Rentokil Initial Plc - Interim Results

2019 Interim Results

Strong first half performance: Organic Revenue growth of 4.2%, continued momentum in M&A and increased spend expectation for full year, divestment of our 17.8% stake in JV with Haniel

 

Results 

 

 

H1 2019

Growth

£m

 

 

 

AER

AER

CER

 

 

 

 

 

 

 

Ongoing Revenue

 

 

 

1,289.9

10.7%

8.8%

Revenue

 

 

 

1,298.9

10.4%

8.5%

Ongoing Operating Profit

 

 

 

152.1

13.0%

11.6%

Operating Profit

 

 

 

125.5

15.4%

14.6%

Adjusted profit before tax

 

 

 

141.6

13.7%

12.4%

Profit before tax

 

 

 

113.8

3.7%

3.2%

Free Cash Flow

 

 

 

95.9

 

 

Adjusted EPS

 

 

 

5.99p

14.0%

12.9%

EPS

 

 

 

4.75p

1.3%

0.7%

Dividend per share

 

 

 

1.51p

15.2%

 

 

 

2019 Interim Highlights

 

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Revenue, profit and cash in excess of medium-term targets: Ongoing Revenue up 8.8%, Organic Revenue up 4.2%, Ongoing Operating Profit up 11.6% and Free Cash Flow conversion of 93% (over last 12 months)

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Strong Organic Revenue growth of 4.2% equals our highest growth rate in the first half for over a decade, despite wet weather in North America in Q2

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11.4% Ongoing Revenue growth in Pest Control (4.8% Organic), driven by strong innovation and digital performance (H1 2018: 4.0% Organic)

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6.5% Ongoing Revenue growth in Hygiene (4.3% Organic), reflecting very good results in UK, Europe and Pacific and ongoing contributions from acquisitions (H1 2018: 2.1% Organic)

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0.4% pts improvement in Group Net Operating Margin at 11.9%, 0.5% pts improvement in North America Net Operating Margin at 12.1%

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Free Cash Flow of £95.9m, a £22.9m increase on the prior year (H1 2018: £73.0m)

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1.1% pts improvement in customer retention at 87.1% (1.8% pts improvement in Pest Control at 86.1%), 2.8% pts improvement in colleague retention at 87.0% (over the last 12 months)

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Continuing strong M&A performance:

 

17 businesses - 12 Pest Control, 5 Hygiene - acquired in Growth (9 deals) and Emerging (8 deals) markets with combined annualised revenues of c. £55m. Cash spend on current and prior year M&A of £120.9m

 

7 pest control acquisitions in North America with c. $59m annualised revenues in H1 (vs Full Year 2018: c. $53m) including a Top 40 US pest control company, Active Pest Control, in Atlanta

New city entries in Jordan (Amman) and Sri Lanka (Colombo)

 

Given progress in H1 and ongoing strength of pipeline, M&A spend for FY 2019 now expected to exceed £250m

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Sale of stake in JV with Haniel:  

 

Divestment of 17.8% interest in CWS-boco International GmbH to Haniel agreed on 30 July 2019 for cash consideration of €430m

 

Carrying value of investment in JV at 30 June 2019 €290m, resulting in estimated profit on disposal of ~€140m

 

Proceeds from the sale to initially reduce debt and then redeployed to support the Group's M&A programme

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15.2% increase in interim dividend at 1.51p per share

 

Andy Ransom, CEO of Rentokil Initial plc, said:

"The business has performed very well in the first six months with strong Organic growth of 4.2%, driven by the expertise of our people, our continued leadership in technology and innovation, and further execution of high-quality acquisitions in Growth and Emerging markets. 

 

"We have made 17 acquisitions in Pest Control and Hygiene - including a top-40 pest control business in the US and new market entries into Jordan and Sri Lanka.  We are also delighted with the sale of our stake in the JV with Haniel, the proceeds from which we will use initially to reduce debt and then redeploy into further M&A to build scale and density.  Our pipeline of M&A prospects remains strong and we now expect to spend over £250m on acquisitions during the year.    

 

"I am very encouraged by our performance in H1 and confident of delivering further progress in the second half. Our guidance for the full year remains unchanged."