8th Nov 2007 07:01
Rentokil Initial PLC08 November 2007 8 November 2007 RENTOKIL INITIAL PLC (RTO) TRADING UPDATE FOR THIRD QUARTER ENDED 30 SEPTEMBER 2007 Highlights •Q3 sales and profits strongly ahead in line with our expectations •Revenue up across all divisions: Q3 up 25.3%, year to date up 23.8% •Organic growth: Q3 up 4.1%, year to date up 4.3% •Adjusted operating profit up 18.1% for Q3, 8.8% year to date •Q3 adjusted profit before tax and amortisation up 21.1%, a continuation of positive quarterly trend • Profit before income tax from continuing operations £41.0m (2006: £42.8m) •Continued strong performance from City Link and Asia Pacific, integration programmes on track, benefits becoming visible •Improved divisional performance from Pest Control and Textiles & Washroom Services •Investment towards building stronger market positions continues: €36 deals for a total consideration of £77 million during the quarter, bringing the total to 86 deals, £173 million year to date •Guidance for 2007 and 2008 remains unchanged Note: all comparisons are for continuing operations and at constant exchangerates except profit before income tax which is a statutory number at actualexchange rates. Doug Flynn, Chief Executive of Rentokil Initial plc, said: "As we indicated at the time of our interim results in August, profit before taxand amortisation has moved strongly ahead during the quarter and is in line withour expectations. The group has continued to build on the progress made duringthe first half of the year and our outlook for 2007 and 2008 remains unchanged." Financial Summary £million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 changePro forma Continuing Operations(1)At 2006 constant exchange rates(2) Revenue 566.1 451.9 25.3% 1,640.7 1,325.4 23.8% Operatingprofitbefore 66.7 62.4 6.9% 189.4 177.7 6.6%amortisationof intangibles(3) Add back:one-off 7.1 0.1 - 10.3 5.9 74.6%items Adjustedoperating 73.8 62.5 18.1% 199.7 183.6 8.8%profit(4) Share ofprofit fromassociates 0.6 0.5 20.0% 1.8 1.6 12.5%(net of tax) Interest (15.3) (14.2) (7.7%) (53.8) (34.7) (55.0%) Adjustedprofit 59.1 48.8 21.1% 147.7 150.5 (1.9%)before income tax(4) Continuing Operations (1)At actualexchange rates Revenue 560.6 449.4 24.7% 1,623.7 1,330.8 22.0% Operatingprofitbefore 66.0 62.0 6.5% 187.1 178.8 4.6%amortisationof intangibles(5) Amortisationof intangible (10.1) (5.5) (83.6%) (28.4) (13.6) (108.8%)assets (6) Operating 55.9 56.5 (1.1%) 158.7 165.2 (3.9%)profit Share ofprofit fromassociates 0.5 0.5 - 1.6 1.6 -(net oftax) Net interest (15.4) (14.2) (8.5%) (54.0) (34.6) (56.1%)payable Profit beforeincome tax 41.0 42.8 (4.2%) 106.3 132.2 (19.6%) Operating cash flow 150.4 148.5 1.3% Free cash flow (7) 97.2 75.5 28.7% (1)All figures are for continuing operations and are unaudited. The ElectronicSecurity division has been treated as discontinued. (2)Results at constant exchange rates have been translated at the full year average exchange rates for the year ended 31 December 2006. £/$ average rates: Q3 2007 1.9930; Q3 2006 1.8177; FY 2006 1.8469. £/• average rates: Q3 2007 1.4765; Q3 2006 1.4593, FY2006 1.4659 (3)Before amortisation of intangible assets (other than computer software anddevelopment costs) of £28.9m (2006: £13.5m) year to date. (4)Before amortisation of intangible assets (other than computer software anddevelopment costs) of £28.9m (2006: £13.5m) year to date and items of a one-offnature of £10.3m (2006: £5.9m) year to date. See appendix 4 for further details. (5)Before amortisation of intangible assets (other than computer software anddevelopment costs) of £28.4m (2006: £13.6m) year to date. (6)Other than amortisation of computer software and development costs. (7)Cash flow before acquisitions, disposals, equity dividend payments and specialpension contributions. Enquiries: Shareholder/analyst enquiries:Andrew Macfarlane, Chief Financial Officer/Katharine Rycroft, Head of Investor Relations Rentokil Initial plc 020 7866 3055 Media enquiries:Malcolm Padley, Head of Corporate Communications Rentokil Initial plc 07788 978199Kate Holgate / Tom Williams Brunswick Group 020 7404 5959 A conference call for analysts and shareholders will be held on 8 November at 9:00am.To join this call, please dial +44(0)20 7806 1966 (UK), +33(0)1 70 99 43 04 (France),+852 3002 1356 (Hong Kong) quoting the confirmation code: 4272284.A recording of the call will be available for 14 days on the following numbers: UK: +44 (0)20 7806 1970, France: +33 (0)1 71 23 02 48, Hong Kong: +852 3002 1607 and US: +1 718 354 1112. The passcode for all replay numbers is 4272284#. This announcement contains statements that are, or may be, forward-lookingregarding the group's financial position and results, business strategy, plansand objectives. Such statements involve risk and uncertainty because they relateto future events and circumstances and there are accordingly a number of factorswhich might cause actual results and performance to differ materially from thoseexpressed or implied by such statements. Note: The commentary in the Overview and Divisional Review reflects themanagement divisional structure and not the statutory segmental information. Allcomparisons are at constant 2006 full year average exchange rates. References tooperating profit are for continuing businesses before amortisation of intangibleassets (other than computer software and development costs) unless otherwisestated. References to adjusted operating profit and adjusted profit before taxand amortisation (PBTA) also exclude items of a one-off nature, totalling a netcost of £10.3 million (2006: £5.9 million) year to date that have impacted theresults. In 2007, they relate to the group's restructuring programmes in thePest Control and Textiles and Washroom Services divisions and the City Link/Target Express integration project and consist of the profit on the sale of aformer business unit head office, consultancy, reorganisation and redundancycosts. These have been separately identified because they are not considered tobe "business as usual" items and they have a varying impact on differentbusinesses and reporting periods. An analysis of these costs by division isprovided in appendix 4. OVERVIEW THIRD QUARTER Performance across the group was in line with plan during the third quarter,with adjusted profit before tax and amortisation moving strongly ahead asanticipated. Revenue for the group as a whole of £566.1 million was 25.3% higher than prioryear, with all divisions reporting increased revenues. The strongest revenuegrowth came from City Link, Asia Pacific and Facilities Services. However, PestControl and Ambius continued to demonstrate improved performance with revenuesincreasing by 9.1% and 10.3% respectively over the corresponding period in 2006.Excluding the impact of acquisitions and disposals, organic revenue growth inthe third quarter was 4.1%. The contract portfolio grew by 4.8% during the threemonths. Group operating profit (before amortisation of intangibles) of £66.7 million was6.9% higher than in 2006. Adjusted operating profit (before amortisation ofintangible assets of £10.3 million and one-off items of £7.1 million) was £73.8million, an increase of 18.1%. Adjusted profit before income tax (again, beforeamortisation of intangible assets and one-off costs) moved ahead strongly by21.1% to £59.1 million. Excluding the estimated benefit of the interest receivedon the proceeds from the sale of Electronic Security, adjusted profit beforeincome tax was up 5.3% in the quarter. The sale of the Electronic Security division in France remains subject toregulatory approval by the French authorities. Further progress was made during the quarter to integrate the businessesacquired during 2006, most notably Target Express, the City Link franchises andPink Healthcare in Australia. Progress on the integration of Target Express isdelivering synergy benefits ahead of original plan and in line with the halfyear statement. We have continued to make solid progress in our Textiles and Washroom divisionwith profit in the quarter up 4.5% on the prior year. In the UK we announced theclosure of two sites which will allow us to complete the rationalisation of thebranch and processing infrastructure. Textiles and Washrooms was ahead of lastyear in the key markets of Germany, Netherlands, France and Belgium. Thebusiness in France has responded well to initiatives to better develop thewashrooms business together with a number of higher margin specialist areas. Our pest control operations in continental Europe continued the solid progressmade in organic growth and are beginning to convert more of that growth intoprofit. In the UK revenue was up on the corresponding quarter, for the firsttime since the fourth quarter of 2005. However, more work is needed on serviceefficiency before this flows through into increased profitability. The group continued its programme of investing in building strong marketpositions in growth sectors and made 36 acquisitions in the period for a totalconsideration of £77 million. The majority of the acquisitions were in AsiaPacific and Pest Control. Following the acquisition of Ambigest in July,Rentokil has now become the clear number one pest control company in Spain. YEAR TO DATE For the year to date revenue of £1,640.7 million was 23.8% above the same periodlast year. Organic revenue growth was 4.3% for the nine months. All divisionsreported increased revenue for the year to date, with City Link, Asia Pacificand Facilities Services giving the strongest performance. The contract portfolioincreased by 6.9% over the nine-month period. Operating profit (beforeamortisation of intangibles) for the group grew by 6.6% to £189.4 million andadjusted operating profit (before amortisation and one-off items) amounted to£199.7 million, an increase of 8.8% on prior year. Adjusted PBTA continues to improve. In Q1 profit fell by 23.2% versus thecorresponding period, reducing to a decline of 4.3% in Q2. In Q3 profitincreased by 21.1% or 5.3% if the interest benefit from the sale of ElectronicSecurity is excluded. Year to date adjusted profit before tax and amortisation is down by 1.9% at£147.7 million. Our continued focus on customer service and efficiency has resulted in improvedcontract retention rates across all our divisions with the exception ofFacilities Services. Within this division retention rates were lower in thequarter due to the loss of a number of contracts. As a result the group'sannualised retention rate has fallen back slightly for the nine months to 87.6%from the 88.3% reported at both the half year 2007 and for the nine month periodin 2006. OUTLOOK The outlook for the remainder of 2007 is unchanged and we reiterate our guidanceissued at the interim stage for the full year 2007 and 2008. Excluding the interest benefit from the sale of Electronic Security (of around£15 million), we continue to expect that profit before tax and amortisation forthe year before one-off items will be in line with 2006, with profits movingahead strongly in the second half. In 2008 full year profit before tax and amortisation is expected to show mid tohigh single digit growth over 2007 after excluding the interest benefit from thesale of Electronic Security (around £15 million in 2007 and £30 million in2008). DIVISIONAL REVIEW Initial Textiles and Washroom Services £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 change At 2006 constant exchange rates: Portfolio - netmovement (appendix 1) 5.4 2.1 2.8 3.2 Revenue 150.1 147.3 1.9% 450.7 442.4 1.9% Operating profit(before amortisation ofintangible assets(1)) 23.9 15.5 54.2% 77.3 68.4 13.0% One-off items 4.0 11.2 3.9 13.4 Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 27.9 26.7 4.5% 81.2 81.8 (0.7%) (1)Other than computer software and development costs Revenue for the division as a whole increased by 1.9%, both for the quarter andthe year to date. Excluding the impact of acquisitions and the disposed GermanHospital Services business, organic revenue increased by 3.2% during thethree-month period. Profit in the quarter was up 4.5% on the prior year.Progress in continental Europe continued to be sound with strong profitperformances in Germany, France, Netherlands and Spain, but the division as awhole is being held back by the major restructuring programme ongoing in the UK. The rate of portfolio growth excluding the UK business continues to improve withcurrent annualised growth in the range of 3 to 4%. Portfolio growth during theyear to date has come largely from existing customers increasing their volumeswith us. The UK business is showing better portfolio trends, with two out of the threemonths of Q3 posting a net gain. However, profits are still under pressure dueto reorganisation of the business. During the quarter we announced the closureof our plants at Bradford and Chorley which will allow us to move processing tothree new modern sites in Reading, Birmingham and Glasgow. We expect thetransfer of work to be completed by the end of January 2008. One-off costsassociated with the closures and the linked exit from the Wipers businesstotalled £2.1 million and were recognised in the quarter, net of the profit onsale of surplus assets. In Belgium further restructuring costs of £1.4 millionwere incurred and the new Lokeren plant is now fully operational. Rentokil Pest Control £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 change At 2006 constant exchange rates: Portfolio - netmovement (appendix 1) 23.1 2.8 30.1 52.3 Revenue 82.9 76.0 9.1% 229.5 208.4 10.1% Operating profit(before amortisation ofintangible assets(1)) 19.7 18.8 4.8% 47.6 50.6 (5.9%) One-off items 0.1 0.6 0.7 2.2 Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 19.8 19.4 2.1% 48.3 52.8 (8.5%) (1) Other than computer software and development costs The Pest Control division delivered the expected improvement in performanceduring the third quarter with increased revenue of 9.1% compared to the sameperiod last year. Organic growth for the quarter was 4.3%. Q3 adjusted operatingprofit was 2.1% higher than 2006, assisted in part by acquisitions in Spain andthe US. Organically the deterioration in UK profits versus 2006 offset thestrong performances seen in other markets. In North America the acquisition of Presto-X-Company was completed in July andinitial indications are that trading is in line with expectations. ExcludingPresto-X, growth in revenue was 6.5% with profit up strongly on the previousyear. Despite a slow start to the peak season as a result of unusually coldweather at the beginning of the second quarter, weather patterns normalised overthe summer months contributing to strong sales uplift during the quarter. Continental Europe continued to make good progress with a 10.6% increase inrevenue giving a 4.5% increase in adjusted operating profit. Organic revenuegrowth was 4.2% with the remainder delivered by a number of acquisitions inSpain, Finland and Estonia (the division's first entry into the Baltic region). Some of our mid-sized operations have demonstrated particularly strong organicgrowth, most notably Spain, Italy, Austria and Portugal. The UK business continued to make progress with good new business performanceleading to revenue growth of 2.1% against a decline of 1.3% in Q2. Contractretention rates have further strengthened during the three months to anannualised rate of 81.6% and the contract portfolio has now grown by 2.2% sincethe start of the year. Profit has lagged revenue growth and was down 10.8% on anadjusted basis in the period although the rate of regression has slowed quarterby quarter this year. Service productivity declined at the start of the year asthe business adjusted to its new operating model and this continues to be themain focus for improvement. Ambius £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 change At 2006 constant exchange rates: Portfolio - netmovement (appendix 1) 1.2 2.0 1.8 2.0 Revenue 26.7 24.2 10.3% 78.3 73.7 6.2% Operating profit(before amortisation ofintangible assets(1)) 1.4 1.1 27.3% 4.0 3.2 25.0% One-off items - 0.3 - 0.3 Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1) 1.4 1.4 - 4.0 3.5 14.3% (1) Other than computer software and development costs Revenue from Ambius grew by 10.3% during the quarter, of which organic growthwas 2.9%. North America, which accounted for 59% of Ambius's total revenue inQ3, delivered organic revenue growth of 4.1%. With the exception of France,continental Europe showed strong organic growth in the period, averaging 5.6%.Revenue in both the UK and France continued to show decline, but the newmanagement team recruited earlier in the year is making progress in addressingperformance issues in these markets. Adjusted operating profit for the quarter was flat with last year as the declinein the UK offset improvements elsewhere. City Link £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 Change At 2006 constantexchange rates: Revenue 107.6 44.6 141.3% 310.6 126.4 145.7% Operating profit(before amortisation ofintangible assets(1)) 11.4 6.8 67.6% 32.8 20.5 60.0% One-off items 3.0 - 5.7 - Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 14.4 6.8 111.8% 38.5 20.5 87.8% (1)Other than computer software and development costs City Link, our parcels delivery business, continued to make good progress in thethird quarter, reporting revenue over 140% higher year-on-year. However,comparisons with 2006 are impacted by the acquisitions of Target Express inNovember 2006 and the franchise operations during 2006 and 2007. Operatingprofit increased by 67.6% in the third quarter and adjusted operating profit by111.8%. Year-to-date integration costs of £5.7 million have been incurred, ofwhich £3.0 million was incurred in the quarter. Network turnover grew by 3.5% during the quarter and 5.6% year to date. CityLink derives approximately 70% of annual revenues from the business to business(B to B) market and the balance from the business to consumer (B to C) segmentThe larger B to B segment has shown good year-on-year growth during the firstthree quarters with good levels of retention. The B to C segment softened overthe quarter, a continuation of the trend highlighted at the interim stage. As part of the integration of Target Express and City Link we have beenreviewing the profitability of our account base. We have a very large number ofsmall accounts (i.e. those customers typically spending less than £50 per week)but which represent under 3.5 % of network turnover. These accounts areunprofitable on current terms and we are taking steps to improve this. Theexercise is likely to reduce 4th quarter revenue by around 1% but will be morethan recouped by the operational cost savings generated in the first half of2008. In the third quarter one more franchise has been bought in leaving only onefranchise, representing less than 1% of network turnover, outstanding. Progress on the integration of Target Express is delivering synergy benefitsahead of original plan and in line with the half year statement. In September wemerged two depots into one combined site in Swindon as a pilot project. Nofurther sites will be merged until after the key Christmas trading period inorder to minimise any risk of disruption to service. However, the roll out ofmechanical handling systems, handheld scanners and operational systems (a keyelement of integration) is continuing. This will substantially reduce the impactof change when the physical integration of depots commences in January. Initial Facilities Services £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 change At 2006 constant exchange rates: Portfolio - netmovement (appendix 1) 31.0 20.4 35.9 30.4 Revenue 150.1 126.6 18.6% 434.4 380.6 14.1% Operating profit(before amortisation ofintangible assets(1)) 8.8 6.7 31.3% 27.4 21.7 26.3% One-off items - 1.3 - 1.4 Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 8.8 8.0 10.0% 27.4 23.1 18.6% (1)Other than computer software and development costs Initial Facilities Services produced a satisfactory performance during thequarter with revenue up 18.6%, 2.8% of which was organic. Adjusted operatingprofit was up 10.0%, largely attributable to the profit on the sale of the smallNetherlands cleaning business. In the UK cleaning revenue increased by 30.4% largely as a result of increasedcontract turnover and portfolio growth coming from the acquisitions of InSituand Lancaster. Excluding acquisitions operating profit was flat, reflecting atough commercial environment which we are countering with efficiency initiativesincluding Smartcleaning, a daytime cleaning concept and RAPID Customer AccountManagement, an industry first in the remote management of cleaning contracts. InUK Catering, as part of active client profitability management, we exited from anumber of unprofitable schools catering contracts during the period but newcontract wins effective from Q4 will offset this loss. Annualised customer retention rates fell back during the quarter to 78.7%(against 88.6% in Q2) largely as a result of a number of contract losses. Rentokil Initial Asia Pacific £ million Third Quarter Year to Date Q3 07 Q3 06 Change YTD 07 YTD 06 change At 2006 constant exchange rates: Portfolio - netmovement (appendix 1) 8.2 1.4 25.5 14.2 Revenue 41.4 25.9 59.8% 115.2 72.1 59.8% Operating profit(before amortisation ofintangible assets(1)) 6.8 4.9 38.8% 20.8 14.4 44.4% One-off items - 0.4 - 1.2 Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 6.8 5.3 28.3% 20.8 15.6 33.3% (1)Other than computer software and development costs Asia Pacific has enjoyed another strong period of growth with revenue and profitshowing significant improvements on last year as a result of good organic growthacross the region and a continued high level of acquisition activity. Revenueincreased by 59.8% over the same period prior year with adjusted operatingprofit up 28.3% on 2006. Of this organic growth was 14.1%, boosted by the HongKong Government pest control contract won in April. In Australia the pest control business continues to show strong organic growth.In Washrooms the integration of Pink Healthcare is progressing and work tocombine service routes, align service frequencies and introduce new work flowsis progressing. Since its acquisition in April performance from Rentokil Taiming has been veryencouraging. The business, while still small, is already profitable. Owners ofproprietary and highly effective fogging technology, Rentokil Taiming has beenrecommended as the 'preferred supplier' to work closely with the Beijing PestControl Association on the Beijing Winter Cockroach Control Campaign ahead ofthe Olympics in 2008. A total of 18 acquisitions were made in the region during the quarter (bringingthe total number of deals completed year to date to 41) for a combinedconsideration of £65 million. These were primarily in the areas of pest control,washrooms and tropical plants. They will contribute annualised revenue of some£38 million. Other (South Africa) £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 change At 2006 constantexchange rates: Portfolio - netmovement (appendix 1) - 0.1 1.8 1.2 Revenue 7.3 7.3 - 22.0 21.8 0.9% Operating profit(before amortisation of 2.7 3.5 (22.9%) 8.1 8.8 (8.0%)intangible assets (1)) One-off items - (1.0) - (0.8) Adjusted operatingprofit (before one-offitems and amortisationof intangible assets(1)) 2.7 2.5 8.0% 8.1 8.0 1.3% (1) Other than computer software and development costs Adjusted operating profit grew by 8.0% in the quarter. Strong growth in pestcontrol revenue of 11% year to date has been partially offset by the washroomsbusiness, which has been broadly flat compared with last year. FINANCIAL ITEMS Central Costs £ million Third Quarter Year to Date Q3 07 Q3 06 change YTD 07 YTD 06 Change At 2006 constantexchange rates: Central costs (8.0) 5.1 - (28.6) (9.9) (188.9%) One-off items - (12.7) - (11.8) Central costs beforeone-off items (8.0) (7.6) (5.3%) (28.6) (21.7) (31.8%) Year to date adjusted central costs were £6.9 million higher than the prioryear. The principal reasons for the increase are start-up costs of the new UKShared Service Centre in Dudley and the continuing build-up of costs associatedwith the long-term incentive plan. However, as noted at the half year, the runrate of central costs is starting to fall as savings and operationalefficiencies come through. One-off Items Details of the one-off items incurred in the period for which adjustments havebeen made are set out in Appendix 4. These have been separately identifiedbecause they are not considered to be "business as usual" items and they have avarying impact on different businesses and reporting periods. Across the group the net cost of these one-off items for the nine months was£10.3 million, compared with £5.9 million last year. These were incurred incompleting the UK Pest Control rationalisation, continuing the restructuring ofthe UK Washroom business, closure costs of plants in Belgium and in the UK(Bradford and Chorley), exit from the Wipers business and the integration atCity Link. Our estimate for one-off costs for the year remains at circa £16million as reported at the half year, but this figure may increase if we areable to exit the surplus City Link/Target Express depots later this year. Thiswould have the effect of bringing forward integration costs, planned to beincurred in 2008, into 2007. Interest Net interest payable for the first nine months of 2007 was £53.8 million, a£19.1 million increase over the prior year. Of the increase approximately £9million was attributable to higher levels of average debt and £10 million toeffective interest rates which were, on average, approximately 1% higher than in2006. The proceeds from the sale of Electronic Security, which were received inearly July, reduced interest expense in the quarter by approximately £7.7million. Cash Flow and Debt Operating cash flow for the year to date was £150.4 million compared with £148.5million in the prior year. However, free cash flow was £97.2 million, £21.7million better than in 2006, primarily reflecting lower net tax paymentsfollowing the receipt of certain refunds in the first half of the year. In the nine months to 30 September 2007 cash outflow for acquisitions was £170.5million compared with £151.2 million for the same period in 2006. Net receiptsfrom disposals (primarily the sale of the Electronic Security businesses inJuly) generated £512.8 million. The equivalent figure for 2006 was £148.4million representing the proceeds from the sale of the Manned Guardingbusinesses. At 30 September 2007 net debt was £954.7 million. Discontinued Businesses The sale of the UK, Netherlands and US Electronic Security businesses wascompleted on 2 July 2007 and the gross proceeds from the sale amounted to£533.9 million. It remains our intention to sell the French Electronic Security companyand it has been treated as discontinued for the purpose of the third quarterresults. Appendix 1 ANNUAL CONTRACT PORTFOLIO - CONTINUING BUSINESSES 3 Months to 30 September 2007£m at constant 2006exchange rates 1.7.07 New Terminations Net Acquisitions/ 30.9.07 Business Additions/ Disposals Reductions Textiles & WashroomServices 568.9 12.0 (11.2) 4.0 0.6 574.3Pest Control 221.4 9.2 (8.0) 2.9 19.0 244.5Ambius 88.9 1.9 (2.6) 0.7 1.2 90.1 FacilitiesServices 419.3 9.1 (22.3) 4.8 39.4 450.3Asia Pacific 120.4 4.9 (4.0) 1.3 6.0 128.6 Other 28.5 0.7 (1.1) 0.4 - 28.5TOTAL 1,447.4 37.8 (49.2) 14.1 66.2 1,516.3 9 Months to 30 September 2007£m at constantexchange rates 1.7.07 New Terminations Net Acquisitions/ 30.9.07 Business Additions/ Disposals Reductions Textiles & WashroomServices 571.5 40.9 (40.0) 11.5 (9.6) 574.3Pest Control 214.4 26.3 (24.0) 7.1 20.7 244.5Ambius 88.3 5.7 (7.8) 2.7 1.2 90.1 FacilitiesServices 414.4 35.3 (46.8) 8.0 39.4 450.3Asia Pacific 103.1 24.6 (10.7) 2.1 9.5 128.6 Other 26.7 2.4 (2.8) 2.2 - 28.5TOTAL 1,418.4 135.2 (132.1) 33.6 61.2 1,516.3 Notes Contract portfolio definition: Customer contracts are usually either "fixedprice", "as-used" (based on volume) or mixed contracts. Contract portfolio isthe measure of the annualised value of these customer contracts. Contract portfolio valuation: The contract portfolio value is typically recordedas the annual value from the customer contract. However, in some cases -especially "as-used" (based on volume) and mixed contracts - estimates arerequired in order to derive the contract portfolio value. The key points inrespect of valuation are: "As-used" contracts: These are more typical in Textiles and Washroom Services,where elements of the contract are often variable and based on usage. Valuationis based on historic data (where available) or forecast values. Income annualisation: In some instances, where for example the underlyingcontract systems cannot value portfolio or there is a significant "as-used"element, the portfolio valuation is calculated using an invoice annualisationmethod. Inter-company: The contract portfolio figures include an element ofinter-company revenue. Job work and extras: Many of the contracts within the contract portfolio includead hoc and/or repeat job work and extras. These values are excluded from thecontract portfolio. Rebates: The contract portfolio value is gross of customer rebates. These areconsidered as a normal part of trading and are therefore not removed from theportfolio valuation. New business: Represents new contractual arrangements in the period, which caneither be new contracts with an existing customer or with a new customer. Terminations: Represent the cessation of either a specific existing customercontract or the complete cessation of business with a customer, in the period. Net additions/reductions: Represents net change to the value of existingcustomer contracts in the period as a result of changes (either up or down) involume and/or pricing. Acquisitions: Represents the valuation of customer contracts obtained fromacquisitions made in the period. Appendix 2 Divisional Analysis (at constant exchange rates)(based upon the way businesses are managed) 3 months to 3 months to 9 months to 9 months to 30 September 30 September 30 September 30 September 2007 2006 2007 2006(at 2006 constant £m £m £m £mexchange rates) (unaudited) (unaudited) (unaudited) (unaudited) Business Analysis Revenue Textiles &Washroom Services 150.1 147.3 450.7 442.4 Pest Control 82.9 76.0 229.5 208.4 Ambius 26.7 24.2 78.3 73.7 City Link 107.6 44.6 310.6 126.4 FacilitiesServices 150.1 126.6 434.4 380.6 Asia Pacific 41.4 25.9 115.2 72.1 Other 7.3 7.3 22.0 21.8 Continuingoperations at 2006constant exchangerates 566.1 451.9 1,640.7 1,325.4 Exchange (5.5) (2.5) (17.0) 5.4Continuingoperations atactual exchangerates 560.6 449.4 1,623.7 1,330.8 Operating profit* Textiles &Washroom Services 23.9 15.5 77.3 68.4 Pest Control 19.7 18.8 47.6 50.6 Ambius 1.4 1.1 4.0 3.2 City Link 11.4 6.8 32.8 20.5 Facilities Services 8.8 6.7 27.4 21.7 Asia Pacific 6.8 4.9 20.8 14.4 Other 2.7 3.5 8.1 8.8 Central costs (8.0) 5.1 (28.6) (9.9) Continuingoperations at 2006constant exchangerates 66.7 62.4 189.4 177.7 Exchange (0.7) (0.4) (2.3) 1.1Continuingoperations atactual exchangerates 66.0 62.0 187.1 178.8 Adjusted operating profit** Textiles &Washroom Services 27.9 26.7 81.2 81.8 Pest Control 19.8 19.4 48.3 52.8 Ambius 1.4 1.4 4.0 3.5 City Link 14.4 6.8 38.5 20.5 Facilities Services 8.8 8.0 27.4 23.1 Asia Pacific 6.8 5.3 20.8 15.6 Other 2.7 2.5 8.1 8.0 Central costs (8.0) (7.6) (28.6) (21.7) Continuingoperations at 2006constant exchangerates 73.8 62.5 199.7 183.6 Exchange (0.7) (0.4) (2.3) 1.1Continuingoperations atactual exchangerates 73.1 62.1 197.4 184.7 * Before amortisation of intangible assets other than computer software anddevelopment costs ** Before amortisation of intangible assets other than computer software anddevelopment costs and items of a one-off nature (see appendix 4 for furtherdetails). Appendix 3 Divisional Analysis (at actual exchange rates) (based upon the way businesses are managed) 3 months to 3 months to 9 months to 9 months to 30 September 30 September 30 September 30 September 2007 2006 2007 2006(at actual exchange £m £m £m £mrates) (unaudited) (unaudited) (unaudited) (unaudited) Business Analysis Revenue Textiles &Washroom Services 149.9 146.6 447.9 444.2 Pest Control 80.4 75.6 222.9 209.8 Ambius 25.3 24.0 74.8 74.5 City Link 107.6 44.6 310.6 126.4 Facilities Services 150.0 126.5 433.9 380.8 Asia Pacific 41.0 25.5 114.1 72.5 Other 6.4 6.6 19.5 22.6 Continuingoperations atactual exchangerates 560.6 449.4 1,623.7 1,330.8 Operating profit* Textiles &Washroom Services 23.8 15.3 76.7 68.7 Pest Control 19.3 18.9 46.8 50.9 Ambius 1.3 1.1 3.8 3.3 City Link 11.4 6.8 32.8 20.5 Facilities Services 8.8 6.7 27.4 21.7 Asia Pacific 6.9 4.8 20.9 14.5 Other 2.4 3.3 7.2 9.1 Central costs (7.9) 5.1 (28.5) (9.9) Continuingoperations atactual exchangerates 66.0 62.0 187.1 178.8 Adjusted operating profit** Textiles &Washroom Services 27.8 26.5 80.6 82.1 Pest Control 19.4 19.5 47.5 53.1 Ambius 1.3 1.4 3.8 3.6 City Link 14.4 6.8 38.5 20.5 Facilities Services 8.8 8.0 27.4 23.1 Asia Pacific 6.9 5.2 20.9 15.7 Other 2.4 2.3 7.2 8.3 Central costs (7.9) (7.6) (28.5) (21.7) Continuingoperations atactual exchangerates 73.1 62.1 197.4 184.7 * Before amortisation of intangible assets other than computer software anddevelopment costs. ** Before amortisation of intangible assets other than computer software anddevelopment costs and items of a one-off nature (see appendix 4 for furtherdetails). Appendix 4 One-off Items 3 months to 3 months to 9 months to 9 months to 30 September 30 September 30 September 30 September 2007 2006 2007 2006 £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited) Textiles &Washroom Services (4.0) (11.2) (3.9) (13.4) Pest Control (0.1) (0.6) (0.7) (2.2) Ambius - (0.3) - (0.3) City Link (3.0) - (5.7) - Facilities Services - (1.3) - (1.4) Asia Pacific - (0.4) - (1.2) Other - 1.0 - 0.8 Central costs - 12.7 - 11.8 (7.1) (0.1) (10.3) (5.9) Note: All numbers at both actual and constant exchange rates. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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