Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2010 Earnings Presentation
40 slides from Rentokil Initial's earnings presentation, Feb 18, 2011
Slide 1: 2010 Preliminary Results
2010 Preliminary Results 18 February 2011 1
Slide 2: Introduction
Introduction John McAdam Chairman
Slide 3: Highlights
Highlights Alan Brown Chief Executive Officer
Slide 4: 2010 Highlights
2010 Highlights • 15% growth in Adjusted PBTA at £192.3m; – Strong performances from Pest Control, Facilities Services and Asia Pacific – Poor performance from City Link and Textiles & Hygiene (Benelux) • 18% growth in adjusted EPS at 7.81p • Revenue down 1.4% although trend improving • Cost savings
Slide 5: Operating & Financial Review
Operating & Financial Review Jeremy Townsend Chief Financial Officer
Slide 6: Financial Highlights
Financial Highlights Q4 FULL YEAR 2010 2009 2010 2009 £m £m £m £m Revenue at CER 642 645 (0.5%) 2,500 2,531 (1.2%) Adjusted PBITA at CER 67 71 (6.6%) 239 221 8.3% Adjusted PBTA at CER 58 61 (5.7%) 192 167 15.1% Adjusted PBTA at AER 59 62 (5.3%) 192 167 15.5% Operating Cash Flow at AER 86 96 (10.8%)
Slide 7: Textiles & Hygiene
Textiles & Hygiene At constant exchange rates Click to edit Master title style • Revenue -1.5% (-0.5% organic) held back by operational % Group Revenue % Adj. PBITA2 control issues in the Benelux and challenging market conditions: 33.1% 45.7% – Poor operational control and pricing pressure in Nether
Slide 8: Pest Control
Pest Control At constant exchange rates Click to edit Master title style • Revenue -0.3%: % Group Revenue % Adj. PBITA2 – Growth in Europe, North America, UK, East Africa and Caribbean (EAC) 20.0% 35.9% – Offset by 8.5% decline in UK & Ireland Hygiene and lower revenue from Libyan contract* – Excell
Slide 9: Asia Pacific
Asia Pacific At constant exchange rates Click to edit Master title style • Revenue -4.9% impacted by 2009 exit of low-margin % Group Revenue % Adj. PBITA2 government contract • Underlying revenue broadly flat year on year: 7.5% 9.3% – Asia +1.4%: • Solid growth momentum in established markets (Indon
Slide 10: Ambius
Ambius At constant exchange rates Click to edit Master title style • Despite ongoing market challenges, an improving revenue % Group Revenue % Adj. PBITA2 trend on 2009: 4.6% 3.1% – FY -3.6% (2009: -10.5%), return to growth in Q4 (+4.0%) reflecting easing of conditions in H2 – Strong uplift in jobs
Slide 11: City Link
City Link At constant exchange rates Click to edit Master title style • Major structural change undertaken in 2010: % Group Revenue – Hub & Trunking restructuring complete, conversion of fleet to curtain sided trailers, roll out of new unified IT 13.1% platform, further reductions in depot numbers •
Slide 12: Initial Facilities Services
Initial Facilities Services At constant exchange rates Click to edit Master title style % Group Revenue % Adj. PBITA2 • Excellent profit & cash performance in difficult conditions 21.7% 9.5% • Improving revenue line as year progressed: – FY +1.6% reflecting Knightsbridge contribution – +1.6% in Q4,
Slide 13: Interest
Interest At actual exchange rates £ million FY 2010 FY 2009 Net interest on bank/bond/finance lease debt* (50.4) (63.6) Net (loss)/return on Pension Scheme 0.1 5.9 Mark-to-market/forex adjustments - (2.1) Other (0.8) 2.2 Per income statement (51.1) (57.6) Average net debt £1,039m £1,213m Average int
Slide 14: Operating Cash Flow
Operating Cash Flow At actual exchange rates £ million FY 2010 FY 2009 Adjusted PBITA 239 221 One-off items (25) (40) Depreciation 213 216 Non-cash items1 11 7 EBITDA 438 404 Working capital - one off (22) 20* - underlying (11) 72* Capex (198) (189) Fixed asset disposal proceeds2 13 10 Operating cas
Slide 15: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates £ million FY 2010 FY 2009 Operating cash flow 220 317 Cash interest (44) (62) Cash tax (35) (17) Other - (1) Free cash flow 141 237 Acquisitions & Disposals (8) (7) FX and other 21 24 Decrease in net debt 154 254 Opening net debt (1,10
Slide 16: Net Debt
Net Debt Net debt at Debt Maturity Coupon 31/12/101,2 £m £500m 2012 LIBOR +0.4% (110) RCF £50m 2013 LIBOR +3.25% (50) FRN £75m 2013-33 LIBOR +3.98% (75) Reset Bond €500m 2014 4.625% (439) Bond £300m 2016 5.75% (333) Bond 1 IAS 39 fair values + 533 2 Headroom £390m; EBITDA / interest covenant is 4x m
Slide 17: Tax
Tax At actual exchange rates £ million FY 2010 Tax FY 2009 Tax charge charge Profit before one-off costs and amortisation of intangibles 192.3 48. 1 166.5 45.6 Goodwill impairment (97.8) - (4.3) - Lease guarantee claim (29.2) - - - Amortisation of other intangibles (54.9) (16.6) (57.0) (17.4) Other
Slide 18: Strategic Review
Strategic Review Alan Brown Chief Executive Officer
Slide 19: Execution of the Strategic Plan
Execution of the Strategic Plan 2009 progress 2010 progress 1. Customer Service/Care 2. Developing Capability 3. Delivering Operational Excellence 4. Lowest Cost and Maximum Cash 5. Profitable Growth – existing/new strong progress progress limited progress 19
Slide 20: Strategic Plan Progress 2008 to 2010
Strategic Plan Progress 2008 to 2010 1. Customer service/care • Service has moved from frequently extremely poor to generally good • Customer Care – good with Tier 1 customers but Tier 2 and 3 still frequently poor and rarely measured 2. Capability • Strengthened the management team and made some pr
Slide 21: Group Goals & KPIs
Group Goals & KPIs Group Goals 2008 2009 2010 * Colleague Colleague engagement* N/A 70% 70% engagement Colleagues Sales colleague retention 54.6% 63.5% 63.8% surveyed across group Service colleague retention 74.2% 74.4% 75.9% for the first H&S LTA rate 1.82 1.53 1.72 time in 2009 Gross sales % of op
Slide 22: 2011 Key Objectives
2011 Key Objectives 1. Turnaround City Link and Textiles & Hygiene Benelux: – City Link Operational Improvement Programme in place by October 2011 but short- term financial performance will be worse than prior year – T&H Benelux stabilised and profitable – further update with Q1 results 2. Customer
Slide 23: Objective 1: Textiles & Hygiene Benelux
Objective 1: Textiles & Hygiene Benelux • Background – Weak general management over a number of years – Unsustainable price position, particularly in Netherlands – Poor operational control, particularly restructuring in Belgium – Financial control issues uncovered during 2010 as we implemented Benel
Slide 24: Objective 1: City Link Improvement Plan
Objective 1: City Link Improvement Plan 1. Operations 2. Contingency Planning for Peak • Physical restructuring limited to Hatfield area in • Major benefit from implementation of Q2 plus a few depot upgrades Customer Care & Operations initiatives • Depot Blueprint designed & implemented by Q3 • Deve
Slide 25: Objective 1: City Link Improvement Plan
Objective 1: City Link Improvement Plan 3. Customer Care 4. Sales & Marketing • Rentokil Initial (RI) investment in state of art • Target profitable growth in 4 key sectors Telephony & Customer Care tools – Implementation by October 2011 ─ Healthcare – Permitting load transfer between central call ─
Slide 26: Objective 2: Customer Care
Objective 2: Customer Care Customer care – immediate, effective, surprising Be pro-active in contacting, listening to and responding to all our customers, not just the very large 26
Slide 27: Objective 2: Customer Care
Objective 2: Customer Care The plan of action Reward & Recognition for Customer Contact Customer Contact Route Optimisation – Front Line Colleagues Management programme Management systems scheduling & optimising workload 27
Slide 28: Objective 2: Customer Care - Measuring Progress
Objective 2: Customer Care - Measuring Progress State of service (98%) Your voice Customer counts voice counts (73/72) (CVC +5%) World World Class Class Service Customer Customer Customer colleague Care Care response times retention (80% in 20secs) rates (82%) Customer Customer retention complaints
Slide 29: Objective 2: Customer Care - Complaints Management
Objective 2: Customer Care - Complaints Management Example from UK Washrooms Ju ne July Aug Sep t O ct Nov Dec 800 700 600 500 400 300 200 100 0 Serv ice: Visit m issed no S ervice: O verd ue Serv ice: O nl y part Serv ice: B ille d for S LS/ AM : Ap po in tm ent Serv ice: P oo r C DR r esp onse Ser
Slide 30: Objective 3: Consistent and Profitable Growth
Objective 3: Consistent and Profitable Growth More & Improved……………..: Existing customers New customers New service lines • Service & Customer Care • Selling Propositions • Product and service innovation • Cross selling • Targeted marketing effort • Related service propositions e.g. Vector Control •
Slide 31: Existing Customers – Retention Rates
Existing Customers – Retention Rates 12 Month Retention Rate % 90.0% Pest 85.0% Ambius IFS Textiles & 80.0% Hygiene APAC Continuing Ops 75.0% 70.0% Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10 10
Slide 32: Objective 3: Consistent and Profitable Growth
Objective 3: Consistent and Profitable Growth More & Improved……………..: Existing customers New customers New service lines • Service & Customer Care • Selling Propositions • Product and service innovation • Cross selling • Targeted marketing effort • Related service propositions e.g. Vector Control •
Slide 33: New Business – Contract Sales %
New Business – Contract Sales % 12 Month Gross Sales Rate % 26.0% 24.0% Pest 22.0% Ambius 20.0% IFS Textiles & 18.0% Hygiene APAC 16.0% Continuing Ops 14.0% 12.0% 10.0% Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- 09 09 09 09 09 09 09 10 10 10 10 10
Slide 34: Programme Olympic: Update on Progress
Programme Olympic: Update on Progress • Advantage • Atlas • Maximize • Customer Account Management • Customer Complaints Management 34
Slide 35: Objective 3: Consistent and profitable growth
Objective 3: Consistent and profitable growth More & Improved……………..: Existing customers New customers New service lines • Service & Customer Care • Selling Propositions • Product and service innovation • Cross selling • Targeted marketing effort • Related service propositions e.g. Vector Control •
Slide 36: Objective 4: Cost Savings
Objective 4: Cost Savings 2011 target £60m…………..: 1. Service Productivity 2. Procurement 3. Overheads • Route optimisation • Rationalisation of Textiles & Hygiene • Continued back office ranges rationalisation • Depot & hub rationalisation • Further savings in indirect costs • Re-platforming of syst
Slide 37: Lowest Cost, Maximum Cash: Cost Savings
4. Lowest, Cost, Maximum Cash: Cost Savings Cost savings achieved vs. prior year 70 £60m £60m 60 50 £44m £45m From 2010 From 2011 projects projects 40 £m 30 20 £16m £15m 10 From 2009 From 2010 projects projects 0 2010 2011 37
Slide 38: Outlook
Outlook • Continued progress in Pest Control, Textiles & Hygiene (excluding Benelux) Facilities Services and Asia Pacific • Operational issues in City Link resolved by October 2011 but financial delivery weak until then • Textiles & Hygiene Benelux performing satisfactorily under new management but
Slide 39: Questions
Rentokil Initial Questions
Slide 40: 2010 Preliminary Results
2010 Preliminary Results 18 February 2011 40