Spotless : Annual General Meeting - Chairman and CEO address

ASX Announcement

20 October 2016

Please see attached address to be delivered by the Chairman and the CEO to shareholders at Spotless' Annual General Meeting to be held at 2.00pm today at the Melbourne Town Hall, 90- 120 Swanston Street, Melbourne, Victoria.

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Spotless Group Holdings Limited ABN 27 154 229 562

549 St Kilda Rd, Melbourne VIC 3004 Australia www.spotless.com Page 1 of 5

Address by Chairman Margaret Jackson AC and CEO Martin Sheppard

Spotless is a great company with an exceptional team. Today, we number more than 36,000 people managing facilities, projects and events and providing laundry services across Australia and New Zealand.

In this, our 70th year of operations, we are proud of our contributions to the communities we serve. Spotless staff work tirelessly every day providing critical security, preparing nutritious meals and maintaining public housing that accommodates tens of thousands of people. It does not stop there. Our work includes operating all aspects of mining towns, defence bases, catering for large sporting venues and operating Australia's largest commercial laundry operation, delivering linen to hospitals and hotels and uniforms to workers. In all, our teams have the capability to deliver over one hundred different services.

Every day our teams partner with our valued customers and suppliers to create great experiences. That is why we have grown to become Australia and New Zealand's leading provider of integrated facilities services.

FY16 was a challenging year for Spotless with short-term issues impacting our ability to hit growth targets. However, despite these challenges we delivered a solid result and the company remains in a strong financial position.

Our financial highlights for the year included:

• Significant growth in underlying revenue and EBITDA of 17% and 6% respectively;

• Reported revenue growth of 10.6% with EBITDA down 1.5% on the previous period;

• Net profit after tax of $122m, down 14% on the previous period, and underlying NPAT of $131m, which is down 4%; and

• Net debt improved from 31 December and is comfortably within debt facility requirements. Since the IPO in 2014 earnings have increased at a compound annual growth rate of 10.8%.

  The Board declared total dividends of 8.5 cents per share for the financial year.

  Business investment

  The last two years have been a period of significant investment for Spotless. We committed $200 million to six acquisitions, invested in the working capital in these acquired businesses and invested the capital required to support delivery of our long term contracts including PPP's.

  This investment has expanded the breadth of our capabilities to include security, mechanical and electrical services, as well as water, power, lighting and other utility services.

  We will continue to consider bolt on acquisition opportunities in the future. However, they will be more modest than in recent years as we leverage this recent investment and focus on stimulating organic growth and managing down debt.

  Our capabilities

  Here at Spotless we have a clear vision - and that is to be the first choice in the markets we serve.

  We aim to drive customer value through long-dated, expandable, multi-service contracts which leverage our scale, geographic footprint and breadth of capabilities.

  We are confident in the strength of our underlying business. Our business has attributes that will underpin stable returns over the long term. In particular Spotless has:

• A blue chip customer base;

• A contract book with average contract tenure of 4.8 years;

• Significant contracts with government that reduces credit risk;

• Diversification across sectors and service lines; and

• an enviable cost structure enabling strong margins.

These elements provide a very stable base and Spotless is well positioned for the next phase of growth. Martin Sheppard will provide more commentary about this in his CEO presentation.

Spotless' greatest asset is our people and we are committed to attracting, developing and retaining the very best staff for the company, at all levels.

We continue to invest in workforce diversity, indigenous employment and training opportunities to ensure our team has the necessary range of skills, knowledge and experience to serve our diverse range of customers.

I wish to thank our professional team for their commitment to working safely and delivering high quality services. Every one of them should be proud of the great work they do.

On behalf of the Board, I extend a sincere thanks to our Chief Executive Officer Martin Sheppard and his management team for their hard work over the past 12 months.

They have worked diligently to integrate acquired businesses and completed a review of our strategy aimed at ensuring the company is well positioned to deliver sustainable, reliable and predictable growth over the long term. FY17 will be a transitional year for the Group as we start to implement the new strategic focus. Martin will provide more details about the strategy reset in his presentation.

Spotless' corporate governance practices are designed to deliver responsible stewardship, business integrity, accountability and effective risk management. We have a great gender balance at the Board level and within our workforce, reinforcing our belief in the value of diversity.

Personally, I would like to recognise my colleagues on the Board for their diligence and continued support throughout FY16.

During the year, Geoff Hutchinson and Rob Koczkar retired from the Board. I thank them both for their great contribution to Spotless. While this year we were pleased to welcome Julie Coates as a Director.

Prior to Rob's departure we commenced a search for a new director and we currently have an outstanding short list.

I would like to thank our valued customers for continuing to select Spotless for the expertise and professional services we offer. Lastly, I thank you, our shareholders, for your continuing investment, interest and loyalty - we will work hard to ensure a strong Spotless for the future.

I would like to start by looking at our financial results for 2016 in a little more detail.

FY16's results were solid, following a record year in 2015. The results did not however meet the expectations of the Board and shareholders held early in the year. There were specific reasons for this including:

• Synergy benefits on acquisitions not being realised as quickly as expected. The volume of effort and complexity of integrating six acquisitions in a short period challenged the business;

• Several large bids for new contracts that were live early in the year were not secured. This adversely impacted against budgets and the outlook and also adversely impacted in-year results due to the write off of material bid costs.

Absent these impacts, EBITDA grew in FY16 over FY15.

In addition, FY16 was also impacted to a lesser degree by some significant contract losses including the Rio Tinto, Suncorp Stadium and the Western Properties contracts as these demobilised during the year. The full year impact of these losses will carry into the FY17 year.

On a more positive note, in 2016 Spotless negotiated $480m of renewals and secured $130m of new contracts including three additional PPP contracts. In all Spotless now has sixteen PPP contracts, seven of which are mobilising in 2017. Once mobilised, these contracts provide a great source of long dated stable earnings for Spotless whilst also demonstrating Spotless's sector leading delivery.

Also pleasingly, we were able to maintain margins in the Facilities Services business in a competitive environment.

This, however, was not the case in the Laundries business which was adversely impacted by operating issues associated with the integration of the recently acquired Laundries. Changes in the mix of product being processed and new competition in some markets also adversely impacted the Laundries division, causing EBITDA margins to fall.

We expect that as current improvement plans focusing on optimising the mix of business, and equipment renewal are delivered, we will see margins improve.

In relation to the Balance Sheet, our reported net debt position at 30 June 2016 was $790m representing a net debt to EBITDA of 2.4 times. We are comfortable with our gearing and we are well inside our financial covenants. I think that it is important to recognise that we are at the end of a significant investment cycle following the acquisitions and, as expected, we are at the higher end of the gearing range within which the Board is comfortable. We do intend to reduce the Net Debt to EBITDA over time but the timing of this will be balanced against other capital management initiatives.

Safety performance improvement in 2016 was strong with a 41% reduction in the lost time injury frequency rate and an 8% reduction in recordable injuries.

Safety remains our highest priority and all at Spotless continually evaluate the risks attached to the activities we undertake. We have targeted further improvements in safety in FY17.

The centrepiece of the strategy involves stimulating organic growth to deliver improved win and retention rates and is a natural progression from the strategy pursued in recent years, which prioritised cost reduction to improve margins and acquisitions to build capability and drive growth.