Annual Report 2019

A world of innovation.

Highlights of 2019 from this year's Annual Report.

Annual Report 2019


+ 8.6 %
£2.6b
Revenue*

+ 10.5 %
£365.5m
Operating Profit*

250.7m
98.6%
Free Cash Flow Conversion

430.0m
17.8% share
Haniel JV Divestment

* Ongoing operations at CER

Global leader operating in over 80 countries

Rentokil Initial is the global leader in the provision of route-based services which protect people and enhance lives. Throughout the world demand for higher standards of public health, stricter food safety legislation and compliance with workplace safety regulations are driving demand for our expertise in pest control and hygiene services.

Andy Ransom Chief Executive

“The Company has performed strongly in 2019 with a combination of organic and acquisitive growth. We are confident of delivering further operational and financial progress in 2020. The new decade presents clear opportunities for sustainable profitable growth.”

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Overview of 2019

Revenue
Profit
Cash flow

Revenue

Ongoing Revenue, which excludes disposed businesses, increased by 8.6% in 2019, with all regions contributing to growth. Organic Revenue growth of 4.5% was our highest level of annual growth in 15 years and in excess of our medium-term financial target of 3% to 4% growth per annum. Organic growth in H2 was 4.8%, with 4.1% in Q4 versus 4.7% in Q4 2018. Acquisitions performed well during the period, contributing 4.1% to Ongoing Revenue growth.

Total Revenue of £2,682.8m rose by 8.5% at constant exchange rates and by 9.8% at actual exchange rates, reflecting growth across all main regions and business categories.

Profit

Ongoing Operating Profit, which excludes disposed businesses, increased by 10.5% in the year to £365.5m, again reflecting growth across all five regions. This resulted in an increase in Net Operating Margins to 13.8% - driven by improvement in a number of key regions and in particular our North American business; but held back slightly by an increase in central costs of £7m, reflecting the impact of the increase in our share price on LTIP costs.

Ongoing Operating Profit benefited by c.£3.5m from the implementation of IFRS 16 which was adopted from 1 January 2019.

Free cash flow

Free Cash Flow increased by £58.7m to £250.7m, delivering Free Cash Flow Conversion of 98.6% for the year. The increase was principally driven by a £36.1m increase in Adjusted Operating Profit and an increase in dividends received from the now disposed CWS-boco International GmbH of £18.0m. Post the implementation of IFRS 16 from the start of 2019 depreciation and capital expenditure have both increased but they offset and the net impact was broadly cash neutral.

Revenue

Revenue

Ongoing Revenue, which excludes disposed businesses, increased by 8.6% in 2019, with all regions contributing to growth. Organic Revenue growth of 4.5% was our highest level of annual growth in 15 years and in excess of our medium-term financial target of 3% to 4% growth per annum. Organic growth in H2 was 4.8%, with 4.1% in Q4 versus 4.7% in Q4 2018. Acquisitions performed well during the period, contributing 4.1% to Ongoing Revenue growth.

Total Revenue of £2,682.8m rose by 8.5% at constant exchange rates and by 9.8% at actual exchange rates, reflecting growth across all main regions and business categories.

Profit

Profit

Ongoing Operating Profit, which excludes disposed businesses, increased by 10.5% in the year to £365.5m, again reflecting growth across all five regions. This resulted in an increase in Net Operating Margins to 13.8% - driven by improvement in a number of key regions and in particular our North American business; but held back slightly by an increase in central costs of £7m, reflecting the impact of the increase in our share price on LTIP costs.

Ongoing Operating Profit benefited by c.£3.5m from the implementation of IFRS 16 which was adopted from 1 January 2019.

Cash flow

Free cash flow

Free Cash Flow increased by £58.7m to £250.7m, delivering Free Cash Flow Conversion of 98.6% for the year. The increase was principally driven by a £36.1m increase in Adjusted Operating Profit and an increase in dividends received from the now disposed CWS-boco International GmbH of £18.0m. Post the implementation of IFRS 16 from the start of 2019 depreciation and capital expenditure have both increased but they offset and the net impact was broadly cash neutral.

Mergers and Acquisitions

2019 was another excellent year for M&A, with 41 acquisitions in 23 countries and the divestment in July of our 17.8% stake in CWS-boco International GmbH (the JV with Haniel).

Find out more

Our Business Categories

1 Pest Control
2 Hygiene
3 Protect & Enhance

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, through the introduction of innovative products and services, acquisitions and our determination to be an Employer of Choice across our global operations. Pest Control accounts for 64% of Group Ongoing Revenue and 68% of Group Ongoing Operating Profit.

Find out more about Pest Control

Initial Hygiene is the world’s largest hygiene services company offering an extensive range of award-winning products and services to enhance customers’ washrooms, while at the same time ensuring they are compliant with legislation. It is a strongly complementary business to Pest Control, serving similar customers and sharing country management, technology, infrastructure and back office services. Like Pest Control, Hygiene is a route-based business where profit growth is driven by a fundamental understanding of the importance of density. Hygiene accounts for 21% of Group Ongoing Revenue and 22% of Group Ongoing Operating Profit.

Find out more about Hygiene

The four businesses included in this category are Workwear, Ambius, Property Care and Dental Services. All are cash-generative businesses which share overheads with our Pest Control and Hygiene businesses. However, they operate in markets which typically offer lower opportunities for growth. Combined, the businesses represent 15% of Group Ongoing Revenue and 10% of Group Ongoing Operating Profit.

Find out more about Protect & Enhance

1 Pest Control

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, through the introduction of innovative products and services, acquisitions and our determination to be an Employer of Choice across our global operations. Pest Control accounts for 64% of Group Ongoing Revenue and 68% of Group Ongoing Operating Profit.

Find out more about Pest Control

2 Hygiene

Initial Hygiene is the world’s largest hygiene services company offering an extensive range of award-winning products and services to enhance customers’ washrooms, while at the same time ensuring they are compliant with legislation. It is a strongly complementary business to Pest Control, serving similar customers and sharing country management, technology, infrastructure and back office services. Like Pest Control, Hygiene is a route-based business where profit growth is driven by a fundamental understanding of the importance of density. Hygiene accounts for 21% of Group Ongoing Revenue and 22% of Group Ongoing Operating Profit.

Find out more about Hygiene

3 Protect & Enhance

The four businesses included in this category are Workwear, Ambius, Property Care and Dental Services. All are cash-generative businesses which share overheads with our Pest Control and Hygiene businesses. However, they operate in markets which typically offer lower opportunities for growth. Combined, the businesses represent 15% of Group Ongoing Revenue and 10% of Group Ongoing Operating Profit.

Find out more about Protect & Enhance

Richard Solomons Chairman, Rentokil Initial plc

“As the business continues to grow, it is key that the Board maintains the highest corporate governance standards and works with management to continue the successful delivery of our strategy.”

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Annual Report 2019

An outline of what we do through descriptions of our businesses, markets, growth opportunities and initiatives.

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Regional Performances View More
Acquisitions & Disposals View More
Key Performance Indicators View More
Innovation

Innovation is part of our culture. It’s not just a function, nor just product development, but a way of thinking. All our colleagues are encouraged and empowered to improve and enhance our business performance by innovating. At Rentokil Initial, it’s everyone’s responsibility.

Digital Expertise

Rentokil has developed the world’s leading digital pest control platform providing an unmatched level of monitoring, reporting and insight for our customers who face the risk of increased fines and censure without effective pest management and reporting.

Customer Satisfaction

In 2019 our State of Service KPI of 97.2% was once again significantly ahead of our target 95% and our Group customer satisfaction score (measured by our Customer Voice Counts surveys) has strengthened further, rising by 2.4 points to 44.5 points with Pest Control our highest performing category – up 3.5 points to 60.2 points.

Employer of Choice

Our Employer of Choice programme, which aims to improve colleague recruitment, engagement, talent, development, diversity and retention, made further progress in 2019. Visits to our Global Recruitment Portal have seen an increase of over 1000% from 2017. Colleague engagement improved by 2% in 2019 – to a level above the High Performance norm.

January
2019

Rentokil Indonesia celebrated its 50th anniversary.

February
2019

We launched Dual Autogate Connect – the first connected device to target both mice and rats.

March
2019

We launched Rentokil Initial Cares: a new fund established to use unclaimed dividends to fund good causes in line with the company’s mission of protecting people and enhancing lives.

May
2019

The acquisition of Rapid Washroooms - allowed us to expand the variety and flexibility of what we can offer with our new Rapid>SmartHygiene range, ideal for high footfall washrooms.

Rentokil Initial won the International Risk Initiative of the Year at the International Institute of Risk and Safety Management’s Risk Excellence Awards. The award recognised the successful launch and ongoing implementation of our global SHE Golden Rules programme.

June
2019

We made our market entry into Jordan with the acquisition of Arena Public Health Co. Ltd, formerly the largest independent pest control company in the Kingdom.

Lumnia Compact Colour was launched, giving our customers a range of stylish options for front-of-house insect light traps.

July
2019

We acquired Ecovec in Brazil, building scale to our centre of expertise in mosquito control, supplementing our earlier acquisitions of Multicontrole in Brazil alongside VDCI and Mosquito Control Services in North America.

September
2019

A RoSPA Gold Award was achieved in the UK for a second year running, demonstrating our commitment to a strong health and safety culture.

October
2019

Initial launched its new range of washroom soaps which use natural extracts and have a minimal environmental impact – so they are kinder to users and to our planet.

November
2019

We acquired Florida Pest Control in North America, a high-quality service provider for commercial and residential customers that brings in 600 colleagues from 20 branches throughout central and northern Florida.

Rentokil Initial was ranked 9th in the Hampton-Alexander Review for Board diversity. We were also ranked #1 by Indeed’s Top-Rated Workplaces for 2019: Best in the Private Sector.

December
2019

At the Management Today awards for Britain’s Most Admired Companies Rentokil Initial won the sector award for Business Support Services as well as the overall award for Diversity and Inclusion.

January 2019

Rentokil Indonesia celebrated its 50th anniversary.

February 2019

We launched Dual Autogate Connect – the first connected device to target both mice and rats.

March 2019

We launched Rentokil Initial Cares: a new fund established to use unclaimed dividends to fund good causes in line with the company’s mission of protecting people and enhancing lives.

May 2019

The acquisition of Rapid Washroooms - allowed us to expand the variety and flexibility of what we can offer with our new Rapid>SmartHygiene range, ideal for high footfall washrooms.

Rentokil Initial won the International Risk Initiative of the Year at the International Institute of Risk and Safety Management’s Risk Excellence Awards. The award recognised the successful launch and ongoing implementation of our global SHE Golden Rules programme.

June 2019

We made our market entry into Jordan with the acquisition of Arena Public Health Co. Ltd, formerly the largest independent pest control company in the Kingdom.

Lumnia Compact Colour was launched, giving our customers a range of stylish options for front-of-house insect light traps.

July 2019

We acquired Ecovec in Brazil, building scale to our centre of expertise in mosquito control, supplementing our earlier acquisitions of Multicontrole in Brazil alongside VDCI and Mosquito Control Services in North America.

September 2019

A RoSPA Gold Award was achieved in the UK for a second year running, demonstrating our commitment to a strong health and safety culture.

October 2019

Initial launched its new range of washroom soaps which use natural extracts and have a minimal environmental impact – so they are kinder to users and to our planet.

November 2019

We acquired Florida Pest Control in North America, a high-quality service provider for commercial and residential customers that brings in 600 colleagues from 20 branches throughout central and northern Florida.

Rentokil Initial was ranked 9th in the Hampton-Alexander Review for Board diversity. We were also ranked #1 by Indeed’s Top-Rated Workplaces for 2019: Best in the Private Sector.

December 2019

At the Management Today awards for Britain’s Most Admired Companies Rentokil Initial won the sector award for Business Support Services as well as the overall award for Diversity and Inclusion.

Protecting People. Enhancing Lives.

Our responsible business actions focus on helping to improve public health, protecting property from pest damage and reducing risk of poor workplace hygiene, together with reducing emissions, energy and water usage.

Safety
47%
Reduction in Lost Time Accidents since 2014
62%
Reduction in Working Days Lost since 2014
Environment
3.7%
Reduction in emissions in 2019
20.4%
Achieved our 5-year target of 20% reduction
Training
1.8m
Content views by colleagues in 2019
40%
Increase in views of U+ training year on year
Community
£250k
per year pledged through Rentokil Initial Cares
£237k
donated to Malaria No More since the relationship began
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