Annual Financial Report

RNS Number : 7828E

MITIE Group PLC

06 June 2012

 



6 June 2012

MITIE Group PLC

MITIE Group PLC (the "Company") - Annual Financial Report

Following the release on 21 May 2012 of the Company's preliminary results for the year ended 31 March 2012 (the 'Preliminary Announcement'), the Company announces that it has published its Annual Report and Accounts for 2012 (the 'Annual Report and Accounts').  

The Company's 2012 Annual General Meeting will be held at UBS Investment Bank, 1 Finsbury Avenue, London, EC2M 2PP on 11 July 2012 at 2.30pm.

Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting for 2012 (the 'AGM Notice') are available to view on the Company's website: www.mitie.com.  Hard copies have been mailed to those shareholders who have elected to continue to receive paper communications. 

Copies of the Annual Report and Accounts, the AGM Notice, and the form of proxy in relation to the AGM are being submitted to the National Storage Mechanism and will be shortly be available for inspection at: www.hemscott.com/nsm.do.

The Preliminary Announcement included a set of financial statements and a review of the development and performance of the Company.  In compliance with Disclosure and Transparency Rule (DTR) 6.3.5 the Company has extracted and set out below certain information from its Annual Report and Accounts 2012.  This information is included herein solely for the purpose of complying with DTR 6.3.5 and the requirements it imposes on the Company as to how to make public its annual financial reports.  It should be read in conjunction with the Company's Preliminary Announcement issued on 21 May 2012.  Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the full 2012 Annual Report and Accounts.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2012 Annual Report and Accounts.

The information contained in this announcement and in the Preliminary Announcement does not constitute the Group's statutory accounts but is derived from those accounts.  The statutory accounts for the year ended 31 March 2012 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Principal Risks and Uncertainties 

Following the establishment of our new Enterprise Risk function in 2011, a fundamental review of the way risks are identified, analysed and controlled was undertaken during the year. As a result of this comprehensive review a more streamlined approach to establishing our principal risks has been carried out, resulting in the number of identified risks moving from 19 in the last Annual Report to12 currently. This improvement in our risk management approach further enhances our ability to develop and grow our business with the assurance that key risks are effectively managed through robust and embedded processes, with management prioritising their resource to address significant areas of risk. The principal risks and uncertainties we face are set out below.

Category	Areas of risk	Mitigation
Strategic Risks
Loss of competitive position	Utilising new technologies to drive efficiency improvements. Infrastructure to support growth. Unclear or inappropriate marketing strategy. Insufficient funding.	Focus on clear strategic priorities. Business case for investment in new infrastructure/technologies. Recruitment and retention of talented people. Strong relationships with main funders. Funding sources diversified.
Inadequate contract performance	Bidding and winning large scale contracts. Incorrectly priced tenders. Onerous contract terms and conditions. Services and technologies do not fit the needs of the market. Loss of a material contract.	Relationship management with key targets. Focus on strategic bids. Experienced teams who can adapt to changing markets. Use of internal and external legal specialists. Delegated Board Authorities.
Inability to support development in new markets	Knowledge and familiarity of local legislature, regulations and common practices particularly in new territories. Political risk. Management control over operations.	Local management assigned to provide local expertise. Delegated Board Authority for entry into overseas markets. External specialist advice. Insurance programme in place locally.
Reputational damage caused by employees not working to company values	Inappropriate dealing with stakeholders (employees, clients and supply chain). Inappropriate financial dealings. Anti-competitive behaviour. Bribery and corruption exposure.	Management systems to prevent fraud/economic crime. Whistleblowing and confidential reporting system. Technology solutions to review and analyse transactions. Training in developing a responsible culture.
Market conditions/ economic climate negatively impacting on performance	Customers reduce volume/value of services. Increased price competition. Changes in public spending. Inflation and interest rate uncertainty. Customers going into administration and bad debts. Customers face difficulty raising funds. Volatile equity and bond market.	Spread of client base. Extensive use of credit exposure consolidation tool. Credit insurance. Hedging against adverse interest rate fluctuations.
Regulatory Risks
Non-compliance with legislation	Lack of awareness or action outside of relevant laws and regulations and subsequent changes thereto.	Departmental responsibility for relevant regulatory requirements. Expert external advisors. Specific compliance systems in place. Ongoing training and guidance. Conformance monitoring. Internal and external audits.
Financial Risks
Inadequate liquidity to meet requirements/ obligations	Facility maturity risk. Difficulty in re-financing. Change of credit terms with client and suppliers. Credit control and cash flow management. Terms of borrowing instruments. Increased pension scheme liabilities.	Committed bank facility in place spread across six banks and on-going relationships with funders. US Private Placement funds of £100m and long term maturity. £40m of overdraft facilities in place. Regular reporting on key indicators. Statements of compliance with borrowing powers. Daily and weekly monitoring of bank balances and net debt. Financial Procedures Manual.
Crystallisation of losses on uninsured risks	Risk of breach of insurance conditions/covenants. Failure to log and/or provide sufficient and complete information for each business activity/risk exposure. Exposure to self-insurance. Failure to adequately control activities.	Group and Division Business Management System. Co-ordination of QHSE, Business Risk and Insurance information. Annual review of insurance cover. Use of expert insurance and other advisers for risk assessment.
Failure of material counterparty or joint venture	Financial instability and failure risk of clients, suppliers, advisers, insurers and funding providers increased in current climate. Funding becomes more expensive or is withdrawn. Breach of banking covenants. Pension scheme counterparties may be underfunded due to poor investment performance.	Legal review of contracts and formal, regular counterparty status assessment. Delegated authority for approval and review of counterparty relationships. Diversification of counterparty base to limit dependencies. Governance of pension schemes.
Operational risks
Major health, safety or environmental incident	Incident caused by MITIE or its sub-contractors. Working at height. Working with electricity, gas, asbestos or other hazardous materials. Driving and vehicle safety. Fire, water and waste management. Food safety. Manual handling and slips, trips and falls.	On-going training for all employees supported by QHSE professionals. Provision of appropriate equipment and PPE. Specific procedures in place for high risk areas. Internal and external audits.
Trading position compromised due to system, control or process failure	Failure of critical systems, controls, processes or networks. Network cyber-attack. Insufficient data storage. Non-conformance with legislation. Industrial action.	Defined business management systems, policies, control framework and delegated authorities. Malicious software protection. Multiple network routes to data centres. Experienced in-house IT resources. Systems support and backups. Diversity and geographic spread of operations. Flexible workforce and network access. Disaster Recovery/Business Continuity Plans. Application of due process. Internal audit, including the use of computer assisted techniques.
Inability to attract and retain talented people	Attraction, motivation, retention and development of talented people. Performance Management. Management training.	Competitive remuneration. Talent management and personal development plans. Succession planning. Mentoring and graduate programme. Leadership development training.

Directors' Responsibility Statement

The following statement is extracted from page 63 of the 2012 Annual Report and Accounts and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3.  This statement relates solely to the 2012 Annual Report and Accounts and is not connected to the extracted information set out in this announcement or the Preliminary Announcement:

"The Directors are responsible for preparing the Annual Report and Accounts. The Directors are required to prepare the financial statements for the group in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and have chosen to prepare Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP).

In the case of International Financial Reporting Standards (IFRS) accounts, International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the Preparation and Presentation of Financial Statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with IFRS where applicable. The Directors are also required to:

-     properly select and apply accounting policies;

-     present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

-     provide additional disclosures when compliance with the specific IFRS requirements is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and,

-     make an assessment of the Company's ability to continue as a going concern.

In the parent company accounts, the Directors have elected to prepare the financial statements in accordance with UK Generally Accepted Accounting Principles. The Directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

-     select suitable accounting policies and then apply them consistently;

-     make judgements and estimates that are reasonable and prudent;

-     state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and,

-     prepare financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Company, safeguarding the assets, taking reasonable steps for the prevention and detection of fraud and other irregularities, and the preparation of a Directors' report and Directors' remuneration report which comply with the relevant requirements of the Companies Acts, Listing Rules and Disclosure and Transparency Rules (DTRs).

The Directors are also responsible for the maintenance and integrity of the Company website. Financial statements published by the Company on this website are prepared in accordance with UK legislation which may differ from legislation in other jurisdictions.

To the best of each Director's knowledge the financial statements, prepared in accordance with the applicable set of accounting standards and contained within this Annual Report and Accounts, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group and the undertakings included in the consolidation taken as a whole, and the management report, which is incorporated into the Directors' report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with the description of the principal risks and uncertainties they face."

Related party transactions

The following extract from the Annual Report and Accounts refers to related party transactions as set out in Note 38:

"Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.

During the year, the group derived £9.1m (2011: £5.6m) of construction revenue from contracts with joint ventures and associated undertakings. At 31 March 2012 £1.5m (2011: £nil) of invoices were outstanding.

The Company purchased 40,000 B Ordinary shares in the capital of MITIE Property Services (UK) Limited from Kenneth Robson (a relative of Bill Robson, a Director of MITIE), for a total consideration of £553,600 by the allotment of 227,482 Ordinary shares in MITIE, and £10,600 in cash. This transaction was approved for the purposes of section 190 of the Companies Act 2006 by MITIE shareholders at a General Meeting on 10 November 2011.

No other material contract or arrangement has been entered into during the year, nor existed at the end of the year, in which a Director had a material interest.

The group's key management personnel are the Directors and Non-Executive Directors whose remuneration is disclosed in the audited section of the Directors' remuneration report. The share-based payment charge for key management personnel was £1.0m (2011: £0.8m)."

Notes to editors

For further information, please contact:

Erica Lockhart, Head of Investor Relations and External Affairs

T: 020 3123 8675 M: 07979 784488

John Telling, Group Corporate Affairs Director

T: 020 3123 8673 M: 07979 701006

 

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