Business review

Asia Pacific

Market conditions

The Asian pest control and washroom hygiene market had a difficult first half in 2009 in tightening economic conditions with a slowdown in Malaysia, Singapore, Hong Kong and Indonesia partially offset by strong performances in China and India. Growth in the Australian and Pacific pest and washroom hygiene markets was slow in 2009, especially in the first half, due to nervous economic backdrop. Some recovery was seen in the second half.

£m	Fourth quarter 2009	2008	Change	Full year 2009	2008	Change
At 2008 constant exchange rates:
Revenue	44.5	46.3	(3.9%)	183.4	196.5	(6.7%)
APBITA*	1.9	5.9	(67.8%)	19.8	23.6	(16.1%)
At actual exchange rates:
APBITA*	2.1	5.8	(63.8%)	21.1	23.6	(10.6%)

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

Revenue declined 6.7% year on year and adjusted operating profit decreased by 16.1% (£3.8 million).

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Asia

Revenue fell by 12.5%, the result of legacy issues including the cancellation of the Hong Kong government contract and weaker government business in China (including the non-repeat of the Olympics pest control contracts). Excluding these items revenue fell by 0.2%. There has also been a severe decline in the fumigation business in Singapore, the Philippines and Malaysia as a result of slower international trade in 2009. This decline was marginally offset by growth in Indonesia, India and Korea.

Profit declined by £4.7 million largely due to the impact of charges related to the clean up of prior year control and acquisition issues as well as lower revenue noted above.

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Pacific

In the Pacific region revenue was 1.7% below the prior year due to weaker residential jobbing in the Pest business and loss of portfolio in the Ambius business. Profit grew by 4.3%, led by a strong turnaround in Australian Pest, a steady Washrooms performance and aggressive cost-savings programmes.

Service levels in the Australian Pest Control business reached a record 98.9% during 2009. Contract turnover rose by 2.8%. However, job revenue declined due to reduced demand for pre-construction termite barriers due to a downturn in building construction. DSO improved by 10 days to 42 days.

Washrooms service has continued to improve and is now at 97.1% but contract portfolio declined by 7.1%, revenue by 1.3%. Service staff retention increased year on year from 14.3% to 53.3%. This has led to improved service levels which in turn have led to an improved contract retention rate of 78.8%.

Cash performance has been strong and debtor days have decreased from 55 days to 42 days year on year.

During the year the Asia Pacific management team was significantly strengthened by the appointments of a new Managing Director, Finance Director and other senior country heads.

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2010 preview

Market conditions in some of our Asian and Pacific markets are expected to improve in 2010. Against this backdrop we expect to achieve a modest overall improvement across the region through improved retention, focusing on high levels of service and implementing a continuing series of cost reduction measures.

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