2008InterimResults 1 . - - PowerPoint PPT Presentation

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2008InterimResults

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• *At constant exchange rates
• Divisional&FinancialReview
• OperationalDevelopments
• Q&A

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AndrewMacfarlane

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Revenue 1,178.1

• 1,120.6

1,068.8 4.8 EBITA 68.2

• 59.4

122.4 (51.5) Interest (24.6)

• (24.3)

(38.7) 37.2 Associates 1.2

• 1.0

1.1 (9.1) PBTA 44.8

• 36.1

84.8 (57.4) One.offitems 3.3

• 3.2

3.2 . $%& 48.1

• 39.3

88.0 (55.3)

• Freecashflow

(actualexchangerates)

• (16.4)
• 48.8
• .
• BasicEPS(continuing
• perations)
• 0.66p
• 2.88p
• (77.1)
• InterimDPS
• 0.65p
• 2.13p
• (69.5)
• € average exchange rate 1.30 (2007: 1.46)

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• *+,
• (15.4)
• (12.5)
• (27.9)
• 24.1
• .
• &(-!
• 24.6
• 20.2
• 44.8
• 53.5
• (16.3)
• %
• 11.4
• 17.8
• 29.2
• 28.3
• 3.2
• ./
• 8.6
• 9.1
• 17.7
• 18.6
• (4.8)
• %
• 6.0
• 4.8
• 10.8
• 14.3
• (24.5)
• !0
• 0.9
• 1.3
• 2.2
• 2.5
• (12.0)
• 1.2
• 2.7
• 2.2
• 4.9
• 4.8
• 2.1
• (10.1)
• (9.0)
• (19.1)
• (20.5)
• 6.8
• $'3&
• 4"
• 5546
• 747
• 847
• 1842
• 47
• 49
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• 1642
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• 194"2
• 16472
• 19452
• 154"2
• 5"4
• $%&
• 947
• 94"
• 5645
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• 188452

In 2008, certain shared service, IT and other costs that were treated as central costs in 2007 are being charged to the business that benefit from them. In H1 these costs totalled £3.7m and have principally been recharged to TWS £0.8m, Pest Control £1.3m, Facilities Services £1.1m and Asia Pacific £0.2m. Comparative figures have not been restated.

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• 847
• Changesdueto<
• CityLink
• (52.0)
• AustraliaPestControl&Washrooms
• (4.2)
• UKWashroom(1)
• (3.7)
• UKPestControl(2)
• (2.3)
• FranceTextiles/Washrooms
• (1.5)
• BeneluxTextiles/Washrooms
• (1.1)
• CentralCosts(3)
• 1.4
• Otherbusinessesintotal
• 0.4
• 747

(1)

Excluding Wipers: £0.8m additional central costs recharged in 2008

(2)

Of which £0.5m is additional central cost recharged in 2008

(3)

Of which £3.7m is the benefit of additional central costs recharged to divisions in 2008

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Revenue

• 95.2

96.1 191.3 RecurringCosts

• (101.5)

(106.4) (207.9) Non.recurringcosts(1)

• (9.1)

(2.2) (11.3) $%3&

• 18492

1482 1"462 One.offitems(2)

• (1.5)

. (1.5) %3&

• 17462

1482 16492 Changeinnetworkrevenue(%)

• (10.6)%

(7.0)% (8.8)% ChangeinRPC(%)

• (2.5)%

(2.1)% (2.3)%

(1) Comprising

Q1: asset write-downs and additional provisions for bad debts, service credits and transit liability claims Q2: franchisee receivable write-off and additional leasehold depreciation

(2) Comprising

Q1: redundancy and asset write-downs associated with depot integration

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80 100 120 140 160 180 200 220 240 260 2007 N etwork R evenue Prior Y ear Los t N ew B us ines s Los t B us ines s U ptrade D

• wntrade

2008 N etwork R evenue

£ M

£m

Jun-07 Y TD 212.3 Prior Y ear Lost (29.0) N ew business 11.7 Lost business (11.8) N et W in 08 (0.1) U ptrade 52.5 D

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ntrade (42.1) N et U ptrade 08 10.4 Jun-08 Y TD 193.6 N etw

• rk Reven

ue

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10,000 15,000 20,000 25,000 30,000 35,000 6 / 7 7 / 7 8 / 7 9 / 7 1 / 7 1 1 / 7 1 2 / 7 1 / 8 2 / 8 3 / 8 4 / 8 5 / 8 6 / 8 7 / 8

• No. of trading customers per reporting period

H2 2007 H1 2008

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City Link - Combined Network Revenue (13 Week MA) 6.5 7.0 7.5 8.0 8.5 9.0 9.5

4 / 1 / 8 1 8 / 1 / 8 1 / 2 / 8 1 5 / 2 / 8 2 9 / 2 / 8 1 4 / 3 / 8 2 8 / 3 / 8 1 1 / 4 / 8 2 5 / 4 / 8 9 / 5 / 8 2 3 / 5 / 8 6 / 6 / 8 2 / 6 / 8 4 / 7 / 8 1 8 / 7 / 8 1 / 8 / 8 1 5 / 8 / 8 2 9 / 8 / 8 1 2 / 9 / 8 2 6 / 9 / 8 1 / 1 / 8 2 4 / 1 / 8 7 / 1 1 / 8 2 1 / 1 1 / 8 5 / 1 2 / 8 1 9 / 1 2 / 8

Weekly Revenue £ M 2006 2007 2008 Q1 Q2 Q3 Q4 EASTER MAY BANK HOLIDAY AUGUST BANK HOLIDAY

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• France
• 116.0
• 110.4
• 5.1
• 1.4
• 8.4
• (1.5)
• Netherlands
• 37.9
• 37.9
• .
• 0.7
• 0.3
• (1.1)
• Belgium
• 35.7
• 33.9
• 5.3
• 5.1
• 1.9
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• Germany(2)
• 33.6
• 34.9
• (3.7)
• (0.7)
• 2.5
• (0.2)
• Others/divisionalcentre
• 45.8
• 42.5
• 7.8
• 2.0
• 1.4
• (2.1)
• '
• 764
• 8647
• 547
• 4"
• 948
• 19462
• UK(3)(4)(5)
• 35.2
• 42.3
• (16.8)
• 2.1
• (1.7)
• (3.8)
• B/&
• 594
• 546
• 4
• 4"
• 4
• 14"2
• $4'3&"
• 8548
• $4'3&
• 994

(1)

Annualised

(2)

Revenuereductionreflectswithdrawalfromhospitalservice

(3)

Includeswipersactivitiesin2007(revenue£3.4m,profit£0.1m)

(4)

AfterchargingadditionalcentralcostsinH12008of£0.8m

(5) UKWashrooms:AdjPBITAH12008£1.3m,H12007£5.1m,2007fullyear£9.0m

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3&(?-!./ % >A1&2

£m ex GHS

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5 10 15 20 25 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Continental Europe UK

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• USA(1)
• 53.1
• 41.5
• 74.0
• 83.2
• 0.1
• 3.4
• Europe
• 69.1
• 60.0
• 86.6
• 86.3
• 3.6
• 1.3
• UK(2)
• 32.7
• 31.2
• 81.9
• 84.2
• 0.2
• (2.3)
• DivisionalCosts(2)/Other
• 9.6
• 10.3
• 91.5
• 92.0
• .
• (1.5)
• 164.5
• 143.0
• 81.9
• 85.1
• 3.9
• 0.9
• $'3&"
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• (1) LossofCopesanbusinessinMarch2008reducedretentionrateby9.3percentagepoints

(2) Afterre.chargingadditionalcentralcostsinH12008of£1.3m.£0.5mUK,£0.8mdivisionalcosts

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• Cleaning/IFM
• 191.2
• 178.6
• 89.1
• 88.9
• 8.8
• (0.9)(1)
• Catering
• 29.8
• 32.2
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• Hospitals
• 33.7
• 31.3
• 74.4
• 88.3
• (5.0)
• 0.1
• Other/Divisionaloverheads
• 49.8
• 42.5
• 88.8
• 85.5
• 1.8
• (0.1)
• 304.5
• 284.6
• 87.2
• 88.4
• 5.6
• (0.9)
• $'3&"
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• CAfterchargingadditionalcentralcostsinH12008of£1.1m

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• NorthAsia
• 15.7
• 9.3
• 90.0
• 78.0
• 1.2
• 1.2
• SouthAsia
• 26.6
• 19.5
• 85.1
• 81.0
• 2.3
• 0.8
• Pacific(1)
• .AustraliaPestControl
• 17.2
• 14.7
• 86.4
• 90.3
• 1.1
• (1.5)
• .AustraliaWashroom
• 17.4
• 18.3
• 90.8
• 91.5
• 0.2
• (2.7)
• .Other(2)
• 13.5
• 12.0
• 89.8
• 90.3
• 0.6
• 0.2
• DivisionalCosts(1)
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• (1.5)
• 90.4
• 73.8
• 88.5
• 87.2
• 5.4
• (3.5)
• $'3&"
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• (1)AfterchargingadditionalcentralcostsinH12008of£0.2m

(2)AustraliaAmbius,NewZealandandFiji

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142 142 4 1482 142 1642

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• Costshigherin1HduetosetupofUKSharedServiceCentre
• Run.ratefellinQ3– efficiencysavings
• Q4reflectsbonusandpropertyprovisionadjustments
• £7.4mp.a.isbeingre.chargedtodivisionsforITandSharedServicesin2008;2007

notrestated

• ProvisionalcostofnewmanagementteamLTIP£2minH2

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£ million 2008 2007 H1 H1

Netinterestonbank/bond/financeleasedebt* (29.9) (37.3) Expectedreturnonpensionschemeassets 30.1 25.4 Interestonpensionschemeliabilities (27.0) (25.7) 3.1 (0.3) FeesandSouthAfricaBEE (0.8) (0.7) Unwindofdiscountonprovisions (0.6) (1.1) Mark.to.market/forexadjustments 3.6 0.8 Perincomestatement (24.6) (38.6) Averageinterestrateonbank/bond/finance/leasedebt 5.8% 5.8% Averagenetdebt £1,031m £1,294m *Afterinterestreceivedonfairvaluehedges

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• Profitbeforetax(continuingops)

18.3

• 65.3
• Explanationoftaxcharge

Expectedchargeatblendedrate 5.5

• 19.7
• Untaxedprovisionrelease

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• (2.7)
• Otherfactorsaffectingtaxcharge

(0.4)

• 0.4
• Prioryearadjustments

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• (5.4)
• Actualtaxcharge

5.1

• 12.0
• Cashtaxpaid

10.3 7.3 27.1

• Fullyearblendedrateapprox.31%
• Fullyeareffectivetaxrate,excludingprioryearadjustments,inrangeof

29%to33%

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(1)

Includescashflowsfromone.offitems,whichwerenotsignificant

(2)

Excludingcomputersoftwareanddevelopmentcosts

(3)

Impairmentcharges,profitonsaleoffixedassets,pensioncurtailmentetc.

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2008

2007

Continuing activities Continuing activities beforeone.

• ffitems

Discontinued activities One.off items Total EBIT 41.7 106.0 19.4 3.2 122.2 Amortisation(2) 26.5 18.3 1.5 . 19.8 Depreciation 88.9 76.2 2.2 . 78.4 Non.cashitems(3) 1.4 (4.7) . (2.3) (7.0) EBITDA 158.5 195.8 23.1 (5.5) 213.4 WorkingCapital (16.0) (40.9) 1.7 (18.0) (57.2) Netcapex (104.2) (74.6) (2.6) . (77.2) Operatingcashflow 38.3 80.3 22.2 (23.5) 79.0

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Actualexchangerates !

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": OperatingCashFlow 38.3 79.0 188.1 Interest(1) (44.4) (22.9) (58.9) Tax (10.3) (7.3) (27.1)

• 17492

94 4 Equitydividend (94.9) (94.9) (133.4) Acquisitions(2) (28.9) (93.6) (197.4) Disposals (1.8) 0.6 596.8 Pensioncontribution(3) . (30.0) (80.0) FX/other (10.2) 7.0 (47.0) Increaseinnetdebt 1842 1742 94

(1) Includingfinanceleases.Intereston€500mbondissuedMarch2007ispaidannuallyinarrears. €23.1mp.a. (2) Cashplusacquireddebt (3) £33.3mputintoescrowinJuly2008followingfinalisationof31March2007UKpensionschemevaluation

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>B0+C*

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! Cash/Bank (86.6) . £252mfacilitytoFebruary2010 (inc12monthterm.outoption) . £500mRCFtoOctober2012 !/

• €100mnoterepaidJuly
• At31Julybankdrawings£155m

leavingcommittedheadroomof £597m

• Facilitiescontainsinglefinancialratio

covenant:EBITDA/interestcover, testedsemi.annuallyon12monthlook back

• Substantialcovenantheadroomfor

2008

• For2009,3 profitssameasour

forecastfor2008andinterest£10m higherasaresultoffinancingactivities &'> 2009covenantheadroomwould stillbe>£50mEBITDA €100mnote (80.0) July2008 £250mbond (258.3) November2008 €500mbond (392.7) March2014 £300mbond (281.7) March2016 >'&B'& 1D66452

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AlanBrown,ChiefExecutiveOfficer

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Somewell.runoperations Somegoodmanagementteams Generallyhighlymotivated,committedandproudfront.linecolleagues Manyleadingandattractivemarketpositions Strongsalesculture Somesimilaritiesinbusinessprocessesacrossthedivisions Realgrowthopportunities,particularlyinpestcontrol

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/E,*,

Anumberofcommonissuesacrosskeybusinesses: – Lossoffocusonthecustomerandoncustomerservice – Insufficientandunclearaccountabilityforthecustomerandfor results – Insufficientfocusonoperationalexcellence – Lackofclearpolicy,processorsystemsframeworkwithinwhichtooperate – Consistentfailuretoexecutemajorchangeoracquisitionintegrationprogrammes

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• 98.5%internaldeliveryon.timeperformancetarget. overallservicenowbetter

thanthis

• Netcustomersuptrading
• Netnewbusinesswinsfromlargecustomersandstrongpipeline
• Relocalisationofcustomerservice. byyearend

– FG%:

• Stateofserviceupto95.4%endJulycomparedtomid.80%in2007– targetisto

deliver100%servicelevelforfirsttimeinbusiness’shistory

• Additionalserviceheadstofurtherimproveservicelevels

– FG-!<

• On.timeservicedeliveryperformanceimprovedfrom77%to87%
• Investmentinadditionaldriverstomeetcustomerserviceagreements
• Roll.outofnewPDAs. combinedmobilephone,SatNavand‘proofofdelivery’

service– customersignsandprintsname– completebyyearend

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City Link - Weekly Service Performance

90% 91% 92% 93% 94% 95% 96% 97% 98% 99% 100% 2 5 / 4 / 2 8 2 / 5 / 2 8 9 / 5 / 2 8 1 6 / 5 / 2 8 2 3 / 5 / 2 8 3 / 5 / 2 8 6 / 6 / 2 8 1 3 / 6 / 2 8 2 / 6 / 2 8 2 7 / 6 / 2 8 4 / 7 / 2 8 1 1 / 7 / 2 8 1 8 / 7 / 2 8 2 5 / 7 / 2 8 1 / 8 / 2 8 8 / 8 / 2 8

Average Service Levels Service Standard All Service Timed Service

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Rolling 12 Month LT SoS

76.0% 78.0% 80.0% 82.0% 84.0% 86.0% 88.0% 90.0% 92.0% 94.0% 96.0% Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Rolling average LSE Rolling average M&W Rolling average NOR Rolling average RPC

July state of service: 96%

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– FG-!<

• Customerresponsibilitybacktobranches
• Co.ordinatedprogrammebetweencreditcontrolwithsupportofsales andaccount

managementteamsontheground

• Sharedinformationsystembeingdevelopedtoensurevisibilityofallaspectsof

customerrelationship – FG%:

• Restructuredcreditcontrolincludingnewmanagementteamandaddedvoice

recognition/routingtechnologytoimproveefficiencyofquerymanagement

• Accountsreceivableimprovedby15%inQ2vs.Q12008,butmuchmoretodo

–

• !<
• Creditcontrolbeingtransferredbacktobranches
• Willallowquickerqueryresolutionandcashcollection

– *+,<

• Overdueaccountsreceivableshalved

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54B/!!*!!,

Initiativesunderway:

– Commonprocessmapforalloperations – Roll.outofInternationalContractsAdministrationBranchSystem(ICABS)toolacross PestControl,AsiaPacificandUKWashrooms – Standardisedbranchmodelforprocessing,proceduresandsystems –

• Finance. decisiononcommonsystempending

– Developmentandexploitationofexistingsystems – Projectmanagement– designandtraining

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94'!!0,

Almost1000branches/depots/servicecentresaroundtheworld Servingtensofthousandsofcustomers Seriouserosionofaccountabilityforservice&resultsatbranchlevelinsomebusinesses Accountabilitytoberestoredtobranches,withinclearlydefinedoperatingframework

– FG-!<

• Movingtowardsneworganisationalstructurewithclearownership ofcustomer

experienceandaccountabilityforcustomerrelationship –

• !<
• Establishing‘pods’ – small,localbranchserviceteamsservicingparticularareas,

especiallyacrossSydney – *+,<

• Transferofcustomerservice,customerrelationshipandP&Lresponsibilitybackto

branches

$ %

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84B//

Threemainareasoffocus: – Increasingproductivityoffront.linecolleagues,bothservice&sales – Reducingadministrationcosts – IncreasingproductivityintextilesbusinessincontinentalEurope Scopingofopportunity: – Group:

• Administrationandoverheadcostscurrently20%ofrevenue

– AustraliaPestControl:

• IntegrationofresidentialandcommerciallabourforcepostsuccessfulMelbournepilot

– CityLink:

• £25mcostsavingsidentifiedsofar,mainbenefitin2009

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&;

Organisationalchangesimplementedon1July2008tosupportoperationalagenda: – IntheUK,allUKcleaningbusinessesplusUKWashroomsandSpecialistHygiene (excludingMedicalServices)broughtunderoneleadershipteam – DedicatedleadershipteamestablishedforPestControlworldwide,though

• perationalresponsibilityforallAsiaPacificbusinessesremainswithdedicated

APACteambasedinSingapore – DedicatedleadershipteamestablishedforTextiles&Washroomsin continentalEurope

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B/!;*

• Alldivisionsandfunctionscurrentlydevelopingdetailed,three.yearplans
• Operationallyfocused,outliningpracticalstepstoimplementfivekeyprioritiesacross

thebusiness

• Alsoaddressinggrowthagenda

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Beijing Contract

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2008guidanceunchangedfromtradingupdate25July2008 2009outlook: – BulkofprofitimprovementtocomefromCityLink – Performanceimprovementselsewherelikelytobeoffsetbyhigher interestcost – Operationalplanunderdevelopment:mayrequireadditionalinvestment 36

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2008InterimResults