REG - MITIE Group PLC - H1 FY25 results
21/11/2024 07:00
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RNS Number : 0440N MITIE Group PLC 21 November 2024
21 November 2024
Mitie Group plc
LEI number: 213800MTCLTKEHWZMJ03
Interim results for the six months to 30 September 2024
Continued good strategic progress and financial performance
H1 revenue and operating profit up 14%
Record contract wins and renewals/extensions
Highlights
· Revenue(1) up 14% to £2,430m (H1 FY24: £2,132m), including 8% organic growth
primarily driven by new contract wins, scope increases and pricing, alongside
a 6% contribution from acquisitions
· Record contract wins and renewals, up 54% to £3.7bn TCV (H1 FY24: £2.4bn);
Renewals rate of 64% (FY24: 79%) reflects the loss of two notable public
sector contracts; book to bill ratio of 150%(5)
· Operating profit before other items(2,3) up 14% to £101m (H1 FY24: £89m)
· Operating profit margin(3) before other items maintained at 4.2% (H1 FY24:
4.2%); includes margin enhancement initiatives, offset by investments in the
new Three-Year Plan and a loss in the telecoms infrastructure business
· Basic EPS before other items up 2% to 5.4p (H1 FY24: 5.3p), with the benefits
of higher operating profit and the share buyback programme offsetting a higher
effective corporation tax rate and finance costs
· Operating profit of £63m (H1 FY24: £57m) and basic EPS of 3.0p (H1 FY24:
3.3p); other items(2) of £38m (H1 FY24: £32m) include costs to deliver
margin enhancement initiatives and an increase in acquisition-related costs
· Free cash flow generation of £34m (H1 FY24: £48m); operating cash flow of
£81m (H1 FY24: £73m)
· Three acquisitions completed year-to-date for £49m, including a power
connections business in H1 (£4.3m), and a UK fire systems business (£36.9m)
and a Spanish security business (£7.5m) post-period end
· Closing net debt up £107m to £188m in H1, reflecting increased returns to
shareholders, acquisitions and increased electric vehicle lease obligations,
offset by free cash flow generation
· Strong balance sheet with continued low leverage of 0.7x average net
debt/EBITDA(6) (FY24: 0.6x)
· Interim dividend up 30% to 1.3p per share (H1 FY24: 1.0p)
· FY25 share buyback programme doubled in July to £100m; of which £55m
completed in H1 with 45m shares purchased at c.120p average price (of which
34m shares have been cancelled)
· Reiterate confidence in meeting Board expectations for FY25 and delivering our
new Three-Year Plan targets, notwithstanding headwinds from the recent Autumn
Budget
Six months to 30 September 2024 Six months to 30 September 2023
Before other items(2,6) Other items(2) Total Before other items(2,6) Other items(2) Total
£m unless otherwise specified
Revenue (including share of JVs & associates) 2,430.4 - 2,430.4 2,132.4 - 2,132.4
Group revenue 2,425.6 - 2,425.6 2,083.3 - 2,083.3
Operating profit(3,4) 101.1 (37.7) 63.4 88.8 (32.0) 56.8
Operating profit margin(3) 4.2% - 2.6% 4.2% - 2.7%
Profit before tax 94.5 (37.7) 56.8 84.3 (32.0) 52.3
Profit for the period 71.1 (31.0) 40.1 68.2 (25.3) 42.9
Basic earnings per share 5.4p 3.0p 5.3p 3.3p
Dividend per share 1.3p 1.0p
Cash generated from operations 81.4 73.0
Free cash inflow(6) 34.3 47.9
Average daily net debt(6) (219.0) (156.1)
Closing net debt(6) (187.5) (112.7)
Total order book(5) £12.6bn £9.9bn
Return on invested capital (ROIC)(6) 25.4% 25.2%
1. Including share of joint ventures (JVs) and associates.
2. Other items are described in Note 3 to the condensed
consolidated financial statements.
3. Operating profit includes share of profit after tax from JVs
and associates. Operating profit margin is operating profit as a percentage of
revenue including share of JVs and associates.
4. The comparative figures have been re-presented to reclassify
£4.2m of acquisition-related costs from 'Operating profit before other items'
to 'Other items', to align with how these costs were classified in the Annual
Report & Accounts for FY24. See Note 1 to the condensed consolidated
financial statements for further details.
5. Total order book includes secured fixed term contract work,
variable (including estimated variable work) and project work. Book to bill
ratio is the relationship between orders received during the period and
revenue recognised for the period.
6. Performance before other items, net debt, free cash flow,
EBITDA (rolling 12-month) and ROIC are presented as Alternative Performance
Measures. Explanations as to why these measures are presented, and
reconciliations to the equivalent statutory measures, are set out in Appendix
1 to the condensed consolidated financial statements.
Commenting on the first six months and the outlook, Phil Bentley, Group Chief
Executive, said:
"We are in the foundation year of our new Facilities Transformation Three-Year
Plan (FY25 - FY27); a year in which we are making investments in technology,
sales & marketing and our projects capabilities. These investments will
enhance our growth by strengthening our market leading position, increasing
our pipeline and driving cross-sell opportunities.
"During the first six months of our new Plan, we have delivered good strategic
progress and financial performance as our investments start to bear fruit. We
have delivered high-single-digit organic growth, in part driven by our ability
to stand up a 'surge response' team to protect public safety; progressed our
programme of margin enhancement initiatives; continued to build our
capabilities through targeted acquisitions; and achieved record contract wins
and renewals/extensions.
"Growth over the Plan period is underpinned by highly attractive macro
trends. Across both the public and private sectors our customers are
increasingly looking to Mitie to reduce their carbon footprint, modernise
their buildings, implement power upgrades and grid connections, and support
their growing data centre and other critical environment requirements as
building regulations change. We are also well positioned to support the
government in its commitment to invest in the UK's defence capabilities and
the modernisation of its built estate, alongside significant capital funding
for schools and the NHS.
"I am grateful to our 72,000 colleagues who provide outstanding service for
our customers. Through their hard work and by deploying Mitie's advanced
technologies - harnessing real time data and intelligence, advanced analytics
and Artificial Intelligence - we continue to lead our industry.
"We have reflected on the changes to employers' National Insurance announced
in the Autumn Budget, which take effect from April 2025. We have a strong
track record of managing inflationary costs - including annual increases in
the National Living Wage; contractual protections in place on many of our
contracts; and strong customer relationships where negotiations are
necessary. Our current estimate is a c.£25m impact of additional costs in
FY26, after contractual and commercial recovery through pricing, which we plan
to mitigate through new margin enhancement initiatives and other management
actions.
"Returning to H1 FY25 - the foundation year of our new Facilities
Transformation Three-Year Plan - our financial and operational performance has
been good, and I'm pleased that this momentum has continued into the second
half of the year. This underpins our confidence that we will deliver the
Board's expectations for the full year, as we progress towards our ambitious
medium-term targets."
- END -
Analyst Presentation and Q&A
Phil Bentley (CEO) and Simon Kirkpatrick (CFO) will host a presentation and
Q&A session today (21 November 2024) at 9.30am at The Shard and via a
webcast. For dial in details please contact kate.heseltine@mitie.com
(mailto:kate.heseltine@mitie.com) . A copy of the presentation will be
available on the company website in advance of the live presentation,
www.mitie.com/investors (http://www.mitie.com/investors) .
For further information
Kate Heseltine M: +44 (0)738 443 9112 E: kate.heseltine@mitie.com (mailto:kate.heseltine@mitie.com)
Group IR and Corporate Finance Director
Claire Lovegrove M: +44 (0)790 027 6400 E: claire.lovegrove@mitie.com (mailto:claire.lovegrove@mitie.com)
Director of Corporate Affairs
Richard Mountain M: +44 (0)790 968 4466
FTI Consulting
About Mitie
Founded in 1987, Mitie employs 72,000 colleagues and is the leading
technology-led Facilities Transformation company in the UK. We are a trusted
partner to around 3,000 blue chip customers across the public and private
sectors, working with them to transform their built estates, and the lived
experience for their colleagues and customers, as well as providing
data-driven insights to inform better decision-making.
In each of our core services of engineering (hard services) and security and
hygiene (soft services) we hold market leadership positions. We also deliver
projects capabilities in the areas of power and grid connections, building fit
outs & modernisation, decarbonisation, fire & security, and telecoms
infrastructure. Our sector expertise includes central government, critical
national infrastructure, defence, financial services, healthcare & life
sciences, local government & education, retail & logistics and
transport & aviation.
We hold industry-leading ESG credentials, including a place on the CDP Climate
change A List, and in the past 12 months we have received multiple industry
awards including B2B Marketing Team of the Year, Best Low Carbon Solution and
Net Zero Carbon Strategy of the Year. Targeting Net Zero by the end of 2025,
our ambitious emissions reduction plans have been validated by the Science
Based Targets initiative (SBTi). We have been recognised as a UK Top
Employer for the sixth consecutive year. Find out more at www.mitie.com
(http://www.mitie.com/) .
Chief Executive's strategic review
Overview
In the first six months of our new Facilities Transformation Three-Year Plan
(FY25 - FY27), Mitie delivered a good financial performance and further
strategic progress. Revenue (including share of JVs and associates) for the
six months ended 30 September 2024 (H1 FY25) grew by 14% to £2,430m (H1 FY24:
£2,132m), including organic growth of 8% - significantly ahead of core FM
market growth of c.4% per annum. Operating profit before other items also grew
by 14% to £101.1m (H1 FY24: £88.8m) whilst basic EPS before other items grew
by 2% to 5.4p (H1 FY24: 5.3p) despite a higher effective corporation tax rate
and finance costs.
This is the foundation year of our new Plan, and we are making investments in
the business to develop our Facilities Transformation offering and drive
growth and margin expansion over the years ahead. After factoring in these
increased investments, we maintained the H1 FY25 operating profit margin
before other items at 4.2% (H1 FY24: 4.2%). We continue to make good progress
with our programme of margin enhancement initiatives, and we have a clear path
to our >5% operating margin target by FY27.
Based on the equivalent statutory measures, Group revenue increased by 16% to
£2,426m (H1 FY24: £2,083m), operating profit increased by 12% to £63.4m (H1
FY24: £56.8m) and basic EPS reduced by 9% to 3.0p (H1 FY24: 3.3p). The
reduction in basic EPS reflected improved profitability and the benefit from
the share buyback programme being more than offset by a £5.7m increase in
other items after tax to £31.0m (H1 FY24: £25.3m) due to higher
acquisition-related costs, and the higher effective tax rate. Further details
are set out in the Finance Review.
Facilities Transformation Three-Year Plan (FY25 - FY27)
Our Three-Year Plan pivots the business from traditional Facilities Management
to technology-driven Facilities Transformation. Mitie is the FM market leader
in the UK, with deep capabilities to aggregate workflow and workforce data
across the built environment, and is a trusted partner to thousands of
blue-chip public and private sector organisations.
As such, we are well positioned to meet the changing needs of our customers
and unlock the value that exists in each of their environments. These needs
are underpinned by highly attractive macro trends, including those outlined
below and in the Operating Review.
At our Capital Markets Day in October 2023, we set ambitious financial targets
(based on alternative performance measures) to accelerate growth and enhance
shareholder returns over the new Plan period, underpinned by proactive capital
deployment and leverage of 0.75x - 1.5x (average net debt/EBITDA):
· High single digit revenue compound annual growth rate
· >5% operating margin by FY27
· Basic EPS growth above that of revenue growth, despite higher
corporation tax rates
· £150m annual free cash flow by FY27
Accelerating growth
Our technology-led Facilities Transformation Plan is expected to deliver
accelerated growth through the key pillars of 1) key account growth; 2)
projects upsell; and 3) infill M&A. We are targeting high single digit
revenue growth annually (inclusive of the contribution from M&A).
In H1 FY25, organic growth through key accounts (net wins and contract growth)
and projects upsell contributed 8% to revenue growth, inclusive of contract
re-pricing of 3%. Infill M&A completed since 1 April 2023 contributed a
further 6% of inorganic growth.
Record contract wins and renewals/extensions
New contract wins and extensions/renewals increased by 54% to a record £3.7bn
TCV in H1 FY25 (H1 FY24: £2.4bn), reflecting the investments we are making in
our sales and marketing teams.
Notable new wins of £2.1bn included security and hygiene services for
Community Health Partnerships and Landsec, building maintenance for The
Coventry and Rugby Hospital, IFM and projects for EY, engineering services for
Halfords and the Metropolitan Police Service, and a c.£400m contract awarded
by the Ministry of Justice to operate the UK's first all-electric 'green'
prison (HMP Millsike).
Contract extensions/renewals of £1.6bn TCV included a further three-year
extension with Lloyds Banking Group - our largest private sector customer, a
five-year IFM extension for Heathrow Airport, engineering and hygiene services
for a large e-commerce business, security for Fedex and hygiene for Bank of
Ireland.
We have a large, diversified portfolio of customers, and contract renewals are
therefore completed on a rolling basis throughout each year. During the
period, two notable public sector contracts were not renewed (one on marginal
scoring judgements and one on price) and will end in FY26. Due to the size of
these contracts over their lifespan, Mitie's renewal rate therefore fell to
64% (FY24: 79%), although we expect this to rebound given the strong
commercial momentum in the business more widely.
Our total order book increased by 11% to £12.6bn (FY24: £11.4bn), and our
pipeline of new opportunities stands at a record £22bn across a range of
organisations in the public and private sectors.
Projects work underpinned by attractive macro trends
We continue to see demand from our customers for transformational projects
across their estates and have expanded our technical capabilities through
further targeted acquisitions. As a result, our Group projects revenue -
delivered across all three of our divisions - increased by c.20% to £0.6bn
(H1 FY24: £0.5bn).
Retro-fitting and modernising buildings, including lifecycle upgrades, remain
a key driver of growth, where we are integrating systems to create
'intelligent buildings', and ensuring that buildings meet evolving legislative
and regulatory requirements. This includes new fire and security legislation,
which places a greater responsibility on building owners and managers to
protect occupants, and minimum energy efficiency standards for commercial
buildings. Decarbonisation technologies, such as solar, electric vehicle (EV)
charging and battery storage, are also increasingly being sought after by our
customers, alongside our expanded suite of power and grid connections
capabilities.
The UK is one of the largest and fastest growing data centre markets in
Europe, and we are expanding our delivery of mechanical & electrical,
cooling and fire & security systems fit outs in these buildings and across
wider critical environments. We saw a pause in some data centre projects
during the period, as customers reassess the significant increase in scale,
power and cooling requirements arising from AI, which we are well placed to
meet and expect to be a key driver of growth in future periods.
We have also continued to deliver a range of projects works across our Defence
contracts, reflecting the UK government's commitment to invest in the
country's defence capabilities and the modernisation and decarbonisation of
its built estate.
Our telecoms infrastructure business has continued to underperform in a
challenging market, characterised by poor contracting terms with the major
network operators and delays in the completion of projects placing significant
pressure on margins. We are renegotiating or exiting from certain unprofitable
frameworks and expect revenue from this business to reduce by c.20% in FY25
(FY24: c.£90m). A new management team has been appointed and is expected to
return the business to a break even run rate by the end of FY25.
Three strategic projects acquisitions completed year-to-date
We have guided to c.£75m per annum spend on infill M&A over the new Plan,
to deepen our projects capabilities in the high-growth, high-margin areas of
buildings infrastructure, decarbonisation, power and grid connections and fire
& security. Having completed three acquisitions for a consideration of
£49m (excluding employment-linked earnouts) in the year to date, the pipeline
of opportunities remains attractive.
During H1, we acquired ESM Power, a leading high voltage electrical
engineering business, for an initial £4.3m. This acquisition enhances our
expertise in the growing high voltage power connections market and complements
our Rock Power Connections and G2 Energy businesses by creating a full suite
of power connections services.
Shortly after the period end, we acquired Grupo Visegurity, a leading security
business in Spain, for €9m (£7.5m) initial cash consideration. This,
alongside the recent acquisition of Biservicus, supports the strategic
expansion of our security services capabilities in the attractive Spanish FM
market.
We have also enhanced our scale and self-delivered offering in the high
growth, high margin UK fire & security market through the acquisition of
Argus Fire, an engineering-led fire systems business, for £36.9m. This
complements the recent acquisitions of GBE Converge and RHI Industrials and
provides cross-sell opportunities across our blue-chip customer base.
Operating margin progression
We have a clear path to an operating profit margin before other items of at
least 5% by FY27. This will be achieved through our ongoing programme of
margin enhancement initiatives and improved operational leverage, alongside
the contribution from higher margin infill M&A and projects works. We
expect these management actions to more than offset the continued impact of
inflation and contract pricing dynamics in a highly competitive environment.
In H1 FY25, the Group maintained an operating profit margin before other items
of 4.2% (H1 FY24: 4.2%), despite additional investments to drive growth and
margin expansion (£7m), headwinds from inflation (£3m), the completion of
higher margin contracts, and losses in our telecoms business (£11m).
Offsetting these factors, the operating margin benefited from a good trading
performance, the delivery of £11m of savings through margin enhancement
initiatives (MEIs), as well as 40bps improvement in margins as a result of
operational leverage.
We expanded the scope of our MEIs from overhead efficiencies to operations and
in-contract opportunities during H1, and we have raised our guidance for FY25
cost savings by £5m to £25m. Workstreams included increasing self-delivery
to customers and reducing our reliance on third-party contractors; working
with key accounts to define a best practice account model; using technology
and AI to deploy resources more efficiently; the continued outsourcing of
certain finance functions; and the continued consolidation of Mitie's core
systems and processes.
Our investments in the foundation year of our Plan are already starting to
deliver tangible results, including record H1 contract wins and
renewals/extensions, and will continue in H2. We are investing in our sales
and marketing teams to develop sector and customer-driven strategies, whilst
enhancing our customer relationship management (CRM) functionality and
business development skillset. We are putting more resource into contract
re-bids, and we are focusing on training and incentives for 'in contract'
teams to drive growth over the contract life. We are also investing in
technology, by developing our 'intelligent' solutions and enabling AI in our
core systems. In our Projects business we are enhancing our consult &
design capabilities and developing our Projects Centre of Excellence.
Sustainable free cash flow generation
We are targeting free cash flow generation of c.£150m per annum by FY27, as
we expect increased profitability and ongoing working capital process
improvements to offset the increased working capital tied up in our growing
projects business together with some customers demanding longer payment terms.
Sustainable free cash flow generation, and our robust balance sheet, underpins
our proactive approach to deploying capital.
In H1 FY25, the Group generated £81m of cash from operations (H1 FY24:
£73m), leading to a free cash inflow of £34m (H1 FY24: £48m). Higher cash
from operations reflects growth in operating profit, primarily offset by
higher lease, interest and corporation tax payments and a £38m seasonal
working capital outflow in H1. We remain on track to deliver at least £100m
of free cash flow in FY25.
Proactive and growing capital deployment
Our capital deployment policy prioritises a progressive dividend (within a
target payout range of 30-40%) and the purchase of all shares to fulfil
colleague incentive schemes to mitigate shareholder dilution. We also
continue to pursue higher-growth, higher-margin infill M&A to enhance our
projects capabilities and return excess funds to shareholders through share
buyback programmes.
The Board has declared an interim dividend of 1.3p per share, consistent with
our approach of setting the interim dividend at one third of the prior year
total dividend (FY24: 4.0p per share). The interim dividend will be paid on 4
February 2025 to all shareholders that are on the register at 20 December
2024. Shares in Mitie will be quoted ex-dividend on 19 December 2024 and the
dividend reinvestment plan (DRIP) election date is 9 January 2025.
During the period, and in the year to date, we have acquired 8m shares at a
cost of £9m to fulfil colleague incentive plans. We also invested £49m in
three acquisitions (including £4.3m in H1), as outlined above.
We commenced our current share buyback programme on 15 April 2024 and doubled
it, from £50m to £100m, on 24 July 2024. In H1, we purchased 45m shares in
total (£55m) at an average price of c.120p. We are holding c.11m of these
shares in treasury to fulfil the 2021 SAYE scheme, vesting in February 2025,
and are cancelling all shares we purchase in excess of this.
Strong balance sheet and modest leverage
Closing net debt of £188m (FY24: £81m) reflects the active capital
deployments across dividends, buybacks, share purchases for incentive schemes
and M&A totalling £121m, alongside a £21m increase in lease obligations
as we continue to transition our fleet to electric vehicles (EV) and extend
the duration of leases, partially offset by free cashflow generation of £34m.
Average daily net debt was £219m in H1 FY25 (H1 FY24: £156m) and leverage
was 0.7x average net debt / EBITDA (H1 FY24: 0.6x). We are still below our
targeted leverage range of 0.75x to 1.5x during our new Three-Year Plan.
Technology leadership
Our competitive advantage is embedded in our people and our industry-leading
technology, enabling us to deliver transformative, data-driven, 'intelligent'
solutions to meet the changing needs of our customers.
This includes Intelligent Engineering - supporting the 24x7 remote monitoring
and predictive maintenance of connected assets; Intelligent Security -
enabling the deployment of resources in response to the changing risk and
threat profiles of our customers' estates; Intelligent Hygiene - delivering
demand-led hygiene based on building usage data and sensor technology; and
Intelligent Projects - where our Emissions Intelligence platform is enabling
the automation of emissions data capture and reporting as well as the creation
of Net Zero pathways for clients.
In H1, we started to deploy Intelligent Engineering across 700 connected sites
and Intelligent Hygiene across over 100 sites, whilst Intelligent Security has
focused on retail customers and covers the location risk of 8,200 sites.
Emissions Intelligence has been adopted by four customers with a good pipeline
of take up expected in H2.
Our 'intelligent' solutions are supported by the ongoing integration and
upgrade of our core systems and platforms, as well as the increasing use of
AI. We have upgraded our Government Maximo (MAS 9) platform to unlock
Generative AI (GenAI) assistants to better manage work orders, asset
maintenance and onboarding. We are embedding AI in our CRM and procurement
platforms and optimising predictive maintenance and asset failures. In H2, we
will focus on enabling AI in our other core finance and HR platforms and
rolling out Microsoft Co-Pilot process automation.
Environmental, Social and Governance (ESG) leadership
Mitie is recognised as a leader in ESG among global industry peers. These
initiatives form a key part of how we do business, ensuring we grow
sustainably and responsibly. Our leading credentials also enable us to work
with our customers to realise their own sustainability and Net Zero ambitions.
During H1 FY25, we completed a 'double materiality' assessment to identify the
sustainability issues that are most material to our business and stakeholders
(customers, colleagues, suppliers, shareholders etc) by evaluating both their
impacts on the environment and society as well as the potential financial
impacts on Mitie. Further details, including a summary of the preliminary
outcomes from the assessment, are provided in our 2024 ESG Report, published
in August 2024.
We also published our first Climate Transition Plan in this report, building
on the success of the Plan Zero initiative that we launched in 2020 to create
a path to our ambitious 2025 Net Zero target. Our largest carbon emissions
relate to our vehicles, and we transitioned a further c.900 from diesel to
electric vehicles (EVs) in H1 FY25. At 30 September 2024, we had c.6,000 EVs
in our fleet - one of the largest in the UK - representing 75% of all our
vehicles, and we remain on track to transition 80% of the fleet to EV by the
end of FY25.
We continue to offer career development opportunities and industry-leading
benefits to our colleagues to attract and retain the best talent. For example,
we are currently supporting over 1,300 colleagues through apprenticeships
across 90 technical, professional and managerial courses. In September, we
welcomed our largest ever cohort of early career and new hires into our
technical apprentices and graduate engineering roles, and we have also
recently expanded our programmes focused on developing women in
leadership.
Operating review
As part of our new Facilities Transformation Three-Year Plan (FY25 - FY27), we
have simplified our organisational structure to align to our core service line
capabilities of Engineering, Security and Hygiene.
From the start of FY25 we absorbed the Central Government & Defence
division into Business Services (Central Government) and into Technical
Services (Defence). Police services, which was previously reported within Care
& Custody in Communities, is now reporting into Business Services.
Business Services
Business Services is the UK's largest provider of technology-led Security and
Hygiene services across c.2,500 contracts, with sector expertise in retail,
transport & aviation, central government and financial & professional
services. It also provides landscaping and waste services, and Mitie's Spanish
business is reported within the division.
Business Services, £m H1 FY25 Restated(1) Change Restated(1)
H1 FY24 FY24
Revenue 1,079 956 13% 1,977
Security(1) 517 428 21% 863
Hygiene 224 194 16% 407
Central Government(1) 185 217 (15%) 447
Spain 79 51 55% 114
Waste 43 38 13% 77
Landscapes 31 28 11% 69
Operating profit before other items 72.8 68.4 6.4% 149.8
Operating profit margin before other items 6.7% 7.2% (0.5ppt) 7.6%
Total order book £4.0bn £2.6bn 54% £3.3bn
(1) Restated to reflect the change to divisional reporting to include Police
services (within Security) and Central Government in Business Services. FY24
restated Central Government revenue excludes £77m reclassified to Defence
relating to the Landmarc step change acquisition
Performance highlights
· Revenue +13% to £1,079m (H1 FY24: £956m), reflects good new wins, the
provision of 'surge response' security services, growth in projects, pricing
and acquisitions, offset by the completion of certain public sector contracts.
· Operating profit before other items +6% to £72.8m (H1 FY24: £68.4m),
reflects improved trading and MEIs, offset by the higher margin public sector
contracts that have ended and a £3m debt provision relating to ISG work
· £1.9bn TCV of wins and extensions/renewals, primarily in the healthcare,
financial services and retail sectors, resulted in a 21% increase in the total
order book to £4.0bn (FY24: £3.3bn)
· Mitie's position as a leading integrated fire & security systems provider
enhanced through the acquisition of Argus Fire for £36.9m, post-period end
· Spanish security capability expanded through the acquisition of Grupo
Visegurity for €9m (£7.5m), post-period end
Operational performance
Business Services delivered a resilient performance in H1 FY25, with revenue
benefiting from new wins, the provision of short-term 'surge response'
security services to the Home Office during the summer, projects &
variable works, pricing and the contribution from acquisitions. This growth
was partially offset by the completion of higher margin, short-term public
sector works, such as the Afghan Relocations and Assistance contract and
Inland Border Forces, and one notable Central Government contract that was not
renewed in the prior year and ended in March.
The division secured £1.9bn TCV of contract wins, scope increases and
extensions/renewals primarily in the healthcare, financial services, and
retail sectors. The largest win was for the provision of security and hygiene
services to surgeries and local hospitals for Community Health Partnerships.
Retail is one of the division's largest sectors, with c.£400m of annual
revenue and a blue-chip customer base of national retailers and flagship
shopping centres. Alongside the continued growth in existing accounts, the
division won new contracts to deliver security services for Aldi and Lidl and
fire maintenance work for Halfords. The largest contract extension in the
period was for the provision of hygiene services to a large e-commerce
business.
Business Services continued to expand its presence in the London financial
services market through a new contract with EY, and was successful in
completing a two-year contract extension for Deutsche Bank. Elsewhere, other
notable extensions and renewals included AS Watson, Bank of Ireland and
Bellway.
Improved trading and MEIs more than offset the impact from the completion of
the higher margin public sector contracts and a c.£3m debt provision for work
that was being performed for ISG before it went into administration. MEIs
primarily focused on operational excellence and productivity improvements,
including the outsourcing of mobile security response services. Merlin for
Hygiene continues to be rolled out across customer sites, providing real time
data to support demand-led hygiene. c.10% productivity gains are being
achieved at these sites, resulting in cost savings for Mitie and the customer,
and enhanced standards of cleanliness.
Mitie's fire & security projects business has further strengthened its
position as a leading integrated systems provider, organically and through the
acquisition of Argus Fire for £36.9m after the period end. Argus Fire
specialises in the design, installation, servicing and maintenance of active
fire protection systems. It significantly enhances Mitie's scale and
self-delivered offering in the higher-growth, higher-margin c.£3bn p.a. UK
fire & security market, and complements the prior year acquisitions of GBE
Converge and RHI Industrials.
During the period, Business Services secured projects with Scottish Power to
design and deliver an integrated physical security, fire and civil engineering
solution across 10 critical national infrastructure sub-stations, and with
Google to fit out fire, security and ICT systems within two data centres. The
division also continued to benefit from the upgrade of critical security
infrastructure across certain central government offices.
Mitie Spain benefited from net wins in the current and prior year, and the
acquisition of Biservicus (Sept 2023). Shortly after the period end, Grupo
Visegurity, a leading security business, was acquired for €9m (£7.5m). In a
highly fragmented Spanish FM market, where participants are predominantly
single service, these acquisitions represent a strategic expansion of Mitie
Spain's security capabilities.
Waste and Landscapes both delivered good growth. Waste benefited from pricing
and growth in the Cliniwaste business, which is one of the few UK companies to
have been validated at the highest level of disinfection for the treatment of
infectious clinical waste. Landscapes benefited from new wins, notably at
Edinburgh Airport, as well as variable works and pricing.
Recent awards include British Security Awards - Business of the Year; Fire
& Security Matters - Security Guarding Company and Security Project of the
Year; Retail Risk, Fraud Awards - Physical Risk Management Team of the Year.
Technical Services
Technical Services is the UK's largest provider of Engineering services to
manage facilities and critical assets across c.350 contracts, including a
number of contracts for the Ministry of Defence (MoD). Through existing
capabilities and infill M&A, the division delivers projects in the high
growth areas of buildings infrastructure, decarbonisation, power and grid
connections and telecoms infrastructure to help customers transform their
built estates.
Technical Services, £m H1 FY25 Restated(1) Change Restated
H1 FY24 FY24(1)
Revenue (including share of JVs and associates) 913 825 11% 1,817
Engineering 665 636 5% 1,326
Defence(1) 248 189 31% 491
Operating profit before other items 30.1 28.2 6.7% 74.9
Operating profit margin before other items 3.3% 3.4% (0.1ppt) 4.1%
Total order book £4.3bn £3.8bn 13% £4.0bn
(1) Restated to reflect the change to divisional reporting to include Defence
within Technical Services. FY24 restated Defence revenue includes £77m
reclassified from Central Government relating to the Landmarc step change
acquisition
Performance highlights
· Revenue +11% to £913m (H1 FY24: £825m), driven by a strong performance in
Defence as well as growth through Engineering scope increases, projects and
acquisitions, which more than offset net contract losses
· Operating profit before other items of £30.1m (H1 FY24: £28.2m), reflects
margin enhancement initiatives and acquisitions, partially offset by net
contract losses and a loss in the telecoms infrastructure business
· £1.2bn TCV of engineering and IFM contract wins and extensions/renewals
resulted in an 8% increase in the total order book to £4.3bn (FY24: £4.0bn)
· ESM Power acquired for an initial £4.3m, enhancing our expertise in the
growing power connections market
Operational performance
Technical Services revenue benefited from strong growth in Defence, reflecting
the new Germany and wider Europe Defence Infrastructure Organisation contract
(commenced in June), projects and variable works, and pricing. In Engineering
the contribution from projects, scope increases and acquisitions (including
the consolidation of Landmarc as a subsidiary), was partially offset by net
contract losses.
The latter primarily relates to one private sector IFM contract that was not
renewed, and completed at the end of FY24, although the division continues to
deliver engineering projects works (alongside subcontracted security, waste
and landscaping services via Business Services).
Notable new engineering and IFM contracts included Dublin City University, EY,
Grosvenor Ltd, Halfords and the Metropolitan Police Service. The division also
secured a further contract extension with Mitie's largest private sector
customer, Lloyds Banking Group, in addition to extensions for Heathrow
Airport, Bank of Ireland, Government Communications Bureau and Marsh &
McLennan.
Margin enhancement initiatives in the period focused on streamlining account
structures, driving efficiency gains through the introduction of GenAI
assistants and AI-driven tools to predict asset failures and optimise
predictive maintenance, as well as reducing divisional overheads. The
increased self-delivery of certain works, such as fire, water and asbestos
compliance in Defence, is also starting to gain traction as part of a
Group-wide initiative.
Overall, the Technical Services operating margin reduced to 3.3% (H1 FY24:
3.4%), after factoring in an £11m loss in the telecoms infrastructure
business, which we are taking steps to address and expect to return to a break
even run rate by the end of FY25. Excluding this loss, the operating margin
would have increased to 4.5%. Other factors that influence the margin include:
1) the division absorbing the management cost of IFM contracts; 2) higher
depreciation charges relating to technology investments; 3) exposure to
non-recoverable cost inflation; and 4) the investment to rebuild the order
book for G2 Energy (acquired through a liquidation process in 2023).
Approximately two thirds of Mitie's H1 projects revenue was delivered through
Technical Services. During the period, further capability was added in the
growing power connections market via the acquisition of ESM Power, such that
Mitie now offers a full suite of power connection services of any size and
voltage.
Mitie continues to deliver a range of project works across MoD contracts in
the UK and overseas territories, reflecting the government's commitment to
invest in the country's defence capabilities, and the modernisation and
decarbonisation of its built estate. During H1 the division completed the
refurbishment of 150 properties as part of the Service Family Accommodation
programme. A number of significant projects were also undertaken for FDIS in
Scotland and Northern Ireland, including refurbishment programmes, power
reconfigurations, and demolition works, whilst a critical airfield resurfacing
project commenced at the RAF's Mount Pleasant complex in the Falkland Islands.
More widely, Technical Services installed solar PV panels for NATS, Magnox and
across multiple David Lloyd Sports Centres sites, undertook the restoration of
a prominent Lloyds Banking Group branch, and commenced the refurbishment of a
1960's scenery workshop to create editing suites and offices for the BBC.
Recent awards include Chambers Ireland Awards - Facilities Management Company
of the Year; Global FM Awards - Silver for Business Excellence Smart Toolbox
Programme; RoSPA - 'Gold' Award (Defence - Gibraltar) and 'President's Award
(Defence - Cyprus)
Communities
The Communities division delivers sustainable outcomes as a trusted partner to
the public sector across Local Government & Education, Healthcare and Care
& Custody. The division operates over 100 PFI and traditional commercial
contracts.
Communities, £m H1 FY25 Restated(1) Change Restated(1)
H1 FY24 FY24
Revenue including share of JVs and associates 438 351 25% 717
Local Government & Education 157 142 11% 265
Healthcare 153 135 13% 275
Care & Custody(1) 128 74 73% 177
Operating profit before other items(2) 23.2 16.6 39.8% 36.1
Operating profit margin before other items(2) 5.3% 4.7% +0.6ppt 5.0%
Total order book £4.3bn £3.5bn 23% £4.1bn
(1) Restated to reflect the change to divisional reporting to report Police
services (previously in Care & Custody) in Business Services.
(2) H1 FY24 operating profit re-presented to reclassify a £4.2m provision on
a PFI contract to Other Items (consistent with FY24 reporting).
Performance highlights
· Revenue increased by 25% to £438m (H1 FY24: £351m), reflecting contract
scope increases in Care & Custody, new wins, projects and variable works,
and pricing
· Operating profit before other items up 40% to £23.2m (H1 FY24: £16.6m),
largely reflecting reduced losses on one PFI contract, MEIs and a one-off
legal settlement, partially offset by mobilisation costs on a new contract
· £0.6bn TCV of contract wins, extensions/renewals and scope increases,
resulted in a 5% increase in the total order book to £4.3bn (FY24: £4.1bn)
Operational performance
Communities delivered strong revenue growth in H1, reflecting sustained higher
volumes on the Immigration Escorting Services contract in Care & Custody,
projects and variable works, pricing and the contribution from net wins
(including London Southbank University in the prior year).
Operating profit benefited from the good trading momentum, MEIs, a further
reduction in losses on one historically challenging PFI hospital contract to
£0.7m (H1 FY24: £2.8m loss), reflecting management actions to improve
productivity and re-set pricing, as well as a one-off legal settlement. This
more than offset initial costs relating to the mobilisation of the HMP
Millsike contract, including the recruitment and training of colleagues.
The division secured £0.6bn TCV of contract wins, extensions/renewals and
scope changes to existing contracts. Notable wins included a 10-year £400m
TCV contract to operate HMP Millsike, the UK's first all-electric prison, and
a hard services contract for Coventry & Rugby Hospital, which commenced in
May 2024. Notable extensions/renewals included University Hospitals Dorset and
Birmingham Community Healthcare NHS Foundation Trusts.
Projects included work on a new emergency department resuscitation building,
alongside wider lifecycle projects work on the Dudley Hospital contract, as
well as decarbonisation and energy-efficient classroom expansion works at
schools within the Essex County Council portfolio.
Communities has continued to develop its technology capabilities. Mitie
Healthcare completed a pilot using the Internet of Things (IoT) to track the
location of wheelchairs at a major acute care hospital in partnership with
Vodafone. Following its success, the pilot is being extended to track mobile
critical care appliances. The results of real-time location services at
Cumberland Infirmary, initially deployed in 2022, showed a 58% reduction in
response times, a 65% decrease in porter task times, and a 247% increase in
daily hygiene tasks completed. Trials of Mitie's Merlin for Hygiene
application have been successfully completed in a Health and Care Partnership
facility, with additional education sites planned for H2 to enhance
productivity.
Recent awards include IWFM Positive Impact Climate Action - Towards Net Zero,
Essex County Council
Corporate overheads
Corporate overheads represent the costs of running the Group and include costs
for central functions such as commercial sales and business development,
finance, marketing, legal and HR. Corporate overhead costs have increased by
2% to £25.0m (H1 FY24: £24.4m), reflecting growth in the business, more than
offset by overhead savings across functions and shared services.
Finance review
Alternative Performance Measures
In addition to presenting statutory measures, the Group presents its results
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 the cost of restructuring
programmes, acquisition and disposal related costs (including the 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 is set out below:
£m unless otherwise specified H1 FY25 H1 FY24(1)
Revenue including share of joint ventures and associates 2,430.4 2,132.4
Group revenue 2,425.6 2,083.3
Operating profit before other items 101.1 88.8
Other items (37.7) (32.0)
Operating profit 63.4 56.8
Net finance costs (6.6) (4.5)
Profit before tax 56.8 52.3
Tax (16.7) (9.4)
Profit after tax 40.1 42.9
Less: Profit attributable to non-controlling interest (2.9) -
Profit attributable to owners of the parent 37.2 42.9
Basic earnings per share before other items 5.4p 5.3p
Basic earnings per share 3.0p 3.3p
(1) The comparative figures for H1 FY24 have been re-presented to reclassify
£4.2m (£3.4m net of tax) of acquisition-related costs from 'Operating profit
before other items' to 'Other items', to align with how these costs were
classified in the Annual Report & Accounts for FY24. See Note 1 to the
condensed consolidated financial statements for further details.
Revenue
Revenue for H1 FY25 of £2,430m, including share of revenue from joint
ventures and associates, has improved by 14.0% compared to H1 FY24 (H1 FY24:
£2,132m). Of this growth, 8.1% (£172m) was organic, driven by growth in Core
FM (+4.3ppt), Projects (+0.6ppt), and pricing (+3.2ppt). The remaining 5.9%
(£126m) of growth was inorganic.
Organic Core FM growth of £91m included revenue from new key accounts such as
Aldi, Lidl and EY, higher volumes for the existing Immigration Escorting
Services contract, and the provision of 'surge response' security services for
the Home Office during the summer. This 'surge response' work in H1 FY25
more than offset the revenue delivered in H1 FY24 from the short-term Afghan
Relocations and Inland Border Force contracts.
Organic Projects growth was £13m in the period, underpinned by market macro
trends. Growth was particularly strong in Business Services and Communities,
driven by the upgrade of critical security infrastructure across central
government offices, decarbonisation works, and asset lifecycle upgrades. This
was partially offset by a reduction in Technical Services, where we have
exited certain unprofitable frameworks in the telecoms infrastructure
business, closed the legacy roofing business in H2 FY24, and have seen a
number of customers reassess the significant increase in scale, power and
cooling requirements arising from AI for their data centre builds.
The repricing of revenue for inflation has added £68m in the period (H1 FY24:
£93m), reflecting an average CPI rate for the period of 2.1% (H1 FY24: 7.6%).
The £126m of inorganic growth primarily related to the consolidation of
Landmarc (explained further below) and the acquisitions of JCA Engineering and
GBE Converge in the prior year, combined with the acquisition of ESM Power in
H1 FY25.
Operating profit
Operating profit before other items was £101.1m (H1 FY24: £88.8m), an
increase of £12.3m (+13.9%). This improvement was driven by Core FM and
Projects growth (£14.7m), margin enhancement initiative savings (£11.0m),
and inorganic growth (£7.8m), partially offset by losses in the telecoms
business (-£11.2m), investments in our cost base related to sales, marketing,
technology and the mobilisation of new contracts (-£7.3m), as well as
unrecovered cost inflation (-£2.7m).
Core FM and Projects growth of £14.7m was driven by the revenue growth
outlined above, as well as contract margin improvements, in particular in
Communities where trading on one loss making contract has significantly
improved, and contractual penalty charges have reduced across a number of
contracts. These profit improvements were partially offset by losses of
£11.2m in the telecoms business, which is currently being restructured.
Of the incremental £11.0m of profit from margin enhancement initiatives
(MEI), the Target Operating Model programme contributed £7.5m through
overhead efficiencies such as optimisation of the Group's organisational
structure, and consolidating core systems and processes. This programme has
now also been extended into contracts and operations, contributing an
additional £1.8m of savings through focusing on the design and optimisation
of our account structures, and increasing the levels of 'self-delivery' to
customers by reducing our reliance on third-party contractors. In addition, we
have continued to deliver savings through the roll out of Coupa (our Digital
supplier platform) across the Group, which has contributed £1.7m of savings.
Of the £7.8m of inorganic profit growth, £5.0m relates to the consolidation
of Landmarc (explained further below), and £2.8m to other acquisitions. The
most significant contributions from acquisitions were from JCA Engineering,
GBE Converge and ESM Power, partially offset by an expected loss in G2 Energy,
which is still rebuilding its order book after being acquired through a
liquidation process.
The investments of £7.3m are being made to underpin our growth strategy, and
are focused on sales, marketing and technology. This £7.3m investment will
drive significant growth in FY26 and includes an initial £1.4m of
mobilisation costs for the Millsike prison contract, which, given the scale
and nature of the contract, will be much greater than the costs that are
typically incurred for contract mobilisation.
Operating profit after other items was £63.4m (H1 FY24: £56.8m), a year on
year improvement of 11.6%. This included net charges from other items of
£37.7m (H1 FY24: £32.0m), which are explained below.
Other items
£m H1 FY25 H1 FY24(1)
Target Operating Model (TOM) (8.2) (10.2)
Digital supplier platform (DSP) (1.8) (1.8)
Margin enhancement initiatives (10.0) (12.0)
Employment-linked earnout charges (5.3) (2.6)
Pension-related costs (6.1) -
Professional fees (2.2) (1.6)
Other acquisition related costs(1) (0.1) (4.4)
Amortisation of acquisition related intangible assets (14.0) (11.4)
Acquisition related costs (27.7) (20.0)
Total other items (37.7) (32.0)
(1) The comparative figures for H1 FY24 have been re-presented to reclassify
£4.2m of acquisition-related costs from 'Operating profit before other items'
to 'Other items', to align with how these costs were classified in the Annual
Report & Accounts for FY24. See Note 1 to the condensed consolidated
financial statements for further details.
The Group incurred £37.7m of other item charges in H1 FY25 (H1 FY24:
£32.0m). Of these, £20.6m (H1 FY24: £20.6m) are cash in nature.
Acquisition related costs include employment-linked earnout charges of £5.3m
(H1 FY24: £2.6m), which will be payable to former owners of acquired
businesses if post acquisition performance targets are hit, and employment
conditions are satisfied. Pension-related costs of £6.1m (H1 FY24: £nil)
comprise changes in pension liabilities linked to prior period acquisitions
and disposals, including £2.8m of settlement costs associated with Section 75
pension liabilities, and pre acquisition service costs related to acquired
pension schemes. Further details are set out in Note 3 to the condensed
consolidated financial statements.
Cash other items also includes £10.0m of costs related to delivery of the
Group's margin enhancement initiatives (H1 FY24: £12.0m), which have reduced
by 17% year on year. The reduction in these costs has been driven by the
completion of a number of savings initiatives in H2 FY24 and H1 FY25.
Non-cash costs relate to the amortisation of acquisition related intangible
assets of £14.0m (H1 FY24: £11.4m), and £3.1m of the pension-related costs
outlined above that do not require cash settlement.
Net finance costs
Net finance costs increased to £6.6m in H1 FY25 (H1 FY24: £4.5m), reflecting
the higher levels of net debt explained below.
Tax
The tax charge for the period was £16.7m (H1 FY24: £9.4m), comprising a tax
charge on profit before other items of £23.4m (H1 FY24: £16.1m) and a tax
credit for other items of £6.7m (H1 FY24: £6.7m).
The effective tax rate on profit before other items of 24.8% (H1 FY24: 19.1%)
is higher than in H1 of FY24, because H1 FY24 benefited from additional
deferred tax assets related to the losses acquired with the Interserve
business.
After other items, the tax charge for the period equated to an effective tax
rate of 29.4%, which is higher than the standard corporation tax rate due to
certain other items costs not being deductible for tax purposes.
The Group paid corporation tax of £10.3m in the period (H1 FY24: £6.3m), of
which £8.6m (H1 FY24: £5.1m) was paid in the UK, and £1.7m (H1 FY24:
£1.2m) overseas.
Consolidation of Landmarc
As previously reported, Landmarc has been consolidated as a subsidiary since
November 2023, prior to which it was reported as a joint venture. As a
result of this change (known as a 'step acquisition'), the Group has reported
a year on year increase in revenue (including share of JVs and associates) of
£43m from Landmarc, comprising £42m from the step acquisition (i.e.
inorganic growth) and £1m organic growth.
Operating profit before other items from Landmarc increased by £7.4m,
comprising £5.0m from the step acquisition (i.e. inorganic growth) and £2.4m
from organic growth. The organic growth reflects increased volumes of activity
on the sites that Mitie manages.
The consolidation of Landmarc from November 2023 also gives rise to the
recognition of a non-controlling interest deduction, which represents the
non-controlling interest's (49%) share of Landmarc's profit after tax. In H1
FY25 the deduction was £3.7m before other items. As a result of this
non-controlling interest deduction, whilst the step acquisition of Landmarc
does benefit operating profit (and profit after tax) for the Group, it has no
impact on earnings per share before other items.
Earnings per share
Basic earnings per share before other items increased to 5.4p in the period
(H1 FY24: 5.3p). This improvement is due to the increase in operating profit
in the year (+0.5p), and the reduction in the weighted average number of
shares resulting from the ongoing share buyback programme (+0.3p), offset by
share schemes exercised by colleagues in the period (-0.2p), the increase in
the effective tax rate (-0.4p), and the increase in net finance costs (-0.1p).
Basic earnings per share reduced to 3.0p (H1 FY24: 3.3p). This reflects the
improvement from the factors outlined above, offset by the increase in
acquisition related other items.
Return on invested capital (ROIC)
£m unless otherwise specified H1 FY25 H1 FY24
(R12M)(1) (R12M)(1,2)
Operating profit before other items 222.5 182.9
Tax(3) (48.0) (31.1)
Operating profit before other items after tax 174.5 151.8
Invested capital 688.0 602.8
ROIC % 25.4% 25.2%
( 1) The comparative figures for H1 FY24 have been re-presented to reclassify
£4.2m (£3.4m net of tax) of acquisition-related costs from 'Operating profit
before other items' to 'Other items', to align with how these costs were
classified in the Annual Report & Accounts for FY24. See Note 1 to the
condensed consolidated financial statements for further details.
(2) R12M represents a rolling 12-month basis
(3) Tax charge has been calculated on operating profit before other items
using the effective tax rate for the last 12 months of 21.6% (H1 FY24: 17.0%)
ROIC on a rolling 12-month basis has increased by 0.2ppt to 25.4% in H1 FY25
(H1 FY24: 25.2%) as a result of the increase in operating profit before other
items. The increase in invested capital has been driven by the acquisitions
completed in the last 12 months, and by the continued transition of our leased
fleet to electric vehicles (EVs).
Balance sheet
£m H1 FY25 FY24
Goodwill and intangible assets 637.0 645.1
Property, plant and equipment 230.1 204.7
Working capital balances (194.5) (200.1)
Provisions (85.2) (113.2)
Net debt (187.5) (80.8)
Net retirement benefit assets/(liabilities) 8.2 (0.8)
Deferred tax (liabilities)/assets (2.6) 7.9
Other net assets 13.0 10.9
Total net assets 418.5 473.7
As at 30 September 2024, the Group's reported net assets stood at £418.5m, a
decrease of £55.2m since 31 March 2024. This reduction is driven by the
£108.5m of distributions in the form of share buybacks, dividends and
purchase of own shares into trusts for share incentive schemes, which are also
reflected in the increase in net debt (explained further below in the 'Cash
flow and net debt' section). This reduction was partially offset by the
profit generated for the period of £40.1m.
Goodwill and intangible assets
The decrease of £8.1m is driven by the amortisation of acquired intangible
assets of £14.0m, partially offset by additional goodwill and acquired
intangible assets resulting from the acquisition of ESM Power, and from the
finalisation of the GBE Converge completion accounts (together £5.9m).
Property, plant and equipment
The increase of £25.4m is related to the ongoing transition of our leased
vehicle fleet to more expensive EVs. During H1 FY25, c.900 EVs were added,
taking the proportion of EVs to 75% of the total fleet.
Provisions
At 30 September 2024, provisions totalled £85.2m (FY24: £113.2m), which
largely comprised contract specific costs of £43.7m (FY24: £49.2m) and the
insurance reserve of £27.2m (FY24: £27.2m). Provisions decreased during the
period by £28.0m, primarily due to the transfer of Section 75 pension
liabilities of £21.7m to other payables following the agreement of a schedule
of payments to settle the liability (as explained below). £6.6m of contract
specific provisions were utilised in the period. See Note 10 to the condensed
consolidated financial statements for further details on provisions.
Retirement benefit schemes
At 30 September 2024, the Group's net retirement benefit assets on an IAS 19
basis were £8.2m (FY24: £0.8m net liabilities). The net improvement (£9.0m)
was due to favourable movements in financial assumptions that have resulted in
the main Group scheme moving to a surplus of £8.4m (FY24: £1.4m deficit).
Encouragingly, the latest triennial valuation for the largest scheme showed a
material £72.7m reduction in the actuarial deficit to £19.4m at 31 March
2023. As a result, deficit repair contributions will reduce from c.£14m p.a.
to £8.4m in FY25 (of which the Group paid £5.2m in H1), followed by £6.4m
in FY26 and a smaller contribution, as required, in FY27 in order to eliminate
the funding shortfall.
As noted above, the Group reached a settlement agreement with the trustees of
the multi-employer defined benefit Plumbing & Mechanical Services (UK)
Industry Pension Scheme, which will settle the Section 75 liabilities and
extinguish any future liabilities relating to the scheme. This will result
in equal monthly payments totalling £24.5m over a three-year period
(commencing in H2 FY25). This debt has been fully recognised in other
payables as at 30 September 2024, through the transfer of £21.7m from
provisions and a £2.8m charge arising from the settlement agreement which has
been included in other items in H1 FY25.
Deferred tax
The net deferred tax balance in H1 FY25 was a liability of £2.6m, a change of
£10.5m from the FY24 year end asset of £7.9m. This change was primarily a
result of the utilisation of tax losses.
Cash flow and net debt
£m unless otherwise specified H1 FY25 H1 FY24(1)
Operating profit before other items 101.1 88.8
Add back: depreciation & amortisation 35.6 26.3
EBITDA 136.7 115.1
Other items(2) (20.6) (20.6)
Other operating movements 3.1 1.0
Operating cash flows before movements in working capital 119.2 95.5
Working capital movements(3) (37.6) (22.5)
Capex, capital element of lease payments & other (30.9) (20.8)
Net interest payments (6.1) (4.9)
Tax payments (10.3) (6.3)
Dividends from joint ventures - 6.9
Free cash inflow 34.3 47.9
Share buybacks (54.6) (25.2)
Purchase of own shares into trusts (9.4) (7.1)
Acquisitions (12.2) (45.7)
Dividends paid (44.5) (28.6)
Lease liabilities & other (20.3) (9.9)
Increase in net debt during the period (106.7) (68.6)
Closing net (debt) (187.5) (112.7)
Average daily net (debt) (219.0) (156.1)
Leverage(4) (average daily net debt/EBITDA) 0.7x 0.6x
(1) The comparative figures have been re-presented to reclassify £4.2m of
acquisition-related costs from 'Operating profit before other items' to 'Other
items', to align with how these costs were classified in the Annual Report
& Accounts for FY24. See Note 1 to the condensed consolidated financial
statements for further details.
(2) Other items excluding non-cash amortisation of acquisition related
intangible assets and non-cash pension-related costs
(3) Working capital movements have been adjusted to exclude movements in
restricted cash and other adjustments which do not form part of net debt (as
explained in the Alternative Performance Measures Appendix to the condensed
consolidated financial statements)
(4) Leverage is calculated on a 12-month rolling basis, and uses post-IFRS 16
net debt
Operating cash flows before movements in working capital improved by £23.7m
to £119.2m (H1 FY24: £95.5m), primarily due to the increase in EBITDA driven
by the good trading performance.
The Group generated a free cash inflow of £34.3m for H1 FY25, with the good
trading performance partially offset by anticipated cash outflows from
increased working capital, and higher lease, interest and tax payments
compared to H1 FY24. Dividends received from joint ventures in H1 FY24 (of
£6.9m) related to Landmarc when it was still reported as a joint venture.
The cash outflow from working capital of £37.6m (H1 FY24: £22.5m) reflects
investments required to support the growth of the Projects businesses, and the
seasonal cash outflow caused by the high volume of project works undertaken in
Q4, which unwind in H1. As we expected, we have also seen cash outflows from
working capital where some private sector customers have demanded increasingly
onerous payment terms. We expect this trend will continue in the second half
of the year, and into FY26. Additionally, we benefited from some one off
improvements in cash in the period, including ongoing process improvements and
the renegotiation of certain customer payment terms.
Capex, capital element of lease payments & other increased by £10.1m
compared to H1 FY24, primarily related to the capital element of lease
payments, which increased by £8.9m. The £1.2m increase in net interest
payments was due to the higher levels of net debt, including higher lease
liabilities. Tax payments increased by £4.0m primarily due to the inclusion
of tax payments for the Landmarc subsidiary in H1 FY25, which were not
consolidated in H1 FY24 when Landmarc was still reported as a joint venture.
The share buyback programme for FY25 was doubled to £100m in July. In H1
FY25, 45.2m shares were repurchased (at a cost of £54.6m), of which 33.9m
have been cancelled. A further 8.2m shares were purchased into employee
trusts to satisfy share schemes (at a cost of £9.4m).
Acquisitions have increased net debt by £12.2m, including the acquisition of
ESM Power in the period for cash consideration, net of cash acquired, of
£4.3m, the increase of £1.5m in consideration paid for GBE Converge arising
from the completion accounts settlement and employment-linked earnout payments
of £6.4m related to prior period acquisitions.
Dividends paid of £44.5m include the final FY24 dividend of £38.5m, which
was paid in August 2024, with the higher cash outflow reflecting the increase
in the FY24 final dividend per share of 3.0p compared to FY23 (2.2p). A £6.0m
dividend was paid to the Landmarc minority shareholder.
Lease liabilities & other include an increase in lease liabilities in H1
FY25 (net of capital repayments) of £20.7m (H1 FY24: £9.7m), as we
transition our fleet to EVs, and extend the average duration of leases. By the
end of H1 FY25, 75% of the total fleet was electric, compared with 53% at the
end of H1 FY24.
Net debt
Average daily net debt of (£219.0m) for H1 FY25 was £58.3m higher than in
FY24 (£160.7m), resulting in a leverage ratio (average daily net debt /
EBITDA) of 0.7x for H1 FY25 (FY24: 0.6x), lower than our 0.75x to 1.5x
guidance. Closing net debt of £187.5m as at 30 September 2024 was £106.7m
higher (FY24: £80.8m).
These increases during H1 FY25 were driven by capital returns to shareholders
and acquisitions totalling £120.7m, as outlined above, combined with
additional lease liabilities of £20.7m, partially offset by the free cash
inflow of £34.3m.
Liquidity and covenants
As at 30 September 2024, the Group had £400m of committed funding
arrangements, comprising a £250m Revolving Credit Facility (RCF), and £150m
of US Private Placement (USPP) notes. In October 2024 the maturity of the
RCF was extended by one year to October 2028. The final £30m of the USPP
notes issued in 2012 are due to mature in December 2024.
On 25 July 2024, DBRS Morningstar confirmed Mitie's credit rating of BBB with
a 'stable' outlook.
Mitie's two key covenant ratios are covenant 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. Covenant ratios are measured
on a post-IFRS 16 basis with appropriate adjustments for leases, being
primarily the exclusion of lease liabilities from net debt and the inclusion
of a charge equivalent to lease payments against EBITDA.
As at 30 September 2024, the Group was operating well within these ratios at
< 0x covenant leverage and 68.0x interest cover. A reconciliation of the
calculations is set out in the table below:
H1 FY25 H1 FY24 (R12M)(5,6)
£m unless otherwise specified (R12M)(5)
Operating profit before other items 222.5 182.9
Add: depreciation & amortisation 67.2 54.1
Headline EBITDA 289.7 237.0
Add: covenant adjustments(1) 21.6 21.5
Leases adjustment(2) (53.8) (39.0)
Consolidated EBITDA (a) 257.5 219.5
Full-year effect of acquisitions & disposals 6.6 9.1
Full-year effect of Landmarc step acquisition 0.3 -
Adjusted consolidated EBITDA (b) 264.4 228.6
Net finance costs 11.5 8.6
Less: covenant adjustments (0.6) (0.1)
Leases adjustment(3) (7.1) (4.7)
Consolidated net finance costs (c) 3.8 3.8
Interest cover (ratio of (a) to (c)) 68.0x 57.8x
Net debt 187.5 112.7
Impact of hedge accounting & upfront fees 2.2 2.6
Leases adjustment(4) (194.7) (139.1)
Consolidated total net cash (d) (5.0) (23.8)
Covenant leverage (ratio of (d) to (b)) < 0x < 0x
(1) Covenant adjustments to EBITDA relate to share-based payments charges, and
pension administration expenses and past service costs
(2) Leases adjustment for EBITDA relates to depreciation charge for leased
assets and interest charge for lease liabilities (i.e. application of a charge
equivalent to lease payments)
(3) Leases adjustment for net finance costs relates to interest charge for
lease liabilities (i.e. removal of interest on lease liabilities)
(4) Leases adjustment for net debt relates to lease liabilities (i.e. removal
of lease liabilities)
(5) R12M represents a rolling 12-month basis
(6) The comparative figures have been re-presented to reclassify £4.2m of
acquisition-related costs from 'Operating profit before other items' to 'Other
items', to align with how these costs were classified in the Annual Report
& Accounts for FY24. See Note 1 to the condensed consolidated financial
statements for further details.
Principal risks and uncertainties affecting the business
The Group continues to operate within a constantly changing external risk
environment, which includes political instability, economic uncertainty,
environmental concerns, and technological advancements. In the first half of
FY25, the Group - as a major provider of services to the public sector - has
responded to a range of matters, including changes in policy by the new
Government which are relevant to the Group's business and supporting the
Government's response to the UK civil unrest during the summer. Throughout
this period, the Group has shown substantial resilience, adaptability and the
ability to seize opportunities arising out of the evolving environment.
In the second half of the year, the most prominent challenge for the Group is
anticipated to be the continuing political and economic uncertainties,
worsened by the current geopolitical landscape and escalating tensions.
The new Government has announced policy modifications that could have direct
implications on our operations in the future, such as the changes to National
Insurance announced in the recent Autumn Budget and the comprehensive changes
to employment rights proposed by the Employment Rights Bill, which was
recently introduced to Parliament; however, the precise impacts remain
unknown. Further details on our strategies to address these challenges as they
emerge can be found in the Group's Annual Report and Accounts 2024 on pages 82
to 88.
Responsibility statement
The Directors of Mitie Group plc confirm that, to the best of their knowledge:
· the unaudited condensed consolidated financial statements have been prepared
in accordance with UK-adopted International Accounting Standard 34 Interim
Financial Reporting; and
· the interim management report, as required by rules 4.2.7R and 4.2.8R of the
Disclosure Guidance and Transparency Rules, includes a fair review of:
- important events during the six months ended 30 September 2024 and their
impact on the unaudited condensed consolidated financial statements;
- a description of the principal risks and uncertainties for the second half
of the year; and
- related parties' transactions and changes therein.
The names and functions of the Directors of Mitie Group plc are available on
the Group's website:
www.mitie.com/investors/corporate-governance/our-board.
On behalf of the Board
Phil Bentley
Chief Executive Officer
20 November 2024
INDEPENDENT REVIEW REPORT TO MITIE GROUP PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with UK-adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed consolidated
statement of changes in equity, the condensed consolidated statement of cash
flows and the related Notes 1 to 18.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410
(Revised)"). A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in Note 1(b), the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK-adopted International
Accounting Standard 34, Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
Group to cease to continue as a going concern.
Responsibilities of directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the 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 Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion section of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
20 November 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Condensed consolidated income statement
For the six months ended 30 September 2024
30 September 2023
30 September 2024
Notes Before Other Total Before Other Total
Other items(1)
items(1
£m
Other items(1,2)
items(1,2
£m
£m ) £m
£m ) £m
Revenue including share of joint ventures and associates 2 2,430.4 - 2,430.4 2,132.4 - 2,132.4
Less: share of revenue of joint ventures and associates(3) 2 (4.8) - (4.8) (49.1) - (49.1)
Group revenue 2 2,425.6 - 2,425.6 2,083.3 - 2,083.3
Cost of sales (2,171.8) - (2,171.8) (1,861.4) - (1,861.4)
Gross profit 253.8 - 253.8 221.9 - 221.9
Administrative expenses (157.5) (37.7) (195.2) (138.6) (32.0) (170.6)
Other income 4.5 - 4.5 1.3 - 1.3
Share of profit of joint ventures and associates(3) 0.3 - 0.3 4.2 - 4.2
Operating profit/(loss)(4) 2 101.1 (37.7) 63.4 88.8 (32.0) 56.8
Finance income 1.9 - 1.9 1.8 - 1.8
Finance costs (8.5) - (8.5) (6.3) - (6.3)
Net finance costs (6.6) - (6.6) (4.5) - (4.5)
Profit/(loss) before tax 94.5 (37.7) 56.8 84.3 (32.0) 52.3
Tax 4 (23.4) 6.7 (16.7) (16.1) 6.7 (9.4)
Profit/(loss) after tax 71.1 (31.0) 40.1 68.2 (25.3) 42.9
Attributable to:
Equity holders of the parent 67.4 (30.2) 37.2 68.2 (25.3) 42.9
Non-controlling interests 3.7 (0.8) 2.9 - - -
Profit/(loss) for the period 71.1 (31.0) 40.1 68.2 (25.3) 42.9
Earnings per share (EPS) attributable to
owners of the parent
Basic 6 5.4p 3.0p 5.3p 3.3p
Diluted 6 5.0p 2.7p 4.8p 3.0p
Notes:
1. Other items are as described in Note
3.
2. In the comparative period for the six months ended 30 September 2023, a
charge of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items. This reclassification within the Group's
Alternative Performance Measures has no impact on the statutory profit or EPS
for the period then ended. Refer to Note 1.
3. The Group obtained control of Landmarc Support Services Limited
(Landmarc) on 16 November 2023, and since that date Landmarc's financial
results have been consolidated as
a subsidiary of the Group. Prior to 16 November 2023, Landmarc was accounted
for as a joint venture of the Group.
4. Including impairment losses on trade receivables, other receivables and
accrued income of £3.2m (2023: £1.4m).
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2024
Notes 30 September 30 September
2024 2023
£m
£m
Profit for the period 40.1 42.9
Items that will not be reclassified to profit or loss in subsequent periods
Remeasurement of retirement benefit assets/obligations 16 6.9 (7.3)
Tax (charge)/credit relating to items that will not be reclassified to profit (0.5) 0.3
or loss in subsequent periods
6.4 (7.0)
Items that may be reclassified to profit or loss in subsequent periods
Exchange differences on translation of foreign operations (0.9) (0.4)
Net losses on cash flow hedges taken to equity - (0.1)
Tax credit relating to items that may be reclassified to profit or loss in - 0.1
subsequent periods
(0.9) (0.4)
Other comprehensive income/(expense) for the period 5.5 (7.4)
Total comprehensive income for the period 45.6 35.5
Attributable to:
Equity holders of the parent 42.6 35.5
Non-controlling interests 3.0 -
Total comprehensive income for the period 45.6 35.5
Condensed consolidated statement of financial position
As at 30 September 2024
Notes 30 September 31 March
2024 2024
£m
£m
Non-current assets
Goodwill 7 366.6 361.7
Other intangible assets 270.4 283.4
Property, plant and equipment(1) 13 230.1 204.7
Interests in joint ventures and associates 1.3 0.9
Trade and other receivables 8 20.6 21.0
Contract assets 0.4 0.5
Retirement benefit assets 16 10.4 4.2
Deferred tax assets - 7.9
Total non-current assets 899.8 884.3
Current assets
Inventories 15.1 14.7
Trade and other receivables 8 930.4 775.1
Contract assets 1.3 1.0
Current tax receivable 10.6 7.8
Cash and cash equivalents 11 159.0 244.9
Total current assets 1,116.4 1,043.5
Total assets 2,016.2 1,927.8
Current liabilities
Trade and other payables 9 (987.7) (892.4)
Deferred income (129.5) (91.8)
Current tax payable (2.9) (2.0)
Financing liabilities 12 (79.1) (73.8)
Provisions 10 (39.4) (66.5)
Total current liabilities (1,238.6) (1,126.5)
Net current liabilities (122.2) (83.0)
Non-current liabilities
Trade and other payables 9 (28.1) (12.7)
Deferred income (17.0) (15.5)
Financing liabilities 12 (263.4) (247.7)
Provisions 10 (45.8) (46.7)
Retirement benefit liabilities 16 (2.2) (5.0)
Deferred tax liabilities (2.6) -
Total non-current liabilities (359.1) (327.6)
Total liabilities (1,597.7) (1,454.1)
Net assets 418.5 473.7
Note:
1. Includes owned property, plant and equipment of £43.1m (31 March 2024:
£39.2m) and right-of-use assets of £187.0m (31 March 2024: £165.5m). During
the six months ended 30 September 2024, owned property, plant and equipment
assets increased due to asset additions of £9.1m (of which £7.0m was settled
in cash during the period) and £0.5m arising on acquisition of businesses,
partially offset by depreciation of £5.6m and disposals of £0.1m. Refer to
Note 13 for right-of-use assets .
Condensed consolidated statement of financial position continued
As at 30 September 2024
30 September 2024 31 March
£m
2024
£m
Equity
Share capital 32.5 33.3
Share premium 132.0 132.0
Merger reserve 157.0 157.0
Own shares reserve (71.3) (69.8)
Share-based payments reserve 36.8 42.1
Capital redemption reserve 4.1 3.3
Hedging and translation reserve (3.0) (2.1)
Retained profits 112.9 157.4
Equity attributable to owners of the parent 401.0 453.2
Non-controlling interests 17.5 20.5
Total equity 418.5 473.7
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2024
30 September 2024
Share capital Share Merger Own shares Share-based payments reserve Capital redemption reserve Hedging and Retained Total attributable to owners of the parent Non-controlling interests Total equity
£m premium reserve(1) reserve
translation profits
£m
£m
£m
£m £m £m
reserve
£m £m £m
£m
At 1 April 2024 33.3 132.0 157.0 (69.8) 42.1 3.3 (2.1) 157.4 453.2 20.5 473.7
Profit for the period - - - - - - - 37.2 37.2 2.9 40.1
Other comprehensive income - - - - - - (0.9) 6.3 5.4 0.1 5.5
Total comprehensive income - - - - - - (0.9) 43.5 42.6 3.0 45.6
Transactions with owners
Dividends paid - - - - - - - (38.5) (38.5) - (38.5)
Purchase of own shares(2) - - - (9.4) - - - - (9.4) - (9.4)
Share buybacks(3) (0.8) - - (13.4) - 0.8 - (41.2) (54.6) - (54.6)
Share-based payments - - - 21.3 (5.3) - - (7.6) 8.4 - 8.4
Tax on share-based payments - - - - - - - (0.7) (0.7) - (0.7)
Non-controlling interest dividends - - - - - - - - - (6.0) (6.0)
Total transactions with owners (0.8) - - (1.5) (5.3) 0.8 - (88.0) (94.8) (6.0) (100.8)
At 30 September 2024 32.5 132.0 157.0 (71.3) 36.8 4.1 (3.0) 112.9 401.0 17.5 418.5
Notes:
1. The merger reserve represents amounts relating to premiums arising on
shares issued subject to the provisions of Section 612 of the Companies Act
2006.
2. During the period the Employee Benefit Trust acquired 7.7m ordinary
shares through market purchases for a consideration of £8.8m and the Share
Incentive Plan Trust acquired 0.5m shares for a consideration of £0.6m.
3. The share buybacks resulted in market purchases of 45.2m ordinary shares,
of which 33.9m shares were subsequently cancelled and 11.3m shares were bought
into Treasury.
30 September 2023
Share capital Share Merger Own shares Share-based payments reserve Capital redemption reserve Hedging and Retained profits Total equity Non-controlling interests Total equity
£m premium reserve(1) reserve
translation
£m
£m
£m
£m
£m £m £m reserve £m £m
£m
At 1 April 2023 34.0 131.5 157.0 (59.0) 33.7 2.6 (1.4) 123.3 421.7 - 421.7
Profit for the period - - - - - - - 42.9 42.9 - 42.9
Other comprehensive expense - - - - - - (0.4) (7.0) (7.4) - (7.4)
Total comprehensive income - - - - - - (0.4) 35.9 35.5 - 35.5
Transactions with owners
Dividends paid - - - - - - - (28.6) (28.6) - (28.6)
Purchase of own shares(2) - - - (7.1) - - - - (7.1) - (7.1)
Share buybacks(3) (0.1) - - (20.4) - 0.1 - (4.8) (25.2) - (25.2)
Share-based payments - 0.4 - 11.0 3.4 - - (2.8) 12.0 - 12.0
Tax on share-based payments - - - - - - - 3.3 3.3 - 3.3
Total transactions with owners (0.1) 0.4 - (16.5) 3.4 0.1 - (32.9) (45.6) - (45.6)
At 30 September 2023 33.9 131.9 157.0 (75.5) 37.1 2.7 (1.8) 126.3 411.6 - 411.6
Notes:
1. The merger reserve represents amounts relating to premiums arising on
shares issued subject to the provisions of Section 612 of the Companies Act
2006.
2. During the period the Employee Benefit Trust acquired 6.9m ordinary
shares through market purchases for a consideration of £6.7m and the Share
Incentive Plan Trust acquired 0.4m shares for a consideration of £0.4m.
3. The share buybacks resulted in market purchases of 26.2m ordinary shares,
of which 4.9m shares were subsequently cancelled and 21.3m shares were bought
into Treasury.
Condensed consolidated statement of cash flows
For the six months ended 30 September 2024
Notes 30 September 2024 30 September 2023
£m
£m
Operating profit before Other items(1) 2 101.1 88.8
Other items(1) 3 (37.7) (32.0)
Operating profit 63.4 56.8
Adjustments for:
Share-based payments expense 8.5 11.6
Defined benefit pension costs 16 4.5 1.9
Defined benefit pension contributions 16 (6.4) (8.3)
Depreciation of property, plant and equipment 31.5 21.7
Amortisation of intangible assets 17.8 15.6
Share of profit of joint ventures and associates (0.3) (4.2)
Amortisation of contract assets 0.3 0.4
Gain on disposal of property, plant and equipment (0.1) -
Operating cash flows before movements in working capital 119.2 95.5
Increase in inventories (0.4) (0.8)
(Increase)/decrease in receivables (146.8) 35.1
Increase in contract assets (0.3) (0.1)
Increase in deferred income 34.3 2.3
Increase/(decrease) in payables 82.2 (61.2)
(Decrease)/increase in provisions (6.8) 2.2
Cash generated from operations 81.4 73.0
Income taxes paid 4 (10.3) (6.3)
Interest paid(2) (7.9) (6.8)
Net cash generated from operating activities 63.2 59.9
Investing activities
Acquisition of businesses, net of cash acquired(3) 15 (5.8) (45.7)
Interest received 1.8 1.9
Purchase of property, plant and equipment (7.0) (5.2)
Dividends received from joint ventures and associates - 6.9
Purchase of other intangible assets (3.7) (3.5)
Disposal of property, plant and equipment 0.2 0.1
Net cash used in investing activities (14.5) (45.5)
Notes:
1. In the comparative period for the six months ended 30 September 2023, a
charge of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items. This reclassification within the Group's
Alternative Performance Measures has no impact on the statutory profit for the
period then ended. Refer to Note 1.
2. Interest paid includes £4.1m (2023: £2.6m) in relation to lease
liabilities. Refer to Note 13.
3. Acquisition of businesses is net of cash acquired of £1.4m (2023:
£20.9m). Refer to Note 15.
Condensed consolidated statement of cash flows continued
For the six months ended 30 September 2024
Notes 30 September 2024 30 September 2023
£m
£m
Financing activities
Purchase of own shares (9.4) (7.1)
Shares bought back (54.6) (25.2)
Capital element of lease rentals 13 (26.8) (17.9)
Lease incentives received - 5.7
Repayment of bank loans - (8.3)
Payment of arrangement fees - (1.1)
Proceeds received on settlement of share-based payment transactions 0.9 0.4
Equity dividends paid 5 (38.5) (28.6)
Dividends paid to non-controlling interest (6.0) -
Net cash used in financing activities (134.4) (82.1)
Net decrease in cash and cash equivalents (85.7) (67.7)
Net cash and cash equivalents at beginning of the period 244.9 248.3
Effect of foreign exchange rate changes (0.2) (0.4)
Net cash and cash equivalents at end of the period 11 159.0 180.2
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2024
1. Basis of preparation and significant accounting policies
(a) Basis of preparation
Mitie Group plc (the Company) is a company incorporated in the United Kingdom
and registered in Scotland. The Company's registered office is at 35 Duchess
Road, Rutherglen, Glasgow, G73 1AU. The Group comprises the Company and all
its subsidiaries.
These unaudited condensed consolidated financial statements (the condensed
consolidated financial statements) for the six months ended 30 September 2024
have been prepared in accordance with UK-adopted International Accounting
Standard (IAS) 34 Interim Financial Reporting, and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The condensed consolidated financial statements have been reviewed by BDO LLP
but have not been audited. They do not include all the information and
disclosures required in the annual financial statements, and therefore should
be read in conjunction with the Group's Annual Report and Accounts for the
year ended 31 March 2024 (Annual Report and Accounts 2024).
These condensed consolidated financial statements do not comprise statutory
accounts within the meaning of Section 434 of the Companies Act 2006. A copy
of the statutory accounts for the year ended 31 March 2024 has been delivered
to the Registrar of Companies and is available upon request from the Company's
registered office or at www.mitie.com/investors. The independent auditor's
report for the year ended 31 March 2024 was unqualified and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act 2006.
The condensed consolidated financial statements were approved by the Board of
Directors on 20 November 2024.
Going concern
The condensed consolidated financial statements for the six months ended 30
September 2024 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 6 to 77 of the Annual Report and Accounts 2024
and the principal risks and uncertainties as set out on pages 78 to 88 and the
viability statement on page 90 of the same.
The Directors have carried out an assessment of the Group's ability to
continue as a going concern for the period of at least 12 months from the date
of approval of the condensed consolidated 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 over the Going Concern Assessment Period.
The Group's principal debt financing arrangements as at 30 September 2024 were
a £250m Revolving Credit Facility (RCF), which was undrawn as at 30 September
2024, and £150m of US private placement (USPP) notes. 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.
In September 2023, the Group increased the RCF from £150m to £250m and its
maturity date was extended for one year to October 2027. In October 2024 the
maturity date was extended for one further year such that the RCF now matures
in October 2028.
Of the USPP notes, £120m were issued in December 2022, split equally between
8, 10 and 12 year maturities, and with an average coupon of 2.94%. The Base
Case Forecasts assume that the remaining £30m of USPP notes, which are due to
mature in December 2024, will not be replaced.
Mitie currently operates within the terms of its agreements with its lenders,
with consolidated net cash (i.e. net cash adjusted for covenant purposes,
primarily by the exclusion of lease liabilities) of £5.0m as at 30 September
2024. The Base Case Forecasts indicate that the Group will continue to operate
within these terms and that the headroom provided by the Group's 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's cash
flow model to assess the point at which the financial 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 further
UK budgetary changes, the continued impact of the Russian invasion of Ukraine,
conflict within the Middle East and high inflation:
• 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 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.
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 37% by 30 September 2026 (H1 FY27), compared to the Base Case
Forecasts, which 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 the
COVID-hit year ended 31 March 2021, Mitie's revenue excluding Interserve
declined by only 1.6%; and
• 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 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 has adequate resources to continue in operational existence for a
period of no less than 12 months from the date of approval of these condensed
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.
(b) Material accounting policies
In preparing these condensed consolidated financial statements for the six
months ended 30 September 2024, the Group's accounting policies and methods of
computation are consistent with those applied in the preparation of the
Group's annual consolidated financial statements for the year ended 31 March
2024, which were prepared in accordance with UK-adopted International
Accounting Standards in conformity with the requirements of the Companies Act
2006.
None of the new or amended standards and interpretations below that are
effective for the first time for the year ending 31 March 2025 have had a
material effect on the Group.
• Amendments to IAS 1 Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current
• Amendments to IAS 1 Presentation of Financial Statements - Non-current
Liabilities with Covenants
• Amendments to IFRS 16 Leases - Lease Liability in a Sale and Leaseback
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments -
Supplier Finance Arrangements
None of the new standards and amendments that are not yet effective are
expected to have a material effect on the Group other than presentational
changes that will be required for the year ending 31 March 2028 under IFRS 18
Presentation and Disclosure in Financial Statements, the impact of which is
being assessed.
Statutory and non-statutory measures of performance
As a result of the non-statutory measures of performance presented in the
condensed consolidated financial statements, the accounting policy used in
determining the non-statutory measures of performance, which has remained
unchanged in the six months ended 30 September 2024, is set out below.
In the condensed consolidated 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 its operations.
Other items are items of financial performance which management believes
should be separately identified on the face of the condensed consolidated
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, charges with respect to
employment-linked earnouts, fair value gain on acquisitions, gain or loss on
business disposals, cost of restructuring programmes and other exceptional
items as Other items, together with their related tax effect. Should these
items be reversed, disclosure of this would also be as Other items. The
associated post-acquisition trading results generated by acquired businesses
and the benefits from restructuring programmes are not included as Other
items.
Separate presentation of these items is intended to enhance understanding of
the financial performance of the Group in the period and the extent to which
results are influenced by material unusual and/or non-recurring items. Further
detail of Other items is set out in Note 3.
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 condensed consolidated financial
statements (refer to Appendix 1).
Re-presentation of comparative Other items
In the comparative period for the six months ended 30 September 2023, a charge
of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items. This reclassification within the Group's
Alternative Performance Measures has no impact on the statutory profit or EPS
for the period then ended.
The charge being re-presented was in respect of an adjustment to a provision
on a certain PFI contract. This provision was recognised on the acquisition of
Interserve and the provision was originally recognised against goodwill. The
reclassification is to ensure consistency with how equivalent credits were
reported in the second half of the year ended 31 March 2024, and with how this
charge was presented in the Annual Report and Accounts 2024.
As a result of the re-presentation, the operating profit before Other items
for the six months ended 30 September 2023 has increased by £4.2m
(re-presented from £84.6m to £88.8m), with a corresponding increase in net
costs classified as Other items of £4.2m (re-presented from a net charge of
£27.8m to £32.0m). The corresponding tax impact of this re-presentation has
also been re-presented, resulting in an increase in the profit after tax
before Other items for the six months ended 30 September 2023 of £3.4m
(re-presented from £64.8m to £68.2m).
(c) Critical accounting judgements and key sources of estimation uncertainty
In preparing these condensed consolidated financial statements, the
significant estimates and judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the Annual Report and Accounts 2024.
2. Business segment information
The Group's operating segments are established on the basis of those
components of the Group that are evaluated regularly by the Chief Operating
Decision Maker in deciding how to allocate resources and in assessing
performance. The Group has determined the Chief Operating Decision Maker to be
its Board of Directors. 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. Segment assets and liabilities have not been
disclosed as they are not reviewed by the Board.
The Group manages its business on a service division basis. During the period,
the Group re-organised its Central Government and Defence (CG&D) division,
as a result of which the Central Government business was moved into the
Business Services division, and the Defence business was moved into the
Technical Services division. As a result of the re-organisation, CG&D is
not considered to be an operating segment for the six months ended 30
September 2024, and the Group has three reportable segments (2024: four
segments). Furthermore, the Police Services business has been re-organised
from the Communities division to the Business Services division. The change in
operating segments reflects how the Chief Operating Decision Maker evaluates
the divisions and their performance and decides on resource allocation.
The comparatives for the six months ended 30 September 2023 have been restated
for the change in the composition of reportable segments.
Income statement information
Restated(1)
Six months ended 30 September 2024 Six months ended 30 September 2023
Revenue Operating profit/(loss) before Other items(3 Operating margin before Other items(3 Revenue Operating profit/(loss) before Other items(3) Operating
£m ) £m ) %
£m
£m
margin before Other items(3)
%
Business Services 1,079.2 72.8 6.7 955.9 68.4 7.2
Technical Services(2) 913.1 30.1 3.3 825.3 28.2 3.4
Communities(2) 438.1 23.2 5.3 351.2 16.6 4.7
Corporate centre - (25.0) - - (24.4) -
Total for the Group 2,430.4 101.1 4.2 2,132.4 88.8 4.2
Notes:
1. The comparatives for the six months ended 30 September 2023 have been
restated for the change in the composition of reportable segments. In
addition, a charge within the Communities division of £4.2m which was
previously classified within administrative expenses before Other items
(£3.4m net of tax), has been re-presented to be disclosed as Other items in
line with the presentation in the Annual Report and Accounts 2024. Refer to
Note 1.
2. Revenue includes share of joint ventures and associates of £4.8m (2023:
£5.4m) within Communities. For Technical Services, revenue for the six months
ended 30 September 2023 includes the share of revenue from Landmarc of
£43.7m. From 16 November 2023, Landmarc has been consolidated as a subsidiary
of the Group.
3. Other items are as described in Note 3.
4. No single customer accounted for more than 10% of external revenue in the
six months ended 30 September 2024 or in the comparative period. The UK
Government is not considered a single customer.
A reconciliation of operating profit before Other items to total profit before
tax is provided below:
Six months ended 30 September 2024 Six months ended 30 September 2023(1)
£m £m
Operating profit before Other items 101.1 88.8
Other items(2) (37.7) (32.0)
Net finance costs (6.6) (4.5)
Profit before tax 56.8 52.3
Notes:
1. The comparatives for the six months ended 30 September 2023 have been
re-presented to include a charge of £4.2m within Other items in line with the
presentation in the Annual Report and Accounts 2024. The charge was previously
classified within administrative expenses before Other items. Refer to Note 1.
2. Other items are as described in Note 3.
Disaggregated revenue
The Group disaggregates revenue from contracts with customers by sector
(government and non-government). Management believes that this best depicts
how the nature 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.
Restated(1)
Six months ended 30 September 2024 Six months ended 30 September 2023
Sector(2) Sector(2)
Government Non-government Total Government Non-government Total
£m
£m
£m
£m
£m
£m
Business Services 468.2 611.0 1,079.2 445.1 510.8 955.9
Technical Services 385.0 528.1 913.1 309.5 515.8 825.3
Communities 437.3 0.8 438.1 350.3 0.9 351.2
Revenue including joint ventures and associates 1,290.5 1,139.9 2,430.4 1,104.9 1,027.5 2,132.4
Less: share of joint ventures and associates(3) (4.8) - (4.8) (49.1) - (49.1)
Group revenue 1,285.7 1,139.9 2,425.6 1,055.8 1,027.5 2,083.3
Notes:
1. The comparatives for the six months ended 30 September 2023 have been
restated for the change in the composition of reportable segments.
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 includes share of joint ventures and associates of £4.8m (2023:
£5.4m) within Communities. For Technical Services, revenue for the six months
ended 30 September 2023 includes the share of revenue from Landmarc of
£43.7m. From 16 November 2023, Landmarc has been consolidated as a subsidiary
of the Group.
3. Other items
Other items are items of financial performance which management believes
should be separately identified on the face of the condensed consolidated
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, charges with respect to
employment-linked earnouts, fair value gain on acquisitions, gain or loss on
business disposals, cost of restructuring programmes and other exceptional
items as Other items, together with their related tax effect:
Six months ended 30 September 2024
Restructure costs Acquisition and disposal Other exceptional Total
£m
related costs
items
£m
£m
£m
Other items before tax (8.2) (27.7) (1.8) (37.7)
Tax 2.1 4.2 0.4 6.7
Other items after tax (6.1) (23.5) (1.4) (31.0)
Six months ended 30 September 2023(1)
Restructure costs Acquisition and disposal Other exceptional Total
£m
related costs
items
£m
£m
£m
Other items before tax (10.2) (20.0) (1.8) (32.0)
Tax 2.6 3.7 0.4 6.7
Other items after tax (7.6) (16.3) (1.4) (25.3)
Note:
1. Other items for the period ended 30 September 2023 has been re-presented
to include a £4.2m charge within acquisition and disposal related costs which
was previously classified within administrative expenses. As a result, Other
items for the period ended 30 September 2023 have increased by £4.2m to
£32.0m, and the related tax credit has increased by £0.8m to £6.7m. Refer
to Note 1.
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. Material transformation programmes are included as Other
items where initiatives are considered to be non-recurring in nature and are
not considered to be normal operating costs of the business. Restructure costs
of £8.2m (2023: £10.2m) are in respect of the Target Operating Model (TOM)
transformation programme, and includes the further outsourcing of back-office
functions, consolidating systems and processes, and optimising the
organisation structure. Cumulative cash costs of £36.8m (2023: £18.4m) have
been recognised within the condensed consolidated income statement and
classified as Other items since its launch in 2022. The programme is expected
to complete by 31 March 2025.
The costs associated with the Group transformation programme include £2.7m of
external consultancy costs (2023: £2.9m), fixed-term staff costs of £2.6m
(2023: £3.3m) to manage and implement changes and redundancy costs of £2.9m
(2023: £1.4m). For the period ended 30 September 2023, dual-run licence costs
in relation to a decommissioned operating system of £2.3m and onerous lease
costs of £0.3m, were also incurred. The associated tax credit for restructure
costs recognised as Other items is £2.1m (2023: £2.6m).
Acquisition and disposal related costs
Six months ended Six months ended
30 September 2024 30 September 2023(2)
£m £m
Employment-linked earnout charges (5.3) (2.6)
Pension-related costs(1) (6.1) -
Professional fees (2.2) (1.6)
Other acquisition related costs(2) (0.1) (4.4)
Amortisation of acquisition related intangible assets (14.0) (11.4)
Acquisition and disposal costs (27.7) (20.0)
Tax 4.2 3.7
Acquisition and disposal costs net of tax (23.5) (16.3)
Notes:
1. Includes a £2.8m charge where the Group entered into a settlement
agreement with the trustees of the Plumbing Scheme with respect to its Section
75 debt in relation to the previously disposed Social Housing business. In
addition, a £2.0m contract settlement charge has been recognised to reverse
the gross surplus on certain Local Government Pension Schemes (LGPS), however
an asset ceiling had been applied and therefore no net surplus was recognised
on the condensed consolidated statement of financial position. The reversal of
the asset ceiling has been credited to other comprehensive income. There is
also a £1.1m past service cost charge and a related £0.2m of administrative
expense arising on changes to the Landmarc pension scheme rules that increase
member benefits for pre-acquisition services. Refer to Note 16.
2. The comparative for the period ended 30 September 2023 has been
re-presented to include a £4.2m charge (£3.4m net of tax) which was
previously classified within administrative expenses before Other items. Refer
to Note 1.
Other exceptional items
Other exceptional items of £1.8m (2023: £1.8m) relate to the implementation
of a new digital supplier platform resulting in a step change in the Group's
supply chain management capabilities. These comprise fixed-term staff costs of
£1.3m (2023: £1.3m) and third-party implementation costs of £0.5m (2023:
£0.5m). This implementation, which is transformational in nature, is expected
to be completed during the year ending 31 March 2025. Cumulative cash costs of
£13.3m (2023: £9.6m) have been recognised within the condensed consolidated
income statement and classified as Other items since its launch in 2022.
4. Tax
The tax charge for the period has been calculated based upon the effective tax
rate expected to apply to the Group for the year ending 31 March 2025, using
rates substantively enacted by 30 September 2024. The rate of tax on profit
before Other items for the period was 24.8% (2023: 19.1%). The rate of 24.8%
is slightly lower than the UK statutory rate of 25%, mainly due to the
effective tax rate on overseas profits being lower than 25%. The rate
incorporates the impact of Pillar Two income taxes, which is estimated to be a
charge of £0.2m for the year ending 31 March 2025 (2024: not applicable).
The lower prior year effective tax rate on profit before Other items reflected
the benefit of recognising additional deferred tax assets related to the
losses acquired with the Interserve business. Excluding the impact of this
benefit, the effective tax rate on profit before Other items for the six
months ended 30 September 2023 would have been 24.1%. The Group expects its
sustainable effective tax rate to continue to be approximately equal to the UK
statutory rate, which increased from 19% to 25% with effect from 1 April 2023.
The effective tax rate on total profits was 29.4%, which is higher than the UK
statutory rate primarily due to non-tax deductible acquisition related costs
which are charged to Other items. The tax credit on Other items equates to a
rate of tax of 17.8% (2023: 20.9%).
Corporation tax payments for the period amounted to £10.3m (2023: £6.3m), of
which £8.6m (2023: £5.1m) was paid in the UK and £1.7m (2023: £1.2m) was
paid overseas.
The Group has unutilised income tax losses of £118.7m (31 March 2024:
£151.4m) that are available for offset against future profits. A deferred tax
asset has been recognised in respect of £90.5m (31 March 2024: £123.2m) of
these losses to the extent that it is probable that taxable profits will be
generated in the future and be available for utilisation. When considering the
recoverability of deferred tax assets, the taxable profit forecasts are based
on the same information used to support the going concern and goodwill
assessments.
No deferred tax asset has been recognised in respect of losses of £13.0m (31
March 2024: £13.0m) and disallowed interest under UK corporate interest
restriction rules of £15.2m (31 March 2024: £15.2m) because recoverability
is uncertain. All amounts may be carried forward indefinitely. Deferred tax
has been calculated using tax rates that were substantively enacted at the
condensed consolidated statement of financial position date.
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.
5. Dividends
During the six months ended 30 September 2024, the Group paid £38.5m in
respect of the final dividend for the year ended 31 March 2024 of 3.0p per
share (31 March 2023: 2.2p). The Board has declared an interim dividend for
the year ending 31 March 2025 of 1.3p per share (31 March 2024: 1.0p per
share) which will be paid on 4 February 2025 to all shareholders on the
register at the close of business on 20 December 2024.
6. Earnings per share
The calculation of the basic and diluted EPS is based on the following data:
Six months ended Six months ended
30 September 2024 30 September 2023(1)
£m £m
Profit before Other items attributable to owners of the parent 67.4 68.2
Other items net of tax attributable to owners of the parent(2) (30.2) (25.3)
Profit attributable to owners of the parent 37.2 42.9
Notes:
1. In the comparative period for the six months ended 30 September 2023, a
charge of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items. Refer to Note 1.
2. Other items are as described in Note 3.
Number of shares Six months ended Six months ended
30 September 2024
30 September 2023
million
million
Weighted average number of ordinary shares for the purpose of basic EPS(1) 1,258.5 1,290.6
Effect of dilutive potential ordinary shares 101.1 127.0
Weighted average number of ordinary shares for the purpose of diluted EPS 1,359.6 1,417.6
Note:
1. The weighted average number of ordinary shares in issue during the period
excludes those accounted for in the own shares reserve.
Six months ended Six months ended
30 September 2024 30 September 2023
pence per share pence per share
Basic EPS before Other items(1,2) 5.4 5.3
Basic EPS 3.0 3.3
Diluted EPS before Other items(1,2) 5.0 4.8
Diluted EPS 2.7 3.0
Notes:
1. Other items are as described in Note 3.
2. Basic and diluted earnings per share before Other items at 30 September
2023 have been re-presented to reflect the change to profit before Other items
as set out above. Refer to Note 1.
7. Goodwill
£m
Cost
At 31 March 2024 394.2
Arising on business combinations(1) 4.9
At 30 September 2024 399.1
Accumulated impairment losses
At 31 March 2024, 30 September 2024 32.5
Net book value
At 31 March 2024 361.7
At 30 September 2024 366.6
Note:
1. Includes goodwill of £3.1m arising from the Group's acquisition of ESM
Power during the six months ended 30 September 2024, and £1.8m of goodwill
arising upon measurement period adjustments relating to the prior year
acquisitions of GBE and Cliniwaste. Refer to Note 15.
8. Trade and other receivables
30 September 31 March
2024 2024
£m £m
Trade receivables 477.9 411.5
Accrued income 371.4 302.7
Prepayments 61.4 50.5
Other receivables 40.3 31.4
Total 951.0 796.1
Included in current assets 930.4 775.1
Included in non-current assets 20.6 21.0
Total 951.0 796.1
Trade receivables at 30 September 2024 represent 29 days credit on sales (31
March 2024: 25 days). Management considers that the carrying amount of trade
and other receivables approximates their fair value.
9. Trade and other payables
30 September 31 March
2024 2024
£m £m
Trade payables 285.0 171.6
Other taxes and social security 154.1 156.1
Other payables 68.0 42.9
Accruals 508.7 534.5
Total 1,015.8 905.1
Included in current liabilities 987.7 892.4
Included in non-current liabilities(1) 28.1 12.7
Total 1,015.8 905.1
Note:
1. As at 30 September 2024, non-current other payables mainly comprise the
Section 75 employer debt liabilities (refer to Note 10), contingent
consideration and performance-based employment-linked earnouts arising on the
acquisitions of ESM Power, RHI Industrials, Biservicus, JCA Engineering and
Custom Solar.
Trade payables at 30 September 2024 represent 38 days credit on trade
purchases (31 March 2024: 22 days). Management considers that the carrying
amount of trade and other payables approximates their fair value.
10. Provisions
Contract Insurance Pension Dilapidations Restructuring Other Total
specific
reserve
£m
£m
£m
£m
£m
costs
£m
£m
At 31 March 2024 49.2 27.2 21.7 8.2 2.4 4.5 113.2
Additional provisions in the period 1.8 6.3 - 1.0 0.5 0.1 9.7
Released to the income statement (0.8) (0.4) - (0.1) - - (1.3)
Arising on business combinations 0.1 - - - - - 0.1
Transferred to other payables - - (21.7) - - - (21.7)
Utilised in the period (6.6) (5.9) - - (1.3) (1.0) (14.8)
At 30 September 2024 43.7 27.2 - 9.1 1.6 3.6 85.2
Included in current liabilities 23.4 9.7 - 1.4 1.6 3.3 39.4
Included in non-current liabilities 20.3 17.5 - 7.7 - 0.3 45.8
Total 43.7 27.2 - 9.1 1.6 3.6 85.2
Contract specific costs
Contract specific costs provisions of £43.7m (31 March 2024: £49.2m)
comprise onerous contract provisions of £9.0m (31 March 2024: £8.8m) and
other contract specific provisions of £34.7m (31 March 2024: £40.4m).
Onerous contracts are mainly in respect of 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, as disclosed in the Annual Report and Accounts 2024. The Group
recognised additional onerous contract provisions of £1.6m, of which £0.1m
arose on business combinations, and utilised £1.4m in the period.
Contract specific provisions have been made primarily to cover remedial and
rectification costs required to meet clients' contract terms, and include a
£10.9m (31 March 2024: £10.9m) provision relating to a significant liability
risk on a certain contract which is subject to dispute, a £3.4m (31 March
2024: £3.8m) provision relating to remedial works on a certain contract, a
£4.5m (31 March 2024: £4.6m) provision relating to a commercial settlement
dispute for a certain contract, and a £4.7m (31 March 2024: £6.3m) provision
for rectification works on a certain contract. 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 period the Group recognised additional contract specific provisions of
£0.3m, utilised £5.2m, and released £0.8m.
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 condensed consolidated statement of financial position date.
The provision is expected to be utilised over five years.
The insurance reserve of £27.2m is presented gross of an insurer
reimbursement asset of £4.4m (31 March 2024: £4.9m), which represents the
amount the Group is virtually certain to recover for claims under its
insurance policies. Of this other receivable, £2.8m (31 March 2024: £3.2m)
is presented as non-current.
Pension
The pension provision balance at 31 March 2024 comprised £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 & Mechanical
Services (UK) Industry Pension Scheme (the Plumbing Scheme), a funded
multi-employer defined benefit scheme.
During the period, a settlement agreement was reached with the trustees of the
Plumbing Scheme. As a result of this, the amount of £21.7m has been
transferred from provisions to other payables, and a further charge of £2.8m
has been recognised as Other items in respect of Mitie Property Services (UK)
Limited's participation in the Plumbing Scheme. These amounts are expected
to be paid over a period of three years.
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 provision would include the costs for repairs of
any damage and wear and tear and is expected to be utilised in the next ten
years.
Restructuring
The restructuring provision as at 30 September 2024 includes additions of
£0.5m, which have been recognised within Other items in relation to
redundancies with respect to the Group's Target Operating Model programme,
where a detailed formal plan is in place and a valid expectation in those
affected has been raised. The amount is expected to be utilised within the
next year.
11. Cash and cash equivalents
30 September 31 March
2024 2024
£m £m
Cash and cash equivalents 159.0 244.9
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. The
Group's bank arrangements provide the legally enforceable right to offset and
the Group demonstrates its intention to offset by formally sweeping the
balances within each bank account. The balances are therefore offset in the
financial statements.
At 30 September 2024, included within cash and cash equivalents is £4.0m (31
March 2024: £4.2m) which is subject to various constraints on the Group's
ability to utilise these balances. These constraints primarily relate to cash
held through a joint operation, or in escrow, where cash is not available for
use by the Group.
12. Financing liabilities
Notes 30 September 31 March
2024
2024
£m
£m
Private placement notes 150.0 150.0
Lease liabilities 13 194.7 174.0
Loan arrangement fees (2.2) (2.5)
Total 342.5 321.5
Included in current liabilities 79.1 73.8
Included in non-current liabilities 263.4 247.7
Total 342.5 321.5
In September 2023, the Group increased its revolving credit facility from
£150.0m to £250.0m, and the maturity date was extended by one year from
October 2026 to October 2027. In October 2024 the maturity date was extended
for one further year such that the facility now matures in October 2028. All
other terms remain unchanged and the facility was undrawn at the time of the
modification.
In December 2022, the Group issued £120.0m of new US private placement (USPP)
notes, under a delayed funding agreement to avoid any overlap with the
£121.5m (being the repayment amount after taking account of the
cross-currency interest rate swaps) of notes that matured in the same month.
The new notes are split equally between 8, 10 and 12 year maturities, and were
issued with an average coupon of 2.94%. A further £30.0m of USPP notes with a
coupon of 4.04% are due to mature in December 2024.
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 compliant with these
covenants as at 30 September 2024 and hence all amounts are classified in line
with repayment dates.
At 30 September 2024, the Group had available £250.0m (31 March 2024:
£250.0m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met.
13. Leases
Right-of-use assets Properties Plant and vehicles Total
£m
£m
£m
At 31 March 2024 35.2 130.3 165.5
Additions 4.1 43.1 47.2
Modifications to lease terms and disposals (0.3) 0.5 0.2
Depreciation (3.2) (22.7) (25.9)
At 30 September 2024 35.8 151.2 187.0
Lease liabilities £m
At 31 March 2024 174.0
Additions 45.4
Modifications to lease terms and disposals 2.1
Interest expense related to lease liabilities 4.1
Repayment of lease liabilities (including interest) (30.9)
At 30 September 2024 194.7
30 September 31 March
2024 2024
£m £m
Included in current liabilities 49.7 44.4
Included in non-current liabilities 145.0 129.6
Total 194.7 174.0
14. Analysis of net debt
Notes 30 September 31 March
2024
2024 £m
£m
Cash and cash equivalents ( ) 11 159.0 244.9
Adjusted for: restricted cash(1) (4.0) (4.2)
Private placement notes 12 (150.0) (150.0)
Loan arrangement fees 12 2.2 2.5
Net cash before lease obligations 7.2 93.2
Lease liabilities 13 (194.7) (174.0)
Net debt (187.5) (80.8)
Note:
1. Restricted cash is subject to various constraints on the Group's ability
to utilise these balances. These constraints primarily relate to cash held
through a joint operation, or in escrow, where cash is not available for use
by the Group.
Reconciliation of net cash flow to movements in net debt Six months ended 30 September 2024 Six months ended
£m 30 September 2023
£m
Notes
Net decrease in cash and cash equivalents (85.7) (67.7)
Decrease in restricted cash 0.2 -
Net decrease in unrestricted cash and cash equivalents (85.5) (67.7)
Cash drivers
Repayment of bank loans - 8.3
Payment of arrangement fees - 1.1
Capital element of lease rentals 13 26.8 17.9
Non-cash drivers
Non-cash movement in bank loans 12 (0.3) (0.1)
Non-cash movement in lease liabilities 13 (47.5) (27.6)
Effect of foreign exchange rate changes (0.2) (0.5)
Increase in net debt during the period (106.7) (68.6)
Opening net debt (80.8) (44.1)
Closing net debt (187.5) (112.7)
15. Acquisitions
ESM Power
On 1 August 2024, the Group completed the acquisition of the entire issued
share capital of ESM Power Limited and Woodford Investments Limited (together
ESM Power) for a consideration of £5.9m, which comprises an initial cash
consideration of £5.7m, and £0.2m contingent on the outcome of a completion
accounts process. ESM Power is a leading electrical engineering business
specialising in grid and power connections and will enhance the Group's high
voltage connections expertise.
Amounts up to a maximum of £3.0m payable to the former owners of the business
are treated as remuneration for post-acquisition employment services because a
condition of receiving payment is the former owners' continued employment
within the Mitie Group. These amounts are payable based on two performance
periods for the years ending 31 March 2025 and 31 March 2026 up to a maximum
of £3.0m in total. Accruals where required are recognised over the period
that the related employment services are received up until the point at which
the consideration becomes payable.
ESM Power contributed £7.7m of revenue and £1.1m of operating profit before
Other items to the Group's results during the six months ended 30 September
2024. Goodwill on the acquisition of ESM Power represents the premium
associated with taking over the operations which are considered to strengthen
the Group's high voltage connections expertise. The Group's assessments of the
fair values of the assets and liabilities recognised as a result of the
acquisition are provisional and will be finalised within 12 months of the
acquisition date. The provisional purchase price allocation is as follows:
Provisional fair value
£m
Customer contracts 1.3
Property, plant and equipment 0.5
Trade and other receivables 9.9
Cash and cash equivalents 1.4
Trade and other payables (4.4)
Deferred income (5.0)
Provisions (0.1)
Current tax liabilities (0.5)
Deferred tax liabilities (0.3)
Net identifiable assets acquired 2.8
Goodwill 3.1
Total cash consideration 5.9
Prior period acquisitions
On 1 November 2023 and 9 October 2023, the Group completed the acquisitions of
GBE Converge Group Ltd (GBE) and Cliniwaste Holdings Limited (Cliniwaste)
respectively. The accounting for these acquisitions was disclosed as
provisional within the Group's results for the year ended 31 March 2024.
The Group has used the 12-month measurement period from the date of
acquisition, in accordance with IFRS 3 Business Combinations, to finalise the
fair value measurement relating to the completion accounts process. During the
six months ended 30 September 2024, the fair value of consideration and
corresponding goodwill for GBE was increased by £1.5m following the outcome
of the completion accounts process. The increase in consideration was cash
settled during the period.
In addition, the fair value of the acquired net assets for Cliniwaste
decreased by £0.3m due to a fair value adjustment, which led to a
corresponding increase in goodwill of £0.3m.
Cash flows on acquisitions
Six months ended Six months ended
30 September 2024 30 September 2023
£m
£m
Cash consideration 7.2 66.6
Less: cash balance acquired (1.4) (20.9)
Net outflow of cash - investing activities 5.8 45.7
16. 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 the Group scheme, the Landmarc scheme
and other smaller schemes.
The Group operates a number of defined contribution pension schemes for
qualifying employees. During the six months ended 30 September 2024, the Group
made a total contribution to defined contribution schemes of £10.3m (2023:
£7.5m) and contributions to the auto-enrolment scheme of £12.2m (2023:
£10.9m), which are included in the income statement charge.
The defined benefit schemes include the Mitie Group plc Pension Scheme (Group
scheme), which is comprised of two segregated sections: Part A (the Group
section) and Part B (the Interserve section), and the Landmarc scheme. The
Group obtained control of Landmarc Support Services Limited (Landmarc) on 16
November 2023. Landmarc is the employing company for the Landmarc scheme,
which commenced on 1 July 2003, at which time approximately 1,000 employees
became members of the scheme. On 1 July 2021 the last remaining active members
ceased accrual and the Landmarc scheme closed to future accrual. In December
2022, the trustee of the Landmarc scheme entered into a qualifying insurance
buy-in to secure the remaining uninsured benefits of the scheme.
The Group also operates a number of 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. Other schemes also include the Admitted Body schemes,
which are largely sections of Local Government Pension Schemes (LGPS), in
respect of certain employees who transferred to the Group under the Transfer
of Undertakings (Protection of Employment) Regulations 2006 (TUPE) or through
the acquisition of subsidiary companies.
The Group is aware of a case involving Virgin Media and NTL Pension Trustee,
which could potentially lead to additional liabilities for some pension
schemes and sponsors in the UK. Developments on this issue are being
monitored but at this stage the impact, if any, is not known and will be
assessed, if applicable, in the future.
Principal accounting assumptions at statement of financial position date
Group section Interserve section Landmarc scheme Other schemes
30 September 2024 31 March 2024 30 September 2024 31 March 30 September 2024 31 March 30 September 2024 31 March 2024
%
%
%
%
%
%
2024 2024
%
%
Key assumptions used for IAS 19 valuation:
Discount rate 5.09 4.84 5.11 4.80 5.10 4.80 5.11 4.80
Expected rate of pensionable pay increases 2.51 2.63 2.65 2.80 3.10 3.30 3.38 2.80
Retail price inflation 3.13 3.26 3.10 3.20 3.10 3.30 3.10 3.20
Consumer price inflation 2.51 2.63 2.65 2.80 2.60 2.70 2.65 2.80
Future pension increases 2.51 2.63 2.65 2.80 3.10 3.30 2.77 3.20
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 (Decrease)/ increase (Decrease)/ increase
assumption
in obligations
in obligations
%
£m
Increase in discount rate 0.25% (3.3) (9.2)
Increase in inflation-linked assumptions(1) 0.25% 2.3 6.4
Increase in consumer price inflation (excluding pay) 0.25% 1.1 3.1
Increase in life expectancy 1 year 3.3 9.2
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, such as a change in discount rates as a
result of a change in UK corporate bond yields.
Amounts recognised in financial statements
Amounts recognised in the condensed consolidated income statement are as
follows:
30 September 2024 30 September 2023
Group Interserve Landmarc scheme £m Other Total Group Interserve Landmarc scheme £m Other Total
section
section
schemes
£m
scheme
scheme
schemes
£m
£m
£m
£m
£m
£m
£m
Current service cost - (0.2) - (0.4) (0.6) - (0.3) - (0.5) (0.8)
Past service cost (including curtailments/settlements) (1,2) - - (1.1) (2.0) (3.1) - - - (0.2) (0.2)
Total administration expense(1) (0.5) - (0.2) (0.1) (0.8) (0.9) - - - (0.9)
Amounts recognised in operating profit (0.5) (0.2) (1.3) (2.5) (4.5) (0.9) (0.3) - (0.7) (1.9)
Net interest income - - 0.1 - 0.1 0.1 0.1 - - 0.2
Amounts recognised in profit before tax (0.5) (0.2) (1.2) (2.5) (4.4) (0.8) (0.2) - (0.7) (1.7)
Notes:
1. During the period ended 30 September 2024, an agreement to amend the
Landmarc scheme rules to increase certain cash benefits which members receive
on retirement was completed. The Group incurred a £1.1m past service cost
charge and administrative expenses of £0.2m in relation to the amendment of
the Landmarc scheme rules, which have been recognised in the condensed
consolidated income statement as Other items. Refer to Note 3.
2. During the period ended 30 September 2024, the Group formally exited
certain LGPS schemes, resulting in a £2.0m contract settlement charge, which
was recognised within Other items. Refer to Note 3.
Amounts recognised in the condensed consolidated statement of comprehensive
income are as follows:
30 September 2024 30 September 2023
Group Other Total Group Other Total
section
schemes
£m
scheme
£m
£m Interserve Landmarc scheme £m
£m
£m schemes
section
£m Interserve Landmarc scheme £m
scheme
£m £m
Actuarial gains arising due to changes in financial assumptions 8.0 1.0 1.6 2.7 13.3 21.4 2.0 - 9.2 32.6
Actuarial gains/(losses) arising from liability experience - 2.0 (0.3) (0.2) 1.5 (4.9) (0.3) - (0.1) (5.3)
Actuarial (losses)/gains arising due to changes in demographic assumptions (0.2) 0.3 - 0.5 0.6 - - - - -
Movement in asset ceiling, excluding interest(1) - - - (2.6) (2.6) - - - (2.3) (2.3)
Return on scheme assets, excluding interest income (5.6) (1.2) (1.1) 2.0 (5.9) (23.1) (3.2) - (5.9) (32.2)
Return on reimbursement asset(2) - - - - - - - - (0.1) (0.1)
Amounts recognised in condensed consolidated statement of comprehensive income 2.2 2.1 0.2 2.4 6.9 (6.6) (1.5) - 0.8 (7.3)
Notes:
1. The £2.6m net charge for the period ended 30 September 2024 includes a
£2.0m credit with respect to the reversal of gross surplus associated with
the exit of certain LGPS schemes.
2. The reimbursement asset of £0.9m at 30 September 2024 (31 March 2024:
£0.9m) is recorded within other receivables.
The amounts included in the condensed consolidated statement of financial
position are as follows:
30 September 2024 31 March 2024
Group Interserve Landmarc scheme £m Other Total Group Interserve Landmarc scheme £m Other Total
section
section
schemes
£m
section
section
schemes
£m
£m
£m
£m
£m
£m
£m
Fair value of scheme assets 175.0 23.9 39.9 77.1 315.9 174.8 24.4 41.1 80.0 320.3
Present value of defined benefit obligations (170.1) (20.4) (37.9) (52.0) (280.4) (177.4) (23.2) (38.1) (58.1) (296.8)
Surplus without restriction 4.9 3.5 2.0 25.1 35.5 (2.6) 1.2 3.0 21.9 23.5
Effect of asset ceiling - - - (27.3) (27.3) - - - (24.3) (24.3)
Net pension asset/(liability) 4.9 3.5 2.0 (2.2) 8.2 (2.6) 1.2 3.0 (2.4) (0.8)
Movements in the present value of defined benefit obligations were as follows:
Group Interserve Landmarc scheme Other Total
section
section
£m
schemes
£m
£m
£m
£m
At 31 March 2024 177.4 23.2 38.1 58.1 296.8
Current service cost - 0.2 - 0.4 0.6
Interest cost 4.2 0.6 0.9 1.2 6.9
Contributions from scheme members - 0.1 - 0.1 0.2
Actuarial gains arising due to changes in financial assumptions (8.0) (1.0) (1.6) (2.7) (13.3)
Actuarial (gains)/losses arising from experience - (2.0) 0.3 0.2 (1.5)
Actuarial losses/(gains) arising due to changes in demographic assumptions 0.2 (0.3) - (0.5) (0.6)
Benefits paid (3.7) (0.4) (0.9) (0.7) (5.7)
Past service cost - - 1.1 - 1.1
Contract settlement - - - (4.1) (4.1)
At 30 September 2024 170.1 20.4 37.9 52.0 280.4
Movements in the fair value of scheme assets were as follows:
Group Interserve Landmarc scheme Other Total
section
section
£m
schemes
£m
£m
£m
£m
At 31 March 2024 174.8 24.4 41.1 80.0 320.3
Interest income 4.2 0.6 1.0 1.7 7.5
Actuarial (losses)/gains on assets (5.6) (1.2) (1.1) 2.0 (5.9)
Contributions from the sponsoring companies(1) 5.8 0.4 - 0.2 6.4
Contributions from scheme members - 0.1 - 0.1 0.2
Expenses paid (0.5) - (0.2) (0.1) (0.8)
Benefits paid (3.7) (0.4) (0.9) (0.7) (5.7)
Contract settlement - - - (6.1) (6.1)
At 30 September 2024 175.0 23.9 39.9 77.1 315.9
Note:
1. Group section contributions of £5.8m (2023: £7.7m) are inclusive of
£5.2m of deficit repair contributions (2023: £7.0m).
17. 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 six months ended 30 September 2024, the Group
made donations and gifts in kind of £0.2m (2023: £0.1m) to the Foundation.
During the period ended 30 September 2024, the Group recognised revenue from
transactions with joint ventures or associates of £2.0m (2023: £1.4m). The
amounts due from joint ventures and associates at 30 September 2024 was £0.1m
(31 March 2024: £nil) and no expense has been recognised in the period for
bad or doubtful debts in respect of the amounts owed by joint ventures and
associates (2023: £nil).
All transactions with these related parties were made on terms equivalent to
those that prevail in arm's length transactions.
18. Events after the reporting period
Grupo Visegurity acquisition
On 7 October 2024, the Group acquired Grupo Visegurity (Visegurity) for a
maximum cash consideration of €11.0m (£9.2m), comprising an initial cash
payment of €9.0m (£7.5m) and contingent consideration linked to performance
of up to €2.0m (£1.7m) which is payable over two years. Visegurity has over
20 years of experience in security services in Spain, primarily focusing on
manned guarding, alarm response and access control, alongside concierge,
patrol and security systems services and is complementary to the strategic
expansion of the Group's security capabilities in Spain. Given the proximity
of the acquisition to the reporting date, management has provided information
available at the time of approval of the condensed consolidated financial
statements. Further disclosures will be made within the Group's Annual Report
and Accounts for the year ending 31 March 2025.
Argus Fire acquisition
On 24 October 2024, the Group acquired Argus Fire Protection Company Limited
(Argus Fire) for a total cash consideration of £36.9m (net of cash acquired).
Argus Fire has over 40 years of experience specialising in the design,
installation, servicing and maintenance of active fire protection systems,
using sprinklers and inert gas to control fire outbreaks, alongside electronic
fire detection and alarm systems. The acquisition significantly enhances
Mitie's scale and self-delivered offering in this market. Given the proximity
of the acquisition to the reporting date, management has provided information
available at the time of approval of the condensed consolidated financial
statements. Further disclosures will be made within the Group's Annual Report
and Accounts for the year ending 31 March 2025.
Appendix 1 - 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, charges with respect to employment-linked earnouts, fair value gain on
acquisitions, gain or loss on business disposals, cost of restructuring
programmes and other exceptional items. Further details of these Other items
are provided in Note 3.
Operating profit Six months ended 30 September 2024 Six months ended 30 September 2023(1)
£m
£m
Operating profit Statutory measures 63.4 56.8
Adjust for: restructure costs Note 3 8.2 10.2
Adjust for: acquisition and disposal related costs Note 3 27.7 20.0
Adjust for: other exceptional items Note 3 1.8 1.8
Operating profit before Other items Performance measures 101.1 88.8
Note:
1. The comparatives for the six months ended 30 September 2023 have been
restated for the change in the composition of reportable segments. In
addition, a charge of £4.2m (£3.4m net of tax) which was previously
classified within administrative expenses before Other items, has been
re-presented to be disclosed as Other items, in line with the presentation in
the Annual Report and Accounts 2024. Refer to Note 1.
Reconciliations are provided below to show how the Group's segmental reported
results are adjusted to exclude Other items.
Six months ended 30 September 2024 Six months ended 30 September 2023(1)
£m
£m
Operating profit/(loss) Reported Adjust for: Performance measures Reported Adjust for: Performance
results
Other items
results
Other items
measures
(Note 3)
(Note 3)
Segment
Business Services 69.6 3.2 72.8 67.0 1.4 68.4
Technical Services 21.7 8.4 30.1 24.5 3.7 28.2
Communities 22.5 0.7 23.2 12.4 4.2 16.6
Corporate centre (50.4) 25.4 (25.0) (47.1) 22.7 (24.4)
Total 63.4 37.7 101.1 56.8 32.0 88.8
Note:
1. The comparatives for the six months ended 30 September 2023 have been
restated for the change in the composition of reportable segments. In
addition, a charge of £4.2m (£3.4m net of tax) which was previously
classified within administrative expenses before Other items, has been
re-presented to be disclosed as Other items, in line with the presentation in
the Annual Report and Accounts 2024. Refer to Note 1.
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. The table below reconciles this to the statutory basic earnings per
share.
Earnings per share Six months ended Six months ended
30 September 2024
30 September 2023
pence
pence(1)
Statutory basic earnings per share Statutory measures 3.0 3.3
Adjust for: Other items per share 2.4 2.0
Basic earnings per share before Other items Performance measures 5.4 5.3
Note:
1. Basic earnings per share before Other items for the six months ended 30
September 2023 has been re-presented to reflect the change to profit before
Other items. Refer to Note 1.
Net debt and total financial obligations
Net 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. Restricted cash, which is subject to various
constraints on the Group's ability to utilise these balances, has been
excluded from the net debt measure.
Total financial obligations (TFO) is defined as the Group's net debt including
net retirement benefit liabilities. TFO represents all debt-like financing
items the Group has made use of at period end.
A reconciliation from reported figures is presented below:
Net debt 30 September 2024 31 March
£m
2024
£m
Cash and cash equivalents Statutory measures 159.0 244.9
Adjusted for: restricted cash Note 11 (4.0) (4.2)
Financing liabilities Note 12 (342.5) (321.5)
Net debt Performance measures (187.5) (80.8)
Net retirement benefit assets/(liabilities) Note 16 8.2 (0.8)
TFO Performance measures (179.3) (81.6)
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. This
measure showed average daily net debt of £219.0m for the six months ended 30
September 2024 and compared with £160.7m for the year ended 31 March 2024.
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 Six months ended ( )
30 September 2024
£m Six months ended
30 September 2023
£m
Net cash generated from operating activities Statutory measures 63.2 59.9
Add: net decrease in restricted cash 0.2 -
Interest received 1.8 1.9
Dividends received from joint ventures and associates - 6.9
Employment-linked earnouts 6.4 -
Purchase of property, plant and equipment (7.0) (5.2)
Purchase of other intangible assets (3.7) (3.5)
Disposal of property, plant and equipment 0.2 0.1
Lease incentives received - 5.7
Capital element of lease rentals paid Note 13 (26.8) (17.9)
Free cash inflow Performance measures 34.3 47.9
Earnings before interest, tax, depreciation and amortisation
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a
measure of the Group's profitability. EBITDA is measured as profit before tax
excluding the impact of net finance costs, Other items, depreciation on
property, plant and equipment, amortisation and impairment of non-current
assets and amortisation of contract assets.
EBITDA Six months ended Six months ended
30 September 2024 30 September 2023(1)
£m
£m
Profit before tax Statutory measures 56.8 52.3
Add: net finance costs 6.6 4.5
Operating profit 63.4 56.8
Add: Other items Note 3 37.7 32.0
Operating profit before Other items 101.1 88.8
Add:
Depreciation of property, plant and equipment 31.5 21.7
Amortisation of non-current assets(2) 3.8 4.2
Amortisation of contract assets 0.3 0.4
EBITDA Performance measures 136.7 115.1
Notes:
1. In the comparative period for the six months ended 30 September 2023, a
charge of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items, in line with the presentation in the Annual Report
and Accounts 2024. Refer to Note 1.
2. Excludes amounts classified in the condensed 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, based on a 12-month rolling operating profit before Other items after
tax.
30 September 2024 31 March
£m
2024 30 September 2023(1)
£m
£m
Net assets Statutory measures 418.5 473.7 411.6
Add:
Non-current liabilities 359.1 327.6 333.4
Current provisions Note 10 39.4 66.5 57.7
Current Private Placement notes Note 12 30.0 30.0 -
Deduct:
Non-current deferred tax assets - (7.9) (19.7)
Cash and cash equivalents Note 11 (159.0) (244.9) (180.2)
Invested capital Performance measures 688.0 645.0 602.8
Operating profit before Other items(2) 222.5 210.2 182.9
Tax(3) (48.0) (39.7) (31.1)
Operating profit before Other items after tax(2) 174.5 170.5 151.8
ROIC % Performance measures 25.4% 26.4% 25.2%
Notes:
1. In the comparative period for the six months ended 30 September 2023, a
charge of £4.2m (£3.4m net of tax) which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items, in line with the presentation in the Annual Report
and Accounts 2024. Refer to Note 1.
2. Operating profit is presented on a rolling 12-month basis.
3. The tax charge has been calculated at the effective tax rate on pre-tax
profits before other items of 21.6% (31 March 2024: 18.9%, 30 September 2023:
17.0%).
Appendix 2 - Change in divisional reporting
As part of the new Facilities Transformation Three-Year Plan (FY25 - FY27),
the Group has simplified its organisational structure to align to the core
service line capabilities of Engineering, Security and Hygiene. From the
start of FY25 the Central Government & Defence division (CG&D) was
absorbed into Business Services (Central Government) and into Technical
Services (Defence). Police services, which was previously reported within
Communities, is now reporting into Business Services.
The prior year comparatives, restated to reflect the resulting change in
reportable segments, are provided below.
For the six months ended 30 September 2023
Restated As reported(1)
Six months ended 30 September 2023 Six months ended 30 September 2023
£m
£m
Revenue Operating profit/(loss) before Other items Revenue Operating profit/(loss) before Other items
Business Services 955.9 68.4 719.0 41.7
Technical Services 825.3 28.2 635.9 19.5
CG&D - - 406.6 34.0
Communities 351.2 16.6 370.9 18.0
Corporate centre - (24.4) - (24.4)
Total 2,132.4 88.8 2,132.4 88.8
Note:
1. For the six months ended 30 September 2023, a charge within the
Communities division of £4.2m which was previously classified within
administrative expenses before Other items, has been re-presented to be
disclosed as Other items, in line with the presentation in the Annual Report
and Accounts 2024. Refer to Note 1.
For the year ended 31 March 2024
Restated As reported
Year ended 31 March 2024 Year ended 31 March 2024
£m
£m
Revenue Operating profit/(loss) before Other items Revenue Operating profit/(loss) before Other items
Business Services(1) 1,977.2 149.8 1,489.7 97.0
Technical Services(1) 1,816.9 74.9 1,326.5 44.3
CG&D - - 937.7 80.4
Communities 716.6 36.1 756.8 39.1
Corporate centre - (50.6) - (50.6)
Total 4,510.7 210.2 4,510.7 210.2
Note:
1 FY24 restated Defence revenue within Technical Services includes £77m
reclassified from Central Government relating to the Landmarc step change
acquisition.
For the year ended 31 March 2023
Restated As reported
Year ended 31 March 2023 Year ended 31 March 2023
£m
£m
Revenue Operating profit/(loss) before Other items Revenue Operating profit/(loss) before Other items
Business Services 1,893.5 136.5 1,413.8 92.3
Technical Services 1,543.0 52.4 1,154.1 34.1
CG&D - - 828.3 59.8
Communities 618.6 28.7 658.9 31.4
Corporate centre - (55.5) - (55.5)
Total 4,055.1 162.1 4,055.1 162.1
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