First Half Highlights (at CER)
§ Good progress made in Q2, momentum expected to continue in H2
§ Adjusted operating profit +5.2%, revenue up 3.7%
o Strong acceleration of profit growth in Q2
o Recent acquisitions performing well, contributing 6.0% (£65.6m) of revenue growth
o Underlying organic revenue growth3 down 1.6% year on year reflecting portfolio change in Initial Facilities and poor weather in US
§ Strong performance in core businesses outside continental Europe
o Integration of Western Exterminator proceeding to plan
o UK core business capitalising on integrated country operating model to deliver strong profit growth
o Asia profit +43.5% - notably strong performances from China, India and Vietnam
o Six further pest acquisitions in Brazil, French Guyana, Portugal, Canada and the US
§ Conditions in continental Europe continue to be challenging
o France & Benelux experiencing pricing pressure. Belgian flat linen sale completed end Q1
§ Initial Facilities transition out of low profitability single service contracts largely complete
o 2.9% decline in revenue reflecting catering contract losses and withdrawal from certain selected single service cleaning contracts in the UK & Spain. Margins to improve as sector mix evolves toward total facilities management
§ City Link disposed in Q2
o £14.2m trading loss and £39.0m one-off loss on disposal; reported in discontinued operations
§ Cost savings of £21.1m on track to exceed full year target of £40m
o £24.6m investment in reorganisation costs to achieve this
§ Cash flow impacted by increased investment in capex and restructuring
o Reorganisation costs now forecast at £50m reflecting increased investment in Integrated Country Operating Model
o Significant improvement in cash flow expected in H2 reflecting business seasonality and working capital phasing
§ Interim dividend of 0.70p per share declared, an increase of 4.5% on prior year
Alan Brown, Chief Executive Officer of Rentokil Initial plc, said:
"The business has performed strongly during Q2 despite adverse weather in Central and Eastern US and economic pressures in France and the Netherlands in particular. The introduction of our Integrated Country Operating Model is delivering cost and implementation benefits. The integration of Western Exterminator is proceeding to plan. Our major innovations in Hygiene and Workwear are being rolled out during Q3.
"While we remain mindful of continuing challenging market conditions in Europe, we expect the momentum achieved in Q2 to be maintained in the second half."
