Final Results

26 February 2016

Berendsen plc Full Year Results

Announcement for the Year Ended 31 December 2015

Good underlying growth and significant operational and strategic developments

* Before exceptional cost of £0.9 million (£nil), goodwill impairment charge of £6.4 million (£nil) and £14.4 million (£21.5 million) amortisation of customer contracts

** Growth at constant exchange rates ("CER") and excluding acquisitions

Operational Highlights

· Workwear underlying revenue grew 3%, with operating margin improving 50bps to 21.4%

o German Workwear grew 9% and UK Workwear saw good productivity improvements

· Facility underlying revenue grew 4%, with operating margin unchanged at 25.9%

o Cleanroom delivered double-digit organic revenue growth

· UK Flat Linen revenue up 1%, with margin down at 10.9% (12.8%)

o Impacted by churn in Hotels: Improvements targeted under new Business Line structure

Strategic and Financial Highlights

· Group underlying adjusted operating profit up 5% and operating profit margin up 30bps

· Adjusted EPS of 60.4p (62.1p); impacted by strength of Sterling during the year

· 99% of adjusted profit after tax converted to free cash flow of £102.5m

· Return on invested capital increased by 40bps to 10.3% in line with delivering double-digit ROIC target

· Dividend up 5%, ahead of EPS growth and in line with our progressive dividend policy

Iain Ferguson, Chairman of Berendsen, commented:

"We are pleased to report good operational progress for the year, in line with our expectations. Last November, we presented our Strategy Update reconfirming significant market opportunities and announcing the move to a revised four Business Line structure to accelerate the pace of delivery. During the course of 2016, we will be focused on completing the Business Line structure and on implementing a series of new initiatives designed to capture these growth opportunities. The Board expects to achieve a further year of good underlying progress in 2016."

Contacts:

Analyst Meeting

The company will present to analysts at 9:00 am today. A live audiocast of the presentation and questions will be available on the company's website on www.berendsen.com. Questions will only be taken at the meeting.

Strategy update

In November 2015, we presented the results of our Strategy Update to the investment community. Our updated strategy builds on the reconfirmation of our strong market positions and our proven business model and is designed to accelerate the pace of delivery. We believe that focusing on our customers' requirements is core to driving this strategy and we are moving to a revised four Business Line structure to do this: Workwear, Facility (includes Cleanroom, Mats and Washroom), Hospitality and Healthcare. Plans for the implementation of the newly created Business Lines (Hospitality and Healthcare) are well underway and we expect to be fully managing and reporting our operations in line with the new structure from the beginning of 2017 at the latest. Particular emphasis will be placed on enhancing operational excellence across the Group and on increasing business development capabilities to support both organic and bolt-on acquisition growth opportunities.

We are making good progress implementing the updated strategy which is moving ahead according to plan.

· We have appointed a Managing Director of Hospitality (Niels Peter Hansen), who has begun the development of this new Business Line.

· We have recruited an experienced Group Business Development, who will start in April.

· We have appointed a Berendsen Excellence Director (Claude Sada). We have also recruited three new Black Belts and selected 100 people for LEAN training in three waves through 2016, with the first 25 completing their training in Yellow, Green and Black Belt levels by the end of March. Our project work is focusing on completing the blueprinting of the new operating models for Hospitality and Healthcare, shared services and Health and Safety.

Capital allocation remains a key discipline and will be applied to prioritise investment opportunities across the Business Lines. We expect to increase our level of investment in attractive near-term opportunities, particularly in Workwear and Cleanroom, whilst maintaining double-digit ROIC for the Group. We are accelerating the completion of our UK and German Workwear plant conversions to CL 2000, namely in Durham, Dietzenbach and a new site in Bavaria, and we have commenced planning for the further investment in the UK including, the conversion of the recently acquired Cleanroom facility in Newbury to our CL 2000 model.

As part of our Strategy Update, we also set out the revised medium term financial objectives as follows:

· Sustainable revenue growth, prior to currency impacts, of at least GDP +2%pa

· Continued margin improvement and underlying EPS growth ahead of revenue growth

· Strong underlying cash flow with 75% to 90% cash conversion after targeted investments

· Net debt to EBITDA in the range of 1x to 2x

· Post tax ROIC maintained in double-digits

· A progressive dividend policy

Group Overview

Revenue at £1,006 million was 3% lower compared to last year (£1,038.6 million). Adjusted operating profit (before exceptional items and amortisation of customer contracts) was down 3% to £153.8 million (£158.7 million). The negative impact of currency translation decreased revenue and adjusted operating profit by £71.4 million and £13.5 million respectively compared to last year. Excluding currency translation and the contribution from acquisitions, underlying revenue grew 3% and adjusted operating profit grew 5%. The negative impact of currency translation was apparent throughout 2015 as sterling strengthened against the currencies in which we operate in Continental Europe. We delivered a 30 bps improvement in adjusted operating margin, reflecting strong margin improvement in our Continental European businesses as a whole.

Our net finance expense was £18.7 million, a decrease from £20.2 million last year as a result of our strong cash flow and lower average interest rate. In March, we successfully concluded the renegotiation of our Revolving Credit Facility (RCF) with a new €510 million facility extending out to March 2020 with the possibility to extend for a further two years. This replaced existing facilities which were due to expire in July 2016. The total facilities available to the Group are £834 million with our new RCF and our private placements notes extending from 2016 to 2025. The average fixed interest rate on our borrowings is 4.1% and we took the opportunity in 2015 to pre-fund the maturity of our May and December 2016 US private placement notes at substantially lower rates.

Adjusted profit before tax was £135.1 million compared to £138.5 million last year and adjusted earnings per share were 60.4 pence (62.1 pence). Our effective tax rate on adjusted profit before taxation was 23.4%, similar to last year. We expect the tax rate for 2016 to be at a similar level.

We incurred exceptional costs of £0.9 million (£nil) in relation to the implementation of our strategic initiatives. These relate to recruitment and programme management costs, as well as some restructuring in our business lines to reflect the new priorities. As previously announced, we expect to incur a total of £5-10 million of one-off cash costs in implementing our strategy over the next 24 months to establish our business line structure and invest in capabilities to deliver on the growth opportunities available to us. We expect the additional ongoing cost of building this capability and investment in our new business lines to be approximately £2 million in 2016.

As part of our strategy update we reviewed the market structure of each of our businesses and the opportunities for growth and profit improvement. We characterised the market structure in Germany Healthcare to be aggressively competitive and while we have a good management and are making significant progress in our growth and profit improvement plans, there remains substantial free capacity within our plants, which we believe will take some time to fill. Following this review we announced at the beginning of 2016, the closure of one of our German Healthcare plants where the services provided did not meet the requirements of our core portfolio and profit improvement agenda. Accordingly, in evaluating the goodwill related to this business for impairment this year, as required by accounting standards, we applied a higher risk factor and this resulted in an impairment charge of £6.4 million this year, after which the goodwill in this part of the business has been fully written down. This charge is shown as part of exceptional costs.

Amortisation of acquired customer contracts was £14.4 million (£21.5 million). Operating profit after exceptional items, goodwill impairment and amortisation was £132.1 million (£137.2 million) and profit before tax was £113.4 million (£117.0 million). Basic earnings per share were 51.9 pence compared with 52.6 pence in 2014.

Our free cash flow was £102.5 million in 2015 (£122.6 million), a conversion of 99% of group adjusted profit after tax with our net capital expenditure down on last year at £173.9 million (£179.5 million) but above depreciation of £168.2 million (£174.8 million). Investment in textiles was £144.5 million (£149.9 million) reflecting a good level of new contract activity. Plant investments amounted to £37.4 million, compared to £33.3 million last year, as we continued to upgrade our UK Workwear plants, add capacity in our Flat Linen plants outside the UK to accommodate the significant contract gains and make further investments in technology in our Cleanroom plants. We have completed the expansion of our plant in the Czech Republic and have invested in capacity upgrades in Poland, where we continue to see excellent growth. We remain well invested to serve our business today and have an excellent footprint across the markets we serve. We have also identified opportunities to accelerate the delivery of returns in certain of our key markets where the momentum of the business is strongest. We will target higher levels of plant investment in UK and German Workwear over the next 24 months, to capture the margin improvements available from extending our CL2000 operating model. In Cleanroom, where we have excellent revenue growth based on deep customer relationships, we see opportunities to expand our footprint. Overall, we expect net capital expenditure to be ahead of depreciation in 2016 and our free cash conversion to be in the range of 75%-90% of our adjusted profit after tax.

We purchased shares for the Employee Benefit Trust amounting to £14.2 million and we contributed an additional £3.7 million to the UK pension fund in the year. We are not planning for further additional contributions to pension in 2016 pending the results of our triennial valuation which is due in late 2016. At 31 December 2015, the pension accounting surplus for the Group was £15.8 million (£1.0 million surplus at the end of 2014).

Net borrowings at 31 December 2015 were £370.9 million (31 December 2014: £374.4 million), reflecting strong cash flow conversion, with dividends paid of £52.1 million and £9.2 million on acquisitions, as we acquired the assets and customer contracts of a UK Hotel laundry and also invested in small bolt-on acquisitions in Denmark. There was an adverse currency movement of £17.4 million largely as a result of the retranslation of the US dollar component of our US private placement notes. These have been swapped to euro, Danish krone and Swedish krona, the currencies in which we fund our business and the positive impact of retranslation to these underlying currencies is shown in derivative assets on our balance sheet. The covenants of our RCF reflect adjustment to the underlying currencies.

The group retains a strong balance sheet with funding flexibility for future growth and a ratio of net debt to earnings before exceptional items, interest, tax, depreciation and amortisation (EBITDA) of 1.0 times (2014: 1.1 times), compared with the RCF covenant level of not more than three and a quarter times. We have total private placement notes of £458 million and the group's bank facilities extend to March 2020 and amount to £376 million, of which £336 million was undrawn at the year end.

We seek to create value by increasing our return on invested capital in line with our strategic objectives: we aim to increase our returns by growing revenues and margins and managing our invested capital by converting our growth to cash. This year we increased our return on invested capital (ROIC) by 40bps from 9.9% last year to 10.3%. Since the announcement of our Strategic Review in 2010, our return has increased by 290 bps from 7.4% and we have delivered on our objective of double-digit returns. We intend to maintain ROIC at double-digit at the same time as increasing our investment in the business. In addition, our return on operating capital, which is before goodwill and other intangible assets related to acquisitions and reflects the high level of returns available from organic investment, was 26.5% (25.5%).

The Board is recommending a final dividend of 21.5 pence, which, together with the interim dividend of 10 pence paid in October 2015, gives a total of 31.5 pence; an increase of 5% on last year's level. The final dividend will be paid on 6 May 2016 to shareholders on the register at the close of business on 8 April 2016.

Business Line Performance

Below we report the results for the year ended 31 December 2015 in our current Business Line segmentation.

* before amortisation of customer contracts and exceptional costs, including goodwill impairment.

** Prior year restated to include Ireland Workwear as part of Core Workwear instead of Flat Linen outside UK and the transfer of procurement activity from workwear to central overheads.

CORE GROWTH

Workwear

Revenue was £304.6 million (£314.4 million), with adjusted operating profit at £65.3 million (£65.7 million). The adjusted operating margin increased 50bps to 21.4%. On an underlying currency basis revenue was up 3% with adjusted operating profit up 7%.

We see significant opportunity to continue to grow well in Workwear. It is the largest of our business lines, operating in a well-established outsourcing market with £3.5 billion of addressed opportunity across all the territories in which we operate. We see a significant proportion of this market potential from those who do not currently outsource and this virgin opportunity of £1.6 billion is biggest in the UK and Germany which we are targeting for further investment.

We are well positioned to capitalise on this potential. Our CL 2000 model, based on customer specific workflow, allows us to provide solutions to individual customer needs with higher levels of service, productivity and efficiency than traditional mechanised laundry flows. Improved market segmentation is driving successful targeting of large and mid-sized companies where the levels of service complexity are higher and our solutions are most valuable to the customer, allowing us to differentiate further our offering from the competition. This business line is making good progress in defining our next generation CL model, CL 3.0, which will further streamline the end-to-end management of our service to the customer and capitalise further on the application of Lean operating principles. Central to this will be enhanced service delivery with investment in online solutions and key account management.

We are innovators in our markets and our Product Design Centre in Sweden continues to address regulatory requirements and produce bespoke solutions for customer specific requirements, for example in the food industry. The standard product collections from our Design Centre represent almost half of all new contract sales, leading to greater utility for the customer and efficiencies for order processing and lead times for delivery.

We are pleased to report that the operating margin of our UK and German businesses has now reached 17% in combination, up 500bps from 2010. In the UK we have seen further productivity improvements from the three plants operating under CL2000, enabling consolidation of our plant in Croydon during the year at a cost of £2.1 million, which was charged to operating profit in the first half of the year. In the second half of 2015 we announced that our fourth CL2000 plant will be in Durham where we have acquired a new site to build a state-of-the-art facility. We will close our existing site in the area, having realised a profit of £2.0 million on the sale of that site, offsetting the plant closure costs of Croydon in the first half.

In Germany, our revenue growth was 9% and this continues to be the highest level of growth for the business line, driven primarily by increases in market share through our differentiated approach. Ongoing productivity improvements delivered a double-digit increase in operating profit and strong margin improvement.

In the last three years we have converted five plants to CL2000 across the division with proven benefits to customer service, productivity and margin. We believe we now have the experience and capability to accelerate the pace of development and we are planning to convert 12 plants over the next three years. This investment will be focused on the UK and Germany where we are targeting to swiftly close the margin gap to our 'Best Practice' countries, which currently stands 800bps higher. In addition, at the start of 2015, we transferred management of our Workwear business in Ireland to our Workwear Business Line team: this transition has gone well, and Ireland is now performing ahead of plan and we see further opportunity to drive best practice improvements and profitability in this region.

Economic activity in our 'Best Practice' countries, Denmark, Sweden and Holland, was mixed. We saw limited momentum overall, but we did achieve good progress in Sweden where GDP growth was around 3%. Here we delivered a 5% increase in revenue, demonstrating the leverage of the business to economic growth even in a well-developed market. We are pleased with the level of new sales in Denmark where customers who are new to the outsourcing model accounted for 82% of new contracts. We held our position in Holland, despite the fact that this continues to be a highly competitive and more challenging market. These countries also benefited from a focus on operational improvements, increasing productivity and growing margins, as we continue to leverage the opportunities inherent in our CL2000 model.

Facility

Reported revenue was £224.3 million (£237.7 million) with adjusted operating profit, at £58.1 million (£61.6 million), down 6%. Adjusted operating profit margin was consistent with last year at 25.9%. On an underlying constant currency basis excluding acquisitions, revenue grew by an encouraging 4% and adjusted operating profit was up 6%. We made progress in each of the three operating units within Facility: Cleanroom, Mats and Washroom, all of which have leading market positions.

Our Cleanroom business, a leader in its market where customers require a very high integrity service, has a significant opportunity to move with its customers to new markets. These customers operate primarily in highly regulated pharmaceutical or technology sites and we offer a unique platform with a network of back-up facilities to deliver superior service. Our expertise is in managing contamination control in cleanroom environments and we are expanding the tool kit of solutions we offer our customers. This is enabled through our plant structure which, like Workwear, is based on the CL2000 customer specific workflow. Cleanroom delivered excellent double-digit organic revenue growth and margin improvement in 2015, with a strong pipeline of contracts and enhanced solutions to existing customers. In Germany, we are winning a high level of new contracts and this, together with on-going operational focus, contributed to an improved margin which is moving closer to the average for this business activity. Our UK Cleanroom acquisition is performing ahead of our expectations. As announced in our Strategy Update, we will be targeting future investment in both new capacity in Germany and the UK, along with upgrades in Denmark and Sweden, to capture the opportunities available to us in the Cleanroom market.

In Mat and Washroom, our markets are growing and favourable outsourcing trends provide opportunities to grow in virgin markets, where we estimate that there is almost £0.7 billion of addressed opportunity. Innovation is at the heart of our Mats and Washroom businesses, and focuses on the growing awareness of the importance of safety, cleanliness and hygiene in public places.

In Mats, which is over half the revenue of the Business Line and has the greater scale and density necessary to deliver higher margins, we continue to improve the business mix with a higher level of sales of premium categories in all markets and we continue to increase the number of mats at existing customer sites. Further, we introduced our new 'zone concept' focusing on unmet needs for mat solutions inside the buildings in addition to the typical entrance zone solution. This has resulted in a broader portfolio of services, meeting the individual customer's needs. In our emerging markets, we invested in additional sales capacity, and this was rewarded with higher growth rates. In the Danish market, we introduced our new microfiber mat with greater absorbency and durability. We have been very pleased with the take up of this premium product, which we will now roll out in several other markets in 2016. As announced in our Strategy Update and in order to facilitate further development of the Mats business we have appointed a Business Unit Director of Mats services, who will lead this business within the Facility Business Line.

In Washroom, we have seen good growth in our full service product packages, adding profitability to our services. We are further differentiating our sales efforts with greater success being delivered from our field salesforce which is selling to smaller customer establishments where the level of administration in managing the service effectively in-house is a greater burden. At the same time we are seeing more demand for innovation from those customers where maintaining high hygiene standards and integrity is critical, such as in food processing. We have introduced the Berendsen Light Guide system which guides the occupant through the use of the washroom services. Here we have demonstrated to customers that there is a 30% increase in hygiene routines after introduction.

A number of our larger contracts in the facilities management segment, where price competition is greatest, were renegotiated in 2015. While we remain committed to this segment, we are increasing our focus on higher integrity customers and on supporting our field salesforce. In order to facilitate this focus we have also appointed a Business Unit Director of Washroom services who will lead this business within Facility.

Overall our Mat and Washroom businesses contract base expanded, with solid growth in Sweden and improving activity in Denmark. Progress continued to be slower in Holland and Norway, with the latter being impacted by the downturn in oil. We put a number of initiatives in place to address this and consequently we saw improved performance in the second half. In our emerging Central European markets, we saw double-digit revenue growth and margin improvement, and we are pleased with the progress made by these businesses in underdeveloped markets. We completed a £2 million investment to extend our plant in the Czech Republic and we have also planned capacity upgrades in Poland to capture the further opportunities available to us.

UK Flat Linen

Revenue in 2015 was 1% ahead of the prior year at £210.1 million (£207.5 million) and adjusted operating profit lower at £22.8 million (£26.5 million). The adjusted operating margin was 10.9% (12.8%). Revenue growth was impacted by the extra billing week in 2015 and adjusting for this, underlying revenue and adjusted revenue was unchanged and operating profit down 14%.

Niels Peter Hansen was appointed Managing Director of Hospitality at the start of 2016. Niels Peter is leading a development team to define a leading, customer-specific, workflow for our hospitality customers. His team is drawn from each of our UK and Scandinavian hospitality units and also includes a number of process experts. Our research shows that customers demand a flexible and individually tailored linen service which is aligned to their own brand values. The acquisition in the year of the assets and contract base of White Knight Laundry Services (UK) provides us with additional capacity and a laundry system that delivers the sophisticated linen processing technology needed to provide this level of service, efficiently and with higher levels of productivity. We are looking to improve the acquired business as we work towards delivering the superior operating model. We are also trialling the use of ultra-high frequency chip technology (RFID) for improved tracking and identification of linen, which will assist in improving linen utilisation. The contract churn in UK hotels, which has been previously reported, impacted the business line results in the first half of the year having exited a major national contract at the end of the first half last year and the start-up of new contract wins this year resulting in higher depreciation. There were several new contract wins in the second half, particularly with budget hotel groups, which lead to some improvement but there will be a period of rebuilding in this part of the portfolio as we align it to the broader Business Line.

In Healthcare, we made good progress in generating add-on sales from existing contracts, with continued product and service innovations to hospitals and through better contract management. New outsourcing activity continued to be limited but we won some new contracts that were already in the market. We continue to believe that increased outsourcing will provide the NHS Trusts with good opportunities to make savings. We are focused on continuous operational improvements to help improve profitability in this business line. We believe the move to a business line structure for Healthcare will allow us to deliver hygiene and cleanliness promises to hospitals and offer fuller service solutions to meet our customers' needs. Our pilot programme, based in South London, to deliver services to the large and as yet untapped Care Home market is progressing well and we are allocating resource to accelerate development of a scalable solution for our service and operating model.

MANAGE FOR VALUE

Flat Linen Outside the UK

Revenue in our Flat Linen businesses outside the UK was £195.0 million (£207.2 million) and adjusted operating profit was up to £13.7 million (£13.1 million). On an underlying constant currency basis, revenue grew 5% and adjusted operating profit was up 16%. The adjusted operating margin increased by 70bps to 7.0%.

The businesses in this segment demonstrated that they have opportunities to grow within their markets, which further supports their integration into the business line structure as we progress through 2016.

In our Hotels market underlying revenue increased following the good contract wins, particularly in Scandinavia hotels, and the sharing of 'best practice' which, combined, lead to improved margins. Scandinavian hotels are organised under shared management, which will facilitate our new Business Line structure, and this has benefited our customers through higher levels of service and improved quality. These contract successes have improved our market position and, following the downsizing of a competitor in Sweden, we took the opportunity to invest in additional plant capacity. Higher volumes and a continuous focus on operational improvements helped to improve profitability.

We are pleased with our overall progress in Healthcare where we saw modest revenue growth and improved profitability compared to last year. Our markets were more challenging during the year as a result of pricing pressure as contracts came up for renewal. The Healthcare markets have benefited from significant innovation and high levels of service and we are undertaking a review to ensure that our services are properly aligned to customer need and that we are appropriately rewarded where we deliver added value through a differentiated service.

Clinical Solutions and Decontamination

Revenue was £72.0 million (£71.5 million) with adjusted operating profit of £5.2 million (£5.5 million) and adjusted operating margin was 7.2%.

We saw good revenue growth in our decontamination business with new volume from existing contracts and the start-up of a significant new contract. Our service levels are strong and we are discussing our service offering with a number of potential new customers to utilise available capacity at our existing sites. We are pleased with the progress being made and the business continues to grow its profits. In the clinical solutions business, sales of consumables and single use drapes and gowns were up, but revenue from re-usable textiles was slightly reduced due to lower volumes, which adversely impacted the level of profitability.

Summary and Outlook for the Group

We are pleased to report good operational progress for the year, in line with our expectations. Last November, we presented our Strategy Update reconfirming significant market opportunities and announcing the move to a revised four Business Line structure to accelerate the pace of delivery. During the course of 2016, we will be focused on completing the Business Line structure and on implementing a series of new initiatives designed to capture these growth opportunities. The Board expects to achieve a further year of good underlying progress in 2016.

Consolidated income statement

Consolidated statement of comprehensive income

Items in the statement above are disclosed net of tax. The tax relating to each component of other comprehensive income is disclosed in note 5.

Consolidated balance sheet

Consolidated cash flow statement

Consolidated statement of changes in equity

The group has an Employee Benefit Trust to administer share plans and to acquire company shares, using funds contributed by the group, to meet commitments to group employees. At 31 December 2015, the Trust held 1,715,142 (2014: 1,870,186) shares.

Included within retained earnings is an amount of £37.6 million loss (2014: £17.9 million loss) which relates to currency translation.

Notes to the consolidated financial statements

1 Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The Berendsen plc's Report and Accounts 2015 (the "Annual Report") will be posted to shareholders on 14 March 2016. The Annual Report will also be made available on the company's website, www.berendsen.com, from 14 March 2016. The financial information set out herein does not constitute the company's statutory accounts for the year ended 31 December 2015 but is derived from those financial statements and the accompanying directors' report. The statutory accounts for 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 28 April 2016. The auditors have reported on the company's statutory accounts; the report was unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

The comparative figures for the year ended 31st December 2014 are not the financial statements for the financial year but are derived from those accounts which have been reported on by the group's auditors and delivered to the Registrar of Companies. The report was unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.

During the year the group reclassified stocks of textile rental garments awaiting delivery to customers from property, plant and equipment to inventories. Textile asset additions at cost include purchases of textile garments held at central warehouse reclassified to finished goods inventories of £0.4 million in 2015. 2014 comparatives have been restated to reflect the same position; £10.4 million has been reclassified from property, plant and equipment to inventories. Of this balance £2.7 million related to purchases in 2014.

From 1 January 2015 the Workwear element of the group's Irish Manage for Value businesses is reported under the core Workwear Business Line. In addition, from 1 January 2015 the group's internally focused procurement activities have been reported within central operations. Central operations also include the cost of the group's marketing and communication functions. Consequently, in accordance with IFRS 8, the 2015 segmental analysis, as set out below, has been adjusted to reflect the position had these changes been in place throughout the year ended 31 December 2014.

2 Segmental information

The results for the year ended 31 December 2015 under the business line structure are as follows:

From 1 January 2015 the Workwear element of the group's Irish Manage for Value businesses is reported under the core Workwear Business Line. In addition, from 1 January 2015 the group's internally focused procurement activities have been reported within central operations. Central operations also include the cost of the group's marketing and communication functions. Consequently, in accordance with IFRS 8, the 2015 segmental analysis, as set out below, has been adjusted to reflect the position had these changes been in place throughout the year ended 31 December 2014.

Unallocated costs includes group marketing, central procurement and communication functions.

Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.

Sales between business line segments are carried out at arms-length. The company is domiciled in the UK.

Flat linen outside the UK comprises; Germany and Austria Healthcare, Direct sale, Scandinavia flat linen and Ireland excluding workwear.

2 Segmental information (continued)

The results for the year ended 31 December 2014 under the business line structure are as follows:

2 Segmental information (continued)

The changes by business line, to the disclosures previously made for the year ended 31 December 2014 may be summarised as follows:

The segment assets and liabilities at 31 December 2015 under the business line structure are as follows:

The segment assets and liabilities at 31 December 2014 under the business line structure are as follows:

The changes by business line, to the disclosures previously made for the year ended 31 December 2014 may be summarised as follows:

2 Segmental information (continued)

Business line operating assets consist primarily of property, plant and equipment, intangible assets, inventories and trade and other receivables.

Business line operating liabilities consist primarily of trade and other payables and provisions.

Unallocated assets include operating assets relating to corporate segments.

Unallocated liabilities include operating liabilities for corporate segments.