Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2013 Earnings Presentation
32 slides from Rentokil Initial's earnings presentation, Aug 14, 2013
Slide 1: 2013 Interim Results
2013 Interim Results 14 August 2013 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: Highlights
Highlights Alan Brown Chief Executive Officer 3
Slide 4: Interim Highlights
Interim Highlights At constant exchange rates • Strong performance in core businesses outside continental Europe: – Integration of Western Exterminator proceeding to plan – UK core business capitalising on integrated country operating model to deliver strong profit growth – Asia profit +43.5% – nota
Slide 5: Operating & Financial Review
Operating & Financial Review Jeremy Townsend Chief Financial Officer 5
Slide 6: Headline Financials (Continuing Operations)
Headline Financials (Continuing Operations) Q2 H1 2013 2012 2013 2012 Δ Δ £m £m £m £m Revenue at CER 580.4 556.7 4.3% 1,140.8 1,099.9 3.7% Adjusted PBITA1 at CER 65.2 59.2 10.1% 108.9 103.5 5.2% Adjusted PBTA2 at CER 53.3 49.4 7.9% 85.0 83.5 1.8% Adjusted PBTA2 at AER 54.8 49.4 10.9% 87.6 85.0 3.1%
Slide 7: 2012 Financial Highlights
2012 Financial Highlights • Adjusted operating profit +5.2%, revenue up 3.7%: – Strong acceleration of profit growth in Q2 – Recent acquisitions performing well, contributing 6.0% (£65.6m) of revenue growth – Underlying organic revenue growth down 1.6% year on year, reflecting challenging economic c
Slide 8: East Region
East Region At constant exchange rates Click to edit Master title style • Revenue -1.8%, profit flat year on year - Continuation of difficult trading conditions in Europe % Group Revenue % Adj. PBITA2 - Benelux particularly impacted by pricing pressure in flat linen; 41.1% 56.6% Belgian flat linen b
Slide 9: West Region
West Region At constant exchange rates Click to edit Master title style • Revenue +18.4%, profit +14.6% - Revenue and profit growth driven largely by North America % Group Revenue % Adj. PBITA2 through acquisition of Western Exterminator 30.6% 33.2% - UK & Ireland revenue adversely impacted by tough
Slide 10: Asia Region
Asia Region At constant exchange rates Click to edit Master title style • Revenue +6.6%, profit +43.5% - Good performances from pest and hygiene categories, % Group Revenue % Adj. PBITA2 reflecting ongoing market development 4.5% 2.2% - Combined revenue growth of +35% from emerging markets of India,
Slide 11: Initial Facilities
Initial Facilities At constant exchange rates Click to edit Master title style • Revenue -2.9%, profit -3.3% - Due to catering contract losses and continued planned % Group Revenue % Adj. PBITA2 withdrawal from a number of single service based contracts 23.8% 8.0% in order to de-risk portfolio and i
Slide 12: Operating Cash Flow
Operating Cash Flow At actual exchange rates £ million H1 2013 H1 2012 Adjusted PBITA 112.6 104.9 Reorganisation costs and one-off items (26.9) (13.4) Depreciation 104.8 93.6 Non-cash items1 1.5 4.5 EBITDA 192.0 189.6 Working capital (76.6) (52.5) Capex (118.4) (105.1) Fixed asset disposal proceeds2
Slide 13: Guidance for H2
Guidance for H2 • Cost savings to exceed £40m: supported by implementation of Integrated Country Operating Model • Central costs in line with 2012 reflecting continuing investment in capability • Interest cost reflects carry cost of pre-funding 2014 bond maturities: estimated total P&L charge £56m-£
Slide 14: Strategy Update
Strategy Update Alan Brown Chief Executive Officer 14
Slide 15: Strategy for Growth
Strategy for Growth • Clear choices on core categories – Pest Control is our lead category seeking presence in any metropolitan, politically stable area with temperate to tropical climate – Hygiene to follow Pest into new territories – Workwear to focus on continental Europe – Plants to focus on 11
Slide 16: Strategic Framework For Growth
Strategic Framework For Growth Prioritisation and resource allocation at group and local levels Sector / Market / Leverage Customer Country Local Drive Service & Where Where Attractiveness Trends How Where Density Product To Play To Play To Play To Win - Strategic Differentiation - Strategic - Scale
Slide 17: Where To Play: Market / Country Trends
Where To Play: Market / Country Trends Market / Country Trends Prioritisation and resource allocation at group and local levels Sector / Customer Attractiveness Market / Where Country Trends To Play Where To -Play Strategic Prioritisation - Strategic Prioritisation Service / Product Penetration 17
Slide 18: Where To Play: Global Footprint Based On Proforma 2012 Revenue
Where To Play: Global Footprint Based On Proforma* 2012 Revenue Continental UK & Europe Ireland 173 79 268 78 44 North 9 418 America 224 Pacific 63 63 69 Africa & 16 Asia £m Revenue 2012 Caribbean 46 Pest Control 24 50 Hygiene Services 24 Plants 0.3 4 Workwear *including full year effect of acquisit
Slide 19: Where To Play: Pest Category
Where To Play: Pest Category Market / Country Trends Top 3 markets Growth markets Other large businesses • US, UK and Australia account for 52% of • Rentokil presence now established in all • Netherlands, Germany, Spain, France, Pest revenue high potential countries Belgium all strong businesses tho
Slide 20: Where To Play: Hygiene Category
Where To Play: Hygiene Category Market / Country Trends Top 7 markets Growth markets • Top 7 countries account for 75% of •Malaysia, Indonesia have market leading Hygiene revenue positions and expected to grow strongly • All except Australia are European •Hygiene accounts for 50% of Asia sales count
Slide 21: Where To Play – Workwear Category
Where To Play – Workwear Category Market / Country Trends Workwear Flat Linen Cleanrooms • Predominately in 4 continental countries – • 21% of category revenue • Growing and profitable niche category France, Germany, Belgium & Netherlands • France 82% of our flat linen business providing specialist
Slide 22: Where To Play – Plants Category
Where To Play – Plants Category Market / Country Trends Top 5 markets Markets with critical mass • USA 42% of category revenue •Six further markets have reasonable scale • Next 4 countries a further 33% of revenue •All integrated with RI operations in these countries • All have market leading positi
Slide 23: Where To Play – Acquisitions: Acquiring Well, Integrating Well
Where To Play – Acquisitions: Acquiring Well, Integrating Well Spend per region UK 10% • 33 deals over 24 months for £116m APAC 7% Cont EU 7% • All expected to meet investment hurdle rates NA 68% LATAM 8% • Between £0.1m - £10m in consideration - Western Exterminator the exception Over 10% of spend
Slide 24: How To Win
How To Win Leveraging Global Scale Deployment Through Country Toolkit National / International Leverage How Leverage Local Density Drive Service & Product To Win Differentiation Where - Scale Leverage To- Capability Play Building - Strategic Prioritisation Leverage Global Scale 24
Slide 25: How To Win: Leveraging Local Density, Global Scale
How To Win: Leveraging Local Density, Global Scale Revenue 6 months to 30 June 2013 Global Marketing, Innovation & Category Teams Integrated Country Operating Model Pest Other Hygiene Workwear Plants Total Control France 11 38 122 2 10 183 Local density Benelux 24 40 47 10 6 127 Germany 23 30 43 1 4
Slide 26: How To Win
How To Win Leveraging Global Scale Deployment Through Country Toolkit National / International Leverage How Leverage Local Density Drive Service & Product To Win Differentiation Where - Scale Leverage To- Capability Play Building - Strategic Prioritisation Leverage Global Scale 26
Slide 27: Drive Service & Product Innovation – Signature Hygiene Range
Drive Service & Product Innovation – Signature Hygiene Range • Proprietary range of 32 products to Initial design • Sourced from manufacturers in Asia and Europe • Significant aesthetic advance on current product range; good functionality and proven resilience • Enhanced sales capability through cus
Slide 28: Customer Voice Counts Quarterly Moving Average Trends
Customer Voice Counts Quarterly Moving Average Trends • CVC trends improving in all categories • Particularly strong improvement from Pest Hygiene following new product launches • Further roll out of proactive customer account management processes Plants Hygiene TOTAL RI GROUP Initial Facilities Wor
Slide 29: Outlook for H2
Outlook for H2 • Conditions expected to remain tough in many of our markets: continental Europe in particular • Introduction of Integrated Country Operating Model delivering cost and implementation benefits • Integration of Western Exterminator proceeding in line with expectations • Further roll out
Slide 30: 2013 Interim Results
2013 Interim Results 14 August 2013 30
Slide 31: Free Cash Flow and Movement in Net Debt
Free Cash Flow and Movement in Net Debt At actual exchange rates £ million H1 2013 H1 2012 Operating cash flow (24.1) 21.0 Cash interest (26.5) (37.6) Financing - other - 2.0 Cash tax (17.6) (17.3) Free cash flow (68.2) (31.9) Acquisitions & Disposals (3.8) (3.7) Dividends (25.9) (24.1) Special pens
Slide 32: Net Debt
Net Debt Net debt at Debt Maturity 30/06/131,2 £m £270m 2016 (0) RCF £240m 2014 (0) RCF £50m 2013 (50) FRN £500m 2014 (419) Bond €300m 2016 (315) Bond £500m 2019 (436) Bond Cash & Other 982 (1,122) 1 Headroom £510m; EBITDA / interest covenant is 4x minimum, actual 8.9x, Net debt/EBITDA covenant is 3