TIDMRTO
RNS Number : 2186M
Rentokil Initial PLC
27 July 2017
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2017
Accelerated Organic Revenue growth and strong execution of
M&A
27 July 2017
H1
Results 2017 Growth
GBPm AER AER CER
Ongoing Revenue 1,056.0 28.4% 16.0%
Revenue 1,233.6 25.0% 13.0%
Ongoing Operating
Profit 122.1 29.2% 13.0%
Operating Profit 143.8 56.6% 37.5%
Adjusted profit
before tax 126.3 28.5% 12.5%
Net profit on disposal 462.5 - -
of businesses
Profit before
tax 592.9 637.4% 581.8%
Free cash flow 68.1
Adjusted EPS 5.36p 27.6% 10.9%
EPS 31.62p 788.2% 717.1%
Dividend per
share 1.14p 15.2%
This statement includes certain financial performance
measures which are not GAAP measures as defined
under International Financial Reporting Standards
(IFRS). An explanation of the measures used
along with reconciliation to the nearest IFRS
measures is provided in Note 12 on page 24.
Interim Highlights
-- Further delivery of financial targets - Ongoing Revenue
growth of 16.0%, Ongoing Operating Profit growth of 13.0% and Free
Cash Flow of GBP68.1m
-- Continued improvement in Organic Revenue growth - total
Organic Revenue growth of 4.2% driven by Pest Control, +6.5% and
Hygiene, +3.0%. Flat Organic Revenue in France Workwear of -0.1%
(H1 2016: -3.7%)
-- Particularly strong execution of M&A - GBP206.8m spend on M&A in first half including:
o Joint venture with India's largest pest control company, PCI,
a strategically important step in a country with significant growth
potential - 57% stake acquired with annualised revenues in the year
prior to acquisition of GBP47m
o Five pest control acquisitions in the US with combined
annualised revenues of GBP61m reinforce our position as the number
three player in the key North American market
o 19 further acquisitions (13 in Pest Control, five in Hygiene
and one in Protect & Enhance) with combined annualised revenues
of GBP67m
-- Completion of joint venture with Haniel to create a leading
provider of workwear and hygiene services in Europe on 30 June 2017
and proposed divestment of eight laundries in France to Regie Linge
Developpement (RLD). We aim to return our remaining France workwear
operations to profitable growth by end 2018
-- 15.2% increase in interim dividend of 1.14p
-- Expectations for the full year unchanged
Commenting on today's interim results Andy Ransom, CEO of
Rentokil Initial plc, said:
"I am pleased with our performance in H1 and the continued
momentum in the business. Pest Control has performed well across
the regions and we remain encouraged by the progress we are
delivering in Hygiene. We have significantly accelerated our
M&A activity this year, acquiring 24 high quality pest control
and hygiene businesses across 15 countries, strengthening our
already leading positions in key growth territories.
"Our joint venture with Haniel represents a step change in the
execution of our strategy. It is a great deal for both our
companies and gives us a valuable stake in a leading European
Workwear and Hygiene business while at the same time allowing us to
redeploy the proceeds from the divestment into Pest Control and
Hygiene, which now represent over 90% of operating profit. We are a
stronger and more focused business going forward, operating in
higher growth markets, with improving levels of organic growth,
reduced capital intensity and high levels of cash generation. As a
reflection of this, we are increasing our guidance for revenue,
profit and cash delivery over the medium term.
"Prospects in the majority of our markets are good and, while
conditions in France remain difficult, we are confident of meeting
our expectations for 2017."
This statement includes certain financial performance measures
which are not GAAP measures as defined under International
Financial Reporting Standards (IFRS). 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. In particular, following
the completion of the Haniel JV on 30 June 2017, the financial
results of the businesses contributed to the JV have been removed
from Ongoing Revenue and Ongoing profit measures. The financial
results of the French workwear businesses that are proposed to be
sold to RLD have also been excluded, recognising an expected
completion of the transaction in the second half of 2017. 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. An explanation of the measures used along with
reconciliation to the nearest IFRS measures is provided in Note 12
on page 24.
Revenue
Excluding the financial performance of disposed businesses and
businesses held for sale, Ongoing Revenue increased by 16.0% in the
first half, with all regions contributing to growth. Both North
America and Asia grew revenues by 29.7%, while the UK and ROW grew
by 7.1%, Pacific by 8.9% and Europe by 4.3%. Group Organic Revenue
growth was 4.2% and growth from acquired businesses was 11.8%.
Ongoing Revenue in Pest Control grew strongly at 25.8% during H1,
of which 6.5% was Organic Revenue, while Hygiene continued its
positive growth trajectory, reporting increased revenues of 3.7%.
Our Protect & Enhance businesses (which include our France
workwear operations, our global Ambius business and our UK Property
Care operations) reported revenue growth of 0.6% during the period.
Total Revenue at actual exchange rates increased by 25.0%,
reflecting the favourable impact of foreign exchange movements.
Profit
Excluding the results of disposed businesses and businesses held
for sale, Ongoing Operating Profit increased by 13.0% in H1,
reflecting growth in all regions but offset by lower profits in
France and an increase in central and regional overheads from
investments in digital capability and increased charges for Long
Term Incentive Plans as a result of the share price performance of
the Company. Restructuring costs amounted to GBP3.8m at CER (H1
2016: GBP4.4m) consisting mainly of costs in respect of initiatives
focused on driving operational efficiency in North America, France
and the UK.
Profit before tax at actual rates grew by 637.4% to GBP592.9m.
Profit before tax is after a net profit on disposal of businesses
of GBP462.5m including the profit on disposal of the businesses
transferred into the Haniel joint venture of GBP481.6m and a loss
of GBP19.1m in relation to the write-down of the eight French
laundries' assets proposed to be divested to RLD. Other one-off
costs amounted to GBP7.7m (H1 2016: GBP2.1m).
Adjusted profit before tax at actual exchange rates of
GBP126.3m, which excludes the net profit from disposal of
businesses, was favourably impacted by foreign exchange movements
of GBP9.0m, due mainly to the weakening of Sterling against the
Euro and the US Dollar in the year.
Cash
Free Cash Flow from continuing operations at actual exchange
rates amounted to GBP68.1m, driven by the increased profit delivery
in H1 and a year-on-year reduction in interest payments following
the bond refinancing in Q1 2016, offset by an increase in capex (in
line with revenue) and adverse working capital phasing. Spend on
current and prior-year acquisitions (including the Rentokil PCI
joint venture in India) totalled GBP206.8m, net proceeds received
to date from the completion of the JV with Haniel were GBP396.1m
and dividend payments were GBP43.5m (a GBP6.0m, 16.0% increase on
the prior year). Foreign exchange translation and other items
increased net debt by GBP0.7m, leaving an overall decrease in net
debt of GBP213.2m and closing net debt of GBP1,025.5m.
M&A
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 have had a
particularly strong six months of M&A activity, acquiring 25
businesses - 19 in Pest Control, five in Hygiene and one in Protect
& Enhance with combined annualised revenues in the year prior
to acquisition of GBP175m and total spend including prior year
acquisitions of GBP206.8m. In North America we have continued to
reinforce our presence as the number three player in the world's
largest Pest Control market through the acquisition of five
businesses, including Allgood Pest Solutions. In addition, we have
become the clear market leader in India and in the Kingdom of Saudi
Arabia and the Gulf Cooperation Council countries through the
Rentokil PCI joint venture in India and the acquisition of Sames.
We expect underlying M&A activity for the remainder of the year
to continue in line with H1 but do not currently anticipate as many
larger deals as those executed this year to date. We expect a
further GBP50m spend on M&A in H2.
Enquiries:
Rentokil
Investors Katharine Initial 01276 536585 / 07811
/ Analysts: Rycroft plc 270734
Rentokil
Malcolm Initial
Media: Padley plc 07788 978 199
John Sunnucks Bell Pottinger 0203 772 2549
A presentation for investors and analysts will be held on
Thursday 27 July at 9.15am 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.
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.
REGIONAL PERFORMANCE OVERVIEW
Due to the international nature of the Group, foreign exchange
movements can have a significant impact on regional performance. In
order to help understand the underlying trading performance, unless
otherwise stated, percentage movements in Ongoing Revenue and
Ongoing Operating Profit are presented at constant exchange
rates.
In North America Ongoing Revenue grew 29.7% in H1, of which
24.1% was growth through acquisition and 5.6% was organic. Pest
Control grew by 33.1% (6.0% organic), helped by a very strong
performance in the products business. Strong Ongoing Operating
Profit growth of 29.5% reflects the leverage impact from higher
revenues and acquisitions. Net Operating Margins were maintained at
11.9%, with a 1.6% point improvement in pest control service
margins reflecting greater density and overhead consolidation from
acquisitions, offset by the increase in the mix of the lower margin
products revenues. Five pest control businesses were acquired in
the region in the first half of this year with combined annualised
revenues of c. GBP61m in the year prior to purchase.
Ongoing Revenue for Europe rose by 4.3% (of which 3.0% was
organic), reflecting good growth in Germany (+10.2%) and Southern
Europe (+5.8%) and an improved performance in France, which grew by
0.6%. Latin America, which is run out of the Europe region, once
again performed particularly well rising by 38.8%. Our European
Hygiene operations grew by 3.5%, driven by growth in France and
Southern Europe, while Ongoing Revenue from our Pest Control
businesses grew by 10.6%. Overall Ongoing Operating Profit for the
Europe region rose by 0.6%, with good growth in Benelux, Germany
and Southern Europe offset by declines in France Workwear. Net
Operating Margins declined by 70 basis points to 18.2%, reflecting
ongoing market challenges in our France Workwear business.
Including the CWS-Boco hygiene business in Italy, the region
acquired six new businesses in the first half - two in Pest Control
and four in Hygiene with combined annualised revenues of c.
GBP41m.
As noted above, in December 2016 we signed a joint venture
agreement with Haniel to create a leading provider of Workwear and
Hygiene services in Europe by transferring our Workwear and Hygiene
businesses in Benelux and Central and Eastern Europe into CWS-boco
(owned by Haniel). The transaction completed on 30 June 2017. We
also announce today our proposed divestment of eight laundries
(predominantly flat linen) in France to RLD. Subject to successful
completion of an employee consultation process, the Company expects
to complete the disposal in Q4 2017. We aim to return our remaining
France workwear operations to profitable growth by the end of
2018.
UK & Rest of World region delivered a good performance in
H1, with an overall increase in Ongoing Revenue of 7.1%, comprising
Organic Revenue growth of 2.1% and growth through acquisition of
5.0%. The region delivered continued growth from UK Pest Control
and Hygiene, with Pest Control continuing to benefit from increased
jobbing work in particular. However our UK property care business
has seen a challenging market in H1 which has impacted both revenue
and margins. The Rest of World operations delivered strong Ongoing
Revenue growth of 10.3% across all of its regional clusters in the
Nordics, Caribbean, Africa and MENAT. Overall Ongoing Operating
Profit for the region grew by 4.8%, reflecting higher revenues.
However, Net Operating Margins for the UK and Rest of World region
declined by 50 basis points to 19.4%, reflecting lower margins in
the property care business. The region acquired seven new
businesses in the first half including five in Pest Control and one
in Hygiene with combined annualised revenues of c. GBP22m.
The Asia region has had another excellent performance with
Ongoing Revenue increasing by 29.7% (+7.4% Organic Revenue growth)
with both Pest Control and Hygiene performing well. Our operations
in the less established markets of India (excluding the Rentokil
PCI joint venture), China and Vietnam continue to deliver strong
growth of 16.8%. Including PCI, these countries combined delivered
revenue growth of 166%. Ongoing Operating Profit in the region grew
by 30.5% in 2017, reflecting the leverage from higher revenues,
density and service productivity. Net Operating Margins increased
by 10 basis points to 9.9%, with growth in Hygiene margins being
offset by the dilutive effect of the lower-margin PCI pest control
business. Including PCI, we acquired four pest control businesses
during H1 in India, Singapore and Malaysia with combined annualised
revenues of c. GBP49m.
In the Pacific region Ongoing Revenue grew well by 8.9% in H1,
(+4.7% Organic Revenue growth), driven by good performances in our
Australian pest control and hygiene businesses offsetting some
weakness in residential pest control work in Australia. Ongoing
Operating Profit in the region grew by 8.9%, in line with revenue
growth with Net Operating Margins maintained at 20.9%. We acquired
three small pest control companies in Australia in the first half,
with combined annualised revenues of c. GBP2m.
BUSINESS PERFORMANCE OVERVIEW
Since February 2014 we have implemented an effective and
consistent strategy - called our RIGHT WAY plan - at pace and this
strategy has delivered consistent progress against our financial
targets. The plan has been based upon a clear, fixed business model
with five geographic regions and three core business lines, all
operating on a low-cost, single-country operating structure. Our
three core competencies have been: our colleagues as experts; our
business leadership; and our lean multi-business operations. In
addition, we have used a quadrant analysis tool for capital
allocation and operational management to group our businesses into
a four-box growth potential grid which has again worked very well
for us over the past three and a half years.
Our joint venture with Haniel represents a step change in the
execution of our strategy. The transaction allows us to redeploy
the proceeds from the divestment into Pest Control and Hygiene,
which now represent over 90% of Ongoing Operating Profit. We are a
stronger and more focused business going forward, operating in
higher growth markets, with improving levels of organic growth,
reduced capital intensity and high levels of cash generation.
It is therefore appropriate to update our business model,
strategy and targets to reflect the significant changes to our
business portfolio and our focus going forward. As a reflection of
this, on average over the next five years we would expect our
Ongoing Revenue growth to increase to 5-8% per annum with Ongoing
Profit growth of c. 10% and Free Cash Flow conversion of 90%+.
Business Model
1. We have over 1800 local service teams across the world
covering 91% of global GDP in over 90 of the world's 100 largest
cities across North America, Europe, UK and the Rest of World, Asia
and the Pacific. Operating in over 65 countries, c. 90% of our
revenues are derived outside of the UK.
2. We have market-leading businesses in Pest Control and Hygiene markets:
Following the completion of our Joint Venture with Haniel, the
existing categories and quadrants will be merged into a new
reporting framework as set out below.
Rentokil is the world's leading pest control company with a
principal focus on Growth and Emerging markets with number one
positions in 44 markets, number two positions in 13 markets and
number three positions in eight markets globally.
Initial is a world leader in the provision of global hygiene
services with a focus on delivering operational excellence in over
40 markets in which it operates. It is the leading player in 23
markets, number two in 12 markets and number three in a further
three markets globally.
Our Protect & Enhance businesses (which account for less
than 10% of Ongoing Operating Profit) include Ambius (our global
plants business), our UK property care business and our
France-based workwear business. All are profitable,
cash-generative, route-based businesses focused on delivering
enhanced service quality to protect customer retention and
profitability.
3. The Expertise of our People is paramount to delivering
excellence in service quality. Our 35,500 colleagues across the
world are highly-motivated and trained experts with strong local
insight, operating within integrated country models.
4. We have a Leadership position in Digital Capability and
Innovation and see significant opportunities to drive revenues,
reduce costs and better serve and retain our customers through the
deployment of digital technologies. In addition, the innovation and
development of differentiated products is at the heart of what we
do.
5. At the centre of our Consistent and Efficient Operating Model
is our 'colleague - customer - shareholder' value chain: the RIGHT
People, doing the RIGHT Things for customers, in the RIGHT Way for
shareholders. This necessitates investment in recruiting, training
and retaining the right people who in turn deliver outstanding
customer service (measured by Customer Voice Counts satisfaction
surveys) and sales excellence (measured by gross sales), supported
by innovation and digital expertise. In this way we can deliver
value for shareholders, achieved through customer retention, growth
in contract and jobbing sales, price management and service
efficiency. Underpinning this is a consistent focus on productivity
and cost management, a deep understanding of product and route
density, best practice sharing and common IT platforms.
6 Our Financial Model to Compound Growth is a virtuous circle
predicated on delivering organic growth and M&A growth which
leads to increased density which is directly correlated to improved
gross margins across our business categories. The above, combined
with our low cost operating model, drives strong profitable growth
and sustainable free cash flow which is deployed in two ways:
firstly, into a financially disciplined M&A programme and
operational investment and; secondly, into maintaining our
progressive dividend policy.
Rentokil - the world's largest commercial pest control
company
We have strengthened our position as global leaders in pest
control through increased organic growth and by establishing
stronger market positions particularly in Emerging and Growth
markets, and through innovation, digital expertise and
acquisitions. In H1 2017 Pest Control Ongoing Revenue and Ongoing
Operating Profit grew by 25.8% and 21.4% respectively. Organic
Revenue rose by 6.5% with growth through acquisition of 19.3%. Pest
Control now accounts for 63% of Ongoing Revenue and 70% of Ongoing
Operating Profit and generates a Net Operating Margin of c. 19% on
an annualised basis. In Pest Control M&A we seek an IRR in
Growth markets of 13%+ and 15%+ in Emerging markets.
Pest Control is an attractive and growing market offering
sustainable, long-term growth prospects and is expected to deliver
a compound annual growth rate (CAGR) of between 5% and 6%*. A
description of structural growth drivers is provided below:
* Source: Various market reports forecasting over 5+ years
including Markets & Markets, Allied Market Research, Future
Market Insight (all 2017)
1. Emerging markets and urbanisation - this includes the rise of
middle classes in Asia and Latin America which is driving increased
spend on pest control. According to the Organisation for Economic
Cooperation and Development, by 2030 Asia will represent 66% of the
global middle class. Rentokil is uniquely placed in these markets
with unrivalled scale, brand and experience. In Asia we currently
have over 7,500 technicians in 12 countries operating in 500+
locations. We have a strong leadership position in India through
our recent JV with PCI and in H1 our pest control operations in the
more mature markets of Malaysia, Singapore and Indonesia grew at
8%. We also have leadership positions in those cities in which we
are present in Latin America and continue to target new cities and
build greater density. Ongoing Revenue from our operations in
Brazil grew by 37% in the first six months of this year.
2. Science and innovation - innovation is fuelling growth in
pest control, particularly in established markets where consumer
expectations for improved products and techniques is rising.
Rentokil leads the industry in providing innovative solutions to
enhance core lines, meet emerging threats and the requirements of
new regulation. Our strong pipeline of innovations includes
next-generation PestConnect digital products and Lumnia, our
innovative LED electronic fly killer which was launched in 10
markets this year and generated revenues some 40% ahead of our
expectations.
3. Compliance, risks and digital reporting - drivers here
include increasing levels of regulation and enforcement, demand for
higher quality reporting and risk management assurance, and the
impact of social media driving companies to invest in brand
protection. We are leaders in offering digital tools and services
across the customer experience and have digital expertise at every
stage of the customer journey from web searching through to
e-billing. We continue to see strong demand for PestConnect, our
remote monitoring system for rodents, among high-dependency
customers. Over 30,000 devices are now in the field and have sent
us over 25 million individual messages relating to the presence of
rodent activity and service productivity. We also continue to
improve our customer experience through the roll-out of the
myRentokil customer portal which is currently being used in c. 45%
of commercial customer premises. Our objective going forward is to
have 100% of our commercial customers using the myRentokil portal
by the end of 2019.
4. Climate change - rising temperatures are enabling pests to
become endemic. It is also leading to an increased threat from
mosquitoes transmitting diseases such as dengue fever, Zika, yellow
fever, encephalitis, West Nile virus, chikungunya and malaria. With
our global presence we are able to share our expertise gained in
territories such as Asia, Latin America, the Caribbean, Africa and
North America. This is illustrated by our contract to handle pest
control for the Rio 2016 Olympic Games and the award of the US
Federal Government's Centers for Disease Control Zika contract in
the United States and Puerto Rico last year.
5. Global standards - international hygiene standards
(particularly in the food industry) are converging and driving a
consistency in approach from multi-nationals. With operations in
over 65 countries, our international reach is a key differentiator
in our ability to service global accounts and our pipeline of new
opportunities is currently worth c. GBP50m.
6. Growth in North America - this is the world's largest pest
control market (representing 50% of the global market) and worth c.
$8bn. It is expected to reach $10bn by 2020, growing at a CAGR of
c. 5% through to 2023. Rentokil has a strong market position,
growing organically faster than the market. Recent growth has been
aided by a strong performance in national accounts and the pest
products business. Looking forward, demand for mosquito control is
expected to outpace demand for general pest services. North America
is a key market for M&A and, as the 'buyer of choice', our
pipeline remains particularly strong. Through a combination of
organic and non-organic growth actions, we aim to generate $1.5bn
revenues and Net Operating Margins of c. 18% by 2020.
Initial Hygiene - one of the world's leading commercial hygiene
services companies
As a leading player in the hygiene industry, Initial Hygiene has
award-winning products including Signature, Reflection and Colour
and one of the world's strongest brands, which is particularly
valuable in Emerging markets. We have an in-depth understanding of
the importance of density and operational drivers of growth. We
have strong market positions in higher-growth markets and are well
placed to take advantage of major demographic changes.
Since 2013 we have delivered a significant improvement in
revenue growth, established a strong product range, launched the
myInitial customer portal for enhanced customer insight and
engagement and have begun to acquire bolt-on businesses to build
scale and density. In H1 2017 Ongoing Revenue and Ongoing Operating
Profit grew by 3.7% and 9.9% respectively. Organic Revenue rose by
3.0% with growth through acquisition of 0.7%. Hygiene accounts for
19% of Ongoing Revenue and 21% of Ongoing Operating Profit. It
generates a Net Operating Margin of c. 19% on an annualised basis.
In M&A we seek an IRR of 15% to 20%+.
Like Pest Control, our hygiene businesses operate in an
attractive industry offering good growth opportunities as
expectations around standards of hygiene increase. The business is
highly profitable with margins being driven by post code density
(servicing as many customers as possible in any tight geographic
zone) and customer penetration (selling multiple service lines to
customers). What we seek therefore is more customers on our routes
and more products within customers' premises. Key structural growth
drivers of the industry include:
1. Changing demographics and tighter regulation - these include
population growth and an aging population which result in more
health issues and hygiene product requirements, higher expectations
for nappy changing / disposal in public and retail areas, and
incontinence facilities and product disposal. Other demographic
changes include growth in Emerging markets, rising middle classes
and greater levels of women at work requiring more feminine hygiene
facilities and services. Tighter regulation across the world is
also driving greater compliance with workplace hygiene, food
production and retail hygiene and environmental standards.
The products and services which address the above are called 'In
Cubicle Hygiene Services' and account for c. 40% of the hygiene
market. Services include disposal of sanitary waste and disposal of
nappies and incontinence products. We have developed high quality
products to match these growth drivers and increase density,
including Signature, Reflection and full Colour bins in different
size options to suit customer needs and also premium 'No Touch'
products.
2. Rising customer expectations - there is an increasing
awareness of the link between good hand hygiene and wellbeing and a
greater expectation for healthy workplaces and healthcare
facilities. Social media is also driving companies to invest in
brand protection while an increasing focus on sustainability is
encouraging lower water consumption and paper saving.
'Hand Care Services' account for c. 25% of the hygiene market.
Initial Hygiene offers a full range of hand hygiene solutions
including soap and sanitiser dispensers, hand driers, roller towels
and paper towel dispensers, consumables and premium 'No-Touch'
products.
3. Enhanced brand experience - this is important within
organisations seeking to enhance and differentiate customer
experience through the use of design, colour and scent. 'Air Care
Hygiene Services' account for c. 20% of the market. Clean air is a
major topic in Asia given air pollution concerns and accounts for
over 30% of the market in Malaysia for example. Air Care Services
include commercial air scenting, air fresheners and air
purification services to combat airborne bacteria such as 'flu,
e.coli and salmonella. Initial Hygiene's Premium Scenting range
provides both standard and bespoke scenting and customer segments
include hotels (offering scenting in lobby areas), car showrooms
and clothing retailers seeking to match scent to brand.
4. Mitigating risk - 'Floor Care Services' include indoor and
outdoor mats which help prevent trips and slips and account for c.
15% of the hygiene market. Initial Hygiene offers a range of
high-quality products including textile and non-textile floor mats
for use in reception areas, industrial and food preparation areas.
It also offers logo and branded mats to enhance brand
experience.
Protect and Enhance businesses - focus on enhanced service,
customer retention and profit protection
The three businesses which are included in this category are
Ambius, Property Care and France Workwear. All are profitable,
cash-generative route-based businesses and combined represent less
than 10% of Ongoing Operating Profit. The businesses generate a Net
Operating Margin of c. 10% on an annualised basis. In M&A we
seek an IRR of 20%+. A brief description of each is provided
below:
1. Ambius - operates in 17 countries with leadership positions
in the US, Canada, Australia and New Zealand. Its product offering
is broadly consistent across the world and includes interior
landscaping (living walls), Christmas decorations and premium
scenting. Key customer segments are offices, facilities management,
hospitality and retail. Its strategic focus is on higher-margin
green (living) walls and premium scenting, expanding and exploiting
international agreements and driving lead generation through
digital applications.
2. Property Care - based only in the UK, services include dry
rot, woodworm and damp proofing. Highly fragmented, the UK market
is valued at c. GBP150m. We have built a leading position in the
industry over recent years, cemented by the acquisitions of Peter
Cox and Wise. We have developed a strong operational capability
with certified teams primarily undertaking jobbing work in
commercial and social housing. While the business has a defensive
cash position with advance payment required before work is
undertaken, the market is currently experiencing some weakness. The
strategic focus of Property Care is on sharing digital expertise
with Pest Control, cost optimisation and efficiency, IT system
integration and margin management.
3. France Workwear - our remaining workwear operations in France
have shown operational and financial improvements in H1 2017
however market conditions continue to be challenging. The business
generated first half Ongoing Revenues of GBP85m and Ongoing
Operating Profits of GBP11m. We aim to return the operations to
profitable growth by the end of 2018. The European workwear
industry is currently undergoing a period of consolidation with the
proposed Elis / Berendsen merger, our own JV with Haniel and our
proposed divestment of eight of our textile laundries to RLD. Going
forward, our France Workwear operations will continue to implement
our Quality Workwear agenda focused on service quality, together
with profit improvement and margin protection initiatives.
M&A
Acquisitions are core to our strategy - we have the in-house
capability to identify, evaluate and execute acquisitions at pace.
Our model for value-creating M&A is structured around
disciplined evaluation of targets, detailed integration programmes
and careful governance of new businesses under our ownership.
We have significantly accelerated our execution of M&A
during the year, particularly within Emerging and Growth markets.
This year to date we have acquired 25 businesses for GBP206.8m (19
in Pest Control, five in Hygiene and one in Protect & Enhance)
with combined annualised revenues of GBP175m. We have been active
in M&A across all our regions, acquiring businesses in 15
countries including Australia, Chile, Colombia, Denmark, France,
India, Ireland, Italy, Malawi, Malaysia, Saudi Arabia, Singapore,
Sweden, the UK, and the US.
In North America we have continued to reinforce our presence as
the number three player in the world's largest pest control market
through the acquisition of five pest control companies, four of
which are larger businesses, each with revenues in excess of $12m.
These businesses generated annualised revenues of c. $77m in the
year prior to acquisition, giving us annualised revenues from our
North America business of over $1.1bn.
In March 2017 we created a joint venture with PCI, India's
largest pest control company, which offers a comprehensive range of
pest control services and products through its countrywide network.
Rentokil, which has management control of the JV through a 57%
stake, is integrating its Indian operations into the JV and the
combined business (known as Rentokil PCI) has revenues of 4.5bn
rupees (c. GBP54m), will operate from c. 250 locations and employ
c. 6,900 people. Further, on 11 April our JV in the Kingdom of
Saudi Arabia (KSA) acquired Sames, the market leader in the
commercial pest control sector in KSA with c. 2,500 customers
covering most major cities, making us the number one pest control
company in KSA and the Gulf Cooperation Council countries. The
business generated revenues of GBP9m in the last 12 months prior to
acquisition.
We monitor the integration and performance of acquired
businesses closely to ensure they meet our financial hurdles. Out
of those 35 businesses acquired over an 18-month period, between
October 2014 and March 2016 (trading for more than one year), only
one acquisition is delivering returns slightly lower than the
category target hurdle rate.
Going forward, we will continue to execute a differentiated
approach to capital investment and M&A, with clear expectations
and IRRs by business line as indicated above. We will continue to
seek further acquisition opportunities in the second half in both
Pest Control and Hygiene and the pipeline of prospects remains
strong. While we have exceeded our guidance spend of GBP150m for
2017 on M&A already this year, we expect the volume of M&A
activity for the remainder of the year to continue in line with H1,
but do not currently anticipate as many larger deals as those
executed this year to date. We expect a further c. GBP50m spend on
M&A in H2.
Completion of JV transaction with Haniel and proposed disposal
of eight laundries in France
Our transaction to enter into a JV with Haniel to combine our
Workwear and Hygiene businesses in Benelux and Central and Eastern
Europe completed on 30 June 2017. We anticipate retaining our 17.8%
stake in the combined business for three to five years, after which
time we have various exit options under the terms of the agreement.
The Company now has Workwear operations in France only.
We are also announcing today that the Company holds an
irrevocable Put Option to sell eight laundries in France to RLD.
The laundries, which predominantly supply flat linen (sheets and
towels) to the highly competitive healthcare sector and employs c.
1,000 people, delivered revenues of EUR78m and were break-even for
the year ended 31 December 2016.
Unconditional clearance was received from the French competition
authorities on 8 July 2017. The Company is now engaged in
consultations with employee representative bodies. A decision to
exercise the Put Option will be made at the end of the consultation
process. Assuming the successful completion of the employee
consultation process the Company expects to complete the disposal
in H2.
FINANCIAL REVIEW
Central and regional overheads
The GBP3.2m increase in central and regional overheads to
GBP37.4m at CER (2016: GBP34.2m) largely reflects investments in
digital capability and increases in Long-Term Incentive Plans
following the continued share price performance of the Company.
Restructuring costs
In February 2016 we announced that, with the exception of
integration costs for significant acquisitions, we will report
restructuring costs within operating profit. Integration costs
associated with significant acquisitions will be reported as
one-off items and excluded from operating profit.
Restructuring costs of GBP3.8m at CER (2016: GBP4.4m) consisted
mainly of costs in respect of initiatives focused on driving
operational efficiency in North America, France and the UK.
Disposals (at AER)
A net profit on disposal of businesses has been recognised of
GBP462.5m relating to the profit on disposal of the businesses
transferred to the Haniel JV of GBP481.6m and the write-down of
French flat linen assets that are proposed to be sold to RLD
(GBP19.1m).
The profit on disposal in respect of the Haniel JV includes
consideration of GBP703.4m comprising cash consideration of
GBP449.4m (of which a net GBP396.1m has been received to date) plus
the retained 17.8% share in the JV of GBP254.0m. Net assets of the
businesses contributed amounted to GBP245.3m which together with
transaction costs of GBP18.7m and foreign exchange gains
transferred from reserves of GBP42.2m resulted in a profit on
disposal of GBP481.6m.
One-off items (at AER)
One-off costs of GBP7.7m (H1 2016: GBP2.1m) primarily relate to
the acquisition and integration costs of Steritech. Details of
one-off items are set out in Note 4.
Interest (at AER)
Net interest payable (excluding the net interest credit from
pensions) at actual exchange rates was GBP20.6m compared to
GBP18.7m in the prior year, a net increase of GBP1.9m primarily
from the impact of exchange due to the weakening of Sterling
against the Euro and US Dollar. The average cost of net debt for
the Group was 3.5% for H1 2017.
Tax
The income tax expense for the first half at actual exchange
rates was GBP13.3m on the reported profit before tax of GBP592.9m.
After adjusting the reported profit before tax for the profits and
losses on disposal of businesses, the amortisation of intangible
assets (excluding computer software), one-off items and the net
interest credit from pensions, the Adjusted Effective Tax Rate for
the first half of 2017 was 22.2% (H1 2016: 22.1%). This compares
with a blended rate of tax for the countries in which the Group
operates of 25% (2016: 25%). The lower adjusted tax rate compared
to the blended tax rate is principally due to the benefit of
previously unrecognised brought forward tax losses being set off
against UK profits.
Net debt and cash flow
GBPm at actual exchange Year to Date
rates
--------------------------------
H1 2017 H1 2016 Change
GBPm GBPm GBPm
---------------------------------- ---------- ---------- --------
Adjusted Operating Profit 143.1 114.0 29.1
One-off items - operating (7.7) (2.1) (5.6)
Depreciation 107.3 93.8 13.5
Other 3.1 1.6 1.5
---------- ---------- --------
EBITDA 245.8 207.3 38.5
Working capital (24.1) (2.9) (21.2)
Provisions (6.0) (5.4) (0.6)
Capex - additions (124.8) (104.6) (20.2)
Capex - disposals 3.0 3.3 (0.3)
---------- ---------- --------
Operating cash flow - continuing
operations 93.9 97.7 (3.8)
Interest (6.3) (22.8) 16.5
Tax (19.5) (17.8) (1.7)
Free Cash Flow 68.1 57.1 11.0
Acquisitions (206.8) (34.9) (171.9)
Disposal of companies and
businesses 396.1 0.5 395.6
Dividends (43.5) (37.5) (6.0)
Foreign exchange translation
and other items (0.7) (142.8) 142.1
--------
Decrease / (increase) in
net debt 213.2 (157.6) 370.8
Opening net debt (1,238.7) (1,026.6) (212.1)
---------- ---------- --------
Closing net debt (1,025.5) (1,184.2) 158.7
========== ========== ========
Operating cash inflow (GBP93.9m at AER for continuing
operations) was GBP3.8m lower than 2016 largely due to an increase
in EBITDA being offset by the phasing of working capital outflows
and higher capital expenditure on the increased revenue base and
due to foreign exchange.
Interest payments (including finance lease interest) were
GBP16.5m lower than last year due to phasing following the maturity
of the GBP300m bond in Q1 2016. This resulted in Free Cash Flow
from continuing operations of GBP68.1m, an increase of GBP11.0m on
the prior year.
Cash spent on acquisitions totalled GBP206.8m. Proceeds received
in H1 from the completion of the JV transaction with Haniel net of
transactions costs (GBP5.8m) and cash disposed (GBP17.5m) was
GBP396.1m with further deferred consideration of c. GBP30m expected
to be received in H2 subject to net debt and working capital
adjustments. The Company made dividend payments of GBP43.5m in 2017
(a GBP6.0m, 16.0% increase on the prior year) which together with
foreign exchange translation and other items of GBP0.7m resulted in
an overall decrease in net debt of GBP213.2m and closing net debt
of GBP1,025.5m.
Pensions
At 30 June 2017 the Company's UK defined benefit pension scheme,
which is closed to new members, was valued at an accounting surplus
of GBP265.7m on the Company's balance sheet. Following the most
recent triennial actuarial valuation as at 31 December 2015 the
Trustee and the Company agreed that the Scheme is now fully funded
on a technical provisions basis. The Trustees have therefore agreed
annual payments will not be required going forward. Because the
Scheme is fully funded on a technical provisions basis, GBP9.0m of
payments previously held in escrow was released to the Company in
February 2017. The funding position will be reviewed at the next
actuarial valuation, which is scheduled for 31 December 2018.
Funding
At 30 June 2017, and following the receipt of the proceeds in
respect of the Haniel JV, the Group had net debt of GBP1,025.5m
representing a reduction of GBP213.3m from the net debt as at 31
December 2016. The Group has GBP507m of centrally held funds and
available undrawn committed facilities. The ratio of net debt to
EBITDA at 30 June 2017 was c. 2x and the Company's credit rating
remains at BBB with a Stable outlook. We are committed to
maintaining a BBB rating and, based on our expectations for the
coming year and our strong cash flow projections for 2017, we are
confident in doing so.
The Directors continue to adopt the going concern basis in
preparing the accounts on the basis that the Group's strong
liquidity position and ability to reduce 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.
Dividend
Following an encouraging performance in the first half of 2017,
and in anticipation of further progress for the remainder of the
year, the Board is declaring an interim dividend for 2017 of 1.14p
per share, an increase of 15.2% compared to 2016, payable to
shareholders on the register at the close of business on 11 August
2017, to be paid on 13 September 2017.
Board changes
Alan Giles, a Non-Executive Director of the Company since 2006,
retired at the conclusion of the Company's annual general meeting
on 10 May 2017. He also resigned as Senior Independent Director,
Chairman of the Remuneration Committee and as a member of the Audit
and Nomination Committees at that time. Chris Geoghegan, who was
appointed to the Board in June 2016, has succeeded him as Senior
Independent Director and Chairman of the Remuneration Committee.
Sir Crispin Davis was appointed as a Non-Executive Director of the
Company and a member of the Audit and Nomination Committees on 20
July 2017.
Audit re-tender
As previously disclosed in the 2016 Annual Report, the Company
will shortly be commencing a competitive tender process for its
external auditor. The current auditor, KPMG LLP, was appointed in
2009. The Audit Committee expects to complete the competitive
tender process in 2017.
GUIDANCE AND OUTLOOK FOR 2017 (at CER unless otherwise
stated)
The estimated financial impact of the completion of the joint
venture with Haniel on the Company's H2 performance is summarised
in the table below:
GBPm
H2 operating profit of businesses transferred(1) (19)
Central overhead and interest reduction 5
Estimated share of Income from JV (adjusted)(2) 7
-------
(7)
-------
(1 Based on the profit contributed by the businesses contributed to the JV in H2 of 2016) 2 To be equity accounted from H2 - share of joint venture earnings is based on a 17.8% stake and on an adjusted basis (excluding goodwill amortisation and one-off integration costs) and estimated based on the pro forma earnings for the JV for the 12 months to 31 December 2016
The businesses that have now been transferred to Haniel
contributed GBP19m to operating profit in H2 2016. This impact is
offset by an estimated reduction in central overheads and interest
(relating to the disposal proceeds which has been used to partially
pay down debt) of c. GBP5m and a share of profit from the JV (on an
adjusted basis excluding goodwill amortisation and integration
costs) of c. GBP7m.
Central and regional overheads for the year are expected to be
GBP6m above the prior year principally due to investments in
digital capability and LTIP charges being offset by central savings
in relation to the Haniel JV noted above. This is GBP4m higher than
previously guided.
We estimate that restructuring costs (reported within Ongoing
Operating Profit) will be in line with 2016 at c. GBP7m.
Interest costs are estimated to be c. GBP40m with the previously
guided underlying increase being offset by the estimated reduction
in H2 following the receipt of the proceeds from the Haniel JV.
Cash interest is estimated to be broadly in line with the P&L
impact.
Following the referendum in June 2016 Sterling has weakened
significantly against both the Euro and the US Dollar and, if
recent exchange rates were to continue for the rest of this year,
the full year estimated favourable impact of currency movements on
our profit would be in the region of GBP20m.
Our current estimate for the Adjusted Effective Tax Rate is
around 22.5% (2016: 22.3%) with cash tax payable in the region of
GBP40m to GBP45m. Working capital outflow is anticipated to be in
line with 2016 at around GBP10m and net capex in the region of
GBP210m - GBP220m (subject to foreign exchange movements) a
reduction of c. GBP25m versus our previous guidance and reflecting
reduced capex in H2 following the transfer of the businesses to the
Haniel JV.
The impact of the JV with Haniel reduces Free Cash Flow in 2017
by c. GBP18m. Based upon current exchange rates, we have increased
our guidance on Free Cash Flow to a minimum of GBP150m for
2017.
Condensed consolidated statement of profit or loss and other
comprehensive income
For the period ended 30 June
6 months to 30 June 2017 6 months to 30 June 2016
Notes GBPm GBPm
========================================================= ======= ======================== ========================
Revenue 4 1,233.6 987.1
Operating profit 143.8 91.8
Net profit on disposal of businesses 6 462.5 -
Profit before interest and income tax 606.3 91.8
Finance income 7.2 10.0
Finance cost (24.4) (24.4)
Share of profit from associates, net of tax of GBP1.9m
(2016: GBP1.4m) 3.8 3.0
========================================================= ======= ======================== ========================
Profit before income tax 592.9 80.4
Income tax expense(1) (13.3) (15.3)
========================================================= ======= ======================== ========================
Profit for the year attributable to the Company's equity
holders (including non-controlling
interests of GBP0.1m (2016: GBP0.2m)) 579.6 65.1
========================================================= ======= ======================== ========================
Other comprehensive income:
Items that are not reclassified subsequently to the
income statement:
Re-measurement of net defined benefit asset 9 (9.5) 95.9
Tax related to items taken to other comprehensive income 1.7 (19.2)
Items that may be reclassified subsequently to the
income statement:
Net exchange adjustments offset in reserves (22.5) (0.7)
Other items (36.0) (0.8)
--------------------------------------------------------- ------- ------------------------ ------------------------
Total comprehensive income for the year (including
non-controlling interests of GBP0.1m (2016:
GBP0.2m)) 513.3 140.3
--------------------------------------------------------- ------- ------------------------ ------------------------
1 taxation includes GBP13.3m (HY 2016: GBP13.9m) in
respect of overseas taxation
Earnings per share attributable to the Company's equity
holders:
Basic 31.62p 3.56p
========================================================= ======= ======================== ========================
Diluted 31.49p 3.54p
========================================================= ======= ======================== ========================
Non-GAAP measures
Operating profit 143.8 91.8
Adjusted for:
Amortisation and impairment of intangible assets
(excluding computer software) 4 25.9 20.1
One-off items - operating 4 7.7 2.1
Reversal of depreciation - assets held-for-sale (34.3) -
========================================================= ======= ======================== ========================
Adjusted operating profit 143.1 114.0
Finance income 7.2 10.0
Add back: Net interest credit from pensions (3.4) (4.3)
Finance cost (24.4) (24.4)
Share of profit from associates, net of tax of GBP1.9m
(2016: GBP1.4m) 3.8 3.0
========================================================= ======= ======================== ========================
Adjusted profit before income tax 126.3 98.3
Basic adjusted earnings per share attributable to the
Company's equity holders 5.36p 4.20p
--------------------------------------------------------- ------- ------------------------ ------------------------
The weighted average number of ordinary shares in issue is
1,833m (HY 2016: 1,823m). For the diluted EPS calculation the
adjustment for share options and LTIPs is 7.7m (HY 2016: 8.3m).
Condensed consolidated balance sheet
At 30 At 31
June December
2017 2016
Notes GBPm GBPm
------------------------------------------------- ---------- ----------
Assets
Non-current assets
Intangible assets 1,202.4 999.6
Property, plant and
equipment 382.1 416.3
Investments in associated
undertakings 275.1 17.8
Other investments 0.2 0.2
Deferred tax assets 1.5 2.0
Retirement benefit
assets 8 266.3 272.7
Other receivables 10.1 10.8
Derivative financial
instruments 10 3.5 -
------------------------------------ ----------- ---------- ----------
2,141.2 1,719.4
------------------------------------ ----------- ---------- ----------
Current assets
Other investments 3.2 9.6
Inventories 88.7 80.0
Trade and other receivables 462.0 383.3
Current tax assets 13.3 11.0
Disposal group held-for-sale 30.4 177.7
Derivative financial
instruments 10 1.3 1.6
Cash and cash equivalents 499.5 160.2
------------------------------------ ----------- ---------- ----------
1,098.4 823.4
------------------------------------ ----------- ---------- ----------
Liabilities
Current liabilities
Trade and other payables (513.3) (458.5)
Current tax liabilities (79.0) (71.6)
Provisions for other
liabilities and charges (29.0) (15.3)
Bank and other short-term
borrowings 9 (388.3) (77.4)
Derivative financial
instruments 10 (1.5) (56.8)
------------------------------------ ----------- ---------- ----------
(1,011.1) (679.6)
------------------------------------ ----------- ---------- ----------
Net current assets 87.3 143.8
------------------------------------ ----------- ---------- ----------
Non-current liabilities
Other payables(1) (68.3) (21.4)
Bank and other long-term
borrowings 9 (1,130.7) (1,260.4)
Deferred tax liabilities (95.3) (112.8)
Retirement benefit
obligations 8 (27.3) (30.9)
Provisions for other
liabilities and charges (53.9) (55.2)
Derivative financial
instruments 10 (18.8) (21.8)
------------------------------------ ----------- ---------- ----------
(1,394.3) (1,502.5)
------------------------------------ ----------- ---------- ----------
Net assets 834.2 360.7
------------------------------------ ----------- ---------- ----------
Equity
Capital and reserves attributable
to the company's equity holders
Called up share capital 18.4 18.3
Share premium account 6.8 6.8
Other reserves (1,822.0) (1,763.5)
Retained profits 2,630.8 2,099.0
------------------------------------ ---------------------- ----------
834.0 360.6
Non-controlling interests 0.2 0.1
------------------------------------ ---------------------- ----------
Total equity 834.2 360.7
------------------------------------ ---------------------- ----------
1 Non-current other payables includes GBP42.6m of contingent
consideration related to the PCI India acquisition
Condensed 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 2016 18.2 6.8 (1,768.8) 1,956.1 (0.2) 212.1
Profit for the period - - - 64.9 0.2 65.1
Other comprehensive
income:
Net exchange adjustments
offset in reserves - - (0.7) - - (0.7)
Remeasurement of net
defined benefit asset - - 95.9 - 95.9
Effective portion
of changes in fair
value of cash flow
hedge - - (0.8) - - (0.8)
Tax related to remeasurement
of net defined benefit
asset - - (19.2) - (19.2)
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
Total comprehensive
income for the period - - (1.5) 141.6 0.2 140.3
Transactions with
non-controlling interests:
Amounts received from
non-controlling interests - - - - 0.2 0.2
Transactions with
owners:
Dividends paid to
equity shareholders - - - (37.5) - (37.5)
Issue of ordinary
shares 0.1 - - - - 0.1
Cost of share options
and long-term incentive
plan - - - 2.3 - 2.3
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
At 30 June 2016 18.3 6.8 (1,770.3) 2,062.5 0.2 317.5
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
At 1 January 2017 18.3 6.8 (1,763.5) 2,099.0 0.1 360.7
Profit for the period - - - 579.5 0.1 579.6
Other comprehensive
income:
Net exchange adjustments
offset in reserves - - (22.5) - - (22.5)
Remeasurement of net
defined benefit asset - - - (9.5) - (9.5)
Effective portion
of changes in fair
value of cash flow
hedge - - 6.2 - - 6.2
Cumulative exchange
recycled to income
statement on disposal
of foreign operations - - (42.2) - - (42.2)
Tax related to remeasurement
of net defined benefit
asset - - - 1.7 - 1.7
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
Total comprehensive
income for the period - - (58.5) 571.7 0.1 513.3
Transactions with
owners:
Dividends paid to
equity shareholders - - - (43.5) - (43.5)
Issue of ordinary
shares 0.1 - - - - 0.1
Cost of share options
and long-term incentive
plan - - - 3.6 - 3.6
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
At 30 June 2017 18.4 6.8 (1,822.0) 2,630.8 0.2 834.2
------------------------------ ---------- ---------- ----------- ----------- -------------- ---------
Treasury shares represent 7.9m (HY 2016: 5.4m) shares held by
the Rentokil Initial Employee Share Trust and are netted against
retained earnings. The market value of these shares at 30 June 2017
was GBP21.6m (HY 2016: GBP10.4m). 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 2016 (1,722.7) 10.4 0.2 (56.7) (1,768.8)
Net exchange adjustments
offset in reserves - - - (0.7) (0.7)
Effective portion of
changes in fair value
of cash flow hedge - - (0.8) - (0.8)
------------------------------- ----------- ------ --------- ------------ ----------
Total comprehensive
income for the period - - (0.8) (0.7) (1.5)
------------------------------- ----------- ------ --------- ------------ ----------
At 30 June 2016 (1,722.7) 10.4 (0.6) (57.4) (1,770.3)
------------------------------- ----------- ------ --------- ------------ ----------
At 1 January 2017 (1,722.7) 10.4 (5.9) (45.3) (1,763.5)
Net exchange adjustments
offset in reserves - - - (22.5) (22.5)
Effective portion of
changes in fair value
of cash flow hedge - - 6.2 - 6.2
Cumulative exchange
recycled to income statement
on disposal of foreign
operations - - - (42.2) (42.2)
------------------------------- ----------- ------ --------- ------------ ----------
Total comprehensive
income for the period - - 6.2 (64.7) (58.5)
------------------------------- ----------- ------ --------- ------------ ----------
At 30 June 2017 (1,722.7) 10.4 0.3 (110.0) (1,822.0)
------------------------------- ----------- ------ --------- ------------ ----------
Condensed consolidated cash flow statement
6 months 6 months
to 30 to 30
June June
2017 2016
Notes GBPm GBPm
----------------------------------------- ------ --------- ---------
Profit for the period 579.6 65.1
Adjustments for:
- Tax 13.3 15.3
- Share of profit from associates (3.8) (3.0)
- Net interest credit from pensions (3.4) (4.3)
- Interest income (3.8) (5.7)
- Interest expense 24.4 24.4
Reversal of non-cash items:
- Depreciation and impairment
of property, plant and equipment 66.6 87.8
- Amortisation and impairment
of intangible assets(1) 25.9 20.1
- Amortisation of computer software 6.4 6.0
- Other non-cash items 3.1 1.6
- Profit on sale of businesses (462.5) -
Changes in working capital (excluding
the effects of acquisitions
and exchange differences on
consolidation):
- Inventories (7.6) (6.8)
- Trade and other receivables (38.5) (16.0)
- Trade and other payables and
provisions 16.0 14.5
----------------------------------------- ------ --------- ---------
Cash generated from operating
activities 215.7 199.0
Interest received 8.2 6.3
Interest paid (13.8) (28.5)
Income tax paid (19.5) (17.8)
----------------------------------------- ------ --------- ---------
Net cash generated from operating
activities 190.6 159.0
----------------------------------------- ------ --------- ---------
Cash flows from investing activities
Purchase of property, plant
and equipment (107.3) (89.0)
Purchase of intangible fixed
assets (7.4) (8.8)
Proceeds from sale of property,
plant and equipment 3.0 3.3
Acquisition of companies and
businesses, net of cash acquired 5 (206.8) (27.6)
Disposal of companies and businesses
(net of disposal costs) 396.1 0.5
----------------------------------------- ------ --------- ---------
Net cash flows from investing
activities 77.6 (121.6)
----------------------------------------- ------ --------- ---------
Cash flows from financing activities
Issue of ordinary share capital 0.1 0.1
Dividends paid to equity shareholders (43.5) (37.5)
Interest element of finance
lease payments (0.7) (0.6)
Capital element of finance lease
payments (8.5) (6.6)
Cash outflow on settlement of debt
related foreign exchange forward
contracts (43.5) (0.3)
Proceeds from issue of debt 225.0 239.4
Net investment in term deposits 6.4 94.4
Net loan/bond repayments (10.5) (341.4)
----------------------------------------- ------ --------- ---------
Net cash flows from financing
activities 124.8 (29.7)
----------------------------------------- ------ --------- ---------
Net increase in cash and cash
equivalents 393.0 7.7
Cash and cash equivalents at
beginning of year 105.9 100.5
Exchange gains/(losses) on cash
and cash equivalents (4.7) 6.8
----------------------------------------- ------ --------- ---------
Cash and cash equivalents at
end of the financial period 494.4 115.0
----------------------------------------- ------ --------- ---------
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 condensed consolidated half-yearly financial information for
the half-year to 30 June 2017 was approved for issue on 27 July
2017.
On pages 65 to 66 of the Annual Report 2016 we set out the
Group's approach to risk management and on pages 34 to 39 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 2016 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
2016. 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 2016 results please refer to the
Annual Report 2016 which can be accessed here:
http://www.rentokil-initial.com/investors/year-in-review.aspx
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 condensed consolidated financial statements
for the year ended 31 December 2016 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 condensed 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 2016, as
described in those financial statements with the addition of
accounting policy choices as described in note 5 and 6.
The preparation of the interim financial information for the
half-year ended 30 June 2017 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 2017:
- Amendments resulting from the disclosure initiative - IAS 7
- Amendments regarding the recognition of deferred tax assets for unrealised losses - IAS 12
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 2016 or
30 June 2016. The Group has not early adopted any standard,
interpretation or amendment that was issued but is not yet
effective.
The Group is considering the impact on the financial statements
of relevant forthcoming standards, including IFRS 15 Revenue from
Contracts with Customers (effective 1 January 2018), IFRS 16 Leases
(effective 1 January 2019), and IFRS 9 Financial Instruments
(effective 1 January 2018).
It is expected that substantially all of the Group's revenue
will be treated as revenue from contracts with customers under IFRS
15, but the new standard will not require material changes to the
timing of revenue recognition. We also expect that certain sales
commissions that meet the requirements stated within the standard
may need to be recognised as an asset and amortised over the life
of the contracts to which they relate. This treatment is not
anticipated to materially affect the profit of the Group.
As a result of the changes within the forthcoming standard IFRS
16 Leases, the majority of our existing operating leases will be
accounted for as right of use assets, which will be largely offset
by corresponding lease liabilities. The assets will be recognised
as property, plant and equipment, and the lease liability will
increase net debt. It is anticipated that operating expenses will
decrease and financing costs will increase as the operating lease
expense is replaced by depreciation and interest. Depreciation will
be straight-line over the life of the lease but the financing
charge will decrease over the lease term. The overall impact on net
profit is not expected to be material.
The changes resulting from the new standard IFRS 9 are expected
to be minimal. Financial assets are subject to new rules regarding
provisions for impairment, however the Group has minimal financial
assets (other than trade debtors), and a history of minimal
impairments against these assets. Therefore the impact is not
expected to be material.
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 Executive Leadership Team
responsible for the review of Group performance. The operating
businesses within each segment report to the Regional Managing
Directors.
Given the international nature of the Group, foreign exchange
movements can have a significant impact on regional performance and
as a result the segmental analysis is presented at constant
exchange rates (CER). Restructuring costs and central and regional
overheads are also presented separately as they are not directly
attributable to any reportable segment. 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
12.
Operating Operating
Revenue Revenue profit profit
30 June 2017 30 June 2016 30 June 2017 30 June 2016
GBPm GBPm GBPm GBPm
================================================= ============= ============= ============= =============
France 136.6 135.7 19.5 21.5
Benelux 38.9 38.5 11.1 10.4
Germany 36.8 33.4 10.6 9.5
Southern Europe 35.9 33.9 5.5 5.0
Latin America 15.8 11.4 1.5 1.5
================================================= ============= ============= ============= =============
Europe 264.0 252.9 48.2 47.9
================================================= ============= ============= ============= =============
UK & Ireland 122.5 115.9 22.2 21.6
Rest of World 60.2 54.6 13.3 12.3
================================================= ============= ============= ============= =============
UK & Rest of World 182.7 170.5 35.5 33.9
================================================= ============= ============= ============= =============
Asia 82.4 63.5 8.2 6.3
North America 386.7 298.0 45.8 35.4
Pacific 80.8 74.2 16.9 15.5
Central and regional overheads - - (37.4) (34.2)
Restructuring costs - - (3.8) (4.4)
================================================= ============= ============= ============= =============
Ongoing operations at constant exchange rates 996.6 859.1 113.4 100.4
Disposed businesses 168.3 172.0 52.5 20.2
================================================= ============= ============= ============= =============
Continuing operations at constant exchange rates 1,164.9 1,031.1 165.9 120.6
Foreign exchange 68.7 (44.0) 11.5 (6.6)
================================================= ============= ============= ============= =============
Continuing operations at actual exchange rates 1,233.6 987.1 177.4 114.0
================================================= ============= ============= ============= =============
One-off items - operating (7.7) (2.1)
Amortisation of intangible assets(1) (25.9) (20.1)
Operating profit 143.8 91.8
================================================= ============= ============= ============= =============
One-off items and amortisation and impairment of intangible
assets
Amortisation Amortisation One-off One-off
and impairment and impairment items items
of intangibles(1) of intangibles(1) - operating - operating
======================
30 June 30 June 30 June 30 June
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
====================== =================== =================== ============= ==============
Europe 3.1 2.9 1.3 0.3
UK & Rest of World 3.5 2.6 0.2 0.2
Asia 1.4 1.2 0.4 0.3
North America 13.4 12.1 4.1 1.3
Pacific 1.2 0.4 0.3 0.3
Central and regional 1.9 1.6 0.9 0.1
Disposed businesses - 0.1 - (0.3)
====================== =================== =================== ============= ==============
Total at constant
exchange rates 24.5 20.9 7.2 2.2
Foreign exchange 1.4 (0.8) 0.5 (0.1)
====================== =================== =================== ============= ==============
Total at actual
exchange rates 25.9 20.1 7.7 2.1
====================== =================== =================== ============= ==============
1 excluding computer software
One-off items - operating largely comprises acquisition and
integration costs associated with significant acquisitions and in
particular the Steritech acquisition in North America.
5. Business combinations
The Group purchased 100% of either the share capital or the
trade and assets of 24 companies and businesses in the period and
57% of PCI India.
The Group has elected to account for the PCI India acquisition
under the anticipated acquisition method per IAS 1 , and therefore
no non-controlling interest is recognised. Under this accounting
policy, put and call options are accounted for as an anticipated
acquisition of the underlying non-controlling interest. The
acquisition includes put options whereby the non-controlling
interest can require the Group to purchase the remaining 43% of
shares in stages over a fixed term (between five and ten years from
the date of acquisition). The Group also holds a call option to
acquire the shares from the non-controlling interest at the end of
this fixed term which has not been recognised as it has nil fair
value. The Group has recognised contingent consideration of
GBP43.0m for the anticipated acquisition of the shares. The Group
has also made an accounting policy choice, consistent with IAS 39,
to recognise movements in the fair value of the liability for the
options through other comprehensive income.
The total consideration in respect of acquisitions in the
current year was GBP281.6m. Details of goodwill and the fair value
of net assets acquired are as follows:
6 months
6 months to
to 30 30
June June
2017 2016
GBPm GBPm
------------------------------ --------- ---------
Purchase consideration:
- Cash paid 207.5 25.6
- Deferred and contingent
consideration 74.1 6.8
-------------------------------- --------- ---------
Total purchase consideration 281.6 32.4
Fair value of net assets
acquired (56.5) (19.8)
-------------------------------- --------- ---------
Goodwill from current
period acquisitions 225.1 12.6
-------------------------------- --------- ---------
Goodwill represents the synergies, workforce and other benefits
expected as a result of combining the respective businesses.
Deferred consideration of GBP3.2m and contingent consideration
of GBP70.9m 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 finalised in the 2017 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 30
June June
2017 2016
GBPm GBPm
------------------------- --------- ---------
Non-current assets
- Intangible assets 45.9 21.3
- Property, plant and
equipment 11.7 1.0
Current assets 25.6 2.2
Current liabilities (20.0) (1.5)
Non-current liabilities (6.7) (3.2)
---------------------------- --------- ---------
Net assets acquired 56.5 19.8
---------------------------- --------- ---------
From the dates of acquisition to 30 June 2017, these
acquisitions contributed GBP40.5m to revenue and GBP5.8m to
operating profit. If the acquisitions had occurred on 1 January
2017, the revenue and operating profit of the combined entity would
have amounted to GBP1,252.7m and GBP553.2m respectively.
In relation to prior period acquisitions, there has been an
adjustment to the provisional fair values resulting in an increase
to goodwill of GBP0.5m.
In addition GBP5.0m was paid in respect of deferred and
contingent consideration for prior year acquisitions resulting in
the total cash outflow in the period from current and past period
acquisitions, net of cash acquired, of GBP206.8m.
6. Disposal group held for sale and business disposals
Net profit on disposal of businesses
30 June 2017
GBPm
------------------------------ -------------
Disposal group held-for-sale
impairment charge (19.1)
Net gain on disposal of
businesses 481.6
------------------------------ -------------
462.5
------------------------------ -------------
A non-current asset or a disposal group is classified as held
for sale if its carrying amount will be recovered principally
through sale rather than through continuing use, it is available
for immediate sale, and sale is highly probable within one
year.
On initial classification as held for sale, non-current assets
and disposal groups are measured at the lower of previous carrying
amount and fair value less costs to sell with any adjustments taken
to profit or loss. The same applies to gains and losses on
subsequent remeasurement although gains are not recognised in
excess of any cumulative impairment loss. Any impairment loss on a
disposal group is first allocated to goodwill, and then to
remaining assets and liabilities on pro rata basis, except that no
loss is allocated to inventories, financial assets, deferred tax
assets and employee benefit assets , which continue to be measured
in accordance with the Group's accounting policies. Intangible
assets and property, plant and equipment once classified as held
for sale or distribution are not amortised or depreciated.
Subject to a successful completion of an employee consultation
process and competition clearance, eight textile laundries in
France are planned to be sold to Regie Linge Developpement ('RLD')
for consideration of EUR33.0m. This disposal is expected to
complete in the second half of the year. The assets and liabilities
of the disposal group have been written down to their recoverable
value resulting in an impairment of GBP19.1m, and classified as
held for sale as set out in the table below.
Net assets of disposal group held for sale
30 June 2017
GBPm
=============================== ============
Assets held for sale
Property, plant and equipment 43.2
Inventories 0.9
Liabilities held for sale
Trade and other payables (0.2)
Retirement benefit obligations (2.8)
Deferred and current tax (10.7)
=============================== ============
Net assets held for sale 30.4
=============================== ============
On the 30 June 2017 the Group sold its Workwear and Hygiene
operations in 10 countries, principally in the Benelux and Central
and Eastern Europe, to a joint venture with the CWS-Boco businesses
of Franz Haniel & Cie. Holding Company. The disposal group was
recognised as held for sale at 31 December 2016. In addition to
cash consideration the Group received an 17.8% share in the
combined CWS-Boco business. This is accounted for as an investment
in associate at 30 June 2017. The value of the investment in
associate is based on the valuation of the combined businesses.
The Group has made an accounting policy choice to recognise a
full disposal of the businesses to CWS-boco under IFRS 10, rather
than accounting for this as a partial disposal under IAS 28. Under
this approach, no elimination of the gain or loss is performed and
the fair value of the retained investment is its deemed cost for
the purposes of subsequent accounting. Details of net assets
disposed and disposal proceeds in the year relating to this
disposal are as follows:
30 June
2017
GBPm
==================================== ======= =======
Non-current assets
- Intangible assets 39.1
- Property, plant and equipment 202.7
Current assets
- Inventories 2.0
- Trade and other receivables 52.0
- Cash 17.5
Current liabilities
- Trade and other payables (44.7)
Non-current liabilities
- Provisions (1.7)
- Retirement benefit obligations (2.0)
- Deferred and current tax (19.6)
==================================== ======= =======
Net assets and liabilities disposed 245.3
Cash consideration (419.4)
Deferred consideration (30.0)
Share of investment in associate (254.0)
==================================== =======
Total consideration (703.4)
Cumulative exchange recycled from
translation reserve (42.2)
Costs of disposal 18.7
Net gain on disposal (481.6)
==================================== ======= =======
7. Dividends
6 months
to 6 months Year
30 to 30 to 31
June June December
2017 2016 2016
GBPm GBPm GBPm
---------------------------------- ----------- ----------- -----------
2015 final dividend paid - 2.06p
per share - 37.5 37.5
2016 interim dividend paid -
0.99p per share - - 18.0
2016 final dividend paid - 2.38p
per share 43.5 - -
------------------------------------ ----------- ----------- -----------
43.5 37.5 55.5
------------------------------------ ----------- ----------- -----------
The directors have declared an interim dividend of 1.14p per
share amounting to GBP21.0m payable on 13 September 2017 to
shareholders on the register at 12 August 2017. The Company has a
progressive dividend policy and will take a view on the level of
any growth for 2017 based on the year-end results. These interim
financial statements do not reflect this dividend payable.
8. Retirement benefit obligations
Apart from the legally required state social security 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 2015
Pension Scheme in the United Kingdom ("the scheme"). It has a
number of defined benefit sections which are all now closed to new
members. At 30 June 2017 the scheme was valued at an accounting
surplus of GBP265.7m (December 2016: GBP272.0m) on the Group's
balance sheet.
Other schemes currently in an accounting surplus position total
GBP0.6m and other schemes currently in an accounting deficit
position total GBP27.3m
The scheme is re-appraised semi-annually by independent
actuaries based upon actuarial assumptions in accordance with IAS
19 requirements. The principal assumptions used for the scheme are
shown below:
30 June 31 December
2017 2016
GBPm GBPm
-------------------------- ---------- --------------
Weighted average
%
Discount rate 2.6% 2.6%
Future salary increases N/A N/A
Future pension increases 3.4% 3.4%
RPI Inflation 3.5% 3.5%
CPI Inflation 2.4% 2.4%
--------------------------- ---------- --------------
The trustees of the scheme value the liabilities on a different
basis and in the most recent valuation at 31 December 2015, it was
agreed that the scheme is now fully funded and no contributions are
required from the company at this time. The funding position will
be reviewed at the next triennial actuarial valuation, which is due
to be carried out at 31 December 2018.
9. Bank and other borrowings
At
30 At 31
June December
2017 2016
GBPm GBPm
--------------------------- -------- ----------
Non-current
RCF and other bank
borrowings 360.7 473.4
Bond debt 743.1 764.6
Finance lease liabilities 26.9 22.4
---------------------------- -------- ----------
1,130.7 1,260.4
--------------------------- -------- ----------
Current
Bank overdrafts 5.1 54.3
Bank borrowings 308.3 -
Bond debt 43.8 -
Bond interest accruals 18.7 6.2
Finance lease liabilities 12.4 16.9
---------------------------- -------- ----------
388.3 77.4
--------------------------- -------- ----------
Total bank and other
borrowings 1,519.0 1,337.8
---------------------------- -------- ----------
At 30 June 2017, the Group has a GBP420m revolving credit
facility (RCF) which is available for cash drawings up to GBP360m,
and for guarantees and letters of credit up to GBP60m. The maturity
date is January 2022. As at 30 June 2017 GBP308.3m was drawn under
the part of the facility available for cash drawings and GBP33.2m
under the part available for guarantees.
The Group also has a US$25m revolving credit facility, maturing
December 2019, on terms in line with main RCF. At 30 June 2017,
nothing was drawn on this facility.
In addition the Group has Term Loans available for cash drawings
of up to GBP200m and $157m with a maturity date of December 2018.
Both were fully drawn during the six months to 30 June 2017. The
cost of borrowing under the GBP200m and $157m loans were 1.01% and
1.99% respectively.
Medium-term notes and bond debt comprises:
Effective
Bond interest hedged interest
coupon rate
------------------------------ ------------------------ -----------------
Non-current
EUR50m bond due March
2018(1) Float 3M EURIBOR+0.48% Fixed 0.66%
EUR500m bond due September
2019 Fixed 3.375% Fixed 3.50%
EUR350m bond due October
2021 Fixed 3.25% Fixed 3.41%
GBP1.3m perpetual debentures Fixed 5.00% Fixed 5.00%
GBP0.3m perpetual debentures Fixed 4.50% Fixed 4.50%
------------------------------ ------------------------ -----------------
Average cost of bond debt
at period end rates 3.30%
-------------------------------------------------------- -----------------
1 The EUR50m bond due March 2018 was fixed at rate of 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
The carrying values and the fair values of the Group's
non-current borrowings are shown in the table below. Fair values
are based on cash flows discounted at the current market rates.
Carrying Carrying Fair Fair
amount amount Value Value
30 June 31 December 30 June 31 December
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
------------------------------ --------- ------------ -------- ------------
Bank borrowings 360.7 473.4 360.7 473.4
EUR50m bond due March
2018 - 42.6 - 42.6
EUR500m bond due September
2019 437.4 425.0 469.5 465.6
EUR350m bond due October
2021 304.7 296.0 339.4 337.0
GBP1.6m perpetual debentures 1.0 1.0 1.7 1.7
Finance lease liabilities 26.9 22.4 26.9 22.4
------------------------------ --------- ------------ -------- ------------
1,130.7 1,260.4 1,198.2 1,342.7
------------------------------ --------- ------------ -------- ------------
10. 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.
Hierarchy
Financial instrument level Valuation method
=============================== ========== ================================
Financial assets traded 1 Current bid price
in active markets
Financial liabilities 1 Current ask price
traded in active markets
Long-term debt 1 Quoted market prices or dealer
quotes for similar instruments
Interest rate/currency 1 Market swap rates at the
swaps balance sheet date
Forward foreign exchange 1 Forward exchange market rates
contracts at the balance sheet date
Borrowings not traded 2 Cash flows discounted at
in active markets current market rates
Financial instruments 2 or Valuation assumptions based
not traded in active 3 on market conditions at the
markets balance sheet date
Trade payables and receivables 3 Nominal value less estimated
credit adjustments
Other financial instruments 3 Variety of techniques including
discounted cash flows
=============================== ========== ================================
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 Fair Fair Fair
value value value Value
assets assets liabilities liabilities
30 June 31 December 30 June 31 December
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
---------------------------------- -------- ------------ ------------- -------------
Interest rate swaps:
* non-hedge - - (6.3) (6.0)
* cash flow hedge 3.6 1.3 (0.1) (0.2)
* net investment hedge 0.1 - (12.4) (65.9)
Foreign exchange forwards:
* cash flow hedge - - - (6.0)
* non-hedge 1.1 (1.3) -
Foreign exchange swaps:
* non-hedge - 0.3 (0.2) (0.5)
---------------------------------- -------- ------------ ------------- -------------
4.8 1.6 (20.3) (78.6)
---------------------------------- -------- ------------ ------------- -------------
Analysed as follows:
Current portion 1.3 1.6 (1.5) (56.8)
Non-current portion 3.5 - (18.8) (21.8)
---------------------------------- -------- ------------ ------------- -------------
4.8 1.6 (20.3) (78.6)
---------------------------------- -------- ------------ ------------- -------------
11. Events occurring after the balance sheet date
Bank borrowings of GBP307.9m were repaid on 3 July 2017
(GBP154.3m) and 5 July 2017 (GBP153.6m). Additionally the Group
entered into a EUR/USD cross currency interest rate swap on 3 July
2017 converting Euro debt of EUR141.3m to USD debt of $161.1m.
There were no other significant events occurring after the
balance sheet date.
12. Alternative performance measures
Definitions and reconciliation of non-GAAP measures to GAAP
measures
The Group uses a number of measures to present the financial
performance of the business which are not GAAP measures as defined
under IFRS. Management believes these measures provide valuable
additional information for users of the financial statements in
order to understand the underlying trading performance. The Group's
internal strategic planning process is also based on these measures
and they are used for incentive purposes. They should be viewed as
complements to, and not replacements for, the comparable GAAP
measures.
Constant exchange rates (CER)
Given the international nature of the Group's operations,
foreign exchange movements can have a significant impact on the
reported results of the Group when they are translated into
sterling (the functional reporting currency of the Group). In order
to help understand the underlying trading performance of the
business, unless otherwise stated, percentage movements for revenue
and profit measures are presented at constant exchange rates (CER).
Constant exchange rates are calculated by retranslating current
year reported numbers at the full year average exchange rates for
the prior year, in order to give management and other users of the
accounts better visibility of underlying performance against the
prior period. The major exchange rates used are GBP/$ FY 2016
1.3556 (FY 2015 1.5288) and GBP/EUR FY 2016 1.2299 (FY 2015
1.3770). Comparisons are to the period ended 30 June 2016 (2016)
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 amortisation and impairment of intangible assets
(excluding computer software), one-off items (see below), gain or
loss on disposal of businesses, and add-back of depreciation on
held-for-sale assets.
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 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 by removing distortions
caused by non-recurring expenses and income, and the amortisation
and impairment of intangible assets arising on the acquisition of
businesses. Adjusted profit measures are calculated by adding the
following items back to the equivalent GAAP profit measure:
-- Amortisation and impairment of intangible assets (excluding software)
-- One-off items
-- Net profit on disposal of businesses
-- Depreciation - held-for-sale assets
-- Net interest credit from pensions
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 non-recurring expenses or income
which will have a non-recurring impact on the 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. One-off items
are analysed in Note 4.
Given the size, the net profit on disposal of businesses of
GBP409.0m has been separately presented on the face of the
consolidated statement of profit or loss below operating
profit.
In addition, following the announcement of the joint venture
(JV) with Haniel in December 2016 the assets of the businesses
being contributed into the JV were reported as 'held for sale'. In
accordance with IFRS 5, - Non-current Assets Held for Sale and
Discontinued Operations - the assets were not depreciated from that
point which has increased the profitability of the disposed
businesses by GBP34.3m in the first half. In order to avoid this
distorting the underlying performance of the business the
non-depreciation benefit has been added back in arriving at our
adjusted profit measures (Adjusted EPS and Adjusted PBTA).
Prior to 2016 restructuring costs were an adjustment in arriving
at adjusted profit measures. Although they are no longer adjusted
for, they are presented in the segmental analysis in order to
provide comparability. Central and regional costs are overhead
costs which cannot be allocated to any specific segment.
Adjusted earnings per share is earnings per share calculated on
adjusted profit after tax.
12. Alternative performance measures (continued)
A reconciliation of non-GAAP measures to the comparable GAAP
equivalents is provided below at both AER and CER:
% change
========
H1 H1 H1 H1
2017 2017 2016 2016
AER CER AER CER
GBPm GBPm GBPm GBPm AER CER
========
Ongoing Revenue 1,056.0 996.6 822.6 859.1 28.4% 16.0%
Revenue - disposed
and closed businesses 177.6 168.3 164.5 172.0 7.9% (2.1%)
=========================== ======== ======== ======= ======== ========= =========
Revenue 1,233.6 1,164.9 987.1 1,031.1 25.0% 13.0%
=========================== ======== ======== ======= ======== ========= =========
Ongoing Operating
Profit 122.1 113.4 94.7 100.4 29.2% 13.0%
Operating Profit
- disposed and
closed businesses 55.3 52.5 19.3 20.2 186.7% 160.1%
=========================== ======== ======== ======= ======== ========= =========
Operating Profit
- continuing operations 177.4 165.9 114.0 120.6 55.9% 37.7%
Depreciation -
held-for-sale assets (34.3) (32.6) - - - -
=========================== ======== ======== ======= ======== ========= =========
Adjusted Operating
Profit 143.1 133.3 114.0 120.6 25.7% 10.6%
=========================== ======== ======== ======= ======== ========= =========
One-off items -
Operating (7.7) (7.3) (2.1) (2.2) (266.7%) (231.8%)
Depreciation -
held-for-sale assets 34.3 32.6 - - - -
Amortisation and
impairment of intangible
assets (25.9) (24.5) (20.1) (20.9) (28.9%) (17.0%)
=========================== ======== ======== ======= ======== ========= =========
Operating profit 143.8 134.1 91.8 97.5 56.6% 37.5%
=========================== ======== ======== ======= ======== ========= =========
Profit on disposal
of businesses 462.5 461.4 - - - -
Share of profit
from associates
(net of tax) 3.8 3.6 3.0 3.2 27.5% 13.2%
Net interest payable
(excluding pensions) (20.6) (19.6) (18.7) (19.5) (10.2%) (1.3%)
Net interest credit
from pensions 3.4 3.4 4.3 4.3 (21.4%) (21.1%)
=========================== ======== ======== ======= ======== ========= =========
Profit before tax 592.9 582.9 80.4 85.5 637.4% 581.8%
=========================== ======== ======== ======= ======== ========= =========
Net interest credit
from pensions (3.4) (3.4) (4.3) (4.3) (21.4%) (21.1%)
One-off items -
Operating 7.7 7.3 2.1 2.2 (266.7%) (231.8%)
Profit on disposal
of businesses (462.5) (461.4) - - - -
Depreciation -
held-for-sale assets (34.3) (32.6) - - - -
Amortisation and
impairment of intangible
assets 25.9 24.5 20.1 20.9 (28.9%) (17.0%)
=========================== ======== ======== ======= ======== ========= =========
Adjusted profit
before tax 126.3 117.3 98.3 104.3 28.5% 12.5%
=========================== ======== ======== ======= ======== ========= =========
Basic earnings
per share 31.62p 31.13p 3.56p 3.81p 788.2% 717.1%
Basic adjusted
earnings per share 5.36p 4.97p 4.20p 4.48p 27.6% 10.9%
=========================== ======== ======== ======= ======== ========= =========
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. The table below
reconciles organic measures by category to the comparable GAAP
measures.
UK and North
Europe ROW Asia America Pacific Total
GBPm % GBPm % GBPm % GBPm % GBPm % GBPm %
-------------------- ------ ---- ------ ---- ----- ----- ------ ----- ----- ---- ------ -----
H1 2016 Ongoing
Revenue (as
reported) 252.9 - 170.5 - 63.5 - 298.0 - 74.2 - 859.1 -
Pro forma revenue
from 2016 and
2017 acquisitions 3.3 1.3 8.5 5.0 14.2 22.3 71.8 24.1 3.1 4.2 100.9 11.8
Organic Revenue
growth 7.8 3.0 3.7 2.1 4.7 7.4 16.9 5.6 3.5 4.7 36.6 4.2
-------------------- ------ ---- ------ ---- ----- ----- ------ ----- ----- ---- ------ -----
H1 2017 Ongoing
Revenue (as
reported) 264.0 4.3 182.7 7.1 82.4 29.7 386.7 29.7 80.8 8.9 996.6 16.0
-------------------- ------ ---- ------ ---- ----- ----- ------ ----- ----- ---- ------ -----
Pest Protect
Control Hygiene & Enhance Total
GBPm % GBPm % GBPm % GBPm %
------------------------- ------ ----- ------ ---- ------ ------ ------ -----
H1 2016 Ongoing Revenue
(as reported) 502.1 - 184.5 - 172.5 - 859.1 -
Pro forma revenue
from 2016 and 2017
acquisitions 96.7 19.3 1.3 0.7 2.9 1.7 100.9 11.8
Organic growth 32.8 6.5 5.6 3.0 (1.8) (1.1) 36.6 4.2
------------------------- ------ ----- ------ ---- ------ ------ ------ -----
H1 2017 Ongoing Revenue
(as reported) 631.6 25.8 191.4 3.7 173.6 0.6 996.6 16.0
------------------------- ------ ----- ------ ---- ------ ------ ------ -----
12. Alternative performance measures (continued)
Segmental analysis
Segmental information has been presented in accordance with IFRS
8 Operating Segments (Note 4). The "Geographic" reporting segments
reflect the internal management organisation and reporting
structure of the Group. The "Category" reporting segment has been
revised in 2017 and now combines with the quadrant analysis to give
new operational categories of Pest Control, Hygiene, and Protect
& Enhance (made up of the non-core businesses of Workwear,
Ambius and Property Care).
Segmental analysis is presented at CER unless otherwise
stated.
Regional Analysis
Revenue Operating Profit
======================= ================================= ================================
Change Change
from from
H1 2017 HY 2016 H1 2017 HY 2016
======================= ================== ============= ================ ==============
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
======================= ======== ======== ===== ====== ======= ======= ====== ======
France 144.0 136.6 11.0 0.6 20.6 19.5 0.1 (9.3)
Benelux 41.0 38.9 11.4 1.0 11.7 11.1 17.4 6.4
Germany 38.8 36.8 21.7 10.2 11.2 10.6 23.2 11.4
Southern Europe 37.9 35.9 16.7 5.8 5.8 5.5 22.0 10.4
Latin America 17.7 15.8 67.6 38.8 1.6 1.5 14.8 0.5
======================= ======== ======== ===== ====== ======= ======= ====== ======
Total Europe 279.4 264.0 15.7 4.3 50.9 48.2 11.2 0.6
======================= ======== ======== ===== ====== ======= ======= ====== ======
UK & Ireland 123.0 122.5 6.5 5.6 22.4 22.2 4.5 2.9
Rest of World 64.9 60.2 25.4 10.3 14.4 13.3 23.8 8.2
======================= ======== ======== ===== ====== ======= ======= ====== ======
UK & Rest of
World 187.9 182.7 12.4 7.1 36.8 35.5 11.3 4.8
======================= ======== ======== ===== ====== ======= ======= ====== ======
Asia 87.4 82.4 44.2 29.7 8.5 8.2 42.3 30.5
North America 413.5 386.7 45.9 29.7 49.0 45.8 45.7 29.5
Pacific 87.8 80.8 25.8 8.9 18.3 16.9 26.0 8.9
Central and
regional overheads - - - - (37.5) (37.4) (9.7) (9.6)
Restructuring
costs - - - - (3.9) (3.8) 7.4 13.6
Ongoing operations 1,056.0 996.6 28.4 16.0 122.1 113.4 29.2 13.0
======================= ======== ======== ===== ====== ======= ======= ====== ======
Disposed businesses 177.6 168.3 7.9 (2.1) 55.3 52.5 186.7 160.1
======================= ======== ======== ===== ====== ======= ======= ====== ======
Continuing operations 1,233.6 1,164.9 25.0 13.0 177.4 165.9 55.9 37.7
======================= ======== ======== ===== ====== ======= ======= ====== ======
Depreciation
- held-for-sale
assets - - - - (34.3) (32.6) - -
======================= ======== ======== ===== ====== ======= ======= ====== ======
Adjusted - Continuing
operations 1,233.6 1,164.9 25.0 13.0 143.1 133.3 25.7 10.6
======================= ======== ======== ===== ====== ======= ======= ====== ======
Category Analysis(1)
Revenue Operating Profit
========================================================== ==================================
Change Change
from from
H1 2017 HY 2016 H1 2017 HY 2016
======================== ================== ============= ================ ================
AER CER AER CER AER CER AER CER
GBPm GBPm % % GBPm GBPm % %
======================== ======== ======== ===== ====== ======= ======= ======= =======
Pest Control 672.0 631.6 40.2 25.8 113.8 107.6 34.3 21.4
- Growth 578.1 543.9 36.0 22.2 99.6 94.1 29.1 16.8
- Emerging 93.9 87.7 72.7 53.4 14.2 13.5 87.2 68.2
Hygiene 201.4 191.4 13.6 3.7 35.5 33.6 21.1 9.9
Protect & Enhance 182.6 173.6 10.1 0.6 14.2 13.4 (25.0) (32.1)
Central and
regional overheads - - - - (37.5) (37.4) (9.7) (9.6)
Restructuring
costs - - - - (3.9) (3.8) 7.4 13.6
Ongoing operations 1,056.0 996.6 28.4 16.0 122.1 113.4 29.2 13.0
======================== ======== ======== ===== ====== ======= ======= ======= =======
Disposed businesses 177.6 168.3 7.9 (2.1) 55.3 52.5 186.7 160.1
======================== ======== ======== ===== ====== ======= ======= ======= =======
Continuing operations 1,233.6 1,164.9 25.0 13.0 177.4 165.9 55.9 37.7
======================== ======== ======== ===== ====== ======= ======= ======= =======
Depreciation
- held-for-sale
assets - - - - (34.3) (32.6) - -
======================== ======== ======== ===== ====== ======= ======= ======= =======
Adjusted - Continuing
operations 1,233.6 1,164.9 25.0 13.0 143.1 133.3 25.7 10.6
======================== ======== ======== ===== ====== ======= ======= ======= =======
1 The "Category" reporting segment has been revised in 2017, this table is restated
12. Alternative performance measures (continued)
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 2017 H1 2016 Variance
% % %
========================== ======== ======== =========
France 14.3 15.8 (1.5)
Benelux 28.6 27.1 1.5
Germany 28.7 28.4 0.3
Southern Europe 15.4 14.8 0.6
Latin America 9.2 12.9 (3.7)
========================== ======== ======== =========
Total Europe 18.2 18.9 (0.7)
========================== ======== ======== =========
UK & Ireland 18.1 18.6 (0.5)
Rest of World 22.1 22.6 (0.5)
========================== ======== ======== =========
UK & Rest of World 19.4 19.9 (0.5)
========================== ======== ======== =========
Asia 9.9 9.8 0.1
North America 11.9 11.9 -
Pacific 20.9 20.9 -
Ongoing operations(1) 11.4 11.7 (0.3)
========================== ======== ======== =========
Disposed businesses 11.8 11.7 0.1
========================== ======== ======== =========
Continuing operations(1) 11.4 11.7 (0.3)
========================== ======== ======== =========
H1 2017 H1 2016(2) Variance
% % %
========================== ======== =========== =========
Pest Control 17.0 17.6 (0.6)
- Growth 17.3 18.1 (0.8)
- Emerging 15.3 14.0 1.3
Hygiene 17.6 16.6 1.0
Protect & Enhance 7.7 11.4 (3.7)
Ongoing operations(1) 11.4 11.7 (0.3)
========================== ======== =========== =========
Disposed businesses 11.8 11.7 0.1
========================== ======== =========== =========
Continuing operations(1) 11.4 11.7 (0.3)
========================== ======== =========== =========
1 Operating Margin for ongoing operations and continuing
operations is calculated after central and regional overheads and
restructuring costs
2 The "Category" reporting segment has been revised in 2017, this table is restated
Free Cash Flow
The Group aims to generate sustainable cash flow (Free Cash
Flow) in order the 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, equipment and
intangible fixed 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 2017 H1 2016
AER AER
GBPm GBPm
==================================== ======== ========
Net cash from operating activities 190.6 159.0
Purchase of property, plant,
equipment and intangible fixed
assets (114.7) (97.8)
Leased property, plant and
equipment (10.1) (6.8)
Proceeds from sale of property,
plant, equipment and software 3.0 3.3
Interest element of finance
lease payments (0.7) (0.6)
Free Cash Flow 68.1 57.1
==================================== ======== ========
12. Alternative performance measures (continued)
Adjusted Effective Tax Rate
Adjusted 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 H1
2017 2016
GBPm GBPm
=========================================== ====== ======
Unadjusted income tax expense 13.3 15.3
Tax adjustments on:
Amortisation and impairment of intangible
assets (excluding computer software) 8.3 6.6
One-off items - operating 2.3 0.6
Net interest credit from pensions (0.6) (0.8)
Profits and losses on disposal of
businesses and reversal of depreciation
on assets held for sale 4.8 -
Adjusted income tax expense (a) 28.1 21.7
Adjusted profit before income tax
(b) 126.3 98.3
=========================================== ====== ======
Adjusted Effective Tax Rate (a/b) 22.2% 22.1%
=========================================== ====== ======
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
26 July 2017
The directors of Rentokil Initial plc are listed in the Rentokil
Initial plc Annual Report for 31 December 2016. A list of the
current directors is maintained on the Rentokil Initial website:
www.rentokil-initial.com
INDEPENT REVIEW REPORT TO RENTOKIL INITIAL PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the condensed
consolidated income statement, condensed consolidated balance
sheet, condensed consolidated statement of comprehensive income,
condensed consolidated statement of changes in equity, condensed
consolidated cash flow and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
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.
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 International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
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 DTR of 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.
Paul Sawdon
for and on behalf of KPMG LLP,
Chartered Accountants
15 Canada Square
London
E14 5GL
26 July 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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