TIDMRTO
RNS Number : 9955T
Rentokil Initial PLC
28 July 2022
2022 Interim Results
Excellent momentum continued in first half with strong revenue
growth and pricing fully offsetting inflation.
Performance supported by proven and resilient business
model.
Key milestones reached in Terminix transaction.
Financial Results* H1 2022 Growth
--------
GBPm AER AER CER
-------- ------ ------
Ongoing Revenue(1) 1,571.2 8.1% 5.6%
-------- ------ ------
Ongoing Revenue excluding disinfection(1) 1,557.4 14.7% 12.0%
-------- ------ ------
Ongoing Operating Profit 232.5 11.5% 9.6%
-------- ------ ------
Adjusted profit before tax 225.4 16.2% 14.7%
-------- ------ ------
Free Cash Flow 136.3
-------- ------ ------
Adjusted EPS 9.49p 14.1% 7.8%
-------- ------ ------
Statutory Results
-------- ------ ------
Revenue 1,572.1 8.1% 5.5%
-------- ------ ------
Operating Profit 169.7 5.6% 3.9%
-------- ------ ------
Profit before tax 161.9 8.8% 7.8%
-------- ------ ------
EPS 6.67p 4.0%
-------- ------ ------
Dividend per share 2.4p 15.0%
-------- ------ ------
2022 Interim Highlights (Unless otherwise stated, all figures
are presented at constant exchange rates and revenue growth figures
exclude the disinfection business).
-- Strong topline momentum continues: Ongoing Revenue excluding
disinfection up 12.0%, Organic Revenue 2 up 7.3%, driven
by strong demand for our business services and demonstrable
price progression. Total Revenue up 8.1% to GBP1,572.1m at
AER
- Ongoing Revenue including disinfection up 5.6%. GBP13.6m
revenues from disinfection, with substantial reduction
in the period as anticipated (H1 21: GBP95.3m)
---------------------------------------------------------------
- In North America Organic Revenue up 6.4% and Ongoing Revenue
excluding disinfection up 12.5%
-- Broad-based growth across business categories
- 12.1% Ongoing Revenue growth in Pest Control (5.6% Organic)
---------------------------------------------------------------
- 10.8% Ongoing Revenue (excluding disinfection) growth
in Hygiene & Wellbeing (10.0% Organic)
---------------------------------------------------------------
- 16.0% Ongoing Revenue growth in France Workwear (16.0%
Organic)
-- 9.6% growth in Ongoing Operating Profit including disinfection;
16.2% growth in Adjusted PBT (at AER)
- Continued strong price progression, accompanied by improved
customer retention of 85.4% (H1 21: 84.3%), fully offsetting
increased cost inflation
---------------------------------------------------------------
- Group Net Operating Margin up 60 bps year on year to 14.9%,
despite the anticipated reduction of disinfection business.
North American Net Operating Margin up 40 bps year on
year to 16.0%
---------------------------------------------------------------
- No material contribution from the release of Covid-related
prior year provisions
---------------------------------------------------------------
- Statutory profit before tax up 8.8% to GBP161.9m at AER
-- Free Cash Flow of GBP136.3m in H1 including GBP14.9m of one
off cashflows relating largely to Terminix transaction (88%
conversion)
-- Net debt to EBITDA ratio 2.2x (at 30 June 2022) largely due
to acquisition spend
-- Significant progress achieved towards closing of Terminix
transaction:
- US anti-trust condition satisfied; draft circular and
prospectus filed with the FCA; initial F-4 filed with
the SEC including completion of PCAOB audit uplift; and
Terminix's UK and Norway pest management businesses divested
---------------------------------------------------------------
- Successful issue in June of bonds totalling c.GBP1.6bn
and $700m term loan underpins transaction funding
-- Excellent ongoing M&A programme:
- 31 acquisitions in 17 countries in H1 2022 - 26 Pest,
5 Hygiene, including new market entry in Argentina
---------------------------------------------------------------
- Total annualised revenues in the year prior to purchase
of GBP68.4m for consideration of GBP159.6m
---------------------------------------------------------------
- Good pipeline of high-quality M&A. Guidance on targeted
spend (not including Terminix) in 2022 maintained at c.GBP250m
-- Leadership in innovation and technology sustained, including
an additional 25,000 digital PestConnect systems deployed
notwithstanding supply challenges in chip supply, and new
product launches to expand the core washroom and air care
portfolios
-- Declared interim dividend up 15% at 2.4p per share, in line
with our progressive dividend policy
Andy Ransom, CEO of Rentokil Initial plc, said:
"The business has evidenced excellent momentum in the first half
of the year with strong growth in Ongoing Revenue excluding
disinfection of 12.0% and Organic growth of 7.3%, driven by
momentum across our Pest Control and Hygiene & Wellbeing
businesses. We're delivering on our priorities: continued
outstanding customer service and investment in innovation and
digital, sustained high levels of customer and colleague retention,
excellent progress on integration planning for the Terminix
transaction, as well as strong delivery on our pipeline of other
quality M&A opportunities.
Significant progress was achieved toward closing of the Terminix
transaction. Deal completion remains on track for the second half
of 2022, with a target completion date at or around the end of the
third quarter, depending on the timing of completion of the reviews
of the circular and prospectus and the Form F-4 by the FCA and the
SEC respectively.
The nature of our business model remains a key determinant of
the strength and resilience of our performance. As a global
operation that benefits from highly defensive product and service
lines, the company is well placed to navigate macro-economic and
geopolitical volatility. In the first half, the topline has
sustained strong momentum. We've been successful in proactively
managing cost inflation through pricing to protect margin, while
continuing to drive margin improvements through delivery on our
strategy. In addition to delivering increased scale and density in
North America and leadership in the global pest control market, the
Terminix acquisition provides a significant opportunity to achieve
additional structural cost savings across the combined
organisation.
We look forward to delivering further good progress in the
second half of the year."
Enquiries:
Rentokil Initial
Investors / Analysts: Peter Russell plc 07795 166506
Rentokil Initial
Media: Malcolm Padley plc 07788 978199
---------------- ------------------ -------------
A presentation for investors and analysts will be held today, 28
July at 9.15am in the Bartholomew Suite Conference Room, The
Leonardo Royal Hotel, 45 Prescot Street, London E1 8GP. This will
be available via a live audio webcast at
www.rentokil-initial.com.
1. Ongoing Revenue excluding disinfection removes revenues from
disinfection, a short term revenue stream created in response to
the pandemic which has tapered as we exit the pandemic is used to
allow users of the statements to understand the trajectory of the
strategic segments of the Group without the distortion of this
short pandemic related revenue stream.
2. Organic Revenue growth represents the growth in Ongoing
Revenue excluding the effect of businesses acquired during the
year.
AER - actual exchange rates; CER - constant 2021 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 (including and excluding impact of Covid related
disinfection sales), Ongoing Operating Profit, Adjusted profit
before tax, Free Cash Flow and Adjusted Earnings per Share (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 future
performance. Ongoing Operating Profit and Adjusted profit before
tax exclude certain items that could distort the underlying trading
performance. 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 25.
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 Ongoing Revenue performance
(Includes disinfection business)
H1 2022 H1 2021 H1
GBPm GBPm % change
-------- -------- -----------
North America 656.1 642.7 2.1
------------------------------ -------- -------- -----------
France 162.9 147.3 10.6
-------- -------- -----------
Benelux 49.6 45.9 8.2
-------- -------- -----------
Germany 55.7 58.1 (4.1)
-------- -------- -----------
Southern Europe 75.2 72.8 3.4
-------- -------- -----------
Nordics 41.1 34.6 18.7
-------- -------- -----------
Latin America & Caribbean 55.4 45.4 21.9
------------------------------ -------- -------- -----------
Total Europe 439.9 404.1 8.9
------------------------------ -------- -------- -----------
UK, Ireland & Baltics 160.8 155.7 3.3
-------- -------- -----------
Sub Saharan Africa 20.3 20.1 0.6
------------------------------ -------- -------- -----------
UK & Sub-Saharan Africa 181.1 175.8 3.0
------------------------------ -------- -------- -----------
Asia & MENAT 147.1 129.6 13.5
-------- -------- -----------
Pacific 107.7 98.6 9.3
-------- -------- -----------
Central & regional overheads 2.5 2.1 15.2
------------------------------ -------- -------- -----------
Ongoing operations 1,534.4 1,452.9 5.6
------------------------------ -------- -------- -----------
Category analysis of Ongoing Revenue performance
H1 2022 H1 2021 H1
GBPm GBPm % change
-------- -------- -----------
Pest Control 1,049.0 935.7 12.1
-------- -------- -----------
- Growth 912.6 822.0 11.0
-------- -------- -----------
- Emerging 136.4 113.7 19.9
-------- -------- -----------
Hygiene & Wellbeing 391.3 436.1 (10.3)
-------- -------- -----------
- Core Hygiene & Wellbeing 377.7 340.8 10.8
-------- -------- -----------
- Disinfection 13.6 95.3 (85.7)
-------- -------- -----------
France Workwear 91.6 79.0 16.0
-------- -------- -----------
Central & regional overheads 2.5 2.1 15.2
------------------------------ -------- -------- -----------
Ongoing operations 1,534.4 1,452.9 5.6
------------------------------ -------- -------- -----------
In order to help understand the underlying trading performance,
unless otherwise stated, figures below are presented at constant
exchange rates and revenue growth figures exclude the disinfection
business.
The Group delivered strong momentum in revenue in H1, with
Ongoing Revenue excluding disinfection rising 12.0% (Q1: 12.2%, Q2:
11.9%) to GBP1,520.8m. Ongoing Revenue including disinfection
increased 5.6% to GBP1,534.4m with Total Revenue growing by 8.1% to
GBP1,572.1m at AER (up 5.5% at CER). Our North America, Europe and
Asia & MENAT businesses delivered double-digit growth in
Ongoing Revenue excluding disinfection. H1 growth in Ongoing
Revenue excluding disinfection was up 12.5% in North America, up
13.6% in Europe and up 15.5% in Asia & MENAT, despite some
impact from reintroduced lockdowns across parts of the region.
H1 revenues from one-time disinfection services amounted to
GBP13.6m, GBP8.8m of which was generated in Q1 and GBP4.8m in Q2 (a
reduction of around 86% on H1 2021). Sales of disinfection have
trended fully in line with our expectations and market guidance.
The impact of the anticipated reduction in disinfection was most
pronounced in the period in North America and Europe, where Ongoing
Revenue growth including disinfection was 2.1% and 8.9%
respectively. Full year Group revenues from disinfection are
anticipated to be in the region of GBP20m, in line with previous
guidance.
Our Pest Control category grew Ongoing Revenue by 12.1% (5.6%
Organic) to GBP1,049.0m, driven by strong price progression and
with good work volumes. Hygiene & Wellbeing Ongoing Revenue
excluding disinfection grew by 10.8% (10.0% Organic) to GBP377.7m
in H1 supported by strong demand for critical services. Ongoing
Revenue including disinfection was GBP391.3m. Improving market
conditions were reflected in the stronger contribution from our
France Workwear business, which overall is back to pre-Covid
levels. Ongoing Revenue in France Workwear rose by 16.0% to
GBP91.6m.
Profit (at CER)
Ongoing Operating Profit rose by 9.6% during the first half to
GBP228.1m, reflecting business growth across all major reporting
countries, regions and categories. This has resulted in a 60 basis
points increase year on year in Net Operating Margins to 14.9%
through our strategy of organic growth driving density improvements
and M&A integration delivering synergies. In managing pricing,
we have communicated input cost challenges carefully to our
customers, and there has been clear recognition of the need for the
financial effects to be passed through into customer prices. As a
consequence of good execution on strategy, Net Operating Margin for
Pest Control increased 40 basis points year on year to 18.1%.
Hygiene & Wellbeing Net Operating Margin was broadly flat at
19.7% (H1 2021: 19.8%). H1 restructuring costs of GBP4.6m at CER
(GBP4.8m at AER) were up GBP0.7m on the prior year (H1 21: GBP3.9m
at CER and AER) consisting mainly of costs in respect of
initiatives focused on our North America transformation
programme.
Adjusted profit before tax (at AER) of GBP225.4m, which excludes
the impact of one-off items and amortisation and impairment of
intangible assets (excluding computer software), increased by 16.2%
at AER, and reflects growth in all regions and categories. Adjusted
interest of GBP11.8m at actual exchange rates was significantly
lower year on year, due to a financing credit caused by the IAS29
hyperinflation restatement in Lebanon of GBP6.4m. One-off items
(operating) of GBP23.1m in H1 includes GBP19.0m related to the
Terminix acquisition and c.GBP4.0m related to other
acquisitions.
Statutory profit before tax from continuing operations at AER
was GBP161.9m, an increase of 8.8% (2021: GBP148.8m) on the prior
year.
Cash (at AER)
EBITDA was GBP17.3m higher in H1 22 at GBP326.7m. Operating cash
flow (GBP187.1m for continuing operations) was GBP72.9m lower than
in H1 2021. This reflects an elevated prior year performance, which
had a strong cleardown of the receivables ledger as we exited the
pandemic alongside the non-repeat of disinfection revenues in 2021
and an increase in working capital and capex during 2022. The Group
incurred a net working capital outflow of GBP15.1m in H1 2022.
Whilst we remain tightly focused on working capital management, in
the current macro-economic environment, the Group is working hard
with customers and suppliers to manage supply chain challenges. As
such, we invested in higher inventories, with cash outflows up
c.GBP22m relative to H1 2021 to provide confidence in our ability
to maintain supply to customers. In the first six months of the
year, the trend of collection of receivables has been strong, with
our collection rate by the end of June 2022 up 1.5% on the prior
year. Capital expenditure of GBP128.4m was incurred in the period
(H1 21: GBP112.7m), reflecting a more normal pattern of spend as we
exit the pandemic. Interest payments of GBP18.6m are GBP4.3m higher
than in the prior year. Cash tax payments for the period were
GBP32.2m, an increase of GBP7.2m compared with the corresponding
period last year. Free Cash Flow was GBP136.3m (H1 21: GBP220.7m),
with Free Cash Flow Conversion of 88% for the half year. Cash spend
on current and prior year acquisitions in H1 totalled
GBP127.4m.
On 25 February 2022, Rentokil Initial replaced its $2.7bn bridge
facility provided by Barclays with a $700m three-year term loan
facility provided by 15 banks and a $2bn bridge facility provided
by eight banks. Subsequently, during June 2022, in order to convert
the bridge facility into long-term debt, the Group successfully
priced three bonds: EUR850m 5-year at 3.875%; EUR600m 8-year at
4.375%; and GBP400m 10-year at 5.0%. At 30 June 2022, the proceeds
of the bond were held on deposit pending completion of the Terminix
transaction.
Acquisition of Terminix Global Holdings, Inc
Significant progress was achieved toward closing of the Terminix
transaction: US anti-trust condition was satisfied; Rentokil
Initial's draft circular and prospectus was filed with the
Financial Conduct Authority (FCA); the initial F-4 (and first
amendment to the F-4) was filed with the US Securities and Exchange
Commission (SEC) including completion of the PCAOB audit uplift;
and Terminix's UK and Norway pest management businesses were
successfully divested. In addition, integration planning was
substantially advanced by the two companies. Now that documentation
required to be presented to Rentokil Initial and Terminix
shareholders has been submitted to the FCA and the SEC
respectively, review by these regulators is underway. Once the
requisite regulatory reviews have been completed and the F-4 has
been declared effective by the SEC, Rentokil Initial and Terminix
will be in a position to put the transaction to their respective
shareholders. Deal completion remains on track for the second half
of 2022, with a target completion date at or around the end of the
third quarter, depending on the timing of completion of the reviews
of the circular and prospectus and the Form F-4 by the FCA and the
SEC respectively.
Financing for the transaction was further underpinned when on 27
June 2022, Rentokil Initial successfully priced three bonds raising
c.GBP1.6bn, converting its bridge facility into long term debt.
These bonds fully cover the $1.3bn cash element of the transaction
consideration. The balance of the bonds alongside the $700m three
year loan facility will cover the refinancing of Terminix debt and
transaction costs.
Regional performance review
Due to the international nature of the Group, foreign exchange
movements can have a significant impact on regional performance.
Unless otherwise stated, percentage movements in Ongoing Revenue
and Ongoing Operating Profit are presented at constant exchange
rates.
North America
In North America Ongoing Revenue excluding disinfection grew by
12.5% of which 6.4% was organic. As highlighted in our Preliminary
results in March, we are lapping strong disinfection revenues of
GBP60.8m from H1 2021. These considerably reduced in the first half
of the current year to just GBP1.2m, as Covid related market
conditions improved across the region. As such, Ongoing Revenue
including disinfection grew by 2.1%.
Ongoing Revenue in Pest Control grew by 12.0% (5.5% Organic),
underpinned by further improved price realisation. There was a
modest headwind in the period from unseasonably cold weather in
certain parts of the country in April which delayed the start of
the pest season. Our distribution business delivered good growth in
the half year despite ongoing supply chain challenges, which we've
taken steps to effectively mitigate by managing inventory levels to
maintain supply to customers.
Ongoing Operating Profit growth of 4.8% reflects the combined
impact from higher revenues and acquisitions, and the anticipated
reduction in disinfection business. Strong price realisation across
all channels has successfully offset expected inflationary
pressures. We continue to monitor fuel, labour and direct cost
inflation to adjust our pricing strategy on a regular basis. Net
Operating Margins in North America were up 40 basis points year on
year to 16.0%, despite the anticipated reduction in disinfection
business. We remain on track to deliver a 18% margin in North
America by the end of FY 2022.
As previously noted, in addition to operational leverage from
increased density, the re-platforming of our IT infrastructure is a
key factor for margin progression. We have now effectively
completed the migration of our core markets onto the new system
with the remainder being acquisitions that continue to be brought
over per the normal course of business. This consolidation delivers
cost benefits and allows us to deploy our Group applications more
effectively in the key areas of service, sales and customer
engagement.
Despite labour market pressures we maintained a good level of
colleague retention at more than 80%. We continued to make
investments in being an employer of choice as we readied our
workforce for peak season. We are seeing ongoing success with our
virtual recruiting events, with applicants per vacancy holding
steady or slightly improving.
Our North American M&A programme continued with the purchase
of 6 businesses with combined annualised revenues of around
GBP13.0m in the year prior to purchase. While suitably focused on
the Terminix transaction as we near close, we also look forward to
continued bolt-on M&A activity in the region in H2.
Europe (including Latin America & Caribbean)
The region overall have enjoyed strengthened performance,
underpinned by both pricing and volumes. Pest Control, which led
the early post-Covid recovery, sustained good growth. The strength
is notwithstanding some pockets of continued supply chain
disruption such as our German fumigation business that is still
impacted at port. In Hygiene & Wellbeing there has been
increased stabilisation of relationships across sectors, with
tourism, notably in southern Europe, catching up more incrementally
as the year proceeds. After an extended period of service
suspensions due to Covid, Hygiene & Wellbeing is back to
providing full contractual service terms in the majority of markets
in which it operates. Ambius, particularly in northern Europe, has
benefited from good sales of green products, partly offset by
slower recovery ramp ups in the hospitality market affecting
Specialist Hygiene and in our dental recycling business where the
lag from reduced dental visits during Covid is still affecting
collection volumes.
Improving market conditions were reflected in the stronger
contribution from our France Workwear business, which overall is
back to pre-Covid levels. A lag in recovery of the 'as-used'
business in the Paris region has been balanced elsewhere including
in regions where it had not previously been established.
Regional Ongoing Revenue grew by 13.6% (excluding disinfection)
in the first half of the year (9.6% organic). Including
disinfection, growth was 8.9% (5.1% organic). Ongoing Revenue
Growth in Pest Control was 14.4%. Our Hygiene & Wellbeing
operations grew Ongoing Revenue by 11.6% (excluding disinfection)
in the period. France Workwear Ongoing Revenue was up 16.0%.
While labour markets throughout the region remain tight,
colleague retention rates remain very high across the region at
mid-90% levels, with both service and sales colleagues trending
well. The business has had continued good results on senior hiring
and a renewed emphasis on regional recruitment. Temporary Covid
absences, which are on an improving trend, and a competitive
recruitment market have modestly impacted service and sales
capacity respectively in some markets. While there have been rising
inflationary pressures throughout the period, including on wages
rates, fuel and paper, we have been successful at protecting
margins with pass-through pricing covering the in-year cost
inflation in all categories.
Ongoing Operating Profit in the region grew by 16.3% to
GBP85.0m, supported by 61.2% growth in France, 28.3% growth in
Latin America & Caribbean and 16.0% growth in Benelux. Net
Operating Margins increased by 120 basis points to 19.3%. M&A
has continued strongly in the region, with targets delivered and a
strong ongoing pipeline balanced between Pest Control and Hygiene
& Wellbeing. The region completed 13 business acquisitions in
the first half of the year (equalling the number of deals in FY
2021) with annualised revenues of GBP41.5m in the year prior to
purchase. These acquisitions helped the business become the market
leader in Spain and Poland.
UK & Sub-Saharan Africa
The region delivered a resilient trading performance against
strong comparators in the prior year, which provided strong growth
opportunities in both the medical waste and disinfection business
streams. The universal lifting of restrictions and end of the mass
testing regime have meant these lines of business have slowed
significantly, as anticipated, into Q2.
Ongoing Revenue excluding disinfection for the region increased
by 5.6% (5.6% Organic). Pest Control grew by 4.5%, while Hygiene
& Wellbeing (excluding disinfection) grew by 8.4%. Regional
Ongoing Operating Profit decreased by 0.5% to GBP46.4m in H1 driven
by the non repeat of bad debt provision release in the previous
year, causing Net Operating Margins to fall by 90 basis points to
25.6%. Regional cash performance has been strong in H1, with debtor
days outstanding at pre-pandemic levels and with no significant
escalation in bad debt or customer insolvencies.
Hygiene operations (including Washrooms, Medical and Specialist
Hygiene) delivered good revenue growth despite the roll back of
Medical Testing programmes. Our UK Property Care business also
posted a solid performance in H1, benefiting from recovery in the
commercial property market, though slightly dampened by domestic
property services, where growth has slowed in recent months in line
with the housing market. Our Ambius business has delivered an
improving performance reflecting ongoing easing of restrictions in
hospitality, office and travel sectors.
The UK labour market has faced well publicised labour shortages
with knock-on service challenges across the economy. Our sustained
investment in colleagues and services mean that these have stood up
well despite the challenging environment. Colleague retention has
strengthened significantly on the second half of last year up by
400 basis points to 82%, while the state of service - our core
input service indicator - is now back in excess of pre pandemic
levels. Customer Voice Counts (CVC) - our key service satisfaction
output measure - has returned to its pre pandemic level. The net
result of this colleague and service focus is that customer
retention at 86.5% is now above pre pandemic levels leading to
strong portfolio growth in the period.
Inflationary pressures have been significant but the region's
long-established pricing and margin management systems, process and
controls have delivered a price performance that mitigates these
cost increases, and in H1 has not been margin dilutive. The region
paid an above UK wage average increase for front line colleagues,
but this was underpinned by further changes in working practices
and processes to link this payment to efficiency and productivity
as well as offering significant working flexibility.
Asia and MENAT
Regional Ongoing Revenue excluding disinfection rose by 15.5% in
H1, of which 8.3% was Organic. Ongoing Operating Profit increased
by 17.2%.
In general, the Asia region has delivered an improving
performance during H1, with an overall uplift in revenue
performance from Q4 2021 into the current year. Sectors hardest hit
from the pandemic such as hospitality, retail and offices, have
been resuming operations leading to a gradual recovery in demand
for service provision in Pest Control and Hygiene. Sales of our air
purification solutions are also getting traction in key markets of
Indonesia and Malaysia. Due to new strict Covid lockdowns in the
period, China and Hong Kong have countered the trend, with
operations in these markets severely curtailed driving a spike in
temporary customer suspensions. In addition, as expected, after an
ongoing good contribution into Q1, disinfection sales unwound
markedly across most of the region from the beginning of Q2.
Key markets opening up has supported improved contract
conversion and price increases flowing to margin. Net Operating
Margins for the Asia and MENAT region was up 40 basis points to
14.0%. We have made good progress on price increases, with notably
strong execution in Indonesia serving as a model for other
countries. Price realisation is more challenged in some other
markets and for customers experiencing ongoing problems from the
pandemic.
Service colleague retention has improved on the prior year, with
sales colleague retention at pre-Covid levels, improving on a
monthly basis. Asia acquired 7 businesses in H1 with annualised
revenues in the year prior to purchase of GBP9.8m.
Pacific
Performance in the Pacific continues to strengthen. In general,
there has been increased demand for our services throughout the
region with the progressive reopening of markets, international
travel and return to offices. In Hygiene & Wellbeing, there has
been momentum in portfolio growth due to robust gross sales and
strong customer retention. The region has seen sustained demand for
our range of air hygiene solutions, including Viruskiller that was
launched in Australia and New Zealand in the second half of last
year. In Pest Control, the continued strong demand in commercial
has been supported by a rebound in residential. The performance has
been despite some adverse impact from the inclement weather along
Australia's eastern seaboard as well as some reduced capacity from
tightness in the labour market and enforced isolation due to
Covid.
Ongoing Revenue excluding disinfection in the Pacific grew by
9.8% (5.3% organic growth), with growth in Hygiene & Wellbeing
(excluding disinfection) of 11.1% and Pest Control growth of 8.2%.
Regional Ongoing Operating Profit grew by 15.8% to GBP23.5m and Net
Operating Margins rose by 120 basis points to 21.8%. The region
acquired 4 Pest Control businesses in the period, one in New
Zealand and three in Australia, with annualised revenues in the
year prior to purchase of GBP4.0m.
Overall customer retention for the region remained ahead of
expectations. Labour markets remain tight with restricted supply
exerting some pressure on retention in Pest Control. However, we
remain focused on attracting and retaining the right people across
all categories to enable us to maintain service excellence. The
region continues to mitigate input cost inflation through our
normal pricing policy and ability to pass on costs to existing and
new customers.
Category performance review
Pest Control
Our Pest Control business overall has delivered good growth in
the first six months of the year, underpinned by the critical
nature of its services. Ongoing Revenue was up by 12.1% (5.6%
Organic) to GBP1,049.0m. Ongoing Revenue in Growth markets was up
11.0% to GBP912.6m and in Emerging markets was up 19.9% to
GBP136.4m. Ongoing Operating Profit was up by 14.8% to GBP189.8m.
Ongoing Operating Profit in Growth markets was up 14.1% to
GBP172.5m and in Emerging markets was up 22.8% to GBP17.3m.
Performance has been supported by both pricing and volumes, led by
the Commercial Pest Control business. Strength in the Pest Control
category is notwithstanding some pockets of disruption that have
been impacted by supply chain limitations, protracted lockdown and
other Covid-related constraints.
M&A has continued to be strong this year, and we have
acquired 26 pest control businesses for the half year to 30 June,
with annualised revenues in the year prior to acquisition of
c.GBP64.9m.
Innovation and Technology
The Company's investment in innovation and technology continue
to drive profitable growth in the business. It 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, enhance
our ability to up-sell additional products and service lines and
support customer retention, while lowering our operating costs and
enhancing our sustainability credentials. To the broader backdrop
of a current investment pipeline of 50+ projects across major pest
sectors, we've driven more initiatives in recent months:
-- Building on last year's growing demand for PestConnect, the first half
of 2022 has seen further roll-out of the PestConnect system notwithstanding
supply challenges in chip supply. This provides a real-time, early
warning digital system for monitoring and controlling rodents. There
are now more than 262,000 devices in operation (up 25,000 in six months)
across nearly 15,000 sites.
-- The Company's Lumnia range of commercial fly control products continue
to gain in popularity. Lumnia's innovative LED insect light traps (ILTs)
are the modern solution to an age-old problem, attracting and containing
flying insects quickly and securely and keeping them out of sight.
In the last 12 months more than 100,000 Lumnia units were sold. Partnering
with Vodafone, Google, our North America and Asia colleagues we are
now developing a partner app for Lumnia, to improve the accuracy and
efficiency of counting flies and identifying trends using machine learning.
-- As part of its bird proofing, the Company introduced its latest intelligent
bird scare device, launching in 8 markets. The device has an intelligent
built-in system that recognises different bird species and identifies
the best scare tool from a broad range to deter each of them. It can
detect birds inside a radius of 250 metres.
-- Helping drive efficiency and opening new channels for US residential
customers, our pest control self-service portal now has more than 20,000
customers signed up. The 24/7 customer portal enables scheduling of
service visits, online payment of bills and viewing of documents. We've
taken this technology from concept to launch in the US in 5 months,
already saving more than 2200 call centre hours.
-- Working with Vodafone and Google we have conducted effective field
trials of our innovative connected cameras, which monitor premises
and identify pests with the use of AI technology. At 18 customer sites,
4,500 photos have been taken across 34,000 hours of monitoring. The
technology heralds faster control of pest problems and the removal
of unnecessary visits where no activity has taken place.
-- From the second half of the year, we plan to roll out globally our
Flexi Armour Rodent Proofing Range, which applies impenetrable barriers
to reduce the risk of rodent infestations to premises, while lessening
the need to use rodenticides and thus lowering the impact on wildlife.
Hygiene & Wellbeing
We previously announced the expansion of Hygiene into a larger
Hygiene & Wellbeing category from the start of the current
year, reflecting the growing significance of this market. To meet
enhanced expectations, Rentokil Initial offers a wide range of
services. In addition to core washroom hygiene, we're focused on
leveraging our expertise outside the washroom with specialist
hygiene services in air care and clinical waste management. We're
also improving the occupant experience throughout with premium
scenting, plants, air quality monitoring and green walls.
Hygiene & Wellbeing Ongoing Revenue excluding disinfection
grew by 10.8% (10.0% Organic) to GBP377.7m. Ongoing Revenue in
Hygiene Washrooms grew by 11.0% and Ongoing Revenue in
Premises/Enhanced Environments grew by 10.5%. Ongoing Revenue
including disinfection was GBP391.3m. Ongoing Operating Profit was
GBP77.1m. Our focus in 2022 is on protecting the existing customer
base whilst targeting new growth opportunities. A ramp up in
activity across service sectors such as offices, shops, schools and
hospitality has provided a tailwind to performance. As with Pest
Control, operations in parts of Asia were interrupted by lockdowns
into the current year. We have acquired 5 hygiene companies this
year with annualised revenues of c.GBP3.5m in the year prior to
purchase.
Last year's rapid deployment of disinfection services across 60
countries enabled us to generate GBP117.8m 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 did so typically to remain open during lockdown. As
expected, as these conditions significantly eased around the world,
there has been a large reduction in customers' need for these
one-time services.
Innovation and Technology
We see the main opportunities for growth in our Hygiene &
Wellbeing category as being core washrooms, premises hygiene,
including air care, and enhanced environments. Ongoing Revenue
growth in these core streams was 11.0%, while growth in premises
and enhanced environments was 10.5%. Helping execute on these
priorities and growth, another set of initiatives were implemented,
and milestones reached in the first half of the year:
Core Washroom Hygiene: Our Hygiene services for inside the
washroom provide a range of innovative products for creating safer
washrooms, including hand hygiene (soaps and driers), air care
(purification and scenting), in-cubicle (feminine hygiene units),
No-touch products and digital hygiene services. Customer sectors
range from public sector (schools, government buildings) and
facilities management through to hotels, bars & restaurants,
industrials and retail.
-- In the first half of the year, we successfully launched Luna Dry and
Luna Mini Dry products in Europe with strong initial product penetration.
This precedes a planned global rollout scheduled for H2. These feature
the very latest brushless motor technology, a hygienic HEPA 13 filter
and long-life performance to deliver a high-quality customer experience.
-- We have also continued to invest in our high-quality dispenser ranges
to add differentiation and build upsell. In H1 we significantly increased
usage of our Signature suite of units, with the Company installing
another c.150,000 units.
Premises Hygiene: In multiple environments, including offices,
kitchens and reception areas, the Company is able to provide
products such as air purification, hand sanitiser, surface hygiene
and specialist clinical waste management.
-- The Group has sustained its focus in the current year on the high-growth
air care market, already with a product range that features air purification,
air sterilisation and air scenting products. Over 11,000 air purification
units, including Viruskiller, have been installed over the last 12
months, with a 35% increase year on year in H1.
-- In the first half, we added a new air filtration product, Aeramax Pro
3, which was introduced in Europe. A wall-mounted or floor-standing
HEPA and carbon filter air purifier with allergy-friendly accreditation
the Aeramax Pro 3 is suitable for in and out of washrooms.
Rentokil Initial is extending its clean air and wellbeing
portfolio into air quality monitoring with data analysis and
actionable insights. Pilots have begun in Asia to assess and
benchmark the quality of air in customer premises and partnership
opportunities with third party solutions are being explored. We
plan to offer a 'total building approach' and add value through
healthy building assessments and associated service model.
MyInitial, Rentokil Initial's customer portal with 24/7 access
to service data continues to gain traction with more users,
features and enhanced security. Total registered users have now
reached over 100,000. In the period there has been a back-end
development focus to further strengthen the platform's security,
reliability and performance. New country-led features developed
include floor plans and recommendations, and waste management
services.
France Workwear
Improving market conditions were also reflected in the stronger
contribution from our France Workwear business, which overall is
back to pre-Covid levels. Ongoing Revenue rose by 16.0% to GBP91.6m
with Organic Revenue growth of 16.0%. Ongoing Operating Profit was
up by 122.5% to GBP13.4m. A lag in recovery of the 'as-used'
business in the Paris region (which is c.90% of 2019 levels in
Hotels, Restaurants and Catering 'HORECA') has been balanced
elsewhere including in regions where it had not previously been
established. France Workwear's state of service, a measure of
contracted performance, increased to 99.1%, while the average for
new customer implementation improved to 16 weeks in H1 2022 (H1 21:
21 weeks).
Continued strength of M&A
We have delivered further strong execution of M&A in the
first half, with 31 deals in H1, comprised of 26 in Pest Control
and 5 in Hygiene & Wellbeing. A total consideration of GBP159.6
m was paid for these acquired businesses with total annualised
revenues of GBP68.4m in the year prior to purchase. We have added 6
new businesses in North America during the period with the region
continuing to present good opportunities to build density in the
market. There was a good performance in Europe with 13 deals and
GBP41.5m revenues acquired. 7 acquisitions were made in Asia and
MENAT, which help double the size of our business in the
Philippines, with Manila being one of our 'cities of the future'. 4
acquisitions were made in the Pacific region. Based on our most
recent analysis, the Group's M&A programme continues to perform
at or above our required 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. Our pipeline of prospects remains strong and we
reiterate our guidance on spend on M&A for FY 2022 at
c.GBP250m.
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.
We are seeing good results from our ongoing recruitment
programme with more people than ever before applying to work for
the company. We continue to drive hiring activity, filling roles
due to turnover and growth, as well as filling seasonal roles.
The global labour market is very competitive, fuelled by
candidate shortages. Nevertheless, in H1 we have maintained our
overall Group colleague retention rate in the mid-eighties percent
range, although down by 1% on 2021, on a rolling 12-month basis. We
have seen a small increase in Service colleague turnover in the 12
months to June 2022, particularly with colleagues who have less
than six months service, while Sales colleague retention has been
unchanged. Total colleague retention in H1 remained stable. Our
performance on retention will be further supported in H2 with our
largest ever training and development 'Festival' for colleagues in
September this year.
Rentokil Initial has been recognised with the credential of a
top 25 UK apprenticeship employer 2022.
Financial review
Central and regional overheads
Central and regional overheads of GBP47.6m at CER (GBP48.4m at
AER) were up GBP2.1m on the prior year (H1 21: GBP45.5m at CER and
GBP45.3m at AER).
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 GBP4.6m at CER (GBP4.8m at AER) were
up GBP0.7m on the prior year (H1 21: GBP3.9m at CER and AER)
consisted mainly of costs in respect of initiatives focused on our
North America transformation programme, together with integration
costs of smaller acquisitions.
Interest (at AER)
Adjusted interest of GBP11.8m is lower year on year, due to a
financing credit caused by the IAS29 hyperinflation restatement in
Lebanon of GBP6.4m. Cash interest was GBP18.6m (H1 21:
GBP14.3m).
Tax
The income tax charge for the period at actual exchange rates
was GBP37.7m on the reported profit before tax of GBP161.9m. 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 H1 2022 at AER was 21.8% (2021: 20.4%). This compares
with a blended rate of tax, which is calculated on Adjusted Profit
before Tax, of 24% (2021: 24%).
Net debt and cash flow
Year to
Date
---------- ---------- ----------
H1 2022 H1 2021 Change
GBPm at actual exchange rates GBPm GBPm GBPm
---------- ---------- ----------
Adjusted Operating Profit 232.5 208.6 23.9
---------- ---------- ----------
One-off items - operating (23.1) (10.9) (12.2)
---------- ---------- ----------
Depreciation 113.7 108.1 5.6
---------- ---------- ----------
Other 3.6 3.6 -
---------- ---------- ----------
EBITDA 326.7 309.4 17.3
---------- ---------- ----------
Working capital (15.1) 63.6 (78.7)
---------- ---------- ----------
Movement on provisions 0.7 (1.9) 2.6
---------- ---------- ----------
Capex - additions (83.1) (71.6) (11.5)
---------- ---------- ----------
Capex - disposals 3.2 1.6 1.6
---------- ---------- ----------
Capital element of lease payments
and initial direct costs incurred (45.3) (41.1) (4.2)
---------- ---------- ----------
Operating cash flow 187.1 260.0 (72.9)
---------- ---------- ----------
Interest (18.6) (14.3) (4.3)
---------- ---------- ----------
Tax (32.2) (25.0) (7.2)
---------- ---------- ----------
Free Cash Flow 136.3 220.7 (84.4)
---------- ---------- ----------
Acquisitions (127.4) (254.7) 127.3
---------- ---------- ----------
Disposal of companies and businesses 0.4 - 0.4
---------- ---------- ----------
Dividends (79.6) (100.0) 20.4
---------- ---------- ----------
Cost of issuing new shares (13.0) - (13.0)
---------- ---------- ----------
Other - (1.1) 1.1
---------- ---------- ----------
Debt related cash flows
---------- ---------- ----------
Acquisition of shares from non-controlling
interest - (9.4) 9.4
---------- ---------- ----------
Cash outflow on settlement of
debt related foreign exchange
forward contracts 0.9 (1.8) 2.7
---------- ---------- ----------
Net investment in term deposits (2.1) 0.1 (2.2)
---------- ---------- ----------
Proceeds from new debt 1,743.8 1.5 1,742.3
---------- ---------- ----------
Debt repayments (136.2) (9.1) (127.1)
---------- ---------- ----------
Net debt related cash flows 1,606.4 (18.7) 1,625.1
---------- ---------- ----------
Net increase/(decrease) in cash
and cash equivalents 1,523.1 (153.8) 1,676.9
---------- ---------- ----------
Cash and cash equivalents at beginning
of the year 241.9 550.8 (308.9)
---------- ---------- ----------
Exchange gains/(losses) on cash
and cash equivalents 22.8 (9.1) 31.9
---------- ---------- ----------
Cash and cash equivalents at end
of the financial year 1,787.8 387.9 1,399.9
---------- ---------- ----------
Net increase/(decrease) in cash
and cash equivalents 1,523.1 (153.8) 1,676.9
---------- ---------- ----------
Net debt related cash flows (1,606.4) 18.7 (1,625.1)
---------- ---------- ----------
IFRS 16 lease liability movement 0.8 1.3 (0.5)
---------- ---------- ----------
Net debt acquired (0.7) (6.4) 5.7
---------- ---------- ----------
Foreign exchange translation and
other items (77.7) 23.2 (100.9)
---------- ---------- ----------
Increase in net debt (160.9) (117.0) (43.9)
---------- ---------- ----------
Opening net debt (1,284.7) (1,015.3) (269.4)
---------- ---------- ----------
Closing net debt (1,445.6) (1,132.3) (313.3)
---------- ---------- ----------
Operating cash flow (GBP187.1m for continuing operations) was
GBP72.9m lower than in H1 2021. This reflects an elevated prior
year performance, alongside an increase in working capital and
increased capex partially offset by higher EBITDA. The Group
incurred a net working capital outflow of GBP15.1m. In the current
macro-economic environment, the Group is working hard with
customers and suppliers to manage supply chain challenges. As such,
we invested in higher inventories, with cash outflows up GBP22m
relative to H1 2021 to provide confidence in our ability to
maintain supply to customers. Capital expenditure of GBP128.4m was
incurred in the period (H1 21: GBP112.7m), reflecting a more normal
pattern of spend as we exit the pandemic. Within free cash flow,
one off cash flows of GBP14.9m were incurred, mostly related to the
Terminix transaction. These cash flows are excluded from the
longstanding definition for cash flow conversion calculations.
Interest payments of GBP18.6m are GBP4.3m higher than in the
prior year. Cash tax payments for the period were GBP32.2m, an
increase of GBP7.2m compared with the corresponding period last
year. Free Cash Flow was GBP136.3m (H1 21: GBP220.7m), with Free
Cash Flow Conversion of 88% for the half.
Cash spend on current and prior year acquisitions in H1 of
GBP127.4m, dividend payments of GBP79.6m and the cost of issuing
new shares of GBP13.0m have contributed to an underlying change in
net debt of GBP83.2m. Foreign exchange translation and other items
of GBP77.7m is primarily due to the strengthening of the Dollar
against sterling. Overall, this led to a change in net debt of
GBP160.9m and closing net debt of GBP1,445.6m.
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. Please see note 2 to the supporting financial statements for
further information.
Funding
On 25 February 2022, Rentokil Initial replaced its $2.7bn bridge
facility provided by Barclays with a $700m three-year term loan
facility provided by 15 banks and a $2bn bridge facility provided
by eight banks. Subsequently, during June 2022, in order to convert
the bridge facility into long-term debt, the Group successfully
priced three bonds: EUR850m 5-year at 3.875%; EUR600m 8-year at
4.375%; and GBP400m 10-year at 5.0%. These bonds fully cover the
$1.3bn cash element of the transaction consideration. The balance
of the bonds alongside the $700m three year loan facility will
cover the refinancing of Terminix debt and transaction costs.
In addition, the Group entered into a GBP120m uncommitted RCF
facility with ING Bank N.V. which was drawn down in full and repaid
during the period. This facility was cancelled on 30 June 2022
As at 30 June, the Group had liquidity headroom in excess of
GBP2,328m, including both the bond funding raised for the Terminix
transaction and the GBP550m of undrawn RCF, with a maturity date of
August 2025. The net debt to EBITDA ratio was 2.2x at 30 June 2022.
We remain committed to maintaining a BBB investment grade credit
rating and are confident of doing so.
Dividend
In view of our performance in the first half of 2022 and our
confidence for H2, the Board is declaring an interim dividend
payment of 2.4p, a 15.0% increase on H1 2021, payable to
shareholders on the register at the close of business on 5 August
2022 and to be paid on 12 September 2022. The last day for DRIP
elections is 19 August 2022.
Outlook
The nature of our business model remains a key determinant of
the strength and resilience of our performance. As a global
operation that benefits from highly defensive product and service
lines, the company is well placed to navigate macro-economic and
geopolitical volatility. In the first half, the topline has
sustained excellent momentum. We've been successful in proactively
managing cost inflation through pricing to protect margin, while
continuing to drive margin improvements through delivery on our
strategy. In addition to delivering increased scale and density in
North America and leadership in the global pest control market, the
Terminix acquisition provides a significant opportunity to achieve
additional structural cost savings across the combined
organisation.
We look forward to delivering further good progress in the
second half of the year.
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
2022 2021 (1)
Notes GBPm GBPm
------ ---------- ----------
Revenue(1) 4 1,572.1 1,454.7
------ ---------- ----------
Operating expenses(1) (1,402.4) (1,294.1)
---------------------------------------------- ------ ---------- ----------
Operating profit 169.7 160.6
------ ---------- ----------
Finance income 7.0 1.7
------ ---------- ----------
Finance cost (19.5) (18.0)
------ ---------- ----------
Share of profit from associates, net
of tax of GBP2.1m (2021: GBP1.9m) 4.7 4.5
---------------------------------------------- ------ ---------- ----------
Profit before income tax 161.9 148.8
------ ---------- ----------
Income tax expense(2) (37.7) (29.6)
---------------------------------------------- ------ ---------- ----------
Profit for the period attributable
to the Company's equity holders (including
non-controlling interests of GBPnil
(2021: GBPnil)) 124.2 119.2
---------------------------------------------- ------ ---------- ----------
Other comprehensive income:
------ ---------- ----------
Items that are not reclassified subsequently
to the income statement:
---------- ----------
Re-measurement of net defined benefit
asset (1.9) 1.1
------ ---------- ----------
Tax related to items taken to other
comprehensive income (2.7) (0.3)
------ ---------- ----------
Items that may be reclassified subsequently
to the income statement:
---------- ----------
Net exchange adjustments offset in
reserves 214.1 (37.9)
------ ---------- ----------
Net (loss)/gain on net investment hedge (66.0) 25.2
------ ---------- ----------
Cost of hedging 4.4 (2.0)
------ ---------- ----------
Effective portion of changes in fair
value of cash flow hedge (6.6) 4.6
---------------------------------------------- ------ ---------- ----------
Other comprehensive income for the
period 141.3 (9.3)
---------------------------------------------- ------ ---------- ----------
Total comprehensive income for the
period (including non-controlling interests
of GBPnil (2021: GBPnil)) 265.5 109.9
---------------------------------------------- ------ ---------- ----------
Earnings per share attributable to
the Company's equity holders:
------ ---------- ----------
Basic 6.67p 6.42p
---------------------------------------------- ------ ---------- ----------
Diluted 6.65p 6.39p
---------------------------------------------- ------ ---------- ----------
1. Revenue and operating expenses have been restated in 2021 to
reflect a correction in presentation in relation to certain sales
contracts where the Group acts as agent. Both revenue and operating
expenses have been restated by GBP8.0m. For these contracts,
revenue is presented on a net basis.
2. Taxation includes GBP26.5m (HY 2021: GBP28.5m) in respect of
overseas taxation.
The weighted average number of ordinary shares in issue is
1,860m (HY 2021: 1,857m). For the diluted EPS calculation the
adjustment for share options and LTIPs is 6.1m (HY 2021: 6.2m).
Consolidated balance sheet (unaudited)
At 30 June At 31 December
2022 2021
Notes GBPm GBPm
------ ----------- ---------------
Assets
------ ----------- ---------------
Non-current assets
------ ----------- ---------------
Intangible assets 2,499.0 2,164.3
------ ----------- ---------------
Property, plant and equipment 428.6 398.1
------ ----------- ---------------
Right-of-use assets 242.8 227.5
------ ----------- ---------------
Investments in associated undertakings 32.2 29.7
------ ----------- ---------------
Other investments 0.3 0.2
------ ----------- ---------------
Deferred tax assets 43.7 41.6
------ ----------- ---------------
Contract costs 82.6 75.0
------ ----------- ---------------
Retirement benefit assets 9 2.6 19.0
------ ----------- ---------------
Other receivables 15.6 14.3
------ ----------- ---------------
Derivative financial instruments 12 6.2 9.8
---------------------------------------- ------ ----------- ---------------
3,353.6 2,979.5
---------------------------------------- ------ ----------- ---------------
Current assets
------ ----------- ---------------
Retirement benefit assets 9 18.2 -
------ ----------- ---------------
Other investments 3.7 1.6
------ ----------- ---------------
Inventories 172.4 135.7
------ ----------- ---------------
Trade and other receivables 609.9 526.9
------ ----------- ---------------
Current tax assets 9.3 8.5
------ ----------- ---------------
Derivative financial instruments 12 2.0 2.5
------ ----------- ---------------
Cash and cash equivalents 2,371.1 668.4
---------------------------------------- ------ ----------- ---------------
3,186.6 1,343.6
---------------------------------------- ------ ----------- ---------------
Liabilities
------ ----------- ---------------
Current liabilities
------ ----------- ---------------
Trade and other payables (905.3) (764.0)
------ ----------- ---------------
Current tax liabilities (78.0) (60.5)
------ ----------- ---------------
Provisions for liabilities and charges (27.3) (27.0)
------ ----------- ---------------
Bank and other short-term borrowings 10 (607.2) (459.3)
------ ----------- ---------------
Lease liabilities (80.3) (77.8)
------ ----------- ---------------
Derivative financial instruments 12 (0.2) (1.0)
---------------------------------------- ------ ----------- ---------------
(1,698.3) (1,389.6)
---------------------------------------- ------ ----------- ---------------
Net current assets/(liabilities) 1,488.3 (46.0)
---------------------------------------- ------ ----------- ---------------
Non-current liabilities
------ ----------- ---------------
Other payables(1) (64.4) (71.5)
------ ----------- ---------------
Bank and other long-term borrowings 10 (2,918.2) (1,256.1)
------ ----------- ---------------
Lease liabilities (149.7) (139.2)
------ ----------- ---------------
Deferred tax liabilities (128.0) (108.1)
------ ----------- ---------------
Retirement benefit obligations 9 (31.6) (27.3)
------ ----------- ---------------
Provisions for liabilities and charges (38.8) (33.9)
------ ----------- ---------------
Derivative financial instruments 12 (73.0) (33.5)
---------------------------------------- ------ ----------- ---------------
(3,403.7) (1,669.6)
---------------------------------------- ------ ----------- ---------------
Net assets 1,438.2 1,263.9
---------------------------------------- ------ ----------- ---------------
Equity
------ ----------- ---------------
Capital and reserves attributable
to the company's equity holders
------ ----------- ---------------
Share capital 18.6 18.6
------ ----------- ---------------
Share premium 6.8 6.8
------ ----------- ---------------
Other reserves (1,781.7) (1,927.6)
------ ----------- ---------------
Retained profits 3,195.0 3,166.6
---------------------------------------- ------ ----------- ---------------
1,438.7 1,264.4
------ ----------- ---------------
Non-controlling interests (0.5) (0.5)
---------------------------------------- ------ ----------- ---------------
Total equity 1,438.2 1,263.9
---------------------------------------- ------ ----------- ---------------
1. Non-current other payables includes GBP42.8m put option
liability related to the PCI India acquisition (2021:
GBP41.8m).
Consolidated statement of changes in equity (unaudited)
Called Share
up share premium Other Retained Non-controlling Total
capital account reserves earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
---------- --------- ---------- ---------- ---------------- --------
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 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 on cash flow
hedge(1) - - 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
-------------------------------- ---------- --------- ---------- ---------- ---------------- --------
At 1 January 2022 18.6 6.8 (1,927.6) 3,166.6 (0.5) 1,263.9
-------------------------------- ---------- --------- ---------- ---------- ---------------- --------
Profit for the period - - - 124.2 - 124.2
---------- --------- ---------- ---------- ---------------- --------
Other comprehensive
income:
---------- --------- ---------- ---------- ---------------- --------
Net exchange adjustments
offset in reserves - - 214.1 - - 214.1
---------- --------- ---------- ---------- ---------------- --------
Net loss on net investment
hedge - - (66.0) - - (66.0)
---------- --------- ---------- ---------- ---------------- --------
Cost of hedging - - 4.4 - - 4.4
---------- --------- ---------- ---------- ---------------- --------
Remeasurement of net
defined benefit asset - - - (1.9) - (1.9)
---------- --------- ---------- ---------- ---------------- --------
Net loss on cash flow
hedge(1) - - (6.6) - - (6.6)
---------- --------- ---------- ---------- ---------------- --------
Tax related to items
taken directly to other
comprehensive income - - - (2.7) - (2.7)
-------------------------------- ---------- --------- ---------- ---------- ---------------- --------
Total comprehensive
income for the period - - 145.9 119.6 - 265.5
---------- --------- ---------- ---------- ---------------- --------
Transactions with owners:
---------- --------- ---------- ---------- ---------------- --------
Cost of issuing new
shares - - - (13.0) - (13.0)
---------- --------- ---------- ---------- ---------------- --------
Dividends paid to equity
shareholders - - - (79.6) - (79.6)
---------- --------- ---------- ---------- ---------------- --------
Cost of equity-settled
share-based payment
plans - - - 4.7 - 4.7
---------- --------- ---------- ---------- ---------------- --------
Tax related to items
taken directly to equity - - - (4.3) - (4.3)
---------- --------- ---------- ---------- ---------------- --------
Movement in the carrying
value of put options - - - 1.0 - 1.0
-------------------------------- ---------- --------- ---------- ---------- ---------------- --------
At 30 June 2022 18.6 6.8 (1,781.7) 3,195.0 (0.5) 1,438.2
-------------------------------- ---------- --------- ---------- ---------- ---------------- --------
1. GBP6.6m net loss on cash flow hedge includes GBP7.2m gain
(2021: GBP13.0m loss) from the effective portion of changes in fair
value offset by reclassification to the income statement of
GBP13.8m gain (2021: GBP17.6m loss) due to changes in foreign
exchange rates.
Shares of GBP0.1m (2020: GBP0.1m) have been netted against
retained earnings. This represents 12.3m (HY 2021: 10.3m) shares
held by the Rentokil Initial Employee Share Trust. The market value
of these shares at 30 June 2022 was GBP58.4m (HY 2021: GBP51.0m).
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 reserve of hedging Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------- --------- --------- ------------ ------------ ----------
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 on net investment
hedge - - - 25.2 - 25.2
----------- --------- --------- ------------ ------------ ----------
Net gain on cash flow
hedge(1) - - 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)
---------------------------- ----------- --------- --------- ------------ ------------ ----------
At 1 January 2022 (1,722.7) - 8.8 (211.2) (2.5) (1,927.6)
---------------------------- ----------- --------- --------- ------------ ------------ ----------
Net exchange adjustments
offset in reserves - - - 214.1 - 214.1
----------- --------- --------- ------------ ------------ ----------
Net loss on net investment
hedge - - - (66.0) - (66.0)
----------- --------- --------- ------------ ------------ ----------
Net loss on cash flow
hedge(1) - - (6.6) - - (6.6)
----------- --------- --------- ------------ ------------ ----------
Cost of hedging - - - - 4.4 4.4
---------------------------- ----------- --------- --------- ------------ ------------ ----------
Total comprehensive
income for the period - - (6.6) 148.1 4.4 145.9
---------------------------- ----------- --------- --------- ------------ ------------ ----------
At 30 June 2022 (1,722.7) - 2.2 (63.1) 1.9 (1,781.7)
---------------------------- ----------- --------- --------- ------------ ------------ ----------
1. GBP6.6m net loss on cash flow hedge includes GBP7.2m gain
(2021: GBP13.0m loss) from the effective portion of changes in fair
value offset by reclassification to the income statement of
GBP13.8m gain (2021: GBP17.6m loss) due to changes in foreign
exchange rates.
Consolidated cash flow statement (unaudited)
6 months 6 months
to to
30 June 30 June
2022 2021
Notes GBPm GBPm
------ --------- ---------
Profit for the period 124.2 119.2
------ --------- ---------
Adjustments for:
------ --------- ---------
- Tax 37.7 29.6
------ --------- ---------
- Share of profit from associates (4.7) (4.5)
------ --------- ---------
- Interest income (7.0) (1.7)
------ --------- ---------
- Interest expense 19.5 18.0
------ --------- ---------
Reversal of non-cash items:
------ --------- ---------
- Depreciation and impairment of property,
plant and equipment 105.1 100.6
------ --------- ---------
- Amortisation and impairment of intangible
assets(1) 39.7 37.1
------ --------- ---------
- Amortisation of computer software 8.6 7.5
------ --------- ---------
- Other non-cash items 3.2 3.6
------ --------- ---------
Changes in working capital (excluding
the effects of acquisitions and exchange
differences on consolidation):
------ --------- ---------
- Inventories (21.7) (1.4)
------ --------- ---------
- Contract costs (2.5) 0.2
------ --------- ---------
- Trade and other receivables (57.1) 22.6
------ --------- ---------
- Contract assets 7.1 6.6
------ --------- ---------
- Trade and other payables and provisions 46.8 24.5
------ --------- ---------
- Contract liabilities 13.0 9.2
---------------------------------------------- ------ --------- ---------
Cash generated from operating activities 311.9 371.1
------ --------- ---------
Interest received 2.3 1.8
------ --------- ---------
Interest paid(2) (20.9) (16.1)
------ --------- ---------
Income tax paid (32.2) (25.0)
---------------------------------------------- ------ --------- ---------
Net cash generated from operating activities 261.1 331.8
---------------------------------------------- ------ --------- ---------
Cash flows from investing activities
------ --------- ---------
Purchase of property, plant and equipment (67.9) (59.1)
------ --------- ---------
Purchase of intangible fixed assets (15.2) (12.5)
------ --------- ---------
Proceeds from sale of property, plant
and equipment 3.2 1.6
------ --------- ---------
Acquisition of companies and businesses,
net of cash acquired 6 (127.4) (254.7)
------ --------- ---------
Disposal of companies and businesses 0.4 -
------ --------- ---------
Dividends received from associates 0.4 -
------ --------- ---------
Net change to cash flow from investment
in term deposits (2.1) 0.1
---------------------------------------------- ------ --------- ---------
Net cash flows from investing activities (208.6) (324.6)
---------------------------------------------- ------ --------- ---------
Cash flows from financing activities
------ --------- ---------
Dividends paid to equity shareholders (79.6) (100.0)
------ --------- ---------
Acquisition of shares from non-controlling
interest - (9.4)
------ --------- ---------
Capital element of lease payments (45.3) (42.2)
------ --------- ---------
Cost of issuing new shares (13.0) -
------ --------- ---------
Cash inflow/(outflow) on settlement
of debt related foreign exchange forward
contracts 0.9 (1.8)
------ --------- ---------
Proceeds from new debt 1,743.8 1.5
------ --------- ---------
Debt repayments (136.2) (9.1)
---------------------------------------------- ------ --------- ---------
Net cash flows from financing activities 1,470.6 (161.0)
---------------------------------------------- ------ --------- ---------
Net increase/(decrease) in cash and
cash equivalents 1,523.1 (153.8)
------ --------- ---------
Cash and cash equivalents at beginning
of year 241.9 550.8
------ --------- ---------
Exchange gains/(losses) on cash and
cash equivalents 22.8 (9.1)
---------------------------------------------- ------ --------- ---------
Cash and cash equivalents at end of
the financial period 1,787.8 387.9
---------------------------------------------- ------ --------- ---------
1. Excluding computer software.
2. Interest paid includes interest on lease payments of GBP3.3m
(2021: GBP3.1m).
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 2022 was approved on 27 July 2022 for issue on
28 July 2022.
On page 108 of the Annual Report 2021 we set out the Group's
approach to risk management and on pages 73 to 79 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 2021. A summary of the risks
is laid out in the table below:
Principal risk Summary of risk
-----------------------------------------
Failure to integrate acquisitions The Company has a strategy that
and execute disposals from continuing includes growth by acquisition,
business and has acquired 31 businesses
in H1 2022. These companies need
to be integrated quickly and
efficiently to minimise potential
impact on the acquired business
and the existing business.
-----------------------------------------
Failure to develop products The Company operates across markets
and services that are tailored that are at different stages
and relevant to local markets in the economic cycle, at varying
and market conditions stages 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 grow our business The Company's two core categories
profitably in a changing (Pest Control and Hygiene & Wellbeing
macro-economic environment since January 2022) operate in
a global macro-economic environment
that is subject to uncertainty
and volatility.
-----------------------------------------
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.
-----------------------------------------
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 ensure business continuity The business needs to have resilience
in case of a material incident to ensure business can continue
if impacted by external events,
e.g. cyber attack, hurricane
or terrorism.
-----------------------------------------
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 colleagues,
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.
-----------------------------------------
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.
--------------------------------------- -----------------------------------------
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
2021. 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 2021 results please refer to the
Annual Report 2021 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 2021 which have
been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
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 for a 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 eighteen 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.
In addition the Directors have considered the incremental
impacts of a failed Terminix transaction. This would potentially
include the payment of committed deal costs and a break fee.
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 2022 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.
There are no significant judgements or key sources of estimation
uncertainty made by management in applying the Group's accounting
policies.
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 2021. 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 2022.
A number of new standards are effective from 1 January 2022 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 2022:
- Property, Plant and Equipment: Proceeds before Intended Use
- Amendments to IAS 16
- Onerous Contracts - Cost of Fulfilling a Contract - Amendments
to IAS 37
--------------------------------------------------------------
- Annual Improvements to IFRS Standards 2018-2020
--------------------------------------------------------------
- Reference to the Conceptual Framework - Amendments to IFRS
3.
--------------------------------------------------------------
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 2021 or
30 June 2021. 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.
From 1 January 2022 there has been a change to the regional and
category reporting structure. This updated reporting structure is
reflected in the tables below.
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.
Revenue Operating Operating
Revenue 30 June profit profit
30 June 2021 30 June 30 June
2022 (1) 2022 2021
GBPm GBPm GBPm GBPm
--------- --------- ---------- ----------
North America(1) 693.9 637.7 110.9 99.3
--------------------------------------- --------- --------- ---------- ----------
France 159.6 148.7 22.8 14.6
--------- --------- ---------- ----------
Benelux 48.6 46.3 14.5 12.9
--------- --------- ---------- ----------
Germany 54.9 58.5 16.4 18.3
--------- --------- ---------- ----------
Southern Europe 73.8 73.5 12.8 13.2
--------- --------- ---------- ----------
Nordics 40.4 34.9 6.7 6.5
--------- --------- ---------- ----------
Latin America & Caribbean 56.6 46.0 10.3 8.3
--------------------------------------- --------- --------- ---------- ----------
Europe 433.9 407.9 83.5 73.8
--------------------------------------- --------- --------- ---------- ----------
UK, Ireland & Baltics 160.5 155.8 42.0 42.0
--------- --------- ---------- ----------
Sub-Saharan Africa 20.5 20.3 4.3 4.6
--------------------------------------- --------- --------- ---------- ----------
UK & Sub-Saharan Africa 181.0 176.1 46.3 46.6
--------------------------------------- --------- --------- ---------- ----------
Asia & MENAT 151.3 129.5 21.3 17.6
--------- --------- ---------- ----------
Pacific 108.6 99.7 23.7 20.5
--------- --------- ---------- ----------
Central and regional overheads 2.5 2.1 (48.4) (45.3)
--------- --------- ---------- ----------
Restructuring costs - - (4.8) (3.9)
--------------------------------------- --------- --------- ---------- ----------
Ongoing operations at actual exchange
rates 1,571.2 1,453.0 232.5 208.6
--------- --------- ---------- ----------
Disposed businesses(2) 0.9 1.7 - -
--------------------------------------- --------- --------- ---------- ----------
Continuing operations at actual
exchange rates 1,572.1 1,454.7 232.5 208.6
--------- --------- ---------- ----------
One-off items - operating (23.1) (10.9)
--------- --------- ---------- ----------
Amortisation of intangible assets(3) (39.8) (37.1)
--------------------------------------- --------- --------- ---------- ----------
Operating profit 169.6 160.6
--------------------------------------- --------- --------- ---------- ----------
1. Revenue has been restated by GBP8.0m in 2021 to reflect a
correction in presentation in relation to certain sales contracts
where the Group acts as agent.
2. Includes revenue of GBP0.9m (2021: GBP1.5m) from product
sales by the Group to CWS-boco International GmbH.
3. Excluding computer software.
One-off items
One-off items - operating is a charge of GBP23.1m (2021:
GBP10.9m) which mainly relates to acquisition and integration
costs, GBP19.0m of which relates to the Terminix acquisition.
Analysis of revenue by business category
Revenue Revenue
30 June 30 June
2022 2021 (1)
GBPm GBPm
--------- ----------
Pest Control 1,086.4 933.4
--------- ----------
Hygiene & Wellbeing 392.5 437.8
--------- ----------
France Workwear 89.8 79.7
--------- ----------
Central & regional overheads 2.5 2.1
--------- ----------
Disposed businesses 0.9 1.7
------------------------------ --------- ----------
Total 1,572.1 1,454.7
------------------------------ --------- ----------
1. Revenue has been restated by GBP8.0m in 2021 to reflect a
correction in presentation in relation to certain sales contracts
where the Group acts as agent.
Analysis of revenue by type
Revenue Revenue
30 June 30 June
2022 2021 (1)
GBPm GBPm
--------- ----------
Recognised over time
--------- ----------
Contract service revenue 1,110.2 973.6
--------- ----------
Recognised at a point in time
--------- ----------
Job work 288.5 330.1
--------- ----------
Sale of goods 173.4 151.0
------------------------------- --------- ----------
Total 1,572.1 1,454.7
------------------------------- --------- ----------
1. Revenue has been restated by GBP8.0m in 2021 to reflect a
correction in presentation in relation to certain sales contracts
where the Group acts as agent.
Amortisation and impairment of intangible assets
Amortisation Amortisation
and impairment and impairment
of intangibles(1) of intangibles(1)
30 June 30 June
2022 2021
GBPm GBPm
------------------- -------------------
North America 19.9 16.7
------------------- -------------------
Europe 7.2 6.7
------------------- -------------------
UK & Sub-Saharan Africa 3.8 4.3
------------------- -------------------
Asia & MENAT 4.6 3.7
------------------- -------------------
Pacific 1.9 1.9
------------------- -------------------
Central and regional 2.4 3.8
------------------------- ------------------- -------------------
Total 39.8 37.1
------------------------- ------------------- -------------------
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
2022 2021
GBPm GBPm
--------- ---------
UK corporation tax at 19.0% (2021: 19.0%) 9.4 8.1
--------- ---------
Overseas taxation 40.1 28.5
--------- ---------
Adjustments in respect of prior periods (2.0) (3.6)
------------------------------------------- --------- ---------
Total current tax 47.5 33.0
------------------------------------------- --------- ---------
Deferred tax (credit)/expense (9.7) 0.9
--------- ---------
Adjustments from change in tax rates - (3.8)
--------- ---------
Adjustments in respect of prior periods - (0.5)
------------------------------------------- --------- ---------
Total deferred tax (9.7) (3.4)
------------------------------------------- --------- ---------
Total income tax expense 37.8 29.6
------------------------------------------- --------- ---------
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 2022 using rates substantively enacted
by 30 June 2022. 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 23.2% (H1 2021: 19.9%).
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 21.8% (H1 2021:
20.4%). This compares with a blended rate of tax for the countries
in which the Group operates of 24% (H1 2021: 24%).
Legislation has been enacted to increase the standard rate of UK
corporation tax from 19% to 25% from 1 April 2023. As a result
deferred tax balances have been calculated at 19% or 25% depending
upon when the balance is expected to unwind.
On 20 July 2022, HM Treasury released draft Pillar 2 legislation
that would commence from 1 January 2024. We are reviewing this
draft legislation to understand the potential impact on the
Group.
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 GBP56.7m as at 30 June 2022 (December 2021: GBP57.2m).
Included within this amount is GBP11.3m (December 2021: GBP11.5m)
in respect of interest arising on tax provisions which is included
in other payables.
Total tax payments for the period amounted to GBP32.2m (2021:
GBP25.0m), an increase of GBP7.2m.
The movement on the deferred income tax account is as
follows:
6 months 6 months
to to
30 June 30 June
2022 2021
GBPm GBPm
--------- ---------
At 1 January (66.5) (57.0)
--------- ---------
Exchange differences (7.3) 2.1
--------- ---------
Acquisition of companies and businesses (15.6) (3.5)
--------- ---------
Credited to the income statement 9.7 3.4
--------- ---------
Charged to other comprehensive income (0.3) (0.3)
--------- ---------
(Charged)/credited to equity (4.3) 1.2
---------------------------------------------- --------- ---------
At 30 June (84.3) (54.1)
---------------------------------------------- --------- ---------
Deferred taxation has been presented on
the balance sheet as follows:
--------- ---------
Deferred tax asset within non-current assets 43.7 36.5
--------- ---------
Deferred tax liability within non-current
liabilities (128.0) (90.6)
---------------------------------------------- --------- ---------
(84.3) (54.1)
---------------------------------------------- --------- ---------
A deferred tax asset of GBP8.2m has been recognised in respect
of UK losses (December 2021: GBP12.4m) carried forward at 30 June
2022. 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
GBP34.6m have not been recognised as at 30 June 2022 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 GBP67.0m
(December 2021: GBP81.6m) 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 31 companies and businesses in the period. 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 GBP159.6m. Details of goodwill and the fair value
of net assets acquired are as follows:
6 months 6 months
to to
30 June 30 June
2022 2021
GBPm GBPm
--------- ---------
Purchase consideration:
--------- ---------
- Cash paid 115.5 69.2
--------- ---------
- Deferred and contingent consideration 44.1 18.8
------------------------------------------- --------- ---------
Total purchase consideration 159.6 88.0
--------- ---------
Fair value of net assets acquired (72.9) (30.8)
------------------------------------------- --------- ---------
Goodwill from current period acquisitions 86.7 57.2
------------------------------------------- --------- ---------
Goodwill represents the synergies, workforce and other benefits
expected as a result of combining the respective businesses.
Deferred consideration of GBP17.2m and contingent consideration
of GBP26.9m 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 2022 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
2022 2021
GBPm GBPm
--------- ---------
Non-current assets
--------- ---------
- Intangible assets(1) 70.4 29.3
--------- ---------
- Property, plant and equipment 6.9 3.0
--------- ---------
Current assets 17.3 5.6
--------- ---------
Current liabilities (5.7) (3.2)
--------- ---------
Non-current liabilities (16.0) (3.9)
--------------------------------- --------- ---------
Net assets acquired 72.9 30.8
--------------------------------- --------- ---------
1. Includes GBP68.1m (2021: GBP29.2m) of customer lists and
GBP2.3m (2021: GBP0.1m) of other intangibles.
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 2022, these
acquisitions contributed GBP13.6m to revenue and GBP2.6m to
operating profit. If the acquisitions had occurred on 1 January
2022, the revenue and operating profit of the combined entity would
have amounted to GBP1,589.7m and GBP171.9m respectively.
In relation to prior period acquisitions, there has been an
adjustment to the provisional fair values resulting in an increase
to goodwill of GBP2.3m.
The Group paid GBP18.8m 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 GBP6.9m cash acquired, of GBP127.4m. In
addition the Group acquired GBP0.5m of lease liabilities and
GBP0.2m of loans bringing the movement on net debt from
acquisitions to GBP128.1m.
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 possible indicators of impairment. The
assessment included a review of internal and external factors that
have the potential to significantly reduce the CGU value. No
indicators of possible impairment have been identified as a result
of this assessment.
8. Dividends
6 months 6 months
to to
30 June 30 June Year to
2022 2021 31 December
GBPm GBPm 2021 GBPm
------------------------------------ --------- --------- -------------
2020 final dividend paid - 5.41p
per share - 100.0 100.0
------------------------------------ --------- --------- -------------
2021 interim dividend paid - 2.09p
per share - - 38.7
------------------------------------ --------- --------- -------------
2021 final dividend paid - 4.30
per share 79.1 - -
------------------------------------ --------- --------- -------------
79.1 100.0 138.7
------------------------------------ --------- --------- -------------
The directors have declared an interim dividend of 2.40p per
share amounting to GBP44.7m payable on 12 September 2022 to
shareholders on the register at close of business on 5 August 2022.
The last day for DRIP elections is 19 August 2022. The Company has
a progressive dividend policy and will consider the level of growth
for 2022 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.
Buy-out of the Group's principal scheme (the Rentokil Initial
2015 Pension Scheme in the United Kingdom ("the Scheme")) completed
on 24 February 2022, extinguishing a retirement benefit obligation
of GBP1,152.1m and the related insurance policy asset. At 30 June
2022 a retirement benefit asset relating to the Scheme remains on
the balance sheet amounting to GBP18.2m (December 2021: GBP18.2m).
This represents the surplus assets remaining in the Scheme that
will be distributed to the Group on wind up of the Scheme. It
remains subject to certain estimates and assumptions made at the
balance sheet date which could lead the overall surplus available
to change.
Schemes currently in an accounting surplus position total
GBP20.8m (December 2021: GBP19.0m) and schemes currently in an
accounting deficit position total GBP31.6m (December 2021:
GBP27.3m).
10. Net debt
At 30 June At 31 December
2022 2021
GBPm GBPm
----------- ---------------
Current
----------- ---------------
Cash and cash equivalents in the Consolidated
Balance Sheet(1) 2,371.1 668.4
----------- ---------------
Other investments 3.7 1.6
----------- ---------------
Fair value of debt-related derivatives(2) 1.8 1.5
----------- ---------------
Bank and other short-term borrowings: (607.2) (459.3)
----------- ---------------
Lease liabilities (80.3) (77.8)
----------------------------------------------- ----------- ---------------
1,689.1 134.4
----------------------------------------------- ----------- ---------------
Non-current
----------- ---------------
Fair value of debt-related derivatives(3) (66.8) (23.7)
----------- ---------------
Bank and other long-term borrowings: (2,918.2) (1,256.2)
----------- ---------------
Lease liabilities (149.7) (139.2)
----------------------------------------------- ----------- ---------------
(3,134.7) (1,419.1)
----------------------------------------------- ----------- ---------------
Total net debt (1,445.6) (1,284.7)
----------------------------------------------- ----------- ---------------
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. Current fair value of debt-related derivatives is the net
amount of current derivative financial assets and liabilities
included in the Consolidated Balance Sheet.
3. Non-current fair value of debt-related derivatives is the net
amount of non-current derivative financial assets and liabilities
included in the Consolidated Balance Sheet.
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
GBP2,915.8m (December 2021: GBP1,253.7m) and a fair value of
GBP2,842.3m (December 2021: GBP1,272.1m). No further disclosures
are required by IFRS 7.29(a).
Cash at bank and in hand includes GBP8.6m (December 2021:
GBP6.6m) 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's bank debt comprises:
Drawn Interest
Facility at rate at
30 June 30 June
amount 2022 Headroom 2022
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 2022 the facility was
undrawn (2021: GBPnil).
In addition the Group entered into a GBP120m uncommitted RCF
facility with ING Bank N.V. which was drawn down in full and repaid
during the period. This facility was cancelled on 30 June 2022.
During June 2022, the Group issued new bonds, denominated in EUR
and GBP, in three tranches to fund the cash settlement of the
acquisition price of Rentokil's takeover of Terminix Global
Holdings, Inc. ('Terminix').
The bonds contain call options that allow them to be redeemed
early by the Group. Management has performed analysis and concluded
that separation of the embedded derivatives within each bond is not
required (nor permissible). Each bond is required to be classified
in full at amortised cost.
Further information on the new financing arrangements can be
found on page 10 under the 'Funding' heading.
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 0.950% Fixed 2.973%
--------------- -----------------
EUR500m bond due May 2026 Fixed 0.875% Fixed 1.505%
--------------- -----------------
EUR850m bond due June 2027(1) Fixed 3.875% Fixed 3.963%
--------------- -----------------
EUR600m bond due October 2028 Fixed 0.500% Fixed 1.030%
--------------- -----------------
EUR600m bond due June 2030(1) Fixed 4.375% Fixed 4.375%
--------------- -----------------
GBP400m bond due June 2032(1) Fixed 5.000% Fixed 5.250%
----------------------------------------- --------------- -----------------
Average cost of bond debt at period end
rates 2.559%
---------------------------------------------------------- -----------------
1. Bond issued in June 2022.
The effective interest rate reflects the interest rate after the
impact of cross currency interest rate swaps.
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.
No financial instruments have moved between levels in the
period.
Hierarchy
Financial instrument level Valuation method
---------- ------------------------------------
Financial assets traded
in active markets 1 Current bid price
---------- ------------------------------------
Financial liabilities traded
in active markets 1 Current ask price
---------- ------------------------------------
Listed bonds 1 Quoted market prices
---------- ------------------------------------
Quoted market prices or dealer
Money market funds 1 quotes for similar instruments
---------- ------------------------------------
Interest rate/currency Discounted cash flow based on
swaps 2 market swap rates
---------- ------------------------------------
Forward foreign exchange
contracts 2 Forward exchange market rates
---------- ------------------------------------
Metal hedging options and Discounted cash flow using quoted
non-deliverable market prices and forward interest
forwards 2 rates
---------- ------------------------------------
Borrowings not traded in
active markets
(term loans and uncommitted
facilities) 2 Nominal value
---------- ------------------------------------
Money market deposits 2 Nominal value
---------- ------------------------------------
Nominal value less estimated
Trade payables and receivables 2 credit adjustments
---------- ------------------------------------
Contingent consideration
(including put
option liability) 3 Discounted cash flow using WACC
------------------------------- ---------- ------------------------------------
The Group entered into deal-contingent cross-currency swaps in
relation to the Terminix acquisition. These instruments were
executed on-market on 30 June 2022 and had an immaterial valuation
at the balance sheet date.
Fair value Fair value Fair value Fair value
assets assets liabilities liabilities
30 June 31 December 30 June 31 December
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
----------- ------------- ------------- -------------
Interest rate swaps (level
2):
----------- ------------- ------------- -------------
- non-hedge 0.2 - - (0.6)
----------- ------------- ------------- -------------
- cash flow hedge - - (14.8) (25.3)
----------- ------------- ------------- -------------
- net investment hedge 7.7 11.0 (58.2) (8.2)
----------- ------------- ------------- -------------
Foreign exchange swaps
(level 2):
----------- ------------- ------------- -------------
- non-hedge 0.2 1.3 (0.1) (0.4)
------------------------------- ----------- ------------- ------------- -------------
Metal hedging options
and non-deliverable forwards
(level 2):
----------- ------------- ------------- -------------
- non-hedge 0.1 - (0.1) -
------------------------------- ----------- ------------- ------------- -------------
8.2 12.3 (73.2) (34.5)
------------------------------- ----------- ------------- ------------- -------------
Analysed as follows:
Current portion 2.0 2.5 (0.2) (1.0)
Non-current portion 6.2 9.8 (73.0) (33.5)
------------------------------- ----------- ------------- ------------- -------------
Derivative financial
instruments 8.2 12.3 (73.2) (34.5)
------------------------------- ----------- ------------- ------------- -------------
Contingent consideration
(including put option
liability) (level 3) - - (90.2) (75.0)
------------------------------- ----------- ------------- ------------- -------------
Analysed as follows:
Current portion - - (46.8) (22.8)
Non-current portion - - (43.4) (52.2)
------------------------------- ----------- ------------- ------------- -------------
Other payables (non-current) - - (90.2) (75.0)
------------------------------- ----------- ------------- ------------- -------------
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 GBP2.1m decrease in
the liability, and a 100 basis point decrease in the discount rate
would result in a GBP1.2m 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 Contingent
consideration consideration
30 June 30 June
2022 2021
GBPm GBPm
--------------- ---------------
At 1 January 75.0 62.8
--------------- ---------------
Exchange differences 1.5 (0.3)
--------------- ---------------
Acquisitions 27.3 11.6
--------------- ---------------
Payments (12.6) (6.4)
--------------- ---------------
Revaluation of put option through equity (1.0) 0.4
------------------------------------------ --------------- ---------------
90.2 68.1
------------------------------------------ --------------- ---------------
Fair value is equal to carrying value for all other trade and
other payables.
13. Events occurring after the balance sheet date
There were no 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 2021 1.3739 and
GBP/EUR FY 2021 1.1617. Comparisons are to the six months ended 30
June 2021 (H1 2021) 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 H1 H1 H1
2022 2022 2021 2021
AER CER AER CER
GBPm GBPm GBPm GBPm AER CER
-------- -------- -------- -------- -------- --------
Ongoing Revenue 1,571.2 1,534.4 1,453.0 1,452.9 8.1 5.6
-------- -------- -------- -------- -------- --------
Revenue - disposed and closed
businesses 0.9 0.9 1.7 1.7 (47.3) (47.4)
--------------------------------- -------- -------- -------- -------- -------- --------
Revenue 1,572.1 1,535.3 1,454.7 1,454.6 8.1 5.5
--------------------------------- -------- -------- -------- -------- -------- --------
Ongoing Operating Profit 232.5 228.1 208.6 208.2 11.5 9.6
-------- -------- -------- -------- -------- --------
Operating Profit - disposed
and closed businesses - - - - - -
-------- -------- -------- -------- -------- --------
Adjusted Operating Profit 232.5 228.1 208.6 208.2 11.5 9.6
-------- -------- -------- -------- -------- --------
One-off items - operating (23.1) (22.9) (10.9) (10.9) (111.8) (110.5)
-------- -------- -------- -------- -------- --------
Amortisation and impairment
of intangible assets(1) (39.7) (38.7) (37.1) (37.1) (7.4) (4.3)
--------------------------------- -------- -------- -------- -------- -------- --------
Operating profit 169.7 166.5 160.6 160.2 5.6 3.9
--------------------------------- -------- -------- -------- -------- -------- --------
Share of profit from associates
(net of tax) 4.7 4.9 4.5 4.5 3.6 9.9
-------- -------- -------- -------- -------- --------
Net adjusted interest payable (11.8) (11.0) (19.1) (19.1) 38.4 42.5
-------- -------- -------- -------- -------- --------
Net interest adjustments (0.7) (0.5) 2.8 2.8 (123.0) (118.8)
--------------------------------- -------- -------- -------- -------- -------- --------
Profit before tax 161.9 159.9 148.8 148.4 8.8 7.8
--------------------------------- -------- -------- -------- -------- -------- --------
Net interest adjustments 0.7 0.5 (2.8) (2.8) 123.0 118.8
-------- -------- -------- -------- -------- --------
One-off items - operating 23.1 22.9 10.9 10.9 111.8 110.5
-------- -------- -------- -------- -------- --------
Amortisation and impairment
of intangible assets(1) 39.7 38.7 37.1 37.1 7.4 4.3
--------------------------------- -------- -------- -------- -------- -------- --------
Adjusted profit before tax 225.4 222.0 194.0 193.6 16.2 14.7
--------------------------------- -------- -------- -------- -------- -------- --------
Basic earnings per share 6.67p 6.57p 6.42p 6.69p
-------- -------- -------- -------- -------- --------
Basic adjusted earnings per
share 10.69p 10.49p 8.31p 8.66p
--------------------------------- -------- -------- -------- -------- -------- --------
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).
Pro forma
revenue
2021 from 2021
Ongoing and 2022 Organic 2022 Ongoing
Revenue acquisitions Revenue growth Revenue
-------- ------------------ -------------------- -----------------
GBPm GBPm % GBPm % GBPm %
------------------------- -------- ---------- ------ ---------- -------- ---------- -----
North America 642.7 35.5 5.5 (22.1) (3.4) 656.1 2.1
-------- ---------- ------ ---------- -------- ---------- -----
Europe 404.1 15.1 3.8 20.7 5.1 439.9 8.9
-------- ---------- ------ ---------- -------- ---------- -----
UK & Sub-Saharan Africa 175.8 - - 5.3 3.0 181.1 3.0
-------- ---------- ------ ---------- -------- ---------- -----
Asia & MENAT 129.6 10.1 7.8 7.4 5.7 147.1 13.5
-------- ---------- ------ ---------- -------- ---------- -----
Pacific 98.6 4.4 4.5 4.7 4.8 107.7 9.3
-------- ---------- ------ ---------- -------- ---------- -----
Central & regional
OH 2.1 - - 0.4 15.2 2.5 15.2
------------------------- -------- ---------- ------ ---------- -------- ---------- -----
Total 1,452.9 65.1 4.5 16.4 1.1 1,534.4 5.6
------------------------- -------- ---------- ------ ---------- -------- ---------- -----
Pro forma
revenue
2021 from 2021
Ongoing and 2022 Organic 2022 Ongoing
Revenue acquisitions Revenue growth Revenue
-------- ------------------ -------------------- -----------------
GBPm GBPm % GBPm % GBPm %
--------------------- -------- ---------- ------ --------- --------- --------- ------
Pest Control 935.7 61.1 6.5 52.2 5.6 1,049.0 12.1
-------- ---------- ------ --------- --------- --------- ------
Hygiene & Wellbeing 436.1 4.0 0.9 (48.8) (11.2) 391.3 (10.3)
-------- ---------- ------ --------- --------- --------- ------
France Workwear 79.0 - - 12.6 16.0 91.6 16.0
-------- ---------- ------ --------- --------- --------- ------
Central & regional
OH 2.1 - - 0.4 15.2 2.5 15.2
--------------------- -------- ---------- ------ --------- --------- --------- ------
Total 1,452.9 65.1 4.5 16.4 1.1 1,534.4 5.6
--------------------- -------- ---------- ------ --------- --------- --------- ------
Regional Analysis
Ongoing Revenue Ongoing Operating Profit
------------------------------------ ----------------------------------
Change from Change from
H1 2022 HY 2021 H1 2022 HY 2021
----------------------- ------------------ ---------------- ---------------- ----------------
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
North America 693.9 656.1 8.8 2.1 110.9 104.8 11.7 4.8
-------- -------- ------- ------- ------- ------- ------- -------
France 159.6 162.9 7.3 10.6 22.8 23.3 56.4 61.2
-------- -------- ------- ------- ------- ------- ------- -------
Benelux 48.6 49.6 5.1 8.2 14.5 14.8 12.6 16.0
-------- -------- ------- ------- ------- ------- ------- -------
Germany 54.9 55.7 (6.2) (4.1) 16.4 16.6 (10.5) (8.7)
-------- -------- ------- ------- ------- ------- ------- -------
Southern Europe 73.8 75.2 0.3 3.4 12.8 13.1 (3.1) (0.2)
-------- -------- ------- ------- ------- ------- ------- -------
Nordics 40.4 41.1 15.6 18.7 6.7 6.8 2.4 5.1
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Latin America
& Caribbean 56.6 55.4 23.1 21.9 10.3 10.4 25.4 28.3
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Total Europe 433.9 439.9 6.4 8.9 83.5 85.0 13.3 16.3
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
UK, Ireland &
Baltics 160.5 160.8 3.0 3.3 42.0 42.1 (0.2) 0.1
-------- -------- ------- ------- ------- ------- ------- -------
Sub-Saharan Africa 20.5 20.3 1.0 0.6 4.3 4.3 (5.4) (5.7)
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
UK & Sub-Saharan
Africa 181.0 181.1 2.8 3.0 46.3 46.4 (0.7) (0.5)
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Asia & MENAT 151.3 147.1 16.9 13.5 21.3 20.6 21.1 17.2
-------- -------- ------- ------- ------- ------- ------- -------
Pacific 108.6 107.7 8.9 9.3 23.7 23.5 15.3 15.8
-------- -------- ------- ------- ------- ------- ------- -------
Central and regional
overheads 2.5 2.5 15.7 15.2 (48.4) (47.6) (6.7) (4.6)
-------- -------- ------- ------- ------- ------- ------- -------
Restructuring
costs - - - - (4.8) (4.6) (25.1) (19.1)
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Ongoing operations 1,571.2 1,534.4 8.1 5.6 232.5 228.1 11.5 9.6
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Disposed businesses 0.9 0.9 (47.3) (47.4) - - - -
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Continuing operations 1,572.1 1,535.3 8.1 5.5 232.5 228.1 11.5 9.6
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Category Analysis
Ongoing Revenue Ongoing Operating Profit
------------------------------------ ----------------------------------
Change from Change from
H1 2022 HY 2021 H1 2022 HY 2021
----------------------- ------------------ ---------------- ---------------- ----------------
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Pest Control 1,086.4 1,049.0 16.4 12.1 195.3 189.8 18.3 14.8
-------- -------- ------- ------- ------- ------- ------- -------
- Growth(1) 946.0 912.6 15.4 11.0 177.5 172.5 17.6 14.1
-------- -------- ------- ------- ------- ------- ------- -------
- Emerging(2) 140.4 136.4 23.3 19.9 17.8 17.3 25.5 22.8
-------- -------- ------- ------- ------- ------- ------- -------
Hygiene & Wellbeing 392.5 391.3 (10.3) (10.3) 77.2 77.1 (10.8) (10.7)
-------- -------- ------- ------- ------- ------- ------- -------
- Core Hygiene
& Wellbeing 378.7 377.7 10.5 10.8
-------- -------- ------- ------- ------- ------- ------- -------
- Disinfection 13.8 13.6 (85.4) (85.7)
-------- -------- ------- ------- ------- ------- ------- -------
France Workwear 89.8 91.6 12.6 16.0 13.2 13.4 115.8 122.5
-------- -------- ------- ------- ------- ------- ------- -------
Central and regional
overheads 2.5 2.5 15.7 15.2 (48.4) (47.6) (6.7) (4.6)
-------- -------- ------- ------- ------- ------- ------- -------
Restructuring
costs - - - - (4.8) (4.6) (25.1) (19.1)
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Ongoing operations 1,571.2 1,534.4 8.1 5.6 232.5 228.1 11.5 9.6
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Disposed businesses 0.9 0.9 (47.3) (47.4) - - - -
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
Continuing operations 1,572.1 1,535.3 8.1 5.5 232.5 228.1 11.5 9.6
----------------------- -------- -------- ------- ------- ------- ------- ------- -------
1. Growth markets include North America, the UK and Ireland,
Pacific, Germany, Benelux and the Caribbean.
2. Emerging markets include Asia & MENAT, Latin America and
Central America.
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 2022 H1 2021 Variance
% % % points
--------- --------- -----------
North America 16.0 15.6 0.4
--------- --------- -----------
France 14.3 9.8 4.5
--------- --------- -----------
Benelux 29.9 27.9 2.0
--------- --------- -----------
Germany 29.8 31.3 (1.5)
--------- --------- -----------
Southern Europe 17.3 18.0 (0.7)
--------- --------- -----------
Nordics 16.6 18.7 (2.1)
--------------------------- --------- --------- -----------
Latin America & Caribbean 18.8 17.8 1.0
--------------------------- --------- --------- -----------
Total Europe 19.3 18.1 1.2
--------------------------- --------- --------- -----------
UK, Ireland & Baltics 26.1 27.0 (0.9)
--------- --------- -----------
Sub-Saharan Africa 21.3 22.7 (1.4)
--------------------------- --------- --------- -----------
UK & Sub-Saharan Africa 25.6 26.5 (0.9)
--------------------------- --------- --------- -----------
Asia & MENAT 14.0 13.6 0.4
--------- --------- -----------
Pacific 21.8 20.6 1.2
--------------------------- --------- --------- -----------
Ongoing operations(1) 14.9 14.3 0.6
--------------------------- --------- --------- -----------
Disposed businesses - 1.5 (1.5)
--------------------------- --------- --------- -----------
Continuing operations(1) 14.9 14.3 0.6
--------------------------- --------- --------- -----------
H1 2022 H1 2021 Variance
% % % points
--------- --------- -----------
Pest Control 18.1 17.7 0.4
--------- --------- -----------
- Growth 18.9 18.4 0.5
--------- --------- -----------
- Emerging 12.7 12.4 0.3
--------- --------- -----------
Hygiene & Wellbeing 19.7 19.8 (0.1)
--------- --------- -----------
France Workwear 14.7 7.6 7.1
-------------------------- --------- --------- -----------
Ongoing operations(1) 14.9 14.3 0.6
-------------------------- --------- --------- -----------
Disposed businesses - 1.5 (1.5)
-------------------------- --------- --------- -----------
Continuing operations(1) 14.9 14.3 0.6
-------------------------- --------- --------- -----------
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.
H1 2022 H1 2021
AER AER
GBPm GBPm
-------- --------
Net finance costs (12.5) (16.3)
-------- --------
Net interest credit from pensions 0.1 0.1
-------- --------
Interest fair value adjustments 0.6 (2.9)
----------------------------------- -------- --------
Adjusted interest (11.8) (19.1)
----------------------------------- -------- --------
Free Cash Flow
The Group aims to generate sustainable cash flows (Free Cash
Flow) in order to support its acquisition programme and to fund
dividend payments to shareholders. Free cash flow is measured as
net cash from operating activities, adjusted for cash flows related
to the purchase and sale of property, plant and equipment and
intangible fixed assets, cash flows related to leased assets and
dividends received from associates. These items are considered by
management to be non-discretionary as continued investment in these
assets is required to support the day-to-day operations of the
business. A reconciliation of Free Cash Flow from net cash from
operating activities is provided in the table below:
H1 2022 H1 2021
AER AER
GBPm GBPm
-------- --------
Net cash from operating activities 261.1 331.8
-------- --------
Purchase of property, plant, equipment and
intangible fixed assets (83.1) (71.6)
-------- --------
Capital element of lease payments and initial
direct costs incurred (45.3) (41.1)
-------- --------
Proceeds from sale of property, plant, equipment
and software 3.2 1.6
-------- --------
Dividends received from associates 0.4 -
-------------------------------------------------- -------- --------
Free Cash Flow 136.3 220.7
-------------------------------------------------- -------- --------
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 2022 H1 2021
AER AER
GBPm GBPm
-------- --------
Adjusted profit before tax 225.4 194.0
-------------------------------------------- -------- --------
Adjusted tax expense (49.2) (39.6)
-------------------------------------------- -------- --------
Adjusted profit after tax from continuing
operations attributable to equity holders
of the Company 176.2 154.4
-------------------------------------------- -------- --------
Free Cash Flow from continuing operations 136.3 220.7
-------- --------
One-off items - operating 14.9 9.0
-------- --------
Product development additions 3.4 2.7
-------------------------------------------- -------- --------
154.6 232.4
-------------------------------------------- -------- --------
Free Cash Flow Conversion 87.7% 150.5%
-------------------------------------------- -------- --------
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 2022 H1 2021
AER AER
GBPm GBPm
-------- --------
Income tax expense 37.7 29.6
-------- --------
Tax adjustments on:
-------- --------
Amortisation and impairment of intangible
assets (excluding computer software) 9.9 9.1
-------- --------
One-off items - operating 1.4 1.4
-------- --------
Net interest adjustments 0.2 (0.5)
------------------------------------------- -------- --------
Adjusted income tax expense (a) 49.2 39.6
-------- --------
Adjusted profit before income tax (b) 225.4 194.0
------------------------------------------- -------- --------
Effective Tax Rate (a/b) 21.8% 20.4%
------------------------------------------- -------- --------
Responsibility statement of the directors in respect of the 2022
interim statement
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; and
- 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.
----------------------------------------------------------------
We have reviewed, and found that we have nothing to report in
relation to the requirements of 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
27 July 2022
The directors of Rentokil Initial plc are listed in the Rentokil
Initial plc Annual Report for 31 December 2021. 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 2022 interim statement of Rentokil Initial plc for the 6
month period ended 30 June 2022 (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.
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2022;
-- 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 2022 interim
statement 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.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council 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 2022 interim
statement and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The 2022 interim statement, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the 2022
interim statement in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the 2022 interim statement,
including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the 2022 interim statement based on our
review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 July 2022
Additional Information About The Proposed Transaction And Where
To Find It
In connection with the proposed transaction between Rentokil
Initial plc ("Rentokil Initial") and Terminix Global Holdings, Inc.
("Terminix"), Rentokil Initial has filed with the U.S. Securities
and Exchange Commission (the "SEC") a preliminary registration
statement on Form F-4, which includes a preliminary proxy statement
of Terminix that also constitutes a preliminary prospectus of
Rentokil Initial. Each of Rentokil Initial and Terminix will also
file other relevant documents in connection with the proposed
transaction. The definitive proxy statement/prospectus will be sent
to the shareholders of Terminix. Rentokil Initial will also file a
shareholder proxy circular in connection with the proposed
transaction with applicable securities regulators in the United
Kingdom and the shareholder proxy circular will be sent to Rentokil
Initial's shareholders. This communication is not a substitute for
any registration statement, proxy statement/prospectus or other
documents Rentokil Initial and/or Terminix may file with the SEC in
connection with the proposed transaction. BEFORE MAKING ANY VOTING
OR INVESTMENT DECISIONS, INVESTORS, STOCKHOLDERS AND SHAREHOLDERS
OF TERMINIX AND RENTOKIL INITIAL ARE URGED TO READ CAREFULLY AND IN
THEIR ENTIRETY THE PROXY STATEMENT/PROSPECTUS AND SHAREHOLDER PROXY
CIRCULAR, AS APPLICABLE, AND ANY OTHER RELEVANT DOCUMENTS THAT ARE
FILED OR WILL BE FILED WITH THE SEC OR APPLICABLE SECURITIES
REGULATORS IN THE UNITED KINGDOM, AS WELL AS ANY AMMENTS OR
SUPPLEMENTS TO THESE DOCUMENTS, IN CONNECTION WITH THE PROPOSED
TRANSACTION WHEN THEY BECOME AVAILABLE, AS THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT TERMINIX, RENTOKIL INITIAL, THE
PROPOSED TRANSACTION AND RELATED MATTERS. The registration
statement and proxy statement/prospectus and other documents filed
by Rentokil Initial and Terminix with the SEC, when filed, will be
available free of charge at the SEC's website at www.sec.gov. In
addition, investors and shareholders will be able to obtain free
copies of the proxy statement/prospectus and other documents filed
with the SEC by Terminix online at investors.terminix.com, upon
written request delivered to Terminix at 150 Peabody Pl., Memphis,
TN 38103, USA, Attention: Corporate Secretary, or by calling
Terminix's Corporate Secretary's Office by telephone at +1
901-597-1400 or by email at deidre.richardson@terminix.com, and
will be able to obtain free copies of the registration statement,
proxy statement/prospectus, shareholder proxy circular and other
documents which will be filed with the SEC and applicable
securities regulators in the United Kingdom by Rentokil Initial
online at https://www.rentokil-initial.com, upon written request
delivered to Rentokil Initial at Compass House, Manor Royal,
Crawley, West Sussex, RH10 9PY, England, Attention: Peter Russell,
or by calling Rentokil Initial by telephone at +44 (0) 7811 270734
or by email at investor@rentokil-initial.com. The information
included on, or accessible through, Rentokil Initial's or
Terminix's website is not incorporated by reference into this
communication.
This communication is for informational purposes only and is not
intended to, and shall not, constitute an offer to sell or buy or
the solicitation of an offer to sell or buy any securities, nor
shall there be any sale of securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
appropriate registration or qualification under the securities laws
of any such jurisdiction. No offering of securities shall be made
except by means of a prospectus meeting the requirements of Section
10 of the U.S. Securities Act of 1933, as amended.
Participants in the Solicitation of Proxies
This communication is not a solicitation of proxies in
connection with the proposed transaction. However, under SEC rules,
Terminix, Rentokil Initial, and certain of their respective
directors, executive officers and other members of the management
and employees may be deemed to be participants in the solicitation
of proxies in connection with the proposed transaction. Information
about Terminix's directors and executive officers may be found on
its website at
corporate.terminix.com/responsibility/corporate-governance and in
its 2021 Annual Report on Form 10-K filed with the SEC on March 1,
2022, available at investors.terminix.com and www.sec.gov.
Information about Rentokil Initial's directors and executive
officers may be found on its website at
https://www.rentokil-initial.com and in its 2021 Annual Report
filed with applicable securities regulators in the United Kingdom
on March 30, 2022, available on its website at
https://www.rentokil-initial.com. The information included on, or
accessible through, Rentokil Initial's or Terminix's website is not
incorporated by reference into this communication. These documents
can be obtained free of charge from the sources indicated above.
Additional information regarding the interests of such potential
participants in the solicitation of proxies in connection with the
proposed transaction will be included in the proxy
statement/prospectus and shareholder proxy circular and other
relevant materials filed with the SEC and applicable securities
regulators in the United Kingdom when they become available.
Information Regarding Forward-Looking Statements
This communication contains forward-looking statements as that
term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can sometimes be identified by the use
of forward-looking terms such as "believes," "expects," "may,"
"will," "shall," "should," "would," "could," "potential," "seeks,"
"aims," "projects," "predicts," "is optimistic," "intends,"
"plans," "estimates," "targets, " "anticipates," "continues" or
other comparable terms or negatives of these terms, but not all
forward-looking statements include such identifying words.
Forward-looking statements are based upon current plans, estimates
and expectations that are subject to risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those indicated or
anticipated by such forward-looking statements. We can give no
assurance that such plans, estimates or expectations will be
achieved and therefore, actual results may differ materially from
any plans, estimates or expectations in such forward-looking
statements. Important factors that could cause actual results to
differ materially from such plans, estimates or expectations
include: a condition to the closing of the proposed transaction may
not be satisfied; the occurrence of any event that can give rise to
termination of the proposed transaction; Rentokil Initial is unable
to achieve the synergies and value creation contemplated by the
proposed transaction; Rentokil Initial is unable to promptly and
effectively integrate Terminix's businesses; management's time and
attention is diverted on transaction related issues; disruption
from the proposed transaction makes it more difficult to maintain
business, contractual and operational relationships; the credit
ratings of Rentokil Initial declines following the proposed
transaction; legal proceedings are instituted against Terminix or
Rentokil Initial; Terminix or Rentokil Initial is unable to retain
or hire key personnel; the announcement or the consummation of the
proposed acquisition has a negative effect on the market price of
the capital stock of Terminix or Rentokil Initial or on Terminix's
or Rentokil Initial's operating results; evolving legal, regulatory
and tax regimes; changes in economic, financial, political and
regulatory conditions, in the United Kingdom, the United States and
elsewhere, and other factors that contribute to uncertainty and
volatility, natural and man-made disasters, civil unrest, pandemics
(e.g., the coronavirus (COVID-19) pandemic (the "COVID-19
pandemic")), geopolitical uncertainty, and conditions that may
result from legislative, regulatory, trade and policy changes
associated with the current or subsequent U.S. or U.K.
administration; the ability of Rentokil Initial or Terminix to
successfully recover from a disaster or other business continuity
problem due to a hurricane, flood, earthquake, terrorist attack,
war, conflict, pandemic, security breach, cyber-attack, power loss,
telecommunications failure or other natural or man-made event,
including the ability to function remotely during long-term
disruptions such as the COVID-19 pandemic; the impact of public
health crises, such as pandemics (including the COVID-19 pandemic)
and epidemics and any related company or governmental policies and
actions to protect the health and safety of individuals or
governmental policies or actions to maintain the functioning of
national or global economies and markets, including any quarantine,
"shelter in place," "stay at home," workforce reduction, social
distancing, shut down or similar actions and policies; actions by
third parties, including government agencies; the risk that
disruptions from the proposed transaction will harm Rentokil
Initial's or Terminix's business, including current plans and
operations; certain restrictions during the pendency of the
acquisition that may impact Rentokil Initial's or Terminix's
ability to pursue certain business opportunities or strategic
transactions; Rentokil Initial's or Terminix's ability to meet
expectations regarding the accounting and tax treatments of the
proposed transaction ; the risks and uncertainties discussed in the
"Risks and Uncertainties" section in Rentokil Initial's reports
available on the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on its
website at https://www.rentokil-initial.com (information included
on or accessible through Rentokil Initial's website is not
incorporated by reference into this communication); and the risks
and uncertainties discussed in the "Risk Factors" and "Information
Regarding Forward-Looking Statements" sections in Terminix's
reports filed with the SEC. These risks, as well as other risks
associated with the proposed transaction, will be more fully
discussed in the proxy statement/prospectus and shareholder proxy
circular. While the list of factors presented here is, and the list
of factors to be presented in proxy statement/prospectus and
shareholder proxy circular will be, considered representative, no
such list should be considered to be a complete statement of all
potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realization of
forward-looking statements. We caution you not to place undue
reliance on any of these forward-looking statements as they are not
guarantees of future performance or outcomes and that actual
performance and outcomes, including, without limitation, our actual
results of operations, financial condition and liquidity, and the
development of new markets or market segments in which we operate,
may differ materially from those made in or suggested by the
forward-looking statements contained in this communication. Except
as required by law, neither Rentokil Initial nor Terminix assumes
any obligation to update or revise the information contained
herein, which speaks only as of the date hereof.
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 RRMRTMTATBLT
(END) Dow Jones Newswires
July 28, 2022 02:00 ET (06:00 GMT)
Rentokil Initial (LSE:RTO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Rentokil Initial (LSE:RTO)
Historical Stock Chart
From Jul 2023 to Jul 2024
