Final Results

MITIE Group PLC 15 July 2002 15 July 2002 MITIE Group PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2002 GROWTH CONTINUES Pre-tax profit up 21% to £30.4m (2001 - £25.1m) Turnover up 25% to £518.9m (2001 - £415.4m) Earnings per share up 30% to 6.5p (2001 - 5.0p) Total dividend per share up 28% to 1.6p (2001 - 1.25p) David Telling, Chairman, reports 'The recent turmoil in world financial markets makes it difficult to express optimism about economic prospects in general. However, trading has been satisfactory in the first months of the current year and I believe we will continue to achieve profitable growth.' Notes: MITIE: Management Incentive Through Investment Equity. ACTIVITY: MITIE Group PLC provides Support and Building Services to the owners and occupiers of commercial and industrial premises. FOR FURTHER INFORMATION: On 15 July 2002 Ian Stewart, Chief Executive, MITIE Group PLC Mobile: 07979 701002 John Urquhart, Corporate Affairs, MITIE Group PLC Mobile: 07979 701006 at UBS Warburg, I Finsbury Avenue 020 7568 2128 / Switchboard: 020 7567 8000 Subsequently - MITIE Group PLC, Head Office 01934 862006 EXTRACTS FROM THE CHAIRMAN'S STATEMENT Introduction The ethos and business model of MITIE Group (MITIE) has proved to be as resilient as ever in the uncertain conditions of the past 12 months. The commitment brought about by individuals' investment of their own money has worked well for MITIE, for our customers and for our shareholders. As you will recall, on 2 August last year I handed over the role of Chief Executive to Ian Stewart and strengthened your Board by appointing four new Executive Directors. I am pleased that the change has been seamless and am gratified by the support that the new Chief Executive has received from all his colleagues. Results Turnover rose to £518.9m, an increase of 25%, and pre-tax profit rose by 21% to £30.4m. Earnings per share rose by 30% to 6.5p. All growth was organic. Your Board is recommending a final dividend of 0.9p per share, making a total of 1.6p for the year, an increase of 28%. Corporate Developments In the year we started two new companies, MITIE Engineering Services (Liverpool) Ltd as well as a further Engineering Maintenance company in the South West. Since the year end we have started two further Engineering companies and a company within the Property Services Division, MITIE Interiors Ltd. As a deliberate strategy we reduced our exposure to capital intensive activities and sold our majority stake in MITIE Powered Access Ltd to its management team in February 2002. Since the year-end, we have also sold the five companies making up the Access contracting business to another management buy-out team. People I truly believe that the concept of MITIE has given many people the chance to fulfil their potential. It is because of their professionalism that the growth of the Company has been sustained and I would like to thank most sincerely all the staff for their continued commitment. We are very fortunate to have so many people who are passionate about their company to the extent that they work far beyond the call of duty. More particularly, I am very pleased to welcome Manish Chande as a Non Executive Director of the Company following his appointment to the Board on Friday, 12 July 2002. He brings with him a wealth of experience of the Property and Support Services Industries and I am sure he will be of considerable benefit to MITIE. Accounting Policies In the light of investors' current heightened interest, I would like to reassure our Shareholders that MITIE has always applied conservative accounting policies. For example we have always accounted for bidding expenses in line with the recently introduced UITF 34. Outlook MITIE stands to benefit substantially from the Government's continuation of schemes for the improvement of the public services, particularly health and education. Such is the present reputation of the Company that almost every business in the MITIE Group reports record forward order books from a strong customer base. Indeed, the situation is tailor-made for the highly motivated and entrepreneurial Managing Directors that the MITIE business model attracts. It is in these people, under Ian Stewart, that I place my full confidence for another successful year. The recent turmoil in world financial markets makes it difficult to express optimism about economic prospects in general. However, trading has been satisfactory in the first months of the current year and I believe we will continue to achieve profitable growth. DAVID M TELLING Chairman EXTRACTS FROM THE CHIEF EXECUTIVE'S STATEMENT Introduction This is my first review as Chief Executive of MITIE Group (MITIE) and I would like to outline my primary goal for the Company at the outset. My aim is for MITIE to become the first choice provider of Support and Building Services to the owners and occupiers of industrial, commercial and government buildings. I am confident that we can achieve this without sacrificing our unique entrepreneurial culture or compromising on quality. To achieve this aim we decided that a limited amount of restructuring had to be effected and have already taken action to strengthen the Group's competitive position. We have disposed of the most capital-intensive businesses, namely MITIE Powered Access Ltd and the Access contracting group of companies. Following the buy-in of the minority stake in MITIE Managed Services Ltd, we have promoted certain senior people to improve our strategic management capability. Markets The traditional, and often conservative, markets in which MITIE used to operate have changed enormously over the last five years. Pressure to perform has forced our clients to consider ways of driving costs out of their infrastructure and one of the solutions has been to enter into larger, often national, services contracts for longer periods. This has brought a degree of stability to the markets in which we operate and better visibility and security of earnings to service companies such as MITIE. A further development, particularly in Building Services, is the welcome growth of less adversarial relationships arising from the formation of joint ventures, partnerships and framework agreements with our clients. This new way of doing business provides tremendous opportunities for companies within MITIE. The great strengths of MITIE companies include not only the unique equity ethos, which motivates all concerned to achieve ambitious targets, but also the pool of skilled and semi-skilled labour which each employs. This is the envy of their competitors in the present climate of skills shortages. I strongly believe that our core skills are in the management of people intensive projects, which is why we disposed of the two capital-intensive businesses to their management teams. The MITIE business model, by its very nature, makes considerable demands on individual Managing Directors. Our planning process revealed a need to release some key people to address the strategic development of the MITIE Group more explicitly. As a result the Board approved the buy-in of the minority shares in MITIE Managed Services Ltd and subsequently appointed Colin Hale, who was responsible for building that company, to the role of Strategic Development Director for the MITIE Group as a whole. We are now better placed to manage change and exploit development options and new opportunities as they arise. Segmental Analysis Activity Turnover Turnover Pre- Pre- Pre-Tax Pre-Tax Tax Tax Profit Profit £'000 £'000 Profit Profit Margin Margin 2002 2001 £'000 £'000 % 2002 % 2001 2002 2001 Building 290,980 249,765 14,041 12,493 4.8 5.0 Services Support 227,872 165,610 16,316 12,582 7.2 7.6 Services 518,852 415,375 30,357 25,075 5.9 6.0 Building Services Division Building Services is made up of Engineering Services, Property Services and Access Systems. Engineering Services Engineering Services continues to concentrate on building long-term relationships with customers. Developing sound collaborative arrangements based on mutual trust is conducive to more successful, stable and efficient business relationships which in turn can lead to better financial returns for both parties. These relationships have already been fruitful and are developing well with key clients in specific target markets, including education, leisure and retail. Supply chain relationships in framework agreements have enabled negotiated reductions in our tender costs whilst protecting our margin. Engineering Services is in the forefront of the new way of doing business. It has embraced the customer-oriented culture developed in our Support Services Division and rejected the traditional confrontational and litigious attitudes of the Construction Industry. The ability to operate anywhere in the UK and the hard-earned reputation for consistent excellence in delivery, help greatly as more national contracts are offered. There is considerable potential to grow the business further. The discipline has already secured 75% of its budgeted turnover for the current year, such orders coming as a result of highly selective marketing. Understandably, it remains optimistic about its prospects for the forthcoming year. Property Services Customers' continual drive to outsource non-core services has created a vibrant market for Property Services, which is in a strong position through being able to offer a broad range of skills and deliver a quality product by means of a directly employed labour force. Repeat business accounted for 60% of turnover with the remainder coming from new clients, who have, in particular, wanted us to take on multi-service refurbishment projects. Refurbishment capabilities have been expanded considerably and Property Services is one of the country's leading organisations in this field. This has been achieved by selective tendering, a highly incentivised management team and an experienced and well-trained labour force. Performance has been improved by tight cost controls and by ensuring that quality is delivered first time, largely eliminating the costs of re-working. We are developing better ways of working together with our customers for mutual benefit. Property Services has an infrastructure in place to manage growth wherever there are opportunities and to widen the range of services. Access Systems MITIE Generation Ltd, our remaining plant company, is a well-respected hire and sale business with a good range of scaffolding products and a well- motivated staff. With a greater management emphasis on national accounts, it has increased its sales force and also formed alliances with suppliers to increase turnover and margin. New products have been launched and the search continues to find innovative, cost-saving equipment that will appeal to buyers and hirers alike. A reorganisation of the discipline followed the sale of the other capital intensive businesses. A graduate of our own MBA course at Henley Management College, Mark Clifford, has been appointed head of this Discipline. Support Services Division The Division consists of Engineering Maintenance, Cleaning and Managed Services. Engineering Maintenance Engineering Maintenance has maintained its excellent growth rate. Many new orders were received, including a national contract for Rolls Royce. All major contracts due for renewal were retained, with others such as Nokia extended to operate on a national basis. There is no shortage of work. The skill lies in picking the right contracts as more and more clients expect the service provider to accept greater operational risk. Securing good engineers with commercial acumen is a major restricting factor in this fast growing market, estimated to be £3 billion, of which MITIE Engineering Maintenance Ltd has at present a share of only around 2%. Engineering Maintenance continues to be a good example of the efficiencies of the MITIE business model, with a commendable record or profitable growth. In addition to the services it provides, its strengths include its operational management, IT, reporting and client liaison skills. It has an excellent record in Health & Safety, which gives confidence to existing and prospective customers. Managed Services Managed Services is the facilities management arm of MITIE and brings together the service offerings of all disciplines in the Group. During the year there was a substantial increase in turnover. A notable contract was started with Standard Chartered Bank, which is for a term of five years with a total value of some £30 million. I am particularly happy to announce that the original five year contract with Land Securities Trillium for the Department of Work and Pensions estate was extended for a further 10 years: MITIE's first £100 million contract. MITIE Business Services Ltd has also done well, winning new contracts with the London Stock Exchange and Barclays Bank in Canary Wharf, which should provide an excellent entree into that exciting business community. This is the reprographics and document handling business, which also provides reception, telephonist and messenger services. It also has an important role in the contract with Standard Chartered Bank, which illustrates yet another example of success in cross-selling. Many of MITIE Managed Services Ltd's competitors appear to have geared themselves exclusively for PFI involvement, perhaps at the expense of attention to the Private Sector, where we continue to develop our business profitably. Managed Services has exploited the synergy between disciplines and has the advantage of a wide range of services, each of which is capable of finding the entry point for the subsequent delivery of many other services. MITIE Managed Services Ltd has an experienced management team that is selective and cautious about the work it undertakes. It has achieved an enviable track record of profitable growth. Cleaning The cleaning industry is no exception to the changing way in which business is being procured. Big companies are asking for additional services to be provided in order to reduce their supply chain and to become more efficient, a process known as bundling services. MITIE Cleaning is therefore consolidating its existing relationships, as contracts move from a three year average to a five to ten year average duration. MITIE's own multi-skilled offering and avowed intention to maintain service quality continue to help to win large contracts. MITIE Cleaning has had a particularly good year in the Midlands and in London, where further good prospects have arisen out of a valuable flagship contract with a major financial institution that is a benchmark for our service delivery. Margins were slightly impacted by the sheer size and scale of the start-up costs incurred in the mobilisation of some very large new contracts, for example RBS NatWest and the additional 30 sites gained in the national contract with BAE Systems. This is a normal feature of our operations. The situation improved in the second half as these contracts settled into their expected performance pattern. Our Cleaning Companies received a Winning with People Award in London and two more Kimberly Clark Golden Service Awards, for the contracts at the Palace of Westminster and the British Airways London Eye. These brought the number of such awards won over the past five years to nine and gained further public recognition of our drive for quality. MITIE Catering Services Ltd continued to trade satisfactorily during the year following the award of a number of high profile contracts. Its management has been strengthened by the appointment of a senior industry professional, Robin Hay, as Managing Director. Conclusion MITIE is now even more a service-oriented company than this time last year, having disposed of most of its capital-intensive businesses. It has greater forward visibility of earnings as a result of longer, larger contracts and an encouraging order book going forward. We are better organised to address the issues of longer term growth and to develop new services to meet customers' requirements. The increase in cash resources of £13.4m from the recent disposals is available to grow the business as and when the right opportunities arise. Above all, after a period when others down-sized their workforces and outsourced their services, it has a substantial resource in the form of a pool of skilled and motivated management and labour, in trades and professions that are in great demand. My first year as Chief Executive has been busy and demanding. I am fortunate to have experienced, executive colleagues who are not only well-respected as proven performers but are, I believe, individually the best in their fields. It, therefore, gives me great confidence for the future that the opportunities provided by the market and the commitment and the passion of everyone within MITIE, will combine to drive the next stage of growth. IAN R STEWART Chief Executive MITIE Group PLC Group Profit and Loss Account (Unaudited) for the year ended 31 March 2002 2002 2001 £'000 £'000 Turnover Continuing operations 493,829 393,738 Discontinued operations 25,023 21,637 518,852 415,375 Cost of sales (397,954) (315,328) Gross profit 120,898 100,047 Administrative expenses (90,931) (75,020) Operating profit Continuing operations 29,040 24,945 Discontinued operations 927 82 29,967 25,027 Interest 390 48 Profit on ordinary activities before tax 30,357 25,075 Tax on profit on ordinary activities (9,027) (8,420) Profit on ordinary activities after tax 21,330 16,655 Minority interests (2,712) (2,703) Attributable profit for the financial year 18,618 13,952 Dividends - equity (4,623) (3,497) Retained profit for the financial year 13,995 10,455 Earnings per ordinary share - basic 6.5p 5.0p - diluted 6.4p 4.9p MITIE Group PLC Group Balance Sheet (Unaudited) as at 31 March 2002 2002 2001 £'000 £'000 Fixed Assets Intangible assets 14,724 8,597 Tangible assets 45,082 48,123 59,806 56,720 Current Assets Work in progress and stocks 23,706 24,244 Debtors 87,137 70,365 Cash at bank and in hand 25,106 6,135 135,949 100,744 Creditors - due within one year (110,987) (94,182) Net Current Assets 24,962 6,562 Total Assets less Current Liabilities 84,768 63,282 Creditors - due after one year (27) (788) Provision for liabilities and charges (1,496) (2,191) 83,245 60,303 Capital and Reserves Called up share capital 7,220 6,991 Share premium account 25,483 13,738 Revaluation reserve (503) (514) Profit and loss account 42,291 29,951 Equity shareholders' funds 74,491 50,166 Minority interest 8,754 10,137 83,245 60,303 MITIE Group PLC Group Cash Flow Statement (Unaudited) for the year ended 31 March 2002 2002 2001 £'000 £'000 Net cash inflow from operating activities 37,295 33,111 Return on investments and servicing of finance Interest received 469 75 Interest paid - (100) Interest element of finance lease rentals (6) (7) 463 (32) Tax UK corporation tax paid (8,783) (6,763) Capital expenditure Payments to acquire tangible fixed assets (15,015) (20,057) Receipts from sales of tangible fixed assets 3,364 1,117 (11,651) (18,940) Acquisitions and disposals Payments to acquire subsidiary undertakings (1,457) (1,015) Net cash acquired with subsidiary undertakings - 525 Receipts from disposals of subsidiary undertakings 2,367 - 910 (490) Equity dividends paid (2,090) (3,194) Cash Inflow before financing 16,144 3,692 Financing Issue of ordinary share capital 2,838 590 Net unsecured loans received 35 157 Capital element of finance lease rental payments (29) (57) Repayment of unsecured loans due within one year (17) (52) 2,827 638 Increase in cash in the period 18,971 4,330 MITIE Group PLC Group net cash inflow from operating activities (Unaudited) 2002 2001 £'000 £'000 Operating profit 29,967 25,027 Depreciation 11,809 11,784 Amortisation of goodwill 640 73 Profit on sale of tangible fixed assets (678) (789) Decrease/(increase) in work in progress and stocks 514 (5,955) (Increase) in debtors (16,706) (11,186) Increase in creditors 11,749 14,157 37,295 33,111 NOTES: 1. Dividend The Directors are recommending a final dividend of 0.9p per 2.5p Ordinary Share, making a total dividend for the year ended 31 March 2002 of 1.6p per share. If approved at the Annual General Meeting, the final dividend will be paid on 1 October 2002 to Shareholders on the Register on 6 September 2002. On 2 April 2001, each Ordinary Share of 5p was subdivided into two Ordinary Shares of 2.5p each. 2. Earnings Per Share Earnings per 2.5p share are calculated by reference to the profit after tax and minorities of £18,618,000 (2001: £13,952,000) and on the weighted average number of 2.5p Ordinary Shares in issue during the year of 284,250,155 (2001: 277,603,608). The diluted earnings per share has been calculated on the basic earnings and the weighted number of shares plus an additional 4,813,163 (2001: 6,162,684) shares representing the fair value of the weighted average number of shares under option during the year. 3. Deferred tax We have adopted the new financial reporting standard FRS 19 which has involved moving from partial provision basis for deferred tax to full provision basis. This change has resulted in a credit of £463,000 relating to prior years being taken in this year's Profit & Loss Account. 4. The Group has continued to account for pensions in accordance with SSAP 24 but has also followed the transitional arrangements contained in FRS 17. 5. The consolidated profit and loss, balance sheet and cash flow statements have been prepared on a basis consistent with the accounts for the year ended 31 March 2001. 6. The Annual General Meeting will be held at The Stable Block, Barley Wood, Wrington, Bristol, BS40 5SA, on 19 September 2002 at Noon. 7. The financial information set out in the announcement does not constitute the Company's statutory accounts for the year's ended 31 March 2002 or 2001. The financial information for the year ended 31 March 2001 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 March 2002 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange

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