Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2019 Earnings Presentation
51 slides from Rentokil Initial's earnings presentation, Jul 31, 2019
Slide 1: 2019 Interim Financial Results
31 July 2019 2019 INTERIM FINANCIAL RESULTS 1
Slide 2: accordance with the Company’s legal or regulatory obligations (including under the Listing Rules and
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: 2019 Interim Financial Results - Andy Ransom, CEO
31 July 2019 2019 INTERIM FINANCIAL RESULTS Andy Ransom, CEO 3
Slide 4: H1 2019 Highlights
H1 2019 Highlights 8.8% H1 Ongoing Revenue Growth at CER. Ongoing Revenue ahead of medium-term target (5%-8%) with all Regions contributing. 4.2% Strong H1 Organic Revenue H1 Organic Revenue Growth (H1 2018: 3.0%). growth in both Pest Control and Hygiene. 11.4% H1 Pest Control Ongoing Revenue Growth
Slide 5: H1 2019 Highlights
H1 2019 Highlights 11.6% H1 Ongoing Profit Growth at CER. Strong Ongoing Profit Growth and Free Cash Flow both ahead of H1 2018. £95.9m Operating margins up 0.4% Strong Free Cash Flow +£22.9m (vs H1 2018). pts and by +0.5% pts in North America. 1.1% pts Improvement in Customer Retention. 1.8% pts im
Slide 6: H1 2019 Highlights
H1 2019 Highlights £55m 17 deals delivered £55m revenues. 17 high-quality acquisitions c.£121m in cash spent in H1. Strong pipeline. with 12 in Pest Control and 5 in Hygiene in H1. $59m Divestment of 17.8% stake 7 deals in NA in H1 with $59m annualised revenues. in joint venture with Haniel FY 2018
Slide 7: H1 2019 CEO Statement
H1 2019 “The business has performed very well in the first six months with strong organic growth of 4.2%. We have again exceeded our medium-term financial targets for revenue, profit and cash.” “We are confident of delivering further progress in H2 2019.” 7
Slide 8: H1 2019 Financial Review
31 July 2019 H1 2019 Financial Review Jeremy Townsend, CFO 8
Slide 9: Financial Highlights
Financial Highlights H1 2019 £ million Δ Δ Revenue AER CER AER CER £1,289.9m 8.8% Ongoing Revenue* 1,289.9 1,281.0 10.7% 8.8% Ongoing Operating Profit * 152.1 151.8 13.0% 11.6% Profit £152.1m 11.6% Adjusted PBTA 141.6 141.4 13.7% 12.4% PBT 113.8 114.0 3.7% 3.2% Free Cash Flow 95.9 Cash £95.9m 93% Ad
Slide 10: Strong Financial Progress
Strong Financial Progress A track record of delivery Strong and sustainable Ongoing Revenue growth: Ongoing Operating Profit growth delivery of Free Cash Flow, 5%–8%, 3%-4% Organic (CER) c.10% (CER) c.90% conversion** (AER) £m £m £m 4.5% Organic 5 YR 2500 5 YR 5 YR 200 CAGR 4.0% 330.0 CAGR CAGR 11.5
Slide 11: North America
North America Progress in H1: Ongoing Revenue growth +9.6% Ongoing Revenue growth of 9.6% in H1, 3.7% Organic Organic Revenue growth +3.7% Pest Control growth of 10.3%, up 3.9% Organic, despite unseasonably wet weather in certain parts of the country in Q2, Ongoing Operating Profit growth +14.7% par
Slide 12: North America
North America Update on plan to deliver $1.5bn revenue, 18% Net Operating Margins Building scale and local density on national footprint with +300 branches, 45 distribution centres, +8,000 colleagues. Targets (FY) / Activity Progress in H1 2019 4% to 5% 3.7% Organic growth Organic growth An improvin
Slide 13: North America
North America Path to $1.5bn revenue Path to 18% Net Operating Margins • Remain on track to deliver $1.5bn revenue by the • Progress on margin delivery in H1 on track for 2021 end of 2020 target • H1 revenue growth in line with 10% CAGR required • Steady progress with IT transformation to replatform
Slide 14: North America IT re-platforming timeline
North America IT re-platforming and applications deployment: timeline to completion The first step in our IT programme is to create 2019 2020 2021 a consistent platform across the country. We will have all the data from the business into the cloud during 2019 and the large majority Infrastructure Al
Slide 15: Europe
Europe Progress in H1: Excellent Ongoing Revenue performance in Germany (+16.3%), strong Ongoing Revenue growth +7.7% growth in Southern Europe (+7.5%), and improved performances in Benelux and France, up 5.8% and 3.7%. Latin America (reported within Europe Organic Revenue growth +4.8% region) conti
Slide 16: UK & Rest of World
UK & Rest of World Progress in H1: Ongoing Revenue growth +10.0% Excellent performance from UK Pest Control and Hygiene; UK Pest +6.5% Organic, benefiting from large contract wins, Hygiene +8.4% Organic Organic Revenue growth +4.5% benefiting from high levels of customer service, improving customer
Slide 17: Asia
Asia Ongoing Revenue growth +11.6% Progress in H1: Organic Revenue growth +5.5% 11.6% increase in Ongoing Revenue, +5.5% Organic, reflecting good Ongoing Operating Profit growth +11.9% performances from both Pest Control and Hygiene @CER Ongoing Operating Profit growth of 11.9%, reflecting higher re
Slide 18: Pacific
Pacific Ongoing Revenue growth +2.4% Progress in H1: Organic Revenue growth +1.9% 2.4% growth in Ongoing Revenue (+1.9% Organic), driven by solid performances across core Pest Control and Hygiene categories Ongoing Operating Profit growth +2.5% Notably good performance from Australia Hygiene, reflec
Slide 19: Operating Cash Flow
Operating Cash Flow £ million @AER H1 2019 H1 2018 Adjusted Operating Profit 152.2 134.5 Increase in Adjusted Operating One-off items - Operating 9.8 2.6 Profit largely offset by working Depreciation 105.5 72.8 capital outflows due to phasing Other1 3.5 0.8 Depreciation and capex both EBITDA increas
Slide 20: Free Cash Flow & Movement in Net Debt
Free Cash Flow & Movement in Net Debt £ million @AER H1 2019 H1 2018 Operating Cash Flow – continuing 127.0 105.3 Interest payments £4.5m higher than H1 2018 and tax payments decreased by Cash interest (11.8) (7.3) £5.7m, both reflecting phasing of Cash tax (19.3) (25.0) payments versus the prior ye
Slide 21: Disposal of 17.8% interest in Haniel JV
Disposal of 17.8% interest in Haniel JV € million In July 2017 the Group’s Workwear and Hygiene assets in Germany and Cash consideration from disposal of 17.8% stake 430 Benelux were transferred into a Joint Venture (JV) with Haniel for cash consideration of €520m and a retained 17.8% share in the J
Slide 22: Balance Sheet
Balance Sheet Balance Sheet • Net Debt at 30 June 2019 £1441.9m, an increase of £288.4m from 31 December 2018. £184.0m of the increase relates to additional lease liabilities recognised on implementation of IFRS 16 • £918.6m of centrally held funds and available undrawn committed facilities • Net De
Slide 23: Guidance for H2 / FY 2019
Guidance for H2 / FY 2019 IFRS 16 now expected to increase Ongoing Operating Profit by £3m and adjusted interest charge by £3m (previous guidance was between £5m and £10m) – no overall impact on Adjusted Profit before Tax Business is trading in line with our expectations and therefore our guidance f
Slide 24: H1 2019 Summary
H1 2019 Summary ✓ +8.8% growth in Ongoing Revenue (vs target 5% to 8%) ✓ +4.2% Organic growth (vs. target 3% to 4%) ✓ +11.6% increase in Ongoing Operating Profit (vs. target 10%) ✓ £95.9m Free Cash Flow, 93% conversion over last 12 months ✓ Sale of minority stake in Haniel JV for proceeds of €430m,
Slide 25: A people business, enabled by world-class technologies and innovations
31 July 2019 A people business, enabled by world-class technologies and innovations Andy Ransom, CEO 25
Slide 26: Consistent Model for Profitable Growth
Consistent Model for Profitable Growth Transparent medium-term targets Market-Leading Businesses Multi-local Operations Leadership in Digital and Innovation +1800 local service teams. Pest Control Hygiene Protect & Enhance 80 countries covering 90% global GDP. Focus: Growth Focus: and Emerging Opera
Slide 27: Digital expertise and leadership in innovation
Low Cost Operating Model “The machine” RIGHT PEOPLE RIGHT THINGS RIGHT WAY Service efficiency Delivering customer Digital expertise and leadership in innovation service and customer engagement (CVC) Customer retention Becoming an Employer of Choice. Contract portfolio growth Profit and Cash Colleagu
Slide 28: Digital expertise and leadership in innovation
Low Cost Operating Model Highly motivated people, enabled by world-class technologies and innovations RIGHT PEOPLE RIGHT THINGS RIGHT WAY Service efficiency Delivering customer Digital expertise and leadership in innovation service and customer engagement (CVC) Customer retention Becoming an Employe
Slide 29: How we run our Business
How we run our Business Safety, Health and Environment (SHE): Agenda item number one Excellent H1 Safety Performance World Class: 18% improvement in Lost Time Accident (LTA) rate to 0.57 (year on year). Lost Time Accidents 37% NA: LTA rate 0.42 (YTD) – 32% improvement on 2018. 2014: 1.00 7% improvem
Slide 30: How we run our Business: Employer of Choice
How we run our Business Employer of Choice Our goal is to increase colleague retention, boost line manager Group LTA Rate capability and build expertise - and thereby improving productivity and the service we offer. Good progress in H1. High quality colleague experience Building expertise World-clas
Slide 31: Rentokil Pest Control
Rentokil Pest Control Consistent strong performance Strong Performance in H1 2019 @CER 900 H1 Ongoing Revenue: £817.8m +11.4% 2014-2019 REVENUE £818m H1 Profit: £135.3m +11.5% 800 CAGR £734m 16.8% Organic growth: 4.8% (4.0% in H1 2018). 700 £650m Acquisitions: 6.6%. Ongoing revenue breakdown: 600 Gr
Slide 32: Rentokil: Global Leaders in Pest Control
Rentokil: Global Leaders in Pest Control Strong performance in long-term growth markets @CER Nordics +14% UK +26% Germany North America +21% +10% France China +10% +15% UAE Caribbean +20% +13% Thailand Indonesia +19% Brazil +61% +9% Sub-Saharan Chile +11% Vietnam +24% +25% South Africa +13% Growth a
Slide 33: Rentokil Pest Control
Rentokil Pest Control The world’s leading pest control company @CER H1 Organic growth ✓ Global leader - number one in over 50 markets. ✓ Strong Employer of Choice programme – outstanding technical training building expertise. ✓ Powerful brand. One of the top 50 most valuable 4.8% Commercial Services
Slide 34: Rentokil Pest Control
Rentokil Pest Control The world’s leading pest control company @CER Leading in digital and innovation ✓ Improve our productivity - reduce our costs. Strong Performance in H1 2019 ✓ More sophisticated pest control needs – higher barriers to excellence. Revenue: £819m +11.5% Profit: £XXXm +X.X% ✓ Prot
Slide 35: Differentiation through Innovation
Differentiation through Innovation Lumnia has revolutionised the insect light trap market – continued strong growth in H1 First to develop LED range for Full range to meet the needs of all commercial pest control customer segments Energy savings of 61% compared to previous range. Launch: Standard an
Slide 36: Driving Productivity and Cost Reduction
Driving Productivity and Cost Reduction Series of pilots using Artificial Intelligence (AI) underway @CER AI Appointments in place: Director for Digital Products and Operational AI. Strong Performance in H1 2019 Group Director for Digital Innovation and Customer AI. AI route optimisation productivit
Slide 37: Protecting Core Markets
Protecting Core Markets Innovative rodent control @CER Rodent control accounts for c. $2bn of the global pest control market and continues to grow at c. 4% p.a. Strong Performance in H1 2019 In H1 2019 we launched a range of new products to enhance our Revenue: £819m +11.5% proposition in this core
Slide 38: Responding to Customers' Needs
Responding to Customers’ Needs Customers risk increased fines without effective pest management and reporting The world’s leading digital pest control platform providing an unmatched level of monitoring, reporting and insight for customers. Strong progress. PestConnect myRentokil CommandCentre Inter
Slide 39: The biggest killer on the planet...?
The Biggest Killer on the Planet? The biggest killer on the planet…? 39
Slide 40: Biggest killers on the planet...?
Biggest killers on the planet…? Aedes albopictus Aedes aegypti (also known as Asian tiger Can spread Dengue fever, mosquito). Can spread Dengue Chikungunya, Zika, Mayaro fever, Zika and West Nile and Yellow fever. viruses. Anopheles gambiae considered to be one of the Culex pipiens most efficient ve
Slide 41: Significant threats to public health
Significant threats to public health WEST NILE VIRUS YELLOW FEVER 30 THOUSAND 207 THOUSAND CASES PER YEAR CASES PER YEAR HOT SPOT FOR DENGUE FEVER ALL THE DISEASES 390 MILLION CASES PER YEAR MALARIA For illustration only, based on data 200 MILLION from the World Health Organization. CASES PER YEAR U
Slide 42: Growing threat of mosquito-borne diseases
Growing threat of mosquito-borne diseases Drug-resistant malaria Urbanisation will make break-bone parasites 'spreading aggressively' across (Dengue) fever one of the most south-east Asia common diseases of the century. Up to 80% of the most Will extend into Southern Europe. common carriers of the D
Slide 43: Building our world-class capabilities
Building our world-class capabilities Mosquito & Vector Control market: Total market is worth c. $4.4bn and growing at c.7% p.a. Rentokil Initial: People & expertise, footprint in key countries, experience (public authority contracts to commercial & residential contracts and jobs). Technology and in
Slide 44: Initial Hygiene
Initial Hygiene Strong increase in organic growth 300 Strong Performance in H1 2019 @CER £277m 280 2014-2019 H1 Ongoing Revenue: £277.2m +6.5% REVENUE £260m 260 CAGR H1 Profit: £45.4m +8.6% 9.5% Organic growth: 4.3% (H1 2018: 2.1%). Strong progress, 240 particularly France (+4.0%), Australia (+4.0%)
Slide 45: Initial Hygiene
Initial Hygiene Broad-based improvements for organic growth and productivity M&A Best-in-class products 5 Hygiene deals in H1 2019 Product differentiation focus 4 deals in FY2018 eg Signature Colour & H1 launches with Cannon Hygiene – fully integrated in 8 new soaps and new aerosol fragrances. count
Slide 46: Initial Hygiene: Extending our range of services
Initial Hygiene Extending our range of services Digital Route Based Air Care Revenue:Hygiene £279m +6.6%Extensions Profit: £XXXm +X.X% Exploit opportunities as the market Maximise shared expertise with Pest Target potential growth options in for air enhancement and purification in Digital / IOT. new
Slide 47: Protect and Enhance
Protect and Enhance 14% of group Ongoing Revenues H1 Focus on Quality and Service @CER 2014-2019 REVENUE H1 Ongoing Revenue: £186.0m +1.4% CAGR 0.4% H1 Profit: £16.5m -2.0% 200 France Workwear £188m H1 Ongoing Revenue: £96.9m +2.9% (year on year). £186m £183m £182m £183m £183m H1 Profit: In line wit
Slide 48: Protect and Enhance: France Workwear
Protect and Enhance France Workwear France Workwear - continued progress with focus on product & service quality H1 2019: Ongoing Revenues +2.9% to £97m, profits in line with PY. Employer of Choice: Significant safety improvements (Lost Time Accident rate from 1.59 to 0.69). RFID: Tracking and garme
Slide 49: Value Creating M&A
Value Creating M&A Disciplined execution of our strategy in H1 2019 Strong First Half – 17 acquisitions Transforming the shape of the Group through M&A. delivered with annualised revenues Focus on higher growth businesses. of £55.1m. £121m cash spend in H1. M&A focus: Building density through highly
Slide 50: Delivered a Strong Performance in H1
Delivered a Strong Performance in H1 Interim Dividend of 1.51p per share – an increase of 15.2% Colleague & Customer Strong progress Organic Retention Innovation Revenue Growth Increasingly by 2.8% pts and +44% Lumnia sales. 4.2% 1.1% pts respectively. +29% myRentokil usage. in H1 2019. Ongoing Oper
Slide 51: Rentokil Initial
Rentokil Initial Protecting People. Enhancing Lives. THE QUEEN’S AWARDS THE QUEEN’S AWARDS FOR ENTERPRISE: FOR ENTERPRISE: INTERNATIONAL TRADE INNOVATION 2017 2018