Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2015 Earnings Presentation
45 slides from Rentokil Initial's earnings presentation, March 2016
Slide 1: 2015 Preliminary Results
2015 Preliminary Results Welcome
Slide 2: Forward-looking statements
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 nu
Slide 3: Opening Remarks
2015 Preliminary Results: Opening Remarks John McAdam Chairman
Slide 4: Introduction
2015 Preliminary Results: Introduction Andy Ransom Chief Executive Officer
Slide 5: 2015 Highlights: Revenue growth
2015 Highlights E xecuti ng our s tr ate g y i n 2015 +6.5% O n g o i n g r e ve n u e + 6 . 5 % ( C E R ) i n 2 0 1 5 ( o r g a n i c + 1 . 8 % vs 1 . 2 % P Y ) . Good growth in NA, Germany, Asia, Pacific and UK. H2 revenue growth +7.7% (H1: 5.3%) reflecting Steritech acquisition in Q4. Customer re
Slide 6: 2015 Highlights: Operating profit
2015 Highlights E xecuti ng our s tr ate g y i n 2015 +8.5% Ongoing adjusted operating profit +8.5% (CER). Focus on density building. Group margins up 20bps. NA & Asia seeing margin uplift (+1.2% pts). France remains challenging. 6
Slide 7: 2015 Highlights: Pest Control
2015 Highlights E xecuti ng our s tr ate g y i n 2015 +13.1% P e s t C o n t r o l : + 1 3 . 1 % r e ve n u e a n d + 1 4 . 2 % p r o f i t i n 2 0 1 5 ( C E R ) . 4.6% organic growth. Leadership in digital and innovation. World class business performing well. 7
Slide 8: Hygiene Growth
2015 Highlights E xecuti ng our s tr ate g y i n 2015 Hygiene Growth H y g i e n e r e ve n u e + 2 . 6 % a n d p r o f i t + 1 . 2 % g r o w t h i n 2 0 1 5 ( C E R ) . Good progress in Pacific, Asia and UK & Ireland, in particular. Benefits of product investment coming through. 8
Slide 9: 23 acquisitions
2015 Highlights E xecuti ng our s tr ate g y i n 2015 23 acquisitions 23 acquisitions in 2015, 21 in Pest Control. Annualised revenues of £158m. Steritech integration progressing well. 9
Slide 10: Growth & Emerging
2015 Highlights E xecuti ng our s tr ate g y i n 2015 Growth & Emerging Capital allocation model working well. Revenue growth: +14.0% Emerging, +12.0% Growth (CER). All 2015 acquisitions in Growth & Emerging quadrants. Growth & Emerging: 60% of portfolio. 10
Slide 11: Encouraging overall performance in 2015
Encouraging overall performance in 2015 Clear strategy in place. Good opportunities to maintain the progress in 2016 11
Slide 12: Financial Review
2015 Preliminary Results: Financial Review Jeremy Townsend Chief Financial Officer
Slide 13: Financial Highlights (Continuing Operations)
Financial Highlights (Continuing Operations) H2 Full Year 2015 2014 Δ 2015 2014 Δ Revenue at CER 951.1 892.6 6.6% 1,837.2 1,740.8 5.5% Revenue at CER – ongoing* 941.3 874.4 7.7% 1,813.9 1,702.9 6.5% Adjusted PBITA at CER 144.3 133.3 8.3% 251.2 232.2 8.2% Adjusted PBITA at CER – ongoing* 145.4 134.0
Slide 14: North America
North America At constant exchange rates S t r o n g p e r fo r m a n c e i n 2 0 1 5 Group revenue Group operating profit suppor ted by acquisitions Reve n u e u p 1 6 . 8 % ( + 2 . 7 % o r g a n i c ) , o p e r at i n g p r o f i t u p 2 8 . 6 % 22% 17% +3.0% organic growth from Pest Control Opera
Slide 15: Europe
Europe At constant exchange rates Reve n u e f l at , g o o d g r ow t h i n c e n t r a l Group revenue Group operating profit and souther n Europe O ve r a l l p e r fo r m a n c e h e l d b a ck b y Fr a n c e a n d B e n e l u x 45% 48% Good revenue growth in Germany (+3.2%), southern Europe (+5
Slide 16: UK & ROW
UK & ROW At constant exchange rates Reve n u e + 1 1 . 5 % ( + 4 . 2 % o r g a n i c ) i n 2 0 1 5 Group revenue Group operating profit O p e r at i n g p r o f i t + 1 2 . 5 % r e f l e c t i n g r eve n u e p e r fo r m a n c e a n d i m p a c t o f Pe t e r C ox p r o p e r t y c a r e b u s i n
Slide 17: Asia
Asia At constant exchange rates Reve n u e + 1 1 . 3 % ( + 8 . 6 % o r g a n i c Group revenue Group operating profit g r ow t h ) i n 2 0 1 5 O p e r at i n g p r o f i t + 2 7 . 5 % r e f l e c t i n g l eve r a g e f r o m r eve n u e 6% 3% Good performances from both Pest Control and Hygiene bus
Slide 18: Pacific
Pacific At constant exchange rates Reve n u e + 4 . 3 % ( + 3 . 5 % o r g a n i c Group revenue Group operating profit g r ow t h ) i n 2 0 1 5 O p e r at i n g p r o f i t + 7 . 3 % r e f l e c t i n g l eve r a g e f r o m r eve n u e 8% 9% Revenue driven by growth in contract revenue in Pest and
Slide 19: Operating Cash Flow
Operating Cash Flow At actual exchange rates £ million FY 2015 FY 2014 Adjusted PBITA 232.9 232.2 Restructuring costs (7.9) (8.8) One-off items (5.4) (0.1) Depreciation 172.7 187.6 Non-cash items1 10.8 (1.9) EBITDA 403.1 409.0 Working capital (0.7) (4.4) Movement on provisions (7.0) (16.5) Capex (18
Slide 20: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates £ million FY 2015 FY 2014 Operating cash flow – continuing 220.7 209.5 Cash interest (44.2) (49.5) Special pension contributions (0.9) (1.0) Cash tax (27.9) (30.1) Free cash flow – continuing 147.7 128.9 Free cash flow – discontinued (
Slide 21: Capital allocation
Capital allocation I m pr oved f r ee cas h f l ow del i ver y over l as t t wo year s : Enabling investment in Pest Control acquisitions, particularly in Growth and Emerging markets 54 businesses acquired over two years with annualised revenues of £233m C ont i nued a ppl i cat i on of ca pi t al a
Slide 22: Balance Sheet
Balance Sheet Net debt to EBITDA 2.5x post Steritech acquisition (2014: 1.9x) Credit rating maintained at BBB in September 2015 Free cash flow target raised from £100m+ per annum: £110m+ for 2016 and £120m+ for 2017 Revolving credit facility extended to January 2021 Over £150m of centrally-held fund
Slide 23: Delivering Shareholder Value: 2016 Reporting Framework
Delivering Shareholder Value Transparent reporting on our performance 2016 Repor ti ng Fr am ewor k With the exception of integration costs for significant acquisitions, we will report restructuring costs above the line in 2016 Organisational structure unchanged and locked down - therefore no change
Slide 24: 2015 Summary and Guidance for 2016
2015 Summary and Guidance for 2016 2015 Financial Summary Guidance for 2016 Ongoing revenue increase of 6.5% • Central & regional overheads in line with 2015 • Above the line restructuring costs c.£7m Improvement in organic growth +1.8% (1.2% PY) • Steritech integration costs c£5m (reported with
Slide 25: Executing our Strategy: The Next Phase
Executing our Strategy: The Next Phase Andy Ransom Chief Executive Officer 25
Slide 26: Our Strategic Roadmap
Our Strategic Roadmap Working well and unchanged Strong and sustainable Mid-single digit High-single digit Medium-term targets: delivery of free cash revenue growth profit growth flow (£110m+ pa) 26
Slide 27: Quadrant Strategy in 2015
Quadrant Strategy in 2015 Capital allocation model Good progress in expanding our EMERGING GROWTH presence in higher GDP growth markets – Growth (+12.0%) and Revenue +14.0% to £142.4m Revenue +12.0% to £943.2m Emerging (+14.0%). Operating profit +24.3% to £21.7m Operating profit +15.7% to £170.7m 3
Slide 28: Business Lines in 2015
Business Lines in 2015 Global leadership in Pest Control and Hygiene Pest Control (44% Group Revenue, 48% Group Operating Profit, 19.1% Operating Margin) World class business performing well. Revenue: £791m +13.1% Strong innovation pipeline – Connect, AutoGate. Increasing scale in Growth and Emergin
Slide 29: The Next Phase
The Next Phase Consistent strategy, refreshed and focused • Greater exploitation of digital expertise Next Phase Accelerate Pest Control • Further differentiation through innovation • Deliver enhanced margins through density and local share Execute Now in Hygiene • Boost sales and service productivi
Slide 30: Accelerate Pest Control
Accelerate Pest Control Rentokil well positioned to lead a growing market Re n t o k i l h a s a n u n r i v a l l e d g l o b a l leader ship position complemented f u r t h e r w i t h S t e r i t e ch . Stronger positions in today’s growing markets. Good M&A pipeline to build further – we continu
Slide 31: Steritech integration on track in North America
Accelerate Pest Control Steritech integration on track in North America S t e r i t e ch - o n t r a ck t o d e l i ve r o u r 2016 syner gy tar gets. Integration work streams underway. Add on services - detailed work plans including near-term opportunities. Strong route density opportunities identi
Slide 32: Global expertise: Integrated Mosquito Management
Accelerate Pest Control Global expertise: Integrated Mosquito Management Re n t o k i l o f fe r s m o n i t o r i n g a n d c o n t r o l s e r v i c e s i n A s i a , L at A m , C a r i b b e a n , A f r i c a and Nor th America. Major public health concerns: Dengue fever, Zika, Yellow fever, Ence
Slide 33: Hygiene: Execute Now - High quality range
Hygiene: Execute Now High quality range - increasing differentiation Reflection Strengthened hygiene range - smar ter range selling. Signature range now fully launched. COLOUR 4 new Signature products added to the range. Signature Complete No-Touch washroom range. Prestige Styling Premium customers
Slide 34: Hygiene: Execute Now - Operational best practice
Hygiene: Execute Now Focus on execution of operational best practice C o u n t r y a c t i o n p l a n s fo c u s e d o n Hygi e ne : Annua l Re ve nue G r ow th d e l i ve r i n g o p e r at i o n a l b e s t p r a c t i c e . Examples: Indonesia: Density focused sales campaign in Jakarta Hygiene s
Slide 35: Europe
Europe Country plans focused on what we can control Benelux: France: Much improved on its major issues of 2013. Operational Progress in Workwear. YoY revenue slightly behind but profit slightly up. Safety (LTA) 54.7% Improvement Lower service delivery and processing cost. Customer satisfaction 12.5%
Slide 36: Workwear Quality Programme
Workwear Quality Programme KPIs in place and good processing improvements 1. Rigorous application of KPIs to measure quality of service. • New customer-focused Quality KPIs – 12 new metrics - introduced across the business’ operations. • Improved customer satisfaction by country – of between +2% and
Slide 37: Workwear Quality Programme: Range harmonisation
Workwear Quality Programme Range harmonisation and sharing of best practice 5. Smarter selling. • New service concepts in development – eg use of management information showing garment usage/wash frequency by wearer and type (supporting hygiene compliance in food sector). 6. Creation of product and
Slide 38: Digital Leadership
Digital Leadership Building sales pipeline and customer retention Te ch n o l o g y l e a d e r s h i p d r i v i n g g r ow t h a n d l o n g t e r m d i f fe r e n t i at i o n . New Pest Control web platform Rolled out in 2015 to 23 markets – now in all major markets. Total visitors +19% and web
Slide 39: Innovation Leadership
Innovation Leadership Building sales pipeline and customer retention PestConnect S t r o n g i n n ov at i o n p i p e l i n e i n p l a c e i n cl u d i n g s e n s o r s fo r 2 4 / 7 p e s t & h y g i e n e . PestConnect Success in the Netherlands in 2015. Connect portfolio of €1m+. 3+ year contra
Slide 40: Value Creating M&A
Value Creating M&A Capital allocation model working well EMERGING GROWTH • 2015: 23 acquisitions, £158m annualised revenues. Since 1/1/15 Since 1/1/15 • 13 acquisitions in North America - building city Acquisitions: 3 Acquisitions: 20 density and Steritech strategic acquisition. Revenue: £1.6m Reven
Slide 41: Strategy into Action
Strategy into Action 44%% 4% 8% Focus on Growth and Emerging – changing shape of Group Revenues 32% 28% by quadrants 35%% 35 2013 32% 2016 Completed 6 acquisitions in 2016 Acquisition pipeline 60% remains strong. 29% 29% Emerging Growth Protect & Enhance Two thirds of portfolio in Growth & Emerging
Slide 42: Encouraging performance
Encouraging performance Next Phase being executed Accelerating Pest Control (+13.1% ongoing revenue, +4.6% organic). Hygiene returned to profitable growth; focus on ‘execution now’ in sales and operations. Workwear Quality agenda making an operational difference; challenging conditions in France.
Slide 43: 2015 results summary
Rentokil ale Initial Se A (s 980, \ cone ) /- s +6.5% ceo Tigre E (CER) 99d \reenton, / | +18% organic (FY 2014:+1.2%) & retese) irate oy ‘Gua HygieneConnect, PestConnect & AutoGate Y/N Xa b\_ 12.8% ‘9 ) ( 1) 48.5% cin ( ,cnsana | improvement nw — sey, \ catistction / £148m By we ahead Ys ‘ 0.9% } D
Slide 44: Rentokil Initial
Rentokil Initial Protecting People. Enhancing Lives.
Slide 45: Growth Potential: Countries by quadrant
Revised list of countries by quadrant as at 1/1/16 EMERGING GROWTH HIGH IRR ~15% IRR >15% Asia NA, UK, Germany MENAT Caribbean Latin America France PC Central America Nordics PC Fiji South Africa PC Kenya/Mozambique Australia/NZ PC & Washrooms Growth Potential Baltics Italy PC Ireland PC & Washrooms