Annual Financial Report

RNS Number : 1567I

MITIE Group PLC

09 June 2011

 



9 June 2011

MITIE Group PLC

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

Following the release on 23 May 2011 of the Company's preliminary results for the year ended 31 March 2011 (the 'Preliminary Announcement'), the Company announces that it has published its Annual Report and Accounts for 2011 (the 'Annual Report and Accounts').  

The Company's 2011 Annual General Meeting will be held at UBS Investment Bank, 1 Finsbury Avenue, London, EC2M 2PP on 13 July 2011 at 2.30pm.

Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting for 2011 (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 2011.  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 23 May 2011.  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 2011 Annual Report and Accounts.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2011 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 2011 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Principal Risks and Uncertainties 
The principal risks and uncertainties relating to the Company are set out on pages 44 and 45 of the 2011 Annual Report and Accounts from which the following is extracted in full and unedited text:

A comprehensive approach to risk identification, mitigation and management is critical to MITIE and allows us to operate and develop our business in the knowledge that key risks have been considered accurately and planned for robustly.  The principal risks and uncertainties we face are set out below.

Category	Areas of risk	Mitigation
Strategic Risks
Loss of competitive position	Identification of appropriate markets and strategies. Investment in infrastructure. Attraction and retention of talented people. Bid strategy. Maintenance of competitive funding structure. Identification of and compliance with key certification/standards.	Focus on clear strategic priorities. Business case for investment in new infrastructure. Ongoing recruitment of new talent. Attractive reward and retention models for key teams. Strong relationships with equity and debt funders. Internal and external audits.
Inadequate management and infrastructure to support development	Knowledge of local regulations and practices. Political/exchange rate risk. Management control over operations. Management of people, suppliers, infrastructure and culture.	Approval process for entry into overseas markets. Building overseas knowledge through existing work in some overseas jurisdictions. Formal Delegated Authorities. Involvement of external specialists. Insurance. Management of foreign currency exposure.
Significant damage to brand reputation	Market perception. Traditional and social media attention. Consistent brand management.	Operational framework and risk management processes. Clear policies and procedures on internal and external communication. Dedicated Corporate Affairs team. Media training. Brand standards. Dedicated Marketing teams.
Failure of acquisitions to deliver expected benefits	Strategic and cultural fit. Due diligence. Synergies. Integration issues. TUPE and pension considerations. Increased gearing. Management.	Clear strategy. Experienced due diligence team. Integration governance and framework. Deferred consideration. Post-acquisition reviews.
Growth opportunities are not optimised	Adaptability of bid teams to market changes. Pricing of tenders. Agreement of contractual terms and conditions.	Relationship management programmes in place with key targets. Investment in and a regular review of bid pipeline. Tender and contractual review process with clearly defined approval process.
Responsibility objectives are not met	Delivering on our commitment to act sustainably and responsibly. Compliance with social, ethical and environmental standards. Consistency of approach.	Governance structure and policies. Data capture and impact analysis. Awareness training. Carbon management strategies.
Financial Risks
Failure to achieve financial objectives	Approach to and application of financial management procedures.	Group policies and procedures on financial management. Dedicated Group functions. Clear financial Key Performance Indicators to measure and communicate financial performance. Formal Delegated Authorities. Tiered level of review and challenge on financial results. Clear internal financial controls and statement of compliance. Internal and external audits.
Market conditions negatively impact on company performance	Client credit risk. Change in customer requirements and circumstances. Change in stock, financial and operational markets. Price competition. Change in government policy/spending. Inflation and interest rate uncertainty.	Limits in place to manage exposure to individual customers and sub-contractors. Hedging. Group-wide credit exposure consolidation tool. Credit insurance. On-going dialogue with financial community. Change control procedures.

Inadequate liquidity to meet obligations	Facility maturity risk. Terms of borrowing instruments. Short-term cash flow movements. Changes in funding markets.	Diversification of funding sources and tenure. Regular reporting on key indicators. Cash flow forecasting for visibility of short and long term funding requirements. Daily and weekly monitoring of bank balances. £250m facility spread across six banks and on-going relationships with funders. US Private placement funds of £100m and long term maturity. £40m overdraft facility in place.
Counterparty or company fails to meet obligations leading to significant financial loss	Availability and cost of funding. Covenants. Credit risk of insurers and funding providers. Pension and share scheme administration. Client and supply chain exposure.	Daily review of bank balances and quarterly review of covenants. Controls over acceptance of counterparty risk. Audit of key counterparties. Governance over pension schemes.
Significant financial loss due to fraud or other economic crimes	Volumes of transactions driven by numbers of employees, customers, suppliers and other stakeholders, and impact of economic climate.	Processes and systems designed to prevent fraud/economic crimes, confidential whistleblowing and reporting channels to investigate and take remedial action on identified instances.
Operational risks
Major health, safety or environmental incident	Working at height. Working with electricity, gas or asbestos. Driving and vehicle safety. Fire, water and waste management. Food safety. Manual handling and hazardous materials. 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.
Inability to trade	Access to premises, systems and utilities. Payment of employees. Adverse weather/event. Legislation and licence to operate. Industrial relations. Provision of technology based management information solutions to clients. Control over portfolio and implementation of new systems.	Malicious software protection. Multiple network routes to data centres. Experienced in-house IT resources. Process and governance for implementation of new and existing systems. Systems support and back-ups. Diversity and geographic spread of operations. Flexible workforce and network access. Disaster Recovery/Business Continuity Plans. Application of due process.
Failure to deliver/retain existing business	Mobilisation within specific timescales. Co-ordination of multi-service delivery. Complex technical specification. Changes to scale and scope of contract works. Client retention. Availability of appropriately skilled personnel.	Management of mobilisation plans. Teams skilled to deal with existing and changing technical and operational requirements. Contract management and review protocols and plans. Comprehensive business management and controls systems. Focus on innovation and use of technology to add value to client service proposition. Relationship management programmes in place with clients.
Lack of appropriately skilled people	Attraction, motivation and retention of talented people. Resourcing at appropriate levels. Performance management. Management training. Legislative compliance.	Competitive remuneration. Employee reward system. Management and personal development plans. Succession planning. Apprenticeship and MITIE talent programmes. Governance and audit structures to ensure legislative compliance.
Sub-contractors/suppliers perform poorly/are not appropriately insured	Performance of sub-contractors and suppliers affecting client relationships. Third party health and safety procedures and insurance. Financial penalties, consequential loss/damages. Over reliance on key service providers.	Vetting and induction procedures to meet key certification/standards. Document monitoring. Relationship management and performance monitoring. Divisional T&Cs in place. Maintenance of appropriate insurance both internally and of subcontractors/suppliers.
Loss of confidential information	Availability and security of key systems, data storage devices and corporate information.	Malicious software protection. Policies and procedures over use and loss of data. Physical and IT access controls and segregation of duties.
Compliance risks
Lack of insurance cover or material litigation	Insurance covenants. Visibility of claims. Increasing operational scale. Balance of internally held risk versus risk borne by the market.	Group and divisional management systems. Annual review of insurance cover and self-insurance. All incidents reported within 48 hours. Risk reduction programmes run in conjunction with insurers.
Non-compliance with legislation	Awareness of relevant laws, regulations and amendments. Industry licensing. Capital market regulations. Banking covenant compliance.	Departmental responsibility for relevant regulatory requirements including new Senior Accounting Officer, Equality and Bribery & Corruption Act requirements. Expert external advisors. Specific compliance systems in place. On-going training and guidance. Conformance monitoring. Internal & external audits.

Directors' Responsibility Statement

The following statement is extracted from page 60 of the 2011 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 2011 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 KingdomGenerally 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 and, 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.

In the case of UK GAAP accounts, 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 and state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

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 36:

"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 £5.6m of construction revenue from joint ventures and associated undertakings. No invoices were outstanding at the year end. No other disclosures have been made in respect of joint ventures and associated undertakings on the grounds of materiality. No 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 relating to share options granted to key management personnel is £0.8m (2010: £1.4m)."

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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