Rentokil Initial Regulatory News (RTO)

RENTOKIL INITIAL PLC (RTO)

PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2011

Full Year Highlights*

·; Revenue and profit growth in key Pest, Hygiene, Textiles and Facilities Services categories despite market challenges:

- Initial Facilities revenue +7%, AsiaPac +4%, Pest Control (excl. Libya) +3%, Textiles & Hygiene +3%

·; Acquisitions performing well; contributing net £41m of revenue increase

·; Textiles & Hygiene Benelux turnaround delivered; back to growth in Q4 2010

·; Despite progress on capability, City Link financial performance disappointing: £31.3m loss reflecting reduced revenue and poor productivity

·; £44m cost savings, but impacted by City Link; £50m savings target for 2012

·; Operating cash flow £155m; refinancing of Revolving Credit Facility completed December 2011

·; Resumption of dividend payments; proposed final dividend of 1.33p per share reflecting progress in Pest, Hygiene, Textiles, Facilities Services and strong cash flow

Alan Brown, Chief Executive Officer of Rentokil Initial plc, said:

"Our Operational Excellence strategy - which focuses on capability development across all functions - is delivering increasing revenue growth in Pest Control, Hygiene, Textiles and Facilities Services categories despite tough market challenges. I am particularly pleased with the rates of growth achieved toward the end of Q4, which have continued into the early part of 2012. The investment in rollout of the Olympic sales growth initiatives is likely however to limit profit growth in these categories to mid single digits for the time being.

"City Link continues to disappoint. While Q4 volumes grew 8% and revenue by 0.5%, losses were £3.1m greater than Q4 2010 due to low productivity, driven in part by conservative resource planning for the Christmas period. The financial performance of the business will remain poor in H1 2012, however, we remain committed to resolving the key revenue and cost control issues facing this business. I am encouraged by the immediate impact of the new City Link MD and FD and by the quality of the improvement plan currently being implemented.

"Progress made across the rest of the group and continued strong operating cash flows have given the board sufficient confidence to recommence dividend payments with a final dividend of 1.33p per share."

AER - actual exchange rates; CER - constant 2010 exchange rates

1 before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

2 cash flow before interest, tax, acquisitions, disposals and foreign exchange adjustments

3 earnings per share before the after tax effects of amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

FINANCIAL SUMMARY

1 all figures are for continuing operations

2 results at constant exchange rates have been translated at the full year average exchange rates for the year ended

31 December 2010. £/$ average rates: FY 2011 1.6057; FY 2010 1.5486, £/€ average rates: FY 2011 1.1532; FY 2010 1.1659

3 before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

4 see Appendix 4 for further details

5 including impairment of intangibles of £149.2m at constant and actual rates of exchange (excluding computer software)

6 cash flow before interest, tax, acquisitions, disposals and foreign exchange adjustments

7 earnings per share before the after tax effects of amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

This announcement contains statements that are, or may be, forward-looking regarding the group's financial position and results, business strategy, plans and objectives. Such statements involve risk and uncertainty because they relate to future events and circumstances and there are accordingly a number of factors which might cause actual results and performance to differ materially from those expressed or implied by such statements. Forward-looking statements speak only as of the date they are made and no representation or warranty, whether expressed or implied, is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Other than in accordance with the Company's legal or regulatory obligations (including under the Listing Rules and the Disclosure and Transparency Rules), the Company does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Information contained in this announcement relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. Nothing in this announcement should be construed as a profit forecast.

Investors / Analysts enquiries:

Katharine Rycroft, Head of Investor Relations Rentokil Initial plc 01293 858 166

Media enquiries:

Malcolm Padley Rentokil Initial plc 07788 978 199 / 01293 858 165

Kate Holgate, Kate Miller Brunswick Group 020 7404 5959

Basis of preparation

Segmental information has been presented in accordance with IFRS 8 "Operating Segments" which the group has implemented with effect from 1 January 2009. This statement reflects internal organisation changes made on 1 January 2011 with our Scandinavian and Iberian Textiles & Hygiene units and some small Pest units transferring from the Textiles & Hygiene division to the Pest Control division. Prior year comparisons have been restated. In all cases references to operating profit are for continuing businesses before amortisation and impairment of intangible assets (excluding computer software). References to adjusted operating profit and adjusted profit before tax also exclude reorganisation costs and one-off items, totalling a net cost of £38.0m (2010: £25.1m) that have had a significant impact on the results of the group. £34.4m of these relate directly to the group's major reorganisation program and consist mainly of redundancy costs, consultancy and plant and office closure costs net of the profit on sale of certain properties. One-off items include a provision of £4.8m against our full financial exposure arising from the suspension of our Libyan pest control business, £4.0m of acquisition costs and credits of £3.9m in respect of negative goodwill and £1.3m relating to the release of prior year provisions. In 2010, a credit of £35.0m in respect of a change in pension liabilities as a result of using CPI rather than RPI for calculating certain future pensions increases and a £29.2m charge in respect of a claim under a lease guarantee made by a subsidiary following the disposal of a business some 20 years ago are also included in one-off items. These costs have been separately identified as they are not considered to be "business as usual" expenses and have a varying impact on different businesses and reporting periods. Details of one-off items incurred in the period, for which adjustments have been made, are set out in Appendix 4. All comparisons are at constant 2010 full year average exchange rates.

The financial information in this statement does not constitute the company's statutory accounts for the years ended 31 December 2011 or 2010. The financial information for 2010 and 2011 is derived from the statutory accounts for 2010, which have been delivered to the registrar of companies, and 2011, which will be delivered to the registrar of companies and issued to shareholders in March 2012. The auditors have reported on the 2010 and 2011 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

PROGRESS ON KEY OBJECTIVES IN 2011

Turnaround businesses

Two businesses were identified as turnaround businesses in 2011, Textiles & Hygiene Benelux and City Link. We have been pleased with the performance of Textiles & Hygiene Benelux during the year with the business achieving planned revenue and profit growth in 2011. We expect the business to continue to perform well in 2012.

Considerable progress has been made in City Link in 2011 in the areas of sales & marketing, operations, customer care and contingency plans for key trading. As a consequence, service levels have been strong throughout the year, in contrast to Q4 2010. We have however been disappointed by the financial performance of the business with lower revenue per consignment and poor productivity resulting in increased losses.

Given the poor performance of the business in 2011 we have written off intangible assets at the 2011 year end relating to City Link. The total write down amounted to £146m of which £108m related to goodwill and £38m related to customer lists.

The new City Link leadership team brings a great deal of successful UK Parcels industry experience to the business. They have begun to implement a comprehensive recovery plan which we expect to show material results by Q3 2012. The plan targets productivity savings in excess of £20m primarily through driver productivity, supported by route and round optimisation and a move to variable pay for subcontractors. There are also initiatives to reduce trunking, warehouse operations and back office costs.

Customer care

City Link made significant progress in this area in 2011, implementing a programme which was fully operational ahead of the peak Christmas trading period. The quality and speed of response to customer and consignee enquiries has shown a marked improvement and further progress is expected in 2012.

Following the success of the City Link programme, best practice initiatives will begin to be implemented across the group in 2012. In addition, proactive customer account management processes will also be rolled out, following successful trials within the UK Pest & Hygiene business in 2011. Customer Voice Counts (a measurement of customer satisfaction) will be adopted as a target for incentive purposes.

Growth - consistent & profitable

Our focus on profitable sales growth began to build some momentum in 2011 with organic growth being achieved by Pest Control excluding Libya (1.7%), Textiles & Hygiene (1.4%) and Asia Pacific (3.8%). Despite challenges in many of our markets, retention remained unchanged during the year at 83.9%. We have also been pleased with the progress made on our Programme Olympic growth pilots which have contributed to the 8% organic growth of the UK Pest Control business in H2 2011.

We expect to build further momentum in organic sales growth as we start to deploy the Programme Olympic initiatives across the rest of the Pest Control Division in 2012 and the rest of the group in 2013. We have also restructured our marketing & innovation teams to drive more focus in these areas, especially in the key categories of pest control, hygiene and textiles.

Sales growth in 2011 has also been delivered through a number of successful acquisitions during the year. These acquisitions have:

·; strengthened our proposition in territories where we currently operate (Ant-Eater, an Australian pest control business and Westplant, a Netherlands based interior plants business)

·; expanded our geographical footprint in new locations (National Britannia Turkey and Tetengo, pest control businesses based in Turkey and Mexico respectively)

·; increased our service offering (the acquisitions by Initial Facilities of the Services Division of Santia Group and MSS Facilities Management to add Fire, Water and Maintenance to our portfolio of facilities management services)

·; provided more control over our supply chain (the acquisition by Textiles & Hygiene of a business in France which designs, develops and sources workwear garments)

We will continue to target further growth through acquisition in 2012, with a particular focus on pest control opportunities in North America, Latin America and the Middle East.

Cost savings

The group continued to deliver cost savings in 2011, achieving cost reductions of £44m through a combination of restructuring, procurement, service productivity and back office rationalisation, supported by various Programme Olympic initiatives. Cost savings were £16m below target primarily due to slower than expected progress on service productivity in City Link. Cost savings are an essential part of the group's operating model, offsetting the impact of labour, fuel and product inflation and providing capacity for investment in capability. Cost savings have been targeted at £50m for 2012 through procurement, service productivity and back office rationalisation.

FUNDING

The group generated operating cash flows of £154.7m in 2011 (2010: £222.7m), representing 92% conversion from profit (after adjusting for one-off cash flows of £51.6m) against a target of 100%. Cash flow was negatively impacted in H1 2011 by a very strong performance in Q4 2010 (attributable to the phasing of cash collections in Initial Facilities), lower profitability and higher capex levels.

Capex in 2011 was 103% of depreciation reflecting inflationary pressures, sales growth in Textiles & Hygiene and upweighted investment in systems to support Programme Olympic and improvements in customer care.

At 31 December 2011 the group had net debt of £919.0m. Of this, £855.0m is represented by capital market notes issued by the group. The earliest maturity of any of these instruments is 2013. In December 2011 the group entered into a new £270m Revolving Credit Facility maturing in December 2016. The group has adequate headroom in its bank facilities in terms of funds available to withdraw and in relation to its interest cover and net debt covenants.

At the 2011 interim stage we announced we had reached a provisional agreement with the UK pension scheme trustees in relation to the 31 March 2010 triennial valuation of the Company's UK pension scheme and its funding. Final agreement has now been reached with the trustees which assumes a funding deficit of £80m at the valuation date and a funding arrangement by the Company of £12.5m per annum over an eight-year period commencing in January 2012. It is noted that the funding deficit agreed with the trustees was calculated on a different basis to the valuation of the pension scheme's assets and liabilities on the Company's balance sheet, which were calculated using applicable accounting standards. At 31 December 2011 the UK scheme was valued at a surplus of £144m on the Company's balance sheet.

DIVIDEND

Although the board is not satisfied with the current financial performance of City Link, good progress has been made with the turnaround of Textiles & Hygiene Benelux and the rest of the group's businesses are performing well in difficult conditions. Further, through strong operating cash flow performance, the Company has reduced significantly its debt levels over the last three years and has also resolved its medium-term pension funding and borrowing arrangements. Taking this into consideration, the board proposes to resume the payment of dividends to shareholders and is recommending a final dividend in respect of 2011 of 1.33p per share, payable to shareholders on the register at the close of business on 10 May 2012 to be paid on 15 May 2012. This equates to a full year dividend of 2p per share on a one third, two thirds, interim / final basis. The board intends to pursue a progressive dividend policy going forward.

OUTLOOK FOR 2012

Our Operational Excellence strategy, which focuses on capability development across all functions - is delivering increasing revenue growth in Pest Control, Hygiene, Textiles and Facilities Services categories despite tough market challenges. We are particularly pleased with the rates of growth achieved toward the end of Q4, which have continued into the early part of 2012. The investment in rollout of the Olympic initiatives is likely however to limit profit growth in these categories to mid single digits for the time being.

City Link continues to disappoint. While Q4 volumes grew 8% and revenue by 0.5%, losses were £3.1m greater than Q4 2010 due to low productivity, driven in part by conservative resource planning for the Christmas period. The financial performance of the business will remain poor in H1 2012, however, we remain committed to resolving the key revenue and cost control issues facing the business. We are encouraged by the immediate impact of the new City Link CEO and CFO and by the quality of the improvement plan currently being implemented.

Progress made across the rest of the group and continued strong operating cash flows has given the board sufficient confidence to recommence dividend payments with a final dividend of 1.33p per share.

DIVISIONAL PERFORMANCE

Textiles & Hygiene

1 excluding computer software

Full year revenue grew by 2.7%, an organic increase of 1.4% after adjusting for the acquisitions of the Swedish dental business in late 2010, two specialist hygiene businesses in H1 2011 and the French textiles supply business in Q4 2011. Revenue growth was however impacted by a challenging economic environment in Italy and the UK. Inflationary and commodity cost increases, particularly cotton prices, were managed well. This is best reflected in France, where despite continued competitor pressure, the business achieved organic revenue growth of 1.5%. Benelux delivered growth of 1.2%, demonstrating a significant turnaround on the prior year. Germany reported another robust performance, delivering growth of 5.8%. This was however partially offset by Italy's revenue decline of 3.2%. Divisional customer retention was 86.2%, unchanged on the prior year.

Profit rose by 3.8% on 2010, after adjusting for acquisitions. The Benelux businesses achieved the highest growth at 16.6% reflecting the turnaround of the business, control over pricing and significant benefits derived from restructuring. Germany's continued strong performance saw profit rise by 12%. France achieved an organic profit growth of 5.9% in challenging economic conditions with customer retention improving by 2.2% on the previous year. These solid performances in the larger markets were offset by some of the smaller businesses in Italy, Eastern Europe, Specialist Hygiene and UK Supplies (as well as increased investment in divisional overheads).

While the economic outlook in continental Europe for 2012 looks very uncertain, Divisional initiatives launched in 2011 across many areas, including marketing, sales and service productivity, will help the Division mitigate against the impact of challenging conditions and inflation. Key objectives for the coming year include: continued refinement of pricing policy; a focus on product innovation to support the hygiene offer; the delivery of further cost savings through procurement, restructuring and back office administration and; increased investment in infrastructure to drive growth and cost savings.

Pest Control

1 excluding computer software

Revenue for the Division grew by 0.3%, up 3.1% excluding disposals and the suspension of operations in Libya in Q1. UK Pest Control grew by 11.3%, of which 6.7% is attributed to the acquisition of the pest control operations of Santia Services and, although revenue in the UK & Ireland Hygiene business fell, its rate of decline slowed to 5.7% from 9.7% in 2010. In Europe strong performances from Germany, Austria, Switzerland and the Nordics were largely offset by difficult trading conditions in Spain, Portugal and Greece, which have been impacted by the Eurozone crisis, with overall revenue growth for the region of 1.8%. North America, the Division's largest business, delivered strong growth of 5.5%, South Africa 3.4% and East Africa & the Caribbean 7.1%.

Profit rose by 3.5%, up 4.6% excluding disposals and Libya, reflecting continued good cost management across most businesses. Notably strong profit growth performances were recorded in UK Pest (16.2%), Germany (11.4%), Austria (20.9%), Switzerland (32.9%), the Nordics (8.3%) and North America (7.9%). Profits declined in the UK Hygiene operations and the difficult markets of Spain, Portugal, Ireland and Greece.

We expect overall market conditions to soften in 2012, particularly in Ireland and the Southern European economies which we believe will continue to be severely impacted by the economic crisis. Key objectives for the coming year include: deployment of Programme Olympic growth initiatives to drive further organic growth; a continued focus on cost saving in service productivity and back office administration (particularly North America) and; further bolt-on acquisitions in targeted regions.

Asia Pacific

1 excluding computer software

Asia Pacific revenue increased by 4.1% in 2011 (2010: up 0.6%). Both Asia and Pacific achieved growth with Pacific up 3.0% and Asia up 5.9%. Excluding the acquisition of Australian pest control business Anteater earlier in the year, Pacific grew by 2.3%. In Asia the momentum in key markets of Indonesia (up 15.1%) and Malaysia (up 7.3%) reflects traction in sales and marketing and other growth initiatives. The emerging businesses of India and Vietnam continued to progress, benefiting from investment in capability. Thailand had a weak close to the year due to the severe flooding throughout the country. In Pacific the Australia pest business grew 6.8% with significant gains in share. The Australia hygiene business, Pink, grew by 1.6%, an improvement on the negative growth trend of recent years.

Profits for the Division rose by 7.1% for the year. Gross margins remain stable with price increases and cost savings offsetting inflationary pressures. Investment in sales and marketing is now delivering to the bottom line.

Conditions for 2012 remain positive although there may be some slowdown in growth if Asian economies are impacted by the debt crisis in Europe. The Pacific region is solid, reflecting a robust Australian economy supported by the mining industry. Key Divisional objectives for 2012 include: continued refinement of pricing policy to reflect local market conditions, product and range innovation and to offset relatively high regional cost inflation; a focus on product innovation to support the hygiene offer; continued integration of Pest & Hygiene operations under single country management teams and; further pursuit of cost saving opportunities in back office administration, especially in the Pacific region.

Ambius

1 excluding computer software

Ambius revenue grew by 1.1% in 2011, (down 0.9% organic), reflecting the Q3 acquisition of Westplant in Holland. Christmas season job sales remained strong in Q4 with the total value sold slightly ahead of the prior year. Gross sales declined by 0.8% year on year, however terminations improved by 8.0% giving a full year retention rate of 84.7%.

Profit was flat year on year, with cost saving initiatives mitigating the impact of cost inflation on plants and fuel as well as changes in business mix.

Trading for Ambius in 2012 is anticipated to show some improvements over 2011 as brand extensions continue to be a major focus for the Division. Further cost saving initiatives have been introduced in 2011, and the full benefit is expected to support profitability in 2012. Key objectives for the coming year include: ongoing development of service and product extensions to support the core offer and; further cost savings through service productivity and back office rationalisation.

City Link

1 excluding computer software

Despite operational improvements during 2011 the business made an operating loss of £31.3m on revenue down 8.5% to £306.9m, reflecting a 3.5% volume decline and 5.0% decline in Revenue Per Consignment (RPC). Losses were also impacted by slow progress on cost saving initiatives and productivity in particular.

RPC decline was driven by a loss of smaller and medium sized customers in Q1 predominantly due to poor service quality in December 2010, a very competitive market and a lack of investment in account management. Quality of service improved dramatically in 2011 and has consistently been at a high level throughout the year. City Link invested in both account management and customer service during the year and as a result is now gaining momentum in winning new business. It exited the year with an additional £25m in annualised contract sales and the new business pipeline remains in excess of £50m. There is also a need, however, to increase prices after many years of serial decline in the industry as a whole.

The B2C market is expected to continue to grow in 2012 while the B2B market remains more susceptible to economic conditions, around which there remains uncertainty. Excess capacity in the market continues to make pricing extremely competitive. Key objectives for the coming year include: top line growth with a focus on profitable new customers; development of higher margin offer lines and; the delivery of £20m in cost savings, focused on driver productivity and supported by hub & trunking, warehouse and back office cost reductions.

A strong plan has been put in place by the new leadership team. Though we do not expect an improvement in financial performance during H1 2012, we expect to see better results in H2 2012.

Initial Facilities

1 excluding computer software

Despite the difficult market conditions described above, Initial Facilities performed robustly in the year with revenue growing 6.9% overall, aided by the acquisitions of the Fire and Water businesses of Santia Services in early 2011. Underlying revenue, excluding acquisitions, was broadly flat.

Further progress in improving operational efficiency and ongoing cost reductions have helped contribute to improvements in profitability, with growth of 13.1% for the full year. Excluding acquisitions, profit grew by 4.1% year on year.

Continued uncertainty remains around the UK economic outlook for 2012. Consumer confidence is expected to remain weak in an environment of financial and economic instability across Europe, and on-going British government spending austerity. However, having reorganised in 2011, improved efficiency of operations and acquired the Santia Fire and Water businesses, and the MSS maintenance business, Initial Facilities is well placed to provide good-value innovative integrated facilities solutions to its customers. The acquisition of MSS in November 2011 provides strong capability in the maintenance field, which allows Initial Facilities to now provide all key facilities services directly. Key objectives for 2012 include: leveraging recent acquisitions to drive top line growth through increased new contract win rates; gross margin improvement through applying LEAN principles to service delivery and; net margin improvements through further cost savings in back office administration.

Central Costs

Central costs increased by £10.7m reflecting investment in Programme Olympic and higher insurance cost provisions than in 2010.

Reorganisation costs and one-off items

References to adjusted operating profit and adjusted profit before tax also exclude reorganisation costs and one-off items, totalling a net cost of £38.0m (2010: £25.1m) that have had a significant impact on the results of the group. £34.4m of these relate directly to the group's major reorganisation programme and consist mainly of redundancy costs, consultancy and plant and office closure costs net of the profit on sale of certain properties. One-off items include a provision of £4.8m against our full financial exposure arising from the suspension of our Libyan pest control business, £4.0m of acquisition costs and credits of £3.9m in respect of negative goodwill and £1.3m relating to the release of prior year provisions. In 2010, a credit of £35.0m in respect of a change in pension liabilities as a result of using CPI rather than RPI for calculating certain future pensions increases and a £29.2m charge in respect of a claim under a lease guarantee made by a subsidiary following the disposal of a business some 20 years ago are also included in one-off items. These costs have been separately identified as they are not considered to be "business as usual" expenses and have a varying impact on different businesses and reporting periods. Details of one-off items incurred in the period, for which adjustments have been made, are set out in Appendix 4.

Intangible assets impairment

In accordance with the group's accounting policy, goodwill is tested for impairment annually using cash flow projections based on financial budgets and long-range plans. During the year an impairment charge of £111.5m (of which £108.1m relates to City Link) has been recognised and charged to the income statement. Additionally, an impairment charge of £37.7m has been recognised and charged to the income statement in respect of customer lists and relationships, all relating to City Link.

Interest

Net interest payable of £44.6m was £6.5m lower than in 2010. Underlying interest (excluding pensions, mark to market and foreign exchange differences) was £48.6m, compared to £51.2m in the prior year, a reduction of £2.6m, due to lower rates and net debt. Net interest payable included improvements of £3.1m from pension income and £0.8m resulting from mark to market and foreign exchange differences.

Tax

The income tax expense for the year was £16.6m on the reported loss before tax of £50.5m. The principal reason for the high tax charge (when compared with the reported loss) is that there is no tax relief due on the goodwill impairment of £111.5m. After adjusting for the goodwill impairment and also the amortisation of intangible assets, reorganisation costs and one-off items, the effective tax rate for the year is 24.9% (2010: 24.9%) of APBITA. This compares with a blended rate of tax for the countries in which the group operates of 29% (2010: 29%). The principal factor that caused the effective tax rate to be lower than the blended rate is the release of prior year provisions for tax no longer considered necessary as various issues were either settled or became statute barred in the year.

Net debt and cash flow

1 before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

Operating cash flow was £68.0m lower than 2010 due to lower EBITDA and increased net capex, with working capital outflows being relatively flat (despite an £18m adverse impact in Q1 relating to the phasing of Initial Facilities cash flows in 2010).

Total tax payments were £44.5m compared with £35.0m in 2010, with the increase attributable to the phasing of payments relating to prior year liabilities. Interest payments were £0.5m higher than 2010 and the acquisition/disposal outflow of £32.0m largely reflects the acquisitions of Santia Services, MSS and the remaining non-controlling interest in our catering business. Foreign exchange translation and other items increased cash flow by £0.7m, leaving an overall inflow of £34.6m and net debt of £919.0m.

Appendix 1

ANNUAL CONTRACT PORTFOLIO - CONTINUING BUSINESSES

3 Months to 31 December 2011

12 Months to 31 December 2011

Notes

Contract portfolio definition: Customer contracts are usually either "fixed price", "as-used" (based on volume) or mixed contracts. Contract portfolio is the measure of the annualised value of these customer contracts.

Contract portfolio valuation: The contract portfolio value is typically recorded as the annual value from the customer contract. However, in some cases - especially "as-used" (based on volume) and mixed contracts - estimates are required in order to derive the contract portfolio value. The key points in respect of valuation are:

"As-used" contracts: These are more typical in Textiles and Hygiene and Catering, where elements of the contract are often variable and based on usage. Valuation is based on historic data (where available) or forecast values.

Income annualisation: In some instances, where for example the underlying contract systems cannot value portfolio or there is a significant "as-used" element, the portfolio valuation is calculated using an invoice annualisation method.

Inter-company: The contract portfolio figures include an element of inter-company revenue.

Job work and extras: Many of the contracts within the contract portfolio include ad hoc and/or repeat job work and extras. These values are excluded from the contract portfolio.

Rebates: The contract portfolio value is gross of customer rebates. These are considered as a normal part of trading and are therefore not removed from the portfolio valuation.

New business/Additions: Represents new contractual arrangements in the period with a new or existing customers and additional business added to existing contracts.

Terminations/Reductions: Represent the cessation or reduction in value of an existing customer contract or the complete cessation of business with a customer.

Net Price Increases: Represents the net change in portfolio value as a result of price increase and decreases.

Acquisitions/Disposals: Represents the net value of customer contracts added or lost as a result of businesses acquired or disposed in the period. Also includes the net volume related changes for the textiles businesses, where it is common practice for customers to increase or decrease service volumes according to their daily operational requirements.

Retention rates: Retention rates are calculated on total terminations (terminations and reductions).

Appendix 2

Divisional Analysis (at constant exchange rates)

1 excluding computer software

Revenue growth (at CER)

1 organic revenue growth excludes the effect of acquisitions, disposals and inter group trading

Appendix 3

Divisional Analysis (at actual exchange rates)

1 excluding computer software

Appendix 4

One-off Items including reorganisation costs

References to adjusted operating profit and adjusted profit before tax also exclude reorganisation costs and one-off items, totalling a net cost of £38.0m (2010: £25.1m) that have had a significant impact on the results of the group. £34.4m of these relate directly to the group's major reorganisation program and consist mainly of redundancy costs, consultancy and plant and office closure costs net of the profit on sale of certain properties. One-off items include a provision of £4.8m against our full financial exposure arising from the suspension of our Libyan pest control business, £4.0m of acquisition costs and credits of £3.9m in respect of negative goodwill and £1.3m relating to the release of prior year provisions. In 2010, a credit of £35.0m in respect of a change in pension liabilities as a result of using CPI rather than RPI for calculating certain future pensions increases and a £29.2m charge in respect of a claim under a lease guarantee made by a subsidiary following the disposal of a business some 20 years ago are also included in one-off items. These costs have been separately identified as they are not considered to be "business as usual" expenses and have a varying impact on different businesses and reporting periods.

 Appendix 5

Business Category Analysis (at constant exchange rates)

The above tables represent revenue and adjusted operating profit* (APBITA) by segment, as disclosed in note 1 of the financial statements, split across the main groups of business category and activity: pest control, hygiene, textiles, interior plants, facilities services and parcel delivery. "Other" represents a number of small businesses outside of the other categories. The segment information disclosed in note 1 of the financial statements is presented in accordance with IFRS 8 "Operating Segments". This additional information is designed to provide further details split by category and activity given that a number of our segments include businesses from different categories.

* before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

1 excluding computer software

2 taxation includes £23.4m  (2010: £22.6m) in respect of overseas taxation

3 earnings per share before the after tax effects of amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items

The board is recommending the payment of a final dividend in respect of 2011 of 1.33p (2010: 0p) per share amounting to £24.1m (2010: £nil). See note 6.