TIDMRTO
RNS Number : 4968U
Rentokil Initial PLC
30 July 2015
RENTOKIL INITIAL PLC (RTO)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015
30 July 2015
Results H1 2015 Growth
GBPm AER AER CER
Revenue 855.3 0.1% 4.5%
Revenue - ongoing operations(1) 851.1 0.9% 5.2%
Adjusted operating profit(2) 99.7 (0.5%) 8.0%
Adjusted operating profit(2)
- ongoing operations(1) 99.4 (0.5%) 8.0%
Adjusted profit before tax(2) 82.5 6.5% 16.6%
Profit before tax 70.2 5.1% 15.9%
Free cash flow(3) 55.4
Adjusted EPS(4) 3.49p 7.1% 18.4%
-- Strong growth in revenue and profit in H1
-- Positive organic growth trend continues into H1: +1.9% year on year (FY 2014: +1.2%)
-- Pest control particularly strong: revenue growth +9.6% (+4.8% organic)
-- Free cash flow of GBP55.4m, on track to meet GBP100m+ target for the full year
-- Continued M&A execution: 14 bolt-ons (12 in pest) with
combined annualised revenues of GBP21m
-- Further reduction in net debt to GBP730m, GBP129m lower than H1 2014
-- Interim dividend increased by 13% to 0.87p
-- Expectations for the full year are unchanged
Commenting on the 2015 interim results Andy Ransom, CEO of
Rentokil Initial plc, said:
"In February 2014 we set out our new differentiated strategy and
introduced medium-term targets for mid-single digit revenue growth,
high-single digit profit growth and a significant improvement in
cash generation.
"We have continued to implement our strategy at pace and made
further good progress in the first half of 2015, delivering ongoing
revenue growth of 5.2%, profit growth of 8.0% and free cash flow of
GBP55m.
"While prospects in the majority of our key markets are good,
conditions in certain parts of Europe remain challenging,
particularly in France and the Netherlands. We are nonetheless on
track to achieve our 2015 revenue, profit and cash
expectations.
"Overall I am encouraged by the progress that we have made over
the last eighteen months and I am confident of delivering further
value for shareholders as we enter the next phase in the execution
of our plan."
Revenue (at CER)
Revenue from ongoing operations increased by 5.2% in H1,
comprising organic growth of 1.9% and growth from acquired
businesses of 3.3%.
Revenue in the pest control category grew particularly strongly,
at 9.6% in H1, 4.8% of which was organic.
Growth in H1 in the Emerging (+17.5%) and Growth (+9.2%)
quadrants was strong with good performances from North America, UK,
Germany, Latin America, Asia and Pacific. This was partially offset
by declines in the Protect & Enhance quadrant (-1.0%), largely
driven by France and Benelux and by a small decline in the Manage
for Value
quadrant (-0.7%).
During the period we closed our Austrian and Northern Ireland
flat linen businesses in Manage for Value which, together with
other businesses divested in 2014, reduced revenue growth by 0.7%,
resulting in total revenue growth of 4.5%.
Profit (at CER)
Adjusted operating profit from ongoing operations increased by
8.0% in H1, reflecting growth in North America, the UK, Germany,
Asia and Pacific, offset by lower profits in France and
Benelux.
Adjusted profit before tax (at AER) was negatively impacted by
GBP6.6m due to the continued strengthening of Sterling against the
Euro. Based on current exchange rates the impact of currency
movements would be around GBP19m for the full year (GBP5m higher
than previous guidance).
Restructuring costs were a net charge of GBP2.5m and one-off
items were a net credit of GBP0.2m. We continue to expect
restructuring costs to be less than GBP10m for the year. Profit
before tax increased by 15.9% in H1. After taking into account
currency movements, profit before tax increased by 5.1%.
Cash (at AER)
Free cash flow from continuing operations of GBP55.4m in H1 was
GBP50.7m ahead of the prior year, driven by reductions in capex and
working capital outflows (in part due to foreign exchange and
phasing) as well as a reduction in interest payments and the
beneficial settlement of a legacy legal claim. After taking into
account the expenditure on current and prior year acquisitions
(GBP32.7m) and the benefit of exchange rate movements, net debt
reduced by GBP129.4m to GBP729.8m (30 June 2014: GBP859.2m).
M&A (at AER)
In line with our strategy we have continued our M&A
programme to pursue targets in higher growth markets and in areas
which add local density to our existing operations. We acquired 12
bolt-ons in pest control in H1, along with two small acquisitions
in Ambius. In North America we have continued to expand our
presence with the purchase of six pest control bolt-ons. In
addition, we have acquired small businesses in the UK, Australia,
Korea, South Africa and Poland. We have also expanded our presence
in Latin America with a small bolt-on acquisition in Colombia and
with the acquisition of Sagrip which gives us access to the main
cities in Guatemala and El Salvador. Combined annual revenues of
the above businesses totalled GBP21m in the 12 months immediately
prior to acquisition. The integration of all acquisitions is
progressing well and the pipeline remains strong with opportunities
to create value, particularly in pest control. Cash spend on
M&A for the full year is likely to be in excess of GBP50m given
the level of cash spent on acquisitions in H1.
Enquiries:
Investors Katharine Rentokil Initial
/ Analysts: Rycroft plc 01276 536585 / 07811 270734
Rentokil Initial
Media: Malcolm Padley plc 07788 978 199
John Sunnucks Bell Pottinger 0203 772 2549
Ben Woodford
A presentation for investors and analysts will be held on
Thursday 30 July 2015 at 9.00am in the Sidney Suite
Conference Room, 1st Floor, The Grange Tower Bridge Hotel, 45 Prescot Street, London E1 8GP.
This will be available via a live audio web cast at
www.rentokil-initial.com.
AER - actual exchange rates; CER - constant 2014 exchange
rates
(1) ongoing revenue and profit exclude the financial performance
of disposed and closed businesses but include results from
acquisitions
(2) before amortisation and impairment of intangibles (excluding
computer software), restructuring costs and one-off items, and net
interest credit from pensions
(3) cash flow before acquisitions, disposals, foreign exchange
adjustments and discontinued operations
(4) earnings per share before the after tax effects of
amortisation and impairment of intangibles (excluding computer
software), restructuring costs and one-off items and net interest
credit from pensions
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 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.
FINANCIAL SUMMARY
GBPm Half Year
--------------------------
2015 Change
2014
------------------------------------ ----- --------------- -------- ------- ------- --------
Continuing Operations(1)
At 2014 constant exchange rates(2)
Revenue - ongoing operations(3) 881.5 837.6 5.2%
Revenue - disposed and closed businesses 4.6 10.6 (56.6%)
------- ------- --------
Revenue 886.1 848.2 4.5%
------- ------- --------
Adjusted operating profit(4) - ongoing
operations(3) 106.5 98.6 8.0%
Adjusted operating profit(4) - disposed
and closed businesses 0.4 0.3 33.3%
Adjusted operating profit(4) 106.9 98.9 8.0%
Restructuring costs and one-off items
- operating(5) (2.3) (2.4) 4.2%
Amortisation and impairment of intangible
assets (13.8) (9.7) (42.3%)
------- ------- --------
Operating profit 90.8 86.8 4.6%
Share of profit from associates (net
of tax) 2.8 2.1 33.3%
Net interest payable (excluding pensions) (20.6) (24.6) 16.3%
Net interest credit from pensions 3.0 1.3 130.8%
------- ------- --------
Profit before tax 76.0 65.6 15.9%
------- ------- --------
Adjusted profit before tax(4) 89.1 76.4 16.6%
Operating cash flow(6) 98.6 50.9
Basic earnings per share 3.32p 2.81p 18.1%
Basic adjusted earnings per share(7) 3.80p 3.21p 18.4%
Continuing Operations(1)
At actual exchange rates
Revenue - ongoing operations(3) 851.1 843.6 0.9%
Revenue - disposed and closed businesses 4.2 10.8 (61.1%)
------- ------- --------
Revenue 855.3 854.4 0.1%
------- ------- --------
Adjusted operating profit(4) - ongoing
operations(3) 99.4 99.9 (0.5%)
Adjusted operating profit(4) - disposed
and closed businesses 0.3 0.3 -
Adjusted operating profit(4) 99.7 100.2 (0.5%)
Restructuring costs and one-off items
- operating(5) (1.4) (2.3) 39.1%
Amortisation and impairment of intangible
assets (13.9) (9.7) (43.3%)
------- ------- --------
Operating profit 84.4 88.2 (4.3%)
Share of profit from associates (net
of tax) 2.7 2.2 22.7%
Net interest payable (excluding pensions) (19.9) (24.9) 20.1%
Net interest credit from pensions 3.0 1.3 130.8%
------- ------- --------
Profit before tax 70.2 66.8 5.1%
------- ------- --------
Adjusted profit before tax(4) 82.5 77.5 6.5%
Operating cash flow(6) 93.6 51.5
Basic earnings per share 3.05p 2.86p 6.6%
Basic adjusted earnings per share(7) 3.49p 3.26p 7.1%
Dividend per share (proposed/paid) 0.87p 0.77p 13.0%
(1)
all figures are for continuing operations unless otherwise
stated
(2)
results at constant exchange rates have been translated at the
full year average exchange rates for the year ended 31 December
2014. GBP/$ average rates: H1 2015 1.5321; FY 2014 1.6465, GBP/EUR
average rates: H1 2015 1.3645; FY 2014 1.2438
(3)
ongoing revenue and profit exclude the financial performance of
disposed and closed businesses but include results from
acquisitions
(4)
before amortisation and impairment of intangibles (excluding
computer software), restructuring costs and one-off items, and net
interest credit from pensions
(5)
see Note 4 on page 16 for further details
(6)
cash flow before interest, tax, acquisitions, disposals, foreign
exchange adjustments and discontinued operations
(7)
earnings per share before the after tax effects of amortisation
and impairment of intangibles (excluding computer software),
restructuring costs and one-off items and net interest credit from
pensions
Basis of preparation
Segmental information has been presented in accordance with IFRS
8 "Operating Segments" and reflects internal organisation changes
made in 2014. Unless otherwise stated references to 'revenue' are
for ongoing businesses and references to 'profit' and 'operating
profit' are for ongoing businesses before amortisation, impairment
of intangible assets (excluding computer software) and
restructuring costs and one-off items (totalling a net cost of
GBP2.3m) that have had a significant impact on the results of the
group. These costs have been separately identified as they are not
considered to be "business as usual" expenses and have a varying
impact on different businesses and reporting periods. Ongoing
revenue and profit is from continuing operations excluding the
results from disposed and closed businesses but includes the
results from acquisitions. All references to revenue and profit are
at constant 2014 full year average exchange rates (CER) unless
otherwise stated.
REGIONAL PERFORMANCE
In the North America region revenue grew by 8.3% in H1, driven
by organic revenue growth (+2.7%) and the continuing acquisition
programme (+5.6%). Organic revenue growth from pest control was
2.9%. Strong profit growth of 19.5% was driven by acquisitions, the
leverage impact from higher revenues as well as further margin
improvement from back office and property rationalisation and lower
fuel prices. This has improved margins by 1% point.
In the Europe region revenue rose by 0.4% in H1, but organic
revenue declined by 0.8%. Good revenue growth in Germany (+3.0%),
Southern Europe (+5.2%) and Latin America (which is managed out of
the European Region and which grew by 52.8%) was offset by declines
in France (-3.1%) and Benelux (-0.8%). Profit was down 2.9% in H1,
primarily driven by the revenue reductions and pricing pressure in
France. We see opportunities to support margins through service
productivity and branch and back office rationalisation.
Trading conditions remain challenging in certain parts of
Europe, in France and the Netherlands in particular. Overall we
expect trading performance in the region in H2 to be in line with
H1.
In the UK & Rest of World region revenue increased by 13.2%
in H1, reflecting organic growth of 5.5% and acquisition growth of
7.7%, largely from the Peter Cox acquisition made at the end of
2014. The region delivered continued growth from the UK pest and
hygiene categories, with pest control benefitting from increased
jobbing work in particular. The Rest of World operations delivered
good revenue growth driven by the Caribbean and South Africa. H1
profit grew by 6.8%. Margins declined by 1.2% points in the period,
partly reflecting the impact of the Peter Cox acquisition and the
phasing of certain costs in the Rest of World operations.
In the Asia Region revenue increased by 13.3% in H1 (+9.0%
organic) with both the pest control and hygiene categories
performing well. Our operations in the emerging markets of India,
China and Vietnam continue to grow well, delivering combined
revenue growth of 28%. High single digit revenue increase was
delivered in the more mature markets of Indonesia and Malaysia.
Profit in the region grew by 51.6% in the first half, reflecting
leverage from higher revenues and the ongoing benefit from back
office rationalisation, with margins higher by 2.2% points on H1
2014. Acquisitions in Asia account for 11.3% of profit growth.
In the Pacific region revenue grew by 4.3% in H1 (+3.8%
organic), reflecting increased contracts in the pest and hygiene
categories and more jobbing work in pest control. First half profit
grew by 7.9%, reflecting higher revenues and also supported by a
programme of procurement savings and branch administration
rationalisation.
DIVIDEND
The Board has declared an interim dividend of 0.87p per share,
amounting to GBP15.8m, payable on 16 September 2015 to shareholders
on the register at the close of business on 14 August 2015. This is
an increase of 13% on the interim dividend for 2014.
GUIDANCE FOR 2015
Central and divisional overheads are anticipated to be in line
with 2014. Impact to the P&L of restructuring costs is expected
to be no greater than GBP10m. Interest costs are likely to be in
the region of GBP42m, reflecting the impact of the Company's recent
refinancings. Our current estimate for the adjusted effective tax
rate is 23.4% (in line with last year) with cash tax payable no
more than GBP40m. Sterling has continued to strengthen in H1 and
based on current exchange rates the impact on 2015 adjusted profit
before tax would be c.GBP19m (GBP5m more than our previous
guidance). Working capital outflow is unchanged and estimated to be
at or below GBP20m, with net capex no more than GBP200m. Cash spend
on M&A for the full year is likely to be in excess of GBP50m
given the level of cash spent on acquisitions in H1.
OUTLOOK
In February 2014 we set out our new differentiated strategy and
introduced medium-term targets for mid-single digit revenue growth,
high-single digit profit growth and a significant improvement in
cash generation.
We have continued to implement our strategy at pace and in the
first half of 2015 we have delivered ongoing revenue growth of
5.2%, profit growth of 8.0% and free cash flow of GBP55m.
While prospects in the majority of our key markets are good,
conditions in certain parts of Europe remain challenging
particularly in France and the Netherlands. We are nonetheless on
track to achieve our 2015 revenue, profit and cash
expectations.
Overall, we are encouraged by the progress that we have made
over the last eighteen months and are confident of delivering
further value for shareholders as we enter the next phase in the
execution of our plan.
DELIVERING PROFITABLE GROWTH
In February 2014 we announced our RIGHT WAY plan to deliver
sustainable revenue and profitable growth. The plan is based upon a
new, focused model for the Company which includes the introduction
of five geographic regions with a low cost operating structure:
North America, Europe, UK & Rest of World, Asia and Pacific.
Our core competencies are our colleagues as experts, our category
leadership, and our lean multi-business model. We manage the
business for profitable growth by grouping our categories and
geographies into a growth potential and profit contribution matrix
to assist capital allocation and by utilising six operational
levers to drive growth.
We also announced the following medium-term targets:
------------------------------------------------------------------------------------------------------------------------------------------------------
1. Mid-single digit revenue growth, supported by M&A
investment and divestment of non-core or poorly performing
businesses;
2. High-single digit profit growth, leveraging revenue targets; and
3. Strong and sustainable delivery of free cash flow of GBP100m+
p.a. to fund M&A, implement a progressive dividend policy and
reduce debt.
------------------------------------------------------------------------------------------------------------------------------------------------------
Progress in phase one
The group has undergone a significant transformation over the
past 18 months and is now delivering strong and sustainable free
cash flow. We called to an end the period of large-scale
restructuring from 2008 to 2013 and have cut restructuring costs by
some GBP40m compared to the levels in 2013. Central and divisional
overheads have been reduced by GBP12m, working capital is managed
more tightly and capex is broadly in line with depreciation. In
addition, we have a fully-funded pension scheme, group net debt (at
just under GBP730m) is at its lowest level for 15 years and we have
reached our target credit rating of BBB (Stable Outlook).
Within the categories while Pest Control and Hygiene have made
solid progress, further work remains to be done in Workwear. We
update on our category progress in phase one of our Right Way plan
below.
Pest Control:
-- We have an outstanding, world-leading pest control business
with market leadership positions in 47 of the 60+ countries in
which we operate. Pest Control is the growth engine of the group
and in H1 overall pest revenues grew by 9.6% (+4.8% organic)
-- We have established coast-to-coast coverage in the US and are
the third largest market player, servicing a national customer
base
-- We are accelerating our presence in high growth emerging
markets with a refocused strategy for China and India and now
establishing a strong position in Latin America
-- Building greater density in pest control is our primary
M&A focus and we have acquired 35 businesses since January
2014, all of which are performing at or ahead of the required
quadrant IRR hurdle rates
-- Our innovation pipeline and digital expertise are driving
service differentiation, sales and customer engagement:
- Notable product innovations include 'PestConnect'
(commercialised remote monitoring), 'RodentGate' (smart external
traps that only open to rats) and 'myRentokil' (a risk-based
extranet and App for customers)
- Launch of a new performance-enhancing website in 20 markets to
drive further digital expertise improvement across our
operations
Hygiene:
-- Hygiene is a global hygiene services leader - much needed
re-investment has been made with new product ranges now fully in
place including 'Signature', 'Colour', 'Reflection' and 'No
Touch'
- Overall revenue growth of 2.3% in H1
- UK & Ireland hygiene businesses now returned to growth (+3.7% in H1)
- +1.3% revenue growth in France in H1 reflecting roll-out of the 'Signature' range
- +3.9% revenue growth in the Pacific region
-- We are building a strong position in Emerging markets (revenue +17.5% in H1):
- 13.3% revenue growth in Asia in H1
-- Innovation is beginning to gain traction:
- 'HygieneConnect' - which uses the same technology as
'PestConnect' and which is the world's first integrated wireless
monitoring and display system designed to raise hand washing
compliance
- Launch of 'myInitial' extranet for better customer engagement.
-- Our premium scenting business is currently growing at over 30% p.a., albeit from a low base
Workwear:
-- Progress over the past 18 months includes:
- Launch of new product ranges in main European countries
- Steady performance from our German workwear operations
- Continued growth in the higher-margin Cleanroom business
- Exit of our lower-margin flat linen operations in Austria and Northern Ireland
-- However, overall category performance continues to be
held-back by France and the Netherlands
-- Acceptable service levels are in place but the opportunity
for differentiation is through providing the highest product and
service quality
Our capital allocation model is working well, with M&A and
capex allocated in line with quadrant strategies. We have
established a high quality pipeline of acquisitions and have
acquired 44 businesses over the past 18 months (36 of which have
been in the Growth and Emerging markets) with combined annual
revenues of GBP78.6m. All are performing at or ahead of their
quadrant IRR hurdle rates. We have acquired 17 businesses in North
America, building greater density in this important region and have
entered new high growth markets including Chile and Colombia. The
Growth and Emerging quadrants now account for almost 60% of group
revenue. In the Manage for Value quadrant we have disposed of a
number of non-core operations (notably the Initial Facilities,
Spanish Medical and Austrian products businesses and more recently
our flat linen operations in Austria and Northern Ireland) leaving
the remaining businesses comprising just 4% of group revenue.
Overview of the next phase
Below we summarise our priorities for the next phase of
execution of our Right Way plan:
-----------------------------------------------------------------------------------------------------------------------------------------------------
1. Increasing our exposure to Growth and Emerging markets
particularly in North America and Asia;
2. Accelerating and prioritising Pest Control with upside to go
for in Hygiene through "Execute Now" and Workwear's quality-focused
improvement plan;
3. Greater exploitation of our digital expertise - to drive sales and customer engagement;
4. Further differentiation through innovation - delivery of pipeline of innovations to market;
5. Delivering enhanced margins where possible through city
density and local share (for example North America and Asia);
6. Boosting sales and service productivity;
7. Greater sharing of best practice - further roll-out of the
'Project Speed' programme for greater sharing of operational best
practices; and
8. Value-creating M&A programme - continuing to use our
differentiated approach with clear strategies for growth and
capital allocation.
------------------------------------------------------------------------------------------------------------------------------------------------------
Pest Control - 'Acceleration'
Our pest control business is set to become our majority category
and we plan to deliver continued acceleration for the business
through:
-- deployment of new pest products and services from innovation pipeline;
-- roll-out of our performance-enhancing web presence across the group;
-- our leadership in the 'Internet-of-Things' for pest control,
for example monitoring devices covering a range of pests and
risk-based reporting through extranets/apps;
-- leverage of our North America position and growth and share growth in Emerging markets; and
-- continued M&A programme to build greater density.
Hygiene - 'Execute Now'
Within the hygiene category we will pursue an 'Execute Now'
growth strategy to leverage our strengths across our 40+ markets of
operations by:
-- building on the strength of our leading hygiene brand and strong market positions;
-- selling with confidence - including new product ranges such
as 'Reflection', 'Signature', 'Colour' and 'No Touch' and Premium
Scenting;
-- leading on innovation through 'Internet-of-Things' for
hygiene, for example sensing, hand hygiene compliance, particularly
in the food and health market sectors; and
-- building city density and extend our footprint through organic growth and continued M&A.
Workwear - 'Quality of Service'
Our aim is to create a workwear business that has clear market
differentiation through the highest level of product and service
quality, thus driving greater customer satisfaction and in turn
generating improved revenue and margins. The plan includes:
-- rigorous application of KPIs to measure quality of service;
-- improved product visibility through the entire service process;
-- best-in-class processing - highest standards in washing and
repair quality; new higher quality detergents;
-- greater responsiveness to customer needs - shorter lead time
between contract and deployment (for example web-based size taking
pilot);
-- smarter selling - "selling a service rather than a product";
-- creation of product and service innovation action group; and
-- leveraging European scale and best practice - to create a
more effective organisation through best practice sharing in supply
chain, R&D, processing, sales and marketing.
FINANCIAL REVIEW
Central and regional overheads (at CER)
Central and regional overheads decreased by GBP2.4m in H1 to
GBP32.3m, partly reflecting the lapping impact of the cost
reduction programme in 2014 and continued cost discipline.
Restructuring costs and one-off items - operating (at CER)
Restructuring costs of GBP2.5m were in line with the prior year.
These consisted mainly of redundancy costs and plant and office
closure costs. One-off costs in the first half netted to a credit
of GBP0.2m (2014: credit of GBP0.8m) with the costs associated with
the closure of our Austrian and Northern Ireland flat linen
businesses (GBP11.0m) offset by the income (GBP10.8m) from the
settlement of a legacy legal claim.
Interest (at AER)
Net interest payable was GBP19.9m compared to GBP24.9m in H1 of
the prior year, a decrease of GBP5.0m. The decrease is
predominantly due to the reduced interest rate following the
repayment of a EUR500m bond in March 2014.
Tax (at AER)
The income tax expense on continuing operations for H1 was 20.5%
on reported profit before tax compared with 22.2% in H1 2014. After
adjusting profit for the amortisation and impairment of intangible
assets (excluding computer software), reorganisation costs and
one-off items and net pension credit from pensions, the effective
tax rate is 23.4%, compared with 23.6% in H1 2014. This compares
with a blended rate of tax for the countries in which the group
operates of about 26% (26.5% in H1 2014). The reduction is
principally due to the offset of the group's UK profits by brought
forward tax losses.
Net debt and cash flow
GBPm at actual exchange rates Year to Date
------------------------------
2015 HY 2014 HY Change
GBPm GBPm GBPm
------------------------------------------ -------- ---------- --------
Adjusted operating profit(1) 99.7 100.2 (0.5)
Restructuring costs (2.3) (3.1) 0.8
One-off items - operating 0.9 0.8 0.1
Depreciation 85.4 92.1 (6.7)
Other non-cash 7.9 (2.4) 10.3
-------- ---------- --------
EBITDA 191.6 187.6 4.0
Working capital (8.0) (29.3) 21.3
Movement on provisions (5.1) (8.7) 3.6
Capex - additions (88.5) (101.2) 12.7
Capex - disposals 3.6 3.1 0.5
-------- ---------- --------
Operating cash flow - continuing
operations 93.6 51.5 42.1
Interest (23.5) (34.4) 10.9
Tax (14.7) (12.4) (2.3)
Free cash flow - continuing operations 55.4 4.7 50.7
Free cash flow - discontinued operations (0.6) (35.5) 34.9
-------- ---------- --------
Free cash flow 54.8 (30.8) 85.6
Acquisitions (32.7) (41.7) 9.0
Disposal of companies and businesses - 253.1 (253.1)
Restricted cash disposed of with
companies and businesses - (16.3) 16.3
Dividends (33.1) (29.2) (3.9)
Foreign exchange translation and
other items 56.2 40.5 15.7
--------
(Increase) / decrease in net debt 45.2 175.6 (130.4)
Opening net debt (775.0) (1,034.8) 259.8
--------
Closing net debt (729.8) (859.2) 129.4
======== ========== --------
(1) before amortisation and impairment of intangibles (excluding
computer software), restructuring costs and one-off items
Operating cash inflow of GBP93.6m at AER for continuing
operations was GBP42.1m favourable to 2014 mainly due to reductions
in working capital outflows and capital expenditure in 2015 and
helped by the favourable settlement of a legacy legal claim.
Interest payments (including finance lease interest) were
GBP10.9m lower than last year at GBP23.5m, principally due to the
re-phasing of interest payments to the second half of the year
following the bond refinancing in 2014.
Free cash inflow from continued operations of GBP55.4m was
GBP50.7m favourable compared to the prior year. The cash spent on
acquisitions in H1 totalled GBP32.7m and the Company made a
dividend payment of GBP33.1m in 2015.
Foreign exchange translation and other items reduced net debt by
GBP56.2m, leaving an overall reduction in net debt of GBP129.4m
compared to 30 June 2014 and closing net debt of GBP729.8m.
Capital expenditure (at AER)
Net capital expenditure from continuing operations of GBP84.9m
was GBP13.2m lower than in the first half of 2014 due to exchange
rate movements and phasing. We expect capital expenditure to be no
more than GBP200m for the full year.
Pensions (at AER)
At 30 June 2015 the Company's UK defined benefit pension scheme,
which is closed to new members, was valued at an accounting surplus
of GBP203.9m on the Company's balance sheet. The Company has
recognised the pension surplus as an asset because the group has an
unconditional right to a refund of the surplus at the end of the
Scheme's life.
The trustees value the scheme on a different basis. The most
recent formal actuarial valuation showed that at 31 March 2013 the
Scheme was 98.7% funded with a deficit of GBP17.8m. However, based
on movements since 31 March 2013 the Scheme was estimated to have
an actuarial surplus in excess of GBP20m at 30 June 2015.
It is anticipated that the Scheme will remain in surplus but in
order to mitigate the risk that it does not, annual contributions
of GBP3.2m per annum over the six-year period will be paid into a
joint escrow account by the Company. The first payment was made in
October 2014. In the event that the deficit is not cleared by the
time of the 31 March 2019 valuation, it will be funded from the
escrow account.
Funding (at AER)
At 30 June 2015 the group had net debt of GBP730m and a strong
liquidity position, comprising over GBP225m of centrally held funds
and GBP270m of available undrawn committed facilities.
During Q1 the group refinanced its GBP270m Revolving Credit
Facility and GBP40m Letter of Credit Facility, both maturing
December 2016 combining the two facilities into a single facility,
a GBP315m cash and letter of credit facility maturing in January
2020, of which a maximum of GBP270m may be used for cash
drawings.
The group has a GBP300m bond maturing in March 2016. It is
envisaged that the bond will be refinanced substantially through
existing cash balances and facilities. However, we will continue to
review our funding position and will provide an update in due
course.
The Directors continue to adopt the going concern basis in
preparing the interim statement on the basis that the group's
strong liquidity position and ability to reduce operating capital
expenditure or expenditure on bolt-on acquisitions are sufficient
to meet the group's forecast funding needs, including those
modelled in a downside case.
Appendix 1
Regional Analysis - ongoing operations
Revenue Adjusted operating profit
---------------------------------- ------------------------------------
GBPm 6 months Change from 6 months Change from
to 30 June HY 2014 to 30 June HY 2014
2015 2015
-------------- ------------------ ---------------- ------------------
CER AER CER AER CER AER CER AER
----------------------- ------ ------ -------- -------- ------- ------- -------- --------
France 170.4 155.3 (3.1%) (13.4%) 23.6 21.5 (16.0%) (24.8%)
Benelux 110.1 100.4 (0.8%) (11.3%) 16.7 15.2 (3.5%) (14.1%)
Germany 90.4 83.5 3.0% (6.6%) 23.3 21.6 11.0% 0.9%
Other Europe 43.9 40.2 14.0% 2.3% 6.1 5.6 13.0% 1.8%
Total Europe 414.8 379.4 0.4% (9.9%) 69.7 63.9 (2.9%) (12.7%)
UK & Ireland 111.0 110.3 18.0% 17.1% 20.4 19.3 14.6% 8.4%
Rest of World 58.2 54.8 5.1% (2.5%) 12.5 11.9 (3.8%) (9.8%)
UK & Rest of World 169.2 165.1 13.2% 9.8% 32.9 31.2 6.8% 0.6%
Asia 52.9 53.7 13.3% 16.2% 4.7 4.6 51.6% 48.4%
North America 176.9 189.3 8.3% 17.8% 17.8 19.1 19.5% 30.8%
Pacific 67.7 63.6 4.3% (2.2%) 13.7 12.9 7.9% 1.6%
Central and regional
overheads - - - - (32.3) (32.3) 6.9% 6.9%
----------------------- ------ ------ -------- -------- ------- ------- -------- --------
Ongoing operations 881.5 851.1 5.2% 0.9% 106.5 99.4 8.0% (0.5%)
Disposed businesses 4.6 4.2 (56.6%) (61.1%) 0.4 0.3 33.3% -
----------------------- ------ ------ -------- -------- ------- ------- -------- --------
Continuing operations 886.1 855.3 4.5% 0.1% 106.9 99.7 8.0% (0.5%)
----------------------- ------ ------ -------- -------- ------- ------- -------- --------
Appendix 2
Category Analysis - ongoing operations
Revenue Adjusted operating profit
---------------------------------- -----------------------------------
GBPm 6 months Change from 6 months Change from
to 30 June HY 2014 to 30 June HY 2014
2015 2015
-------------- ------------------ ---------------- -----------------
CER AER CER AER CER AER CER AER
----------------------- ------ ------ -------- -------- ------- ------- ------- --------
Pest Control 367.2 367.8 9.6% 10.0% 65.0 63.7 10.5% 7.8%
Hygiene 227.1 214.5 2.3% (4.4%) 42.9 40.5 (0.2%) (6.9%)
Workwear 192.6 175.8 (2.4%) (12.6%) 24.0 21.8 (9.4%) (19.3%)
Other 94.6 93.0 13.4% 11.2% 6.9 5.7 38.0% 14.0%
Central and regional
overheads - - - - (32.3) (32.3) 6.9% 6.9%
----------------------- ------ ------ -------- -------- ------- ------- ------- --------
Ongoing operations 881.5 851.1 5.2% 0.9% 106.5 99.4 8.0% (0.5%)
Disposed businesses 4.6 4.2 (56.6%) (61.1%) 0.4 0.3 33.3% -
----------------------- ------ ------ -------- -------- ------- ------- ------- --------
Continuing operations 886.1 855.3 4.5% 0.1% 106.9 99.7 8.0% (0.5%)
----------------------- ------ ------ -------- -------- ------- ------- ------- --------
Consolidated income statement
6 months 6 months
to 30 to 30
June June
2015 2014
Notes GBPm GBPm
--------------------------------- ---------- ------------- ------------- --------- ----------
Revenue 4 855.3 854.4
Operating expenses (770.9) (766.2)
------------------------------------------------------------------ ------- --------- ----------
Operating profit 84.4 88.2
Analysed as:
Operating profit before amortisation and
impairment of intangibles(1) , restructuring
costs and one-off items 4 99.7 100.2
Restructuring costs 4 (2.3) (3.1)
One-off items - operating 4 0.9 0.8
Amortisation and impairment of
intangible assets(1) 4 (13.9) (9.7)
------------------------------------------------------ ----- ------- --------- ----------
Operating profit 84.4 88.2
Interest payable and similar charges (25.2) (29.3)
Interest receivable 5.3 4.4
Net interest credit from pensions 3.0 1.3
Share of profit from associates
(net of tax) 2.7 2.2
------------------------------------------------------ ----- ------- --------- ----------
Profit before income tax 70.2 66.8
Income tax expense(2) (14.4) (14.8)
------------------------------------------------------ ----- ------- --------- ----------
Profit for the period from continuing
operations 55.8 52.0
Discontinued operations:
Profit for the period from
discontinued operations 5 - 135.8
Profit for the period (including discontinued
operations) 55.8 187.8
------------------------------------------------------------------ ------- --------- ----------
Attributable to:
Equity holders of the Company 55.5 187.7
Non-controlling interests 0.3 0.1
------------------------------------- ------------------- ------- --------- ----------
55.8 187.8
------------------------------------- ------------------- ------- --------- ----------
The weighted average number of ordinary shares in issue is 1,819m
(HY 2014: 1,817m). For the diluted calculation the adjustment
for share options and LTIPs is 6.2m (HY 2014: 6.3m).
Basic earnings per share
- Continuing operations 3.05p 2.86p
- Discontinued operations - 7.47p
- Continuing and discontinued
operations 3.05p 10.33p
Diluted earnings per share
- Continuing operations 3.04p 2.85p
- Discontinued operations - 7.45p
- Continuing and discontinued
operations 3.04p 10.30p
Basic adjusted earnings
per share(3)
- Continuing operations 3.49p 3.26p
Diluted adjusted earnings
per share(3)
- Continuing operations 3.48p 3.25p
(1) excluding computer software
(2) taxation includes GBP13.3m (HY 2014: GBP11.9m) in respect of
overseas taxation
(3) earnings per share before the after tax effects of
amortisation and impairment of intangibles (excluding computer
software), restructuring costs and one-off items and net interest
credit on pensions
Consolidated statement of comprehensive income
6 months 6 months
to 30 to 30
June June
2015 2014
GBPm GBPm
--------------------------------------------------- ---------------------- ------- --------- ---------
Profit for the period (including discontinued
operations) 55.8 187.8
Other comprehensive income:
Items that are not reclassified subsequently
to profit or loss:
Remeasurement of net defined benefit asset/liability 8.0 21.5
Tax related to remeasurement of net defined
benefit asset/liability (1.7) (4.3)
Items that may be reclassified subsequently
to profit or loss:
Net exchange adjustments
offset in reserves 11.6 8.1
Effective portion of changes in fair value
of cash flow hedge 0.1 0.6
Cumulative exchange recycled
to income statement on disposal
of foreign operations - 0.6
------------------------------------------------------- ------------------ ------- --------- ---------
Total other comprehensive income 18.0 26.5
Total comprehensive income 73.8 214.3
--------------------------------------------------------------------------- ------- --------- ---------
Attributable to:
Equity holders of the
Company 73.5 214.2
Non-controlling interests 0.3 0.1
------------------------------------------------------------------------------------ --------- ---------
73.8 214.3
------------------------------- ------------------------------------------------- --------- ---------
Consolidated balance sheet
At 30 June At 31 December
2015 2014
Notes GBPm GBPm
-------------------------------------------- ------------------- ----------- ---------------
Assets
Non-current assets
Intangible assets 434.0 431.3
Property, plant and equipment 460.1 505.5
Investments in associated
undertakings 16.5 14.4
Other investments 0.1 0.1
Deferred tax assets 2.9 3.5
Retirement benefit assets 9 203.9 192.2
Other receivables 8.5 11.5
Derivative financial instruments 8 1.0 1.4
-------------------------------------------- ------------------- ----------- ---------------
1,127.0 1,159.9
------------------------------------------- ------------------- ----------- ---------------
Current assets
Other investments 98.5 51.4
Inventories 58.5 58.9
Trade and other receivables 312.8 314.5
Current tax assets 5.8 6.0
Derivative financial instruments 8 1.7 0.6
Cash and cash equivalents 167.9 197.1
-------------------------------------------- ------------------- ----------- ---------------
645.2 628.5
------------------------------------------- ------------------- ----------- ---------------
Liabilities
Current liabilities
Trade and other payables (362.5) (382.0)
Current tax liabilities (67.5) (71.8)
Provisions for other liabilities
and charges (22.2) (24.5)
Bank and other short-term
borrowings 7 (333.0) (31.1)
Derivative financial instruments 8 (6.4) (6.7)
-------------------------------------------- ------------------- ----------- ---------------
(791.6) (516.1)
------------------------------------------- ------------------- ----------- ---------------
Net current assets / (liabilities) (146.4) 112.4
-------------------------------------------- ------------------- ----------- ---------------
Non-current liabilities
Other payables (14.2) (12.9)
Bank and other long-term
borrowings 7 (650.7) (976.1)
Deferred tax liabilities (76.9) (78.3)
Retirement benefit obligations (26.0) (25.8)
Provisions for other liabilities
and charges (55.0) (59.8)
Derivative financial instruments 8 (16.2) (19.4)
-------------------------------------------- ------------------- ----------- ---------------
(839.0) (1,172.3)
------------------------------------------- ------------------- ----------- ---------------
Net assets 141.6 100.0
-------------------------------------------- ------------------- ----------- ---------------
Equity
Capital and reserves attributable to the company's equity
holders
Called up share capital 18.2 18.2
Share premium account 6.8 6.8
Other reserves (1,760.3) (1,772.0)
Retained profits 1,876.8 1,847.2
-------------------------------------------- -------------- --- ----------- ---------------
141.5 100.2
Non-controlling interests 0.1 (0.2)
-------------------------------------------- -------------- --- ----------- ---------------
Total equity 141.6 100.0
-------------------------------------------- -------------- --- ----------- ---------------
Consolidated statement of changes in equity
Called
up Share Non
share premium Other Retained controlling Total
capital account reserves earnings interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ----------- ----------- -------------- ---------
At 1 January 2014 18.2 6.8 (1,790.2) 1,533.1 0.1 (232.0)
Profit for the period - - - 187.7 0.1 187.8
Other comprehensive income:
Net exchange adjustments offset
in reserves - - 8.1 - - 8.1
Remeasurement of net defined
benefit asset/liability - - - 21.5 - 21.5
Effective portion of changes
in fair value of cash flow hedge - - 0.6 - - 0.6
Cumulative exchange recycled
to income statement on disposal
of foreign operations - - - 0.6 - 0.6
Tax related to remeasurement
of net defined benefit asset/liability - - - (4.3) - (4.3)
----------------------------------------- ---------- ---------- ----------- ----------- -------------- ---------
Total comprehensive income for
the period - - 8.7 205.5 0.1 214.3
Transactions with owners:
Dividends paid to equity shareholders - - - (29.2) - (29.2)
Cost of share options and long-term
incentive plan - - - 0.9 - 0.9
At 30 June 2014 18.2 6.8 (1,781.5) 1,710.3 0.2 (46.0)
----------------------------------------- ---------- ---------- ----------- ----------- -------------- ---------
At 1 January 2015 18.2 6.8 (1,772.0) 1,847.2 (0.2) 100.0
Profit for the period - - - 55.5 0.3 55.8
Other comprehensive income:
Net exchange adjustments offset
in reserves - - 11.6 - - 11.6
Remeasurement of net defined
benefit asset/liability - - - 8.0 - 8.0
Effective portion of changes
in fair value of cash flow hedge - - 0.1 - - 0.1
Tax related to remeasurement
of net defined benefit asset/liability - - - (1.7) - (1.7)
----------------------------------------- ---------- ---------- ----------- ----------- -------------- ---------
Total comprehensive income for
the period - - 11.7 61.8 0.3 73.8
Transactions with owners:
Dividends paid to equity shareholders - - - (33.1) - (33.1)
Cost of share options and long-term
incentive plan - - - 0.9 - 0.9
At 30 June 2015 18.2 6.8 (1,760.3) 1,876.8 0.1 141.6
----------------------------------------- ---------- ---------- ----------- ----------- -------------- ---------
Treasury shares of GBP7.0m (HY 2014: GBP11.1m) have been netted
against retained earnings. Treasury shares represent 3.8m (HY 2014:
6.0m) shares held by the Rentokil Initial Employee Share Trust. The
market value of these shares at 30 June 2015 was GBP5.6m (HY 2014:
GBP6.7m). Dividend income from, and voting rights on, the shares
held by the Trust have been waived.
Analysis of other reserves Cash
Capital flow
reduction hedge Translation
reserve Legal reserve reserve Total
GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------- ---------- ------------- ----------
At 1 January 2014 (1,722.7) 10.4 0.1 (78.0) (1,790.2)
Net exchange adjustments offset
in reserves - - - 8.1 8.1
Effective portion of changes in
fair value of cash flow hedge - - 0.6 - 0.6
--------------------------------- ------------ ------- ---------- ------------- ----------
Total comprehensive income for
the period - - 0.6 8.1 8.7
At 30 June 2014 (1,722.7) 10.4 0.7 (69.9) (1,781.5)
--------------------------------- ------------ ------- ---------- ------------- ----------
At 1 January 2015 (1,722.7) 10.4 - (59.7) (1,772.0)
Net exchange adjustments offset
in reserves - - - 11.6 11.6
Effective portion of changes in
fair value of cash flow hedge - - 0.1 - 0.1
--------------------------------- ------------ ------- ---------- ------------- ----------
Total comprehensive income for
the period - - 0.1 11.6 11.7
At 30 June 2015 (1,722.7) 10.4 0.1 (48.1) (1,760.3)
--------------------------------- ------------ ------- ---------- ------------- ----------
Consolidated cash flow statement
6 months 6 months
to 30 to 30
June June
2015 2014
Notes GBPm GBPm
---------------------------------------------------- ------ --------- ---------
Profit for the period 55.8 187.8
Adjustments for:
- Profit on sale of discontinued operations
excluding costs of disposal 5 - (146.0)
- Discontinued operations tax 5 - 0.5
- Tax 14.4 14.8
- Share of profit from associates (2.7) (2.2)
- Net interest credit from pensions (3.0) (1.3)
- Interest income (5.3) (4.4)
- Interest expense 25.2 29.3
Reversal of non-cash items:
- Depreciation and impairment of property,
plant and equipment 80.4 87.0
- Amortisation and impairment of intangible
assets(1) 13.9 10.1
- Amortisation of computer software 5.0 5.9
- LTIP charges 0.9 0.9
- Other non-cash items 7.0 -
- Profit on sale of property, plant and
equipment (0.4) (0.2)
- Loss on disposal / retirement of intangible 0.4 -
assets
- Profit on disposal of companies and businesses
(not included within discontinued operations) - (3.1)
Changes in working capital (excluding the
effects of acquisitions and exchange differences
on consolidation):
- Inventories (2.0) (4.2)
- Trade and other receivables (12.0) (38.7)
- Trade and other payables and provisions 0.3 (20.2)
---------------------------------------------------- ------ --------- ---------
Cash generated from operating activities 177.9 116.0
Interest received 5.0 5.3
Interest paid (28.1) (39.3)
Income tax paid (14.7) (12.4)
---------------------------------------------------- ------ --------- ---------
Net cash generated from operating activities 140.1 69.6
---------------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (77.4) (92.2)
Purchase of intangible fixed assets (5.1) (5.6)
Proceeds from sale of property, plant and
equipment 3.6 3.1
Acquisition of companies and businesses,
net of cash acquired 10 (32.7) (41.7)
Disposal of companies and businesses - 253.1
Disposal of restricted cash - (16.3)
Net cash flows from investing activities (111.6) 100.4
---------------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Dividends paid to equity shareholders (33.1) (29.2)
Interest element of finance lease payments (0.4) (0.4)
Capital element of finance lease payments (4.5) (4.0)
Cash outflow on settlement of debt related foreign
exchange forward contracts (0.3) (5.4)
Proceeds from issue of debt 36.6 2.6
Net investment in term deposits (47.1) 241.5
Net loan repayments - (400.1)
---------------------------------------------------- ------ --------- ---------
Net cash flows from financing activities (48.8) (195.0)
---------------------------------------------------- ------ --------- ---------
Net decrease in cash and cash equivalents (20.3) (25.0)
Cash and cash equivalents at beginning of
year 194.1 143.4
Exchange losses on cash and cash equivalents (6.5) (4.7)
---------------------------------------------------- ------ --------- ---------
Cash and cash equivalents at end of the
financial period 167.3 113.7
---------------------------------------------------- ------ --------- ---------
(1) excluding computer software
1. General information
The Company is a limited liability company incorporated and
domiciled in the UK with a listing on the London Stock
Exchange.
The address of its registered office is Rentokil Initial plc,
Riverbank, Meadows Business Park, Blackwater, Camberley, Surrey
GU17 9AB.
The consolidated half-yearly financial information for the
half-year to 30 June 2015 was approved for issue on 29 July
2015.
On pages 56 to 57 of the Annual Report 2014 we set out the
group's approach to risk management and on pages 36 to 37 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 2014 and actions continue
to be taken to substantially mitigate the impact of such risks,
should they materialise.
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
2014. The comparative figures for the year ended 31 December 2014
are not the group's statutory accounts for that financial year.
Those accounts have been reported upon by the group's auditors and
delivered to the registrar of companies. The report of the auditors
was unqualified, did not include a reference to any matters to
which the auditors 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 2014 results please refer to the
Annual Report 2014 which can be accessed here:
http://www.rentokil-initial.com/investors/results-centre
2. Basis of preparation
These interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU. As required by the Disclosure and
Transparency Rules of the Financial Conduct Authority, the interim
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the
year ended 31 December 2014 except for the changes described in
note 3.
After reviewing group cash balances, borrowing facilities and
projected cash flows, the directors believe that the group has
adequate resources to continue operations for the foreseeable
future. For this reason they continue to adopt the going concern
basis in preparing the consolidated financial statements.
3. Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 December 2014, as
described in those financial statements.
The preparation of the interim financial information for the
half-year ended 30 June 2015 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.
Significant seasonal or cyclical variations in the group's total
revenues are not experienced during the financial year.
Changes in accounting policies
The group has adopted the following amendments to standards with
effect from 1 January 2015:
- Defined benefit plans: Employee contributions - amendments to IAS 19
- Annual improvements to IFRS: 2010-2012 cycle - amendments to
IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38
- Annual improvements to IFRS: 2011-2013 cycle - amendments to
IFRS 1, IFRS 3, IFRS 13 and IAS 40
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 2014 or
30 June 2014. 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" which the group has implemented with effect
from 1 January 2009.
Adjusted Adjusted
Revenue Revenue operating operating
profit profit
6 months 6 months 6 months 6 months
to 30 to 30 to 30 to 30
June 2015 June 2014 June 2015 June 2014
Ongoing operations GBPm GBPm GBPm GBPm
------------------------------------------- ----------- ----------- ------------ ------------
France 170.4 175.9 23.6 28.1
Benelux 110.1 111.0 16.7 17.3
Germany 90.4 87.8 23.3 21.0
Other Europe 43.9 38.5 6.1 5.4
------------------------------------------- ----------- ----------- ------------ ------------
Europe 414.8 413.2 69.7 71.8
UK & Ireland 111.0 94.1 20.4 17.8
Rest of World 58.2 55.4 12.5 13.0
------------------------------------------- ----------- ----------- ------------ ------------
UK & Rest of World 169.2 149.5 32.9 30.8
Asia 52.9 46.7 4.7 3.1
North America 176.9 163.3 17.8 14.9
Pacific 67.7 64.9 13.7 12.7
Central and regional costs - - (32.3) (34.7)
------------------------------------------- ----------- ----------- ------------ ------------
Ongoing operations at constant exchange
rates 881.5 837.6 106.5 98.6
Disposed businesses(1) 4.6 10.6 0.4 0.3
------------------------------------------- ----------- ----------- ------------ ------------
Continuing operations at constant
exchange rates 886.1 848.2 106.9 98.9
Foreign exchange (30.8) 6.2 (7.2) 1.3
------------------------------------------- ----------- ----------- ------------ ------------
Continuing operations at actual
exchange rates 855.3 854.4 99.7 100.2
------------------------------------------- ----------- ----------- ------------ ------------
Restructuring costs - - (2.3) (3.1)
One-off items - operating - - 0.9 0.8
Amortisation and impairment of intangible
assets(2) - - (13.9) (9.7)
Operating profit - - 84.4 88.2
Interest payable and similar charges - - (25.2) (29.3)
Interest receivable - - 5.3 4.4
Net interest credit from pensions - - 3.0 1.3
Share of profit from associates
(net of tax) - Asia - - 2.7 2.2
------------------------------------------- ----------- ----------- ------------ ------------
Profit before income tax and discontinued
operations - - 70.2 66.8
------------------------------------------- ----------- ----------- ------------ ------------
(1) disposed businesses are those businesses that have been
disposed or exited and therefore are not included as an ongoing
operation
(2) excluding computer software
Restructuring costs, one-off items, and amortisation and impairment
of intangible assets (at actual exchange rates)
Amortisation Amortisation Restructuring Restructuring
and impairment and impairment costs costs One-off One-off
6 months 6 months 6 months 6 months items items
to 30 to 30 to to 6 months 6 months
June 2015 June 2014 30 June 30 June to to
2015 2014 30 June 30 June
2015 2014
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------------- ----------------- ---------------- ---------------- ----------- -----------
Europe 3.4 1.9 1.9 1.6 8.0 (2.2)
UK & Rest of
World 2.6 1.5 0.2 0.3 2.0 0.5
Asia 0.8 0.5 - 0.2 0.1 -
North America 6.1 5.0 0.1 - (0.3) 0.6
Pacific 0.2 0.1 0.1 0.3 - -
Central and
regional 0.8 0.7 - 0.7 (10.7) 0.3
------------------ ----------------- ----------------- ---------------- ---------------- ----------- -----------
13.9 9.7 2.3 3.1 (0.9) (0.8)
------------------ ----------------- ----------------- ---------------- ---------------- ----------- -----------
Restructuring costs and one-off items have been separately
identified as they are not considered to be "business as usual"
expenses and have a varying impact on different businesses and
reporting periods.
One-off items includes GBP10.1m for the costs associated with
the closure of the Austrian and Belfast flat linen businesses
(Europe GBP8.3m, UK & ROW GBP1.8m), offset by GBP10.8m related
to the net income from the settlement of a legacy legal claim
(Central and regional).
5. Discontinued operations and disposals
There are no discontinued operations as at 30 June 2015.
On 18 March 2014 the group sold the Initial Facilities (IF)
division. The division was not previously classified as held for
sale or as a discontinued operation. Management committed to a plan
to sell this division early in 2014, following a decision to
concentrate on the group's core international businesses in pest
control, hygiene and workwear. For details on the effects of this
discontinued operation, please refer to the 2014 annual report.
6. Dividends
6 months 6 months Year
to 30 to 30 to 31
June June December
2015 2014 2014
GBPm GBPm GBPm
------------------------ -------- ---------------- ----------- ----------- -----------
2013 final dividend paid - 1.61p per share - 29.2 29.2
2014 interim dividend paid - 0.77p per share - - 14.0
2014 final dividend paid - 1.82p per share 33.1 - -
33.1 29.2 43.2
---------------------------------------------------- ----------- ----------- -----------
The directors have declared an interim dividend of 0.87p per
share amounting to GBP15.8m payable on 16 September 2015 to
shareholders on the register at 14 August 2015. The Company has a
progressive dividend policy and will take a view on the level of
any growth for 2015 based on the year-end results. These interim
financial statements do not reflect this dividend payable.
7. Bank and other borrowings
At 30 At 31
June December
2015 2014
GBPm GBPm
--------------------------------- ----- ----------------------- ------- ----------
Non-current
RCF and other bank borrowings 0.1 0.2
Bond debt 635.1 960.6
Finance lease liabilities 15.5 15.3
----------------------------------------------------------------- ------- ----------
650.7 976.1
----------------------- ------- ----------
Current
Bank overdrafts 0.6 3.0
Bank borrowings 1.0 1.3
Bond debt 302.9 -
Bond interest accruals 19.4 18.7
Finance lease liabilities 9.1 8.1
----------------------------------------------------------------- ------- ----------
333.0 31.1
----------------------- ------- ----------
Total bank and other borrowings 983.7 1,007.2
----------------------------------------------------------------- ------- ----------
Medium-term notes and bond debt comprises:
Bond interest Effective hedged
coupon interest rate
------------------------------------- ------------------------ -----------------
Non-current
EUR500m bond due September 2019 Fixed 3.375% Fixed 3.62%
EUR350m bond due October 2021 Fixed 3.25% Fixed 3.52%
EUR50m bond due March 2018(1) Float 3M EURIBOR+0.48% Fixed 0.68%
GBP1.3m debentures Fixed 5.00% Fixed 5.00%
GBP0.3m debentures Fixed 4.50% Fixed 4.50%
Current
GBP300m bond due March 2016 Fixed 5.75% Fixed 4.48%
Average cost of bond debt at period
end rates 3.76%
--------------------------------------------------------------- -----------------
(1) The EUR50m bond due March 2018 was fixed at 0.57% payable
quarterly. The effective hedge rate is higher than the annual
coupon on our bonds due to discount and fees paid on issuance
On 27 January 2015 a new combined facility of GBP315m, maturing
in 2020, was signed. This new facility replaced the previous
facility which was due to expire in December 2016. Under the
facility, a maximum of GBP270m can be drawn in cash and the
remainder available for guarantees. The marginal cost of borrowing
under the facility at the period end was 1.18%. During the six
months to 30 June 2015 the facility was undrawn.
The group's facility, bank borrowings and bonds are held at
amortised cost.
The carrying values and the fair values of the group's
non-current borrowings are shown below. Fair values are based on
cashflows discounted at the current market rates:
Carrying Carrying Fair Value Fair Value
amount amount
30 June 31 December 30 June 31 December
2015 2014 2015 2014
GBPm GBPm GBPm GBPm
--------------------------------- --------- ------------ ----------- ------------
Bank borrowings 0.1 0.2 0.1 0.2
GBP300m bond due March 2016 - 304.8 - 315.8
EUR500m bond due September 2019 353.1 386.2 389.6 431.9
EUR350m bond due October 2021 245.6 268.6 275.8 308.0
EUR50m bond due March 2018 35.4 - 35.6 -
GBP1.6m debentures 1.0 1.0 1.7 1.7
Finance lease liabilities 15.5 15.3 15.5 15.3
--------------------------------- --------- ------------ ----------- ------------
650.7 976.1 718.3 1,072.9
--------------------------------- --------- ------------ ----------- ------------
The carrying values and the fair values of the group's bonds to
be repaid in the next 12 months are shown below. Fair values are
based on cashflows discounted at the current market rates:
Carrying Carrying Fair Value Fair Value
amount amount
30 June 31 December 30 June 31 December
2015 2014 2015 2014
GBPm GBPm GBPm GBPm
----------------------------- --------- ------------ ----------- ------------
GBP300m bond due March 2016 302.9 - 309.4 -
----------------------------- --------- ------------ ----------- ------------
8. Derivative financial instruments
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;
Level 3 - inputs for the asset or liability that are not based
on observable market data.
The group holds all derivatives at fair value using discounted
cash flow models based on market rates which are observable.
Therefore all derivative financial instruments and
available-for-sale assets held by the group fall into Level 2.
Contingent consideration payable on acquisitions by the group falls
into Level 3. No financial instruments have moved between levels in
the period.
Fair value Fair value Fair value Fair Value
assets assets liabilities liabilities
30 June 30 June 30 June 30 June
2015 2014 2015 2014
GBPm GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------------- -------------
Interest rate swaps:
* non-hedge - - (7.4) (7.9)
* cash flow hedge 1.0 0.4 (6.1) (3.1)
* net investment hedge 1.2 1.0 (9.0) (12.8)
Foreign exchange swaps:
* non-hedge 0.5 0.6 (0.1) (2.4)
---------------------------------- ----------- ----------- ------------- -------------
2.7 2.0 (22.6) (26.2)
---------------------------------- ----------- ----------- ------------- -------------
Analysed as follows:
Current portion 1.7 0.6 (6.4) (6.8)
Non-current portion 1.0 1.4 (16.2) (19.4)
---------------------------------- ----------- ----------- ------------- -------------
2.7 2.0 (22.6) (26.2)
---------------------------------- ----------- ----------- ------------- -------------
9. Retirement benefit obligations
Apart from the legally required social security state schemes,
the group operates a number of pension schemes around the world
covering many of its employees. The major schemes are of the
defined benefit type with assets held in separate trustee
administered funds.
The principal scheme in the group is the Rentokil Initial
Pension Scheme in the United Kingdom ("the scheme"). It has a
number of defined benefit sections which are all now closed to new
members. At 30 June 2015 the scheme was valued at an accounting
surplus of GBP203.9m (December 2014: GBP192.2m) on the group's
balance sheet.
The scheme is re-appraised bi-annually by independent actuaries
based upon actuarial assumptions in accordance with IAS 19
requirements. The principal assumptions used for the scheme are
shown below.
31 December
30 June 2015 2014
GBPm GBPm
-------------------------- --------------- --------------
Weighted average %
Discount rate 3.7% 3.4%
Future salary increases N/A N/A
Future pension increases 3.4% 3.2%
RPI Inflation 3.5% 3.3%
CPI Inflation 2.4% 2.2%
---------------------------- --------------- --------------
The trustees of the scheme value the scheme on a different basis
and at 30 June 2015 their valuation is estimated to be a surplus in
excess of GBP20m. Under the terms of the agreed recovery plan, the
group continues to make payments into escrow of GBP3.2m per year
and the balance in escrow currently stands at GBP6.4m. The
valuations stated exclude the payments into escrow. The group
continues to recognise the escrow balance as restricted cash. Under
the terms of the recovery plan in the event the scheme is in
deficit at the time of the 31 March 2019 valuation it will be
funded from the escrow account.
10. Business combinations
The group purchased 100% of the share capital or the trade and
assets of 14 companies and businesses in the period. The total
consideration in respect of acquisitions in the current year was
GBP34.6m and the total cash outflow in the period from current and
past period acquisitions, net of cash acquired, was GBP32.7m.
From the dates of acquisition to 30 June 2015, these
acquisitions contributed GBP7.1m to revenue and GBP2.0m to
operating profit. If the acquisitions had occurred on 1 January
2015, the revenue and operating profit of the combined entity would
have amounted to GBP857.4m and GBP84.6m respectively.
Details of goodwill and the fair value of net assets acquired
are as follows:
6 months 6 months
to 30 to 30
June June
2015 2014
GBPm GBPm
------------------------------ --------- ---------
Purchase consideration:
- Cash paid 26.6 36.1
- Deferred and contingent
consideration 8.0 10.0
---------------------------------- --------- ---------
Total purchase consideration 34.6 46.1
Fair value of net assets
acquired (12.8) (23.4)
---------------------------------- --------- ---------
Goodwill from current period
acquisitions 21.8 22.7
---------------------------------- --------- ---------
Goodwill represents the synergies, workforce and other benefits
expected as a result of combining the respective businesses. None
of the goodwill recognised is expected to be deductible for tax
purposes.
Deferred consideration up to a maximum of GBP8.0m is payable
over the next two years, and the group incurred acquisition-related
costs of GBP0.5m in respect of the above acquisitions.
The provisional fair value of assets and liabilities arising
from acquisitions in the period are shown below. The provisional
fair values will be finalised in the 2015 financial statements. The
fair values are provisional as the acquisition accounting has not
yet been finalised as a result of the proximity of the acquisitions
to the period end.
6 months
6 months to 30
to 30 June
June 2015 2014
GBPm GBPm
--------------------------------- ----------- ---------
Non-current assets
- Intangible assets 12.8 21.3
- Property, plant and equipment 1.7 3.6
Current assets 1.3 6.0
Current liabilities (0.5) (4.3)
Non-current liabilities (2.5) (3.2)
------------------------------------- ----------- ---------
Net assets acquired 12.8 23.4
------------------------------------- ----------- ---------
11. Events occurring after the balance sheet date
There were no significant events occurring after the balance
sheet date.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU
-- the interim management report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
o DTR 4.2.8R of the Disclosure 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
29 July 2015
The directors of Rentokil Initial plc are listed in the Rentokil
Initial plc Annual Report for 31 December 2014. A List of the
current directors is maintained on the Rentokil Initial website:
www.rentokil-initial.com
INDEPENDENT REVIEW REPORT TO RENTOKIL INITIAL PLC
Introduction
We have been engaged by the Company to review the financial
statements in the half-yearly financial report for the six months
ended 30 June 2015 which comprises the consolidated income
statement, consolidated balance sheet, consolidated statement of
comprehensive income, consolidated statement of changes in equity,
consolidated cash flow statement and the related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the EU.
The financial statements included in this half-yearly financial
report have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the financial statements in the half-yearly financial report based
on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. 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 Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial statements in the
half-yearly financial report for the six months ended 30 June 2015
is not prepared, in all material respects, in accordance with IAS
34 as adopted by the EU and the DTR of the UK FCA.
Paul Sawdon
for and on behalf of KPMG LLP,
Chartered Accountants
15 Canada Square
London
E14 5GL
29 July 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUBPMUPAGMB
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