SPOTLESS GROUP LIMITED 
By • Group earnings growth guidance in FY2012 reconfirmed and weighted towards second half
• Year to date trading in Facility Services and International Services above prior period
• A$240m syndicated debt facility refinanced at lower interest rates with longer tenor
• New 5-year resources agreement with ERA in Northern Territory
Spotless Group Limited (ASX/NZSX: SPT) Chairman Mr Peter
Smedley announced at the company's Annual General Meeting
that Spotless was entering the final phase of its strategic
plan to sustainably transform the business.
"FY11 was a year in which Spotless maintained the execution
of its strategy in the face of continued tough economic
conditions," said Mr Smedley.
"In the 2008 financial year the Board endorsed the Spotless
strategic plan to sustainably transform the business. Four
years into this transformative strategic plan, the Company
has improved governance frameworks, management accountability
and corporate transparency, aligned the organisational
structure and executive talent bench strength to execute the
strategic plan and delivered profitable growth within
Facility Services.
"We have entered the final phase of this plan - to modernize
the company with a focus on delivering higher margin,
integrated services and setting our sights on sustained
future performance improvements. To secure substantial profit
margin and performance improvements, Spotless is now
transforming its business processes and IT systems."
Mr Smedley said more subdued business conditions had
persisted to varying degrees across the company's client
base, but had also given rise to outsourcing
opportunities.
Managing Director and CEO Josef Farnik updated the meeting on
trading conditions and the progress of the new
Business and IT Platform.
"Our investment in a new Business and IT Platform will
produce more timely, better quality management support as
well as contract delivery at a lower cost," said Mr
Farnik.
The Company reconfirmed that a significant earnings uplift is
expected from the Company's new business and IT platform
once the project is fully complete next financial year. Net
annualised and recurring EBITDA benefits of $20 million to
$25 million are expected.
The Company has received commitments from its banking
syndicate to extend its $240 million syndicated facility at
the same level of $240 million into the following
tranches:
1. a $90 million 364 day revolving facility;
2. a $90 million three year tranche; and
3. a $60 million five year tranche.
The refinanced debt will be priced approximately 50 basis
points below the Company's existing pricing. All other terms,
including banking covenants, remain generally unchanged. The
next major refinance is due in FY14.
Spotless has today agreed to enter into a 5-year integrated services contract with Energy Resources Australia (ERA) at their Ranger mine in the Northern Territory. The mine is situated 260km east of Darwin and has occupancy capacity of 600 people. Spotless will provide integrated services to the Ranger Mine site accommodation and within the township of Jabiru. Spotless mobilised this site during the first half and reached final contract agreement with ERA today. At full operation will employ approximately 90 people dedicated to this contract.
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ASX / NZX Media Release 18 November 2011Spotless services include: accommodation and camp management, reactive and preventative maintenance, security, catering, housekeeping, grounds maintenance, pest control and waste management.
Trading UpdateFacility Services & International Services
Key contracts mobilised last financial year are performing
broadly in-line with the company's expectations. Overall, the
new business pipeline is strong, although due to the timing
of large integrated tenders new mobilisations have
slowed.
Market competition and tight margins, and the investment in
our new Business & IT platform, is placing pressure on
earnings. Clients in some sectors, including retail and
manufacturing, are exercising caution, which is resulting in
less discretionary spending in certain contracts. Year to
date, Facility Services and International Services EBIT are
both above the prior corresponding period.
Braiform
Macroeconomic conditions for Braiform are extremely soft and
unpredictable. Retailers continue to report sales declines
and this has created a further reduction in working capital
and inventories throughout the supply chain.
Year to date EBIT for Braiform has declined relative to this
time last year.
Facility Services
The Australian and New Zealand Facility Services businesses
continue to secure new contracts and importantly the
profitability of new revenue streams secured in the prior
year continues to improve. However, Spotless faces operating
headwinds due to soft market conditions in some sectors and
transitional costs relating to the new
Business and IT platform. Total mobilisation costs for the
first half are expected to be below the prior period.
Overall, Spotless expects that Australia and New Zealand
Facility Services will deliver earnings growth in FY12,
weighted towards the second half.
International Services
International Services is focused on delivering the London Olympics contract and the Company continues to expect a positive EBIT contribution from this business in FY12.
Braiform
Braiform year to date EBIT has declined relative to this time
last year and may result in a small EBIT loss for the first
half. Management has responded to market conditions with cost
control and margin enhancement initiatives, which coupled
with normal seasonality, are expected to result in stronger
second half earnings. The full year FY12 earnings result for
Braiform will be influenced by the market environment
prevailing in the second half along with the impact of
further internal restructuring initiatives, but is expected
to be a positive EBIT result.
Subject to no further major deterioration in trading
conditions, Spotless Group continues to expect to deliver
earnings growth in FY12 relative to the prior year.
For further information, please contact:
Kerrina Lawrence
M: +61 (0) 434 198 427
Rowan Wilkie
M: +61 (0) 418 577 956
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