Annual Report 2015

2015 has been a year of further progress at Rentokil Initial.

Highlights of 2015 from this year's Annual Report.

Annual Report 2015


+ 6.5%
£1.8b
Revenue*

+ 8.5%
£252.8m
Operating Profit*

£147.7m
vs target of £100m
Free Cash Flow

+ 13.1%
2.93p
Final Dividend

* Ongoing operations at CER

Protecting People. Enhancing Lives.

Rentokil Initial is a 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 service expertise.

John McAdam Chairman, Rentokil Initial plc

“During 2015 we have continued to execute our differentiated strategy to drive profitable growth with both focus and pace. This strategy is centred on delivering medium-term improvements in revenue and profit and a sustainable improvement in free cashflow.”

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Overview of 2015

Revenue from ongoing
operations
Adjusted operating profit
Free cash flow

Revenue from ongoing operations (CER) increased by 6.5% in 2015, comprising organic growth of 1.8% and growth from acquired businesses of 4.7%. Revenue in the Pest Control business grew strongly at 13.1% during the year, of which 4.6% was organic. Growth in 2015 in the Emerging (+14.0%) and Growth (+12.0%) quadrants was driven by good performances from North America, UK, Germany, Latin America, Asia and Pacific. Revenue in the Protect & Enhance quadrant declined by 1.2%, largely driven by France, with the Manage for Value quadrant down 0.3% on the prior year.

Adjusted operating profit from ongoing operations (CER) increased by 8.5% in 2015, reflecting growth in North America, the UK, Germany, Asia and Pacific, offset by lower profits in France. Adjusted profit before tax of £198.0m (at AER) was negatively impacted by foreign exchange of £17.1m due mainly to the strengthening of Sterling against the Euro in the year. Restructuring costs of £8.3m (2014: £8.8m) were maintained at under our £10m target for the year.

Free cash flow from continuing operations amounted to £147.7m in 2015, driven by continued strong operating cash flow, a reduction in interest and tax payments and the beneficial settlement of a legacy legal claim. After taking into account the expenditure on current and prior-year acquisitions (£369.2m) and exchange rate movements, net debt increased by £251.6m to £1,026.6m (31 December 2014: £775.0m).

Revenue from ongoing
operations

Revenue from ongoing operations (CER) increased by 6.5% in 2015, comprising organic growth of 1.8% and growth from acquired businesses of 4.7%. Revenue in the Pest Control business grew strongly at 13.1% during the year, of which 4.6% was organic. Growth in 2015 in the Emerging (+14.0%) and Growth (+12.0%) quadrants was driven by good performances from North America, UK, Germany, Latin America, Asia and Pacific. Revenue in the Protect & Enhance quadrant declined by 1.2%, largely driven by France, with the Manage for Value quadrant down 0.3% on the prior year.

Adjusted operating profit

Adjusted operating profit from ongoing operations (CER) increased by 8.5% in 2015, reflecting growth in North America, the UK, Germany, Asia and Pacific, offset by lower profits in France. Adjusted profit before tax of £198.0m (at AER) was negatively impacted by foreign exchange of £17.1m due mainly to the strengthening of Sterling against the Euro in the year. Restructuring costs of £8.3m (2014: £8.8m) were maintained at under our £10m target for the year.

Free cash flow

Free cash flow from continuing operations amounted to £147.7m in 2015, driven by continued strong operating cash flow, a reduction in interest and tax payments and the beneficial settlement of a legacy legal claim. After taking into account the expenditure on current and prior-year acquisitions (£369.2m) and exchange rate movements, net debt increased by £251.6m to £1,026.6m (31 December 2014: £775.0m).

Differentiated Strategy

The differentiated quadrant-based strategy is working well and we have taken further steps in moving our portfolio towards higher growth businesses and geographies.

Our Business Model Our Quadrants

Priorities for the Next Phase of our Strategy

1 Accelerating Pest
Control
2 ‘Execute Now’ in
Hygiene
3 WorkWear Quality
Focus

Rentokil is the world’s leading commercial pest control company. In 2015, revenues were up 13.1% - with 4.6% organic growth (+3.1% PY) - and profits up 14.2% through a combination of leading market positions, leadership in digital marketing and a strong pipeline of innovations. 21 acquisitions in 2015 including Steritech.

Find out more about Pest Control

In 2015 our Hygiene business returned to both revenue and profit growth. Organic revenue growth of +2.3% in 2015 (+0.2% PY). Good performances in Pacific +3.7%, UK +7.3% and Ireland +8.3%. We now have a range of products that we believe are second to none and are providing genuine differentiation in the market.

Find out more about Hygiene

In 2015 the Company outlined that the Next Phase for our Workwear business was to deliver genuine differentiation through product and service quality though seven areas of focus.

Example: Best-in-class processing

The Company has introduced new detergents into our 37 laundries. This has resulted in:

Find out more about Workwear


50%
Reduction in
bleach used

30%
Reduction in
textile wear

10%
Reduction in
water used

8.5%
Less energy
required
1 Accelerating Pest
Control

Rentokil is the world’s leading commercial pest control company. In 2015, revenues were up 13.1% - with 4.6% organic growth (+3.1% PY) - and profits up 14.2% through a combination of leading market positions, leadership in digital marketing and a strong pipeline of innovations. 21 acquisitions in 2015 including Steritech.

Find out more about Pest Control

2 ‘Execute Now’ in
Hygiene

In 2015 our Hygiene business returned to both revenue and profit growth. Organic revenue growth of +2.3% in 2015 (+0.2% PY). Good performances in Pacific +3.7%, UK +7.3% and Ireland +8.3%. We now have a range of products that we believe are second to none and are providing genuine differentiation in the market.

Find out more about Hygiene

3 WorkWear Quality
Focus

In 2015 the Company outlined that the Next Phase for our Workwear business was to deliver genuine differentiation through product and service quality though seven areas of focus.

Example: Best-in-class processing

The Company has introduced new detergents into our 37 laundries. This has resulted in:

Find out more about Workwear


50%
Reduction in
bleach used

30%
Reduction in
textile wear

10%
Reduction in
water used

8.5%
Less energy
required
Andy Ransom Chief Executive Officer, Rentokil Initial plc

“We are confident of delivering further value for shareholders as we enter the Next Phase in the execution of our strategy.”

Download Q&A with CEO

Downloads & links

Annual Report 2015

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

Download
Regional Performance View More
Acquisitions & Disposals View More
Funding & Dividends View More
Key Performance Indicators View More
Acquisitions focus on Growth and Emerging markets

All of the Company’s acquisitions in 2015 were in these two higher growth quadrants - which now account for c.60% of revenue.

Innovation

In 2015 the company launched HygieneConnect and Autogate, and began the rollout of PestConnect technologies.

Digital expertise

We invest in technology to drive short-term growth and long-term differentiation. In 2015 we completed the roll out of our Pest Control Web platform into all major markets, resulting in a 19% increase in visitors and a 13% increase in Web enquiries.

Customer satisfaction

In 2015 the Company maintained high levels of customer service, improved customer satisfaction by 12.8% (as measured using the NPS system to 28.2 from 25 in 2014) and saw customer retention rise by 0.9%.

January
2015

Announced the acquisition of Peter Cox Property Care, a leader in the provision of remedial property care services in the UK.

Acquisitions in Italy (EcoTime Pest Control) and the Bahamas (Tropical Pest Control) to build density.

February
2015

Initial launches HygieneConnect – the first system to monitor and display hand washroom compliance.

March
2015

Acquisition of Eradico Services Inc in Michigan, USA, and Sagrip S.A. giving us market entry in Guatemala and El Salvador.

Completion of €50 million Floating Rate Notes due 13 March 2018 - fixed at an interest rate of 0.574%.

April
2015

Launch of AutoGate in Germany.

May
2015

Signature Colour range rolls out in France and then across Europe.

August
2015

Continued expansion with the acquisition of Chicago-based Anderson Pest Solutions, building customer density.

October
2015

Completion of the Steritch Group Inc acquisition - Rentokil becomes the third largest pest control business in North America.

December
2015

The acquisition of Oliver Exterminating builds density in Arizona and Florida and provides market entry into Puerto Rico and the Dominican Republic. 

January 2015

Announced the acquisition of Peter Cox Property Care, a leader in the provision of remedial property care services in the UK.

Acquisitions in Italy (EcoTime Pest Control) and the Bahamas (Tropical Pest Control) to build density.

February 2015

Initial launches HygieneConnect – the first system to monitor and display hand washroom compliance.

March 2015

Acquisition of Eradico Services Inc in Michigan, USA, and Sagrip S.A. giving us market entry in Guatemala and El Salvador.

Completion of €50 million Floating Rate Notes due 13 March 2018 - fixed at an interest rate of 0.574%.

April 2015

Launch of AutoGate in Germany.

May 2015

Signature Colour range rolls out in France and then across Europe.

August 2015

Continued expansion with the acquisition of Chicago-based Anderson Pest Solutions, building customer density.

October 2015

Completion of the Steritch Group Inc acquisition - Rentokil becomes the third largest pest control business in North America.

December 2015

The acquisition of Oliver Exterminating builds density in Arizona and Florida and provides market entry into Puerto Rico and the Dominican Republic. 

Protecting People. Enhancing Lives.

Our corporate responsibility 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. Download the 2015 Corporate Responsibility report here.

Safety
22%
improvement Long-Term Accident rate
30%
Improvement Working Days Lost rate
Environment
9%
Improvement in emissions
8%
Improvement in water consumption in workwear plants
Training
43,000
Online courses undertaken
3,250
Technical training days delivered in the UK
Community
£128k
Donated to charities
£40k
Donated to Malaria No More