Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2015 Earnings Presentation
34 slides from Rentokil Initial's earnings presentation, Jul 30, 2015
Slide 1: 2015 Interim Financial Results
2015 Interim Financial Results 2015 Interim Financial Results Welcome Welcome 30 July 2015 30 July 2015 1
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: 2015 Interim Financial Results - Andy Ransom, Chief Executive
2015 Interim Financial Results Andy Ransom Chief Executive 30 July 2015 3
Slide 4: Introduction
Introduction • Good revenue and profit performance in H1 (+5.2% ongoing revenue; 8% ongoing profit growth) • Pest Control growing strongly (+9.6% in H1, 4.8% organic) • Momentum in M&A – 14 bolt-ons (12 in pest) with combined revenues of £21m • Strong cash performance (£55.4m in H1) – on track to me
Slide 5: Financial Overview - Jeremy Townsend, CFO
2015 Interim Financial Results Financial Overview Jeremy Townsend CFO 30 July 2015 5
Slide 6: Financial Highlights (Continuing Operations)
Financial Highlights (Continuing Operations) £ million H1 2015 H1 2014 Revenue at CER 886.1 848.2 4.5% REV Revenue at CER – ongoing* 881.5 837.6 5.2% Adjusted PBITA at CER 106.9 98.9 8.0% Adjusted PBITA at CER – ongoing* 106.5 98.6 8.0% PROFIT Adjusted PBTA at CER 89.1 76.4 16.6% Adjusted PBTA at AE
Slide 7: North America
North America At constant exchange rates % Group Revenue % Adj. PBITA • Revenue1 +8.3% – Organic revenue of +2.7%, pest organic revenue +2.9% 20.1% 12.8% – Revenue from continuing acquisition programme +5.6% – Seven bolt-on acquisitions in H1, generating annualised revenue of c. £14m H1 2015 • Opera
Slide 8: Europe
Europe At constant exchange rates • Revenue1 +0.4% (-0.8% organic) % Group Revenue % Adj. PBITA – Good revenue growth in Germany (+3.0%), Southern Europe (+5.2%) and Latin America (+52.8%) (managed out 47.0% 50.2% of the Europe region) – Offset by declines in France (-3.1%) and Benelux (-0.8%) • Ope
Slide 9: UK and ROW
Middle East Turkey, Africa UK and ROW At constant exchange rates % Group Revenue % Adj. PBITA • Revenue1 +13.2% – Organic growth +5.5%, acquisition growth of 7.7% largely from Peter Cox 19.2% 23.7% acquisition completed at the end of 2014 – Continued growth from the UK pest control and hygiene categ
Slide 10: Asia
Asia At constant exchange rates % Group Revenue % Adj. PBITA • Revenue1 +13.3% (+9.0% organic) – Both pest control and hygiene categories performing well 6.0% 3.4% – Operations in the emerging markets of India, China and Vietnam continue to grow strongly - combined revenue growth of 28%. – High sing
Slide 11: Pacific
Pacific At constant exchange rates % Group Revenue % Adj. PBITA • Revenue1 +4.3% (+3.8% organic) - Due to increased contract work in pest and hygiene categories and 7.7% 9.9% greater job work in pest control • Operating profit2 +7.9% – Reflecting higher revenues and also supported by procurement sav
Slide 12: Operating Cash Flow
Operating Cash Flow At constant exchange rates H1 2015 H1 2014 Adjusted PBITA 99.7 100.2 Restructuring costs (2.3) (3.1) One-off items 0.9 0.8 Depreciation 85.4 92.1 Non-cash items1 7.9 (2.4) EBITDA 191.6 187.6 Working capital (8.0) (29.3) Movement on provisions (5.1) (8.7) Capex (88.5) (101.2) Fixe
Slide 13: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates H1 2015 H1 2014 Operating cash flow – continuing 93.6 51.5 Cash interest (23.5) (34.4) Cash tax (14.7) (12.4) Free cash flow – continuing 55.4 4.7 Free cash flow – discontinued (0.6) (35.5) Free cash flow 54.8 (30.8) Acquisitions (32.7
Slide 14: Guidance for 2015
Guidance for 2015 • Central and regional overheads anticipated to be in line with 2014 • P&L impact of restructuring costs no greater than £10m. • Interest costs c.£42m - reflecting impact of recent refinancings - cash impact slightly higher than P&L impact • Based on current exchange rates the impa
Slide 15: Delivering profitable growth … the next phase
Delivering profitable growth … the next phase Andy Ransom Chief Executive 30 July 2015
Slide 16: Agenda
Agenda 1. Quick reminder of our RIGHT WAY plan for profitable growth. 2. Update on our progress in Phase One of the plan. 3. Our priorities - by Quadrant and Category - as we enter the next phase. 16
Slide 17: Phase one of the plan
Phase one of the plan • 18 months ago we articulated our new The Rentokil Initial Model strategy for profitable growth – Business model: Five regions with low cost operating structure. – Focus on our three core categories. – Cultural change: Local management freed up to drive local sales growth. – D
Slide 18: Rentokil Initial Today
Rentokil Initial Today • Pest Control – global leaders – Outstanding business – most international pest control company – Well positioned to capitalise on increasing demand – Innovation pipeline and digital expertise delivering results. – 35 acquisitions (since 1/1/14), performing ahead of IRR thres
Slide 19: Rentokil Initial Today/2
Rentokil Initial Today/2 • Business has been transformed – delivering strong and sustainable free cash flow – Period of large-scale restructuring ended. – Steady improvement in revenue and profit. – Reduction in central and regional overheads of £12m. – Managing working capital tightly. – Capex broa
Slide 20: Rentokil Initial Today/3
Rentokil Initial Today/3 4% 4% 8% 36% 32% 2013 38% 2015 Growth and Emerging 50% markets now account for almost 60% of group revenue. 28% Emerging Growth Protect & Enhance Manage for Value 20
Slide 21: The next phase
The next phase 1. Increasing our exposure to Growth and Emerging markets – North America and Asia in particular. 2. Accelerate and prioritise Pest Control and upside to go for in Hygiene through “Execute Now” and Workwear’s quality-focused improvement plan. 3. Greater exploitation of our digital exp
Slide 22: Growth potential
Growth & Emerging markets Continued progress in H1 +17.5% +9.2% Growth potential Growth and Emerging in H1 revenue fuelled by acquisitions in Latin America and organic growth in Asia, UK, NA and Germany. -0.7% -1.0% Note: ongoing revenue Profit contribution 22
Slide 23: Emerging
Asia, MENAT Emerging LatAm, Fiji Phase 1 Next phase Built presence in high growth emerging Accelerate growth in Emerging markets – a markets to target higher levels of organic platform for long‐term sustainable growth ‐ growth. set to grow in relative importance, growing profitability with scale
Slide 24: Manage for Value
Manage for Value Italy (H), Spain Portugal, Greece Phase 1 Next phase Exited under‐performing or low margin Country plans targeting productivity, route businesses: City Link, IFS, Austrian density, aggressive cost management and Products and Spanish Medical. In H1 we retention in line with MFV s
Slide 25: Protect & Enhance
Protect & Enhance France (T&H), Benelux, Pacific (H), SA (H) Phase 1 Next phase Pest businesses in France, Nordics, SA Execute Workwear Performance and the Pacific – moved into Growth. Improvement Plan (details to follow) focused on quality of service and leveraging scale. Improved OCF perform
Slide 26: Growth
USA, Germany, Growth UK, Caribbean Phase 1 Next phase Creating national pest control position in Deliver enhanced margins through density North America, world’s largest pest and local market share. market. NA revenue +8.3% in H1. Push hard on: UK revenue +18% in H1 and continuing − Leverage
Slide 27: Growth Potential: Capital allocation model working well
Capital allocation model working well H1 2015 H1 2015 H1 2015 Acquisitions: 3 Acquisitions: 10 Revenue: £1.8m Revenue: £18.2m • Continued to pursue targets in Growth and Emerging markets. Colombia, Korea, Guatemala, NA x7, Australia, UK, Poland • 14 acquisitions completed; 12 in pest control. • Grow
Slide 28: Pest Control
Pest Control H1 category revenue £367m Phase 1 Next Phase Our growth engine: Revenue growth Leverage this powerhouse business – the c. 10% (organic 4.8%) in H1 2015. world’s most international pest control company – continue to accelerate growth. Delivered organic growth in c.50 pest busines
Slide 29: Hygiene
Hygiene H1 category revenue £227m Phase 1 Next Phase Revenue growth 2.3% in H1 2015, “Execute Now” growth strategy - leverage benefits of Signature range. strengths across our 40+ markets: UK & Ireland - hygiene returned to Build on great hygiene brand and strong growth (+3.7% in H1 2015) m
Slide 30: Workwear
Workwear H1 category revenue £193m Phase 1 Our aim is to create a Significant restructuring completed. Workwear business New products launched in main European countries. that has clear market differentiation through Germany continues to perform well. the highest level of Growing Cleanroom
Slide 31: Workwear: Next phase
Workwear Next phase The priorities: • Rigorous application of KPIs to measure quality of service. • Improved product visibility through the entire service process. • Best in class processing – highest standards in washing and repair quality; new higher quality detergents. • More responsiveness to c
Slide 32: The next phase…
The next phase… Momentum, Pace and Consistency 1. Increasing our exposure to Growth and Emerging markets – North America and Asia in particular. 2. Accelerate and prioritise Pest Control and upside to go for in Hygiene through “Execute Now” and Workwear’s quality-focused improvement plan. 3. Greater
Slide 33: Rentokil Initial
Rentokil Initial
Slide 34: Growth Potential: Capital allocation model working well
Capital allocation model working well Since 1/1/14 Since 1/1/14 Phase One Acquisitions: 11 Acquisitions: 25 Revenue: £18.7m Revenue: £59.9m • Focused on targets in Growth and Emerging markets – 36 acquisitions, £78.6m revenue. Brazil, Chile, Colombia, Korea, NA x17, UK, Caribbean, Australia • Entere