MITIE Group PLC Annual Report and Accounts 2011 The strategic outsourcing and energy services company

Big plans. Bigger aspirations. Overview Governance Accounts MITIE at a glance 02 Directors’ report 46 Independent auditors’ report Chairman’s statement 04 Board of Directors 47 to the members of MITIE Group PLC 70 Directors’ report: Consolidated income statement 71 Business review corporate governance statement 50 Consolidated statement Chief Executive’s strategy overview 06 Directors’ report: statement of of comprehensive income 72 Key performance indicators 12 Directors’ responsibilities 60 Consolidated balance sheet 73 Key client case studies 15 Remuneration report 61 Consolidated statement of changes in equity 75 Our approach: Consolidated statement of cash flows 76 Vodafone 16 Notes to the consolidated Rolls-Royce 18 financial statements 78 Waitrose 20 Independent auditors’ report to Historic Royal Palaces 22 the members of MITIE Group PLC 113 Orbit Housing Association 24 Company balance sheet 114 New contract summary 26 Notes to the Company Market overview 29 financial statements 115 Operating review 32 Shareholder information IBC Sustainability review 35 Financial review 39 Factors that could affect our business 44 change that will help us achieve achieve us help will that change our aspirations – and it’s what our aspirations –andit’s what things that remain the same… things that remain same… the by the quality, commitment commitment quality, the by consistently strong growth It’s our ability to adapt and and to adapt ourability It’s and passion of our people, people, our of passion and We’re equally proud of the the of proud equally We’re continues tosetus apart. who enable us to deliver enablewho ustodeliver as always, we are driven wearedriven as always, year after year.year after Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance Business review 01 Overview MITIE Group PLC Annual Report and Accounts 2011

Our business The shape of our business. Created by our clients.

We specialise in outsourcing and energy services. Everything we do is driven by meeting the outsourcing needs of our clients. We work in close partnership with each client to provide everything from strategic consultancy to service delivery. In simple terms, we think, we manage and we deliver on their behalf.

Facilities Technical Facilities Management Management

Security; Cleaning; Catering; Document Review of operations Integrated FM; Mechanical and Review of operations 32 32 management and reprographics; electrical engineering maintenance; Reception and front of house; Waste Mobile multi-site FM; Specialist technical management; Environmental services; services; CarbonCare energy services; Landscaping; Pest control Lighting design and maintenance; Building Management Systems and controls; Compliance services

£882.2m £437.1m 2011 Revenue 2011 Revenue

Clients include Clients include Management Property contract Rolls-Royce the on 1team our of part is who caterers ‘ingredients’ the of One Clients include Clients and repairs Insurance claims management panels; Solar photovoltaic installation; engineering and electrical Mechanical Plumbing; protection; Fire Interior fit-out; refurbishment; Painting; Roofing; Property maintenance; Building £509.7m 2011 Revenue 2011 Revenue

32 Review of operations Clients include Clients Management Asset infrastructure Community management; (ESCo) company services Energy integration; development; Renewable energy data centre Low-carbon development; centre energy Decentralised £62.4m 2011 Revenue Annual Report and Accounts 2011 Accounts and Report Annual

32 Review of operations MITIE Group PLC PLC Group MITIE

Accounts Governance Business review 03 02 Overview MITIE Group PLC Annual Report and Accounts 2011

Chairman’s statement

Roger Matthews Chairman Strong results… and exciting market opportunities

Revenue Operating profit Profit before tax £m +10.0% before other items +16.5% £m +8.9% £m

2007 1,228.8 2007 62.2 2007 56.6 2008 1,407.2 2008 72.2 2008 67.9 2009 1,521.9 2009 80.5 2009 75.9 2010 1,720.1 2010 93.0 2010 79.7 2011 1,891.4 2011 108.3 2011 86.8 We also acquired Dalkia FM in Ireland Ireland FMin Dalkia acquired We also services. energy FMand integrated of £7.3m for an acquisition. acquisition. of £7.3m an for funding debt using after (2010: £86.6 m), at £76.5m EBITDA times 0.65 at year end the at net debt with strong is extremely sheet balance The 95.2%). 86.7% (2010: of to cash EBITDA of conversion excellent represents which for the year, (2010: £98.4m) £102.5m of operations from inflows cash reporting on cash, focus strong our retained We have 19.5p share). per (2010: share per by 15.9% to 22.6p grew items other before share per Earnings to £105.7mby 15.3% (2010: £91.7m). increased items other and tax before Profit (2010: 5.4%). 5.7% of margin improved an reflecting (2010: £93.0m), to16.5% £108.3m by increased items other before profit to £1,891.4m (2010: £1,720.1m). Operating by 10.0% grew revenues year, the During Results position. confident and strong in a year financial new the We start market. energy decentralised developing fast the in investment asignificant and made confirmed which Vodafone and Rolls-Royce with contracts expand and to retain delighted We were capability. overseas our as well as propositions energy and technology, facilities management (FM) people, our in to invest continuing initiatives, key strategic our on progress excellent made wehave year, the During people. our of work hard p to the testament and is a backdrop that remains challenging economic aUK against performance dividends. This is an excellent and earnings revenue, growth in progress at MITIE, with double-digit strong of year another had We have Overview p items other before share per earnings Basic 2011 2010 2009 2008 2007 our strategy of providing

12.8 +15.9% assion and assion and 14.9 17.2 19.5 22.6 contribution to the Board. the contribution to valuable his We thank him for 2011. 31 on March as a PLC Director down stepped Goodman Roger Board, the on been have which nine of MITIE, at 17 for years serving After Board 24 June 2011. at register on the 2011 to shareholders 12 on August paid will be dividend the Meeting, General Annual the approval at earnings. Subject to shareholder adjusted 2.5 times of ratio at a cover growth share per earnings underlying to maintain dividends in line with policy dividend our with This is consistent 2010. on 9.0p, of a15.4% increase year the for share per dividend total a providing share, Ordinary per 4.9p of dividend final increased an recommended has Board The our shareholders. dividends and dividend growth for attractive to generate We continue Dividend budgeted revenue (2010: 75%). 75%). (2010: revenue budgeted 2012 31 March 81% is of ending year the for revenue £11.4bn contracted our and at stands currently pipeline sales Our (2010: £6.4bn). £6.8bn at a record stands now and year 6.3% during the by increased which book, our order in growth strong to see We continue as they arise. value-creating acquisition opportunities of advantage to take position a strong in us leave facilities these of Both years. nine and seven between mature which notes of 2010, in a mix December in debt Placement Private US of equivalent £100m down We also drew AGM. the after down draw for available be will 2015, which September until £250m of bank facilities committed have now and facilities bank our refinanced We have recently p share per earnings Basic 2011 2010 2009 2008 2007 +10.1% 11.9 14.3 16.7 16.9 18.6 of sustainable, profitable growth. profitable sustainable, of record track long its on to build continue will MITIE that confident We are business. our of development the for strategy a clear have and robust financially efficiencies intobusinesses. their are We and innovation further look to introduce board the across clients markets, as our in opportunities exciting are There pipeline. sales and growing book order strong our which supports of all markets, new and technology continue investing in our people, to us enabled has This record. track consistent our underpins which sectors, private and public the both across base client high-quality We adiverse, have business model overseas. integrated our of development the and supplemented by selective acquisitions continue We position. excellent an in is MITIE Outlook careers. their in to succeed people our for opportunities providing and talent nurturing performance, team exceptional rewarding and recognising on focused We remain success. future to our critical is people of our motivation strong results and maintaining the consistently to achieve us who allow people dedicated talented, our is It Ireland. FMin Dalkia of acquisition our following us joined who those to welcome like wewould particular, In sector employers. private UK’s largest the of one us makes which 61,906 of a company individuals, now We year. are the during us joined who people 5,327 the to welcome and support and efforts exceptional their for people our of all to thank like We would People Chairman Matthews Roger p Dividend per share 2011 2010 2009 2008 2007 to focus on organic growth, growth, organic on to focus Annual Report and Accounts 2011 Accounts and Report Annual +15.4% 5.1 6.0 MITIE Group PLC PLC Group MITIE 6.9 .8 7. 9.0

Accounts Governance Business review 05 04 Overview MITIE Group PLC Annual Report and Accounts 2011

Chief Executive’s strategy overview

Ruby McGregor-Smith Chief Executive Responding to changing client needs

This has been another good year for MITIE, with double-digit growth in revenues, operating profit and EPS. But you probably know that already. The figures are well reported in the media and feature prominently throughout this report for all to see. In this statement, I intend to focus on the story behind that success and how as an aspirational company, we achieve aspirational goals. Outsourcing market evolution market Outsourcing develop. and progress they as need they everything with them support and clients our for We’re there we go… go, ourclients Where things that matter most to them. the discuss can they where forum a people our gives media Social or keepup-to-date! discussion, Join the Price Shift 1980 In-house

18–19 Rolls-Royce for did we what See Pest control Pest Maintenance Cleaning Catering engineering M&E Security Single service 1990 has grown for 23 consecutive years. consecutive 23 for grown has business our why and clients, MITIE to stay tend clients MITIE why it. That’s promised we how exactly deliver, wewill we say what exactly to deliver development industry-leading training and and processes IT innovative skills, and experience our weblend Then on. spot absolutely it to get vital is it –but legislation by so even more made and complex is our teams very effectively. People transfer wemobilise place, in contracts with Then, client. the with levels service agreeing and right, exactly specification the getting with starts approach Our money. clients our save wecan how is which efficiently, very things these We do can and much more besides. roads gritting pests, controlling officers, security and cleaners engineers, providing to consumption reducing energy estatesmanaging property and from everything for responsible people the weare that mean capabilities and scope broad Our businesses. own their to build order in need clients that services outsourced everyday we deliver the – company that we’re aservice forget wenever that is strength MITIE’s Overview Best practice Standardised provision contact point Single savings cost Broader Bundled services 2000 Project management Supply chain Consultancy Overseas Property Management systems Management information delivery Integrated Integrated FM 2010 Add-on services specialist those needs, as and when they change. they when and as needs, those meet to job our It’s different. something do to us asks somebody day every because dull never is MITIE at Life pace. individual own their at changing are which needs different dramatically have all they and stages, different at all They are own. their of ajourney on is client each that is show doesn’t chart the what But more integrated services. cases, some in then, and services bundled to services single providing from journey, along on is industry the that is in a nutshell, shows, it what –and below the chart in outsourcing market is neatly encapsulated the of evolution we. The are as our clients, by driven are markets the times, At all beyond the UK. the beyond support want clients our as growing is business our of side international The ourwings Spreading Sp p re Energy/carbon investment Asset Data management Technology Business process outsourcing and services Buildings management Strategic outsourcing 2015 ad Annual Report and Accounts 2011 Accounts and Report Annual iin g ou u r wwi MITIE Group PLC PLC Group MITIE ng s Value

Accounts Governance 07 06 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Chief Executive’s strategy overview

“ I’m glad I’m part of the MITIE staff group.” @leondinzy Twitter comment, February 2011 

The more things change… The acquisition of Dalkia FM in Ireland, …the more they stay the same which was finalised in June, is an The recession has been a major driver for Entrepreneurial spirit has always been one important step along this pathway. change in our marketplace. Clients are of the qualities that makes MITIE different. Dalkia provides outsourcing solutions restructuring and rethinking to reduce It is part of our DNA and goes right back to clients in several different sectors and costs and they are turning to us for to the birth of the company. Examples their experience has given us proven assistance. At the same time, they are of that entrepreneurship in action are FM capability in a new territory. looking to improve the way they manage everywhere – not only in the creative way energy, and taking advantage of our In the public sector, budgetary pressures we approach contracts, but also in the energy services offering, which helps cut remain, which will create further practical support we have given people carbon while also reducing costs. This is opportunities for MITIE in the coming to help them develop their careers and ensuring that in the UK, our core market, months and years. We are well-placed to grow successful outsourcing businesses. attractive opportunities for growth remain. support our public sector clients and have Since 1988, we have consistently backed close working relationships with the the idea of equity and opportunity with 75% of our contract awards this year have Cabinet Office and other bodies. Local funds and support, and have helped come from the private sector and we government, justice and health are just over 80 successful start-ups in that time. are seeing a lot of activity at the moment. three of the sectors where we can see In fact the acronym MITIE stands for There is also a move towards more great opportunities. Indeed, several ‘Management Incentive Through integrated facilities management – of these have already come to fruition, Investment Equity’. not only in the UK but also overseas. including the contract to provide a full When clients tell us that they would like During the year, we refreshed this idea custody and detention service at the the MITIE services they enjoy in the UK to by launching the ‘MITIE Entrepreneurial Campsfield House immigration centre. be available in other countries, we will Programme’, a £10m fund to back teams This is our first contract in the prisons sector do everything in our power to make it with innovative ideas for starting mutually- – and I am confident that we can go on to happen. Our relationship with Rolls-Royce owned businesses. The ‘MITIE model’ win many more. is a case in point, where during 2010 we gives management teams an equity went from being a UK supplier to one The need for all organisations to use stake in a business, which they then grow who partners with them across Europe. fewer natural resources is changing our over a five to ten-year period and which marketplace, as our clients rethink the is eventually acquired by us in full. The international opportunities for way they supply and consume energy. our business are growing fast and Energy management is, and should be, will continue to do so as we help more integral to facilities management and clients like Rolls-Royce be more efficient we have invested considerably in these outside the UK. Around 40% of our top capabilities – we are now one of the 100 clients are multinationals, so the top two energy services companies in opportunity is clear, and we are actively the UK. We believe energy services will, looking at how we can support them. in time, be part of every contract we operate, and are well-positioned to take advantage of this opportunity. 42% of our top 100 customers are multinational businesses

Public sector Moving into opportunities new sectors Budgetary pressures will create We continue to identify £10m further opportunities for MITIE in the opportunities in new markets, Entrepreneurial fund to attract coming months and years. sectors and regions. dynamic management teams to our business – find out more at www.mitie.com/entrepreneurs on pages 12–14. pages on found be can these and changes, these to reflect report KPIs we to the changes some We have made strategy. our underpins that element an as excellence operational added wehave why is which are we, so too efficient, more operations their to make seeking are our clients as Just markets. overseas in presence our will as few years, next us over the for focus agrowing be services will energy-related that we anticipate particular, In markets. new on entering emphasis increased an be will there clients, our of needs changing meet the to order in them ways of delivering and services new weintroduce As change. can focus of areas each although unchanged, year the largely is and well worked has strategy The years. five for so done has and business our of heart the at lies growth profitable sustainable, on afocus value through stakeholder to deliver A strategy Our strategy newsolutions providing and building ouroffering – newskills Acquiring

20 supermarket… energy for a the provide woodchips to use we how about Read y l

Sustainable profitable growth strategy: strategy: growth profitable Sustainable performance performance We We We develop, secure and maintain energy sustainable and secure a offer that solutions energy We develop best the We use We have sector sector have We We We acquisitions selective with growth our Support 7.Acquisitions do we of everything efficiency operational the Improve 6. excellence Operational revenues services energy our of the proportion increase and countries different and markets complementary in capabilities our Expand 5. New markets stakeholders to all brand our enhances that areputation build and Act responsibly 4. Responsibility risk manage and business our to protect view Take along-term 3. Risk industry the in talent the best develop and train retain, motivate, Recruit, 2. People clients existing contracts with expand and retain clients and new to attract services world-class Provide Clients 1. We are experts at at experts We are presence European agrowing plus UK, the across coverage broadest and both of range largest We the have the We provide an have We Why MITIE? under which strategy proposition… our customer underpins which A strategy motivate our people our motivate manage energy supply entrepreneurial culture entrepreneurial essential services essential specialists technology mobilising contracts with our end-to-end CarbonCare offering CarbonCare end-to-end our with  by developing their careers and rewarding excellent excellent rewarding and careers their by developing “ October 2010 Facebook comment, Leon Jones future ahead.” exciting an –What 2010 Dec –6th EMEA Rolls-Royce for –1team MITIE tomorrow, us join who colleagues newest European and UK the all to hello …saying to tailor our services to specific industries to specific services our to tailor to provide the most efficient services services efficient the most to provide pins our clients need to run their buildings and infrastructure and buildings their to run our clients need o critical technologycritical infrastructure hard and soft Facilities Management Management soft Facilities and hard ur that is embedded in our DNA DNA our in is embedded that c

us to me r pr op os ition “ Annual Report and Accounts 2011 Accounts and Report Annual March 2011 comment, Twitter @Cardiff-Airport @MITIE-Group-PLC.” company help of partner #recycled with the being now waste of 75% green! goes airport #cardiff decentralised decentralised

services services MITIE Group PLC PLC Group MITIE

Accounts Governance 09 08 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Chief Executive’s strategy overview

Focused on our people Our new HR director, Katherine Thomas, is putting a spotlight on talent.

Sustainability Supporting our people MITIE has always been a responsible The other way we build trust is through business and we focus our sustainability our people, all 61,906 of them. Most are activities in seven areas which are aligned based on-site and work at the sharp end to our profitable growth strategy. This is of the business. Whether they are facing explained in detail on pages 36–38. our clients each day, or working behind the scenes, we work hard to engage and MiTec Investing in technology develop all of our people. Our new technology centre in Communication with so many people We approach all our contracts from the Northern Ireland is a totally secure on so many different sites, many of them perspective of partnership – we want to hub for remote monitoring. working shifts, can be a real challenge. work with our clients, not just for our clients, Just as we deliver services in the way and to win their trust in all that we do. that our clients want them delivered, Technology plays a key role here, so we also communicate with our people because it enables us to show clients in the ways that they’re most comfortable exactly what we are doing and when with. In addition to all of the traditional we are doing it, in real time. methods of communication, that For example, our MiWorld system allows means social media – and in particular a client to see everything from the Facebook, Twitter and YouTube. temperature of a factory to the current Our view is that these sites give our status of an engineer visit or when the people an important forum where they security guard last clocked on and off – can discuss the things that matter most it is all at the click of a mouse, on a to them. We take on board what people dashboard on his or her PC. Such are saying, and when issues are raised knowledge can highlight inefficiencies we always respond. and duplications and create further In October 2010, we appointed opportunities to manage costs. Giving our people a voice Katherine Thomas as our new group We communicate with our Handheld PDAs (personal digital assistants) HR director. She brings a wealth of people in the ways they are are now used across our business, over a experience to the role, having previously most comfortable with. large number of sectors and service lines. worked at BT as group talent and The technology is designed to meet the leadership director, and has already diverse requirements of all our different begun to formalise our people agenda. contracts and is quick and easy to deploy. We now have a more structured PDAs allow us to do operational tasks, approach to HR issues, with a clear vision including the scheduling of our mobile for where we want to be in 2014, with an workforce, in a much more efficient way. emphasis on issues such as recruitment For example, each month we use PDAs and retention, talent management, to conduct in excess of 1,400 audits and succession planning and leadership to schedule over 25,000 planned and development. reactive activities. Sales pipeline £11.4bn 2012 order book £6.8bn “ October 2010 Facebook comment, McCormick Paul be much appreciated.” would any updates Ireland. in Northern Building ARC MiTec new the about excited …very Here’s what all this means means allthis Here’s what for our performance… “

for 5 years. So MITIE So 5years. for my own record my own employed by the by the employed realised just Ihave all. …hello October 2010 Facebook comment, Joy Mutlow be doing something right.” . recognition. industry attract regularly which people our of achievements enormous the of asample just are These Year by Rolls-Royce. the of Supplier Global awarded recently wewere spectrum, the of end other At the work. of the world into back disability mental or a physical with people and unemployed term long- the get and barriers down break to helps programme groundbreaking Employee Volunteering Awards. The European first the at category innovation the in winner the was scheme Apprentice Real Our year. the throughout of awards anumber of form the in recognised was people our of work hard consistent The community. and workplace the in inclusion and diversity equality, achieving to commitment our strengthening of purpose the with Group Steering Inclusion and a Diversity established graduate programme. We also MITIE first the 2010In welaunched

I have broken by being by being same firm or I must Imust or sense of humour that underpins what what underpins that of humour sense expertise, passion and, at times, great Finally, I’d like to place on record my my record on to place I’d like Finally, profitable growth. sustainable, continued for positioned growth aspirations. The business is well our to achieve us enable pipeline, will sales and book order record as a as well conversion, cash excellent sheet and balance strong Our are significant. abroad and UK the in services energy and outsourcing in opportunities The health. justice and housing, social government, in local opportunities of pipeline strong have a and frameworks sector large public to several appointed We have been technology. of use and capabilities services energy our by differentiated are and clients our with relationships excellent wehave where sector private the in work significant some secured We have contracts. transformational of anumber awarded been have year we this and results good very are These Forward Looking www.youtube.com/user/MITIEGroupPLC twitter.com/mitie_group_plc www.facebook.com/group.mitie Chief Executive Ruby McGregor-Smith year. the during all you alongside to work privilege areal It has been we do. made have who people the to all thanks MITIE what it is today. It’s your drive, drive, your It’s today. is it what MITIE Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 11 10 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Key performance indicators

Our strategy 1. Clients Monitoring 2. People 3. Risk and managing 4. Responsibility 5. New markets 6. Operational efficiency performance. 7. Acquisitions Retention of existing contracts within Facilities Management % £ Delivering sustained 2007 85.0 2008 86.0 2009 88.0 2010 87.0 profit growth. 2011 84.2 Description: In order to achieve sustainable, profitable growth, We look at a range of indicators to assess our performance we monitor the percentage of existing contracts against our stated strategy. These include KPIs that are aligned retained in our Facilities Management division on a rolling 12-month basis. to each of the elements of our strategy, as well as the financial Target: indicators that we as a business are focused on. Achieve contract retention rates in excess of 90%. Comment: Our contract retention rate in our Facilities Management division stands at 84.2%. £ Non-financial KPI

£ Financial KPI

Our strategy Our strategy Our strategy 1. Clients 1. Clients 1. Clients 2. People 2. People 2. People 3. Risk 3. Risk 3. Risk 4. Responsibility 4. Responsibility 4. Responsibility 5. New markets 5. New markets 5. New markets 6. Operational efficiency 6. Operational efficiency 6. Operational efficiency 7. Acquisitions 7. Acquisitions 7. Acquisitions Reportable accidents Carbon dioxide emissions Energy services per 1,000, employees £ £ % of revenue £

2007 5.1 2007 not measured 2007 not measured 2008 4.0 2008 not measured 2008 not measured 2009 3.9 2009 not measured 2009 not measured 2010 3.5 2010 0.87 2010 not measured 2011 3.1 2011 0.82 2011 34.0

Description: Description: Description: Reportable accidents are defined as fatalities, major In previous years emissions have been reported as CO2. Sustainability will be an increasingly competitive injuries and injuries resulting in absence from work of This year they are reported as CO2e to allow for all six advantage for us going forward as our clients look over three days. Our people are our greatest asset. Greenhouse Gases (GHG) and broken down into scopes to us to help them improve their performance and Providing them with a safe environment in which to 1, 2 and 3 in accordance with the GHG protocol. reduce their costs. work is of paramount importance to us, so we use a Emissions are calculated using the Defra guidance on Target: KPI for reportable accidents to assess our performance. how to measure and report GHG emissions and apply Increase the proportion of energy services related the 2010 guidelines for company reporting. Last year’s Objective: revenue each year. total CO2 emissions have been recalculated using CO2e Retain focus on reducing the risk of accidents in for Scope 1 (direct emissions, gas and transport) and Comment: our business. Scope 2 (indirect energy, purchased electricity) but This is the first year that we have been analysing our Comment: excludes landlord managed energy and expensed performance in this area. Our focus on health and safety has enabled business fuel (part of Scope 3). We have also restated us to reduce reportable accidents to 3.1 per the 2010 data to allow for changes to the property 1,000 employees. portfolio and acquisitions. The rate of CO2e emissions per MITIE employee is calculated using the average number of people employed during the year. Objective: Understand and minimise the environmental impact of our operations. Comment: Emissions per employee are lower than the prior year. % of revenue % of International Our international revenues were 1.3% of group. group. of 1.3% were revenues international Our Comment: revenues. international of proportion our Increase Target: base. revenue our diversifying from benefit and we procurement expand to look clients our markets as We see increasing opportunities in international Description: and integrated FM contracts. FM integrated and multi-service to attributable now are revenues of 58% Comment: arena. this in performing are we well how measure to order in contracts of types these by generated is that revenue of percentage the We measure services. of range broad our to due trend this of demands the meet to positioned well are we and years few past the over contracts FM and multi-service towards markets the in atrend seen We have services. other providing by clients existing with relationships our expanding through is growth for opportunities our of one contracts, service single through generated historically was revenue our of portion asubstantial As Description: MITIE within split types Contract 50% 25% 75% 2011 2010 2009 2008 2007 2007 Multi-service &FM Multi-service Single service n/a n/a n/a n/a 2008 2009 2010 2011 £ £ 1.3 Secured revenue % revenue Secured and found on the following spread. following the found on and indicators performance financial key our of also one is which margin, profit operating group our is productivity our assess to way best the perspective, agroup From assess performance. to measures different many use and efficiently, more operating on focused are divisions our of All secured. were revenues . Acquisitions 7. excellence Operational 6. New markets 5. Responsibility 4. Risk 3. People 2. At the start of the financial year 2012, 2012, year financial the of start At the Comment: year. financial each of start the at revenues budgeted of 75% than greater Secure Target: contracted. already are that revenues budgeted our of percentage the calculate we year, financial each of start Atthe streams. revenue recurring long-term on focused We are Description: 1. Clients 1. Our strategy 2011 2010 2009 2008 2007 81% of budgeted 81% budgeted of 74.0 75.0 75.0 78.0 81.0 £ . Acquisitions 7. efficiency Operational 6. New markets 5. Responsibility 4. Risk 3. People 2. . Acquisitions 7. efficiency Operational 6. New markets 5. Responsibility 4. Risk 3. People 2. Management retention % Clients 1. Our strategy 1. Clients 1. Our strategy Our management retention rate was 89.5% for the year. the for 89.5% was rate retention management Our Comment: 90%. over of rate aretention maintain to management of retention and development the on focus Enhance Target: us. for measure important an is people our retaining in are we successful how Monitoring creating and outstanding nurturing management. in ourselves pride we and business apeople is MITIE Description: 2011 at 0.65 and interest cover of 33.1 for the year. the for 33.1 of cover interest and 2011 0.65 at 31 at March EBITDA to debt net with gearing, limited of abackdrop against made be can investments these that ensured have sheet balance and strong facilities banking committed flows, cash Our strong model. MITIE the under companies six in acquisitions interest minority in £6.8m and Ireland, in Dalkia FM of acquisition the in £7.3m invested we year This 2011 2010 2009 2008 2007 Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE 89.5 91.4 92.0 92.0 93.0 £

Accounts Governance 13 12 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Key performance indicators

Financial key performance indicators

Capital expenditure Conversion of EBITDA to cash Our financial KPIs are focused as a % of revenue £ £ on the quality of our earnings 2007 1.8 2007 114.4 and cash flows, the control 2008 1.4 2008 90.3 2009 1.1 2009 97.5 of capital expenditure and 2010 1.5 2010 95.2 the sustainability of dividends. 2011 1.4 2011 86.7 We have performed strongly Description: Description: Our strength lies in the management of people and The efficiency with which we manage the generation against these measures again in the provision of suitable assets to support their work, of cash is an important indicator for our business. but our business is not capital intensive. We continue MITIE is built on a sound understanding of the this year. to monitor and control capital expenditure, and target importance of cash and working capital management growth and acquisitions in areas that do not require and that ethos remains critical to our business. substantial capital expenditure. The conversion of earnings before interest, tax, depreciation and amortisation (EBITDA) to cash Target range: is one of the significant cash-flow indicators for MITIE. Maintain below 2.0% of revenue. Target range: Comment: Over 80.0% of EBITDA converted to cash. Capital expenditure was 1.4% of revenue. Comment: We have achieved our target this year with 86.7% of EBITDA being converted to cash.

Group operating profit margin Dividend growth (before other items*) £ £

2007 5.1 2007 18.6 2008 5.1 2008 17.6 2009 5.3 2009 15.0 2010 5.4 2010 13.0 2011 5.7 2011 15.4

Description: Description: Our operating profit margin (before other items*) It is important that we continue to target a dividend provides us with a good indicator of the profitability policy that provides an appropriate return to of our business. Where we have material restructuring shareholders with a dividend which grows in line with and acquisition related items, such as integration costs, the underlying earnings of the Group. Dividend cover we exclude these from our measure. is calculated by reference to our underlying earnings which we measure using our basic EPS before other Target range: items*. EPS before other items is 22.6p (2010: 19.5p) Maintain operating profit margins between 5.0% giving rise to growth of 15.9%. and 6.0% per annum. Target range: Comment: At least in line with underlying earnings growth at a We have improved our margin by 0.3ppts to 5.7%. cover rate of 2.5 times adjusted earnings. Comment: Our dividend growth for the year was 15.4%, providing cover of 2.5 times adjusted earnings.

* Other items are restructuring and acquisition related items. Same passionate Same passionate delivering them. delivering New services. services. New New awards. New ways of New ways of approach. k k

New contract summary contract New

Key client case studies Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 15 14 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Integrated solutions: Ringing the changes for Vodafone, across the UK and Ireland. Our relationship with Vodafone started with a technical facilities management contract that came into MITIE through our acquisitionn of Dalkia FM in 2009. This had a base contract value of £6m per annum and last year, Vodafone moved to a fully integrated FM model across the UK and Ireland, with a base value of £16m.

Energy management is an important part of what we do for Vodafone. One of our goals is to help them meet their target of a 50% carbon reduction by 2020. our acquisition of Dalkia FM. FM. Dalkia of our acquisition through that were enhanced skills management energy and facilities technical with the capabilities FM soft our bringing together significantly, for Vodafone We have expanded our work of other services other of Supply chain management of a range services house of Front control pest and landscaping Cleaning, Security Maintenance centres. call and warehouses exchanges, telephone mobile centres, data portfolio, the retail offices, commercial including properties, all covers contract The Ireland. and UK the across energy management for Vodafone and facilities total providing We are Overview of services provided periods extension one-year two with contract Year 5 Annual contracted revenues £16m A joint board to hold innovation forums innovation hold to board A joint commitments service core Ten efficiencies cost achieve to KPIs and systems information Intelligent One seamless delivery model We offered: FMteam. and suppliers its with efficiencies to drive FM model Vodafone wanted a fully-integrated and developments Recent achievements years to come. years strategy its property supporting in the this relationship with Vodafone and upon to building forward looking We are services. outsourced of scope scale and their organisations by increasing the innovationfurther and efficiencies into to introduce clients our with working are we how demonstrates also It FM. Dalkia of acquisition the that underpinned rationale strategic the reinforces it as MITIE for contract asignificant is This Transition Director David Richards sites across the UK and Ireland. multiple at needs client’s our to meet ability our on and quality consistent on ourselves pride also –we services of breadth unmatched an with Vodafone provide we do only Not Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 17 16 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

We have set up a new-look We have grown our passionate MITIE now mmanagesanaga es ffacilitiesacilities aacrosscross integrated facilities service brand team which will work together to the UK and six European countries – ‘1 team’ which will replace MITIE take service excellence to a whole Norway, Finland, Sweden, Germany, branding on all services across new level. France and Poland – with 61 sites the contract and is unique to our in total. Rolls-Royce contract.

Integrated solutions: Helping Rolls-Royce on its journey as an organisation. Our relationship with Rolls-Royce started life as a single-service cleaning contract in East Kilbride, Scotland in 1992. Over nearly two decades, a lot has changed…

Chris Franklin 1,000+ Operations Director EMEA MITIE employees on the contract

We now work closely with Rolls–Royce in support of its global property strategy. From our single service cleaning contract in 1992, to a national cleaning contract in 1998, to UK-wide facilities management in 2003, we have a proven delivery model and long-term relationship. The new pan-European agreement represents a significant increase in the scope of our existing UK facilities management contract. Landscaping Security and emergency services management document and reception Catering, control pest and waste, Cleaning, and fabric maintenance engineering planning, Space range of services including: alarge We deliver Europe. Continental and UK the in properties client’s our of facilities and energy management integrated for is contract new Our Overview of services provided Countries 7 Sites 61 data management platform. management information and integrated –our MiWorld from data performance estate and management team with asset property its provide We will strategy over the coming years. coming the over strategy management energy and property its to supporting forward looking weare and 18-yearour with Rolls-Royce relationship value We really Europe. and UK the integrated facilities management across to deliver ability our in trust represents abroad and home at both expansion its and contract largest our is This continuous improvement Performance management and model aflexible with Consistent and standardised delivery culture and quality Service Cost savings factors: key success several of basis the on awarded was 2010 and December in commenced contract new The and developments Recent achievements Annual Report and Accounts 2011 Accounts Accoun and and Report Report Annual Annual MITIE Group PLC PLC Group MITIE MITI E Gr oup ts

Accounts Governance 19 18 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Waitrose is part of the John Lewis This project places the East Cowes Partnership, which has a vision Waitrose at the heart of its local to create off-grid energy centres community and means that the store for stores and other sites. has a negative carbon footprint.

Innovative solutions: Reducing energy prices and enhancing sustainability for Waitrose. We are working with Waitrose to deliver the retailer’s first biomass powered, carbon-negative store, at East Cowes on the Isle of Wight.

All of the energy needs of the The energy centre is fuelleded store and more will be met by by woodchip biomass. the energy centre. Key Account Director Key Account David Mackey Support for events and other functions other and events for Support centre the of lifetime the over certainty cost energy guaranteed offers MITIE known as tri-generation – store the for water chilled and heat electricity, produce will centre energy The client the from investment capital for requirement no with term, contract the £1m to over up saving MITIE, from energy its purchase will Waitrose operated by MITIE. and built –designed, centre energy provided by an innovative decentralised be will requirements energy Its Wight. of Isle the on Waitrose first the be will Cowes East at supermarket new the area, the for scheme regeneration amajor of Part Overview of services provided electricity grid of consumption in reduction 90% and MITIE. Waitrose between apartnership under delivered to be the first project is Cowes East future. the in use can Waitrose that stores sustainable of the kind establishes and premises other across rolled out to be able is model innovative This Wight of Isle the suppliers on local Waitrose’ of woodlands sustainable from sourced is fuel biomass Woodchip area surrounding the in centre amedical and homes 170 local nearly to exported be will energy Surplus annum per 1,257 tonnes by emissions carbon cut and gas by 80% by90%, electricity grid of consumption 2,000m atypical In provide them with energy security. and commitments sustainability its meet to client our help will centre energy This and developments Recent achievements 2 store it will reduce reduce will it store Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 21 20 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

During our long relationship with Historic Royal Palaces, we have been finalists four times, and winners twice, in the Kimberley Clark Golden Service Awards – known in the industry as The Cleaning Oscars.

Proven solutions: Raising the standards through long-term partnership. Our relationship with Historic Royal Palaces started in 1993 with the award of a cleaning contract for Kensington Palace. Many yyearsears andand severalseveral awardsawards later,later, wewe nownow helphelp looklook afterafter four of London’s most iconic and best-loved premises.premises. 85% Recycling rates achieved

David Johnson Managing Director, Cleaning and Environmental Services music festivals. fireworks displays, weddings and premises, including ice skating, their on held are events which unusual more the of with some Palaces Royal Historic We assist Support for events and other functions other and events for Support &recycling Waste cleaning pest control, window services, washroom cleaning, Daily House,Banqueting Tower of London Palace, Court Hampton Palace, Kensington now. 18 for years Palaces Royal to Historic services environmental and cleaning providing been we have – capabilities service single specialist our loveus for others FMoffering, integrated afully want clients our of many Whilst Overview of services provided contract the on employees MITIE 100+ and Christmas parties. parties. Christmas and conferences receptions, dinners, as toflexibility assist with functions such increased provide We regularly Palaces open the of all keep help to weather extreme during assistance provided has team Our 85% of rates recycling achieved We have Palaces the across staff MITIE 100 of excess in employ We now awarded back in 1993. first was contract the since time fifth the is This Palaces. Royal Historic with contract our renewed We recently have and developments Recent achievements Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 23 22 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Orbit has an ambition of ‘building Our expanded contract is a tribute brighter futures for people and to the outstanding results we already communities’ which we are deliver for Orbit. We are committed supporting with our long-term to continuing to deliver a first-class commitment to investing service to both Orbit and its residents. in the community.

Sustainable solutions: Bringing home the benefits to win additional business. Having successfully worked with Orbit South to provide reactive repairs to its social housing stock, we were the natural choice when they decided to extend the contract across more regions and services.

John Lewthwaite Regional Manager, Social Housing East Anglia, London and the South East South the and London Anglia, East across homes 14,000 covers agreement The and planned improvement works voids repairs, reactive deliver We will with an optional five-year extension years ten for contract £110m partnering East. Orbit for contract new as a well as South, Orbit for work additional awarded recently We were partnerships. long-term to develop is Orbit’s vision areas. Surrey Kent and the Bexley, to provide reactive housing repairs in South Orbit with acontract held in 2009, weacquired Ltd, 2007, which EPS Since Overview of services provided 10 years over contract Partnering £110m o r RI SOUTH ORBIT b t package as part of the contract. the of part as package investment a community offer residents to able wewere record, track strong to our addition In money. for value real provide also and service agreat deliver to going was who acontractor wanted and process, selection the in involved were residents Orbit too. residents organisation’s the for option favoured the also wewere East, and Orbit South of choice the MITIE was only Not and developments Recent achievements while keeping costs down. down. costs keeping while service the to improve continue we can means contract ofthe length the and partnership along-term for vision Orbit’s people local for employment term long and We create will opportunities training £1m turnover every for employed apprentice One and training days workshops DIY as such events run We will initiatives community for support work, charitable projects, refurbishment includes Typically annually investment community £110,000 Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

AccoA untsntsntsts GoveGoGoveovovevernanrnarnrnannaana cece 25 24 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

New contract summary Some more of our recent successes Private sector Technology and communications

Client Contract Timeframe Total value Vodafone Total facilities and energy management for Vodafone’s entire UK property portfolio, including 5 years £80m commercial offices, retail portfolio, data centres, mobile telephone exchanges, warehouses and call centres. MITIE will self-deliver cleaning, maintenance, security, business services, +1 year +£16m landscaping and pest control, and manage the supply chain of a range of other services +1 year +£16m including catering, reprographics and transport RWE npower Integrated facilities management contract to provide services which include mechanical 5 years £45.5m and electrical maintenance, security and cleaning WTE plant consortium Design, build and operate a renewable energy power plant 10 years £28m A leading provider of global IT, Power and cooling resilience project coupled with multiple data hall fit-outs, and other DC 18 months £20m security, and communication upgrade works across their estate solutions Cable&Wireless Retained our contract to provide integrated facilities management. The scope of services 3 years ND has been designed to encompass all manned sites within its UK and Ireland portfolio. Services include: facilities management, security, help desk, landscaping, waste management, recycling, meeting room services, mail services and couriers, reception, archiving, car parking, cleaning, pest control, catering and vending, stationery, health, safety and environmental and transport services Oracle Security services in the UK and Ireland 3 years £5m

Finance and professional services

Client Contract Timeframe Total value European investment bank Out of hours works on a building management system infrastructure upgrade for an 18 months £14m occupied building Kleinwort Benson Fit-out of six floors at Kleinwort Benson’s London office. Scope of works included fitting-out 22 weeks ND meeting rooms, general office space and a high quality reception area Cushman & Wakefield Design, development and installation of the M&E services as part of an extensive 14 months £5m redevelopment project involving the remodelling and reconstruction of a tower block Leading law firm Full suite of business services including reception, telephony, office moves, mail, reprographics 3 years £3m and desktop publishing Allianz Insurance Provide technical FM building services maintenance for new HQ building in London, as well 3 years £3.5m as soft services including cleaning, switchboard, post-room and reception UK Bank Lighting project in retail banking branches to provide improved, more energy efficient, lighting 6 months £2.5m Savings and investments Security services across a range of locations in the Edinburgh area 3 years £2.2m company International law firm Renewed a contract to provide document management, distribution services and 3 years £1.8m stationery provision

Retail

Client Contract Timeframe Total value Tesco Retained 100% of our existing business and added £13m of new business to our cleaning 3 years £80.4m portfolio. This now encompasses eight new regions covering the South West, the South East and the West country, adding 330 additional stores. In total we now clean 30% of the estate Marks & Spencer Working at the new flagship store at Westfield Stratford City to install all of the mechanical and 9 months ND electrical services in a 200,000 square feet retail space Capital Shopping Centres Roof refurbishment of the MetroCentre Newcastle using liquid plastics built up roofing system 24 weeks £2.1m LloydsPharmacy Lighting projects in retail pharmacies to provide improved, more energy efficient, lighting 3 months £1.9m Value Retail Plc Contract to provide security services at Bicester Village from May 2011, which includes the 3 years £1.4m redevelopment of the site’s CCTV control room Waitrose Contract to design, build and operate first biomass-powered store, at East Cowes. The new ND ND supermarket will have its energy requirements provided by an innovative off-grid energy centre, designed, built and operated by MITIE Letter of intent to design, build and operate a biomass-powered store at Bracknell ND ND

ND = Not disclosed Persimmon Homes Homes Persimmon Force,Buying DTZ Norway AS, Eiendom NMK Telereal Trillium Property Centrica LtdAstrium Utilities company pharmaceutical Large andpharmaceutical Healthcare Edinburgh Castle Palaces Royal Historic House Opera Royal Leisure AgustaWestland manufacturing company andLuxury automobile engine Rolls-Royce Manufacturing Low cost airline Network Rail Ltd Ltd Airports BAA London for Transport Transport Executive Greater Manchester Passenger Airport Group Manchester The Transport letContract Contract Client Contract Client Client Contract Contract Client Client Contract Client Major cleaning contract with Manchester Airport which involves terminal cleaning, car park management car park waste cleaning, internal and sweeps terminal road and involves which Airport Manchester with contract cleaning Major Plumbing and heating installations for 170 new build housing plots housing build 170 new for installations heating and Plumbing their of four at UK the in cleaning and locations security both for portfolio L&G the securing in We were park. also successful retail and leisure Coliseum and centre, shopping new two Castlegate awarded at and estate contracts industrial Park Follingsby at contract security the Retained and technical other soft FM services as well as catering including contract management Facilities years seven afurther for contract the to portfolio buildings 600 of southern the adding be now will and 13 years for Scotland and North the &Pensions in Work estate for Department the on services management waste and control cleaning, pest delivered We have arrangement. framework management existing an of property part as works project future with this offset to potential the is there although annum, per £9m around is revenue contracted in reduction net The renewed. not was contract FM technical our however Trillium, Telereal for contract cleaning our extended significantly have we exercise, aretender Following incentive heating government’s Scottish the of part as systems heating of Installation services vending and catering cleaning, maintenance, grounds mail room, reception, providing sites, Portsmouth and extension) Stevenage year the two covers which apossible (with years three for contract management facilities Integrated provision helpdesk to approach innovative and price aguaranteed with sites, maximum two of management facilities for contract athree-year Re-awarded Services Associated and Framework agreement Cleaning the through Partner Collaborative Castle Scotland aHistoric Edinburgh as for services environmental and cleaning provide to acontract Awarded control pest and cleaning, hygiene window areas, feminine historic of management, waste cleaning specialist events, profile high after public of especially cleaning areas, daily include –services London of Tower the and House Kensington Banqueting Palace, Palace, Court Hampton covering contract, cleaning HRP the of retender Successful Garden Covent premises prestigious the at reprographics and mail telephony, engineering, security, include cleaning, which services deliver to contract management facilities Integrated Yeovil in locations and Farnborough manufacturer’s rotacraft the at guarding manned for contract Security sites manufacturing their at waste and cleaning office, head industrial their and includes showrooms which premises UK carmaker’s this for services waste and Cleaning management energy and facilities integrated deliver to contract Pan-European bases airport their of one at services associated and cleaning Aircraft their including UK, office the buildingportfolio, encompassing around afullrange of physical services FM of and electronic range security broad our include to extension Contract at Heathrow management facilities technical landside and Air 2011 April in commencing portfolio, office Transport for head the to London services management facilities technical provide to acontract Secured throughout Manchester Greater properties transport public to works painting reactive and Planned ierm Total value Timeframe Total value Timeframe Total value Timeframe Total value Timeframe Total value Timeframe Total value Timeframe er £1.9m 3 years £6.3m ND years 2.5 Rolling £4m £2.6m 5 years £4.2m 1 year £15.5m 3 years 5 years ND ND 3 years 4 years 8mnh £1m months 18 £1.1m 3 years £14m 7 years £177m 7 years £2m 3 years years +2 3 years £3.2m 3 years £0.8m 3 years £3.4m 3 years £19m 5 years Annual Report and Accounts 2011 Accounts and Report Annual ND = Not disclosed =Not ND equivalent £5.6m MITIE Group PLC PLC Group MITIE

Accounts Governance 27 26 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

New contract summary Public sector Central and Local Government

Client Contract Timeframe Total value Home Office Awarded our first immigration centre contract with the Home Office through the UK Border 5 years £25m Agency for Campsfield House Immigration Removal Centre, where we will deliver a full custody and detention service including all aspects of hard and soft facilities management, catering and energy management Scottish Government New cleaning and waste contract which covers 144 buildings across Scotland 4 years £15m National Assembly for Wales Expanded renewed FM contract 5 years £10m Kent County Council Mechanical services for public and educational buildings including planned service and 4 years £6m maintenance for heating and hot water services Department for International Following our appointment to the Office of Government Commerce (Buying Solutions) 3 years £2.4m framework agreement, we have been awarded a contract with the Department for International Development Development to provide FM services including helpdesk, M&E maintenance, fabric maintenance, cleaning, catering and landscaping Palace of Westminster Programme of works to renovate and improve the primary M&E services to the 7 months £1.5m House of Commons, House of Lords and the Palace of Westminster

Education

Client Contract Timeframe Total value Luton Borough Council Awarded the FM contract to deliver services at Lea Manor, Ashcroft, Lealands and Challney 25 years £73m Girls Schools University of the West of England Engineering and maintenance services with building fabric provision across 5 years £12.5m student accommodation

Health

Client Contract Timeframe Total value Hull & East Yorkshire Hospitals Retained a contract to provide cleaning services for two large acute hospitals, Hull Royal 5 years £73m NHS Trust Infirmary and Castle Hill Hospital +2 years £35m Mersey Care NHS Trust Retained and expanded our technical facilities management contract providing planned and 4 years £10.4m reactive building maintenance services throughout the Trust’s estate along with strategic energy management support London hospital Added services to our existing cleaning contract, including the supply and delivery 6 years £3m of consumables on site (additional) West Midlands Cleaning of ambulances and buildings over 84 sites. New integrated contract previously held by 3 years £4.2m Ambulance Service four contractors Tameside Hospital NHS Awarded a contract to provide cleaning and portering services at Tameside General Hospital 5 years £15m Foundation Trust

Social housing

Client Contract Timeframe Total value Orbit Group Contract to deliver reactive repairs, voids and planned improvement works to 14,000 homes for 10 years £110m Orbit Group across East Anglia, London and the South East +5 years Somer Housing Group Programme to upgrade over 3,700 kitchens and bathrooms across homes provided by Somer 5 years £20m Housing Group Lambeth Living Contract for domestic gas servicing and responsive repairs, communal and heating hot water 7 years £17.5m service and repairs, cold water services and landlord communal services which include lighting and emergency lighting Homes for Islington Expansion of existing contract to cover gas servicing, repairs, boiler replacement and upgrades 4 years £8m for approx 9,500 homes Fareham Borough Council Contract for kitchen and bathroom refurbishments – approximately 140 kitchens and 5 years £2.5m 50 bathrooms per annum Ealing Council Fire door replacement and associated works for up to 1,000 properties per annum 3 years £2.6m South Lanarkshire Council Central heating installations 15 months £1.5m Port of Leith Housing Association SHQS refurbishments 6 months £1m

ND = Not disclosed performance. marketplace. An evolving Consistent Consistent k k Operating review Operating Market overview Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 29 28 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Marketplace overview

Private sector Good opportunities. 63% £1.2bn 2011 Revenue Sector Market MITIE size pa share In existing markets Finance and professional £5bn 4.7% Manufacturing £5bn 2.7% Technology and communications £4bn 3.0% and beyond. Retail £5bn 3.7% Property management £6bn 3.2% Utilities £8bn 1.2% As a strategic outsourcing and energy services company, Transport and logistics £11bn 1.1% we serve both private and public sector clients. Construction £9bn 0.5% Leisure £6bn 0.9% Our marketplace continues to evolve, driven by the needs of all Organisations are seeking to drive down clients to improve efficiency while reducing costs. Energy remains costs by focusing on integrated services, a major expense for many clients and frequently outstrips other supplier rationalisation, retendering and factors in terms of potential savings. innovation. As companies consolidate, they are examining their cost base and We are working with clients to look at how best to structure identifying opportunities for outsourcing. outsourcing solutions, in new and innovative ways. We initiate Our ability to deliver integrated services is capital expenditure projects and deliver new energy contracts again proving a key differentiator. As we have seen with the recent contract that lead to significant reductions – not only in monetary terms, awards from Vodafone and Rolls-Royce, but also in carbon emissions, which is an important issue for many clients are keen to access our all sectors. strengths in a broader range of integrated services. Technology is another important driver, as more clients appreciate the value of instant information being displayed via a dashboard on their PC. We are also experiencing a number of clients choosing to take a ‘whole life’ view and linking the initial capital expenditure to the lifetime operating expenditure of their contracts. Critical infrastructure projects such as data centres will be a major challenge for all sectors in the coming years. A data centre is the hub of a modern organisation, with failure causing the loss of company- “ @MITIE_Group_PLC – it is “ Isams online is great and critical facilities including email and good to see companies convenient! Well done MITIE access to the internet. Many organisations that we work with committing for introducing it, especially  to a strategy for growth.  as a floating security officer are currently initiating plans to invest #startupbritain.” it is very useful!” significant funds in data centre infrastructure Richard Betts Nezam Uddin and the low-carbon energy solutions Twitter comment, Facebook comment, to power them. April 2011 April 2011 Looking at outsourcing activity in the various sectors, the financial and professional services area remains particularly active. Many clients are changing their procurement models and this has led to high levels of private sector tenders, most especially in the retail, transport and utilities sectors. metered electricity consumption electricity metered dioxide (CO carbon of tonne each for allowances to buy forced spend) electricity £460,000 to approximately (equivalent a year hours watt mega 6,000 than energy use and carbon footprint. footprint. carbon and use energy their to sector, manage public the in helping all organisations, including those weare service, CarbonCare our Through energy performance. to their according table league in a see organisations with total total with organisations see will scheme The by 2050. 1990 levels from greenhouse gas emissions by at least 80% to reduce pledge Government’s the of part ahuge is CRC The 2010. April in effect into came Scheme Efficiency (CRC) Energy Commitment Reduction Carbon The emissions. carbon are too so –but sector public the for akey issue are costs Energy provided. are services in which way the to transform seeks Government the as important to be expected are sector private and public the between Partnerships sector. public the in benefits similar to deliver likely are and sector private the in well worked These have management and administration. of costs the reducing in part to play Mutual ownership models have a education. and social housing health, justice, of areas in our focus particularly deficit, the of addressing agenda Government’s the UK support to well-positioned weare services, and improving also while costs reduce to potential the has that outsourcing We believe years. coming the during place in to remain trend this We expect outsourcing. for opportunities is creating this and cost to energy from headcount – detail fine in expenditure looking at many of them significant. They are cutbacks, initiating are bodies and other authorities local Government, UK The sector Public elhae£0n1.0% 1.4% 2.3% £10bn 3.9% £12bn £9bn £6bn Healthcare Education Social housing Government Sector Market Market Sector 2011 Revenue 37% £0.7bn £0.7bn 2 ) they emit and be placed placed be and emit ) they size pa half-hourly half-hourly greater share MITIE MITIE to exploit this tremendous potential. tremendous to exploit this well-placed we are increasingly clients, specific for across Europe opportunities look at value-creating we As services. integrated 10% is around which of billion, £250 of excess in is FMservices outsourced for market Africa) and East Middle (Europe, EMEA the of value the to research, According international opportunities for MITIE. to develop (SMI) International Management partners in Service our with closely works team This global experience. with team asenior management developed have Ireland and FMin Dalkia we acquired strategy, international our of part As will increase. contracts pan-European through business that we expect operations, procurement their centralise As they presence. international an clients have our of Many its European properties. facilities and energy management of the for us appointed year Rolls-Royce Forboundaries. example, the during national across efficiency and improve costs to reduce order in their spend procurement. They want to leverage on view pan-European are taking a An increasing number of clients International service centre. service customer a24-hour via services response emergency as well as insurancenon-emergency claims, large, manages It claims. commercial property insurance managing both domestic and Property Management business, Solutions complements our existing Property model. MITIE using the foropportunities entrepreneurs providing about passionate are we that proof living and start-up latest our Solutions, Property of Director Managing is Felton Wayne markets niche enter to model MITIE the Using future opportunity. area where we anticipate significant an sector, prisons in the contract first our is This centre. immigration House Campsfield at service detention and custody full a deliver to Office Home by the contract afive-year we were awarded 2010, of end the Towards grid. national the into back sold being energy surplus with wood, local from sourced be will plant to the energy All plant. waste-to-energy a for provision energy the for agreement first 2011 our wesigned February In to us. new are which sectors two in contracts awarded wewere recently and markets, in new We continue to identify opportunities markets growth Emerging and employees. and welcome the management team to delighted are we and overseas, clients our support tofurther us allows acquisition This and finance. logistics, manufacturing, utilities communications, transport and including technology and industries of a variety operating in sectors, private and public the both in clients of range for a It provides integrated FM solutions business of Dalkia in Ireland. integrated Management Facilities the acquired we 2010, June In toHeading Ireland Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 31 30 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Operating review Exceptional capability. Well-placed for future growth. Since 1 April 2010, we have operated primarily in four divisions: Facilities, Technical Facilities, Property, and Asset Management. Each division brings together a selection of services that naturally fit together – from both an operational and a client perspective. As we grow, more of our contracts incorporate two, three or even all of our divisions.

Facilities Management We made significant progress during Specialist services to the police and the year, particularly in our ability to bid justice markets is a growing area for us. Revenue for and win large contracts that span There are opportunities in prisons, a range +7.0% many regions and draw on the services of police support services, and we have of all of our divisions. As our clients look already commenced work in our first 2010 824.6 2011 882.2 to create value from all of their assets, immigration detention centre. we have responded with a flexible We are also developing our catering Operating profit model that uses our broad range of offering, with a brand refresh and the before other items +11.3% expertise in asset, energy and property appointment of a new managing management alongside any or all of 2010 50.5 director and a sales director. 2011 56.2 our FM capabilities. Our recent investments in customer The savings that clients can achieve by Operating profit margin relationship management and our transitioning to a full FM service continue integrated offering are bearing fruit: +0.3pp to drive growth in our business. Energy we achieved a 84.2% retention rate management is also an important 2010 6.1 for rebid contracts during the year. 2011 6.4 differentiator for us and the development We are also the third biggest player in of CarbonCare has given us a market- Order book both cleaning and security in the UK leading offering. £4.1bn and one of the top ten providers for We tailor all of our services to suit our all of our other FM services. clients’ needs and this has seen us Looking ahead, our ability to save costs increasingly develop niche offerings Our Facilities Management (FM) business for both new and existing clients, along for specific sectors, such as retail, transport, is responsible for delivering ‘soft’ FM with our focus on retaining clients and services. The division’s offering ranges healthcare and, more recently, justice expanding into new markets, will support from fully integrated FM and consultancy, and prisons. to any of our specialist single services continued growth in FM. which include: We have made several enhancements to our security business and now offer Security; Cleaning; Catering; Document management and reprographics; Reception a total security management solution, and front of house; Waste management; which includes manned guarding, Environmental services; Landscaping; response services, key holding and Pest control. remote monitoring via our newly-opened technology centre in Northern Ireland. Management businesses. Property and Asset our with conjunction in working solutions, energy renewable cleaner and decentralised provide We also reductions. energy guaranteed delivers and compliance carbon legislative ensures data, footprint carbon and energy manages technologies, introduces innovative ideas and awareness of environmental issues, increases that solution energy a total delivers It by TFM. provided are services CarbonCare of number A significant UK. the in companies services energy two top the in MITIE placed BSRIA In 2010, marketplace. the in TFM differentiate helped successfully has offering CarbonCare our where area an and driver akey growth is reduction Energy Management Technical Facilities

Specialist technicalSpecialist services; CarbonCare energy maintenance;engineering FM; Mobile multi-site electrical and mechanical FM: Integrated include: Services to reduce energy consumption. need the and engineering technology, facilities management (FM) that is led by services’ ‘hard on focuses business (TFM) Our Technical Facilities Management Order book margin profit Operating items other before profit Operating Revenue Compliance services. controls; and Systems Management Building services; Lighting design and maintenance;

2011 2011

2010 2010 2010 2011

+26.8%

+58.7% £1.4bn

15.5 +1.1pp 344.8

4.5

437.1

24.6 5.6

in the fast-growing TFM arena. TFM fast-growing the in clients our to support well-positioned weare that mean areas, in these capabilities our to supplement made wehave investments the with coupled FM, integrated and reduction energy Current market in trends, particularly of engagement. people have an above average level our that concluded rate, and response leading) (class a62% achieved survey engagement employee Arecent level. every at training and people on We focus arise. that issues to any response immediate an deliver can who engineers trained appropriately the have we sure make and advance in failure of points potential to identify us This enables management programmes in place. risk effective to put order in equipment and plant the monitor and understand to hard We work unique. environment their make that factors the clients and individual for drivers the understand to is role Our clients. many for is critical A well-maintained data environment Management installation capabilities. Asset our leveraging be we will where amarket is sites intensive data of increases,opportunities the maintenance ofcross-selling number the As FM budgets. technical entire their for responsibility take and agent’ a‘managing as to act us require which contracts of number increasing an seeing weare where clients, MobileTech be will attractive to retail that We anticipate relationships. local strong to build helping area, geographic alocal within to clients services provide technicians Our multi-skilled widely spread portfolios. property with to organisations most especially UK, the across (MobileTech) services FM technical mobile and responsive fast delivers which Services, Mobile National launched We recently have contract. House Opera Royal the is as by TFM, led are which contracts, Rolls-Royce and Vodafone our in example for services, on hard where clients’ businesses are focused offering, and is importantparticularly FM integrated our underpins expertise FM technical Our TFM. for driver major a also FMis integrated towards shift The Property Management Property to their communities. communities. to their services cost-effective which deliver organisations local owned mutually of creation the enables It services. the delivering are who employees the and partner sector a private association, housing or authority a local between ownership shared which uses Localcare, model, partnering a new We launched have East. South us in the strengthened has and integrated fully been has Ltd acquisition EPS The us. for focus important an are market, Housing togetherDepartments, with the Social Government Central and Local country. the of parts certain in activities of our engineering some wediscontinued this process, of part As complete. is Management contracting business into Property engineering our of integration The way. flexible and efficient amore in to operate and solutions, end-to-end integrated, more clients our to offer order in business, to our changes of aseries made We recently have

ongoing repairs, including: to refurbishment and fit-out total from services, integrated of suite afull provides Management businessOur Property Order book margin profit Operating items other before profit Operating Revenue and repairs. management claims Insurance panels; Solar photovoltaic installation; engineering Plumbing; Mechanical and electrical protection; Fire fit-out; Interior Roofing; Painting; maintenance;Property refurbishment; Building

2011 2011

2010 2010 2010 2011

Annual Report and Accounts 2011 Accounts and Report Annual

£1.2bn

-0.9pp

-14.7% +2.7%

MITIE Group PLC PLC Group MITIE

4.2 21.4

496.2 509.7 25.1 5.1

Accounts Governance 33 32 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Operating review

We have combined our interiors and Asset Management At the Royal Free Hospital we successfully mechanical and engineering installation completed a gas turbine energy centre businesses into one integrated fit-out Revenue development and are now engaging business. Increased confidence in the +14.5% with the client to look at cooling upgrades. UK retail sector has generated new We developed a sustainable biomass 2010 54.5 demand for store fit-out and refurbishment 2011 62.4 energy centre for a Waitrose store in East and we are confident of gaining further Cowes, the first of its kind for the John Lewis market share as capital spending returns. Operating profit Partnership, and we have also entered In addition, our Residential Solutions before other items +5.3% into a joint venture to develop a biomass- offering now combines our capabilities in fuelled energy centre for a large UK 2010 1.9 plumbing, heating, installation, carpentry 2011 2.0 manufacturer. and decoration to provide a complete In addition, we have established a internal fit-out solution to the new build Operating profit margin reputation as a leader in the data centre housing market. -0.3pp market, where our skills in understanding We completed a renewable energy 2010 3.5 and mitigating risk profiles have brought pilot project to install photovoltaic (PV) 2011 3.2 us an impressive portfolio of projects and roof mounted panels that use solar accounts. We completed several major Order book cells to convert energy from the sun into data centre projects during the year, electricity. The installations took place £0.1bn including one for a leading global on an initial pilot of 200 properties, which telecommunications company. are owned by registered social landlords. This series of flagship developments The residents benefit from cheaper Our Asset Management division develops bespoke energy assets that has given us validation and visibility electricity costs while the homeowner offer a secure and sustainable energy in the marketplace and supported receives an income from feed-in tariffs supply. Carbon efficient technologies the growth of a healthy forward sales for any excess energy generated. are used to create energy infrastructure pipeline. We are now able to show We anticipate significant opportunities which provides the electricity, heating how organisations with intensive energy in this market, with potential for up to or cooling required by our clients. needs can meet their own requirements, 15,000 further properties during 2011. Decentralised energy delivers the long- securely and efficiently, while supporting term benefits of guaranteed cost savings, We are also working overseas for the first reduced carbon emissions and supply their communities through local networks. time, in conjunction with TFM and FM, certainty. Services include: We are recognised as one of the few to deliver space planning and project providers in the UK that has the track Decentralised energy centre development; work on the Rolls-Royce Property Estate Low-carbon data centre development; record, scale and expertise to deliver throughout Europe. Renewable energy integration; substantial decentralised energy centres Energy services company (ESCo) that will guarantee availability over a Our order book is significant and we are management; Community infrastructure. sustained contract term. Our business seeing signs of optimism in many of our will be driven forward by this momentum markets. Property Management is now We are seeing increased opportunities and by our continuing focus on key in a strong position to take advantage in the decentralised energy market. sectors where we have a strong of the various growth opportunities in Both public and private sector clients competitive capability. our chosen sectors as markets improve. recognise that this is an effective way to reduce energy costs and consumption, without an upfront capital investment in many cases. The ability to achieve sustainability targets whilst retaining funding for core services is a compelling argument in the current economic climate, particularly for our public sector clients. The good progress made during the year is a result of the significant investments we have made to develop our capabilities. We have been awarded several transformational contracts which, when completed, will provide us with world-class reference sites from which to roll-out similar models. An approach which which approach An links our corporate and sustainability and sustainability to sustainability. to Our approach approach Our strategies. k

Sustainability reviewSustainability Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 35 34 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Sustainability review Identifying the issues. Committing to addressing them.

Sustainability at MITIE A new simplified, It was clear from our review that we’ve already made real progress in all these We have already talked about the streamlined strategy areas, but there is always room for significant commercial opportunities The challenge for all companies now – improvement. Our new sustainability opening up to us in the field of and especially for those that aspire to strategy is designed to help us do this. sustainability – both through the leadership, as we do – is to fully integrate Our goal is to ensure that our corporate comprehensive services under our sustainability into their corporate strategy, and sustainability strategies are mutually CarbonCare offering, and through the and the way decisions are made in supportive, so that over the long term the work we do every day to help clients the business, day to day. This means work we do to improve our sustainability generate locally produced energy. understanding and addressing strategic performance will create value for our However we haven’t discussed how sustainability risks and opportunities, and shareholders, and our efforts to make we’ve also worked hard to improve our linking these to our commercial activities MITIE a more profitable business will also own sustainability performance over the and ambitions. It means having robust make it a more sustainable one. In simple last few years. We have always believed KPIs and targets that relate directly to our terms, it’s about fulfilling the ’sustainable’ that this makes good business sense sustainability strategy, and ensuring that part of our corporate strategy, which aims and have made it a priority accordingly. our reporting to stakeholders is transparent to deliver stakeholder value through a We’ve improved our own environmental and comprehensive about all of the most focus on sustainable and profitable long- performance, and set ourselves material issues we face. term growth. challenging targets in areas like energy and fuel use. We’ve started to engage Environmental data directly and more regularly with our % 2010 Change suppliers to help raise environmental full year against restated and social standards across our whole baseline Resource Units 2011 (baseline)* supply chain. We’ve extended the Scope 1 Gas and fleet transport fuel Tonnes of CO2e 44,248 42,779 3% quality and range of the training we Scope 2 Electricity Tonnes of CO2e 3,728 4,022 -7% offer to employees, and reinforced our Intensity Tonnes of CO2e/employee 0.82 0.87 -6% commitment to diversity and inclusion. Intensity Tonnes/£m 25.36 27.21 -7% And we’ve continued to work actively in Energy and business Tonnes of CO2e 12,341 13,467 -8% the community, both through sponsoring Scope 3 Upstream car travel life-changing projects like our Real Water Tonnes of CO2e 8 9-11% Apprentice programme, and through Intensity Tonnes of CO2e/employee 0.0001 0.0002 -50% encouraging our own employees to Created waste Tonnes 994 1,436 -31% volunteer in their own local Created waste Kg 17 27 -37% neighbourhoods. per employee We’re proud of what we have achieved, General waste Tonnes 606 989 -39% but as sustainability has become more Recycled waste Tonnes 388 447 -13% mainstream, the public and our own % Recycled 39% 31% 26% stakeholders have started to expect GHG Emissions data for 1 April 2010 to 31 March 2011 in line with financial accounting period. more of us, both in the UK and around the Notes: In 2010, we participated in the global voluntary reporting programme, The Carbon Disclosure Project and were rated world. With this in mind we have worked 76 with a performance rating of B. actively with the Sustainability team at Transport: Despite an increase of 447 vehicles due to business growth, our average annual consumption per vehicle PricewaterhouseCoopers to understand has dropped by just over 3% against our 2010 baseline. Energy: Consumption has decreased by 13% against baseline primarily through the reduction in property portfolio the areas where we might improve, and improvements in heating and lighting refits. Although MITIE’s energy emissions are not covered under the EU ETS, setting ourselves a new, more focused Climate Change Agreement or Carbon Reduction Commitment Energy Efficiency Scheme, we are committed to driving down energy wastage through better management and the purchase of 100% renewable energy tariff electricity. and demanding strategy going forward, Waste: The total amount of waste created has reduced by 31% resulting in a lower recycled percentage. which will ensure that our business Water: Our water consumption had decreased by 11% against baseline through improved awareness and reduction is resilient and sustainable not just in managed properties. economically, but in every other way. *2010 data has been restated in line with improved management information and to include a full year of extrapolated Dalkia FM and EPS Ltd acquisition data to enable year on year comparison and for ourselves. ourselves. for and clients both for our value, more generate and productive, more become partnerships, more long-term we’ll build goals these of both weachieve If service delivery. our with concerned are objectives two first our why want. That’s clients our what exactly delivers that sustainable services world-class, of aprovider as areputation toWe build want stakeholders. to our and business to the both priority, highest the of that are issues those on resources and time our to focus us allow will approach Taking this integration. post applied measures performance relevant the and diligence, due during standard as out carried are considerations sustainability necessary since the of focus area aseparate as incorporated been not has driver, strategy corporate our seventh Acquisitions, momentum. build and progress our track wecan so that measures, performance and objective, aclearly-defined Each has drivers. strategy corporate our with aligned directly are and doing been we’ve already work the build on which key areas, six behind sustainability on wedo everything re-aligning We are areas focus Six their needs. their needs. –anticipate –wehope and we meet management,relationship and how customer to related everything covers objective This acompany. as success long-term our drive will business, and our of heart the is service Client Clients ourUnderpinning group strategy: properly ourclients after Looking relationships at the same time. time. same the at relationships nurturing and footprint community placement scheme, our widening Apprentice Real award-winning and like our pioneering programmes to up set our clients to help available expertise our own make We’ll also management system. our group-wide customer relationship into results the by integrating receive, we feedback the from can as we much as learn and ayear, least once at key clients our We’ll surveying be practice? in mean this does What we can help our clients do this as well. as this do clients our help we can performance; unlike many businesses environmental own our to improve more do wecan businesses, other many Like impact. asignificant make wecan webelieve where area an and us, for ones important most the of is one objective environmental own Our related. closely are objectives two next The give a better service to clients. to clients. service abetter give will make us more price competitive and practices cultural own our Challenging with to have standards. high sustainability wework suppliers the all for push and costs unnecessary out cut productive, more become to hard we’re working why is which one, a more sustainable always is business efficient A more Operational efficiency ourUnderpinning group strategy: smarter contracts Operating we can measure future performance. performance. future measure we can which against abaseline set and chain, supply our in spots hot emission carbon and risks change climate particular any to identify be will objectives first of our one so here, important particularly are issues Environmental period. a12-month within weset the targets exceed or to meet them of all expect will and year, every suppliers major 40 least at of audits we’ll run this Alongside workshops. interactive and programmes, e-learning new through leaders team our to all practices the take-up of more sustainable business promoting byby 2013. be 10% We’ll also fleet whole our across consumption fuel in areduction spearhead communications campaign to employee an We’ll using be practice? in mean this does What position going forward by early 2012. 2012. by early forward going position that on to improve and communication paperless for on signed suppliers of percentage the to establish We also aim priority. first asa suppliers five office top our targeting waste, packaging to reduce suppliers our with actively more we’ll work time, same year. At the Responsibility/sustainability ourUnderpinning group strategy: resources natural Using fewer emissions to 135g CO emissions fleet car average in our reduction further a to see and hope fleet, our in vehicles low emissions, zero-emission, and hybrid ultra- use of the We’re encouraging also of 80%. rate to the business, and an overall recycling changes other and acquisitions account into to take restated been which has 2010 baseline, the with 2013 compared by use energy office in 15% reduction a to achieve wehope this, By doing wins. quick for areas target and people own our engage to help this data use can We difference. areal make can data estimated than actual rather Once again, this is an area where practice? in mean this does What our environmental impact. our environmental impact. reduce help to work everyday own their in do can they what and us, of expect understands what our stakeholders employees our of one every ensure to Weneed people. own our among awareness of issues like change climate raise to do wecan more There’s Annual Report and Accounts 2011 Accounts and Report Annual 2 per km in the next next the in km per MITIE Group PLC PLC Group MITIE

Accounts Governance 37 36 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Sustainability review

Doing more for our clients Nurturing our people’s talent Enabling people to work safe, with less, wherever they are Underpinning our group strategy: and go home safe People in the world Underpinning our group strategy: Underpinning our group strategy: Risk New markets What we do for ourselves, we can also We want to offer our clients the best This sounds simple enough as an idea, do for our clients. Sustainability will be service in the market, and we can but given the complexity of our business, an increasingly competitive advantage only do that if we have the best people. and the sophisticated technical services for us going forward, as our clients One way we’ll be doing this is by setting many of our people provide, it can be look to us to help them improve their ourselves the specific goal of recruiting, a challenge ensuring that every working performance and cut their costs. retaining and motivating our people area is as safe as it can possibly be. Our aim better than any of our peers. We want is to be even better at doing that. What does this mean in practice? all our people to fulfil their utmost What does this mean in practice? Our innovative low carbon and potential, and support that through environmental technologies are some formal training and development, One of the most effective ways to of the best in the market, and no-one plus opportunities to develop their improve health and safety performance else offers such a complete or integrated personal skills through volunteering. in any business is to share the lessons range. We want to grow this area of learned from previous incidents – What does this mean in practice? our business and really capitalise on this those that happened, those that expertise. We’ll begin by assessing how Earlier in this report we talk about were near-misses, and those that were well our actual and potential clients our business goals for 2012. If we’re successfully prevented. One way we’re understand our ’green’ capabilities, to meet these challenges we’ll need doing this is by providing a new incident and then set ourselves targets to grow to have outstanding leaders across the management platform that will enable the business from there. We’ll reinforce business, so management development more effective measurement of a better this by ensuring all our employees will be especially important over the range of health and safety-related KPIs. are fully aware of what we can do next year. This will include identifying Another is by implementing a new for clients in this increasingly important the roles where succession planning approach to assessing the root causes area, both in the UK and abroad. is either an imminent need or a of incidents, and we aim to apply this particular challenge. thinking to all major and high potential incidents that occur. The next objective relates to our own It’s also vital that all our people people, who have always been our understand exactly what’s expected We’ll also be launching the third real competitive advantage, and the of them, both as individuals and as phase of our health and safety risk reason for our success. members of teams. This is why we’ll management leadership programme, be refreshing our performance which is all about ensuring that the most management framework, and aligning senior people in the business lead by it even more closely with our core values. example when it comes to safety and We’ll be strengthening our internal well-being at work and further embed engagement programme, establishing this focus culturally in the business. The a core set of measures across MITIE so programme will run in tandem with the we understand the road ahead and latest Work Safe Home Safe! campaign, setting appropriate targets to achieve which raises awareness of the specific complete reach across the group. hazards our people might encounter on We’ll also encourage people to take a daily basis of the expected behaviours part as volunteers in a wide range of required and to stay safe on the job. activities, whether it’s supporting our regional charities’ fundraising efforts or getting stuck into our three new biodiversity community projects.

You can read more about what we’re Last but definitely not least, our sixth doing in all of these areas and see our objective is in the area of health and latest performance data at: safety. We have a proven track record in this area, both on our own account, mitie.com/sustainability2011mitie.com/sustainability2011 and in the work we do for clients. Few companies have the extensive expertise we do in the management, mitigation and elimination of risks in the workplace. It is without doubt one of our greatest strengths. consecutive year year consecutive In the 23rd fact, A great set A great set of growth. of results. k

Factors that could affect our business our affect could that Factors k

Financial review Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 39 38 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Financial review

Suzanne Baxter Group Finance Director

Strong performance on all fronts for future growth. for future capacity enhanced and low gearing strong position with good prospects, a in year financial new the We enter December 2019. to up periods of arange for capacity facilities provide debt long-term financing These facilities. banking our existing of extension and renewal the through and notes loan placement private of US issue an by completing position funding long-term our We strengthened have Rolls-Royce. of support in Europe in continental activities of and the commencement Ireland FMin Dalkia of acquisition the through basis on an international portfolio our enhanced and have Ltd EPS FMand Dalkia of acquisitions year prior the of the integration wecompleted year the During sheet. balance astrong of maintenance the and conversion cash growth, acquisitive and organic both on focus our by underpinned are that results financial strong of set another delivered has MITIE of acquisitions made in the year ended ended year the in made acquisitions of effect year full the including revenue year prior Proforma £38.4m. of growth organic and year the during Ireland FMin Dalkia of £113.5m,of £19.4m acquisition the from acquisitions year prior of impact year full to the attributable is revenue in increase The strategy. our with line in growth, acquisitive and organic of combination £1,891.4m (2010: £1,720.1m) a through to by 10.0% increased has Revenue Revenue performance Financial 5.7% (2010: 5.4%). 5.4%). 5.7% (2010: to improved margin our and £93.0m) (2010: to by £108.3m 16.5% increased items other before profit Operating items other before profit Operating ManagementProperty business. overall growth profile achieved in our the affected negatively which markets, related construction certain in continued conditions Challenging solutions. management facilities energy and enhancing efficiency for demand clients’ of year the during continuation Management businesses reflects the Asset and Facilities Technical Facilities, our in experienced growth strong The 5.3%). half 1.6%; second half (first 3.5% was year the for growth business, organic underlying revenue contracting engineering our in activities discontinued of exclusion the After Facilities Management below: out set is division by operating analysis The year. the during revenue in growth We experienced have 2.1% was basis. that on growth organic and 2010 £1,833.6m 31 was March Total revenue Total Asset Management Management Property Management Technical Facilities £m Revenue 2011 2010 2009 2008 2007

,9. 002.1 10.0 1,891.4 8. . 4.6 7.0 882.2 0. . (6.5) 2.7 509.7 3. 686.8 26.8 437.1 2011 241. 14.5 14.5 62.4 £m +10.0%

1,228.8 growth 1,407.2 Total Total 1,521.9 % 1,720.1 Organic 1,891.4 growth % before items other Total profit operating past service cost pensionbenefit scheme Amendment to defined Asset Management Management Technical Facilities is set out below: out set is division by operating analysis The the year. during items other before profit operating in growth We experienced have page. the following on explained as items related acquisition Property Management Property in 2009. FM Dalkia of acquisition the of respect in Management Facilities Technical within synergies the from contribution positive the as well as revenue, our drove that conditions market the reflect growth profit operating in trends The Facilities Management Other items comprise restructuring and and restructuring comprise items Other as explained on page 43. liabilities, of valuation the for to CPI RPI from change the of result the as schemes pension benefit defined of certain cost service past to the an amendment from £4.1m of income is items other before profit operating in Included basis. that on 12.2% was growth organic and £95.4m was 2010 31 March ended year the in made acquisitions of effect year full the including items other before profit operating year £11.6m. of prior growth Proforma Ireland the during year and organic FMin Dalkia of acquisition the £1.3m from £2.4m, of acquisitions year prior of impact year full to the attributable is items other before profit operating in increase The £m items other before profit Operating 2011 2010 2009 2008 2007 Annual Report and Accounts 2011 Accounts and Report Annual

0. . 16.5 5.7 108.3 0. . 12.0 5.5 104.2 2011 626411.3 6.4 56.2 465658.7 5.6 24.6 1442(14.7) 4.2 21.4 £m . . 5.3 3.2 2.0 . – – 4.1 62.2 +16.5%

72.2 Margin Margin 80.5 MITIE Group PLC PLC Group MITIE 93.0 %

growth 108.3 Total Total %

Accounts Governance 41 40 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Financial review

Other items Profit before tax Dividend Other items for the year were £18.8m Profit before tax and before other items for It is MITIE’s policy to grow its dividend in (2010: £11.9m) and comprised the the year increased by 15.3% to £105.7m line with adjusted earnings per share. The amortisation of acquisition related (2010: £91.7m). final dividend proposed by the Board has intangible assets of £8.9m (2010: £5.3m) increased by 19.5% to 4.9p per share (2010: Reported profit before tax for the year and integration, acquisition and 4.1p per share). This brings the full year was £86.8m (2010: £79.7m), an increase reorganisation costs of £9.9m (2010: £6.6m). dividend to 9.0p per share (2010: 7.8p per of 8.9% on the prior year. share), an increase of 15.4%. The full year The increase in the amortisation of dividend reflects a cover of 2.5 times intangible assets of £3.6m in the year Taxation adjusted earnings per share, in line with reflects the full year effect of the The tax charge for the year was £21.4m our dividend policy. amortisation of assets identified in respect (2010: £22.2m), an improvement in the of the prior year acquisitions of Dalkia FM effective rate of tax to 24.7% (2010: 27.9%). Cash flow, funding and liquidity and EPS Ltd (incremental charge £3.1m) The improvement in the effective tax along with a charge of £0.5m in respect The conversion of group earnings rate is attributable to the £0.5m positive of the amortisation of intangible assets before interest, tax, depreciation and impact of recalculating the group’s identified during the year following the amortisation (EBITDA) to cash for the year overall deferred tax liability at the acquisition of Dalkia FM in Ireland. was achieved at a rate of 86.7% (2010: lower corporation tax rate of 26% which 95.2%). The cash performance of the group Integration and acquisition costs of is effective from 1 April 2011 along with remains strong and in excess of our stated £5.1m (2010: £6.6m) were incurred during a credit of £3.2m in respect of prior key performance indicator which targets the year in respect of the acquisitions year items. the conversion of EBITDA to cash, at or of Dalkia FM, EPS Ltd and Dalkia FM in above 80% on a rolling 12 month basis. Ireland. These charges mainly comprised Profit after tax costs associated with the implementation Cash conversion measures the success Reported profit after tax for the year of new management, internal control of the group in converting operating was £65.4m (2010: £57.5m), an increase and back office systems and structures. profit (measured by EBITDA) to cash and of 13.7% on the prior year. Furthermore, costs of £4.8m have been demonstrates the quality of earnings incurred in respect of the restructuring and effective cash management. Earnings per share of certain parts of the group’s Property MITIE has consistently delivered cash Management business. These costs are Our track record of delivering stakeholder conversion in excess of 90% over the last not expected to recur. value through earnings growth continued five years. We commented in last year’s this year. Basic EPS before other items After the impact of other items, the annual report that we had consciously increased by 15.9% to 22.6p per share operating profit for the year was £89.5m reduced the cash conversion target for (2010: 19.5p per share). (2010: £81.1m). the current year to 80% as we expected Basic EPS was 18.6p per share (2010: 16.9p to invest in working capital to support Finance costs per share), an increase of 10.1%. This latter the organic growth of the business. measure showed lower growth due to We recognised that larger scale FM Net finance costs for the year were £2.7m the impact of in-year integration and contracts that were expected to enter (2010: £1.4m). The increase in net costs restructuring costs that are non-recurring. our portfolio during the year would require during the year reflects the impact of the support of working capital during their funding costs associated with recent early months of operation. We maintain acquisitions and the increase in interest our focus on cash, which has allowed us rates payable by the group attributable to deliver consistently strong performance to £100m sterling equivalent borrowings in cash conversion over the last five years. drawn down under US private placement loan notes in December 2010 as part of our refinancing activities.

Profit before tax Basic earnings per share £m +8.9% before other items +15.9% p

2007 56.6 2007 12.8 2008 67.9 2008 14.9 2009 75.9 2009 17.2 2010 79.7 2010 19.5 2011 86.8 2011 22.6

Basic earnings per share Dividend per share p +10.1% p +15.4%

2007 11.9 2007 5.1 2008 14.3 2008 6.0 2009 16.7 2009 6.9 2010 16.9 2010 7. 8 2011 18.6 2011 9.0 2017. The US denominated dollar December in ($96m) maturing dollars in US facilities of £40m. facilities of £40m. overdraft further has 2011. also group The July AGM in the following drawdown for available be 2015 will and in September renewal for due fall will which £250m of facilities banking committed new secured 2011, March 29 on MITIE addition, In 2012. in to expire due were which facilities bank dated shorter to repay used were proceeds The 1.26%. + LIBOR of rate interest sterling a floating with half and 3.88% of rate interest an at fixed half with debt, sterling into swapped placement proceeds have been denominated in sterling and fixed at an an at fixed and sterling in denominated notes of £40m of consists issue £100m. The of avalue for investors institutional with on page 14 of this report. report. 14 this of on page out set are KPIs financial our of Details each. in strength of record track afive-year demonstrated now have and year this again measures these against strongly performed We have of dividends. sustainability the and expenditure capital of control the flows, cash and earnings our of quality and level the focused on specifically are KPIs our financial and growth profitable sustainable achieving of objective strategic with our aligned are KPIs These performance. our of aspects critical communicate and to measure non-financial KPIs financial and clear of aset uses MITIE (KPIs) indicators Key performance notes of 2019 £60m and December in maturing 4.38% of rate interest issue an completed successfully 2010, MITIE 16 On December strategy. refinancing our of part as group the for platform funding term longer and arenewed establishing on focused wehave year the During (2010: 0.84). 0.65 of ratio to EBITDA debt net was £76.5m (2010: £86.6m), representing a 2011 31 at debt March net and modest remained has group the of gearing The of US private placement loan notes notes loan placement private US of denominated denominated private the year ended 31 March 2011. 31 March ended year the for statement income the in recognised been £4.1m of has acredit change, of this aresult As statement. income the in cost service past anegative as recognised and benefits pension defined in change a as treated been has this of implication benefit pension The liabilities. financial group’sdefined the of certain affects base valuation based to aCPI The move sheet. balance the on obligations pension of value the in a reduction in results liabilities pension future of valuation to the ofCPI application RPI, the than lower is CPI As increases. pension statutory future of level the determine to RPI than rather inflation of measure CPI the use will it that has announced government UK the budget, June 2010 the in announcement the Following (2010: £3.7m). to £0.0m amounted funding to committed is it which in of schemes respect in obligations pension benefit defined group’s The TUPE. under group to the transferred have who employees certain of respect in arrangements Government status as well as to other Local Body Admitted under schemes customers’ defined benefit pension to its contributions making as well as schemes pension contribution of defined to anumber contributes also group The £6.8m). (2010: scheme group principal the on £3.0m of adeficit included (2010: £10.5m). This £3.0m of adeficit is sheet the balance pension arrangements included on benefit defined the all of position funding net The contributes. group the to which schemes pension benefit the defined of respect in deficit significant by any Our financial strength remains unaffected Pensions manufacturing, utilities and finance. finance. and utilities manufacturing, logistics, and transport communications, industries including technology and of arange across operating sectors private and public the in clients of range a for FMsolutions integrated provides business of Dalkia in Ireland. This business integrated facilities management the acquired 2010, MITIE June 25 On Acquisitions Group Finance Director Baxter Suzanne 28 July 2010. on share per price market closing the being share, per 209.2p at valued PLC Group MITIE in each 2.5p of shares Ordinary new 3.0m of issue by the £6.4m remaining to the as and cash in to £0.4m as satisfied being to £6.8m amounted purchases six all for consideration total The Model. MITIE the as known entrepreneurial investment programme with under arrangements our accordance in agreements shareholder respective of articles association and their under companies subsidiary minority shareholdings of six MITIE certain purchased 2010, MITIE August In model investment entrepreneurial MITIE’s to the accounts. accounts. to the 31 Note within found be can acquisitions these of details Further services. the UK delivers MITIE which in contracts global to tender territories different 34 in providers FMservice of anetwork uses SMI £0.5m. for International Management Service in to 50% stake its increased also MITIE 2011. 31 March ended year the during incurred were respectively £1.0m and £0.3m of costs and integration Acquisition case. business acquisition our with line in is £1.3m of which items other before profit £19.4m operating and of revenue contributed has the business ownership, of date the From the year. during cash in paid was consideration (£7.9m) deferred of (£0.9m) €1.0m and €9.5m of consideration Initial targets. specific other 2010 and 31 December ended year the for amortisation and earnings before interest, tax, depreciation of level aminimum achieving business only payable dependent upon the (£1.8m) to €2m up (£10.6m),to €12.5m with up be will payable consideration total The Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 43 42 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

Factors that could affect our business A thorough review. Of our principal risks and uncertainties. A comprehensive approach to risk identification, mitigation and management is critical to MITIE and allows us to operate and develop our business in the knowledge that key risks have been considered accurately and planned for robustly. The principal risks and uncertainties we face are set out below. Strategic risks

Category Areas of risk Mitigation Loss of competitive position Identification of appropriate markets and strategies. Focus on clear strategic priorities. Business case for Investment in infrastructure. Attraction and retention investment in new infrastructure. Ongoing recruitment of talented people. Bid strategy. Maintenance of of new talent. Attractive reward and retention models competitive funding structure. Identification of and for key teams. Strong relationships with equity and compliance with key certification/standards. debt funders. Internal and external audits. Inadequate management and Knowledge of local regulations and practices. Political/ Approval process for entry into overseas markets. exchange rate risk. Management control over operations. Building overseas knowledge through existing work infrastructure to support development Management of people, suppliers, infrastructure and in some overseas jurisdictions. Formal Delegated culture. Authorities. Involvement of external specialists. Insurance. Management of foreign currency exposure. Significant damage to brand reputation Market perception. Traditional and social media Operational framework and risk management attention. Consistent brand management. processes. Clear policies and procedures on internal and external communication. Dedicated Corporate Affairs team. Media training. Brand standards. Dedicated Marketing teams. Failure of acquisitions to deliver Strategic and cultural fit. Due diligence. Synergies. Clear strategy. Experienced due diligence team. Integration issues. TUPE and pension considerations. Integration governance and framework. Deferred expected benefits Increased gearing. Management. consideration. Post acquisition reviews. Growth opportunities are not optimised Adaptability of bid teams to market changes. Pricing of Relationship management programmes in place with tenders. Agreement of contractual terms and conditions. key targets. Investment in and a regular review of bid pipeline. Tender and contractual review process with clearly defined approval process. Responsibility objectives are not met Delivering on our commitment to act sustainably Governance structure and policies. Data capture and responsibly. Compliance with social, ethical and and impact analysis. Awareness training. Carbon environmental standards. Consistency of approach. management strategies. Financial risks

Category Areas of risk Mitigation Failure to achieve financial objectives Approach to and application of financial management Group policies and procedures on financial procedures. management. Dedicated Group functions. Clear financial Key Performance Indicators to measure and communicate financial performance. Formal Delegated Authorities. Tiered level of review and challenge on financial results. Clear internal financial controls and statement of compliance. Internal and external audits. Market conditions negatively impact Client credit risk. Change in customer requirements Limits in place to manage exposure to individual and circumstances. Change in stock, financial and customers and sub-contractors. Hedging. on company performance operational markets. Price competition. Change in Group-wide credit exposure consolidation tool. government policy/spending. Inflation and interest Credit insurance. Ongoing dialogue with financial rate uncertainty. community. Change control procedures. Inadequate liquidity to meet obligations Facility maturity risk. Terms of borrowing instruments. Short- Diversification of funding sources and tenure. Regular term cashflow movements. Changes in funding markets. reporting on key indicators. Cash flow forecasting for visibility of short and long term funding requirements. Daily and weekly monitoring of bank balances. £250m facility spread across six banks and ongoing relationships with funders. US Private placement funds of £100m and long term maturity. £40m overdraft facility in place. Counterparty or company fails to Availability and cost of funding. Covenants. Credit risk of Daily review of bank balances and quarterly insurers and funding providers. Pension and share scheme review of covenants. Controls over acceptance meet obligations leading to significant administration. Client and supply chain exposure. of counterparty risk. Audit of key counterparties. financial loss Governance over pension schemes. Significant financial loss due to fraud Volumes of transactions driven by numbers of employees, Processes and systems designed to prevent fraud/ customers, suppliers and other stakeholders, and impact economic crimes, confidential whistleblowing and or other economic crimes of economic climate. reporting channels to investigate and take remedial action on identified instances. Non-compliance with legislation or material litigation cover insurance of Lack Compliance risks information confidential of Loss insured appropriately not poorly/are Sub-contractors/suppliers perform Lack of appropriately skilled people business existing deliver/retain to Failure Inability to trade environmental incident or safety health, Major risks Operational aeoyAeso ikMitigation Areas of risk Category Mitigation Areas of risk Category devices and corporate information. corporate and devices storage data systems, key of security and Availability service providers. consequential loss/damages. Over reliance on key safety procedures and insurance. Financial penalties, affecting client relationships. Third health party and suppliers and sub-contractors of Performance compliance. management. Management training. Legislative Performance levels. appropriate at Resourcing people. talented of retention and motivation Attraction, personnel. skilled appropriately of Availability retention. Client works. contract of scope and scale to Changes specification. technical Complex delivery. multi-service Mobilisation within specific timescales. Co-ordination of new systems. of implementation and portfolio over Control clients. to solutions information management based technology of Provision relations. Industrial operate. to licence and Legislation weather/event. Adverse employees. of Payment utilities. and systems premises, to Access falls. and trips Slips, materials. hazardous and handling Manual safety. Food management. waste and water Fire, safety. vehicle and Driving asbestos. or gas electricity, with Working height. at Working regulations. Banking covenant compliance. compliance. covenant Banking regulations. amendments. licensing. Industry Capital market and regulations laws, relevant of Awareness market. the by borne risk versus risk held internally of Balance scale. operational Insurance covenants. Visibility of claims. Increasing IT access controls and segregation of duties. duties. of segregation and controls access IT and Physical data. of loss and use over procedures software protection.Malicious Policies and contractors/suppliers. sub- of and internally both insurance appropriate of monitoring. Divisional T&Cs in place. Maintenance Relationship management and performance certification/standards. Document monitoring. key meet to procedures induction and Vetting ensure legislative compliance. to structures audit and Governance programmes. talent MITIE and Apprenticeship planning. Succession plans. development personal and Management system. reward Employee remuneration. Competitive clients. with place in programmes client service proposition. Relationship management to value add to technology of use and innovation on business management and controls systems. Focus Comprehensive plans. and protocols review and operational requirements. Contract management and technical changing and existing with deal to Management of mobilisation plans. Teams skilled due process. of Application Plans. Continuity Recovery/Business Disaster access. network and workforce Flexible operations. of spread geographic and Diversity back-ups. and support Systems systems. existing and new of implementation for governance and Process resources. IT in-house Experienced centres. data to routes network Multiple protection. software Malicious audits. external and Internal areas. risk high for place in procedures Specific PPE. and equipment appropriate of Provision professionals. QHSE by Ongoing training for all employees supported external audits. guidance. Conformance monitoring. Internal & compliance systems in place. Ongoing training and requirements. external advisors. Specific Expert Act Corruption & Bribery and Equality Officer, Accounting Senior new including requirements Departmental responsibility for relevant regulatory insurers. with conjunction in run programmes reduction Risk hours. 48 within reported incidents All self-insurance. and cover insurance of review Annual Group and divisional management systems. Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts Governance 45 44 Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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,QWURGXFWLRQ The Directors submit their report together with the audited consolidated financial statements of the MITIE group of companies for the year ended 31 March 2011. The Directors’ report includes the Business review, the corporate governance statement, the Remuneration report, the Directors’ responsibility statement, all other parts of this Annual Report and Accounts and those documents that are referred to within this report and are available at www.mitie.com/investors_corporate-governance.

3ULQFLSDODFWLYLWLHV MITIE Group PLC is the holding company of the group. The principal activity of the Company is to provide management services to the group. The group’s activities are focused on the provision of strategic outsourcing and energy services in support of the buildings, facilities and infrastructure of its clients. Further details of the subsidiary undertakings of the Company principally affecting the profits or net assets of the group in the reporting period are listed in Note 37 to the financial statements.

%DVLVRIUHSRUW This report (together with the other parts of this Annual Report and Accounts and other documents incorporated by reference) has been prepared, and is published, in accordance with, and in reliance upon, applicable English company law and the liabilities of the Directors in relation to this report are subject to the limitations provided by such law.

Group’s Property Management division. and now holds thepositionof Managing Director ofthe He wasappointed asanExecutive DirectorinAugust2001 acquisition ofTrident Main GroupPLCin Bill joinedMITIE Executive Director Bill Robson ofBitC. Risk Committee workplace, and ofthe Financeand isalsoamember organisation with afocuson genderdiversity inthe Opportunity NowAdvisory Board, apartof theBitC roles withSerco Groupplc.Suzanneholdsaseat onthe and alsoheldanumberof commercialandoperational mergers andacquisitionsrelatedtransactionsupport Accountant. Priortojoining MITIE GroupPLCinApril2006.SuzanneisaChartered Suzanne wasappointed asGroup Finance Director of Group FinanceDirector Suzanne Baxter on diversityinthe workplace. Opportunity, apartofthe BitC organisation withafocus organisation and continues toactasChair of Racefor trustee directorsforthe BusinessintheCommunity(BitC) appointed tothe boardof During theyear,Rubywas Non-Executive DirectorofMichael sector, primarilyatSercoGroupplc.Inaddition,sheisa held arangeofseniorroleswithinthesupportservices Chief ExecutiveinMarch20 Operating Officer inSeptember 2005andsubsequentlyas Group PLCinDecember 2002,laterappointedasChief Ruby wasappointed asGroup Finance Director ofMITIE Chief Executive Ruby McGregor-Smith accessandsafetysystems. Limited, suppliersofscaffolding, aNon-Executive Director ofGenerationMITIE. Heis (UK) Chairman inMarch 2007.Ian wasafounding memberof in 2001and was appointed asNon-Executive Deputy Ian wasappointed asChief Executive ofMITIEGroupPLC Non-Executive DeputyChairman Ian Stewart Director of Zetar PLCandTrustee ofCancer Research UK. Chairman ofLSLProperty Services PLC,aNon-Executive Director ofCompassGroup PLC. RogerisNon-Executive and GroupManaging Director andGroup Finance held therolesofGroup Finance Director of JSainsbury plc as Non-Executive Chairmanin Group PLC inDecember 2006andwaslater appointed Roger was appointed asaNon-Executive Director of MITIE Member oftheRemuneration Committee Chairman oftheNominationCommittee Non-Executive Chairman Roger Matthews %RDUGRI'LUHFWRUV  tenance Services Limited. MITIE, shespecialisedin 07. PriortojoiningMITIE,Ruby January 1992followingthe July 2008.Rogerpreviously Page International plc. Deloitte LLPinLondonhavin March 2006. Davidwasprevi David wasappointedasaNon-Executive Director in Member oftheNomination andRemuneration Committees Chairman oftheAudit Committee Senior IndependentDirector David Jenkins and SkillsaUKBusiness Ambassador. a CommissioneroftheUKCommission for Employment Chairman ofUK TradeandIndustryTechnology Board, Holdings plcinJanuary2011 Larry was appointedasaNon-Executive DirectorofARM appointed as Chairman ofe-skills SectorSkillsCouncil. UKandIreland.Larrywaspreviously Chief ExecutiveIBM IBM including General Manager, a numberof senior positions during his32year careerwith Europe, MiddleEastandAfrica untilJuly2010and held 1 February2010.Heheldtheposition Larry joinedMITIEasaNon-Executive Director on Member oftheAudit Committee Non-Executive Director Director of Eden (GM)Limited,amotorretailgroup. of BikersLegal Defence Limited.Graeme isManaging Trades Benevolent Fundandis Non-ExecutiveChairman He isaNon-ExecutiveDirector of BEN, the Motor &Allied Inchcape PLC,RACMotoring Servicesand RegVardy plc. July 2006.Graeme previouslyheldappointments with Graeme was appointed as a Non-Executive Director in Member oftheRemuneration Committee Non-Executive Director Graeme Potts Rover GroupPLC andLucas Girling Limited. positionswithBAESystems, Lines Limitedandhasalsoheld Engineering. Terrywasprevious Centre LimitedandtheNationalSkillsAcademyforRailway Gateway LondonLimited,Manufacturing Technology PLC,Invest positions atMJGleesonGroup in Thames 2009. HeiscurrentlyChairman ofCrossrail andholds Terry wasappointedasaNon-ExecutiveDirectorinJuly Member oftheAudit andNominationCommittees Chairman oftheRemuneration Committee Non-Executive Director Larry Hirst CBE Larry Hirst Terry Morgan CBE He isaGovernorofDowne HouseSchool. Director ofRenewable Energy SystemsHoldings Limited. of Development SecuritiesPLCandaNon-Executive Assurance andAdvisoryServices.DavidisChairman g spentover20yearsin andisalsoNon-Executive ously aseniorPartner with ly ChiefExecutiveofTube IBM Northern Regionand Annual Report and Accounts 2011 Accounts and Report Annual ofChairmanIBM MITIE Group PLC PLC Group MITIE

Accounts 47 46 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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&RPSOLDQFHZLWKWKH&RGH The Board recognises that the manner in which the group is governed is critical to the long-term success of the business and is committed to the principles of corporate governance, for which the Board is accountable to shareholders, as detailed in the Combined Code on Corporate Governance 2008 (the Code). In May 2010, the Financial Reporting Council (‘FRC’) introduced the UK Corporate Governance Code 2010 (the ‘New Code’). The disclosure requirements of the New Code apply to companies with accounting periods commencing on or after 29 June 2010. Accordingly, the disclosure requirements of the New Code will be reported in the 2012 corporate governance statement, however all other provisions of a continuing nature are referred to where relevant within this statement. This report, together with the Directors’ remuneration report, provides details of key aspects of MITIE’s corporate governance environment and explains the manner in which the Board has applied the principles and provisions of good governance as set out in Section 1 of the Code and the New Code where relevant. Throughout the reporting period, significant consideration has been given to the balance of the Board and its Committees and the Board is conscious of any non-compliance with the Code. During the year and before the retirement of Roger Goodman on 31 March 2011, the Board reflected a ratio of 4:5 of independent Directors to non- independent Directors (excluding the Chairman) compared to a 1:1 requirement under the Code. The Board confirms that the group has complied with all relevant provisions set out in Section 1 of the Code throughout the year other than as noted above. With effect from 1 April 2011, the Board complies with the provisions of Code A.3 and has going forward an equal number of independent and non-independent Directors (excluding the Chairman).

%RDUGVWUXFWXUHDQGOHDGHUVKLS Role of the Board The Board is collectively responsible for the long-term success of the Company and accordingly, reviews and agrees the strategy for the group proposed by the Executive Directors on an annual basis. In setting the strategy, the Board takes account of key matters such as market trends, competitive environment, private/public sector approach, international aspects, people and talent and the MITIE model (as explained further below) ensuring at all times that sufficient consideration is given to risk and internal controls. Matters that are exclusively dealt with by the Board include: setting group objectives and strategies, approving business plans and budgets and monitoring performance against these, approving material acquisitions, disposals and business start-ups, including any material transactions outside of the normal course of business, approving the Group’s Half-yearly and Annual Report and Accounts, appointing and removing the Chairman, Directors and Company Secretary, management of the group’s risk profile and monitoring the group’s corporate governance arrangements. Approvals are managed in accordance with the group’s delegated authorities and matters are also set out in a schedule of matters reserved for the Board which is available at www.mitie.com/investors_corporate-governance. Roles and responsibilities There is a clear division of responsibility between the roles of Chairman and Chief Executive as formally set out in the terms of reference for each of these roles. The Chairman is a Non-Executive Director and is responsible for the effective running and leadership of the Board, ensuring its effectiveness. The Chairman liaises with the Company Secretary on the annual Board plan, agrees and sets the Board agendas, ensuring at all times that there is sufficient time allocated for strategic discussions. The Chairman encourages openness and fluid communication between Executive and Non-Executive Directors, a culture which has been facilitated by meetings between the Chairman and individual Directors. The Chairman ensures that the Non-Executive Directors contribute effectively and that the Executive and Non-Executive Directors are aware of the views of major shareholders. He is also responsible for ensuring that the Board addresses major challenges faced by MITIE and for the effective performance of the Board and its committees. The Chairman is available to consult with shareholders throughout the year and will be available at the Annual General Meeting (‘AGM’). The Chief Executive is responsible for all aspects of the operation and management of the group and its business within the authorities delegated by the Board. She is responsible for developing and effectively implementing strategy following approval of the strategic and financial plan by the Board. The Chief Executive’s remit includes proposing investment into new business and geographical areas and ensuring at all times that the group’s risk profile is appropriately considered. She ensures the timely and accurate disclosure of information to the Board and to shareholders. She leads the Executive Directors and senior management team in the day-to-day running of the group’s business under clear delegation of authority from the Board. The Chief Executive maintains regular dialogue with the Chairman on all important Company matters and together they provide coherent leadership of the group. if theirdefencewasunsuccessful. in anyaction andtorepay againstthem theirdefencecosts(totheextentfunded by theCompany bytheCompany) to paydamagesawardedCompany may Directorswould stillbeliable funddefencecosts.Individual totheCompany connection with any negligence, default,breachofdutyor of theCompany,andspecif the protectionprovidedtoDirectors inrespectofanylitigationtheir against positionDirectors relatingto asaDirector brought against itsDirectorsand/orofficers. TheMemorandum andArticles ofAssociationtheCompanyextend an Company maintainsDirectors’ The Director indemnity and ensuring arecompliedwith. that Board procedures forThe Company ensuring Secretary isresponsible good communication flowswithintheBoardand itscommittees and performance evaluation forthe Chairman. concerns of shareholders.Explai informationto on obtainabala majorshareholdersandfinancial analysis or forwhichsuchcontactisinappropriatein which have not beenresolved through the The roleofthe Senior Independent Director isto Directors’ service contracts are availablefor inspection atMITIE’sregisteredoffice,the head officeand attheAGM. operation ofkey financialcontrols.Theterms monitor high level corporatereportingandsatisfythemselves asto understanding andappreciationforthe business whenapproving strategy.In addition, theNon-ExecutiveDirectors Non-Executive senior divisional Directors managementheld one-to-one teams meetingswithcertain togainwider are responsible forcontributing tothe formulation anddevelopmentof strategy. During thereporting period, the Directors, offering abreadth of knowledge, experienceand for thestrategicDirectors constructively directionofthe group,the Non-Executive challenge andprobetheExecutive Non-Executive Directorsareresponsiblefor exercisingtheir independen  ically provide that the Company may ically providethat theCompany ned further belowistheSeniorIndependent Director’s roleinsuccessionplanning d officers’liabilityinsurance, providing appropri normal channels ofChairman, Chie thecircumstances. TheSenior Independent Director inparticularreviews of appointment oftheNon-Executiveof appointment Directors’ and the Executive make himselfavailabletoshareholders shouldtheyhaveconcerns individual skills. Inaddition individual skills. indemnify Directors again the integrityoffina of trust in relation to the Company andthatthe oftrustinrelationtothe t skill and judgement.Inreviewing the proposals nced understanding ofthe issuesand f Executive orGroup Finance Director ate cover for any legalaction ncial informationandthe , theNon-ExecutiveDirectors st anyliabilityincurred in Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts 49 48 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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%RDUGHIIHFWLYHQHVV Composition of the Board The membership of the Board as at 31 March 2011 and biographical details of the Directors (including details of committee chairmanships and other positions held) are given on page 47. During the year one Executive Director, Roger Goodman, retired from the Board. To comply with provision B.7.1 of the New Code, all Directors will submit themselves for re-election at the forthcoming AGM and details are provided in the Notice of AGM which is also available at www.mitie.com/investors. During the year, Non-Executive Director independence was considered by the Board. The Board determined that all Non-Executive Directors as at 31 March 2011, with the exception of the Deputy Chairman Ian Stewart, were independent in mind and judgement, and free from any material relationship that could interfere with their ability to discharge their duties effectively. Specific consideration was given to David Jenkins’ prior role with Deloitte LLP MITIE’s external auditors and his term of appointment. The Board determined that David is independent given that he had not been involved in the provision of services to MITIE and the passage of time since his departure from Deloitte LLP in May 2004. The Board has determined that David continues to provide independent influence and constructive support to the Group in his role as Senior Independent Director. As part of the ongoing review of Board performance the Nomination Committee and the Board specifically reviewed the roles of Chairman and Senior Independent Director, and the composition and chairmanship of each of its committees. The Board is satisfied that its composition is appropriate having regard in particular to the integrity, skills, knowledge and experience of its Directors and the size and nature of the business, and having regard to its desire that the Board does not become too large and unwieldy. The Board as at 31 March 2011, following Roger Goodman’s retirement, was comprised of four independent Non-Executive Directors; a Non-Executive Director deemed non- independent as a result of his prior role as Chief Executive of the group, the Non-Executive Chairman and three Executive Directors. The Board has four formally constituted committees: the Audit Committee, the Executive Committee, the Nomination Committee and the Remuneration Committee for which the duties and responsibilities of each are set out in the terms of reference which are available at www.mitie.com/investors_corporate-governance. All Board committees are provided with sufficient resources to undertake their duties. Further details in relation to the composition, role and functioning of each committee are set out within this Directors’ report, with the exception of the Remuneration Committee which is explained further in the Remuneration report on page 61. The Executive Committee members are Ruby McGregor-Smith, Suzanne Baxter, Bill Robson and, until his retirement as a Director on 31 March 2011, Roger Goodman. It functions primarily as an approval and signing committee and meets on an ad hoc basis, as and when required. Powers are specifically delegated to the Committee by the Board as evidenced in the Board minutes and the group Delegated Authorities Register, and the Committee are instructed to revert to the Board should any further decision making be required. In addition, the group operates an Executive Board. It is not a formally constituted committee of the Board, operating solely under the delegated powers of the Chief Executive, but is charged with supporting the Chief Executive in the operational management of the group. Board appointments The Nomination Committee leads the process for appointments to the Board and makes appropriate recommendations to the Board. Directors are appointed and may be removed in accordance with the Articles of Association of the Company and the provisions of the Companies Acts. As at 23 May 2011, the members of the Committee are: Roger Matthews (Committee Chairman), David Jenkins and Terry Morgan. Ruby McGregor-Smith stepped down from the Committee during the year but continues to attend meetings at the invitation of the Chairman. During the year, the Committee met to evaluate the balance and composition of the Board. The Committee is committed to ensuring that new Directors bring the requisite skills, knowledge and experience required for the role being considered. It oversaw the Board succession planning with relation to the retirement of Roger Goodman and determined that his responsibilities be maintained by the Executive Board members. In considering any succession for the role of the Chairman, the Senior Independent Director chairs the Committee. In addition, with support from the newly appointed Group HR director, the Committee has introduced a separate meeting in the coming year, which will be attended by the Chief Executive and Group HR director, to address succession planning for the Board and across the Group to ensure that there is a sufficient mix of experience and skills. The Committee recognises the need for the Board to have a balance of skills, experience, independence and knowledge of the Company as outlined in B.1 of the New Code and in the search for new candidates, the Committee has due regard for the benefits of diversity, including gender, in line with section B.2 of the New Code. New Director appointments recommended to the Board by the Committee are undertaken in accordance with the Committee’s objective appointment and recruitment process. Director commitments Executive Directors are permitted to accept appointments outside the group provided permission is sought from the Chairman and the Chief Executive and that the additional appointments do not interfere with the Directors’ ability to discharge their duties effectively. The commitments outside the group of the Executive Directors are detailed in the Remuneration report on page 64. Executive Directors are entitled to retain any fees earned from these external appointments. the Articlesof conflictiskeptunder on-goingAssociation to review. the Board), such Company isauthorisedSecretary. Where a potentialconflict (underthestatutory powers andpowers granted under theChiefExecutive aspossibletotheChairman, andthe situation ortransactionalconflict mustbereportedassoon Articles of Association of the Company Articles ofAssociationwhich ofthe Company hasoperated effectivelyduring thereporting period. Anypotential The Board has a formal policy onthedeclaration and management of directorconflicts inaccordance withthe Director conflicts resolution oftheshareholders. the Code,NewCompaniesActsandrelated independent legaladvicefun its Directorshavethe accesstothe CompanySecretary adviceand and, where servicesof appropriate, external Board,itscommitteesand presentationsfromnon-Boardmemberstime totime,detailed onoperationalmatters.The briefings fromthe CompanySecretaryon matters relatingto ognCE 81 8 3 6 1 8 3 With regards totheappointment andreplacement of Directors, theCompanyisgovernedits ArticlesofAssociation, by Directors’ Interests the retiredon 31March2011. from Board Goodman Roger 2 Committee fromtheNomination in McGregor-Smith 2010. stepped Ruby May down 1 Note: 6 L HirstCBE T KMorganCBE G JPotts D SJenkins W Robson N RGoodman S CBaxter R McGregor-Smith I RStewart R JMatthews Number ofmeetings heldinyear: Director review includereportson health andsafety, currenttrading and performance, corporate developmentactivitiesand dutiesproperly.PaperssubmittedregularlyDirector isappropriatelybriefed forthe andabletodischargetheir Board’s same timeframe,haveaccesstoasecurefacilityforacce Directors aresupplied withan agenda and supportingpapers for all Director information and support regulatoryand updatedregularlyaswhen developments arise. Board delegated authoritiesandanoverview oftheCompany’s insurancearrangements. TheHandbookisreviewed reference, an overview ofDirectors’ statutory duties,corporategovernance and regulatory guidelines,acopyofthe receive acopy oftheBoard Handbook, whichcontains essential information suchas Board andcommittee termsof reference and copiesof recent Board minutesandsupporting papers. Inadditiontotheinductionpack,allDirectors a copyofMITIE’sMemorandum andArticlesofAssociation, latestAnnual Reportand Accounts, committee termsof Directors receive visits toCompanyanda tailoredinformationpackwhichincludes keyclientsites,andthatallnew The Board has a generalpolicythateachnewDirector receives Director development  Chairman withtheDirector concerned. During the year and, where possible, attend allBoardmeetings andtheAGM. Anytimecommitment matters areaddressed bythe All Directorsareexpectedtoallocatesufficienttime the the chairman meetswiththeGroupFinanceDirectorona of theAuditCommittee regular basis. the Chairman met theNon-Executive Directorsonseveral occasions withouttheExecutiveDirectors beingpresent and Nomination) ofwhich Bo and abudget meeting. Directors’attendance atscheduled and issuesrelatingtoshares and other administrative matte thereviewand approvalofacquisitions meetings. Additionalto dealwith unscheduled meetings Board wereheld 2 6– –– 1 6– –– they aremembersisshownin ded by MITIE. In addition to scheduledBoard ded byMITIE.Inadditionto thefollowing table: ended 31March were sixscheduledBoard 2011, there ssing boardpackselectronically. Th Company todischargeth rs. Eachyear, theBoard holdsadedicatedstrategymeeting corporategovernance. The legislation. The Articlesmaybeamendedlegislation. byspecial ard andcommitteemeetings(Audit,Remuneration atailoredinductionsuitabletotheirrolewhichincludes Board meetingsin a timely and committee meetingsduringtheyear, Board Audit Remuneration Nomination 636–63 –– 6– 7– 6– 81 –– 6–6– –– –– 81 eir responsibilities effectively eir responsibilities Board willalsoreceive,from is ensuresthateach

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Accounts 51 50 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Board evaluation and re-election The Board is committed to effective and rigorous review of its performance and that of the committees and individual Directors, and accordingly a formal evaluation of the performance and effectiveness of the Board, its committees and of each Director is performed annually. Director performance evaluation for the current year has been carried out using a combination of formal appraisal questionnaires completed by all Board members and through meetings and discussions. This process includes feedback on the performance of the Chairman which is reviewed by the Senior Independent Director and independent discussions are held as required with the Non-Executive Directors in order to appraise the performance of the Chairman. The results of these reviews are reported to the Board and used to improve the Board’s performance. Results of the prior year appraisal process identified an overall level of satisfaction with the performance of the Board and that of its committees and Directors. Notwithstanding this, several further improvements in Board operation have been implemented during the reporting year, including introducing a separate meeting to deal with strategic planning each year which is followed up with defined actions to be reported back to the Board, clearer focus within management reporting on strategic matters and a strengthening of the HR support for the Remuneration Committee. As part of the formal Board evaluation, the Board has considered the performance of each Director and is satisfied that they continue to be effective and demonstrate clear commitment to their role. To comply with provision B.7.1 of the New Code all Directors are subject to annual re-elections. The Board is currently considering its approach to the externally facilitated performance evaluation of Directors every three years in accordance with B.6.2 of the New Code.

%RDUGDFFRXQWDELOLW\ Financial and business reporting The Company is required to set out a fair review of the business of the group during the reporting period including an analysis of the position of the group at the end of the reporting period and the principal risks and uncertainties facing the group. Details of the Business review are contained in this Directors’ and Governance report and the following sections of this Annual Report and Accounts: − the Chairman’s statement on page 4 and 5; − the Chief Executive’s review on pages 6 to 11; − the Key Performance Indicators on pages 12 to 1 4 ; − the Marketplace overview on pages 30 and 31; − the Operating review which includes the business model on pages 31 to 34; − the Sustainability review on pages 35 to 38; − the Financial review on pages 39 to 43; and − Factors that could affect our business on pages 44 and 45. Collectively these sections present a balanced assessment of the Company’s position and prospects. They demonstrate how the Directors have acted in the way most likely to promote the success of the Company, explaining how the Company generates and preserves value over the longer term and provides an overview of the strategy for delivering the Company’s objectives. Going concern The Directors acknowledge the Financial Reporting Council’s Going Concern and Liquidity Risk: Guidance for Directors of UK Companies issued in October 2009. The group’s business activities, together with factors likely to affect its future development, performance and position are set out in the Business review as referred to on pages 6 to 45. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial review on pages 40 to 43. In addition, Note 25 to the consolidated financial statements includes details of the group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to credit risk and liquidity risk. The group’s financial forecasts, taking into account possible sensitivities in trading performance, indicate that the group will be able to operate within the level of its committed borrowing facilities. The group’s committed borrowing facilities comprise £100m of US Private Placement Loan Notes expiring between December 2017 and December 2019 which were issued in December 2010 and its committed banking facilities. The group renegotiated its banking facilities in March 2011 and its new committed facility of £250m will be available for drawdown in July 2011, subject to the approval of an amendment to the Articles of Association at the forthcoming AGM to clarify the definition of borrowing limits. Until that point, the group’s existing committed banking facility of £230m remains available for use by the group. The new committed facility will remain in place until September 2015. The Directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the Annual Report and Accounts. on apreand Theprincipalrisks post-controls risk evaluation. consider strategic, operational,financial andcompliance risks mitigating controlsbased andtheeffectivenessof the 44 and 45.The processforidentifying,evaluating and riskfactorsthataffect the couldbusiness onpages setting strategy whichare detailedfurtherinthesectionregarding to triennial basis dependent upon materiality and inherent risk assessment. During the reporting period, theBoard riskassessment.Duringthe to triennialbasis dependentuponmateriality andinherent internal auditprogrammeThe riskregisterformsthebasis foreach ofthe year with riskareasreviewed on anannual risk registerwhich ismaintainedbythe gr the Financial ReportingCouncil.Specifically, theBoardconsiders Policy andaccompanying ‘Whistleblowing’activityis procedurestomitigatetherisksposedwithin business. has been considering theintroduction ofthe BriberyAct 2010 andaccordingly,hasimplemented arevisedFraud and that this process is monitored by the Boardand thatthis inaccor processismonitored bythe has beenin place throughout and anincreaseintheuseof useandcompilation thatexists ofriskregistersThis workhasfocusedonthe withinthegroup, the assuranceframework by thegroup which has been reviewedand improvedduring the reporting period withsupportfrom Grant Thornton. The Board confirms thatthere isa Risk management level. undertaken across the group todemonstratetheimportance of themanagement and assessment ofriskatasenior of riskmanagement withinthebusiness,ExecutiveBoardregularlyreviews theprogramme ofriskmanagement not identified any risks that result in a material, unmitigatedexposure tothegroup.not identifiedanyrisksthatresult inamaterial, in Committee along with theresultsof communicated totheAudit in particular, those relating to specific matters reported by internal or external auditors.in particular,those relatingtospecificmatters Tofurtherencourageaculture reportedby internalorexternal havedialoguewithth As necessary,theAuditCommitteewill independent perspective oncertain alsoreceivesregularreportsCommittee. TheAuditCommittee from theexternal auditorswhocontribute afurther thedeveloped bytheHeadof Gen Business Riskwhoreportsto programme is designed toprovidealev internal auditreportsfromthebusinessriskfunctionandvia of meetingswithBusiness Risk.Theinternalaudit theHead auditfunction,includingapproving the activitiesofinternal with management, supportsthe Committee Board bymonitoring assetoutabove. Specifically, theAudit and guiding year viathereceipt andreview Monitoring iscarriedoutthroughoutthe of various reports, presentations anddiscussions Monitoring the systemof internalcontrol of internalcontrol. businessesprovidesadditionalsupportbetween these andformsakeypartofthe system functionsandtheoperating and safety,IT,insurance, human resour the group has a teamofspecialist functions resourceswithindividualsresponsible includinglegal,health forspecific framework of delegated authoritiesandgroup achieving also theidentificationandmanagement itsobjectivesandstrategies ofrisksthatmayimpactupon MITIE system ofinternalcontrol Thissystemisdesignedtosupportthe group’spursuitof andforreviewing itseffectiveness. strategic objectives.TheBoard when establishingandoperatingtoachievethegroup’s is responsibleforthegroup’s The Board recognises thatitisrespon Risk management and internal control  subsidiary isheadedbyamanaging orregional director who hasauthoritytomanage theirbusiness withinthis transactionscontract approval,recruitment, andspecificgrouppolicies.Eachoperating capitalexpenditure,banking non-financial all operatingsubsidiariesthatincludesbothfinancialand authorities andmattersrelatingtostrategy, and toensure reserved fortheBoard,aformal delegatedauthoritiesmatrixisissuedto compliance withthematters business successfully. Inordertodelegateresponsibilities clearly consistency and control with theautonomy thatlocalmanag tobalancetheneed each division for and operatingbusinesstoworkwithin.Thisframeworkisdesigned group-wide an policies andproceduressupportthebusiness byproviding individuals whopromotethe higheststandards competence,governanceand ethicalbehaviour. ofintegrity, Group fairness andresponsibility throug The Board and senior management are responsible forThe Boardand maintaining seniormanagementareresponsible Internal control framework absolute, assuranceagainst material misstatementandloss. than eliminate the riskoffailing and uponthe the groupoperates.Thesystemofinternalcontrolisdesignedtomanageenvironment rather inwhich computer assisted audit techniques. TheBoardconfirms assistedthat itsriskassessmentprocess audittechniques. computer the reportingyearanduptodateof approval of theAnnualReportandAccounts to achieve these objectives andstrategiesto achieve these objectives hout the group. Essential to thisisthe hout thegroup.Essentialto continuing processfor iden sible for determining the levelof riskacceptablethatisappropriateforthegroup sible fordeterminingthe aspects oftheinternalfinanc ces, tax,pensions,purchasing, finance and el of assurance over key risksasidentifiedinthegroupriskregister andis el ofassuranceover oup’s BusinessRiskfunction.This reg policies andprocedures outlinedabove.Tosupportthebusinessfurther, managing risksrequiresthegroupanditsprincipal businessesmanaging to dance with the revised guidance on internal control issued by oninternalcontrolissued dance withthe revisedguidance identified from this process arerecordedidentified fromthis onthegroup’s tifying, evaluatingandman e ExecutiveDirectorson their control responsibilities and ement require todevelopandmanag operational internalcontrol frameworkforthegroup, theinternalauditprogramme,reviewingregular eral Counselandinde and effectivelytothegroup’soperating businesses ial controlsystems arising from their work. vestigations carried out.Th and developinga culture of recruitment and retention nature andextent ofthesignificant risksittakesin and it will only providereasonable,and not and itwillonly ister isreviewed periodicallybytheBoard. business risk.Regulardialogue pendently tothe Audit aging significantrisksfaced ese investigations have ese investigations ofhighly skilled integrity,competence, Annual Report and Accounts 2011 Accounts and Report Annual e eachoperating MITIE Group PLC PLC Group MITIE

Accounts 53 52 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Reviewing the effectiveness of the system of internal control In line with Turnbull Guidance and C.2.1 of the New Code, the Board performs a formal annual assessment of the operation and effectiveness of the system of internal control covering all material controls, including financial, operation and compliance controls, and updates this assessment prior to the signing of the Annual Report and Accounts. The Board also holds discussions with senior management and reviews the results of a formal internal controls review and system effectiveness confirmation from each operating subsidiary. The Head of Business Risk attends each Audit Committee meeting to provide regular updates on the effectiveness of the group’s internal controls. The Board confirms that management has taken steps during the year to improve the system of internal control, embed effective controls further into the operations of the group and to address improvements as they come to management’s attention. These steps are monitored at executive level to ensure they are implemented appropriately and that they are effective. Consolidated accounts preparation and financial reporting The consolidated accounts of the group are prepared by the Group Finance function that is responsible for the review and compilation of reports and financial results from each of the operating divisions and subsidiaries within the group, in accordance with the group internal control and reporting procedures. Each operating division supports its report and results submission with a statement of compliance with the group’s principal internal controls which is subject to review and sample audit by the internal audit function. In addition, the representations made by the Board in support of the consolidated financial statements including those in relation to the operating divisions are supported by detailed papers and cascaded reporting requirements throughout the group, which are reviewed by either the group finance team or internal audit and presented to the Audit Committee and the Board for final approval as appropriate. Internal control systems: information and communication The group maintains a number of systems and processes that report relevant information to group executive management and the Board as necessary. This includes financial and non-financial information regarding business performance, compliance with policy and procedure, relevant regulations and business critical matters. At an operational level each division and business holds regular board and management meetings. To maintain and develop relationships between separate divisions and to address specific matters, regional meetings are also held and are attended by regional representatives of each division. Senior group management also regularly attend these meetings. The Audit Committee The Company has a formally constituted Audit Committee comprised of independent Non-Executive Directors. The Audit Committee is generally responsible for: − monitoring and reviewing the integrity of the group’s corporate reporting which includes any formal announcements relating to the group’s financial performance, and any significant financial reporting judgements therein; − monitoring and reviewing the independence and objectivity of the group’s external auditors, the objectivity and effectiveness of the audit process and the effectiveness and implementation of the group policy on the provision of non-audit services (the Non-Audit Services Policy); − monitoring and reviewing the integrity and effectiveness of the group’s internal financial controls environment, internal audit function and business risk management structures; and − making recommendations to the Board on shareholder resolutions for the appointment of, and remuneration for, external auditors. The chairman of the Committee will be available at the AGM to answer any questions about the work of the Committee. Committee composition The Committee consists entirely of independent Non-Executive Directors and is chaired by David Jenkins. During the year the Audit Committee comprised: David Jenkins, Terry Morgan and Larry Hirst. The composition of the Committee meets the requirements of the Code. All members of the Committee are considered as being appropriately experienced to fulfil their duties and David Jenkins continues to be deemed by the Board as at the date of this report, to have significant, recent and relevant financial experience through his qualifications and held appointments. Meetings of the Committee During the year the Audit Committee held three meetings (see summary of meeting attendance on page 51). The Audit Committee invited the external auditors, Chairman, Chief Executive, Group Finance Director and Head of Business Risk to attend relevant parts of the meetings of the Committee. The matters under consideration at these meetings included: − generally monitoring the group’s corporate reporting process and the statutory audit of the annual Group accounts; − the Half-yearly Financial Report and Annual Report and Accounts; − critical accounting policies and judgements; engagement partner isrotated everyfiveyears, withthe next rotation dueinrespectof theyearending 31 March2014. that restrictthe capacity AuditCommittee’s torecommend aparticularfirmforappointment. Theleadaudit throughout the appointment therearenocontractualobligations year.When oftheexternalauditor, considering the confirms thatthe requirementsof theNon-Auditobjectivity ofthe externalauditors ServicesPolicyhavebeen and met toensuringthe independencerelated services iscommitted and andnon-audit services. TheAuditCommittee LLP).EachyeartheAuditCommitteereviewsauditorperformanceDeloitte &Touche inrespectof audit services,audit PLC hasbeen auditedbythefirmnowknown asDeloitteLLP(previouslyTouche and ToucheRoss&Co,Deloitte Prior to1994,MITIEwasauditedbyBDOBinder Hamlynwho External auditor throughtheinternalrectification andre-auditofissuesidentified auditprogramme. remains effective emphasisplaceduponremediation, givenof thegroupand the theincreasingsizeandcomplexity − − − − −  the group. The group’s internal audit function reportsthe group. directly Thegroup’s internalauditfunction totheGroup CounselandtheChairman oftheAudit employees mayraiseconcernsregarding reporting or other any mattersoffinancial perceived improprietiesacross the ChairmanThe CommitteealsometseparatelywiththeexternalauditorsandHead metwith of Businessof Risk − − − the externalauditorsfromperformingwork whichwillresu flexibility fortheGroupFinanceDirectorto approve expenditure this policyprovidessufficientcontrolov item,regardlessofamount,is audit feeand/or whereany Committee foranynon-audit spendwiththeauditorsthat, onanannual basiscumulativelyexceeds50%ofthe annual over thelevels bytheauditorsandrequires ofnon-auditworkperformed to thechairman notification oftheAudit The AuditCommitteehasapprovedaNon-Audit Services recommended there-appointment of Deloitte LLPtothe Board. The AuditCommitteeissatisfiedwith the performanceof externalauditor andafter dueconsideration,has Committee. The Committee continues toreviewCommittee. TheCommittee thesizeandcomposition monitoring includesthe of theinternal thearrangementsbywhich The remitoftheAuditCommittee audit function and Internal auditfunction the AuditCommitteewithoutpresenceofExecutiveDirectors. be proposed atthe forthcoming AGM. Deloitte LLPhave expressed their willingnesstocontinuein Re-appointment ofauditors This confirmationisgiven,andshould − − Report thedate andAccountsconfirmsthat: ofapprovalthisAnnual Each of theDirectorsinoffice asof Disclosure ofinformationtotheauditors to thefinancialstatements. the feespaidtotheexternalauditorsisgivenin controls designedtosafeguardNote 6 itsindependence.Asummary of toperformtheworkin of non-auditservicesifthey are bestsuited any potential threattotheirindepende decisions forthe group,creating aconflictofinterest,finding           compliance withtheNon-AuditPolicy bytheexternalauditorsand Services the effectiveness oftheexternal auditorsincluding the approvaloffeesfor external auditors; the re-appointment oftheexternal auditors; and judgements; and scopeofworkthe reviewof externalauditors’ andoverall auditplan,nature summaryofkey issues generally monitoringthe effectiveness auditandriskmanagement oftheinternalcontrol, systemsand functions. the reviewofkey internalaudit reportsand findings;and the approval ofthegrouprisk assurance fortheframework and theinternalauditplan yearending31March 2011; any relevant audit information andtoestablishthatthe Company’s auditors areaware ofsuchinformation. he/she has each takenallthestepsthathe/she oughttohave taken asaDirectorto make himself/herself aware of preparation of theirreport)ofwhichthe Company’s auditorsareunaware; and so faras he/she isaware,therenorelevant auditinformation be interpreted, in accordancebe interpreted, with Section er the levels of non-audit spendwiththe er thelevelsofnon-audit nce. Additionally, the externalauditorsnce. willon Additionally,the the appropriateness and skillsoftheauditteam; lt inthemauditingtheir Policy that ensures that the Audit Committee hasvisibility Policy thatensurestheAuditCommittee considered significan office asauditors and the resolutiontore-appointthem will office merged their practicewithDeloitte.Since1994,MITIEGroup themselves in the role ofadvocatethemselves inthe forMITIE orcreating on advice below those levels. This policy alsorestricts on advicebelowthoselevels.Thispolicy (being informationrequired bytheauditorsin question. DeloitteLLPalsomaintains itsowninternal of theinternal auditfunctiontoensurethat it maintenance ofauditor t. The Audit Committee issatisfiedthat t. TheAuditCommittee Auditors whilstproviding sufficient own work, making management own work, 418 of theCompanies Act2006. ly be consideredly fortheprovision Annual Report and Accounts 2011 Accounts and Report Annual independence; MITIE Group PLC PLC Group MITIE

Accounts 55 54 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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6KDUHKROGHUGLDORJXH The Board is committed to an on-going pro-active dialogue with institutional and private investors and welcomes the introduction of the UK Stewardship Code applicable to institutional shareholders, to further encourage engagement between the Company and its shareholders. The principal method of communication between the Board and shareholders is via news announcements, the Interim Management Statements, the Half-yearly Financial Report, the Annual Report and Accounts, the Sustainability Report and MITIE’s website (www.mitie.com). A full programme of formal and informal events, institutional investor meetings and presentations are also held following the Half̂yearly and Preliminary Results announcements which are led by the Chief Executive and Group Finance Director. The Chairman and Senior Independent Director are available for additional meetings with shareholders upon request. The Board encourages the on-going dialogue between the Directors and investors and as such all Directors were present at the 2010 AGM and made themselves available for direct discussions with shareholders. Latest group information, financial reports, corporate governance and sustainability matters, Half-yearly and Preliminary Results presentations, major shareholder information and all announcements are made available to shareholders via the MITIE website (www.mitie.com) which has a specific area dedicated to investor relations. Significant importance is attached to investor feedback on the group’s performance, and as such the Executive Board receives an investor relations report at each meeting detailing corporate news, share price activity, investor relations activity and major shareholder movements. The Board is updated by the Executive Directors on these matters and receive the monthly Chief Executive’s report which has a section dedicated to investor feedback and broker updates and detailed analyst and investor feedback following the Half-yearly and Preliminary Results presentations. The Chairman is responsible for ensuring that the Board is made aware of the issues and concerns of the major shareholders. The AGM also allows shareholders to address and discuss any issues surrounding the group directly with the Executive and Non-Executive Directors. Electronic communications The Directors remain committed to improving and extending the electronic methods in which the Company communicates with its shareholders, not only allowing the latest information on the group to be provided instantly but recognising the environmental benefits. The Board encourages each shareholder to join the growing number of investors electing to receive their information electronically and further details on how to register are provided on the inside back cover of this report.

)LQDQFLDOPDWWHUV Financial results and dividends A detailed commentary on the financial results of the group for the year is contained within the financial review on pages 39 to 43 of this report. The profit before taxation for the financial year is £86.8m (2010: £79.7m). The Directors have recommended and paid the following dividends during the year: − recommended a total Ordinary dividend of 9.0p per share for the year ended 31 March 2011 (2010: 7.8p) with a total value of £31.9m based upon the number of shares issued as at 23 May 2011 (2010: £27.6m) − paid on 3 February 2011, an interim dividend of 4.1p per Ordinary share with a total value of £14.4m (2010: £13.1m) − recommended a final dividend of 4.9p per Ordinary share with a total value of £17.5m based upon the number of shares issued as at 23 May 2011 (2010: £14.5m) The final dividend for the year will be paid on 12 August 2011, subject to shareholder approval at the AGM, to Ordinary shareholders on the register on 24 June 2011. The Company operates a Dividend Re-Investment Plan (DRIP) which allows shareholders to build their holding by using the cash dividend to purchase additional shares in MITIE. Further details on the operation of the DRIP are included at the back of this report and are available from MITIE’s Registrar. During the reporting period, the trustees of the Company’s Employee Benefit Trusts waived dividends on shares held. Shares held in the Employee Benefit Trust are for the operation of the Company’s employee share schemes as explained further on page 65.

&DSLWDOVWUXFWXUH Share capital and powers of shareholders The group is financed through both equity share capital and debt instruments. Details of changes to the Company’s share capital are given in Note 29 to the financial statements. The Company has a single class of shares – 2.5p Ordinary shares – with no right to any fixed income and with each share carrying the right to one vote at general meetings of the Company. Under the Company’s Articles of Association, holders of Ordinary shares are entitled to participate in any dividends pro-rata to their holding. The Board may propose and pay interim dividends and recommend a final dividend for approval by the shareholders at the AGM. A final dividend may be declared by the shareholders in a general meeting by ordinary resolution, but such dividend cannot exceed the amount recommended by the Board. employment that occurs solelybecauseofa take-overbid. legislation. TheDirectorsarenotawareof any Articles ofAssociation mitie.com/investors_corporate-governance) ofthe Company(available andprevailing atwww. restrictions onthesizeofanyshareh attach specific claw-backprovisions for periods ofuptotwoyearsfollowing Otherwise,therearenospecific allotment. ofsuch thatbothpreventthe transfer shares and/or companies haverestrictions in MITIEModelplaceduponthem ofminorityCertain shares thatareissuedasconsideration bytheCompany shareholders oftheshares upon acquisition Restrictionson the tradingshares of forthcoming AGMtoclarifythe ofanamendmentavailable fordrawdown ofAssociation tothe atthe Articles inJuly2011subject totheapproval On 29March 2011, thegroup plus 1.26%. proceeds wereswappedinto sterlingdebt with half fixed at3.88% andhalfwithafloating sterlinginterest rateofLIBOR notes denominated inUSdollars ($96m)maturing inse The issueconsistedof£40m notesdenominated insterling In December 2010,theCompanycompleted  restrictions on oronvotingrigh thetransfer of securities agreements between the Company and its Directors or employees that provide forcompensation andits Directors oragreements for employeesthat lossofofficeor provide between theCompany − The 2010AGM authorised: Share capitalauthorisations Company’s sharecapital.Detailsofemployeeschemesaresetoutbelow andinNote34tothe Accounts. www.mitie.com/investors) which contains similar provisions in respect of the Company’s equitysharecapital. inrespectof www.mitie.com/investors)the Company’s whichcontains similarprovisions the 2011Noticewww.mitie.com/investors). ofAGM(which Shareholders isavailable arereferredto at the Further detailsoftheseauthorisationsareavailablein − − significant interms oftheir of theCompanysuchasbank facilit and timing of future purchases will be determined bythe and timingoffuturepurchaseswillbedetermined havebeennopurchasesbytheDuring theyear Companyof to31March MITIE shares.Theexactamount 2011 there performance of therelevant subsidiary MITIE subsidiarycompanies.Thesellingshareholdersga or inMITIEshares.On12August2010,the Inconsideration forthesepurchases,MITIE Model. theCompany generally tosettlepaymentincash hastheoption arms-length basis,with thepricingstructuregenerally andinaccordance applicable forothertransfers underthe minority shares. thepricetobepaid Themechanism forcalculating certain minority shareholders in suchcompanies mayprovide anoption for thepurchase bytheCompanyof their Under thetermsofcertain shareholder agreementsand buyback andthe allotmentofsharesinthe Company are provided intheNoticeofAGM. but thispolicywillbereviewedonacasebybasis.Further other factors.ItistheCompany’spresent in There areanumber ofother agreements with provisionsor terminateuponachange thattakeeffect, ofalter control Other share matters www.companieshouse.gov.uk. fromCompanies House at forindividual MITIEModelcompanies) incorporated into thearticles ofassociation relation tothose warranties andassurances. Detailsof these structuresaregenerallyavailable(totheextent for amaximum periodoftwomay yearsandmayanyclaimsthattheCompany haveinthefuture besoldtomeet in    to anaggregate nominalamoun – duringthereporting period, theDirectorsutilisedthisauthor total equating grantedto 37.59%of underMITIE’sshareschemes(such theissuedsharecapitalasat31March 2010) shares representing onethird of theissuedsharecapitaloutstanding plus15,029,127 commitment inrespectofoptions the Directors toallot(unders551Compa issued sharecapitalasat31 March 2010) – during the the Company tomakemarket toatotalof35,317,170 purchases shares(representing ofitsownshares 10%ofthe up and MITIE’s shareschemes asexplainedfurtherbelow; andfor tominorityshareholders MITIE Modelshares inconsideration authority) toallot4,615,605 sharestoanaggregate nomina capital asat31March2010) – duringthereporting period aggregate nominal valueequalto£441,464.63oramaxi of pre-emptionthe dis-application(underSection570(1) rightsCompanies Act2006) overallotted sharesuptoan shareholders inconsiderationforMITIEModel sharesasexplainedfurther below; likely impacton the businessor the group asawhole.TheDirectors are not awareof any renegotiated its bankingfacilities an definition of borrowing limits. Furtherdetailscanbefound intheNotice ofAGM. definition ofborrowinglimits. t of £115,390.13 to employees participatinginMITIE’s t of£115,390.13toemployees olding or on the transfer ofsh olding oronthetransfer y agreements share andemployee plan companies. Thesharesissuedinconsideration Company announced thepurchase of certain minorityshareholdings insix nies Act2006)shares uptoanag tention tocancel any sharesit an issueofUSprivateplacementloan agreements betweenComp ven years.TheUSdollardenominatedprivateplacement ts. Noperson has anyspecial ve certain warrantiesandassuran ve certain reporting period, the Directorsdidnotutilisethisauthority. articles ofassociationrelatingtoMITIEModelcompanies, Company and willbedependen notes to the 2010 Notice ofAGM(availableat notes tothe2010Notice mum 17,658,585 shares (representing 5% ofthe issuedshare , (andthe preceding theDirectorsutilisedthisauthority and fixed at4.38%maturinginnineyears and£60mof l amountof£115,390.13toemployeesparticipating in ity (andthe precedingauthority)toallot4,615,605shares detailsontheproposed renewalofpowersfor share ares, which areboth governed bytheprovisionsof the d its new committedfacilityof£250mwill be d itsnew in respectofsuch transfer istransparent, onan buys back,rather thanholdthemin treasury, any shareholder gregate nominal amountof£3,318,825.41 s. Noneoftheseareconsidered tobe notes with institutional investors. noteswithinstitutional rights ofcontrol overthe are beingheldinsafecustody share schemes and tominority ces relating to pastandfuture t onmarketconditionsand s thatmayresultin Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts 57 56 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Interests in share capital As at 23 May 2011 the Company has been notified of the following significant holdings of voting rights in its shares under the Disclosure and Transparency Rules:

Number of Percentage Ordinary shares of share of 2.5p each capital Massachusetts Financial Services Company 17,993,365 5.09% Majedie Asset Management Limited 16,327,802 5.05% FMR LLC 18,000,006 5.04% Invesco Limited 17,965,851 5.02%

Details of the Directors’ interests in the share capital of the Company are detailed within the Remuneration report. As at 23 May 2011, the Directors’ interests have not changed from those held as at 31 March 2011. AGM The 2011 AGM will be held at the offices of UBS Investment Bank, 1 Finsbury Avenue, London, EC2M 2PP at 2.30pm on 13 July 2011. The Notice of AGM will be available at www.mitie.com/investors on 6 June 2011.

2WKHULQIRUPDWLRQ Employee involvement and employee equity-based incentivisation The Board remains committed to fostering and developing a culture of employee involvement in the business through communication with employees and equity involvement whereby employees are enabled to build a stake in the Company through the Company’s various equity-based incentive schemes. Communication with MITIE’s employees continues to have a high priority. The group communicates with employees through the use of Group-wide mailings, employee magazines and updates, employee-focused initiatives and media networks and provision of access to broadcasts of periodic financial presentations. We are also committed to developing our use of social media tools as an effective way of communicating with our people as we recognise that these methods can provide great ways of allowing our people to give us feedback, share ideas and engage with the wider MITIE community. Our social media tools are supported by a new, Group-wide intranet system that was launched during the year. The system has already improved communications and information sharing across the business and includes regular blog updates by the Executive Board members and functional teams. Through the use of their own communication processes each of the group’s businesses is encouraged to ensure that employees are kept informed on Group and individual business developments and social networking sites continue to play an important part of engagement and communication with employees. The group continues to operate its Group-wide MITIE Stars-programme to recognise and reward exceptional performance by its people. The MITIE’s Got Talent, Group-wide talent contest continues to be supported and encourages employee engagement and recognition. The Group Sustainability Report contains further details of these initiatives and is available from www.mitie.com. Employees remain actively involved in the group’s activities via an employee forum. This year the forum held two meetings and included presentations by senior management or functional heads as requested by the employee representatives. The Board will continue to seek increasing involvement and activity of the employee representatives. The Board believes that the group’s culture of employee equity involvement is a significant driver in the group’s growth performance and that this assists in attracting and retaining skilled and committed employees. During the year the group has continued to operate the MITIE Long Term Incentive Plan to incentivise and reward senior members of the MITIE management team, the Executive Share Option Scheme for certain other employees and the Savings Related Share Option Scheme which is open to all eligible employees of the group. During the year, the Remuneration Committee reviewed the effectiveness and suitability of the group’s employee share schemes and recommended to the Board amendments to equity-incentive schemes as outlined further in the Remuneration report and Notice of AGM, specifically the introduction of a Share Incentive Plan to be available to all employees and therefore encouraging wider equity participation within the group. The Board believes that the changes proposed to shareholders maximise the accessibility, effectiveness and incentive value of equity schemes. The group has historically grown by giving entrepreneurial managers the opportunity to create wealth by taking the risk of starting a new business, taking equity stakes at fair value in those new businesses in conjunction with MITIE and then, dependent on a pre-agreed pricing structure, offering to sell that stake to MITIE predominantly in exchange for MITIE shares, at the option of MITIE. This incentivisation scheme typically provides for such managers to elect to offer their stake in their business to MITIE between the fifth and tenth years from the date of establishment of the business. 23 May 2011 2011 23 May Secretary Company Marie-Claire Haines MITIEshareholdersMITIE’s pastperformanceandcontinuesto andthe alignment of interestbetween ensure aclose as consideration for aminimum oftwoyears.TheBoardbeliev Recipients ofsharesunder  By orderof the Board principal subsidiariesaregiveninNote37 The groupoperate registered branchofficesin Branch offices (2010: £nil).Thetotalvalueofcommunity in group’s policy not tomakepolitical donations,andduring Donations tocharity and yearam community projects madeduringthe Donations carryGiven the outanymaterial researchand nature ofthegroup’s developmentwork. activitiesitdoesnot Research anddevelopment The operating review setsouttheBoard’sviewon likelyfuturedevelopments ofthe group. Future developments significant eventssincethebalancesheetdate.There havenotbeenany Events after the balance sheet date value ofthegroup’sinterests in between thebook The Boarddoesvalue andthecurrentopen notbelievethatthereisanymaterialdifference market Fixed assets 36 days’ purchases outstanding (2010: 31days). group’s standard purchasing termscan be foundatwww.mitie.com/suppliers. At31 March 2011, thegroup had purchasing terms(asnotifiedtosuppliers),orotherwise adhere tothe suppliers’ standardterms.Acopyof the termsofpayment preferablyonthe agreedwithsuppliers, group’s standardThe group’spolicyistocomplywiththe Payment of creditors infurtherThe amountofinterestcapitalised detailinNote9tothefinancialstatements. bythegroupissetout Finance costs and tomanagefinancialrisk.Furtherdetailsoftheseinstrumen objective ofthesewhen necessary instrumentsistoraisefunds ormaterial.Theprincipal forgeneral corporate purposes from itstrade.Theuseofinterestrateswaps and The Board remains committed todevelopingfurther acult Employee diversity andinclusion Entrepreneurial Fundtobackmanagement teams withinnovativeideasforstartingmutually ownedbusinesses. management and employees on17January ofthegroup.2011, the Accordingly, group launcheda £10m through offering equalopportunitiesregardless ofgender bestpeople, are designedto attract,retain, trainand motivate thevery development of employeesthrough skillsenhancementan the group’s employees through respecting andappreciating theirdifferencesandtopromoting the continuous performanceinstruments suchastradeguarantees. Inaddition,variousotherfinancial creditors and trade debtors arise The group’sfinancialinstruments Financial instruments www.mitie.com. issues. Furtherinformationcanbefoun diversity week.Activitiesincludedpresentations, workshops andtrainingsessions focused onequalityanddiversity Inclusion Steering Groupto thelaunchofadedicated heighten awarenessissues andaccordinglyoversaw ofdiversity The Company actively supportsdiversityandinclusion during thereporting period, establishedaDiversity& be identicaltothatofother employees. whilstemployeesofthegroup)should,asfarreasonably possible, persons (includingthosewhobecomedisabled applicant concerned.Itisthepolicyof groupth aspect ofdiversity. Applicationsfromdisabledpersonsare always fully this incentivisation landandbuildings. includebankloans,finance leases,overdrafts,USprivate placement loannotesand d withinthe dedicated Sustaina group’s to thefinancial statements. vestment was £534,015 (2010:£392,483). scheme are generally restrictedfromsellingthe MITIEsharesreceived schemeare the RepublicofIrelandandIsle currency derivativesare usedtomanageinterestandcurrencyrisk at the training,careerdevelopment andpromotion ofdisabled , race, religion, age, disability, ure thatencouragestheinclusion the reportingperiodnopoliticalcontributionsweremade d training programmes. es thatthisisauniquebusin ts aregiven inNote24tothefinancial statements. considered, bearinginmind ounted to£190,738(2010:£1 recognising thatthiscan bility Reportwhichcanbefound at The group’semploymentpolicies Man.Further detailsofthegroup’s sexual orientationoranyother ess modelthathasdriven and diversity ofall be achieved only Annual Report and Accounts 2011 Accounts and Report Annual theaptitudesof 10,500). 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Accounts 59 58 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Statement of Directors’ responsibilities in respect of the accounts The Directors are responsible for preparing the Annual Report and Accounts. The Directors are required to prepare the financial statements for the group in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and have chosen to prepare Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP). In the case of International Financial Reporting Standards (IFRS) accounts, International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with IFRS where applicable. The Directors are also required to properly select and apply accounting policies, present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information and, provide additional disclosures when compliance with the specific IFRS requirements is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. In the case of UK GAAP accounts, the Directors are required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to select suitable accounting policies and then apply them consistently, make judgements and estimates that are reasonable and prudent and state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial position of the Company, safeguarding the assets, taking reasonable steps for the prevention and detection of fraud and other irregularities, and the preparation of a Directors’ report and Directors’ remuneration report which comply with the relevant requirements of the Companies Acts, Listing Rules and Disclosure and Transparency Rules (DTRs). The Directors are also responsible for the maintenance and integrity of the Company website. Financial statements published by the Company on this website are prepared in accordance with UK legislation which may differ from legislation in other jurisdictions. To the best of each Director’s knowledge: the financial statements, prepared in accordance with the applicable set of accounting standards and contained within this Annual Report and Accounts, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group and the undertakings included in the consolidation taken as a whole and the management report, which is incorporated into the Directors’ report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with the description of the principal risks and uncertainties they face. By order of the Board

Ruby McGregor-Smith Suzanne Baxter Chief Executive Group Finance Director 23 May 2011 23 May 2011

− − − − − website. Thetermsofreference([email protected]) andfromtheCompany’s include: The termsofreferenceon requestfrom theCompanySecretary for theare available Committee Terms ofreference Associates providenootherservices tothe Company. During theyear andsought theCommitteerequestedattendance advicefrom of KeplerAssociates. Kepler Committee the to Advisers performance and remuneration oftheExecutive Directors. performanceandthe informationontheCompany’s Committee meetingsbyinvitationonly,toprovidefurther Graeme Potts and RogerChief Executiveandthe Matthews. RubyMcGregor-Smith,Group HRdirector attended Company. The membersofthe Remuneration CommitteeareTerryMorg The Remuneration Committeemeteighttimesintheyearand Membership 5HPXQHUDWLRQ&RPPLWWHH This reporthasbeenprepared onbehalfof the Bo ,QWURGXFWLRQ 5HPXQHUDWLRQUHSRUW Section A: The following information isnotsubject to audit on 13July2011. to auditandSectionB:subject toaudit.Thereportwillbe two reporttherefore sections;Sectionin accordance hasbeenarrangedinto withtheregulations.The A:notsubject by theCompany’sstate thatthe auditorsandto beaudited forthemaudited information to hasbeen dulyprepared referenceRules anddue tothe ABI guidelines. Theaforementioned regulationsrequire certain elementsofthisreport in andpromotes goodgovernance throughtheadoption of theCode and theNew Code, compliancewiththe Listing and covers allDirectorswho served onthe Board during the reporting period. TheRemunerationCommittee believes with theSchedule 8oftheLargeandMedium–sizedCompanies      the shareholders atthegroup’sAGM. drafting and approving the Directors’ remuneration report andany remuneration related resolutionstobeput performance targets; and/or future shareplans,includingth acting onbehalf ofthe Board, inconnection withtheestablishment and administrationofthe group’s current agreeing ExecutiveDirectors’contractualterms; the performance of determining the remuneration totalindividual certain aspects oftheremunerationsenior management; shaping and agreeing with the Board theframeworkofpolicyforremuneration of Board the Executive Directors with and agreeing and shaping individual inlinewiththeagreedremuneration policy; e selection of participants, the setting of option pricesandthesetting thesettinge selectionofparticipants, of of option package of eachExecutiveDirectorwithdueregardtothe package ard inaccordancewith presented for shareholder approvalatthe forthcoming AGM is comprisedofsolelyNon-Executive Directors ofthe Groups (AccountsandReports) Regulations 2008 an (Committee chairman),DavidJenkins, s420ofthe Companies Act20 Annual Report and Accounts 2011 Accounts and Report Annual 06 andinline MITIE Group PLC PLC Group MITIE

Accounts 61 60 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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5HPXQHUDWLRQSROLFLHVDQGSULQFLSOHV General remuneration principles The Committee is responsible for formulating remuneration policies and principles that promote the success of the Company in creating value for shareholders over the longer term, through alignment with the corporate objectives and business strategy after taking into full account the associated risks. The Committee understands that it is accountable to shareholders for the decisions made on Executive remuneration and seeks to maintain open and constructive communication where changes on remuneration policy are being proposed. The remuneration policy for the Company’s Executive Directors and other group senior executives is shaped by the requirement to align the interests and individual performance of the Senior Executive team with those of MITIE’s shareholders. The policy has particular regard to the Company’s and the group’s long-standing culture of encouraging equity ownership in order to achieve this alignment. The Committee, and the Board, continue to believe that the principle of equity incentivisation has been a key driving force in the past success of the group. Consequently, in order to maintain and further develop MITIE’s performance culture, the Committee believes that the remuneration packages of the Executive Directors should continue to contain significant performance-related equity-based elements. The Remuneration Committee believes exceptional performance should be matched with appropriate remuneration to attract, retain and motivate Directors and management while being mindful of the behaviour that such packages create. The Committee ensures that packages are linked to and support the long-term performance of the Company. Remuneration policy The remuneration policy of the Company promotes and embeds the Company’s remuneration principles. The Company’s policy is:

Performance linked Company performance determines a significant element of remuneration packages. Only top-end performance can achieve the stretching targets that are reflected in the performance-linked pay elements of the packages. Shareholder aligned The discretionary share schemes are based on EPS growth aligning the interests of shareholders and the members of the senior executive team. Bonuses are structured to reward the attainment of the strategic target of long-term sustainable, profitable growth. Comprehensive and simple The overall remuneration policy is comprehensive without becoming overcomplicated and encourages Executives to concentrate on growth of the group.

The Remuneration Committee believes, and is satisfied that, the remuneration policy is appropriate and takes account of the group’s performance and strategic objectives. The Committee plans to continue to use this approach and policy as a framework for the setting of future packages, whilst having due regard for the remuneration packages offered across the group and the external market. Share ownership policy A share ownership policy for Executive Directors was introduced in 2007 at the same time as the LTIP. Under this policy, all Executive Directors are required, over time, to build and maintain a shareholding in the Company worth 100% of base salary (150% of salary for any Executive Director who is granted an LTIP award of more than 100% of base salary). The Committee recognises that the principal mechanism for building up this holding will be on the exercise of LTIP awards and accordingly, until such time as the shareholding requirement is met, Executive Directors will be expected to retain no fewer than 50% of shares (net of taxes) that vest under the LTIP. Table 1: Share ownership update

Number of Percentage of Value of target Ordinary shares Value of target holding holding as at owned as at holding as at achieved as at 1 May 20101 31 March 2011 31 March 2011 2 1 May 2011 R McGregor-Smith £735,000 341,071 £670,205 91% S C Baxter £474,000 71,230 £139,967 30% N R Goodman3 £297,000 954,542 £1,875,675 632% W Robson £306,000 1,555,835 £3,057,216 999%

Note: 1 On the 1 May each year, the Committee reviews the expected target holding for the Executive Directors, calculated as a percentage of salary. 2 Calculated at a share price of 196.5p being the closing market price on 31 March 2011. The share price used to calculate the target holding as at 31 March 2010 was 228.7p 3 Roger Goodman retired on 31 March 2011. Company and thealigning financial strategic targets,theRemuneration Committeehaddueconsideration ofthe longer-term success ofthe additional levelofbonusfor 2010/11 would beassessedonaseri budgeted financial performance and,followingan amendmentbythe Remuneration CommitteeinMay2010,the 25% business duringthisperiod. As inth above for twoyearsandforfeited100% ofsalarydeferred shouldtheDirector intoMITIEGroupPLCshares leavethe During 2010/11,ExecutiveDirectorshadthe opportunity toearn performance but alsohasa link tolonger-term performancethroughpartialdeliveryinMITIEGroup PLC shares. Theannual bonusof achievinglong-termsustainable,profitable rewards mainlyshort-termCompany growth. andVariable remuneration be aligned tothe isdesignedtodrive group strategicMITIE’s performance objective Annual bonus with dueconsideration ofthebenchmarkingexercise. ofthe outcomes above the continuedgrowth ofthegroupandperformanceindividualexecutivedirectors, andperformance The ExecutiveDirectorsreceivedsalaryincreasesduringthe yearthattook account of therange of factorsdescribed of theindividual Directors. of other factors whendetermining appropriate salarylev remuneration.Theof basesalary, Committeealsotakesaccountof a range totalcash(iesalaryplusbonus)and Benchmarking isconductedbyexternalremuneration co Base salary As at the date of the report, the Committee expects the annual bonus structure for bonusstructure expectsthe annual the Committee of thereport, date As atthe for twoyears. financial strategic targetsandtherefore awarded afurther 25%of basesalary, deferred intoMITIEGroupPLCshares hadbeenachievedonthenon- decidedthatsignificantoverallpaid incash.TheRemuneration progress Committee During theyear underreview, MITIEachieved thefinancialin fulland100%ofbasesalarywas performance target performance targets forthe annual bonus are sufficiently stretching forthe maximumbonuspayment. variable elementsofthe market. ThebalancebetweenExecutive Directors’ thefixedand packages issetoutbelow. needsandisappropriatelypositionedrelativetothe structure regularly toensurethat itremains aligned withbusiness to aligntheExecutive Directors’with theinterests packages ofshareholders. TheCommitteeteststheremuneration element (annual performance-relatedbonusandlong-term equitybased incentiv The overallpackageforExecutive Directorsconsistsofafixedelement(salaryandcertain benefits) andavariable .H\HOHPHQWVRI([HFXWLYH'LUHFWRU5HPXQHUDWLRQ  on page65. Boardlevelaredetailed and managementshare schemes applicablebelow teams.Detailsoftheamendmentsto Policy (asdescribedonpage 62).Vestingof shareawards under theLTIP are basedon performance measured over schemes designedtosupport65) andthe thisethosare ShareOwnershipLTIP (asdescribedonpagethe Company’s share-based incentives.ForExecutive Directorsandcertain senior gr profitableThe remuneration decisionmakingand sustainable packagereinforceslong-term growth throughtheuseof Share-based incentives although ESOScontinuestobe below).Itis in Table4ofSectionB the Company.CertainExecutiveDirectorsstillretain three years.This periodisconsideredappropriate toalign rewards toExecutive Directors withthestrategic objectives of of interestswith shareholders. continuetobelievethatthe TheRemuneration Committee used to reward and incentivise certainothermembers of theseniorgroupexecutive used torewardandincentivise the intention oftheCommitteenottoissuefurther the intention ESOS options toExecutiveDirectors, e previous year,upto100%ofsalary couldbeearnedfortheachievement of group options granted undertheESOS(details oftheholdingsareset out optionsgranted els including marketconditions nsultants against sectorand size comparators, inrespect bonusesofupto125% of salary,with any bonus earned es ofnon-financial strategictargets.Insettingthe non- oup executives, theprincipalmethodologies and 2011/12 to remain broadly unchanged. broadly 2011/12 toremain es) andhasbeen structured inorder and theresponsibilitiesskills Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

Accounts 63 62 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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.H\HOHPHQWVRI([HFXWLYH'LUHFWRU5HPXQHUDWLRQ Other standard benefits The other benefits awarded to the Executive Directors consist of contributions to a pension scheme, private healthcare and the provision of a car allowance.

([HFXWLYH'LUHFWRUV·VHUYLFHFRQWUDFWV All Directors are appointed for an indeterminate period of office but are subject to annual re-election at the AGM in accordance with the New Code. The Executive Directors’ service contracts are available for inspection at MITIE’s registered office, the head office and at the AGM. All the Executive Directors have rolling service contracts which provide for a maximum of 12 months’ notice from either party. There are no provisions for compensation on termination of employment set out within the contracts of the Executive Directors. The dates of the service contracts of the Executive Directors are set out below: Table 2: Executive Director’s service contracts

Date of Contract term agreement Notice period R McGregor-Smith Rolling contract 01-Apr-03 12 months S C Baxter Rolling contract 10-Apr-06 12 months W Robson Rolling contract 01-Apr-03 12 months

3ROLF\RQH[WHUQDODSSRLQWPHQWV The Board recognises that the appointment of Executive Directors to non-executive positions at other companies can be beneficial both for the individual Director and the group through the broadening of their experience and knowledge. Ruby McGregor-Smith receives fees of £51,000 per annum in respect of her role as a Non-Executive Director of Michael Page International plc. As set out in the Directors’ and Governance Report, Executive Directors are entitled to retain any fees earned from external appointments.

1RQ([HFXWLYH'LUHFWRUV Non-Executive Directors’ fees The fee level is designed both to recognise the contribution and responsibilities of the role and to attract individuals with the experience and skills required to contribute to the future development of the Board and the group. The Non- Executive Directors are paid a basic fee with an additional fee for chairing a committee, together with expenses incurred in carrying out their duties on behalf of the Company. Non-Executive Directors are not eligible to participate in any of the Company’s share schemes or the annual bonus scheme, nor do they receive pension or ancillary benefits. Further details of fees paid to Non-Executive Directors are provided in Table 1 of Section B below. Non-Executive Directors’ engagement terms The terms of appointment of the Non-Executive Directors are available for inspection at MITIE’s registered office, the head office and at the AGM. The Non-Executive Directors are engaged for an initial term of three years which is terminable on either three or six months’ notice and thereafter on a rolling term. Table 3: Non-Executive Directors’ engagement terms

Additional duties Date of engagement terms Initial contract term Notice period Chairman; R J Matthews Chairman of Nomination Committee 04-Dec-06 3 years 6 months I R Stewart Deputy Chairman 30-Mar-07 3 years 6 months Senior Independent Director; D S Jenkins Chairman of Audit Committee 31-Jan-06 3 years 6 months G J Potts 01-Aug-06 3 years 6 months T K Morgan CBE Chairman of Remuneration Committee 01-Jul-09 3 years 3 months L Hirst CBE 01-Feb-10 3 years 3 months

(measured asRPI)plus4%perannum.Theschemepermitsthe grant ofshare appreciation rights and the settlement of theoptions period– average growthinearningspershareoverthethree-year mustexceedinflation vesting to thescheme approved threshold by theESOShasasingleperformance shareholders for atvesting the2007AGM, to purposes) section ofthe scheme. Overall,awardsarelimited thescheme.Abovein theapproved £30,000, element of optionsareawardedundertheunapproved(forHMRC shares of£30,000The schemehasbeenapproved toan individuallimit can by HMRCandoptions beawarded over teamsix monthswhoarepartoftheleadership ofthegroup(includes participate inthe LTIP.Currently,2001ESOS isusedtoretain,reward and motivate employees withcontinuous serviceof wh under the2001ESOSisgenerallyfocusedtowardsemployees The shareoptions detailedinTable4of below mainBoardleveland proposestocontinuewithawards onthe basisexplained above. Notice ofAGM.TheBoardfeelsthattheschemecontinues toofferincentive andmotivationtothose employees shareof outstanding Nopriceispayableuponaward appreciation inrespectof unapproved rights. options with The 2001ESOS toallemployeesofthegroup.Theaward ofoptions isadiscretionaryschemeandthereforenotopen ESOS’) ShareOption Scheme (‘2001 Executive 2001 the Company. arefoundin Furtherdetailsofthescheme the Noticeof AGM. introduction of (‘2011 SIP’) anewShareIncentive salarytopurchaseshares which Plan in allowsemployeestousetheir which can be foundinthe equity participation for allemployeesand proposesthe introducti Following areview bytheRemuneration Committee,theBoardcontin not begranted underthe2001SAYE Scheme rulesafterSeptember 2011, when thescheme expires. have been issuedtoanyDirectorsof thethree-yearperiod.No options under introduction ofnewESOSrules (‘2011ESOS’) whichare broadly consistent withthe2001 ESOS, asdetailedinthe As aresultofthereviewequity schemesbytheRemunerationCommittee, theBoardisrecommendingan 2001 ESOS. approved for HMRC purposes. Salarydeductionsaremadeand savings the areusedtopurchase options atthe end The 2001SAYE Schemeisthe Company’s non-discretion SAYE SAYE’) Scheme (‘2001 2001 Section B below. ESOS andthe performance conditions that appliedatthepercentage dateofgrant growth requireda inthe schemes as detailed. The interests of the Executive 4and5of schemes asdetailed. Directorsinterests of the is setoutinTables ineachofthese The schemes out below.TheBoardisproposingthe renewal ofschem to ensuretheir Thegroup currentlycontinued effectiveness. operatesthreeequity-basedincentiveschemes asset During thereporting reviewedtheperiod, theCommitteehasthoroughly Company’s incentiveschemes share-based Equity-based incentive schemes (PSOR\HHVKDUHVFKHPHV  The Committeemayalsodecidetograntcash-based awardsofan joint-ownership structureorthrough direct grants, inthe incentivising Executive Directors therefore notopen toallemployeesofthegroup.TheLTIPisfocusedon The LTIPisadiscretionary schemeand Long-term Incentive Plan (‘LTIP’) it istheCommittee’scurrent policy th Company’sor inexcessof10%perannum earningsper shareequalto compound overtheperiod from the dateof for awardsof up to250% of any employee’s annual base salary. financial yearis200% ofannualcircumstances, basesalary.In exceptional suchasrecruitment, therulescurrentlyallow The upperlimitonthemarket value(as discretion ofthe Committee. event ofa change ofcont practice, contain provision forpro-rata vestingintheev Awards are not transferable, except ondeath,andare not pensionabl an award. individual recipientelecting to payincomerequired forthegrant taxandnational of whereappropriate)is insurance, the current LTIP after26July2017,when thecurrentscheme expires.Nopayment(otherthanin respect ofany satisfy share-based awardsin intend cash, todoso.Anawardmay althoughnot itdoes not begrantedcurrently under been no grants toDirectorsunder the 2001 ESOS (both the sametime.SincegrantMcGregor-Smith toRuby in Table4ofSectionB,thereand Suzanne have Baxterdetailed any otherthe awardsto memberDirectors detailedbelowarethesameasfor ofthe schemes who received awards at grant the ofthe option option tothedatefirst becameexercisable.Theperformanceconditions relating onwhich to rol of the group, awards will be pro-ratedboth rol ofthegroup,awardswillbe Notice ofAGM.Inadditionto theintroduction ofthe 2011 SAYE,theBoard proposesthe and seniormanagement. Awardsunder at equity-basedincentives for Directors willbebasedsolelyuponLTIPawards. at grant)ofawards thatanindiv Section Bwere granted toExecutiveDirectors prior undertheunapprovedpart andtheHMRC-approved part), and ary option schemeary open ent of retirement, redundancy, form of nil-cost options,cond e rules whereindicatedbelowandth 100% of an individual’s base salary.Following changes o arebelowmainBoard levelandwhodonot on of new SAYE Scheme rules(‘2011SAYE’), detailsof equivalent value equivalent toshare-based awardsorto seniormanagers,managers and teamleaders). ues to believe that theSAYE Schemeencouragesues tobelievethat e. Theschemerules,inlinewith standard industry idual Executive Directormay receive inany the LTIPmaybemade,eitherthrough a fortimeand performance, subjecttothe the2001SAYEScheme.Anawardmay to alleligibleemployeesandis itional sharesorforfeitableshares. disabilityand/ordeath.Inthe to2007under e introduction of new Annual Report and Accounts 2011 Accounts and Report Annual the2001 MITIE Group PLC PLC Group MITIE

Accounts 65 64 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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The Committee continues to believe that EPS is the most appropriate long-term performance measure for MITIE as it is aligned with the group’s strategy and KPIs. This performance criterion has the advantages of simplicity and transparency which the Committee believes enhance the LTIP’s effectiveness as an incentive. Awards will normally vest after three years provided that certain performance criteria have been met. All awards are subject to performance conditions that require adjusted EPS, less inflation (measured by the retail prices index – RPI), to exceed certain performance thresholds over a three-year period. Where EPS growth is less than a ‘lower performance threshold’ no awards will vest, awards vest in full when EPS growth is equal to, or more than, an ‘upper performance threshold’, vesting is on a straight-line basis for performance between these levels. For LTIP awards granted in 2010, the lower performance threshold (at which 25% of an award vests) is RPI + 5% per annum and the upper performance threshold is RPI + 10% per annum. Table 5 in Section B provides details of the performance targets governing the vesting of LTIP awards granted in prior years. As announced on 30 March 2010, the Committee approved the accelerated vesting of LTIP awards granted in 2007, in line with the plan rules. This decision was taken by the Committee after thorough and considered reflection and did not result in any additional costs to the Company. The upper performance threshold applicable to the 2007 LTIP award was assessed to have been achieved and consequently the awards granted in 2007 vested in full. On 26 July 2010 (the normal vesting date), the Committee assessed the extent to which the performance conditions applicable to the award had been satisfied, confirming that no shares were to be clawed-back and approved the transfer of legal title. LTIP awards granted to, and exercised by, the Executive Directors are set out in Table 5 of Section B below. Share dilution The Company manages dilution rates within the ABI guidelines of 10% of issued Ordinary share capital in respect of all-employee schemes and discretionary schemes (the LTIP, ESOS and SAYE) and 5% in respect of discretionary schemes (the LTIP and ESOS). In calculating compliance with these guidelines the Company allocates available ‘headroom’ on a ten-year flat-line basis, making adjustments for projected lapse rates and projected increases in issued share capital. LTIP awards are satisfied through the market purchase of shares held by the MITIE Group PLC Employee Benefit Trust 2007 and the MITIE Group PLC Employee Benefit Trust 2008. The potential dilution of the Company’s issued share capital is set out below in respect of all outstanding awards granted under the Company’s equity-based incentive schemes which are to be satisfied through the allotment of new shares. Table 4: Share dilution at 31 March 2011

Current total dilution All share plan (maximum 10%) 8.1% Discretionary share plans (maximum 5%) 4.3%

7RWDOVKDUHKROGHUUHWXUQ The graph below shows the total shareholder return performance of MITIE shares compared with the FTSE 250 and FTSE 350 Support Services indices over a five-year period to 31 March 2011. The Committee is of the opinion that these comparators provide a clear picture of the performance of MITIE relative to a range of companies of comparable size as well as a specific group of companies within the same sector. Total shareholder return is calculated according to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and assumes that all dividends are reinvested. The market price of the Company’s shares as at 31 March 2011 was 196.5p. The highest and lowest prices during the year were 241.1p and 188.7p respectively.

175 MITIE FTSE 250 150 FTSE 350

125

100 TSR (rebased to 100)

75

50 Apr 2006 Apr 2007 Apr 2008 Apr 2009 Apr 2010 Apr 2011 osn 5202 25 2 14 0 2 522 0 2 103 2 13 retired on 31March2011. Goodman Roger 1 Note: W Robson N RGoodman R McGregor-Smith – 64 – 36 – – Table 3: Defined benefit pension schemetransfervalues retired on 31March2011. Goodman Roger 1 Note: – – 282 – – W Robson N RGoodman 352 – – R McGregor-Smith – – 16 1,409 16 – – 1,759 – 12 – Table 2: Defined benefit pension schemebenefits – – 3. to theindividualDirector)aresetoutinTable 61 40 – schemes(whichcalculated inamannerconsistentwithretirementbenefit donot represent a sumpaidorpayable 16 out inTable2below.Thetransfer values of the Directors’ accrued benefits underthedefined benefit pensionscheme The pensionbenefits ofDirectors who are members ofthe MITIEGroupPLCDefinedBenefit PensionScheme areset 63 77 – 45 3HQVLRQ 40 12 79 306 Thefeesinconsideration forthe services of TerryMorganCBEwere paid to TKM Management ServicesLimited. 3 140 retired on 31March2011. Goodman Roger 2 Group PLC2.5pshares. MITIE into Deferred 98 1 Note: 306 316 Total 123 L Hirst 316 T KMorgan 490 G Potts D SJenkins 490 I RStewart R Matthews Non-Executive Directors W Robson N RGoodman S CBaxter R McGregor-Smith Executive Directors Table 1: Directors’remuneration during theyear. Table 1provides orreceivable detailsofDirectors’ byeachpersonwhoserved remunerationpaidto asaDirector 'LUHFWRUV·UHPXQHUDWLRQ Section B: Information subject to audit $XGLWHGLQIRUPDWLRQ CBE 40––––– CBE 1 1 2 3 3 3 30 2 5902 0 549 31 27277 91 16 12 59 74 297 297 45–––––

salary/fees £’000 Base Base Performance earned related in year bonus £’000 Performance 31 March 2010 2010 31 March Transfer values deferred in related shares bonus £’000 £’000 1 contributions supplement 31 March 2010 2010 31 March in lieuof pension Contributions made bythe Salary £’000 Accrued Director Director pension £’000 £’000 Contributions 432 34 to pensions schemes pension during £’000 pension over Increase in Increase in – accrued accrued the year the year £’000 £’000 £’000 Benefits £’000 £’000 Transfer valueof Real increasein inflation, netof increase (after Annual Report and Accounts 2011 Accounts and Report Annual contributions)

accrued pension pension £’000 £’000 3,902 1,229 Total £’000 140 778 790 755 2011 40 45 40 40 45 31 March2011 31 March2011 MITIE Group PLC PLC Group MITIE Transfer value Accrued pension 3,615 1,157 Total £’000 £’000 £’000 596 641 126 140 676 800 676 2010 33 37 15 40 45 40 34 7

Accounts 67 66 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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The benefits of the Executive Directors who are members of the MITIE Group PLC Defined Benefit Pension Scheme are based on a pensionable salary capped at £123,600. The Company made contributions to the group’s defined benefit scheme on behalf of the three Directors who are members of the scheme at a rate of 10% (2010: 10%) of the value of the benefit cap of £123,600. In addition, the three directors received a salary supplement of 20% of salary (2010: 20%) in lieu of pension contributions following approval of the Remuneration Committee, in order to bring the value of their benefits in line with market practice. Suzanne Baxter is not a member of the MITIE Group PLC Defined Benefit Pension Scheme as the scheme was closed to new entrants in 2005, before she joined the group. It is the intention of the Remuneration Committee that the value of the pension benefits provided to Suzanne Baxter should mirror the value of the pension benefits provided to the other Executive Directors under the capped defined benefit arrangements, albeit that her benefits are provided through a separate defined contribution arrangement. Following an assessment of the value of her defined contribution pension scheme assets as at 31 March 2010, no pension contributions were required for Suzanne Baxter for the year ended 31 March 2011 (2010: 13.5% of base salary). In addition, Suzanne Baxter received a salary supplement of 20% of base salary (2010: 20%) in lieu of pension contributions following approval of the Remuneration Committee, in order to bring the value of her benefits in line with market practice.

6KDUHRZQHUVKLS In accordance with the Register of Directors’ interests, the rights of the Directors to subscribe for and their holdings of shares in MITIE Group PLC are as set out in Tables 4, 5 and 6. Table 4: Directors’ interests in options granted under the MITIE Group PLC 2001 Executive Share Option Scheme

ESOS options Granted Lapsed Exercised ESOS options Exercise outstanding at during during during outstanding at price 1 April 2010 the year the year the year 31 March 20111 p Exercisable between R McGregor-Smith Unapproved scheme 100,000 – – – 100,000 162 06/08 06/15 Unapproved scheme 100,000 – – – 100,000 191 06/09 06/16 S C Baxter Unapproved scheme 35,000 – – – 35,000 191 06/09 06/16 Approved scheme 15,000 – – – 15,000 191 06/09 06/16

1 The market price of the Company’s shares as at 31 March 2011 was 196.5p. The highest and lowest prices during the year were 241.1p and 188.7p respectively. Table 5: Directors’ interests in nil-cost options granted under the MITIE Group PLC 2007 Long Term Incentive Plan

LTIP options Granted during Lapsed Exercised LTIP options Exercise outstanding at the year at during during outstanding at price Year of grant1 1 April 2010 223.24p/share the year the year2 31 March 2011 3 p Exercisable between R McGregor-Smith 2007 145,440 – – 145,440 – Nil-cost 03/10 03/11 2008 409,894 –– – 409,894 Nil-cost 06/11 06/12 2009 430,338 –– – 430,338 Nil-cost 06/12 06/13 2010 – 438,989 – – 438,989 Nil-cost 06/13 06/14 S C Baxter 2007 102,201 – – 102,201 – Nil-cost 03/10 03/11 2008 273,262 –– – 273,262 Nil-cost 06/11 06/12 2009 282,847 –– – 282,847 Nil-cost 06/12 06/13 2010 – 283,103 – – 283,103 Nil-cost 06/13 06/14 N R Goodman4 2007 94,340 – – 94,340 – Nil-cost 03/10 03/11 2008 129,564 –– – 129,564 Nil-cost 06/11 06/12 2009 134,422 –– – 134,422 Nil-cost 06/12 06/13 2010 – 133,041 – – 133,041 Nil-cost 06/13 06/14 W Robson 2007 94,340 – – 94,340 – Nil-cost 03/10 03/11 2008 129,564 –– – 129,564 Nil-cost 06/11 06/12 2009 134,422 –– – 134,422 Nil-cost 06/12 06/13 2010 – 137,072 – – 137,072 Nil-cost 06/13 06/14

Note: 1 The performance criteria applicable to the 2007 and 2008 awards are lower and upper performance thresholds of RPI+5% p.a. and RPI+14% p.a. respectively. The performance criteria applicable to the 2009 and 2010 award are lower and upper performance thresholds of RPI+5% p.a. and RPI+10% p.a. respectively. 2 The options granted in 2007 were approved to vest and were exercised on 30 March 2010. The Committee assessed the extent to which the performance conditions applicable to the award and confirmed that these had been satisfied on the normal vesting date of 26 July 2010. The market price on exercise was 223.9p. 3 The market price of the Company’s shares as at 31 March 2011 was 196.5p. The highest and lowest prices during the year were 241.1p and 188.7p respectively. The Directors acquired a conditional joint beneficial interest with the MITIE Employee Benefit Trust 2008 in the shares awarded under the LTIP in 2008, 2009 and 2010. The full beneficial interest will transfer to the Director only if the performance criteria applicable to the award are met. 4 Roger Goodman retired on 31 March 2011. Chairman RemunerationCommittee Terry Morgan COr This reportwas approved by the Board and hasbeensignedonitsbehalfby: to participatein anyMITIEModelinvestments inthefuture. interests have beenacquiredbyDirectors since 2004andit were acquired undertheMITIEModel,furtherdetailsofwhich are given intheDirectors’ reporton page 57.Nosuch capital ofcertain oftheCompany’s subsidiary companies. The interestsofDirectorsinthesesubsidiarycompanies Table 7above detailsthebeneficialinterestsof MITIE TransportServicesLtd R McGregor-Smith Table 7: Directors’interestsinMITIEsubs retired on 31March2011. Goodman Roger 2 the of Aproportion shares settle on 8June2010to weresold theaccelerated the200 vesting of tax liabilitiesarisingfrom 1 Note: L Hirst T KMorgan G Potts D SJenkins I RStewart R Matthews Non-Executive Directors W Robson N RGoodman S CBaxter R McGregor-Smith Executive Directors Table 6: Directorshareownership  CBE

CBE CBE

2

idiary companies(under the MITIE Model) theDirectors (whowere inoffi dinary sharesof£1each is the Company’s policy thatDirectorsis theCompany’s will notbeentitled Number ofOrdinaryMITIEshares beneficially ownedasat ce on31March 2011) intheshare 31 March2011 2,020,000 1,555,835 7 LTIP award. award. 7 LTIP 954,542 100,000 341,071 15,000 15,000 50,000 71,230 25,000 25,000 Nil

1 Number ofOrdinary MITIE shares 31 March2011 Annual Report and Accounts 2011 Accounts and Report Annual Number of beneficially owned as at shares 1 April 2010 (or date date of (or 1 April2010 900 appointment iflater) MITIE Group PLC PLC Group MITIE 2,020,000 1,595,053 1 April2010 Number of 993,761 100,000 112,201 399,376 15,000 50,000 shares 900 Nil Nil

Accounts 69 68 Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

,QGHSHQGHQWDXGLWRUV· UHSRUWWRWKHPHPEHUVRI0,7,(*URXS3/& For the year ended 31 March 2011

We have audited the Group financial statements of MITIE Opinion on other matters prescribed by the Companies Act Group PLC for the year ended 31 March 2011 which 2006 comprise the Consolidated Income Statement, the In our opinion the information given in the Directors’ report Consolidated Statement of Comprehensive Income, the for the financial year for which the financial statements are Consolidated Balance Sheet, the Consolidated Statement prepared is consistent with the Group financial statements. of Changes in Equity, the Consolidated Statement of Cash Matters on which we are required to report by exception Flows and the related notes 1 to 37. The financial reporting We have nothing to report in respect of the following: framework that has been applied in their preparation is applicable law and International Financial Reporting Under the Companies Act 2006 we are required to report Standards (IFRSs) as adopted by the European Union. to you if, in our opinion: This report is made solely to the Company’s members, − certain disclosures of Directors’ remuneration specified as a body, in accordance with Chapter 3 of Part 16 of the by law are not made; or Companies Act 2006. Our audit work has been undertaken − we have not received all the information and so that we might state to the Company’s members those explanations we require for our audit. matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent Under the Listing Rules we are required to review: permitted by law, we do not accept or assume − the Directors’ statement contained within the Directors’ responsibility to anyone other than the Company and report: Corporate governance statement in relation to the company’s members as a body, for our audit work, going concern; for this report, or for the opinions we have formed. − the part of the Corporate governance statement Respective responsibilities of directors and auditor relating to the Company’s compliance with the nine As explained more fully in the Directors’ Responsibilities provisions of the June 2008 Combined Code specified Statement, the Directors are responsible for the for our review; and preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our − certain elements of the report to shareholders by the responsibility is to audit and express an opinion on the Board on directors’ remuneration. Group financial statements in accordance with applicable Other matters law and International Standards on Auditing (UK and We have reported separately on the parent company Ireland). Those standards require us to comply with the financial statements of MITIE Group PLC for the year ended Auditing Practices Board’s (APB’s) Ethical Standards 31 March 2011 and on the information in the Directors’ for Auditors. Remuneration Report that is described as having been Scope of the audit of the financial statements audited.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are Ian Krieger (Senior Statutory Auditor) free from material misstatement, whether caused by for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor fraud or error. This includes an assessment of: whether Bristol, United Kingdom the accounting policies are appropriate to the Group’s 23 May 2011 circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the Group financial statements: − give a true and fair view of the state of the Group’s affairs as at 31 March 2011 and of its profit for the year then ended; − have been properly prepared in accordance with IFRSs as adopted by the European Union; and − have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Equity holdersoftheparent Otheritemsareanalysed in Note 5. * – diluted – basic Earnings per share (EPS) Non-controlling interests Attributable to: Tax Finance costs Investment revenue Administrative expenses Cost ofsales Revenue Continuing operations theFor yearended 31 March2011 &RQVROLGDWHGLQFRPHVWDWHPHQW Grossprofit Operating profit Profit for the year Profit before tax Net finance costs Notes 4,6 4,6 3,4 12 12 10 9 8

(1,593.5 ,9. 1,891.4 – 1,891.4 196 1.)(208.4) (18.8) (189.6) 22 39p18.3p 18.6p (3.9)p (4.0)p 22.2p 22.6p 0. 1.)86.8 (18.9) 105.7 89.5 297.9 (18.8) – 108.3 297.9 2.)50(21.4) 5.0 (26.4) Before 93(13.9 79.3 93(13.9 (13.9 79.3 79.1 26 (0.1 (0.1 (2.6) (3.0) items* other . 0.4 – 0.4 . 0.2 – 0.2 £m ) items* Other £m (1,593.5 – ) ) ) ) ) 65.4 65.4 65.2 (2.7 (3.1 Total 2011 £m ) ) ) (1,444.0) – (1,444.0) – (1,444.0) 1,720.1 – 1,720.1 131 1.)(195.0) (11.9) (183.1) 92 26p16.6p 16.9p 19.2p (2.6)p 19.5p (2.6)p 276.1 – 276.1 2.)31(22.2) 3.1 (25.3) Before Before 64(.)57.5 66.4 (8.9) 64(.)57.5 57.1 66.4 (8.9) 66.0 (8.9) 17(20 79.7 91.7 (12.0) 81.1 93.0 (11.9) other items* 13 01 (1.4) (3.2) (0.1) (0.1) (1.3) (3.1) . 1.8 1.8 – . 0.4 0.4 – £m £m 2010

Annual Report and Accounts 2011 Accounts and Report Annual Other items* £m £m MITIE Group PLC PLC Group MITIE Total £m

71 70 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

&RQVROLGDWHGVWDWHPHQWRIFRPSUHKHQVLYHLQFRPH For the year ended 31 March 2011

2011 2010 Notes £m £m

Profit for the year 65.4 57.5

Other comprehensive income/(expense):

Actuarial losses on defined benefit pension schemes 35 (1.1) (13.1)

Exchange differences on translation of foreign operations 0.5 –

Losses on a hedge of a net investment taken to equity (0.4) –

Cash flow hedges:

Losses arising during the year (1.4) –

Reclassification adjustment for gains included in profit and loss 0.9 –

Tax (charge)/credit on items taken directly to equity (0.1) 4.2

Other comprehensive expense for the year, net of tax (1.6) (8.9)

Total comprehensive income for the financial year 63.8 48.6

Attributable to:

Equity holders of the parent 63.6 48.2

Non-controlling interests 0.2 0.4

Deferred taxliabilities Retirement benefit obligation Provisions Financing liabilities Non-current liabilities Provisions Financing liabilities Current taxliabilities Trade andotherpayables Current liabilities Cash andcash equivalents Trade andotherreceivables Inventories Current assets Deferred taxassets Trade andotherreceivables Property, plant andequipment Other intangibleassets Goodwill Non-current assets At 31March2011 &RQVROLGDWHGEDODQFHVKHHW Net assets Total liabilities Total non-current liabilities Net currentassets liabilitiesTotal current Total assets Total currentassets Total non-current assets Notes 20 18 16 21 18 15 14 13 21 35 28 24 28 24 23

Annual Report and Accounts 2011 Accounts and Report Annual 1,083.9 (685.9) (229.3) (204.8) (456.6) (432.9) 606.2 130.6 470.1 477.7 333.0 398.0 149.6 (13.3) (16.6) 11.6 59.3 64.7 (3.0) (8.2) (4.5) (2.6) 2011 5.5 9.1 £m MITIE Group PLC PLC Group MITIE (529.8) (141.0) (388.8) (106.2) (359.3) 893.2 433.2 460.0 363.4 405.6 324.0 (10.5) (11.2) (13.1) (15.0) 44.4 23.7 54.5 67.4 14.1 (9.9) (4.6) 2010 3.9 £m –

73 72 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

&RQVROLGDWHGEDODQFHVKHHW At 31 March 2011

2011 2010 Notes £m £m

Equity

Share capital 29 8.9 8.8

Share premium account 30 80.6 76.7

Merger reserve 30 85.1 80.3

Share-based payments reserve 30 7.5 5.4

Own shares reserve 30 (13.8) (8.1)

Other reserves 30 0.2 0.2

Hedging and translation reserve 30 (0.4) –

Retained earnings 223.8 192.3

Equity attributable to equity holders of the parent 391.9 355.6

Non-controlling interests 6.1 7.8

Total equity 398.0 363.4

The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2011. They were signed on its behalf by:

Ruby McGregor-Smith Suzanne Baxter Chief Executive Group Finance Director otoln neet – (4.8) – – – – – – – – – – 64.0 – (0.4) (28.9) – 1.2 (5.7) – – 192.3 – – – – – – – – – – – 4.8 – 0.2 – – – – 3.9 – – (8.1) controlling interests – movements in non- 0.1 – 5.4 – – Acquisitions andother – – – 2.1 Share-based 80.3 (24.7) – 167.4 (4.5) – Purchase ofown shares 76.7 – – 1.4 – payments – Dividends 8.8 – – Shares issued – – paid – income 0.2 – Total comprehensive – – 13.1 (5.2) At 31March 2010 – – 52.3 controlling 4.4 – 1.6 movements in non- 0.7 – – Acquisitions andother 67.2 interests 1.0 Share-based 24.4 – Purchase ofown shares 8.1 – payments Dividends Shares issued paid income Total comprehensive At 1April2009 the31 ended year For March2011 &RQVROLGDWHGVWDWHPHQWRIFKDQJHVLQHTXLW\ t3 ac 01 . 8. 8. . 1.)02(.)238 9. 61398.0 6.1 391.9 223.8 (0.4) 0.2 (13.8) 7.5 85.1 80.6 8.9 At 31March 2011

capital Share £m £m 48.2 – – – – – premium account Share £m £m reserve Merger £m payments reserve based based Share- £m reserve shares Own £m reserves Other £m translation Hedging reserve and and £m Retained earnings £m £m Attributable the parent holders of to equity 355.6 266.5 (28.9) (24.7) Annual Report and Accounts 2011 Accounts and Report Annual 63.6 66.1 48.2 (4.8) (5.7) (4.5) 3.3 8.8 4.0 £m – controlling interests 10.1 (1.7) (0.2) (0.2) (2.5) Non- 0.2 0.4 7.8 £m MITIE Group PLC PLC Group MITIE – – – – – – 363.4 276.6 (29.1) (24.9) 66.1 63.8 48.6 (6.5) (5.7) (4.5) (2.5) Total 3.3 8.8 4.0 £m

75 74 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

&RQVROLGDWHGVWDWHPHQWRIFDVKIORZV For the year ended 31 March 2011

2011 2010 Notes £m £m Operating profit 89.5 81.1 Adjustments for:

Share-based payment expense 34 3.3 4.0

Pension charge 35 3.5 3.8

Amendment to defined benefit pension scheme past service cost 35 (4.1) –

Pension contributions 35 (7.9) (6.3)

Depreciation of property, plant and equipment 15 17.9 16.4

Amortisation of intangible assets 14 10.8 5.9 Gain on disposal of property, plant and equipment (0.1) (0.4) Operating cash flows before movements in working capital 112.9 104.5 (Increase)/decrease in inventories (1.6) 0.2 Increase in receivables (70.8) (41.4) Increase in payables 62.0 36.3 Decrease in provisions – (1.2) Cash generated by operations 102.5 98.4 Income taxes paid (14.3) (22.2) Interest paid (2.5) (3.4)

Additional pension contribution 35 – (0.5) Net cash from operating activities 85.7 72.3 Investing activities Interest received 0.2 1.9 Purchase of property, plant and equipment (21.0) (21.7)

Purchase of subsidiary undertakings, net of cash acquired 31 (11.8) (157.9)

Purchase of other intangible assets 14 (5.0) (5.8) Disposals of property, plant and equipment 3.0 3.1 Net cash outflow from investing activities (34.6) (180.4) Financing activities Repayments of obligations under finance leases (3.2) (2.2) Proceeds on issue of share capital 2.7 3.1 Proceeds from share placing – 41.8 Repayments of loan notes on purchase of subsidiary undertakings (5.8) – Bank loans (repaid)/raised (3.7) 90.0 Private placement notes raised 100.2 –

Purchase of own shares 30 (5.7) (4.5)

Equity dividends paid 11 (28.9) (24.7) Non-controlling interests dividends paid (0.2) (0.2) Net cash inflow from financing 55.4 103.3

Net increase/(decrease) in cash and cash equivalents 106.5 (4.8)

Net cash and cash equivalents at beginning of the year 23.7 28.5 Effect of foreign exchange rate changes 0.4 – Net cash and cash equivalents at end of the year 130.6 23.7 Net cash and cash equivalents comprise: Cash at bank 130.6 23.7 130.6 23.7  Opening net(debt)/funds Increase in finance leases ofsubsidiaryundertakings Issue ofloannotesonpurchase Repayments ofloannoteson Non-cash movement inprivate placement notes andassociated hedges Private placement notesraised Bank loansrepaid/(raised) Effect of foreign exchange rate changes Net increase/(decrease) incash and cash equivalents Reconciliation of net cashflowto movements innet(debt)/funds the31 ended year For March2011 &RQVROLGDWHGVWDWHPHQWRIFDVKIORZV Closing net debt Decrease/(increase) innet debtduringthe year purchase ofsubsidiaryundertakings Notes 27

Annual Report and Accounts 2011 Accounts and Report Annual (100.2) 106.5 (76.5) (86.6) 10.1 (1.4) (3.9) (0.3) 2011 5.8 3.2 0.4 £m MITIE Group PLC PLC Group MITIE (86.6) (97.5) (90.0) 10.9 (4.8) (2.7) 2010 2010 £m – – – – –

77 76 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

1RWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV

%DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV Basis of preparation The group’s financial statements for the year ended 31 March 2011 are prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the European Union and therefore the group financial statements comply with Article 4 of the EU IAS Regulation. As more fully detailed in the Directors’ report: Corporate Governance statement, the g roup’s financial statements have been prepared on a going concern basis. The group’s financial statements have been prepared on the historical cost basis, except for certain financial instruments which are required to be measured at fair value. The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those followed in the preparation of the group’s annual financial statements for the year ended 31 March 2010 except for the adoption in the year of: − IFRS 3 ‘Business Combinations’ (revised 2008); adoption of this revised standard has resulted in changes to the initial recognition and subsequent measurement of deferred contingent consideration. The standard also requires all acquisition related costs to be recognised as period expenses in accordance with the relevant IFRS. The revised standard applies to all of the group’s business combinations that occurred on or after 1 April 2010. Adoption of this revised standard has resulted in a reduction in profit before tax of £0.3m and a reduction in net assets of £0.2m; and − IAS 27 ‘Consolidated and Separate Financial Statements’ (revised 2008); changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for within shareholders’ equity. No gain or loss is recognised on such transactions and goodwill is not re-measured. Any difference between the change in the non- controlling interest and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. Adoption of this revised standard had no impact on profit before tax but resulted in a reduction in net assets of £4.8m. The following amendments and interpretations are also effective for the first time in the current year but have had no impact on the results or financial position of the group: − IFRIC 17 ‘Distributions of Non-cash Assets to Owners’; − Amendments to IFRS 2 ‘Group Cash-settled Share-based Payment Transactions’; − IAS 28 ‘Investments in Associates’ – consequential amendments arising from amendments to IFRS 3; − IAS 31 ‘Interests in Joint Ventures’ – consequential amendments arising from amendments to IFRS 3; − Amendments to IAS 32 ‘Financial Instruments: Presentation’ – classification of rights issues; − Amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ – eligible hedged items; and − Amendments resulting from April 2009 Annual Improvements to IFRSs. The following standards and interpretations have been issued but are not yet effective (and in some cases have not yet been adopted by the EU): − Amendment to IFRIC 14 ‘Prepayments of a Minimum Funding Requirement’; − IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’; − Amendments to IFRS 7 ‘Financial Instruments: Disclosures’ – transfers of financial assets; − IFRS 9 ‘Financial Instruments’; − Amendments to IAS 12 ‘Income Taxes’ – recovery of underlying assets; − IAS 24 (Revised) ‘Related Party Disclosures’; − IAS 27 (Revised) ‘Separate Financial Statements’; − IAS 28 (Revised) ‘Investments in Associates and Joint Ventures’; − IFRS 10 ‘Consolidated Financial Statements’; − IFRS 11 ‘Joint Arrangements’; − IFRS 12 ‘Disclosures of Interests in Other Entities’; − IFRS 13 ‘Fair Value Measurement’; and − Amendments resulting from May 2010 Annual Improvements to IFRSs. The Directors do not anticipate that the adoption of these standards and interpretations will have a material financial impact on the group’s financial statements in the period of initial application. Interests of non-controlling interest statements of the accountingpoliciesused subsidiaries tobring from the dateonwhichcontrol istransferred outofthegroup.Wherenecessary, adjustments aremade tothefinancial Subsidiaries areconsolidated fromthedate on been eliminatedinfull. All inter-companybalances an allocated firsttoreducethe carrying amount ofanygoodwill allocated recoverable amountofthe cash-generating unitislessthan th disposal. On disposal of a subsidiarythe attributable amountofgoodwill is not reversed inasubsequent period. unit pro-rata onthebasisof for impairment annually,ormore frequently whenthere is benefit fromthesynergiesof the For thepurpose ofimpairment allocated testing,goodwillis to not subsequently reversed. losses. Itisreviewedforimpairmentatleastannually. Anyim Goodwill isinitiallyrecognisedasanassetatcostand fair valueofthe identifiableassetsand Goodwill arisingonconsolidationrepresents th Goodwill adjustments totheconting obligation, the economicoutflow was formed partoftheacquisitioncosts;contingent consideration wasrec IFRS 3(revised 2008) whichdifferinth Any businesscombinationspriorto1April2010wereaccounted forusingthestandards in placepriorto theadoption of consideration classified asequityarenotrecognised. instruments issuedbythegroup the aggregatedate ofexchange, incurredorassumed, ofassetsgiven, ofthefair andequity liabilities values, atthe The acquisitionofsubsidiariesisaccountedforusingthe Business combinations the consideration paidorreceiv goodwill isnotre-measured.Anydifference between a lossofcontrol areaccounted forwithinshareholders’ equity. value oftheassetsandliabiliti consolidated accounts tobringintolineanydissimilaraccounting Accepted AccountingPracticeacquired Dalkia companies). (withtheexceptionof the Adjustmentsaremadeinthe either inprofitorlossasachangetoother comprehensiv of thebusinesscombination ov Goodwill arisingonacquisitionisrecognised asanassetand which arerecognisedandmeasuredatfairvaluelesscoststosell. classified asheldforresaleinaccordance withIFRS recognised attheirfairvaluetheacquisitiondate,exceptfor non-current assets(ordisposalgroups) thatare contingent and The acquiree’sidentifiableassets,liabilities in thefairvalueofcontingent the acquisitiondate,aboutfactsandcircumstances that existed at additional within information,adjusted againstone yearfrom obtained thecostofacquisitionwheretheyresultfrom consideration arrangement, date.Subsequent changesin such fair measured atfairvaluetheacquisition values are Where applicable,theconsideration for an recognised immediatelyinprofitorloss. contingent and identifiable assets,liabilities liabilities contingent liabilitiesrecognised. If,afterreassessment, the gr h iaca ttmnso h aet ompany andsubsidiaries arepreparedinaccordancewithUKGenerally The financialstatementsofthe parent The consolidated thefinancial financialstatementscomprise statementsofMITIEGroupPLCandallitssubsidiaries. Basis ofconsolidation out below. The significant accounting Significant accountingpoliciesunderIFRS %DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV  policies adopted inthepreparationof group’sIFRS policiesadopted financial information areset ent wererecognisedaspartof goodwill. consideration the carrying amountofeacha es recognised. Changes in a parent’s ownersh es recognised.Changesinaparent’s consideration classified as an assetorliability consideration classifiedasan d transactions, including unrealised prof d transactions,includingunrealised er the group’s interest inthe netfair in exchangeforcontrol ed is recognised directly in equityandattributed totheownersof theparent. in ed isrecogniseddirectly combination. Cash-generating unitsto shareholders aremeasuredatthenon-con e followingrespects;transactioncostsdirectlyattributable tothe acquisition c more thannot likely andareliableestimatewasdeterminable; andsubsequent liabilities ofasubsidiaryatthe dateofacquisition. liabilities acquisition includes resultingfroma anyassetsorliabilities contingent e excessofthe costofacquisition whichcontrol istransferred tothegroup andceaseto beconsolidated 5 ‘Non-Current AssetsHeldforSaleandDiscontinuedOperations’, exceeds thecostof exceeds the change inthe non-controlling is subsequentlymeasured atcostlessaccumulatedimpairment of theacquiree.Acquisitioncostsincurredareexpensed. anindicationthattheun liabilities thatmeetthecondition liabilities sset intheunit. e income.Changesinthe pairment isrecognisedimmediatelyinprofitorlossand is oup’s interest inthenetfairvalueofacquiree’s initially measured atcost,beingtheexcessofcost initially measured e carryingamountofthe each of the group’s No gain or lossisrecognised into line withthoseusedbythegroup.into line included inthe policies that may exist betweenUK policies GAAPandIFRS. thatmayexist method.Thecostoftheacquisitionismeasuredat value oftheiden the acquisition date.the Allothersubsequentchanges ognised if,and only if its arising from inter-group transactions, haveits arisingfrominter-group totheunitandthen which goodwill hasbeenallocatedaretested An impairment loss recognised for goodwill is An impairment lossrecognisedforgoodwill is are recognised inaccordancewithIAS39, ip interestinasubsidiarythatdonotresult business combination,theexcessis trolling interest’s proportionofthe net fair trolling over thegroup’sinterest inthe determination ofthe it may beimpaired. Ifthe cash-generating units expectedto tifiable assets,liabilitiesand fair valueofcontingent interestand the fairvalueof unit, theimpairmentlossis , thegrouphadapresent on suchtransactions and s forrecognitionare to the other assetsofthe Annual Report and Accounts 2011 Accounts and Report Annual profit or loss on MITIE Group PLC PLC Group MITIE

79 78 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

1RWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV

%DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. Intangible assets Intangible assets identified in a business acquisition are capitalised at fair value as at the date of acquisition. Software and development expenditure is capitalised as an intangible asset if the asset created can be identified, if it is probable that the asset created will generate future economic benefits and if the development cost of the asset can be measured reliably. Following initial recognition, the carrying amount of an intangible asset is its cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are reviewed for impairment annually, or more frequently when there is an indication that they may be impaired. Amortisation expense is charged to administrative expenses in the income statement on a straight-line basis over its useful life. Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. Revenue represents income recognised in respect of services provided during the period (stated net of value added tax) and is earned predominantly within the United Kingdom. Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract at the balance sheet date. Revenue from time and material contracts is recognised at the contractual rates as labour hours and tasks are delivered and direct expenses incurred. In other cases, where services provided reflect a contractual arrangement to deliver an indeterminate number of acts over the contract term, revenue is recognised on a straight-line basis unless this is not an accurate reflection of the work performed. Where a straight-line basis is not appropriate, for example if specific works on contracts represent a significant element of the whole, revenue is recognised based on the percentage of completion method, based on the proportion of costs incurred at the balance sheet date relative to the total estimated cost of completing the contracted work. Revenue from long-term contracts represents the sales value of work done in the year, including fees invoiced and estimates in respect of amounts to be invoiced after the year end. Profits are recognised on long-term contracts where the final outcome can be assessed with reasonable certainty. In calculating this, the percentage of completion method is used based on the proportion of costs incurred to the total estimated cost. Cost includes direct staff costs and outlays. Full provision is made for all known or anticipated losses on each contract immediately such losses are forecast. Gross amounts due from customers are stated at the proportion of the anticipated net sales value earned to date less amounts billed on account. To the extent that fees paid on account exceed the value of work performed, they are included in creditors as gross amounts due to customers. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Leasing Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Any lease incentives are amortised on a straight-line basis over the non-cancellable period for which the group has contracted to lease the asset, together with any further terms for which the group has the option to continue to lease the asset if, at the inception of the lease, it is judged to be reasonably certain that the group will exercise the option. inwhichcase or crediteddirectly toequity, the intheincome statement,exceptwhen itsheet date.Deferred taxischargedor charged relatesto items credited asset is realised, basedupontaxratesand legislationthathavebeenasset isrealised, enacted orsubstantively enacted atthebalance Deferred taxiscalculatedat thetaxratesthat areexpected toapply it isnolonger probable that sufficient taxableprofitswillbe The carryingeach balance sheetdateandreducedtotheextent that amount ofdeferred taxassetsisreviewedat combination) of other assetsandliabilitiesina not recognisedifthetemporarydifferenc profits willbeavailableagainst whichdeductible temporarydi taxable temporary differences and deferred tax assets are recognised to the extent thatitisprobabletaxable temporarydifferencesanddeferred taxassetsarerecognisedtotheextent thattaxable and isaccounted forusingthe Deferred balancesheet method. aregenerally recognised liability tax liabilities forall thefinancialstatements and liabilitiesin Deferred taxistheexpected tobepayableorrecoverableondifferences between thecarrying amountsofassets enacted rates thathavebeenenactedby thebalance sheet date. orsubstantively further excludesitemsthatarenevertaxable ordeductibl income statement ofincome becauseitems or expense itexcludes thataretaxableordeductibleinotheryears and it Taxableprofitdiffersfrom netprofitThe taxcurrently asreportedinthe payableisbasedontaxableprofitforthe year. The taxexpense taxcurrentlypayableanddeferred represents the tax. sumofthe Taxation future contributions totheplan. resulting fromthiscalculation topastservicecost,is limited obligation asadjustedforunrecognisedpastservicecost,and asreduced bythefairvalueofscheme assets.Anyasset The retirement benefit obligat overthe amortised on untilthebenefitsbecomevested. average period a straight-linebasis Past servicecostisrecognisedimmediatelytotheextentthatbenefits arealready vested,andotherwiseis the statement of comprehensive income. adjustments arisingontheir acquisition,are are recognised infull Credit Method,withactuarialvaluationsbeing carriedout For thedefined benefitpension schemes,thecostofproviding benefitsusing theProjected isdetermined Unit Payments tothe definedcontribution schemes and arechargedstakeholder pension asanexpensetheyfalldue. employees. In addition,thegroupoperatesanumber of definedcontribution retirementbenefit schemesfor allqualifying which isfor afixed periodonly. group participates, thegroup accounts for itslegaland The groupoperates and participates inanumber ofdefined benefitschemes.of theschemes Inrespect inwhichthe Retirement benefitcosts shall berecognisedinth foreign operation, thedef differences arising equityinthegr arerecognised in directly average intosterlingat sheet date.Incomeandexpenses exchangeratesfortheperiod. aretranslated Exchange On consolidation, theassets and liabilities any exchange component of thatgainorloss isalsorecogniseddirectlyinequity. non-monetary items inrespectofwhich gains andlossesarerecogniseddirectlyinequity.Forsuchnon-monetary items, carried atfair value areincludedinprofitorlossfortheperiod exceptfordifferencesarising on theretranslationof are includedinprofitorlossfortheperiod. Exchange differencesarisingonthe retranslation settlementofmonetary ofmonetary items,andonthe items, historical costin aforeign currency are notretranslated. prevailing atthedatewhen thefairvaluewasdetermin Non-monetary itemscarriedatfairvaluethataredenominatedinforeign currencies aretranslatedat therates reported attheratesofexchange prevailing atthatdate. date oftransaction.Monetaryassets business. Transactions incurrenciesotherthan currency thefunctional are recordedat therateofexchange atthe prepared of thegroup’sThe financialstatementsofeach inthefunctionalcurrencyapplicabletothat businesses are Foreign currency %DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV  theperiodinwhichth e incomestatement. erred cumulative amount recognised in equityrelatingtothatparticularforeignoperation erred cumulativeamountrecognised ion recognised in the balance sheet represents the present value oftheion recognised definedbenefit inthebalancesheetrepresents thepresent and liabilities denominated inforei and liabilitiesdenominated and the corresponding tax bases usedin and thecorresponding e arises from goodwill or fromthe initial e arises from goodwill of thegroup’sof overseasoperation Exchange differences arising Exchange differences translated intosterlingatexchange ey occur. They are recognised outside profit an They arerecognisedoutside ey occur. transaction that affects neither the deferred tax is also dealt withinequity. deferred tax isalsodealt ed. Non-monetary items thataremeasured in termsof constructive obligations over the periodofits participation e. The group’s liability forcurrenttaxiscalculatedusing at eachbalancesheetdate.Actuarialgainsandlosses plus thepresentvalueofavailableref available toallowallorpart of theasset toberecovered. oup’s hedging andtranslation reserve.On disposalofa fferences canbeutilised.Suchassets and liabilitiesare in theperiodwhenliability issettledorthe onthe retranslationof non-monetary items gn currencies atthebalancesheetdateare s, including goodwill andfairvalue rates prevailingatthe balance recognition (otherthan the computationoftaxableprofit, tax profitnor the accounting profit. d lossandpresented in unds andreductionsin Annual Report and Accounts 2011 Accounts and Report Annual inabusiness MITIE Group PLC PLC Group MITIE

81 80 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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%DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is charged so as to write off the cost less expected residual value of the assets over their estimated useful lives and is calculated on a straight-line basis as follows: Freehold buildings and long leasehold property – over 50 years Leasehold improvements – period of the lease Plant and vehicles – 3–10 years Annually the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash- generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash- generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Inventories Inventories are stated at the lower of cost and net realisable value. Costs represent materials, direct labour and overheads incurred in bringing the inventories to their present condition and location. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and estimated selling costs. Provision is made for obsolete, slow moving or defective items where appropriate. Financial instruments Financial assets and financial liabilities are recognised on the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument. The group derecognises financial assets and liabilities only when the contractual rights and obligations are discharged or expire. Assets that are assessed not to be individually impaired are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables includes the group’s past experience of collecting payments, the number of delayed payments in the portfolio past the average credit period as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement. Financial assets comprise loans and receivables and are measured at initial recognition at fair value and subsequently at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised where there is objective evidence that the asset is impaired. Cash and cash equivalents comprise cash in hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial liabilities comprise certain trade and other payables and financing liabilities including bank and other borrowings and are measured at initial recognition at fair value and subsequently at amortised cost with the exception of derivative financial instruments which are either classified as fair value through profit and loss or may be accounted for using hedge accounting. Bank and other borrowings are stated at the amount of the net proceeds after deduction of transaction costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

reserve. Thegainorlossrelatingtoany recognised inothercomprehensive incom effective portion ofcha attributable toaparticularriskassociatedwitheitherrecognised Hedges areclassified ascash flowhedgeshedge theexposurewhen they tochangesincashflows thatare Cash flowhedges when the hedged item is recognised in profit or loss, in the same lineoftheincomestatement the astherecognised when the hedged itemisrecognisedinprofitorloss, recognised inothercomprehensiv in profit or loss immediately unless thederivative in profitorlossimmediatelyunless balance sheet dateandincludedasfinancialassetsorli entered intoandaresubsequentlyremeasuredtotheirfairvalue,determinedbyreferencemarket rates,ateach exchange. Derivative financial exchange contractstomanagethegroup’s exposuretofinancialrisksassociatedwithinterestratesand foreign The groupusesderivativefinancial instruments in Derivative financial instrum Equity instrumentsissuedbytheCompanyarerecordedatproceedsreceived,netofdirectissuecosts. %DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV  hedges, or hedges ofnetinvestmentsinforeignoperati The groupmay designate certainhe depends onthe natureofthe timingof thehedgerelationship. recognitioninprofitorloss in thesamewayasexchangedifferencesrelatingto foreignoperation asdescribed above. hedging instrument relatingto theeffective accumulated arereclassified portionof the inequity hedge toprofitorloss The gainorlossrelatingtoanyine hedge isrecognisedinoth for similarlytocash flow hedges. Anygain or lossonthehedg group’s share inthenetassets ofaforeign operation. Hedges ofnetinvestments inforeign operationsareaccounted Hedges areclassified asnetinvestment hedges hedgetheforeign whencurrency they exposuretochangesinthe Hedges of net investmen profit orloss. immediately in loss. Whenaforecast transactionisno that timeisaccumulatedinequityandrecognised exercised, ornolonger qualifies forhedge accounting.gain orloss Any Hedge accounting isdiscontinued whenthegrouprevokes th recognised inthelineofincomestatementitem attributabletothehedgedriskare relatingtothe hedgeditem. attributable to thehedged risk.Thechangeinthefairvalue ofthehedging instrument andthechangein hedged recorded inprofitorlossimmediately,together Changesinthe fa asset orliability. Hedges areclassified asfairvaluehedges the exposurewhen they tochanges hedge inthefair value ofarecognised Fair valuehedges changes in fair valuesor group documents whether the undertaking varioushedgetransactions. Furthermore, atthe inceptionofthehedge andonan ongoingbasis, the between the hedging instrument andthe hedg accounted forascashflow hedges. Attheinception ofthe hedgerelationship,the entity documentstherelationship discontinued when the group revo amount ofthe hedgeditemarising orlossfromthatdate. from the isamortisedtoprofit hedgedrisk he ornolongerqualifiesfor is sold,terminated,exercised, included intheinitialmeasur thegainsandlossesprev or anon-financial liability, hedged item.However,when the nges inthefairvalue ofderivativ cash flowsofthe hedged item. ts in foreign operations er comprehensive in incomeand accumulated ents and hedge accounting ement ofthe cost ofthe asset non-financial hedging instrumentthatis used instruments are initially recognised atfairvalue atthedatederivativecontractis instruments are initiallyrecognised ffective portion isrecognisedimmediatelyin ir value of derivatives that aredesignated ir valueofderivatives e income andaccumulated in arereclassified orlossintheperiods equity toprofit forecast transaction that ishedged kes the hedging relationship, the he dging instruments including derivativesdging aseitherfairvaluehedges,cashflow instrumentsincluding longer expected to occur, the gain orlos longer expectedto ineffective portion is recognisedimmediately in ineffective portionis e andaccumulated within inequity with any changesinthe with any ed item,along with itsriskmanagement objectivesand itsstrategyfor is designatedandeffective asahe cluding cross currencycluding interest rateswaps and forward foreign iously accumulatedinequityaretransferred from equityand iously when the forecast transactionisulti when the ons. Hedgesofforeignexchangerisk onfirmcommitments are es thataredesignatedand qualifyascashflowhedgesare abilities asappropriate.Theresultinggainorlossisrecognised abilities dge accounting.Thefairvalueadjustmenttothecarrying ing instrument relatingto the effective portionofthe e hedgingrelationship,th in ahedgingrelationshipishi asset forecasttransaction.The or liabilitya results intherecognition dging instrument expiresorissold,terminated, recognised inothercom fair valueofthehedgeditemthatare or non-financial liability. Hedge accounting Hedge or non-financialliability. is the group’stranslation and qualifyasfairvaluehedgesare thegroup’stranslation profit or loss. Gainsorlossesonthe s accumulated in equity isrecognised s accumulatedinequity dging instrument,in profit orloss.Amountspreviously e hedging instrumentexpiresor mately recognisedinprofit or ghly effective inoffsetting of a non-financialof asset prehensive income at Annual Report and Accounts 2011 Accounts and Report Annual and hedging reserve. and hedging and hedging which event MITIE Group PLC PLC Group MITIE

83 82 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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%DVLVRISUHSDUDWLRQDQGVLJQLILFDQWDFFRXQWLQJSROLFLHV Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Bid, mobilisation and pre-contract costs Rendering of services All bid costs are expensed through the income statement up to the point where contract award or full recovery of the costs is virtually certain. The confirmation of the preferred bidder for a contract by a client is the point at which the award of a contract is considered to be virtually certain. Costs incurred after that point, but before the commencement of services under the contract, are defined as mobilisation costs. These costs are capitalised and included within trade and other receivables on the balance sheet provided that the costs relate directly to the contract, are separately identifiable, can be measured reliably and that the future net cash inflows from the contract are estimated to be no less than the amounts capitalised. The capitalised mobilisation costs are amortised over the life of the contract, generally on a straight-line basis, or on a basis to reflect the profile of work to be performed over the life of the contract if the straight-line basis is not considered to be appropriate for the specific contract to which the costs relate. If the contract becomes loss making, any unamortised costs are written off immediately. Construction contracts In the case of construction contracts, pre-contract costs that are direct costs associated with securing a contract and which can be separately identified and measured reliably are included in the cost of the contract when the realisation of income from the contract is virtually certain. Their treatment is as for mobilisation costs above. Share-based payments The group operates a number of executive and employee share option schemes. For all grants of share options and awards, the fair value as at the date of grant is calculated using the Black-Scholes model and the corresponding expense is recognised on a straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest. Save As You Earn (SAYE) options are treated as cancelled when employees cease to contribute to the scheme, resulting in an acceleration of the remainder of the related expense. The group has taken advantage of the transitional provisions of IFRS 2 in respect of equity-settled awards and has applied IFRS 2 only to equity-settled awards granted after 7 November 2002 that had not vested before 1 April 2005.

&ULWLFDODFFRXQWLQJMXGJHPHQWVDQGNH\VRXUFHVRIHVWLPDWLRQXQFHUWDLQW\ Critical judgements in applying the group’s accounting policies In the process of applying the group’s accounting policies, which are described in Note 1 above, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements. Revenue recognition Revenue is recognised for certain project based contracts based on the stage of completion of the contract activity. This is measured by comparing the proportion of costs incurred against the estimated whole-life contract costs. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Measurement and impairment of intangible assets The measurement of intangible assets other than goodwill on a business combination involves estimation of future cash flows and the selection of suitable discount rates. Determining whether goodwill and other intangible assets are impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation involves an estimation of the future cash flows of cash-generating units and also the selection of appropriate discount rates to use in order to calculate present values. The carrying value of goodwill and other intangible assets is £397.7m (2010: £391.4m) at the balance sheet date; see Notes 13 and 14. Management do not consider that any reasonably foreseeable change in the key assumptions would result in an impairment. The sensitivityofdefin sheet dateis£126.8m(2010:£180.1m);seeNote35. benefitfuture returns obligations rates.Thepresentvalueofdefined on assetsand atthebalancefuture contribution of definedbenefit obligations isdependent onmaterial keyassumptionsincludingdiscount rates, mortality rates, management proposition withinane in previously which were FMbusinessandourduring theyear.On1April2010,acquiredDalkia Engineering Maintenance business, The financial databelowreflects theperformanceof primary segmental information. basisonwhichThe groupmanages the divisionbasis.Thesedivisionsare the group itsbusinessonaservice reports its Business segments %XVLQHVVDQGJHRJUDSKLFDOVHJPHQWV Total Construction contracts Rendering ofservices 5HYHQXH Mortality rate Consumer PriceInflation Retail PriceInflation Discount rate The measurement ofprov The group’sprovisions(perNote28)comprise deferredconti Measurementd ofprovisionsand &ULWLFDODFFRXQWLQJMXGJHPHQWVDQGNH\VRXUFHVRIHVWLPDWLRQ  and includedwithinthe Contracting of £201.2mand £4.9m have been excludedfromthe comparative data below forAsset Management In addition,revenueandoperating profit beforeother items fortheyearending 31March 2010 forEngineering for AssetManagementandincluded Engineering Maintenance of £344.8mand £15.5m respectively havebeen excludedfromthecomparativedatabelow reorganisation. Revenueand operating profit before other itemsforthe 2010 hasbeenadjustedtoreflectthe in respectofthe yearending31March The comparative databelow Management with effect from 25June2010. business toconsolidateitsproposition.TheacquiredDalkia Engineering Contracting offeringof ourAsset Manageme ed benefit pensionobligationstochang comparative period disclosuresforProperty Management. the AssetManagement divi isions anddefined benefit efined benefit pension obligations w operating division branded Techn within thecomparativeperioddisclosuresforTechnicalFacilities Management. obligations requires judgement. In obligations particular, the calculation sion, were restructuredtobringtogetherour technicalfacilities sion, were our four divisions in the organisational structures ourfourdivisionsinthe thatapplied nt divisionwas combinedwith ourProperty Management FM inIreland businesswasincorporatedintoFacilities ngent consideration and insurance reserve. es inprincipalactuarial assumptionsisshown below: XQFHUWDLQW\ year ending31March 2010 forDalkiaFMand ical FacilitiesManagement. Furthermore,the

Annual Report and Accounts 2011 Accounts and Report Annual assumption Change in +1 year 1,891.4 1,654.5 +0.5% (10.8) +0.5% +0.5% 05 (1.9) (3.8) –0.5% –0.5% –0.5% 236.9 2011 £m MITIE Group PLC PLC Group MITIE (decrease) 1,720.1 1,464.4 Increase/ in liability 255.7 14.6 2010 1.9 4.4 3.8 £m £m

85 84 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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2011 20102 Operating Operating profit before Profit profit before Profit Revenue other items1 Margin before tax Revenue other items1 Margin before tax £m £m % £m £m £m % £m Facilities Management 882.2 56.2 6.4 52.6 824.6 50.5 6.1 48.8 Technical Facilities Management 437.1 24.6 5.6 15.5 344.8 15.5 4.5 6.3 Property Management 509.7 21.4 4.2 13.0 496.2 25.1 5.1 23.0 Asset Management 62.4 2.0 3.2 1.6 54.5 1.9 3.5 1.6 Amendment to defined benefit pension scheme past service cost (Note 35) – 4.1 – 4.1 – – – – Total 1,891.4 108.3 5.7 86.8 1,720.1 93.0 5.4 79.7

1 Other items are analysed in Note 5. 2 Re-presented in the structure which applied during the year.

The revenue analysis above is net of inter segment sales which are not considered significant. No single customer accounted for more than 10% of external revenue in 2011 or 2010. In the year ending 31 March 2010 the group early adopted the Improvement to IFRS 8 issued in April 2009 which clarified that a measure of segment assets should be disclosed only if that amount is regularly provided to the chief operating decision maker and consequently no segment assets are disclosed.

Geographical segments

2011 2010 Operating Operating profit before Profit profit before Profit Revenue other items* Margin before tax Revenue other items* Margin before tax £m £m % £m £m £m % £m United Kingdom 1,866.4 107.3 5.7 86.1 1,716.2 93.0 5.4 79.7 Other countries 25.0 1.0 4.0 0.7 3.9 – – – Total 1,891.4 108.3 5.7 86.8 1,720.1 93.0 5.4 79.7

* Other items are analysed in Note 5.

2WKHULWHPV The group separately identified and disclosed restructuring and acquisition related items (termed ‘other items’).

2011 2010 £m £m Administrative expenses Restructuring costs relating to integration of Dalkia FM, EPS Ltd and Dalkia FM in Ireland 4.8 6.6 Restructuring costs of Property Management businesses 4.8 – Acquisition costs 0.3 – Amortisation of acquisition related intangibles 8.9 5.3 18.8 11.9 Finance costs Unwinding of discount on deferred contingent consideration 0.1 0.1 Other items before tax 18.9 12.0 Tax on other items (5.0) (3.1) Other items net of tax 13.9 8.9

 amounts, total were57% non-auditfees payabletotheCompany’s auditors pension scheme andtrusts,£nil(2010:£97,000) offees were and shouldbe regarded as Details ofDirectors’ remuneration andinterests Share-based payments(Note 34) Other pension costs Social securitycosts Wages andsalaries Their aggregateremunerationcomprised: The numberofpeopleemployedat31Marchwas: Re-presentedinthe structure which duringtheyear, applied see Note4. * Asset Management Property Management Technical FacilitiesManagement Facilities Management The averagenumberofpeopleemployedduringthe financial yearwas: Number ofpeople 6WDIIFRVWV In additiontotheamountsshown auditorsreceivedfeesof£ above the Non-audit fees Other services Tax services Total auditfees Other auditrelatedservicestothegroup subsidiaries pursuanttolegislation Fees payableto theCompany’s auditorsandtheirassociatesfortheaudit oftheCompany’s Fees payableto theCompany’sauditorsforauditof annual accounts A detailedanalysisofauditors’remuneration isprovidedbelow: Staff costs(Note 7) plantandequipmentGain on disposal ofproperty, Amortisation of intangibleassets (Note14) Depreciation of property, plant andequipment(Note15) Operating profithasbeenarriv 2SHUDWLQJSURILW 

Total group Total Total group an integralpart of thisNote. ed ataftercharging/(crediting): are provided in theauditedsectionof the Directors’ remuneration report incurred inrelationtoacquisitions.Includingthese 19,000 (2010: £16,000) (2010: 31%) of theyear’s total auditfees. for the audit ofthegroup Annual Report and Accounts 2011 Accounts and Report Annual 61,906 50,130 58,860 1,088 842.8 3,877 4,682 922.5 922.5 69.0 10.8 17.9 (0.1) £’000 171 403 261 142 685 625 2011 2011 2011 2011 3.3 7.4 50 10 £m £m MITIE Group PLC PLC Group MITIE 53,631 46,239 56,579 878.6 797.7 878.6 3,734 3,462 11.0 65.9 16.4 £’000 (0.4) 675 600 550 196 2010* 2010 2010 2010 5.9 4.0 75 28 47 50 £m £m –

87 86 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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,QYHVWPHQWUHYHQXH 2011 2010 £m £m Interest on bank deposits 0.2 1.6 Other interest receivable 0.2 0.1 Fair value movement on derivative financial instruments – 0.1

0.4 1.8

)LQDQFHFRVWV 2011 2010 £m £m Interest on bank and other borrowings 3.1 3.0 Interest on obligations under finance leases 0.3 0.3 Loss arising on derivatives in a designated fair value hedge 2.7 – Gain arising on adjustment for the hedged item in a designated fair value hedge (2.9) – Fair value movement on other derivative financial instruments 0.1 – Unwinding of discount on deferred contingent consideration 0.1 0.1 Total interest expense 3.4 3.4 Less: amounts included in the cost of qualifying assets (0.3) (0.2) 3.1 3.2

Borrowing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are calculated by applying an average capitalisation rate of 1.4% (2010: 0.9%) to expenditure on such assets.

7D[ 2011 2010 £m £m Current tax 15.7 23.8 Deferred tax (Note 21) 5.7 (1.6) 21.4 22.2

Corporation tax is calculated at 28.0% (2010: 28.0%) of the estimated assessable profit for the year. The charge for the year can be reconciled to the profit per the consolidated income statement as follows:

2011 2010 £m £m Profit before tax 86.8 79.7 Tax at the UK corporation tax rate of 28.0% (2010: 28.0%) 24.3 22.3

Expenses not deductible for tax purposes 0.8 0.2 Impact of changes in statutory tax rates (0.5) – Tax losses not recognised/previously unrecognised – (0.2) Prior year adjustments (3.2) (0.1) Tax charge for the year 21.4 22.2

In addition to the amount charged to the consolidated income statement, tax relating to retirement benefit costs, share-based payments and hedged items amounting to £0.1m has been charged directly to equity (2010: credit of £4.2m). Number ofshares with certaininstitutionaland Following the shares acquisitionof Dalkia FMin2009,19.0mnew of2.5peach Ordinary were placedon 12August 2009 shares reserve (see Note30). The weighted average number Ordinarysharesinissueduringtheyear of excludesthoseaccounted forintheOwn Diluted earningspershare Diluted earningspershare – before other items Basic earnings per share Basic earnings per share –before other items Weighted average shares forthenumber purposeof Ordinary ofdilutedEPS Effect ofdilutivepotent Weighted average shares forthenumber purposeof Ordinary of basic EPS * holdersoftheparentNet profitattributable toequity Other itemsnet oftax* oftheparentNet profitattributable before otheritems* toequityholders The calculationofthebasic and diluted earningspershare Basic anddiluted have been calculated in (DUQLQJVSHUVKDUH inthesefinancialstatements. included asaliability attheAnnualGeneral Meetingandhas not beenThe proposed finaldividendissubjecttoapprovalbyshareholders 31 March2011of4.9p(2010: 4.1p) pershareProposed final dividendfortheyearended Interim dividendfortheyear ended 31March20 Final dividendfortheyearended31March 2010 Amounts recognisedasdistributionstoequityholdersintheyear: 'LYLGHQGV 

Otheritemsareanalysed in Note 5. ial Ordinaryshares:shareoptions other qualified investors. EPS isbasedonthe followingdata: 11 of 4.1p (2010:3.7p)pershare of 4.1p(2009:3.6p)per share accordance withIAS 33‘EarningsPerShare’.

Annual Report and Accounts 2011 Accounts and Report Annual 356.9 350.5 (13.9) million 28.9 18.3 22.2 18.6 22.6 65.2 79.1 17.5 14.5 14.4 2011 2011 2011 2011 6.4 £m £m p MITIE Group PLC PLC Group MITIE 344.4 338.4 million 24.7 16.6 19.2 16.9 19.5 57.1 66.0 14.5 11.6 13.1 (8.9) 2010 2010 2010 2010 6.0 £m £m p

89 88 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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£m Cost At 1 April 2009 201.2 Acquisition of subsidiaries 103.6 Acquisition of non-controlling interests 18.7 Change in deferred contingent consideration for subsidiaries acquired in prior years 0.5 At 1 April 2010 324.0 Acquisition of subsidiaries 11.6 Impact of foreign exchange 0.4 Change in deferred contingent consideration for subsidiaries acquired in prior years (3.0) At 31 March 2011 333.0

Accumulated impairment losses At 1 April 2009 – At 1 April 2010 – At 31 March 2011 –

Carrying amount At 31 March 2011 333.0 At 31 March 2010 324.0

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. Goodwill has been allocated to CGUs, which align with the business segments, as this is how goodwill is monitored by the group internally.

2011 2010* Cost £m £m Facilities Management 160.0 151.3 Technical Facilities Management 82.7 81.7 Property Management 85.8 86.5 Asset Management 4.5 4.5 333.0 324.0

* Re-presented in the structure which applied during the year, see Note 4. The group tests goodwill at least annually for impairment. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The group prepares cash flow forecasts derived from the most recent financial budgets approved by the Board for the next five years and extrapolates cash flows for the following five years based on an estimated growth rate of 2% (2010: 2%) per annum. This rate does not exceed the average long-term growth rate for the relevant markets. risk thataresignificantly differentfromthose experienced by thegroup as awhole. hrefrteya 662.3 – 1.0 6.6 5.6 4.3 of betweenthey five andtenyears,havebeenbrought once intouse. which currently rangefrom threetotenyears. Software anddevelopment costsareamortised overtheir usefullife include acquiredsoftware,tradenamesandnon-compete agreements and areamortised over theirusefullives anticipated tocurrently rangefromsixtoeightyears.Otheracquisitionrelated intangibles generate benefits. These their oftimeover which useful livesbasedonthe theyCustomer relationshipsareperiod amortisedover are – – 0.1 14.0 Carrying amount Charge forthe year Charge forthe year At 1April2009 Amortisation 0.6 Impact of foreign exchange 8.9 Additions 2.4 Additions 34.2 At 1April2009 Cost 2WKHULQWDQJLEOHDVVHWV the CGUs. No reasonablyforeseeablechangein Asset Management Property Management Technical FacilitiesManagement Facilities Management Company’s CGUs,Weighted Average whicharebasedonthe The ratesusedtodiscounttheforecastcash flowsfrom *RRGZLOO  ote roup’s treasuryfunctionsand borrowing linestofund to the to all Cost ofCapital,areshownbelow.Thesamerateisapplied t3 ac 00 837.9 38.3 At 31March 2010 t1Arl21 991.0 9.9 8.9 48.2 March 2011 31 At At 1April2010 March 2011 31 At At 1April2010 At 31 March 2011 March 2011 31 At g the key assumptions would result in animpairment resultin the key assumptionswould theiroperationsandthatno relationships Customer CGUs, reflecting that CGUs, reflecting all CGUshave the sameaccess 653.3 16.5 9.5 50.7 426.2 34.2 custo eae Acquisition related £m Other £m acquisition CGUdemonstrateslevelsof of the goodwill ofany related 14.0 46.2 43.1 40.4 19.8 10.9 60.2 57.1 Total 8.9 5.3 5.6 3.0 0.1 £m

Annual Report and Accounts 2011 Accounts and Report Annual development Software and expenditure 16.1 21.2 24.3 26.9 21.9 2011 8.0 8.0 8.0 8.0 1.9 0.6 0.1 5.0 5.8 2.6 0.7 £m % – MITIE Group PLC PLC Group MITIE 22.4 11.6 64.7 87.1 79.0 10.8 30.1 48.9 67.4 Total 2010 5.9 5.7 8.0 0.1 9.4 9.4 9.4 9.4 £m %

91 90 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Freehold Leasehold Plant and properties properties vehicles Total £m £m £m £m Cost At 1 April 2009 5.1 7.5 65.4 78.0 Additions – 1.0 25.6 26.6 Acquired with subsidiaries – – 2.9 2.9 Disposals – – (10.3) (10.3) At 1 April 2010 5.1 8.5 83.6 97.2 Additions – 6.1 19.5 25.6 Transfers – 1.7 (1.7) – Disposals (0.3) (0.6) (11.8) (12.7) At 31 March 2011 4.8 15.7 89.6 110.1

Accumulated depreciation and impairment At 1 April 2009 0.7 2.8 30.4 33.9 Charge for the year 0.1 0.9 15.4 16.4 Disposals –– (7.6)(7.6) At 1 April 2010 0.8 3.7 38.2 42.7 Charge for the year 0.1 1.3 16.5 17.9 Transfers – 1.1 (1.1) – Disposals (0.1) (0.5) (9.2) (9.8) At 31 March 2011 0.8 5.6 44.4 50.8

Carrying amount At 31 March 2011 4.0 10.1 45.2 59.3 At 31 March 2010 4.3 4.8 45.4 54.5

The net book value of plant and vehicles held under finance leases included above was £9.2m (2010: £8.3m). Additions to fixtures and equipment during the year amounting to £4.6m (2010: £4.9m) were financed by new finance leases.

,QYHQWRULHV 2011 2010 £m £m Work-in-progress 4.1 1.0 Materials 1.4 2.9 5.5 3.9

)LQDQFLDODVVHWV 2011 2010 £m £m Trade receivables (Note 18) 303.5 230.3 Amounts recoverable on contracts (Note 19) 94.3 110.5 Other debtors 14.1 17.0 Cash and cash equivalents (Note 20) 130.6 23.7 542.5 381.5

Included in current assets 530.9 381.5 Included in non-current assets 11.6 – 542.5 381.5 The Directors consider thattheand other carryingamountreceivablesapproximates theirfairvalue. oftrade services was40days(2010:38 days). credit provisionrequiredinexcess oftheallowancefo the customer to base beinglarge limited due trade receivablefromthedate creditwasinitiallygranted In determiningtherecoverability ofa totradereceivablesexposure tocreditriskinrelation atthebalance bycustomer.Limitscredit qualityanddefineslimits andscoring are updated asappropriate.Themaximum Before accepting new customers, thegroup usesexternalcreditscoring systemstoassessthepotential customer’s Amounts recovered duringtheyear Amounts written offasuncollectable Impairment lossesrecognised year the of beginning atthe Balance Movement inthe allowancefordoubtful debt: Allowance for doubtful debt Impaired receivables Not impairedandmorethan threemonthsoverdue Not impairedandlessthanthree months overdue Neither impairednorpastdue Ageing oftradereceivables: Included innon-currentassets Included incurrentassets Prepayments and accrued income Amounts recoverable on contracts (Note19) Trade receivables Allowance for doubtful debt Amounts receivable for thesale ofservices 7UDGHDQGRWKHUUHFHLYDEOHV payment from customers whichhaveno AmountsrecoverableAll financialassets on areclassifiedasloansandreceivables. contracts includeapplicationsfor )LQDQFLDODVVHWV  Other debtors

trade receivablethe group considers anychang fixed paymentterms untilinvoiced. and unrelated. Accordingly, theDirectors believ and unrelated. r doubtful debt.Theaveragecredit period takenonsalesof up tothereportingdate.Theconcentration ofcreditriskis sheet dateisthefairvalueoftradereceivables. e inthecredit quality ofthe e thatthereisnofurther

Annual Report and Accounts 2011 Accounts and Report Annual 219.8 470.1 303.5 310.4 303.5 481.7 481.7 10.7 16.9 67.5 11.6 69.8 94.3 14.1 (2.9) (1.9) (6.9) (6.9) 2011 2011 2011 1.0 6.2 6.9 £m £m £m MITIE Group PLC PLC Group MITIE 230.3 405.6 405.6 165.8 405.6 230.3 241.0 110.5 (10.7) (10.7) 10.7 11.7 57.9 47.8 17.0 (1.4) (0.6) 2010 2010 2010 6.5 6.2 5.6 £m £m £m –

93 92 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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2011 2010 Contracts in progress at the balance sheet date £m £m Amounts due from contract customers included in trade and other receivables 94.3 110.5 Amounts due to contract customers included in trade and other payables – (0.8) 94.3 109.7

Contract costs incurred plus recognised profits less recognised losses to date 721.3 964.9 Less progress billings (627.0) (855.2) 94.3 109.7

Included in current assets 82.7 109.7 Included in non-current assets 11.6 – 94.3 109.7

At 31 March 2011, retentions held by customers for contract work amounted to £15.8m (2010: £17.7m).

&DVKDQGFDVKHTXLYDOHQWV 2011 2010 £m £m Cash and cash equivalents 130.6 23.7 130.6 23.7

Cash and cash equivalents comprise cash held by the group and short-term bank deposits with an original maturity of three months or less. The carrying amount of the assets approximates their fair value. At 31 March 2011 £7.0m (2010: £nil) of cash and cash equivalents were held in foreign currencies. Included in cash and cash equivalents are deposits totalling £9.1m (2010: £7.3m) held by the group’s insurance subsidiary, which are not readily available for the general purposes of the group. The credit risk on liquid funds and financial instruments is limited because the counterparties are banks with high credit-ratings assigned by recognised international credit-rating agencies and are managed through regular review. Included innon-currentliabilities tax assets and liabilities recognisedbuttheactualimpact tax assetsand willliabilities bedepen main taxrate of 1%each year Futurerate downto reductions would23% by1April2014. furtherreduce theUKdeferred of £0.5mtotheincomestatement.that itintendstoenactfurther TheUKGovernment has indicated reductionsin the reflecttherateof and liabilitiesto was substantively enactedon29March 2011.Thereduction thebalancesheetcarryingvalueofdeferredtaxassets in The UKGovernment announced In additionthe group has £0.4m(2010:£0.5m)ofcapitallosses. Included incurrentliabilities Financing liabilities(Note24) Accruals anddeferredincome Other creditors Trade creditors – )LQDQFLDOOLDELOLWLHV – – 1.3 0.1 – – (0.3) – 1.2 (0.2) (5.7) 4.4 0.1 (0.8) 0.4 3.5 The group has unutilised incometax – (0.3) – – – 0.9 Deferred taxliabilities 1.0 – Deferred taxassets 3.2 0.1 (12.0) 3.7 0.6 (2.5) – (after offset)for financial reporting purposes: (1.8) – (0.4) The fo beenoffset. Certain deferredtaxassetsandliabilitieshave – (0.8) – 1.5 (0.8) – Reallocation – 0.4 0.4 (0.8) Acquisition ofsubsidiaries Credit/(charge) toequity – (Charge)/credit toincome (1.0) Acquisition ofsubsidiaries 0.4 Credit toequity (Charge)/credit toincome At 1April2009 the current andpriorreporting period: The following are themajordeferredtaxliabilitiesandassetsrecogn 'HIHUUHGWD[ 

t1Arl21 (.)21(30 . . 1.6 8.8 1.7 (13.0) (liability)/assetNet deferred tax 2.1 (0.2) March 2011 31 At At 1April2010 a reductionintheUKcorporation tax rate from 28% to26%from1 April 2011,which Accelerated tax tax atwhichthoseassets areexpected toreversehasresultedinadeferredtaxcredit depreciation losses of £5.0m(2010:£5.2m)thatare losses 10 . 1.)124.11.3 1.2 (10.6) 0.8 (1.0) £m £m obligations Retirement benefit £m assets acquired Intangible llowing is theanalysisofdeferred taxbalances £m ised bythegroup andmov dent onthedeferred taxpositionatthetime. Share options available foroffsetag £m differences Short-term timing £m £m ements thereonduring ainst futureprofits. Annual Report and Accounts 2011 Accounts and Report Annual Tax losses 204.8 364.2 207.4 133.1 212.3 569.0 569.0 (13.3) 16.2 (4.2) 2011 2011 9.1 £m £m £m MITIE Group PLC PLC Group MITIE 405.6 405.6 106.2 299.4 110.8 100.2 179.1 (13.1) 15.5 14.1 (4.2) (5.7) (7.2) Total 2010 2010 1.0 1.0 1.6 2.8 0.5 3.8 £m £m £m – –

95 94 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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)LQDQFLDOOLDELOLWLHV With the exception of derivative financial instruments and the private placement notes, all financial liabilities are held at amortised cost. The Directors estimate that their carrying value approximates their fair value. Derivative financial instruments, which are included in financing liabilities, are initially recognised 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 (see Note 25). The carrying value of the private placement notes at 31 March 2011 includes a fair value adjustment for interest rate and currency risk of £2.1m. The fair value of the private placement notes is not significantly different from their carrying value.

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2011 2010 £m £m Payments received on account 3.1 4.1 Trade creditors 212.3 179.1 Other taxes and social security 68.2 60.4 Other creditors 16.2 15.5 Accruals and deferred income 133.1 100.2 432.9 359.3

Trade creditors and accruals and deferred income principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 36 days (2010: 31 days). The Directors consider that the carrying amount of trade and other payables approximates their fair value.

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2011 2010 £m £m Bank loans 96.8 100.0 Private placement notes 97.6 – Loan notes 1.6 3.5 Derivative financial instruments (Note 25) 3.2 0.5 Obligations under finance leases (Note 26) 8.2 6.8 207.4 110.8

Included in current liabilities 2.6 4.6 Included in non-current liabilities 204.8 106.2 207.4 110.8

The banking facilities and private placement notes are unsecured but have financial and non-financial covenants and obligations commonly associated with these arrangements. Included in current liabilities are £2.4m (2010: £2.2m) of obligations under finance leases (see Note 26), £0.2m (2010: £0.5m) of derivative financial instruments (see Note 25) and £nil (2010: £1.9m) of loan notes. Included in bank loans are £11.8m (2010: £nil) of loans denominated in foreign currency. The amount, maturity and interest terms of thePPnotes The amount,maturityandinterestterms are asshown below: contracts have the same duration and other critical terms as the borrowingsandare to considered be highlyeffective. contracts havethesamedurationand othercriticaltermsas also hasfurther overdraftfacilities of£40m. remains availableforusebythegroup.Thenewcommitted facil AGM toclarifythedefinition drawdown inJuly2011,subjecttotheapprovalofan am to equity to offset gains or losses on thetranslationto equityoffsetgainsorlosses ofthenetinvestment. on exposure toforeign exchangeor losseson the translation riskonthisinvestment.Gains of theborrowing are transferred of thenetinvestment in Included inbankloansat31 Hedge of net investment inforeign operations denominated in sterling.Allfair flows denominatedare exchangedPrivate Placementmarket inUS$from the US for floating interest cash flows The group holds anumber of crosscurrency interestrate swaps designated asfairvalue hedges.Fixedinterestcash Fair valuehedges were assessedasbeing highly effectiveas at 31March2011. exchange currency contracts designatedas probableforecasttransactions.Allcashflowhedges hedgesof highly inare exchanged sterling.The forfixedinterestcashflows group denominated also holds anumberof forward cash flows arisingover theperiods toDecemberfrom the 2017anddenominated USPrivate Placementmarket inUS$ The group holds anumber of crosscurrency interestrate swaps designated ascashflow hedges.Bi-annual fixedinterest Cash flowhedges Hedging activities derivatives isgovernedbygroup Swapinterest the effects ofthese risks byusingderivative fin n/a groupseeksto risk.The minimise These risksincludeinterestraterisk,foreign currency risk,liquidityriskandcredit The group’sTreasuryfunctionmon )LQDQFLDOULVNPDQDJHPHQWREMHFWLYHV Interestterms £LIBOR+1.26% £fixedat4.38% £fixedat3.88% The group renegotiated itsbanking US$fixedat3.39% Amount £40.0m provided inNote32. US$fixedat3.39% carry interest rateswhichare currentlydeterminedat0.4% ov US$48m respect ofwhich allconditionsprecedent ha US$48m At 31March2011,thegrouphadavailable £132.3m Loan notes 18December 2019 Private placement notes Maturitydate 18December 2017 Bank loans 18December 2017 Overdrafts The weighted average interest duringtheyear ratespaid on 9 year 7 year 7 year Tranche through amix of fixedandvariableratedebt, thegroup has rateentered intocrosscurrencyinterest swaps.Theswap of thegroup.In ordertomanage the riskofforeign currency fluctuations andtomanage the group’s finance costs otherseniorunsecuredindebtedness unsecuredandPrivate Placement rank paripassuwith market.ThePPnotesare On 16 December 2010,thegroupissuedUS$96.0m and £40.0mofprivatenotes inthe UnitedStates placement(‘PP’) Private placement notes )LQDQFLQJOLDELOLWLHV  theRepublic ofIrelandbusiness of borrowing limits.Untilthat March 2011 was a borrowing of €9.5mMarch (2010: 2011 wasaborrowing value hedges wereassessedasbeinghigh policies andreviewedregularly.Group policyisno itors andmanages thefinancialrisksrelatingto operationsof the group. facilities inMarch2011anditsn facilities d been met. The facilities havean d beenmet. The ancial instruments tohedge theseriskexposures.Theuseoffinancial (2010: £121.2m)ofundrawn of DalkiaFMinIrelandand endment totheArticlesofAssoci endment point, thegroup’s existingcommittedban the overdrafts andloans the er LIBOR.Detailsofthe ity will remain inplace ity willremain until September2015.Thegroup ew committed facilityof£250m will beavailablefor nil) whichhasbeen ly effectiveasat31March 2011. expiry date ofJanuary2012.Theloans committed borrowingfacilitiesin is beingusedtohedgethegroup’s t totradeinfinancial instruments. group’s contingent liabilities are group’s contingentliabilitiesare outstanding wereasfollows: ation attheforthcoming designated asahedge Annual Report and Accounts 2011 Accounts and Report Annual king facility of£230m 2011 3.6 1.0 1.9 % – MITIE Group PLC PLC Group MITIE 2010 0.9 2.0 % – –

97 96 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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)LQDQFLDOULVNPDQDJHPHQWREMHFWLYHV Derivative financial instruments The carrying values of derivative financial instruments at the balance sheet date were as follows:

Assets Assets Liabilities Liabilities 2011 2010 2011 2010 £m £m £m £m Cross currency interest rate swaps designated as cash flow hedges – – 0.8 – Cross currency interest rate swaps designated as fair value hedges – – 2.1 – Derivative financial instruments hedging private placement notes – – 2.9 – Callable interest rate swaps – – 0.2 0.5 Forward foreign exchange contracts – – 0.1 – – – 3.2 0.5

Included in current assets/liabilities – – 0.2 0.5 Included in non-current assets/liabilities – – 3.0 – – – 3.2 0.5

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. 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. The cross currency interest rate swaps are net settled and other contracts are gross settled. Foreign currency risk The group has limited exposure to transactional foreign currency risk from trading transactions in currencies other than the functional currency of individual group entities. The group considers the need to hedge its exposures appropriately and will enter into forward foreign exchange contracts to mitigate any significant risks. The group has some exposure to translational foreign currency risk from the translation of its operations in the Republic of Ireland and other European territories. The group considers the need to hedge its exposures appropriately. In addition, on 16 December 2010, the group issued US$96.0m and £40.0m of private placement (‘PP’) notes in the United States Private Placement market and this has been fully hedged into sterling using cross currency interest rate swaps (see Note 24). Interest rate risk The group’s activities expose it to the financial risks of interest rates. The group’s Treasury function reviews its risk management strategy on a regular basis and will appropriately enter into derivative financial instruments in order to manage interest rate risk. Having issued US$96.0m and £40.0m of private placement (‘PP’) notes in the United States Private Placement fixed rate market on 16 December 2010, the group has swapped US$48m into floating rate debt (see Note 24). If interest rates had been 0.5% higher/lower and all other variables were held constant, the group’s profit after tax for the year ended 31 March 2011 and reserves would decrease/increase by £0.6m (2010: £0.3m). on aregular basis. requirements with theexception ofthose applicable to the group’s captiveinsurance subsidiary,whichismonitored The group’scapitalstructureisreviewed regularly.Thegroupisnotsubjecttoexternally imposedregulatorycapital consists of per thecons net (debt)/funds per Note27and equity structureofthegroup maximising thethrough theoptimisation Thecapital returntostakeholders ofdebtand equity. The groupmanages itscapital toensure Capital riskmanagement to manage interest raterisk.Grouppolicyisnottotradeinfinancialinstruments. te rdtr 1. –15.5 115.3 179.1 – – – 100.2 108.3 – – – 7.0 15.5 – 179.1 – 108.0 100.2 – 122.8 – – – 6.1 16.2 – 212.3 management strategy onaregularbasisandwillappropriately The group’sactivities exposeittothefinancialrisksofinterest rates.Thegroup’s Treasury function reviews itsrisk 133.1 Market risk All financialassetsarerecoverablewithinoneyear,except All financialliabilities,otherthanfinanci Financing liabilities Accruals anddeferredincome Other creditors Trade creditors At 31March2010 Financing liabilities Accruals anddeferredincome Other creditors Trade creditors At 31March2011 presented inthebalancesheet are Theamounts toitstradereceivables. primarilyattributable The group’screditriskis The group’sprincipal financialassets arecashand cash equivalents andtradeother receivables. financialreported quarterly. institutionsisreviewedonadailybasis. of businessplaced with Thevalue and financThe group’screditrisktoallofitsbanks Credit risk )LQDQFLDOULVNPDQDJHPHQWREMHFWLYHV  which, basedonprevious experience,iseviden net ofallowancesfordoubtful receivables.Anallowancefor impairment ismadewheretherean identified lossevent group’s financial liabilities: group’s financialliabilities: The tablesbelowsummarisethematurityprofile Note 24. headroom inthegroup’sdaily cash theprojectedgroup’s assets cashflows and liabilities The groupmonitors itsrisktoashortage of fundsusingacash flowprojection modelwhichconsiders the maturityofthe Liquidity risk and customers. of counterparties number exposurespreadoveralarge creditrisk,with of concentration significant has no group The where appropriate, certaindebts aresubject tocreditinsurance. Financial liabilities Financial liabilities movements arethen arranged.Detailsof ng liabilities, are interest free. Details of financing liabilities are given inN free.Details offinancingliabilitiesare interest ng liabilities, are that entities in the groupwillbe ableto that entitiesinthe ce ofareduction inthe recove (including both undiscounted interest and principal undiscountedcash interestandprincipal flows) ofthe (including both ial counterpartiesismonitoredonanongoing basis andformally from operations.Bankfacilities whichallowforappropriate for those disclosedasnon-current inNote 17. enter intoderivativefinan olidated statementofchangesinequity. our bankfacilitiescanbefound in rability ofthecash one year one year 0. 108.3 301.8 122.8 108.0 367.7 continue asgoing concerns while Within Within £m £m In thesecond In thesecond to fifthyears to fifthyears to cial instruments inorder £m £m £m Annual Report and Accounts 2011 Accounts and Report Annual flows. Inaddition, five years five years After After £m £m – MITIE Group PLC PLC Group MITIE ote 24. 598.5 236.9 133.1 212.3 410.1 16.2 Total Total £m £m

99 98 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Minimum lease payments Present value of lease payments 2011 2010 2011 2010 £m £m £m £m Amounts payable under finance leases: Within one year 2.7 2.5 2.4 2.2 In the second to fifth years inclusive 6.2 5.2 5.7 4.6 After five years 0.1 – 0.1 – 9.0 7.7 8.2 6.8 Less: future finance charges (0.8) (0.9) – – Present value of lease obligations 8.2 6.8 8.2 6.8 Less: Amount due for settlement within 12 months (2.4) (2.2) (2.4) (2.2) Amount due for settlement after 12 months 5.8 4.6 5.8 4.6

The average remaining lease term is 38 months (2010: 35 months). For the year ended 31 March 2011, the average effective borrowing rate was 2.9% (2010: 4.2%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in sterling. The fair value of the group’s lease obligations approximates their carrying amount. The group’s obligations under finance leases are protected by the lessors’ rights over the leased assets.

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2011 2010 £m £m Cash and cash equivalents (Note 20) 130.6 23.7 Bank loans (Note 24) (96.8) (100.0) Private placement notes (Note 24) (97.6) – Derivative financial instruments hedging private placement notes (Note 25) (2.9) – Net debt before loan notes and obligations under finance leases (66.7) (76.3) Loan notes (Note 24) (1.6) (3.5) Obligations under finance leases (Note 26) (8.2) (6.8) Net debt (76.5) (86.6)

 mut eonsdtruhgowl 38 3.8 – 1.9 3.8 1.8 0.1 During theyeardeferredcontingent consi made duringthe year,ofwhich£0.7mwas settled incashduringtheyear(seeNote31). targets being Atotalof attained, atthebestestimateofDirectors. Provision ismadefordeferredconting – Included incurrentliabilities (0.4) 2.5 Amounts recognisedthroughgoodwill Utilised duringtheyear 0.1 Amounts chargedtotheincomestatement At 1April2009 Included innon-currentliabilities Included incurrentliabilities Amounts recognisedthroughgoodwill Utilised duringtheyear Amounts chargedtotheincomestatement At 1April2010 3URYLVLRQV  nlddi o-urn iblte 11.2 Included innon-currentliabilities are settled. outstanding claims incurred at the The provisionforinsuranceclaims represents Company amountspayableLimited inrespectof byMITIEReinsurance acquisitions accountedfor underIFRS 3 (20 2007 of Robert £3.0mofdeferred Prettiewassettledinloannotes. contingent Inaddition, consideration thataroseon in At 31 March 2010 At 31March March 2011 31 At cash duetoattainment ofprofittargets. balance sheet dates. These amountswillbecomepayableaseachyear’sclaims balance sheetdates.These ent consideration, which mayent consideration, become payable upto2012subject toprofit deration respectofthe of £3.5m in £3.9m ofdeferred contingentconsiderat 04) has been releasedthrough goodwill. £2.6mwasprovided inrespect ofacquisitions acquisition in2009ofEPSLtdwassettled ion inrespectofthe acquisition in consideration consideration contingent contingent Deferred Deferred Deferred 109420.4 11.0 9.4 12.9 8.2 298221.1 12.9 8.2 20 30 (5.0) (3.0) (2.0) (2.5) (8.1) 4.5 8.2 £m £m £m 9.9

21.1 Annual Report and Accounts 2011 Accounts and Report Annual Insurance Insurance reserve reserve £m £m MITIE Group PLC PLC Group MITIE (10.6) 12.7 21.1 12.7 (0.4) Total Total 8.2 2.6 4.5 £m £m

101 100 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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Number Ordinary shares of 2.5p million £m Authorised At 31 March 2010 and 31 March 2011 500.0 12.5

Allotted and fully paid At 1 April 2010 353.2 8.8 Issued for acquisitions 3.0 0.1 Issued under share option schemes 1.6 – At 31 March 2011 357.8 8.9

At 1 April 2009 323.0 8.1 Issued for placing 19.0 0.5 Issued for acquisitions 9.0 0.2 Issued under share option schemes 2.2 – At 31 March 2010 353.2 8.8

During the year 3.0m (2010: 9.0m) Ordinary shares of 2.5p were allotted in respect of the acquisition of non-controlling interests at a mid-market price of 209.2p (2010: 237.8p) giving rise to share premium of £1.6m (2010: £8.0m) and a merger reserve of £4.8m (2010: £13.1m). During the year 1.6m (2010: 2.2m) Ordinary shares of 2.5p were allotted in respect of share option schemes at a price between 117p and 226p (2010: 95p and 220p) giving rise to share premium of £2.3m (2010: £3.0m). On 12 August 2009 19.0m new Ordinary shares of 2.5p each were placed with certain institutional and other qualified investors by UBS Limited and Investec Bank plc acting as joint bookrunners and joint brokers, giving rise to share premium of £41.3m.

5HVHUYHV Share premium account The share premium account represents the premium arising on the issue of equity shares (see Note 29). Merger reserve The merger reserve represents amounts relating to premiums arising on shares issued subject to the provisions of Section 612 of the Companies Act 2006 (see Note 29). Share-based payment reserve The Share-based payment reserve represents credits relating to equity-settled share-based payment transactions granted after 7 November 2002 that have not yet fully vested (see Note 34). Own shares reserve The group uses shares held in the Employee Benefit Trust to satisfy options under the group’s LTIP share option scheme. During the year 2.6m shares were purchased at a cost of £5.7m. The Own shares reserve at 31 March 2011 represents the cost of 5.9m (2010: 3.3m) shares in MITIE Group PLC, with a weighted average of 5.3m (2010: 4.6m) shares during the year. Other reserves Other reserves are comprised of the revaluation reserve of (£0.2m) (2010: (£0.2m)), the capital redemption reserve of £0.3m (2010: £0.3m) and other reserves of £0.1m (2010: £0.1m). Hedging and translation reserve The hedging and translation reserve represents foreign exchange differences arising on translation of the group’s overseas operations, movements relating to cash flow hedges and movements on net investment hedges. during theyear. 1.5 (5.7) and other targets beingattained, above.Deferred isincluded Deferred contingent consideration of upto€2.0m, which may become payable upto 2012subjectto certainprofit Provision ismadefordeferred con 5.0 (0.8) – assimilation intothegroup. Noneofthe goodwill (0.7) from new companies, expectedprofitability arising The goodwillarisingontheacquisition of (4.9) (0.4) Acquisition relatedcostsincluded withinOther 0.4 1.5 5.4 Cash andcash equivalents acquired (1.1) Cash consideration Net cashoutflowon arising acquisition Deferred contingent consideration Cash Satisfied by Goodwill Net assetsacquired Current taxliability Trade andotherpayables Cash andcash equivalents Trade andotherreceivables Deferred tax(liability)/asset Intangible assets Net assetsacquired Limited) andDalkiaEnergyFacilitiesLimited On 25June2010,MITIEacquired100%of DFM Prov ofFMbusiness Purchase Dalkia in Ireland Current year acquisitions Other Environmental Property consideration) Services Limited (deferred Non-controlling interests Service Management International Limited Dalkia FMinIreland During theyear anetcash aroseonthe outflow acquisitionssetoutbelow: of£11.8m $FTXLVLWLRQV  for totalconsideration ofupto €12.5m.The yearly financial reportfor the six monthsto30September 2011. informationbe presented onfairvalueswillaftertheend of accounting inaccordance withIFRS3(2008).Belowwe provide Total consideration Net cashoutflow Total consideration Net cashoutflow onacquisitions tingent consideration at the Directors’ best estimate of thelikelyfutureobligation. Directors’ bestestimate tingent considerationatthe Dalkia FM in Ireland isattributable DalkiaFMinIreland totheunderlyingprofitability ofthe transaction has beenaccountedfor items(Note5)amounted to£0.3m. (subsequently renamed MITIELimited), (subsequently recognised isexpectedtobedeductible forincome taxpurposes. recognised iders Limited Management (subsequentlyrenamed MITIEFacilities business andtheanticipated fu the12month measurement periodinthegroup’s Half- contingent considerationof provisional information on by the acquisition methodof ture operating synergiesarisingfrom Book value together Dalkia FMinIreland, the acquisition. Final 02 (0.2) – (0.2) €1.0m wassettledincash . 66 2.9 9.5 (6.6) . 58 3.0 8.8 (5.8) £m £m

Annual Report and Accounts 2011 Accounts and Report Annual adjustments Fair value £m

MITIE Group PLC PLC Group MITIE Fair value 10.6 10.6 11.8 (1.5) 7.3 0.1 3.5 0.4 0.5 7.3 8.8 1.8 8.8 7.7 £m £m

103 102 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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$FTXLVLWLRQV Dalkia FM in Ireland contributed £19.4m to revenue and £1.3m to the group’s operating profit before other items for the period. If the acquisition had taken place at the start of the period, the group’s revenue and operating profit before other items would have been approximately £1,897m and £109m respectively. Purchase of Service Management International Limited The group increased its stake to 50% in Service Management International Limited for total cash consideration of £0.5m. Purchase of non-controlling interests

MITIE MITIE MITIE Engineering Engineering Engineering MITIE Maintenance Maintenance Services Engineering MITIE MITIE Services (North) Ltd (Caledonia) Ltd (Midlands) Ltd Projects Ltd Engineering Ltd (Retail) Ltd Total £m £m £m £m £m £m £m Non-controlling interests 0.4 – 0.2 0.4 0.7 0.2 1.9 Retained earnings 1.2 0.1 0.6 0.8 2.4 (0.2) 4.9 Total purchase consideration 1.6 0.1 0.8 1.2 3.1 – 6.8

Shares issued – MITIE Group PLC 1.5 0.1 0.8 1.2 2.8 – 6.4 Cash consideration 0.1 –––0.3 – 0.4 Total purchase consideration 1.6 0.1 0.8 1.2 3.1 – 6.8

Prior year acquisitions The group reported provisional information on the acquisitions made in the prior year in the Annual Report and Accounts 2010. Below we provide final information on those acquisitions. The final fair value of net assets acquired, presented below, has reduced by £3.3m since the provisional fair value information was presented. This has resulted in a corresponding £3.3m increase to goodwill. These changes were not significant to the prior year balance sheet. Purchase of Dalkia Technical Facilities Management On 12 August 2009 MITIE acquired 100% of Dalkia Technical Facilities Management (Dalkia FM), for total consideration of £119.5m. The transaction was accounted for by the purchase method of accounting in accordance with IFRS 3 (2004).

Provisional fair Final fair value Final value adjustments fair value £m £m £m Net assets acquired Intangible assets 29.9 – 29.9 Deferred tax (liability)/asset (3.7) 0.3 (3.4) Property, plant and equipment 2.4 (0.4) 2.0 Inventories 1.2 – 1.2 Trade and other receivables 59.8 0.5 60.3 Trade and other payables (42.1) (1.5) (43.6) Current tax liability (0.3) – (0.3) Net assets acquired 47.2 (1.1) 46.1

Goodwill 73.4 Total consideration 119.5

Satisfied by Cash 116.2 Directly attributable costs 3.3 Total consideration 119.5

Net cash outflow arising on acquisition Cash consideration 119.5 Net cash outflow 119.5

ahadcs qiaet 35 3.5 (24.1) 18.8 (3.2) – period duetoattainmentofis nowin profit targetsand 0.2 (20.9) 0.4 (2.6) Deferred contingent consideration of £3.5m, which 3.5 18.6 0.9 (0.1) Loan acquired Cash andcash equivalents acquired Cash consideration 0.5 (3.5) Net cashoutflowon arising acquisition Directly attributable costs Cash Satisfied by Goodwill Net assetsacquired Loans Trade andotherpayables Cash andcash equivalents Trade andotherreceivables Inventories Property, plant andequipment Deferred tax(liability)/asset Intangible assets Net assetsacquired purchase method ofaccounting in accordance withIFRS 3(2004). consideration of upto£40.9mwith On 20November 2009MITIEacquired100% PropertyServices ofEnvironmental Limited(EPSLtd)fora maximum Purchase ofEnvironmental Property Services Limited $FTXLVLWLRQV  Total consideration Net cashoutflow Total consideration an initial consideration of£36.8m. aninitialconsideration Thetransaction was accounted forbythe was provided forat31Marchsettled incashduringthe 2010, was cluded incashcon sideration above. Provisional fair 33–13.3 13.3 – value 23 (2.3) – (2.3) . 22 7.4 9.6 (2.2) . 0.4 0.4 – £m £m

Final fairvalue Annual Report and Accounts 2011 Accounts and Report Annual adjustments £m MITIE Group PLC PLC Group MITIE fair value 40.9 39.7 40.9 40.9 40.3 33.5 (3.5) Final 2.3 0.6 £m

105 104 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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&RQWLQJHQWOLDELOLWLHV The Company is party with other group companies to cross guarantees of each other’s bank and other borrowings, commitments and overdrafts of £368 .0m (2010: £270.0m). The Company and various of its subsidiaries are, from time to time, party to legal proceedings and claims that are in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect on the group’s financial position. Deferred contingent consideration relating to acquisitions has been accrued at the Directors’ best estimate of the likely future obligation of £4.5m (2010: £12.9m) per Note 28. The actual amounts payable may vary up to a maximum of £6.9m (2010: £32.4m) dependent upon the results of the acquired businesses. 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 £34.9m (2010: £23.4m) in the ordinary course of business. These are not expected to result in any material financial loss.

2SHUDWLQJOHDVHDUUDQJHPHQWV The group as Lessee

2011 2010 £m £m Minimum lease payments under operating leases recognised in income for the year 10.1 9.6

At the balance sheet date, the group had total outstanding aggregate commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2011 2010 £m £m Within one year 9.9 7.6 In the second to fifth years inclusive 17.5 15.2 After five years 5.5 4.0 32.9 26.8

Operating lease payments represent rentals payable by the group for certain of its office properties and hire of vehicles and other equipment. These leases have average durations ranging from three to ten years. No arrangements have been entered into for contingent rental payments.

6KDUHEDVHGSD\PHQWV Equity-settled share option schemes The Company has four share option schemes: The MITIE Group PLC Long Term Incentive Plan (LTIP) The LTIP was introduced in 2007. The awards of shares or rights to acquire shares (the awards) are offered to a small number of key senior management. Where offered as options the exercise price is nil. The vesting period is three years. If the awards remain unexercised after a period of four years from the date of grant, the awards expire. The awards may be forfeited if the employee leaves the group. Before the awards can be exercised, a performance condition must be satisfied; the number of awards that vest is determined by a sliding scale above the Retail Price Index per annum compound growth in earnings per share over a three-year period. The MITIE Group PLC 1991 Executive share option scheme The Executive share option scheme exercise price is equal to the average market value of the shares over the five day period immediately preceding the date of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options may be forfeited if the employee leaves the group. No options have been granted under this scheme since August 2001. The MITIE Group PLC 2001 Executive share option scheme The Executive share option scheme exercise price is equal to the average market value of the shares over the five day period immediately preceding the date of grant. The vesting period is three years. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options may be forfeited if the employee leaves the group. Before options can be exercised, the performance condition that must be satisfied is that the percentage growth in earnings per share over a three-year period must be equal or greater than 10.0% per annum compound in respect of awards prior to July 2007 and 4.0% above the Retail Price Index per annum thereafter. as follows: The fairvalueofoptionsismeasuredby options granted onthosedates was£4.7m. 2009 in respect of the LTIP, Executive and SAYE shareoption schemes.Theaggregate 2009 inrespectof theestimated oftheLTIP,Executiveand fairvaluesofthe granted onthose 2010, options dateswas£4.4m.In were theyeargranted inJune,JulyandAugust ended31 March exercise restrictionsan non-transferability, is basedupon historical data onmanagement’sand has been bestestimatesadjusted based forthe effectsof Expected volatilitywasbased uponthehistorical volatility over th Expected dividends(%) Risk-free rate(%) Expected life(years) Expected volatility(%) Exercise price (p) Share price(p) (2010: 234p).Theoptionsoutstanding The weighted average share dateofexerciseexercised priceatthe during theyearwas206p forshareoptions 2001 SAYE share options 2001 Executive shareoptions Long TermIncentive Planshareoptions The group recognised the following expenses relatedtoshare-basedpayments: Included within thisbalance 0.3m)optionsthat are0.2m(2010: havenotbeenrecognised in accordance withthetransitional * Exercisable attheendof year Exercised duringtheyear Forfeited duringtheyear Granted duringtheyear Outstanding atbeginningof the year on thedayprecedingdate onwhichinvi 80.0% ofthe marketvalue Theexercisepriceisnotlessthan The SAYEscheme oftheshares isopentoallemployees. The MITIEGroupSAYE PLC2001 scheme 6KDUHEDVHGSD\PHQWV  of the LTIP, SAYE and Executive share option schemes.Theaggregateof theLTIP,SAYE ofthe andExecutiveshare estimated fairvaluesoftheoptions (2010: 4.6years).Intheyearended31March2011,options ranging from117p– 254p Details oftheshare options duringthe outstanding yearareasfollows: expire. Optionsmaybeforfeitediftheemployeeleavesgroup. months fromoptions remainunexercised after thedateof aperiodof period isthreeyears.Ifthe vesting, theoptionssix to September 2009, thevesting period isfiveyears.Foroptions grantedinSeptember 2009andthereafter, thevesting Outstanding at theendofyear* with IFRS 2. were grantedon or Theseoptionsbefore 7November2002. have notbeensubsequently modified and therefore do not need tobeac (2010: 117p–254p)andaweight at 31 March 2011 had exercise prices(otherth at 31March 2011 had exercise use of the Black-Scholes model. Thein use oftheBlack-Scholes d behavioural considerations. d behavioural tations to participate in the scheme areissued.Foroptionsgrantedprior tations to participate inthe ed average remaining contractual were granted inJune,JulyandAugust 2010 inrespect e expected lifeofth share options Number of (million) 81162 18.1 25152 22.5 16 151 194 (1.6) (2.0) . 202 3.0 140 8.0 puts intotheBlack-Scholesmodelare exercise price an nilinth e schemes.Theexpectedlife Weighted average (in p) 2011 provisions of IFRS2 astheoptions

e caseoftheLTIP)

22163 2.2 139 5.4 2010 (.)108 172 (2.8) 162 (1.8) 17.3 1. 162 18.1 life of4.4years Annual Report and Accounts 2011 Accounts and Report Annual share options counted for in accordance inaccordance for counted 2.22–3.93 1.49–5.25 191–230 Number of 28–36 0–254 (million) 3–6 2011 2011 0.8 0.9 1.6 3.3 £m MITIE Group PLC PLC Group MITIE exercise price 1.43–3.30 2.42–5.25 133–230 Weighted average 27–36 0–254 (in p) 3–6 2010 2010 4.0 0.9 0.7 2.4 £m

107 106 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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5HWLUHPHQWEHQHILWVFKHPHV Defined contribution schemes The group operates a number of defined contribution retirement benefit schemes for qualifying employees. The assets of the schemes are held separately from those of the group in funds controlled by the scheme providers. The group paid employer contributions of £8.1m (2010: £7.2m) during the year. As at 31 March 2011, contributions of £0.5m (2010: £0.5m) due in respect of the current reporting period had not been paid over to the schemes. Defined benefit schemes

Group defined benefit scheme The group operates a defined benefit pension scheme called the MITIE Group PLC Pension Scheme where MITIE Group PLC is the principal employer. The assets of the scheme are held separately from the group. Contributions to the scheme are charged to the income statement so as to spread the cost of pensions over the employees’ working lives with the group. Under the scheme, the employees are entitled to retirement benefits varying between 0% and 66% of final salary on attainment of a retirement age of 65. No other post-retirement benefits are provided. The schemes are funded schemes. The most recent actuarial valuation of the group scheme’s assets and the present value of their defined benefit obligations was carried out as at 1 April 2008 by Mr Chris Bamford, Fellow of the Institute of Actuaries, from AON Consulting Limited. The next triennial valuation is due to be carried out as at 1 April 2011. Other defined benefit schemes Grouped together under ‘Other schemes’ is one (2010: one) scheme in which the group is a participating employer and a number of schemes to which the group makes contributions under Admitted Body status to our customers’ defined benefit schemes in respect of certain TUPE employees. These valuations are updated by the actuaries at each balance sheet date. The present values of the defined benefit obligations, the related current service cost and past service cost were measured using the Projected Unit Credit Method. For the Admitted Body Schemes, which are all part of the Local Government Pension Scheme, the group will only participate for a finite period up to the end of the contracts. The group is required to pay regular contributions as decided by the relevant Scheme Actuaries and detailed in the schemes’ Schedule of Contributions. In a number of cases contributions payable by the employer are capped and any excess recovered from the body that the employees transferred from. In addition, in certain cases, at the end of the contract the group will be required to pay any deficit (as determined by the Scheme Actuary) that is remaining for its notional section of the scheme. Assumptions Following the announcement in the June 2010 budget, the UK government has announced that it will use the Consumer Price Index (CPI) measure of inflation rather than the Retail Price Index (RPI) to determine the level of future statutory pension increases. As CPI is lower than RPI, the application of CPI to the valuation of future pension liabilities results in a reduction in the value of pension obligations on the balance sheet. The move to a CPI based valuation base affects certain of the group’s defined benefit pension liabilities. The financial implication of this has been treated as a change in defined pension benefits and recognised as a negative past service cost in the income statement. As a result of this change, a credit of £4.1m has been recognised in the income statement for the year ended 31 March 2011.

Group schemes Other schemes 2011 2010 2011 2010 % % % % Key assumptions used for IAS 19 valuation: Discount rate 5.60 5.60 5.60 5.60 Expected return on scheme assets: Equity instruments 8.00 8.00 8.00 8.00 Debt instruments 5.00 5.00 5.00 5.00 Property 7.50 7.50 7.50 7.50 Other assets 1.50 1.50 1.50 1.50 Alternative assets 7.00 7.00 7.00 7.00 Expected rate of salary increases 4.50 4.50 4.00 Up to 4.50 Retail Price Inflation 3.50 3.50 3.50 3.50 Consumer Price Inflation 2.70 n/a 2.70 n/a Future pension increases 3.50 3.50 2.80 3.50  Amounts recognised inadministrative expenses inrespect ofthesedefinedbenefitschemesareasfollows: The sensitivityof the schemeon cash andalternate assets. been setequaltothatexpected onequitieslessamargin.Theexpectedreturn otherassetsistherateearnedby on long-termThe returnon giltsandbonds bonds. isthecurrent Theexpectedreturnonmarket yield property has class. Theexpectedreturnonequitiesisthesumofdividendgrowth and capitalgrowth netofinvestment expenses. Contract adjustment (Deficit)/surplus inscheme benefit obligations Present value of defined Fair valueofschemeassets The amountsincludedinth income is£24.7m(2010:£23.6m). The cumulativeamountofactuarial Actuarial (losses)/gainsonliabilities Expected returnonscheme assets Actual return on schemeassets Amounts recognisedintheconsolidatedstatement of Negative past servicecost Expected returnonscheme assets Interest cost Current servicecost of theexpectedis calculatedastheweightedaverage return The overallexpectedreturn of eachon assets asset 5HWLUHPHQWEHQHILWVFKHPHV  retirement benefitschemesare asfollows:

Net pensionliability defined benefit obligations e balancesheetarisingfromthe group’sobliga loss recognised since 1 April 2004inthe loss recognisedsince1 to changes in principalactuarialassumptions to changes Group scheme Group scheme Group scheme 175 93 (126.8) (9.3) (117.5) 1. . 124.3 9.8 114.5 30 . (2.5) 0.5 (3.0) 0.8 (7.8) 1.8 (0.8) (1.0) (7.0) (6.9) (4.4) (0.7) (0.3) (6.2) (4.1) 30 (3.0) – (3.0) 17 . (1.1) 0.6 (1.7) . 04 5.9 (0.4) 6.3 4.1 7.8 0.7 0.8 3.4 7.0 . . 0.6 0.5 0.1 £m £m £m comprehensive incomeareasfollows: 05 (0.5) (0.5) – Other schemes Other schemes Other schemes £m £m £m tions in respect ofits consolidated statementofcomprehensive Total Total Total 2011 2011 2011 £m £m £m Group scheme Group scheme Group scheme 182 7.)(180.1) (71.9) (108.2) 0. 15162.9 101.4 61.5 2.)(26 (39.3) (12.6) (26.7) 1.)(.)(13.1) (0.9) (12.2) is shownin Note2. 961. 34.5 19.6 14.9 68 1.)(17.2) (10.4) (6.8) (8.3) (3.2) (5.1) (8.2) (3.9) (3.2) (1.0) (5.0) (2.9) 68 37 (10.5) (3.7) (6.8) 28 10 (3.8) (1.0) (2.8) . . 8.3 5.1 3.2 £m £m £m £m – – . 6.7 – 6.7 defined benefit Other schemes Other schemes Other schemes Annual Report and Accounts 2011 Accounts and Report Annual £m £m £m MITIE Group PLC PLC Group MITIE Total Total Total 2010 2010 2010 £m £m £m

109 108 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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5HWLUHPHQWEHQHILWVFKHPHV Movements in the present value of defined benefit obligations were as follows:

2011 2010 Group scheme Other schemes Total Group scheme Other schemes Total £m £m £m £m £m £m At 1 April 108.2 71.9 180.1 74.3 51.8 126.1 Current service cost 4.1 0.3 4.4 2.9 1.0 3.9 Interest cost 6.2 0.7 6.9 5.0 3.2 8.2 Contributions from scheme members 0.8 0.1 0.9 0.9 0.5 1.4 Actuarial gains and losses 1.0 (0.9) 0.1 26.7 16.8 43.5 Benefits paid (2.2) (0.4) (2.6) (1.6) (1.1) (2.7) Negative past service cost (3.4) (0.7) (4.1) – – – Contract transfers 2.8 (61.7) (58.9) – (0.3) (0.3) At 31 March 117.5 9.3 126.8 108.2 71.9 180.1

Movements in the fair value of scheme assets were as follows:

2011 2010 Group scheme Other schemes Total Group scheme Other schemes Total £m £m £m £m £m £m At 1 April 101.4 61.5 162.9 77.3 45.8 123.1 Expected return on scheme assets 7.0 0.8 7.8 5.1 3.2 8.3 Actuarial gains and losses (0.7) (1.2) (1.9) 14.5 11.7 26.2 Contributions from the sponsoring companies 5.4 2.5 7.9 5.2 1.6 6.8 Contributions from scheme members 0.8 0.1 0.9 0.9 0.5 1.4 Benefits paid (2.2) (0.4) (2.6) (1.6) (1.1) (2.7) Contract transfers 2.8 (53.5) (50.7) – (0.2) (0.2) At 31 March 114.5 9.8 124.3 101.4 61.5 162.9

The analysis of the scheme assets at the balance sheet date was as follows:

2011 2010 Group scheme Other schemes Total Group scheme Other schemes Total £m £m £m £m £m £m Equity instruments 49.8 7.0 56.8 56.7 44.7 101.4 Debt instruments 24.6 1.8 26.4 22.2 10.2 32.4 Property 17.7 0.5 18.2 11.4 5.1 16.5 Other assets 1.8 0.5 2.3 2.2 1.5 3.7 Alternative assets 20.6 – 20.6 8.9 – 8.9 At 31 March 114.5 9.8 124.3 101.4 61.5 162.9

The pension schemes have invested in property occupied by the group with a fair value of £3.9m (2010: £3.9m) generating rental of £0.3m (2010: £0.3m). At 31 March 2011 the pension schemes held no MITIE Group PLC shares (2010: nil). The pension schemes have not invested in any other assets used by the group. Transactions between the group and the pension schemes are conducted at arm’s length. The mortality for the group schemes is based upon up to date tables which project mortality improvements in the future. For a male aged 65.0 years the expected life is 89.0 years (2010: 87.4 years) and for a female aged 65.0 years the expected life is 92.0 years (2010: 89.8 years). Mortality for the other schemes is that used by the relevant scheme actuary. granted tokeymanagement personnel is£0.8m(2010: £1.4m). remunerationin theauditedsectionof Directors’ report. Theshare-based payment chargerelatingtoshare options The group’s keymanagement personnel are theDirectors and inwhichaDirector hadamaterialinterest. during theyear,norexistedatendof hasbeen enteredinto associated undertakingson materialcontractorarrangement the groundsof materiality. No No invoiceswereoutstandingattheyearend. Nooth During theyear,group derived£5.6m consolidation and arenotdisclosedinthisNote. Transactions betweentheCompan 5HODWHGSDUW\WUDQVDFWLRQV paid overtotheschemes. As at31March 2011,contributions of£0.8m (2010: (2010: £5.0m) andtoother The estimatedcontributions expectedgroup schemes tobeduring thecurrent paidtothe financial year are£4.0m Experience adjustments onscheme assets Percentage ofschemeliabilities Experience adjustments onschemeliabilities (Deficit)/surplus intheschem Present value of definedbenefit obligations Fair valueofschemeassets Percentage of schemeassets Experience adjustments onscheme assets Percentage ofschemeliabilities Experience adjustments onschemeliabilities (Deficit)/surplus in Present value of definedbenefit obligations Fair valueofschemeassets The historyofexperience adjustmentsisasfollows: 5HWLUHPHQWEHQHILWVFKHPHV  Percentage of schemeassets the scheme schemes £0.3m (2010:£1.6m). 37 34 24 – (2.4) (3.4) e (3.7) y and its subsidiaries, which arerelated y andits subsidiaries, of construction revenue fromjoin £2.4m) due inrespectofthecurrent reporting period£2.4m) due hadnotbeen er disclosures have beenmadeinrespectofjoint venturesand (13.3)% Non-Executive Directors whoseremunerationisdisclosed (0.6)% (0.4)% (117.5) 114.5 9.2% (1.3) (9.8) (0.7) (0.5) (3.0) 2011 2011 9.8 0.9 £m £m – t venturesandassociated undertakings. parties, havebeeneliminatedon 182 7.)(87 (82.7) (78.7) (74.3) (108.2) 43 2.) 48%(1.0)% (27.4)%(4.8)% 14.3% 90 2.) 1.) – (11.5)% (28.4)% 19.0% 0. 738. 83.2 77.388.6 101.4 6.)(92 5.)(61.4) (54.7) (49.2) (65.2) .%(53%(52%3.9% (15.3)%(15.2)% 0.1% .%(22%(00%1.6% (10.0)% (22.2)% 1.0% 17(30 60 – (6.0) (13.0) 11.7 (0.5) (4.1) (21.2) 14.5 154. 2361.4 45.852.3 61.5 07 0952(1.0) 10.95.2 (0.7) (3.2) 11.312.0 (0.1) 68 . . 0.5 3.09.9 (6.8) 2010 2010 £m £m 2009 2009 2009 £m £m £m

Annual Report and Accounts 2011 Accounts and Report Annual 2008 2008 £m £m Group schemes Other schemes MITIE Group PLC PLC Group MITIE 2007 2007 £m £m

111 110 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

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3ULQFLSDOVXEVLGLDULHV The companies set out below are those which were part of the group at 31 March 2011 and in the opinion of the Directors significantly affected the group’s results and net assets during the year. Principal subsidiaries are incorporated in the United Kingdom and are held directly or indirectly by MITIE Group PLC.

At 31 March At 31 March At 31 March 2011 2011 2011 % Voting % Ownership % Nominal Division Activities Principal subsidiaries rights owned interest value owned Facilities Our Facilities Management division MITIE Facilities Services Ltd 100.0% 100.0% 100.0% Management delivers facilities consultancy, management and service delivery MITIE Cleaning & 99.2% 99.2% 99.2% to our clients. Within the division, Environmental Services Ltd during the year ended 31 March 2011 we recognised four MITIE Security Holdings Ltd 94.4% 99.9% 99.9% principal business lines which were: Facilities Management, which comprises our managed services, business services, client services and PFI businesses; Cleaning and Environmental, which encompasses our cleaning, landscaping and pest control businesses; Security and Catering. Technical Facilities Our Technical Facilities MITIE Technical Facilities 100.0% 100.0% 100.0% Management Management division focuses on Management Ltd (formerly facilities management that is led Dalkia Energy & Technical by technology, engineering and Services Ltd) energy requirements. It comprises

the integrated operations of our Engineering Maintenance business and Dalkia FM. Property Our Property Management division MITIE Property Services 80.1% 80.1% 80.1% Management offers an integrated property (UK) Ltd management service, including mechanical and electrical Robert Prettie & Co Ltd 100.0% 100.0% 100.0% engineering, energy and more general facilities management Environmental Property 100.0% 100.0% 100.0% services in addition to the Services Ltd traditional services such as

maintenance, refurbishment, painting, roofing, interior fit-out, fire protection, plumbing and heating. Asset Our Asset Management MITIE Asset Management Ltd 100.0% 100.0% 100.0% Management division provides the integration, management MITIE Infrastructure Ltd 100.0% 100.0% 100.0% and maintenance of technical assets to meet the challenges of the low-carbon economy including; energy design, generation and certification, infrastructure projects, building services and mechanical and electrical engineering.

The companies listed above represent the principal subsidiary companies of the group. A full list of subsidiary companies will be annexed to the next annual return.

− − − In ouropinion the parent company financial statements: statements financial on Opinion inconsistencies weconsiderthe implicationsforourreport. become aware ofanyapparent material misstatements or inconsistencies withthe information inthe annualreporttoidentifymaterial In addition,wereadallthefi and theoverall of thefinancial presentation statements. of significant accounting estimates madebytheDirectors; thereasonableness applied andadequatelydisclosed; company’s circumstancesand have been consistently the accounting policies are appropriateto theparent anassessment fraud orerror. of: whetherThis includes are freefrom material misstatement,whethercausedby give reasonableassurancethat thefinancialstatements and disclosures inthefinancial statementssufficientto An auditinvolvesobtaining statements financial of the audit the of Scope Auditors. the AuditingPracticesBoard’s (APB’s)EthicalStandardsfor require us tocomplywith (UK andIreland).Thosestandards applicable lawandInternational Standards onAuditing parent company financial statements inaccordance with express Our responsibility istoauditand and for being satisfiedthatthey giveatrue andfairview. preparation of theparent company financial statements Statement, the directors areresponsibleforthe As explainedmorefullyintheDirectors’Responsibilities auditor and of directors responsibilities Respective this report,or for theopinions wehaveformed. company’s members asabody, forouraudit work, for anyoneoth responsibility to extent permitted bylaw,wedonotaccept orassume an auditors’report and for no otherpurpose. Tothefullest tostatethemin members those matterswearerequired undertaken sothatwemi of theCompanies Act2006. Our auditworkhasbeen as abody,inaccordancewith Chapter 3ofPart16 company’smembers, This reportismadesolelytothe Accepted AccountingPractice). Accounting Standards (United KingdomGenerally preparation is applicable lawandUnited Kingdom reporting framework that has beenappliedintheir Sheet andthe relatednotes38to51.Thefinancial 31 March 2011 whichcomprise theCompany Balance statements of MITIE GroupPLCfortheyear ended We haveauditedtheparent company financial ,QGHSHQGHQWDXGLWRUV·UHSRUWWR    requirements of theCompaniesAct 2006. have been preparedinaccordancewiththe Practice; and United KingdomGen have been properlypreparedinaccordance with company’s affairs asat31March 2011; give atrueandfairviewofthe stateofthe parent erally AcceptedAccounting audited financialstatements.Ifwe ght statetothecompany’s er thanthecompany andthe evidence abouttheamounts nancial andnon-financial an opiniononthe WKHPHPEHUVRI0,7,(*URXS3/& 2011 23 May Bristol, United Kingdom Chartered Accountants andStatutory Auditor for andonbehalfofDeloitteLLP Ian Krieger(SeniorStatutoryAuditor) 2011. March 31 statements of MITIE GroupPLCfortheyear ended We havereported separately ontheGroup financial Other matters − In ouropinion: − − report toyouif,inouropinion: matters where theCompanies Act2006requires usto We havenothing toreport in respect ofthe following exception by report to required are on whichwe Matters Opinion on other matters prescr − − −       explanations werequirefor our audit. we have not receivedalltheinformation and with theCompaniesAct2006;and audited hasbeenproperlypreparedinaccordance the partof the Directors’ Remuneration Reporttobe financial statements. prepared isconsistentwiththeparentcompany financial yearforwhichthefinancial statementsare the information given inthe Directors’ Report forthe us; or have not been receivedfrom branches not visitedby the parent company, or returnsadequate for ouraudit adequate accountingrecordshavenotbeenkeptby returns; or accountingnot inagreement withthe records and of theDirectors’ Remuneration Reportto be auditedare the parent company financial statementsandthepart by lawarenot made;or certain disclosures ofdirectors’ remuneration specified ibed by the Companies Act 2006 CompaniesAct 2006 the by ibed Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

113 112 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

&RPSDQ\EDODQFHVKHHW At 31 March 2011

2011 2010 Notes £m £m

Fixed assets

Tangible assets 41 30.2 25.6

Investments in subsidiary undertakings 42 645.4 627.5

Total fixed assets 675.6 653.1

Current assets

Debtors 43 49.3 57.7

Total current assets 49.3 57.7

Total assets 724.9 710.8

Creditors: amounts falling due within one year 44 (162.3) (147.0)

Provisions 46 (4.5) (9.9)

Total current liabilities (166.8) (156.9)

Net current liabilities (117.5) (99.2)

Total assets less current liabilities 558.1 553.9

Creditors: amounts falling due after more than one year 45 (98.4) (101.6)

Provisions 46 (1.6) (4.6)

Total liabilities (266.8) (263.1)

Net assets 458.1 447.7

Capital and reserves

Share capital 47 8.9 8.8

Share premium account 48 80.6 76.7

Merger reserve 48 85.1 80.3

Share-based payments reserve 48 7.8 6.1

Own shares reserve 48 (13.8) (8.1)

Other reserves 48 0.3 0.3

Profit and loss account 48 289.2 283.6

Equity shareholders’ funds 458.1 447.7

The financial statements of MITIE Group PLC, company registration number SC 19230, were approved by the Board of Directors and authorised for issue on 23 May 2011. They were signed on its behalf by:

Ruby McGregor-Smith Suzanne Baxter Chief Executive Group Finance Director

regarded asmorelikelythannotthatthey willbe where there taxassets isnocommitment arerecognised toremitthese earnings.Deferred totheextentthatitis to selltheasset,oronunremittedof fixedassetswherethere earningsofsubsidiariesandassociates isnocommitment are included in the financial statemen are includedinthefinancial from the inclusionofitemsincome n eilto hthv eneatdo usatvl nce tteblnesetdt Timingdifferences arise and legislationthathave been enactedor atthebalancesheet substantively date enacted tax, orarightto paylesstax,atafuturedate,ratesexpectedtoapply when they crystallisebasedupontaxrates Deferred taxisprovidedinfull ontimingdifferences th atthebalancesheet enacted orsubstantivelydate. enacted Current taxisprovidedatamounts expected tobepaid(orrecove Taxation ln n eils 3–10years indicate thecarryingvalue may notbere The carrying values oftangiblefor fixed assetsarereviewed 5–10years Software anddevelopment costs Plant andvehicles as follows: assets over charged soas to writeoffthe costofthe of moneyand, whereappropriate,th discounting theexpectedfuturecashflows atapre-taxratethatreflectscurrentmarket assessments ofthetimevalue material, provisionsaredeterminedby account,effect ofthetimevaluemoneyis netofany reimbursement. Ifthe when the reimbursementisvirtually certain. reimbursed, for exampleunder aninsurance contract, thereimbursement isrecognised asaseparateassetbutonly estimate can theCompanyexpectsbe madeoftheamount obligation. allofaprovisionto Where someor be that anoutflow ofresourcesembodying economicbenefi theCompany hasapresentProvisions arerecognisedwhen Provisions are recognised inprofitorlossth aresubstantiallyreadyfortheir intendeduseorsale.Allotherborrowingcosts those assets,untilsuchtimeastheassets fortheirintendeduseorsale,areaddedto thecostof that necessarily takeasubstantialperiodof timetogetready Borrowing costs directlyattributable to theacquisition,construction assets, orproductionofqualifying which are assets Borrowing costs current market moneyand therisksspecifictoasset. assessmentsofthetimevalue presentin use,theestimatedfuturecash valueusingapre-taxdiscountratethatreflectsflows are discounted totheir The recoverable amountoftangible fixed the estimatedrecoverable amount, units theassetsare writtendown orcash-generating totheirrecoverable amount. provisionis recognisedasaborrowing duetothepassage cost. oftime Tangible fixedassetsarestatedaccumulated depreciation atcostless Tangible fixed assets Fixed assetinvestmentsinsubsidiariesareshownat Investments and thepreceding year. The principalaccounting policiesaresummarisedbelow.They have been prepared ona going concern basis. financialstatements governance statement,theCompany’s Directors’ report: Corporate As morefullydetailedinthe Standards and law. prepared under thehistoricalcostconvention andin the Company arepresentedasrequiredThe separatefinancial bycompany statementsof law.They havebeen Basis of accounting 6LJQLILFDQWDFFRXQWLQJSROLFLHV the31 ended year For March2011 1RWHVWRWKH&RPSDQ\ILQDQFLDOVWDWHPHQWV e period inwhichthey areincurred. and expenditure in tax computations in and expenditureintax e risksspecifictothe Wherediscounti liability. ts. Deferredtaxisnotprovidedontimingdiffere coverable. Ifanysuch assets isthegreaterofnetselling pricean The expenserelatingtoany provision recovered. Deferredtax assetsand liabilitiesarenotdiscounted. cost lessanyprovisionfor impairment. their estimated usefullivesandiscalculatedonastraight-linebasis accordancewith applicable UnitedKingdom Accounting at result inanobligationatth at ts will be required to settle the obligationanda reliable tosettlethe ts willberequired impairment whenevents obligation as aresult ofapasteventanditisprobable have been appliedconsistentlythroughouttheyear indicationexistsandwh red) usingthetaxratesandlaws that have been  and anyimpairmentin

periodsdifferentfromthoseinwhichthey is chargedtothe profit andloss ng is used,theincreasein e balance sheetdatetopaymore d value inuse.Inassessing or changesin circumstances nces arisingfromtherevaluation ere thecarryingvaluesexceed . value.Depreciationis Annual Report and Accounts 2011 Accounts and Report Annual MITIE Group PLC PLC Group MITIE

115 114 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

1RWHVWRWKH&RPSDQ\ILQDQFLDOVWDWHPHQWV

6LJQLILFDQWDFFRXQWLQJSROLFLHV Financial instruments Trade receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the profit and loss account where there is objective evidence that the asset is impaired. Cash and cash equivalents comprise cash in hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the profit and loss account and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade payables are measured at amortised cost. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial assets and financial liabilities are recognised on the Company’s balance sheet when the Company becomes a party to the contractual provisions of the instrument. Share-based payments The Company operates a number of executive and employee share option schemes. For all grants of share options and awards, the fair value as at the date of grant is calculated using the Black-Scholes model and the corresponding expense is recognised on a straight-line basis over the vesting period. Save As You Earn (SAYE) options are treated as cancelled when employees cease to contribute to the scheme, resulting in an acceleration of the remainder of the related expense. Options over the Company’s shares awarded to employees of the Company’s subsidiaries are accounted for as a capital contribution within the carrying value of Investments in subsidiary undertakings. Pensions Pension costs represent amounts paid to one of the group’s pension schemes. For the purposes of FRS 17 ‘Retirement Benefits’ the Company has been unable to identify its share of the underlying assets and liabilities of the group defined benefit pension scheme on a consistent and reasonable basis. Therefore the Company is accounting for contributions to the scheme as if it were a defined contribution scheme. Note 35 to the consolidated financial statements sets out the details of the IAS 19 ‘Employee Benefits’ net pension liability of £3.0m (2010: £10.5m).

3URILWIRUWKH\HDU As permitted by Section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account for the year. MITIE Group PLC reported a profit after taxation for the financial year ended 31 March 2011 of £32.9m (2010: £10.1m, which included £4.7m of non-distributable profits that arose from internal restructuring during the year). The auditors’ remuneration for audit services to the Company was £50,000 (2010: £50,000). Detailed disclosures of Directors’ remuneration and share options are given in the audited section of the Directors’ remuneration report contained in the consolidated financial statements.

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2011 2010 £m £m Amounts recognised as distributions to equity holders in the year: Final dividend for the year ended 31 March 2010 of 4.1p (2009: 3.6p) per share 14.5 11.6 Interim dividend for the year ended 31 March 2011 of 4.1p (2010: 3.7p) per share 14.4 13.1 28.9 24.7

Proposed final dividend for the year ended 31 March 2011 of 4.9p (2010: 4.1p) per share 17.5 14.5

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

Details ofthe acquisitions in 2010 At 31March Carrying amount At 1April2010 Provision forimpairment Capital contribution reshare-based payments Additions At 1April2010 Shares at cost ,QYHVWPHQWVLQVXEVLGLDU\XQGHUWDNLQJV Borrowing costs the yearas of£0.3m partofsoftware (2010:£0.2m)were capitalisedduring anddevelopment costs. 2010 At 31March Carrying amount Disposals Charge forthe year At 1April2010 Accumulated depreciation Disposals Additions At 1April2010 Cost 7DQJLEOHIL[HGDVVHWV  of non-compete agreements investmentsis£4.6m(2010:£4.1m). includedin associated intangible assetsintheformof non-compete agreements valuedat£0.5m.Thecumulativecost of principal subsidiariesinNote37.Additionstothe At 31 March 2011 March 2011 31 At March 2011 31 At At 31 March 2011 March 2011 31 At March 2011 31 At March 2011 31 At March 2011 31 At the year are provided in Note 31of the the yearareprovidedinNote cost ofinvestments £16.2m include those incurred toobtain consolidated financialstatementsandalisting

Plant and Plant and vehicles 10.5 26.3 (0.3) – (0.3) – 5.0 20.6 6.5 23.7 1.9 2.4 0.7 3.4 5.0 7.4 21.3 4.0 2.6 £m £m

Annual Report and Accounts 2011 Accounts and Report Annual development Software and costs £m MITIE Group PLC PLC Group MITIE 645.4 657.0 627.5 639.1 11.6 30.2 36.8 25.6 28.7 11.6 16.2 (0.3) (0.3) Total 6.6 3.8 3.1 8.4 1.7 £m £m

117 116 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

1RWHVWRWKH&RPSDQ\ILQDQFLDOVWDWHPHQWV

'HEWRUV 2011 2010 £m £m Amounts owed by subsidiary undertakings 46.2 52.5 Other debtors 0.6 1.5 Corporation tax – 1.7 Prepayments and accrued income 2.5 2.0 49.3 57.7

The Directors consider that the carrying amount of debtors approximates their fair value.

&UHGLWRUVDPRXQWVIDOOLQJGXHZLWKLQRQH\HDU 2011 2010 £m £m Overdraft 25.6 114.2 Loan notes – 1.9 Trade creditors 1.8 2.8 Amounts owed to subsidiary undertakings 116.2 18.6 Other taxes and social security 1.5 3.4 Accruals and deferred income 9.9 6.1 Corporation tax 7.3 – 162.3 147.0

The Directors consider that the carrying amount of creditors approximates their fair value. The Company’s bank overdrafts are part of the group’s banking arrangements and are offset against credit balances within the group. The Company has adequate liquidity to discharge all current obligations.

&UHGLWRUVDPRXQWVIDOOLQJGXHDIWHUPRUHWKDQRQH\HDU 2011 2010 £m £m Loan notes 1.6 1.6 Bank loans 96.8 100.0 98.4 101.6

The group’s bank loans, with the exception of the private placement notes, are held by the parent company, MITIE Group PLC. For details of group borrowings, see Note 24.

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Deferred contingent consideration Deferred tax Total £m £m £m At 1 April 2010 12.9 1.6 14.5 Utilised during the year (8.1) – (8.1) Other movements in the year (0.3) – (0.3) At 31 March 2011 4.5 1.6 6.1

Falling due within one year 4.5 Falling due after more than one year 1.6 6.1

Details of the deferred contingent consideration are provided in Note 28 of the consolidated financial statements.

osaeodr – (28.9) – 32.9 – – – 1.6 – – – – – – – – 283.6 – 1.7 0.3 – – (8.1) – – 4.8 – Details ofcontingent havebeen liabilities give 6.1 &RQWLQJHQWOLDELOLWLHV – 3.9 – isnon-distribu £192.4m * 80.3 0.1 – to shareholders 76.7 Dividends paid Profit for theyear 8.8 Share-based payments Purchase ofown shares Shares issued At beginningof year 5HVHUYHV Details ofmovementsinsh Issued undershareoption schemes Issued foracquisitions Issued forplacing At 1April2009 Issued undershareoption schemes Issued foracquisitions At 1April2010 Allotted and fully paid At 31March 2010 and31 March 2011 Authorised Ordinary shares of 2.5p 6KDUHFDSLWDO  aac t3 ac 01 . 8. 5178(38 . 292458.1 289.2 0.3 (13.8) 7.8 85.1 80.6 8.9 Balanceat 31 March2011 2010 At 31March March 2011 31 At table, £187.7m having arisen from internal arisenfrom table, £187.7mhaving

are capital during the year are provided inNote29ofthe consolidatedfinancialstatements. are capitalduringtheyearprovided capital Share £m £m – – –

premium account Share n inNote32 of th £m restructuringinthe end year reserve Merger £m e consolidatedfinancialstatements. Share-based payments reserve ed 31 March 2008 and £4.7min ed 31 March2008and £m Own shares reserve (5.7) – – – (5.7) £m the year ended 31March2010. ended the year reserves Other £m £m

Annual Report and Accounts 2011 Accounts and Report Annual Number account* 5. 8.8 353.2 12.5 500.0 5. 8.9 357.8 2. 8.1 323.0 5. 8.8 353.2 and loss ilo £m million 900.5 19.0 . – 0.1 1.6 3.0 . – 0.2 2.2 9.0 Profit £m MITIE Group PLC PLC Group MITIE 447.7 (28.9) 32.9 (5.7) Total 3.3 8.8 £m

119 118 Accounts Governance Business review Overview MITIE Group PLC Annual Report and Accounts 2011

1RWHVWRWKH&RPSDQ\ILQDQFLDOVWDWHPHQWV

6KDUHEDVHGSD\PHQWV Equity-settled share option schemes The Company has four share option schemes as described in Note 34 of the consolidated financial statements. The Company recognised the following expenses related to share-based payments:

2011 2010 £m £m Long Term Incentive Plan share options 1.3 2.0 2001 Executive share options 0.2 0.2 2001 SAYE share options 0.1 0.1 1.6 2.3

The fair value of options is measured by use of the Black-Scholes model. The inputs into the Black-Scholes model are as described in Note 34 of the consolidated financial statements.

5HODWHGSDUWLHV The Company makes management charges to all of its subsidiaries, whether they are wholly-owned or otherwise, and receives dividends from its subsidiaries, according to their ability to remit them. Other details of related party transactions have been given in Note 36 of the consolidated financial statements.

Shareholder information

Results Dividend reinvestment plan (DRIP) MITIE has set up a dividend reinvestment 2012 Interim management statement 15 August 2011 plan (DRIP) to enable you to build your 2012 Half-yearly results 21 November 2011 shareholding by using your cash dividends under a standing election Dividends to buy additional shares in MITIE. If you would like to receive further information, 2011 Half-yearly dividend 4.1p paid 3 February 2011 including details of how to apply, please 2011 Final dividend 4.9p (proposed) call Capita Registrars on 020 8639 3402 2011 Final ex dividend date 22 June 2011 or contact them by sending an email to: [email protected] 2011 Final dividend record date 24 June 2011 2011 Final dividend last date for receipt/ MITIE online share portal revocation of DRIP mandate 18 July 2011 MITIE has launched a shareholder portal 2011 Final dividend payment date 12 August 2011 where shareholders can register and can: – access information on shareholdings 2011 Annual General Meeting and movements; 2011 Annual General Meeting 13 July 2011 – update address details; – view dividend payments received Company details and register bank mandate instructions; MITIE Group PLC – sell MITIE shares; 1 Harlequin Office Park Fieldfare – complete an online proxy voting form; Emerson Green and Bristol – register for e-communications allowing BS16 7FN MITIE to notify shareholders by email Telephone: +44 (0) 117 970 8800 that certain documents are available Fax: +44 (0) 117 301 4159 to view on its website. This will further Email: [email protected] reduce MITIE’s carbon footprint as well Website: www.mitie.com as reduce costs. Registered number: SC 19230 If you wish to register, please sign up at www.mitie-shares.com Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: +44 (0) 871 664 0300* Website: www.mitie-shares.com Corporate website *calls cost 10p a minute plus network extras, lines are open 8.30am – 5.30pm Mon – Fri This report can be downloaded in PDF format from the MITIE website, which also contains additional general information about MITIE.MITIE. Please visit www.mitie.com

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