TIDMMTO
RNS Number : 5346G
MITIE Group PLC
23 November 2015
Mitie Group plc
Half-yearly financial report
for the six months ended 30 September 2015
Financial highlights
HY16 HY15 Change HY16 HY15 Change
Headline(1) Headline(1) Statutory Statutory
-------------------------- ------------ ------------ -------- ----------- ----------- ---------
Revenue GBP1,123.1m GBP1,095.0m 2.6% GBP1,123.1m GBP1,098.8m 2.2%
Operating profit GBP58.1m GBP64.2m (9.5)% GBP53.1m GBP5.9m 800.0%
Profit/(loss) before tax GBP50.1m GBP57.0m (12.1)% GBP45.1m GBP(1.3)m n/a
Operating profit margin 5.2% 5.9% (0.7)ppt 4.7% 0.5% +4.2ppt
Basic earnings per share 11.1p 12.4p (10.5)% 9.9p (1.0)p n/a
Dividend per share 5.4p 5.2p 3.8% 5.4p 5.2p 3.8%
Cash conversion 101.2% 80.3% +20.9ppt 91.4% 128.6% (37.2)ppt
-------------------------- ------------ ------------ -------- ----------- ----------- ---------
-- Headline revenue growth of 2.6%, of which 2.1% is organic;
overall performance will be weighted to the second half of the
year
-- Headline operating profit of GBP58.1m declined 9.5%, largely
reflecting a deterioration in the results of the Healthcare
division
-- Following completion of the group's restructuring activities
statutory operating profit increased from GBP5.9m to GBP53.1m for
the first six months of the year
-- Strong headline cash conversion of 101.2%
-- Net debt at 30 September 2015 was GBP221.8m or 1.5x EBITDA (HY15: GBP233.8m or 1.5x EBITDA)
-- Continued good dividend growth of 3.8% reflects confidence in future performance
Good overall performance
-- 100% contract retention rate in integrated FM: retained
Rolls-Royce for a further five years, extended Sky for an
additional five years and retained RWE npower
-- Awarded a range of new integrated FM contracts including with
dmg media, Deloitte, Thales Group and a high street bank - combined
total annual value in excess of GBP50m
-- Rated as the top overall service provider* in the UK FM industry for the third year running
-- Strong organic revenue growth in Property Management, driven
by good growth with existing clients
-- In our Healthcare division we have exited unprofitable
contracts and consolidated branches; recent contract awards with
the Royal Borough of Kensington and Chelsea and the London Borough
of Hammersmith and Fulham, show the beginning of a more positive
trend and we expect to see a return to profitability over the next
18 months
-- Positive about the introduction of the National Living Wage,
which will ensure that many of our people are better rewarded and
feel more motivated to do the jobs they do, as well as improve
retention rates across our business; no material impact on future
earnings is anticipated
Well-positioned for the long term
-- Healthy order book at GBP8.5bn (March 2015: GBP9.0bn) and
sales pipeline at GBP9.2bn (March 2015: GBP9.7bn)
-- 97% of 2015/16 budgeted revenue secured (prior year: 98%) and
68% of 2016/17 forecast revenue secured (prior year: 72%)
Ruby McGregor-Smith CBE, Chief Executive of Mitie,
commented:
"Mitie has had a positive start to the year. Our focus on the
services sector, primarily in facilities management, will ensure we
continue our long-term track record of sustainable profitable
growth.
"We are the market leader in integrated FM and are particularly
pleased with recent contract awards and retentions. This gives us
confidence we will deliver a good full-year performance."
(1) Headline results exclude Other items; see note 3.
* i-FM brand survey
For further information please contact:
Erica Lockhart, Executive Affairs Director
T: +44 (0) 20 3123 8179 M: +44 (0) 7979 784488
John Telling, Group Corporate Affairs Director
T: +44 (0) 20 3123 8673 M: +44 (0) 7979 701006
Mitie will be presenting its interim results for the period
ended 30 September 2015 at 09.30 on Monday 23 November 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.
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 23 November
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
Mitie is purely a services business, operating primarily in our
core market of UK FM, which has continued to perform well,
particularly in the area of integrated FM where we had a number of
important contract retentions and awards during the period. Our
exit from the construction market was completed in the last
financial year. Our social housing business has seen a pleasing
improvement in performance, with strong growth in the first half of
the year. Whilst the homecare market remains challenging, we are
encouraged by recent contract awards, which give us confidence that
conditions are beginning to improve.
Headline revenue for the six months to 30 September 2015 grew by
2.6% to GBP1,123.1m (HY15: GBP1,095.0m). Of this amount, 2.1% was
organic growth.
Headline operating profit fell by 9.5% to GBP58.1m (HY15:
GBP64.2m), however statutory operating profit increased by GBP47.2m
to GBP53.1m (HY15: GBP5.9m), reflecting the reduction in Other
items. The headline operating profit margin was 5.2% (HY15: 5.9%).
Within Soft FM, which represents the largest part of the group, the
operating profit margin increased to 6.7% (HY15: 6.5%). The primary
driver of the reduction in margin at a headline level, was the
deterioration in profitability of our healthcare business. Margins
within Hard FM were also lower in the period, as a result of a
higher than usual balance of project works skewed to the second
half of the financial year.
Headline cash conversion was very strong at 101.2% on a rolling
12-month basis (HY15: 80.3%), above our target KPI of 80%. Headline
basic earnings per share decreased by 10.5% to 11.1 pence (HY15:
12.4 pence) while the dividend rose by 3.8% to 5.4 pence per share
(HY15: 5.2 pence per share) at 2.1x cover.
The order book stands at GBP8.5bn (March 2015: GBP9.0bn) and our
sales pipeline is GBP9.2bn (March 2015: GBP9.7bn). At the end of
the first six months of our financial year, 97% of budgeted
revenues for the entire year had already been secured (prior year:
98%), while 68% of our forecast revenues for the year ending 31
March 2017 have also been secured (prior year: 72%).
The private sector accounted for 62% of revenue during the first
half of the year. We retained and won a number of key contracts
across the sector, including in finance and professional services,
manufacturing and leisure. The public sector generated 38% of
revenue during the period. We work with clients in healthcare,
justice, local government and social housing, and see selected
long-term opportunities in all of these sectors.
Strategy
Mitie's strategy is to be the best outsourcing provider,
delivering the highest quality and most innovative services in our
chosen markets and being an employer of choice. We are focused on
achieving our targets in relation to organic growth, cash
conversion and margins, and maintaining an efficient balance
sheet.
Organic growth will be driven predominantly by our FM business,
which accounts for 85% of the group. We are the UK market leader in
integrated FM, and will continue to evolve and differentiate our
offering, provide the best service to clients and retain the number
one market position. We will also remain focused on growing each of
our single service specialisms, which are both successful
standalone businesses as well as critical to our ability to
self-deliver the full range of integrated FM services.
Our Property Management business remains focused on long-term
maintenance contracts in the social housing market, where further
bundling and integration of services will provide good growth
opportunities.
In our healthcare business, we are addressing the short-term
challenges that we have seen in the homecare market, and are
positioning ourselves to take advantage of the industry evolution
that will inevitably take place and the long-term growth
opportunities associated with that.
Organic growth is very much our focus, and in the medium term we
expect overall organic growth of the group to range between three
and eight per cent.
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
M&A will be limited to small, bolt-on businesses that add
capability to our core FM offering. Over the last five years, on
average in each year we have invested cGBP10m on acquisitions,
excluding Enara. We expect M&A activity over the short to
medium term to be broadly similar to this.
Our cash conversion target is 80% and over the last ten years we
have achieved an average conversion of 102%. Our headline operating
profit margin has consistently ranged between five and six percent
(and is 5.6% on average over the last ten years); we are confident
of maintaining it in this range.
Maintaining an efficient balance sheet is also a key priority.
Our overall capital allocation priorities, in order, are to:
support the delivery of organic growth; make small bolt-on
acquisitions that add capability to our core FM business; continue
our excellent track record of dividend growth; and if our net
debt:EBITDA ratio falls consistently below 1x we will return any
surplus cash to shareholders.
Divisional overview
Facilities Management (FM)
GBPm HY 2016 HY 2015 Growth
-------- ------- ------- --------
Revenue
Soft FM 635.7 622.7 2.1%
Hard FM 310.5 300.8 3.2%
------- ------- --------
946.2 923.5 2.5%
-------- ------- ------- --------
Operating profit
Soft FM 42.4 40.3 5.2%
Hard FM 10.5 13.9 (24.5)%
------- ------- --------
52.9 54.2 (2.4)%
-------- ------- ------- --------
Operating profit margin
Soft FM 6.7% 6.5% +0.2ppt
Hard FM 3.4% 4.6% (1.2)ppt
------- ------- --------
5.6% 5.9% (0.3)ppt
-------- ------- ------- --------
Our FM business is made up of a Soft FM and a Hard FM division.
Soft FM is made up of cleaning, landscaping, waste management, pest
control, security, catering, events and front of house services.
Hard FM provides maintenance and a range of specialist services.
Our integrated FM proposition brings together the full range of
hard and soft FM services.
Our core FM business has delivered a good performance, with
organic growth of 1.8%. We have a track record of building and
maintaining long-term client relationships, with our largest
contracts constituting a significant share of revenue.
Profit in the Hard FM division will be more skewed to the second
half of the year, due to the phasing of project works.
Integrated
The first six months of the year saw excellent results in
contract retentions, particularly in the area of integrated FM,
where we have successfully extended all our major private sector
contracts over the last 12 months. There are no significant re-bids
in this portfolio over the medium term.
We have retained our contract to deliver pan-European integrated
FM services for Rolls-Royce. This was the largest contract out to
tender during this financial year and we are delighted to be
continuing a relationship that first began in 1992, when we
provided a single service to Rolls-Royce in the UK.
We also extended our integrated FM contract with Sky for an
additional five years. We have supported Sky's operations since
2012 and the new agreement, under which we will provide integrated
FM across Sky's entire estate in the UK and Ireland, will extend
our partnership to 2023 and generate total revenues of GBP190m.
In addition, we successfully renewed our integrated FM contract
with RWE npower and were awarded a new contract to provide
integrated FM for dmg media, building on our existing work
providing security services to the group.
Our success at developing existing client relationships has been
complemented by a range of service contracts for new clients,
including three significant integrated FM contracts. Each of these
contracts is valued at around GBP40m over five years and includes
the potential for additional reactive and project works. In the
finance sector, we were appointed preferred bidder by Deloitte and
will deliver a wide range of services across 34 sites and over 1.3m
square feet of office space. We also won a contract to provide
services to over 300 UK branches of a new High Street bank. In the
industrial sector, we have been appointed preferred bidder to
provide services across the UK estate of Thales Group.
Soft FM
Cleaning
The cleaning business has had a positive start to the year, with
a number of new clients including Westfield Shopping centre,
Chelsea Harbour, Santander, Michelin and Royal Bank of Canada. We
have retained a number of high profile accounts such as Ofcom,
Michael Page Group, Northumbrian Water, TFL, AEC Aero, Etihad
Airways and Everton FC. The transport and commercial sectors are
seeing good growth, with new business and a high retention of
accounts.
We have also begun a major investment in the IT infrastructure
of the cleaning business, to move it forward for the future. Our
award winning Workplace+ application, which is already embedded in
our security business, is to be rolled out in the cleaning
business, along with other IT applications that will maximise
efficiency. Other applications are also being developed, such as
mobile application planning and processing, which has been launched
in the industrial services sector - it offers real time data stamp
of attendance and work carried out rather than paper based
confirmation. Wearable technology from Samsung is being tested in
multiple locations across the UK, which will manage workflows and
increase productivity.
Specialist services - landscaping, waste management, pest
control
Our landscaping business is performing well and has successfully
mobilised its largest ever account, with Jones Lang LaSalle as part
of Mitie's broader bundled services contract. It has also
re-launched its offering, with a motto that 'first impressions
count' and a focus on its broader horticultural credentials. There
is a good pipeline, particularly in the property sector, and we are
seeing the size of the potential opportunities grow quite
significantly from a few years ago.
In pest control, the offering is centred on intelligent pest
management. We are seeing the benefits of our investment in a
portal, 'Pest Alert', which allows clients to see in real time what
the activity is on their site and receive a totally paperless
service.
Within waste management, there is a strong pipeline, and lots of
opportunities particularly with our existing client base. We have
been awarded new work with the Hull NHS Trust, and retained and
extended work with Novartis.
Across pest control and waste management, we see good
opportunities in the food, leisure and retail sectors, as well as
pharmaceutical and FMCG.
Security
Our security business - Total Security Management - continues to
lead the market in terms of its overall offering, combining people,
consultancy and technology to help clients reduce their various
security risks.
We have been awarded good levels of new business, most notably
with E.ON, Belfast City Airport, Allen & Overy and Mars. We
have retained and grown a number of high profile accounts including
Eurostar, PepsiCo, 125 Old Broad St and Coventry University. Our
growth in the transport and aviation sectors has been excellent and
we anticipate further growth in these areas, along with our clients
in high security environments such as nuclear and defence.
Our technology business has continued to see good traction. Our
offering encompasses systems, mobile services, Procius (vetting and
personnel screening) and remote management. Procius, which we
acquired in 2015, has been fully integrated into our own screening
and vetting business alongside our UKCRBs brand. We are extremely
pleased by the performance in this area, with new clients such as
Ethical workforce, Sky Guard, and Diamond Exec Aviation adding to
our already impressive client list of leading brands such as
British Airways and Easyjet. Our systems business has continued to
grow strongly with large installations of camera and access control
systems, for clients such as BAE Systems and Ashworth Hospital.
In August, we announced a partnering agreement with Fujitsu,
which enables us to operate in the cyber security space. Coupled
with the re-launch of Mitec, our purpose-built technology and
remote management centre, this will help us to deliver enterprise
security risk management services and grow in the security
convergence arena, between physical and cyber security.
Catering, events, front of house
Our catering business Gather & Gather continues to perform
strongly, having secured new contracts with annual revenues in
excess of GBP16m in the first half of the financial year. Successes
include new sites with Primark and Laithwaites Wines. Gather &
Gather also continues to enjoy strong retention performance across
its existing client base.
Since launching over two years ago, its unique offering has
developed real traction in the marketplace. The approach is all
about creating food with personality and attitude, and a commitment
to sourcing in a responsible, ethical and sustainable way. In
particular, for corporate clients who see catering as a key part of
how they look after the health and wellbeing of their own employees
and improve retention, Gather & Gather's focus on high quality
food that is locally sourced, is proving very attractive.
Our events arm Creativevents has also enjoyed significant
success, mobilising a new commercial café within the viewing
platform at The Shard, and securing a new contract under its
Creative Bars model for Live Music at Alexandra Palace. They have
also been appointed preferred bidder for a six year contract with
Farnborough Airshow.
Our Client Services offering continues to grow, supported by its
industry-leading training and development programme, having secured
yet another nomination at this year's BIFM awards in recognition of
its National Training team.
Hard FM
Maintenance
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
We deliver a full range of technical and building services to
clients across a broad range of market sectors. We manage and
maintain all of our clients' mechanical and electrical engineering
maintenance needs, as part of our focus on long-term client
relationships. We are the largest provider of these services in the
UK.
In the first six months of the financial year we retained
contracts with Mersey Care Healthcare and Aberdeen College, and
expanded our contract with property management company Jones Lang
LaSalle to include shopping centres and lighting. We successfully
mobilised our contract with BBC Worldwide, and completed our
lighting installation contract with Ladbrokes. Our contract with
Heathrow Airport continues to grow.
We continue to develop the best systems and the processes to
support what we do for our clients, from market-leading auditing
tools to innovative engineering systems. We are also investing in
automating our processes and integrating our systems. The result is
that we bring innovative ideas to our clients, offer them better
value for money, and support them to make robust decisions about
their property strategies.
Specialist technical services
We provide additional, critical specialist services, which
broaden 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.
We are Europe's largest indoor lighting maintenance specialist,
with 50 years' experience in design, installation and maintenance.
We utilise the latest technology to improve visual quality and
efficiency. Last year, by utilising LED technology, we saved our
clients over GBP5m and over 31,000 tonnes of CO(2) and we have over
200 skilled lighting engineers working across the country.
Our water treatment business continues to go from strength to
strength. It is the fastest growing water compliance business in
the UK, providing a single source for all our clients' water and
air quality needs.
Our Resilience solution for data centre environments is the most
comprehensive critical engineering solution in the market. Our
expertise in this area really differentiates our offering. It is
relied upon by the largest financial and media institutions in the
world, with over 600 people looking after 750,000 square feet of
white space.
Other developments
One of the highlights for the FM business has been the
successful launch of our Executive Relationship Programme (ERP), an
initiative through which we are building relationships with
strategic level contacts across our top 400 clients and prospects.
The ERP is giving us the opportunity to demonstrate how our
thinking and approach can add value to contracts and to help us
engage with clients through a strategic forum where industry peers
can discuss shared challenges. We aim to use extensive research and
strategy papers to underline our position as thought leaders in the
market - and the ERP is already helping us enter into conversations
with clients at a senior level. Those conversations are emphasising
the importance of service delivery and also highlighting the fact
that our insight and knowledge set us apart from our
competitors.
We help our clients to run more efficient and effective
businesses - and organisations across the board are becoming
increasingly aware of the role that we can play in improving the
performance of their people. During the first half of the year we
commissioned the Quora report, which showed that over 80% of
service sector employees agree that FM is a core people-facing
operational function. Those working in finance and the legal
professions felt particularly let down by their workplaces, with
almost half feeling that their workplaces did not optimise
productivity and fewer than 35% identifying themselves as
'emotionally attached' to their workplaces. Our FM business is
working hard to help clients put the needs of their people ahead of
the needs of their buildings, and to reap the rewards of a
motivated, engaged workforce.
Innovation
Being an outsourcer of choice is all about delivering high
quality services and bringing innovation to everything we do.
Increasingly, what differentiates us to our clients and prospective
clients, is what we provide over and above service delivery. Along
with developing our core service offerings, we have continually
grown and evolved our advisory capabilities.
Through Source8 we provide advisory and business support
services to corporate, governmental and non-governmental
organisations on the implementation of real estate, technology and
risk management solutions globally.
Through Utilyx, we provide expert energy consultancy, working
with businesses and organisations to help reduce costs and carbon
emissions, develop smarter ways to meet energy needs and better
manage the risks posed by volatile markets. We also help clients
comply with the growing demands of energy and environmental
legislation.
Our compliance offering provides comprehensive technology led,
evidence based auditing services that ensures our clients comply
with the building legislation and sustain safe, robust and legally
compliant operations. And we manage people risk for our clients
through our vetting and screening business.
Technology is driving change across every service we do, which
is producing significant operational benefits to our clients. We
have invested heavily in applications, from MiWorld, which allows
clients to see everything we do across their estates, to
Workplace+, which gives thousands of our people direct access to
wage information, holiday bookings and roster updates. From
wearable technology to intelligent pest control, we are constantly
evolving our offering.
Data is becoming ever more important to our clients and we have
embraced this. For a number of clients, we have embedded data and
analytics functionality that helps them to better understand and
manage their property portfolios. The expertise we provide
includes:
-- Planning long-term property footprint, refurbishment cycles
and acquisition/disposal strategies
-- Managing lease renewals and expiries and the impact of that
on operations and project work plans
-- Managing the technical asset maintenance and renewal
programme and optimising the operating and capital expenditure
budgets
-- Understanding the footfall of building and how utility can be maximised
-- Ensuring the estate is compliant and managing the associated audit trail
Property Management
GBPm HY 2016 HY 2015 Growth
------------------------ ------- ------- -------
Revenue 137.9 123.3 11.8%
------------------------ ------- ------- -------
Operating profit 7.3 5.5 32.7%
------------------------ ------- ------- -------
Operating profit margin 5.3% 4.5% +0.8ppt
------------------------ ------- ------- -------
We work with housing associations, local authorities and private
landlords, providing property management services through long-term
contracts. Client budgets for service delivery and investment may
be under heightening pressure, but the social housing market
remains stable with significant potential for our business through
the unique outsourcing solutions Mitie provide. Margins have
improved as our contract portfolio matures, with over a third of
our revenues continuing to grow through ongoing ten year strategic
partnerships, and significant benefits derived from the trend for
clients to choose bundled and integrated services.
As with the FM business, our focus in property management is
squarely on supporting existing clients and maintaining long-term
partnerships. We are trusted advisers to our clients, working
alongside them to develop bespoke strategies for the management,
maintenance and investment in housing assets and communities. With
clients increasingly recognising the value we bring to their
organisations, they are choosing us to take greater responsibility
for their services, leveraging our integrated service offering, and
moving more and more toward a commissioning client role. For
example, our contract with the London Borough of Hammersmith and
Fulham continues to grow, develop, and is now established as an
industry-leading, integrated services contract.
Since the start of the financial year, we have been awarded
contracts, including with Circle Housing, to provide responsive
repairs and maintenance services to 6,500 properties in London.
Healthcare
GBPm HY 2016 HY 2015 Growth
------------------------ ------- ------- ---------
Revenue 39.0 48.2 (19.1)%
------------------------ ------- ------- ---------
Operating (loss)/profit (2.1) 4.5 n/a
------------------------ ------- ------- ---------
Operating (loss)/profit
margin (5.4)% 9.3% (14.7)ppt
------------------------ ------- ------- ---------
We provide high quality homecare, employing outstanding people
who help individuals to live more comfortable and independent lives
in their own homes. The performance in this business has
deteriorated in what is currently a challenging market. Our
response has been to take positive action to reshape the business
to meet market opportunities.
Revenues have fallen by approximately 20% compared to the same
period in the prior year. Around half of this reduction is a result
of the closure of a number of branches. We have focused investment
and resources on our highest quality branches and exited areas
where pricing pressures are unsustainable; we will not jeopardise
the quality of care by providing services at unsustainable rates.
The remaining drop-off in revenue is a result of lost hours on a
small number of other branches.
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
At the same time, our cost base has increased. We have taken the
decision to pre-emptively increase wages across the business.
Whilst a significant upfront cost, this change will allow us to
properly meet demand to provide care on the frameworks we are on,
reduce our use of agency staff, reduce our staff turnover and
related costs, and improve the quality of our services. We believe
higher wages in this industry will ensure our people feel well
rewarded for the valuable work they do. The need to respond to
increased regulation has also impacted our cost base.
We were awarded two significant new contracts, within the Royal
Borough of Kensington and Chelsea and the London Borough of
Hammersmith & Fulham, the latter already being a property
management client. Our bids scored highly on quality and
sustainability, and included a commitment to paying the London
Living Wage to our people. Each of these new contracts is for five
years and will see around 3,000 hours of care delivered per week to
some 1,500 individuals in the home. Together, these contracts have
the potential to generate a total of around GBP25m revenues over a
five year period.
We expect that the business will return to profitability over
the next 18 months.
Despite the short-term challenges, we remain confident of the
medium to long-term prospects for this business. The two
fundamental drivers of an ageing population, along with a need to
care for people in their own homes rather than in hospitals or
residential care environments, will underpin growth of this
market.
In the longer term, reform to integrate health and social care
budgets is the only solution that will ensure the right decision
making and most efficient allocation of resources in the provision
of care. Once made, this change will create a more integrated
service, with a much simpler path through it and a better
experience for individuals caught in the middle of the current
arrangements. However, change has been slow and a faster pace in
integrating NHS and Social Care would benefit all parties involved
- the individuals receiving care and their families, the providers
of care, the commissioners of care, and the taxpayer - none of whom
are 'winners' under the current arrangement.
The delay to these reforms puts increasing pressure on Councils,
whose budgets have seen successive cuts over the past five years.
Against that backdrop, we have seen evidence of positive change in
the first half of the year. There is a growing acknowledgment of
the importance of sustainable rates among local authorities. Our
average charge rates are rising and we expect the introduction of
the National Living Wage to support this trend. We have also seen
some consolidation in the market, where we are being awarded more
work as the lead provider, rather than as one of a large number of
providers.
Our people
One factor more than any other helps us deliver excellence to
our clients - the quality of our people. Carefully-chosen,
well-trained and focused on providing great service, our people are
what marks Mitie as a very different sort of company, and we work
hard to ensure that they are appropriately protected and
rewarded.
Health and safety is something we take very seriously, and
during the first half we were proud to see this commitment
recognised by the award of our eighth consecutive Gold Medal from
the Royal Society for the Prevention of Accidents (RoSPA). The
RoSPA scheme, which is the largest and longest running programme of
its kind in the UK, recognises commitment to accident and ill
health prevention.
National Living Wage
As a large employer, we welcome the recent budget announcement
that a new National Living Wage (NLW) will be introduced in the UK.
We are positive about this move, which ensures that those of our
people who are affected, are better rewarded and feel more
motivated to do the jobs they do. It will also improve retention
rates across our business.
Since the minimum wage was introduced in 1999, we have managed
the impact from its annual change as part of the normal course of
our business.
The areas of our business that are impacted by this change are
single service contracts in cleaning, a small area of security,
catering and healthcare. One third of the contracts in these areas
of the business come up for re-tender each year, and all work bid
or re-bid from July 2015 onwards has factored in the NLW increases.
Many contracts in the group have wage rates above this level.
Having reviewed our contracts and spoken with our clients, we
are confident that the contractual positions we have across our
client base will similarly ensure that the introduction of the NLW
will not have a material impact on our future earnings.
We also believe that this is an important move for the
outsourcing industry, as it affects all competitors equally and
creates a level playing field in terms of bidding. We do expect
outsourcing prices to increase in the future and will not be
advocating job cuts in reaction to this change. However, we will
continue to work with our clients to identify cost efficiencies in
other areas. The vast majority of our client base has been
supportive of our approach.
Financial performance
Mitie has had a positive start to the financial year. Headline
revenue was GBP1,123.1m (HY15: GBP1,095.0m) reflecting growth of
2.6% in the period, of which 2.1% was organic. Headline operating
profit was GBP58.1m in the period (HY15: GBP64.2m), generating a
headline operating profit margin of 5.2% (HY15: 5.9%).
The results of the group have been driven by strong performance
in the core Soft FM, Hard FM and Property Management divisions,
where revenues grew by 3.6% to GBP1,084.1m with operating profit of
GBP60.2m (HY15: GBP59.7m), with a blended margin of 5.6% (HY15:
5.7%). Organic growth across these divisions was 3.1% (HY15: 4.7%).
Operating profit margins in Soft FM and Property Management have
seen positive development in the period, with the latter
specifically benefiting from the impact of volume growth; whilst in
Hard FM, delays in project work until the second half of the year
has contributed to a margin reduction in the period. In the
Healthcare division, where volumes have declined and we have taken
actions to reshape the business in the first half of the year, we
have reported a loss in the period of GBP2.1m (HY15: profit of
GBP4.5m).
The overall performance of the group will be weighted towards
the second half of the financial year with 97% of budgeted revenues
already secured.
Other items in the period were GBP5.0m (HY15: GBP58.3m), all of
which was the amortisation of acquisition related intangible assets
(HY15: GBP5.1m). In the previous period, charges in respect of the
exit from the group's interest in certain asset management
contracts and engineering construction business were GBP52.6m.
There were no similar charges in the current period.
Statutory operating profit rose to GBP53.1m (HY15: GBP5.9m), an
increase of 800.0% on the prior year, reflecting the reduction in
Other items.
Net finance costs in the period were GBP8.0m (HY15:
GBP7.2m).
Headline profit before tax for the period was GBP50.1m (HY15:
GBP57.0m). The effective rate of tax on profit for the period was
in line with the UK corporation tax rate at 20.3% (HY15: 21.0%) and
resulted in headline earnings per share (EPS) of 11.1p per share
(HY15: 12.4p per share). Statutory profit before tax was GBP45.1m
(HY15: GBP(1.3)m), with this increase largely reflecting the
reduction in Other items. Statutory basic EPS was 9.9p per share
(HY15: negative 1.0p per share).
Our return on capital employed for the period was 16.0% (HY15:
16.7%). This reflects the efficient management of our asset base
and is in excess of our weighted average cost of capital which is
currently 7.2%.
Balance sheet
The group's net assets at 30 September 2015 were GBP390.1m
(HY15: GBP376.6m). Within this, goodwill and other intangible
assets were GBP533.1m (HY15: GBP532.2m) of which GBP126.1m (HY15:
GBP128.3m) relates to our Healthcare business. Whilst there has
been a deterioration in the profitabilty of the Healthcare division
following two years of profitable performance, we remain positive
about the longer term prospects of this market and our long term
business plan continues to support the carrying value of goodwill
in this business area. Details are set out in Note 14.
Our profits continue to be backed by strong cash flows. The
conversion of headline EBITDA to operating cash was 101.2% (HY15:
80.3%) on a rolling 12-month basis which is above our stated
long-term target of 80%. The conversion of statutory EBITDA to
operating cash was 91.4% (HY15: 128.6%). There has been no material
impact in the period of cash outflows from businesses being
restructured or exited.
Net debt at the period end was GBP221.8m (HY15: GBP233.8m) which
on a headline basis was 1.5x rolling 12-month EBITDA (HY15: 1.5x)
and remains comfortably within our banking covenants. It is usual
to see an outflow of working capital in the first half of the year
and in the six months to 30 September 2015 there was a headline
outflow of GBP61.1m (HY15: GBP69.6m).
The group has committed revolving credit and private placement
facilities of GBP527m over a tenure of 2017-2024. 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. Sufficient funding is in place to support our short
term treasury requirements and future growth opportunities.
The group operates both defined benefit and defined contribution
pension schemes. Our financial strength and balance sheet remain
unaffected by any significant pensions deficit, with the net
deficit on our defined benefit obligations as at 30 September 2015
being GBP32.8m (March 2015: GBP35.8m).
Dividend
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
The group has a strong track record of dividend growth and it is
the Board's policy to grow dividends at least in line with the
underlying earnings of the group, whilst maintaining dividend cover
at a prudent level. The interim dividend declared by the Board of
5.4p per share (HY15: 5.2p per share) represents an increase of
3.8% on the prior year. The dividend represents a cover of 2.1
times earnings per share.
During the first half, cash dividends of GBP23.1m were paid to
shareholders (HY15: GBP21.9m). The proposed interim dividend for
the six months ended 30 September 2015 was approved by the Board on
13 November 2015 and will be paid on 1 February 2016 to
shareholders on the register at close of business on 18 December
2015.
Board changes
Mark Reckitt was appointed a Non-Executive Director of the Board
on 1 July. He is Chairman of the Audit Committee and has also been
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.
Crawford Gillies stepped down from the Board at the AGM on 13
July. David Jenkins stepped down as Chairman of the Audit Committee
and Senior Independent Director at the AGM, and will remain as a
Non-Executive Director until his retirement on 31 December 2015.
Larry Hirst CBE, who has been a Non-Executive Director for the past
five years, was appointed Senior Independent Director at the AGM.
We have commenced a search for an additional Non-Executive Director
to complement the current skills that we have on the Board.
Key factors that could affect our business
Underpinning the ability to achieve the group's strategic
objective of delivering sustainable, profitable growth is the
system of risk management and internal control. The assessment and
management of risk is undertaken by every business segment, which
has a comprehensive risk management process in place, with business
risk registers feeding through to the group risk register reviewed
by our Board. We continue to analyse our risk profile through four
categories: strategic; financial; operational; and regulatory. The
on-going review of our principal risks and uncertainties has not
identified any significant changes from those detailed on pages 38
and 39 of our 2015 Annual Report and Accounts, although we continue
to actively monitor and mitigate for any potential impact of
regulatory changes, for example in areas such as the national
living wage.
Outlook
Mitie is purely a services business, focused on the long-term
growth opportunities across our key outsourcing markets. We have
made good progress during the first half of the year. We remain the
UK market leader in integrated FM, where we continue to grow with
new and existing clients.
We are seeing positive momentum in the business, giving us
confidence that we will deliver a good full-year performance. We
will continue to build on our long track record of sustainable
profitable growth.
Client Contract Timeframe Estimated
total
value
Private sector
Transport
Rolls-Royce Appointed preferred bidder for an 5 years ND
integrated facilities management
contract. This will be one of Mitie's
largest pan-European agreements and
will mark the continuation of a relationship
which began in 1992
--------------------------------------------- ----------- ---------
Thales Awarded a contract to provide integrated 5 years GBP40m
facilities management across 12 key
sites in the UK, delivering services
including maintenance, cleaning,
manned guarding, waste, landscaping
and pest control
--------------------------------------------- ----------- ---------
TfL Retained a street furniture cleaning 5 years GBP17m
and maintenance contract with Transport
for London (TfL)
--------------------------------------------- ----------- ---------
Belfast City Airport Awarded a contract to deliver a range 3 years GBP6m
of security services to the airport
--------------------------------------------- ----------- ---------
Michelin Awarded a major industrial cleaning 3 years GBP2m
contract with one of the world's
largest tyre manufacturers at workshops,
warehouses and offices across the
UK
--------------------------------------------- ----------- ---------
Retail and leisure
Sky Extended an integrated facilities 5 years ND
management contract to January 2023.
Mitie delivers a range of services,
including catering at a number of
bespoke cafes, restaurants and coffee
bars across the estate, through its
award winning Gather & Gather catering
business
--------------------------------------------- ----------- ---------
NEC Awarded a new contract to provide 3 years ND
landscaping services to the NEC in
Birmingham - one of Europe's most
prestigious venues for trade and
consumer shows. Mitie will also be
providing pest control services to
the centre
--------------------------------------------- ----------- ---------
Chelsea Harbour Awarded cleaning and security contracts 5 years GBP8m
across the site, based in south west
London on the River Thames, including
the marina, commercial offices and
the residential estate
--------------------------------------------- ----------- ---------
Leading cosmetics Awarded a contract to deliver full 3 years GBP3m
company facilities management services to
their new headquarters in central
London
--------------------------------------------- ----------- ---------
The Broadway, Appointed to deliver security services 3 years GBP3m
Westfield Shopping to the shopping centre in Bradford's
Centres city centre
--------------------------------------------- ----------- ---------
Finance and professional services
Deloitte Appointed to deliver integrated facilities 5 years GBP40m
management services across Deloitte's
entire UK estate, comprising 34 offices
and more than 1.3 million square
feet of office space
--------------------------------------------- ----------- ---------
High street bank A contract with a new UK bank to 5 years GBP40m
deliver integrated facilities management
services at all of its office buildings
and over 300 bank branches
--------------------------------------------- ----------- ---------
Linklaters Expanded a document management contract 5 years ND
with the global law firm to provide
reprographic and digital scanning
services as well as previously provided
mail and distribution services
--------------------------------------------- ----------- ---------
Leading international Awarded a security contract with 1 year GBP1m
law firm the leading international law firm.
Over 40 security guards will be employed
at the firm's global HQ in the City
of London
--------------------------------------------- ----------- ---------
Technology and communications
dmg media Mitie previously provided security ND ND
to the group and now provides a full
range of integrated FM services including
mechanical and electrical engineering
maintenance, cleaning, security,
pest control, front of house and
mailroom and logistic services
--------------------------------------------- ----------- ---------
RWE npower Renewed an integrated facilities 3 year GBP30m
management contract providing cleaning, (+2 years)
security, waste management, reprographics,
space planning, mechanical and electrical
maintenance, pest control, mailroom
management and drink and snack vending
--------------------------------------------- ----------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
Fujitsu Established a partnering agreement N/A N/A
with Fujitsu in enterprise cyber
security and intelligent building
monitoring. Mitie extended its security
contract with Fujitsu for 3 years
in April 2015
--------------------------------------------- ----------- ---------
New and retained contracts
Client Contract Timeframe Estimated
total
value
Utilities
Eggborough Power Awarded a security contract delivering 3 years ND
Station 24 hour security personnel. In addition
to this Mitie offers superior learning,
development and management capabilities
through its online operations software
Workplace+
---------------------------------------- ----------- ---------
E.ON Appointed by the leading energy company 2 years ND
to (+2 years)
deliver 24 hour security personnel
across all
of E.ON's UK sites
---------------------------------------- ----------- ---------
Scottish & Southern Renewed a security contract with 3 years GBP4m
Energy the British energy company providing
manned guarding and technology security
solutions
---------------------------------------- ----------- ---------
Public sector
Social Housing
Circle Housing Awarded a contract to provide responsive ND ND
repairs and maintenance services
to 6,500 properties in London
---------------------------------------- ----------- ---------
Homecare
London Borough Awarded a contract to provide homecare 5 years GBP13m
of Hammersmith services. Mitie currently provides
& Fulham property management services to housing
in the borough
---------------------------------------- ----------- ---------
London Borough A new contract (as part of a Tri-Borough 5 years GBP13m
of Kensington framework) to deliver 3000 hours
& Chelsea of homecare services per week to
the London borough
---------------------------------------- ----------- ---------
Independent review report to Mitie Group plc
For the six months ended 30 September 2015
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2015 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, the
condensed consolidated statement of cash flows and related notes 1
to 15. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2015 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
23 November 2015
Condensed consolidated income statement
For the six months ended 30 September 2015
30 September 2015 30 September 2014
(unaudited) (unaudited)
---------------------------------- ----- ---------------------------- ----------------------------
Other Other
Headline items(1) Total Headline items(1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Continuing operations
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Revenue 2 1,123.1 - 1,123.1 1,095.0 3.8 1,098.8
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Cost of sales (963.7) - (963.7) (930.7) (8.2) (938.9)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Gross profit 159.4 - 159.4 164.3 (4.4) 159.9
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Administrative expenses (101.7) (5.0) (106.7) (100.5) (53.9) (154.4)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Share of profit of joint ventures
and associates 0.4 - 0.4 0.4 - 0.4
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Operating profit 2 58.1 (5.0) 53.1 64.2 (58.3) 5.9
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Investment revenue - - - 0.1 - 0.1
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Finance costs (8.0) - (8.0) (7.3) - (7.3)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Net finance costs (8.0) - (8.0) (7.2) - (7.2)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Profit/(loss) before tax 2 50.1 (5.0) 45.1 57.0 (58.3) (1.3)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Tax 4 (10.1) 0.9 (9.2) (12.0) 10.0 (2.0)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Profit/(loss) for the period 40.0 (4.1) 35.9 45.0 (48.3) (3.3)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Attributable to:
---------------------------------- ----- -------- --------- ------- -------- --------- -------
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
Equity holders of the parent 39.3 (4.1) 35.2 44.6 (48.3) (3.7)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Non-controlling interests 0.7 - 0.7 0.4 - 0.4
---------------------------------- ----- -------- --------- ------- -------- --------- -------
40.0 (4.1) 35.9 45.0 (48.3) (3.3)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
Earnings per share (EPS)
---------------------------------- ----- -------- --------- ------- -------- --------- -------
- basic 6 11.1p (1.2)p 9.9p 12.4p (13.4)p (1.0)p
---------------------------------- ----- -------- --------- ------- -------- --------- -------
- diluted 6 10.7p (1.1)p 9.6p 12.0p (13.0)p (1.0)p
---------------------------------- ----- -------- --------- ------- -------- --------- -------
1 Other items are as described in Note 3.
Condensed consolidated income statement
For the year ended 31 March 2015
Year to 31 March 2015 (audited)
------------------------------------------------- ----- ------------------------------------
Headline Other items(1) Total
Notes GBPm GBPm GBPm
------------------------------------------------- ----- --------- -------------- ---------
Continuing operations
------------------------------------------------- ----- --------- -------------- ---------
Revenue 2 2,266.2 7.6 2,273.8
------------------------------------------------- ----- --------- -------------- ---------
Cost of sales (1,928.3) (17.4) (1,945.7)
------------------------------------------------- ----- --------- -------------- ---------
Gross profit 337.9 (9.8) 328.1
------------------------------------------------- ----- --------- -------------- ---------
Administrative expenses (210.0) (62.8) (272.8)
------------------------------------------------- ----- --------- -------------- ---------
Share of profit of joint ventures and associates 0.7 - 0.7
------------------------------------------------- ----- --------- -------------- ---------
Operating profit 2 128.6 (72.6) 56.0
------------------------------------------------- ----- --------- -------------- ---------
Investment revenue 0.3 - 0.3
------------------------------------------------- ----- --------- -------------- ---------
Finance costs (14.8) - (14.8)
------------------------------------------------- ----- --------- -------------- ---------
Net finance costs (14.5) - (14.5)
------------------------------------------------- ----- --------- -------------- ---------
Profit before tax 2 114.1 (72.6) 41.5
------------------------------------------------- ----- --------- -------------- ---------
Tax (24.1) 18.3 (5.8)
------------------------------------------------- ----- --------- -------------- ---------
Profit for the year 90.0 (54.3) 35.7
------------------------------------------------- ----- --------- -------------- ---------
Attributable to:
------------------------------------------------- ----- --------- -------------- ---------
Equity holders of the parent 89.3 (54.3) 35.0
------------------------------------------------- ----- --------- -------------- ---------
Non-controlling interests 0.7 - 0.7
------------------------------------------------- ----- --------- -------------- ---------
90.0 (54.3) 35.7
------------------------------------------------- ----- --------- -------------- ---------
Earnings per share (EPS)
------------------------------------------------- ----- --------- -------------- ---------
- basic 6 24.8p (15.1)p 9.7p
------------------------------------------------- ----- --------- -------------- ---------
- diluted 6 24.2p (14.7)p 9.5p
------------------------------------------------- ----- --------- -------------- ---------
1 Other items are as described in Note 3.
Condensed consolidated statement of comprehensive income
For the six months to 30 September 2015
30 September
------------------------------------------------------------- ---------------- ---------------- ---------------
Year to
31 March
2015 (unaudited) 2014 (unaudited) 2015 (audited)
GBPm GBPm GBPm
------------------------------------------------------------- ---------------- ---------------- ---------------
Profit/(loss) for the period 35.9 (3.3) 35.7
------------------------------------------------------------- ---------------- ---------------- ---------------
Items that will not be reclassified subsequently to profit
or loss
------------------------------------------------------------- ---------------- ---------------- ---------------
Remeasurement of net defined benefit pension liability 4.6 (7.4) (15.0)
------------------------------------------------------------- ---------------- ---------------- ---------------
Income tax relating to items not reclassified (0.9) 1.4 3.0
------------------------------------------------------------- ---------------- ---------------- ---------------
3.7 (6.0) (12.0)
------------------------------------------------------------- ---------------- ---------------- ---------------
Items that may be reclassified subsequently to profit
or loss
------------------------------------------------------------- ---------------- ---------------- ---------------
Exchange differences on translation of foreign operations (0.6) (0.6) (2.0)
------------------------------------------------------------- ---------------- ---------------- ---------------
(Loss)/gain on a hedge of a net investment taken to equity (0.1) 0.5 1.1
------------------------------------------------------------- ---------------- ---------------- ---------------
Cash flow hedges:
------------------------------------------------------------- ---------------- ---------------- ---------------
(Losses)/gains arising during the period (2.8) 3.2 13.4
------------------------------------------------------------- ---------------- ---------------- ---------------
Reclassification adjustment for gains/(losses) included
in profit and loss 2.6 (3.4) (14.6)
------------------------------------------------------------- ---------------- ---------------- ---------------
Income tax credit relating to items that may be reclassified 0.1 0.4 0.2
------------------------------------------------------------- ---------------- ---------------- ---------------
(0.8) 0.1 (1.9)
------------------------------------------------------------- ---------------- ---------------- ---------------
Other comprehensive income/(expense) for the financial
period 2.9 (5.9) (13.9)
------------------------------------------------------------- ---------------- ---------------- ---------------
Total comprehensive income/(expense) for the financial
period 38.8 (9.2) 21.8
------------------------------------------------------------- ---------------- ---------------- ---------------
Attributable to:
------------------------------------------------------------- ---------------- ---------------- ---------------
Equity holders of the parent 38.1 (9.6) 21.1
------------------------------------------------------------- ---------------- ---------------- ---------------
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
Non-controlling interests 0.7 0.4 0.7
------------------------------------------------------------- ---------------- ---------------- ---------------
Condensed consolidated balance sheet
At 30 September 2015
30 September
------------------------------------------ ----- ---------------- ---------------- -----------
31 March
2015
2014 (unaudited) (audited)
2015 (unaudited)
Notes GBPm GBPm GBPm
------------------------------------------ ----- ---------------- ---------------- -----------
Non-current assets
------------------------------------------ ----- ---------------- ---------------- -----------
Goodwill 464.4 459.3 464.4
------------------------------------------ ----- ---------------- ---------------- -----------
Other intangible assets 68.7 72.9 76.6
------------------------------------------ ----- ---------------- ---------------- -----------
Property, plant and equipment 54.2 56.2 53.3
------------------------------------------ ----- ---------------- ---------------- -----------
Interest in joint ventures and associates 1.1 0.7 1.1
------------------------------------------ ----- ---------------- ---------------- -----------
Financing assets 4.1 1.4 8.0
------------------------------------------ ----- ---------------- ---------------- -----------
Trade and other receivables 68.3 50.9 58.5
------------------------------------------ ----- ---------------- ---------------- -----------
Deferred tax assets 11.9 17.5 13.4
------------------------------------------ ----- ---------------- ---------------- -----------
Total non-current assets 672.7 658.9 675.3
------------------------------------------ ----- ---------------- ---------------- -----------
Current assets
------------------------------------------ ----- ---------------- ---------------- -----------
Inventories 9.9 8.4 11.0
------------------------------------------ ----- ---------------- ---------------- -----------
Trade and other receivables 460.1 496.4 421.4
------------------------------------------ ----- ---------------- ---------------- -----------
Cash and cash equivalents 53.0 41.6 96.4
------------------------------------------ ----- ---------------- ---------------- -----------
Total current assets 523.0 546.4 528.8
------------------------------------------ ----- ---------------- ---------------- -----------
Total assets 1,195.7 1,205.3 1,204.1
------------------------------------------ ----- ---------------- ---------------- -----------
Current liabilities
------------------------------------------ ----- ---------------- ---------------- -----------
Trade and other payables (461.1) (493.2) (476.0)
------------------------------------------ ----- ---------------- ---------------- -----------
Current tax liabilities (11.3) (13.7) (5.2)
------------------------------------------ ----- ---------------- ---------------- -----------
Financing liabilities (1.5) (2.1) (1.8)
------------------------------------------ ----- ---------------- ---------------- -----------
Provisions 10 (6.8) (1.2) (4.9)
------------------------------------------ ----- ---------------- ---------------- -----------
Total current liabilities (480.7) (510.2) (487.9)
------------------------------------------ ----- ---------------- ---------------- -----------
Net current assets 42.3 36.2 40.9
------------------------------------------ ----- ---------------- ---------------- -----------
Non-current liabilities
------------------------------------------ ----- ---------------- ---------------- -----------
Trade and other payables (8.4) - (8.0)
------------------------------------------ ----- ---------------- ---------------- -----------
Financing liabilities (276.2) (273.3) (279.2)
------------------------------------------ ----- ---------------- ---------------- -----------
Provisions 10 (0.7) (8.0) (7.4)
------------------------------------------ ----- ---------------- ---------------- -----------
Retirement benefit obligation (32.8) (27.4) (35.8)
------------------------------------------ ----- ---------------- ---------------- -----------
Deferred tax liabilities (6.8) (9.8) (7.5)
------------------------------------------ ----- ---------------- ---------------- -----------
Total non-current liabilities (324.9) (318.5) (337.9)
------------------------------------------ ----- ---------------- ---------------- -----------
Total liabilities (805.6) (828.7) (825.8)
------------------------------------------ ----- ---------------- ---------------- -----------
Net assets 390.1 376.6 378.3
------------------------------------------ ----- ---------------- ---------------- -----------
30 September
--------------------------------------------- ----- ---------------- ---------------- -----------
31 March
2015
2014 (unaudited) (audited)
2015 (unaudited)
Notes GBPm GBPm GBPm
--------------------------------------------- ----- ---------------- ---------------- -----------
Equity
--------------------------------------------- ----- ---------------- ---------------- -----------
Share capital 11 9.4 9.3 9.4
--------------------------------------------- ----- ---------------- ---------------- -----------
Share premium account 126.0 121.5 122.6
--------------------------------------------- ----- ---------------- ---------------- -----------
Merger reserve 80.1 98.5 80.1
--------------------------------------------- ----- ---------------- ---------------- -----------
Share-based payments reserve 7.6 3.5 7.2
--------------------------------------------- ----- ---------------- ---------------- -----------
Own shares reserve (52.8) (37.9) (47.5)
--------------------------------------------- ----- ---------------- ---------------- -----------
Other reserves 0.4 0.4 0.4
--------------------------------------------- ----- ---------------- ---------------- -----------
Hedging and translation reserve (7.3) (4.6) (6.4)
--------------------------------------------- ----- ---------------- ---------------- -----------
Retained earnings 222.9 182.5 209.2
--------------------------------------------- ----- ---------------- ---------------- -----------
Equity attributable to equity holders of the
parent 386.3 373.2 375.0
--------------------------------------------- ----- ---------------- ---------------- -----------
Non-controlling interests 3.8 3.4 3.3
--------------------------------------------- ----- ---------------- ---------------- -----------
Total equity 390.1 376.6 378.3
--------------------------------------------- ----- ---------------- ---------------- -----------
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2015
Attributable
Share Share-based Own Hedging and to equity
Share premium Merger payments shares Other translation Retained holders of
capital account reserve reserve reserve reserves reserve earnings the parent Non-controlling Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm interests GBPm GBPm
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
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
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
(Loss)/profit for
the period - - - - - - - (3.7) (3.7) 0.4 (3.3)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Other
comprehensive
expense - - - - - - (0.3) (5.6) (5.9) - (5.9)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Total
comprehensive
(expense)/income - - - - - - (0.3) (9.3) (9.6) 0.4 (9.2)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Shares issued - 2.6 - - - - - - 2.6 - 2.6
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Dividends paid - - - - - - - (21.9) (21.9) (0.1) (22.0)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Purchase of own
shares - - - - (1.1) - - - (1.1) - (1.1)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Share-based
payments - - - 0.9 0.4 - - 1.2 2.5 - 2.5
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Tax on
share-based
payment
transactions - - - - - - - (0.2) (0.2) - (0.2)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Transfers between
reserves - - (2.7) - - - - 2.7 - - -
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Acquisitions and
other movements
in
non-controlling
interests - - - - - - - - - 0.1 0.1
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
At 30 September
2014 9.3 121.5 98.5 3.5 (37.9) 0.4 (4.6) 182.5 373.2 3.4 376.6
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Profit for the
period - - - - - - - 38.7 38.7 0.3 39.0
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Other
comprehensive
expense - - - - - - (1.8) (6.2) (8.0) - (8.0)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Total
comprehensive
(expense)/income - - - - - - (1.8) 32.5 30.7 0.3 31.0
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Shares issued 0.1 1.1 - - - - - 1.2 - 1.2
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Dividends paid - - - - - - - (18.6) (18.6) - (18.6)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Purchase of own
shares - - - - (9.6) - - - (9.6) - (9.6)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Share-based
payments - - - 3.7 - - - 0.2 3.9 - 3.9
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Tax on
share-based
payment
transactions - - - - - - - 0.1 0.1 - 0.1
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Transfer between
reserves - - (18.4) - - - - 18.4 - - -
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Acquisitions and
other movements
in
non-controlling
interests - - - - - - - (5.9) (5.9) (0.4) (6.3)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
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
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Attributable
Share Share-based Own Hedging and to equity
Share premium Merger payments shares Other translation Retained holders of
capital account reserve reserve reserve reserves reserve earnings the parent Non-controlling Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm interests GBPm GBPm
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
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
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Profit for the
period - - - - - - - 35.2 35.2 0.7 35.9
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Other
comprehensive
(expense)/income - - - - - - (0.9) 3.8 2.9 - 2.9
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Total
comprehensive
(expense)/income - - - - - - (0.9) 39.0 38.1 0.7 38.8
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Shares issued - 3.4 - - - - - - 3.4 - 3.4
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Dividends paid - - - - - - - (23.1) (23.1) (0.2) (23.3)
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Purchase of own
shares - - - - (6.6) - - - (6.6) - (6.6)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Share buybacks - - - - - - - (4.4) (4.4) - (4.4)
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Share-based
payments - - - 0.4 1.3 - - 1.4 3.1 - 3.1
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Tax on
share-based
payment
transactions - - - - - - - 0.1 0.1 - 0.1
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Acquisitions and
other movements
in
non-controlling
interests - - - - - - - 0.7 0.7 - 0.7
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
At 30 September
2015 9.4 126.0 80.1 7.6 (52.8) 0.4 (7.3) 222.9 386.3 3.8 390.1
----------------- ------- ------- ------- ----------- ------- -------- ----------- -------- ------------ --------------- ------
Condensed consolidated statement of cash flows
For the six months ended 30 September 2015
30 September
---------------------------------------------------------- ---------------- ---------------- -----------
Year to
31 March
2015
2014 (unaudited) (audited)
2015 (unaudited)
GBPm GBPm GBPm
---------------------------------------------------------- ---------------- ---------------- -----------
Operating profit 53.1 5.9 56.0
---------------------------------------------------------- ---------------- ---------------- -----------
Adjustments for:
---------------------------------------------------------- ---------------- ---------------- -----------
Share-based payment expense 3.3 2.7 6.5
---------------------------------------------------------- ---------------- ---------------- -----------
Defined benefit pension charge 2.6 2.1 4.0
---------------------------------------------------------- ---------------- ---------------- -----------
Defined benefit pension contributions (1.6) (1.6) (3.1)
---------------------------------------------------------- ---------------- ---------------- -----------
Acquisition costs - 0.2 0.3
---------------------------------------------------------- ---------------- ---------------- -----------
Depreciation of property, plant and equipment 8.3 9.0 19.7
---------------------------------------------------------- ---------------- ---------------- -----------
Amortisation of intangible assets 8.8 7.6 13.8
---------------------------------------------------------- ---------------- ---------------- -----------
Other non-cash movement in Other items - 19.0 19.0
---------------------------------------------------------- ---------------- ---------------- -----------
Share of profit of joint ventures and associates (0.4) (0.4) (0.7)
---------------------------------------------------------- ---------------- ---------------- -----------
(Gain)/loss on disposal of property, plant and equipment (0.4) - 0.3
---------------------------------------------------------- ---------------- ---------------- -----------
Operating cash flows before movements in working capital 73.7 44.5 115.8
---------------------------------------------------------- ---------------- ---------------- -----------
Decrease/(increase) in inventories 1.1 (1.0) (3.8)
---------------------------------------------------------- ---------------- ---------------- -----------
(Increase)/decrease in receivables (48.7) (14.3) 53.4
---------------------------------------------------------- ---------------- ---------------- -----------
Decrease in payables (15.7) (30.5) (50.9)
---------------------------------------------------------- ---------------- ---------------- -----------
Decrease in provisions (0.2) (0.7) (1.3)
---------------------------------------------------------- ---------------- ---------------- -----------
Cash generated by operations 10.2 (2.0) 113.2
---------------------------------------------------------- ---------------- ---------------- -----------
Income taxes paid (3.1) (6.5) (15.5)
---------------------------------------------------------- ---------------- ---------------- -----------
Interest paid (7.5) (6.7) (13.1)
---------------------------------------------------------- ---------------- ---------------- -----------
Facility extension fees - (2.0) (2.0)
---------------------------------------------------------- ---------------- ---------------- -----------
Acquisition costs - (0.2) (0.3)
---------------------------------------------------------- ---------------- ---------------- -----------
Net cash (outflow)/inflow from operating activities (0.4) (17.4) 82.3
---------------------------------------------------------- ---------------- ---------------- -----------
Investing activities
---------------------------------------------------------- ---------------- ---------------- -----------
Interest received 0.4 - -
---------------------------------------------------------- ---------------- ---------------- -----------
Purchase of property, plant and equipment (10.0) (8.2) (23.0)
---------------------------------------------------------- ---------------- ---------------- -----------
Purchase of subsidiary undertakings, net of cash acquired (3.7) - (0.5)
---------------------------------------------------------- ---------------- ---------------- -----------
Dividends received from joint ventures and associates 0.7 0.5 0.5
---------------------------------------------------------- ---------------- ---------------- -----------
Investment in financing assets 0.2 - (0.3)
---------------------------------------------------------- ---------------- ---------------- -----------
Purchase of other intangible assets (1.0) (1.3) (3.9)
---------------------------------------------------------- ---------------- ---------------- -----------
Disposals of property, plant and equipment 2.0 0.7 1.8
---------------------------------------------------------- ---------------- ---------------- -----------
Net cash outflow from investing activities (11.4) (8.3) (25.4)
---------------------------------------------------------- ---------------- ---------------- -----------
30 September
--------------------------------------------------------- ---------------- ---------------- -----------
Year to
31 March
2015
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
2014 (unaudited) (audited)
2015 (unaudited)
GBPm GBPm GBPm
--------------------------------------------------------- ---------------- ---------------- -----------
Financing activities
--------------------------------------------------------- ---------------- ---------------- -----------
Repayments of obligations under finance leases (1.0) (2.0) (2.0)
--------------------------------------------------------- ---------------- ---------------- -----------
Proceeds on issue of share capital 3.4 2.5 3.8
--------------------------------------------------------- ---------------- ---------------- -----------
Bank loans raised 0.5 1.1 0.6
--------------------------------------------------------- ---------------- ---------------- -----------
Purchase of own shares (6.6) (1.1) (10.7)
--------------------------------------------------------- ---------------- ---------------- -----------
Share buybacks (4.4) - -
--------------------------------------------------------- ---------------- ---------------- -----------
Equity dividends paid (23.1) (21.9) (40.5)
--------------------------------------------------------- ---------------- ---------------- -----------
Non-controlling interest dividends paid (0.2) (0.1) (0.1)
--------------------------------------------------------- ---------------- ---------------- -----------
Net cash outflow from financing (31.4) (21.5) (48.9)
--------------------------------------------------------- ---------------- ---------------- -----------
Net (decrease)/increase in cash and cash equivalents (43.2) (47.2) 8.0
--------------------------------------------------------- ---------------- ---------------- -----------
Net cash and cash equivalents at beginning of the period 96.4 89.1 89.1
--------------------------------------------------------- ---------------- ---------------- -----------
Effect of foreign exchange rate changes (0.2) (0.3) (0.7)
--------------------------------------------------------- ---------------- ---------------- -----------
Net cash and cash equivalents at end of the period 53.0 41.6 96.4
--------------------------------------------------------- ---------------- ---------------- -----------
Net cash and cash equivalents comprise:
--------------------------------------------------------- ---------------- ---------------- -----------
Cash at bank 53.0 41.6 96.4
--------------------------------------------------------- ---------------- ---------------- -----------
53.0 41.6 96.4
--------------------------------------------------------- ---------------- ---------------- -----------
30 September
----------------------------------------------------- ----- ---------------- ---------------- -----------
Year to
31 March
2015
2014 (unaudited) (audited)
Reconciliation of net cash flow to movement in 2015 (unaudited)
net debt Notes GBPm GBPm GBPm
----------------------------------------------------- ----- ---------------- ---------------- -----------
Net (decrease)/increase in cash and cash equivalents (43.2) (47.2) 8.0
----------------------------------------------------- ----- ---------------- ---------------- -----------
Effect of foreign exchange rate changes (0.2) (0.3) (0.7)
----------------------------------------------------- ----- ---------------- ---------------- -----------
(Increase)/decrease in bank loans (0.6) (0.4) 1.4
----------------------------------------------------- ----- ---------------- ---------------- -----------
Non-cash movement in private placement notes
and associated hedges (0.2) (0.3) (1.3)
----------------------------------------------------- ----- ---------------- ---------------- -----------
Decrease in finance leases 0.2 1.0 1.4
----------------------------------------------------- ----- ---------------- ---------------- -----------
(Increase)/decrease in net debt during the period (44.0) (47.2) 8.8
----------------------------------------------------- ----- ---------------- ---------------- -----------
Opening net debt (177.8) (186.6) (186.6)
----------------------------------------------------- ----- ---------------- ---------------- -----------
Closing net debt 8 (221.8) (233.8) (177.8)
----------------------------------------------------- ----- ---------------- ---------------- -----------
Notes to the condensed consolidated financial statements
For the six months to 30 September 2015
1 Basis of preparation
The condensed consolidated financial statements for the six
months to 30 September 2015 have been prepared on the basis of the
accounting policies set out in the 2015 Annual Report and
Accounts.
These accounting policies are drawn up in accordance with
International Accounting Standards (IAS) and International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board and as adopted for use in the European
Union. The condensed financial statements for the six months to 30
September 2015 have been prepared in accordance with IAS 34
'Interim Financial Reporting' and with the Disclosure and
Transparency Rules of the Financial Conduct Authority.
The condensed consolidated financial statements for the six
months to 30 September 2015 have been reviewed by Deloitte LLP but
have not been audited (see page 10). They do not include all the
information and disclosures required in the annual financial
statements, and therefore should be read in conjunction with the
group's annual financial statements as at 31 March 2015. The
financial information presented for the year ended 31 March 2015
does not represent full statutory accounts within the meaning of
Section 434 of the Companies Act 2006. A copy of the statutory
accounts for that year has been delivered to the Registrar of
Companies. The auditor's report on those accounts was not
qualified, did not include reference to any matters to which the
auditor drew attention by way of emphasis without qualifying the
report and did not contain a statement under Section 498 of the
Companies Act 2006.
Significant accounting policies
The accounting policies and methods of computation adopted in
the preparation of the condensed consolidated financial statements
are consistent with those followed in the preparation of the
group's annual financial statements for the year ended 31 March
2015.
Going concern and principal risks and uncertainties
The Directors have considered the Financial Reporting Council
guidance on going concern and the principal risks and uncertainties
affecting the group which, in the Directors' view, are unchanged
from those described on pages 38 and 39 of the group's 2015 Annual
Report and Accounts. The group benefits from a well diversified
portfolio of service offerings and has a broad, diverse customer
base. The group currently operates well within the financial
covenants associated with its committed funding lines and its
GBP252m of US Private Placement debt expiring in December 2017,
December 2019, December 2022 and December 2024. The group also
benefits from a committed facility of GBP275m, which will mature in
July 2019. Together with the US Private Placements, this gives the
group total committed funding of GBP527m, of which GBP260m was
undrawn at 30 September 2015.
After making enquiries, the Directors have a reasonable
expectation that the group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, the
group continues to adopt the going concern basis of accounting in
preparing the condensed consolidated financial statements.
2 Business and geographical segments
Business segments
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
The group manages its business on a service division basis,
although elements of the group's Soft FM and Hard FM divisions make
up the group's Integrated FM business. These divisions are the
basis on which the group reports its primary segmental information.
With effect from 1 April 2015 Energy Solutions is being reported as
part of Hard FM. Soft FM, Healthcare and Property Management remain
unchanged.
Six months to 30 September 2015 Six months to 30 September 2014
(unaudited) (unaudited and restated)
----------- ----------------------------------------------------------------- -----------------------------------------------------------------
Headline Headline
Headline operating Headline operating
Headline operating profit Headline operating profit
Revenue revenue profit margin Profit/ Revenue revenue profit margin Profit/
GBPm GBPm GBPm % (loss) before tax GBPm GBPm GBPm GBPm % (loss) before tax GBPm
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Soft FM 635.7 635.7 42.4 6.7 41.6 622.7 622.7 40.3 6.5 38.8
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Hard FM 310.5 310.5 10.5 3.4 5.7 300.8 300.8 13.9 4.6 10.3
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Property
Management 137.9 137.9 7.3 5.3 7.2 123.3 123.3 5.5 4.5 5.5
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Healthcare 39.0 39.0 (2.1) (5.4) (4.4) 48.2 48.2 4.5 9.3 2.4
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Other items
(Note 3) - - - - (5.0) 3.8 - - - (58.3)
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Total 1,123.1 1,123.1 58.1 5.2 45.1 1,098.8 1,095.0 64.2 5.9 (1.3)
----------- ------- -------- --------- --------- ------------------------ ------- -------- --------- --------- ------------------------
Year to 31 March 2015 (audited)
-------------------- ------------------------------------------------------------------------------------------------
Headline operating Headline operating
Headline revenue profit profit margin Profit/ (loss)
Revenue GBPm GBPm GBPm % before tax GBPm
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Soft FM 1,280.3 1280.3 81.9 6.4 79.6
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Hard FM 621.1 621.1 31.4 5.1 24.2
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Property Management 273.4 273.4 10.4 3.8 9.9
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Healthcare 91.4 91.4 4.9 5.4 0.4
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Other items (Note 3) 7.6 - - - (72.6)
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
Total 2,273.8 2,266.2 128.6 5.7 41.5
-------------------- ------------ ------------------- ------------------- ------------------- -------------------
The revenue analysis above is net of inter-segment sales which
are not considered significant.
IFRS 8 requires 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
Six months to 30 September 2015 (unaudited) Six months to 30 September 2014 (unaudited)
---------- ---------------------------------------------------- ----------------------------------------------------
Headline Headline
Headline operating Profit/ Headline operating Profit/
Headline operating profit (loss) Headline operating profit (loss)
Revenue revenue profit margin before tax Revenue revenue profit margin before tax
GBPm GBPm GBPm % GBPm GBPm GBPm GBPm % GBPm
---------- ------- -------- --------- --------- ----------- ------- -------- --------- --------- -----------
United
Kingdom 1,086.4 1,086.4 58.3 5.4 45.6 1,059.0 1,055.2 63.9 6.1 (1.4)
---------- ------- -------- --------- --------- ----------- ------- -------- --------- --------- -----------
Other
countries 36.7 36.7 (0.2) (0.5) (0.5) 39.8 39.8 0.3 0.8 0.1
---------- ------- -------- --------- --------- ----------- ------- -------- --------- --------- -----------
Total 1,123.1 1,123.1 58.1 5.2 45.1 1,098.8 1,095.0 64.2 5.9 (1.3)
---------- ------- -------- --------- --------- ----------- ------- -------- --------- --------- -----------
Year to 31 March (unaudited)
---------------- -------------------------------------------------------------------------------------
Profit/
Headline operating Headline operating (loss)
Revenue Headline revenue profit profit margin before tax
GBPm GBPm GBPm % GBPm
---------------- ------- -------------------- -------------------- ------------------- -----------
United Kingdom 2,190.7 2,183.1 126.8 5.8 40.0
--------------------- ------- -------------------- -------------------- ------------------- -----------
Other countries 83.1 83.1 1.8 2.2 1.5
--------------------- ------- -------------------- -------------------- ------------------- -----------
Total 2,273.8 2,266.2 128.6 5.7 41.5
--------------------- ------- -------------------- -------------------- ------------------- -----------
Note:
Headline revenue and operating profit exclude other items which
are analysed in Note 3 and are all incurred in the United
Kingdom.
3 Other items
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
The group separately identifies and discloses restructuring and
acquisition related items (termed 'other items'). During the year
ended 31 March 2015, the group separately reported as Other items
the results of certain design and build contracts and certain
business activities in construction related markets from which it
was exiting. During the half year ended 30 September 2015, no
further net charges have arisen in respect of these contracts and
business activities. Net cash outflows of GBP2.4m have been
incurred in relation to the final close out of these contracts and
business activities in the period.
Six months to 30 September
2014
Six months to 30 September
2015 (unaudited) (unaudited)
-------------------------------------- --------------------------------------- -------------------------------------
Restructuring
Restructuring and
and acquisition Businesses Other acquisition Businesses Other
related costs being exited items related costs being exited items
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Revenue - - - - 3.8 3.8
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Cost of sales - - - - (8.2) (8.2)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Administrative expenses:
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Overheads - - - - (2.5) (2.5)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Exceptional charges in relation
to design and build Asset Management
contracts
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
in Energy Solutions - - - (45.7) - (45.7)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Restructuring costs relating
to the integration of Complete
Group - - - (0.4) - (0.4)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Acquisition costs - - - (0.2) - (0.2)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Amortisation of acquisition
related intangibles (5.0) - (5.0) (5.1) - (5.1)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Other items before tax (5.0) - (5.0) (51.4) (6.9) (58.3)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Tax on other items 0.9 - 0.9 8.6 1.4 10.0
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Other items net of tax (4.1) - (4.1) (42.8) (5.5) (48.3)
-------------------------------------- ---------------- ------------- ------ -------------- ------------- ------
Year to 31 March 2015 (audited)
------------------------------------------------------------ ---------------------------------------
Restructuring
and acquisition Businesses Other
related costs being exited items
GBPm GBPm GBPm
------------------------------------------------------------ ---------------- ------------- ------
Revenue - 7.6 7.6
------------------------------------------------------------ ---------------- ------------- ------
Cost of Sales - (17.4) (17.4)
------------------------------------------------------------ ---------------- ------------- ------
Administrative expenses:
------------------------------------------------------------ ---------------- ------------- ------
Overheads - (6.1) (6.1)
------------------------------------------------------------ ---------------- ------------- ------
Exceptional charges in relation to design and build Asset
Management contracts in Energy Solutions (45.7) - (45.7)
------------------------------------------------------------ ---------------- ------------- ------
Restructuring costs relating to the integration of Complete
group (0.6) - (0.6)
------------------------------------------------------------ ---------------- ------------- ------
Acquisition costs (0.3) - (0.3)
------------------------------------------------------------ ---------------- ------------- ------
Amortisation of acquisition related intangibles (10.1) - (10.1)
------------------------------------------------------------ ---------------- ------------- ------
Other items before tax (56.7) (15.9) (72.6)
------------------------------------------------------------ ---------------- ------------- ------
Tax on other items 15.0 3.3 18.3
------------------------------------------------------------ ---------------- ------------- ------
Other items net of tax (41.7) (12.6) (54.3)
------------------------------------------------------------ ---------------- ------------- ------
4 Tax
The income tax charge for the six months ended 30 September 2015
is calculated based upon the effective tax rates expected to apply
to the group for the full year. The rate of tax on headline profits
is 20.3% (2014: 21.0%) with the decrease compared to the prior
period mainly being due to the 1% reduction in the UK statutory tax
rate from 21% to 20%. The effective rate of tax on headline
earnings is principally influenced by tax relief for share
incentive plans that may fluctuate with share price movements,
overseas tax rates and recurring non-tax deductible expenses. The
group expects its sustainable effective tax rate to be slightly
above the UK statutory rate.
Tax relief is recognised on other items to the extent that it is
considered probable that tax relief will be obtained or losses will
be utilised by the group. The effective rate of tax on other items
is 20.0% (2014: 17.2%); in the prior period the tax rate was
affected by uncertainty around the incidence and timing of certain
losses and provisions. The effective tax rate on statutory profits
is 20.3% (2014: (153.8)%); in the prior period this reflected the
lower rate of tax relief on other items relative to statutory
profits for the period.
5 Dividends
The proposed interim dividend of 5.4p (2014: 5.2p) per share
(not recognised as a liability at 30 September 2015) will be paid
on 1 February 2016 to shareholders on the register on 18 December
2015.
The dividend disclosed in the statement of cash flows represents
the final ordinary dividend of 6.5p (2014: 6.1p) per share as
proposed in the 31 March 2015 financial statements and approved at
the group's AGM (not recognised as a liability at 31 March
2015).
6 Earnings per share
Basic and diluted earnings per share have been calculated in
accordance with IAS 33 'Earnings Per Share'.
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
The calculation of the basic and diluted EPS is based on the
following data:
Six months to 30 September
----------------------------------------------------------------- ---------------------------- ---------
Year to
31 March
2015 2014 2015
GBPm GBPm GBPm
----------------------------------------------------------------- ------------ -------------- ---------
Net headline profit attributable to equity holders of the parent 39.3 44.6 89.3
----------------------------------------------------------------- ------------ -------------- ---------
Other items net of tax (4.1) (48.3) (54.3)
----------------------------------------------------------------- ------------ -------------- ---------
Net profit/(loss) attributable to equity holders of the parent 35.2 (3.7) 35.0
----------------------------------------------------------------- ------------ -------------- ---------
Six months to 30 September
-------------------------------------------------------------------------- ---------------------------- ---------
Year to
31 March
2015 2014 2015
Number of shares million million million
-------------------------------------------------------------------------- ------------- ------------- ---------
Weighted average number of Ordinary shares for the purpose of basic EPS 355.4 359.9 359.3
-------------------------------------------------------------------------- ------------- ------------- ---------
Effect of dilutive potential Ordinary shares: share options 10.5 12.5 10.4
-------------------------------------------------------------------------- ------------- ------------- ---------
Weighted average number of Ordinary shares for the purpose of diluted EPS 365.9 372.4 369.7
-------------------------------------------------------------------------- ------------- ------------- ---------
Six months to 30 September
------------------------------------ ---------------------------- ---------
Year to
31 March
2015 2014 2015
p p p
------------------------------------ ------------ -------------- ---------
Headline basic earnings per share 11.1 12.4 24.8
------------------------------------ ------------ -------------- ---------
Basic earnings per share 9.9 (1.0) 9.7
------------------------------------ ------------ -------------- ---------
Headline diluted earnings per share 10.7 12.0 24.2
------------------------------------ ------------ -------------- ---------
Diluted earnings per share 9.6 (1.0) 9.5
------------------------------------ ------------ -------------- ---------
Note: Headline profit and earnings exclude other items which are
analysed in Note 3.
The weighted average number of Ordinary shares in issue during
the period excludes those accounted for in the Own shares reserve
which were purchased in the market and are held in Treasury or by
the Employee Benefit Trust to satisfy options under the group's
LTIP and SIP share option schemes. The Own shares reserve
represents the cost of 19.2m (2014: 14.2m) shares in Mitie Group
plc, with a weighted average of 19.3m shares during the period
(2014: 14.1m).
7 Acquisitions
There were no acquisitions during the period, a net cash outflow
of GBP3.7m arose on prior year acquisitions as set out below:
GBPm
------------------------------------- -----
Procius Limited 0.3
------------------------------------- -----
Source Eight Limited 0.5
------------------------------------- -----
Direct Enquiries Holdings Limited 3.8
------------------------------------- -----
Mitie Property Services (UK) Limited (1.0)
------------------------------------- -----
Other 0.1
------------------------------------- -----
Net cash outflow on acquisitions 3.7
------------------------------------- -----
Prior year acquisitions
Purchase of Procius Limited
On 16 October 2014, Mitie acquired the leading UK pre-employment
screening company Procius Limited ('Procius') for a total
consideration of GBP3.1m including GBP0.3m of deferred contingent
consideration which was paid in cash in the current period. The
transaction has been accounted for by the acquisition method of
accounting in accordance with IFRS 3 (2008). The provisional
accounting in the 2015 Annual Report and Accounts was reviewed
during the period resulting in no significant adjustments to the
fair value of net assets acquired and the value of goodwill.
Purchase of Source 8 Limited
On 26 November 2014, Mitie acquired a 51% stake in the real
estate, technology and risk management consultancy Source Eight
Limited ('Source 8') for an initial consideration of GBP2.5m and up
to GBP0.8m of deferred contingent consideration, of which GBP0.5m
was paid in cash in the current period. 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. The transaction has been accounted for by the acquisition
method of accounting in accordance with IFRS 3 (2008). The
provisional accounting in the 2015 Annual Report and Accounts was
reviewed during the period resulting in a reduction to the fair
value of net assets acquired of GBP0.2m, from GBP1.5m to GBP1.3m,
and an increase in the value of goodwill of GBP0.2m from GBP2.5m to
GBP2.7m.
Purchase of non-controlling interests
During the year ended 31 March 2015, 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 year
ended 31 March 2015 and GBP3.8m was paid in April 2015.
During the period, Mitie reduced its original business valuation
of the acquisition of Mitie Property Services (UK) Limited in
August 2011 which resulted in a net cash inflow of GBP1.0m.
8 Analysis of net debt
30 September
----------------------------------------------------------- ---------------- ---------------- ------------
31 March
2015
2014 (unaudited) (audited)
2015 (unaudited)
GBPm GBPm GBPm
----------------------------------------------------------- ---------------- ---------------- ------------
Cash and cash equivalents 53.0 41.6 96.4
----------------------------------------------------------- ---------------- ---------------- ------------
Bank loans (14.5) (15.6) (13.9)
----------------------------------------------------------- ---------------- ---------------- ------------
Private placement notes (259.9) (249.4) (263.6)
----------------------------------------------------------- ---------------- ---------------- ------------
Derivative financial instruments hedging private placement
notes 2.9 (6.5) 6.8
----------------------------------------------------------- ---------------- ---------------- ------------
Net debt before obligations under finance leases (218.5) (229.9) (174.3)
----------------------------------------------------------- ---------------- ---------------- ------------
Obligations under finance leases (3.3) (3.9) (3.5)
----------------------------------------------------------- ---------------- ---------------- ------------
Net debt (221.8) (233.8) (177.8)
----------------------------------------------------------- ---------------- ---------------- ------------
9 Financial instruments
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
With the exception of derivative financial instruments, private
placement notes and deferred contingent consideration, all
financial assets and liabilities are held at amortised cost. The
Directors estimate that their carrying value approximates their
fair value.
Derivative financial instruments and private placement notes are
measured initially at fair value at the date the contract is
entered into and are subsequently remeasured to their fair value
through profit or loss unless they are designated as hedges for
which hedge accounting can be applied. The carrying value of the
private placement notes at 30 September 2015 includes a fair value
adjustment for interest rate and currency risk of GBP0.4m (2014:
GBP0.5m). The fair value of the private placement notes is not
significantly different from their carrying value.
Deferred contingent consideration is measured at the Directors'
best estimate of the likely future obligation based on the
attainment of certain profit targets. In assessing the likely
future obligation, the Directors have used their experience and
knowledge of market conditions, alongside internal business plans
and growth forecasts. Actual amounts payable may vary up to a
maximum of GBP6.8m (2014: GBP7.8m) dependent upon the results of
the acquired businesses.
Put options of non-controlling interests are measured at
amortised cost based on the expected redemption value, which is
determined by the Directors' best estimate of the present value of
the likely future obligation based on the attainment of certain
profit targets.
Fair value measurements are classified into three levels,
depending on the degree to which the fair value is observable:
- Level 1 fair value measurements are those derived from quoted
prices in active markets for identical assets or liabilities;
- Level 2 fair value measurements are those derived from other
observable inputs for the asset or liability; and
- Level 3 fair value measurements are those derived from
valuation techniques using inputs that are not based on observable
market data.
We consider that the derivative financial instruments fall into
Level 2 and that deferred contingent consideration and put options
on non-controlling interests fall into Level 3.
The following table shows the reconciliation from the opening to
closing balances for Level 3 fair values:
Deferred Put options
contingent of non-controlling
consideration interests
GBPm GBPm
-------------------------------------------------------------------- -------------- -------------------
At 1 April 2015 11.4 8.0
-------------------------------------------------------------------- -------------- -------------------
Deferred contingent consideration settled in cash during the period (4.6) -
-------------------------------------------------------------------- -------------- -------------------
Movement of put options recognised in equity - 0.4
-------------------------------------------------------------------- -------------- -------------------
At 30 September 2015 6.8 8.4
-------------------------------------------------------------------- -------------- -------------------
There were no transfers between levels during the period. All
contracts are gross settled.
The carrying values of derivative financial instruments at the
balance sheet date were as follows:
30 September
------------------------------------------------------------------- ------------- -------------- -----------
Year to
31 March
2015 2014 2015
(unaudited) (unaudited) (audited)
Assets GBPm GBPm GBPm
------------------------------------------------------------------- ------------- -------------- -----------
Cross currency interest rate swaps designated as cash flow hedges 0.9 - 3.7
------------------------------------------------------------------- ------------- -------------- -----------
Cross currency interest rate swaps designated as fair value hedges 2.0 - 3.1
------------------------------------------------------------------- ------------- -------------- -----------
Derivative financial instruments hedging private placement notes 2.9 - 6.8
------------------------------------------------------------------- ------------- -------------- -----------
30 September
------------------------------------------------------------------- ---------------- ---------------- -----------
Year to
31 March
2015
2015 (unaudited) 2014 (unaudited) (audited)
Liabilities GBPm GBPm GBPm
------------------------------------------------------------------- ---------------- ---------------- -----------
Cross currency interest rate swaps designated as cash flow hedges - (6.5) -
------------------------------------------------------------------- ---------------- ---------------- -----------
Cross currency interest rate swaps designated as fair value hedges - - -
------------------------------------------------------------------- ---------------- ---------------- -----------
Derivative financial instruments hedging private placement notes - (6.5) -
------------------------------------------------------------------- ---------------- ---------------- -----------
Derivative financial instruments are measured at fair value.
Fair values of derivative financial instruments are calculated
based on a discounted cash flow analysis using appropriate market
information for the duration of the instruments.
10 Provisions
Deferred
contingent Insurance
consideration reserve Total
GBPm GBPm GBPm
-------------------------------------------------------------------- -------------- --------- -----
At 1 April 2015 11.4 0.9 12.3
-------------------------------------------------------------------- -------------- --------- -----
Deferred contingent consideration settled in cash during the period (4.6) - (4.6)
-------------------------------------------------------------------- -------------- --------- -----
Utilised within the Captive Insurance subsidiary - (0.2) (0.2)
-------------------------------------------------------------------- -------------- --------- -----
At 30 September 2015 6.8 0.7 7.5
-------------------------------------------------------------------- -------------- --------- -----
Included in current liabilities 6.8
-------------------------------------------------------------------- -------------- --------- -----
Included in non-current liabilities 0.7
-------------------------------------------------------------------- -------------- --------- -----
7.5
-------------------------------------------------------------------- -------------- --------- -----
Deferred
contingent Insurance
consideration reserve Total
GBPm GBPm GBPm
------------------------------------------------- -------------- --------- -----
At 1 April 2014 7.8 2.2 10.0
------------------------------------------------- -------------- --------- -----
Utilised within the Captive Insurance subsidiary - (0.8) (0.8)
------------------------------------------------- -------------- --------- -----
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
At 30 September 2014 7.8 1.4 9.2
------------------------------------------------- -------------- --------- -----
Amounts recognised in the income statement - 0.1 0.1
------------------------------------------------- -------------- --------- -----
Amounts recognised through goodwill 1.1 - 1.1
------------------------------------------------- -------------- --------- -----
Utilised within the Captive Insurance subsidiary - (0.6) (0.6)
------------------------------------------------- -------------- --------- -----
Amounts recognised through equity 2.5 - 2.5
------------------------------------------------- -------------- --------- -----
At 31 March 2015 11.4 0.9 12.3
------------------------------------------------- -------------- --------- -----
31 March
2015
30 September
2014 (unaudited) (audited)
GBPm GBPm
------------------------------------ ----------------- -----------
Included in current liabilities 1.2 4.9
------------------------------------ ----------------- -----------
Included in non-current liabilities 8.0 7.4
------------------------------------ ----------------- -----------
9.2 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.
11 Share capital
Number
Ordinary shares of 2.5p million GBPm
---------------------------------- -------- ----
Allotted and fully paid
---------------------------------- -------- ----
At 1 April 2015 375.2 9.4
---------------------------------- -------- ----
Share buybacks (1.5) -
---------------------------------- -------- ----
Issued under share option schemes 1.4 -
---------------------------------- -------- ----
At 30 September 2015 375.1 9.4
---------------------------------- -------- ----
At 1 April 2014 373.5 9.3
---------------------------------- -------- ----
Issued under share option schemes 1.1 -
---------------------------------- -------- ----
At 30 September 2014 374.6 9.3
---------------------------------- -------- ----
During the period 1.4m (2014: 1.1m) Ordinary shares of 2.5p were
allotted in respect of share option schemes at a price between 162p
and 319p (2014: 127p and 254p) giving rise to share premium of
GBP3.4m (2014: GBP2.6m). During the period 1.5m (2014: nil)
Ordinary shares of 2.5p were bought by Mitie Group plc at a cost of
GBP4.4m (2014: GBPnil) and subsequently cancelled. In addition,
2.3m (2014: 0.3m) Treasury shares were purchased at a cost of
GBP6.6m (2014: GBP1.1m).
12 Contingent liabilities
The Company and various of its subsidiaries are, from time to
time, party to legal proceedings and claims that are in the
ordinary course of business. The Directors do not anticipate that
the outcome of these proceedings and claims, either individually or
in aggregate, will have a material adverse effect on the group's
financial position, other than as provided for in the accounts.
Deferred contingent consideration relating to acquisitions has
been accrued at the Directors' best estimate of the likely future
obligation of GBP6.8m (2014: GBP7.8m). This is the maximum amount
payable subject to certain targets being attained.
In addition, the group and its subsidiaries have provided
guarantees and indemnities in respect of performance, issued by
financial institutions on its behalf, amounting to GBP24.3m (2014:
GBP34.7m) in the ordinary course of business. These are not
expected to result in any material financial loss.
13 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note.
During the period, the group derived GBP0.2m (2014: GBP0.2m) of
revenue from contracts with joint ventures and associated
undertakings. At 30 September 2015 trade and other receivables of
GBPnil (2014: GBP1.1m) were outstanding and loans to joint ventures
and associates of GBP1.2m (2014: GBP1.3m) were included in
Financing assets.
Mitie Group plc has a related party relationship with the Mitie
Foundation, a charitable company, as R McGregor-Smith and S C
Baxter are two of the trustees of the Foundation. During the
period, the group made donations of GBP40,000 (2014: GBP10,000) and
gifts in kind of GBP130,700 (2014: GBP95,400) to the Foundation. At
the end of the period GBP4,000 (2014: GBP35,000) was due to the
Foundation.
No other material contract or arrangement has been entered into
during the period, nor existed at the end of the period, in which a
Director had a material interest. Amounts paid to key management
personnel are disclosed in the Directors' remuneration report of
our Annual Report and Accounts.
14 Goodwill
Background
The financial performance of the Healthcare business has
deteriorated in the six months to 30 September 2015 and that
division has reported an operating loss of GBP2.1m for that period.
We have been taking positive action to reshape the business during
the period to meet future market opportunities and are encouraged
by recent contract awards which give us confidence that conditions
are beginning to improve.
We remain confident in the long-term prospects of the healthcare
sector and continue to closely monitor the financial performance of
the group's Healthcare cash-generating unit (CGU). The Directors
have reviewed the revised long-term business plan for the
Healthcare business and believe that the assumptions on which it is
based are reasonable given current performance and market
conditions. The Directors continue to see long-term growth
opportunities in the domiciliary care market, especially in light
of the increasing political focus on the current funding of the
sector and the expected demographic shift in the UK.
The Directors recognise that there are risks and uncertainties
in its Healthcare CGU if the performance of the business does not
improve as expected over the longer term in line with the revised
business plan. Factors that could cause deterioration in the future
cash flows of the business compared to the plan include:
- the inability to recruit and retain staff at appropriate wage
rates;
- the inability to win new and retain contracts to provide care
hours at sustainable prices; and
- an adverse structural change to outsourcing of care in the UK
caused by changes in UK Government policy.
Review of the carrying value of goodwill in the Healthcare
CGU
Given the loss recorded in the first half of the year, the
Directors have undertaken an impairment review and made additional
voluntary disclosure in this regard in the half yearly report.
Accordingly, the group has updated its estimate of the recoverable
amount of its Healthcare CGU at 30 September 2015.
There is headroom between the carrying value of goodwill for the
Healthcare CGU and the recoverable amount, being the net present
value of the future cash flows that are expected to be generated by
the business. The value of goodwill and intangible assets
attributed to this CGU at 30 September 2015 was GBP106.6m and
GBP19.4m respectively (31 March 2015: GBP106.6m and GBP21.4m).
Key assumptions
The key assumptions for the calculations of the net present
value of future cash flows continue to be those regarding discount
rates, growth rates and expected changes to revenue and direct
costs, in particular:
- cash flow forecasts are derived from a detailed five year
business plan approved by the Board, with a terminal value using an
inflationary growth rate assumption of 2.5% based on industry
growth forecasts and compound annual revenue growth rates of 12.4%
(using revenue of GBP91.4m reported for the year ended 31 March
2015 as the reference point for the rate of compound annual revenue
growth) underpinning the growth in operating profit in the first
five years of the plan; and
- the pre-tax rate used to discount the forecast cash flows for
the CGU is 9.4%, which has been adjusted for the risks specific to
the market in which the CGU operates.
Sensitivity analysis
The Directors have concluded that headroom falls to zero only
when the key assumptions change significantly and 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:
- an increase in the pre-tax discount rate of 3.3%; or
- a fall of 3.7% in the terminal value growth rate to a negative
long-term inflationary assumption of 1.2%; or
- a 38% reduction in operating profit by year 5 compared to the
revised business plan.
Based on the commentary and analysis above, and considering
current market conditions, the Directors have concluded that no
reasonably foreseeable change in the key assumptions would result
in an impairment of the value of goodwill or intangible assets of
the Healthcare CGU.
(MORE TO FOLLOW) Dow Jones Newswires
November 23, 2015 02:00 ET (07:00 GMT)
Mitie (LSE:MTO)
Historical Stock Chart
From Feb 2024 to Mar 2024
Mitie (LSE:MTO)
Historical Stock Chart
From Mar 2023 to Mar 2024