FORECAST: SPT: Trading Update

21 May 2010 4:14 pm

SPT 21/05/2010 FORECAST

REL: 1614 HRS Spotless Group Limited

FORECAST: SPT: Trading Update

Spotless Group Limited (ASX/NZX: SPT) today provided an update to second half trading conditions.

Across Facility Services, early signs of demand recovery experienced in the period leading up to the interim result have not been sustained in March and April. In some areas, demand has softened further, with this trend running across both public and private sector clients.

Revenues within the government sector have been impacted by several key issues. Project works undertaken on behalf of the Australian Department of Defence are currently lower than previous years. The unexpected and immediate cancellation of the Ceiling Insulation program has resulted in revenue reductions and shut down costs to the company. Additionally, whilst the company has participated in the Federal Government's stimulus programs in public housing and education, underlying maintenance activity undertaken on behalf of state governments within existing contracts has reduced as a result of stimulus programs.

Spotless has also experienced deeper and longer than expected softness in private sector demand, particularly due to deferred property maintenance and other discretionary expenditure as well as subdued spending on corporate hospitality. With the exception of the company's resources contracts, early signs of recovery in private sector discretionary demand noted at the interim result have not been sustained. Pleasingly, several new Facility Services contracts have been won since the interim result. As a result of these wins larger than expected upfront mobilisation costs will be incurred during the second half.

For Braiform, both FX rates and resin costs have moved unfavourably since the interim result, and demand patterns overall have not improved.

Taking into account the matters noted above, and assuming no unexpected deterioration in May and June demand patterns when compared with 2009 levels, the company now expects to achieve 2010 reported Group EBIT broadly in line with 2009 reported Group EBIT. As a result of investment in the business, underlying earnings continue to track higher than reported earnings.

Reported 2010 Net Profit after Tax (NPAT) is expected to exceed 2009 reported NPAT. The key driver of the higher NPAT when compared to 2009 is lower interest expense, which the company continues to expect will be broadly in line with the first half of 2010. The reduction in interest expense from 2009 levels follows the impact of debt reduction from the August 2009 equity raising, somewhat offset by higher levels of investment in the Transformation program, the recent Cleanevent acquisition and the company's new Queensland laundry plant.

Notwithstanding demand softness within existing contracts referred to above, the company has continued to progress its strategic plan during the second half. In addition to new contract wins noted above, the integration of Cleanevent is progressing to plan, with the business expected to contribute to earnings from the 2011 financial year. The next phase of the Transformation program has commenced, including a company-wide program of work that will overhaul IT systems and simplify business processes at each of the company's thousands of sites. Investment in this program will drive significant and sustainable efficiency gains. Finally, the new $20 million Brisbane laundry is on track for completion by 30 June.

Spotless is confident that current trading performance largely reflects the impact of those external factors identified above. The company is scheduled to announce its financial year 2010 results on Friday 20 August.

For further information please visit www.spotless.com

Media Kerrina Lawrence M: +61 (0) 434 198 427

Investors Rowan Wilkie M: +61 (0) 418 577 956

ABOUT SPOTLESS

Spotless Group - is a leading multi-national services organisation comprised of Facility Services and Retailer Services. Established in 1946, Spotless is listed on the Australian and New Zealand Stock Exchanges and employs more than 37,000 people. Spotless is one of the top 15 private sector employers in Australia and is a Top 10 private sector employer in New Zealand.

The Group's Facility Services operations provide global facilities management and asset maintenance services comprising catering, cleaning, painting and laundry services across a broad range of industry sectors. Retailer Services, operating under the brand Braiform, provides customised garment hanger and packaging solutions to retailers and garment manufacturers in more than 30 countries. End CA:00195189 For:SPT Type:FORECAST Time:2010-05-21:16:14:35

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