Business review

Ambius

Market conditions

Growth declined in 2009 as demand for products and services softened in the major markets, especially in the US, UK, France and Belgium and principally the result of challenging economic conditions. All markets are highly fragmented with a large number of small operators, although the larger companies have a competitive advantage in terms of route density and product offering. Ambius currently has approximately 55,000 customers over 13 countries.

£m	Fourth quarter 2009	2008	Change	Full year 2009	2008	Change
At 2008 constant exchange rates:
Revenue	30.5	35.2	(13.4%)	106.8	119.3	(10.5%)
APBITA*	4.3	4.9	(12.2%)	7.6	9.9	(23.2%)
At actual exchange rates:
APBITA*	4.9	5.0	(2.0%)	8.8	9.9	(11.1%)

*Adjusted profit before interest, one-off items and amortisation and impairment of intangible assets, other than computer software.

Ambius has experienced exceptionally difficult market conditions in 2009. Revenue fell 10.5% as a result of increasing contract terminations and a 22.3% decline in job sales. Although overall customer retention fell from 81.9% in 2008 to 77.3%, it improved in the second half to 79.8% (H1 2009: 75.2%).

Adjusted operating profit fell 23.2%. In addition to adjusting service head count in line with portfolio movement, the business has been pursuing a number of cost savings initiatives to mitigate revenue decline.

North America has been weak with a 12.3% decline in revenue. Portfolio has been impacted by the difficult economy and customer retention fell by five percentage points to 75.0% but improved as the year progressed. Job sales declined 21.0% year on year, but showed greater resilience in Q4 with Holiday sales only falling by 11.2% year on year.

Revenue in Europe declined 8.1% with most countries experiencing difficult economic conditions. Customer retention declined from 83.8% in 2008 to 79.9% but, as with the US, improved towards the end of the year. Profit was adversely impacted by increased redundancy costs, an increase in bad debts and a 24.6% reduction in job sales year on year.

Sales of brand extension services, including ambient scenting and fresh fruit delivery, have continued to rise during the period and now account for 11.8% of total contract sales compared to 7.2% in 2008.

Operating cash flow has been a key focus for 2009 with conversion of 165% compared to 81% in 2008. This has been achieved through a focus on working capital and tight control over capital expenditure. DSO at 37 days improved by two days year on year.

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2010 preview

Trading for Ambius in 2010 is anticipated to remain challenging in all markets, at least for the first half of the year. The implementation of cost savings initiatives in 2009 will show a full year impact in 2010 as we attempt to maintain our current levels of profitability.

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