuity, including
dedicated Executive Management scenario testing.
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.
Operating in accordance with ISO 22301-2019 and 31000-2018.
Continuous horizon scanning via the Intelligence Hub with regular
alerts to teams on potential threats and significant events.
Critical Engineering and Technical Assurance (CETA) Programme
implemented in Technical Services to help manage high-risk contracts.
Insurance cover in place to cover business interruption.
Colleagues can work from home without loss of any business-critical
systems/applications.
Themes and root causes monitored from the results of audits to
target specific actions.
Digital supplier platform (DSP) – supports the efficiency of Mitie
supply chain processes (supplier onboarding/supplier health,
Contract Lifecycle Management, Sourcing and Purchase to Pay).
Future plans
Roll-out of targeted critical and business continuity management
training modules.
Review digitalisation of business impact analysis.
Capability
enablers
Margin
enhancement
Grow
Mitie
8
Impacts on strategic pillars: Change in year:
Business resilience
Generate
cash
Unchanged
Strategic report Governance Financial statements
75
Mitie Group plc
Annual Report and Accounts 2022
Controls and mitigating actions
Consistent HR resourcing process and system across the Group.
Process in place for online training and development, with access to
online learning for all colleagues.
Consistent process to manage both temporary and permanent
recruitment.
Training and development programmes for senior leadership.
Developed talent identification, management and development
framework.
Improved performance management framework.
HR structure streamlined and working in close partnership with
the business.
Induction programme, mandatory for new starters.
Regular communications from leadership team – including Executive
Management 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.
Attraction strategy developed and deployed.
Enhanced benefits such as free shares, life assurance, virtual GP,
and a salary advance scheme.
New careers site launched in FY22 attracting more than 128,000
new and unique viewers.
Future plans
A further award of free shares to increase employee share
ownership.
Launch of a Group-wide Employee Value Proposition campaign,
bringing together the total employee offer in one place to attract
and retain talent. External and internal communications campaigns
planned.
Launch Career Band Framework to provide colleagues with visibility
of career paths and internal opportunities for career advancement.
Open flexible benefits (Choices) to hourly paid colleagues (currently
open to salaried colleagues only).
Continue to improve employee experience through system
enhancements including single sign on for People Hub and Learning
Hub (core HR systems).
Run a ‘cost of living’ campaign to provide financial support and advice
through colleague benefits including discount scheme, Salary Finance
(low-rate loans) and Salary Advance.
Ongoing review of labour markets.
Capability
enablers
Grow
Mitie
9
Impacts on strategic pillars: Change in year:
Employees
Increased
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.
FY22 witnessed large-scale impacts to the UK labour market as the
economy began to recover from COVID-19. This was compounded
by the broader implications of Brexit which had the potential to
compromise the availability of labour and key skills. During FY22, the
Group continued to work hard to minimise disruption caused by this
evolving external landscape. In FY22, Mitie took positive action to retain
talent, through the provision of enhanced benefits for all colleagues
including free shares, enhanced maternity pay, the addition of sabbaticals/
career breaks, life assurance, virtual GP, and a salary advance scheme
(the ability to draw down pay earned ahead of payday). Additionally, to
ensure compliance with the EU Settlement Scheme, the Group worked
closely with impacted colleagues to ensure that they were assisted and
guided through the process effectively.
Mitie made great progress in FY22 on the journey to make the Company
a truly inclusive place to work, through diversity networks and an
award-winning conscious inclusion learning programme (Count Me In).
Other highlights included the delivery of executive roadshows over a
three-week period in the form of Team Talk Live and partnering with
external experts to enhance Mitie’s attraction strategy and collateral.
In FY23, Mitie will continue to proactively monitor developments in
relation to the labour market as well as any further implications resulting
from COVID-19, such as workforce fatigue. The Group will launch a
Group-wide Employee Value Proposition campaign, a Career Band
Framework as well as a cost-of-living campaign to provide financial
support and advice.
76
Mitie Group plc
Annual Report and Accounts 2022
Principal risks and uncertainties
continued
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, resulting in financial losses owing to
fines and in some circumstances significant reputation damage.
In FY22, many sectors have been impacted by shortfalls in key products
and materials. This in turn has led to delayed or reduced deliveries,
mis-picks of products, short notice substitutions and short-term
unavailability of key products and materials. During FY22, the Group
continued to work closely with supply chain partners to ensure Mitie
was operating effectively and to reduce the impact from disruption.
At an account level there were ongoing reviews of key products and
materials, and customers were continually kept abreast of developments.
In FY22, the Group launched its new digital supply chain platform (DSP)
to better manage supply chain and associated risks. This has resulted in
a structured review of all suppliers and subcontractors, which has seen
88% of subcontractors (by spend) fully accredited on a best-in-class
QHSE accreditation platform (Safe Contractor). A further Procurement
and Supply Chain (PSC) Insights initiative was also introduced to keep
both customers and the wider business informed of the changing
environment. During the same period, transitional activities took place
following the integration of Interserve, with two separate supply
frameworks being amalgamated into one.
In FY23, Mitie will continue to proactively monitor developments with
both the internal and external landscapes, paying particular attention to
the ongoing issues still being experienced from both COVID-19 and
Brexit, combined with the impact of inflation, which continues to affect
all businesses. Particular focus will continue to remain on Supplier
Risk Management and Supplier Health facilitated by data delivered via
the DSP. The Group is actively monitoring the entire supplier base
(c.12,000 suppliers) for key risk areas and has a structured programme
to close gaps and manage risks, particularly around subcontractors’
QHSE accreditation and all suppliers’ insurance coverage.
Controls and mitigating actions
Key policies and associated operating procedures, including Supply
Management Framework.
Dedicated Procurement and Commercial teams.
Mitie First approach adopted.
Project Forté driven improvements under Supply Chain Management
workstream, including enhanced supplier audits, improved invoicing
capabilities, master service agreements and job automation.
Rigorous on-boarding framework integrated into business utilising the
digital supplier platform (DSP).
Defined service level agreements 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.
Ongoing review of third-party business continuity arrangements
with regular reporting to the Group Risk team.
DSP facilitating supplier health and risk checks as well as
invoice processing.
Procurement and Supply Chain (PSC) Insights introduced.
Future plans
Ongoing review focused on post COVID-19 and Brexit landscapes
and inflation implications.
Continued roll-out and enhancement of processes relating to
th e D SP.
Ongoing supplier review focused on QHSE accreditations and
insurance coverage.
Capability
enablers
Margin
enhancement
Grow
Mitie
10
Impacts on strategic pillars: Change in year:
Third-party management
Increased
Strategic report Governance Financial statements
77
Mitie Group plc
Annual Report and Accounts 2022
Margin
enhancement
Controls and mitigating actions
Specialist legal and financial professionals.
Ongoing review of market conditions and value for stakeholders.
Rigorous due diligence and risk management processes.
Training and awareness.
Financial governance and controls.
Assessment of new acquisitions against Mitie’s internal control
framework.
Future plans
Continued focus on growth strategy ensuring healthy balance
between short-term value and long-term return is maintained.
Ongoing enhancements to acquisition evaluation process.
Ongoing review of market conditions.
Capability
enablers
Grow
Mitie
11
Impacts on strategic pillars: Change in year:
Growth through acquisitions
An important part of Mitie’s growth is generated through
acquisitions. Market conditions might mean the ability to secure
such opportunities for future growth which are favourable to
Mitie in respect of price and terms and conditions may not always
be available.
A component of Mitie’s growth is generated through acquisitions, which
provide an opportunity to grow market share and enhance service
offerings. Any future growth through acquisitions will depend on the
continued availability of suitable propositions both in relation to price,
and terms and conditions as well as the Group’s ability to fund them.
As well as opportunities, acquisitions encompass a series of risks which
if miscalculated, particularly around the value and integration of the
business being acquired, could have a detrimental impact on the Group.
An inability to effectively manage all associated risks could delay the
delivery of expected benefits and consequently hinder Mitie’s business
performance. In order to make sure these risks are managed successfully,
it is important that Mitie maintains a rigorous acquisition evaluation
process and due diligence is completed to the highest standard and
appropriate attention is given to the integration of new acquisitions.
Following the acquisitions of DAEL Ventures, Rock Power Connections,
Esoteric and Biotecture in FY22, Mitie intends to continue to identify and
secure opportunities which will enhance the Group’s existing offerings.
NEW
78
Mitie Group plc
Annual Report and Accounts 2022
Shining a light on
safer workspaces
Innovation in creating a hygienic, clean workspace
As more people return to office working, our Innovation Forum –
a group created to support the development of technology to
enhance the built environment – has explored innovative ways to
clean and disinfect working areas more thoroughly and efficiently.
In 2021, we partnered with Luxibel, a global provider of UVC
Disinfection Systems, to explore new ways of protecting against
airborne pathogens, creating a safer and cleaner indoor environment
through the power of light.
Harnessing the power of UVC light
We introduced Luxibel UVC air filtration systems and UVC
purification lamps as a pilot in the Mitie HQ at The Shard, London.
These use a special frequency of ultraviolet light – UVC – to provide
a highly effective, chemical-free disinfection solution, proven to kill
99.994% of airborne pathogens. We identified this as the safest, most
effective technology, which also gives people the added confidence
afforded by visibly working units. Our air filtration systems are always
on and disinfecting indoor air 24/7. We have subsequently installed air
filtration systems in all our major offices.
A visible investment in safety
Post-lockdown, organisations had to ensure COVID-19 safety
measures were in place to protect employees and limit the spread of
the virus. As the pandemic has developed, the focus has moved from
improving air quality as a ‘Covid-measure’ to improving wellbeing and
increasing productivity overall. We have successfully rolled out the
technology for contracts with our customers including Network Rail
and Government Property Agency and it’s even been featured on
the BBC.
89%
of workplaces describe air quality
as ‘important’ or ‘very important’
566
UVC light units deployed so far
99.994%
airborne pathogens killed by UVClight
Link to strategy
Capability enablers – Science of Service
Strategic report Governance Financial statements
79
Mitie Group plc
Annual Report and Accounts 2022
Being severely immune
compromised, I’m at the sharp end
of clinical vulnerability with regards
to all infections and COVID is no
exception. Mitie’s investment in
UVC within our offices played a
part in my decision to join. This isn’t
just about clean air… for me, it’s
about inclusion.
Nicola Mulford,
Marketing Propositions Manager, Mitie
80
Mitie Group plc
Annual Report and Accounts 2022
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.
As detailed further on pages 36 to 51 and 131 to 132, Mitie has 13 industry-leading social value and responsible business targets as part of its Social
Value Framework. Progress towards these targets is published monthly in Mitie’s Social Value & Responsible Business Dashboard which is available at
www.mitie.com/esg. Mitie met or exceeded all 13 of its social value targets for FY22.
Mitie’s leadership position across ESG has been shown by the improvement in ratings from major ESG rating agencies during FY22, including
The Sustainable FM Index.
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.
Reporting requirement Relevant policies
1
Annual Report page reference
Environmental matters Sustainability policy
Procurement policy
Chief Executive’s strategic review pages 6 to 12
Stakeholder engagement pages 30 to 32
Environment pages 41 to 49
Social Value & Responsible Business Committee report
pages 131 to 132
Employees Employee Handbook
People policy
Equality diversity and inclusion policy
Health and safety policy
Ethical business practice policy
Sustainability policy
Quality policy
Chief Executive’s strategic review pages 6 to 12
Stakeholder engagement pages 30 to 32
People pages 37 to 40
Social matters Sustainability policy Chief Executive’s strategic review pages 6 to 12
Stakeholder engagement pages 30 to 32
Community page 50
Social Value & Responsible Business Committee report
pages 131 to 132
Human rights Employee Handbook
Ethical business practice policy
Stakeholder engagement pages 30 to 32
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
People pages 37 to 40
Stakeholder engagement pages 30 to 32
Culture at Mitie pages 96 to 99
Suppliers Procurement policy
Supplier social value policy
Responsible supply chain page 51
Business model Our business model pages 28 to 29
Non-financial KPIs Key performance indicators pages 16 to 19
Principal risks Principal risks and uncertainties pages 66 to 77
Viability statement pages 83 to 84
Audit Committee report pages 107 to 114
Governance pages 86 to 114
1. Policies, statements and codes are available at www.mitie.com
Strategic report Governance Financial statements
81
Mitie Group plc
Annual Report and Accounts 2022
Section 172 statement
Key decisions in the year
Mitie acquired:
DAEL Ventures, a leading provider of
acquisition, design and construction services
(ADC) in the UK for mobile telecoms
infrastructure, on 5 August 2021
Rock Power Connections, an independent
connection provider, specialising in the
design and installation of new high voltage
electricity supplies, the renewal of electrical
assets up to 132kV and electric vehicle
charge points, on 1 November 2021
P2ML, a specialist telecoms tower design
house, on 1 April 2022
8point8, a leading provider of design
and construction services in the UK,
predominantly for mobile telecoms
tower infrastructure, on 3 May 2022
When considering the proposals to acquire
these companies during FY22, the Board
considered the strategic benefits to
stakeholders of the transactions.
Employees:
New colleagues benefit from becoming part
of a larger, more profitable company;
They also benefit from our 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 new colleagues; and
Capacity and bandwidth of existing Mitie
colleagues involved with the acquisitions.
Customers and suppliers:
Opportunities to enhance our portfolio of
services, enabling us to deliver new and
complementary services to existing
customers as well as new customers;
Roll-out of our customer-facing technologies
to the customers of the acquired businesses,
improving customer experience; and
Risk of renegotiation or early termination of
customer contracts.
Shareholders:
Impact on EPS and return on invested
capital;
Potential cost synergies, as well as the
possibility of unexpected liabilities and costs
or inaccurate assumptions and estimates
relating to benefits and synergies;
Expected stronger financial profile
supporting a progressive dividend policy; and
Possible difficulties integrating the new
businesses.
Community and environment:
Impact on our social value agenda and Plan
Zero targets and milestones.
Outcome and impact of the decision
After due consideration of the matters set
out in Section 172 of the Act, related risks
and opportunities and the impact on wider
stakeholders, the Board approved the
acquisition of the companies. The acquisitions,
which were integrated into the Technical
Services division, are performing in line
with expectations.
We believe that considering our stakeholders in
key business decisions is not only the right thing
to do but is fundamental to our ability to drive
value creation over the longer term. Now, as
we enter a new financial year in the midst of
recovering from a global pandemic, balancing the
needs and expectations of our stakeholders has
never been a more important or challenging
task. Board Directors are bound by their duties
under the Companies Act 2006 (the “Act”) to
promote the success of the Company for the
benefit of our members as a whole. In doing
so, however, we must have regard for the
interests of all of our stakeholders, to ensure
the long-term sustainability of the Company.
The Board is therefore responsible for ensuring
that it fulfils its obligations to those impacted by
our business, in its stakeholder consideration
and engagement. Stakeholder consideration is
embedded throughout the business, with the
Board and senior management actively engaged
in communication and engagement initiatives.
The following pages comprise our Section 172(1)
statement, setting out how the Board has, in
performing its duties over the course of the
year, had regard to the matters set out in
Section 172(1) (a) to (f) of the Act, alongside
examples of how each of our key stakeholders
have been considered and engaged. Further
information can also be found throughout the
Strategic report and in our exploration of key
strategic decisions made in the Governance
report. Details of Mitie’s key stakeholders, how
the Group has engaged with them during FY22
and the outcomes of that engagement, are set
out on pages 30 to 32. Engagement activities
specifically carried out by the Board collectively
and individually can be found on pages 93
and 98.
The Board made some crucial decisions during
the year, promoting the Company’s purpose,
strategy and long-term sustainability. All Board
decisions are made having considered the
matters set out in Section 172(1) of the
Companies Act 2006, and here we analyse
some of these decisions and considerations
in detail.
Acquisition of DAEL Ventures, Rock Power Connections,
P2ML and 8point8
82
Mitie Group plc
Annual Report and Accounts 2022
Key decisions in the year
The Board did not recommend a final dividend
in respect of the year to 31 March 2020, and
no interim or final dividend for the year to
31 March 2021, due to the uncertain micro-
and macro-environments resulting from the
COVID-19 pandemic. When considering the
proposals to resume the payment of dividends
for FY22, the Board considered cash
generation, the performance of the underlying
business and the long-term impact of paying
the dividends on the liquidity and solvency
positions. The Board also considered the
impact of the dividend decisions on
expectations relating to the dividend policy.
Shareholders and lenders:
Shareholders’ expectations in relation to the
payment of dividends, both from a capital
return perspective and as a signal of future
performance; and
The impact of paying dividends on whether
the business remained within the financial
covenants agreed with lenders.
Employees:
For colleagues who participate in the
Group’s employee share schemes, the
payment of dividends enabled returns for
those colleagues.
Community and environment:
The fact that we repaid the monies
received from Government for our
directly employed colleagues, under the
Coronavirus Job Retention Scheme
established to support businesses through
the COVID-19 pandemic.
Outcome and impact of the decision
Following due consideration of all the matters
set out in Section 172, and with £86m of free
cash flow reported in the first half of the year,
average daily net debt of £60m, and the
underlying performance of the business back
to pre-COVID levels, the Board determined
that the resumption of dividends through the
declaration of the FY22 interim dividend was
consistent with the Group’s risk appetite having
assessed the likely impact on the business and
its stakeholders (including in the long term),
and that similar considerations applied for the
recommendation of the FY22 final dividend.
Approval of FY22 interim and final dividends
Mitie acquired Interserve Facilities Management
(Interserve) on 30 November 2020, and the
12-month integration programme, delivered
through 16 complex projects, was completed
during FY22. Delivering significant cost
synergies, introducing Interserve customers
to our market-leading technologies, renewing
Interserve contracts, and driving cross-selling
opportunities are core drivers of future
value-creation.
The Board received progress reports on the
implementation of the integration programme
at each Board meeting.
Employees:
Former Interserve colleagues benefited
from the transfer to our HR and payroll
systems, giving full access to systems and
available benefits and rewards, learning and
development opportunities;
Delivery of the expected employee
synergies on integration; and
Management of talent flight risk from former
Interserve colleagues.
Customers and suppliers:
Delivery of improved customer experience,
monitored through performance in NPS
survey;
Roll-out of Mitie’s customer-facing
technologies to Interserve customers,
improving customer experience;
Mitigation of the risk of the failure to renew
former Interserve customer contracts or
early termination of those contracts;
Consolidation of supplier base; and
Delivery of the new public sector contracts,
resulting from the acquisition.
Shareholders:
Impact on EPS and return on invested
capital and whether the improvements
to the profit margins and free cash flow
had been delivered;
Realisation of the cost synergies;
Strengthened financial profile offering the
opportunity to resume dividends; and
Mitigation of the 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 accounts process contained in
the sale and purchase agreement, and the
subsequent expert determination process.
Community and environment:
Impact on our overall social value agenda
and Plan Zero targets and milestones; and
Expansion of the Mitie Foundation agenda
to include Interserve geographical areas.
Outcome and impact of the decision
The integration programme completed at
the end of November 2021 as planned.
The 16 projects and the various project teams
delivered on the objectives set back in the
planning phase, navigating the challenges of
delivering such extensive change in a short
period of time with the added complications
of remote working due to COVID-19.
Integration of Interserve
Section 172 statement
continued
Strategic report Governance Financial statements
83
Mitie Group plc
Annual Report and Accounts 2022
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 1 to 84).
The key factors affecting the Group’s
prospects are:
Mitie is one of the leading UK’s leading
facilities management businesses with c.5%
of the market;
The outsourcing market is relatively
insensitive to economic cycles;
We have a clear vision for our technology-
centric growth strategy;
We are making good progress in our
transformation programmes; and
We have 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 the viability assessment as it
is supported by our strategic, budgeting and
business planning cycles and is relevant to the
duration of the Group’s existing contracts with
customers which is typically around three years.
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 111 to 113, are considered.
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;
Share buyback programme beginning in FY23;
Settlement of existing provisions according to
our 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 financial
covenants and liquidity headroom of existing
committed facilities.
The Group’s core liquidity is provided by a
£150m revolving credit facility and £151.5m of
US Private Placement notes. £120m of new
US Private Placement notes will be issued under
a delayed funding arrangement in December
2022, avoiding any overlap with the existing
£121.5m of notes that mature in the same
month (see Going Concern statement on
pages 152 and 153 for further detail). A further
£30m of notes will mature in December 2024,
which the base case scenario assumes will be
re-financed. In addition, at 31 March 2022 the
Group had utilised £45m of its confidential
invoice discounting facility. This facility is being
wound down, which will result in an increase in
Group debt that has been included in the base
case scenario.
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
understand the reduction required to cause a
breach of interest cover covenant. Whilst the
impact on revenue, gross margin, overheads,
and net debt was assessed, revenue was the
focus of the reverse stress test as this is less
within the control of management.
Scenario Principal risks
1 Inability to refinance
Assumptions
Debt: £30m of US Private Placement notes repaid in December 2024 and not replaced
5
2 Demand/operational shock
Assumptions
Revenue: 5% year-on-year revenue reduction across assessment period
Costs: £40m one-off cost in FY23 (or equivalent amount of savings not being realised)
2, 3, 4, 6, 7, 8
3 Inflation/employee/supply chain disruption
Assumptions
Margin: 2% gross margin erosion across assessment period
1, 9, 10
4 Reverse stress test n/a
84
Mitie Group plc
Annual Report and Accounts 2022
In each of scenarios 1-3 the Group was able to
continue operating within debt covenants and
liquidity headroom. The conclusion from the
reverse stress test is that it requires 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:
Revenue would need to decline by
approximately 34% (assuming the gross
margin was maintained) in the year ending
31 March 2023 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 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
scenario analysis or reverse stress test results.
These include the short-term scaling down
of capital expenditure, overhead efficiency/
reduction measures including cancellation
of discretionary bonuses and reduced
discretionary spend, asset disposals and
reductions in cash distributions and share
buybacks.
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 2025.
The Strategic Report on pages 1 to 84 of
Mitie Group plc, company registration
number SC019230, was approved by the
board of Directors and authorised for issue
on 9 June 2022.
It was signed on its behalf by
Phil Bentley
Chief Executive Officer
Simon Kirkpatrick
Chief Financial Officer
Viability statement
continued
Strategic report Governance Financial statements
85
Mitie Group plc
Annual Report and Accounts 2022
Governance
86 Chairman’s introduction to governance
and the Board
87 Board of Directors
90 Board leadership and Company purpose
92 Stakeholder engagement
94 Strategy and the Boardroom
96 Culture at Mitie
100 Division of responsibilities
102 Board effectiveness and evaluation
104 Nomination Committee report
107 Audit Committee report
115 Directors’ remuneration report
131 Social Value & Responsible Business
Committee report
133 Directors’ report
136 Statement of Directors’ responsibilities
86
Mitie Group plc
Annual Report and Accounts 2022
Chairman’s introduction to governance and the Board
Monitored the progress of the 12-month
programme to integrate 20,000 employees,
400 customers and 3,600 suppliers who
joined Mitie through the acquisition of
Interserve Facilities Management (Interserve)
Considered and approved the resumption of
the payment of dividends to shareholders and
approved the refinancing of debt securities
Considered updates on workforce approach
and policies from Jennifer Duvalier, our
Remuneration Committee Chair, following
the various listening sessions she held
with colleagues
Oversaw performance against the change
programmes underway within Mitie
Considered and approved several important
strategic acquisitions and disposals, in line with
Mitie’s M&A strategy
Board composition
The Nomination Committee continues to lead the
process for Board appointments and ensures that
plans are in place for orderly Board and senior
management succession. On the recommendation
of the Committee, Chet Patel and Salma Shah
were appointed to the Board as Non-Executive
Directors on 1 April 2022, following the
departure of Nivedita Krishnamurthy Bhagat.
With a background in business-to-business
service environments and promoting sales and
growth strategies along with his expertise in
business technology and cyber security, Chet will
further strengthen the commercial expertise on
the Mitie Board. With a background in public
policy and public affairs, Salma will bring additional
public sector expertise reflecting Mitie’s increased
public sector focus. The Company Secretary and
I ensured that a tailored induction programme
was put together for Chet and Salma.
The Board considered whether the balance in its
members’ skills and experience is 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 pages 87
to 89.
Board evaluation
Following the external evaluation of the Board in
FY21, the Board agreed areas of focus for FY22.
FY22, the second year of our cycle, involved the
Board performing an internal evaluation of
progress against the FY22 areas of focus and the
resulting actions, as well as agreeing new areas of
focus for FY23. Further information on this year’s
evaluation can be found on pages 102 to 103.
Stakeholder engagement
Effective engagement enables the Board to ensure
that stakeholder interests are considered when
making strategic decisions. The Board spent time
in FY22 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.
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 key decisions made by the
Board during FY22 and the Board’s consideration
of their impact on key stakeholders. The Section
172(1) statement can be found on pages 81 to 82.
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 sessions during FY22, 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
98 to 99. In FY23, the other Non-Executive
Directors and I will join Jennifer and attend and
participate in the employee listening sessions.
Hybrid AGM
We know our AGMs provide investors with a
valuable opportunity to communicate with us.
In recognition of this, and building on the success
of last year’s meeting, we will be conducting
this year’s AGM electronically once again. The
meeting will be held as a combined physical and
electronic meeting (a hybrid meeting). In addition
to being able to vote and submit questions
electronically in advance, all shareholders will be
able to join the meeting online to hear from Phil
and I, ask questions and vote on our resolutions.
UK Corporate Governance Code
and statement of compliance
Mitie applied all the principles and complied
with all the relevant provisions of the 2018 UK
Corporate Governance Code (Code) during
FY22, with the exception of provision 38
(alignment of executive director pension
contribution rates with those available to the
workforce). Simon Kirkpatrick was appointed in
April 2021 with a pension benefit which was
aligned to the workforce. Phil Bentley’s pension
benefit will be fully aligned with the wider
workforce from 1 January 2023, in line with the
Remuneration Policy approved by shareholders
in 2021. Details on how we have applied the
principles set out in the Code and how
governance operates at Mitie have been
summarised throughout the Directors’ Report.
Derek Mapp
Chairman
As Chairman, one of my key roles is to ensure
that the Board and Mitie continue to have high
standards of corporate governance while, at the
same time, establishing and continually developing
the right controls to provide the Board with the
appropriate level of oversight and assurance.
By having a sound corporate governance
framework, we can ensure effective and efficient
decision-making, and the right balance of knowledge,
diversity, skills, experience and challenge to
monitor and manage the risks we face.
Board’s focus during the year
In what continues to be a challenging
macroeconomic environment, the Board had a
busy year. Our focus during the year has been
to accelerate the Company’s pursuance of its
strategic priorities, while managing the ongoing
uncertainties associated with COVID-19, labour
cost inflation and other inflationary pressures.
During the year, the Board resumed physical
meetings, including a site visit to Manchester Technical
Services Operating Centre, received updates on
financial and operational performance, as well as
strategic ‘deep dives’ on each business unit and:
Balanced business performance and
shareholder interests
Approved the operating plan for the
financial year
Derek Mapp
Chairman
Effective corporate governance
is fundamental to the way Mitie
conducts business. By encouraging
entrepreneurial and responsible
management, it supports the
creation of long-term, sustainable
value for shareholders and
stakeholders and contributes
to wider society.
Strategic report Governance Financial statements
87
Mitie Group plc
Annual Report and Accounts 2022
Board of Directors
Derek Mapp
Non-Executive Chairman
Date of appointment to the Board
9 May 2017
Other current appointments
Derek is an independent non-
executive director and chair-
designate of the Board of Eurocell plc
(Eurocell) and a member of Eurocell’s
Nomination and Remuneration
Committees. Derek will assume
the role of chair of the board of
Eurocell and chair of the Nomination
Committee of Eurocell effective
1July 2022. Derek is also a director
of Woodall Group Limited, a private
company and has several other
private business interests.
Past roles
Derek was Chair of Informa plc from
March 2008 until his retirement on
3June 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.
Skills and experience
Experienced chairman and
entrepreneur with exceptional
leadership skills
Extensive career in ownership,
managerial, operational and
commercial roles in service
industries
Wealth of commercial experience
and exceptional governance
experience within various sectors
Promotes robust debate and an
open and engaged culture
Phil Bentley
Chief Executive
Date of appointment to the Board
1 November 2016
Other current appointments
None
Past roles
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 while 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. His 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 Diageo.
Skills and experience
Executive and non-executive
experience with FTSE 100
companies for over 20 years
Significant strategic and
commercial experience at both
national and global levels
Exceptional executive and
leadership experience from across
industry
Extensive financial and investment
community experience
Accountant by profession, with a
master’s degree from Oxford
University and an MBA from
INSEAD, Fontainebleau
Simon Kirkpatrick
Chief Financial Officer
Date of appointment to the Board
1 April 2021
Other current appointments
None
Past roles
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. He began his
professional career with Ernst &
Young where he was a director in
the Energy practice.
Skills and experience
Significant UK and international plc
experience
Proven track record in
transforming complex contracting
businesses
Exceptional financial experience
and extensive strategic and
commercial experience across
a number of sectors
Qualified as a chartered
accountant with a law degree
from Exeter University
NC
AC
NC
RC
SV&
RBC
Audit Committee
Member
Committee Chair
Nomination
Committee Member
Remuneration
Committee Member
Social Value & Responsible
Business Committee Member
Continued overleaf
88
Mitie Group plc
Annual Report and Accounts 2022
Baroness Couttie
Independent Non-Executive
Director
Date of appointment to the Board
15 November 2017
Other current appointments
Philippa is a member of the House
of Lords and a member of the
European Affairs Select Committee.
She is also Deputy Chair of the
Guernsey Financial Services
Commission and a member of
its Investment Committee and
Audit Committee.
Past roles
Philippa led Westminster City
Council from 2012 to 2017. She was
elected to the Council in 2006 and
subsequently served as Cabinet
Member for Finance, Cabinet
Member for Housing and Deputy
Cabinet Member for Children’s
Services. She was also 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 after she left Schroders,
where she headed up its principal
finance business. She was also
previously Chief Executive of
Cornerstone Communications and
then PR Consultants.
Philippa has served as a non-
executive director on several
boards since 2006, including Royal
Parks and the London Local
Enterprise Partnership.
Skills and experience
Extensive experience of the
financial sector, developing
corporate strategy and executing
change management
Exceptional experience in both
public and private sectors at the
most senior level
Ennobled and joined the House of
Lords in 2016
An honours degree in Psychology
from the University of St Andrews
Jennifer Duvalier
Independent Non-Executive
Director
Date of appointment to the Board
26 July 2017
Other current appointments
Jennifer is Non-Executive Director
and Chair of the Remuneration
Committee of Guardian Media
Group plc, Chair of the
Remuneration Committee and a
member of the 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. She 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.
Past roles
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.
Skills and experience
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 management
experience
Executive team and Board
effectiveness
MA (Hons) in English and French
from the University of Oxford
Chet Patel
Independent Non-Executive
Director
Date of appointment to the Board
1 April 2022
Other current appointments
With over 15 years’ commercial
experience at BT Group, Chet is
currently Chief Commercial Officer
& Managing Director, Americas,
BT Global.
Chet is also a non-executive advisor
for a tech start-up and a law firm.
Past roles
Chet was non-executive director
at London First between 2013 and
2017. He was also a non-executive
member of the London Enterprise
Panel between 2013 and 2016.
Prior to joining the BT Group in
2006, Chet worked for Charles
Schwab.
Skills and experience
Commercial expertise in the B2B
service environment, promoting
growth and sales strategies
Expertise in business technology,
cyber security, business
transformation, commercial
and marketing
An MBA from Henley
Management College
An honours degree in Economics
& Politics from University of Leeds
Mary Reilly
Independent Non-Executive
Director
Date of appointment to the Board
1 September 2017
Other current appointments
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 Independent Non-Executive
Director of Gemfields Group
Limited and on the board of
Mar Holdco S.a.r.l, a privately held
Luxembourg company. Her current
trusteeships include the Invictus
Games Foundation, PDSA and
Crown Agents International
Development.
Past roles
Mary was Non-Executive Director
and Chair of the Audit Committee
of Travelzoo from 2013 to 2022 and
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 for Transport
and of Crown Agents Limited, an
international development company,
from 2013 to 2017. Prior to this, she
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.
She was a partner in Deloitte LLP
(and predecessor firms) for over
25years. She was an audit partner in
the UK specialising in manufacturing,
luxury retail and business services.
She also headed a unit offering
outsourcing capability.
Skills and experience
Exceptional audit, risk
management and assurance
experience
Accounting, finance and
international experience
Chartered accountant, with a
degree in History from University
College London
AC AC
SV&
RBC
NC NCNCRC
Board of Directors
continued
AC RC
Strategic report Governance Financial statements
89
Mitie Group plc
Annual Report and Accounts 2022
Salma Shah
Independent Non-Executive
Director
Date of appointment to the Board
1 April 2022
Other current appointments
Salma is a Partner at Portland
Communications, advising clients
on public policy and public affairs
communications.
Past roles
Salma held Special Advisor roles in
several Government departments
between 2014 and 2019. Prior to
this, she worked as a News &
Political Programmes Producer
for BBC News.
Skills and experience
Public sector expertise
Extensive experience in public
policy, public affairs and
communications
An honours degree in Journalism
& Politics from University of
Salford
Peter Dickinson
Chief of Staff, General Counsel
& Company Secretary
Date of appointment
6 March 2017
Other current appointments
None
Past roles
Peter was a partner at the global law
firm Mayer Brown International LLP
(and its predecessor firm) between
1995 and 2017 and played a leading
role in developing the firm’s
Technology, Media and Telecoms
(TMT) practice.
From 2015 until March 2017, Peter
co-headed Mayer Brown’s global
Technology Transactions practice.
Between 2005 and 2015, he was the
head of Mayer Brown’s Corporate
practice in London and, in addition,
between 2008 and 2015, he was the
co-head of Mayer Brown’s global
Corporate practice.
Skills and experience
Substantial experience of
providing legal, regulatory and
commercial advice at board level
Significant experience advising on
corporate merger and acquisition
transactions, joint ventures and
other significant commercial
transactions, including large-scale
multi-jurisdictional outsourcing
projects
Qualified solicitor with a degree in
law from Southampton University
Roger Yates
Senior Independent Director
Date of appointment to the Board
1 March 2018
Other current appointments
Roger is Non-Executive Director
of Biotech Growth Trust Plc.
He is Senior Independent 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.
Past roles
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, from 2010 to 2012 and
as Chairman from 2012 to 2017.
Roger’s non-executive roles have
included F&C Investments, IG Group
plc, Electra Private Equity plc and
JPMorgan Elect plc.
Skills and experience
Substantial board experience
Strong business track record
Exceptional knowledge of the
finance and investment community
MA in Modern History from
Worcester College, University
of Oxford
AC
SV&
RBC
SV&
RBC
NCRC RC
AC
NC
RC
SV&
RBC
Audit Committee
Member
Committee Chair
Nomination
Committee Member
Remuneration
Committee Member
Social Value & Responsible
Business Committee Member
90
Mitie Group plc
Annual Report and Accounts 2022
Board leadership and Company purpose
Governance framework
The Company’s formal governance framework
underpins the Company’s operations. In addition
to the three main Board Committees, the
Company has a Social Value & Responsible
Business Committee, Disclosure Committee
and an informal Bid Committee.
The Social Value & Responsible Business
Committee is chaired by Baroness Couttie,
an Independent Non-Executive Director.
Its members include a second Independent
Non-Executive Director, the Chief of Staff,
General Counsel & Company Secretary, Chief
Government & Strategy Officer, Group HR
Director, Head of Media Relations, Managing
Director of Business Services and Managing
Director of Care & Custody. The Social Value &
Responsible Business Committee met five times
during FY22. Its purpose is to drive the Group’s
social value and responsible business agenda
and ensure the Group conducts its business in
a commercially responsible way. Further detail
on the activities of the Committee during the
year can be found on pages 131 to 132.
The Disclosure Committee is chaired by the
Chief Executive. Its members include the
Chairman, Chief Financial Officer, Chief of Staff,
General Counsel & Company Secretary and
the Deputy General Counsel. The Disclosure
Committee met three times during FY22.
Its purpose is to assist and inform decisions
of the Board concerning the identification of
inside information and make recommendations
about how and when the Company should
disclose that information in accordance with
the Company’s disclosure policy.
The Bid Committee is chaired by the Chief
Executive. Its members include the Chief
Financial Officer, Chief of Staff, General Counsel
& Company Secretary, Chief Government &
Strategy Officer and members of the sales team.
The Bid Committee met weekly during FY22.
Its purpose is to consider 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 formal
Committees are available at www.mitie.com/
investors/corporate-governance.
Company purpose
As detailed on page 2 of the Strategic report,
the Company’s purpose is that: our expertise,
care, technology and insight create amazing
work environments, helping our customers
be exceptional, every day.
Purpose of the Board
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 authority to
Committees and may delegate day-to-day
management and decision-making to individual
Executive Directors. The purpose of each Board
Committee is summarised above and set out in
more detail in the Committee report.
Matters reserved for the Board
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 reviewed by the Board
in January 2022.
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
Approve the annual budget, treasury policies
and dividend policy
Review the effectiveness of the Group’s risk
management and internal control processes
Approve all material acquisitions, material
disposals, and 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
Board meeting process
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.
Board
Mitie Group Executive (MGX)
Business divisions
Nomination Committee Audit Committee Remuneration Committee
Purpose: to evaluate and
make recommendations
regarding the composition,
diversity, experience,
knowledge, skills and
independence of the Board
and its Committees. Read
more on pages 104 to 106.
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. Read more
on pages 107 to 114.
Purpose: to determine and
review the Company’s
remuneration policy and
monitor its implementation.
Read more on pages 115
to130.
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. The Board is updated on matters discussed at MGX meetings at Board
meetings as part of the Chief Executive’s regular update paper, and on an ad hoc basis
as required.
Business Services, Central Government & Defence, Communities, Technical Services and
Specialist Services.
Strategic report Governance Financial statements
91
Mitie Group plc
Annual Report and Accounts 2022
Director attendance at meetings of the Board and its Committees
Position Name Board
Nomination
Committee
Audit
Committee
Remuneration
Committee
Chairman Derek Mapp 6/6 2/2 – –
Executive Directors Phil Bentley 6/6 – – –
Simon Kirkpatrick 6/6 – – –
Independent
Non-Executive
Directors
Nivedita Krishnamurthy Bhagat* 5/5 0/1 7/7 –
Baroness Couttie** 4/6 2/2 6/8 –
Jennifer Duvalier 6/6 2/2 – 5/5
Mary Reilly 6/6 2/2 8/8 5/5
Roger Yates 6/6 2/2 8/8 5/5
* Nivedita Krishnamurthy Bhagat resigned from the Board on 17 February 2022.
** Baroness Couttie was unable to attend some meetings due to ill-health.
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 Board meeting 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.
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.
Advice of the Company Secretary
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.
92
Mitie Group plc
Annual Report and Accounts 2022
Stakeholder engagement
Stakeholder engagement
mechanisms and Section 172(1)
statement
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 ongoing
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 30 to 32. Details of
stakeholder activities undertaken by the Board
can be found on page 93. 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 98 to 99.
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 81 to 82.
Dialogue with shareholders
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 proactively with the investment
community and 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.
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 95. 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.
2022 Annual General Meeting
Mitie’s Annual General Meeting (AGM) will be
held on 26 July 2022 at 11.30am at Level 12,
The Shard, 32 London Bridge Street, London
SE1 9SG and on an electronic platform.
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, the Company will 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.
Resources for shareholders and
other stakeholders
Mitie has a specific area dedicated to investor
relations on its website (www.mitie.com/
investors) 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
Strategic report Governance Financial statements
93
Mitie Group plc
Annual Report and Accounts 2022
Board activities: stakeholder engagementDialogue with shareholders
2021
2022
2022
Apr
Jun
Jul
Aug
Sept
Oct
Nov
Feb
Mar
Following publication of
the FY21 results, a Virtual
Town Hall event was held,
with all colleagues invited
to join.
Following publication
of the HY22 results, a
Virtual Town Hall event
was held, with all
colleagues invited to join.
Jul – Aug
Meetings were held with
banks to discuss revolving
credit facility refinancing.
Meeting was held with
banks and noteholders
to present management
information pack.
Visit to Manchester
Technical Services
Operating Centre (TSOC).
Cabinet Office Strategic
Supplier Annual Review.
Meeting was held with
noteholders to discuss
US Private Placement
refinancing.
Town Hall event for
colleagues at Manchester
TSOC, with all Board
members in attendance.
Town Hall event for
colleagues in Bristol, with
Executive Directors and
other MGX members
in attendance.
Meeting was held with
banks and noteholders to
present FY21 results.
Hosted a ‘Decarbonising
the Public Built Estate’
event with politicians,
senior civil servants,
experts and industry
leaders to discuss the
drive towards Net Zero.
Jun – Jul
Team Talk Live 2021 took
place, with all colleagues
invited to join. Further
detail can be found on
page 38.
The Chairman,
accompanied by an
Independent Non-
Executive Director, met
all top 10 shareholders
as part of an annual
roadshow.
Following publication
of the HY22 results,
meetings were held with
a significant proportion
of major shareholders.
Ad hoc meetings were
held with institutional and
retail investors throughout
the year, including
attendance at investment
conferences.
Following publication
of the FY21 results,
one-to-one meetings
were held with
institutional investors.
The 2021 Annual General Meeting was held in London as a
combined physical and electronic meeting (a hybrid meeting).
At the meeting, all resolutions passed, with more than 70%
of the votes cast in favour. The resolutions which received
a vote of more than 20% against (as a percentage of the
number of votes cast) were in respect of the remuneration
report, remuneration policy, authority to disapply
pre-emption rights for the purposes of acquisitions and
capital investments and the Enhanced Delivery Plan (EDP).
The Company undertook extensive consultation with major
shareholders prior to the AGM regarding remuneration
matters and some changes were made to the final EDP
to reflect shareholder feedback. The Board has a clear
understanding of the reasons why a minority of shareholders
were not supportive of the EDP. One major shareholder
voted against the resolution related to the authority to
disapply pre-emption rights for the purposes of acquisitions
and capital investments and the Board has a clear
understanding of their rationale for not supporting this
resolution. The Board appreciated the level of engagement
with many shareholders.
Apr – Jul
Engagement meetings
were held with a significant
proportion of major
shareholders on
remuneration policy
matters.
94
Mitie Group plc
Annual Report and Accounts 2022
Strategy and the Boardroom
Setting strategy
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 2021 and
was attended by Board members. On the day,
the Board debated intervention and investment
plans for achieving Mitie’s strategic imperatives
of growth, enhanced margin, cash generation
and accelerated enablers.
How governance contributes to
the delivery of strategy
Details of how opportunities and risks to the
future success of the business have been
considered and addressed can be found in the
Strategic report on pages 22 to 25, 46 to 49
and 66 to 77. Details of the sustainability of
the Company’s business model can be found
in the Strategic report on pages 28 to 29.
Mitie’s governance framework underpins the
delivery of strategy and can be found on
page 90. An overview of Mitie’s strategy can be
found in the Strategic report on pages 6 to 12.
Boardroom discussions
The Board held six formal scheduled meetings
during FY22. 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 91 and 93 respectively.
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.
Further detail on Boardroom discussions relating
to certain key Board decisions can be found in
the Section 172(1) statement on pages 81 to 82.
Strategic pillar: grow Mitie
Disposal of
Document
Management
The Board debated and approved the disposal of Mitie’s Document Management business to Swiss Post Solutions which
completed on 30 September 2021.
The sale of Mitie’s Document Management business aligned with the Group’s strategy of realising value from non-core
businesses to allow reinvestment in higher growth opportunities.
Acquisition of DAEL
Ventures, P2ML and
8point8
The Board debated and approved the acquisition of DAEL Ventures which completed in August 2021, P2ML which completed
in April 2022 and 8Point8 which completed in May 2022.
The acquisition of DAEL Ventures, P2ML and 8Point8 broadened Mitie’s scale and expertise in the fast-growing telecoms
sector and aligned with the Group’s growth and margin enhancement strategies.
Strategic pillar: margin enhancement
Integration synergies Regular updates on integration activities were delivered to the Board and discussed at meetings. These included updates in
relation to finance, people, property and technology integration initiatives.
Project Forté The Board was regularly updated on Project Forté, the digital transformation and modernisation of the technology
infrastructure for Engineering Services.
Procurement savings The Board was regularly updated on key improvement projects aimed at standardising and improving Mitie’s procurement
policy and processes as part of the integration of Interserve.
Annual operating
plan
The Board reviewed and approved the Group’s annual operating plan for FY23 in March 2022.
Strategic pillar: generate cash
Revolving credit
facility
The Board approved a new £150m revolving credit facility for a period of four years from October 2021, with the option to
extend for a further year. The new revolving credit facility replaced a £250m facility which was amended and extended in the
early days of the COVID-19 pandemic in June 2020 and is on significantly more favourable terms.
US Private
Placement
The Board debated and approved the issuance of £120m of US Private Placement notes. The new notes will be formally issued
under a delayed funding arrangement in December 2022, avoiding overlap with the existing £121.5m of notes that mature in
December 2022. The new notes are split equally between 8, 10 and 12 year maturities and will be issued at an average coupon
of 2.94%, significantly below the current coupon.
Dividend The Board reviewed and approved the reintroduction of an interim dividend payment. In doing so, the Board considered the
Group’s cash generation and performance of the underlying business, which had returned to pre-COVID levels, and noted
that furlough support received for colleagues at Mitie’s own operations had been repaid.
Strategic report Governance Financial statements
95
Mitie Group plc
Annual Report and Accounts 2022
Capability enablers: ‘Great place to work’
Employee
engagement
The Board received and discussed the results of the spring 2021 employee engagement survey, Upload, and identified areas
for improvement action to be taken in FY22. Further information can be found on page 97.
The Board was updated on Mitie’s virtual engagement festival, Team Talk Live 2021, including employee feedback on the event
and engagement data.
Diversity and
inclusion
The Board was regularly updated on Mitie’s bespoke conscious inclusion programme, Count Me In, and activities undertaken
throughout FY22 by Mitie’s diversity networks.
Employee voice in
the Boardroom
Jennifer Duvalier is Mitie’s designated Non-Executive Director responsible for oversight of the Board’s engagement with
the workforce.
She voiced what she heard and learnt from frontline employees at employee listening sessions and discussed key themes with
the Board. After each employee event, Jennifer also shared a summary of specific items of feedback with the Board.
Further information on Jennifer’s activities in this role can be found on pages 98 to 99.
People Moves
project
The Board was updated on the People Moves project which involved the transition of all legacy Interserve colleagues
onto Mitie HR systems. Transferred colleagues have access to Mitie’s HR systems and access to benefits available to all
Mitie employees.
Capability enablers: Science of Service (Technology)
SAP implementation The Board was regularly updated on the project to move Technical Services off the Oracle finance platform and Interserve
off the AX12 finance platform onto SAP. Moving towards one finance platform across Mitie brings better control as it
allows greater automation and control of transaction processes.
Client technology
journey
The Board was updated on the roll-out of Mitie’s award-winning, cutting-edge Connected Workspace technology on legacy
Interserve contracts.
Capability enablers: decarbonisation
Acquisition of Rock
Power Connections
(Rock)
The Board debated and approved the acquisition of Rock which completed on 31 October 2021.
The acquisition of Rock enhances Mitie’s ability to offer a truly end-to-end solution to meet customers’ Net Zero goals, and to
capture a greater share of the fast-growing high voltage electric vehicle charging market.
The acquisition of Rock was in line with Mitie’s strategy of investing in high growth, high return businesses within the energy space.
Net Zero estate The Board was updated on progress towards achieving Mitie’s commitment to a Net Zero estate by 2025. This included
achievement of Mitie’s target of four Net Zero properties by the end of FY22.
Standing agenda items:
Committee updates At every Board meeting a verbal update was provided by the chair of each Board Committee. Updates included an overview
of any Committee meetings and any recommendations from the Committee requiring approval by the Board.
Chief Executive’s
update
At every Board meeting the Chief Executive presented a paper on topics such as:
Business highlights
Sales and marketing
Information systems and technology
Key project and divisional updates
The Chief Executive’s update paper incorporates matters relating to strategy and matters discussed at MGX meetings and
Bid Committee meetings.
Chief Financial
Officer’s update
At every Board meeting the Chief Financial Officer presented on topics such as:
Financial performance of the Group
Interserve finance integration
Refinancing
Further detail about the refinancing can be found under ‘Revolving credit facility’ and ‘US Private Placement’ above.
Chief of Staff,
General Counsel &
Company Secretary’s
update
At every Board meeting the Chief of Staff, General Counsel & Company Secretary presented a paper on topics such as:
QHSE performance and statistics
Fleet road safety and electric vehicle numbers
HR and colleague-related matters
Diversity and inclusion network activities
Internal and external communications
Whistleblowing
Governance and regulatory matters
Investor relations An investor relations report was presented at every Board meeting on topics such as:
Share price performance
Investor engagement and feedback
ESG ratings
Analyst research and consensus
Share register analysis
Sector news
96
Mitie Group plc
Annual Report and Accounts 2022
Culture at Mitie
Mitie is a people business, offering facilities
management services that are driven by Mitie
colleagues. Mitie’s vision is to be the destination
employer in the facilities management industry,
creating a ‘Great place to work’, and a truly
inclusive culture where our people are supported
to achieve their potential. Further detail can be
found in the People section on pages 37 to 40.
All Directors lead by example and promote the
desired culture.
Alignment of remuneration
and culture
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 SMART objectives in
areas that really add value to the business, build
development plans that help colleagues achieve
their objectives and personal development goals,
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 37
to 40 and Mitie’s Real Living Wage commitment
on page 37.
Ethics
Mitie is committed to promoting diversity
and equality, eliminating discrimination and
encouraging inclusivity among colleagues.
All colleagues are required to adhere to Mitie’s
key ethics and compliance policies, which include
the Employee Handbook, Ethical Business
Practice Policy, People Policy and Inclusion Policy.
Colleagues are encouraged to report any
behaviours that they believe do not comply with
the policies or do not meet the standards of
conduct expected at Mitie. Channels for raising
any such concerns include Mitie’s independent
whistleblowing service, line managers, People
Support or directly with the Chief Executive via
email to Grill Phil. Mitie’s award-winning conscious
inclusion development campaign, Count Me In,
is available to all colleagues and continued
throughout FY22. During the year, a new
module ‘Inclusive Leader’ was incorporated into
Mitie’s Licence to Lead programme. The new
module explores what inclusivity is, and why it is
important in leadership and identifies practical
steps leaders can take to create an inclusive
culture. Further details on Mitie’s Count Me In
programme can be found on page 39.
CMA Investigation
As announced on 4 March 2022, the
Competition and Markets Authority (CMA)
launched an investigation into the participation
by Mitie, Mitie Care and Custody Limited and
PAE Incorporated in the ongoing procurement
processes run by the UK Government (Home
Office) for the contracts to supply certain
services at Heathrow and Derwentside
Immigration Removal Centres (IRC) in the UK.
Mitie withdrew from the Derwentside IRC
tender process, without submitting a bid, due
to the Home Office’s ‘lotting’ conditions, which
would have prevented a single bidder from
winning both contracts. Mitie confirms that
it remains engaged in the Heathrow IRC
tender process, through Mitie Care and
Custody Limited.
Mitie strongly condemns anti-competitive
practices and is co-operating fully with the CMA
and the investigation. Mitie is confident that it has
no case to answer and will be fully exonerated.
How the Board assesses and
monitors culture
Mitie’s core 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.
These information flows, together with direct
engagement from each business, are key to the
Board’s oversight of cultural matters. Mitie also
measures several 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.
In March 2022, all Board members attended
an in-person Town Hall event to speak to
employees face to face. Jennifer Duvalier, Mitie’s
designated Non-Executive Director responsible
for workforce engagement, also undertook a full
programme of in-person and virtual employee
listening sessions throughout the year. Further
details of Jennifer’s role and activities can be
found on pages 98 to 99.
Several all-employee virtual events were also
hosted throughout the year by the Executive
Directors and members of the MGX, some of
which were also attended by Non-Executive
Directors. Virtual events held included the ability
for employees to ask questions of management
via a chat box (anonymously if preferred). Details
of Team Talk Live 2021, Mitie’s virtual employee
engagement festival of events, can be found on
page 38.
Set out below are further examples of how the
Board monitors culture:
Whistleblowing
Mitie has an independent whistleblowing service,
‘Speak Up’, to enable employees, customers,
suppliers and third parties to report any concerns
or wrongdoing anonymously without any fear of
retaliation. During FY22, the Group moved to
a whistleblowing service platform, EthicsPoint
which is managed by an independent third-party
service provider, Navex Global. The service can
be accessed via a freephone hotline number and
a web portal, details of which are made available
to employees in multiple languages via workplace
posters, our Employee Handbook, Intranet
and MitiePeople.com. The service can also be
accessed by customer and supplier personnel as
well as members of the public with details being
provided 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
and reviewed by a central Whistleblowing
Investigation Group which includes Deputy
General Counsel and senior members of the
Group’s Internal Audit function. This helps to
ensure transparency and enables any trends 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 as well as details
of ongoing investigations. The introduction of
EthicsPoint has provided improved reporting
capabilities, including the ability to report by
business division and by investigation status/
outcome. This improved functionality enhances
the Board’s ability to effectively track the
progress of investigations and to monitor and
address trends across individual business units
and the Group as a whole.
QHSE/LiveSafe
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.
During FY22, the Board was updated on Mitie’s
first ‘LiveSafe Zero Harm Week’ which involved
QHSE leaders from across the business taking to
the virtual stage to highlight QHSE focus areas,
including mental health, wellbeing, environmental
compliance and fleet safety. Mitie colleagues
were invited to get involved by joining events
and sharing safety stories.
Colleagues’ perception of workplace safety
at Mitie is high, with four in five colleagues
who responded to Mitie’s annual employee
engagement survey agreeing that it is important
at Mitie.
A non-financial QHSE KPI is included in the
Group’s reporting: the lost time injury frequency
rate (read more on page 18).
Culture at Mitie is underpinned by its purpose: Our expertise, care,
technology and insight create amazing work environments, helping our
customers be exceptional, every day.
Strategic report Governance Financial statements
97
Mitie Group plc
Annual Report and Accounts 2022
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.
Date Action
April – May 2021 The 2021 Upload engagement survey was launched. The survey was open to all employees, was translated into various
different languages and could be completed through several different mediums to enable maximum participation.
June 2021 Survey results were presented to the Board at its June 2021 meeting and focus areas for improvement were identified.
Further detail on focus areas can be found in the table below.
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 98 to 99.
July 2021 – February 2022 Next steps and plans to address the matters raised from the 2021 Upload survey were established.
Initiatives taken in response to the survey, details of which can be found in the table below, were communicated to
colleagues throughout the year.
Early March 2022 The ‘You Said, We Did’ campaign was launched to highlight steps undertaken by management during the year in
addressing the areas identified. The campaign was communicated to colleagues through several different mediums.
Colleagues 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.
Upload survey insights and actions taken
Upload survey insights (You Said) Action taken (We Did)
Reward and recognition
Determine the right benefits for frontline
colleagues
Improve instant recognition offering
Awarded free shares to all Mitie colleagues in May 2021
Relaunched Mitie’s all-employee Share Incentive Plan in October 2021, increasing the
matching share ratio to give colleagues one matching share for every two partnership
shares acquired
Launched enhanced maternity and adoption pay in November 2021
Introduced a new sabbaticals procedure in November 2021
Launched a benefits advent calendar in December 2021 with over 100 prizes won
by colleagues
A ‘Great place to work’
Deliver and promote Mitie’s ESG commitments
Continue to improve learning and development
offering
Target set for Mitie to have a Net Zero estate by 2025
ESG-related content featured in weekly Recap email newsletters sent to colleagues
throughout the year
Created a catalogue of e-learning courses to help colleagues navigate Mitie’s digital offering
Learning Hub licences provided to all Mitie colleagues (former Interserve frontline
colleagues hadn’t had these previously)
Empowerment and autonomy
Listen to colleagues and continue to give them
a voice
Full programme of activities, including listening sessions, undertaken by Jennifer Duvalier in
her role as designated Non-Executive Director for workforce engagement
You Said, We Did campaign following Upload survey
Systems, processes and technology
Improve self-serve support and laptop monitoring
Integrate people systems to speed up data
processes
Redesigned Mitie’s IT support homepage, highlighting FAQs with the use of self-help videos
Rolled out over 3,000 laptops, delivering improvements in memory and performance
Migrated over 11,000 colleagues onto WorkPlace+
Senior leadership team
Ensure senior leadership is visible and accessible
All colleagues were invited to join Team Talk Live 2021, Mitie’s virtual employee
engagement festival of events, which was held across June and July 2021. As part of Team
Talk Live 2021, colleagues had the opportunity to join members of the MGX and Mitie
Leadership Team over breakfast or lunch to get to know them better and ask questions.
Three live ‘Grill Phil’ events were also held, with the Chief Executive available to answer
questions from colleagues
Mitie’s Big Equality Summit #3 was also held as part of Team Talk Live 2021. At the summit
MGX members shared feedback they had received from other colleagues as part of the
Count on Us ‘truth teller’ exercise
Rolled out monthly managers’ calls across more business divisions
Held Town Hall event with Executive Directors and other MGX members in Bristol in
February 2022
Held Town Hall event with the Board in Manchester in March 2022
2021 Upload survey
98
Mitie Group plc
Annual Report and Accounts 2022
Culture at Mitie
continued
Designated NED for workforce
engagement
Jennifer Duvalier is Mitie’s designated Non-
Executive Director responsible for oversight of
the Board’s engagement with the workforce.
Jennifer participates directly in employee
engagement initiatives and carried out a full
programme of activities during FY22. Jennifer
encourages colleagues to share their views and
champions their voice in Board discussions.
Why Jennifer?
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.
Jennifer’s thoughts
“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.”
Board expectations
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
colleagues in the Boardroom. Jennifer regularly
shares what she has heard and learnt with the
Board at Board meetings, 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.
Jennifer’s site visits
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.
Details of actions taken in response to feedback
received by Jennifer are shared across Mitie’s
internal communication channels, including
MiNet and Recap newsletter. In these
communications, colleagues are also encouraged
to get in touch if they would like to arrange a
visit with Jennifer for their site.
While each event varies in structure, generally
Jennifer has a tour or receives an overview
of the site and a one-to-one 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.
Jennifer’s activities
The Board considers it important that employee
views are heard through several mediums,
including feedback from managers, surveys,
internal communications and digital channels
(such as Yammer), to develop a positive culture
across the business.
Therefore, as well as the site visits and virtual
listening sessions noted opposite, Jennifer is fully
involved in a range of other activities, including
analysing the feedback from Mitie’s Upload
surveys and Pulse surveys, championing
employee voice 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.
Why the role adds value (over and above
other employee engagement mechanisms)
In carrying out her role, Jennifer meets people
across the business and listens 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.
Jennifer’s learnings and how the Board has
responded
Themes identified from Jennifer’s listening
sessions include:
Benefits and recognition
Technology and access to systems
Training and career progression
Communications
The wider Board will join Jennifer Duvalier in
running listening sessions during FY23.
2021
2022
Apr
Jun
Sept
Oct
Nov
Jan
Feb
Mar
Virtual listening session with
Network Rail colleagues
Virtual listening session with
Falkland Islands colleagues
Virtual listening session with
Thales colleagues
Visit to Manchester TSOC and
dinner with Technical Services
leadership team
Virtual listening session with GSK
(Ware and Barnard Castle)
colleagues
Virtual listening session with
Lloyds Banking Group (Edinburgh)
colleagues
Virtual listening session with
University College London
Hospital (UCLH) colleagues
Listening session with frontline
colleagues on reward and
executive remuneration
International Women’s Day
‘Exceptional Women in Business’
event at Manchester TSOC
Jennifer Duvalier’s activities
Strategic report Governance Financial statements
99
Mitie Group plc
Annual Report and Accounts 2022
Details of actions taken in response to feedback received are set out below.
Benefits and recognition
Positive feedback Improvement areas Actions taken
New benefits, specifically life assurance, free
shares and the Virtual GP service, were well
received.
Colleagues felt supported through COVID-19.
There was positive acknowledgement of the
support and encouragement for frontline
colleagues to be vaccinated, including
confirmation that hourly paid workers would
be paid for time taken to get vaccinated during
a shift.
Colleagues like the Mitie Stars recognition
scheme, but some felt that the scheme could
be enhanced to act as more of an incentive,
with more generous awards.
Visibility of available benefits was cited as an
issue for some.
Free shares not being available to overseas
colleagues was raised as demotivating in the
Falkland Islands session.
Conducted a reward survey in September 2021.
The 4,000 responses received helped to reshape
Mitie’s Stars and long service programmes which
are due to be relaunched in FY23.
Benefits were regularly promoted through
Group communication channels, including Mitie’s
weekly all-colleague email newsletter (Recap),
monthly line-manager cascade communications
(Download) and Mitie’s intranet site (Minet).
Explored options for awarding free shares to
overseas colleagues and made arrangements
for an alternative solution to align with the UK
colleague benefit.
Technology and access to systems
New laptops and mobile phones well received
by colleagues who transferred from Interserve.
Sometimes a delayed response for IT support,
and access not always available.
Ticketing system wasn’t felt to work as efficiently
as it could all of the time.
Poor internet connectivity, hindering ability
to access corporate information, training and
other services.
Set up self-service automations to reduce the
need to contact the IT service desk.
Redesigned Mitie’s IT support homepage, as
detailed on page 97, in response to Mitie’s Upload
2021 sur vey.
Improved Wi-Fi networks at multiple sites.
Training and career progression
Several colleagues applauded the access to
training and development opportunities at
Mitie. Apprenticeships were described as
“more accessible than in the past” with positive
acknowledgement of the encouragement and
support for these from managers.
Some colleagues raised a lack of clarity on
what training is available to them and how to
access this.
There was a request for the Mitie mentoring
programme to be reinvigorated, as it was
difficult to source mentors from beyond the
account team.
Colleagues would like to have access to tablets
so that those who don’t have easy access to
technology and/or who lack confidence online
can identify and enrol for training. This was
highlighted in relation to cleaning and catering
colleagues working in frontline roles.
Launched a Learning & Development SharePoint
site to help colleagues access Mitie’s full Learning &
Development offering. The site was promoted to
colleagues throughout People Celebration Month,
held in January 2022, to raise awareness.
Plans put in place to launch a Mentoring Hub.
UCLH contract management team purchased six
tablets and docking stations to enable colleagues
to access the Learning Hub more easily.
Communications
Corporate and local communication throughout
the COVID-19 pandemic was felt to have been
very good, with both the level and frequency
of information appropriate, including to those
on furlough.
Although communication is good, there is a
need to ensure that the communication cascade
process includes all colleagues, including those
who don’t have access to IT.
Desire for more personalised communication.
Some colleagues felt overwhelmed by
communications and needed more signposting
to what is most relevant for them.
Plans put in place to audit Mitie’s internal
communication channels to improve efficacy
and reach.
Launched People Celebration Month across
Mitie and externally on social media to amplify the
diversity of roles, skills and career opportunities.
This included a week-long focus on frontline
colleagues.
GSK contract management team has introduced
noticeboards with ‘what’s going on’ to improve
communication on site.
100
Mitie Group plc
Annual Report and Accounts 2022
Division of responsibilities
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 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 www.mitie.
com/investors/corporate-governance 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
Chairman
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 judgement
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
* Nivedita Krishnamurthy Bhagat resigned from the
Board on 17 February 2022.
** Chet Patel and Salma Shah were appointed to the
Board on 1 April 2022.
Biographies of the current Directors can be
found on pages 87 to 89.
Board composition
Chairman
Derek Mapp
Executive Directors
Phil Bentley
Simon Kirkpatrick
Senior Independent Non-Executive
Director
Roger Yates
Independent Non-Executive Directors
Nivedita Krishnamurthy Bhagat*
Baroness Couttie
Jennifer Duvalier
Chet Patel**
Mary Reilly
Salma Shah**
Strategic report Governance Financial statements
101
Mitie Group plc
Annual Report and Accounts 2022
Senior Independent Director
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
Non-Executive Directors
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 the senior
executive team
Hold a primary role in Board succession
planning
Chief Executive
In his role as Chief Executive, 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
Chief Financial Officer
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
Chief of Staff, General Counsel
& Company Secretary
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, including
on all aspects of the Group’s governance
framework and the application of its
delegated authorities
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 and Sustainability 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.
102
Mitie Group plc
Annual Report and Accounts 2022
Board effectiveness and evaluation
Board effectiveness
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 of the Chairman.
Process followed for internal FY22 evaluation:
Jan
Feb Mar
Engagement, scope and
focus of review agreed
Evaluation meeting slots
diarised
The Chairman conducted
evaluation meetings with
Board members and
senior management
The Senior Independent
Director conducted an
evaluation meeting with
the Chairman
Findings were collated
and evaluated
The Chairman and Senior
Independent Director
provided a report to the
Board and Committees
Outcomes of the internal
Board evaluation were
established, and actions agreed
by the Board and Committees
Internal Board evaluation process
Outcomes from the internal FY22 evaluation
Outcomes/suggestions Actions undertaken or planned
The Board concluded that it and its Committees had continued to
operate effectively during FY22. The selection of new Non-Executive
Directors was critical to addressing any gaps in experience of the Board
and ensuring chemistry and collegiate working is maintained.
A full induction has been arranged for Chet Patel and Salma Shah.
Committee membership has been reviewed and refreshed, in light of
their appointment.
Jennifer Duvalier would continue to act as the Company’s designated
Non-Executive Director responsible for oversight of the Board’s
engagement with the workforce. However, the Chair and other
Non-Executive Directors would additionally attend and participate
in employee listening sessions.
A calendar of events has been agreed for FY23 which will be attended by
both Jennifer and other Non-Executive Directors.
To continue to progress a number of ambitious programmes of
ESG-centred activities.
The Board and Social Value & Responsible Business Committee, through
its oversight and governance of all Mitie’s social value and responsible
business initiatives, will continue to evaluate how ESG issues affect key
aspects of the business, what Mitie’s ambitions and goals should be as a
long-term sustainable business, and opportunities to better report on
these activities.
Strategic report Governance Financial statements
103
Mitie Group plc
Annual Report and Accounts 2022
Progress made on actions identified in prior year
The Board engaged an independent consultant, Belinda Hudson, to conduct the FY20 Board evaluation. Belinda does not have any known connection
with the Company or any individual Directors. The external Board evaluation was delayed due to the COVID-19 pandemic and took place during FY21.
Outcomes from the evaluation conducted for FY20 were reviewed at the March 2021 Board and Nomination Committee meetings. Progress made
during FY22 on actions identified as part of the FY20 evaluation are set out below.
Outcomes/suggestions Actions previously undertaken or planned Progress made on actions during FY22
To review any gaps in experience of the Board The Nomination Committee reviewed and
discussed the Board skills matrix at its March
2021 meeting
The Board further reviewed the experience of
its members as a whole, taking into account the
resignation of Nivedita Krishnamurthy Bhagat.
The Board skills matrix was discussed by the
Board/Nomination Committee at its March 2022
meeting. It was recognised by the Board that
the selection of new Non-Executive Directors
would be key
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
Recognised as important by the Chairman
who provided regular updates during FY22.
Non-Executive Director only sessions were
held in September 2021 and March 2022
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
Considered to be at the right level
To undertake a regular review of the Chief
Executive and other MGX members both in
performance and behaviour
To be undertaken at the two Non-Executive
Director only sessions. Chief Executive to be
invited to attend in part
Performance of Chief Executive and MGX
members discussed at the Non-Executive
Director only sessions
To encourage the Chief Executive to have
regular sessions with each individual Non-
Executive Director
Non-Executive Director/Chief Executive
meetings to be diarised
Meetings took place during FY22 and were
recognised as mutually beneficial
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
Undertaken at the Board strategy day held in
September 2021. Strategy-related updates were
also incorporated into the Chief Executive’s
standing agenda item at all Board meetings.
Further detail on strategy can be found on
pages6 to 12
The Board to regularly review the culture
within the Board, MGX and across the Group
for consistency with the Purpose, Values
and Strategy
Already assessed via several mechanisms such
as the designated Non-Executive Director for
workforce engagement, Net Promoter Score
survey and Upload survey. Will be enhanced
by the whole Board through site visits when
COVID-19 permit
All Board members attended a Town Hall
event held at Manchester TSOC in March 2022.
The Chief Executive and Chief Financial Officer
additionally undertook numerous site visits during
the year
Further detail on how the Board monitors
culture can be found on pages 96 to 99 and
on Jennifer Duvalier’s activities in her role as
designated Non-Executive Director for
workforce engagement on pages98 to 99
To include broader management team members
at Board dinners
To be planned when appropriate, subject to
COVID-19 restrictions
When appropriate, other members of the MGX
attended Board meetings and a Board dinner
held during FY22
104
Mitie Group plc
Annual Report and Accounts 2022
Nomination Committee report
As Chairman of the Nomination Committee,
Iam very pleased to report on the work done
by the Committee during the year.
A key responsibility of the Committee is to
maintain plans for orderly Board succession, and
the Committee regularly receives and reviews
updates on the structure, size and composition
of the Board and its Committees, to ensure
critical skills and experience are appropriately
refreshed. On the recommendation of the
Committee, Chet Patel and Salma Shah were
appointed to the Board as Non-Executive
Directors with effect from 1 April 2022,
following the departure of Nivedita
Krishnamurthy Bhagat. With a background in
business-to-business service environments,
promoting sales and growth strategies along
with his expertise in business technology and
cyber security, Chet will further strengthen the
commercial expertise on the Board. With a
background in public policy and public affairs,
Salma will bring additional public sector
expertise reflecting Mitie’s increased public
sector focus. The Committee has also reviewed
the executive talent pipeline and maintained its
senior management succession plans, reflecting
the Board’s responsibility to ensure appropriate
plans are in place.
Diversity and inclusion are essential to Mitie’s
purpose, and the Board received and discussed a
detailed update from our Group HR Director,
Jasmine Hudson, in March 2022.
Following the external evaluation of the Board in
FY21, the Board agreed areas of focus for FY22.
This year, the second year of our cycle, involved
the Board performing an internal evaluation of
progress against the FY22 areas of focus and
the resulting actions, as well as agreeing new
areas of focus for the coming year. Further
information on this year’s evaluation can be
found on pages 102 to 103.
The Committee also considered the proposed
election/re-election of directors at the AGM
and reviewed the number of external
directorships held by each Non-Executive
Director.
Derek Mapp
Chair of the Nomination Committee
Key purpose of the Nomination
Committee
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
continues to remain appropriate.
Key responsibilities of the
Nomination Committee
The key responsibilities of the Nomination
Committee include:
Regularly reviewing the structure, size and
composition (including the skills, experience
and knowledge required) of the Board and
make recommendations to the Board about
any changes
Ensuring plans are in place for an orderly
succession to Board and senior management
positions and oversee the development of a
diverse pipeline for succession
Considering the length of service of the
Board as a whole so that membership of the
Board is regularly refreshed
Identifying and nominating, for approval by
the Board, candidates to fill Board vacancies
as and when they arise
Keeping under review the number of external
directorships held by each Non-Executive
Director
Reviewing the results of the Board
performance evaluation process that relate
to the composition of the Board
Keeping 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 www.mitie.com/
investors/corporate-governance.
Nomination Committee
members
At the date of this report and throughout FY22,
the Nomination Committee comprised:
Chairman*: Derek Mapp
Committee members
Nivedita Krishnamurthy Bhagat
(until 17 February 2022)
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.
The Committee’s activities had
particular focus on aligning our
Board and leadership teams’ skills
with the Mitie strategy.
Derek Mapp
Chair of the Nomination Committee
Strategic report Governance Financial statements
105
Mitie Group plc
Annual Report and Accounts 2022
All members of the Nomination Committee
are considered independent in accordance with
the Code.
Nomination Committee
meetings
The Nomination Committee met twice during
FY22. The attendance of individual Committee
members can be found on page 91.
Key activities during the year
Composition
As it does annually, the Nomination Committee
reviewed the composition and leadership of the
Board and each of its Committees during FY22.
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 below.
Succession planning
The Board recognises the importance of
succession planning and Board refreshment
and maintains succession plans for the Board
and senior management.
During FY22, the Nomination Committee
discussed succession planning at both its
meetings.
The Board considered both the Board skills
matrix and the Board 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 proactive
and not just reactive in nature.
The tenure of members of the Board is
relatively short, with the Chairman having
been appointed in May 2017 and all the
Non-Executive Directors having served for
less than five years. The Committee considers
tenure when determining a Non-Executive
Director’s independence.
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 Committee engaged
Sam Allen Associates as the search firm
involved with the recruitment of Chet Patel
and Salma Shah, our most recently appointed
Non-Executive Directors. The process followed
for their appointment is detailed below.
Director succession process
1 Candidate requirements A detailed candidate profile setting out required capabilities and experience was agreed. Sam Allen
Associates was appointed to facilitate the process.*
2 Search Sam Allen Associates prepared an initial longlist of candidates and conducted the first round of
interviews to assess the candidates’ fit with the role and key competencies.
3 Interviews The Committee then considered a shortlist of candidates and held interviews. Subsequent interviews
were held with the Chief Executive.
4 Board approval and announcement The Committee made a recommendation to the Board for its consideration. Following Board approval,
the appointments were announced in line with the requirements of the FCA’s Listing Rules.
* Sam Allen Associates had no other connection with the Company or individual Directors.
Individual Director contribution
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 are set out in their biographies on pages 87 to 89.
Board skills matrix
Skills/experience area Derek Mapp Phil Bentley
Simon
Kirkpatrick
Baroness
Couttie
Jennifer
Duvalier Chet Patel Mary Reilly Salma Shah Roger Yates
Leadership and
business operations Exceptional Exceptional ✔ ✔ ✔ ✔ ✔ ✔
Strategy development ✔ Exceptional ✔ ✔ ✔ ✔ ✔ ✔
Corporate governance Exceptional ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
Audit/risk management
and assurance ✔ Exceptional ✔ ✔ Exceptional ✔
Remuneration/HR Exceptional ✔
Commercial ✔ Exceptional ✔ ✔ ✔ Exceptional ✔ ✔
Technology/digital ✔ ✔ ✔
Finance Exceptional Exceptional ✔ ✔ ✔ ✔
Investment community Exceptional ✔ ✔ Exceptional
Government/public
sector experience Exceptional ✔ Exceptional
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.
106
Mitie Group plc
Annual Report and Accounts 2022
Nomination Committee report
continued
Director external appointments
and time commitments
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.
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 Nomination Committee fully
considered the time commitments of Chet Patel
and Salma Shah prior to their appointment as
Non-Executive Directors and no concerns
were raised.
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.
The Board remains confident that all Board
members continue to have sufficient time to
dedicate to their duties.
Re-election of Directors
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 2021 AGM, each Director in post at the
time stood for election or re-election and was
appointed or re-appointed by shareholders.
At the 2022 AGM, all Directors will stand for
election or re-election.
The rules governing the appointment and
replacement of Directors are set out in the
Company’s Articles of Association, the Code,
the 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 2022 AGM.
Conflicts of interest
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 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.
Neither Phil Bentley nor Simon Kirkpatrick
held any external positions during FY22.
External positions held by the Chairman and
current Non-Executive Directors are detailed
in their biographies on pages 87 to 89.
Induction and training
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
A similar induction has been arranged for
Chet Patel and Salma Shah, to take place in
May/June 2022.
All Directors have access to Mitie’s Board
Handbook on an 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 2022.
Briefing notes on changes in the regulatory and
governance environment are circulated to
Directors on an ad hoc basis. Online training on
regulatory and governance changes is also made
available to the Directors. Visits (in person
and/or virtually) to different business sites and
offices are arranged for Directors to facilitate
a deeper understanding of the business.
Diversity and inclusion
Mitie has a Board Inclusion Policy which
recognises the importance of the Board’s
membership reflecting diversity in its
broadest sense.
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
40% of the Directors are women, provided
this remains consistent with the skills and
diversity requirements when seeking a new
appointment to the Board
Ensure at least one of the Chair, Chief
Executive, Chief Financial Officer or Senior
Independent Director is a woman, provided
this remains consistent with the skills and
diversity requirements when seeking a new
appointment to the Board
Ensure there is at least one Director from
a minority ethnic background, 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 underrepresented
groups across Mitie
The policy recognises 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 at the
date of this report, 44% of the Directors are
women and there are two Directors from a
minority ethnic background. Neither the Chair,
Chief Executive, Chief Financial Officer nor
Senior Independent Director is a woman; as
vacancies arise, we will seek to address any
diversity gaps in our Board while ensuring we
recruit talented Board members who have the
appropriate mix of skills, capabilities and market
knowledge to ensure the Board is effective.
A breakdown of the gender balance of those
in senior management and their direct reports
can be found on page 39.
Mitie’s Board Inclusion Policy is available at
www.mitie.com/investors/corporate-governance.
Strategic report Governance Financial statements
107
Mitie Group plc
Annual Report and Accounts 2022
Audit Committee report
Audit Committee members
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 88.
At the date of this report, and throughout FY22,
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 87 to 89.
Chair: Mary Reilly
Committee members:
Baroness Couttie
Roger Yates
Chet Patel (appointed 1April 2022)
Nivedita Krishnamurthy Bhagat
(resigned 17February 2022)
Frequency of Audit Committee
meetings
The Audit Committee met eight times during
FY22. For the Directors’ attendance, see table
on page 91. 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.
Report from the Audit
Committee Chair
On behalf of the Board, I am pleased to present
the Audit Committee report for the financial
year ended 31 March 2022. During the year,
Nivedita Krishnamurthy Bhagat resigned, and
Chet Patel has been appointed to the Audit
Committee in April 2022. I would like to thank
Nivedita for her valuable contributions during
her time on the Committee and extend a warm
welcome to Chet.
This report provides insight into key areas
considered by the Audit Committee during
the year to discharge its responsibilities in
relation to financial reporting, risk management,
internal control, the internal audit function,
and interaction with BDO LLP (the Group’s
external auditor).
Following the Interserve Facilities Management
(Interserve) acquisition, the Group is now a
larger and more complex business. The
integration of the Interserve business has
proceeded as planned, resulting in the
establishment of two new divisions,
Communities and Central Government &
Defence. The integration has also delivered the
successful migration of the Interserve companies
onto the Group’s Enterprise Resource Planning
(ERP) system, which was a complex project. In
addition, the Group has acquired a number of
smaller, but strategically important, businesses
during the year, where integration activities have
ensured robust controls and processes while
seeking to preserve the entrepreneurial cultures
that have made them successful.
The business also continues to focus on
the implementation of its transformation
programme, which was reflected in the
nature of some of the matters presented
for consideration at the Audit Committee.
This transformation programme is scheduled
to be completed in FY23.
Given the evolving environment, I have
continued to make a conscious effort to meet
senior finance staff throughout the year, which
gave me an opportunity to gauge the extent
of any significant issues that emerged and
monitor progress.
Good progress has been
made by the Group to
standardise processes and
controls across the enlarged
business, manage the
associated risks and ensure
rigour around the related
financial reporting.
Mary Reilly
Chair of the Audit Committee
108
Mitie Group plc
Annual Report and Accounts 2022
Audit Committee report
continued
Good progress has been made by the Group to
standardise processes and controls across the
enlarged business, manage the associated risks
and ensure rigour around the related financial
reporting, including:
The review of balance sheets for the acquired
businesses, accounting policies, processes and
controls as part of the acquisition accounting
and integration processes;
Finance teams have been strengthened to
manage effectively the increased complexity
of the enlarged Group;
Training has continued to be provided
to finance teams of the newly acquired
businesses to ensure consistent application
of the Group’s accounting policies;
As revenue recognition continues to be a
critical area of judgement for the Group,
periodic reviews are conducted by Group
Finance to assess compliance with the
Group’s accounting policy. One of these
reviews was presented to, and discussed at,
an Audit Committee meeting this year, with
a particular focus on the new divisions; and
The identification and documentation of
key internal controls across the Group,
strengthening these where required and
ensuring controls function effectively. The
main focus has been on internal controls
over financial reporting in anticipation of
impending UK legislation in this area.
In addition to fulfilling its normal programme
of activities this year, the areas of focus for
the Audit Committee in relation to the FY22
financial statements have been:
Assessing judgements made by management
in respect of the acquisition of Interserve,
including adjustments to the fair values of
assets and liabilities on the opening balance
sheet, valuation of the consideration paid,
and recoverability of the amounts receivable
in respect of the outcome of the completion
accounts process and the related expert
determination;
Evaluating judgements made by management
on the adequacy of provisions required on
loss making contracts and the appropriateness
of the related disclosures;
Assessing judgements made by management
in respect of other acquisitions completed
in the year. In particular, focus was placed
on fair value adjustments to recognise
acquired intangible assets on the acquisition
of DAEL Ventures UK (DAEL) and Rock
Power Connections Limited (Rock) and
the accounting treatment for deferred
consideration;
Evaluating the impact and disclosure of the
accounting policy change in relation to
previously capitalised configuration and
customisation costs in respect of Software
as a Service (SaaS) platforms;
Evaluating classification of disposed businesses
in the year as discontinued operations and
the judgements associated with prior year
disposals, such as the retained liabilities related
to the Social Housing business;
Challenging management’s judgements in
relation to impairment assessments for the
carrying value of goodwill, the adequacy of
provisions for the recoverability of supplier
rebates and the recoverability of deferred
tax assets in relation to losses;
Considering the classification of certain costs
within Other Items and the associated
disclosure, by reviewing the framework of
controls operated by management around
this area, and challenging the nature of the
charges and credits classified as Other Items
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 152
and 153 and 83 and 84 respectively, in the
context of the recovery of the business
from the COVID-19 pandemic; and
Assessing the appropriateness of climate-
related disclosures and evaluating if the
Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations have
been embedded appropriately.
Further detail regarding the Audit Committee
and its work can be found on pages 109 to 114.
In conclusion, the Audit Committee can provide
positive assurance to the Board that the Annual
Report and Accounts 2022, 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 2022
AGM to answer any questions about the work
of the Audit Committee.
Mary Reilly
Chair of the Audit Committee
Strategic report Governance Financial statements
109
Mitie Group plc
Annual Report and Accounts 2022
Key purpose of the
Audit Committee
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 www.mitie.com/investors/corporate-
governance.
Key responsibilities of the Audit
Committee in relation
to financial reporting
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; and
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.
Significant issues considered by
the Audit Committee during
the year
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 increased complexity
of the enlarged Group as a result of the
integration of the acquired Interserve business.
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 papers 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 the related disclosure presented in the
Annual Report and Accounts.
Interserve acquisition
Matters presented to the Audit Committee
related to the acquisition of Interserve were
complex and judgemental. This included the
appropriateness of adjustments to the opening
balance sheet at the end of the 12-month
measurement period, which ended on
29November 2021, and management’s best
estimate of fair value of consideration paid.
Recognising that the completion accounts
mechanism contained in the sale and purchase
agreement (SPA) pursuant to which Mitie
acquired the Interserve entities from How
Group Limited was complex and would be the
subject of a commercial negotiation and, in the
absence of agreement, an expert determination
process, the estimated value of the receivable
was inherently uncertain. The judgements
underpinning management’s best estimate of the
completion accounts receivable were therefore
discussed extensively at Audit Committee
meetings during the year, taking into account any
new information arising. The Audit Committee
also discussed with management the appropriate
level of disclosure, to highlight that, given the
inherent uncertainty, the final amount agreed
or determined could be materially different
from management’s best estimate.
Following the conclusion of the expert’s
determination in April 2022, for which the
expert sought a legal opinion in relation to
the interpretation of the accounting hierarchy
which formed part of the completion accounts
mechanism included within the SPA, an
agreement was reached for the seller to pay
£7.1m to Mitie (of which £1.1m was settled
during H2 FY22 and £6.0m was settled in May
2022).This resulted in a £45.6m reduction in the
completion accounts receivable, compared with
management’s best estimate of the amount due.
Contract specific provisions
During the year, management has performed
reviews of contracts to assess whether any
contracts may be onerous over the remaining
term of the contract, and, where this is the
case, the extent to which a provision should
be made for future forecast losses.
Management also conducted an assessment
of the adequacy of provisions related to
material contractual disputes.
Onerous contract provisions totalling £13.2m
have been recognised at 31 March 2022 (2021
restated: £17.6m). These primarily relate to a
number of loss-making contracts that were
acquired with the Interserve business, the
Communities division. Management’s
assessments were made in the context of the
plans that have been developed and are being
implemented by divisional management to
improve the profitability of these contracts.
Other contract specific provisions, totalling
£43.1m, have been recognised at 31 March
2022 (2021restated: £42.9m), which primarily
relate to remedial and rectification costs
required to meet customers contract terms.
Management’s assessment included external
expert opinions obtained, where necessary, to
assess the adequacy of provisions recognised.
The Audit Committee has reviewed the
assessments presented by management, and
also invited the Managing Director of the
Communities division to attend an Audit
Committee meeting as part of the discussions
related to the adequacy of the onerous contract
provisions in place. The Audit Committee also
took into account the views expressed by the
external auditor, based on their independent
reviews of these contracts and related forecasts.
Cyber incident
The Audit Committee 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
cyber incident.
Accounting policy change for
SaaS arrangements
During the year, the Group revised its
accounting policy in relation to upfront
configuration and customisation costs incurred
in implementing Software as a Service (SaaS)
arrangements in response to the International
Financial Reporting Interpretations Committee
(IFRIC) agenda decision clarifying its
interpretation of how current accounting
standards apply to these types of arrangement.
110
Mitie Group plc
Annual Report and Accounts 2022
Audit Committee report
continued
The Audit Committee challenged management
on its approach to ensuring completeness of the
adjustment and also the methodology applied to
quantify the prior year impact of the accounting
policy change.
Revenue recognition
Due to the complexity and scale of many of
the Group’s contracts, 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.
In particular, management presented a paper to
the Audit Committee summarising the outcome
of a periodic review conducted by Group
Finance which assessed revenue recognition
practices applied across the divisions, in the
context of the Group accounting policy. This
review achieved approximately 30% coverage
of Group revenue. The outcomes of this paper
were assessed by the Audit Committee, with
a particular focus on the new divisions to
ensure that the Group accounting policies and
procedures had been appropriately embedded,
and their application was consistent with the
other divisions in the Group.
Valuation of goodwill
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.
Management concluded that there was no
impairment using either the latest forecast or as
a result of applying reasonable sensitivities to key
variables. The Audit Committee has considered
papers prepared by management and has
challenged the assumptions and methodology
applied to assess the carrying value of goodwill.
The basis of reallocation of goodwill as a result
of the new divisional structure for the business
was also assessed and challenged.
Other material accounting judgements
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:
Provisioning for, and disclosure of, contingent
liabilities related to the Group’s participation
in multi-employer pension schemes;
Provisioning for certain commercial
settlements, disputes and other
contractual liabilities;
The recoverability of rebates receivable
from suppliers;
The recoverability of deferred tax assets;
Accounting for acquisitions, including DAEL
and Rock; and
Assumptions used for pensions actuarial
valuation.
Use of Alternative Performance Measures
(APMs)
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 and income
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
charges and credits reported within each
category and documenting the rationale as
to why these charges and credits were both
incremental to business as usual and directly
related to the category.
The Audit Committee challenged as to whether
any charges or credits had been rejected from
the Other Items category, based on the
framework of controls operated by Group
Finance around the reporting of Other Items.
Management confirmed that the divisions
continued to engage proactively with Group
Finance to discuss whether potential charges
or credits would qualify as Other Items.
The Audit Committee concurred with the
judgements made by management in respect
of the presentation of the APMs, and noted
in particular that significant credits have been
reported within Other Items, in addition to
charges, which reflected a balanced assessment.
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 220 to 223.
Review of the Group’s going concern and
viability statements
The Audit Committee has reviewed the Group’s
assessment of going concern. The Audit
Committee also reviewed the Group’s viability
assessment over a period of three years to
31 March 2025, which considered a range of
scenarios that were based on the potential
financial impact of the Group’s principal risks
and uncertainties as set out on pages 66 to 77.
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 test 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
and further mitigation actions available
to management.
Based on the Group’s forecasts for the going
concern assessment period, 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 pages 152 and 153.
Strategic report Governance Financial statements
111
Mitie Group plc
Annual Report and Accounts 2022
In accordance with the Code, the Directors
have assessed the viability of the Group over the
three-year period to 31 March 2025. 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 2025. The more
detailed assessment of the Group’s long-term
viability is set out in the Viability Statement on
pages 83 and 84.
Climate reporting
The Audit Committee has reviewed the
climate- related disclosures across governance,
strategy, risk management and metrics and
targets, and concurred with management that
the requirements of eight of the 11 TCFD
disclosure recommendations have been
complied with. Management has explained the
reasons for not being able to comply with the
remaining three TCFD recommendations at this
stage, which is consistent with the FRC’s ‘comply
or explain’ requirement in respect of TCFD.
The Audit Committee challenged management
on the impact of climate risks on financial results,
in particular relating to asset impairments and
the estimation of provisions for onerous
contracts. Following this review, the Audit
Committee concurred with management that
there were no material financial statement
impacts for FY22 in respect of these matters.
Risk management and
internal controls
The Board is responsible for maintaining and
monitoring sound risk management and internal
control systems. The Audit Committee supports
the Board in this respect by monitoring the
effectiveness of the overall risk management
process and the system of internal controls.
The Audit Committee considers emerging
risks with management as part of the risk
management update it receives and reviews
the risk management framework and
outcomes to support the Going Concern
and the Viability Statement.
The Audit Committee also keeps under
review the adequacy and effectiveness of the
Company’s internal financial controls and
internal control and risk management systems
established to identify, assess, manage and
monitor financial risks. The Audit Committee
also advises the Board on such risks and
how these are tracked, managed, mitigated
and reported.
Risk management approach
The approach to risk management is regularly
reviewed by the Audit Committee, the Board
and the Mitie Group Executive (MGX) team
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.
Mitie continues to review and improve its
approach to governance, risk management
and internal control, and during FY22, the risk
management framework has been developed
further to make sure it is aligned to the
organisational processes and strategy as well
as helping to support corporate governance
requirements. A new database for capturing.
monitoring and reporting risks at all levels within
the Group has been deployed during the year
and is now the primary tool for assessing how
well risks are being managed. The Group Risk
Committee has met regularly throughout the
year, and helps coordinate the risk processes
across the Group. This allows better
coordination of reporting of risks to the
senior leadership team (the MGX), the Audit
Committee and the Board. The continuing
impact of the COVID-19 pandemic, Brexit, the
Russian invasion of Ukraine and integration of
Interserve have helped ensure focus to improve
the consistency of risk processes and effective
management of risks.
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 and authority limits
are aligned at divisional level. This approach
helps to clearly disseminate 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.
Operational and financial systems improvement
projects have been delivered in the Technical
Services division and former Interserve divisions,
which moves the business onto consistent
platforms. The review and documentation of
key internal controls in the internal control
framework has also continued to progress
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 actions
taken as appropriate.
Risk culture
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 Employee
Handbook and ethical business conduct policies,
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 impact of the
COVID-19 pandemic and external geopolitical
issues have served to provide valuable learning
points to enhance the risk management and
continuity processes.
Risk management process
The Audit Committee monitors the
effectiveness of the overall risk management
process. 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.
112
Mitie Group plc
Annual Report and Accounts 2022
Audit Committee report
continued
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.
Risk identification and assessment
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 FY22, the Group Risk
Committee has regularly reviewed the impact
on the business of the risks associated with the
pandemic and the integration of the Interserve
business units, as well as changes in the external
environment through horizon scanning. The
changes to the risk profile are then reported
to the Audit Committee, the MGX and the
Board for their consideration. 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.
Risk mitigation
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.
Risk monitoring and review
Risk registers are reviewed regularly throughout
the 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.
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 66 to 77.
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 FY22 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.
Internal controls
The Board is responsible for maintaining an
effective system of internal control. Mitie’s
system of internal control consists of financial,
operational and compliance controls.
The system covers both monitoring and
oversight controls at divisional level, comprising
business leadership review and direction, and
detailed process controls and control activities,
which are embedded in business processes.
A more formal and comprehensive internal
control framework is being implemented which
is helping to improve internal controls across the
Group and 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 likely
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 harmonisation of
policies and procedures across the Group was a
key focus during the integration of Interserve.
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.
Assurance
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.
Strategic report Governance Financial statements
113
Mitie Group plc
Annual Report and Accounts 2022
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.
Senior Accounting Officer update
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 FY22, thereby
supporting signature of the Senior Accounting
Officer certificate. The Audit Committee
considered this paper and was satisfied with
the approach taken by management.
Internal Audit
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.
The impact on the risk profile of the business
of the integration of the Interserve business
units and the recovery from the COVID-19
pandemic, formed key elements of the Internal
Audit plan for FY22.The Audit plan was
presented to and approved by the Audit
Committee in March 2021, but kept under
continual review throughout the year.
Any changes to the plan were discussed
with the Chair of the Audit Committee
and approved by the Audit Committee.
The audit plan was predominantly focused on
the effectiveness of internal processes and
controls Group-wide, major contracts, individual
divisional risks and strategic initiatives. As noted
previously, a significant element of the plan
covered process and contract risks in former
Interserve business units, as well as activities
associated with the integration, including
IT systems implementations.
Some key areas of focus in the FY22 audit plan
have included:
A review of the risk and control activities
in the bid management processes across
the Group;
An audit of the implementation of a new
ERP system in a division;
A number audits of contract management
processes for customer accounts in former
Interserve business units focusing on controls,
governance, and ongoing contract
management processes; and
An audit of governance processes within
Mitie Ireland.
Regular updates were provided to the Audit
Committee throughout FY22 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 review, improvement and
documentation of the key internal controls
across the business, mainly focused in internal
controls over financial reporting, was presented
to the Audit Committee regularly. As described
previously, this will help ensure compliance with
impending legislation on reporting of internal
controls and helps raise awareness of the
importance of internal controls in the business.
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. The vast majority of actions continue
to be closed by the agreed completion date,
due to sharp focus from senior management.
This remains an important area for the Audit
Committee, and management is required to
provide an explanation if planned closure dates
are missed.
Review of whistleblowing processes
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.
During the year, this service was migrated
to a new service, EthicsPoint, which was
accompanied with a campaign across the Group
to ensure all employees are aware of the service.
An update on whistleblowing activity is provided
to the Board at every Board meeting.
Allegations of fraud
In instances where allegations of fraud have
been reported, these are 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
monitors the implementation of any required
actions, aimed at preventing future occurrence
of similar issues and enhancing internal processes
and controls.
114
Mitie Group plc
Annual Report and Accounts 2022
External audit
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.
Appointment and re-appointment of the
external auditor
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.
For FY22, BDO continued to provide external
audit services to the Group. Scott McNaughton
was the lead partner for BDO on the audit of
Mitie for the year ended 31 March 2022 and was
the lead partner for the previous four years. In
accordance with rotation requirements for audit
partners on listed entity audits, the FY22 audit
will be Scott’s final year on the Group’s audit.
In readiness for this change, the audit team has
been strengthened by a new supporting partner
in the FY22 audit who will work alongside Scott
to ensure senior level continuity on the audit
going forward. A new lead partner, previously
unconnected with BDO’s audit of the Group,
has been introduced to take on this role.
The partners involved with divisional audits
are not required to rotate at this time.
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.
External auditor effectiveness
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; and
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.
In addition, the BDO partners leading the audits
for four large divisions presented a summary of
their audit approaches to the Audit Committee
prior to the FY22 year end audit. Meetings with
the external auditor included challenge from the
Audit Committee around audit process and
opportunities to place more reliance on controls
as part of the audit approach.
Non-audit services provided by the
external auditor
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; or
Find itself in the role of advocate for
the Group.
The Group non-audit services policy reflects
the requirements of the FRC’s Revised Ethical
Standard 2019, which became effective from
15 March 2020 and limits the types of non-audit
services that external auditors can provide.
Under the 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 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 FY22, irrespective of
value, was submitted to the Audit Committee.
A summary of the fees paid to the external
auditor for FY22 is set out in Note 6 to the
financial statements. Fees for other audit-related
services of £175,000 primarily related to the
review of the half-yearly financial report 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.
It was identified by management and BDO that a
non-permitted VAT service had been provided
by BDO Belgium to an entity acquired as part of
the acquisition of Interserve for a fee of £250.
The non-permitted services were ceased
immediately upon identification, and the
amounts concerned were considered to be too
trivial to raise any concern about external
auditor independence. Subsequently, guidance
across the Mitie Group and the BDO member
firms was reinforced by management and
BDO respectively.
Fair, balanced and understandable
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; and
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 136.
Audit Committee report
continued
Strategic report Governance Financial statements
115
Mitie Group plc
Annual Report and Accounts 2022
Statement from the
Remuneration Committee Chair
On behalf of the Board, I am pleased to present
the Directors’ remuneration report for the year
ended 31 March 2022.
The report is split into two main parts:
Executive remuneration at a glance.
This sets out a summary of our policy,
remuneration outcomes for this year and
how we intend to operate our policy for
nextyear
The Annual Report on Remuneration.
This provides more detail on the above,
as well as setting out other remuneration-
related disclosures
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.
Business performance and
context
In FY22, Mitie has delivered a record £4bn of
revenue (including share of joint ventures and
associates), £167m of operating profit before
other items and £133m of free cash flow.
These strong results were boosted by
rapid-response COVID-related contracts and
the acquisition of the Interserve Facilities
Management (Interserve) business. Our
underlying business (excluding Interserve and
the short-term COVID-related contracts) grew
revenue by 14% in FY22, and is in good shape
as it bounces back from COVID. The new
strategy to accelerate growth, enhance margins
and improve cash generation is creating a
strong platform to further improve earnings.
Remuneration review and policy
The Remuneration Committee undertook a
detailed review of remuneration arrangements
as part of the renewal of the remuneration
policy at the 2021 AGM. As part of our review,
we consulted with major shareholders and took
their feedback into account when finalising the
new policy. Further detail on the implementation
of the policy in the year is provided in the
Executive remuneration at a glance section
following this statement. The new policy is
set out in full in our Annual Report and
Accounts 2021.
Remuneration decisions and
outcomes in respect of FY22
Salary and fees
The CEO’s salary of £900,000 has been
unchanged since his appointment in 2016. As in
previous years, the Committee decided to not
implement any salary increase for Phil Bentley.
Simon Kirkpatrick was appointed as CFO with
effect from 1 April 2021. As highlighted in last
year’s report, his salary was set at £350,000
which was at the lower end of the market
and significantly lower than the salary of the
previous CFO to serve on a non-interim basis
(Paul Woolf at £430,000). It was noted that,
over the years, as Simon develops in the
role and subject to his performance and
development, the Committee expects to
increase his salary to be in line with the market.
The Committee was and is aware that proxy
advisory bodies may highlight these increases as
a repeated annual area of concern. However,
the Committee considers this to have been and
still be the most appropriate approach for the
individual, the Company and its shareholders.
In line with this approach, the Committee
determined that it was appropriate to increase
the CFO’s salary from £350,000 to £378,000
(+8%) from 1 April 2022. This remains below
typical FTSE 250 salary levels for a CFO and is
12% below the previous non-interim incumbent.
FY22 bonus
The annual bonus for FY22 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.
FY22 was an outstanding year of record levels
of revenue, profit and cash. This resulted in
maximum vesting under the financial targets.
Assessment of strategic and individual
performance was such that 95% of the overall
bonus maximum was awarded to the CEO and
CFO, half of which is deferred into shares for
two years. Performance against financial and
non-financial targets is described in more detail
in the Annual Report on Remuneration.
2019 LTIP
The Committee assessed the outcome of the
June 2019 LTIP awards granted under the plan
against two performance measures: Earnings
Per Share (EPS) growth and cash conversion.
Following a review of performance against
targets, the Committee determined that 100%
of the award would vest in August/October
2022. This is described in more detail in the
Annual Report on Remuneration.
We are committed to
providing remuneration that
is both fair and reflective of
Company performance.
Jennifer Duvalier
Chair of the Remuneration
Committee
Directors’ remuneration report
116
Mitie Group plc
Annual Report and Accounts 2022
Incentive outcomes
The Committee challenged itself to ensure that
bonus and LTIP outcomes were appropriate in
the round. The Committee was comfortable
that the incentive outcomes summarised above
were appropriately commensurate with both
organisational and individual performance.
Furthermore, it considered that they were
appropriate in the context of the shareholder,
employee and customer experience in FY22.
As such, the Committee did not apply any
discretion to the formulaic outturns and
considers that the policy operated as intended.
Incentives approach for FY23
For FY23, the Committee is intending to
operate the annual bonus and LTIP using the
same broad framework that was used for
FY22. Phil Bentley’s maximum bonus and
LTIP opportunity will be unchanged at 160%
and 200% of base salary respectively. Simon
Kirkpatrick’s maximum bonus and LTIP
opportunity will be unchanged at 130% and
150% 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 replace cash conversion with
return on invested capital (ROIC) for 2022 LTIP
awards, for which FY25 will be the final year
of the performance period. The introduction
of this measure recognises the strategic
importance of ROIC to the business and more
closely aligns new LTIP awards with Mitie’s
overall business strategy. It also complements
the use of ROIC under the Enhanced Delivery
Plan by it continuing to be a long-term focus
beyond the end of FY24. The performance
measures for the 2022 LTIP awards will
therefore be based on: adjusted EPS (50%),
return on invested capital (35%) and ESG
targets (15%). In this way, ESG measures are
appropriately present in both our bonus
(through the strategic element) and LTIP.
Wider workforce considerations
and engagement
The Company 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. In
2021, the SIP scheme was enhanced to provide
employees with a greater incentive to invest
in Mitie shares, and free shares were awarded
to all eligible UK-based employees. In 2022,
the Company intends to make another award
of free shares to UK-based employees and
offer a free shares equivalent to international
colleagues.
The average base pay for the wider workforce
has increased by 4% from FY21 to FY22.
The Mitie Board values the views of our
employees and has multiple engagement
routes. In addition to my role as the Chair of
the Remuneration Committee, I act as the
Company’s designated Non-Executive Director
responsible for oversight of the Board’s
engagement with the workforce. In this role,
Iregularly engage with the workforce on a
broad range of topics, including reward and
benefits. In addition, we undertake an annual
engagement survey in order to better
understand the views of a wider range of
employees. The engagement survey includes a
range of specific questions on the Company’s
pay practices and presents an opportunity for
the workforce to ask its own questions about
employee or executive reward.
Through the feedback from the engagement
survey, supplemented with my findings from
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.
I attended a listening session earlier this year
with frontline colleagues specifically focused on
reward and executive remuneration. It was a
useful session; colleagues were reassured to
hear about the Board’s rigour around fairness
for the consideration of reward for the
Executive Directors in line with that of the
wider workforce.
The Remuneration Committee
The members of the Remuneration Committee
are all Non-Executive Directors and are shown
on pages 88 and 89. During the year ended 31
March 2022, the Committee met 5 times.
For the Directors’ attendance, see the table
on page 91.
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.
Conclusion
We will be seeking approval for the Directors’
remuneration report (advisory vote) at the 2022
AGM. I welcome your views and feedback on
the report.
Jennifer Duvalier
Chair of the Remuneration Committee
jennifer.duvalier@mitie.com
Statement from the Remuneration Committee Chair
continued
Directors’ remuneration report
Strategic report Governance Financial statements
117
Mitie Group plc
Annual Report and Accounts 2022
Executive remuneration at a glance
How we intend to operate our policy for FY23
The following table provides an overview of our remuneration policy and summarises the approach for remuneration arrangements for Executive
Directors for FY21 alongside how the Committee intends to apply the policy in FY23. The full Policy approved at the 2021 AGM is available on our website
(www.mitie.com/investors/corporate-governance) and in the Annual Report and Accounts 2021.
At a glance Overview of policy FY22 FY23
Base salary
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
An external comparator group comprising
sector comparators and size adjusted
comparator organisations
CEO: £900,000
CFO: £350,000
CEO: £900,000 (no increase)
CFO: £378,000 (+8%)
As discussed in the Chair’s Statement
to shareholders, the CFO’s salary was
set low relative to market and the
previous incumbent, with the intention
to incrementally increase over the
years, depending on performance and
development. The new level remains
below typical FTSE 250 CFO salary
levels and c.12% below the previous
non-interim incumbent (£430,000).
Benefits
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.
Benefits for FY22 include private
medical cover, car allowance/car,
and financial/tax planning advice.
No changes to benefits are planned
for FY23.
Pension
Executive Directors are eligible to participate
in the defined contribution pension scheme
or to receive a cash allowance in lieu of a
pension contribution.
CEO: 20% of base salary
CFO: 3% of base salary
(in line with the workforce)
CEO: 20% of base salary and
reducing to the workforce rate
from 1 January 2023
CFO: 3% of base salary
(in line with the workforce)
Maximum bonus
opportunity
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.
CEO: 160% of base salary
CFO: 130% of base salary
CEO: 160% of base salary
CFO: 130% of base salary
Bonus deferral
50% of the bonus is normally deferred into
shares which vest after a minimum of two years
(subject to continued employment).
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
Bonus
performance
measures – mix
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.
70% financial, 30% strategic 70% financial, 30% strategic
Bonus
performance
measures –
metrics
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.
Revenue (35%)
Profit (35%)
Strategic targets (30%)
Revenue (35%)
Profit (35%)
Strategic targets (30%)
Maximum LTIP
opportunity
Awards may be made up to a maximum level
of 200% of base salary.
CEO: 200% of base salary
CFO: 150% base of salary
CEO: 200% of base salary
CFO: 150% base of salary
LTIP performance
measures
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.
Adjusted EPS (50%)
Cash conversion (35%)
ESG measures (15%)
Adjusted EPS (50%)
Return on invested capital (35%)
ESG measures (15%)
118
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
At a glance Overview of policy FY22 FY23
LTIP holding period
of two years
after vest
Awards will normally be subject to an additional
holding period of at least two years.
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)
Enhanced Delivery
Plan opportunity
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
(this was a one-off award made in FY22).
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
n/a
Enhanced Delivery
Plan performance
measures
Awards will vest based on performance
measured over three years.
Return on invested capital (75%)
Synergies (25%)
Vesting is also subject to both an
absolute share price underpin
and a net debt underpin
n/a
Enhanced Delivery
Plan holding period
of two years
after vest
Awards will be subject to an additional holding
period of two years.
Shares released after at least five
years (vesting after three years
plus two-year holding period)
n/a
Share ownership
requirements
Executive Directors are required, over time, to build and maintain a minimum shareholding in the Company worth 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
Recovery provisions (malus and clawback) have applied to incentives for a number of years. Further details on the recovery
provisions, including the circumstances and timeframe for which they can be applied, are set out in the remuneration policy.
The table below reports a single figure of total remuneration for each of the Executive Directors for the financial year ended 31 March 2022 and their
comparative figures for the financial year ended 31 March 2021.
1. Phil Bentley's headline salary remained at £900,000 throughout FY21. However, this figure reflects the salary paid as he, along with other executives, took a voluntary pay
reduction during FY21 in light of the pandemic
2. Simon Kirkpatrick was not an Executive Director for FY21
Further information on the above is provided in the Annual Report on Remuneration.
Single figure for FY22
Phil Bentley
2022
Salary £900,000
Benefits £22,706
Pensions £180,000
Bonus £1,368,000
LTIP £1,398,770
Total £3,869,476
Simon Kirkpatrick
2
2022
Salary £350,000
Benefits £6,942
Pensions £10,500
Bonus £432,250
LTIP £89,478
Total £889,170
2021
Salar y £787, 50 0
1
Benefits £20,625
Pensions £180,000
Bonus £1,131,186
LTIP £ 722,312
Total £2 ,891,623
Executive remuneration at a glance
continued
Strategic report Governance Financial statements
119
Mitie Group plc
Annual Report and Accounts 2022
Summary of remuneration policy
Excluding the one-off awards made under the Enhanced Delivery Plan for FY23, the standard remuneration approach for the Executive Directors
comprises the following elements:
Executive incentives and link to strategy
The following table sets out how the intended measures across the incentive plans for FY23 support the Group’s strategy and KPIs:
Sustained and renewed
profit growth Quality client base
Strong cash-generative
business Strategic targets
Annual bonus
35% profit 35% revenue 10% free cash flow 20% strategic objectives
(inc. ESG)
LTIP
50% adjusted EPS 35% ROIC 15% ESG measures
EDP (2021 award)
25% synergies 75% ROIC
Note: details of the FY23 annual bonus targets will be disclosed in the FY23 remuneration report.
UK Corporate Governance Code: Provision 40
The following table sets out how the revised Remuneration Policy addresses the factors set out in the UK Corporate Governance Code:
Clarity 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 were consulted on the Committee’s
approach to remuneration, including the changes to the Remuneration Policy and introduction of the Enhanced
Delivery Plan, which were approved by shareholders at the 2021 AGM.
Simplicity 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:
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
Predictability 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 of
the 2021 Annual Report and Accounts sets out four illustrations of the application of the 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 remuneration policy and the Company’s incentive schemes have been designed to drive appropriate behaviours
consistent with Mitie’s purpose, values and strategy.
Base salary LTI P
Annual
bonus
PensionBenefits
+ + + + = Total
Fixed
Variable
120
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Executive Director remuneration (subject to audit)
The table below reports a single figure of total remuneration for each of the Executive Directors for FY22 and their comparative figures for FY21.
Year Salary Benefits
2
Pension
3
Total fixed pay
Annual
bonus
4
LTIP
5
Tota l
variable pay To tal
Phil Bentley 2022 £900,000 £22,706 £180,000 £1,102,706 £1,368,000 £1,398,770 £2,766,770 £3,869,476
2021 £787,500 £20,625 £180,000 £988,125 £1,131,186 £772,312 £1,903,498 £2,891,623
Simon Kirkpatrick
1
2022 £350,000 £6,942 £10,500 £367,442 £432,250 £89,478 £521,728 £889,170
2021 – – – – – – – –
Notes:
1. Simon Kirkpatrick was appointed to the Board as Chief Financial Officer on 1 April 2021 and the information in the table sets out his earnings as an Executive Director from that date.
2. 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. Simon Kirkpatrick has received the
use of an electric car for a period of six months during FY21, which attracts 1% benefit in kind tax. Phil Bentley's includes the matching shares element from his SIP purchases for
January - March 2022 based on the share price upon purchase.
3. The pension benefit disclosed above comprises cash allowances in lieu of pension contributions for Phil Bentley and Simon Kirkpatrick of 20% and 3% of base salary respectively.
4. 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 FY22
was determined is provided on pages 121 and 122.
5. The LTIP figure disclosed for FY22 is in respect of the 2019 LTIP and has been valued, in line with the regulations, using the average share price of the last three months of FY22 (59p)
and includes dividend equivalents accrued over this period. This share price is below the share price at the grant date (as adjusted for the bonus element of the 2020 Rights Issue) 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
125. The LTIP figure disclosed for Phil Bentley for FY21 is in respect of the 2018 LTIP and has been adjusted from the figure included in the FY21 remuneration table to reflect the
actual valuation based on the closing share price on the first date of vesting of the awards, being 2 August 2021 (64.9p) and includes dividend equivalents accrued until the first
vesting date.
Non-Executive Director remuneration (subject to audit)
The fees for the Non-Executive Directors for FY22 and their comparative figures for FY21 are set out below:
2022
1
£’000
2021
1
£’000
Derek Mapp 225 197
Nivedita Krishnamurthy Bhagat
2
46 46
Baroness Couttie 60 52
Jennifer Duvalier 60 52
Mary Reilly 60 52
Roger Yates 59 52
Former Director – 10
Total 510 461
Notes:
1. All amounts were paid in cash and no other UK taxable benefits were received in either year.
2. Nivedita Krishnamurthy Bhagat stepped down from the Board on 17 February 2022.
Base salary and benefits
The CEO’s salary of £900,000 has been unchanged since his appointment in 2016. As in previous years, the Committee decided to not implement any
salary increase for Phil Bentley.
Simon Kirkpatrick was appointed as CFO with effect from 1 April 2021. As highlighted in last year’s report, his salary was set at £350,000 which was at the
lower end of the market and significantly lower than the salary of the previous CFO to serve on a non-interim basis (Paul Woolf at £430,000). It was noted
that, over the years, as Simon develops in the role and subject to his performance and development, the Committee expects to increase his salary to be
in line with the market. The Committee was and is aware that proxy advisory bodies may highlight these increases as a repeated annual area of concern.
However, the Committee considers this to have been and still be the most appropriate approach for the individual, the Company and its shareholders.
In line with this approach, the Committee determined that it was appropriate to increase the CFO’s salary from £350,000 to £378,000 (+8%) from
1 April 2022. This remains below typical FTSE 250 salary levels for a CFO and is 12% below the previous non-interim incumbent. Benefits are as described
in the notes to the Executive Director remuneration table on page 120. No changes in benefits are planned for FY23.
Annual report on remuneration
Strategic report Governance Financial statements
121
Mitie Group plc
Annual Report and Accounts 2022
Non-Executive Director fees
Fees are reviewed on a periodic basis and at least every three years. Fees for the Chairman have not been increased since his appointment in 2017. Fees
for the Non-Executive Directors have not increased since 2016. Following a market review of fees during 2022, it was determined that from 1 April 2022:
fees for the Chairman remain at the same level of £225,000; basic fees for the Non-Executive Directors remain at the same level of £52,000; additional
fees for Senior Independent Director status and for chairing a Committee are each increased by £2,000; and an additional fee of £5,000 per annum is
introduced for the designated Non-Executive Director for workforce engagement. These changes are summarised in the table below.
From 1 April 2022
1
£’000
From 1 April 2021
£’000
Chairman fees
2
225 225
Non-Executive Director core fees
3
52 52
Additional fees:
Senior Independent Director 9 7
Chair of a Committee 10 8
Designated Non-Executive Director for workforce engagement 5 –
Notes:
1. The core fees of £52,000 per annum paid to each Non-Executive Director (including the Chairman) would ordinarily total £364,000 for FY23. Total fees including additional duties
would ordinarily amount to £581,000 for FY23 (£510,150 actual for FY22).
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, for chairing Committees and for the
designated Non-Executive Director for workforce engagement to reflect the greater responsibility and time commitment required.
Annual Bonus Plan (ABP) FY22
Awards in respect of FY22 were considered under the ABP. Phil Bentley was eligible for a maximum bonus opportunity of 160% of base salary. Simon
Kirkpatrick was eligible for a maximum bonus opportunity of 130% of base salary.
The awards were 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.
FY22 was an outstanding year of record levels of revenue, profit and cash. This resulted in maximum vesting under all the financial targets; 35% operating
profit; 35% revenue; and 10% free cash flow which formed part of the strategic targets. The remaining elements were other strategic targets (10%) and
individual objectives (10%). The Remuneration Committee determined that performance under these last two elements warranted 7.5% each for both
CEO and CFO, which is discussed in further detail later in this section. This resulted in bonuses for the CEO and CFO representing 95% of the maximum
opportunity.
The Remuneration Committee gave careful consideration to this FY22 annual bonus out-turn and took into account the experience of Mitie shareholders,
colleagues and other stakeholders. It was felt that the overall outcome was appropriate in this context, and reflected what has been an exceptional year of
management performance and therefore no discretion was applied.
The following tables set out performance against the financial, strategic and individual measures and targets.
Performance measure Weighting Performance range Performance Out-turn (% of bonus opportunity)
Operating profit
1
35% of the award £98.7m threshold £166.9m; above maximum 35%
£109.7m target
£120.6m maximum
Revenue
2
35% of the award £3,216m threshold £3,997m; above maximum 35%
£3,385m target
£3,554m maximum
Free cash flow 10% of the award £25m threshold £133m; above maximum 10%
£45m target
£65m maximum
Other strategic targets – CEO and
CFO
10% of the award The Committee considered performance against the
strategic objectives set out below and determined
that the out-turn was 75% of the maximum for the
CEO and CFO
7.5%
Individual objectives – CEO and CFO 10% of the award The Committee considered performance against the
individual objectives set out below and determined
that the out-turn was 75% of the maximum for the
CEO and CFO
7.5%
Total 95%
Notes:
1. Operating profit before other items from continuing operations.
2. Revenue including share of joint ventures and associates from continuing operations.
122
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Annual report on remuneration
continued
Performance against the strategic targets and individual objectives set for Phil Bentley and Simon Kirkpatrick were as follows:
Phil Bentley (CEO)
Strategic targets
Strategy
Industry leader throughout COVID and recognised as ‘go to’ provider for short-term Government
‘surge’ requirements
Became UK No.1 in Cleaning by sales and opened Hygiene and Cleaning Centre of Excellence
Continued focus on core activities with the acquisition of DAEL, Rock and Biotecture and disposal
of Document Management
Achieved Investment Grade credit rating (BBB stable) and refinanced RCF and USPP at significantly
reduced costs
Individual objectives
Accelerate integration synergies
FY22 Interserve cost synergies of £30m, with run rate of c£40m p.a. at year end
Cross-selling revenue of £42m
Customers
Interserve NPS improved from -18 to +13
Mitie Strategic Accounts NPS improved from +55 to +60
Cabinet Office Annual Review recognised strong progress made through proactive Corporate
Affairs Strategy
New wins included DHSC, FDIS, FMSP, BAE Systems and Costa
Colleagues
SLT diversity increased from 25.2% to 31.7%
Team Talk Live accessed by over 25,000 colleagues
Successful Team facilitation for MGX, with several members having bespoke coaching
ESG
MSCI AA rating; CDP A-; Sustainalytics 85% (Platinum low risk)
ESG targets now embedded in both long term incentives and annual bonus
Simon Kirkpatrick (CFO)
Strategic targets
Strategy
Achieved Investment Grade credit rating (BBB stable)
Refinanced Revolving Credit Facility and US Private Placement notes at significantly reduced costs
(>£3m)
New Group reporting structure in place in H1 FY22
Interserve cost synergies of £30m delivered in FY22
2 day reduction in Days Sales Outstanding through process improvements, contributing to a £60m
working capital improvement
Individual objectives
Finance function
Interserve successfully folded into Mitie process and control environment
Complex, automated intercompany billing solution delivered, generating £11m working capital
improvement and £1.9m profit through process improvements
Detailed operating model for finance developed, which should deliver significant savings and
improved service for the Group
Smooth year end reporting and audit process
Colleagues and stakeholders
Over 10 moves and promotions made at senior levels of the finance team
Succession planning and talent reviews held for the first time
Good relationships established with many external stakeholders (USPP holders, banks, brokers,
analysts, investors)
The bonus outcome is therefore as follows:
Total bonus payable
% of salary
Total bonus
£’000
Cash
£’000
Deferred shares
£’000
Phil Bentley 152% of salary 1,368 684 684
Simon Kirkpatrick 123.5% of salary 432 216 216
Strategic report Governance Financial statements
123
Mitie Group plc
Annual Report and Accounts 2022
Annual Bonus Plan FY23
The ABP will be operated on similar terms for FY23. The maximum bonus opportunity for FY23 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 FY23 remuneration report.
LTIP awards granted in 2021 (subject to audit)
On 24 September 2021, the following conditional LTIP awards were granted to the Executive Directors:
Award Type
Number of
shares
1
Face value
% of base
salary
Performance
conditions
Performance
period
% vesting at
threshold
Phil Bentley Performance LTIP
Sep 21
Nil-cost
options
2,975,206 £1,800,000 200% Performance
conditions are set
out in the table
below
Three financial
years ending
31 March 2024
25%
Simon Kirkpatrick Performance LTIP
Sep 21
Nil-cost
options
867,768 £525,000 150% Performance
conditions are set
out in the table
below
Three financial
years ending
31 March 2024
25%
Note:
1. Number of shares was calculated based on the average closing middle market price of 60.5p for the last five trading days prior to the start of the financial year on 1 April 2021.
LTIP awards granted in 2021 are subject to three performance measures, adjusted EPS, cash conversion and ESG targets. These 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 2023)
Earnings Per Share (EPS) 50% of the award 6.9p – 7.8p 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.
Cash conversion 35% of the award 80% – 90% pa 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 6
Gender diversity: increase percentage of women holding senior leadership roles to 30%
Ethnic diversity: increase percentage of racially diverse colleagues holding senior leadership roles
to 10%
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.
124
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Annual report on remuneration
continued
EDP awards granted in FY22 (subject to audit)
On 27 July 2021, the following conditional EDP awards were granted to the Executive Directors:
Award Type
Number
of shares
1
Face value
% of base
salary
Performance
conditions
Performance
period
% vesting at
threshold
Phil Bentley EDP July 21 Nil-cost
options
9,520,661 £5,760,000 640% Performance
conditions are set
out in the table
below
Three financial
years ending
31 March 2024
25%
Simon Kirkpatrick EDP July 21 Nil-cost
options
1,504,132 £910,000 260% Performance
conditions are set
out in the table
below
Three financial
years ending
31 March 2024
25%
Note:
1. Number of shares was calculated based on the average closing middle market price of 60.5p for the last five trading days prior to the start of the financial year on 1 April 2021.
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
31March 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 customers).
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.
LTI P 2022
Phil Bentley and Simon Kirkpatrick will be granted LTIP awards of 200% and 150% of base salary respectively in respect of FY23.
The awards will vest in 2025 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 2025)
Earnings Per Share (EPS) 50% of the award 7.1p threshold
7.9p target
8.7p maximum
25%
70%
100%
Return on invested
capital
35% of the award 19.9% threshold
22.1% target
24.3% maximum
25%
70%
100%
ESG targets 15% of the award
Greenhouse gas emission reduction: (a) revenue intensity of Scope 1 and 2 emissions reduced to
4.5%; and (b) 5% pa reduction in Scope 3 emissions
Fleet zero carbon: 85% of Mitie's total fleet is zero tailpipe emissions
Employee engagement: improve employee engagement by 4ppt
Customer engagement: improve net promoter score (NPS) by 4
Gender diversity: increase percentage of women holding senior leadership roles to 35%
Ethnic diversity: increase percentage of racially diverse colleagues holding senior leadership roles
to 10%
Note that the EPS figures above of 7.1p, 7.9p and 8.7p at threshold, target and maximum levels of performance effectively represent EPS growth of 6.4%,
10.2% and 13.8% per annum respectively from a notional base year FY22 EPS figure of 5.9p, which represents FY22 EPS excluding the non-repeatable
COVID earnings.
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 and employee experience. Awards are also subject to an additional post-vesting holding period of at least two years.
Strategic report Governance Financial statements
125
Mitie Group plc
Annual Report and Accounts 2022
Details of June 2019 LTIP award vesting in FY23
The Committee assessed the outcome of the June 2019 LTIP awards (based on FY22 results) granted under the plan against two performance measures:
Performance
measure Weighting
Performance
range
Vesting of portion of the award (performance period three years ending
31 March 2022)
Mitie
performance
Vesting
(% of max)
Earnings Per
Share (EPS)
growth
50% of the
award
5% – 10% 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 Mitie achieves EPS growth of 7.5% pa,
70% of the award will vest. If EPS growth of 10% pa or more is
achieved, all the awards will vest. Between 5% and 7.5% and 7.5%
and 10%, the proportion of awards vesting will be determined on
a linear sliding scale basis.
26% pa 50%
Cash
conversion
50% of the
award
80% – 90% pa 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
Mitie achieves 85% pa cash conversion. 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.
116% pa 50%
This results in 100% vesting of the 2019 LTIP award on a formulaic basis. As part of their assessment, the Committee took into account the wider
performance of the Group and the context of both the shareholder and employee experience. In doing so, it determined that the outcome was
appropriate and no discretion was applied. 2019 LTIP awards will vest later in 2022 and Phil Bentley's award is subject to a two-year post-vesting holding
period. Simon Kirkpatrick's 2019 LTIP award was granted when he was not an Executive Director and was not subject to a two-year post-vesting holding
period. All LTIP awards granted to Executive Directors are subject to a two-year post-vesting holding period.
Loss of office payments (subject to audit)
There have been no loss of office payments to past Directors during FY22.
Payments to past Directors (subject to audit)
Andrew Peeler's bonus payment for FY21 was disclosed as £200,000 in error in last year's remuneration report and should have been £250,000. As he
was not a Director during FY22, his remuneration is not required to be disclosed in the single figure table for FY22, where this would have been corrected
and explained in the prior year comparatives. For completeness, it should be noted that £175,000 was paid to him in January 2021 and £75,000 was paid
to him at the end of his assignment with Mitie in June 2021. For clarity, there have been no other payments to Andrew since his departure. Therefore this
represents a correction rather than an additional payment to a past Director. For completeness, there have been no other payments to past Directors
during FY22 that relate to their period as a Director.
126
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Annual report on remuneration
continued
Percentage change in remuneration of Directors and employees
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.
FY20/FY21
1
FY21/FY22
1
Salary
2
Benefits
3
Bonus Salary
2
Benefits
3
Bonus
Average pay based on Mitie’s UK employees 2.5% (20.8)% (23.9)% 4.1% 5.7% 99.4%
Executive Directors
Phil Bentley (12.5)% (25.0)% N/A
4
14.3% 10.1% 20.9%
Simon Kirkpatrick
5
N/A N/A N/A N/A N/A N/A
Non-Executive Directors
Derek Mapp (12.5)% – – 14.3% – –
Nivedita Krishnamurthy Bhagat (12.5)% – – 1.4% – –
Baroness Couttie (10.5)% – – 14.3% – –
Jennifer Duvalier (12.5)% – – 14.3% – –
Mary Reilly (12.5)% – – 14.3% – –
Roger Yates (12.5)% – – 14.3% – –
Notes:
1. The average UK employee figures reflect the changes in average annual pay for UK employees employed throughout FY21 and FY22 for FY21/22 and throughout FY20 and FY21
for FY20/21. Employees who have been on furlough during FY21 or FY22 have been excluded for the purposes of this analysis.
2. The increases in salary for Directors for FY22 compared with FY21 following the reductions in salary for FY21 compared with FY20 arose from the Non-Executive Directors and
Phil Bentley volunteering 30% reductions in their fees/salaries respectively for five months from 1 April 2020 as part of Mitie’s actions to mitigate the impact of COVID-19.
3. Includes taxable benefits such as car/car allowance, private medical benefit and private fuel. The introduction of the 1% benefit in kind tax on electric vehicles has impacted the
benefits in FY22. Also includes Phil Bentley's matching shares element from his SIP purchases for January - March 2022 based on the share price upon purchase.
4. Phil Bentley’s FY20 bonus was £nil as he waived it.
5. Simon Kirkpatrick was appointed to the Board on 1 April 2021 and therefore there are no appropriate prior year comparatives in terms of Director remuneration. He will be included
in next year's report when it will be possible to show a FY22/FY23 change in remuneration.
CEO pay ratio
The table below sets out the CEO pay ratio in respect of FY22. CEO pay ratio data for previous financial years is provided for reference.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
FY22 Option B 189:1 161:1 141:1
FY21
1
Option B 151:1 129:1 116:1
FY20 Option B 154:1 139:1 108:1
1 The FY21 single figure has been updated as a result of reflecting the actual valuation on the closing share price on the first date of vesting of the LTIP award.
The pay ratios set out above were calculated using the Group’s FY22 gender pay data based on employees as at 5 April 2021 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 70,000 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 CEO pay ratio figures for FY22 have increased this year due to an increase in the CEO's single figure, primarily as a result of the vesting of the 2019
LTIP and an increased annual bonus payment in respect of FY22 from FY21. As a Real Living Wage service provider, Mitie continues to increase pay levels
among 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 Element of pay 25th percentile employee Median employee 75th percentile employee
FY22
Base salary (FTE) £19,760 £22,724 £26,660
Total pay (FTE) £20,433 £23,988 £27,519
Strategic report Governance Financial statements
127
Mitie Group plc
Annual Report and Accounts 2022
Relative spend on pay
The table below shows the total cost of remuneration in the Group, compared with dividends distributed.
Year ended
31 March 2022
£m
Year ended
31 March 2021
£m Change
Aggregate employee remuneration 2,132 1,473 44.7%
Equity dividends 6 – N/A
Assessing pay and performance
The table below provides a summary of the Chief Executive Officer’s single figure remuneration over the past 10 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:
0
50
100
150
200
250
300
TSR (Rebased to 100)
March 12
Mitie
March 13 March 14 March 15 March 16 March 17 March 18 March 19 March 20 March 21 March 22
FTSE 250 FTSE 350 Support Services FTSE 350
FY13 FY14 FY15 F Y16
FY17
Ruby
McGregor-
Smith
1
FY17
Phil
Bentley
1
FY18 FY19 FY20 FY21 FY22
Single figure
remuneration £2,105,131 £1,447,266 £1,525,824 £2,448,161 £530,628 £479,073 £1,102,549 £2,248,948 £2,029,856 £2,891,623
3
£3,869,476
Annual bonus element
(actual as a % of max) 85% 90% 50% 73% 0% waived waived 79% waived 78.6% 95%
LTIP element (actual
vesting as a % of max) 57.2% 0% 25% 69.5% 0% n/a n/a n/a 79.7%
2
50% 100%
Notes:
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.
3. The single remuneration figure for FY21 has been adjusted from the figure published in the FY21 remuneration table to reflect the actual valuation of Phil Bentley's 2018 LTIP award
based on the closing share price on the first date of vesting of the award, being 2 August 2021 (64.9p).
128
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Annual report on remuneration
continued
Share ownership (subject to audit)
Number of shares
owned as at
31 March 2022
1
Value of
target holding
Target
shareholding
Percentage of salary
held as at
31 March 2022
Percentage of target
achieved as at
31 March 2022
Compliance with
share ownership
guidelines
Phil Bentley
2
10,754,889 £1,800,000 2,975,207 723% 361% Achieved
Simon Kirkpatrick 6,332 £700,000 1,157,025 1% 1%
Not achieved but
compliant
3
Notes:
1. Includes shares owned by connected persons.
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 FY21 (60.5p).
3. Simon Kirkpatrick was appointed to the Board on 1 April 2021.
Directors’ outstanding share interests (subject to audit)
The following tables provide the outstanding share interests for the Executive Directors:
Directors’ interests granted under the share schemes
Year of grant
Options
outstanding
as at 31 March
2021
10
Granted in year Lapsed in year Exercised in year
Options
outstanding
as at 31 March
2022
11
Exercise price
Earliest normal
exercise date
Phil Bentley Nov 2016 LTIP¹ 425,094 – – (425,094) – Nil-cost May 2020
8
July 2017 LTIP
2
343,117 – – (171,558) 171,559 Nil-cost July 2020
8
Aug 2018 LTIP
3
2,283,069 – (1,141,534) – 1,141,535 Nil-cost Aug 2021
8
June 2019 LTIP
4
2,275,608 – – – 2,275,608 Nil-cost June 2022
8
Aug 2020 LTIP
5
5,278,592 – – – 5,278,592 Nil-cost Aug 2023
8
Sep 2021 LTIP
6
– 2,975,206 – – 2,975,206 Nil-cost Sep 2024
8
July 2021 EDP
7
– 9,520,661 – – 9,520,661 Nil-cost Sep 2024
8
June 2019 DBP 722,847 – – (722,847) – Nil-cost June 2021
June 2021 DBP
12
– 769,514 – – 769,514 Nil-cost June 2023
Nov 2021 SAYE – 35,714 – – 35,714 50.40p Feb 2025
Simon
Kirkpatrick
Oct 2019 LTIP
4
148,913 – – – 148,913 Nil-cost Oct 2022
Aug 2020 LTIP
5
322,580 – – – 322,580 Nil-cost Aug 2023
Sep 2021 LTIP
6
– 867,768 – – 867,768 Nil-cost Sep 2024
8
July 2021 EDP
7
– 1,504,132 – – 1,504,132 Nil-cost Sep 2024
8
Dec 2020 CSP
9
577,427 – – – 577,427 Nil-cost Dec 2022
Sep 2020 SAYE 46,187 – – – 46,187 27.28p Dec 2023
Notes:
1. The performance criteria applicable to the November 2016 LTIP award were disclosed on pages 154 and 155 of the FY20 remuneration report.
2. The performance criteria applicable to the 2017 LTIP awards were disclosed on pages 155 and 156 of the FY20 remuneration report.
3. The performance criteria applicable to the 2018 LTIP awards were disclosed on page 110 of the FY21 remuneration report.
4. The performance criteria applicable to the 2019 LTIP awards are disclosed on page 125 of this FY22 remuneration report.
5. The performance criteria applicable to the 2020 LTIP awards were disclosed on pages 108 and 109 of the FY21 remuneration report.
6. The performance criteria applicable to the 2021 LTIP awards are disclosed on page 123 of this FY22 remuneration report.
7. The performance criteria applicable to the 2021 EDP awards are disclosed on page 124 of this FY22 remuneration report.
8. Awards are subject to an additional two-year holding period.
9. The 2020 Conditional Share Plan (CSP) awards are subject to a personal performance rating.
10. For all awards prior to August 2020, the number of options has been adjusted for the bonus element of the Rights Issue (x1.93426825).
11. The closing market price of the Company’s shares as at 31 March 2022 was 62.9p. The highest and lowest closing market prices during FY22 were 77.3p and 46.45p respectively.
12. The Deferred Bonus Plan award on 17 June 2021 represents the deferral of 50% of the bonus awarded for FY21 with the number of shares based on the closing middle market price
of 73.5p for the day before the date of grant.
Strategic report Governance Financial statements
129
Mitie Group plc
Annual Report and Accounts 2022
Directors’ share ownership
Number of
ordinary shares
beneficially
owned as at
31 March 2022
(or date of
cessation
if earlier)
1
Number of
ordinary shares
beneficially
owned as at
31 March 2021
(or date of
cessation
if earlier)
Executive Directors
Phil Bentley 10,754,889 9,154,496
Simon Kirkpatrick
2
6,332 N/A
Non-Executive Directors
Derek Mapp 553,812 494,806
Nivedita Krishnamurthy Bhagat 85,649 75,108
Baroness Couttie 86,311 70,582
Jennifer Duvalier 78,243 67,581
Mary Reilly 92,663 79,698
Roger Yates 160,000 160,000
Notes:
1. The number of shares beneficially owned since 31 March 2022 has changed due to a planned purchase that took place on 1 April 2022 for Non-Executive Directors. The revised
figures are as follows: Derek Mapp – 571,198 shares, Baroness Couttie – 90,833 shares, Jennifer Duvalier – 81,416 shares, and Mary Reilly – 96,521 shares. In addition, Phil Bentley
made two SIP transactions, one on 13 April 2022 where an additional 441 shares were acquired and one on 13 May 2022 where 416 shares were acquired.
2. Simon Kirkpatrick was appointed to the Board on 1 April 2021.
There have been no changes, other than those in note 1 above, between 1 April 2022 and 7 June 2022, the last practicable date prior to the date of
this report.
Share dilution
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 10-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 10 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 2022 Dilution
All share plans (maximum 10%) 7.8%
Discretionary share plans (maximum 5%) 2.9%
130
Mitie Group plc
Annual Report and Accounts 2022
Directors’ remuneration report
Shareholder voting
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.
At the Company’s 2021 AGM, a resolution was passed to approve the 2021 Directors’ remuneration report and a separate resolution was passed to
approve the 2021 Directors’ remuneration policy. The results of the votes on these resolutions were as follows:
Number of votes Votes in favour Votes against Withheld¹
2021 Directors’ remuneration policy – 2021 AGM 835.7m 356.9m 1.4m
70.1% 29.9% –
2021 Directors’ remuneration report – 2021 AGM 950.9m 242m 1.2m
79.7% 20.3% –
Note:
1. Votes withheld are not counted in the calculation of the proportion of votes for or against a resolution.
The Board notes that, although the resolutions to approve the Directors’ remuneration report and the Directors’ remuneration policy were passed
by a majority of shareholders, a significant minority of shareholders voted against the resolutions. The Company undertook extensive consultation with
major shareholders prior to the AGM regarding remuneration matters and some changes were made to the final EDP to reflect shareholder feedback.
The Board has a clear understanding of the reasons why a minority of shareholders were not supportive of the EDP. One major shareholder voted
against the resolution related to the authority to disapply pre-emption rights for the purposes of acquisitions and capital investments and the Board
has a clear understanding of their rationale for not supporting this resolution. The Board appreciated the level of engagement with many shareholders.
Remuneration Committee and its advisors
The Remuneration Committee seeks and considers advice from independent remuneration advisors where appropriate.
Deloitte LLP have 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 £28,500 (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.
Annual report on remuneration
continued
Strategic report Governance Financial statements
131
Mitie Group plc
Annual Report and Accounts 2022
Social Value & Responsible
Business Committee report
Social Value & Responsible
Business Committee members
At the date of this report and throughout FY22,
the Social Value & Responsible Business
Committee comprised:
Chair: Baroness Couttie
Committee members:
Salma Shah (from 1April 2022)
Peter Dickinson, Chief of Staff, General Counsel
& Company Secretary
Kath Fontana, Managing Director of Projects
(until 31 March 2022)
Jasmine Hudson, Group HR Director
Simon King, Director of Sustainability &
Social Value (until 25 February 2022)
Claire Lovegrove, Head of Media Relations
Danny Spencer, Managing Director of Care &
Custody (from 22 September 2021)
Jason Towse, Managing Director of
Business Services
Simon Venn, Chief Government &
Strategy Officer
Social Value & Responsible
Business Committee meetings
The Social Value & Responsible Business
Committee met five times during FY22.
Key purpose of the Social
Value & Responsible Business
Committee
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.
Key responsibilities of the
Social Value & Responsible
Business Committee
The key responsibilities of the Social Value &
Responsible Business Committee include:
Driving the social value and responsible
business agenda on behalf of the Group
Ensuring 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
Benefiting Mitie’s customers, colleagues and
shareholders
The Social Value & Responsible Business
Committee Terms of Reference are
available at www.mitie.com/investors/
corporate-governance.
Task Force on Climate-Related
Financial Disclosures (TCFD)
Board oversight of climate-related risks
and opportunities
Both the Board and the Social Value &
Responsible Business Committee have oversight
of climate-related risks and opportunities.
At each Board meeting, the Chair of the
Committee provides an update which includes
an overview of any Committee meeting and
any recommendations from the Committee
requiring approval by the Board.
Derek Mapp, Chair of the Board, joined
two Committee meetings during FY22 and
with effect from 1 April 2022, Salma Shah,
Independent Non-Executive Director, was
appointed as an additional member of
the Committee.
All members of the Board have access to Social
Value & Responsible Business Committee
meeting papers via an electronic Board portal.
Management’s role in assessing and managing
climate-related risks and opportunities
Due to the action-oriented nature of the
Committee, a significant proportion of its
membership comprises members of the MGX
and senior management. As at 31 March 2022,
four Committee members were members of
the MGX.
As illustrated on the following page, a
governance framework comprising the Plan
Zero Working Group, Plan Zero Steering
Group, the Committee and the Board, ensures
that climate-related risks and opportunities are
appropriately assessed and managed at Mitie.
Mitie’s Climate Change risk assessment
document (TCFD risks and opportunities) is
maintained by Jason Roberts, Group Director
for Sustainability & Social Value, who is a regular
attendee of the Committee and Chair of the
Plan Zero Steering Group. Senior members of
the Finance team distribute the document to all
business areas for them to review business and
operation-specific risks and opportunities.
We’ve made great strides at
embedding sustainability and
social value across Mitie, and
are dedicated to driving this
further. Our award winning Plan
Zero initiative and Ready2Work
programmes are a testament to the
value we are adding to communities
in protecting our environment and
creating employment opportunities
for underrepresented groups.
Baroness Couttie
Chair of the Social Value &
Responsible Business Committee
132
Mitie Group plc
Annual Report and Accounts 2022
Governance framework
Board
The Board has overall responsibility for
sustainability, environmental and climate-related
matters, including TCFD risks and opportunities.
The Board reviews climate-related risks and
opportunities as part of its principal risks and
business strategy considerations.
Social Value & Responsible Business
Committee
The Committee has oversight for sustainability,
environmental and climate-related matters,
including TCFD risks and opportunities.
The Committee reviews and approves Mitie’s
Climate Change Risk Assessment document
(TCFD risks and opportunities) following its
approval by the Plan Zero Steering Group.
The Committee receives regular updates
on outputs from Plan Zero Steering
Group meetings.
Plan Zero Steering Group
The Plan Zero Steering Group meets quarterly
and reports to the Committee. Its members
include Managing Directors of Mitie’s business
divisions and senior members of the Finance
team. Its key responsibilities include to:
Oversee and direct the Plan Zero Working
Group
Deliver Plan Zero solutions and opportunities
to Mitie’s customers
Review and mitigate identified climate-related
risks
Realise climate-related opportunities
Review and approve Mitie’s Climate Change
Risk Assessment document (TCFD risks and
opportunities)
Plan Zero Working Group
The Plan Zero Working Group meets monthly
and reports to the Plan Zero Steering Group.
Its members include ESG team members and
operational managers from across the Group.
Its key responsibilities include to:
Identify and deliver actions to achieve Plan
Zero objectives
Develop, review and update Mitie’s Climate
Change Risk Assessment document (TCFD
risks and opportunities)
Key activities during the year
Developed Environmental, Social and
Governance (ESG) performance
During FY22, the Committee discussed
initiatives aimed at improving Mitie’s ESG scores
with ESG rating agencies. As a result of these
initiatives, Mitie received the highest ranking
Platinum Award in The Sustainable FM Index’s
(SFMI) December 2021 report, an improvement
on Mitie’s Gold Award in 2020.
Progress on Plan Zero
During FY22, Mitie made significant progress on
transitioning its fleet to electric vehicles (EV).
With over 2,200 EVs deployed, Mitie has one
of the largest pure electric fleets in the UK.
Following the completion of site audits in FY21
across Mitie’s estate, all identified optimisation
measures have been implemented. During FY22,
Mitie’s Property Team commenced the process
of removing gas fired boilers from the estate,
and as at 31 March 2022 Mitie had nine buildings
that were fully decarbonised and operating on
100% renewable energy. A further seven
buildings have been identified for transition
to low carbon heat pumps in FY23.
Mitie Waste made significant progress in diverting
waste from landfill. Over 10,000 bags of old
Interserve uniforms were collected from colleagues
over a four-month period through Mitie’s recycling
services. Eighty tonnes of textiles were diverted
from landfill which saved 1,787 tonnes of carbon.
Mitie supported public and private sector
organisations with their own decarbonisation
agendas. During FY22, Mitie provided Plan Zero
pathways for 24 customers at nearly 800 sites
and executed decarbonisation capital projects
across its customer base, implementing
specialist technologies including EV charging
infrastructure, solar PV and heat pumps.
Mitie also supported its public sector clients
to successfully apply for £73m from the Public
Sector Decarbonisation Scheme.
Mitie’s leadership position has been recognised
by winning various awards including The IWFM
Impact Award for Positive Climate Action
2021, GREENFLEET Award for Outstanding
Achievement, Fleet News Fleet of the Year
Award and edie Fleet Management Initiative
of the Year award.
In February 2021, Mitie made a public
commitment to a science-based target to
address all of its Scope 3 emissions with a Net
Zero target by 2035, incorporating its supply
chain. Mitie expects to submit its plans to the
Science-Based Target Initiative for verification
during HY23.
Strong progress on social value targets
Progress against Mitie’s social value targets
continues to improve. Mitie achieved all of
its 13 social value targets for FY22.
Highlights for FY22 include:
Completed 14,650 volunteering hours
(target was 12,000 hours)
Promoted Voluntary, Community and Social
Enterprise spend in our procurement to the
value of £1.1m (target was spend of £750k)
Saved an additional 1,569 tonnes of carbon
(target was to reduce carbon to a maximum
of 25,230 tonnes and Mitie achieved a
reduction to 23,661 tonnes)
Increased racial diversity of the Mitie
Leadership Team to 8% (target was 3%)
Progress against Mitie’s social value targets is
published monthly on www.mitie.com/esg
providing public transparency on performance.
The Mitie Foundation
The Foundation continues to support individuals
with perceived barriers to employment, such
as the long-term unemployed, those with
disabilities or learning difficulties, veterans
and people with convictions. During FY22,
the Foundation delivered four Ready2Work
programmes across the country, supporting
50 individuals with perceived barriers to
employment to gain hands-on work experience
within Mitie’s service lines. Nearly 70% of those
who completed the programme went on to gain
sustainable employment. Mitie’s Ready2Work
programme also won two awards, enie’s Driving
Social Inclusion in the Workplace and UK Social
Mobility Award’s Recruitment Programme of
the Year.
During FY22, the Foundation also launched a
career page, to support applications for Mitie
vacancies from individuals introduced by
Foundation partners. The Foundation offers
advice and guidance on effective job searches,
as well as CV and interview preparation where
needed. Foundation candidates who apply for
a job with Mitie are guaranteed an interview
provided they meet the job role’s minimum
entry requirements. Since the implementation
of this process, over 136 colleagues have
joined the Mitie business in various roles
including management.
Baroness Couttie
Chair of the Social Value & Responsible
Business Committee
Board
Social Value & Responsible Business
Committee
Plan Zero Steering Group
Plan Zero Working Group
Social Value & Responsible Business Committee report
continued
Strategic report Governance Financial statements
133
Mitie Group plc
Annual Report and Accounts 2022
The Directors present their Annual Report, together with the audited financial statements of the
Company and the Group, for the year ended 31 March 2022.
The Directors’ report required under the Companies Act 2006 comprises the corporate governance
statement on pages 85 to 106. The corporate governance statement on pages 85 to 106 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 2022
comprises the Strategic report and this Directors’ report.
Cross-references
Employee engagement Details of how Mitie encourages employee involvement can be found in
the Strategic report on pages 37 to 40.
Equality, diversity and
inclusion (including
employment of disabled
persons)
Details of Mitie’s commitment to equality, diversity and inclusion,
including in relation to the employment of disabled persons, can be
found on pages 37 to 40.
Business relationships 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 81 to 82.
Greenhouse gas emissions,
energy consumption and
efficiency
Details of greenhouse gas emissions, energy consumption and efficiency
can be found in the Strategic report on page 45.
Environmental data Environmental data can be found in the Strategic report on page 45.
The information required to be disclosed by Listing Rule 9.8.4 can be found in the following locations:
Details of any long-term incentive schemes Directors’ remuneration report on pages 115 to
130 and Note 31 to the consolidated
financial statements
Details of any arrangements under which a
Director has waived or agreed to waive any
emoluments or future emoluments
Directors’ remuneration report on page 127
Shareholder waiver of dividends and
future dividends
Directors’ report on page 133
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.
Principal Group activities
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 2 to 3 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, Oman,
Poland, Saudi Arabia, Slovakia, Spain, 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 6 to 12.
Financial results
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 59 to 63.
The Group’s profit before tax from continuing
operations for the year ended 31 March 2022
was £52.3m (2021: restated £13.7m loss).
Dividends
An interim dividend of 0.4p per Ordinary Share
(2021: nil) with a total value of £5.7m was paid to
shareholders on 2 February 2022.
The Directors recommend a final dividend of
1.4p per Ordinary Share (2021: nil) with a total
value of £19.5m (2021: nil) based upon the
number of shares in issue as at 7 June 2022.
Subject to approval at the 2022 AGM, the final
dividend will be paid on 5 August 2022 to
shareholders on the register as at close of
business on 24 June 2022.
Total dividends per Ordinary Share for the year
ended 31 March 2022 will be 1.8p (2021: nil).
As at 31 March 2022, the Company had
distributable reserves of £54.6m (2021: £89.6m).
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 agreed to waive dividends payable
on Ordinary Shares held by the trust in respect
of the year ended 31 March 2022.
In accordance with Section 726 of the
Companies Act 2006, no dividends are paid
on Ordinary Shares held in treasury.
Directors
The names of all persons who served as
Directors of the Company at any time during
FY22 are set out on page 100. Full biographical
details of the current Directors, including
Committee membership and external
appointments, are set out on pages 87 to 89.
Director independence
The Board considered the independence of
all Non-Executive Directors during FY22
and determined that, as at 31 March 2022,
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.
Indemnification of Directors and
insurance
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 FY22 and remains in force as at the
date of this report.
Directors’ report
134
Mitie Group plc
Annual Report and Accounts 2022
Directors’ report
continued
Certain subsidiary directors have also been
granted a qualifying third-party indemnity
provision which has been in force throughout
FY22 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.
Share capital
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 FY22, 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.
Financial instruments
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.
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.
Restrictions on the transfer
of shares
Ordinary Shares held by Project County SPV I
Designated Activity Company were 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
Facilities Management (Interserve) by the
Company), pursuant to which the voting rights
attaching to the Ordinary Shares held by Project
County SPV I Designated Activity Company
were to be exercised by How Group Limited
and How Group Limited was 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 were
held by Project County SPV I Designated
Activity Company. How Group Limited sold
its remaining holding in the Company’s issued
share capital during FY22 was announced on
17 June 2021.
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.
Significant interests in the Company’s share capital
As at 31 March 2022, 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% 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):
Number of
Ordinary Shares % of voting rights
Silchester International Investors LLP 200,588,146 14.02%
FIL Limited 140,742,713 9.83%
Brandes Investment Partners LLP 91,892,126 6.42%
Heronbridge Investment Management 83,460,781 5.83%
Schroder plc 77,614,308 5.42%
Alchemy Special Opportunities Fund IV 71,023,280 4.96%
BlackRock Inc 69,974,298 4.89%
Vanguard Group 60,078,240 4.20%
FMR LLC 59,374,800 4.15%
Oasis Investments II Master Fund 56,201,527 3.93%
Lombard Odier Investment Managers 43,978,187 3.07%
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 7 June 2022, 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 129.
Strategic report Governance Financial statements
135
Mitie Group plc
Annual Report and Accounts 2022
Powers of the Company to issue
or buy back its own shares
During FY22, the Company allotted 5,283,107
new Ordinary Shares as detailed below.
2,341,931 new Ordinary Shares were
subscribed for by the Company’s Employee
Benefit Trust at nominal value on 2 August
2021 following a block listing
2,941,176 new Ordinary Shares were
subscribed for by the Company’s Employee
Benefit Trust at nominal value on 6 January
2022 following a block listing
The Company did not undertake any market
purchases of its own shares during FY22. The
Employee Benefit Trust purchased 22.9m shares
during FY22. 6,155,800 shares were distributed
from treasury to the Company’s Share Incentive
Plan trust during FY22. 297,567 shares were
distributed from treasury in connection with the
exercise of awards under the Mitie Group plc
2011 SAYE scheme during FY22. Exercisable
awards under the Mitie Group plc 2001 and
2011 Executive Share Option schemes were
underwater during FY22 and no awards
were exercised.
The total number of Ordinary Shares held by
the Company in treasury as at 31 March 2022
was 1,290,992, representing 0.1% of the issued
share capital of the Company (2021: 7,744,359,
representing 0.5% of the issued share capital of
the Company).
At the AGM held on 27 July 2021, the
Company’s shareholders authorised:
The Directors to allot Ordinary Shares
up to an aggregate nominal amount of
£3,563,906.40, equating to 10% of the issued
share capital of the Company (excluding
treasury shares) as at 11 June 2021
The disapplication of pre-emption rights over
allotted shares up to an aggregate nominal
value of £1,781,953.20, equating to 5% of
the issued share capital (excluding treasury
shares) and 4.99% of the issued share capital
(including treasury shares) of the Company,
each as at 11 June 2021
The disapplication of pre-emption rights over
allotted shares up to an aggregate nominal
value of £1,781,953.20, equating to 5% of
the issued share capital (excluding treasury
shares) and 4.99% of the issued share capital
(including treasury shares) of the Company,
each as at 11 June 2021, 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 142,556,256
Ordinary Shares, equating to 10% of the
issued share capital (excluding treasury
shares) of the Company as at 11 June 2021
These authorities will expire on the earlier of
30September 2022 and the conclusion of the
2022 AGM. A renewal of these authorities will
be put to shareholders at the 2022 AGM.
Further details are included in the notes to the
relevant meeting notice, which can be found on
Mitie’s website.
Articles of Association
At the AGM held on 27 July 2021, shareholders
approved the adoption of new Articles of
Association of the Company (the “Articles”).
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 www.mitie.com/
investors/corporate-governance.
Significant agreements –
change of control
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.
Disclosure of information to
the auditor
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.
Post balance sheet events
Details of post balance sheet events can
be found in Note 36 to the consolidated
financial statements.
By order of the Board
Peter Dickinson
Chief of Staff, General Counsel &
Company Secretary
9 June 2022
136
Mitie Group plc
Annual Report and Accounts 2022
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 UK-
adopted international accounting standards 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 Financial Reporting Standards 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 UK-adopted international
accounting standards, 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, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s position
and performance, business model and strategy.
Directors’ responsibilities
pursuant to DTR4.1.12
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
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.
By order of the Board
Phil Bentley
Chief Executive
9 June 2022
Simon Kirkpatrick
Chief Financial Officer
9 June 2022
Statement of Directors’ responsibilities
in respect of the Annual Report, Remuneration report and financial statements
137
Mitie Group plc
Annual Report and Accounts 2022
Financial statements
138 Independent auditor’s report to the
members of Mitie Group plc
145 Consolidated incomestatement
146 Consolidated statement of
comprehensive income
147 Consolidated balance sheet
149 Consolidated statement of changes
inequity
150 Consolidated statement of cash flows
152 Notes to the consolidated
financial statements
214 Company balance sheet
215 Company statement of changes in equity
216 Notes to the Company
financial statements
220 Appendix – Alternative Performance
Measures
224 Shareholder information
138
Mitie Group plc
Annual Report and Accounts 2022
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 2022
and of the Group’s profit for the year then
ended;
the Group financial statements have been
properly prepared in accordance with UK
adopted international accounting standards;
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.
We have audited the financial statements of
Mitie Group plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended
31 March 2022 which comprise 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 UK
adopted international accounting standards.
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
31March 2018 and subsequent financial periods.
The period of total uninterrupted engagement
including reappointments is five years,
covering the years ended 31 March 2018 to
31 March 2022.
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 on 30 November 2020, we
identified that certain services were provided
by overseas member firms of the BDO network
to entities within the Interserve subsidiaries
acquired, which were prohibited under the
FRC’s Ethical Standard. These services were
therefore terminated at the earliest opportunity
and in accordance with the Standard.
However, we identified that a further
engagement for VAT services between BDO
Denmark and a former Interserve subsidiary,
which was previously understood to have
ceased prior to 31 March 2021 year end but had
continued to be provided to Mitie FM Limited
(formerly Interserve (Facilities Management)
Ltd). We have obtained confirmation that the
services are now terminated and a new VAT
provider has been appointed. The fees charged
for the VAT services were £250.
We have assessed the threats to independence
as a result of the provision of this service
and, in our opinion, we do not consider that
our independence has been compromised
by the inadvertent 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:
We considered the 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, current
Government guidance, and the business’
performance in the 2022 financial year;
We obtained the Directors’ cash flow
forecasts covering a period of 12 months
from the date of approval of the financial
statements, 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 downturn in revenues; or
– a deterioration of gross margin; or
– an increase in costs; or
– a downturn in cash generation
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,
and we challenged the nature and feasibility of
the mitigating actions available to the business
identified by the Directors;
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
reverse stress test sensitivities and current
trading performance;
We obtained the new financing agreements
entered into by the Group during the year
and confirmed that the revolving credit facility
was extended to October 2025;
Strategic report Governance Financial statements
139
Mitie Group plc
Annual Report and Accounts 2022
We considered Management’s assessment of
the Group meeting pre-drawdown conditions
of the new US Private Placement Note
agreement which is due to be utilised in
December 2022;
We assessed covenants during the year
and at year end, to check that the Group
were compliant under the terms of the
financing agreements;
We evaluated forecast covenant compliance
and headroom calculations with reference to
the covenants stated in the relevant financing
agreements; 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 the Parent 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
Coverage
1
97% (2021: 100%) of Group revenue
91% (2021: 99%) of Group total assets
Key Audit Matters (“KAMs”) 1) Revenue recognition and cut-off of accrued income - consistent with prior year
2) Accounting for the acquisition of the Interserve component – consistent with prior year
3) Onerous contract and claims provisions (within the acquired Interserve subsidiaries) – consistent with
prioryear
The prior year KAMs also included Presentation of Other Items. Whilst the Group continues to recognise
Other Items in its Consolidated Income Statement, this is not considered a KAM in the current year due to
the decreased level of judgement involved in the classification of Other Items.
Materiality Group financial statements as a whole
£6.4m (2021: £3.8m) based on 5% of continuing profit before tax and non-recurring other items (2021: 5% of
3-year normalised average 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
ouraudit
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, Central Government & Defence,
Communities, and Corporate Centre were
considered to be significant components
subject to full scope audits.
Specialist Services (incorporating Landscapes,
Waste, Care & Custody and Spanish entities)
was considered to be a non-significant
component, 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 LLP, through either the Group audit team
or component audit teams completed all audits
and desktop review procedures.
Our involvement with component auditors
For the work performed by component
auditors, the Group audit 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
awhole.
Our involvement with component auditors
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), materiality levels, and matters relating
to irregularities and fraud. The instructions
also 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 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
Review of their working papers with
additional challenge and specific work
requests to ensure alignment with
conclusions drawn.
140
Mitie Group plc
Annual Report and Accounts 2022
Independent auditor’s report to the members of Mitie Group plc
continued
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 How the scope of our audit addressed the 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 under IFRS 15
Revenue from Contracts with
Customers can be complex and may
be incorrectly applied, resulting in
inappropriate recognition or
measurement of revenue.
The Group has material levels of
accrued income, there is a risk that
cut-off has not been correctly
applied and that revenue has not
been appropriately recognised in
respect of accrued income.
Due to the above we considered
revenue recognition to be a key
audit matter.
We completed the following audit procedures:
Tested a sample of new and modified contracts in the year by evaluating
Management’s IFRS 15 Revenue from Contracts with Customers 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.
Tested a sample of accrued income balances at the year end to supporting
documentation to confirm whether the revenue has been recognised in
the appropriate period, with procedures including: verifying contractual
terms, agreeing to proof and timing of service delivery, confirming
customer acceptance and subsequent invoicing, reviewing relevant
customer correspondence regarding the specific accrued income balances.
Key observations:
We found that new and modified contracts were being accounted for in
accordance with the requirements of the applicable accounting standards
and that the recognition and measurement of revenue in the year
was appropriate.
We are satisfied that revenue was recognised in the appropriate period in
respect of accrued income.
Accounting for the acquisition of
the Interserve subsidiaries
The accounting policies and critical
judgements applied are disclosed
in Notes 1 and 2.
The acquisition balances are
disclosed in Note 30. The
completion accounts adjustment
following the Expert Determination
decision is disclosed in Note 4.
The Group completed the
acquisition of the former Interserve
subsidiaries on 30 November 2020,
for which the IFRS 3 Business
Combinations 365-day measurement
period ended on 29 November
2021. The accounting for
measurement period adjustments
in respect of provisions and
purchase consideration involved
significant judgement.
The consideration paid was subject
to potential adjustments under
the terms of the Share Purchase
Agreement (“SPA”). Management
and the Seller, were unable to agree
the amount of the adjustment
and accordingly an amount of
£50.8m was referred to an Expert
Determination process. Together
with other amounts due from
the Seller, an amount of £52.7m
was held as a receivable on
29 November 2021. At the
conclusion of this process in
April 2022 and after subsequent
commercial negotiations with
the Seller, the Group reached
a settlement of £7.1m.
Given the outcome of the Expert
Determination process, our key
audit matter related to whether
Management’s original assessment
of the amount due was reasonable.
We completed the following audit procedures:
Obtained an understanding of the measurement period adjustments
recorded on the acquisition balance sheet and agreed the significant
adjustments to supporting documentation, including consideration of
whether these would be permissible adjustments under the SPA.
Challenged Management with regards to the completeness of the
measurement period adjustments recorded based on our knowledge
and understanding of the acquired business, and of information arising
in the measurement period.
Reviewed the Expert Determination report and evaluated the Expert’s
reasoning for their decision on each disputed item in light of the terms of
the SPA .
Reviewed Management’s assessment of the Expert Determination and
evaluated their rationale in light of the conclusions reached by the Expert.
Engaged with our internal Dispute Resolution specialists in assessing the
reasonableness of Mitie’s submission to the Expert Determination process.
Vouched the final settlement with the Seller to a formal agreement and
verified the cost recorded in the Income Statement.
Key observations:
We found Management’s original assessment of consideration at the close of
the IFRS 3 Business Combinations measurement period to be supportable and
in accordance with applicable accounting standards.
Strategic report Governance Financial statements
141
Mitie Group plc
Annual Report and Accounts 2022
Key audit matter How the scope of our audit addressed the key audit matter
Onerous contract and claims
provisions (within the acquired
Interserve subsidiaries)
The accounting policies and critical
judgements applied are disclosed in
Notes 1 and 2.
Provisions are disclosed in Note 21.
Material onerous contract
provisions are recognised within the
Communities component (acquired
as part of the Interserve acquisition).
The contracts are in some cases
for durations of up to 20 years and
significant judgement is required
on future operational costs and
efficiencies to determine the level
of provision required.
Material claims provisions are also
recognised within the Communities
component. Significant estimation
is involved in determining the costs
likely to be incurred to resolve these
claims and judgement is required
to determine the extent of the
Group’s liability.
In respect of both of these matters,
the disclosure provided and the
estimated range of possible
outcomes given, are key areas of
Management judgement.
We completed the following audit procedures in relation to onerous
contract provisions:
Assessed the completeness of onerous contract provisions through review
of a sample of contracts to assess contract performance and identify any
loss-making or potentially loss-making contracts for which a provision had
not been considered.
Challenged Management on the appropriateness of the initiatives within
the onerous contract provision assessments which otherwise reduce
the provision.
Obtained an understanding of, and challenged, Management’s assumptions
used within the calculations. This included considering whether initiatives
were within the Group’s contractual ability to implement, the ability to
reasonably assess their financial impact, and the rationale on forecast
timing of implementation.
For the population of onerous contracts, we reviewed actual results for
each contract for the period against forecast for the same period.
Evaluated the sensitivity analysis prepared by Management and performed
our own sensitivity calculations to assess the appropriateness of the
provisions recorded.
Reviewed the adequacy of the Group’s disclosures in respect of this area
and its compliance with the requirements of the accounting standards.
We completed the following audit procedures in relation to the potential
claims provisions:
Obtained an understanding of each matter through discussion with senior
management and the Group’s internal legal counsel.
Reviewed relevant communications with third parties where available.
In respect of potential claims, reviewed reports issued by experts engaged
by Management and challenged assumptions used within them.
Considered the competence and independence of the experts engaged
by Management, and developed independent ranges for each provision
to consider the individual and aggregate differences between those and
Management’s positions.
Reviewed 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 judgements made by Management in assessing the
onerous contracts and claims provisions are appropriate and the amounts
recorded by Management are within a reasonable range.
Furthermore, we consider the disclosures around these matters to
be appropriate.
142
Mitie Group plc
Annual Report and Accounts 2022
Independent auditor’s report to the members of Mitie Group plc
continued
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements Parent company
2022
£m
2021
£m
2022
£m
2021
£m
Materiality 6.4 3.8 4.4 2.7
Basis for determining
materiality
5% of continuing profit
before tax and non-
recurring Other Items
5% of continuing 3-year
normalised average profit
before tax and Other Items
70% of group materiality
Rationale for the
benchmark applied
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.
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 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.
The Parent Company does not trade and materiality was
set at a percentage of Group materiality.
Performance materiality 4.4 2.5 2.4 1.7
Basis for determining
performance materiality
70% of Materiality
Rationale for
benchmark applied
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.
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 £1.25m to £5.4m (2021: £1m to £2.5m).
In the audit of each component, we further
applied performance materiality levels of
65%-70% (2021: 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 £224k (2021: £133k).
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.
Strategic report Governance Financial statements
143
Mitie Group plc
Annual Report and Accounts 2022
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 Code specified for our review.
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 basis of
accounting and any material uncertainties identified set out on page 136; and
The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment
covers and why the period is appropriate set out on page 83.
Other Code provisions
Directors’ statement on fair, balanced and understandable set out on page 114;
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
on page 66;
The section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on page 66; and
The section describing the work of the audit committee set out on page 109.
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.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the Companies Act 2006.
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 136, 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.
144
Mitie Group plc
Annual Report and Accounts 2022
Independent auditor’s report to the members of Mitie Group plc
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, UK-adopted
International Accounting Standards, 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, external
legal counsel, the company secretary, and
the Audit Committee. Our procedures also
included reviewing minutes from Board and
Audit Committee meetings, and reviewing
internal audit reports 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 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 subsidiaries
and Onerous contracts and claims
provisions 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.
We performed additional specific procedures
in respect of frauds reported in the period
and in respect of issues that may have an
adverse bearing on the internal control
environment around fraud.
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
9 June 2022
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
Strategic report Governance Financial statements
145
Mitie Group plc
Annual Report and Accounts 2022
Notes
2022
Restated
1,2
2021
Before
other items
£m
Other
items
3
£m
Total
£m
Before
other items
£m
Other
items
3
£m
Tota l
£m
Continuing operations
Revenue including share of joint ventures and associates 3,996.8 – 3,996.8 2,528.8 – 2,528.8
Less: share of revenue of joint ventures and associates 15 (93.5 ) – (93.5 ) (29.8 ) – (29.8 )
Group revenue 3 3,903.3 – 3,903.3 2,499.0 – 2,499.0
Cost of sales (3,451.5 ) – (3,451.5 ) (2,222.7 ) – (2,222.7 )
Gross profit 451.8 – 451.8 276.3 – 276.3
Administrative expenses (291.5 ) (102.2 ) (393.7 ) (219.4 ) (53.6 ) (273.0 )
Other income – 9.8 9.8 – – –
Share of profit/(loss) of joint ventures and associates 15 6.6 (2.4 ) 4.2 1.9 (1.2 ) 0.7
Operating profit/(loss)
4
3, 6 166.9 (94.8 ) 72.1 58.8 (54.8 ) 4.0
Finance income 0.2 – 0.2 0.5 – 0.5
Finance costs 8 (20.0 ) – (20.0 ) (18.2 ) – (18.2 )
Net finance costs (19.8 ) – (19.8 ) (17.7 ) – (17.7 )
Profit/(loss) before tax 147.1 (94.8 ) 52.3 41.1 (54.8 ) (13.7 )
Tax 9 (19.0 ) (2.0 ) (21.0 ) (7.9 ) 7.5 (0.4 )
Profit/(loss) from continuing operations after tax 128.1 (96.8 ) 31.3 33.2 (47.3 ) (14.1 )
Discontinued operations
Profit from discontinued operations before tax 5 3.0 17.0 20.0 5.4 2.9 8.3
Tax 9 (0.6 ) – (0.6 ) (0.7 ) (0.4 ) (1.1 )
Profit from discontinued operations after tax 5 2.4 17.0 19.4 4.7 2.5 7.2
Profit/(loss) for the year attributable to owners of the parent 130.5 (79.8 ) 50.7 37.9 (44.8 ) (6.9 )
Earnings/(loss) per share (EPS) attributable to owners of
theparent
From continuing operations:
Basic 11 9.2 p 2.2 p 3.1 p (1.3 )p
Diluted 11 8.3 p 2.0 p 3.1 p (1.3 )p
Total Group:
Basic 11 9.4 p 3.6 p 3.5 p (0.6 )p
Diluted 11 8.5 p 3.3 p 3.5 p (0.6 )p
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations for the
year ended 31 March 2021 have been re-presented within discontinued operations. Refer to Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for Software as a Service (SaaS) arrangements as a result of the
International Financial Reporting Interpretations Committee (IFRIC) agenda decision. Refer to Note 1.
3. Other items are as described in Note 4.
4. Including net impairment losses on trade receivables and accrued income of £0. 8 m (2021: £6. 2 m).
Consolidated income statement
For the year ended 31 March 2022
146
Mitie Group plc
Annual Report and Accounts 2022
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Notes
2022
£m
Restated
1
2021
£m
Profit/(loss) for the year 50.7 (6.9 )
Items that will not be reclassified to profit or loss in subsequent years
Remeasurement of net defined benefit pension liabilities 32 22.1 (5.4 )
Share of other comprehensive income of joint ventures 15 0.7 0.4
Tax (charge)/credit relating to items that will not be reclassified to profit or loss in subsequent years 9 (3.8 ) 1.0
Items that may be reclassified to profit or loss in subsequent years
Exchange differences on translation of foreign operations 0.1 (0.9 )
Net losses on cash flow hedges taken to equity
2
(0.5 ) (1.1 )
Tax credit relating to items that may be reclassified to profit or loss in subsequent years 9 0.1 0.1
(0.3 ) (1.9 )
Other comprehensive income/(expense) for the year 18.7 (5.9 )
Total comprehensive income/(expense) for the year attributable to owners of the parent 69.4 (12.8 )
Notes:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to
Note 1.
2. Net losses on cash flow hedges taken to equity include fair value gains of £5.1 m (2021: £1 3.7 m losses) on derivative financial instruments used for hedging private placement notes
(see Note 25). These gains are netted against reclassifications related to foreign exchange losses on private placement notes of £5.6 m (2021: £1 2.6 m gains).
Strategic report Governance Financial statements
147
Mitie Group plc
Annual Report and Accounts 2022
Notes
2022
£m
Restated
1
2021
£m
Restated
1
2020
£m
Non-current assets
Goodwill 12 301.3 294.8 278.9
Other intangible assets 13 258.9 261.0 44.9
Property, plant and equipment 14 143.9 117.9 110.8
Interests in joint ventures and associates 15 11.9 11.0 –
Derivative financial instruments 25 – 14.6 28.0
Other receivables 16 7.8 8.3 3.3
Contract assets 17 1.6 2.4 3.2
Retirement benefit assets 32 1.6 3.0 –
Deferred tax assets 22 11.1 22.3 32.6
Total non-current assets 738.1 735.3 501.7
Current assets
Inventories 18 11.9 12.7 4.8
Trade and other receivables 16 704.0 678.8 414.6
Contract assets 17 1.6 1.5 1.6
Derivative financial instruments 25 19.6 – 0.2
Current tax receivable 1.0 4.4 2.1
Cash and cash equivalents 23 345.2 196.2 139.5
Total current assets 1,083.3 893.6 562.8
Total assets 1,821.4 1,628.9 1,064.5
Current liabilities
Trade and other payables 19 (841.2 ) (701.8 ) (513.4 )
Deferred income 20 (83.5 ) (84.8 ) (35.9 )
Current tax payable (4.1 ) (3.8 ) –
Financing liabilities 24 (171.1 ) (28.7 ) (24.3 )
Provisions 21 (54.7 ) (55.5 ) (41.4 )
Total current liabilities (1,154.6 ) (874.6 ) (615.0 )
Net current (liabilities)/assets (71.3 ) 19.0 (52.2 )
Non-current liabilities
Trade and other payables 19 (2.8 ) (0.5 ) (0.3 )
Deferred income 20 (32.6 ) (30.1 ) (15.6 )
Financing liabilities 24 (129.5 ) (250.1 ) (296.4 )
Provisions 21 (62.3 ) (68.1 ) (11.8 )
Retirement benefit liabilities 32 (13.8 ) (45.5 ) (46.7 )
Deferred tax liabilities 22 – (2.5 ) (2.9 )
Total non-current liabilities (241.0 ) (396.8 ) (373.7 )
Total liabilities (1,395.6 ) (1,271.4 ) (988.7 )
Net assets 425.8 357.5 75.8
Note:
1. The comparatives as at 31 March 2021 and 31 March 2020 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision
(refer to Note 1) and the comparatives as at 31 March 2021 have also been restated for measurement period adjustments in respect of the Interserve acquisition (refer to Note 2,
Note 22 and Note 30).
Consolidated balance sheet
As at 31 March 2022
148
Mitie Group plc
Annual Report and Accounts 2022
Consolidated balance sheet continued
As at 31 March 2022
Notes
2022
£m
Restated
1
2021
£m
Restated
1
2020
£m
Equity
Share capital 28 35.7 35.6 9.3
Share premium 28 130.6 130.6 130.6
Merger reserve 29 358.6 358.6 99.9
Own shares reserve 29 (36.9 ) (28.8 ) (34.2 )
Other reserves
2
29 28.4 14.5 9.5
Hedging and translation reserve 29 (2.6 ) (2.3 ) (0.4 )
Retained losses (88.0 ) (150.7 ) (138.9 )
Equity attributable to owners of the parent 425.8 357.5 75.8
Notes:
1. The comparatives as at 31 March 2021 and 31 March 2020 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
2. Other reserves include the share-based payments reserve and the capital redemption reserve. Refer to 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 9 June 2022. They were signed on its behalf by:
Phil Bentley Simon Kirkpatrick
Chief Executive Officer Chief Financial Officer
Strategic report Governance Financial statements
149
Mitie Group plc
Annual Report and Accounts 2022
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Own shares
reserve
£m
Other
reserves
1
£m
Hedging and
translation
reserve
£m
Retained
losses
2
£m
Restated
2
Total equit y
£m
At 1 April 2020
2
Loss for the year
2
Other comprehensive expense – – – – – (1.9 ) (4.0 ) (5.9 )
Total comprehensive expense
2
Transactions with owners
Issue of shares
3
Rights issue expenses
4
Share-based payments – – – 5.4 5.0 – (0.9 ) 9.5
Total transactions with owners 26.3 – 258.7 5.4 5.0 – (0.9 ) 294.5
At 31 March 2021
2
At 1 April 2021
2
Profit for the year – – – – – – 50.7 50.7
Other comprehensive income – – – – – (0.3 ) 19.0 18.7
Total comprehensive income – – – – – (0.3 ) 69.7 69.4
Transactions with owners
Dividends paid – – – – – – (5.7 ) (5.7 )
Issue of shares 0.1 – – (0.1 ) – – – –
Purchase of own shares – – – (13.8 ) – – – (13.8 )
Share-based payments – – – 5.8 13.9 – (1.1 ) 18.6
Tax on share-based payments – – – – – – (0.2 ) (0.2 )
Total transactions with owners 0.1 – – (8.1 ) 13.9 – (7.0 ) (1.1 )
At 31 March 2022 35.7 130.6 358.6 (36.9 ) 28.4 (2.6 ) (88.0 ) 425.8
Notes:
1. Other reserves include the share-based payments reserve and the capital redemption reserve. Refer to Note 29.
2. The comparatives for the year ended 31 March 2021 and as at 1 April 2020 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC
agenda decision. Refer to Note 1.
3. As part of the consideration for Interserve acquisition, 248.4 million shares were issued during the year ended 31 March 2021 with a premium of £88 .4 m arising (see Note 30).
In addition, 805.1 million shares were issued during the year ended 31 March 2021 with a premium of £173.3 m 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 the total premium arising of £26 1 .7 m was not required
to be credited to share premium.
4. Under the cash box structure, the Group received £1 93.4 m from the rights issue, after deduction of issue costs of £7 .9 m. The remaining £3 .0 m of rights issue expenses were paid
by the Group (see Note 33).
Consolidated statement of changes in equity
For the year ended 31 March 2022
150
Mitie Group plc
Annual Report and Accounts 2022
Consolidated statement of cash flows
For the year ended 31 March 2022
Notes
2022
£m
Restated
1
2021
£m
Continuing operations – operating profit before other items
2
3 166.9 58.8
Continuing operations – other items
2
4 (94.8 ) (54.8 )
Discontinued operations – operating profit after other items
2
5 19.9 8.0
Adjustments for:
Share-based payments expense 31 18.6 9.5
Defined benefit pension costs 32 4.4 2.0
Defined benefit pension contributions 32 (14.2 ) (12.2 )
Depreciation of property, plant and equipment 14, 26 41.6 34.4
Amortisation of intangible assets 13 27.2 16.1
Amortisation of customer contracts and relationships for joint ventures arising on business combinations 15 2.4 1.2
Share of profit of joint ventures and associates 15 (6.6 ) (1.9 )
Amortisation of contract assets 17 1.7 1.7
Impairment of non-current assets 13, 14, 26 3.7 13.7
Loss on disposal of property, plant and equipment 0.5 –
Gain on disposal of businesses 5 (13.0 ) (1.2 )
Interserve completion accounts adjustment 30 45.6 –
Operating cash flows before movements in working capital 203.9 75.3
Decrease/(increase) in inventories 0.9 (1.7 )
Increase in receivables (66.0 ) (4.3 )
Increase in contract assets (1.0 ) (0.8 )
(Decrease)/increase in deferred income (2.6 ) 6.7
Increase/(decrease) in payables 135.9 (34.9 )
Decrease in provisions (7.2 ) (1.4 )
Cash generated from operations 263.9 38.9
Income taxes paid (16.2 ) (1.0 )
Interest paid (17.5 ) (15.9 )
Net cash generated from operating activities 230.2 22.0
Investing activities
Acquisition of businesses, net of cash acquired
3
30 (24.9 ) (64.6 )
Disposal of businesses, net of cash disposed 5 29.9 –
Interest received 0.3 0.8
Purchase of property, plant and equipment 14 (15.4 ) (7.6 )
Dividends received from joint ventures and associates 15 4.0 0.8
Purchase of other intangible assets 13 (20.2 ) (14.1 )
Disposal of property, plant and equipment 0.4 1.0
Net cash used in investing activities (25.9 ) (83.7 )
Notes:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
2. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations. Operating profit after Other items from discontinued operations comprises profit before net finance income and tax of £6 .9 m
(2021 restated: £6 .8 m) and gain on disposal before tax of £13.0 m (2021: £1.2 m). Refer to Note 5.
3. Acquisition of businesses is net of cash acquired of £4.8 m (2021: £40 .4 m). Refer to Note 30.
Strategic report Governance Financial statements
151
Mitie Group plc
Annual Report and Accounts 2022
Notes
2022
£m
2021
£m
Financing activities
Proceeds from issue of ordinary shares 33 – 193.4
Purchase of own shares 29 (13.8 ) –
Rights issue expenses paid 33 – (3.0 )
Capital element of lease rentals 26 (33.9 ) (28.1 )
Repayment of bank loans – (40.5 )
Payment of arrangement fees (1.7 ) (2.8 )
Equity dividends paid 10 (5.7 ) –
Net cash (used in)/generated from financing activities (55.1 ) 119.0
Net increase in cash and cash equivalents 149.2 57.3
Net cash and cash equivalents at beginning of the year 196.2 139.5
Effect of foreign exchange rate changes (0.2 ) (0.6 )
Net cash and cash equivalents at end of the year 23 345.2 196.2
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.
Reconciliation of net cash flow to movements in net debt Notes
2022
£m
2021
£m
Net increase in cash and cash equivalents 149.2 57.3
Increase in restricted cash and cash held on trust
1
(18.8) (18.7)
Net increase in unrestricted cash and cash equivalents 130.4 38.6
Cash drivers
Repayment of bank loans – 40.5
Payment of arrangement fees 1.7 2.8
Capital element of lease rentals 33.9 28.1
Non-cash drivers
Non-cash movement in bank loans (2.0) (1.1)
Non-cash movement in private placement notes and associated hedges (0.7) (1.1)
Non-cash movement in lease liabilities
2
(49.6) (41.1)
Effect of foreign exchange rate changes (0.3) (0.4)
Decrease in net debt during the year 113.4 66.3
Opening net debt (86.7) (153.0)
Closing net cash/(debt) 27 26.7 (86.7)
Notes:
1. As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the Group’s customers was held
on trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022.
2. Included within the non-cash movement in lease liabilities is £0.7m (2021: £14.2m) of lease liabilities arising on acquisition of businesses and £1.5m (2021: £nil) of lease liabilities on
business disposals. See Notes 26 and 30.
Consolidated statement of cash flows continued
For the year ended 31 March 2022
152
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies
(a) Basis of preparation
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 consolidated financial statements for the year ended 31 March 2022 have been prepared in accordance with UK-adopted International
Accounting Standards.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International
Accounting Standards in its consolidated financial statements for the year ended 31 March 2021. This change constituted a change in accounting framework.
However, there was no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.
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.
Going concern
The financial statements for the year ended 31 March 2022 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 4 to 65 of the 2022 Annual Report and Accounts, the principal risks and
uncertainties as set out on pages 66 to 77 and the viability statement on pages 83 to 84 of the same.
The Directors have carried out an assessment of the Group’s and the Company’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 (the Going Concern Assessment Period). This assessment was based on the latest medium-term cash
forecasts from the Group’s cash flow model (the Base Case Forecasts), which is based on the Board approved budget. These Base Case Forecasts indicate
that the debt facilities currently in place are adequate to support the Group and the Company over the Going Concern Assessment Period.
The Group’s principal debt financing arrangements as at 31 March 2022 were a £150m revolving credit facility, of which £141.5m was undrawn as at
31 March 2022, and £151.5m of US private placement (USPP) notes (being the repayment amount after taking account of the cross-currency swaps
hedging the principal amount), of which £121.5m are due to mature in December 2022. The revolving credit facility was put in place in October 2021,
maturing in October 2025 (with an option to extend for a further year, subject to lenders’ approval), on significantly more favourable terms than the
previous facility. 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 59 to 63.
The issue of £120.0m of new USPP notes has also been agreed, under a delayed funding arrangement in December 2022, avoiding any overlap with the
existing £121.5m of notes that mature in the same month. The new notes are split equally between 8, 10 and 12 year maturities, and will be issued with an
average coupon that is significantly below the current coupon. The remaining £30m of USPP notes are due to mature in December 2024, which is outside
of the Going Concern Assessment Period.
Mitie currently operates within the terms of its agreements with its lenders, with consolidated net cash (i.e. net cash adjusted for covenant purposes, with
appropriate adjustments for leases) of £147.7m at 31 March 2022. 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 a reverse stress test 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 the Group’s principal risks and uncertainties.
The primary financial risks related to adverse changes in the economic environment and/or a deterioration in commercial or operational conditions are
listed below. These risks have been considered in the context of any potential further impact of COVID-19, as well as the potential impact of the Russian
invasion of Ukraine:
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;
An increase in costs: this reflects the risks of a shortfall in planned overhead cost savings, including the margin enhancement initiatives not being
delivered, or other cost increases such as sustained higher cost inflation; and
A downturn in cash generation: this reflects the risks of customers delaying payments due to liquidity constraints, the removal of ancillary debt facilities
or any substantial one-off settlements related to commercial issues.
Strategic report Governance Financial statements
153
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
As a result of completing this assessment, the Directors concluded that the likelihood of the reverse stress scenarios arising was remote. In reaching the
conclusion of remote, the Directors considered the following:
All stress test scenarios would require a very severe deterioration compared to the Base Case Forecasts. Revenue is considered to be the key risk, as
this is less within the control of management. Revenue would need to decline by approximately 34% in the year ending 31 March 2023, compared to
the Base Case Forecasts, that are based on mid-single digit underlying revenue growth (which excludes COVID related revenues). A 34% decline in
revenue is considered to be very severe given the high proportion of Mitie’s revenue that is fixed in nature and the fact that even in a COVID-hit year,
Mitie’s revenue excluding Interserve declined by only 1.6%.
In the event that results started to trend significantly below those included in the Base Case Forecasts, additional mitigation actions have been identified
that would be implemented, which are not factored into the reverse stress test scenarios. These include the short-term scaling down of capital
expenditure, overhead efficiency/reduction measures including cancellation of discretionary bonuses and reduced discretionary spend, asset disposals
and reductions in cash distributions and share buybacks.
Based on these assessments, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in
operational existence for a period of no less than 12 months from the date of approval of these consolidated financial statements. In addition, the
Directors have concluded that the likelihood of the reverse stress scenarios arising is remote and therefore no material uncertainty exists.
Accounting standards that are newly effective in the current year
The following amendments became effective during the year ended 31 March 2022:
Interest Rate Benchmark Reform Phase 2 (IBOR) amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were issued by the IASB in August 2020 to provide practical expedients and reliefs
in relation to modifications of financial instruments and leases that arise from the transition from IBOR to an alternative benchmark rate. Phase 2 also
provides further reliefs to hedge accounting requirements. These amendments were effective for the Group from 1 April 2021.
The impact of IBOR reform on the Group is not material.
IFRS 16 COVID-19 Related Rent Concessions
On 28 May 2020, the IASB issued COVID-19 Related Rent Concessions amendments to IFRS 16 Leases. The amendments provide relief to lessees from
applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic.
The Group has not received COVID-19 related rent concessions during the year and therefore these amendments do not impact the Group.
Accounting standards that are not yet mandatory and have not been applied by the Group
On 14 May 2020, the IASB published amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets regarding costs a company should include
as the cost of fulfilling a contract when assessing whether a contract is onerous. The changes specify that the ‘cost of fulfilling’ a contract comprises the
‘costs that relate directly to the contract’. The amendments are effective for annual periods beginning on or after 1 January 2022 and will be effective for
the Group for the year ending 31 March 2023. The Group is currently in the process of assessing the impact of this amendment.
(b) Accounting policy change
During the year, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing Software
as a Service (SaaS) arrangements in response to the International Financial Reporting Interpretations Committee (IFRIC) agenda decision clarifying its
interpretation of how current accounting standards apply to these types of arrangements. The new accounting policy is presented below.
SaaS arrangements are service contracts providing the Group with the right to access the provider’s cloud-based application software over the contract
period. Previously, Mitie’s accounting policy was to capitalise the upfront configuration and customisation costs in implementing SaaS arrangements and to
subsequently amortise them over their useful economic life.
In response to the clarification provided by the IFRIC agenda decision, Mitie has changed its accounting policy such that distinct upfront configuration and
customisation costs incurred in implementing SaaS arrangements are recognised as operating expenses when the services are received. Some of these
costs incurred are for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and
meets the definition of and recognition criteria for an intangible asset. These costs are recognised as intangible software assets and amortised over the
useful life of the software on a straight-line basis.
The change in accounting policy has been accounted for retrospectively and, accordingly, the comparative information for 31 March 2021 and 1 April 2020
have been restated as summarised below.
154
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
Impact on consolidated income statement and statement of comprehensive income
For the year ended 31 March 2021
As reported
£m
Impact of
changes in
accounting policy
£m
Discontinued
operations
restatement
1
£m
As restated
£m
Group revenue from continuing operations 2,559.5 – (60.5) 2,499.0
Cost of sales (2,274.9) – 52.2 (2,222.7)
Gross profit from continuing operations 284.6 – (8.3) 276.3
Administrative expenses (277.0) 0.5 3.5 (273.0)
Share of profit of joint ventures and associates 0.7 – – 0.7
Total operating profit from continuing operations 8.3 0.5 (4.8) 4.0
Net finance costs (17.4) – (0.3) (17.7)
Loss from continuing operations before tax (9.1) 0.5 (5.1) (13.7)
Tax (1.0) (0.1) 0.7 (0.4)
Loss from continuing operations after tax (10.1) 0.4 (4.4) (14.1)
Profit from discontinued operations after tax 2.8 – 4.4 7.2
Loss for the year attributable to owners of the parent (7.3) 0.4 – (6.9)
Total comprehensive expense for the year attributable to owners of the parent (13.2) 0.4 – (12.8)
Note:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations. Refer to Note 5.
Impact on earnings per share
Pence per share
For the year ended 31 March 2021
As reported
Impact of
changes in
accounting policy
Discontinued
operations
restatement
1
As restated
From continuing operations
Basic loss per share (0.9)p (0.0)p (0.4)p (1.3)p
Diluted loss per share (0.9)p (0.0)p (0.4)p (1.3)p
Total Group
Basic loss per share (0.6)p (0.0)p (0.0)p (0.6)p
Diluted loss per share (0.6)p (0.0)p (0.0)p (0.6)p
Note:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations. Refer to Note 5.
Impact on the consolidated balance sheet
31 March 2021 1 April 2020
As reported
£m
Impact of
changes in
accounting policy
£m
As restated
£m
As reported
£m
Impact of
changes in
accounting policy
£m
As restated
£m
Other intangible assets 266.2 (5.2) 261.0 50.6 (5.7) 44.9
Current tax receivable 3.5 0.9 4.4 1.1 1.0 2.1
Net assets 361.8 (4.3) 357.5 80.5 (4.7) 75.8
Retained losses (146.4) (4.3) (150.7) (134.2) (4.7) (138.9)
Equity attributable to owners of the parent 361.8 (4.3) 357.5 80.5 (4.7) 75.8
Strategic report Governance Financial statements
155
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
Impact on consolidated statement of cash flows
For the year ended 31 March 2021
As reported
£m
Impact of
changes in
accounting policy
£m
As restated
£m
Operating profit 11.5 0.5 12.0
Amortisation of intangible assets 17.5 (1.4) 16.1
Operating cash flows before movements in working capital 76.2 (0.9) 75.3
Cash generated from operations 39.8 (0.9) 38.9
Net cash generated from operating activities 22.9 (0.9) 22.0
Purchase of other intangible assets (15.0) 0.9 (14.1)
Net cash (used in)/generated from investing activities (84.6) 0.9 (83.7)
Cash and cash equivalents 196.2 – 196.2
(c) Significant accounting policies
The significant accounting policies adopted in the preparation of the Group’s IFRS financial information are set out below.
Basis of consolidation
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
by the Financial Reporting Council (FRC). Accordingly, for the year ended 31 March 2022, 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.
In preparing these Group consolidated financial statements, the Group’s accounting policies and methods of computation were, with the exception of
the change in the accounting policy referred to above, the same as those that applied in the preparation of the Group’s consolidated financial statements
for the year ended 31 March 2021, which were prepared in accordance with UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
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.
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 remeasured. 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.
Joint ventures and associates
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.
Joint operations
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.
156
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
Statutory and non-statutory measures of performance
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 year 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 Authority (ESMA),
the Group has included an APM appendix to the financial statements on pages 220 to 223.
Revenue recognition policy
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 year based on the delivery of
performance obligations and an assessment of when control is transferred to the customer.
IFRS 15 provides a single, principle-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.
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, including contract renewals, 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 stand-alone selling price of the distinct goods or services. If the price of additional distinct
goods or services is not commensurate with the stand-alone 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. distinct and accounted for as separate performance obligations;
ii. combined with other promised goods or services until a bundle is identified that is distinct; or
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 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.
Strategic report Governance Financial statements
157
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
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 or 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.
Long-term complex contracts
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.
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.
Repeat service-based contracts (single and bundled contracts)
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.
Short-term service-based arrangements
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.
158
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
Government grants
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 consolidated 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 consolidated 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.
Other revenue
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.
Contract costs
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 year.
Contract fulfilment costs
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 consolidated balance sheet:
i. the costs directly relate to the contract (e.g. direct labour, materials, subcontractors);
ii. the Group is building an asset that will subsequently be used to deliver contract outcomes; and
iii. the costs are expected to be recoverable, i.e. the contract is expected to be profitable after amortising the capitalised costs.
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.
Amortisation and impairment of contract assets
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 consolidated income statement in the year.
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.
Accrued income and deferred income
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 year end date is more than amounts invoiced, the Group recognises accrued income for the difference. Where revenue
recognised at the year 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.
Foreign currency
The financial statements of each of the Group’s businesses are prepared in the functional currency applicable to that business. Transactions in currencies
other than the functional currency are recorded at the rate of exchange at the date of transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. Exchange differences arising on the settlement of
monetary items, and on the retranslation of monetary items, are included in the consolidated income statement for the year.
Strategic report Governance Financial statements
159
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
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 pounds sterling at exchange rates prevailing at the balance sheet date. Income and expenses are translated into pounds 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 consolidated income statement.
Finance costs
Finance costs consist of interest and other costs that are incurred in connection with the borrowing of funds. Finance costs are recognised in the
consolidated income statement in the year 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 cash flows from interest paid as operating activities and
interest received as investing activities. Interest paid includes the interest portion of the lease liabilities.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the consolidated 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 consolidated 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.
Operating segments
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.
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.
Acquisition costs incurred are expensed. The 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 consolidated 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 consolidated 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.
160
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
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 payments discounted using an appropriate discount
rate. As required 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.
Acquisition related liabilities or performance-based employment-linked earnouts are the estimated amounts payable to previous owners. The estimated
future payments that are accrued over the period the sellers are required to remain with the business are accounted for as remuneration for post-acquisition
services and recognised within the consolidated income statement and classified as Other items. The amounts not linked to employment are considered to
be deferred consideration and estimated and recognised at acquisition at their discounted fair value, with the unwind of the discount recorded as part of
finance costs.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets,
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 consolidated income statement for the year 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.
Other intangible assets
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.
Upfront configuration and customisation costs incurred in implementing SaaS arrangements are recognised as operating expenses when the services are
received. Some of these costs incurred are for the development of software code that enhances or modifies, or creates additional capability to, existing
on-premise systems and meets the definition of and recognition criteria for an intangible asset. These costs are recognised as intangible software assets
and amortised over the useful life of the software on a straight-line basis.
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 consolidated income statement on a straight-line basis over its useful life as follows:
Customer contracts and relationships 5–15 years
Software and development expenditure 3–10 years
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is charged so as to write off the
cost less expected residual value of the assets over their estimated useful lives and is calculated on a straight-line basis as follows:
Land and buildings 50 years or lease term if shorter
Plant and vehicles 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.
Strategic report Governance Financial statements
161
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
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.
Inventories
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.
Financial instruments – classification and measurement
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 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 consolidated income statement.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Invoice discounting
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.
Financial instruments – impairment of financial assets
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 historical 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).
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, including cross-currency interest rate swaps and forward foreign exchange contracts, to manage the
Group’s exposure to financial risks associated with interest rates and foreign exchange. Derivative financial instruments are initially recognised at fair value
at the date the derivative contract is entered into and are subsequently remeasured to their fair value, determined by reference to market rates, at each
balance sheet date and included as financial assets or liabilities as appropriate. The resulting gain or loss is recognised in the consolidated income statement
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the consolidated
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.
162
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
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 consolidated income statement.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the consolidated income statement in the
periods when the hedged item is recognised in the consolidated 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 consolidated income statement. When a forecast transaction is no longer expected to occur, the gain or loss
accumulated in equity is recognised immediately in the consolidated 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 consolidated income statement. Gains or losses on the
hedging instrument relating to the effective portion of the hedge accumulated in equity are reclassified to the consolidated income statement in the same
way as exchange differences relating to the foreign operation.
Leases
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 consolidated income statement as they
are incurred.
A right-of-use asset is capitalised on the consolidated 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 the rate implicit in
the lease or, where not available, the incremental borrowing rate. Lease payments made are apportioned between a capital repayment amount and an
interest charge which are disclosed within the financing and 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 consolidated 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.
Provisions and contingent liabilities
Provisions have been made for contract specific costs, onerous contracts, insurance exposures, legal claims, other property related commitments including
dilapidations and pension related provisions which primarily relate to Section 75 employer debt liabilities.
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 consolidated 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 finance cost.
Strategic report Governance Financial statements
163
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
Contract specific cost provisions are made when the Group expects to incur future remedial and rectification costs required to meet customers’
contractual terms. Costs are estimated using either the work of external consultants or internal experts. The amount recognised as a provision represents
management’s best estimate and is inherently uncertain and could change materially over time. The provision is reviewed at least on a bi-annual basis
for changes in cost estimate. Any change in cost estimate is recognised as a charge or a release to the provision when it occurs.
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.
The insurance reserve relates to employers’ and motor and fleet liabilities retained in the Group’s self-insurance arrangement. The insurance reserve
includes the full estimated value of the liability gross of amounts expected to be recovered from the Group’s insurer. Any related insurance reimbursement
asset that is virtually certain to be received is separately presented gross within trade and other receivables on the consolidated balance sheet.
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.
Contingent assets
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.
Share-based payments
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 Benefit 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.
Costs incurred on issue of equity
The Group incurred costs in the prior 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.
Retirement benefit costs
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 consolidated statement of comprehensive income in
the period in which they occur.
Defined benefit pension costs (including curtailments) are recognised in the consolidated income statement, in administrative expenses, 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. Assets recognised are adjusted for tax, where relevant.
164
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies continued
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. 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 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 consolidated balance sheet, however, the obligations are disclosed as contingent liabilities in
Note34.
Dividends
Interim dividends are recognised 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.
2. Critical accounting judgements and key sources of estimation uncertainty
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.
Critical judgements in applying the Group’s accounting policies
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 renewals 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.
Some of the Group’s contracts include variable consideration where management assesses the extent to which revenue is recognised. For certain
contracts, key judgements were made on whether it is considered highly probable that a significant reversal of revenue will not occur when the associated
uncertainty with the variable consideration is subsequently resolved.
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. Refer to Note 1 which details the Group’s policy for Other
items.
Other items after tax of £79.8m were charged (2021: £44.8m) to the consolidated income statement for the year ended 31 March 2022. Included within
the net charge were material one-off charges in respect of the implementation of the digital supplier platform of £4.4m which, in management’s judgement,
is a material one-off programme delivering a step change in the Group’s supplier chain management capabilities and therefore meets the Group’s definition
to be categorised as Other items. Also included within other exceptional items is income of £9.8m, arising as a result of commercial negotiations with a
certain customer leading to de-recognition of pre-acquisition liabilities with respect to Interserve, which in management’s judgement is a material one-off
income and meets the Group’s policy for being categorised as Other items. A complete analysis of the amounts included in Other items is detailed in
Note4.
Recoverability of trade receivables and accrued income
The Group has material amounts of billed and unbilled work outstanding at 31 March 2022. 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.
Strategic report Governance Financial statements
165
Mitie Group plc
Annual Report and Accounts 2022
2. Critical accounting judgements and key sources of estimation uncertainty continued
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
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.
Interserve acquisition
The Group completed the acquisition of Interservefm (Holdings) Limited (Interserve) on 30 November 2020. Under IFRS 3 Business Combinations, the fair
value of assets and liabilities must be finalised within a 12-month measurement period following the date of acquisition (the Measurement Period), which
ended on 29 November 2021 in the case of Interserve. During the Measurement Period, the Group performed further analysis of balances acquired as part
of the Interserve transaction and decreased the fair value of the net identifiable assets acquired as reported at 31 March 2021 by £7.7m to £131.0m. This was
predominantly due to increases in provisions for certain PFI contracts where new information had been received about facts and circumstances that existed as
at the acquisition date, which in management’s judgement, if known, would have affected the measurement of the amounts recognised at the acquisition date.
During the Measurement Period, the fair value of the consideration for the Group’s acquisition of Interserve, was increased by £4.9m to £146.9m.
This was due to a reduction in management’s best estimate of the amount expected to be received through the completion accounts process and other
mechanisms allowed by the Share Purchase Agreement (SPA), from £57.6m to £52.7m, primarily reflecting the removal of certain liabilities on the
acquisition balance sheet and adjustments arising from the completion accounts process. This estimate was based on the facts and circumstances that were
present and known during the Measurement Period, although the outcome of the completion accounts process remained inherently uncertain at the end
of the Measurement Period, given that the SPA terms related to the completion accounts mechanism were complex, and the completion accounts would
be the subject of commercial negotiation and, in the absence of agreement, an expert determination process. As previously disclosed, it was therefore
recognised that the final amount agreed could be materially different from the estimate. The completion accounts process (and expert determination) has
since been concluded. Following the expert’s determination, for which the expert sought a legal opinion in relation to the interpretation of the complex
SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group, of which £1.1m was settled during the second half of the year
ended 31 March 2022 and £6.0m was settled in May 2022. The resulting £45.6m reduction in the related receivable has been recognised as an adjusting
post balance sheet event in the consolidated income statement and classified as Other items, given that the Measurement Period had ended.
The changes made to the fair value of the net identifiable assets acquired and the consideration during the Measurement Period resulted in an increase in
the goodwill balance of £12.6m to £15.9m which has been retrospectively adjusted (see Note 30).
The impact of the retrospective adjustment on the consolidated balance sheet at 31 March 2021 is shown below.
31 March 2021
As reported
£m
Interserve
measurement
period
adjustments
£m
Impact of
change in
accounting policy
1
£m
As restated
£m
Goodwill 282.2 12.6 – 294.8
Other intangible assets 266.2 – (5.2) 261.0
Deferred tax assets 32.0 (9.7) – 22.3
Total non-current assets 737.6 2.9 (5.2) 735.3
Current trade and other receivables 683.6 (4.8) – 678.8
Current tax receivable 3.5 – 0.9 4.4
Total current assets 897.5 (4.8) 0.9 893.6
Total assets 1,635.1 (1.9) (4.3) 1,628.9
Current trade and other payables (701.5) (0.3) – (701.8)
Current deferred income (84.5) (0.3) – (84.8)
Current provisions (48.3) (7.2) – (55.5)
Total current liabilities (866.8) (7.8) – (874.6)
Net current assets 30.7 (12.6) 0.9 19.0
Deferred tax liabilities (12.2) 9.7 – (2.5)
Total non-current liabilities (406.5) 9.7 – (396.8)
Total liabilities (1,273.3) 1.9 – (1,271.4)
Net assets 361.8 – (4.3) 357.5
Note:
1. The comparatives as at 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to Note 1.
166
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
2. Critical accounting judgements and key sources of estimation uncertainty continued
DAEL and Rock acquisitions
On 5 August 2021 the Group completed the acquisition of DAEL Ventures Limited (DAEL) and on 1 November 2021 the Group completed the
acquisition of Rock Power Connections Limited (Rock). The most significant fair value adjustments arising on the acquisitions of DAEL and Rock related
to attributing value to the acquired intangible assets recognised in the form of customer contracts and relationships.
In determining the fair value of 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 provisional fair values for customer contracts and relationships of £5.0m for DAEL and £2.5m for Rock with corresponding provisional deferred
tax liabilities in relation to those intangible assets of £1.2m and £0.6m respectively.
Classification of disposed businesses as discontinued operations
On 1 June 2021, the Group completed the sale of Mitie Norge AS, Mitie Sverige AB and Mitie Polska Sp z.o.o (together, the Nordics and Poland
operations). On 30 September 2021, the Group also completed the sale of Mitie Business Services Limited and Mitie Business Services UK Limited
(together, the Document Management business).
The results of the Nordics and Poland operations have been classified as discontinued operations as the disposal related to specific geographical areas of
operations and was part of a single co-ordinated plan. The results of the Document Management business have been classified as discontinued operations
as the disposed business represented a separate major line of business and the disposal was part of a single co-ordinated plan. Comparative information
has been re-presented to show the results of the Nordics and Poland operations and the Document Management business as discontinued operations.
Allocation of goodwill
The Group adopted a relative value approach based on operating profit before depreciation, amortisation, impairment and Other items to allocate
goodwill to the disposed businesses and to reallocate goodwill related to the reorganisation of the divisional structure. As a result, goodwill of £14.4m
allocated to the Document Management business and £1.4m allocated to the Nordics and Poland operations have been disposed. These amounts have
been excluded from the carrying value of goodwill within the Business Services and Technical Services CGUs, respectively. These amounts are included
in the net assets for the disposed businesses used in the determination of the gain or loss on disposal. Further details are included in Notes 5 and 12.
Similarly, as a result of Mitie’s reorganisation of its divisional structure, goodwill has been reallocated between CGUs based on a relative value approach.
Consequently, goodwill of £60.9m has been reallocated from the Technical Services CGU to the Communities CGU and £8.9m has been reallocated from
the Business Services CGU to the Communities CGU.
Landmarc joint venture
The Group holds 51% of the equity shares in Landmarc Support Services Limited (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.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty, that have the most significant effect on the carrying value of
assets and liabilities as at 31 March 2022, 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 2022 of £117.0m (2021 restated: £123.6m). Further details
are included in Note 21.
On 13 May 2020, Interserve Group Limited (IGL) announced that it was subject to a cyber-attack, which affected elements of the Interserve Group’s
IT systems (including enterprise resource planning and human resource systems), including elements related to the Interserve entities acquired by Mitie
(the Cyber Incident).
The Cyber Incident was reported to the Information Commissioner’s Office (ICO) on 5 May 2020. The ICO subsequently advised IGL that it considered
it likely that IGL had breached certain articles of the GDPR. It was therefore possible that IGL or members of the Interserve Group could be subject to
any regulatory action in respect of the Cyber Incident which, if they were found in breach of their obligations under the GDPR, could result in a remedial
order or fine.
On 27 April 2022, the ICO subsequently issued a Notice of Intent (NOI) to IGL, advising that it is minded to issue IGL with a penalty notice under section
155 of the UK’s Data Protection Act 2018. The NOI contains a confirmation that the ICO is satisfied that IGL is the controller with primary responsibility
for the matters which gave rise to the breach of certain articles of the GDPR.
Strategic report Governance Financial statements
167
Mitie Group plc
Annual Report and Accounts 2022
2. Critical accounting judgements and key sources of estimation uncertainty continued
In accordance with the Share Purchase Agreement dated 25 June 2020 (SPA), pursuant to which Mitie acquired the Interserve entities from How Group
Limited (HGL), HGL agreed to indemnify Mitie against any penalty that the ICO might impose on the Interserve entities acquired by Mitie in relation to the
Cyber Incident (the Cyber Indemnity). The Cyber Indemnity was, alongside other indemnities given by HGL, secured by escrow arrangements, pursuant to
which £40.0m was held in an escrow account for a period of two years (until 30 November 2022).
Management reasonably believe that, having regard to the NOI (including the confirmation that IGL is the relevant controller for the purposes of the ICO’s
investigation), the former Interserve entities, acquired on 30 November 2020, will not be subject to any regulatory action in respect of the Cyber Incident
which could result in a remedial order or fine. Further details are included in Note 34.
Onerous contract provisions
Onerous contract provisions totalling £13.2m have been recognised at 31 March 2022 (2021 restated: £17.6m). These primarily arose on the acquisition of
Interserve and include a measurement period adjustment of £6.4m (see Note 30).
Onerous contract assessments are performed by the Group at an individual contract level 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 key performance indicators (KPIs);
identifying cost saving initiatives that are considered to be probable 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 range of possible future outcomes in respect of 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 estimation identified above in measuring
the provision, in aggregate, the assessed range of possible future outcomes on these contracts in the next financial year could potentially lead to a
reduction in the provision of up to £10m or a further increase of up to £19m being recognised.
An onerous contract provision has not been recognised on a certain contract which made a loss of £8.7m in the year ended 31 March 2022 (2021: £3.9m)
and has 18 years remaining on the contract. This contract was acquired as part of the acquisition of Interserve, and a detailed turnaround plan is in the
process of being implemented. Based on the plan, management expects that the contract will return to profitability and will record a cumulative profit for
the remaining term of the contract.
Other contract specific provisions
In addition to the onerous contract provisions, the Group has recognised £43.1m of contract specific provisions at 31 March 2022 (2021 restated: £42.9m).
These have been recognised primarily to cover costs required to meet specific contractual obligations.
Within this total, £14.7m relates to a certain contract where a significant liability has been estimated in relation to a commercial dispute. Management
sought external assistance to value the potential risk exposure to the Group. The actual exposure to the Group may differ from the amount provided at
31March 2022 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, the assessed range of possible future outcomes could potentially lead to a reduction in the provision of up to £3m or a further increase of up to
£9m being recognised, 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.
Provisions in relation to certain contracts are also subject to independent adjudication and negotiation with the customers.
Measurement of defined benefit pension obligations
The net pension liability at 31 March 2022 was £12.2m (2021: £42.5m), which includes a retirement benefit asset of £1.6m (2021: £3.0m).
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 2022 (2021: £21.7m) for Section 75 employer debts in
respect of the participation of Robert Prettie & Co. Limited and Mitie FM Limited in the Plumbing Scheme.
Deferred tax assets
The Group has recognised deferred tax assets of £11.1m (2021 restated: £22.3m), refer to Note 22. Recovery of these assets is subject to the Group
generating taxable profits in future years. Management has assessed recovery of these assets with reference to the Group’s medium-term forecasts.
168
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
3. Business segment information
The Group manages its business on a service division basis. At 31 March 2022, the Group had eight reportable segments and the information, as reported,
is consistent with information presented to the Board of Directors, which is the Group’s chief operating decision maker. Revenue including share of joint
ventures and associates, 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.
The information presented for the year ended 31 March 2021 has been re-presented to reflect changes in the divisional structure, following the acquisition
of Interserve, implemented during the year ended 31 March 2022. Mitie has reorganised its divisional structure into eight reportable segments: Business
Services, Technical Services, Central Government & Defence (CG&D), Communities, Care & Custody, Landscapes, Waste and Spain. As part of the
reorganisation, three new divisions have been formed related to businesses acquired with Interserve, namely Communities, CG&D and Spain. In addition,
Mitie’s PFI and Healthcare operations have been transferred to Communities from Technical Services and Business Services respectively. Care & Custody,
Landscapes, Waste and Spain have been aggregated and categorised as Specialist Services, however, each of these businesses individually meets the IFRS 8
Operating Segments criteria for being a separate operating segment.
Segment assets and liabilities have not been disclosed as they are not reviewed by the Board.
Income statement information
2022 Restated
1
2021
Revenue
3
£m
Operating
profit/(loss)
before other
items
4
£m
Operating
margin before
other items
4
%
Revenue
3
£m
Operating
profit/(loss)
before other
items
2,4
£m
Operating
margin before
other items
2,4
%
Business Services 1,522.0 107.5 7.1 1,022.9 47.6 4.7
Technical Services 972.9 30.0 3.1 751.2 11.0 1.5
CG&D
3
669.4 38.4 5.7 225.5 10.1 4.5
Communities
3
460.0 19.9 4.3 265.0 16.6 6.3
Specialist Services 372.5 32.5 8.7 264.2 23.8 9.0
Care & Custody 135.7 9.9 7.3 108.8 7.4 6.8
Landscapes 55.0 9.2 16.7 50.2 8.4 16.7
Waste 76.7 8.3 10.8 74.6 6.7 9.0
Spain 105.1 5.1 4.9 30.6 1.3 4.2
Corporate centre – (61.4) – – (50.3) –
Total from continuing operations 3,996.8 166.9 4.2 2,528.8 58.8 2.3
Document Management 25.5 2.8 11.0 47.5 4.7 9.9
Nordics and Poland 1.9 0.1 5.3 13.0 0.4 3.1
Total from discontinued operations 27.4 2.9 10.6 60.5 5.1 8.4
Total Group 4,024.2 169.8 4.2 2,589.3 63.9 2.5
Notes:
1. Re-presented due to the change in divisional structure and to classify the Document Management business and operations in the Nordics and Poland as discontinued operations.
See Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
3. Revenue includes share of joint ventures and associates, of which £85.1m (2021: £27.2m) is included within CG&D and £8.4m (2021: £2.6m) within Communities.
4. Other items are as described in Note 4.
5. No single customer accounted for more than 10% of external revenue in the year ended 31 March 2022 or in the comparative year. The UK Government is not considered
a single customer.
Strategic report Governance Financial statements
169
Mitie Group plc
Annual Report and Accounts 2022
3. Business segment information continued
A reconciliation of segment operating profit before other items to total profit/(loss) before tax is provided below:
2022 Restated
1,2
2021
From continuing
operations
£m
From discontinued
operations
£m
Total Group
£m
From continuing
operations
£m
From discontinued
operations
£m
Tota l G roup
£m
Operating profit before other items 166.9 2.9 169.8 58.8 5.1 63.9
Other items
3
(94.8) 17.0 (77.8) (54.8) 2.9 (51.9)
Net finance (costs)/income (19.8) 0.1 (19.7) (17.7) 0.3 (17.4)
Profit/(loss) before tax 52.3 20.0 72.3 (13.7) 8.3 (5.4)
Notes:
1. Re-presented to classify the Document Management business and operations in the Nordics and Poland as discontinued operations. See Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
3. Other items are as described in Note 4.
Geographical segments
Revenue, operating profit and operating margin from external customers by geographical segment are shown below:
2022 Restated
1
2021
Revenue
2
£m
Operating profit
before other
items
4
£m
Operating margin
before other
items
4
%
Revenue
2
£m
Operating profit
before other
items
3,4
£m
Operating margin
before other
items
3,4
%
United Kingdom 3,844.5 160.3 4.2 2,446.9 56.3 2.3
Other countries 152.3 6.6 4.3 81.9 2.5 3.1
Continuing operations 3,996.8 166.9 4.2 2,528.8 58.8 2.3
United Kingdom 25.5 2.8 11.0 47.5 4.7 9.9
Other countries 1.9 0.1 5.3 13.0 0.4 3.1
Discontinued operations 27.4 2.9 10.6 60.5 5.1 8.4
Total Group 4,024.2 169.8 4.2 2,589.3 63.9 2.5
Notes:
1. Re-presented to classify the Document Management business and operations in the Nordics and Poland as discontinued operations. See Note 5.
2. Revenue includes share of joint ventures and associates.
3. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
4. 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:
2022
£m
Restated
1,2
2021
£m
United Kingdom 700.3 676.4
Other countries 14.8 11.0
Total 715.1 687.4
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition (refer to Note 2 and Note 30).
2. The comparatives as at 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to Note 1.
170
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
3. Business segment information continued
Supplementary information
2022 Restated
1
2021
Depreciation
of property,
plant and
equipment
£m
Amortisation
of intangible
assets £m
Amortisation
of contract
assets
£m
Other
items
2
£m
Depreciation
of property,
plant and
equipment
£m
Amortisation
of intangible
assets
3
£m
Amortisation
of contract
assets
£m
Other
items
2
£m
Business Services 1.9 2.3 – 17.6 2.7 1.2 – 19.2
Technical Services 0.8 0.7 1.0 21.1 0.5 0.6 1.0 20.9
CG&D 0.3 0.2 – (3.5) 0.1 – – 5.2
Communities 0.9 – – 10.9 0.1 – – 1.5
Specialist Services 2.5 – 0.7 3.1 2.1 – 0.7 4.0
Care & Custody 0.3 – 0.7 1.2 0.3 – 0.7 1.9
Landscapes 0.9 – – 0.6 0.8 – – 0.8
Waste 0.3 – – 0.9 0.6 – – 1.3
Spain 1.0 – – 0.4 0.4 – – –
Corporate centre 35.0 24.0 – 45.6 28.5 14.3 – 4.0
Continuing operations 41.4 27.2 1.7 94.8 34.0 16.1 1.7 54.8
Catering – – – – – – – 1.6
Healthcare – – – – – – – (2.1)
Pest Control – – – – – – – (0.7)
Social Housing – – – (4.0) – – – (2.0)
Document Management 0.2 – – (16.0) 0.4 – – –
Nordics and Poland – – – 3.0 – – – 0.3
Discontinued operations 0.2 – – (17.0) 0.4 – – (2.9)
Total Group 41.6 27.2 1.7 77.8 34.4 16.1 1.7 51.9
Notes:
1. Re-presented due to the change in divisional structure and to classify the Document Management business and operations in the Nordics and Poland as discontinued operations.
See Note 5.
2. Other items are as described in Note 4.
3. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
Disaggregated revenue
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.
Strategic report Governance Financial statements
171
Mitie Group plc
Annual Report and Accounts 2022
3. Business segment information continued
2022
Sector
1
Contract duration for timing of revenue recognition
Government
£m
Non-government
£m
Total
£m
Less than 2 years
£m
More than 2 years
£m
Total
£m
Business Services 686.6 835.4 1,522.0 682.0 840.0 1,522.0
Technical Services 275.5 697.4 972.9 79.2 893.7 972.9
CG&D 669.4 – 669.4 0.7 668.7 669.4
Communities 452.1 7.9 460.0 18.2 441.8 460.0
Specialist Services 259.5 113.0 372.5 85.0 287.5 372.5
Care & Custody 135.7 – 135.7 50.1 85.6 135.7
Landscapes 20.0 35.0 55.0 18.5 36.5 55.0
Waste 31.0 45.7 76.7 14.1 62.6 76.7
Spain 72.8 32.3 105.1 2.3 102.8 105.1
Continuing operations including joint
ventures and associates 2,343.1 1,653.7 3,996.8 865.1 3,131.7 3,996.8
Less: Joint ventures and associates
2
(93.5) – (93.5) – (93.5) (93.5)
Continuing operations excluding joint
ventures and associates 2,249.6 1,653.7 3,903.3 865.1 3,038.2 3,903.3
Document Management 1.7 23.8 25.5 0.1 25.4 25.5
Nordics and Poland – 1.9 1.9 – 1.9 1.9
Discontinued operations 1.7 25.7 27.4 0.1 27.3 27.4
Total Group excluding joint ventures and associates 2,251.3 1,679.4 3,930.7 865.2 3,065.5 3,930.7
Notes:
1. Sector is defined by the end customer on any contract, for example, if the Group is a subcontractor to a company repairing a government building, then the contract would be classified
as government.
2. Revenue from joint ventures and associates includes £85.1m and £8.4m within the CG&D and Communities segments respectively.
2021
1
Sector
2
Contract duration for timing of revenue recognition
Government
£m
Non-government
£m
Tota l
£m
Less than 2 years
£m
More than 2 years
£m
Tota l
£m
Business Services 271.7 751.2 1,022.9 247.3 775.6 1,022.9
Technical Services 193.4 557.8 751.2 69.3 681.9 751.2
CG&D 225.5 – 225.5 – 225.5 225.5
Communities 263.1 1.9 265.0 8.0 257.0 265.0
Specialist Services 168.8 95.4 264.2 80.9 183.3 264.2
Care & Custody 108.8 – 108.8 23.6 85.2 108.8
Landscapes 13.1 37.1 50.2 15.4 34.8 50.2
Waste 25.4 49.2 74.6 12.9 61.7 74.6
Spain 21.5 9.1 30.6 29.0 1.6 30.6
Continuing operations including joint
ventures and associates 1,122.5 1,406.3 2,528.8 405.5 2,123.3 2,528.8
Less: Joint ventures and associates
3
(29.8) – (29.8) – (29.8) (29.8)
Continuing operations excluding joint ventures
and associates 1,092.7 1,406.3 2,499.0 405.5 2,093.5 2,499.0
Document Management 3.4 44.1 47.5 0.2 47.3 47.5
Nordics and Poland – 13.0 13.0 – 13.0 13.0
Discontinued operations 3.4 57.1 60.5 0.2 60.3 60.5
Total Group excluding joint ventures and associates 1,096.1 1,463.4 2,559.5 405.7 2,153.8 2,559.5
Notes:
1. Re-presented due to the change in divisional structure and to classify the Document Management business and operations in the Nordics and Poland as discontinued operations.
See Note 5.
2. Sector is defined by the end customer on any contract, for example, if the Group is a subcontractor to a company repairing a government building, then the contract would be
classified as government.
3. Revenue from joint ventures and associates includes £27.2m and £2.6m within the CG&D and Communities segments respectively.
172
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
3. Business segment information continued
Transaction price allocated to the remaining performance obligations
The table below shows the secured 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.
2022 2021
1
Less than 1 year
£m
More than 1 year
£m
Total secured
revenue
£m
Less than 1 year
£m
More than 1 year
£m
Total secured
revenue
£m
Business Services 638.8 805.5 1,444.3 812.8 696.5 1,509.3
Technical Services 443.9 779.9 1,223.8 493.0 594.8 1,087.8
CG&D
2
346.3 502.8 849.1 347.3 481.3 828.6
Communities
2
275.2 2,582.4 2,857.6 252.6 2,852.1 3,104.7
Specialist Services 194.7 484.4 679.1 138.5 425.4 563.9
Care & Custody 120.1 397.8 517.9 99.7 345.2 444.9
Landscapes 32.1 68.8 100.9 0.2 61.9 62.1
Waste 7.0 8.6 15.6 7.8 13.3 21.1
Spain 35.5 9.2 44.7 30.8 5.0 35.8
Continuing operations and Total 1,898.9 5,155.0 7,053.9 2,044.2 5,050.1 7,094.3
Notes:
1. Re-presented due to the change in divisional structure and to classify the Document Management business and operations in the Nordics and Poland as discontinued operations.
See Note 5.
2. Forward order book includes share of joint ventures and associates.
4. 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.
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:
Continuing operations
2022
Restructure
costs
£m
Acquisition
and disposal
related costs
£m
Gain on
disposal
£m
Other
exceptional
items
£m
Total
£m
Other items before tax (10.9) (89.3) – 5.4 (94.8)
Tax
1
2.1 (3.1) – (1.0) (2.0)
Other items after tax (8.8) (92.4) – 4.4 (96.8)
Discontinued operations
Other items before tax – 4.0 13.0 – 17.0
Tax – – – – –
Other items after tax – 4.0 13.0 – 17.0
Total Group
Other items before tax (10.9) (85.3) 13.0 5.4 (77.8)
Tax
1
2.1 (3.1) – (1.0) (2.0)
Other items after tax (8.8) (88.4) 13.0 4.4 (79.8)
Note:
1. Includes £8.1m charge as a result of the increase in the rate of UK corporation tax from 1 April 2023. This primarily relates to the remeasurement of the deferred tax liability on the
customer contracts and relationships intangible arising on the acquisition of Interserve. See Note 9.
Strategic report Governance Financial statements
173
Mitie Group plc
Annual Report and Accounts 2022
4. Other items continued
Continuing operations
2021
1
Restructure
costs
£m
Acquisition
and disposal
related costs
£m
Gain on
disposal
£m
Other
exceptional
items
£m
Tota l
£m
Other items before tax (24.9) (33.1) – 3.2 (54.8)
Tax 4.8 3.3 – (0.6) 7.5
Other items after tax (20.1) (29.8) – 2.6 (47.3)
Discontinued operations
Other items before tax (0.3) 2.0 1.2 – 2.9
Tax – (0.4) – – (0.4)
Other items after tax (0.3) 1.6 1.2 – 2.5
Total Group
Other items before tax (25.2) (31.1) 1.2 3.2 (51.9)
Tax 4.8 2.9 – (0.6) 7.1
Other items after tax (20.4) (28.2) 1.2 2.6 (44.8)
Note:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations. Refer to Note 5.
Restructure costs
The Group has been undertaking a major transformation programme involving the restructuring of operations to reposition the business for its next
phase of growth, which includes Project Forte and the Property programme. The costs are analysed below:
2022 2021
Continuing
operations
£m
Discontinued
operations
£m
Total
£m
Continuing
operations
£m
Discontinued
operations
£m
Tota l
£m
Group transformation programme:
Project Forte
1
(10.2) – (10.2) (10.6) – (10.6)
Property
2
(0.4) – (0.4) (11.3) – (11.3)
Other transformation projects
3
(0.3) – (0.3) (3.0) (0.3) (3.3)
Restructure costs (10.9) – (10.9) (24.9) (0.3) (25.2)
Tax 2.1 – 2.1 4.8 – 4.8
Restructure costs net of taxation (8.8) – (8.8) (20.1) (0.3) (20.4)
Notes:
1. Project Forte was launched in 2019, primarily focusing on re-engineering the Technical Services business to modernise and optimise workflow processes. It will improve both the
customer experience and the efficiency of the internal operations. Project Forte is also driving further Group-wide organisational consolidation, automation of processes and further
offshoring of back office activities. Cumulative costs of £31.4m have been recognised within the consolidated income statement and classified as Other items on Project Forte since its
launch in 2019, of which £6.5m were non-cash costs. The project is expected to be completed during the year ending 31 March 2023.
2. Programme to restructure the property portfolio to align with the new operating model, which involves the vacation of office space. Cumulative costs of £13.2m have been recognised
within the consolidated income statement and classified as Other items since its launch in 2019, which predominantly relate to non-cash impairment charges in relation to right-of-use
assets recognised on property leases. The programme is expected to be completed during the year ending 31 March 2023.
3. Other transformation projects focus on aligning the remaining areas of the business to the new operating model, including fixed-term staff costs related to simplifying the
management structure.
The costs associated with the Group transformation programme include consultancy costs of £4.1m (2021: £3.6m), fixed-term staff costs of £5.2m
(2021: £4.2m) to manage and implement the changes, a right-of-use asset impairment of £0.1m (2021: £6.3m), other onerous lease costs of £0.2m
(2021: £2.6m) and intangible asset impairments of £1.3m (2021: £3.4m). In the year ended 31 March 2021, redundancy costs of £3.2m and property,
plant and equipment impairments of £1.9m were also recognised.
174
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
4. Other items continued
Acquisition and disposal related costs
2022 2021
Continuing
operations
£m
Discontinued
operations
£m
Total
£m
Continuing
operations
£m
Discontinued
operations
£m
Tota l
£m
Interserve acquisition related costs
1
(2.4) – (2.4) (14.8) – (14.8)
Interserve integration costs
2
(16.2) – (16.2) (8.8) – (8.8)
Interserve completion accounts adjustment
3
(45.6) – (45.6) – – –
Interserve amortisation of acquisition
relatedassets
4
(19.1) – (19.1) (6.7) – (6.7)
Total Interserve acquisition costs (83.3) – (83.3) (30.3) – (30.3)
Other amortisation of acquisition related
intangible assets (2.8) – (2.8) (2.2) – (2.2)
Other transaction related projects – – – (0.6) – (0.6)
Other acquisition transaction costs
5
(3.2) – (3.2) – – –
Other disposal income
6
– 4.0 4.0 – 2.0 2.0
Acquisition and disposal costs (89.3) 4.0 (85.3) (33.1) 2.0 (31.1)
Tax (3.1) – (3.1) 3.3 (0.4) 2.9
Acquisition and disposal costs net of taxation (92.4) 4.0 (88.4) (29.8) 1.6 (28.2)
Notes:
1. Comprises £2.5m of professional fees and an additional provision in respect of parent company guarantees of £0.6m, partially offset by the release of certain pre-acquisition net
payables amounts in respect of Interserve of £0.7m.
2. Comprises £5.3m of professional fees, staff related integration costs of £3.1m, dual running costs related to the transitional service arrangement of £1.9m, IT integration costs of £1.6m,
redundancy costs of £1.8m, software impairments of £1.4m, rebranding costs of £0.6m, other property related costs of £0.2m, right-of-use asset impairments of £0.1m and other
integration costs of £0.2m.
3. At 31 March 2021 other receivables included £52.7m (restated) which represented management’s best estimate of the amount expected to be recovered by the Group through the
completion accounts and other SPA mechanisms on the Interserve acquisition. At 31 March 2021 it was disclosed that the outcome of the completion accounts process was inherently
uncertain, given that the SPA terms related to the completion accounts mechanism were complex, and the completion accounts would be the subject of a commercial negotiation
and, in the absence of agreement, an expert determination process, and the final amount agreed could therefore be materially different from the estimate. The completion accounts
process (and expert determination) has since been concluded. Following the expert’s determination, for which the expert sought a legal opinion in relation to the interpretation of the
complex SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group. The resulting £45.6m reduction in the related receivable has been recognised in the
consolidated income statement and classified as Other items, given that the Measurement Period had ended. See Note 2.
4. Includes £16.7m amortisation on customer contracts and relationships acquired with Interserve and £2.4m related to 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.
5. Other acquisition transaction costs for the year ended 31 March 2022 comprise £1.7m of professional fees, £0.3m of fixed-term staff costs, £0.1m of other acquisition costs, £0.1m of
redundancy costs relating to acquisitions other than Interserve and £1.0m of performance-based employment-linked earnouts arising from acquisitions. Refer to Note 30.
6. Other disposal income relates to rectification works on property maintenance contracts associated with the disposal of the Social Housing business of £4.0m (2021: £2.0m).
Gain on disposal
A net gain on disposal of businesses of £13.0m (2021: £1.2m) has been recognised in Other items. See Note 5 for further details.
Other exceptional items
Other exceptional items included in operating profit are analysed below:
2022 2021
Continuing
operations
£m
Discontinued
operations
£m
Total
£m
Continuing
operations
£m
Discontinued
operations
£m
Tota l
£m
Settlement of contractual disputes
1
9.8 – 9.8 – – –
Net settlement of legal dispute – – – 3.7 – 3.7
Digital supplier platform
2
(4.4) – (4.4) – – –
Other exceptional items – – – (0.5) – (0.5)
Other exceptional items 5.4 – 5.4 3.2 – 3.2
Tax (1.0) – (1.0) (0.6) – (0.6)
Other exceptional items net of taxation 4.4 – 4.4 2.6 – 2.6
Notes:
1. For the year ended 31 March 2022, as a result of commercial negotiations with a certain customer, pre-acquisition liabilities of £9.8m have been de-recognised with respect to
Interserve. The resulting gain of £9.8m has been recognised in the consolidated income statement as Other items, given the Measurement Period had ended.
2. Costs of £4.4m incurred in the implementation of a new digital supplier platform resulting in a step change in the Group’s supply chain management capabilities. This implementation,
which is transformational in nature, is expected to be completed during the year ending 31 March 2023 and the cumulative one-off cash cost of the implementation is expected to
be £7.5m .
Strategic report Governance Financial statements
175
Mitie Group plc
Annual Report and Accounts 2022
5. Discontinued operations and disposal of subsidiaries
On 1 June 2021, the Group completed the sale of Mitie Norge AS, Mitie Sverige AB and Mitie Polska Sp z.o.o (together, the Nordics and Poland
operations). On 30 September 2021, the Group completed the sale of Mitie Business Services Limited and Mitie Business Services UK Limited (together,
the Document Management business). The results of the Nordics and Poland operations and the Document Management business have been classified as
discontinued operations at 31 March 2022 and comparative information has been re-presented.
The Group recognised a net loss on disposal of £3.0m in relation to the disposal of the Nordics and Poland operations and a net gain on disposal of £16.0m
in relation to the disposal of the Document Management business.
2022 2021
1
Nordics and
Poland
£m
Document
Management
£m
Social
Housing
£m
Total
£m
Tota l
£m
Total consideration 0.3 36.7 – 37.0 (2.6)
Net assets disposed
2
(2.9) (19.7) – (22.6) –
Recycling of foreign exchange loss in reserves (0.3) – – (0.3) –
Transaction costs (0.1) (1.0) – (1.1) –
Release of customer liability – – – – 1.7
Release of indemnity provision – – – – 2.1
Net loss/(gain) on disposal of discontinued operations as
reported in other items (see Note 4) (3.0) 16.0 – 13.0 1.2
Profit before tax before other items 0.1 2.9 – 3.0 5.4
Other items (see Note 4) – – 4.0 4.0 1.7
Profit before tax 0.1 2.9 4.0 7.0 7.1
Tax – (0.6) – (0.6) (1.1)
Profit for the period after tax 0.1 2.3 4.0 6.4 6.0
Total (loss)/profit for the year (2.9) 18.3 4.0 19.4 7.2
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations have been
re-presented.
2. Net assets disposed in the Nordics and Poland operations include goodwill of £1.4m and cash balances of £1.5m. Net assets disposed in the Document Management business include
goodwill of £14.4m and cash balances of £4.6m.
Income statement of discontinued operations
2022
Nordics and Poland Document Management
Social
Housing Total discontinued operations
Before
other items
£m
Other
items
1
£m
Total
£m
Before
other items
£m
Other
items
1
£m
Total
£m
Other
items
1
and Total
£m
Before
other items
£m
Other
items
1
£m
Total
£m
Revenue 1.9 – 1.9 25.5 – 25.5 – 27.4 – 27.4
Cost of sales (1.7) – (1.7) (21.6) – (21.6) – (23.3) – (23.3)
Gross profit 0.2 – 0.2 3.9 – 3.9 – 4.1 – 4.1
Administrative expenses (0.1) – (0.1) (1.1) – (1.1) 4.0 (1.2) 4.0 2.8
Operating profit 0.1 – 0.1 2.8 – 2.8 4.0 2.9 4.0 6.9
Net finance income – – – 0.1 – 0.1 – 0.1 – 0.1
Profit before tax 0.1 – 0.1 2.9 – 2.9 4.0 3.0 4.0 7.0
Tax – – – (0.6) – (0.6) – (0.6) – (0.6)
Profit for the period 0.1 – 0.1 2.3 – 2.3 4.0 2.4 4.0 6.4
Net (loss)/gain on disposal – (3.0) (3.0) – 16.0 16.0 – – 13.0 13.0
Total profit/(loss) for the period 0.1 (3.0) (2.9) 2.3 16.0 18.3 4.0 2.4 17.0 19.4
Note:
1. Other items are as described in Note 4.
176
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
5. Discontinued operations and disposal of subsidiaries continued
2021
Nordics and Poland
Document
Management Catering
Pest
Control
Social
Housing Healthcare Total discontinued operations
Before
other
items
£m
Other
items
1
£m
Tota l
£m
Before
other items
and total
£m
Other
items
1
and total
£m
Other
items
1
and total
£m
Other
items
1
and total
£m
Other
items
1
and total
£m
Before
other
items
£m
Other
items
1
£m
Tota l
£m
Revenue 13.0 – 13.0 47.5 – – – – 60.5 – 60.5
Cost of sales (11.8) – (11.8) (40.4) – – – – (52.2) – (52.2)
Gross profit 1.2 – 1.2 7.1 – – – – 8.3 – 8.3
Administrative expenses (0.8) (0.3) (1.1) (2.4) – – 2.0 – (3.2) 1.7 (1.5)
Operating profit 0.4 (0.3) 0.1 4.7 – – 2.0 – 5.1 1.7 6.8
Net finance income – – – 0.3 – – – – 0.3 – 0.3
Profit before tax 0.4 (0.3) 0.1 5.0 – – 2.0 – 5.4 1.7 7.1
Tax – – – (0.7) – – (0.4) – (0.7) (0.4) (1.1)
Profit/(loss) for the period 0.4 (0.3) 0.1 4.3 – – 1.6 – 4.7 1.3 6.0
Net (loss)/gain on disposal – – – – (1.6) 0.7 – 2.1 – 1.2 1.2
Total profit/(loss) for the
period 0.4 (0.3) 0.1 4.3 (1.6) 0.7 1.6 2.1 4.7 2.5 7.2
Note:
1. Other items are as described in Note 4.
Cash flows from discontinued operations
2022
Nordics and
Poland
£m
Document
Management
£m
Total
£m
Cash consideration 0.3 36.7 37.0
Cash disposed (1.5) (4.6) (6.1)
Cash transaction costs – (1.0) (1.0)
Disposal proceeds net of cash disposed and transaction costs (1.2) 31.1 29.9
The following table shows cashflows from the discontinued operations arising during the ordinary course of business up to date of disposal.
2022
Nordics and
Poland
£m
Document
Management
£m
Total
£m
Net cash (used in)/generated from operating activities (0.2) 0.4 0.2
Net cash used in financing activities – (0.1) (0.1)
(Decrease)/increase in cash and cash equivalents (0.2) 0.3 0.1
6. Operating profit
Operating profit includes the following expenses/(income):
Total Group
2022
£m
2021
£m
Depreciation of property, plant and equipment (Note 14 and Note 26) 41.6 34.4
Amortisation of other intangible assets (Note 13)
1
27.2 16.1
Amortisation of contract assets (Note 17) 1.7 1.7
Impairment of property, plant and equipment (Note 14) – 1.9
Impairment of right-of-use assets (Note 26) 0.2 7.4
Impairment of other intangible assets (Note 13) 3.5 4.4
Loss on disposal of property, plant and equipment 0.5 –
Gain on disposal of subsidiaries (Note 5) (13.0) (1.2)
Impairment loss recognised on trade receivables (Note 25) 1.5 1.8
Impairment loss recognised on accrued income (Note 25) 0.6 4.4
Reversal of impairment on accrued income (Note 25) (1.3) –
Note:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to Note 1.
Strategic report Governance Financial statements
177
Mitie Group plc
Annual Report and Accounts 2022
6. Operating profit continued
A detailed analysis of auditor’s remuneration is provided below:
2022
£’000
2021
£’000
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 252 240
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant to
legislation – current year 2,933 1,918
Fees payable to Grant Thornton and its associates for the audit of the Company’s subsidiaries pursuant to legislation – 866
Total audit fees – current year 3,185 3,024
Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant to
legislation – prior year 115 443
Total audit fees 3,300 3,467
Audit-related assurance services to the Group 175 115
Tax advisory services – 1
Other assurance services 9 1,883
Non-audit services provided by Grant Thornton – 62
Total non-audit fees 184 2,061
Total 3,484 5,528
7. Employees
The average number of people employed during the financial year was:
Number of people
1
2022 2021
2,3
Technical Services 8,668 7,502
Business Services 38,501 33,197
CG&D 4,858 1,818
Communities 7,714 5,015
Specialist Services 7,531 4,211
Care & Custody 2,190 1,999
Landscapes 730 795
Waste 260 247
Spain 4,351 1,170
Corporate centre 130 129
Continuing operations 67,402 51,872
Nordics and Poland 17 124
Document Management 659 947
Discontinued operations 676 1,071
Total Group 68,078 52,943
Notes:
1. Average number of people employed from the date of acquisition of businesses.
2. The comparative for the year ended 31 March 2021 has been re-presented as the Group disposed the Document Management business and operations in the Nordics and Poland
during the year ended 31 March 2022.
3. The comparatives for the year ended 31 March 2021 have been re-presented to reflect changes in management reporting implemented during the year. See Note 3 for details of the
revised divisional structure.
178
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
7. Employees continued
The total employment costs, including Directors, were:
Aggregate remuneration comprised:
2022
£m
2021
£m
Wages and salaries
1
1,928.4 1,323.7
Social security costs 143.7 108.1
Other pension costs 40.8 31.5
Share-based payments (Note 31) 18.6 9.5
Total 2,131.5 1,472.8
Note:
1. For the year ended 31 March 2022, wages and salaries have been reduced by a net amount of £9.5m (2021: £49.7m), which represents UK Government grants received under the
Coronavirus Job Retention Scheme of £ 9.5m (2021: £53.8m), less repayments back to the UK Government of £nil (2021: £4.1m) relating to furloughed colleagues employed directly
at Mitie’s own operations.
Executive and Non-Executive Directors’ aggregate emoluments are shown below:
2022
£m
2021
£m
Short term benefits 3.6 1.7
Pension and other employment benefits 0.2 0.2
Share-based payments 5.5 2.3
Total 9.3 4.2
8. Finance costs
Continuing operations
2022
£m
2021
£m
Interest on bank facilities 4.3 4.7
Interest on private placement loan notes 6.1 6.1
Bank fees 4.7 3.1
Interest on lease liabilities (Note 26) 4.0 3.3
Unwinding of discounts on provisions – 0.1
Net interest on defined benefit pension scheme assets and liabilities (Note 32) 0.9 0.9
Total 20.0 18.2
9. Tax
Total Group
2022
£m
Restated
1
2021
£m
Current tax 19.4 1.3
Deferred tax (Note 22) 2.2 0.2
Tax charge for the year 21.6 1.5
Continuing operations 21.0 0.4
Discontinued operations 0.6 1.1
Tax charge for the year 21.6 1.5
Note:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
Strategic report Governance Financial statements
179
Mitie Group plc
Annual Report and Accounts 2022
9. Tax continued
Corporation tax is calculated at 19% (2021: 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 is as follows:
Total Group
2022 Restated
1
2021
Before
other items
£m
Other
items
2
£m
Total
£m
Before
other items
£m
Other
items
2
£m
Tota l
£m
Profit/(loss) before tax 150.1 (77.8) 72.3 46.5 (51.9) (5.4)
Tax at UK rate of 19% (2021: 19%) 28.5 (14.8) 13.7 8.8 (9.9) (1.1)
Reconciling tax charges for:
Non-tax deductible charges – 9.0 9.0 0.9 2.6 3.5
Share-based payments (0.6) – (0.6) (0.2) 0.2 –
Gain on disposal of businesses – (2.5) (2.5) – (0.2) (0.2)
Impact of equity accounted investments (1.7) 0.5 (1.2) (0.5) 0.2 (0.3)
Losses not recognised 2.2 – 2.2 0.2 – 0.2
Overseas tax rates (0.5) – (0.5) (0.2) – (0.2)
Impact of change in statutory tax rates (9.0) 8.1 (0.9) – – –
Prior year adjustments 0.7 1.7 2.4 (0.4) – (0.4)
Tax charge/(credit) for the year 19.6 2.0 21.6 8.6 (7.1) 1.5
Effective tax rate for the year 13.1% (2.6%) 29.9% 18.5% 13.7% (27.8%)
Notes:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
2. Other items are as described in Note 4.
In addition to the amounts charged to the consolidated income statement, tax relating to remeasurements of retirement benefit liabilities amounting
to a £3.8m charge (2021: £1.0m credit) and a £0.1m credit relating to hedged items (2021: £0.1m credit) have been taken directly to the statement of
comprehensive income. A £0.2m charge related to share options (2021: £nil) has been taken directly to equity.
The UK corporation tax rate will increase from 19% to 25% from 1 April 2023. This change has been substantively enacted at the balance sheet date and
is therefore incorporated into the amounts contained in this report.
10. Dividends
2022
Pence per share
2022
£m
2021
Pence per share
2021
£m
Amounts recognised as distributions in the year:
Final dividend for the prior year – – – –
Interim dividend for the current year 0.4 5.7 – –
0.4 5.7 – –
Proposed final dividend for the year ended 31 March 1.4 19.5 – –
Dividends are recognised as distributions in the year in which they are paid. Subject to approval at the Annual General Meeting on 26 July 2022, the final
dividend for the year ended 31 March 2022 will be paid on 5 August 2022 to holders on the register on 24 June 2022. The ordinary shares will be quoted
ex-dividend on 23 June 2022.
180
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
11. Earnings per share
The calculation of the basic and diluted EPS is based on the following data:
2022 Restated
1,2
2021
From
continuing
operations
£m
From
discontinued
operations
£m
Total
Group
£m
From
continuing
operations
£m
From
discontinued
operations
£m
Tota l
Group
£m
Net profit before other items attributable to
owners of the parent 128.1 2.4 130.5 33.2 4.7 37.9
Other items net of tax
3
(96.8) 17.0 (79.8) (47.3) 2.5 (44.8)
Net profit/(loss) attributable to owners of
theparent 31.3 19.4 50.7 (14.1) 7.2 (6.9)
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations for
the year ended 31 March 2021 have been re-presented within discontinued operations. Refer to Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
3. Other items are as described in Note 4.
Number of shares
2022
million
2021
million
Weighted average number of ordinary shares for the purpose of basic EPS
1
1,395.4 1,082.5
Effect of dilutive potential ordinary shares
2
143.2 –
Weighted average number of ordinary shares for the purpose of diluted EPS
1,2
1,538.6 1,082.5
Notes:
1. The weighted average number of ordinary shares in issue during the year excludes those accounted for in the own shares reserve.
2. The dilutive potential ordinary shares relate to instruments that could potentially dilute basic earnings per share in the future, such as share-based payments. At 31 March 2022, no
shares (2021: 70.2 million 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 from continuing operations in the year ended 31 March 2021, hence the diluted loss per share needs to be the same amount as the basic loss per share.
2022 Restated
1,2
2021
From
continuing
operations
pence per share
From
discontinued
operations
pence per share
Total
Group
pence per share
From
continuing
operations
pence per share
From
discontinued
operations
pence per share
Tota l
Group
pence per share
Basic earnings before other items
3
9.2 0.2 9.4 3.1 0.4 3.5
Basic earnings/(loss) 2.2 1.4 3.6 (1.3) 0.7 (0.6)
Diluted earnings before other items
3
8.3 0.2 8.5 3.1 0.4 3.5
Diluted earnings/(loss) 2.0 1.3 3.3 (1.3) 0.7 (0.6)
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations for
the year ended 31 March 2021 have been re-presented within discontinued operations. Refer to Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
3. Other items are as described in Note 4.
Strategic report Governance Financial statements
181
Mitie Group plc
Annual Report and Accounts 2022
12. Goodwill
£m
Cost
At 1 April 2020 311.4
Arising on business combinations
1
15.9
At 31 March 2021
1
327.3
Arising on business combinations
2
22.3
Disposal of businesses
3
(15.8)
At 31 March 2022 333.8
Accumulated impairment losses
At 1 April 2020 32.5
At 31 March 2021 32.5
At 31 March 2022 32.5
Net book value
At 31 March 2022 301.3
At 31 March 2021
1
294.8
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition, with the goodwill arising on the Interserve
acquisition increasing from £3.3m to £15.9m. Refer to Note 2 and Note 30.
2. The Group acquired DAEL, Rock, Biotecture and Esoteric during the year ended 31 March 2022. Refer to Note 30.
3. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The goodwill disposed was £14.4m and
£1.4m respectively. Refer to Note 5.
Goodwill impairment testing
Mitie has reorganised its business during the year ended 31 March 2022 and the determination of CGUs has been updated accordingly to meet the
criteria laid out by IAS 36 Impairment of Assets. The information presented as at 31 March 2021 has been re-presented accordingly. Technical Services,
Business Services, Communities, Landscapes and Central Government & Defence (CG&D) have been determined to be relevant CGUs for the year
ended 31March 2022, where goodwill has been attributed.
Goodwill acquired in a business combination is allocated, at acquisition, to the 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:
Pre-tax
discount rate
%
Goodwill
2022
£m
Goodwill
1
2021
£m
Technical Services 9.6% 105.9 86.5
Business Services 9.9% 105.1 118.8
Communities 10.3% 81.0 81.0
Landscapes 10.5% 6.6 5.8
CG&D 10.4% 2.7 2.7
Total 301.3 294.8
Notes:
1. The comparatives as at 31 March 2021 have been restated as a result of the reorganisation of Mitie’s business and for measurement period adjustments in respect of the Interserve
acquisition, with the goodwill arising on the Interserve acquisition increasing from £3.3m to £15.9m. Refer to Note 2 and Note 30.
2. Mitie’s PFI and Healthcare operations have moved to Communities from Technical Services and Business Services respectively, with goodwill of £60.9m and £8.9m reallocated
respectively. In addition, of the carrying value of goodwill allocated to Business and Industry (B&I) CGU, £1.2m and £0.8m has been allocated to the Business Services and Technical
Services CGUs respectively. The comparatives as at 31 March 2021 have been restated accordingly.
182
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
12. Goodwill continued
At 31 March 2021 under the previous organisational structure, the goodwill would have been allocated as follows:
Goodwill
1
2021
£m
Technical Services 146.6
Business Services 126.5
Landscapes 5.8
CG&D 2.7
Communities 11.2
B&I 2.0
Total 294.8
Note:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition, with the goodwill arising on the Interserve
acquisition increasing from £3.3m to £15.9m. Refer to Note 2 and Note 30.
Key assumptions
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.
Forecast operating profits
For all CGUs, the Group prepared cash flow projections derived from the most recent forecasts for the year ending 31 March 2023 and the Group’s
medium-term strategic plan to 31 March 2027. Forecast revenue and direct costs are based on past performance and expectations of future changes in
the market, operating model and cost base including the impact of inflation.
Growth rates and terminal values
Medium-term revenue growth rates applied to the value-in-use calculations of each CGU reflect management’s strategy for a period of five years.
Terminal values were determined using a long-term growth assumption of 2.0% (2021: 2.0%).
Discount rates
The pre-tax discount rates used to assess the forecast cash flows from CGUs are derived from the Group’s post-tax weighted average cost of capital,
which was 7.8% as at 31 March 2022 (2021: 9.1%). These rates are reviewed annually by external advisors 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.
Sensitivity analysis
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. A further sensitivity analysis has also been performed and management has concluded that even
in the downside scenario, no impairments would be required.
Strategic report Governance Financial statements
183
Mitie Group plc
Annual Report and Accounts 2022
13. Other intangible assets
Acquisition related
Total
acquisition
related
£m
Restated
1
Software and
development
expenditure
£m
Restated
1
Total
£m
Customer
contracts and
relationships
£m
Other
£m
Cost
At 1 April 2020 101.9 10.9 112.8 62.4 175.2
Additions – – – 14.1 14.1
Arising on business combinations 219.3 3.4 222.7 – 222.7
Disposals – – – (14.5) (14.5)
Effect of movements in exchange rates (0.1) – (0.1) (0.1) (0.2)
At 31 March 2021 321.1 14.3 335.4 61.9 397.3
Additions – – – 20.2 20.2
Arising on business combinations 8.4 – 8.4 – 8.4
Disposals – – – (8.8) (8.8)
Reclassifications – (3.4) (3.4) 3.4 –
Effect of movements in exchange rates – – – 0.1 0.1
At 31 March 2022 329.5 10.9 340.4 76.8 417.2
Amortisation and impairment
At 1 April 2020 87.0 10.5 97.5 32.8 130.3
Charge for the year 7.6 0.1 7.7 8.4 16.1
Impairments – – – 4.4 4.4
Disposals – – – (14.4) (14.4)
Effect of movements in exchange rates (0.1) – (0.1) – (0.1)
At 31 March 2021 94.5 10.6 105.1 31.2 136.3
Charge for the year 19.4 0.1 19.5 7.7 27.2
Impairments – – – 3.5 3.5
Disposals – – – (8.8) (8.8)
Effect of movements in exchange rates – – – 0.1 0.1
At 31 March 2022 113.9 10.7 124.6 33.7 158.3
Net book value
At 31 March 2022 215.6 0.2 215.8 43.1 258.9
At 31 March 2021 226.6 3.7 230.3 30.7 261.0
Note:
1. The comparatives for software and development expenditure as at 1 April 2020, for the year ended 31 March 2021 and as at 31 March 2021 have been restated for the change in
accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to Note 1.
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 nine 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.
Following a review of the carrying amount of intangible assets, an impairment of £3.5m has been recorded (2021: £4.4m), of which £2.7m (2021: £3.4m)
is included within Other items. See Note 4.
184
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
14. Property, plant and equipment
Property, plant and equipment comprise owned and leased assets.
2022
£m
2021
£m
Owned property, plant and equipment 29.9 24.3
Right-of-use assets (Note 26) 114.0 93.6
Total 143.9 117.9
The table below relates to owned property, plant and equipment.
Land and
buildings
£m
Plant and
vehicles
£m
Total
£m
Cost
At 1 April 2020 16.1 49.1 65.2
Additions – 7.6 7.6
Disposals (5.1) (3.3) (8.4)
Arising on business combinations 0.8 4.3 5.1
Effect of movements in exchange rates (0.1) (0.2) (0.3)
At 31 March 2021 11.7 57.5 69.2
Additions – 15.4 15.4
Disposals (2.5) (11.8) (14.3)
Arising on business combinations – 1.3 1.3
Disposal of businesses (0.2) (4.1) (4.3)
Effect of movements in exchange rates – (0.1) (0.1)
At 31 March 2022 9.0 58.2 67.2
Accumulated depreciation and impairment
At 1 April 2020 10.4 32.1 42.5
Charge for the year 1.2 7.0 8.2
Impairments 1.4 0.5 1.9
Disposals (4.9) (2.5) (7.4)
Effect of movements in exchange rates (0.1) (0.2) (0.3)
At 31 March 2021 8.0 36.9 44.9
Charge for the year 0.6 8.7 9.3
Disposals (2.5) (10.9) (13.4)
Disposal of businesses (0.1) (3.8) (3.9)
Effect of movements in exchange rates 0.3 0.1 0.4
At 31 March 2022 6.3 31.0 37.3
Net book value
At 31 March 2022 2.7 27.2 29.9
At 31 March 2021 3.7 20.6 24.3
No impairment of property, plant and equipment has been recorded in the year ended 31 March 2022 (2021: £1.9m which was included within
Other items).
Strategic report Governance Financial statements
185
Mitie Group plc
Annual Report and Accounts 2022
15. Interests in joint ventures and associates
The Group has interests in joint ventures and associates, which are all equity accounted entities. Landmarc Support Services Limited (Landmarc UK) and
Sussex Estates and Facilities LLP (Sussex) are 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.
Interests in joint ventures and associates
Ownership
%
Nature of
relationship
2022
£m
2021
£m
Landmarc UK 51 Joint venture 10.5 9.9
Sussex 35 Associate 0.7 0.5
Other Joint ventures 0.7 0.6
At 31 March 11.9 11.0
Landmarc UK
1
£m
Sussex
1
£m
Other
1
£m
Group share
of joint
ventures and
associates
2022
£m
Group share
of joint
ventures and
associates
2021
£m
At 1 April 9.9 0.5 0.6 11.0 –
Arising on business combinations – – – – 10.7
Share of profit before other items 5.5 1.0 0.1 6.6 1.9
Share of profit – Other items
2
(2.4) – – (2.4) (1.2)
Share of other comprehensive income 0.7 – – 0.7 0.4
Dividends (3.2) (0.8) – (4.0) (0.8)
At 31 March 10.5 0.7 0.7 11.9 11.0
Notes:
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. See Note 4.
Summarised income statement (100%)
2022 2021
Landmarc UK
£m
Sussex
£m
Other
£m
Total
£m
Landmarc UK
£m
Sussex
£m
Other
£m
Tota l
£m
Revenue 164.6 24.0 2.2 190.8 50.6 7.3 2.8 60.7
Share of revenue of joint ventures and associates 84.0 8.4 1.1 93.5 25.8 2.6 1.4 29.8
Depreciation and amortisation
1
(0.9) – – (0.9) (0.3) – – (0.3)
Operating profit 13.3 2.8 0.2 16.3 3.8 0.7 0.1 4.6
Finance income 0.1 – – 0.1 – – – –
Tax (2.5) – – (2.5) (0.7) – – (0.7)
Profit for the year 10.9 2.8 0.2 13.9 3.1 0.7 0.1 3.9
Other comprehensive income 1.3 – – 1.3 0.9 – – 0.9
Total comprehensive income (100%) 12.2 2.8 0.2 15.2 4.0 0.7 0.1 4.8
Note:
1. Excluding the amortisation of customer contracts and relationships arising on business combinations. The Group’s share is £2.4m (2021: £1.2m) included within Other items.
See Note4.
186
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
15. Interests in joint ventures and associates continued
Summarised balance sheet (100%)
2022 2021
Landmarc UK
£m
Sussex
£m
Other
£m
Total
£m
Landmarc UK
£m
Sussex
£m
Other
£m
Tota l
£m
Non-current assets
1
10.7 – – 10.7 12.5 – – 12.5
Current assets 41.3 8.9 5.1 55.3 29.0 6.3 7.5 42.8
Current liabilities (31.4) (7.0) (3.6) (42.0) (22.1) (4.8) (6.3) (33.2)
Net assets (100%) 20.6 1.9 1.5 24.0 19.4 1.5 1.2 22.1
Share of net assets 10.5 0.7 0.7 11.9 9.9 0.5 0.6 11.0
The above includes the following:
Cash and cash equivalents (100%) 28.7 7.4 0.4 36.5 24.1 4.6 0.3 29.0
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 the customer relationships was
£3.6m as at 30 November 2020, which has been fully amortised at 31 March 2022 following an amortisation charge of £2.4m (2021: £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, had 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 and this was released during the year ended 31 March 2022. 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.
16. Trade and other receivables
2022
£m
Restated
1
2021
£m
Trade receivables 386.3 362.4
Accrued income 239.7 208.7
Prepayments 30.4 27.0
Other receivables
2
55.4 89.0
Total 711.8 687.1
Included in current assets 704.0 678.8
Included in non-current assets 7.8 8.3
Total 711.8 687.1
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
2. At 31 March 2022 other receivables included the £6.0m (2021 restated: £52.7m) which represented management’s best estimate of the amount expected to be recovered by the
Group through the completion accounts and other SPA mechanisms on the Interserve acquisition. At 31 March 2021 it was disclosed that the outcome of the completion accounts
process was inherently uncertain, given that the SPA terms related to the completion accounts mechanism were complex, and the completion accounts would be the subject of a
commercial negotiation and, in the absence of agreement, an expert determination process, and the final amount agreed could therefore be materially different from the estimate.
The completion accounts process, including commercial negotiations and expert determination, has since been concluded. Following the expert’s determination, for which the expert
sought a legal opinion in relation to the interpretation of the complex SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group, of which £1.1m was
settled during the second half of the year ended 31 March 2022 and £6.0m was settled in May 2022. See Note 30.
Trade receivables at 31 March 2022 represent 28 days credit on sales (2021: 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 £51.7m as at 31 March 2021 to £44.5m as at 31 March 2022.
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.
Strategic report Governance Financial statements
187
Mitie Group plc
Annual Report and Accounts 2022
17. Contract assets
Pre-contract
costs
£m
Contract
fulfilment
costs
£m
Total
£m
At 1 April 2020 1.5 3.3 4.8
Additions 0.7 0.1 0.8
Amortisation (0.8) (0.9) (1.7)
At 31 March 2021 1.4 2.5 3.9
Additions 0.1 0.9 1.0
Amortisation (0.8) (0.9) (1.7)
At 31 March 2022 0.7 2.5 3.2
Included in current assets 0.6 1.0 1.6
Included in non-current assets 0.1 1.5 1.6
Total 0.7 2.5 3.2
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 2022 (2021: £nil).
18. Inventories
2022
£m
2021
£m
Consumables 11.9 12.7
Total 11.9 12.7
19. Trade and other payables
2022
£m
Restated
1
2021
£m
Trade payables 134.8 131.4
Other taxes and social security 117.7 122.6
Other payables
2
57.2 32.7
Accruals 534.3 415.6
Total 844.0 702.3
Included in current liabilities 841.2 701.8
Included in non-current liabilities
3
2.8 0.5
Total 844.0 702.3
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
2. As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the Group’s customers was held on
trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022 and is included within current other payables at 31 March 2022.
3. Non-current other payables mainly comprise contingent consideration and performance-based employment-linked earnouts arising on the acquisitions of Rock, Esoteric and
Biotecture. Refer to Note 30.
Trade creditors at 31 March 2022 represent 23 days credit on trade purchases (2021 restated: 26 days).
Management considers that the carrying amount of trade and other payables approximates their fair value.
188
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
20. Deferred income
The significant changes in deferred income are as follows:
2022
£m
Restated
1
2021
£m
At 1 April 114.9 51.5
Revenue recognised that was included in the deferred income balance at the beginning of the year (58.6) (45.2)
Increase due to cash received, excluding amounts recognised as revenue during the year 56.1 48.9
Arising on business combinations 3.7 59.7
At 31 March 116.1 114.9
Included within current liabilities 83.5 84.8
Included within non-current liabilities 32.6 30.1
Total 116.1 114.9
Note:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
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.
21. Provisions
Contract
specific costs
£m
Insurance
reserve
£m
Pension
£m
Dilapidations
£m
Restructuring
£m
Other
£m
Total
£m
At 31 March 2021 (as reported) 54.1 27.9 23.8 5.9 2.2 2.5 116.4
Measurement period adjustments
1
6.4 0.7 – (0.3) – 0.4 7.2
At 31 March 2021
1
60.5 28.6 23.8 5.6 2.2 2.9 123.6
Additional provisions in the year 6.3 7.1 – 1.3 0.6 0.6 15.9
Released to the income statement (1.0) – – (0.1) – – (1.1)
Utilised in the year (9.5) (9.7) (0.1) (0.3) (0.9) (0.9) (21.4)
At 31 March 2022 56.3 26.0 23.7 6.5 1.9 2.6 117.0
Included in current liabilities 19.3 7.8 23.7 0.9 0.4 2.6 54.7
Included in non-current liabilities 37.0 18.2 – 5.6 1.5 – 62.3
Total 56.3 26.0 23.7 6.5 1.9 2.6 117.0
Note:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
Contract specific costs
Contract specific costs provision of £56.3m (2021 restated: £60.5m) comprise onerous contract provisions of £13.2m (2021 restated: £17.6m) and other
contract specific provisions of £43.1m (2021 restated: £42.9m).
Other onerous contract provisions are made where the forecast direct costs of completing a contract exceed the forecast income from the contract.
The main contracts these provisions relate to are 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, the calculation of onerous contract provisions is a key source of estimation uncertainty.
Key judgements used in the calculation of the provision and sensitivity to change in assumptions are set out in Note 2. The Group utilised £5.0m 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’ contract terms, and include
a £14.7m provision relating to a significant liability risk on a certain contract which is subject to dispute, a £6.4m provision relating to a commercial
settlement dispute for a certain contract, and £3.9m relating to costs of rectification works associated with certain property maintenance contracts
of the discontinued Social Housing business. The value of these provisions reflects the single most likely outcome and is expected to be utilised over
a maximum period of eight years. The remaining provision relates to other potential commercial claims and rectification work for other contracts.
During the year the Group utilised £4.5m of the contract specific provisions.
Strategic report Governance Financial statements
189
Mitie Group plc
Annual Report and Accounts 2022
21. Provisions continued
Insurance reserve
The Group retains a portion of the exposure in relation to insurance policies for employer liabilities and motor and fleet liabilities. Judgement is involved
in assessing outstanding liabilities, the ultimate cost and timing of which cannot be known with certainty at the balance sheet date. The provision includes
claims incurred but not yet reported and is based on information available at the balance sheet date. The provision is expected to be utilised over
five years.
The insurance reserve of £26.0m is presented gross of a insurer reimbursement asset of £6.5m (2021: £8.2m), which represents the amount the Group
is virtually certain to recover for claims under its insurance policies. The asset is presented as non-current other receivables.
Pension
The pension provision balance at 31 March 2022 includes £21.7m for Section 75 employer debt liabilities of Robert Prettie & Co Limited and Mitie FM
Limited as a result of their participation in the Plumbing Scheme. This amount 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.
Dilapidations
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.
Restructuring
The restructuring provision relates to unavoidable costs of the organisational change associated with the Group’s property transformation programme
that are explicitly excluded from the measurement of lease liabilities in accordance with IFRS 16. The amount is expected to be utilised over the next
four years.
22. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon:
Losses
£m
Accelerated
capital
allowances
£m
Retirement
benefit
liabilities
£m
Intangible
assets
acquired
£m
Share
options
£m
Short-term
timing
differences
£m
Total
1
£m
At 1 April 2020 11.7 5.7 12.7 (2.9) 0.4 2.1 29.7
Arising on business combinations 18.3 10.9 0.6 (41.5) – 0.9 (10.8)
(Charge)/credit to income statement (0.2) (0.9) (2.1) 1.5 1.7 (0.2) (0.2)
Credit to equity and other comprehensive income – – 1.0 – – 0.1 1.1
At 31 March 2021 29.8 15.7 12.2 (42.9) 2.1 2.9 19.8
Arising on business combinations – (0.2) – (2.0) – – (2.2)
Disposal of subsidiary undertakings – (0.4) – – – – (0.4)
(Charge)/credit to income statement 4.3 (1.6) (5.8) (7.8) 4.6 4.1 (2.2)
(Charge)/credit to equity and other comprehensive income – – (3.8) – (0.2) 0.1 (3.9)
At 31 March 2022 34.1 13.5 2.6 (52.7) 6.5 7.1 11.1
Note:
1. Deferred tax liabilities of £52.7m (2021: £40.4m) are offset against deferred tax assets as they relate to income taxes levied by the same tax authority and the Group intends to settle
its current tax assets and liabilities on a net basis. Deferred tax liabilities of £9.7m, related to Interserve, as disclosed at 31 March 2021 have been netted off against deferred tax assets
in the restated balance sheet. Refer to Note 2.
The Group has unutilised income tax losses of £223.5m (2021: £243.8m) that are available for offset against future profits. A deferred tax asset has been
recognised in respect of £136.3m (2021: £156.3m) of these losses to the extent that it is probable that taxable profits will be generated in the future and be
available for utilisation. All losses may be carried forward indefinitely. Deferred tax has been calculated using tax rates that were substantively enacted at
the balance sheet date. Refer to Note 9.
190
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
23. Cash and cash equivalents
2022
£m
2021
£m
Cash and cash equivalents 345.2 196.2
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 2022, included within cash and cash equivalents is £17.5m (2021: £18.7m) 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, where cash is
not available for use by the Group.
As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the
Group’s customers was held on trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022 and
has not been categorised as restricted cash.
The carrying amount of the assets approximates their fair value.
24. Financing liabilities
2022
£m
2021
£m
Bank loans – under committed facilities 7.1 6.6
Private placement notes
1
171.0 165.4
Lease liabilities (Note 26) 122.5 106.8
Total 300.6 278.8
Included in current liabilities 171.1 28.7
Included in non-current liabilities
1
129.5 250.1
Total 300.6 278.8
Note:
1. As at 31 March 2021, £0.1m of foreign exchange forward contracts were included in non-current financing liabilities.
In October 2021, the Group signed a new £150m revolving credit facility and terminated the existing £250m facility. The new facility expires in October
2025 (with an option to extend a further year, subject to lenders’ approval) and is on significantly more favourable terms. As a result, the remaining
capitalised arrangement fees of £1.0m for the previous facility have been written off and recorded in the consolidated income statement as finance costs.
In November 2021, the Group agreed, under a delayed funding arrangement, the issue of £120.0m of new US private placement notes in December
2022, avoiding any overlap with the existing £121.5m of notes that mature in the same month. The new notes are split equally between 8, 10 and 12 year
maturities, and will be issued with an average coupon of 2.94% which is considerably below the current coupon.
The revolving credit facility and the US 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 2022 and hence all amounts are classified in line
with repayment dates.
At 31 March 2022, the Group had available £141.5m (2021: £241.4m) 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:
2022
%
2021
%
Bank loans 2.4 1.3
Private placement notes 4.0 4.0
Private placement notes
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 the Group’s finance costs, 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 2022 are shown below.
Tranche Maturity date Amount Interest terms Swap interest
10 year 16 December 2022 US$76.0m US$ fixed at 3.85% £ fixed at 4.05%
10 year 16 December 2022 US$77.0m US$ fixed at 3.85% £ fixed at 4.02%
10 year 16 December 2022 £25.0m £ fixed at 3.87% n/a
12 year 16 December 2024 £30.0m £ fixed at 4.04% n/a
Strategic report Governance Financial statements
191
Mitie Group plc
Annual Report and Accounts 2022
25. Financial instruments
Classification
The Group’s principal financial assets are cash and cash equivalents, trade receivables, accrued income, other receivables and derivative financial
instruments. The Group’s principal financial liabilities are financing liabilities, trade payables, accruals and other payables.
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:
2022
£m
Restated
1
2021
£m
Held at amortised cost
Cash and cash equivalents 345.2 196.2
Trade receivables 386.3 362.4
Accrued income 239.7 208.7
Other receivables 48.7 36.3
Financing liabilities (300.6) (278.8)
Trade payables (134.8) (131.4)
Other payables (54.4) (32.7)
Accruals (534.3) (415.6)
Held at fair value through profit and loss
Other receivables
2
6.0 52.7
Other payables
3
(2.8) –
Held at fair value through other comprehensive income
Other receivables
4
0.7 –
Derivative financial instruments hedging private placement notes 19.6 14.5
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
2. At 31 March 2022 other receivables included the £6.0m (2021 restated: £52.7m) which represented management’s best estimate of the amount expected to be recovered by the
Group through the completion accounts and other SPA mechanisms on the Interserve acquisition. At 31 March 2021 it was disclosed that the outcome of the completion accounts
process was inherently uncertain, given that the SPA terms related to the completion accounts mechanism were complex, and the completion accounts would be the subject of a
commercial negotiation and, in the absence of agreement, an expert determination process, and the final amount agreed could therefore be materially different from the estimate.
The completion accounts process, including commercial negotiations and expert determination, has since been concluded. Following the expert’s determination, for which the expert
sought a legal opinion in relation to the interpretation of the complex SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group, of which £6.0m
remained receivable at 31 March 2022. See Note 30.
3. Other payables held at fair value through the profit and loss at 31 March 2022 mainly comprise contingent consideration and performance-based employment-linked earnouts arising
on the acquisitions of Rock, Esoteric, Biotecture. Refer to Note 30.
4. At 31 March 2022, £0.7m (2021: £nil) was recognised relating to a defined benefit reimbursement asset. See Note 32.
Derivative financial instruments are considered to fall into Level 2 and the fair values are estimated by discounting expected future cashflows incorporating
various inputs including interest rate curves and forward rates from third party sources.
As at 31 March 2022, the £6.0m other receivable in relation to the Interserve acquisition arising from the outcome of the completion accounts process,
including commercial negotiation and expert determination, was considered to fall into Level 1. At 31 March 2021 the restated £52.7m other receivable
in relation to the Interserve acquisition had been considered to fall into Level 3. There have been no other transfers between levels during the year.
Certain other payables, which fall into level 3, comprise deferred consideration and performance-based employment-linked earnouts of £2.8m on the
acquisitions of Rock, Esoteric and Biotecture. The fair value has been determined based on management’s best estimate of achieving future targets to
which the consideration and earnouts are linked. The most significant unobservable input used in the fair value measurements is the future forecast
performance of the acquired businesses.
192
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
25. Financial instruments continued
Risk management objectives
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.
Interest rate risk
The Group’s activities expose it to the financial risks of interest rates. The Group’s treasury function reviews its risk management strategy on a regular
basis and will, as appropriate, enter into derivative financial instruments in order to manage interest rate risk.
Interest rate sensitivity
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 2022
and reserves would increase by £0.1m (2021: £0.2m).
Foreign currency risk
The Group has limited exposure to transactional foreign currency risk from trading transactions in currencies other than the functional currency of
individual group entities 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 pounds sterling
using cross-currency interest rate swaps (see Hedging activities below).
At 31 March 2022 £26.4m (2021: £24.5m) of cash and cash equivalents were held in foreign currencies. Included in bank loans were £8.5m (2021: £8.6m)
of loans denominated in foreign currency.
Liquidity risk
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:
Financial liabilities at 31 March 2022
Within
one year
£m
In the second
to fifth years
£m
After
five years
£m
Total
£m
Trade payables 134.8 – – 134.8
Other payables 54.4 2.8 – 57.2
Accruals 534.3 – – 534.3
Financing liabilities 189.6 111.6 24.4 325.6
Financial liabilities 913.1 114.4 24.4 1,051.9
Financial liabilities at 31 March 2021 – Restated
1
Within
one year
£m
In the second
to fifth years
£m
After
five years
£m
Tota l
£m
Trade payables 131.4 – – 131.4
Other payables 32.7 – – 32.7
Accruals 415.6 – – 415.6
Financing liabilities 49.4 238.2 22.6 310.2
Financial liabilities
2
629.1 238.2 22.6 889.9
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
2. Financial liabilities maturity profile is exclusive of the £19.6m (2021: £14.5m) derivative net assets which would naturally offset the settlement value of the maturing private placement
notes in financing liabilities.
Strategic report Governance Financial statements
193
Mitie Group plc
Annual Report and Accounts 2022
25. Financial instruments continued
Credit risk
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 £19.6m (2021: £14.5m), 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 £345.2m (2021: £196.2m).
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 consolidated 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.
The following tables provide information about the Group’s exposure to credit risk and ECLs against customer balances:
Trade receivables
31 March 2022 31 March 2021
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
Current (not overdue) 363.4 (1.3) 362.1 333.0 (5.6) 327.4
1-30 days overdue 16.4 (0.1) 16.3 10.8 (0.1) 10.7
31-60 days overdue 5.4 (0.1) 5.3 17.9 (0.1) 17.8
61-90 days overdue 1.6 (0.1) 1.5 4.6 (0.1) 4.5
More than 90 days overdue 11.4 (10.3) 1.1 6.6 (4.6) 2.0
Total 398.2 (11.9) 386.3 372.9 (10.5) 362.4
Accrued income
31 March 2022 31 March 2021
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
Gross carrying
amount
£m
Loss
allowance
£m
Net carrying
amount
£m
1-30 days overdue 202.6 (2.8) 199.8 181.2 (3.6) 177.6
31-60 days overdue 16.6 (0.1) 16.5 13.5 (0.3) 13.2
61-90 days overdue 9.4 (0.4) 9.0 5.8 (0.4) 5.4
More than 90 days overdue 21.2 (6.8) 14.4 19.0 (6.5) 12.5
Total 249.8 (10.1) 239.7 219.5 (10.8) 208.7
The following table provides the movement in the allowance for impairment in respect of trade receivables and accrued income:
2022 £m 2021 £m
Trade receivables Accrued income Trade receivables Accrued income
At 1 April 10.5 10.8 3.9 5.2
Impairment losses recognised
1
1.5 0.6 6.6 5.6
Reversal of impairment – (1.3) – –
Disposal of businesses (0.1) – – –
At 31 March 11.9 10.1 10.5 10.8
Note:
1. Impairment losses of £4.8m and £1.2m were netted against gross receivables at 31 March 2021 in relation to trade receivables and accrued income respectively on the acquisition of
Interserve, and have been re-presented to provide further clarity and comparability.
194
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
25. Financial instruments continued
Capital management risk
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.
Hedging activities
Derivative financial instruments – cash flow hedges
The Group holds a number of cross-currency interest rate swaps designated as cash flow hedges on US$153m of private placement notes. Biannual fixed
interest cash flows denominated in US dollars arising over the periods to December 2022 from the US Private Placement market are exchanged for fixed
interest cash flows denominated in pounds sterling.
A fair value gain of £5.1m (2021: £13.7m loss) was recognised in other comprehensive income during the year. All cash flow hedges were assessed as being
highly effective as at 31 March 2022 and no amounts (2021: £nil) relating to hedge ineffectiveness were recognised in profit or loss during the year.
The carrying value of derivative financial instruments at the balance sheet date was as follows:
Hedging instrument Hedged item
Cross-currency
interest rate
swaps
£m
Forward foreign
1
exchange
contracts
£m
Total
£m
US$ private
placement notes
£m
At 1 April 2021 14.6 (0.1) 14.5 (110.3)
Movements in cash flow hedges 5.0 0.1 5.1 (5.6)
At 31 March 2022 19.6 – 19.6 (115.9)
Hedging instrument Hedged item
Cross-currency
interest rate
swaps
£m
Forward foreign
1
exchange
contracts
£m
Tota l
£m
US$ private
placement notes
£m
At 1 April 2020 28.2 – 28.2 (122.9)
Movements in cash flow hedges (13.6) (0.1) (13.7) 12.6
At 31 March 2021 14.6 (0.1) 14.5 (110.3)
Note:
1. At 31 March 2021, £0.1m of forward foreign exchange contracts were included in non-current financing liabilities on the consolidated balance sheet.
Hedge of net investment in foreign operations
Included in bank loans at 31 March 2022 was a borrowing of €9.5m (2021: €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.
Strategic report Governance Financial statements
195
Mitie Group plc
Annual Report and Accounts 2022
26. Leases
Right-of-use assets
Properties
£m
Plant and
vehicles
£m
Total
£m
At 1 April 2020 43.3 44.8 88.1
Additions 0.4 23.7 24.1
Arising on business combinations 6.6 6.9 13.5
Impairment (7.4) – (7.4)
Modifications to lease terms – 1.5 1.5
Depreciation (5.7) (20.5) (26.2)
At 31 March 2021 37.2 56.4 93.6
Additions 15.4 33.8 49.2
Arising on business combinations 0.5 0.2 0.7
Disposal of businesses (1.5) – (1.5)
Impairment (0.2) – (0.2)
Modifications to lease terms and disposals (2.8) 7.3 4.5
Depreciation (6.3) (26.0) (32.3)
At 31 March 2022 42.3 71.7 114.0
Lease liabilities
2022
£m
2021
£m
At 1 April 106.8 93.8
Additions 48.9 25.4
Arising on business combinations 0.7 14.2
Disposal of businesses (1.5) –
Modifications to lease terms and disposals 1.5 1.5
Interest expense related to lease liabilities 4.0 3.3
Repayment of lease liabilities (including interest) (37.9) (31.4)
At 31 March 122.5 106.8
Maturity analysis – contractual undiscounted cash flows
2022
£m
2021
£m
Less than one year 33.8 31.9
One to five years 76.8 63.3
More than five years 24.4 22.6
Total undiscounted lease liabilities 135.0 117.8
Lease liabilities in the consolidated balance sheet 122.5 106.8
Current 30.1 28.7
Non-current 92.4 78.1
Amounts recognised in the consolidated income statement
2022
£m
2021
£m
Depreciation of right-of-use assets (32.3) (26.2)
Short-term lease expense (1.1) (1.9)
Low-value lease expense (0.1) (0.1)
Operating profit impact (33.5) (28.2)
Interest on lease liabilities (4.0) (3.3)
Profit before taxation impact (37.5) (31.5)
Amounts recognised in the consolidated statement of cash flows
2022
£m
2021
£m
Total cash outflow for capitalised leases
1
37.9 31.4
Note:
1. Includes capital element of lease rental payments of £33.9m (2021: £28.1m) and interest payments of £4.0m (2021: £3.3m).
196
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
27. Analysis of net debt
2022
£m
2021
£m
Cash and cash equivalents (Note 23) 345.2 196.2
Adjusted for: restricted cash and cash held on trust
1
(37.5) (18.7)
Bank loans (Note 24) (7.1) (6.6)
Private placement notes
2
(Note 24) (171.0) (165.4)
Derivative financial instruments hedging private placement notes (Note 25) 19.6 14.6
Net cash before lease obligations 149.2 20.1
Lease liabilities (Note 26) (122.5) (106.8)
Net cash/(debt) 26.7 (86.7)
Notes:
1. As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the Group’s customers was held on
trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022.
2. Including £nil (2021: £0.1m) of forward foreign exchange contracts.
28. Share capital and share premium
Ordinary shares Share capital Share premium
2022
Number
million
2021
Number
million
2022
£m
2021
£m
2022
£m
2021
£m
At 1 April 1,427.2 373.7 35.6 9.3 130.6 130.6
Issue of shares 5.3 – 0.1 – – –
Rights issue (see Note 33) – 805.1 – 20.1 – –
Interserve acquisition (see Note 30) – 248.4 – 6.2 – –
At 31 March 1,432.5 1,427.2 35.7 35.6 130.6 130.6
Shares were issued during the year to satisfy employee share schemes.
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.
Share premium represents the premium arising on the issue of equity shares.
29. Reserves
Merger reserve
The merger reserve represents amounts relating to premiums arising on shares issued subject to the provisions of Section 612 of the Companies Act 2006.
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), partially offset by £3.0m of rights issue expenses.
Own shares reserve
The Group uses shares held in the Employee Benefit Trust (EBT) to satisfy conditional awards under the Group’s LTIP, CSP, EDP and DBP share schemes
and shares held in the SIP Trust to provide free shares and matching shares under the SIP scheme. During the year the trusts distributed 5.2m (2021: 3.6m)
shares at a cost of £5.0m (2021: £5.4m) to satisfy awards under those schemes.
The Company uses Treasury shares to satisfy share options under the Group’s ESOS and SAYE share schemes. During the year, 0.3m Treasury shares have
been distributed at a cost of £0.8m to satisfy options under the Group’s share schemes (2021: nil) and 6.2m (2021: nil) Treasury shares were transferred to
the SIP Trust.
During the year the EBT acquired 20.0m shares through market purchases, with a further 2.9m shares committed, for a total consideration of £13.7m.
The purchase of these shares, together with associated fees and stamp duty amounting to £0.1m, has utilised £13.8m of the Company’s distributable
profits. During the year the EBT also subscribed £0.1m for 5.3m new issue shares in the Company. In the year ended 31 March 2021, the EBT acquired
2.6m shares through the Rights Issue by selling nil-paid rights.
The own shares reserve at 31 March 2022 represents the cost of 34.0m (2021: 11.3m) ordinary shares in Mitie Group plc held for the purposes of the
share schemes, with a weighted average of 13.0m (2021: 11.3m) shares during the year. In the year ended 31 March 2022, the £5.8m (2021: £5.4m)
share-based payments movement in the own shares reserve includes: i) £2.2m (2021: £1.4m) release to the share-based payment reserve in relation to
share award exercises; and ii) a £3.6m (2021: £4.0m) transfer to retained losses which represents a loss on share award exercises or been forfeited or
cancelled. In addition, £2.5m (2021: £3.1m) has been released from the share-based payments reserve to retained losses In relation to share awards which
have lapsed In the year.
Strategic report Governance Financial statements
197
Mitie Group plc
Annual Report and Accounts 2022
29. Reserves continued
Other reserves
Other reserves include the share-based payments reserve of £27.5m (2021: £13.6m) and the capital redemption reserve of £0.9m (2021: £0.9m).
The share-based payments reserve represents credits in respect of the expense recognised during the vesting period for unexercised awards under the
Group’s equity-settled share schemes (see Note 31).
Hedging and translation reserve
The hedging and translation reserve of £(2.6)m (2021: £(2.3)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 £0.5m (2021: £1.1m loss) 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 gain of £0.1m during the year (2021: £0.9m loss). A tax credit of £0.1m (2021: £0.1m credit) has been recognised on these movements through
other comprehensive income.
30. Acquisitions
Current period acquisitions
DAEL
On 5 August 2021, the Group acquired the entire issued share capital of DAEL Ventures Limited (DAEL) for a total cash consideration of £14.7m, funded
through Mitie’s own resources. DAEL is a leading provider of acquisition, design, and construction services in the UK for mobile telecoms infrastructure.
This acquisition will broaden the Group’s expertise in the fast-growing telecoms sector, delivering end-to-end service for customers and giving Mitie
market-leading capabilities.
DAEL contributed £16.7m of revenue and £0.4m of operating profit before other items to the Group’s results for the year ended 31 March 2022.
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 provisional purchase price allocation is as follows:
Book value
£m
Fair value
adjustments
£m
Provisional
fair value
£m
Customer relationships – 5.0 5.0
Property, plant and equipment 0.9 – 0.9
Right-of-use assets 0.1 – 0.1
Trade and other receivables 8.0 – 8.0
Cash and cash equivalents 1.5 – 1.5
Trade and other payables (8.3) – (8.3)
Deferred income (0.5) – (0.5)
Financing liabilities (0.1) – (0.1)
Current tax payable (0.1) – (0.1)
Deferred tax liabilities (0.2) (1.2) (1.4)
Net identifiable assets acquired 1.3 3.8 5.1
Goodwill 9.6
Total cash consideration 14.7
Goodwill on the acquisition of DAEL mainly represents the premium associated with taking over the operations which are considered to enhance the
Group’s ability to deliver across the telecoms sector and the assembled workforce acquired. Goodwill acquired has been allocated to the Technical
Services CGU.
Rock
On 1 November 2021, the Group completed the acquisition of the entire issued share capital of Rock Power Connections Ltd (Rock), a leading
independent connections provider (IPC). Rock has nationwide coverage and specialises in the design and installation of new high voltage electricity supplies,
the renewal of industrial and commercial customers’ electrical assets up to 132kV and the installation of EV charging points for non-residential blue-chip
customers. This acquisition will bolster Mitie’s existing EV expertise, enhancing the Group’s ability to offer a truly end-to-end solution to meet clients’ Net
Zero goals. The transaction consideration funded through Mitie’s own resources, comprised of an initial payment of £10.0m (before debt-free/cash-free
and normalised working capital increases of £2.2m), with two deferred payments in aggregate of up to £1.1m (£0.9m discounted) by 31 March 2024, linked
to stretching performance targets. The transaction also includes two performance-based employment-linked earnouts totalling a maximum of £4.4m,
of which £0.9m has been recognised within the consolidated income statement and classified as Other items during the year ended 31 March 2022.
Rock contributed £7.3m of revenue and £0.3m of operating profit before other items to the Group’s results during the year ended 31 March 2022.
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:
198
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
30. Acquisitions continued
Book value
£m
Fair value
adjustments
£m
Provisional
fair value
£m
Customer relationships – 2.5 2.5
Property, plant and equipment 0.2 – 0.2
Right-of-use assets 0.2 – 0.2
Trade and other receivables 2.2 – 2.2
Inventories 0.1 – 0.1
Cash and cash equivalents 3.0 – 3.0
Trade and other payables (2.3) – (2.3)
Deferred Income (3.0) – (3.0)
Financing liabilities (0.2) – (0.2)
Current tax payable (0.2) – (0.2)
Deferred tax liabilities – (0.6) (0.6)
Net identifiable assets acquired – 1.9 1.9
Goodwill 11.2
Total consideration 13.1
Cash consideration 12.2
Deferred consideration 0.9
Total consideration 13.1
Goodwill on the acquisition of Rock represents the premium associated with taking over the operations which are considered to enhance the Group’s
ability to better deliver Plan Zero. Goodwill acquired has been allocated to the Technical Services CGU.
Esoteric
On 17 November 2021, the Group completed the acquisition of the entire issued share capital of issued share capital of Esoteric Limited (Esoteric), a niche
provider of leading counter espionage and specialist countermeasure services, on a cash free, debt free basis. Mitie is strengthening its security intelligence
offering with the acquisition of a leading provider of specialist counter espionage services. The transaction consideration, funded through Mitie’s own
resources, comprised of an initial payment of £0.6m, with two deferred payments in aggregate of up to £0.5m (£0.4m discounted) by 31 March 2024,
linked to stretching performance targets.
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 net identified assets acquired of £0.3m, included £nil cash and cash equivalents, resulted in a goodwill of £0.7m. Goodwill
acquired has been allocated to the Business Services CGU.
Esoteric contributed £0.4m of revenue and £0.1m of operating profit before other items to the Group’s results during the year ended 31 March 2022.
Goodwill on the acquisition of Esoteric represents the premium associated with taking over the operations which are considered to enhance the Group’s
ability to better deliver across the security sector.
Biotecture
On 31 January 2022, the Group completed the acquisition of Biotecture Limited and Green Planet Design Ltd, collectively Biotecture, for a cash consideration
of £2.2m, funded through the Group’s own resources. The transaction also includes two performance-based employment-linked earnouts totalling a maximum
of £1.0m, of which £0.1m has been recognised within the consolidated income statement and classified as Other items during the year ended 31 March 2022.
Biotecture design, build and maintain vertical gardens, known as living walls. This acquisition will complement Mitie’s Plan Zero programme to support businesses
to achieve a Net Zero carbon future.
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 net identified assets acquired of £1.4m, included £0.3m cash and cash equivalents, resulted in a goodwill of £0.8m.
Goodwill acquired has been allocated to the Landscapes CGU.
Biotecture contributed £0.8m of revenue and £0.1m of operating profit before other items to the Group’s results during the year ended 31 March 2022.
Goodwill on the acquisition of Biotecture represents the premium associated with taking over the operations which are considered to enhance the
Group’s ability to better deliver Plan Zero.
Based on estimates made of the full year impact of the above noted acquisitions, Group revenue and operating profit before other items for the year
would have increased by approximately £23.9m and £1.9m respectively, resulting in total Group revenue of £3,927.2m and total Group operating profit
before other items of £168.8m.
Prior period acquisitions
On 30 November 2020, the Group announced that it had completed the acquisition of the entire issued share capital of Interservefm (Holdings) Limited
(Interserve). Interserve is a leading UK-focused facilities management business, providing services across multiple end-markets. The acquisition allows
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.
Initial consideration for the acquisition comprised the issuance of 248.4 million ordinary shares valued using the closing share price at 30 November 2020,
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 was to be validated by a completion
accounts process).
Strategic report Governance Financial statements
199
Mitie Group plc
Annual Report and Accounts 2022
30. Acquisitions continued
The acquisition accounting for the Interserve transaction was disclosed as provisional within the Group’s full year results to 31 March 2021. As such, the
Group used the 12-month measurement period from the date of acquisition (Measurement Period), in accordance with IFRS 3 Business Combinations, to
finalise the fair value measurement of particular assets, liabilities, and items of consideration (relating to the completion accounts process). The Measurement
Period ended for this transaction on 29 November 2021 and hence, fair value amounts are disclosed as final as at 31 March 2022.
During the Measurement Period, the fair value of consideration was adjusted by £4.9m to £146.9m following an adjustment which represented management’s
best estimate of the amount expected to be received through the completion accounts process. This adjustment to consideration as a result of the
completion accounts process reduced the fair value of consideration and therefore goodwill by £52.7m with a corresponding receivable being recorded.
The outcome of the completion accounts process was inherently uncertain at the end of the Measurement Period, given that the SPA terms related to
the completion accounts mechanism were complex, and the completion accounts would be the subject of commercial negotiation and, in the absence of
agreement, an expert determination process, and, as has previously been disclosed, the final amount agreed could therefore be materially different from
the estimate made at the end of the Measurement Period.
Also during the Measurement Period, the Group performed further analysis of balances acquired as part of the Interserve transaction which included
working capital adjustments to receivables, payables and deferred income. The activities that were undertaken by the Group in the fair value measurement
exercise resulted in a £7.2m adjustment to increase provisions and a £4.9m adjustment to increase consideration as a result of the completion accounts
process. The adjustments made to both the fair value of net identifiable assets acquired and the fair value of total consideration resulted in a consequential
increase of £12.6m to goodwill, culminating in a balance of £15.9m being recognised. There was no material impact to the post acquisition income statement.
As noted above, the Group has recognised fair value adjustments of £7.2m to increase provisions acquired, of which £6.4m related to onerous contract
provisions. This was predominantly the result of the review performed by management of PFI contracts where new information received about obligations
that existed at the date of acquisition and the quantification of estimated costs led to a remeasurement of the liability. Management performed additional
investigative surveys and received additional information from customers.
The Group’s assessment of the fair values of the assets and liabilities recognised as a result of the acquisition is as follows:
As disclosed at 31 March 2021 At 31 March 2022
Book value
£m
Fair value
adjustments
£m
Provisional
fair value
£m
Fair value
adjustments
£m
Fair value
£m
Customer contracts and relationships – 219.3 219.3 – 219.3
Other intangible assets 3.6 (0.2) 3.4 – 3.4
Property, plant and equipment 4.6 0.5 5.1 – 5.1
Right-of-use assets 16.9 (3.4) 13.5 – 13.5
Interest in joint ventures and associates 7.0 3.7 10.7 – 10.7
Deferred tax assets 19.6 (19.6) – – –
Inventories 6.3 – 6.3 – 6.3
Trade and other receivables 214.9 – 214.9 0.1 215.0
Cash and cash equivalents 40.4 – 40.4 – 40.4
Trade and other payables (223.6) 1.1 (222.5) (0.3) (222.8)
Deferred income (59.4) – (59.4) (0.3) (59.7)
Financing liabilities (18.1) 3.9 (14.2) – (14.2)
Current tax liabilities (1.6) – (1.6) – (1.6)
Provisions (66.7) – (66.7) (7.2) (73.9)
Pension assets 0.3 – 0.3 – 0.3
Deferred tax liabilities – (10.8) (10.8) – (10.8)
Net identifiable (liabilities)/assets acquired (55.8) 194.5 138.7 (7.7) 131.0
Goodwill
1
3.3 12.6 15.9
Total consideration 142.0 4.9 146.9
Cash consideration 105.0 – 105.0
Shares consideration 94.6 – 94.6
Adjustment to consideration
2
(57.6) 4.9 (52.7)
Total consideration 142.0 4.9 146.9
Notes:
1. Goodwill does not qualify for separate recognition and largely represents the value attributed to the assembled workforce acquired.
2. Adjustment to consideration represented management’s best estimate of the amount expected to be recovered by the Group through the completion accounts and other SPA
mechanisms. The outcome of the completion accounts process was inherently uncertain, given that this was subject to a commercial negotiation and an expert determination process,
and the final amount agreed could therefore be materially different from the estimate made at the end of the Measurement Period.
200
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
30. Acquisitions continued
The completion accounts process (and expert determination) has since been concluded. Following the expert’s determination, for which the expert sought
a legal opinion in relation to the interpretation of the complex SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group, of
which £1.1m was settled during the second half of the year ended 31 March 2022 and £6.0m was settled in May 2022. The resulting £45.6m reduction in
the related receivable of £52.7m has been recognised in the consolidated income statement and classified as Other items, given that the Measurement
Period had ended.
Cash flows on acquisitions
2022
£m
2021
£m
Cash consideration 29.7 105.0
Less: cash balance acquired
1
(4.8) (40.4)
Net outflow of cash – investing activities 24.9 64.6
Note:
1. £19.4m of the cash acquired in the year ended 31 March 2021 was subject to restrictions.
31. Share-based payments
The Group has six equity-settled share schemes. The Group also has 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.
The Mitie Group plc Long Term Incentive Plan (LTIP)
The LTIP was introduced in 2007, renewed in 2015 and amended and extended in 2021. The conditional awards of shares or rights to acquire shares
(the awards) are offered to a small number of key senior management personnel. 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.
The Enhanced Delivery Plan (EDP)
The EDP was introduced in 2021. The conditional awards of shares or the rights to acquire shares (the awards) are offered to a small number of key senior
management personnel. Where offered as options, the exercise price is £nil. The vesting period is three years, and they are subject to a holding period
of two additional years. If the awards remain unexercised after a period of twelve months from the date of vesting (but subject to the additional holding
period), 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 non-market measures over a three-year period.
The Conditional Share Plan (CSP)
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 personnel. 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.
The Mitie Group plc Executive Share Option Scheme (ESOS)
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.
The Mitie Group plc Save as You Earn scheme (SAYE)
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.
Strategic report Governance Financial statements
201
Mitie Group plc
Annual Report and Accounts 2022
31. Share-based payments continued
The Share Incentive Plan (SIP)
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. Since October 2021, one conditional matching share has been
awarded for every two 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:
2022 2021 2022 2021
Number of
conditional
share awards
(million)
Number of
conditional
share awards
(million)
Number of
share options
(million)
Weighted
average
exercise price
(p)
Number of
share options
(million)
Weighted
average
exercise price
(p)
Outstanding at 1 April 65.3 29.2 56.7 47 20.1 82
Granted during the year 53.6 45.4 22.4 65 47.2 27
Lapsed during the year (6.6) (5.6) (10.4) 50 (10.6) 78
Exercised during the year (4.8) (3.7) (0.7) 60 – –
Outstanding at 31 March 107.5 65.3 68.0 55 56.7 47
Exercisable at the end of the year 4.3 204 4.6 141
The Group recognised the following expenses related to share-based payments:
2022
£m
2021
£m
Discretionary share plans 16.6 8.7
Non-discretionary share plans 2.0 0.8
18.6 9.5
The share-based payment related expense charged to the consolidated income statement for the year is £18.6m (2021: £9.5m) and represents share-based
payment transactions relating to discretionary and non-discretionary share plans. The share-based payments charge for the year is net of income statement
credits of £0.3m (2021: £0.1m) for changes in assumptions relating to the likelihood of options vesting.
In addition, there has been: i) a transfer of £3.6m (2021: £4.0m) from the own shares reserve to retained losses which represents a loss on share award
exercises; and ii) a release of £2.5m (2021: £3.1m) from the share-based payments reserve to retained losses in relation to share awards which have lapsed
or been forfeited or cancelled in the year.
The weighted average share price at the date of exercise for awards and share options exercised during the year was 63p (2021: 45p). The conditional
share awards and share options outstanding at 31 March 2022 had exercise prices (other than nil in the case of the LTIP, CSP, EDP, DBP and the matching
shares under the SIP) ranging from 26p – 131p (2021: 26p – 131p) and a weighted average remaining contractual life of 3.4 years (2021: 3.4 years). In the
year ended 31 March 2022, options were granted in respect of the SAYE, LTIP, CSP, and EDP schemes and awards of matching shares and 6.0m free shares
were made under the SIP. The aggregate of the estimated fair values of those options granted and awards made was £40.5m (2021: £28.3m).
The fair value of options is measured by use of the Black-Scholes model.
The inputs into the Black-Scholes model are as follows:
2022 2021
Share price (p) 34 – 151 34 – 151
Exercise price (p) 0 – 134 0 – 134
Expected volatility (%) 25 – 36 25 – 30
Expected life (years) 3 – 4 3 – 4
Risk-free rate (%) (0.7) – 1.4 (0.7) – 0.6
Expected dividends (%) 0.0 – 2.7 0.0 – 2.7
202
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
32. Retirement benefit schemes
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 defined benefit schemes include the Mitie Group plc
Pension Scheme (Group scheme), the Interserve Scheme Part C (Interserve scheme) and three smaller schemes; MacLellan Group 2000 Retirement Benefit
Scheme, THK Insulation Limited Retirement Benefits Scheme and Cyprus Provident Fund. Due to the size of the smaller schemes, the Directors present the
results and position of these schemes within this Note within Other schemes with Admitted Body schemes, largely sections of Local Government pension
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. In addition, Interserve Scheme Part B (Landmarc), is held within interest in joint ventures and associates.
Defined contribution schemes
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 £14.8m (2021: £11.9m) and contributions to the
auto-enrolment scheme of £21.5m (2021: £17.8m), which are included in the consolidated income statement charge. The Group expects to make
contributions of a similar amount in the year ending 31 March 2023.
Defined benefit schemes
Group scheme
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 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.
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.
The latest funding valuation as at 31 March 2020 indicated an actuarial deficit of £92.1m. As a result, the Group has agreed a deficit recovery plan with the
trustees totalling £92.8m over seven years, which should eliminate the deficit if the funding assumptions materialise in practice. In this regard, £21.5m has
been paid to 31 March 2022, which includes £10.9m paid during the year ended 31 March 2022.
Interserve Scheme Part C (Interserve scheme)
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. Following the Flexible Apportionment Arrangement, the first triennial valuation is being carried out at 31 December 2020. An initial funding
valuation as at 31 December 2020 for the Interserve scheme was received during the year, which indicated an actuarial deficit of £1.6m, subject to approval
by the scheme’s trustees.
The Group 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.
Other defined benefit schemes
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.
Strategic report Governance Financial statements
203
Mitie Group plc
Annual Report and Accounts 2022
32. Retirement benefit schemes continued
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.
The Group made contributions to the Other schemes of £0.8m in the year (2021: £0.3m). The Group expects to make contributions of around £0.8m to
the Other schemes in the year ending 31 March 2023.
Multi-employer schemes
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 2023 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.
Provisions of £21.7m were held at 31 March 2022 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.
Accounting assumptions
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.
The assumptions for life expectancy have been set with reference to the actuarial tables used in the latest funding valuations. 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 2022.
Principal accounting assumptions at balance sheet date
Group scheme Interserve scheme Other schemes
2022
%
2021
%
2022
%
2021
%
2022
%
2021
%
Key assumptions used for IAS 19 valuation:
Discount rate 2.75 2.10 2.80 2.10 2.80 2.10
Expected rate of pensionable pay increases 3.60 2.50 3.80 2.50 3.80 2.50
Retail price inflation 3.60 3.25 3.30 3.25 3.30 3.25
Consumer price inflation 2.85 2.50 2.85 2.50 2.85 2.50
Future pension increases 3.60 3.25 3.80 3.30 3.80 3.25
Group scheme Interserve scheme
2022
Years
2021
Year s
2022
Years
2021
Year s
Post retirement life expectancy:
Current pensioners at 65 – male 87.6 87.6 86.2 86.3
Current pensioners at 65 – female 89.0 88.9 88.3 88.3
Future pensioners at 65 – male 88.7 88.6 87.3 87.3
Future pensioners at 65 – female 90.2 90.1 89.6 89.6
Life expectancy for the other schemes is that used by the relevant scheme actuary.
204
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
32. Retirement benefit schemes continued
Sensitivity of defined benefit obligations to key assumptions
The sensitivity of defined benefit obligations to changes in principal actuarial assumptions is shown below.
Impact on defined benefit obligations
Change in
assumption
Increase/
(decrease)
in obligations
%
Increase/
(decrease)
in obligations
£m
Increase in discount rate 0.1% (1.7%) (6.1)
Increase in retail price inflation
1
0.1% 1.1% 3.8
Increase in consumer price inflation (excluding pay) 0.1% 0.8% 3.0
Increase in life expectancy 1 year 3.6% 13.2
Note:
1. Including other inflation-linked assumptions (consumer price inflation, pension increases and salary growth).
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, 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 19 years for the Interserve scheme.
Amounts recognised in financial statements
Amounts recognised in the consolidated income statement are as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
Current service cost (0.2) (0.9) (2.0) (3.1) (0.2) (0.3) (0.5) (1.0)
Past service cost (including curtailments)
1
– – (0.5) (0.5) (0.2) – – (0.2)
Total administration expense (0.4) (0.3) (0.1) (0.8) (0.8) – – (0.8)
Amounts recognised in operating profit (0.6) (1.2) (2.6) (4.4) (1.2) (0.3) (0.5) (2.0)
Past service cost
1
– – – – – – – –
Net interest cost (0.8) 0.1 (0.2) (0.9) (1.0) 0.1 – (0.9)
Amounts recognised in profit/(loss) before tax (1.4) (1.1) (2.8) (5.3) (2.2) (0.2) (0.5) (2.9)
Note:
1. The past service cost of £0.5m was a cost in respect of the McCloud judgement. For the year ended 31 March 2021, £0.2m was a cost in respect of equalising Guaranteed Minimum
Pensions and is recognised within the consolidated income statement and classified as Other items.
Amounts recognised in the consolidated statement of comprehensive income are as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
Actuarial gains/(losses) arising due to changes
in financial assumptions 20.1 0.3 (0.8) 19.6 (34.9) 0.6 (1.7) (36.0)
Actuarial (losses)/gains arising from
liability experience (1.8) (1.9) – (3.7) 9.4 (0.1) 0.3 9.6
Actuarial (losses)/gains due to changes in
demographic assumptions (1.3) (0.8) – (2.1) 4.0 – 0.4 4.4
Movement in asset ceiling – – (5.1) (5.1) – – (1.0) (1.0)
Return on scheme assets, excluding
interest income 6.5 0.7 5.5 12.7 16.1 (1.7) 3.2 17.6
Return on reimbursement asset
1
– – 0.7 0.7 – – – –
Amounts recognised in consolidated statement
of comprehensive income 23.5 (1.7) 0.3 22.1 (5.4) (1.2) 1.2 (5.4)
Note:
1. Included within the consolidated statement of comprehensive income is £0.7m related to a reimbursement asset. The reimbursement asset is recorded within other receivables.
Strategic report Governance Financial statements
205
Mitie Group plc
Annual Report and Accounts 2022
32. Retirement benefit schemes continued
The amounts included in the consolidated balance sheet are as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
Fair value of scheme assets 231.0 32.6 87.0 350.6 215.3 30.7 80.8 326.8
Present value of defined benefit obligations (238.3) (31.0) (93.5) (362.8) (256.7) (27.7) (84.9) (369.3)
Net pension (liability)/asset (7.3) 1.6 (6.5) (12.2) (41.4) 3.0 (4.1) (42.5)
All figures above are shown before deferred tax.
Movements in the present value of defined benefit obligations were as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
At 1 April 256.7 27.7 84.9 369.3 236.4 – 13.2 249.6
Arising on business combinations – – – – – 27.9 23.9 51.8
Participation in additional schemes – – – – – – 45.5 45.5
Current service cost 0.2 0.9 2.0 3.1 0.2 0.3 0.5 1.0
Interest cost 5.3 0.6 1.6 7.5 5.5 0.1 0.4 6.0
Contributions from scheme members – 0.1 0.2 0.3 – – 0.1 0.1
Actuarial (gains)/losses arising due to changes in
financial assumptions (20.1) (0.3) 0.8 (19.6) 34.9 (0.6) 1.7 36.0
Actuarial losses/(gains) arising from experience 1.8 1.9 – 3.7 (9.4) 0.1 (0.3) (9.6)
Actuarial losses/(gains) due to changes in
demographic assumptions 1.3 0.8 – 2.1 (4.0) – (0.4) (4.4)
Movement in asset ceiling – – 5.1 5.1 – – 1.0 1.0
Benefits paid (6.9) (0.7) (1.0) (8.6) (7.1) (0.1) (0.7) (7.9)
Past service cost (including curtailments) – – (0.1) (0.1) 0.2 – – 0.2
At 31 March 238.3 31.0 93.5 362.8 256.7 27.7 84.9 369.3
The defined benefit obligations of the Group scheme are analysed by participant status as at the 31 March 2020 funding valuation date below:
2022
£m
2021
£m
Active 2.2 3.6
Deferred 130.1 167.4
Pensioners 106.0 85.7
At 31 March 238.3 256.7
206
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
32. Retirement benefit schemes continued
Movements in the fair value of scheme assets were as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
At 1 April 215.3 30.7 80.8 326.8 191.1 – 11.8 202.9
Arising on business combinations – – – – – 31.9 20.2 52.1
Participation in additional schemes – – – – – – 45.5 45.5
Interest income 4.5 0.7 1.4 6.6 4.5 0.2 0.4 5.1
Actuarial gains/(losses) on assets 6.5 0.7 5.5 12.7 16.1 (1.7) 3.2 17.6
Contributions from the sponsoring companies 12.0 1.4 0.8 14.2 11.5 0.4 0.3 12.2
Contributions from scheme members – 0.1 0.2 0.3 – – 0.1 0.1
Expenses paid (0.4) (0.3) (0.1) (0.8) (0.8) – – (0.8)
Benefits paid (6.9) (0.7) (1.0) (8.6) (7.1) (0.1) (0.7) (7.9)
Past service cost (including curtailments) – – (0.6) (0.6) – – – –
At 31 March 231.0 32.6 87.0 350.6 215.3 30.7 80.8 326.8
Fair values of the assets held by the schemes were as follows:
2022 2021
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Total
£m
Group
scheme
£m
Interserve
scheme
£m
Other
schemes
£m
Tota l
£m
Equities 64.3 15.1 49.6 129.0 68.1 – 45.7 113.8
Government bonds 82.2 – 1.0 83.2 54.2 14.5 2.7 71.4
Corporate bonds 18.2 3.4 14.6 36.2 28.7 3.3 13.9 45.9
Property 9.4 2.5 13.9 25.8 16.7 2.1 10.5 29.3
Commodities 3.8 – – 3.8 – – – –
Diversified growth fund 23.0 11.1 3.4 37.5 43.9 9.9 3.2 57.0
Cash 30.1 0.5 4.5 35.1 3.7 0.9 4.8 9.4
Total fair value of assets 231.0 32.6 87.0 350.6 215.3 30.7 80.8 326.8
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 56% (2021: 59%) of the assets are held in equities, property, commodities and pooled investment vehicles which seek a higher expected level of
return over the long term.
The property assets represent quoted property investments.
Strategic report Governance Financial statements
207
Mitie Group plc
Annual Report and Accounts 2022
32. Retirement benefit schemes continued
Risks and risk management
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 (44%) in
equities and other return-seeking assets (principally diversified growth funds (DGFs), property and commodities). 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, commodities, government bonds and corporate bonds. The Group scheme holds 10% 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.
Areas of risk management
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.
33. Rights issue
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. 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.
208
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
34. Contingent liabilities
Cyber incident
On 13 May 2020, Interserve Group Limited (IGL) announced that it was subject to a cyber-attack, which affected elements of the Interserve Group’s IT systems
(including enterprise resource planning and human resource systems), including elements related to the Interserve entities acquired by Mitie (the Cyber Incident).
The Cyber Incident was reported to the Information Commissioner’s Office (ICO) on 5 May 2020. The ICO subsequently advised IGL that it considered it likely
that IGL had breached certain articles of the GDPR. It was therefore possible that IGL or members of the Interserve Group could be subject to any regulatory
action in respect of the Cyber Incident which, if they were found in breach of their obligations under the GDPR, could result in a remedial order or fine.
On 27 April 2022 the ICO subsequently issued a Notice of Intent (NOI) to IGL, advising that it is minded to issue IGL with a penalty notice under section
155 of the UK’s Data Protection Act 2018. The NOI contains a confirmation that the ICO is satisfied that IGL is the controller with primary responsibility
for the matters which gave rise to the breach of certain articles of the GDPR.
In accordance with the share purchase agreement dated 25 June 2020 (the SPA), pursuant to which Mitie acquired the Interserve entities from How
Group Limited (HGL), HGL agreed to indemnify Mitie against any penalty that the ICO might impose on the Interserve entities acquired by Mitie in
relation to the Cyber Incident (the Cyber Indemnity). The Cyber Indemnity was, alongside other indemnities given by HGL, secured by escrow
arrangements, pursuant to which £40.0m was held in an escrow account for a period of two years (until 30 November 2022).
Management reasonably believe that, having regard to the NOI (including the confirmation that IGL is the relevant controller for the purposes of the ICO’s
investigation), the former Interserve entities, acquired on 30 November 2020, will not be subject to any regulatory action in respect of the Cyber Incident
which could result in a remedial order or fine.
On 26 May 2022, Mitie and HGL agreed to settle all and any liabilities arising out of the SPA, including, without limitation, all and any sums due from HGL to
Mitie pursuant to the completion account process contained in the SPA (and the expert determination process related thereto) by the payment of £6.0m
from HGL to Mitie.
As part of those settlement arrangements, Mitie and HGL agreed that £32.5m would be released from the escrow arrangements, of which £6.0m would
be paid directly to Mitie (in satisfaction of HGL’s obligation to Mitie). It was agreed that the Cyber Indemnity would continue in full force and effect and
that the balance of the escrow monies, £7.5m, would remain in the escrow account until the earlier of: (i) any enforcement notice made by the ICO in
connection with the Cyber Incident having been settled, determined or agreed; (ii) the ICO having confirmed that it will not take any formal enforcement
action in connection with the Cyber Incident; or (iii) 30 November 2023.
Contractual disputes, guarantees and indemnities
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.
The Group and its subsidiaries have provided performance and financial guarantees, issued by financial institutions on its behalf, amounting to £29.2m
(2021: £27.2m) in the ordinary course of business. These are not expected to result in any material financial loss.
Multi-employer pension schemes
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.
Employment claims
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.
35. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.
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 (2021: £0.2m) to the Foundation.
During the year ended 31 March 2022, the Group recognised revenue from transactions with joint ventures or associates of £1.6m (2021: £0.6m).
The amounts due from joint ventures and associates at the year end is £0.4m (2021: £0.3m) and £0.2m (2021: £nil) expense has been recognised in the
year for bad or doubtful debts in respect of the amounts owed by joint ventures and associates.
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 the other members of the MGX, including the share-based payments charge, is £9.2m (2021:
£6.3m). 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.
Strategic report Governance Financial statements
209
Mitie Group plc
Annual Report and Accounts 2022
35. Related party transactions continued
2022
£m
2021
£m
Short-term employment benefits 4.0 3.4
Post-employment benefits 0.3 0.2
Share-based payments 4.9 2.7
At 31 March 9.2 6.3
For the year ended 31 March 2022, during the period of common directorship, the Group generated revenue of £0.1m (2021: £0.1m) relating to Informa
plc, a company whose chairman is also Mitie Group plc’s non-executive chairman. There were outstanding balances at 31 March 2022 of £0.1m (2021: £nil).
During the year ended 31 March 2022, the Group generated revenue of £0.2m (2021: £0.1m) relating to St James’ Place plc, £0.1m (2021: £0.1m) relating
to Essentra plc and £nil (2021: £0.6m) relating to SIG plc, companies with non-executive directors who are also Mitie Group plc non-executive directors.
The outstanding balances at the year ended 31 March 2022 are £0.1m (2021: £0.1m), £0.1m (2021: £nil) and £nil (2021: £0.5m) respectively. No expense
has been recognised in the year for bad or doubtful debts in respect of the amounts owed by related parties.
All transactions with these related parties were made on terms equivalent to those that prevail in arm’s length transactions.
36. Events after the reporting period
Following the expert’s determination, on 8 April 2022, for which the expert sought a legal opinion in relation to the interpretation of the complex
Interserve SPA requirements, an agreement was reached on 12 May 2022 for the seller to pay £7.1m to the Group, of which £1.1m was settled during the
second half of the year ended 31 March 2022 and £6.0m was settled in May 2022. The resulting £45.6m reduction in the related £52.7m receivable has
been treated as an adjusting post balance sheet event and has been recognised in the consolidated income statement and classified as Other items given
that the Measurement Period had ended.
On 1 April 2022, the Group announced that it had acquired the entire issued share capital of P2ML Limited (P2ML), a specialist telecoms tower design
house, which will further expand its Telecoms Acquisition, Design and Construction (ADC) capabilities. P2ML has market leading expertise in providing
design, construction, inspection and maintenance services for cellular telecoms infrastructure, enabling major network operators and tower owners to
facilitate upgrades to their estates. This ensures that new technologies, such as 5G, can be implemented and optimised safely and to the highest standard.
P2ML will be acquired cash free, debt free, for a transaction consideration of £2.1m, with a normalised level of working capital. The acquisition will be
funded from the Group’s existing facilities. The initial accounting for the business combination had not been completed at the time the consolidated
financial statements were authorised for issue.
On 3 May 2022, the Group announced that it had acquired the entire issued share capital of 8point8 Support Limited, 8point8 Training Limited and
Vantage Solutions Limited (collectively 8point8), a leading provider of design and construction services in the UK, predominantly for mobile telecoms tower
infrastructure. Total transaction consideration is £10.0m and the acquisition will be funded from the Group’s existing facilities. The initial accounting for the
business combination had not been completed at the time the consolidated financial statements were authorised for issue.
On 8 June 2022, the Board approved an initial £50.0m share buyback programme over the next 12 months.
On 8 June 2022, the Group entered into a sale and purchase agreement to acquire the entire issued share capital of Custom Solar Ltd (‘Custom Solar’),
a solar power solutions company specialising in the development, design, installation and maintenance of solar power systems for public and private sector
clients. The transaction consideration comprises an initial payment of £8.0m, with deferred payments in aggregate of up to £4.4m by the end of FY25,
linked to performance targets. Custom Solar will be acquired cash free, debt free, with a normalised level of working capital. The transaction is expected
to complete on 30 June 2022 and will be funded through the Group’s existing facilities. The initial accounting for the business combination had not been
completed at the time the consolidated financial statements were authorised for issue.
37. Related undertakings
Subsidiaries
The companies set out below are those subsidiaries which were part of the Group at 31 March 2022.
Company Country of incorporation
% voting rights
and ownership
interest
% nominal
value owned
Bateman’s Cleaning Services Limited
1
United Kingdom 100% 100%
Bespoke Power Solutions Global Ltd United Kingdom 100% 100%
Biotecture Limited United Kingdom 100% 100%
Broadreach Group Limited United Kingdom 100% 100%
Building & Property Trustees Ltd
1
United Kingdom 100% 100%
Care & Custody (Health) Limited United Kingdom 100% 100%
Central Window Cleaning Company Limited (in liquidation) United Kingdom 100% 100%
Cole Motors Limited
1
United Kingdom 100% 100%
CTI Power Limited United Kingdom 100% 100%
Direct Enquiries Holdings Limited (in liquidation) United Kingdom 100% 100%
Esoteric Limited United Kingdom 100% 100%
210
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
Company Country of incorporation
% voting rights
and ownership
interest
% nominal
value owned
First Security Group Limited
1
United Kingdom 100% 100%
Global Aware International Group Limited
1
United Kingdom 100% 100%
Global Aware International Ltd
2
(registration number 6753723) United Kingdom 100% 100%
Green Planet Design Ltd United Kingdom 100% 100%
Hi-Tech Cleaning Solutions Limited (in liquidation) United Kingdom 100% 100%
Industrial Services International Limited (in liquidation) United Kingdom 100% 100%
Insitu Cleaning Company Limited United Kingdom 100% 100%
Interserve Saudi Arabia LLC (in liquidation) Kingdom of Saudi Arabia 100% 100%
Jabez Holdings Limited
2
(registration number 5129988) United Kingdom 100% 100%
Knightsbridge Guarding Holdings Limited United Kingdom 100% 100%
Knightsbridge Guarding Limited United Kingdom 100% 100%
Lancaster Office Cleaning Company Limited
1
United Kingdom 100% 100%
Maclellan Group Limited United Kingdom 100% 100%
MacLellan Integrated Services Limited United Kingdom 100% 100%
MacLellan International Airport Services Limited
1
United Kingdom 100% 100%
Maclellan International Limited United Kingdom 100% 100%
MacLellan Limited
1
United Kingdom 100% 100%
Maclellan Management Services Limited United Kingdom 100% 100%
Mitie (Defence) Limited United Kingdom 100% 100%
Mitie (Facilities Services) Limited
1
United Kingdom 100% 100%
Mitie (Facilities Services-Slough) Limited United Kingdom 100% 100%
Mitie Aviation Security Limited
4
United Kingdom 100% 100%
Mitie Belgium BV Belgium 100% 100%
Mitie Belgium Security BV Belgium 100% 100%
Mitie Building Services (UK) Limited (in liquidation) United Kingdom 100% 100%
Mitie Built Environment Limited
2
(registration number 972457) United Kingdom 100% 100%
Mitie Care and Custody Limited
4
United Kingdom 100% 100%
Mitie Catering Services Limited United Kingdom 100% 100%
Mitie Centro Especial de Empleo S.L. Spain 100% 100%
Mitie Cleaning & Environmental Services Limited United Kingdom 100% 100%
Mitie Cleaning Services Limited
1
United Kingdom 100% 100%
Mitie Client Services Limited
2
(registration number 6329913) United Kingdom 100% 100%
Mitie Company Secretarial Services Limited
1
United Kingdom 100% 100%
Mitie Compliance Ltd (in liquidation) United Kingdom 100% 100%
Mitie Deutschland GmbH Germany 100% 100%
Mitie Document Solutions Limited (in liquidation) United Kingdom 100% 100%
Mitie Dormant (No.1) Limited
1
United Kingdom 100% 100%
Mitie Dormant (No.2) Limited
1
United Kingdom 100% 100%
Mitie Engineering Limited
4
(in liquidation) United Kingdom 100% 100%
Mitie Engineering Services (Bristol) Limited
1
United Kingdom 100% 100%
Mitie Engineering Services (Guernsey) Limited Guernsey 100% 100%
Mitie Engineering Services (Jersey) Limited Jersey 100% 100%
Mitie Engineering Services (Northern Region) Limited
2
(registration number 2564586) United Kingdom 100% 100%
Mitie Engineering Services (Wales) Limited
1
United Kingdom 100% 100%
Mitie Engineering Services Limited (in liquidation) United Kingdom 100% 100%
Mitie Environmental Services Limited United Kingdom 100% 100%
Mitie Events & Leisure Services Limited
5
(in liquidation) United Kingdom 100% 100%
37. Related undertakings continued
Strategic report Governance Financial statements
211
Mitie Group plc
Annual Report and Accounts 2022
Company Country of incorporation
% voting rights
and ownership
interest
% nominal
value owned
Mitie Facilities Management Limited
4
Ireland 100% 100%
Mitie Facilities Services S.A. Spain 100% 100%
Mitie Fire Services Limited (in liquidation) United Kingdom 100% 100%
Mitie FM Limited United Kingdom 100% 100%
Mitie France SAS France 100% 100%
Mitie FS (UK) Limited United Kingdom 100% 100%
Mitie Group Pension Scheme Trustee Company Limited
1
United Kingdom 100% 100%
Mitie Holdings Limited United Kingdom 100% 100%
Mitie Hospital Services Limited (in liquidation) United Kingdom 100% 100%
Mitie Infrastructure Limited
2,5
(registration number 4387035) United Kingdom 100% 100%
Mitie Integra Baleares S.L. (formerly Mitie España S.L.) Spain 100% 100%
Mitie Integra Canarias S.L. Spain 100% 100%
Mitie Integra S.L. Spain 100% 100%
Mitie Integrated Facilities Management Limited (in liquidation) United Kingdom 100% 100%
Mitie Integrated Services Limited United Kingdom 100% 100%
Mitie International Limited
2
(registration number 4032745) United Kingdom 100% 100%
Mitie Investments Limited
2
(registration number 7650472) United Kingdom 100% 100%
Mitie Justice Limited (in liquidation) United Kingdom 100% 100%
Mitie Landscapes Limited United Kingdom 100% 100%
Mitie Limited United Kingdom 100% 100%
Mitie Local Services Limited (in liquidation) United Kingdom 100% 100%
Mitie Managed Services Limited
1
United Kingdom 100% 100%
Mitie Nederland B.V. Netherlands 100% 100%
Mitie NI Limited United Kingdom 100% 100%
Mitie PFI Limited United Kingdom 100% 100%
Mitie Project Services Limited United Kingdom 100% 100%
Mitie Property Services (UK) Limited
3
United Kingdom 100% 100%
Mitie Resources Limited (in liquidation) United Kingdom 100% 100%
Mitie Roofing Limited
3
United Kingdom 100% 100%
Mitie Schweiz GmbH Switzerland 100% 100%
Mitie Scotgate Limited (in liquidation) United Kingdom 100% 100%
Mitie Security (Fire & Electronics) Limited
1
United Kingdom 100% 100%
Mitie Security (First) Limited United Kingdom 100% 100%
Mitie Security (Knightsbridge) Limited United Kingdom 100% 100%
Mitie Security (London) Limited (in liquidation) United Kingdom 100% 100%
Mitie Security Holdings Limited
2
(registration number 5909105) United Kingdom 100% 100%
Mitie Security Limited United Kingdom 100% 100%
Mitie Security Services Limited
1
United Kingdom 100% 100%
Mitie Services (Retail) Limited
1
United Kingdom 100% 100%
Mitie Shared Services Limited United Kingdom 100% 100%
Mitie Specialist Services (Holdings) Limited United Kingdom 100% 100%
Mitie Suomi Oy Finland 100% 100%
Mitie T S 2 Limited
1,4
United Kingdom 100% 100%
Mitie Technical Facilities Management Holdings Limited
2
(registration number 7094957) United Kingdom 100% 100%
Mitie Technical Facilities Management Limited United Kingdom 100% 100%
Mitie Technical Services Limited United Kingdom 100% 100%
Mitie Telecoms Assets Limited (formerly Jistics Limited) United Kingdom 100% 100%
37. Related undertakings continued
212
Mitie Group plc
Annual Report and Accounts 2022
Notes to the consolidated financial statements continued
For the year ended 31 March 2022
Company Country of incorporation
% voting rights
and ownership
interest
% nominal
value owned
Mitie Telecoms Limited (formerly Dael Telecom Ltd) United Kingdom 100% 100%
Mitie Telecoms Towers Limited (formerly J B Towers Limited) United Kingdom 100% 100%
Mitie Telecoms Ventures Limited (formerly Dael Ventures Limited) United Kingdom 100% 100%
Mitie Transport Services Limited
1
United Kingdom 100% 100%
Mitie Treasury Management Limited
3
United Kingdom 100% 100%
Mitie Trustee Limited
1
United Kingdom 100% 100%
Mitie Waste & Environmental Services Limited
4
United Kingdom 100% 100%
Mitie Work Wise Limited (in liquidation) United Kingdom 100% 100%
Mitiefm (Holdings) Limited United Kingdom 100% 100%
Mitiefm Services Limited United Kingdom 100% 100%
Parkersell Limited
1
United Kingdom 100% 100%
Phoenix Fire Services Limited United Kingdom 100% 100%
Phonotas Services Limited (in liquidation) United Kingdom 100% 100%
Procius Limited
2
(registration number 4730672) United Kingdom 100% 100%
Project Orion Limited
3
(in liquidation) Jersey 100% 100%
R & D Holdings Limited
1
United Kingdom 100% 100%
Ramoneur Cleaning and Support Services Limited (in liquidation) United Kingdom 100% 100%
Retail Cleaning Services Limited (in liquidation) United Kingdom 100% 100%
Robert Prettie & Co Limited United Kingdom 100% 100%
Rock Power Connections Ltd United Kingdom 100% 100%
Source Eight Limited
2,4
(registration number 5004767) United Kingdom 100% 100%
Source8 Africa Limited
2
(registration number 8743753) United Kingdom 100% 100%
Source8 Delivery (Nigeria) Limited Nigeria 100% 100%
SSD UK Limited United Kingdom 100% 100%
Tass (Europe) Limited (in liquidation) United Kingdom 100% 100%
Translimp Contract Services S.A. Spain 100% 100%
UK CRBS Limited
2
(registration number 3656962) United Kingdom 100% 100%
Unique Cleaning Services Limited
1
United Kingdom 100% 100%
Utilyx Asset Management Limited
2
(registration number 6434091) United Kingdom 100% 100%
Utilyx Asset Management Projects Limited
2
(registration number 6900472) United Kingdom 100% 100%
Utilyx Broking Limited
1
United Kingdom 100% 100%
Utilyx Healthcare Energy Services Limited United Kingdom 100% 100%
Utilyx Holdings Limited
1
United Kingdom 100% 100%
Utilyx Limited United Kingdom 100% 100%
Utilyx Risk Management Limited
2
(registration number 4999392) United Kingdom 100% 100%
Vision Security Group Limited United Kingdom 100% 100%
Vision Security Group Systems Limited
1
United Kingdom 100% 100%
VSG Payroll Services Limited (in liquidation) United Kingdom 100% 100%
VSG Staff Hire Limited (in liquidation) United Kingdom 100% 100%
VSG Systems Direct Limited (in liquidation) United Kingdom 100% 100%
Waveambda Limited United Kingdom 100% 100%
Wealthy Thoughts Limited
2
(registration number 3839703) United Kingdom 100% 100%
Notes:
1. These subsidiaries were dormant during the year ended 31 March 2022 and will take the exemption from audit for the year (by virtue of Section 480 of the Companies Act 2006).
2. These subsidiaries have taken advantage of the audit exemption under Section 479A of the Companies Act 2006 for the period ended 31 March 2022. As such, Mitie Group plc has
provided a guarantee against all debts and liabilities in these subsidiaries as at 31 March 2022.
3. Held directly by the Company.
4. The Company holds direct minority interest in these subsidiaries.
5. The Company has voting control of these subsidiaries through direct interests in a class of shares representing fewer than 50% of the total issued share capital of the subsidiaries.
37. Related undertakings continued
Strategic report Governance Financial statements
213
Mitie Group plc
Annual Report and Accounts 2022
37. Related undertakings continued
The registered office of all subsidiaries is Level 12, The Shard, 32 London Bridge Street, London, SE1 9SG, with the exception of those that are in
liquidation, the registered office of which is 30 Finsbury Square, London, EC2A 1AG, and the following:
Company Registered office address
Hi-Tech Cleaning Solutions Limited (in liquidation) 10 Fleet Place, London, EC4M 7QS
Interserve Saudi Arabia LLC (in liquidation) PO Box 26982, Riyadh, 11595, Kingdom of Saudi Arabia
Mitie Belgium BV Regus Brussels South Station, Marcel Broodthaersplein 8 (box 5), 1060 Brussels (Sint-Gillis),
Belgium
Mitie Belgium Security BV Regus Brussels South Station, Marcel Broodthaersplein 8 (box 5), 1060 Brussels (Sint-Gillis),
Belgium
Mitie Centro Especial De Empleo S.L. Calle San Miguel 25, Bajo 1, Azuqueca de Henares, 19200, Guadalajara, Spain
Mitie Deutschland GmbH c/o Pinsent Masons Germany LLP, OTTOSTR. 21, 80333, Munich, Germany
Mitie Engineering Services (Guernsey) Limited c/o MPR Private Clients Limited, PO Box 119, Martello Court, Admiral Park, St Peter Port,
GY1 3HB, Guernsey
Mitie Engineering Services (Jersey) Limited IFC 5, St Helier, JE1 1ST, Jersey
Mitie Facilities Management Limited 108 Q House, Furze Road, Sandyford, Dublin 18, Ireland
Mitie Facilities Services S.A. Calle Juan Ignacio Luca de Tena, 8, 28027, Madrid, Spain
Mitie France SAS 259 rue St Honore, 75001, Paris, France
Mitie Integra Baleares S.L. (formerly Mitie España S.L.) C/Cala Blanca, número 15, Polígono Son Fuster, 07009, Palma, Spain
Mitie Integra Canarias S.L. c/o Luciano Ramos Diaz, 1, Local 2 Despacho 4 – S Cristobal Laguna, 38202, San Cristobal
de la Laguna, Tenerife, Spain
Mitie Integra S.L. Carretera Santa Creu do Calafell 81, Gava, 08850, Barcelona, Spain
Mitie Nederland B.V. Javastraat 12, Rotterdam, Netherlands
Mitie NI Limited Mitec Operations Centre, Unit 9B, First Floor, Silverwood Business Park, Silverwood Rd,
Lurgan, Craigavon, Northern Ireland, BT66 6SY, United Kingdom
Mitie Schweiz GmbH Brandschenkestrasse 90, CH-8027, Zurich, Switzerland
Mitie Suomi Oy c/o Ov Visma Services Infocon Ab, Pormestarinrine 8, 00160 Helsinki, Finland
Project Orion Limited (in liquidation) 3rd Floor, 44 Esplanade, St Helier, JE4 9WG, Jersey
Source8 Delivery (Nigeria) Limited 235 Ikorodu Road, Ilupeju, Lagos, Nigeria
Translimp Contract Services S.A. Calle Juan Ignacio Luca de Tena, 8, 28027, Madrid, Spain
No subsidiaries have non-controlling interests that are material to the Group.
Joint ventures and associates
The Group had the following joint ventures and associates at 31 March 2022.
Entity Registered office address
2022
% voting rights
and ownership
interest
2022
% nominal
value owned
Interserve Rezayat Company LLC
(in liquidation)
Unit 6 and 7, Al Amani Center, Anas Bin Malik Road, Building number 2727,
Additional number 8114, Riyadh, Postal Code 133, Kingdom of Saudi Arabia
50% 50%
Landmarc Support Services Limited
1
Level 12, The Shard, 32 London Bridge Street, London, SE1 9SG 51% 51%
PriDE (SERP) Ltd Level 12, The Shard, 32 London Bridge Street, London, SE1 9SG 50% 50%
Sussex Estates and Facilities LLP Level 12, The Shard, 32 London Bridge Street, London, SE1 9SG 35% 35%
Note:
1. Landmarc Support Services Limited owns 49% of Landmarc Gulf Consultancy Management LLC, an entity whose registered office is in the United Arab Emirates.
Joint operations
The Group had the following joint operations at 31 March 2022.
Joint operations Country of incorporation Principal activity
2022
% interest
OneAim United Kingdom Siteworks 50%
214
Mitie Group plc
Annual Report and Accounts 2022
Company balance sheet
As at 31 March 2022
Notes
2022
£m
2021
£m
Non-current assets
Investments in subsidiaries 4 640.1 579.5
Other receivables 5 0.3 0.5
Deferred tax assets 6 2.8 1.4
Total non-current assets 643.2 581.4
Current assets
Trade and other receivables 5 188.3 255.1
Current tax receivable 20.6 11.0
Cash and cash equivalents 1.6 0.9
Total current assets 210.5 267.0
Total assets 853.7 848.4
Current liabilities
Trade and other payables 7 (42.7) (21.1)
Provisions 8 (3.2) (4.2)
Total current liabilities (45.9) (25.3)
Net current assets 164.6 241.7
Non-current liabilities
Provisions 8 (7.5) (6.4)
Total non-current liabilities (7.5) (6.4)
Total liabilities (53.4) (31.7)
Net assets 800.3 816.7
Equity
Share capital 9 35.7 35.6
Share premium 9 130.6 130.6
Merger reserve 9 358.6 358.6
Own shares reserve 9 (36.9) (28.8)
Other reserves 9 28.4 14.5
Retained earnings
1
283.9 306.2
Total equity 800.3 816.7
Note:
1. The loss for the financial year ended 31 March 2022 was £15.3m (2021: £1.4m).
The accompanying notes on pages 216 to 219 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 9 June 2022. They were signed on its behalf by:
Phil Bentley Simon Kirkpatrick
Chief Executive Officer Chief Financial Officer
Strategic report Governance Financial statements
215
Mitie Group plc
Annual Report and Accounts 2022
Company statement of changes in equity
For the year ended 31 March 2022
Share
capital
£m
Share
premium
£m
Merger
reserve
£m
Own shares
reserve
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 April 2020 9.3 130.6 99.9 (34.2) 9.5 308.5 523.6
Loss for the year – – – – – (1.4) (1.4)
Total comprehensive expense – – – – – (1.4) (1.4)
Transactions with owners
Issue of shares 26.3 – 261.7 – – – 288.0
Rights issue expenses – – (3.0) – – – (3.0)
Share-based payments – – – 5.4 5.0 (0.9) 9.5
Total transactions with owners 26.3 – 258.7 5.4 5.0 (0.9) 294.5
At 31 March 2021 35.6 130.6 358.6 (28.8) 14.5 306.2 816.7
At 1 April 2021 35.6 130.6 358.6 (28.8) 14.5 306.2 816.7
Loss for the year – – – – – (15.3) (15.3)
Total comprehensive expense – – – – – (15.3) (15.3)
Transactions with owners
Dividends paid
1
– – – – – (5.7) (5.7)
Issue of shares 0.1 – – (0.1) – – –
Purchase of own shares – – – (13.8) – – (13.8)
Share-based payments – – – 5.8 13.9 (1.1) 18.6
Tax on share-based payments – – – – – (0.2) (0.2)
Total transactions with owners 0.1 – – (8.1) 13.9 (7.0) (1.1)
At 31 March 2022 35.7 130.6 358.6 (36.9) 28.4 283.9 800.3
Note:
1. Dividends paid to shareholders have been disclosed in Note 10 to the consolidated financial statements.
216
Mitie Group plc
Annual Report and Accounts 2022
Notes to the Company financial statements
For the year ended 31 March 2022
1. Basis of preparation and significant accounting policies
(a) Basis of preparation and accounting
Mitie Group plc (the Company) is a public company limited by shares, incorporated in the United Kingdom and registered in Scotland. The Company’s
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 comprises the Company and all its subsidiaries.
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101).
In preparing its financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting
Standards as adopted by the UK (UK-adopted International Accounting Standards), but makes amendments where necessary in order to comply with the
Companies Act 2006 and to take advantage of FRS 101 disclosure exemptions.
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the UK Endorsement Board. In preparing these financial statements in accordance with
FRS 101, the Company transitioned to UK-adopted International Accounting Standards (as described above) in its financial statements for the year ended
31 March 2021. This change constituted a change in accounting framework. However, there was no impact on recognition, measurement or disclosure in
the period reported as a result of the change in framework.
The Company’s financial statements have been prepared on the historical cost basis and on a going concern basis.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
a cash flow statement and related notes;
comparative period reconciliations for share capital;
the statement of compliance with UK-adopted International Accounting Standards;
disclosures in respect of capital management;
the effects of new but not yet effective UK-adopted International Accounting Standards;
disclosures in respect of the compensation of Key Management Personnel; and
disclosures in respect of related party transactions entered into between two or more members of a group, provided that any subsidiary which is
a party to the transaction is wholly owned by such a member.
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect
of the following disclosures:
IFRS 2 Share-based Payment in respect of Group settled share-based payments; and
certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instruments: Disclosures.
In accordance with Section 408(3) of the Companies Act 2006, the Company is exempt from the requirement to present its own income statement.
There are no new and mandatorily effective standards in the year that would have a material impact on the financial statements.
(b) Significant accounting policies
The significant accounting policies and measurement bases adopted are the same as those disclosed in Note 1 to the consolidated financial statements,
except as noted below, and have been applied consistently throughout the year and the preceding year, unless stated otherwise.
Investments
Investments in subsidiaries are shown at cost less any impairments. 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 consolidated
income statement whenever the carrying value of an asset exceeds its recoverable amount.
Financial instruments
Intercompany loans are all assessed as being repayable on demand. The impairment assessment of receivables is in accordance with IFRS 9.
Taxation
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax is provided in full on 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.
Strategic report Governance Financial statements
217
Mitie Group plc
Annual Report and Accounts 2022
1. Basis of preparation and significant accounting policies continued
Share-based payments
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.
(c) Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements under 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.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have the most significant effect
on the carrying value of assets and liabilities as at 31 March 2022, are discussed below:
Impairment of investments in subsidiaries
The carrying values of investments in subsidiaries have been disclosed in Note 4. Determining whether an investment is impaired requires an estimation of
its recoverable amount. The recoverable amount involves an estimation of the future cash flows and the selection of appropriate discount rates in order to
calculate present values.
2. Staff numbers and costs
There were no persons employed by the Company (including Directors) during the year ended 31 March 2022 and 31 March 2021. Information about the
Directors’ remuneration has been disclosed in the consolidated financial statements.
3. Auditor’s remuneration
The auditor’s remuneration for audit services to the Company has been disclosed in Note 6 to the consolidated financial statements.
4. Investments in subsidiaries
£m
Cost
At 1 April 2020 594.2
Additions
1
49.2
Capital contribution with respect to share-based payments 5.5
At 31 March 2021 648.9
Additions
1
51.6
Capital contribution with respect to share-based payments 10.7
At 31 March 2022 711.2
Impairment
At 1 April 2020 68.6
Charge for the year 0.8
At 31 March 2021 69.4
Charge for the year 1.7
At 31 March 2022 71.1
Net book value
At 31 March 2022 640.1
At 31 March 2021 579.5
Note:
1. Relates to increases in the investment in Mitie Treasury Management Limited due to the Interserve acquisition and related adjustments as a result of the completion accounts and
other SPA mechanisms (see Note 5).
Details of the Company’s subsidiary undertakings have been disclosed in Note 37 to the consolidated financial statements.
218
Mitie Group plc
Annual Report and Accounts 2022
Notes to the Company financial statements continued
For the year ended 31 March 2022
4. Investments in subsidiaries continued
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 was compared to the asset’s recoverable amount and was further assessed by reference to value in use as required. 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 value using a long-term growth rate of 2% (2021: 2%) and are consistent with those used for the Group’s goodwill
impairment 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. The pre-tax discount rates used to assess the forecast cash flows, ranging from 10.2% to 11.7%, have been derived from the
Company’s post-tax weighted average cost of capital, which was 7.8% at 31 March 2022 (2021: 9.1%). These rates are reviewed annually by external
advisors and adjusted for the risks specific to the business being assessed and the market in which it operates.
As a result of this analysis, the Directors have determined an impairment of £1.7m (2021: £0.8m) was required to the Company’s investment in Mitie
Roofing Limited (2021: Source Eight Limited). All other investments had significant headroom and required no impairment.
An increase in the discount rate of 1% would have resulted in a further impairment of £1.7m to the Company’s investments.
5. Trade and other receivables
2022
£m
2021
£m
Amounts owed by subsidiaries 156.0 188.8
Other receivables
1
32.4 66.2
Prepayments 0.2 0.6
Total 188.6 255.6
Current 188.3 255.1
Non-current 0.3 0.5
Total 188.6 255.6
Note:
1. At 31 March 2022 other receivables included the £6.0m (2021: £57.6m) which represented management’s best estimate of the amount expected to be recovered by the Group
through the completion accounts and other SPA mechanisms on the Interserve acquisition. At 31 March 2021 it was disclosed that the outcome of the completion accounts process
was inherently uncertain, given that the SPA terms related to the completion accounts mechanism were complex, and the completion accounts would be the subject of a commercial
negotiation and, in the absence of agreement, an expert determination process, and the final amount agreed could therefore be materially different from the estimate. The completion
accounts process, including commercial negotiations and expert determination, has since been concluded. Following the expert’s determination, for which the expert sought a legal
opinion in relation to the interpretation of the complex SPA requirements, an agreement was reached for the seller to pay £7.1m to the Group, of which £1.1m was settled during the
second half of the year ended 31 March 2022 and £6.0m was settled in May 2022.
Amounts owed by subsidiaries are repayable on demand. The Directors consider that the carrying amount of trade and other receivables approximates
their fair value. Included within amounts owed by subsidiaries above is £92.0m (2021: £132.5m) relating to interest-bearing loans at 5% per annum
(2021: 5% per annum).
6. Deferred tax assets
Accelerated
capital
allowance
£m
Share-based
payments
timing
difference
£m
Total
£m
At 1 April 2020 – 0.3 0.3
Credit to income statement 0.4 0.7 1.1
At 31 March 2021 0.4 1.0 1.4
Credit to income statement 0.1 1.5 1.6
Charge to equity – (0.2) (0.2)
At 31 March 2022 0.5 2.3 2.8
Strategic report Governance Financial statements
219
Mitie Group plc
Annual Report and Accounts 2022
7. Trade and other payables
2022
£m
2021
£m
Trade payables 1.8 2.9
Amounts owed to subsidiaries 15.6 4.5
Other taxes and social security 3.0 0.4
Accruals 22.3 13.3
Total 42.7 21.1
Amounts owed to subsidiaries are repayable on demand. The Directors consider that the carrying amount of trade and other payables approximates their
fair value.
8. Provisions
£m
At 1 April 2021 10.6
Additional provisions in the year 4.8
Utilised in the year (4.7)
At 31 March 2022 10.7
Current 3.2
Non-current 7.5
Total 10.7
The majority of the provisions and related movements during the year were 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 incurred but not yet reported and is based on
information available at the balance sheet date.
9. Equity
Details of the Company’s share capital, share premium, merger reserve, own shares reserve and other reserves have been disclosed in Note 28 and
Note 29 to the consolidated financial statements.
10. Contingent liabilities
The Company enters into financial guarantee arrangements to guarantee the indebtedness of other companies within the 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 £29.2m (2021: £27.2m) in the ordinary course of business. These are not expected to result in any material financial loss.
As disclosed in Note 37 to the consolidated financial statements, certain subsidiaries have taken advantage of the audit exemption under Section 479A of
the Companies Act 2006 for the year ended 31 March 2022. A parent company guarantee has been provided for these companies under Section 479C
of the Companies Act 2006.
11. Share-based payments
The Company has certain equity-settled share schemes as described in Note 31 to the consolidated financial statements.
12. Related parties
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 2022 or 31 March 2021. Detailed disclosures of Directors’ remuneration and share interests
are given in the audited section of the Directors’ remuneration report on pages 115 to 130. The Company had no employees during the years ended
31 March 2022 and 31 March 2021.
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 2022 (2021: £nil).
220
Mitie Group plc
Annual Report and Accounts 2022
Appendix – Alternative Performance Measures
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:
Performance before other items
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.
Operating profit
2022
£m
Restated
1,2
2021
£m
Operating profit from continuing operations Statutory measures 72.1 4.0
Adjust for: restructure costs Note 4 10.9 24.9
Adjust for: acquisition and disposal related costs Note 4 89.3 33.1
Adjust for: other exceptional items Note 4 (5.4) (3.2)
Operating profit before other items from continuing operations Performance measures 166.9 58.8
Operating profit from discontinued operations
1,3
Statutory measures 19.9 8.0
Adjust for: restructure costs Note 4 – 0.3
Adjust for: acquisition and disposal related costs Note 4 (4.0) (2.0)
Adjust for: gain on disposal Note 4 (13.0) (1.2)
Operating profit before other items from discontinued operations Performance measures 2.9 5.1
Operating profit before other items – Group Performance measures 169.8 63.9
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations above. Refer to Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
3. Operating profit from discontinued operations comprises the profit before net finance income and tax of £6.9m (2021 restated: £6.8m) and gain on disposal before tax of £13.0m
(2021: £1.2m).
Strategic report Governance Financial statements
221
Mitie Group plc
Annual Report and Accounts 2022
Reconciliations are provided below to show how the Group’s segmental reported results are adjusted to exclude Other items.
Operating profit/(loss)
2022
£m
Restated
1,2 ,3
2021
£m
Reported
results
Adjust for:
Other items
(Note 4)
Performance
measures
Reported
results
Adjust for:
Other items
(Note 4)
Performance
measures
Segment
Business Services 89.9 17.6 107.5 28.4 19.2 47.6
Technical Services 8.9 21.1 30.0 (9.9) 20.9 11.0
CG&D 41.9 (3.5) 38.4 4.9 5.2 10.1
Communities 9.0 10.9 19.9 15.1 1.5 16.6
Specialist Services 29.4 3.1 32.5 19.8 4.0 23.8
Care & Custody 8.7 1.2 9.9 5.5 1.9 7.4
Landscapes 8.6 0.6 9.2 7.6 0.8 8.4
Waste 7.4 0.9 8.3 5.4 1.3 6.7
Spain 4.7 0.4 5.1 1.3 – 1.3
Corporate centre (107.0) 45.6 (61.4) (54.3) 4.0 (50.3)
Total from continuing operations 72.1 94.8 166.9 4.0 54.8 58.8
Catering – – – (1.6) 1.6 –
Healthcare – – – 2.1 (2.1) –
Pest Control – – – 0.7 (0.7) –
Social Housing 4.0 (4.0) – 2.0 (2.0) –
Document Management 18.8 (16.0) 2.8 4.7 – 4.7
Nordics and Poland (2.9) 3.0 0.1 0.1 0.3 0.4
Total from discontinued operations
4
19.9 (17.0) 2.9 8.0 (2.9) 5.1
Total Group 92.0 77.8 169.8 12.0 51.9 63.9
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations above. Refer to Note 5.
2. The comparatives as at 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision. Refer to Note 1.
3. Operating profit/(loss) from continuing operations for the year ended 31 March 2021 has been re-presented following the Group reorganising its divisional structure.
4. The reported operating profit from discontinued operations comprises the profit before net finance income and tax of £6.9m (2021 restated: £6.8m) and gain on disposal before tax
of £13.0m (2021: £1.2m).
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.
Earnings per share
2022
pence
Restated
1,2
2021
pence
Statutory basic earnings/(loss) per share Statutory measures 3.6 (0.6)
Adjust for: earnings per share from discontinued operations (1.4) (0.7)
Statutory basic earnings/(loss) per share from continuing operations 2.2 (1.3)
Adjust for: other items per share from continuing operations 7.0 4.4
Basic earnings per share before other items from continuing operations Performance measures 9.2 3.1
Notes:
1. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations for
the year ended 31 March 2021 have been re-presented within discontinued operations. Refer to Note 5.
2. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
222
Mitie Group plc
Annual Report and Accounts 2022
Appendix – Alternative Performance Measures
continued
Net cash/(debt) and total financial obligations
Net cash/(debt) is defined as the difference between total borrowings and 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 and cash which was held on trust
for the CID facility provider, has been excluded from the net cash/(debt) measure.
Total financial obligations (TFO) is defined as the Group’s net cash/(debt) including the amount of invoice discounting under the Group’s CID facility and the
net retirement benefit liabilities. TFO represents all debt-like financing items the Group has made use of at the year end.
A reconciliation from reported figures is presented below:
Net cash/(debt)
2022
£m
2021
£m
Cash and cash equivalents Statutory measures 345.2 196.2
Adjusted for: restricted cash and cash held on trust
1
Note 23 (37.5) (18.7)
Financing liabilities Note 24 (300.6) (278.8)
Derivative financial instruments hedging private placement notes Note 25 19.6 14.6
Net cash/(debt) Performance measures 26.7 (86.7)
Customer invoice discounting facility Note 16 (44.5) (51.7)
Net retirement benefit liabilities Note 32 (12.2) (42.5)
TFO Performance measures (30.0) (180.9)
Note:
1. As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the Group’s customers was held on
trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022.
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 daily net debt of £24.7m for the year ended 31 March 2022, compared with £47.1m for the year ended 31 March 2021.
Free cash flow
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.
Free cash flow
2022
£m
Restated
1
2021
£m
Net cash generated from operating activities Statutory measures 230.2 22.0
Add: net (increase)/decrease in restricted cash and cash held on trust
2
(18.8) 0.7
Interest received 0.3 0.8
Dividends received from joint ventures and associates 4.0 0.8
Purchase of own shares (13.8) –
Purchase of property, plant and equipment (15.4) (7.6)
Purchase of other intangible assets (20.2) (14.1)
Disposal of property, plant and equipment 0.4 1.0
Capital element of lease rentals paid (33.9) (28.1)
Free cash inflow/(outflow) Performance measures 132.8 (24.5)
Notes:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
2. As at 31 March 2022, £20.0m cash (2021: £nil) was held across the Group’s bank accounts in respect of the CID facility, where cash collected from the Group’s customers was
held on trust for the CID facility provider. This cash was subsequently remitted to the CID facility provider by 5 April 2022.
Strategic report Governance Financial statements
223
Mitie Group plc
Annual Report and Accounts 2022
Earnings before interest, tax, depreciation and amortisation
Earnings from continuing operations before interest, tax, depreciation and amortisation (EBITDA) is a measure of the Group’s profitability. EBITDA
is measured as profit/(loss) before tax from continuing operations excluding the impact of net finance costs, Other items, depreciation of property,
plant and equipment, amortisation and impairment of non-current assets and amortisation of contract assets.
EBITDA
2022
£m
2021
1
£m
Profit/(loss) before tax from continuing operations Statutory measures 52.3 (13.7)
Add: net finance costs from continuing operations 19.8 17.7
Operating profit from continuing operations 72.1 4.0
Add: Other items from continuing operations Note 4 94.8 54.8
Operating profit before other items from continuing operations 166.9 58.8
Add:
Depreciation of property, plant and equipment Note 3, 14, 26 41.4 34.0
Amortisation of non-current assets
1,2
Note 13 7.7 8.4
Amortisation of contract assets Note 17 1.7 1.7
Impairment of non-current assets
2
Note 13 0.8 1.0
EBITDA Performance measures 218.5 103.9
Notes:
1. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
2. Excludes amounts classified in the consolidated income statement as Other items.
Return on invested capital
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.
2022
£m
Restated
1,2 ,3
2021
£m
Net assets Statutory measures 425.8 357.5
Add:
Non-current liabilities 241.0 396.8
Current provisions Note 21 54.7 55.5
Current Private Placement notes
4
Note 24 141.0 –
Deduct:
Non-current derivative financial assets Note 25 – (14.6)
Current derivative financial assets Note 25 (19.6) –
Non-current deferred tax assets Note 22 (11.1) (22.3)
Cash and cash equivalents Note 23 (345.2) (196.2)
Invested capital Performance measures 486.6 576.7
Continuing operating profit before other items
2,3
166.9 58.8
Tax
2,5
(21.5) (11.3)
Continuing operating profit before other items after tax
2,5
145.4 47.5
ROIC %
6
Performance measures 29.9% 8.2%
Notes:
1. The comparatives as at 31 March 2021 have been restated for measurement period adjustments in respect of the Interserve acquisition. Refer to Note 2 and Note 30.
2. The Group disposed the Document Management business and operations in the Nordics and Poland during the year ended 31 March 2022. The results of these operations are
re-presented within discontinued operations.
3. The comparatives for the year ended 31 March 2021 have been restated for the change in accounting policy for SaaS arrangements as a result of the IFRIC agenda decision.
Refer to Note 1.
4. The current portion of the US Private Placement notes has been added back to provide further clarity and comparability of invested capital.
5. Tax charge has been calculated at the effective tax rate for the year on pre-tax profits before other items for continuing operations of 12.9% (2021 restated: 19.2%).
6. The ROIC metric used for the purposes of the Enhanced Delivery Plan (EDP) requires further adjustments under the detailed rules agreed with shareholders.
224
Mitie Group plc
Annual Report and Accounts 2022
Overview
HY23 interim results 17 November 2022
Dividends
FY22 interim dividend (0.4p paid) 2 February 2022
FY22 final dividend (1.4p proposed):
Ex-dividend date 23 June 2022
Record date 24 June 2022
Last date for receipt/revocation of Dividend
Reinvestment Plan (DRIP) mandate 11 July 2022
Payment date 5 August 2022
Annual General Meeting
2022 Annual General Meeting 26 July 2022
Registered office
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
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone: 0371 664 0391
*
*
Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international rate.
Lines are open 9.00am – 5.30pm, Monday to Friday excluding public holidays in
England and Wales.
Mitie online share portal
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
Corporate website
This report can be downloaded in PDF from the Mitie website, which also
contains additional general information about Mitie.
Please visit www.mitie.com
Shareholder information
Cautionary statement
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.
Printed on GalerieArt Satin, an FSC
®
Mixed
Sources paper manufactured using pulp
from well managed forests at a mill
accredited with EMAS and ISO 14001
environmental standards.
Printed by Pureprint Group.
Pureprint are ISO 14001 certified,
CarbonNeutral
®
and FSC
®
chain of Custody
certified. The inks used are vegetable oil based.
Designed and produced by Friend.
www.friendstudio.com.
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: SC019230
More information
Visit our corporate website:
www.mitie.com/investors
Follow us on twitter:
@mitie
Visit our LinkedIn page:
www.linkedin.com/company/mitie/
Watch our latest content:
www.youtube.com/user/mitiegroupplc
Mitie Group plc Annual Report and Accounts 2022