Mitie : Annual Report & Accounts

Mitie

Facilities

Transformation

Mitie Group plc

Annual Report

and Accounts 2024

We are the UK's leading technology-led Facilities Transformation company.

A trusted partner to over 3,000 blue-chip customers across the public and private sectors, working with them to transform their built estates and the lived experiences for their people, and providing data-driven insights to inform decision-making.

In each of our core service lines of Engineering, Security and Cleaning & Hygiene we hold market leadership positions. We upsell Projects capabilities in the higher growth categories of Buildings Infrastructure, Decarbonisation, Fire & Security and Telecoms Infrastructure.

Facilities Transformation Three-Year Plan, page 24

Strategic report

Governance

Financial statements

Our customers' changing needs

8

Our new Three-Year Plan

24

Strategic report

1. Financial and non-financial highlights
2. A compelling investment case
3. Chairman's statement

1. Our customers' changing needs

1. Positive macro-trends

1. Our expertise

1. Our customers

16 Our core capabilities

16 Intelligent Engineering Maintenance

18 Intelligent Projects

20 Intelligent Security

22 Intelligent Cleaning & Hygiene

1. Our new Three-Year Plan (FY25 - FY27)

1. Chief Executive's review

1. Key performance indicators

1. Our business model

1. Stakeholder engagement

1. Section 172 statement

45 Operating review

45 Business Services

46 Technical Services

47 Central Government & Defence

48 Communities

49 Finance review

54 Our environment and social value framework 56 People

61 Environment

63 TCFD

76 Community

77 Responsible supply chain

78 Principal risks and uncertainties

1. Non-financialand sustainability information statement
2. Viability statement

Our exceptional colleagues

13

Our technology-led solutions

12

Governance

1. Chairman's introduction to governance and the Board
2. Board of Directors

1. Board leadership and Company purpose

1. Division of responsibilities

1. Board activities: stakeholder engagement
2. Strategy and the Boardroom

1. Culture at Mitie

1. Board effectiveness and evaluation

1. Nomination Committee report

1. Audit Committee report

123 Environment, Social & Governance (ESG) Committee report

1. Directors' remuneration report

1. Directors' report

1. Statement of Directors' responsibilities

Financial statements

154 Independent auditor's report to the members of Mitie Group plc

1. Consolidated income statement
2. Consolidated statement of comprehensive income
3. Consolidated statement of financial position

1. Consolidated statement of changes in equity
2. Consolidated statement of cash flows

1. Notes to the consolidated financial statements

1. Company statement of financial position
2. Company statement of changes in equity
3. Notes to the Company financial statements

1. Appendix - Alternative Performance Measures

1. Shareholder information

Mitie Group plc	03
Annual Report and Accounts 2024

Record year of delivery.

All medium-term targets achieved

Mitie delivered a record performance and further strategic progress in

the year ended 31 March 2024. In this final year of our previous Three-Year Plan (FY22 - FY24), we have demonstrated a strong track record of achievement, having met or significantly exceeded all of our medium-term targets. Our new Three-Year Plan (FY25 - FY27) pivots the business from traditional Facilities Management to technology-led Facilities Transformation, with ambitious targets to accelerate growth and enhance shareholder returns.

Financial

Revenue, including share	KPI Operating profit before	KPI Basic earnings per share	KPI Dividend per share	KPI
of JVs and associates	other items1,2	before other items1
£4,511m	£210m	12.3p	4.0p
+11%	+30%	+29%	+38%
FY23: £4,055m	FY23: £162m	FY23: 9.5p	FY23: 2.9p

Group revenue	Operating profit2	Free cash flow
£4,445m	£166m	£158m

KPI Average daily net debt	KPI
£161m

+13%	+42%	+£92m	+£77m
FY23: £3,945m	FY23: £117m	FY23: £66m	FY23: £84m

Non-Financial

Employee engagement

KPI Net Promoter Score

KPI Employee turnover

KPI Carbon emissions3

KPI

63%	+60	13%	290,207
+6ppt	+18pt		-6ppt	-10%
FY23: 57%	FY23:	+42	FY23: 19%	FY23: 322,553

Details of our full KPIs on pages 32 to 35

Customer type	Total order book £11.4bn
Revenue, including share of	Including share of joint
joint ventures and associates	ventures and associates

	%		£bn
Government	53		1 year	2.6
Non-government	47		1-2 years	2.1
			>2 years	6.7

Total pipeline

£18.6bn

27% growth year-on-year

Alternative Performance Measures (APMs)

The Group's performance measures continue to include some measures which are not defined or specified under IFRS. A reconciliation of the APMs to the equivalent IFRS measures is provided in the Appendix - Alternative Performance Measures on pages 228 to 231.

1. Other items are as described in Note 4 to the consolidated financial statements.
2. Operating profit includes share of profit after tax from joint ventures and associates.
3. Scope 1, 2 and 3 global carbon emissions (tonnes CO2e), net of 4,500 carbon credits.

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	Annual Report and Accounts 2024

Strategic report

Governance

Financial statements

A compelling investment case. Creating value

We are the leader in our industry, with a loyal and diverse blue-chip customer base and a core set of capabilities that are differentiated by our technology and people. Our new Three-Year Plan is expected to extend our market leadership position. It targets the delivery of high single-digit revenue growth annually, an operating margin of at least 5% and sustainable free cash flow of c.£150m per annum by FY27. We will also maintain a return on invested capital (ROIC) of >20%.

1

Strong track record of delivery

• Met or significantly exceeded all medium-term targets in previous Plan
• Total Shareholder Return of 80% from FY22 to FY24 (#10 in FTSE 250)
• Proven track record of winning and retaining contracts, and improving contract profitability
• Added value to acquisitions through demonstratable revenue/cost synergies
• Eliminated off balance sheet financing and built a robust balance sheet

2

Scale and market leadership

• Clear UK market leader with 13% share (twice that of next competitor)
• Market leadership in each of our core service lines
• Unique offer of transformational Projects alongside technology-led Integrated Facilities Management (IFM)
• Expertise across a wide range of sectors and in critical environments
• Diversified customer base with inflation protection on the majority of contracts

13%

Mitie's market share

Frost & Sullivan, 2023

3

Attractive market dynamics

• Operating in the largest and most dynamic Facilities Management (FM) market in Europe
• Integrated/bundled contracts the norm and growing faster than wider market
• Exposure to high growth sectors (e.g. data centres, defence, healthcare, life sciences and TMT)
• Capabilities underpinned by positive macro-trends (e.g. decarbonisation, modernisation of the built environment and regulatory changes)

4

Technology innovation

• Data-driven'intelligent' solutions enabled through investment in the Mitie Digital Platform
• Capabilities being enriched by Artificial Intelligence/Machine Learning (AI/ML), for example to deliver predictive maintenance and risk-based security resource deployment
• Strategic partnerships with global IT companies (e.g. Microsoft, Vodafone)
• Industry-leadingcyber security credentials (e.g. 4.1 NIST rating)

5

ESG leadership

• Recognised as a global Environmental, Social and Governance (ESG) leader
• Ambitious Net Zero targets validated by the Science Based Targets initiative
• One of the UK's largest fleets of electric vehicles (EVs)
• Industry-leadingbenefits packages for all our colleagues
• Top Employer for the sixth consecutive year, and a record 63% of surveyed colleagues 'fully engaged'

Low risk: 10.5

A List

Platinum

Score: AA

Mitie Group plc	05
Annual Report and Accounts 2024

Chairman's statement

A year of significant progress

We see the changing landscape as a world of opportunity in which we are well positioned to benefit. I would like to thank our exceptional Mitie colleagues for their dedication to our success this year.

Derek Mapp

Chairman

Dear Mitie Shareholder

This has been another year of significant progress for your company. Our customers are at the heart of everything we do, and we have been on the front foot in responding to their changing needs as a trusted partner. In October 2023, we set out our new Three-Year Plan (FY25 - FY27), pivoting from traditional Facilities Management to technology-driven Facilities Transformation, with ambitious financial targets that will continue to drive growth

and shareholder returns.

We see the changing landscape as a world of opportunity, in which we are well positioned to benefit. Our competitive advantage lies in the technology that we have invested in over the past six years, coupled with our market-leading position in each of our core service lines and our transformational Projects work.

This unique approach enables us to work hand in hand with our customers to transform their built estates, and enhance the lived experience for their own colleagues and customers.

As a result, I am delighted to report that our Net Promoter Scores - what our customers really think of Mitie - are at record levels.

It goes without saying that none of this would be possible without the enduring commitment and hard work of our talented colleagues. Collectively, we have not only faced into challenges during the year, given the ongoing geopolitical and macroeconomic uncertainties, but also celebrated success, with many colleagues benefiting significantly from our Save As You Earn schemes.

I am extremely proud of the resilience your company has shown. In this final year of our previous Three-Year Plan (FY22 - FY24), we have demonstrated a strong track record of achievement, having met or significantly exceeded all of our stretching financial targets, and delivered an 80% Total Shareholder Return (#10 in FTSE 250) over the three-year period.

The delivery of these targets and significant value creation for shareholders has been reflected in the 92.5% vesting of the 2021 Enhanced Delivery Plan.

FY24 revenue and operating profit before other items reached the record levels of £4,511m (FY23: £4,055m) and £210m (FY23: £162m), respectively, resulting in an operating margin of 4.7% (FY23: 4.0%). Earnings per share before other items increased by 29% to 12.3p.

As we enter our new Facilities Transformation Three-Year Plan (FY25 - FY27), the Board will continue to both support and challenge the executive leadership team to drive growth and returns, while ensuring that we maximise our positive contribution to the environment and the communities we serve.

One Mitie

In visiting a number of our sites across the UK and Gibraltar, my admiration for our 68,000 colleagues across the business has continued to grow. Through the collaborative 'One Mitie' way of working that is embedded in our culture, our people have gone the extra mile to overcome numerous challenges and deliver outstanding results. I would like to thank each of them for their dedication to our success this year.

Attracting, retaining and developing talent is a top priority. We offer industry-leading benefits packages to our people, which includes the provision of free shares to all employees, for the fourth year running, and we were delighted to be recognised as a Top Employer for the sixth consecutive year, and one of the most diverse. This commitment to our people is reflected in a record 63% (FY23: 57%) of surveyed employees 'fully engaged'.

ESG leadership

Sustainability and social value are fundamental to our business, and I am delighted that we continue to be recognised for our leadership.

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	Annual Report and Accounts 2024

Strategic report

Governance

Financial statements

We received validation from the Science Based Targets initiatives (SBTi) in April 2023 for our commitment to ambitious Net Zero targets, which will see us become carbon neutral for our operations by the end of 2025.

In February, we secured a place on the CDP's Climate Change A List for exemplary carbon reporting and environmental management, a distinction awarded to only 2% of the 21,000 organisations assessed annually. We have also retained our Platinum status in the Sustainable Facilities Management Index (SFMI) for the third consecutive year and, shortly after year end, we had our Low risk rating reconfirmed by Sustainalytics.

Stakeholder engagement

The Board has a duty to understand the needs of all our stakeholders and to act on their feedback, and one of the many ways we do so is through an extensive programme of engagement. For our colleagues - many of whom work on the frontline - the Board members undertake a range of listening sessions to hear their views and ensure the lines of communication are always open. Board members also attend equality diversity and inclusion (ED&I) events run by our diversity networks across Mitie and participate in our annual Team Talk Local events.

It has been my pleasure to not only engage with shareholders on my annual Chairman's governance roadshow, but to join Jennifer Duvalier, Chair of the Remuneration Committee, in an extensive consultation on our new remuneration policy, ahead of its submission for approval at our 2024 AGM.

During FY24, we started work on a new materiality assessment, to ensure that we are responsive to our stakeholders' views on all ESG matters, and we expect to share the initial findings in our 2024 ESG Report.

Board composition

We feel passionately that the composition of our Board should reflect wider society and comprise a diverse range of skills and experience to promote strong governance. Currently, 44% of Board positions are held by women and 22% are ethnically diverse. This goes together with our proactive approach to succession planning, both at Board level and across the executive leadership team.

We were delighted to welcome Penny James to the Board as a new Non-Executive Director in February 2024. Penny brings extensive financial services experience, strong leadership skills and financial and risk expertise. She has joined the Audit and Nomination Committees and

is expected to become Chair of the Audit Committee when Mary Reilly steps down following the completion of the FY25 Annual Report and Accounts.

Shareholder returns

Our capital allocation policy prioritises a progressive dividend, the market purchase of all shares to fulfil employee incentive schemes, strategic infill M&A in high growth markets and the return of surplus funds to shareholders. It is underpinned by a target leverage range of 0.75x to 1.5x (average net debt/EBITDA).

Within this context, the Board is recommending a final dividend of 3.0p per share which, when added to the 1.0p interim dividend paid in respect of the first six months of the year, takes the total dividend for FY24 to 4.0p per share. This is a 38% increase on the prior year (FY23: 2.9p) and represents a payout ratio of 33% (FY23: 30%). The final dividend will be paid

on 5 August 2024, following approval at the 2024 AGM.

During FY24, we completed our second £50m share buyback programme and, in aggregate, we have returned £173m to shareholders through buybacks and dividends over the past two years. Our free cash flow generation and strong balance sheet support our latest £50m share buyback programme, which was launched in April 2024.

Closing remarks

I am tremendously proud to have been a part of Mitie's journey over the past seven years. Your company has embraced immense change and tackled challenges with agility and resilience, to emerge as the market leader in Facilities Transformation in the UK, with significant growth opportunities ahead.

I would like to thank my fellow Board members, alongside our shareholders, customers, colleagues and partners, for their unwavering support and commitment to shaping Mitie for this exciting next stage of the journey.

Derek Mapp

Chairman

Further reading

Facilities Transformation Three-Year Plan (FY25 - FY27)

See pages 24 to 25

Stakeholder engagement

See pages 38 to 41

Financial performance

See pages 49 to 53

Our environment and social value framework

See pages 54 to 77

Governance report

See pages 92 to 109

Directors' remuneration report

See pages 126 to 148

Mitie Group plc	07
Annual Report and Accounts 2024

Our customers' needs are changing

We create and deliver innovative technology-led solutions to meet the evolving needs of our customers and help them to respond to new regulatory, social, environmental and operational challenges.

Customer needs

Optimising

asset performance and maximising productivity

Our customers seek to reduce the downtime of their critical assets to improve productivity, de-risk operations and reduce costs. They look for a partner that can predict, prevent and fix issues with minimum intrusion, provide a holistic view of asset performance and recommend areas for improvement to achieve 'best in class' across their estates.

Transforming

estates, workplaces and customer experience

We work with our customers to transform the 'lived' experience across their estates; to create a 'Great Place to Work'. Our customers are increasingly prioritising user-centric, collaborative spaces that are commute-worthy,space-optimised and flexible, to engage with their customers, attract talent and optimise hybrid working.

Creating

healthier and more sustainable spaces

Our customers look for efficient, flexible and reliable cleaning solutions that adjust to daily and seasonal usage and demand patterns, provide proof of service and cleanliness, use eco-friendly products and scale with their future business needs. We also work with our customers to maximise the reuse of resources and minimise waste.

How we are helping
• Building automation	• Workplace consulting & design	• Real-time tracking & spill detect
• Remote monitoring	• Building fitouts and retrofits	• Demand-led robotics
• Predictive maintenance	• Connected technologies	• Eco-friendly cleaning solutions
• De-risking operations	• Space optimisation	• Circular economy

Engineering Maintenance spotlight	Projects spotlight	Cleaning & Hygiene spotlight
See page 17	See page 19	See page 23

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	Annual Report and Accounts 2024

Strategic report

Governance

Financial statements

Customer needs

Protecting people, property and assets

Assurance of safety and security is imperative to our customers and this requires intelligence, technology and skilled people. Our customers need to be able to make rapid, informed decisions in response to evolving threats and rising levels of business crime. They must also prepare for tightening building safety and Martyn's Law legislation.

Accelerating the path to Net Zero

In their quest to decarbonise assets and fleets, our customers need a trusted partner that can help them achieve Net Zero targets by assessing their current environmental impact, identifying opportunities for improvement and delivering practical solutions to reduce carbon emissions, save costs and secure energy supplies.

How we are helping
• Risk assurance	• Carbon data capture/reporting
• Perimeter hardening	• Renewable power and storage
• AI video analytics	• Energy independence
• Biometrics	• Network optimisation

Security spotlight	Projects spotlight
See page 21	See page 19

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Annual Report and Accounts 2024

Positive macro-trends

Our service lines and sectors have attractive growth prospects that are underpinned by positive macro-trends, ranging from decarbonisation and the circular economy to the modernisation of the built environment and changes in the regulatory landscape.

Decarbonisation

Investment in public and private sector renewable energy projects has increased significantly in recent years. For

£22bn

UK Infrastructure

Bank fund

Link to business areas:

In the UK, over 80% of commercial buildings do not currently meet the Minimum Energy Efficiency Standards required by 2030.

Repurposing the electricity grid

The nation's energy infrastructure is becoming increasingly reliant on renewable sources, requiring substantial investment to modernise

and upgrade the UK's Grid infrastructure and build sufficient storage capacity. To meet these needs, National Grid is investing up to £54bn in its infrastructure network by 2030.

£54bn

National Grid Upgrade Programme

Link to business areas:

example, the UK Infrastructure Bank is providing £22bn of infrastructure finance to tackle climate change and support regional and local economic growth.

According to the World Economic Forum, c.40% of all global carbon emissions come from the built environment.

These regulatory requirements, alongside our customers' own Net Zero ambitions and appetite for modern and sustainable spaces, are creating a wave of demand for building modernisation and decarbonisation works that is expected to accelerate over the years ahead.

£8bn p.a.

UK data centre investments

Evolving workplaces

We continue to see an increasing proportion of capital budgets being channelled into the redesign of workspaces, as organisations embrace hybrid working and focus on amenities, collaborative spaces, technology enablement, wellness and sustainability to attract and retain talent. According to the Building Controls Industry Association, the UK market for building control systems installations was worth £600m in 2023.

£600m

UK addressable market

Link to business areas:

Increasing data centre investment

The UK data centre market is expected to see investment of £8bn per annum by 2029 (Arizton). Major cloud service providers are expanding their UK data centre presence, with future growth being driven by the Internet of Things, high

Link to business areas:

performance computing and developments in Artificial Intelligence (AI). Additionally, the UK Government is actively promoting digital infrastructure through initiatives such as its national AI strategy, aimed at accelerating investment and positioning Britain as a global leader in this area.

Business areas

Engineering Maintenance

Security

Cleaning & Hygiene

Projects

Waste

Care & Custody

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	Annual Report and Accounts 2024