Rentokil Initial Plc · LSE:RTO
Rentokil Initial — FY2021 Earnings Presentation
46 slides from Rentokil Initial's earnings presentation, Mar 3, 2022
Slide 1: An excellent financial and operational performance in 2021
An excellent financial and operational performance in 2021. 3 March 2022 1
Slide 2: Rentokil-Terminix: Additional Information About The Proposed Transaction
Rentokil-Terminix: Additional Information About The Proposed Transaction And Where To Find It Rentokil-Terminix: Additional Information About The Proposed Transaction And Where To Find It In connection with the proposed transaction between Rentokil Initial plc (“Rentokil”) and Terminix Global Holdin
Slide 3: Highlights
Highlights Preliminary Results 2021 Andy Ransom Chief Executive 3
Slide 4: 2021 Highlights – Financials
2021 | Highlights – Financials Excellent performance in revenue, profit & cash, underlining the strength in our core businesses. +9.8% +19.5% 107.3% Ongoing Revenue Growth of +9.8% to Ongoing Operating Profit Growth Free Cash Flow of £326.5m. £3,063.5m. in 2021 of 19.5% to £458.7m. 107.3% cash conve
Slide 5: 2021 Highlights – Operational Execution
2021 | Highlights – Operational Execution Continued strong progress in Employer of Choice, digital and innovation 52% 58% 85.3% 52% increase in job applications 58% growth in Customer retention up to through our Career Portal to PestConnect with 85.3% (2020: 84.5%). c.17,000. 12,000 vacancies filled
Slide 6: 2021 Highlights – M&A
2021 | Highlights – M&A 2021 cash spend on M&A of £463.1m* in line with £450m-£500m H2 guidance. 52 businesses acquired in 2021. 48 deals in Pest Control, 4 in Hygiene & Wellbeing. Businesses acquired 52 in 2021. Total annualised revenues of £146.6m for businesses acquired in 2021. Strong pipeline o
Slide 7: Financial & Regional Review
Financial & Regional Review Preliminary Results 2021 Stuart Ingall-Tombs Chief Financial Officer
Slide 8: Financial highlights
Financial highlights Revenue +9.8%, demonstrating strong FY 2021 momentum in our core businesses £3,063.5m £ million Δ Δ AER CER AER CER +19.5%, reflecting resumption of our Profit high-quality service model and Ongoing Revenue* 2,953.9 3,063.5 5.9% 9.8% £458.7m associated revenue and bad debt provi
Slide 9: North America
North America Total Pest Control revenues +24.3% (8.9% Organic), Pest Services +22.3% Ongoing Revenue growth +14.2% ➢ Commercial Pest +21%, aided by good volumes across most markets Organic Revenue growth* +8.9% ➢ Residential Pest +31%, benefiting from work from home business environment and strong
Slide 10: North America cont’d: Infrastructure
North America cont’d 2019 2020 2021 2022 IT re-platforming programme focused on Infrastructure STATUS delivering a standard modern technology All data in Google Cloud Platform 100% platform to support efficient and unified operating model across the business. Standard operating system 100% Having da
Slide 11: North America core IT re-platforming complete
North America core IT re-platforming complete Successful migration of multiple legacy systems onto one core operating platform ✓ Service planning & route optimisation now performed in one core system ✓ Standard customer notifications and ability for customers to rearrange service visit using optimis
Slide 12: Europe
Europe Ongoing Revenue +3.9%, reflecting improvements in France (+3.8%), southern Europe (+6.9%) and Latin America (+15.0%) Ongoing Revenue growth +3.9% Core categories performing well, despite ongoing disruption from Organic Revenue growth* +4.8% lockdowns and intermittent restrictions Ongoing Oper
Slide 13: UK & Rest of World
UK & Rest of World Revenue +10.8% (+10.7% Organic): strong rebound in the UK as restrictions ease, robust performance from ROW Ongoing Revenue growth +10.8% ➢ UK & Ireland Pest and Hygiene (ex. disinfection) +6.2% and +19.6% Organic Revenue growth* +10.7% ➢ ROW Pest and Hygiene (ex. disinfection) +1
Slide 14: Asia
Asia Improving regional performance, +5.0% growth in regional Ongoing Ongoing Revenue growth +5.0% Revenue, +4.1% Organic Recovery held back by difficult trading conditions and lockdowns in Organic Revenue growth* +4.1% Malaysia, Indonesia, Vietnam and Thailand. China reopening at a Ongoing Operatin
Slide 15: Pacific
Pacific Robust performance in Australia despite intermittent lockdowns, weaker Ongoing Revenue growth +8.7% in New Zealand reflecting tight restrictions: 8.7% growth in Ongoing Revenue and encouraging organic growth levels Organic Revenue growth* +6.7% ➢ Pest Control +10.3%, aided by strong commerci
Slide 16: Focus on pricing
Focus on pricing Higher cost inflation than recent years – but we are well positioned to respond Majority of our commercial customers on evergreen rolling contracts with automatic annual price increases passed through on the anniversary of contract inception APIs therefore implemented every month, a
Slide 17: Operating Cash Flow
Operating Cash Flow £ million @AER 2021 2020 Adjusted Operating Profit 441.5 384.0 One-off items – Operating (20.7) (7.7) Depreciation 223.6 228.8 Other 9.7 11.1 Operating Cash Flow of £432.3m for continuing operations driven by a EBITDA 654.1 616.2 £57.5m increase in Adjusted Operating Profit, offs
Slide 18: Operating Cash Flow cont’d
Operating Cash Flow cont’d £ million 2021 2020 Interest payments of £36.4m, were Operating Cash Flow – continuing £4.6m lower than in 2020. Cash tax 432.3 412.0 payments of £68.9m were £4.5m Cash interest @AER (36.4) (41.0) higher than in the prior year, reflecting Cash tax (68.9) (64.4) higher Grou
Slide 19: Balance Sheet
Balance Sheet £ million @AER 2021 2020 Cash on acquisitions of £463.1m and Net (decrease)/increase in cash and cash equivalents (295.0) 279.4 dividends of £138.7m contributed to Net debt related cash flows 19.8 (168.4) an underlying increase in net debt of IFRS 16 liability movement (1.5) 9.9 £288.9
Slide 20: Technical guidance and outlook for 2022
Technical guidance and outlook for 2022* P&L Cash Flow • Medium-term growth targets: Ongoing Revenue growth 6% to 9% (4% to 5% • Neutral working capital; Organic), Ongoing Operating Profit 10%+, Free Cash Flow conversion c.90%; • Capex £270m to £290m, reflecting more normal pattern of • Restructurin
Slide 21: 2021 summary
2021 summary ✓ +9.8% growth in Ongoing Revenue (vs. target 6% to 9%) despite ongoing market challenges in some of our regions ✓ +7.5% Organic growth in core business, our highest rate in over a decade An excellent ✓ +19.5% increase in Ongoing Operating Profit, considerably in excess performance in 2
Slide 22: Executing our Strategy
Executing our Strategy. Preliminary Results 2021 Andy Ransom Chief Executive 22
Slide 23: Our Operating Model
Our Operating Model Multiple growth levers incl. people, retention and pricing. ESG: We have made a good start on our journey to net zero by 2040. Vehicle migration to ultra-low emissions Retention in the mid-80s. fleet underway. First operations now using renewable Career+ generated 15,000 applicat
Slide 24: Rentokil Pest Control
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Slide 25: Rentokil Pest Control | 2021
Rentokil Pest Control | 2021 Strong growth in 2021 – combination of organic growth and M&A 2021 £2,020.0m Strong performance FY 2021 @CER 2020 £1,703.9m Ongoing Revenue: £2,020.0m +18.6% 2019 £1,696m Organic Growth: +8.1% 2018 £1,529m Ongoing Operating Profit: £375.8m +33.4% 2017 £1,365m 8 Year Pest
Slide 26: Proprietary Innovation: PestConnect
Proprietary Innovation Differentiation and Setting New Standards PestConnect units in the field PestConnect success - providing customers with a complete remote pest detection solution and full traceability. c. 87,000 PestConnect units added in 2021. c. 235,000 units now in the field. 2019 2020 2021
Slide 27: Proprietary Innovation: Lumnia Insect Light Traps
Proprietary Innovation Differentiation and Setting New Standards Lumnia Insect Light Traps: The value of continuous innovation and product development. 89,000 units installed in 2021 - 65% increase year on year. c.260,000 units now in customer premises. 5 products launched since 2017 - meeting diffe
Slide 28: Proprietary Innovation: Partnership with Vodafone
Proprietary Innovation New Technology and AI Partnership with Vodafone Joining forces to develop the next generation of connected products for use in pest management. Technology is central to our roadmap, starting with connected devices to improve efficiency and enhance customer service and supporti
Slide 29: Pest Control M&A
Pest Control M&A Excellent M&A in 2021 Acquisitions are a core part to our Pest Control category # deals and annualised revenues @ CER Pest Control growth strategy, enabling 166 150 us to build density. 142 122 129 85 48 pest control companies acquired in 2021 with revenues of £142m - building on ou
Slide 30: Initial Hygiene
‘Qi The Experts Ac hl Cs, in-Hygiene en 2 60 kmph Bi | & Rentokil Initial Protecting People. Enhancing Lives. Initial Hygiene
Slide 31: Initial Hygiene | 2021
Initial Hygiene | 2021 Strong growth in 2021 – combination of organic growth and M&A 2021 £556m Strong performance FY 2021 @CER 2020 £514m Ongoing Revenue: £555.6m +8.2% 2019 £539m Organic Growth: +7.4% Ongoing Operating Profit*: £141.2m -18.3% 2018 £512m 8 YEAR * Including disinfection 2017 £413m R
Slide 32: Initial Hygiene: Inside the Washroom
Initial Hygiene Inside the Washroom – existing customers Over the medium term from 2022 we will deliver 4% - 6% organic growth on the enlarged H&W category (excludes Disinfection). Selling more to existing customers by Increasing customer demand for no- meeting their ‘new’ hygiene needs, eg: touch p
Slide 33: Initial Hygiene: Outside the Washroom
Initial Hygiene Outside the Washroom: Premises Hygiene and Enhanced Environments September 2021 - the WHO launched new guidelines on internal air quality, providing clear evidence of the damage air pollution inflicts on human health and recommend new air quality levels to protect the health of popul
Slide 34: Initial Hygiene: Outside the Washroom – trusted brand
Initial Hygiene Outside the Washroom – trusted brand Working alongside TennisAustralia to provide protection from airborne viruses and bacteria to players, staff, and spectators as the Official Hygiene Partner of the Australian Open in 2021 and 2022 – including the use of 70 VirusKiller air purifica
Slide 35: Protect & Enhance
Protect & Enhance 35
Slide 36: Protect & Enhance | 2021
Protect & Enhance | 2021 Standalone reporting of Workwear from 1 January 2022 Our France Workwear business grew by 1.9% in 2021. There was an average of 3.4% customers closed Focus on Quality and Service FY 2021 @CER throughout 2021, this decreased by the end of 2021 was close to zero. Ongoing Reven
Slide 37: Excellent Progress in M&A
Excellent Progress in M&A with 52 Businesses Cash paid in 2021 of £563m ahead of £450m-£500m guidance Acquired Cash spend in 2021 of £463.1m* with £450m-£500m H2 guidance M&A in 2021 52 businesses acquired. 48 deals in Pest Control. 4 deals in H&W. Total annualised revenues of £209.1m for businesses
Slide 38: Acquisition of Terminix
Acquisition of Terminix Step-change in local density, significant synergies and attractive financials Scale = Density Complementary + Synergies Attractive financials • North America is the world’s largest pest • Strong operational and cultural fit – similar • Opportunity to increase Group Net Operat
Slide 39: Mobilisation
Acquisition of Terminix Integration planning underway. On track for H2 completion. On Track Regulatory Initial process underway. Expiry of Initial review period in March. ✓ Sale of UK and Norway operations by Terminix ✓ Integration Mobilisation Business strategy, continuity and operating model ✓ Pla
Slide 40: Governance and Planning
Governance and Planning Positive engagement and development of detailed implementation plans Governance structure in place. Excellent working relationships established between integration planning teams in both companies. Supported by third party expert consultants to supplement RI and Terminix expe
Slide 41: Synergy tracking
Synergy tracking Significant focus with detailed planning underway Multiple cost and efficiency synergy levers in plan (examples shown left) with 3Y delivery timescale. c.50% of synergies from back office incl. procurement and c.50% from the network. Run rate synergies expected to accumulate c.30%,
Slide 42: Significant Progress in 2021
Significant Progress in 2021 Strong financial performance and excellent M&A 9.8% growth in Ongoing Revenue to £3,063.5m 18.6% growth in Pest Control, 8.1% Organic Growth. 8.2% growth in Core Hygiene, 7.4% is Organic Growth. 87,000 increase in PestConnect installations 58% growth in PestConnect to c.
Slide 43: An excellent financial and operational performance in 2021
An excellent financial and operational performance in 2021. 3 March 2022 43
Slide 44: Combined Group Illustration for FY 2021
Combined Group Illustration for FY 2021 The Combined Group’s FY2021 illustrated revenue would have been US$6.0bn (£4.5bn), with adjusted EBITDA of US$1.3bn (£1.0bn) and Free Cash Flow of US$0.7bn (£0.5bn). US$m FY 2021 @ 2021 AER RTO Growth TMX Growth Combined Growth Revenue 3,924 5% 2,045 4% 5,969
Slide 45: New Category Structure from January 2022
Terminix New Agreement Category Structure from January 2022 Revenue and profit – 2021 reported and by new category structure 2021 Structure New Structure from 01.01.2022 £365.6 170.2 £730.8 REVENUE (£m) £555.6 £2,020.0 £2,040.2 £43.2 £17.5 £170.6 £141.2 Core Hygiene & PROFIT (£m) Hygiene* Wellbeing*
Slide 46: ESG accreditation in 2021
ESG accreditation in 2021 Dow Jones Sustainability 4% improvement in our score to 69% (65% 2020 & 2019). DJSI Europe Index (DJSI) and DJSI World members. The Company is a member of the DJSI Yearbook of leading companies – top 716 companies of the 7,500 participants. Vigeo Eiris (VE) 3rd out of 103 c