Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2021 Earnings Presentation
57 slides from Rentokil Initial's earnings presentation, Jul 29, 2021
Slide 1: Interim Results 2021
Interim Results 2021 Core businesses returned. Strong first six months. Excellent M&A. 29 July 2021 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: Interim Results 2021 - Andy Ransom, CEO
Interim Results 2021 Core businesses returned. Strong first six months. Excellent M&A. Andy Ransom CEO 3
Slide 4: H1 2021: Highlights - Core Businesses Returned
H1 2021: Highlights Executing our strategy Core Businesses Returned All core businesses returned to growth in H1. Ongoing Revenue growth in H1 – Pest Control +18.7%, core Hygiene +9.3%. Lapping Covid-impacted Q2 2020. Temporary lockdown of customer premises down to c.1% in Pest Control (US: 0.15%).
Slide 5: H1 2021: Highlights - Strong Growth Performance
H1 2021: Highlights Strong Growth Performance in H1 18.3% 55.4% 151% Ongoing Revenue Growth in H1 +18.3% to £1,512.5m (CER). Ongoing Operating Profit +55.4%. Excellent Free Cash Flow of £222.0m in H1 (151% conversion). Group Organic Growth of 11.7% in H1 2021: Pest Control 8.5%, Hygiene 9.0%. Custom
Slide 6: H1 2021: Highlights - Excellent M&A delivery
H1 2021: Highlights Excellent M&A delivery - ahead of target £147.7m 24 acquisitions in H1 including 17 deals in Q2. 21 in Pest Control. In addition, agreement with Boecker – outstanding pest control company in the Middle East. Annualised revenues of £147.7m including Boecker and EPS* Upweighting fu
Slide 7: Financial and Regional Review
Interim Results 2021 Financial and Regional Review Stuart Ingall-Tombs Chief Financial Officer 7
Slide 8: Financial Highlights
Financial Highlights H1 2021 Revenue +18.3%, demonstrating £ million Δ Δ recovery of our core £1,512.5m businesses AER CER AER CER Ongoing Revenue1 1,458.3 1,512.5 13.6% 18.3% Profit +55.4%, reflecting growth in all categories & regions Revenue £215.9m 1,462.7 1,517.0 13.3% 18.0% Ongoing Operating P
Slide 9: North America
North America Group Revenue: 46% Group Profit: 41% Overview of performance in H1 Total Pest Control revenue growth of 24.8%, with Pest Services H1 2021 Growth +20.6%, reflecting good demand from both Commercial and Residential customers: Ongoing Revenue £694.1m +29.8% • Commercial Pest +23.2% Organi
Slide 10: North America cont'd
North America cont’d All numbers at CER Overview of regional impact from COVID-19 in H1 Terminations, pricing and labour environment Revenue growth driven by recovery in all businesses and return • Little change in termination rates, which remain within to more normalised trading patterns: normal ra
Slide 11: North America cont'd
North America cont’d Update on progress towards 18% margins and IT re-platforming programme All numbers at CER Revenue & margin performance Progress on IT re-platforming programme • Total revenues +29.8%, reflecting return to growth of all • IT re-platforming programme proceeding well and to plan: b
Slide 12: North America IT re-platforming infrastructure
North America cont’d Significant progress on IT re-platforming and applications deployment in H1 2019 2020 2021 2022 IT re-platforming programme focused on Infrastructure STATUS delivering a standard modern technology All data in Google Cloud Platform COMPLETE 100% platform to support efficient and
Slide 13: Europe
Europe All numbers at CER Group Revenue: 24% Group Profit: 24% Financial performance in H1 H1 2021 Growth Revenue growth +9.5%, reflecting performance improvements in France (+11.3%), southern Europe (+10.7%), Germany (+6.2%) and Ongoing Revenue £360.9m +9.5% Latin America (+17.4%) Pest Control reve
Slide 14: Europe cont'd
Europe cont’d All numbers at CER Impact of market conditions on trading in H1 Terminations, pricing and labour environment • Mixed conditions, with continued lockdowns impacting • No evidence of increased customer insolvencies across customer re-openings and service frequency, especially core Europe
Slide 15: UK & Rest of World
UK & Rest of World All numbers at CER Group Revenue: 16% Group Profit: 22% Financial performance in H1 Revenues +11.2% (+10.6% Organic): H1 2021 Growth ➢ UK and Ireland Pest Control and Hygiene (excl. disinfection) Ongoing Revenue £235.8m +11.2% +5.2% and +14.7% ➢ ROW Pest and Hygiene operations (ex
Slide 16: UK & Rest of World cont'd
UK & Rest of World cont’d All numbers at CER Impact of market conditions on trading in H1 Terminations, pricing and labour environment • A strong rebound in the UK as restrictions ease • Strong cash performance in H1; no significant escalation in • Rest of World operations performing resiliently des
Slide 17: Asia
Asia All numbers at CER Group Revenue: 8% Group Profit: 5% H1 2021 Growth Ongoing Revenue Financial performance in H1 £125.0m +7.4% 7.4% growth in regional Ongoing Revenue, +7.1% Organic Organic Revenue Growth +7.1% Ongoing Operating Profit +14.6%, reflecting higher revenues Ongoing Operating Profit
Slide 18: Asia cont'd
Asia cont’d All numbers at CER Impact of market conditions on trading in H1 Terminations, pricing and labour environment Improving regional performance but real recovery held • No escalation in bad debts and customer insolvencies in H1 back by rising COVID cases in key markets of Malaysia and • Stra
Slide 19: Pacific
Pacific Group Revenue: 6% Group Profit: 8% H1 2021 Growth Financial performance in H1 Ongoing Revenue £96.7m +12.9% 12.9% growth in regional Ongoing Revenue, +11.8% Organic 11.3% growth in Pest Control, 14.0% growth in Hygiene (excl. Organic Revenue Growth +11.8% disinfection) and +7.3% in Ambius On
Slide 20: Pacific cont'd
Pacific cont’d All numbers at CER Impact of market conditions on trading in H1 Terminations, pricing and labour environment Good recovery in Pest and Hygiene in Australia and NZ • Minimal bad debt from suspended portfolio customers; Fiji impacted by suspension of all international and domestic no sp
Slide 21: Operating Cash Flow
Operating Cash Flow £ million @AER H1 2021 H1 2020 Adjusted Operating Profit 208.6 139.0 One-off items – Operating (10.9) 4.5 Depreciation 108.1 109.3 Operating cash flow (£261.3m at AER for continuing operations) was Other1 3.6 (3.2) £88.1m higher than in H1 2020, driven by a £69.6m increase in EBI
Slide 22: Free Cash Flow & Movement in Net Debt
Free Cash Flow & Movement in Net Debt Interest payments £1.9m lower than in prior year. Cash tax payments of £25.0m, up £ million @AER H1 2021 H12020 £11.5m on H1 2020. H1 2020 tax payments abnormally low due to various deferred tax Operating Cash Flow – continuing 261.3 173.2 payments during the ea
Slide 23: Balance Sheet
Balance Sheet Balance Sheet • Net debt at 31 June 2021 of £1,114.5m • On 11 June 2021, notice was given to bond holders under the €350m bond due 7 October 2021 that the Group would repay the remaining €175m outstanding on 7 July 2021 using its par call option • This repayment was funded using procee
Slide 24: Technical guidance for 2021
Technical guidance for 2021 P&L • Medium-term growth targets unchanged: ➢ Ongoing Revenue growth target 5% to 8% (3% to 4% Organic), Ongoing Operating Profit growth c.10%, Free Cash Flow conversion c.90% • Restructuring costs c.£10m • Central and regional overheads £10m to £15m lower than 2020, prin
Slide 25: Outlook for H2
Outlook for H2 • We expect our Pest Control, Hygiene and Protect & Enhance categories to demonstrate further operational and financial progress in H2 2021. • Disinfection services are expected to progressively unwind in quarters 3 and 4, contributing £10m to £20m in H2, to give a total of between £1
Slide 26: H1 Summary
H1 Summary • Ongoing Revenue, Ongoing Operating Profit and cash conversion significantly ahead of medium-term growth targets • H1 core category revenues boosted by additional £98.3m revenues from disinfection; £10m to £20m revenues expected in H2 • Customer collections remain strong, no material esc
Slide 27: Interim Results 2021 - Andy Ransom, CEO
Interim Results 2021 Core businesses returned. Strong first six months. Excellent M&A. Andy Ransom CEO 27
Slide 28: Operating Model
Operating Model Industry leading Huge commitment during the Strong performance in H1 ESG. Increasingly important to pandemic. Recruitment market is competitive but customers. being successfully managed. In the first half of 2021 the operating model ran smoothly with a strong people performance (exce
Slide 29: Employer of Choice - Safety
Employer of Choice - Safety Excellent performance during 2020 maintained in H1 Use of technology to drive safety standards World Class: Lost Time Accidents Several technologies in place to drive higher standards. New App to deliver consistent Site Risk Assessment (SRA) – enables H1 2019: 0.58 35% co
Slide 30: Employer of Choice - Recruitment
Employer of Choice - Recruitment Market-leading recruitment practices sustaining our performance Recruitment market is very competitive - fuelled “UK’s most active graduate recruiter” by lockdowns easing and candidate shortages Source: Indeed, May 2021 (continued government support in place). Despit
Slide 31: Employer of Choice - Diversity
Employer of Choice - Diversity Building on our strengths Diverse culture across the company No gender pay gap. 2021 Hampton-Alexander review placed RI as 7th for Board gender diversity. Senior management (c.80 colleagues) – 30% female (2019: 28%). H1 colleague survey: “Are there equal opportunities
Slide 32: Environment
Environment Our ambition is to be at Net Zero carbon emission by the end of 2040 65% of the consumers post pandemic are attracted to doing business with brands that are environment- friendly, provide “green” credentials for Vigeo Eiris products/services - versus 29% pre-pandemic.* As at 31 May 2021
Slide 33: The S of ESG…
The S of ESG… PPE worth £2.5m donated to hospitals in India during H1 Shipment included coveralls, face masks, gloves, hand soap and sanitiser. +500 hospitals and frontline health workers - mix of customers and non-customers across India. Priority given to Covid Hospitals, many non-covid hospitals a
Slide 34: Rentokil Pest Control: The world's leading pest control company
Rentokil Pest Control: The world’s leading pest control company.
Slide 35: Rentokil Pest Control
Rentokil Pest Control Strong business and supportive demographics Powerful business. Strong demographic support. Demographic shifts are creating an older and wealthier ✓ Global leader – number one in 54 of our 82 markets global population – supporting our core customer groups ✓ City focused strategy
Slide 36: Rentokil Pest Control - Core business has returned
Rentokil Pest Control Core business has returned Strong H1 2021 @CER H1 Ongoing Revenue: £975.9m +18.7% 1100 2015-2021 REVENUE H1 Profit: £170.3m +36.7% £976m 1000 CAGR 20% increase 900 15.4% H1 Ongoing Revenue: NA +24.8%, Asia +13.3%, Pacific +11.3%, £814m £822m Europe +10.1%. H1 Organic Revenue gr
Slide 37: Innovation drives profitable growth
Innovation drives profitable growth Innovation is part of our culture Growth • Leadership & brand • Differentiation ahead of competitors • Digital / technology expectations & reporting In the UK, c.30% of Enhanced service to customers and support customer retention Ongoing Revenues in • Target key g
Slide 38: Innovation: Driving growth
Innovation: Driving growth Fluorescent What’s next in the Tracking innovation pipeline? The Power Centre Gel CAPITAL MARKETS DAY 28 September 2021 Autogate RapidPro RADAR Rat Riddance 2017 2018 2019 2020 2021 Lumnia Eradico Entotherm Command Centre MultiMouse 38
Slide 39: Innovative and Sustainable
Innovative and Sustainable New rodent control unit set for launch Eradico, our latest and most sustainable rodent control solution – launches in H2. 2020 saw a year-on-year rise of 12.4% in global rodent activity: +5.5 million infested locations reported (RI Command Centre). Single, global solution:
Slide 40: Innovative and sustainable - PestConnect
Innovative and sustainable “Data is the next big thing in Pest Control.” PestConnect units in the field now exceed 200,000 – up 32% vs 2020 CAPITAL MARKETS DAY 28 September 2021 The world’s leading digital pest control platform providing an In person meeting. unmatched level of monitoring, reporting
Slide 41: Initial Hygiene: The World's leading Hygiene services business
Initial Hygiene: The World’s leading Hygiene services business The 02 selects Initial Hygiene Officially appointed as the Specialist Hygiene Services Partner of London's The O2 in H1. Central to this unique agreement is the installation of our VIRUSKILLER air purifier units at the venue. Installed u
Slide 42: Initial Hygiene
Initial Hygiene The world’s leading Hygiene services business Strong Global Hygiene Business Changing perceptions of Hygiene The Covid-19 crisis has brought about a long-term ✓ Leading positions in 22 of 65 markets (top 3 in 38) change in attitudes towards the importance of ✓ Powerful Hygiene brand
Slide 43: Initial Hygiene – the Core
Initial Hygiene – the Core Core business has returned 280 £267m £269m 2015-2021 Good performance in H1 2021 @CER 260 REVENUE £250m Ongoing Revenue: Core: £269.1m +9.3% CAGR £246m 240 7.0% Ongoing Revenue: Disinfection £98.3m +105.9% Total Hygiene £367.4m +25.0% 220 Ongoing Operating Profit*: £78.6m
Slide 44: Disinfection Services
Disinfection Services A massive success in 2020 – protected jobs and created value Played a vital role in supporting those customers that needed to stay open during lockdown. Identified opportunity in March 2020, learning from China. Launched in 60 markets. Won new business and created roles for 7,0
Slide 45: Growth Opportunities in Hygiene: Core Washrooms
Hygiene: Growth Opportunities in Hygiene The Next Pest Control. Delivering our organic growth ambition CAPITAL MARKETS DAY of 4 - 6% over the medium term 28 September 2021 Core Washrooms At the CMD we will cover: Core washroom proposition in 65 markets: • What do we sell, where and to who. • Density
Slide 46: Growth Opportunities in Hygiene: Inside Washrooms
Growth Opportunities in Hygiene Delivering our organic growth ambition of 4 - 6% over the medium term Inside Washrooms At the CMD we will cover: New products/services for inside washrooms: • Expanding into new services to existing customers such Air Hygiene and Digital Washrooms Hygiene. • New sales
Slide 47: Growth Opportunities in Hygiene: Premises Hygiene
Growth Opportunities in Hygiene Delivering our organic growth ambition of 4 - 6% over the medium term Premises Hygiene At the CMD we will cover: Opportunities outside of the Washrooms: • Expanding Hygiene into new areas such as indoor air hygiene for multiple locations from offices to retail. • Spec
Slide 48: Growth Opportunities in Hygiene: New Markets
Growth Opportunities in Hygiene Delivering our organic growth ambition of 4 - 6% over the medium term Extended footprint: New Markets At the CMD we will cover: Our expansion into new markets: • Progress underway in the 20 new markets. • Bringing our brand, range, expertise, experience and track reco
Slide 49: Growth Opportunities in Hygiene: M&A
Growth Opportunities in Hygiene Delivering our organic growth ambition of 4 - 6% over the medium term Extended footprint: M&A At the CMD we will cover: Our model for expansion through M&A: • Market – scale and growth drivers. • Where are we targeting? • What’s the model in Hygiene? • Scale of the pi
Slide 50: Protect and Enhance
Protect and Enhance 11% of group Ongoing Revenues Return to growth in Q2 @CER 2015-2021 REVENUE H1 Ongoing Revenue: £169.2m +4.6% CAGR -1.8% H1 Profit: £14.1m +80.5% 200 £188m £186m H1 Organic Revenue growth of 3.9%. £182m £183m £183m 180 £169m Ongoing Revenues improved from -12.3% in Q1 to £162m +2
Slide 51: Protect and Enhance - France Workwear
Protect and Enhance France Workwear France Workwear – performance improved as lockdowns eased in H1. H1 Ongoing Revenue: £82.0m +4.0%. H1 Profit: £6.8m +180.3% Despite the pandemic's significant impact on the French economy, our Workwear operation has achieved a solid performance in H1. New customer
Slide 52: Protect and Enhance - Smaller route-based businesses
Protect and Enhance Smaller route-based businesses Ambius Property Care Dental Hygiene 17 countries with leadership positions Property preservation service offering Dental waste management – for the including North America, Netherlands, France services across the UK. All types of property compliant
Slide 53: Excellent M&A performance
Excellent M&A performance Increased target spend for full year # Deals: 24 acquisitions in H1 (17 in Q2). 21 in Pest Control, 2 in Hygiene and 1 in Ambius 8 deals in NA (incl. EPS*) with £92.7m revenues in H1 North America Region: EPS (15th in the US Top 100) – strong start in H1 Annualised revenues
Slide 54: Expansion in the Middle East
Expansion in the Middle East Attractive market – climate and high economic activity Agreement with Boecker – a leading pest Creating the number one control service provider in the Middle East Pest Control company in the Operations in the United Arab Emirates, Kingdom of Saudi Middle East. Arabia, Jo
Slide 55: H1 2021 Performance
H1 2021 Performance Strong organic growth and M&A execution Ongoing Revenue growth: +18.3% to £1,512.5m (CER) 18.7% growth in Pest Control, 8.5% organic growth. 9.3% growth in Core Hygiene, 9.0% organic growth. Organic growth in Q2: Pest Control of +15.5% and Hygiene of +29.0%. Lapping Covid-impacte
Slide 56: Q&A with management team
Q&A with management team A Q&A will start at 10.00am. Please dial in to ask a question: 020 3936 2999 Access code: 537792 If you just want to listen, please stay on this webcast. 56
Slide 57: Rentokil Initial
Rentokil Initial Protecting People. Enhancing Lives. laner, ert A be V... % nnonest \e (6) 4 K 57