Half-Yearly Financial Report

MITIE Group PLC 26 November 2007 26 November 2007 MITIE Group PLC Half-yearly financial report for the six months to 30 September 2007 A further period of strong growth Financial Highlights For six months to 30 September 2007 2007 2006 Growth £m £m Revenue 682.1 585.0 16.6% Operating profit before amortisation 34.4 28.1 22.4% Profit before tax 32.2 26.3 22.4% 2007 2006 Growth p p Basic earnings per share before amortisation 7.0 5.7 22.8% Basic earnings per share 6.8 5.5 23.6% Dividend per share 2.8 2.4 16.7% Key points • Strong revenue growth of 16.6% to £682.1m; organic growth 12.5% • Operating profit before amortisation up 22.4% to £34.4m • Basic EPS up 23.6% to 6.8p • Interim dividend up 16.7% to 2.8p • Operating profit margins at 5.1% • 94% of 2007/08 forecast revenue secured Ruby McGregor-Smith, Chief Executive of MITIE Group PLC, commented: 'We have delivered a strong performance in the first half of the year. Our broad service offering across our Facilities, Property and Engineering Services divisions enables us to meet the growing demand from clients for bundled services. During the period we also acquired Robert Prettie and successfully integrated it within our Property Services division. We remain confident of another successful year.' For further information, please contact: David Revis, Investor Relations Manager T: 020 7034 7102 M: 07979 702465 John Telling, Head of Corporate Affairs and Emerging Markets T: 020 7034 7106 M: 07979 701006 MITIE will be presenting its interim results for the period ending 30 September 2007 at 0930hrs on Monday 26 November 2007 at UBS Investment Bank, Seventh Floor, 1 Finsbury Avenue, London, EC2M 2PP. A webcast of MITIE's results presentation with interactive Q&A functionality will be available online at www.mitie.co.uk at 0930hrs. A copy of the slides will be available to download from the webcast interface as well as from the MITIE website later in the day. High resolution images are available for the media to download free of charge from www.vismedia.co.uk. ABOUT MITIE - Passionate About Service MITIE is the UK's market leader in delivering Facilities, Property and Engineering Services. MITIE employs more than 44,000 employees in the UK and trains and motivates them to deliver for our clients. By recruiting and retaining the best people we aim to ensure our 6,500 public and private sector clients are continually satisfied with the service they receive from us. We deliver professional, flexible, cost-effective solutions, through our partnerships with clients. Our extensive range of Facilities, Property and Engineering Services is designed to maintain, manage and improve their buildings and surroundings. Whether procuring single, managed or bundled services our clients can be assured that we always aim to deliver the highest level of service. MITIE provides an extensive range of the Facilities Services that organisations may wish to outsource including catering, cleaning, document management, front of house services, energy services, engineering maintenance, integrated facilities management, landscaping, grounds maintenance, pest control, security and waste and environmental services. We also offer Property and Engineering Services, improving buildings for our customers by providing building refurbishment, fit-out and maintenance services, together with mechanical & electrical engineering. Strong client relationships are at the heart of MITIE's business and we will continue to innovate and build our bundled and integrated service offerings. We have a flexible approach so that our customers can choose any combination of our services to meet their needs. Interim Management Report Overview of financial performance The first half of the year to 31 March 2008 has seen strong growth across all three of our divisions and our revenue has increased by 16.6% to £682.1m (2006: £585.0m). We have again delivered double-digit organic revenue growth, with revenues ahead by 12.5% (2006: 11.6%), whilst the acquisition of Robert Prettie & Co Limited (Robert Prettie), which completed on 2 April 2007, has brought in a further £24.1m of revenue to the Group. Revenue in our Facilities Services division grew organically by 10.1% to £381.4m (2006: £346.5m). In Property Services, revenue grew by 38.8% to £141.7m (2006: £102.1m) reflecting organic growth of 15.2% and revenue of £24.1m from Robert Prettie, whilst in Engineering Services, organic growth drove revenue up 16.6% to £159.0m (2006: £136.4m). We achieved our goal of maintaining operating profit margins in the range of 5% to 6%, delivering margins before amortisation of 5.1% (2006: 4.8%; 5.0% pre-integration costs). Operating profit margins before amortisation in our Facilities Services division were 5.9% (2006: 5.6%: 5.9% pre-integration costs), reflecting growth over those reported in the prior period after non-recurring integration costs relating to acquisitions in our security business in 2006 and maintaining underlying margins stated before those non-recurring costs. In Property Services, margins grew to 5.3% from 4.7% reflecting the change in mix brought about by the acquisition of Robert Prettie, whilst in Engineering Services margins were maintained at 2.8% (2006: 2.8%). Operating profit before amortisation rose by 22.4% to £34.4m (2006: £28.1m). Profit before tax was up by 22.4% to £32.2m (2006: £26.3m), and our basic earnings per share (before amortisation) grew by 22.8% to 7.0p (2006: 5.7p). The Board has declared an interim dividend of 2.8p per share (2006: 2.4p) which represents an increase of 16.7% from last year. This dividend will be paid on 8 February 2008 to shareholders on the register on the 11 January 2008. Our balance sheet remains strong and provides capacity for future acquisitive and organic growth. Our defined benefit pension schemes show a net surplus of £1.7m (2006: £0.5m deficit) and we retain our focus on the management of capital expenditure and working capital. Net debt before loan notes and finance leases at 30 September 2007 was £8.5m (2006: £20.8m), whilst total net debt stood at £23.5m (2006: £31.4m). We continue to focus on the management of our working capital and cashflow and use a rolling 12 month measure of the conversion of EBITDA to cash (cash conversion) as an indicator of the efficiency of our cash management activities. In the 12 month period to 30 September 2007, cash conversion was 100% (2006: 83%). Acquisitions On 2 April 2007, we acquired the plumbing and heating company Robert Prettie for an initial consideration of £8.6m and a potential maximum consideration of £32.7m, depending on performance over the three year period following acquisition. The fair value of deferred consideration on this acquisition of £14.0m is included within provisions in the consolidated balance sheet. This acquisition has added significantly to the capabilities of our Property Services division in the housing sector and has complemented the existing regional operations. Robert Prettie works in partnership with local authorities, councils, developers and registered social landlords on kitchen and bathroom installations, heating replacement, gas servicing, maintenance and call out services. In August 2007, we acquired minority interest shares from the management of four MITIE subsidiary companies, KBS Fire Protection Systems Limited, MITIE Engineering Services (Liverpool) Limited, MITIE McCartney Fire Protection Limited and MITIE Technology Limited. The maximum aggregate consideration for the four purchases amounted to £6.6m, which was settled by the issue of 2,279,508 new MITIE Group PLC ordinary shares of 2.5p each (valued at 237.25p per share, being the closing market price per MITIE share on 9 August 2007 and totalling £5.4m) and £0.1m cash. The balance of £1.1m of the consideration is deferred and will be paid in new MITIE shares by 30 September 2008 subject to the attainment of specified profit targets by the relevant companies in the year to 31 March 2008. We also settled deferred consideration of £0.2m in respect of the purchase in August 2006 of the minority shareholdings in MITIE Engineering Maintenance (South West) Limited which was settled by the issue of 69,792 new MITIE shares. In addition, the minority interest shares in MITIE Security (South West) Limited were acquired for £0.6m as part of the plan to introduce the second generation scheme within our Security business. Markets Growth in our markets remains buoyant. In 2007, revenues in our target markets grew to £44.7bn (Source: IC Market Tracking(R) Facility Services in United Kingdom) with MITIE having only a 2.7% overall market share. We see clear opportunities to continue to grow our offer in the fragmented markets in which we operate. With the exception of Security, where we have a 12% market share, our market share is below 5% in our other businesses. We continue to target an increase in our overall market share. The support services market is undergoing consolidation, both through acquisition and in the delivery of services through larger, national scope or bundled contracts. We are well placed to make appropriate acquisitions and to take advantage of this trend towards larger scale contracts, where we can self-deliver a broad range of single, bundled and integrated facilities management contracts to meet the changing needs of our clients. Equity incentivisation Equity incentivisation within MITIE now takes several forms including: a first generation model for new 'start ups'; a second generation model for our more mature businesses; a Savings Related Share Option Scheme (SAYE) for all employees; an Executive Share Option Scheme and a Long Term Incentive Plan (LTIP) for key senior management. We continue to start new businesses and support first generation equity start-ups within MITIE. In October we started MITIE Client Services Limited. This business sits within the Facilities Services division and will provide clients with high quality, client facing support services including reception, switchboard, helpdesk and events management. As part of the development of our equity incentivisation model, we have introduced a second generation equity scheme into some of our established businesses in order to provide an equity opportunity for the new management teams within those businesses. Second generation schemes have been set up in our Property Services division and also in the Cleaning and Security businesses within our Facilities Services division. The second generation scheme in Security was introduced on 4 October 2007 following shareholder approval at an EGM. The introduction of this scheme is important for the successful development and consolidation of our Security business which has grown rapidly, particularly over the last two years. Our LTIP scheme was introduced in July 2007 following shareholder approval at the AGM. EPS growth targets over three years form the basis of the performance criteria for the LTIP, with shares being offered to a small number of key management. People We are committed to recruiting, training, motivating and retaining the best people in the industry to work for MITIE. Our people are at the heart of our company and it is their passion and enthusiasm that allow MITIE to prosper. The depth of operational skill that is available within each of our chosen service lines allows us to deliver high quality services through trained specialists who are committed to exceeding our customers' expectations. In June 2007, MITIE became one of the first employers to make the UK Government's Skills Pledge. Our commitment to the Skills Pledge forms part of our strategy to ensure that our people are appropriately skilled and trained to deliver excellent services to our clients, and to take advantage of the opportunities offered to them. Reliability and track record Our success in delivering sustainable growth by achieving high standards of service to customers, whilst remaining cost conscious and cash focused, has enabled us to grow profit and revenue every year since MITIE was formed in 1987. We have also grown or maintained EPS every year since 1988 when MITIE shares were listed on the London Stock Exchange. Future prospects The outlook for MITIE remains extremely positive and we are well positioned to deliver future profitable growth. We have a strong, established market position and the ability to combine and bundle our broad range of services. We retain our focus on our people and on the delivery of excellent services to our clients. We continue to see many areas of potential growth and are developing our business to meet the needs of our markets whilst providing more efficient services and support to our operational team and our clients. As part of our growth strategy, we will continue to consider selective acquisitions and have the financial capacity to support this objective. Overall, our focus remains to increase market share in our selected markets whilst maintaining our margins within their target ranges. We remain confident of another successful year. Divisional Review MITIE's business is structured into three divisions: Facilities Services which delivers services through either single, bundled or facilities management contracts, Property Services and Engineering Services. The first half of the year has seen our teams secure new work which has added to our order book and now means that 94% of our forecast revenue for the year is secured. Facilities Services Our Facilities Services division delivers a broad range of complementary services to clients through either single, bundled or facilities management contracts. The majority of our business is still delivered through single service contracts but we are continuing to see an increasing demand from clients for bundled services as they recognise the benefits that can be realised through rationalising their supply chain. Facilities Services has had a strong start to the year with revenues increasing by 10.1% to £381.4m (2006: £346.5m). Profit before interest, tax and amortisation was up by 15.4% to £22.5m (2006: £19.5m) and the operating profit margin before amortisation was 5.9% (2006: 5.6%). Single Services 62.0% of our Facilities Services contracts are delivered as single service contracts. We recognise that our single services customers want the best possible service delivered individually by the specialists employed by MITIE. Notable single service contract wins in the period include: •Cable & Wireless - An engineering maintenance contract to provide M&E maintenance services throughout 725 sites of the Cable & Wireless estate in the UK and Ireland, covering all stages of the equipment lifecycle from assistance with design through to aftercare and end of life disposal. •Atomic Weapons Establishment (AWE) - A security contract where our team of officers will provide security support services to aid the MOD Police who manage the security of AWE's sites at Aldermaston and Burghfield in Berkshire. •Herbert Smith - A document management contract where the services provided will include the management of this leading City law firm's mail, reprographics and records management. This is a strategically important win as we have been seeing the level of interest in outsourcing document management services in the legal sector increasing during the last six months. •Terminal 5 (BAA) - A three year cleaning and waste management contract for Heathrow Terminal 5, which is one of the largest buildings in Europe, involving over 300 MITIE people. Bundled Services The bundling of services occurs when a client decides to procure more than one service from a single service provider. For the client, bundling means improved efficiency. It can mean just one invoice a month, services being managed together, a reduced number of systems to audit and a smaller number of suppliers to manage, whilst retaining the control of in-house facilities management. For MITIE, the bundling of services also provides a significant and developing opportunity - 24.0% of our Facilities Services division revenue is delivered through bundled contracts and we anticipate that this will increase over the medium-term. The bundling of services represents a key part of our strategy and will be a major driver of organic growth. Notable bundled services wins during the period include: •HBOS - In addition to the cleaning, landscaping and pest control contract for all HBOS branches around the UK which started in February 2007, we have now extended our contract to provide bundled services to a further 130 of their major office sites around the country. The contract has doubled in value and now involves over 2,000 MITIE people. •Merrill Lynch - We have re-secured work to provide both the mail and distribution services as well as the front of house services contract. This includes the provision of the reception, switchboard and helpdesk services to Merrill Lynch's London estate and was the first contract win for our new Client Services start-up. •Nokia - This contract started as a maintenance contract in 1999, adding cleaning in 2004. The contract was successfully re-tendered in 2007 for a further period of three years when mail services were also added to the contract. Facilities Management Facilities Management (FM) represents 14.0% of the revenue of our Facilities Services division. As our scale in each of our chosen markets grows, we are seeing increasing opportunities to compete for larger private and public sector contracts. This is a growth area for MITIE and one we are very focused on. Facilities Management also includes PFI contracts, where we are already the market leader in delivering managed services to schools. Notable Facilities Management wins in the period include: •Perth & Kinross Council - A public private partnership agreement with Axiom Education (Perth & Kinross) Limited for a project to build and operate 7 new schools on 6 sites. MITIE is part of the Axiom consortium and has won a contract for the delivery of full FM services for a 30 year period. Following completion of construction, provision of FM services will commence at the first school in June 2009 with the remaining schools opening over the following two years. Property Services Our Property Services division provides refurbishment, maintenance, interior fit-out, passive fire protection, roofing and painting services, benefiting a wide range of customers through making a positive impact in the workplace and helping to sustain communities through growth and change. The division has had a good start to the year, winning sizable long-term contracts, both repeat business and new work, for varied services covering many different sectors. The integration of our latest acquisition, plumbing and heating specialist Robert Prettie operating within the Midlands, has increased our national coverage and strengthened our presence in the housing sector in the areas of social housing and new house fit-out for private developers. There has been strong organic growth across the division during the period. This has been driven by a shift from more traditional contracting to longer term relationships through framework agreements and partnering initiatives. Revenue in the period was up 38.8% to £141.7m (2006: £102.1m), driven by organic growth of 15.2% (2006: 30.6%) and revenue from Robert Prettie of £24.1m. Profit before interest, tax and amortisation increased by 56.3% to £7.5m (2006: £4.8m) and the operating profit margin before amortisation was 5.3% (2006: 4.7%), reflecting the change in mix brought about by the acquisition of Robert Prettie. Notable contract wins include: •Helical Bar PLC - A structural commercial refurbishment of Clareville House in SW1 including the creation of additional internal space and the installation of new lifts and a new copper roof. This will turn the building into high quality office space with retail and restaurant accommodation at ground floor level and leisure usage at basement level. •Dacorum Borough Council - We have been selected as the service provider to maintain the Council's housing stock of 10,700 properties based in Hemel Hempstead. Dacorum Borough Council will be transferring its skilled management team and operatives to MITIE providing a seamless and continued service to the residents of the borough delivered from new offices in the heart of Hemel Hempstead. •Deutsche Bank - A contract to fit out 25,000 sq ft across two floors at Pinners Hall, which is prime office space right in the heart of the City of London. The work includes reconfiguring air conditioning systems and installing new fire alarms and lighting within a new metal ceiling system. •Bruntwood - A contract to provide additional refurbishment services at The Plaza in Liverpool to create a remodelled ground floor entrance, a three-storey glazed atrium, a new ground floor reception, retail space and bespoke meeting areas. MITIE has already refurbished seven floors (approximately 200,000 sq ft) of the 15-storey building, which Bruntwood is remodelling extensively prior to letting each floor, some of which will be serviced office space. Engineering Services Our Engineering Services division covers the design and installation of mechanical and electrical systems, information and communication technology, and energy and utilities infrastructure, serving a wide range of clients from many different sectors. New contracts helped to drive revenue up 16.6% to £159.0m (2006: £136.4m). Profit before interest, tax and amortisation increased by 15.8% to £4.4m (2006: £3.8m) with the operating profit margin before amortisation maintained at 2.8% (2006: 2.8%). The shift from traditional contracting activities has continued with technology, retail and social housing now accounting for up to 40% of the work mix. Major contract wins include: •National Physical Laboratory - We have been working at the National Physical Laboratory since 2005 undertaking upgrades to a number of laboratories and offices together with the replacement and upgrade of plant and equipment in the utility pods. We are currently onsite in Teddington working on a project to create a new facility to house a linear accelerator, an electrical device for the acceleration of subatomic particles, generating high energy X-rays which target and destroy cancer cells. •Data centre provider - A contract with one of the world's leading providers of data centre space, for the design and construction of two new resilient power stations and the refurbishment of an existing power station within one of their London data centres. •Standard Life Investments - We have been employed on a new build, state-of-the-art office development in central Guildford as a result of our substantial knowledge and expertise of renewable technologies. Our design team integrated with the client's professional team at an early stage and proposed the idea of a bespoke energy solution which embraced renewable technology, the main feature being a ground coupled heat exchanger linked to a water source variable refrigerant flow heat pump system. •Easter Group - Our client is a leading developer of Green office space, and was the driver for a new build business park development near Reading. MITIE's knowledge of geo-thermal energy technologies was crucial to this contract award and demonstrated a full understanding of the complete service solution needed to help make the customers vision a reality. Collaborating with the professional team early on, the services carried out by MITIE include the design, build and installation of closed loop borefields and of a ground source heat pump system. Key performance indicators In order to manage and monitor our performance, we employ a range of key performance indicators (KPIs) that we use to manage and assess our business performance and retain our focus on profitable growth. Our financial KPIs are focused in the following areas: Margins Target - Maintain Group operating profit margins before amortisation The operating profit margin before amortisation for the first half of the year was 5.1% (2006: 4.8%; 5.0% before non-recurring integration costs). Operating profit margins before amortisation in Facilities Services of 5.9% (2006: 5.6%) and in Property Services of 5.3% (2006: 4.7%) showed enhancement compared to the prior period, whilst in Engineering Services margins were maintained at 2.8% (2006: 2.8%). Cash conversion Target - Convert over 90% of Group EBITDA to cash The efficiency with which we manage the generation of cash within MITIE is an important indicator for our business. The cash flow within MITIE is cyclical and we monitor average annualised rates of the conversion of profits to cash. In the 12 months to 30 September 2007, we converted 100% (2006: 83%) of EBITDA to cash. Cash conversion for the six months to 30 September 2007 was 62% (2006: 84%) reflecting the reversal of short-term timing differences in April 2007. In our Annual Report for the year ended 31 March 2007 we reported cash conversion of 114%, driven by particularly strong cash conversion in the second half of the year of 141%, and that more sustainable levels of 90%-100% would be expected going forwards. We continue to support this view in respect of the Group's ongoing cash conversion. Capital expenditure Target - Maintain below 2% of revenue We have continued to meet our target of keeping our capital expenditure to below 2% of revenue with capital expenditure levels at 1.3% (2006: 1.6%) of revenue during the first six months. Dividend growth Target - Maintain in line with underlying earnings at 2.5 times cover Our dividend policy is to maintain dividend growth at least in line with the underlying profit growth of the business after adjusting for amortisation and at a cover ratio of 2.5 times. The Board has declared an interim dividend of 2.8p per share (2006: 2.4p) which represents an increase of 16.7% compared to the prior period interim dividend. Statement of principal risks and uncertainties We have an established risk management and corporate governance framework for identifying, evaluating and managing significant risks faced by MITIE. We recognise that risks and uncertainties offer the potential for both upside and downside changes within our business. We employ internal and external specialists to manage our risk profile and regularly review our system of internal control to ensure that risks are appropriately identified and addressed. Our principal risks and uncertainties for the second six months of the financial year remain the same as detailed on pages 20 and 21 in MITIE's 2007 Annual Report, a copy of which is available on our website at www.mitie.co.uk. We have summarised the risks below: New business - As our business develops, we will increasingly tender for larger and more complex contracts creating new or larger scale risks as well as the opportunity for enhanced returns. Acquisitions - We continue to seek acquisitions that fit with or complement our existing business and acknowledge the risks surrounding appropriate pricing and integration of any new business. Health, safety and environment - The range of activities that we undertake carries with it a broad spectrum of health, safety and environmental risks with the potential to impact a number of stakeholder groups including our employees, the public and our clients. Employee skills shortages - MITIE is a people business and our success relies on our ability to recruit and retain the best talent throughout the organisation. Liquidity - Maintaining sufficient liquidity is essential for ensuring that we can meet our strategic targets and manage our day to day commitments. Pensions - We manage our exposure to pension scheme liabilities through the use of specialist in-house and external advisers and through established procedures to ensure compliance with current regulations. Statement of directors' responsibilities The Directors of MITIE Group PLC confirm that to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS34 as adopted by the European Union, and that the interim management report includes a true and fair view of the assets, liabilities, financial position and profits of the MITIE Group PLC as required by the Disclosure and Transparency Rules (DTR) 4.2.4 and a fair review of the information required by DTR 4.2.7 and DTR 4.2.8. By order of the Board Ruby McGregor-Smith Chief Executive MITIE Group PLC 26 November 2007 CONDENSED CONSOLIDATED INCOME STATEMENT 30 September 30 September 2007 2006 (unaudited) (unaudited) --------------------------------------------------------------------------------------------------------- Notes Before Amortisation of Total Before Amortisation of Total amortisation intangible amortisation intangible assets assets £m £m £m £m £m £m --------------------------------------------------------------------------------------------------------- Continuing operations Revenue 3 682.1 - 682.1 585.0 - 585.0 Cost of sales (557.3) - (557.3) (476.6) - (476.6) --------------------------------------------------------------------------------------------------------- Gross profit 124.8 - 124.8 108.4 - 108.4 --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- Other administrative expenses (90.4) - (90.4) (80.3) - (80.3) Amortisation of intangible assets - (0.9) (0.9) - (0.8) (0.8) --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- Total administrative expenses (90.4) (0.9) (91.3) (80.3) (0.8) (81.1) --------------------------------------------------------------------------------------------------------- Operating profit 2 34.4 (0.9) 33.5 28.1 (0.8) 27.3 Investment revenue 0.7 - 0.7 0.2 - 0.2 Finance costs (2.0) - (2.0) (1.2) - (1.2) --------------------------------------------------------------------------------------------------------- Profit before tax 33.1 (0.9) 32.2 27.1 (0.8) 26.3 --------------------------------------------------------------------------------------------------------- Tax (10.1) 0.3 (9.8) (8.3) 0.2 (8.1) --------------------------------------------------------------------------------------------------------- Profit for the period from continuing operations 23.0 (0.6) 22.4 18.8 (0.6) 18.2 --------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- Profit for the period 23.0 (0.6) 22.4 18.8 (0.6) 18.2 --------------------------------------------------------------------------------------------------------- Attributable to: Equity holders of the parent 21.8 (0.6) 21.2 17.6 (0.6) 17.0 Minority interests 1.2 - 1.2 1.2 - 1.2 --------------------------------------------------------------------------------------------------------- 23.0 (0.6) 22.4 18.8 (0.6) 18.2 --------------------------------------------------------------------------------------------------------- Earnings per share (EPS) - Basic 6 7.0p (0.2)p 6.8p 5.7p (0.2)p 5.5p - Diluted 6 6.9p (0.2)p 6.7p 5.6p (0.2)p 5.4p --------------------------------------------------------------------------------------------------------- 31 March 2007 (audited) --------------------------------------------------------------------------------------- Notes Before Amortisation of Total amortisation intangible assets £m £m £m --------------------------------------------------------------------------------------- Continuing operations Revenue 3 1,228.8 - 1,228.8 Cost of sales (999.8) - (999.8) --------------------------------------------------------------------------------------- Gross profit 229.0 - 229.0 --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- Other administrative expenses (169.1) - (169.1) Amortisation of intangible assets - (1.6) (1.6) --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- Total administrative expenses (169.1) (1.6) (170.7) --------------------------------------------------------------------------------------- Operating profit 2 59.9 (1.6) 58.3 Investment revenue 0.8 - 0.8 Finance costs (2.5) - (2.5) --------------------------------------------------------------------------------------- Profit before tax 58.2 (1.6) 56.6 --------------------------------------------------------------------------------------- Tax (17.9) 0.5 (17.4) --------------------------------------------------------------------------------------- Profit for the period from continuing operations 40.3 (1.1) 39.2 --------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------- Profit for the period 40.3 (1.1) 39.2 --------------------------------------------------------------------------------------- Attributable to: Equity holders of the parent 38.1 (1.1) 37.0 Minority interests 2.2 - 2.2 --------------------------------------------------------------------------------------- 40.3 (1.1) 39.2 --------------------------------------------------------------------------------------- Earnings per share (EPS) - Basic 6 12.3p (0.4)p 11.9p - Diluted 6 12.1p (0.3)p 11.8p --------------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 30 September ------------------------------------------------------------------- Year to 2007 2006 31 March (unaudited) (unaudited) 2007 (audited) £m £m £m ----------------------------------------------------------------------------------- Actuarial losses on defined benefit pension schemes - (3.2) (4.7) Tax credit on actuarial loss taken directly to equity - 1.0 1.5 ----------------------------------------------------------------------------------- Net expense on defined benefit pension schemes recognised directly in equity - (2.2) (3.2) Profit for the period 22.4 18.2 39.2 ----------------------------------------------------------------------------------- Total recognised income and expense for the financial period 22.4 16.0 36.0 ----------------------------------------------------------------------------------- Attributable to: Equity holders of the parent 21.2 14.8 33.8 Minority interests 1.2 1.2 2.2 ----------------------------------------------------------------------------------- CONDENSED CONSOLIDATED BALANCE SHEET 30 September ------------------------------------------------------------------------- Notes 2007 2006 31 March (unaudited) (unaudited) 2007 (audited) £m £m £m -------------------------------------------------------------------------------------- Non-current assets Goodwill 179.8 146.6 148.4 Other intangible assets 14.4 10.7 9.9 Property, plant and equipment 41.8 36.4 41.5 Deferred tax assets 7.0 5.1 7.7 Retirement benefit surplus 2.1 - 0.5 -------------------------------------------------------------------------------------- Total non-current assets 245.1 198.8 208.0 -------------------------------------------------------------------------------------- Current assets Inventories 10.8 10.1 7.9 Trade and other receivables 309.3 256.4 272.8 Cash and cash equivalents 13.2 9.2 25.6 -------------------------------------------------------------------------------------- Total current assets 333.3 275.7 306.3 -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Total assets 578.4 474.5 514.3 -------------------------------------------------------------------------------------- Current liabilities Trade and other payables (279.7) (220.4) (255.7) Financial liabilities (33.2) (30.5) (30.9) Provisions (1.1) (2.9) (0.3) Current tax liabilities (10.1) (7.0) (8.2) -------------------------------------------------------------------------------------- Total current liabilities (324.1) (260.8) (295.1) -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Net current assets 9.2 14.9 11.2 -------------------------------------------------------------------------------------- Non-current liabilities Financial liabilities (3.5) (10.1) (2.8) Provisions (25.7) (10.3) (8.6) Retirement benefit obligation (0.4) (0.5) - Deferred tax liabilities (3.9) (3.7) (3.9) -------------------------------------------------------------------------------------- Total non-current liabilities (33.5) (24.6) (15.3) -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Total liabilities (357.6) (285.4) (310.4) -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Net assets 2 220.8 189.1 203.9 -------------------------------------------------------------------------------------- Equity 11 Share capital 7.9 7.8 7.8 Share premium account 17.5 15.0 16.6 Merger reserve 60.4 54.9 54.9 Revaluation reserve (0.2) (0.2) (0.2) Capital redemption reserve 0.3 0.3 0.3 Other reserve 0.1 0.3 0.2 Share-based payments reserve 2.1 1.5 1.9 Own shares reserve (2.0) - - Retained earnings 124.0 97.8 110.2 -------------------------------------------------------------------------------------- Equity attributable to equity holders of the parent 210.1 177.4 191.7 -------------------------------------------------------------------------------------- Minority interests 10.7 11.7 12.2 -------------------------------------------------------------------------------------- Total equity 220.8 189.1 203.9 -------------------------------------------------------------------------------------- CONDENSED CONSOLIDATED CASH FLOW STATEMENT 30 September -------------------------------------------------------------------------- Notes 2007 2006 31 March (unaudited) (unaudited) 2007 (audited) £m £m £m -------------------------------------------------------------------------------------- Net cash from operating activities 7 16.4 19.0 63.9 Investing activities Interest received 0.7 0.2 0.7 Purchase of property, plant and equipment (7.4) (9.6) (20.8) Purchase of subsidiary undertakings (11.7) (2.3) (3.9) Purchase of other intangible assets (3.6) - - Disposals of property, plant and equipment 2.9 2.1 3.6 -------------------------------------------------------------------------------------- Net cash outflow from investing activities (19.1) (9.6) (20.4) -------------------------------------------------------------------------------------- Financing activities Repayments of obligations under finance leases (0.6) (0.1) (0.9) Proceeds on issue of share capital 0.8 0.9 2.5 Repayments of loans on purchase of subsidiary undertakings (1.0) - (1.0) Bank loans repaid - (1.0) (11.0) Purchase of own shares (2.0) - - Equity dividends paid (8.4) (7.4) (14.9) Minority dividends paid (0.2) (0.2) (0.2) -------------------------------------------------------------------------------------- Net cash outflow from financing (11.4) (7.8) (25.5) -------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------- Net (decrease)/increase in cash and cash equivalents (14.1) 1.6 18.0 -------------------------------------------------------------------------------------- Net cash and cash equivalents at beginning of the period 25.6 7.6 7.6 -------------------------------------------------------------------------------------- Net cash and cash equivalents at end of the period 11.5 9.2 25.6 -------------------------------------------------------------------------------------- Net cash and cash equivalents comprises: Cash at bank 13.2 9.2 25.6 Overdraft (1.7) - - -------------------------------------------------------------------------------------- 11.5 9.2 25.6 -------------------------------------------------------------------------------------- NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 30 September 2007 1. Basis of preparation The condensed financial statements for the six months to 30 September 2007 have been prepared on the basis of the accounting policies set out in the Group's latest annual financial statements for the year ended 31 March 2007. These accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union. The condensed financial statements for the six months to 30 September 2007 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The condensed consolidated financial statements are unaudited and have not been subject to review. They do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Group's annual financial statements as at 31 March 2007. The financial information presented for the year ended 31 March 2007 does not represent full statutory accounts within the meaning of Section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Significant accounting policies The accounting policies and methods of computation adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2007, except for the adoption of new standards and interpretations, noted below. Adoption of these standards and interpretations did not have any significant effect on the financial position or performance of the Group. •Amendment to IAS 1 'Presentation of Financial Statements: Capital Disclosures'; •IFRS 7 'Financial Instruments: Disclosures'; •IFRIC 8 'Scope of IFRS 2'; •IFRIC 9 'Reassessment of Embedded Derivatives'; •IFRIC 10 'Interim Financial Reporting and Impairment'; •IFRIC 11 'IFRS 2 - Group and Treasury Share Transactions'; and •Amendment to IAS 23 'Capitalisation of Borrowing Costs'. 2. Segmental analysis Six months to 30 September 2007 Six months to 30 September 2006 --------------------------------------------------------------------------------------------------------- Revenue Profit before Margin Profit before Revenue Profit before Margin Profit before interest tax tax interest tax tax and and amortisation amortisation £m £m % £m £m £m % £m --------------------------------------------------------------------------------------------------------- Facilities Services 381.4 22.5 5.9 20.3 346.5 19.5 5.6 17.5 Property Services 141.7 7.5 5.3 7.1 102.1 4.8 4.7 4.8 Engineering Services 159.0 4.4 2.8 4.8 136.4 3.8 2.8 4.0 --------------------------------------------------------------------------------------------------------- Total continuing operations 682.1 34.4 5.1 32.2 585.0 28.1 4.8 26.3 --------------------------------------------------------------------------------------------------------- The prior period results set out above are stated after integration costs of £1.1m relating to acquisitions. The results of the Group before the effect of integration costs are as follows: Six months to 30 September 2006 ----------------------------------------------------------------------------------------------- Revenue Profit before Margin Profit interest tax before and tax amortisation £m £m % £m ----------------------------------------------------------------------------------------------- Facilities Services 346.5 19.5 5.6 17.5 Add: Integration costs - 1.1 - 1.1 ----------------------------------------------------------------------------------------------- Total 346.5 20.6 5.9 18.6 ----------------------------------------------------------------------------------------------- Property Services 102.1 4.8 4.7 4.8 Engineering Services 136.4 3.8 2.8 4.0 ----------------------------------------------------------------------------------------------- Total continuing operations 585.0 29.2 5.0 27.4 ----------------------------------------------------------------------------------------------- Year to 31 March 2007 -------------------------------------------------------------------------------- Revenue Profit before Margin Profit interest tax before and tax amortisation £m £m % £m -------------------------------------------------------------------------------- Facilities Services 732.1 41.5 5.7 37.4 Property Services 215.1 10.6 4.9 10.9 Engineering Services 281.6 7.8 2.8 8.3 -------------------------------------------------------------------------------- Total continuing operations 1,228.8 59.9 4.9 56.6 -------------------------------------------------------------------------------- The results set out above are stated after integration costs of £2.3m relating to acquisitions. The results of the Group before the effect of integration costs are as follows: Year to 31 March 2007 -------------------------------------------------------------------------------- Revenue Profit before Margin Profit interest tax before and tax amortisation £m £m % £m -------------------------------------------------------------------------------- Facilities Services 732.1 41.5 5.7 37.4 Add: Integration costs - 2.3 - 2.3 -------------------------------------------------------------------------------- Total 732.1 43.8 6.0 39.7 -------------------------------------------------------------------------------- Property Services 215.1 10.6 4.9 10.9 Engineering Services 281.6 7.8 2.8 8.3 -------------------------------------------------------------------------------- Total continuing operations 1,228.8 62.2 5.1 58.9 -------------------------------------------------------------------------------- 2. Segmental analysis continued Six months to Six months to 30 September 30 September 2007 2006 -------------------------------------------------------------------------------------------------- Other segment Facilities Property Engineering Total Facilities Property Engineering Total information Services Services Services Services Services Services £m £m £m £m £m £m £m £m -------------------------------------------------------------------------------------------------- Assets by segment Intangible assets 142.1 35.5 16.6 194.2 139.7 5.5 12.1 157.3 Divisional assets 216.3 91.6 109.8 417.7 195.5 72.3 82.9 350.7 -------------------------------------------------------------------------------------------------- 358.4 127.1 126.4 611.9 335.2 77.8 95.0 508.0 Unallocated assets (33.5)(i) (33.5)(i) -------------------------------------------------------------------------------------------------- Total assets 578.4 474.5 -------------------------------------------------------------------------------------------------- Liabilities by segment Divisional liabilities (143.3) (73.9) (92.9) (310.1) (144.3) (48.3) (66.4) (259.0) Unallocated liabilities (47.5)(i) (26.4)(i) -------------------------------------------------------------------------------------------------- Total liabilities (357.6) (285.4) -------------------------------------------------------------------------------------------------- Total net assets 220.8 189.1 -------------------------------------------------------------------------------------------------- Capital expenditure Tangible assets 6.5 1.2 1.0 8.7 4.7 3.8 1.1 9.6 Depreciation charge 4.5 1.5 0.8 6.8 4.1 1.0 0.8 5.9 Intangible assets 2.3 30.0 4.5 36.8 2.3 - 0.5 2.8 Intangible amortisation 0.8 0.1 - 0.9 0.8 - - 0.8 -------------------------------------------------------------------------------------------------- (i) Relates to interdivisional funding. The 2006 comparatives have been revised to separately identify assets and liabilities that are not directly attributable to a business segment. Year to 31 March 2007 -------------------------------------------------------------------------------- Other segment information Facilities Property Engineering Total Services Services Services £m £m £m £m -------------------------------------------------------------------------------- Assets by segment Intangible assets 140.6 5.6 12.1 158.3 Divisional assets 226.5 75.5 100.6 402.6 -------------------------------------------------------------------------------- 367.1 81.1 112.7 560.9 Unallocated assets (46.6)(i) -------------------------------------------------------------------------------- Total assets 514.3 -------------------------------------------------------------------------------- Liabilities by segment Divisional liabilities (159.7) (55.0) (81.2) (295.9) Unallocated liabilities (14.5)(i) -------------------------------------------------------------------------------- Total liabilities (310.4) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total net assets 203.9 -------------------------------------------------------------------------------- Capital expenditure Tangible assets 12.7 7.0 2.8 22.5 Depreciation charge 9.0 2.4 1.6 13.0 Intangible assets 3.9 0.2 0.5 4.6 Intangible amortisation 1.6 - - 1.6 -------------------------------------------------------------------------------- (i) Relates to interdivisional funding. 3. Revenue The following analysis is provided for additional information: Six months to 30 September Year to -------------------------------------------------------------- 31 March 2007 2006 2007 £m £m £m -------------------------------------------------------------------------------- Facilities Services Cleaning 117.4 105.4 220.9 Security 130.4 121.2 241.8 Engineering Maintenance 52.9 49.0 109.7 Integrated Services 50.6 44.6 99.9 Business Services 11.5 10.5 24.1 Catering 9.8 7.7 19.7 Landscape 5.5 5.4 10.3 Pest Control 3.3 2.7 5.7 -------------------------------------------------------------------------------- Total Facilities Services 381.4 346.5 732.1 -------------------------------------------------------------------------------- Property Services 141.7 102.1 215.1 Engineering Services 159.0 136.4 281.6 -------------------------------------------------------------------------------- Total 682.1 585.0 1,228.8 -------------------------------------------------------------------------------- 4. Dividends The proposed interim dividend of 2.8p (2006: 2.4p) per share (not recognised as a liability at 30 September 2007) will be paid on 8 February 2008 to shareholders on the Register on 11 January 2008. The dividend disclosed in the cash flow represents the final ordinary dividend of 2.7p (2006: 2.4p) per share as proposed in the 31 March 2007 financial statements and approved at the Group's AGM (not recognised as a liability at 31 March 2007). 5. Taxation Income tax on profit before intangible amortisation for the six months ended 30 September 2007 is based on an effective rate of 30.5%, which has been calculated by reference to the projected charge for the full year. The reduction in the corporation tax rate next year to 28% has not materially impacted deferred tax. 6. Earnings per share Basic and diluted earnings per share have been calculated in accordance with IAS 33 'Earnings Per Share'. The calculation of the basic and diluted EPS is based on the following data: Six months to 30 September Year to ------------------------------------------------------------------- 31 March Number of shares 2007 2006 2007 -------------------------------------------------------------------------------- Weighted average number of Ordinary shares for the purpose of basic EPS 313.2 309.2 310.6 Effect of dilutive potential Ordinary shares: share options 4.5 3.6 4.4 Weighted average number of Ordinary shares for the purpose of diluted EPS 317.7 312.8 315.0 -------------------------------------------------------------------------------- 7. Notes to the cash flow statement Six months to 30 September Year to ------------------------------------------------------------------- 31 March Reconciliation of operating profit 2007 2006 2007 to net cash from operating (unaudited) (unaudited) (audited) activities £m £m £m -------------------------------------------------------------------------------- Operating profit from continuing operations 33.5 27.3 58.3 Adjustments for: Share-based payment expense 0.6 0.6 1.1 Pension charge 0.8 0.8 1.8 Pension contributions (2.4) (1.7) (5.2) Depreciation of property, plant and equipment 6.8 5.9 13.0 Amortisation of intangible assets 0.9 0.8 1.6 Gain on disposal of property, plant and equipment (1.0) (0.6) (1.1) -------------------------------------------------------------------------------- Operating cash flows before movements in working capital 39.2 33.1 69.5 -------------------------------------------------------------------------------- Decrease/(increase) in inventories 2.0 (1.3) 0.9 Increase in receivables (35.3) (12.1) (28.5) Increase in payables 17.0 6.4 39.4 Increase in provisions 2.8 2.6 2.1 -------------------------------------------------------------------------------- Cash generated by operations 25.7 28.7 83.4 -------------------------------------------------------------------------------- Income taxes paid (8.0) (8.5) (17.0) Interest paid (1.3) (1.2) (2.5) -------------------------------------------------------------------------------- Net cash from operating activities 16.4 19.0 63.9 -------------------------------------------------------------------------------- 8. Acquisition of subsidiaries Purchase of minority interests MITIE McCartney KBS Fire MITIE MITIE MITIE Security Total Fire Protection Protection Technology Ltd Engineering (South West) Ltd Systems Services Ltd Ltd (Liverpool) Ltd £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------ Minority interests 0.7 0.1 1.0 0.6 0.2 2.6 Goodwill 0.5 - 1.6 2.1 0.4 4.6 ------------------------------------------------------------------------------------------------------------ Total purchase consideration 1.2 0.1 2.6 2.7 0.6 7.2 Shares issued - MITIE Group PLC 1.2 0.1 2.0 2.1 - 5.4 Deferred contingent consideration - - 0.5 0.6 - 1.1 ------------------------------------------------------------------------------------------------------------ Cash consideration being cash outflow in the period - - 0.1 - 0.6 0.7 ------------------------------------------------------------------------------------------------------------ During the period £1.0m of loan notes in respect of The Watch Security Limited were redeemed. Furthermore £0.2m of deferred consideration in respect of the purchase last year of the minority shareholdings in MITIE Engineering Maintenance (South West) Limited was settled by the issue of new MITIE shares. Purchase of subsidiary On 2 April 2007 MITIE acquired 100% of Robert Prettie for total consideration of £23.2m. The transaction has been accounted for by the purchase method of accounting. Book value Fair value Fair value adjustments £m £m £m -------------------------------------------------------------------------------- Net assets acquired Intangible assets 8.6 (6.7) 1.9 Deferred tax liability - (0.4) (0.4) Property, plant and equipment 0.2 - 0.2 Inventories 4.9 (0.4) 4.5 Trade and other receivables 1.2 - 1.2 Cash and cash equivalents 0.2 - 0.2 Trade and other payables (6.3) (0.2) (6.5) Current tax liabilities (0.7) - (0.7) Loans (3.7) - (3.7) Pension liabilities (0.4) - (0.4) -------------------------------------------------------------------------------- Net assets acquired 4.0 (7.7) (3.7) Goodwill 26.9 -------------------------------------------------------------------------------- Total consideration 23.2 -------------------------------------------------------------------------------- Satisfied by Cash 7.0 Loan notes 1.6 Deferred contingent consideration 14.0 Directly attributable costs 0.6 -------------------------------------------------------------------------------- Total consideration 23.2 -------------------------------------------------------------------------------- Net cash outflow arising on acquisition Cash consideration 7.0 Cash and cash equivalents acquired (0.2) Loans repaid 3.7 -------------------------------------------------------------------------------- Net cash outflow 10.5 -------------------------------------------------------------------------------- The goodwill arising on the acquisition of Robert Prettie is attributable to the underlying profitability of the company, expected profitability arising from new business and the anticipated future operating synergies arising from assimilation into the Group. The full exercise to determine the assets acquired is still to be completed, thus the values are provisional; this exercise will be completed for the full year financial statements. The company contributed £24.1m to revenue and £2.0m to the Group's profit before tax for the period. Integration costs of £0.4m have been absorbed within the Property Services division. As the Group acquired Robert Prettie on 2 April 2007 there is no difference between the revenue and profit as reported from that which would have been made had the acquisition been on the first day of the financial period. The unwind of discounted deferred contingent consideration gave rise to a £0.4m finance charge in the period. 9. Analysis of net debt 30 September --------------------------------------------------------------- 31 March 2007 2006 2007 £m £m £m -------------------------------------------------------------------------------- Cash at bank 13.2 9.2 25.6 Overdraft (1.7) - - -------------------------------------------------------------------------------- Net cash and cash equivalents 11.5 9.2 25.6 Bank loans (20.0) (30.0) (20.0) -------------------------------------------------------------------------------- Net (debt)/cash before loan notes and obligations under finance leases (8.5) (20.8) 5.6 -------------------------------------------------------------------------------- Loan notes (11.7) (8.9) (11.1) Obligations under finance leases (3.3) (1.7) (2.6) -------------------------------------------------------------------------------- Net debt (23.5) (31.4) (8.1) -------------------------------------------------------------------------------- 10. Share capital Ordinary Ordinary Shares Shares of 2.5p of 2.5p Number £m -------------------------------------------------------------------------------- Authorised At 30 September 2006 and 1 April 2007 340,000,000 8.5 Authorised during the period 160,000,000 4.0 -------------------------------------------------------------------------------- At 30 September 2007 500,000,000 12.5 -------------------------------------------------------------------------------- Allotted and fully paid At 1 April 2007 312,449,195 7.8 Issued for acquisitions 2,349,300 0.1 Issued under share option schemes 684,750 - -------------------------------------------------------------------------------- At 30 September 2007 315,483,245 7.9 -------------------------------------------------------------------------------- At 1 April 2006 308,762,569 7.7 Issued for acquisitions 1,727,180 0.1 Issued under share option schemes 734,020 - -------------------------------------------------------------------------------- At 30 September 2006 311,223,769 7.8 -------------------------------------------------------------------------------- At the company's AGM on 26 July 2007 the Company's authorised share capital was increased from 340,000,000 to 500,000,000 Ordinary Shares of 2.5p each. During the period 2,349,300 (2006: 1,727,180) Ordinary Shares of 2.5p were allotted in respect of acquiring minority interests at a mid-market price of 237.2p (2006: 191.2p) giving rise to share premium of £nil (2006: £0.4m) and a merger reserve of £5.5m (2006: £2.9m). During the period 684,750 (2006: 734,020) Ordinary Shares of 2.5p were allotted in respect of share option schemes at a price between 58p and 191p (2006: 58p and 174p) giving rise to share premium of £0.9m (2006: £0.9m). 11. Reserves Share- Share Capital based Own Called-up premium Merger Revaluation redemption Other payments shares Retained share capital account reserve reserve reserve reserve(i) reserve reserve earnings Total £m £m £m £m £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------------------ Balance at 1 April 2007 7.8 16.6 54.9 (0.2) 0.3 0.2 1.9 - 110.2 191.7 Shares issued and net premium arising in respect of acquisitions 0.1 - 5.5 - - - - - - 5.6 Shares issued and net premium in connection with exercise of share options - 0.9 - - - (0.1) - - - 0.8 Profit for the period attributable to equity holders of the parent - - - - - - - - 21.2 21.2 Dividends paid - - - - - - - - (8.4) (8.4) Purchase of own shares by Employee Benefit Trust - - - - - - - (2.0) - (2.0) Share-based payments - - - - - - 0.2 - 0.4 0.6 Tax credit on items taken directly to equity - - - - - - - - 0.6 0.6--------------------------------------------------------------------------------------------------------------------- --- Net actuarial loss on defined benefit pension schemes - - - - - - - - - - Tax credit on actuarial loss taken directly to equity - - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------ Net expense on defined benefit pension schemes recognised directly in equity in the period - - - - - - - - - - ------------------------------------------------------------------------------------------------------------------------ Balance at 30 September 2007 7.9 17.5 60.4 (0.2) 0.3 0.1 2.1 (2.0) 124.0 210.1 ------------------------------------------------------------------------------------------------------------------------ (i) This is a non-distributable reserve. 11. Reserves continued Share- Share Capital based Own Called-up premium Merger Revaluation redemption Other payments shares Retained share capital account reserve reserve reserve reserve(i) reserve reserve earnings Total £m £m £m £m £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------------------ Balance at 1 April 2006 7.7 13.7 52.0 (0.2) 0.3 0.3 1.4 - 90.1 165.3 Shares issued and net premium arising in respect of acquisitions 0.1 0.4 2.9 - - - - - - 3.4 Shares issued and net premium in connection with exercise of share options - 0.9 - - - - - - - 0.9 Profit for the period attributable to equity holders of the parent - - - - - - - - 17.0 17.0 Dividends paid - - - - - - - - (7.6) (7.6) Share-based payments - - - - - - 0.1 - 0.5 0.6 ------------------------------------------------------------------------------------------------------------------------ Net actuarial loss on defined benefit pension schemes - - - - - - - - (3.2) (3.2) Tax credit on actuarial loss taken directly to equity - - - - - - - - 1.0 1.0 ------------------------------------------------------------------------------------------------------------------------ Net expense on defined benefit pension schemes recognised directly in equity in the period - - - - - - - - (2.2) (2.2) ------------------------------------------------------------------------------------------------------------------------ Balance at 30 September 2006 7.8 15.0 54.9 (0.2) 0.3 0.3 1.5 - 97.8 177.4 ------------------------------------------------------------------------------------------------------------------------ (i) This is a non-distributable reserve. 12. Contingent Liabilities The Company is party with other Group companies to cross guarantees of each other's bank loans, commitments, facilities and overdrafts of £190m (2006: £103m). 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. 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 £7.2m (2006: £10.8m) in the ordinary course of business. These are not expected to result in any material financial loss. 13. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. No material contract or arrangement has been entered into during the period, nor existed at the end of the period, in which a Director had a material interest. Amounts paid to key management personnel are disclosed in the Directors' remuneration report of our Annual Report. During the period, MITIE's Long Term Incentive Plan (LTIP) was introduced and offered to a small group of key senior management. This information is provided by RNS The company news service from the London Stock Exchange

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