spotless group limited 2009 annual report for … · • cafe and canteen services ... it was...

Spotless Group Limited 77 004 376 514

350 Queen Street Melbourne Victoria 3000 Australia www.spotless.com.au T +61 3 9269 7600 F +61 3 9269 7712

14 October 2009 Company Announcements Office Australian Securities Exchange Limited 4th Floor 20 Bridge Street SYDNEY NSW 2000

SPOTLESS GROUP LIMITED 2009 ANNUAL REPORT

Any enquiries should be directed to Mr. Rowan Wilkie on +61 3 9269 7303

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2009 ANNUAL REPORT

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Our BuSINESS

SpotleSS Group limited ABN 77 004 376 514

Registered Office: Level 3, 350 Queen Street Melbourne Vic 3000

www.spotless.com

AnnuAl GenerAl meetinGFriday 20 November 2009 At Zinc at Federation Square, Cnr. Flinders and Swanston Streets Melbourne Vic 3000

FinAnciAl cAlendArRecord date for final dividend: 7 September 2009

Final dividend paid: 16 October 2009

CONtENtSpAGES 1-4

Our Business1. The Spotless Advantage2. Retailer Services3. Facility Services4. Financial Summary

5. Chairman’s Review6. Managing Director

& CEO’s Review7. Chief Financial Officer’s

Review

18. Sustainability22. Board Of Directors24. Group Executive

Management Team

8. Managed Services10. Food Services12. Cleaning Services14. Laundry Services16. Retailer Services

– Braiform

25. 2009 Financial Statements

pAGES 5-7 pAGES 8-16 pAGES 18-24 pAGE 25-108

the Spotless Group is an international provider of contract management and supply chain solutions through Facility Services and retailer Services.

Spotless operates in thousands of client locations across major market sectors including health, public housing, defence, industry, retail, government, resources, hospitality, education...

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tHE SpOtLESS

ADVANtAGE

Sector Knowledge:LATEST TECHNOLOGIES,

SKILLED PROFESSIONALS AND INDUSTRY BEST PRACTICE

Intellectual Property:VAST ARRAY OF

TECHNICAL SOLUTIONS

Scale:PROCUREMENT ECONOMIES,

LABOUR FORCE MANAGEMENT, SUPPLY CHAIN SOLUTIONS

Breadth of Services:EFFICIENCIES, MULTI-SKILLING,

COMMON PROCESSES AND SYSTEMS, INDUSTRY LEADING

SPECIALISED SERVICES

Third Party Management:ACCREDITATION, RISK AND GOVERNANCE

STANDARDS

tHE SpOtLESS ADVANtAGE

Spotless’ portfolio of individual service offerings bundle together to provide economies of scale, skill and scope to clients around the world.

Services are delivered seamlessly into client businesses by providing ongoing facility management and retail supply chain solutions. it might be a single service... it might be 30 services.

We design, build, operate, and create value for clients through:

Spotless Group Limited Annual Report 2009 : 1

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RETAILER SERVICES

GARmEnT HAnGInG SoLuTIonS

• Tailored garment hanging solutions and industry standard ranges at multiple ‘needlepoints’ around the globe

PRInT & PACkAGInG SoLuTIonS

• Swing tickets

• Labels

• Shrouds

• Hangpac

• Security solutions

CLoSEd LooP RE-uSE PRoGRAmS

• Hanger design

• Hanger recovery

• Processing

• Reverse logistics

End-To-End SuPPLy CHAIn SofTwARE

• B2B E-commerce engine

• Campaign management

• Supply chain visibility

• Multi-currency / Multi-lingual

the retailer Services business, operating under the brand Braiform, provides supply chain solutions via customised garment hanger and packaging options to retailers and garment manufacturers in more than 30 countries. Braiform has 830 employees.

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fACILITy SERVICES

mAnAGEd SERVICES

• Facilities management

• Asset life cycle management

• Public Private Partnerships

• Preventative and corrective maintenance

• Essential services

• Painting services

• Refurbishment services

• Mechanical and electrical services

• Support services

food SERVICES

• Retail food and beverage

• Cafe and canteen services

• Residential catering

• Corporate hospitality

• Major venue and event catering

CLEAnInG SERVICES

• Industrial cleaning

• Waste management and recycling

• Pest control

• Sterile cleaning

• Grounds maintenance

• Housekeeping

LAundRy SERVICES

• Linen rental and laundering

• Uniform rental and laundering

• Mats and floor accessories

• Washroom services

• Sterilisation

every day more than 30,000 employees deliver and manage more than 100 specialist support services at thousands of locations.


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080706 09

2,44

2.0

2,38

3.3

080706 09

26.3

21.5

080706 09

105.

194

.5

080706 09

12.0

19.5

080706 09

62.6

90.1

080706 09

7.4

12.2

080706 09

21.0

11.0

080706 0940

.440

.5

fInAnCIAL SummARy

SEGmEnT RESuLTS

2009 $m

2008 $m

change %

SALES REVEnuE

managed Services 1,048.4 1,075.6 (2.5%)

cleaning Services 243.3 245.6 (0.9%)

Food Service 545.3 556.2 (2.0%)

laundry Services 225.6 223.7 0.8%

retailer Services – Braiform 320.7 340.9 (5.9%)

total 2,383.3 2,442.0 (2.4%)

EBIT

managed Services 34.2 29.5 15.9%

cleaning Services 11.5 12.0 (4.2%)

Food Service 25.3 28.6 (11.5%)

laundry Services 26.7 28.0 (4.6%)

retailer Services – Braiform 6.9 15.7 (56.1%)

corporate Administration (10.1) (8.7) (16.1%)

Group eBit prior to nris 94.5 105.1 (10.1%)

non-recurring items (pre tax) (4.4) (42.5) 89.6%

reported Group eBit 90.1 62.6 43.9%

rEpOrtED EpS(CENTS)

EpS prIOr tO NrIS(CENTS)

GEArING (NEt DEBt/NEt DEBt pLuS EquIty)(CENTS)

rEturN ON EquIty (AVErAGE) (%)

SALES rEVENuE($m)

EBIt prIOr tO NrIS($m)

rEpOrtED EBIt($m)

DIVIDEND pEr SHArE(CENTS)

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CHAIRmAn’S REVIEw

Your Company delivered a very credible performance in 2009 considering the severity of the economic conditions that impacted all areas of the business to varying degrees. The Company’s transformational journey continued in 2009. It built on the efficiency and structural improvements of the prior year, which removed $25 million of costs, and ensured Spotless was well placed to withstand and contain the affects of the adverse economic conditions.

Financial performanceReported Earnings Per Share (EPS) increased 62.5 per cent over the prior year to 19.5 cents per share. Reported Earnings Before Interest and Tax (EBIT) increased by 43.9 per cent to $90.1 million. Reported Net Profit After Tax (NPAT) was $42.7 million, up 64.2 per cent on the prior year. Net debt at 30 June 2009 increased modestly to $247.2 million with the gearing ratio slightly higher at 40.5 per cent.

Group revenue declined 2.4 per cent to $2.39 billion as clients responded to the worsening financial conditions as the year progressed.

It was pleasing that, after a poor first half, Braiform delivered an improved performance in the second half despite a continuation of the poor retail demand in the United States and Europe. The result reflects the improvements that have been made to Braiform over the past two years.

Your Company has undertaken a number of measures to further strengthen its financial platform. During the year the Company’s debt was refinanced, restructured and extended to 2012. In August an equity raising was announced with the Institutional Placement and a Share Purchase Plan for retail shareholders completed, raising a total of $86 million. The equity raising is a prudent measure, which will strengthen the balance sheet. Following the Institutional Placement (and after the purchase of the remaining shares in Taylors, New Zealand, should it proceed) gearing (net debt to net debt plus equity) will reduce from 40.5 per cent at the end of June 2009 to 31 per cent on a pro-forma basis, positioning Spotless at the bottom end of its target gearing range of 30 to 50 per cent.

transformational ChangeNew Managing Director and Chief Executive Jo Farnik now has a strong leadership team in place focused on delivery of our transformation. The second year of the transformational agenda saw further restructuring of Braiform operations to create a more efficient, productive and nimble organisation organised around trading hubs in Europe, the United States and Asia. The containment of costs continued across the Group.

Three bolt-on acquisitions were made during the year. These acquisitions increase the range of services we offer clients and also grow our business in Western Australia and New South Wales.

GovernanceThe recomposition of the Board is nearing completion. David Davis, who had been on the Spotless Board since 2000, stepped down in February. When Lawrie O’Bryan steps down at the Annual General Meeting in November the Board changes will be complete with a final Board comprising seven Directors.

Bronwyn Morris took over the Chair of the Audit, Finance and Risk Committee from Lawrie in February. Bronwyn is a former partner at KPMG with experience in the area of audit and risk management.

In view of the economic conditions the Directors decided to freeze their fees at the 2009 rate for the financial year 2010.

Dividend policyThe Directors reviewed the Company’s dividend policy prior to the Interim Results in February and determined a target payout ratio of between 50 per cent and 60 per cent of EPS. The Directors declared a final dividend of six cents per share taking the full year dividend to 11 cents, fully franked, reflecting a full year payout ratio of 51 per cent on EPS prior to Non Recurring Items.

OutlookThe Board wishes to thank the Spotless employees for their contribution to the Company. It has been a tough year. Economic conditions remain uncertain and it is not yet clear how client sentiment will be affected. However, with the transformation of the Company well underway and a clear growth strategy in place, Spotless is well positioned to weather any ongoing economic softness and to take full advantage of improvements in conditions when they occur.

In the coming year, management will be focused on growing the business organically, increasing the number of clients with multiple and fully managed services, exploring growth by further sector penetration, growing the Braiform business and, continuing our financial discipline. Bolt-on acquisitions will also be considered if appropriate.

peter J SmedleyChairman


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mAnAGInG dIRECToR & CEo’S REVIEw

The Spotless Group delivered a sound financial performance in 2009.

During the year the Company made progress on its commitment to becoming a leading international provider of contract management services and supply chain solutions across single, multi and fully ‘managed’ outcomes. This vision is being pursued through a continued focus on growth, financial discipline and our people.

While progress was made on a number of fronts and safety statistics improved significantly, I regret to report that one Spotless employee died at work, in our Honduras operations, during the financial year. As a result, management’s resolve to achieve zero injuries in the workplace has seen a greater focus on incident prevention and personal accountability.

In the past year, Spotless has made pleasing progress on its acquisitive growth agenda, bolstering the depth of service line expertise and breadth of market sector exposure and geographical reach. Improved organic growth continues to be a major priority in financial year 2010.

Our strict financial discipline in cost reduction enabled Spotless to minimise the impact of this year’s challenging economic conditions. The economic conditions did impact Facility Services more significantly than originally envisaged in terms of reduced consumer spending and clients’ deferral of discretionary project expenditure. Braiform continued to feel the impacts of tough retail conditions across Europe and the United States, however, recent restructuring and supply chain initiatives place the business in a strong competitive position to capitalise on any improvement in retail conditions.

Growth The Company’s growth aspirations progressed on a number of fronts during financial year 2009.

A suite of strategic bolt-on acquisitions increased the depth and breadth of service expertise and expanded the Company’s geographical footprint, particularly in the Facility Services business:

• Arrix Cleaning – The acquisition of a commercial cleaning operation in Western Australia (WA) provided increased scale in the WA market and cemented Spotless’ presence in the government sector.

• Ensign North Rocks – The addition of a commercial laundry to the Spotless New South Wales laundry portfolio delivered increased operational capacity, allowing for an improved balance of facilities along client segment lines.

• Riley Shelley – The privately owned painting and refurbishment business was acquired late in fiscal 2009. The acquisition provides a new ‘self delivered’ capability set to compliment Spotless’ existing service offering. Riley Shelley enables Spotless to in-source services provided to current clients and extends the breadth of services on offer to potential clients.

A group-wide focus on increasing the number of Spotless services provided to existing clients and development of an account management model, gained traction during 2009. This approach will significantly increase value to both clients and Spotless. Clients will benefit from access to greater efficiencies, multi-skilled staff, common processes and centralised systems. Spotless benefits through increased revenue and improved contract retention.

During the year the value and quantum of in-sourcing increased across the Facility Services business. In-sourcing relates to the services self performed by Spotless, where the buying decision lies with Spotless, for example; providing uniforms and linen to Spotless hospitality venues, cleaning at Spotless operated sites and painting services where Spotless owns/manages the overall facility.

The Retailer Services business, Braiform, gained momentum with its closed loop re-use program, offering retailers an environmentally sound and economically advantageous method of processing garment hangers through the supply chain. Additionally, key contracts were secured in Europe and North America covering a range of services. Notwithstanding the global implications of reduced demand, which led to Braiform’s poor financial result, financial year 2009 should be seen as a strong step forward in its overall restructuring.

Financial Discipline Continued restructuring, aimed at providing an efficient and scalable platform for growth, occurred across all parts of the business in financial year 2009.

Given the prevailing degree of economic uncertainty, additional precautionary cost measures were put in place at the end of financial year 2009, including a management salary freeze across the Company.

In financial year 2009 improved working capital management, successful debt refinancing, together with a capital raising undertaken in August 2009, means Spotless now has a significantly bolstered balance sheet to withstand economic pressures and act when appropriate on business opportunities that meet stringent financial and strategic criteria.

A focus on maximising shareholder value has been instilled throughout all aspects of the business including contract performance, working capital management and all investment decisions.

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people At the centre of our commitment to people is the Company’s safety agenda. In financial year 2009, Spotless reduced the rolling 12 month average CIFR by a pleasing 21.7 per cent. The fatality that occurred in Honduras serves as a reminder to all employees of the critical importance of safety.

The Spotless safety program targets 32,000 staff and more than 4,500 subcontractors, across more than 30 countries. Safety is an integral part of staff and contractor induction, contract mobilisation and is embedded in all our operations.

More than 1,600 employees were involved in accredited traineeships in Australia and Government endorsed literacy programs in New Zealand. Spotless continues to invest in stringent subcontractor accreditation programs. The Company’s group-wide commitment to training, accreditation and safety standards is a benefit for our clients and our people.

Spotless is rapidly strengthening technology platforms to support communication and flexible working arrangements and is investing in communication channels to improve information and knowledge sharing.

In line with our transformational agenda, a number of executive appointments were made during financial year 2009 to provide greater focus on operational delivery and the Group’s technology agenda and development focus.

OutlookSolid growth opportunities exist across Facility Services and Retailer Services, notwithstanding external financial challenges that may persist.

Facility Services has a low level of major contracts up for renewal during 2010, a strong base business across a broad and deep client group, growth opportunities arising from the governments’ fiscal response to the global financial crisis and the impact of bolt-on acquisitions. These are all expected to combine to produce improved performance in 2010.

While the global economic outlook remains unclear, Braiform expects to produce improved results in 2010, although the second half of each year is traditionally stronger than the first due to the product mix and summer versus winter seasonality in the northern hemisphere.

Since assuming the role of Managing Director and CEO in July 2008 I have been fortunate to work with an organisation of dedicated and highly capable individuals who have adapted to change and at all times remained focused on the needs of our clients and the growth of Spotless.

Josef FarnikManaging Director and Chief Executive Officer

Spotless has contained the effect on the business of the economic conditions due, in considerable part, to an ongoing commitment to cost reduction leveraging off the efficiency improvement program of the prior year.

Fiscal 2009 saw a focus on strengthening the balance sheet, improving cash flow and ensuring the business has the financial soundness to withstand ongoing economic uncertainty, as well as grow and take full advantage of opportunities when conditions improve.

Debt facilities refinanced, extended and restructuredIn the first half of financial year 2009 Spotless entered into a syndicated debt facility to restructure its three bilateral debt facilities into a single syndicated unsecured facility of AUD240 million expiring in February 2012. Including the Company’s USD130 million in US Private Placement notes, Spotless’ debt maturity profile has been significantly extended to between three and six years. Spotless remains comfortably within its debt covenants.

Balance SheetSpotless’ net debt at 30 June 2009 increased modestly to $247.2 million with the gearing ratio slightly higher at 40.5 per cent. This level of net debt is towards the lower end of the monthly working capital cycle. Net debt levels have been contained, despite several bolt-on acquisitions totalling $19 million made during the year, reflecting the strong cash flow generation of the Group.

Equity raisingUpon the announcement of the 2009 Annual Results, Spotless also announced an equity raising, comprising an underwritten institutional placement, which was fully subscribed, and a Share Purchase Plan. The equity raised will be used to pay down debt and strengthen the balance sheet providing the flexibility to reinvest in the business and pursue further bolt- on acquisitions should the opportunity arise.

Andre Carstens Chief Financial Officer and Company Secretary

CHIEf fInAnCIAL offICER'S REVIEw


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Overview of resultsFinancial year 2009 saw a strong result from the Managed Services underlying business, especially in light of the challenging economic environment. Whilst total revenue, including “pass through” (revenue for services conducted for and on behalf of certain clients) was down 2.5 per cent to $1,048.4 million, the underlying business grew 8.0 per cent to $896.4 million. Importantly, EBIT increased by 15.9 per cent to $34.2 million. The increase in EBIT margin was partially impacted by some one-off adjustments. The Managed Services division was the least impacted by the general economic environment.

GrowthNew business wins during the year in the education sector, organic growth in existing contracts and early traction from the Australian Federal Government Stimulus program offset the loss of a Defence contract and a number of other smaller contracts.

Of particular note in financial year 2009 was the renewal and expansion of Spotless’ share of the Housing NSW contract, which was awarded late in the first half of the financial year. Spotless now maintains in excess of 50,000 residential properties across Sydney’s eastern and southern suburbs and the Southern Highlands and Illawarra regions. Managed Services has a strong portfolio of State Government contracts across public housing, health, education and other infrastructure, demonstrating examples of best practice in life cycle asset maintenance. This strong base enables further growth within this important sector for Managed Services.

Managed Services is well positioned for growth in 2010. Recent contract wins in the resources and education sectors underpin revenue growth, with a second half impact on returns as mobilisation costs are incurred in the first half. A relatively small proportion of the existing contract base is up for renewal in 2010 and therefore business development priorities will focus on securing new contract wins across Spotless’ preferred sectors.

The Australian Federal Government Stimulus program should see an increased level of maintenance and small minor works project

expenditure opportunities for Spotless in public housing and education. Spotless is participating in the ceiling insulation component of the Australian Federal Government Stimulus program. In this instance Spotless is leveraging its extensive experience in developing and managing a network of accredited subcontractors as well as conducting independent on site completion audits. The existing 24 hour, seven days a week National Contact Centre and proprietary works/contractor management systems allowed Spotless to quickly respond to a partnering opportunity with Bunnings.

Managed Services provides a wide range of hard and soft services to clients. The business model involves a combination of direct and indirect delivery, and 22 individual services in one major contract. In an endeavour to deliver increasing benefits to clients, the balance of in-sourcing versus subcontracting is continually reviewed and Spotless will continue to use a combination of both. Towards the end of financial year 2009 Spotless completed the acquisition of Riley Shelley, a private Australian painting and refurbishment company. The Riley Shelley business brings an additional client base into Spotless and complimentary services to provide to existing and new Spotless clients. In addition, Riley Shelley provides in-sourcing services to Spotless as a direct client in Laundry Services and in Food Services’ retail fit-outs. Spotless will continue to review other service lines as candidates for either in-house development or acquisition opportunities seeking to deliver improved value and certainty of delivery to clients.

Financial DisciplineManagement continues to identify underperforming contracts and is working with clients to lift customer satisfaction and financial returns. Benchmarking of comparable service delivery costs and solutions, constant vigilance on managing input costs and ensuring high levels of personal accountability are designed to maximise contract margins.

The division continues to review and remedy areas of administrative inefficiencies across all parts of this complex trans Tasman business. As part of the Spotless transformation there is a strong focus on standardisation of common support activities.

revieW oF operAtionS – FAcility ServiceS

Managed Services

GRowTH• New business wins in education and resources

• Major contract extension in NSW Housing

• Federal Government stimulus work

• Riley Shelley acquisition brings new service lines – painting and refurbishment

fInAnCIAL dISCIPLInE• Focus on improving contract performance

and customer satisfaction

• Removal of duplicated activity

• Greater standardisation of processes

PEoPLE• Safety – reduced the rolling 12 month average

by 21.6 per cent

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mAnAGEd SERVICESRevenue: $1,048.4 million

EBIT: $34.2 million

1.8 millionCALLS tO tHE SpOtLESS CONtACt CENtrE ANNuALLy

50,000+puBLIC SECtOr DwELLINGS FOr StAtE AND tErrItOry GOVErNMENtS MAINtAINED

3,500+SuBCONtrACtOrS wOrk wItH Our DIrECt EMpLOyEES

1,200+puBLIC AND prIVAtE SCHOOLS AND HIGHEr EDuCAtION CENtrES MAINtAINED

Working capital discipline is a key priority and impacts Work In Progress billing and recoveries as well as Trade Debtor management.

peopleManaged Services has more than 5,000 employees and an extensive network of accredited subcontractors across Australia and New Zealand. Over and above specific client requirements, Spotless maintains and operates comprehensive programs of induction, training and coaching in the area of Occupational Health, Safety and Environment. There is a strong commitment to achieving quality outcomes for clients and a paramount focus on safety. Managed Services reduced the rolling 12 month average CIFR by 21.6 per cent for the year.

SpOtLESS MANAGED SErVICES EMpLOyEES prOVIDE A rANGE OF HArD AND SOFt SErVICES ACrOSS tHOuSANDS OF SItES IN AuStrALIA AND NEw ZEALAND.

Extensive on the job training is supplemented by various programs including participation in the Australian Federal Government Traineeship scheme.

OutlookThe 2010 financial year will see solid growth for Managed Services under its new leadership, with the full year contribution of Riley Shelley, additional contract wins and likely upside from the Australian Federal Government Stimulus program.

A focus on operational excellence remains crucial for the division and its clients in 2010.


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Food ServicesThe financial performance of the Food Services division was significantly influenced by the economic conditions, which reduced demand in Australia and New Zealand. Revenue contracted 2 per cent to $545.3 million on the prior year. EBIT fell 11.5 per cent to $25.3 million. This was driven largely by a revenue mix effect in terms of the loss of higher margin sales in the face of a significant fixed cost base.

GrowthFood Services signed 47 new contracts in 2009, including New Zealand Parliament, Sunshine Coast Airport, Ormond College, an affiliated College of the University of Melbourne, Kensington Colleges, Bank of New Zealand and the inaugural Townsville 400 V8 car race.

Despite a significant improvement in net contract wins, losses and renewal rates by Alliance Catering (which provides site-based catering for business and industry, education and aged care), the economic conditions reduced activity at site level. The erosion was due to lower function activity, declining cash sales in industrial sites and reduced client subsidies.

The Hospitality & Retail Catering business, (which includes stadia, function venues, airports and major events), was influenced by economic conditions in all segments through the loss of high value corporate hospitality activity and reduced customer spending. Stadia attendance in Australia held and there was good attendance at other major sports events. There was a general decline in attendance at New Zealand stadia. The business was also impacted by sporting fixture schedule shifts from financial year 2009 into financial year 2010 and the redevelopment of Eden Park in New Zealand ahead of the 2011 Rugby World Cup.

Large numbers of major airport terminal redevelopments disrupted trading at airport retail food outlets. Airport outlets in the renewed contracts grew by 12 per cent, which ensures the revenue base of the Spotless Airports business for the next five years.

Financial DisciplineFood Services experienced significant margin pressure as a consequence of the erosion of higher value function and corporate hospitality activities and increased depreciation charges flowing from new investments in airport retail fit outs. Head count numbers were reduced where possible, whilst maintaining client delivery standards. The costs of food and beverages were maintained through a range of group procurement and operational initiatives.

Full integration of Australian and New Zealand operations occurred during the year resulting in increased systems uniformity. The divisional structure was rationalised from four business units to two (Alliance Catering and Hospitality & Retail Catering) with consequential rationalisation of support structures.

In a climate of client cost reduction, Alliance Catering worked with many clients to realign service delivery to retain a viable catering service in the face of a reduced level of client operations and staff levels. This resulted in some short term reduction in profitability.

peopleFood Services transitioned smoothly to the new two business unit structure, and emerged with a more efficient cross Tasman operational platform. Key senior appointments were made to support growth of the Epicure Catering and Alliance Catering brands, and to prepare for major international event activity in 2011.

A continuing strong focus on safety resulted in a reduction in the 12 month rolling average CIFR of 22.4 per cent. Key initiatives included the roll-out of online staff training modules to frontline staff and a program ensuring staff electrical protection through the comprehensive deployment of Residual Current Devices.

The long established Spotless apprentice chefs’ development program was endorsed with many of the 55 apprentices winning prizes in leading industry culinary competitions, including the Nestlé Golden Chefs Hat Award.

GrOwtH• Alliance catering secures contract wins and renewals

• Attendance at stadia held firm

• Growth impacted by economic conditions

fInAnCIAL dISCIPLInE• Full trans Tasman integration

• Increased uniformity of systems

• Careful management of input costs

PEoPLE• Safety – reduction in the 12 month rolling

average CIFR of 22.4 per cent

• Apprentice chefs receive recognition

• Numerous industry awards won


Food Services

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Other major industry awards won by Spotless during 2009 include:

• Restaurant and Caterer’s Awards for Excellence Best Venue Caterer – Suncorp StadiumBest Event Caterer – Gold Coast Indy 300Corporate Caterer of the Year – Deloitte MelbourneSite Caterer of the Year – Geelong GrammarWedding Caterer – State Library of South Australia.

• 2009 Oceanafest AwardsGold Medal and Overall Winner Restaurant of Champions – Perth Convention Exhibition Centre Most Outstanding Establishment – Perth Convention Exhibition Centre.

OutlookThe impact of global economic conditions on Food Services is expected to reduce through financial year 2010. The legacy impacts of the 2009 recession are likely to see a continuing conservative approach to high-end corporate hospitality and a sustained focus by business and industry to reduce catering costs. The completion of major airport terminal redevelopments in the first half of the 2010 financial year will allow trading conditions to stabilise, with the expanded Spotless airport outlet portfolio well positioned to benefit from the growth of low cost carriers.

The Food Services pipeline of growth opportunities is strong in all market segments. The Alliance Catering and Epicure Catering brands will be launched in New Zealand in the first half of the 2010 financial year. There will be a continuing roll-out of successful Spotless owned café brands (Velluto and Espresso Plus) and corporate franchise brands (including Red Rooster, Sumo Salad and Aromas). An increased level of stadia events is scheduled, including concert tours. Spotless continues to be the leading major event caterer in Australia and New Zealand.

SpOtLESS EMpLOyEES prOVIDE FOOD SErVICES FOr SpOrtS FANS, AIrpOrt VISItOrS, FuNCtION GuEStS, OFFICE AND FACtOry wOrkErS, StuDENtS AND tHE ELDErLy.

food SERVICESRevenue: $545.3 million

EBIT: $25.3 million

14,000EMpLOyEES INCLuDING 2,000 CHEFS

210,000+pEOpLE SErVED EVEry DAy ACrOSS AuStrALIA AND NEw ZEALAND

11SpOrtING StADIA ACrOSS AuStrALIA AND NEw ZEALAND

80+rEtAIL FOOD AND BEVErAGE OutLEtS IN DOMEStIC AND INtErNAtIONAL AIrpOrt tErMINALS


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Overview of resultsCleaning Services’ performance for the year saw strong contract gains and the acquisition of one of the largest suppliers of commercial cleaning services in Western Australia. However, the financial result was impacted in the second half by clients seeking cost reductions in response to the economic downturn. Cleaning Services worked collaboratively with clients to help manage these pressures and in some cases contract scope reductions were agreed and extended contract terms exchanged. Improvements in labour management and productivity implemented at the end of financial year 2008 had a positive impact on profits during the first half of 2009 compared with the prior year.

Revenue declined by a modest 0.9 per cent to $243.3 million. EBIT declined by 4.2 per cent to $11.5 million.

GrowthThe business development focus on specialised cleaning produced pleasing contract wins, including a major Queensland power station, several food processing sites in New South Wales and a number of major educational facilities, shopping centres and entertainment complexes throughout Australia and New Zealand.

During the year the size of the cleaning business in Tasmania doubled through organic growth. These wins were offset by some major contract losses particularly in New Zealand and the economic impact of clients requiring cost reductions. Contract retention was in excess of 90 per cent, with a number of major contracts retained or renegotiated during the year.

Arrix, the prominent West Australian cleaning business, was acquired and integrated towards the end of the year. Arrix has significant contracts with the State Government providing cleaning services in the education and transport facility segments and a substantial customer base in the retail sector. It will make a full contribution in 2010.

Financial Discipline

Margins were difficult to hold as the year progressed and clients sought cost reductions in existing and new contracts.

Management’s continued focus on labour productivity improvements and the efficiency improvement program initiated in 2008 ensured a solid, competitive foundation for the division to withstand some of the economic conditions and client requests for cost reductions. The Division has a lean management structure and labour costs are managed on a weekly basis.

peopleDuring the year Spotless signed the Clean Start Agreement providing improved wages and conditions for cleaning staff working in central capital city locations in Australia. Australian Federal Government award modernisation will see further pay increases flow early in the new calendar year which will affect all cleaning companies. However, the majority of Spotless’ cleaning contracts have linked award escalation clauses.

Management continues its focus on self delivery rather than subcontracting, producing improved staff motivation, career opportunities and better service for clients.


Cleaning Services

GrOwtH• Worked with clients to manage costs

• Contract wins including a major Queensland power station, shopping centres and industrial sites throughout Australia and New Zealand

• Acquired Arrix significantly increasing our presence in Western Australia

fInAnCIAL dISCIPLInE• Labour management and productivity improvements reduced

costs and ensured competitiveness

PEoPLE• Safety – reduction in the 12 month rolling average

CIFR of 18.3 per cent

• Signed Clean Start Agreement – improving wages and conditions of CBD employees

• Safety program rolled out in New Zealand

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A poor safety record in New Zealand was reversed during the year with the introduction and roll out of the comprehensive safety@spotless program, which is embedding a safety culture and process for employees across all sites. The 12 month rolling average CIFR for the division improved by 18.3 per cent on the prior year.

Participation in the vocational training program as part of the Australian Federal Government Traineeship Scheme continues to provide on the job training. Employees receive Certificate 3 in Cleaning Maintenance upon completion of the course.

The rollout of hand held and wireless technologies is improving the tracking and reporting of the cleaning delivery for clients and productivity of line management teams.

Outlook2010 will benefit from a full year contribution of Arrix and mobilising three major new contracts at the end of financial year 2009.

Business development opportunities in specialised cleaning will continue to be explored along with opportunities to provide cleaning to other Spotless clients.

Account retention remains a key focus in financial year 2010 and will be achieved through consistent delivery, quality control and cost management.

Revenue is expected to grow at a faster rate than margin with clients continuing to respond cautiously to economic conditions and the general requirement to be competitive in the markets Spotless operates within.

SpECIALISED CLEANING IS prOVIDED AIrSIDE At AIrpOrtS, IN FOOD prODuCtION FACILItIES, HOSpItALS, CASINOS, OFFICES AND rEtAIL OutLEtS.

CLEAnInG SERVICESRevenue: $243.3 million

EBIT: $11.5 million

5,000FACILItIES CLEANED EVEry DAy

8,700EMpLOyEES

2,200+SItES CLEANED FOr NAtIONAL CuStOMErS IN AuStrALIA AND NEw ZEALAND

280+SCHOOL AND HIGHEr EDuCAtION FACILItIES CLEANED


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Laundry Services recorded a year of good growth in healthcare linen. This result was tempered by some contraction in demand for workwear garments due to clients responding to the poor economic conditions. In financial year 2009, revenue grew by 0.8 per cent over the prior year to $225.6 million. EBIT fell 4.6 per cent to 26.7 million. Garments, which generate higher gross profit margins than linen, experienced a challenging year as existing customers reduced their workforce, closed/scaled back operations or sought price reductions, contributing to overall EBIT decline.

GrowthSales growth was driven by new business, particularly new healthcare linen contracts won through a combination of hospitals outsourcing their linen for the first time or through competitive tender processes. In addition, all major healthcare linen contracts were successfully renewed in financial year 2009.

Garments experienced a decline in its client base, mainly through the loss of a number of small accounts and the contraction of operations amongst larger customers. It is pleasing to note that a number of major garment contracts with national clients were successfully renewed in financial year 2009. A Client Retention Strategy was implemented as a key platform for retaining current clients, providing a strong base for future growth opportunities.

New Zealand revenue was impacted by a downturn in the accommodation market. However, significant internal efficiency and productivity improvements in New Zealand laundry plants resulted in an improved margin over the prior disappointing year.

Spotless acquired Pearl laundry (Ensign – North Rocks) in May. This enabled Spotless to meet increased demand in both healthcare and accommodation linen in Sydney. NSW operations were restructured into specialised plants for healthcare, hospitality and garments.

Financial DisciplineOperational performance benchmarking continues to be a key focus area to maximise profitability. Financial year 2009 delivered a year

on year productivity improvement of 3 per cent in linen sites and 5.5 per cent in garment sites as part of ongoing efficiency programs.

Investment in new materials handling plant and equipment in Western Australia and South Australia provided productivity improvements. The full impact of the benefits of these investments will be evident in financial year 2010. Continued investment in plant and equipment upgrades will be made in 2010, driving ongoing productivity improvements.

Laundry Services continued to invest in energy reduction projects with the ongoing roll out of water re-use equipment the major project for financial year 2009. This equipment contributed to a reduction in water consumption over the prior year of a further 6.4 per cent of litres of water used per kilogram laundered. Trials also commenced into low temperature washing technology which will further reduce energy consumption and this project will continue into 2010. The optimisation of distribution and logistics channels to reduce vehicle fuel consumption and costs continued during the year with all garment sites now using route optimisation. Fuel consumption has now fallen by 50,000 litres annualised or 13 per cent over the period prior to the introduction of the optimisation project.

GrOwtH• Good growth in healthcare linen from contract wins and

hospital outsourcing

• Acquired a new laundry in Sydney to meet increasing demand

fInAnCIAL dISCIPLInE• Efficiency and productivity improvements in New Zealand

• New materials handling equipment improved productivity

• Energy reduction investments reduced costs

PEoPLE• Safety – reduction in the 12 month rolling average

CIFR of 25.2 per cent

• Pearl Laundry employees joined the Spotless team


Laundry Services

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A continuing focus has been applied to minimising significant investment in linen and uniform stocks.

peopleThere remains a strong commitment to safety throughout the laundry division. A reduction in incidents continues to be achieved through the application of safety disciplines and the development of a safe work culture.

Financial year 2009 saw a combined Australia and New Zealand year on year improvement in safety resulting in a rolling 12 month average reduction in CIFR of 25.2 per cent.

All employees at the Pearl laundry transferred to Spotless within the acquisition phase and are now operating under Spotless employment terms.

The restructuring of the division and alignment of human resources to the growth strategy continued. The business

development team was restructured and the sales offerings redefined, which helped minimise the impact of the market decline in garments and has created a stronger platform for future growth.

OutlookAs the financial year 2009 closed, healthcare linen continued to grow whilst the pressure on garments remained. Margin pressures are expected to persist as clients continue to seek cost reductions to help manage their own financial position.

The 2010 financial year will see continued growth in the healthcare linen business and a focus on minimising any further decline in garments.

Work has begun on a new $20 million laundry in Brisbane which will service South East Queensland. The new laundry will be a world-class green facility optimising water and energy usage.

LAundRy SERVICESRevenue: $225.6 million

EBIT: $26.7 million

20COMMErCIAL LAuNDry pLANtS ACrOSS AuStrALIA AND NEw ZEALAND

95,000tONNES OF LINEN AND wOrk GArMENtS LAuNDErED EVEry yEAr

160+HOSpItALS prOVIDED LINEN – SOME rECEIVING StErALISAtION SErVICES

2,500EMpLOyEES


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Braiform sales and profit in financial year 2009 declined over the prior year. The decline was a direct reflection of the recession-induced tough retail trading conditions in North America and Europe resulting in a reduced demand for garment hangers across Braiform’s main markets. Revenue was also negatively impacted by lower unit selling prices resulting from lower input costs and increased market competition. The combination of these factors resulted in a decline in revenue of 5.9 per cent to $320.7 million over the prior year. EBIT declined 56.1 per cent to $6.9 million.

Second half performance was significantly better than the first with the benefits of performance improvement initiatives and cost reduction programs providing a sound platform for profit growth despite the persistent poor economic conditions impacting demand.

GrowthRevenue in the second half was positively impacted by a campaign focused on hanger sales to Asian-based garment manufacturers. Of particular note in financial year 2009 were results from a concerted effort and focus on selling the closed loop re-use program in North America and Europe. Braiform is well positioned for growth in 2010 with two new European contracts signed, commencing in the first half of financial year 2010 that will underpin revenue growth.

Braiform also provides a range of garment ticket, label and packaging products and services to the retail sector in Europe that are highly complementary to the garment hanger product offer. Braiform intends leveraging its expertise in the print and packaging products market to address specific growth opportunities identified with key retailers in North America.

Financial DisciplineIn 2009 Braiform continued to reduce costs while maintaining the cost reductions achieved during the prior year. Employee numbers were reduced during the year as a direct result of continued business restructuring and back office technology improvements,

which streamlined business processes and improved efficiency. During the year investment was made in a single global business enterprise system that provides improved management information. The system further consolidates the global organisation structure providing a platform for business to business back office integration with client information technology systems.

Significant progress was made during the year on inventory management, resulting in lower stock levels, increased stock turn rate and more efficient production scheduling and use of working capital. In addition, by further consolidating moulders and warehousing facilities into regional hubs, production planning improved and economies of scale increased. Resin costs stabilised in the second half reducing raw materials costs yielding improved product margins.

Product development and capital investment is focused on maximising returns from a standardised range of garment hangers specifically built for the rigors of closed loop re-use. The new range of garment hangers was developed with a more universal application to the division’s major markets and wider client base, significantly enhancing global supply chain efficiency, product availability and reduced inventory levels in all stocking locations.

peopleAt the end of financial year 2009, Braiform had 830 employees globally, which is a reduction of more than 17 per cent on the prior year. Over and above specific skills and customer service based training, Braiform provides comprehensive programs of induction, training and coaching in the area of Occupational Health, Safety and Environment, and product quality and technical training. The global roll out of the safety program ‘safety@spotless’ was completed, providing a consistent, cultural approach to safety improvement across all global locations.

Management depth and technical capability has been enhanced with the recruitment of experienced operators into key positions such as quality management and human resources.

revieW oF operAtionS – retAiler ServiceS

Braiform

GrOwtH• Economic conditions reduced retail demand for garment hangers

• Two new European contracts signed for closed loop re-use program

fInAnCIAL dISCIPLInE• Restructuring continued

• Technology improvement streamlined processes and improved efficiency

• Lower raw materials costs due to resin costs stabilising

PEoPLE• Safety program rolled out

• New management and professional capability recruited

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OutlookThe 2010 financial year will see continued growth for Braiform through client uptake of the new European closed loop hanger re-use contracts and increased market penetration in Asia and the United States market with the print and packaging offer. The focus on selling re-use programs into Europe and North America will continue, with a number of client trials to be undertaken early in 2010.

The print and packaging offer, where Braiform provides all of the items required to make a garment ready for retail, including swing tags, labels, stiffeners and packaging, will be vigorously pursued and extended to new markets during the year. Also being promoted is the leveraging of the existing global closed

BrAIFOrM prOVIDES GArMENt MANuFACturErS AND rEtAILErS GArMENt HANGEr SOLutIONS tHAt INCLuDE BOtH tHE SINGLE uSE HANGEr OptION AND tHE CLOSED LOOp rE-uSE prOGrAM wHICH SEES HANGErS rE-uSED up tO NINE tIMES.

RETAILER SERVICESRevenue: $320.7 million

EBIT: $6.9 million

3 billionHANGErS MANuFACturED AND DIStrIButED ArOuND tHE wOrLD EVEry yEAr

850 million +HANGErS NOw pArt OF tHE CLOSED LOOp rE-uSE prOGrAM

830EMpLOyEES wOrLDwIDE

30 +BrAIFOrM prOVIDES SuppLy CHAIN SOLutIONS ACrOSS MOrE tHAN 30 COuNtrIES

loop re-use supply chain for other items commonly used by garment retailers that are also well suited to Braiform’s unique re-use business model.

Completion of the global roll out of a standardised business information technology system will generate continued performance improvements and efficiency.

While the global economic outlook remains unclear, Braiform expects improved financial results in 2010 through continued focus on sustaining cost savings already achieved. The second half of each year is traditionally stronger than the first due to the product mix and summer versus winter seasonality in the northern hemisphere.


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SuSTAInABILITy

In 2009 Spotless continued its commitment to sustainable operations. the Company is committed to using our specialised knowledge, services and other resources to support our people, develop communities and improve our environmental impact.

During the year Spotless implemented a number of consistent global policies and processes related to safety and people, and the focus on auditing and measurement increased significantly.

EnVIRonmEnT In 2009 Spotless’ environmental management strategy focussed on water, waste and energy management.

water ManagementSpotless’ Laundry Services division processes more than 95,000 tonnes of laundry each year. Therefore, reducing the volume of water consumed is a key priority for the Company. In financial year 2009 Laundry Services achieved a 6.4 per cent reduction in water usage year on year to 15.10 litres/kg laundered. The Company’s water reduction achievements have been acknowledged by multiple state governments and additional investment in water re-use technology and water efficient equipment is planned for 2010.

waste ManagementA key aspect of the Retailer Services operations is the closed loop garment hanger re-use program. Garment hangers are collected at store at point of sale, transferred to warehouses, checked and washed and shipped back to approved garment manufacturers for re-use up to nine times. The program offers significant

environmental advantages. There are approximately 110 grams of Carbon Dioxide (CO2) emissions for every new hanger made and re-using a hanger up to nine times can save close to 1Kg of CO2 emissions per hanger, in addition to a significant reduction in landfill.

Braiform also recycles hangers not suitable for the re-use program, via a crushing and recompounding process that helps reduce costs, reduce the use of raw materials and improve waste management. These programs also deliver significant environmental benefits, compared to new hanger production.

Recycling is a priority on all Spotless sites whether an office, food outlet or client site. In particular, Spotless’ Cleaning Services division works closely with clients to establish and implement waste recycling plans, which have seen landfill reduce from 240 tonnes to 10 tonnes per month at a single site.

Energy and Greenhouse ManagementSpotless’ Environmental Policy provides a systematic approach for energy management across our global operations. A data management system is being implemented across all applicable Australian sites to enable National Greenhouse and Energy Reporting Act (NGER) reporting compliance. This system will be progressively implemented into Spotless’ locations worldwide.

In 2009 Spotless continued to invest in energy savings technologies and processes, particularly in the Laundry Services operations, which represents the majority of Spotless greenhouse gas production. Laundry Services reduced energy consumption by 8.8 per cent (gigajoule/per tonne) over the prior year. In addition, a new chemical system that enables a lower

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temperature and pH in the washing cycle was introduced at a number of laundry plants during the year. This system reduces the amount of energy needed for heating and the lower pH in waste water enables greater volumes of water to be recycled.

‘Green’ Laundry Work has begun on a new green laundry in Brisbane, which will service South East Queensland. The new laundry will be a world-class green facility optimising water and energy usage. Storm water harvesting, water recycling and photovoltaic cells are incorporated in the design of the laundry, which is due to be operational by the end of 2010.

truck route optimisation reduces fuel usage Truck route optimisation technology has been implemented at laundry plants in NSW, WA, South Australia and Queensland. The program has produced an average reduction in fuel usage of 13 per cent, or 50,000 litres annualised.

Chemical free cleaning Spotless’ Cleaning division is constantly reviewing new technology and has transitioned to environmentally friendly equipment such as chemical free and water recyclable scrubbers, microfibre cloths and the use of green chemicals at a number of locations.

Food Services Green table and Green Globe involvement Spotless’ Food Services division works with clients to calculate, assess and address the energy, waste and water usage at specific sites. For example; Epicure Catering is working with the Melbourne City Council to receive accreditation under the Green Table Australia Scheme. The Spotless managed Perth Convention

Exhibition Centre participates in the internationally recognised Green Globe Accreditation program to minimise waste, use energy and fresh water efficiently, reduce the use of hazardous substances and transportation associated with catering.

CommunITy InVESTmEnT In 2009 Spotless continued its commitment to community development by donating our services, our expertise, access to facilities and venues, localised community involvement, and funds, all totalling almost $1 million. Spotless also donates surplus food to those in need, has an active indigenous employment program and provides jobs for disadvantaged young people.

Victorian Bushfire reliefSpotless’ contribution to Victorian bushfire relief included industry expertise, catering support and direct funds. Spotless made contributions valued at more than $665,000.

• Spotless prepared and provided more than 7,000 meals to fire fighters, volunteers and bushfire evacuees throughout the disaster period, including hundreds of meals daily at the Healesville Relief Centre.

• The Company matched employee financial donations to the Red Cross Bushfire Relief fund, with a combined total of $134,000.

• As caterer for the MCG, Spotless was pleased to contribute all profits from the Melbourne Sound Relief concert to the bushfire relief effort. The event was attended by approximately 80,000 people.


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20

SuSTAInABILITy conTInued

Charity, fund raising and community support In 2009 Spotless continued its active support of fund raising activities. Contributions included; the use of corporate suites, Spotless venues and catering services, donation of catering profits, and a wide variety of sponsorships. Involvement in programs such as SecondBite, a program that donates food to more than 70 charities in Victoria and Tasmania, also continued throughout 2009.

EmploymentSpotless supports Whitelion, an organisation that works with highly vulnerable young people, by contributing funds, event catering and permanent job placement within the Spotless business.

Through its indigenous employment program Spotless is committed to employing at least 170 people from indigenous backgrounds over the next 12 months.

Working with the Liquor Hospitality and Miscellaneous Workers Union, Spotless Food Services division was part of a program to create opportunities for immigrants from the Horn of Africa.

PEoPLEThe Spotless team consists of 32,000 people and a vast network of thousands of subcontractors across more than 30 countries. During 2009 emphasis has been on the implementation of common policies, procedures and recognition across all geographic regions and divisions.

SafetySafety is the cornerstone of the company’s people agenda.

Safety Performance In 2009 Spotless delivered a pleasing 21.7 per cent reduction in the rolling 12 month Combined Injury Frequency Rate (CIFR). In 2009 one Spotless employee died at work. This regrettable incident has further strengthened the company’s commitment and focus on safety training, incident prevention and personal accountability.

Safety TrainingA number of training initiatives were introduced during 2009 including additional on line training, a new safety intranet site and an enhanced online contractor induction program – 9,000 contractors completed the program during the year.

Site manager training in site safety risk profiling and hazard awareness was also rolled out across the company during the year. This training enables managers to identify and control Occupational Health Safety and Environment risks within their areas of responsibility.

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Safety Incident Reporting Incident notification and reporting has been consolidated to provide real time reporting and analysis across the Group. The system enables managers to access information in either a consolidated form or at a detailed level covering a single incident.

Safety InvestmentDue to the potential severity of elecrical incidents, Spotless invested more than $950,000 to provide employee protection through installation of Residual Current Devices (RCDs), either hard wired at the source or portable, at client and Spotless sites. A review of the Electrical Safety Management plan and a new online training program were developed during the year for employees and subcontractors.

training and DevelopmentVocational Training and educationSpotless’ training program ensures employees receive nationally recognised skills and qualifications. In Australia, more than 1,000 people undertook vocational training programs, which provide training and assessment in the workplace, combining on-the-job knowledge and experience with nationally recognised externally provided training.

new Zealand Language, Literacy and numeracy developmentIn New Zealand, Spotless completed the first stage of a long term Language, Literacy and Numeracy (LLN) program. The LLN program resulted in a 30 per cent average increase in reading ability amongst participants. Spotless’ LLN program will be rolled

out across New Zealand over the next five years. Spotless is Chair of the New Zealand Employer Champions Forum, a government-coordinated group comprised of large employers who have an interest in the progression of workplace literacy.

diploma of Management During 2009 Spotless sponsored seventy Spotless employees from around Australia to complete Diploma of Management studies via the Australian Institute of Management.

Spotless new Zealand Growing Futures programIn 2009 more than 50 annual scholarships were awarded to the children of New Zealand employees. The scholarships contribute to the cost of tutoring in specific education or musical disciplines or towards the cost of uniforms and equipment for sporting pursuits.

Employment conditionsclean startDuring the year Spotless signed the Clean Start Agreement with the Liquor Hospitality and Miscellaneous Workers Union to provide improved wages and conditions for cleaning employees working in the central business districts of Australian capital cities.

Parental leavePaid parental leave is available to eligible female employees providing them with up to eight weeks paid leave.

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BoARd of dIRECToRS

peter J Smedley BCom, MBA FAICDchairman, independent non-executive director

Peter was appointed a Non-executive Director on 8 December 2006 and Chairman on 9 February 2007.

Peter has extensive commercial experience and knowledge gained through his current and previous roles. He is Chairman of OneSteel Limited and Care Australia, Deputy Chairman of the Colonial Foundation and Director of Care International, The Australian Ballet and The Haven Foundation.

Peter was formerly Managing Director and Chief Executive Officer of Colonial Group Limited, Mayne Group Limited and Chairman of the State Bank of New South Wales, Deputy Chairman of Newcrest and Director of Austen and Butta Limited, and Shell Australia Limited.

Peter is a member of the Governance and Nominations Committee (Chairman), Human Resources Committee, Operational Risk Committee (Chairman) and Strategy Committee (Chairman).

Subsequent to the date of this report, Peter stepped down as Chairman of the Governance and Nominations Committee.

Other listed Company Directorships held during the last three years:

• OneSteel Limited – appointed 23 October 2000.

Josef (Jo) p Farnik BEc, CAexecutive director

Jo was appointed an Executive Director on 25 February 2008.

Jo joined Spotless Group Limited in April 2007 as Group General Manager, Strategy Development & Communication, later adding Chief Executive Officer, Retailer Services to his responsibilities. He was appointed Managing Director and Chief Executive Officer on 2 July 2008.

Jo has held a number of senior roles spanning a broad range of industries ranging from Marketing Planning Manager to Managing Director and Chief Executive Officer in areas of Retail Sales, Marketing, Operations, Supply Chain Management, Procurement, Information Technology and Corporate Strategy with companies such as Pacific Dunlop, Royal Dutch Shell – The Hague, Shell Australia, Shell Oil Houston and Tattersalls.

Jo is a member of the Information Technology Committee, Operational Risk Committee and Strategy Committee.


• Nil.

Alan E Beanland BSc., FAICDIndependent non-executive director

Alan was appointed a Non-executive Director on 20 June 2008.

Alan has extensive experience across four continents as a Director, Senior Executive, Consultant and Business Developer within the Information Technology and Finance sectors and has advised Australian and Asian Groups on their international business expansion activities.

Alan is Chairman of Superpartners and a Director of Dragon Mountain Gold Limited and Hancock Victorian Plantations.

Alan is a member of the Audit, Finance and Risk Committee, Information Technology Committee (Chairman) and Occupational Health, Safety and Environment Committee.


• Dragon Mountain Gold Limited – appointed 15 May 2007.

Bronwyn k Morris BCom, FCA FAICDIndependent non-executive director

Bronwyn was appointed a Non-executive Director on 23 May 2007.

Bronwyn is a Chartered Accountant and former partner of KPMG. Bronwyn’s expertise and interest in the areas of audit and risk management are of significant benefit to Spotless.

Bronwyn is a Director of Brisbane Marketing Pty Ltd, Care Australia, QIC Limited, Taylors Group Limited and The Royal Automobile Club of Queensland and is a Councillor of Bond University. She is a former Chairman of Queensland Rail and a former Director of Colorado Group Limited.

Bronwyn is a member of the Audit, Finance and Risk Committee (Chairman), Information Technology Committee and Occupational Health, Safety and Environment Committee.


• Taylors Group Limited (listed on the NZX) – appointed 21 February 2008

• Colorado Group Limited – Director from 31 October 1999 to 15 February 2007.

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Lawrence B O’Bryan BComIndependent non-executive director

Lawrie was appointed a Non-executive Director on 1 September 2000.

Lawrie’s financial expertise spans across the USA, Asia, Australia and New Zealand regions. He has held a number of senior financial roles which include Vice President Finance Asia Pacific with WR Grace & Co.

Lawrie is a member of the Audit, Finance and Risk Committee, Governance and Nominations Committee, Information Technology Committee and Operational Risk Committee.

Other listed Company Directorships during the last three years:

• Nil.

Dean A pritchard BE, FIE Aust, CP Eng., FAICDIndependent non-executive director

Dean was appointed a Non-executive Director on 23 May 2007.

Dean is a Civil Engineer and is Chairman of Steel & Tube Holdings Limited a subsidiary of OneSteel limited (listed on the NZX) and Director of Eraring Energy, OneSteel Limited and Oz Minerals Limited.

Dean formerly served as Chairman of ICS Global Limited, Chief Executive Officer of Baulderstone Hornibrook and a Director of Railcorp.

Dean is a member of the, Governance and Nominations Committee, Human Resources Committee and Occupational Health, Safety and Environment Committee (Chairman).


• OneSteel Limited – appointed October 2000

• Oz Minerals Limited – appointed May 2008

• Steel & Tube Holdings Limited a subsidiary of OneSteel limited (listed on NZX) – appointed May 2005

• ICS Global Limited – Director from June 1999 to June 2007.

Elizabeth M proust BA(Hons)., LLB., FAICDIndependent non-executive director

Elizabeth was appointed a Non-executive Director on 20 June 2008.

Elizabeth has held leadership roles in the private and public sectors throughout Australia in Local, State and Federal Government and the oil and banking industries. She has held senior positions in the Victorian Government and was formerly CEO of the City of Melbourne.

Elizabeth is Chairman of Nestle Australia Limited, a Director of Insurance Manufacturers Australia Pty Ltd, Perpetual Limited, Queensland Trustee Pty Ltd and Sinclair Knight Merz Pty Ltd and a member of the Advisory Council at JPMorgan.

Elizabeth is a member of the Audit, Finance and Risk Committee, Human Resources Committee and Occupational Health, Safety and Environment Committee.

Subsequent to the date of this report, Elizabeth was appointed Chairman of the Human Resources Committee.


• Perpetual Limited – appointed 16 January 2006.

Geoffrey t ricketts LLB (Hons) (FInstD)Independent non-executive director

Geoff was appointed a Non-executive Director on 8 July 1996.

Geoff is a Consultant to Russell McVeagh Solicitors of New Zealand and has extensive legal expertise and commercial experience.

Geoff is Chairman of Lion Nathan Limited, a Director of Suncorp-Metway Limited and Chairman of Taylors Group Limited.

Geoff is a member of the Audit, Finance and Risk Committee, Governance and Nominations Committee, Human Resources Committee (Chairman) and Strategy Committee.

Subsequent to the date of this report, Geoff was appointed Chairman of the Governance and Nominations Committee and ceased to be a member of the Human Resources Committee.


• Lion Nathan Limited – appointed 13 June 1988

• Suncorp-Metway Limited – appointed 20 March 2007

• Taylors Group Limited – appointed 13 January 1992.


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GRouP ExECuTIVE mAnAGEmEnT TEAm

John Bishop Group General Manager Laundry Services

Nick Ente Chief Executive Officer Braiform

André Carstens Chief Financial Officer, Company Secretary

Michael Givoni Group General Manager Development

tim Sexton Group General Manager Food Services

wendy Field Group General Manager, Managed Services Managing Director Taylors Group Limited

Jeff pearce Group General Manager Human Resources

Anthony StevensChief Information Officer

Julianne page Group General Manager Cleaning Services

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Notes to the FiNaNcial statemeNts contInUEDfor the financial year ended 30 June 2009

2009 aNNual FiNaNcial statemeNts

corporate Governance 26

Directors’ Report 34

Remuneration Report 36

Income Statement 46

Balance Sheet 47

Statement of changes in Equity 48

cash Flow Statement 50

notes to the Financial Statements 511. Statement of Compliance 51

2. Basis of Preparation 51

3. Significant Accounting Policies 51

4. Change in Accounting Policy 58

5. Segment Information 59

6. Profit From Operations 61

7. Income Tax 62

8. Earnings Per Share 64

9. Dividends 64

10. Cash and Cash Equivalents 65

11. Current Trade and Other Receivables 67

12. Current Inventories 70

13. Other Current Financial Assets 70

14. Investments Accounted for Using the Equity Method 70

15. Other Non-Current Financial Assets 71

16. Property, Plant and Equipment 72

17. Goodwill 74

18. Intangible Assets 75

19. Current Trade and Other Payables 76

20. Current Borrowings 76

21. Current Provisions 76

22. Other Current Liabilities 78

23. Non-Current Borrowings 78

24. Other Non-Current Financial Liabilities 78

25. Non-Current Provisions 78

26. Other Non-Current Liabilities 79

27. Reserves 79

28. Share-based payments 80

29. Related Party Disclosures 81

30. Commitments for Expenditure 85

31. Contingent Liabilities 85

32. Leases 86

33. Remuneration of Auditors 87

34. Controlled Entities 87

35. Capital and Financial Risk Management 90

36. Acquisition of Business 98

37. Events After the Balance Date 100

38. New Standards and Interpretations not yet Adopted 100

Directors’ Declaration 101

Audit Independence Declaration 102

Auditor’s Report 103

Shareholder Information 105

corporate Directory 109Spotless Group Limited Annual Report 2009 : 25

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CORPORATE GOVERNANCE REPORTThis report outlines the corporate governance framework adopted by the Board of Spotless Group Limited (“Spotless”).

The Board is committed to achieving effective and prudent corporate governance practices for the Spotless group of companies. Spotless supports the Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and Recommendations, and sets out in this report Spotless’ compliance with those Principles.

The governance practices detailed in this report were in place throughout the reporting period and as at the date of this report. The Board regularly reviews and evaluates its governance practices as set out in this report to ensure ongoing effectiveness.

Shareholders may view the governance practices at the Corporate Governance section of the Company’s website (www.spotless.com) under the Investor Centre.

Role of Board of DirectorsIn accordance with the Constitution, the business of Spotless is to be managed by the Directors who may exercise all the powers of the Company as are not by the Corporations Act 2001 or by the Constitution, required to be exercised by the Company in general meeting.

The Board is responsible for the overall corporate governance of the Company. The Board Charter defines the primary role of the Board to be, to protect and enhance shareholder value, by striving for above-average financial and non-financial performance whilst managing risks faced by the Company.

The Board carries out this role through exercising the following functions:

• selecting and appointing the Managing Director and setting the remuneration and conditions of employment for the role;

• setting and reviewing objectives, goals and strategic direction for the Company with a view to maximising shareholder value;

• authorising the annual budget and supervising financial performance;

• overseeing the establishment of adequate controls and appropriate monitoring of financial and non-financial compliance;

• ensuring the establishment of high business standards, ethical conduct and fostering a culture of compliance and accountability;

• promoting the Company to, and communicating effectively with, key stakeholders to assist them in understanding the Company’s priorities, goals and strategic direction;

• approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestments;

• monitoring the performance of management in accordance with the core values, operating style, strategic priorities and Spotless’ Code of Conduct;

• overseeing an executive management succession plan;

• delegating authority in a transparent and appropriate manner to senior executives;

• ensuring a diverse and effective Board with appropriate operating standards and procedures for the Board and its Committees;

• ensuring that the principal business risks have been identified and the implementation and monitoring by management of a framework to manage those risks;

• ensuring the Company acts legally and responsibly on all matters; and

• ensuring proper and timely financial and governance reporting to shareholders.

All Directors must conduct themselves in accordance with the law and best corporate practice, in particular to ensure that they comply with each of the following principles:

• Directors act in the best interests of Spotless as a whole and with honesty and in good faith;

• Directors use care and diligence when carrying out their duties as Directors and act in a way that recognises that their primary duty is to the shareholders of Spotless whilst appropriately taking into account the interests of other stakeholders;

• Directors do not make improper use of their position as Directors or of information obtained from their position;

• Directors do not allow any personal conflicts of interest or the interests of any associate or related party to interfere with their duties to Spotless;

• Directors do not engage in conduct which is likely to attract undue negative publicity to Spotless or is likely to damage the Company’s reputation;

• each individual Director has an ongoing responsibility to exercise sound rational judgement and independence of mind and to take all reasonable steps to make proper enquiries when making decisions on behalf of Spotless;

• Directors recognise and respect the confidential nature of information to which they are privy in the course of exercising their duties and agree to honour the confidentiality of that information; and

• consistent with these principles, Directors seek to ensure that Spotless operates ethically, safely and profitably in the interest of all stakeholders.

The Directors may appoint a Managing Director for the period and on the terms they deem fit.

The Directors have conferred on the Managing Director all the powers of management of Spotless. The Managing Director is accountable to the Directors for the management and control of the affairs of the Company and its related bodies corporate and is responsible for the day-to-day decision making and ensuring the implementation of Board approved strategy.

corporate GoverNaNce

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corporate GoverNaNce contInUED

Spotless operates under a strict regime of delegated authority levels determined by the Board, which set out the limits of authority for management.

Management are regularly involved in Board discussion and Directors have opportunities for contact with a wider group of management and staff, which includes visits to Spotless operations.

Under the Spotless Constitution, the Board may delegate its responsibility to Committees. The Board’s standing Committees are set out on pages 29 to 31, each of which has its own Charter.

Board Charter & Board Committee ChartersThe Board has established a Board Charter and Board Committee Charters. These constitute a reference point for Directors, employees and investors in understanding Spotless’ approach to the processes, performance measures, values and ethical standards which govern Directors and employees.

The Board Charter for Spotless sets out the:

• powers and responsibilities of the Board;

• matters specifically reserved to the Board and those delegated to the Managing Director; and

• corporate governance procedures aimed at ensuring the effective operation of the Board.

The Charters are reviewed annually by the Governance & Nominations Committee and are published on the Spotless website.

Board AppointmentsAll Directors receive a formal letter of appointment from the Chairman which sets out the matters listed in ASX Corporate Governance Principle 1.1.

New Directors also receive a copy of the Board Charter and Corporate Governance Guidelines, Spotless Constitution and copies of key financial documents.

The induction of new Directors is overseen by the Chairman. In addition to receiving briefings from the Chairman, new Directors are provided with materials that outline their obligations and rights as individual Directors and as members of the Board. They are also provided with information and briefings from management to support and assist them in understanding Spotless and its operations. The Board induction process involves the following activities:

• individual briefings with the Chairman and Managing Director to discuss expectations and responsibilities;

• attendance at briefing sessions convened by the Secretary which include presentations on the business by executive management;

• provision of a comprehensive package of briefing materials in relation to the Company; and

• as appropriate, visits to Spotless facilities and meetings with management.

Briefings on specialist areas of the business are arranged for Directors and Directors are kept up to date with developments in the industry. Directors are encouraged to visit Spotless facilities and meet with management to gain a better understanding of the business operations of the Company.

Board Composition and IndependenceThe composition of the Board is reviewed regularly in relation to the appropriate mix of skills and expertise to assist with the achievement of the strategic direction. The Chair will be an independent Director and will be precluded from filling the role of Chief Executive Officer while he or she is the Chair. Succession planning for Directors is an ongoing function of the Chairman and the Board.

In considering new appointees to the Board, consideration is given to the ability of the appointee to contribute to the ongoing effectiveness of the Board, to exercise sound business judgement and to contribute to the development of the strategic direction of the Company.

The Spotless Board consists of eight Directors one of whom is a non-independent Executive Director. The Board will regularly assess whether each Non-executive Director is independent and each Non-executive Director will be required to provide to the Board all information that may be relevant to this assessment. Details of each Director’s qualifications, directorships of other listed companies within the past three years, experience and other responsibilities are given on pages 22 and 23 of this report.

Each Non-executive Director has been assessed by the Board as an independent Director. For these purposes an independent Director is a Non-executive Director whom the Board considers to be independent of management and free of any business or other relationship that could materially interfere with the exercise of unfettered and independent judgement.

Specifically, the Board considers that an independent Director is a Non-executive Director who:

• is not a substantial shareholder of the Company (as defined by s.9 of the Corporations Act 2001) or officer of, or otherwise associated directly with, a substantial shareholder of the Company;

• within the last three years has not been employed in an executive capacity by the Company or other Group member, or been a Director after ceasing to hold any such employment;

• within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another Group member, or an employee materially associated with the service provider;

• is not a material supplier or customer of the Company or other Group member, or an officer of, or otherwise associated directly or indirectly with, a material supplier or customer;

• has no material contractual relationship with the Company or another Group member other than as a Director of the Company;


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• has not served on the Board for a period the length of which could, in the Board’s opinion, interfere with the Director’s ability to act in the best interests of the Company; and

• is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

Directors must ensure that they disclose any material contract, relationship or interest in accordance with the Corporations Act 2001 and Spotless policies. Details of any such matters are set out in the Financial Statements and this report. Directors must strictly adhere to the constraints on their participation and voting in relation to matters in which they may have an interest in accordance with the Corporations Act 2001 and Spotless policies.

Each Director may be involved with other companies or professional firms which may from time to time have dealings with Spotless. Relevant dealings are reported in the notes of this report (recording related party dealings) as required by law.

Board EvaluationThe Governance & Nominations Committee facilitates the review of Board and Committee performance. This Committee examines the Board’s composition and achievements, and makes recommendations to the full Board regarding the appropriate mix of skills and experience at the Board table from time to time. External independent advisers will be engaged to assist these processes as necessary.

Matters considered in the assessment may include:

• the effectiveness of discussion and debate at Board and Committee meetings;

• the effectiveness of the Board’s (and Committees’) processes and relationship with management;

• the quality and timeliness of meeting agendas, Board and Committee papers and secretariat support; and

• the composition of the Board and each Committee, focusing on the blend of skills and experience.

The performance of individual Directors is assessed against a range of criteria which may include the ability of a Director to:

• consistently take the perspective of creating shareholder value;

• contribute to the development of strategy;

• understand the major risks affecting the business;

• provide clear direction to management;

• contribute to Board cohesion;

• commit the time required to fulfil the role; and

• listen to and respect the ideas of fellow Directors and members of management.

A review of Board performance in meeting stakeholder expectations was conducted by the Board during the reporting period, led by the Chairman. The Chairman reviewed individual Director performance with each Director during the reporting period.

RemunerationA detailed Remuneration Report is included as part of this Annual Report. The report details the basis of remunerating Directors, management and employees.

Remuneration details of each Director and relevant senior management is contained in the Remuneration Report on pages 36 to 45.

The Constitution provides that the total amount of Directors’ remuneration (excluding the Managing Director’s) must not exceed the amount set by the general meeting (currently $1.6 million). The amount paid to each Director is to be determined by agreement of the Directors.

The Constitution provides that, if a Director provides additional duties at the request of the other Directors, the Company may pay additional remuneration to that Director as determined by the other Directors.

A Director is entitled under the Constitution to be reimbursed out of the funds of the Company for reasonable travelling, accommodation and other expenses which are incurred whilst on business for the Company.

Independent Professional AdviceIn order to assist Directors in fulfilling their responsibilities, each Director has the right (with prior approval of the Chairman) to seek independent professional advice at the expense of the Company. The advice received is made available to the Board.

Board CommitteesThe following Committees have been established to assist the Board in the effective discharge of its duties:

• Audit, Finance & Risk Committee;

• Strategy Committee;

• Human Resources Committee;

• Occupational Health, Safety & Environment Committee;

• Governance & Nominations Committee;

• Operational Risk Committee; and

• Information Technology Committee.

In addition to these Committees, from time to time the Board may delegate powers to special purpose Committees created in accordance with the Company’s Constitution.

Each Committee has a Charter approved by the Directors setting out the membership, functions and reporting obligations of the Committee. Committee meetings are held in accordance with the relevant Committee Charter or as required.

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The membership of each Committee is set out on page 31. A table outlining the number of Board and Committee meetings held during the reporting period, together with the attendances at those meetings, is set out in the Directors Report at page 35.

Minutes from each Committee meeting are circulated with the Board papers for the next Board meeting and any recommendations adopted by the Directors are recorded in the Directors’ minutes of meeting.

The Managing Director and relevant senior management may be invited to attend Committee meetings at the request of the Committee.

Details of each of the Committees are as follows.

Audit, Finance & Risk CommitteeThe Audit, Finance & Risk Committee is comprised of five independent Non-executive Directors. Directors will be appointed to the Audit, Finance & Risk Committee having regard to their qualifications, experience and knowledge of the industry in which the Company operates.

Executives attend meetings of the Committee by invitation. In addition, the internal and external auditors may be invited to attend Committee meetings at the request of the Committee.

The Audit, Finance & Risk Committee meets at least four times each year. In February the Committee meets to consider the half yearly accounts and in August the Committee meets to consider the annual accounts. In May and November the Committee meets to principally consider risk and compliance matters.

The purpose of the Audit, Finance & Risk Committee is to assist the Board in fulfilling its statutory and fiduciary duties relating to the external reporting of financial information, the internal control and risk management framework, the independence and effectiveness of audit and compliance with laws, regulations and internal policies.

The responsibilities of the Committee are to:

• review the annual and half yearly accounts with the external auditor, review whether audits have been conducted effectively and that the accounts are presented fairly in accordance with Australian Accounting Standards and the Corporations Act 2001 and report thereon to the Board as appropriate;

• review all significant accounting policy changes and where appropriate, recommend them to the Board;

• monitor and report to the Board on the framework, adequacy and security of internal control, accounting and management information systems;

• approve policies for the oversight and management of material business risk;

• ensure a sound system of risk management and internal control is in place and that the system is operating effectively in all material respects in relation to financial report risks;

• monitor the working relationship between the internal and external audit functions and provide an open communication channel between internal and external auditors and the Board;

• ensure adequate audit coverage for all major financial risks of the business and report to the Board on any issues arising from this coverage;

• approve the internal audit risk assessment and related audit plan;

• review internal and external audit reports to ensure that where significant deficiencies in controls or procedures have been identified, management takes prompt remedial action and reports to the Board as appropriate;

• review, and in the case of external audit, agree fees and recommend to the Board on the appointment or replacement of the auditor. For internal audit, recommend to the Board the appointment of internal auditors;

• monitor the engagement of the external auditor to undertake non-audit services where the Company will accept the auditor’s performance of the engagements;

• assess the performance and independence of the external auditor and whether the Committee is satisfied that independence of this function has been maintained having regard to the provision of non-audit services;

• assess the performance and (where appropriate) the independence of internal auditors;

• monitor and report to the Board on relevant tax matters (including tax compliance procedures);

• review post implementation audits of major capital projects;

• monitor funding commitments and availability;

• assess and review the business risk process including major customer contracts, product liability, operational risk etc; and

• review major non-financial regulatory matters through the use of a compliance monitoring and reporting regime, which covers the following areas of exposure:

– asset and income protection (including both general and workers compensation insurance);

– trade practices;

– conflicts of interest;

– discrimination and harassment; and

– ethical standards.

To the extent required to carry out its responsibilities effectively, the Audit, Finance & Risk Committee will be provided with the rights of access to management, rights to seek explanations and additional information and access to the internal and external auditors.

The Charter of the Audit, Finance & Risk Committee is published on the Spotless website.


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Governance & Nominations CommitteeThe Governance & Nominations Committee is comprised of four independent Non-executive Directors and meets as and when required.

The Governance & Nominations Committee’s role is to:

• advise the Board on the Company’s governance processes and policies and recommend changes to the Board as appropriate;

• assess the necessary and desirable competencies of Board members;

• assist the Board in the selection and appointment of Board members;

• review Board succession planning (including the Managing Director); and

• ensure that there is an appropriate process for evaluation of the Board.

In forming its recommendations to the Board in relation to appointments, the Governance & Nominations Committee considers matters including:

• the skills, knowledge and experience necessary to allow it to meet the strategic vision for the business;

• the skills, knowledge and experience currently represented;

• any skills, knowledge and experience not adequately represented and agrees the process necessary to ensure a candidate is selected that brings those traits; and

• how Board performance might be enhanced, both at an individual Director level and for the Board as a whole.

To the extent necessary to perform its functions, the Governance & Nominations Committee will be provided with access to adequate internal and external resources, including access to advice from external consultants or specialists where necessary.

The Charter of the Governance & Nominations Committee is published on the Spotless website.

Strategy CommitteeThe Strategy Committee is comprised of two independent Non-executive Directors and an Executive Director and meets as and when required.

The Strategy Committee’s role is to assist the Board in fulfilling its responsibilities relating to the supervision of any significant acquisition, development or divestment opportunities, and providing guidance to management during negotiations as necessary. In addition, the Committee assists the Board in supervising the development and implementation of the corporate strategy for the Company.

The Charter of the Strategy Committee is published on the Spotless website.

Human Resources CommitteeThe Human Resources Committee is comprised of four independent Non-executive Directors and meets as necessary, but at least twice each year.

The responsibilities of this Committee are to:

• advise the Board on remuneration policies and practices relating to employees;

• make specific recommendations to the Board on remuneration packages, policies and procedures applicable to senior management including recruitment, retention and termination;

• review the remuneration of Non-executive Directors and recommend any changes to the Board;

• advise the Board in relation to share plans, incentive performance packages and succession planning;

• review processes relating to the identification and development of key, high potential employees;

• ensure adequate succession planning is in place; and

• review and recommend superannuation arrangements.

The Charter of the Human Resources Committee is published on the Spotless website

Occupational Health, Safety & Environment CommitteeThe Occupational Health, Safety & Environment Committee is comprised of four independent Non-executive Directors and meets at least four times each year.

The Committee’s role relates to occupational health, safety and environment matters. In this respect, it is responsible for:

• reviewing all significant policies and changes thereto and, where appropriate, recommending them to the Board;

• monitoring and reporting to the Board, as appropriate, on the adequacy of management systems;

• monitoring and reporting to the Board, as appropriate, on the adequacy of performance and compliance;

• ensuring adequate internal and external audit coverage for all major risks and reporting to the Board on any issues arising from this coverage;

• reporting to the Board specifically on workers compensation insurance and related management processes; and

• reporting to the Board specifically on any other significant health, safety and environment issues.

The Charter of the Occupational Health, Safety & Environment Committee is published on the Spotless website.

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Operational Risk CommitteeThe Operational Risk Committee is comprised of two independent Non-executive Directors, an Executive Director and the Chief Financial Officer and meets at least four times each year.

The Operational Risk Committee focuses on particular operational and business risks referred to the Committee by the Board. The duties of the Committee in respect of these risks include to:

• monitor and report to the Board on the critical operational and business risks;

• ensure monitoring, review and audit coverage for the operational and business risks are appropriate; and

• initiate any investigations or review of processes that are deemed appropriate for any specific critical risk.

The Charter of the Operational Risk Committee is published on the Spotless website.

Information Technology CommitteeThe Information Technology Committee is comprised of three Non-executive Directors and an Executive Director and meets at least four times each year.

The Information Technology Committee assists the Board in the effective discharge of its responsibilities in relation to information technology matters. In this respect, it is responsible for:

• monitoring and reporting to the Board as appropriate on the adequacy of technology systems;

• evaluating and advising the Board on the long-term Information Technology strategy for Spotless and ensuring alignment with the Spotless Business Strategy;

• assessing the prioritisation and progress of major Information Technology projects;

• assessing and reviewing all major Information Technology risks and the effectiveness of disaster recovery planning and Information Technology security;

• reviewing major Information Technology project post implementation assessments.

The Charter of the Information Technology Committee is published on the Spotless website.

Board Committee Memberships as at the date of this report

Audit, Finance & Risk

Governance & Nominations Strategy

Human Resources

Occupational Health, Safety & Environment

Operational Risk

Information Technology

Bronwyn K Morris (Chairman)

Peter J Smedley (Chairman)


Geoffrey T Ricketts (Chairman)

Dean A Pritchard (Chairman)


Alan E Beanland (Chairman)

Alan E Beanland

Lawrence B O’Bryan

Josef P Farnik Dean A Pritchard

Alan E Beanland


Josef P Farnik

Geoffrey T Ricketts

Dean A Pritchard

Geoffrey T Ricketts

Peter J Smedley

Bronwyn K Morris

Josef P Farnik Bronwyn K Morris

Elizabeth M Proust

Geoffrey T Ricketts

Elizabeth M Proust

Elizabeth M Proust

Andre Carstens



Subsequent to the date of this report the Committee memberships changed as follows:

• Geoffrey T Ricketts became Chairman of the Governance & Nominations Committee

• Elizabeth M Proust became Chairman of the Human Resources Committee

• Geoffrey T Ricketts ceased being a member of the Human Resources Committee

Lawrence B O’Bryan will retire from the Board and the Committees at the 2009 Annual General Meeting.


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Ethics and ConductThe Board is committed to uphold the highest standards of corporate and personal conduct. Spotless also recognises that its reputation is paramount in the development of the Company. To facilitate a culture of ethical behaviour, the Board has approved a Code of Conduct (“The Code”) which provides a framework by which all Spotless employees must operate.

This Code, which is provided to all Directors, officers, managers and staff (collectively “employees”), outlines the required standard of conduct to which all employees must adhere and commits them to high standards of conduct and compliance with the law.

Under the Code, all employees are required to:

• comply with the law;

• act honestly and with integrity;

• not place themselves in situations that may create conflicts of interest;

• use Spotless’ assets responsibly and in the best interests of Spotless; and

• be responsible and accountable for their actions.

The Code of Conduct is published on the Spotless website.

Dealing in SharesDirectors and employees are encouraged to be long-term holders of the Company’s shares. The Company has a policy on insider trading which prohibits short term trading in the Company’s shares.

All employees are prohibited from trading Spotless shares if they are aware of any price-sensitive information that has not been made public. Subject to this, Company policy permits Directors and senior management to deal in Company shares in the 30 day period from the:

• date of the Company’s Annual General Meeting;

• release of the half yearly announcement to the ASX;

• release of the full year announcement to the ASX; and

• release of a disclosure document offering equity securities in the Company.

For the avoidance of doubt, Directors and senior management are required to advise the Chairman or his delegate before trading in Company shares at all times including within the trading periods.

Directors are to advise the Board about any margin loan or lien over shares which may involve involuntary trading during blackout periods.

The Company’s policies prohibit speculative financial transactions and hedging transactions over Company shares.

Current shareholdings of Directors are shown on page 44 of the Remuneration Report.

The Company’s trading policies are published on the Spotless website.

Continuous Disclosure PolicyThe Board is committed to providing timely and relevant disclosure to the market and other stakeholders. Spotless has a clearly defined Continuous Disclosure policy to ensure compliance with its disclosure obligations under the ASX Listing Rules and the Corporations Act 2001.

Procedures are in place to support the policy, including periodic and immediate reporting protocols. Responsibility for managing the policy rests with the Company Secretary.

The Company’s Continuous Disclosure policy is published on the Spotless website.

Risk ManagementSpotless is committed to managing risk to protect its people, the environment, Company assets and its reputation as well as to realise opportunities. A risk and compliance management control framework assists Spotless to operate effectively and efficiently, achieve business objectives, ensure reliable reporting and comply with applicable laws and regulations.

The Board oversees the establishment and implementation of the risk management framework and policies, reviews the effectiveness of the Company’s implementation thereof and ensures investors are informed of material changes to the Company’s risk profile. The Board is assisted in this process through the Audit, Finance & Risk Committee, the Operational Risk Committee, the Information Technology Committee and the Occupational Health, Safety & Environment Committee by focusing the Company on risk oversight and management and on internal control.

These Committees provide advice to the Board and report on the status of the Company’s business risks through integrated risk management programs. These management programs cover areas such as the environment, occupational health and safety, operations, asset protection, financial reporting and internal control.

Chief Executive Officer & Chief Financial Officer CertificateSpotless has internal processes and procedures that have been implemented to manage financial integrity and business, operational and legal compliance risks. These processes are supervised by the Audit, Finance & Risk Committee.

The Chief Executive Officer and Chief Financial Officer have certified to the Board prior to signing the Financial Statements that:

• the Financial Statements for Spotless Group Limited for the year ended 30 June 2009 present a true and fair view, in all material respects, of the Group’s financial condition and

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operational results, are in accordance with the relevant accounting standards and are based on financial records that have been properly maintained;

• the above statement is founded, in all material respects, on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and

• the Group’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

This certificate, as well as the supervision by the Audit, Finance & Risk Committee, has enabled the Board to approve the Company’s Financial Statements for the year ended 30 June 2009.

External AuditThe external audit of Spotless is governed by the following policy:

• the external auditor must clearly demonstrate its independence;

• the external auditor must not provide services which are in conflict with the role of the auditor unless the prior approval of the Audit, Finance & Risk Committee is obtained;

• the quality of the audit must be reviewed annually;

• the lead audit partner must be rotated at the end of a period no longer than five years;

• the appropriateness of conducting an audit tender must be reviewed at the end of a period no longer than five years; and

• the services and fees provided by the external auditor must be fully disclosed.

The Audit, Finance & Risk Committee is responsible for overseeing the implementation of this policy.

The external auditor attends the Annual General Meeting to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor’s report.

Shareholder CommunicationsThe Board is committed to transparent and honest communication with shareholders. Shareholders are encouraged to make their views known to the Company and to directly raise any matters of concern.

Shareholders may choose to access Company information electronically. Spotless provides corporate information on its website (www.spotless.com) including:

• announcements lodged with the ASX;

• the half yearly and full year Financial Statements and results presentations;

• the Annual Report and Notice of Annual General Meeting;

• the Chairman’s and Managing Director’s address to the Annual General Meeting;

• webcasts of the Annual General Meeting;

• webcasts of half yearly and full year results presentations; and

• general information on the Company and its activities.

The Company’s website also has a Corporate Governance section where the Board and Board Committee Charters are published along with other Company policies which may be of interest to shareholders and potential investors.

The Annual General Meeting provides an important opportunity for shareholders to express their views and respond to Board proposals. Shareholders are encouraged to attend the Annual General Meeting.


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Directors’ report

Your Directors are pleased to present their report for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

DirectorsThe following people were Directors of Spotless Group Limited during the entire financial year and up to the date of this report, unless otherwise stated:

Peter J Smedley (Chairman);Josef P Farnik;Alan E Beanland;David G Davis (retired as a Director on 18 February 2009);Bronwyn K Morris;Lawrence B O’Bryan;Dean A Pritchard;Elizabeth M Proust;Geoffrey T Ricketts.

Details of the Directors’ qualifications, experience and responsibilities are set out on pages 22 to 23.

Company SecretaryAndre Carstens, who is currently the Chief Financial Officer, was appointed Company Secretary of Spotless Group Limited effective from 1 July 2008 and held that position throughout and at the end of the financial year. Andre is a member of the Institute of Chartered Accountants in Australia.

Principal ActivitiesThe principal activities of the Spotless Group of companies during the financial year ended 30 June 2009 were the provision of an extensive range of services and products to Business, Industry, Healthcare, Education, Resources, Government and Leisure activities in Australia and New Zealand and to garment based Retailers and Manufacturers throughout the world.

Consolidated Results and Review of OperationsThe net consolidated profit of the Spotless Group of companies for the financial year after income tax expense and outside equity interests was $42.7 million (2008: $26.0 million).

A review of the operations for the Spotless Group of companies and the results of those operations for the year ended 30 June 2009 are set out on pages 5 to 17.

Changes in State of AffairsThe Directors are not aware of any significant change in the state of affairs of the Spotless Group of companies that occurred during the financial year.

Subsequent EventsThere has not been any matter or circumstance that has arisen since the end of the financial year that has significantly affected, or may significantly affect, the operations of the Spotless Group of companies, the results of those operations or the state of affairs of the Spotless Group of companies in future financial years.

Future DevelopmentsThe likely developments in the Consolidated Entity’s operations are referred to in the review of operations contained in the announcement made to the market on 25 August 2009. The Directors believe, on reasonable grounds, that reporting further information, including expected future results, would unreasonably prejudice the interests of the Spotless Group of companies.

DividendsThe amounts set out below have been paid by the Company during the financial year or have been declared by Directors but not paid during the financial year up to the date of this report.

Franking Dividends Total paid/ % cents/share payable $m

Final 2008 Dividend (paid 3 October 2008) 60% 10.5 22.9

Interim 2009 Dividend (paid 17 April 2009) 100% 5.0 10.9

Final 2009 Dividend (payable 16 October 2009) 100% 6.0 13.1

The entire unfranked portion of the dividend is “conduit foreign income”. Accordingly the unfranked portion payable to non-residents which would otherwise be subject to 15% non-resident shareholder’s tax is exempt from that tax.

Performance Rights Granted to Senior Executives668,666 Performance rights were granted to Senior Executives on 20 November 2008 (2008: 439,717). The terms and conditions of these grants are set out in the Remuneration Report.

Share optionsThere are no options over unissued ordinary shares in the Company as at 30 June 2009 (2008: nil).

Environmental RegulationThe Spotless Group has processes in place to ensure that it is aware of and, at a minimum, meets the intent of Environmental legislation and regulations. It further has established programs to improve Environmental performance (e.g. Laundry water re-use and heat exchange, garment hanger re-use and recycling) which contributes to business effectiveness as well as providing socially responsible outcomes.

A detailed Environmental Report is on pages 18 to 21 of this Annual Report.

Indemnification of OfficersThe Company’s Constitution allows the Company to indemnify Directors and officers against liability which results from their serving as a Director or officer of the Company, subject to certain provisos.

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Directors’ report contInUED

During the year ended 30 June 2009, the Company paid a premium for insurance covering all Directors and officers of Spotless Group Limited and all controlled entities. The events covered by this policy are in respect of amounts that the Director or officer has become legally obliged to pay resulting from claims made during the policy period for loss caused, or alleged to be caused, by a wrongful act committed by a Director or officer while acting in that capacity. The contract of insurance prohibits disclosure of the limit of the indemnity or the amount of the premium.

The Company and its Directors have entered into a Deed of Indemnity, Insurance and Access. The executive officers of the Company and its subsidiaries are also entitled to the benefits of the Deed.

No amount has been paid pursuant to those indemnities in the year ended 30 June 2009 or since that date to the date of this report.

Non-audit ServicesDetails of the amounts paid or payable to the Spotless Group Auditor, Deloitte Touche Tohmatsu, for non-audit services provided during the year are set out in Note 33 of the Financial Statements.

In accordance with advice provided by the Auditor to the Board, the Directors are satisfied that the provision of non-audit services by Deloitte Touche Tohmatsu is compatible with the general standard of independence for auditors required by the Corporations Act 2001.

The Directors are of the opinion that the services as disclosed in Note 33 to the Financial Statements do not compromise the external auditor’s independence, based on advice received from the Audit, Finance & Risk Committee, for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the Auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

Auditor’s Independence DeclarationThe auditor’s independence declaration is included on page 102.

Proceedings Brought on Behalf of SpotlessThe Corporations Act allows members and other specified persons to bring actions on behalf of the Company. There have been no proceedings or applications brought on behalf of the Company pursuant to section 237 of the Corporations Act 2001.

RoundingsSpotless Group Limited is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the Directors’ report and the financial report have been rounded to the nearest hundred thousand dollars, unless otherwise indicated.

Attendance at Board and Committee Meetings between 1 July 2008 and 30 June 2009 Occupational Audit, Finance Governance & Human Health, Safety Information Operational Board & Risk Nominations Resources & Environment Technology Risk

Name (b,c) Held (a) Attended Held (a) Attended Held (a) Attended Held (a) Attended Held (a) Attended Held (a) Attended Held (a) Attended

P J Smedley 10 10 2 2 4 4 6 6

D G Davis 7 7 6 6 3 3 2 1

J P Farnik 10 10 4 4 6 6

B K Morris 10 9 7 7 4 4 4 4

L B O’Bryan 10 10 7 7 2 2 4 4 6 6

D A Pritchard 10 10 2 2 4 4 4 4

G T Ricketts 10 10 7 7 4 4

A E Beanland 10 10 7 6 4 4 4 4

E M Proust 10 10 7 7 4 4

(a) Meetings held while a member.

(b) The Strategy for the Spotless Group was overviewed by the entire Board. The Strategy Committee did not hold a separate meeting during the financial year.

(c) Messrs Elliott and Wilson resigned on 1 and 2 July respectively and therefore did not attend any meetings during the financial year.


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REMuNERATION REPORT

Remuneration Principles and FrameworkThe objective of the Spotless remuneration principles and framework is to pay market competitive remuneration that will enable the attraction, development and retention of Directors and executives. For this purpose market competitive remuneration includes an appropriate part of the reward mix, being related to performance and the achievement of measurable objectives linked to the creation of value for shareholders.

Board Oversight of RemunerationHuman Resources CommitteeThe Human Resources Committee of the Board is responsible for the oversight of management performance and capability, and the suitability and application of remuneration policies and practices in the Company.

The Terms of Reference of the Human Resources Committee are:

• review the compensation of Non-executive Directors and recommend any changes to the Board;

• advise the Board on compensation policies and practices relating to employees;

• make specific recommendations to the Board on remuneration packages, policies and procedures applicable to senior management including recruitment, retention and termination;

• advise the Board in relation to share plans, incentive performance packages and succession planning;

• review processes relating to the identification and development of key high potential employees;

• ensure adequate succession planning is in place; and

• review and recommend superannuation arrangements.

The Human Resources Committee is presently comprised of four independent Non-executive Directors. The Committee shall meet on at least two occasions per year. In the year ended June 2008 the Committee met three times and year ended June 2009 the Committee met four times.

Non-executive Directors’ RemunerationOverviewNon-executive Directors means non-employee Directors of Spotless Group Limited. This phrase includes both “independent” and “non-independent” Directors as defined by Spotless in the Corporate Governance Report contained in this Annual Report.

The structure of the Company’s Non-executive Director remuneration is separate from that applicable to Executive Directors and executives. Non-executive Directors’ base compensation is not linked to Company performance. Non-executive Directors are not granted share rights or options, and do not receive any bonus or other compensation in a way that would detract from their independence and impartiality.

In the determination of compensation and related arrangements for Non-executive Directors and Executive Directors, the Human Resources Committee makes recommendations to the Board for final decision. In fulfilling these responsibilities the Human Resources Committee engages external remuneration consultants for independent advice and market comparative data. This advice takes into consideration the level of fees paid to Board members of other comparable Australian corporations, the size and complexity of the Company’s operations, the activities of the Company, and the responsibilities and workload requirements of the Board members.

Non-executive Directors’ Fee StructureDuring the year Non-executive Directors’ remuneration comprised fees in the form of cash, superannuation and the purchase of shares in the Company. Superannuation contributions are made into complying Superannuation Funds nominated by the Non-executive Directors.

Non-executive Directors of Spotless receive their annual fee for their service on the Board and on Committees. All Non-executive Directors sit on at least one Committee, and although there is provision in the Constitution for Non-executive Directors to be paid for extra services or special exertion, they are not paid a separate fee for accepting the role of Committee Chairman or for participation on Committees. No Non-executive Directors were paid an additional amount for extra services or special exertion.

The following fee structure has applied to Non-executive Directors since 1 July 2008.

Table 1. Non-executive Directors’ fees

Chairman $390,000 pa

Non-executive Director $130,000 pa

Committee Fees

Chairman Nil

Member Nil

At the 2007 Annual General Meeting, shareholders approved $1.6 million as the maximum aggregate amount of annual Non-executive Director fees.

Pursuant to the terms of the Company’s Constitution, Directors are entitled to be paid or reimbursed for all travelling and related expenses connected with their attendance at Board or Committee meetings, or when conducting other business of the Company.

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Non-executive Directors’ Share PurchasesFrom February 2007 Non-executive Directors were offered a long-term component of fees that formed part of the total amount of annually declared Directors’ compensation. This long-term component was not paid directly to the Director but applied (excluding any mandatory statutory superannuation contributions) to an on market purchase of shares in the Company. Under the terms of the Plan the shares purchased are held on behalf of each Non-executive Director until their retirement from the Board of Directors. Dividends in respect of these shares are paid at the time that the dividends are paid to shareholders.

The cost of acquiring shares was expensed at the time of purchase in the accounts of the Company. This ensured that the cost of providing the long-term component impacted accounts annually.

Consistent with the goal of maintaining the independence and impartiality of Non-executive Directors, the purchase of Plan shares is not dependent on the satisfaction of any performance condition.

As a result of the reform of the taxation of Employee Share Schemes announced by the Government in the 2009 Budget, the Board has determined that the Non–executive Directors shall from 1 July 2009 not apply part of their fees to the purchase of Company shares.

Non-executive Directors’ Retirement benefits (Discontinued Scheme)The Company’s Constitution provides for the payment of a retiring allowance to Non-executive Directors who have held office for more than 60 months (five years). In 2006 the Board determined that the Non-executive Directors’ retiring benefit would be discontinued from 1 July 2006.

It was resolved at the 2006 Annual General meeting that the accrued entitlements of each Non-executive Director’s retiring benefit would be held by the Company until the Director ceased office. Interest continues to accrue on a monthly basis on these balances and is included in the Non-executive’s Compensation report as “Prescribed Benefits”.

The provision for the accrued Retirement Benefits is set out in the table below (refer Note 21 to the Financial Statements):

Table 2. Provision for Retirement Benefits for Non-executive Directors

Accrued Benefit Interest Amount Accrued Benefit 1 July 2008 Earned Paid 30 June 2009 Name $ $ $ $

D G Davis 237,887 10,521 248,408 –

L B O’Bryan 237,887 12,347 – 250,234

G T Ricketts 337,007 17,491 – 354,498

M E Elliott 124,607 – 124,607 –

Total 937,388 40,359 373,015 604,732

Executive Director and Executive RemunerationExecutive Remuneration StructureExecutive Director and Executive remuneration is composed of the following elements:

• Fixed Annual Remuneration which includes cash and non cash benefits.

• Short Term Incentives (STI) which are bonuses granted on the achievement of annual performance targets.

• Long Term Incentives (LTI) which, subject to meeting performance standards, accrue from participation in the Spotless Group Executive Securities Plans.

The elements of remuneration and the applicable terms covering participation are incorporated in the employment agreements for each Spotless executive. Details of each element are as follows:

Fixed Annual RemunerationFixed Annual Remuneration is the aggregate of the various forms of benefit provided to an executive on an ongoing basis. The predominant part of fixed remuneration is base salary and executives are able to apply flexibility in the use of non cash benefits such as superannuation contributions, motor vehicle leases and salary sacrifice benefits in accordance with relevant taxation office guidelines.

The value of the benefits included in fixed annual remuneration is set out under the heading of Non Monetary Benefits in Table 3.

Fixed annual remuneration is reviewed each year (normally in June) or at the time of significant change in responsibility for an individual position. To assist in the remuneration review process the Company seeks independent advice from external remuneration consultants. The Human Resources Committee separately seeks independent advice from external remuneration consultants on executive remuneration.

Short Term IncentivesExecutives participate in the STI Plan where incentive entitlement to an incentive payment is dependent on the achievement of agreed financial, business and safety objectives over the 12 month business year.

The potential awards under the STI Plan are based on a market competitive percentage of fixed annual remuneration for the achievement of target results, with the potential for an incentive reward of up to a maximum of two times the target percentage for superior performance.

The incentive criteria for the Managing Director and Chief Executive Officer and for executives are set by the Human Resources Committee at the commencement of the business year. Any incentive awards (if applicable) are approved by the Committee at the end of the year based on the full year’s results.

For 2009, the performance criteria related to the achievement of specified financial and safety targets.

The emphasis on the achievement of financial targets is driven by the business imperative to improve financial performance.

REMuNERATION REPORT (continued)


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When applicable, the STI awards are normally paid in cash although individuals may elect to salary sacrifice into superannuation.

Long Term IncentivesDuring 2009 the Company had two LTI plans in place, the Spotless Group’s Securities Plan, and the LTI Share Plan.

Spotless Group Securities PlanThe Spotless Group Securities Plan was approved by shareholders in 1997. Executive Directors and executives were invited to join the plan which required them to enter into an agreement with the Company for an interest free loan to purchase shares in accordance with the Securities Plan rules. These loans are shown at Note 29 to the financial statements.

The loan amount is fixed at the issue value regardless of a rise or fall in the market price of the underlying shares. The full amount of the loan must be repaid following the termination of employment with Spotless.

The employees receive dividends as they are declared, however they are not permitted to dispose of the shares until any outstanding loan amount is repaid.

The plan was closed to further allocations in 2007 but remains in place for the management of securities and loans on issue.

Long Term Incentive Share PlanThe LTI Share Plan was established in 2006. The plan provides for annual grants of performance rights to be made based on a three year performance period; with entitlement to vest only in the event participants achieve target criteria at the end of the three year period.

• Target Performance Criteria

The target performance criteria focus directly on shareholder value i.e. non-diluted earnings per share (EPS) and relative total shareholder return (RTSR).

• Assessment of performance against measures

Vesting for 75% of each grant of Performance Rights is based on EPS criteria related to growth over three years. The EPS growth required and the potential rewards are set out in the following table:

Performance 12% 10% 6% Over 3 Year Compound Compound Compound Period Annual Growth Annual Growth Annual Growth

Vesting Rate 100% of EPS 75% of EPS 50% of EPS (Potential Award) Component Component Component

Vesting for 25% of each grant of performance rights is based on RTSR criteria measuring the relative return to shareholders based on the share price movement and dividends paid compared to other entities in the ASX 100 to 200 companies. The relative return to shareholders and the potential awards are set out in the following table:

Performance Spotless Group is Spotless Group is Over 3 Year positioned at the positioned at the Period 75th percentile of RTSR 50th percentile of RTSR

Vesting Rate 100% of RTSR 50% of RTSR (Potential Award) Component Component

For performance between the minimum and maximum vesting targets, vesting is on a straight line sliding scale.

The Human Resources Committee believes that the performance measures chosen are consistent with market practice, are an effective means of linking performance with measurable, long term outcomes and reflective of the long term interests of shareholders.

Limit on Securities that can be issuedThe number of securities that can be issued pursuant to the plans must not exceed 10% of the issued capital of the Company. The issued securities as at the date of this report total 218,989,920. Hence the maximum number of securities which may be issued under the plans is 21,898,992. As at the date of this report there are 2,471,158 securities on issue under the plans, being 1.13% of issued capital.

634,212 Performance Rights were granted to eight participating executives in 2009. The value of grants made under the performance share plan in 2009 is set out under the column heading “Share-Based Payments” later in this report in Table 4.

Anti-hedging PolicyAs a condition of participation in the Spotless Group LTI Plans, executives are not permitted to limit their exposure to risk in relation to Spotless shares received as remuneration in a way that would interfere with exposure to fluctuations in the market value of those shares.

Executive Retention PlansSpotless has no retention plans in place for the Managing Director and Chief Executive Officer or senior executives.

Performance of Spotless/Measuring Business PerformanceA key objective of the executive remuneration policy is to link an increased proportion of executive reward to the performance of Spotless, with emphasis on the creation of sustainable value for shareholders.


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Over the period 1 September 2006 to 11 August 2009 the Company has slightly outperformed a Benchmark Index of ASX 100 to 200 companies as evidenced by the following chart:

40.0%

30.0%

20.0%

10.0%

0.0%

(10.0%)

(20.0%)

Cum

ulat

ive

tota

l sha

reho

lder

ret

urn

(30.0%)

(40.0%)

0.0%

0.0% 2.0%

(8.5%)

(31.2%)

Spotless Group Benchmark Index

(34.2%)

(2.2%)

36.2%

01-Sep2006

01-Sep2007

01-Sep2008

01-Sep2009

Source: IRESS as at 11-Aug-2009

Methodology: TSR = return from share price appreciation + return from dividends reinvested at the closing share price of the day the dividends were paid. Share prices based on a rolling five day average.

Note 1: The Benchmark Index comprises a sample of companies who were ranked within the 101st to 200th position of the S&P/ASX 200 index on both 01-Sep-2006 and 11-Aug-2009. Index TSR is based on the median of the TSRs of each Company in the sample.

Financial performance for the past five years is indicated by the following table:

2009 2008 2007 2006 2005 Year $m $m $m $m $m

Sales Revenue 2,383 2,442 2,569 2,517 2,681

Profit After Tax Attributable to Members 42.7 26.0 47.3 61.8 85.3

Earnings before Finance Costs, Income tax and Non-Recurring items 94.5 105.1 94.9 112.8 106.7

During 2009, dividends of $32.0 million were paid to shareholders. Spotless Group Limited’s shares traded at $2.76 on 1 July 2008 and $2.26 on 30 June 2009.

Year ended 30 June 2009 2008 2007 2006 2005

Share price (AUD) 2.26 2.59 4.86 4.80 5.20

Total dividends paid ($m) 32.0 36.0 42.7 39.6 40.1

Link Between Company Performance and Executive RemunerationThe Company did not meet the stringent incentive performance targets set for 2009 under the remuneration policy. The effect of the non-achievement of the target criteria on Spotless executive remuneration is outlined as follows:

Annual Remuneration ReviewThe Human Resources Committee conducted a review of Non-executive Director and executive remuneration in June 2009 and recommended to the Board, and the Board approved, that in view of the economic circumstances it was prudent not to increase Non–executive Director’s fees or the fixed remuneration for the Managing Director and Chief Executive Officer and the Spotless executives as would normally apply from 1 July 2009.

Short Term IncentiveBased on the Company and Business division performance for the year the Human Resources Committee has determined that no executives (including the Managing Director and Chief Executive Officer) were entitled to STI payments.

The bonus payments shown in Table 4 “Remuneration of Directors and Key Management Personnel” relate to performance in the 2008 year.

Long Term Incentive Plans • Group Securities Plan

The gap between the value of the loan shares held and the balance outstanding of the applicable loans (refer to Notes 13 and 15 of the Financial Statements) has widened as the underlying Spotless share price has fallen compared to June 2008. The executives involved remain responsible for the full value of the loans regardless of the share price.

• Performance Share Plan

Vesting of the initial Performance Rights grant was dependent on growth in Spotless Earnings per Share (EPS) and Relative Total Shareholder Return (RTSR) over the Performance period 2006 to 2009.

75% of the initial Performance Rights grant was subject to the EPS vesting criteria. Performance over the vesting period resulted in none of those Rights vesting. Under the Rules of the Performance Rights Plan there is no retesting for vesting of the Performance Rights.

25% of the initial Performance Rights granted are subject the RTSR vesting criteria. The measurement of performance will occur in August 2009 following the release of Company annual results to enable comparison with other entities that appear between 100 and 200 on the S&P/ASX 200 index.



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Executive Directors and Executives – Retirement BenefitsSpotless contributes to a range of superannuation and pension benefits schemes on behalf of its employees throughout the jurisdictions in which the group companies operate. These schemes reflect the statutory requirements and/or local market practice of the countries in which Spotless employs the employees.

Spotless does not operate its own superannuation fund and is therefore not exposed to any potential funding deficiencies in contributions to a defined benefit fund.

In Australia contributions are made on behalf of employees to externally managed funds at the compulsory superannuation rate of 9% (up to a statutory maximum of $13,745 pa for 2009) as determined by law.

Key Terms of Employment ContractsManaging Director and Chief Executive OfficerP A WilsonMr Peter Wilson stood down from the role of Managing Director and Chief Executive Officer on 2 July 2008. The change enabled Mr Wilson to take up the position of Executive Chairman Braiform (Spotless Plastics Pty Ltd) the corporate office of which is in Hong Kong. The appointment was to 31 December 2008, covering the balance of the term of his employment agreement. His fixed remuneration for the period continued at the rate of $1,432,000 pa.

At the cessation of the agreement on 31 December 2008 Mr Wilson was paid in lieu of accrued and untaken statutory entitlements calculated to the cessation date.

J P FarnikMr Jo Farnik was appointed to the position of Managing Director and Chief Executive Officer with effect from 2 July 2008. His service agreement is open ended with termination by either party giving 12 months written notice.

Mr Farnik’s remuneration comprises three components, base remuneration, short term incentive and long term incentive.

Fixed remunerationMr Farnik’s fixed (base) remuneration is at the rate of $900,000 per annum which comprises cash, superannuation and employment related benefits (including fringe benefits tax).

Under his Services Agreement, Mr Farnik’s base remuneration shall be reviewed by the Board’s Human Resources Committee on or before 1 July each year commencing 1 July 2009. Any alteration to his remuneration shall have effect from 1 July each year. Following a review in June 2009, the Human Resources Committee determined that Mr Farnik’s base remuneration would not be increased in July 2009.

Short Term Incentives (STI)The amount of any STI payment in each year is determined by the Board following assessment of Mr Farnik’s performance against financial, business, safety and personal targets set by the Board in consultation with Mr Farnik at the start of each financial year.

If Mr Farnik achieves all short term targets set for a particular financial year, he will be entitled to an amount equal to 60% of his base remuneration. If Mr Farnik exceeds short term targets set for a particular financial year, he will be entitled to an amount greater than 60% of his base remuneration to a maximum of 120% of the Base Remuneration. If Mr Farnik’s employment terminates for any reason other than by Spotless for misconduct, the Board, in its absolute discretion, will determine whether Mr Farnik is entitled to any of the STI which was set for the financial year in which the termination occurs, and, if so, the amount.

Key financial criteria to be met to qualify for STI payments in the year ended 2010 relate to Spotless EBIT, Operating Cash Flow and Return On Funds Employed, the same as for other participating executives. The Human Resources Committee has determined that, based on Spotless performance against the criteria in 2009, Mr Farnik was not entitled to a STI payment for the year.

Long Term IncentivesThe terms of Mr Farnik’s Services Agreement include participation in the Spotless’ Group Limited Long Term Incentive Share Plan (“LTI Share Plan”). This is the Plan applicable to all other participating executives within Spotless.

On commencement Mr Farnik became entitled to a grant of Performance Rights. The number of Performance Rights is calculated by dividing 90% of his base remuneration by the basic share price and then rounded to the nearest 1,000 Performance Rights. The basic share price for the ten days volume weighted average trading price (VWAP) of Spotless Group Limited shares on the ASX following the 2009 results announcement by the Company in August 2008 was $3.57. Accordingly 227,000 Performance Rights were granted.

The commencement date for the three year performance period to determine the vesting of the Performance Rights related to his appointment as Managing Director and Chief Executive Officer is 1 July 2008.

The number of shares Mr Farnik will actually receive from each allocation of the Performance Rights (i.e. which vest) is determined according to measurement against two components of Performance Criteria, i.e. Earnings per Share (EPS) and Relative Total Shareholder Return (RTSR). Full details of the performance Criteria are set under the heading “Long Term Incentive Share Plan” on page 38.

At the first and second anniversaries of commencement Mr Farnik is entitled, under his employment contract, to grants under the arrangements set out above using the base remuneration at the time and the VWAP following the results announcements in 2009 and 2010 respectively. Thereafter, invitations and details for Mr Farnik’s participation in the LTI Share Plan shall be at the sole discretion of the Directors.


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As an Executive Director Mr Farnik is not eligible to participate in the Non-executive Directors Share Plan.

If the employment of Mr Farnik terminates by death, illness, incapacity, or by appropriate notice by either party he will be paid any amount owing in respect of base remuneration calculated to the date of the termination and any accrued but untaken statutory leave entitlements calculated to the date of the termination of Mr Farnik’s employment. In addition on termination of employment for any reason other than for cause, Spotless will pay to Mr Farnik any amount owing in respect of the STI provisions of the agreement and the LTI provisions of the agreement.

In the event Mr Farnik terminates his employment by giving one months’ notice within six months after the occurrence of a fundamental change, he will be entitled to a payment equivalent to 12 month’s base remuneration as applicable immediately prior to the date of termination, in addition to the payments referred to above. “Fundamental Change” means a change which occurs where, following a reorganisation, takeover of the Company, merger, scheme of arrangement or change of control of the Company or the demerger, reconstruction or amalgamation of all or part of the Company’s business Mr Farnik ceases to hold the position of Managing Director and Chief Executive Officer of the Company or the status, duties or authority of the position are materially diminished.

For a period of 12 months from the date of termination, Mr Farnik must not directly or indirectly engage in any activity that would compete with or be to the detriment of the Company.

Senior ExecutivesSpotless executive service agreements are mostly open ended with termination subject to the notice of termination provisions within the agreements. Executives may terminate their employment with six months written notice. The Company may terminate employment for cause or not for cause. If the Company terminates an executive’s employment, other than for cause, the Company shall give 12 months notice in writing or pay 12 months Fixed Annual Remuneration at the time of termination.

An executive who is terminated by the Company (other than for cause) shall be entitled to a pro-rata STI award based on the period of employment in the year, provided that at least six months has been served in the year.

If the employment of an individual executive terminates due to death, illness, incapacity, appropriate notice by the Company or by notice from the individual due to a fundamental change in the business, the Board in its absolute discretion may determine whether Performance Rights granted to the individual shall vest.

The executives are bound by “non compete” clauses which restrain them for a period of twelve months from taking up employment or engaging in activities which would be to the detriment of the Company.

Remuneration of Directors and Key Management PersonnelThe Key Management Personnel of Spotless are the Executive Directors and those executives that have authority and responsibility for planning, directing and controlling the activities of the Company. The Non-executive Directors of Spotless Group Limited and the Key Management Personnel for the year ended 30 June 2009 are:

Period Name Title (if less than full year)

Smedley P J Chairman

Beanland A E Non-executive Director

Davis D G Non-executive Director To 15 February 2009

Elliott M E Non-executive Director To 1 July 2008

Morris B K Non-executive Director

O’Bryan L B Non-executive Director

Pritchard D A Non-executive Director

Proust E M Non-executive Director

Ricketts G T Non-executive Director

Wilson P A Managing Director and To 2 July 2008 Chief Executive Officer

Wilson P A Executive Chairman 3 July to 31 Dec 2008 Braiform

Farnik J P Managing Director and From 2 July 2008 Chief Executive Officer

Bishop J F Group General Manager Laundry Services

Carstens A Chief Financial Officer and Company Secretary

Ente N J Chief Executive Officer From 1 September Braiform 2008

Field W J Managing Director’s To 1 June 2009 Representative New Zealand

Field W J Group General Manager From 2 June 2009 Managed Services

Givoni M N Group General Manager Development

Lamell P C Group General Manager To 31 May 2009 Managed Services

Lamell P C Group General Manager From 1 June 2009 Sector Strategy

Page J Group General Manager From 1 September Cleaning Services 2008

Pearce J W Group General Manager Human Resources

Sulicich M Group General Manager To 31 August 2008 Cleaning Services

Sexton T J Group General Manager Food Services

Stevens A P Chief Information Officer From 2 March 2009

Watson K Group General Manager From 1 January Corporate and 2009 Public Affairs



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Table 3. Remuneration of Directors and Key Management Personnel 2009

% of Short Term Post Share-Based Rem 2009 Benefits Employment Payments Total At Risk

Salary Bonus Non- Other Superann- Termination Prescribed Equity Lapsed Monetary Payments uation Payments Benefits Settled* Rights

Non-executive Directors

Smedley P J 260,000 – 4,119 – – – – 130,000 – 394,119 –

Beanland A E 89,878 – – – 11,022 – – 32,599 – 133,499 –

Davis D G 89,449 – – – 5,367 – 10,521 – – 105,337 –

Elliott M E – – – – – – – – – – –

Morris B K 86,667 – – – 10,733 – – 32,599 – 129,999 –

O’Bryan L B 29,817 – – – 100,182 – 12,347 – – 142,346 –

Pritchard D A 77,401 – – – 19,999 – – 32,599 – 129,999 –

Proust E M 89,878 – – – 11,022 – – 32,599 – 133,499 –

Ricketts G T 130,000 – – – – – 17,491 – – 147,491 –

Executive Directors

Wilson P A 716,361 – 2,060 60,525 6,439 1,506,270 – – – 2,291,655 –

Farnik J P 1,026,356 72,500 4,119 – 42,644 – – 165,403 (66,457) 1,244,565 14

Executives

Bishop J F 203,289 21,870 – – 100,211 – – 29,754 (14,024) 341,100 11

Carstens A 515,384 22,000 4,119 – 50,615 – – 75,900 (66,457) 601,561 5

Ente N J 416,667 100,000 123,686 – – – – 45,168 – 685,521 21

Field W J 359,246 20,000 60,967 – – – – 21,319 – 461,532 9

Givoni M N 372,728 32,340 4,119 – 16,540 – – 2,285 (13,711) 414,301 5

Lamell P C 435,673 30,000 4,119 – 87,932 – – 80,243 (63,745) 574,222 8

Pearce J W 420,000 – 4,119 – 100,000 – – – – 524,119 –

Page J 243,559 15,518 – – 14,898 – – – – 273,975 6

Sexton T J 302,941 25,650 4,119 – 91,058 – – 38,939 (16,827) 445,880 11

Stevens A P 120,418 – 1,373 – 4,581 – – – – 126,372 –

Sulicich M 83,495 27,000 – – 3,436 – – 5,269 (14,488) 104,712 17

Watson K 168,127 – – – 6,872 – – – – 174,999 –

Total of Key Management Personnel 6,237,334 366,878 216,919 60,525 683,551 1,506,270 40,359 724,676 (255,709) 9,580,803

Balance of 5 Highest Paid

Gouldson S F 739,463 – 60,127 – – – – – – 799,590 –

Pizer T D 277,992 – 411,264 – 42,000 – – – – 731,256 –

* For Executives and Executive Directors, this represents an AIFRS accounting value for performance rights issued and does not reflect actual remuneration received by Key Management Personnel. The “Share-Based Payments Lapsed Rights” represents negative amounts reflecting the write-back of performance rights issued in February 2008 that lapsed in June 2009 due to performance related criteria not being met.

The amount of $1,506,270 paid to P A Wilson and reported under the heading “Termination Payments” relates to the payment in lieu of accrued and untaken Annual Leave and Long Services Leave at the expiry of his Employment Contract on 31 December 2008.

G T Ricketts was paid Directors fees of A$40,819 for 2009 and A$42,699 for 2008 by Taylors Group Limited (a 66.1% owned subsidiary)

B K Morris was paid Directors fees of A$20,410 for 2009 and A$7,643 for 2008 by Taylors Group Limited (a 66.1% owned subsidiary)


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Table 4. Remuneration of Directors and Key Management Personnel 2008

Share- % of Short Term Post Based Rem 2008 Benefits Employment Payments Total At Risk

Salary Bonus Non- Other Superann- Termination Prescribed Equity Monetary Payments uation Payments Benefits Settled

Non-executive Directors

Smedley P J 260,000 – 4,119 – – – – 130,000 394,119 –

Beanland A E – – – – – – – – – –

Davis D G 30,000 – – – 100,000 – 14,707 – 144,707 –

Elliott M E 119,266 – – – 10,734 – 7,704 – 137,704 –

Morris B K 86,667 – – – 10,734 – – 32,599 130,000 –

O’Bryan L B – – – – 100,000 – 14,707 30,000 144,707 –

Pritchard D A 86,667 – – – 10,734 – – 32,599 130,000 –

Proust E M – – – – – – – – – –

Ricketts G T 130,000 – – – – – 20,835 – 150,835 –

Executive Directors

Wilson P A 1,310,614 – 92,183 – 100,000 – – – 1,502,797 –

Farnik J P 483,729 – 39,119 80,000 40,528 – – 54,853 698,229 8

Executives

Anderson C J 287,611 – 4,119 – 35,443 – – 11,594 338,767 3

Bishop J F 177,652 – – – 77,725 – – 9,592 264,969 4

Carstens A 481,881 – 39,119 100,000 50,005 – – 54,853 725,858 8

Field W J 34,057 – 27,499 – 2,188 – – – 63,744 –

Givoni M N 276,983 – 26,619 – 14,779 – – 9,141 327,522 3

Geor D 550,047 – 45,367 – – – – – 595,414 –

Lamell P C 410,589 – 3,419 – 10,941 – – 62,329 487,278 13

Pearce J W 417,805 – 4,119 – 106,094 – – – 528,018 –

Sexton T J 260,421 – 4,119 – 90,443 – – 11,219 366,202 3

Sulicich M 354,844 – – – 34,417 – – 13,464 402,725 3

Total of Key Management Personnel 5,758,833 – 289,801 180,000 794,765 – 57,953 452,244 7,533,596

Balance of 5 Highest Paid

Feist R 174,949 – 121,169 – 8,832 433,526 – – 738,476 –

Davidson S 229,080 – 39,186 – 11,454 610,024 – – 889,744 –

Gouldson S F 699,767 – 80,245 – 20,858 – – – 800,870 –

D G Davis, P A Wilson and M Sulicich ceased being Key Management Personnel during the 2009 year. C Anderson ceased to be a Key Management Personnel on 30 June 2008.



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Equity Instruments Relating to Directors and Nominated Executives.The following table sets out each Director’s relevant interest in shares of the Company as at the date of this report:

Number of Fully Director Paid Ordinary Shares

2009 2008

Smedley P J 157,237 86,483

Beanland A E 12,723 –

Davis D G 30,567 28,861

Morris B K 24,095 5,242

O’Bryan L B 28,045 23,045

Pritchard D A 42,838 25,098

Proust E M 26,047 –

Ricketts G T 19,469 18,381

Farnik J P – –

The Company did not issue any options during the 2009 year (2008: nil).

Performance Rights Granted as RemunerationOn 20 November 2008 the following Performance Rights were granted as equity remuneration benefits under the Spotless Long Term Incentive Share Plan. The Performance Rights were issued free of charge and entitle the holder to one fully paid ordinary share in the entity (for no consideration) subject to meeting the vesting conditions. Details of the vesting conditions relating to the Performance Rights are provided on page 38 of this report.

Fair Value Performance per Right at Amount Date when Shares Rights Granted Vesting Grant Date Payable by Allocated or Name During 2009 Criteria $ the recipient Expiry Date Rights lapse

Farnik J P 170,250 EPS 2.04 Nil 30/6/11 30/6/11 56,750 RTSR 1.62 Nil 30/6/11 30/8/11

Bishop J F 31,880 EPS 2.04 Nil 30/6/11 30/6/11 10,627 RTSR 1.62 Nil 30/6/11 30/8/11

Carstens A 66,176 EPS 2.04 Nil 30/6/11 30/6/11 22,059 RTSR 1.62 Nil 30/6/11 30/8/11

Ente N J 52,521 EPS 2.04 Nil 30/6/11 30/6/11 17,507 RTSR 1.62 Nil 30/6/11 30/8/11

Field W J 24,790 EPS 2.04 Nil 30/6/11 30/6/11 8,263 RTSR 1.62 Nil 30/6/11 30/8/11

Lamell P C 63,656 EPS 2.04 Nil 30/6/11 30/6/11 21,219 RTSR 1.62 Nil 30/6/11 30/8/11

Sexton T J 42,016 EPS 2.04 Nil 30/6/11 30/6/11 14,006 RTSR 1.62 Nil 30/6/11 30/8/11


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Spotless Performance Rights Holdings – Key Management Personnel

Holding at Grants Lapsed Holding at Name June 2008 During 2009 During 2009 June 2009

Farnik J P 101,382 227,000 76,037 252,345

Bishop J F 17,279 42,507 12,959 46,827

Carstens A 101,382 88,235 76,037 113,580

Ente N J – 70,028 – 70,028

Field W J – 33,053 – 33,053

Givoni M N 16,895 – 12,671 4,224

Lamell P C 115,200 84,874 86,400 113,674

Sexton T J 20,735 56,022 15,551 61,206

Sulicich M 24,885 – 24,885 –

Total 397,758 601,719 304,540 694,937

Valuation of Performance Rights GrantsIn accordance with AASB 2 “Share-Based Payment” each Performance Right grant is valued as at the date of grant. The valuation of the 2009 Performance Rights grants was conducted by an independent valuer using the Monte Carlo simulation and Binomial tree models. For the Performance Rights with vesting subject to EPS growth the fair value is $2.04, and for the Performance Rights with vesting subject to Relative TSR the fair value is $1.62.

Shares Granted as RemunerationDue to the closure of the Spotless Group Securities Plan no loan shares were granted during the 2009 year. Share loans still in place from earlier year loan share grants to Key Management Personnel are:

Key Management Personnel Number of Shares Loan $

Wilson P A 1,781,704 7,478,117

Bishop J F 5,715 15,000

Givoni M N 252,858 1,274,500

Sexton T J 292,143 1,453,900

Total 2,332,420 10,221,517

On behalf of the Board of Directors

P J Smedley J P Farnik Chairman Managing Director and Chief Executive Officer

Sydney 25 August 2009 Sydney 25 August 2009



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iNcome statemeNtfor the financial year ended 30 June 2009

Consolidated Company

2009 2008 2009 2008 Note $m $m $m $m

Revenue attributable to continuing operations 6(a) 2,388.6 2,445.9 50.0 49.0

Other income attributable to continuing operations 6(b) 8.1 4.7 – 1.2

2,396.7 2,450.6 50.0 50.2

Direct employee expenses (845.4) (844.1) (4.4) (3.4)

Subcontractor expenses (575.2) (609.6) – –

Cost of goods used (533.4) (541.0) – –

Occupancy costs (71.3) (73.2) – –

Professional costs (17.5) (34.8) – (3.8)

Transportation costs (45.2) (45.4) – –

Catering rights (54.2) (51.5) – –

Other expenses (93.6) (114.6) (4.2) (2.7)

Profit before depreciation, amortisation, finance costs and income tax expense (EBITDA) 160.9 136.4 41.4 40.3

Depreciation and amortisation expense 6(d) (70.8) (73.8) – –

Profit before finance costs and income tax expense (EBIT) 90.1 62.6 41.4 40.3

Finance costs – interest expense 6(e) (26.9) (24.5) (2.7) (1.1)

Finance costs – interest revenue 6(e) 1.9 5.6 0.9 3.2

Profit before income tax expense 65.1 43.7 39.6 42.4

Income tax (expense)/income 7(a) (21.2) (17.1) 3.2 2.3

Profit for the year 43.9 26.6 42.8 44.7

Attributable to:

Equity holders of the parent 42.7 26.0 42.8 44.7

Minority interest 1.2 0.6 – –

43.9 26.6 42.8 44.7

2009 2008 cents cents

Earnings per share

Basic and diluted earnings per share 8 19.5 12.0

The accompanying notes form an integral part of these Financial Statements.

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BalaNce sheetas at 30 June 2009


2009 2008 2009 2008 Note $m $m $m $m

Current assets

Cash and cash equivalents 10(a) 56.0 46.6 9.0 0.9

Current tax assets 3.2 1.7 – –

Trade and other receivables 11 279.9 272.7 – 2.1

Inventories 12 51.1 60.0 – –

Other financial assets 13 2.7 0.1 296.1 248.6

Prepayments 9.6 12.2 0.9 1.0

Total current assets 402.5 393.3 306.0 252.6

Non-current assets

Investments accounted for using the equity method 14 5.0 5.4 – –

Other financial assets 15 23.5 28.6 500.3 501.0

Property, plant and equipment 16 185.9 171.6 – –

Goodwill 17 393.3 384.7 – –

Intangible assets 18 19.5 12.0 – –

Deferred tax assets 7(c) 37.1 35.5 1.0 0.3

Prepayments 6.5 7.3 2.1 0.2

Total non-current assets 670.8 645.1 503.4 501.5

Total assets 1,073.3 1,038.4 809.4 754.1

Current liabilities

Trade and other payables 19 303.4 291.5 1.9 2.8

Borrowings 20 10.1 58.3 – –

Current tax payables 3.3 7.0 1.4 4.1

Provisions 21 73.9 73.9 0.7 1.0

Other 22 4.4 1.5 – –

Total current liabilities 395.1 432.2 4.0 7.9

Non-current liabilities

Borrowings 23 259.4 182.1 50.0 –

Other financial liabilities 24 33.7 45.9 2.2 –

Deferred tax liabilities 7(d) 14.6 12.1 0.4 –

Provisions 25 5.4 11.0 – –

Other 26 1.4 1.1 – –

Total non-current liabilities 314.5 252.2 52.6 –

Total liabilities 709.6 684.4 56.6 7.9

Net assets 363.7 354.0 752.8 746.2

Equity

Issued capital 521.5 519.6 521.5 519.6

Reserves 27 (24.1) (22.5) (4.3) –

Retained profits (141.8) (150.7) 235.6 226.6

Parent entity interest 355.6 346.4 752.8 746.2

Minority interest 8.1 7.6 – –

Total equity 363.7 354.0 752.8 746.2


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statemeNt oF chaNGes iN equityfor the financial year ended 30 June 2009

Attributable to equity holders of the parent

Foreign Share- Number Currency Debt Investment Based Outside Issued Issued Translation Hedging Revaluation Payment Retained Equity Shares (i) Capital Reserve Reserve Reserve Reserve earnings Total Interests Total Note (million) $m $m $m $m $m $m $m $m $m

Consolidated

At 1 July 2007 216.0 510.1 (16.8) (2.7) – – (131.2) 359.4 8.8 368.2

Currency translation differences – – (10.7) – – – – (10.7) (1.1) (11.8)

Movement in foreign exchange swap – – – 1.1 – – – 1.1 – 1.1

Movement in loan balance – – – 13.9 – – – 13.9 – 13.9

Loss on available- for-sale financial assets – – – – (2.7) – – (2.7) – (2.7)

Tax effect of movements – – – (4.6) – – – (4.6) – (4.6)

Total income and expense for the year recognised directly in equity – – (10.7) 10.4 (2.7) – – (3.0) (1.1) (4.1)

Profit for the year – – – – – – 26.0 26.0 0.6 26.6

Total recognised income/(expense) for year – – (10.7) 10.4 (2.7) – 26.0 23.0 (0.5) 22.5

Dividends reinvested (ii) 2.4 9.5 – – – – – 9.5 – 9.5

Dividends paid 9 – – – – – – (45.5) (45.5) (0.7) (46.2)

At 1 July 2008 (iv) 218.4 519.6 (27.5) 7.7 (2.7) – (150.7) 346.4 7.6 354.0

Currency translation differences – – 4.7 – – – – 4.7 0.1 4.8

Movement in cash flow hedges – – – 12.2 – – – 12.2 – 12.2

Movement in loan balance – – – (21.1) – – – (21.1) – (21.1)

Loss on available- for-sale financial assets – – – – (1.7) – – (1.7) – (1.7)

Tax effect of movements – – – 2.6 – – – 2.6 – 2.6

Total income and expense for the year recognised directly in equity – – 4.7 (6.3) (1.7) – – (3.3) 0.1 (3.2)

Transfer to profit of impairment of available- for-sale financial assets – – – – 4.4 – – 4.4 – 4.4

Profit for the year – – – – – 42.7 42.7 1.2 43.9

Total recognised income/(expense) for year – – 4.7 (6.3) 2.7 – 42.7 43.8 1.3 45.1


Dividends paid 9 – – – – – – (33.8) (33.8) (0.8) (34.6)

Recognition of share-based payment expense – – – – – 0.6 – 0.6 – 0.6

Re-purchase of shares – – – – – (3.8) – (3.8) – (3.8)

Tax effect of movements – – – – – 0.5 – 0.5 – 0.5

At 30 June 2009 (iv) 219.0 521.5 (22.8) 1.4 – (2.7) (141.8) 355.6 8.1 363.7

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statemeNt oF chaNGes iN equity contInUEDfor the financial year ended 30 June 2009

Attributable to equity holders of the parent

Foreign Share- Number Currency Debt Investment Based Outside Issued Issued Translation Hedging Revaluation Payment Retained Equity Shares (i) Capital Reserve Reserve Reserve Reserve earnings Total Interests Total Note (million) $m $m $m $m $m $m $m $m $m

Parent

At 1 July 2007 216.0 510.1 – – – – 227.4 737.5 – 737.5

Total income and expense for the year recognised directly in equity – – – – – – – – – –

Profit for the year – – – – – – 44.7 44.7 – 44.7

Total recognised income for year – – – – – – 44.7 44.7 – 44.7


Dividends paid 9 – – – – – – (45.5) (45.5) – (45.5)

Issue of shares under Securities Plan (vi) – – – – – – – – – –

At 1 July 2008 (iv) 218.4 519.6 – – – – 226.6 746.2 – 746.2

Movement in cash flow hedge – – – (2.2) – – – (2.2) – (2.2)

Tax effects of movements – – – 0.6 – – – 0.6 – 0.6

Total income and expense for the year recognised directly in equity – – – (1.6) – – – (1.6) – (1.6)

Profit for the year – – – – – 42.8 42.8 – 42.8

Total recognised income for year – – – (1.6) – – 42.8 41.2 – 41.2


Dividends paid 9 – – – – – – (33.8) (33.8) – (33.8)

Recognition of share-based payment expense – – – – – 0.6 – 0.6 – 0.6

Re-purchase of shares (3.8) – (3.8) – (3.8)

Tax effect of movements – – – – – 0.5 – 0.5 – 0.5

At 30 June 2009 (iv) 219.0 521.5 – (1.6) – (2.7) 235.6 752.8 – 752.8


(i) Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(ii) The 2008 final dividend had 457,659 (2007: 1,270,728) shares issued at $3.39 (2007: $4.21) per share as a result of the Dividend Re-investment Plan, while the 2009 interim dividend resulted in 180,415 (2008: 1,127,496) shares issued at $1.83 (2008: $3.71) per share.

(iii) During the year no options were exercised and no options lapsed (2008: 300,000) (Note 28).

(iv) Total number of fully paid ordinary shares on issue at 30 June 2009 was 218,989,922 (2008: 218,351,848).

(v) Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

(vi) Under the Spotless Group Securities Plan there were no shares issued in the current year (2008: Nil).

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cash Flow statemeNtfor the financial year ended 30 June 2009

Consolidated Company Inflows (Outflows) Inflows (Outflows)

2009 2008 2009 2008 Note $m $m $m $m

Cash flows from operating activities

Receipts from customers 2,592.3 2,697.9 – –

Payments to suppliers and employees (2,416.9) (2,559.6) (10.9) (8.2)

Interest received 1.0 2.0 0.1 0.1

Other receipts 8.1 5.3 – –

Interest and other costs of finance paid (25.7) (24.1) (2.7) (1.1)

Income tax paid (22.5) (17.9) (11.0) (7.9)

Net cash provided by/(used in) operating activities 10(c) 136.3 103.6 (24.5) (17.1)

Cash flows from investing activities

Proceeds from related parties – – 16.7 30.5

Payment for investment securities – (12.0) – –

Payment for property, plant and equipment (75.4) (67.5) – –

Payment for option on property (1.3) – – –

Proceeds from sale of property, plant and equipment 4.2 2.7 – –

Payment for business (18.8) (16.8) – –

Payment for joint venture – (5.6) – –

Payment for intangible assets (3.4) (2.7) – –

Proceeds from repayment of Security Plan Loans 2.3 17.3 1.6 15.6

Issue of Security Plan Loans – – – –

Net proceeds from repayment of other loans – 0.4 – –

Net cash provided by/(used in) investing activities (92.4) (84.2) 18.3 46.1

Cash flows from financing activities

Payment for share scheme (3.8) – (3.8) –

Proceeds from borrowings 351.6 831.4 50.0 24.4

Repayment of borrowings (344.0) (839.0) – (24.4)

Dividends paid

– members of the parent entity (31.9) (36.0) (31.9) (36.0)

– outside equity interests (0.8) (0.7) – –

Net cash provided by/(used in) financing activities (28.9) (44.3) 14.3 (36.0)

Net increase/(decrease) in cash held 15.0 (24.9) 8.1 (7.0)

Cash and cash equivalents at the beginning of the financial year 35.4 64.8 0.9 7.9

Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies 5.6 (4.5) – –

Cash and cash equivalents at the end of the financial year 10(a) 56.0 35.4 9.0 0.9


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Notes to the FiNaNcial statemeNtsfor the financial year ended 30 June 2009

1. Statement of ComplianceThe financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law.

The financial report includes the separate Financial Statements of the Company and the consolidated Financial Statements of the Consolidated Entity.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (“A-IFRS”). Compliance with A-IFRS ensures that the Financial Statements and notes of the Company and the Consolidated Entity comply with International Financial Reporting Standards (“IFRS”).

The Financial Statements were authorised for issue by the Directors on 25 August 2009.

2. Basis of PreparationThe financial report has been prepared on a historical cost basis, except for financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded to the nearest hundred thousand dollars, unless otherwise indicated.

3. Significant Accounting PoliciesAdoption of new and revised Accounting StandardsFrom 1 July 2008 the Consolidated Entity has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 January 2008. Adoption of these Standards and Interpretations did not have any effect on the financial position or performance of the Consolidated Entity.

• AASB 2007-4 ‘Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments and Erratum: Proportionate Consolidation’

• AASB 2007-7 ‘Amendments to Australian Accounting Standards’

• AASB 2008-10 ‘Amendments to Australian Accounting Standards – Reclassification of Financial Instruments’

• Interpretation 12 ‘Service Concession Arrangements’

• Interpretation 4 ‘Determining whether an Arrangement contains a Lease (revised)’

• Interpretation 129 ‘Service Concession Arrangements: Disclosure (revised)’

• AASB 2007-2 ‘Amendments to Australian Accounting Standards arising from AASB Interpretation 12’

Early adoption of Accounting StandardsThe Consolidated Entity has not elected to early adoption of any new standards or amendments.

Refer Note 38 for New Standards and Interpretations not yet adopted.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Basis of ConsolidationThe Consolidated Financial Statements incorporate the Financial Statements of the Company (the parent entity) and entities controlled by the Company (its subsidiaries), referred to as the ‘Consolidated Entity’ in these Financial Statements. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies into line with those used by other members of the Consolidated Entity.

In preparing the consolidated Financial Statements, all intercompany balances and transactions including unrealised profits arising from intra-group transactions, are eliminated in full. In the separate Financial Statements of the Company, intra-group transactions are generally accounted for by reference to the existing book value of the items.

Minority interests not held by the Consolidated Entity are allocated their share of net profit after tax in the income statement and are presented within equity in the consolidated balance sheet, separately from parent shareholder’s equity.

(b) Business CombinationsAcquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Consolidated Entity in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except non-current assets (or disposal groups) that are classified as held for sale (which are measured at fair value less costs to sell).

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Consolidated Entity’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Consolidated Entity’s interest in the net fair value of the acquiree’s identifiable assets, liabilities, and contingent liabilities exceeds the cost of the business combination, the excess is immediately recognised in profit or loss.


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3. Significant Accounting Policies (continued)

(c) Foreign CurrencyBoth the functional currency and presentation currency of Spotless Group Limited and its Australian subsidiaries are Australian Dollars (AUD).

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date with all differences taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Foreign subsidiaries have a functional currency other than Australian Dollars. As at the reporting date, the assets and liabilities of these foreign subsidiaries are translated into the presentation currency of the Consolidated Group by applying the rate of exchange ruling at the balance sheet date and the income statements are translated at the weighted average exchange rates for the reporting period or at the exchange rates ruling at the date of the transaction. The exchange differences arising on the translation are taken to the foreign currency translation reserve.

On disposal of a foreign subsidiary with a functional currency other than Australian Dollars, the deferred cumulative amount recognised in the foreign currency translation reserve relating to that particular subsidiary is recognised in the income statement.

(d) Accounts PayableTrade payables and other accounts payable are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services.

(e) Borrowing CostsBorrowing costs are capitalised where they relate to qualifying assets and expensed over the asset’s useful life.

(f) Cash and Cash EquivalentsCash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(g) Derivative Financial Instruments

The Consolidated Entity has entered into derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including cross currency swap contracts all of which relate to the senior unsecured notes (US Private Placement).

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The

resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Consolidated Entity designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations.

The fair value of hedging derivatives is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in the fair value recognised in profit or loss.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.

Note 35 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also detailed in the Statement of Changes in Equity.

Currently, the Consolidated Entity has only entered into hedges of the type classified as cash flow hedges. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity in the debt hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the income statement as the recognised hedged item being “finance costs – interest expense”. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Consolidated Entity revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

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(h) Employee BenefitsA liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, sick leave and Directors retirement allowances when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits (including Directors retirement allowances) expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Consolidated Entity in respect of services provided by employees up to the reporting date.

Defined contribution plansContributions to defined contribution superannuation plans are expensed when employees have rendered service entitling them to the contributions.

(i) Financial Instruments Issued by the CompanyDebt and equity instrumentsDebt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Transaction costs on the issue of equity instrumentsTransaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instrument to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Financial guarantee contract liabilitiesFinancial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of: (i) the amount of the obligation under the contract, as determined under AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’; and (ii) the amount initially recognised less, where appropriate, cumulative amortisation in accordance with revenue recognition policies described in Note 3(w).

Other LiabilitiesFinancial liabilities, including all loans and borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments

through the expected life of the financial liability, or, where appropriate, a shorter period.

(j) Goods and Services TaxRevenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except (i) for receivables and payables which are recognised inclusive of GST; and (ii) where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

(k) GoodwillGoodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in profit and loss and cannot be subsequently reversed.

(l) InventoriesInventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories using the method most appropriate to each particular class of inventory, with the majority being valued on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

(m) InvestmentsInvestments in subsidiaries and associates within the Parent Entity are recorded at cost. Investments in associates are accounted for under the equity method in the consolidated Financial Statements.

(n) Income TaxCurrent taxCurrent tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred taxDeferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.


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(n) Income Tax (continued)In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures except where the Consolidated Entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Consolidated Entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Consolidated Entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax for the period is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or the excess of net assets over the purchase price.

Tax consolidationThe Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Spotless Group Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary

differences of the members of the tax-consolidated group are recognised in the separate Financial Statements of the members of the tax-consolidated group using the “separate taxpayer within group” approach by reference to the carrying amounts in the separate Financial Statements of each entity and the tax values applying under tax consolidation.

Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in Note 7. Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

(o) Joint Venture EntitiesInterests in jointly controlled entities in which the Consolidated Entity is a venturer (and so has joint control) are accounted for under the equity method in the consolidated Financial Statements.

(p) Leased AssetsLeases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Finance lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis.

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(q) Non Current Assets Held For SaleNon-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

(r) Intangible AssetsPatentsPatents are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives of 10 to 17 years. The estimated useful life and amortisation is reviewed annually.

Intangible assets acquired in a business combinationIntangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses.

Contracts and brand namesContracts and brand names were acquired in a business combination. Amortisation is charged on a straight-line basis over the estimated useful lives of between 5 and 20 years for contracts and 20 years for brand names.

Internally-generated intangible assets – capitalised development

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. When completed, capitalised development will be amortised on a straight-line basis over its estimated useful life.

(s) Property, Plant and EquipmentProperty, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost includes expenditure that is directly attributable to the acquisition or construction of the item.

Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete. On completion of the remediation and additional construction of the Barkly Street property, it will be measured at cost and transferred to investment property.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold interest and leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter. The straight-line method of depreciation is used for all assets except for a small number of older leasehold assets which are depreciated using the reducing balance method.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

The following estimated useful lives are used in the calculation of depreciation:

• Buildings: 50 years

• Plant and equipment: 3 – 13 years

• Plant and equipment under finance lease: 5 years

• Leasehold interest: 50 years

• Leasehold improvement: 5 – 15 years

• Rental Stock: 18 months – 5 years

• Braiform stock in circulation – 4 years

Following initial recognition at cost, land and buildings are carried at cost less any subsequent accumulated depreciation on buildings and accumulated impairment losses.


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(t) Impairment of AssetsAt each reporting date, the Consolidated Entity reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount of an asset is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss for the financial year in which it was incurred.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(u) ProvisionsProvisions are recognised when the Consolidated Entity has a present obligation (legal or constructive) as a result of a past event, it is probable that the Consolidated Entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous contracts – Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Consolidated Entity has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Dividends – A provision is recognised for dividends when they have been declared, determined or publicly recommended by the Directors on or before the balance sheet date.

Public liability – A provision is recognised under the Consolidated Entity’s self-insured public liability for claims below the insured excess.

(v) Financial assetsAvailable-for-sale financial assetsCertain shares held by the Consolidated Entity are classified as being available-for-sale and are stated at fair value. Fair value is determined with reference to quoted market prices. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve with the exception of impairment losses. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit and loss when the Consolidated Entity’s right to receive the dividends is established.

Loans and ReceivablesTrade and other receivables are recorded at amortised cost less impairment.

(w) Revenue RecognitionRendering of servicesThe revenue of the time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses incurred. Life cycle maintenance revenue is based on stage of completion based on costs incurred. Where a loss is expected to occur it is recognised immediately.

Sale of goodsRevenue from the sale of goods is recognised when the Consolidated Entity has passed the significant risks and rewards of ownership of the goods to the buyer.

RoyaltiesRoyalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Interest revenueInterest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. Interest revenue is recognised in the income statement line “other income”.

Dividend revenueDividend revenue is recognised when the Consolidated Entity’s right to receive payment has been established.

(x) Share-based paymentsShare-based payments made to employees and others, that grant rights over the shares of the parent entity, Spotless Group Limited, are accounted for as equity-settled share-based payment transactions when the rights over the shares are granted by Spotless Group Limited. As Spotless Group Limited does not require reimbursement for the cost of the grant, amounts relating

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(x) Share-based payments (continued)to the grant are deemed a contribution by Spotless Group Limited in its capacity as owner.

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a binomial model and/or Monte Carlo simulation model.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Consolidated Entity’s estimate of shares that will eventually vest.

The above policy is applied to all equity-settled share-based payments that were granted after 7 November 2002 that vested after 1 January 2005.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

(y) Interest Free LoansWhen the Consolidated Entity recognises a loan that is not issued at the market rate of interest, an estimate of the present value of all future cash receipts discounted, using the prevailing market rate of interest, is calculated. The variance between the nominal loan balance and the present value calculation is deemed to be foregone in respect of past services rendered by the employees. This expense is then recouped as interest revenue over the life of the loan.

(z) Government Grants

Government grants are assistance by the Government in the form of transfers of resources to the Consolidated Entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. Government grants are not recognised until there is reasonable assurance that the Consolidated Entity will comply with the conditions attaching to them and the grants will be received.

Government grants whose primary condition is that the Consolidated Entity should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the balance sheet and recognised as income on a systematic and rational basis over the useful lives of the related assets. Other government grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis.

(aa) Comparative InformationThe Consolidated Entity has reclassified $2.4 million from current trade payables to current provisions to conform with the current years presentation.

(ab) Critical accounting judgements and key sources of estimation uncertainty

In the application of the Consolidated Entity’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.

Judgements made by management in the application of A-IFRS that have significant effects on the Financial Statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the Financial Statements.

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Interest free loansInterest free loans are as described in Note 3(y). In the case of these loans an estimate of the life of the loan is calculated by taking the age of employees and estimating their expected service period, i.e. their expected years to retirement. This is reviewed at the end of each annual reporting period. The future cash receipts are then discounted over this estimated loan life using a discount rate from 5.87% to 6.37%, which represents the prevailing market rate of interest at the time the loans were taken. During the year $2.3 million of the outstanding loans have been repaid (2008: $17.3 million), $0.9 million has been recouped as interest revenue (2008:$3.6 million) and there has been no interest deemed as foregone (2008: $nil).

Long-term contract revenue recognitionThe Company has a limited number of long-term maintenance contracts that are engaged in a suite of related services under the one contract. The Company distinguishes between these revenue streams with respect to revenue recognition. Planned maintenance services revenue is recognised based on services completed. Life cycle maintenance revenue is based on stage of completion based on costs incurred. In recognising the revenue the Company periodically re-forecasts the estimated total contract costs based on the different stage of completion of the contract.


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(ab) Critical accounting judgements and key sources of estimation uncertainty (continued)Property, plant and equipmentAs described in Note 16 the Consolidated Entity acquired land and buildings (including 49 apartments) at 227 Barkly Street, Brunswick (‘the property’) for $5.8 million in 2007.

It is alleged the acquired property has certain levels of contamination, which the Consolidated Entity intends to remediate, the extent of which will be discussed with the Environment Protection Authority Victoria. The Consolidated Entity also intends to restore the apartments to a condition ready for sale. A provision for remediation and provision to restore the apartments was capitalised into the cost of the property at 30 June 2007. This provision for remediation and restoration of the property was estimated at $2.9 million based on an assessment by external advisors. Therefore, the total cost of the property at 30 June 2007 was $8.7 million. As remediation and construction progresses, actual costs are being monitored against the estimated provisions made. For the year ended 30 June 2009 $350,000 has been spent on remediation and restoration (2008: $270,000).

Impairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

The carrying amount of goodwill at the balance sheet date was $393.3 million (2008: $384.7 million). Details of the impairment calculation are provided in Note 17.

4. Change in Accounting PolicyDuring the financial year, the Company concluded that the current method of accounting for stock in circulation (re-use hangers within the Braiform segment) should be changed in order to provide more accurate and relevant recording of the actual underlying transactions. The previous method accounted for stock acquired as a prepayment and amortised the prepayment to the income statement via cost of goods sold over a four year period, reflecting the estimated useful life of the hangers.

The Company believes that the re-use hangers meet the definition of Property, Plant and Equipment under AASB 116 Property, Plant and Equipment and should therefore be classified as such, with the cost being depreciated to the income statement through depreciation expense.

In accordance with the requirements of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, the change in accounting policy has been recognised retrospectively and comparatives have been restated. The change in accounting policy had the following impact on the consolidated financial report:


2009 2008 2009 2008 Note $m $m $m $m

Income Statement

Decrease in raw materials, consumables and finished goods used (13.4) (14.9) – –

Increase in depreciation and amortisation expense 6(d) 13.4 14.9 – –

Net increase in profit for the year – – – –

Balance Sheet

Decrease in prepayments – current (8.0) (9.7) – –

Decrease in prepayments – non-current (8.0) (9.7) – –

Increase in property, plant and equipment 16 16.0 19.4 – –

Net movement in total assets – – – –

Cash Flow Statement

Decrease in payments to suppliers and employees (5.7) (11.5) – –

Increase in payments for property, plant and equipment 5.7 11.5 – –

Net movement in cash flows – – – –

This change in accounting policy has not had any net impact on profit, total assets, cash flows or earnings per share.

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5. Segment InformationThe Consolidated Entity’s reportable segments under AASB 8 are as follows:

Consolidated

External Sales Revenue Segment Result Total Assets Total Liabilities

2009 2008 2009 2008 2009 2008 2009 2008 $m $m $m $m $m $m $m $m

Operating Segments

Cleaning Services 243.3 245.6 11.5 12.0 35.7 33.8 38.3 43.1

Food Services 545.3 556.2 25.3 28.6 82.7 89.3 91.7 94.3

Laundries 225.6 223.7 26.7 28.0 141.7 123.5 30.8 20.1

Managed Services 1,048.4 1,075.6 34.2 29.5 193.6 151.4 169.4 125.6

2,062.6 2,101.1 97.7 98.1 453.7 398.0 330.2 283.1

Braiform (Retailer Services) 320.7 340.9 6.9 15.7 97.5 130.6 48.2 63.0

2,383.3 2,442.0 104.6 113.8 551.2 528.6 378.4 346.1

Unallocated corporate administration – – (10.1) (8.7) 9.1 15.4 1.4 10.6

Total Operating Segments 2,383.3 2,442.0 94.5 105.1 560.3 544.0 379.8 356.7

Legal disputes – – – (2.6) 8.7 8.8 2.1 2.5

Impairment of available for sale financial assets – – (4.4) – – – – –

Transaction costs – – – (14.3) – 0.3 – 8.6

Non-recurring items – – – (25.6) – 0.7 – 5.7

Profit before finance costs and income tax expense (“EBIT”) 90.1 62.6

Net Finance Costs / Cash / Loans – – (25.0) (18.9) 70.9 62.7 309.8 291.8

Goodwill – – – – 393.3 384.7 – –

Income Tax Expense / Tax Balances – – (21.2) (17.1) 40.1 37.2 17.9 19.1

2,383.3 2,442.0 43.9 26.6 1,073.3 1,038.4 709.6 684.4

Inter-segment transactions are immaterial.

The accounting policies of the reportable segments are the same as the Consolidated Entity’s accounting policies. Segment profit represents the profit earned by each segment without allocation of corporate administration costs, gains on disposal of businesses, legal dispute costs, transaction costs, non-recurring items, finance costs and income tax expense.

All assets are allocated to reportable segments other than cash and cash equivalents, current and deferred tax assets, legal dispute assets, goodwill and those assets related to disposed businesses.

Goodwill is attributable to each of the operating segments, see Note 17, but is not allocated to reportable segments for the purposes of this segment report provided to the chief operating decision maker.

All liabilities apart from interest-bearing liabilities and borrowings, current and deferred tax liabilities and legal dispute liabilities are allocated to reportable segments. Assets and liabilities used jointly by reportable segments are allocated to the individual reportable segments on a reasonableness basis as determined by the Directors.F

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5. Segment Information (continued)

Operating SegmentsCleaning Services: provides commercial and specialised cleaning services to a wide range of critical sectors including hospitals, schools and airports.

Food Services: offers food services to a diverse range of customers including sport stadiums, function centres, airports and business and education institutions.

Laundries: wash and supply workwear for large supermarket chains, food manufacturing and general industry customers. Specialise in linen and laundry for the healthcare sector, including sterilised linen and surgical packs.

Managed Services: is comprised of Spotless’ facilities management, asset maintenance operations and painting and refurbishment services. Managed Services supports a variety of sectors such as defence, education, health, industry and mining.

Braiform (Retailer Services): This division manages the supply of garment hanger and apparel packaging products, servicing clients globally. The division also manufactures certain moulded products, including clothes hangers and bathroom products from plants in the USA, Australia and New Zealand.

Other Segment Information Consolidated

EBITDA Depreciation and Amortisation Additions to Non-Current Assets

2009 2008 2009 2008 2009 2008Operating Segments $m $m $m $m $m $m

Cleaning Services 13.9 14.6 2.4 2.6 7.2 2.1

Food Services 32.8 34.7 7.5 6.1 18.2 34.1

Laundries 59.4 61.3 32.7 33.3 45.9 35.0

Managed Services 39.2 34.3 5.0 4.8 6.3 4.6

145.3 144.9 47.6 46.8 77.6 75.8

Braiform (Retailer Services) 30.1 42.7 23.2 27.0 17.8 16.4

Total Operating Segments 175.4 187.6 70.8 73.8 95.4 92.2

Unallocated corporate administration (10.1) (8.7) – – – –

Non-recurring items (4.4) (42.5) – – – –

160.9 136.4 70.8 73.8 95.4 92.2

Geographical InformationThe Consolidated Entity’s geographical segments are determined based on the location of the subsidiary. Revenues from external customers are attributed to individual countries based on the address of the entity that issues the invoice for the goods or services.

The Consolidated Entity’s revenue from external customers and information about its segment assets (non-current assets excluding financial assets, goodwill and deferred tax assets) by geographic location are detailed as follows:

Consolidated

External Sales Revenue Non-Current Assets

2009 2008 2009 2008 $m $m $m $m

Australia 1,771.4 1,795.6 136.6 122.0

New Zealand 299.5 315.2 32.8 36.3

Hong Kong 131.4 130.0 38.6 18.4

United Kingdom 26.4 40.0 1.9 2.1

United States 29.8 37.1 4.6 4.6

Other countries 124.8 124.1 2.4 3.2

Total Geographical Segments 2,383.3 2,442.0 216.9 186.6

Major CustomersThe Consolidated Entity has a number of customers to which it provides its products and services. The Consolidated Entity does not rely on any individual contract in the current or prior year that exceeds 10% of revenue.

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2009 2008 2009 2008 $m $m $m $m

6. Profit From Operations

(a) Revenue from operating activitiesSales revenue:

Rendering of services 1,682.3 1,804.9 – –

Sale of goods 701.0 637.1 – –

2,383.3 2,442.0 – –

Royalties 5.3 3.9 – –

Dividends wholly-owned controlled entities – – 50.0 49.0

Revenue attributable to continuing operations 2,388.6 2,445.9 50.0 49.0

(b) Other income/(loss)Gain/(loss) from the sale of assets:

Property, plant and equipment 2.9 1.8 – 1.2

Business – – – –

Other realised foreign exchange gains/(losses) 1.8 (0.1) – –

Other 3.4 3.0 – –

Other income attributable to continuing operations 8.1 4.7 – 1.2

(c) Impairment of assetsImpairment of non-current assets – 3.5 – –

(Reversal)/impairment of catering rights – (2.5) – –

Impairment of available-for-sale financial assets 4.4 – – –

Total impairments 4.4 1.0 – –

(d) Depreciation and amortisation of non-current assetsProperty, plant and equipment 30.6 32.1 – –

Leased assets 0.2 0.2 – –

Laundries rental stock 25.2 26.0 – –

Amortisation of identifiable intangible assets 1.4 0.6 – –

Braiform stock in circulation 13.4 14.9 – –

Total depreciation and amortisation of non-current assets 70.8 73.8 – –

(e) Net Finance CostsInterest expense:

Interest charged from third party entities 26.0 23.6 2.3 0.7

Other borrowing costs 0.7 0.5 0.4 0.4

Directors’ retiring allowance 0.1 0.1 – –

Unwinding of discounts on provisions 0.1 0.3 – –

26.9 24.5 2.7 1.1

Interest revenue:

Third party entities 1.0 2.0 0.1 0.1

Security plan loans 0.9 3.6 0.8 3.1

1.9 5.6 0.9 3.2

Net finance costs 25.0 18.9 1.8 (2.1)

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2009 2008 2009 2008 $m $m $m $m

6. Profit From Operations (continued)

(f) Other costsDoubtful debt expense 1.2 0.3 – –

Operating lease expense 35.5 36.7 – –

Employee expenses – superannuation defined contribution plans 43.2 43.1 0.1 0.1

Share-based payment expense 0.6 0.3 0.6 0.3

Termination benefits 6.8 7.6 – –

7. Income Tax

(a) Income tax recognised in profit or lossCurrent tax expense/(income) in respect of the current year 17.0 13.8 (3.1) (2.4)

Adjustments recognised in the current year in relation to the current tax of prior years 0.7 0.2 – (0.3)

Deferred tax expense/(income) relating to the origination and reversal of temporary differences 3.5 3.1 (0.1) 0.4

Total tax expense/(income) 21.2 17.1 (3.2) (2.3)

(b) Reconciliation of prima-facie tax on profit to income tax expenseProfit 65.1 43.7 39.6 42.4

Income tax expense calculated at 30% 19.5 13.1 11.9 12.7

Items that increase/(decrease) tax expense

Investment allowances (2.3) – – –

Capital profits offset by capital losses (1.2) (0.5) – –

Non-deductible entertainment expense 0.3 0.4 – –

Tax rate differential on overseas earnings 1.2 2.6 – –

Losses not tax effected less use of previously unrecognised losses 0.2 0.1 – –

Withholding tax on dividends 1.9 0.6 – –

Other items 0.9 0.6 (0.1) (0.1)

Impact of the tax consolidation system

Non-assessable amounts related to transactions within the tax consolidated group – – (15.0) (14.6)

20.5 16.9 (3.2) (2.0)

Adjustments recognised in the current year in relation to the current tax of the prior years 0.7 0.2 – (0.3)

Total tax expense/(income) 21.2 17.1 (3.2) (2.3)

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. The Consolidated Entity is also subject to a number of international tax rates, the following are those that relate to our material geographical segments: New Zealand 30% (reduced from 33% effective 1 July 2008); Hong Kong 16.5%; United Kingdom 28% (reduced from 30% effective 1 April 2008); and United States 34%. There has been no material effect from the change in international tax rates.

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2009 2008 2009 2008 $m $m $m $m

7. Income Tax (continued)

(c) Deferred tax assetsArising from temporary differences

Employee compensation and benefits accrued 21.9 21.9 0.2 0.3

Other provisions 2.7 4.7 0.1 –

Property, plant and equipment 1.2 1.6 – –

Other 5.0 2.8 0.7 –

30.8 31.0 1.0 0.3

Arising from tax losses or offsets

Revenue losses 6.3 4.5 – –

Deferred tax assets 37.1 35.5 1.0 0.3

The opening balance of deferred tax assets at 1 July 2007 was $37.9 million in the Consolidated Entity and $0.7 million in the Company.

unrecognised deferred tax assets

The following deferred tax assets have not been brought to account as assets:

Arising from unused tax losses – Morocco 0.7 1.2 – –

Arising from unused tax losses – France 0.6 0.9 – –

Arising from unused tax losses – Other jurisdictions 0.1 0.1 – –

Arising from unused capital losses – USA 3.6 3.1 – –

Arising from unused capital losses – Australia 36.0 36.9 36.0 36.9

41.0 42.2 36.0 36.9

All the above unused tax losses and deductible temporary differences have no expiry date, except for losses in France of $0.6 million which expire five years after the loss is incurred and losses of $0.7 million in Morocco which expire four years after the loss is incurred.

(d) Deferred tax liabilitiesArising from temporary differences

Undistributed profits held in controlled entities 1.3 1.3 – –

Catering rights and prepayments 5.3 2.9 – –

Property, plant and equipment 4.5 3.7 – –

Other 3.5 4.2 0.4 –

Deferred tax liabilities 14.6 12.1 0.4 –

The opening balance of deferred tax liabilities at 1 July 2007 was $11.9 million in the Consolidated Entity and nil in the Company.

unrecognised deferred tax liabilities

Deferred tax liabilities not recognised as the Company does not intend to repatriate certain undistributed profits held in controlled entities 1.1 1.0 – –

(e) Income tax recognised directly in equityThe following current and deferred amounts were charged/(credited) directly to equity during the period:

Deferred tax asset/(liability)

Debt hedging reserve 2.6 (4.6) 0.6 –

Share-based payment reserve 0.5 – 0.5 –

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7. Income Tax (continued)

(f) Tax consolidation systemThe Company as head entity and its Australian resident wholly owned entities have been treated as a single entity for income tax purposes under the Australian tax consolidation regime since 1 July 2002.

(g) Tax consolidationThe Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2002 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Spotless Group Limited.

The members of the tax-consolidated group are identified in Note 34.

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, Spotless Group Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group.

The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if any entity should leave the tax-consolidated group. No amounts have been recognised in the Financial Statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

8. Earnings Per Share Consolidated

2009 2008 cents per share cents per share

Basic and diluted earnings per share

From continuing operations 19.5 12.0

Total basic and diluted earnings per share 19.5 12.0

ReconciliationThe earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

2009 2008 $m $m

Earnings used in the calculation of basic and diluted earnings per share 42.7 26.0

2009 2008 ’000 ’000

Weighted average number of ordinary shares 218,727 217,131

Basic and dilutive earnings per share produce materially the same result and as such are combined for disclosure purposes.

9. Dividends Consolidated Company

2009 2008 2009 2008 $m $m $m $m

Fully Paid Ordinary SharesRecognised Amounts

2009 Interim dividend – paid: 5c per share 100% franked (2008: 10.5c per share 40% franked) 10.9 22.8 10.9 22.8

2008 Final dividend – paid: 10.5c per share 60% franked (2007: 10.5c per share 47% franked) 22.9 22.7 22.9 22.7

33.8 45.5 33.8 45.5

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2009 2008 2009 2008 $m $m $m $m

9. Dividends (continued)unrecognised Amounts

Final dividend: 6.0c per share 100% franked (2008: 10.5c per share 60% franked) 13.1 22.9 13.1 22.9

On 25 August 2009, the Directors declared a 100% franked final dividend of 6.0c per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2009, to be paid to shareholders on 16 October 2009. This dividend has not been included as a liability in these Financial Statements. The dividend will be paid to all shareholders on the Register of Members on 7 September 2009. The total estimated dividend to be paid is $13.1 million.

unrecognised Amounts (continued)

Adjusted franking account balance (tax paid basis) 1.9 3.9 1.9 3.9

Impact on franking account balance of dividends not recognised (5.6) (5.9) (5.6) (5.9)

10. Cash and Cash Equivalents

(a) Reconciliation of cash and cash equivalentsFor the purposes of the cash flow statement, cash includes cash on hand and in banks and investments in money market instruments (excluding term deposits), net of outstanding bank overdrafts and short-term money market borrowings that are not subject to a term facility.

Cash at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

Cash and cash equivalents 56.0 46.6 9.0 0.9

Bank overdraft (Note 20) – (11.2) – –

Total cash and cash equivalents 56.0 35.4 9.0 0.9

(b) Financing facilitiesThe economic entity has:

Unsecured multi-option facilities which are on a three-year term expiring in March 2012 (2008: rolling basis expiring in August and September 2010). These facilities are subject to review before maturity at which time they may be extended for a further period.

Amount used 99.6 31.7

Amount unused 140.4 78.3

Secured single-option facility which is on a one-year rolling basis currently expiring April 2010. This facility is subject to review before maturity at which time it may be extended for a further period.

Amount used 8.0 –

Amount unused 12.0 –

US Private Placement issued on 15 July 2003. Senior unsecured notes expiring 15 July 2013 and 15 July 2015.


Amount unused – –

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2009 2008 2009 2008 $m $m $m $m

10. Cash and Cash Equivalents (continued)

(b) Financing facilities (continued)Unsecured single-option facilities which are on a one-year rolling basis currently expiring November 2009 and July 2010. These facilities are subject to review before maturity at which time they may be extended for a further period.


Amount unused 19.5 107.0

Unsecured multi-option facilities which are on a five-year rolling basis currently expiring on August and September 2012. These facilities are subject to review before maturity at which time they may be extended for a further period.

Amount used – 18.1

Amount unused – 26.9

Total financing facilities 472.3 497.7

(c) Reconciliation of profit from ordinary activities after related income tax to net cash flows from operating activities

Profit for the year 43.9 26.6 42.8 44.7

Depreciation and amortisation of non-current assets 70.8 73.8 – –

(Profit)/loss from sales of non-current assets (2.9) (1.8) – (1.2)

Share of joint venture entities profit (0.1) (0.4) – –

Interest revenue from security plan loans (0.9) (3.6) (0.8) (3.1)

Interest expense on security plan loans – – – –

Unrealised foreign exchange gain (1.8) 0.1 – –

Dividend revenue 0.5 – (50.0) (49.0)

Impairment of assets 3.4 1.0 – –

Onerous lease contracts (4.2) – – –

Unwinding of discount on onerous contracts 0.1 0.3 – –

Share-based payment expense 0.6 0.3 0.6 0.3

Increase/(decrease) in income tax payable (5.2) (3.7) (15.8) (10.6)

Increase/(decrease) in deferred tax balances 1.1 2.0 (0.3) 0.4

Changes in assets and liabilities, net of effects from acquisition and disposal of businesses:

(Increase)/decrease in assets:

Current receivables 4.4 (5.2) 2.1 –

Current inventories 9.0 1.2 – –

Prepayments 3.4 (4.7) (1.9) 0.3

Increase/(decrease) in liabilities:

Current trade payables 11.3 18.3 (0.9) 2.6

Other current liabilities 2.9 (0.6) (0.3) (1.5)

Net cash from operating activities 136.3 103.6 (24.5) (17.1)

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2009 2008 2009 2008 $m $m $m $m

11. Current Trade and Other ReceivablesTrade receivables 260.9 266.5 – –

Allowance for doubtful debts (3.1) (3.5) – –

Other debtors 22.1 9.7 – 2.1

279.9 272.7 – 2.1

The classes of trade receivables have been determined by reference to the credit terms and also follow the lines of the operating segments. Our policy requires customers to pay in accordance with these agreed credit terms.

The credit terms for each of the classes are as follows:

• Cleaning: generally 30 days from date of invoice.

• Food: generally 7 to 30 days from date of invoice.

• Laundries: generally 30 days from date of invoice.

• Managed Services: generally 7 to 30 days from date of invoice.

• Managed Services – Other: generally 31 to 60 days from date of invoice.

• Braiform (Retailer Services): generally 30 days from date of invoice.

• Braiform (Retailer Services) – Other: generally 90-120 days under Letters of Credit.

In the ageing analysis on the next page, trade receivables have been aged according to their original due date. At both the current and prior year end there are no receivables that would have been past due had their terms not been renegotiated.

The Consolidated Entity trades only with recognised creditworthy third parties, and as such collateral is not requested.

Receivables balances are monitored on an ongoing basis with the result that the Consolidated Entity’s exposure to bad debts is not significant. Specifically, for all classes of trade receivables we have used the following basis to assess the allowance for doubtful debts:

• an assessment of trade receivables on an individual account basis to determine whether there is objective evidence that an individual trade receivable is impaired;

• all debt greater than 60 days is reviewed for any risk of dispute or collectibility;

• any prior knowledge of debtor insolvency or other credit risk;

• an estimate of irrecoverable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience.

In determining the recoverability of a trade receivable, the Consolidated Entity considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

If a debt is considered to be in dispute or there is uncertainty around collection the allowance for doubtful debts is used. A debt is only written off when it is considered to be non-recoverable, all collection effort has been exhausted or the debtor is in liquidation or receivership.

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11. Current Trade and Other Receivables (continued) Braiform Managed Managed Braiform (Retailer Services) Cleaning Food Laundries Services Services Other (Retailer Services) Other Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 $m $m $m $m $m $m $m $m $m $m $m $m $m $m $m $m

Trade receivables (i) 21.8 26.3 26.2 33.3 31.4 29.8 141.6 113.9 10.0 17.0 28.8 44.3 1.1 1.9 260.9 266.5

Allowance for doubtful debts (ii) – (0.2) (0.2) (0.1) (0.1) (0.1) – (0.1) – – (2.2) (2.7) (0.6) (0.3) (3.1) (3.5)

21.8 26.1 26.0 33.2 31.3 29.7 141.6 113.8 10.0 17.0 26.6 41.6 0.5 1.6 257.8 263.0

Movement in the allowance for doubtful debts

Balance at beginning of the year (0.2) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) – – (2.7) (2.7) (0.3) (0.3) (3.5) (3.4)

Amounts written off during the year – – – – 0.2 0.1 – 0.1 – – 0.1 0.5 – – 0.3 0.7

Amounts recovered during the year – – – – – – – – – – – – – – – –

(Increase)/decrease in allowance recognised in profit or loss 0.2 (0.1) (0.1) – (0.2) (0.1) 0.1 (0.1) – – 0.4 (0.5) (0.3) – 0.1 (0.8)

Balance at end of the year – (0.2) (0.2) (0.1) (0.1) (0.1) – (0.1) – – (2.2) (2.7) (0.6) (0.3) (3.1) (3.5)

Ageing of past due but not impaired (i) (iii)

30 – 60 days 2.5 2.8 4.5 6.6 5.3 5.2 8.3 11.1 n/a n/a 8.6 11.2 n/a n/a 29.2 36.9

60 – 90 days 0.5 0.7 0.6 1.4 0.6 1.5 1.8 1.5 0.1 0.1 2.4 4.7 n/a n/a 6.0 9.9

90 – 120 days 0.1 0.8 0.2 0.7 0.5 0.7 1.2 1.0 0.5 0.1 1.0 1.9 0.2 0.3 3.7 5.5

+120 days 0.3 0.7 0.3 1.3 0.2 0.2 2.5 4.2 0.4 – 2.1 5.2 0.1 0.3 5.9 11.9

Total 3.4 5.0 5.6 10.0 6.6 7.6 13.8 17.8 1.0 0.2 14.1 23.0 0.3 0.6 44.8 64.2

(i) Included in the Consolidated Entity’s trade receivables balance are debtors with a carrying amount of $44.8 million (2008: $64.2 million) which are past due at the reporting date for which the Consolidated Entity has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Consolidated Entity does not hold any collateral over these balances.

(ii) At 30 June 2009 there are no material individually impaired trade receivables included in the allowance for doubtful debts (2008: $Nil).

(iii) The Spotless standard Terms and Conditions allows for interest to be charged on overdue debts.

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11. Current Trade and Other Receivables (continued) Braiform Managed Managed Braiform (Retailer Services) Cleaning Food Laundries Services Services Other (Retailer Services) Other Total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 $m $m $m $m $m $m $m $m $m $m $m $m $m $m $m $m

Trade receivables (i) 21.8 26.3 26.2 33.3 31.4 29.8 141.6 113.9 10.0 17.0 28.8 44.3 1.1 1.9 260.9 266.5

Allowance for doubtful debts (ii) – (0.2) (0.2) (0.1) (0.1) (0.1) – (0.1) – – (2.2) (2.7) (0.6) (0.3) (3.1) (3.5)

21.8 26.1 26.0 33.2 31.3 29.7 141.6 113.8 10.0 17.0 26.6 41.6 0.5 1.6 257.8 263.0

Movement in the allowance for doubtful debts

Balance at beginning of the year (0.2) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) (0.1) – – (2.7) (2.7) (0.3) (0.3) (3.5) (3.4)

Amounts written off during the year – – – – 0.2 0.1 – 0.1 – – 0.1 0.5 – – 0.3 0.7

Amounts recovered during the year – – – – – – – – – – – – – – – –

(Increase)/decrease in allowance recognised in profit or loss 0.2 (0.1) (0.1) – (0.2) (0.1) 0.1 (0.1) – – 0.4 (0.5) (0.3) – 0.1 (0.8)

Balance at end of the year – (0.2) (0.2) (0.1) (0.1) (0.1) – (0.1) – – (2.2) (2.7) (0.6) (0.3) (3.1) (3.5)

Ageing of past due but not impaired (i) (iii)

30 – 60 days 2.5 2.8 4.5 6.6 5.3 5.2 8.3 11.1 n/a n/a 8.6 11.2 n/a n/a 29.2 36.9

60 – 90 days 0.5 0.7 0.6 1.4 0.6 1.5 1.8 1.5 0.1 0.1 2.4 4.7 n/a n/a 6.0 9.9

90 – 120 days 0.1 0.8 0.2 0.7 0.5 0.7 1.2 1.0 0.5 0.1 1.0 1.9 0.2 0.3 3.7 5.5

+120 days 0.3 0.7 0.3 1.3 0.2 0.2 2.5 4.2 0.4 – 2.1 5.2 0.1 0.3 5.9 11.9

Total 3.4 5.0 5.6 10.0 6.6 7.6 13.8 17.8 1.0 0.2 14.1 23.0 0.3 0.6 44.8 64.2

(i) Included in the Consolidated Entity’s trade receivables balance are debtors with a carrying amount of $44.8 million (2008: $64.2 million) which are past due at the reporting date for which the Consolidated Entity has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Consolidated Entity does not hold any collateral over these balances.

(ii) At 30 June 2009 there are no material individually impaired trade receivables included in the allowance for doubtful debts (2008: $Nil).

(iii) The Spotless standard Terms and Conditions allows for interest to be charged on overdue debts.

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2009 2008 2009 2008 $m $m $m $m

12. Current InventoriesRaw materials and stores 4.7 8.2 – –

Finished goods 46.4 51.8 – –

51.1 60.0 – –

13. Other Current Financial AssetsAt amortised cost

Loans to other persons (i) 0.1 0.1 – –

Security plan loans (i) 2.6 – – –

Amounts receivable from wholly-owned entities (i) – – 296.1 248.6

2.7 0.1 296.1 248.6

(i) All current financial assets are non interest bearing.

14. Investments Accounted for using the Equity MethodInvestments in jointly controlled entities 5.0 5.4 – –

5.0 5.4 – –

Consolidated Ownership Interest Carrying Amount

2009 2008 2009 2008 % % $m $m

Joint Venture Entities

ZFS Functions Ltd (Food Services, Australia) 50 50 0.2 0.2

Eden Park Catering Ltd (formerly Michael O’Brien Catering Pty Ltd) (Food Services, New Zealand) 50 50 4.8 5.2

Spotless Services Middle East General Maintenance LLC 50 – – –


2009 2008 2009 2008 $m $m $m $m

Reconciliation of movement in investment in joint venture entities

Balance at the beginning of the year 5.4 0.3 – –

Acquisitions – 5.2 – –

Share of profit for the year (0.1) 0.4 – –

Dividends (0.3) (0.5) – –

Balance at the end of the year 5.0 5.4 – –

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14. Investments Accounted for using the Equity Method (continued)Summarised financial information in respect of the Consolidated Entity’s jointly controlled entities is set out below:

Consolidated

2009 2008 $m $m

Financial position:

Current assets 0.8 2.4

Non-current assets 4.4 4.3

5.2 6.7

Current liabilities (0.3) (1.4)

Non-current liabilities – –

(0.3) (1.4)

Net assets 4.9 5.3

Consolidated Entity’s share of jointly controlled entities’ net assets 2.5 2.7

Financial performance:

Income 11.0 10.7

Expenses 11.1 9.9

Consolidated Entity’s share of jointly controlled entities’ profit/(loss) (0.1) 0.4

Dividends received from joint venturesDuring the year the Consolidated Entity received dividends of $360,000 (2008: $510,000) from its jointly controlled entities.

Contingent liabilities and capital commitmentsThe Consolidated Entity’s share of capital commitments, other expenditure commitments and contingent liabilities of jointly controlled entities are disclosed in Notes 30 and 31 respectively.

15. Other Non-Current Financial Assets Consolidated Company

2009 2008 2009 2008 $m $m $m $m

Shares in controlled entities – – 486.6 486.6

Available-for-sale investments carried at fair value

Shares 7.6 9.4 – –

At amortised cost

Loans to other persons 1.4 2.1 – –

Other receivables (i) 2.2 0.9 – –

Securities Plan loans (i) (ii) 12.3 16.2 13.7 14.4

23.5 28.6 500.3 501.0

(i) Non interest bearing.

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16. Property, Plant and Equipment At Cost

Investment Plant Laundries Braiform Property Freehold Leasehold and Rental Stock in under Leased Land Buildings Improvements Equipment Stock Circulation Construction (i) Assets Total $m $m $m $m $m $m $m $m $m

Consolidated

Gross carrying amount

Balance at 1 July 2007 10.7 15.2 31.3 365.0 125.3 55.8 8.7 3.6 615.6

Additions – 0.5 6.8 22.5 26.2 11.5 – – 67.5

Disposals (0.4) (0.2) (4.1) (52.5) (6.9) – – – (64.1)

Decommissioning costs – – (0.3) – – – – – (0.3)

Net foreign exchange variance (0.1) (0.3) (1.0) (21.6) (2.5) (6.8) – (0.7) (33.0)

Balance at 30 June 2008 10.2 15.2 32.7 313.4 142.1 60.5 8.7 2.9 585.7

Additions – 1.1 6.9 33.1 30.1 5.7 – 0.1 7.0

Disposals – – (0.9) (15.7) (6.9) – – (0.2) (23.7)

Decommissioning costs – – – – – – – – –

Net foreign exchange variance 0.1 0.3 0.3 12.2 (0.4) 10.4 – 0.2 23.1

Balance at 30 June 2009 10.3 16.6 39.0 343.0 164.9 76.6 8.7 3.0 662.1

Accumulated depreciation

Balance at 1 July 2007 – (2.3) (21.5) (268.9) (93.3) (30.5) – (2.1) (418.6)

Disposals – – 3.8 44.9 6.6 – – – 55.3

Decommissioning costs – – 0.1 – – – – – 0.1

Impairment losses charged to profit – – – (0.6) – – – – (0.6)

Reversals of impairment losses charged to profit – – – 0.7 – – – – 0.7

Net foreign exchange variance – 0.1 0.2 15.7 1.3 4.3 – 0.5 22.1

Depreciation expense – (0.3) (2.2) (29.5) (26.0) (14.9) – (0.2) (73.1)

Balance at 30 June 2008 – (2.5) (19.6) (237.7) (111.4) (41.1) – (1.8) (414.1)

Disposals – – 0.9 14.4 6.9 – – 0.1 22.3

Decommissioning costs – – – – – – – – –

Impairment losses charged to profit – – – – – – – – –

Reversals of impairment losses charged to profit – – – 1.0 – – – – 1.0

Net foreign exchange variance – (0.2) (0.7) (8.8) (0.2) (6.1) – – (16.0)

Depreciation expense – (0.3) (3.3) (27.0) (25.2) (13.4) – (0.2) (69.4)

Balance at 30 June 2009 – (3.0) (22.7) (258.1) (129.9) (60.6) – (1.9) (476.2)

Net book value

As at 30 June 2008 10.2 12.7 13.1 75.7 30.7 19.4 8.7 1.1 171.6

As at 30 June 2009 10.3 13.6 16.3 84.9 35.0 16.0 8.7 1.1 185.9

(i) On 20 April 2007 the Consolidated Entity acquired land and buildings (including 49 apartments) at 227 Barkly Street, Brunswick (“the property”) for $5.8 million. The acquired property has certain alleged levels of contamination, which the Consolidated Entity intends to remediate, the extent of which will be discussed with the Environment Protection Authority Victoria. The Consolidated Entity also intends to restore the apartments to a condition ready for sale. The provision for remediation and restoration of the property has been estimated at $2.1 million (refer Note 21), based on an assessment by external advisors. This brings the total cost of investment property under construction to $8.7 million. The acquisition of the property has no direct impact on the current litigation against the Consolidated Entity in connection with the alleged contamination of the property (refer Note 31).

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16. Property, Plant and Equipment (continued) At Cost

Freehold Plant and Land Buildings Equipment Total $m $m $m $m

Company

Gross carrying amount

Balance at 1 July 2007 0.4 0.2 0.1 0.7

Additions – – – –

Disposals (0.4) (0.2) – (0.6)

Transfers from/(to) subsidiaries – – – –

Balance at 30 June 2008 – – 0.1 0.1

Additions – – – –

Disposals – –

Transfers from/(to) subsidiaries – – – –

Balance at 30 June 2009 – – 0.1 0.1

Accumulated depreciation

Balance at 1 July 2007 – – (0.1) (0.1)

Disposals – – – –

Transfers (from)/to subsidiaries – – – –

Depreciation expense – – – –

Balance at 30 June 2008 – – (0.1) (0.1)

Disposals – – – –

Transfers (from)/to subsidiaries – – – –

Depreciation expense – – – –

Balance at 30 June 2009 – – (0.1) (0.1)

Net book value

As at 30 June 2008 – – – –

As at 30 June 2009 – – – –

Aggregate depreciation allocated during the year is recognised as an expense and disclosed in Note 6(d) to the Financial Statements.

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2009 2008 2009 2008 $m $m $m $m

17. GoodwillGoodwill 470.3 461.7 – –

Accumulated impairment losses (77.0) (77.0) – –

393.3 384.7 – –

ReconciliationGoodwill

Balance at beginning of financial year 461.7 458.7 – –

Additional amounts recognised from business combinations occurring during the period 7.8 10.5

Effects of foreign exchange differences 0.8 (7.5) – –

Balance at end of financial year 470.3 461.7 – –

There was no movement in accumulated impairment losses for the year (2008: no movement).

Allocation of goodwill to cash-generating unitsThe entire balance of goodwill has been allocated for impairment testing purposes to one individual cash-generating unit and to five groups of cash-generating units, as follows:

Individual cash-generating units:

Taylors Group Limited 5.0 5.0

Groups of cash-generating units:

Cleaning Services 29.8 25.1

Food Services 87.7 87.4

Laundries 20.0 19.9

Managed Services 75.9 72.4

Braiform (Retailer Services) – net of impairment losses 174.9 174.9

There has been no change in the cash generating units in the current year.

Cleaning Services, Food Services, Laundries, Managed Services and Taylors Group LimitedThe recoverable amount is determined based on a value in use calculation which uses cash flow projections based on financial budgets / business plans approved by the Board of Directors covering a five year period extrapolated over a further five years using nominal growth rates with a residual at the end of year ten, and a discount rate of 10.5% pa (2008: 12.2% pa). Any reasonable possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

Braiform (Retailer Services)The recoverable amount is determined based on a value in use calculation which uses cash flow projections based on financial budgets / business plans approved by the Board of Directors covering a five year period extrapolated over a further five years using nominal growth rates with a residual at the end of year ten, and a discount rate of 10.1% pa (2008: 10.60% pa). Any reasonable possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

For all calculations the budgeted gross margin is the budgeted gross margin for the next financial year. Other influences on projections such as movements in commodity prices and inflation are factored into the discount rate applied in each test.

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18. Intangible AssetsPatents 4.2 2.9 – –

Brand names 5.0 3.4 – –

Customer contracts 5.6 2.9 – –

Capitalised development 8.4 5.0 – –

Accumulated amortisation (3.7) (2.2) – –

19.5 12.0 – –

ReconciliationsPatentsBalance at beginning of financial year 2.9 3.0 – –

Additions 1.1 – – –

Derecognised on disposal of a subsidiary – – – –

Effects of foreign exchange differences 0.2 (0.1) – –


Accumulated amortisationBalance at beginning of financial year (1.9) (1.8) – –

Amortisation for the period (0.5) (0.3) – –

Derecognised on disposal of a subsidiary – – – –

Effects of foreign exchange differences (0.1) 0.2 – –

Balance at end of financial year (2.5) (1.9) – –

Brand namesBalance at beginning of financial year 3.4 – – –

Acquisitions through business combinations 1.6 3.4 – –


Accumulated amortisationBalance at beginning of financial year (0.1) – – –



Customer contractsBalance at beginning of financial year 2.9 – – –

Acquisitions through business combinations 2.7 2.9 – –


Accumulated amortisationBalance at beginning of financial year (0.2) – – –



Capitalised developmentBalance at beginning of financial year 5.0 2.3 – –

Additions from internal development 3.4 2.7 – –


Accumulated amortisationBalance at beginning of financial year – – – –

Amortisation for the period (0.4) – – –

Balance at end of financial year (0.4) – – –

Aggregate amortisation allocated during the year is recognised as an expense and disclosed in Note 6(d) to the Financial Statements.

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19. Current Trade and Other PayablesTrade payables (i) 296.3 283.1 1.9 2.8

Goods and Services Tax (GST) payable 7.1 8.4 – –

303.4 291.5 1.9 2.8

(i) Credit periods range from 1 day prompt payment to 75 days. The average credit period is 45 days. Interest is not incurred on any outstanding balances. The Consolidated Entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

Financial guaranteesThe parent entity is: (i) party to a financial guarantee to a bank in respect of an entity in the Consolidated Entity; and (ii) party to deeds of cross guarantee with other entities in the Consolidated Entity. The nature of the deeds of cross guarantee is such that each company which is party to the deed, guarantees, to each creditor, payment in full of any debt in accordance with the deed of cross guarantee. No material adjustment is required in the separate Financial Statements of the Company to recognise the financial guarantee liability associated with its exposure under the deeds of cross guarantee or with respect to the parent entity guarantee to a bank.

20. Current Borrowingsunsecured: at amortised cost

Bank overdraft – 11.2 – –

Bank facilities 10.0 – – –

Bank loans – 47.0 – –

Secured: at amortised cost

Finance lease liabilities (i) 0.1 0.1 – –

10.1 58.3 – –

(i) Secured by the assets leased.

Details regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 35.

21. Current ProvisionsPublic liability 2.0 2.1 – –

Employee benefits (i) 68.4 67.0 0.1 0.1

Directors’ retiring allowance 0.6 1.0 0.6 0.9

Onerous lease contracts 0.8 1.4 – –

Land remediation – Barkly Street 2.1 2.4 – –

73.9 73.9 0.7 1.0

(i) The current provision for employee benefits includes $19.5 million of vested long service leave entitlements accrued but not expected to be taken within 12 months (2008: $18.7 million). All annual leave entitlements accrued in the current provision for employee benefits are expected to be taken within 12 months.

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21. Current Provisions (continued)

ReconciliationsReconciliations of the carrying amounts of each class of provision are set out below:

Public liability

Carrying amount at beginning of year 2.1 1.7 – –

Increase/(decrease) in provision during the year 0.5 1.1 – –

Payments made during the year (0.6) (0.7) – –

Carrying amount at end of the year 2.0 2.1 – –

Directors’ retiring allowance

Carrying amount at beginning of year 1.0 0.9 0.9 0.9

Interest earned 0.1 0.1 – –

Payments made during the year (0.5) – (0.3) –

Carrying amount at end of the year 0.6 1.0 0.6 0.9

Onerous lease contracts


Provisions made / (written back) during the year (0.6) – – –


Land Remediation – Barkly Street


Payments made during the year (0.3) (0.3) – –


Public liabilityThe provision for public liability represents the Directors’ best estimate of the future sacrifice of economic benefits that will be required under the Consolidated Entity’s self-insured public liability exposure relating to claims below the insured excess. The estimate is based on historical trends and may vary as a result of claims.

Directors’ retiring allowanceThe Board in 2006 decided to discontinue the Non-executive Directors’ retiring allowance effectively from 1 July 2006. It was agreed at the 2006 Annual General Meeting that the accrued entitlements of the Non-executive Directors’ retiring allowance would be held by the Company until they cease office.

Onerous lease contractsThe provision for onerous lease contracts represents the present value of future lease payments that the Consolidated Entity is presently obliged to make under non-cancellable onerous operating lease contracts, less revenue expected to be earned on the lease including estimated future sub-lease revenue, where applicable. The estimate may vary as a result of changes in the utilisation of the leased premises and sub-lease arrangements where applicable. The unexpired term of the leases range from seven to eight years.

Land Remediation – Barkly StreetThe provision for land remediation represents the estimated costs to be incurred to restore land and buildings at 227 Barkly Street to a condition ready for sale (refer Note 16). The estimate is based on an assessment by external advisors.

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22. Other Current LiabilitiesNon interest bearing

Owing under purchase and other agreements 4.4 1.5 – –

23. Non-Current BorrowingsUnsecured: at amortised cost

Bank loans 101.6 49.8 50.0 –

Senior unsecured notes 157.3 131.8 – –

Secured: at amortised cost

Finance lease liabilities(i) 0.5 0.5 – –

259.4 182.1 50.0 –

(i) Secured by the assets leased.

Details regarding interest rate, foreign exchange and liquidity risk are disclosed in Note 35.

24. Other Non-Current Financial LiabilitiesDerivatives at fair value 33.7 45.9 2.2 –

25. Non-Current ProvisionsEmployee benefits 2.7 3.8 – –

Decommissioning costs 2.3 2.3 – –

Onerous lease contracts 0.4 4.9 – –

5.4 11.0 – –

ReconciliationsReconciliations of the carrying amounts of each class of provision are set out below:

Decommissioning costs


Decommissioning costs utilised – – – –

Reductions resulting from remeasurement – (0.3) – –


Onerous lease contracts (Note 21)


Provisions made / written back during the year (3.6) – – –

Onerous lease contracts provision utilised (1.0) (1.6) – –

Unwinding of discount 0.1 0.3 – –


Provision for decommissioning costsThe provision for decommissioning costs is a capitalised estimate of the costs of dismantling plant and equipment and restoring sites on which it is located. This obligation is incurred when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. The Consolidated Entity has identified the ‘make-good’ clauses on some of its leasehold properties to meet such criteria.

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26. Other Non-Current LiabilitiesOwing under purchase and other agreements 1.4 1.1 – –

27. ReservesDebt hedging 1.4 7.7 (1.6) –

Investment revaluation reserve – (2.7) – –

Foreign currency translation (22.8) (27.5) – –

Share-based payment reserve (2.7) – (2.7) –

Balance at end of the financial year (24.1) (22.5) (4.3) –

Debt hedging reserveThe hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.

Investment revaluation reserveThe investment revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold that portion of the reserve which relates to that financial asset, is effectively realised and is recognised in profit or loss. Where a revalued financial asset is impaired that portion of the reserve which relates to that financial asset is recognised in profit or loss.

Foreign currency translation reserveExchange differences relating to foreign currency monetary items forming part of the net investment in a foreign operation and the translation of foreign controlled entities are brought to account by entries made directly to the foreign currency translation reserve, as described in Note 3(c).

Share-based payment reserveThe Share-based payment reserve is used to record the value of benefits provided to employees and Directors in the form of equity as part of their remuneration. The Plans are described in Note 28.

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2009 2008 No. No.

28. Share-based paymentsPerformance Share Plan

Balance at beginning of the financial year 439,717 –

Granted during the year 668,666 439,717

Balance at end of the financial year(i) 1,108,383 439,717

No. 2009 2008 Earliest Executives No. No. Grant Date exercise Date Expiry Date Exercise Price

Granted 22 February 2008 9 – 439,717 22/02/2008 30/08/2009 30/08/2009 –

Granted 20 November 2008 7 668,666 – 20/11/2008 30/06/2011 31/08/2011 –

(i) The Consolidated Entity established a performance based share plan in 2006. The plan provides for annual grants of performance rights to be made based on a three year performance period; with entitlement to vest only in the event participants achieve their targets at the end of the three year period. The performance rights were issued free of charge and entitle the holder to one fully paid ordinary share in the entity subject to meeting the vesting conditions.

Performance rights granted on 22 February 2008 were issued at a fair value of $1.62 per right. Performance rights granted on 20 November 2008 were issued at a fair value of $1.62 (167,166 rights) and $2.04 (501,500 rights) per right. The rights were valued using binomial tree and Monte Carlo simulation models using the share price at the date of issue, volatility of 40% and dividend yield rate of 5.5% as key inputs.

The performance criteria focuses directly on shareholder value i.e. non-diluted earnings per share (EPS) and relative total shareholder return (RTSR). The Human Resources Committee believes that the performance measures chosen are consistent with market practice and are an effective means of linking performance with measurable, long-term outcomes. The long-term interests of shareholders are reflected in the measure chosen, and are therefore an effective method of aligning the interests of the executives with those of the shareholders.

Vesting for 75% of each grant of performance rights is based on EPS criteria related to growth over three years. Vesting for 25% of each grant of performance rights is based on RTSR criteria measuring the relative return to shareholders based on the share price movement and dividends paid compared to other entities in the ASX 100 to 200 companies. Refer to the Remuneration Report in the Directors’ Report for further information on the performance criteria.

2009 2008 No. No.

Executive Share Option Plan

Balance at beginning of the financial year – 300,000

Lapsed during the year – (300,000)

Balance at end of the financial year(i) – –

No. 2009 2008 Earliest Executives No. No. Grant Date exercise Date Expiry Date Exercise Price

Granted 18 March 2003 2 – – 18/03/2003 19/03/2006 19/03/2008 $5.00

(i) Options do not carry any dividends or voting rights until exercised. The individual must pay the exercise price to the Company in order to exercise the options.

As stated in Note 3(x), equity-settled share-based payments granted after 7 November 2002 are measured at fair value at the date of grant. Therefore those granted on 18 March 2003 were measured at a total value of $224,400 at date of issue using a binomial model. This model assumed a spot price of $4.28, volatility of 30.5% and a risk free rate of 5.3%.

There are no specific performance criteria which must be met prior to the beneficial vesting of options, which are issued to overseas domiciled senior executives, in recognition of taxation differences, to facilitate their participation in the Spotless Group Securities Plan mentioned in Note 29(e).

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29. Related Party Disclosures

(a) Equity interests in related partiesEquity interests in controlled entities:

Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 34 to the Financial Statements.

Details of the percentage of interests in joint ventures are disclosed in Note 14 to the Financial Statements.

(b) Key Management Personnel compensation and retirement benefitThe following persons were Key Management Personnel of Spotless Group Limited during the financial year:

Key Management Personnel Position Date of change in position

Directors during and at the end of the financial year

P J Smedley Non-executive Chairman

A E Beanland Non-executive Director

D G Davis Non-executive Director resigned 15 February 2009

M E Elliott Non-executive Director resigned 1 July 2008

J P Farnik Managing Director & Chief Executive Officer appointed 2 July 2008

B K Morris Non-executive Director

L B O’Bryan Non-executive Director

D A Pritchard Non-executive Director

E M Proust Non-executive Director

G T Ricketts Non-executive Director

P A Wilson (i) Former Managing Director & Chief Executive Officer resigned 2 July 2008

Executives at the end of the financial year

A Carstens Chief Financial Officer & Company Secretary

J W Pearce Group General Manager – Human Resources

P C Lamell Group General Manager – Sector Strategy appointed 1 June 2009

J Page Group General Manager – Cleaning Services appointed 1 September 2008

J F Bishop Group General Manager – Laundry Services

T J Sexton Group General Manager – Food Services

W J Field Group General Manager – Managed Services appointed 2 June 2009

M N Givoni Group General Manager – Development

K Watson Group General Manager – Public and Corporate Affairs appointed 1 January 2009

N J Ente Chief Executive Officer – Braiform appointed 1 September 2008

A P Stevens Chief Information Officer appointed 2 March 2009

M Sulicich Group General Manager – Cleaning Services resigned 31 August 2008

(i) P A Wilson resigned as Managing Director and Chief Executive Officer on 2 July 2008 and was appointed Executive Chairman Braiform for the period 3 July 2008 to 31 December 2008.F

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29. Related Party Disclosures (continued)

(b) Key Management Personnel compensation and retirement benefit (continued)The aggregate compensation of the Key Management Personnel of the Consolidated Entity and the Company is set out below:


2009 2008 2009 2008 $ $ $ $

Short-term employee benefits 6,881,656 6,228,634 1,636,155 2,119,516

Post-employment benefits 723,910 852,718 205,123 390,155

Termination payments 1,506,270 – 1,506,270 –

Share-based payment 468,967 585,957 260,396 225,198

9,580,803 7,667,309 3,607,944 2,734,869

Director fees paid by Taylors Group Limited (66.01% owned subsidiary) 61,229 50,342 – –

9,642,032 7,717,651 3,607,944 2,734,869

Details of Key Management Personnel compensation and retirement benefits are disclosed in the Directors’ Report as the Company is applying the relief granted under AASB 2008-4 “Amendments to Australian Accounting Standards – Key Management Personnel Disclosures by Disclosing Entities” that exempt disclosing entities that are companies from providing remuneration disclosures in relation to their Key Management Personnel in their annual financial reports required by AASB 124 “Related Party Disclosures”.

(c) Loan disclosures Balance at Interest Interest Balance Number beginning charged not charged Write-off at end in group $ $ $ $ $

Directors2009 (ii) 7,478,117 – – – 7,478,117 12008 7,478,117 – – – 7,478,117 1

Executives2009 2,959,400 – – – 2,728,400 42008 4,769,500 – – – 2,959,400 4

Total2009 10,437,517 – – – 10,206,517 52008 12,247,617 – – – 10,437,517 5

Individuals with loans above $100,000 in the reporting period

Balance at Interest Interest Balance Highest beginning charged not charged Write-off at end in period $ $ $ $ $ $

Directors

P A Wilson (ii)2009 7,478,117 – – – 7,478,117 7,478,1172008 7,478,117 – – – 7,478,117 7,478,117

Executives

C J Anderson (iii)2009 n/a – – – n/a n/a2008 231,000 – – – 231,000 231,000

T J Sexton (i)2009 1,453,900 – – – 1,453,900 1,453,9002008 n/a – – – 1,453,900 1,453,900

M N Givoni (i)2009 1,274,500 – – – 1,274,500 1,274,5002008 n/a – – – 1,274,500 1,274,500

(i) T J Sexton and M Givoni became Key Management Personnel during the prior period. (ii) P A Wilson ceased to be a Director on 2 July 2008. (iii) C J Anderson ceased to be a Key Management Personnel on 30 June 2008.

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(d) Key Management Personnel equity holdingsFully paid ordinary shares issued by Spotless Group Limited (i) Balance at start Received Balance at end of reporting Granted as on exercise Net other of reporting period compensation of options changes period No. No. No. No. No.

DirectorsP J Smedley2009 86,483 – – 70,754 157,2372008 3,610 – – 82,873 86,483

A E Beanland2009 – – – 12,723 12,7232008 n/a – – – –

D G Davis (iii)2009 28,861 – – 1,706 30,5672008 27,383 – – 1,478 28,861

P A Wilson (iv)2009 2,679,491 – – – 2,679,4912008 2,679,491 – – 2,679,491 2,679,491

B K Morris2009 5,242 – – 18,853 24,0952008 – – – 5,242 5,242

L B O’Bryan2009 23,045 – – 5,000 28,0452008 16,000 – – 7,045 23,045

D A Pritchard2009 25,098 – – 17,740 42,8382008 – – – 25,098 25,098

E M Proust2009 – – – 26,407 26,4072008 n/a – – – –

G T Ricketts2009 18,381 – – 1,088 19,4692008 17,440 – – 941 18,381

ExecutivesJ F Bishop (ii)2009 16,428 – – – 16,4282008 n/a – – – 16,428

T J Sexton (ii)2009 297,260 – – – 297,2602008 n/a – – – 297,260

M N Givoni (ii)2009 254,823 – – – 254,8232008 n/a – – – 254,823

C J Anderson (v)2009 n/a – – – n/a2008 50,000 – – – 50,000

The shareholdings include shares acquired under the Spotless Group Securities Plan and Spotless Services Securities Plan described in Note29(e).

(i) Includes Ordinary Shares held directly, indirectly or beneficially by Key Management Personnel, including their related parties.(ii) P C Lamell, J F Bishop, T J Sexton, W J Field and M N Givoni became Key Management Personnel during the prior reporting period.(iii) D G Davis resigned as a Director during the year.(iv) P A Wilson ceased to be a Director on 2 July 2008.(v) C J Anderson ceased to be a Key Management Personnel on 30 June 2008.

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(d) Key Management Personnel equity holdings (continued)Executive performance rights issued by Spotless Group Limited Balance at Granted as Balance at Balance beginning compen- end of Vested at Rights vested of period (i) sation Vested (iii) Lapsed period 30 June 2009 during year 2009 No. No. No. No. No. No. No.

Executives

A Carstens 101,382 88,235 – (76,037) 113,580 – –

J P Farnik 101,382 227,000 – (76,037) 252,345 – –

P C Lamell 115,200 84,874 – (86,400) 113,674 – –

T J Sexton 20,735 56,022 – (15,551) 61,206 – –

J F Bishop 17,279 42,507 – (12,959) 46,827 – –

M N Givoni 16,895 – – (12,671) 4,224 – –

N J Ente – 70,028 – – 70,028 – –

W J Field – 33,053 – – 33,053 – –

M Sulicich 24,885 – – (24,885) – – –

C J Anderson 21,429 n/a n/a n/a n/a n/a n/a

(i) The first issue of rights under this program occurred in 2008 therefore the opening balance in the table above also reflects rights issued in the prior year.

(ii) C J Anderson ceased to be a Key Management Personnel on 30 June 2008.

(iii) Each right issued entitles the holder to one fully paid ordinary share in the Company (for no consideration) subject to meeting certain vesting conditions.

(e) Spotless Group Securities Plan and Spotless Services Securities PlanThe Spotless Group Securities Plan (‘the Group Plan’) provides for the issue of shares and other securities such as options, warrants and any other securities which may become appropriate to provide incentive and rewards for employees and Executive Directors of the Company. Members are advanced funds to purchase fully paid shares with the amount of the loan being returned as subscription monies to the Company making the loan. The cash effect of these employee loan and capital subscription transactions is neutral for the Company. These loans attract no interest. The Spotless Services Securities Plan has terms and conditions similar to those under the Group Plan.

At 30 June 2009 Directors and executives had a balance of 550,716 ordinary shares (2008: 3,245,128 shares) under the provisions of the Group Plan. During 2009 no executives or Spotless Group Limited Directors repaid loans under the provisions of the Securities Plan (2008: nine executives, two directors).

There were no shares issued under the Spotless Group Securities Plan in the current year (2008: Nil).

(f) Other transactions with Key Management PersonnelThere were no other transactions between Key Management Personnel, or their related parties, and the Company or it’s subsidiaries during the reporting period.

(g) Transactions within the wholly-owned groupThe wholly-owned group includes the ultimate parent entity in the wholly-owned group, wholly-owned controlled entities, and other entities in the wholly-owned group. The ultimate parent entity in the wholly-owned group is Spotless Group Limited.

Details of dividend revenue derived by the parent entity from wholly-owned controlled entities are disclosed in Note 6 to the Financial Statements.

Amounts receivable from wholly-owned controlled entities are disclosed in Note 13 to the Financial Statements.

During the financial year Spotless Group Limited provided administration services to other entities in the wholly-owned group. Other transactions that occurred during the financial year between entities in the wholly-owned group were:

• advancement of interest free loans;

• sale and purchase of goods at cost;

• rental of premises at commercial rates; and

• forgiveness of intercompany debt.

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(h) Transactions with other related partiesOther related parties include the ultimate parent entity, partly-owned controlled entities, joint venture entities, Directors of related parties and their Director related entities and other related parties.

(i) Controlling entitiesThe parent entity in the Consolidated Entity is Spotless Group Limited.

The ultimate parent entity in the wholly-owned group is Spotless Group Limited.

The ultimate Australian parent entity is Spotless Group Limited.

The ultimate parent entity is Spotless Group Limited.

30. Commitments for Expenditure

(a) Capital expenditure commitmentsNot longer than 1 year 6.1 0.4 – –

Longer than 1 year and not longer than 5 years – – – –

Longer than 5 years – – – –

6.1 0.4 – –

These commitments represent contractual obligations to purchase plant and equipment.

(b) Other commitmentsNot longer than 1 year 26.1 23.9 – –

Longer than 1 year and not longer than 5 years 57.7 66.6 – –

Longer than 5 years 15.9 6.9 – –

99.7 97.4 – –

The majority of these commitments represent minimum catering rights on long-term contracts. Additional catering rights based on future revenues are, or may become payable, however these cannot be accurately quantified.

(c) Lease commitmentsFinance lease liabilities and non-cancellable operating lease commitments are disclosed in Note 32 to the Financial Statements.

31. Contingent LiabilitiesLegal proceedings (i)(ii) – – – –

Contract performance guarantees (iii) 25.7 26.1 – –

(i) In February 2004 the Consolidated Entity announced that litigation had commenced against Spotless Group member entities in respect of contamination of two sites in Barkly Street Brunswick, formerly leased by a Spotless Group entity but vacated many years ago. Notes have appeared in the Spotless Group Limited Financial Statements in 2004 and subsequent years. Hearing of the claims proceeded before the Victorian Supreme Court over the past year. On 5 October 2007 the court determined that all claims against the Spotless Group failed, other than a limited claim for statutory compensation amounting to between $3 million and $4 million. The final amount will be determined after independent assessment and further submissions to the court. Spotless is currently in the process of appealing this judgement.

(ii) Two entities in the Consolidated Entity, have been charged under the Occupational Safety and Health Act 1984 (WA), in relation to two deaths and serious harm caused to seven persons during Cyclone George in March 2007. The charges have been made by WorkSafe WA, which has also brought charges against six other companies, who are not part of the Consolidated Entity. The matter has been set down for trial from 31 May 2010.

(iii) A number of entities in the Consolidated Entity are required to guarantee their performance for certain contracts. These guarantees relate to contracts in the Food Services, Cleaning Services and Managed Services segments. The amount disclosed represents the aggregate amount of such guarantees. The extent to which an outflow of funds will be required is dependent on the future operations.

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32. Leases

(a) Operating leasesLeasing arrangementsOperating leases relate to office facilities and manufacturing and laundry plants with lease terms of four to ten years. All operating lease contracts contain market review clauses in the event that the Consolidated Entity exercises its option to renew. The Consolidated Entity does not have an option to purchase the leased assets at the expiry of the lease period.

Non-cancellable operating leases

Not longer than 1 year 20.9 22.6 – –

Longer than 1 year and not longer than 5 years 35.5 41.1 – –

Longer than 5 years 18.8 11.7 – –

75.2 75.4 – –

(b) Finance leasesLeasing arrangementsFinance leases relate to plant and equipment with lease terms of one to three years. The Consolidated Entity has options to purchase the equipment at a market price at the conclusion of the lease agreements.

Finance lease liabilities (including discontinued operations)

Minimum future lease payments

Not later than 1 year 0.3 0.1 – –

Later than 1 year and not later than 5 years 0.3 0.4 – –

Later than 5 years 0.1 0.3 – –

Minimum Finance Lease Payments 0.7 0.8 – –

Less future finance charges (0.1) (0.2) – –

Present value of minimum lease payments 0.6 0.6 – –

Present Value of minimum future lease payments

Not later than 1 year 0.2 0.1 – –

Later than 1 year and not later than 5 years 0.3 0.2 – –

Later than 5 years 0.1 0.3 – –

Present value of minimum lease payments 0.6 0.6 – –

Included in the Financial Statements as:

Current borrowings (Note 20) 0.1 0.1 – –

Non-current borrowings (Note 23) 0.5 0.5 – –

0.6 0.6 – –

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33. Remuneration of Auditors Consolidated Company

2009 2008 2009 2008 $m $m $m $m

Auditor of the parent entity

Auditing/reviewing the financial report 0.694 0.626 0.694 –

Catering right audits 0.033 0.041 – –

Other services 0.033 0.033 – 0.060

0.760 0.700 0.694 0.060

Other Deloitte Touche Tohmatsu International auditors

Auditing the financial report 0.819 0.693 – –

Tax advice and other services 0.058 0.257 – –

0.877 0.950 – –

1.637 1.650 0.694 0.060

34. Controlled Entities

Parent entity (incorporated in Australia)Spotless Group Limited

Wholly-owned entities of Spotless Group Limited with ownership interest of 100% (2008: 100%) incorporated in Australia:

Allmark Services Australia Pty Ltd (c)

Bennelong Services Pty Ltd (c)

Berkeley Challenge Pty Ltd (c)

Berkeley Challenge (Central) Pty Ltd (c)

Berkeley Challenge (Commercial) Pty Ltd (c)

Berkeley Challenge (East) Pty Ltd (c)

Berkeley Challenge Environmental Services Pty Ltd (c)

Berkeley Challenge Hospitality Services Pty Ltd (c)

Berkeley Challenge Housekeeping Services Pty Ltd (c)

Berkeley Challenge (Management) Pty Ltd (c)

Berkeley Challenge (Newcastle) Pty Ltd (c)

Berkeley Challenge (North) Pty Ltd (c)

Berkeley Challenge (NSW) Pty Ltd (c)

Berkeley Challenge (SA) Pty Ltd (c)

Berkeley Challenge (South) Pty Ltd (c)

Berkeley Challenge (West) Pty Ltd (c)

Berkeley Challenge (Wollongong) Pty Ltd (c)

Berkeleys Franchise Services Pty Ltd (c)

Berkeley Railcar Services Pty Ltd (b)(c)

Bridge Services Pty Ltd (c)

Callaghan Services Pty Ltd (c)

Castlereagh Market Services Pty Ltd (c)

Cromer Services Pty Ltd (c)

Darling Services Pty Ltd (c)

Ensign Operations Pty Ltd (c)

Ensign Services (Aust) Pty Ltd (c)

Erina Services Pty Ltd (c)

Figtree Services Pty Ltd (c)

Homebush Services Pty Ltd (c)

Hunter Services Pty Ltd (c)

Kent Services Pty Ltd (c)

Kotara Services Pty Ltd (c)

Lithgow Services Pty Ltd (c)

Macarthur Campbelltown Services Pty Ltd (c)

Martin Services Pty Ltd (c)

Mayfield Services Pty Ltd (c)

Minto Services Pty Ltd (c)

Moore Park Services Pty Ltd (c)

Nationwide Venue Management Pty Ltd (c)

O’Brien Catering Pty Ltd (c)

Parramatta Services Pty Ltd (c)

Penrith Services Pty Ltd (c)

Port Kembla Services Pty Ltd (c)

Redfern Services Pty Ltd (c)

Riley Shelley Services Pty Ltd (b)(c)

Sports Venue Services Pty Ltd (c)

Spotless Apparel Pty Ltd (c)

Spotless Cleaning Services Pty Ltd (c)

Spotless Defence Services Pty Ltd (c)

Spotless Hotel Support Services Pty Ltd (c)

Spotless Investment Holdings Pty Ltd (b) (c)

Spotless Management Services Pty Ltd (c)

Spotless P&F Pty Ltd (c)

Spotless Plastics Pty Ltd (c)

Spotless Property Cleaning Services Pty Ltd (c)

Spotless Property Operations Pty Ltd (c)

Spotless Services Australia Limited (c)

Spotless Services International Pty Ltd (c)

Spotless Services Limited (c)

Spotless Services (NSW) Pty Ltd (c)

SSL Asset Services (Management) Pty Ltd (c)

SSL Facilities Management Pty Ltd (c)

SSL Facilities Management Real Estate Services Pty Ltd (c)

SSL FM Services Pty Ltd (c)

SSL Health Services Pty Ltd (c)

SSL Health Services (NSW) Pty Ltd (c)

SSL Security Services Pty Ltd (c)

Taylors Two Two Seven Pty Ltd (c)

Victoria Services Pty Ltd (c)

Walker Services Pty Ltd (c)

Warilla Services Pty Ltd (c)

Name of entity Ref Name of entity Ref Name of entity Ref

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34. Controlled Entities (continued)

Wholly-owned entities of Spotless Group Limited with ownership interest of 100% (2008: 100%) incorporated overseas:

Name of entity Ref Country Name of entity Ref CountryBraitrim (Deutschland) GmbH (a) Germany Braitrim (Thailand) Limited (a) Thailand

Braitrim Direct Limited (a) UK Braitrim (UK) Limited (a) UK

Braitrim Direct S.A.R.L. (a) France Metromain Limited (a) UK

Braitrim (Far East) Limited (a) HK Peopleassets.net Acquisition Corp (a) USA

Braitrim France S.A. (a) France Peopleassets.net LLC (a) USA

Braitrim Group Limited (a) UK Plastiform de Honduras S. de. R.L. (a) Honduras

Braitrim Holdings Limited (a) UK Plastiform Limited (a) UK

Braitrim India (Pte) Ltd (a) India Spotless Enterprises Inc (a) USA

Braitrim (Lanka) Pvt Ltd (a) Sri Lanka Spotless Ganchos S.DE.R.L. DEC.B. (a) Mexico

Braitrim Maroc SA (a) Morocco Spotless Plastics Mexico Logistics S.DE.R.L. DEC.B.

(a) Mexico

Braitrim Packaging (UK) Limited (a) UK Spotless Plastics (HK) Limited (a) HK

Braitrim Plastiform Bangladesh Limited (a) Bangladesh Spotless Plastics Trading (Shanghai) Limited

(a) PRC

Braitrim Plasti-form Dis Ticaret A.S. (a) Turkey Spotless Plastics (UK) Ltd (a) UK

Braitrim Plasti-Form (Middle East) FZCO (a) Dubai UAE Spotless Plastics (USA) Inc (a) USA

Braitrim Plasti-Form South Africa (Proprietary) Limited

(a) South Africa Spotless Services (NZ) Ltd (a) NZ

Braitrim (Scandinavia) AB (a) Sweden Spotless Services (Singapore) Pte Ltd (a) Singapore

Braitrim (Singapore) Pte Ltd (a) Singapore Windswept Acquisition Corp (a) USA

Other controlled entities of Spotless Group Limited with less than 100% ownership interest:

Ownership interest %

Name of entity Ref Country 2009 2008

Laytons Linen Hire Ltd (a) NZ 66.01 66.01

Taylors Group Ltd (a) NZ 66.01 66.01

(a) Audited by international associates of Deloitte Touche Tohmatsu, Australia.

(b) Controlled Entity incorporated during the current year.

(c) These wholly-owned entities are relieved from the requirement to prepare audited accounts under the Australian Securities and Investments Commission Class Order 98/1418 as they are parties to a Deed of Cross Guarantee with Spotless Group Limited. The Deed of Cross Guarantee was originally executed on 8 June 1995 and amended by Assumption Deeds executed on 26 June 2000 and 17 April 2002, the Revocation Deed executed on 1 June 2000 and a Deed of Retirement and Appointment of Trustee and Alternate Trustee dated 13 June 2001. This Deed of Cross Guarantee was revoked on 13 June 2007 and a replacement Deed of Cross Guarantee under Class Order 98/1418 dated 13 June 2007 was lodged with the Australian Securities and Investment Commission. These all form part of the tax consolidated group of which Spotless Group Limited is the head entity.

The total liabilities of these wholly-owned controlled entities who are party to the Deed of Cross Guarantee (excluding owed to the Company itself) are $409.6 million (2008: $401.7 million).

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2009 2008 $m $m

34. Controlled Entities (continued)Set out below are the consolidated income statement and balance sheet of those wholly-owned entities that are relieved from the requirement to prepare accounts under ASIC Class Order 98/1418 as they are party to the deed of cross guarantee with Spotless Group Limited:

Income StatementRevenue 1,803.4 1,811.1Other income 3.4 2.7 1,806.8 1,813.8Direct employee and subcontractor expenses (1,215.7) (1,239.6)Raw materials, consumables and finished goods used (65.7) (65.7)Impairment of assets and onerous contracts – –Other expenses (397.5) 419.2Profit before depreciation, finance costs and income tax expense (EBITDA) 127.9 89.3Depreciation and amortisation expense (36.1) (35.0)Profit before finance costs and income tax expense (EBIT) 91.8 54.3Finance costs (17.4) (18.0)Profit before income tax expense 74.4 36.3Income tax expense (0.3) (11.3)Profit for the year 74.1 25.0

Balance SheetCurrent assetsCash and cash equivalents 18.6 2.9Current tax assets – –Trade and other receivables 219.8 190.0Inventories 16.7 13.1Other financial assets 0.1 0.1Prepayments 6.6 10.1Total current assets 261.8 216.2Non-current assetsOther financial assets 398.2 400.0Property, plant and equipment 125.5 108.0Goodwill 112.3 102.1Intangible assets 14.9 6.7Deferred tax assets 26.1 21.7Prepayments 6.4 7.3Total non-current assets 683.4 645.8Total assets 945.2 862.0Current liabilitiesTrade and other payables 233.3 208.1Borrowings 8.0 11.2Current tax payables (7.4) 3.9Provisions 57.6 57.1Other 3.4 1.6Total current liabilities 294.9 281.9Non-current liabilitiesBorrowings 116.6 66.2Other financial liabilities 33.7 45.9Deferred tax liabilities 5.9 4.7Provisions 4.1 9.8Other 1.4 1.1Total non-current liabilities 161.7 127.7Total liabilities 456.6 409.6Net assets 488.6 452.4

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2009 2008 $m $m

34. Controlled Entities (continued)EquityIssued capital 521.5 519.6Reserves (1.1) 4.9Retained profits (i) (31.8) (72.1)Total equity 488.6 452.4(i) Retained profitsBalance at beginning of the financial year (72.1) (51.6)Net Profit attributable to members of the parent entity 74.1 25.0Dividends paid (33.8) (45.5)Balance at end of the financial year (31.8) (72.1)

Consolidated

2009 2008 $m $m

35. Capital and Financial Risk Management

(a) Capital risk managementThe Consolidated Entity’s and the Company’s capital risk management objective is to safeguard the ability of the Spotless Group of companies to continue as a going concern in order to continue to provide returns to stakeholders whilst maintaining an optimal capital structure that reduces the cost of capital.

The capital structure of the Consolidated Entity at reporting date was as follows:

Cash and cash equivalents (Note 10(a)) (56.0) (46.6)

Current borrowings (Note 20) 10.1 58.3

Non-current borrowings (Note 23) 259.4 182.1

Financial liabilities (Note 24) 33.7 45.9

Issued capital, reserves and retained earnings 363.7 354.0

Total capital 610.9 593.7

The Board of Directors regularly reviews the capital structure by considering the absolute and relative cost and risks associated with each class of capital, market conditions, stakeholder expectations and current market practices. In order to effect capital management initiatives to maintain or adjust the capital structure, adjustments may be made to the amount of dividends paid, the issuance or return of equity capital to shareholders, or the procurement or retirement of debt.

Operating cash flows are used to maintain and expand the assets of the Consolidated Entity, as well as to make routine outflows of tax, interest, dividends and debt repayments.

To meet its anticipated funding requirements the Consolidated Entity uses its three principal debt financiers. The Group’s financing activities are coordinated centrally through Group Treasury.

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Consolidated

2009 2008 $m $m

35. Capital and Financial Risk Management (continued)

(a) Capital risk management (continued)Gearing ratioThe Board of Directors monitors capital structure primarily on the basis of the gearing ratio (net debt divided by total capital) and has set a long term target gearing ratio for the Consolidated Entity of between 30% and 50%. The gearing ratio at reporting date was as follows:

Debt (i) 303.2 286.3

Cash and cash equivalents (56.0) (46.6)

Net debt 247.2 239.7

Equity (ii) 363.7 354.0

Total capital (iii) 610.9 593.7

Gearing ratio 40.5% 40.4%

(i) Debt is defined as the sum of current borrowings (Note 20), non-current borrowings (Note 23) and non-current other financial liabilities (Note 24).

(ii) Equity is the sum of issued capital, reserves and retained earnings includes all capital and reserves.

(iii) Total capital is calculated as equity plus net debt.

In monitoring the appropriateness of capital structure the Board of Directors also has reference to Consolidated Entity’s financial covenants.

Categories of financial instruments


2009 2008 2009 2008 $m $m $m $m

Financial Assets

Cash and cash equivalents 56.0 46.6 9.0 0.9

Loans and receivables 298.5 292.0 309.8 265.1

Available for sale investments 7.6 9.4 – –

Financial Liabilities

Amortised cost 572.9 531.9 51.9 2.8

Derivative instruments at fair value – cash flow hedges 33.7 45.9 2.2 –

Financial covenantsThe Consolidated Entity’s financing agreements require compliance with financial covenants. These include gearing (as defined above), leverage (net debt divided by EBITDA) and interest cover (EBITDA divided by net interest expense).

The Board of Directors reviews compliance with these covenants on a monthly basis. In both the current and prior financial years the Consolidated Entity did not breach any financial covenants.

Senior Bank Debt FacilityDuring the current year, the Consolidated Entity restructured its $240 million bilateral facilities into a $240 million syndicated unsecured facility maturing in March 2012. The debt maturity profile of the Consolidated Entity now extends to between three and six years.

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(b) Financial Risk ManagementThe Consolidated Entity’s and the Company’s activities create an exposure to a number of financial risks including market risk (interest rate, foreign exchange and equity price), liquidity risk, sovereign risk and credit risk.

The Consolidated Entity’s financial risk management objective is to minimise the potential adverse effects on financial performance arising from changes in financial risk. Financial risk is managed centrally by Group Treasury under the direction of the Board of Directors. The Consolidated Entity and the Company do not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial asset or a financial liability will change as a result of changes in market interest rates. The Consolidated Entity’s exposure to interest rate risk arises primarily from those financial instruments that regularly reprice to a market rate of interest (ie. have a variable rate of interest). Financial assets and financial liabilities that are at a fixed interest rate do not create a variable cash flow exposure.

The Consolidated Entity regularly monitors interest rate exposure and reports this to the Board of Directors. Interest rate risk is managed by holding a portfolio of borrowing facilities with different pricing characteristics, and maintaining a mixture of variable rate and fixed rate financial instruments.

The weighted average interest rates on fixed rate and variable rate financial instruments for the Consolidated Entity as at reporting date are summarised below:

Fixed Interest Rate Average Variable Less than 1 to 3 More than Non Interest interest Interest Rate 1 Year Years 3 Years Bearing Total Rate $m $m $m $m $m $m2009 Financial AssetsCash 0.97% 56.0 – – – – 56.0Trade & Other Receivables – – – – – 279.9 279.9Available for sale investments – – – – – 7.6 7.6Other financial assets – – – – – 18.6 18.6 56.0 – – – 306.1 362.12009 Financial LiabilitiesTrade and Other Payables – – – – – 303.4 303.4Bank loans* 6.16% 103.7 8.0 – 188.7 – 300.4Finance lease liabilities 8.92% – 0.1 – 0.5 – 0.6Other financial liabilities – – – – – 2.2 2.2 103.7 8.1 – 189.2 305.6 606.6

Fixed Interest Rate Average Variable Less than 1 to 3 More than Non Interest interest Interest Rate 1 Year Years 3 Years Bearing Total Rate $m $m $m $m $m $m2008 Financial AssetsCash 3.50% 46.6 – – – – 46.6

Trade & Other Receivables – – – – – 272.7 272.7

Available for sale investments – – – – – 9.4 9.4

Other financial assets – – – – – 19.3 19.3

46.6 – – – 301.4 348.0

2008 Financial LiabilitiesTrade and Other Payables – – – – – 291.5 291.5

Bank overdraft 14.75% 11.2 – – – – 11.2

Bank loans* 6.78% 85.8 – – 188.7 – 274.5

Finance lease liabilities 10.00% – – 0.1 0.5 – 0.6

97.0 – 0.1 189.2 291.5 577.8

* Includes US private placement of USD130.0 million converted to AUD140.1 million and NZD35.1 million.

The average interest rate is calculated as the weighted average effective interest rate based upon the principal amount of the functional currency exposure.

The Consolidated Entity had no non-currency related interest rate derivatives at reporting date (2008: nil).

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(b) Financial Risk Management (continued)The weighted average interest rates on fixed rate and variable rate financial instruments for the Company as at reporting date are summarised below:

Fixed Interest Rate Average Variable Non interest Interest Less than 1 to 3 More than Interest Rate Rate 1 Year Years 3 Years Bearing Total $m $m $m $m $m $m2009 Financial AssetsCash 2.95% 9.0 – – – – 9.0Trade & Other Receivables – – – – – – –Other financial assets – – – – – 309.8 309.8 9.0 – – – 309.8 318.82009 Financial LiabilitiesTrade and Other Payables – – – – – 1.9 1.9Bank loans 5.83% 50.0 – – – – 50.0Finance lease liabilities – – – – – – –Other financial liabilities – – – – – 2.2 2.2 50.0 – – – 4.1 54.1

Fixed Interest Rate Average Variable Non interest Interest Less than 1 to 3 More than Interest Rate Rate 1 Year Years 3 Years Bearing Total $m $m $m $m $m $m2008 Financial AssetsCash 4.29% 0.9 – – – – 0.9Trade & Other Receivables – – – – – 2.1 2.1Other financial assets – – – – – 263.0 263.0

0.9 – – – 265.1 266.0

2008 Financial LiabilitiesTrade and Other Payables – – – – – 2.8 2.8Bank loans – – – – – – –Finance lease liabilities – – – – – – –

– – – – 2.8 2.8

The Company had no non-currency related interest rate derivatives at reporting date (2008: nil).

The following table details the sensitivity to earnings and reserves resulting from a change in Australian and US Dollar interest rates. The sensitivity analysis assumes a constant bank credit margin and a parallel shift in the interest rate yield curve.


2009 2008 2009 2008 $m $m $m $m

Australian and uS Dollars200 basis point pa increaseNet profit (0.4) (0.5) (0.6) –Reserve 0.8 (0.6) (0.3) (0.8)

200 basis point pa decreaseNet profit 0.4 0.5 0.6 –Reserve (0.8) 0.6 0.3 0.8

A positive number indicates an increase in net profit and reserves. All amounts are after tax.

A ± 200 basis point (2.00%) change has been used in this sensitivity on the basis that this change is representative of the average change in interest rates over a three year period, which is the period during which the Consolidated Entity has variable interest rate exposure.

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(b) Financial Risk Management (continued)Fair ValueOther than derivative financial assets and liabilities, the carrying amounts of financial assets and financial liabilities in the Financial Statements are at amortised cost and approximate fair value. The carrying amounts of derivative financial assets and financial liabilities in the Financial Statements are based upon market-quoted forward exchange rates and yield curves matching the cash flow profile.

The fair value of the US Private Placement Note at 30 June 2009 was $188.6 million (2008: $143.1 million).

Foreign Currency RiskForeign currency risk is the risk that the value of a financial commitment (including a forecast transaction) or a recognised financial asset or financial liability will change as a result of changes in market foreign exchange rates. In addition, the Consolidated Entity operates internationally and is exposed to foreign exchange risk where its subsidiaries transact in a currency other than the functional currency of the subsidiary.

Changes in the value of the subsidiaries are recorded in the foreign currency translation reserve.

The Consolidated Entity regularly monitors foreign exchange rate exposure and reports this to the Board of Directors. Foreign exchange risk is managed using a combination of natural hedging and foreign exchange derivative transactions. Operating cash flows in foreign currencies are used to meet interest and principal repayments under foreign currency borrowings.

The carrying amount of the Consolidated Entity’s foreign currency denominated monetary assets and monetary liabilities is as follows:

Monetary Assets Monetary Liabilities

2009 2008 2009 2008

FC AuD FC AUD FC AuD FC AUD m m m m m m m m

Consolidated

US Dollars 2.9 3.4 4.4 4.6 – – – –

UK Sterling 0.4 0.9 – – – – – –

Euro 0.6 1.1 0.6 1.0 – – – –

3.9 5.4 5.0 5.6 – – – –

Company

US Dollars 0.2 0.2 0.2 0.2 – – – –

UK Sterling – – – – – – – –

Euro – – – – – – – –

0.2 0.2 0.2 0.2 – – – –

At reporting date, the Consolidated Entity had the following foreign exchange derivative transactions:

2009 Derivative Transactions Notional Amount

uSD AuD uSD NZD AuD EuR AuD Total AuD m m m m m m m m

Consolidated

Cross Currency Swaps 90.0 140.1 20.0 35.1 28.2 – – 168.3

Forward Exchange Contracts 0.6 0.9 – – – 7.7 15.7 16.6

90.6 141.0 20.0 35.1 28.2 7.7 15.7 184.9

Company

Cross Currency Swaps 33.0 51.3 – – – – – 51.3

Forward Exchange Contracts 0.6 0.9 – – – 7.7 15.7 16.6

33.6 52.2 – – – 7.7 15.7 67.9

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(b) Financial Risk Management (continued)

2008 Derivative Transactions Notional Amount

uSD AuD uSD NZD AuD EuR AuD Total AuD m m m m m m m m

Consolidated

Cross Currency Swaps 90.0 140.1 20.0 35.1 27.8 – – 167.9

Forward Exchange Contracts – – – – – – – –

90.0 140.1 20.0 35.1 27.8 – – 167.9

Company

Cross Currency Swaps 33.0 51.3 – – – – – 51.3

Forward Exchange Contracts – – – – – – – –

33.0 51.3 – – – – – 51.3

The Consolidated Entity has adopted the cash flow hedge accounting provisions of AASB 139 in respect of all foreign exchange derivative transactions. Accordingly, changes in the fair value of all foreign exchange derivatives are deferred to the hedge reserve until the underlying foreign exchange exposure occurs.

The fair value of the Consolidated Entity’s derivative transactions at reporting date is as follows:


2009 2008 2009 2008 $m $m $m $m

Cross Currency Swaps (31.5) (45.9) – –

Forward Exchange Contracts (2.2) – (2.2) –

(33.7) (45.9) (2.2) –

The following table details the sensitivity to earnings and reserves resulting from a change in foreign exchange rates on the Consolidated Entity’s financial instruments.

10% pa increase in foreign exchange rate

Net profit (0.4) (0.4) – –

Reserve (0.9) – (0.9) –

10% pa decrease in foreign exchange rate

Net profit 0.4 0.4 – –

Reserve 1.0 – 1.0 –


A ± 10% change has been used in this sensitivity on the basis that this change is representative of the average change in foreign exchange rates over a twelve month period.

Liquidity RiskLiquidity risk is the risk that the Consolidated Entity will not have sufficient funds to meet its financial commitments as and when they fall due.

The Consolidated Entity regularly monitors liquidity risk and reports this to the Board of Directors. Liquidity risk is managed through frequent and periodic cash flow forecasting and analysis. Liquidity support is provided through holding a liquidity margin in committed debt facilities supported by other uncommitted facilities. At reporting date, the Consolidated Entity had unutilised committed debt facilities of $171.9m (2008: $212.2m).

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(b) Financial Risk Management (continued)The Consolidated Entity’s contractual maturity date for its financial liabilities is as follows. These tables are based upon undiscounted cash flows.

Average Interest Less than 1 to 3 3 to 12 12 months Greater than Rate 1 month months months to 3 years 3 years Total 2009 $m $m $m $m $m $m

Consolidated

Trade & other payables – 303.4 – – – – 303.4

Bank loans* 6.16% 6.6 7.9 14.5 132.1 219.3 380.4

Finance lease liabilities 8.92% – – 0.1 – 0.5 0.6

Other financial liabilities – – – – 2.2 – 2.2

310.0 7.9 14.6 134.3 219.8 686.6

Company

Trade and other payables – 1.9 – – – – 1.9

Bank loans 5.83% – – 4.1 54.5 4.8 63.4

Finance lease liabilities – – – – – – –

Other financial liabilities – – – – 2.2 – 2.2

1.9 – 4.1 56.7 4.8 67.5

Average Interest Less than 1 to 3 3 to 12 12 months Greater than Rate 1 month months months to 3 years 3 years Total 2008 $m $m $m $m $m $m

Consolidated


Bank overdraft 14.75% 11.2 – – – – 11.2

Bank loans* 6.78% – 61.9 – 65.6 296.8 424.3

Finance lease liabilities 10.00% – – 0.1 – 0.7 0.8

Other financial liabilities – – – – – – –

305.1 61.9 0.1 65.6 297.5 730.2

Company


Bank loans – – – – – – –

US private placement – – – – – – –

Finance lease liabilities – – – – – – –

2.8 – – – – 2.8

* Includes Cross Currency Swaps that convert drawings under the US Private Placement Note Program into AUD140.1 million and NZD35.1 million.

Sovereign RiskSovereign (country) risk is the risk that political, legal, security or economic developments in a country could adversely affect operational and financial performance. Sovereign risk is calculated as the sum of the equity of all subsidiaries and joint ventures in cross-jurisdictional transactions and includes loans, guarantees and inter-company trading accounts. The Consolidated Entity has sovereign risk by virtue of the geographic spread of its operations. The Board of Directors approves operations in offshore jurisdictions. Cash held in offshore jurisdictions is kept to a minimum and is held with high credit-quality financial institutions.

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(b) Financial Risk Management (continued)Equity Price RiskThe Consolidated Entity is exposed to equity price risk arising from investments held in public companies listed on the Australian Securities Exchange. Equity investments are approved by the Board of Directors and are held for strategic and not trading purposes. At reporting date, the fair value of these investments was $7.6 million (2008: $9.4 million). The Consolidated Entity does not trade these investments.

The following table details the sensitivity to earnings and reserves resulting from a change in the market price of the Consolidated Entity’s equity investments:


2009 2008 2009 2008 $m $m $m $m

15% pa increase in equity price

Net profit – – – –

Reserve 0.8 1.0 – –

15% pa decrease in equity price

Net profit (0.8) (1.0) – –

Reserve – – – –


A ± 15% change has been used in this sensitivity on the basis that this change is representative of the average change in foreign exchange rates over a twelve month period.

Credit Risk ManagementCredit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity. The Consolidated Entity has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Consolidated Entity measures credit risk on a fair value basis. The Company is only exposed to credit risk in relation to Securities Plan loans, which are discussed below. The Company does not have any other exposure to credit risk as it has no trade receivables and is only due amounts from wholly-owned entities.

Trade receivables consist of a large number of customers, spread across a diverse range of industries and geographical areas. In addition, receivable balances are monitored on a monthly basis with the result that the Consolidated Entity’s exposure to bad debts is not significant.

The Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The carrying amount of financial assets recorded in the Financial Statements, net of any provisions for losses, represents the Consolidated Entity’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.

Spotless Group Securities Plan & Spotless Services Securities Plan loansThe Company and the Consolidated Entity have Security Plan loan receivables. When a Director or executive leaves the Consolidated Entity, repayment of the Security Plan loans shall be made within 60 business days or within 120 business days in the event of death or such date as determined by the Board.

In the event that the Director or executive is in default the Consolidated Entity and Company is authorised to sell the securities and apply the proceeds to the outstanding loan. If the securities are sold and the net proceeds are less than the outstanding loan the deficiency shall be recoverable in full by the Consolidated Entity and Company as a debt immediately due and payable from the Director or executive. There have not been any deficiencies incurred throughout the life of the Securities Plan Loans.

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36. Acquisition of BusinessOn 24 April 2009, Spotless Group Limited acquired the net assets of Riley Shelley Pty Ltd, a company based in Australia specialising in painting and property services. The total cost of the combination was $14.6 million and comprised costs of $1.0 million.

The net assets acquired in the business combination, and the goodwill arising, are as follows:

Recognised Carrying on acquisition value $m $m

Inventory 0.1 0.1

Plant and equipment 1.1 1.1

Brand names 0.4 –

Receivables and work in progress 11.6 11.6

Payables (1.2) (1.2)

Provisions (0.8) (0.8)

Deferred tax 0.2 –

Fair value of identifiable net assets 11.4 10.8

Goodwill arising on acquisition 3.2

14.6

Cost of the combination:

Cash payment 11.7

Deferred consideration 1.9

Costs associated with the acquisition 1.0

14.6

The cash outflow on acquisition to date is as follows:

Cash paid 12.7

Net cash outflow 12.7

The accounting for the acquisition of the Riley Shelley business is provisional at reporting date.

Goodwill arose in the business combination because the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, increased market share and revenue growth. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured.

As the business was only acquired in April 2009 it is not possible to accurately estimate the full year impact on earnings had the acquisition taken place at the beginning of the year.

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36. Acquisition of Business (continued)On 4 June 2009, Spotless Group Limited acquired the net assets of Arrix Pty Ltd, a company based in Perth specialising in commercial cleaning services. The total cost of the combination was $7.1 million and comprised costs of $0.2 million.

The net assets acquired in the business combination, and the goodwill arising, are as follows:

Recognised Carrying on acquisition value $m $m

Plant and equipment 0.5 0.5

Brand names 1.0 –

Contracts 2.7 –

Provisions (0.9) (0.9)

Deferred tax (0.8) –

Fair value of identifiable net assets 2.5 (0.4)

Goodwill arising on acquisition 4.6

7.1

Cost of the combination:

Cash payment 5.8

Deferred consideration 1.1

Costs associated with the acquisition 0.2

7.1

The cash outflow on acquisition to date is as follows:

Cash paid 6.1

Net cash outflow 6.1

The accounting for the acquisition of the Arrix business is provisional at reporting date.

Goodwill arose in the business combination because the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, increased market share and revenue growth. These benefits are not recognised separately from goodwill as the future economic benefits arising from them cannot be reliably measured.

As the business was only acquired in June 2009 it is not possible to accurately estimate the full year impact on earnings had the acquisition taken place at the beginning of the year.

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37. Events After the Balance DateSince the end of the financial year, the Directors have declared the following dividend:

Rate Franking per share per share Amount Date Payable Class of share (cents) (cents) $m

Ordinary 6.0 6.0 13.1 16 Oct 2009

38. New Standards and Interpretations not yet AdoptedAt the date of authorisation of the financial report, the Standards and Interpretations listed below were in issue but not yet effective:

Initial application of the following Standard will not affect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Consolidated Entity and the Company’s financial report:

• AASB 101 ‘Presentation of Financial Statements’ (revised September 2007). Effective for annual reporting periods beginning on or after 1 January 2009.

Initial application of the following standards and Interpretations is not expected to have any material impact on the financial report of the Consolidated Entity and the Company:

• AASB 123 ‘Borrowing Costs’ (revised). Effective for annual reporting periods beginning on or after 1 January 2009.

• AASB 2008-1 ‘Amendments to Australian Accounting Standard – Share-based payments: Vesting Conditions and Cancellations’. Effective for annual reporting periods beginning on or after 1 January 2009.

The potential effect of the initial application of the following Standards have not yet been determined:

• Revised AASB 3 ‘Business Combinations’ and revised AASB 127 ‘Consolidated and Separate Financial Statements’. Effective for annual reporting periods beginning on or after 1 July 2009.

• AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Process’. Effective for annual reporting periods beginning on or after 1 January 2009.

• AASB 2008-6 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process’. Effective for annual reporting periods beginning on or after 1 July 2009.

• AASB 2008-7 ‘Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate’. Effective for annual reporting periods beginning on or after 1 January 2009.

Revised AASB 101 ‘Presentation of Financial Statements’The impact of this standard will be on disclosure in the Financial Statements. All non-owner changes in equity must be presented in one statement of comprehensive income, or in a separate income statement and statement of comprehensive income. Components of comprehensive income may not be presented in the statement of changes in equity. Income tax and reclassification adjustments relating to each component of other comprehensive income have to be disclosed. The titles of Financial Statements will also change.

Revised AASB 123 ‘Borrowing Costs’The Standard eliminates the option of expensing borrowing costs related to qualifying assets, instead requiring capitalisation. Transitional provisions require prospective application to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after the application date.

Revised AASB 3 ‘Business Combinations’ and revised AASB 127 ‘Separate and Consolidated Financial Statements’The Standard introduces greater emphasis on the use of fair value through increasing the judgement and subjectivity around business combination accounting and requiring greater involvement of valuation experts. Further volatility in the income statement will be introduced through the separate accounting for transaction costs, changes in the fair value of contingent consideration, settlement of pre-existing contracts and share-based payments.

The Standard also focuses on changes in control as a significant economic event, with requirements to remeasure existing interests to fair value on gaining or losing control, and to recognise all transactions between controlling and non-controlling shareholders whilst control is retained in retained earnings.

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Directors’ DeclaratioN

The Directors of Spotless Group Limited declare that:

(a) in our opinion the Financial Statements and notes thereto are in accordance with the Corporations Act 2001 (“the Act”) including:

i. section 296 of the Act (compliance with accounting standards); and

ii. section 297 of the Act (true and fair view);

(b) in our opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and

(c) they have been given the declarations required by section 295A of the Act.

In the Directors’ opinion, there are reasonable grounds to believe that the Company and the Companies to which Australian Securities and Investments Commission Class Order 98/1418 applies (as set out in Note 34 to the Financial Statements) will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross Guarantee to which they are a party.

Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Act.

On behalf of the Directors

P J Smedley J P Farnik Chairman Managing Director and Chief Executive Officer

Sydney 25 August 2009 Sydney 25 August 2009

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Distribution of Shareholdings at 9 September 2009Range No.of Shareholders No.of Shares

1 – 1,000 1,587 733,850

1,001 – 5,000 2,027 5,084,536

5,001 – 10,000 591 4,232,672

10,001 – 100,000 482 1 1,903,945

100,001 and over 97 229,883,407

Total 4,784 251,838,410

Less than marketable parcel of 184 shares 319 22,126

Twenty Largest Shareholders at 9 September 2009 Fully Paid Ordinary Shares % of Issued Capital

National Nominees Limited 46,554,636 18.49

JP Morgan Nominees Australia Limited 26,733,512 10.62

HSBC Custody Nominees (Australia) Limited 23,680,242 9.40

RBC Dexia Investor Services Australia Nominees Pty Limited 15,820,367 6.28

RBC Dexia Investor Services Australia Nominees Pty Limited (BKCust A/C) 13,923,145 5.53

Neweconomy Com Au Nominees Pty Limited (CB Nominees Account) 10,000,704 3.97

Citicorp Nominees Pty Limited 9,853,807 3.91

Cogent Nominees Pty Limited 8,128,498 3.23

Tasman Asset Management Limited (Tyndall Australian Share Wholesale Portfolio A/C) 7,051,026 2.80

Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/C) 6,579,01 1 2.61

Mr Brian Stuart Blythe 5,159,31 1 2.05

ACN 122 808 324 Pty Limited 4,573,767 1.82

Citicorp Nominees Pty Limited <CFSIL CFS WS SMALL COMP A/C> 3, 157,473 1.25

Citicorp Nominees Pty Ltd (CFSIL Cwlth Aust Shs 1 A/C) 3,100,000 1.23

ANZ Nominees Limited (Cash Income A/C) 2,919,808 1.16

Queensland Investment Corporation 2,818,618 1.12

Silchester Pty Limited 2,544,214 1.01

Silchester Pty Limited 2,254,800 0.90

Silchester Investments Pty Limited 1,825,000 0.72

AMP Life Limited 1 ,618,071 0.64

198,296,010 78.74

Substantial Shareholders at 9 September 2009(i) Lazard Asset Management Pacific Co has an entitlement to a total of 28,871,679 fully paid ordinary shares

or 13.18% in Spotless Group Limited.

(ii) Commonwealth Bank of Australia has an entitlement to a total of 21,306,046, fully paid ordinary shares or 8.46% in Spotless Group Limited.

(iii) Maple Brown Abbott has an entitlement to a total of 17,945,903 fully paid ordinary shares or 8.26% in Spotless Group Limited.

(iv) Suncorp-Metway Pty Ltd has an entitlement to a total of 16,252,799 fully paid ordinary shares or 7.4217% in Spotless Group Limited.

(v) National Australia Bank Limited has an entitlement to a total of 14,954,526 fully paid ordinary shares or 6.829% in Spotless Group Limited.

(vi) Investor Mutual Limited has an entitlement to a total of 13,398,576 fully paid ordinary shares or 6.14% in Spotless Group Limited.

(vii) B S Blythe has an entitlement to a total of 12,757,850 fully paid ordinary shares or 5.80% in Spotless Group Limited.

(viii) Vanguard Investments Australia Limited has an entitlement to a total of 10,956,661 fully paid ordinary shares or 5.03% in Spotless Group Limited.

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Shareholder Services

Shareholder enquiriesShareholders with enquiries about their shareholdings, or who require forms to be sent out, should contact the Share Registry, Computershare Investor Services Pty Limited:

By telephone: (within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000

By post: Computershare Investor Services Pty Limited GPO Box 2975 Melbourne Vic 3000 Australia

By fax: (within Australia) 03 9473 2555 (outside Australia) +61 3 9473 2555

By email: [email protected]

Shareholder formsShareholders may also download a number of forms from either the Spotless Investor Centre on the Spotless website (www.spotless.com) or the Computershare website (www.computershare.com) to help manage their investment in Spotless, including:

• Change of address form

• Change of name form

• Consolidation of shareholding form

• Tax file number or ABN notification form

• Dividend direct payment request form

• Dividend reinvestment plan application, variation or termination form.

Electronic CommunicationsShareholders of listed companies receives a number of paper-based communications each year. For shareholders who prefer to receive Spotless shareholder communications electronically, Spotless has joined the Computershare/Landcare Australia initiative called eTree.

See the Spotless Investor Centre on the Spotless website for full details of how shareholders can register to receive electronic communications, thereby reducing the amount of paper used each year and helping to preserve the environment.

CHESS (Clearing House Electronic Subregister System)Shareholder who wish to move to an uncertificated holding under the Australian Securities Exchange CHESS system should contact their stockbroker. Further information is available from the ASX Settlement and Transfer Corporation Pty Ltd, Level 5, 20 Bridge Street, Sydney NSW 2000 or by telephone (02) 9227 0793.

Spotless website (www.spotless.com)The Spotless website provides up-to-date and extensive information about Spotless and the services we provide, as well as containing links to subsidiary websites. Included on the site is a shareholder-friendly Investor Centre. Visit the site for reports, announcements, financial statements, Corporate Governance information and more.

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Notes

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DirectorsP J Smedley (Chairman) J P Farnik (Managing Director & Chief Executive Officer) A E Beanland B K Morris L B O’Bryan D A Pritchard E M Proust G T Ricketts

SecretaryA Carstens

Bankers Australia and New Zealand Banking Group Limited Commonwealth Bank of Australia HSBC Bank Australia Limited JPMorgan Chase Bank, NA

AuditorsDeloitte Touche Tohmatsu

SolicitorsClayton Utz Minter Ellison

Securities Exchange ListingsSpotless Group Limited (SPT) – Australian Securities Exchange Limited

Taylors Group Limited – New Zealand Exchange Limited

Share registry for Spotless Group Limited Computershare Investor Services Pty Limited “Yarra Falls”, 452 Johnston Street, Abbotsford Victoria 3067 Australia

Telephone (outside Australia): +61 3 9415 4000 Telephone (within Australia): 1300 850 505 Fax: +61 3 9473 2555

Corporate Offices

registered officeAustraliaSpotless Group Limited Level 3, 350 Queen Street Melbourne Victoria 3000

Telephone: +61 3 9269 7600 Fax: +61 3 9269 7712

International OfficesNew ZealandSpotless Services (NZ) Limited Taylors Group Limited 600 Great South Road Ellerslie Auckland

Telephone: +64 9 526 3620 Fax: +64 9 579 0382

united kingdomBraitrim Holdings Limited Braitrim House 98 Victoria Road London NW10 6NB

Telephone: +44 208 723 3000 Fax: +44 208 723 3076

uSASpotless Enterprises Incorporated 100 Motor Parkway – Suite 155 Hauppauge, New York 11788

Telephone: +1 631 951 9000 Fax: +1 631 951 9027

AsiaSpotless Plastics (HK) Limited Units 1301 – 1310 Level 13 Tower 1 Millennium City 1 388 Kwun Tong Road Kwun Tong Kowloon Hong Kong

Telephone: +852 2793 0163 Fax: +852 2342 7309

representative OfficesAfrica: Morocco, United Arab Emirates, South AfricaAmericas: Mexico, HondurasAsia: Bangladesh, China, India, Singapore, Sri Lanka, ThailandEurope: France, Germany, Sweden, Turkey

CoRPoRATE dIRECToRy

deSIGn: coLLIeR & ASSocIATeS tHe StrAteGic deSiGn compAny #14147

this report was printed on 9lives 80, a combination of 80% recycled fibre and 20% totally chlorine free pulp. it is an FSc mixed Source certified paper, which ensures that all virgin pulp is derived from well-managed forests, and is manufactured by an iSo 14001 certified mill.

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SpotleSS Group limited ABN 77 004 376 514

Registered Office: Level 3, 350 Queen Street Melbourne Vic 3000

www.spotless.com

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spotless group limited 2009 annual report for … · • cafe and canteen services ... it was...

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