Last checked at 25 Jun 2021 15:30
Mitie Group plc
25 June 2021
LEI number: 213800MTCLTKEHWZMJ03
Mitie Group plc (the 'Company') - Annual Financial Report
Following the release on 10 June 2021 of the Company's final results for the year ended 31 March 2021 (the 'Final Results Announcement'), the Company announces that it has published its Annual Report and Accounts for 2021 (the 'Annual Report and Accounts').
The Company's 2021 Annual General Meeting will be held at Level 12, The Shard, 32 London Bridge Street, London SE1 9SG on 27 July 2021 at 11:30am and on an electronic platform as described in Appendix 4 of the Notice of Annual General Meeting 2021 (the 'AGM Notice').
Copies of the Annual Report and Accounts and the AGM Notice are available to view on the Company's website: www.mitie.com. Hard copies have been mailed to those shareholders who have elected to continue to receive paper communications.
Copies of the Annual Report and Accounts, the AGM Notice and the form of proxy in relation to the AGM are being submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Final Results Announcement included a set of financial statements and a review of the development and performance of the Company. In compliance with Disclosure Guidance and Transparency Rule (DTR) 6.3.5, the Company has extracted and set out below certain information from the Annual Report and Accounts. This information is included herein solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on the Company as to how to make public its annual financial reports. It should be read in conjunction with the Company's Final Results Announcement issued on 10 June 2021. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Accounts. Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report and Accounts.
The information contained in this announcement and in the Final Results Announcement does not constitute the Group's statutory accounts but is derived from those accounts. The statutory accounts for the year ended 31 March 2021 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
Principal risks and uncertainties
Risk 1: Interserve integration
Failure to manage activities associated with the integration of Interserve whilst also giving due consideration to the carry-over of risk(s), in particular those pertaining to the transaction phase of the acquisition, as well as the day to day impact on employees, customers, and other third parties involved in the Mitie business, could hinder the Group's ability to adopt common processes, systems and ways of working and ultimately result in Mitie failing to meet its £43m savings target through synergies, and cause damage to its reputation.
Impacts on strategic pillars: Customer, People, Technology, Cost
Change in year: NEW RISK also incorporates the structural complexity risk
On 30 November 2020, Mitie completed the acquisition of Interserve, creating the UK's largest facilities management company. As with any acquisition, Mitie will pick up a number of risks in relation to the Interserve acquisition, including risks which remained 'live' and were carried across from the transaction phase e.g. risks relating to the operating environment, risks relating to financial information and risks relating to the acquisition, as well as those relating to the integration phase of the project, most notably a failure to deliver on the £43m savings target.
An inability to effectively manage all associated Interserve FM risks could delay the delivery of expected benefits from the acquisition and consequently have a detrimental impact on Mitie's business performance. In order to make sure these risks are managed effectively it is important that Mitie maintains its stringent integration framework and continues to deliver on time and to the high-quality standard expected. Mitie also needs to communicate changes effectively and deliver regular and relevant updates to all key stakeholders.
Controls and mitigating actions
• | Integration leadership team established with MGX sponsorship |
• | Workstreams established with appropriate representation at business unit, function, and executive level |
• | Experienced programme managers in place and governance frameworks embedded to monitor ongoing impacts and direct actions, including Board meetings |
• | Experienced staff members dedicated to the programmes to allow focus on the improvement activity |
• | Integration of system rollouts underway - HR and IT systems due to conclude Autumn 2021 |
• | Risks identified as part of the transaction phase reviewed and incorporated in Group risk register with documented controls |
• | Integration Pulse surveying being undertaken at agreed milestones. |
• | Regular dialogue with staff and clients to understand their requirements and update on pertinent milestones |
• | Regular monitoring of change projects |
• | Continued investment in and benefits delivery from the Quality Improvement Council (QIC) programme |
• | Dedicated risk management and assurance procedures within the programmes to ensure internal controls are operating effectively |
• | Amalgamated approaches adopted to address ongoing COVID-19 and Brexit associated risks and issues |
Future plans
• | Continue to review progress of workstreams and performance against savings target. |
Risk 2: Funding
Inability to maintain access to and renew suitable sources of funding due to a perceived risk in Mitie's business and/or the sector as a whole may impact the Group's ability to maintain profitable business performance.
Impacts on strategic pillars: Customer, Technology, Cost
Change in year: DECREASED
In order to be able to meet its financial commitments, Mitie needs access to a number of affordable sources of finance. Mitie's core debt facilities include a revolving credit facility and private placement loan notes. Mitie needs to have sufficient liquidity to be able to pay suppliers and staff, whilst also investing in the business and ensuring it has enough resources for profitable growth.
During FY21, Mitie raised £190m through the Rights Issue and extended its revolving credit facility of £250m to December 2022, strengthening the financial position of the Group and decreasing the impact of this risk. Mitie has focused on maintaining strong financial discipline in the management of its working capital and investment decisions and on minimising its funding requirements. This has included working with the Group's back-office outsource partner to improve processes and efficiency.
During the year, COVID-19 has not impacted the availability of the Group's existing committed facilities but there is a risk that it affects Mitie's ability to raise further funding should the need arise.
Any actual or perceived weaknesses in Mitie's financial position could restrict the Group's access to finance or attract high interest rates.
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 |
Risk 3: Climate change and social impact
An inability to quickly identify and effectively respond to the challenges posed by climate change could hinder Mitie's transition to a lower-carbon business and result in significant business interruption and missing new opportunities for growth. Furthermore, a failure to appropriately consider the environmental and social impact of Mitie's business and its activities may create a negative perception with employees, clients, investors, government, and the general public. This could lead to failures in securing and/or retaining contracts and sources of funding, as well as impacting negatively on Mitie's reputation.
Impacts on strategic pillars: Customer, People, Technology
Change in year: NEW RISK also incorporates the Social Impact risk
Climate change remains a significant crisis facing the global community. The implications are broad and cover a number of risk topics, including but not limited to infrastructure, insurance (e.g. longer-term accessibility and impact on premiums), climate action failure and extreme weather conditions. Furthermore, there are also ramifications which could arise in the form of social unrest, political fragmentation and geopolitical tensions in turn shaping the effectiveness of responses within Mitie's external landscape moving forward.
As well as the obvious mandatory requirements for managing the risks associated with climate change, combined with there being a moral obligation, a failure to successfully drive forward a business, which demonstrates and delivers carbon reductions, would significantly hinder Mitie's operating model, and ultimately stop it from winning and retaining business. The ability to be a market leader in this field provides extensive opportunity and ultimately takes Mitie and its clients, as well as others associated with its business activities on the required journey.
It is very important that Mitie continues to understand and monitor the social and environmental impact of its business activities, and takes into consideration the views of employees, clients, suppliers, investors, and the wider public on these matters. The role that businesses play in society is now, more than ever, being closely monitored by a number of groups and several measures have begun to be utilised. These are increasingly being used in decisions to award contracts, and to drive investment and funding decisions.
As a business Mitie needs to make sure it is a valued member of society and minimises its impact on the environment. Failure to do so may affect its reputation and financial performance, through inability to attract suitably skilled employees, failure to maintain and grow the business and fines for non-compliance with relevant legislation.
Controls and mitigating actions
• | Plan Zero - to reach net zero Scope 1&2 operational carbon emissions by 2025 - ongoing. Recently extended pledge to reach net zero for Scope 3 emissions by 2035 - suppliers, employee commuting and working from home |
• | Ongoing conversion of fleet vehicles to electric - as at 31 March 2021, Mitie had 1,080 electric vehicles, with a further 1,000 electric vehicles on order. Also trialling electric solutions for specialist fleet, such as the electric gritter, which was launched in January 2021 by Mitie Landscapes |
• | Social Value & Responsible Business (SVRB) Committee held seven meetings in FY21, chaired by Non-Executive Director Philippa Couttie |
• | Climate change risk assessment maintained and approved by the SVRB Committee |
• | Key policies and associated operating procedures in place |
• | Use of inhouse subject matter experts specialising in an array of topics including energy, waste and fleet |
• | Regular testing of crisis management and business continuity plans |
• | Insurance cover in place to cover property damage and business interruption |
• | Winter and Summer preparedness planning at account level |
• | Ongoing reviews of planned preventative maintenance (PPM) lifecycles |
• | Targets in place for four of Mitie's five social value framework pillars |
• | Active apprenticeship scheme across the Group |
• | Learning and People Hubs to support employees' development and wellbeing |
• | Continuous horizon scanning via GSOC, with regular alerts to teams on potential threats and significant events |
Future plans
• | Continued delivery of Plan Zero to meet both 2025 and 2035 targets |
• | Gifting funds for apprenticeships to SMEs to support the UK Government's Levelling Up agenda |
• | Partnering clients to develop employability skills within the community, through the Mitie Foundation |
• | Proactively targeting under-represented groups to employ within the communities in which Mitie operates |
• | Proactively driving Mitie's Diversity and Inclusion strategy |
Risk 4: Cyber security and data management
In the normal course of business, Mitie collects, processes, and retains sensitive and confidential information about its customers, employees, and operations. Hacking, phishing attacks, ransomware, insider threats, physical breaches or other actions may cause this confidential information to be lost or misused. Any data loss could affect client delivery operations and may result in a major data breach leading to fines, remediation costs and reputational damage.
Impacts on strategic pillars: Customer, Technology, Cost
Change in year: INCREASED title updated to highlight cyber security
The data held by Mitie is one of its most important assets and includes information concerning its business operations, employees, clients, suppliers, and others. Mitie needs to maintain adequate controls to mitigate risks associated with loss or theft of data which would damage its reputation with clients and potentially result in significant fines from regulators.
During FY21, the general level of threat posed from cyber-attacks has heightened. Alongside an increase in phishing and ransomware attacks, which were linked to COVID-19, Mitie has had to actively control the increases in risk arising from the rapid transition to remote working at the start of the COVID-19 pandemic, and more recently any associated risks from the acquisition of Interserve, including limited impacts from its cyber incident.
Mitie is continuing to invest in technology to improve the security of its business through alerting users to possible cyber-attacks or phishing attempts. Mitie continues to maintain formal technical and procedural controls to ensure confidential and sensitive data is processed, transmitted, and stored securely. These controls are deployed across the Group's IT systems and are subject to regular review and testing and help maintain compliance with the requirements of the General Data Protection Regulation and the UK Data Protection Act 2018.
Controls and mitigating actions
• | Continued alignment with CE+ requirements, and Information Security Management System (ISMS) in place, processes consistent with ISO 27001 standards. |
• | Internal processes and controls for all systems changes to ensure cyber best practice and compliance with data protection laws and regulations |
• | Rationalisation and upgrade of ERP systems and infrastructure |
• | Centralised information security team and dedicated data privacy officers in place |
• | Outsourcing of routine IT operations to a highly skilled partner organisation, Wipro, to improve IT resilience and controls |
• | Adoption of Microsoft and Wipro cyber toolsets and proactive monitoring and management of cyber threats |
• | Clear strategy to utilise leading edge cloud technology, delivering disaster recovery and business continuity improvements |
• | Crisis management and business continuity testing led by the MGX, including a cyber-attack simulation which took place in May 2021 |
• | Regular communications to employees to highlight IT risks and expected behaviours |
• | Upgrades to legacy systems to reduce complexity and improve management information |
• | Cyber insurance policy |
• | Ongoing monitoring of Brexit decisions relating to data protocol adequacy |
Future plans
• | Wipro Security Operations Centre will provide Mitie with an enhanced level of information security monitoring and alerting. |
• | Security assessments by a leading firm of cyber security experts and the National Cyber Security Centre, to conduct phased threat assessments and stress tests on the Mitie network |
Risk 5: Health, Safety and Environment
Failure to maintain appropriately high standards in health, safety and environmental management may result in catastrophic events, harm to employees, client staff or members of the public, consequential fines, prosecution, and reputational damage.
Impacts on strategic pillars: Customer, People
Change in year: INCREASED Note: this change in status is linked purely to the COVID-19 pandemic. In terms of business as usual activities, Mitie's HSE indicators have continued to show year on year improvements in all areas
During FY21, the risk posed to the health and safety of Mitie's employees owing to COVID-19 has increased, particularly in relation to front-line workers who have played an essential role throughout the pandemic by physically attending site to keep clients' businesses and critical infrastructure operational. Mitie has actively controlled any potential increase in risk through an array of measures, including but not limited to: employees having access to adequate PPE to enable them to perform their duties safely; the introduction of a rigorous COVID-19 risk assessment and technical compliance process, which included the use of regular temperature checks, increased cleaning regimes, the use of Citrox Protect and more recently the introduction of the new UVC disinfection system following Mitie's partnership with Luxibel (all of which has been instrumental in getting both Mitie's and its clients' staff back into their work environments); and substantial enhancements to wellbeing offerings.
At all levels in the organisation, safety is Mitie's number one priority. Mitie ensures that all risks are properly assessed and managed, its staff are trained and expectations of how they perform their work are clearly explained, and adherence to health and safety standards is regularly monitored. If these risks are not managed appropriately, they could lead to harm to individuals and damage to the environment, and consequently prosecution, fines, and significant damage to Mitie's reputation.
Mitie is committed to maintaining the highest levels of health, safety and environmental (HS&E) standards. The services which Mitie delivers could potentially present an increased risk of a health and safety incident involving its employees, client staff or even members of the public. Mitie's activities also carry a risk of damage to the environment. It is essential that these risks are managed in a highly diligent and effective manner.
Controls and mitigating actions
• | A comprehensive Quality, Health, Safety and Environment (QHSE) strategy in place and under continual review for effectiveness |
• | Major cultural HS&E programme, LiveSafe, continuing, with clear rules, engagement, and training for staff |
• | Regular training and communication delivered throughout the Group, in accordance with the LiveSafe principles - LiveSafe e-learning training programme launched which sets out HS&E expectations including 'stop the job' supported by key safety message from the Chief Executive Officer |
• | Certified H&S management system to ISO45001 and environmental system to ISO14001 |
• | Full integration of improved incident recording, monitoring, and reporting system |
• | Regular HS&E reviews conducted at all levels through the organisation |
• | Clear and standardised KPIs introduced to monitor progress |
• | Targeted QHSE procedural audit programme introduced |
• | Themes and root causes monitored from the results of audits to target specific actions, including training |
• | QHSE function 'Plan Zero Champions' as part of the Plan Zero programme to promote strategy and good practice in environmental management |
• | Enhanced health and wellbeing framework integrated into the business |
• | COVID-19 risk assessment and technical compliance processes |
• | Use of new technology such as the UVC disinfection system and thermal imaging to mitigate against COVID-19 |
• | Insurance cover in place to cover employers' liability, public liability and motor fleet |
Future plans
• | Introduction of Quality Culture programme looking into Cost of non-Quality and ensuring the right person is in the right place at the right time. This will include key principles, good habits, and tools to ensure Mitie has a reliable investigation process and drive continual improvement in health, safety and environmental management |
• | Development of enhanced environmental e-Learning awareness training |
Risk 6: Regulatory
Failure to comply with applicable laws and regulations may lead to fines, prosecution, and damage to Mitie's reputation.
Impacts on strategic pillars: People, Technology
Change in year: INCREASED
Mitie's business is subject to a wide range of laws and regulations, including health and safety, employment, data protection, anti-bribery and corruption legislation and statutory wage requirements.
During FY21, there have been notable changes to Mitie's external environment in terms of regulatory updates, and in the main this has been attributable to COVID-19, Brexit and corporate governance. As a consequence, there have been a number of obligations to fulfil in order for Mitie to remain legally compliant. COVID-19 arguably presented the greatest challenges given the disparities in regulations adopted by the UK countries, compounded by the pace of change through the pandemic.
Mitie continues to ensure it has effective governance and oversight of its compliance with applicable laws and regulations and continuously assesses the impact of changes in relevant legislation. It is also important that Mitie provides appropriate communications and training for its staff to make sure they are aware of their obligations, and that regular monitoring of compliance is undertaken.
Failure to comply with applicable laws and regulations could result in prosecution and/or significant fines, and, from a reputational perspective, could damage Mitie's relationships with clients and its success when bidding for work. As a consequence, Mitie may also face debarment from tendering for public sector contracts.
Controls and mitigating actions
• | Specialist legal and QHSE expertise aligned to business units |
• | Code of Conduct for all employees |
• | Independent whistleblowing system available to all employees to report any concerns |
• | Group-wide policies updated for changes to laws and regulations and maintained in the online Information Management System (IMS) |
• | Regular and thorough internal and external regulatory audits |
• | Training and awareness materials communicated to employees via Mitie's digital Learning Hub and monitoring of completion performed |
• | Regular monitoring of legal and regulatory changes by Group functions including Company Secretariat, Legal and QHSE |
• | Financial governance and controls in place |
• | Commercial governance and controls in place |
• | Legal representation on both COVID-19 and Brexit Readiness working groups |
Future plans
• | Establishment of Internal Control Declaration framework to align with impending UK legislation on corporate governance |
• | Ongoing review of IMS to update policies and procedures |
Risk 7: Competitive advantage
A failure to maintain competitive advantage resulting in the loss of key clients, an over-reliance on a particular sector, or a failure to produce bids which are financially viable and have a balanced approach to risk, could have a significant impact on Mitie's financial performance and reputation.
Impacts on strategic pillars: Customer, People, Technology, Cost
Change in year: DECREASED combines portfolio, market share and contract losses risks
During FY21, Mitie has continued to improve its financial strength, customer service and employee engagement, as well as growing its market share, all of which have been against a backdrop of significant disruption arising from the COVID-19 pandemic. Notable achievements included the acquisition of Interserve resulting in significant growth to Mitie's public sector portfolio as well as Mitie's involvement in support of the UK's strategy to combat COVID-19, including operating over 150 testing sites.
It is imperative that Mitie does not become complacent and maintains awareness of competitors' offerings, the changing external environment as well as market coverage. Furthermore, the importance attached to the development and delivery of competitive bids, along with meeting obligations through the delivery of a quality service for existing clients, should not be underestimated. Failure to deliver the services agreed in contracts could negatively impact the Group's customer relationships and reputation, and lead to legal disputes and the termination of key contracts.
Controls and mitigating actions
• | Executive management bid committee approval for complex bids minimum annum threshold established |
• | Robust risk assessment of bids - commercial, legal and operational |
• | Detailed contracting guidelines developed and rolled out |
• | Clear delegated authorities register |
• | Strategic account management programme |
• | KPI/SLA formal reviews with customers |
• | Sales and CRM teams focused on developing pipeline across all major sectors |
• | Improved CRM capabilities with active relationship management |
• | Focus on Customer Satisfaction Net Promoter Score and soliciting feedback |
• | Review of any loss-making contracts to ensure learnings are identified and applied to future bids |
• | Improved sales and pipeline management information to track and measure growth, wins and losses |
• | Win/loss debriefing process to take learnings for future bidding activities |
• | Appointment to Crown Commercial Services frameworks FM RM3830 and Security RM6089 |
• | Appointment to the Prison Operator Services framework |
• | Chief Government & Strategy Officer to coordinate all interfaces with the Cabinet Office |
• | Focus on high-margin opportunities with growth potential, for example technology-led solutions. |
• | Development of new and innovative service offerings |
• | Review of contractual terms relating to Interserve business areas ongoing for both sales and renewals |
Future plans
• | Sales Academy being relaunched to improve skillsets and competencies around bidding and commercial sales |
• | Continue to pursue suitable opportunities on the Crown Commercial Services frameworks. |
• | Implementing the Mitie way of selling and retaining work and developing and sharing best practice |
• | Accelerating value creation through a greater understanding of customers' needs |
• | Target emerging markets |
• | Continue to engage with opportunities that have scope for innovative solutions |
• | Continue activities around thought leadership events |
Risk 8: Business resilience
An inability to effectively respond to global events, such as a pandemic or supply chain disruption and/or a catastrophic event at a key business location could result in significant business interruption. The effect on employees, customers, and the supply chain, could result in severe consequences for the financial health and reputation of Mitie's business.
Impacts on strategic pillars: Customer, People, Technology, Cost
Change in year: NEW RISK also incorporates incident at client site risk
Whilst COVID-19 is now very much part of daily routine, there remains a high possibility of another pandemic, given that four have already occurred within the last century. Therefore, it would be remiss to remove the threat of a pandemic altogether from Mitie's risk profile. Similarly, external assessments relating to: the threats posed from terrorist attacks, either physical or cyber related; climate challenges; and the ongoing position relating to the post Brexit landscape combined with the consequences of COVID-19, highlight the importance of Mitie managing any disruptive risks which could negatively impact its organisational resilience.
Mitie delivers services to clients at a number of important and high-profile sites across the country. These include locations with substantial historical and cultural significance and high level of scrutiny by governmental bodies, media organisations and the general public. If a major incident occurred at one of these sites, whether through the negligent or deliberate act of Mitie staff, it would attract a large amount of publicity and have a highly negative impact on Mitie's reputation. It would also be likely to limit the Group's chances of winning future contracts and potentially maintaining current clients.
In order to make sure this risk is managed, it is important that Mitie has appropriate policies and processes in place, which clearly set out its expectations of staff and ensure that its business remains resilient. Mitie also needs to communicate these effectively and deliver regular and relevant training to staff. In addition, it is important that Mitie ensures staff have been appropriately vetted to determine who is eligible to work on particular contracts and sites, so that the specific requirements of clients are met.
It is also necessary to have effective business continuity plans in place for its operations, including its services outsourced to companies based in India, so that Mitie is able to continue to deliver a high-quality service to clients in the event of a disruptive incident. Should an incident occur, a comprehensive and tested crisis response plan is essential to minimise the impact to staff, clients, the public and the environment.
Controls and mitigating actions
• | Key policies and associated operating procedures in place. |
• | Dedicated Risk team and GSOC. |
• | Regular testing of crisis management and business continuity, including MGX-led simulations. |
• | Stringent governance controls including oversight from Risk Committee, with regular reporting to the Audit Committee and Board. |
• | Close monitoring of supply chain to ensure continuity of critical supplies |
• | Internal and external compliance audits |
• | Critical Engineering and Technical Assurance programme implemented in Technical Services to help manage high-risk contracts |
• | Technical Appointments framework used in Technical Services to ensure that correct capability/resources are deployed on customer sites/contracts to help mitigate risks |
• | Insurance cover is in place to cover business interruption |
• | Themes and root causes monitored from the results of audits to target specific actions, including training |
Future plans
• | Seeking certification to validate operating in accordance with ISO 22301-2019 |
• | Ongoing contingency planning for managing the COVID-19 impacts on both the business and its suppliers and the post-Brexit landscape through the COVID-19 and Brexit Readiness working groups |
• | Continuous horizon scanning via GSOC with regular alerts to teams on potential threats and significant events |
Risk 9: Employees
Inability to recruit, retain and reward suitably talented employees, as well as failure to implement appropriate development plans and simple, consistent processes across the business and cultivate a One Mitie culture, could result in employees being disengaged and negatively impact the Group's operational and financial performance.
Impacts on strategic pillars: Customer, People
Change in year: INCREASED
During FY21, the COVID-19 pandemic, Brexit (specifically changes relating to the Right to Work/Settlement Scheme), and the acquisition of Interserve with its 27,500 employees joining Mitie, have reinforced the importance of managing the Group's employees effectively. Its people are Mitie's biggest asset and underpin everything it does. For the success of the business it is important that Mitie continues to recruit, develop, motivate, and retain talented individuals. An inability to do this would have an adverse impact on the profitability of contracts as well as their successful delivery.
Mitie needs to have the right level of experience and expertise available and be able to develop a culture of high standards of achievement, compliance to the Mitie values and good governance and control. In order to achieve this, Mitie also needs to provide development opportunities for its employees to enable them to reach their full potential.
For a successful integration of Interserve, it is important that Mitie maintains stability and consistency particularly around its senior leadership team to provide high-quality direction for the business, and actively seek to promote the 'One Mitie' way of operating across the business to ensure greater consistency in processes and controls, guarantee all employees respond positively to the implementation of forthcoming change initiatives, and facilitate seamless movement of staff across the Group. It is also vital in the short term that the changes associated with Brexit, specifically the Settlement Scheme, are managed both effectively and efficiently.
Controls and mitigating actions
• | Consistent HR resourcing process and system across the Group for both temporary and permanent recruitment |
• | Process in place for online training and development |
• | Training and development programmes for senior leadership |
• | Developed talent identification, management, and development framework |
• | Clear performance management framework |
• | HR structure streamlined and partially devolved to business units |
• | Launch of new induction programme, mandatory for new starters |
• | Regular communications from leadership team - including MGX country-wide roadshows |
• | Specific plans developed to address results of employee survey |
• | Competitive remuneration, terms, and conditions |
• | Regular employee offers |
• | Succession plans in place for critical roles, especially for senior leadership |
• | Established Brexit fora for overseeing compliance with the Settlement Scheme, as well as other mandatory people related changes |
Future plans
• | Attraction strategy to be developed and deployed centred around employee 'deal' promoting benefits and development opportunities |
• | Grading framework to be deployed to allow employees to understand where they fit in the business and their potential for career development |
• | Benefit enhancement plan in development with frontline focus |
Risk 10: Third-party management
Failure to successfully manage strategic third-party relationships or a catastrophic event and/or failure involving a third-party partner, could impact Mitie's ability to deliver contractual outcomes, resulting in financial losses and in some circumstances leading to fines and significant reputational damage.
Impacts on strategic pillars: Customer, People, Cost
Change in year: NEW RISK
Mitie maintains a number of third-party relationships and spends c:£1.35bn on an array of supplies and services. A number of these supplies and services are critical to ensuring that clients continue to deliver their respective operations.
The scale and impact of both COVID-19 and Brexit, both in the UK and internationally, has heightened the possibility of disruption or failure to some of Mitie's key third-party partners occurring. This risk is compounded by transitional activities following the acquisition of Interserve, which involve the amalgamation of supplier frameworks.
An inability to effectively manage risks related to third-party management could have serious financial and reputational ramifications for Mitie. Furthermore, due to there being significant dependencies in this area, the consequences of not managing third parties effectively and efficiently could also have serious implications on the management of Mitie's other principal risks. As a result, it is vital that Mitie maintains a rigorous framework for managing both its subcontractors and suppliers, and that this is systematically reviewed.
Controls and mitigating actions
• | Key policies and associated operating procedures |
• | Dedicated Procurement and Commercial teams |
• | Mitie First approach adopted |
• | Project Forte driven improvements under Supply Chain Management workstream, including enhanced supplier audits, improved invoicing capabilities, MSAs and job automation |
• | Rigorous on-boarding framework |
• | Defined SLAs and key performance indicators |
• | Ongoing spending review |
• | Dedicated risk management and assurance procedures including targeted QHSE assurance programme and Internal Audit to ensure internal controls are operating effectively |
• | Appointment of COVID-19 and Brexit Procurement leads |
• | Ongoing review of third-party business continuity arrangements, with regular reporting to the Group Risk Team as well as COVID-19 and Brexit Readiness working groups |
Future plans
• | Implementation of Digital Supplier Platform recommendations following review |
• | Ongoing delivery of Project Forte initiatives. |
Statement of Directors' responsibilities in respect of the Annual Report, Remuneration report and financial statements
The following statement is extracted from page 128 of the Annual Report and Accounts and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3. This statement relates solely to the Annual Report and Accounts and is not connected to the extracted information set out in this announcement or the Final Results Announcement:
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law including FRS 101 Reduced Disclosure Framework.
Under company law, the Directors must not approve the financial statements unless they are satisfied that these give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for the period.
In preparing these financial statements, the Directors are required to:
• | Select suitable accounting policies and apply them consistently |
• | Make judgements and accounting estimates that are reasonable, relevant, reliable and prudent |
• | For the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements |
• | For the Company financial statements, state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements |
• | Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group or Company will continue in business |
• | Prepare a Directors' report, Strategic report and Directors' remuneration report which comply with the requirements of the Companies Act 2006 |
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Directors' responsibilities pursuant to DTR4.1
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.
-Ends-
For further information, contact:
Claire Lovegrove
Head of Media Relations | M: +44 (0)790 027 6400 | E: claire.lovegrove@mitie.com |
Fiona Lawrence
Group IR Director | M: +44 (0)7808 727 500 | E: fiona.lawrenceIR@mitie.com |
Peter Dickinson
Chief of Staff and General Counsel | M: +44 (0)776 821 5013 | E: peter.dickinson@mitie.com |
Notes for editors
About Mitie
Founded in 1987, Mitie is the UK's leading facilities management (FM) company. We offer a range of services to Central Government and Defence, Communities (Healthcare, Education and Local Authorities); and Technical Services (Engineering Services, Energy, Water and Real Estate Services) and Business Services (Security, Cleaning and Office Services) to Private Sector clients in Financial Services, Manufacturing, Transport, Retail and Telecoms; and Specialist Services (Care & Custody, Landscapes and Waste Management).
Mitie, which acquired Interserve's FM business in December 2020, employs 77,500 people and is the champion of the 'Front-Line Heroes' who have kept Britain running during the COVID-19 pandemic. We take care of our customers' people and buildings, by delivering essential services and deploying industry leading technology to create safe and effective workspaces.
The business continues to execute its technology-led strategy and in the past six months has received multiple awards.
Find out more at www.mitie.com.