Spotless Group (ASX:SPO)

Dana Nelson
Market Cap (AUD): 1.88B
Sector: Industrials
Last Trade (AUD): 0 +0 (+0%)
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1. About

Spotless is a leading provider of integrated facilities services with clients across Australia and New Zealand. More than 100 integrated services, a team of 36,000 exceptional people and an innovation agenda allow Company to deliver tailored solutions for over 1,000 clients. Company’s clients are from a diverse range of industry sectors including defence; education; government; healthcare; senior living; sports & venues; resources; leisure & hospitality; airports; industrial; commercial; property; utilities and public private partnerships.

Spotless is publicly listed on the Australian Securities Exchange (ASX: SPO) and headquartered in Melbourne. Spotless is 88 % owned by Downer EDI Limited (DOW), and together the Company is the leading provider of integrated services in Australia and New Zealand.

2. Business model


The Group operates the following divisions:[1]



Revenue ($’M)

% of total Revenue

% of Profit (before Int, Tax, Depn & Amort)

Profit drivers[2]

Facility Services




  • Sales revenue increased from June 2017 by $38.3m (+1.3%) reflecting full year revenue from newly mobilised PPP contracts, the contribution from the newly acquired Cabrini Laundry and increased project works across the Group, partially offset by the full year impact of contracts exited under the contract rationalisation program and the writeback of $41.0m of revenue relating to the new Royal Adelaide Hospital contract
  • EBITDA for the period has been significantly impacted by $120.1m of individually significant items recorded as a result of the Downer takeover and contract rationalisation and restructure

Laundries Services




Corporate/ eliminations





3. Strategy


Key strategies include:[3]


  • Spotless has leading or strong market positions in all the sectors in which it operates and continues to win new work in its core markets as well as renew and extend existing contracts
  • Downer’s 87.8% ownership of Spotless has strengthened the Group, including its balance sheet and cash flow performance
  • The relationship with Downer has also created numerous joint bidding and market development opportunities that will deliver value over the short to medium term

4. Markets


The Group operates in markets including:[4]


Industry (Australia)

Industry Revenue

Growth Rate

Commercial Cleaning Services

$12 billion (2018)

5.0% (annual 14-19)

Catering Services

$8 billion (2017)

3.7%  (annual 13-18)

Painting and Decorating Services

$6 billion (2018)

1.6% (annual 13-18)

5. Competition


Major competitors include:[5]


  • Servcorp Limited (ASX: SRV)
  • Hansen Technologies Limited (ASX: HSN)
  • InvoCare Limited (ASX: IVC)
  • Delecta Ltd (ASX: DLC)

6. History



A single dry cleaning business opened in Fitzroy, Melbourne



The business incorporated as Spotless Pty Ltd



Its store was expanding rapidly throughout Victoria and NSW



The Group became publicly listed on the Australian Stock Exchange. The Group had 450 retail outlets, 11 dry cleaning plants, one general laundry - and a shoe repair factory



Spotless employed 1,452 people. The Group operated 831 retail outlets. And 41 factories



The Group established a Kentucky Fried Chicken franchise from the USA - as well as franchises for Red Barn and Crusty’s Hot Break Kitchens



The Group expanded into NZ through Nationwide Food Service



Spotless bought a garment hanger supply business to meet the needs of clothing manufacturers and retailers



Spotless bought 50% of Ensign - Australia’s biggest workwear and linen rental firm



The Group diversified into food by purchasing Nationwide Food Services and O’Brien Catering



Spotless acquired Lomey Manufacturing - a plastics injection moulding company in North Carolina, USA

The Group won the fast food contract for World Expo, Brisbane



Spotless purchased Mustard Catering - a boutique caterer in WA



The Group diversified into grounds maintenance by acquired Grass Australia



Spotless acquired Australian and NZ support services business, P&O. This acquisition added property and facilities management, cleaning services and building and asset maintenance to its growing portfolio



Spotless had its first Olympics experience providing cleaning and housekeeping to the Sydney 2000 Olympic Games



The Group acquired Victorian boutique caterer, EPICURE Catering



Spotless won its first Public Private Partnership (PPP) contract with New South Wales schools



Spotless launched a multi million dollar OHS program - safety@spotless



The Group acquired Alliance Catering in Victoria and NSW



Spotless was listed on the NZ Stock Exchange

The Group acquired CE Property Services – Cleanevent and CleanDomain



Spotless signed the Royal Adelaide Hospital PPP contract – the largest contract in its history to this date



Spotless purchased by private equity group, Pacific Equity Partners. Delists from both the Australian and New Zealand stock exchanges, and sells all international divisions



Spotless admitted to official list of the Australian Stock Exchange (ASX) under the code SPO

Spotless launched TechGuard Security brand in Australia



Spotless acquired Australia's leading air-conditioning and mechanical services provider, AE Smith

Spotless acquired Utility Services Group (USG)



Retention of Laundries business



Spotless Group Holdings Limited to be removed from the S&P/ASX 200 Index

Downer's offer for Spotless now closed, Downer has a controlling interest of 87.8% in Spotless



Spotless Group Holdings Limited announced it had successfully completed the refinancing of an A$900 million syndicated debt facility

7. Team


Board of Directors[7]


Professor John Humphrey – Chairman and Non-Executive Director

Peter Tompkins – Chief Executive Officer and Managing Director

Simon Mckeon Ao – Non-Executive Director

Grant Fenn – Non-Executive Director

Dr. Grant Thorne – Non-Executive Director

Michael Ferguson – Non-Executive Director


Management Team


Peter Tompkins – Chief Executive Officer and Managing Director

Chris Storey – Chief Financial Officer

Paul Morris – General Counsel and Company Secretary

Paul Mahoney – Executive General Manager, Government

Catherine Walsh – Executive General Manager – People and Customer

Jamie Boulton – Executive General Manager, Markets & Growth

Harley Oaten – Executive General Manager – Laundries

Jacob Bonisch – Executive General Manager – Defence Development

Michelle Dixon – Executive General Manager – Hospitality & FM

Russell Houlahan – Executive General Manager – Infrastructure & Construction

Bruce Cullen – Executive General Manager, New Zealand

David Mackenzie – Executive General Manager – Power, Gas & Communications

read more

8. Financials


2018 Half Year Results Presentation


Financial Year 2017/18 (ended 30 June):[8]



Revenue ($’M)

% Change

Profit (before Int, Tax, Depn & Amort) ($’M)

% Change

Facility Services




















9. Risk


Major risks include:[9]


Capital risk

The Group’s capital risk management objective is to safeguard the ability 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 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 affect capital management initiatives to maintain or adjust the capital structure, adjustments may be made to the amount of permitted distributions, the issuance or return of equity capital to shareholders, or the procurement or retirement of debt


Interest Rate Risk

Interest rate risk is the risk that a financial instrument’s fair value or future cash flows will fluctuate due to changes in market interest rates.The Group’s exposure to interest rate risk arises primarily from financial instruments with a variable rate of interest. Financial instruments with fixed interest rates do not create variable cash flow exposure. The Group's policy is to fix estimated interest rate risk exposure at a minimum of 50% for a period of at least 12 months or as otherwise determined by the Board of Directors. The Group regularly monitors interest rate exposure and reports this to the Board of Directors. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group manages this risk by using floating-to-fixed interest rate swaps for a portion of variable rate borrowings. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The Group enters into and designates a selection of interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk. At 30 June 2018, after taking into account the effect of interest rate swaps and other fixed-rate borrowings, $64.6 million (2017: $127.3 million) or 8% (2017: 15%) of the Group's borrowings are at a fixed rate of interest. The Group has entered into AUD450 million and NZD100 million of interest rate swaps to hedge variability in cash flows attributable to future movements in base rates. The interest rate swaps had effective dates of July 2018 and August 2018.


Foreign Currency Risk

Foreign currency risk is the risk the value of a financial commitment (including a forecast transaction) or a recognised financial instrument will fluctuate due to changes in market foreign exchange rates. The Group’s exposure to foreign exchange risk relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s presentation currency) and the Group’s net investments in foreign subsidiaries. Additionally, the Group operates internationally and is exposed to foreign exchange risk where its subsidiaries do not transact in the subsidiary’s functional currency.


Liquidity Risk

Liquidity risk is the risk the Group will not have sufficient funds to meet its financial commitments as and when they fall due. The Group 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. At 30 June 2018, the Group had unutilised committed debt facilities of $230.0 million (2017: $225.0 million).


Credit Risk

Credit risk is the risk that a counterparty defaults on its contractual obligations resulting in financial loss to the Group. The Group has a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral as a means of mitigating this risk. The Group measures credit risk on a fair value basis. Trade receivables consist of a large number of customers, spread across a diverse range of industries and geographical areas. Additionally, receivable balances are monitored continuously and the Group’s exposure to bad debts is not significant. The Group does not have any significant credit risk exposure to any single or 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 Group’s maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.