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9 Nov 2012 07:00
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RENTOKIL INITIAL PLC (RTO)
INTERIM MANAGEMENT STATEMENT
9 November 2012
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Results (ยฃm) | Q3 2012 | Growth | YTD 2012 | Growth | ||
AER | AER | CER | AER | AER | CER | |
Revenue | 626.7 | (1.6%) | 2.2% | 1,883.1 | (0.1%) | 2.7% |
Adjusted operating profit1 | 61.4 | (3.6%) | 3.9% | 148.7 | (5.2%) | 1.2% |
Adjusted profit before tax1 | 53.2 | 0.2% | 7.4% | 126.7 | 0.1% | 7.3% |
Profit before tax | 36.3 | 0.8% | 9.9% | 82.9 | 26.2% | 39.2% |
Operating cash flow2 | 44.6 | (21.1%) | (11.4%) | 65.4 | (19.3%) | (7.8%) |
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Q3 Highlights (at CER)
ยง Group revenue +2.2% (+0.2%* organic) in softening European markets:
ร Asia +4.2%, Initial Facilities +5.3%*, City Link +2.4%, Pest Control +2.1%, Textiles & Hygiene +1.3%
ร Acquisitions performing well, contributing 2.3% (ยฃ14.7m) of revenue growth
ยง City Link revenue +2.4%, 19.1% reduction in operating loss. Recovery plan remains on track but Q3 financial performance impacted by adverse customer mix and volume decline during the Olympics
ยง Adjusted operating profit up 3.9%, with improvement in City Link partly offset by increased central investment in marketing, innovation and capability development
ยง Profit before tax up 9.9%, 39.2% year to date reflecting reduced amortisation and interest
ยง Cost savings of ยฃ37.2m year to date; expect to exceed ยฃ50m target for 2012
ยง Acquisition of Western Exterminator Pest Control for $114.6m positions Rentokil as third largest player in key US market - completion expected in Q4
* excluding Initial Facilities Spain, where the business is being scaled down to reduce financial exposure and has impacted group performance by 0.3%
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Alan Brown, Chief Executive Officer of Rentokil Initial plc, said:
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"Challenging conditions across Europe, including the UK, have limited group revenue growth in Q3. Outside Europe our businesses are considerably more buoyant.
"City Link's operational recovery continued during Q3 with a 12% year-on-year reduction in cost per delivery. Volume grew 15% and operating losses fell by 19% year on year, though both were adversely impacted by lower than expected demand during the Olympics. We have also continued to see a reduction in revenue per consignment as a result of adverse customer mix. The impact of this is now expected to result in a small loss for Q4.
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"We continue to invest strongly in capability and in market position. We are optimistic about both our innovation and our acquisition pipeline, though cautious in respect of trading. Nevertheless we anticipate further year-on-year improvement in profit performance at constant exchange rates in Q4."
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Financial position and funding update
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Operating cash flow of ยฃ44.6m was ยฃ10.9m lower than Q3 2011 primarily due to the phasing of working capital. Net debt at 30 September was ยฃ943.2m. The Company raised a new seven-year โฌ500m bond paying 3.375% in September 2012. This provides financing forย the acquisition of Western Exterminator, our 2013 maturities, and partially finances the โฌ500m March 2014 bond. In October 2012 the Company repurchased its ยฃ75m bond with potential first maturity in 2013 for its fair value of ยฃ104m, representing an exceptional cash loss of ยฃ29m which will be recognised in Q4. A further loss of ยฃ2m was crystallised on the related hedge accounted interest rate swaps at the same time. There have been no further changes in the financial position of the group in the period since 30 June 2012. The group intends to refinance the remainder of the โฌ500m March 2014 bond in the coming months.
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AER - actual exchange rates; CER - constant 2011 exchange rates
1 before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items
2 cash flow before interest, tax, acquisitions, disposals and foreign exchange adjustments
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Financial Summary
ยฃmillion | Third Quarter | Year to Date | |||||
| 2012 | 2011 | change | 2012 | 2011 | change | ||
Continuing Operations1 At 2011 constant exchange rates2 | |||||||
Revenue | 649.0 | 635.2 | 2.2% | 1,931.6 | 1,881.2 | 2.7% | |
Adjusted operating profit3 | 65.8 | 63.3 | 3.9% | 157.7 | 155.8 | 1.2% | |
Reorganisation costs and one-off items4 | (12.7) | (6.2) | (104.8%) | (27.4) | (26.3) | (4.2%) | |
Amortisation and impairment of intangible assets | (4.8) | (10.9) | 56.0% | (17.4) | (34.6) | 49.7% | |
Operating profit | 48.3 | 46.2 | 4.5% | 112.9 | 94.9 | 19.0% | |
Share of profit from associates (net of tax) | 1.2 | 1.0 | 20.0% | 3.7 | 3.3 | 12.1% | |
Net interest payable | (10.5) | (11.7) | 10.3% | (26.8) | (33.7) | 20.5% | |
Profit before tax | 39.0 | 35.5 | 9.9% | 89.8 | 64.5 | 39.2% | |
Adjusted profit before tax3 | 56.5 | 52.6 | 7.4% | 134.6 | 125.4 | 7.3% | |
Operating cash flow5 | 49.6 | 56.0 | (11.4%) | 73.7 | 79.9 | (7.8%) | |
Continuing Operations1 At actual exchange rates | |||||||
Revenue | 626.7 | 637.0 | (1.6%) | 1,883.1 | 1,885.9 | (0.1%) | |
Adjusted operating profit3 | 61.4 | 63.7 | (3.6%) | 148.7 | 156.9 | (5.2%) | |
Reorganisation costs and one-off items4 | (12.1) | (6.3) | (92.1%) | (26.7) | (26.4) | (1.1%) | |
Amortisation and impairment of intangible assets | (4.8) | (10.8) | 55.6% | (17.1) | (34.5) | 50.4% | |
Operating profit | 44.5 | 46.6 | (4.5%) | 104.9 | 96.0 | 9.3% | |
Share of profit from associates (net of tax) | 1.3 | 1.0 | 30.0% | 3.8 | 3.3 | 15.2% | |
Net interest payable | (9.5) | (11.6) | 18.1% | (25.8) | (33.6) | 23.2% | |
Profit before tax | 36.3 | 36.0 | 0.8% | 82.9 | 65.7 | 26.2% | |
Adjusted profit before tax3 | 53.2 | 53.1 | 0.2% | 126.7 | 126.6 | 0.1% | |
Operating cash flow5 | 44.6 | 56.5 | (21.1%) | 65.4 | 81.0 | (19.3%) | |
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1 all figures are for continuing operations and are unaudited
2 results at constant exchange rates have been translated at the full year average exchange rates for the year ended 31
December 2011. ยฃ/$ average rates: Q3 2012 1.5829; FY 2011 1.6057, ยฃ/โฌ average rates: Q3 2012 1.2307; FY 2011 1.1532
3 before amortisation and impairment of intangibles (excluding computer software), reorganisation costs and one-off items
4 see Appendix 2 for further details
5 cash flow before interest, tax, acquisitions, disposals and foreign exchange adjustments
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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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Enquiries:
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Investors / Analysts enquiries:
Katharine Rycroft, Head of Investor Relations Rentokil Initial plc 01293 858 166
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Media enquiries:
Malcolm Padley, Corporate Communications Rentokil Initial plc 07788 978 199
Kate Holgate, Catriona McDermott Brunswick Group 020 7404 5959
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City Link Investor Seminar - The Grange Tower Bridge Hotel, 45 Prescot Street, London E1 8GP
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Rentokil Initial plc is today hosting an Investor Seminar focused on the group's City Link operations. The event will include presentations on the UK domestic parcels market, City Link's growth initiatives, strategy and capability development. David Smith, Managing Director, will confirm that current trading is in line with the comments made in today's Q3 trading update.
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The majority of the presentations will be web cast live and will be available on the Rentokil Initial web site. The day will begin with a brief update on Q3 which will commence at 8.45am. The full web cast will be available after the event.
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ย Appendix 1
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Divisional Analysis
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3 months to 30 September 2012
ยฃmillion ย | 3 months to 30 September 2012 | ย Change from Q3 2011 | ย Change from Q3 2011 | ย Organic growth |
ย | AER | AER | CER | CER |
Revenue | ||||
Textiles & Hygiene | 212.7 | (5.8%) | 1.3% | (0.3%) |
Pest Control | 187.0 | (1.5%) | 2.1% | 0.6% |
Asia | 24.6 | 3.4% | 4.2% | 6.1% |
City Link | 76.2 | 2.4% | 2.4% | 2.4% |
Initial Facilities | 146.1 | 2.9% | 3.7% | (2.8%) |
Segmental revenue | 646.6 | (1.4%) | 2.3% | (0.1%) |
Intra group trading | (19.9) | (4.7%) | (6.8%) | |
At actual exchange rates | 626.7 | (1.6%) | ||
Exchange | 22.3 | |||
At constant exchange rates | 649.0 | 2.2% | (0.1%) | |
Adjusted operating profit | ||||
Textiles & Hygiene | 34.9 | (6.9%) | 0.8% | 0.8% |
Pest Control | 36.5 | (0.3%) | 4.4% | 3.0% |
Asia | 1.6 | 100.0% | 88.9% | 88.9% |
City Link | (5.5) | 19.1% | 19.1% | 19.1% |
Initial Facilities | 6.9 | 3.0% | 4.5% | 5.6% |
Central Costs | (13.0) | (17.1%) | (16.2%) | (17.4%) |
Segmental profit | 61.4 | (3.6%) | 3.9% | 3.2% |
Reorganisation costs and one-off items | (12.1) | (92.1%) | (104.8%) | |
Amortisation of intangible assets1 | (4.8) | 55.6% | 56.0% | |
At actual exchange rates | 44.5 | (4.5%) | ||
Exchange | 3.8 | |||
At constant exchange rates | 48.3 | 4.5% | 3.2% | |
1 excluding computer software
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9 months to 30 September 2012
ยฃmillion ย | 9 months to 30 September 2012 | ย Change from YTD 2011 | ย Change from YTD 2011 | ย Organic growth |
ย | AER | AER | CER | CER |
Revenue | ||||
Textiles & Hygiene | 657.6 | (2.6%) | 2.7% | 0.9% |
Pest Control | 544.5 | (0.2%) | 2.6% | 0.9% |
Asia | 73.2 | 5.9% | 6.4% | 7.7% |
City Link | 225.7 | 3.1% | 3.1% | 3.1% |
Initial Facilities | 441.1 | 1.9% | 2.5% | (3.0%) |
Segmental revenue | 1,942.1 | - | 2.8% | 0.5% |
Intra group trading | (59.0) | (5.5%) | (6.4%) | |
At actual exchange rates | 1,883.1 | (0.1%) | ||
Exchange | 48.5 | |||
At constant exchange rates | 1,931.6 | 2.7% | 0.5% | |
Adjusted operating profit | ||||
Textiles & Hygiene | 99.2 | (1.9%) | 3.9% | 4.1% |
Pest Control | 88.5 | (3.4%) | 1.0% | 0.1% |
Asia | 4.0 | 42.9% | 46.4% | 46.4% |
City Link | (24.0) | 2.4% | 2.4% | 2.4% |
Initial Facilities | 19.2 | 7.3% | 7.8% | 6.2% |
Central Costs | (38.2) | (19.7%) | (19.4%) | (19.7%) |
Segmental profit | 148.7 | (5.2%) | 1.2% | 0.6% |
Reorganisation costs and one-off items | (26.7) | (1.1%) | (4.2%) | |
Amortisation of intangible assets1 | (17.1) | 50.4% | 49.7% | |
At actual exchange rates | 104.9 | 9.3% | ||
Exchange | 8.0 | |||
At constant exchange rates | 112.9 | 19.0% | 0.6% | |
1 excluding computer software
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Appendix 2
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Category Analysis
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3 months to 30 September 2012
ยฃmillion ย | 3 months to 30 September 2012 | ย Change from Q3 2011 | ย Change from Q3 2011 | ย Organic growth |
ย | AER | AER | CER | CER |
Revenue | ||||
Pest Control | 146.1 | 1.7% | 4.7% | 3.3% |
Hygiene | 125.9 | (6.7%) | (1.5%) | (1.5%) |
Textiles | 102.4 | (7.2%) | 2.0% | 2.3% |
Interior Plants | 31.7 | (1.6%) | 0.9% | (1.3%) |
Facilities Services | 142.8 | 3.3% | 4.2% | (2.6%) |
Parcel Delivery | 76.2 | 2.4% | 2.4% | 2.4% |
Other | 21.5 | (3.6%) | 0.4% | (15.3%) |
Total | 646.6 | (1.4%) | 2.3% | (0.1%) |
Adjusted operating profit | ||||
Pest Control | 33.4 | 0.3% | 4.5% | 2.7% |
Hygiene | 26.7 | (6.0%) | 0.4% | 0.4% |
Textiles | 18.1 | (3.7%) | 5.4% | 5.4% |
Interior Plants | 2.5 | 8.7% | 13.0% | 8.1% |
Facilities Services | 5.2 | (17.5%) | (18.8%) | (19.8%) |
Parcel Delivery | (5.5) | 19.1% | 19.1% | 19.1% |
Other | (19.0) | (2.2)% | (2.7)% | (1.0%) |
Total | 61.4 | (3.6%) | 3.9% | 3.2% |
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9 months to 30 September 2012
ยฃmillion ย | 9 months to 30 September 2012 | ย Change from YTD 2011 | ย Change from YTD 2011 | ย Organic growth |
ย | AER | AER | CER | CER |
Revenue | ||||
Pest Control | 420.4 | 3.2% | 5.2% | 3.6% |
Hygiene | 384.7 | (4.1%) | (0.1%) | (0.3%) |
Textiles | 314.5 | (4.4%) | 2.7% | 2.9% |
Interior Plants | 96.1 | (0.1%) | 1.5% | (1.9%) |
Facilities Services | 430.6 | 1.9% | 2.5% | (3.0%) |
Parcel Delivery | 225.7 | 3.1% | 3.1% | 3.1% |
Other | 70.1 | 5.1% | 8.4% | (7.9%) |
Total | 1,942.1 | - | 2.8% | 0.5% |
Adjusted operating profit | ||||
Pest Control | 84.2 | (1.8%) | 1.5% | 0.5% |
Hygiene | 75.2 | (4.0%) | 0.8% | 0.6% |
Textiles | 48.1 | 2.6% | 10.1% | 10.0% |
Interior Plants | 6.3 | 10.5% | 16.1% | 8.5% |
Facilities Services | 16.9 | (1.2%) | (1.7%) | (3.5%) |
Parcel Delivery | (24.0) | 2.4% | 2.4% | 2.4% |
Other | (58.0) | (11.1%) | (11.3%) | (9.9%) |
Total | 148.7 | (5.2%) | 1.2% | 0.6% |
Appendix 3
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ANNUAL CONTRACT PORTFOLIO - CONTINUING BUSINESSES
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3 Months to 30 September 2012
| ย ยฃm at constant 2011 exchange rates | ย ย 1.7.12 | New Business / Additions | ย Terminations/ Reductions | ย Net Price Increases | ย Acquisitions/(Disposals) | ย ย 30.9.12 | 30.9.12 at actual exchange |
Textiles & Hygiene | 775.2 | 20.4 | (18.7) | 2.4 | (0.1) | 779.2 | 740.0 |
Pest Control | 583.0 | 21.1 | (22.1) | 1.9 | 5.6 | 589.5 | 573.1 |
Asia | 81.6 | 5.3 | (3.6) | 0.2 | - | 83.5 | 83.0 |
Initial Facilities | 517.8 | 13.5 | (27.3) | 0.4 | 7.7 | 512.1 | 509.2 |
TOTAL | 1,957.6 | 60.3 | (71.7) | 4.9 | 13.2 | 1,964.3 | 1,905.3 |
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9 Months to 30 September 2012
| ย ยฃm at constant 2011 exchange rates | ย ย 1.1.12 | New Business / Additions | ย Terminations / Reductions | ย Net Price Increases | ย Acquisitions/(Disposals) | ย ย 30.9.12 | 30.9.12 at actual exchange |
Textiles & Hygiene | 760.6 | 69.8 | (63.2) | 12.5 | (0.5) | 779.2 | 740.0 |
Pest Control | 576.7 | 65.7 | (69.1) | 8.4 | 7.8 | 589.5 | 573.1 |
Asia | 77.6 | 16.2 | (10.9) | 0.6 | - | 83.5 | 83.0 |
Initial Facilities | 518.1 | 58.0 | (73.6) | 1.9 | 7.7 | 512.1 | 509.2 |
TOTAL | 1,933.0 | 209.7 | (216.8) | 23.4 | 15.0 | 1,964.3 | 1,905.3 |
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Notes
Contract portfolio definition: Customer contracts are usually either "fixed price", "as-used" (based on volume) or mixed contracts. Contract portfolio is the measure of the annualised value of these customer contracts.
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Contract portfolio valuation: The contract portfolio value is typically recorded as the annual value from the customer contract. However, in some cases - especially "as-used" (based on volume) and mixed contracts - estimates are required in order to derive the contract portfolio value. The key points in respect of valuation are:
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"As-used" contracts: These are more typical in Textiles and Hygiene and Catering, where elements of the contract are often variable and based on usage. Valuation is based on historic data (where available) or forecast values.
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Income annualisation: In some instances, where for example the underlying contract systems cannot value portfolio or there is a significant "as-used" element, the portfolio valuation is calculated using an invoice annualisation method.
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Inter-company: The contract portfolio figures include an element of inter-company revenue.
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Job work and extras: Many of the contracts within the contract portfolio include ad hoc and/or repeat job work and extras. These values are excluded from the contract portfolio.
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Rebates: The contract portfolio value is gross of customer rebates. These are considered as a normal part of trading and are therefore not removed from the portfolio valuation.
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New business/Additions: Represents new contractual arrangements in the period with a new or existing customers and additional business added to existing contracts.
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Terminations/Reductions: Represents the cessation or reduction in value of an existing customer contract or the complete cessation of business with a customer.
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Net Price Increases: Represents the net change in portfolio value as a result of price increase and decreases.
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Acquisitions/Disposals: Represents the net value of customer contracts added or lost as a result of businesses acquired or disposed in the period. Also includes the net volume related changes for the textiles businesses, where it is common practice for customers to increase or decrease service volumes according to their daily operational requirements.
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Retention rates: Retention rates are calculated on total terminations (terminations and reductions).
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Appendix 4
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Reorganisation costs and one-off items
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ย ย | 3 months to 30 September 2012 | 3 months to 30 September 2011 | 9 months to 30 September 2012 | 9 months to 30 September 2011 |
ย | ยฃm | ยฃm | ยฃm | ยฃm |
Textiles & Hygiene | (8.7) | (1.8) | (14.2) | (6.1) |
Pest Control | (1.1) | (1.0) | (1.7) | (7.6) |
Asia | 0.3 | (0.3) | 0.3 | (0.7) |
City Link | (0.4) | (0.5) | (1.6) | (4.2) |
Initial Facilities | (2.2) | (1.8) | (7.1) | (4.9) |
Central Costs | (0.6) | (1.0) | (3.1) | (2.9) |
At constant exchange rates | (12.7) | (6.4) | (27.4) | (26.4) |
Exchange | 0.6 | 0.1 | 0.7 | - |
At actual exchange rates | (12.1) | (6.3) | (26.7) | (26.4) |
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Net reorganisation costs and one-off items amounted to ยฃ27.4m (2011: ยฃ26.4m). ยฃ25.1m (2011: ยฃ21.5m) of these relate directly to the group's major reorganisation program, including Olympic, and consists mainly of redundancy costs, consultancy and plant and office closure costs net of the profit on sale of certain properties.
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