Annual Financial Report

RNS Number : 1173Q

MITIE Group PLC

24 June 2022

 

Mitie Group plc

24 June 2022

LEI number: 213800MTCLTKEHWZMJ03

Mitie Group plc (the 'Company') - Annual Financial Report

Following the release on 9 June 2022 of the Company's full year results for the year ended 31 March 2022 (the 'Full Year Results Announcement'), the Company announces that it has published its Annual Report and Accounts for 2022 (the 'Annual Report').

The Company's 2022 Annual General Meeting (AGM) will be held at Level 12, The Shard, 32 London Bridge Street, London SE1 9SG on 26 July 2022 at 11:30am and on an electronic platform as described in Appendix 2 of the Notice of Annual General Meeting 2022 (the 'AGM Notice').

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

The Annual Report has been prepared using the single electronic reporting format specified in the TD ESEF Regulation. Copies of the Annual Report, the AGM Notice and the form of proxy in relation to the AGM are being submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Full Year Results Announcement included a set of financial statements and a review of the development and performance of the Company.  In compliance with Disclosure Guidance and Transparency Rule (DTR) 6.3.5, the Company has extracted and set out below certain information from the Annual Report.  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 Full Year Results Announcement issued on 9 June 2022.  Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the full Annual Report.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report.

The information contained in this announcement and in the Full Year Results Announcement does not constitute the Group's statutory accounts but is derived from those accounts.  The statutory accounts for the year ended 31 March 2022 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's AGM.

Principal risks and uncertainties

Risk 1: Economic and political uncertainties

An inability to quickly identify and effectively respond to the risks posed from either geopolitical or macroeconomic matters could adversely impact Mitie. A sudden change in market conditions such

as an economic slowdown or significant political uncertainty, either nationally or globally, could have a negative impact on the demand for the Group's services.

Impacts on strategic pillars: Grow Mitie, Margin enhancement, Generate cash, Capability enablers

Change in year: NEW RISK

Mitie's performance may be affected by general economic conditions and other financial and

political factors outside the Group's control. An economic slowdown may result in decreased project

work and discretionary spend or descoping of services by customers, which can lead to an impact on

the Group's financial performance.

Post COVID-19, demand for goods and services and economic growth has started to recover. However, this recovery has caused prices to increase due to global supply and demand issues, and such pressures may continue in the medium term. Recent political conflicts have compounded the risk

further with additional price increases being experienced, for example in relation to fuel and

energy.

Mitie drives most of its revenue from a client base in the UK, with limited exposure to the wider

global economy in respect of demand for services; however, the costs of delivery are exposed to

global inflationary impacts. The Group continues to monitor the impact of the current economic and

political challenges on the cost of delivering its services to ensure mitigating actions, such as using contractual protections to pass on such cost increases, minimise the Group's exposure to this and

associated risks.

Controls and mitigating actions

· Mix of long-term contract portfolio in both the public and private sectors.

· Continual development of new and innovative solutions via Connected Workspace.

· Focus on higher margin growth opportunities.

· Regular reviews of the sales pipeline.

· Increasing spread of client base, reducing reliance on individual customers.

· Strategic account management programme.

· Dedicated Finance, Risk and Intelligence Hub specialists scanning environment.

· Utilising contract mechanisms to recharge cost increases.

· Digital supplier platform (DSP) providing greater visibility of and ability to manage supply chain.

· Leveraging buying power to help mitigate the increase in cost of goods and services.

Future plans

·   Continuous horizon scanning including via Intelligence Hub which issues regular alerts to teams on potential threats and significant events.

· Ongoing review of market conditions.

Risk 2: Climate change and social impact

An inability to quickly identify and effectively respond to the challenges posed by climate change could hinder the Group's transition to a lower-carbon business, result in significant business interruption and/or compromise new opportunities for growth. Furthermore, a failure to appropriately consider the environmental and social impact of Mitie's business and its activities may create a negative perception with employees, customers, investors, government and the general public. This could lead to failures in securing and/or retaining contracts and sources of funding, as well as impacting negatively on Mitie's reputation.

Impacts on strategic pillars: Grow Mitie, Capability enablers

Change in year: UNCHANGED

During FY22, Mitie's commitment to meeting its sustainability pledges pertaining to fleet, energy

use and waste continued, as well as its commitment to setting a science-based target. The latter

defines and promotes best practice in emission reductions and Net Zero targets in line with climate

science for the Group's Net Zero scope 3 emissions. Information on achievements to date is detailed

within the ESG section of this Annual Report.

The Group remains committed to leading the charge on environmental sustainability and recognises

that the scale and pace of adaptation will continue to accelerate. For FY23, the Group has

highlighted three challenges that will be confronted. Firstly, getting sustainability to the

frontline, embedding it into everything Mitie's 72,000 colleagues do and changing mindsets so that

everyone considers sustainability in everything they do; secondly, addressing the looming skills

shortage through the continued development of a sustainable jobs framework; and thirdly, focusing

on UK carbon nature credits, which will be limited, and tackling any remaining carbon through the

use of more direct action.

Mitie continues to monitor developments in relation to climate change and sustainability, adopting

a risk-based approach. The Group has a live Climate Change risk register in place, which is

regularly reviewed and consulted on as detailed within the TCFD. For more information on how the

Group is responding to this risk please refer to the Social Value & Responsible Business Committee

report and ESG section of this Annual Report.

Controls and mitigating actions

· Plan Zero - continued implementation of three key pillars (eliminating carbon emissions from power and transport, eradicating non-sustainable waste, and enhancing inefficient buildings to meet the highest environmental standards). Mitie has nine buildings that are decarbonised and has transitioned over 2,200 vehicles to electric (33% of Mitie's fleet).

·   Social Value & Responsible Business (SVRB) Committee - five meetings were held in FY22, chaired by Non-Executive Director Phillippa Couttie.

· Environmental Management System ISO 14001 and Energy Management System ISO 50001.

· Climate change risk assessment maintained and approved by the SVRB Committee.

· Key policies and associated operating procedures in place.

·   Use of inhouse subject matter experts specialising in an array of topics including energy, waste, biodiversity, procurement and fleet.

· Regular testing of crisis management and business continuity plans.

· Winter and summer preparedness planning at account level.

· Ongoing reviews of Planned Preventative Maintenance (PPM) lifecycles.

· Continuous horizon scanning via the Group's Intelligence Hub, with regular alerts to teams on potential threats and significant events.

· Insurance cover in place to cover property damage and business interruption.

· Targets in place for Mitie's social value framework pillars.

· Mitie Foundation - launch of Giving Back, Mitie's employee volunteering programme.

· Active apprenticeship scheme across the Group, training Mitie colleagues to enhance operational delivery and address skills gaps.

Future plans

·   Promote sustainable thinking throughout the Group and increase awareness of the climate crisis and social value.

· Continue to decarbonise Mitie operations through the elimination of fossil fuels.

· Encourage the supply chain to align themselves to Mitie's carbon reduction journey.

· Train Mitie colleagues in all aspects of sustainability and fill the skills gap.

Risk 3: Cyber security and data management

In the normal course of business, Mitie collects, processes and retains sensitive and confidential information about its customers, employees and operations. Hacking, phishing attacks, ransomware,

insider threats, physical breaches or other actions may cause this confidential information to be lost or misused. Any data loss could affect client delivery operations and may result in a major data breach leading to fines, remediation costs and reputational damage.

Impacts on strategic pillars: Grow Mitie, Capability enablers

Change in year: INCREASED

The data held by Mitie continues to be one of its most important assets and includes information

concerning its business operations, employees, customers, suppliers and others. Mitie needs to

maintain adequate controls to mitigate risks associated with loss or theft of data which would

damage its reputation with customers and potentially result in significant fines from regulators.

During FY22, there was a material increase in cybercrime nationally and internationally as

criminals sought to exploit security weaknesses exposed by operational disruptions, with an

increasing threat to companies including Mitie. The Group continues to monitor and act on any

suspicious activity, wider trends in technology as well as information and guidance from the

National Cyber Security Centre to ensure its resilience.

Mitie acknowledges that the risks posed by cybercrime will intensify in response to growing digital

dependency. Mitie is continuing to invest in technology to improve the security of its business.

Mitie also continues to maintain formal technical and procedural controls to ensure confidential

and sensitive data is processed, transmitted and stored securely. These controls are deployed

across the Group's IT systems and are subject to regular review and testing, and help maintain

compliance with the requirements of the General Data Protection Regulation and the UK Data

Protection Act 2018.

Controls and mitigating actions

· Continued alignment with CE+ requirements, and ISO 27001 certified Information Security Management System in place.

· Internal processes and controls for all systems changes to ensure cyber best practice and compliance with data protection laws and regulations.

· Rationalisation and upgrade of ERP systems and infrastructure.

· Dedicated information security team and data privacy officers in place.

·   Outsourcing of routine IT operations to a highly skilled partner organisation, Wipro, to improve IT resilience and controls. Includes 24/7 service providing Mitie with an enhanced level of information security monitoring and alerting. The 24/7 Cyber Defence Centre service provided by Wipro actively monitors all alerts and incidents raised by the various security tools.

· Adoption of Microsoft and Wipro cyber toolsets and proactive monitoring and management of cyber-threats.

·   Clear strategy to utilise leading edge cloud technology, delivering disaster recovery and business continuity improvements.

· Crisis management and business continuity testing focused on cyber-attacks, a series of exercises aimed at ensuring that downtime is minimised, and client trust is maintained.

· Regular communications to employees to highlight IT risks and expected behaviours.

· Launch of new and enhanced cyber security training.

· Upgrades to legacy systems to reduce complexity and improve management information.

· Cyber insurance policy.

· MGX Playbook for the management of a cyber-attack.

· Security assessment by a leading firm of cyber security experts, to conduct a phased threat assessment and stress test on the Mitie network.

Future plans

· Broaden scope of ISO 27001 certification to provide all new business areas with a consistent risk and security focus.

· Information Security team to conduct penetration testing of applications during the development phase to improve security and reduce defects.

· Phishing attack exercises to be conducted every three months across the Group to reinforce training and highlight dangers.

·   Conduct quarterly simulated major security incident exercises to ensure that the incident response process is robust. 

Risk 4: Health, safety and environment

Failure to maintain appropriately high standards in health, safety and environmental management may result in catastrophic events, harm to employees, client staff or members of the public, consequential

fines, prosecution and reputational damage.

Impacts on strategic pillars: Grow Mitie, Capability enablers

Change in year: INCREASED

At all levels in the organisation, safety is Mitie's number one priority.  Mitie ensures that all

risks are properly assessed and managed, its staff are trained and expectations of how they perform

their work are clearly explained, and adherence to health and safety standards is regularly

monitored. If these risks are not managed appropriately, they could lead to harm to individuals and

damage to the environment, and consequently prosecution, fines and significant damage to Mitie's

reputation.

During FY22, Mitie's QHSE key performance indicators have been broadly positive with performance

either stable or improving following the integration of Interserve. Focus is now on aligning

approaches to project type works to ensure a consistent end to end approach is adopted, using the

Group's new automated risk management platform and Projects Community of Practice Group.

Mitie continues to monitor developments in relation to COVID-19 to ensure business interruptions

are kept to a minimum and productivity in a safe environment is maximised. The Group has a live

COVID-19 risk register in place, which is regularly reviewed and consulted. Focus remains on

ensuring that appropriate steps are taken to safeguard the physical and mental wellbeing of

colleagues, suppliers and others involved in Mitie operations. The recovery phase of the pandemic

has been welcomed across the Group with Mitie proactively prioritising and supporting colleagues,

customers and subcontracting partners with getting Britain back to business, including the

management of more than 280 COVID-19 testing centres during FY22.

Mitie remains vigilant should a change in direction be required due to a COVID variant triggering a

new wave or should there be a requirement for other courses of action relating to the pandemic.

Continual horizon scanning, reviewing and assessment via the Intelligence Hub continues to

play a pivotal role in helping to maintain the Group's resilience.

Controls and mitigating actions

· A comprehensive Quality, Health, Safety and Environment (QHSE) strategy in place and under continual review for effectiveness.

· Major cultural HS&E programme, LiveSafe, continuing, with clear rules, engagement and training for staff.

·   Regular training and communication delivered throughout the Group, in accordance with the LiveSafe principles. LiveSafe e-learning training programme sets out HS&E expectations including 'stop the job' supported by key safety message from the Chief Executive, Phil Bentley.

· H&S management system certified to ISO 45001 and environmental system to ISO 14001.

· Fully integrated incident recording, monitoring and reporting system.

· Regular HS&E reviews conducted at Group and Business Unit level.

· Clear and standardised KPIs to monitor progress and improvements.

· Targeted QHSE procedural audit programme.

· Themes and root causes monitored from the results of audits to target specific actions, including training.

· QHSE function 'Plan Zero Champions' as part of the Plan Zero programme to promote strategy and good practice in environmental management.

· Health and wellbeing framework integrated into the business.

· COVID-19 Working Group.

· COVID-19 risk assessment and technical compliance processes in place and regularly reviewed.

· UVC disinfection system and thermal imaging in place to mitigate against spread of COVID-19.

· Insurance cover in place to cover Employers' Liability, Public Liability and Motor fleet insurance.

·   Focused zero harm weeks concentrating on pertinent subjects to further strengthen Mitie's QHSE culture.

· Ongoing review of QHSE team ensuring maintenance of competencies and correct provision of support and guidance across the Group.

Future plans

· Ongoing review of COVID-19 landscape.

· Continuation of QHSE engagement tours, meeting and speaking to frontline teams, gauging an understanding of safety compliance and targeting any required improvements.

· Evolution of Projects Community of Practice Group.

Risk 5: Funding

Inability to maintain access to and renew suitable sources of funding due to a perceived risk in Mitie's business and/or the sector as a whole may impact the Group's ability to maintain profitable

business performance.

Impacts on strategic pillars: Grow Mitie, Margin enhancement

Change in year: REDUCED

In order to be able to meet its financial commitments, the Group needs access to a number of

affordable sources of finance. Mitie's core debt facilities include a revolving credit facility and

private placement loan notes. Mitie needs to have sufficient liquidity to be able to pay suppliers

and staff, while also investing in the business and ensuring it has enough resources for profitable

growth.

During FY22, the Group has continued to actively manage its cash, liquidity and debt position and

focus on this remains strong. A reduced revolving credit facility (RCF) of £150m has been

refinanced on a longer tenor (4 years + 1 year), and at an interest rate 125bps lower than the

facility it replaced.

In November, agreement was reached to refinance US private placement (USPP) notes that mature in

December 2022. £120m of new notes will be issued under a delayed funding arrangement, avoiding any overlap with the maturing £121.5m of notes and at an improved average coupon of 2.94%. The new notes will have an average 10-year maturity profile.

The Group has a balance sheet which is strong, stable and flexible, to support future growth opportunities.

Controls and mitigating actions

· Maintenance of strong banking, debt and equity relationships.

· Regular forecasting of cash flow and net debt.

· Thorough focus on working capital cycles with a clear set of KPIs.

· Clear policy on provisions.

· Strong focus on and monitoring of cash collection.

· Regular reviews of payment terms with customers and supply chain.

· Focus on working capital processes to reduce cycle times and average net debt.

Future plans

· Continue to work with a range of financial institutions to ensure that affordable finance sources can be accessed.

Risk 6: Regulatory

Failure to comply with applicable laws and regulations may lead to fines, prosecution and damage to Mitie's reputation.

Impacts on strategic pillars: Grow Mitie, Capability enablers

Change in year: UNCHANGED

Mitie is subject to a wide range of laws and regulations, including health and safety, employment,

data protection, anti-bribery and corruption legislation and statutory wage requirements.

During FY22, there were notable changes to Mitie's external environment in terms of regulatory

updates, and in the main these continued to be related to COVID-19 (e.g. mandatory vaccination

requirements and end of furlough), Brexit (e.g. new immigration laws), and corporate governance

requirements (e.g. mandatory TCFD reporting). As a consequence, a number of related activities took

place throughout FY22 to ensure the Group remained legally compliant.

In FY23, the Group does not envisage the pace of legislative change altering and will continue to

proactively scan the external operating environment as well as assess the impact of changes, as

they arise. Uncertainty still remains around legislation yet to be passed and the impact of this on

Mitie. There are still unknowns associated with both the knock-on impact of Brexit as well as

COVID-19 from a regulatory perspective.

Mitie recognises that a failure to comply with applicable laws and regulations could result in

prosecution and/or significant fines, and, from a reputational perspective, could damage the

Group's relationships with customers and its success when bidding for work. As a consequence, Mitie may also face debarment when tendering for public sector contracts.

Controls and mitigating actions

· Specialist legal and QHSE expertise aligned to business units.

· Code of Conduct for all employees.

· Independent whistleblowing system available to all employees to report any concerns.

· Group-wide policies updated for changes to laws and regulations and maintained in the online Information Management System (IMS).

· Regular and thorough internal and external regulatory audits.

· Training and awareness materials communicated to employees via Mitie's digital Learning Hub and monitoring of completion performed, especially for mandatory courses.

· Regular monitoring of legal and regulatory changes by Group functions including Company Secretariat, Legal and QHSE.

· Financial governance and controls in place.

· Commercial governance and controls in place.

· Establishment of Internal Control Declaration framework ongoing to align with potential UK legislation requirements.

Future plans

· Ongoing horizon scanning.

· Ongoing review of IMS to update policies and procedures.

Risk 7: Competitive advantage

A failure to maintain competitive advantage resulting in a loss in key customers, an over-reliance

on a particular sector or a failure to produce bids which are financially viable could have a

significant impact on Mitie's financial health and reputation.

Impacts on strategic pillars: Grow Mitie, Margin enhancement, Generate cash

Change in year: UNCHANGED

FY22 has witnessed many achievements for the Group, including but not limited to, the successful

completion of the Interserve integration, a large number of high-profile contract wins, the

acquisition of new businesses such as DAEL Ventures, Rock Power Connections and Esoteric, the

introduction of new centres of excellence including Cleaning and Hygiene and the Technical Services

Operations Centre, and the proactive management to support the COVID-19 recovery, most notably

through the management of more than 280 COVID-19 testing centres.

Despite such achievements, the Group recognises the importance of staying focused and continually

reviewing ongoing challenges, such as threats posed by new entrants, market saturation across the

sectors, growing competition as well as the ongoing effects from COVID-19. Each of these challenges

has the potential to impact profit margins and disrupt Mitie operations.

In FY23, the Group will continue to monitor the changing external environment as well as market

coverage. Furthermore, Mitie will continue to develop and deliver competitive bids, along with

maintaining obligations towards the delivery of a quality service for existing customers.

Controls and mitigating actions

· Bid Committee approval for complex bids.

· Robust risk assessment of bids - Commercial, Legal and Operational.

· Detailed contracting guidelines in place.

· Clear delegated authorities register.

· Strategic account management programme.

· KPI/SLA formal reviews with customers.

· Sales and CRM teams focused on developing pipeline across all major sectors.

· Improved CRM capabilities with active relationship management.

· Focus on Customer Satisfaction (Net Promoter Score and soliciting feedback).

· Review of any loss-making contracts to ensure learnings are identified and applied to future bids.

· Sales and pipeline management information to track and measure growth, wins and losses.

· Win/loss debriefing process to take learnings for future bidding activities.

· Chief Government & Strategy Officer coordinating all interfaces with the Cabinet Office.

· Focus on high-margin opportunities with growth potential, for example technology-led solutions.

· Development of new and innovative service offerings.

· Sales Academy.

Future plans

· Continue to pursue suitable opportunities through the Crown Commercial Services frameworks.

· Continue to target emerging markets.

· Continue to engage with opportunities that have scope for innovative solutions.

Risk 8: Business resilience

An inability to effectively respond to global events, such as a pandemic or supply chain disruption and/or a catastrophic event at a key business location could result in significant business interruption. The effect on employees, customers and the supply chain could result in severe consequences for the financial health and reputation of Mitie's business.

Impacts on strategic pillars: Grow Mitie, Margin enhancement, Generate cash, Capability enablers

Change in year: UNCHANGED

During FY22, Mitie's commitment to ensuring its organisational resilience and viability has

continued, despite uncertainty relating to COVID-19, post Brexit issues, increasing cyber-threats

and more recent geopolitical events and the associated implications. During FY22, the Group has

taken additional steps to ensure its ability to respond to disruptive events is not hindered by a

failure to plan. Extra controls have been rolled out to tackle the Group's response to a sustained

period off-line owing to a cyber-attack and additional measures have been introduced to safeguard

operational practices which could be compromised owing to an issue with one or more of Mitie's

major suppliers and/or service providers. Mitie has utilised learnings from previous incidents to develop a series of manual operating procedures to support business activities in the event of a cyber-attack on its operations.

The Group remains committed to enhancing its planning and response capability to minimise the

impact from any significant business interruption and improve the speed of recoverability. Mitie

recognises that as the business grows, the risks associated with a sustained period of downtime

increase. In FY23, Mitie will be launching a series of targeted training modules to all business

area leads with responsibility for critical and business continuity management. As well as

reinforcing the importance of planning in order to prevent panic, the modules will also focus on the need to plan for disruptive events associated with sustainability risk management, ensuring that Mitie colleagues are prepared for all eventualities and are well placed to support customers and other third parties engaged in Mitie activities, as required.

The Group will continue to work closely with both supply chain and key service providers to ensure

improvements in this area. This includes being proactive and vigilant of the changing environment

and ensuring business continuity plans remain fit-for-purpose.

Controls and mitigating actions

· Key policies and associated operating procedures in place.

· Dedicated specialist teams including Risk, Information Systems, Finance, Occupational Health, Supply Chain and Intelligence Hub.

· Maintained and updated crisis and business continuity plans for key activities across all Mitie operations, including key service providers.

· Disaster recovery framework embedded and managed.

· Regular testing of crisis management and business continuity, including dedicated Executive Management scenario testing.

· Stringent governance controls including oversight from Risk Committee, with regular reporting to the Audit Committee and Board.

· Close monitoring of supply chain to ensure continuity of critical supplies.

· Internal and external compliance audits.

· Operating in accordance with ISO 22301-2019 and 31000-2018.

· Continuous horizon scanning via the Intelligence Hub with regular alerts to teams on potential threats and significant events.

· Critical Engineering and Technical Assurance (CETA) Programme implemented in Technical Services to help manage high-risk contracts.

· Insurance cover in place to cover business interruption.

· Colleagues can work from home without loss of any business-critical systems/applications.

· Themes and root causes monitored from the results of audits to target specific actions.

·   Digital supplier platform (DSP) - supports the efficiency of Mitie supply chain processes (supplier onboarding/supplier health, Contract Lifecycle Management, Sourcing and Purchase to Pay).

Future plans

· Roll-out of targeted critical and business continuity management training modules.

· Review digitalisation of business impact analysis.

Risk 9: Employees

Inability to recruit, retain and reward suitably talented employees, as well as failure to implement appropriate development plans and simple, consistent processes across the business and cultivate a One Mitie culture, could result in employees being disengaged and negatively impact the Group's operational and financial performance.

Impacts on strategic pillars: Grow Mitie, Capability enablers

Change in year: INCREASED

FY22 witnessed large-scale impacts to the UK labour market as the economy began to recover from

COVID-19. This was compounded by the broader implications of Brexit which had the potential to

compromise the availability of labour and key skills. During FY22, the Group continued to work hard

to minimise disruption caused by this evolving external landscape. In FY22, Mitie took positive action to retain talent, through the provision of enhanced benefits for all colleagues including free shares, enhanced maternity pay, the addition of sabbaticals/ career breaks, life assurance, virtual GP, and a salary advance scheme (the ability to draw down pay earned ahead of payday). Additionally, to ensure compliance with the EU Settlement Scheme, the Group worked closely with impacted colleagues to ensure that they were assisted and guided through the process effectively.

Mitie made great progress in FY22 on the journey to make the Company a truly inclusive place to

work, through diversity networks and an award-winning conscious inclusion learning programme (Count Me In). Other highlights included the delivery of executive roadshows over a three-week period in the form of Team Talk Live and partnering with external experts to enhance Mitie's attraction strategy and collateral.

In FY23, Mitie will continue to proactively monitor developments in relation to the labour market

as well as any further implications resulting from COVID-19, such as workforce fatigue. The Group

will launch a Group-wide Employee Value Proposition campaign, a Career Band Framework as well as a cost-of-living campaign to provide financial support and advice.

Controls and mitigating actions

· Consistent HR resourcing process and system across the Group.

· Process in place for online training and development, with access to online learning for all colleagues.

· Consistent process to manage both temporary and permanent recruitment.

· Training and development programmes for senior leadership.

· Developed talent identification, management and development framework.

· Improved performance management framework.

· HR structure streamlined and working in close partnership with the business.

· Induction programme, mandatory for new starters.

· Regular communications from leadership team - including Executive Management country-wide roadshows.

· Specific plans developed to address results of employee survey.

· Competitive remuneration, terms and conditions.

· Regular employee offers.

· Succession plans in place for critical roles, especially for senior leadership.

· Attraction strategy developed and deployed.

· Enhanced benefits such as free shares, life assurance, virtual GP, and a salary advance scheme.

· New careers site launched in FY22 attracting more than 128,000 new and unique viewers.

Future plans

· A further award of free shares to increase employee share ownership.

· Launch of a Group-wide Employee Value Proposition campaign, bringing together the total employee offer in one place to attract and retain talent. External and internal communications campaigns planned.

·   Launch Career Band Framework to provide colleagues with visibility of career paths and internal opportunities for career advancement.

· Open flexible benefits (Choices) to hourly paid colleagues (currently open to salaried colleagues only).

·   Continue to improve employee experience through system enhancements including single sign on for People Hub and Learning Hub (core HR systems).

· Run a 'cost of living' campaign to provide financial support and advice through colleague benefits including discount scheme, Salary Finance (low-rate loans) and Salary Advance.

· Ongoing review of labour markets.

Risk 10: Third-party management

Failure to successfully manage strategic third-party relationships or a catastrophic event and/or

failure involving a third-party partner, could impact Mitie's ability to deliver, resulting in financial losses owing to fines and in some circumstances significant reputation damage.

Impacts on strategic pillars: Grow Mitie, Margin enhancement, Capability enablers

Change in year: INCREASED

In FY22, many sectors have been impacted by shortfalls in key products and materials. This in turn

has led to delayed or reduced deliveries, mis-picks of products, short notice substitutions and short-term unavailability of key products and materials. During FY22, the Group continued to work closely with supply chain partners to ensure Mitie was operating effectively and to reduce the impact from disruption. At an account level there were ongoing reviews of key products and materials, and customers were continually kept abreast of developments.

In FY22, the Group launched its new digital supply chain platform (DSP) to better manage supply

chain and associated risks. This has resulted in a structured review of all suppliers and

subcontractors, which has seen 88% of subcontractors (by spend) fully accredited on a best-in-class

QHSE accreditation platform (Safe Contractor). A further Procurement and Supply Chain (PSC)

Insights initiative was also introduced to keep both customers and the wider business informed of

the changing environment. During the same period, transitional activities took place following the

integration of Interserve, with two separate supply frameworks being amalgamated into one.

In FY23, Mitie will continue to proactively monitor developments with both the internal and external landscapes, paying particular attention to the ongoing issues still being experienced from both COVID-19 and Brexit, combined with the impact of inflation, which continues to affect all businesses. Particular focus will continue to remain on Supplier Risk Management and Supplier Health facilitated by data delivered via the DSP. The Group is actively monitoring the entire supplier base (c.12,000 suppliers) for key risk areas and has a structured programme to close gaps and manage risks, particularly around subcontractors' QHSE accreditation and all suppliers' insurance coverage.

Controls and mitigating actions

· Key policies and associated operating procedures, including Supply Management Framework.

· Dedicated Procurement and Commercial teams.

· Mitie First approach adopted.

·   Project Forté driven improvements under Supply Chain Management workstream, including enhanced supplier audits, improved invoicing capabilities, master service agreements and job automation.

· Rigorous on-boarding framework integrated into business utilising the digital supplier platform (DSP).

· Defined service level agreements and key performance indicators.

· Ongoing spending review.

·   Dedicated risk management and assurance procedures (including targeted QHSE assurance programme and internal audit) to ensure internal controls are operating effectively.

· Ongoing review of third-party business continuity arrangements with regular reporting to the Group Risk team.

· DSP facilitating supplier health and risk checks as well as invoice processing.

· Procurement and Supply Chain (PSC) Insights introduced.

Future plans

· Ongoing review focused on post COVID-19 and Brexit landscapes and inflation implications.

· Continued roll-out and enhancement of processes relating to the DSP.

· Ongoing supplier review focused on QHSE accreditations and insurance coverage.

Statement of Directors' responsibilities in respect of the Annual Report, Remuneration report and financial statements

The following statement is extracted from page 136 of the Annual Report and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3. This statement relates solely to the Annual Report and is not connected to the extracted information set out in this announcement or the Full Year Results Announcement:

The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and with UK-adopted international accounting standards and have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law including Financial Reporting Standards 101 Reduced Disclosure Framework.

Under company law, the Directors must not approve the financial statements unless they are satisfied that these give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for the period.

In preparing these financial statements, the Directors are required to:

· Select suitable accounting policies and apply them consistently

· Make judgements and accounting estimates that are reasonable, relevant, reliable and prudent

·   For the Group financial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements

· For the Company financial statements, state whether applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements

· Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group or Company will continue in business

· Prepare a Directors' report, Strategic report and Directors' remuneration report which comply with the requirements of the Companies Act 2006

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Directors' responsibilities pursuant to DTR4.1

The Directors confirm that to the best of their knowledge:

· The Group financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

· The management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

Website publication

The Directors are responsible for ensuring that the Annual Report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

-Ends-

For further information

Fiona Lawrence Group IR Director	M: [phone]	E:  [e-mail]
Claire Lovegrove Head of Media Relations	M: [phone]	E: [e-mail]
Richard Mountain FTI Consulting	M: [phone]

About Mitie

Founded in 1987, Mitie's job is to look after places where Britain works and is the leading facilities management company in the UK. We offer a range of services to the Public Sectors in Central Government and Defence and Communities (Healthcare, Education and Campus & Critical).  Our Technical Services (Engineering Services, Energy, Water and Real Estate Services) and Business Services (Security, Cleaning and Office Services) divisions serve private sector customers in Telecoms, Financial & Professional Services, Transport and Industrials and increasingly to the public sector. Finally, our Specialist Services (Care & Custody, Landscapes, Waste Management and Spain) division serves both the public and private sectors in these niche businesses.

Mitie acquired Interserve's facilities management business on 30 November 2020 and now employs 72,000 people. We are the champion of the 'Frontline Heroes' who have kept Britain working during the COVID pandemic. We take care of our customers' people and buildings, through the 'Science of Service', delivering essential services and deploying industry-leading technology to create safe and effective workspaces.

The business continues to execute its technology-led strategy and in the past twelve months has received multiple awards. Find out more at www.mitie.com .

 

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