Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2009 Earnings Presentation
41 slides from Rentokil Initial's earnings presentation, Feb 19, 2010
Slide 1: Many small steps on the road to profitable growth
Many small steps on the road to profitable growth 2009 Preliminary Results 19 February 2010 1
Slide 2: Introduction
Introduction John McAdam Chairman 2
Slide 3: Highlights
Highlights Alan Brown Chief Executive Officer 3
Slide 4: 2009 Financial Highlights
2009 Financial Highlights 54% increase in adjusted profit before tax1 at AER at £166.5m Operating cash flow £317m (2008: £130m) = 143% cash conversion at AER Year-on-year reduction in net debt from £1.36bn to £1.11bn 5% revenue increase at AER, 2.2% decline at CER Cost savings of £82m (of which £54m
Slide 5: Operating & Financial Review
Operating & Financial Review Michael Murray Chief Financial Officer 5
Slide 6: Financial Highlights
Financial Highlights Q4 FULL YEAR 2009 2008 2009 2008 £m £m £m £m Revenue at CER 601 610 (1.4)% 2,356 2,410 (2.2)% Adjusted PBITA at CER 65 54 20% 195 167 17% Adjusted PBTA at CER 54 34 61% 140 108 30% Adjusted PBTA at AER 62 37 68% 167 108 54% Operating Cash Flow at AER 96 57 67% 317 130 144% CER =
Slide 7: Textiles and Washrooms
Textiles and Washrooms At constant exchange rates % Revenue % Adj. PBITA2 Q4 2009 FY 2009 Q4 FY 31.9% 48.3% Revenue £195.2m £772.1m 2.0% 2.5% Adj. PBITA at CER1 £34.3m £115.1m 5.9% (6.7)% OCF at CER £37.7m £139.5m 43.3% 63.3% Revenue up 2.5% - primarily France (+4.9%), Germany (+2.4%) & contribution
Slide 8: Rentokil Pest Control
Rentokil Pest Control At constant exchange rates % Revenue % Adj. PBITA2 Q4 2009 FY2009 Q4 FY 16.4% 31.5% Revenue £96.4m £396.7m 2.3% 3.3% Adj. PBITA at CER1 £18.2m £75.2m 19.0% 1.9% OCF at CER £21.2m £82.1m (14.5)% 11.1% Profit up 1.9% on 3.3% revenue growth (of which 2.3% Libya) Stable revenue per
Slide 9: Asia Pacific
Asia Pacific At constant exchange rates % Revenue % Adj. PBITA2 Q4 2009 FY 2009 Q4 FY 7.6% 8.3% Revenue £44.5m £183.4m (3.9)% (6.7)% Adj. PBITA at CER1 £1.9m £19.8m (67.8)% (16.1)% OCF at CER £7.0m £35.2m 62.8% 200.9% Asia: Revenue down 13% - result of exit of HK Pest contract, non-repeat of Olympic
Slide 10: Ambius
Ambius At constant exchange rates % Revenue % Adj. PBITA2 Q4 2009 FY 2009 Q4 FY 4.4% 3.2% Revenue £30.5m £106.8m (13.4)% (10.5)% Adj. PBITA at CER1 £4.3m £7.6m (12.2)% (23.2)% OCF at CER £3.4m £12.6m 142.9% 57.5% Exceptionally challenging market conditions impacting portfolio & sales Revenue down 10
Slide 11: City Link
City Link At constant exchange rates % Revenue Q4 2009 FY 2009 Q4 FY 14.6% Revenue £100.9m £353.1m 3.8% (7.5)% Adj. PBITA 1 £2.7m (£5.6)m - 87.1% OCF £8.5m £1.9m - - 2009 operating loss of £5.6m (2008: £43.5m loss), return to profitability in Q4 FY revenue down £29m due to difficult economic conditi
Slide 12: Initial Facilities Services
Initial Facilities Services At constant exchange rates % Revenue % Adj. PBITA2 Q4 2009 FY 2009 Q4 FY 25.1% 11.0% Revenue £150.6m £608.6m (8.4)% (6.8)% Adj. PBITA at CER1 £11.6m £26.3m 26.1% 42.9% OCF at CER £20.2m £46.4m 2.0% 113.8% Revenue down 7%, of which 2% Retail Cleaning, Catering & Hospitals
Slide 13: Interest
Interest At actual exchange rates £ million FY 2009 FY 2008 Net interest on bank/bond/finance lease debt* (63.6) (66.1) Net return on Pension Scheme 5.9 7.6 Mark-to-market/forex adjustments (2.1) 0.1 Other 2.2 (3.5) Per income statement (57.6) (61.9) Average interest rate on bank/bond/ finance/lease
Slide 14: Operating Cash Flow
Operating Cash Flow At actual exchange rates £ million FY 2009 FY 2008 Adjusted PBITA 221 172 One-off items (40) (20) Depreciation 216 191 Non-cash items1 7 5 EBITDA 404 348 Working capital 92 3 Capex (189) (237) Fixed asset disposal proceeds2 10 16 Operating cash flow 317 130 1 Profit on sale of fi
Slide 15: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates £ million FY 2009 FY 2008 Operating cash flow 317 129 Cash interest (62) (67) Cash tax (17) (27) Other (1) - Free cash flow 237 35 Dividend - (107) Acquisitions & Disposals1 (7) (43) Special pension payment - (33) FX 2 24 (267) Decreas
Slide 16: Strategy Update & Growth Objectives
Strategy Update & Growth Objectives Alan Brown Chief Executive Officer 16
Slide 17: Execution of the Strategic Plan in 2009
Execution of the Strategic Plan in 2009 2009 Progress 1. Outstanding Customer Service 2. Developing Capability 3. Delivering Operational Excellence 4. Lowest Cost and Maximum Cash 5. Profitable Growth = strong progress = progress = limited progress 17
Slide 18: Group Goals & KPIs
Group Goals & KPIs Group Goals 2008 2009 * Colleague engagement surveyed across group for Colleague engagement* N/A 71% the first time in 2009 - COLLEAGUES Sales colleagues retention 54.6% 63.5% previously, only Rentokil (78% 08 to 81% in 09) & Service colleague retention 74.2% 74.4% Ambius (70% in
Slide 19: 1. Outstanding Customer Service
1. Outstanding Customer Service Drive customer service across all our businesses: - Group State of Service 98.1%, +96% in turnaround businesses - Improve Contract State of Service to 97.5% Values & Behaviours: Service, Relationships & Teamwork: - Excellent group take up of “Service, Relationships &
Slide 20: 2. Developing Capability
2. Developing Capability Drive Performance Management, Global Grading & HRIS: - PDRs rolled out to 1,900 managers via HR global information system - Global grading implemented across group - Talent Review roll out to top 500 in Q2 2010 Upgrade functional & operational management: - New senior manage
Slide 21: 3. Developing Operational Excellence
3. Developing Operational Excellence Turnaround businesses off critical list and focused for growth: - City Link growth agenda in development - UK Pest & Washrooms: roll out of Brand & Customer Proposition strategy Develop common information systems & processes: - Further roll out of iCABS across Eu
Slide 22: TWS Starting Point for Finance Systems
3. Developing Operational Excellence TWS Starting Point for Finance Systems General Ledger Receivables Payables Fixed Assets Inventory Payroll France Eurocomptos Eurocomptos Eurocomptos ImmoWin Sacha / Atlas Anaël Germany Schilling Schilling Schilling Schilling None Schilling Topas Belgium FIS 2000
Slide 23: 3. Developing Operational Excellence: City Link
3. Developing Operational Excellence: City Link 2007 2008 2009 Stabilise & Recovery & Deliver Stabilise Network Business Change & Performance Sustainable Broken Change Preparation Improvement Unification Growth Preparation Return to profitability Q4 2009, full year loss of £5.6m Cost savings of £54m
Slide 24: 3. Developing Operational Excellence: City Link
3. Developing Operational Excellence: City Link 2007 2008 2009 2010 2011 Stabilise & Recovery & Deliver Stabilise Network Business Change & Recovery & Performance Sustainable Broken Change Performance Improvement Unification Preparation Growth Preparation Improvement One Hub: 2 to 1 Hubs One Linehau
Slide 25: 4. Lowest Possible Cost, Maximum Cash
4. Lowest Possible Cost, Maximum Cash £82m cost savings in 2009: - £54m (City Link) - £28m (IFS, Pest Control, TWS, Ambius, AsiaPac & Group Centre) £317m operating cash flow: - Target beating 12-day reduction in DSO = 61 to 49 days - Capex reduction = £179m (83% of depreciation at AER) Driving down
Slide 26: 4. Lowest Cost, Maximum Cash: Initiatives for 2010
4. Lowest Cost, Maximum Cash: Initiatives for 2010 £75m cost savings in 2010: - City Link depot & hub consolidation - TWS procurement programme & plant rationalisation - Divisional & Centre cost savings programmes, including £17m indirect procurement savings Reduction in admin & overhead from 17.9%
Slide 27: 4. Lowest Cost, Maximum Cash: Programme Olympic
4. Lowest Cost, Maximum Cash: Programme Olympic Recognise the Develop a importance of culture of “right Share Information business support first time” in a transparent processes way Simplify and Six broad programmes Capture data standardise Our accurately at source Four process focused processes 1.
Slide 28: 4. Lowest Cost, Maximum Cash: Cost Savings
4. Lowest Cost, Maximum Cash: Cost Savings Cost savings achieved vs. prior year 90 £82m 80 £75m 70 £49m £56m 60 From 2009 From 2010 projects projects 50 £m 40 30 £33m 20 From 2008 projects £19m 10 From 2009 projects 0 2009 2010 28
Slide 29: 5. Profitable Growth
5. Profitable Growth Market Segmentation & Brand Development - Industry Classification - Attitudinal Segmentation - Brand Development - Customer Proposition Sales Effectiveness - Organisation, Recruitment & Training - Prospect Identification - Prospect Development - Cross Selling - Customer Contact
Slide 30: 5. Profitable Growth: Market Segmentation
5. Profitable Growth: Market Segmentation Consistent Industry Identifying the most Matching Our Offers segmentation across RI Attractive Segments to Customer Needs • An enabler to cross-selling • Economic value by segment • Increase in • Common processes • Sales strategies aligned to – Win Rate prio
Slide 31: 5. Profitable Growth: Industry Segmentation
5. Profitable Growth: Industry Segmentation Example – Industry Coding for City Link City Link: Number of Customers by SIC Retail & Retail Services Manufacturing Administrative and Support Services Information and Communication Professional, Scientific & Technical Other Service Activities Transportat
Slide 32: 5. Profitable Growth: Attitudinal Segmentation
5. Profitable Growth: Attitudinal Segmentation Example – Selling Pest Control to Hospitality Customers Traditional Offer to Our New Hospitality Proposition Customers Focused pest control service Our Offer Generic pest control including hygiene advice service (leveraging wider capabilities) 1. Improv
Slide 33: 5. Profitable Growth: Prospect Identification
5. Profitable Growth: Prospect Identification Current challenges: - Inadequate management of sales diaries (gaps, planning time, admin) - Inconsistent response times to inbound enquiries & leads - Failure to capture and prioritise Prospect data Productivity initiatives: - ‘Indoor’ sales support role
Slide 34: 5. Profitable Growth: Sales Effectiveness
5. Profitable Growth: Sales Effectiveness Example - UK Washrooms Pilots (South West Region) PILOT 1 PRIMARY GOAL: Sales pipelines full of high potential Prospects Critical Success Factors Improve quantity, quality & accuracy of Prospects, with first priority to internal Prospect sources Collate Pros
Slide 35: 5. Profitable Growth: Sales Effectiveness
5. Profitable Growth: Sales Effectiveness UK Washrooms Pilots cont’d PILOTS 3 & 4 PRIMARY GOAL: To Improve Retention & Sales to Existing Customers Critical Success Factors Tele-care team appointed at branch/regional level Dramatic improvement in first time resolution of service queries Create appoin
Slide 36: 5. Profitable Growth
5. Profitable Growth Market Segmentation & Brand Development - Industry Classification - Attitudinal Segmentation - Brand Development - Customer Proposition Sales Effectiveness - Organisation, Recruitment & Training - Prospect Identification - Prospect Development - Cross Selling - Customer Contact
Slide 37: Outlook
Outlook Trading conditions continue to be challenging but we target modest revenue growth at constant exchange rates Group-wide focus on ongoing development & mobilisation of growth agenda £75m cost savings offset in part by investment in growth and competitiveness Cash flow impacted by £53m restruc
Slide 38: Questions
& Rentokil Initial Questions 38
Slide 39: Net Debt
Net Debt Net debt at Debt Maturity Coupon 31/12/091 £m £500m 2012 LIBOR +0.5% (225)2 RCF £50m 2013 LIBOR +3.25% (50) FRN £75m 2013-33 LIBOR +3.98% (75) Reset Bond €500m 2014 4.625% (453) Bond £300m 2016 5.75% (337) Bond + 323 (1,108) 1 IAS 39 fair values 2 Headroom £280m; EBITDA / interest covenant
Slide 40: Taxation
Taxation At actual exchange rates £ million FY 2009 FY 2008 Profit before tax (continuing ops) 65.0 22.8 Explanation of tax charge Expected charge1 17.6 7.2 Recurring factors affecting tax charge 1.0 (0.2) 18.6 7.0 Deferred tax on unremitted profits (6.8) - Other items2 - 12.4 Prior year adjustments
Slide 41: Many small steps on the road to profitable growth
Many small steps on the road to profitable growth 2009 Preliminary Results 19 February 2010 41