REG - MITIE Group PLC - Annual Financial Report <Origin Href="QuoteRef">MTO.L</Origin> - Part 1
06/09/2014 02:03
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RNS Number : 1517J
MITIE Group PLC
09 June 2014
9 June 2014
Mitie Group plc
Mitie Group plc (the "Company") - Annual Financial Report
Following the release on 19 May 2014 of the Company's preliminary results for
the year ended 31 March 2014 (the 'Preliminary Announcement'), the Company
announces that it has published its Annual Report and Accounts for 2014 (the
'Annual Report and Accounts').
The Company's 2014 Annual General Meeting will be held at UBS Investment Bank,
1 Finsbury Avenue, London, EC2M 2PP on 9 July 2014 at 2.30pm.
Copies of the Annual Report and Accounts and the Notice of the Annual General
Meeting for 2014 (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:
www.hemscott.com/nsm.do.
The Preliminary Announcement included a set of financial statements and a
review of the development and performance of the Company. In compliance with
Disclosure and Transparency Rule (DTR) 6.3.5 the Company has extracted and set
out below certain information from its Annual Report and Accounts 2014. 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 Preliminary Announcement issued on 19 May 2014. 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 2014 Annual Report and Accounts.
Page numbers and cross-references in the extracted information below refer to
page numbers and cross-references in the 2014 Annual Report and Accounts.
The information contained in this announcement and in the Preliminary
Announcement does not constitute the Group's statutory accounts but is derived
from those accounts. The statutory accounts for the year ended 31 March 2014
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
The section below describes identified principal risks to the achievement of
our strategic business objectives. These risks are those believed by the Board
to be most significant to impact our strategy, our financial and operational
performance and ultimately our reputation. There may be other risks which are
currently unknown to the group or which may become material in the future. We
continue to group risk in four categories: strategic, financial, operational
and regulatory.
Strategic risk
Risk Mitigation
Contract mobilisation, management and performance The group continues to see large scale complex integrated facilities management contracts as materially important to the achievement of our strategic objectives. Our Large and complex integrated facilities management contracts are subject to executive management oversight and approval. Teams of experienced bid, mobilisation and operational delivery specialists support these contracts to mitigate the risk of failure at any stage. Regular dialogue occurs with the client's executive management to ensure service delivery remains in line with the client's expectations. Our Board governs and reviews the investment in and support for the development and deployment of technical solutions and these programmes have governance and review structures in place to monitor their ongoing performance.
ability tosuccessfully mobilise, operate and manage such contracts is critical for the maintenance of our financial position. As our service offering becomes increasingly
complex as a business differentiator, we become increasingly reliant on the deliveryof sophisticated technological solutions for our clients. Thesesolutions necessarily
carry increased risk around design, delivery and successful implementation when compared to our more traditional business activities. Our ability to retain and win new
contracts of this type is therefore important for the future success of our business.
Company performance and resourcing requirements impacted by change to the market and economic conditions Mitie's principal macro-economic exposure is to the UK market, with only very limited exposure to the wider global economy. With the UK economy showing some signs We remain highly focused on delivering sustainable, profitable growth and are completing our exit strategy from more cyclical, margin-diluting markets. Our strategy continues to be reviewed and evolve to ensure high margin growth areas are targeted, underpinned by the right supporting business infrastructure. Our focus on thedevelopment of our long-term contract portfolio reduces the group's financial exposure to rapid changes in the economic environment. The acquisition strategy remains targeted on securing opportunities both to help diversify our business offering and to enhance our current services. Entry into new business areas is controlled and requires Board approval.
ofrecovery, an expected potential upturn in the pipeline of opportunities for Mitie is anticipated. The need for our business model to adapt and grow with any ongoing
economic upturn is therefore paramount. With private sector clients likely to be varied in terms of the volume, value and range of required services, a failure to
recognise and respond to these demands may impact the group's ability to win or retain significant business opportunities. Our diverse business portfolio provides
resilience during times of economic changesand varying demands on our resources, depending on the wayin which the economic cycle affects our client base.
Protecting our reputation The strength of our reputation remains a critical component in our ability to achieve our strategic objectives and growth targets. A detrimental impact to our reputation We recognise that a strong corporate governanceframework supported by demonstrable values andbehaviours provides the basis for effective reputational management. Our governance framework provides dedicated policies, procedures, training programmes and audit to address specific issues which, if realised, may give rise to reputational impact. Specific elements of thisframework were revised, rationalised and strengthenedduring the year. As our business continues to grow and develop into new sectors we will remain strongly focused on protecting the strength of our reputation through effective governance, leadership and the developmentof our ethical business framework.
may lead to a loss in market confidence in our ability to retain or undertake new client work and may affect our financial performance andgrowth prospects. We understand
clearly that any incident involving major harm to one of our people or our clients/ partners, corrupt practices involving fraud or bribery, weak financial control
processes or failure to meet regulatory requirements may significantly impact our reputation. Such an impact could result in contract losses, failure to win new business,
financial penalties and difficulties in the future recruitment of key staff.
Financial risk
Risk Mitigation
Financial strength and access to appropriately scaled and diverse sources of funding Our financial strength makes us an attractive partner to our clients and stakeholders, including our funding partners. Should our financial performance deteriorate, our We continue to monitor our financial performance very closely via our mature financial governance arrangements, with daily monitoring of bank balances, weekly cash flow forecasting and regular financial performance andbalance sheet reviews. We continue to maintain our strongbanking, debt finance and equity relationships, with a diverse portfolio of committed long-term funding.
ability to access funding on competitive terms could be impacted, causing a restriction in our ability to grow both organically and through acquisition, and an increase
in the cost of borrowing which could affect our financial performance. Our most significant area of expenditure is staff costs, whichhave to be paid regularly and at
specific times. Our ability to do this is reliant upon the continued availability of funding, our ability to manage our cash flow, access to varied sourcesof funds and
working capital. It is critical to the success and continuity of our business.
Reliance on material counterparties Our business activities are dependent on a number of significant counterparties such as insurers, banks, clients and suppliers. Effective and ongoing relationships with We have strategically developed a diverse and robust counterparty base, limiting the dependency of any one counterparty and hence the impact of any potential failure.A formal review of material counterparty risk is undertakenby the Board and at divisional and business level.
our material counterparties will underpin the group's ability to meet its strategic objectives. The failure of a key subcontractor, supplier, financing or other partner
could have a detrimental impact on the operational and financial effectiveness of our business and our ability to trade.
Operational risk
Risk Mitigation
Significant health, safety or environmental incident Many of our diverse operations, if not effectively managed, have the potential to result in significant harm to our employees, our business partners, members of the The Board maintains its commitment to the higheststandards of quality, health, safety and environmental (QHSE) performance, through effective governance, oversight and management standards, with QHSE performance continuing to be the first item on every Board agenda. Our well-established QHSE management systems are certified to the ISO 9001, 14001 and OHSAS 18001 standards and we continue to focus on the importance of values and behaviours through our employee engagement programme Work Safe Home Safe! To support our management system and engagement programme we focus on developing training programmes to ensure every employee, at every level of the business, has the core competencies required to do their work safely. Our programmes are supported by a network of dedicated and experienced QHSEprofessionals, backed up with the use of external parties to provide specialist technical expertise where required.
public,or to damage the environment. As a major employer our focus on and commitment to safeguarding our people and protecting the environment remains unwavering. Failure
to do so could result in a significant incident, affecting an employee, their family, friends and colleagues, or lead to regulatory action, financial impact or damage to
our reputation.
System, process or control failure may impact our operational performance Our operational efficiency and future business performance is increasingly reliant on the use of sophisticated, interdependent business systems, which provide the basis Our core policies provide the basis of our governance framework and these remain under continual review to ensure they remain optimised in line with effectivegovernance practices as the business continues to grow and diversify. Our internal control effectiveness continues to be reviewed formally, supported by a programme of internal audits and self-certification on the operation of key controls and procedures. Business critical systems are tested to ensure effectiverecovery following a potential disaster scenario and we have in place an assurance programme to test the adequacy of our mitigation activity. Oversight of IT related governance is provided by the IT steering group who continue to monitor the effectiveness of the informationsecurity management system which is aligned with recognised international standards.
for contractmanagement and business support activities. These systems, in addition to our governance framework of policies and procedures, will remain critical for the
control and successof the business as they help to drive innovative solutions to customer requirements, improve operational efficiency via the use of targeted management
information and underpin the effectiveness of our business support functions. The business critical nature of these systems means that operational failure may result in a
significant impact on operational delivery, contract management and clientexpectations. Equally the role of systems in ensuring the effectiveness of the business support
control and reporting environment may mean that system failure could lead to abreakdown in the controls around high volume transactions and compliance areas such as
vetting and employment legislation. Such a breakdown could result in financial orother misstatements occurring or non-compliance fines.
Retention and attraction of skilled people We acknowledge the importance of attracting and retaining the best skilled people at all levels of the business to achieve our strategic objectives and helping to deliver Our career development and talent management programmes are a key focus for our management teams, ensuring a pipeline of opportunities exist for staff at every level of the business. Additionally, succession plans exist for key management to ensure a talent pool is identified,developed and ready for succession if needed. Our focuson training and competency at all levels of the business continues to ensure that we develop our people to enable them to manage the changing profile of our business.
our long-term growth aspirations. This is particularly the case where we require specialist technical expertise or management and where the market may be highly
competitive. We also recognise the importance of diversity in ensuring a broad range of views are considered when developing strategy and supporting programmes.
Challenges in attracting new talent, or developing and retaining our existing employees could impact our ability to achieve our strategic growth objectives. As we
continue to grow and diversify into new areas, this risk will continue to be a focus for the Board.
Regulatory risk
Risk Mitigation
Non-compliance with the developing regulatory framework We continue to provide a strong focus on ensuring, as a minimum requirement, legal compliance in all of our business areas, in particular where we enter into new Our legal compliance framework, as a key element of our management system, has been established to ensure proactive identification of legal and
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