2012 Preliminary Results 15 March 2013

Transcription

1 2012 Preliminary Results 15 March

2 This presentation 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 presentation should be construed as a profit forecast. 2

3 Highlights Alan Brown Chief Executive Officer 3

4 2012 Highlights At constant exchange rates Revenue and profit improvement in all divisions despite market challenges: Revenue +2.8%, +0.8%* organic Acquisitions performing well, contributing 2.4%, net 61m, of revenue growth Strong finish to 2012: Q4 adjusted profit before tax up 16%, FY +10% Solid performance from Initial Textiles & Hygiene in tough conditions Strong performance from Asia (notably Malaysia, China and India) Good progress from City Link: volumes +17% year on year; losses reduced by 5m of which 4m in Q4 Initial Facilities transition from single service cleaning to TFM moving rapidly Expansion of Rentokil Pest Control footprint through acquisition of Western and bolt-ons in North, Central, South America and Middle East Good progress in 2012 and a strong finish to the year *excluding Initial Facilities Spain, where the business is being scaled down to reduce financial exposure 4

5 Operating & Financial Review Jeremy Townsend Chief Financial Officer 5

6 Financial Highlights Q4 FY m m m m Revenue at CER % 2, , % Adjusted PBITA at CER % % Adjusted PBTA at CER % % Adjusted PBTA at AER % % Operating Cash Flow at AER % % Basic adjusted EPS at AER 7.73p 7.48p 3.3% CER = constant exchange rates AER = actual exchange rates 6

7 2012 Financial Highlights Revenue growth across all divisions: Asia +6.2%, City Link +4.8%, Pest Control +2.8%**, Textiles & Hygiene +2.5%, Initial Facilities +3.8%* Adjusted operating profit +5.1%: Improvements in profitability from all divisions (reduced losses at City Link) Offset in part by increased investment in capability through central costs Profit before tax 82.7m (at AER) versus loss last year of 50.5m, due to significantly higher amortisation and impairment charges in 2011 Operating cash flow at 157.0m +1.5% due to reduced working capital outflows 59m cost savings (versus target 50m); 50m target for 2013 Final dividend +7.5% to 1.43p (2011: 1.33p) - full year total of 2.10p (notional 5% increase for the year) * excluding Initial Facilities Spain where the business is being scaled down to reduce financial exposure. This has impacted group performance by 0.4% but has led to profit improvement in Initial Facilities Spain ** includes Ambius operations, post its integration into the Pest Control Division 7

8 Textiles & Hygiene Click to edit Master title style At constant exchange rates Revenue +2.5% (+0.8% organic): - Solid performances in Germany and France despite economic slowdown % Group Revenue % Adj. PBITA % 49.7% - Growth in Pacific despite adverse weather affecting pest business - Customer retention 89.1% (+2.7% yoy) +3.5% profit growth (+3.5% organic): - Strong performance from Benelux reflecting continued turnaround - Germany and France performing robustly in challenging conditions - Australia pest control adversely impacted by weather Q FY 2012 Q4 FY Revenue % 2.5% Adj. PBITA % 3.5% 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes central costs 8

9 Pest Control Click to edit Master title style At constant exchange rates Revenue +2.8% (+0.4% organic): Strong performances in North America and Northern Europe offsetting weaker trading in Southern Europe New operations in Middle East, North, Central and South America performing in line with expectations Profit +3.6% (+2.0% organic): Strong improvements in North America, East Africa and the Caribbean Modest growth in UK and Europe Decline in Southern Europe and Ireland reflecting ongoing Eurozone crisis Acquisition of Western completed Dec % Group Revenue % Adj. PBITA % 46.9% Q FY 2012 Q4 FY Revenue % 2.8% Adj. PBITA % 3.6% 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes central costs 9

10 Asia Click to edit Master title style At constant exchange rates Revenue +6.2% (+7.4% organic): High single digit growth in mature markets of Malaysia and Singapore % Group Revenue % Adj. PBITA 2 3.7% 2.2% 33% growth from emerging markets of India, China and Vietnam combined Profit +39.1% (+35.1% organic) reflecting revenue growth, productivity and pricing improvements Q FY 2012 Q4 FY Revenue % 6.2% Adj. PBITA % 39.1% 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes central costs 10

11 City Link Click to edit Master title style Loss of 26.4m on revenue up 4.8% 17% growth in volumes but sales mix contributing to 10% fall in Revenue Per Consignment Good progress with recovery plan: 13% reduction in direct costs Implementation of new volume-based owner driver contracts across depots Improved hub and line haul efficiency and full route re-design Investment in improved scanning and GPS technology driving gains in productivity Further consolidation of depot network % Group Revenue At constant exchange rates 11.9% Q FY 2012 Q4 FY Revenue % 4.8% Adj. PBITA 1 (2.4) (26.4) 64.2% 15.7% 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 11

12 Initial Facilities Click to edit Master title style At constant exchange rates Revenue +3.8%* driven by MSS, Modus and Phoenix acquisitions % Group Revenue % Adj. PBITA % 10.3% Underlying revenue -1.7%* reflecting decline in single service cleaning +9.6% growth in profit (+5.2% excluding acquisitions) reflecting margin improvement, operational efficiency and cost reductions Q FY 2012 Q4 FY Revenue % 2.1% Adj. PBITA % 9.6% 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes central costs *excludes Initial Facilities Spain, where the business is being scaled down to reduce financial exposure 12

13 Interest At actual exchange rates million FY 2012 FY 2011 Net interest on bank/bond/finance lease debt (49.0) (47.0) Other 0.4 (0.8) Underlying Interest (48.6) (47.8) Net return on pension scheme Per income statement (36.3) (44.6) Average net debt 954m 936m Average interest rate on bank/bond/finance/lease debt 5.1% 4.8% 13

14 Operating Cash Flow At actual exchange rates million FY 2012 FY 2011 Adjusted PBITA Reorganisation costs and one-off items (51.8) (38.2) Depreciation Non-cash items EBITDA Working capital (24.7) (32.1) Capex (218.4) (216.4) Fixed asset disposal proceeds Operating cash flow Profit on sale of fixed assets, IFRS 2 etc. 2 Property, plant, vehicles 14

15 Free Cash Flow and Movement in Net Debt At actual exchange rates million FY 2012 FY 2011 Operating cash flow Cash interest (44.2) (44.4) One-off items financing (31.4) - Financing - other Cash tax (35.6) (44.5) Free cash flow Acquisitions & Disposals (82.8) (32.0) Dividends (36.2) - Special pension contribution (12.5) - FX and other (Increase) / decrease in net debt (70.5) 34.6 Opening net debt (919.0) (953.6) Closing net debt (989.5) (919.0) 15

16 Funding Liquidity requirement for S&P requires the group to fund its maturities of c 150m in 2013 and 500m in March 2014 at least 12 months in advance In September 2012 the group raised a 500m seven-year bond paying an annual coupon of 3.375% The group has met the remaining liquidity requirement by entering into an additional 240m two-year committed bank bridge facility maturing December 2014 Current headroom and maturities by year ( m) We anticipate that we will issue a bond in the region of 300m later in the year to refinance the bond maturity in

17 Guidance for 2013 Cost savings 50m: focus on back-office administration Central costs in line with 2012: Reflecting continued investment in IT and M&I Impact of change in accounting basis for pension admin costs Pension interest benefit to be excluded from adjusted PBTA in 2013 Interest cost reflecting carry cost of pre-funding 2014 bond maturities: estimated total P&L charge 56m- 58m Exchange rate volatility: Sterling weakness a potential benefit to P&L One-off costs for 2013 expected to be in line with 2012 reflecting further restructuring and focus on back-office rationalisation Net capex 230m- 250m: investment in workwear & hygiene plant, EFR and IT, part funded by non-core disposals (e.g. Belgian flat linen) Working capital outflow 20m- 30m Adjusted effective tax rate 26%: 2013 tax payments c. 40m 17

18 Strategy Update Alan Brown Chief Executive Officer 18

19 Objectives for Turnaround the financial performance of City Link 2 Customer Care greater customer satisfaction and retention through care initiatives and CVC 3 Cost Savings from productivity, procurement and back-office rationalisation 4 Growth through marketing & innovation, Programme Olympic and acquisitions 19

20 1 Turnaround City Link: Progress in 2012 Quarter 1 Quarter 2 Quarter 3 Quarter 4 m 2012 Change vs Change 2012 Change 2012 vs vs Change vs Revenue Profit* (12.7) (2.0) (5.8) 1.3 (5.5) 1.3 (2.4) 4.3 Typically poor January trading New business improving Step change in productivity Fuel surcharge takes effect E-tailer volumes lower than expected Operational management changes Poor August trading; especially in London Implementation of customer profitability action plans Poor productivity in early part of quarter Price increases take effect High Tier 2 attrition Sales effectiveness programme initiated 20 Volumes slow to start but in line with expectations by early December * Profit taken at APBITA level Strong peak without major incident all depots clear by 24/12

21 2 Customer Care: Customer Voice Counts Trend Q4 MAT 2012 vs. Q4 MAT 2011* Rentokil Initial +1.2 Ambius +1.8 Asia +5.8 Pacific +3.7 Initial Facilities +5.1 Textiles & Hygiene +4.3 Rentokil Pest Control +0.4 *City Link data not available 21

22 3 Cost Savings Progress in 2012 Division 2012 Activities Saving Restructuring in France and Benelux Textiles & Hygiene 15 Overheads 18m m Direct / indirect procurement Pest Control City Link Restructuring in North America, Ambius (UK and Nordics), Property Care, Medical, UK Washrooms Depot, driver, warehouse, hub & trunking cost initiatives 16 15m m 17m Initial Facilities Restructuring Procurement Property rationalisation Workforce management Application of LEAN initiatives 9m Combined savings of 59m 22

23 4 Growth: Marketing & Innovation (M&I) Progress in 2012 M&I team established to drive world-class innovation in pest control, hygiene, workwear and plants Driving better products and services Roll out of Advantage Sales Tool (pest and hygiene) Further development PestNetOnline and launch of PestConnect remote monitoring Launch of high end Reflection hygiene range and development of Signature hygiene range for 2013 launch Successful pilot of On Site Service feminine hygiene service roll out in Australia in 2013 A total of nine priority projects for implementation in 2013 /

24 4 Growth: Acquisitions in 2012 Pest Control Textiles & Hygiene Initial Facilities US: -Western Exterminator (California) -Eden (Washington/Oregon) -Jones (South Carolina) Canada: -Braemar (Halifax) Middle East: -Totalai (Abu Dhabi/ Dubai) Latin America: -Asseio (Brazil) ProQure Handelsbolag -Mats servicing (Sweden) Residus Sanitaris -Dental/clinical waste management Modus FM -Technical Services Phoenix Fire Services -Sprinkler/Dry Rise Installation 128m combined annualised revenue 24

25 4 Growth: Western Integration Acquisition of Western Exterminator completed 10 December 2012 Trading well driven largely by cost base improvements Integration proceeding well: - Senior management in place for both pest control and speciality products businesses - Reorganisation activity in line with plan: synergies expected in year one - Implementation of common systems, tools and processes underway (Navision, migration to North America payroll, implementation of NA region/district hub & spoke structure) - Integration of national accounts sales team Western geographic presence topped and tailed by acquisitions of Eden Technologies in Portland and Assured Environments in Phoenix 25

26 Strategic Objectives for Customer Service/Care 2. Developing Capability 2. Developing Capability 3. Operational Excellence 4. Cost and Maximum Cash 5. Growth CVC industrialised across most operations and bonus linked Drive material improvement in colleague behaviour and handling of customer enquiries Further investment in processes and systems 35m capex investment in systems Further investment in innovation Sales focus on account management & productivity Continuation of City Link turnaround Establish Shared Service Centre in Malaysia Roll out Standard Operating Procedures across group Implementation of Integrated Country Operating Model Cost savings of 50m Major change programmes Netherlands, France, Germany and US IT productivity Launch of Signature hygiene range globally New technology roll-out - Advantage sales tool and IAAS in pest control Launch of Initial workwear range across Europe Acquisitions 26

27 Turnaround City Link: Priorities for 2013 Delivering outstanding customer service Delivering the capability of our organisation & people Delivering operational excellence Operating at lowest possible cost Delivering profitable growth 1. Segmentation of customer care offering 2. Business-wide customer experience training 3. Cross-functional customer process audit 1. Deliver sales effectiveness 2. Driver standards 3. Standard based employee terms & conditions 1. Operational conformance 2. Estimated Time of Arrival 3. Cage tracking & embedding end-to-end scanning 1. Resource mix optimisation 2. Optimised hub & trunking model 3. System simplification 1. Yield management 2. Rolling out the right products 3. Selling to the right customers 27

28 Integrated Country Operating Model Move to externally reporting group results on a major country, as well as category basis from Q New operating model supports implementation of group strategic thrusts Supported by global and regional teams providing FM and parcels largely single country operations managed as stand-alone elements of portfolio Integrated Country Operating Model for Core Operations (pest, hygiene, workwear, plants) Management accountability Category focus (expertise in marketing & innovation, sales, operations) Global specialist functions (finance, HR, IT) Operating model combines global leverage with local implementation Grouped into three geographic regions East, West and Asia From January 2013 almost all core businesses run by one manager per country 28

29 Integrated Country Operating Model (2012 results reported in 2013 format) 2012 Revenue (CER) Pest Facilities Parcel APBITA Control Hygiene Workwear Plants Services Delivery Other Total (CER) m m m m m m m m m France Benelux Germany Pacific East , North America UK and Ireland Rest of World West Asia Initial Facilities City Link (26) Overheads* (73) Group , APBITA (CER) (26) (79) 236 *(centre and regional) 29

30 The Signature Range Global Hygiene Launch May 2013 Proprietary range of 32 products to Initial design Sourced from manufacturers in Asia & Europe Significant aesthetic advance on current product range with good functionality & proven resilience Global scale has driven substantial product benefit at a marginal increase in cost over current range 30

31 Initial Workwear Range European Launch April 2013 Universal Range Knitwear/Cotton Club Target markets Larger industries Manufacturing industry Transportation & storage Automotive (retail) Wholesale Target markets Retail Hospitality Professional services 31

32 Global/European Hygiene & Workwear Range Development Benefits Speed to market Better design values Centralise workwear / hygiene knowledge to support expert positioning Scale benefits driving c.25% stock and SKU reduction 32 32

33 Growth: Organic Growth Trend 2010 to 2012 At constant exchange rates Organic growth % * 0 (0.5) (1) (2) (1.6) (3) (3.1) 2009 *excluding Initial Facilities Spain where the business is being scaled down to reduce financial exposure. This has impacted group performance by 0.4%. 33

34 Outlook Conditions expected to remain tough in many of our markets: UK and continental Europe in particular Strong innovation agenda for 2013 in our core categories Integrated Country Operating Model to deliver revenue growth and cost savings: particularly in North America with integration of Ambius & Western into existing pest operations to create a business with pro-forma revenue of US$520m Substantial reduction in City Link losses Confident in sustaining momentum achieved in Q for 2013 as a whole 34

35 2012 Preliminary Results 15 March

36 Net Debt Debt 270m RCF 240m RCF 50m FRN 500m Bond 300m Bond 500m Bond Maturity Net debt at 31/12/12 1,2 m 2016 (0) 2014 (0) 2013 (50) 2014 (392) 2016 (312) 2019 (403) Cash & Other (990) 1 IAS 39 fair values 2 Headroom 180m; EBITDA / interest covenant is 4x minimum, actual 9.3x, Net debt/ebitda covenant is 3.5x maximum, actual is 2.1x' 3 Cash less finance leases and other debt 36

37 Initial Workwear Range Personal Protective Equipment (PPE) PPE Range High Vis PPE Range Flame & heat PPE Range Multirisk Target markets Civil engeneering Municipalities Waste collection Utilities (gas, electr,steam) Renewable energy sector Target markets Welders &workers in water, gas, oil, power, petrochem, metal processing Machine construction Metallurgy Target markets Petrochemicals Oil industry Energy sector Emergency services 37

38 Initial Workwear Range Food / Catering Collection Migration of all Food ranges to CAWE Target markets Food manufacturing Catering services 38

39 Initial Workwear Range Driver Collection 39

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