Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2014 Earnings Presentation
43 slides from Rentokil Initial's earnings presentation, Aug 1, 2014
Slide 1: 2014 Interim Results Presentation
2014 Interim Results Presentation Andy Ransom, Chief Executive Jeremy Townsend, Chief Financial Officer 1 1 August 2014 1
Slide 2: Company’s legal or regulatory obligations (including under the Listing Rules
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: 2014 Interim Results: Putting Our Strategy Into Action
2014 Interim Results Putting Our Strategy Into Action Andy Ransom Chief Executive
Slide 4: Introduction
Introduction • Encouraging H1 progress • Simpler organisation post sale of IFS with clear regional structure • Momentum in M&A • Solid profit delivery with reduction in central overheads • Strong cash performance with significant reduction in restructuring and one-off costs THE RIGHT WAY… STRATEGY I
Slide 5: 2014 Interim Results
2014 Interim Results Jeremy Townsend Chief Financial Officer
Slide 6: Financial Highlights (Continuing Operations)
Financial Highlights (Continuing Operations) Q2 £ million H1 2014 2013 2014 2013 £m £m £m £m Revenue at CER 466.4 451.0 3.4% 896.7 883.4 1.5% Revenue – ongoing 466.0 448.7 3.9% 895.8 872.2 2.7% Adjusted PBITA at CER 65.3 60.5 8.0% 106.6 99.0 7.7% Adjusted PBTA at CER 56.1 47.7 17.6% 83.7 73.9 13.3%
Slide 7: Delivering Shareholder Value: 2014 priorities
Delivering Shareholder Value Strategy into action - 2014 priorities Sustainable Profit Growth Increased Free Cash Flow • Sales force to focus on yield • Lower capex - £20m reduction versus management 2013 • Service productivity • IT capex <£25m • Branch admin rationalisation • Restructuring costs <£
Slide 8: Asia
Asia Asia At constant exchange rates • Ongoing revenue +6.1% (+5.6% organic) % Group Revenue % Adj. PBITA2 • Adjusted PBITA1 +12.9% 5.7% 2.5% - Good performances from pest and hygiene categories - Combined revenue growth of 26% from India, China and Vietnam - High-single digit revenue growth from In
Slide 9: North America
USA Mexico Canada North America At constant exchange rates • Ongoing revenue +5.0% (+0.7% organic) % Group Revenue % Adj. PBITA2 • Adjusted PBITA1 +19.1% 19.1% 11.0% - Revenue growth driven by acquisitions - Organic revenue growth impacted by adverse weather conditions on East and West coast – perfo
Slide 10: UK and Rest of World
Middle East UK Turkey, Africa Caribbean UK and ROW Ireland Nordics At constant exchange rates • Ongoing revenue +4.5% (+2.4% organic) % Group Revenue % Adj. PBITA2 • Adjusted PBITA1 +4.2% 17.6% 22.9% - Continued growth from UK pest and hygiene categories, and pest jobbing work in particular - Strong
Slide 11: Europe
Germany Latin America Austria Switzerland Europe Spain, Portugal France Italy, Greece Benelux At constant exchange rates • Ongoing revenue +1.4% (-0.3% organic) % Group Revenue % Adj. PBITA2 • Adjusted PBITA1 -3.3% 49.6% 53.7% - Revenue growth in Germany (1.2%) and France (1.3%) offset by decline in
Slide 12: Pacific
Pacific Australia, Fiji New Zealand At constant exchange rates • Ongoing revenue -0.6% (-0.6% organic) % Group Revenue % Adj. PBITA2 • Adjusted PBITA1 +4.5% 8.0% 9.9% - Revenue decline driven by reduced Pest jobbing and product sales - Margin improvement supported by branch administration rationalis
Slide 13: Sustainable Profit Growth: Report card for H1
Delivering Shareholder Value Strategy into action - 2014 priorities Sustainable Profit Growth – “Report card” for H1 • Sales force to focus on yield management • Good progress in France in H1 – opportunities across Group, especially Benelux, Germany and Asia • Service productivity • Further opportun
Slide 14: Operating Cash Flow
Operating Cash Flow At actual exchange rates H1 2014 H1 2013 Adjusted PBITA 100.2 100.7 Reorganisation costs and one-off items (2.3) (20.5) Depreciation 92.1 102.4 Non-cash items1 (2.4) 1.4 EBITDA 187.6 184.0 Working capital (29.3) (41.8) Movement on provisions (8.7) (4.5) Capex (101.2) (115.8) Fixe
Slide 15: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates H1 2014 H1 2013 Operating cash flow - continuing 51.5 23.8 Cash interest (34.4) (30.3) Special pension contributions - (12.5) Disposal of available-for-sale investments - 1.3 Cash tax (12.4) (17.6) Free cash flow - continuing 4.7 (35.3
Slide 16: Increased Free Cash Flow: Report Card for H1
Delivering Shareholder Value Strategy into action - 2014 priorities Increased Free Cash Flow – “Report Card” for H1 • Lower capex - £20m reduction versus 2013 • £16m reduction in H1 • IT Capex <£25m • Half year spend of £7m; full year investment estimated at £20m • Restructuring costs <£20m versus £
Slide 17: Guidance for H2
Guidance for H2 • Central and divisional overheads - below £70m in 2014 (£10m reduction on 2013 H1 run-rate) • Interest costs £50m – reflecting benefits of 2012 and 2013 refinancing; cash impact in line with P&L charge • Exchange rate impact – c.£17m adverse impact to P&L from strengthening of Sterl
Slide 18: Putting our Strategy into Action
Putting our Strategy into Action Andy Ransom Chief Executive
Slide 19: Summary of Strategy
Summary of Strategy Differentiated in its Driven for Shareholder A Focused Plan Delivery Value • A clear organisation built • Clear framework to drive • Restructuring largely around a low cost performance through complete: a strong base operating model differential management for profitable growth •
Slide 20: Delivering Shareholder Value
Delivering Shareholder Value Driving Higher Revenue Sustainable Profit Growth Increasing Cash Conversion • Focus on: • Restructuring largely • Increase operating cash - Our chosen categories complete conversion • Significant reduction in - Manage working capital - Strength in core tightly competenci
Slide 21: Our Three Categories
Our Three Categories Services That Protect People and Enhance Lives Rentokil Pest Control Initial Hygiene Initial Workwear Protecting People Protecting People Protecting People • From the risks of pest-borne • From the risks of poor hygiene • From the risks of injury in the disease and cross-contami
Slide 22: 2014 H1 Category Analysis
2014 H1 Category Analysis At CER Ongoing basis excluding divested businesses 2014 Revenue (£m) 2014 Profit (£m) Q1 Δ Q2 Δ H1 Δ Q1 Δ Q2 Δ H1 Δ Pest Control 161.8 4.6% 193.2 8.5% 355.0 6.7% 22.5 8.2% 39.7 10.0% 62.2 9.3% Hygiene 117.3 0.8% 118.7 1.3% 236.0 1.0% 22.6 -1.7% 23.0 -3.4% 45.6 -2.6% Workwea
Slide 23: Differentiated Plan: Quadrant approach
£64m £359m Differentiated Plan for Driving Shareholder Value £8.2m £55.7m £66m £406m Quadrant approach - different strategies £8.3m £71.5m • Lower value/capita markets • Established markets • High GDP growth • Average or above GDP • High growth in pest & growth hygiene: • Often unconsolidated - Grow
Slide 24: Differentiated Plan: Countries and categories
£64m £359m Differentiated Plan for Driving Shareholder Value £8.2m £55.7m £66m £406m Countries and categories £8.3m £71.5m • Categories: • Categories: - Pest - Pest - Hygiene - Hygiene - Cleanroom (Workwear) • Geographies: - Asia • Geographies: - Mid East, N Africa, Turkey - North America - Latin Am
Slide 25: H1 2014 Revenue Performance by Quadrant
£64m £359m £8.2m £55.7m H1 2014 Revenue Performance by Quadrant £66m £406m £8.3m £71.5m • Emerging - growth +18.7% +4.3% fuelled by acquisitions in Latin America and Growth Potential organic growth in Asia • Growth – good performance in UK in H1 • Q2 improved -0.5% -0.2% performance o Emerging +26.9
Slide 26: H1 2014 Operating Profit Performance by Quadrant
£64m £359m £8.2m £55.7m H1 2014 Operating Profit Performance by Quadrant £66m £406m £8.3m £71.5m • Emerging and Growth +13.9% +7.0% – good progress. • Manage for Value – Growth Potential focus on profit improvement strategies in H1 • Protect & Enhance held back by Benelux +3.7% -4.1% (Workwear and H
Slide 27: Emerging: Build Leading Positions in Pest & Hygiene
Asia, Mid East Turkey, Africa Emerging: LatAm Build Leading Positions in Pest & Hygiene PROTECTEMERGING & ENHANCE H1 Rev: £64m vs £54m H1 2013 • Categories: - Pest - Hygiene 100% • Geographies: LatAm - Asia - Mid East, N Africa, Turkey 50% Other 100% 7% - East Africa Asia LatAm - Latin America 0% Gr
Slide 28: Emerging: Latin America
Latin Emerging: Latin America America Strategy into Action Building leading positions in LatAm Bogotá • Chile (incl. Colombia): two deals in H1 • Bestway • Pest control, hygiene and business services • Leader in Hygiene in Chile Rio de Janeiro São Paulo • Operating in Colombia (4th economy & fastest
Slide 29: Emerging: Asia
Emerging: Asia Asia Strategy into Action Driving growth in Asia • China fragmented market with no clear leader yet – RI growing +33% mainly in the food retail and processing sectors – Gross margin: 30.2% in H1 2014 (22.8% in H1 2013) • RI India now number 3 in the market – Accelerating growth with e
Slide 30: Manage for Value
Manage for Value: Ireland, Spain, Aggressive Cost Management & Selective Divestments Portugal, Italy, Greece MANAGE FOR VALUE H1 Rev: £66m vs £67m H1 2013 • Categories: - Ambius (small markets) 100% Other Ambius • Geographies: 50% - Ireland 8% Ireland 100% Other - Spain, Portugal, 0% S Europe Ambius
Slide 31: Manage for Value: Southern Europe
Manage for Value: Southern Europe Ireland, Spain, Strategy into Action Portugal, Italy, Greece Italy Hygiene - Service Productivity Improvements • Productivity improvement programme: better service planning, improved scheduling, re-zoning of service technicians • Targeted upselling: Strong sales str
Slide 32: Protect & Enhance: Building Profit and Cash Contribution
Protect & Enhance: France, Benelux, Building Profit and Cash Contribution Nordics, Pacific, South Africa PROTECT & ENHANCE H1 Rev: £406m vs £407m H1 2013 • Categories: - Hygiene - Workwear 100% South Africa Pacific • Geographies: 50% Nordics - France, Benelux 45% 100% South Africa Benelux - Nordics
Slide 33: Protect & Enhance: France
Protect & Enhance: France Strategy into Action France PRICING STRATEGY IN FRANCE • Actions grounded on detailed financial analysis - by customer, sector, branch, sales route • Focus on yield management - pricing strategies for high and low margin customers • Linked to sales colleague Low Gross Margi
Slide 34: Protect & Enhance: Benelux
Protect & Enhance: Benelux Strategy into Action Benelux Drivers of weak performance Plan to stabilise performance Drivers of weak formance • Challenging economic conditions • New MD and FD in place to improve • Highly competitive markets management capability – Increased pricing pressure, especially
Slide 35: Growth: Deploy All Levers and Bulk Up With M&A
N America, UK, Germany, Austria Growth: Switz, Caribbean Deploy All Levers and Bulk Up With M&A PROTECT & ENHANCE GROWTH H1 Rev: £359m vs £345m H1 2013 • Categories: - Pest - Hygiene 100% - Cleanroom (Workwear) Other Germany • Geographies: 50% - North America UK 100% Other - UK 40% N America Germany
Slide 36: Growth: UK Organic Growth
United Growth: UK Kingdom Strategy into Action Organic Growth • Building the sales pipeline – New websites – Increasing web traffic, search performance and brand awareness through PR – Internal lead generation - up 30% - using internal Social Media (Google+) • Delivering the right product offer – Ne
Slide 37: Growth: UK
UK Growth Strategy into Action 11 20,000+ 1000+ 21 51 3,210 6,109 #pestaurant tweets Visitors to 1.2m pestaurant.com Facebook reach 1.02m 19,409 Linkedin impressions Television Radio News articles interview & interview & 6,000 Visitors to local Video views country sites Countries Attendees & mention
Slide 38: New: www.rentokil.co.uk
UK Growth Strategy into Action New: www.rentokil.co.uk 34% est Of our new pest business comes from enquiries +57% 300+ UK articles over 12 months Enquiries for 500 UK mentions on Facebook pest control 700 UK mentions on Twitter (year on year) 38
Slide 39: M&A – Continued Progress Through H1
M&A – Continued Progress Through H1 Strategy into Action • 17 deals completed Acquisitions: 5 Acquisitions: 8 Revenue: £12.9m Revenue: £18.3m • £34.7m annualised revenues Chile (2), India, Mozambique, Korea UK, 7 bolt-on deals in US • First steps in Chile Growth Potential and Mozambique • Building d
Slide 40: M&A Process
M&A Process Strategy into Action Identify key target Contact programme All offers submitted to cities and companies monitored monthly by the Investment to maximise density dedicated in-house Committee and growth potential M&A team with (CEO, CFO and Group sophisticated financial Financial Controller
Slide 41: Strategy into Action: Summary
Strategy into Action • Organisation • Added focus – regions and categories • Strategy • Applying differentiated, quadrant strategy, with different levers for growth • Divested non-core businesses • Medium-term target: Mid-single digit revenue growth • Improved organic growth in Q2 • M&A
Slide 42: Putting Strategy into Action
Putting Strategy into Action 42
Slide 43: And now it's your turn...
And now it’s your turn... Go on... try one www.pestaurant.com 43 AncreMoonen Photography