Coronavirus Update

Rentokil Initial PLC 2020 Preliminary Results

This content has been sourced from: https://www.investegate.co.uk/rentokil-initial-plc...

 

Results 

 

 

FY 2020

Growth

£m

 

 

 

AER

AER

CER

 

 

 

 

 

 

 

Ongoing Revenue

 

 

 

2,809.6

5.0%

6.3%

Revenue

 

 

 

2,823.5

4.0%

5.3%

Ongoing Operating Profit

 

 

 

383.8

4.3%

5.4%

Adjusted Operating Profit

 

 

 

384.0

5.1%

6.3%

Adjusted profit before tax

 

 

 

355.2

4.2%

5.3%

Profit before tax

 

 

 

229.8

(32.1%)

(31.9%)

Free Cash Flow

 

 

 

336.8

 

 

Adjusted EPS

 

 

 

15.37p

6.5%

7.8%

EPS

 

 

 

10.03p

(34.6%)

(34.3%)

 

 

 

2020 Highlights (at CER unless otherwise stated) 

 

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6.3% increase in Ongoing Revenue; meeting our medium-term growth target despite significant challenges

 

· 1.0% growth in Pest Control (H1: +1.0%, H2: +0.9%), reflecting our essential service status and ability to continue to serve customers.  Strongly positioned for structural growth as we transition out of the pandemic

 

· 36.8% growth in Hygiene (H1: +10.5%, H2: +62.6%), a very strong performance reflecting continued high demand for hygiene products and disinfection services which have more than offset washrooms service declines from temporary business closures

 

· Revenue from disinfection services of £225.1m (H1: £48.8m, H2: £176.3m) 

 

· 12.0% decline in Protect & Enhance(H1: -12.9%, H2: -11.1%), principally driven by COVID-impacted performance from France Workwear (down 10.4% year on year) 

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5.4% increase in Ongoing Operating Profit; reflecting significant actions to mitigate COVID-related revenue reductions, and despite an increased £34m bad debt provision and £25m of additional costs of personal protective equipment (PPE)

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Strong Free Cash Flow of £336.8m; representing 123% cash conversion, delivered through tight controls over costs, capex and working capital

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$1.5bn North America revenue target surpassed at $1,585.7m revenues, good progress towards 18% margin with 2020 margins at 17.3%, IT re-platforming on track to complete in 2021

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International expansion of Hygiene category into 20 new markets in 2020; including North America, Latin America, Europe and the Middle East.  Hygiene medium-term organic growth target up weighted to 4% - 6% p.a. from 2022. 'Hygiene: the Next Pest Control?' Capital Markets Day planned for 28 September 2021 

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Liquidity headroom in excess of £1.2bn at 31 December 2020; including £550m of undrawn RCF, Net Debt/EBITDA ratio at 1.6x (down from 1.8x at the start of 2020)

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A good year of M&A despite suspension in Q2:

· 23 businesses acquired in 2020: 21 Pest Control, 1 Hygiene and 1 Protect & Enhance (Ambius)

· Acquisition of Environmental Pest Service (EPS LLP) in December: 15th largest North American pest control business

· Acquired combined annualised revenues of c.£158m (incl. EPS LLP). Cash spend in 2020 of £201.9m (excl. EPS LLP)

· Anticipated spend in 2021 of c.£400m (incl. consideration for EPS LLP paid in January 2021)

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Recommended dividend payment of 5.41p for 2020 reflecting the strength of our performance in 2020 and confidence in outlook for 2021

 

 

Andy Ransom, CEO of Rentokil Initial plc, said:

"In an extraordinary year, we have demonstrated the inherent strength of our business, growing revenue, profit and cash. We have shown great agility by launching new disinfection services in 60 countries to address a critical need for customers, accelerated the international expansion of our Hygiene business and have acquired 23 high quality businesses to build density, particularly in our key North America Pest Control market. 

 

"In addition, we have continued to deliver record levels of colleague safety, training and retention, and our leadership in innovation and digital has contributed to our underlying success in Pest and Hygiene during the year. Having recognised at an early stage that we faced a global crisis, we acted swiftly to protect all our stakeholders - our people, shareholders, customers and suppliers, and the communities we serve.

 

"Notwithstanding the impact from business closures in lockdown, Pest Control continues to exhibit good structural growth drivers. As the world's largest commercial pest control company, Rentokil is ideally placed to capitalise on the opportunities presented in a post-vaccine world. The medium-term prospects for our Hygiene business have never looked more promising as the demand for global hygiene services is sustained post the pandemic, and its innovation, digital leadership and expertise - inside and outside of the washroom - mean we are targeting medium-term underlying organic growth in core Hygiene comparable to that in Pest Control, at 4% to 6% from 2022.

 

"2021 will be a year of transition as we cross the bridge from the worst of the crisis in 2020 to, hopefully, a post-pandemic 2022.  Thanks to the significant and swift actions we took in 2020, we are strongly positioned for the coming year, and expect to see further progress from our core Pest Control, Hygiene and Protect & Enhance categories.  We will continue to provide disinfection services as part of the crisis response, but expect volumes and prices to significantly unwind as the year progresses and the crisis hopefully abates.

 

"While the obvious uncertainty presented by the ongoing COVID-19 pandemic remains, we are confident of delivering further operational and financial progress in 2021.

 

"On behalf of the Board, I would like to thank all of our colleagues for their outstanding response this year. It is their commitment and sacrifice that has ensured that Rentokil Initial moved quickly from the Crisis phase to Recovery, and is now able to explore fully the opportunities presented to us in a post-vaccine world."