Rentokil Pest Control Investor Seminar/media/Files/R/Rentokil/... · Rentokil Pest Control Investor...
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Welcome
Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
This presentation contains statements that are, or may be, forward-looking regarding the group's financial position and results, business strategy, plans and objectives. Such statements involve risk and uncertainty because they relate to future events and circumstances and there are accordingly a number of factors which might cause actual results and performance to differ materially from those expressed or implied by such statements. Forward-looking statements speak only as of the date they are 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 in accordance with the Company’s legal or regulatory obligations (including under the Listing Rules and the Disclosure and Transparency Rules), the Company does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Information contained in this announcement relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. Nothing in this presentation should be construed as a profit forecast.
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Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
Andy Ransom Chief Executive Rentokil Initial plc
Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
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8.45 Rentokil: The Global Leader in Pest Control Andy Ransom
9.00 Delivering Expertise to The Frontline: The Rentokil Model Phill Wood
9.20 Growth Opportunity in North America John Myers
9.35 A Strong Brand around the World Stewart Power
9.50 Coffee
10.10 3 x Innovation Break-Out sessions
11.10 Rentokil around the World Andy Ransom
11.15 The Market Leader In Asia Paul Cochrane
11.30 Our Expansion into Latin America Alain van Lidth de Jeude
11.45 Leveraging Acquisitions Chris Hunt
11.55 Pest Control – A Financially Attractive Category Jeremy Townsend
12.05 Closing Comments and Q&A Andy Ransom & Team
12:25 Lunch
The Global Leader in Pest Control
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Phill Wood Regional MD, UK and Rest of World Joined Rentokil Initial in 2006 and was appointed MD UK & ROW in 2013. Prior roles included Managing Director positions with Lex Service/RAC plc.
Strong Progress
Stewart Power Chief Marketing Officer Joined in 2006 as Marketing Director, Rentokil. Prior roles included directorships at RAC Business Solutions, Capita Group and was a management consultant with the Boston Consulting Group
Paul Cochrane Regional MD, Asia Joined Rentokil Initial in 1990 and was appointed MD Asia in 2013. Prior roles in the company included: Managing Director Initial Hygiene Pacific, Managing Director Ambius UK and Managing Director New Zealand & Fiji
John Myers Regional MD, North America Joined Rentokil Initial in 2008 as President, North America Pest Control division. Prior roles included Senior Vice President of Sales at Cintas Corporation as well as a number of operational and business development positions
Alain van Lidth de Jeude Managing Director, Benelux and Latin America Joined Rentokil Initial in 2001 and was appointed as MD Rentokil Pest Control Europe in 2006. Started Rentokil Latin America in 2012 and in charge of Rentokil Initial Benelux since 2014. Prior roles included: Belgian GIB Group: General Manager Quick Restaurants BV & Franchise Director Quick NV
Chris Hunt Group M&A Director Joined Rentokil Initial in 2012 as Group M&A Director. Prior roles included Corporate M&A Director at AstraZeneca plc and Director, KPMG Transaction Services
Today’s Speakers
Pest Control A Compelling Growth Industry
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Attractive category with high margins and good growth prospects
* TechNavio Analysis 2015
Term
ites
M
osq
uit
oes
Rats
An
ts
Flies
Bed Bugs
Wasps
Fleas
Spiders
Cockroaches
Ants
Snakes
Termites
Fleas
Pest Control Rats
Termites
Mosquitoes
Wasps
£10bn global industry 5.3% CAGR*
• £10bn industry, growing at a CAGR of 5.3% to 2019*
• Attractive business model – sets us apart from other industries – Revenue is typically on a contract recurring basis – for Rentokil 75% – Multiple portfolio levers – retention, upsell, organic, price – Ability to drive high margins through city-based density
• Proven, enduring category – came through the global recession well
• Faster growth with increasing economic activity – More housing, offices, hospitality
• Encouraging growth trends – Rising demand in nascent emerging markets with growing middle classes – Increasing intolerance towards pests – demand for higher hygiene standards – Global urbanisation – Tighter regulation and enforcement eg food safety and environment protection – Opportunities for consolidation in highly fragmented markets
Rentokil = Pest Control
The Global Leader in Pest Control
• Unrivalled global leadership position – Most international across 60+ countries
• Strongest brand around the world, particularly important in Emerging
• Significant operational leverage – Proven, repeatable lean business model with best people, tools and training – On average, 63% of sales originate from digital channels
• Innovating at pace for future growth – Global Technical Centre delivering innovation pipeline that’s second to none
• Strong position in higher growth/higher margin segments – Best management information tools
• Highly cash generative and clear capital allocation strategy – Strong M&A capability and excellent leverage out of acquisitions – Driving profitable growth through density
• Opportunities to expand into adjacent services – Vector control, marine, agriculture
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Phill Wood Regional MD, UK & Rest of World Region
Delivering Expertise to The Frontline: The Rentokil Model
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The Global Leader in Pest Control
Delivering The Rentokil Model Around the World Delivering Experience from UK to the Rest of World Region
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• A strong, growing business
• Developing the Rentokil model – Sales, Service & Technical Capability – Density and Productivity – Delivering Innovation to the front line – Delivered with Speed - our cloud-technology platform
Delivering into Rest of World Markets UK as the Lead Market in the Region
• A set of 20 smaller pest control markets – Generally market leader with good shares – Mostly in developing to mid-maturity markets – But also smaller mature markets (eg Ireland & Nordics)
• Benefit from leveraging capability in UK – Requires minimal overhead using cloud technology
Rentokil in the UK Founded in 1925
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Some things have changed substantially over the years…
While others have remained the same…
Customers continue to place heavy emphasis on technician & surveyor training & quality assessment, as well as a proactive management approach to identifying
& communicating pest control risks
Rentokil in the UK The UK Pest Control Market
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• £6 per head population – second highest spend on Pest Control per head in Europe
• Four major competitors of which only Rentokil & Ecolab are pure Pest plays
• Mitie & Cannon are Pest Businesses which also self deliver to their FM owners
• Rentokil is the clear market leader, with approx. 20% market share and the only truly self-delivering National player
• 10% of Market Local Authorities (est. 15% now provide no service – 2% in 2009)
• Large degree of fragmentation circa 42% small local operators
A total market of around £400m
Source: Rentokil +3rd Party Market Research
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mar
ket
Shar
e
Small Operators
Local Authorities
Medium-Sized Cos
Ecolab, Mitie & Cannon
Rentokil
42%
10%
7%
21%
20%
Rentokil in the UK Revenue & Profit Growth
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Historical Revenue & Profit trends:
• Revenue - Over the period from 2010 to 2014 we have grown revenue by 25% • Average annual revenue growth 6% over the period • 2014 includes acquisition of loss making Green Compliance pest business
• Profit - Over the period from 2010 to 2014 we have grown profits by 41% • Average annual profit growth 9% over the period
Cumulative Revenue Growth
The Rentokil Model Championed in the UK
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Investment in Sales & Technical Capability
Driving Sales Productivity
Driving Density One Service & Sales Team
Innovations to Drive Margin
30% of new sales from services under three years old
SPEED Cloud Technology to
engage across organisation and deliver tight control
Leveraging our Functions through The Country Model
The Rentokil Model Investment in Sales and Technical Capabilities
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Route 1 Main innovations launch method
to all FLCs – over 100 sessions per year for surveyors & virtual
sessions for technicians
Technical Academy Highly qualified technicians
(designed & delivered internally, but validated by the BPCA). 95% of our techs are L2 or above & 50% of the UK’s L4
technicians are at Rentokil
Sales Academy 3,000 technical training days p.a.
New starter & ongoing refreshers. Continued support
through monthly, quarterly & 6-monthly formal tests
Formal training programmes for all FLCs on a regular basis to equip them with the right skills and keep them up to date on products, competition, services & legislation
eLearning New for 2015 - used for Level 1 tech training + TPA (Technician
Performance Assessment) modules & seasonal pest training
The Rentokil Model Develop Leaders of the Future
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Formal, well-structured training & development through Aspiring Managers, Team Leader
Training & Living Leaders to help us develop existing & future Leaders, leading to 21
promotions in 2014 80%+ appointments internal
A formal graduate programme, with 59
graduates commencing in front line roles
Operationally experienced managers for the future
The Rentokil Model Sales Productivity With Focused Sales Management & Integrated Marketing
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A model geared around enquiry generation
Supporting Techs to Generate Leads
Brand & Local Community Support Structured & targeted PR
Route 1 Programme
• Leads per Sales head per day are up 23% from 2011 to 2014 driven by management focus and regular communications over G+
• Enquiries per head per day up 12% from 2011
• As a result local sales per head per day is trending to be up 73% from 2011 to 2014
The Rentokil Model Driving Density Through One Service Team
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• Revenue per technician – indexed forward from 2011 Levels – 11% growth over the period – 3% per annum CAGR over period
• Detailed focus through monthly management on all elements of productivity (e.g. visits per day) supported by speed tools to ensure minimisation of time not on customers sites
Using technology – consistent national training/qualification level & business scale to maximise time spent with customers and minimise travel
Speed Mapper app to maximise selling
time in a patch
Fast responses to customers
More effective use of time onsite
The Rentokil Model Using Innovation To Drive Margin
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G+ and our speed approach enabling us to launch an average of 3 new innovations per quarter:
• Innovations under three years old account for circa 30% of new sales
• A further 12 new services/offers between now & year end
Speed of execution – Pest Disinfection offer from concept to launch in ONE MONTH:
The Rentokil Model Speed - Cloud Technology to Engage Organisation and Deliver Tight Control
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Speed Central – mobile responsive online libraries of
relevant information for different roles
Timely, managed & controlled comms to everyone
Virtual support – videos, tutorials
Everyone has an android device
Standard survey, pricing & quoting tools everywhere
Automating as many processes as possible
• A 50% increase in the number of front line technicians being managed by local management
• Constant focus on eliminating processes steps via automation and by putting information in the hands of decision makers so that they can make informed decisions faster – without compromising control
• Largest G+/social media in Google world outside of Asia
The Rentokil Model Leverage of Business Functions Through Our Country Model
All support functions run as a Country Area team supporting
all UK based businesses
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Each support function has a standard operating model, marginally tailored
for each business
Standard reporting & KPIs/ performance metrics for each
support function
• Support functions consolidated for all businesses under single teams for Marketing, HR & Finance
• All businesses have direct responsible team members in each function
• Standardised policies, processes & reporting across all businesses allow larger spans of control & reduced headcount
Supporting Growth in Rest of World Markets Leveraging UK Capability To Deliver International Growth
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Market Revenue Profit Relative
Position Growth Growth Margin
Ireland 1 6% 7% H
Estonia 1 18% 23% H
Norway 2 11% 20% H
Turkey 1 15% 158% M
Jamaica 1 22% 83% M
Martinique 1 13% 62% M
Barbados 1 9% 100% M
Denmark 1 8% 16% M
Lithuania 1 8% 6% M
Kenya 1 5% 13% H
Finland 1 4% 11% H
Guyana 1 2% 104% H
South Africa 1 4% 5% H
Trinidad 1 3% 3% H
UAE 1 41% 61% L
Saudi Arabia 1 286% 76% L
Sweden 3 7% 25% L
Bahamas 1 - - M
Mozambique 1 - - L
Zambia 1 - - L
Total Rest of World 1 8% 14% H Es
tab
lish
ed R
ento
kil P
est
Bu
sin
esse
s N
ew in
20
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Delivering Growth in Rest of World
• All businesses in growth in 2014 – Contract and Job Revenue up – Improved profit margins in every business
• Will continue to drive growth potential – Leveraging UK capability and productivity models – Delivering innovation tailored to local markets – Lower cost base through Speed
The Rentokil Model Deploying Capability to RoW Markets Using Speed
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Run a virtual region with virtual business reviews
on a regular basis
Virtual regional support teams with regular reviews via hangout
Drive rate of new service launches to develop the
market
Transfer best practice in Sales & Marketing & provide
training/support to upgrade local Sales & Operational
capability
System rollouts
Consistent compliance & financial control
Standard marketing model everywhere
Share ideas that work & implement quickly
eg PR stories/support material/product incentives/school tours/Pestaurant
Route 1 Programme Virtual web management & new website rollout
Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
John Myers Regional MD, North America
The Growth Opportunity In North America
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The Quadrant Approach Our Strategic Approach for running the Pest Control Business
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• Our Emerging markets are the future; they are the building blocks to drive growth today and into the future
• The Growth markets represent those markets that are well-developed, but still have significant growth potential to drive our growth agenda
• The majority of our Global Pest Control revenue and profit come from the Growth quadrant
Quadrant Performance for Pest • Asia
• Latin America
• MENAT
• East Africa
• Fiji
• North America
• UK
• Germany
• France
• Nordics
• Pacific
• South Africa
• Caribbean
• Portugal
• Spain
• Greece
• Benelux
• Ireland
• Italy
Gro
wth
Po
ten
tial
Profit Contribution
11% of Rev 7% of Profit 32% of Growth
60% of Rev 55% of Profit 55% of Growth
23% of Rev 31% of Profit 12% of Growth
6% of Rev 7% of Profit 1% of Growth
The North American Pest Control Market Rentokil Well-Placed for Growth in the World’s Biggest Pest Market
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Rentokil Number Three & Gaining Share Half the Worldwide Market
North America 4.8
Rollins 17% (incl Orkin)
Terminix 17%
Rentokil 5%
Ecolab 5%
Other 55%
• Only 45% provided by the Top 4 companies • Rentokil has grown significantly faster through a combination or organic growth and strategic acquisitions
• A large market that grew 3.5% in 2014 • Rentokil grew significantly faster at 6.2%
Half the Worldwide Market
Asia 1.4
LatAm 0.8
Mid East & N Africa 0.2
RoW 0.3
Europe 1.8
North America 5.0
Pacific 0.5
Source: Multiple Sources, Internal Estimates, Using Apr 2015 Exchange Rates to GBP
• Worldwide Market £10 bn
Rentokil Pest Control in the North American Market Our 10 Year History of Growth
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0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Revenue Growth %
+76% +12%
+18% +4%
+14% +8% +5% +24% +18% APBITA Growth %
$m
+90%
+26%
+51% +16%
+5% +6% +0%
+42%
+9%
Since acquisition of Presto-X in 2007 • Total Revenue Growth of 14.4% CAGR and Profit Growth of 20.2% CAGR
Revenue $
APBITA $
North American Acquisitions We Have A Clear Acquisition Model That Links Value To Strategy
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Rationale Strategy
The Residential Opportunity
• Two thirds of the North American opportunity is Residential/Termite
• The Residential market particularly benefits from absolute scale particularly in marketing efficiency
• Once regions achieve scale in commercial, then target bolt-on residential acquisitions
North American Acquisitions We Have A Clear Acquisition Model That Links Value To Strategy
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Rationale Strategy
The Residential Opportunity
• Two thirds of the North American opportunity is Residential/Termite
• The Residential market particularly benefits from absolute scale particularly in marketing efficiency
• Once regions achieve scale in commercial, then target bolt-on residential acquisitions
Building Local Route Density
• Relative route density is a key determinant of operational success and profitability
• Bolt-on acquisitions provide a high level of synergy for sub-scale branches
• Prioritise acquisition efforts to sub-scale locations
• Standard process for acquiring and integrating new companies effectively and efficiently
Our Focus is Coverage for National Accounts and Building Local Density (Growth in Residential is a Secondary Benefit)
Driving Local Profitability Accelerate Profitability Through Local Density
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Local Market Share
Op
era
tin
g M
argi
ns*
Impact of Density on Branch Profitability
* Margins before Corporate Overhead
Driving Local Profitability Accelerate Profitability Through Local Density
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M&A Activities
• Bolt on example
Local Organic Growth
Before After
Revenue $884,000 $1,463,000
Operating Margin*
$154,000 17%
$295,000 20%
Local Market Share
Op
era
tin
g M
argi
ns*
Impact of Density on Branch Profitability
* Margins before Corporate Overhead
Driving Local Profitability Accelerate Profitability Through Local Density
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M&A Activities
• Bolt on example
Local Organic Growth
• Invest in Commercial Sales Reps to drive base scale in B2B pest control
• Up-sell and cross-sell the services needed by our customers
• Where attractive, expand into Residential market through local marketing activities – brand awareness, PR, PPC and SEO, events
Before After
Revenue $884,000 $1,463,000
Operating Margins*
$154,000 17%
$295,000 20%
Local Market Share
Op
era
tin
g M
argi
ns*
Impact of Density on Branch Profitability
* Margins before Corporate Overhead
The North America Pest Business A portfolio of businesses delivering varying levels of profit performance
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• Operating Margins* 6.7%
Gro
wth
Po
ten
tial
Profit Contribution
• Our North American Pest branches are
a portfolio of locations delivering
different levels of revenue growth,
profit growth, and profit margins.
• We have a strong balance of Growth
and Protect and Enhance locations.
• As our businesses develop and achieve
greater scale and density, we are able
to maximize the profit margins we
deliver
Quadrant Impact on Margin • Operating Margins* 23.8%
• Operating Margins* 32.1%
* Margins before Corporate Overhead
Our focus is on
North American Acquisitions We Have A Clear Acquisition Model That Links Value To Strategy
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Rationale Strategy
The Residential Opportunity
•Two thirds of the North American opportunity is Residential/Termite
•The Residential market particularly benefits from absolute scale particularly in marketing efficiency
•Once regions achieve scale in commercial, then target bolt-on residential acquisitions
Building Local Route Density
•Relative route density is a key determinant of operational success and profitability
•Bolt-on acquisitions provide a high level of synergy for sub-scale branches
•Prioritise acquisition efforts to sub-scale locations
•Standard process for acquiring and integrating new companies effectively and efficiently
Coverage for National Accounts
•28% of the commercial pest control market is national accounts ($680m)
•Opportunity to leverage our international account relationships
•Extend our footprint through medium-sized, regional acquisitions
National Account Customers in the US Acquisitions Have Opened Up a $680m Market for Rentokil
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Under-represented in National Accounts But, Well-Placed for Growth
0%
2%
4%
6%
8%
10%
12%5.
4%
3.9%
7.8%
10.2
%
2.5%
Sources: Market data - G Curl Pest Control Industry 2012 report; based on 2014; Nat A/c Mkt
National Accounts Data filters: >25 premises and >500 employees
Share
• Only 4 companies can service national customers – Rentokil is one of them • We cover around 96% of the population and 49 of the top 50 markets in the US • Rentokil has 7.8% of the Commercial Market, but only 2.5% of the National Accounts Markets:
a $30m+ million opportunity
XX Top 50 cities by population
No Rentokil business coverage
Rentokil business coverage
Our focus is on
North American Acquisitions We Have A Clear Acquisition Model That Links Value To Strategy
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Rationale Strategy
The Residential Opportunity
•Two thirds of the North American opportunity is Residential/Termite
•The Residential market particularly benefits from absolute scale particularly in marketing efficiency
•Once regions achieve scale in commercial, then target bolt-on residential acquisitions
Building Local Route Density
•Relative route density is a key determinant of operational success and profitability
•Bolt-on acquisitions provide a high level of synergy for sub-scale branches
•Prioritise acquisition efforts to sub-scale locations
•Standard process for acquiring and integrating new companies effectively and efficiently
Coverage for National Accounts
•28% of the commercial pest control market is national accounts ($680m)
•Opportunity to leverage our international account relationships
•Extend our footprint through medium-sized, regional acquisitions
Our Focus is on Building Local Density and Coverage for National Accounts (Growth in Residential is a Secondary Benefit)
The North American Strategy for Profitable Growth A Clear and Consistent Strategy
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The Approach
Local Organic Growth
• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors
• Upsell a wider range of services and new innovations to our existing customers
• Investment in Brand Building for commercial, but especially in our residential markets
• Maintain our very high customer satisfaction rates to deliver high Customer Retention
The Rentokil Model
The North American Strategy for Profitable Growth A Clear and Consistent Strategy
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The Approach
Local Organic Growth
• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors
• Upsell a wider range of services and new innovations to our existing customers
• Investment in Brand Building for commercial, but especially in our residential markets
• Maintain our very high customer satisfaction rates to deliver high Customer Retention
The National Accounts Opportunity
• Drive Awareness that there is now an alternative supplier in Rentokil
• Continue to invest in national accounts Capability (e.g. sales teams and operational excellence)
• Customer Segment Targeting particularly leveraging our links with international customers
The Rentokil Model
The North American Strategy for Profitable Growth A Clear and Consistent Strategy
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The Approach
Local Organic Growth
• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors
• Upsell a wider range of services and new innovations to our existing customers
• Investment in Brand Building for commercial, but especially in our residential markets
• Maintain our very high customer satisfaction rates to deliver high Customer Retention
The National Accounts Opportunity
• Drive Awareness that there is now an alternative supplier in Rentokil
• Continue to invest in national accounts Capability (e.g. sales teams and operational excellence)
• Customer Segment Targeting particularly leveraging our links with international customers
Target Growth for Route Density
• A clear focus on where to drive Route Density growth: top 50 Metro areas and sub-scale markets
• Restructure routes to improve Route Optimisation to deliver the route density and profitability
• Consider route density in our Pricing strategy (e.g. National Accounts)
The Rentokil Model
The North American Strategy for Profitable Growth A Clear and Consistent Strategy
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The Approach
Local Organic Growth
• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors
• Upsell a wider range of services and new innovations to our existing customers
• Investment in Brand Building for commercial, but especially in our residential markets
• Maintain our very high customer satisfaction rates to deliver high Customer Retention
The National Accounts Opportunity
• Drive Awareness that there is now an alternative supplier in Rentokil
• Continue to invest in national accounts Capability (e.g. sales teams and operational excellence)
• Customer Segment Targeting particularly leveraging our links with international customers
Target Growth for Route Density
• A clear focus on where to drive Route Density growth: top 50 Metro areas and sub-scale markets
• Restructure routes to improve Route Optimisation to deliver the route density and profitability
• Consider route density in our Pricing strategy (e.g. National Accounts)
Accelerate Growth Through M&A
• Continue our Strategic Approach to Acquisitions: National Coverage, Building Route Density in our sub-scale markets, and Expanding our Residential Footprint
• Continue to Deliver Strong Returns on the companies we do buy through rigorous Due Diligence and well-developed Integration Plans
The Rentokil Model
The North American Strategy for Profitable Growth A Clear and Consistent Strategy
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The Approach
Local Organic Growth
• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors
• Upsell a wider range of services and new innovations to our existing customers
• Investment in Brand Building for commercial, but especially in our residential markets
• Maintain our very high customer satisfaction rates to deliver high Customer Retention
The National Accounts Opportunity
• Drive Awareness that there is now an alternative supplier in Rentokil
• Continue to invest in national accounts Capability (e.g. sales teams and operational excellence)
• Customer Segment Targeting particularly leveraging our links with international customers
Target Growth for Route Density
• A clear focus on where to drive Route Density growth: top 50 Metro areas and sub-scale markets
• Restructure routes to improve Route Optimisation to deliver the route density and profitability
• Consider route density in our Pricing strategy (e.g. National Accounts)
Accelerate Growth Through M&A
• Continue our Strategic Approach to Acquisitions: National Coverage, Building Route Density in our sub-scale markets, and Expanding our Residential Footprint
• Continue to Deliver Strong Returns on the companies we do buy through rigorous Due Diligence and well-developed Integration Plans
The Rentokil Model
A strategy designed to deliver Strong Growth and Rising Margins
Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
Stewart Power Chief Marketing Officer
A Strong Brand Around The World
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The Global Leader in Pest Control
Rentokil Around The World Strong Positions And Strong Brands
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Strong Market Positions Around the World Strong and Consistent Branding
Market Position
Number of Rentokil Markets
Mature Emerging Total
Number 1 16 31 47
Number 2 2 9 11
Number 3 3 2 5
Number 4/5 2 1 3
An Excellent Position But Need To Keep Building Brand Strength
Building Brand Strength Through Integrated Programmes Leveraging Local Development Around The World
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Building Brand Awareness Building Brand Salience Building Brand Leadership
Multi-Channel Marketing (Key Focus on Digital) Service Innovation
Winning The Battle For Customers Online A Core Area Of Competence That We Leverage Around The World
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30% pa growth in online visitors and accelerating conversion rates
63% of new business for Rentokil now originates from digital channels
J F M A M J J A S O N D
2010
2011
2012
2013
2014
Org
anic
Vis
ito
rs,
ren
toki
l.co
m s
ites
Customers come to us to look for answers to their pest problems
Brand Leadership Through Innovation Tangible Value of New Product Sales
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What Innovation delivers for us
Technical Leadership Supporting Our Brand Leadership Position
Rentokil has always been defined by its Innovation and Technical Leadership
• Innovative Products – Fast, effective and targeted treatments – Detection and monitoring
• Technical Leadership – Technical surveys by sales colleagues – The knowledge and insight of our Technicians
• Direct upsell opportunities
• Realising a higher price premium
• New opportunities to sell
• Something new to talk to customers about
Differentiating Through Our Innovation It’s How We Do It As Much As What We Deliver
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Understanding Animal Behaviour
Developing New Products and Service Offers
Developing & Testing Novel Interventions
Regulatory & Technical Compliance
Measuring Product Efficacy
Break-out Sessions (by badge colour dot)
Break-out Presenters Room Session 1
10.10–10.25 Session 2
10.30–10.45 Session 3
10.50-11.05
1) Insect Control
Savvas Othon Mark Reader
Harpley
2) Rodent Control
Nigel Cheeseright Berwyn Evans
Bartholomew
3) The Role of Information
Jacob Catsburg Stewart Power
Prescot
Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control
The Global Leader in Pest Control
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Andy Ransom Chief Executive Rentokil Initial plc
Rentokil around the World 1 May 2015
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The Global Leader in Pest Control
The Rentokil Family The Most International Pest Control Company Around The World
54 66 Territories covering 91% of world’s economy – Market Leader in 47
Rentokil Around The World Our Coverage Is A Differentiating Advantage
55
Highest Coverage of World Economy Company-Owned Business Model
Clear Market Leadership Through Our International Footprint
Pest Company Territories % World GDP Rentokil 66 91%
Ecolab 15 63%
Terminix 23 58%
Rollins/Orkin 34 54%
Anticimex 13 18%
• Our model is for company-owned businesses – We do not franchise (except four small, legacy franchises) – We JV by exception (Japan and Saudi Arabia)
• Ensures consistency in delivery & performance and higher earnings from international growth
• Rollins & Terminix franchise international ops – Rollins: 31 out of 34 markets franchised – Terminix: 21 out of 23 markets franchised
Growth From Emerging Markets A Major Contributor To The Category’s Growth
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• Asia
• Latin America
• MENAT
• East Africa
• Fiji
• North America
• UK
• Germany
• France
• Nordics
• Pacific
• South Africa
• Caribbean
• Portugal
• Spain
• Greece
• Benelux
• Ireland
• Italy
Gro
wth
Po
ten
tia
l
Profit Contribution
11% of Rev 32% of Growth
60% of Rev 55% of Growth
23% of Rev 12% of Growth
6% of Rev 1% of Growth
• 11% of revenue but 32% of growth
• Growth rate of 31%
• Organic Growth of 12%
• Benchmarked against weighted GDP growth of 6.4%
Performance: Emerging Quadrant
Quadrant Positioning – Pest
A major source of growth today while building the pest business of the future
Paul Cochrane Regional MD, Asia
The Market Leader In Asia
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The Global Leader in Pest Control
2012 2013 2014 CAGR
Revenue (£m) 41.4 46.6 52.3
Growth % +11% +12% +12% +12%
Organic % +11% +13% +10% +12%
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Rentokil In Asia Good Momentum and a Strong Platform to Leverage Growth
Sourcing: RI Internal database
A Strong Base To Build From 12 Countries 224 Service Locations 1,865 Technicians and 91 Field Biologists
The Asian Pest Control Market Growth Outperforms GDP
£3.5m, +30% £4.0m, +2%
£0.9m, +49%
£13m, + 8.3%
£11m , +8.4%
£5.8m, +15%
£6.1m , +34.9%
£1.3m, +10.4%
£1m, + 5%
£1.5m, +1%
2
2
3
£2.5m, +6.6%
Sourcing: RI Internal database 59
£2.2m, + 12.5%
Rentokil Position 1 2 3
2014 Revenue, 11-14 CAGR%
The market leader across Asia with strong positions in all markets
Key growth drivers
• Established Pest Control Market – Mind-set on Pest Control Service • Continuous density building via geographic/customer tier expansion, right sector mix • Differentiation from service review, translating into increased customer retention, from 84% in 2011 to 87% in 2014 • Building best technicians in the industry through various training and engagement programmes • Winning sales team, equipped with solid technical knowledge • Robust sales and marketing plan and execution
Sourcing: RI Internal database 60
Case Study from Malaysia Leverage Brand and Strong Positions In An Established Market (2011-14 CAGR 8.3%) pa)
1
2
3
2012 2013 2014
Others
Residential
Offices
Industrial And Manufacturing (NonFood)
Food Processing
Food & Beverage
Key Facts
• Population: 1.8Million (as of 2010) – largest population in Malaysia, with a high standard of living, lowest poverty rate
• The state of Selangor has the largest economy, making up 23% of the total GDP of Malaysia
• The most developed in Malaysia with good infrastructure
• Residential, Food processing, Industrial & Manufacturing sectors are the core growth drivers
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Shah Alam
+9%
+22% £m
Case Study from Malaysia – Selangor Branch Selling Additional Services to Customers for Retention (87% in 2012 to 89% in 2014)
Rentokil In Asia Focus on Audited Industries (Primarily Food) and Brand Protection
Food & Beverage Service
+18% +28% +21% +19% +9% +9%
Sector Split
2012-14 CAGR
13% 8% 9% 6% 13% 8%
+16%
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Industrial & Manufacturing
Food Processing
Chain Food Retailer
Hotels Residential Office
13%
Export Assurance
Food Legislation and Auditing
Brand Protection
Rising Middle Class
Drivers
Rentokil is trusted to provide assurance in food hygiene - a key issue in Asia
Rentokil In Asia Huge Opportunity for Growth in China & India Pest Control Markets
Sourcing: (1) Global Pest Control Services Market 2015-19, Technavio (2) RI Internal database, external desk research & market intelligence including interview local Pest Control Association 63
£ 231 m(2)
£0.17 / capita
(1.1% of US)
£ 4,950m(1)
£15.30 / capita Sabiha to validate
1,390 m
Population: 1.26bn
323m 1,260 m
£ 128 m(2)
£0.10 / capita
(0.7% of US)
CAGR 15%(2)
CAGR 3.5% CAGR 12%(2)
Population:
Pest Control Industry:
Spend / Capita:
Growth Rate
64
1
• 230-300 million middle class (est 630m by 2022)(1,5)
• 127 cities with 1 million + population(1)
• Top Consumption Trends (2013)(2)
- Pay for safety, only 26% feel satisfied on food safety - Rapid increase in dining out - 10% pa growth in leisure & vacation travel
• Rising trend in the consumption of services (Health care/Financial/Property/Travel/Retail)
Sourcing: (1) Helen Wang, the China Dream (2) Ipsos, Key findings of China Middle Class Quality of Life (3) The Times of India, Oct/14 (4) Hitting the sweet pot, EY ((4)World Population Statistics (5) Mapping China’s Middleclass, June 2013, McKinsey (6) STR Global, Jan/15
• 160 million middle-class(3)(est. 200M/2020)(4)
• 53 cities with 1 million + population(6)
• Drive different consumption patterns - healthcare, education, recreation, personal products and services
• New sense of nationhood in India - Drawn from the aspiring middle classes in cities - Linked by commerce and technology - Rising standards of living and good government(4)
Factors Driving Growth in China and India Explosive Growth of Emerging Middle Class Driving Up Expectations for Hygiene
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Factors Driving Growth in China and India Professionalising of Food Industry Rapidly Driving Need for Pest Control 2
• 2nd Largest retail market after USA(1) World’s largest on-line retail market(5)
• 33,000 large food manufacturers (sales more than £550K)(2)
• Booming food service industries - eg Starbucks doubling to 3000 outlets by 2019(3)
• 5,000 Government Food Safety Initiatives since 2009(3)
- New standards for production environments & processes - Traceability and accountability through supply chain - Tough penalties enforced by a new China FDA
• Aggressive entry from International Audit Bodies
Sourcing: (1)(2) GAIN Report, USDA, Apr/2013, Dec/2014 (3) Food Safety in China, SSRC, Feb/2014; The power of China Retail 2013, Delloitte(4) Coffee chains brew robust future in China, FT, 12/14 (5) iResearch
• Online food ordering $800m and growing 20-30% pa
• The Indian food manufacturing industry accounts for(5)
- 32% of total Indian food market - 14% of manufacturing GDP, 13% of India’s exports and
6% of total industrial investment
• India’s food manufacturer sector 5th in the world in exports, production and consumption
• 37,000 food manufacturers
• New Food Safety Regulations driving quality and hygiene to make India more competitive in global market
Case Study from China Driving Profitable Growth Through Targeting Top Cities (2011-14 CAGR 34% pa)
66
0
1
2
3
4
5
6
7
2012 2013 2014
+31%
+44%
+28%
£m
Key Growth Driver
• Target Top 18 city Cluster, sector mix focus to build density
• High performing sales force, supported with defined sales & marketing program
• Operation optimization & technician capability building as the differentiation to build customer relationships
• Industry Evolution – Strategic partnership with Key Accounts, Food Safety Compliance body and Pest Control Association
Sourcing: RI Internal database
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Key Facts Of Shanghai Branch
• Focus on 3 city clusters, Shanghai/Hangzhou/Ningbo with population of 99M (as of 2013)(1)
• GDP per Capita – SH (US$14,845), Hangzhou/Ningbo (US$11,225)(1)
• City Cluster including No. 1 Commercial city in China, Industrial & Food Processing Development Zones
8% 14% 21% 32% 4%
0
1
2
2012 2013 2014
Others
Office/FM
Industrial
Hotel
Food Service
Food Retailer
Food Processing
+32%
+25%
£m
Sourcing: (1) China Census
Case Study from China – Shanghai Branch Focus on Density & Sector Mix To Drive Revenue And Margin Improvement
2
2
3
3%, 121
3%, 3,000
3%, 3,000
38%, 30
24%, 300
31%, 200
14%, 33 19%, 15-20
• Target top 5% of the 6700 pest control
service providers in 8 key countries
• Drive consolidation in established markets through bolt-on acquisitions in Malaysia, Indonesia, Singapore, Thailand & Hong Kong
• Acquire for footprint expansion and density building in China, India & Korea to establish lead positions
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Rentokil In Asia M&A Accelerates Growth While Increasing Profitability
Rentokil Position 1 2 3
Rentokil Share, No of Providers
Strong Pipeline, Dedicated & Experienced Regional M&A Team
• Momentum in organic revenue growth
• Accelerating further through M&A
• Geography & sector focus to build density and profitability
• Meeting needs of target customer - Integrated service offer - Service extensions & innovation
• Clearly targeted sales & marketing campaigns
• High-performing sales team
• Outstanding customer service measured by Net Promoter Score
• Technician capability building & engagement program
• Transforming operation model via digital devices
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Rentokil In Asia Strong Position, Good Momentum, Huge Opportunities & A Clear Plan
Differentiated Service Offer Differentiated Service Delivery Differentiated Business Strategy
Alain van Lidth de Jeude Regional MD, South America
Our Expansion into Latin America
The Global Leader in Pest Control
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Focus On Latin America South America, Central America and Mexico
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Dynamic Population Economic Potential Maturing Pest Market
• 600m Population – Growing 1.2% pa (0.7% in Asia)
• Young population – 28% under 14 years (22% in Asia)
• Urbanised Population – 79% Urbanised – 52% in Asia, 75% in Europe
• $9,500 GDP / Capita – $36k in EU, $6k in Asia
• GDP growth 3-4% to 2016 – Long-term forecasts higher
• Significant growth in food, technology & manufacturing – Core sectors for pest control
• Professionalising pest industry – Supporting exports into US
• High pest burden – Mosquitoes (esp. Dengue risk) – Rodent control
• International businesses – Looking for same standards as North
America and Europe
A Key Region for Long-Term Growth and Supporting International Businesses
Pest Control In Latin America Principal Markets
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Latin America £840m Market (including Mexico and Central America)
Consolidating with the arrival of International Players
Latin America is becoming a key part of the world Pest Control market
• Rentokil (6 countries) – Brazil, Colombia, Chile – Mexico, Guatemala, El Salvador
• Ecolab (3 Counties) – Mexico, Brazil, Chile
• Rollins / Orkin (12 Countries – all franchises) – Brazil, Chile, Ecuador, Guatemala, Paraguay, Peru, Uruguay – Costa Rica, Guatemala, Honduras, Mexico, Panama
• Terminix (4 Countries – all franchises) – Brazil, Chile, Honduras, Mexico
Colombia £60m
Brazil £320m
Argentina £45m
Peru £40m
Chile £35m
Other S America
£80m
Central America
£70m
Mexico £200m
Rentokil In Latin America A City-based Strategy To Drive Profitability
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Our Strategy is a City Strategy Rather Than A Country Strategy
South America Highly Urbanised
City Country Millions of People
Sao Paolo* Brazil 20
Bueno Aires Argentina 13
Rio* Brazil 12
Lima Peru 9
Bogota * Colombia 9
Santiago* Chile 6
Belo Horizonte Brazil 5
Medelin * Colombia 4
Salvador Brazil 4
• 20% of South American population covered in top 10 cities alone
Route Density Delivers Cost Leadership
• Route density & optimisation for lowest cost – More time on customers’ sites and less in their vans – Faster and lower cost response for emergency call outs
• Benchmark is relative density vs competitors
• Cities provide the absolute density
• In control of operations
Entering New Markets What We Look For In An Acquisition
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Quality in the Metrics Quality in the Business
A rigorous M&A process to deliver the right opportunities
• City coverage in target regions/countries – Absolute density and density relative to competition
• Quality of financial performance – Volume and revenue growth vs market growth – Profit level and cost management – Synergy potential – Impact of closing inappropriate/unethical contracts
• Quality of contract portfolio – Target sectors – Service Mix & Upsell Potential – Retention Rates
• Quality of management and colleagues – Fit with Rentokil culture and values – Looking for leaders who will stay with us – Capability to absorb bolt ons
Rentokil In Latin America Our Journey To Date
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Market Entry: 2011 Acquisitions: 1 Market Position: 2
Mexico
Market Entry: 2012 Acquisitions: 3 Market Position: 2
Brazil
Market Entry: 2015 Acquisitions: 1 Market Position: 2
El Salvador
Market Entry: 2014 Acquisitions: 2 Market Position: 5
Colombia
Market Entry: 2015 Acquisitions: 1 Market Position: 2
Guatemala
Market Entry: 2014 Acquisitions: 2 Market Position: 3
Chile
Rentokil In Latin America Local Growth Supporting International Growth
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Rentokil’s Added Value to Acquisitions Delivering Growth for Rentokil
M&A into Latin America is delivering enhanced organic growth while building a strong position
• Ultimately the opportunity to grow faster – Accelerating growth still further within fast growing markets
• Access to our world class capability – The strongest brand in the market – Proprietary products and innovation – IT systems, mobile technology and customer extranets – Training and structured know-how
• Access to international businesses – A brand trusted to deliver to international standards – Introductions and support for international businesses
• Joining a group where colleagues can grow – For front line colleagues as well as management
2011 2012 2013 2014 2015
Turnover (£'000) 856 4.036 7.237 20.145 26.760
Growth% - 371% 79% 178% 33%
Organic % - 6% 26% 23% 17%
Chris Hunt Group M&A Director
Our Track-Record Of Creating Leverage Through Acquisitions
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The Global Leader in Pest Control
Creating Leverage Through Acquisitions Recap On M&A Case Studies
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City Density (Asia)
• Acquiring quality competitors in target city clusters
• Blending capabilities
• Bolts-ons in established markets for route density
• Back office synergy
We buy platforms in new attractive markets, build density and capability or expand our existing country footprint
Market Entry (Latin America)
• Identify the right platform – Quality in the economics and in the business
• Cultural fit
• Former owners stay and flourish
• Improve performance through RI technology and financial discipline
National Density (US)
• Highest M&A focus
• Extend footprint with medium sized regional deals
• Bolt-ons build local scale & density
• Rentokil sales and service models
• Back office synergy
Creating Leverage Through Acquisitions Strong Track Record
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4 3 8
3
7 8
10
3
3
4
1
1
2012 2013 2014 2015 YTDGro
wth
Po
ten
tial
Profit Contribution
Acquisitions: 18 Revenue: £26m Bahamas, Brazil (3), Chile (2), Colombia, El Salvador, French Guyana, Guatemala, India (2), Korea, Mozambique, Saudi Arabia, Singapore, Turkey, UAE
Acquisitions: 2 Revenue: £1m Spain, Portugal
Acquisitions: 7 Revenue: £9m Italy (5), Netherlands, Rep. of Ireland
Acquisitions: 28 Revenue: £145m North America (21), UK (2), Lithuania, Zambia, Norway, N. Ireland, Australia
Pest Acquisitions since 2012
55 Pest Acquisitions since 2012
We have the in-house capability to identify, evaluate and execute Acquisitions at Pace
Creating Leverage Through Acquisitions Our Model for Value Creation
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• Market position & Experience
• Scale & density
• Customer/segment relationships
• Reputation
• Profitability
• Business Ethics
• Role of management
• Secure key customers
• Revenue synergy potential: – Rentokil Sales & Service models – Proprietary products and services
• Cost synergy potential: – Service Productivity – Property – G&A
• Rentokil Technology
• Investment Committee Review – Pre & post DD
• Track integration activities
• Track progress vs business case
• Post deal review (1 year)
• Bi-annual review of business case vs. actuals by plc Board
Disciplined Evaluation Clear Integration Plan Governance Model
We understand where and how we Create Value and have a Proven Model to deliver it
Creating Leverage Through Acquisitions Financial Value Creation – Deals done vs Investment Case 2012 to H1 2014
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Gro
wth
Po
ten
tial
Profit Contribution
% of total spend: 76% Target IRR: 15 - 20% Actual IRR: 20%
• All quadrants met or exceeded IRR targets
• Integration activities accelerated
• Most deal structures adjust for shortfalls so underpin IRR returns
Total Performance (n=33 deals)(1)
We expect to deliver ~£50m of value-adding acquisitions each year
Acquisitions: 10 Revenue: +4% EBITA: +2% % of total spend: 20%
Target IRR: 15% Actual IRR: 20%
Acquisitions: 16 Revenue: -- EBITA: +16%
Acquisitions: 2 Revenue: -14% EBITA: +8%
Acquisitions: 5 Revenue: -9% EBITA: -26%
% of total spend: 1% Target IRR: 25% + Actual IRR: 27%
% of total spend: 3% Target IRR: 20% + Actual IRR: 23%
(1) Pest deals completed from 2012 to H1 2014
Creating Leverage Through Acquisitions In Summary
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1. We have a very strong track record and a good pipeline of opportunity
Proven Track Record Proven Integration Model Proven Value Creation
We understand where and how we Create Value and have a Proven Model to deliver it
14 12
23
6
IRR
20% 20%
27% 23%
2. We have the model to transfer our know-how to acquired businesses
3. Our acquisitions deliver real financial value
Jeremy Townsend Chief Financial Officer
Pest Control: A Financially Attractive Category
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The Global Leader in Pest Control
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Pest Control – Further Potential For Margin Improvement Low Capital Intensity/High Cash Generation
World Number 1 for Commercial Pest Control
Market Leadership in 47 out of 66 markets
• Pest Control ongoing revenue +8.5% in 2014 (+12% in Q4)
• Category profit +8.4% in 2014 (+10% in Q4)
• Pest Control: 41% of group revenue and 44% of group profit
• Clear capital allocation strategy focused on pest acquisitions
• 23 acquisitions in 2014; 6 in Q1 2015
• Further potential for margin improvement: M&A and organic growth will increase margins particularly in NA & Asia
• High cash returns on capital employed (c25%): low capital requirement and high cash generation
2014 Revenue: £740m 2014 Op Profit: £140m
2014 Op Margin: 18.9%
Netherlands Germany
US
UK
Australia
Other
41% 44%
Group Pest
Pest control delivers strong returns on capital
% of Group profits
44%
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Pest Control – High Revenue Growth And M&A Focus Increasing Exposure To Higher Growth Markets
We have increased our exposure to Pest Control & Emerging and Growth quadrants We have increased our exposure to Pest Control & Emerging and Growth quadrants
Andy Ransom Chief Executive
Rentokil Pest Control A Compelling Growth Story
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The Global Leader in Pest Control
Rentokil = Pest Control
The Global Leader in Pest Control
• Unrivalled global leadership position – Most international across 60+ countries
• Strongest brand around the world, particularly important in Emerging
• Significant operational leverage – Proven, repeatable lean business model with best people, tools and training – On average, 63% of sales originate from digital channels
• Innovating at pace for future growth – Global Technical Centre delivering innovation pipeline that’s second to none
• Strong position in higher growth/higher margin segments – Best management information tools
• Highly cash generative and clear capital allocation strategy – Strong M&A capability and excellent leverage out of acquisitions – Driving profitable growth through density
• Opportunities to expand into adjacent services – Vector control, marine, agriculture
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Rentokil Pest Control Investor Seminar 1 May 2015
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The Global Leader in Pest Control