Document

Prospectus

Financial Adviser Joint Lead Managers

Spotless Group Holdings Limited ABN 27 154 229 562

Initial public offering of fully paid ordinary shares

Co-Lead Manager

important notices

Offer

The Offer contained in this Prospectus is an invitation to acquire fully paid ordinary shares

( Shares ) in Spotless Group Holdings Limited

(ABN 27 154 229 562) ( Company or Spotless ).

This Prospectus is issued by the Company and

Spotless SaleCo Pty Ltd (ACN 168 847 916)

( SaleCo ).

LOdGement and LiStinG

This Prospectus is dated 28 April 2014 and was lodged with ASIC on that date. None of ASIC, the ASX or their respective officers takes any responsibility for the contents of this

Prospectus or the merits of the investment to which this Prospectus relates. Spotless will apply to the ASX within seven days after the

Prospectus Date for admission of the Company to the official list of the ASX and quotation of its

Shares on the ASX.

exPiry date

No Shares will be issued or sold on the basis of this Prospectus after the Expiry Date, being the date 13 months after 28 April 2014.

nOte tO aPPLicantS

The information contained in this Prospectus is not financial product advice and does not take into account the investment objectives, financial situation or particular needs (including financial and tax issues) of any prospective investor.

It is important that you read this Prospectus carefully and in its entirety before deciding whether to invest in Spotless. In considering the prospects of Spotless, you should consider the best estimate assumptions underlying the

Forecast Financial Information set out in

Section 3.9 and the risk factors that could affect Spotless’ business, financial condition and results of operations and the value of your investment in it. You should carefully consider these risks in light of your investment objectives, financial situation and particular needs (including financial and taxation issues) and seek professional advice from your accountant, financial adviser, stockbroker, lawyer or other independent professional adviser before deciding whether to invest in the

Shares. Some of the key risk factors that should be considered by prospective investors are set out in Section 4. There may be risk factors in addition to these that should be considered in light of your personal circumstances.

No person named in this Prospectus, nor any other person, guarantees the performance of

Spotless, the repayment of capital by Spotless or the payment of a dividend or other distribution on the Shares.

No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this

Prospectus. Any information or representation not so contained may not be relied on as having been authorised by Spotless or SaleCo’s directors or any other person in connection with the Offer. You should rely only on information in this Prospectus.

imPOrtant infOrmatiOn fOr new ZeaLand inveStOrS

This offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the

Corporations Act 2001 (Cth) ( Corporations Act ) and Regulations. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities

(Mutual Recognition of Securities Offerings

– Australia) Regulations 2008.

This Offer and the content of the offer document are principally governed by Australian rather than New Zealand law. In the main, the

Corporations Act and Regulations (Australia) set out how the Offer must be made.

There are differences in how securities are regulated under Australian law. For example, the disclosure of fees for collective investment schemes is different under the Australian regime.

The rights, remedies, and compensation arrangements available to New Zealand investors in Australian securities may differ from the rights, remedies, and compensation arrangements for New Zealand securities.

Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to this Offer. If you need to make a complaint about this Offer, please contact the Financial Markets Authority,

Wellington, New Zealand. The Australian and

New Zealand regulators will work together to settle your complaint.

The taxation treatment of Australian securities is not the same as for New Zealand securities.

If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser.

The Offer may involve a currency exchange risk.

The currency for the securities is not New Zealand dollars. The value of the securities will go up or down according to changes in the exchange rate between that currency and New Zealand dollars.

These changes may be significant.

If you expect the securities to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in

New Zealand in New Zealand dollars.

If the securities are able to be traded on a securities market and you wish to trade the securities through that market, you will have to make arrangements for a participant in that market to sell the securities on your behalf.

If the securities market does not operate in

New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the securities and trading may differ from securities markets that operate in New Zealand.

nO accePtance Of aPPLicatiOnS durinG exPOSure PeriOd

The Corporations Act prohibits the Company from processing applications to subscribe for, or acquire, Shares under this Prospectus

( Applications ) in the seven day period after the

Lodgement Date of this Prospectus with ASIC

( Exposure Period ). This Exposure Period may be extended by ASIC by up to a further seven days. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds.

The examination may result in the identification of deficiencies in this Prospectus, in which case any Application may need to be dealt with in accordance with section 724 of the

Corporations Act. Applications received during the Exposure Period will not be processed until after the expiry of the Exposure Period. No preference will be conferred on Applications received during the Exposure Period.

ObtaininG a cOPy Of tHiS PrOSPectuS

This Prospectus is available to Australian and

New Zealand investors in electronic form at www.spotless.com/offer. The Offer constituted by this Prospectus in electronic form at www.spotless.com/offer is available only to Australian and New Zealand residents accessing that website within Australia or

New Zealand. It is not available to persons in other jurisdictions (including the United States).

Persons having received a copy of this

Prospectus in its electronic form may, before the Closing Date, obtain a paper copy of this

Prospectus (free of charge) by telephoning the Spotless Offer Information Line on

1800 660 083. If you are eligible to participate in the Offer and are calling from outside

Australia, you should call +61 1800 660 083.

Applications for Shares may only be made on an Application Form attached to or accompanying this Prospectus, or by completing an electronic application at www.spotless.com/offer. See Section 6 for further information.

StatementS Of PaSt PerfOrmance

This Prospectus includes information regarding the past performance of Spotless. Investors should be aware that past performance is not indicative of future performance.

financiaL infOrmatiOn

PreSentatiOn and amOuntS

Section 3 sets out in detail the Financial

Information referred to in this Prospectus. The basis of preparation of the Financial Information is set out in Section 3.2.

All references to FY2011, FY2012, FY2013,

FY2014 and FY2015 appearing in this

Prospectus are to the financial years ended or ending 30 June (as relevant), unless otherwise indicated. All references to H1FY2013 and

H1FY2014 are to the half years ended or ending

31 December 2012 and 31 December 2013, respectively, unless otherwise indicated.

The Financial Information has been prepared in accordance with the recognition and measurement principles prescribed by the

Australian Accounting Standards issued by the Australian Accounting Standards Board, which are consistent with International Financial

Reporting Standards ( IFRS ) and interpretations issued by the International Accounting

Standards Board ( IASB ).

This Prospectus includes Forecast Financial

Information based on the best estimate assumptions of the Directors on their assessment of present economic and operating conditions, and a number of assumptions regarding future events and actions that, as at the Prospectus Date, the Directors expect to take place (including the key assumptions set out in Section 3.9). The basis of preparation and presentation of the Forecast Financial

Information, to the extent applicable, is consistent with the basis of preparation and presentation for the Pro Forma Historical Financial Information.

The Forecast Financial Information presented in this Prospectus is unaudited.

The Financial Information is presented in an abbreviated form. It does not include all of the presentation and disclosures required by the

Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial

reports prepared in accordance with the

Corporations Act.

All financial amounts contained in this

Prospectus are expressed in Australian currency, unless otherwise stated. Any discrepancies between totals and sums of components in tables, figures and diagrams contained in this Prospectus are due to rounding.

The Financial Information in this Prospectus should be read in conjunction with, and is qualified by reference to, the information contained in Sections 3 and 4.

financiaL infOrmatiOn fOr fy1990 tO fy2010

Historical financial information for FY1990 to FY2010 has been derived from statutory accounts and adjusted based on publicly available information in those statutory accounts to exclude the identified discontinued operations. This has been done to present the information as consistently as possible with the pro forma Financial Information for FY2011 to FY2014; however, the FY1990 to FY2010 information may not have been prepared or presented on a consistent basis to the pro forma Financial Information for FY2011 to FY2014.

fOrward LOOkinG StatementS

This Prospectus contains forward looking statements which are identified by words such as “believes”, “considers”, “could”, “estimates”,

“expects”, “intends”, “may”, “targets” and other similar words that involve risks and uncertainties.

The Forecast Financial Information is an example of forward looking statements.

Any forward looking statements are subject to various risk factors that could cause Spotless’ actual results to differ materially from the results expressed or anticipated in these statements.

Such statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the Directors of the

Company, SaleCo, the directors of SaleCo and management of the Company. Forward looking statements should therefore be read in conjunction with, and are qualified by reference to the discussion of the Pro Forma Historical

Financial Information in Section 3.8, general assumptions as set out in Section 3.9, specific assumptions as set out in Section 3.9, the sensitivity analysis as set out in Section 3.10, risk factors as set out in Section 4 and other information in this Prospectus.

Spotless and SaleCo cannot and do not give any assurance that the results, performance or achievements expressed or implied by the forward looking statements contained in the

Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward looking statements. Spotless has no intention of updating or revising forward looking statements, or publishing prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information, contained in this

Prospectus, except where required by law.

market and induStry infOrmatiOn

This Prospectus contains statistics, data and other information relating to markets, market sizes, market shares, market positions and other industry data pertaining to Spotless’ business and markets. Unless otherwise indicated, such information is based on a market study ( Company Market Study ) that Spotless commissioned from L.E.K.

Consulting, as well as Spotless’ analysis of such information. See Section 5.3.1 for further information relating to the Company Market

Study and L.E.K. Consulting’s engagement.

The information contained in the Company

Market Study has been accurately reproduced, and, as far as Spotless is aware, no facts have been omitted which would render the information provided inaccurate or misleading.

The Company Market Study includes or is otherwise based on information supplied to

L.E.K. Consulting by or on behalf of Spotless, including internal financial and operational information of Spotless. In addition, Spotless understands from L.E.K. Consulting that the

Company Market Study includes or is otherwise based on information obtained from (i) various data collection agencies, industry associations, forums and institutes and private market analysts; and (ii) publicly available information, such as federal and state government budgets, tender publications, and other information publicly released by corporations and government departments, as well as primary interviews conducted with industry experts and participants and secondary market research.

While the Company Market Study provides that the views, opinions, forecasts and information contained in it are based on information reasonably believed by L.E.K. Consulting in good faith to be reliable, L.E.K. Consulting has not independently verified or audited the information or material provided to it by or on behalf of Spotless. In addition, Spotless has not independently verified, and cannot give any assurances as to the accuracy and completeness of the market and industry data contained in this Prospectus that has been extracted or derived from the Company

Market Study. Accordingly, the accuracy and completeness of such information is not guaranteed.

Investors should note that market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions.

PHOtOGraPHS and diaGramS

Photographs and diagrams used in this

Prospectus that do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses this Prospectus or its contents or that the assets shown in them are owned by Spotless.

Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the Prospectus Date.

cOmPany webSite

Any references to documents included on

Spotless’ website at www.spotless.com or the

Offer Website www.spotless.com/offer are for convenience only, and none of the documents or other information available on Spotless’ website is incorporated herein by reference.

defined termS, time and currency

Defined terms and abbreviations used in this

Prospectus have the meanings given in the glossary in Appendix B of this Prospectus.

Unless otherwise stated or implied, references to times in this Prospectus are to Sydney time

(GMT +10). All monetary amounts referred in this Prospectus are, unless otherwise noted, in

Australian dollars and rounded to the nearest

$0.1 million.

diScLaimerS

None of Spotless, SaleCo or any other person warrants or guarantees the future performance of Spotless, or any return on any investment made pursuant to this Prospectus.

As set out in Section 6.10.3, it is expected that the Shares will be quoted on the ASX initially on a conditional and deferred settlement basis.

Spotless, SaleCo, Spotless’ service provider

Link Market Services Limited (ABN 54 083 214

537) ( Share Registry ), the Financial Adviser, the

JLMs and the Existing Shareholders disclaim all liability, whether in negligence or otherwise, to persons who trade Shares before receiving their holding statements.

This disclaimer does not purport to disclaim any warranties or liability which cannot be disclaimed by law.

SeLLinG reStrictiOnS

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Shares or the Offer, or to otherwise permit a public offering of Shares, in any jurisdiction outside Australia and New

Zealand. The distribution of this Prospectus

(including in electronic form) outside Australia and New Zealand may be restricted by law and persons who come into possession of this

Prospectus outside Australia and New Zealand should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

This Prospectus may not be distributed to, or relied upon by, any person in the United States unless accompanied by the Institutional

Offering Memorandum as part of the

Institutional Offer.

The Shares to be offered under the Offer have not been, and will not be, registered under the

US Securities Act or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, in the United States unless the

Shares are registered under the US Securities

Act or are offered and sold in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and applicable US state securities laws.

See Sections 6.8 and 9.13 for more detail on selling restrictions that apply to the offer and sale of Shares in jurisdictions outside Australia.

Privacy

By filling out the Application Form to apply for

Shares, you are providing personal information to Spotless and SaleCo through the Share

Registry, which is contracted by Spotless to manage Applications. Spotless, SaleCo and the

Share Registry on their behalf may collect, hold, use and disclose that personal information for

2

important notices

continued

the purpose of processing your Application, servicing your needs as a Shareholder, providing facilities and services that you need or request and carrying out appropriate administration.

If you do not provide the information requested in the Application Form, Spotless, SaleCo and the Share Registry may not be able to process or accept your Application.

Your personal information may also be provided to Spotless’ agents and service providers on the basis that they deal with such information in accordance with Spotless’ privacy policy.

The agents and service providers of Spotless may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law. The types of agents and service providers that may be provided with your personal information and the circumstances in which your personal information may be shared are:

• the Share Registry for ongoing administration of the register of members;

• printers and other companies for the purpose of preparation and distribution of statements and for handling mail;

• market research companies for the purpose of analysing the Shareholder base; and

• legal and accounting firms, auditors, contractors, consultants and other advisers for the purpose of administering, and advising on, the Shares and for associated actions.

If an Applicant becomes a Shareholder, the

Corporations Act requires Spotless to include information about the Shareholder (including name, address and details of the Shares held) in its public register of members. The information contained in Spotless’ register of members must remain there even if that person ceases to be a Shareholder. Information contained in Spotless’ register of members is also used to facilitate dividend payments and corporate communications (including Spotless’ financial results, annual reports and other information that Spotless may wish to communicate to its Shareholders) and compliance by Spotless with legal and regulatory requirements. An Applicant has a right to gain access to his or her personal information that Spotless, SaleCo and the

Share Registry hold about that person, subject to certain exemptions under law. A fee may be charged for access. Access requests must be made in writing or by telephone call to Spotless’ registered office or the Share Registry’s office, details of which are disclosed in the Corporate

Directory on the final page of this Prospectus.

Applicants can obtain a copy of Spotless’ privacy policy by visiting the Spotless website

(www.spotless.com/offer). By submitting an

Application, you agree that Spotless and the

Share Registry may communicate with you in electronic form or contact you by telephone in relation to the Offer.

financiaL ServiceS Guide

The provider of the independent review of the

Forecast Financial Information is required to provide Australian retail clients with a financial services guide in relation to the review under the Corporations Act.

The financial services guide is provided in

Section 8.

QueStiOnS

If you have any questions about how to apply for Shares, please call your Broker. Instructions on how to apply for Shares are set out in

Sections 6.3, 6.4 and 6.5 of this Prospectus and on the back of the Application Form. If you have any questions in relation to the Offer, contact the Spotless Offer Information Line on 1800 660 083 (toll free within Australia) or

+61 1800 660 083 (outside Australia) between

8.30am and 5.30pm (Sydney time), Monday to Friday.

SPOTLESS GROUP HOLDINGS LIMITED

table of contents

CHAIRMAN’S LETTER

Key Offer Statistics and Important Dates

1. Investment Overview

2. Business and Industry Overview

3. Financial Information

4. Key Risks

5. Key Individuals, Interests and Benefits

6. Details of the Offer

7. Investigating Accountant’s Report on historical financial information

8. Investigating Accountant’s Report on forecast financial information

9. Additional Information

Appendix A – Significant Accounting Policies

Appendix B – Glossary

Corporate Directory

172

177

184

206

218

228

67

119

129

155

7

23

4

5

Of it.

ProsPectus 3

chairman’s Letter

Dear Investor,

On behalf of the Board of Directors, it is my pleasure to invite you to become a Shareholder in Spotless Group

Holdings Limited ( Spotless ). Founded in 1946, Spotless is a leading provider of outsourced facility services and laundry and linen services in Australia and New Zealand. Within the market it serves, Spotless is the leader by revenue, scale and breadth of services. Spotless, which is one of Australia’s and New Zealand’s largest employers with almost 33,000 employees, provides its services to a diverse range of customers across various industry sectors in Australia and New Zealand.

Spotless serves four primary customer sectors, being Health, Education and Government; Commercial and Leisure;

Base and Township; and Laundry and Linen. Across these customer sectors, Spotless provides facility management, catering and food and cleaning services as well as laundry and linen services.

Spotless operates in the facility services industry in Australia and New Zealand. L.E.K. Consulting estimates that the potential revenue of the market that Spotless serves in Australia is approximately $40.4 billion per annum in

FY2013 and in New Zealand is approximately NZ$4.0 billion per annum in FY2013. It is estimated that in Australia approximately 47% (or $18.9 billion) outsourced to third party service providers like Spotless. In New Zealand, it is estimated that approximately 61%

(or NZ$2.4 billion) 2

1 of the total revenue in Spotless’ market is attributable to services that are

of total revenue in Spotless’ market is outsourced.

Spotless provides services to a high quality and diverse customer base and benefits from entering into multi-year contracts with many of these customers, providing it with a high degree of revenue visibility. Approximately 55% 3 of Spotless’ FY2013 Facility Services Sales Revenue was derived from situations where Spotless provided multiple services to a single customer under its integrated services model or PPP model. Spotless also benefits from a cost base that is largely embedded within contracts and is therefore variable for contract wins and losses and from the fact that approximately 99.6%

Spotless’ strong margins.

4 of its contracts contain some form of embedded price growth mechanism. These favourable contract dynamics, combined with an efficient and customer focused management structure, underpin

Spotless has also had a history of revenue growth, delivering a CAGR of 8.8% since 1990.

5 Looking forward,

Spotless’ growth strategy is underpinned by four pillars, being underlying market growth, outsourcing penetration, market share growth and expansion opportunities in adjacent services and customer sectors.

The purpose of the Offer is to raise capital to reduce the Company’s existing debt levels, provide Spotless with access to capital markets and added financial flexibility to pursue further growth opportunities, create a liquid market for Spotless’ shares and to allow Existing Shareholders to realise part of their investment in Spotless.

Upon Completion of the Offer, new shareholders are expected to hold 50.6% of the shares in Spotless

Shareholders, including PEP Shareholders and Management Shareholders, will hold the remaining shares in

Spotless. The PEP Shareholders remain supporters of Spotless.

6 . Existing

This Prospectus contains detailed information about the Offer and the historical and forecast financial position of

Spotless, as well as the material risks associated with an investment in the Company. I encourage you to read this document carefully and in its entirety before making your investment decision.

I believe firmly in the Spotless management team and the work they have done to date in successfully repositioning the business to take advantage of the significant growth opportunities in the Australian and New Zealand facility services markets.

On behalf of my fellow Directors, I look forward to welcoming you as a Shareholder.

Yours sincerely, margaret Jackson ac

Independent Non-Executive Chairman

1 L.E.K. Consulting.

2 Frost & Sullivan.

3 Based on identifiable Facility Services contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 69.7% of pro forma

FY2013 Sales Revenue.

4 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represented 74.6% of pro forma FY2013 Sales Revenue.

5 Spotless’ revenue CAGR over FY1990 to FY2012. Refer to Section 2.6.1.

6 Based on a Final Price at the midpoint of the Indicative Price Range and disregarding any over-allocation and any exercise of the Over-allocation Option

(see Section 6.6). This includes bonus Shares issued to Directors in connection with the Offer (see Section 5.3.2).

4 SPOTLESS GROUP HOLDINGS LIMITED

key Offer Statistics and important dates ke y Offer statistics 7

Indicative Price Range 8

Total proceeds under the Offer at Indicative Price Range

(assuming no over-allocation as described in Section 6.6)

Total proceeds under the Offer at Indicative Price Range

(assuming the Over-allocation Option is exercised in full)

Total proceeds from the issue of New Shares under the Offer 9

Total proceeds from the sale of Existing Shares under the Offer 9

(assuming no over-allocation as described in Section 6.6)

Total proceeds from the sale of Existing Shares under the Offer 9

(assuming the Over-allocation Option is exercised in full)

Total number of New Shares available under the Offer 9

Total Existing Shares to be sold under the Offer 9, 10

Maximum number of shares that can be over-allocated as described in Section 6.6

Total number of Shares on issue at Completion of the Offer 9

Indicative market capitalisation 9

Pro forma net debt (reflecting management target cash position at Completion of the Offer) 11

Enterprise Value 12

Enterprise Value / pro forma FY2015 forecast EBITDA 9

Enterprise Value / pro forma FY2015 forecast EBITA 9

Indicative Price Range / pro forma consolidated FY2015 forecast Adjusted NPAT per Share 9



Indicative Price Range / pro forma consolidated FY2014 forecast Adjusted NPAT per Share 9

Implied forecast dividend yield range for FY2015 dividend 13

$1.60 – $1.85

$864.9 million – $1,000.0 million

$994.6 million – $1,150.0 million

$695.3 million – $700.2 million



378.5 million – 434.5 million

106.0 million – 162.0 million

81.1 million

1,045.0 million – 1,098.3 million

$1,757.3 million – $1,933.3 million

$617.6 million

$2,374.9 million – $2,551.0 million

7.9x – 8.5x

9.9x – 10.6x

12.4x – 13.6x

9.5x – 10.3x

12.3x – 13.2x

15.8x – 17.4x

5.1% – 5.6%

7 Key Offer statistics contain Forecast Financial Information set out in Section 3.9, prepared on the basis of the best estimate assumptions set out in Section 3.9 and should be read in conjunction with the discussion of the Pro Forma Historical Financial Information in Section 3.8 including the sensitivities set out in Section 3.10, and the risk factors set out in Section 4. This table contains non-IFRS financial measures, which are discussed in Section 3.3.

8 The Indicative Price Range is the indicative range for the Final Price. The Final Price may be set below, within or above the Indicative Price Range. Shares may trade below the lower end of the Indicative Price Range (refer to Section 6.4 for more details).

9 Based on the Indicative Price Range.

10 This disregards any over-allocation and any exercise of the Over-allocation Option. See Section 6.6 for further information.

11 The pro forma Australian dollar denominated debt as at 31 December 2013 of $617.6 million reflects management’s target cash position at Completion of the Offer and is net of capitalised borrowing costs of $4.7 million (see Section 3.6 for further information).

12 Enterprise Value is calculated as the sum of market capitalisation of Spotless at the Indicative Price Range and pro forma net debt as at 31 December

2013 (reflecting management target cash position at Completion of the Offer—see Section 3.6 for further information).

13 Calculated as the implied dividend per Share divided by the Indicative Price Range. For more information on Spotless’ dividend policy, see Section 3.13.

ProsPectus 5

6 key Offer Statistics and important dates continued key dates

Prospectus Lodgement Date

Broker Firm Offer and Personnel and Priority Offer open

Broker Firm Offer and Personnel and Priority Offer close and Applications due

Bookbuild to determine Final Price

Final Price announced to the market

Expected commencement of trading on a conditional and deferred settlement basis on the ASX

Settlement

Issue and transfer of Shares

28 april 2014

6 may 2014

19 may 2014

20-21 may 2014

22 may 2014

23 may 2014

27 may 2014

28 may 2014

dates may change

The dates above are indicative only and may be subject to change without notice.

Spotless, in consultation with the Financial Adviser and the JLMs, reserves the right to vary the times and dates of the Offer including to close the Offer early, extend the Offer or accept late Applications, either generally or in particular cases, without notification. Applications received under the Offer are irrevocable and may not be varied or withdrawn except as required by law.

Investors are therefore encouraged to submit their Application Forms as early as possible after the Offer opens.

How to invest

Applications for Shares can only be made by completing and lodging an Application Form.

Instructions on how to apply for Shares are set out in Sections 6.3, 6.4 and 6.5 and on the back of the

Application Form.

Questions

Please call the Spotless Offer Information Line on 1800 660 083 (toll free within Australia) or +61 1800 660 083

(outside Australia) from 8.30am until 5.30pm (Sydney time) Monday to Friday. If you are unclear in relation to any matter or are uncertain as to whether Spotless is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent and qualified professional adviser before deciding whether to invest.


1. investment Overview

PrOSPectuS 7

topic Summary

1. investment Overview continued

1.1 introduction

what is Spotless’ business?

what is the market currently served by

Spotless and what are its key customer sectors?

for more information

Spotless is a market leading provider of outsourced facility services and laundry and linen services in Australia and New Zealand. Within the market it serves, Spotless is the leader by revenue, scale and breadth of services. Spotless today employs almost 33,000 people comprised of full-time, part-time and casual employees, making Spotless one of

Australia’s and New Zealand’s largest employers.

In FY2013 Spotless:

• Served food to 76 million customers;

• catered to approximately 11 million sports fans at stadia and major events;

• maintained over 80,000 homes in public housing estates;

• Laundered 36 million sheets and 22 million industrial garments;

• Served 13.5 million meals across 16 remote mining operations;

• delivered 3.5 million hours of service to over 200 healthcare providers; and

• Purchased 4,600 tonnes of meat, poultry and seafood.

Spotless operates in the facility services and laundry and linen services industry in Australia and New Zealand. L.E.K. Consulting estimates that the potential revenue of the market that Spotless served in FY2013 was approximately $40.4 billion per annum in Australia and approximately NZ$4.0 billion (A$3.2 billion) 14 per annum in New

Zealand. It is estimated that in Australia approximately 47% (or

$18.9 billion) 15 of the total revenue in Spotless’ market is attributable to services that are outsourced to third party service providers like

Spotless. The New Zealand market has experienced a greater penetration of outsourcing than the Australian market, with approximately 61% (or NZ$2.4 billion) of the market outsourced in FY2013.

16

Spotless delivers its services to the following four key customer sectors:

• Health, education and Government: Customers in this sector include private and governmental entities involved in the provision of social infrastructure services;

• commercial and Leisure: Customers in this sector include large and medium sized companies, operators of airports and airline terminals and operators of function centres and large stadia;

• base and township: Customers in this sector include defence forces and resources companies; and

• Laundry and Linen: Customers in this sector include hospitals, aged care facilities, hotels and corporate customers.

Section 2.1

Sections 2.1 and 2.2

14 Assuming exchange rate of NZD/AUD 0.8002.


16 L.E.K. Consulting, Frost & Sullivan.


topic Summary what services does Spotless provide?

who are

Spotless’ customers?

why is the Offer being conducted?

Spotless’ main services are: facility Services

• Facility Management, which includes property management, maintenance and mechanical services, grounds management, security and fire services, waste management and the delivery of a range of other facility services;

• Catering and Food, which includes services such as operating canteens, dining halls and restaurants, personal meal delivery, specialised food preparation and delivery, management of food and beverage facilities and event catering services; and

• Cleaning, which includes general facility cleaning, specialist industrial and sterile cleaning and washroom services; and

Laundry and Linen Services

• Laundry and Linen, which includes the rental, cleaning, collection, delivery and stock management of linen, uniforms and specialised workwear.

Spotless currently holds a large contract base of in excess of

1,750 contracts.

Spotless provides services to a diverse customer base that includes governmental departments, agencies and authorities at the federal, state and municipal level, large global and domestic corporations and medium sized domestic corporations across Australia and

New Zealand.

Spotless enjoys a high degree of customer diversity, with its largest contract representing only 4% of pro forma Sales Revenue in FY2013.

The Offer is being conducted to:

• reduce the Company’s existing debt levels;

• provide Spotless with access to capital markets and added financial flexibility to pursue further growth opportunities;

• create a liquid market for Spotless’ Shares; and

• allow Existing Shareholders to realise part of their investment in Spotless.

1.2 key features of Spotless’ business model

How does

Spotless generate its revenue?

Spotless generated approximately 83% of its pro forma Sales Revenue in FY2013 from contractual arrangements.

Spotless generates the remainder of its revenue from sources that do not fall within a documented contract, including products and services delivered to a large number of smaller customers within the Laundry and Linen services segment, as well as operating business units in painting and building maintenance and event-based catering revenue.

While these relationships and services do not fall within a documented multi-year contract, they are usually subject to Spotless’ standard business terms and conditions.


Section 2.1

Section 2.4

Chairman’s

Letter

Section 2.4

ProsPectus 9

topic Summary

1. investment Overview continued what is the nature of

Spotless’ customer relationships and contracts?

Spotless has a large number of long term customer relationships.

Spotless benefits from contracts with relatively long terms, with approximately 57% 17 of its contracts (by pro forma Sales Revenue for FY2013 under contract) having an average term of five years or more excluding extension options.

Spotless offers its contracted services under three main relationship models 18 :

• Single Service (approximately 45% of Facility Services contractbased FY2013 pro forma Sales Revenue);

• multiple integrated Services (approximately 50% of Facility

Services contract-based FY2013 pro forma Sales Revenue); and

• Public-Private Partnership (PPP) (approximately 5% of Facility

Services contract-based FY2013 pro forma Sales Revenue).

which geographical markets does Spotless operate in?

Approximately 86% of Spotless’ pro forma Sales Revenue in FY2013 was generated in Australia with the remaining 14% generated in

New Zealand.

what is Spotless’ history?

How has the company been reorganised since 2012?


Section 2.4

Section 3.5

The Spotless business was founded by Ian McMullin in 1946 as a dry cleaning business based in Melbourne, Australia and incorporated as Spotless Pty Ltd in 1957. The company was first listed on the

Australian Stock Exchange in 1961 and grew both organically and through acquisitions to become a diversified facility services provider, offering a broad range of services.

In August 2012, the listed holding company of the group, Spotless

Group Limited, was acquired by Pacific Industrial Services ( 2012

Acquisition ), an entity owned by the PEP Shareholders, the

Coinvestment Shareholders and Management Shareholders.

Following the 2012 Acquisition, a new senior management team was appointed, headed by Chief Executive Officer ( CEO ) Bruce Dixon.

This team has driven a significant improvement in operating performance.

Following the 2012 Acquisition, the management team restructured the business.

In restructuring the business, the management team sought to achieve three key objectives:

• increase customer focus: Change the organisational structure to enable Spotless staff throughout the organisation to focus on the customers’ needs on a holistic basis, rather than a service line specific basis;

• improve quality of earnings, margins and productivity: Reduce the unpredictability of earnings that was being caused by the

Braiform and International Services divisions and improve overall

Group margins and cash flows to be more consistent with those of international peers; and

• business development and pipeline growth: Focus the organisational structure to allow Spotless to better identify and pursue new business growth opportunities within each customer sector, leveraging in-house service line expertise where appropriate.

Section 2.1

Section 2.1

17 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 74.6% of pro forma FY2013 Sales Revenue.

18 Based on identifiable Facility Services contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 69.7% of pro forma



topic

How has the company been reorganised since 2012? continued

How does

Spotless expect to fund its operations?

what is Spotless’ dividend policy?

what is the key financial information?

Summary for more information

The key restructuring initiatives of the new management team upon taking control were:

• refocused organisational structure: Spotless was realigned to be a customer centric business, organised based on customer sectors rather than on service delivery based silos;

• divestment of non-core divisions: Two non-core divisions,

Braiform and International Services, were divested;

• addressing the cost base: Management focused on reducing overhead, driving procurement savings, improving direct labour productivity and exiting loss making and marginal contracts; and

• business development decentralised to sector management:

Spotless’ business development function was restructured to focus on customer sectors rather than discrete services or product offerings.

Spotless’ principal sources of funds will be cash flows from operations and borrowings under its New Banking Facilities.

Spotless is forecast to continue to generate strong cash flow from operations with pro forma Free Cash Flow forecast in FY2015 to be

$246 million.

After Listing, Spotless will also have total debt facilities in place of

$837 million, of which $637 million will be drawn and approximately

$50 million used to provide bank guarantees on Completion of the Offer.

The Directors intend to pay out between 65–75% of Adjusted NPAT as a dividend commencing in FY2015.

The level of payout ratio is expected to vary between periods depending on factors the Directors may consider, including the general business environment, the operating results and financial condition of

Spotless, future funding requirements, capital management initiatives, taxation considerations (including the level of franking credits available), any contractual, legal or regulatory restrictions on the payment of dividends by Spotless, and any other factors the Directors may consider relevant.

Section 2.1

Section 3.6

Section 3.13

Section 3 Pro forma historical

Pro forma forecast

Statutory forecast fy2011 fy2012 fy2013 fy2014 fy2015 fy2014 fy2015 $m

Total revenue 2,505.0 2,574.5 2,585.9 2,560.6 2,694.4 2,560.6 2,694.4

NPAT 39.4

31.6

47.7

103.4

134.5

(41.4) 134.5

Sales

Revenue 2,364.6 2,411.9 2,468.7 2,478.6 2,694.4 2,478.6 2,694.4

EBITDA

EBITA

146.2

91.8

139.6

82.6

166.2

113.0

248.8

193.8

301.4

240.9

179.4

124.4

301.4

240.9

Adjusted

NPAT

Adjusted

EPS 19

40.0

$0.04

32.8

$0.03

54.9

$0.05

111.0

$0.10

141.8

$0.13

Note: This table contains non-IFRS financial measures. Refer to Section 3 for further financial information.

19 This assumes the Final Price is set at the midpoint of the Indicative Price Range.

ProsPectus 11

topic Summary


1.3 key strengths

the market leading provider of integrated services in australia and new Zealand facility services and laundry and linen services markets

High quality customer base with attractive contract dynamics

Strong margins underpinned by a cost base embedded within contracts and contract pass through mechanisms

Strong revenue growth outlook for more information

Spotless is the market leader in the Australian and New Zealand facility services and laundry and linen services markets, holding leading positions across four key customer sectors: Health, Education and

Government; Commercial and Leisure; Base and Township; and

Laundry and Linen.

Within Australia and New Zealand, Spotless’ scale allows it to offer its customers a fully integrated, multi-service offering, providing a broader array of services in more places than that of any of its competitors.

Spotless’ Australian and New Zealand national coverage provides it with a competitive advantage, particularly when tendering for, or renewing, contracts with customers with a national presence as it is able to offer a single, national solution to the customers’ requirements.

Spotless serves a high quality customer base, with approximately

54% 20 of pro forma Sales Revenue in FY2013 generated from entities backed by governments (all of which have 2013 credit ratings from

Standard & Poor’s of AA or better).

Spotless’ business also has low customer concentration, with in excess of 1,750 contracts, no single customer contract accounting for more than 4% of pro forma Sales Revenue in FY2013 and the top five contracts representing 16% of FY2013 pro forma Sales Revenue.

Customer contracts are typically long term, with approximately 57% 21 of contracts by FY2013 pro forma Sales Revenue having a contract term (excluding extension options) of five years or more.

Spotless’ operating cost base is largely embedded within contracts, and is therefore variable for contract wins and losses. Overall, more than 94% of the FY2013 pro forma operating cost base comprised of operating costs embedded within contracts, with costs such as head office and sector-based overheads, representing only 6% of total costs.

Approximately 99.6% 20 of Spotless’ contracts contain some form of embedded price growth mechanism.

To enhance value and productivity, Spotless also continually refines its delivery mix between labour and subcontractors, and its mix of employees between full-time, part-time and casual employees.

Spotless’ growth strategy is underpinned by four pillars: underlying market growth, outsourcing penetration, market share growth and expansion opportunities in adjacent services and customer sectors.

underlying market growth: Inherent growth in target sectors underpins Spotless’ revenue growth outlook. L.E.K. Consulting expects underlying growth of 5.3% per annum in the (in-sourced and outsourced) Australian facility services and laundry and linen services markets over FY2013 to FY2018. This is broadly in line with forecast nominal GDP growth in Australia of 5-6% per annum.

21

Section 2.3

Section 2.4

Section 2.4

Section 2.6

20 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 74.6% of pro forma FY2013 Sales Revenue.

21 Nominal GDP forecast CAGR for 2013-2018 period from Euromonitor of approximately 6% and from IMF World Economic Outlook Database of 5.3%.


topic

Strong revenue growth outlook continued

Highly experienced management team and board


Outsourcing penetration: Spotless expects to be a beneficiary of the positive trend towards outsourcing in Australia. L.E.K. Consulting forecasts the outsourced market to grow at a CAGR of 8.2% between

FY2013 and FY2018. A number of additional potential outsourcing opportunities (primarily in the health and education sub-sectors) have been identified, which if realised could increase outsourcing penetration from approximately 47% in FY2013 to approximately 54% by FY2018.

22 market share growth: This includes gaining market share from competitors and cross-selling opportunities.

• Market share opportunities: Spotless expects to be able to gain market share by winning contracts with new customers that are currently serviced by competitors. To that end, management is targeting opportunities particularly in the Base and Township customer sector, where Spotless is not currently the market leader but rather only holds a top three position.

• Cross-selling opportunities: Spotless has opportunities to deliver additional services to existing customers via integrated services solutions and through expanding existing services to other customer sites. Management expects to benefit from the trend toward more integrated services offerings.

expansion opportunities: This includes customer sector expansion and service line expansion opportunities.

• Customer sector expansion: Spotless intends to expand into certain adjacent markets it does not currently serve. These include home care, allied health services and immigration. L.E.K. Consulting estimates the size of these adjacent markets, in aggregate, to be worth approximately $11 billion in revenue per annum.

• Service line expansion: Spotless has the opportunity to further expand its product offering into adjacent services. Several potentially attractive adjacent service lines have been identified where Spotless could increase its in-house offering, instead of subcontracting, to enhance its integrated services offering to customers and improve margins. These service lines include security, fire protection, pest control and heating. The total market for these services, in aggregate, is approximately $12 billion in revenue per annum.

23

The Spotless management team is highly experienced and led by the CEO and Executive Director, Bruce Dixon.

Bruce Dixon was appointed CEO of Spotless in August 2012 and has significant experience in leading business restructuring and profit improvement programs. Bruce was previously Managing Director of

Healthscope Limited from December 1997 to October 2010. Prior to that, Bruce held various senior management positions at Spotless.

The current Spotless management team has a broad range of experience and is responsible for driving the improved performance of Spotless.

They have delivered sustainable margin improvement, established a platform for future growth and created a culture of performance.

The independent Board is chaired by Ms Margaret Jackson AC. The other

Directors are Diane Grady AM (Independent Non-Executive Director),

Garry Hounsell (Independent Non-Executive Director), Geoff Hutchinson

(Non-Executive Director), Rob Koczkar (Non-Executive Director) and

The Hon. Nick Sherry (Independent Non-Executive Director).

Section 2.6




ProsPectus 13

14 topic Summary


1.4 key risks

Spotless may fail to renew existing contracts or win new contracts

Potential delays to commencement of new contracts and dependence on third parties

Spotless’ failure to properly understand customer requirements, drivers of customer demand or cost inputs may lead to low margins or poor performing contracts for more information

Spotless’ ability to renew contracts with existing customers and win new contracts with existing and new customers is fundamental to its business, growth and profitability. Spotless faces competition in all the markets in which it operates. New contracts, including contracts entered into with an existing customer where a previous contract has expired, are usually subject to a competitive process. There is a risk that Spotless may not win these contracts.

Failure to successfully renew existing contracts or to win new contracts could negatively impact Spotless’ financial performance.

Where Spotless wins a contract, commencement of the contract can be delayed past the expected commencement date. Spotless is also a party to a number of contracts where Spotless’ ability to perform its obligations and commence earning revenue is dependent on third parties performing their own contractual arrangements in a timely manner. Spotless may not have any contractual protection against such delays. Any delay in the commencement of a contract may result in a delay in Spotless receiving revenue or may cause Spotless to incur additional costs, and therefore could have an adverse impact on

Spotless’ financial performance, including its ability to achieve management’s forecasts for the business.

Spotless may from time to time enter into contracts where agreed revenue is insufficient to cover Spotless’ costs of delivering the services or to provide adequate profit margins. This can occur for a number of reasons, including a failure to properly understand the scope and requirements of a contract, a failure to assess accurately the costs of delivering the contracted services, a failure to properly model the drivers of customer demand or a failure to adhere to Spotless’ internal risk assessment and contracting process guidelines. If Spotless enters into low margin contracts, Spotless’ revenue and profitability could be adversely impacted.

Section 4.2

Section 4.2

Section 4.2

customers may have the right to terminate their contracts or may seek to renegotiate during the contract term

Spotless’ existing and target customers may choose to change from outsourcing to in-sourcing of services

Customers have a right to terminate contracts in certain circumstances.

Termination of Spotless’ services by a customer before the end of a contract’s term will reduce Spotless’ future revenue and, in some situations, may leave Spotless with excess capacity or redundancy costs. Upon termination, Spotless may not receive adequate compensation, or any compensation, for such losses and costs.

From time to time, customers may seek to renegotiate existing contracts for various reasons during the term of the contract. If contract renegotiations lead to the parties entering into new contracts on terms less favourable to Spotless, or if the parties fail to reach an agreement and the customer terminates the existing contract, Spotless’ revenue and profitability could be adversely impacted.

Spotless’ financial performance depends on its customers and the industries in which it operates continuing to outsource facility services and laundry services. Spotless’ anticipated future growth depends in part on additional services being outsourced in the future. A decline in outsourcing in the industries in which Spotless and its customers operate, or an increase in customers taking services back in-house may adversely affect Spotless’ future revenue and profitability and its prospects for growth.

Section 4.2

Section 4.2


topic Summary for more information

Spotless’ performance is linked to its ability to attract and retain key management

Spotless’ performance is linked to its ability to manage effectively a large and diverse workforce

Spotless may fail to meet its workplace health and safety obligations

Spotless delivers catering and food services and may be adversely impacted by a failure to comply with food safety standards and alcohol licences

Spotless’ performance is dependent on the ability of its senior executives and other key personnel to manage and grow its business and respond to customers’ needs. Continuity and retention of senior executives and other key personnel are important for customer retention and ongoing customer negotiations, and for the ongoing implementation of current business transformation and growth initiatives. The loss of the services of Spotless’ senior executives or other key personnel, or an inability to attract and retain qualified and competent senior executives or other key personnel, could have a material adverse effect on

Spotless’ operating and financial performance.

Spotless manages a large and diverse workforce consisting of almost

33,000 employees to deliver outsourced services to its customers.

Spotless’ service quality is largely dependent on Spotless’ ability to attract, develop, motivate and retain appropriately skilled personnel in these categories, and provide a sufficient level of training and oversight in order to achieve consistent standards. A high level of staff turnover reduces operational efficiency, impairs knowledge management and leads to excessive recruitment costs.

Many of Spotless’ full and part-time employees are represented by a union or are otherwise employed under awards or union-negotiated

Enterprise Agreements. The negotiation of new Enterprise Agreements or changes to awards from time to time may increase the overall costs of running Spotless’ business and such increased costs may not be able to be passed through to customers in full.

If employees take industrial action, Spotless could be exposed to loss to the extent the industrial action impairs Spotless’ ability to provide services or causes disruption to Spotless’ customers, if the relevant customer contracts do not include industrial action as a force majeure event or, even if they do, if the action becomes materially extended.

Spotless is subject to laws and regulations in respect of health and safety. Additional or amended laws and regulations may increase the cost of compliance, adversely impact Spotless’ ability to comply, or expose Spotless to greater potential liabilities. In the event Spotless breaches these laws and regulations, including for example where

Spotless is held responsible for an injury or death, Spotless and its

Directors and officers could be subject to sanctions and penalties, and Spotless’ safety record and reputation may be affected, which may make it difficult for Spotless to hire and retain personnel and win new business.

In each jurisdiction in which it operates, Spotless is required to comply with a variety of regulations at various governmental levels including in relation to the handling, preparation and serving of food, the cleanliness of food production facilities and the responsible service of alcohol.

In providing catering and food services, there is a risk that raw materials may deteriorate or products may become contaminated within the supply chain. Such incidents or instances of non-compliance with food safety and alcohol laws and regulations could damage

Spotless’ brand and reputation, which may in turn make it difficult for

Spotless to win contracts from customers. Other potential adverse consequences for Spotless include the loss of the ability to sell alcohol at venues, other regulatory penalties, and liability associated with adverse health effects on consumers, loss of stock, delay in supply and financial costs.

Section 4.2

Section 4.2

Section 4.2

Section 4.2

ProsPectus 15

topic Summary


Significant retained holding by the PeP

Shareholders and coinvestment

Shareholders

Following Completion of the Offer, the PEP Shareholders, Coinvestment

Shareholders and certain Management Shareholders will hold approximately 48.2% to 50.7% of the issued capital of the Company 24 .

The PEP Shareholders, with Coinvestment Shareholders, may therefore have the capacity to control the election of Directors, and the potential outcome of all matters submitted to a vote of Shareholders. The interests of the PEP Shareholders and Coinvestment Shareholders may differ from the interests of Spotless, and the interests of investors who purchase Shares in the Offer. Also, while they hold a large stake in the

Company, the PEP Shareholders and Coinvestment Shareholders will be able to determine or influence whether a takeover or similar offer for the Shares is successful.

Furthermore whilst escrow restrictions will apply to the Shares held by the PEP Shareholders, Coinvestment Shareholders and certain

Management Shareholders for the period disclosed in Section 6.7, there will be no restrictions on the sale of any Existing Shares on and from the date on which those escrow restrictions are released in accordance with the terms of the relevant restriction (or sooner, in the event an exception to the restriction is available). A significant sale of Shares by some or all of the PEP Shareholders and Coinvestment

Shareholders, or the perception that such sales have occurred or might occur, could adversely affect the price of Shares.

Other key risks

A number of other key risks are included in Section 4.


Section 4.3

Section 4

1.5 key Offer statistics

25 what are the key

Offer statistics?

Indicative Price Range 26

Total proceeds under the Offer at Indicative

Price Range (assuming no over-allocation as described in Section 6.6)

Total proceeds under the Offer at Indicative

Price Range (assuming the Over-allocation

Option is exercised in full)

Total proceeds from the issue of New Shares under the Offer 27

Total proceeds from the sale of Existing

Shares under the Offer 27 (assuming no over-allocation as described in Section 6.6)

Total proceeds from the sale of Existing

Shares under the Offer 27 (assuming the

Over-allocation Option is exercised in full)

Total number of New Shares available under the Offer 27

Total Existing Shares to be sold under the Offer 27, 28

$1.60 – $1.85

$864.9 million –

$1,000.0 million

$994.6 million –

$1,150.0 million

$695.3 million –

$700.2 million

$169.6 million –

$299.8 million

$299.3 million –

$449.8 million

378.5 million –

434.5 million

106.0 million –

162.0 million

Sections 3 and 6

24 Based on the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option (see Section 6.6 for further information). This also disregards any bonus Shares issued to Directors in connection with the Offer (see Section 5.3.2) and any additional Shares acquired by Non-Executive Directors under the Offer.

25 Key Offer statistics contain Forecast Financial Information set out in Section 3.9, prepared on the basis of the best estimate assumptions set out in Section 3.9 and should be read in conjunction with the discussion of the Pro Forma Historical Financial Information in Section 3.8 including the sensitivities set out in Section 3.10, and the risk factors set out in Section 4. This table contains non-IFRS financial measures, which are discussed in Section 3.3.

26 The Indicative Price Range is the indicative range for the Final Price. The Final Price may be set below, within or above the Indicative Price Range.

Shares may trade below the lower end of the Indicative Price Range (refer to Section 6.4 for more details).


28 This disregards any over-allocation and any exercise of the Over-allocation Option (see Section 6.6 for further information).


topic what are the key

Offer statistics? continued

Summary

Maximum number of shares that can be over-allocated as described in Section 6.6

Total number of Shares on issue at

Completion of the Offer 31

Indicative market capitalisation 31

81.1 million

1,045.0 million –

1,098.3 million

$1,757.3 million –

$1,933.3 million

$617.6 million Pro forma net debt (reflecting management target cash position at Completion of the Offer) 29

Enterprise Value 30



Indicative Price Range / pro forma consolidated FY2015 forecast Adjusted

NPAT per Share 31



Indicative Price Range / pro forma consolidated FY2014 forecast Adjusted

NPAT per Share 31

Implied forecast dividend yield range for FY2015 dividend 32

Pro forma net debt (reflecting management target cash position at Completion of the

Offer) 33 / pro forma FY2015 forecast EBITDA

Pro forma net debt (reflecting management target cash position at Completion of the

Offer) 33 / pro forma FY2014 forecast EBITDA

$2,374.9 million –

$2,551.0 million

7.9x – 8.5x

9.9x – 10.6x

12.4x – 13.6x

9.5x – 10.3x

12.3x – 13.2x

15.8x – 17.4x

5.1% – 5.6%

2.05x

2.48x


Sections 3 and 6


30 Enterprise Value is calculated as the sum of market capitalisation of Spotless at the Indicative Price Range and pro forma net debt as at 31 December

2013 (reflecting management target cash position at Completion of the Offer—see Section 3.6 for further information).


32 Calculated as the implied dividend per Share divided by the Indicative Price Range. For more information on Spotless’ dividend policy, see Section 3.13.


ProsPectus 17

topic Summary


1.6 Spotless directors and key executives

who are the directors and key executives of Spotless?

directors

• Margaret Jackson AC (Independent Chairman)

• Bruce Dixon (Chief Executive Officer)

• Diane Grady AM (Independent Non-Executive Director)

• Garry Hounsell (Independent Non-Executive Director)

• Geoff Hutchinson (Non-Executive Director)

• Rob Koczkar (Non-Executive Director)

• The Hon. Nick Sherry (Independent Non-Executive Director) key executives

• Bruce Dixon (Chief Executive Officer)

• Vita Pepe (Chief Operating Officer)

• Danny Agnoletto (Chief Financial Officer)

• Paul Waterson (Group General Manager)

• Dana Nelson (Group General Manager)

• Sue Williams (Group General Manager)

• Paul Morris (General Counsel and Company Secretary)

• John Douglas (General Manager Human Resources)

• Catriona Larritt (General Manager Business Development)

• Chris Hewison (General Manager, Group Procurement and Property)

• Peter Lotz (Chief Information Officer)

• Simon Lipscombe (General Manager New Zealand)

1.7 Significant interests of key people and related party transactions

who are the existing

Shareholders and what will their interest in

Spotless be at completion of the Offer?

existing Shareholders

Shareholding prior to the Offer

(%)

Shareholding following com pletion of the Offer

(Shares)

(m) 34

Shareholding following com pletion of the Offer

(%) 34

PEP Shareholders

Coinvestment Shareholders

72.5%

20.6%

378.8

107.7

35.4%

10.1%

Management Shareholders and other current Existing

Shareholders total

6.9%

100.0%

42.3

528.8

4.0%

49.4%

Note: Any discrepancies between totals and sums of components in this table are due to rounding.



Section 6.1

34 This assumes that the Final Price is set at the midpoint of the Indicative Price Range.


topic Summary for more information will any Shares be subject to restrictions on disposal following completion of the Offer?

All Shares retained by the PEP Shareholders, Coinvestment

Shareholders and certain Management Shareholders following

Completion of the Offer will be subject to voluntary escrow arrangements.

PeP Shareholders and coinvestment Shareholders

Under the terms of the voluntary escrow arrangements, subject to the

Over-allocation Option arrangements and certain customary exceptions,

Shares held by the PEP Shareholders and the Coinvestment

Shareholders may only be sold in the period prior to Spotless’ financial results being announced for FY2015 on the following basis:

Section 6.7

Securities to be released from escrow escrow release conditions

25% of Shares held at Completion of Offer (including any shares returned following stabilisation process)

25% of Shares held at Completion of Offer (including any shares returned following stabilisation process)

• Financial results for FY2014 released; and

• Volume-weighted average price in any 20 consecutive trading days following release of those financial results exceeds the Final Price by more than 20%

• Financial results for H1FY2015 released; and


After the release of the FY2015 financial results, all remaining Shares held by the PEP Shareholders and Coinvestment Shareholders will cease to be subject to escrow restrictions.

The Shares the subject of these voluntary escrow arrangements will include shares which are returned to the PEP Shareholders and

Coinvestment Shareholders pursuant to the Over-allocation option arrangements described in Section 6.6.

management Shareholders

Shares retained by certain Management Shareholders following

Completion of the Offer will also be subject to voluntary escrow arrangements. Under the terms of those escrow arrangements, subject to certain customary exceptions and exceptions for certain individual executives, Shares may only be sold on the following basis: after:

The announcement of FY2015 financial results

The announcement of FY2016 financial results the % of issued Shares that each management Shareholder may sell is:

50%

All remaining Shares retained by

Management Shareholders will cease to be subject to escrow restrictions

ProsPectus 19


1. investment Overview continued what significant benefits and interests are payable to directors and other persons connected with

Spotless or the Offer and what significant interests do they hold?

directors and key executives

Margaret

Jackson

Bruce Dixon

Diane Grady

Garry Hounsell

Geoff

Hutchinson

Rob Koczkar

Shares held prior to the

Offer

–

14,896,628 (1,853,006)

–

–

–

–

Shares acquired/

(sold) in the Offer 35

1,739,130

31,159

115,942

43,478

289,855 iPO bonus

Shares 35

139,130

Shares held on Listing 35

1,878,260

– 13,043,622

84,783

86,957

–

–

115,942

202,899

43,478

289,855

Nick Sherry – 11,594 69,565 81,159

14,896,628 – – 14,896,628 Vita Pepe

Danny

Agnoletto – – – – for more information


interests, benefits and related party transactions of the PeP

Shareholders

Directors and key executives are entitled to remuneration and fees on commercial terms. Key management are also entitled to receive options under Spotless’ Long Term Incentive Scheme (see Section 5.3.3).

Geoff Hutchinson and Rob Koczkar will also have an indirect interest in

Shares through investment vehicles that hold interests in vehicles that are among the PEP Shareholders.

They are also executives of Pacific Equity Partners Pty Limited, an affiliated entity of which will receive certain fees in connection with the Listing as described in Section 6.1.

The PEP Shareholders and Coinvestment Shareholders will retain a 45.5% interest in Spotless on Completion of the Offer.

36

In March 2014, the Independent Directors approved the Company entering into a Relationship Deed with representatives of the PEP Shareholders.

Under the Relationship Deed, the representatives of the PEP Shareholders retain the right to appoint two Directors to the Board for so long as the

PEP Shareholders and the Coinvestment Shareholders (other than

Lentesco) together hold at least 25%, or one Director to the Board for so long as the PEP Shareholders and the Coinvestment Shareholders together hold at least 10%, of the issued share capital of Spotless.

PEP Advisory and the Coinvestment Shareholders will receive certain fees on Completion of the Offer as outlined in Section 6.1.


1.8 Proposed use of funds and key terms and conditions of the Offer

who is the issuer of the

Prospectus?

Spotless Group Holdings Limited (ABN 27 154 229 562), a company registered in Victoria, Australia and Spotless SaleCo Pty Ltd

(ACN 168 847 916), a company registered in Victoria, Australia.

Section 6.1

what is the Offer?

what is Saleco?

The Offer is an initial public offering of 540.5 million Shares that will in part be issued by the Company and in part sold by SaleCo.

37

SaleCo is a special purpose vehicle, established to sell Shares acquired from the Selling Shareholders.

The Existing Shares which SaleCo acquires from the Selling

Shareholders, along with New Shares issued by the Company, will be transferred to Successful Applicants at the Final Price.

Section 6.1

Section 9.3

35 This assumes that the Final Price is set at the midpoint of the Indicative Price Range.

36 This assumes that the Final Price is set at the midpoint of the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option (see Section 6.6 for further information).

37 This disregards any over-allocation and any exercise of the Over-allocation Option (see Section 6.6 for further information).


topic what is the

Over-allocation

Option?

what are overallocations and what is market stabilisation?

what is the proposed use of funds raised pursuant to the Offer?

will the Shares be quoted?

How is the Offer structured?


The Over-allocation Option is the option granted by SaleCo to the

Stabilisation Manager to acquire up to an additional 81.1 million Shares at the Final Price, to cover over-allocations made under the Offer, if any.

The Over-allocation Option represents between 7.4% and 7.8% of the

Shares on issue at Completion of the Offer (assuming that the Final Price is at the bottom and top of the Indicative Price Range respectively).

The Company and SaleCo, in agreement with the JLMs, may overallocate up to 81.1 million Shares to Institutional Investors under the

Institutional Offer.

If Shares are over-allocated, the Stabilisation Manager will initially satisfy these over-allocations by borrowing an equivalent number of Shares from SaleCo. Ultimately, the over-allocations (or any borrowings undertaken to satisfy the over-allocations) are expected to be satisfied either by:

• requiring SaleCo to transfer Shares at the Final Price under the

Over-allocation Option; or

• purchasing Shares on the ASX at or below the Final Price once

ASX trading in the Shares commences; or

• by a combination of these means, any time within the period of up to 30 days following Listing.

The purchase of Shares on the ASX during that period is referred to as

“market stabilisation”. Such purchases may have the effect of stabilising the trading price for Shares on the ASX in circumstances where the trading price is at or below the Final Price. There is no guarantee that the trading price of Shares will not drop below the Final Price (even if the Stabilisation Manager undertakes market stabilisation).

Assuming the Final Price is at the midpoint of the Indicative Price

Range, the funds received under the Offer will be used as follows:

• $697.7 million will be paid to the Company to reduce net debt and pay costs associated with the Offer; and

• $234.7 million received by SaleCo will be paid to the Selling

Shareholders (each of whom will have sold Existing Shares to SaleCo) 38 .

Spotless will apply to the ASX within seven days after the Prospectus

Date for admission of the Company to the official list of the ASX and quotation of Shares on the ASX (which is expected to be under the code SPO). It is anticipated that quotation will initially be on a conditional and deferred settlement basis.

Completion of the Offer is conditional on the ASX approving that application. If approval is not given within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act.

The Offer comprises:

• the Broker Firm Offer;

• the Institutional Offer, which consists of an invitation to acquire

Shares made to Institutional Investors; and

• the Personnel and Priority Offer, which is only open to Eligible

Employees and investors nominated by Spotless located in Australia and New Zealand.

Section 6.6

Section 6.6

Section 6.1

Section 6.9

Sections 6.3,

6.4 and 6.5

38 This disregards any exercise of the Over-allocation Option (see Section 6.6 for further information).

ProsPectus 21


1. investment Overview continued is the Offer underwritten?

No. The Offer is not underwritten.

what is the allocation policy?


Section 6.2

The allocation of Shares between the Broker Firm Offer, the Institutional

Offer and the Personnel and Priority Offer will be determined by the

JLMs in agreement with Spotless and the Financial Adviser, having regard to the allocation policies outlined in Sections 6.3, 6.4 and 6.5.

With respect to the Broker Firm Offer, it will be a matter for the Brokers and Co-Managers how they allocate firm stock among their eligible retail clients.

No brokerage, commission or stamp duty is payable by Applicants on acquisition of Shares under the Offer.

Sections 6.3,

6.4 and 6.5

Section 6.2

is there any brokerage, commission or stamp duty payable by applicants?

what are the tax implications of investing in

Shares?

when will i receive confirmation that my application has been successful?

Shareholders may be subject to Australian income tax or withholding tax on any future dividends paid. The tax consequences of any investment in the Shares will depend upon an investor’s particular circumstances, particularly for non-resident Shareholders. Applicants should obtain their own tax advice prior to deciding whether to invest.

It is expected that initial holding statements will be dispatched by standard post on or about 28 May 2014.

Section 9.10

Sections 6.3,

6.4 and 6.5

How can i apply?

where can i find more information about this

Prospectus or the Offer?

can the Offer be withdrawn?

If you are an eligible investor, you may apply for Shares by completing a valid Application Form.

To the extent permitted by law, an Application under the Offer is irrevocable.

Please call the Spotless Offer Information Line on 1800 660 083

(toll free within Australia) or +61 1800 660 083 (outside Australia) from

8.30am until 5.30pm (Sydney time) Monday to Friday. If you are unclear in relation to any matter or are uncertain as to whether Spotless is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent and qualified professional adviser before deciding whether to invest.

Sections 6.3,

6.4 and 6.5

Key Offer

Statistics and

Important

Dates and on pages

5 and 6

Spotless reserves the right not to proceed with the Offer at any time before the issue of New Shares or transfer of Existing Shares to

Successful Applicants.

If the Offer does not proceed, Application Monies will be refunded by the Share Registry, your Broker or Spotless.

No interest will be paid on any Application Monies refunded as a result of the withdrawal of the Offer.

Section 6.9


Section 2

ProsPectus 23

24

2. business and industry Overview

This Section 2 provides an overview of Spotless and the industry in which it operates.

2.1 Overview of Spotless

2.1.1 introduction

Spotless is a market leading provider of outsourced facility services and laundry and linen services in

Australia and New Zealand. Within the market it serves, Spotless is the leader by revenue, scale and breadth of services. Spotless today employs almost 33,000 people comprised of full-time, part-time and casual employees, making Spotless one of Australia’s and New Zealand’s largest employers.

Spotless provides a broad range of facility services, which include facility management, catering and food and cleaning services, as well as laundry and linen services, such as industrial laundering and linen and uniform rental. Spotless provides these services to a diverse customer base that includes governmental departments, agencies and authorities at the federal, state and municipal level, large global and domestic corporations and medium sized domestic corporations across Australia and

New Zealand.

In FY2013, Spotless:

 Served food to 76 million customers;

 catered to approximately 11 million sports fans at stadia and major events;

 maintained over 80,000 homes in public housing estates;

 Laundered 36 million sheets and 22 million industrial garments;

 Served 13.5 million meals across 16 remote mining operations;

 delivered 3.5 million hours of service to over 200 healthcare providers; and

 Purchased 4,600 tonnes of meat, poultry and seafood.


2.1.2 Spotless’ key customer sectors and services provided

Spotless is organised around four key customer sectors: Health, Education and Government;

Commercial and Leisure; Base and Township; and Laundry and Linen.

Specific examples of the services provided by Spotless across these key customer sectors are outlined in Figures 1 and 3 below.

fig. 1 Summary of Spotless’ business

Segments facility Services Laundries customer sectors Health, Education and Government

Commercial and

Leisure

Base and Township Laundry and Linen

# 1 Top 3 # 1 Spotless estimated marked position

# 1

% of Spotless pro forma fy2013

Sales revenue 1,2

$857m

35%

$867m

35%

$483m

20%

$262m

11% industry sectors served

Health

Public and private

hospitals

Aged care facilities

Education

Universities and colleges

High schools

Government

Buildings and agencies

Public housing

Correctional facilities

Commercial

Commercial offices and major retail space

Airports and airline terminals

Other transport, manufacturing and utilities

Leisure, Sport and Entertainment

Major sporting stadia

Entertainment, leisure and function facilities

Defence

Residential housing

Barracks and bases

Resources

Remote mining townships

Mining support facilities

Health laundry

Public and private hospitals

Day procedure centres

Aged care facilities

Accommodation laundry

Hotels

Serviced apartments

Motels

Other laundry

(garments)

Various workplaces

(e.g. food, manufacturing etc)

Overview of services provided

Facility management, catering and cleaning services for social infrastructure providers

Facility management, catering and cleaning services for private sector companies, major events and large stadia

Integrated services contracts for large

Defence bases, remote mines and mining townships

Notes:

1. Sales Revenue excludes Legacy Pass Through Revenue and Other Income—see Section 3 for further detail.

2. Pro forma FY2013 Sales Revenue by customer sector does not add to 100% due to rounding.

Centralised laundry services for linen and uniforms

ProsPectus 25

26

2. business and industry Overview continued

2.1.3 Spotless’ key service types

Spotless offers its customers an integrated multi-service offering with a single point of contact under a range of contractual models that deliver customers their desired level of services required for the successful operation of their facility.

Spotless’ main services are:

facility Services

– Facility Management, which includes property management, maintenance and mechanical services, grounds management, security and fire services, waste management and the delivery of a range of other facility services;

– Catering and Food, including services such as operating canteens, dining halls and restaurants, personal meal delivery, specialised food preparation and delivery, management of food and beverage facilities and event catering services; and

– Cleaning, which includes general facility cleaning, specialist industrial and sterile cleaning and washroom services; and

Laundry and Linen Services

– Laundry and Linen, which includes the rental, cleaning, collection, delivery and stock management of linen, uniforms and specialised workwear.

Spotless’ service mix measured by proportion of Sales Revenue is set out in the diagram below.

fig. 2 Spotless service mix (Pro forma fy2013 Sales revenue) 1,2

Laundry and Linen

11%

Cleaning 19% 37% Facility Management

34%

Catering and Food

Note:

1 Sales Revenue excludes Legacy Pass Through Revenue and Other Income—see Section 3 for further detail.

2 Core service mix contribution does not add to 100% due to rounding.


fig. 3 example of services offered by Spotless

Health, education and Government commercial and Leisure facility management

• Commissioning new hospital facilities

• Biomedical equipment maintenance

• Social infrastructure PPP life cycle upgrades

• Maintenance services at schools and universities

• Planned and reactive maintenance of social housing stock

• Facility management of commercial offices base and township

• Preventative maintenance services within manufacturing and distribution facilities

• Operational and facility management of convention and function centres

• Mechanical maintenance of industrial equipment, including

HVAC systems, forklifts, hoists and gantries

• Essential services maintenance

(e.g. fire systems, exit lights)

• Planned and reactive maintenance of Defence property, plant and equipment, including logistical support to special forces training exercises

• Integrated management of

Defence Headquarters Joint

Operations Command facility, including perimeter security

• Accommodation services for resources customers, e.g. room bookings and flight reservations catering and food cleaning

Laundry and Linen

• Dining services in boarding schools and university colleges

• School “tuckshops” and branded cafeterias

• Menu and food production management system in hospitals

• Production and distribution of catering within hospital networks via Spotless patient service assistants with automated guidance vehicles planned for new PPP hospitals

• Stadium catering, including retail, function and corporate hospitality suites

• Exclusive catering provider to one-off and recurring major sporting and entertainment events

• Branded retail outlets at airports

• Sterile cleaning of operating theatres within hospitals

• Cleaning of schools under integrated PPP contracts

• Cleaning of lecture theatres and open space areas within universities

• Cleaning of government offices

• Cleaning of public transport infrastructure

• Catering services to workers in remote mining and defence locations, operating restaurants, cafes, stocking vending machines and other event based catering services

• Operating supermarkets and post offices in remote mining townships and camps

• Special event cleaning for major sporting, function and entertainment venues helping to clean up, dispose of waste and prepare for the next event

• Industrial cleaning of plant and equipment, including power station turbines

• Cleaning, security and concierge services within major retail shopping centres

• Cleaning and housekeeping services to mine sites and villages, including accommodation and common areas

• Cleaning services within

Defence bases and military offices

• Linen services to hospitals across Australia and

New Zealand, managing the collection, laundering and return of linen as well as providing garments, surgical scrubs, gowns, sterilised theatre items and other specialty items

• Linen services to Commercial and Leisure clients including accommodation linen, laundering and linen management supply

• Turnkey branded workwear garment rental and laundering services for customers including retail and manufacturing operations

• Linen services to mine sites and villages including accommodation linen, laundering and linen supply management

ProsPectus 27


Spotless delivers its services through a range of proprietary brands servicing different sub-sectors of the market under the broader Spotless corporate brand. These brands are set out in Figure 4.

fig. 4 Spotless’ brand portfolio brand Services delivered

– Facility management

– Accommodation management

– Fleet management

– Car park management

– Concierge and mailroom

– Venue management

– Event management

– Patient management

– Security services

– Energy meter reading

– Asset maintenance

– Mechanical and electrical services

– Building trades services

– Painting services

– Grounds and gardens

– Pest control

– Building management systems

– Fire and emergency services

– Energy and water management

– Handyman services

– Stadia, venue and event catering

– Dining rooms and cafes

– Functions

– Corporate hospitality

– Retail food and beverage

– Cafeterias, cafes and canteens

– Retail food and beverage

– Resident dining

– Aged care

– Schools and colleges

– Mining camps and defence sites

– Hospital patient meals

– Functions and boardrooms

– Meals on wheels

– Airport retail food and beverage

– Venue, event and precinct cleaning

– Waste management and recycling customer sub-sectors serviced

– Business and Industry

– Defence

– Education

– Health

– Government

– Leisure, Sports and Entertainment

– Resources


– Defence

– Education

– Health

– Government


– Resources



– Defence

– Education

– Health

– Government

– Resources


– Commercial, retail and industrial cleaning

– Waste management and recycling

– Hygiene and washroom services

– Window cleaning

– Concierge and mailroom

– Linen supply, laundering and management

– accommodation

– hospitality

– healthcare

– sterilising

– Workwear laundering, rental and management

– Workwear supply and design

– Floor care and washroom services


– Defence

– Education

– Health

– Government

– Resources


– Defence

– Education

– Health

– Government

– Laundries


– Resources


fig. 5

Case studies which provide examples that demonstrate the delivery of Spotless’ services are outlined in Figures 5 to 7 below.

case study

new royal adelaide Hospital

Will be one of the largest and most technologically advanced hospitals to be built in Australia

– Spotless is to act as facility manager under a PPP with the Government of South Australia from completion of this hospital in 2016

– A “Profit and Loss” contract 39 under a PPP structure with a term of 35 years

– Spotless will provide an integrated facility service offering, including helpdesk, facility maintenance, utilities and medical gases management, grounds and garden maintenance services, security, car parking services, pest control services, patient support services, cleaning and domestic services, orderly services, catering services, waste management services, internal linen distribution services and bulk stores distribution services

– Spotless has designed and will be responsible for delivering a complex and comprehensive preventative and life cycle maintenance program to cost-effectively refurbish and upgrade the hospital throughout the contract term

– Spotless will adopt a patient centred integrated approach that supports the State’s Model of

Care, placing the patient and their well-being at the core of clinical and non-clinical service delivery, capitalising on the synergies that exist in the delivery of services and facilitating effective internal and external communication at all levels

– The PPP is designed to limit the customers’ costs and is expected to improve quality standards and deliver a lift in patient, clinician and visitor satisfaction across South Australia

Images supplied by Hansen Yuncken and Leighton Contractors Joint Venture and partnership of Silver Thomas Hanley and Design Inc.

39 Refer to Section 2.4.3 for details on Spotless’ contract pricing structures.

ProsPectus 29

2. business and industry Overview continued fig. 6 case study

melbourne cricket Ground (mcG)

10th largest stadium in the world and Australia’s pre-eminent sporting stadium, a relationship spanning 36 years

– Spotless manages the catering and food retail services at the MCG for ‘match-day’ and

‘non-match day’ functions

– A “Profit and Loss” style contract 40 where Spotless pays licensing fees for the right to provide catering, with the current contract term commencing in October 2011 for an initial term of five years

– Operates 114 corporate suites, 31 function rooms / areas, seven restaurant / cafes, 56 bars,

38 food concession stands / retail outlets and 20 mobile food stands and serves over three million people per year including over 600,000 Melbourne Cricket Club members

– 95 full-time staff supported by casual staff (from 80 to 2,000 depending on the event)

– During a typical ‘match day’ Spotless caters for up to 5,000 guests across a variety of corporate functions, caters to over 1,960 guests across 114 corporate suites and provides an extensive retail food and beverage offering across 38 outlets. Spotless provides these services through an employee base that it manages throughout the entire Australian sporting calendar

– For ‘non-match day’ functions, Spotless manages the function booking process on behalf of the

MCG, from initial enquiry through to booking, catering for and managing the function on the day

30



fig. 7 case study

QGc

A complex multi-stage mobilisation of integrated services supporting one of Australia’s largest

LNG projects

– In February 2012 Spotless was awarded the integrated village management contract to support the major Liquid Natural Gas ( LNG ) project for Queensland-based QGC Pty Limited ( QGC ), an Australian subsidiary of BG Group developing natural resources in the Surat Basin region

– A “Cost Plus” and “Fee for Service” style contract 41

– Key services under the contract include accommodation management, catering, maintenance, housekeeping and recreational leisure programs

– Since 2012, Spotless has mobilised over 15,000 beds in the Resources sector. Spotless’ mobilisation for QGC was delivered through flexible and transparent customer engagement and a structured contract management and communications plan

– Since early 2012, Spotless has adapted its services scope and levels to meet QGC’s changing requirements. Spotless’ initial brief was to manage and maintain assets and provide services to support up to 1,650 people working on the Queensland Curtis LNG project. Due to QGC success in delivering construction, volumes have significantly exceeded initial expectations and camp volumes have exceeded 3,000 people across the three construction support camps at Ruby Jo, Woleebee Creek and Jordon


ProsPectus 31


2.1.4 company history and recent business transformation

The Spotless business has a 68 year history, having been founded by Ian McMullin in 1946.

Key events in the history of the business are set out in Figure 8 below.

fig. 8 key historical events

1946

Founded by Ian McMullin as a dry cleaning business in Melbourne, Australia

1957

1961

Business incorporated as Spotless Pty Ltd

Listed on the Australian Stock Exchange as Spotless Limited

1971

1977

1984

1987

1991

1993

1999

2001

2004

2006-08

2009

2010

2012

Acquired a local garment hanger supply business

Expanded into the industrial laundry space with the acquisition of a 50% interest in Ensign; the remaining 50% was acquired in 1981

Expanded into New Zealand market through laundry business acquisitions

Diversified into food services with the acquisition of Nationwide Food Services and O’Brien

Catering (focused on stadia, residential, boarding schools and mine sites catering)

First contract with the Australian Department of Defence

Acquired Plastiform (US based) to expand into the international garment hanger manufacturing and supply business

Increased scale of the New Zealand laundries business with the acquisition of 55% of Taylors (New Zealand Stock Exchange listed laundry services business); the remaining

45% was acquired in 2009

Enhanced catering offering with the acquisition of Mustard Catering, a large Western Australia based up-market catering group

Strengthened facility maintenance and cleaning capabilities with the acquisition of Support Services businesses from P&O in Australia and New Zealand

Acquired Braitrim (UK based), which was merged with Plastiform to form Braiform to further expand garment hanger manufacturing and supply capability

Acquired Epicure Catering providing exposure to high end, boutique catering services and further extending capabilities across catering services

Won its first PPP project for social infrastructure to provide facilities services for

New South Wales schools

Ian McMullin, Ron Evans and Brian Blythe stepped down from Board

Acquisition of Alliance Catering

Change of management

Expanded facility management capability by extending service maintenance product lines into painting with the acquisition of Riley Shelley (a painting and refurbishment business)

Obtained secondary listing on New Zealand Stock Exchange

Entered into the international facility services market with the acquisition of Cleanevent and Event Management Catering

Taken private by Pacific Industrial Services — an entity owned by the PEP Shareholders, the Coinvestment Shareholders and Management Shareholders

Appointment of Bruce Dixon as CEO leading a new management team

Divested non-core divisions Braiform and International Services


Members of the new management team, led by Bruce Dixon, had prepared for the 2012 Acquisition of Spotless over a period of almost two years. Following completion of the acquisition, the new management team was able to move quickly to implement its new strategy designed to establish a culture of performance and an organisation-wide focus on profitability.

In restructuring the business, the management team sought to achieve three key objectives:

• increase customer focus: Change the organisational structure to enable Spotless staff throughout the organisation to focus on the customers’ needs on a holistic, rather than service line specific basis;

• improve quality of earnings, margins and productivity: Reduce the unpredictability of earnings that was being caused by the Braiform and International Services divisions and improve overall Group margin and cash flows to be more consistent with those of international peers.

Particular focus was applied to reversing the significant increase in overhead support full-time equivalents that had occurred between 2008 and 2012, which had coincided with a decrease in adjusted EBITDA margin from approximately 6.7% 42 to approximately 5.7% 43 between FY2008 and FY2012; and

• business development and pipeline growth: Focus the organisational structure and accountabilities to allow Spotless to better identify and pursue opportunities within each customer sector, leveraging in-house service line and business development expertise where appropriate.

The key restructuring initiatives of the new management team upon taking control were:

• refocused organisational structure: Spotless was realigned to be a customer centric business, organised based on customer sectors rather than on service delivery-based silos.

This has allowed customer facing staff to be focused on customer needs and to gain a better understanding of what customer outcomes might be required rather than being purely focused on executing a single service line. This has resulted in a significant change in the approach to customer management and cross-selling of services. Account managers are now more specialised in understanding the operation of customer facilities, sector by sector. With accountabilities realigned within customer sector teams, account managers are now better placed to build direct relationships with their customers across all facets of mobilisation, delivery, debtor collection and changing service requirements;

• divestment of non-core divisions: Two non-core divisions, Braiform and International Services, were divested. The Braiform business had been a long standing underperformer in the broader

Group, with sales and EBIT having fallen by approximately 51% and approximately 87% respectively over FY2006 to FY2011. Braiform was considered non-core by the Board and management and divested in December 2012. Similarly, the Board and management believed that the International

Services business was uncompetitive in the markets in which it operated, and that it delivered considerably lower margins than those of the rest of the Group. As a result, that business was divested in December 2012. Divestment of the lower margin non-core divisions allowed new management to fully focus on the core business;

42 Statutory FY2008 EBITDA of $121.5 million adjusted for restructuring costs ($24.6 million), transaction costs ($14.3 million), impaired assets and onerous contracts ($1.0 million) and legal disputes ($2.6 million).

43 Statutory FY2012 EBITDA of $153.2 million adjusted for non-recurring transaction costs as part of the acquisition of Spotless by Pacific

Industrial Services ($8.0 million).

ProsPectus 33


• addressing the cost base: Management focused on reducing overhead, reviewing the procurement function, improving direct labour productivity and exiting loss making contracts.

This was achieved via the following measures:

– to support a reduction in overhead, employees in administrative or management roles were reduced by approximately 790 full-time equivalents, a saving equivalent to 50% of the FY2012 total overhead expenses. A majority of these headcount reductions took place by the end of

December 2012;

– following a review of the procurement function, a more coordinated approach was adopted with all major categories of product and service supply being reviewed and retendered across the organisation. This initiative achieved a greater than 30% reduction in the number of suppliers and an aggregate 7% saving on the applicable cost base of FY2012 procurement expenditure secured through new contractual arrangements;

– management also implemented a number of labour management initiatives to improve labour productivity. These included new labour rostering systems, a new daily labour reporting tool, weekly reporting of labour hours against budget and regular meetings between each sector general manager, chief operating office and group general manager to review site-level rosters, overtime variances and payroll costs by contract; and

– management undertook an extensive review of Spotless’ contract base, which allowed the

Company to identify and intentionally exit loss making contracts. This review also allowed management to identify additional cost saving opportunities and institute new benchmarking practices to monitor contract performance.

The recalibration of the cost base increased margins and cash flow generation. Spotless’ pro forma EBITDA margin in H1FY2014 was approximately 10% in FY2012 and approximately 13% 46

44 , compared to approximately 6% 45

in FY1990. Throughout this process, management focused on ensuring there was minimal impact on the customer facing side of the organisation and that continuity of service was maintained. A summary of the change from service line focus to customer sector focus is set out in Figure 9 below; and

• business development accountability decentralised to sector management: Spotless’ business development function was restructured to focus on customer sectors rather than discrete services or product offerings. Sector management teams are now responsible for understanding customer needs and encouraged to pro-actively identify new business opportunities to pursue.

See Section 2.7 for further detail on Spotless’ business development function.

34

44 Based on pro forma Sales Revenue and EBITDA for H1FY2014.

45 Based on pro forma Sales Revenue and EBITDA for FY2012.

46 FY1990 EBITDA margin based on FY1990 statutory profit before tax of ($28.8 million), plus net interest ($3.3 million), plus depreciation and amortisation ($24.6 million); adjusted to exclude profit before tax ($0.6 million) and depreciation and amortisation ($2.1 million) from discontinued Manufacturing segment. Depreciation and amortisation for Manufacturing segment based on allocation of total depreciation and amortisation, proportionally allocated between segments based on revenue. FY1990 revenue based on statutory revenue from sales

($443 million) adjusted to exclude discontinued Manufacturing segment ($38 million).


fig. 9 Spotless restructure under current management team

Service delivery based silos 1 (by statutory FY2012 revenue)

Laundry

Braiform

7%

International

2%

9%

47%

Managed Services

Food

21%

13%

Cleaning

Customer centric business model 1 (by pro forma FY2013 Sales Revenue 2 )

Laundry and Linen

11%

Base and Township 20%

35%

Health, Education and Government

35%

Commercial and Leisure

Notes:

1 Service delivery silos / customer sector contributions do not add to 100% due to roundings.

2 Sales Revenue excludes Legacy Pass Through Revenue and Other Income – see Section 3 for further detail.

new management team objectives

• Increase customer focus

• Improve quality of earnings, margins and profitability

• Business development and pipeline growth

actions taken

• Refocused organisational structure

• Divestment of non-core divisions

• Addressing the cost base

• Business development accountability decentralised to sector management

ProsPectus 35


2.2 industry overview

Spotless operates in the facility services and laundry and linen services industry in Australia and

New Zealand. Broadly, facility services involve providing owners and operators of various types of facilities with an outsourced solution to any of a wide variety of services that may be required to operate the facility. The role of a facility service provider is to manage and maintain facilities in a secure and compliant manner. A facility can be described as a place, amenity, piece of equipment, or particular service provided for a particular purpose. Typically, facility services are provided under contract and provide varying degrees of risk transfer and specific outcomes to facility service providers and customers.

Certain statistics, data and other information in this Section 2.2 as well as Sections 2.5 and 2.6 relating to markets, market sizes, market shares, market positions, forecast market growth and other industry data pertaining to Spotless’ business and markets is, as indicated below, based on the

Company Market Study that Spotless commissioned from L.E.K. Consulting, as well as Spotless’ analysis of such information. See Important Notices for further information relating to the Company

Market Study and L.E.K. Consulting’s engagement.

2.2.1 australian market size and segmentation

L.E.K. Consulting estimates that the potential revenue of the market that Spotless serves in Australia was approximately $40.4 billion per annum in FY2013, including both the revenue generated by outsourced service providers and the potential revenue that would be generated if services currently performed in-house were outsourced.

This market is defined by reference to the services Spotless currently provides to the four end-market customer sectors that Spotless currently serves—Health, Education and Government; Commercial and Leisure; Base and Township; and Laundry and Linen—and includes both facility services and laundry and linen services. It does not include potential revenue from adjacent customer sectors that Spotless does not currently serve but that may be regarded as part of a broader facility services industry.

Facility services and laundry and linen services are either performed in-house by facility owners, or are outsourced (partially or wholly) to an external facility service provider. It is estimated that approximately 53% ($21.5 billion) 47 of the total revenue in Spotless’ market in Australia is attributable to services that are provided in-house, while the remaining approximately 47% ($18.9 billion) 48 is attributable to services that are outsourced. The proportion of the Australian market which is outsourced is forecast to grow, however it is still below the estimated level of outsourcing in other markets such as New Zealand (61%) 49 , the UK (58%) 50 and Japan (66%) 51 .

36







fig. 10 Spotless’ market in australia relative to outsourcing in other global markets

Australian facility services industries served by Spotless (FY2013)

Global outsourcing penetration

A$40.4 billion

100%

7%

8%

80%

A$40.4 billion

100%

80%

100%

80%

53% 34% 39% 42%

60% 42% 60%

60%

51%

40% 40%

40%

20% 43% 20% 47%

20%

66% 61% 58% 49%

0%

Total market in Australia

0%

Source: L.E.K. Consulting, Frost & Sullivan

In-house vs.

Outsourced

53%

47%

0%

Japan

(2010)

New Zealand

(2013)

UK

(2010)

Scandinavia Germany

(2010) (2010)

Sources: Frost & Sullivan


Laundry and Linen


Outsourced

Base and Township 1

In-house

Note:

1 Estimated total size of Base and Township customer sector is expected to reduce given Government initiative to achieve efficiencies in Defence expenditure.

An overview of Spotless’ market and customer sectors is provided in Figure 11.

fig. 11 market segment and customer sector overview (fy2013)

Segments customer sectors

Health, education and Government 1 facility Services commercial and

Leisure base and township 2

Laundries

Laundry and Linen estimated total size ($bn) 17.5

estimated outsourced market size ($bn)

5.7

17.1

9.6

3.1

2.9

2.7

0.6

estimated % of market outsourced

33% 56% 93% 24% estimated outsourced market sub-sector split

– Health (22%)

– Education (27%)

– Government

(50%)

– Business and

Industry (92%)


(8%)

– Resources (65%)

– Defence (35%)

– Laundry and Linen

(100%)

Source: L.E.K. Consulting

Notes:

1 Health, Education and Government estimated customer sub-sector split of outsourced market does not add to 100% due to rounding.

2 Estimated total size of Base and Township customer sector has been calculated assuming efficiency improvements in Australian Defence

Force contracts.

ProsPectus 37


2.2.2 australian market trends

Management has identified a number of key trends in the market Spotless serves in Australia.

These trends include:

• increasing outsourcing: Management believes that there is a trend towards the outsourcing of services, particularly in services provided to governments and government entities. This trend and the decision to outsource has been driven by factors such as:

– a desire to reduce cost: Customers that decide to outsource typically conclude that outsourcing will be more cost-efficient given efficiencies and economies of scale available to facility services providers;

– a lack of in-house capability / expertise: Customers may lack the capability and expertise to manage facility services, particularly across multiple service lines; and

– a desire to focus on core competencies: Outsourcing enables customers to focus on their core business and not be distracted by the need to manage and administer facility services.

Once a decision to outsource has been made, customers typically select a facility services provider that they believe will satisfy their outsourcing objectives while presenting the lowest risk to the efficient operation of their business. The decision is generally based on some combination of the following criteria:

– organisational experience and track record: Customers are typically highly focused on minimising the risk that an outsourcing solution has an undesirable effect on their core activity or results in poor customer service or undesirable publicity. Consequently, large customers such as governments and corporates typically look to outsource services to large and reputable facility service providers;

– ability to mobilise: The service provider’s capacity to mobilise to start performing facility services within an acceptable timeframe and adjust to changes in the scope of the services required to be performed over time is fundamental to meeting customer needs. Larger service providers are at a natural advantage in this regard given their access to workforce, reduced need for subcontractors and depth of skills and expertise;

– integrated offer and breadth of service: The ability to deliver a wide range of services

(either through self-delivery or subcontracting) and integrate services into a single offering tends to drive efficiencies, which Spotless management believes is increasingly becoming an important factor for customers;

– understanding of the customer’s business / activity: Customers tend to prefer outsourcing providers that have a strong understanding of their underlying business or activity and are therefore considered to be better positioned to deliver the services the customer needs with a lower level of risk. Service providers with a greater depth of customer sector expertise tend to be better positioned in this regard;

– value for money: The pricing structure proposed needs to be appropriate to the service offering being provided and supplanted. Pricing and pricing structures vary depending on the risk carried by the service providers in the contract and the complexity and scale of the service;

– track record of performance and compliance: A history of seamless mobilisation, service delivery and compliance with all applicable operational, health and safety and associated regulations is critical in establishing confidence with, and mitigating the risk to, the customer; and

– local focus: Having a strong local presence in all regions of Australia and New Zealand appeals to stakeholders in both countries and their respective territories. Further, a local presence is often important for government contracts where there may be a greater focus on ensuring prime contractors support small to medium-sized enterprises.


In many cases, facility services are critical to the effective operation of the customer’s business and yet the cost of the services represents only a small proportion of the customer’s total operating costs. In these circumstances, many customers tend to be very focused on the reliability of the service provider and not necessarily on obtaining the lowest cost services;

• integrated services: Management believes there is also a trend towards the contracting of integrated services whereby the ability to provide integrated services is becoming an increasingly important determinant for large customers in awarding facility services contracts in Australia and

New Zealand. Management attributes this trend to the enhanced customer value proposition from integrated services, including a single point of contact, administration benefits and control of service delivery, reducing costs, risks and ultimately enhancing value for money to customers.

The trend towards integrated services is likely to benefit larger facility service providers like

Spotless, as these providers are better placed to deliver breadth and depth of integrated services and have a history of integrated service capability and capacity. The provision of integrated services generally gives rise to a more complex contractual relationship between service provider and customer over a longer term;

• centralised purchasing: An increasing trend to centralised purchasing has been observed, particularly across large corporates where purchasing is increasingly being centralised at a regional or national level. Key drivers of this trend include the potential efficiencies and cost savings achievable through scale procurement, consistency of service specifications and quality across facilities and a reduced level of administrative complexity for the customer. Given the geographic span and complexity arising from centralised contracts, large scale facility service providers such as Spotless are better placed to deliver these services and the desired efficiencies to customers;

• increasing consolidation: Management expects that the trend toward integrated services and centralised purchasing will continue and will drive an increase in market consolidation as scale and demonstrable self-delivery capability remain important drivers in the customer selection of facility services providers;

• PPPs: Since Spotless secured its first PPP approximately 10 years ago, management has observed an increasing trend towards the evaluation of PPP models to develop new and existing social infrastructure assets across both state and federal governments. The use of PPPs across a range of facility types, including hospitals, schools, prisons, social housing assets and defence facilities, is expected to continue as Australian and New Zealand governments continue to face budget challenges and seek ways to maintain and enhance services while delivering value for money to taxpayers; and

• Outcome-based performance contracts: In addition to PPP outcome-based contracts, both governmental and large corporate customers are increasingly focusing on performance contracts rather than input-based contracts. Under a performance contract, the customer specifies the desired output or service level and agrees a set cost of this service with the service provider.

Under an input-based contract, the service provider receives payment based on the costs incurred (primarily wages) plus an agreed margin. The trend to performance and outcome-based contracting enables a service provider to receive payment for risk transfer and delivering its key performance indicators. The service provider is responsible for managing its cost base and service levels, delivering certainty to customers while receiving returns commensurate with value delivered and risk transferred to the service provider.

2.2.3 competitive landscape in australia

The market Spotless serves in Australia is highly fragmented. Market participants include domestically-based suppliers as well as global providers who have local operations. Spotless is the largest provider in its market, approximately 1.2× larger than the second largest provider based on an estimate of revenue generated within the market Spotless serves.

52

52 Refer to market definition in Section 2.2.1. Based on Compass Group FY Sep 2013 Australia and New Zealand financial report filings.

Compass Group (New Zealand) revenue has been converted to AUD at a rate of NZD/AUD 0.82).

ProsPectus 39

40

2. business and industry Overview continued fig. 12 estimated annual facility services revenue in australia and new Zealand of large competitors

3.0

2.5

2.5

2.0

2.0

1.5

1.3

1.0

0.9

0.9

0.8

0.5

0.6

0.3

0.2

0.0

Spotless

(Aus and NZ)

(2013) 1

Compass

(Aus and NZ)

(2013)

Serco ISS

(Aus and NZ)

(2012)

(Aus and NZ)

(2013)

Transfield

(Aus and NZ)

(2013)

Programmed Sodexo

(Aus and NZ)

(2013)

(Aus and NZ)

(2013)

UGL

(Asia-Pac)

(2013)

Delaware

(Aus and NZ)

(2012)

Source: L.E.K. Consulting

Notes:

1 Spotless pro forma FY2013 Sales Revenue.

Figure 13 shows the service offerings of Spotless’ main competition within the market that

Spotless serves in Australia and New Zealand based on available public information.

A number of these competitors serve markets and offer service lines that are outside the market within which Spotless competes, and which are therefore not shown on Figure 13. As Figure 13 shows, Spotless offers a broader range of service in these customer sectors in comparison to that of its major competitors.


fig. 13 Outsourced facility services industry players and customer sector participants (fy2013) 1 facility

Services providers

Service line australia and new

Zealand

FM

Catering

Cleaning

Laundries

FM

Catering

Cleaning

Laundries

FM

Catering

Cleaning

Laundries

FM

Catering

FM

Catering

Cleaning

Laundries

FM

Catering

Cleaning

Laundries

FM

Catering

Cleaning

Laundries

Cleaning

Laundries

FM

Catering

Cleaning

Laundries

FM

Catering

Cleaning

Laundries main sector focus (australia and new Zealand) 2

Health, education and Government

Health education Government commercial and Leisure b&i

3

Leisure

3 base and township resources defence

= Core service focus (Australia and New Zealand) (based on public company information)

Source: L.E.K. Consulting

Notes:

1 Applies to target sectors in Spotless’ market—see Section 2.2.1 for further detail.

2 Current Australia and New Zealand service focus shown for competitors.

3 B&I represents Business and Industry and LSE represents Leisure, Sports and Entertainment.

ProsPectus 41

42


Spotless holds leading market positions across the Health, Education and Government, the

Commercial and Leisure and the Laundry and Linen customer sectors while maintaining a top three position in the Base and Township customer sector.

Spotless’ positions across the key customer sectors are outlined below in Figure 14.

fig. 14 Spotless market share 1 by customer sector (%) by pro forma total revenue (fy2013)

30%

25%

20%

15%

10%

5%

13%

0%

Spotless market position 2


#1

Notes:

1 L.E.K.Consulting.

2 Management estimate of Spotless market position.

7%


#1

16%

Base and

Township

Top 3

27%

Laundry and Linen

#1


2.2.4 new Zealand market size and segmentation

L.E.K. Consulting estimates that the potential revenue of the market that Spotless serves in

New Zealand was approximately NZ$4.0 billion (A$3.2 billion) 53 per annum in FY2013.

The New Zealand market has experienced a greater penetration of outsourcing than the Australian market, with Frost & Sullivan estimating that approximately 61% (or NZ$2.4 billion) of the market was outsourced in FY2013.

fig. 15 new Zealand facility services industries served by Spotless (fy2013)

100%

NZ$4.0 billion

4%

NZ$4.0 billion

80%


60%

40%

56% 39% Commercial and Leisure

Base and Township

Laundry and Linen 1

20% 40% 61%

Outsourced

In-house

0%

Total New Zealand market

In-house vs.

Outsourced

Source: L.E.K. Consulting, Frost & Sullivan

Notes:

Note:

1 Laundry and Linen is embedded in each of the sectors shown for the total New Zealand market that Spotless serves.

2.2.5 competitive landscape in new Zealand

It is estimated that approximately 70% 54 of the outsourced market that Spotless serves is held by the top 10 market participants. Spotless is the leading provider within this market in New Zealand with an estimated 18% 55 share of the outsourced portion of the market.

The key growth drivers in each of the Australian and New Zealand market are discussed in more detail in Section 2.5.

53 Assuming exchange rate of NZD/AUD 0.8002.



ProsPectus 43


2.3 Spotless’ competitive strengths

Spotless believes that its competitive strengths include:

• Scale and national presence: As the leading service provider in its market in Australia and

New Zealand and the only provider with a national presence across facility services and laundry and linen services in these markets, Spotless believes that it has a unique capability to self-perform a greater proportion of services across a range of geographically diverse contracts. Spotless therefore has greater flexibility and responsiveness to meet customer needs and greater economies of scale when administering and delivering services;

• breadth of service offering and integrated offer: Spotless provides facilities management, catering, cleaning and laundry and linen services across more customer sectors and sub-sectors than any of its competitors. Spotless’ service capability includes fully integrated multi-service offerings, allowing it to bid on a greater scope of technically diverse customer requirements and to readily add incremental services during a customer engagement if the scope of work expands;

• brand and reputation: Management believes that Spotless’ long history of delivering facility services and laundry and linen services in Australia and New Zealand and its established brand give the Company a high level of credibility as a low-risk outsourcing provider;

• Self-delivery: Spotless self-delivers approximately 77% 56 of its services which gives it greater control over the quality of the services being provided to the customer, enables it to better understand the customer’s risks and requirements, and reduces the need to manage subcontractors. Self-delivery also increases the margin earned on individual contracts.

Spotless has initiatives in place to increase the proportion of services it self-delivers;

• Local: Spotless is a well-known Australian and New Zealand brand. When tendering for new opportunities, Spotless is often competing against subsidiaries of foreign companies, and in these situations its Australian heritage can be advantageous, particularly where the customer is an Australian government-related entity focused on supporting the local economy with its procurement spend. Spotless has held a long standing brand presence in New Zealand, where its brand and the Taylors laundry brand are well recognised. Further, Spotless is one of the largest private sector employers across New Zealand;

• Laundry and linen capabilities: Spotless has unrivalled scale and geographic coverage across laundry and linen services in Australia operating both company owned and leased laundry facilities throughout Australia and New Zealand, providing services in every Australian state and territory and holding a leading market position across laundry and linen services in Australia and

New Zealand; and

• mobilisation: Spotless is experienced in mobilising large teams quickly, safely and seamlessly to meet contract requirements, which it believes is a point of differentiation and source of operating efficiency. Spotless has a dedicated mobilisation process that specialises in planning, implementing and establishing services in line with its customers’ requirements.

2.4 customers

2.4.1 customer base

Spotless has a number of long term customer relationships. Spotless provides services to a diverse customer base that includes government departments, agencies and authorities at the federal, state and municipal level, large global and domestic corporations and medium sized domestic corporations across

Australia and New Zealand. Across these customer groups, Spotless enjoys a high degree of customer diversity with its largest contract representing only approximately 4% of FY2013 pro forma Sales

Revenue, the top five contracts representing approximately 16% of FY2013 pro forma Sales Revenue and the largest 200 contracts representing approximately 74% of FY2013 pro forma Sales Revenue.

44

56 Based on sub-contractor expenses being 23% of pro forma FY2013 total operating expenses.


Spotless’ contract portfolio includes a range of high quality customers with approximately 54% of contract-based pro forma Sales Revenue in FY2013 generated from entities backed by governments

(all of which had 2013 credit ratings from Standard & Poor’s of AA or better) 57 .

The strength of Spotless’ relationships with existing customers is demonstrated by its high degree of revenue retention. For example, Spotless, for the period from 1 July 2013 to 31 January 2014, has lost contracts worth only 4% of FY2013 pro forma Sales Revenue. Spotless typically seeks to renew or extend customer contracts before they fall due, rather than having contracts go to competitive tender.

fig. 16 major customer type (Pro forma fy2013 Sales revenue) 1

Major customer type – (Pro forma FY2013 Sales Revenue) 1

Australian state governments

31%

Australian local governments

1%

New Zealand Government

10%

23% Multi nationals

Australian

Government

12%

23%

Other corporates

Note:

1 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 74.6% of pro forma FY2013

Sales Revenue.

16%

Top 5 contracts

Residual

26%

Top 151-200 contracts


3%

5%

12%


25%

Top 6-25 contracts

13%

Top 26-50 contracts

57 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 74.6% of pro forma FY2013

Sales Revenue.

ProsPectus 45


2.4.2 customer relationship models

In FY2013, Spotless generated approximately 83% of its pro forma Sales Revenue under customer contracts, with the remaining 17% of pro forma Sales Revenue delivered under Spotless’ usual terms of business. Spotless offers its contracted services under three main relationship models:

• Single Service 58 (approximately 45% of facility Services contract-based fy2013 pro forma Sales revenue): Generally shorter term contracts for a single specific service with an average tenor of five years (excluding optional renewal periods). These contracts are typically smaller in size based on per annum revenue contribution;

• multiple integrated Services 59 (approximately 50% of facility Services contract-based fy2013 pro forma Sales revenue): Generally longer term contracts for the provision of multiple services at a single customer site with an average tenor of five years (excluding optional renewal periods) that are typically larger in size in terms of per annum revenue contribution and higher margin than single service contracts; and

• PPPs 60 (approximately 5% of facility Services contract-based fy2013 pro forma Sales revenue): A PPP is a partnership between the public sector and the private sector, the purpose of which is to finance, design, construct and operate a facility normally falling within the domain of the public sector. Spotless’ PPPs have an average tenor of 27 years, and are generally large in size and have higher margins than Multiple Integrated Services contracts. Under the PPPs, the facility services provider is typically responsible for the delivery of all facility services at the site for the life of the contract.

fig. 18 Selected Spotless key customers across each sector

Health, education and Government commercial and Leisure base and township

Laundry and

Linen

46

58 Based on identifiable Facility Services contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 69.7% of pro forma FY2013 Sales Revenue.




PPPs and Multiple Integrated Services typically have higher margins because they enable Spotless to leverage fixed costs across multiple services. PPPs also typically have a longer contract duration and are relatively higher margin due to performance-based key performance indicators and risk transfer.

Figure 19 provides an outline of the relative metrics of each service model measured over the typical contract life.

fig. 19 facility Services customer models 61

Single service multiple integrated services

PPPs

Service integration/ value to customer

Lower Higher tenor Shorter Longer

Size Smaller Larger margin Lower Higher

Spotless primarily self-delivers its services, with subcontractor costs representing only 23% of

Spotless’ FY2013 pro forma total operating expenses. While Spotless has a philosophy of self-delivery of services wherever appropriate, in some circumstances customer value is best realised by engaging subcontractors. Spotless may utilise subcontractors where services are complex, specialised and infrequent in nature or require original equipment manufacturer servicing or where direct employment across all roles would not be cost efficient (such as certain services in remote areas). In addition, some contracts, including contracts with governmental entities and resources companies, require a portion of services to include “local content”, requiring Spotless to engage local subcontractors and social enterprises. Spotless has a strong level of engagement with small to medium sized enterprises and social enterprises, and provides customer access to this network as a point of difference. There is scope for Spotless to continue to incrementally increase its level of self-delivery, with management having identified an opportunity to establish labour pools to service existing contracts which provides an alternative to the current practice of engaging subcontractors.


ProsPectus 47


2.4.3 customer contracts

Spotless currently holds a large contract base of in excess of 1,750 contracts as at February 2014, which represented approximately 83% of FY2013 pro forma Sales Revenue. Spotless also derives revenue from the provision of services that are not documented by a specific contract. These include products and services delivered to a large number of smaller customers within the Laundries segment, as well as operating business units in painting and building maintenance and event-based catering revenue (both within the Commercial and Leisure customer sector). While these relationships do not fall within a documented contract, they are usually subject to Spotless’ standard business terms and conditions.

Spotless benefits from contracts with relatively long terms, with approximately 57%

(by FY2013 pro forma Sales Revenue under contract 63

62 of its contracts

) having an average term of five years or more excluding extension options and 11 or more years where contract extension terms are included. This provides Spotless with a high degree of revenue visibility across a large portion of its revenue base.

In addition, over 99% of Spotless’ FY2013 pro forma Sales Revenue was derived from recurring services (as opposed to project based services).

fig. 20 major contract dynamics

Contract length (excluding options to extend)

(Pro forma FY2013 Sales Revenue) 1

6+ years

32%

Less than 1 year

6%

5%

1-2 years

2-3 years

12%

7% 3-4 years

13%

4-5 years

25%

5-6 years

Note:


Sales Revenue.

48

62 Based on identifiable contracts with greater than $1 million pro forma FY2013 Sales Revenue which represent 74.6% of pro forma


63 Pro forma FY2013 Sales Revenue under contract represents approximately 83% of all pro forma FY2013 Sales Revenue.


Contract pricing structures 64

Spotless contracts under a range of different pricing structures. Cost Plus contracts represented approximately 12% of Spotless’ FY2013 pro forma Sales Revenue that was generated from contracts.

Under a Cost Plus structure, Spotless is entitled to a reimbursement of costs plus a fixed management fee or margin while the customer takes profit and loss risk (e.g., in catering contracts) or bears the cost of service risk (e.g., in facility management contracts) on the applicable contract. Spotless’ remaining contracts can be broadly classified as Profit and Loss contracts and cover a spectrum of risk and return profiles. These contracts represented the remaining 88% 65 of Spotless’ FY2013 pro forma Sales

Revenue that was generated from contracts 66 . The concept of “Profit and Loss” is a services industry term indicating elements of risk and reward for the contractor, subject to key performance indicators.

Profits and losses on the operation of the contract are to Spotless’ account and while commercial arrangements can vary, examples include:

• licence fee payable by Spotless (fixed, variable or combination of both), to deliver catering services at a stadium, school or airport, with Spotless retaining any profit or accruing any loss generated from the activity;

• operations partly subsidised by the customer, e.g., a customer that subsidises the cost of food for its employees at a food outlet, with Spotless otherwise conducting the activity on a normal commercial basis;

• comprehensive maintenance services with repair and breakdown risk shared between Spotless and its customer;

• PPP contracts for greenfield and brownfield social infrastructure assets, e.g., schools, hospitals or prisons, whereby Spotless performs a service for a pre-agreed fee and carries the risk of the cost associated with delivering that service; and

• flat fee paid for services (e.g., monthly) or a schedule of rates that is invoiced as work is performed with pricing being based on an agreed scope of service and site plan (e.g., cleaning services), asset register (e.g., scheduled maintenance contracts) or weekly charge per item (e.g., laundry contracts for linen and garments); Spotless carries the risk of delivering the service under these contracts.

For each of the above contract types, fees are generally subject to periodic rise and fall price escalation to cover cost escalation, as well as adjustments for scope changes.

Approximately 99.6% of Spotless’ Sales Revenue 67 contains some form of embedded price growth mechanisms e.g., price escalators may be based on national and regional CPI, labour and food price indices, cost plus or fixed percentage increases. These pricing mechanisms provide Spotless with both underlying growth across existing contracts and a degree of margin protection against escalating costs. Price increases due to escalators may be different from the movement in the underlying costs and may occur at a different time. As a result, contractual price growth mechanisms may escalate more rapidly than underlying costs, providing margin expansion, or more slowly and hence provide only partial protection against cost inflation.

64 The contract pricing structures shown are high level descriptions only. Individual contracts may differ from the summary provided and/or may contain combinations of the shown fee structures or departures from the shown structures.

65 Includes 21.9% of contracts with contract specific pricing mechanisms that can be broadly defined as “Profit and Loss” contracts.

66 Pro forma FY2013 Sales Revenue under contract represents approximately 83% of all pro forma FY2013 Sales Revenue.


Sales Revenue.

ProsPectus 49

50

2. business and industry Overview continued fig. 21 contract pricing mechanisms

Presence of price mechanism in major contracts

(Pro forma FY2013 Sales Revenue) 1

100%

< No price growth mechanism

0.4%

80%

60%

< Embedded price growth mechanism

99.6%

40%

20%

0%

Pro forma FY2013 Sales Revenue


Sales Revenue.

Many of Spotless’ contracts contain provisions for abatement or other penalties if Spotless fails to meet agreed service standards.

Customers also typically have the right to terminate contracts in certain circumstances if Spotless fails to perform adequately. In addition, some customers have the right to terminate contracts for convenience, without fault on Spotless’ part. Such provisions tend to be more prevalent in government contracts where procurement policies require their inclusion. To the knowledge of management, no such customer has exercised its right to terminate a material contract for convenience.


Cost structures for contract delivery

Spotless’ operating cost base is largely embedded within contracts, and is therefore variable for contract wins and losses. Overall, more than 94% of the FY2013 pro forma operating cost base comprised of operating costs embedded within contracts and customer facing service delivery, with costs such as head office and sector based overheads, representing only 6% of total costs.

Spotless’ key resource through which facility services are delivered is people. Collectively, labour and subcontractor expenses accounted for 68% of the FY2013 pro forma cost base. Spotless employs a flexible and large labour pool comprising a mix of casual, part-time and full-time employees. This structure enables Spotless to manage costs in response to fluctuations in market demand as well as shifting employees between existing customer contracts and locations. To deliver greatest value and productivity, Spotless continually refines its delivery mix between labour and subcontractors, and its mix of employees between full-time, part-time and casual employees.

fig. 22 flexible operating cost base

Pro forma operating cost base (fy2013)

100% 100%

80%

6% < Fixed costs

80%

< Catering rights

< Operating expenses

< Cost of goods sold

60% 60%

< Subcontractor costs

40%

94% < Costs embedded within contracts

40%

20% 20% < Labour costs

0%

FY2013

0%

FY2013

Refer to Section 3 for further information on Spotless’ cost base.

ProsPectus 51


2.4.4 customer service delivery model

2.4.4.1 Facility Services

The delivery of a facility services contract is the responsibility of the relevant customer sector team.

In delivering these services, the customer sector team undertakes six broad steps, being:

• mobilisation: Includes a range of activities such as recruitment, procurement, induction and service specific training to prepare Spotless for delivery of the services. Spotless’ mobilisation process specialises in ensuring mobilisation is fast and seamless. The effectiveness of Spotless’ mobilisation is enhanced by its flexible labour pool and internal labour hire agency, which enables Spotless to draw on a pool of pre-qualified existing and prospective employees;

• Service management: Following commencement of the service, the contract is managed in accordance with Spotless’ contract management plan which details the appropriate rules, policies, guidelines and any other matters relevant to the delivery of the services;

• reporting: Typically regular reporting of key performance indicators is undertaken to ensure contracts are being run efficiently and the scope of work is being met;

• contract review: Throughout the delivery of the service, Spotless typically participates in joint service reviews with its customers to ensure continued customer value delivery and periodically reviews scope and alternatives to service models to meet the changing needs of customers over time;

• account management: Spotless actively manages each account throughout the engagement, remaining focused on meeting customer demands while also seeking to identify other needs that could be met with a Spotless service, and offering these services to the customer; and

• contract renewal: Spotless aims to initiate contract renewal discussions with customers in advance of the expiry date of a contract, with the intention of renewing or extending the contract on a bilateral basis rather than a formal tender process.

2.4.4.2 Laundry and Linen

The provision of laundry and linen services is different from the provision of facility services. While facility services are provided “onsite” at a customer location, laundry and linen services are primarily provided “offsite” at Spotless owned or leased facilities. Spotless typically arranges for collection of soiled linen and garments from the customer site, delivering these items to a central, Spotless owned or leased industrial laundry facility for processing. Once the sorting, washing, drying, ironing and allocation process is complete, Spotless dispatches the linen and garments back to the customer site, e.g. directly to hospital wards or individual employee lockers in the case of uniforms.

As well as processing soiled linen and garments, Spotless owns a large stock of linen and garments which it rents to customers while also offering customers a comprehensive stock management solution across its entire linen and garment inventory.

Spotless operates 16 68 strategically positioned laundry and linen facilities throughout Australia and

New Zealand that provide unrivalled scale and breadth of geographic coverage. Spotless utilises this network together with its sophisticated logistics function to enable it to service customers throughout

Australia and New Zealand. Through these facilities, Spotless processed 103,000 tonnes of linen and garments in FY2013.

52

68 Includes five composite garment and linen sites, excludes sub processor sites.


fig. 23 Spotless’ Laundry and Linen network

Darwin

Perth

Murdoch

Queensland regional

Brisbane

Darra

Coffs Harbour

Adelaide

Dudley Park

North Rocks

Bathurst

Somersby

Rosebery

Punchbowl

Sydney

Albury

Northcote

Melbourne

Abbotsford

Point Chev

Hamilton

Kelston

Nelson

Wellington

Tasmania

Christchurch

Garment and Linen

Garment only

Linen only

Sub processor

Head Office

2.5 industry growth drivers

2.5.1 australian facilities services growth drivers

L.E.K. Consulting forecasts that the revenue generated by the outsourced market that Spotless serves will grow at a CAGR of approximately 8.2% over the period from FY2013 to FY2018.

This growth is a function of growth in the total facility services industry, combined with an increase in the prevalence of outsourcing.

Underlying market growth

L.E.K. Consulting forecasts growth in the underlying market (being insourced and outsourced activities) that Spotless serves of 5.3% per annum from FY2013 to FY2018. Underlying total growth in this market is a product of volume and price growth in the total market which is driven by a combination of both macro and microeconomic factors, such as hospital patient days, CPI, sector employment, food price inflation and population growth. Australian nominal GDP growth is forecast to be approximately 6% 69 per annum over the 2013 to 2018 period. The Health, Education and Government and the Commercial and Leisure customer sectors are forecast by L.E.K. Consulting to show the strongest underlying growth over the FY2013 to FY2018 period at approximately 6.4% and approximately 4.8%, respectively.

The Base and Township and the Laundry and Linen customer sectors are forecast by L.E.K. Consulting to grow at approximately 4.7% 70 and approximately 3.2%, respectively, over the same period.

69 Euromonitor.

70 Estimated total size of Base and Township customer sector is expected to reduce in FY2014 due to the value impact of significant retenders within this sector containing efficiency initiatives. Market growth from FY2014 has been calculated on an estimated post retender revenue estimate.

ProsPectus 53


Outsourcing growth

L.E.K. Consulting forecasts additional potential growth over FY2013 to FY2018 as a result of growth in the penetration of outsourcing. Individual customer opportunities that would add to a total of

$3.0 billion 71 in annual revenue to the market that Spotless serves have been identified by Spotless management as potential new outsourcing projects over the next five years. If realised, these additional outsourcing opportunities are forecast to increase the level of outsourcing in these markets in Australia to approximately 54% in FY2018.

72 Growth in the outsourced market is forecast to be strongest in the Health, Education and Government customer sector, driven by favourable underlying growth drivers and a strong pipeline of potential new outsourcing opportunities, particularly in the

Health sub-sector. Outsourcing growth is also expected in the Laundry and Linen customer sector.

A summary of the underlying market growth and outsourced market growth outlook in the key customer sectors Spotless serves is set out in Figure 24 below.

fig. 24 Spotless’ end-markets growth outlook

Forecast underlying

Australian market growth

(FY2013-18 CAGR)

Incremental growth due to increased outsourcing

(FY2013-18 CAGR)

Forecast Australian outsourced market growth

(FY2013-18 CAGR)

6% 9% 15%

5% 0% 5%

5% 1

3%

0%

3%

5%

6% c.5.3% underlying market growth

Source: L.E.K. Consulting


Base and Township


Laundry and Linen c.8.2% outsourced market growth

Note:

1 Estimated total size of the Base and Township sector is expected to reduce in FY2014 as a result of efficiency initiatives. Market growth for the Base and Township sector has been calculated for the period FY2014 to FY2018, excluding estimated one-off efficiency adjustments.

54




2.5.2 australian underlying market growth drivers

Health, Education and Government

L.E.K. Consulting forecasts the underlying market in the Health, Education and Government customer sector to grow at a CAGR of approximately 6.4% over the FY2013 to FY2018 period.

The key drivers of underlying market growth in the Health, Education and Government customer sector are set out below in Figure 25.

fig. 25 key drivers of growth in the Health, education and Government customer sector

Sub-sectors key growth drivers

Health education

– Total hospital patient days per annum

– Facilities services cost per hospital patient day

– Number of aged care occupied beds

– Aged care facilities services expenditure per occupied bed day

– Number of students

– Average sqm building space per student

– Facilities services spend per student / sqm

Government – Number of employees

– Sqm per employee

– Number of public housing dwellings

– Number of prisoners

– CPI and labour price index

L.E.K. Consulting forecasts underlying growth across the Health sub-sector to be driven by continued growth in demand for hospital and aged care services and subsequent growth in patient and occupied bed days, a trend toward improved catering standards across health and aged care facilities and an increasing maintenance spend given the ageing of existing healthcare assets.

Underlying growth across the Education sub-sector is supported by modest volume growth in the student market, constrained in part by a decline in facilities space per student in tertiary education.

The market for Government customer sub-sector is expected to show growth of approximately

5% per annum.

Commercial and Leisure

L.E.K. Consulting forecasts the underlying market in the Commercial and Leisure customer sector to grow at a CAGR of approximately 4.8% over the FY2013 to FY2018 period.

The key drivers of underlying total market growth in the Commercial and Leisure customer sector are set out below in Figure 26.

ProsPectus 55

2. business and industry Overview continued fig. 26 key drivers of growth in the commercial and Leisure customer sector


business and industry

Leisure, Sports and entertainment

– Commercial office space

– Major shopping centre floor space

– Airline passengers

– Employment growth

– Commercial and retail facilities services cost per sqm

– Attendance and frequency of sporting and entertainment events

– Growth in average catering and cleaning spend per attendee

Volume growth across the Business and Industry sub-sector is forecast to be driven by modest growth in retail and commercial office space of approximately 0.7% per annum and stronger growth in airport passenger numbers of approximately 4.2% per annum. Price growth is forecast to be driven by growth in facility services costs per square metre in commercial offices and major retail spaces and facilities services spend per passenger across major airports.

Growth in the Leisure, Sports and Entertainment sub-sector is expected to grow as a result of continued growth of attendees at function centres and modest growth in sporting attendance, as well as a continuation of growth in sports stadia spend per attendee and price indexation in function catering.

Base and Township

L.E.K. Consulting forecasts the underlying market in the Base and Township customer sector to grow at a CAGR of approximately 4.7% 73 over the FY2013 to FY2018 period.

The key drivers of underlying total market growth in the Base and Township customer sector are set out below in Figure 27.

fig. 27 key drivers of growth in the base and township customer sector


resources defence

– Resources remote operations employment

– Mining production (as a driver of resources industry employment)

– CPI linked price escalation clauses

– Permanent defence force and military personnel

Growth in the Resources sub-sector is expected to be driven by an increasing number of employees engaged in mining operations. While the level of mining exploration and development activity has slowed in Australia, Spotless caters primarily to established production facilities, which are forecast to continue to exhibit strong growth in demand for remote workers.

Defence growth is expected to be driven by modest growth in permanent military personnel.

Laundry and Linen

L.E.K. Consulting forecasts the underlying market in the Laundry and Linen customer sector to grow at a CAGR of approximately 3.2% over the FY2013 to FY2018 period.

The key drivers of underlying total market growth in the Laundry and Linen customer sector are set out below in Figure 28.

73 Growth rate is calculated assuming Australian Defence Force efficiency targets, which assumes an initial yield reduction driven by a desire to reduce cost.


fig. 28 key drivers of growth in the Laundry and Linen customer sector


Hospitals and aged care

– Number of patient days

– Occupied bed days

– Number of procedures

– CPI linked price escalators

– Total room nights in paid accommodation accommodation workwear and other

– Number of employees in uniform

Modest growth in the Workwear and Accommodation sub-sectors is expected, with stronger growth anticipated in the Hospitals sub-sector, driven by volume and price indexation. Growth may be constrained in part by a decline in certain workwear markets such as food manufacturing employment.

2.5.3 australian outsourcing growth drivers

L.E.K. Consulting has identified potential outsourcing growth opportunities over FY2013 to FY2018 in the Health, Education and Government and the Laundry and Linen customer sectors. Unlike the

Commercial and Leisure and the Base and Township customer sectors where the majority of the market is outsourced (approximately 56% and approximately 93%, respectively) 74 , the Health,

Education and Government and the Laundry and Linen customer sectors are relatively underpenetrated at approximately 33% 75 and approximately 24% 76 outsourcing, respectively.

Health

L.E.K. Consulting expects the growth in outsourcing in the Health sub-sector to be driven by a move to increase outsourcing in public hospitals, in particular across New South Wales ( NSW ) and

Queensland ( QLD ). In 2012, the NSW Government established a Commission of Audit to review the delivery of its services. The Commission recommended that HealthShare NSW, the current provider of shared services to public hospitals and health services, should investigate whether some of its functions would be more effectively provided through outsourced arrangements. In line with this recommendation, HealthShare NSW has begun outsourcing processes for information and communication technology and linen services. L.E.K. Consulting estimates that the outsourcing of these functions would add a total of approximately $1.3 billion of annual revenue to the market.

Similarly in 2012, the QLD Government established a Commission of Audit to review the

Government’s financial position, and to make recommendations on, among other things, ensuring value for money in the delivery of frontline services. In 2013, the Commission recommended that the Government should progressively expand contestable markets, initially in metropolitan areas, for the private provision of non-clinical support services such as catering, cleaning, laundry and ward support. The QLD Government accepted this recommendation in April 2013. L.E.K. Consulting estimates that outsourcing these functions would add approximately $0.7 billion of annual revenue to the market.




ProsPectus 57


Education

L.E.K. Consulting has identified potential additional outsourcing of approximately $0.7 billion in annual revenue across Education, driven primarily by a move to increase outsourcing across universities and colleges as well as in Queensland public schools and Western Australian independent public schools.

Federal Government funding cuts to universities and colleges have accelerated the focus on cost reduction and increased outsourcing of facility services across these institutions. Outsourcing of maintenance and grounds services is expected to be the key driver given the limited outsourcing currently in place for these services. L.E.K. Consulting estimates that the outsourcing of these services across universities and colleges would add approximately $0.6 billion of annual revenue to the market.

There is also potential for additional outsourcing growth across QLD public schools where the QLD

Department of Education, Training and Employment is seeking to consolidate facility services into large outsourced contracts. There is potential for a similar level of increased outsourcing in public schools in Western Australia ( WA ) following a change in the WA Governments funding model that gives schools more autonomy over their operations and costs. L.E.K. Consulting estimates that outsourcing these services would add approximately $140 million of annual revenue to the market.

Government

Across the Government sub-sector, opportunities include the outsourcing of facility management for government facilities across NSW and QLD including state-run correctional facilities. L.E.K. Consulting estimates that the outsourcing of these services for the two states combined would add approximately

$0.28 billion in annual revenue to the market.

Laundry and Linen

L.E.K. Consulting estimates that additional outsourcing opportunities across the Laundry and Linen customer sector could add approximately $72 million of annual revenue to the market. There is potential for government owned laundries serving public hospitals in NSW, QLD and the Northern

Territory to be outsourced in the medium term. A ‘contestability review’ has been announced by the

QLD Government and the NSW Government is understood to be reviewing its outsourcing strategy.

2.5.4 new Zealand facility services growth drivers

L.E.K. Consulting forecasts that the New Zealand market will follow similar general industry and sector specific demand trends to the Australian market across the key customer sectors.

Macroeconomic trends indicate overall underlying market growth in New Zealand will be slightly slower than that in Australia. From 2013 to 2018, New Zealand’s nominal GDP is forecast to grow at a CAGR of approximately 5% approximately 6% 78

77 , compared to the Australian forecast nominal GDP CAGR of

, and its population is forecast to grow at a CAGR of 0.8% period compared to the Australian forecast CAGR of 1.2% 80 .

79 over the same

In addition to the underlying market growth, only modest further increases in the penetration of outsourcing are anticipated in the New Zealand market, with L.E.K. Consulting having identified potential outsourcing opportunities worth an estimated NZ$0.1 billion of annual revenue in the market which, if realised, would increase outsourcing penetration from approximately 61% 81 to approximately

65%. This includes the retender and consolidation of laundry services by Health Benefits Limited for district health boards in New Zealand and the potential outsourcing of public school facilities maintenance and cleaning by the New Zealand Ministry of Education.

77 Euromonitor.

78 Euromonitor.

79 International Monetary Fund World Economic Outlook.

80 International Monetary Fund World Economic Outlook.



2.6 Spotless’ growth strategy

2.6.1 Spotless’ growth framework

Spotless has had a history of revenue growth (8.8% CAGR since 1990) 82 . The Company’s revenue profile remained resilient through FY2013 despite the significant reorganisation that occurred following its acquisition by Pacific Industrial Services in 2012 and the intentional exit of loss making and marginal contracts. Pro forma Sales Revenue is forecast to grow at a CAGR of 4.5% over

FY2013 to FY2015.

fig. 29 Spotless revenue growth since fy1990 1

3,000

2,500

CAGR (FY2006

–FY2012)

2 : c.4%

2,000

1,500

1,000

CAG

R (F

Y199

0–F

Y20

06): c

.11%

500

0

FY1990 FY1992 FY1994 FY1996 FY1998 FY2000 FY2002 FY2004 FY2006 FY2008 FY2010 FY2012

Notes:

1 Historical financial information for FY1990 to FY2010 has been derived from statutory accounts and adjusted based on publicly available information in those statutory accounts to exclude the identified discontinued operations. This has been done to present the FY1990 to

FY2010 information as consistently as possible with the pro forma Financial Information for FY2011 to FY2014; however, the FY1990 to

FY2010 information may not have been prepared or presented on a consistent basis to the pro forma financial information for FY2011 to FY2014. Figure 29 represents Spotless statutory revenue from sales for the period FY1990 to FY2010 adjusted to exclude discontinued operations that are separately reported: Manufacturing segment revenue (FY1990 to FY1999); Plastics segment revenue (FY2000); Braiform segment revenue (FY2001 to FY2010); Windswept segment revenue (FY2001 to FY2005); Clifford Hallam segment revenue (FY2005);

International Services segment revenue (FY2010). For FY2011 and FY2012, pro forma total revenue less Other Income is shown.

2 Between 2006 to 2008 Ian McMullin, Ron Evans and Brian Blythe stepped down from the Board and there was a change of management.

FY2006 to FY2012 represents the subsequent period leading up to the take private of Spotless.

Spotless’ growth strategy is underpinned by four pillars: underlying market growth, outsourcing penetration, market share growth and expansion opportunities in adjacent services and customer sectors.

This growth framework is summarised in Figure 30 below.

82 Spotless’ revenue CAGR over FY1990 to FY2012. Refer to notes under Figure 29.

ProsPectus 59

2. business and industry Overview continued fig. 30 Spotless’ growth framework

1 underlying market

Growth

✓

✓ contractual price growth mechanisms in most contracts, driving underlying price growth

expected customer volume and growth with customer demand for facility services typically growing in line with, or above, GDP

2

Outsourcing

Penetration

✓

✓

Significant outsourcing growth is anticipated through to 2018, in particular across Health, Education and Government, where possible market opportunities with $3.0 billion in annual revenue have been identified

PPPs secured, providing long term, contracted income streams (~$130 million of additional contracted PPP Sales Revenue per annum commencing over

FY2016 and FY2017)

60

3 market Share

Growth

✓

✓ cross-sell existing products to existing customers with expansion to additional customer sites and provision of additional services

(driven by an increasing demand for integrated solutions and outsourcing)

Gain market share in a fragmented market via value proposition / breadth of service offering

4 expansion

Opportunities

✓

✓ enter attractive adjacent sectors where Spotless can utilise its competitive advantages. Opportunities include home care, allied health services, and immigration

expand service lines and improve self delivery which reduces need for subcontracting (e.g. security, fire protection, heating, ventilation and air-conditioning event management and staffing)

2.6.2 underlying market growth

Inherent growth in target sectors and a relatively strong underlying economy underpin Spotless’ revenue growth outlook. As outlined in Section 2.5, L.E.K. Consulting expects underlying growth of 5.3% per annum in the (insourced and outsourced) Australian market over FY2013 to FY2018, broadly in line with nominal GDP growth forecast of approximately 6% 83 .

Spotless expects to benefit from this underlying market growth across all customer sectors as its customer contracts are typically structured to include annual price escalators based on CPI or labour cost index growth.

2.6.3 Outsourcing penetration

Spotless expects to be a beneficiary of the positive trend towards outsourcing in Australia, and the specific opportunities identified in Section 2.5.3. L.E.K. Consulting forecasts the outsourced market to grow at a CAGR of 8.2% between FY2013 to FY2018. Spotless intends to pursue new outsourcing opportunities, and has been actively positioning itself ahead of anticipated tenders. Given its strength in the Health, Education and Government customer sector, where most of the outsourcing opportunities are expected, and its market leading position and competitive strengths (as outlined in Section 2.3),

Spotless expects to benefit from these outsourcing opportunities.

Spotless also intends to bid for a number of the expected outsourcing opportunities in the Laundry and Linen customer sector and believes it is competitively well placed to secure a proportion of these opportunities given its existing network of facilities and breadth of service offering.

83 Euromonitor.


2.6.4 market share growth

Market share opportunities

Spotless expects to be able to gain market share by winning contracts with new customers that are currently being serviced by competitors. To that end, management is targeting opportunities in all customer sectors and in particular in the Base and Township customer sector. Historically, Spotless has not been the market leader in the Base and Township customer sector but has rather held only a top three position. Spotless has recently been growing its portfolio of Base and Township contracts and expects to continue to do so. Spotless management has identified an estimated $600 million in annual revenue opportunities in contracts currently held by competitors that are expected to be brought to market by 2018 across the Resources sub-sector. Additionally, Spotless is currently pursuing approximately $150 million of further opportunities and Spotless believes it is well positioned to win a proportion of that work.

Cross-sell opportunities

Spotless has opportunities to deliver additional services to existing customers via integrated services solutions and through expanding existing services to other customer sites. In connection with its operational restructuring in 2012, Spotless’ management structure changed from a service line basis to a customer sector focus, which has made it easier to cross-sell additional services, particularly in the Commercial and Leisure customer sector. See Section 2.1.4 for further discussion on the restructuring initiatives undertaken by management.

2.6.5 expansion opportunities

Customer sector expansion

Spotless has identified expansion opportunities into certain adjacent customer sectors it does not currently serve. These include home care, allied health services and immigration.

Adjacent market opportunities have been identified in the health sub-sector through areas including home care and allied health services, both of which are exposed to the macro trend of Australia’s ageing population. L.E.K. Consulting estimates these opportunities generate a total market opportunity of approximately $6.8 billion of annual revenue. In addition, facilities management opportunities in local government have been identified as an extension of existing offerings, which

L.E.K. Consulting estimates may generate approximately $2.2 billion of annual market revenue.

L.E.K. Consulting estimates that the Australian Federal Government currently spends approximately

$2 billion on relevant immigration programs, which includes expenditure on facilities services.

Spotless believes that a portion of services contracts may be tendered in 2014 and 2015. Spotless has not historically serviced the immigration sector; however, it believes that it is well qualified to provide integrated facility services to the immigration sector within Australia given its track record in providing analogous services across the Base and Township customer sector.

These areas represent longer term opportunities; however, they would represent natural areas of organic expansion for Spotless given they would effectively involve provision of Spotless’ existing services to new customers.

Spotless may choose to extend or acquire new customer service capabilities in order to enhance prospects of successful customer sector expansion.

ProsPectus 61


Service line expansion

Spotless has the opportunity to further expand its product offering into adjacent services.

Several potentially attractive adjacent service lines, which are estimated to generate a total market opportunity of approximately $11 billion 84 of annual revenue, have been identified where Spotless could increase its in-house offering, instead of subcontracting, to enhance its integrated service offering to customers and improve margins. These service lines include security, fire protection, pest control and heating, ventilation and air-conditioning, particularly in the Commercial and

Leisure customer sector.

Spotless has also identified event management and staffing as a prospective potential adjacent service to the services it provides its customers in the Leisure, Sports and Entertainment sub-sector.

This market is estimated to generate approximately $1 billion 85 of annual market revenue. Spotless has opportunities to leverage existing relationships with large entertainment venues and expand its service offering to include additional activities such as security management, facility set-up, and event staffing.

Given the number of near term organic growth opportunities, service line expansion currently represents a longer term priority for Spotless management.

fig. 31 Spotless’ market share and expansion growth strategies near term opportunities Long term opportunities resources

Approximately

$0.6 billion p.a. in remote contracts up for tender to 2018 and approximately

$150 million of near term opportunities commercial

Additional services and expansion to other customer sites: approximately

25 accounts identified

Leisure

Revenue uplift via cross sell via integrated service solutions: 4 prospective near term opportunities market share growth opportunity

Spotless cross sell revenue uplift opportunity

Source: L.E.K. Consulting (where indicated with *) immigration

Retender of facility services contracts expected to commence in

2014 (within immigration programs totalling approximately

$2.0 billion in Federal

Government spend*)

Government

Approximately

$2.2 billion* in Australian local government facility management market where

Spotless can target an extension of its existing offering

Health approximately $11 billion* in potential adjacent market opportunities

Approximately

$6.8 billion* in potential adjacent markets including home care and allied health services commercial

Approximately

$11 billion* in adjacent services markets: security, fire protection, pest control and heating, ventilation and airconditioning

Leisure

Approximately

$1 billion* in event management and staffing markets where

Spotless can leverage existing relationships with LSE venues approximately $12 billion* of adjacent service lines where Spotless can target market share growth

62




2.7 Spotless’ business development capability

Following the organisational restructure in 2012, Spotless is now focused around end customer sectors rather than specific service line functions. As core responsibility for business development has been decentralised and assigned to each sector, the now-streamlined central business development team supports the growth objectives of each sector as required. Each sector management team is now responsible for understanding customer needs in depth within their sector. Sector management teams are encouraged to pro-actively identify new business opportunities within their sector, rather than merely reacting to announced tenders.

The implementation of this new structure, together with the growing market opportunity across the Australian and New Zealand Facility and Laundry and Linen services markets, has resulted in Spotless’ currently identified potential New Contract Opportunities growing to approximately

$1.5 billion in annual revenue, compared with only $0.6 billion in February 2012 prior to the organisational restructure. These New Contract Opportunities are expected to come to market in

FY2014 and FY2015 and primarily relate to opportunities in the Health, Education and Government customer sector which alone represent approximately $0.9 billion of revenue per annum. In addition, an incremental, approximately $2.6 billion of near term market potential has been identified in the

Resources and Immigration markets.

fig. 32 Spotless’ new contract opportunities

New Contract Opportunities as at March 2014 (A$ billion Sales Revenue per annum)

Identified New Contract Opportunities

Incremental potential market opportunities 1

2.0

3

0.6

0.7

0.6

0.2

1.5

1.5

9%

10%

19%

61%

New outsourcing opportunities

Market share opportunities

Cross-sell opportunities


Base and Township

Total Total

(by customer sector) 2

Large resources opportunities

Immigration


Laundry and Linen

3 Source: L.E.K. Consulting.

ProsPectus 63


Between 1 July 2013 and 31 January 2014, Spotless has been successful in winning approximately

30% 86 of the new business it has tendered for. Since 2004, Spotless has been particularly successful at winning PPP facility service contracts. Of the 30 major PPP facility services contracts awarded since 2004, Spotless bid on 23 and won 14. Nine of these contracts have reached full operation by FY2014. The other five PPPs will commence or reach first year at full operation over FY2016 and FY2017 and are expected to generate incremental Sales Revenue of approximately $130 million per annum once at full operation. Spotless’ 14 currently contracted PPPs are expected to contribute

Sales Revenue of approximately $230 million in FY2017 and total Sales Revenue of approximately

$10.5 billion in aggregate over the FY2014 to FY2046 period.

87

2.8 employees

2.8.1 employee base

Spotless is the largest employer within the Australian facility services industry, with almost 33,000 employees. As at 31 December 2013, full-time staff numbers were approximately 10,000 and parttime employees were approximately 6,000. During the year ended 31 December 2013, approximately

17,000 were employed as casuals.

Spotless utilises a high proportion of casual employees as a cost-effective way to shift employees among existing customer contracts and locations based on changes in customer demand. In addition, Spotless keeps a central support pool of approximately 700 part-time and casual staff trained across a broad range of skills, to meet any short term spikes in demand across contracts

(e.g., a new customer contract mobilisation).

Approximately 80% of employees are based in Australia and 20% in New Zealand. The vast majority of Spotless staff are directly involved with the provision of services under customer contracts.

The Leisure, Sports and Entertainment sub-sector is the largest employer in the Spotless Group, with a large casual workforce to service the seasonal or infrequent, event driven service requirements of its major stadium customers. Other sub-sectors have employee numbers more in line with their sales contribution to the Spotless Group.

fig. 33 Spotless’ employee base

Employee mix

(at 31 December 2013)

Full-time

29% 9,733

Casual

17,316 53%

18%

Part-time

5,872

64

86 New business win rate of approximately 30% reflects the proportion of estimated EBITDA secured, measured against the estimated total

EBITDA where Spotless has submitted final proposals and has received win/loss result, year to date FY2014 for the seven months to

31 January 2014.

87 PPP contracts include price escalation provisions. Value assumes escalation of approximately 3% per annum and that none of the contracts are terminated.


2.8.2 industrial relations

Spotless has 71 industrial instruments in place in Australia and New Zealand, including both modern awards and Enterprise Agreements. The largest 10 instruments (including the New Zealand employment regime) cover over 80% of employees by number.

Spotless is focused on providing a positive working environment for its employees. In Australia,

United Voice and the Australian Workers Union are the two principal unions Spotless interacts with, though seven other unions cover Spotless employees in Australia and nine unions in New Zealand.

Spotless management communicates regularly with national and state offices of key unions across

Australia and New Zealand and the Fair Work Commission (the main industrial relations supervision agency in Australia).

Spotless’ approach to union and employee management has resulted in zero disputations or days lost to industrial action since the new management team was appointed in 2012.

2.8.3 employee training

In order to effectively deliver services and manage risk, Spotless provides training to ensure all employees and subcontractors are trained and competent to perform their respective roles at

Spotless and at customer sites. Training and awareness programs include site induction, service delivery, workplace safety, food safety, professional behaviours and environmental management.

2.9 Supplier relationships

Following the procurement initiatives undertaken by management as part of the broader organisational restructure, Spotless achieved a greater than 30% reduction in the number of suppliers and an aggregate 7% saving on the applicable cost base of FY2012 procurement expenditure secured through new contractual arrangements.

Approximately 80% of Spotless’ supplier spend is with approximately 700 suppliers. The largest category of Spotless’ supplier spend is subcontractor and food and beverage costs. Spotless’ single largest supplier in FY2013 represented 5.7% of Spotless’ total procurement spend and was a supplier of food products.

Spotless maintains a panel of approved subcontractors for a given trade service within each geography it operates. Subcontractors are assessed against criteria including risk management quality, capacity and value for money prior to appointment to the panels.

Spotless negotiates the pricing and other terms for the majority of its purchases in Australia and

New Zealand directly with suppliers and manufacturers. Spotless does not accept volume risk or commit to a specific volume with suppliers and subcontractors. Suppliers and subcontractors remain responsible for managing staffing and required stock levels to service Spotless and for delivering products and services to Spotless’ locations upon receipt of an approved work or purchase order.

Spotless’ agreements with its suppliers are generally for a fixed term of between two and five years.

Supplier agreements generally stipulate key performance indicators, performance criteria, pricing and the method for pricing reviews.

ProsPectus 65


2.10 Property, Plant and equipment

Spotless’ principal property, plant and equipment consist of laundry facilities. The Laundries business has significant capital equipment in the form of 16 88 industrial laundries which require Maintenance

Capital Expenditure each year. The Laundries business also needs to invest in linen and uniform stock (rental stock) each year as existing stock is typically worn out on a three year cycle. Laundries’ more capital intensive nature is reflected in the higher margins the business earns relative to other facility services.

Other property, plant and equipment consist of catering and retailing fitout and fixtures, maintenance equipment, computer and office equipment and service equipment and fixtures include cleaning, maintenance and laundry equipment.

Real estate primarily comprises laundry facilities and office space in Australia and New Zealand.

Spotless owns nine freehold laundry properties and leases an additional 15.

89 Excluding laundries,

Spotless owns one freehold property (an investment property held for sale) and leases 98 properties across Australia and New Zealand.

In certain circumstances, Spotless leases laundry facilities and office space, computer software and other equipment (primarily kitchen equipment).

2.11 information technology

In 2010, under previous management, Spotless established a project to implement SAP Enterprise

Resource Planning software, with this IT platform intended to form a key financial and operational tool once fully implemented. Shortly after the 2012 Acquisition, a review of the project was undertaken by the current management team. It was found that the project scope and implementation plan were ill-suited to the Spotless business, with a lack of clarity as to the realisation of financial benefits and significant work requiring rectification. The project was de-scaled in size and scope to cover accounting and finance, payroll, procurement and reporting. The implementation schedule was extended to 2015 to ensure an orderly implementation, while a smaller investment is being made to extend the life of existing functional IT systems and work in parallel with the SAP platform. At the

Prospectus Date, all corporate functions and a number of operating sectors are operating on SAP, with remaining operations planned for implementation over the course of FY2014 and FY2015. Spotless currently expects to materially complete the implementation across its operating business units in

FY2015, with a significant reduction in IT spending following completion of this project.

66

88 Includes five composite garment and linen sites, excludes sub processor sites. Some properties currently owned or leased by the business are not currently used as laundry plants (e.g. sites used for administration, warehousing and distribution only).

89 Some properties currently owned or leased by Spotless are not currently used as laundry plants (e.g. sites used for administration, warehousing and distribution only).


Section 3

PrOSPectuS 67

3. financial information


3.1.1 background

On 30 April 2012, Pacific Industrial Services BidCo Pty Ltd, a wholly owned subsidiary of the

Company, which was then called Pacific Industrial Services Pty Ltd ( Pacific Industrial Services ), entered into a Scheme Implementation Agreement with Spotless Group Limited, providing for a

Scheme of Arrangement under which it acquired all the issued shares of Spotless Group Limited.

Following the approval of Spotless Group Limited shareholders, the scheme was implemented on

16 August 2012, at which time Spotless Group Limited became a wholly owned indirect subsidiary of Pacific Industrial Services.

The first reported financial information of Pacific Industrial Services was for the year ended

30 June 2013 which included 10.5 months of Spotless Group Limited’s operations from

16 August 2012 to 30 June 2013. Pacific Industrial Services’ historical condensed consolidated financial statements for the half year ended 31 December 2013 included comparative information for the prior corresponding period, which covered 4.5 months of operations from 16 August 2012 to 31 December 2012.

The unaudited historical condensed consolidated financial statements of Pacific Industrial Services for the half years ended 31 December 2012 and 31 December 2013 were prepared in accordance with

AASB 134 Interim Financial Reporting. As the company was not listed at the half years noted above, these condensed consolidated financial statements were not required for statutory purposes to be lodged with ASIC.

Prior to lodging this Prospectus, Pacific Industrial Services was converted into a public company and renamed Spotless Group Holdings Limited.

References to Spotless in Section 3 relate to Spotless Group Limited for FY2011 and FY2012, Pacific

Industrial Services for FY2013, H1FY2013 and H1FY2014 and Spotless Group Holdings Limited for

FY2014 and FY2015.

3.1.2 Overview of financial information

The financial information for Spotless contained in Section 3 has been extracted from:

• statutory historical financial information for Spotless, being the:

– audited statutory annual historical consolidated statements of profit or loss for FY2011,

FY2012 and FY2013 ( Statutory Historical Results );

– reviewed half year historical condensed consolidated statements of profit or loss for

H1FY2013 and H1FY2014 ( Half Year Historical Results );

– audited statutory annual historical consolidated statements of cash flows for FY2011,

FY2012 and FY2013 ( Statutory Historical Cash Flows );

– reviewed half year historical condensed consolidated statements of cash flows for H1FY2013 and H1FY2014 ( Half Year Historical Cash Flows ); and

– reviewed historical condensed consolidated statement of financial position as at

31 December 2013,

(together the Statutory Historical Financial Information );

• pro forma historical financial information for Spotless, being the:

– pro forma historical consolidated statements of profit or loss for FY2011, FY2012, FY2013,

H1FY2013 and H1FY2014 ( Pro Forma Historical Results );

– pro forma historical consolidated statements of cash flows for FY2011, FY2012, FY2013,

H1FY2013 and H1FY2014 ( Pro Forma Historical Cash Flows ); and

– pro forma historical consolidated statement of financial position as at 31 December 2013,

(together the Pro Forma Historical Financial Information ); and


• forecast financial information for Spotless being the:

– pro forma forecast consolidated statements of profit or loss for FY2014 and FY2015

( Pro Forma Forecast Results );

– statutory forecast consolidated statements of profit or loss for FY2014 and FY2015

( Statutory Forecast Results );

– pro forma forecast consolidated statements of cash flows for FY2014 and FY2015

( Pro Forma Forecast Cash Flows ); and

– statutory forecast consolidated statements of cash flows for FY2014 and FY2015

( Statutory Forecast Cash Flows ),

(together the Forecast Financial Information ).

The Statutory Historical Financial Information and Pro Forma Historical Financial Information together form the Historical Financial Information .

The Historical Financial Information and Forecast Financial Information together form the Financial

Information .

This Section 3 also sets out:

• the basis of preparation and presentation of the Financial Information (refer to Section 3.2);

• management’s discussion and analysis of the Pro Forma Historical Financial Information, which is intended to convey management’s views regarding the historical financial performance of Spotless and includes a description of the key measures that Spotless reports in its financial statements or internally, and that management uses to evaluate and manage the business and their main drivers

(refer to Section 3.8);

• the general assumptions, Directors’ best estimate assumptions and specific assumptions, underlying the Forecast Financial Information and key sensitivities in respect of the Pro Forma

Forecast Results (refer to Sections 3.9 and 3.10);

• a description of the way in which Spotless finances its operations, including a description of the New Banking Facilities (refer to Section 3.6);

• information regarding Spotless’ contractual commitments and contingent liabilities

(refer to Section 3.6);

• a discussion of the way Spotless manages financial risk (refer to Section 3.11); and

• Spotless’ dividend policy (refer to Section 3.13).

The information in this Section 3 should also be read in conjunction with the risk factors set out in Section 4 and other information contained in this Prospectus.

All amounts disclosed in the tables in this Section 3 are presented in Australian dollars and, unless otherwise noted, are rounded to the nearest $0.1 million. Tables in this Section 3 have not been amended to correct immaterial summation differences that may arise from this rounding convention.

ProsPectus 69

70

3. financial information continued

3.2 basis of preparation and presentation of the financial information

3.2.1 Overview

The Financial Information has been prepared and presented in accordance with the recognition and measurement principles of the Australian Accounting Standards (including the Australian Accounting

Interpretations) issued by the Australian Accounting Standards Board, which are consistent with

International Financial Reporting Standards ( IFRS ) and interpretations issued by the International

Accounting Standards Board ( IASB ). The Financial Information is presented in an abbreviated form and does not include all the disclosures, statements or comparative information as required by the Australian Accounting Standards applicable to general purpose financial reports prepared in accordance with the Corporations Act.

Accounting policies have been consistently applied for Spotless throughout the periods presented.

Significant accounting policies and selected notes relevant to the Financial Information are set out in Appendix A.

Spotless has two reporting segments under AASB 8 Operating Segments, which are Facility

Services and Laundries. In addition to the reporting segments, Spotless also reports Sales Revenue for customers in similar sectors (Health, Education and Government; Commercial and Leisure; Base and Township; and Laundry and Linen) and by geographic region (Australia and New Zealand).

3.2.2 Preparation of Historical financial information

The unaudited Pro Forma Historical Financial Information has been prepared solely for inclusion in this Prospectus.

The Pro Forma Historical Financial Information has been derived from:

• the audited general purpose statutory consolidated financial statements of Spotless Group Limited for FY2011 and FY2012;

• the audited general purpose statutory consolidated financial statements of Pacific Industrial

Services for FY2013; and

• the reviewed condensed consolidated financial statements of Pacific Industrial Services for H1FY2013 and H1FY2014.

As Spotless Group Limited was acquired by Pacific Industrial Services on 16 August 2012, the FY2013 statutory results are based on a 10.5 month period and the H1FY2013 results are based on a 4.5 month period.

The general purpose statutory historical consolidated financial statements of Spotless Group

Limited for FY2011 and FY2012 were audited by Deloitte Touche Tohmatsu. Deloitte Touche

Tohmatsu issued unqualified opinions in respect of both periods. The general purpose statutory consolidated historical financial statements of Pacific Industrial Services for FY2013 were audited by Ernst & Young. Ernst & Young has issued an unqualified opinion in respect to that period. The unaudited historical condensed consolidated financial statements of Pacific Industrial Services for H1FY2013 and H1FY2014 were reviewed by Ernst & Young, which issued unqualified review conclusions in respect to these periods.


Pro forma adjustments have been made to the Statutory Historical Financial Information to:

• include the 1.5 month period of operations of Spotless Group Limited from 1 July 2012 to 16 August 2012 in FY2013 and H1FY2013 prior to the 2012 Acquisition;

• reflect additional listed public company costs;

• eliminate transaction costs related to the 2012 Acquisition and subsequent costs of restructuring the business;

• remove discontinued or divested operations;

• give effect to the new capital structure being put in place in connection with the Offer; and

• apply a tax expense rate of 30%, which is the Australian corporate tax rate and Spotless’ anticipated tax rate following Completion of the Offer.

The pro forma historical consolidated statements of profit or loss exclude certain purchase price allocation items related to the 2012 Acquisition, such as provisions (employee, doubtful debts, onerous contracts, property make good, environmental, onerous property leases and public liability) and capitalised software expenditure write downs, as these adjustments were charged directly to the acquisition statement of financial position as at 16 August 2012 in accordance with the fair value requirements of AASB 3 Business Combinations.

A detailed description of the pro forma adjustments that have been made to the Statutory Historical

Financial Information is provided as follows:

• Section 3.4 provides a reconciliation of the statutory annual historical consolidated statements of profit or loss of Spotless for FY2011, FY2012 and FY2013 to the pro forma historical consolidated statements of profit or loss of Spotless for FY2011, FY2012 and FY2013;

• Section 3.4 provides a reconciliation of the half year historical condensed consolidated statements of profit or loss of Spotless for H1FY2013 and H1FY2014 to the half year pro forma historical consolidated statements of profit or loss of Spotless for H1FY2013 and H1FY2014;

• Section 3.6 provides a reconciliation of the historical consolidated statement of financial position of Spotless as at 31 December 2013 to the pro forma historical consolidated statement of financial position of Spotless as at 31 December 2013;

• Section 3.7 provides a reconciliation of the statutory historical consolidated statements of cash flows of Spotless for FY2011, FY2012 and FY2013 to the pro forma historical consolidated statements of cash flows of Spotless for FY2011, FY2012 and for FY2013; and

• Section 3.7 provides a reconciliation of the half year historical consolidated statements of cash flows of Spotless for H1FY2013 and H1FY2014 to the pro forma historical consolidated statements of cash flows of Spotless for H1FY2013 and H1FY2014.

The Pro Forma Historical Financial Information presented in this Prospectus has been reviewed by

Deloitte Corporate Finance but has not been audited. Deloitte Corporate Finance has prepared an

Investigatory Accountant’s Report on the Historical Financial Information (refer to Section 7) and on the Forecast Financial Information (refer to Section 8).

Investors should note that past results are not a guarantee of future performance.

ProsPectus 71

72


3.2.3 Preparation of forecast financial information

The Forecast Financial Information has been prepared solely for inclusion in this Prospectus. The

Directors are satisfied that the Forecast Financial Information has been prepared with due care and attention, and that all best estimate assumptions, when taken as a whole, are reasonable at the time of preparing this Prospectus.

The Forecast Financial Information has been prepared on the basis of numerous assumptions, including the general assumptions, the Directors’ best estimate assumptions and the specific assumptions set out in Section 3.9. This information is intended to assist investors in assessing the reasonableness and likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur. Investors should be aware that the timing of actual events, in particular the commencement of new contracts, together with the contract win and churn rates, might differ from that assumed in preparing the Forecast Financial Information, and that this may have a material positive or negative effect on Spotless’ actual financial performance or financial position.

Investors are advised to review the general assumptions, the Director’s best estimate assumptions and the specific assumptions set out in Section 3.9, in conjunction with the significant accounting policies included in Appendix A, the sensitivity analysis set out in Section 3.10, the risk factors set out in Section 4 and other information set out in this Prospectus.

The Forecast Financial Information for FY2014 includes the reviewed results of Spotless for H1FY2014 and the forecast results for the remaining six months to 30 June 2014, incorporating actual unaudited trading results for January and February 2014.

The FY2014 Forecast Financial Information has been prepared reflecting the actual results to

February 2014 of trading activities in New Zealand translated at an average foreign currency conversion rate of NZD/AUD 0.90. This conversion rate has been applied for the remaining four months to 30 June 2014. For FY2015, the forecast results of New Zealand trading activities have been translated applying a foreign currency conversion rate of NZD/AUD 0.93.

The forecast consolidated statements of profit or loss of Spotless for FY2014 and FY2015 have been presented on both a pro forma and a statutory basis. The statutory forecast consolidated statements of profit or loss of Spotless for FY2014 and FY2015 reflect the financial performance that the Directors expect to report in Spotless’ financial statements for these periods, following Completion of the Offer.

The pro forma forecast consolidated statements of profit or loss of Spotless for FY2014 and FY2015 are derived from the statutory forecast consolidated statements of profit or loss adjusted to reflect the full year effect of the capital structure that will be in place following the Offer and excludes the one-off costs of the Offer and other non-recurring items. Section 3.4 provides a reconciliation between the statutory forecast consolidated statements of profit or loss of Spotless for FY2014 and FY2015 and the pro forma forecast consolidated statements of profit or loss of Spotless for FY2014 and FY2015.

Similarly, Section 3.7 provides a reconciliation between the statutory forecast consolidated statements of cash flows of Spotless for FY2014 and FY2015 and the pro forma consolidated statements of cash flows of Spotless for FY2014 and FY2015.

The basis of preparation and presentation of the Forecast Financial Information is consistent with the basis of preparation and presentation of the Pro Forma Historical Financial Information.

The Directors have no intention to update or revise the Forecast Financial Information or other forward looking statements following the issue of this Prospectus, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law.


3.3 explanation of certain non-ifrS and other financial measures

Spotless uses certain measures to manage and report on its business that are not recognised under

Australian Accounting Standards. These measures are referred to as non-IFRS financial measures.

Non-IFRS financial measures are intended to supplement the measures calculated in accordance with Australian Accounting Standards and not be a substitute for those measures. Because non-IFRS financial measures are not defined by a recognised body of accounting standards, they do not have a prescribed meaning and the way that Spotless calculates them may be different to the way that other companies calculate similarly-titled measures.

The principal non-IFRS financial measures used in this Prospectus are described below, together with certain other measures that management uses to assess the business and to communicate with investors regarding its performance and financial condition.

3.3.1 Sales revenue, Legacy Pass through revenue, Legacy Pass through costs and Other income

In a number of contracts, Spotless from time to time procures certain goods and services on behalf of the customer on a pass through basis. That is, the customer reimburses Spotless for the cost of supply, with no margin.

Australian Accounting Standards require such pass through revenue and costs to be recorded in Spotless’ statements of profit or loss as revenue and expenses, even though they do not have a direct economic effect on Spotless’ business.

Spotless has one large government customer for which this pass through revenue arrangement is expected to cease during FY2015. In order to assist readers to evaluate Spotless’ business (without the impact of these revenues and expenses), Spotless separately reports this revenue and these costs as non-IFRS financial measures called Legacy Pass Through Revenue and Legacy Pass

Through Costs . Spotless reports Sales Revenue as revenue excluding Legacy Pass Through

Revenue and excluding Other Income. Other Income comprises government grant income relating to traineeships and operational foreign exchange gains.

3.3.2 ebitda, ebitda margin, ebita, ebita margin and ebit

EBITDA is earnings before interest, tax, depreciation and amortisation. Management uses EBITDA to evaluate the operating performance of the business without the non-cash impact of depreciation and amortisation and before interest and tax charges, which are significantly affected by the capital structure and historical tax position of Spotless. Spotless also presents EBITDA Margin , which is

EBITDA divided by Sales Revenue, expressed as a percentage. EBITDA Margin is a key measure that management uses to evaluate the profitability of the overall business, its business segments and individual contracts.

Because it eliminates the non-cash charges for depreciation and amortisation, EBITDA is useful to help understand the cash generation potential of the business. However, it should not be considered as an alternative to cash flow from operations and investors should not consider EBITDA in isolation from, or as a substitute for, analysis of the Company’s results of operations. Some of the limitations of EBITDA are that it does not reflect:

• the Company’s cash or capital expenditure;

• changes in the Company’s working capital needs;

• the cash requirements necessary to service interest payments or principal repayments in respect of any borrowings;

• that, although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future, and there will likely be cash requirements for such replacements; and

• that other companies in the Company’s industry may calculate these measures differently from how the Company does, limiting their usefulness as a comparative measure.

ProsPectus 73

74


EBITDA may not be indicative of the Company’s historical operating results, nor is it meant to be a projection or forecast of future results.

The Directors believe that EBITDA is a measure commonly reported and widely used by investors in comparing performance without regard to depreciation and amortisation (which can vary significantly depending upon accounting methods), interest or tax. EBITDA has been disclosed in this Prospectus because it is used by management in determining the Group’s core performance and the Directors believe that it permits better analysis of Spotless’ operating performance.

EBITA is earnings before interest, tax and amortisation. It is similar to EBITDA, except that it includes depreciation. Including depreciation provides a useful alternative measure because the depreciation charge largely relates to plant and equipment (in particular laundry rental stock) that will be replaced in the ordinary course of business. EBITA Margin is EBITA divided by Sales Revenue, expressed as a percentage.

EBIT is earnings before interest and tax.

3.3.3 Segment contribution, allocation of corporate Overheads, Segment ebitda and Segment ebita

In the segment disclosures in this Prospectus, along with the IFRS measure of Segment Contribution,

Spotless uses three non-IFRS financial measures of segment performance in order to assist readers to understand the relative profitability of its business segments. Spotless has unallocated corporate overheads which include executive, legal, finance, property, procurement, information services, human resources, and business development expenses incurred by Spotless that are not directly attributable to the businesses within the reporting segments. The following measures enable readers to analyse segment results with and without these corporate overheads:

• Segment Contribution – this refers to the EBITDA generated by each segment in the ordinary course of business and is included in the segment notes to Spotless’ financial statements;

• Allocation of Corporate Overheads – this reflects the share of the unallocated corporate overheads that is being attributed to the segment on the basis of the proportion of Sales Revenue that the segment generated;

• Segment EBITDA – this is the EBITDA of the segment after the Allocation of Corporate

Overheads; and

• Segment EBITA – this is Segment EBITDA less depreciation (including both direct segment depreciation and an allocation of corporate overhead depreciation that is attributed to the segment on the basis of the proportion of Sales Revenue that the segment generated).


3.3.4 adjusted nPat

Adjusted NPAT is a non-IFRS adjusted measure of net profit after tax that is intended to remove the effect of certain non-cash charges that are attributable to acquisitions and certain other provisions.

These charges are:

• Amortisation of Customer Contracts – accounting standards required Spotless to allocate the purchase price of the business among its assets upon the 2012 Acquisition and to record them on its statement of financial position at their assessed values. This includes certain intangible assets, in particular customer contracts, that would not be recorded as assets on the statement of financial position in the absence of an acquisition. The value of these assets is being amortised over a seven to 30 year period and the amount amortised in each accounting period forms part of the amortisation charge in the statements of profit or loss for FY2013, FY2014 and FY2015.

Amortisation of Customer Contracts for FY2011 and FY2012 relates to acquisitions prior to the

2012 Acquisition; and

• Unwind of Discounts on Provisions – as part of the purchase price allocation for the 2012

Acquisition, Spotless raised a number of provisions for future liabilities, including for future environmental liabilities, make-good obligations on leased properties, onerous property leases and onerous customer contracts. These provisions were discounted to their net present value at the date of the 2012 Acquisition as required by Australian Accounting Standards. In each subsequent accounting period, as the period used to calculate the net present value of the liability becomes shorter, and to the extent the liability is not used, the net present value increases.

The amount of the subsequent non-cash increase is recognised in the statements of profit or loss for FY2013, FY2014 and FY2015, as part of net finance costs. Unwind of Discounts on Provisions for FY2011 and FY2012 relates to onerous contract provisions arising prior to the 2012 Acquisition.

Because these non-cash charges are a direct consequence of accounting treatment and will only apply for a finite period, the Directors believe that showing a non-IFRS measure that excludes them provides a useful insight into the underlying profitability of the business.

3.3.5 capital expenditure

Capital Expenditure is presented on a basis consistent with how Spotless management considers the categories of Capital Expenditure:

• Growth Capital Expenditure – Capital Expenditure is identified as growth when specifically related to new contracts, material expansion of an existing contract or investment to reduce the cost base;

• Maintenance Capital Expenditure – Capital Expenditure replenishing or replacing existing property, plant and equipment is considered to be Maintenance Capital Expenditure; and

• SAP IT Capital Expenditure – Capital Expenditure relating to SAP IT implementation is separately identified, reflecting the unique complex and finite nature of this project (the roll-out is expected to be materially completed during FY2015).

ProsPectus 75


A split between Maintenance Capital Expenditure and Growth Capital Expenditure for the historical periods presented in this Prospectus was not presented in the Statutory Historical Financial

Information and, as a result, these items are instead shown on an aggregated basis.

3.3.6 working capital

Spotless defines Working Capital as the total of current trade and other receivables, inventory, prepayments, trade and other payables, current provisions and other current creditors.

3.3.7 free cash flow and free cash flow conversion

Free Cash Flow is a non-IFRS measure that represents EBITDA less change in Working Capital less

Maintenance Capital Expenditure. Free Cash Flow Conversion is Free Cash Flow divided by EBITDA, expressed as a percentage. As a result, it is a measure of the operating cash flow generated by the business before Growth Capital Expenditure and SAP IT Capital Expenditure. It is important to note that Free Cash Flow does not take into account the requirements of the business for cash to fund financing costs such as interest expenses and tax payments.


3.4 Historical and forecast consolidated statements of profit or loss

Tables 1 and 2 below set out the Pro Forma Historical Results, the Pro Forma Forecast Results and the Statutory Forecast Results.

table 1 Summary pro forma historical consolidated statements of profit or loss for fy2011 to fy2013 and summary pro forma and statutory forecast consolidated statements of profit or loss for fy2014 and fy2015

Pro forma historical Pro forma forecast Statutory forecast

June year end

$ million

Sales revenue

Legacy Pass Through

Revenue

Other Income total revenue

Direct employee costs

Subcontractor costs

Cost of goods sold

Other costs

Legacy Pass Through

Costs total operating expenses ebitda

Depreciation ebita

Amortisation ebit

Net finance costs

Profit before tax

Tax expense nPat

Amortisation of

Customer Contracts

(after tax)

Unwind of Discounts on Provisions (after tax) adjusted nPat

Note fy2011 fy2012 fy2013 fy2014 fy2015 fy2014 fy2015

1 2,364.6

2,411.9

2,468.7

2,478.6

2,694.4

2,478.6

2,694.4

2

4 (2,358.8) (2,434.9) (2,419.7) (2,311.8) (2,393.0) (2,381.2) (2,393.0)

146.2

139.6

166.2

248.8

301.4

179.4

301.4

(54.4)

91.8

(57.0)

82.6

(53.2)

113.0

(55.0)

193.8

(60.5)

240.9

(55.0)

124.4

(60.5)

240.9

5 (2.9)

88.9

(4.8)

77.8

(10.2)

102.8

(10.9)

182.9

(14.0)

226.9

(10.9)

113.5

(14.0)

226.9

6

7

(32.6)

56.3

(16.9)

39.4

(32.6)

45.2

(13.6)

31.6

(34.7)

68.1

(20.4)

47.7

(35.2)

147.7

(44.3)

103.4

(34.7) (172.7)

192.2

(59.2)

(57.7)

134.5

17.8

(41.4)

(34.7)

192.2

(57.7)

134.5

8

9

10

2

3

137.1

3.3

159.0

3.6

116.6

0.6

82.0

–

–

–

82.0

–

2,505.0

2,574.5

2,585.9

2,560.6

2,694.4

2,560.6

2,694.4

–

–

(1,071.1) (1,087.8) (1,094.0) (1,038.5) (1,168.2) (1,052.9) (1,168.2)

(530.5) (530.4) (550.8) (575.6) (559.9) (575.6) (559.9)

(340.8) (386.7) (395.9) (374.5) (403.7) (374.5) (403.7)

(279.3) (271.0) (262.4) (241.2) (261.2) (296.2) (261.2)

(137.1) (159.0) (116.6)

0.5

0.1

40.0

1.1

0.1

32.8

5.7

1.5

54.9

(82.0)

5.7

1.9

111.0

–

5.7

1.6

141.8

(82.0) –

ProsPectus 77


Notes:

1 Sales Revenue is revenue excluding Legacy Pass Through Revenue and Other Income. Refer to Section 3.3.

2 Spotless is reimbursed for products and services procured on behalf of a customer from third party suppliers across a range of contracts.

The arrangement with a relevant customer for a material contract is expected to cease in FY2015; therefore, this revenue (Legacy Pass

Through Revenue) is reported separately to Sales Revenue. Similarly, the cost of the same amount (Legacy Pass Through Costs) is shown separately in operating expenses, having been extracted from subcontractor costs. Refer to Section 3.3.

3 Other Income comprises government grant income relating to traineeships and operational foreign exchange gains.

4 Operating expense line items impacted by the pro forma adjustments to the statutory consolidated statements of profit or loss (shown in Tables 7 and 8) are direct employee costs (for redundancy costs within the transaction and restructuring costs adjustment) and other costs (for all other pro forma adjustments to the operating expenses). The 1.5 month adjustment impacts all operating expense line items.

5 Amortisation expense relates to capitalised intangible assets, predominantly information technology software and Amortisation of

Customer Contracts (which were capitalised as part of the purchase price allocation upon the 2012 Acquisition).

6 Pro forma historical net finance costs have been adjusted to reflect the terms of the New Banking Facilities on Completion of the Offer.

Refer to Section 3.6.

7 A pro forma tax expense rate of 30% has been applied, which is the Australian corporate tax rate and is reflective of the Spotless’ anticipated tax rate following Completion of the Offer.

8 Amortisation of Customer Contracts is a non-cash item. Upon the 2012 Acquisition, certain intangible assets resulting from acquisitions, in particular customer contracts, were recorded on Spotless’ statement of financial position at their assessed values. The value of these assets is being amortised over a seven to 30 year period and forms part of the amortisation change in the statements of profit or loss for

FY2013, FY2014 and FY2015. Amortisation of Customer Contracts for FY2011 and FY2012 relates to acquisitions prior to the 2012

Acquisiton. This amortisation expense is added back after tax to derive Adjusted NPAT. Refer to Section 3.3.

9 The Unwind of Discounts on Provisions relates to the non-cash after tax increase in the net present value of the provisions raised upon the 2012 Acquisition, accounted for in net finance costs for FY2013, FY2014 and FY2015. Unwind of Discounts on Provisions for FY2011 and FY2012 relates to onerous contract provisions arising prior to the 2012 Acquisition. This non-cash finance cost is added back after tax to derive Adjusted NPAT. Refer to Section 3.3.

10 Adjusted NPAT reflects adjustments to add back Amortisation of Customer Contracts and Unwind of Discounts on Provisions after tax.



table 2 Summary pro forma historical consolidated statements of profit or loss for H1fy2013 and H1fy2014

Pro forma historical december half

$ million

Sales revenue

Legacy Pass Through Revenue


Direct employee costs

Subcontractor costs

Cost of goods sold

Other costs

Legacy Pass Through Costs total operating expenses ebitda

Depreciation ebita


Net finance costs


Tax expense nPat

Amortisation of Customer Contracts (after tax)

Unwind of Discounts on Provisions (after tax) adjusted nPat

Notes: Refer to Table 1 notes.

Note

1

2

3

5

6

7

8

9

10

2

4

H1fy2013

(64.4)

(1,233.8)

51.5

(26.6)

24.9

(5.1)

19.8

(17.4)

2.4

(0.7)

1.7

2.9

0.8

5.4

1,219.7

64.4

1.2

1,285.3

(562.9)

(248.8)

(209.0)

(148.7)

Set out in Tables 3 and 4 is a summary of Spotless’ key historical operating metrics for FY2011,

FY2012, FY2013, H1FY2013 and H1FY2014 derived from the Pro Forma Historical Results, and the forecast key operating metrics for FY2014 and FY2015 derived from the Pro Forma Forecast Results and the Statutory Forecast Results. Refer to Section 3.3 for more detail on the metrics shown.

H1fy2014

(39.6)

(1,165.5)

120.4

(27.7)

92.7

(5.1)

87.6

(18.0)

69.6

(20.9)

48.7

2.9

1.3

52.9

1,246.0

39.6

0.3

1,285.9

(516.4)

(291.0)

(201.5)

(117.0)

ProsPectus 79

3. financial information continued table 3 key pro forma historical financial metrics for fy2011 to fy2013 and pro forma and statutory forecast financial metrics for fy2014 and fy2015


June year end

$ million

Group

Sales Revenue growth

EBITDA growth

EBITDA Margin

EBITA growth

EBITA Margin

Free Cash Flow

Conversion facility Services

EBITDA Margin

EBITA Margin

Laundries

Note fy2011 fy2012 fy2013 fy2014 fy2015 fy2014 fy2015

1

1

2

3

3

6.2%

3.9%

3.8%

3.0%

2.0% 8.7%

(4.5%) 19.1% 49.7% 21.1%

5.8%

(10.0%)

3.4%

3.4%

2.6%

2.4%

6.7%

36.8%

4.6%

4.7%

4.0%

0.4%

10.0%

71.5%

7.8%

54.0%

7.9%

7.1%

11.2%

24.3%

8.9%

81.6%

9.1%

8.3%

5.0%

39.4%

8.7%

68.0%

7.2% 11.2%

93.6%

8.9%

75.3%

EBITDA Margin 3 26.4% 25.5% 23.8% 28.6% 28.3%

EBITA Margin 3 11.5% 10.7% 9.3% 14.0% 13.9%

Notes:

1 EBITDA Margin is EBITDA divided by Sales Revenue. EBITA Margin is EBITA divided by Sales Revenue. Refer to Section 3.3.

2 Free Cash Flow Conversion represents (EBITDA less change in Working Capital less Maintenance Capital Expenditure) divided by EBITDA, as set out in Table 16. Refer to Section 3.3.

3 Segment EBITDA and Segment EBITA are based on Segment Contribution after Allocation of Corporate Overheads. Corporate overheads have been attributed to the segment on the basis of the proportion of Sales Revenue generated by the segment. Segment EBITDA Margin is Segment EBITDA divided by Sales Revenue. Segment EBITA Margin is Segment EBITA divided by Sales Revenue. Refer to Section 3.3.

table 4 key pro forma historical financial metrics for H1fy2013 and H1fy2014


$ million

Group

Sales Revenue growth

EBITDA growth

EBITDA Margin

EBITA growth

EBITA Margin facility Services

EBITDA Margin

EBITA Margin

Laundries

EBITDA Margin

EBITA Margin


Note

1

1

3

3

3

3

H1fy2013

4.2%

2.0%

2.3%

1.5%

20.3%

6.1%

H1fy2014

2.2%

133.8%

9.7%

272.3%

7.4%

7.6%

6.8%

27.2%

12.9%


Tables 5 and 6 below set out the Statutory Historical Results. As the 2012 Acquisition was completed on 16 August 2012, the FY2013 statutory historical results are based on a 10.5 month period and the

H1FY2013 results are based on a 4.5 month period.

table 5 Summary statutory historical consolidated statements of profit or loss for fy2011 to fy2013

June year end

$ million

Revenue


Total operating expenses ebitda

Depreciation


Net finance costs


Tax (expense) / benefit nPat

Loss after tax from discontinued operations in FY2013

Statutory nPat fy2011

(12 months)

Statutory historical fy2012

(12 months)

2,789.2

3.3

2,792.5

(2,627.8)

164.7

(71.7)

(2.9)

90.1

(25.5)

64.6

(21.8)

42.8

–

42.8

2,827.2

6.7

2,833.9

(2,680.7)

153.2

(72.1)

(4.8)

76.3

(29.3)

47.0

(20.6)

26.4

–

26.4

fy2013

(10.5 months)

2,236.0

0.3

2,236.3

(2,184.2)

52.1

(46.6)

(8.8)

(3.3)

(69.6)

(72.9)

18.7

(54.2)

(38.6)

(92.8) table 6 Summary historical consolidated statements of profit or loss for H1fy2013 and H1fy2014 december half

$ million

Revenue


Total operating expenses ebitda

Depreciation


Net finance costs


Tax benefit nPat

Loss after tax from discontinued operations in FY2013 nPat including discontinued operations

Historical

H1fy2013

(4.5 months)

H1fy2014

(6 months)

934.8

0.9

935.7

(962.5)

(26.8)

(20.0)

(3.7)

(50.5)

(39.0)

(89.5)

29.0

(60.5)

(38.6)

(99.1)

1,285.6

0.3

1,285.9

(1,185.1)

100.8

(27.7)

(5.1)

68.0

(75.0)

(7.0)

3.2

(3.8)

–

(3.8)

ProsPectus 81


Pro forma adjustments to the statutory historical and forecast consolidated statements of profit or loss

Tables 7 and 8 set out a reconciliation from the Statutory Historical Results and the Statutory

Forecast Results to the Pro Forma Historical Results and Pro Forma Forecast Results respectively.

table 7 Pro forma adjustments to the statutory historical consolidated statements of profit or loss for fy2011 to fy2013 and pro forma adjustments to the statutory forecast consolidated statements of profit or loss for fy2014 and fy2015

Historical forecast

June year end

$ million Note fy2011 fy2012 fy2013 fy2014 fy2015

Statutory nPat

1.5 month adjustment 1

Listed public company costs and director fees 2

Transaction and restructuring costs 3

New share-based payment plan

Foreign currency translation cost

Discontinued operations total operating expense adjustments

Interest expense adjustment

Income tax expense adjustments total adjustments

Pro forma nPat

4

5

6

7

8

42.8

(2.3)

(1.2)

(7.1)

4.9

(3.4)

39.4

–

–

1.1

–

–

26.4

–

–

8.0

–

–

(6.7)

1.3

(3.1)

7.0

5.2

31.6

(92.8)

5.4

(1.9)

93.8

(1.0)

9.9

38.6

144.8

35.1

(39.4)

140.5

47.7

(41.4)

–

(2.0)

72.3

(0.9)

–

–

69.4

137.5

(62.1)

144.8

103.4

134.5

–

–

–

–

–

–

–

134.5

Amortisation of Customer Contracts

(after tax)

Unwind of Discounts on Provisions

(after tax)

0.5

1.1

5.7

5.7

5.7

0.1

0.1

1.5

1.9

1.6

Pro forma adjusted nPat 9 40.0

32.8

54.9

111.0

141.8

Notes:

1 An adjustment has been made to include the results of operations of Spotless Group Limited for the period from 1 July 2012 to 16 August

2012, the latter date of the 2012 Acquisition. The adjustment includes actual results excluding transaction and restructuring costs and includes the Unwind of Discounts on Provisions applied on acquisition, as if they had applied from 1 July 2012.

2 An adjustment has been made to include Spotless’ estimate of the incremental costs that it will incur as a listed public company. These incremental costs include Director and executive remuneration, additional audit and tax compliance and other listed entity related compliance and other costs. No adjustment has been made to FY2011 and FY2012 as Spotless Group Limited traded as a listed public company.

3 The non-recurring transaction related costs incurred during these periods as part of the 2012 Acquisition have been removed for FY2012 and FY2013. Similar costs incurred as part of the acquisition of certain International Services entities in FY2011 (which were subsequently sold) have also been removed. An adjustment has also been made to remove the costs related to the restructuring of the business following the 2012 Acquisition, including redundancies, onerous leases, staff retention and former management bonuses and business exit costs. Bank guarantee costs have been adjusted downward to reflect the rates applicable under the New Banking Facilities. For FY2014, forecast costs associated with the Company’s initial public offering process have also been excluded from pro forma NPAT.

4 An adjustment has been made for the new share-based payment plan to be implemented on Completion of the Offer for FY2013,

H1FY2013 and H12014. No adjustment has been made to FY2011 and FY2012 as Spotless traded as a listed public company with its own remuneration structures in these periods.

5 An adjustment has been made for FY2013 and H1FY2013 to remove the non-recurring foreign currency translation loss on New Zealand dollar denominated debt repayments associated with the debt restructuring following the 2012 Acquisition, as this is directly related to the debt restructure and will not be recurring.

6 On 1 December 2012, Spotless disposed of the International Services business. On 14 December 2012, Spotless disposed of the Braiform business. The operations of these businesses have been excluded from the pro forma results for FY2011, FY2012, FY2013 and H1FY2013, as they do not form part of the ongoing operations of the Group.

7 The interest expense has been adjusted to reflect the anticipated debt profile, interest rates and borrowing costs applicable under the New Banking Facilities, following the Offer. This includes the removal of the existing amortisation and write-off of borrowing costs associated with the historical debt facilities. Lower debt levels under the New Banking Facilities are the primary driver of the adjustment for FY2013 and FY2014.

8 The tax expense has been adjusted to apply a pro forma tax expense rate of 30%, which is the Australian corporate tax rate and is reflective of Spotless’ anticipated tax rate following Completion of the Offer.

9 Adjusted NPAT reflects adjustments for Amortisation of Customer Contracts and Unwind of Discounts on Provisions after tax.

–

–

–


table 8 Pro forma adjustments to the historical consolidated statements of profit or loss for

H1fy2013 and H1fy2014

Historical december half

$ million nPat

1.5 month adjustment

Listed public company costs and director fees

Transaction and restructuring costs

New share-based payment plan

Foreign currency translation cost

Discontinued operations total operating expense adjustments

Interest expense adjustment

Income tax expense adjustments total adjustments

Pro forma nPat

Amortisation of Customer Contracts after tax

Unwind of Discounts on Provisions after tax

Pro forma adjusted nPat


Note

3

4

1

2

5

6

7

8

9

H1fy2013

109.0

21.8

(30.0)

100.8

1.7

2.9

0.8

5.4

(99.1)

5.4

(0.8)

62.0

(0.5)

4.3

38.6

H1fy2014

19.6

57.0

(24.1)

52.5

48.7

2.9

1.3

52.9

(3.8)

–

(1.1)

21.5

(0.5)

(0.3)

–

3.5 Segment and customer sector information

Spotless has two reporting segments: Facility Services and Laundries. In addition to the reporting segments, Spotless presents Sales Revenue for customers in similar sectors (Health, Education and Government; Commercial and Leisure; Base and Township; and Laundry and Linen) and by geographic segment (Australia and New Zealand).

facility Services

The Facility Services segment comprises the results of Spotless’ facility management, catering and cleaning service offerings to customers in the Health, Education and Government; Commercial and Leisure; and Base and Township customer sectors.

Laundries

The Laundries segment comprises the results of Spotless’ laundry and linen service offerings.

Tables 9 and 10 contain a summary of Spotless’ Sales Revenue by customer sector, and Spotless’

Sales Revenue, EBITDA and EBITA by reporting segment for FY2011 to FY2015, H1FY2013 and

H1FY2014.

ProsPectus 83

3. financial information continued table 9 Pro forma Sales revenue, ebitda and ebita summary by reporting segment and customer sector for fy2011 to fy2015

Pro forma historical Pro forma forecast change

June year end

$ million facility Services



Base and

Township

Facility Services

Sales Revenue

Facility Services

Segment

Contribution

Facility Services

Allocation of

Corporate

Overheads facility Services

Segment ebitda

Depreciation facility Services

Segment ebita

Laundries

Note fy2011 fy2012 fy2013 fy2014 fy2015

1

2

3

832.6

910.7

372.5

2,115.8 2,152.2 2,206.9 2,223.7 2,403.8

131.8

(51.4)

80.4

(17.1)

63.3

793.0

906.7

452.5

122.9

(49.4)

73.5

(18.6)

54.9

857.0

866.5

483.4

143.2

(39.4)

103.8

(15.1)

88.7

927.1 1,044.0

739.7

556.9

212.4

(36.6)

175.8

(17.7)

158.1

774.8

585.0

257.4

(38.3) (12.4%)

219.1

(18.6)

200.5

fy2011– fy2013 caGr fy2013– fy2014

1.5%

(2.5%) (14.6%)

13.9%

2.1%

4.2%

13.6%

(6.0%)

18.4%

8.2%

15.2%

0.8%

48.3%

(7.1%)

69.4%

17.2%

78.2% fy2014– fy2015

12.6%

4.7%

5.0%

8.1%

21.2%

4.6%

24.6%

5.1%

26.8%

Laundries (Laundry and Linen) Sales

Revenue

Laundries

Segment

Contribution

Laundries

Allocation of

Corporate

Overheads

Laundries

Segment ebitda

1

2

248.8

71.9

(6.1)

259.7

72.1

(6.0)

261.8

67.1

(4.7)

254.9

77.2

(4.2)

290.6

86.9

2.6%

(3.4%)

(2.6%)

15.1%

(4.6) (12.2%) (10.6%)

14.0%

12.6%

9.5%

65.8

66.1

62.4

73.0

82.3

(2.6%) 17.0% 12.7%

Depreciation 3 (37.3) (38.4) (38.1) (37.3) (41.9) 1.1% (2.1%) 12.3%

Laundries

Segment ebita 28.5

27.7

24.3

35.7

40.4

(7.7%) 46.9% 13.2%

Notes:

1 Segment Contribution represents the Segment EBITDA before adjusting for unallocated corporate overheads (see note 2).

2 Segment EBITDA and Segment EBITA are based on Segment Contribution after Allocation of Corporate Overheads. Corporate overheads have been attributed to the segment on the basis of the proportion of Sales Revenue generated by the segment. Refer to Section 3.3.

3 Includes segment depreciation, as well as depreciation relating to unallocated corporate assets apportioned between segments in proportion to the Sales Revenue generated by each segment.


table 10 Pro forma Sales revenue, ebitda and ebita summary by reportable segment and customer sector for H1fy2013 and H1fy2014 december half

$ million facility Services



Base and Township facility Services Sales revenue

Facility Services Segment Contribution

Facility Services Allocation of Corporate Overheads facility Services Segment ebitda

Depreciation facility Services Segment ebita

Laundries

Laundries (Laundry and Linen) Sales revenue

Laundries Segment Contribution

Laundries Allocation of Corporate Overheads

Laundries Segment ebitda

Depreciation

Laundries Segment ebita


Note

1

2

3

1

2

3

Pro forma historical

H1fy2013

404.2

450.4

232.4

1,087.0

47.0

(22.4)

24.6

(7.8)

16.8

132.7

29.6

(2.7)

26.9

(18.8)

8.1

H1fy2014

450.3

385.6

277.6

1,113.5

102.5

(18.1)

84.4

(8.8)

75.6

132.5

38.2

(2.2)

36.0

(18.9)

17.1

change

H1fy2013–

H1fy2014

(0.2%)

29.1%

(18.5%)

33.8%

0.5%

111.1%

Tables 11 and 12 contain a summary of Spotless’ Sales Revenue by geographic segment for FY2011,

FY2012, FY2013, FY2014, FY2015, H1FY2013 and H1FY2014.

table 11 Pro forma Sales revenue summary by geographic segment for fy2011 to fy2015

11.4%

(14.4%)

19.4%

2.4%

118.1%

(19.2%)

243.1%

12.8%

350.0%

June year end

$ million

Australia

New Zealand

Sales revenue

Pro forma historical Pro forma forecast fy2011 fy2012 fy2013 fy2014 fy2015

2,060.4

2,087.0

2,116.2

2,094.1

2,284.2

304.2

324.9

352.5

384.5

410.2

2,364.6

2,411.9

2,468.7

2,478.6

2,694.4

change fy2011– fy2013 caGr

1.3%

7.6%

2.2% fy2013– fy2014

(1.0%)

9.1%

0.4% fy2014– fy2015

9.1%

6.7%

8.7% table 12 Pro forma Sales revenue summary by geographic segment for H1fy2013 and H1fy2014 december half

$ million

Australia

New Zealand

Sales revenue


H1fy2013

1,055.5

164.2

1,219.7

H1fy2014

1,058.4

187.6

1,246.0

change

H1fy2013–

H1fy2014

0.3%

14.3%

2.2%

ProsPectus 85

86


3.6 Pro forma historical consolidated statement of financial position

3.6.1 Statement of financial position

Table 13 sets out the adjustments that have been made to the reviewed historical consolidated statement of financial position for Spotless as at 31 December 2013 to prepare a pro forma historical consolidated statement of financial position for Spotless. These adjustments reflect the impact of the operating and capital structure that will be in place at Completion of the Offer as if it had occurred or was in place as at 31 December 2013.

On Completion of the Offer, Spotless will issue new equity and draw down on its New Banking

Facilities (described below), with proceeds used to pay:

• amounts owing by Spotless under its Existing Banking Facilities (including debt break fees and associated derivatives) in place immediately prior to Completion of the Offer;

• establishment costs in respect of the New Banking Facilities applicable at Completion of the Offer; and

• other transaction advisory fees, costs and expenses arising in connection with the Offer.

The pro forma historical consolidated statement of financial position shown in Table 13 has been extracted from the reviewed financial statements for the half year ended 31 December 2013 and adjusted to reflect the impact of the Offer and the refinancing arrangements as if they took place as at 31 December 2013. The adjustments also include assumptions relating to the Offer which include matters not known at the Prospectus Date, e.g. the Final Price, the extent of sell down by

Selling Shareholders and the number of new Shares to be issued by the Company. The pro forma historical consolidated statement of financial position is therefore provided for illustrative purposes only and is not necessarily representative of Spotless’ view on its future financial position.

In particular, cash and cash equivalents in the pro forma historical consolidated statement of financial position have been adjusted to reflect the impact of the Offer and the refinancing arrangements as if they took place as at 31 December 2013, in accordance with ASIC Regulatory Guide 228 paragraph

92, and as such does not adjust for various anticipated cash requirements of the business between

31 December 2013 and Completion of the Offer. The resulting cash and cash equivalents balance is not reflective of management’s target cash position at Completion of the Offer which is $15.0 million.

Refer to Table 14 for target financial indebtedness at Completion of the Offer.

Further information on the sources and uses of funds of the Offer is contained in Section 6.1 and further information on the New Banking Facilities is contained in this Section 3.6 and Section 9.5.


table 13 Pro forma historical consolidated statement of financial position

Note

31 december

2013 (before completion of the Offer) estimated impact of the

Offer and new banking facilities as at 31 december 2013

$ million assets current assets

Cash and cash equivalents

Current tax assets

Trade and other receivables

Inventory

Prepayments

Assets classified as held for sale total current assets non-current assets

Investments accounted for using the equity method

Trade and other receivables

Property, plant and equipment

Goodwill

Intangible assets

Deferred tax assets

Prepayments

Derivatives at fair value total non-current assets total assets

Liabilities current liabilities

Trade and other payables

Borrowings

Provisions total current liabilities non-current liabilities

Borrowings

Deferred tax liabilities

Provisions

Other financial liabilities total non-current liabilities total liabilities net assets

1

2

3

4

5

5

1.8

23.8

208.6

827.4

136.0

129.6

1.5

52.2

1,380.9

1,777.6

54.7

1.5

304.8

21.9

8.3

5.5

396.7

257.9

0.5

104.2

362.6

1,206.1

61.9

61.6

1.9

1,331.5

1,694.1

83.5

43.8

–

–

–

–

–

43.8

11.3

(0.2)

–

11.1

(573.8)

(15.7)

–

–

(589.5)

(578.4)

597.1

–

27.1

–

(52.2)

(25.1)

18.7

–

–

–

–

Pro forma

(reflecting completion of the Offer)

269.2

0.3

104.2

373.7

632.3

46.2

61.6

1.9

742.0

1,115.7

680.6

98.5

1.5

304.8

21.9

8.3

5.5

440.5

1.8

23.8

208.6

827.4

136.0

156.7

1.5

–

1,355.8

1,796.3

ProsPectus 87

3. financial information continued as at 31 december 2013

$ million Note

31 december

2013 (before completion of the Offer) estimated impact of the

Offer and new banking facilities

Pro forma

(reflecting completion of the Offer) equity

Share capital

Reserves

6

7

329.6

(1.0)

651.3

4.2

980.9

3.2

Accumulated losses 8 (245.1) (58.4) (303.5) total equity 83.5

597.1

680.6

Notes:

1 The net adjustments to cash and cash equivalents include:

• raising cash as a result of the Offer, offset by the payment of transaction costs related to the Offer;

• drawings under the New Banking Facilities;

• making of a principal repayment on the Existing Banking Facilities; and

• realisation of swap assets, as a result of the refinancing.

Management’s target cash position at Completion of the Offer is $15.0 million.

2 The adjustment to deferred tax assets represents the tax effect of the costs associated with the Offer and the tax deduction associated with the write off of existing borrowing costs and debt break fees.

3 The refinancing will result in the realisation of swap assets recorded at $52.2 million at 31 December 2013.

4 Adjustment relates to certain transaction costs to be paid in FY2015.

5 Spotless has executed a syndicated facility agreement and a bilateral facility agreement (see Section 3.6.4). On Completion of the Offer, funding provided under the facility agreement for the New Banking Facilities will be drawn down to $637.0 million, with associated refinancing costs which will be capitalised and amortised over the terms of the loans. All proceeds from the New Banking Facilities are non-current liabilities. Spotless will make a principal repayment of $1,250.1 million on its Existing Banking Facilities and write off existing capitalised borrowing costs.

6 Share capital is impacted by the primary equity Offer of $697.7 million (assumes the Final Price is at the midpoint of the Indicative Price

Range) offset by the costs after income tax related to the issue of New Shares of approximately $46.4 million.

7 Reserves are impacted by the restructuring of pre-IPO executive incentives.

8 Accumulated losses are impacted by:

• IPO transaction costs that are required to be expensed;

• write off of borrowing costs associated with the Existing Banking Facilities;

• swap and debt break fees; and

• the restructuring of pre-IPO executive incentives.

3.6.2 Liquidity and capital resources

Spotless’ principal sources of cash are cash generated from operations, cash on hand and borrowings under the New Banking Facilities. Following Completion of the Offer, Spotless is targeting

$15.0 million of cash and cash equivalents and approximately $150 million undrawn availability under the New Banking Facilities, of which $115 million is available to fund working capital requirements.

Spotless’ main uses of cash are to fund its operations, Working Capital, Capital Expenditure

(including expenditure required to maintain its current assets (including replacement of laundry rental stock) and to expand its business as it wins additional contracts), interest payments, principal repayments and payment of tax and dividends. Spotless believes that its cash on hand, cash from operations and undrawn borrowing capacity under the New Banking Facilities will be sufficient to meet its cash requirements for the foreseeable future.

3.6.3 indebtedness

Table 14 below sets out the indebtedness of Spotless as at 31 December 2013, before Completion of the Offer and on a pro forma basis adjusted for the repayment of the Existing Banking Facilities and associated break fees, anticipated drawings under the New Banking Facilities and receipt of the net proceeds of the Offer reflecting Completion of the Offer, as if these actions took place as at 31 December 2013. The net debt does not include the impact of other operational, financing or investing activities from 1 January 2014 to the date of the Offer; hence, management target indebtedness at Completion of the Offer is also included.


table 14 Pro forma consolidated indebtedness as at 31 december 2013 as at 31 december 2013

$ million Note

31 december

2013 (before completion of the Offer)

Pro forma

(reflecting completion of the Offer)

Pro forma

(reflecting management target cash position at completion of the Offer)

Loans and borrowings

Finance lease obligations

Senior debt

Less: upfront fees paid total loans and borrowings

Less: cash and cash equivalents

Less: derivatives at fair value net total indebtedness

1

2

3

4

0.3

1,250.1

(43.8)

1,206.6

(54.7)

(52.2)

1,099.7

0.3

637.0

(4.7)

632.6

(98.5)

–

534.1

Net debt / FY2014F pro forma EBITDA

Net debt / FY2015F pro forma EBITDA

5

5

2.48×

2.05×

FY2014F pro forma EBITDA / FY2014F net cash interest expense 5, 6 8.00×

FY2015F pro forma EBITDA / FY2015F net cash interest expense 5, 6 9.69×

Notes:

1 At 31 December 2013, senior debt comprised of $1,250.1 million of current and non-current borrowings. Total loans and borrowings are presented on the consolidated statement of financial position at 31 December 2013, net of existing capitalised borrowing costs of $43.8 million and increased for finance lease obligations of $0.3 million.

2 Pro forma loans and borrowings reflect $637.0 million drawn under the New Banking Facilities as detailed below in this Section 3.6 and

Section 9.5 and are presented net of capitalised borrowings costs of $4.7 million.

3 The pro forma historical consolidated statement of financial position as at 31 December 2013 (Table 13) has been adjusted to reflect the impact of the Offer and the refinancing arrangements as if they took place at that date, in accordance with ASIC Regulatory Guide 228 paragraph 92, and as such does not adjust for various anticipated cash requirements of the business between 1 January 2014 and

Completion of the Offer. To assist investors to better understand the Company’s expected level of gearing on Completion of the Offer, management has provided pro forma indebtedness reflecting the target level of cash and cash equivalents at Completion of the Offer.

The differences are generated due to additional funding levels required to cover expected changes in the mark to market valuation of existing debt and swap arrangements which will be terminated on Completion of the Offer, payment of accrued interest and fees up to Completion of the Offer and the anticipated working capital position at Completion of the Offer.

4 The derivatives at fair value relate to cross currency interest rate swaps on the borrowings as at 31 December 2013.

5 Calculations under the covenants in the New Banking Facilities for net debt, EBITDA and net cash interest expense include a number of specific adjustments. These adjustments are not reflected in net debt, EBITDA and net cash interest expense shown in this Prospectus and therefore these measures will be different to the values used for covenant calculations under the New Banking Facilities. Refer to the description below in this Section 3.6 and Section 9.5 for further details.

6 Based on net finance costs (as set out in the pro forma forecast in Table 1), adjusted to exclude Unwind of Discounts on Provisions

(pre-tax) and facility fee amortisation. Unwind of Discounts on Provisions (pre-tax) is forecast to be $2.7 million in FY2014 and $2.2 million in FY2015. Facility fee amortisation is forecast to be $1.4 million in FY2014 and FY2015.

0.3

637.0

(4.7)

632.6

(15.0)

–

617.6

3.6.4 description of the new banking facilities

Spotless has executed (i) a syndicated facility agreement for the provision of revolving facilities

( Syndicated Facility Agreement ) and (ii) a bilateral facility agreement provided by Australia and

New Zealand Banking Group Limited for the provision of cash advance, financial and performance guarantee facilities ( Bilateral Facility Agreement , and together with the Syndicated Facility Agreement, the New Banking Facilities ). The mandated lead arrangers, underwriters and bookrunners for the

Syndicated Facility Agreement are Citibank N.A., Sydney Branch and UBS AG, Australia Branch.

On Completion of the Offer, funding provided under the facility agreements for the New Banking

Facilities (together with proceeds from the issue of New Shares by the Company under the Offer) will be utilised to repay the Existing Banking Facilities, comprising US dollar denominated senior debt facilities and associated derivatives, as well as certain other obligations of Spotless and its

ProsPectus 89


90 subsidiaries. Upon repayment of the Existing Banking Facilities, the associated guarantees and security granted by the Spotless Group will be discharged.

The availability of funding under the New Banking Facilities is conditional upon confirmation that

Spotless will be quoted on the ASX as contemplated by the Offer and other conditions precedent which are within the control of Spotless and customary for facilities of the nature of the New Banking

Facilities. Accordingly, at Completion of the Offer, Spotless will have debt funding available to assist with the repayment of the Existing Banking Facilities of Spotless and its subsidiaries and to provide for funding needs after Listing.

The Syndicated Facility Agreement has an aggregate commitment of A$637 million and comprises:

• A$424.2 million three year revolving facility A ( Facility A ), with a sub-tranche available for cash advances in Australian dollars up to A$324.9 million, and a sub-tranche available for cash advances in New Zealand dollars up to NZ$107 million, each of which will be fully drawn at

Completion of the Offer; and

• A$212.8 million four year revolving facility B ( Facility B ), with a sub-tranche available for cash advances in Australian dollars up to A$163.6 million, and a sub-tranche available for cash advances in New Zealand dollars up to NZ$53 million, each of which will be fully drawn at

Completion of the Offer.

The Bilateral Facility Agreement has a total aggregate commitment of A$200 million (with a total aggregate New Zealand dollar sub-limit of NZ$95 million) and comprises:

• A$115 million two year revolving cash advance facility available in Australian and New Zealand dollars, with a NZ$70 million sub-limit ( Cash Advance Facility );

• A$80 million performance guarantee facility available in both Australian and New Zealand dollars, with a NZ$20 million sub-limit, subject to annual review ( Performance Guarantee Facility ); and

• A$5 million financial guarantee facility available in both Australian and New Zealand dollars, with a NZ$5 million sub-limit, subject to annual review ( Financial Guarantee Facility ).

The sub-tranche amounts under the New Banking Facilities were determined based on an exchange rate of the A$ to the NZ$ of 1.0776, as at 7 April 2014. Therefore, Spotless will be exposed to fluctuations in the exchange rate between the A$ and the NZ$ for the period between 7 April 2014 and the Completion of the Offer.

Approximately A$50 million of the aggregate of the Performance Guarantee Facility and the Financial

Guarantee Facility are expected to be used to fund letters of credit, bank and performance guarantees at Completion of the Offer.

Pro forma net finance cost

Facility A, Facility B and the Cash Advance Facility have variable interest rates, based on the bank bill swap bid rate (BBSY or BKBM as applicable) plus a margin. The Performance Guarantee Facility and

Financial Guarantee Facility (for drawings of letter of credit, bank and performance guarantees) have issuance fees equal to their respective margin.

Facility A, Facility B and the Cash Advance Facility will attract commitment fees equal to 50% of the margin on the committed but undrawn funds under each facility.

The Financial Guarantee Facility and the Performance Guarantee Facility attract commitment fees which are less than 65% of their respective margins on the committed but undrawn funds under each facility.

The pro forma forecast consolidated interest expense for Facility A and Facility B is $29.9 million in

FY2014 and FY2015, on the assumption that each facility is drawn during the entire FY2014 and

FY2015 periods, and applying Spotless’ interest rate hedging policy described in Section 3.11.

Other pro forma net finance costs relate to the Cash Advance Facility, the commitment fees under the

Financial Guarantee Facility and the Performance Guarantee Facility and income from cash interest.


The pro forma forecast consolidated net finance cost includes the full year effect of the amortisation of upfront fees for raising the New Banking Facilities, that have been capitalised and amortised over the terms of the loans.

Financial covenants

The New Banking Facilities contain undertakings which are customary for facilities of their nature and which are consistent across the Syndicated Facility Agreement and the Bilateral Facility Agreement.

The undertakings include financial undertakings which will be tested at financial year end and financial half year end based on the preceding 12 month period, commencing in the period ending

31 December 2014. These undertakings include:

• a net leverage ratio that is not greater than 3.50 to 1, being net debt to EBITDA (as defined under the New Banking Facilities); and

• an interest cover ratio that is not less than 3.00 to 1, being EBITDA to net total cash interest

(as defined under the New Banking Facilities).

Calculations under the covenants in the New Banking Facilities for net debt, EBITDA and net cash interest expense include a number of specific adjustments. These adjustments are not reflected in net debt, EBITDA and net cash interest expense shown in this Prospectus and therefore these measures will be different to the values used for covenant calculations under the New Banking Facilities.

Spotless expects to remain in compliance with these financial and other undertakings.

Refer to Section 9.5 for more information on the New Banking Facilities.

3.6.5 capital and contractual commitments

Table 15 sets out Spotless’ Capital Expenditure and other commitments as at 30 June 2013.

table 15 capital expenditure and other commitments as at 30 June 2013 as at 30 June 2013

$ million Note

Less than

1 year 1 – 5 years more than

5 years total

Non-cancellable operating leases

Catering rights

Capital Expenditure commitments

36.6

35.6

5.3

65.8

62.8

–

45.8

0.5

–

148.2

98.8

5.3

Finance lease obligations 1 0.3

0.2

– 0.5

total 77.8

128.8

46.3

252.8

Note:

1 Finance lease obligations shown in this table reflect the balance at 30 June 2013. This reduced to a total of $0.3 million at 31 December

2013, as shown in Tables 13 and 14.

3.6.6 contingent liabilities

Spotless is required to guarantee its performance or provide financial surety for certain contracts.

The extent to which an outflow of funds will be required is dependent on the future operations.

At 31 December 2013, Spotless had $49.0 million of performance guarantees outstanding.

The amount disclosed represents the aggregate amount of such guarantees.

Spotless does not have any contingent liabilities in respect of legal proceedings that are likely to have a material adverse impact on the business or financial position of Spotless as at the Prospectus Date.

3.7 Summary pro forma historical and forecast consolidated statements of cash flows and statutory forecast consolidated statements of cash flows

Table 16 sets out a summary of Spotless’ pro forma historical consolidated statements of cash flows for FY2011, FY2012, FY2013, H1FY2013 and H1FY2014, pro forma forecast consolidated statements of cash flows for FY2014 and FY2015 and statutory forecast consolidated statements of cash flows for FY2014 and FY2015.

ProsPectus 91

3. financial information continued table 16 Summary pro forma historical consolidated statements of cash flows for fy2011 to fy2013 and pro forma and statutory forecast consolidated statements of cash flows for fy2014 and fy2015



Notes:

1 Non-cash share-based payments have been added back to EBITDA and include acceleration of the existing executive share options charge due to vesting on the IPO of Spotless in statutory forecast FY2014.

2 Working Capital comprises current trade and other receivables, inventory, prepayments, trade and other payables, current provisions and other current creditors. Refer to Section 3.3.

3 Capital Expenditure includes Maintenance Capital Expenditure and Growth Capital Expenditure. Refer to Section 3.3.

4 The pro forma and statutory forecast tax payments are less than the forecast tax expense in the pro forma statements of profit or loss due to the availability of carry forward tax losses in Australia.

5 The pro forma net interest and other costs on financial debt are based on the New Banking Facilities, as if the arrangements were in place since 1 July 2013.

6 Distribution to Shareholders in H1FY2014 reflects return of capital ($298.0 million) and dividends paid ($148.5 million).

7 Net repayment of Existing Banking Facilities includes proceeds of $522.5 million received in H1FY2014 and repayments $1,218.5 million.

8 The fees incurred with the establishment of the New Banking Facilities will be capitalised and amortised on a straight-line basis over the terms of the loans. Refer to Section 3.6.

9 Assumes the Final Price is at the midpoint of the Indicative Price Range.

10 Represents expected interim dividend for the period from 1 July 2014 to 31 December 2014 and expected to be paid in March 2015, in accordance with Spotless’ dividend policy. Anticipated dividend for the period from 1 January 2015 to 30 June 2015 will become payable in FY2016. Refer to Section 3.13 for further details.

11 Capitalised transaction costs associated with the Offer.

table 17 Summary pro forma historical consolidated statements of cash flows for H1fy2013 and

H1fy2014


$ million ebitda

Add: non-cash charge for share-based payments

Changes in Working Capital

Capital Expenditure (excluding SAP IT Capital Expenditure)

SAP IT Capital Expenditure net cash flow before financing and taxation


Note

1

2

H1fy2013

51.5

0.5

27.3

(39.6)

(22.8)

16.9

H1fy2014

120.4

0.5

(55.8)

(28.5)

(4.9)

31.7

Pro forma adjustments to the statutory historical consolidated statements of cash flows

Tables 18, 19 and 20 set out the pro forma adjustments to the Statutory Historical Cash Flows as well as the Statutory Forecast Cash Flows to reflect the full year impact of the operating structure that will be in place following Completion of the Offer and to eliminate certain non-recurring items.

ProsPectus 93

94

3. financial information continued table 18 Pro forma adjustments to the statutory consolidated historical statements of cash flows for fy2011 to fy2013

Historical

June year end

$ million Note fy2011 fy2012 fy2013

Statutory net cash flow before financing, taxation and business combinations


Acquisition / disposals of businesses

Dividends received

Receipts from security plan loans

Proceeds from sale of investment securities

1

2

3

4

5

(5.6)

1.1

11.4

(0.3)

–

–

(29.1)

8.0

–

(1.0)

(1.8)

–

Net proceeds from sale of International Services and Braiform

Removal of International Services and Braiform

Listed public company costs

6

7

8

–

0.3

–

–

(0.5)

–

(30.3)

–

(1.9)

1.5 month adjustment 9 – – (32.3)

Pro forma net cash flow before financing and taxation 6.9

(24.4) 79.8

Notes:

1 Consists of $1.1 million and $8.0 million of transaction costs expensed to the statutory historical consolidated statements of profit or loss in

FY2011 and FY2012 respectively, as presented in Table 7 reconciling the statutory NPAT to pro forma Adjusted NPAT. The FY2013 balance of $62.5 million consists of transaction and restructuring costs of $93.8 million, as presented in Table 7, reduced for the non-cash component of transaction and restructuring costs $31.3 million.

2 Excludes the cash consideration paid for the acquisition of certain International Services entities in FY2011 as these businesses have been sold and therefore do not form part of the ongoing operations of the Group.

3 Excludes the dividends received from businesses that do not form part of the ongoing operations of the Group.

4 Excludes the receipts from security plan loans that do not form part of the ongoing operations of the Group.

5 Excludes the proceeds from sale of investment securities that do not form part of the ongoing operations of the Group.

6 Cash flows are adjusted for the operation of net proceeds from the disposal by Spotless of the International Services and Braiform businesses on 1 December 2012 and 14 December 2012 respectively. The net proceeds from the sale of these businesses have been excluded as they do not form part of the ongoing operations of the Group.

7 Cash flows are adjusted for the disposal by Spotless of the International Services and Braiform businesses given their disposal on

1 December 2012 and 14 December 2012 respectively. For FY2011 and FY2012, the operations of these businesses have been excluded as they do not form part of the ongoing operations of the Group.

8 Additional public company costs of $1.9 million have been added in FY2013 to reflect the cost as a listed public company.

9 The FY2013 financial statements for Spotless included the operations and cash flows from the date the 2012 Acquisition was completed

(16 August 2012). The operations of Spotless from 1 July 2012 to 16 August 2012 have been included in the pro forma information for comparative purposes to ensure a 12 month period is presented for FY2013 (and a six month period is presented for H1FY2013).

95.0

62.5

–

(0.3)

(6.5)

(6.4)


table 19 Pro forma adjustments to the historical consolidated statements of cash flows for

H1fy2013 and H1fy2014

Historical december half

$ million Note H1fy2013 H1fy2014 net cash flow before financing, taxation and business combinations


Dividends received

Receipts from security plan loans

Proceeds from sale of investment securities

Net proceeds from sale of International Services and Braiform

1A

3

4

5

6

54.0

39.5

(0.3)

(6.5)

(6.4)

(30.3)


1.5 month adjustment

8

9

(0.8)

(32.3)

(1.1)

–

Pro forma net cash flow before financing and taxation 16.9

31.7

Notes: Refer to Table 18 notes. In addition:

1A H1FY2013 cash flow related to transaction and restructuring costs of $62.0 million, as presented in Table 8 reconciling NPAT to pro forma

Adjusted NPAT, reduced for the non-cash component of transaction and restructuring costs $22.5 million. H1FY2014 cash flow related to transaction and restructuring costs of $21.5 million, as presented in Table 8 reconciling NPAT to pro forma Adjusted NPAT, reduced for the non-cash component of transaction and restructuring costs and unpaid amounts of $8.0 million. Also includes $0.4 million and

$0.7 million of bank guarantee costs expensed to the forecast statutory statements of profit or loss in H1FY2013 and H1FY2014 respectively, as presented in Table 8 reconciling NPAT to pro forma Adjusted NPAT.

21.7

13.5

–

(2.4)

–

–

ProsPectus 95

96

3. financial information continued table 20 Pro forma adjustments to the statutory forecast consolidated statements of cash flows for fy2014 and fy2015 forecast

June year end

$ million Note fy2014 fy2015

Statutory net cash flow

Interest and other costs paid on financial debt

Tax paid

1

65.2

55.3

(3.9)

63.7

–

–



Distribution to Shareholders in H1FY2014

Net repayment of Existing Banking Facilities

Proceeds from New Banking Facilities

Upfront fees for New Banking Facilities

2

3

4

5

120.7

(2.0)

446.5

696.0

(637.0)

4.7

6

Proceeds from issue of new Shares

Changes in Working Capital 7

697.7

11.2

–

7.6

Other (1.6) –

Pro forma net cash flow 57.4

82.6

Notes:

1 The difference in interest recognised on a pro forma basis to statutory presentation reflects the impact of the New Banking Facilities for the forecast period from 1 July 2013 to Completion of the Offer.

2 Includes $65.6 million of restructuring and transaction costs expensed to the statutory forecast consolidated statement of profit or loss in FY2014. An additional $6.7 million of non-cash costs have been recognised in the statutory forecast consolidated statement of profit or loss as presented in Table 7. Certain transaction costs of $11.3 million are expected to be paid in FY2015. Transaction costs of $66.3 million have been recognised in the FY2014 statutory forecast consolidated statement of cash flows and assumed to be capitalised to the consolidated statement of financial position at Completion of the Offer.

3 Recognises, on a pro forma basis, the additional expenses as a result of being a listed public company from 1 July 2013 to Completion of the Offer, consistent with the pro forma forecast consolidated statement of profit or loss in FY2014.

4 Distribution to Shareholders in H1FY2014 reflects return of capital ($298.0 million) and dividends paid ($148.5 million).

5. Net repayment of Existing Banking Facilities includes proceeds of $522.5 million (net of receipts from security plan loans) received in H1FY2014 and repayments of $1,218.5 million at Completion of the Offer.

6. The fees incurred with the establishment of the New Banking Facilities will be capitalised and amortised on a straight-line basis over the terms of the loans. Refer to Section 3.6.

7. Changes in Working Capital differences reflect the statutory net cash flow associated with provisions recognised through the purchase price allocation process primarily related to the restructuring initiatives of Spotless management. These cash flows have been excluded on a pro forma basis.

11.3

–

–

–

–

–


3.8 management discussion and analysis of the Pro forma Historical financial information

3.8.1 General factors affecting the operating and financial performance, including key measures and their drivers

Set out below is a discussion of the general factors which affected Spotless’ operations and relative financial performance in FY2011, FY2012, FY2013, H1FY2013 and H1FY2014 and which the Directors expect may continue to affect it in the future.

The discussion of those general factors is intended to provide a brief summary only and does not detail all the factors that affected Spotless’ historical operating and financial performance, nor everything which may affect its operations and financial performance in the future.

In August 2012, Spotless Group Limited was acquired by Pacific Industrial Services, an entity owned by the PEP Shareholders, the Coinvestment Shareholders and the Management Shareholders. Following completion of the acquisition, the new management team was able to move quickly to implement its new strategy designed to establish a culture of performance and an organisation-wide focus on profitability. Refer to Section 2.1.4 for further details.

Revenue

Spotless earns the majority of its revenue from customer contracts and other standing arrangements.

The Facility Services segment earns revenue from the performance of a wide variety of services including facilities management, catering and cleaning. Some catering contracts (such as stadia and airports) include the provision of retail food services where Spotless generates revenue for the sale of goods directly to consumers.

In the Laundries segment, Spotless earns revenue both under contract and under longstanding customer arrangements. Revenue is a function of the volume of laundry processed and the unit charges of both rented and sold items.

Drivers of Spotless’ revenue in both Facility Services and Laundries can be identified at three levels:

• Industry demand – this includes the level of economic growth and demographic factors which drive the overall demand for the services that Spotless provides. In the shorter term, the key driver of demand is underlying activity and growth in outsourcing. Key drivers for each customer sector are detailed in Section 2.5;

• Winning and retaining contracts – Spotless derives most of its revenue under multi-year customer contracts. Spotless’ rate of success in winning new contracts and retaining existing contracts when they come up for renewal is the most important driver of revenue; and

• Existing contract performance – revenue levels within an existing contract can vary over time based on a number of factors, for example a change in scope or volume of services required under a contract.

Spotless’ total revenue consists of Sales Revenue, Legacy Pass Through Revenue and Other Income, which are explained in Section 3.3. Management considers Sales Revenue to be the most appropriate measure of the revenue generated by Spotless’ operations.

Operating expenses

Spotless’ operating expense line items are:

• Direct employee costs – costs of labour to perform services, supply goods and perform head office functions;

• Subcontractor costs – costs of subcontractors engaged to provide additional capacity and provide services that augment Spotless’ current capabilities;

• Cost of goods sold – costs of materials and supplies that Spotless uses to perform its services, including building supplies and hardware, cleaning products, linen and work-wear, food and beverages and office supplies;

ProsPectus 97


98

• Other costs – costs such as occupancy costs, professional costs, transportation costs, payments for catering rights and other expenses; and

• Legacy Pass Through Costs – reimbursed costs that are directly associated with Legacy Pass

Through Revenue. Refer to Section 3.3.

The majority of costs including direct employee costs, subcontractor costs, cost of goods sold and other costs, are embedded within the service delivery of particular contracts and are therefore variable for contract wins and losses.

EBITDA and EBITDA Margins

Facility Services

The Facility Services segment EBITDA reflects revenue from customer contracts and other standing arrangements, less costs relating to the delivery of these services. Key costs are direct labour and employee on-costs, subcontractor costs, cost of goods sold and overhead costs. Both Facility

Services Segment EBITDA and EBITDA Margins are presented after Allocation of Corporate

Overheads, as described in Section 3.3.

While management has undertaken initiatives that have reduced costs across the Facility

Services segment, including a procurement review and labour management initiatives, Spotless generally manages the costs of providing services and evaluates profitability at an EBITDA level on a contract-by-contract basis, particularly focusing on ensuring that each contract generates an acceptable EBITDA Margin.

Laundries

The Laundries segment EBITDA reflects revenue from customer contracts, typically rental and fee-for-service contracts and other standing arrangements, less costs including rent, labour, electricity, gas, water, fuel and vehicle running costs. Laundries segment EBITDA Margins are consistently higher than those for the Facility Services segment, reflecting the higher level of capital intensity inherent in operating a portfolio of industrial laundry facilities. Both Laundries Segment

EBITDA and EBITDA Margins are presented after Allocation of Corporate Overheads, as described in Section 3.3.

Depreciation

Depreciation expense comprises depreciation of fixtures, fittings and equipment across the Facility

Services and Laundries segments. The Laundries segment includes an additional depreciation category for laundry rental stock assets, being a pool of linen and garments owned by Spotless and rented to customers.

Working Capital

Working Capital comprises current trade and other receivables, inventory, prepayments, trade and other payables, current provisions and other current creditors.

Given the magnitude of revenue inflow and cost outflow, Working Capital can vary significantly across a month, with Working Capital generally peaking in the middle of the month. The variability in Working

Capital means that point-to-point movements in balances may not accurately reflect the average changes of Working Capital in the business. Intra-month cash balances can therefore vary by up to approximately $50 million from those reported at month end.

As Spotless revenue rises, there is generally a requirement to increase Working Capital as trade receivables grow (partly offset by increases in trade payables and higher employee related provisions). Typical trading terms for customer contracts are 30 days from invoice. Typical trading terms for subcontractors are seven to 30 days and other suppliers are typically 30 to 50 days.

Further, the bulk of Spotless’ workforce is paid on a weekly basis (as measured by employee numbers and gross wages paid). Spotless’ inventory movements are generally not a significant driver of changes in Working Capital.


The new management team has brought a renewed focus to managing Working Capital. Debtor management has been improved through decentralisation of accounts receivable accountabilities to the relevant customer sectors, with relationship and service delivery managers better positioned to discuss invoicing directly with customers. Weekly meetings are held with the Chief Operating Officer,

Group General Managers, sector General Managers and Customer Managers to monitor and review debtor levels.

Spotless management monitor debtor levels by using a ratio of debtor days outstanding. Spotless calculates this measure, expressed in days outstanding, by dividing current trade debtor balances by historical Sales Revenue (excluding Legacy pass-through revenue). Spotless management measure debtor days outstanding using trade receivables (i.e. customer invoiced revenue) only, excluding other receivables and amounts where a customer invoice has not been issued. As at 31 December 2013 debtor days on this calculation basis were approximately 33 days.

Further, Spotless management monitor creditor levels by using a ratio of creditor days outstanding.

Spotless calculates this measure, expressed in days outstanding, by dividing current trade creditor balances by historical expenditure (excluding labour costs). Spotless management measure creditor days outstanding using trade payables (ie. received creditor invoices)only, excluding other payables and amounts where a creditor invoice has not been received. As at 31 December 2013 creditor days on this calculation basis were approximately 44 days.

As part of its procurement overhaul since the 2012 Acquisition, Spotless has successfully restructured its supplier arrangements impacting both pricing and payment terms. Changes to payment practices are expected to result in a reduction of payables outstanding by 30 June FY2014, to what management believes is a more sustainable long term level.

Capital Expenditure

Spotless has several categories of Capital Expenditure.

Fixtures, fittings and equipment

For Facility Services, Capital Expenditure on fixtures, fittings and equipment is primarily expenditure required to service specific customer contracts, including the establishment of new contracts. Given the breadth of services Spotless provides, the capital items are quite varied in nature, including for example, kitchen and restaurant fit outs and street sweeping equipment. In the Laundries segment,

Capital Expenditure includes expenditure for both the maintenance of existing equipment as well as investments to drive plant efficiency or to increase capacity.

Laundry rental stock

The Laundries segment business model involves renting of linen, workwear and other textile garments.

Capital Expenditure on laundry rental stock is expenditure to either replenish or grow the pool of rental stock. It includes Maintenance Capital Expenditure where the expenditure is required to replenish existing stock and Growth Capital Expenditure where additional stock is required for material new work.

SAP IT implementation (SAP IT Capital Expenditure)

Spotless invested a total of $102.9 million in Capital Expenditure over FY2011, FY2012 and FY2013 on the implementation of new SAP enterprise resource planning software. Immediately following the

2012 Acquisition, a review of the existing SAP and related implementation program was undertaken, resulting in a more focused scope. The SAP roll out is expected to be materially completed during

FY2015. A total investment of $24.0 million in Capital Expenditure over FY2014 and FY2015 is required to materially complete the implementation. Refer to Section 2.11 for further details.

ProsPectus 99


3.8.2 Pro forma historical consolidated statements of profit or loss: fy2011 compared to fy2012

Table 21 sets out the summary pro forma historical consolidated statements of profit or loss for

FY2011 and FY2012.

table 21 Selected pro forma historical consolidated statements of profit or loss: fy2011 compared to fy2012


June year end

$ million

Sales revenue



Base and Township

Facility Services Sales Revenue

Laundries (Laundry and Linen)

Sales Revenue

Sales revenue

Total revenue ebitda

Facility Services EBITDA

Laundries EBITDA ebitda ebita

Note

1

2

2 fy2011

832.6

910.7

372.5

2,115.8

248.8

2,364.6

2,505.0

80.4

65.8

146.2

fy2012

793.0

906.7

452.5

2,152.2

259.7

2,411.9

2,574.5

73.5

66.1

139.6

change

(39.6)

(4.0)

+80.0

+36.4

+10.9

+47.3

+69.5

(6.9)

+0.3

(6.6) change %

(4.8%)

(0.4%)

21.5%

1.7%

4.4%

2.0%

+2.8%

(8.6%)

0.5%

(4.5%)

Facility Services EBITA 2 63.3

54.9

(8.4) (13.3%)

Laundries EBITA 2 28.5

27.7

(0.8) (2.8%) ebita 91.8

82.6

(9.2) (10.0%)

Notes:

1 Total revenue includes Sales Revenue, Legacy Pass Through Revenue and Other Income. Refer to Section 3.3.

2 Segment EBITDA and Segment EBITA are based on Segment Contribution after Allocation of Corporate Overheads. Corporate overheads have been attributed to the segment on the basis of the proportion of Sales Revenue generated by the segment. Refer to Section 3.3.

Sales Revenue

Sales Revenue increased by $47.3 million, from $2.36 billion to $2.41 billion, an increase of 2.0%, driven by an increase in the Base and Township and the Laundry and Linen customer sectors, partially offset by declines in the Health, Education and Government and the Commercial and Leisure customer sectors:

• Health, education and Government decreased by $39.6 million, from $832.6 million to

$793.0 million, a decrease of 4.8%. The decrease was driven by the unsuccessful retender of one material Education contract and the loss of a number of smaller contracts, partially offset by the commencement of new contracts and revenue increases within existing contracts, particularly in Health and Government;

• commercial and Leisure decreased by $4.0 million, from $910.7 million to $906.7 million, a decrease of 0.4%. The decrease was driven by a decline in Business and Industry partially offset by a range of new contract wins as well as increased event related activity in Leisure,

Sports and Entertainment;


• base and township increased by $80.0 million, from $372.5 million to $452.5 million, an increase of 21.5%. The increase was driven by strong growth in resources camp services through the full year impact of a number of large contracts mobilised in FY2011, new contract wins during the year and higher occupancy levels. This was partially offset by a decline in Defence sub-sector revenue due to lower activity levels when compared with that for the prior year; and

• Laundry and Linen increased by $10.9 million, from $248.8 million to $259.7 million, an increase of 4.4%. The increase was largely driven by higher volumes with existing customers, offset in part by net customer churn.

EBITDA

EBITDA decreased by $6.6 million, from $146.2 million to $139.6 million, a decrease of 4.5%. This was driven by a decrease in Facility Services EBITDA of $6.9 million, partially offset by an increase in Laundries EBITDA of $0.3 million.

Facility Services EBITDA Margin decreased from 3.8% to 3.4%. EBITDA was negatively impacted by a number of large unprofitable contracts entered into prior to the 2012 Acquisition, which have subsequently been exited. EBITDA was also negatively impacted by unplanned mobilisation costs associated with a number of new contracts In addition, higher operational expenditure was incurred following the transition to the new SAP IT platform across cleaning contracts.

Laundries EBITDA Margin decreased from 26.4% to 25.5%, with revenue growth more than offset by cost growth, particularly higher management and administrative expenditure.

Depreciation

Depreciation expense increased by $2.6 million, from $54.4 million to $57.0 million, an increase of

4.8%. This was primarily due to higher Capital Expenditure in FY2011 and FY2012 when compared with that in previous periods, relating to the commencement of new contracts and the construction of a new laundry in Queensland.

3.8.3 Pro forma historical consolidated statements of cash flows: fy2011 compared to fy2012

Table 22 sets out the summary pro forma historical consolidated statements of cash flows for FY2011 and FY2012.

table 22 Selected pro forma historical consolidated statements of cash flows: fy2011 compared to fy2012


June year end

$ million Note fy2011 fy2012 ebitda

Add: non-cash charge / (credit) for share-based payments



1

2

146.2

2.7

(46.8)

(74.6)

139.6

(1.0)

(54.9)

(60.1)

SAP IT Capital Expenditure (20.6) (48.0) net cash flow before financing and taxation 6.9

(24.4)

Notes:

1 Working Capital comprises current trade and other receivables, inventory, prepayments, trade and other payables, current provisions and other current creditors. Refer to Section 3.3.

2 Capital Expenditure includes Maintenance Capital Expenditure and Growth Capital Expenditure. Refer to Section 3.3.

ProsPectus 101


Changes in Working Capital

Working Capital increased by $54.9 million during the period. Throughout FY2012, average trade receivables increased significantly driven in part by invoicing issues associated with the launch of the

SAP IT system. Aged debtors also grew as a result of a number of disputed invoices. On average, other elements of Working Capital remained relatively stable.


Total Capital Expenditure increased by $12.9 million, from $95.2 million to $108.1 million, an increase of 13.6%, driven by:

• lower levels of Capital Expenditure on fixtures, fittings and equipment (declined from $43.8 million to $28.5 million) with declines in spending in the Facility Services and corporate support areas, partly offset by a small increase in Laundries Capital Expenditure;

• higher laundry rental stock spending, which increased from $30.8 million to $31.6 million; and

• significantly increased spending on the SAP IT project, which increased from $20.6 million to $48.0 million.

3.8.4 Pro forma historical consolidated statements of profit or loss: fy2012 compared to fy2013

Table 23 sets out the summary pro forma historical consolidated statements of profit or loss for FY2012 and FY2013.

table 23 Selected pro forma historical consolidated statements of profit or loss: fy2012 compared to fy2013


June year end

$ million

Sales revenue



Base and Township

Facility Services


Sales revenue




Facility Services EBITA

Laundries EBITA ebita


Note

1

2

2

2

2 fy2012

793.0

906.7

452.5

2,152.2

259.7

2,411.9

2,574.5

73.5

66.1

139.6

54.9

27.7

82.6

fy2013

857.0

866.5

483.4

2,206.9

261.8

2,468.7

2,585.9

103.8

62.4

166.2

88.7

24.3

113.0

change

+64.0

(40.2)

+30.9

+54.7

+2.1

+56.8

+11.4

+30.3

(3.7)

+26.6

+33.8

(3.4)

+30.4

change %

41.2%

(5.6%)

19.1%

61.6%

(12.3%)

36.8%

8.1%

(4.4%)

6.8%

2.5%

0.8%

2.4%

0.4%


Sales Revenue

Sales Revenue increased by $56.8 million, from $2.41 billion to $2.47 billion, an increase of 2.4%.

The increase was driven by an increase in the Health, Education and Government and the Base and Township customer sectors, partially offset by a decline in the Commercial and Leisure customer sector:

• Health, education and Government increased by $64.0 million, from $793.0 million to

$857.0 million, an increase of 8.1%. The increase was primarily driven by higher volumes within existing Government contracts along with higher revenue resulting from a number of Health contracts ramping up to full operation during the period. Growth in revenue from existing Education contracts was largely offset by a number of contract losses during the period;

• commercial and Leisure decreased by $40.2 million, from $906.7 million to $866.5 million, a decrease of 4.4%. The decrease included the part year effect of voluntarily exiting a number of unprofitable Business and Industry contracts, including two material contracts and a range of smaller contracts. Leisure, Sports and Entertainment revenue also declined driven by lower major event revenue;

• base and township increased by $30.9 million, from $452.5 million to $483.4 million, an increase of 6.8%, driven by higher revenue from existing Defence contracts and new Resources contracts, partly offset by lower revenue in some Resources contracts due to lower activity levels and a lost

Defence contract; and

• Laundry and Linen increased by $2.1 million, from $259.7 million to $261.8 million, an increase of 0.8%, driven by higher volumes within existing contracts, partially offset by lower revenue from a material repriced contract.

EBITDA

EBITDA increased by $26.6 million, from $139.6 million to $166.2 million, an increase of 19.1%. This was driven by an increase in Facility Services EBITDA of $30.3 million, partially offset by a decrease in Laundries EBITDA of $3.7 million.

EBITDA benefited by the new management team’s focus on addressing the cost base, following the

2012 Acquisition. The cost reduction program included:

• reduction in administrative and management roles;

• review of procurement practices and renegotiation of many supplier contracts;

• consolidation of laundry sites;

• implementation of improved labour management practices; and

• detailed contract performance reviews, including exiting a number of marginal and unprofitable contracts.

The initiatives were implemented progressively following the 2012 Acquisition and, as a result, only a part year benefit of the savings is reflected in the FY2013 results. Over the period, total corporate overheads and support costs (including allocated and unallocated) reduced by $9.3 million, from

$92.9 million to $83.6 million. Further detail on the program to address the cost base is detailed in

Section 2.1.4.

Facility Services EBITDA Margin increased from 3.4% to 4.7%, reflecting the in-year impact of the management actions described above.

Laundries EBITDA Margin decreased from 25.5% to 23.8%, driven by lower margins on retendered contracts, including one material contract, and a change in purchasing arrangements relating to rental stock. These impacts were partly offset by the in-year impact of lower management and administrative costs following the 2012 Acquisition and the consolidation of laundry sites.

ProsPectus 103


Depreciation

Depreciation expense decreased by $3.8 million, from $57.0 million to $53.2 million, a decrease of

6.7%. This was primarily due to a reduction in the carrying value of fixed assets, which, as required under Australian Accounting Standards, were reviewed following completion of the 2012 Acquisition.

3.8.5 Pro forma historical consolidated statements of cash flows: fy2012 compared to fy2013

Table 24 sets out the summary pro forma historical consolidated statements of cash flows for

FY2012 and FY2013.

table 24 Selected pro forma historical consolidated statements of cash flows: fy2012 compared to fy2013


June year end


(Less) / add: non-cash (credit) / charge for share-based payments





Note

1

2 fy2012

139.6

(1.0)

(54.9)

(60.1)

(48.0)

(24.4) fy2013

166.2

1.0

7.0

(60.1)

(34.3)

79.8


Working capital decreased by $7.0 million during the period. Following the 2012 Acquisition, the new management team brought a renewed focus on the management and collection of receivables, achieving a significant reduction in average trade receivable balances through the year. This included addressing the invoicing issues during the SAP implementation and resolving disputed invoices.

Trade receivables at 30 June 2013 were above average and this peak is reflected in the minimal changes in Working Capital on a year-end to year-end basis. On average, other elements of Working

Capital remained relatively stable.


Total Capital Expenditure declined by $13.7 million, from $108.1 million to $94.4 million, a decrease of 12.7%, driven by:

• higher levels of Capital Expenditure on fixtures, fittings and equipment (increased from

$28.5 million to $30.3 million) driven by Capital Expenditure on Laundries plant and equipment to drive efficiency gains;

• lower laundry rental stock spending, which declined from $31.6 million to $29.9 million; and

• lower spending on the SAP IT project resulting from a more focused project scope under new management, with spending reduced from $48.0 million to $34.3 million.

3.8.6 Pro forma historical consolidated statements of profit or loss: H1fy2013 compared to H1fy2014

Table 25 sets out the summary pro forma historical consolidated statement of profit or loss for

H1FY2013 and H1FY2014.


table 25 Selected pro forma historical consolidated statements of profit or loss items: H1fy2013 compared to H1fy2014


$ million

Sales revenue



Base and Township

Facility Services


Sales revenue







Note

1

2

2

2

2

H1fy2013

404.2

450.4

232.4

1,087.0

132.7

1,219.7

1,285.3

24.6

26.9

51.5

16.8

8.1

24.9

H1fy2014

450.3

385.6

277.6

1,113.5

132.5

1,246.0

1,285.9

84.4

36.0

120.4

75.6

17.1

92.7

change

+46.1

(64.8)

+45.2

+26.5

(0.2)

+26.3

+0.6

+59.8

+9.1

+68.9

+58.8

+9.0

+67.8

change %

243.1%

33.8%

133.8%

350.0%

111.1%

272.3%

11.4%

(14.4%)

19.4%

2.4%

(0.2%)

2.2%

+0.0%

Revenue

Sales Revenue increased by $26.3 million, from $1.22 billion to $1.25 billion, an increase of 2.2%.

The overall increase was driven by an increase in the Health, Education and Government and the

Base and Township customer sectors, partially offset by declines in the Commercial and Leisure and the Laundry and Linen customer sectors:

• Health, education and Government increased by $46.1 million, from $404.2 million to

$450.3 million, an increase of 11.4%, driven by higher activity levels and volumes within existing

Government and Health contracts, partly offset by lost Education contracts;

• commercial and Leisure decreased by $64.8 million, from $450.4 million to $385.6 million, a decrease of 14.4%, reflecting the impact of contracts voluntarily exited during the prior financial year and contracts lost during the period, with these impacts partly offset by higher activity levels within existing contracts and new contract wins;

• base and township increased by $45.2 million, from $232.4 million to $277.6 million, an increase of 19.4%, driven by mix of performance across the portfolio, with higher activity levels in a number of contracts across both Resources and Defence, partly offset by lower activity levels within several

Resources contracts; and

• Laundry and Linen decreased by $0.2 million, from $132.7 million to $132.5 million, a decrease of 0.2%, driven by lost contracts, partly offset by foreign exchange gains on New Zealand dollar denominated revenue.

ProsPectus 105


EBITDA

EBITDA increased by $68.9 million, from $51.5 million to $120.4 million, an increase of 133.8%.

This was driven by an increase in Facility Services EBITDA of $59.8 million and Laundries EBITDA of $9.1 million.

Facility Services EBITDA Margin increased from 2.3% to 7.6%, as the impact of the management cost reduction and efficiency initiatives implemented in both the prior period and the current period flowed through the business. Refer to Section 2.1.4 for further detail.

Laundries EBITDA Margin increased from 20.3% to 27.2%, driven by improved plant and distribution productivity, in addition to the impact of the program to address the cost base, detailed in

Section 2.1.4.

Corporate overhead costs were reduced as a result of the program to address the cost base, with both Facility Services and Laundries EBITDA Margins benefiting from these initiatives.

The decrease in direct employee costs was partially offset by an increase in subcontractor costs, driven by a change in labour type required to service contracts during the period.

Depreciation

Depreciation expense increased by $1.1 million, from $26.6 million to $27.7 million, an increase of

4.1%. This was primarily due to Capital Expenditure exceeding depreciation on fixtures, fittings and equipment during the prior period, influencing depreciation expense for a full six months. Rental stock depreciation remained relatively stable.

3.8.7 Pro forma historical consolidated statements of cash flows: H1fy2013 compared to H1fy2014

Table 26 sets out the pro forma historical consolidated statements of cash flows for H1FY2013 and H1FY2014 table 26 Selected pro forma historical consolidated statements of cash flows: H1fy2013 compared to H1fy2014








Note

1

2

H1fy2013

51.5

0.5

27.3

(39.6)

(22.8)

16.9

H1fy2014

120.4

0.5

(55.8)

(28.5)

(4.9)

31.7


Working Capital increased by $55.8 million during the period, primarily driven by a reduction in trade payables, together with a decrease in employee provisions as holiday leave balances were managed over the summer. As part of its procurement review, management successfully restructured the supplier arrangements; in aggregate, this resulted in a reduction in average prices paid to suppliers but also a reduction in payment days. Changes to payment practices are expected to result in a reduction of payables outstanding by 30 June FY2014, to what management believe is a more sustainable long term level.



Total Capital Expenditure declined by $29.0 million, from $62.4 million to $33.4 million, a decrease of 46.5%, driven by:

• significantly lower levels of Capital Expenditure on fixtures, fittings and equipment (decreased from

$24.9 million to $14.0 million), particularly in the Facility Services and corporate support areas, offset by higher levels of Laundries Capital Expenditure on more efficient plant and equipment;

• lower laundry rental stock spending, which declined from $14.7 million to $14.5 million; and

• materially lower spending on the SAP IT project, resulting from a tighter project scope under new management, with spending reduced from $22.8 million to $4.9 million.

3.9 forecast financial information

The basis of preparation of the FY2014 and FY2015 Forecast Financial Information is detailed in

Section 3.2. This Section 3.9 details the general assumptions, Directors’ best estimate assumptions and specific assumptions adopted in preparing the Forecast Financial Information.

3.9.1 General assumptions

The following general assumptions are relevant to the Forecast Financial Information:

• there is no material change in the competitive and operating environments in which

Spotless operates;

• there is no change in applicable Australian Accounting Standards and IFRS that would have a material impact on Spotless’ accounting policies, financial reporting or disclosure requirements;

• there is no significant deviation from current market expectations of the broader economic conditions including exchange rates relevant to the Australian and New Zealand segments under which Spotless and its key customers operate;

• there is no material change in the legislative regimes (including taxation) and regulatory environment in which Spotless and its customers operate;

• there are no material losses of customers or contracts beyond those incorporated in the forecasts;

• there is no material amendment to any material agreement relating to Spotless’ business other than as disclosed in this Prospectus;

• there are no significant disruptions to the continuity of operations of Spotless and there are no other material changes in Spotless’ business;

• no material acquisitions or divestments are completed;

• there are no material changes to Spotless’ corporate and funding structure other than as set out in, or contemplated by, this Prospectus;

• there is no loss of key management personnel and Spotless will maintain the ongoing ability to recruit and retain required personnel;

• there is no material litigation that will arise or be settled to the benefit or detriment of Spotless;

• there are no material contingent liabilities that will arise or be realised to the detriment of Spotless;

• the Offer proceeds in accordance with the key dates set out on page 6 of this Prospectus; and

• none of the risks set out in Section 4 occurs.

ProsPectus 107


3.9.2 directors’ best estimate assumptions

The Forecast Financial Information includes Spotless’ reviewed results for H1FY2014 and the actual trading results for January and February 2014.

The Forecast Financial Information is based on various best estimate assumptions, of which the key assumptions are set out below. The assumptions below are a summary only and do not represent all factors that will affect Spotless’ forecast financial performance. This information is intended to assist investors in assessing the reasonableness and likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur. It should be read in conjunction with the basis of preparation of the Forecast Financial Information set out in Section 3.2, the general assumptions set out in this Section 3.9 and the risk factors set out in Section 4.

The Directors’ best estimate assumptions are categorised below:

• Existing business and support functions – the forecast for the existing business is constructed on a contract-by-contract basis considering the key drivers underlying each contract (including applying the price and cost escalator as applicable in each contract, expectations of activity levels such as scope expansion or contraction and expected productivity changes as applicable). Assumptions reflect management knowledge of the contract, customer communication about expected outlook, market conditions and current foreign exchange rates where relevant;

• Full year effect of contract wins and losses in the prior period – each forecast period includes the full year impact of contracts that have been won or lost in a prior period. For FY2015, this includes net new business assumed to be won between 28 February 2014 and 30 June 2014;

• Net new business – the forecast for net new business is constructed on a contract-by-contract basis considering potential losses of existing contracts that are due to be retendered during the forecast period, together with new contracts expected to be won during the forecast period.

For material contracts due to be renewed, the probability of renewal has been assessed by management for each contract taking into account specific knowledge of the contract. For smaller contracts, renewal rates consistent with recent experience have been applied. New business wins in the forecast period are based on opportunities that were identified at the time of constructing the forecast. Opportunities were assessed for expected contract start date, and were probability weighted by management after considering the current status of the tender (e.g. where Spotless has been advised it is the preferred provider), knowledge of the number of providers tendering for the work and consideration of whether the contract is a:

– scope increase for an existing customer;

– new outsourcing opportunity not previously outsourced to a professional provider; or

– contract currently delivered on an outsourced basis by a competitor to Spotless.

Overall forecast win rates are consistent with management’s experience since the 2012

Acquisition. The forecast does not include unidentified opportunities that may come to tender during the forecast period other than in the Laundries segment, which includes an amount of unidentified growth from small customers that is based on historic experience; and

• Specific initiatives – the forecast includes the impact of various cost saving initiatives. These include initiatives that have been implemented and for which the full year impact has not yet been achieved, initiatives that are currently being implemented, and initiatives that have been planned and are expected to be implemented during the forecast period.


3.9.3 Specific assumptions

For FY2014, the forecast includes actual trading performance of Spotless up until 28 February 2014.

As set out in Section 2.7, Spotless has identified contract opportunities which are expected to come to market in FY2014 and FY2015 ( New Contract Opportunities ).

The New Contract Opportunities include approximately 200 contracts with an annualised revenue opportunity of approximately $1.5 billion, consisting of:

• Health, Education and Government – contracts with an annualised revenue opportunity of approximately $0.9 billion;

• Commercial and Leisure – contracts with an annualised revenue opportunity of approximately

$0.3 billion;

• Base and Township – contracts with an annualised revenue opportunity of approximately

$0.1 billion; and

• Laundries and Linen – contracts with an annualised revenue opportunity of approximately

$0.1 billion.

These opportunities comprise:

• scope increase for an existing customer – contracts with an annualised revenue opportunity of approximately $0.2 billion;

• new outsourcing opportunity not currently outsourced to a professional provider – contracts with an annualised revenue opportunity of approximately $0.7 billion; and

• contract currently delivered on an outsourced basis by a competitor to Spotless – contracts with an annualised revenue opportunity of approximately $0.6 billion.

The New Contract Opportunities used for the purpose of setting the Prospectus forecast does not assume any contribution from the Resources and Immigration market potential of $0.6 billion and

$2.0 billion respectively, discussed in Section 2.7.

ProsPectus 109


3.9.4 Pro forma consolidated statements of profit or loss: fy2013 compared to fy2014

Table 27 sets out the pro forma historical consolidated statement of profit or loss for FY2013 compared to the pro forma forecast consolidated statement of profit or loss for FY2014.

table 27 Selected pro forma consolidated statements of profit or loss items: fy2013 compared to fy2014



June year end

$ million

Sales revenue



Base and Township

Facility Services


Sales revenue







Note

1

2

2

2

2 fy2013

857.0

866.5

483.4

2,206.9

261.8

2,468.7

2,585.9

103.8

62.4

166.2

88.7

24.3

113.0

fy2014

927.1

739.7

556.9

2,223.7

254.9

2,478.6

2,560.6

175.8

73.0

248.8

158.1

35.7

193.8

change

+70.1

(126.8)

+73.5

+16.8

(6.9)

+9.9

(25.3)

+72.0

+10.6

+82.6

+69.4

+11.4

+80.8

change %

69.4%

17.0%

49.7%

78.2%

46.9%

71.5%

8.2%

(14.6%)

15.2%

0.8%

(2.6%)

0.4%

(1.0%)

Sales Revenue

Sales Revenue is forecast to increase modestly from $2.47 billion to $2.48 billion, an increase of 0.4%.

Overall growth is driven by an increase in the Health, Education and Government and the Base and

Township customer sectors, offset by declines in the Commercial and Leisure and the Laundry and

Linen customer sectors:

• Health, education and Government is forecast to increase by $70.1 million, from $857.0 million to $927.1 million, an increase of 8.2%. Forecast growth is driven by Government and Health, partially offset by a decline in Education. The majority of Government growth during FY2014 is attributable to additional activity within existing contracts together with the part year effect of net new business in the forecast period. Growth in Health is driven by higher activity levels within a number of Health contracts, including one material contract, and mobilisation revenue for two

Health PPP contracts. The forecast decline in Education is primarily driven by the loss of a number of tertiary and secondary education contracts, in a year during which an above average number of contracts in the Education portfolio are due for renewal. These losses are expected to be partly offset by higher revenue from PPP contracts;


• commercial and Leisure is forecast to decrease by $126.8 million, from $866.5 million to

$739.7 million, a decrease of 14.6%. The forecast decline is driven by Business and Industry, partially offset by growth in Leisure, Sports and Education. The decline in Business and Industry partially reflects the impact of contracts voluntarily exited as part of management’s program to exit marginal and unprofitable contracts, together with other contract churn during the period.

The forecast increase in Leisure, Sports and Entertainment revenue is mainly driven by expected strong performance at four key stadia and conference centres and the annualised impact of a new

Australian venue contract mobilised during FY2013, offset by expected lower revenue from three stadia contracts and the voluntary exit from a major cleaning contract with low levels of profitability;

• base and township is forecast to increase by $73.5 million, from $483.4 million to $556.9 million, an increase of 15.2%. Forecast growth is expected to be driven by an increase in Resources, with additional growth in existing Defence contracts. Resources forecast growth is driven by the annualised impact of new camp services contracts mobilised during FY2013 and FY2014 across the Pilbara and Surat Basin regions. Growth in Defence is forecast to be largely driven by increased activity levels within existing Australian contracts, partly offset by lower activity within

New Zealand contracts; and

• Laundry and Linen is forecast to decrease by $6.9 million, from $261.8 million to $254.9 million, a decrease of 2.6%. The forecast decline in revenue is primarily due to the loss of a national workwear garment contract, partly offset by higher revenue and volumes from existing customers, particularly in healthcare.

EBITDA

EBITDA in FY2014 is forecast to increase by $82.6 million, from $166.2 million to $248.8 million.

As described in the specific assumptions, the forecast includes Spotless’ reviewed results for

H1FY2014 and the actual unaudited trading results for January and February 2014.

During the period, management continued to implement the cost and efficiency program. The forecast FY2014 result includes the full year impact of initiatives implemented in FY2013, together with a part year impact of initiatives implemented in FY2014, the majority of which have been implemented as at 28 February 2014.

Net new business for the period from 28 February 2014 to 30 June 2014 includes the part year effect on a probability weighted basis of a number of new Government opportunities which management expects to commence during the period.

Facility Services EBITDA Margin is forecast to increase from 4.7% to 7.9%, reflecting benefits of the program to address the cost base, together with stronger margins from PPP contracts.

Laundries EBITDA Margin is expected to increase from 23.8% to 28.6%, reflecting the benefits of the cost-out program.

Depreciation

Depreciation expense is forecast to increase by $1.8 million, from $53.2 million to $55.0 million, an increase of 3.4%. This is primarily due to higher forecast depreciation in the Facility Services and corporate support areas, offset by a reduction in forecast depreciation of laundry rental stock.

ProsPectus 111


3.9.5 Pro forma consolidated statements of cash flows: fy2013 compared to fy2014

Table 28 sets out the summary pro forma historical consolidated statement of cash flows for FY2013 compared to the pro forma forecast consolidated statement of cash flows for FY2014.

table 28 Selected pro forma consolidated statements of cash flows: fy2013 compared to fy2014



June year end







Note

1

2 fy2013

166.2

1.0

7.0

(60.1)

(34.3)

79.8

fy2014

248.8

1.0

(76.8)

(66.1)

(10.9)

96.0


Working Capital is forecast to increase by $76.8 million during the period, primarily driven by a reduction in trade payables, together with a decrease in employee provisions as holiday leave balances were managed over the summer. As part of its procurement review, management successfully restructured the supplier arrangements; in aggregate, this resulted in a reduction in average prices paid to suppliers but also a reduction in payment days. Changes to payment practices have resulted in a reduction of payables days to what management believes is a more sustainable long term level.


Total Capital Expenditure is forecast to decrease by $17.4 million from $94.4 million to $77.0 million, a decline of 18.4%, driven by:

• higher Capital Expenditure on fixtures, fittings and equipment, which is forecast to increase from

$30.2 million to $39.0 million. In FY2014, other general investment comprised $13.8 million of

Maintenance Capital Expenditure and $25.2 million of Growth Capital Expenditure. The Growth

Capital Expenditure is primarily in the Commercial and Leisure and the Base and Township customer sectors to support new contracts and businesses;

• lower laundry rental stock investment, which is forecast to decrease from $30.0 million to

$27.2 million, is driven by procurement savings on laundry rental stock. In FY2014, laundry rental stock is expected to comprise $25.0 million of Maintenance Capital Expenditure and $2.2 million of Growth Capital Expenditure related to new contracts and customers; and

• significantly lower SAP IT Capital Expenditure, which is forecast to decline from $34.3 million to $10.9 million, as the project nears completion.


3.9.6 Pro forma forecast consolidated statements of profit or loss: fy2014 compared to fy2015

Table 29 sets out the pro forma forecast consolidated statement of profit or loss for FY2014 and FY2015.

table 29 Selected pro forma forecast consolidated statements of profit or loss items: fy2014 compared to fy2015


June year end

$ million

Sales revenue



Base and Township

Facility Services


Sales revenue







Note

1

2

2

2

2 fy2014

927.1

739.7

556.9

2,223.7

254.9

2,478.6

2,560.6

175.8

73.0

248.8

158.1

35.7

193.8

fy2015

1,044.0

774.8

585.0

2,403.8

290.6

2,694.4

2,694.4

219.1

82.3

301.4

200.5

40.4

240.9

change

+116.9

+35.1

+28.1

+180.1

+35.7

+215.8

+133.8

+43.3

+9.3

+52.6

+42.4

+4.7

+47.1

change %

24.6%

12.7%

21.1%

26.8%

13.2%

24.3%

12.6%

4.7%

5.0%

8.1%

14.0%

8.7%

+5.2%

Sales Revenue

Sales Revenue is forecast to increase by $215.8 million, from $2.48 billion to $2.69 billion, an increase of 8.7%. This growth is expected to comprise:

• $106.1 million from existing business;

• a decline of $68.4 million from the full year effect of contract wins and losses in FY2014; and

• $178.2 million from net new business (in-year effect of contracts commencing and losses terminating during FY2015).

The categories above are explained further in the Directors’ best estimate assumptions in this

Section 3.9.

Sales Revenue for Facility Services and Laundries is outlined below:

• Health, education and Government is forecast to increase by $116.9 million, from $927.1 million to $1,044.0 million, an increase of 12.6%. The forecast includes revenue from net new business of $97.2 million.

Forecast growth is expected to come from both Health and Government, partially offset by a decline in Education. Forecast growth in Health is driven by both new business and growth within existing contracts. Forecast growth in Government is driven by new business and growth from a small number of existing integrated services contracts. The decline in Education reflects the full year impact of contracts lost during prior periods;

ProsPectus 113


114

• commercial and Leisure is forecast to increase by $35.1 million, from $739.7 million to

$774.8 million, an increase of 4.7%. The forecast includes revenue from net new business of $27.7 million.

Both the Business and Industry and Leisure, Sports and Entertainment sub-sectors are expected to deliver growth. The negative full year effect of contracts lost in FY2014 is forecast to be offset by growth in the existing portfolio. Leisure, Sports and Entertainment revenue is forecast to reflect the full year impact of contracts lost in FY2014, partially offset by increased volumes in stadia and venues and new business;

• base and township is forecast to increase by $28.1 million, from $556.9 million to $585.0 million, an increase of 5.0%. The forecast includes revenue from net new business of $23.0 million.

Both Resources and Defence are expected to contribute to revenue growth. Resources growth is driven primarily by expected new contract wins and increased volume in most major contracts, partially offset by reduction in revenue in a large Queensland contract. Defence growth reflects a change in the mix of contracts through the year; and

• Laundry and Linen revenue is forecast to increase by $35.7 million, from $254.9 million to

$290.6 million, an increase of 14.0%. The forecast includes revenue from net new business of

$30.3 million. Growth is primarily from new business, of which approximately 69% has either been won or for which Spotless is in final negotiations. A number of existing contracts are expected to have higher revenue, which will be mostly offset by the full year effect of a number of contracts either lost during FY2014 or for which the contract scope has decreased.

EBITDA

EBITDA in FY2015 is forecast to increase by $52.6 million, from $248.8 million to $301.4 million.

This growth is expected to comprise:

• $7.9 million from existing business and support functions;

• a decline of $5.7 million due to the net effect of contract wins and losses from FY2014;

• $22.4 million from net new business (in-year effect of contracts commencing and losses terminating during FY2015); and

• $28.0 million of benefit from specific initiatives.

The net effect of contract wins and losses from FY2014 includes known wins and losses prior to 28 February 2014 and the full year effect of net new business assumed to be won between

28 February 2014 and 30 June 2014, as included in the FY2014 forecast. It includes event based revenue and EBITDA for contracts such as the Cricket World Cup which are known to have been won but for which there was no (or limited) impact in FY2014.

Net new business reflects the impact of the assumed revenue wins and losses described above.

The EBITDA impact is driven by the assumed margins on these contracts, which on average is

12.6%. The average margin reflects the assumed contract mix across the Facility Services and

Laundries segments. It is also impacted by certain existing material contracts which are due be replaced by new contracting arrangements during the period. The margin on the new arrangements is expected to be materially lower than the existing margins.

The specific initiatives comprise various cost saving and efficiency initiatives addressing overheads, property, insurance and procurement, together with in-contract efficiency savings, and improved profitability from self-delivering certain services that are currently serviced by subcontractors. Of the

$28.0 million included in the forecast period, $13.5 million is expected to be delivered from initiatives that have been implemented, but for which the full year effect has not yet been delivered and

$14.5 million is from initiatives that are presently in implementation.

As a result of these changes, Facility Services EBITDA Margin is forecast to increase from 7.9% to 9.1%. Laundries EBITDA Margin is expected to decrease from 28.6% to 28.3%.


Depreciation

Depreciation expense is forecast to increase by $5.5 million, from $55.0 million to $60.5 million, an increase of 10.0%. This is primarily due to higher levels of Growth Capital Expenditure during

FY2015 with significant investments in rental stock, fixtures, fittings and equipment to support new customer contracts.

3.9.7 Pro forma forecast consolidated statements of cash flows: fy2014 compared to fy2015

Table 30 sets out the summary pro forma forecast consolidated statement of cash flows for FY2014 and FY2015.

table 30 Selected pro forma forecast consolidated statements of cash flows: fy2014 compared to fy2015


June year end

$ million Note fy2014 fy2015 ebitda



Maintenance Capital Expenditure free cash flow

Growth Capital Expenditure

Capital Expenditure (excluding SAP IT Capital Expenditure)

1

248.8

1.0

(76.8)

(38.7)

134.3

(27.4)

(66.1)

301.4

1.0

(19.1)

(37.3)

246.0

(69.9)

(107.2) 2


(10.9)

96.0

(13.1)

163.0

Free Cash Flow Conversion 3 54.0% 81.6%

Notes: Refer to Table 22 notes. In addition:

3 Free Cash Flow Conversion represents (EBITDA less change in Working Capital less Maintenance Capital Expenditure) divided by EBITDA.



Working Capital is forecast to increase by $19.1 million during the period, primarily driven by growth in trade receivables, partially offset by growth in trade payables as a result of the growth in revenues of the business.


Total Capital Expenditure is forecast to increase by $43.3 million, from $77.0 million to $120.3 million, an increase of 56.2%, driven by the net impact of the following key factors:

• lower Maintenance Capital Expenditure on fixtures, fittings and equipment across the Group, which is forecast to decrease slightly from $13.8 million to $13.5 million;

• significantly higher Growth Capital Expenditure on fixtures, fittings and equipment, which is forecast to increase from $25.2 million to $60.6 million. The increase is driven by a number of growth initiatives to support new contract revenue, across both Facility Services and Laundries.

The increase in Facility Services Capital Expenditure is primarily driven by investment in new equipment to support contracts in the Base and Township and the Commercial and Leisure customer sectors;

• lower laundry rental stock Maintenance Capital Expenditure, which is forecast to decrease from

$25.0 million to $23.8 million;

• higher laundry rental stock Growth Capital Expenditure, which is forecast to increase from

$2.2 million to $9.3 million, with growth relating to forecast linen contract wins in both Australia and New Zealand; and

ProsPectus 115


• higher Capital Expenditure on the SAP IT platform, with spending forecast to rise from

$10.9 million to $13.1 million. It is expected that the planned roll out of SAP will be materially completed during FY2015.

3.10 Sensitivity analysis

The Forecast Financial Information is based on a number of estimates and assumptions that are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Spotless, and its Directors and management, and depend upon assumptions with respect to future business developments, which are subject to change.

Investors should be aware that future events cannot be predicted with certainty and as a result, deviations from the figures forecast in this Prospectus are to be expected. To assist investors in assessing the impact of these assumptions on the forecasts, set out below is a summary of the sensitivity of certain Forecast Financial Information to changes in a number of key variables. The changes in the key variables as set out in the sensitivity analysis are not intended to be indicative of the complete range of variations that may be experienced. For the purposes of the analysis below, the effect of the changes in key assumptions on the FY2015 pro forma forecast Adjusted NPAT of

$141.8 million is presented.

The sensitivity analysis is intended as a guide only and variations in actual performance could exceed the ranges shown.

table 31 Sensitivity analysis on pro forma forecast adjusted nPat for fy2015 assumption Note variance fy2015 pro forma adjusted nPat impact ($ million)

Sales Revenue

New business – probability

New business – timing

1

2

3

+/- 1%

+/- 5%

+/- 1 month

+2.1/-2.1

+4.7/-4.4

+1.6/-2.4

Probability of renewal

Cost initiatives

Change in AUD/NZD

4

5

6

+/- 5%

+/- 5%

+/- 1c

+0.9/-0.9

+1.0/-1.0

-0.3/+0.3

Change in interest rates 7 +/- 25bps -0.6/+0.6

Notes:

1 Full year impact of an increase or decrease to Sales Revenue of 1%. Sensitivity assumes FY2015 EBITDA Margin of 11.2% to be constant on change in Sales Revenue.

2 Probability weighting of new business wins increased or reduced by 5%. Sensitivity excludes contracts that have been won or are in preferred tender status as at 28 February 2014.

3 New business wins commencing after 1 August 2014, brought forward by one month or new business wins commencing after 1 July 2014, delayed by one month.

4 For existing contracts due for retender from 1 March 2014, probability of renewal increased or decreased by 5%.

5 Benefit from cost saving and efficiency initiatives of $28.0 million assumed in FY2015, increased or decreased by 5%.

6 AUD / NZD exchange rate is increased or decreased by 1 cent, impacting earnings, depreciation and interest incurred in

New Zealand dollars.

7 Interest rate is increased or decreased by 25 basis points, impacting only the unhedged portion of the New Banking Facilities. Spotless’ interest rate hedging policy is described in Section 3.11.

Care should be taken in interpreting these sensitivities. The estimated impact of changes in each of the variables has been calculated in isolation from changes in other variables, in order to illustrate the likely impact on the forecast.

In practice, changes in variables may offset each other or be additive, and it is likely that Spotless management would respond to any adverse change in one variable by seeking to minimise the net effect on Spotless’ Adjusted NPAT.


3.11 financial risk management framework

Spotless’ activities expose it to a number of financial risks including market risk (interest rate and foreign exchange), liquidity risk and credit risk.

Spotless’ financial risk management objective is to minimise the potential adverse effects on financial performance arising from changes in financial risk. Financial risk is managed centrally by Spotless’ finance team under the direction of the Board of Directors.

Spotless does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

3.11.1 market risk

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial asset or a financial liability will change as a result of changes in market interest rates. Borrowings issued at variable rates expose Spotless to cash flow interest rate risk. The finance team manages Spotless’ cash flow interest rate 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. Spotless enters into and designates a selection of interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk.

Spotless’ interest rate policy is to fix estimated interest rate exposure at a minimum of 50% for a period of at least 12 months, or as otherwise determined by the Board.

Foreign exchange risk

Spotless’ exposure to the risk of changes in foreign exchange rates relates to Spotless’ operating activities (when revenue or expense is denominated in a different currency from Spotless’ presentation currency, primarily New Zealand dollars) and Spotless’ net investments in foreign subsidiaries (currently only New Zealand) where the value of the investments in subsidiaries is recorded in the foreign currency translation reserve.

Foreign exchange risk is managed using a combination of natural hedging and foreign exchange derivative transactions. Operating cash flows in foreign currencies are used to meet interest payments and principal repayments under foreign currency borrowings.

3.11.2 Liquidity risk

Liquidity risk is the risk that Spotless will not have sufficient funds to meet its financial commitments as and when they fall due.

The finance team manages liquidity risk through frequent and periodic cash flow forecasting and analysis. Liquidity support is provided through holding a liquidity margin in committed debt facilities.

At Completion of the Offer, Spotless expects to have unutilised committed debt facilities of approximately $150 million, of which $115 million is available to fund working capital requirements.

3.11.3 credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to Spotless. Spotless has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. Spotless 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. In addition, receivable balances are monitored on a monthly basis with the result that Spotless’ exposure to bad debts is not significant.

Spotless does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. Approximately 54% of Spotless’ pro forma Sales

Revenue in FY2013 was generated from entities backed by governments (all of which had 2013

ProsPectus 117

3. financial information continued credit ratings from Standard & Poor’s of AA or better) 90 . 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 Spotless’ maximum exposure to credit risk without taking account of the value of any collateral or other security obtained.

3.12 critical accounting judgments and estimates

Preparing financial statements in accordance with Australian Accounting Standards requires management to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.

Judgments made by management in the application of accounting standards that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to financial statements.

Refer to Appendix A of this Prospectus.

3.13 dividend policy

Depending on available profits and the financial position of Spotless, it is the current intention of the Board to pay dividends.

The Directors intend to pay out between 65% to 75% of Spotless’ Adjusted NPAT as a dividend commencing in FY2015.

The Directors anticipate that the first dividend to Shareholders will be determined in respect of the period from 1 July 2014 to 31 December 2014, and will become payable in March 2015 and will be unfranked. The Company expects the dividend in respect of the period from 1 January 2015 to

30 June 2015 will be partly franked, or unfranked. The Company expects to be in a position to fully frank dividends thereafter.

The level of payout ratio is expected to vary between periods depending on factors the Directors may consider, including the general business environment, the operating results and financial condition of

Spotless, future funding requirements, capital management initiatives, tax considerations (including the level of franking credits available), any contractual, legal or regulatory restrictions on the payment of dividends by Spotless, and any other factors the Directors may consider relevant.

No assurances can be given by any person, including the Directors, about the payment of any dividend and the level of franking on any such dividend. Please read the Forecast Financial

Information in conjunction with the assumptions underlying its preparation as set out in Section 3.2, the risk factors set out in Section 4 and the terms of the New Banking Facilities set out in Section 9.5.

Investors who are not residents of Australia and who acquire Shares may be subject to Australian withholding tax on dividends or other distributions paid in respect of the Shares. Prospective investors who are not residents of Australia should consult with their own tax advisors regarding the application of the Australian withholding or other taxes to their particular situations as well as any additional tax consequences resulting from purchasing, holding or disposing of the Shares.

118


Sales Revenue.


Section 4

PrOSPectuS 119

4. key risks


Spotless is subject to various risk factors. Some of these are specific to its business activities.

Others are of a more general nature. Individually, or in combination, these risk factors may affect the future operating and financial performance of Spotless, its investment returns and the value of an investment in the Shares. Each of the risks set out below could, if they eventuate, have a material adverse impact on Spotless’ business, financial condition and results of operations. Investors should be aware that this Section 4 does not purport to list every risk that may be associated with an investment in Spotless or the Shares, either now or in the future, and that many of the risks described below are outside the control of Spotless and its Directors and management. This Section 4 should be read in conjunction with other information disclosed in this Prospectus. There can be no guarantee that Spotless will achieve its stated objectives or that any forward looking statements or forecasts will eventuate.

Before applying for Shares, investors should satisfy themselves that they have a sufficient understanding of the matters identified in this Section 4 and should consider whether Shares are a suitable investment for them, having regard to their own investment objectives, financial circumstances and particular needs (including financial and tax issues). If investors are unclear in their understanding of any matter or are uncertain as to whether Spotless is a suitable investment for them, they should seek professional guidance from their solicitor, stockbroker, accountant or other independent and qualified professional adviser before deciding whether to invest.

4.2 business risk factors

4.2.1 Spotless may fail to renew existing contracts or win new contracts

Spotless’ ability to renew contracts with existing customers and win new contracts with existing and new customers is fundamental to its business, growth and profitability. Spotless faces competition in all the market sectors in which it operates. New contracts, including contracts entered into with an existing customer where a previous contract has expired, are usually subject to a competitive process. There is a risk that Spotless may not win these contracts for any of a number of reasons.

These include, for example:

• lower pricing from competitors;

• increased competition, including in sectors where there are low barriers to entry;

• Spotless’ inability to differentiate its services and to market them effectively;

• Spotless’ failure to maintain the quality or efficiency of its service offerings or to anticipate, identify or react to changes in customer preferences or requirements;

• Spotless’ failure to react to new developments in service delivery technology; and

• negative perceptions adversely affecting Spotless’ brand and reputation as a result of the eventuation of some of the other risk factors listed in this Section 4.

Failure to successfully renew existing contracts or to win new contracts could negatively impact

Spotless’ financial performance, including, in the case of a failure to retain an existing customer, by leaving Spotless with excess capacity or redundancy costs, and adversely impact its ability to grow its operations.


4.2.2 commencement of Spotless’ new contracts may be delayed

Where Spotless wins a contract, commencement of the contract can be delayed past the expected commencement date, for example where there is a delay in the transition to Spotless from the customer’s existing provider or where Spotless fails to mobilise the resources needed to provide services under the contract in a timely manner. Spotless is also a party to a number of contracts where Spotless’ ability to perform its obligations and commence earning revenue is dependent on third parties performing their own contractual arrangements in a timely manner. Examples of these situations include delays in the construction of buildings or commissioning of plant and equipment in respect of which Spotless is to provide its services. Spotless may not have any contractual protection against such delays. Any delay in the commencement of a contract may result in a delay in Spotless receiving revenue or may cause Spotless to incur additional costs, and therefore could have an adverse impact on Spotless’ financial performance, including its ability to achieve management’s forecasts for the business.

4.2.3 Spotless may fail to properly understand customer requirements, drivers of customer demand or cost inputs

A large number of Spotless’ material contracts are large, complex multi-year contracts, often providing multiple services across multiple customer sites, and many are not able to be terminated by Spotless unless the customer is in breach. Spotless may from time to time enter into contracts where the agreed revenue is insufficient to cover Spotless’ costs of delivering the services or to provide adequate profit margins. This can occur for a number of reasons, including a failure to properly understand the scope and requirements of a contract, a failure to assess accurately the costs of delivering the contracted services, a failure to properly model the drivers of customer demand or a failure to adhere to the business’ internal risk assessment and contracting process guidelines. The risk of such failures occurring may increase as Spotless seeks to enter into new adjacent markets, or to expand its product offering into adjacent services, in which it has less experience and industry knowledge. If Spotless enters into low margin contracts, Spotless’ revenue and profitability could be adversely impacted.

4.2.4 Some customers may have the right to terminate their contracts or may seek to renegotiate during the contract term

Some customers have a right to terminate contracts in certain circumstances, including where a party acquires control of Spotless, or where Spotless is in material breach of the contract. In addition, contracts with government entities customarily contain a right for the customer to terminate for convenience. Termination of Spotless’ services by a customer before the end of a contract’s term will reduce Spotless’ future revenue and, in some situations, may leave Spotless with excess capacity or excess labour or redundancy costs. Upon termination, Spotless may not receive adequate compensation, or any compensation, for such losses and costs.

From time to time, customers may seek to renegotiate existing contracts for various reasons during the term of the contract. To the extent such customers have a right to terminate a contract (for convenience or otherwise), they may seek to use this right as leverage in the renegotiation process.

Although the frequency of contract renegotiations has historically been low, the frequency of contract renegotiations may increase in the future. If contract renegotiations lead to the parties entering into new contracts on terms less favourable to Spotless, or if the parties fail to reach an agreement and the customer terminates the existing contract, Spotless’ revenue and profitability could be adversely impacted. Spotless may have potential liabilities for redundancies and other liabilities as a consequence of any contracts that are renegotiated or terminated before they would otherwise expire.

ProsPectus 121

4. key risks continued

4.2.5 claims for abatements, damages or indemnities may arise in connection with Spotless’ service delivery under customer contracts

Some of Spotless’ customer contracts impose detailed obligations on Spotless to perform services at a defined standard. From time to time, Spotless may fail to perform its obligations under a contract, or may disagree with its customers about whether the services have been performed in the manner that the contract requires. In such cases, Spotless may be subject to claims for abatements, liquidated damages or liability under indemnity provisions, or Spotless’ invoices may otherwise not be paid.

These types of liabilities, unlike other liabilities such as public injury liability or liability for third party property damage, are not typically insurable and could have a negative impact on Spotless’ financial performance.

4.2.6 Spotless’ existing and target customers may choose to change from outsourcing to in-sourcing of services

Spotless’ financial performance depends on its customers continuing to outsource facility services and laundry and linen services. Spotless’ anticipated future growth depends in part on additional services being outsourced in the future. A reduction in outsourcing may result from a variety of factors, including changing economic conditions or industry trends, changes in the specific strategies of

Spotless’ customers or poor performance by outsourced service providers. A decline in outsourcing in the industries in which Spotless’ customers operate, or an increase in customers taking services back in-house (i.e. in-sourcing) may adversely affect Spotless’ future revenue and profitability and its prospects for growth.

A significant portion of Spotless’ existing business consists of providing facility services and laundry and linen services to diverse government departments and bodies at national, state and local levels in Australia and New Zealand. Outsourcing decisions by government departments and bodies may be driven by political and public policy considerations and preferences as well as the priorities and agendas of political parties or other stakeholders. These are subject to change, including as a result of changes in government. A decline in outsourcing by government departments and bodies may adversely affect Spotless’ future revenue and profitability and its prospects for growth.

4.2.7 Spotless’ performance is linked to its ability to attract and retain key management

Spotless’ performance is dependent on the ability of its senior executives and other key personnel to manage and grow its business and respond to customers’ needs. Continuity and retention of senior executives and other key personnel are important for customer retention and ongoing customer negotiations, and for the ongoing implementation of the business transformation and growth initiatives commenced by the new senior management team appointed in August 2012. The loss of the services of Spotless’ senior executives or other key personnel, or an inability to attract and retain qualified and competent senior executives or other key personnel, could have a material adverse effect on Spotless’ operating and financial performance.


4.2.8 Spotless’ performance is linked to its ability to manage effectively a large and diverse workforce

Spotless manages a large and diverse workforce consisting of almost 33,000 full-time, part-time and casual employees. Spotless’ service quality is largely dependent on Spotless’ ability to attract, develop, motivate and retain appropriately skilled personnel in these categories (including through management of employees’ pay and entitlements in accordance with award and regulatory requirements), and on Spotless’ ability to provide a sufficient level of training and oversight in order to achieve consistent standards (including through the implementation of an adequate human resources policy framework). A high level of staff turnover reduces operational efficiency, impairs knowledge management and leads to excessive recruitment costs.

Spotless competes with competitors and other businesses for personnel with the right qualities, skills, experience and performance potential. There is a risk that Spotless may not be able to attract and retain personnel or not be able to find effective replacements in a timely manner. This could have a material adverse effect on Spotless’ business, especially its ability to provide facility services to customers in remote geographic regions such as remote mining townships. There is a risk that

Spotless will not be able to source appropriate labour (including qualified local and regional management) in these regions within the expected wage levels. This could result in higher labour costs in those regions, which could adversely impact Spotless’ financial performance.

Many of Spotless’ full and part-time employees are represented by a union or are otherwise employed under awards or union-negotiated Enterprise Agreements. The negotiation of new Enterprise

Agreements or changes to awards from time to time may increase the overall costs of running Spotless’ business and such increased costs may not be able to be passed through to customers in full.

If employees take industrial action, Spotless could be exposed to loss to the extent the industrial action impairs Spotless’ ability to provide services or causes disruption to Spotless’ customers, if the relevant customer contracts do not include industrial action as a force majeure event or, even if they do, the action becomes materially extended.

4.2.9 Spotless may fail to meet its workplace health and safety obligations

Spotless operates in Australia and New Zealand and is subject to laws and regulations in respect of health and safety in each of these jurisdictions. Additional or amended laws and regulations may increase the cost of compliance, adversely impact Spotless’ ability to comply, or expose Spotless to greater potential liabilities where, for example, changes to the regulatory framework result in higher or more complicated regulatory standards.

In the event Spotless breaches these laws and regulations, including for example where Spotless is held responsible for an injury or death, Spotless and its Directors and officers could be subject to sanctions and penalties. Fatalities or workplace accidents may adversely affect Spotless’ safety record and reputation, which may make it difficult for Spotless to hire and retain personnel and win new business. In addition, many of Spotless’ existing and potential customers, particularly those in the resources sub-sector, treat safety as a key criterion when evaluating potential outsourcing partners.

Any deterioration in Spotless’ workplace safety performance may adversely affect Spotless’ ability to win and retain contracts with these customers.

ProsPectus 123


4.2.10 disruption to Spotless’ external suppliers may lead to Spotless failing to meet customer requirements

Spotless has supply relationships with manufacturers, distributors, logistics providers and subcontractors, which it uses for the sourcing and delivery of food and other supplies, and the provision of services. Suppliers may experience or cause disruptions that are beyond the control of Spotless, for example as a result of financial distress, industrial action or the actions of regulators.

Sustained disruption to the services provided by a major supplier which results in disruption to the supply chain could adversely impact Spotless’ financial condition and results.

Inadequate or inefficient management of subcontractors, including the use of subcontractors without the required level of insurance, skills and accreditations, could also result in damage to Spotless’ reputation, or cause Spotless to be in breach of its customer contracts, which could adversely impact

Spotless’ operating and financial performance.

4.2.11 rising input costs may lead to lower profitability

The profitability of Spotless’ contracts depends on its management of costs. This involves active management of input volumes and per-unit prices, and maintaining the ability to pass increases in costs through to customers in the form of price increases. A significant or sustained increase in input costs to which Spotless is unable to respond adequately, or at all, either through cost reduction measures or contract price increases, could have an adverse effect on the financial performance of the business and the ability of the business to deliver its forecast financial results. Some, but not all, customer contracts include price escalation provisions, but there is a risk that such provisions may not allow Spotless to recoup all cost increases.

4.2.12 Spotless may be adversely impacted by a failure to comply with food safety standards and alcohol licences

In each jurisdiction in which it operates, Spotless is required to comply with a variety of regulations at various governmental levels including in relation to the handling, preparation and serving of food, the cleanliness of food production facilities and the responsible service of alcohol.

In providing catering and food services, there is a risk that raw materials may deteriorate or products may become contaminated within the supply chain due to various factors, including human error or equipment failure. Such incidents or instances of non-compliance with food safety and alcohol laws and regulations could damage Spotless’ brand and reputation, which may in turn make it difficult for

Spotless to win contracts with customers. Other potential adverse consequences for Spotless include loss of the ability to sell alcohol at venues, other regulatory penalties, and liability associated with adverse health effects on consumers, loss of stock, delay in supply and financial costs. In addition, new or amended regulations may increase the cost of compliance, adversely impact Spotless’ ability to comply, or expose Spotless to unforeseen costs and liabilities where, for example, such changes to the regulatory framework result in higher or more complicated regulatory standards.

4.2.13 incidences of non-compliance with environmental regulation may have consequences for the business

Spotless is required to run its operations in compliance with legislation concerning the protection of the environment, including relating to the use of natural resources (e.g. water), emissions and waste water, and the generation, storage, handling, transportation, treatment and disposal of waste materials.

In particular, certain chemicals have contaminated soil and groundwater at some of Spotless’ laundry sites due to historical use of those sites, which are subject to regulatory management. Spotless may, in the future, be required to remediate the contamination caused by such events.

Costs may be incurred in connection with actual or alleged violations arising under any environmental laws, including fines, damages and criminal or civil sanctions, or interruptions to operations.


4.2.14 failure of key it systems may lead to a disruption of customer services, loss of information and/or lower financial performance

Spotless relies on a variety of IT systems in order to manage and deliver services and communicate with its customers, suppliers and employees. A number of the systems in operation are based on older technologies and others have been developed and tailored for Spotless’ business over a number of years. Over time, the skills required to support and maintain those technologies are likely to become less widely available and it may be difficult to hire suitably qualified personnel. There is also a risk that if key personnel who manage these systems were to leave the business, that valuable knowledge would be lost.

Spotless is part way through a staged implementation of a new enterprise resource planning system which will ultimately become the primary financial system for the business. Any disruption caused by the implementation of the enterprise resource planning system, the failure of other key software applications or underlying equipment or communication networks, could delay day-to-day decision making, management reporting and efficient product delivery, which in turn may have an adverse effect on Spotless’ business and financial performance.

4.2.15 failure to manage working capital may negatively impact Spotless’ business

At any point in time, Spotless holds a significant level of trade receivables, and is therefore exposed to the risk that it may not be able to collect the full value of its trade receivables if the creditworthiness of its individual customers were to deteriorate. While the concentration of Spotless’ credit risk is limited as a result of the diversity of its customer base, an economic downturn could affect the solvency of customers, which in turn could adversely affect Spotless’ revenue and profitability and result in losses to Spotless.

Similarly, Spotless must ensure that trade payables are maintained at appropriate levels over time and that its key suppliers are paid within reasonable periods. Any misalignment between the movement in receivables and payables could significantly impact Spotless’ cash position.

4.2.16 exchange rate fluctuations may affect Spotless’ earnings

In FY2013, 14% of Spotless’ pro forma Sales Revenue was earned in New Zealand dollars. If the exchange rate between the Australian dollar and the New Zealand dollar varies, Spotless’ revenue and balance sheet valuations in Australian dollars will vary accordingly, either positively or negatively.

There is a risk that, if the Australian dollar increases in relation to the New Zealand dollar, it may affect

Spotless’ ability to achieve its forecast results.

While Spotless may implement currency hedging policies, the Australian dollar value of both its net debt and operating profits may fluctuate as exchange rates vary and, in any case, such hedging may not be effective. This could adversely impact Spotless’ financial performance.

4.2.17 acquisitions and investments by Spotless may not be successful

Spotless may acquire businesses from time to time. There can be no assurance that Spotless will be successful in realising the anticipated benefits and synergies of any businesses that it acquires.

The ability to realise these benefits will depend in part on whether Spotless can efficiently integrate acquired businesses with its existing operations. The challenges of integrating and operating acquired businesses may be greater if Spotless acquires businesses that provide services outside Spotless’ current offering, particularly if it is unable to retain the acquired company’s management. In addition, there is a risk that Spotless will overestimate the value of acquired businesses and therefore overpay.

These factors may adversely impact Spotless’ financial performance.

ProsPectus 125


4.2.18 Spotless may not be able to secure future funding on acceptable terms

Spotless’ New Banking Facilities will require refinancing in the future and Spotless may seek additional debt finance in the future to support growth. The terms which debt financiers are willing to offer may depend on macroeconomic conditions, the tenor of the facilities, the performance of Spotless and the risks associated with the intended use of the funds. Deterioration of Spotless’ financial condition, reduction in its credit standing or instability in local and global bank and capital markets could increase Spotless’ cost of borrowing or eliminate its ability to raise additional debt or replace existing debt as it matures. An inability for Spotless to secure debt funding on reasonable terms or, to continue to comply with its financial covenants could constrain the future growth of its business and could adversely impact Spotless’ operating and financial performance.

4.2.19 General economic conditions in australia and new Zealand may worsen

Spotless’ business is predominantly based in Australia, with the balance of its business based in

New Zealand. The operating and financial performance of Spotless is influenced by the general economic conditions in Australia and New Zealand, as well as general economic conditions globally.

A prolonged downturn in general economic conditions may impact the demand for Spotless’ services or make it difficult to win or renew contracts at equivalent or higher prices. Economic conditions in Australia and New Zealand may also encourage increased competition, either from domestic competitors or from overseas competitors. These factors may in turn have a material adverse impact on Spotless’ financial performance and growth prospects.

4.2.20 Spotless could be impacted by force majeure events

Events may occur within or outside Australia and New Zealand that could impact upon the Australian and New Zealand economies, the operations of Spotless and the price of the Shares. The events include but are not limited to acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, labour strikes, civil wars, natural disasters, outbreaks of disease or other natural or man-made events or occurrences that can have an adverse effect on the demand for Spotless’ services and its ability to conduct business. Spotless has only a limited ability to insure against some of these risks.

4.3 investment and general risk factors

4.3.1 Price of Shares may go down

Once Spotless becomes a publicly listed company on the ASX, it will become subject to general market risk that is inherent in all securities listed on a securities exchange. This may result in fluctuations in its

Share price that are not explained by the fundamental operations and activities of Spotless.

The price of Shares quoted on the ASX may rise or fall and the Shares may trade below or above the Final Price due to a number of factors, including:

• general economic conditions, in Australia and globally, including interest rates, exchange rates, inflation rates and commodity prices;

• fluctuations in the local and global market for listed stocks;

• changes to government policy, legislation or regulation;

• inclusion in or removal from market indices (including S&P / ASX indices);

• the nature of markets in which Spotless operates;

• general and operational business risks;

• natural disasters; and

• global hostilities, tensions and acts of terrorism.

There is no assurance that the price of the Shares will increase following their quotation on the ASX, even if Spotless’ earnings increase.


4.3.2 trading in Shares may not be liquid

Once the Shares are quoted on the ASX, there can be no guarantee that an active trading market for the Shares will develop or that the price of the Shares will increase. There may be relatively few potential buyers or sellers of the Shares on the ASX at any time. This may increase the volatility of the market price of the Shares. It may also affect the prevailing market price at which Shareholders are able to sell their Shares. This may result in Shareholders receiving a market price for their Shares that is less than the price that Shareholders paid.

4.3.3 Significant retained holding by the PeP Shareholders and coinvestment Shareholders

The PEP Shareholders, Coinvestment Shareholders and certain Management Shareholders have entered into voluntary escrow arrangements in relation to all of their Escrowed Shares.

In each case, the escrow restrictions are subject to certain exceptions as set out in more detail in

Section 6.7. The absence of any sale of Escrowed Shares by the Escrow Shareholders during their

Escrowed Period may cause, or at least contribute to, limited liquidity in the market for the Shares.

This could affect the prevailing market price at which Shareholders are able to sell their Shares. It is important to recognise that Shareholders may receive a market price for their Shares that is less than the price that Shareholders paid.

Following the end of the relevant Escrow Period, a significant sale of Shares by the PEP Shareholders and Coinvestment Shareholders, or the perception that such sales might occur, could adversely affect the market price of the Shares. As referred to in Section 9.5, Spotless has agreed to assist in any sale of Shares by the PEP Shareholders.

Because of the size of the retained interest in Spotless by the PEP Shareholders and Coinvestment

Shareholders, they have the capacity to control the election of Directors and the potential outcome of matters submitted to a vote of Shareholders. As referred to in Section 9.5, even if the PEP Shareholders and Coinvestment Shareholders (other than Lentesco) reduce their current Shareholding, representatives of the PEP Shareholders will retain the right to nominate two Directors to the Board for so long as they hold at least 25%, or one Director to the Board for so long as they hold at least 10%, of the issued share capital of Spotless (subject to carve-outs for certain dilutive events). These rights to nominate Directors are in addition to the PEP Shareholders’ and Coinvestment Shareholders’ rights to vote their Shares on a resolution to elect any other Director to the Board. The interests of the

PEP Shareholders and Coinvestment Shareholders may differ from the interests of Spotless and the interests of Shareholders who purchase Shares in the Offer. Also, while they hold a large stake in the

Company, the PEP Shareholders, with the Coinvestment Shareholders, will be able to determine or influence whether a takeover or similar offer for the Shares is successful.

4.3.4 risk of Shareholder dilution

In the future, Spotless may elect to issue Shares or engage in fundraisings and also to fund, or raise proceeds, for acquisitions that Spotless may decide to make. While Spotless will be subject to the constraints of the ASX Listing Rules regarding the percentage of its capital that it is able to issue within a 12 month period (other than where exceptions apply), Shareholders may be diluted as a result of such issues of Shares and fundraisings.

ProsPectus 127


4.3.5 taxation changes may negatively affect Spotless

There is the potential for further changes to tax laws and changes in the way tax laws are interpreted.

Any change to the current rates of taxes imposed on Spotless (including in foreign jurisdictions in which Spotless operates) is likely to affect returns to Shareholders.

Spotless obtains external expert advice on the application of the tax laws to its operations. An interpretation of taxation laws by a revenue authority that is contrary to Spotless’ interpretation of those laws may increase the amount of tax to be paid.

In addition, an investment in the Shares involves tax considerations which may differ for each

Shareholder. Each prospective Shareholder is encouraged to seek professional tax advice in connection with any investment in Spotless.

4.3.6 australian accounting Standards may change

Australian Accounting Standards are set by the AASB and are outside the control of either Spotless or its Directors and management. The AASB is due to introduce new or refined Australian Accounting

Standards during the period from 2014 to 2018, which may affect future measurement and recognition of key statement of profit and loss and balance sheet items, including revenue and receivables.

There is also a risk that interpretations of existing Australian Accounting Standards, including those relating to the measurement and recognition of key statement of profit and loss and balance sheet items, including revenue and receivables, may differ. Changes to Australian Accounting Standards issued by the AASB or changes to the commonly held views on the application of those standards could materially adversely affect the financial performance and position reported in Spotless’ consolidated financial statements.


Section 5

PrOSPectuS 129

5. key individuals, interests and benefits

5.1 board of directors

The Directors bring to the Board relevant experience and skills, including industry and business knowledge, financial management and corporate governance experience.

ms margaret Jackson ac

Independent

Non-Executive Chairman

BEc, MBA, Hon LLD

(Monash), FCA, FAICD

Margaret was appointed independent Non-Executive Chairman in March 2014.

Margaret is chairman of FlexiGroup Limited, Artisan Spirit

Merchants and Ansett Aviation Training Limited. She is also a director of the Prince’s Charities Australia and President of

Australian Volunteers International.

Margaret has also served as chairman of Qantas Airways Limited and the Victorian Transport Accident Commission, and a director of The Broken Hill Proprietary Company Limited, The Australia and

New Zealand Banking Group Limited, Pacific Dunlop Limited, John

Fairfax Holdings Limited, Billabong International Ltd and Telecom

Australia. Margaret is former chairman of the Advisory Board for the Salvation Army Southern Territory, the Playbox Theatre

Company and Methodist Ladies College. Before beginning her career in 1992 as a full time company director, Margaret was a partner of KPMG Peat Marwick’s Management Consulting Division.

mr bruce dixon

Chief Executive Officer and Executive Director

BA (Econ) ms diane Grady am

Independent

Non-Executive Director

MBA (Harvard), MA, BA

(Hons), FAICD

Bruce was appointed as Chief Executive Officer ( CEO ) and as a Director in August 2012.

Bruce served as Managing Director of Healthscope Limited,

Australia’s largest provider of integrated healthcare services, from

1997 to 2010, during which time he oversaw compound revenue growth of 32% per annum and profit growth of 33% per annum from 2000 to 2010. Before this, Bruce was a long serving senior executive of Spotless, having held the positions of General

Manager of Spotless Healthcare, and General Manager of

Servicemaster of Australasia. Bruce has previously served as non-executive director of Greencross Limited (Australia’s leading veterinary business) and as a non-executive director of Ruralco

Holdings Limited (Australian agribusiness).

Diane was appointed as a Non-Executive Director in March 2014.

She is chairman of the People and Remuneration Committee.

Diane is a director of Macquarie Bank, a senior adviser to

McKinsey & Company, chair of Ascham School, and chair of

The Hunger Project Australia. She is also on the Advisory Board of the Centre for Ethical Leadership (Ormond College), and the

NSW Innovation and Productivity Council. Diane has 20 years’ experience on major public company and not-for-profit boards.

Diane has also served as a director of Woolworths, Lend Lease,

Goodman Group, BlueScope Steel, a trustee of the Sydney Opera

House and president of Chief Executive Women. Before beginning her career as a full-time company director, Diane was a partner of

McKinsey & Company where she was a leader of the firm’s global

Organisation and Change Management group and headed the

Consumer Goods, Retailing and Marketing Practice in Australia.


mr Garry Hounsell

Independent


BBus(Acc), FCA, CPA,

FAICD mr Geoffrey Hutchinson 91


BCom, BSc, MBA

(Dean’s List)

Garry was appointed as a Non-Executive Director in March 2014.

He is chairman of the Audit, Business Risk and Compliance

Committee.

Garry is chairman of Investec Global Aircraft Fund and PanAust

Limited, and is a director of Qantas Airways Limited, director of DuluxGroup Limited, Treasury Wine Estates Limited and

Ingeus Limited.

Garry has also served as a director of Orica Limited and Nufarm

Limited, deputy chairman of Mitchell Communication Group

Limited and chairman of eMitch Limited. Garry was also a former senior partner of Ernst & Young, chief executive officer and country managing partner of Arthur Andersen and a board member of law firm Freehills (now Herbert Smith Freehills).

Geoff was appointed a Non-Executive Director in September 2012.

Geoff is a director of Pacific Equity Partners, having joined Pacific

Equity Partners in 2008, and also serves as a director of Veda

Group Limited.

Geoff has also served as a manager with Bain & Company where he consulted to clients in Australia, the United Kingdom and South Africa in the consumer goods, retail, industrial services, telecommunications, airline and mining industries on strategy, performance improvement and organisational design. Geoff also worked with Bain & Company’s UK Private Equity practice leading due diligence engagements for private equity investors.

mr robert koczkar 92


BEng (Mech and Manuf)

(Hons) (Melb)

Rob was appointed a Non-Executive Director in November 2011.

Rob is a managing director of Pacific Equity Partners and is chief executive officer-elect of Social Ventures Australia Limited ( SVA ).

Rob will transition to the role with SVA in October 2014.

Rob also serves as chairman of Energy Developments Limited and as a director of Goodstart Early Learning Limited and SVA.

Rob has previously held positions with investment firm Texas

Pacific Group where he was based in its London office and strategy consulting firm Bain & Company variously based in

Australia, the United Kingdom and the United States.

91 Board nominee on behalf of the PEP Shareholders.

92 Board nominee on behalf of the PEP Shareholders.

ProsPectus 131

5. key individuals, interests and benefits continued the Hon. nick Sherry

Independent


BA (Tas)

Nick was appointed as a Non-Executive Director in March 2014.

Nick is chairman of FNZ (Australia) Pty Limited and is also a

Senior Advisor Superannuation and Pensions to Citi and advises in a range of countries on all aspects of the reform of Pension

Systems including working with the OECD and World Economic

Forum. He is a member of the UNSW Risk – Actuarial Studies

Advisory Board and the Business Advisory Panel of Insurance

Ireland’s Public Policy Council.

Nick also served as a Senator for Tasmania from 1990 to 2012.

He served as Minister for Superannuation and Corporate Law from

2007 to 2009, Assistant Treasurer in 2009 and 2010 and Small

Business Minister in 2010 and 2011.

5.2 key executives

As part of the 2012 Acquisition, Bruce Dixon undertook a review of the management team structure of Spotless. As a result of this review, the majority of senior management were changed and Bruce

Dixon was appointed as CEO. The new management team has extensive experience in managing multi-site labour intensive businesses and has been instrumental in the transformation of Spotless and restoration of Spotless’ margins.

See Section 5.1.

bruce dixon

Chief Executive Officer and Executive Director

BA (Econ) vita Pepe

Chief Operating Officer

MHA

Vita Pepe joined Spotless and was appointed to her current role as Chief Operating Officer ( COO ) in August 2012.

Prior to joining Spotless, Vita served as group chief operating officer at Healthscope Limited from 1998 to 2010. In this role, as COO, Vita was responsible for all operations within the Healthscope business.

Prior to this, Vita held a number of senior chief executive officer positions in the public health sector.


danny agnoletto

Chief Financial Officer

BCom, Grad Dip Applied

Finance & Investment

Danny joined Spotless and was appointed chief financial officer

( CFO ) in August 2013. Danny is a highly experienced public company chief financial officer.

Prior to joining Spotless, Danny was chief financial officer of listed real estate management group ING Real Estate Investment

Management, listed infrastructure entity ConnectEast Group and listed investment company Hudson Conway Limited. He is a fellow of The Institute of Chartered Accountants in Australia and Financial

Services Institute of Australasia.

Paul waterson

Group General Manager

MBA

Paul joined Spotless in August 2012 and in February 2014 was appointed to his current position as a Group General Manager responsible for the Government, Laundries, Defence and

Resources sub-sectors.

Prior to joining Spotless, Paul was chief operating officer of

Pathology and Medical Centres at Healthscope Limited where he was responsible for integrating many acquired hospitals and pathology laboratories with a focus on cost synergies and business growth.

dana nelson


BSc (Orthoptics) Masters of

Enterprise (Management &

Leadership) (Melbourne

Business School)

Dana joined Spotless in 2010 to lead the development of the

Alliance Catering business and in February 2014 was appointed to her current position as a Group General Manager responsible for

Commercial and Leisure, Business and Industry, Education and

New Zealand Business and Industry customer sub-sectors.

Prior to joining Spotless, Dana was managing director of Delaware

North (Australia / NZ).

ProsPectus 133

5. key individuals, interests and benefits continued

Sue williams


RN, BBus, MBA

Sue joined Spotless in January 2013 as a Group General Manager responsible for the Health and Aged Care customer sub-sectors.

Prior to joining Spotless, Sue served in roles including chief operating officer of hospitals at Healthscope Limited, a partner at

KPMG and chief nurse of the North-Western Healthcare Network.

Sue has over 25 years of experience in the health industry at a senior management level in both the public and private sectors.

Paul morris

General Counsel and

Company Secretary

BEc (Hons), LLB

Paul joined Spotless in August 2000 and has led the Group Legal division since July 2008. In September 2012, Paul was appointed

General Counsel and Company Secretary.

Prior to joining Spotless, Paul was a senior associate at Minter

Ellison, practising in corporate law and mergers and acquisitions.

John douglas

General Manager

Human Resources

BA, LLB

John joined Spotless in August 2012 to manage the human resources function for Spotless.

Prior to joining Spotless, John established and managed the human resources function for Healthscope Limited. He has worked as a barrister and solicitor and held other senior human resources management roles in various industries.


catriona Larritt

General Manager Business

Development

BA (Hons), MBA (Harvard)

Catriona joined Spotless in April 2014.

Prior to joining Spotless, Catriona held several management positions at Australia Post including her roles as general manager of eServices, general manager of Corporate Strategy and general manager of Decipha Digital MailBox. Before joining Australia Post,

Catriona was also employed as a principal in the Melbourne office of The Boston Consulting Group.

chris Hewison

General Manager, Group

Procurement and Property

BBus (Property), Grad Dip

Bus Mgt, MBA

Chris joined Spotless in 2008 and in July 2011 was appointed to his current position as General Manager, Group Procurement

& Property. Prior to this role, Chris held several positions within

Spotless, serving as General Manager Service Delivery and

General Manager Corporate Services.

Prior to joining Spotless, Chris held several senior client interfacing roles at DTZ (a UGL company) and Knight Frank.

Peter Lotz

Chief Information Officer

BSc (Eng), MBA

Peter joined Spotless in June 2012 and was appointed to his current role as Chief Information Officer in December 2012.

Prior to joining Spotless, Peter spent six years as a senior partner at CharterMason where he was responsible for large, enterprise system projects for multiple clients in Victoria.

Prior to that role, Peter held a number of senior roles at IBM,

PricewaterhouseCoopers (PwC) Consulting, COMPAREX and

Hewlett Packard.

ProsPectus 135


Simon Lipscombe

General Manager

New Zealand

BA

Simon joined Spotless in March 2008 to lead the Healthcare

Services business in New Zealand and was appointed in May 2013 to the role of General Manager New Zealand, a role that also incorporates being General Manager of the Business and Industry and Education customer sub-sectors.

Prior to joining Spotless, Simon held several senior positions at

Restaurant Brands including operations executive KFC, general manager Pizza, and head of Human Resources for the group.

5.3 interests and benefits

This Section 5.3 sets out the nature and extent of the interests and fees of certain persons involved in the Offer. Other than as set out below or elsewhere in this Prospectus, no:

• Director or proposed Director;

• person named in this Prospectus who has performed a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus;

• promoter of Spotless; or

• underwriter to the Offer or financial services licensee named in the Prospectus as a financial services licensee involved in the Offer, holds at the time of lodgement of this Prospectus with ASIC, or has held in the two years before lodgement of this Prospectus with ASIC, an interest in:

• the formation or promotion of Spotless;

• property acquired or proposed to be acquired by Spotless in connection with its formation or promotion, or in connection with the Offer; or

• the Offer, and no amount (whether in cash, Shares or otherwise) has been paid or agreed to be paid, nor has any benefit been given or agreed to be given, to any such persons for services in connection with the formation or promotion of Spotless or the Offer or to any Director or proposed Director to induce them to become, or qualify as, a Director.


5.3.1 interests of advisers

Spotless has engaged the following professional advisers:

• Highbury Partnership Pty Limited has acted as Financial Adviser to the Offer. Spotless has paid, or agreed to pay, the Financial Adviser a fee of up to 0.50% of the funds raised under the Offer

(including any proceeds raised from the exercise of the Over-allocation Option) for its services;

• Citi, Deutsche Bank and UBS have acted as JLMs to the Offer. Spotless has paid, or agreed to pay, the JLMs the fees described in Section 9.5 for these services;

• Evans & Partners has acted as Co-Lead Manager to the Offer. The JLMs will pay to Evans & Partners, out of the fees payable to them by Spotless, a fixed fee of $350,000 for these services, together with a broker firm fee of 1.5% (inclusive of GST) of the value of its allocation of Offer Shares. If

Evans & Partners receives an allocation in excess of $50,000,000, an additional broker firm fee of 0.25% of the value above $50,000,000 will be paid to Evans & Partners by the JLMs;

• Each of Bell Potter Securities Limited, UBS Wealth Management Australia Limited and Wilson HTM

Corporate Finance Limited has acted as Co-Manager to the Offer and will be paid a broker firm fee of 1.5% (inclusive of GST) of the value of its allocation of Offer Shares by the JLMs out of the fees payable to them by Spotless;

• Gilbert + Tobin has acted as Australian legal adviser to the Company in relation to the Offer.

Spotless has paid or agreed to pay, approximately $1,000,000 (excluding disbursements and GST) for these services up until the Prospectus Date. Further amounts may be paid to Gilbert + Tobin in accordance with its normal time-based charges;

• Deloitte Corporate Finance has acted as Investigating Accountant and has prepared the

Investigating Accountant’s Report and has performed work in relation to due diligence enquiries.

Spotless has paid, or agreed to pay, up to $1,350,000 (excluding GST) for the above services up until the Prospectus Date. Further amounts may be paid to Deloitte Corporate Finance under time based charges;

• Ernst & Young has acted as taxation adviser to Spotless in relation to the Offer. Spotless has paid, or agreed to pay, approximately $400,000 (excluding disbursements and GST) for these services up to the Prospectus Date. Further amounts may be paid to Ernst & Young under time based charges; and

• L.E.K. Consulting has acted as business adviser to Spotless in connection with the Offer and has prepared the Company Market Study. Spotless has paid, or agreed to pay, approximately

$1,100,000 (excluding disbursements and GST) for these services.

Other than as otherwise stated, these amounts, and other expenses of the Offer, will be paid by

Spotless out of funds raised under the Offer or available cash. Further information on the use of proceeds and payment of expenses of the Offer is set out in Section 6.1.

5.3.2 directors’ and Senior management interests and remuneration

Non-Executive Director remuneration

Under the Constitution, the Board decides the total amount paid to each Director as remuneration for their services as a Director to the Company. However, under the ASX Listing Rules, the total amount of fees paid to all Directors for their services (excluding, for these purposes, the salary of any Executive Director) must not exceed in aggregate in any financial year the amount fixed by the Company in general meeting.

This amount has been fixed by the Company at $2 million per annum. Any change to that aggregate annual sum needs to be approved by Shareholders. The aggregate sum includes any special and additional remuneration for special exertions and additional services performed by a Director as determined appropriate by the Board. The ASX Listing Rules require that the remuneration of

Directors must not include a commission on, or a percentage of, operating revenue.

ProsPectus 137


138

Annual Directors’ fees to be paid by the Company are $320,000 to the Chairman, Margaret Jackson

AC, and $160,000 to each of Diane Grady AM, Garry Hounsell, Geoff Hutchinson, Rob Koczkar and

The Hon. Nick Sherry. In addition, the chairman of the Audit and Risk Management Committee will be paid $40,000 annually and the chairman of the People and Remuneration Committee will be paid $35,000 annually for their services provided to those committees.

All Directors’ fees include superannuation.

Payments in connection with the Listing

In the event of the Listing, each of Margaret Jackson AC, Diane Grady AM, Garry Hounsell and the Hon. Nick Sherry will receive a one-off bonus in the form of Shares. The amount of the bonus payable is $240,000 worth of Shares for the Chairman, $150,000 worth of Shares for the chairman of the Audit and Risk Management Committee, $146,250 worth of Shares for the chairman of the

People and Remuneration Committee and $120,000 worth of Shares for The Hon. Nick Sherry

(in each case, calculated at the Final Price).

Rob Koczkar and Geoff Hutchinson are executives of Pacific Equity Partners, an affiliated entity which will receive certain fees in connection with the Listing as described in Section 6.1.

Executive Director remuneration

Chief Executive Officer

Spotless has entered into an employment agreement with Bruce Dixon to govern his employment with Spotless as its Chief Executive Officer.

Bruce Dixon will, upon Completion of the Offer, be entitled to receive total fixed remuneration

(comprising base salary, superannuation and any other non-cash benefits) of $1,100,000 per annum.

Bruce Dixon will also be entitled to participate in Spotless’ short term incentive plan ( STI Plan ). Prior to FY2015, the maximum annual incentive that Bruce Dixon may be eligible to receive under the STI

Plan will be a cash payment of no greater than the maximum annual incentive that may be awarded in FY2015. Commencing FY2015, the maximum annual incentive that may be awarded to Bruce Dixon under the STI Plan is 90% of his total fixed annual remuneration depending on the achievement of certain performance criteria (see Section 5.3.3 for further details). It is also proposed that from

FY2015, 30% of any annual incentive awarded to Bruce Dixon under the STI Plan will be deferred for a period of 12 months in the form of restricted Shares, subject to obtaining Shareholder approval

(if required) and the award of Shares being permitted under applicable law. Vesting of the deferred component will be conditional on Bruce Dixon remaining employed by the Spotless Group at the time of vesting, except in certain circumstances where his employment is terminated without cause, in which case, the deferred component will vest immediately. The remaining incentive award will be paid in cash. Bruce Dixon will also be eligible to participate in Spotless’ long term incentive plan, the Spotless Executive Incentive Plan ( LTI Plan ) (see Section 5.3.3 for further details).

Spotless will grant up to $1,100,000 worth of Options under the LTI Plan to Bruce Dixon on or around Completion of the Offer. The actual number of Options that Bruce Dixon will receive will be determined in accordance with the method described in Section 5.3.3. Subject to the satisfaction of vesting conditions set by the Plan Committee, 25% of the Options granted based on value will vest on 30 June 2016 and 75% of the Options granted based on value will vest on 30 June 2017. The key terms and conditions (including the exercise price and vesting conditions) applicable to the Options granted to Bruce Dixon under the LTI Plan are set out in Section 5.3.3. It is intended that future grants of Shares, Options or Rights under the LTI Plan will be made annually and that these will vest three years from issue or grant, subject to the satisfaction vesting conditions set by the Plan Committee.

Bruce Dixon’s employment agreement may be terminated by Spotless or Bruce by giving at least six months’ notice in writing of such termination or, alternatively in Spotless’ case, payment in lieu of notice. In the event of such termination, Spotless may direct Bruce Dixon to take enforced leave

( Gardening Leave ) during any notice period of termination, during which time he will remain an employee and entitled to receive remuneration and all other contractual benefits.


Spotless may terminate Bruce Dixon’s employment without notice or payment in lieu of notice for serious and wilful misconduct. If there is a substantial diminution of Bruce Dixon’s responsibilities or authority or if he ceases to report to the Board (except with his consent or where Spotless has terminated his employment) ( Fundamental Change ), Bruce Dixon may terminate his employment agreement by giving one month’s notice in writing within 30 days of the Fundamental Change, in which case he will be entitled to a payment equivalent to six months’ base salary and superannuation.

Upon the termination of Bruce Dixon’s employment agreement, he will be subject to a restraint of trade period of 12 months (less any period of Gardening Leave). The enforceability of the restraint clause is subject to all usual legal requirements.

Details of Bruce Dixon’s escrow arrangements are set out in Section 6.7.

Other Senior Management

Spotless’ other members of Senior Management are employed under individual employment agreements. These establish:

• variable notice and termination provisions:

– of up to six months;

– by Spotless without notice in the event of serious misconduct; or

– in the case of one member of Senior Management, by that person on one month’s notice in specified circumstances where there is a substantial diminution of that person’s responsibilities or authority, in which case the member of Senior Management will be entitled to a payment equivalent to six months’ remuneration;

• restraint of trade provisions of between three to 12 months after termination of employment.

The enforceability of the restraint clause is subject to all usual legal requirements;

• eligibility to participate in the STI Plan up to a specified percentage of fixed annual remuneration.

Refer to Section 5.3.3 for further details about the STI Plan;

• eligibility to participate in the LTI Plan. Other Senior Management (excluding Bruce Dixon) will together receive $575,000 worth of Options on or around Completion of the Offer under the terms of the LTI Plan (see Section 5.3.3 for further details); and

• leave entitlements in accordance with applicable legislation.

In addition, in the event of the Listing, one member of Senior Management will receive a one-off cash bonus payment of $250,000.

Details of the escrow arrangements applicable to Senior Management are set out in Section 6.7.

Deeds of access, indemnity and insurance for Directors

The Company has entered into a deed of access, indemnity and insurance with each Director which contains the Director’s right of access to certain books and records of the Company for the period from the date of the deed until seven years after the Director ceases to hold office.

This seven year period can be extended where certain proceedings or investigations commence before the seven year period expires and remain on foot. Pursuant to the Constitution, the Company must indemnify all directors, executive officers and auditors of the Company or of its related bodies corporate, past and present, against all liabilities that arise from their position as an officer of the

Company (or related body corporate as the case may be) to the extent permitted by law. Under the deed of access, insurance and indemnity, the Company indemnifies each Director against any liability that may arise from their position as an officer of the Company, to the extent permitted by law. The deed provides that the Company must meet the full amount of any such liabilities, including reasonable legal costs and expenses. The Company may arrange and maintain directors’ and officers’ insurance for its Directors to the extent permitted by law. Pursuant to the deed of access, indemnity and insurance, the Company must use reasonable endeavours to maintain such insurance for the period from the date of the deed until seven years after the Director ceases to hold office. This seven year period can be extended where certain proceedings or investigations commence before the seven year period expires.

ProsPectus 139


Other information about Directors’ interests and benefits

Directors will be reimbursed for reasonable travel and other expenses incurred in attending to Spotless’ affairs. Non-Executive Directors may be paid such additional or special remuneration as the Directors decide is appropriate where a Director performs extra work or services which are not within the normal role of a director of Spotless or a subsidiary.

There are no retirement benefit schemes for Directors, other than statutory superannuation contributions.

Chapter 2E of the Corporations Act prohibits a company from giving a financial benefit to a related party

(including any director) without the prior approval of its members by ordinary resolution. Rob Koczkar and Geoff Hutchinson have indirect interests in PEP Advisory, which has received management fees from Spotless under an advisory services agreement, and will receive further fees under that agreement in connection with the Offer. The advisory services agreement will terminate on Completion of the Offer. See Section 6.1. PEP Advisory will receive no further fees following Completion of the

Offer, and although these arrangements were entered into on arm’s length terms, member approval was obtained before the Prospectus Date.

Other interests of Directors and Senior Management are set out in Sections 5.3.2

.

Directors’ interests in Shares and other securities

Directors are not required under the Constitution to hold any shares. However, the interests in Shares and other securities of all Directors on Completion of the Offer are expected to be as follows: name

Margaret Jackson AC

Bruce Dixon

Diane Grady AM

Garry Hounsell

Geoff Hutchinson

Rob Koczkar

The Hon. Nick Sherry

Shares held immediately prior to the Offer

Shares acquired/

(sold) in the Offer 93

– 1,739,130

14,896,628 (1,853,006)

–

–

31,159

115,942

–

–

–

43,478

289,855

11,594 iPO bonus

Shares 93

Shares held on completion of the Offer 93

139,130 1,878,260

– 13,043,622

84,783

86,957

115,942

202,899

–

–

69,565

43,478

289,855

81,159

In addition, Bruce Dixon will receive $1,100,000 worth of Options under the LTI Plan on or around

Completion of the Offer as described in Sections 5.3.2 and 5.3.3. The actual number of Options that

Bruce Dixon will receive will be determined in accordance with the method described in

Section 5.3.3.

Rob Koczkar and Geoff Hutchinson will also have an indirect interest in Shares through investment vehicles that hold interests in vehicles that are among the PEP Shareholders.

Final Directors’ security holdings will be notified to the ASX on Listing. Directors may hold their interests in securities shown above directly, or indirectly through holdings by companies or trusts.

See Section 6.7 for details of the Shares that will be subject to escrow arrangements.

140

93 This assumes the Final Price is set at the midpoint of the Indicative Price Range.


5.3.3 employee and executive incentive arrangements

Spotless has established incentive arrangements to assist in the attraction, motivation and retention of Senior Management and other selected employees of Spotless as set out below, comprising:

• predominantly cash-based short term incentive arrangements; and

• equity-based long term incentive arrangements.

Short term incentive arrangements

The Board has determined that Spotless’ current remuneration policy for the CEO, other Senior

Management and other selected employees of Spotless include the STI Plan.

Under the STI Plan, participants have an opportunity to receive an incentive payment calculated as a percentage of their fixed annual remuneration each year, conditional upon achievement of financial and non-financial performance measures. The performance measures against which each participant’s short term incentive is assessed and their relative weightings are tailored to a participant’s role and are set by the Board each year.

Prior to FY2015, the incentive that a participant may receive under the STI Plan will be no greater than the amounts set out below.

For FY2015, the maximum incentive ( Maximum STI ) that may be awarded to Senior Management has been set as follows, expressed as a percentage of fixed annual remuneration:

Position

CEO

Other Senior Management 94 maximum

Sti

90%

75%

Other selected employees will also be eligible to participate in the STI Plan, and the Maximum STI for these employees will be as determined by the Board.

Under the STI Plan, from FY2015, it is intended that 30% of any incentive awarded to Senior

Management and other selected senior executives if determined by the Board will be deferred for a period of 12 months. In the case of certain senior executives (including Senior Management), it is intended that such deferred component would be in the form of restricted Shares, subject to obtaining

Shareholder approval (if required) and the award of Shares to the relevant participant being permitted under applicable law. Otherwise, the deferred component would be in the form of cash. Vesting of the deferred component is conditional on the participant remaining employed by the Spotless Group at the time of vesting, except in certain circumstances where employment is terminated without cause, in which case the deferred component will vest immediately. The remaining incentive award will be paid in cash.

94 Other Senior Management comprise the CFO and COO.

ProsPectus 141


142 executive incentive Plan

Spotless has adopted the LTI Plan in order to assist in the motivation and retention of Senior

Management and other selected employees of Spotless. The LTI Plan is designed to align the interests of eligible employees more closely with the interests of Shareholders by providing an opportunity for eligible employees to receive an equity interest in Spotless. Under the LTI Plan, eligible employees may be offered Shares, Options or Rights which may be subject to vesting conditions set by the Plan Committee.

Spotless may offer additional long term incentive schemes to Senior Management and other employees over time.

The key terms of the LTI Plan are as follows: eligibility Participants must be a permanent full-time or part-time employee or executive director of Spotless or any of its subsidiaries ( Employee ).

The Plan Committee will determine which Employees are eligible to participate in the LTI Plan ( Eligible LTI Employees ).

Offers

Loan funded Shares

Under the rules of the LTI Plan, Shares, Options and / or Rights

( Awards ) may be offered to Eligible LTI Employees from time to time.

The number of Awards the subject of an offer under the LTI Plan will be determined by the Plan Committee.

Subject to applicable law, the Plan Committee may determine that a loan may be made by the Company to a participant for the purpose of acquiring or subscribing for Shares the subject of an offer under the

LTI Plan.

terms and conditions The Plan Committee has the absolute discretion to determine the terms and conditions applicable to an offer under the LTI Plan, including:

– any conditions required to be satisfied before an Award will be granted;

– any conditions restricting dealing in, or which might result in the forfeiture of, Shares the subject of an offer ( Share Vesting Conditions );

– any performance, vesting or other conditions required to be satisfied before Options or Rights vest and may be exercised ( Option Vesting

Conditions or Right Vesting Conditions (as applicable));

– any period during which Shares will be subject to any Share Vesting

Conditions or during which Option Vesting Conditions or Right

Vesting Conditions must be satisfied before Options or Rights vest

( Vesting Period );

– the exercise period during which Options or Rights may be exercised, subject to the terms of the LTI Plan and the offer ( Exercise Period );

– any applicable issue price and / or exercise price;

– the terms and conditions of any loan that Spotless will make to the participant for the purpose of acquiring or subscribing for Shares the subject of an offer;


ProsPectus terms and conditions continued

– any disposal restrictions on Shares to be issued or transferred upon the exercise of Options or Rights; and

– any other specific terms and conditions applicable to the offer.

The specific terms and conditions applicable to an offer must be set out in the offer invitation.

ranking of Shares Shares issued (including Shares issued upon exercise of Options or Rights) under the LTI Plan will rank equally in all respects with existing Shares.

restrictions on Shares Subject to the ASX Listing Rules, Spotless must refuse to transfer, and must apply a holding lock to prevent a transfer of, any Shares to which Share Vesting Conditions or other disposal restrictions attach.

The Plan Committee may take any other steps that it considers necessary or appropriate to enforce any disposal restrictions.

If restricted by applicable law, a participant may not enter into any arrangement for the purpose of hedging, or otherwise affecting their economic exposure to any Shares to which Share Vesting Conditions or other disposal restrictions attach.

vesting of Shares forfeiture of Shares

If Shares are offered subject to Share Vesting Conditions, Spotless must give the participant a vesting notice upon such Share Vesting

Conditions having been satisfied or waived by the Plan Committee.

Upon all Share Vesting Conditions attaching to Shares having been satisfied or waived (as determined by the Plan Committee), the Shares will cease to be subject to such Share Vesting Conditions and the Plan

Committee must lift the holding lock applicable to such Shares.

Shares which are subject to Share Vesting Conditions ( Unvested

Shares ) may be forfeited:

– if the Plan Committee determines that any Share Vesting Condition applicable to the Unvested Shares has not been satisfied in accordance with its terms or is not capable of being satisfied;

– in certain circumstances if the participant’s employment is terminated

(see Cessation of employment below);

– in the event of a change of control (see Change of control below);

– in other circumstances specified in the LTI Plan rules (e.g. where the

Plan Committee determines that the participant has committed an act of fraud or gross misconduct in relation to the affairs of Spotless); or

– if the participant purports to deal in the Unvested Shares in breach of Share Vesting Conditions or enter into any hedging arrangement in respect of the Unvested Shares in breach of any hedging restrictions.

143

5. key individuals, interests and benefits continued rights attaching to unvested Shares capital reconstructions

Options rights rights attaching to

Options and rights

Unless otherwise specified in the particular offer, a participant may:

– exercise all voting rights attaching to the Shares held by the participant pursuant to the offer; and

– participate in any bonus issue on the same terms as other

Shareholders (provided that, if the Shares held by the participant are subject to any Share Vesting Conditions, any Shares issued under the bonus issue will be subject to the same Share Vesting Conditions).

The Plan Committee may determine, at the time of the offer of Shares to a participant, whether the participant is entitled to all dividends declared or paid on Shares which are subject to Share Vesting

Conditions (including whether any such dividends are to be held in escrow until the Shares are fully vested).

In the event of a capital reconstruction, subject to the ASX Listing Rules, the Plan Committee may adjust the number of Shares issued pursuant to an offer under the LTI Plan as the Plan Committee deems appropriate.

Each Option confers on its holder the entitlement to acquire one Share

(by way of issue or transfer) at the exercise price (if any) upon the exercise of the Option.

Each Right confers on its holder the entitlement to receive one Share

(by way of issue or transfer) at the exercise price (if any) upon the exercise of the Right.

A participant has no right or interest in a Share the subject of an Option or Right held by the participant until the Share is issued or transferred to that participant pursuant to the exercise of the Option or Right.

Options and Rights do not carry any rights to dividends, rights to vote or rights to capital.


ProsPectus vesting and exercise of Options and rights

Lapse of Options and rights

If Options or Rights are offered subject to Option Vesting Conditions or Right Vesting Conditions (as applicable), Spotless must give the participant a vesting notice upon such conditions having been satisfied or waived by the Plan Committee.

Subject to any Option Vesting Conditions or Right Vesting Conditions

(as applicable) having been satisfied or waived and the Option or Right not having lapsed in accordance with the terms of the LTI Plan, an

Option or Right may be exercised at any time during the Exercise

Period by the participant giving an exercise notice to Spotless and paying the exercise price (if any).

The Plan Committee may permit a participant to exercise Options or Rights in respect of which an exercise price is payable by way of a Cashless Exercise ( Cashless Exercise ). If Options or Rights are exercised by Cashless Exercise:

– the participant will not be required to pay the exercise price for the Options or Rights; and

– Spotless will only issue or transfer to the participant such number of Shares that have a value equal to the total value of the Shares that would have been issued or transferred to the person if the

Options or Rights had been exercised other than by way of Cashless

Exercise, less the total amount of the exercise price that would otherwise have been payable on exercise of the Options or Rights.

Unless otherwise specified in the Option Vesting Conditions or Right

Vesting Conditions (as applicable) or otherwise determined by the Plan

Committee, an Option or Right will lapse on the earliest of:

– if the Plan Committee determines that any Option Vesting Condition or Share Vesting Condition (as applicable) applicable to the Option or Right has not been satisfied in accordance with its terms or is not capable of being satisfied;

– the expiry of the exercise period;

– in certain circumstances if the participant’s employment is terminated (see Cessation of employment below);

– in the event of a change of control (see Change of control below);

– in other circumstances specified in the LTI Plan rules (e.g. where the

Plan Committee determines that the participant has committed an act of fraud or gross misconduct in relation to the affairs of Spotless); or

– if the participant purports to deal in the Option or Right in breach of any disposal or hedging restrictions in respect of the Option or Right in breach of any hedging restrictions.

145


146 restrictions on

Options and rights

Except as permitted by the Plan Committee, Options and Rights must not be sold, transferred, encumbered or otherwise dealt with.

The Plan Committee may permit the transfer of Options or Rights if the transfer occurs as part of a takeover or in other circumstances determined by the Plan Committee.

If restricted by applicable law, a participant may not enter into any arrangement for the purpose of hedging, or otherwise affecting their economic exposure to any Options or Rights.

waiver of vesting conditions new issues

The Plan Committee has the discretion to reduce or waive Share

Vesting Conditions, Option Vesting Conditions or Right Vesting

Conditions (as applicable) attaching to Awards in whole or in part at any time.

A participant holding Options or Rights is not entitled to participate in any new issue of securities unless the participant has become entitled to exercise his or her Options or Rights, and does so, before the record date for the determination of entitlements to the new issue of securities and participates as a result of being the holder of Shares.

bonus issues, pro-rata issues and capital reorganisations

The LTI Plan provides for adjustments to be made to the number of

Shares which a participant would be entitled to receive on the exercise of Options or Rights or the exercise price (if any) of the Options or

Rights in the event of a bonus issue or pro-rata issue to existing holders of Shares (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) or a reorganisation of capital.

winding up cessation of employment

If a resolution for a voluntary winding up of Spotless is proposed

(other than for the purpose of a reconstruction or amalgamation), the

Plan Committee may, in its absolute discretion, give written notice to participants that, subject to any Option Vesting Conditions or Right

Vesting Conditions, the participants may, during the period specified in the notice, exercise their Options or Rights if the Exercise Period has not expired.

The LTI Plan contains certain provisions concerning the treatment of vested and unvested Shares, Options and / or Rights in the event that a participant ceases employment.

change of control In the event of a change of control, unvested Shares, Options and / or

Rights will vest on a pro-rata basis based on the proportion of the applicable Vesting Period that has elapsed at the date of the change of control. The Plan Committee has the discretion as to how to treat the remaining unvested Shares, Options and / or Rights which may include the remaining unvested Shares, Options and / or Rights being forfeited or lapsing (as applicable) or vesting being accelerated.


Quotation trustee

Plan limit and compliance with laws amendments

Options and Rights will not be quoted on the ASX. Subject to the ASX

Listing Rules, Spotless will apply to the ASX for the official quotation of any Shares issued to participants for the purposes of the LTI Plan.

Spotless may appoint a trustee to acquire and hold Shares, Options or Rights (including unvested Shares, Options or Rights) on behalf of participants, for transfer to future participants or otherwise for the purposes of the LTI Plan.

No Awards may be issued to, or exercised by, a participant if to do so would contravene the Corporations Act, the ASX Listing Rules or any relief or waiver granted by ASIC or the ASX that binds Spotless in making any offer under the LTI Plan or otherwise in connection with the operation of the LTI Plan.

No Awards may be offered under the LTI Plan if to do so would breach the 5% capital limit on the issue of shares set out in ASIC Class Order

03/184 in relation to employee share schemes.

Subject to the ASX Listing Rules, the Plan Committee or the Board may, in its absolute discretion amend the LTI Plan rules, or waive or modify the application of the LTI Plan rules in relation to a participant, provided that

(except in specified circumstances) if such amendment would adversely affect the rights of participants in respect of any Awards then held by them, the Plan Committee or the Board must obtain the consent of participants who hold not less than 75% of the total number of those

Awards held by all those participants before making the amendment.

ProsPectus 147


Grants under the LTI Plan

Current grants

Spotless will grant approximately $3,200,000 worth of Options to participants under the LTI Plan, on or around Completion of the Offer. The Options will be granted in two tranches: the first tranche involving the grant of Options ( Tranche 1 Options ) equal in value to 25% of the aggregate value of the

Options to be granted, and the second tranche involving the grant of Options ( Tranche 2 Options ) equal in value to 75% of the aggregate value of the Options to be granted.

The actual number of Options to be granted will be determined by aggregating the number of

Tranche 1 Options (calculated by dividing 25% of the aggregate value of the Options to be granted by the value per Tranche 1 Option at the date of grant determined using a Black Scholes valuation at the Final Price) and the number of Tranche 2 Options (calculated by dividing 75% of the aggregate value of the Options to be granted by the value per Tranche 2 Option at the date of grant determined using a Black Scholes valuation at the Final Price).

Each grant of Options to be made by Spotless on or around Completion of the Offer will be on the terms generally described above and as follows:

Grant date On or around Completion of the Offer (estimated to be 28 May 2014) consideration for grant

Nil exercise price vesting Period exercise Period

An amount equal to the Final Price per Option

The period commencing on the date of grant and ending on:

– 30 June 2016, in respect of 25% of Tranche 1 Options; and

– 30 June 2017, in respect of 75% of Tranche 2 Options.

In respect of Tranche 1 Options: from the date of the relevant vesting notice until 30 June 2017; and

In respect of Tranche 2 Options: from the date of the relevant vesting notice until 30 June 2018.


Option vesting conditions

Performance measures:

– 50% of the Options granted will vest subject to a relative total

Shareholder return ( TSR ) performance hurdle over the relevant

Vesting Period ( TSR Options ); and

– the remaining 50% of the Options granted will vest subject to an earnings per Share ( EPS ) performance hurdle over the relevant

Vesting Period ( EPS Options ).

Spotless’ TSR from the date of Listing will be assessed against the relative performance over the relevant Vesting Period of a list of comparable companies to be determined by the Board. The relative

TSR performance targets and corresponding percentages of the maximum number of TSR Options that would vest are as follows:

– below the 51st percentile TSR growth – 0%;

– at the 51st percentile TSR growth – 50%;

– equal to or above the 51st percentile but below the 75th percentile

TSR growth – pro-rata straight-line between 50% and 100%; and

– equal to or above the 75th percentile TSR growth – 100%.

The Share price baseline for the TSR calculation will be the Final Price.

The relative EPS performance targets (being the compound annual

EPS growth over the relevant Vesting Period, adjusted to take into account one-off items associated with the Offer, if necessary) and corresponding percentages of the maximum number of EPS Options that would vest are as determined by the Board.

The Options will not vest unless at the time of satisfaction of all other

Option Vesting Conditions, the volume weighted average price of

Shares traded on the ASX calculated over the last five trading days on which sales in the Shares are recorded, is 105% or more of the exercise price, or such other percentage as determined by the Board.

Bruce Dixon will be granted up to $1,100,000 worth of Options under the LTI Plan on the above terms on or around Completion of the Offer. The actual number of Options that Bruce Dixon will receive will be determined in accordance with the method described above.

Other members of Senior Management and certain other senior executives identified by the Board will also receive grants of Options under the LTI Plan on the above terms. A total value of $575,000 worth of Options will be granted to Senior Management (excluding Bruce Dixon) under the LTI Plan on or around Completion of the Offer. The actual number of Options that Senior Management (excluding

Bruce Dixon) will receive will be determined in accordance with the method described above. In addition, Options may be granted to other Eligible LTI Employees as determined by the Board.

Future grants

It is intended that future grants under the LTI Plan will be made annually and that these will vest

3 years from grant, subject to the satisfaction of any Share Vesting Conditions, Option Vesting

Conditions or Right Vesting Conditions (as applicable) set by the Plan Committee. However, there is no obligation on Spotless to make any further grants under the LTI Plan.

ProsPectus 149


5.4 corporate governance

5.4.1 introduction

This Section 5.4 explains how the Board will oversee the management of Spotless’ business.

The Board is responsible for the overall corporate governance of Spotless. The Board monitors the operational and financial position and performance of Spotless and oversees its business strategy including approving the strategic goals of Spotless and considering and approving an annual business plan, including a budget. The Board is committed to maximising performance, generating financial returns and greater value for Shareholders, and sustaining the growth and success of

Spotless. In conducting Spotless’ business with these objectives, the Board seeks to ensure that

Spotless is properly managed to protect and enhance Shareholder interests, and that Spotless, and its Directors, officers and personnel operate in an appropriate environment of corporate governance.

Accordingly, the Board has created a framework for managing Spotless including adopting relevant internal controls, risk management processes and corporate governance policies and practices which it believes are appropriate for Spotless’ business and which are designed to promote the responsible management and conduct of Spotless.

The main policies and practices adopted by Spotless, which will take effect from Listing, are summarised below. In addition, many governance elements are contained in the Constitution.

The Code of Conduct outlines how Spotless expects Directors, officers and personnel to behave and conduct business in a range of circumstances. In particular, the Code of Conduct requires awareness of, and compliance with, laws and regulations relevant to Spotless’ operations, including occupational health and safety, risk management, privacy and employment and diversity practices.

Details and copies of Spotless’ key policies and practices and the charters for the Board and each of its committees are available at www.spotless.com.

Spotless is seeking to list its Shares on the ASX. The ASX Corporate Governance Council has developed and released its Corporate Governance Principles and Recommendations for Australian listed entities ( ASX Recommendations ) in order to promote investor confidence and to assist companies in meeting stakeholder expectations. The ASX Recommendations are not prescriptive, but guidelines. However, under the ASX Listing Rules, Spotless will be required to provide a statement in its annual report disclosing the extent to which it has followed the recommendations in the reporting period. Where Spotless does not follow a recommendation, it must identify the recommendation that has not been followed and give reasons for not following it. The Board does not anticipate that it will depart from the ASX Recommendations. However, it may do so in the future if it considers that such departure would be reasonable.

5.4.2 board of directors

As at the Prospectus Date, the Board of Directors comprises four independent Non-Executive

Directors (including the Chairman), two Non-Executive Directors and the CEO.

The Board comprises:

• Margaret Jackson AC – Independent Non-Executive Chairman;

• Bruce Dixon – Chief Executive Officer;

• Diane Grady AM – Independent Non-Executive Director;

• Garry Hounsell – Independent Non-Executive Director;

• Geoff Hutchinson – Non-Executive Director;

• Rob Koczkar – Non-Executive Director; and

• The Hon. Nick Sherry – Independent Non-Executive Director.

Detailed biographies of the Board members are provided in Section 5.1.

Each Director has confirmed to the Company that he or she anticipates being available to perform his or her duties as a Non-Executive Director or Executive Director without constraint from other commitments.


The Board considers an independent Director to be a Non-Executive Director who is not a member of the Company’s management and who is free of any business or other relationship that could materially interfere with or reasonably be perceived to materially interfere with the independent exercise of their judgement. The Board will consider the materiality of any given relationship on a case-by-case basis and has adopted guidelines to assist in this regard. The Board will review the independence of each Director in light of interests disclosed to the Board from time to time.

The Board Charter sets out guidelines of materiality for the purpose of determining independence of Directors in accordance with the ASX Recommendations and has adopted a definition of independence that is based on that set out in the ASX Recommendations.

The Board considers qualitative principles of materiality for the purpose of determining ‘independence’ on a case-by-case basis. The Board will consider whether there are any factors or considerations which may mean that the Director’s interest, business or relationship could, or could be reasonably perceived to, materially interfere with the Director’s ability to act in the best interests of the Company.

The Board considers that each of Margaret Jackson AC, Diane Grady AM, Garry Hounsell and

The Hon. Nick Sherry is an independent Director for the purpose of the ASX Recommendations.

Bruce Dixon, Rob Koczkar, and Geoff Hutchinson are not considered by the Board to be independent.

Bruce is the CEO and Managing Director of Spotless. Rob Koczkar and Geoff Hutchinson are

Directors nominated on behalf of the PEP Shareholders and the Coinvestment Shareholders (other than Lentesco) which are expected to hold 43.4% of the Shares on Completion of the Offer 95 .

On this basis, the Board will consist of a majority of independent Directors. The Board considers that each of the Non-Executive Directors brings an objective and independent judgment to the Board’s deliberations and that each of the Non-Executive Directors makes a valuable contribution to the

Company through the skills they bring to the Board and their understanding of Spotless’ business.

5.4.3 board charter

The Board Charter adopted by the Board sets out the responsibilities of the Board in detail.

It envisages that the Board should comprise Directors with a range of skills, expertise, experience and diversity which are relevant to the Company’s businesses and the Board’s responsibilities. The

Board Charter allows the Board to delegate powers and responsibilities to committees established by the Board. The Board is accountable to Shareholders in discharging its duties.

5.4.4 board committees

The Board may from time to time establish appropriate committees to assist in the discharge of its responsibilities. The Board has established an Audit, Business Risk and Compliance Committee, a Nomination Committee and a People and Remuneration Committee.

Other committees may be established by the Board as and when required.

Under the Board Charter, Board committee performance evaluations will occur at least once per year.

Audit, Business Risk and Compliance Committee

The role of the Audit, Business Risk and Compliance Committee is to assist the Board in fulfilling its responsibilities for corporate governance and overseeing the Company’s internal control structure and risk management systems. The Audit, Business Risk and Compliance Committee also confirms the quality and reliability of the financial information prepared by the Company, works with the external auditor on behalf of the Board and reviews non-audit services provided by the external auditor, to confirm they are consistent with maintaining external audit independence.

The Audit, Business Risk and Compliance Committee provides advice to the Board and reports on the status and management of the risks to the Company. The purpose of the Audit, Business Risk

95 This assumes that the Final Price is set at the midpoint of the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option. See Section 6.6 for further information.

ProsPectus 151

5. key individuals, interests and benefits continued and Compliance Committee’s risk management process is to assist the Board in relation to risk management policies, procedures and systems and ensure that risks are identified, assessed and appropriately managed.

It is the policy of the Company that its external auditor must be an independent external auditor.

The Charter of the Audit, Business Risk and Compliance Committee provides that the committee should comprise at least three Directors all of whom are Non-Executive Directors and a majority of whom are independent of management. A member of the Audit, Business and Risk and Compliance

Committee, who is an independent Director and who does not chair the Board, shall be appointed the chair of the committee.

The Audit, Business Risk and Compliance Committee will meet as often as is required by the Audit,

Business and Risk and Compliance Committee Charter. The chair of the Audit, Business Risk and

Compliance Committee will routinely invite other Directors, members and representatives of the external auditor to be present at meetings of the committee and seek advice from external advisors. The Audit, Business Risk and Compliance Committee will regularly report to the

Board about committee activities, issues and related recommendations.

The committee comprises Garry Hounsell (chair), Margaret Jackson, The Hon. Nick Sherry and

Geoff Hutchinson.

People and Remuneration Committee

The role of the People and Remuneration Committee is to review and make recommendations to the Board with respect to Spotless’ human resources policies and obligations, to make recommendations to the Board on remuneration packages and policies related to the Directors and senior management and to ensure that the remuneration policies and practices are consistent with the Company’s strategic goals. Independent advice will be sought where appropriate.

The People and Remuneration Committee will meet as often as is required by the People and

Remuneration Committee Charter. Following each meeting, the People and Remuneration Committee will report to the Board on any matter that should be brought to the Board’s attention and on any recommendation of the People and Remuneration Committee that requires Board approval.

The committee comprises Diane Grady (chair), Margaret Jackson, The Hon. Nick Sherry and

Rob Koczkar.

Nomination Committee

The Nomination Committee is responsible for reviewing and making recommendations in relation to the composition and performance of the Board and its committees and ensuring that adequate succession plans are in place (including for the recruitment and appointment of Directors and senior management). Independent advice will be sought where appropriate.

The Nomination Committee will meet as often as required and its recommendations from time to time will be reported to the Board. The committee will be chaired by Margaret Jackson and will also comprise other directors selected by the Board from time to time.

5.4.5 risk management Policy

The identification and proper management of the Company’s risks are an important priority of the

Board. The Company has adopted a risk management policy appropriate for its business (which is reflected in the Audit, Business Risk and Compliance Committee Charter). This policy highlights the risks relevant to the Company’s operations and the Company’s commitment to designing and implementing systems and methods appropriate to minimise and control its risks.

The Board is responsible for overseeing and approving risk management strategy and policies.

The Board has delegated to the Audit, Business Risk and Compliance Committee responsibility for identifying major risk areas and monitoring risk management to provide assurance that major business risks are identified, consistently assessed and appropriately addressed.


The Company will regularly undertake reviews of its risk management procedures to ensure that it complies with its legal obligations, including assisting the Chief Executive Officer or Chief Financial

Officer to provide the required declaration under section 295A of the Corporations Act.

The Company has in place a system whereby management is required to report as to its adherence to policies and guidelines approved by the Board for the management of risks.

5.4.6 diversity policy

The workforce of the Company is made up of individuals with diverse skills, backgrounds, perspectives and experiences and this diversity is recognised, valued and respected. The

Company acknowledges the positive outcomes that can be achieved through a diverse workforce and recognises and utilises the contribution of diverse skills and talent from its workforce. For the purposes of this policy, ‘diversity’ encompasses (without limitation) diversity of gender, age, ethnicity, cultural background, impairment or disability, sexual orientation and religion.

5.4.7 continuous disclosure policy

Once listed, the Company will be required to comply with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act. The Company will be required to disclose to the ASX any information concerning the Company which a reasonable person would expect to have a material effect on the price or value of the Company’s securities.

The Board aims to ensure that Shareholders and stakeholders are informed of all major developments affecting the Company’s state of affairs. As such, the Company has adopted a Disclosure Policy and

Shareholder Communication Policy, which together establish procedures to ensure that Directors and senior management are aware of, and fulfil their obligations in relation to, providing timely, full and accurate disclosure of material information to the Company’s stakeholders and comply with the

Company’s disclosure obligations under the Corporations Act and the ASX Listing Rules. The Disclosure

Policy also sets out procedures for communicating with Shareholders, the media and the market.

The Board’s aim is to ensure that Shareholders are provided with sufficient information to assess the performance of the Company and that they are informed of all major developments affecting the state of affairs of the Company relevant to Shareholders in accordance with all applicable laws. Information will be communicated to Shareholders through the Lodgement of information with the ASX required by the

Company’s continuous disclosure obligations and publishing information on the Company’s website. The

Shareholder Communication Policy is designed to promote effective communication with Shareholders and other Spotless stakeholders and to encourage effective participation of relevant parties at general meetings. The Shareholder Communication Policy supplements the Disclosure Policy.

The Company is committed to observing its disclosure obligations under the ASX Listing Rules and

Corporations Act. Information will be communicated to Shareholders through the Lodgement of all relevant financial and other information with the ASX and continuous disclosure announcements will be made available on the Company’s website at www.spotless.com/offer.

5.4.8 Share trading Policy

The Company has adopted a Share Trading Policy which will apply to the Company and its Directors,

Company Secretary and senior management and other persons nominated by the Board from time to time ( Relevant Persons ).

The Share Trading Policy is intended to explain the types of conduct in relation to dealings in securities that are prohibited under the Corporations Act and to establish procedures in relation to dealings in Shares by Relevant Persons.

The Share Trading Policy defines certain “closed periods” during which trading in Shares by Relevant

Persons is prohibited. Those closed periods are currently defined as any of the following periods:

• the period commencing six weeks prior to the release of the Company’s half year results to the

ASX and ending 24 hours after such release; or

• the period commencing six weeks prior to the release of the Company’s full year results to the

ASX and ending 24 hours after such release; or

ProsPectus 153


• the period commencing two weeks prior to the Company’s annual general meeting and ending

24 hours after the annual general meeting; or

• any other period that the Board designates as a “closed period” for the purposes of this policy, such as a period during which the Company is involved in corporate transactions that may have a material impact on the price of the Company’s listed securities.

In all instances, buying or selling Shares is not permitted at any time by any person who possesses price-sensitive information in a manner contrary to the Corporations Act.

5.4.9 code of conduct

The Board recognises the need to observe the highest standards of corporate practice and business conduct. Accordingly, the Board has adopted a Code of Conduct, which sets out the way the Company conducts business. The Company will carry on business honestly and fairly, acting only in ways that reflect well on the Company in strict compliance with all laws and regulations.

The policy document outlines Company employees’ obligations of compliance with the Code of

Conduct, and explains how the Code of Conduct interacts with the Company’s other corporate governance policies.

Responsibilities include protection of the Company’s business, using the Company’s resources in an appropriate manner, protecting confidential information and avoiding conflicts of interest.

5.4.10 relationship with Pacific equity Partners

The PEP Shareholders, together with the Coinvestment Shareholders, will retain a 45.5% interest in Spotless on Completion of the Offer.

96

The PEP Shareholders continue to be supportive of Spotless and its growth potential and their current intention is to remain a strategic Shareholder of Spotless. The PEP Shareholders and

Coinvestment Shareholders have entered into voluntary escrow arrangements. Any decision by the

PEP Shareholders or Coinvestment Shareholders to sell down their interest in Spotless following the expiry of the voluntary escrow arrangements will be a decision made having regard to a range of factors. These include the market environment at the time and the interests of the investors in the

PEP Shareholders and Coinvestment Shareholders. See Section 6.7 for a summary of the terms of the voluntary escrow arrangements.

The Independent Directors have approved the Company entering into a Relationship Deed with representatives of the PEP Shareholders that governs their relationship while the PEP Shareholders and

Coinvestment Shareholders (other than Lentesco) retain an interest in Spotless. Section 9.5.3 provides a summary of the terms of the Relationship Deed. The key provisions of the Relationship Deed:

• require that the parties agree procedures for the management of conflicts of interest and appropriate use of confidential information;

• provide for representatives of the PEP Shareholders to have the right to nominate two Directors to the Board while the PEP Shareholders and Coinvestment Shareholders (other than Lentesco) hold at least 25%, or one Director to the Board while the PEP Shareholders and Coinvestment

Shareholders (other than Lentesco) hold at least 10%, of the issued share capital of Spotless; and

• require Spotless to provide market disclosure (subject to certain conditions) to facilitate the

PEP Shareholders and Coinvestment Shareholders (other than Lentesco) selling their Shares.

The PEP Shareholders and Coinvestment Shareholders have also entered into confidentiality arrangements with Spotless which govern access to Spotless’ information.

Risks associated with the PEP Shareholders’ and Coinvestment Shareholders’ continued interest in Spotless are set out in Section 4.3.3.

154

96 This assumes that the Final Price is set at the midpoint of the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option. See Section 6.6 for further information.


Section 6

PrOSPectuS 155

6. details of the Offer

6.1 the Offer

This Prospectus relates to an offer of 540.5 million Shares, comprising an initial public offering of

404.5 million New Shares by Spotless and the sale of 136 million Existing Shares held by SaleCo

(assuming in both cases that the Final Price is at the midpoint of the Indicative Price Range and disregarding any exercise of the Over-allocation Option).

97 The total number of Shares on issue at the Completion of the Offer will be 1,069.7 million 98 and all Shares will rank equally with each other.

The Shares offered under this Prospectus will represent approximately 50.5% of the Shares on issue on Completion of the Offer.

99

The Company and SaleCo, in agreement with the JLMs, may over-allocate up to 81.1 million additional Shares to Institutional Investors under the Institutional Offer. SaleCo has granted to the

Stabilisation Manager an option to purchase up to an additional 81.1 million Shares at the Final Price to cover over-allocations, if any. A full exercise of the Over-allocation Option would result in a total

Offer size of 621.6 million Shares. See Section 6.6 for details of the Over-allocation Option.

Disregarding any exercise of the Over-allocation Option, the Offer is expected to raise between

$864.9 million and $1 billion. Assuming the Final Price is at the midpoint of the Indicative Price Range, the Offer will raise $932.4 million of total proceeds comprising $697.7 million from the issue of New

Shares by Spotless and $234.7 million from the sale of Existing Shares by SaleCo. Successful

Applicants under the Offer will pay the Final Price, which will be determined at the conclusion of the bookbuild and may be set at a price below, within or above the Indicative Price Range.

The Offer is made on the terms, and is subject to the conditions, set out in this Prospectus.

6.1.1 Structure of the Offer

The Offer comprises:

• the Broker Firm Offer, which is open only to Australian and New Zealand resident retail clients of Brokers who have received a firm allocation of Shares from their Broker;

• the Institutional Offer, which consists of an invitation to bid to Institutional Investors in Australia and a number of other eligible jurisdictions under the Institutional Offering Memorandum or this

Prospectus (as applicable) to acquire Shares; and

• the Personnel and Priority Offer, which is open only to Eligible Employees and investors nominated by Spotless located in Australia and New Zealand.

No general public offer of Shares will be made under the Offer. The allocation of Shares between the Broker Firm Offer, the Institutional Offer and the Personnel and Priority Offer will be determined by the JLMs, in agreement with Spotless and the Financial Adviser, having regard to the allocation policy outlined in Sections 6.3, 6.4 and 6.5.

6.1.2 Purpose of the Offer and use of proceeds

The purpose of the Offer is to:

• provide Spotless with funds to reduce the Company’s existing debt level;

• provide Spotless with access to capital markets to give added financial flexibility to pursue further growth opportunities;

• provide Spotless with a liquid market for its Shares; and

• to allow Existing Shareholders to realise part of their investment in Spotless.

97 Disregarding any exercise of the Over-allocation Option, the Offer comprises a fixed number of 540.5 million shares at all points within the Indicative Price Range but it will be comprised of a different number of New Shares and Existing Shares depending on where the

Final Price falls within the Indicative Price range. If the Final Price is at the bottom of the Indicative Price Range, the Offer will comprise

434.5 million New Shares and 106 million Existing Shares. If the Final Price is at the top of the Indicative Price Range, the Offer will comprise 378.5 million New Shares and 162 million Existing Shares.

98 This is based on the assumption that the Final Price is at the midpoint of the Indicative Price Range. If the Final Price is at the bottom of the Indicative Price Range, the total number of Shares on issue at Completion of the Offer will be 1,098.3 million. If the Final Price is at the top of the Indicative Price Range, the total number of Shares on issue at Completion of the Offer will be 1,045.0 million.

99 This is based on the assumption that the Final Price is at the midpoint of the Indicative Price Range and disregards any exercise of the Over-allocation Option. See Section 6.6 for further information.


table 32 Sources and uses of funds 100

Sources of funds

Cash proceeds received for New Shares issued under the Offer

Cash proceeds received from sale of Existing Shares

Drawdown of New Banking Facilities total sources

$ million

697.7

234.7

637.0

1,569.5

%

44.5%

15.0%

40.6%

100.0% uses of funds

Payment of proceeds to SaleCo

Repayment of the existing liabilities 101

Other fees associated with the Offer 102 total uses

$ million

234.7

1,276.3

58.5

1,569.5

%

15.0%

81.3%

3.7%

100.0%


6.1.3 Pro forma statement of financial position

Spotless’ pro forma statement of financial position following Completion of the Offer, including details of the pro forma adjustments, is set out in Section 3.6.

6.1.4 capital structure

Spotless’ indebtedness as at 31 December 2013, both before and adjusted to reflect the Offer, is set out in Section 3.6.

6.1.5 Shareholding structure

The details of the ownership of Shares on Listing are set out below:

Shareholder

PEP Shareholders

Coinvestment Shareholders

Management Shareholders and other Existing Shareholders

New Shares to be issued under the

Offer or at Completion of the Offer 103

Existing Shares to be sold under the Offer total

Shareholding pre-iPO

(Shares)

Shareholding pre-iPO (%)

481.8

136.9

72.5%

20.6%

46.1

–

–

664.9

6.9%

–

–

100.0%

Shares issued/ acquired/

(sold) 100

Shareholding post-iPO

(Shares) 100

Shareholding post-iPO

(%) 100

(103.0)

(29.3)

378.8

107.7

35.4%

10.1%

(3.8)

404.9

136.0

404.9

42.3

404.9

136.0

1,069.7

4.0%

37.8%

12.7%

100.0%


Management Shareholders will sell down up to 8.3% of all Shares they would otherwise hold on

Completion of the Offer.

98 Shares held by the PEP Shareholders, the Coinvestment Shareholders and the Management Shareholders post IPO will be subject to restrictions contained in voluntary escrow arrangements described in Section 6.7.

100 This assumes that the Final Price is set at the midpoint of the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option (see Section 6.6 for further information).

101 Existing liabilities include Existing Banking Facilities, break fees and financing fees. Also included is $7.6 million in fees (excluding GST) payable to PEP Advisory and the Coinvestment Shareholders in respect of prior periods under an advisory services agreement that terminates on Completion of the Offer.

102 Other fees associated with the Offer include, assuming the Final Price is set at the midpoint of the Indicative Price Range, $24.6 million in fees (excluding GST) payable to PEP Advisory under an advisory services agreement for services provided in connection with the Offer.

The advisory services agreement terminates on Completion of the Offer.

103 This includes bonus Shares issued to Directors in connection with the Offer (see Section 5.3.2) and any additional Shares acquired by Directors under the Offer.

ProsPectus 157

6. details of the Offer continued

6.1.6 Potential effect of the fundraising on the future of Spotless

The Directors believe that on Completion of the Offer, Spotless will have sufficient funds available from the cash proceeds of the Offer, its operations and the New Banking Facilities, to fulfil the purposes of the Offer and meet its stated business objectives.

6.2 terms and conditions of the Offer

topic Summary

Shares (being fully paid ordinary shares in Spotless).

what is the type of security being offered?

what are the rights and liabilities attached to the security being offered?

what is the consideration payable for each security being offered?

A description of the Shares, including the rights and liabilities attaching to these, is set out in Section 6.10 below.

what is the Offer period?

what are the cash proceeds to be raised?

what is the minimum and maximum application size under the broker firm Offer?

what is the minimum and maximum application size under the Personnel and

Priority Offer?

The Indicative Price Range for the Offer is $1.60 to $1.85 per Share. Successful Applicants under the Offer will pay the Final Price, which will be determined at the conclusion of the bookbuild and may be set at a price below, within or above the Indicative Price Range.

The Final Price will be determined after the close of the Offer and it may be above, below or within the Indicative Price

Range. Applicants under the Broker Firm Offer and Priority

Offer will apply for a set dollar value of Shares. Accordingly,

Applicants will not know the number of Shares they will receive at the time they make their investment decision, nor will they know the Final Price. Except as required by law,

Applicants cannot withdraw their Applications once the

Final Price and allocations of Shares have been determined.

The key dates, including details of the Offer period, are set out on page 6.

No Shares will be issued on the basis of this Prospectus later than the Expiry Date of 13 months after the

Prospectus Date.

Between $864.9 million and $1 billion is expected to be raised under the Offer (based on the Indicative Price Range and disregarding any over-allocation or exercise of the

Over-allocation Option).

The minimum and maximum Applications under the Broker

Firm Offer are as determined by the Applicant’s Broker.

Spotless, the JLMs and the Financial Adviser reserve the right to reject any Application or to allocate a lesser number of Shares than that applied for, in their absolute discretion.

Applications under the Personnel and Priority Offer must be for a minimum of $1,000 worth of Shares and in multiples of $500 worth of Shares thereafter.

Spotless, the JLMs and the Financial Adviser reserve the right to reject any Application or to allocate a lesser number of Shares than that applied for, in their absolute discretion.


ProsPectus topic what is the allocation policy?

will the securities be listed?

when are the securities expected to commence trading?

Summary

The allocation of Shares between the Broker Firm Offer, the

Institutional Offer and the Personnel and Priority Offer will be determined by the JLMs by agreement with Spotless and the Financial Adviser, having regard to the allocation policy outlined in Sections 6.3, 6.4 and 6.5.

With respect to the Broker Firm Offer, it will be a matter for the Brokers to determine how they allocate Shares among their eligible retail clients, and they (and not Spotless, the

JLMs or the Financial Adviser) will be responsible for ensuring that eligible retail clients who have received an allocation from them receive the relevant Shares.

The allocation of Shares under the Institutional Offer will be determined by the JLMs by agreement with Spotless and the Financial Adviser.

The Broker Firm Offer and Personnel and Priority Offer are not open to investors in the United States.

For further information on the:

– Broker Firm Offer, see Section 6.3;

– Institutional Offer, see Section 6.4; and

– Personnel and Priority Offer, see Section 6.5.

Spotless will apply within seven days of the Prospectus

Date for Listing of the Shares on the ASX under the code

SPO. Completion of the Offer is conditional on the ASX approving the application. If approval is not given within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act.

It is expected that trading of the Shares on the ASX will commence on or about 23 May 2014, initially on a conditional and deferred settlement basis.

Trading will be on a conditional and deferred settlement basis until Spotless has advised the ASX that holding statements have been dispatched to Shareholders.

Normal Settlement trading is expected to commence on or about 30 May 2014.

If Settlement has not occurred within 14 days (or such longer period as the ASX allows) after the day Shares are first quoted on the ASX, the Offer and confirmations of allocations will be cancelled and of no further effect and all Application Monies will be refunded (without interest).

159

6. details of the Offer continued topic when are the securities expected to commence trading? continued

Summary

It is the responsibility of each Applicant to confirm their holding before trading in Shares. Applicants who sell

Shares before they receive an initial statement of holding do so at their own risk. Spotless, the JLMs, the Financial

Adviser and the Existing Shareholders disclaim all liability, whether in negligence or otherwise, to persons who sell

Shares before receiving their initial statement of holding, whether on the basis of a confirmation of allocation provided by any of them, by the Spotless Offer

Information Line, by a Broker or otherwise.

No. The Offer is not underwritten.

Yes. Details are provided in Section 6.7.

is the Offer underwritten?

are there any escrow arrangements?

are there any taxation considerations?

is there any brokerage, commission or stamp duty considerations?


what should you do with any enquiries?

No brokerage, commission or stamp duty is payable by

Applicants on acquisition of Shares under the Offer. See

Section 9.5 for details of various fees payable by Spotless to the JLMs and by the JLMs to certain Brokers.

Please call the Spotless Offer Information Line on

1800 660 083 (toll free within Australia) or +61 1800 660 083

(outside Australia) from 8.30am until 5.30pm (Sydney time)

Monday to Friday.

If you are unclear in relation to any matter or are uncertain as to whether Spotless is a suitable investment for you, you should seek professional guidance from your solicitor, stockbroker, accountant or other independent and qualified professional adviser before deciding whether to invest.

6.3 broker firm Offer

6.3.1 who can apply in the broker firm Offer

The Broker Firm Offer is open to persons who have received a firm allocation from their Broker and who have a registered address in Australia or New Zealand and are not located in the United States.

Investors who are offered a firm allocation by a Broker will be treated as an Applicant under the

Broker Firm Offer in respect of that allocation.

Investors should contact their Broker to determine whether they may be allocated Shares under the

Broker Firm Offer.

The Broker Firm Offer is not open to persons in the United States.

6.3.2 How to apply for Shares under the broker firm Offer

Applications for Shares may only be made on an Application Form attached to or accompanying this

Prospectus or any replacement prospectus. If you are an Investor applying under the Broker Firm Offer, you should complete and lodge your Application Form with the Broker from whom you received your firm allocation of Shares. Application Forms must be completed in accordance with the instructions given to you by your Broker and the instructions set out on the reverse of the Application Form.


By making an Application, you declare that you were given access to this Prospectus, together with an Application Form. The Corporations Act prohibits any person from passing an Application Form to another person unless it is attached to, or accompanied by, a hard copy of this Prospectus or the complete and unaltered electronic version of this Prospectus.

Applicants under the Broker Firm Offer should contact their Broker about the minimum and maximum

Application size. Spotless, the JLMs and the Financial Adviser reserve the right to aggregate any

Applications that they believe may be multiple Applications from the same person. Spotless may determine a person to be eligible to participate in the Broker Firm Offer, and may amend or waive the Broker Firm Offer application procedures or requirements, in its discretion in compliance with applicable laws.

Applicants under the Broker Firm Offer must lodge their Application Form and Application Monies with the relevant Broker in accordance with the relevant Broker’s directions in order to receive their firm allocation of Shares. Applicants under the Broker Firm Offer must not send their Application

Forms to the Share Registry.

The Broker Firm Offer opens at 9.00am (Sydney time) on 6 May 2014 and is expected to close at

5.00pm (Sydney time) on 19 May 2014. Spotless, the JLMs and the Financial Adviser reserve the right to extend the Offer or any part of it, accept late Applications or bids either generally or in particular cases reject any Application or bid, or allocate to any Applicant fewer Shares than the amount bid for.

Applicants are therefore encouraged to submit their Applications as early as possible. Please contact your Broker for instructions.

6.3.3 Payment methods

Applicants under the Broker Firm Offer must pay their Application Monies in accordance with instructions from their Broker.

6.3.4 application acceptances and application monies

An Application in the Broker Firm Offer is an offer by the Applicant to subscribe for Shares for all or any of the Application Amount specified in the Application Form at the Final Price on the terms and conditions set out in this Prospectus including any supplementary or replacement prospectus and the Application Form. To the extent permitted by law, an Application by an Applicant under the Offer is irrevocable. Acceptance of an Application will give rise to a binding contract.

Spotless reserves the right to decline any Application and all Applications in whole or in part, without giving any reason. Applicants under the Broker Firm Offer whose Applications are not accepted, or who are allocated a lesser number of Shares than the amount applied for, will receive a refund of all or part of their Application Monies, as applicable. Interest will not be paid on any monies refunded.

Successful Applicants in the Broker Firm Offer will be allotted Shares at the Final Price and will receive the number of Shares equal to the value of their Application accepted by Spotless divided by the Final Price (rounded down to the nearest whole Share).

6.3.5 allocation policy under the broker firm Offer

The allocation of firm stock to Brokers will be determined by the JLMs, by agreement with Spotless and the Financial Adviser. Shares which are allocated to Brokers for allocation to their Australian or

New Zealand resident retail clients will be issued or transferred to the Applicants who have received a valid allocation of Shares from those Brokers. It will be a matter for the Brokers to determine how they allocate Shares among their eligible retail clients, and they (and not Spotless, the JLMs or the Financial

Adviser) will be responsible for ensuring that eligible retail clients who have received an allocation from them receive the relevant Shares.

6.3.6 announcement of final allocation policy in the broker firm Offer

Spotless expects to announce the final allocation policy under the Broker Firm Offer on or about

22 May 2014. Applicants under the Broker Firm Offer will also be able to confirm their firm allocation through the Broker from whom they received their allocation.

However, if you sell Shares before receiving a holding statement, you do so at your own risk, even if you confirmed your firm allocation through a Broker.

ProsPectus 161


6.4 institutional Offer

6.4.1 invitations to bid

Spotless and SaleCo are inviting certain eligible Institutional Investors to bid for Shares in the

Institutional Offer. The Institutional Offer will comprise an invitation to Institutional Investors in Australia to bid for Shares under this Prospectus, and an invitation to Institutional Investors in certain eligible jurisdictions outside Australia to bid for Shares under this Prospectus of the Institutional Offering

Memorandum, as applicable.

6.4.2 institutional Offer process and the indicative Price range

The Institutional Offer will be conducted using a bookbuild process managed by the JLMs. Full details of how to participate, including bidding instructions, will be provided to eligible participants by the JLMs.

Participants can only bid into the bookbuild for Shares through the JLMs. They may bid for Shares at specific prices or at the Final Price. Participants may bid above, below or within the Indicative Price

Range, which is $1.60 to $1.85 per Share.

Under the terms of the Offer Management Agreement, the Final Price will be determined by the

JLMs in agreement with Spotless and the Financial Adviser, after the close of the Broker Firm Offer and the Institutional Offer as described in Section 6.4.

The Institutional Offer will open on 20 May 2014 and close on 21 May 2014. Spotless, in consultation with the JLMs and the Financial Adviser reserves the right to vary the times and dates of the Offer including to close the Offer early, extend the Offer or to accept late Applications or bids, either generally or in particular cases, without notification.

Bids in the Institutional Offer may be amended or withdrawn at any time up to the close of the

Institutional Offer. Any bid not withdrawn at the close of the Institutional Offer is an irrevocable offer by the relevant bidder to subscribe or procure subscribers for the Shares bid for (or such lesser number as may be allocated) at the price per Share bid or at the Final Price, where this is below the price per Share bid, on the terms and conditions set out in this Prospectus (including any supplementary or replacement document) and in accordance with any bidding instructions provided by the JLMs to participants.

Bids can be accepted or rejected in whole or in part without further notice to the bidder. Acceptance of a bid will give rise to a binding contract on allocation of Shares to Successful Applicants conditional on the quotation of Shares on the ASX and Settlement. Details of the arrangements for notification and Settlement of allocations applying to participants in the Institutional Offer will be provided to participants in the bookbuild process.

6.4.3 final Price

The Institutional Offer bookbuild process will be used to determine the Final Price. Under the terms of the Offer Management Agreement, the Final Price will be determined by the JLMs, Spotless and the Financial Adviser after the close of the Broker Firm Offer and the Institutional Offer. It is expected that the Final Price will be announced to the market on 22 May 2014. In determining the Final Price, consideration will be given to, but will not be limited to, the following factors:

• the level of demand for Shares under the Institutional Offer at various prices;

• the level of demand for Shares under the Broker Firm Offer;

• the objective of maximising the proceeds of the Offer; and

• the desire for an orderly secondary market in the Shares.

The Final Price will not necessarily be the highest price at which Shares could be sold. In the

Institutional Offer, the Final Price may be set below, within or above the Indicative Price Range.

All Successful Applicants under the Offer will pay the Final Price.


6.4.4 allocation policy under the institutional Offer

The allocation of Shares under the Institutional Offer will be determined by the JLMs by agreement with

Spotless and the Financial Adviser. The JLMs, by agreement with Spotless and the Financial Adviser, have absolute discretion regarding the basis of allocation of Shares among Institutional Investors.

The initial determinant of the allocation of Shares under the Institutional Offer will be the Final Price.

Bids lodged at prices below the Final Price will not receive an allocation of Shares.

The allocation policy will also be influenced by a range of factors, including:

• the price and number of Shares bid for by particular Applicants;

• the timeliness of the bid by particular Applicants; and

• any other factors that Spotless, the JLMs and the Financial Adviser considered appropriate.

6.5 Personnel and Priority Offer

6.5.1 Personnel offer

Eligible Employees are eligible to participate in the personnel offer ( Personnel Offer) .

Eligible Employees who are Australian residents may apply for Shares online and must comply with the instructions on the website, www.spotless.com/offer.

Applications under the Personnel Offer must be for a minimum of $1,000 worth of Shares and in multiples of $500 worth of Shares thereafter.

Eligible Employees will receive a guaranteed minimum allocation of $1,000 worth of Shares at the Final

Price (rounded down to the nearest whole Share). Subject to the guaranteed minimum allocation, the final allocation of Shares to Applicants in the Personnel Offer will be at Spotless’ absolute discretion and Spotless may reject an Application, or allocate fewer Shares than the amount applied for.

For Eligible Employees who are Australian residents, payment may be made via B PAY ® only. Application

Monies must be received by the Share Registry by 5.00pm (Sydney time) on 19 May 2014.

To make a payment via B PAY ® , Applicants will need to apply online at www.spotless.com/offer and must comply with the instructions on the website. It is the Applicant’s responsibility to ensure that his or her B PAY ® payment is received by the Share Registry by no later than 5.00pm (Sydney time) on 19 May 2014. Financial institutions may implement earlier cut-off times with regards to electronic payment, and Applicants should therefore take this into consideration when making payment.

For Eligible Employees who are New Zealand residents, applications may be made by completing and returning their personalised Application Form to the Share Registry with an accompanying cheque, bank draft or money order for the Application Monies.

Cheques, bank drafts or money orders must be drawn in Australian dollars and be made payable to

‘Spotless Share Offer Account’ and crossed ‘Not Negotiable’. Cash will not be accepted. Receipts for payments will not be issued. Applicants should ensure that sufficient funds are held in the relevant account(s) to cover their cheque(s). If the amount of an Applicant’s cheque(s) (or the amount for which those cheque(s) clear in time for allocation) is insufficient to pay for the Shares applied for in his or her Application Form, the Applicant may be taken to have applied for such lower amount as the cleared Application Monies will pay for or the Application may be rejected. Application Monies must be received by the Share Registry by 5.00pm (Sydney time) on 19 May 2014. It is the Applicant’s responsibility to ensure sufficient time is allowed for postage to the Share Registry’s office in Sydney.

6.5.2 Priority offer

The Priority Offer is open to Investors nominated by Spotless. If you are a Priority Offer Applicant, you will receive a personalised invitation to apply for Shares in the priority offer ( Priority Offer ).

You may apply for an amount up to the amount indicated on your personalised invitation. Any amount applied for in excess of this may be refunded in full (without interest) or accepted in full.

Priority Offer Applicants may apply for Shares online and must comply with the instructions on the website, www.spotless.com/offer.

ProsPectus 163


6.6

Applications under the Priority Offer for an amount less than the amount indicated on your personalised invitation must be for a minimum of $1,000 worth of Shares and in multiples of

$500 worth of Shares thereafter.

Priority Offer Applicants are guaranteed an allocation of Shares in the amount specified on their personalised invitation or such a lesser amount validly applied for (rounded down to the nearest whole Share).

Spotless otherwise has absolute discretion regarding the allocation of Shares to Applicants in the

Priority Offer and may reject an Application, or allocate fewer Shares than the amount applied for, in its absolute discretion.

Payment may be made via B PAY ® only. Application Monies must be received by the Share Registry by 5.00pm (Sydney time) on 19 May 2014.

To make a payment via B PAY ® , you will need to apply online at www.spotless.com/offer and must comply with the instructions on the website. It is your responsibility to ensure that your B PAY ® payment is received by the Share Registry by no later than 5.00pm (Sydney time) on 19 May 2014.

You should be aware that your financial institution may implement earlier cut-off times with regards to electronic payment, and you should therefore take this into consideration when making payment.

Over-allocation Option and market stabilisation

The Company and SaleCo, with the agreement of the JLMs, may over-allocate in the Offer up to

81.1 million additional Shares to Institutional Investors under the Institutional Offer. The maximum size of the over-allocation represents between 7.4% and 7.8% of the Shares on issue at Completion of the Offer (on the assumption that the Final Price is at the bottom and top of the Indicative Price

Range respectively).

If Shares are over-allocated, the Stabilisation Manager may initially satisfy these over-allocations by borrowing an equivalent number of Shares from SaleCo at settlement of the Institutional Offer

( Settlement ). Shares delivered on Settlement under the borrowing arrangements and transferred to Institutional Investors will be delivered and transferred under this Prospectus or the Institutional

Offering Memorandum.

The JLMs may satisfy their obligation to return Shares borrowed from SaleCo by the Stabilisation

Manager either by:

• requiring SaleCo to transfer Shares at the Final Price under an option granted by SaleCo to the Stabilisation Manager to acquire up to an additional 81.1 million Shares at the Final Price

( Over-allocation Option ); or

• purchasing Shares on the ASX at or below the Final Price once ASX trading in the Shares commences; or

• a combination of these means, at any time within the period of up to 30 days following Listing ( Stabilisation Period ).

The final number of Shares sold by SaleCo under the Offer will depend upon whether the Stabilisation

Manager exercises the Over-allocation Option at all, in part or in full. To the extent that the Overallocation Option is exercised, the obligation of SaleCo to transfer Shares on exercise will be offset against the Stabilisation Manager’s obligation to return Shares borrowed from SaleCo. So, for example, if the Over-allocation Option is exercised in full, the Stabilisation Manager’s obligation to return the borrowed Shares will be set off completely by SaleCo’s obligation to transfer Shares under the Over-allocation Option. The effect of this will be that the final number of Existing Shares sold by SaleCo under the Offer will increase by up to 81.1 million Shares, being 7.4% of the number of

Shares on issue at Completion of the Offer (assuming that the Final Price is at the bottom end of the Indicative Price Range).

The PEP Shareholders and Coinvestment Shareholders have entered into Share lending and option arrangements with SaleCo, which will allow SaleCo to loan the over-allotment Shares to the


6.7

Stabilisation Manager and to grant the Over-allocation Option to the Stabilisation Manager. The effect of these arrangements is that to the extent that the Stabilisation Manager exercises the Over-allocation

Option the PEP Shareholders and Coinvestment Shareholders will increase the number of Existing

Shares that they sell to SaleCo. If the Over-allocation Option is exercised in full the retained shareholding of the the PEP Shareholders and Coinvestment Shareholders will reduce to between

36.3% and 39.6%.

104

If an over-allotment of Shares is made to Institutional Investors under the Offer, the Stabilisation

Manager may on any day during the Stabilisation Period on which the Stabilisation Manager has consulted with the Company and SaleCo, engage in market stabilisation activities by bidding for and purchasing Shares up to the number of the Shares the subject of the over-allotment on the

ASX in accordance with conditions imposed by ASIC and the ASX. These conditions include:

• any stabilising bids by the Stabilisation Manager must not, on any trading day, be higher than the lower of the highest current independent bid on the ASX or the Final Price;

• the purchases made by the Stabilisation Manager on a given trading day for the purposes of satisfying its obligations to deliver Shares will be disclosed on the ASX Company Announcements platform prior to commencement of trading on the following trading day (with such disclosure to be made on a daily basis); and

• bids on the ASX or by the Stabilisation Manager to satisfy over-allocations will be identified on ASX’s trading platform at the time the bid is made.

Such purchases may have the effect of stabilising the trading price for Shares on the ASX at a level higher than may otherwise have been the case in circumstances where the trading price is at or below the Final Price.

During the Stabilisation Period, the Stabilisation Manager may resell some or all of the Shares so purchased. This resale may also affect the trading price of Shares (for example, this may have the effect of creating a lower price than may otherwise have been the case), although the Stabilisation

Manager is not able to resell Shares for less than the Final Price in these circumstances.

There is no guarantee that the trading price of Shares will not drop below the Final Price.

The proceeds received by the Stabilisation Manager for any Shares that are over-allocated under the

Offer will be released to SaleCo after the end of the Stabilisation Period. If the Over-allocation Option is not exercised in full, the Stabilisation Manager will transfer to SaleCo at that time the Shares purchased in market stabilisation activities which have not been resold, by way of return of Shares borrowed from SaleCo.

SaleCo will be entitled to receive any profits arising from market stabilisation activities, and also any interest earned on the proceeds received by the Stabilisation Manager in respect of the over-allocated

Shares up until the time those proceeds are released to SaleCo.

SaleCo indemnifies the Stabilisation Manager against certain taxes and duties that may arise in connection with the Over-allocation Option and market stabilisation activities and is also required to reimburse the Stabilisation Manager for third party costs and expenses incurred by it in connection with the Over-allocation Option and market stabilisation activities.

voluntary escrow arrangements

All of the Existing Shares held at Completion of the Offer by the Escrowed Shareholders (other than any Shares purchased by them under the Offer) will be subject to voluntary escrow arrangements.

PeP Shareholders and coinvestment Shareholders

Under the terms of the voluntary escrow arrangements, subject to the Over-allocation Option arrangements and certain customary exceptions described below, Shares held by the PEP

Shareholders and the Coinvestment Shareholders may only be sold in the period prior to Spotless’ financial results being announced for FY2015 on the following basis:

104 This assumes that the Final Price is at the top and bottom of the Indicative Price Range respectively.

ProsPectus 165


166

Securities to be released from escrow

25% of Shares held at completion of

Offer (including any shares returned following stabilisation process)

25% of Shares held at completion of

Offer (including any shares returned following stabilisation process) escrow release conditions

• Financial results for FY2014 released; and


• Financial results for H1FY2015 released; and


After the release of the FY2015 financial results, all remaining Shares held by the PEP Shareholders and Coinvestment Shareholders will cease to be subject to escrow restrictions.

The Shares the subject of these voluntary escrow arrangements will include Shares which are returned to the PEP Shareholders and Coinvestment Shareholders pursuant to the Over-allocation

Option arrangements described in section 6.6 above.

In addition to the common exceptions to escrow described below, the PEP Shareholders and

Coinvestment Shareholders may encumber any or all of their Shares to a bona fide third party financial institution as security for a loan, hedge or other financial accommodation, provided that the encumbrance does not in any way constitute a direct or indirect disposal of the economic interests, or decrease an economic interest, that the relevant Escrowed Shareholder has in any of its escrowed

Shares and no escrowed Shares may be transferred to the financial institution in connection with the encumbrance (with the documentation for such encumbrance making it clear that the escrowed

Shares remain in escrow and subject to the voluntary escrow arrangements for the term of those arrangements).

management Shareholders

All Shares retained by Management Shareholders following Completion of the Offer will also be subject to voluntary escrow arrangements. Under the terms of those escrow arrangements, subject to certain customary exceptions and exceptions for certain individual executives as set out below,

Shares may only be sold on the following basis: after the announcement of fy15 financial results the announcement of fy16 financial results the % of issued Shares that each management Shareholder may sell is

50%

All remaining Shares retained by Management Shareholders will cease to be subject to escrow restrictions

In addition, the Board has the discretion to release Management Shareholders’ Shares from voluntary escrow in circumstances where the relevant manager dies, or becomes seriously or permanently incapacitated.

Shares held by two Management Shareholders, Vita Pepe and Geoffrey Barnsley, will be subject to voluntary escrow arrangements on the same basis as other Management Shareholders, except that

100% of their Shares will cease to be subject to escrow restrictions after the announcement of FY15 financial results if those results demonstrate that the Company has met or exceeded the forecast revenue, NPAT and EBITDA for that period set out in this Prospectus.


6.8

Shares held by two other Management Shareholders, Josef Czyzewski and Tim Sexton, will not be subject to voluntary escrow arrangements because these two Management Shareholders have indicated their intention to retire from Spotless shortly after the Listing.

Options granted under the LTI Plan are not covered by the voluntary escrow arrangements. Rather, they are subject to the terms of the LTI Plan. terms common to all voluntary escrow arrangements

Each Escrowed Shareholder has agreed to enter into an escrow deed in respect of their escrowed

Shareholding retained following the Offer, which prevent them from disposing of their respective escrowed Shares for the applicable escrow period as described above. The restriction on ‘disposing’ is broadly defined and includes, among other things, selling, assigning, transferring or otherwise disposing of any interest in the Shares, encumbering or granting a security interest over the Shares

(except to the extent outlined in this Section 6.7), doing, or omitting to do, any act if the act or omission would have the effect of transferring effective ownership or control of any of the Shares or agreeing to do any those things.

All of the Escrowed Shareholders may be released early from these escrow obligations to enable:

• the Escrowed Shareholder to accept an offer under a takeover bid in relation to its Shares if holders of at least half of the Shares the subject of the bid that are not held by the Escrowed

Shareholders have accepted the takeover bid;

• the Shares held by the Escrowed Shareholders to be transferred or cancelled as part of a merger by scheme of arrangement under Part 5.1 of the Corporations Act; or

• Escrowed Shareholders to participate in an equal access buyback or capital reduction.

During the escrow period, Escrowed Shareholders whose Shares remain subject to escrow, may dispose of any of their Shares to the extent the disposal is required by applicable law (including an order of a court of competent jurisdiction) to the extent the disposal is to an affiliated fund entity (in the case of the PEP Shareholders and Coinvestment Shareholders) or to a trust or entity which the

Escrowed Shareholder controls (in the case of the Management Shareholders).

restrictions on distribution

No action has been taken to register or qualify this Prospectus, the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia and New Zealand. In particular, the Offer and sale of the Shares has not been, and will not be, registered under the U.S. Securities

Act or the securities laws of any state or other jurisdiction of the United States and may not be offered or sold, directly or indirectly, in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable

U.S. state securities laws.

This Prospectus does not constitute an offer or invitation to subscribe for Shares in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation or issue under this Prospectus.

105

This Prospectus may not be released or distributed in the United States or elsewhere outside

Australia or New Zealand unless it is attached to, or constitutes part of, the Institutional Offering

Memorandum that describes selling restrictions applicable in the United States and other jurisdictions outside Australia and New Zealand, and may only be distributed to persons to whom the Institutional

Offer may lawfully be made in accordance with the laws of any applicable jurisdiction.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the

United States. The Shares have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States and the Shares may not be offered or sold, directly or indirectly, in the United States.

Each Applicant in the Broker Firm Offer and the Personal and Priority Offer, and each person in

Australia or New Zealand to whom the Institutional Offer is made under this Prospectus, will be taken to have represented, warranted and agreed as follows:

105 See also Section 9.13.

ProsPectus 167


6.9

• it understands that the Offer and sale of the Shares have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state or other jurisdiction of the United

States and may not be offered, sold or resold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws;

• it is not in the United States;

• it has not and will not send the Prospectus or any other material relating to the Offer to any person in the United States; and

• it will not offer or sell the Shares in the United States or in any other jurisdiction outside Australia or New Zealand except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in compliance with all applicable laws in the jurisdiction in which Shares are offered and sold.

Each person who bids for Shares in the Institutional Offer will be required to make certain representations, warranties and covenants set out in the confirmation of allocation letter distributed to it.

discretion regarding the Offer

Spotless may withdraw the Offer at any time before the issue of New Shares or transfer of Existing

Shares to Successful Applicants under the Broker Firm Offer, Institutional Offer and Personnel and

Priority Offer. If the Offer, or any part of it, does not proceed, all relevant Application Monies will be refunded (without interest).

Spotless, in consultation with the JLMs and the Financial Adviser reserves the right to extend the

Offer or any part of it, accept late Applications or bids either generally or in particular cases, reject any Application or bid, or allocate to any Applicant fewer Shares than the amount applied or bid for.

6.10 aSx listing, registers and holding statements, and conditional and deferred settlement trading

6.10.1 application to the aSx for Listing

Spotless will apply to ASX within seven days of the Prospectus Date for admission of the Company to the official list of the ASX and quotation of the Shares on the ASX. Spotless’ ASX code is expected to be SPO.

The ASX takes no responsibility for this Prospectus or the investment to which it relates. The fact that the ASX may admit Spotless to the official list is not to be taken as an indication of the merits of Spotless or the Shares offered for subscription.

If Spotless has not been admitted to the official list within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act.

Spotless will be required to comply with the ASX Listing Rules, subject to any waivers obtained by Spotless from time to time.

6.10.2 cHeSS and issuer sponsored holdings

Spotless will apply to participate in the ASX’s Clearing House Electronic Subregister System ( CHESS ) and will comply with the ASX Listing Rules and the ASX Settlement Operating Rules. CHESS is an electronic transfer and settlement system for transactions in securities quoted on the ASX under which transfers are effected in an electronic form.

When the Shares become approved financial products (as defined in the ASX Settlement Operating

Rules), holdings will be registered in one of two subregisters, being an electronic CHESS subregister or an issuer sponsored subregister.


For all Successful Applicants, the Shares of a Shareholder who is a participant in CHESS or a

Shareholder sponsored by a participant in CHESS will be registered on the CHESS subregister.

All other Shares will be registered on the issuer sponsored subregister.

Following Completion of the Offer, Shareholders will be sent a holding statement that sets out the number of Shares that have been allocated to them. This statement will also provide details of a Shareholder’s Holder Identification Number for CHESS holders or, where applicable, the

Securityholder Reference Number of issuer sponsored holders. Shareholders will subsequently receive statements showing any changes to their Shareholding. Certificates will not be issued.

Shareholders will receive subsequent statements during the first week of the following month if there has been a change to their holding on the register and as otherwise required under the ASX Listing

Rules and the Corporations Act. Additional statements may be requested at any other time either directly through the Shareholder’s sponsoring broker in the case of a holding on the CHESS subregister or through the Share Registry in the case of a holding on the issuer sponsored subregister. Spotless and the Share Registry may charge a fee for these additional issuer sponsored statements.

6.10.3 conditional and deferred settlement trading and selling Shares on market

It is expected that trading of the Shares on the ASX (on a conditional and deferred settlement basis) will commence on or about 23 May 2014.

The contracts formed on acceptance of Applications will be conditional on the ASX agreeing to quote the Shares on the ASX, and on issue occurring. Trades occurring on the ASX before issue occurring will be conditional on issue occurring.

Conditional trading will continue until Spotless has advised the ASX that issue has occurred, which is expected to be on or about 28 May 2014. Trading will then be on an unconditional but deferred settlement basis until Spotless has advised the ASX that holding statements have been dispatched to Shareholders. Normal settlement trading is expected to commence on or about 30 May 2014.

If settlement has not occurred within 14 days (or such longer period as the ASX allows) after the day

Shares are first quoted on the ASX, the Offer and all contracts arising on acceptance of the Offer will be cancelled and of no further effect and all Application Monies will be refunded (without interest).

In these circumstances, all purchases and sales made through the ASX participating organisations during the conditional trading period will be cancelled and of no effect.

It is the responsibility of each Applicant to confirm their holding before trading in Shares. Applicants who sell Shares before they receive an initial statement of holding do so at their own risk. Spotless, the JLMs, the Financial Adviser and the Existing Shareholders disclaim all liability, whether in negligence or otherwise, to persons who sell Shares before receiving their initial statement of holding, whether on the basis of a confirmation of allocation provided by any of them, by the Spotless Offer

Information Line by a Broker or otherwise.

6.11 constitution and rights attaching to the Shares

introduction

The rights and liabilities attaching to ownership of Shares arise from a combination of the Constitution, statute, the ASX Listing Rules and general law. A summary of the significant rights attaching to the

Shares and a description of other material provisions of the Constitution are set out below. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of Shareholders. The summary assumes that Spotless is admitted to the official list of the ASX.

voting at a general meeting

At a general meeting of Spotless, every shareholder present in person or by proxy, representative or attorney has one vote on a show of hands and, on a poll, one vote for each share held and a fraction of a vote for each partly paid share held by the member and in respect of which the member is entitled to vote.

ProsPectus 169

6. details of the Offer continued meetings of members

Each Shareholder is entitled to receive notice of, and to attend and vote at, general meetings of Spotless and to receive all notices, accounts and other documents required to be sent to

Shareholders under the Constitution, the Corporations Act and the ASX Listing Rules.

dividends

The Board may from time to time resolve to pay dividends to shareholders and fix the amount of the dividend, the time for determining entitlements to the dividend and the timing and method of payment. For further information in respect of Spotless’ proposed dividend policy, see Section 3.13.

transfer of Shares

Subject to the Constitution, Shares may be transferred by a proper transfer effected in accordance with the ASX Settlement Operating Rules, by a written instrument of transfer which complies with the

Constitution or by any other method permitted by the Corporations Act, the ASX Listing Rules or the

ASX Settlement Operating Rules.

The Board may refuse to register a transfer of Shares where permitted to do so under the

Corporations Act, the ASX Listing Rules or the ASX Settlement Operating Rules. The Board must refuse to register a transfer of Shares when required by the Corporations Act, the ASX Listing Rules or the ASX Settlement Operating Rules.

issue of further shares

Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules and any rights and restrictions attached to a class of shares, Spotless may issue, or grant options in respect of further shares on such terms and conditions as the Directors resolve.

winding up

If Spotless is wound up, then subject to any rights or restrictions attached to a class of shares, any surplus must be divided among Spotless’ members in the proportions which the amount paid and payable (including amounts credited) on the shares of a member is of the total amount paid and payable (including amounts credited) on the shares of all members of Spotless.

unmarketable parcels

Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules,

Spotless may sell the Shares of a Shareholder who holds less than a marketable parcel of Shares.

Share buy-backs

Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules,

Spotless may buy back shares in itself on terms and at times determined by the Board if the financial position of the Company justifies it.

Proportional takeover provisions

The Constitution contains provisions for shareholder approval to be required in relation to any proportional takeover bid.

These provisions will cease to apply unless renewed by special resolution of the Shareholders in general meeting by the third anniversary of the date of the Constitution’s adoption.

variation of class rights

At present, Spotless’ only class of shares on issue is ordinary shares. Subject to the Corporations Act and the terms of issue of a class of shares, the rights attaching to any class of shares may be varied or cancelled:

• with the consent in writing of the holders of three-quarters of the issued shares included in that class; or

• by a special resolution passed at a separate meeting of the holders of those shares.


In either case, the holders of not less than 10% of the votes in the class of shares, the rights of which have been varied or cancelled, may apply to a court of competent jurisdiction to exercise its discretion to set aside such a variation or cancellation.

dividend reinvestment plan

The Constitution authorises the Directors, on any terms and at their discretion, to establish a dividend reinvestment plan (under which any member may elect that the dividends payable by Spotless be reinvested by a subscription for securities in the Company or a related body corporate).

directors—appointment and removal

Under the Constitution, the minimum number of Directors that may comprise the Board is three and the maximum is fixed by the Directors but may not be more than 10 unless the Shareholders pass a resolution varying that number. Directors are elected at annual general meetings of Spotless.

Retirement will occur on a rotational basis so that any Director who has held office for three or more years or three or more annual general meetings (excluding any Managing Director) faces re-election.

The Directors may also appoint a Director to fill a casual vacancy on the Board or in addition to the existing Directors, who will then hold office until the next annual general meeting of Spotless.

directors—voting

Questions arising at a meeting of the Board will be decided by a majority of votes of the Directors present at the meeting and entitled to vote on the matter.

directors—remuneration

See Section 5.3 for a description of the remuneration arrangements for Directors.

indemnities

Spotless, to the extent permitted by law, indemnifies each Director against any liability incurred by that person as an officer of Spotless or its subsidiaries, and legal costs incurred by that person in defending an action for a liability of that person. Spotless, to the extent permitted by law, may make a payment (whether by way of advance or otherwise) to a Director in respect of legal costs incurred by that person in defending an action for a liability of that person.

Spotless, to the extent permitted by law, may pay, or agree to pay, a premium for a contract insuring a Director against any liability incurred by that person as an officer of Spotless or its subsidiaries and legal costs incurred by that person in defending an action for a liability of that person.

Spotless, to the extent permitted by law, may enter into an agreement or deed with a Director or a person who is, or has been, an officer of Spotless or its subsidiaries, under which Spotless must do all of the following:

• keep books of Spotless and allow either or both that person and that person’s advisers access to those books on the terms agreed;

• indemnify that person against any liability incurred by that person as an officer of Spotless or its subsidiaries and legal costs incurred by that person in defending an action for a liability of that person;

• make a payment (whether by way of advance, loan or otherwise) to that person in respect of legal costs incurred by that person in defending an action for a liability of that person; and

• keep that person insured in respect of any act or omission by that person while a Director or an officer of Spotless or its subsidiaries, on the terms agreed (including as to payment of all or part of the premium for the contract for insurance).

amendment

The Constitution can only be amended by special resolution passed by at least three-quarters of the votes cast by shareholders present (in person or by proxy) and entitled to vote on the resolution at a general meeting of Spotless. Spotless must give at least 28 days written notice of a general meeting of Spotless.

ProsPectus 171

Section 7


7. investigating accountant’s report on

Historical financial information

ProsPectus

28 April 2014

The Directors

Spotless Group Holdings Limited

549 St Kilda Road

MELBOURNE VIC 3004

The Directors

Spotless SaleCo Pty Limited

549 St Kilda Road

MELBOURNE VIC 3004

Dear Directors

Deloitte Corporate Finance Pty Limited

ACN 003 833 127

AFSL 241457

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

Tel: +61 (0) 2 9322 7000

Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

INVESTIGATING ACCOUNTANT’S REPORT ON PRO FORMA HISTORICAL

FINANCIAL INFORMATION

Introduction

This report has been prepared at the request of the Directors of Spotless Group Holdings Limited

(the “Company”) for inclusion in the prospectus (“Prospectus”) to be issued by the Company and

Spotless SaleCo Pty Limited (“ SaleCo ”) in respect of the initial public offering of fully paid ordinary shares in the Company (the “Offer”) and listing of the Company on the Australian

Securities Exchange.

Deloitte Corporate Finance Pty Limited is wholly owned by Deloitte Touche Tohmatsu and holds the appropriate Australian Financial Services licence under the Corporations Act 2001 for the issue of this report.

References to the Company and other terminology used in this report have the same meaning as defined in the Glossary of the Prospectus.

Scope

Pro forma Historical Financial Information

Deloitte Corporate Finance Pty Limited has been engaged by the Directors of the Company to review the following as referred to in Section 3.1 of the Prospectus:

 the pro forma historical consolidated statements of profit or loss for the financial years ended

30 June 2011, 30 June 2012 and 30 June 2013 and for the half years ended 31 December 2012 and 31 December 2013;

 the pro forma historical consolidated cash flow statements for the financial years ended 30 June

2011, 30 June 2012 and 30 June 2013 and for the half years ended 31 December 2012 and 31

December 2013; and

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited


Historical financial information continued

Page 2

28 April 2014

 the pro forma historical consolidated balance sheet as at 31 December 2013, (together the Pro forma Historical Financial Information”).

The Pro forma Historical Financial Information has been derived from:

 Spotless Group Limited’s (“Spotless”) historical consolidated statements of profit or loss and historical consolidated statements of cash flows for the years ended 30 June 2011 and 30 June

2012;

 the Company’s historical consolidated statements of profit or loss and historical consolidated statements of cash flows for the year ended 30 June 2013 and the half years ended 31

December 2012 and 31 December 2013; and

 the Company’s historical consolidated statement of financial position as at 31 December 2013,

(together the “Historical Financial Information”), after adjusting for the effect s of pro forma transactions and/or adjustments described in Section 3.2 of the Prospectus (the “Pro forma

Adjustments”).

The Historical Financial Information has been extracted from the financial reports of:

 Spotless for the years ended 30 June 2011 and 30 June 2012, which were audited by Deloitte

Touche Tohmatsu in accordance with the Australian Auditing Standards. Deloitte Touche

Tohmatsu issued unmodified audit opinions on the respective financial reports; and

 the Company for the year ended 30 June 2013, which was audited by Ernst & Young in accordance with the Australian Auditing Standards. Ernst & Young issued an unmodified audit opinion on the financial report; and

 the Company for the half years ended 31 December 2012 and 31 December 2013, which were reviewed by Ernst & Young in accordance with Auditing Standard on Review Engagements

ASRE 2410 . Ernst & Young issued unmodified review conclusions on the interim condensed reports.

The Pro forma Historical Financial Information is presented in the Prospectus in an abbreviated form, insofar as it does not include all of the presentation and disclosures required by Australian

Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports and interim condensed financial reports prepared in accordance with the Corporations Act 2001.

The stated basis of preparation is the recognition and measurement principles contained in

Australian Accounting Standards applied to the Historical Financial Information and the events or transactions to which the Pro forma Adjustments relate, as described in Section 3.2 of the

Prospectus, as if those events or transactions had occurred as at the date of the historical financial information. Due to its nature, the Pro forma Historical Financial Information does not represent the C ompany’s actual or prospective financial position, comprehensive income and/or cash flows.


ProsPectus

Page 3

28 April 2014

Directors’ Responsibility

The Directors are responsible for:

 the preparation and presentation of the Historical Financial Information and the Pro forma

Historical Financial Information, including the selection and determination of Pro forma

Adjustments made to the Historical Financial Information and included in the Pro forma

Historical Financial Information; and

 the information contained within the Prospectus.

This responsibility includes for the operation of such internal controls as the Directors determine are necessary to enable the preparation of the Historical Financial Information and the Pro forma

Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Our Responsibility

Our responsibility is to express a limited assurance conclusion on the Pro forma Historical

Financial Information based on the procedures performed and the evidence we have obtained. We have conducted our engagement in accordance with Australian Standard on Assurance Engagement

(ASAE) 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective

Financial Information.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly we will not express an audit opinion.

Our engagement did not involve updating or re-issuing any previously issued audit or review report on any financial information used as a source of the financial information.

We have performed the following procedures as we, in our professional judgement, considered reasonable in the circumstances:

 consideration of work papers, accounting records and other documents of Spotless and the

Company, including those dealing with the extraction of Historical Financial Information from audited consolidated financial statements for the years ended 30 June 2011, 30 June 2012 and

30 June 2013 and from reviewed consolidated financial statements for the half years ended 31

December 2012 and 31 December 2013;

 consideration of the appropriateness of Pro forma Adjustments described in Section 3.2 of the

Prospectus;

 enquiry of Directors, management, personnel and advisors;

 the performance of analytical procedures applied to the Pro forma Historical Financial

Information;

 a review of work papers, accounting records and other documents of Spotless and the Company and their auditors; and


Historical financial information continued

Page 4

28 April 2014

 a review of the accounting policies adopted and used by Spotless and the Company over the period for consistency of application.

Conclusions

Pro forma Historical Financial Information

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the Pro forma Historical Financial Information is not presented fairly in all material respects, on the basis of the Pro forma Adjustments described in Section 3.2 of the Prospectus and in accordance with the recognition and measurement principles contained in Australian Accounting

Standards and the accounting policies adopted by Spotless and the Company as disclosed in the

Prospectus.

Restrictions on Use

Without modifying our conclusions, we draw attention to Section 3.2 of the Prospectus, which describes the purpose of the Financial Information, being for inclusion in the Prospectus . As a result, the Investigating Accountant’s Report may not be suitable for use for another purpose.

Consent

Deloitte Corporate Finance Pty Limited has consented to the inclusion of this limited assurance report in the Prospectus in the form and context in which it is included.

Disclosure of Interest

Deloitte Corporate Finance Pty Limited does not have any interest in the outcome of this Offer other than the preparation of this report and participation in the due diligence procedures for which normal professional fees will be received.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

Ian Turner

Director


Section 8

ProsPectus 177

8. investigating accountant’s report on forecast financial information

28 April 2014

The Directors


549 St Kilda Road

MELBOURNE VIC 3004

The Directors

Spotless SaleCo Pty Limited

549 St Kilda Road

MELBOURNE VIC 3004

Dear Directors


ACN 003 833 127

AFSL 241457

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

Tel: +61 (0) 2 9322 7000

Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

INVESTIGATING ACCOUNTANT’S REPORT ON THE STATUTORY FORECAST AND

PRO FORMA FORECAST FINANCIAL INFORMATION AND FINANCIAL SERVICES

GUIDE

Introduction

This report has been prepared at the request of the Directors of Spotless Group Holdings Limited

(the “ Company ” ) for inclusion in the prospectus (“Prospectus”) to be issued by the Company and

Spotless SaleCo Pty Limited (”SaleCo”) in respect of the initial public offering of fully paid ordinary shares in the Company (the “ Offer ” ) and listing of the Company on the Australian

Securities Exchange.

Deloitte Corporate Finance Pty Limited is wholly owned by Deloitte Touche Tohmatsu and holds the appropriate Australian Financial Services licence under the Corporations Act 2001 for the issue of this report.

References to the Company and other terminology used in this report have the same meaning as defined in the Glossary of the Prospectus.

Scope

Deloitte Corporate Finance Pty Limited has been engaged by the Directors of the Company to review the following financial information, as referred to in Section 3.1 of the Prospectus:

 the statutory forecast consolidated statements of profit or loss for the twelve months ending 30

June 2014 and 30 June 2015; and

 the statutory forecast consolidated statements of cash flows for the twelve months ending 30

June 2014 and 30 June 2015, ( together the “ Statutory Forecasts ” ) and;

Liability limited by a scheme approved under Professional Standards Legislation.



ProsPectus

Page 2

28 April 2014

 the pro forma forecast consolidated statements of profit or loss for the twelve months ending 30

June 2014 and 30 June 2015; and

 the pro forma forecast consolidated statements of cash flows for the twelve months ending 30

June 2014 and 30 June 2015 (together the “Pro forma Forecasts”) ,

(together the Statutory Forecasts and the Pro forma Forecasts are the “ Forecasts ” ).

The director’s best -estimate assumptions underlying the Statutory Forecasts are described in

Section 3.9 of the Prospectus. The stated basis of preparation used in the preparation of the

Statutory Forecasts is the recognition and measurement principles contained in Australian

Accounting Standards and the Company’s adopted accounting policies

The Pro forma Forecasts have been derived from the Statutory Forecasts, after adjusting for the effects of the pro forma transactions and/or adjustments described in Section 3.2 of the Prospectus

(the “ Pro forma Adjustments ” ). The stated basis of preparation used in the preparation of the Pro forma Forecasts is the recognition and measurement principles contained in Australian Accounting

Standards applied to the Statutory Forecasts and the events or transactions to which the Pro forma

Adjustments relate, as if those events or transactions had occurred prior to 1 July 2013.

Due to its nature the Pro forma Forecasts do not represent the Company’s actual prospective financial performance and cash flows for twelve month periods ending 30 June 2014 and 30 June 2015.

The Forecasts have been prepared by management and adopted by the Directors in order to provide prospective investors with a guide to the potential financial performance of the Company for the twelve month periods ending 30 June 2014 and 30 June 2015. There is a considerable degree of subjective judgement involved in preparing forecasts since they relate to events and transactions that have not yet occurred and may not occur. Actual results are likely to be different from the

Forecasts since anticipated events or transactions frequently do not occur as expected and the variation may be material.

The Directors’ best estimate assumptions on which the Forecasts are based relate to future events and /or transactions that management expect to occur and actions that management expect to take and are also subject to uncertainties and contingencies, which are often outside the control of the

Company. Evidence may be available to support the assumptions on which the Forecasts are based, however such evidence is generally future orientated and therefore speculative in nature. We are therefore not in a position to express a reasonable assurance conclusion on those best estimate assumptions, and accordingly, provide a lesser level of assurance on the reasonableness of the

Directors’ best estimate assumptions. The limited assurance conclusion expressed in this report has been formed on the above basis.

Prospective investors should be aware of the material risks and uncertainties relating to an investment in the Company, which are detailed in the Prospectus, and the inherent uncertainty relating to the prospective financial information. Accordingly prospective investors should have regard to the investment risks and sensitivities set out in Section 3.10 of the Prospectus.

The sensitivity analysis set out in Section 3.10 of the Prospectus demonstrates the impacts on the

Forecasts of changes in key assumptions. The Forecasts are therefore only indicative of the financial performance which may be achievable. We express no opinion as to whether the

Forecasts will be achieved.

8. investigating accountant’s report on forecast financial information continued

Page 3

28 April 2014

We have assumed, and relied on representations from certain members of management of the

Company, that all material information concerning the prospects and proposed operations of the

Company has been disclosed to us and that the information provided to us for the purpose of our work is true, complete and accurate in all respects. We have no reason to believe that those representations are false.

Directors’ Respo nsibility

The Directors are responsible for:

 the preparation of the Forecasts, including the best estimate assumptions underlying the

Forecasts and the selection and determination of the Pro forma Adjustments made to the

Statutory Forecasts and included in the Pro forma Forecasts; and

 the information contained within the Prospectus.

This responsibility includes for the operation of such internal controls as the Directors determine are necessary to enable the preparation of the Forecasts that are free from material misstatement, whether due to fraud or error.

Our Responsibility

Our responsibility is to express a limited assurance conclusion on the Statutory Forecasts and the

Pro Forma Forecasts based on the procedures performed and the evidence we have obtained. We have conducted our engagement in accordance with Australian Standard on Assurance Engagement

(ASAE) 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective

Financial Information.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly we will not express an audit opinion.

Our engagement did not involve updating or re-issuing any previously issued audit or review report on any financial information used as a source of the Forecasts.

We have performed the following procedures as we, in our professional judgement, considered reasonable in the circumstances:

 enquiries, including discussions with management and Directors of the factors considered in determining the assumptions;

 analytical and other review procedures we considered necessary including examination, on a test basis, of evidence supporting the assumptions, amounts and other disclosures in the

Forecasts;

 review of the accounting policies adopted and used in the preparation of the Forecasts; and


ProsPectus

Page 4

28 April 2014

 consideration of the Pro forma Adjustments applied to the Statutory Forecasts in preparing the

Pro forma Forecasts.

Conclusions

The Statutory Forecasts

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that:

(i) the Directors’ best estimate assumptions used in the preparation of the Statutory Forecasts do not provide reasonable grounds for the Statutory Forecasts; and

(ii) in all material respects, the Statutory Forecasts:

(a) are not prepared on the basis of the Directors’ best estimate assumptions as described in Section 3.9 of the Prospectus; and

(b) are not presented fairly in accordance with the stated basis of preparation, being the accounting policies adopted and used by the Company and the recognition and measurement principles contained in Australian Accounting Standards; and

(iii) the Statutory Forecasts themselves are unreasonable.

The Pro forma Forecasts

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that:

(i) the Directors’ best estimate assumptions used in the preparation of the Pro forma Forecasts do not provide reasonable grounds for the Pro forma Forecasts; and

(ii) in all material respects, the Pro forma Forecasts:

(a) are not prepared on the basis of the Directors’ best estimate assumptions as described in Section 3.9 of the Prospectus; and

(b) are not presented fairly in accordance with the stated basis of preparation, being the accounting policies adopted and used by the Company and the recognition and measurement principles contained in Australian Accounting Standards, applied to the

Statutory Forecast and the events or transactions to which the Pro forma Adjustments relate, as if those events or transactions had occurred as at 1 July 2013; and

(iii) the Pro forma Forecasts themselves are unreasonable.

Restrictions on Use

Without modifying our conclusions, we draw attention to Section 3.2 of the Prospectus, which describes the purpose of the Forecasts, being for inclusion in the Prospectus. As a result, the

Investigating Accountant’s Report may not be suitable fo r use for another purpose.

8. investigating accountant’s report on forecast financial information continued

Page 5

28 April 2014

Consent

Deloitte Corporate Finance Pty Limited has consented to the inclusion of this limited assurance report in the Prospectus in the form and context in which it is included.

Disclosure of Interest

Deloitte Corporate Finance Pty Limited does not have any interest in the outcome of this Offer other than the preparation of this report and participation in the due diligence procedures for which normal professional fees will be received.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

Ian Turner

Director


Financial Services Guide

What is a Financial Services Guide?

This Financial Services Guide (FSG) provides important information to assist you in deciding whether to use our services. This FSG includes details of how we are remunerated and deal with complaints.

Where you have engaged us, we act on your behalf when providing financial services. Where you have not engaged us, we act on behalf of our client when providing these financial services, and are required to give you an

FSG because you have received a report or other financial services from us.

The remuneration paid to our directors reflects their individual contribution to the organisation and covers all aspects of performance.

We do not pay commissions or provide other benefits to anyone who refers prospective clients to us.

Associations and relationships

We are ultimately controlled by the Deloitte member firm in

Australia (Deloitte Touche Tohmatsu). Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu.

We and other entities related to Deloitte Touche

Tohmatsu:

What financial services are we licensed to provide?

We are authorised to provide financial product advice and to arrange for another person to deal in financial products in relation to securities, interests in managed investment schemes, government debentures, stocks or bonds and regulated emissions units (i.e., carbon) to retail and wholesale clients.

Our general financial product advice

Where we have issued a report, our report contains only general advice. This advice does not take into account your personal objectives, financial situation or needs. You should consider whether our advice is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is provided to you in connection with the acquisition of a financial product you should read the relevant offer document carefully before making any decision about whether to acquire that product.

 do not have any formal associations or relationships with any entities that are issuers of financial products

 may provide professional services to issuers of financial products in the ordinary course of business.

What should you do if you have a complaint?

If you have any concerns regarding our report or service, please contact us. Our complaint handling process is designed to respond to your concerns promptly and equitably. All complaints must be in writing to the address below.

If you are not satisfied with how we respond to your complaint, you may contact the Financial Ombudsman

Service (FOS). FOS provides free advice and assistance to consumers to help them resolve complaints relating to the financial services industry. FOS ’ contact details are also set out below.

How are we and all employees remunerated?

Our fees are usually determined on a fixed fee or time cost basis and may include reimbursement of any expenses incurred in providing the services. Our fees are agreed with, and paid by, those who engage us. Clients may request particulars of our remuneration within a reasonable time after being given this FSG.

Other than our fees, we, our directors and officers, any related bodies corporate, affiliates or associates and their directors and officers, do not receive any commissions or other benefits.

All employees receive a salary and while eligible for annual salary increases and bonuses based on overall performance they do not receive any commissions or other benefits as a result of the services provided to you.

1 February 2013

The Complaints Officer

PO Box N250

Grosvenor Place

Sydney NSW 1220 complaints@deloitte.com.au

Fax: +61 2 9255 8434

Financial Ombudsman Service

GPO Box 3

Melbourne VIC 3001 info@fos.org.au

www.fos.org.au

Tel: 1300 780 808

Fax: +61 3 9613 6399

What compensation arrangements do we have?

Deloitte Australia holds professional indemnity insurance that covers the financial services provided by us. This insurance satisfies the compensation requirements of the

Corporations Act 2001 (Cth).

Deloitte Corporate Finance Pty Limited, ABN 19 003 883 127, AFSL 241457 of Level 1 Grosvenor Place, 225 George Street, Sydney NSW 2000

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of

Deloitte Touche Tohmatsu Limited and its member firms.


ProsPectus

Section 9

184 SPOtLeSS GrOuP HOLdinGS Limited

9. additional information

9.1 registration

Spotless was registered in Victoria, Australia on 11 November 2011 as a private company and was converted to a public company on 25 March 2014.

9.2 company tax status and financial year

Spotless will be taxed in Australia as a public company. The financial year of Spotless ends on 30 June annually.

9.3

9.4

Sale of Shares by Saleco

SaleCo, a special purpose vehicle, has been established to facilitate the sale of Existing Shares by the Selling Shareholders.

Each of the Selling Shareholders has irrevocably offered to sell to SaleCo some of their Existing

Shares, which will be available for sale by SaleCo into the Offer, free from encumbrances and third party rights, and conditional on Listing.

The Existing Shares which SaleCo acquires from the Selling Shareholders will be transferred to

Successful Applicants at the Final Price. The price payable by SaleCo for these Existing Shares is the Final Price.

SaleCo has no material assets, liabilities or operations other than its interests in and obligations under the Offer Management Agreement. The sole shareholder of SaleCo is Margaret Jackson, and the directors are Diane Grady, Garry Hounsell, Margaret Jackson and The Hon. Nick Sherry. Spotless has agreed to provide such resources and support as are necessary to enable SaleCo to discharge its functions in relation to the Offer and has indemnified SaleCo in respect of costs of the Offer.

Spotless has indemnified SaleCo and the shareholder and officers and directors of SaleCo for any loss which SaleCo or the officers and directors of SaleCo may incur in connection with the Offer.

corporate structure (simplified)

SPOTLESS GROUP HOLDINGS LIMITED

ACN 154 229 562

SPOTLESS GROUP LIMITED

ACN 004 376 514

SPOTLESS AUSTRALIAN OPERATING ENTITIES

Key:

Interest held through subsidiaries

SPOTLESS HOLDINGS (NZ) LIMITED

4363558

SPOTLESS NZ OPERATING ENTITY

ProsPectus 185

9. additional information continued

9.5 material contracts

Along with the Offer Management Agreement, summarised below, the Directors consider that there are a number of contracts which are significant or material to Spotless or of such a nature that an investor may wish to have details of them when making an assessment of whether to apply for

Shares. Summaries for material contracts set out in this Prospectus (including the summary of the

Offer Management Agreement set out below), do not purport to be complete and are qualified by the text of the contracts themselves.

9.5.1 Offer management agreement

Spotless, SaleCo and the JLMs signed the Offer Management Agreement about or on the Prospectus

Date. Under the Offer Management Agreement, Spotless and SaleCo appointed Citi, Deutsche Bank and UBS as JLMs to the Offer. The following is a summary of the principal provisions of the Offer

Management Agreement. Under the Offer Management Agreement, the JLMs have agreed to arrange and manage the Offer, including the bookbuild, and to provide settlement support for the settlement obligations of Successful Applicants under the Broker Firm Offer and Institutional Offer.

Fees and expenses

Spotless has agreed to pay certain fees to the JLMs. The offering, management and Settlement fees will become payable by Spotless on the date of Settlement (save for any portion of these fees that relate to the Over-allocation, which will be payable in July 2014) and will be paid to the JLMs in agreed proportions. The offering, management and Settlement fees payable are calculated as 2.00% of the funds raised under the Offer (excluding funds raised from any over-allocation described in Section 6.6).

If the Stabilisation Manager exercises the Over-allocation Option, the Joint Lead Managers will be entitled (in their agreed proportions) to an additional offering, management and Settlement fee calculated as 2.00% of the value of the Shares acquired under the Over-allocation Option (based on the Final Price). Spotless may also pay an incentive fee to one or more of the JLMs of up to 0.50% of the funds raised under the Offer (excluding the over-allocation Shares but including any Shares acquired under the Over-allocation Option) (up to their agreed proportion). Payment of the incentive fee is at Spotless’ absolute discretion. If Spotless elects to pay the incentive fee, it will determine the amount of the fee no later than 5 business days after completion of the Stabilisation Period and, once determined, the time of payment of that fee is on or before 31 July 2014. The actual amount of fees payable to the JLMs will not be known until the determination of the Final Price. In addition, Spotless and SaleCo must reimburse each JLM for reasonable expenses, including legal and travel costs.

The JLMs have engaged Evans & Partners to act as Co-Lead Manager to the Offer and each of Bell Potter Securities Limited, UBS Wealth Management Australia Limited and Wilson HTM

Corporate Finance Limited to act as Co-Manager to the Offer. The JLMs will pay the fees payable to the Co-Lead Manager and each Co-Manager as disclosed in Section 5.3.1 out of the fees payable to the JLMs by Spotless.

Termination events not limited by materiality

Each JLM may terminate its obligations under the Offer Management Agreement prior to 10:00am on the Settlement date on the occurrence of a number of customary termination events, including

(amongst others):

• ( failure of a condition ) any of the conditions precedent to the JLMs’ obligations under the Offer

Management Agreement are not satisfied. The Offer Management Agreement contains typical conditions precedent for an agreement of this kind, including failure by Spotless to enter into the New

Banking Facilities or to obtain all required approvals from ASX and ASIC in connection with the Offer;

• ( Prospectus ) the Prospectus does not comply with the Corporations Act or New Zealand

Securities laws (including if a statement in the Prospectus is or becomes misleading or deceptive or likely to mislead or deceive, or a matter required to be included is omitted from the Prospectus);

• ( other disclosures ) disclosures in certain other Offer documents include an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of circumstances under which they were made, not misleading;


• ( Forecasts ) any of the Offer documents include any forecast, expression of opinion, belief, intention or expectation which is not based on reasonable grounds (including having regard to ASIC Regulatory Guide 170), taken as a whole;

• ( Supplementary prospectus ) a supplementary prospectus is required, or in the reasonable opinion of the terminating JLM is required, under section 719 of the Corporations Act or a supplementary prospectus is issued in a form that has not been approved by the JLMs in circumstances required by the Offer Management Agreement;

• ( unable to issue shares ) Spotless or SaleCo is prevented from transferring or allotting and issuing (as applicable) the Shares, within the time required by the timetable included in the Offer

Management Agreement, the Offer documents, the Listing Rules, by applicable laws, an order of a court of competent jurisdiction or a governmental authority;

• ( Escrow Deeds ) any of the Escrow Deeds are withdrawn, varied, terminated, rescinded, breached, altered or amended (other than with the JLMs’ consent);

• ( Capital and business disposals ) unauthorised alterations to Spotless’ share capital or business disposals;

• ( fraud and other offences ) any director of Spotless or SaleCo engages in or is charged with fraud or an indictable offence, is disqualified from managing a corporation or Spotless, SaleCo or a member of the Spotless Group engages in fraudulent activity;

• ( insolvency ) the insolvency of Spotless or SaleCo or a member of the Spotless Group;

• ( chairman, chief executive officer or chief financial officer ) a change in Spotless’ chief executive officer, chief financial officer or the chairman of the board of Directors of Spotless is announced or occurs;

• ( timetable ) an event specified in the timetable set out in the Offer Management Agreement up to and including the commencement of normal trading is delayed by more than 1 business day

(other than any delay consented to by the JLMs, such consent not to be unreasonably withheld or delayed);

• ( listing and quotation ) approval is refused or not granted, or approval is granted subject to conditions other than customary conditions, for:

– Spotless’ admission to the official list of the ASX on or before the date by which the ASX is to have confirmed quotation of the Shares; or

– the quotation of all of Spotless’ Shares, including the Shares issued under the Offer, on the ASX or for Spotless’ Shares, to be traded through CHESS on or before the date on which deferred settlement and conditional trading of the Shares commences, or if granted, the approval is subsequently withdrawn, qualified (other than by customary conditions) or withheld;

• ( notifications ) any of the following notifications are made (other than a notification that isn’t made public and that is withdrawn within the earlier of (i) 3 business days; (ii) the business day prior to the date of opening of the bookbuild; and (iii) 5.00pm on the business day prior to the Settlement Date.

– ASIC issues an order (including an interim order) under section 739 of the Corporations Act;

– ASIC holds a hearing under section 739(2) of the Corporations Act;

– an application is made by ASIC for an order under Part 9.5 of the Corporations Act in relation to the Offer documents or ASIC commences any investigation or hearing under Part 3 of the

Australian Securities and Investments Act 2001 (Cth) in relation to the Offer documents;

– any person (other than a JLM seeking to Terminate) who has previously consented to the inclusion of its name in the Prospectus withdraws its consent; or

– any person (other than a JLM seeking to Terminate) gives a notice under section 730 of the

Corporations Act in relation to the Offer documents;

ProsPectus 187


• ( withdrawal ) Spotless or SaleCo withdraws the Prospectus, any invitations to apply for Offer

Shares under the Offer documents or all of any part of the Offer or indicates that it does not intend to proceed with the Offer or any part of it (other than as permitted by the Offer

Management Agreement);

• ( certificate not provided ) Spotless or SaleCo does not provide a closing certificate as and when required by the Offer Management Agreement; and

• ( Sale Deeds ) a Sale Deed is withdrawn, varied, terminated, rescinded, breached, altered, or materially amended (other than as contemplated by the Offer Management Agreement).

Termination events limited by materiality

If any of the following events occur prior to 10:00am on Settlement Date, the JLMs may terminate their obligations under the Offer Management Agreement if the JLM reasonably believes (and does in fact believe) that the event (a) has had or is likely to have a material adverse effect on the ability of the JLMs to market the Offer or the outcome, success or Settlement of the Offer, the willingness of investors to subscribe for the Offer Shares, or price at which Offer Shares are sold or the likely price at which the Offer Shares will trade on ASX or; (b) has given or is likely to give rise to the JLMs contravening any applicable laws or incurring a liability.

• ( new circumstances ) there occurs a new circumstance that arises after the Prospectus is lodged that would have been required to be included in the Prospectus if it had arisen before lodgement;

• ( disclosures in the due diligence report and any other information ) the due diligence reports or any other information supplied by or on behalf of Spotless or SaleCo to the Joint Lead Managers in relation to the Spotless Group or the Offer is (or is likely to), or becomes (or becomes likely to be), false, misleading or deceptive, including by way of omission;

• ( adverse change ) any adverse change occurs in the assets, liabilities, financial position or performance, profits, losses or prospects or forecasts of Spotless or the Spotless Group (insofar as the position in relation to an entity in the Spotless Group affects the overall position of Spotless), including any adverse change in the assets, liabilities, financial position or performance, profits, losses, prospects or forecasts of Spotless or the Spotless Group from those disclosed in any

Offer document;

• ( Offer Documents ) any of the Offer documents (other than the US Offer documents or the

Prospectus), certain other public disclosures made by the Company or any aspect of the Offer does not comply with the Corporations Act (including if a statement in any of the Offer documents

(other than the US Offer documents or the Propsectus) or those other public disclosures is or becomes misleading or deceptive), or a matter required by the Listing Rules or any other applicable law or regulation to be included is omitted from an Offer document or the other public disclosures;

• ( force majeure ) there is an event or occurrence, including any statute, order, rule, regulation, directive or request of any governmental agency which makes it illegal for the JLMs to satisfy an obligation under the Offer Management Agreement, or to market, promote or settle the Offer;

• ( breach ) Spotless or SaleCo defaults on one or more of its obligations under the Offer

Management Agreement;

• ( representations and warranties ) a representation, warranty, undertaking or obligation contained in the Offer Management Agreement on the part of Spotless or SaleCo is breached, becomes not true or correct or is not performed;

• ( constitution ) Spotless varies any term of its constitution other than as contemplated by the Prospectus without the prior written consent of the JLMs (not to be unreasonably withheld or delayed);


• ( hostilities ) hostilities not presently existing commence (whether war has been declared or not) or an escalation in existing hostilities occurs (whether war has been declared or not) involving any one or more of Australia, New Zealand, Singapore, Hong Kong, the United States, United Kingdom,

Japan, Ukraine or the People’s Republic of China or a major act of terrorism is perpetrated in any of those places;

• ( disruption in financial markets ) any of the following occurs following completion of the Bookbuild up to 9.00am on the day of Settlement:

– a general moratorium on commercial banking activities in Australia, Singapore, Hong Kong, the United Kingdom or the United States is declared by the relevant central banking authority in those countries, or there is a material disruption in commercial banking or security settlement or clearance services in any of those countries; or

– any disruption to the financial markets, political or economic conditions or currency exchange rates or controls of Australia, New Zealand, Singapore, Hong Kong, the United Kingdom or the United States, or in the international financial markets; or

– trading in all securities quoted or listed on the ASX, the London Stock Exchange or the New

York Stock Exchange is suspended or limited in a material respect for one day (or a substantial part of one day) on which that exchange is open for trading;

• ( change of law ) there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia, any State of Australia or the Parliament of New Zealand a new law or the Reserve Bank of Australia or any Commonwealth or State authority, including ASIC, adopts or announces a proposal to adopt a new policy (other than a law or policy which has been announced before the date of the Offer Management Agreement);

• ( change in management or the board ) a change in senior management or the board of Directors

(other than in relation to the chief executive officer or chief financial officer or the chairman of the board of Directors) of Spotless occurs;

• ( compliance with law ) a contravention by Spotless or any entity in the Spotless Group of the

Corporations Act, New Zealand Securities laws, the Competition and Consumer Act 2010 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth), the Spotless constitution, any of the ASX Listing Rules or any other applicable law;

• ( material contracts ) if the New Banking Facilities or the Offer Management Agreement are varied, terminated, rescinded or altered or amended without the prior consent of the JLMs or any of those contracts is breached or becomes void, voidable, illegal, invalid or unenforceable or capable of being terminated, rescinded or avoided or of limited force and affect or its performance is or becomes illegal;

• ( certificate incorrect ) a statement in any closing certificate provided by Spotless or SaleCo to the

JLMs is false, misleading, inaccurate or untrue or incorrect (including by way of omission); and

• ( legal proceedings ) any of the following occurs:

– the commencement of legal proceedings against Spotless, SaleCo or any Spotless Group member or any Director of Spotless or SaleCo or of any Spotless Group member in that capacity; or

– any regulatory body commences an enquiry or public action against Spotless or SaleCo or announces that it intends to take such action (whether in respect of the Offer or otherwise).

Effect of termination of the Offer Management Agreement

If a JLM terminates its obligations under the Offer Management Agreement, the JLM which validly terminates will no longer be a lead manager and will not be obliged to conduct the bookbuild or provide Settlement support. Under the Offer Management Agreement, if one JLM terminates, the other JLMs may give notice in writing to Spotless and SaleCo stating whether they assume the obligations of the terminating JLM.

ProsPectus 189


Representations, warranties, undertakings and other terms

Spotless and SaleCo give various representations, warranties and undertakings to the JLMs

(in respect of themselves) which are standard for Offers of this kind, including that the documents issued or published by or on behalf of Spotless and SaleCo in respect of the Offer to comply with all applicable laws. These representations, warranties and undertakings relate to matters such as the conduct of the parties, the conduct and outcome of the due diligence process, information provided to the JLMs, financial information, material contracts, licences, compliance with ASX Listing Rules and laws, information contained in this Prospectus and the conduct of the Offer.

With the exception of the New Shares issued under the Offer and certain other limited exceptions,

Spotless has also agreed that it will not, without the JLMs prior written consent, allot or agree to allot

(or indicate that it may or will do so), any equity securities (or securities convertible into equity) at any time after the date of the Offer Management Agreement and before the expiration of 180 days after the Completion of the Offer. Spotless has also undertaken to conduct its business in the ordinary course and not to dispose or agree to dispose of the whole or a substantial part of its business or property except as disclosed in this Prospectus (other than with the JLMs’ consent, not to be unreasonably withheld or delayed) before the expiration of 90 days after Completion of the Offer.

Indemnity

Spotless and SaleCo agree to indemnify the JLMs, their affiliates and the officers, directors, employees, agents, contractors and representatives of the JLMs and their affiliates against all claims, demands, damages, losses, costs, expenses, liabilities or damages incurred by them in connection with the Offer, the bookbuild and the Offer documents (subject to limited exclusions).

9.5.2 description of the new banking facilities

The New Banking Facilities comprise:

• under the Syndicated Facility Agreement:

– NZ$107 million three year revolving facility A1, available for cash advances in New Zealand dollars;

– A$324.9 million three year revolving facility A2, available for cash advances in Australian dollars;

– NZ$53 million four year revolving facility B1, available for cash advances in New Zealand dollars; and

– A$163.6 million four year revolving facility B2, available for cash advances in Australian dollars; and

• under the Bilateral Facility Agreement:

– A$115 million two year revolving cash advance facility, available for advances in Australian dollars or New Zealand dollars (up to a NZ$70 million sub-limit);

– A$80 million performance guarantee facility, subject to annual review, available for advances in Australian dollars or New Zealand dollars (up to a NZ$20 million sub-limit); and

– A$5 million financial guarantee facility, subject to annual review, available for advances in Australian dollars or New Zealand dollars (up to a NZ$5 million sub-limit).

Refer to Section 3.6 for more information on the New Banking Facilities, including a detailed description of the facilities, the pro forma net finance cost and the financial covenants.

Other financing considerations

Financial covenants

Refer to Section 3.6 for New Banking Facilities’ financial covenants.

Security

The New Banking Facilities will be unsecured.


Guarantees

Spotless must ensure that at all times the guarantors under the New Banking Facilities together hold at least 85% of the Spotless Group’s total assets, and generate at least 85% of the Spotless Group’s

EBITDA as defined under the New Banking Facilities (including by procuring any new subsidiary required in order to meet this test to execute a deed of accession and become a guarantor, under the New Banking Facilities).

Representations, warranties and undertakings

The New Banking Facilities will contain a number of representations, warranties and undertakings that are generally customary for facilities of their nature, including undertakings to provide certain financial and other information, a negative pledge (with appropriate carve-outs), restrictions as to disposals and acquisitions of assets (subject to exceptions usual for facilities of their nature) and restrictions on making distributions, incurring permitted indebtedness and provision of financial accommodation (in each case also subject to exceptions usual for facilities of their nature).

Defaults

The New Banking Facilities will also contain certain events of default which are customary for facilities of their nature. These events of default include the failure to make payments due, a breach of any financial covenants, a breach of any other obligation under the facilities, the misrepresentation of facts pertaining to any finance document, the occurrence of a cross default, the occurrence of any insolvency event as well as any event which has or may have a material adverse effect on, for example, the business or financial condition of Spotless and its guarantor subsidiaries. In a number of instances, the events of default are subject to materiality thresholds and/or cure periods.

It will be a review event under the New Banking Facilities if there is a change of control in Spotless, or, if following listing on the ASX, the Shares are removed from the official list of the ASX or suspended from trading for 10 consecutive business days (for reasons other than there being an imminent announcement of a major acquisition or merger transaction). Following such review event, the lenders may either agree to revised terms with Spotless or, if agreement cannot be reached, require repayment of the New Banking Facilities. A change of control is defined to be the acquisition by any person (other than the PEP Shareholders), either directly or indirectly, of beneficial ownership of 50% or more of the ordinary voting power of the outstanding voting shares in the Company.

Upon the occurrence of an event of default, the lenders under the New Banking Facilities will be entitled to, among other things, declare that all amounts owing to them under the facilities are immediately due and payable, terminate all or part of its obligations to Spotless and the Spotless

Group and charge additional fees and interest.

Hedging policy

Under the New Banking Facilities, no borrower or guarantor may enter into hedging transactions other than: (i) interest rate, currency and commodity hedging as set out in the Spotless Group’s hedging policy; (ii) spot and forward delivery foreign exchange contracts entered into in the ordinary course of business and not for speculative purposes; and (iii) any derivative transactions entered into for the hedging of actual or projected real exposures arising in the ordinary course of trading activities of a member of the Spotless Group and not for speculative purposes.

Distributions

Spotless is able to make distributions (including paying dividends) to its shareholders if, immediately prior to and following the distribution, the financial covenants set out in Section 3.6 are complied with and no default or review event is subsisting or will immediately occur as a result of the distribution being made.

ProsPectus 191


9.5.3 relationship deed and related agreements

Following Completion of the Offer, the PEP Shareholders and Coinvestment Shareholders may hold up to a maximum of 47.0% of the issued share capital of Spotless.

106 All Shares offered for issue under the Offer will be issued subject to the disclosures in this Prospectus and will rank equally with each other, and with those Shares held by the PEP Shareholders and Coinvestment Shareholders.

The Independent Directors approved the Company entering into a Relationship Deed with representatives of the PEP Shareholders on 26 March 2014 which governs certain aspects of the relationship between the PEP Shareholders, their representatives and Spotless. The Relationship

Deed includes provisions for access to Spotless’ information and confidentiality arrangements with the PEP Shareholders. The Relationship Deed requires that the parties agree procedures for the management of conflicts of interest and appropriate use of confidential information. Representatives of the PEP Shareholders retain the right to nominate two Directors to the Board while the PEP

Shareholders and Coinvestment Shareholders (other than Lentesco) hold at least 25%, or one

Director to the Board while the PEP Shareholders and Coinvestment Shareholders (other than

Lentesco) hold at least 10%, of the issued share capital of Spotless. Spotless is also required to provide market disclosure (subject to certain conditions) to facilitate the PEP Shareholders and

Coinvestment Shareholders (other than Lentesco) selling their Shares.

Prior to the Listing, PEP Advisory, an advisor to the PEP Shareholders, will have also provided advisory services to the Group. This arrangement terminates on Completion of the Offer following payment of accrued fees described in Section 5.3.

9.6 description of the syndicate

The JLMs to the Offer are Citi, Deutsche Bank and UBS.

The Co-Lead Manager to the Offer is Evans & Partners.

9.7 insurance

Spotless has a range of insurance policies in place to manage the risks of its day-to-day business and certain other activities.

These policies include professional indemnity insurance, which is held by all member companies of the

Spotless Group, along with workers compensation insurance for all states and territories of operation.

There are additional, more specific policies in place to cover other relevant business risks, including property, corporate travel and public and products liability cover.

9.8 regulatory matters

Spotless is subject to governmental regulation at the national, state and local government level in relation to many aspects of its operations in Australia and New Zealand.

These include laws of general application in areas such as trade practices and consumer protection, employment and workplace relations, and occupational health and safety as well as licensing requirements relevant to Spotless’ specific operations in areas such as:

• food services including in relation to the service of liquor;

• construction, trade and security services; and

• Spotless’ laundry operations.

Spotless’ licensing requirements for its food services and construction, trade and security services principally involve a credentialing procedure with local and state authorities and ongoing requirements in relation to maintenance of standards and risk management. Spotless’ industrial laundries are the subject of trade waste licence agreements with local water authorities, which require Spotless to adhere to water treatment and monitoring requirements for the discharge of laundry wastewater.

106 This assumes that the Final Price is set at the bottom of the Indicative Price Range. This disregards any over-allocation and any exercise of the Over-allocation Option. See Section 6.6 for further information.


9.9

Spotless operates a Group-wide compliance and licensing program to ensure that all relevant licensing requirements are maintained.

In addition to these regulatory requirements, Spotless’ contracts with certain customers, including government or resources sub-sector customers, generally require Spotless to adhere to their procurement policies in areas such as workplace relations and indigenous opportunities. These requirements are addressed by Spotless as part of mobilising and managing the relevant contracts.

See Section 2.4.2 for additional information.

Legal proceedings

Spotless is from time to time, party to various disputes and legal proceedings incidental to the conduct of its business. As at the Prospectus Date, there are no legal proceedings to which Spotless is a party that it believes are likely to have a material adverse impact on its future financial results and

Spotless is not aware of any such legal proceedings that are pending or threatened.

9.10 Summary of tax issues for australian and new Zealand tax resident investors

9.10.1 taxation considerations

The comments in Section 9.10.2 provide a general outline of Australian tax issues for Australian tax resident Shareholders who acquire Shares under this Prospectus and that hold Shares on capital account for Australian income tax purposes. The categories of Shareholders considered in this summary are limited to individuals, companies (other than life insurance companies), trusts, partnerships and complying superannuation entities that hold their Shares on capital account.

This summary does not consider the consequences for foreign resident Shareholders, insurance companies, banks, Shareholders that hold their Shares on revenue account or carry on a business of trading in shares, or Shareholders who are exempt from Australian tax. This summary also does not cover the consequences for Shareholders who are subject to the Taxation of Financial

Arrangements rules contained in Division 230 of the Income Tax Assessment Act 1997 (Cth).

The comments in Section 9.10.3 provide a general outline of New Zealand tax issues for New Zealand tax resident Shareholders who acquire Shares under this Prospectus and that hold Shares in

Spotless in their own name on capital account for New Zealand income tax purposes, but does not include managed funds. Whether the Shares are ultimately held on capital account (as opposed to revenue account or as trading stock) may depend on the type of Shareholder involved and their specific circumstances.

This summary does not consider the consequences for non-New Zealand resident Shareholders,

Shareholders that hold their Shares on revenue account or carry on a business of trading in shares or Shareholders who are exempt from New Zealand tax.

The summaries in Sections 9.10.2 and 9.10.3 are general in nature and are not exhaustive of all income tax consequences that could apply in all circumstances of any given Shareholder. The individual circumstances of each Shareholder may affect the taxation implications of the investment of the Shareholder.

It is recommended that all Shareholders consult their own independent tax advisers regarding the income tax (including capital gains tax), stamp duty and GST consequences of acquiring, owning and disposing of Shares, having regard to the specific circumstances.

The summaries in Sections 9.10.2 and 9.10.3 are based on the relevant Australian and New Zealand tax law in force, established interpretations of that law and understanding of the practice of the relevant tax authority at the time of issue of this Prospectus. The summaries do not take into account the tax law of countries other than Australia and New Zealand.

ProsPectus 193


Tax laws are complex and subject to ongoing change. The tax consequences discussed in these summaries do not take into account or anticipate any changes in law (by legislation or judicial decision) or any changes in the administrative practice or interpretation by the relevant authorities. If there is a change, including a change having retrospective effect, the tax, stamp duty and GST consequences should be reconsidered by Shareholders in light of the changes. The precise implications of ownership or disposal of the Shares will depend upon each Shareholder’s specific circumstances.

This summary in Section 9.10 does not constitute financial product advice as defined in the

Corporations Act. This summary is confined to taxation issues and is only one of the matters which need to be considered by Shareholders before making a decision about their investments.

Shareholders should consider taking advice from a licenced advisor, before making a decision about their investments.

9.10.2 australian tax resident Shareholders

Australian tax resident individuals and complying superannuation entities

Where dividends on a Share are paid by the Company, those dividends will constitute assessable income of an Australian tax resident Shareholder. Australian tax resident Shareholders who are individuals or complying superannuation entities should include the dividend in their assessable income in the year the dividend is paid, together with any franking credit attached to that dividend.

The rate of tax payable by each Australian Shareholder that is an individual will depend on the individual circumstances of the Shareholder and his/her prevailing marginal rate of income tax.

Shareholders who are individuals or complying superannuation entities should be entitled to a tax offset equal to the franking credit attached to the dividend subject to being a “qualified person”.

The tax offset can be applied to reduce the tax payable on the Shareholder’s taxable income.

Where the tax offset exceeds the tax payable on the Shareholder’s taxable income, such

Shareholders should be entitled to a tax refund.

Where a dividend paid by the Company is unfranked, the Shareholder will generally be taxed at his or her prevailing marginal rate on the dividend received with no tax offset.

Corporate Shareholders

Corporate Shareholders are also required to include both the dividend and associated franking credit in their assessable income. A tax offset is then allowed up to the amount of the franking credit on the dividend.

An Australian tax resident corporate Shareholder should be entitled to a credit in its own franking account to the extent of the franking credit attached to the dividend received. Such corporate

Shareholders can then pass on the benefit of the franking credits to their own shareholder(s) on the payment of franked dividends.

Excess franking credits received by a corporate Shareholder cannot give rise to a refund, but may in certain circumstances be converted into carry forward tax losses.

Trusts and partnerships

Australian tax resident Shareholders who are trustees (other than trustees of complying superannuation entities) or partnerships should include the dividend and franking credit in determining the net income of the trust or partnership. A beneficiary, trustee or partner may be entitled to a tax offset equal to the beneficiary’s or partner’s share of the net income of the trust or partnership as the case may be.

Shares held “at risk”

To be eligible for the benefit of franking credits and tax offset a Shareholder must satisfy the “holding period” rule and “related payment” rule. This requires that a Shareholder hold the Shares in the Company

“at risk” for more than 45 days continuously (not including the date of acquisition and disposal).


Any day on which a Shareholder has a materially diminished risk of loss or opportunity for gain in respect of the Shares (e.g. through transactions such as granting Options or warrants over Shares or entering into a contract to sell the Shares) will not be counted as a day on which the Shareholder held the Shares “at risk”. In addition, a Shareholder must not be obliged to make a “related payment” in respect of any dividend, unless they hold the Shares at risk for the required holding period around the dividend dates.

Where these rules are not satisfied the Shareholder will not be able to include an amount for the franking credits in their assessable income and will not be entitled to a tax offset.

This holding period rule is subject to certain exceptions, including where the total franking offsets of an individual in a year of income do not exceed A$5,000. Special rules apply to trusts and beneficiaries.

Shareholders should obtain their own professional tax advice to determine if these requirements, as they apply to them, have been satisfied.

On 14 May 2013, the former Australian Government announced changes that may apply to deny tax offsets to certain “dividend washing” arrangements. In late March 2014 exposure draft legislation was released for public consultation. Shareholders should consider the impact of this proposed change together with the broader integrity provisions that apply to the claiming of tax offsets given their own personal circumstances.

Capital gains tax (CGT) implications for Australian tax resident Shareholders on a disposal of Shares

The disposal of a Share by a Shareholder will be a CGT event. A capital gain will arise where the

“capital proceeds” on disposal exceed the “cost base” of the Share (broadly, the amount paid to acquire the Share plus any transaction costs incurred in relation to the acquisition or disposal of the

Shares). In the case of an “arm’s length” on-market sale, the capital proceeds will generally be the cash proceeds received from the sale of the Shares.

A CGT discount may be applied against the net capital gain where the Shareholder is an individual, complying superannuation entity or trustee, and the Shares have been held for more than 12 months prior to the CGT event. Where the CGT discount applies, any capital gain arising to individuals and entities acting as trustees (other than a trust that is a complying superannuation entity) may be reduced by one-half after offsetting current year or prior year capital losses. For a complying superannuation entity, any capital gain may be reduced by one-third, after offsetting current year or prior year capital losses.

Where the Shareholder is the trustee of a trust that has held the Shares for more than 12 months before disposal, the CGT discount may flow through to the beneficiaries of the trust if those beneficiaries are not companies. Shareholders that are trustees should seek specific advice regarding the tax consequences of distributions to beneficiaries who may qualify for discounted capital gains.

A capital loss will be realised where the “reduced cost base” of the Share exceeds the “capital proceeds” from disposal. Capital losses may only be offset against capital gains realised by the

Shareholder in the same income year or future income years, subject to certain loss recoupment tests being satisfied. Capital losses cannot be offset against other assessable income.

Tax file numbers

Shareholders are not required to quote their tax file number ( TFN ), or where relevant Australian

Business Number ( ABN ), to the Company. However, if a valid TFN, ABN or exemption details are not provided, Australian tax may be required to be deducted by the Company from distributions and/or unfranked dividends at the maximum marginal tax rate plus the Medicare levy. Australian tax should not be required to be deducted by the Company in respect of fully franked dividends.

A Shareholder that holds Shares as part of an enterprise may quote their ABN instead of their TFN.

Non-residents are exempt from this requirement.

ProsPectus 195


GST

No GST should be payable by Shareholders in respect of the acquisition or disposal of their Shares, regardless of whether or not the Shareholder is registered for GST.

Shareholders may not be entitled to claim full input tax credits in respect of any GST included in the costs they have incurred in connection with their acquisition of the Shares. Separate GST advice should be sought by Shareholders in this respect relevant to their particular circumstances.

No GST should be payable by Shareholders on receiving dividends distributed by the Company.

Stamp duty

Shareholders should not be liable for stamp duty in respect of the acquisition of their Shares, unless they acquire, either alone or with an associated/related person, an interest of 90% or more in the

Company. Under current stamp duty legislation, no stamp duty would ordinarily be payable by

Shareholders on any subsequent transfer of their Shares whilst the Company remains listed.

9.10.3 new Zealand tax resident Shareholders

New Zealand income tax treatment of dividends received by New Zealand tax resident Shareholders

New Zealand tax resident Shareholders that are individuals, trustees of a trust or portfolio corporate shareholders (those holding less than 10% shareholding interests in the Company) will generally be required to include in their assessable income the gross dividend actually received, which includes any New Zealand imputation credits attached to that dividend and withholding taxes. New Zealand tax resident Shareholders would then be subject to New Zealand tax at their applicable tax rate on the gross dividend amount (which includes the imputation credit and any applicable withholding taxes amount).

New Zealand tax resident Shareholders should be entitled to a tax offset against their New Zealand tax liability equal to the New Zealand imputation credits attached to the dividend. The tax offset can be applied to reduce the tax payable on the New Zealand tax resident Shareholder’s taxable income.

Where the offset exceeds the tax payable on the New Zealand tax resident Shareholder’s taxable income, excess imputation credits can be carried forward by the Shareholder for utilisation in future income years (in the form of tax credits for individuals or losses for companies and trustees other than a Maori trustee).

Non-portfolio New Zealand corporate Shareholders (holding 10% or greater shareholding interests in the Company) should not be subject to income tax on any dividends received from the Company.

Franking credits/withholding tax

Australian withholding tax will apply for any unfranked dividends (but not for fully franked dividends).

Should the Company be required to deduct Australian withholding tax on any dividend it pays,

New Zealand tax legislation allows a foreign tax credit to be claimed by New Zealand tax resident

Shareholders in respect of that amount of overseas tax paid. However, the amount of the credit for the foreign tax is restricted to the amount of the New Zealand tax payable calculated under certain rules.

Foreign tax credits are non-refundable credits and, if not utilised in the income year to which they relate, will be forfeited.

New Zealand tax resident Shareholders are not entitled to a New Zealand tax credit for any Australian franking credits attached to dividends, but likewise are not taxed on the amount of any franking credits attached to dividends.

Triangular (Trans-Tasman) tax regime and dividend imputation

The Triangular (Trans-Tasman) tax regime allows an Australian tax resident company, such as the

Company, to elect to maintain a New Zealand imputation credit account. Consequently, New Zealand taxes paid by the Company’s New Zealand subsidiaries could then result in New Zealand imputation


credits being attached to dividends paid on the Shares. The imputation credits must be attached pro rata to all dividends, regardless of the tax residence of the Shareholder.

The Company and its relevant subsidiaries intend to investigate the option to elect to enter into this regime and whether they will seek to maintain a New Zealand imputation credit account with respect to New Zealand taxes paid. If so elected, and the Company declares dividends with

New Zealand imputation credits attached, all Shareholders would receive New Zealand imputation credits. New Zealand tax resident Shareholders may then be entitled to use these imputation credits under New Zealand tax law to offset against their New Zealand income tax liability (refer above).

The level of New Zealand imputation credits available to be attached to a dividend will depend on the amount of New Zealand taxes paid. No decision to enter the Triangular (Trans-Tasman) tax regime has been made.

New Zealand income tax treatment of Shareholding

New Zealand tax resident Shareholders may be subject to New Zealand tax in respect of foreign shareholdings, including their Shares, under either:

• ordinary tax rules applying to share investments; or

• New Zealand’s Foreign Investment Fund ( FIF ) regime.

The FIF regime should not apply to the Shares on the basis that the Company meets the exemption criteria that it is:

• listed on the All Ordinaries in Australia, or another ASX approved index; and

• required by Australian tax law to maintain a franking account.

If for any reason the Company does not meet its listing requirements in any income year,

New Zealand tax resident Shareholders may be subject to the FIF regime in respect of their holding of the Shares. In the event that the FIF regime applies, Shareholders should obtain professional tax advice.

It is therefore anticipated that New Zealand’s ordinary tax rules will apply to Shares held by

New Zealand tax resident Shareholders, in which case only dividends received (see above) and gains on disposal of the Shares, in limited circumstances (see below) may be taxable.

Disposal of Shares

Amounts derived by New Zealand tax resident Shareholders from the sale or disposal of the Shares should not be included in assessable income for New Zealand tax purposes if the Shares are held on capital account. For completeness, Shareholders will be subject to tax on gains realised on the sale or disposal of Shares where:

• the Shareholder is in the business of dealing in shares; or

• the Shares were acquired for the purpose of resale; or

• the Shares were acquired as part of a profit-making undertaking or scheme; or

• the Shares are otherwise held on revenue account.

New Zealand tax resident Shareholders should seek their own tax advice about whether the proceeds from the sale of the Shares will be taxable in New Zealand.

Goods and services tax

Under current New Zealand law, no New Zealand goods and services tax liability will arise on either the issue of the Shares or transfer of the Existing Shares pursuant to the Offer or on the subsequent transfer of the Shares.

Stamp duty

As there is no stamp duty in New Zealand, neither the acquisition nor disposal of Shares will attract stamp duty in New Zealand.

ProsPectus 197


9.11 consents

Each of the parties referred to below ( Consenting Party ), to the maximum extent permitted by law, expressly disclaims all liabilities in respect of, makes no representations regarding and takes no responsibility for any statements in or omissions from this Prospectus, other than the reference to its name in the form and context in which it is named and a statement or report included in this

Prospectus with its consent as specified below.

Written consents to the issue of this Prospectus have been given and, at the time of Lodgement of this Prospectus with ASIC, had not been withdrawn by the following parties:

• Highbury Partnership Pty Limited has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as financial adviser to the Offer in the form and context in which it is named;

• each of Citi, Deutsche Bank and UBS has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as a JLM to the

Offer in the form and context in which it is named;

• Evans & Partners have given, and has not withdrawn prior to lodgement of this Prospectus with

ASIC, its written consent to be named in this Prospectus as Co-Lead Manager to the Offer in the form and context in which it is named;

• each of Bell Potter Securities Limited, UBS Wealth Management Australia Limited and Wilson

HTM Corporate Finance Limited has given, and has not withdrawn prior to lodgement of this

Prospectus with ASIC, its written consent to be named in this Prospectus as a Co-Manager to the Offer in the form and context in which it is named;

• Gilbert + Tobin has given, and has not withdrawn prior to the lodgement of this Prospectus with

ASIC, its written consent to be named in this Prospectus as Australian legal adviser (other than in relation to taxation matters) to Spotless in relation to the Offer in the form and context in which it is named;

• Deloitte Corporate Finance has given, and has not withdrawn prior to the lodgement of this

Prospectus with ASIC, its written consent to be named in this Prospectus as Investigating

Accountant to Spotless in relation to the Pro Forma Historical Financial Information, Pro Forma

Forecast Financial Information and Statutory Forecast Financial Information in the form and context in which it is named and has given and not withdrawn its consent to the inclusion in this

Prospectus of its Investigating Accountant’s Report in the form and context in which it is included;

• Deloitte Touche Tohmatsu has given, and has not withdrawn prior to the lodgement of this

Prospectus with ASIC, its written consent to be named in this Prospectus as auditor of Spotless

Group Limited in FY2011 and FY2012;

• Ernst & Young has given, and has not withdrawn prior to the lodgement of this Prospectus with

ASIC, its written consent to be named in this Prospectus as the auditor and tax advisor to Spotless in the form and context in which it is named;

• L.E.K. Consulting has given, and has not withdrawn prior to the lodgement of this Prospectus with

ASIC, its written consent to the inclusion in this Prospectus of references to it and statements and charts in this Prospectus regarding the industry Spotless operates in;

• Link Market Services Limited has given, and has not withdrawn prior to the lodgement of this

Prospectus with ASIC, its written consent to be named in this Prospectus as the Share Registry in the form and context in which it is named. Link Market Services Limited has had no involvement in the preparation of any part of this Prospectus other than being named as Share Registry to Spotless;

• Frost & Sullivan has given, and has not withdrawn prior to the lodgement of this Prospectus with

ASIC, its written consent to be named in this Prospectus and to the inclusion of the references to it in the form and context in which they are included; and

• Euromonitor has given, and has not withdrawn prior to the lodgement of this Prospectus with

ASIC, its written consent to be named in this Prospectus and to the inclusion of the references to it in the form and context in which they are included.


No entity or person referred to in this Section 9.11 has made any statement that is included in this

Prospectus or any statement on which a statement made in this Prospectus is based, except as stated above. Each of the persons and entities referred to in this Section 9.11 has not authorised or caused the issue of this Prospectus and does not make any offer of Shares.

9.12 aSic relief and modifications

ASIC has indicated that it is prepared to grant certain relief from, and modifications to, the following provisions of the Corporations Act:

• relief so that the takeovers provisions of the Corporations Act, will not apply to certain relevant interests that the Company would otherwise acquire in the PEP Shareholders’ and the Coinvestment

Shareholders’ Escrowed Shares by reason of the voluntary escrow arrangements in relation to those Shares described in Section 6.7; and

• relief under Sections 911A(2)(l), 992B(1)(a), 1020F(1)(a) and 1020F(1)(b) to effectively extend the benefit of ASIC Class Order 03/184 to the LTI Plan. This provides Spotless with conditional relief from the requirement to issue disclosure documentation in connection with the grant of Options, as well as relieving Spotless from the operation of the licensing, advertising, securities hawking and managed investment scheme provisions of the Corporations Act for offers of Options under the LTI Plan in accordance with ASIC’s conditions. As a result of granting this relief, Shares issued by Spotless upon exercise of a vested Option granted under the LTI Plan will not be subject to the on-sale restrictions of the Corporations Act.

9.13 international Offer restrictions

This Prospectus does not constitute an offer of Shares in any jurisdiction in which it would be unlawful. Shares may not be offered or sold in any country outside Australia or New Zealand except to the extent permitted below.

9.13.1 canada (british columbia, Ontario and Quebec provinces)

This document constitutes an offering of Shares only in the Provinces of British Columbia, Ontario and Quebec (the “Provinces”) and to those persons to whom they may be lawfully distributed in the Provinces, and only by persons permitted to sell such Shares. This document is not, and under no circumstances is to be construed as, an advertisement or a public offering of securities in the

Provinces. This document may only be distributed in the Provinces to persons that are “accredited investors” within the meaning of NI 45-106 – Prospectus and Registration Exemptions , of the

Canadian Securities Administrators.

No securities commission or similar authority in the Provinces has reviewed or in any way passed upon this document, the merits of the Shares or the offering of Shares and any representation to the contrary is an offence.

No prospectus has been, or will be, filed in the Provinces with respect to the offering of Shares or the resale of such securities. Any person in the Provinces lawfully participating in the offer will not receive the information, legal rights or protections that would be afforded had a prospectus been filed and receipted by the securities regulator in the applicable Province. Furthermore, any resale of the Shares in the Provinces must be made in accordance with applicable Canadian securities laws which may require resales to be made in accordance with exemptions from dealer registration and prospectus requirements.

These resale restrictions may in some circumstances apply to resales of the Shares outside Canada and, as a result, Canadian purchasers should seek legal advice prior to any resale of the Shares.

The Company and SaleCo, and their respective directors and officers, may be located outside Canada, and as a result, it may not be possible for Canadian purchasers to effect service of process within

Canada upon the Company or SaleCo or their respective directors or officers. All or a substantial portion of the assets of the Company and SaleCo and such persons may be located outside Canada, and as a result, it may not be possible to satisfy a judgment against the Company or SaleCo or such persons in Canada or to enforce a judgment obtained in Canadian courts against the Company or

SaleCo or such persons outside Canada.

ProsPectus 199


200

Any financial information contained in this document has been prepared in accordance with

Australian Accounting Standards and also comply with International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board. Unless stated otherwise, all dollar amounts contained in this document are in Australian dollars.

Statutory Rights of Action for Damages or Rescission

Securities legislation in certain of the Provinces may provide purchasers with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, when an offering memorandum that is delivered to purchasers contains a misrepresentation. These rights and remedies must be exercised within prescribed time limits and are subject to the defenses contained in applicable securities legislation. Prospective purchasers should refer to the applicable provisions of the securities legislation of their respective Province for the particulars of these rights or consult with a legal adviser.

The following is a summary of the statutory rights of rescission or to damages, or both, available to purchasers in Ontario. In Ontario, every purchaser of the Shares purchased pursuant to this document (other than (a) a “Canadian financial institution” or a “Schedule III bank” (each as defined in

NI 45-106), (b) the Business Development Bank of Canada or (c) a subsidiary of any person referred to in (a) or (b) above, if the person owns all the voting securities of the subsidiary, except the voting securities required by law to be owned by the directors of that subsidiary) shall have a statutory right of action for damages and/or rescission against the Company or SaleCo if this document or any amendment thereto contains a misrepresentation. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against the Company or SaleCo.

This right of action for rescission or damages is in addition to and without derogation from any other right the purchaser may have at law. In particular, Section 130.1 of the Securities Act (Ontario) provides that, if this document contains a misrepresentation, a purchaser who purchases the Shares during the period of distribution shall be deemed to have relied on the misrepresentation if it was a misrepresentation at the time of purchase and has a right of action for damages or, alternatively, may elect to exercise a right of rescission against the Company or SaleCo, provided that (a) neither the Company nor SaleCo will be liable if it proves that the purchaser purchased the Shares with knowledge of the misrepresentation; (b) in an action for damages, neither the Company nor SaleCo is liable for all or any portion of the damages that the Company or SaleCo proves does not represent the depreciation in value of the Shares as a result of the misrepresentation relied upon; and (c) in no case shall the amount recoverable exceed the price at which the Shares were offered.

Section 138 of the Securities Act (Ontario) provides that no action shall be commenced to enforce these rights more than (a) in the case of any action for rescission, 180 days after the date of the transaction that gave rise to the cause of action or (b) in the case of any action, other than an action for rescission, the earlier of (i) 180 days after the purchaser first had knowledge of the fact giving rise to the cause of action or (ii) three years after the date of the transaction that gave rise to the cause of action. These rights are in addition to and not in derogation from any other right the purchaser may have.

Certain Canadian income tax considerations.

Prospective purchasers of the Shares should consult their own tax adviser with respect to any taxes payable in connection with the acquisition, holding or disposition of the Shares as any discussion of taxation related matters in this document is not a comprehensive description and there are a number of substantive Canadian tax compliance requirements for investors in the Provinces.

Language of documents in Canada.

Upon receipt of this document, each investor in Canada hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the Shares (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.


9.13.2 china

The information in this document does not constitute a public offer of the Shares, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph,

Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The

Shares may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors”.

9.13.3 european economic area – belgium, denmark, Germany, Luxembourg and netherlands

The information in this document has been prepared on the basis that all offers of Shares will be made pursuant to an exemption under the Directive 2003/71/EC ( Prospectus Directive ), as amended and implemented in Member States of the European Economic Area (each, a Relevant Member

State ), from the requirement to produce a prospectus for offers of securities.

An offer to the public of Shares has not been made, and may not be made, in a Relevant Member

State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:

• to any legal entity that is authorized or regulated to operate in the financial markets or whose main business is to invest in financial instruments;

• to any legal entity that satisfies two of the following three criteria: (i) balance sheet total of at least 20,000,000; (ii) annual net turnover of at least 40,000,000 and (iii) own funds of at least

2,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);

• to any person or entity who has requested to be treated as a professional client in accordance with the EU Markets in Financial Instruments Directive (Directive 2004/39/EC, “MiFID”); or

• to any person or entity who is recognised as an eligible counterparty in accordance with Article 24 of the MiFID.

9.13.4 france

This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq . of the General Regulation of the French Autorité des marchés financiers ( AMF ). The Shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.

This document and any other offering material relating to the Shares have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed (directly or indirectly) to the public in France. Such offers, sales and distributions have been and shall only be made in France to qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2, D.411-1, L.533-16, L.533-20, D.533-11, D.533-13, D.744-1,

D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.

Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the Shares cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.

9.13.5 Hong kong

WARNING: This document has not been, and will not be, registered as a prospectus under the

Companies Ordinance (Cap. 32) of Hong Kong ( Companies Ordinance ), nor has it been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures

Ordinance (Cap. 571) of the Laws of Hong Kong ( SFO ). No action has been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the Shares have not been and will not be offered or sold in

Hong Kong other than to “professional investors” (as defined in the SFO).

ProsPectus 201


No advertisement, invitation or document relating to the Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong

Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors (as defined in the SFO and any rules made under that ordinance). No person allotted Shares may sell, or offer to sell, such securities in circumstances that amount to an offer to the public in Hong Kong within six months following the date of issue of such securities.

The contents of this document have not been reviewed by any Hong Kong regulatory authority.

You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice.

9.13.6 ireland

The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005, as amended

( Prospectus Regulations ). The Shares have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to “qualified investors” as defined in Regulation 2(l) of the Prospectus Regulations.

9.13.7 italy

The offering of the Shares in the Republic of Italy has not been authorized by the Italian Securities and

Exchange Commission ( Commissione Nazionale per le Società e la Borsa or CONSOB ) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the Shares may be distributed in Italy and the Shares may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998, as amended ( Decree

No. 58 ), other than:

• to qualified investors ( Qualified Investors ), as defined in Article 100 of Decree No. 58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999, as amended ( Regulation

No. 1197l ); and

• in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971.

Any offer, sale or delivery of the Shares or distribution of any offer document relating to the Shares in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:

• made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended),

Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 (as amended) and any other applicable laws; and

• in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws.

Any subsequent distribution of the Shares in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such Shares being declared null and void and in the liability of the entity transferring the Shares for any damages suffered by the investors.

9.13.8 Japan

The Shares have not been and will not be registered under Article 4, paragraph 1 of the Financial

Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended ( FIEL ) pursuant to an exemption from the registration requirements applicable to a private placement of securities to


Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the

FIEL and the regulations promulgated thereunder). Accordingly, the Shares may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than

Qualified Institutional Investors. Any Qualified Institutional Investor who acquires Shares may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of Shares is conditional upon the execution of an agreement to that effect.

9.13.9 malaysia

No approval from the Securities Commission of Malaysia has been or will be obtained in relation to any offer of Shares. The Shares may not be offered or sold in Malaysia except pursuant to an exemption from the prospectus requirements under the Malaysian Capital Markets and Services Act.

9.13.10 norway

This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway within the meaning of the Norwegian

Securities Trading Act of 2007.

The Shares may not be offered or sold, directly or indirectly, in Norway except to “professional clients”

(as defined in Norwegian Securities Regulation of 29 June 2007 no. 876 and including non-professional clients having met the criteria for being deemed to be professional and for which an investment firm has waived the protection as non-professional in accordance with the procedures in this regulation).

9.13.11 Singapore

This document and any other materials relating to the Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials in connection with the offer or sale, or invitation for subscription or purchase, of Shares, may not be issued, circulated or distributed, nor may the

Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of

Singapore (the “SFA”), or as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA.

This document has been given to you on the basis that you are (i) an existing holder of the

Company’s shares, (ii) an “institutional investor” (as defined in the SFA) or (iii) a “relevant person”

(as defined in section 275(2) of the SFA). In the event that you are not an investor falling within any of the categories set out above, please return this document immediately. You may not forward or circulate this document to any other person in Singapore.

Any offer is not made to you with a view to the Shares being subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be applicable to investors who acquire Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.

9.13.12 Sweden

This document has not been, and will not be, registered with or approved by Finansinspektionen

(the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the Shares be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of Shares in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.

ProsPectus 203


9.13.13 Switzerland

The Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss

Exchange ( SIX ) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the Shares may be publicly distributed or otherwise made publicly available in

Switzerland. The Shares will only be offered to regulated financial intermediaries such as banks, securities dealers, insurance institutions and fund management companies as well as institutional investors with professional treasury operations.

Neither this document nor any other offering or marketing material relating to the Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of Shares will not be supervised by, the Swiss Financial Market Supervisory

Authority ( FINMA ).

This document is personal to the recipient only and not for general circulation in Switzerland.

9.13.14 united arab emirates

Neither this document nor the Shares have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or any other governmental authority in the United Arab Emirates, nor has the Company or SaleCo received authorization or licensing from the Central Bank of the United Arab Emirates, the Emirates

Securities and Commodities Authority or any other governmental authority in the United Arab

Emirates to market or sell the Shares within the United Arab Emirates. No marketing of any financial products or services may be made from within the United Arab Emirates and no subscription to any financial products or services may be consummated within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the Shares, including the receipt of applications and/or the allotment or redemption of Shares, may be rendered within the United Arab Emirates by the Company or SaleCo.

No offer or invitation to subscribe for Shares is valid in, or permitted from any person in, the Dubai

International Financial Centre.

9.13.15 united kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus

(within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended

( FSMA )) has been published or is intended to be published in respect of the Shares. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the Shares may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.

Any invitation or inducement to engage in investment activity (within the meaning of section 21 of

FSMA) received in connection with the issue or sale of the Shares has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the

United Kingdom in circumstances in which section 21(1) of FSMA does not apply to the Company or SaleCo.

In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005

( FPO ), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth


companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

9.14 Ownership restrictions

The sale and purchase of shares in Australia are regulated by a number of laws that restrict the level of ownership or control by any one person (either alone or in combination with others). This

Section 9.14 contains a general description of these laws.

9.14.1 Foreign Acquisitions and Takeovers Act 1975 (Cth) and federal Government foreign investment Policy

Generally, the Foreign Acquisitions and Takeovers Act 1975 (Cth) applies to acquisitions of shares and voting power in a company of 15% or more by a single foreign person and its associates

( Substantial Interest ), or 40% or more by two or more unassociated foreign persons and their associates ( Aggregate Substantial Interest ).

Where an acquisition of a Substantial Interest or Aggregate Substantial Interest meets certain criteria, the acquisition may not occur unless notice of it has been given to the Federal Treasurer and the

Federal Treasurer has either stated that there is no objection to the proposed acquisition in terms of the Federal Government’s Foreign Investment Policy ( Policy ) or a statutory period has expired without the Federal Treasurer objecting. An acquisition of a Substantial Interest or an Aggregate Substantial

Interest meeting certain criteria may also lead to divestment orders unless a process of notification, and either a statement of non-objection or expiry of a statutory period without objection, has occurred.

In addition, in accordance with the Policy, acquisitions of a direct investment in an Australian company by foreign governments and their related entities should be notified to the Foreign

Investment Review Board for approval, irrespective of value. According to the Policy, a ‘direct investment’ will typically include any investment of 10% or more of the shares (or other securities or equivalent economic interest or voting power) in an Australian company but may also include investment of less than 10% where the investor is building a strategic stake in the target or obtains potential influence or control over the target investment.

9.14.2 corporations act

The takeover provisions in Chapter 6 of the Corporations Act restrict acquisitions of shares in listed companies, and unlisted companies with more than 50 members, if the acquirer’s (or another party’s) voting power would increase to above 20%, or would increase from a starting point that is above

20% and below 90%, unless certain exceptions apply. The Corporations Act also imposes notification requirements on persons having voting power of 5% or more in the Company either themselves or through an associate.

9.15 Governing law

This Prospectus and the contracts that arise from the acceptance of the Applications and bids under this Prospectus are governed by the laws applicable in Victoria and each Applicant under this

Prospectus submits to the exclusive jurisdiction of the courts of Victoria.

9.16 Statement of directors

This Prospectus is authorised by each director of the Company and of SaleCo who consents to its Lodgement with ASIC and its issue.

ProsPectus 205

appendix a


aPPendix a

Significant accounting Policies

Significant accounting policies

adoption of new and revised australian accounting Standards

At the date of authorisation of the audited historical FY2013 financial report, the Australian Accounting

Standards and Australian Accounting Interpretations listed below were in issue but not yet effective. However, these standards did affect the reviewed condensed consolidated financial statements of Pacific Industrial

Services for H1FY2014. The application of these standards is expected to affect future financial reporting of the

Consolidated Entity:

• AASB 10 Consolidated Financial Statements. Effective for annual reporting periods beginning on or after

1 January 2013;

• AASB 11 Joint Arrangements. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 12 Disclosures of Interests in Other Entities. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 13 Fair Value Measurement and related AASB 2011-8 Amendments to Australian Accounting

Standards arising from AASB 13. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 119 Employee Benefits. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009

– 2011 Cycle. Effective for annual reporting periods beginning on or after 1 January 2013;

• AASB 2012-9 Amendment to AASB 1048 arising from the withdrawal of Australian Interpretation 1039.

Effective for annual reporting periods beginning on or after 1 January 2013; and

• AASB 1053 Application of Tiers of Australian Accounting Standards. Effective for annual reporting periods beginning on or after 1 July 2013.

The potential effect of the initial application of the following standard has not yet been determined:

• AASB 9 Financial Instruments (December 2010). Effective for annual reporting periods beginning on or after 1 July 2015.

The following significant accounting policies have been adopted in the preparation and presentation of the Financial Information in Section 3:

(a) basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company

(the parent entity) and entities controlled by the Company (its subsidiaries), referred to as the

‘Consolidated Entity’ in Spotless’ financial statements. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statements of profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the

Consolidated Entity.

In preparing the consolidated financial statements, all intercompany balances and transactions including unrealised profits arising from intra-group transactions, are eliminated in full.

Non-controlling interests not held by the Consolidated Entity are allocated their share of net profit or loss after tax in the consolidated statements of profit or loss, and are presented within equity in the consolidated statements of financial position, separately from the parent equity.

ProsPectus 207

aPPendix a

Significant accounting Policies continued

(b)

(c)

(d)

(e)

(f)

208 business combinations

Spotless has applied the consolidated revised AASB 3 Business Combinations (2008) and amended

AASB 127 Consolidated and Separate Financial Statements (2008) amended for the new and revised

Australian Accounting Standards, for business combinations. All acquisitions of subsidiaries and businesses have therefore been accounted for using the acquisition method. The cost of a business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by Spotless in exchange for control of the acquiree. Transaction costs directly attributable to the business combination are expensed as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except non-current assets (or disposal groups) that are classified as held for sale (which are measured at the lower of their carrying amount and fair value less costs to sell).

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over Spotless interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, Spotless interest in the net fair value of the acquiree’s identifiable assets, liabilities, and contingent liabilities or its value in use exceeds the cost of the business combination, the excess is immediately recognised in the statement of profit or loss.

Accounting for acquisitions of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions.

foreign currency

Both the functional currency and presentation currency of Spotless and its Australian subsidiaries are Australian dollars.

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date with all differences taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Foreign subsidiaries have a functional currency other than Australian dollars. As at the reporting date, the assets and liabilities of these foreign subsidiaries are translated into the presentation currency of

Spotless by applying the rate of exchange ruling at the balance date and the statement of profit or loss is translated at the weighted average exchange rate for the reporting period or at the exchange rate ruling at the date of the transaction. The exchange differences arising on the translation are taken to the foreign currency translation reserve.

On disposal of a foreign subsidiary with a functional currency other than Australian dollars, the deferred cumulative amount recognised in the foreign currency translation reserve relating to that particular subsidiary is recognised in profit or loss.

accounts payable

Trade payables and other accounts payable are recognised when Spotless becomes obliged to make future payments resulting from the purchase of goods and services.

borrowing costs

Borrowing costs are capitalised where they relate to qualifying assets and are expensed over the asset’s useful life.

cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in transit, cash in banks and investments in money market instruments. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.


(g)

(h) derivative financial instruments

Spotless has entered into derivative financial instruments to manage its exposure to interest rate risk.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Spotless designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), cash flow hedges or hedges of highly probable forecast transactions.

The fair value of derivatives is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in the fair value recognised in profit or loss.

At the inception of the hedge relationship Spotless documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.

Spotless has only entered into hedges of the type classified as cash flow hedges. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity in the debt hedging reserve. The gain or loss relating to any ineffective portion is recognised immediately in profit or loss as part of other expenses or other income. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statements of profit or loss as the recognised hedged item.

When the forecast transaction that is hedged results in the recognition of a non-financial asset or non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when Spotless revokes the hedging relationship or the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.

Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, sick leave and Directors’ retirement allowances when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of short-term employee benefits (including Directors’ retirement allowances) are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by Spotless in respect of services provided by employees up to the reporting date.

Defined contribution superannuation plans

Contributions to defined contribution superannuation plans are expensed when employees have rendered service entitling them to the contributions.

ProsPectus 209

aPPendix a


(i) financial instruments issued by Spotless

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instrument to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of: (i) the amount of the obligation under the contract, as determined under AASB 137

‘Provisions, Contingent Liabilities and Contingent Assets’; and (ii) the amount initially recognised less, where appropriate, cumulative amortisation in accordance with revenue recognition policies described within these policies.

(j)

Other liabilities

Financial liabilities, including all loans and borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective interest rate method basis.

The effective interest rate method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax, except (i) for receivables and payables which are recognised inclusive of goods and services tax; and (ii) where the amount of goods and services tax incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense. The net amount of goods and services tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

Cash flows are included in the statement of cash flows on a gross basis. The goods and services tax component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

(k) Goodwill

Goodwill, representing the excess of the cost of an acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired, is recognised as an asset net of impairment and not amortised. A cash generating unit ( CGU ) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in profit or loss and cannot be subsequently reversed.

(l) inventory

Inventory is stated at the lower of cost or net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory using the method most appropriate to each particular class of inventory, with the majority being valued on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventory less all estimated costs of completion and costs necessary to make the sale.


(m) investments

Investments in associates are accounted for under the equity method in the consolidated financial statements.

(n) income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the statement of financial position. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised.

However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures except where Spotless is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates

(and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Spotless expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and Spotless intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year

Current and deferred tax for the year is recognised as an expense or income in the statement of profit or loss, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or the excess of net assets over the purchase price.

Tax consolidation

Spotless and all its wholly-owned Australian resident entities are part of a tax consolidated group under Australian taxation law. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using the “separate

ProsPectus 211

aPPendix a


(o)

(p)

(q)

(r) taxpayer within group” approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation.

Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax consolidated group are recognised by Spotless (as head entity in the tax consolidated group).

Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are recognised as payable to or receivable by Spotless and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax consolidated group in accordance with the arrangement. Where the tax contribution amount recognised by each member of the tax consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity participants.

Joint venture entities

Interests in joint venture entities in which Spotless is a venturer (and so has joint control) are accounted for under the equity method in the consolidated financial statements.

Leased assets

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Finance lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against profit or loss. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis.

non-current assets classified as held for sale

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

intangible assets

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses.


(s)

(t)

Customer contracts

Customer contracts acquired in business combinations are amortised on a straight-line basis over the estimated useful lives of between 7 and 30 years.

Internally-generated intangible assets – capitalised development

Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable future economic benefits;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above.

When completed, capitalised development will be amortised on a straight- line basis over its estimated useful life. Internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses.

Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost includes expenditure that is directly attributable to the acquisition or construction of the item.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated so as to write off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold interest and leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter. The straight line method of depreciation is used for all assets.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statements of profit or loss.

The following estimated useful lives are used in the calculation of depreciation:

• buildings: 50 years

• plant and equipment: 3 to 20 years

• plant and equipment under finance lease: 5 years

• leasehold improvements:

• laundries rental stock:

5 to 15 years

18 months to 5 years

Estimated useful lives are reassessed each reporting period. Following initial recognition at cost, land and buildings are carried at cost less any subsequent accumulated depreciation on buildings and accumulated impairment losses.

impairment of assets

At each reporting date, Spotless reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the

ProsPectus 213

aPPendix a

Significant accounting Policies continued impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, Spotless estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount of an asset or cash generating unit is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset

(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss for the period in which it was incurred.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(u) Provisions

Provisions are recognised when Spotless has a present obligation (legal or constructive) as a result of a past event, it is probable that Spotless will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

(v)

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous contracts – Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Consolidated Entity has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Dividends – A provision is recognised for dividends when they have been declared, determined or publicly recommended by the Directors on or before the balance date.

Public liability – A provision is recognised under Spotless’s insurance for claims below the insured excess.

financial assets

Financial assets at amortised cost and the effective interest rate method

A financial asset is measured at amortised cost if the following conditions are met:

• cash flows give rise, on specified dates, to cash flows that are solely payments of principal and payment of interest on the principal outstanding; and

• Spotless does not irrevocably elect at initial recognition to measure the instrument at fair value through other comprehensive income to minimise an accounting mismatch.

Amortised cost instruments are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition the carrying amount of amortised cost financial instruments is determined using the effective interest rate method, less any impairment losses.


(w)

(x)

(y)

Financial assets at fair value through other comprehensive income

At initial recognition Spotless may make an irrevocable election (on an instrument-by-instruments basis) to recognise the change in fair value of investments in equity instruments in other comprehensive income. This election is only permitted for equity instruments that are not held for trading purposes.

These instruments are initially recognised at fair value plus transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein are recognised in other comprehensive income and presented within equity in the investment revaluation reserve. When an investment is derecognised, the cumulative gain or loss is transferred directly to retained earnings and is not recognised in profit or loss. Dividends or other distributions received from these investments are recognised in profit or loss when the entity’s right to receive payment or the dividend is established.

revenue recognition

Rendering of services

The revenue of time and material contracts is recognised at the contractual rates as labour hours are delivered and direct expenses incurred. Life cycle maintenance revenue is based on stage of completion based on costs incurred. Where a loss is expected to occur it is recognised immediately in profit or loss.

Sale of goods

Revenue from the sale of goods is recognised when Spotless has passed the significant risks and rewards of ownership of the goods to the buyer.

Interest revenue

Interest revenue is recognised on a time proportionate basis that takes into account the effective interest rate on the financial asset.

Dividend revenue

Dividend revenue is recognised when Spotless’s right to receive payment has been established.

Share-based payments

Share-based payments made to employees and others, that grant rights over the shares of the parent entity, Spotless Group Holdings Limited are accounted for as equity-settled share-based payment transactions.

Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black Scholes model, a binomial model and/or Monte Carlo simulation model.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on Spotless estimate of shares that will eventually vest.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

Securities plan loans

When Spotless recognises a loan that is not issued at the market rate of interest or is interest free, an estimate of the present value of all future cash receipts discounted, using the prevailing market rate of interest, is calculated. The variance between the nominal loan balance and the present value calculation is deemed to be foregone in respect of past services rendered by the employees.

This expense is then recouped as interest revenue over the life of the loan.

ProsPectus 215

aPPendix a


critical accounting judgements and key sources of estimation uncertainty

In the application of the Spotless accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.

Judgements made by management in the application of the Australian Accounting Standards that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The following are the key judgements concerning the future, and other key sources of estimation uncertainty at the balance date, that have the most significant effect on the amounts recognised in the consolidated financial statements:

Recoupment of tax losses

Spotless has carried forward tax losses carried on its statement of financial position as a deferred tax asset. These continue to be carried on the statement of financial position as the Directors believe it is probable that future taxable profits will be available against which the Consolidated Entity can utilise the benefits therefrom. These losses are also subject to satisfying the loss recoupment rules in the

Income Tax Assessment Act 1997 (Cth).

Customer contract useful lives

Customer contracts are carried on the statement of financial position at their initial fair value at the acquisition date net of accumulated amortisation. These intangible assets are amortised on a straight line basis over the average initial contract term of the customer portfolio. The contract term and amortisation period have been based on historical experience and management expectations on the renewal profiles.

Onerous contracts

Spotless has recognised provisions for various contracts assessed as being onerous as at each balance date. The provisions have been calculated based on management’s best estimate of discounted net cash outflows required to fulfil the contracts. The status of these contracts and the adequacy of provisions will be assessed at each reporting date.

Long-term contract revenue recognition

Spotless has a limited number of long-term maintenance contracts that are engaged in a suite of related services under the one contract. Spotless distinguishes between these revenue streams with respect to revenue recognition. Planned maintenance services revenue is recognised based on services completed. Life cycle maintenance revenue is based on stage of completion based on costs incurred. In recognising the revenue Spotless periodically re-forecasts the estimated total contract costs based on the different stage of completion of the contract.


Environmental provisioning

Spotless intends to restore and remediate certain Laundries properties. A provision for remediation to restore the properties exists. This provision is based on assessments by the Directors supported by external advisors. As remediation progresses, actual costs are being monitored against the estimated provisions made.

Impairment of goodwill and intangible assets (including capitalised development)

Determining whether goodwill and intangibles (including capitalised development) is impaired requires an estimation of the higher of fair value less cost to sell or value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires Spotless to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value.

Long service leave

The liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be paid in respect of all employees at balance date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.

Property make good

The Consolidated Entity has made assumptions in arriving at its best estimate of the likely costs to “make good” premises which are currently occupied under operating leases or at customers’ premises. Such estimates involve management forecasting the average restoration cost and are dependent on the nature of the premises occupied.

Estimation of useful lives and residual values of property, plant and equipment

The estimation of the useful lives and residual of values of assets has been based on historical experience as well as manufacturers’ warranties (for plant and equipment), lease terms (for leased equipment) and turnover policies. In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives and residual of values are made when considered necessary.

ProsPectus 217

appendix b


appendix b

Glossary aaSb adjusted ePS adjusted nPat

Australian Accounting Standards Board

Adjusted NPAT divided by total number of Shares on issue at Completion of the Offer net profit after tax that is intended to remove the effect of certain non-cash charges (Amortisation of Customer Contracts and Unwind of Discounts on

Provisions). Refer to Section 3.3

has the meaning given in Section 9.14.1

aggregate Substantial interest allocation of corporate

Overheads amortisation of customer contracts applicant application a person who submits an Application an application to subscribe for Shares offered under this Prospectus application amount or application monies application form the amount accompanying an Application Form submitted by an Applicant the application form attached to or accompanying this Prospectus (including the electronic form provided by an online application facility)

Australian Securities and Investments Commission aSic aSx ASX Limited or the securities exchange that it operates, as the context requires the listing rules of the ASX aSx Listing rules aSx recommendations the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations aSx Settlement

Operating rules the settlement operating rules of the ASX australian accounting

Standards bilateral facility agreement board or board of directors the share of the unallocated corporate overheads that is being attributed to the segment on the basis of the proportion of Sales Revenue that the segment generated. Refer to Section 3.3

a non-cash item relating to certain intangible assets including customer contracts which were capitalised as part of the purchase price allocation and amortised over a seven to 30 year period upon the 2012 Acquisition. Refer to

Section 3.3

Australian Accounting Standards and other authoritative pronouncements issued by the Australian Accounting Standards Board has the meaning given in Section 3.6.4

the board of directors of Spotless

ProsPectus 219

appendix b

Glossary continued broker broker firm Offer caGr capital expenditure any ASX participating organisation selected by the JLMs, Financial Adviser and the Company to act as a Broker to the Offer the offer of Shares under this Prospectus to Australian and New Zealand resident retail clients of Brokers who have received a firm allocation from their Broker compound annual growth rate

Capital expenditure required to maintain Spotless’ current assets (including replacement of laundry rental stock) and to expand its business as it wins additional contracts. Refer to Section 3.3

cash advance facility ceO cfO cGt has the meaning given in Section 3.6.4

Chief Executive Officer

Chief Financial Officer capital gains tax citi Citigroup Global Markets Australia Pty Limited

(ABN 64 003 144 832 / AFS Licence No. 240992) chairman cHeSS

Margaret Jackson AC has the meaning described in Section 6.9

chief executive Officer Bruce Dixon chief financial Officer Danny Agnoletto chief Operating Officer Vita Pepe closing date the date on which the Offer is expected to close, being 19 May 2014 in respect of the Broker Firm Offer and the Personnel and Priority Offer. These dates may be varied without prior notice co-Lead manager co-manager

Evans & Partners each of Bell Potter Securities Limited ABN 25 006 390 772,

UBS Wealth Management Australia Limited ABN 50 005 311 937 and Wilson HTM Corporate Finance Limited ABN 65 057 547 323 coinvestment

Shareholders

Spotless Coinvestment GP (Jersey) Limited (reg. no. 111721) in its capacity as general partner of Spotless Coinvestment L.P., Clean 2009 C.V. duly represented by Alplnvest Partners 2009 B.V., its general partner, in its turn represented by AlpInvest Partners B.V., its managing director, Clean 2011 II

C.V. duly represented by Alplnvest Partners 2011 II B.V., its general partner, in its turn represented by AlpInvest Partners B.V., its managing director,

Clean 2012 I C.V. duly represented by Alplnvest Partners 2012 I B.V., its general partner, in its turn represented by AlpInvest Partners B.V., its managing director and Lentesco Packaging Pty Ltd ACN 136 351 249 as trustee for the

IFM Facility Services Unit Trust


commissioner company company market Study The market study that Spotless commissioned from L.E.K. Consulting completion of the Offer the completion of the Offer, being the date upon which Shares are issued or transferred to Successful Applicants in accordance with the terms of the Offer constitution cOO corporations act cost Plus contract

Australian Information Commissioner

Spotless Group Holdings Limited (ABN 27 154 229 562) the constitution of Spotless

Chief Operating Officer

Corporations Act 2001 (Cth) a customer contract under which Spotless is entitled to reimbursement of its costs plus a fixed management fee or margin

Deloitte Corporate Finance Pty Limited deloitte corporate finance deloitte touche tohmatsu deutsche bank

Deloitte Touche Tohmatsu Limited directors ebit ebita ebita margin ebitda

Deutsche Bank AG Sydney Branch

(ABN 13 064 165 162 / AFS Licence No. 238153) each of the directors of the Company from time to time earnings before interest and tax. Refer to Section 3.3

earnings before interest, tax and amortisation. Refer to Section 3.3

EBITA divided by Sales Revenue, expressed as a percentage ebitda margin eligible employees earnings before interest, tax, depreciation and amortisation. Refer to

Section 3.3

EBITDA divided by Sales Revenue, expressed as a percentage

Australian or New Zealand resident permanent full-time or part-time employees of the Company or any of its subsidiaries as at 5.00pm (Sydney time) on 1 April 2014 and any other persons invited by the Board to participate in the Personnel Offer the employees that are eligible for the LTI Plan referred to in Section 5.3

eligible Lti employees eligible u.S. fund manager a dealer or other professional fiduciary organized, incorporated or (if an individual) resident in the United States that is acting for an account (other than an estate or trust) held for the benefit or account of persons that are not

“U.S. persons” (as defined in Rule 902(k) under the U.S. Securities Act) for which it has and is exercising investment discretion, within the meaning of Rule

902(k)(2)(i) of Regulation S under the U.S. Securities Act

ProsPectus 221

appendix b

Glossary continued enterprise agreement enterprise value ePS ePS Option ernst & young escrow deed escrow Period an agreement approved by the Australian Fair Work Commission setting out employment conditions between an employee or group of employees and an employer in relation to one or more specific workplaces the sum of market capitalisation of $1,845.3 million at the midpoint of the

Indicative Price Range and pro forma net debt as at 31 December 2013

(reflecting management target cash position at Completion of the Offer) of $617.6 million earnings per Share has the meaning given in Section 5.3.3

Ernst & Young the escrow deed between the Company and the Escrowed Shareholders the period commencing the date Spotless is admitted to the official list of the

ASX and continuing until the date that Spotless’ FY2015 financial results are provided to the ASX for release to the market escrowed Shareholders the PEP Shareholders, the Coinvestment Shareholders and certain

Management Shareholders escrowed Shares means the Shares retained immediately following Completion of the Offer by the Escrowed Shareholders evans & Partners existing banking facilities

Evans and Partners Pty Ltd (ABN 85 125 338 785 / AFS Licence No. 318075)

US dollar-denominated senior debt facilities and associated derivatives, as well as certain other obligations of Spotless and its subsidiaries as described in

Section 3.6

existing Shareholders those Shareholders who hold Shares at the Lodgement Date, being the PEP

Shareholders, the Coinvestment Shareholders, the Management Shareholders and other current Shareholders

Shares held by all Existing Shareholders as at the Prospectus Date existing Shares expiry date exposure Period

13 months after the Prospectus Date the seven day period after the Prospectus Date, which may be extended by

ASIC for up to an additional seven days, during which an Application must not be accepted facility a facility b facility Services has the meaning given in Section 3.6.4


Spotless’ Facility Services segment, which includes the results of Spotless’ facility management, catering and cleaning service offerings to customers in the Health, Education and Government; Commercial and Leisure; and Base and Township customer sectors. Refer to Section 3.5


fee for Service contract a customer contract under which Spotless is entitled to an agreed fee for providing services final Price the price per Share that all Successful Applicants will pay for Shares under the

Offer as determined by the bookbuild and the process set out in Section 6.4, denominated in Australian dollars financial adviser financial Guarantee facility financial information

Highbury Partnership Pty Limited (ABN 14 162 169 502/AFSL 434566) has the meaning given in Section 3.6.4

forecast financial information the financial information described as Financial Information in Section 3 the forecast financial information described as Forecast Financial Information in Section 3.9

Period from FY2014 to FY2015 forecast period free cash flow EBITDA less change in Working Capital less Maintenance Capital Expenditure.

Refer to Section 3.3

Free Cash Flow divided by EBITDA, expressed as a percentage free cash flow conversion

Group

Growth capital expenditure

GSt indicative Price range institutional investors

Spotless and each related body corporate of Spotless

Capital Expenditure specifically related to new contracts, material expansion of an existing contract or investment to reduce the cost base. Refer to Section 3.3

income tax assessment act means the Income Tax Assessment Act 1936 (Cth) or the Income Tax

Assessment Act 1997 (Cth) as appropriate independent director has the meaning given in A New Tax System (Goods and Services Tax) Act

1999 (Cth) means each of Margaret Jackson AC, Diane Grady AM, Garry Hounsell and

The Hon. Nick Sherry the indicative price range for the Offer of $1.60 to $1.85 per Share investors who are:

– persons in Australia who are wholesale clients under section 761G of the

Corporations Act and either “professional investors” or “sophisticated investors” under sections 708(11) and 708(8) of the Corporations Act; or

– institutional investors in certain other jurisdictions, as agreed by the

Company and the JLMs, to whom offers of Shares may lawfully be made without the need for a lodged or registered prospectus or other form of disclosure document or filing with, or approval by, any government agency

(except one with which the Company is willing in its discretion to comply), in either case provided that if such investors are in the United States, they are either a QIB or an Eligible U.S. Fund Manager

ProsPectus 223

appendix b

Glossary continued institutional Offer institutional Offering memorandum investigating accountant investigating accountant’s report iPO

JLms

Laundries the invitation to Institutional Investors under this Prospectus to acquire Shares as described in Section 6.4

the offering memorandum under which the Institutional Offer will be made to

QIBs and Eligible U.S. Fund Managers in the United States which consists of this Prospectus and an offer document “wrap”

Deloitte Corporate Finance in its role as investigating accountant in relation to the preparation of the Investigating Accountant’s Reports the report prepared by Deloitte Corporate Finance in its capacity as Investigating Accountant initial public offering

Joint Lead Managers, being Citigroup Global Markets Australia Pty Limited

(ABN 64 003 114 832 / AFS Licence No. 240992) ( Citi ), Deutsche Bank AG

Sydney Branch (ABN 13 064 165 162 AFS Licence No. 238153) ( Deutsche

Bank ), UBS AG, Australia Branch (ABN 47 088 129 613 / AFS Licence No.

231087) ( UBS )

The Laundries segment includes the results of Spotless’ laundry and linen service offerings. Refer to Section 3.5

L.E.K. Consulting (ABN 22 171 613 187) the direct cost associated with Legacy Pass Through Revenue

L.e.k. consulting

Legacy Pass through costs

Legacy Pass through revenue

Lentesco

Listing

Lodgement date

Lti Plan maintenance capital expenditure management

Shareholders maximum Sti new banking facilities

Spotless has one large government customer for which it procures certain goods and services on a “pass through” basis. That is, the customer reimburses Spotless for the cost of supply, with no margin. Refer to

Section 3.3

Lentesco Packaging Pty Ltd (ACN 136 351 249) as trustee for the IFM Facility

Services Unit Trust admission of Spotless to the official list of the ASX and quotation of the Shares on the ASX

28 April 2014 the Spotless Executive Incentive Plan described in Section 5.3.3

Capital Expenditure replenishing or replacing existing property, plant and equipment. Refer to Section 3.3

current management employees of the Spotless Group who hold Existing

Shares immediately prior to Listing has the meaning given in Section 5.3.3

new banking facilities following Completion of the Offer. Terms of the new facilities are detailed in Sections 3.6.4 and 9.5


new contract

Opportunities contract opportunities identified by Spotless which are expected to come to market in FY2014 and FY2015. Refer to Sections 2.7 and 3.9

new Shares the new Shares to be issued by the Company under the Offer non-executive director a member of the Board of Directors who does not form part of Spotless’ management nPat

Offer net profit (or loss) after tax the offer of Shares under this Prospectus

Offer management agreement the agreement of that name between Company, SaleCo and the JLMs on or about Prospectus date an option over a Share Option

Other income government grant income relating to traineeships and operational foreign exchange gains. Refer to Section 3.3

Over-allocation Option the option described in Section 6.6

Pacific equity Partners Pacific Equity Partners Pty Ltd (ACN 082 283 949)

Pacific industrial

Services

Pacific Industrial Services Pty Ltd (ABN 27 154 229 562), the former name of


PeP advisory

PeP Shareholders

PEP Advisory IV Pty Limited (ACN 125 815 223)

Pacific Equity Partners Fund IV GP (Jersey) Limited in its capacity as general partner of Pacific Equity Partners Fund IV LP (incorporated in Jersey), Pacific

Equity Partners Fund IV GP (Jersey) Limited in its capacity as general partner of Pacific Equity Partners Supplementary Fund IV LP (incorporated in Jersey),

Pacific Equity Partners Fund IV (Australasia) Pty Ltd ACN 124 839 989 as trustee for Pacific Equity Partners Fund IV (Australasia) Unit Trust (incorporated in Australia), Pacific Equity Partners Fund IV (Australasia) Pty Ltd ACN 124 839

989 as trustee for Pacific Equity Partners Supplementary Fund IV (Australasia)

Unit Trust (incorporated in Australia), PEP Investment Pty Limited ACN 083

026 984 (incorporated in Australia), Eagle Coinvestment Pty Limited ACN 119

182 688 as trustee for Pacific Equity Partners Fund IV Co-investment Trust B

(incorporated in Australia), being funds advised or managed by Pacific

Equity Partners

Personnel and Priority

Offer

Personnel Offer

Plan committee the Offer of Shares to certain employees of Spotless Group as described in

Section 6.5 and investors nominated by Spotless has the meaning given in Section 6.5.1

the committee which has been delegated power by the Board to administer the LTI Plan or if there has been no delegation, the Board

Policy

PPP has the meaning given in Section 9.14.1

public-private partnership

ProsPectus 225

appendix b

Glossary continued

Priority Offer has the meaning given in Section 6.5.2

Pro forma Historical financial information the financial information described as Pro Forma Historical Financial

Information in Section 3

Profit and Loss contract in relation to a contract means a customer contract under which Spotless takes or shares with the customer the profit and loss risk of providing services


Prospectus profit (or loss) before tax this document (including the electronic form of this Prospectus) and any supplementary or replacement prospectus in relation to this document

Prospectus date

Public information

Qib the date on which a copy of this Prospectus was lodged with ASIC, being 28 April 2014 public and other media statements made by or on behalf of (and with the express authorisation of) Spotless or SaleCo or in relation to the affairs of

Spotless, the Group or the Offer qualified institutional buyer, as defined in Rule 144A under the

U.S. Securities Act relationship deed right

S&P/aSx 200 indices

Saleco

Sales revenue

SaP it the relationship deed described in Section 9.5

a right to a Share granted pursuant to the LTI Plan means an index published by Standard & Poor’s

Spotless SaleCo Pty Limited (ACN 168 847 916) total revenue excluding Legacy Pass Through Revenue and excluding Other

Income. Refer to Section 3.3

New SAP enterprise resource planning software in which Spotless has been investing

Capital Expenditure relating to SAP IT implementation. Refer to Section 3.3

SaP it capital expenditure

Segment contribution

Segment ebita

Segment ebitda

Selling Shareholders

Senior management

EBITDA generated by each segment in the ordinary course of business. Refer to Section 3.3

Segment EBITDA less depreciation (including both direct segment depreciation and an allocation of corporate overhead depreciation that is attributed to the segment on the basis of the proportion of Sales Revenue that the segment generated). Refer to Section 3.3

EBITDA of the segment after the Allocation of Corporate Overheads. Refer to

Section 3.3

Existing Shareholders who elect to sell Shares to SaleCo

Bruce Dixon, Vita Pepe and Danny Agnoletto


Settlement

Share

Share registry

Shareholder

Shareholding

Spotless

Spotless Group

Spotless Offer information Line

Stabilisation manager

Stabilisation Period

Standard & Poor’s

Sti Plan

Substantial interest

Successful applicant

Syndicated facility agreement tranche 1 Option tranche 2 Option tSr tSr Option ubS u.S. Securities act vesting Period working capital the 2012 acquisition has the meaning given in Section 6.6

a fully paid ordinary share in the capital of Spotless

Link Market Services Limited (ABN 54 083 214 537) a holder of Shares a holding of Shares

Spotless Group Holdings Limited (ABN 27 154 229 562)

Spotless and its subsidiaries within Australia: 1800 660 083; or outside Australia: +61 1800 660 083, and in each case, open from 8.30am to 5.30pm (Sydney time)

Monday to Friday during the Offer period

UBS Securities Australia Limited has the meaning given in Section 6.6

means Standard & Poor’s (Australia) Pty Ltd (ACN 007 324 852)

Spotless’ short term incentive plan described in Section 5.3.3


an Applicant or Institutional Investor who is issued Shares under the Offer has the meaning given in Section 3.6.4



total Shareholder return has the meaning given in Section 5.3.3

UBS AG, Australia Branch (ABN 47 088 129 613 / AFS Licence No. 231087) means United States Securities Act of 1933 has the meaning given in Section 5.3.3

the total of current trade and other receivables, inventory, prepayments, trade and other payables, current provisions and other current creditors. Refer to

Section 3.3

the acquisition by Pacific Industrial Services of Spotless Group Limited in August 2012

ProsPectus 227

corporate directory

iSSuer’S reGiStered Office


549 St Kilda Rd,

Melbourne, VIC, 3004, Australia

financiaL adviSer

Highbury Partnership Pty Limited

Level 29, Chifley Tower, 2 Chifley Square

Sydney, NSW, 2000, Australia

JOint Lead manaGerS

Citigroup Global Markets Australia Pty Limited

Level 23, 2 Park Street


Deutsche Bank AG, Sydney Branch

Deutsche Bank Place

Level 16, Corner Hunter and Phillips Streets


UBS AG, Australian Branch

Level 16, Chifley Tower, 2 Chifley Square


cO-Lead manaGer

Evans & Partners

171 Collins Street


cO-manaGerS

Bell Potter Securities Limited

Level 38, Aurora Place, 88 Phillip Street


UBS Wealth Management Australia Limited

Level 16, The Chifley Tower

2 Chifley Square


Wilson HTM Corporate Finance Limited

Level 14, 99 Elizabeth Street


auStraLian LeGaL adviSer

Gilbert + Tobin

2 Park Street


inveStiGatinG accOuntant


Grosvenor Place, 225 George Street


auditOr

Ernst & Young

8 Exhibition Street


SHare reGiStry

Link Market Services Limited

Level 12, 680 George Street


Offer infOrmatiOn Line

Within Australia

1800 660 083

Outside Australia

+61 1800 660 083

Offer webSite

www.spotless.com/offer

cOrPOrate webSite

http://www.spotless.com


www.spotless.com/offer

Document

important notices

important notices

continued

Of it.

dates may change

How to invest

Questions

1.1 introduction

1.2 key features of Spotless’ business model

1.3 key strengths

1.4 key risks

1.5 key Offer statistics

1.6 Spotless directors and key executives

1.7 Significant interests of key people and related party transactions

1.8 Proposed use of funds and key terms and conditions of the Offer

2.1 Overview of Spotless

facility Services

Laundry and Linen Services

new royal adelaide Hospital

melbourne cricket Ground (mcG)

QGc

1946

1957

1961

1971

1977

1984

1987

1991

1993

1999

2001

2004

2006-08

2009

2010

2012

new management team objectives

actions taken

2.2 industry overview

2.3 Spotless’ competitive strengths

2.4 customers

2.5 industry growth drivers

Sub-sectors key growth drivers

Sub-sectors key growth drivers

Sub-sectors key growth drivers

Sub-sectors key growth drivers

2.6 Spotless’ growth strategy

2.7 Spotless’ business development capability

2.8 employees

2.9 Supplier relationships

2.10 Property, Plant and equipment

2.11 information technology

3.1 introduction

3.2 basis of preparation and presentation of the financial information

3.3 explanation of certain non-ifrS and other financial measures

3.4 Historical and forecast consolidated statements of profit or loss

3.5 Segment and customer sector information

3.6 Pro forma historical consolidated statement of financial position

3.7 Summary pro forma historical and forecast consolidated statements of cash flows and statutory forecast consolidated statements of cash flows

3.8 management discussion and analysis of the Pro forma Historical financial information

3.9 forecast financial information

3.10 Sensitivity analysis

3.11 financial risk management framework

3.12 critical accounting judgments and estimates

3.13 dividend policy

4.1 introduction

4.2 business risk factors

4.3 investment and general risk factors

5.1 board of directors

5.2 key executives

5.3 interests and benefits

5.4 corporate governance

6.1 the Offer

6.2 terms and conditions of the Offer

6.3 broker firm Offer

6.4 institutional Offer

6.5 Personnel and Priority Offer

6.6