2019 INTERIM FINANCIAL RESULTS - Rentokil Initial/media/Files/R/...2019 INTERIM FINANCIAL RESULTS 31...
Transcript of 2019 INTERIM FINANCIAL RESULTS - Rentokil Initial/media/Files/R/...2019 INTERIM FINANCIAL RESULTS 31...
2019 INTERIM FINANCIAL RESULTS
31 July 2019
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This presentation contains statements that are, or may be, forward-looking regarding the group'sfinancial position and results, business strategy, plans and objectives. Such statements involve riskand uncertainty because they relate to future events and circumstances and there are accordingly anumber of factors which might cause actual results and performance to differ materially from thoseexpressed or implied by such statements. Forward-looking statements speak only as of the date theyare made and no representation or warranty, whether expressed or implied, is given in relation to them,including as to their completeness or accuracy or the basis on which they were prepared. Other than inaccordance with the Company’s legal or regulatory obligations (including under the Listing Rules andthe Disclosure and Transparency Rules), the Company does not undertake any obligation to update orrevise publicly any forward-looking statement, whether as a result of new information, future events orotherwise. Information contained in this announcement relating to the Company or its share price, orthe yield on its shares, should not be relied upon as an indicator of future performance. Nothing in thispresentation should be construed as a profit forecast.
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2019 INTERIM FINANCIAL RESULTS
31 July 2019
Andy Ransom, CEO
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H1 2019 Highlights
Ongoing Revenue ahead of medium-term target (5%-8%) with all Regions contributing. Strong H1 Organic Revenue growth in both Pest Control and Hygiene.
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8.8%H1 Ongoing Revenue Growth at CER.
4.2%H1 Organic Revenue Growth (H1 2018: 3.0%).
11.4%H1 Pest Control Ongoing Revenue Growth.
4.8% organic growth (H1 2018: 4.0%).
6.5%H1 Hygiene Ongoing Revenue Growth.4.3% organic growth (H1 2018: 2.1%).
H1 2019 Highlights
Strong Ongoing Profit Growth and Free Cash Flow both ahead of H1 2018. Operating margins up 0.4% pts and by +0.5% pts in North America.
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11.6%H1 Ongoing Profit Growth at CER.
£95.9mStrong Free Cash Flow +£22.9m (vs H1 2018).
1.1% ptsImprovement in Customer Retention.
1.8% pts improvement in Pest Control (12-mth MAT).
All RegionsContributed to a strong First Half.
H1 2019 Highlights
17 high-quality acquisitions with 12 in Pest Control and 5 in Hygiene in H1.
Divestment of 17.8% stake in joint venture with Haniel for €430m.
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£55m 17 deals delivered £55m revenues.
c.£121m in cash spent in H1. Strong pipeline.
$59m7 deals in NA in H1 with $59m annualised revenues.
FY 2018 = $53m annualised revenues.
New Pest markets Jordan (Amman) and Sri Lanka (Colombo).
8 deals in Emerging markets.
€430mDivestment of 17.8% share of Haniel JV.
In addition to the €520m received in 2017.No tax to pay on sale proceeds.
H1 2019
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“The business has performed very well in the first six
months with strong organic growth of 4.2%. We have
again exceeded our medium-term financial targets for
revenue, profit and cash.”
“We are confident of delivering further progress in H2 2019.”
H1 2019Financial Review
31 July 2019
Jeremy Townsend, CFO
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Financial Highlights
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H1 2019
£ millionAER CER
ΔAER
ΔCER
Ongoing Revenue* 1,289.9 1,281.0 10.7% 8.8%
Ongoing Operating Profit * 152.1 151.8 13.0% 11.6%
Adjusted PBTA 141.6 141.4 13.7% 12.4%
PBT 113.8 114.0 3.7% 3.2%
Free Cash Flow 95.9
Adjusted EPS 5.99p 5.98p 14.0% 12.9%
Dividend 1.51p 15.2%
Revenue
£1,289.9m8.8%
Cash
£95.9m93% cash conversion**
over last 12 months
Profit
£152.1m11.6%
*Ongoing Revenue and Ongoing Operating Profit exclude the results of disposed businesses. Ongoing Operating Profit and Adjusted PBTA exclude certain items that could distort the underlying trading performance.**Adjusted cash flow conversion on a trailing 12-month basis
0
50
100
150
200
Yr toJune2013
Yr toJune2014
Yr toJune2015
Yr toJune2016
Yr toJune2017
Yr toJune2018
Yr toJune2019
130.0
180.0
230.0
280.0
330.0
Yr toJune2013
Yr toJune2014
Yr toJune2015
Yr toJune2016
Yr toJune2017
Yr toJune2018
Yr toJune2019
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
1300
1500
1700
1900
2100
2300
2500
Yr toJune2013
Yr toJune2014
Yr toJune2015
Yr toJune2016
Yr toJune2017
Yr toJune2018
Yr toJune2019
Strong Financial ProgressA track record of delivery
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Ongoing Revenue growth: 5%–8%, 3%-4% Organic (CER)
Ongoing Operating Profit growth c.10% (CER)
Strong and sustainable delivery of Free Cash Flow,
c.90% conversion** (AER)
+8.8% growth in Ongoing Revenue, +4.2% Organic
+11.6% in H1 2019 Free Cash Flow of £95.9m,
93% cash conversion over last 12 months
5 YR CAGR11.5%
£m £m £m
Organic 5 YR
CAGR3.3%
5 YR CAGR15.2%
*Ongoing Revenue and Ongoing Operating Profit exclude the results of disposed businesses. Ongoing Operating Profit and Adjusted PBTA exclude certain items that could distort the underlying trading performance. Charts calculated on a 12-month trailing basis.
**Adjusted cash flow conversion on a trailing 12-month basis
North America
Ongoing Revenue growth +9.6%
Organic Revenue growth +3.7%
Ongoing Operating Profit growth +14.7%
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Group Revenue: 38% Group Profit: 30%
H1 2019 Growth
Ongoing Revenue £482.8m +9.6%
Ongoing Operating Profit £58.4m +14.7%
Operating Margin 12.1% +0.5% points
Progress in H1:
Ongoing Revenue growth of 9.6% in H1, 3.7% Organic
Pest Control growth of 10.3%, up 3.9% Organic, despite unseasonably wet weather in certain parts of the country in Q2, particularly the North East
Ongoing Operating Profit growth of 14.7%, reflecting higher revenues
Net Operating Margin up 0.5% points at 12.1%, discussed further on following two slides
Seven Pest Control acquisitions in H1 with revenues of c. $59m (c. £44m), ahead of the c. $53m (c. £41m) revenues acquired during the whole of 2018
Focus for H2 2019:
Further delivery of revenue and profit growth, continued M&A and ongoing implementation of Best of Breed programme to drive margin expansion
9.6% increase in revenue and 50 bps improvement in Net Operating Margin
@CER
North America Update on plan to deliver $1.5bn revenue, 18% Net Operating Margins
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Building scale and local density on national footprint with
+300 branches, 45 distribution centres, +8,000 colleagues.
Targets (FY) / Activity Progress in H1 2019
4% to 5%Organic growth
3.7% Organic growthAn improving performance on H1 2018, but held back by wet weather in North Eastern areas of the country in Q2
$50m to $80m additional revenues p.a. from acquisitions
c. $59m acquired revenues in H1 A very strong performance and ahead of the c. $53m of acquired revenues for the whole of 2018, positioning us well for the full year
Best of Breed (BoB) back office programme
Further good progress in procurement and property,IT programme progressing to plan
Net Operating Margin 50 bps improvement in H1, supported by organic revenue growth, synergies from acquisitions beginning to flow through and savings from our Best of Breed programme, partially offset by a greater mix of lower-margin product sales
North America
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Path to $1.5bn revenue Path to 18% Net Operating Margins
Revenue target on track for 2020, 18% margins to be delivered by end of 2021
• Remain on track to deliver $1.5bn revenue by the end of 2020
• H1 revenue growth in line with 10% CAGR required in 2019/20 to hit target
• Our growth expectations remain at 12-15% per annum - Organic (4-5%) and M&A (8-10%)
• M&A pipeline remains strong
• Progress on margin delivery in H1 on track for 2021 target
• Steady progress with IT transformation to replatform the business and deploy Group IT applications effectively
• Margin improvement is back-end loaded reflects the timing of our systems replatforming and applications deployment
North America IT re-platforming and applications deployment: timeline to completion
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The first step in our IT programme is to create a consistent platform across the country. We will have all the data from the business into the cloud during 2019 and the large majority of the business will be on a standard operating system by the end of this year.
Having the data in one place and a consistent infrastructure delivers cost benefits in its own right through reduced back office costs and more effective management. It also critically allows us to deploy our Group applications across the North American region in the key areas of service, sales and customer communications.
Deployment of these applications enables the delivery of Best of Breed margin benefits in 2020 and 2021, meaning our journey to 18% margins by 2021 is weighted towards the end of the period.
2019 2020 2021
PestConnect connected devices
Infr
astr
uct
ure
Serv
ice
Sale
sC
ust
om
er
com
ms
RI Smartphone Service App 100%50%
RI Territory Management Tool 100%50%
RI Service Scheduling Tool 100%50%
MyRentokil Customer Portal 100%
RI Sales Price, Quote, Contract 100%50%
e-Bill / e-Pay solution 100%50%
100%50%
RI Website (v4) 100%50%
All data in Google Cloud Platform 100%
RI Sales Prospect Management 100%50%
Standard operating system* 100%
*excluding any new acquisitions from Jan 2019
Europe
Ongoing Revenue growth +7.7%
Organic Revenue growth +4.8%
Ongoing Operating Profit growth +8.6%
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Group Revenue: 27% Group Profit: 32%
H1 2019 Growth
Ongoing Revenue £349.1m +7.7%
Ongoing Operating Profit £63.0m +8.6%
Operating Margin 18.0% 0.1% points
Progress in H1:
Excellent Ongoing Revenue performance in Germany (+16.3%), strong growth in Southern Europe (+7.5%), and improved performances in Benelux and France, up 5.8% and 3.7%. Latin America (reported within Europe region) continues to perform well, with growth of 20.6%:
• 12.8% growth in Pest Control: 5.1% from acquisitions and Organic growth of 7.7%, aided by notably strong performance in German pest operations
• 6.3% growth in Hygiene, 2.8% Organic, benefiting from strong performances across the region
8.6% increase in Ongoing Operating Profit, with strong growth in Southern Europe, driven by Germany and Benelux
Four acquisitions in Latin America in H1 – two Hygiene, two Pest Control -with total annualised revenues of c. £4m
Sale of stake in Haniel JV for cash consideration of €430m
Focus for H2 2019:
Further growth in Pest Control and Hygiene , ongoing progress in France Workwear, building out the M&A pipeline in Europe
Strong overall performance from Europe region
@CER
UK & Rest of World
Ongoing Revenue growth +10.0%
Organic Revenue growth +4.5%
Ongoing Operating Profit growth +7.3%
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Group Revenue: 19% Group Profit: 23%
H1 2019 Growth
Ongoing Revenue £241.0m +10.0%
Ongoing Operating Profit £45.6m +7.3%
Operating Margin 18.9% -0.5% points
Progress in H1:
Excellent performance from UK Pest Control and Hygiene; UK Pest +6.5% Organic, benefiting from large contract wins, Hygiene +8.4% Organic benefiting from high levels of customer service, improving customer retention and one-off contracts
8.3% revenue growth from Rest of World operations, with contributions across all regional clusters in Nordics, Caribbean, Africa and MENAT
Good overall regional performance dampened by UK Property Care, which continues to experience weak market conditions
7.3% growth in Ongoing Operating Profit reflecting higher revenues, however margin decline of -0.5% points impacted by profit decline in Property Care
Two small acquisitions in H1 – one hygiene business and one pest control business with combined annualised revenues of c. £1m
Focus for H2:
Continued growth in Pest and Hygiene and ongoing implementation of Property Care improvement plan
Excellent performance from UK Pest Control and Hygiene
@CER
Asia
Ongoing Revenue growth +11.6%
Organic Revenue growth +5.5%
Ongoing Operating Profit growth +11.9%
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Group Revenue: 9% Group Profit: 6%
H1 2019 Growth
Ongoing Revenue £113.4m +11.6%
Ongoing Operating Profit £11.6m +11.9%
Operating Margin 10.2% -
Japanese JV* H1 2019 Growth
Ongoing Revenue £25.9m +6.8%
Ongoing Operating Profit £5.8m +0.4%
Operating Margin 22.5% -1.5% points
*Reported within Share of Profit from Associates (net of tax); Rentokil Initial has a 49% share.
@CER
Progress in H1:
11.6% increase in Ongoing Revenue, +5.5% Organic, reflecting good performances from both Pest Control and Hygiene
Ongoing Operating Profit growth of 11.9%, reflecting higher revenues
Net Operating Margins in line with prior year at 10.2%
Four acquisitions in H1 - two small Pest Control acquisitions in Thailand and Sri Lanka and two Hygiene businesses in Indonesia and Malaysia with combined annualised revenues of £7m
Focus for H2:
Further delivery of revenue and profit growth, ongoing execution of Rentokil PCI joint venture, integration of recent acquisitions and further M&A to build scale
Good growth in revenue and profit
Pacific
Ongoing Revenue growth +2.4%
Organic Revenue growth +1.9%
Ongoing Operating Profit growth +2.5%
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Group revenue: 7% Group Profit: 9%
H1 2019 Growth
Ongoing Revenue £94.7m +2.4%
Ongoing Operating Profit £18.6m +2.5%
Operating Margin 19.7% -
A solid H1 performance
@CER
Progress in H1:
2.4% growth in Ongoing Revenue (+1.9% Organic), driven by solid performances across core Pest Control and Hygiene categories
Notably good performance from Australia Hygiene, reflecting the impact of new customer contracts won in 2018 and 2019, driven in part by stronger sales colleague retention.
2.5% growth in Ongoing Operating Profit reflecting higher revenues, with Net Operating Margin in line with prior year at 19.7%
One small pest control acquisition in Australia with annualised revenues of c. £0.4m in year prior to acquisition
Focus for H2:
Further improvements in performance through greater service productivity and additional acquisitions in Pest Control and Hygiene
£ million H1 2019 H1 2018
Adjusted Operating Profit 152.2 134.5
One-off items - Operating 9.8 2.6
Depreciation 105.5 72.8
Other13.5 0.8
EBITDA 271.0 210.7
Working capital (27.8) (14.0)
Movement on provisions (4.0) (7.0)
Capex (112.2) (84.4)
Operating Cash Flow – continuing operations 127.0 105.3
1 Profit on sale of fixed assets, IFRS 2, dividend from associate, etc.2 Property, plant, vehicles
Operating Cash Flow
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Increase in Adjusted Operating Profit largely offset by working capital outflows due to phasing
Depreciation and capex both increased due to IFRS 16 but offset each other, with a broadly neutral net impact
Operating cash inflow £21.7m higher than last year, driven by annual cash dividend of £16.6m received from the Haniel JV
@AER
£ million H1 2019 H1 2018
Operating Cash Flow – continuing 127.0 105.3
Cash interest (11.8) (7.3)
Cash tax (19.3) (25.0)
Free Cash Flow – continuing 95.9 73.0
Acquisitions (120.9) (164.9)
Dividends (58.1) (50.2)
Underlying increase in Net Debt (83.1) (142.1)
FX and other (21.3) (21.3)
IFRS 16 lease obligations (184.0) -
Increase in Net Debt (288.4) (163.4)
Opening Net Debt (1,153.5) (927.3)
Closing Net Debt (1,441.9) (1,090.7)
Free Cash Flow & Movement in Net Debt
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@AER
Interest payments £4.5m higher than H1 2018 and tax payments decreased by £5.7m, both reflecting phasing of payments versus the prior year
Free Cash Flow increased by £22.9m, delivering a Free Cash Flow conversion of 93% over last 12 months
Adoption of IFRS 16 has added £184.0m of lease obligations to Net Debt
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Disposal of 17.8% interest in Haniel JV
In July 2017 the Group’s Workwear and Hygiene assets in Germany and Benelux were transferred into a Joint Venture (JV) with Haniel for cash consideration of €520m and a retained 17.8% share in the JV
Agreement on 30 July 2019 to divest of remaining 17.8% interest in the JV to Haniel for a cash consideration of €430m
As at 30 June 2019 the carrying value of the Company’s investment in the JV was €290m resulting in an estimated profit on disposal of over €140m
Together with initial consideration for transferring the businesses into the JV and dividends received since the formation of the JV, the transaction has realised a total cash return of €979m
The proceeds from the sale will be used initially to pay down debt and support the Group’s M&A programme
No tax on the gain on disposal
€ million
Cash consideration from disposal of 17.8% stake 430
Carrying value of 17.8% JV interest 1 290
Indicative profit on disposal 140
Consideration from original contribution of assets 520
Consideration from disposal of 17.8% stake 430
Dividends received 29
Total consideration 979
APBITA contributed to JV in 20172 53
€430m divestment proceeds
Notes: 1 Net of disposal provision and other costs2 Annualised APBITA for the 12 month period ended 30 June 2017
Balance Sheet
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Balance Sheet
• Net Debt at 30 June 2019 £1441.9m, an increase of £288.4m from 31 December 2018. £184.0m of the increase relates to additional lease liabilities recognised on implementation of IFRS 16
• £918.6m of centrally held funds and available undrawn committed facilities
• Net Debt to EBITDA ratio of 2.6x at 30 June 2019 (including the full year impact of IFRS 16), reflecting dilutive impact of H1 acquisitions
• Adjusting for anticipated €430m proceeds from the sale of the 17.8% stake in Haniel JV, Net Debt to EBITDA ratio will fall to 1.9x
• €500m bond issue in May 2019 with a coupon of 0.875% maturing in May 2026 will be used to refinance €500m bond maturing in September 2019
• Good progress on Pension Scheme buy-out - estimated pre-tax cash surplus of c. £40m (vs. previously guided £20m to £40m) to be returned to the Company on completion in 2020
• Credit rating remains at BBB Stable Outlook
Guidance for H2 / FY 2019
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IFRS 16 now expected to increase Ongoing Operating Profit by £3m and adjusted interest charge by £3m (previous guidance was between £5m and
£10m) – no overall impact on Adjusted Profit before Tax
Business is trading in line with our expectations and therefore our guidance for 2019 (and 2020) is unchanged apart from the items below:
• Central costs expected to be £4m above prior year in line with increase in H1, reflecting continued investment in our innovation and digital
programme and the impact of increased LTIP costs given the increase in our share price
• Underlying P&L and cash interest costs expected to be £4m lower than previously guided due to the successful refinancing of the €500m bond at
lower interest rates (before adjustments for IFRS 16) and lower levels of net debt post the sale of our stake in the Haniel JV. Full year impact in
2020 is an anticipated reduction in interest costs compared to previous guidance for 2019 of c. £14m
• Profit from Associates in H2 anticipated to be ~£7m lower than prior year post the JV disposal. Full year impact on 2020 a reduction of £17m.
• At Prelims we guided to adverse FX of c. £5m. FX has been volatile since then with sterling weakening against the Euro and US dollar. Should
current rates continue for the remainder of the year and throughout 2020, we estimate this would have a positive impact of around £5m - £10m
for 2019 and £10m - £15m in 2020
Therefore, we anticipate 2019 profit expectations to remain unchanged and expectations for 2020 to increase by c. £10m
H1 2019 Summary
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✓ +8.8% growth in Ongoing Revenue (vs target 5% to 8%)
✓ +4.2% Organic growth (vs. target 3% to 4%)
✓ +11.6% increase in Ongoing Operating Profit (vs. target 10%)
✓ £95.9m Free Cash Flow, 93% conversion over last 12 months
✓ Sale of minority stake in Haniel JV for proceeds of €430m, to be used initially to reduce debt and support M&A programme
✓ 17 businesses acquired in H1 with £55m annualised revenues for cash spend of £120.9m
✓ Balance sheet remains robust
✓ Good progress towards buy-out of Pension Scheme with estimated pre-tax cash surplus of c. £40m (vs. previously guided £20m to £40m) to be returned to the Company on completion in 2020
✓ +15.2% increase in 2019 interim dividend at 1.51p per share
We continue to execute our Right Way plan to deliver year-on-year growth in revenue, profit and cash.
We are confident of delivering further progress in the second half.
A people business, enabled by world-class technologies and innovations
31 July 2019
Andy Ransom, CEO
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Consistent Model for Profitable Growth Transparent medium-term targets
• North America
• Europe
• UK & Rest of World
• Asia
• Pacific
Hygiene
Focus: Operational excellence
Protect &
Enhance
Focus: Retention and enhancing profitability
Pest Control
Focus: Growth and Emerging Markets
Differentiated IRRGrowth 13%+
Emerging 15%+
Differentiated IRR
15% - 20%+
Differentiated IRR
20%+
Medium-TermTargets:
Ongoing Revenue
Growth: 5% - 8%
Organic 3%- 4%
Ongoing Operating Profit
Growth: c.10%
Free Cash Flow
Conversion: c.90%
Multi-local Operations Leadership in Digital and InnovationMarket-Leading Businesses
+1800 local service teams.
80 countries covering 90% global GDP.
90/100 largest cities
c.90%of revenues outside the UK
Expertise of our People Low Cost Operating Model Financial Model to Compound Growth
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Low Cost Operating Model“The machine”
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Becoming an
Employer of Choice.
Colleague safety,
expertise,
engagement and
retention.
Delivering customer
service and customer
engagement (CVC)
Sales Excellence
driving
gross sales
(Contract and Jobs)
Service efficiency
Customer
retention
Contract
portfolio growth
Price management
Jobbing and
product sales
Revenue Growth
Profit and Cash
RIGHT PEOPLE RIGHT THINGS RIGHT WAY
Productivity and effective cost management.Density building incl. M&A.
Sharing best practices, common IT and digital solutions.
Dig
ital exp
ert
ise a
nd
lead
ers
hip
in
in
no
vati
on
Low Cost Operating ModelHighly motivated people, enabled by world-class technologies and innovations
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Becoming an
Employer of Choice.
Colleague safety,
expertise,
engagement and
retention.
Delivering customer
service and customer
engagement (CVC)
Sales Excellence
driving
gross sales
(Contract and Jobs)
Service efficiency
Customer
retention
Contract
portfolio growth
Price management
Jobbing and
product sales
Revenue Growth
Profit and Cash
RIGHT PEOPLE RIGHT THINGS RIGHT WAY
Productivity and effective cost management.Density building incl. M&A.
Sharing best practices, common IT and digital solutions.
Dig
ital exp
ert
ise a
nd
lead
ers
hip
in
in
no
vati
on
How we run our BusinessSafety, Health and Environment (SHE): Agenda item number one
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The Royal Society for the Prevention of Accidents Gold Award International Institute for Risk and Safety ManagementInternational Risk Initiative of the Year
Emissions:20% reduction since 2014.New target: 20% reduction by end of 2020 (16% achieved to date).
18% improvement in Lost Time Accident (LTA) rate to 0.57 (year on year).NA: LTA rate 0.42 (YTD) – 32% improvement on 2018.
7% improvement in Working Days Lost rate to 12.67 (year on year).
Monthly KPIs reportingConsistent measurement - branch-country-region.Training eg ‘Safety Moments’ (100+ short videos produced and shared by colleagues).Global awareness campaigns eg Electrical Safety.
Excellent H1 Safety Performance World Class:Lost Time Accidents
2014: 1.00
2018: 0.63
37%
World Class:Working Days Lost
2014: 28.99
2018: 14.77
Net Zero Emissions100% annual carbon footprint mitigated through rainforest protection via Cool Earth / RI Cares initiative.
49%
improvement
improvement
How we run our BusinessEmployer of Choice
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Group LTA RateOur goal is to increase colleague retention, boost line manager
capability and build expertise - and thereby improving productivity
and the service we offer. Good progress in H1.
High quality colleague experience
World-class colleague engagement and enablement.
Glassdoor: Excellent overall rating of 4.4 out of 5 and strong scores for Culture and Values, Career Opportunities and Senior Management.
Building expertise
c. 800,000 training content/courses undertaken in H1 (+10% increase YoY).
c. 350 new training content developed in H1 including training videos to support innovation launches.
Colleague Retention
2.8% pts increase to 87.0%Customer Retention
1.1% pts increase to 87.1%
12 month MAT
Customer Satisfaction (NPS)
Pest Control + 1.6 points / Hygiene + 2.0 points
Rentokil Pest Control
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Consistent strong performance
@CER
300
400
500
600
700
800
900
H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
£414m
£518m
£650m
£734m
£818m
Ongoing Revenue: H1 2014 to H1 2019
£377m
Strong Performance in H1 2019
H1 Ongoing Revenue: £817.8m +11.4%
H1 Profit: £135.3m +11.5%
Organic growth: 4.8% (4.0% in H1 2018).Acquisitions: 6.6%.
Ongoing revenue breakdown:Growth markets: +11.1%.Emerging markets: +13.0%.
Pest Control: 64% of Group Revenues.
Non-cyclical, sustainable growth market.c.$20bn by end of 2019 and growing at c.5% p.a.Rising consumer expectations, growing middle classes, urbanisation, increasing workplace / food regulations, climate change and increasing pest pressures.
Highly fragmented industry40,000 companies, 50% in North America.
2014-2019
REVENUE
CAGR
16.8%
Rentokil: Global Leaders in Pest Control
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Strong performance in long-term growth markets @CER
North America+10%
Chile+25%
UK+26%
Vietnam+24%
South Africa+13%
Germany+21%
Nordics+14%
China+15%
Indonesia+61%Brazil
+9%
Growth across our global Pest Control footprint.
Number one in over 50 of our 80 markets
UAE+20%
H1 2019 Ongoing revenue growth
Caribbean+13%
Thailand+19%
Sub-Saharan+11%
France+10%
Rentokil Pest Control
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The world’s leading pest control company @CER
✓ Global leader - number one in over 50 markets.
✓ Strong Employer of Choice programme – outstanding technical training building expertise.
✓ Powerful brand. One of the top 50 most valuable Commercial Services brands (Brand Finance).
✓ Core strength in attractive Commercial sector.
✓ Leaders in digital and innovation.
✓ Strong digital marketing – record H1 with 9m sessions. Online enquiries up 33%.
✓ Disciplined M&A – highly fragmented market.
A high-quality business, operating in a resilient and growing market.
Pest Control market offers sustainable, long-term growth prospects.
H1 Organic growth
H12014
H12015
H12016
H12017
H12018
H12019
4.8%
1.9%
Rentokil Pest Control
34
The world’s leading pest control company
Strong Performance in H1 2019
Revenue: £819m +11.5%
Profit: £XXXm +X.X%
Organic growth: 5.1% (4.0% in H1 2018).Acquisitions, particularly in North America: 6.4%.
Ongoing revenue breakdown:Growth markets: +X.X%.Emerging markets: +X.X%.
Service?CVC?Customer retention?
Rentokil web traffic +47% YOY with organic growth +60%. Total traffic of 9m sessions (6m in H1 2018).Enquiry growth YTD +33%.
@CER
People, Technology & Innovation = Profitable Growth.
Leading in digital and innovation
✓ Improve our productivity - reduce our costs.
✓ More sophisticated pest control needs – higher barriers to excellence.
✓ Protect our core markets – retention & price.
✓ Responding to customer needs eg sustainability, new regulations.
✓ Enhance customer service and customer satisfaction.
✓ Sharing capability with Hygiene and other businesses.
✓ New and enhanced services to differentiate us – drive sales.
Differentiation through Innovation
35
Lumnia has revolutionised the insect light trap market – continued strong growth in H1
First to develop LED range for
commercial pest controlEnergy savings of 61% compared to previous range.Global leader in the use of LED technology in pest control.Second generation LEDs now in use.
Full range to meet the needs of all
customer segmentsLaunch: Standard and Ultimate (high dependency customers). H1 2019: launched Compact for smaller customers and Compact Colour offering customers a choice of colour, matching decor.H2 / 2020: Further new enhancements in development.
44% increase in Lumnia sales in H1 2019 (year on year).42 markets - strong performance in UK, NA and Australia.
Driving Productivity and Cost Reduction
36
Series of pilots using Artificial Intelligence (AI) underway
Strong Performance in H1 2019
Revenue: £819m +11.5%
Profit: £XXXm +X.X%
Organic growth: 5.1% (4.0% in H1 2018).Acquisitions, particularly in North America: 6.4%.
Ongoing revenue breakdown:Growth markets: +X.X%.Emerging markets: +X.X%.
Service?CVC?Customer retention?
Rentokil web traffic +47% YOY with organic growth +60%. Total traffic of 9m sessions (6m in H1 2018).Enquiry growth YTD +33%.
@CER
AI Appointments in place:
Director for Digital Products and Operational AI.Group Director for Digital Innovation and Customer AI.
AI route optimisation productivity tool:
Artificial Intelligence programme with global technology leader underway - potential to deliver a new route optimisation tool with traffic updates by the millisecond.
AI tool to enhance our effectiveness:
PestID is an image-based smartphone App which identifies a pest from a photo taken by the technician.
Once identified, PestID will recommend the best tools to control the pest plus other important information such as operational safety reminders.
System ‘learns’ over time using Google Auto Machine Learning. Successful first pilot.
Protecting Core MarketsInnovative rodent control
Strong Performance in H1 2019
Revenue: £819m +11.5%
Profit: £XXXm +X.X%
Organic growth: 5.1% (4.0% in H1 2018).Acquisitions, particularly in North America: 6.4%.
Ongoing revenue breakdown:Growth markets: +X.X%.Emerging markets: +X.X%.
Service?CVC?Customer retention?
Rentokil web traffic +47% YOY with organic growth +60%. Total traffic of 9m sessions (6m in H1 2018).Enquiry growth YTD +33%.
@CER
Rodent control accounts for c. $2bn of the global pest control market and continues to grow at c. 4% p.a.
In H1 2019 we launched a range of new products to enhance our proposition in this core market with remote monitoring to allow for a quick response to prevent an infestation.
Dual AutoGate Connect - a rat and mice remote monitoring and control solution - opens its ‘gate’ to provide access to bait.
Rat Riddance Connect - innovative trap that is able to send immediate notification of a rat capture.
Rodent Ceiling Trap - ceiling solution for rodent control in gaps above ceilings. Indicator alert to a capture.
Multi-Mouse Trap - a monitoring sensor that can be attached to several live catch products for real-time reporting, allowing for early technician support.
37
Responding to Customers’ Needs
38
Customers risk increased fines without effective pest management and reporting
The world’s leading digital pest control platform providing an unmatched level of monitoring, reporting and insight for customers. Strong progress.
Internet-of-Things 24/7 monitoring with alerts
Protecting customers’ facilities with maximum effect. Instant alerts for rapid
resolution.
17% increase in connected devices vs H1 2018.
PestConnect
Online tool for real-time insight, report and record
Total transparency on pest management and history of issues for customers – high
quality reporting for audits.
29% increase in usage vs H1 2018.
myRentokil
Tracks pest trends and identifies emerging risks
Mitigate risk with root cause analysis and targeted intervention. New level of pest
control insight.
14m messages across our network in H1.
CommandCentre
CommandCentre now includes data from c.40 countries.98% of commercial customers now on myRentokil
The Biggest Killer on the Planet?
39
The biggest killer on the planet…?
39
Biggest killers on the planet…?
40Over 3,500 species of mosquitoes
Aedes aegyptiCan spread Dengue fever, Chikungunya, Zika, Mayaro and Yellow fever.
Anopheles gambiaeconsidered to be one of the most efficient vectors of Malaria in the world.
Aedes albopictus(also known as Asian tiger mosquito). Can spread Dengue fever, Zika and West Nile viruses.
Culex pipiensMost effective vector for Japanese encephalitis and West Nile virus.
Significant threats to public health
41
YELLOW FEVER207 THOUSAND CASES PER YEAR
HOT SPOT FOR ALL THE DISEASES
MALARIA200 MILLIONCASES PER YEAR
DENGUE FEVER390 MILLIONCASES PER YEAR
WEST NILE VIRUS30 THOUSAND CASES PER YEAR
Unfortunately it’s getting worse…
For illustration only, based on data from the World Health Organization.
Urbanisation will make break-bone (Dengue) fever one of the most common diseases of the century.
Will extend into Southern Europe.
Daily Telegraph - June 2019
In Brazil, almost 1.2m dengue cases in H1 2019.
Increase of almost 600% from last year. Higher temperatures and volume of rainfall.
Brazilian Ministry of Health - July 2019
Six human West Nile virus infections have been reported in Greece and Romania.
European Centre for Disease Prevention and ControlJuly 2019
Dengue Fever Is Massively Spreading Across Thailand.
More than 28,000 cases and 53 death cases from the mosquito-borne Dengue virus. Last year, there were only 33 death cases. One of the most severe Dengue outbreaks in recent years.
Thai Bureau of Epidemiology at the Department of Disease Control - July 2019
Drug-resistant malaria parasites 'spreading aggressively' across south-east Asia
Up to 80% of the most common carriers of the disease are immune to the most common treatments
Guardian – July 2019
Philippines government sounds national alert after steep rise in deaths from dengue
Health authorities in the Philippines have declared a “national dengue alert” after an alarming upsurge in cases
July 2019
Growing threat of mosquito-borne diseases
42
Building our world-class
capabilities
Mosquito & Vector Control market:
Total market is worth c. $4.4bn and growing at c.7% p.a.
Rentokil Initial:
People & expertise, footprint in key countries, experience (public authority contracts to commercial & residential contracts and jobs). Technology and innovation agendas.2018 revenues c. US$50m (mainly NA and Asia).
Building our scale and capabilities:
• Centre of Excellence established.• New Mosquito lab established at The Power Centre.• Acquisitions of VDCI, the US’s leading provider of
municipal and commercial mosquito control, Mosquito Control Services in Louisiana and Multicontrole in Brazil.
• Acquisition of Ecovec in Brazil in July 2019 – high quality business with infrastructure & organization to monitor the presence of mosquitoes – supporting ongoing discussions with municipalities.
43
Initial HygieneStrong increase in organic growth
44
1.4%
3.0%
3.8%
3.0%
2.1%
4.3%
H12014
H12015
H12016
H12017
H12018
H12019
H1 organic growth
140
160
180
200
220
240
260
280
300
H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
£193m£200m
£182m
£277m
£260m
Ongoing Revenue: H1 2014 to H1 2019
£176m
Organic growth: 4.3% (H1 2018: 2.1%). Strong progress, particularly France (+4.0%), Australia (+4.0%) & UK (+8.4%).Acquisitions: 2.2%.
Strong Performance in H1 2019 @CER
H1 Ongoing Revenue: £277.2m +6.5%
H1 Profit: £45.4m +8.6%
Hygiene: 22% of Group Revenues.Market growing around GDP levels.
2014-2019
REVENUE
CAGR
9.5%
Initial HygieneBroad-based improvements for organic growth and productivity
45
Service quality &
Productivity
5-star Trustpilot service rating.On-site servicing – ‘liner’ service rather than traditional bin transfer. UK fully rolled out - van is 50% less full / reducing return times to branch. myInitial portal - increasing self-service –service details, billing, contract terms, etc
M&A
5 Hygiene deals in H1 20194 deals in FY2018 Cannon Hygiene – fully integrated in 8 countries – performing well.Building a strong position in emerging markets eg H1 acquisitions in Indonesia, Malaysia, Chile and Colombia.
Density: sales funnel
Initial web traffic increased by 9% YTD.
Targeting more people with upsell to drive density email campaigns (84k emails sent in UK to targets in 10 months). 30% increase in target list in Q1.
GoogleMyBusiness and Pay Per Clickcampaigns – highly effective.
Digital Innovation
ServiceTrak Hygiene - now in 23 countries50% decrease – in the number of ‘proof of service’ emails requested to be sent to customers.11% increase - total number of sales leads submitted by technicians*.
*Oct 2018 to May 2019
Best-in-class products
Product differentiation focus eg Signature Colour & H1 launches with new soaps and new aerosol fragrances.
2-point improvement in customer satisfaction (NPS)
Incentives continue to drive range selling.
Initial HygieneExtending our range of services
46
Revenue: £279m +6.6%
Profit: £XXXm +X.X%
Digital Hygiene
Route BasedExtensions
Exploit opportunities as the market for air enhancement and purification grows.
Total air care est. $17bn market. CAGR 10% over next 7 years.
Preferred suppliers in place.
Maximise shared expertise with Pest in Digital / IOT.
Digital Hygiene products for the washroom – eg connected soap dispensers.
First digital washroom products in late stage development.
Target potential growth options in new areas eg:
First Aid: New service solution targeting key sectors.
Pilots underway (first aid kits, defibrillator, eye wash etc).
Air Care
Targeting new growth opportunities
Building product density and adding premium ranges
Protect and Enhance
47
14% of group Ongoing Revenues
120
140
160
180
200
H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
£188m£182m £183m £183m
£186m
Ongoing Revenue: H1 2014 to H1 2019
£183m
@CER
H1 Ongoing Revenue: £186.0m +1.4%
H1 Profit: £16.5m -2.0%
H1 Focus on Quality and Service
France WorkwearH1 Ongoing Revenue: £96.9m +2.9% (year on year).H1 Profit: In line with prior year.
Ambius H1 Ongoing Revenue: £66.8m +1.2% (year on year).H1 Profit: In line with prior year.39 awards at the International Plantscape awards 2019.
UK Property CareH1 Ongoing Revenue: £10.5m -7.3% (year on year).Small loss in H1.Best brands and strong service.UK property market remains challenging.Balancing risk mitigation / revenue growth.New Pest proofing work coming through in H2.
2014-2019
REVENUE
CAGR
0.4%
Protect and Enhance
48
France Workwear
France Workwear - continued progress
with focus on product & service quality
H1 2019: Ongoing Revenues +2.9% to £97m, profits in line with PY.
Employer of Choice: Significant safety improvements (Lost Time Accident rate from 1.59 to 0.69).
RFID: Tracking and garment use optimization process underway with 190,000 garments RFID tagged. All laundries now RFID compliant.
Customer terminations: Improved by 9% by volume.
Logistics: First electric vehicles – targeting 30% CO2 emission reduction / 3 years.
Fabric recycling (first in the industry): From August, 95% of our used garments and flat linen (c. 450 tonnes pa) - transformed into thermal insulation.
Overall, good progress in the areas of products & service quality, innovation and people – but too early to claim victory.
Value Creating M&A
49
Disciplined execution of our strategy in H1 2019
49
2013 22%
Pest Control
Hygiene Disposed
Protect & Enhance
18%
29%
39%
14%
64%
H12019
Transforming the shape of the Group through M&A. Focus on higher growth businesses.
14%
Strong First Half – 17 acquisitions
delivered with annualised revenues
of £55.1m. £121m cash spend in H1.
M&A focus: Building density through highly-targeted city acquisitions and entering new city markets.
12 deals in Pest Control and 5 Hygiene deals completed.
£44m ($59m) annualised revenues through 7 deals in North America including Active, one of the top 40 pest control companies.
New city entries in Jordan (Amman) and Sri Lanka (Colombo).
9 deals in Growth markets and 8 in Emerging markets.
Financially disciplined approach to M&A: Our recent acquisitions continue to perform at or above our required hurdle rates.
Excellent pipeline maintained.
Full year spend expected to exceed £250m.
Ongoing revenues
Delivered a Strong Performance in H1Interim Dividend of 1.51p per share – an increase of 15.2%
50
Ongoing Operating profit
11.6%Operating margins +0.4% pts
(Group) +0.5% pts (NA).
Free Cash Flow conversion
93%increased by £22.9m
year on year.
Value-creating M&A
17 dealsc.£55m annualised
revenues. JV divestment. Strong pipeline.
Colleague & Customer
RetentionIncreasingly by 2.8% pts and
1.1% pts respectively.
Strong progress
Innovation+44% Lumnia sales.
+29% myRentokil usage.
Organic Revenue Growth
4.2%in H1 2019.
Confident of delivering further progress in H2 2019.