Preliminary Results for the year ended 31 December 2017

01 Mar 2018

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 measures represent the performance of the continuing operations of the Group (including acquisitions) after removing the effect of disposed or closed businesses. An explanation of the measures used along with reconciliation to the nearest IFRS measures is provided in Note 22 on page 34.

2017 Highlights

• Strong performance in excess of medium-term financial targets - Ongoing Revenue growth of 14.5%, Ongoing Operating Profit growth of 14.8% and Free Cash Flow of £175.8m
• Year-on-year growth in Ongoing Organic Revenue of +3.8% (2016: +3.6%, 3.0% Reported*), driven by Pest Control +5.8% and Hygiene +2.1%
• Particularly strong execution of M&A - 41 businesses acquired with combined annualised revenues of £224.7m. Cash spend on M&A of £281.1m
  • 33 Pest Control acquisitions, seven Hygiene acquisitions and one in Protect & Enhance
  • Pest Control acquisitions include:
    • Controlling interest in joint venture with India’s largest pest control company, PCI, a strategically important step in a country with significant growth potential
    • Nine Pest Control acquisitions in the US with combined annualised revenues of £100m reinforcing our position as the number three player in the key North American market
  • Completion of joint venture with Haniel to create a leading provider of workwear and hygiene services in Europe and divestment of eight predominately flat linen laundries in France to RLD
• Net debt below £1bn at £927.3m, notwithstanding £281.1m spend on acquisitions in 2017
• 15.1% increase in proposed final dividend of 2.74p to bring total dividend for 2017 to 3.88p

* includes performance from those businesses transferred to the Haniel JV

Andy Ransom, CEO of Rentokil Initial plc, said:

“I am pleased with our performance in 2017 and the continued growth momentum in the business. Pest Control has performed well across the regions and we remain encouraged by the progress we are delivering in Hygiene, which is a strong complementary business to our Pest Control operations. 2017 has also been a particularly good year for M&A and we have acquired 33 Pest Control companies and 7 high-quality Hygiene businesses across 24 countries, strengthening our already leading positions in key growth territories. We continue to see a strong pipeline of value enhancing acquisition opportunities going forward.

“Overall, we have had a very good year and I am delighted that we have again exceeded our medium-term financial targets for revenue, profit and cash. We are confident of delivering further progress in 2018.”

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 sold to RLD have also been excluded following the 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 22 on page 24. The term ‘joint venture’ is used to describe the Company’s joint venture with Haniel, however our 17.8% interest in CWS-boco is equity accounted for as an associate. The term is also used to describe the Company’s 57% investment interest in Rentokil PCI, however our interest in Rentokil PCI has been consolidated in our Financial Statements.

Revenue

Ongoing Revenue, which excludes disposed businesses, increased by 14.5% in 2017, with all regions contributing to growth. Asia performed particularly well, increasing revenues by 37.3% (aided by the PCI joint venture) with North America growing by 21.1%. Revenues in the Pacific and Europe rose by 7.7% and 7.3% respectively while the UK and ROW region delivered growth of 6.8%. Group Organic Revenue growth was 3.8% and growth from acquired businesses was 10.7%. Ongoing Revenue in Pest Control grew strongly at 21.4% during the year, of which 5.8% was Organic Revenue, while Hygiene reported increased revenues of 7.6%, up 2.1% Organic. Our Protect & Enhance businesses reported Ongoing Revenue growth of 0.9% during the period with improved performance in our French workwear business. Total Revenue at actual exchange rates increased by 11.3% reflecting the disposal of businesses during the year offset by the favourable impact of foreign exchange.

Profit

Ongoing Operating Profit, which excludes the results of disposed businesses, increased by 14.8% in 2017, reflecting growth in all regions but offset by lower profits in France. Restructuring costs amounted to £6.9m at CER (2016: £7.9m) 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 exchange rates grew by 242.3% to £713.6m. Profit before tax includes a net profit on disposal of businesses of £449.0m, including the profit on disposal of the businesses transferred into the Haniel joint venture of £481.2m and a loss of £32.2m in relation to the divestment of eight, predominantly flat linen laundries in France to RLD. Net one-off costs at actual exchange rates amounted to £6.8m (2016: £8.6m).

Adjusted profit before tax at actual exchange rates of £286.9m, which excludes the net profit from disposal of businesses, was favourably impacted by foreign exchange movements of £19.1m, due mainly to the weakening of Sterling against the Euro in the year.

Cash

Free Cash Flow from continuing operations at actual exchange rates amounted to £175.8m, driven by the increased profit delivery in 2017 and a year-on-year reduction in interest payments following the bond refinancing in Q1 2016, offset by the disposal of the businesses transferred to the Haniel joint venture and the non-repeat of the £7.3m special dividend from our Japanese associate in 2016. Spend on current and prior-year acquisitions (including the Rentokil PCI joint venture in India) totalled £281.1m, net proceeds received from the completion of the JV with Haniel and disposal of the eight laundries in France to RLD were £451.9m and dividend payments were £64.3m (an £8.8m, 15.9% increase on the prior year). Foreign exchange translation and other items decreased net debt by £29.1m, leaving an overall decrease in net debt of £311.4m and closing net debt of £927.3m.

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 acquired 41 businesses for £281.1m - 33 in Pest Control, seven in Hygiene and one in Protect & Enhance - with combined annualised revenues in the year prior to acquisition of £224.7m. 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 nine businesses. 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 will continue to seek further acquisition opportunities in 2018 in both Pest Control and Hygiene and the pipeline of prospects remains strong. Our anticipated spend on acquisitions in 2018 is estimated to be in the region of £200m to £250m.

Enquiries:

A presentation for investors and analysts will be held on Thursday 1 March 2018 at 9.30am 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.

The Company will also be hosting two investor seminars - in London on 16 May 2018 and New York on 17 May 2018 - with a primary focus on Pest Control. Further details and invitations to the event will be issued in due course.

^{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.}

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