Rentokil Initial Regulatory News (RTO)

8 Nov 2006 07:01

Rentokil Initial PLC08 November 2006 8 November 2006 RENTOKIL INITIAL PLC (RTO) TRADING UPDATE FOR THIRD QUARTER ENDED 30 SEPTEMBER 2006 Highlights • Further progress in driving top-line growth and improving customer retention • Third quarter revenue up 13.7%; organic growth 3.5% • Year-to-date revenue up 11.6%; organic growth 3.6% • Third quarter operating profit up 1.7%; year-to-date operating profit down 5.9% • Adjusted operating profit down 10.7% in quarter and 10.0% year-to-date • Good progress in restructuring of key businesses • Further 16 City Link franchise territories acquired Note: All comparisons at constant exchange rates and before amortisation ofcustomer lists. Commenting on the third quarter, Doug Flynn, Chief Executive Officer of RentokilInitial plc, said: "The actions we have taken have helped to deliver a sixth consecutive quarter oftop-line growth. In addition, customer retention has improved in everydivision. Our performance in the third quarter, however, also reflectscontinued difficult markets in European Textiles and Washroom Services and theongoing re-engineering of the UK Washroom business. More encouragingly, ourother large businesses - Pest Control, City Link and Electronic Security - haveperformed largely in line with plan. "Progress continues to be made on reshaping the businesses which are facing thebiggest challenges. Progress is also being made in developing more efficientprocesses in a number of areas. "Our outlook for the remainder of 2006 and 2007 is unchanged." £m % change % change Q3 06 Q3 05 YTD 06 YTD 05Proforma Continuing Operations1At 2005 constant exchange rates2 Revenue 520.8 457.9 13.7% 1,535.7 1,376.4 11.6%Operating profit before amortisation ofcustomer lists3 73.1 71.9 1.7% 205.0 217.9 (5.9%) Add back: one-off items 0.3 10.3 (97.1%) 6.9 17.5 (60.6%) Adjusted operating profit4 73.4 82.2 (10.7%) 211.9 235.4 (10.0%) Share of profit from associates (net of tax) 0.6 0.4 (50.0%) 1.7 1.7 - Interest (14.4) (14.2) (1.4%) (35.3) (41.4) 14.7% Adjusted profit before income tax4 59.6 68.4 (12.9%) 178.3 195.7 (8.9%) Continuing Operations1At actual exchange rates Revenue 515.9 458.6 12.5% 1,534.5 1,375.7 11.5% Operating profit before amortisation ofcustomer lists 71.9 72.1 (0.3%) 204.2 217.9 (6.3%) Amortisation of customer lists (6.7) (5.2) (28.8%) (17.1) (15.5) (10.3%) Operating profit 65.2 66.9 (2.5%) 187.1 202.4 (7.6%) Share of profit from associates (net of tax) 0.5 0.4 25.0% 1.6 1.7 (5.9%) Net interest payable (14.5) (14.2) (2.1%) (35.4) (41.4) 14.5% Profit before income tax 51.2 53.1 (3.6%) 153.3 162.7 (5.8%) Operating cash flow 148.5 217.9 (31.8%) Free cash flow5 75.5 107.1 (29.5%) 1All figures are for continuing operations and are unaudited. The UK linen andworkwear business has been treated as discontinued along with the UK, Canadian,Belgian and US manned guarding businesses. 2Results at constant exchange rates have been translated at the full yearaverage exchange rates for the year ended 31 December 2005. £/$ average rates:Q3 2006 1.8177; FY 2005 1.8217. £/• average rates: Q3 2006 1.4593; FY 20051.4598. 3Before amortisation of customer lists of £17.1m (2005: £15.5m). 4Before amortisation of customer lists of £17.1m (2005: £15.5m) and items of aone-off nature of £6.9m (2005: £17.5m). See appendix 4 for further details. InQ3 2005, the costs of defending the approach from Raphoe amounting to £8m weretreated as an exceptional item. In order to improve comparability, these costshave been reclassified as a one-off item. This treatment will be adopted in the2006 financial statements. 5Cash flow before acquisitions, disposals, equity dividend payments and specialpension contribution. For further information Shareholder/analyst enquiries:Andrew Macfarlane, Chief Financial Officer Rentokil Initial plc 020 7866 3000Lisa Williams, Head of Investor Relations Media enquiries:Malcolm Padley, Head of Corporate Communications Rentokil Initial plc 07788 978 199Jon Rhodes, Tom Williams Brunswick Group 020 7404 5959 A conference call for analysts and shareholders will be held on 8 November at9:00am. To join this call, please dial +44 (0) 20 7806 1957. A recording ofthe call will be available for 14 days on the following numbers: UK - +44 (0) 20806 1970, USA - 718 354 1112. The passcode for both replay numbers is 4593693#. 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 theyrelate to future events and circumstances and there are accordingly a number offactors which might cause actual results and performance to differ materiallyfrom those expressed or implied by such statements. OPERATING REVIEW In all cases, references to operating profit are for continuing businessesbefore amortisation of customer lists. References to adjusted operating profitand adjusted profit before tax and amortisation (PBTA) also exclude items of aone-off nature, totalling a net cost of £6.9 million (2005: £17.5 million) thathave impacted the results for the period. These costs principally relate toreorganisation and redundancy costs and professional and other costs in thegroup centre, offset by the profit on sale of land and buildings and acurtailment credit following changes to the UK defined benefit pension scheme.An analysis of these costs by division is provided in appendix 4. Allcomparisons are at constant 2005 full year average exchange rates. Third quarter Further progress was made in the third quarter against the goal of driving topline growth. Revenue for the group as a whole of £520.8 million was 13.7%higher in the third quarter than the prior year. Increased revenue was recordedby all divisions except Textiles and Washroom Services - where revenue wasessentially unchanged - and Other (principally South Africa). Excluding theimpact of acquisitions, organic revenue growth in the third quarter was 3.5%, upon the 1.9% reported in the second quarter. The portfolio grew by 2% in theperiod. Group operating profit of £73.1 million was 1.7% higher than last year. However, this is distorted by a net £12.7 million one-off credit in centralitems, principally related to a previously announced pension curtailment benefitof £14.7 million. Adjusted operating profit, which excludes the impact ofone-off items, declined by 10.7% to £73.4 million. Adjusted profit before tax(i.e. before one-off items and amortisation of customer lists) fell by 12.9% inthe third quarter to £59.6 million. The rate of regression of profit before taxis greater than that of operating profit due to lower mark-to-market credits inthe interest line in the third quarter of 2006 than last year. Year-to-date For the year-to-date, revenue of £1,535.7 million was 11.6% above the sameperiod last year. Organic revenue growth was 3.6% for the nine months, slightlyahead of the first half growth of 3.5%. As for the third quarter, revenue washigher for all divisions except Textiles and Washroom Services and Other. Theportfolio increased by 7.6% over the period. Operating profit for the groupfell by 5.9% versus last year at £205.0 million, although this was againdistorted by the one-off pension curtailment credit. Over the course of theyear, the group has made a number of acquisitions to improve market andstrategic positions. In almost all cases, these acquired businesses have lowermargins than like businesses already in the company. This mix effect hastherefore contributed to lowering the group's operating margin. Excludingone-off items, adjusted group operating profit fell by 10.0%. Adjusted profitbefore tax of £178.3 million was 8.9% behind last year. Outlook The outlook for the remainder of 2006 and 2007 is unchanged. Before one-offitems, the performance of the Textiles and Washroom Services division in thesecond half of 2006 is expected to be broadly flat with the first half as aresult of current market and trading conditions. We anticipate that our otherdivisions will demonstrate improving profit trends during the second half (againbefore the impact of one-off items). We continue to expect that the group willreturn to modest profit growth in 2007. DIVISIONAL PERFORMANCE Textiles and Washroom Services £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates:Portfolio - net movement 1.9 0.1 2.6 17.2Revenue 147.8 148.7 (0.6%) 444.0 445.1 (0.2%)Operating profit (before amortisation of customer 15.6 33.4 (53.3%) 68.7 98.8 (30.5%)lists)One-off items 11.2 1.2 833.3% 13.4 3.9 243.6%Adjusted operating profit (before one-off itemsand amortisation of customer lists) 26.8 34.6 (22.5%) 82.1 102.7 (20.1%) Revenue for the division as a whole was essentially unchanged from last year forboth the third quarter and the year-to-date. Excluding the impact ofacquisitions, revenue fell by 0.8% in the quarter. Trading conditions in theEuropean business continued to be challenging, as indicated at the time of theinterim results in August. Continuing the trends seen in the first half, allmajor continental European markets achieved revenue growth with the exception ofthe Netherlands. Revenue growth was under 1% in France and Belgium with Germanyperforming a little better than this. There continues to be strong pricepressure in these countries and it is proving difficult to grow the portfolio.However, some of the smaller markets such as Spain, Portugal, the Czech Republicand the Scandinavian countries recorded stronger revenue growth. As previously notified, in the first part of the third quarter the UK washroombusiness was impacted by the loss of customers who had also been users of thenow closed textiles business. Year-to-date, the portfolio loss associated withthese terminations is some £2 million. As a result, UK washroom revenues weredown 11.8% in the third quarter compared to last year. However, the rate ofterminations slowed in September and, encouragingly, new contract wins werehigher in the third quarter than in the first or second quarters, suggestingthat the business is stabilising. Divisional operating profit was negatively impacted by the trading conditionsdescribed above and by a high level of one-off restructuring costs resulting ina fall of 53.3% to £15.6 million. Excluding the effect of one-off items,adjusted operating profit fell by 22.5%. In continental Europe, there weremixed fortunes. Germany achieved good adjusted operating profit growth due toreduced losses in its hospital services business and a better run rate in thetextiles business as the benefits of initiatives aimed at reducing processingcosts began to come through. There were also gains in Belgium, Portugal,Finland and the Czech Republic. However, these increases were more than offsetby profit declines, particularly in France and the Netherlands. In France,sales force costs and energy costs were both materially higher than in the samequarter last year. The Netherlands was affected by a tough pricing environment. The energy-related price increases introduced in the summer in a number ofmarkets have generally stuck and gone some way to mitigating higher energy costsacross continental Europe. Lower revenues in the UK washroom business, due toportfolio losses described above, resulted in a significant decline in adjustedoperating profit in that business in the third quarter. One-off items cost £11.2 million in the quarter, of which £8.7 million relatesto the European business. Plans have been announced to close three plants inGermany: Wilmhelmshaven in the north of the country and Freibourg andUntereisesheim in the south, the latter being part of the hospital servicesbusiness which is being exited. Processing will be transferred to otherexisting facilities. The total cost of these closures is some £6.2 million. Itis anticipated that they will be completed by the middle of next year and theestimated saving, including the elimination of hospital services losses, is £3.4million per year which will be achieved in 2008. The UK washroom reorganisation continued on track in the third quarter withone-off cash costs of £1.8 million incurred during the period related to branchclosure costs. Total one-off costs for 2006 are expected to be £5.8 millionwith further costs incurred in the fourth quarter when 87 staff will leave thebusiness and 13 branches will be vacated. Another £2 million will be incurred inthe first quarter of 2007 as the business moves to 20 branches and relocates itshead office. Once the branch reorganisation is complete (targeted for March2007), the cost base of this business will be reduced by some £3 million perannum compared with the situation in April 2006 when it was still in 35branches. This run rate will be achieved by the end of the first half of 2007.Further steps will be taken in the UK during 2007 which will have the effect ofimproving processing efficiency. Additional profit improvements are expected tocome from better sales and service productivity in 2007 and 2008. The remainder of the one-off costs incurred in the third quarter relate to anumber of other initiatives, principally in Austria, Germany and Italy. The serviced garment market is reliant to a significant degree on manufacturingemployment in western Europe. The market is experiencing a slow but steadymigration of jobs to eastern Europe and other low cost countries which is a keyfactor affecting our businesses in this sector. As a result of this and marketconditions generally, we no longer believe we will meet our target of achievinga one percentage point increase in margin in the French textiles business in2006. However, improving gross margins in this business remains a priority. As previously announced, the French textiles business, Initial BTB SA, is thesubject of a regulatory inquiry by the French Competition Council. RentokilInitial's policy has been and remains to conduct its business in full compliancewith all applicable competition laws. BTB intends to co-operate in allrespects with the Council's inquiries. Pest Control £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates:Portfolio - net movement 3.0 0.5 53.0 2.7Revenue 76.4 53.7 42.3% 209.6 157.1 33.4% Operating profit (before amortisation of customer 19.1 18.2 4.9% 50.9 50.0 1.8%lists) One-off items 0.6 - - 2.2 - - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 19.7 18.2 8.2% 53.1 50.0 6.2% The Pest Control division recorded its best quarter for some time in terms ofboth revenue and profit growth. Revenue increased by 42.3% in the third quartercompared to last year. Excluding acquisitions - principally Ehrlich - revenuewas 2.7% higher. In continental Europe, all the major pest control markets produced higherrevenue than the same quarter last year, most notably in France, theNetherlands, Belgium, Germany, Spain and Portugal. Organic growth rates weretypically over 5%. Revenue again declined in the UK, falling by 2.7%, but therate of decline slowed having been 3.2% in the first half. Revenue wassignificantly higher in the USA as a result of Ehrlich, which has performed wellsince its acquisition in March. A 4.9% increase in operating profit was achieved by the division in the quarterand adjusted operating profit was 8.2% higher than the prior year. The majorcontinental European markets all recorded operating profit ahead of last year.However, operating profit was lower year-on-year for UK pest control as a resultof lower revenue and one-off costs. Major changes to the structure of the UK business are now underway. The 26existing branches will be replaced by 42 field based sales and serviceoperations, 11 regional operations centres and 7 regional administrationcentres. Customer service functions will be moved to a new national call centre.A new specialist team to support high dependency customers, such as in the foodindustry, is also to be established. The business will be de-layered to improveresponsiveness and some 25% of current posts are expected to be made redundantby the end of the year. The majority of the one-off costs for this programme areexpected to be recognised in the fourth quarter and will amount to some £4-5million in total which we expect to be recovered in less than three years oncost savings alone. The integration of Ehrlich is substantially complete. Integration costs - whichare not treated as one-off - have totalled £0.6 million and are expected to be£0.9 million for the full year. The cost synergies associated with combiningEhrlich with the existing US pest control business are anticipated to be in theregion of £0.8 million a year and these will start to come through in the firsthalf of next year. Tropical Plants £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates: Portfolio - net movement 1.9 1.8 2.0 6.5 Revenue 24.5 23.4 4.7% 74.3 70.8 4.9% Operating profit (before amortisation of customer 1.0 1.8 (44.4%) 3.2 4.8 (33.3%)lists) One-off items 0.3 - - 0.3 - - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 1.3 1.8 (27.8%) 3.5 4.8 (27.1%) Tropical Plants saw revenue grow at 4.7% during the quarter, of which organicgrowth was 3.2%. Revenue was higher than last year in the USA, which accountedfor just over 55% of the division's total revenue in the third quarter. It alsoimproved in the Netherlands, Belgium, Canada, Norway and some of the smallermarkets. However, revenue in the UK and France declined, in both countries dueto a high level of terminations in the first half which impacted the portfolioand lower jobs work than last year. These businesses continue to be the focus ofperformance improvement initiatives. The USA saw a modest increase in operating profit in the third quarter.However, this was offset by lower operating profit in almost all of thedivision's other markets and an increase in divisional costs as we strengthenmanagement to address the performance issues. As a result, operating profitdeclined by 44.4% compared to last year and adjusted operating profit fell by27.8%, a rate consistent with the first half. Electronic Security £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates: Portfolio - net movement 0.3 2.8 1.3 5.7 Revenue 66.7 61.6 8.3% 203.6 188.9 7.8% Operating profit (before amortisation of customer 9.9 8.9 11.2% 25.4 26.2 (3.1%)lists) One-off items 0.2 - - 1.0 0.2 400.0% Adjusted operating profit (before one-off itemsand amortisation of customer lists) 10.1 8.9 13.5% 26.4 26.4 - Revenue growth of 8.3% was recorded by Electronic Security in the quarter, ofwhich 0.9% was organic. All markets increased revenue in the third quarterother than the Netherlands, where a small decline resulted from the ongoingrestructuring work in that country. The UK Fire and Security business, Franceand the USA all recorded double digit revenue increases, mostly due toacquisitions. UK Systems is beginning to recover from the delay in the start-upof business already won which was noted in the second quarter but is unlikely tobe able to catch up fully by the year-end. Portfolio development issignificantly behind last year principally due to an exceptional contract win in2005 in UK Systems and a lower level of acquisitions in 2006 than 2005. Operating profit was higher for all businesses compared to the third quarter oflast year, resulting in divisional operating profit up 11.2% and adjustedoperating profit up 13.5%. The strongest profit growth was achieved by UK Fireand Security, France and the USA. The Netherlands produced higher profitdespite lower revenue due to savings accruing from its restructuring programme. City Link £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates: Revenue 44.6 27.0 65.2% 126.4 84.5 49.6% Operating profit (before amortisation of customer 6.8 6.2 9.7% 20.5 18.6 10.2%lists) One-off items - 0.3 - - 0.3 - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 6.8 6.5 4.6% 20.5 18.9 8.5% City Link, the parcels delivery business, continued to make progress in thethird quarter. Revenue was over 65% higher year-on-year. Excluding the impactof franchise acquisitions, organic revenue growth was 7.6% in the quartercompared with an estimated 3-4% market growth in the period. Operating profit increased by 9.7% in the third quarter and adjusted operatingprofit by 4.6%. Year-to-date, integration costs of £0.9 million have beenincurred and absorbed within operating profit. In the third quarter, a further 16 franchises have been bought in through theacquisition of four businesses for a total consideration of £25.5 million.These businesses had revenue of £95 million in the year to completion.Year-to-date, £50.4 million has been spent on the acquisition programme and CityLink now owns 80% of its network. The effect on City Link's 2006 revenue of allthe franchises acquired this year is circa £45 million. The outstandingfranchises are expected to be acquired during the course of 2007. Facilities Services £m % change % change Q3 06 Q3 05 YTD 06 YTD 05 At 2005 constant exchange rates: Portfolio - net movement 20.5 28.0 30.5 34.1 Revenue 126.6 112.7 12.3% 380.8 339.7 12.1% Operating profit (before amortisation of customer 6.7 9.7 (30.9%) 21.7 26.5 (18.1%)lists) One-off items 1.3 - - 1.4 - - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 8.0 9.7 (17.5%) 23.1 26.5 (12.8%) Overall, revenue increased by 12.3% in the third quarter, 10.7% of which wasorganic. This was driven principally by revenue growth in cleaning of some 25%,whilst medical services and specialist hygiene activities also increasedrevenue. Revenue fell in catering and hospital services reflecting thedifficult conditions in those markets. In terms of operating profit, the division saw mixed progress in the quarter.In cleaning, solid performances by the UK and the small Netherlands businesswere offset by Spain where the incorrect phasing of provisions for holiday payflattered performance in the third quarter of 2005. The effect will reverse bythe end of the year. UK catering was boosted by the exit from several schoolmeals contracts which reduced the level of losses incurred in the traditionallyloss-making third quarter. Hospital services and medical services were alsoslightly behind last year in operating profit terms. One-off costs of £1.3 million related principally to management changes andredundancy costs. Asia Pacific £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates: Portfolio - net movement 2.2 1.7 15.5 4.3 Revenue 26.3 22.0 19.5% 73.1 66.0 10.8% Operating profit (before amortisation of customer 5.1 5.6 (8.9%) 14.9 17.0 (12.4%)lists) One-off items 0.4 - - 1.2 - - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 5.5 5.6 (1.8%) 16.1 17.0 (5.3%) The acquisitions of Pink Healthcare and the CWS branded washroom and dustmatbusinesses helped Asia Pacific to a 19.5% increase in revenue in the thirdquarter. All markets increased revenue, with strong growth in Australia, NewZealand, Singapore, Hong Kong and the Philippines. Excluding the impact ofacquisitions, revenue grew by 4.7% in the quarter, with the strongest organicgrowth in Indonesia, Malaysia and the Philippines. Customer retention ratescontinue to improve in a number of markets. Operating profit was impacted by higher costs associated with building thedivisional management team (which is now substantially complete) and by one-offreorganisation costs. Although operating profit was 8.9% lower than last yearin the third quarter, adjusted operating profit was only 1.8% behind, reflectingincreases in Australia, New Zealand and Singapore. In terms of operatingprofit, branch integration costs ahead of the realisation of synergy benefitsand continuing price pressure affected the result of Australian washroom, thedivision's largest business, which saw a marginal decline in profityear-on-year. New Zealand, Singapore, Hong Kong and Taiwan all had higheroperating profit than last year but profit was lower in the Philippines,Malaysia and Indonesia. Other £m % change % change Q3 06 Q3 05 YTD 06 YTD 05At 2005 constant exchange rates: Portfolio - net movement 0.3 (0.2) 1.4 1.1 Revenue 7.9 8.8 (10.2%) 23.9 24.3 (1.6%) Operating profit (before amortisation of customer 3.8 3.1 22.6% 9.6 9.4 2.1%lists) One-off items (1.0) - - (0.8) - - Adjusted operating profit (before one-off itemsand amortisation of customer lists) 2.8 3.1 (9.7%) 8.8 9.4 (6.4%) Other is mostly comprised of the group's activities in South Africa. Revenuefell by 10.2% in the third quarter. Operating profit was 22.6% higher than lastyear, however excluding the impact of one-off credits related to discontinuedprofits, adjusted operating profit fell by 9.7%. Central items £m % change % change Q3 06 Q3 05 YTD 06 YTD 05 Central (costs)/net credit 5.1 (15.0) (9.9) (33.4) One off items - costs/(credits) (12.7) 0.8 (11.8) 5.1 2005 bid defence costs reclassified as one off 8.0 8.0 Adjusted central costs (before one-off items) (7.6) (6.2) (21.7) (20.3) Central costs in the third quarter and year-to-date have been significantlyimpacted by one-off items. In 2006, these mainly relate to the recognition inSeptember of the pension curtailment credit of £14.7 million resulting from theclosure of the UK defined benefit scheme to future accrual. In 2005, £8.0million of bid defence costs were incurred; at the time these were treated asexceptional but have now been reclassified as one-off to bring the treatmentinto line with that now followed for such non-recurring items. One-off items At the half year, guidance was given that one-off costs in the second half wouldbe in the range £15-20 million, before reflecting the UK pension schemecurtailment credit of £14.7 million. We have made better progress thananticipated with our improvement plans in European Textiles and WashroomServices, which led us to recognise costs of £8.7 million the third quarter.The bulk relates to laundry rationalisation in Germany. These costs wereexpected to fall in 2007. We now expect second half one-off costs to be in therange £25 million to £30 million before the pension credit. Cash flow Year-to-date, operating cash flow, which combines the results of continuing anddiscontinued activities, was £69.4 million below the same period last year at£148.5 million (2005: £217.9 million). The primary cause is the £77.9 millionreduction in EBITDA (total operating profit before depreciation andamortisation) reflecting the disposal of Style Conferences and the MannedGuarding businesses and the high level of non-cash items in current yearoperating profit. The working capital outflow was £37.6 million higher thanlast year, impacted by the timing of routine pension payments in 2006 andpayments made on the disposal of surplus properties, together with the pensioncurtailment credit taken to profit. However, net capex cash flows were £46.1million below last year reflecting the disposal of Style Conferences and MannedGuarding together with the proceeds for disposal of properties within the closedUK linen and workwear business. Lower tax and interest payments partly offsetthe year-on-year operating cash flow reduction to leave free cash flow £31.6million below last year at £75.5 million (2005: £107.1 million). Appendix 1 ANNUAL CONTRACT PORTFOLIO - CONTINUING BUSINESSES 3 Months to 30 September 2006 Net£m at constant 2005 New Additions/exchange rates 1.7.06 Business Terminations Reductions Acquisitions 30.9.06Textiles & Washroom Services 564.8 12.5 (13.3) 1.5 1.2 566.7Pest Control 211.7 8.6 (7.6) 1.8 0.2 214.7Tropical Plants 85.1 2.2 (2.3) 0.7 1.3 87.0Electronic Security 100.2 1.9 (2.6) 0.3 0.7 100.5Facilities Services* 361.7 24.6 (7.3) 3.2 - 382.2Asia Pacific 128.4 4.6 (4.0) 0.6 1.0 130.6Other 28.9 1.2 (1.2) 0.3 - 29.2TOTAL 1,480.8 55.6 (38.3) 8.4 4.4 1,510.9 9 Months to 30 September 2006 Net £m at constant 2005 New Additions/exchange rates 1.1.06 Business Terminations Reductions Acquisitions 30.9.06Textiles & Washroom Services 564.1 40.2 (43.7) 4.5 1.6 566.7Pest Control 161.7 23.7 (23.5) 5.7 47.1 214.7Tropical Plants 85.0 6.6 (8.5) 2.5 1.4 87.0Electronic Security 99.2 6.4 (8.1) 1.9 1.1 100.5Facilities Services* 351.7 43.1 (23.4) 10.8 - 382.2Asia Pacific 115.1 13.3 (12.5) 2.7 12.0 130.6Other 27.8 3.1 (3.2) 1.5 - 29.2TOTAL 1,404.6 136.4 (122.9) 29.6 63.2 1,510.9 * Includes net adjustment of £89.6 million at 1 January 2006 for the removal ofcatering, which is no longer considered to be a portfolio business. 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 portfolioinclude ad hoc and/or repeat job work and extras. These values are excludedfrom the contract 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 2006 2005 2006 2005(at 2005 constant exchange rates) £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited)Business Analysis RevenueTextiles & Washroom Services 147.8 148.7 444.0 445.1Pest Control 76.4 53.7 209.6 157.1Tropical Plants 24.5 23.4 74.3 70.8Electronic Security 66.7 61.6 203.6 188.9City Link 44.6 27.0 126.4 84.5Facilities Services 126.6 112.7 380.8 339.7Asia Pacific 26.3 22.0 73.1 66.0Other 7.9 8.8 23.9 24.3Continuing operations at 2005 constant exchangerates 520.8 457.9 1,535.7 1,376.4Exchange (4.9) 0.7 (1.2) (0.7)Continuing operations at actual exchange rates 515.9 458.6 1,534.5 1,375.7 Operating Profit*Textiles & Washroom Services 15.6 33.4 68.7 98.8Pest Control 19.1 18.2 50.9 50.0Tropical Plants 1.0 1.8 3.2 4.8Electronic Security 9.9 8.9 25.4 26.2City Link 6.8 6.2 20.5 18.6Facilities Services 6.7 9.7 21.7 26.5Asia Pacific 5.1 5.6 14.9 17.0Other 3.8 3.1 9.6 9.4Central Items 5.1 (15.0) (9.9) (33.4)Continuing operations at 2005 constant exchangerates 73.1 71.9 205.0 217.9Exchange (1.2) 0.2 (0.8) -Continuing operations at actual exchange rates 71.9 72.1 204.2 217.9Adjusted Operating Profit**Textiles & Washroom Services 26.8 34.6 82.1 102.7Pest Control 19.7 18.2 53.1 50.0Tropical Plants 1.3 1.8 3.5 4.8Electronic Security 10.1 8.9 26.4 26.4City Link 6.8 6.5 20.5 18.9Facilities Services 8.0 9.7 23.1 26.5Asia Pacific 5.5 5.6 16.1 17.0Other 2.8 3.1 8.8 9.4Central Items (7.6) (6.2) (21.7) (20.3)Continuing operations at 2005 constant exchangerates 73.4 82.2 211.9 235.4Exchange (1.2) 0.2 (0.8) -Continuing operations at actual exchange rates 72.2 82.4 211.1 235.4 * Before amortisation of customer lists. ** Before amortisation of customer lists and items of a one-off nature (see appendix 4 for further details). 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 2006 2005 2006 2005(at actual exchange rates) £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited)Business Analysis RevenueTextiles & Washroom Services 146.6 147.6 444.2 444.4Pest Control 75.6 53.9 209.8 157.1Tropical Plants 24.0 24.2 74.5 70.8Electronic Security 66.5 61.7 203.7 188.9City Link 44.6 27.0 126.4 84.5Facilities Services 126.5 112.6 380.8 339.7Asia Pacific 25.5 22.7 72.5 66.0Other 6.6 8.9 22.6 24.3Continuing operations at actual exchange rates 515.9 458.6 1534.5 1,375.7 Operating Profit*Textiles & Washroom Services 15.3 33.4 68.7 98.8Pest Control 18.9 18.2 50.9 50.0Tropical Plants 1.1 1.8 3.3 4.8Electronic Security 9.9 8.9 25.4 26.2City Link 6.8 6.2 20.5 18.6Facilities Services 6.7 9.7 21.7 26.5Asia Pacific 4.8 5.8 14.5 17.0Other 3.3 3.1 9.1 9.4Central Items 5.1 (15.0) (9.9) (33.4)Continuing operations at actual exchange rates 71.9 72.1 204.2 217.9 Adjusted Operating Profit**Textiles & Washroom Services 26.5 34.6 82.1 102.7Pest Control 19.5 18.2 53.1 50.0Tropical Plants 1.4 1.8 3.6 4.8Electronic Security 10.1 8.9 26.4 26.4City Link 6.8 6.5 20.5 18.9Facilities Services 8.0 9.7 23.1 26.5Asia Pacific 5.2 5.8 15.7 17.0Other 2.3 3.1 8.3 9.4Central Items (7.6) (6.2) (21.7) (20.3)Continuing operations at actual exchange rates 72.2 82.4 211.1 235.4 * Before amortisation of customer lists.** Before amortisation of customer lists and items of a one-off nature (see appendix 4 for further details). 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 2006 2005 2006 2005 £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited) Textiles & Washroom Services (11.2) (1.2) (13.4) (3.9)Pest Control (0.6) - (2.2) -Tropical Plants (0.3) - (0.3) -Electronic Security (0.2) - (1.0) (0.2)City Link - (0.3) - (0.3)Facilities Services (1.3) - (1.4) -Asia Pacific (0.4) - (1.2) -Other 1.0 - 0.8 -Central Items 12.7 (8.8) 11.8 (13.1) (0.3) (10.3) (6.9) (17.5) Note: All numbers at both actual and constant exchange rates. This information is provided by RNS The company news service from the London Stock Exchange