Board Review
What we expect to achieve in 2008
In 2008, we have three priorities:
- To return City Link to profit and then profit growth.
- To build on the momentum that we have now established across the rest of our businesses and drive operational excellence.
- To create value for shareholders by improving performance.
In Pest Control we expect to return the UK business to profit growth following the restructuring activity in 2007 and the improvements in sales and revenue growth seen at the end of the year. In continental Europe, we expect to continue our drive for strong organic growth and will continue to make some bolt-on acquisitions to improve market positions. In North America, we will continue our work to improve out-of-season productivity and hence overall margin.
In Textiles and Washroom Services physical restructuring of the UK business is now complete and our focus is on rebuilding revenue, portfolio and growing profit. Margins are some way below their potential and we expect to grow them during 2008 and 2009. In continental Europe, the market continues to be very price competitive and we will be looking at our supply chain and logistics with a view to improving efficiency and reducing costs.
In Facilities Services margins remain low and the pricing environment is highly competitive. We will continue to deploy our “RAPID” approach to the management of small to medium size cleaning contracts and daytime “Smart Clean” initiative to protect margins.
In Asia Pacific we will continue to make acquisitions in pest control to improve our market positions. We will, however, slow the pace of some acquisitions to avoid overstretching management so that we can derive the full benefits from companies that we have already bought.
In City Link we have paused and will review the depot integration programme. Our immediate focus is on rebuilding the sales pipeline and further strengthening customer service as key measures to restore the financial health of the business. Thereafter, we will resume cautiously depot integrations, the bulk of which will now occur in 2009.
Overall, the board expects 2008 to deliver a modest increase in profits for our businesses other than City Link. As already explained, City Link itself may not trade better than breakeven but we do not at present have good visibility for this business and it may be a number of months before we have a better view of 2008’s trading and City Link’s potential for 2009. Consequently, the group’s profit in 2008 may be significantly lower than that in 2007, but the final result will be heavily dependent on City Link.
Our dividend policy is unchanged; we will continue to take a cautious approach to dividend growth until the recovery of the business is well established. The board is recommending an unchanged dividend for 2007. The board is well aware of the importance of the dividend to many shareholders and hopes to be in a position to maintain it for 2008. However, our ability to do so will be dependent on, in particular, our view of 2009 and the speed with which City Link’s trading can be improved.