Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2011 Earnings Presentation
40 slides from Rentokil Initial's earnings presentation, Mar 2, 2012
Slide 1: 2011 Preliminary Results
2011 Preliminary Results 2 March 2012 2
Slide 2: Introduction
Introduction John McAdam Chairman
Slide 3: Highlights
Highlights Alan Brown Chief Executive Officer
Slide 4: 2011 Highlights
2011 Highlights • Revenue & profit growth in Pest, Hygiene, Textiles and Facilities categories, despite markets – Increasing rates of revenue growth: current trend 5% + (excluding City Link) – Acquisitions performing well; contributing net £41m of revenue increase – Textiles & Hygiene Benelux turnar
Slide 5: Operating & Financial Review
Operating & Financial Review Jeremy Townsend Chief Financial Officer
Slide 6: Financial Highlights
Financial Highlights Q4 FY 2011 2010 2011 2010 £m £m £m £m Revenue at CER 658.4 641.7 2.6% 2,525.5 2,496.5 1.2% Adjusted PBITA at CER 67.9 67.0 1.3% 221.0 239.3 (7.6%) Adjusted PBTA at CER 58.0 58.2 (0.3%) 180.5 192.3 (6.1%) Adjusted PBTA at AER 57.8 58.5 (1.2%) 184.4 192.3 (4.1%) Operating Cash Flo
Slide 7: Key Financials
Key Financials • Revenue +1.2%: – Initial Facilities +7%, AsiaPac +4%, Pest Control (excl. Libya) +3%, Textiles & Hygiene +3% – Organic growth +0.9% excluding City Link & Libya – Acquisitions performing well, contributing £41m of revenue growth – City Link revenue down by 9%, reflecting lower volume
Slide 8: Textiles & Hygiene
Textiles & Hygiene At constant exchange rates Click to edit Master title style • Revenue +2.7% (+1.4% organic), reflecting strong % Group Revenue % Adj. PBITA2 performances in Germany, France and Benelux, but held 29.6% 43.3% back by weaker performance in Italy and UK Specialist Hygiene business • P
Slide 9: Pest Control
Pest Control At constant exchange rates Click to edit Master title style % Group Revenue % Adj. PBITA2 • Revenue +0.3% (+3.1% excluding disposals and Libya): – Strong performance in North America and most European 22.4% 42.3% markets offset by Portugal, Spain & Greece – UK Pest +11.3%, of which Sant
Slide 10: Asia Pacific
Asia Pacific At constant exchange rates Click to edit Master title style • Revenue +4.1% – Asia +5.9%: % Group Revenue % Adj. PBITA2 • Momentum in key established markets (Indonesia, 8.8% 11.9% Malaysia) reflecting traction in sales & marketing and growth initiatives • Further progress in emerging b
Slide 11: Ambius
Ambius At constant exchange rates Click to edit Master title style % Group Revenue % Adj. PBITA2 • Revenue +1.1% (-0.9% organic), reflecting Westplant 4.6% 3.2% acquisition: – In a challenging economy, Christmas sales strong in Q4 and ahead of prior year, but overall gross sales down -0.8% – Acquisi
Slide 12: City Link
City Link At constant exchange rates Click to edit Master title style • Operating loss of £31.3m on revenue -8.5% % Group Revenue • Revenue down by £29m reflecting 3.5% decline in 11.8% volumes and RPC decline of 5% • Strong improvement in service quality in 2011, particularly high in peak Christmas
Slide 13: Initial Facilities
Initial Facilities At constant exchange rates Click to edit Master title style % Group Revenue % Adj. PBITA2 • Robust revenue and profit performance in difficult conditions 22.8% 11.0% • Revenue +6.9% (-1.0% organic), assisted by Santia acquisition • Profit +13.1% (+4.1% organic), reflecting margin
Slide 14: Interest
Interest At actual exchange rates £ million FY 2011 FY 2010 Net interest on bank/bond/finance lease debt (47.0) (50.4) Other (1.6) (0.8) Underlying Interest (48.6) (51.2) Net return on pension scheme 3.2 0.1 Mark-to-market/forex adjustments 0.8 - Per income statement (44.6) (51.1) Average net debt £
Slide 15: Operating Cash Flow
Operating Cash Flow At actual exchange rates £ million FY 2011 FY 2010 Adjusted PBITA 224.7 239.3 Reorganisation costs and one-off items (38.2) (25.1) Depreciation 204.2 212.9 Non-cash items1 7.0 13.1 EBITDA 397.7 440.2 Working capital (32.1) (32.8) Capex (216.4) (197.7) Fixed asset disposal proceed
Slide 16: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates £ million FY 2011 FY 2010 Operating cash flow 154.7 222.7 Cash interest (44.4) (43.9) Cash tax (44.5) (35.0) Disposal of AFS investments 0.1 - Free cash flow 65.9 143.8 Acquisitions & Disposals (32.0) (7.9) FX and other 0.7 18.6 Decrea
Slide 17: Guidance for 2012
Guidance for 2012 • Group savings of £50m • Slight increase year on year in average cash interest rate • Pension interest benefit c.£7m • Forex risk given Euro depreciation c.£6m at €1.20/£ • Capex £220m to £240m - investment in T&H plant, EFR and Olympic roll out • Payments to pension scheme of £12
Slide 18: Strategic Review
Strategic Review Alan Brown Chief Executive Officer
Slide 19: Strategic Update
Strategic Update 1. Progress against Strategic Thrusts 2. Building on Divisional Momentum 3. 2012 Outlook 20
Slide 20: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts 2009 2010 2011 Progress Progress 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 21 2 1
Slide 21: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts Progress in 2011 1. Customer Service/Care • 98% service achieved • Retention unchanged at 83.9% 2. Developing 2. Developing Capability Capability • State of Art investment in Care technology, reducing City Link abandoned calls from over 30% to under 5% 3. Deliverin
Slide 22: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts Progress in 2011 1. Customer Service/Care • Good progress on Olympic pilots • Prospect to Cash 2. Developing 2. Developing Capability Capability • People Services • Further strengthening of management team • City Link MD & FD 3. Delivering Operational Excellence •
Slide 23: Growth through Marketing & Innovation
Growth through Marketing & Innovation Organisation changes to drive pace of growth & innovation • Marketing & Innovation for Pest & Hygiene managed through one central team • Xuemei appointed Group Marketing & Entotherm heat cannons and infra Innovation Director red picture of heated room UltraProte
Slide 24: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts Progress in 2011 1. Customer Service/Care • Benelux returned to growth • City Link improvements in contingency planning, customer care & information systems 2. Developing 2. Developing Capability Capability • All businesses focusing on scheduling and route and roun
Slide 25: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts Progress in 2011 1. Customer Service/Care • £44m cost savings • Savings through service productivity procurement and reduction in overheads 2. Developing 2. Developing Capability Capability • DSO reduced by 2 days to 45 days 3. Delivering Operational Excellence Bui
Slide 26: Progress Against Strategic Thrusts
Progress Against Strategic Thrusts Progress in 2011 1. Customer Service/Care • Traction from growth pilots • UK Pest +8% organic growth H2 2011 • Improving momentum in Textiles 2. Developing 2. Developing Capability Capability • Bolt on acquisitions: • Knightsbridge (mid 2010) 3. Delivering Operatio
Slide 27: Building Divisional Momentum – Textiles and Hygiene
Building Divisional Momentum – Textiles and Hygiene Recent trading momentum Continuing progress in 2012 4 70 Market drivers 60 3 • Uncertain economic outlook in Europe Organic revenue growth (%) 50 • But recent reductions in cotton prices 40 2 1.5 APBITA (£m) 1.3 30 2012 performance drivers 1 20 • C
Slide 28: Building Divisional Momentum – Pest Control
Building Divisional Momentum – Pest Control Recent trading momentum Continuing progress in 2012 4 70 Market drivers 60 3 • Uncertain economic outlook in Europe Organic revenue growth (%) 50 • Hygiene businesses exposed to tough competition 1.7 40 2 2012 performance drivers APBITA (£m) 30 1 20 • Prog
Slide 29: Building Divisional Momentum – Asia Pacific
Building Divisional Momentum – Asia Pacific Recent trading momentum Continuing progress in 2012 6 20 Market drivers 4.0 3.8 15 • Conditions for 2012 remain favourable Organic revenue growth (%) 4 2.2 10 • Pacific region solid, reflecting a robust 2 Australian economy APBITA (£m) 5 0 0 2012 performan
Slide 30: Building Divisional Momentum – Ambius
Building Divisional Momentum – Ambius Recent trading momentum Continuing progress in 2012 5 10 Market drivers • Some improvements over 2011 anticipated Organic revenue growth (%) 5 0.6 • Retention trends to remain either static or show 0 0 modest improvements APBITA (£m) (1.1) (1.1) (5) 2012 perform
Slide 31: Building Divisional Momentum – Initial Facilities
Building Divisional Momentum – Initial Facilities Recent trading momentum Continuing progress in 2012 5 15 Market drivers 0.6 • Consumer confidence expected to remain weak Organic revenue growth (%) 0 • On-going spending austerity 0 APBITA (£m) (2.0) 2012 performance drivers (2.3) (5) • Acquisition
Slide 32: Building Divisional Momentum – City Link
Building Divisional Momentum – City Link Recent trading momentum Challenges in 2012 5 10 Market drivers • Continued growth in B2C Organic revenue growth (%) 0 0 • Strong pricing pressures (0.3) APBITA (£m) (5) (3.6) (10) (10) (20) (9.7) (15) (13.5) (30) H1 '10 H2 '10 H1 '11 H2 '11 Organic revenue gr
Slide 33: City Link – Re-visiting the 7-Point Plan from 2008
City Link – Re-visiting the 7-Point Plan from 2008 1. Re-instituting a service orientated culture by ensuring customer services are in close proximity to our customers: + Customer Service - 99.4% in recent weeks + Customer Care – state of the art technology; abandoned calls >20 seconds now under 5%
Slide 34: City Link – Re-visiting the 7-Point Plan from 2008
City Link – Re-visiting the 7-Point Plan from 2008 4. Reviewing the size, number and location of hubs and depots: + Reduced to 1 central hub and 69 depots with further reduction to 65 during 2012 + Significant increase in quality and size of facilities and continued investment in fleet 5. Right-sizi
Slide 35: Building Divisional Momentum – City Link
Building Divisional Momentum – City Link Recent trading momentum Challenges in 2012 5 10 Market drivers • Continued growth in B2C Organic revenue growth (%) 0 0 • Strong pricing pressures (0.3) APBITA (£m) 2012 performance drivers (5) (3.6) (10) • Engage & Enable the front line • Establish strong op
Slide 36: Category Revenue 2011 (£m)
Category Revenue 2011 (£’m) Pest Hygiene Textiles Interior Facilities Parcel Other Total Control Plants Services Delivery Textiles & Hygiene 6 257 438 - - - 70 771 Pest Control 435 128 - 5 - - 13 581 Asia Pacific 100 111 - 15 - - 2 228 Ambius - - - 119 - - - 119 City Link - - - - - 307 - 307 Initial
Slide 37: Outlook for 2012
Outlook for 2012 Recent trading momentum Outlook for 2012 5 150 4 Organic revenue growth (%) 3 100 • Continued momentum in Pest, Hygiene, Textile and Facilities Management categories 2 50 APBITA (£m) 1 0.1 • Financial performance of City Link to remain poor in 0 0 H1 – productivity agenda expected t
Slide 38: 2011 Preliminary Results
2011 Preliminary Results 2 March 2012 39
Slide 39: Net Debt
Net Debt Net debt at Debt Maturity 31/12/111,2 £m £270m 2016 (90) RCF £50m 2013 (50) FRN £75m 2013-33 (75) Reset Bond €500m 2014 (413) Bond £300m 2016 (317) Bond 1 IAS 39 fair values + 263 2 Headroom £180m; EBITDA / interest covenant is 4x minimum, actual 9.3x, Net debt/EBITDA covenant is 3.5x (919)
Slide 40: Tax
Tax At actual exchange rates £ million FY 2011 Tax FY 2010 Tax charge charge Profit before amortisation and impairment of Intangibles, reorganisation costs and one-off items 184.4 46.0 192.3 48.1 Goodwill impairment (111.5) - (97.8) - Amortisation of intangibles (47.5) (14.0) (54.9) (16.6 Reorganisa