Mitie Group Plc delivers record revenue, up 11% to £4,511m

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Mitie Group plc (LON:MTO) has announced its full year results for the year ended 31 March 2024.

Highlights

·	Mitie’s strong track record of delivery continues: all medium-term targets met or significantly exceeded in FY24
·	Record revenue¹, up 11% to £4,511m (FY23: £4,055m), reflecting growth in Key Accounts (including net wins and re-pricing), Projects upsell and M&A (despite the completion of certain short-term public sector contracts)
·	Total contract value (TCV) of £6.2bn wins/renewals (FY23: £4.3bn); 79% renewals rate (FY23: >90%) reflects the loss of two notable contracts; 137% book to bill ratio⁴
·	Operating profit before other items^2,3 up 30% to £210m (FY23: £162m)
·	Operating profit margin³ before other items up 0.7ppt to 4.7% (FY23: 4.0%)
·	Basic EPS before other items up 29% to 12.3p (FY23: 9.5p), reflecting the increase in operating profit, reduction in net finance costs and benefit from share buybacks, partially offset by a higher corporation tax rate
·	Operating profit of £166m (FY23: £117m) and basic EPS of 9.8p (FY23: 6.8p); Other items of £44m (FY23: £45m) include costs to deliver margin enhancement initiatives and non-cash acquisition-related items
·	Strong free cash flow generation of £158m (FY23: £66m), reflecting growth in operating profit and an in-year benefit from working capital process improvements of c.£25m
·	Closing net debt of £81m (FY23: £44m), reflecting positive free cash flow generation, offset by acquisitions and ongoing shareholder returns
·	Strong balance sheet with leverage of 0.6x average net debt/EBITDA⁵ (FY23: 0.4x)
·	Recommended final dividend of 3.0p per share; total dividend up 38% to 4.0p per share (FY23: 2.9p)
·	Share buyback programme for £50m commenced in April; 7m shares purchased to date at 119p average price
·	Robust total order book⁴ and pipeline of £11.4bn (FY23: £9.7bn) and £18.6bn (FY23: £14.7bn), respectively, underpinning future growth in Key Accounts and Projects
·	New Facilities Transformation Three-Year Plan (FY25 – FY27) has commenced with good momentum; we are confident in delivering our medium-target targets and achieving our growth expectations for the year

	Twelve months to 31 March 2024			Twelve months to 31 March 2023
£m unless otherwise specified	Before other items^2,5	Other items²	Total	Before other items^2,5	Other items²	Total
Revenue (including share of JVs & associates)	4,510.7	–	4,510.7	4,055.1	–	4,055.1
Group revenue	4,445.2	–	4,445.2	3,945.0	–	3,945.0
Operating profit/(loss)³	210.2	(44.5)	165.7	162.1	(45.1)	117.0
Operating profit margin³	*4.7%*	–	*3.7*%	4.0%		2.9%
Profit/(loss) before tax	200.8	(44.5)	156.3	150.6	(45.1)	105.5
Profit/(loss) for the period	162.9	(32.0)	130.9	128.0	(36.9)	91.1
Basic earnings per share	12.3p		9.8p	9.5p		6.8p
Dividend per share			4.0p			2.9p
Cash generated from operations			227.9			116.9
Free cash inflow⁵			157.6			65.7
Average daily net debt⁵			160.7			84.3
Closing net debt⁵			80.8			44.1
Total order book⁴			£11.4bn			£9.7bn
Return on invested capital⁵			26.4%			25.4%

1. Including share of joint ventures (JVs) and associates.

2. Other items are described in Note 4 to the condensed consolidated financial statements. In FY24 £24.8m relates to non-cash amortisation of acquired intangible assets (FY23: £21.4m).

3. Operating profit includes share of profit after tax from JVs and associates. Operating profit margin is operating profit as a percentage of revenue including share of JVs and associates.

4. Total order book includes secured fixed term contract work, variable (including estimated variable work) and project work. Book to bill ratio is the relationship between orders received during the year and revenue recognised for the year. Both measures reflect an uplift of £0.5bn arising from the consolidation of Landmarc.

5. Performance before other items, net debt, free cash inflow, EBITDA and return on invested capital are presented as Alternative Performance Measures. Explanations as to why these measures are presented, and reconciliations to the equivalent statutory measures, are set out in the Appendix to the condensed consolidated financial statements.

Commenting on the year and the outlook, Phil Bentley, Group Chief Executive, said:

“We are pleased with our strong performance in FY24, having delivered record revenue, operating margin expansion and a good return on invested capital. Mitie is a cash generative business with a robust balance sheet, and we are committed to investing in accelerated growth, as well as returning surplus funds to shareholders via share buybacks.

“Our divisions are all performing well, with Technical Services, Central Government & Defence and Communities delivering double digit revenue growth, and Business Services more than replacing all of the revenue from certain short-term public sector contracts.

“As a result of this positive outturn, we have met or significantly exceeded all of the financial targets set out in the previous Three-Year Plan (FY22 – FY24), and this has been reflected in Mitie’s Total Shareholder Return over the period (80% TSR; #10 in FTSE 250).

“We have now started to execute our new Facilities Transformation Three-Year Plan (FY25 – FY27), through which we expect to accelerate growth and extend Mitie’s market leadership position. Our confidence in achieving this is underpinned by a record £19bn pipeline of opportunities, through which we will add further Key Accounts and deliver transformational Projects in higher growth categories, as well as by strategic M&A, which will add to our existing Projects capabilities.

“We have secured a number of new contracts and projects in the fourth quarter of FY24 and first quarter of FY25, which give us good business momentum and we expect to offset, in the medium-term, the contracts lost and ending in FY24. Margin enhancement initiatives are also expected to deliver further benefits in the current year, and we will continue to generate strong cash flows and enhanced shareholder returns.

“My appreciation goes to our 68,000 colleagues. Through their hard work, allied to our technology-led approach, Mitie is transforming the built environment and the lived experience for thousands of public and private sector customers and their colleagues.

“FY25 will be another year of delivery towards our medium-term targets and meeting our high single digit revenue growth expectations for the year.”

Analyst Presentation and Q&A

Phil Bentley (CEO) and Simon Kirkpatrick (CFO) will host a presentation and Q&A session today (6 June 2024) at 9.30am at The Shard and via a webcast. For dial in details please contact [email protected]. A copy of the presentation will be available on the company website in advance of the live presentation, www.mitie.com/investors.

Chief Executive’s strategic review

Overview

Mitie delivered a strong financial performance and made further strategic progress in the year ended 31 March 2024. Revenue (including share of JVs and associates) grew by 11% to a record £4,511m (FY23: £4,055m), operating profit before other items grew by 30% to £210m (FY23: £162m) and basic EPS before other items grew by 29% to 12.3p (FY23: 9.5p).

We achieved an operating profit margin before other items of 4.7% (FY23: 4.0%) in the full year, which included a margin of 5.3% in the second half of the year. Sustainable margin improvement was a key pillar of our previous Three-Year Plan (FY22 – FY24), and, building on the successful delivery of this, we have a clear path to achieving an operating margin of at least 5% by FY27.

Based on the equivalent statutory measures, Group revenue increased by 13% to £4,445m (FY23: £3,945m), operating profit increased by 42% to £166m (FY23: £117m) and basic EPS increased by 44% to 9.8p (FY23: 6.8p). The increase in basic EPS reflected improved profitability and a £5m reduction in other items after tax to £32m (FY23: £37m). Further details are set out in the Finance review.

Our strategy and targets

Our achievements against all of the targets (based on alternative performance measures) in the previous Three-Year Plan (FY22 – FY24) are highlighted below:

Metric	Target	Achievement in FY24
Annual revenue growth	Mid-to-high single digit	11%
Operating profit margin	4.5% to 5.5%	4.7%
EBITDA	£200m	£268m
Free cash flow	£100m per annum	£158m
Average leverage	1.0x maximum	0.6x
ROIC	>20%	26.4%

Our new Three-Year Plan (FY25 – FY27) pivots the business from traditional Facilities Management to technology-driven Facilities Transformation. Mitie is the market leader in the UK, with deep capabilities to aggregate workflow and workforce data across the built environment, and a trusted partner to thousands of blue-chip public and private sector organisations. We have advanced our core capabilities through targeted investments in technology and strategic M&A, alongside the work of our exceptional colleagues, to meet the changing needs of our customers.

Our customers are looking for asset optimisation, a reduced carbon footprint and higher levels of assurance for security and cleanliness, whilst embracing hybrid-working and creating a ‘Great Place to Work’. This all requires cyber-secure data driven insights to inform better decision-making.

These needs for transformation are underpinned by attractive macro trends, including decarbonisation, the modernisation of the built environment, and changes in legislation and the regulatory landscape, that benefit both our core service lines and Projects business.

Our ambitious financial targets (based on alternative performance measures) for our new Facilities Transformation Three-Year Plan are set out below and are designed to deliver enhanced shareholder returns over the period.

·	High single digit revenue compound annual growth rate
·	>5% operating margin by FY27
·	EBITDA >£300m by FY27
·	EPS growth above that of revenue growth, despite higher corporation tax rates
·	£150m annual free cash flow by FY27

Accelerating growth

Our technology-led Facilities Transformation strategy is expected to deliver accelerated growth through the key pillars of: 1) Key Account growth; 2) Projects upsell; and 3) Infill M&A. We are targeting high single digit revenue growth annually.

In FY24, organic growth through Key Accounts (net wins and contract growth) and Projects upsell contributed 7% to revenue growth, inclusive of contract re-pricing of 4%. Infill M&A completed since 1 April 2022 contributed a further 4% of inorganic growth.

Key Account growth:

New contract wins, scope increases and extensions/renewals totalled £6.2bn TCV in FY24 (FY23: £4.3bn). New and expanded Key Accounts of £4.4bn TCV included: Aena in Spain; further Amazon sites; the Defence Infrastructure Organisation (DIO) overseas estate in Germany and wider Europe; Department for Transport (DfT); Future Defence Infrastructure Services (FDIS) Service family housing refurbishment projects work; Home Office immigration services; Landmarc scope increases; Landsec additional cleaning and security; and Phoenix Group.

Notable extensions/renewals of £1.8bn TCV included: the Department for Work and Pensions (DWP); the Foreign Commonwealth & Development Office (FCDO); GSK; HMRC; the Home Office and Ministry of Justice; JLL; Landsec; Lloyds Banking Group (LBG); Network Rail; and Sky.

Mitie’s renewal rate reduced to 79% (FY23: >90%). We have a large, diversified portfolio of customers, and contract renewals are therefore completed on a rolling basis throughout each year. During FY24, two notable contracts with a combined c.£70m per annum secured contract value were not renewed (one due to pricing and the other seeking an international provider), and this was reflected in the renewal rate. Both contracts were handed over towards the end of FY24, although we will continue to provide sub-contracted Security, Waste and Landscaping services for one and expect to continue delivering higher margin Projects work for both.

Our total order book increased by 18% to £11.4bn (FY23: £9.7bn), including an increase of £0.5bn TCV from the consolidation of Landmarc. Our pipeline of new opportunities stands at a record £18.6bn.

Projects upsell:

In FY24, we continued to see sustained demand from our customers for transformational projects across their estates and, as a result, Projects revenue across the Group increased by 37% to £1.1bn (FY23: £0.8bn).

The largest driver of this growth was buildings infrastructure work, including lifecycle upgrades to improve asset efficiency, the design and build of inspirational workplaces, and retrofits to ensure buildings meet evolving regulatory requirements. This work accounted for over 70% of Projects revenue and grew by c.40% year-on-year. We continue to see demand for decarbonisation technologies, such as solar, electric vehicle (EV) charging and battery storage, whilst data centre fitouts have also been an area of growth as major cloud-service providers expand their UK presence. We have enhanced our expertise in this area through the acquisitions of JCA Engineering and GBE Converge.

Projects are delivered across all of our divisions, with the largest contributors to revenue growth in FY24 being Central Government & Defence and Technical Services (see Operating Review for further details by division).

Our projects are typically short in duration (one to three months, on average), individually £100k – £150k on average, and around 80% of revenue is delivered through Key Accounts upsell. Whilst some projects are one-off in nature, we often work with customers on rolling programmes, such as the refit of branches for LBG, solar panel installations at David Lloyd Clubs and the refurbishment of housing for the DIO.

Underpinning our work is the Mitie Projects Centre of Excellence (PCoE), driving innovation and productivity, and managing the operating platform including construction, design & management regulations, the project management playbook, and QHSE standards and training. The PCoE also serves as a knowledge centre to support our 2,500 Projects employees across the business.

Infill M&A:

During FY24, Mitie completed seven acquisitions for a combined consideration of £66m, net of cash acquired and excluding employment-linked earnouts.

Our position as a leader in the intelligence and technology-led Fire & Security market has been enhanced by the acquisitions of RHI Industrials (May) – a leading installer of high-tech security and access controls, and GBE Converge (November) – a leading independent provider of fire, security and information and communications technology solutions. Smaller security acquisitions included Linx International (April) – a leading risk management and consulting business, and Biservicus (September) – a Spanish security business,

Enhancing our Mechanical & Electrical (M&E) engineering credentials, we acquired JCA Engineering (September) – a leading principal contractor for complex engineering projects across the UK, with a particular focus on critical environments such as data centres, healthcare and life sciences. We also purchased the assets of G2 Energy (via a liquidation process in July) – a leading high voltage and battery energy storage contractor, and Cliniwaste (October) – a specialist in treating plastic waste.

Additionally, in November, Mitie completed an agreement with its joint venture partner in the ‘Landmarc’ military training estate to amend the shareholders’ agreement. This resulted in Landmarc being consolidated as a subsidiary of Mitie from this date and enables Landmarc to benefit from the wider capabilities of our business.

Operating margin progression

We have a clear path to a target operating profit margin before other items of at least 5% by FY27. This will be achieved through our ongoing programme of margin enhancement initiatives and operational leverage, alongside the contribution from higher margin infill M&A and Projects works. We expect these management actions to more than offset the continued impact of inflation and pressure on contract pricing in a highly competitive environment.

In FY24, the Group achieved the final target in its previous Three-Year Plan (FY22 – FY24), reaching an operating profit margin before other items of 4.7%. This represents an increase of 0.7ppt on the prior year (FY23: 4.0%), and an increase of 2.4ppt since the start of the Plan (FY21: 2.3%). Consistent with the previous year, our H2 performance exceeded that of H1, both for revenue and operating profit, resulting in an operating profit margin of 5.3% in the second half of FY24.

The increase across the year reflects improved underlying trading and the delivery of £40m of savings through margin enhancement initiatives, more than offsetting the net impact of cost inflation that we were unable to pass through to customers (£6m) and the completion of certain short-term public sector contracts (£16m).

Approximately £28m of these savings were delivered through our Target Operating Model (TOM) programme, optimising our organisational structure, centralising transactional finance teams, outsourcing certain back-office functions and consolidating systems and processes. The balance of savings were delivered through further Interserve synergies (£5m), Operational Excellence initiatives (£4m), and the continued roll out of the Coupa digital supplier platform across the divisions (£3m). The costs associated with the delivery of margin enhancement initiatives are included in ‘cash other items’.

We expect to complete the TOM initiatives during FY25. Over the new Facilities Transformation Three-Year Plan (FY25 – FY27), the focus for margin enhancement initiatives will shift towards operations and contract efficiencies, including an optimised organisational structure within customer accounts, improved contract productivity, and an increase in the use of Artificial Intelligence (AI) analytics to drive efficiencies in the deployment of resources and raise customer engagement.

Sustainable free cash flow generation

Mitie is cash generative, a function of strong profitability, tight working capital control and a disciplined approach to capex. In FY24, the Group generated £228m of cash from operations (FY23: £117m), leading to a free cash inflow of £158m (FY23: £66m). This free cash inflow reflected growth in operating profit, alongside working capital process improvements that contributed a one-off benefit of c.£25m in the year.

The Group is targeting free cash flow generation of c.£150m per annum by FY27, as we expect increased profitability and continuing working capital process improvements to offset structural headwinds from growth in the Projects business and customers demanding longer payment terms. Strong free cash flow generation, combined with our robust balance sheet, underpins the proactive and disciplined capital allocation of our financial resources.

Proactive and disciplined capital allocation

Our capital allocation policy prioritises a progressive dividend (within a target payout range of 30-40%) and the purchase of all shares to fulfil employee share schemes to mitigate shareholder dilution. We will also continue to pursue strategic infill M&A, primarily targeting higher growth, higher margin projects businesses in the key areas of Buildings Infrastructure, Decarbonisation and Fire & Security. Excess funds will be returned to shareholders through share buybacks.

Consistent with this approach, the Board is recommending a final dividend of 3.0p per share which, when added to the 1.0p interim dividend paid, takes the total dividend for FY24 to 4.0p per share. This is a 38% increase on the prior year (FY23: 2.9p) and represents a payout ratio of 33% (FY23: 30%). The final dividend will be paid on 5 August 2024, following approval at the 2024 AGM.

During FY24, we completed a £50m share buyback programme, net of £8m cash proceeds received from the vesting of the 2020 Save As You Earn (SAYE) scheme (c.30m shares were purchased via the buyback to fulfil this scheme). We also purchased 20m shares at a cost of £20m for employee incentive schemes, and we invested £66m in the seven infill acquisitions outlined above.

Over the past two years (FY23 and FY24), we have purchased a total of 127m shares (of which 95m have been cancelled) for £100m net cost via share buybacks and 70m shares for £57m into our trusts for employee incentive schemes. The average price per share for these combined share purchases was 80p.

We commenced our current £50m share buyback programme on 15 April 2024. We will hold c.10m shares in treasury to fulfil the 2021 SAYE scheme, vesting in January 2025, and cancel all shares purchased in excess of this. Within the current programme we have purchased 7m shares at an average price of 119p.

Strong balance sheet

Closing net debt of £81m (FY23: £44m) reflects our strong free cash flow generation being more than offset by capital deployment actions totalling £150m, alongside a £45m increase in lease obligations as we continue to transition our fleet to electric vehicles (EV) and extend the duration of leases. Average daily net debt was £161m in FY24 (FY23: £84m) and leverage was 0.6x average net debt / EBITDA (FY23: 0.4x). We are targeting a leverage range of 0.75x to 1.5x in our new Facilities Transformation Three-Year Plan (FY25 – FY27).

Technology leadership

Our competitive advantage is embedded in our people and industry-leading technology, and this has been a key contributor to a record Net Promotor Score of +60. Through ongoing investment, we continue to enhance our unique Mitie Digital Platform and deliver transformative, data-driven, ‘intelligent’ solutions to meet the changing needs of our customers.

This includes Intelligent Engineering – where we are leading in predictive and preventative maintenance; Intelligent Security – where we are pioneering the deployment of resources in response to risk and threat intelligence; Intelligent Cleaning & Hygiene – where we are delivering demand-led cleaning via our sensor technology; and Intelligent Projects – where our new Emissions Intelligence service will enable the automation of emissions data capture and reporting, and the creation of Net Zero pathways for our customers.

These solutions leverage our deep capabilities to aggregate workflow and workforce data across the built environment through our data lake and are increasingly being enriched by the application of Artificial Intelligence and Machine Learning (AI/ML).

During FY24, we have been developing Mitie’s GenAI diagnostic dashboards (Mozaic) in each of our core service lines, using real-time data to increase visibility across our customers’ estates and inform decision-making. Through our predictive analytics capabilities, we are evolving our service delivery to demand-led cleaning and front of house services, threat intelligence and carbon reporting, and predicting and resolving asset issues before they fail.

We are also developing GenAI benchmarking dashboards to compare the performance of customer estates to industry standards and competitors, in areas such as energy consumption, to identify opportunities for improvement. These dashboards are being piloted on several Key Accounts in the retail, distribution and financial services sectors.

Smart Workplaces was launched in H1, to consult, design and deliver workplaces that improve the ‘lived’ experience and, through the adoption of smart technologies, optimise occupancy levels, footprint and the provision of wider services within the building. It includes our digital twin offering, which enables 3D visualisation, experiential design simulations and building information modelling (BIM), to help customers reimagine their workplaces of the future.

Our strategic partnerships with global IT companies such as Microsoft, Vodafone, ServiceNow and Wipro are also developing. In March 2024, we launched our ‘Emissions Intelligence’ service in partnership with Salesforce.com to provide carbon reporting and reduction tools, complementing our existing suite of Plan Zero services.

We are also leveraging our partnership with Microsoft (MS) to deliver increasingly predictive and preventative solutions to our customers and enhance internal processes. During FY24, we fully integrated Azure ChatGPT into Aria/ESME (which allows customers to report issues via an app), delivering improved customer communications and raising case accuracy to 97%. MS Copilot is delivering efficiency savings, and we are implementing AutoGenAI to continue enhancing bid quality and response times.

Our cyber security credentials are industry leading. We consistently score above A90 on the Security Scorecard (an independently assessed measure), we are a Cyber Essentials Plus and ISO27001 certified company and we have a NIST maturity rating of 4.1.

Environment, Social and Governance (ESG) leadership

Mitie is recognised as a leader in ESG among global industry peers. These initiatives form a key part of how we do business, ensuring we grow sustainably and responsibly. Our leading credentials also enable us to work with our customers to realise their own sustainability and Net Zero ambitions.

During FY24, we secured a place on the CDP Climate Change A List, placing us among only 2% of 21,000 organisations that are assessed annually. We received a Platinum rating from the Sustainable Facilities Management Index (SFMI) for the third consecutive year and, shortly after the year end, we received a ‘Low’ risk rating from Sustainalytics of 10.5 (previously 12.4) placing us on the threshold of their ‘Negligible’ risk band.

We have ambitious targets to achieve Net Zero for our operations by the end of 2025, and across our supply chain by 2035, and received validation from the Science Based Targets initiative (SBTi) in April 2023. Our largest carbon emissions relate to our vehicles, and we transitioned a further c.1,900 from diesel to electric vehicles (EVs) in FY24. Our fleet of over 5,000 EVs is one of the largest in the UK and we won Transport/Fleet Management Project of the Year (edie) for our ambitious EV transition plan, among other awards.

We continue to offer career development opportunities and industry-leading benefits to our colleagues in order to attract and retain the best talent. During FY24, we supported over 1,200 colleagues through apprenticeships and expanded our offer to over 90 technical, professional and managerial courses across a diverse range of areas from heat pump engineers and data technicians to security officers, business administrators and project managers.

We were named in the top 100 Apprenticeship Employers for the third consecutive year, in addition to being recognised as a Top Employer UK and an Inclusive Top 50 UK Employer for the sixth consecutive year.

Operating Review

Business Services

Business Services is the UK’s largest provider of technology-led Security and Cleaning & Hygiene services across c.2,000 contracts, with sector expertise in Retail, Transport, Central Government and Financial & Professional services. It also provides Landscaping and Waste services, and Mitie’s Spanish business is reported within the division.

Business Services, £m	FY24	Restated¹FY23	*Change*
Revenue	1,490	1,414²	5%
Security	*823*	782	5%
Cleaning	*407*	390	4%
Spain	*114*	102	12%
Waste	77	74	4%
Landscapes	69	66	5%
Operating profit before other items	97.0	92.3²	5%
Operating profit margin before other items	*6.5%*	6.5%²	–
Total order book	£2.5bn	£1.8bn	39%
Number of employees	39,157	38,124	3%

¹ Restated to reflect the change to divisional reporting from H1 FY24 to include Spain, Waste and Landscapes

² Includes £15m revenue and £7.0m operating profit from Covid contracts. Excluding this, the underlying operating profit was £85.3m and the operating profit margin was 6.1%

Performance highlights

·	Revenue increased by 5% to £1,490m (FY23: £1,414m), reflecting contract re-pricing, acquisitions, increased projects work, and net wins, partially offset by the completion of higher margin short-term public sector works
·	Operating profit before other items increased by 5% to £97.0m (FY23: £92.3m), largely reflecting margin enhancement initiatives and the contribution from acquisitions
·	£2.2bn TCV of contract wins, scope increases and extensions/renewals (FY23: £1.3bn) resulted in a 39% increase in the total order book to £2.5bn (FY23: £1.8bn)
·	Five acquisitions completed, building on the division’s leading position in the UK intelligence and technology-led Fire & Security market, and expanding its security offering in Spain
·	Awards include: six British Security Awards 2023; three Fire & Security Matters Awards 2023; one UK Outstanding Security Performance Award 2024; Pro-Landscaper Sustainable Company of the Year; and four Retail Risk Fraud Awards 2023

Operational performance

Business Services delivered a resilient performance in FY24, with revenue benefiting from contract re-pricing, the contribution from acquisitions, increased project works, and net wins. This growth was partially offset by the completion of higher margin, short-term public sector works, such as the Afghan Relocations and Assistance contract, and residual Covid works.

The division secured £2.2bn TCV of contract wins, scope increases and extensions/renewals primarily in the Critical National Infrastructure (CNI), financial services, and retail sectors. Wins and scope increases included for Aena in Spain, further Amazon sites, expanded security provision for the Home Office, expanded cleaning and security services across Landsec’s estate, Lloyds Banking Group (LBG) projects work, London South Bank University, and Phoenix Group. The largest extensions were LBG, Landsec and Network Rail, while other notable renewals and extensions included HMRC, JLL and Sky.

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Margin enhancement initiatives continued at pace and offset the impact of the completion of the higher margin, short-term public sector works. The initiatives primarily focused on operational excellence and productivity improvements, including enhancing the Workplace+ workforce management app, in order to optimise workforce productivity, and to improve workflows across core services.

Retail is the division’s largest sector, with c.£320m of annual revenue, over 8,500 Mitie colleagues, and a blue-chip customer base of national retailers and flagship shopping centres. Retailers are facing unprecedented levels of crime, with the estimated cost to the sector having almost doubled over the past year to £3.3bn per annum. As the market leader in this sector, Mitie has created an intelligence and technology-led security model, which includes bespoke Security Operations Centres, the risk-based deployment of resources, and end-to-end crime management solutions delivered through dedicated crime analyst teams. Cutting edge technologies are being integrated, including AI video analytics, biometrics, cloud-based systems, and centralised management software in order to streamline operations.

Two pivotal initiatives that gathered momentum during the year and demonstrate the division’s transformative approach are: 1) Operation Alliance – the UK’s first direct data sharing agreement, allowing Mitie to aggregate evidence from retailers against offenders, and disrupt organised gangs; and 2) Pegasus – Mitie took the lead in securing funding from retailers and the Home Office to establish the first police unit dedicated to combating retail crime.

Mitie’s Fire & Security business has further strengthened its position as a leading integrated systems provider through organic growth, and through the acquisitions of RHI Industrials (May 2023) and GBE Converge (November 2023). These businesses have broadened the scope of the division’s fire protection, electronic security and remote monitoring services to encompass perimeter security, civil engineering, and IT networking & managed services capabilities. They have also boosted the division’s projects pipeline in CNI growth markets, including numerous perimeter security projects for National Grid and National Gas, and c.£30m of data centre fitout projects.

Mitie also acquired Linx International (April 2023), the Biservicus security business in Spain (September 2023), and Cliniwaste (October 2023), a specialist in treating single use plastic waste in clinical environments.

Spain revenue increased by 12%, with new contract wins more than offsetting the completion of Covid work in the prior year. New wins included Aena (airport operator), Dirección General de Racionalizatión y Centralización de la Contratación (Ministry of Finance) and Administrador de Infraestructuras Ferroviarias (state owned railway company).

Waste revenue increased by 4%, primarily through organic contract growth. Waste benefited from Group contract wins including DIO and Phoenix Group and extensions including Covent Garden, JLL, Landsec and LBG.

Landscapes revenue increased by 5%. New wins included Amazon, Canal and River Trust, Scottish Power and Yorkshire Water, whilst contract extensions were secured with the DfT, LBG and Network Rail. Within Landscapes, Biotecture (living walls specialist) secured notable projects with Mace Group, McLaughlin & Harvey and Rybrook Group.

Technical Services

Technical Services is the UK’s largest provider of Engineering and Maintenance services, serving c.350 contracts. Through existing capabilities and infill M&A, the division also delivers transformational engineering projects in the high-growth categories of Buildings Infrastructure, Decarbonisation and Telecoms Infrastructure.

Technical Services, £m	FY24	FY23¹	*Change*
Revenue	1,326	1,154	*15%*
Maintenance	*795*	770	3%
Projects	*531*	384	38%
Operating profit before other items	44.3	34.1	*30%*
Operating profit margin before other items	*3.3%*	3.0%	0.3ppt
Total order book	£1.5bn	£1.6bn	(6)%
Number of employees	9,552	9,841	(3)%

¹ Projects revenue restated to include £230m of projects delivered for customers as part of large FM contracts (previously reported in Maintenance).

Performance highlights

·	Revenue increased by 15% to £1,326m (FY23: £1,154m), benefiting from continued growth in projects work, acquisitions, contract re-pricing, and prior year contract wins
·	Operating profit before other items increased by 30% to £44.3m (FY23: £34.1m), reflecting contract growth, margin enhancement initiatives, and acquisitions, partly offset by unrecoverable cost inflation
·	£1.2bn TCV of contract wins, scope increases, extensions/renewals (FY23: £1.0bn) resulted in a 6% reduction in the total order book to £1.5bn (FY23: £1.6bn), due to contract losses
·	JCA Engineering and G2 Energy acquired, expanding the division’s engineering projects capabilities
·	Awards include: Best Low Carbon Solution – Telca 2023; Net Zero Strategy – Energy Management Awards; People Management & Talent Retention – IWFM Awards 2023; Project of the Year – CN Specialist Awards (Custom Solar); UK Partner in Safety / National Award for Safest Contractor – INEOS

Operational performance

Technical Services delivered a strong revenue performance as a result of the continued growth in project works, growth in the recent acquisitions, contract re-pricing and prior year contract wins (e.g. Dublin Airport Authority, National Grid and NATS).

Notable contract wins and scope increases in FY24 included Amazon, BAE Systems, LBG projects work, Phoenix Group and the Scottish Government. Extensions were secured with LBG, Mitie’s largest private sector customer, with the division continuing to benefit from project work related to its branch refurbishment programme. Contracts were also renewed with GSK, Network Rail and Sky.

Margin enhancement initiatives were delivered across the Target Operating Model and Operational Excellence programmes, as well as through divisional overhead cost savings. During FY24, a new helpdesk Optimiser tool was launched to further improve the efficient deployment of engineers. The division is also investing in Gen AI Mozaic to build customisable dashboards and provide data-led insights using Artificial Intelligence.

The Technical Services operating margin increased by 0.3ppt to 3.3% in FY24 (FY23: 3.0%). It remains below that of the Group as a whole due to factors including: 1) the division absorbing the management cost of IFM contracts; 2) a higher depreciation charge relating to investments in technology; 3) a higher exposure to non-recoverable cost inflation; and 4) the investment required in recent infill acquisitions, and underperformance in the Telecoms business, where the terms of certain frameworks are being renegotiated.

Approximately half of Mitie’s £1.1bn Projects revenue is delivered through Technical Services. During FY24, Technical Services enhanced its projects capabilities, including in design, mechanical and engineering works, and in high-tech building infrastructure (such as data centres), through the acquisitions of JCA Engineering and G2 Energy (assets purchased in July through a voluntary liquidation process). There have been notable early successes, with JCA winning a significant project for Kao at its Harlow data centre campus, and G2 winning a contract for Mytilineos Energy & Metals to deliver high voltage electrical infrastructure.

The division has benefited from continued growth in a wider range of projects delivered to customers including the BBC, the Scottish Government, LBG and Deloitte. One of the largest projects completed in FY24 was the full refurbishment and fitout of a 100-year-old manufacturing facility for Rolls Royce to support mission-critical turbine engine assembly.

Central Government and Defence (CG&D)

The CG&D division is one of the UK’s largest providers of services to the MoD and other UK Government departments, providing hard and soft services and transformational projects. CG&D delivers services across 24 contracts and 27 government departments and agencies, at over 3,000 locations in the UK and overseas.

CG&D, £m	FY24	FY23¹	*Change*
Revenue including share of JVs and associates	938	828	*13%*
Central Government	*524*	439	19%
Defence	*414*	389	6%
Operating profit before other items	80.4	59.8	*34%*
Operating profit margin before other items	*8.6%*	7.2%	1.4ppt
Total order book	£3.2bn	£2.4bn	33%
Number of employees	6,879	5,576	23%

¹ No change following the change to divisional reporting effective from H1 FY24

Performance highlights

·	Revenue grew by 13% to £938m (FY23: £828m), benefiting from increased project works, the consolidation of Landmarc, and contract re-pricing, partly offset by net contract losses
·	Operating profit before other items grew by 34% to £80.4m (FY23: £59.8m), largely reflecting the delivery of margin enhancement initiatives and increased levels of higher margin projects and variable work
·	£1.7bn TCV of contract wins, scope increases, extensions/renewals and the Landmarc consolidation (FY23: £1.7bn) resulted in a 33% increase in the total order book to £3.2bn (FY23: £2.4bn)
·	Awards include: Gold (Ascension, DWP, Gibraltar and Hestia) – RoSPA; 12^th consecutive President’s Gold (Cyprus) – RoSPA; 17^th consecutive Gold (Project Armada) – RoSPA Order of Distinction

Operational performance

CG&D performed well in FY24, with revenue growth driven by sustained demand for higher margin transformational projects across contracts such as the Department for Work and Pensions (DWP) and the Ministry of Defence (MoD), through Landmarc (consolidated as a subsidiary from November 2023), and Future Defence Infrastructure Services (FDIS), as well as from pricing. These increases more than offset the loss of revenue from two contracts that ended during the year (one lost due to pricing and one which was strategically not re-bid due to its fragmented operations across European sites). A further notable contract was lost (also on pricing) and terminated at the end of FY24.

During the year, the division secured £1.2bn TCV of contract wins, scope increases, extensions/renewals and £0.5bn TCV from the consolidation of Landmarc. Notable wins included the Defence Infrastructure Organisation overseas estate in Germany and wider Europe, hard services and projects work for the DfT, and soft services for the Government Property Agency’s Central region. Notable contract extensions included the Foreign Commonwealth & Development Office, the DWP, and the Home Office and Ministry of Justice.

Projects work continued to grow, with the most significant being a c.£100m programme to support the DWP Critical Security Infrastructure project to upgrade all security related assets at c.600 sites across their estate. Approximately two thirds of the programme was delivered in FY24, with the balance expected to be completed during FY25. Critical projects work to support the MoD’s defence estate included the delivery of housing refurbishments for Service families, refurbishment of runways and taxiways at the Mount Pleasant Complex airfield in the Falkland Islands, and construction of a new bulk fuel installation facility at RAF Akrotiri, Cyprus.

CG&D continued to roll out and benefit from the new technologies initially introduced in FY23, such as Aria and Mozaic, and completed the implementation of Mitie’s Azure Secure Cloud infrastructure. The division saw ongoing improvements in the utilisation levels of mobile engineers and has introduced the Coupa digital supplier platform across a number of contracts to streamline the purchasing process. The ‘Mitie First’ strategy to insource services resulted in an additional £16m of cross-selling revenue synergies in FY24.

Communities

The Communities division delivers sustainable outcomes as a trusted partner to the public sector across Local Government & Education, Healthcare and Care & Custody. The division operates over 100 PFI and traditional commercial contracts.

Communities, £m	FY24	Restated¹FY23	*Change*
Revenue including share of JVs and associates	757	659	*15%*
Local Government & Education	*265*	240	10%
Healthcare	*275*	250	10%
Care & Custody	*217*	169	28%
Operating profit before other items	39.1	31.4	*25%*
Operating profit margin before other items	*5.2%*	4.8%	0.4ppt
Total order book	£4.2bn	£3.9bn	8%
Number of employees	12,384	10,634	16%

¹ Restated to reflect the change to divisional reporting from H1 FY24 to include Care & Custody. Local Government & Education was previously reported as Education and Campus & Critical.

Performance highlights

·	Revenue increased by 15% to £757m (FY23: £659m), primarily benefiting from higher volumes in Care & Custody, projects and variable works and contract re-pricing which more than offset net contract losses
·	Operating profit before other items increased by 25% to £39.1m (FY23: £31.4m) reflecting reduced losses on one particularly challenging PFI contract, margin enhancement initiatives and contract growth
·	£1.1bn TCV of contract wins, scope increases and extensions/renewals (FY23: £0.3bn) resulted in an 8% increase in the total order book to £4.2bn (FY23: £3.9bn)
·	Awards include Estates & Facilities Team of the Year and Highly Commended for Healthcare Supplier of the Year – Institute of Healthcare Engineering & Estates Management (IHEEM)

Operational performance

Communities delivered strong revenue and profit growth in FY24, driven by an increase in the provision of services for the Immigration Escorting Services contract, projects and variable works (including increased lifecycle projects in healthcare and education settings and work to remove reinforced autoclaved aerated concrete from public buildings), contract re-pricing and operational efficiencies.

The division continues to make progress in driving transformation and implementing margin enhancement initiatives. This helped to deliver an improved performance on one particularly challenging PFI contract, reducing losses to £3.9m in FY24 (FY23: £8.4m). We continue to expect this contract to achieve profitability in FY26, after further productivity improvements and re-sets to pricing.

In FY24, £1.1bn TCV of contract wins, scope increases and extensions/renewals were secured. This included new contracts with London South Bank University to deliver IFM services across multiple sites, as well as an increase in the provision of services for the Immigration Escorting Services contract. The increase in the order book also reflects indexation on long-term contracts and an increase in projects volumes being delivered as the performance of certain PFI contracts continues to improve. Notable contract extensions were awarded for the Heathrow Immigration Removal Centre and for King George Hospital.

Shortly after the year end, the division was awarded a 10-year £329m TCV contract to operate HMP Millsike, the UK’s first all-electric prison. When opened in 2025, the Category C prison will hold 1,500 people who will spend their sentences learning the skills needed to find work on release.

Communities has continued to develop its technology capabilities. FY24 saw successful trials of Mitie’s Merlin for Cleaning application in a healthcare setting and a new partnership with Vodafone using IoT to track the location of non-static assets, such as wheelchairs, in hospital settings. Further technology roll outs are planned in FY25.

Corporate overheads

Corporate overheads represent the costs of running the Group and include costs for central functions such as commercial and business development, finance, marketing, legal and HR, as well as the Board governance obligations of a publicly listed company. Corporate overhead costs have reduced by 9% to £50.6m (FY23: £55.5m), reflecting overhead savings across functions and shared services.

Finance review

Alternative Performance Measures

In addition to presenting statutory measures, the Group presents its results before other items. Management believes this is useful for users of the financial statements, providing both a balanced view of the financial statements, and relevant information on the Group’s financial performance. Accordingly, the Group separately reports the cost of restructuring programmes, acquisition and disposal related costs (including the amortisation of acquisition related intangible assets), gains or losses on business disposals, and other exceptional items as ‘other items’.

Financial performance

The reported Income Statement is set out below:

£m unless otherwise specified	FY24	FY23
Revenue including share of joint ventures and associates	4,510.7	4,055.1
Group revenue	4,445.2	3,945.0
Operating profit before other items	210.2	162.1
Other items	(44.5)	(45.1)
Operating profit	165.7	117.0
Net finance costs	(9.4)	(11.5)
Profit before tax	156.3	105.5
Tax	(25.4)	(14.4)
Profit after tax	130.9	91.1
Profit attributable to non-controlling interest	(4.6)	–
Profit attributable to owners of the parent	126.3	91.1
Basic earnings per share before other items	12.3p	9.5p
Basic earnings per share	9.8p	6.8p

Revenue

Revenue for FY24 of £4,511m, including share of revenue from joint ventures and associates, has improved by 11.2% compared to last year (FY23: £4,055m). Of this growth, 7.1% was organic, driven by net new wins, organic growth on existing contracts, and organic projects growth (totalling £194m), as well as pricing of £177m, offset by the completion of short-term public sector contracts (£81m). Strategic acquisitions contributed £166m of growth in the year.

Revenue growth from net wins included NATS, John Lewis, and Phoenix Group, and growth on existing contracts included higher revenue in Business Services in response to the heightened levels of retail crime.

Organic projects growth was £189m in the year, and was driven by Technical Services, from a range of works across large key accounts, and by CG&D from various large Central Government contracts, as well as FDIS.

Organic growth also includes headwinds from the completion of short-term, high margin public sector contracts in FY24, including the Covid contracts and the wind down of the Afghan Relocations and Assistance contract, which reduced revenue by £81m year on year, as well as contract losses.

The impact of the repricing of revenue for inflation in FY24 was £177m (+4%) (FY23: £163m), and inorganic growth was £166m (+4%), primarily related to projects, through the acquisitions of JCA Engineering, RHI Industrials and GBE Converge, but also from the Landmarc step acquisition, which is explained below.

Total projects revenue for the year, including acquisitions, was £1.1bn (FY23: £0.8bn).

Operating profit

Operating profit before other items was £210.2m (FY23: £162.1m), an increase of £48.1m (+29.7%) in the year. The improvement was driven by margin enhancement initiative savings of £40.3m, net wins, projects and other trading (£19.9m), and strategic acquisitions (£9.7m), including the step acquisition of Landmarc which is explained below. The completion of high margin short-term public sector contracts provided a headwind of £15.6m, and inflation had a negative impact on operating profit of £6.2m.

Of the incremental £40.3m of profit from margin enhancement initiatives, the TOM programme contributed £27.9m through initiatives such as the outsourcing of finance activities, optimisation of the Group’s organisational structure, and helpdesk consolidation. The final Interserve cost synergies contributed £4.6m, taking the total synergies to £56m, and there were savings from the Digital Supplier Platform and Operational Excellence programmes of £7.8m.

The net wins, projects and other trading increase of £19.9m was primarily driven by organic projects growth. All divisions made a positive contribution, but projects profit was particularly strong in Technical Services and CG&D. Margin on this organic projects growth was higher than the Group average, despite underperformance in the Telecoms business, where the pricing of certain frameworks is being renegotiated.

Of the £9.7m of profit growth from strategic acquisitions, £5.1m came from the step acquisition of Landmarc, and £4.6m from the other acquisitions. The most significant contributions were from JCA Engineering and RHI Industrials, partially offset by £2.9m of year one losses from G2 Energy, which is rebuilding its order book after being acquired through a liquidation process.

Through the contractual protections that we have in place, and our strong customer relationships, we were able to recover 97% of cost inflation from customers in the period. The element that we were not able to recover resulted in a reduction in operating profit of £6.2m.

Operating profit after other items was £165.7m (FY23: £117.0m), a year on year improvement of 41.6%. This included net charges from other items of £44.5m (FY23: £45.1m), which are explained below.

Landmarc step acquisition

Landmarc has historically been reported as a joint venture within the Group results. However, on 16 November 2023, amendments to the shareholder agreement were approved which gave Mitie control of Landmarc. As a result, Landmarc has been consolidated into the Group as a subsidiary from that date.

A change of this nature is known as a ‘step acquisition’, which requires the Group’s interest in the joint venture to be fair valued at the date on which it becomes a subsidiary. The credit related to this fair value uplift for Landmarc must be recognised in the income statement, and has been reported as a £17.9m gain within other items, given that it is acquisition-related and is material. Further details are set out in Note 18 to the condensed consolidated financial statements.

The Group has reported a year on year increase in revenue (including share of JVs and associates) of £34.1m from Landmarc, comprising £42.6m from the step acquisition offset by a net £8.5m organic reduction related to a change in revenue mix. Operating profit before other items from Landmarc increased by £10.2m, comprising £5.1m from the step acquisition and £5.1m from organic growth. The increase in operating profit reflects a change in revenue mix in FY24 towards higher margin services.

The consolidation of Landmarc also gives rise to the recognition of a minority interest deduction, which represents the non-controlling interest’s (49%) share of Landmarc’s profit after tax. In FY24 the deduction is £4.6m. As a result of this minority interest deduction, whilst the step acquisition of Landmarc does benefit operating profit (and profit after tax) for the Group, it has no impact on earnings per share before other items.

Other items

£m	FY24	FY23
Target Operating Model (TOM)	(20.4)	(7.9)
Digital supplier platform (DSP)	(3.7)	(3.4)
Margin enhancement initiatives	(24.1)	(11.3)

Employment-linked earnout charges	(9.5)	(0.2)
Other acquisition related costs	(4.0)	(3.5)
Acquisition related costs before non-cash items	(13.5)	(3.7)
Landmarc step acquisition gain	17.9	–
Amortisation of acquisition related intangible assets	(24.8)	(21.4)
Acquisition related costs	(20.4)	(25.1)

Workflow optimisation (Project Forté)	–	(8.7)

Total other items	(44.5)	(45.1)

The Group incurred £44.5m of other items in FY24 (FY23: £45.1m). This included a net £6.9m (FY23: £21.4m) of non-cash items, comprising £24.8m (FY23: £21.4m) of amortisation of acquisition related intangible assets, partially offset by the £17.9m (FY23: £nil) fair value gain from the Landmarc step acquisition, which is explained above.

The remaining other items of £37.6m (FY23: £23.7m) are cash in nature. These cash other items comprise the costs of delivering the Group’s margin enhancement initiatives of £24.1m (FY23: £11.3m) and acquisition related costs of £13.5m (FY23: £3.7m).

The increase in the margin enhancement initiative costs primarily relates to the TOM programme, reflecting the ramp up of activities and significant increase in savings to £28m in FY24 (FY23: £6m).

The largest element of the acquisition related costs is employment-linked earnout charges (£9.5m), of which JCA Engineering is the most significant. These earnout payments will be made if post acquisition performance targets are hit, and employment conditions are satisfied. Although the vast majority of the earnout charges were not paid in FY24 (they will be settled in future periods, at the end of the relevant performance periods), they have been classified as ‘cash’ other items because they will ultimately be settled in cash.

Within the £4.0m of other acquisition related costs is a net £1.1m charge within the Communities division, related to movements on balance sheet provisions recognised on the acquisition of Interserve. The net charge includes an additional £9.0m provision on a PFI contract, where Mitie is liable for rectifying latent defects in the construction by a third party. This has been largely offset by progress on other contracts, resulting in provisions of £7.9m being released. The additional charge and releases have been classified as other items as they relate to liabilities that were inherited with the Interserve acquisition and are material, one-off adjustments.

Net finance costs

Net finance costs improved (decreased) by 18% to £9.4m in FY24 (FY23: £11.5m).

Finance costs benefited from the improved interest rates negotiated for the US Private Placement (USPP) notes, which became effective from December 2022 (£0.9m benefit), together with the termination of the Group’s customer invoice discounting facility (£0.5m benefit). The £9.4m includes a £1.4m increase in the interest charge on lease liabilities, reflecting the transition of the fleet to more expensive electric vehicles (EVs), the related increase in the average duration of the leases, and the expansion of the fleet through acquisitions. Finance income improved, mainly due to increased interest rates on deposited funds (£1.5m benefit).

Tax

The tax charge for the year was £25.4m (FY23: £14.4m), at an effective tax rate (ETR) of 16.3% (FY23: 13.6%). The £25.4m is the net of the tax charge on profit before other items, and the tax credit on other items.

The tax charge on profit before other items was £37.9m (FY23: £22.6m), at an ETR of 18.9% (FY23: 15.0%). This is lower than the standard corporation tax rate of 25%, primarily due to the benefit of a tax credit of £8.8m (FY23: £5.3m) related to the recognition of deferred tax assets for losses acquired with the Interserve business. Excluding the impact of this benefit, the ETR before other items would have been 23.3% (FY23: 18.5%).

Offsetting the £37.9m charge was a tax credit for other items of £12.5m (FY23: £8.2m) at an ETR of 28.1% (FY23: 18.2%), which is higher than the standard tax rate primarily due to the fair value gain from the Landmarc step acquisition not being taxable.

Mitie is a significant contributor of revenues to the UK Exchequer, paying £962.8m of taxes in the year (FY23: £850.1m). Of this total, £173.8m (FY23: £158.5m) relates to taxes borne by Mitie (principally UK corporation tax and employer National Insurance contributions) and £789.0m (FY23: £691.6m) relates to taxes collected by Mitie on behalf of the UK Exchequer (principally VAT, income tax under PAYE and employee National Insurance contributions).

The Group paid corporation tax of £16.9m (FY23: £19.8m) in the year, of which £12.7m (FY23: £14.0m) was paid in the UK, and £4.2m (FY23: £5.8m) overseas.

Joint ventures and associates

Operating profit includes Mitie’s share of the profit after tax for its joint ventures and associates of £6.4m (FY23: £8.3m). These profits primarily relate to Landmarc. The year on year reduction reflects the step acquisition of Landmarc from a joint venture to a subsidiary in November 2023, from which point its profits were no longer classified as being from joint ventures and associates. The Landmarc step acquisition is explained above.

Earnings per share

Basic earnings per share before other items increased by 29% to 12.3p (FY23: 9.5p). This improvement is due to the increase in operating profit in the year (+3.6p), the reduction in net finance charges (+0.1p), and the reduction in the weighted average number of shares as a result of the ongoing share buyback programme (+0.6p). These improvements were partially offset by the increased tax charge (-1.1p), which was driven by the increase in the UK corporation tax rate to 25%, and the new non-controlling interest deduction arising from the step acquisition of Landmarc (-0.4p). As noted above, the step acquisition of Landmarc increases operating profit for the year, but after related deductions for tax and minority interest, it has no overall impact on earnings per share before other items.

Basic earnings per share increased by 44% to 9.8p (FY23: 6.8p). This included an improvement related to the lower other items after tax (+0.2p). Whilst the level of other items within operating profit is largely unchanged year on year, the ETR on other items is higher in FY24 due to the fair value gain from the Landmarc step acquisition not being taxable.

Return on invested capital (ROIC)

£m unless otherwise specified	FY24	FY23
Operating profit before other items	210.2	162.1
Tax¹	(39.7)	(24.3)
Operating profit before other items after tax	170.5	137.8
Invested capital	645.0	543.1
ROIC %	26.4%	25.4%

¹ Tax charge has been calculated on operating profits before other items using the ETR for the year of 18.9% (FY23: 15.0%)

ROIC (before other items) has improved by 1.0ppt to 26.4% in FY24 (FY23: 25.4%) as a result of the increase in operating profit, partially offset by increases in the ETR and invested capital. The increase in invested capital has been driven by the acquisitions completed in FY24.

Balance sheet

£m	FY24	FY23
Goodwill and intangible assets	645.1	564.9
Property, plant and equipment	204.7	156.9
Interests in joint ventures and associates	0.9	8.8
Working capital balances	(200.1)	(179.2)
Provisions	(113.2)	(111.4)
Net debt	(80.8)	(44.1)
Net retirement benefit liabilities	(0.8)	(0.2)
Deferred tax	7.9	20.4
Other net assets	10.0	5.6
Total net assets	473.7	421.7

As at 31 March 2024 the Group’s reported net assets stood at £473.7m, an increase of £52.0m since 31 March 2023. Net debt increased to £80.8m (FY23: £44.1m), mainly as a result of the planned capital allocation actions and the increase in lease liabilities, both of which are discussed further below (in the ‘Cash flow and net debt’ section).

Goodwill and intangible assets have increased by £80.2m as a result of acquisitions undertaken in the year, including the step acquisition of Landmarc (explained above). These acquisitions resulted in additional goodwill of £49.4m and acquired intangible assets of £55.5m, with the increase partially offset by the amortisation of intangible assets during the year.

Property, plant and equipment increased by £47.8m, due to the continued transition of our leased fleet to more expensive EVs, the related increase in the average duration of the leases, and the expansion of the fleet through acquisitions. During FY24, 1,900 EVs were added, taking the proportion of EVs to 66% of the total fleet.

The net deferred tax asset balance has decreased by £12.5m during the year, primarily as a result of deferred tax liabilities of £13.7m being recognised on newly acquired intangible assets.

Provisions

Provisions at 31 March 2024 of £113.2m (FY23: £111.4m) largely comprise contract specific costs of £49.2m (FY23: £49.3m), the insurance reserve of £27.2m (FY23: £26.2m), and pension provisions of £21.7m (FY23: £21.7m), which mainly relate to Section 75 pension liabilities. See Note 13 to the condensed consolidated financial statements for further details on provisions.

Provisions have increased by £1.8m during the year, including the net £1.1m increase in balance sheet provisions from the Interserve acquisition explained above (in the ‘Other items’ section).

Retirement benefit schemes

The Group’s net retirement benefit liabilities on an IAS 19 basis are broadly unchanged at £0.8m (FY23: £0.2m). The net liabilities include a surplus of £3.0m relating to the Landmarc scheme, which is now reported within retirement benefit assets (rather than within the Group’s share of interests in joint ventures and associates), as a result of the consolidation of Landmarc from November 2023. In the summary balance sheet above, the surplus is offset by deficits related to the main Group scheme (£1.4m) and other smaller schemes (£2.4m).

During the year a formal funding valuation of the main Group scheme as at 31 March 2023 was completed. This indicated a funding shortfall of £19.4m on an actuarial basis, an improvement of £72.7m since the last valuation as at 31 March 2020. The Group made deficit repair contributions of £10.6m in the year and has agreed to continue to make deficit repair contributions over the next four years to eliminate the funding shortfall by 2027.

Cash flow and net debt

£m	FY24	FY23
Operating profit before other items	210.2	162.1
Add back: depreciation, amortisation & impairment	57.9	52.4
EBITDA before other items	268.1	214.5
Other items	(37.6)	(23.7)
Other operating movements	3.9	(4.0)
Operating cash flows before movements in working capital	234.4	186.8
Working capital movements¹	(4.3)	(38.8)
Capex, capital element of lease payments & other	(54.3)	(59.6)
Interest payments	(9.7)	(11.9)
Tax payments	(16.9)	(19.8)
Dividends from joint ventures	8.4	9.0
Free cash inflow	157.6	65.7
Share buybacks²	(50.4)	(50.7)
Purchase of own shares into trusts	(19.6)	(37.7)
Acquisitions	(34.7)	(20.2)
Dividends paid	(44.0)	(28.9)
Lease liabilities & other	(45.6)	1.0
Increase in net debt during the year	(36.7)	(70.8)
Closing net (debt)	(80.8)	(44.1)
Average daily net (debt)	(160.7)	(84.3)
Leverage³ (average daily net debt/EBITDA before other items)	0.6x	0.4x

¹ Adjusted to exclude movements in restricted cash and other adjustments which do not form part of net debt (as explained in the Alternative Performance Measures Appendix to the condensed consolidated financial statements)

² FY24 share buybacks are presented net of the proceeds received from the exercise of SAYE schemes

³ Leverage uses post-IFRS 16 net debt

Operating cash flows before movements in working capital increased by £47.6m to £234.4m (FY23: £186.8m), due to the strong operating profit generation before other items in FY24. As explained above, cash other items exclude non-cash amortisation of acquisition related intangible assets and the non-cash fair value gain related to the Landmarc step acquisition.

The Group generated a free cash inflow of £157.6m for FY24, which was underpinned by the strong trading performance, reductions in capex, as well as working capital process improvements.

In FY24 there was a cash outflow from working capital of £4.3m (FY23: £38.8m), reflecting investments required to support the growth of the projects businesses, partially offset by one-off working capital process improvements of c.£25m. These improvements have been made possible by the consolidation of activities into the shared service centre and implementation of the Coupa digital supplier platform, as well as rationalisation of our supplier base and alignment of our VAT groups. The working capital outflow in FY23 primarily related to the decision to terminate the invoice discounting facility.

Capex, the capital element of lease payments & other decreased by £5.3m compared to FY23, with a £5.4m reduction in capex the key driver. Both interest and tax payments were lower in FY24, with the £2.2m decrease in net interest payments resulting from the improved rates achieved through the refinancing of the Revolving Credit Facility (RCF) and USPP facility, as well as higher interest rates on deposits, and closure of the customer invoice discounting facility in FY23. Tax payments were lower by £2.9m, due to the utilisation of losses.

The planned £50m share buyback programme was successfully completed in FY24 and Mitie bought back further shares using the £8m of receipts from the exercise of SAYE schemes. This resulted in the purchase of 58.6m shares, of which 26.1m shares were cancelled, for a net spend of £50m. The remaining 32.5m shares acquired were retained in order to satisfy the 2020 SAYE scheme that vested in December 2023. A further 19.7m shares have been purchased from the market (19.1m into the Employee Benefit Trust (EBT) and 0.6m into the SIP Trust), which will be used to settle other share incentive schemes.

A new £50m share buyback programme was announced on 15 April 2024, from which c.10m of the shares purchased will be held in treasury to satisfy the 2021 SAYE scheme, which vests in January 2025. The remainder will be cancelled.

Acquisitions (including GBE Converge, RHI Industrials, JCA Engineering and the step acquisition of Landmarc) have increased net debt by £34.7m. This includes gross acquisition costs paid of £87.6m, and employment-linked earnout payments of £0.7m, partially offset by net cash of £22.0m acquired with the projects businesses, and £31.6m from the step acquisition of Landmarc.

Dividend payments of £44.0m in FY24 comprised the final FY23 dividend (£28.6m), the interim FY24 dividend (£12.9m) and dividends paid to non-controlling interests (£2.5m). The recommended final FY24 dividend of 3.0p will result in a 38% increase in the total dividend per share to 4.0p for FY24 (FY23: 2.9p), representing a payout ratio of 33%.

Lease liabilities & other includes an increase in lease liabilities in FY24 (net of capital repayments) of £44.6m (FY23: £6.9m), as we transition our fleet to EVs. By the end of FY24, 66% of the total fleet was electric, compared with 46% at the end of FY23.

Net debt

Average daily net debt of £160.7m for FY24 was £76.4m higher than in FY23 (£84.3m), resulting in an average leverage ratio (average daily net debt / EBITDA before other items) of 0.6x for FY24, compared with 0.4x for FY23.

Closing net debt of (£80.8m) as at 31 March 2024 was £36.7m higher (FY23: £44.1m). Total financial obligations (TFO), including net retirement benefit liabilities of £0.8m (FY23: £0.2m), were £81.6m (FY23: £44.3m), and increased in line with the movement in net debt.

These increases during FY24 were mainly due to the planned capital allocation activities of £148.7m, and net increase in lease liabilities of £44.6m, exceeding the free cash inflow of £157.6m. These capital allocation activities relate to acquisitions completed in the period (£66.3m, net of £22.0m cash acquired), share buybacks (£50.4m, net of £8.0m proceeds received from the exercise of SAYE schemes), share purchases for employee incentive schemes (£19.6m) and dividends paid (£44.0m), partially offset by Landmarc cash acquired on consolidation (£31.6m).

Liquidity and covenants

As at 31 March 2024, the Group had £400.0m of committed funding arrangements, comprising a £250.0m RCF, and £150.0m of USPP notes. In September 2023 the RCF was increased by £100m, from £150m to £250m, and its maturity was extended to October 2027, with a further one year extension option at the mutual agreement of all parties. In FY23 (December 2022), £121.5m of USPP notes matured and were replaced by £120.0m of new notes, issued on more favourable terms, with maturities in December 2030 through to 2034. The remaining £30.0m of USPP notes are due to mature in December 2024.

On 28 July 2023, DBRS Morningstar confirmed Mitie’s credit rating of BBB with a ‘stable’ outlook.

Mitie’s two key covenant ratios are leverage (ratio of consolidated total net borrowings to adjusted consolidated EBITDA) and interest cover (ratio of consolidated EBITDA to consolidated net finance costs), with a maximum of 3.0x and minimum of 4.0x respectively. Covenant ratios are measured on a post-IFRS 16 basis with appropriate adjustments for leases, being primarily the exclusion of lease liabilities from net debt and the inclusion of a charge equivalent to lease payments against EBITDA.

As at 31 March 2024, the Group was operating well within these ratios at < 0x covenant leverage and 72.6x interest cover. A reconciliation of the calculations is set out in the table below:

£m		FY24	FY23
Operating profit before other items		210.2	162.1
Add: depreciation, amortisation & impairment		57.9	52.4
Headline EBITDA		268.1	214.5
Add: covenant adjustments¹		21.9	18.2
Leases adjustment²		(43.3)	(38.6)
Consolidated EBITDA	(a)	246.7	194.1
Full-year effect of acquisitions & disposals		11.1	0.5
Full-year effect of Landmarc step acquisition		5.7	–
Adjusted consolidated EBITDA	(b)	263.5	194.6
Net finance costs		9.4	11.5
Less: covenant adjustments		(0.4)	(0.4)
Leases adjustment³		(5.6)	(4.2)
Consolidated net finance costs	(c)	3.4	6.9
Interest cover (ratio of (a) to (c))		72.6x	28.1x
Net debt		80.8	44.1
Impact of hedge accounting & upfront fees		2.5	1.8
Leases adjustment⁴		(174.0)	(129.4)
Consolidated total net cash	(d)	(90.7)	(83.5)
Covenant leverage (ratio of (d) to (b))		< 0x	< 0x

1Covenant adjustments to EBITDA relate to share-based payments charges, and pension administration expenses and past service costs

² Leases adjustment for EBITDA relates to depreciation charge for leased assets and interest charge for lease liabilities (i.e. application of a charge equivalent to lease payments)

³ Leases adjustment for net finance costs relates to interest charge for lease liabilities (i.e. removal of interest on lease liabilities)

⁴ Leases adjustment for net cash relates to lease liabilities (i.e. removal of lease liabilities)