Rentokil Initial Plc · LSE:RTO
Rentokil Initial — H1 2020 Earnings Presentation
59 slides from Rentokil Initial's earnings presentation, Jul 30, 2020
Slide 1: 2020 Interim Financial Results
30 July 2020 2020 INTERIM FINANCIAL RESULTS 1
Slide 2: Forward-looking statements disclaimer
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: 2020 Interim Financial Results – Andy Ransom, CEO
30 July 2020 2020 INTERIM FINANCIAL RESULTS Andy Ransom, CEO 3
Slide 4: 2020 Interim Results
COVID-19 Pandemic +1.0% 2020 Interim Results Outstanding response from the Ongoing Revenue Growth. organisation. Hygiene +10.5%. Pest Control +1.0%. Resilient and robust model. Pest Control and Hygiene held up well and recovering. -9.4% Rapid deployment of Disinfection Ongoing Operating Profit decli
Slide 5: COVID-19 Crisis Phase
COVID-19 Crisis Phase 2020 Interim Results Decisive actions to protect liquidity included drawing down our RCF, successfully applying for CCFF, suspending dividend and M&A, reducing Capex. c.45% of our colleagues made some form of sacrifice including pay waivers, furlough and temporary lay off. Cost
Slide 6: COVID-19 Recovery Phase
COVID-19 Recovery Phase Repaid the RCF. Ongoing Revenue 2020 Interim Results 240 Repaid the CCFF. 230 M&A and Capex programmes restarted. 220 Majority of furloughed colleagues 210 have returned. Pay waiver ended. 200 Supporting customers with ‘re- opening’ services such as 190 disinfection and hand
Slide 7: COVID-19 Strategic Phase
COVID-19 Strategic Phase Providing services that the post- 2020 Interim Results We have a Covid world will want. strategic hand to play that is Expansion of even stronger Hygiene business. than before, M&A restarted / particularly in strength of Hygiene. balance sheet. Strong pipeline remains in pla
Slide 8: Financial & Regional Review
30 July 2020 FINANCIAL & REGIONAL REVIEW Jeremy Townsend, CFO 8
Slide 9: Financial Highlights
Financial Highlights 1.0% growth in H1 2020 Revenue revenue, despite impact £1,283.3m from COVID-19 £ million Δ Δ AER CER AER CER Ongoing Revenue* 1,283.3 1,294.7 0.5% 1.0% 9.4% decline in Profit profit, reflecting a £23m increase Ongoing Operating Profit* 138.8 140.5 (10.2%) (9.4%) £138.8m in bad d
Slide 10: Revenue: impact from COVID-19 crisis
Revenue: impact from COVID-19 crisis ● Revenue for H1 reflects amounts invoiced less any credits provided. It has been calculated on a prudent basis and we would not anticipate any reversal of recognised revenue in H2. @CER ● Revenues of all categories were impacted by the virus in Q2 – Pest Control
Slide 11: Profit: impact from COVID-19 crisis
Profit: impact from COVID-19 crisis ● H1 Ongoing Operating Profit decline of 9.4% in H1 to £139m. Revenue declines in Q2 were mitigated by cost savings of £87m, but these were offset by an increased bad debt provision (£23m), increased costs of personal protective equipment (£9m) and increased restr
Slide 12: North America
North America Overview of regional impact from COVID-19 Group Revenue: 42% Group Profit: 38% North America to date has been our least affected region, delivering a very robust performance to date. However there has been an increase in COVID-19 cases in July in some states, Revenue breakdown by custo
Slide 13: North America cont’d
North America cont’d H1 2020 Growth Overview of performance in H1 Ongoing Revenue £541.4m +7.8% Strong Ongoing Revenue growth of 7.8% in H1, (+10.4% in Q1, +5.7% in Q2) Ongoing Operating Profit £70.3m +15.7% Revenues from Pest Control +4.1% in H1 (+10.3% in Q1, -0.6% in Q2) Ongoing Revenue April -0.
Slide 14: North America cont’d
North America cont’d Update on plan to deliver $1.5bn revenue, 18% Net Operating Margins Progress in H1 Adverse Impacts • Despite Coronavirus, revenue growth of 7.8% in H1 • Commercial Pest Control revenues impacted in Q2 by service • Customers forced to close during lockdown now shortfalls beginnin
Slide 15: North America cont’d
North America cont’d Update on plan to deliver $1.5bn revenue, 18% Net Operating Margins Progress in H1 Adverse Impacts • Three pest control businesses acquired in Q1 with combined • M&A programme suspended during Q2 but resuming M&A annualised revenues of c.$9.5m (c.£7.0m), prior to all M&A investm
Slide 16: Europe
Europe Overview of regional impact from COVID-19 Group Revenue: 26% Group Profit: 25% A mixed impact overall Some countries less affected by COVID-19 due to early and Revenue breakdown by customer segment effective lockdowns, notably Germany, while other countries, including France and parts of Sout
Slide 17: Europe cont’d
Europe cont’d Overview of performance in H1 H1 2020 Growth Despite overall regional declines in revenue in April and May, revenues returned to positive growth of 2.8% in June, aided by revenues from Ongoing Revenue £330.6m -3.8% disinfection Hygiene revenues +4.9% in H1 (+11.3% in Q2), Pest Control
Slide 18: UK & Rest of World
UK & Rest of World Group Revenue: 17% Group Profit: 22% Overview of regional impact from COVID-19 Region significantly impacted by the crisis, principally UK and Ireland Washrooms which were unable to service Revenue breakdown by customer segment customers within many sectors, but primarily the HORE
Slide 19: UK & Rest of World cont’d
UK & Rest of World cont’d Overview of performance in H1 H1 2020 Growth Regional Ongoing Revenue decline of 5.1% in H1 (-15.5% in Q2), Ongoing Revenue £215.5m -5.1% primarily impacted by UK and Ireland Washrooms (down 15.9% in H1, -34.3% in Q2) Ongoing Operating Profit £39.3m -17.2% UK Pest Control d
Slide 20: Asia
Asia Group Revenue: 9% Group Profit: 6% Revenue breakdown by customer segment Overview of regional impact from COVID-19 China, Hong Kong and South Korea among the first countries in the Group to be impacted by the COVID-19 18% crisis and as a result, were the first emerge, with strong demand for dis
Slide 21: Asia cont’d
Asia cont’d H1 2020 Growth Ongoing Revenue £119.8m +3.2% Overview of performance in H1 Ongoing Operating Profit £12.0m +1.0% Regional Ongoing Revenue increase of 3.2% in H1 (Q2: -5.5%), aided by very strong performances from Indonesia (+41%), Hong Kong (+22%) and South Korea (+26%), offset by weaker
Slide 22: Pacific
Pacific Group Revenue: 6% Group Profit: 9% Revenue breakdown by customer segment Overview of regional impact from COVID-19 All operations in the region impacted by the crisis as a result of government restrictions, particularly New Zealand which 13% entered into extreme lockdown in late March Declin
Slide 23: Pacific cont’d
Pacific cont’d H1 2020 Growth Ongoing Revenue £87.4m -5.7% Ongoing Operating Profit £16.4m -10.2% Overview of performance in H1 Ongoing Revenue decline of 5.7% (-14.5% in Q2), with all regional operations impacted by the crisis as a result of Ongoing Revenue April -23.3% government restrictions, par
Slide 24: Operating Cash Flow
Operating Cash Flow £ million @AER H1 2020 H1 2019 Adjusted Operating Profit 139.0 152.2 One-off items – Operating 4.5 9.8 Depreciation 109.3 105.5 Other1 (3.2) 3.5 Operating cash inflow of £173.2m is £46.2m higher than H1 2019, EBITDA 249.6 271.0 principally driven by favourable Working capital 19.
Slide 25: Free Cash Flow & Movement in Net Debt
Free Cash Flow & Movement in Net Debt £ million @AER H1 2020 H1 2019 Interest payments of £16.2m are £4.4m Operating Cash Flow – continuing higher than in the prior year reflecting 173.2 127.0 drawdown of the RCF and CCFF in Q2, while Cash interest (16.2) (11.8) tax payments decreased by £5.8m due t
Slide 26: Balance Sheet
Balance Sheet Balance Sheet • Net debt at 30 June 2020 of £1,102.0m • Repayment on 16 June 2020 of the Group’s £550m RCF drawn down at the start of the Covid-19 pandemic. This amount can be re- drawn at any time up to and including 22 July 2024 • Repayment on 27 July 2020 of the £600m borrowed under
Slide 27: Capital allocation
Capital allocation • Organic drop through • Density Organic and M&A • Yield management Compounding growth Revenue Growth • Technology • Employer of choice • Procurement Financially disciplined Improved M&A programme and Gross Margins operational investment Low cost operating model Strong Profit And
Slide 28: Outlook for H2 2020
Outlook for H2 2020 P&L • Revenues were down 12.1% in April due to COVID-19, but rose 4.2% in June. Assuming a continued gradual resumption in business activity, we expect to make further progress in the second half. However there is a risk that a second wave of the virus and/or economic pressures a
Slide 29: Outlook for H2 2020 cont’d
Outlook for H2 2020 cont’d Cash Flow • As with profit guidance, providing guidance on aspects of cash flow is also challenging given the uncertainty created by COVID-19. However we have more control over certain items, such as investment in capex and M&A. • Working capital outflow for the year is ex
Slide 30: H1 2020 Summary
H1 2020 Summary • 1.0% growth in group Ongoing Revenue despite COVID-19 crisis • Pest Control and Hygiene categories also in positive revenue growth in H1 • Rapid global launch of Hygiene disinfection services contributing £49m of revenues during the half • Protect & Enhance businesses more signific
Slide 31: Protecting People Enhancing Lives... In a post pandemic world
30 July 2020 Protecting People Enhancing Lives... In a post pandemic world. Andy Ransom, CEO 31
Slide 32: Supporting our Colleagues
Supporting our Colleagues Getting it right for our people – and the rest will flow Focused on the safety of our 43,000 colleagues in 83 countries. As at 30 June 2020, 178 colleagues confirmed with Covid-19; tragically one colleague who was on long- term sick leave contracted the virus and passed awa
Slide 33: Supporting our Colleagues
Supporting our Colleagues Our culture allows us to operate at pace and with agility Outstanding response from colleagues – commitment and drive to succeed. Shared sacrifice to minimise redundancies 45% of colleagues had either reduced hours, pay waiver, H1 bonus & PSP suspended, furlough or temporar
Slide 34: Supporting our Customers
Supporting our Customers Trusted globally by customers and their employees and customers Our brands and expertise differentiate us more than ever in a post-Covid world. Continued to serve customers with Essential Services Government and State level liaison globally allowed our technicians in Pest Co
Slide 35: Supporting our Communities & Society
Supporting our Communities & Society Protecting People. Enhancing Lives. Environmental responsibility remains high on our agenda. In addition to the need to offer effective Covid-19 protection services, there is also a requirement to ensure that our solutions are delivered in the most sustainable wa
Slide 36: Supporting our Communities & Society
Supporting our Communities & Society Values in action Lumnia IOT 62% average No wasted Despite the Covid crisis, we continueenergy reduction journeys to demonstrate our values and commitment to communities. Digital portals Electric vehicles +250 local events in May to say Millions of pieces of paper
Slide 37: Rentokil Pest Control
Rentokil Pest Control The world’s leading pest control company Global leader - leader in 55 of our 80 markets. Covid-19 impact on Category Strong Employer of Choice programme – outstanding technical training and careers. Overall, the Category has been less impacted: Powerful brand and proven e
Slide 38: Rentokil Pest Control
Rentokil Pest Control The world’s leading pest control company Resilient Performance in H1 2020 @CER 900 2015-2020 H1 Ongoing Revenue: £836m +1.0% REVENUE £827m £836m CAGR H1 Profit: £125.4m -10.0% 800 14.7% £748m 700 £663m Pest Control performance has varied by country and reflects the severity and
Slide 39: Rentokil Pest Control: PestConnect
Rentokil Pest Control Protecting People and Enhancing Lives… in a post pandemic world PestConnect – the ‘new normal’ for pest control providing digital insight and transparency. 12:00am Leading in Digital Pest Control 06:00am Far greater focus on digital devices and digital reporting. • Less physica
Slide 40: Rentokil Pest Control: Digital sales and marketing
Rentokil Pest Control Protecting People and Enhancing Lives… in a post pandemic world Using our expertise in digital sales and marketing for a more socially distanced world. People want to hear from the experts Major brand marketing campaigns underway - dedicated Covid web pages, email campaigns, so
Slide 41: Rentokil Pest Control Summary
Rentokil Pest Control Summary 1. Category held up extremely well. 2. ‘Essential service’ status confirmed worldwide as part of public health protection. 3. More digital and remote monitoring services. 4. Brands and expertise are differentiators. 5. No discernible impact on customer retention, pricin
Slide 42: Initial Hygiene
Initial Hygiene The world’s leading Hygiene services business Global leader - number one in 22 markets (top 3 Covid-19 impact on Category in 35 markets). For the Hygiene category the Covid-19 crisis brought the short- Strong Employer of Choice programme – term impact of lockdowns and a long-term
Slide 43: Initial Hygiene
Initial Hygiene The world’s leading Hygiene services business 320 Performance in H1 2020 @CER 2015-2020 REVENUE £297m 300 H1 Ongoing Revenue: £297m +10.5% CAGR 280 10.6% £269m H1 Profit: £50.2m +10.0% 260 £252m Ongoing Revenue for the category rose by 10.5% in H1 240 (+16.3% in Q2). Performance vari
Slide 44: Initial Hygiene
Initial Hygiene Protecting People and Enhancing Lives… in a post pandemic world Soaps Hand drying Soaps Sanitisers 4.8% Empty or missing soap dispensers Hand drying must be available at Vital 3rd step of hand hygiene are no longer acceptable. all times. around a building. 1.9% H1 organic growth c.£9
Slide 45: The Opportunities for Initial Hygiene
The Opportunities for Initial Hygiene The time has come for Hygiene. Inside Washrooms. 1 High risk area for Covid-19 and other viruses – we offer a complete range to avoid cross infection. Digital leadership. 2 Digital products for enhanced services plus greater reporting and insight. International
Slide 46: Extensive Range for Inside the Washroom
1. Extensive Range for Inside the Washroom Protecting People and Enhancing Lives… in a post pandemic world Air Care to reassure people that they are breathing in clean air. Air Steriliser provides an Cubicles are a key area of ongoing method of removing potentially potential cross contamination: Toi
Slide 47: Digital Hygiene
2. Digital Hygiene Protecting People and Enhancing Lives… in a post pandemic world Rapid>Count Automated Occupancy Control System Digital Hygiene services using our Social Distancing Tool expertise from Pest Control. Accurately counts how many customers are going in and out of your washrooms, while
Slide 48: International Expansion
3. International Expansion Protecting People and Enhancing Lives… in a post pandemic world North America Latin America & MENAT SoapsEurope Our focus in North America to date has Currently, we operate in 10 markets in As part of the Haniel JV announced in been pest control but clearly this is a Latin
Slide 49: Using our Expertise Outside the Washroom
4. Using our Expertise Outside the Washroom Protecting People and Enhancing Lives… in a post pandemic world Completely different sales conversation – importance of Hygiene everywhere. Low interest sector to one of the world’s most important Broader sales conversations taking place - opportunity to p
Slide 50: Hygiene Disinfection Services
Hygiene Disinfection Services High-quality Disinfection services launched across the world in Q2 Launched Disinfection services in more than 60 markets with 8,000 fully trained colleagues. Range of services Contingency survey, all-purpose specialist disinfection and an emergency disinfection service
Slide 51: Hygiene Disinfection Services
Hygiene Disinfection Services Bringing our standards to Disinfection market – essential to the economic restart Applied our model to Disinfection – people, safety, expertise, innovation, service quality & profitable growth. Innovations being added Types of disinfection fogging machines including the
Slide 52: Initial Hygiene Summary
Initial Hygiene Summary 1. ‘Essential service’ status confirmed – we continued to operate - safety - while others were in lockdown. 2. Disinfection services launched and performed extremely well. 3. Clear opportunities inside and outside the washroom. 4. International expansion. 5. Brand and experti
Slide 53: Protect and Enhance
Protect and Enhance 4% of Group Ongoing Operating Profit in H1 2020 Focus on Quality and Service Covid-19 impact on Q2 2020 Revenue: £161.7m -12.9% Our Protect & Enhance businesses categories of workwear, plants and property care were significantly more impacted Profit: £7.6m -51.3% during the Crisi
Slide 54: Protect and Enhance: France Workwear
Protect and Enhance France Workwear Impact of Covid on Workwear 16 Ongoing Revenue % Workwear impacted by Q2 Horeca 14 lockdown in France. 12 Action plan underway across the business 10 France Workwear declined by 18.5% in H1. 8 Impacted by the lockdown: c.40% customer premises closed in March; 4% i
Slide 55: M&A
M&A Value creating M&A programme back underway Highly targeted acquisitions remain an important part of our growth strategy. Paused in March given pandemic Prudent approach given uncertainty as part of a series of measures to conserve cash and also given the uncertainties that would need to be facto
Slide 56: Operating Model
Performing well in Operating Model Employer of Choice the pandemic. Engagement, Training, Diversity, Retention Health and Safety Impact on society “Progressive” Dividends Great service quality State of Service, CVC Shareholder Value Customer retention Project 90 Cash c. 90% conversion Organic Revenu
Slide 57: Summary: Covid-19 H1 2020
Summary: Covid-19 H1 2020 Outstanding response from colleagues • Strong culture and values. • Established, high-quality management team. • Multi-local is a competitive advantage. • Agile organisation, able to pivot quickly. • WFH exceeded expectations. More than resilient – we will come out of this
Slide 58: Summary: Covid-19 H1 2020
Summary: Covid-19 H1 2020 From Crisis Phase we are now fully into Recovery Phase Crisis Phase into Recovery: • April was the floor. Group Ongoing Revenue • Digital & innovation leadership are important differentiators – connected devices, ‘no touch’ hygiene. • Our brands are more important than ever
Slide 59: Any Questions?
Any Questions? To ask a question please dial: From the UK: 020 3936 2999 All other locations: +44 20 3936 2999 Access code: 282756 An operator will register your details and put you through to ask questions in turn. *1 to ask a question. To listen only, please remain on the webcast. 59