Half Yearly Report

RNS Number : 4073S

MITIE Group PLC

21 November 2011

 



MITIE Group PLC                                                                                  

The strategic outsourcing and energy services company

Half-yearly financial report for the six months ended 30 September 2011

Strong organic growth, enhanced order book and an excellent pipeline

	2011 £m	2010 £m	Growth %
Revenue	971.7	918.7	5.8
Operating profit before other items	51.6	48.4	6.6
Profit before tax and other items	47.9	47.5	0.8
Profit before tax	43.3	36.9	17.3
	2011 p	2010 p	Growth %
Basic earnings per share before other items	10.4	9.9	5.1
Basic earnings per share	9.4	7.7	22.1
Dividend per share	4.4	4.1	7.3

Strong financial performance

·      Strong revenue growth of 5.8% to £971.7m

·      Operating profit before other items up 6.6% to £51.6m

·      Operating profit margin before other items at 5.3% (2010: 5.3%)

·      Good conversion of EBITDA to cash of 81.0% on a rolling 12-month basis, above stated long-term KPI of 80%

·      Interim dividend up 7.3% to 4.4p (2010: 4.1p)

·      Low leverage with net debt at £119.3m (2010: £110.6m) - 0.9x EBITDA on a rolling 12-month basis

Delivering on our strategy with a series of transformational contract awards

·      Success in key bidding areas reinforces the strength of integrated facilities and energy management capability

·      In the private sector, we have significantly expanded existing relationships with Diageo and the Cumbrian Collaboration

·      In the public sector, we have secured key contracts with Ministry of Justice, Essex County Council and West Midlands Construction Framework

·      Total potential value of contracts awarded with these five clients ranges between £740m and £1.3bn

Tremendous prospects for growth demonstrated by enhanced order book and pipeline

·      Excellent progress in organic order book development - up 17.6% or £1.2bn to £8.0bn

·      Buoyant pipeline of potential bid activity which currently stands at £11.7bn (March 2011: £11.4bn)

·      97% of 2011/12 budgeted revenue secured at 30 September 2011 (prior year: 95%), 68% of 2012/13 forecast revenue secured (prior year: 62%)

Significant future opportunities

·      Market leading integrated facilities management capabilities will drive further growth with existing client base

·      Energy proposition supports every key energy issue faced by our clients - security of supply, renewable energy, reduction of carbon emissions, and value through lower costs

·      Focus on providing better quality services, more innovation and more efficiency differentiates us in the marketplace

Ruby McGregor-Smith, Chief Executive of MITIE Group PLC, commented:

"The first half of this year has seen us deliver a strong set of financial results. We have been awarded a number of significant contracts which have enhanced our business. This demonstrates the success of our strategy to invest in our integrated facilities and energy management capability.

Looking ahead, our focus is on developing existing client relationships and maximising opportunities to deliver value in energy services. This will ensure that all of our clients receive great value, high quality services, both in the UK and overseas.

We are mindful of the challenging economic environment. However, the search for greater cost and energy efficiency is central to the strategies of governments and businesses in all our markets - and delivering better quality services, innovation and efficiency lies at the heart of what we do.

With a record order book and a strong pipeline of sales opportunities, I am confident that the group will continue its outstanding track record of sustainable profitable growth."

Erica Lockhart, Head of Investor Relations and External Affairs
T: [phone]         M: [phone]

John Telling, Group Corporate Affairs Director
T: [phone]         M: [phone]

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MITIE will be presenting its interim results for the period ended 30 September 2011 at 09.30 on Monday 21 November 2011. A live webcast of the presentation will be available online at www.mitie.com/investors at 09.30. The recorded webcast of the presentation and a copy of the accompanying slides will also be available on our website.

High resolution images are available for the media to download free of charge from www.flickr.com/mitie_group_plc

Chief Executive's update

The six months to 30 September 2011 have been really enjoyable, busy and exciting. Quite simply, we've done what we said we would do. We expect the next six months will see us continue steadily on our journey, as opportunities in the pipeline translate into more transformational contract awards and more momentum in organic growth.

First the numbers themselves. Revenue increased by 5.8% to £971.7m (2010: £918.7m) and operating profit before other items rose by 6.6% to £51.6m (2010: £48.4m). Operating profit margins were stable at 5.3% (2010: 5.3%). Our basic earnings per share before other items increased by 5.1% to 10.4p per share (2010: 9.9p). Looking ahead, the revenue visibility is excellent, at 97% for the current year (prior year: 95%), and 68% for 2012/13 (prior year: 62%). This is a very pleasing level of growth in line with our expectations - particularly against the backdrop of a challenging economic environment.

I am delighted to report that the Board is declaring an interim dividend of 4.4p, an increase of 7.3% on last year's interim dividend.

And the story behind those numbers? There is no dramatic departure from previous periods: we've continued to respond to changing client needs by delivering the outsourced services that help them take their own businesses in whatever direction they need to go. This is evident in both our order book, which has increased by £1.2bn (17.6%) to £8.0bn during the period, as well as our sales pipeline, which now totals £11.7bn (March 2011: £11.4bn).

Our strength is that we have built excellent client relationships in our key markets in both the public and private sectors across the UK and, increasingly, across international borders too. At the same time, our energy services capability is now integral to everything we do and is generating over one-third of our total revenues.

We are always keen to work with new customers where we see a compatible culture and an opportunity to add value. However, our focus remains on our existing client base - doing more for the people we know well and who know us well. Many of our clients still rely on us for single services, and that means there's huge opportunity for growth as they move towards a more integrated model, in line with market trends, and ask us to take on extra responsibilities.

Public sector

We have achieved a steady flow of contract awards and retentions in the public sector. As we stated in our last Annual Report, we have identified clear opportunities in the justice, health, local authority and social housing markets and it's great to see these being realised today, as well as forming the backbone of a very encouraging pipeline for tomorrow.

A wide range of developments in the last six months have seen us be appointed to the Ministry of Justice's (MoJ) Total Facilities Management (TFM) Framework and then, in September, be awarded two major TFM contracts. The first is for Her Majesty's Courts and Tribunal Service in the south of England, and the second is for Brixton and Isis prisons. The total value will be £200m-£455m over a five to seven year period.

We have invested significantly in the justice sector over the last two years and having already seen the first award with the MoJ, expect to continue bidding for opportunities which represent approximately £1bn of our sales pipeline.

In the health sector, we were awarded major new TFM contracts with two Trusts, while our strengths in social housing were key to our successful tender for a £40m contract for home improvement works in Lewisham.

The highlights of our achievements with local authorities include a four-year minor works and maintenance contract with the West Midlands Construction Framework, valued at up to £350m.

We also formed a ten year partnership with Essex County Council to service over 350 sites, with a total value up to £100m. Both of these contracts involve a number of local authorities in the region, evidence of a new theme emerging of local authorities working together to procure larger outsourcing contracts.

Private sector

In the last six months in the private sector we have been awarded or retained major contracts, including our biggest rebid of the year with the Cumbrian Collaboration. This expanded contract to provide integrated FM and energy services is valued at around £200m over five years and is a good example of how our future business is based on growing a well-established existing relationship - we have been working with Sellafield and the Nuclear Decommissioning Authority, both key partners in the Cumbrian Collaboration, for 11 years now. Our relationship with Sellafield started with a single-service cleaning contract which grew to bundled soft services, and expanded to include hard services with the acquisition of Dalkia FM in 2009. In 2012 we will provide integrated FM to the Cumbrian Collaboration.

For the Airline Operators Committee at Heathrow, we are providing baggage screening services through a three-year contract valued at £17m and we have been awarded new or expanded contracts with BT Group, Channel Four and Primark, amongst others.

Our new contract with Diageo is another example, where we have gone from a £5m per year single service contract to an expanded deal that could be worth over four times as much. We are now providing Diageo with integrated FM and hospitality services at over 70 sites in the UK and Ireland including all manufacturing, packaging and distillery sites as well as the global headquarters in London.

Energy services

We are the second-largest energy services company in the UK, primarily thanks to our full range of integrated services that help clients manage their energy use and carbon footprint. In short, we have the experience and know-how to dramatically improve energy performance. Our energy proposition supports every key energy issue faced by our clients: security of supply, renewable energy, reduction of carbon emissions and, of course, value through lower costs.

There are six key aspects to our energy services proposition: introducing clients to new ideas; establishing an accurate carbon footprint for a site; helping clients comply with legal energy obligations; saving money; designing and installing renewable solutions; and helping clients and their people understand the links between energy use and climate change.

Our investment in energy services capabilities is producing significant benefits. Recent successes include being one of only two companies selected to bid for the first four programmes of a £200m NHS Carbon and Energy Fund, which enables NHS Trusts to upgrade their energy infrastructure to save energy.

This will add to a growing portfolio of energy services work we are performing in the healthcare sector. We were awarded a contract to design, develop and maintain a combined heat and power decentralised energy centre for the Royal Marsden NHS Foundation Trust. For the London Borough of Camden, we have developed an innovative energy scheme to supply up to 1,500 council tenants with surplus heat from our energy plant at the Royal Free Hospital in Hampstead.

In Plymouth we're helping to develop a new plant that will produce energy from waste wood and thereby reduce emissions by 16,500 tonnes a year.

International developments

We are committed to giving our clients the highest standards of service right across their businesses - and that includes in their European operations. We aim to give them the quality they need, when and where they need it. Our pan-European facilities and energy management contract with Rolls-Royce continues to develop and total revenues this year are estimated to be around £80m.

Following our acquisition of Dalkia FM in Ireland in 2010, which gave us a market-leading capability in that region, we have now completed the purchase of the remaining 50% of SMI (Service Management International) from Kluh Service Management.

The acquisition of SMI is part of our strategy to support clients overseas and gives us an improved ability to compete for pan-European integrated FM contracts.

In August, SMI was appointed as a preferential bidder for a contract with Givaudan to provide integrated FM in several European countries.

We are seeing more opportunities emerge in this market as we look to work with our clients and support their overseas operations.

Financial performance

MITIE Group PLC has delivered a strong financial performance in the first six months with revenue growth of 5.8% to £971.7m (2010: £918 .7m) and growth in operating profit before other items of 6.6% to £51.6m (2010: £48.4m). Organic growth in revenue was 5.1% after adjusting for the full year impact (£6.2m) of Dalkia FM in Ireland, acquired in June 2010. This is a very positive result in an economic environment which has demonstrated slow growth.

The group's operating profit margin before other items continues to be within our target range of 5.0%-6.0%, and has been maintained in line with the prior year at 5.3%.

We have delivered good cash conversion. The conversion of EBITDA to operating cash is 81.0% (2010: 91.0%) on a rolling 12-month basis. As stated previously, the planned movement in this headline cash KPI reflects our positive decision to invest our working capital into projects which deliver a strong return on capital and enhance organic growth. Capital expenditure represented 1.7% of revenue (2010: 1.2%) and remains consistent with our target level of less than 2% of revenue.

Net finance costs for the first six months of the year are £3.7m (2010: £1.0m). Our new banking facility of £250m was available for drawdown from July 2011 and expires in September 2015. The general tightening of credit market conditions compared to those which existed when our previous facility was negotiated in January 2007, has resulted in an uplift in interest charges and an increase in facility fees.

Our US private placement loan notes of £100m sterling equivalent, arranged in December 2010, help diversify our debt portfolio by extending our debt maturity profile and reducing our interest risk exposure. The introduction of these notes has also contributed to an increase in interest costs.

The effective tax rate for the period ended 30 September 2011 is 23.8% (2010: 26.8%). The improvement largely reflects the 2% reduction in the main rate of corporation tax with effect from 1 April 2011.

Delivering value                                                                         

We have continued to deliver value through earnings and dividend growth during the first six months of the year with basic EPS before other items increasing by 5.1% to 10.4p per share (2010: 9.9p per share). Basic EPS was 9.4p per share (2010: 7.7p per share), an increase of 22.1% due to the absence of restructuring or acquisition related costs during the period (2010: £6.1m).

The half year dividend declared by the Board of 4.4p per share (2010: 4.1p per share) is an increase of 7.3% on the prior year and maintains the group policy of dividend growth in line with underlying earnings. We expect the full year dividend to be consistent with this target, and at 2.5 times cover on adjusted earnings per share.

Divisional review

Our four operating divisions are Facilities, Technical Facilities, Property and Asset Management. Each division is structured to give clients the flexibility to choose specialist single services, multi-services or integrated facilities management.

In the first half of the year our teams have secured new work and retained existing contracts which have added to our order book and means that 97% of our forecast revenue for the year is now secured.

The strong growth experienced in our Facilities, Technical Facilities and Asset Management businesses reflects the continuation during the period of clients' demand for energy and facilities management solutions that are better quality, more efficient and bring more innovation to their organisations. Challenging conditions remain in certain of our markets, which has negatively affected the growth profile achieved in our Property Management business.

The financial performance highlights of each of our divisions are set out here:

Facilities Management

	2011 £m	2010 £m	%
Revenue	454.0	425.9	6.6
Operating profit before other items	27.2	25.5	6.7
Margin	6.0%	6.0%	0.0pp

Our Facilities Management (FM) business is responsible for delivering 'soft' FM services.

The division's offering ranges from fully integrated FM and consultancy, to any of our specialist single services which include: Security; Cleaning; Catering; Document management and reprographics; Reception and front of house; Waste management; Environmental services; Landscaping; Pest control.

Technical Facilities Management

	2011  £m	2010  £m	%
Revenue	230.1	209.5	9.8
Operating profit before other items	11.6	11.2	3.6
Margin	5.0%	5.3%	(0.3)pp

Our Technical Facilities Management (TFM) business focuses on 'hard services' facilities management (FM) that is led by technology, engineering and the need to reduce energy consumption. Services include:

Integrated FM; mechanical and electrical engineering maintenance; Mobile multi-site FM; Specialist technical services; CarbonCare energy services; Lighting design and maintenance; Building Management Systems and controls; Compliance services.

Property Management

	2011  £m	2010  £m	%
Revenue	249.7	260.9	(4.3)
Operating profit before other items	11.4	12.4	(8.1)
Margin	4.6%	4.8%	(0.2)pp

Our Property Management business provides a full suite of integrated services, from total fit-out and refurbishment to ongoing repairs, including:

Property maintenance; Building refurbishment; Painting; Roofing; Interior fit‑out; Fire protection; Plumbing; Mechanical and electrical engineering installation; Insurance claims management and repairs.

Asset Management

	2011 £m	2010  £m	%
Revenue	37.9	22.4	69.2
Operating profit before other items	1.4	(0.7)	n/a
Margin	3.7%	(3.1)%	6.8pp

Our Asset Management division develops bespoke energy assets that offer a secure and sustainable energy supply. Carbon efficient technologies are used to create energy infrastructure which provides the electricity, heating or cooling required by our clients. Decentralised energy delivers the long-term benefits of guaranteed cost savings, reduced carbon emissions and supply certainty. Services include:

Decentralised energy centre development; Low-carbon data centre development; Renewable energy integration; Energy services company (ESCo) management; Community infrastructure.

Key factors that could affect our business

MITIE's system of internal control is designed to support the group's pursuit of achieving its objectives and strategies, and the identification and management of risks that may impact the group and the environment in which it operates. The assessment of risk is undertaken by every business segment, which has a comprehensive risk register that feeds through to the group risk register reviewed by our Board.

The principal risks and uncertainties have not changed significantly from those detailed on pages 44 and 45 of our Annual Report and Accounts 2011. We analyse our risk profile into four categories:

Strategic: Business development, competitive positioning, acquisitions and trading overseas

Financial: Market conditions, economic climate and counterparties

Operational: IT and finance systems, people, subcontractors and suppliers, trade disruption, health, safety and environment

Compliance: Insurance, material litigation and regulatory.

 

Outlook

The first half of this year has seen us deliver a strong set of financial results. We have been awarded a number of significant contracts which have enhanced our business. This demonstrates the success of our strategy to invest in our integrated facilities and energy management capability.

Looking ahead, our focus is on developing existing client relationships and maximising opportunities to deliver value in energy services. This will ensure that all of our clients receive great value, high quality services, both in the UK and overseas.

We are mindful of the challenging economic environment. However, the search for greater cost and energy efficiency is central to the strategies of governments and businesses in all our markets - and delivering better quality services, innovation and efficiency lies at the heart of what we do.

With a record order book and a strong pipeline of sales opportunities, I am confident that the group will continue its outstanding track record of sustainable profitable growth.

Statement of Directors' responsibilities

The Directors of MITIE Group PLC confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report includes a fair view of the information required by rules 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules. The names and functions of the Directors of MITIE Group PLC are as listed in the group's Annual Report for 2011 (available on the group's website and as described above: www.mitie.com).

By order of the Board

Ruby McGregor-Smith

Chief Executive
MITIE Group PLC
21 November 2011

Some great new and retained contracts

Since April, we have been awarded 20 contracts with a value greater than £3m per annum and 44 contracts valued between £1m and £3m per annum. Some of the largest and most strategically important contracts we've retained or been awarded during the period:

Private sector
Client	Contract	Timeframe	Value range
Cumbrian Collaboration	Retained and significantly expanded an integrated FM and energy services contract with the Cumbrian Collaboration (includes Sellafield Limited, the Nuclear Decommissioning Authority (NDA), Direct Rail Services, Low Level Waste Repository Limited and International Nuclear Services)	5-7 years	£200m -£280m
Diageo	Expanded our technical FM contract to provide integrated facilities management and  hospitality services across Diageo's UK and Irish property portfolio	5 years	£100m - £120m
Public sector
Client	Contract	Timeframe	Value range
Ministry of Justice	Awarded total facilities management contracts for Her Majesty's Courts and Tribunal Service (HMCTS) in the south of England, and two prisons, at Brixton and Isis	5-7 years	£200m - £455m
Essex County Council	Transformational outsourcing contract which includes facilities and property management as well as energy services, working in partnership with Lambert Smith Hampton to provide estate management services	10 years	£80m - £100m
West Midlands Construction Framework	Minor works and maintenance contract for all non-housing capital expenditure and maintenance, primarily within the Birmingham City Council South Area. The contract is also available to 13 other local authorities within the region	4-8 years	£160m - £350m
Energy
Client	Contract	Timeframe	Value range
NHS Carbon and  Energy Fund	Accepted as a partner in the £200m capital fund which enables NHS Trusts to upgrade their energy infrastructure to save energy, carbon and money	*	£200m framework
O-Gen Plymtrek	Energy services company formed by MITIE, O-Gen UK and the Una Group, to develop an energy centre in Plymouth which will convert waste wood into renewable heat and power.	10 years	*
Camden Council	Innovative energy scheme to provide surplus heat from a hospital energy plant to 1,500 council tenants in Camden Council	15 years	*
Waitrose	Contracts to develop and operate biomass energy centres at the Waitrose East Cowes and Bracknell stores	*	*
International
Client	Contract	Timeframe	Value range
Givaudan	Integrated facilities management across several European countries, including Switzerland and Germany	4 years	£23m

* Not disclosed

Condensed consolidated income statement

For the six months to 30 September 2011

		30 September 2011 (unaudited)				30 September 2010 (unaudited)
	Notes	Before other items* £m	Other items* £m	Total £m		Before other items* £m	Other items* £m	Total £m
Continuing operations
Revenue	2	971.7	-	971.7		918.7	-	918.7
Cost of sales		(818.7)	-	(818.7)		(773.6)	-	(773.6)
Gross profit		153.0	-	153.0		145.1	-	145.1
Administrative expenses		(101.4)	(4.6)	(106.0)		(96.7)	(10.5)	(107.2)
Operating profit	2	51.6	(4.6)	47.0		48.4	(10.5)	37.9
Investment revenue		0.2	-	0.2		0.1	-	0.1
Finance costs		(3.9)	-	(3.9)		(1.0)	(0.1)	(1.1)
Net finance costs		(3.7)	-	(3.7)		(0.9)	(0.1)	(1.0)
Profit before tax		47.9	(4.6)	43.3		47.5	(10.6)	36.9
Tax	5	(11.5)	1.2	(10.3)		(12.9)	3.0	(9.9)
Profit for the period		36.4	(3.4)	33.0		34.6	(7.6)	27.0
Attributable to:
Equity holders of the parent		36.3	(3.4)	32.9		34.5	(7.6)	26.9
Non-controlling interests		0.1	-	0.1		0.1	-	0.1
		36.4	(3.4)	33.0		34.6	(7.6)	27.0
Earnings per share (EPS)
- basic	6	10.4p	(1.0)p	9.4p		9.9p	(2.2)p	7.7p
- diluted	6	10.1p	(0.9)p	9.2p		9.7p	(2.1)p	7.6p

* Other items are analysed in Note 3.

Condensed consolidated income statement

For the year to 31 March 2011

			Year to 31 March 2011 (audited)
	Notes		Before other items* £m	Other items* £m	Total £m
Continuing operations
Revenue	2		1,891.4	-	1,891.4
Cost of sales			(1,593.5)	-	(1,593.5)
Gross profit			297.9	-	297.9
Administrative expenses			(189.6)	(18.8)	(208.4)
Operating profit	2		108.3	(18.8)	89.5
Investment revenue			0.4	-	0.4
Finance costs			(3.0)	(0.1)	(3.1)
Net finance costs			(2.6)	(0.1)	(2.7)
Profit before tax			105.7	(18.9)	86.8
Tax			(26.4)	5.0	(21.4)
Profit for the year			79.3	(13.9)	65.4
Attributable to:
Equity holders of the parent			79.1	(13.9)	65.2
Non-controlling interests			0.2	-	0.2
			79.3	(13.9)	65.4
Earnings per share (EPS)
- basic	6		22.6p	(4.0)p	18.6p
- diluted	6		22.2p	(3.9)p	18.3p

* Other items are analysed in Note 3.

Condensed consolidated statement of comprehensive income

For the six months to 30 September 2011

		30 September	Year to 31 March 2011 (audited)  £m
	2011 (unaudited) £m	2010 (unaudited) £m
Profit for the period	33.0	27.0	65.4
Other comprehensive income/(expense):
Actuarial losses on defined benefit pension schemes	(10.7)	(11.1)	(1.1)
Exchange differences on translation of foreign operations	0.3	0.2	0.5
Losses on a hedge of a net investment taken to equity	(0.3)	(0.2)	(0.4)
Cash flow hedges:
Gains/(losses) arising during the period	0.8	-	(1.4)
Reclassification adjustment for (losses)/gains included in profit and loss	(1.0)	-	0.9
Tax credit/(charge) on items taken directly to equity	2.9	2.8	(0.1)
Other comprehensive expense for the period, net of tax	(8.0)	(8.3)	(1.6)
Total comprehensive income for the financial period	25.0	18.7	63.8
Attributable to:
Equity holders of the parent	24.9	18.6	63.6
Non-controlling interests	0.1	0.1	0.2

Condensed consolidated balance sheet

At 30 September 2011

			30 September	31 March  2011 (audited) £m
	Notes	2011 (unaudited) £m	2010 (unaudited) £m
Non-current assets
Goodwill		334.8	330.3	333.0
Other intangible assets		61.1	68.6	64.7
Property, plant and equipment		66.1	54.9	59.3
Trade and other receivables		12.2	-	11.6
Deferred tax assets		9.4	15.8	9.1
Total non-current assets		483.6	469.6	477.7
Current assets
Inventories		5.3	3.4	5.5
Trade and other receivables		479.2	442.7	470.1
Cash and cash equivalents		90.8	48.2	130.6
Total current assets		575.3	494.3	606.2
Total assets		1,058.9	963.9	1,083.9
Current liabilities
Trade and other payables		(414.2)	(379.7)	(432.9)
Current tax liabilities		(11.7)	(15.6)	(16.6)
Financing liabilities		(2.9)	(5.0)	(2.6)
Provisions	9	(0.9)	(3.9)	(4.5)
Total current liabilities		(429.7)	(404.2)	(456.6)
Net current assets		145.6	90.1	149.6
Non-current liabilities
Financing liabilities		(206.9)	(154.2)	(204.8)
Provisions	9	(7.2)	(10.5)	(8.2)
Retirement benefit obligation		(12.5)	(18.7)	(3.0)
Deferred tax liabilities		(13.0)	(12.5)	(13.3)
Total non-current liabilities		(239.6)	(195.9)	(229.3)
Total liabilities		(669.3)	(600.1)	(685.9)
Net assets		389.6	363.8	398.0

Equity
Share capital	10	9.0	8.9	8.9
Share premium account		85.3	78.8	80.6
Merger reserve		93.6	85.1	85.1
Share-based payments reserve		4.8	6.4	7.5
Own shares reserve		(18.6)	(13.8)	(13.8)
Other reserves		0.3	0.2	0.2
Hedging and translation reserve		(0.6)	-	(0.4)
Retained earnings		213.1	192.2	223.8
Equity attributable to equity holders of the parent		386.9	357.8	391.9
Non-controlling interests		2.7	6.0	6.1
Total equity		389.6	363.8	398.0

Condensed consolidated statement of changes in equity

For the six months to 30 September 2011

	Share capital £m	Share premium account £m	Merger reserve £m	Share- based payments reserve £m	Own shares reserve £m	Other reserves £m	Hedging and translation reserve £m	Retained earnings £m	Attributable to equity holders of the parent £m	Non-controlling interests £m	Total £m
At 1 April 2010	8.8	76.7	80.3	5.4	(8.1)	0.2	-	192.3	355.6	7.8	363.4
Total comprehensive income	-	-	-	-	-	-	-	18.6	18.6	0.1	18.7
Shares issued	0.1	2.1	4.8	-	-	-	-	-	7.0	-	7.0
Dividends paid	-	-	-	-	-	-	-	(14.5)	(14.5)	(0.2)	(14.7)
Purchase of own shares	-	-	-	-	(5.7)	-	-	-	(5.7)	-	(5.7)
Share-based payments	-	-	-	1.0	-	-	-	0.7	1.7	-	1.7
Acquisitions and other movements in non-controlling interests	-	-	-	-	-	-	-	(4.9)	(4.9)	(1.7)	(6.6)
At 30 September 2010	8.9	78.8	85.1	6.4	(13.8)	0.2	-	192.2	357.8	6.0	363.8
Total comprehensive income	-	-	-	-	-	-	(0.4)	45.4	45.0	0.1	45.1
Shares issued	-	1.8	-	-	-	-	-	-	1.8	-	1.8
Dividends paid	-	-	-	-	-	-	-	(14.4)	(14.4)	-	(14.4)
Share-based payments	-	-	-	1.1	-	-	-	0.5	1.6	-	1.6
Acquisitions and other movements in non-controlling interests	-	-	-	-	-	-	-	0.1	0.1	-	0.1
At 31 March 2011	8.9	80.6	85.1	7.5	(13.8)	0.2	(0.4)	223.8	391.9	6.1	398.0
Total comprehensive income	-	-	-	-	-	-	(0.2)	25.1	24.9	0.1	25.0
Shares issued	0.2	4.7	8.5	-	-	-	-	-	13.4	-	13.4
Dividends paid	-	-	-	-	-	-	-	(17.1)	(17.1)	(0.2)	(17.3)
Purchase of own shares	-	-	-	-	(7.4)	-	-	-	(7.4)	-	(7.4)
Share buybacks	(0.1)	-	-	-	-	0.1	-	(9.1)	(9.1)	-	(9.1)
Share-based payments	-	-	-	(2.7)	2.6	-	-	1.1	1.0	-	1.0
Acquisitions and other movements in non-controlling interests	-	-	-	-	-	-	-	(10.7)	(10.7)	(3.3)	(14.0)
Balance at 30 September 2011	9.0	85.3	93.6	4.8	(18.6)	0.3	(0.6)	213.1	386.9	2.7	389.6

Condensed consolidated statement of cash flows

For the six months to 30 September 2011

		30 September	Year to 31 March 2011  (audited) £m
	2011 (unaudited) £m	2010 (unaudited) £m
Operating profit	47.0	37.9	89.5
Adjustments for:
Share-based payment expense	1.0	1.7	3.3
Pension charge	1.2	1.7	3.5
Amendment to defined benefit pension scheme past service cost	-	-	(4.1)
Pension contributions	(2.4)	(2.6)	(7.9)
Depreciation of property, plant and equipment	9.2	8.9	17.9
Amortisation of intangible assets	5.7	5.2	10.8
Loss/(gain) on disposal of property, plant and equipment	-	0.1	(0.1)
Operating cash flows before movements in working capital	61.7	52.9	112.9
Decrease/(increase) in inventories	0.2	0.5	(1.6)
Increase in receivables	(6.7)	(31.5)	(70.8)
(Decrease)/increase in payables	(19.2)	10.6	62.0
(Decrease)/increase in provisions	(1.0)	1.3	-
Cash generated by operations	35.0	33.8	102.5
Income taxes paid	(12.4)	(9.3)	(14.3)
Facility arrangement fee paid	(2.5)	-	-
Interest paid	(3.4)	(1.0)	(2.5)
Net cash inflow from operating activities	16.7	23.5	85.7
Investing activities
Interest received	0.1	0.1	0.2
Purchase of property, plant and equipment	(14.0)	(9.2)	(21.0)
Purchase of subsidiary undertakings, net of cash acquired	(7.6)	(11.1)	(11.8)
Purchase of other intangible assets	(2.2)	(3.4)	(5.0)
Disposals of property, plant and equipment	0.5	1.3	3.0
Net cash outflow from investing activities	(23.2)	(22.3)	(34.6)

Financing activities
Repayments of obligations under finance leases	(1.8)	(1.7)	(3.2)
Proceeds on issue of share capital	1.3	0.7	2.7
Repayments of loan notes on purchase of subsidiary undertakings	-	(3.5)	(5.8)
Bank loans raised/(repaid)	1.4	48.2	(3.7)
Private placement notes raised	-	-	100.2
Purchase of own shares	(7.4)	(5.7)	(5.7)
Share buybacks	(9.1)	-	-
Equity dividends paid	(17.1)	(14.5)	(28.9)
Non-controlling interest dividends paid	(0.2)	(0.2)	(0.2)
Net cash (outflow)/inflow from financing	(32.9)	23.3	55.4
Net (decrease)/increase in cash and cash equivalents	(39.4)	24.5	106.5

Net cash and cash equivalents at beginning of the period	130.6	23.7	23.7
Effect of foreign exchange rate changes	(0.4)	-	0.4
Net cash and cash equivalents at end of the period	90.8	48.2	130.6
Net cash and cash equivalents comprise:
Cash at bank	90.8	48.2	130.6
	90.8	48.2	130.6

			30 September	Year to  31 March  2011 (audited) £m
Reconciliation of net cash flow to movement in net debt	Notes	2011 (unaudited) £m	2010 (unaudited) £m
Net (decrease)/increase in cash and cash equivalents		(39.4)	24.5	106.5
Effect of foreign exchange rate changes		(0.4)	-	0.4
Bank loans (raised)/repaid		(1.4)	(48.2)	3.2
Private placement notes raised		-	-	(100.2)
Non-cash movement in private placement notes and associated hedges		(0.6)	-	(0.3)
Repayments of loan notes on purchase of subsidiary undertakings		-	3.5	5.8
Issue of loan notes on purchase of subsidiary undertakings		-	(3.9)	(3.9)
(Increase)/decrease in finance leases		(1.0)	0.1	(1.4)
(Increase)/decrease in net debt during the period		(42.8)	(24.0)	10.1
Opening net debt		(76.5)	(86.6)	(86.6)
Closing net debt	8	(119.3)	(110.6)	(76.5)

Notes to the condensed consolidated financial statements

For the six months to 30 September 2011

1. Basis of preparation

The condensed financial statements for the six months to 30 September 2011 have been prepared on the basis of the accounting policies set out in the group's latest annual financial statements for the year ended 31 March 2011.

These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union. The condensed financial statements for the six months to 30 September 2011 have been prepared in accordance with IAS 34 'Interim Financial Reporting' and with the Disclosure and Transparency Rules of the Financial Services Authority.

The condensed consolidated financial statements are unaudited and have not been subject to review. They do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the group's annual financial statements as at 31 March 2011.

The financial information presented for the year ended 31 March 2011 does not represent full statutory accounts within the meaning of Section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a statement under Section 498 of the Companies Act 2006.

Significant accounting policies

The accounting policies and methods of computation adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the group's annual financial statements for the year ended 31 March 2011.

Various amendments and interpretations are effective for the first time in the current period but have had no impact on the results or financial position of the group.

Going concern

The Directors have considered the Financial Reporting Council guidance on going concern and the principal risks and uncertainties affecting the group. The group benefits from a well diversified portfolio of service offerings and has a broad, diverse customer base. The group currently operates well within the financial covenants associated with its committed funding lines of £250m which remain in place until 2015. Complementing this, the group has £100m of US Private Placement debt which expires between December 2017 and December 2019.

As a consequence, the Directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the group continues to adopt the going concern basis in preparing the condensed consolidated financial statements.

2. Business and geographical segments

Business segments

The group manages its business on a service division basis. These divisions are the basis on which the group reports its primary segmental information.

	Six months to 30 September 2011					Six months to 30 September 2010
	Revenue £m	Operating profit before other items* £m	Margin %	Profit before tax £m		Revenue £m	Operating profit before other items* £m	Margin %	Profit before tax £m
Facilities Management	454.0	27.2	6.0	26.3		425.9	25.5	6.0	23.3
Technical Facilities Management	230.1	11.6	5.0	5.6		209.5	11.2	5.3	5.6
Property Management	249.7	11.4	4.6	10.2		260.9	12.4	4.8	8.9
Asset Management	37.9	1.4	3.7	1.2		22.4	(0.7)	(3.1)	(0.9)
Total	971.7	51.6	5.3	43.3		918.7	48.4	5.3	36.9

		Year to 31 March 2011
		Revenue  £m	Operating profit before other items* £m	Margin %	Profit before tax £m
Facilities Management		882.2	56.2	6.4	52.6
Technical Facilities Management		437.1	24.6	5.6	15.5
Property Management		509.7	21.4	4.2	13.0
Asset Management		62.4	2.0	3.2	1.6
Amendment to defined benefit pension scheme past service cost		-	4.1	-	4.1
Total		1,891.4	108.3	5.7	86.8

* Other items are analysed in Note 3.

The revenue analysis above is net of inter segment sales which are not considered significant.

Geographical segments

	Six months to 30 September 2011					Six months to 30 September 2010
	Revenue £m	Operating profit before other items* £m	Margin %	Profit  before tax £m		Revenue £m	Operating  profit before  other items* £m	Margin %	Profit  before tax £m
United Kingdom	953.5	51.0	5.3	42.8		909.0	48.0	5.3	36.5
Other countries	18.2	0.6	3.3	0.5		9.7	0.4	4.1	0.4
Total	971.7	51.6	5.3	43.3		918.7	48.4	5.3	36.9

						Year to 31 March 2011
						Revenue £m	Operating  profit before  other items* £m	Margin %	Profit  before tax £m
United Kingdom						1,866.4	107.3	5.7	86.1
Other countries						25.0	1.0	4.0	0.7
Total						1,891.4	108.3	5.7	86.8

* Other items are analysed in Note 3.

3. Other items

The group separately identified and disclosed restructuring and acquisition related items (termed 'other items').

	Six months to 30 September		Year to 31 March 2011 £m
	2011  £m	2010 £m
Administrative expenses
Restructuring costs relating to integration of Dalkia FM, EPS Ltd and Dalkia FM in Ireland	-	4.7	4.8
Restructuring costs of Property Management businesses	-	1.1	4.8
Acquisition costs	-	0.3	0.3
Amortisation of acquisition related intangibles	4.6	4.4	8.9
	4.6	10.5	18.8
Finance costs
Unwinding of discount on deferred contingent consideration	-	0.1	0.1
Other items before tax	4.6	10.6	18.9
Tax on other items	(1.2)	(3.0)	(5.0)
Other items net of tax	3.4	7.6	13.9

4. Dividends

The proposed interim dividend of 4.4p (2010: 4.1p) per share (not recognised as a liability at 30 September 2011) will be paid on 6 February 2012 to shareholders on the register on 16 December 2011.

The dividend disclosed in the statement of cash flows represents the final ordinary dividend of 4.9p (2010: 4.1p) per share as proposed in the 31 March 2011 financial statements and approved at the group's AGM (not recognised as a liability at 31 March 2011).

5. Taxation

Income tax on profit before other items for the six months ended 30 September 2011 is based on an effective rate of 24.0% (2010: 27.2%), which has been calculated by reference to the projected charge for the full year. Income tax on profit after other items is based on an effective rate of 23.8% (2010: 26.8%).

6. Earnings per share

Basic and diluted earnings per share have been calculated in accordance with IAS 33 'Earnings Per Share'.

The calculation of the basic and diluted EPS is based on the following data:

	Six months to 30 September		Year to 31 March 2011 £m
	2011 £m	2010 £m
Net profit attributable to equity holders of the parent before other items*	36.3	34.5	79.1
Other items net of tax*	(3.4)	(7.6)	(13.9)
Net profit attributable to equity holders of the parent	32.9	26.9	65.2

	Six months to 30 September		Year to 31 March 2011 million
Number of shares	2011 million	2010 million
Weighted average number of Ordinary shares for the purpose of basic EPS	349.9	349.6	350.5
Effect of dilutive potential Ordinary shares: share options	8.2	5.4	6.4
Weighted average number of Ordinary shares for the purpose of diluted EPS	358.1	355.0	356.9

	Six months to 30 September		Year to 31 March 2011 p
	2011 p	2010 p
Basic earnings per share - before other items*	10.4	9.9	22.6
Basic earnings per share	9.4	7.7	18.6
Diluted earnings per share - before other items*	10.1	9.7	22.2
Diluted earnings per share	9.2	7.6	18.3

* Other items are analysed in Note 3.

The weighted average number of Ordinary shares in issue during the period excludes those accounted for in the Own shares reserve which were purchased in the market and held by the MITIE Group PLC Employee Benefit Trust to satisfy options under the group's LTIP share option scheme. The Own shares reserve represents the cost of 7.9m (2010: 6.0m) shares in MITIE Group PLC, with a weighted average of 7.8m shares during the period (2010: 4.6m).

7. Acquisition of subsidiaries

Purchase of Service Management International Limited

During the period the group increased its stake in Service Management International Limited from 50% to 100% for total cash consideration of £1.5m.

Purchase of non-controlling interests

	MITIE Cleaning Services Ltd £m	MITIE Engineering Maintenance (Caledonia) Ltd £m	MITIE Landscapes Ltd £m	MITIE Property Services (UK) Ltd £m	MITIE Transport Services Ltd £m	Total £m
Shares issued - MITIE Group PLC	1.9	-	-	8.6	1.5	12.0
Cash consideration	0.3	-	1.1	0.5	0.1	2.0
Total purchase consideration	2.2	-	1.1	9.1	1.6	14.0
Non-controlling interests	0.2	-	0.3	2.6	0.2	3.3
Retained earnings	2.0	-	0.8	6.5	1.4	10.7
Total recognised in equity	2.2	-	1.1	9.1	1.6	14.0

The adoption of IAS 27 'Consolidated and Separate Financial Statements' (revised 2008) in the year ended 31 March 2011 has resulted in the difference between the change in non-controlling interest and the consideration paid being recognised in retained earnings. Prior to adoption of the revised standard this amount was recognised in goodwill.

Prior period acquisitions

Purchase of FM business of Dalkia in Ireland

On 25 June 2010, MITIE acquired 100% of DFM Providers Limited (subsequently renamed MITIE Facilities Management Limited) and Dalkia Energy and Facilities Limited (subsequently renamed MITIE Limited), together Dalkia FM in Ireland, for total consideration of up to €12.5m. The transaction has been accounted for by the acquisition method of accounting in accordance with IFRS 3 (2008). Below we provide final information on the acquisition. The fair value of net assets acquired has not changed since the provisional information presented in the Annual Report and Accounts 2011.

	Book value  £m	Fair value adjustments £m	Fair value £m
Net assets acquired
Intangible assets	8.8	(5.8)	3.0
Deferred tax (liability)/asset	(1.1)	0.4	(0.7)
Trade and other receivables	5.4	(0.4)	5.0
Cash and cash equivalents	1.5	-	1.5
Trade and other payables	(4.9)	(0.8)	(5.7)
Current tax liability	(0.2)	-	(0.2)
Net assets acquired	9.5	(6.6)	2.9

Goodwill			7.7
Total consideration			10.6
Satisfied by
Cash			9.7
Deferred contingent consideration			0.9
Total consideration			10.6
Net cash outflow arising on acquisition
Cash consideration			9.7
Cash and cash equivalents acquired			(1.5)
Net cash outflow			8.2

Deferred contingent consideration of £0.9m, which was provided for at 31 March 2011, was settled in cash during the period due to attainment of certain targets and is now included in cash consideration above.

Provision is made for the remaining deferred contingent consideration at the Directors' best estimate of the likely future obligation. Deferred contingent consideration of up to £0.9m, which may become payable up to 2012 subject to certain targets being attained, is included above.

8. Analysis of net debt

		30 September	31 March  2011 £m
	2011 £m	2010 £m
Cash and cash equivalents	90.8	48.2	130.6
Bank loans	(98.2)	(148.2)	(96.8)
Private placement notes	(102.3)	--	(97.6)
Derivative financial instruments hedging private placement notes	1.2	-	(2.9)
Net debt before loan notes and obligations under finance leases	(108.5)	(100.0)	(66.7)
Loan notes	(1.6)	(3.9)	(1.6)
Obligations under finance leases	(9.2)	(6.7)	(8.2)
Net debt	(119.3)	(110.6)	(76.5)

9. Provisions

	Deferred contingent consideration £m	Insurance reserve £m	Total £m
At 1 April 2011	4.5	8.2	12.7
Amounts charged to the income statement	-	0.2	0.2
Deferred contingent consideration settled during the period	(3.8)	-	(3.8)
Utilised within the captive insurance subsidiary	-	(1.2)	(1.2)
Amounts recognised through goodwill	0.2	-	0.2
At 30 September 2011	0.9	7.2	8.1
Included in current liabilities			0.9
Included in non-current liabilities			7.2
			8.1
	Deferred contingent consideration £m	Insurance reserve £m	Total £m
At 1 April 2010	12.9	8.2	21.1
Amounts charged to the income statement	0.1	2.5	2.6
Deferred contingent consideration settled during the period	(7.4)	-	(7.4)
Utilised within the captive insurance subsidiary	-	(1.2)	(1.2)
Amounts recognised through goodwill	(0.7)	-	(0.7)
At 30 September 2010	4.9	9.5	14.4
Included in current liabilities			3.9
Included in non-current liabilities			10.5
			14.4

During the period deferred contingent consideration of £2.9m in respect of the acquisition in 2008 of MITIE Tilley Roofing Limited (formerly D W Tilley Limited) was settled in cash due to attainment of profit targets. This was £0.2m higher than the amount provided for at 31 March 2011 due to better than expected performance.

Deferred contingent consideration of £0.9m in respect of the acquisition in 2010 of Dalkia FM in Ireland was settled in cash due to attainment of certain targets.

The provision for insurance claims represents amounts payable by MITIE Reinsurance Company Limited in respect of outstanding claims incurred at the balance sheet dates. These amounts will become payable as each year's claims are settled.

10. Share capital

Ordinary shares of 2.5p	Number million	£m
Authorised
At 30 September 2010 and 30 September 2011	500.0	12.5
Allotted and fully paid
At 1 April 2011	357.8	8.9
Issued for acquisitions	5.0	0.2
Issued under share option schemes	0.8	-
Share buybacks	(4.1)	(0.1)
At 30 September 2011	359.5	9.0
At 1 April 2010	353.2	8.8
Issued for acquisitions	3.0	0.1
Issued under share option schemes	0.3	-
At 30 September 2010	356.5	8.9

During the period 5.0m (2010: 3.0m) Ordinary shares of 2.5p were allotted in respect of the acquisition of non-controlling interests at a mid-market price of 238.7p (2010: 209.2p) giving rise to share premium of £3.3m (2010: £1.6m) and a merger reserve of £8.5m (2010: £4.8m).

During the period 0.8m (2010: 0.3m) Ordinary shares of 2.5p were allotted in respect of share option schemes at a price between 117p and 226p (2010: 117p and 220p) giving rise to share premium of £1.4m (2010: £0.5m).

During the period 4.1m Ordinary shares of 2.5p were purchased at market prices between 208.6p and 232.9p. These were then cancelled.

11. Contingent liabilities

The Company is party with other group companies to cross guarantees of each other's bank loans, commitments and overdrafts of £392.0m (2010: £270.0m).

The Company and various of its subsidiaries are, from time to time, party to legal proceedings and claims that are in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect on the group's financial position.

Deferred contingent consideration relating to acquisitions has been accrued at the Directors' best estimate of the likely future obligation of £0.9m (2010: £4.9m). The actual amounts payable may vary up to a maximum of £0.9m (2010: £7.7m) subject to certain targets being attained.

In addition, the group and its subsidiaries have provided guarantees and indemnities in respect of performance, issued by financial institutions on its behalf, amounting to £38.7m (31 March 2011: £34.9m, 30 September 2010: £23.3m) in the ordinary course of business. These are not expected to result in any material financial loss.

12. Related party transactions

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

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, conditional on the approval of MITIE shareholders, 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. The acquisition has not been reflected in the results to 30 September 2011 as approval was not obtained until after the period end. Application has been made to the UK Listing Authority and the London Stock Exchange for the Ordinary shares in MITIE to be admitted to the Official List and trading on the London Stock Exchange. It is expected that admission will occur prior to 30 November 2011.

The Company also purchased 900 C Ordinary shares in the capital of MITIE Transport Services Limited from Ruby McGregor-Smith, a Director of MITIE, for a total consideration of £38,106 by allotment of 11,523 Ordinary shares of MITIE and £10,600 in cash.

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

Amounts paid to key management personnel are disclosed in the Directors' remuneration report of our Annual Report.

 

END

 

 

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