Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2014 Earnings Presentation
38 slides from Rentokil Initial's earnings presentation, Feb 27, 2015
Slide 1: 2014 Preliminary Results Presentation
2014 Preliminary Results Presentation 1 Welcome 27 February 2015 1
Slide 2: This presentation contains statements that are, or may be, forward-looking regarding the group's financial
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: Introduction
2014 Preliminary Results Introduction John McAdam Chairman 27 February 2015 3
Slide 4: Executing our Strategy
Executing our Strategy: Andy Ransom Chief Executive 27 February 2015 4
Slide 5: Introduction
Introduction At constant exchange rates • Strong end to the year with Q4 revenue, profit and cash; contributing to good overall performance for 2014: - Ongoing* revenue +3.6%, organic +1.2%, +2.4% from acquisitions - 6.5% ongoing* profit growth supported by reduction in central overheads - £93m impr
Slide 6: Financial Overview
2014 Preliminary Results Financial Overview Jeremy Townsend CFO 27 February 2015 6
Slide 7: Financial Highlights (Continuing Operations)
Financial Highlights (Continuing Operations) Q4 £ million FY 2014 2013 2014 2013 £m £m £m £m REV Revenue at CER 474.3 453.5 4.6% 1,840.3 1,791.4 2.7% Revenue at CER – ongoing* 472.0 449.5 5.0% 1,830.5 1,766.8 3.6% Adjusted PBITA at CER 74.7 71.9 4.0% 249.1 236.1 5.5% Adjusted PBITA at CER – ongoing*
Slide 8: Key Deliverables in 2014
Key Deliverables in 2014 At constant exchange rates Our plan for 2014 was to improve our financial performance… quickly Objectives Strong Progress Objectives Strong Progress • Demonstrate growth in revenue ü +3.6% increase in ongoing* revenue • Deliver improvement in profit performance ü +6.5% inc
Slide 9: North America
North America At constant exchange rates • Strong performance in 2014 supported by acquisitions % Group Revenue % Adj. PBITA • Revenue1 up 6.6% (+1.7% organic), operating profit2 up 15.6% - Strong end to the year with Q4 revenue up 8.4% (+3.3% organic) 20.0% 13.6% - Revenue growth supported by acqui
Slide 10: Europe
Europe At constant exchange rates • 2014 financial performance held back by Benelux and challenging economic % Group Revenue % Adj. PBITA3 environment • FY revenue1 up 1.7% (-0.2% organic), operating profit2 down 3.7% 48.8% 53.2% − More resilient Q4, revenue1 up 2.1% − 2014 revenue growth driven by
Slide 11: UK and Rest of World
Middle East Turkey, Africa UK and ROW At constant exchange rates • FY revenue1 up 5.6% (+3.2% organic), operating profit2 down 1.0% % Group Revenue % Adj. PBITA3 - Strong end to the year with Q4 revenue up 8.3% (+4.2% organic) - Continued growth from UK pest and hygiene categories, pest jobbing work
Slide 12: Asia
Asia At constant exchange rates • Excellent progress in 2014 % Group Revenue % Adj. PBITA • FY revenue1 up 8.1% (+6.7% organic), operating profit2 up 18.2% - Strong end to the year with Q4 revenue up 11.9% 5.8% 2.9% - Good performances from both pest and hygiene categories - Combined revenue growth
Slide 13: Pacific
Pacific At constant exchange rates • Businesses performing well in 2014 % Group Revenue % Adj. PBITA • FY revenue1 up 0.9% (+0.9% organic), operating profit2 up 5.9% - Strong end to the year – Q4 revenue1 up 2.5% 7.9% 9.1% - Revenue driven by growth in contract revenue in pest and hygiene but offset
Slide 14: Operating Cash Flow
Operating Cash Flow At constant exchange rates FY 2014 FY 2013 Adjusted PBITA 232.2 236.1 81% reduction on 2013 Restructuring costs (8.8) (47.4) One-off items (0.1) (4.6) Depreciation 187.6 200.7 Capex and depreciation now in line Non-cash items1 (1.3) 9.6 EBITDA 409.0 394.4 £15.6m better than £20m
Slide 15: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates FY 2014 FY 2013 Operating cash flow – continuing 209.5 137.1 Cash interest (49.5) (51.2) Special pension contributions (1.0) (13.6) Disposal of available-for-sale investments - 1.2 Cash tax (30.1) (37.2) Free cash flow – continuing 128
Slide 16: Balance Sheet
Balance Sheet Financially strong • Free cash flow now £100m+ per annum on a sustainable basis • Net debt to EBITDA: 1.9x • Pension scheme well funded – over £50m surplus on a technical basis – one of the strongest positions in the FTSE 350 • Credit rating upgraded to BBB (stable outlook) on 30 June
Slide 17: Delivering Shareholder Value: 2015 reporting framework
Delivering Shareholder Value Transparent in Delivering Our Performance 2015 reporting framework • Full update on performance at H1 and FY, summary update on trading at Q1 and Q3 • Organisational structure locked down and unchanged – Five core regions – Three core categories • Therefore no changes to
Slide 18: Guidance for 2015
Guidance for 2015 • Central and divisional overheads in line with 2014 • P&L impact of restructuring costs no greater than £10m • Interest costs c.£43m – reflecting impact of recent refinancings – cash impact slightly higher than P&L impact • Adjusted effective tax rate c.23.5%; cash tax payable of
Slide 19: Executing our Strategy
Executing our Strategy: Andy Ransom Chief Executive 27 February 2015 19
Slide 20: The Rentokil Initial Model
The Rentokil Initial Model Strong Regional Businesses • Europe Our Business • North America Organisation • Asia • Pacific • UK & Rest of World Category Leadership Our Colleagues As Experts Lean, Multi-Business Ops Our Core Competencies Branch Pest Hygiene Workwear Six Operational Growth Levers Diffe
Slide 21: Pest Control: Executing our Strategy in 2014
Pest Control Rentokil – global leaders in pest control Executing our Strategy in 2014 • 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 • 70% of pest revenue in Growth and Emerging quadr
Slide 22: Pest Control
Pest Control Rentokil – global leaders in pest control • Strategy to build this category - offers excellent prospects for profitable growth. Building presence in Growth and Emerging quadrants. • Well placed to continue to develop our strengths: – Brand strength – Strong brand and reputation for tech
Slide 23: Pest Control
Pest Control Rentokil – global leaders in pest control • Strongest pipeline of innovation and product development for many years eg: – Novel Biocides – Entopathogenic fungi, next generation rodenticide development – Rodent Gate - Keeps bait safe until the mechanism is activated New rodent unit with
Slide 24: Pest Control Investor Relations Day
Pest Control Investor Relations Day Agenda Global Leaders in Pest Control 1. Q1 Results and Q&A Date: 1 May 2015 2. Global PC market & our leadership position (trends from 2012 onwards) Duration: 09.00 to 13.00 3. Evolution of the pest control market Location: Sydney Suite 4. How we are positioned f
Slide 25: Hygiene: Executing our strategy in 2014
Hygiene Initial – global leaders in Hygiene services Executing our strategy in 2014 • Hygiene ongoing revenue +1% (ex Benelux +1.8%) • Category profit -5.6% in 2014, mainly Benelux • Hygiene: 26% of group revenue and 30% of group profit • 41% of Hygiene revenue in Growth and Emerging quadrants • Exp
Slide 26: Hygiene
Hygiene Initial - global leaders in Hygiene services • Significantly improved service ranges • Signature and Reflection product ranges now fully rolled out - 7 new Signature products and 5 new Reflection products • Signature Colour range launched - 9 new colours in Matt, Gloss and Metallic • Signatu
Slide 27: Launch of Initial HygieneConnect
Launch of Initial HygieneConnect New value adding innovation World’s first integrated wireless monitoring and display system •Measures hand-washing compliance on a systematic basis •Displays combined compliance levels on the LCD units: fully anonymised data •Piloted across Europe: 100,000 people •Le
Slide 28: Workwear: Executing our Strategy in 2014
Workwear A leading brand with scale across the major European markets Executing our Strategy in 2014 • Workwear ongoing revenue flat (ex. Benelux +0.3%) • Category profit -5.5% in 2014 (ex. Benelux +4.8%) • Category profit +1.1% in H2 vs -8.5% in H1 2014 • Cleanroom sector +7.9% revenue; +3% profit
Slide 29: Workwear
Workwear Service development and innovation • New Workwear ranges – Five ranges in the process of launching eg • Alpha – entry level protection garments • Delta – premium full PPE protection with welding, high visibility and multi-protective options. – Positive customer feedback: quality, design, fu
Slide 30: Growth Potential
A clear differential management strategy To drive performance and capital allocation • Our strategy for managing the business is unchanged • Lower value/capita markets • Established markets • High GDP growth • Established demand for pest, hygiene and/or • Four distinct quadrants and • High growth in
Slide 31: Emerging
Emerging Focus on building market share and city focused acquisitions Financials 2013 (£m) 2014 (£m) Change Executing our Strategy Revenue* 111.2 135.4 +21.7% • Emerging markets remain strong with increasing expectations Operating profit 15.3 18.8 +22.6% for improved hygiene standards Capex 7.3 8.0
Slide 32: Growth
Growth Focus on growing market share, building density and sales pipeline Financials 2013 (£m) 2014 (£m) Change Executing our Strategy Revenue* 711.6 751.7 +5.7% • Growth markets remain strong: Good growth in UK & USA Operating profit 120.7 128.3 +6.3% Capex 59.4 53.6 -9.8% • Digital marketing focus
Slide 33: Protect & Enhance
Protect & Enhance Focus on pricing and productivity Financials 2013 (£m) 2014 (£m) Change Executing our Strategy Revenue* 818.3 817 -0.1% • Market conditions challenging in some European markets, performance Operating profit 161.4 154.2 -4.4% held back by Benelux. Positive outlook in Pacific Capex 1
Slide 34: Manage for Value
Manage for Value Focus on profit improvement strategies Financials 2013 (£m) 2014 (£m) Change Executing our Strategy Revenue* 125.7 126.4 +0.5% • Market conditions in Southern European remain challenging Operating profit 19.1 18.2 -4.5% • Strong performances in Italy Pest and Ireland Capex 3.9 3.4 -
Slide 35: Updating the quadrant mix
Updating the quadrant mix Reflecting changes to growth potential • For 2015 the encouraging • Fiji Pest Control performance of several businesses in • France Pest Control • France Cleanrooms the MfV and P&E quadrants means • Netherlands Cleanrooms that we can now move them into new • Nordics Pest Co
Slide 36: Quadrant analysis
Quadrant analysis Growth and Emerging – increasing focus for the portfolio 8.3% Revenue by quadrant 23% Growth and Emerging now account 49.2% for 50+% of group revenue % of Group Revenue Growth increased from 23% of group revenue to almost 50% since 2012 MFV reduced from 41% of group revenue to belo
Slide 37: Continued expansion in Growth and Emerging markets
Continued expansion in Growth and Emerging markets Executing our Strategy • 30 deals completed; 23 in Growth and Emerging – £66m annualised revenues – Pest Control - first steps in Chile, Colombia, Acquisitions: 8 Acquisitions: 15 Bahamas and Mozambique Revenue: £16.9m Revenue: £41.7m – Property Car
Slide 38: Key takeaways
Key takeaways 1. A leader in our chosen markets, generating high returns with good growth opportunities A strong global business with leading positions 2. Clear differential strategy to drive performance and across three core capital allocation categories and excellent 3. Financially strong growth o