Spotless Interim Results Meets AGM Earnings Guidance

Spotless Group Limited (ASX/NZSX: SPT) today announced reported NPAT of $17.4 million declined 29.0 per cent on the prior period, whilst Underlying NPAT declined 8.4 per cent to $23.0 million. Reported Group EBIT of $38.0 million declined 19.7 per cent on the prior period. This EBIT result is in line with the top end of the earnings guidance range provided at the 2010 Annual General Meeting. On an Underlying basis, excluding $8.0 million in mobilisation and start-up costs, Group EBIT was $46.0 million, slightly above the top end of AGM earnings guidance.

The effective tax rate was 34.6 per cent up from 30.2 per cent in the prior period, influenced by investment allowances in the prior period. Group revenue prior to pass-through revenue rose 10.9% to $1,281 million. The Directors declared an interim dividend of 5.0 cents per share, franked to 60%.

Managing Director and CEO, Josef Farnik said “Our interim results reflect sustained organic growth in our core Australian and New Zealand service businesses, short-term costs associated with this growth and continued organic investment in line with our strategic plan. Challenging demand conditions were evident across our contract portfolio and in Braiform’s major markets. Although retendering and cost inflation are placing pressure on margins, we are responding with renewed focus on pricing and costs.

“Organic revenue growth was 4.9 per cent1, notwithstanding soft demand conditions and lack of government stimulus programs present in 2010. This growth is largely due to recent major Facility Services contract wins, with mobilisation currently nearing completion. Looking ahead to 2012, these contracts will have a full twelve months impact on performance. In addition, 2012 will be a big year on the events calendar, with Rugby World Cup in New Zealand, Presidents Cup in Australia and the London Olympics.

“For Braiform, hanger volumes rose only slightly during the half. Combined with intense competition for new orders and sharp increases in key inputs profitability was significantly impacted. Further cost reduction, pricing and sales initiatives are being implemented to minimise these market pressures. Importantly, during the period Braiform continued to grow its re-use offering and restructure its cost base.

“We are confident that our strategy of leveraging the common strengths of our businesses is on track to enable Spotless to fully realise its potential. The Spotless Group has strong underlying cash flows and a robust balance sheet to support reinvestment. A significant milestone in our strategic plan is the introduction of standardised and simplified core business processes, enabled by a modernised IT platform.

We are confident that this transformation investment will deliver significant efficiencies and more profitable growth. Implementation will commence during calendar 2011 and the program is expected to take approximately two years. “Amid continued tight market conditions we are maintaining a strong focus on discretionary expenditure. In the absence of major unforseen events, Spotless continues to expect that FY11 revenue and earnings will exceed FY10 levels.

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ENDS

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