TIDMMTO
RNS Number : 4030N
MITIE Group PLC
18 May 2015
Mitie Group plc
Preliminary announcement of results for the year ended 31 March
2015
Well positioned for growth
Financial highlights
2015 Headline(1) 2014 Headline(1) Headline 2015 Statutory
yoy %
change
------------------------- ---------------- ---------------- -------- --------------
Revenue GBP2,266.2m GBP2,142.6m +5.8 GBP2,273.8m
Operating profit GBP128.6m GBP127.5m +0.9 GBP56.0m
Profit before tax GBP114.1m GBP113.3m +0.7 GBP41.5m
Operating profit margin 5.7% 6.0% -0.3ppt 2.5%
Basic earnings per share 24.8p 24.3p +2.1 9.7p
Dividend per share 11.7p 11.0p +6.4 11.7p
------------------------- ---------------- ---------------- -------- --------------
h Headline revenue growth of 5.8%, of which 4.9% was organic
h Headline operating profit of GBP128.6m, generating a 5.7% operating profit margin
h Excellent headline cash conversion of 95.1% (2014: 102.4%) and
statutory cash conversion of 126.5% (2014: 107.3%); above target
KPI of 80%
h Strong dividend growth of 6.4% to 11.7 pence per share
h Net debt of GBP177.8m or 1.2x headline EBITDA (2014: GBP186.6m or 1.3x headline EBITDA)
h Return on capital employed of 18.6% (2014: 16.9%)
Organic growth driven by facilities management
h Strong organic growth of 6.1% in FM, with margins at 6.0% and
an excellent retention rate of 96%
h Transformational partnership delivering integrated FM for
Lloyds Banking Group extended until 2022
h Our homecare and social housing businesses have been impacted
by market pressures. We remain confident of longer-term
opportunities in these businesses
De-risked the business by completing business exits
h We have completed the exit from our mechanical and electrical
engineering construction and Asset Management businesses.
Exceptional charges incurred were GBP15.9m and GBP45.7m
respectively (2014: GBP13.6m and GBP25.4m), in line with previous
guidance; there will be no further provisions or exceptional
charges relating to either of these businesses
h Significantly reduced the potential volatility of the group's earnings going forward
Well positioned for growth
h 85% of 2015/16 budgeted revenue secured (prior year: 84%)
h Sales pipeline buoyant at GBP9.7bn (2014: GBP8.2bn) and order
book remains strong at GBP9.0bn (2014: GBP8.7bn)
h Launching a GBP20m entrepreneurial fund to back management
teams under the 'Mitie Model', to start up new businesses or invest
in and grow existing small businesses
Ruby McGregor-Smith CBE, Chief Executive of Mitie Group plc,
commented:
"Mitie has made good progress this year. We have repositioned
the business and lowered our risk profile. Our facilities
management business accounts for c.85% of group revenue and is a UK
market leader.
"We see considerable opportunities across our markets, to
provide clients with higher quality, innovative services that save
them money. We also see this as a positive environment in which to
start and grow businesses, and we plan to back entrepreneurs to do
this through our GBP20m 'Mitie Model' entrepreneurial fund.
"We are only as good as all our people, and supporting and
developing them is critical to our ongoing success.
"We are focused on generating profits backed by cash,
maintaining strong margins and growing the dividend. With a
substantial order book and sales pipeline, we are now well placed
to deliver good growth. We look ahead with confidence."
(1) Headline results exclude other items. Other items comprised:
exceptional charges in relation to design and build contracts in
Energy Solutions of GBP45.7m (2014: GBP25.4m); the results of the
mechanical and electrical engineering construction business, with
revenue of GBP7.6m (2014: GBP78.5m) and a trading loss of GBP15.9m
(2014: GBP13.6m loss); acquisition related and integration costs of
GBP0.9m (2014: GBP5.1m); and the amortisation of acquisition
related intangible assets of GBP10.1m (2014: GBP11.0m).
For further information please contact:
Erica Lockhart, Executive Affairs Director
M: +44 (0) 7979 784488 E: erica.lockhart@mitie.com
John Telling, Group Corporate Affairs Director
M: +44 (0) 7979 701006 E: john.telling@mitie.com
Mitie will be presenting its preliminary results for the year
ended 31 March 2015 at 09.30 on Monday 18 May 2015. 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 later in the day. Mitie expects to publish
its Annual Report and Accounts (containing financial statements
that comply with IFRS) in June 2015 and copies will be available
from Mitie's registered office and on its website www.mitie.com.
Mitie's Annual General Meeting will take place at 14.30 on 13 July
2015.
Legal disclaimer
This announcement contains forward-looking statements. Such
statements do not relate strictly to historical facts and can be
identified by the use of words such as 'anticipate', 'expect',
'intend', 'will', 'project', 'plan', and 'believe' and other words
of similar meaning in connection with any discussion of future
events. These statements are made by the Directors of Mitie in good
faith based on the information available to them as at 18 May 2015
and will not be updated during the year. These statements, by their
nature, involve risk and uncertainty because they relate to, and
depend upon, events that may or may not occur in the future. Actual
events may differ materially from those expressed or implied in
this document and accordingly all such statements should be treated
with caution. Nothing in this document should be construed as a
profit forecast.
Except as required by law, Mitie is under no obligation to
update or keep current the forward-looking statements contained in
this report or to correct any inaccuracies which may become
apparent in such forward-looking statements.
High resolution images are available for the media to download
free of charge from www.flickr.com/Mitie_group_plc
Overview
This has been a year of significant progress for Mitie. We have
repositioned the business to focus on our profitable and successful
facilities management (FM) business. We have also completed the
exit from our mechanical and electrical engineering construction
and Asset Management businesses. Whilst this has come at a
significant cost, this action has significantly reduced the
potential volatility of the group's future earnings. We are
confident that the right long-term decisions have been made for the
business and we now have a substantially lower risk profile.
Our FM business has continued to perform strongly, with a steady
flow of contract awards and retentions across our key sectors,
generating strong organic revenue growth of 6.1%. There are
significant market opportunities that will enable us to further
grow our share of single, bundled and integrated work, across all
of our service lines. Our focus has always been on building
long-term partnerships with our clients. The extension of our
integrated FM contract with Lloyds Banking Group this year, through
to 2022, was particularly significant.
The other two main areas we work in - social housing and
healthcare - experienced a challenging year, as a result of pricing
pressure in both these markets. However, we still see good
long-term opportunities to deliver growth in both markets.
Results
During the year, headline revenue grew by 5.8% to GBP2,266.2m
(2014: GBP2,142.6m), of which 4.9% was organic. Headline operating
profit increased by 0.9% to GBP128.6m (2014: GBP127.5m), reflecting
a margin of 5.7% (2014: 6.0%). Headline profit before tax increased
by 0.7% to GBP114.1m (2014: GBP113.3m) and headline earnings per
share increased by 2.1% to 24.8p (2014: 24.3p).
Our statutory results include GBP72.6m of other items (2014:
GBP44.9m), of which GBP62.5m are non-recurring (2014: GBP33.9m).
The key non-recurring items are: GBP15.9m of trading losses
incurred as part of our exit from our mechanical and electrical
engineering construction business (2014: GBP13.6m); exceptional
charges of GBP45.7m relating to our Asset Management business
(2014: GBP25.4m) and costs resulting from acquisitions and related
integration costs of GBP0.9m (2014: GBP5.1m). Statutory profit
before tax was GBP41.5m (2014: GBP68.4m) and statutory earnings per
share was 9.7p (2014: 13.4p).
Cash generation was excellent, with cash inflows from operations
of GBP113.2m (2014: GBP124.1m), representing excellent conversion
of headline EBITDA to cash of 95.1% (2014: 102.4%). The balance
sheet remains robust with net debt at the year-end of GBP177.8m or
1.2x headline EBITDA (2014: GBP186.6m or 1.3x). It is our aim to
increase return on capital employed and it was 18.6% (2014:
16.9%).
In July 2014 the group completed a refinancing of its revolving
credit facility through a syndicate of six banks which secured
GBP275m of committed facilities for a further five years at margins
favourable to the previous facility. Including US Private Placement
notes, the group now has committed funding of GBP527m in place to
support future growth.
During this period, our order book has increased by GBP0.3bn to
GBP9.0bn (2014: GBP8.7bn). Our sales pipeline currently stands at
GBP9.7bn (2014: GBP8.2bn) and our forward revenue visibility is
excellent, with contracted revenue for the year ending 31 March
2016 at 85% of budgeted revenue (prior year: 84%).
Dividend
The Board's policy is to grow the dividend at least in line with
the underlying earnings of the group, while maintaining dividend
cover at a prudent level. The final dividend proposed by the Board
has increased by 6.6% to 6.5p per share (2014: 6.1p per share),
bringing the full year dividend to 11.7p per share (2014: 11.0p per
share), an increase of 6.4%. This results in a dividend cover of
2.1x (2014: 2.2x). Subject to shareholder approval at the Annual
General Meeting (AGM), the dividend will be paid on 4 August 2015
to shareholders on the register at 26 June 2015.
Board and corporate governance
Corporate governance remains an important and committed area of
focus for the Board. The priorities during the year were our growth
strategy, the exit from loss-making businesses, the ongoing review
of performance and risk and the composition of the Board.
On 31 July 2014, Bill Robson stepped down as an Executive
Director of the Board. We thank him for his contribution and are
delighted that he remains as part of the executive team, in his
role as Managing Director of our Property Management division.
On 1 October 2014, Crawford Gillies stepped down from his role
as Chairman of the Remuneration Committee; and he will step down as
a Non-Executive Director of the Board at the AGM on 13 July 2015.
We thank him for his valuable contribution to the Board. Jack
Boyer, Non-Executive Director, has taken on the role of Chairman of
the Remuneration Committee.
David Jenkins will retire from the Board in December 2015. He
will step down as Chairman of the Audit Committee and Senior
Independent Director at the AGM. We thank David for his valuable
contribution to date and for his commitment to the group by
continuing on the Board to ensure a smooth transition. Larry Hirst,
who has been a Non-Executive Director for the past five years, will
be appointed Senior Independent Director at the AGM.
Mark Reckitt will be appointed as a Non-Executive Director of
the Board with effect from 1 July 2015. He will be appointed
Chairman of the Audit Committee as David's successor, and will also
be appointed to the Nomination and Remuneration Committees. Mark
brings significant expertise and experience, having held senior
business, strategy and finance roles at Smiths Group plc, Kraft
Foods Inc., and Cadbury plc. He is Non-Executive Director and
Chairman of the Audit Committees at both Cranswick plc and J D
Wetherspoon plc.
Outlook
Mitie has made good progress this year. We have repositioned the
business and lowered our risk profile. Our Facilities Management
business accounts for c.85% of group revenue and is a UK market
leader.
We see considerable opportunities across our markets, to provide
clients with higher quality, innovative services that save them
money. We are only as good as all our people, and supporting and
developing them is critical to our ongoing success.
We are focused on generating profits backed by cash, maintaining
strong margins and growing the dividend. With a substantial order
book and sales pipeline, we are now well placed to deliver good
growth. We look ahead with confidence.
Developments during the year
This has been a year of important contract awards and
retentions. With repeat business being an excellent indicator of a
company's strengths and the most important driver of our own
organic growth, it was rewarding to again see our contract
retention rate in FM above our target of 90%, at 96%.
During the year we were particularly delighted to extend our
transformational partnership to deliver integrated FM for Lloyds
Banking Group. Our initial five-year contract commenced in 2012 and
the new agreement will extend it through to the end of 2022. This
is one of the biggest private sector FM contracts of its type and
is an excellent example of two organisations working in
partnership.
At Heathrow Airport, our proactive working relationship has led
to an expansion of our FM contracts there to include additional
security services such as hold baggage screening and immigration
presentation services, and we see significant opportunities to
further expand our presence across the Heathrow estate.
We were also awarded a number of major contracts with new
clients during the year. Jones Lang LaSalle has appointed us to
deliver FM services across its UK property portfolio, in a contract
valued in excess of GBP85m over three years.
Our Environmental+ business was awarded a GBP90m
first-generation outsourcing contract to deliver soft FM services
for seven years, across three sites of the Royal Cornwall Hospitals
NHS Trust. We also made good progress in the areas of waste
management, landscaping and pest control. The waste business was
awarded its largest ever contract with a multinational consumer
goods company, for a value of GBP18m over three years. Our
landscaping and pest control businesses benefited from a very
strong year of retention as well as cross-selling to our existing
client base. It extended or retained contracts with valued clients
including the Co-op, Sainsbury's and Mitchells & Butlers.
The ethos of employee share ownership has always been at the
heart of our business. The 'Mitie Model' underpins our
entrepreneurial culture and is a key differentiator in the market;
we continue to use this to attract great management teams and build
our service offering. We believe this is the best environment in
recent years in which to start and grow new businesses, and we plan
to back entrepreneurs to do this through the launch of a GBP20m
entrepreneurial fund.
Our catering business, Gather & Gather, is an example of
where our equity model is resulting in very strong performance. We
brought in a management team four years ago, who invested in the
business and have since more than trebled its revenues and
transformed our offering. It launched its offering in Ireland
during the year and has had notable success there already with the
award of landmark new contracts, including Primark and LinkedIn,
generating revenue of GBP15m per annum.
Our Care and Custody business was also built using the Mitie
model, and just four years after entering the market, it is now the
largest provider of immigration detention services to the Home
Office. During the year we successfully mobilised the eight-year,
GBP180m contract to manage and maintain the Colnbrook and
Harmondsworth detention centres for the Home Office, and this
contract is progressing well.
In January 2015, we were pleased to acquire the remaining 49% of
Mitie Compliance. This is a business which we acquired a majority
stake of in 2011, then called Direct Enquiries. The management team
retained a minority stake, with an incentive to continue building
the business, based on the Mitie model. It has been very
successful, having grown into one of the UK's leading compliance
consultancies. It helps clients to stay compliant with building
legislation, which is vital to sustain safe, robust and legally
compliant operations. It provides comprehensive technology-led,
evidence-based auditing services and has extensive experience in
providing compliance services for some of the UK's biggest
businesses.
In November 2014, we acquired a majority stake of Source8, the
real estate, technology and risk management consultancy. It
provides advisory and business support services to governmental and
non-governmental organisations on the implementation of real
estate, technology and risk management solutions globally. Its
clients include leading global corporations, and the business has
particular expertise in emerging markets and complex environments.
Source8 brings a strategic offering with strong growth potential
and consulting capabilities both in the UK and overseas. The high
quality management team has retained a minority stake in the
business, and are incentivised to grow the business, again using
our unique equity model. This purchase is enabling us to build on
our consultancy offer and is another example of how we are working
hard to deliver a greater breadth of the FM services that our
clients rely on.
In October 2014 we acquired Procius, which specialises in
pre-employment screening. It has particular expertise in the
aviation and transportation sectors. The acquisition is providing
our security business with extra capabilities and is supporting its
growth as one of the UK's largest providers of pre-employment
screening.
Our homecare and social housing businesses both work
predominantly in the local government sector. Local authorities
have significant challenges and as a result we have experienced
pricing pressure in both of these businesses, which has negatively
impacted their financial performance. In both businesses, we are
focused on working with clients who truly value the people who
deliver such important services, and with whom we are able to
develop long-term, sustainable relationships.
In our homecare business, against this market backdrop, we have
closed or streamlined a number of branches where the cost pressures
are most intense. In regions where pricing has reached levels that
are not economically viable, we have withdrawn from bidding
altogether, which has resulted in a lower volume of hours worked
during the year. We have concurrently continued to invest in
resources and infrastructure to grow the business for the long
term. Recruitment remains one of the biggest challenges in this
market and we have taken a number of steps during the year to
address this issue.
We remain confident of the longer-term opportunities in the
healthcare market - the fundamental demand for care for the
elderly, which can be provided more cost-efficiently in the home,
is growing steadily and projected to grow faster in the years to
come. We anticipate growth will come from working with partners
such as the NHS to improve the overall delivery of public health
services at a lower cost, through a significantly improved
operating model in care at home. We will also strengthen our
position in the complex care market, where our Complete Group
business is performing steadily.
Exiting non-core businesses
In 2012, we made the decision to reduce our exposure to
cyclical, high risk, construction-related markets. This was not an
easy decision, and a very difficult course of action for Mitie, but
it was undoubtedly the right thing to do for our long-term
future.
We have now completed our exit from the legacy, loss-making
mechanical and electrical (M&E) engineering construction
businesses as well as our Asset Management business. Both were
characterised by design and build risk, high overhead costs and
cyclicality. The M&E construction business closed before the
end of the financial year, with exceptional losses of GBP15.9m for
the period. In our Asset Management business, all operational and
financial risk on the remaining design and build contracts has been
assessed and a charge of GBP45.7m is included in Other items (see
Note 3). Beyond these amounts, no further exceptional charges will
be incurred from either of these businesses.
Operational performance
Facilities Management
2015 Headline 2014 Headline Growth
----------- ------------- ------------- -------
Revenue
Soft FM GBP1,280.3m GBP1,190.8m 7.5%
Hard FM GBP621.1m GBP595.3m 4.3%
------------- ------------- -------
GBP1,901.4m GBP1,786.1m 6.5%
----------- ------------- ------------- -------
Operating profit
Soft FM GBP81.9m GBP74.8m 9.5%
Hard FM GBP31.4m GBP25.6m 22.7%
------------- ------------- -------
GBP113.3m GBP100.4m 12.8%
----------- ------------- ------------- -------
Operating profit margin
Soft FM 6.4% 6.3% +0.1ppt
Hard FM 5.1% 4.3% +0.8ppt
------------- ------------- -------
6.0% 5.6% +0.4ppt
----------- ------------- ------------- -------
Order book GBP7.6bn GBP7.4bn 2.7%
----------- ------------- ------------- -------
Our core FM business comprises two divisions: Soft FM, which
includes cleaning and environmental services, security, and
catering and front of house; and Hard FM, which consists of a range
of technical and building services. Our integrated FM offering
brings together the full range of soft and hard FM services in a
single tailored proposition.
There has been a slight change to the way we report our FM
results this year, with our Energy Solutions business now
incorporated into Hard FM because it supports the strengths and
objectives of that division.
Developments during the year
The FM business performed very well throughout the year,
delivering strong organic growth of 6.1%, through important
contract awards and extensions. The operating profit margin
improved in both the Soft and Hard FM divisions, reflecting good
market conditions and a continued focus on operational
efficiency.
Client satisfaction is central to our success and we were rated
the top overall service provider in the FM industry for the second
consecutive year in the 2014 i-FM brand survey. The same survey
also identified us as the most innovative provider with the best
brand identity, and placed us either first or second in several of
the service categories, including integrated FM, technical FM,
cleaning and security.
We have made considerable progress developing our FM business,
working with our clients to deliver both tactical and strategic
support to their activities. For our largest clients, we utilise
our extensive experience to provide: tailored consultancy services
to support their strategic objectives; operational solutions to
manage and oversee the demands of complex and changing estates; and
trained people who carry out day-to-day, bespoke FM services. Our
ability to deploy such broad expertise demonstrates our value to
clients, supports the generation of new, profitable revenue streams
and positions us as a clear leader in our chosen markets. In
addition, the introduction of a wider mix of service lines has
enabled us to support our margins through the introduction of
consultancy activities to support our clients' strategic estate
management objectives, with margins consistent with those achieved
by other consultancy or professional services businesses. In the
second half of the year, we have seen a significant contribution
from our consultancy stream in FM, and we expect revenues in this
area to continue to develop. Our operationally-led, professional
expertise and experience in FM is highly valued by our clients and
the provision of selected FM consulting services will also
incorporate our activities from Source8 and Utilyx going
forward.
Our international presence remains relatively small. In
continental Europe, we support a small number of key clients; in
some countries through a self-delivery model and in others using
supply chain management. In Ireland, we have made excellent
progress since our entry into that market in 2010, where our
revenues have trebled over that time. Our catering business, Gather
& Gather, has now expanded into Ireland and has made excellent
progress with the award of a number of exciting contracts there
during the year. Elsewhere, our recent acquisition, Source8,
provides property consulting services across the globe for a range
of UK, European and US based businesses.
Our Care and Custody business is also continuing to expand its
presence in the justice sector, where we look after a number of
immigration removal centres. In 2014, we successfully mobilised our
GBP180m, eight-year contract to manage and maintain two immigration
centres. Three years after entering the market, we are now the
largest provider of immigration detention services to the Home
Office. The mobilisation process included merging the two centres
into one, helping two discrete groups of staff adopt a new
operating model based on a central team, consistent operations and
centralised services such as the control room.
Integrated FM
Our integrated FM business incorporates the full range of hard
and soft FM services. During the year it generated revenue of
GBP0.7bn, a 10% increase on the prior year.
With the integrated FM UK market valued at around GBP22bn, we
continued to prosper and grow, underlining a clear trend for
clients to outsource multiple FM services to a single partner as it
offers them greater access to value added advice beyond day-to-day
operations.
Our clients see us as their trusted advisor - we manage all
services delivered on the account and are the single point of
contact from an operational, tactical and strategic perspective.
Delivering over 95% of the services through our specialist
businesses means we also offer our clients a level of ownership,
performance and value that is a critical differentiator.
Clients also view a provider's track record as a way for them to
achieve assured quality and our broad expertise across multiple
sectors has underpinned much of our success this year. In the
financial and professional sector, in addition to extending our
contract with Lloyds Banking Group, we were awarded a new contract
with a major insurance and professional services company. In the
technology and communications sector, we retained and extended our
contracts with both Vodafone and Eircom.
Expertise in other areas, such as technology, is also critical
to our success. Investment in systems, such as our management
platform Miworld, has enabled us to provide greater data and
management information and therefore insight into strategic
decision making - helping clients reduce total cost of occupancy
while still improving service quality and responsiveness.
Soft FM
Cleaning and environmental services
We are one of the UK's largest providers of cleaning, pest
control, landscaping, waste management and winter gritting,
employing over 30,000 people.
The cleaning business today is more sector oriented, with a
sharp focus on the transport, commercial, retail, manufacturing,
leisure and health sectors. The year's highlights included contract
retentions with clients including Ascot Racecourse, Standard Life
and Heathrow Airport, as well as new agreements with Santander and
Arriva, where we clean, fuel and garage 1,600 buses every day.
In the healthcare sector, we secured major cleaning contracts
with Marie Curie, Hull NHS Trust, Epsom and St Helier Hospitals, as
well as a soft FM contract with Royal Cornwall Hospitals NHS
Trust.
In the retail and consumer goods sector, our waste management
business was awarded its largest contract to date with a
multinational consumer goods company, providing services across 22
sites, with a value of GBP18m over three years. Our pest control
business also retained its largest contract, with Sainsbury's, for
a further two years.
Our landscaping business is growing rapidly; during the year it
was awarded its largest ever contract, as part of the FM services
we will be delivering for Jones Lang LaSalle.
Security
We provide customers with total security management, from
traditional manned security to technology-led services such as
remote monitoring and pre-employment vetting services. The
addressable market for our services is around GBP2.5bn, which is
now growing at approximately 1% per annum following industry
contraction.
We follow a risk-based approach built on people, technology and
consultancy and see excellent opportunities in sectors including
critical security environments (CSE), the public sector, and
transport and aviation. In CSE, we work for risk-averse clients who
need high standards of security, such as AWE, Cumbrian
Collaboration, Lockheed Martin and BAE. In the public sector, we
gained several new clients, notably in the health and education
sector. We continue to dominate the aviation and transport sector,
where we work with clients including Eurostar, Eurotunnel,
Birmingham Airport, airlines at Heathrow Airport and Virgin
Atlantic Airways.
Catering and front of house
With the UK contract catering market estimated at GBP4.2bn, our
Gather & Gather catering business continues to thrive and grow
in this market. It has created a differentiated offer based on
innovative, locally-sourced food and hand-roasted coffee. During
the year it was awarded important new contracts, including with
White Rose, TSB and Gloucester Police. It also expanded into
Ireland, through contracts with Primark and LinkedIn. In London,
Gather & Gather opened its first retail café, The Bench,
situated in the new Goldsmiths' Centre in Clerkenwell.
The focus for our events hospitality business, Creativevents,
shifted during the year, from a predominantly venue-based operation
to an outdoor events business. Highlights included the Chelsea
Flower Show, the RHS Hampton Court Show, Royal Ascot Silver Ring
and Winter Wonderland at Hyde Park.
The front of house team made steady progress during the year,
with a regular flow of contract awards and retentions, both
standalone and as part of our integrated contracts.
Hard FM
We deliver a full range of technical and building services to
clients across a broad range of market sectors. We are the largest
provider of these services in the UK, employing over 5,000 people
in this area of the business, as well as training over 120
apprentices at any one time.
Our focus is on building long-term relationships with clients,
managing and maintaining all of their mechanical and electrical
engineering maintenance needs. We also provide additional, critical
specialist services, which extend our offering and bring valuable
new opportunities to the business. These include heating, cooling,
lighting, fire and security, water treatment, compliance, building
controls, roofing and projects.
The business performed well during the year, continuing to grow
with existing clients and building new relationships. Highlights
include maintaining two of the largest, state of the art, data
centres in the UK and new work awarded with Heathrow and Gatwick
airports, BBC Worldwide, Turner Broadcasting, Tesco and
AB-InBev.
Our lighting business, the largest in the UK, has had a good
year, with demand for LED lighting projects driving growth in this
area. We utilise the latest technology to improve visual quality as
well as significantly improving energy savings and efficiency.
Our compliance business is one of the fastest growing in the UK.
Changing legislation means that our clients need to stay a step
ahead, and we have the broadest range of services and are the
market leaders in our use of technology in this area.
With energy continuing to be a major factor for all our clients,
our energy proposition provides the analytics and solutions that
help improve efficiency and reduce costs. Through our Utilyx
consultancy, we enable clients to take a more strategic approach to
energy issues, helping them buy better and use smarter. Utilyx is
one of the largest buyers of business energy in the UK, on behalf
of its clients, making it an energy partner of choice. In 2014,
Utilyx was named Most Trusted Consultancy and also Large
Consultancy of the Year at the Energy Live Consultancy Awards.
We are differentiated by our national scale, but have a focus on
local delivery, enabling us to service both regional and national
clients. We have continued to invest in technology during the year,
for example market-leading auditing tools and engineering systems,
which allows us to provide truly integrated, end-to-end solutions.
We have also focused on our account management capabilities and our
infrastructure, ensuring we continue to provide quality services
and maintain our proven track record.
Property Management
2015 Headline 2014 Headline Growth
------------------------ ------------- ------------- --------
Revenue GBP273.4m GBP264.8m 3.2%
------------------------ ------------- ------------- --------
Operating profit GBP10.4m GBP14.4m (27.8%)
------------------------ ------------- ------------- --------
Operating profit margin 3.8% 5.4% (1.6ppt)
------------------------ ------------- ------------- --------
Order book GBP1.0bn GBP0.8bn 25.0%
------------------------ ------------- ------------- --------
Our Property Management business serves a wide range of clients
in the domestic housing market, including housing associations and
local authorities, through long-term contracts. Whilst the business
delivered good growth in revenues, there was some pricing pressure
in its markets during the year. We experienced an acceleration of
revenues in the second half of the financial year and the pipeline
of future opportunities is strong.
Property management works in whatever way best meets clients'
needs. This includes via a variety of models such as bespoke
partnering models, strategic planning, investment consultation and
stock surveys. An increasing number of existing clients are joining
the trend towards bundled services and we have also seen a renewed
emphasis on the quality of service delivery. Although currently the
majority of revenues are derived from the public sector, the
business is moving towards a sharper focus on the private rented
sector, which currently accounts for 17% of the UK housing market
and is experiencing high levels of growth.
Over the last 12 months we were awarded a number of property
management contracts with clients such as Circle Housing, Orbit,
London & Quadrant Housing Association and A2 Dominion, while
retaining key contracts with clients including Leeds Council and
Sovereign Housing.
We are the market leaders in painting and repair services, with
national coverage, and during the year we secured new contracts
with Home Group and A2 Dominion, amongst others. We also provide
domestic heating services and have identified increasing
opportunities to supply boiler replacements, insulation and
associated projects. Our insurance services business, which
performs repair services on behalf of insurance companies, has also
made good progress during the year. We anticipate good growth
across these service offerings over the coming year.
Healthcare
2015 Headline 2014 Headline Growth
------------------------ ------------- ------------- --------
Revenue GBP91.4m GBP91.7m (0.3%)
------------------------ ------------- ------------- --------
Operating profit GBP4.9m GBP12.7m (61.4%)
------------------------ ------------- ------------- --------
Operating profit margin 5.4% 13.8% (8.4ppt)
------------------------ ------------- ------------- --------
Order book GBP0.4bn GBP0.5bn (20.0%)
------------------------ ------------- ------------- --------
We provide homecare (also known as adult social care) services
to people who require help and support due to illness or
disability, through our MiHomecare business. We also have Complete
Group, which provides nurse-led complex care solutions in the home.
Today, homecare is in most cases publicly funded and privately
delivered.
The financial performance of this business has been impacted
significantly as a result of the local authority spending cuts,
which is the primary client base of this business. In the last
year, we continued to focus resource on branches that were able to
perform to the standards that we expect and our service users
deserve, and exit regions where local authority cost pressures are
most intense. The other major short term challenge in the homecare
market relates to recruiting and retaining the right number of high
quality care workers. We are investing in recruitment, training and
development programmes in order to ensure a pipeline of
well-trained, committed staff.
While the branch closures impacted our performance during the
year, we are confident of the longer-term growth drivers in the
homecare market, which is valued at GBP17bn. Like other developed
nations, the UK has an ageing population, with the number of over
85s expected to double in the next 25 years. Homecare services
undoubtedly benefit both the person receiving care and the body
funding that care: people often prefer to remain in their own homes
whenever possible; and central government and local authorities
recognise homecare as a more cost-efficient alternative to care in
hospitals or retirement homes. We expect this will also drive a
long-term trend towards integrating health and social care
provision.
Growth in the medium to long term will come from two main
sources. Firstly, our MiHomecare brand continues to win important
new contracts. The second area where we anticipate growth is in
working with partners such as the NHS to improve the delivery of
public services. Such partnerships combine the best of both private
and public sectors and can lead to a marked improvement in quality
accompanied by increased efficiency and reduced costs. We have
continued to invest in the business with a view to these medium and
long-term opportunities, and during the year, we were part of the
UnitingCare Partnership, which was awarded a contract to provide
older people's healthcare and adult community services in
Cambridgeshire and Peterborough.
Financial review
Positioned for future growth
Our business has changed fundamentally over the past ten years.
Our revenue has grown by GBP1.5bn to GBP2.3bn through both strong
organic growth and acquisitions. We have invested in our facilities
management offering to create the leading integrated FM brand in
the UK, to strengthen our order book and enhance our margins by
exiting our cyclical mechanical and electrical engineering and
Asset Management businesses. Our group has delivered strong organic
growth and built an order book of GBP9.0bn with a high quality
client base. We have maintained a strong cash performance, returned
GBP0.3bn in dividends to our shareholders over ten years and grown
the dividend per share every year.
Organic growth of 4.9% outperforms the sector
Headline revenue grew by 5.8% to GBP2.3bn. This represented
organic growth of 4.9% which outperformed the FM sector average of
3.1%.
Mitie has a strong track record of delivering organic growth
with an average of 4.5% over the past five years. This has been
achieved by focusing on our core facilities management offering
both by winning work with new customers and expanding our service
offering with existing customers.
Strong margins, growing profitability
Headline operating profit grew by 0.9% to GBP128.6m. Our
operating profit margin was 5.7%, in line with our target range of
5.5% to 6.5%. It is our medium term objective to grow margins above
6.0%.
Reshaping our business for future growth
We have recognised the impact of a number of non-recurring and
non-cash items which are separately presented within Other items.
We have incurred charges as a result of the exit from two
businesses which no longer meet our growth, risk or return
expectations. As a result, we have repositioned our business for
long term growth.
During the year we completed the exit from our loss-making
mechanical and electrical (M&E) engineering construction
business with exceptional losses of GBP15.9m for the period. In our
Asset Management business, all operational and financial risk on
the remaining design and build contracts has been assessed and a
charge of GBP45.7m has been incurred. Beyond these amounts, no
further exceptional charges will be incurred from either of these
businesses. Further details of Other items are set out in Note
3.
Generating sustainable shareholder value
Headline profit after tax of GBP90.0m resulted in basic headline
earnings per share of 24.8p, an increase of 2.1% on prior year
(2014: 24.3p).
Including Other items, statutory profit after tax of GBP35.7m
resulted in statutory basic earnings per share of 9.7p (2014:
13.4p).
In 2013, the Board approved a share purchase policy to maintain
share numbers at a broadly consistent level year-on-year, with the
aim of ensuring that the interests of shareholders are not diluted
by the issue of shares that support the group's various share
schemes, nor by the issue of shares as consideration for earn outs
under the Mitie Model. To this end, in 2015 the group bought back
3.7 million shares (2014: 5.8 million) at a cost of GBP10.7m. The
shares purchased are held in Treasury. The total number of shares
the group holds in Treasury is 9.5 million.
The average number of shares in issue in the year was 359.3
million (2014: 359.9 million).
Returning cash to shareholders
The group has a strong track record of dividend growth, having
consistently increased dividends annually since the group was
listed on the London Stock Exchange in 1987 and paid GBP175m in
cash dividends to shareholders in the last five years. It is now
our policy to grow dividends at least in line with underlying
earnings. This year's cash returns to shareholders fully reflect
our continued confidence in the business and have not been
discounted by the impact of non-recurring charges and additionally
reflect growth of 6.4% compared with growth in headline basic
earnings per share of 2.1%. The full year dividend recommended by
the Board is 11.7p per share (2014: 11.0p per share), reflecting a
cover of 2.1x (2014: 2.2x) headline earnings per share.
During the year, total dividends of GBP40.5m were paid to
shareholders (2014: GBP38.1m).
Return on capital employed
Our return on capital employed (ROCE) for the year is 18.6%.
ROCE is calculated as headline operating profit after tax (adjusted
for the proforma, full year effect of acquisitions) divided by
capital employed. Capital employed is calculated as net assets
excluding net debt less non-controlling interests.
Our ROCE demonstrates our ability to generate returns from the
capital employed by our business. We focus on our ROCE through the
management of our asset base and profit streams and take into
consideration returns on capital when we invest to maximise the
profitability of the group. By generating returns that exceed our
weighted average cost of capital, currently 7.4%, we are ensuring
that our investment decisions add value to our business.
Balance sheet
At 31 March 2015, the Group had GBP378.3m of net assets.
Goodwill and other intangible assets of GBP541.0m are held on
the balance sheet. In relation to net assets, this profile is
typical of our sector, which is people based and low in capital
intensity, and of businesses growing through acquisition. Details
of the group's goodwill is set out in note 8.
Our group has a limited requirement for investment in property,
plant and equipment and accordingly capital expenditure as a
percentage of revenue is 1.0% and is expected to remain close to 1%
going forward. Our principal investment requirement in capital
terms is in working capital. Working capital management is a key
focus for the group.
Our revenue has grown by over 30% in the past five years to
GBP2.3bn. Our working capital balances have been managed to stay in
line with the growth of our business and working capital investment
has remained relatively constant.
Short-term working capital balances at 31 March 2015 were
(GBP48.5m) or GBP10.0m after the inclusion of non-current trade and
other receivables. The net working capital outflow per the cash
flow statement of GBP2.6m reflects our ongoing focus on working
capital management.
Excellent cash conversion
Our profits are strongly backed by cash flows. Cash conversion
measures our success in converting operating profit (measured by
earnings before interest, tax, depreciation and amortisation
'EBITDA') to cash and reflects both the quality of our earnings and
the effectiveness of our cash management activities. As a key
indicator of our business performance, we target headline cash
conversion of 80% which we have consistently exceeded over the past
five years. This year, headline cash inflows from operations were
GBP144.6m (2014: GBP152.4m), representing headline cash conversion
of 95.1% (2014: 102.4%).
On a statutory basis, cash conversion was 126.5% (2014: 107.3%).
The consistency of our cash generation has been a key feature of
our results and remains a major focus going forward.
Net debt
As at 31 March 2015, net debt was GBP177.8m, a reduction of
GBP8.8m on the prior year. Strong free cash flow of GBP57.5m has
enabled us to return GBP40.5m to shareholders through growing
dividend payments.
We remain comfortably within each of our banking covenants. As
at 31 March 2015, net debt stood at 2.0x statutory EBITDA (2014:
1.6x) and 1.2x headline EBITDA (2014: 1.3x).
Committed facilities to fund future growth
In July 2014 the group completed a refinancing of its revolving
credit facility through a syndicate of six banks which secured
facilities for a further five years at margins favourable to the
previous facility. The group now has committed funding of GBP527m
in place to support our future growth opportunities.
Our interest rate exposure is predominantly fixed, at around 4%
per annum.
The group has a centralised treasury function whose principal
role is to ensure that adequate liquidity is available to meet
funding requirements as they arise, and that financial risk is
effectively identified and managed. Treasury policies and
procedures are approved by the Board. No transactions of a
speculative nature are undertaken. Dealings are restricted to those
banks with suitable credit ratings and counterparty risk and credit
exposure is monitored frequently.
Acquisitions
During the year we acquired two businesses which added GBP10m to
group revenue and GBP2m to group operating profit on a pro forma
basis.
On 16 October 2014, we acquired Procius Limited, the leading UK
pre-employment screening company, for total consideration of up to
GBP2.3m.
On 26 November 2014, we acquired a 51% stake in Source Eight
Limited, a real estate, technology and risk management consultancy
for a maximum initial consideration of GBP2.95m. Further cash
consideration may be payable in respect of put options over the
remaining 49% stake bringing total consideration for a 100% stake
to a maximum of GBP15.5m. At 31 March 2015, a liability of GBP8.0m
has been recognised in respect of the put options which are
potentially exercisable in tranches between 2017 and 2019.
From the date of ownership, the acquired businesses have
contributed headline revenue of GBP3.7m and headline operating
profit of GBP0.6m to the group, which is in line with our
expectations.
Driving entrepreneurialism through equity participation
Mitie operates an entrepreneurial investment programme known as
the Mitie Model. Investment companies are structured so that the
management team takes an equity stake of up to 49% in a business
which they grow over a five to ten-year period, and may eventually
be acquired by Mitie in full, should the acquisition criteria in
the respective Articles of Association and shareholder agreements
be met. Mitie has supported over 100 start-up businesses to grow
using the Mitie model. Currently, Mitie holds majority interests in
11 Mitie Model companies with a carrying value of GBP3.3m.
On 30 January 2015, Mitie Group plc acquired the remaining 49%
share in Direct Enquiries Holdings Limited. The total consideration
was GBP5.6m being satisfied by GBP1.8m in cash paid during the year
and GBP3.8m paid in cash in April 2015.
This purchase and other acquisitions are discussed in more
detail in Note 14.
Tax contribution
Our tax strategy is to manage all taxes, both direct and
indirect, such that we pay the appropriate amount of tax in each
country whilst ensuring that we respect the applicable tax
legislation and utilise, where appropriate, any legislative reliefs
available. This tax strategy is reviewed, regularly monitored and
endorsed by the Board.
Mitie is a significant contributor of tax in the UK, paying
GBP522m in 2015 (2014: GBP599m). This comprised GBP15m of UK
corporation tax and GBP507m of indirect taxes including business
rates, VAT and payroll taxes paid and collected.
The group's headline tax charge was GBP24.1m (2014: GBP25.6m).
The effective headline rate was 21.1% for the year (2014: 22.6%).
As Mitie is predominantly UK based, our effective rate of tax
reflects the UK statutory rate of tax.
After adjusting for the tax credit on other items of GBP18.3m
(2014: GBP5.7m), the statutory income tax charge was GBP5.8m (2014:
GBP19.9m), an effective rate of 14.0% (2014: 29.1%).
Pensions
Our financial strength and balance sheet remain unaffected by
any significant pensions deficit, with the net deficit of all the
defined benefit pension arrangements included on the balance sheet
being GBP35.8m (2014: GBP19.1m).
During the year we completed the actuarial triennial valuation
of the Mitie Group scheme. The scheme actuarial deficit was GBP6.0m
at 31 March 2014. We have agreed with the trustees that no cash
injection into the scheme is currently required, but have committed
to potential cash injections of up to a total of GBP11m over ten
years should the funding position deteriorate materially.
The accounting deficit on Mitie Group plc's principal defined
benefit scheme at 31 March 2015 was GBP34.9m (2014: GBP17.0m),
reflecting a reduction in bond rates. The performance of scheme
assets has, however, remained strong in the year; the scheme has
also benefited from the positive impact of amendments made to the
terms of the Mitie Group defined benefit pension scheme during the
previous year.
The group also makes contributions to customers' defined benefit
pension schemes under Admitted Body arrangements as well as to
other arrangements in respect of certain employees who have
transferred to the group under TUPE. Mitie's net defined benefit
pension obligations in respect of schemes in which it is committed
to funding amounted to GBP0.9m (2014: GBP2.1m).
Statutory and non-statutory measures of performance
Our financial statements contain all the information and
disclosures required by the relevant accounting standards and
regulatory obligations that apply to the group. We have elected to
provide some further disclosures and performance measures in order
to present our financial results in a way that best demonstrates
the performance of our business.
The results described as "headline" report the performance of
the trading activity of our core business along with the central
overhead required to manage the group. The headline measure
illustrates the performance of the underlying activities of the
group, and is a non-statutory measure.
We have separately disclosed any restructuring and
acquisition-related items together with the results of the
engineering construction and Asset Management businesses, which we
have exited. These items are described as Other items within the
income statement and in related parts of this announcement. The
Other items measure of our results is a non-statutory measure. In
the current year, Other items comprise:
h The results of the mechanical and electrical engineering
construction business we have exited
h Exceptional charges in respect of design and build Asset
Management contracts
h Acquisition related charges, including amortisation of
acquisition related intangible assets
The sum of the headline and other items columns are the
statutory reported results of the business and reflect the full
trading result of the group, reported in accordance with IFRS. This
presentation is consistent with the way in which we manage and
report on our business internally and is consistently applied to
assist in the explanation of our performance.
New and retained contracts
Client Contract Timeframe Estimated
total
value
------------------------- ---------------------------------------------- ----------- ---------
Technology and communications
-------------------------------------------------------------------------------------------------
LinkedIn A new contract for Gather & Gather 5 years ND
to provide catering services in
at LinkedIn's headquarters
------------------------- ---------------------------------------------- ----------- ---------
Vodafone Retained and extended an integrated 5 years GBP250m
FM contract to deliver services
including fabric and engineering
maintenance, workplace management,
security and cleaning across 1,500
Vodafone sites
------------------------- ---------------------------------------------- ----------- ---------
BBC Worldwide A new contract delivering the full 3 years ND
range of FM services including maintenance + 3 years
and repairs, cleaning, catering, + 3 years
security and front of house services
at BBC Worldwide's new offices in
Television Centre, White City, London
------------------------- ---------------------------------------------- ----------- ---------
Turner Broadcasting A new contract to deliver FM services 4 years GBP4m
at three of the broadcaster's sites,
including maintenance and repairs,
cleaning, front of house, waste
management and mailroom services
------------------------- ---------------------------------------------- ----------- ---------
Interxion Awarded a contract to provide a 3 years ND
range of security services to its
London data centre campus
------------------------- ---------------------------------------------- ----------- ---------
Gather & Gather were awarded a new
International technology contract to deliver catering services
company in the UK and Ireland 3 years EUR30-40m
------------------------- ---------------------------------------------- ----------- ---------
Transport
-------------------------------------------------------------------------------------------------
Heathrow Airport Expanded existing relationship to 3 years GBP40m
provide security services and hard
FM to Terminals 3, 4, 5, the Heathrow
Express and in the headquarter building,
the Compass Centre and the Heathrow
Academy
------------------------- ---------------------------------------------- ----------- ---------
Arriva Awarded a new contract to clean 5 years GBP20m
buses at depots across the UK
------------------------- ---------------------------------------------- ----------- ---------
Eurostar Retained a contract to deliver a 3 years ND
range of security services at all
UK terminal stations
------------------------- ---------------------------------------------- ----------- ---------
Finance and professional services
-------------------------------------------------------------------------------------------------
Lloyds Banking Extended transformational partnership 7 years ND
Group delivering integrated facilities
management across the bank's entire
UK branch and office estate
------------------------- ---------------------------------------------- ----------- ---------
Santander A new contract to provide cleaning 3 years ND
services to around 1,000 branches
and banking centres across the UK
------------------------- ---------------------------------------------- ----------- ---------
Standard Life Retained and expanded a contract ND ND
to provide cleaning, gritting, landscaping,
pest control and catering
------------------------- ---------------------------------------------- ----------- ---------
Bank of America Retained a contract to provide front 3 years ND
of house services, which includes
reception, switchboard, helpdesk
and meeting and event bookings for
the bank at four locations across
the UK
------------------------- ---------------------------------------------- ----------- ---------
Major high street Appointed to provide hard FM services 3 years GBP6m
insurance company to the group's property portfolio
------------------------- ---------------------------------------------- ----------- ---------
Major insurance Awarded a contract to provide the 5 years GBP40m
and professional full range of FM services at 47
services company buildings across the UK and Ireland
------------------------- ---------------------------------------------- ----------- ---------
Retail and leisure
-------------------------------------------------------------------------------------------------
AB InBev Appointed to provide installation, 5 years c.GBP30m
maintenance and repairs to drinks
dispense equipment in the brewer's
25,000 outlets across the UK. This
builds on our existing contract
delivering cleaning, security, catering
and technical FM services across
37 European countries
------------------------- ---------------------------------------------- ----------- ---------
Gunwharf Quays Awarded a new contract to manage ND ND
shopping centre the Portsmouth retail outlet's guest
relations team
------------------------- ---------------------------------------------- ----------- ---------
Ascot Racecourse Re-secured a cleaning contract, 3 years GBP6m
building on our existing security
and events catering offering
------------------------- ---------------------------------------------- ----------- ---------
Ladbrokes Awarded the UK's largest LED lighting 30 weeks GBP9m
project with the high street bookmaker
------------------------- ---------------------------------------------- ----------- ---------
Fujitsu Retained a contract to provide security 3 years ND
services at over 40 locations in
the UK
------------------------- ---------------------------------------------- ----------- ---------
Multinational consumer Appointed to deliver waste management 3 years GBP18m
goods company services to 22 UK sites, including
13 production sites
------------------------- ---------------------------------------------- ----------- ---------
Primark A new contract delivered by Gather 3 years ND
& Gather, providing catering services
in the UK and Ireland
------------------------- ---------------------------------------------- ----------- ---------
Sainsbury's Retained a contract to deliver pest 2 years ND
control
------------------------- ---------------------------------------------- ----------- ---------
Property management
-------------------------------------------------------------------------------------------------
Jones Lang LaSalle Awarded a significant new contract 3 years GBP85m
to provide a range of FM services
including technical FM and landscaping
services across the group's UK property
portfolio
------------------------- ---------------------------------------------- ----------- ---------
Education
-------------------------------------------------------------------------------------------------
Queen Mary University Awarded a contract to deliver hard 5 years GBP5m
FM services including maintenance + 2 years
and repairs, fire protection, water
treatment and building audit services
to 64 buildings over three campuses
------------------------- ---------------------------------------------- ----------- ---------
Durham University Extended an IFM contract delivering 3 years GBP5m
a comprehensive range of services
including cleaning, landscaping,
pest control and security
------------------------- ---------------------------------------------- ----------- ---------
Client Contract Timeframe Estimated
total
value
------------------------- ---------------------------------------------- ----------- ---------
Healthcare
-------------------------------------------------------------------------------------------------
Larchwood Care A new contract to deliver hard FM 3 years GBP10m
Homes services to care homes across the
UK
------------------------- ---------------------------------------------- ----------- ---------
Royal Cornwall Awarded a first-generation outsourcing 7 years GBP90m
Hospitals NHS Trust contract to deliver soft FM services
across three sites
------------------------- ---------------------------------------------- ----------- ---------
Marie Curie Cancer Awarded a contract with Marie Curie 3 years GBP1m
Care Cancer Care to provide cleaning,
laundry and hostess services for
their hospices in the West Midlands
and Cardiff and the Vale
------------------------- ---------------------------------------------- ----------- ---------
Social Housing
-------------------------------------------------------------------------------------------------
L&Q Housing Association Re-secured a planned works contract 5 years GBP9m
to deliver internal refurbishment
works to properties across London
------------------------- ---------------------------------------------- ----------- ---------
A2Dominion Extended our existing contract to 2 years GBP35m
service two planned maintenance
contracts plus a cyclical decoration
and repair works contract covering
their properties in London and the
South
------------------------- ---------------------------------------------- ----------- ---------
Circle Housing Appointed to provide responsive 1 year GBP6m
repairs and maintenance services
to customers at Circle Housing Old
Ford, managing 6,500 homes in East
London
------------------------- ---------------------------------------------- ----------- ---------
Orbit East and Secured a contract to deliver pre-paint 5 years GBP5m
Orbit South repairs, redecoration and associated
works to approximately 18,000 properties.
This is in addition to our existing
work with the client and brings
the total contract value to GBP157m
over eight years
------------------------- ---------------------------------------------- ----------- ---------
Derwent Living Appointed to carry out internal 7 years GBP5m
and external cyclical decoration,
pre-decoration repairs, minor roofing
repairs and small works
------------------------- ---------------------------------------------- ----------- ---------
Home Group Awarded a painting contract to provide 4 years GBP6m
pre-painting repairs, external refurbishment
and internal redecoration to communal
spaces
------------------------- ---------------------------------------------- ----------- ---------
Central government
-------------------------------------------------------------------------------------------------
Home Office Mobilised our contract to manage 8 years GBP180m
and maintain Colnbrook and Harmondsworth + 3 years (phase
detention centres 1)
------------------------- ---------------------------------------------- ----------- ---------
Homecare
-------------------------------------------------------------------------------------------------
Surrey County Council A new contract to deliver homecare 7 years GBP19m
services
------------------------- ---------------------------------------------- ----------- ---------
London Borough A new contract to deliver homecare 5 years GBP16m
of Hillingdon services for 300 service users + 1 year
+ 1 year
------------------------- ---------------------------------------------- ----------- ---------
London Borough A new contract to deliver homecare 4 years GBP4m
of Brent services
------------------------- ---------------------------------------------- ----------- ---------
Hampshire County A new contract to deliver homecare 4 years GBP4m
Council services
------------------------- ---------------------------------------------- ----------- ---------
London Borough A new contract to deliver homecare 4 years GBP3m
of Redbridge services, including reablement and
complex care
------------------------- ---------------------------------------------- ----------- ---------
London Borough A new contract to deliver homecare 3 years GBP2m
of Hounslow services
------------------------- ---------------------------------------------- ----------- ---------
ND = not disclosed
Consolidated income statement
For the year ended 31 March 2015
2015 2014
------------------------------------------- ----- ------------------------------- -------------------------------
Other Other
Headline Items(1) Total Headline Items(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Continuing operations
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Revenue 2 2,266.2 7.6 2,273.8 2,142.6 78.5 2,221.1
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Cost of sales (1,928.3) (17.4) (1,945.7) (1,819.3) (76.5) (1,895.8)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Gross profit 337.9 (9.8) 328.1 323.3 2.0 325.3
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Administrative expenses (210.0) (62.8) (272.8) (196.3) (46.9) (243.2)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Share of profit of joint ventures and
associates 0.7 - 0.7 0.5 - 0.5
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Operating profit 2 128.6 (72.6) 56.0 127.5 (44.9) 82.6
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Investment revenue 4 0.3 - 0.3 1.2 - 1.2
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Finance costs 4 (14.8) - (14.8) (15.4) - (15.4)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Net finance costs (14.5) - (14.5) (14.2) - (14.2)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Profit before tax 114.1 (72.6) 41.5 113.3 (44.9) 68.4
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Tax 5 (24.1) 18.3 (5.8) (25.6) 5.7 (19.9)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Profit for the year 90.0 (54.3) 35.7 87.7 (39.2) 48.5
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Attributable to:
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Equity holders of the parent 89.3 (54.3) 35.0 87.5 (39.2) 48.3
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Non-controlling interests 0.7 - 0.7 0.2 - 0.2
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
90.0 (54.3) 35.7 87.7 (39.2) 48.5
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Earnings per share (EPS)
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
- basic 7 24.8p (15.1)p 9.7p 24.3p (10.9)p 13.4p
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
- diluted 7 24.2p (14.7)p 9.5p 23.6p (10.6)p 13.0p
------------------------------------------- ----- --------- --------- --------- --------- --------- ---------
Notes:
1 Other items are as described in Note 3.
Consolidated statement of comprehensive income
For the year ended 31 March 2015
2015 2014
GBPm GBPm
--------------------------------------------------------------------------- ------ ------
Profit for the year 35.7 48.5
---------------------------------------------------------------------------- ------ ------
Items that will not be reclassified subsequently to profit or loss
--------------------------------------------------------------------------- ------ ------
Remeasurement of net defined benefit pension liability (15.0) 2.4
---------------------------------------------------------------------------- ------ ------
Income tax relating to items not reclassified 3.0 (1.0)
---------------------------------------------------------------------------- ------ ------
(12.0) 1.4
--------------------------------------------------------------------------- ------ ------
Items that may be reclassified subsequently to profit or loss
--------------------------------------------------------------------------- ------ ------
Exchange differences on translation of foreign operations (2.0) (0.6)
---------------------------------------------------------------------------- ------ ------
Gains on hedge of a net investment taken to equity 1.1 0.2
---------------------------------------------------------------------------- ------ ------
Cash flow hedges:
--------------------------------------------------------------------------- ------ ------
Gains/(losses) arising during the year 13.4 (10.1)
---------------------------------------------------------------------------- ------ ------
Reclassification adjustment for (losses)/gains included in profit and loss (14.6) 12.1
---------------------------------------------------------------------------- ------ ------
Income tax credit/(charge) relating to items that may be reclassified 0.2 (0.8)
---------------------------------------------------------------------------- ------ ------
(1.9) 0.8
--------------------------------------------------------------------------- ------ ------
Other comprehensive (expense)/income for the financial year (13.9) 2.2
---------------------------------------------------------------------------- ------ ------
Total comprehensive income for the financial year 21.8 50.7
---------------------------------------------------------------------------- ------ ------
Attributable to:
--------------------------------------------------------------------------- ------ ------
Equity holders of the parent 21.1 50.5
---------------------------------------------------------------------------- ------ ------
Non-controlling interests 0.7 0.2
---------------------------------------------------------------------------- ------ ------
Consolidated balance sheet
At 31 March 2015
2015 2014
Notes GBPm GBPm
----------------------------------------------------- ----- ------- -------
Non-current assets
----------------------------------------------------- ----- ------- -------
Goodwill 8 464.4 459.6
----------------------------------------------------- ----- ------- -------
Other intangible assets 76.6 79.3
----------------------------------------------------- ----- ------- -------
Property, plant and equipment 53.3 56.7
----------------------------------------------------- ----- ------- -------
Interest in joint ventures and associates 1.1 0.9
----------------------------------------------------- ----- ------- -------
Financing assets 9 8.0 20.4
----------------------------------------------------- ----- ------- -------
Trade and other receivables 10 58.5 41.2
----------------------------------------------------- ----- ------- -------
Deferred tax assets 13.4 8.4
----------------------------------------------------- ----- ------- -------
Total non-current assets 675.3 666.5
----------------------------------------------------- ----- ------- -------
Current assets
----------------------------------------------------- ----- ------- -------
Inventories 11.0 7.4
----------------------------------------------------- ----- ------- -------
Trade and other receivables 10 421.4 491.6
----------------------------------------------------- ----- ------- -------
Cash and cash equivalents 96.4 89.1
----------------------------------------------------- ----- ------- -------
Total current assets 528.8 588.1
----------------------------------------------------- ----- ------- -------
Total assets 1,204.1 1,254.6
----------------------------------------------------- ----- ------- -------
Current liabilities
----------------------------------------------------- ----- ------- -------
Trade and other payables (476.0) (525.6)
----------------------------------------------------- ----- ------- -------
Current tax liabilities (5.2) (11.0)
----------------------------------------------------- ----- ------- -------
Financing liabilities (1.8) (2.7)
----------------------------------------------------- ----- ------- -------
Provisions 12 (4.9) (1.2)
----------------------------------------------------- ----- ------- -------
Total current liabilities (487.9) (540.5)
----------------------------------------------------- ----- ------- -------
Net current assets 40.9 47.6
----------------------------------------------------- ----- ------- -------
Non-current liabilities
----------------------------------------------------- ----- ------- -------
Trade and other payables (8.0) -
----------------------------------------------------- ----- ------- -------
Financing liabilities (279.2) (273.0)
----------------------------------------------------- ----- ------- -------
Provisions 12 (7.4) (8.8)
----------------------------------------------------- ----- ------- -------
Retirement benefit obligation (35.8) (19.1)
----------------------------------------------------- ----- ------- -------
Deferred tax liabilities (7.5) (9.3)
----------------------------------------------------- ----- ------- -------
Total non-current liabilities (337.9) (310.2)
----------------------------------------------------- ----- ------- -------
Total liabilities (825.8) (850.7)
----------------------------------------------------- ----- ------- -------
Net assets 378.3 403.9
----------------------------------------------------- ----- ------- -------
Equity
----------------------------------------------------- ----- ------- -------
Share capital 9.4 9.3
----------------------------------------------------- ----- ------- -------
Share premium account 122.6 118.9
----------------------------------------------------- ----- ------- -------
Merger reserve 80.1 101.2
----------------------------------------------------- ----- ------- -------
Share-based payments reserve 7.2 2.6
----------------------------------------------------- ----- ------- -------
Own shares reserve (47.5) (37.2)
----------------------------------------------------- ----- ------- -------
Other reserves 0.4 0.4
----------------------------------------------------- ----- ------- -------
Hedging and translation reserve (6.4) (4.3)
----------------------------------------------------- ----- ------- -------
Retained earnings 209.2 210.0
----------------------------------------------------- ----- ------- -------
Equity attributable to equity holders of the parent 375.0 400.9
----------------------------------------------------- ----- ------- -------
Non-controlling interests 3.3 3.0
----------------------------------------------------- ----- ------- -------
Total equity 378.3 403.9
----------------------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
For the year ended 31 March 2015
Share- Hedging Attributable
Share based Own and to equity Non-
Share premium Merger payments shares Other translation Retained holders of controlling
capital account reserve reserve reserve reserves reserve earnings the parent interests Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
At 1 April 2013 9.3 108.0 97.6 1.9 (20.3) 0.3 (5.9) 210.6 401.5 3.8 405.3
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Profit for the
year - - - - - - - 48.3 48.3 0.2 48.5
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Other
comprehensive
income - - - - - - 1.6 0.6 2.2 - 2.2
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Total
comprehensive
income - - - - - - 1.6 48.9 50.5 0.2 50.7
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Shares issued 0.1 10.9 3.6 - - - - - 14.6 - 14.6
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Dividends paid - - - - - - - (38.1) (38.1) (0.1) (38.2)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Purchase of own
shares - - - - (19.8) - - - (19.8) - (19.8)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Share-based
payments - - - 0.7 2.9 - - 1.1 4.7 - 4.7
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Tax on
share-based
payment
transactions - - - - - - - 1.0 1.0 - 1.0
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Share buybacks (0.1) - - - - 0.1 - (7.4) (7.4) - (7.4)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Acquisitions and
other movements
in
non-controlling
interests - - - - - - - (6.1) (6.1) (0.9) (7.0)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
At 31 March
2014 9.3 118.9 101.2 2.6 (37.2) 0.4 (4.3) 210.0 400.9 3.0 403.9
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Profit for the
year - 35.0 35.0 0.7 35.7
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Other
comprehensive
expense - - - - - - (2.1) (11.8) (13.9) - (13.9)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Total
comprehensive
income - - - - - - (2.1) 23.2 21.1 0.7 21.8
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Shares issued 0.1 3.7 - - - - - - 3.8 - 3.8
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Dividends paid - - - - - - - (40.5) (40.5) (0.1) (40.6)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Purchase of own
shares - - - - (10.7) - - - (10.7) - (10.7)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Share-based
payments - - - 4.6 0.4 - - 1.4 6.4 - 6.4
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Tax on
share-based
payment
transactions - - - - - - - (0.1) (0.1) - (0.1)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Transfer between
reserves - - (21.1) - - - - 21.1 - - -
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Acquisitions and
other movements
in
non-controlling
interests - - - - - - - (5.9) (5.9) (0.3) (6.2)
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
At 31 March
2015 9.4 122.6 80.1 7.2 (47.5) 0.4 (6.4) 209.2 375.0 3.3 378.3
---------------- ------- ------- ------- -------- ------- -------- ----------- -------- ------------ ----------- ------
Consolidated statement of cash flows
For the year ended 31 March 2015
2015 2014
Notes GBPm GBPm
---------------------------------------------------------- ------- ------- -------
Operating profit 56.0 82.6
---------------------------------------------------------- ------- ------- -------
Adjustments for:
---------------------------------------------------------- ------- ------- -------
Share-based payment expense 6.5 5.0
---------------------------------------------------------- ------- ------- -------
Defined benefit pension charge/(credit) 4.0 (6.1)
---------------------------------------------------------- ------- ------- -------
Defined benefit pension contributions (3.1) (3.6)
---------------------------------------------------------- ------- ------- -------
Acquisition costs 3 0.3 0.7
---------------------------------------------------------- ------- ------- -------
Depreciation of property, plant and equipment 19.7 16.1
---------------------------------------------------------- ------- ------- -------
Amortisation of intangible assets 13.8 17.0
---------------------------------------------------------- ------- ------- -------
Other non-cash movement in Other items 19.0 -
---------------------------------------------------------- ------- ------- -------
Share of profit of joint ventures and associates (0.7) (0.5)
---------------------------------------------------------- ------- ------- -------
Loss/(gain) on disposal of property, plant and equipment 0.3 (0.7)
---------------------------------------------------------- ------- ------- -------
Operating cash flows before movements in working capital 115.8 110.5
---------------------------------------------------------- ------- ------- -------
Increase in inventories (3.8) (0.8)
---------------------------------------------------------- ------- ------- -------
Decrease/(increase) in receivables 53.4 (2.4)
---------------------------------------------------------- ------- ------- -------
(Decrease)/increase in payables (50.9) 16.8
---------------------------------------------------------- ------- ------- -------
Decrease in provisions (1.3) -
---------------------------------------------------------- ------- ------- -------
Cash generated by operations 15 113.2 124.1
---------------------------------------------------------- ------- ------- -------
Income taxes paid (15.5) (18.2)
---------------------------------------------------------- ------- ------- -------
Interest paid (13.1) (14.3)
---------------------------------------------------------- ------- ------- -------
Facility extension fees (2.0) -
---------------------------------------------------------- ------- ------- -------
Acquisition costs 3 (0.3) (0.7)
---------------------------------------------------------- ------- ------- -------
Net cash from operating activities 82.3 90.9
---------------------------------------------------------- ------- ------- -------
Investing activities
---------------------------------------------------------- ------- ------- -------
Interest received - 1.2
---------------------------------------------------------- ------- ------- -------
Purchase of property, plant and equipment (23.0) (20.6)
---------------------------------------------------------- ------- ------- -------
Purchase of subsidiary undertakings, net of cash acquired 14 (0.5) (10.7)
---------------------------------------------------------- ------- ------- -------
Dividends received from joint ventures and associates 0.5 -
---------------------------------------------------------- ------- ------- -------
Investment in financing assets (0.3) 0.8
---------------------------------------------------------- ------- ------- -------
Purchase of other intangible assets (3.9) (6.2)
---------------------------------------------------------- ------- ------- -------
Disposals of property, plant and equipment 1.8 6.0
---------------------------------------------------------- ------- ------- -------
Net cash outflow from investing activities (25.4) (29.5)
---------------------------------------------------------- ------- ------- -------
Financing activities
---------------------------------------------------------- ------- ------- -------
Repayments of obligations under finance leases (2.0) (3.6)
---------------------------------------------------------- ------- ------- -------
Proceeds on issue of share capital 3.8 8.9
---------------------------------------------------------- ------- ------- -------
Bank loans repaid 0.6 (2.8)
---------------------------------------------------------- ------- ------- -------
Purchase of own shares (10.7) (19.8)
---------------------------------------------------------- ------- ------- -------
Share buybacks - (7.4)
---------------------------------------------------------- ------- ------- -------
Equity dividends paid 6 (40.5) (38.1)
---------------------------------------------------------- ------- ------- -------
Non-controlling interests dividends paid (0.1) (0.1)
---------------------------------------------------------- ------- ------- -------
Net cash outflow from financing (48.9) (62.9)
---------------------------------------------------------- ------- ------- -------
Net increase/(decrease) in cash and cash equivalents 8.0 (1.5)
---------------------------------------------------------- ------- ------- -------
Net cash and cash equivalents at beginning of the year 89.1 90.8
---------------------------------------------------------- ------- ------- -------
Effect of foreign exchange rate changes (0.7) (0.2)
---------------------------------------------------------- ------- ------- -------
Net cash and cash equivalents at end of the year 96.4 89.1
---------------------------------------------------------- ------- ------- -------
Net cash and cash equivalents comprise:
---------------------------------------------------------- ------- ------- -------
Cash at bank 96.4 89.1
---------------------------------------------------------- ------- ------- -------
96.4 89.1
---------------------------------------------------------- ------- ------- -------
2015 2014
Reconciliation of net cash flow to movements in net debt Notes GBPm GBPm
------------------------------------------------------------------- ----- ------- -------
Net increase/(decrease) in cash and cash equivalents 8.0 (1.5)
------------------------------------------------------------------- ----- ------- -------
Effect of foreign exchange rate changes (0.7) (0.2)
------------------------------------------------------------------- ----- ------- -------
Decrease in bank loans 1.4 3.5
------------------------------------------------------------------- ----- ------- -------
Non-cash movement in private placement notes and associated hedges (1.3) 2.2
------------------------------------------------------------------- ----- ------- -------
Decrease in finance leases 1.4 1.6
------------------------------------------------------------------- ----- ------- -------
Decrease in net debt during the year 8.8 5.6
------------------------------------------------------------------- ----- ------- -------
Opening net debt (186.6) (192.2)
------------------------------------------------------------------- ----- ------- -------
Closing net debt 13 (177.8) (186.6)
------------------------------------------------------------------- ----- ------- -------
Notes to the consolidated financial statements
For the year ended 31 March 2015
1 Basis of preparation and significant accounting policies
The preliminary announcement is based on the group's financial
statements for the year ended 31 March 2015 which are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted for use in the European Union.
The accounting policies adopted in the preparation of the
consolidated financial statements are consistent with those
followed in the preparation of the group's annual financial
statements for the year ended 31 March 2014 except for the adoption
of IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint
Arrangements', IFRS 12 'Disclosures of Interests in Other
Entities', IAS 27 (Revised) 'Separate Financial Statements' and IAS
28 (Revised) 'Investments in Associates and Joint Ventures'. These
standards clarify aspects of the basis for consolidation. The
adoption of these standards has had no impact on the results or
financial position of the group.
The directors have a reasonable expectation that the group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the Annual Report and
Accounts.
The financial information set out in the preliminary
announcement does not constitute the company's statutory accounts
for the years ended 31 March 2015 or 2014, but is derived from
those accounts. Statutory accounts for 2014 have been delivered to
the Registrar of Companies and those for 2015 will be delivered
following the company's Annual General Meeting. The auditor has
reported on those accounts; the reports were unqualified, did not
draw attention to any matters by way of emphasis without qualifying
the reports and did not contain statements under Section 498(2) or
(3) Companies Act 2006.
2 Business and geographical 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.
Business segments - structure during the year
2015 2014
----------- -------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------
Headline Headline Headline Profit Headline Headline Headline Profit
Revenue revenue(1) operating profit(1) operating profit margin(1) before tax Revenue revenue(1) operating profit(1) operating profit margin(1) before tax
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm % GBPm
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Soft FM 1,280.3 1,280.3 81.9 6.4 79.6 1,190.8 1,190.8 74.8 6.3 72.2
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Hard FM 609.7 609.7 30.0 4.9 24.2 579.4 579.4 30.0 5.2 22.6
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Property
Management 273.4 273.4 10.4 3.8 9.9 264.8 264.8 14.4 5.4 15.1
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Healthcare 91.4 91.4 4.9 5.4 0.4 91.7 91.7 12.7 13.8 8.4
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Energy
Solutions 11.4 11.4 1.4 12.3 - 15.9 15.9 (4.4) (27.7) (5.0)
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Other Items
(Note 3) 7.6 - - - (72.6) 78.5 - - - (44.9)
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
Total 2,273.8 2,266.2 128.6 5.7 41.5 2,221.1 2,142.6 127.5 6.0 68.4
----------- ------- ------------ -------------------- --------------------------- ------------ ------- ------------ -------------------- --------------------------- ------------
With effect from 1 April 2015 Energy Solutions is being reported
as part of Hard FM. Soft FM, Healthcare and Property Management
remain unchanged. A proforma analysis of the financial results of
the business for the year ended 31 March 2015 is set out below.
Business segments - structure from 1 April 2015
2015 2014
----------- ---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------
Headline Headline Headline Profit Headline Headline Headline Profit
Revenue revenue(1) operating profit(1) operating profit margin(1) before tax Revenue revenue(1) operating profit(1) operating profit margin(1) before tax
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm % GBPm
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Soft FM 1,280.3 1,280.3 81.9 6.4 79.6 1,190.8 1,190.8 74.8 6.3 72.2
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Hard FM 621.1 621.1 31.4 5.1 24.2 595.3 595.3 25.6 4.3 17.6
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Property
Management 273.4 273.4 10.4 3.8 9.9 264.8 264.8 14.4 5.4 15.1
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Healthcare 91.4 91.4 4.9 5.4 0.4 91.7 91.7 12.7 13.8 8.4
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Other Items
(Note 3) 7.6 - - - (72.6) 78.5 - - - (44.9)
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
Total 2,273.8 2,266.2 128.6 5.7 41.5 2,221.1 2,142.6 127.5 6.0 68.4
----------- ------- ------------ --------------------- ---------------------------- ------------ ------- ------------ --------------------- ---------------------------- ------------
The revenue analysis above is net of inter-segment sales which
are not considered significant.
No single customer accounted for more than 10% of external
revenue in 2015 or 2014.
The Improvement to IFRS 8 issued in April 2009 clarified that a
measure of segment assets should be disclosed only if that amount
is regularly provided to the chief operating decision maker and
consequently no segment assets are disclosed.
Geographical segments
2015 2014
---------- ------------------------------------------------------ ------------------------------------------------------
Headline(1) Headline(1)
Headline(1) Headline(1)
operating Profit operating Profit
Headline(1) operating profit before Headline(1) operating profit before
Revenue revenue profit margin tax Revenue revenue profit margin tax
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm % GBPm
---------- ------- ----------- ----------- ----------- ------ ------- ----------- ----------- ----------- ------
United
Kingdom 2,190.7 2,183.1 126.8 5.8 40.0 2,149.5 2,071.0 125.7 6.1 66.9
---------- ------- ----------- ----------- ----------- ------ ------- ----------- ----------- ----------- ------
Other
countries 83.1 83.1 1.8 2.2 1.5 71.6 71.6 1.8 2.5 1.5
---------- ------- ----------- ----------- ----------- ------ ------- ----------- ----------- ----------- ------
Total 2,273.8 2,266.2 128.6 5.7 41.5 2,221.1 2,142.6 127.5 6.0 68.4
---------- ------- ----------- ----------- ----------- ------ ------- ----------- ----------- ----------- ------
Notes:
1 Headline revenue and operating profit exclude other items
which are analysed in Note 3.
3 Other items
The group's chosen supplementary measure of performance is
operating profit before other items. The group separately
identifies and discloses restructuring and acquisition related
items (termed 'other items').
The results of the mechanical and electrical engineering
construction businesses which are being exited are also presented
in Other items. During the year those businesses generated revenue
of GBP7.6m (2014: GBP78.5m) and incurred a trading loss of GBP15.9m
(2014: GBP13.6m). The businesses being exited do not meet the
definition of discontinued operations as stipulated by IFRS 5
'Non-current Assets Held for Sale and Discontinued Operations'
because the businesses have not been disposed of and there are no
assets classified as held for sale. Accordingly the disclosures
within non-headline items differ from those applicable for
discontinued operations.
Within our Asset Management business, which became part of our
Energy Solutions division, there are a small number of contracts
where the forecast operational and financial performance has
deteriorated and where returns were highly uncertain. As a result
of significant deterioration in the forecast performance of three
key remaining contracts, together with the decision taken by mutual
agreement with a customer to exit one contract which crystallised a
loss, exceptional charges of GBP45.7m (2014: GBP25.4m) have been
included in other items. GBP27.2m of the GBP45.7m charge relates to
the most material of these projects, O-Gen Plymtrek Limited:
The group has a 30% non-controlling equity interest in a special
purpose company, O-Gen Plymtrek Limited ('O-Gen'), to which Mitie
had extended subordinated debt. The balance of the subordinated
debt included within Financing assets was GBPnil at 31 March 2015
(2014: GBP13.4m before provisions). As a result of a number of
factors, and in particular the combination of not having a majority
of directors on the Board and having no veto rights over
substantive matters, the group's interest in O-Gen is accounted for
as an associate and is held at nil value (2014: nil). The Energy
Solutions division had a contract to construct and operate a
renewable energy plant for O-Gen which had been subject to delays
and considerable cost overruns. In the year ended 31 March 2014,
these delays and overruns gave rise to exceptional charges of
GBP17.1m which were included within the exceptional charges in
Energy Solutions of GBP25.4m. These charges included impairment
losses of GBP8.7m in respect of the subordinated debt and GBP3.0m
in respect of trade and other receivables. At 31 March 2014, the
group's trade and other receivables included a balance of GBP6.1m
before provisions in respect of the plant design and build
contract. In our 2014 Annual Report and Accounts, the group
disclosed a contingent liability with a maximum value of GBP20.6m
in relation to guarantees provided in respect of O-Gen. At 30
September 2014, the group reassessed its exposure to O-Gen and, due
to the deterioration in financial returns, accrued its potential
liability under its guarantee arrangements of GBP19.4m together
with other charges of GBP9.6m relating to the residual financial
exposure to the project. In December 2014, after notification of
further delays to the construction programme, the group decided to
stop construction of the energy plant. As a consequence, the main
funder of the project exercised its rights under one of the
project's financing agreements and on 27 March 2015 Mitie paid
GBP15.9m in cash to settle its residual liability to the funder.
O-Gen sold its interest in the energy plant in March 2015. A total
of GBP27.2m (2014: GBP17.1m) of exceptional charges have been
recognised in respect of the project during the year and are
included within Other items. These charges include impairment
losses of GBP4.7m (2014: GBP8.7m) and GBP3.1m (2014 GBP3.0m) in
respect of the group's subordinated debt and trade and other
receivables respectively. At 31 March 2015, all financial assets in
relation to O-Gen were fully impaired (2014: GBP13.4m and GBP6.1m
gross carrying values in respect of the subordinated debt and trade
and other receivables respectively) and
Mitie has no remaining obligations or liabilities in connection
with the project.
Acquisition costs in the year to 31 March 2015 relate to the
acquisition of Procius Limited and Source Eight Limited.
Other items impacted administrative expenses with the exception
of GBP9.8m of trading losses (2014: GBP2.0m profit) which impacted
gross profit.
2015 2014
------------------- ---------------------------------------------- -----------------------------------------------
Restructuring and Restructuring and
acquisition Businesses acquisition related Businesses
related costs being exited Other items costs being exited Other items
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Revenue - 7.6 7.6 - 78.5 78.5
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Cost of Sales - (17.4) (17.4) - (76.5) (76.5)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Administrative
expenses:
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Overheads - (6.1) (6.1) - (15.6) (15.6)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Exceptional charges
in relation to
design
and build Asset
Management
contracts in
Energy Solutions (45.7) - (45.7) (25.4) - (25.4)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Restructuring costs
relating to the
integration of
Complete Group
(2014: Enara and
Complete
Group) (0.6) - (0.6) (4.4) - (4.4)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Acquisition costs (0.3) - (0.3) (0.7) - (0.7)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Amortisation of
acquisition
related
intangibles (10.1) - (10.1) (11.0) - (11.0)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Restructuring of
Mitie Group
defined benefit
pension scheme - - - 10.2 - 10.2
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Other items before
tax (56.7) (15.9) (72.6) (31.3) (13.6) (44.9)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Tax on other items 15.0 3.3 18.3 3.7 2.0 5.7
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
Other items net of
tax (41.7) (12.6) (54.3) (27.6) (11.6) (39.2)
------------------- ------------------ ------------- ----------- ------------------- ------------- -----------
4 Investment revenue and finance costs
Investment revenue
2015 2014
GBPm GBPm
-------------------------- ----- -----
Interest on bank deposits 0.3 0.2
-------------------------- ----- -----
Other interest receivable - 1.0
-------------------------- ----- -----
0.3 1.2
-------------------------- ----- -----
Finance costs
2015 2014
GBPm GBPm
--------------------------------------------------------------------------------------- ----- -----
Interest on bank facilities 1.4 2.1
--------------------------------------------------------------------------------------- ----- -----
Interest on private placement loan notes 9.6 9.5
--------------------------------------------------------------------------------------- ----- -----
Bank fees 2.8 2.3
--------------------------------------------------------------------------------------- ----- -----
Interest on obligations under finance leases 0.2 0.3
--------------------------------------------------------------------------------------- ----- -----
(Gain)/loss arising on derivatives in a designated fair value hedge (3.7) 3.8
--------------------------------------------------------------------------------------- ----- -----
Loss/(gain) arising on adjustment for the hedged item in a designated fair value hedge 3.8 (4.0)
--------------------------------------------------------------------------------------- ----- -----
Net interest on defined benefit pension scheme assets and liabilities 0.7 1.4
--------------------------------------------------------------------------------------- ----- -----
14.8 15.4
--------------------------------------------------------------------------------------- ----- -----
5 Tax
2015 2014
GBPm GBPm
------------- ----- -----
Current tax 9.7 19.1
------------- ----- -----
Deferred tax (3.9) 0.8
------------- ----- -----
5.8 19.9
------------- ----- -----
Corporation tax is calculated at 21.0% (2014: 23.0%) of the
estimated taxable profit for the year.
A reconciliation of the tax charge to the elements of profit
before tax per the consolidated income statement elements is as
follows:
2015 2014
---------------------------------------- --------------------------------- ---------------------------------
Headline Total Headline Total
GBPm Other items GBPm GBPm GBPm Other items GBPm GBPm
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Profit before tax 114.1 (72.6) 41.5 113.3 (44.9) 68.4
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Tax at UK rate of 21.0% (2014: 23%) 23.9 (15.2) 8.7 26.0 (10.3) 15.7
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Reconciling tax charges for:
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Non-tax deductible charges 0.7 0.1 0.8 0.6 0.2 0.8
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Energy Solutions contract exit costs - (3.2) (3.2) - 3.3 3.3
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Overseas tax rates 0.1 - 0.1 0.2 - 0.2
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Impact of change in statutory tax rates - - - (1.0) - (1.0)
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Prior year adjustments (0.6) - (0.6) (0.2) 1.1 0.9
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Tax charge for the year 24.1 (18.3) 5.8 25.6 (5.7) 19.9
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
Effective tax rate for the year 21.1% 25.2% 14.0% 22.6% 12.7% 29.1%
---------------------------------------- -------- ---------------- ----- -------- ---------------- -----
In addition to the amounts charged to the consolidated income
statement, a tax credit relating to retirement benefit costs and
hedged items amounting to GBP3.2m (2014: GBP1.8m charge) has been
taken directly to the statement of comprehensive income and GBP0.1m
relating to share-based payments has been charged (2014: GBP1.0m
credited) directly to equity.
The effective tax rate on Headline profits is generally higher
than the statutory tax rate due to entertaining costs, commercial
property depreciation and share-based payment charges not being
wholly tax deductible and tax losses incurred overseas. In the
prior year this was offset by the restatement of deferred tax items
for the legislated change in the UK corporate
tax rate from 23% to 20%.
The effective tax rate on Other items generally differs from the
statutory rate due to tax relief not being obtained for certain
acquisition costs. In the prior year tax relief was not fully
recognised on provisions relating to the exit from Energy Solutions
design and build contracts, as the form of the exit from certain
joint venture arrangements was not agreed. Exit from these
contracts was completed in the current year and tax relief is now
recognised on the basis of the actual costs incurred.
Accordingly, the higher effective tax relief rate in the current
year reflects a reversal of the lower effective rate
in the prior year. The prior year charge in 2014 was due to the
lapse of historic tax losses in businesses being exited and
is not repeated in the current year.
6 Dividends
2015 2014
GBPm GBPm
---------------------------------------------------------------------------------------- ----- -----
Amounts recognised as distributions to equity holders in the year:
---------------------------------------------------------------------------------------- ----- -----
Final dividend for the year ended 31 March 2014 of 6.1p (2013: 5.7p) per share 21.9 20.5
---------------------------------------------------------------------------------------- ----- -----
Interim dividend for the year ended 31 March 2015 of 5.2p (2014: 4.9p) per share 18.6 17.6
---------------------------------------------------------------------------------------- ----- -----
40.5 38.1
---------------------------------------------------------------------------------------- ----- -----
Proposed final dividend for the year ended 31 March 2015 of 6.5p (2014: 6.1p) per share 22.9 21.9
---------------------------------------------------------------------------------------- ----- -----
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
7 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:
2015 2014
GBPm GBPm
----------------------------------------------------------------- ------ ------
Net headline profit attributable to equity holders of the parent 89.3 87.5
----------------------------------------------------------------- ------ ------
Other items net of tax (54.3) (39.2)
----------------------------------------------------------------- ------ ------
Net profit attributable to equity holders of the parent 35.0 48.3
----------------------------------------------------------------- ------ ------
2015 2014
Number of shares million million
-------------------------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares for the purpose of basic EPS 359.3 359.9
-------------------------------------------------------------------------- -------- --------
Effect of dilutive potential Ordinary shares: share options 10.4 11.1
-------------------------------------------------------------------------- -------- --------
Weighted average number of Ordinary shares for the purpose of diluted EPS 369.7 371.0
-------------------------------------------------------------------------- -------- --------
2015 2014
p p
--------------------------------------- ---- ----
Headline basic earnings per share(1) 24.8 24.3
--------------------------------------- ---- ----
Basic earnings per share 9.7 13.4
--------------------------------------- ---- ----
Headline diluted earnings per share(1) 24.2 23.6
--------------------------------------- ---- ----
Diluted earnings per share 9.5 13.0
--------------------------------------- ---- ----
Notes:
1 Headline revenue and operating profit exclude other items
which are analysed in Note 3.
The weighted average number of Ordinary shares in issue during
the year excludes those accounted for in the Own shares
reserve.
8 Goodwill
Cost GBPm
------------------------------ -----
At 1 April 2013 447.2
------------------------------ -----
Acquisition of subsidiaries 12.7
------------------------------ -----
Impact of foreign exchange (0.3)
------------------------------ -----
At 1 April 2014 459.6
------------------------------ -----
Acquisition of subsidiaries 5.7
------------------------------ -----
Impact of foreign exchange (0.9)
------------------------------ -----
At 31 March 2015 464.4
------------------------------ -----
Accumulated impairment losses
------------------------------ -----
At 1 April 2013 -
------------------------------ -----
At 1 April 2014 -
------------------------------ -----
At 31 March 2015 -
------------------------------ -----
Carrying amount
------------------------------ -----
At 31 March 2015 464.4
------------------------------ -----
At 31 March 2014 459.6
------------------------------ -----
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) that are expected
to benefit from that business combination. Additions during the
year relate to goodwill recognised on two acquisitions and
finalisation of the acquisition accounting for acquisitions made in
the prior year. More details are presented in the Acquisitions note
(Note 14).
Goodwill has been allocated to CGUs, which align with the
business segments, as this is how goodwill is monitored by the
group internally. Goodwill has arisen principally on the
acquisitions of Initial Security in 2006, Dalkia Technical
Facilities Management in 2009 and Enara in 2012.
Goodwill Goodwill
Discount rate 2015 Discount rate 2014 2015 2014
% % GBPm GBPm
-------------------- ------------------ ------------------ -------- --------
Soft FM 8.7 9.8 171.3 168.1
-------------------- ------------------ ------------------ -------- --------
Hard FM 8.7 9.8 83.8 83.8
-------------------- ------------------ ------------------ -------- --------
Property Management 10.0 11.0 85.2 85.2
-------------------- ------------------ ------------------ -------- --------
Healthcare 10.0 11.0 106.6 105.0
-------------------- ------------------ ------------------ -------- --------
Energy Solutions 10.0 12.0 17.5 17.5
-------------------- ------------------ ------------------ -------- --------
464.4 459.6
-------------------- ------------------ ------------------ -------- --------
The group tests goodwill at least annually for impairment or
more frequently if there are indicators that goodwill may be
impaired.
Key assumptions
The recoverable amounts of the CGUs are determined from value in
use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates
and expected changes to revenue and direct costs during the period.
Management estimates discount rates using pre-tax rates that
reflect current market assessments of the time value of money and
the risks specific to the CGUs. The growth rates are based on
industry growth forecasts. Changes in revenue and direct costs are
based on past practices and expectations of future changes in the
market.
Management recognise that there has been a deterioration in the
profitability of the Healthcare business in the last financial
year. The decline has been driven by a combination of market
pricing pressures due to local authority spending cuts and
difficulties in recruiting and retaining healthcare workers in a
significantly improving jobs market. We have undertaken a complete
review of the business resulting in changes to the operating model
and a reinvigorated business plan which supports our long term view
of the growth rates for this business.
Growth rates and terminal values
The group prepares cash flow forecasts derived from the most
recent one year financial budgets approved by the Board,
extrapolated for four future years by the expected growth
applicable to each unit with a terminal value using an inflationary
growth rate assumption in the range 2.0% - 2.5% dependent on the
CGU.
Discount rates
The pre-tax rates used to discount the forecast cash flows from
CGUs are derived from the Company's post-tax Weighted Average Cost
of Capital, which was 7.4% (2014: 8.2%) at 31 March 2015, and
adjusted for the risks specific to the market in which the CGU
operates. All CGUs have the same access to the group's Treasury
functions and borrowing lines to fund their operations.
Sensitivity analysis
A sensitivity analysis has been performed and the Directors have
concluded that no reasonably foreseeable change in the key
assumptions would result in an impairment of the goodwill of any of
the Soft Facilities Management, Hard Facilities Management,
Property Management and Energy Solutions CGUs. In particular, a 1%
increase in the discount rate or a 1% decrease in the terminal
value growth rate would not result in impairment in any of these
CGUs.
Further sensitivity testing was performed for the group's
Healthcare CGU as it has seen deterioration in profitability in the
last financial year following two years of good performance. The
Directors believe that the assumptions within the business plan for
the Healthcare business are reasonable and there is headroom
between the carrying value of goodwill for that CGU and the net
present value of the future cash flows that are expected to be
generated by the business. There continues to be significant focus
on and investment in the healthcare business and the Directors
continue to see long term growth opportunities in the domiciliary
care market. The Directors recognise that it is possible that an
impairment to the healthcare goodwill could be identified if the
performance of the business does not improve as expected over the
longer term in line with the business plan. Factors that could
cause deterioration in the future cash flows of the business
compared to the plan and cause an impairment in goodwill
include;
h the inability to recruit and retain staff at appropriate wage rates;
h the inability to win new and retain contracts to provide care hours at sustainable prices; and
h an adverse structural change to outsourcing of care in the UK
caused by changes in UK Government policy.
We have considered the impact of a range of sensitivities on the
headroom between the recoverable amount and the carrying value of
the goodwill attributable to the Healthcare CGU. The carrying value
of goodwill (and other intangible assets) becomes equal to its
recoverable amount following the application of the following
sensitivities:
h an increase in the pre-tax discount rate of 3%; or
h a fall in the terminal value growth rate to a negative
long-term inflationary assumption of 1%; or
h a 34% reduction in operating profit by year 5 compared to the plan.
9 Financing assets
2015 2014
GBPm GBPm
--------------------------------------- ----- -----
Derivative financial instruments 6.8 -
--------------------------------------- ----- -----
Loans to joint ventures and associates 1.2 14.8
--------------------------------------- ----- -----
Infrastructure assets - 5.6
--------------------------------------- ----- -----
8.0 20.4
--------------------------------------- ----- -----
Included in current assets - -
--------------------------------------- ----- -----
Included in non-current assets 8.0 20.4
--------------------------------------- ----- -----
8.0 20.4
--------------------------------------- ----- -----
10 Trade and other receivables
2015 2014
GBPm GBPm
---------------------------------------------- ----- -----
Amounts receivable for the sale of services 202.3 259.0
---------------------------------------------- ----- -----
Allowance for doubtful debt (8.4) (6.2)
---------------------------------------------- ----- -----
Trade receivables 193.9 252.8
---------------------------------------------- ----- -----
Amounts recoverable on construction contracts 8.1 13.0
---------------------------------------------- ----- -----
Mobilisation costs (Note 11) 30.6 30.3
---------------------------------------------- ----- -----
Accrued income 192.6 183.4
---------------------------------------------- ----- -----
Prepayments 38.2 28.9
---------------------------------------------- ----- -----
Other debtors 16.5 24.4
---------------------------------------------- ----- -----
479.9 532.8
---------------------------------------------- ----- -----
Included in current assets 421.4 491.6
---------------------------------------------- ----- -----
Included in non-current assets 58.5 41.2
---------------------------------------------- ----- -----
479.9 532.8
---------------------------------------------- ----- -----
Ageing of trade receivables:
2015 2014
GBPm GBPm
------------------------------------------------ ----- -----
Neither impaired nor past due 149.7 198.6
------------------------------------------------ ----- -----
Not impaired and less than three months overdue 34.6 36.5
------------------------------------------------ ----- -----
Not impaired and more than three months overdue 13.5 21.3
------------------------------------------------ ----- -----
Impaired receivables 4.5 2.6
------------------------------------------------ ----- -----
Allowance for doubtful debt (8.4) (6.2)
------------------------------------------------ ----- -----
193.9 252.8
------------------------------------------------ ----- -----
Movement in the allowance for doubtful debt:
2015 2014
GBPm GBPm
------------------------------------- ----- -----
Balance at the beginning of the year 6.2 6.0
------------------------------------- ----- -----
Impairment losses recognised 5.6 2.5
------------------------------------- ----- -----
Amounts written off as uncollectable (2.4) (1.1)
------------------------------------- ----- -----
Amounts recovered during the year (1.0) (1.2)
------------------------------------- ----- -----
8.4 6.2
------------------------------------- ----- -----
The average credit period taken on sales of services was 26 days
(2014: 37 days).
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
11 Mobilisation costs
2015 2014
Mobilisation costs GBPm GBPm
------------------------------------------- ------ -----
At 1 April 30.3 23.2
------------------------------------------- ------ -----
Additions 19.6 15.7
------------------------------------------- ------ -----
Amounts recognised in the income statement (19.3) (8.6)
------------------------------------------- ------ -----
At 31 March 30.6 30.3
------------------------------------------- ------ -----
Included in current assets 12.4 13.7
------------------------------------------- ------ -----
Included in non-current assets 18.2 16.6
------------------------------------------- ------ -----
30.6 30.3
------------------------------------------- ------ -----
All bid costs are expensed through the income statement up to
the point where contract award or full recovery of the costs is
virtually certain. The confirmation of the preferred bidder for a
contract by a client is the point at which the award of a contract
is considered to be virtually certain.
For repeat service-based contracts (single and bundled
contracts), costs incurred after confirmation of preferred bidder,
but before the commencement of services under the contract, are
defined as mobilisation costs. These costs are capitalised and
included within trade and other receivables on the balance sheet
provided that the costs relate directly to the contract, are
separately identifiable, can be measured reliably and that the
future net cash inflows from the contract are estimated to be no
less than the amounts capitalised. The capitalised mobilisation
costs are amortised over the life of the contract, generally on a
straight-line basis, or on a basis to reflect the profile of work
to be performed over the life of the contract if the straight-line
basis is not considered to be appropriate for the specific contract
to which the costs relate. If the contract becomes loss making, any
unamortised costs are written off immediately.
12 Provisions
Deferred
contingent Insurance
consideration reserve Total
GBPm GBPm GBPm
------------------------------------------------- -------------- --------- -----
At 1 April 2014 7.8 2.2 10.0
------------------------------------------------- -------------- --------- -----
Amounts recognised in the income statement - 0.1 0.1
------------------------------------------------- -------------- --------- -----
Amounts recognised through goodwill 1.1 - 1.1
------------------------------------------------- -------------- --------- -----
Utilised within the captive insurance subsidiary - (1.4) (1.4)
------------------------------------------------- -------------- --------- -----
Amounts recognised through equity 2.5 - 2.5
------------------------------------------------- -------------- --------- -----
At 31 March 2015 11.4 0.9 12.3
------------------------------------------------- -------------- --------- -----
Included in current liabilities 4.9
------------------------------------------------- -------------- --------- -----
Included in non-current liabilities 7.4
------------------------------------------------- -------------- --------- -----
12.3
------------------------------------------------- -------------- --------- -----
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.
The deferred contingent consideration recognised through
goodwill of GBP1.1m relates to the acquisitions of Procius Limited
and Source Eight Limited (see Note 14).
Amounts recognised through equity of GBP2.5m arises from
transactions with non-controlling interests and comprises GBP3.8m
in respect of the purchase of the remaining 49% in Direct Enquiries
Holdings Limited net of a GBP1.3m release in respect of Mitie
Security Holdings Limited (see Note 14).
13 Analysis of net debt
2015 2014
GBPm GBPm
----------------------------------------------------------------- ------- -------
Cash and cash equivalents 96.4 89.1
----------------------------------------------------------------- ------- -------
Bank loans (13.9) (15.3)
----------------------------------------------------------------- ------- -------
Private placement notes (263.6) (245.2)
----------------------------------------------------------------- ------- -------
Derivative financial instruments hedging private placement notes 6.8 (10.3)
----------------------------------------------------------------- ------- -------
Net debt before obligations under finance leases (174.3) (181.7)
----------------------------------------------------------------- ------- -------
Obligations under finance leases (3.5) (4.9)
----------------------------------------------------------------- ------- -------
Net debt (177.8) (186.6)
----------------------------------------------------------------- ------- -------
14 Acquisitions
During the year a net cash outflow of GBP0.5m arose on the
acquisitions set out below:
GBPm
---------------------------------- -----
Procius Limited 2.0
---------------------------------- -----
Source Eight Limited 2.2
---------------------------------- -----
Direct Enquiries Holdings Limited 1.8
---------------------------------- -----
Mitie Security Holdings Limited (5.5)
---------------------------------- -----
Net cash outflow on acquisitions 0.5
---------------------------------- -----
Current year acquisitions
Entities acquired during the year contributed GBP3.7m to revenue
and GBP0.6m to the group's headline operating profit for the
period. If the acquisitions had taken place at the start of the
period, the group's headline revenue and operating profit would
have been approximately GBP2,272m and GBP130m respectively.
The acquisitions enhanced our overall offering to clients. The
goodwill arising on the acquisitions is attributable to the
underlying profitability of the companies in the acquired group,
expected profitability arising from new business and the
anticipated future operating synergies arising from assimilation
into Mitie. None of the goodwill recognised is expected to be
deductible for income tax purposes.
Purchase of Procius Limited
On 16 October 2014, Mitie acquired the leading UK pre-employment
screening company Procius Limited ('Procius') from the management
team for a total consideration of GBP3.1m (GBP2.3m on a cash free
basis). The transaction has been accounted for by the acquisition
method of accounting in accordance with IFRS 3 (2008). The
provisional information on the acquisition is provided below.
Purchase of Source Eight Limited
On 26 November 2014, Mitie acquired a 51% stake in the real
estate, technology and risk management consultancy Source Eight
Limited ('Source8') for initial consideration of GBP2.5m paid in
cash on completion and up to GBP0.8m of deferred contingent
consideration. Further cash consideration may be payable in respect
of put options over the remaining 49% bringing total consideration
for a 100% stake up to a maximum of GBP15.8m (GBP15.5m on a cash
free basis). The transaction has been accounted for by the
acquisition method of accounting in accordance with IFRS 3 (2008).
The provisional information on the acquisition is provided
below.
Procius Source8 Total
Fair value GBPm GBPm GBPm
----------------------------------- ------- ------- -----
Net assets acquired
----------------------------------- ------- ------- -----
Intangible assets 1.0 0.9 1.9
----------------------------------- ------- ------- -----
Trade and other receivables 0.3 2.8 3.1
----------------------------------- ------- ------- -----
Cash and cash equivalents 0.8 0.3 1.1
----------------------------------- ------- ------- -----
Trade and other payables (0.6) (2.2) (2.8)
----------------------------------- ------- ------- -----
Corporation tax - (0.2) (0.2)
----------------------------------- ------- ------- -----
Deferred tax liability (0.1) (0.1) (0.2)
----------------------------------- ------- ------- -----
Net assets acquired 1.4 1.5 2.9
----------------------------------- ------- ------- -----
Non-controlling interests - (0.7) (0.7)
----------------------------------- ------- ------- -----
Goodwill 1.7 2.5 4.2
----------------------------------- ------- ------- -----
Total consideration 3.1 3.3 6.4
----------------------------------- ------- ------- -----
Satisfied by
----------------------------------- ------- ------- -----
Cash 2.8 2.5 5.3
----------------------------------- ------- ------- -----
Deferred contingent consideration 0.3 0.8 1.1
----------------------------------- ------- ------- -----
Total consideration 3.1 3.3 6.4
----------------------------------- ------- ------- -----
The non-controlling shareholders of Source8 have options to put
their shareholding to Mitie Group plc. Accordingly, a financial
liability of GBP8.0m has been recognised and a corresponding entry
has been recorded against retained earnings. The options are
exercisable in tranches between 2017 and 2019.
Purchase of non-controlling interests
During the year Mitie purchased 49% of the share capital of
Direct Enquiries Holdings Limited for a cash consideration of
GBP5.6m of which GBP1.8m was paid in the current year and GBP3.8m
was paid in April 2015.
In February 2015, Mitie reduced its original business valuation
of the acquisition of Mitie Security Holdings Limited in March
2013, which resulted in a net cash inflow of GBP5.5m.
Prior year acquisitions
The provisional acquisition accounting for prior year
acquisitions as disclosed in the 2014 Annual Report and Accounts
was reviewed during the period resulting in a reduction of the fair
value of net assets acquired of GBP1.5m and an increase of goodwill
of GBP1.5m. These adjustments comprise an adjustment to estimates
made at the end of the prior year and within a year from the date
of acquisition in line with the requirements of IFRS 3 'Business
Combinations'. The adjustments have not materially changed the net
assets of the group and therefore the 2014 comparative information
has not been restated. The final information on prior year
acquisitions is shown below.
Purchase of Complete Care Holdings Limited
On 15 January 2014, Mitie acquired the high acuity care provider
Complete Care Holdings Limited ('Complete Group') for a total
consideration of GBP9.0m. The transaction has been accounted for by
the acquisition method of accounting in accordance with IFRS 3
(2008). The provisional acquisition accounting in the 2014 Annual
Report and Accounts was reviewed during the period resulting in a
reduction of the fair value of net assets acquired of GBP1.5m and
an increase in goodwill of GBP1.5m to GBP8.0m. The final
information on the acquisition is provided below:
Fair value
GBPm
---------------------------- ----------
Net assets acquired
---------------------------- ----------
Intangible assets 2.1
---------------------------- ----------
Trade and other receivables 2.8
---------------------------- ----------
Cash and cash equivalents 0.2
---------------------------- ----------
Trade and other payables (4.1)
---------------------------- ----------
Net assets acquired 1.0
---------------------------- ----------
Goodwill 8.0
---------------------------- ----------
Total consideration 9.0
---------------------------- ----------
Satisfied by
---------------------------- ----------
Cash 9.0
---------------------------- ----------
Total consideration 9.0
---------------------------- ----------
15 Notes to the consolidated statement of cash flows
2015 2014
------------------------------------------------------ ----------------------------- -----------------------------
Headline Other items Total Headline Other items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Operating profit/(loss) 128.6 (72.6) 56.0 127.5 (44.9) 82.6
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Adjustments for:
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Share-based payment expense 6.5 - 6.5 5.0 - 5.0
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Defined benefit pension charge/credit 4.0 - 4.0 4.4 (10.5) (6.1)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Defined benefit pension contributions (3.1) - (3.1) (3.6) - (3.6)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Acquisition related items - 0.3 0.3 - 0.7 0.7
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Depreciation of property, plant and equipment 19.7 - 19.7 16.1 - 16.1
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Amortisation of intangible assets 3.7 10.1 13.8 5.2 11.8 17.0
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Other non-cash movements in Other items - 19.0 19.0 - -
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Share of profit of joint ventures and associates (0.7) - (0.7) (0.5) - (0.5)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Loss/(gain) on disposal of property, plant and
equipment 0.3 - 0.3 (0.7) - (0.7)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Operating cash flows before movements in working
capital 159.0 (43.2) 115.8 153.4 (42.9) 110.5
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Increase in inventories (3.8) - (3.8) (0.8) - (0.8)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Decrease/(increase) in receivables 36.6 16.8 53.4 (2.4) - (2.4)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
(Decrease)/increase in payables (45.9) (5.0) (50.9) 2.2 14.6 16.8
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Decrease in provisions (1.3) - (1.3) - - -
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Cash generated by operations 144.6 (31.4) 113.2 152.4 (28.3) 124.1
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Cash conversion
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Operating profit 128.6 56.0 127.5 82.6
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Depreciation 19.7 19.7 16.1 16.1
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Amortisation 3.7 13.8 5.2 17.0
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Earnings before interest, tax, depreciation and
amortisation (EBITDA) 152.0 89.5 148.8 115.7
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Cash conversion(1) 95.1% 126.5% 102.4% 107.3%
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Free cash flow
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Cash generated by operations 113.2 124.1
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Purchase of property, plant and equipment (23.0) (20.6)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Purchase of other intangible assets (3.9) (6.2)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Disposals of property, plant and equipment 1.8 6.0
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Income taxes paid (15.5) (18.2)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Interest paid (including facility extension fees) (15.1) (13.1)
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
Free cash flow 57.5 72.0
------------------------------------------------------ -------- ----------- ------ -------- ----------- ------
1 Cash conversion is calculated as cash generated by operations
as a percentage of EBITDA
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGUQWAUPAGRA
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