TIDMRTO
RNS Number : 8329G
Rentokil Initial PLC
29 July 2021
To view a printer friendly version (PDF) of the full
announcement, please click on the link below.
http://www.rns-pdf.londonstockexchange.com/rns/8329G_1-2021-7-28.pdf
2021 Interim Results
A strong performance in H1. All core businesses returning to
growth. Excellent M&A in Q2. Full year market consensus
expected to increase by c.GBP10m to c.GBP15m
Results H1 2021 Growth
----------------
GBPm AER AER CER
-------- ------- -------
Ongoing Revenue1 1,458.3 13.6% 18.3%
-------- ------- -------
Revenue 1,462.7 13.3% 18.0%
-------- ------- -------
Ongoing Operating Profit 208.4 50.1% 55.4%
-------- ------- -------
Adjusted Operating Profit 208.6 50.1% 55.3%
-------- ------- -------
Adjusted profit before tax 194.0 54.5% 60.0%
-------- ------- -------
Profit before tax 148.8 141.2% 146.4%
-------- ------- -------
Free Cash Flow 222.0
-------- ------- -------
Adjusted EPS 8.31p 56.7% 61.5%
-------- ------- -------
EPS 6.42p 153.1% 161.4%
-------- ------- -------
______________________________________________________________________________________________________
2021 Interim Highlights (at CER unless otherwise stated)
-- 18.3% growth in Ongoing Revenue, 11.7% Organic (Q1: 15.4%,
Q2: 21.2%): reflecting momentum in our core businesses in
H1 and double-digit Organic growth across all regions and
core categories in Q2, as we lapped a significantly COVID-impacted
Q2 in 2020
------------------------------------------------------------------------
- 18.7% growth in Pest Control, +8.5% Organic, reflecting
further progressive improvements in North America, Asia
and Pacific and an encouraging return to Organic growth
in Q2 in Europe, LatAm and UK & Rest of World. The category
has delivered 20% revenue growth on H1 2019
--------------------------------------------------------------------
- 9.3% growth in core Hygiene (ex. disinfection), +9.0%
Organic, aided by return to more normalised levels of
regular service provision as lockdown restrictions eased
across many of our markets
--------------------------------------------------------------------
- GBP98.3m revenues from disinfection (Q1: GBP75.7m, Q2:
GBP22.6m), reflecting expected tapering
--------------------------------------------------------------------
- 4.6% growth in Protect & Enhance, +3.9% Organic, with
all four businesses (France Workwear, Ambius, UK Property
Care and Dental Hygiene Services) returning to Organic
growth in Q2
--------------------------------------------------------------------
-- 55.4% growth in Ongoing Operating Profit: reflecting broad-based
growth in all major reporting countries, regions and categories.
Statutory profit before tax up 141.2% to GBP148.8m (at AER)
------------------------------------------------------------------------
-- Very strong Free Cash Flow of GBP222.0m in H1 (151% conversion):
customer collections remain strong, no material escalation
in bad debts or major insolvencies
------------------------------------------------------------------------
-- Continued roll-out of PestConnect in H1: 38% increase in
customer sites and 32% increase in devices in the field,
with over 200,000 devices now deployed globally across 28
markets (including new markets of China, Hong Kong and United
Arab Emirates)
------------------------------------------------------------------------
-- Growing customer interest in air hygiene products and services:
encouraging progress with sales of Inspire Air72 and VIRUSKILLER(TM);
significant progress in Asia and the UK, with key hygiene
partnerships signed in H1, including the UK's O2 arena
------------------------------------------------------------------------
-- An excellent M&A performance year to date:
------------------------------------------------------------------------
- 24 completed acquisitions in H1 - 21 Pest Control, 2 Hygiene,
1 Protect & Enhance (Ambius) - in 13 countries across
all regions, including 8 in North America and 7 in Europe
--------------------------------------------------------------------
- Agreement to enter into a merger and acquisition transaction
with Boecker World Holding SAL (Boecker), a leading pest
control and environmental health business in the Middle
East, operating across the UAE, KSA, Jordan, Kuwait, Lebanon,
Nigeria and Qatar, with acquired annualised revenues in
the year prior to purchase of c.GBP37m
--------------------------------------------------------------------
- Total annualised revenues in the year prior to purchase
of GBP147.7m* for businesses acquired in H1, Boecker (due
to complete on 2 August) and EPS (which completed in December
2020)
--------------------------------------------------------------------
- Actual cash spend in H1 against current and prior-year
acquisitions of GBP261.1m
--------------------------------------------------------------------
- Full year expenditure on M&A now anticipated to be in
the region of GBP450m to GBP500m
--------------------------------------------------------------------
-- Liquidity headroom in excess of GBP1.0bn at 30 June, including
GBP550m of undrawn RCF. Net debt to EBITDA ratio 1.67x (31
December 2020: 1.6x)
------------------------------------------------------------------------
-- Declared interim dividend of 2.09p per share, reflecting
strong H1 and confidence in H2
------------------------------------------------------------------------
________________________________________________________________________________________________________
*EPS revenues were quoted in the 2020 Preliminary results
statement, but are included again here for comparability with cash
paid in January 2021.
Andy Ransom, CEO of Rentokil Initial plc, said:
"We have made excellent progress in the first six months of the
year. Our revenue growth of 18.3% demonstrates a clear recovery of
our core businesses as economic conditions improve across many of
our markets. We have also delivered a very strong cash performance
in H1 with Free Cash Flow conversion of 151%, aided by collections
some 26% ahead of prior year.
"We have been very active in M&A in H1 and have acquired
some outstanding businesses both in North America and across our
other regions of Europe, Latin America, Asia and the Pacific. We
are particularly pleased to announce our transaction with Boecker
which expands our businesses across the Middle East and in Africa,
in line with our strategy of focusing on important growth cities of
the future. Given the strength of our performance in Q2, we now
expect our spend on M&A for the full year to be in the region
of GBP450m to GBP500m.
"We delivered a strong performance in H1, slightly ahead of our
expectations, and given the momentum in the business and agility
demonstrated through the pandemic to date, we are confident of
making continued progress in the balance of the year. Assuming
trading conditions around the world continue to improve and are not
significantly impacted by rising cases of new COVID-19 variants, we
anticipate mid-single digit organic growth in our core businesses
for 2021 and, despite the anticipated tapering off in disinfection
presenting more challenging comparatives in the second half, we
expect market consensus for full year adjusted pre-tax profit to
increase by around GBP10m to GBP15m."
________________________________________________________________________________________________________
Enquiries:
Rentokil Initial
Investors / Analysts: Katharine Rycroft plc 07811 270734
Rentokil Initial
Media: Malcolm Padley plc 07788 978199
------------------- ------------------ -------------
A presentation of the Company's 2021 Interim results will be
held today via a webcast at 9.00am. To access the webcast, please
go to our website, www.rentokil-initial.com.
The formal presentation of results will be followed by Q&A
at 10.00am. To join, please dial:
From the UK: 020 3936 2999
All other locations: +44 203 936 2999
Access code: 537792
An operator will register your details and, should you wish to
ask a question, will put you through in turn. Alternatively, to
listen only, please either remain on the webcast until 10.00am, or
dial back in once again at start time.
________________________________________________________________________________________________________
1. Ongoing Revenue represents the performance of the continuing
operations of the Group (including acquisitions) after removing the
effect of disposed or closed businesses.
AER - actual exchange rates; CER - constant 2020 exchange
rates
This announcement 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 number of factors
which might cause actual results and performance to differ
materially from those expressed or implied by such statements.
Forward-looking statements speak only as of the date they are made
and no representation or warranty, whether expressed or implied, is
given in relation to them, including as to their completeness or
accuracy or the basis on which they were prepared. Other than in
accordance with the Company's legal or regulatory obligations
(including under the Listing Rules and the Disclosure Guidance and
Transparency Rules), the Company does not undertake any obligation
to update or revise publicly any forward-looking statement, whether
as a result of new information, future events or otherwise.
Information contained in this announcement relating to the Company
or its share price, or the yield on its shares, should not be
relied upon as an indicator of future performance. Nothing in this
announcement should be construed as a profit forecast.
Non-GAAP measures - This statement includes certain financial
performance measures which are not GAAP measures as defined under
International Financial Reporting Standards (IFRS). These include
Ongoing Revenue, Ongoing Operating Profit, Adjusted profit before
tax, Free Cash Flow and Adjusted EPS. Management believes these
measures provide valuable additional information for users of the
financial statements in order to understand the underlying trading
performance. Ongoing Revenue and Ongoing Operating Profit represent
the performance of the continuing operations of the Group
(including acquisitions) after removing the effect of disposed or
closed businesses, and enable the users of the accounts to focus on
the performance of the businesses retained by the Group, and that
will therefore contribute to the future performance. Ongoing
Operating Profit and Adjusted profit before tax exclude certain
items that could distort underlying trading performance, including
one-off charges, amortisation and impairment of intangibles and net
interest adjustments. Ongoing Revenue and Ongoing Operating Profit
are presented at CER unless otherwise stated. An explanation of the
measures used along with reconciliation to the nearest IFRS
measures is provided in Note 14 on page 27.
Joint ventures: the term 'joint venture' is used to describe the
Company's 57% ownership of Rentokil PCI, however our interest in
PCI has been consolidated in our Financial Statements.
Summary of financial performance (at CER)
Regional analysis of revenue performance in Q1, Q2 and H1 vs.
2020
Ongoing Revenue at CER
-----------------------------------------------------------------
Q1 Q2 H1 Q1 Q2 H1
GBPm GBPm GBPm % change % change % change
------- ------- -------- ----------- ----------- -----------
France 72.9 75.3 148.2 (3.0) 29.9 11.3
------- ------- -------- ----------- ----------- -----------
Benelux 23.1 24.0 47.1 (0.7) 5.0 2.1
------- ------- -------- ----------- ----------- -----------
Germany 29.4 30.2 59.6 10.3 2.4 6.2
------- ------- -------- ----------- ----------- -----------
Southern Europe 36.9 37.9 74.8 8.7 12.8 10.7
------- ------- -------- ----------- ----------- -----------
Latin America 15.9 15.3 31.2 18.1 16.7 17.4
-------------------- ------- ------- -------- ----------- ----------- -----------
Total Europe 178.2 182.7 360.9 3.3 16.4 9.5
-------------------- ------- ------- -------- ----------- ----------- -----------
UK & Ireland 72.2 83.8 156.0 (6.7) 40.5 13.8
------- ------- -------- ----------- ----------- -----------
Rest of World 39.8 40.0 79.8 1.9 11.5 6.5
-------------------- ------- ------- -------- ----------- ----------- -----------
UK & Rest of
World 112.0 123.8 235.8 (3.8) 29.6 11.2
-------------------- ------- ------- -------- ----------- ----------- -----------
Asia 63.1 61.9 125.0 2.1 13.2 7.4
------- ------- -------- ----------- ----------- -----------
North America 332.6 361.5 694.1 39.4 22.1 29.8
------- ------- -------- ----------- ----------- -----------
Pacific 48.3 48.4 96.7 3.0 24.8 12.9
-------------------- ------- ------- -------- ----------- ----------- -----------
Ongoing operations 734.2 778.3 1,512.5 15.4 21.2 18.3
-------------------- ------- ------- -------- ----------- ----------- -----------
Category analysis of revenue performance in Q1, Q2 and H1 vs.
2020
Ongoing Revenue at CER
-----------------------------------------------------------------
Q1 Q2 H1 Q1 Q2 H1
GBPm GBPm GBPm % change % change % change
------- ------- -------- ----------- ----------- -----------
Pest Control 447.1 528.8 975.9 10.5 26.6 18.7
------- ------- -------- ----------- ----------- -----------
- Growth 384.5 465.4 849.9 12.3 25.8 19.3
------- ------- -------- ----------- ----------- -----------
- Emerging 62.6 63.4 126.0 0.7 32.6 14.6
------- ------- -------- ----------- ----------- -----------
Hygiene 205.5 161.9 367.4 48.5 4.1 25.0
------- ------- -------- ----------- ----------- -----------
- Core Hygiene 129.8 139.3 269.1 (6.2) 29.2 9.3
------- ------- -------- ----------- ----------- -----------
- Disinfection 75.7 22.6 98.3 - (52.5) 105.9
------- ------- -------- ----------- ----------- -----------
Protect & Enhance 81.6 87.6 169.2 (12.3) 27.4 4.6
-------------------- ------- ------- -------- ----------- ----------- -----------
Ongoing operations 734.2 778.3 1,512.5 15.4 21.2 18.3
-------------------- ------- ------- -------- ----------- ----------- -----------
Revenue (at CER)
The Group delivered an excellent revenue performance in H1, with
very strong growth in Q2 as we lapped a significantly
COVID-impacted Q2 2020. H1 Ongoing Revenue rose 18.3%, 11.7%
Organic (Q1: 15.4%, Q2: 21.2%) to GBP1,512.5m, and Total Revenue
grew by 18.0% to GBP1,517.0m (up 13.3% at actual exchange rates).
Our North America, UK & Rest of World and Pacific regions
delivered double-digit revenue growth in H1, aided by increasingly
favourable market conditions as the COVID crisis impacts on these
markets eased. H1 revenue growth in Europe and Asia (at 9.5% and
7.4% respectively), has been impacted to some extent by
reintroduced lockdowns across parts of Europe and by continued
challenging conditions in parts of Latin America and Asia.
Our Pest Control category grew Ongoing Revenue by 18.7% (8.5%
Organic) to GBP975.9m, reflecting further quarterly performance
improvements in North America, Pacific and Asia and a return to
Organic growth in Q2 in Europe, Latin America and UK & ROW. Q1
Organic Revenue rose by 1.4% and Q2 Organic Revenue rose by
15.5%.
Core Hygiene revenues (excluding disinfection) grew by 9.3%
(9.0% Organic) to GBP269.1m in H1, demonstrating a return to more
normalised levels of service provision as lockdown restrictions
have eased across many of our markets. Q1 Organic Revenue declined
by 6.5% and grew by 29.0% in Q2. Overall performance has, however,
been somewhat held back by ongoing government restrictions across
parts of Europe and Asia where customer re-openings are behind
North America, the UK and the Pacific. By the end of June, service
provision to just under 4% of Hygiene customer premises remained
suspended, compared to 4.4% at the end of 2020.
H1 revenues from one-time disinfection services amounted to
GBP98.3m, GBP75.7m of which was generated in Q1 and GBP22.6m in Q2
(a c.70% reduction on Q1 and c.77% reduction on Q4 2020). Sales of
disinfection have trended fully in line with our expectations and
market guidance. Full year revenues from disinfection are
anticipated to be in the region of GBP110m to GBP120m.
Ongoing Revenue in our Protect & Enhance category rose by
4.6% (3.9% Organic) to GBP169.2m with all four businesses (France
Workwear, Ambius, UK Property Care and Dental Waste Services)
returning to Organic growth in Q2. Q1 Organic Revenue declined by
12.8% and grew by 26.4% in Q2. In France, lockdowns began to ease
in May with fewer restrictions on restaurants and as a result, we
have seen an improving performance from our France Workwear
business. While this is encouraging, as-used volumes (where the
customer only pays for specific garments laundered) are still
behind pre-COVID levels, impacted by ongoing temporary customer
suspensions, which were c.1.25% at the end of June. We expect
volumes to improve in H2 as restrictions hopefully ease further
across France and more customers, particularly in the HORECA
sector, are able to fully reopen.
Profit (at CER)
Ongoing Operating Profit rose by 55.4% during the first half to
GBP215.9m, reflecting growth across all major reporting countries,
regions and categories. Profit in H1 has also been supported by
GBP6.0m of bad debt provision releases and GBP5.0m of revenue
provision releases as a result of our strong cash collections
performance in H2 2020 continuing into the first half of 2021. This
has resulted in a 340 basis points increase in Net Operating
Margins to 14.3%. Restructuring costs amounted to GBP4.1m at CER
(H1 2020: GBP5.1m), consisting mainly of costs in respect of
initiatives focused on our North America transformation
programme.
Adjusted profit before tax (at AER) of GBP194.0m which excludes
the impact of one-off items, increased by 54.5%, and reflects
growth in all regions and categories. Adjusted interest of GBP19.1m
at actual exchange rates was GBP1.4m higher than in the prior year,
due to higher swap costs of GBP2.4m due to larger cash balances
held in the period between the raising of the 2028 EUR600m bond in
October 2020 and the settling of the 2021 bond in July 2021.
One-off items (operating) of GBP11.3m in H1 includes GBP10.5m of
acquisition and integration costs and GBP0.8m of other items,
including faulty PPE disposal charges.
Statutory profit before income tax from continuing operations at
AER was GBP148.8m (H1 2020: GBP61.8m), an increase of 141.2% on the
prior year.
Cash (at AER)
Free Cash Flow increased by GBP78.5m to GBP222.0m, delivering
Free Cash Flow Conversion of 151% for the half. The increase was
principally driven by a GBP69.6m increase in Adjusted Operating
Profit and a GBP44.5m improvement in working capital. Cash spend on
current and prior year acquisitions in H1 totalled GBP261.1m.
We have continued to maintain a tight focus on working capital
management in order to optimise inventory levels and to mitigate
any potential increased risk around the delay and non-payment of
receivables. In the first six months of the year, collection of
receivables has been strong and our collection rate by the end of
June 2021 was up 26% on the prior year, with some variation across
the regions.
Regional performance review
Due to the international nature of the Group, foreign exchange
movements can have a significant impact on regional performance. In
order to help understand the underlying trading performance, unless
otherwise stated, percentage movements in Ongoing Revenue and
Ongoing Operating Profit are presented at constant exchange
rates.
North America
North America was our best performing region in the first six
months of 2021, with revenue growth driven by a recovery in all
businesses and a progressive return to more normalised trading
patterns.
We have seen good growth in our Residential Pest Control
portfolio (which represents 36% of our North America Pest Control
business), from both 2020 and 2021 acquisitions as well as from
continued marketing and sales focus. Residential grew by 27.8% in
H1, aided by a continuation of the work from home business
environment. Our acquisition of EPS, which completed on 1 January
2021, is performing strongly and we are benefiting from the
business's Residential concentration in three important markets -
Florida, Georgia and North Carolina.
Our Commercial Pest Control business (64% of our Pest Control
business) grew by 23.2% in H1, aided by good volumes of work across
most markets, including the recovering hotels and travel sector,
and we are also seeing encouraging improvement in areas such as bed
bugs, where travel is gradually returning to pre-pandemic levels.
We anticipate a good rebound in the Hospitality sector when
restrictions hopefully ease further in H2. Our distribution
business has also had a strong H1 and reflects the recovery of the
Pest Services sector and the continued high demand for lawn, golf
and turf products.
Revenues in H1 have also been supported (primarily in Q1) by
ongoing disinfection sales and, as expected, these significantly
reduced in Q2 as COVID-related market conditions improved. Hygiene
sales focus is now being directed towards hand and air disinfection
products, including our VIRUSKILLER(TM) product.
Q2 has also benefited from a recovery of our other commercial
businesses. Brand Standards (which was significantly impacted in
2020 by temporary customer closures in the fast food sector), saw a
return to regular trading with 95% of customers by the end of June
and our Ambius operations also returned to pre-pandemic trading
levels, delivering growth of 17.3% on the prior year.
Ongoing Revenue in North America grew by 29.8% to GBP694.1m in
H1 (Q1: 39.4%, Q2: 22.1%), of which 15.5% was Organic. Revenues
from total Pest Control (including Distribution and Lake
Management) increased by 24.8% to GBP595.8m, with Pest Services
revenue increasing by 20.6%, reflecting good demand from both
Commercial and Residential customers. Total revenues from
disinfection in H1 amounted to GBP64.3m (Q1: GBP53.2m, Q2:
GBP11.1m). Ongoing Operating Profit growth of 54.6% at GBP107.4m
reflects revenue growth across all businesses and the contribution
from disinfection services. The region acquired seven businesses in
the first half with combined annualised revenues of c.GBP29m in the
year prior to purchase.
We continue to make progress towards 18% margins in North
America, growing this by 250 basis points in H1 2021 to 15.5% (H1
2020: 13.0%). This is a result of the gradual return to more normal
levels of growth from our core North American operations as
described above, a further contribution from disinfection (albeit
at lower margins than in 2020 as volumes and prices unwind),
together with cost savings and the benefits from our IT-enabled
Best of Breed programme. We continue to expect North America
margins to be within the range of 16.5% to 17% for the full year
2021, leaving us on track to achieve our 18% margin target by the
end of 2022.
Our IT re-platforming programme is proceeding well and according
to plan. We migrated our West region to the new service planning
and management system at the end of last year, began the migration
of our Southeast and Central operations in H1, and plan to transfer
the Northeast operations onto the system at the end of the year.
Progress to date is good and we are seeing encouraging improvements
in customer service, field service and sales productivity, and
better management of payments.
With National and State Government support continuing, we have
seen little change in customer termination rates, which remain
within normal ranges. Overall customer retention is in line with
2019 and we anticipate further improvements in H2. While we have
seen some inflationary pressures on our cost base, to date we have
been able to pass these on through annual price increases (APIs) to
our customers, in line with our normal policy. Although we are
seeing signs in the US economy of potential wage pressures, we have
not yet seen a broad impact on wages across our operations. North
America overall colleague retention has trended down by a couple of
percentage points on pre-COVID levels as new employees who joined
the business at the height of the pandemic in 2020 leave to seek
preferred employment. While we still have some areas that present
greater challenges in attracting good people, we are seeing ongoing
success with our virtual recruiting events, with applicants per
vacancy and time to fill vacancies improving year on year as
enhanced unemployment benefits fall away and more people return to
the workforce.
Europe
Our Europe region has experienced mixed market conditions in the
first half of the year as a result of the ongoing COVID pandemic.
Continued lockdowns across some countries in Europe and also in
Latin America has resulted in c.10% of customers who have either
remained closed or are requesting reduced services, with core
Hygiene service provision the most impacted service. While trading
is returning to more normal levels, full recovery remains dependent
on vaccination programmes, country-specific reopening plans
(particularly for the HORECA sector), the pace of tourism return
(specially in southern Europe) and employee return to the
office.
Ongoing Revenue Growth in Pest Control grew by 10.1% in H1, (Q1:
up 0.6%, Q2: up 20.6%), with a stronger recovery being impacted by
continued lockdowns across parts of Europe and Latin America and
poor weather in Q2 (which has delayed the emergence of pests such
as wasps, bees and mosquitoes). Organic Pest Control jobbing work
in Europe was 3% higher than in 2019, aided by increased demand for
bird control and bed bugs.
Our core Hygiene operations (excluding disinfection) grew by
10.6% (Q1: -0.9%, Q2: 24.7%) reflecting a recovery in core service
provision. Current sales campaigns are focused on customers return
to work, school and venues and also on expanding our product and
service range to include air hygiene. In France, lockdowns began to
ease in May with fewer restrictions on restaurants and as a result,
we have seen an improving performance from our France Workwear
business, although as-used volumes are still behind pre-pandemic
levels. We expect volumes to improve in H2 as restrictions
hopefully ease further across France and more customers,
particularly in the HORECA sector, are able to fully reopen.
In H1, we introduced air purification services in Europe and
also launched our VIRUSKILLER(TM) product with a focus on the
Nursing home, Education, Healthcare and offices sectors. Our Ambius
business is supporting customer requirements to adhere to social
distancing rules by the provision of green walls and planted room
dividers. In addition, our France Hygiene business is included in a
pilot program to provide specialised hand sanitiser units tailored
to cope with high volumes of passenger traffic on a busy bus
network in Paris.
Regional Ongoing Revenue grew by 9.5% in H1 (Q1: 3.3%, Q2:
16.4%), of which 7.6% was Organic, reflecting softer comparatives
in Q2 and a much improved performance in France (11.3%), southern
Europe (10.7%) and Germany (6.2%). Latin America grew revenues by
17.4%. Pest Control grew by 10.1% while core Hygiene (excluding
disinfection) rose by 10.6%. Ongoing Operating Profit grew by
40.0%, reflecting 234% growth in France, 7.9% growth in Germany, a
54.7% improvement in southern Europe and 51.3% growth in Latin
America. As expected, revenues from disinfection (Q1: GBP12.7m, Q2:
GBP7.3m) significantly reduced during the period and are expected
to unwind further in H2. Net Operating Margins for the Europe
region increased by 380 basis points to 17.6%. The region acquired
nine businesses in H1 - seven of which were in Europe and two in
Latin America - with annualised revenues of c.GBP12m in the year
prior to purchase.
We have not seen any evidence of increased customer insolvencies
across Europe and Latin America in 2021, which are currently at
lower rates than in 2019. However, we will continue to monitor this
situation as government support programmes end in a number of our
countries in Q3 and particularly in Q4. We have passed on APIs in
line with normal pricing policy to our Pest Control and Workwear
customers in H1, while Hygiene has lagged a little due to variable
demand for consumables which are often included within a Hygiene
contract. sales and service colleague retention rates continue to
be very high across the region at mid-90% levels, with both service
and sales colleagues trending slightly ahead of 2019.
UK and Rest of World
Trading conditions in our UK and Rest of World operations, which
were severely impacted by full economic lockdowns throughout Q1,
improved significantly in April, May and June as a result of
continued progress with the UK's vaccination programme and
subsequent easing of restrictions, leading to a strong rebound in
performance in Q2 across all business categories. Our Rest of World
operations have also demonstrated great resilience in H1 despite
wide ranging lockdowns causing continued disruption to trading
conditions, particularly in the Caribbean.
The UK has been the primary market in the region to relax
lockdown rules in H1 and a number of key actions taken in 2020 are
contributing to the strength of our performance this year. These
include accelerating the pace of our service differentiation,
innovation and digital marketing programmes and implementing a
number of significant technology-enabled business and cost
programmes. The core volume of customer portfolio of our businesses
has largely returned to pre-pandemic levels and new customer pest
control enquiries are trending broadly 5% to 7% higher than before
the crisis, aided by the introduction of AI Bots and Webchat tools
across our websites and a strong recovery of existing customer
demand for additional services.
Building on last year's success, roll-out of our PestConnect
product and service has continued at pace in H1 as we install more
units across more customer sites in the UK. We are equally
encouraged by the performance of all our core Hygiene operations
(including Washrooms, Medical and Specialist Hygiene) which
delivered revenue growth of 11.3% in H1 (Q1: -11.7%, Q2: 42.0%).
Our UK Property Care business also returned to growth in H1,
benefiting from strong domestic customer demand for our services as
a result of continued strength in the UK residential housing
market, combined with signs of recovery in the commercial property
market, and leading to overall revenue growth of 59.0%. Our Ambius
business has delivered an improving performance Q2 on Q1 (Q1:
-15.0%, Q2: 24.7%) reflecting some easing of restrictions, although
demand is still dampened by the continued closures of major office
spaces. Sales of disinfection treatments in the UK and Rest of
World countries have reduced, as expected, given the improvement in
COVID-related market conditions.
Ongoing Revenue for the UK and ROW region increased by 11.2%
(Q1: -3.8%, Q2: 29.6%) of which 10.6% was Organic, with UK and
Ireland Pest Control and Hygiene (excluding disinfection) growing
by 5.2% and 14.7% respectively, and ROW Pest and Hygiene operations
(excluding disinfection) growing by 10.9% and 1.3% respectively.
Regional Ongoing Operating Profit increased by 50.8% in H1,
reflecting higher revenues and a 650 basis points improvement in
Net Operating Margins to 24.9%.
Regional cash performance has been strong in H1, with debtor
days outstanding approaching pre-pandemic levels and with no
significant escalation in bad debt or customer insolvencies. In the
UK, we have seen some inflationary increases on both wages and
certain products, both of which have been largely mitigated through
service restructures and customer price increases. The UK
employment market rebounded strongly in Q2 creating a competitive
employment environment, however the strength of our recruitment
model, together with the reputation of our in-house training
academy, apprenticeship programmes and graduate schemes, has
resulted in overall colleague retention and recruitment being in
line with pre-pandemic levels.
Asia
Our Asia region has delivered an improving performance during H1
but real recovery is being held back by rising COVID cases across a
number of key markets, notably Malaysia and Indonesia. Both Pest
Control and Hygiene are being impacted by the ongoing pandemic,
however disinfection sales - which have remained at levels similar
to Q1 2021 and Q4 2020 - continue to provide a hedge to disruption
to core service provision. Our operations in other countries,
notably China, which are benefiting from higher vaccination rates,
are performing more strongly. We are actively promoting air hygiene
across our markets, with the recent launch of VIRUSKILLER(TM) being
well received, particularly in Hong Kong and Singapore which
together have generated c.GBP550,000 of revenues in Q2.
Regional Ongoing Revenue rose by 7.4% in H1 (Q1: 2.1%, Q2:
13.2%), of which 7.1% was Organic. Ongoing Operating Profit
increased by 14.6%. Net Operating Margins for the Asia region
increased by 70 basis points to 10.8%. Asia acquired one Pest
Control business in H1 in Singapore with annualised revenues in the
year prior to purchase of c.GBP0.6m.
We are yet to see any evidence of an escalation in bad debts and
customer insolvencies in H1. APIs have been straightforward for
those customers who are trading well although more difficult to
pass through for customers who are still facing challenging
conditions from the COVID-19 crisis. Colleague retention has
remained high in H1 at just under 90%, with both front-line service
colleague retention and sales colleague retention trending ahead of
pre-COVID 2019 levels.
Pacific
Our core business recovery is going well in the Pacific region,
with Australia and New Zealand performing in line with our
expectations, although Fiji continues to be impacted by the
suspension of international and domestic flights to the country and
its associated impact on tourism. Despite intermittent lockdowns
being experienced in most parts of the region as the government
seeks to contain arrival of the Delta variant, containment of the
COVID-19 virus has been well managed through border restrictions
and mandatory quarantine for returning residents. In addition, a
focus on disease prevention through hand sanitisation, rather than
post-outbreak treatments, has meant that only nominal disinfection
sales were recorded in H1.
Demand for Pest Control services has been strong in H1 for
services spanning Residential, Commercial, birds and fumigation.
While the recent mouse plague in Australia has had a devastating
impact on the farming community in New South Wales, it has not had
a material impact on our business. In Hygiene, core service
provision is recovering well and we are also seeing demand for hand
sanitiser continue to trend ahead of pre-COVID 2019 levels and an
increasing dialogue around air quality that we will leverage going
forward as more people return to their offices. Our Ambius business
has returned to growth with gross sales ahead of our
expectations.
Ongoing Revenue in the Pacific grew by 12.9% (Q1: 3.0%, Q2:
24.8%), of which 11.8% was Organic, with growth in Pest Control of
11.3%, Hygiene (excluding disinfection) growth of 14.0% and Ambius
growth of 7.3%. Regional Ongoing Operating Profit grew by 23.9% and
Net Operating Margins rose by 180 basis points to 20.6%. The region
acquired three small Pest Control and two Hygiene businesses in
Australia in H1 with annualised revenues in the year prior to
purchase of c.GBP3.0m.
As with our other regions, bad debt from suspended portfolio
customers has been minimal to date, with no spikes in insolvencies,
and we will continue to monitor the situation as government
subsidies are scaled back. Overall customer retention for the
region is slightly ahead of our expectations. We are seeing some
wage inflation pressure amid rising demand for labour at all levels
across the region but are confident of continuing to mitigate these
through our normal pricing policy. Overall colleague retention is
broadly similar to 2019 levels. Attracting and retaining the right
people across all categories to enable us to maintain service
excellence remains a key focus going forward.
Share of Profits from Associates
Our share of Profits from Associates (at AER) amounted to
GBP4.5m (H1 2020: GBP4.3m) and related to our Japanese
associate.
Category performance review
Pest Control
Our Pest Control business has demonstrated a good recovery in
the first six months of this year, benefiting from strong growth
from our commercial SME and major international customers as
COVID-related market conditions have improved across many of our
countries, together with continued good demand from residential
customers, many of whom remain working from home, particularly in
North America. M&A has continued to be strong this year, and we
have acquired 21 companies in H1, with annualised revenues in the
year prior to acquisition of GBP106.7m (including EPS).
Innovation
Innovation continues to drive profitable growth, and in the UK,
c.30% of Pest Control revenue comes from innovations (2019, 2020,
H1 2021). Innovation strengthens our brand and cements our
leadership position in the pest control industry, differentiating
us from our competitors, particularly in the area of digital
technology. It also enables us to provide enhanced service to
customers, target key growth sectors (such as rodents), enhance our
ability to up-sell additional products and service lines and
support customer retention. Since 2017, we have launched a
significant number of product innovations, including RapidPro
rodenticide, RADAR and Autogate rodent units, fluorescent rodent
tracking gel, Entotherm heat treatment for bed bugs, Lumnia LED
electronic fly traps and Multi-Mouse Riddance products which use
monitoring sensors that can be attached to several live catch
products for real time reporting.
We will launch Eradico, our new Global Bait Box and our latest
and most sustainable rodent control solution for residential and
commercial properties, in H2. Eradico is a fully recyclable,
innovative, single-solution technology-enabled rodent solution
which addresses 57 different needs and market requirements. By
using Eradico and our digital remote monitoring solution,
PestConnect, we can reduce the number of visits made by our
technicians, thereby lowering fuel use and associated greenhouse
gases. As a single, global solution, Eradico's robust design
withstands climatic extremes of -25degC to +50degC. A connected
version of the system, called RADAR X, a next generation mouse
riddance unit that uses CO2, will also be launched later this year.
We will provide a further update on our innovation pipeline at our
Capital Markets Day on 28 September.
Digital infrastructure and capability
Digital innovation in Pest Control is necessary to meet the
needs of an evolving world. Macro trends (including pandemic driven
trends) are increasing demand for digital solutions and these
include demand for more remote monitoring solutions due to
COVID-19, smart technology becoming a norm driven by younger
generations, and customers demanding increased transparency of
data. Rentokil has developed the world's leading digital pest
control platform, providing an unmatched level of monitoring,
reporting and insight for our customers who face the risk of
increased fines and censure without effective pest management and
reporting.
PestConnect is the "world's smartest mousetrap" and most
advanced digital pest control system. It provides our customers
with a complete remote pest detection solution and full
traceability. Building on last year's growing demand for the
product, the first half of 2021 has seen further roll-out of
PestConnect, with a 38% increase in new customer site installations
to 3,055 new customer sites (to make a total of 11,158 sites) and a
32% increase in devices in the field. We now have over 200,000
devices deployed globally across 28 markets (including new markets
of China, Hong Kong and United Arab Emirates). The Company will be
giving a presentation and demonstration of PestConnect at our
Capital Markets Day in September.
Our myRentokil online customer portal provides secure 24/7
access to real time information that provides easy access to
documentation required for pest control, including reviewing
service recommendations and responding to audits. The portal is
currently used by over 95% of our commercial customers across over
1.2m customer sites in 46 countries.
CommandCentre is our central information hub containing data
compiled from over 50 countries. Hosted in Google Cloud Platform,
we have over 5,000 colleagues accessing global, regional and local
KPIs. The CommandCentre now connects over 200 internal systems to
provide frontline and management teams with the information they
need securely when and where they need it.
Hygiene
As lockdown restrictions ease across our countries of operation
and overall trading conditions improve, our core Hygiene business
is recovering, despite just under 4% of our customers still
remaining temporarily suspended at the end of June 2021. We have
acquired two small hygiene companies this year in Australia with
annualised revenues of c.GBP1.3m in the year prior to purchase.
Our Hygiene Capital Markets Day will provide a deep dive into
four key areas for growth, the first of which will be our Core
Washrooms business. We will give details on: what products we sell,
where and to whom; our density model; the benefits we derive from
being a sister service to Pest Control; our financial performance
pre and post the COVID-19 pandemic; and how we can expand our range
of products and services.
Disinfection
Last year's rapid deployment of disinfection services across 60
countries enabled us to generate GBP221.0m of revenues and provided
a hedge to lower revenues caused from disruption to core hygiene
service provision across our operations. Customers who used our
services in 2020 (such as offices, shops, schools, airports,
emergency vehicles and public transport) did so typically to remain
open during lockdown conditions. As lockdown conditions have
generally reduced around the world, so too has our customers' need
for disinfection services.
Customer suspensions have also reduced as lockdown conditions
have eased and we have seen good progress in re-openings in Pest
Control and Hygiene this year. We continue to expect disinfection
volumes to further unwind in Q3 and Q4, and expect to generate
around GBP10m to GBP20m revenues in H2 which, combined with H1
revenues of GBP98.3m, would generate a total of around GBP110m to
GBP120m for the year.
Opportunities for growth
As we outlined in our Preliminary results statement, we see the
main opportunities for growth in our Hygiene category as being
growth inside washrooms, digital leadership, international
expansion and expanding our expertise outside the washroom.
Inside washrooms
Washrooms are potentially higher risk areas for COVID-19 and
other viruses and 'No Touch' washrooms are the most effective way
to avoid cross-contamination, particularly within cubicle settings.
Toilet paper dispensers that seal away paper until use, 'No Touch'
feminine hygiene units and toilet seat cleaners all prevent
cross-contamination. Our Signature Range of washrooms products have
antimicrobial surfaces which helps reduce cross contamination, as
do our 'No Touch' auto-lift lids on bins and auto dispense of paper
towels and soaps. In H1, demand for our 'No Touch' units increased
by 20% on H1 2020. Air care quality is also an important indicator
of washroom cleanliness, with air sterilisers providing an ongoing
method of removing potentially harmful pathogens from the air.
Our Capital Markets Day will provide further detail on this
growth pillar and information will include: new products/services
for inside washrooms; expanding into new services for existing
customers (e.g. Air Hygiene and Digital Washrooms Hygiene); new
sales channels for existing Washroom customers through the use of
technology; and range extensions.
International expansion
In 2020, due to the opportunity in disinfection sales, we
launched Hygiene in 20 new countries, and we now operate in 65
countries, with top three positions in 38. We launched our first
hygiene services in North America in June with hand, surface and
air hygiene products and expanded our footprint in the Caribbean,
Latin and Central America, the Middle East and Europe. In
September, we will provide details on our plans for these new
markets and how we utilise the strength of our brand, range,
expertise, experience and track record to grow and develop over the
next few years. We will also discuss our entry model for expanding
into other new markets both organically and through M&A. Other
M&A topics will include market structure, scale and growth
drivers, target geographies, the hygiene M&A model, strength of
current pipeline, density economics and internal rates of
return.
Expanding our expertise outside the washroom
From a relatively low interest sector, hygiene has now become
one of the world's most important, presenting opportunities for us
to expand outside of the washroom into high growth areas including
air care, route-based service extensions and digital products and
applications. We can provide hand, air and surface hygiene products
in multiple environments, including offices, kitchens and reception
areas.
Air care is a particular focus for the Group. A year into the
pandemic, evidence shows that COVID-19 is transmitted predominantly
through the air - by people talking and breathing out large
droplets and small particles called aerosols. Therefore, efforts
are increasing to prevent transmission by improving ventilation or
installing rigorously tested air purifiers. Our current air care
product range features air purification, air sterilisation and air
scenting products and in 2020 we launched two important new air
filtration products: Inspire Air72 and VIRUSKILLER(TM) Air
Purifier. When independently tested against Coronavirus DF2 (a
surrogate for Coronavirus) Adenovirus, Influenza and Polio,
VIRUSKILLER(TM) was found to kill 99.9999% of viruses on a single
air pass. In H1, we installed over 17,000 air purification units
into customer sites across 28 countries, generating c.GBP3.2m of
revenues.
We have been actively marketing VIRUSKILLER(TM) across all
regions in H1, and are seeing rising levels of customer interest
and particularly encouraging progress in Italy, Spain, Hong Kong,
Singapore and the UK. VIRUSKILLER(TM) is now sold to a range of
customers including car showrooms, hotels, offices, venues and UK
embassies. Initial Hygiene was appointed Specialist Hygiene
Services Partner of London's O2 arena, with the installation of
VIRUSKILLER(TM) central to the agreement, and we successfully
installed the units in time for this year's BRIT awards. As part of
the agreement, we will also be installing a range of washroom
products and services for visitors to the venue.
We will update the market on the current opportunities we see
for premises hygiene in September and topics will include:
expanding Hygiene into new areas such as indoor air and surface
hygiene for multiple locations from offices to retail; specialist
hygiene services (such as medical waste removal); new service
lines; and the alignment of hygiene with the importance of
Wellbeing.
Continued strength of M&A
We have delivered further excellent execution of M&A in the
first half, acquiring 24 new businesses in H1 in Pest Control,
Hygiene and Protect & Enhance (Ambius). While competition for
high quality assets in North America has continued in H1, the
region still presents good opportunities to build density in the
market and we have added seven new businesses during the period. In
addition to acquisitions in Canada and the US, we have also made
good progress in broadening our geographic presence with pest
control and hygiene purchases in Australia, Brazil, France,
Germany, Italy, Mexico, Saudi Arabia, Singapore, Spain, Sweden and
Switzerland.
We have entered into a merger and acquisition transaction with a
leading independent pest control provider in the Middle East,
Boecker World Holding SAL, which operates across the UAE, KSA,
Jordan, Kuwait, Lebanon, Nigeria and Qatar. The business, which
generated revenues of c.GBP37m in the year prior to purchase, is a
leader in B2B environmental health services including Pest
Management, Food Safety and Germ Control services and products and
employs 1,100 colleagues. The transaction doubles the scale of our
operations in the Middle East, where we are already the market
leader in Pest Control, and is expected to complete on 2 August
2021.
In July this year, we conducted our most recent half-yearly
review of post-investment performance, reviewing 57 acquisitions
made between 1 October 2018 and 31 March 2020 and covering
c.GBP400m of spend. We are pleased with performance, with total
deals delivering revenue and EBITA ahead of our expectations and
with returns also ahead of our IRR hurdle rates.
M&A remains central to our strategy for growth. We will
continue to seek attractive bolt-on deals, both in Pest Control and
with an increased focus on Hygiene, to build density in existing
markets, pursue acquisitions in new markets and the major cities of
the future, and seek medium-sized transactions. Our pipeline of
prospects remains strong and given the strength of our performance
year to date, we now anticipate full year expenditure on M&A to
be in the region of GBP450m to GBP500m.
Employer of Choice (EOC)
Rentokil Initial is committed to being a world-class Employer of
Choice, with colleague safety and the attraction, recruitment and
retention of the best people from the widest possible pool of
talent, being key business objectives globally. As a company, we
strongly believe that creating a diverse and inclusive workforce
which reflects the business environment in which we operate, will
increase colleague engagement and customer satisfaction, as well as
drive increased innovation, enhance our reputation and therefore
boost our financial performance.
The global recruitment market is very competitive, fuelled by
the easing of country lockdowns and candidate shortages as
government support programme remain in place. At the end of H1,
overall colleague retention was 87%, in line with historic norms.
Total service colleague and total sales colleague retention remains
in the mid to high 80% level, and broadly similar to pre-COVID
levels in 2019, although we have seen a small increase in sales
colleague turnover, particularly with colleagues who have less than
six months service and who have left to return to alternative
employment which is now reopening post the pandemic. We have
increased our hiring activity in Q2, filling roles due to turnover
and growth alongside those vacancies that were put on hold during
the height of the COVID-19 crisis and also filling seasonal roles.
From January to May this year, we saw a record number of people
applying to work with us, with just over 98,000 applications
received - an increase of 421% on the same period last year.
Our sustained performance on recruitment is an aggregation of a
number of focused actions including: improved recruitment
processes; record traffic driven to careers portal; a strong
employer brand; effective leveraging of recruitment technology; and
extensive use of our new colleague referral programme, Career+,
which we launched this year in the US, UK and Asia. 92% of
vacancies in our Asia businesses were filled by colleague referrals
in June, resulting in a 40% reduction in days to recruit.
Our monthly vacancy fill rate remains similar to or above 2020
levels and our days to recruit have been improving in both North
America and Asia, which make up over 75% of our global recruitment
activity. Europe and the UK have seen a slight increase in time to
recruit, as a result of continued benefit and government support
schemes making people slow to get back into the job market, but
this trend is likely to change as this support starts to fall away.
In addition, Indeed.com, the world's number one job site, listed
Rentokil Initial as, "The UK's most active graduate recruiter" in
May 2021.
Annual General Meeting (AGM)
The Company noted the outcome of the voting at the AGM in May in
relation to the proposed Directors' Remuneration Policy (resolution
2) and the related amendments to the Company's Performance Share
Plan (PSP) rules (resolution 4). The changes were proposed due to
the continued strong performance and increased size of the business
resulting in the total remuneration package of the Chief Executive
benchmarking just above lower quartile. The new policy aligns the
Executive Directors' potential package with market median and,
consistent with the Company's culture, the weighting of the package
design is strongly performance-based and long term.
When considering the proposed changes, the Board recognised the
sensitivities surrounding executive pay and consulted extensively
with the Company's largest shareholders, as detailed in the
Company's 2020 Annual Report. A significant majority of shares
voted (77%) were in favour of the Directors' Remuneration Policy,
including 19 out of our 20 largest shareholders. The Board remains
of the view that the policy changes are in the best interests of
the Company and its shareholders and has therefore now implemented
the new Directors' Remuneration Policy. The Board continues, as
always, to be available to shareholders and to welcome engagement
on such matters.
Managing a responsible business
As a company, we are actively engaged in ESG - at Board level
and throughout our entire organisation. Our aim is to create a
safe, diverse and engaging workplace, deliver customer service
responsibly and support our communities and environment
effectively. From a social perspective, our employer of choice
programme supports retention and recruitment, and we continued to
deliver high levels of colleague safety, training and retention in
H1 2021.
We achieved our emissions intensity reduction target of 20% last
year and continue to make progress towards our new target of a
further 20% reduction by 2025 and have also established our
long-term goal of net zero emissions by the end of 2040. To achieve
this we have a clear delivery plan based upon eight environmental
work streams and country-level action plans. One such example
involves our UK fleet into which we have installed in-van
telematics to establish which routes and vehicles are appropriate
for the first wave of transitioning to electric vehicles.
Customer and regulatory requirements are leading to an
increasing demand for innovative, non-toxic solutions in pest
control and our aim is to be the global leader in sustainable pest
control. We continue to expand and develop our range of
sustainable, non-toxic solutions across all pest types.
In H1, we donated GBP2.5m of PPE to over 500 hospitals and front
line health workers in India, including coveralls, face masks,
gloves, hand soap and sanitiser. Recipients included customers and
non-customers, with priority given to COVID hospitals. Lord
Bilimoria, President of the CBI, said: "It's been so inspiring to
see Rentokil Initial immediately come forward to supply critical
PPE and sanitiser and help the people of India through this
unprecedented crisis."
Viego Eiris Enhanced Scorecard
Viego Eiris, a global leader in ESG assessments, data, research,
benchmarks and analytics (an affiliate of Moody's Corporation),
published its enhanced scorecard on 31 May 2021. We are proud to
report that Rentokil Initial is ranked within the World 120, Europe
120 and the UK 20 indices, and ranks number one in Business Support
Services out of 103 companies, and 23rd out of 4,913 companies.
Financial review
Central and regional overheads
Central and regional overheads of GBP43.0m at CER were GBP5.5m
higher than prior year (2020: GBP37.5m), due to the non-repeat of
cost savings taken in response to the pandemic in 2020, including
salary waivers and cancellations of bonus schemes.
Restructuring costs
With the exception of integration costs for significant
acquisitions, the Company reports restructuring costs within
adjusted operating profit. Costs associated with significant
acquisitions are reported as one-off items and excluded from
adjusted operating profit.
H1 restructuring costs of GBP4.1m at CER (2020: GBP5.1m)
consisted mainly of costs in respect of initiatives focused on our
North America transformation programme.
Interest (at AER)
Adjusted interest of GBP19.1m was GBP1.4m higher than in the
prior year due to higher swap costs of GBP2.4m due to larger cash
balances held in the period between the raising of the 2028 EUR600m
bond in October 2020 and the settling of the 2021 bond in July
2021. Cash interest is c GBP1.9m below 2020 at GBP14.3m, largely
driven by lower lease interest and matured term loan interest
payments. Finance cost was GBP28.4m lower than 2020 driven by the
cost of closing out an interest derivative linked to US interest
rates in 2020 and non-repeat of c.GBP8m ineffective hedges charged
to the P&L in 2020.
The carrying value of derivative liabilities has decreased by
c.GBP48.0m in the year since June 2020 driven by the settlement of
an interest derivative linked to US interest rates in August 2020,
settlement of interest accrued and strengthening of Sterling
against the Dollar and Euro.
Tax
The income tax charge for the period at actual exchange rates
was GBP29.6m on the reported profit before tax of GBP148.8m, giving
an effective tax rate of 19.9%. After adjusting the reported profit
before tax for the amortisation and impairment of intangible assets
(excluding computer software), one-off items and net interest
adjustments, the Adjusted Effective Tax Rate for the period at AER
was 20.4% (2020: 21.7%). This compares with a blended rate of tax
for the countries in which the Group operates of 24% (2020:
23%).
Net debt and cash flow
Year to
Date
---------- ---------- --------
H1 2021 H1 2020 Change
GBPm at actual exchange rates GBPm GBPm GBPm
---------- ---------- --------
Adjusted Operating Profit 208.6 139.0 69.6
---------- ---------- --------
One-off items - operating (10.9) 4.5 (15.4)
---------- ---------- --------
Depreciation 108.1 109.3 (1.2)
---------- ---------- --------
Other 3.6 (3.2) 6.8
---------- ---------- --------
EBITDA 309.4 249.6 59.8
---------- ---------- --------
Working capital 63.6 19.1 44.5
---------- ---------- --------
Movement on provisions (1.9) 1.8 (3.7)
---------- ---------- --------
Capex - additions (111.4) (102.3) (9.1)
---------- ---------- --------
Capex - disposals 1.6 5.0 (3.4)
---------- ---------- --------
Operating cash flow - continuing
operations 261.3 173.2 88.1
---------- ---------- --------
Interest (14.3) (16.2) 1.9
---------- ---------- --------
Tax (25.0) (13.5) (11.5)
---------- ---------- --------
Free Cash Flow - continuing operations 222.0 143.5 78.5
---------- ---------- --------
Acquisitions (261.1) (50.3) (210.8)
---------- ---------- --------
Disposal of companies and businesses - 2.0 (2.0)
---------- ---------- --------
Dividends (100.0) - (100.0)
---------- ---------- --------
Underlying (increase)/decrease
in net debt (139.1) 95.2 (234.3)
---------- ---------- --------
Foreign exchange translation and
other items 18.9 (124.2) 143.1
---------- ---------- --------
Increase in net debt (120.2) (29.0) (91.2)
---------- ---------- --------
Opening net debt (994.3) (1,073.0) 78.7
---------- ---------- --------
Closing net debt (1,114.5) (1,102.0) (12.5)
---------- ---------- --------
Operating cash flow (GBP261.3m at AER for continuing operations)
was GBP88.1m higher than in H1 2020, driven by a GBP69.6m increase
in Adjusted Operating Profit and a GBP44.5m improvement in working
capital.
Interest payments of GBP14.3m are GBP1.9m lower than in the
prior year. Cash tax payments for the period were GBP25.0m, an
increase of GBP11.5m compared with the corresponding period last
year. Tax payments in the first half of last year were abnormally
low due to various deferred tax payments during the early part of
the COVID-19 crisis which were paid in the second half of 2020.
The first six months' of trading, as well as additional
measures, resulted in Free Cash Flow delivery of GBP222.0m (H1
2020: GBP143.5m). Cash spend on acquisitions of GBP261.1m and
dividend payments of GBP100.0m have contributed to an underlying
increase in net debt of GBP139.1m. Favourable foreign exchange
translation and other items of GBP18.9m is primarily due to the
strengthening of Sterling against the Euro and Dollar. Overall this
led to an increase in net debt of GBP120.2m and closing net debt of
GBP1,114.5m.
Going Concern
The Board continues to adopt the going concern basis in
preparing the accounts on the basis that the Group's strong
liquidity position and its demonstrated ability to manage the level
of capital expenditure, or dividends or expenditure on bolt-on
acquisitions are sufficient to meet the Group's forecast funding
needs, including those modelled in a severe but plausible downside
case.
Funding
On 11 June 2021 the Group gave notice to bond holders under the
EUR350m bond due 7 October 2021 that the Group would repay the
remaining EUR175m outstanding on 7 July 2021 using its par call
option. This repayment was funded using some of the proceeds from
the EUR600m bond issued in October 2020. As at 30 June, the Group
had liquidity headroom in excess of GBP1.0bn, including GBP550m of
undrawn RCF, with a maturity date of August 2025. Our net debt to
EBITDA ratio was 1.67x at 30 June 2021 (31 December 2020: 1.6x),
following settlement of the EPS acquisition in January, additional
acquisition spend and the payment of the 2020 final dividend. We
remain committed to maintaining a BBB investment grade and are
confident of doing so.
UK defined benefit pension scheme buy-out
In December 2018, the Company reached agreement for a bulk
annuity insurance buy-in for its UK Defined Benefit Pension Scheme
("the Scheme") with Pensions Insurance Corporation. The timing of
the wind-up is uncertain, following the 2020 High Court judgement
that ruled that trustees of defined benefit schemes that provided
Guaranteed Minimum Pensions should revisit and, where necessary,
top-up historic cash equivalent transfer values paid since 1990.
The Trustee may therefore need to revisit these before the wind-up
can be completed. This may mean that the wind-up is delayed until
2022. The expected surplus of GBP18m was held on the balance sheet
at 31 December 2020 and at 30 June 2021. The balance has reduced by
GBP13m from June 2020 after the trustees agreed to a pre-tax
partial refund of surplus of GBP13m, which was paid in December
2020. The balance of the refund of the surplus will be paid when
the buy-out is complete.
Dividend
In view of our performance in the first half of 2021 and our
confidence for H2, the Board is declaring an interim dividend
payment of 2.09p, a 38% increase on H1 2019, payable to
shareholders on the register at the close of business on 6 August
2021 and to be paid on 13 September 2021. The last day for DRIP
elections is 20 August 2021.
Climate Change
As part of the Company's annual reporting for 2020 we disclosed
our governance, opportunities and strategies to manage
climate-related risks and the transition to a low-carbon future in
line with the Task Force on Climate-related Financial Disclosures
(TCFD) published recommendations. We also report against the
Sustainability Accounting Standards Board framework for our sector.
Climate-related risks are identified and analysed by our
operational and functional teams. For example, our country and
regulatory teams identify risks related to new laws and
regulations, such as city-based low emission zones and associated
access charging for commercial vehicles as well as local
regulations on the use of pest control treatments in different
environments. Other risks relate to more extreme localised weather
and disruption. We also identify risks to the upside for example
from increased pest pressure and pest migration to new territories
as temperatures increase.
Technical guidance for 2021
P&L
-- Medium-term growth targets unchanged: Ongoing Revenue growth
target 5% to 8% (3% to 4% Organic), Ongoing Operating Profit
growth c.10%, Free Cash Flow conversion c.90%;
-------------------------------------------------------------
-- Restructuring costs c.GBP10m;
-------------------------------------------------------------
-- Central and regional overheads GBP10m to GBP15m lower than
2020, principally reflecting non-repeat of pandemic related
charges in 2020;
-------------------------------------------------------------
-- P&L interest costs c.GBP37m, cash interest costs c.GBP36m
(both at AER);
-------------------------------------------------------------
-- Estimated Adjusted Effective Tax Rate of between 21% and
22%;
-------------------------------------------------------------
-- Share of Profits from Associates in line with 2020, dividend
from Japanese associate of c.GBP8m; and
-------------------------------------------------------------
-- Negative impact of FX remains within the range of GBP15m
to GBP20m (no change to previous guidance).
-------------------------------------------------------------
Cash Flow
-- Working capital guidance now expected to be neutral to slight
inflow, based on our strong cash performance in H1, and updated
from previous guidance in March of up to GBP30m outflows;
-- Capex of GBP250m to GBP270m, c.GBP20m lower than previous
guidance driven by difficulties in obtaining vehicles due
to global supply issues;
----------------------------------------------------------------
-- Cash interest c.GBP36m, reflecting better cash generation
in H1 and favourable foreign exchange;
----------------------------------------------------------------
-- Cash tax payments GBP65m to GBP75m;
----------------------------------------------------------------
-- We now expect to receive the remainder of the GBP30m pre-tax
surplus from the buy-out of the UK pension scheme (GBP13m
received in 2020) in 2022; and
----------------------------------------------------------------
-- Spend on M&A in 2021 now expected to be in the region of
GBP450m to GBP500m (including the consideration paid for
EPS LLP in January 2021).
----------------------------------------------------------------
Outlook
We delivered a strong performance in H1, slightly ahead of our
expectations, and given the momentum in the business and agility
demonstrated through the pandemic to date, we are confident of
making continued progress in the balance of the year. Assuming
trading conditions around the world continue to improve and are not
significantly impacted by rising cases of new COVID-19 variants, we
anticipate mid-single digit organic growth in our core businesses
for 2021 and, despite the anticipated tapering off in disinfection
presenting more challenging comparatives in the second half, we
expect market consensus for full year adjusted pre-tax profit to
increase by around GBP10m to GBP15m.
Consolidated statement of profit or loss and other comprehensive
income (unaudited)
For the period ended 30 June
6 months 6 months
to to
30 June 30 June
2021 20201
Notes GBPm GBPm
------ --------- ---------
Revenue 4 1,462.7 1,291.0
------ --------- ---------
Operating profit 160.6 100.5
------ --------- ---------
Finance income 1.7 3.4
------ --------- ---------
Finance cost (18.0) (46.4)
------ --------- ---------
Share of profit from associates, net
of tax of GBP1.9m (2020: GBP2.1m) 4.5 4.3
------------------------------------------------ ------ --------- ---------
Profit before income tax 148.8 61.8
------ --------- ---------
Income tax expense2 (29.6) (14.7)
------------------------------------------------ ------ --------- ---------
Profit for the period attributable
to the Company's equity holders (including
non-controlling interests of GBPnil
(2020: GBP0.1m)) 119.2 47.1
------------------------------------------------ ------ --------- ---------
Other comprehensive income:
------ --------- ---------
Items that are not reclassified subsequently
to the income statement:
------ --------- ---------
Re-measurement of net defined benefit
asset 1.1 (10.3)
------ --------- ---------
Tax related to items taken to other
comprehensive income (0.3) 3.1
------ --------- ---------
Items that may be reclassified subsequently
to the income statement:
------ --------- ---------
Net exchange adjustments offset in
reserves1 (37.9) 105.5
------ --------- ---------
Net gain/(loss) on net investment hedge1 25.2 (83.0)
------ --------- ---------
Cost of hedging (2.0) 1.4
------ --------- ---------
Net gain/(loss) on cash flow hedge 4.6 (6.0)
------------------------------------------------ ------ --------- ---------
Total comprehensive income for the
period (including non-controlling interests
of GBPnil (2020: GBP0.1m)) 109.9 57.8
------------------------------------------------ ------ --------- ---------
Earnings per share attributable to
the Company's equity holders:
------ --------- ---------
Basic 6.42p 2.54p
------------------------------------------------ ------ --------- ---------
Diluted 6.39p 2.52p
------------------------------------------------ ------ --------- ---------
Non-GAAP measures
------------------------------------------------ ------ --------- ---------
Operating profit 160.6 100.5
------------------------------------------------ ------ --------- ---------
Adjusted for:
------------------------------------------------ ------ --------- ---------
Amortisation and impairment of intangible
assets (excluding computer software) 4 37.1 43.0
------------------------------------------------ ------ --------- ---------
One-off items 4 10.9 (4.5)
------------------------------------------------ ------ --------- ---------
Adjusted operating profit 208.6 139.0
------------------------------------------------ ------ --------- ---------
Finance income 1.7 3.4
------------------------------------------------ ------ --------- ---------
Finance cost (18.0) (46.4)
------------------------------------------------ ------ --------- ---------
Share of profit from associates, net
of tax of GBP1.9m (2020: GBP2.1m) 4.5 4.3
------------------------------------------------ ------ --------- ---------
Net interest adjustments (2.8) 25.3
------------------------------------------------ ------ --------- ---------
Adjusted profit before income tax 194.0 125.6
------------------------------------------------ ------ --------- ---------
Basic adjusted earnings per share attributable
to the Company's equity holders 8.31p 5.30p
------------------------------------------------ ------ --------- ---------
1. Both net exchange adjustments offset in reserves and net
gain/(loss) on net investment hedge have been restated in 2020 to
reflect a correction to the presentation in other comprehensive
income. Previously this was presented as a net GBP22.5m classified
as net exchange adjustments offset in reserves.
2. Taxation includes GBP28.5m (HY 2020: GBP15.8m) in respect of
overseas taxation.
The weighted average number of ordinary shares in issue is
1,857m (HY 2020: 1,852m). For the diluted EPS calculation the
adjustment for share options and LTIPs is 6.2m (HY 2020: 8.4m).
Consolidated balance sheet (unaudited)
At 30 June At 31 December
2021 2020
Notes GBPm GBPm
------ ----------- ---------------
Assets
------ ----------- ---------------
Non-current assets
------ ----------- ---------------
Intangible assets 1,944.3 1,922.1
------ ----------- ---------------
Property, plant and equipment 390.5 402.7
------ ----------- ---------------
Right-of-use assets 214.1 217.5
------ ----------- ---------------
Investments in associated undertakings 29.3 27.2
------ ----------- ---------------
Other investments - 0.2
------ ----------- ---------------
Deferred tax assets 36.5 37.7
------ ----------- ---------------
Contract costs 69.9 67.8
------ ----------- ---------------
Retirement benefit assets 9 18.9 19.0
------ ----------- ---------------
Other receivables 12.9 13.1
------ ----------- ---------------
Derivative financial instruments 12 22.1 37.0
---------------------------------------- ------ ----------- ---------------
2,738.5 2,744.3
---------------------------------------- ------ ----------- ---------------
Current assets
------ ----------- ---------------
Other investments 172.1 172.2
------ ----------- ---------------
Inventories 130.9 131.3
------ ----------- ---------------
Trade and other receivables 513.2 548.6
------ ----------- ---------------
Current tax assets 8.6 10.6
------ ----------- ---------------
Derivative financial instruments 12 1.0 5.6
------ ----------- ---------------
Cash and cash equivalents 1,562.4 2,225.6
---------------------------------------- ------ ----------- ---------------
2,388.2 3,093.9
---------------------------------------- ------ ----------- ---------------
Liabilities
------ ----------- ---------------
Current liabilities
------ ----------- ---------------
Trade and other payables (786.5) (925.0)
------ ----------- ---------------
Current tax liabilities (86.1) (80.0)
------ ----------- ---------------
Provisions for liabilities and charges (25.5) (30.1)
------ ----------- ---------------
Bank and other short-term borrowings 10 (1,344.7) (1,846.6)
------ ----------- ---------------
Lease liabilities (74.4) (72.7)
------ ----------- ---------------
Derivative financial instruments 12 (13.8) (3.5)
---------------------------------------- ------ ----------- ---------------
(2,331.0) (2,957.9)
---------------------------------------- ------ ----------- ---------------
Net current assets 57.2 136.0
---------------------------------------- ------ ----------- ---------------
Non-current liabilities
------ ----------- ---------------
Other payables1 (58.3) (70.4)
------ ----------- ---------------
Bank and other long-term borrowings 10 (1,280.1) (1,337.6)
------ ----------- ---------------
Lease liabilities (134.5) (141.8)
------ ----------- ---------------
Deferred tax liabilities (90.6) (94.7)
------ ----------- ---------------
Retirement benefit obligations 9 (35.4) (38.8)
------ ----------- ---------------
Provisions for liabilities and charges (36.8) (34.1)
------ ----------- ---------------
Derivative financial instruments 12 (24.6) (32.3)
---------------------------------------- ------ ----------- ---------------
(1,660.3) (1,749.7)
---------------------------------------- ------ ----------- ---------------
Net assets 1,135.4 1,130.6
---------------------------------------- ------ ----------- ---------------
Equity
------ ----------- ---------------
Capital and reserves attributable to
the company's equity holders
------ ----------- ---------------
Share capital 18.6 18.5
------ ----------- ---------------
Share premium 6.8 6.8
------ ----------- ---------------
Other reserves (1,936.3) (1,926.2)
------ ----------- ---------------
Retained profits 3,046.7 3,030.6
---------------------------------------- ------ ----------- ---------------
1,135.8 1,129.7
------ ----------- ---------------
Non-controlling interests (0.4) 0.9
---------------------------------------- ------ ----------- ---------------
Total equity 1,135.4 1,130.6
---------------------------------------- ------ ----------- ---------------
1. Non-current other payables includes GBP33.7m Put Option
liability related to the PCI India acquisition (2020:
GBP34.3m).
Consolidated statement of changes in equity (unaudited)
Called Share
up share premium Other Retained Non-controlling Total
capital account reserves1 earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
---------- --------- ----------- ---------- ---------------- --------
At 1 January 2020 18.5 6.8 (1,867.7) 2,844.1 0.6 1,002.3
---------- --------- ----------- ---------- ---------------- --------
Profit for the period - - - 47.0 0.1 47.1
---------- --------- ----------- ---------- ---------------- --------
Other comprehensive
income:
---------- --------- ----------- ---------- ---------------- --------
Net exchange adjustments
offset in reserves1 - - 105.5 - - 105.5
---------- --------- ----------- ---------- ---------------- --------
Net gain/(loss) on net
investment hedge1 - - (83.0) - - (83.0)
---------- --------- ----------- ---------- ---------------- --------
Cost of hedging - - 1.4 - - 1.4
---------- --------- ----------- ---------- ---------------- --------
Remeasurement of net
defined benefit asset - - - (10.3) - (10.3)
---------- --------- ----------- ---------- ---------------- --------
Net gain/(loss) on cash
flow hedge2 - - (6.0) - - (6.0)
---------- --------- ----------- ---------- ---------------- --------
Tax related to items
taken directly to other
comprehensive income - - - 3.1 - 3.1
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
Total comprehensive
income for the period - - 17.9 39.8 0.1 57.8
---------- --------- ----------- ---------- ---------------- --------
Transactions with owners:
---------- --------- ----------- ---------- ---------------- --------
Cost of equity-settled
share-based payment
plans - - - 2.8 - 2.8
---------- --------- ----------- ---------- ---------------- --------
Movement in the carrying
value of put options - - - 10.3 - 10.3
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
At 30 June 2020 18.5 6.8 (1,849.8) 2,897.0 0.7 1,073.2
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
At 1 January 2021 18.5 6.8 (1,926.2) 3,030.6 0.9 1,130.6
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
Profit for the period - - - 119.2 - 119.2
---------- --------- ----------- ---------- ---------------- --------
Other comprehensive
income:
---------- --------- ----------- ---------- ---------------- --------
Net exchange adjustments
offset in reserves - - (37.9) - - (37.9)
---------- --------- ----------- ---------- ---------------- --------
Net gain/(loss) on net
investment hedge - - 25.2 - - 25.2
---------- --------- ----------- ---------- ---------------- --------
Cost of hedging - - (2.0) - - (2.0)
---------- --------- ----------- ---------- ---------------- --------
Remeasurement of net
defined benefit asset - - - 1.1 - 1.1
---------- --------- ----------- ---------- ---------------- --------
Net gain/(loss) on cash
flow hedge2 - - 4.6 - - 4.6
---------- --------- ----------- ---------- ---------------- --------
Tax related to items
taken directly to other
comprehensive income - - - (0.3) - (0.3)
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
Total comprehensive
income for the period - - (10.1) 120.0 - 109.9
---------- --------- ----------- ---------- ---------------- --------
Transactions with owners:
---------- --------- ----------- ---------- ---------------- --------
Shares issued in the
period 0.1 - - (0.1) - -
---------- --------- ----------- ---------- ---------------- --------
Dividends paid to equity
shareholders - - - (100.0) - (100.0)
---------- --------- ----------- ---------- ---------------- --------
Acquisition of non-controlling
interests _ _ _ (8.1) (1.3) (9.4)
---------- --------- ----------- ---------- ---------------- --------
Cost of equity-settled
share-based payment
plans - - - 3.5 - 3.5
---------- --------- ----------- ---------- ---------------- --------
Tax related to items
taken directly to equity - - - 1.2 - 1.2
---------- --------- ----------- ---------- ---------------- --------
Movement in the carrying
value of put options - - - (0.4) - (0.4)
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
At 30 June 2021 18.6 6.8 (1,936.3) 3,046.7 (0.4) 1,135.4
-------------------------------- ---------- --------- ----------- ---------- ---------------- --------
1. Both net exchange adjustments offset in reserves and net
gain/(loss) on net investment hedge have been restated in 2020 to
reflect a correction to the presentation in other comprehensive
income. Previously this was presented as a net GBP22.5m classified
as net exchange adjustments offset in reserves.
2. GBP4.6m net gain on cash flow hedge includes GBP13.0m loss
(2020: GBP20.5m gain) from the effective portion of changes in fair
value offset by reclassification to the income statement of
GBP17.6m loss (2020: GBP26.5m gain) due to changes in foreign
exchange rates.
Shares of GBP0.1m (2020: GBP0.1m) have been netted against
retained earnings. This represents 10.3m (HY 2020: 9.7m) shares
held by the Rentokil Initial Employee Share Trust. The market value
of these shares at 30 June 2021 was GBP51.0m (HY 2020: GBP50.0m).
Dividend income from, and voting rights on, the shares held by the
Trust have been waived.
Analysis of other reserves (unaudited)
Cash
Capital flow
reduction Legal hedge Translation Cost
reserve reserve reserve reserve1 of hedging Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------- --------- --------- ------------ ------------ ----------
At 1 January 2020 (1,722.7) 10.4 0.5 (155.9) - (1,867.7)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
Net exchange adjustments
offset in reserves1 - - - 105.5 - 105.5
----------- --------- --------- ------------ ------------ ----------
Net gain/(loss) on net
investment hedge1 - - - (83.0) - (83.0)
----------- --------- --------- ------------ ------------ ----------
Net gain/(loss) on cash
flow hedge2 - - (6.0) - - (6.0)
----------- --------- --------- ------------ ------------ ----------
Cost of hedging - - - - 1.4 1.4
-------------------------- ----------- --------- --------- ------------ ------------ ----------
Total comprehensive
income for the period - - (6.0) 22.5 1.4 17.9
-------------------------- ----------- --------- --------- ------------ ------------ ----------
At 30 June 2020 (1,722.7) 10.4 (5.5) (133.4) 1.4 (1,849.8)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
At 1 January 2021 (1,722.7) 10.4 (4.4) (208.5) (1.0) (1,926.2)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
Net exchange adjustments
offset in reserves - - - (37.9) - (37.9)
----------- --------- --------- ------------ ------------ ----------
Net gain/(loss) on net
investment hedge - - - 25.2 - 25.2
----------- --------- --------- ------------ ------------ ----------
Net gain/(loss) on cash
flow hedge1 - - 4.6 - - 4.6
----------- --------- --------- ------------ ------------ ----------
Cost of hedging - - - - (2.0) (2.0)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
Total comprehensive
income for the period - - 4.6 (12.7) (2.0) (10.1)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
At 30 June 2021 (1,722.7) 10.4 0.2 (221.2) (3.0) (1,936.3)
-------------------------- ----------- --------- --------- ------------ ------------ ----------
1. Both net exchange adjustments offset in reserves and net
gain/(loss) on net investment hedge have been restated in 2020 to
reflect a correction to the presentation in other comprehensive
income. Previously this was presented as a net GBP22.5m classified
as net exchange adjustments offset in reserves.
2. GBP4.6m net gain on cash flow hedge includes GBP13.0m loss
(2020: GBP20.5m gain) from the effective portion of changes in fair
value offset by reclassification to the income statement of
GBP17.6m loss (2020: GBP26.5m gain) due to changes in foreign
exchange rates.
Consolidated cash flow statement (unaudited)
6 months 6 months
to to
30 June 30 June
2021 20201
Notes GBPm GBPm
------ --------- ---------
Profit for the period 119.2 47.1
------ --------- ---------
Adjustments for:
------ --------- ---------
- Tax 29.6 14.7
------ --------- ---------
- Share of profit from associates (4.5) (4.3)
------ --------- ---------
- Interest income (1.7) (3.4)
------ --------- ---------
- Interest expense 18.0 46.4
------ --------- ---------
Reversal of non-cash items:
------ --------- ---------
- Depreciation and impairment of property,
plant and equipment 100.6 101.8
------ --------- ---------
- Amortisation and impairment of intangible
assets2 37.1 43.0
------ --------- ---------
- Amortisation of computer software 7.5 7.5
------ --------- ---------
- Other non-cash items 3.6 (3.2)
------ --------- ---------
Changes in working capital (excluding
the effects of acquisitions and exchange
differences on consolidation):
------ --------- ---------
- Inventories (1.4) (36.1)
------ --------- ---------
- Contract costs 0.2 (1.0)
------ --------- ---------
- Trade and other receivables 22.6 (73.9)
------ --------- ---------
- Accrued income 6.6 9.5
------ --------- ---------
- Trade and other payables and provisions 24.5 102.2
------ --------- ---------
- Deferred income 9.2 20.2
---------------------------------------------- ------ --------- ---------
Cash generated from operating activities 371.1 270.5
------ --------- ---------
Interest received 1.8 3.3
------ --------- ---------
Interest paid3 (16.1) (19.5)
------ --------- ---------
Income tax paid (25.0) (13.5)
---------------------------------------------- ------ --------- ---------
Net cash generated from operating activities 331.8 240.8
---------------------------------------------- ------ --------- ---------
Cash flows from investing activities
------ --------- ---------
Purchase of property, plant and equipment (59.1) (61.5)
------ --------- ---------
Purchase of intangible fixed assets (12.5) (11.6)
------ --------- ---------
Proceeds from sale of property, plant
and equipment 1.6 5.0
------ --------- ---------
Acquisition of companies and businesses,
net of cash acquired 6 (254.7) (50.3)
------ --------- ---------
Disposal of companies and businesses - 2.0
------ --------- ---------
Net change to cash flow from investment
in term deposits1 0.1 (1.0)
---------------------------------------------- ------ --------- ---------
Net cash flows from investing activities (324.6) (117.4)
---------------------------------------------- ------ --------- ---------
Cash flows from financing activities
------ --------- ---------
Dividends paid to equity shareholders (100.0) -
------ --------- ---------
Acquisition of shares from non-controlling
interest (9.4) -
------ --------- ---------
Capital element of lease payments (42.2) (41.7)
------ --------- ---------
Cash outflow on settlement of debt
related foreign exchange forward contracts (1.8) 1.1
------ --------- ---------
Proceeds from new debt 1.5 1,153.4
------ --------- ---------
Debt repayments (9.1) (592.2)
---------------------------------------------- ------ --------- ---------
Net cash flows from financing activities (161.0) 520.6
---------------------------------------------- ------ --------- ---------
Net (decrease)/increase in cash and
cash equivalents (153.8) 644.0
------ --------- ---------
Cash and cash equivalents at beginning
of year 550.8 273.9
------ --------- ---------
Exchange (losses)/gains on cash and
cash equivalents (9.1) 8.7
---------------------------------------------- ------ --------- ---------
Cash and cash equivalents at end of
the financial period 387.9 926.6
---------------------------------------------- ------ --------- ---------
1. Net change to cash flow from investment in term deposits has
been restated in 2020 to correct the classification from financing
activities to investing activities.
2. Excluding computer software.
3. Interest paid includes interest on lease payments of GBP3.1m
(2020: GBP3.6m).
Explanatory notes to the interim financial statements
(unaudited)
1. General information
The Company is a public limited company incorporated in England
and Wales and domiciled in the UK with a listing on the London
Stock Exchange. The address of its registered office is Rentokil
Initial plc, Compass House, Manor Royal, Crawley, West Sussex, RH10
9PY.
The consolidated half-yearly financial information for the
half-year to 30 June 2021 was approved on 28 July 2021 for issue on
29 July 2021.
On page 105 of the Annual Report 2020 we set out the Group's
approach to risk management and on pages 67 to 73 we define the
principal risks that are most relevant to the Group. These risks
are described in detail and have mitigating actions assigned to
each of them. In our view the principal risks remain unchanged from
those indicated in the Annual Report 2020. A summary of the risks
is laid out in the table below:
Principal risk Summary of risk
--------------------------------------------
Failure to grow our business The Company's three businesses
profitably in a changing macro-economic (Pest Control, Hygiene and Protect
environment & Enhance) operate in a global
macro-economic environment that
is subject to uncertainty and
volatility.
--------------------------------------------
Failure to deliver consistently Our business model depends on
high levels of service to the servicing the needs of our customers
satisfaction of our customers in line with internal high standards
and to levels agreed in contracts.
--------------------------------------------
Failure to develop products We operate across markets that
and services that are tailored are at different stages in the
and relevant to local markets economic cycle, at varying stages
and market conditions of market development and have
different levels of market attractiveness.
We must be sufficiently agile
to develop and deliver products
and services that meet local
market needs.
--------------------------------------------
Failure to ensure business continuity The business needs to have resilience
in case of a material incident to ensure business can continue
if impacted by externally induced
incidents, e.g. cyber attack,
hurricane or terrorism.
--------------------------------------------
Failure to mitigate against Our business is exposed to foreign
financial market risks exchange risk, interest rate
risk, liquidity risk, counterparty
risk and settlement risk.
--------------------------------------------
Fraud, financial crime and loss Collusion between individuals,
or unintended release of personal both internal and external, could
data result in fraud if internal controls
are not in place and working
effectively. The business holds
personal data on employees, some
customers and suppliers: unintended
loss or release of such data
may result in criminal sanctions.
--------------------------------------------
Safety, health and the environment The Company has an obligation
(SHE) to ensure that colleagues, customers
and other stakeholders remain
safe, that the working environment
is not detrimental to health
and that we are aware of and
minimise any adverse impact on
the environment.
--------------------------------------------
Breaches of laws or regulations As a responsible company we aim
(including tax, competition to comply with all laws and regulations
and anti-trust laws) that apply to our businesses
across the globe.
--------------------------------------------
Failure to integrate acquisitions The Company has a strategy that
and execute disposals from continuing includes growth by acquisition,
business and has acquired 24 businesses
in H1 2021 (including the remaining
shares from a non-controlling
interest). These companies need
to be integrated quickly and
efficiently to minimise potential
impact on the acquired business
and the existing business.
--------------------------------------------
Impact of COVID-19 The Company remains limited in
its ability to service customers
where breakouts/waves drive government
lockdowns, resource shortages
due to isolation or supply chain
disruption and different work-patterns
give rise to higher fraud and
cyber risks and ultimately cause
disruption in our customer base
leading to contract reductions
or terminations. While we feel
more confident in our ability
to deal with these risks in 2021,
they continue to exist.
----------------------------------------- --------------------------------------------
These interim financial results do not comprise statutory
accounts within the meaning of Section 435 of the Companies Act
2006, and should be read in conjunction with the Annual Report
2020. Those accounts have been audited and delivered to the
registrar of companies. The report of the auditor was unqualified,
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
For all information relating to 2020 results please refer to the
Annual Report 2020 which can be accessed here:
https://www.rentokil-initial.com/investors/annual-reports.aspx
2. Basis of preparation
The condensed consolidated financial statements have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and in accordance with IAS 34
Interim Financial Reporting as contained in UK-adopted
international accounting standards. The condensed consolidated
financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2020 which have
been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee interpretations
in conformity with the requirements of the Companies Act 2006 and
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. In respect of accounting standards applicable to
the Group in the current period, there is no difference between
IFRS in conformity with the Companies Act 2006, the UK-adopted IFRS
and International Accounting Standards Board (IASB)-adopted
IFRS.
Going concern
The Directors have prepared cash flow forecasts that demonstrate
that the Group has sufficient liquidity to meet its obligations as
they fall due and that it remains complaint with all relevant
covenants for the period of at least 12 months from the date of
approval of these Financial Statements.
Additionally the Directors have assessed severe but plausible
downside scenarios, including the impact of further lockdowns. The
most severe downside scenario assumes a revenue decline of 30%
against base budget for a period of twelve months in the next 24
months, which is considerably worse than the Group's actual
performance in 2020 which saw a downturn of <30% for one month
only. Under this scenario the Group would take mitigating action by
scaling back M&A spend and dividends so as not to breach any
covenants on its drawn debts.
Consequently, the directors are confident that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
3. Accounting policies
The preparation of the interim financial information for the
half-year ended 30 June 2021 requires management to make estimates
and assumptions that affect the reported amounts of revenues,
expenses, assets, liabilities and disclosure of contingent
liabilities at the date of the statement. If in the future such
estimates and assumptions, which are based on management's best
judgement at the date of the statement, deviate from the actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the year in which the circumstances
change.
The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty were the same as those described in the last annual
financial statements. During 2020 the Group increased its bad debt
provision by GBP33m reflecting the risk of potential credit losses
arising from the COVID-19 pandemic. In the period we have continued
to see strong cash collection performances in most markets although
there is slower improvement in older aged debts. On the basis of
the strong cash collection performance trade debtors have reduced
by GBP30m and GBP6m of bad debt provisions created in the previous
year have been released. Approximately 61% of the increase in aged
debt versus pre-pandemic are covered by the increase in bad debt
provision. A 10% increase or decrease in this ratio would result in
an increase or decrease to the provision of GBP4m.
In addition, the re-opening of economies has allowed markets,
particularly the UK, to deliver services that had been delayed by
the pandemic and alongside the strong cash collection performance
this has allowed management to release GBP5m of revenue provisions
booked in 2020 for delayed services. Similar difficulties exist
around the valuation of remaining provisions based on how economies
and customers recover, but as management continues to resolve aged
debts, the range of sensitivity (where a 10% movement in the
provision due to improved service delivery is GBP1.7m at the half
year) will decline further.
Significant seasonal or cyclical variations in the Group's total
revenues are not experienced during the financial year.
Changes in accounting policies
Except as described below, the accounting policies applied in
these interim financial statements are the same as those applied in
the Group's consolidated financial statements as at and for the
year ended 31 December 2020. The changes in accounting policies are
also expected to be reflected in the Group's consolidated financial
statements as at and for the year ending 31 December 2021.
A number of new standards are effective from 1 January 2021 but
they do not have a material effect on the Group's financial
statements.
The Group has adopted the following amendments to standards with
effect from 1 January 2021:
- Amendments to IFRS 16 Leases
- Amendments to IFRS 4 Insurance Contracts
--------------------------------------------------------
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
- interest rate benchmark reform phase 2
--------------------------------------------------------
These standards have had no impact on the financial position or
performance of the Group. Consequently, no adjustment has been made
to the comparative financial information as at 31 December 2020 or
30 June 2020. The Group has not early adopted any standard,
interpretation or amendment that was issued but is not yet
effective.
4. Segmental information
Segmental information has been presented in accordance with IFRS
8 Operating Segments. Reporting segments reflect the internal
management organisation and reporting structures. Each segment is
headed by a Regional Managing Director who reports directly to the
Chief Executive and is a member of the Group's Executive Leadership
Team responsible for the review of Group performance. The operating
businesses within each segment report to the Regional Managing
Directors.
Disaggregated revenue under IFRS 15 is the same as the segmental
analysis below. Restructuring costs and central and regional
overheads are also presented centrally as they are not targeted or
managed at reportable segment level. The basis of presentation is
consistent with the information reviewed by internal management.
Revenue and profit are from Ongoing operations which is defined and
reconciled to the nearest equivalent GAAP measure in Note 14.
Operating Operating
Revenue Revenue profit profit
30 June 30 June 30 June 30 June
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
--------- --------- ---------- ----------
France 145.8 131.4 14.4 4.3
--------- --------- ---------- ----------
Benelux 46.3 45.5 12.9 12.4
--------- --------- ---------- ----------
Germany 58.5 55.4 18.3 17.1
--------- --------- ---------- ----------
Southern Europe 73.5 66.6 13.2 8.6
--------- --------- ---------- ----------
Latin America 30.3 27.0 3.7 2.3
------------------------------------------ --------- --------- ---------- ----------
Europe 354.4 325.9 62.5 44.7
------------------------------------------ --------- --------- ---------- ----------
UK & Ireland 155.8 136.9 42.2 23.5
--------- --------- ---------- ----------
Rest of World 78.6 75.2 16.4 15.1
------------------------------------------ --------- --------- ---------- ----------
UK & Rest of World 234.4 212.1 58.6 38.6
------------------------------------------ --------- --------- ---------- ----------
Asia 119.2 117.7 12.8 11.9
--------- --------- ---------- ----------
North America 650.6 543.9 100.8 70.6
--------- --------- ---------- ----------
Pacific 99.7 83.7 20.5 15.7
--------- --------- ---------- ----------
Central and regional overheads - - (42.9) (37.5)
--------- --------- ---------- ----------
Restructuring costs - - (3.9) (5.2)
------------------------------------------ --------- --------- ---------- ----------
Ongoing operations at actual exchange
rates 1,458.3 1,283.3 208.4 138.8
--------- --------- ---------- ----------
Disposed businesses1 4.4 7.7 0.2 0.2
------------------------------------------ --------- --------- ---------- ----------
Continuing operations at actual exchange
rates 1,462.7 1,291.0 208.6 139.0
--------- --------- ---------- ----------
One-off items - operating (10.9) 4.5
--------- --------- ---------- ----------
Amortisation of intangible assets2 (37.1) (43.0)
------------------------------------------ --------- --------- ---------- ----------
Operating profit 160.6 100.5
------------------------------------------ --------- --------- ---------- ----------
1. Includes revenue of GBP1.5m (2020: GBP4.2m) from product
sales by the Group to CWS-boco International GmbH.
2. Excluding computer software.
One-off items
One-off items - operating is a charge of GBP10.9m (2020: gain of
GBP4.5m). GBP10.3m relates to acquisition, integration and disposal
costs and the remainder relates to adjustments to costs classified
as one-off in prior periods.
Analysis of revenue by business category
Revenue Revenue
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
Pest Control 932.0 829.8
--------- ---------
Hygiene 360.5 292.6
--------- ---------
Protect & Enhance 165.8 160.9
--------- ---------
Disposed businesses 4.4 7.7
--------------------- --------- ---------
Total 1,462.7 1,291.0
--------------------- --------- ---------
Analysis of revenue by type
Revenue Revenue
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
Recognised over time
--------- ---------
Contract service revenue 973.6 886.0
--------- ---------
Recognised at a point in time
--------- ---------
Job work 330.1 263.7
--------- ---------
Sale of goods 159.0 141.3
------------------------------- --------- ---------
Total 1,462.7 1,291.0
------------------------------- --------- ---------
Amortisation and impairment of intangible assets
Amortisation Amortisation
and impairment and impairment
of intangibles1 of intangibles1
30 June 30 June
2021 2020
GBPm GBPm
----------------- -----------------
Europe 5.9 4.6
----------------- -----------------
UK & Rest of World 5.8 5.7
----------------- -----------------
Asia 3.0 11.7
----------------- -----------------
North America 16.7 15.9
----------------- -----------------
Pacific 1.9 1.8
----------------- -----------------
Central and regional 3.8 3.3
---------------------- ----------------- -----------------
Total 37.1 43.0
---------------------- ----------------- -----------------
1. Excluding computer software.
5. Income tax expense
The analysis of the tax charge in the period is as follows:
6 months 6 months
to to
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
UK corporation tax at 19.0% (2020: 19.0%) 8.1 2.1
--------- ---------
Overseas taxation 28.5 15.8
--------- ---------
Adjustments in respect of prior periods (3.6) (1.5)
------------------------------------------- --------- ---------
Total current tax 33.0 16.4
------------------------------------------- --------- ---------
Deferred tax expense 0.9 0.4
--------- ---------
Adjustments from change in tax rates (3.8) (1.6)
--------- ---------
Adjustments in respect of prior periods (0.5) (0.5)
------------------------------------------- --------- ---------
Total deferred tax (3.4) (1.7)
------------------------------------------- --------- ---------
Total income tax expense 29.6 14.7
------------------------------------------- --------- ---------
The tax charge for the period has been calculated by applying
the effective tax rate which is expected to apply to the Group for
the year ended 31 December 2021 using rates substantively enacted
by 30 June 2021. A separate effective income tax rate has been
calculated for each jurisdiction in which the Group operates
applied to the pre-tax profits for the interim period.
The reported tax rate for the period was 19.9% (H1 2020:
23.8%).The Group's Effective Tax Rate (ETR) before amortisation of
intangible assets (excluding computer software), one-off items and
the net interest adjustments for the period was 20.4% (H1 2020:
21.7%). This compares with a blended rate of tax for the countries
in which the Group operates of 24% (H1 2020: 23%).
Legislation to increase the standard rate of UK corporation tax
from 19% to 25% from 1 April 2023 was enacted during the period. As
a result deferred tax balances have been calculated at 19% or 25%
depending upon when the balance is expected to unwind. The deferred
tax asset recognised in the accounts has been increased by GBP3.8m,
reducing the tax charge for the period. This includes a GBP3.2m
increase in the deferred tax asset recognised on UK tax losses.
The Group's ETR is expected to remain above the UK tax rate due
to the proportion of overseas profits which are taxed at a higher
rate than UK profits. In the medium term the Group's Adjusted ETR
is likely to increase towards the blended tax rate. The blended tax
rate is expected to increase to 25% in 2023 when the UK tax rate
increases to 25%.
Total uncertain tax positions (including interest thereon)
amounted to GBP61.9m as at 30 June 2021 (December 2020: GBP64.6m).
Included within this amount is GBP11.7m (December 2020: GBP11.5m)
in respect of interest arising on tax provisions which is included
in other payables.
Total tax payments for the period amounted to GBP25.0m (2020:
GBP13.5m), an increase of GBP11.5m. Tax payments for the
corresponding period last year were abnormally low due to various
tax deferrals available during the COVID-19 pandemic.
The movement on the deferred income tax account is as
follows:
6 months 6 months
to to
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
At 1 January (57.0) (81.5)
--------- ---------
Exchange differences 2.1 (5.2)
--------- ---------
Acquisition of companies and businesses (3.5) (2.9)
--------- ---------
Credited to the income statement 3.4 1.7
--------- ---------
Credited/(charged) to other comprehensive
income (0.3) 3.1
--------- ---------
Credited/(charged) to equity 1.2 0.7
---------------------------------------------- --------- ---------
At 30 June (54.1) (84.1)
---------------------------------------------- --------- ---------
Deferred taxation has been presented on
the balance sheet as follows:
--------- ---------
Deferred tax asset within non-current assets 36.5 30.6
--------- ---------
Deferred tax liability within non-current
liabilities (90.6) (114.7)
---------------------------------------------- --------- ---------
(54.1) (84.1)
---------------------------------------------- --------- ---------
A deferred tax asset of GBP16.7m has been recognised in respect
of UK losses (December 2020: GBP16.0m) carried forward at 30 June
2021. This amount has been calculated by estimating the future UK
taxable profits, against which the UK tax losses will be utilised,
and applying the tax rates (substantively enacted as at the balance
sheet date) applicable for each year. Remaining UK tax losses of
GBP48.0m have not been recognised as at 30 June 2021 as it is not
considered probable that future taxable profits will be available
against which the tax losses can be offset.
At the balance sheet date the Group had tax losses of GBP90.5m
(December 2020: GBP105.0m) on which no deferred tax asset is
recognised because it is not considered probable that future
taxable profits will be available in certain jurisdictions to be
able to benefit from those tax losses.
6. Business combinations
The Group purchased 100% of either the share capital or the
trade and assets of 23 companies and businesses in the period. It
also acquired the remaining shares from a non-controlling interest
which is recognised as an equity transaction rather than a business
combination. An overview of the acquisitions in the year can be
found on page 8 under the 'Continued strength of M&A' heading.
The Group acquires companies and businesses as part of its growth
strategy.
The total consideration in respect of acquisitions in the
current year was GBP88.0m. Details of goodwill and the fair value
of net assets acquired are as follows:
6 months 6 months
to to
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
Purchase consideration:
--------- ---------
- Cash paid 69.2 29.3
--------- ---------
- Deferred and contingent consideration 18.8 8.1
------------------------------------------- --------- ---------
Total purchase consideration 88.0 37.4
--------- ---------
Fair value of net assets acquired (30.8) (15.2)
------------------------------------------- --------- ---------
Goodwill from current period acquisitions 57.2 22.2
------------------------------------------- --------- ---------
Goodwill represents the synergies, workforce and other benefits
expected as a result of combining the respective businesses.
Deferred consideration of GBP7.2m and contingent consideration
of GBP11.6m is payable in respect of the above acquisitions.
Contingent consideration is payable based on a variety of
conditions including revenue and profit targets being met.
The provisional fair value of assets and liabilities arising
from acquisitions in the period are shown below. The provisional
fair values will be materially finalised in the 2021 financial
statements. The fair values are provisional as the acquisition
accounting has not yet been finalised, primarily due to the
proximity of the acquisitions to the period end.
6 months 6 months
to to
30 June 30 June
2021 2020
GBPm GBPm
--------- ---------
Non-current assets
--------- ---------
- Intangible assets 29.3 16.1
--------- ---------
- Property, plant and equipment 3.0 1.4
--------- ---------
Current assets 5.6 5.2
--------- ---------
Current liabilities (3.2) (4.2)
--------- ---------
Non-current liabilities (3.9) (3.3)
--------------------------------- --------- ---------
Net assets acquired 30.8 15.2
--------------------------------- --------- ---------
Acquired receivables are disclosed at fair value and represent
the best estimate of the contractual cash flows expected to be
collected. From the dates of acquisition to 30 June 2021, these
acquisitions contributed GBP8.4m to revenue and GBP1.3m to
operating profit. If the acquisitions had occurred on 1 January
2021, the revenue and operating profit of the combined entity would
have amounted to GBP1,475.6m and GBP163.1m respectively.
In relation to prior period acquisitions, there has been an
adjustment to the provisional fair values resulting in a decrease
to goodwill of GBP1.9m.
The Group paid GBP185.9m in respect of deferred and contingent
consideration for current and prior year acquisitions, resulting in
the total cash outflow in the period from current and past period
acquisitions, net of GBP0.4m cash acquired, of GBP254.7m. In
addition the Group acquired GBP2.2m of lease liabilities and
GBP4.3m of loans bringing the movement on net debt from
acquisitions to GBP261.1m. The settlement of deferred and
contingent consideration is the main reason for the reduction in
trade and other payables in the balance sheet of GBP138.5m.
7. Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired business at the date of acquisition. It is
recognised as an intangible asset. Goodwill arising on the
acquisition of an associate is included in investments in
associates.
Goodwill is carried at cost less accumulated impairment losses
and is tested annually for impairment. For the purpose of
impairment testing, goodwill is allocated to CGUs identified
according to country of operation and reportable business unit. The
way in which CGUs are identified has not changed from prior
periods. Newly acquired entities might be a single CGU until such
time that they can be integrated. Gains and losses on the disposal
of an entity include the carrying amount of goodwill relating to
the entity sold.
The recoverable amount of a CGU is determined based on the
higher of value-in-use calculations using cash flow projections and
fair value less costs to sell if appropriate. The cash flow
projections in year one are based on financial budgets approved by
management, which are prepared as part of the Group's normal
planning process. Cash flows for years two to five use management's
expectation of sales growth, operating costs and margin, based on
past experience and expectations regarding future performance and
profitability for each CGU. Cash flows beyond the five-year period
are extrapolated using estimated long-term growth rates (LTGR). The
effect of climate change has been considered in the cash flows.
An assessment has been performed for all material CGUs at the
half year to identify any indicators of impairment. The assessment
included a review of internal and external factors that have the
potential to significantly reduce the CGU value. As a result of
this assessment 4 CGUs have been tested but none was found to be
impaired:
Goodwill
balance
30 June
2021
CGU Indicator of possible impairment GBPm
------------------------------------------ ---------
Ireland H1 2021 trading lower than budget 3.3
------------------------------------------ ---------
France Workwear H1 2021 trading lower than budget 3.6
------------------------------------------ ---------
France Technivap H1 2021 trading lower than budget 4.4
------------------------------------------ ---------
H1 2021 trading and economic uncertainty
India PCI due to COVID-19 pandemic 70.2
------------------ ------------------------------------------ ---------
A sensitivity analysis for India PCI is shown below:
Impairment
Assumption Rate used GBPm
---------- -----------
Long-term growth rate - 1% decrease 4.02% 0.6
---------- -----------
Terminal operating margin - 1% decrease 15.1% -
---------- -----------
Pre-tax discount rate - 1% increase 13.8% 0.4
----------------------------------------- ---------- -----------
For all other goodwill balances it can be demonstrated that
there is headroom in the recoverable amount of the CGU goodwill
balances based on the assumptions made, and there is not considered
to be any reasonably likely scenario under which material
impairment could be expected to occur based on the testing
performed. A further review will be undertaken at the year end.
8. Dividends
6 months 6 months
to to
30 June 30 June Year to
2021 2020 31 December
GBPm GBPm 2020 GBPm
--------- --------- -------------
2020 final dividend paid - 5.41p
per share 100.3 - -
--------------------------------- --------- --------- -------------
100.3 - -
--------------------------------- --------- --------- -------------
The directors have declared an interim dividend of 2.09p per
share amounting to GBP38.9m payable on 13 September 2021 to
shareholders on the register at close of business on 6 August 2021.
The Company has a progressive dividend policy and will consider the
level of growth for 2021 based on the year-end results. These
interim financial statements do not reflect this dividend
payable.
9. Retirement benefit obligations
Apart from the legally required social security state schemes,
the Group operates a number of pension schemes around the world
covering many of its employees.
The principal scheme in the Group is the Rentokil Initial 2015
Pension Scheme in the United Kingdom ("the scheme"). It has a
number of defined benefit sections which are all now closed to new
members and future accrual of benefits. On 4 December 2018 the
Group signed an agreement with Pension Insurance Corporation plc
(PIC) for PIC to take over the payment of the liabilities in the
scheme via a buy-in, which is anticipated to convert to a full
buy-out before the end of 2022. The trustee purchased an insurance
policy that covers all retirement benefit obligations within the
scheme, thereby removing exposure to the significant risks within
the scheme (including changes in bond yields, inflation and
longevity). The scheme's insurer (PIC) is now responsible for
ensuring there are sufficient assets to meet all future pension
obligations, and is subject to solvency regulations. There is no
volatility associated with the insurance policy asset as under IAS
19 its value is deemed to match the scheme liabilities. Asset
volatility is limited only to the assets remaining in the scheme
following this transaction which are expected to be returned to the
company on wind-up of the scheme.
The Group achieved buy-in within the value of the assets held by
the scheme and was not required to make any further contributions.
While there are still some adjustments expected to the final price
it is anticipated that there will be surplus assets when the scheme
finally winds up in 2022. These assets are recognised as a
retirement benefit asset. This asset has been recognised at
management's estimate of the value of surplus that will be returned
from the scheme to the Group (subject to tax at 35%). In December
2020 the Trustee made a partial refund of surplus to the Group of
GBP13.0m. At 30 June 2021 the retirement benefit asset amounted to
GBP18.2m (December 2020: GBP18.2m). It remains subject to certain
estimates and assumptions made at the balance sheet date which
could lead the overall surplus available to change.
On 30 June 2021 the Group commenced wind-up of the FPC pension
scheme in North America. The wind-up of this scheme is expected to
be complete by 31 December 2021. At the half year the FPC scheme
has an estimated deficit of $9.7m which is the expected cost of
wind-up.
Schemes currently in an accounting surplus position total
GBP18.9m (December 2020: GBP19.0m) and schemes currently in an
accounting deficit position total GBP35.4m (December 2020:
GBP38.8m).
10. Net debt
At 30 June At 31 December
2021 2020
GBPm GBPm
----------- ---------------
Current
----------- ---------------
Cash and cash equivalents in the Consolidated
Balance Sheet1 1,562.4 2,225.6
----------- ---------------
Other investments 172.1 172.2
----------- ---------------
Fair value of debt-related derivatives (12.8) 1.9
----------- ---------------
Bank and other short-term borrowings:
----------- ---------------
- Bank overdraft1 (1,174.5) (1,674.8)
----------- ---------------
- Bond debt2 (150.6) (156.5)
----------- ---------------
- Other overseas loans (11.9) (10.8)
----------- ---------------
- Bond accrual (7.7) (4.5)
----------- ---------------
Lease liabilities (74.4) (72.7)
----------------------------------------------- ----------- ---------------
302.6 480.4
----------------------------------------------- ----------- ---------------
Non-current
----------- ---------------
Fair value of debt-related derivatives (2.5) 4.7
----------- ---------------
Bank and other long-term borrowings:
----------- ---------------
- Bond debt (1,278.5) (1,331.3)
----------- ---------------
- Other overseas loans (1.6) (6.3)
----------- ---------------
Lease liabilities (134.5) (141.8)
----------------------------------------------- ----------- ---------------
(1,417.1) (1,474.7)
----------------------------------------------- ----------- ---------------
Total net debt (1,114.5) (994.3)
----------------------------------------------- ----------- ---------------
1. Cash and cash equivalents in the Consolidated Cash Flow
Statement consists of cash and cash equivalents in the Consolidated
Balance Sheet and bank overdraft.
2. Short-term bond debt was settled on 7 July 2021.
Fair value is equal to carrying value for all elements of net
debt with the exception of bond debt which has a carrying value of
GBP1,429.1m (December 2020: GBP1,487.8m) and a fair value of
GBP1,463.1m (December 2020: GBP1,537.3m). No further disclosures
are required by IFRS 7.29(a).
Cash at bank and in hand includes GBP8.4m (December 2020:
GBP6.7m) of restricted cash. This cash is held in respect of
specific contracts and can only be utilised in line with terms
under the contractual arrangements.
11. Bank and other borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are classified as current
liabilities unless the Group has a continuing right to defer
settlement of the liability for at least 12 months after the
balance sheet date.
The Group operates notional pooling arrangements whereby cash
balances and overdrafts held within the same bank have a legal
right of offset meaning that balances classified as cash and cash
equivalents and bank overdrafts may cause offsetting movements in
the balance sheet.
The Group's bank debt comprises:
Drawn Interest
Facility at rate at
30 June 30 June
amount 2021 Headroom 2021
GBPm GBPm GBPm %
--------- --------- --------- ---------
Non-current
--------- --------- --------- ---------
GBP550m RCF due August 2025 550.0 - 550.0 0.14%
------------------------------ --------- --------- --------- ---------
Average cost of bank debt at
period end rates 0.14%
------------------------------ --------- --------- --------- ---------
The Group has a committed GBP550m revolving credit facility
(RCF) which is available for cash drawings up to GBP550m. The
maturity date is August 2025. As at 30 June 2021 the facility was
undrawn (2020: GBPnil).
The Group's short-term bond debt comprises:
Effective
Bond interest hedged interest
coupon rate
-------------- -----------------
Current
-------------- -----------------
EUR175m bond due October 2021 Fixed 3.25% Fixed 3.47%
------------------------------ -------------- -----------------
On 11 June 2021 the Group gave notice to bond holders under the
EUR175m bond due 7 October 2021 that it would exercise its par call
option. The remaining bonds were repaid on 7 July 2021.
The Group's medium-term notes and bond debt comprises:
Effective
Bond interest hedged interest
coupon rate
--------------- -----------------
Non-current
--------------- -----------------
EUR400m bond due November 2024 Fixed 0.95% Fixed 3.08%
--------------- -----------------
EUR500m bond due May 2026 Fixed 0.875% Fixed 1.50%
--------------- -----------------
EUR600m bond due October 2028 Fixed 0.50% Fixed 0.62%
----------------------------------------- --------------- -----------------
Average cost of bond debt at period end
rates 1.60%
---------------------------------------------------------- -----------------
The effective interest rate reflects the interest rate after the
impact of cross currency interest rate swaps.
LIBOR reform
The Group is currently undertaking an exercise to update its RCF
to be compliant with the cessation of GBP LIBOR by the end of 2021
and USD LIBOR subsequent to that. The Group is also in the process
of completing ISDA fallback agreements with its interest rate swap
counterparties, which will be completed in time for the
deadlines.
12. Derivative financial instruments
The Group uses derivative financial instruments in support of
its hedging strategy which is to hold debt in proportion to the
Group profit and cash flow which are mainly EUR and USD.
For all financial instruments held by the Group, those that are
held at fair value are to be classified by reference to the source
of inputs used to derive the fair value. The following hierarchy is
used:
Level 1 - unadjusted quoted prices in active markets for
identical assets or liabilities;
Level 2 - inputs other than quoted prices that are observable
for the asset or liability either directly as prices or indirectly
through modelling based on prices; and
Level 3 - inputs for the asset or liability that are not based
on observable market data.
Hierarchy
Financial instrument level Valuation method
---------- ------------------------------------
Financial assets traded 1 Current bid price
in active markets
---------- ------------------------------------
Financial liabilities traded 1 Current ask price
in active markets
---------- ------------------------------------
Listed bonds 1 Quoted market prices
---------- ------------------------------------
Money market funds 1 Quoted market prices or dealer
quotes for similar instruments
---------- ------------------------------------
Interest rate/currency 2 Discounted cash flow based on
swaps market swap rates
---------- ------------------------------------
Forward foreign exchange 2 Forward exchange market rates
contracts
---------- ------------------------------------
Metal hedging options and 2 Discounted cash flow using quoted
non-deliverable forwards market prices and forward interest
rates
---------- ------------------------------------
Borrowings not traded in 2 Nominal value
active markets (term loans
and uncommitted facilities)
---------- ------------------------------------
Money market deposits 2 Nominal value
---------- ------------------------------------
Trade payables and receivables 2 Nominal value less estimated
credit adjustments
---------- ------------------------------------
Provisions 2 Discounted cash flow using market
bond rates
---------- ------------------------------------
Contingent consideration 3 Discounted cash flow using WACC
(including put option liability)
---------------------------------- ---------- ------------------------------------
No financial instruments have moved between levels in the
period.
Fair value Fair value Fair value Fair value
assets assets liabilities liabilities1
30 June 31 December 30 June 31 December
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
----------- -------------- ------------- --------------
Interest rate swaps (level
2):
----------- -------------- ------------- --------------
- non-hedge - - (0.8) (0.7)
----------- -------------- ------------- --------------
- cash flow hedge (14.1) - (7.0) (8.3)
----------- -------------- ------------- --------------
- net investment hedge 36.2 37.0 (16.8) (23.3)
----------- -------------- ------------- --------------
Foreign exchange swaps
(level 2):
----------- -------------- ------------- --------------
- non-hedge 0.9 4.2 (13.3) (3.5)
----------- -------------- ------------- --------------
- net investment hedge - 1.2 (0.3) -
----------- -------------- ------------- --------------
Metal hedging options
and non-deliverable forwards
(level 2):
----------- -------------- ------------- --------------
- non-hedge 0.1 0.2 (0.2) -
------------------------------- ----------- -------------- ------------- --------------
23.1 42.6 (38.4) (35.8)
------------------------------- ----------- -------------- ------------- --------------
Analysed as follows:
----------- -------------- ------------- --------------
Current portion 1.0 5.6 (13.8) (3.5)
----------- -------------- ------------- --------------
Non-current portion 22.1 37.0 (24.6) (32.3)
------------------------------- ----------- -------------- ------------- --------------
Derivative financial
instruments 23.1 42.6 (38.4) (35.8)
------------------------------- ----------- -------------- ------------- --------------
Contingent consideration
(including put option
liability) (level 3)1 - - (68.1) (62.8)
------------------------------- ----------- -------------- ------------- --------------
Other payables (non-current) - - (68.1) (62.8)
------------------------------- ----------- -------------- ------------- --------------
1. Fair value liabilities have been restated in 2020 to correct
the omission of contingent consideration.
The assumptions that are made in estimating the value of the put
option liability are option price and discount rate. A 5% reduction
in the estimated option price would result in a GBP1.7m decrease in
the liability, and a 100 basis point decrease in the discount rate
would result in a GBP1.3m increase in the liability. All gains and
losses relating to the put option are recognised in OCI.
Given the volume of acquisitions and the variety of inputs to
the valuation of contingent consideration (depending on each
transaction) there is not considered to be any change in input that
would have a material impact on the contingent consideration
liability.
Contingent
consideration
30 June
2021 GBPm
---------------
At 1 January 62.8
---------------
Exchange differences (0.3)
---------------
Acquisitions 11.6
---------------
Payments (6.4)
---------------
Revaluation of put option through equity 0.4
-------------------------------------------- ---------------
68.1
------------------------------------------ ---------------
Fair value is equal to carrying value for all other trade and
other payables.
13. Events occurring after the balance sheet date
With effect from 2 August 2021 the Group purchased Boecker World
Holding SAL, a leading pest control and environmental health
business in the Middle East, with acquired annualised revenues in
the year prior to purchase of c.GBP37m.
On 7 July 2021 the Group exercised its par call option over the
remaining EUR175m bond due on 7 October 2021.
There were no other significant events occurring after the
balance sheet date.
14. Alternative performance measures
Definitions and reconciliation of non-GAAP measures to GAAP
measures
The Group uses a number of measures to present the financial
performance of the business that are not GAAP measures as defined
under IFRS. Management believes these measures provide valuable
additional information for users of the financial statements in
order to understand the underlying trading performance. The Group's
internal strategic planning process is also based on these measures
and they are used for incentive purposes. They should be viewed as
complements to, and not replacements for, the comparable GAAP
measures.
Constant exchange rates (CER)
Given the international nature of the Group's operations,
foreign exchange movements can have a significant impact on the
reported results of the Group when they are translated into
sterling (the functional reporting currency of the Group). In order
to help understand the underlying trading performance of the
business, often revenue and profit measures are presented at CER.
CER is calculated by translating current year reported numbers at
the full year average exchange rates for the prior year, in order
to give management and other users of the accounts better
visibility of underlying trading performance against the prior
period. The major exchange rates used are GBP/$ FY 2020 1.2951 and
GBP/EUR FY 2020 1.1315. Comparisons are to the six months ended 30
June 2020 (H1 2020) unless otherwise stated.
Ongoing Revenue and Ongoing Operating Profit
Ongoing Revenue and Ongoing Operating Profit represent the
performance of the continuing operations of the Group (including
acquisitions) after removing the effect of disposed or closed
businesses. Ongoing Operating Profit is an adjusted measure and is
presented before items including amortisation and impairment of
intangible assets (excluding computer software), one-off items and
net profit on disposal of businesses (see below for full
details).
Ongoing measures enable the users of the accounts to focus on
the performance of the businesses retained by the Group and that
will therefore contribute to the future performance. Ongoing
Revenue and Ongoing Operating Profit are presented at CER unless
otherwise stated. A reconciliation of Ongoing Revenue and Ongoing
Operating Profit measures to the equivalent GAAP measure is
provided in the table below and in the segmental analysis in Note
4.
Adjusted profit and earnings per share measures
Adjusted profit measures are used to give management and other
users of the accounts a clear understanding of the underlying
profitability of the business over time. Adjusted profit measures
are calculated by adding the following items back to the equivalent
GAAP profit measure:
-- Amortisation and impairment of intangible assets (excluding
computer software);
-- One-off items (operating and associates); and
-----------------------------------------------------------
-- Net interest adjustments.
-----------------------------------------------------------
Intangible assets (excluding computer software) are recognised
on the acquisition of businesses which, by their nature, can vary
by size and amount each year. As a result, amortisation of
intangibles is added back to assist with the understanding of the
underlying trading performance of the business and to allow
comparability across regions and categories.
One-off items are significant expenses or income that will have
a distortive impact on the underlying profitability of the Group.
Typical examples are costs related to the acquisition of businesses
(including aborted acquisitions), gain or loss on disposal or
closure of a business, material gains or losses on disposal of
fixed assets, adjustments to legacy property-related provisions
(vacant property and environmental liabilities), and payments or
receipts as a result of legal disputes.
Net interest adjustments are other non-cash gains and losses
that can cause material fluctuations and distort understanding of
the performance of the business such as net interest on pension
schemes and interest fair value adjustments. These adjustments are
made to aid year-on-year comparability.
Adjusted earnings per share is calculated by dividing adjusted
profit after tax from continuing operations attributable to equity
holders of the Company by the weighted average number of ordinary
shares in issue.
A reconciliation of non-GAAP measures to the comparable GAAP
equivalents is provided below at both AER and CER:
% change
-------- -------- -------- -------- ------------------
H1 2021 H1 2021 H1 2020 H1 2020
AER CER AER CER
GBPm GBPm GBPm GBPm AER CER
-------- -------- -------- -------- -------- --------
Ongoing Revenue 1,458.3 1,512.5 1,283.3 1,278.2 13.6 18.3
-------- -------- -------- -------- -------- --------
Revenue - disposed and closed
businesses 4.4 4.5 7.7 7.8 (42.5) (42.2)
--------------------------------- -------- -------- -------- -------- -------- --------
Revenue 1,462.7 1,517.0 1,291.0 1,286.0 13.3 18.0
--------------------------------- -------- -------- -------- -------- -------- --------
Ongoing Operating Profit 208.4 215.9 138.8 139.0 50.1 55.4
-------- -------- -------- -------- -------- --------
Operating Profit - disposed
and closed businesses 0.2 0.2 0.2 0.2 4.5 3.9
-------- -------- -------- -------- -------- --------
Adjusted Operating Profit 208.6 216.1 139.0 139.2 50.1 55.3
-------- -------- -------- -------- -------- --------
One-off items - operating (10.9) (11.3) 4.5 4.4 (343.1) (357.5)
-------- -------- -------- -------- -------- --------
Amortisation and impairment
of intangible assets1 (37.1) (38.6) (43.0) (42.7) 14.0 9.6
--------------------------------- -------- -------- -------- -------- -------- --------
Operating profit 160.6 166.2 100.5 100.9 60.0 64.8
--------------------------------- -------- -------- -------- -------- -------- --------
Share of profit from associates
(net of tax) 4.5 4.9 4.3 4.3 4.4 13.7
-------- -------- -------- -------- -------- --------
Net adjusted interest payable (19.1) (19.8) (17.7) (17.7) (7.8) (12.2)
-------- -------- -------- -------- -------- --------
Net interest adjustments 2.8 2.7 (25.3) (25.0) 110.9 111.0
--------------------------------- -------- -------- -------- -------- -------- --------
Profit before tax 148.8 154.0 61.8 62.5 141.2 146.4
--------------------------------- -------- -------- -------- -------- -------- --------
Net interest adjustments (2.8) (2.7) 25.3 25.0 (110.9) (111.0)
-------- -------- -------- -------- -------- --------
One-off items - operating 10.9 11.3 (4.5) (4.4) 343.1 357.5
-------- -------- -------- -------- -------- --------
Amortisation and impairment
of intangible assets1 37.1 38.6 43.0 42.7 (14.0) (9.6)
--------------------------------- -------- -------- -------- -------- -------- --------
Adjusted profit before tax 194.0 201.2 125.6 125.8 54.5 60.0
--------------------------------- -------- -------- -------- -------- -------- --------
Basic earnings per share 6.42p 6.69p 2.54p 2.56p 153.1% 161.4%
-------- -------- -------- -------- -------- --------
Basic adjusted earnings per
share 8.31p 8.66p 5.30p 5.36p 56.7% 61.5%
--------------------------------- -------- -------- -------- -------- -------- --------
1. Excluding computer software.
Organic Revenue Measures
Acquisitions are a core part of the Group's growth strategy.
Organic Revenue growth measures are used to help understand the
underlying performance of the Group. Organic Revenue growth
represents the growth in Ongoing Revenue excluding the effect of
businesses acquired during the year. Acquired businesses are
included in organic measures in the year following acquisition, and
the comparative period is adjusted to include an estimated full
year performance for growth calculations (pro forma revenue).
UK and North
Europe ROW Asia America Pacific Total
------------ ------------- ------------ ------------- ------------ ---------------
GBPm % GBPm % GBPm % GBPm % GBPm % GBPm %
------------------------ ------ ---- ------ ----- ------ ---- ------ ----- ----- ----- -------- -----
2020 Ongoing
Revenue (as reported) 329.5 - 212.0 - 116.5 - 534.5 - 85.7 - 1,278.2 -
------ ---- ------ ----- ------ ---- ------ ----- ----- ----- -------- -----
Pro forma revenue
from 2020 and
2021 acquisitions 6.2 1.9 1.3 0.6 0.3 0.3 76.5 14.3 0.9 1.1 85.2 6.6
------ ---- ------ ----- ------ ---- ------ ----- ----- ----- -------- -----
Organic Revenue
growth 25.2 7.6 22.5 10.6 8.2 7.1 83.1 15.5 10.1 11.8 149.1 11.7
------------------------ ------ ---- ------ ----- ------ ---- ------ ----- ----- ----- -------- -----
2021 Ongoing
Revenue (as reported) 360.9 9.5 235.8 11.2 125.0 7.4 694.1 29.8 96.7 12.9 1,512.5 18.3
------------------------ ------ ---- ------ ----- ------ ---- ------ ----- ----- ----- -------- -----
Protect &
Pest Control Hygiene Enhance Total
--------------- ------------- ------------ ---------------
GBPm % GBPm % GBPm % GBPm %
------------------------ -------- ----- ------ ----- ------ ---- -------- -----
2020 Ongoing
Revenue (as reported) 822.4 - 293.9 - 161.9 - 1,278.2 -
-------- ----- ------ ----- ------ ---- -------- -----
Pro forma revenue
from 2020 and
2021 acquisitions 83.4 10.2 0.7 0.2 1.1 0.7 85.2 6.6
-------- ----- ------ ----- ------ ---- -------- -----
Organic Revenue
growth 70.1 8.5 72.8 24.8 6.2 3.9 149.1 11.7
------------------------ -------- ----- ------ ----- ------ ---- -------- -----
2021 Ongoing
Revenue (as reported) 975.9 18.7 367.4 25.0 169.2 4.6 1,512.5 18.3
------------------------ -------- ----- ------ ----- ------ ---- -------- -----
Regional Analysis
Ongoing Revenue Ongoing Operating Profit
------------------------------------ ----------------------------------
Change from Change from
H1 2021 HY 2020 H1 2021 HY 2020
----------------------- ------------------ ---------------- ---------------- ----------------
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
France 145.8 148.2 11.0 11.3 14.4 14.7 235.8 234.1
-------- -------- ------- ------- ------- ------- ------- -------
Benelux 46.3 47.1 1.8 2.1 12.9 13.1 4.0 4.4
-------- -------- ------- ------- ------- ------- ------- -------
Germany 58.5 59.6 5.6 6.2 18.3 18.7 7.3 7.9
-------- -------- ------- ------- ------- ------- ------- -------
Southern Europe 73.5 74.8 10.3 10.7 13.2 13.4 54.1 54.7
-------- -------- ------- ------- ------- ------- ------- -------
Latin America 30.3 31.2 12.2 17.4 3.7 3.6 57.8 51.3
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Total Europe 354.4 360.9 8.7 9.5 62.5 63.5 40.0 40.0
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
UK & Ireland 155.8 156.0 13.9 13.8 42.2 41.9 79.3 75.0
-------- -------- ------- ------- ------- ------- ------- -------
Rest of World 78.6 79.8 4.5 6.5 16.4 16.8 8.8 12.0
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
UK & Rest of
World 234.4 235.8 10.5 11.2 58.6 58.7 51.7 50.8
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Asia 119.2 125.0 1.3 7.4 12.8 13.5 8.0 14.6
-------- -------- ------- ------- ------- ------- ------- -------
North America 650.6 694.1 19.6 29.8 100.8 107.4 42.6 54.6
-------- -------- ------- ------- ------- ------- ------- -------
Pacific 99.7 96.7 19.1 12.9 20.5 19.9 30.6 23.9
-------- -------- ------- ------- ------- ------- ------- -------
Central and regional
overheads - - - - (42.9) (43.0) (14.4) (14.6)
-------- -------- ------- ------- ------- ------- ------- -------
Restructuring
costs - - - - (3.9) (4.1) 25.5 19.4
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Ongoing operations 1,458.3 1,512.5 13.6 18.3 208.4 215.9 50.1 55.4
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Disposed businesses 4.4 4.5 (42.5) (42.2) 0.2 0.2 4.5 3.9
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Continuing operations 1,462.7 1,517.0 13.3 18.0 208.6 216.1 50.1 55.3
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Category Analysis
Ongoing Revenue Ongoing Operating Profit
------------------------------------ ----------------------------------
Change from Change from
H1 2021 HY 2020 H1 2021 HY 2020
----------------------- ------------------ ---------------- ---------------- ----------------
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Pest Control 932.0 975.9 12.3 18.7 163.9 170.3 31.0 36.7
-------- -------- ------- ------- ------- ------- ------- -------
- Growth 811.9 849.9 13.0 19.3 148.8 154.6 29.4 34.9
-------- -------- ------- ------- ------- ------- ------- -------
- Emerging 120.1 126.0 7.7 14.6 15.1 15.7 49.6 57.2
-------- -------- ------- ------- ------- ------- ------- -------
Hygiene 360.5 367.4 23.2 25.0 77.1 78.6 56.7 59.9
-------- -------- ------- ------- ------- ------- ------- -------
- Core Hygiene 266.9 269.1 9.1 9.3
-------- -------- ------- ------- ------- ------- ------- -------
- Disinfection 93.6 98.3 94.7 105.9
-------- -------- ------- ------- ------- ------- ------- -------
Protect & Enhance 165.8 169.2 3.1 4.6 14.2 14.1 97.0 80.5
-------- -------- ------- ------- ------- ------- ------- -------
Central and regional
overheads - - - - (42.9) (43.0) (14.4) (14.6)
-------- -------- ------- ------- ------- ------- ------- -------
Restructuring
costs - - - - (3.9) (4.1) 25.5 19.4
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Ongoing operations 1,458.3 1,512.5 13.6 18.3 208.4 215.9 50.1 55.4
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Disposed businesses 4.4 4.5 (42.5) (42.2) 0.2 0.2 4.5 3.9
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Continuing operations 1,462.7 1,517.0 13.3 18.0 208.6 216.1 50.1 55.3
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Operating Margin
Operating Margin is calculated by dividing Ongoing Operating
Profit by Ongoing Revenue, expressed as a percentage. Net Operating
Margin by region and category is shown in the tables below:
H1 2021 H1 2020 Variance
% % % points
-------- -------- ----------
France 9.9 3.3 6.6
-------- -------- ----------
Benelux 27.9 27.3 0.6
-------- -------- ----------
Germany 31.3 30.8 0.5
-------- -------- ----------
Southern Europe 18.0 12.9 5.1
-------- -------- ----------
Latin America 11.7 9.0 2.7
------------------------ -------- -------- ----------
Total Europe 17.6 13.8 3.8
------------------------ -------- -------- ----------
UK & Ireland 26.9 17.5 9.4
-------- -------- ----------
Rest of World 21.1 20.0 1.1
------------------------ -------- -------- ----------
UK & Rest of World 24.9 18.4 6.5
------------------------ -------- -------- ----------
Asia 10.8 10.1 0.7
-------- -------- ----------
North America 15.5 13.0 2.5
-------- -------- ----------
Pacific 20.6 18.8 1.8
------------------------ -------- -------- ----------
Ongoing operations1 14.3 10.9 3.4
------------------------ -------- -------- ----------
Disposed businesses 4.8 2.6 2.2
------------------------ -------- -------- ----------
Continuing operations1 14.2 10.8 3.4
------------------------ -------- -------- ----------
H1 2021 H1 2020 Variance
% % % points
-------- -------- ----------
Pest Control 17.5 15.2 2.3
-------- -------- ----------
- Growth 18.2 16.1 2.1
-------- -------- ----------
- Emerging 12.5 9.1 3.4
-------- -------- ----------
Hygiene 21.4 16.7 4.7
-------- -------- ----------
Protect & Enhance 8.3 4.8 3.5
------------------------ -------- -------- ----------
Ongoing operations1 14.3 10.9 3.4
------------------------ -------- -------- ----------
Disposed businesses 4.8 2.6 2.2
------------------------ -------- -------- ----------
Continuing operations1 14.2 10.8 3.4
------------------------ -------- -------- ----------
1. Operating Margin for ongoing operations and continuing
operations is calculated after central and regional overheads and
restructuring costs.
Adjusted Interest
Adjusted interest is calculated by adjusting the reported
finance income and costs by the net interest on pensions and
interest fair value adjustments. In H1 2020 there was also an
adjustment for IFRS 16 interest which was removed from H2 2020
onwards.
H1 2021 H1 2020
AER AER
GBPm GBPm
-------- --------
Net finance costs (16.3) (43.0)
-------- --------
Net interest credit from pensions 0.1 0.1
-------- --------
Interest fair value adjustments (2.9) 24.1
-------- --------
IFRS 16 interest adjustment - 1.1
----------------------------------- -------- --------
Adjusted interest (19.1) (17.7)
----------------------------------- -------- --------
Free Cash Flow
The Group aims to generate sustainable cash flows (Free Cash
Flow) from its day to day operating activities to, inter alia,
support its acquisition programme and to fund dividend payments to
shareholders. Free cashflow is defined as "net cash from operating
activities" (in the consolidated cash flow statement on page 17)
adjusted for the net investments arising from the acquisition and
disposal of tangible and intangible fixed assets, and right of use
assets. The ongoing investment in these assets is considered by
management to be fundamental, over the medium and long term, to
delivering the day to day business that generates the operating
profits and associated cashflows of the Group. Free Cash Flow is
used to show a year to year consistent net operations driven cash
performance metric before Group acquisition, dividend and financing
activities A reconciliation of Free Cash Flow to "net cash from
operating activities" is provided in the table below:
H1 2021 H1 2020
AER AER
GBPm GBPm
-------- --------
Net cash from operating activities 331.8 240.8
-------- --------
Purchase of property, plant, equipment and
intangible fixed assets (71.6) (73.1)
-------- --------
Proceeds from sale of property, plant, equipment
and software 1.6 5.0
-------- --------
Net additions and disposals of ROU assets (39.8) (29.2)
-------------------------------------------------- -------- --------
Free Cash Flow 222.0 143.5
-------------------------------------------------- -------- --------
Free Cash Flow Conversion
Free Cash Flow Conversion is calculated by dividing Adjusted
Profit from continuing operations attributable to equity holders of
the Company by Adjusted Free Cash Flow, expressed as a percentage.
Adjusted Free Cash Flow is measured as Free Cash Flow adjusted for
one-off items - operating and product development additions.
H1 2021 H1 2020
AER AER
GBPm GBPm
-------- --------
Adjusted profit after tax from continuing
operations attributable to equity holders
of the Company 154.4 98.4
-------------------------------------------- -------- --------
Free Cash Flow from continuing operations 222.0 143.5
-------- --------
One-off items - operating(1) 9.0 4.7
-------- --------
Product development additions 2.7 2.3
-------------------------------------------- -------- --------
233.7 150.5
-------------------------------------------- -------- --------
Free Cash Flow Conversion 151.4% 152.9%
-------------------------------------------- -------- --------
1. Excludes GBPnil related to gain on sale and leaseback which
is already included in Free Cash Flow from continuing operations
(2020: GBP4.0m).
Effective Tax Rate
Effective Tax Rate is calculated by dividing adjusted income tax
expense by adjusted profit before income tax, expressed as a
percentage. The measure is used by management to assess the rate of
tax applied to the Group's adjusted profit before tax from
continuing operations.
H1 2021 H1 2020
AER AER
GBPm GBPm
-------- --------
Income tax expense 29.6 14.7
-------- --------
Tax adjustments on:
-------- --------
Amortisation and impairment of intangible
assets (excluding computer software) 9.1 8.4
-------- --------
One-off items - operating 1.4 (0.7)
-------- --------
Net interest adjustments (0.5) 4.8
------------------------------------------- -------- --------
Adjusted income tax expense (a) 39.6 27.2
-------- --------
Adjusted profit before income tax (b) 194.0 125.6
------------------------------------------- -------- --------
Effective Tax Rate (a/b) 20.4% 21.7%
------------------------------------------- -------- --------
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
- the condensed set of financial statements prepared in accordance
with IAS 34, 'Internal Financial Reporting', as adopted in
the UK (IAS 34), gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company and its subsidiaries included in the consolidation
as a whole as required by DTR 4.2.4R
- the interim management report includes a fair review of the
information required by:
------------------------------------------------------------------
-- DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have
occurred during the first six months of the financial
year and their impact on the condensed set of financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the year;
and
--------------------------------------------------------------
-- DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken
place in the first six months of the current financial
year and that have materially affected the financial position
or performance of the entity during that period; and any
changes in the related party transactions described in
the last annual report that could do so
--------------------------------------------------------------
By Order of the Board
Andy Ransom
Chief Executive
28 July 2021
The directors of Rentokil Initial plc are listed in the Rentokil
Initial plc Annual Report for 31 December 2020. A list of the
current directors is maintained on the Rentokil Initial website:
rentokil-initial.com
Independent review report to Rentokil Initial plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Rentokil Initial plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the half-yearly financial report of Rentokil Initial plc for the
6 month period ended 30 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2021;
-- the consolidated statement of profit or loss and other comprehensive
income for the period then ended;
-- the consolidated cash flow statement for the period then
ended;
-- the consolidated statement of changes in equity for the
period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report of Rentokil Initial plc have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly financial report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28 July 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BVLLLFDLXBBQ
(END) Dow Jones Newswires
July 29, 2021 02:00 ET (06:00 GMT)
Rentokil Initial (LSE:RTO)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Rentokil Initial (LSE:RTO)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024