REG - Rentokil Initial PLC - Final Results <Origin Href="QuoteRef">RTO.L</Origin> - Part 2
25/02/2016 07:10
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"business as usual" expenses and have a varying impact on different businesses
and reporting periods.
3 excluding computer software
Consolidated Balance Sheet
At 31 December
Notes 2015£m 2014£m
Assets
Non-current assets
Intangible assets 8 818.3 431.3
Property, plant and equipment 9 477.1 505.5
Investments in associated undertakings 17.7 14.4
Other investments 0.1 0.1
Deferred tax assets 2.0 3.5
Retirement benefit assets 13 237.0 192.2
Other receivables 8.5 11.5
Derivative financial instruments 1.4 1.4
1,562.1 1,159.9
Current assets
Other investments 99.3 51.4
Inventories 55.7 58.9
Trade and other receivables 329.8 314.5
Current tax assets 10.5 6.0
Derivative financial instruments 0.8 0.6
Cash and cash equivalents 10,11 102.6 197.1
598.7 628.5
Liabilities
Current liabilities
Trade and other payables (404.4) (382.0)
Current tax liabilities (73.3) (71.8)
Provisions for other liabilities and charges 14 (20.6) (24.5)
Bank and other short-term borrowings 10 (332.6) (31.1)
Derivative financial instruments 10 (21.7) (6.7)
(852.6) (516.1)
Net current (liabilities)/assets (253.9) 112.4
Non-current liabilities
Other payables (15.4) (12.9)
Bank and other long-term borrowings 10 (865.4) (976.1)
Deferred tax liabilities (112.8) (78.3)
Retirement benefit obligations 13 (24.1) (25.8)
Provisions for other liabilities and charges 14 (60.8) (59.8)
Derivative financial instruments 10 (17.6) (19.4)
(1,096.1) (1,172.3)
Net assets 212.1 100.0
Equity
Capital and reserves attributable to the Company's equity holders
Share capital 15 18.2 18.2
Share premium account 6.8 6.8
Other reserves (1,768.8) (1,772.0)
Retained profits 1,956.1 1,847.2
212.3 100.2
Non-controlling interests (0.2) (0.2)
Total equity 212.1 100.0
Consolidated Statement of Changes in Equity
For the year ended 31 December
Attributable to equity holders of the Company
Called up Share Other Retained earnings Non- Total
share premium account reserves £m controlling interests equity
capital £m £m £m £m
£m
At 1 January 2014 18.2 6.8 (1,790.2) 1,533.1 0.1 (232.0)
Profit for the year - - - 261.8 (0.3) 261.5
Other comprehensive income:
Net exchange adjustments offset in reserves - - 17.7 - - 17.7
Re-measurement of net defined benefit asset/liability - - - 114.3 - 114.3
Effective portion of changes in fair value of cash flow hedge - - (0.1) - - (0.1)
Cumulative foreign exchange recycled to income statement on disposal of foreign operations - - 0.6 - - 0.6
Tax related to items taken directly to other comprehensive income - - - (19.9) - (19.9)
Total comprehensive income for the year - - 18.2 356.2 (0.3) 374.1
Transactions with owners:
Dividends paid to equity shareholders - - - (43.2) - (43.2)
Cost of share options and long-term incentive plan - - - 1.1 - 1.1
At 31 December 2014 18.2 6.8 (1,772.0) 1,847.2 (0.2) 100.0
Profit for the year - - - 124.3 - 124.3
Other comprehensive income:
Net exchange adjustments offset in reserves - - 3.0 - - 3.0
Re-measurement of net defined benefit asset/liability - - - 37.2 - 37.2
Effective portion of changes in fair value of cash flow hedge - - 0.2 - - 0.2
Tax related to items taken directly to other comprehensive income - - - (5.9) - (5.9)
Total comprehensive income for the year - - 3.2 155.6 - 158.8
Transactions with owners:
Dividends paid to equity shareholders - - - (48.9) - (48.9)
Cost of share options and long-term incentive plan - - - 2.2 - 2.2
At 31 December 2015 18.2 6.8 (1,768.8) 1,956.1 (0.2) 212.1
Treasury shares of £6.4m (2014: £10.9m) have been netted against retained earnings. Treasury shares represent 3.5m (2014:
5.9m) shares held by the Rentokil Initial Employee Share Trust. The market value of these shares at 31 December 2015 was
£5.6m (2014: £7.1m). Dividend income from, and voting rights on, the shares held by the Trust have been waived.
Consolidated Statement of Changes in Equity (continued)
For the year ended 31 December
Analysis of other reserves
Capital Legal reserve Cash flow Translation Total
reduction £m hedge reserve reserve £m
reserve £m £m
£m
At 1 January 2014 (1,722.7) 10.4 0.1 (78.0) (1,790.2)
Net exchange adjustments offset in reserves - - - 17.7 17.7
Effective portion of changes in fair value of cash flow hedge - - (0.1) - (0.1)
Cumulative exchange recycled to income statement on disposal of foreign operations - - - 0.6 0.6
Total comprehensive (expense)/income for the year - - (0.1) 18.3 18.2
At 31 December 2014 (1,722.7) 10.4 - (59.7) (1,772.0)
Net exchange adjustments offset in reserves - - - 3.0 3.0
Effective portion of changes in fair value of cash flow hedge - - 0.2 - 0.2
Total comprehensive income for the year - - 0.2 3.0 3.2
At 31 December 2015 (1,722.7) 10.4 0.2 (56.7) (1,768.8)
The capital reduction reserve arose in 2005 as a result of the scheme of arrangement of Rentokil Initial 1927 plc, under
section 425 of the Companies Act 1985, to introduce a new holding company, Rentokil Initial plc, and the subsequent
reduction in capital approved by the High Court whereby the nominal value of each ordinary share was reduced from 100p to
1p.
The legal reserve represents amounts set aside in compliance with local laws in certain countries in which the group
operates.
Consolidated Cash Flow Statement
For the year ended 31 December
Notes 2015 2014
£m £m
Cash flows from operating activities
Cash generated from operating activities 391.4 347.0
Interest received 10.2 10.9
Interest paid (53.7) (59.6)
Income tax paid (27.9) (30.1)
Net cash flows from operating activities 320.0 268.2
Cash flows from investing activities
Purchase of property, plant and equipment (159.2) (173.1)
Purchase of intangible fixed assets (13.1) (12.0)
Proceeds from sale of property, plant and equipment 6.7 6.3
Proceeds from sale of investment properties - 6.8
Acquisition of companies and businesses, net of cash acquired 18 (369.2) (68.1)
Disposal of companies and businesses 0.8 256.0
Cash disposed of with companies and businesses - (16.7)
Dividends received from associates 2.1 1.7
Net cash flows from investing activities (531.9) 0.9
Cash flows from financing activities
Dividends paid to equity shareholders 7 (48.9) (43.2)
Interest element of finance lease payments (0.7) (0.8)
Capital element of finance lease payments (9.1) (8.1)
Cash outflow on settlement of debt related foreign exchange forward contracts (2.4) (3.1)
Net investment in term deposits (47.8) 240.7
Proceeds from new debt 232.8 1.1
Non-controlling interest in acquisition 0.3 -
Bond repayments (0.3) (390.6)
Net cash flows from financing activities 123.9 (204.0)
Net (decrease)/increase in cash and cash equivalents (88.0) 65.1
Cash and cash equivalents at beginning of year 194.1 143.4
Exchange losses on cash and cash equivalents (5.6) (14.4)
Cash and cash equivalents at end of the financial year 100.5 194.1
Notes to the financial statements
1. Changes in accounting policies
The group has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with effect from 1 January 2015:
· Defined Benefit Plans: Employee Contributions - amendments to IAS 19
· Annual Improvements to IFRSs 2010-2012 cycle and 2011-2013 cycle - amendments to IFRS 1, 2, 3, 8 and 13 and IAS
16,24,38 and 40
The application of these amendments has had no material impact on the disclosures of the amounts recognised in the group's
consolidated financial statements. Consequently, no adjustment has been made to the comparative financial information at 31
December 2014.
The group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.
2. Segmental information
Segmental information has been presented in accordance with IFRS 8 Operating Segments. Reporting segments reflect the
internal management organisation and reporting structures. Each segment is headed by a Regional Managing Director who
reports directly to the Chief Executive and is a member of the Company Executive Board responsible for the review of group
performance. The operating businesses within each segment report to the Regional Managing Directors.
Profit is shown before amortisation and impairment of intangible assets (excluding computer software) and restructuring
costs and one-off items that have had a significant impact on the results of the group. These costs have been separately
identified as they are not considered to be "business as usual" expenses and have a varying impact on different businesses
and reporting periods. Revenue and profit excludes revenue and profit from businesses disposed or closed but includes
revenue and profit from acquisitions. Constant exchange rates (CER) are used to assist with the year on year
comparisons.
Revenue Revenue Operating Operating
2015 2014 profit profit
£m £m 2015 2014
£m £m
France 334.0 345.9 51.7 64.4
Benelux 211.2 213.6 38.7 38.1
Germany 184.4 178.6 47.8 44.5
Southern Europe 67.5 64.1 11.1 10.8
Latin America 22.3 16.7 3.1 1.9
Europe 819.4 818.9 152.4 159.7
UK & Ireland 225.2 194.9 45.2 37.8
Rest of World 117.1 112.2 26.9 26.3
UK & Rest of World 342.3 307.1 72.1 64.1
Asia 108.1 97.1 10.2 8.0
North America 407.9 349.2 52.6 40.9
Pacific 136.2 130.6 28.1 26.2
Central and divisional costs - - (62.6) (65.9)
Ongoing operations at constant exchange rates 1,813.9 1,702.9 252.8 233.0
Disposed businesses1 23.3 37.9 (1.6) (0.8)
Continuing operations at constant exchange rates 1,837.2 1,740.8 251.2 232.2
Foreign exchange (78.2) - (18.3) -
Continuing operations at actual exchange rates 1,759.0 1,740.8 232.9 232.2
Restructuring costs (7.9) (8.8)
One-off items - operating (5.4) (0.1)
Amortisation of intangible assets2 (29.6) (21.2)
Impairment of goodwill (2.2) -
Operating profit 187.8 202.1
2. Segmental information (continued)
Operating Operating
profit profit
2015 2014
£m £m
Interest payable and similar charges (49.8) (56.2)
Interest receivable 10.2 10.9
Net interest credit from pensions 6.1 2.5
Share of profit from associates (net of tax) - Asia 4.7 3.9
Profit before income tax 159.0 163.2
1 disposed businesses are those businesses that have been disposed or closed and therefore are not included as an
ongoing operation
2 excluding computer software
Amortisation and impairment of intangibles1 Amortisation and impairment of intangibles1 Restructuring costs Restructuring costs One-off items One-off items
2015£m 2014£m 2015£m 2014£m 2015£m 2014£m
Europe 6.9 5.7 6.0 4.0 13.1 (1.0)
UK & Rest of World 6.3 2.8 0.1 0.8 2.6 0.9
Asia 1.5 1.0 - 0.2 - 0.2
North America 14.8 10.0 1.1 1.5 1.4 (0.2)
Pacific 0.4 0.2 0.1 1.3 0.3 0.1
Central & Regional 1.9 1.5 1.0 1.0 (11.0) 0.1
Total at constant exchange rates 31.8 21.2 8.3 8.8 6.4 0.1
Foreign exchange - - (0.4) - (1.0) -
Total at actual exchange rates 31.8 21.2 7.9 8.8 5.4 0.1
Tax effect (9.1) (6.8) (2.2) (1.7) (2.3) 0.3
Total after tax effect 22.7 14.4 5.7 7.1 3.1 0.4
1 excluding computer software
Restructuring costs includes £6.0m for restructuring initiatives in Europe (£4.1m of which relates to France), £1.1m for
integration costs in North America, and £0.4m net cost of restructuring the UK pension scheme. One-off items includes £9.0m
for the costs associated with the closure of the Austrian flat linen business (Europe), £5.6m for costs associated with the
withdrawal from certain other non-core businesses, and £3.0m for acquisition costs (the majority of which were in North
America); offset by £10.8m related to the net income from the settlement of a legal claim (Central & Regional).
3. Interest payable and similar charges
2015 2014
£m £m
Hedged interest payable on medium term notes issued1 33.9 40.7
Interest payable on bank loans and overdrafts1 0.9 1.2
Interest payable on revolving credit facility1 2.8 1.4
Interest payable on foreign exchange swaps 10.2 9.9
Interest payable on finance leases 0.7 0.8
Amortisation of discount on provisions 0.5 1.1
Foreign exchange loss on translation of foreign denominated loan2 - 0.2
Fair value loss on other derivatives3,4 0.8 0.9
Total interest payable and similar charges 49.8 56.2
1 interest expense on financial liabilities held at amortised cost
2 comprises translation gain on financing instruments of £250.3m, offset by losses of £250.2m (reported in Note 4)
(2014: losses of £195.1m offset by gains of £194.9m)
3 loss on financial assets/liabilities at fair value through the income statement.
4 the fair value loss on other derivatives includes fair value losses relating to interest rate swaps.
4. Interest receivable
Interest income is recognised on a time-apportioned basis using the effective interest method. When a receivable is
impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted
at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.
Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis as conditions
warrant.
2015 2014
£m £m
Bank interest 1.7 2.0
Interest receivable on foreign exchange swaps 8.0 8.3
Fair value gain on other derivatives1,2 0.4 0.6
Foreign exchange gain on translation of foreign denominated assets and liabilities3 0.1 -
Interest on net defined benefit asset 6.1 2.5
Total interest receivable 16.3 13.4
1 gain on financial assets/liabilities at fair value through the income statement
2 the fair value gain on other derivatives includes fair value gains relating to interest rate swaps
3 comprises translation gain on financing instruments of £250.3m, offset by losses of £250.2m (2014: losses of £195.1m
offset by gains of £194.9m (reported in Note 3))
5. Income tax expense
2015 2014
£m £m
Analysis of charge in the year
UK corporation tax at 20.25% (2014: 21.5%) 2.2 1.7
Overseas taxation 24.4 32.6
Adjustment in respect of previous periods 5.7 5.1
Total current tax 32.3 39.4
Deferred tax debit/(credit) 4.6 (4.6)
Deferred tax adjustment in respect of previous periods (2.2) 2.3
Total deferred tax 2.4 (2.3)
Total income tax expense 34.7 37.1
A deferred tax asset of £26.1m (2014: £24.7m) has been recognised in respect of UK losses carried forward at 31 December
2015. This amount has been calculated by estimating the future UK taxable profits, against which the UK tax losses will be
utilised, and applying the tax rates (substantively enacted as at the balance sheet date) applicable for each year.
Remaining UK tax losses of £155.5m have not been recognised as at 31 December 2015.
In the 2015 Summer Budget the Chancellor announced a reduction in the UK corporation tax rate from 20% to 19% (effective
from 1 April 2017) and 18% (effective from 1 April 2020) and these rates were substantively enacted on 26 October 2015. The
UK deferred tax liability at 31 December 2015 has been calculated based on the corporation tax rate that is expected to
apply when the liability is settled.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted
average number of shares in issue during the year, excluding those held in the Rentokil Initial Employee Share Trust for UK
employees (see note at the bottom of the consolidated statement of changes in equity) which are treated as cancelled, and
including share options for which all conditions have been met.
Adjusted earnings per share is the basic earnings per share adjusted for the after-tax effects of restructuring costs and
one-off items, amortisation and impairment of intangibles1 and net interest credit from pensions.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all
potential dilutive ordinary shares. The group has two types of potential dilutive ordinary shares - those share options
granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during
the period, and the contingent issuable shares under the group's long-term incentive share plans to the extent the
performance conditions have been met at the end of the period.
Details of the adjusted earnings per share are set out below:
2015 2014
£m £m
Profit from continuing operations attributable to equity holders of the Company 124.3 126.4
Restructuring costs and one-off items, amortisation and impairment of intangibles1, and net interest credit from pensions, before tax 39.0 27.6
Tax on restructuring costs and one-off items of £4.5m (2014: £1.4m) , amortisation and impairment of intangibles of £9.1m (2014: £6.8m), and net interest credit from pensions of £(1.1)m (2014: £(0.5)m) (12.5) (7.7)
Adjusted profit from continuing operations attributable to equity holders of the Company 150.8 146.3
Weighted average number of ordinary shares in issue 1,819.2 1,817.1
Adjustment for share options and LTIPs 7.5 2.5
Weighted average number of ordinary shares for diluted earnings per share 1,826.7 1,819.6
2015 2014
Basic earnings per share 6.83p 6.96p
Diluted earnings per share 6.81p 6.95p
Basic adjusted earnings per share 8.29p 8.05p
Diluted adjusted earnings per share 8.26p 8.04p
1 excluding computer software
7. Dividends
Dividend distribution to the Company's shareholders is recognised as a liability in the group's financial statements in the
period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.
2015 2014
£m £m
2013 final dividend paid - 1.61p per share - 29.2
2014 interim dividend paid - 0.77p per share - 14.0
2014 final dividend paid - 1.82p per share 33.1 -
2015 interim dividend paid 0.87p per share 15.8 -
48.9 43.2
An interim dividend of 0.87p per share was paid on 16 September 2015 amounting to £15.8m. A dividend in respect of 2015 of
2.06p (2014: 1.82p) per 1p share amounting to £37.4m (2014: £33.1m) is to be proposed at the annual general meeting on 11
May 2016. These financial statements do not reflect this recommended dividend.
8. Intangible assets
Goodwill Customer Brands Product development£m Computer 2015 2014
£m lists and £m software Total Total
relationships £m £m £m
£m
Cost
At 1 January 317.0 456.6 34.4 9.5 84.7 902.2 898.5
Exchange differences 0.2 (9.7) 0.9 - (1.9) (10.5) (11.1)
Additions - - - 2.7 10.4 13.1 11.8
Disposals/retirements - - - - (8.4) (8.4) (3.0)
Acquisition of companies and businesses 306.9 95.3 9.8 - 1.9 413.9 74.4
Disposal of companies and businesses (0.7) (2.8) - - - (3.5) (68.4)
At 31 December 623.4 539.4 45.1 12.2 86.7 1,306.8 902.2
Accumulated amortisation and impairment
At 1 January (26.0) (370.4) (20.3) (1.7) (52.5) (470.9) (473.5)
Exchange differences 1.4 11.0 (0.3) - 1.4 13.5 9.2
Disposals/retirements - - - - 7.6 7.6 2.2
Acquisition of companies and businesses - - - - - - (0.1)
Disposal of companies and businesses 0.7 2.8 - - - 3.5 26.0
Impairment charge (2.2) - - - - (2.2) (2.3)
Amortisation charge - (24.8) (3.3) (1.5) (10.4) (40.0) (32.4)
At 31 December (26.1) (381.4) (23.9) (3.2) (53.9) (488.5) (470.9)
Net book value
At 1 January 291.0 86.2 14.1 7.8 32.2 431.3 425.0
At 31 December 597.3 158.0 21.2 9.0 32.8 818.3 431.3
9. Property, plant and equipment
Land and Service contract equipment Other plant and Vehicles 2015 2014
buildings £m equipment and office Total Total
£m £m equipment £m £m
£m
Cost
At 1 January 144.6 639.7 233.7 202.8 1.220.8 1,365.9
Exchange differences (7.7) (38.5) (13.5) (7.6) (67.3) (66.5)
Additions 4.2 129.5 12.9 21.2 167.8 178.9
Disposals (5.1) (95.8) (2.4) (19.8) (123.1) (229.1)
Acquisition of companies and businesses 0.2 - 0.4 5.1 5.7 8.0
Disposal of companies and businesses - - - (0.1) (0.1) (36.4)
At 31 December 136.2 634.9 231.1 201.6 1,203.8 1,220.8
Accumulated depreciation and impairment
At 1 January (41.0) (394.3) (158.9) (121.1) (715.3) (828.8)
Exchange differences 2.5 24.7 9.4 4.9 41.5 41.8
Disposals 2.3 93.8 2.2 18.4 116.7 222.2
Acquisition of companies and businesses - - - - - (3.1)
Disposal of companies and businesses - - - 0.1 0.1 28.3
Impairment (3.5) (1.9) (1.7) (0.3) (7.4) -
Depreciation charge (4.4) (115.9) (14.4) (27.6) (162.3) (175.7)
At 31 December (44.1) (393.6) (163.4) (125.6) (726.7) (715.3)
Net book value
At 1 January 103.6 245.4 74.8 81.7 505.5 537.1
At 31 December 92.1 241.3 67.7 76.0 477.1 505.5
10. Financing
Fair value estimation
All financial instruments held at fair value are classified by reference to the source of inputs used to derive the fair
value. The following hierarchy is used:
Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly as prices or
indirectly through modelling based on prices;
Level 3 - inputs for the asset or liability that are not based on observable market data.
The group uses the following methods to estimate fair value of its financial instruments:
Financial instrument Hierarchy level Valuation method
Financial assets traded in active markets 1 Current bid price
Financial liabilities traded in active markets 1 Current ask price
Borrowings not traded in active markets 2 Cash flows discounted at current market rates
Long-term debt 1 Quoted market prices or dealer quotes for similar instruments
Interest rate/currency swaps 1 Market swap rates at the balance sheet date
Forward foreign exchange contracts 1 Forward exchange market rates at the balance sheet date
Financial instruments not traded in active markets 2 or 3 Valuation assumptions based on market conditions at the balance sheet date
Trade payables and receivables 3 Nominal value less estimated credit adjustments
Other financial instruments 3 Variety of techniques including discounted cash flows
The tables below compare the fair value and carrying amounts for financial assets and liabilities. The table also
reconciles the group's accounting categorisation of financial assets and liabilities (based on initial recognition) to the
classes of assets and liabilities as shown on the face of the balance sheet.
10. Financing (continued)
Contractual cash inflows/(outflows)
Fair value Carrying amount Total contractual cash flows Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
£m £m £m £m £m £m £m
At 31 December 2015Financial assets
Fair value through income statement
Derivative financial instruments 2.2 2.2 2.5 0.9 0.1 1.5 -
Loans and receivables
Cash and cash equivalents 102.6 102.6 102.6 102.6 - - -
Other investments 99.3 99.3 99.3 99.3 - - -
Available-for-sale
Other investments 0.1 0.1 0.1 - - - 0.1
204.2 204.2 204.5 202.8 0.1 1.5 0.1
Financial liabilities
Fair value through income statement
Derivative financial instruments (39.3) (39.3) (44.1) (25.0) (6.3) (12.8) -
Financial liabilities at amortised cost
Bank overdraft (2.1) (2.1) (2.1) (2.1) - - -
Bank loans (199.4) (199.4) (199.4) (0.6) (0.2) (198.6) -
Bond debt (1,016.4) (972.3) (1,072.8) (338.0) (20.7) (450.6) (263.5)
Finance lease liabilities (24.2) (24.2) (24.7) (9.3) (7.5) (7.9) -
(1,281.4) (1,237.3) (1,343.1) (375.0) (34.7) (669.9) (263.5)
At 31 December 2014Financial assets
Fair value through income statement
Derivative financial instruments 2.0 2.0 2.0 0.7 1.3 - -
Loans and receivables
Cash and cash equivalents 197.1 197.1 197.1 197.1 - - -
Other investments 51.4 51.4 51.4 51.4 - - -
Available- for- sale
Other investments 0.1 0.1 0.1 - - - 0.1
250.6 250.6 250.6 249.2 1.3 - 0.1
Financial liabilities
Fair value through income statement
Derivative financial instruments (26.1) (26.1) (33.4) (9.8) (11.8) (11.8) -
Financial liabilities at amortised cost
Bank overdraft (3.0) (3.0) (3.0) (3.0) - - -
Bank loans (1.5) (1.5) (1.5) (0.2) (1.3) - -
Bond debt (1,076.1) (979.3) (1,123.1) (39.2) (339.2) (454.2) (290.5)
Finance lease liabilities (23.4) (23.4) (23.4) (8.1) (7.0) (8.3) -
(1,130.1) (1,033.3) (1,184.4) (60.3) (359.3) (474.3) (290.5)
11. Cash and cash equivalents
Included within cash at bank and in hand is £12.3m (2014: £9.1m) of restricted cash.
The Group operates pooling arrangements whereby cash balances and overdrafts held within the same bank are offset to give a
net balance which is included within cash and cash equivalents on the balance sheet. These cash and bank overdraft figures
before netting are shown in the table below:
11. Cash and cash equivalents (continued)
Offsetting financial assets and liabilities
Gross amounts before offsetting Gross amounts set off Net amounts presented
£m £m £m
At 31 December 2015
Cash at bank and in hand 560.9 (464.2) 96.7
Short-term bank deposits 5.9 - 5.9
Cash and cash equivalents 566.8 (464.2) 102.6
Bank overdraft (466.3) 464.2 (2.1)
100.5 - 100.5
At 31 December 2014
Cash at bank and in hand 1,107.8 (970.9) 136.9
Short-term bank deposits 60.2 - 60.2
Cash and cash equivalents 1,168.0 (970.9) 197.1
Bank overdraft (973.9) 970.9 (3.0)
194.1 - 194.1
12. Bank and other borrowings
The group's bank debt comprises:
Drawn at year end Interest rate at year end
Non-current
£315m RCF due January 2020 (£45m reserved for guarantees)£200m and $157m term loan due December 2018 -£198.6m - 1.44%
Average cost of bank debt at year end rates 1.44%
On 27 January 2015 the group signed a £315m Revolving Credit Facility (RCF). This facility is available for cash drawings
up to £270m and for guarantees and letters of credit up to £45m. The original maturity date was January 2020, but since the
balance sheet date an option to extend the maturity date to January 2021 was granted. The facility incorporates a further
option to extend the facility to January 2022. At the year end there were no drawings under the part of the facility
available for cash drawings, and £29.7m of the part available for guarantees was utilised.
On 31 August 2015 the group signed a Term Loan, available for cash drawings up to £200m and $157m, with a maturity date of
December 2018. At the year end £198.6m (£130m and $102m) was drawn. The cost of borrowing under the group's bank facilities
at the year end was 1.44%. The committed borrowing facilities are subject to guarantees by Rentokil Initial 1927 plc.
Medium-term notes and bond debt comprises:
Bond interest coupon Effective hedged interest rate
Current
£300m bond due March 2016 Fixed 5.75% Fixed 4.48%
Non-current
E50m bond due March 2018 Euribor +0.48% Fixed 0.66%
E500m bond due September 2019 Fixed 3.375% Fixed 3.50%
E350m bond due October 2021 Fixed 3.25% Fixed 3.41%
£1.3m perpetual debentures Fixed 5.00% Fixed 5.00%
£0.3m perpetual debentures Fixed 4.50% Fixed 4.50%
Average cost of bond debt at year end rates 3.69%
On 13 March 2015 the group issued E50m of floating rate notes, maturing 13 March 2018, under its Medium-Term Note Programme
with a coupon of 0.48% over Euribor. The notes were swapped into a fixed interest rate of 0.57% per annum on issue.
13. Retirement benefit obligations
Apart from the legally required social security state schemes, the group operates a number of pension schemes around the
world covering many of its employees.
The principal pension scheme in the group is the Rentokil Initial 2015 Pension Scheme (RIPS) in the UK (formerly the
Rentokil Initial Pension Scheme), which has a number of defined benefit sections, which are now closed to new entrants, and
a defined contribution section. The defined benefit scheme is funded through payments to a trustee-administered fund,
determined by periodic actuarial calculations.
Actuarial valuations of the UK scheme are usually carried out every three years. At 31 December 2015 RIPS was valued at an
accounting surplus of £237.0m (2014: £192.2m) on the group's balance sheet. The trustees of the scheme value the scheme on
a different basis and in the valuation at 31 March 2013 a deficit of £17.8m was agreed. It is expected that this deficit
will be made good by excess returns above the discount rate over the period to 31 January 2019; however the group will make
contributions of £3.2m each year into escrow over this period, subject to a review as part of the actuarial valuation as at
31 March 2016. In the event that the deficit is not cleared by the time of the 31 March 2019 valuation it will be funded
from the escrow account. The valuations stated exclude the escrow balance which stands at £6.4m as at 31 December 2015 (31
December 2014: £3.2m). The group continues to recognise the escrow balance as restricted cash.
The group has recognised the pension surplus as an asset because the group has an unconditional right to a refund of the
surplus at the end of the Scheme's life.
The defined benefit schemes are reappraised semi-annually by independent actuaries based upon actuarial assumptions in
accordance with IAS 19R requirements. The assumptions used for the RIPS scheme are shown below.
2015 2014
Weighted average %
Discount rate 3.8% 3.4%
Future salary increases N/A N/A
Future pension increases 3.3% 3.2%
RPI inflation 3.4% 3.3%
CPI inflation 2.3% 2.2%
The amounts recognised in the balance sheet are determined as follows:
UK RIPS Other1 Total UK RIPS Other1 Total
2015 2015 2015 2014 2014£m 2014£m
£m £m £m £m
Present value of funded obligations (1,186.2) (32.7) (1,218.9) (1,318.9) (33.3) (1,352.2)
Fair value of plan assets 1,423.2 21.7 1,444.9 1,511.1 21.5 1,532.6
237.0 (11.0) 226.0 192.2 (11.8) 180.4
Present value of unfunded obligations - (13.1) (13.1) - (14.0) (14.0)
Asset/(liability) in the balance sheet 237.0 (24.1) 212.9 192.2 (25.8) 166.4
Presented on the balance sheet as:
Retirement benefit assets 237.0 - 237.0 192.2 - 192.2
Retirement benefit obligations - (24.1) (24.1) - (25.8) (25.8)
237.0 (24.1) 212.9 192.2 (25.8) 166.4
The fair value of plan assets at the balance sheet date is analysed as follows:
UK RIPS
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