Facilities Services
MARKET CONDITIONS
Market conditions were tough and pricing competitive. Despite this, there was significant portfolio growth in the Cleaning businesses. Catering suffered from the introduction of the nutritional guidelines in the education segment. Anti-smoking legislation in various European countries is impacting the air filtration business within Specialist Hygiene.
2006 REVIEW
In Cleaning, solid revenue performance was achieved in all countries with overall revenue increasing by 20.9%. Adjusted operating profit for the Cleaning businesses fell marginally below last year reflecting continued margin pressure in a very competitive sector and infrastructure investment to support the increased size of the business. In the UK, the portfolio grew by 30% due to significant growth in the banking and transport sectors combined with the Insitu acquisition which strengthened presence in the shopping centre and leisure sectors. In Spain and the Netherlands, the portfolio grew by 11%, mainly in the transportation and office cleaning sectors.
The Catering business continued to suffer from problems in its education segment and also some contracts in the business and industry segment. As a result revenue and operating profit both fell, revenue by 10.5% and adjusted operating profit by £1.2 million. We were able to exit some unprofitable education contracts in 2006 but remain committed to others.
Hospital Services, which provides cleaning, catering and porterage services to NHS hospitals in the UK, recorded flat revenue with an increase in adjusted operating profit, as 2006 was less severely affected than 2005 by the Government’s Agenda for Change initiative.
Specialist Hygiene, which comprises a number of different activities, recorded revenue at a similar level as last year but adjusted operating profit fell due to the impact of anti-smoking legislation which has undermined the air quality businesses in a number of countries.
Medical Services revenue showed moderate growth but adjusted operating profit declined due to margin pressure and the cost of growth initiatives.
2007 PREVIEW
In Cleaning, market conditions are expected to remain unchanged with pressure on margins continuing. Initiatives are in place to mitigate margin pressure in terms of Smart clean and Contract Management. Expanding group services into existing customers is also a major focus for 2007.
In Catering, the focus is on growth in the business and industry segment. We will continue to exit unprofitable education contracts.
Hospital Services will focus on growth outside of NHS hospitals. We will endeavour to exit any unprofitable contracts. Product innovation and technology will play a key role in this business.
Specialist Hygiene anticipates good revenue and profit growth, other than in air filtration.
Medical Services anticipates moderate revenue and profit growth as the initiatives start to payback.
