Business Description:
Spotless Group Limited (SPT) is an international services company comprises business operations, Facility Services and Retailer Services in a range of sectors including Health, Education, Leisure, Sport and Entertainment, Defence, Government, Retail, Commerce and industry, and Resources.

Strategy Analysis:
Management has attempted growth through two business lines - Facility Services which is an outsourced corporate services provider and Retailer Services which provides global coat hanger logistics. Facility Services industry diversification and longer term contracts reduces earnings volatility somewhat. Cost cutting has been pursued to support earnings during this latest weak demand period. A group transformation program is expected to lead to increased efficiency and generate $17m in annual EBIT benefits. Recent acquisitions in the UK have lead to the creations of a third business, International Services focused on outsourced services in the UK and potentially Europe. But given past experience offshore with Retailer Services we question this strategy and believe management would be better off focusing on improvements to the core Australian business. Spotless Group reported NPAT down 0.5% to $42.8m for the year ended 30 June 2011. Revenues from ordinary activities were $2.79bn, up 10.9% from last year. Basic and Diluted EPS was 16.4 cents compared to 17.1 cents last year. Net operating cash flow was $79.4m compared to $127.9m last year. The final dividend declared was 6 cents, taking the full year dividend to 11 cents, in line with 11 cents last year. Based on current market conditions, the group expects to deliver earnings growth in FY12.