REG - Rentokil Initial PLC - Final Results <Origin Href="QuoteRef">RTO.L</Origin> - Part 2
23/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSW6086Xa
(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
Profit for the year - - - 167.5 0.3 167.8
Other comprehensive income:
Net exchange adjustments offset in reserves - - 11.4 - - 11.4
Re-measurement of net defined benefit asset/liability - - - 21.3 - 21.3
Effective portion of changes in fair value of cash flow hedge - - (6.1) - - (6.1)
Tax related to items taken directly to other comprehensive income - - - 4.1 - 4.1
Total comprehensive income for the year - - 5.3 192.9 0.3 198.5
Transactions with owners:
Dividends paid to equity shareholders - - - (55.5) - (55.5)
Shares issued 0.1 - - - - 0.1
Cost of share options and long-term incentive plan - - - 5.5 - 5.5
At 31 December 2016 18.3 6.8 (1,763.5) 2,099.0 0.1 360.7
Treasury shares of £0.1m (2015: £6.4m) have been netted against retained earnings. Treasury shares represent 4.8m (2015:
3.5m) shares held by the Rentokil Initial Employee Share Trust. The market value of these shares at 31 December 2016 was
£10.7m (2015: £5.6m). 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 2015 (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 (expense)/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)
Net exchange adjustments offset in reserves - - - 11.4 11.4
Effective portion of changes in fair value of cash flow hedge - - (6.1) - (6.1)
Total comprehensive income for the year - - (6.1) 11.4 5.3
At 31 December 2016 (1,722.7) 10.4 (5.9) (45.3) (1,763.5)
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 2016 2015
£m £m
Cash flows from operating activities
Cash generated from operating activities 451.6 391.4
Interest received 12.7 10.2
Interest paid (66.0) (53.7)
Income tax paid (35.8) (27.9)
Net cash flows from operating activities 362.5 320.0
Cash flows from investing activities
Purchase of property, plant and equipment (186.2) (159.2)
Purchase of intangible fixed assets (21.0) (13.1)
Proceeds from sale of property, plant and equipment 6.3 6.7
Acquisition of companies and businesses, net of cash acquired 19 (109.2) (369.2)
Disposal of companies and businesses 0.3 0.8
Dividends received from associates 10.3 2.1
Net cash flows from investing activities (299.5) (531.9)
Cash flows from financing activities
Dividends paid to equity shareholders 7 (55.5) (48.9)
Interest element of finance lease payments (1.3) (0.7)
Capital element of finance lease payments (13.7) (9.1)
Cash outflow on settlement of debt related foreign exchange forward contracts (30.8) (2.4)
Net investment in term deposits 89.7 (47.8)
Proceeds from new debt 242.4 232.8
Non-controlling interest in acquisition - 0.3
Bond repayments (299.0) (0.3)
Net cash flows from financing activities (68.2) 123.9
Net decrease in cash and cash equivalents (5.2) (88.0)
Cash and cash equivalents at beginning of year 100.5 194.1
Exchange losses on cash and cash equivalents 10.6 (5.6)
Cash and cash equivalents at end of the financial year 105.9 100.5
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 2016:
· Annual Improvements to IFRSs 2012-2014 cycle - amendments to IFRS 5, 7 and IAS 19, 34
· Investment entities - amendments to IFRS 10
· Joint arrangements - amendments to IFRS 11
· Presentation of Financial Statements - amendments to IAS 1
· Property, Plant and Equipment - amendments to IAS 16
· Investments in Associates and Joint Ventures - amendments to IAS 28
· Intangible Assets - amendments to IAS 38
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 2015.
The Group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.
The Group has considered the impact on the financial statements of relevant forthcoming standards, including IFRS 15
Revenue from Contracts with Customers and IFRS 16 Leases (effective 1 January 2018 and 1 January 2019 respectively).
It is expected that substantially all of the Group's revenue will be treated as revenue from contracts with customers under
IFRS 15, but the new standard will not require material changes to the timing of revenue recognition. We also expect that
certain sales commissions that meet the requirements stated within the standard may need to be recognised as an asset and
amortised over the life of the contracts to which they relate. This treatment is not anticipated to materially affect the
profit of the Group.
As a result of the changes within the forthcoming standard IFRS 16 Leases, the majority of our existing operating leases
will be accounted for as right of use assets, which will be largely offset by corresponding lease liabilities. The assets
will be recognised as property, plant and equipment, and the lease liability will increase net debt. It is anticipated that
operating expenses will decrease and financing costs will increase as the operating lease expense is replaced by
depreciation and interest. Depreciation will be straight-line over the life of the lease but the financing charge will
decrease over the lease term. The overall impact on net profit is not expected to be material.
The Group will consider the impact on the financial statements of the forthcoming standard; IFRS 9 Financial Instruments
(effective 1 January 2018). It is not expected that there will be a material impact on the financial statements as a result
of adopting this standard.
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 Leadership Team responsible for the review
of Group performance. The operating businesses within each segment report to the Regional Managing Directors.
Given the international nature of the Group, foreign exchange movements can have a significant impact on regional
performance and as a result the segmental analysis is presented at constant currency rates. Restructuring costs and Central
and Regional overheads are also presented centrally as they are not directly attributable to any reportable segment. The
basis of presentation is consistent with the information reviewed by internal management. Revenue and profit are from
Ongoing operations which is defined and reconciled to the nearest equivalent GAAP measure in Note 22.
2. Segmental information (continued)
Revenue Revenue Operating Operating
2016 2015 profit profit
£m £m 2016 2015
£m £m
France 298.9 301.8 40.1 46.7
Benelux 190.5 190.7 35.6 34.9
Germany 175.5 168.6 44.9 43.8
Southern Europe 62.5 61.0 10.7 10.1
Latin America 24.1 19.1 3.6 2.8
Europe 751.5 741.2 134.9 138.3
UK & Ireland 233.7 223.6 44.6 42.5
Rest of World 111.6 106.9 25.7 24.7
UK & Rest of World 345.3 330.5 70.3 67.2
Asia 118.9 106.1 12.4 9.4
North America 604.6 436.5 81.5 56.4
Pacific 135.7 122.5 28.4 25.4
Central and regional costs - - (68.1) (62.5)
Restructuring costs - - (7.1) (7.9)
Ongoing operations at constant exchange rates 1,956.0 1,736.8 252.3 226.3
Disposed businesses 9.3 22.2 (0.5) (1.3)
Continuing operations at constant exchange rates 1,965.3 1,759.0 251.8 225.0
Foreign exchange 202.8 - 32.6 -
Continuing operations at actual exchange rates 2,168.1 1,759.0 284.4 225.0
One-off items - operating (8.6) (5.4)
Amortisation of intangible assets1 (43.4) (29.6)
Impairment of goodwill - (2.2)
Operating profit 232.4 187.8
1 excluding computer software
Amortisation and impairment of intangibles1 Amortisation and impairment of intangibles1 One-off items One-off items
2016£m 2015£m 2016£m 2015£m
Europe 5.5 6.9 0.8 12.1
UK & Rest of World 5.3 6.3 0.5 2.6
Asia 2.4 1.5 0.4 -
North America 21.7 14.8 5.6 1.4
Pacific 1.6 0.4 0.1 0.3
Central and regional 3.1 1.9 0.5 (11.0)
Total at constant exchange rates 39.6 31.8 7.9 5.4
Foreign exchange 3.8 - 0.7 -
Total at actual exchange rates 43.4 31.8 8.6 5.4
Tax effect (14.2) (9.1) (3.0) (2.3)
Total after tax effect 29.2 22.7 5.6 3.1
1 excluding computer software
One-off items at constant exchange rates include: £7.5m of acquisition and integration costs, mainly in North America and
Europe; £1.4m of costs related to the planned joint venture with Haniel (Note 10), and; £2.3m of costs in Europe to settle
a legal dispute. These costs are offset by £2.3m release of contingent consideration on acquisitions in Spain where
performance criteria were not met and £1.3m gain on freehold property disposal and property provision releases, mainly in
Central.
At actual exchange rates, one-off items for 2015 includes £8.1m for the costs associated with the closure of the Austrian
flat linen business, £5.5m for costs associated with the withdrawal from certain other non-core businesses, and £3.1m 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 and regional).
3. Interest payable and similar charges
2016 2015
£m £m
Hedged interest payable on medium term notes issued1 28.4 33.9
Interest payable on bank loans and overdrafts1 0.9 0.9
Interest payable on revolving credit facility1 7.9 2.8
Interest payable on foreign exchange swaps 10.0 10.2
Interest payable on finance leases 1.3 0.7
Amortisation of discount on provisions 0.3 0.5
Fair value loss on other derivatives2,3 0.6 0.8
Total interest payable and similar charges 49.4 49.8
1 interest expense on financial liabilities held at amortised cost
2 loss on financial assets/liabilities at fair value through the income statement
3 the fair value loss on other derivatives includes fair value losses relating to interest rate swaps.
4. Interest receivable
2016 2015
£m £m
Bank interest 1.1 1.7
Interest receivable on foreign exchange swaps 8.5 8.0
Fair value gain on other derivatives1,2 0.5 0.4
Foreign exchange gain on translation of foreign denominated assets and liabilities3 0.8 0.1
Interest on net defined benefit asset 8.4 6.1
Total interest receivable 19.3 16.3
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 £761.0m, offset by losses of £760.2m (2015: losses of £250.3m
offset by gains of £250.2m)
5. Income tax expense
2016 2015
£m £m
Analysis of charge in the year:
UK corporation tax at 20.0% (2015: 20.25%) 2.9 2.2
Overseas taxation 30.2 24.4
Adjustment in respect of previous periods 7.8 5.7
Total current tax 40.9 32.3
Deferred tax debit/(credit) 1.3 4.6
Deferred tax adjustment in respect of previous periods (1.5) (2.2)
Total deferred tax (0.2) 2.4
Total income tax expense 40.7 34.7
Current tax expense represents the amount payable on this year's taxable profits and any adjustment relating to prior
years. Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future due to
differences between accounting and tax bases. Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income. In this case the tax is also recognised in other comprehensive
income.
Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. The following temporary differences are not provided for: the
initial recognition of goodwill; the initial recognition of assets or liabilities in transactions other than a business
combination that at the time of the transactions affect neither the accounting nor taxable profit or loss; and differences
relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The
amount of deferred income tax is determined using tax rates (and laws) that have been enacted (or substantively enacted) at
the balance sheet date, and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available
against which the temporary differences can be utilised. In recognising the deferred tax asset in respect of UK losses,
management has estimated the quantum of future UK taxable profits.
5. Income tax expense (continued)
A deferred tax asset of £22.2m (2015: £26.1m) has been recognised in respect of UK losses carried forward at 31 December
2016. This amount has been calculated by estimating the future UK taxable profits, against which the UK tax losses are
expected to be utilised, and applying the tax rates (substantively enacted as at the balance sheet date) applicable for
each year. Remaining UK tax losses of £135.3m have not been recognised as at 31 December 2016.
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 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's potentially dilutive ordinary shares relate to the contingent issuable
shares under the Group's long term incentive share plants (LTIPs) to the extent the performance conditions have been met at
the end of the period. These share options are issued for nil consideration to employees if performance conditions are
met.
Details of the adjusted earnings per share are set out below:
2016 Restated2 2015
£m £m
Profit from continuing operations attributable to equity holders of the Company 167.8 124.3
One-off items, amortisation and impairment of intangibles1, and net interest credit from pensions, before tax 43.7 31.1
Tax on one-off items of £3.1m (2015: £2.3m) , amortisation and impairment of intangibles of £14.1m (2015: £9.1m), and net interest credit from pensions of £(1.6)m (2015: £(1.1)m) (15.6) (10.3)
Adjusted profit from continuing operations attributable to equity holders of the Company 195.9 145.1
Weighted average number of ordinary shares in issue 1,826.0 1,819.2
Adjustment for share options and LTIPs 16.9 7.5
Weighted average number of ordinary shares for diluted earnings per share 1,842.9 1,826.7
Basic earnings per share 9.19p 6.83p
Diluted earnings per share 9.11p 6.81p
Basic adjusted earnings per share 10.73p 7.98p
Diluted adjusted earnings per share 10.63p 7.94p
1 excluding computer software
2 restated to reflect restructuring costs are now being reported in operating profit
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.
2016 2015
£m £m
2014 final dividend paid - 1.82p per share - 33.1
2015 interim dividend paid - 0.87p per share - 15.8
2015 final dividend paid - 2.06p per share 37.5 -
2016 interim dividend paid 0.99p per share 18.0 -
55.5 48.9
An interim dividend of 0.99p per share was paid on 14 September 2016 amounting to £18.0m. A dividend in respect of 2016 of
2.38p (2015: 2.06p) per 1p share amounting to £43.5m (2015: £37.5m) is to be proposed at the annual general meeting on 10
May 2017. These financial statements do not reflect this recommended dividend.
8. Intangible assets
Goodwill Customer Brands Product development£m Computer 2016 2015
£m lists and £m software Total Total
relationships £m £m £m
£m
Cost
At 1 January 623.4 539.4 45.1 12.2 86.7 1,306.8 902.2
Exchange differences 124.7 98.6 8.3 - 8.2 239.8 (10.5)
Additions - - - 6.0 15.0 21.0 13.1
Disposals/retirements - - - - (7.8) (7.8) (8.4)
Acquisition of companies and businesses 51.2 38.5 7.8 - 0.1 97.6 413.9
Disposal of companies and businesses - - - - - - (3.5)
Transferred to disposal group held-for-sale (33.0) (85.3) (1.1) - (11.2) (130.6) -
At 31 December 766.3 591.2 60.1 18.2 91.0 1,526.8 1,306.8
Accumulated amortisation and impairment
At 1 January (26.1) (381.4) (23.9) (3.2) (53.9) (488.5) (470.9)
Exchange differences (4.2) (69.3) (4.2) - (5.5) (83.2) 13.5
Disposals/retirements - - - - 6.4 6.4 7.6
Disposal of companies and businesses - - 0.1 - - 0.1 3.5
Impairment charge - - - - - - (2.2)
Amortisation charge - (36.9) (3.8) (2.8) (12.4) (55.9) (40.0)
Transferred to disposal group held-for-sale - 84.2 0.6 - 9.1 93.9 -
At 31 December (30.3) (403.4) (31.2) (6.0) (56.3) (527.2) (488.5)
Net book value
At 1 January 597.3 158.0 21.2 9.0 32.8 818.3 431.3
At 31 December 736.0 187.8 28.9 12.2 34.7 999.6 818.3
9. Property, plant and equipment
Land and Service contract equipment Other plant and Vehicles 2016 2015
buildings £m equipment and office Total Total
£m £m equipment £m £m
£m
Cost
At 1 January 136.2 634.9 231.1 201.6 1,203.8 1.220.8
Exchange differences 24.4 115.4 39.4 43.2 222.4 (67.3)
Additions 3.5 153.1 14.5 30.7 201.8 167.8
Disposals (2.0) (133.3) (8.1) (27.6) (171.0) (123.1)
Acquisition of companies and businesses - 0.3 0.7 11.6 12.6 5.7
Disposal of companies and businesses - - - - - (0.1)
Transferred to disposal group held-for-sale (65.7) (346.5) (84.4) (33.8) (530.4) -
At 31 December 96.4 423.9 193.2 225.7 939.2 1,203.8
Accumulated depreciation and impairment
At 1 January (44.1) (393.6) (163.4) (125.6) (726.7) (715.3)
Exchange differences (9.1) (75.0) (28.6) (28.0) (140.7) 41.5
Disposals 0.9 131.2 7.8 25.5 165.4 116.7
Disposal of companies and businesses - - - - - 0.1
Impairment - - - - - (7.4)
Depreciation charge (4.5) (134.6) (15.2) (34.0) (188.3) (162.3)
Transferred to disposal group held-for-sale 30.0 252.6 57.5 27.3 367.4 -
At 31 December (26.8) (219.4) (141.9) (134.8) (522.9) (726.7)
Net book value
At 1 January 92.1 241.3 67.7 76.0 477.1 505.5
At 31 December 69.6 204.5 51.3 90.9 416.3 477.1
10. Disposal group held for sale
A non-current asset or a disposal group is classified as held for sale if its carrying amount will be recovered principally
through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one
year.
On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous
carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to gains
and losses on subsequent remeasurement although gains are not recognised in excess of any cumulative impairment loss. Any
impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro
rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets
and investment property, which continue to be measured in accordance with the Group's accounting policies. Intangible
assets and property, plant and equipment once classified as held for sale or distribution are not amortised or
depreciated.
On the 16 December the Group announced an agreement to form a joint venture with the CWS-Boco businesses of Haniel & Cie.
Holding Company. Under the terms of the arrangement, the Group will contribute its Workwear and Hygiene operations in 10
countries principally in the Benelux and Central and Eastern Europe (the disposal group). As consideration, the Group will
receive c. E520m in cash and a c.18% share in the joint venture, both subject to completion adjustments. Completion of the
transaction is subject to clearance of competition authorities. The Group's interest in the joint arrangement will be
recognised as an investment in associate. The assets and liabilities of the disposal group have been classified as held for
sale and are set out the table below.
Net assets of disposal group held for sale
2016 2015
£m £m
Assets held-for-sale
Property, plant and equipment1 163.1 -
Intangible assets 36.7 -
Inventories 2.0 -
Trade and other receivables 46.7 -
Liabilities held-for-sale
Trade and other payables (43.5) -
Provisions (3.4) -
Retirement benefit obligations (1.4) -
Deferred and current tax (22.5) -
Net assets held-for-sale 177.7 -
1 within the total property, plant and equipment is £4.8m in relation to two properties not included in the disposal to
Haniel, but are held for sale to different third parties
11. 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
Deferred and contingent consideration 3 Fair value based on the future forecasts of the acquired businesses
Other financial instruments 3 Variety of techniques including discounted cash flows
12. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid
investments with original maturities of three months or less (and subject to insignificant changes in value). In the cash
flow statement cash and cash equivalents are shown net of bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
Included within cash at bank and in hand is £25.2m (2015: £12.3m) of restricted cash. This cash is held in respect of
specific contracts and can only be utilised in line with terms under the contractual arrangements.
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:
Offsetting financial assets and liabilities
Gross amounts before offsetting Gross amounts set off Net amounts presented
£m £m £m
At 31 December 2016
Cash at bank and in hand 767.9 (609.7) 158.2
Short-term bank deposits 2.0 - 2.0
Cash and cash equivalents 769.9 (609.7) 160.2
Bank overdraft (664.0) 609.7 (54.3)
105.9 - 105.9
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
13. Analysis of bank and bond debt
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are classified as current
liabilities unless the Group has a continuing right to defer settlement of the liability for at least 12 months after the
balance sheet date.
The Group's bank debt comprises:
Facility amount£m Drawn atyear end£m Headroom£m Interest rateat year end%
Current
£60m RCF due December 2017 60.0 - 60.0 -
Non -current
$25m RCF due December 2019 20.3 - 20.3 -
£315m RCF due January 2022 (£45m reserved for guarantees) 270.0 145.9 124.1 1.24
$157m term loan due December 2018 127.3 127.3 - 1.70
£200m term loan due December 2018 200.0 200.0 - 1.07
Average cost of bank debt at year end rates 677.6 473.2 204.4 1.29
At 31 December 2016 the Group has a £315m Revolving Credit Facility (RCF) which is available for cash drawings up to £270m
and for guarantees and letters of credit up to £45m. The maturity date is January 2022. At the year end, £145.9m was drawn
under the part of the facility available for cash drawings, and £30.2m under the part available for guarantees.
In December 2016 the Group entered into additional short-term revolving credit facilities with two banks for £30m each. The
terms were aligned with the main RCF. On 27 January 2017, these two facilities were cancelled and the commitments were
transferred into the main RCF. At the same time an additional bank was brought into the RCF increasing the amount available
for cash drawings to £360m, and for guarantees and letters of credit to £60m.
13. Analysis of bank and bond debt (continued)
The Group also entered into a $25m revolving credit facility in December 2016, maturing in December 2019, on terms in line
with the main RCF.
Medium-term notes and bond debt comprises:
Bond interest coupon Effective hedged interest rate
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 3.30%
On 31 March 2016 the Group repaid a £300m 5.75% bond using a combination of cash in hand, drawings under the RCF and
drawings under the Term Loan.
The Group considers the fair value of other current liabilities to be equal to the carrying value.
14. 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 2016 RIPS was valued at an
accounting surplus of £272.0m (2015: £237.0m) on the Group's balance sheet. The trustees of the scheme value the scheme on
a different basis and in the valuation at 31 December 2015 it was agreed that the scheme is now fully funded. The trustees
have therefore agreed that the annual payments of £3.2m the company has been paying into an escrow arrangement each January
will not be required going forward. In accordance with the terms of the escrow arrangement, the balance held in escrow was
released back to the company on 16 February 2017. The funding position will be reviewed at the next actuarial valuation,
which is expected to be carried out at 31 December 2018.
The Group will recognise a pension surplus as an asset where there is an unconditional right to a refund or where the Group
has a right to reduce future pension contributions, taking into account the adverse effect of any minimum funding
requirements.
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.
2016 2015
Weighted average %
Discount rate 2.6 % 3.8%
Future salary increases N/A N/A
Future pension increases 3.4% 3.3%
RPI inflation 3.5% 3.4%
CPI inflation 2.4% 2.3%
14. Retirement benefit obligations (continued)
The movement in the net defined benefit obligation for all pension schemes over the accounting period is as follows:
Present value of obligation Fair value of plan assets 2016 Total Present value of obligation Fair value of plan assets Total
2016 £m 2016 2015 2015£m 2015£m
£m £m £m
At 1 January (1,232.0) 1,444.9 212.9 (1,366.2) 1,532.6 166.4
Current service costs1 (0.5) - (0.5) (0.6) - (0.6)
Past service costs1 (0.1) - (0.1) - - -
Administration expenses1 (1.3) - (1.3) (2.7) - (2.7)
Settlement credit1 - - - 31.3 (30.5) 0.8
Interest on net defined benefit asset1 (45.1) 53.5 8.4 (46.4) 50.7 4.3
Exchange difference (8.2) 4.1 (4.1) 4.5 (1.4) 3.1
Total pension income (55.2) 57.6 2.4 (13.9) 18.8 4.9
Remeasurements:
- Remeasurement of gain/(loss) on scheme assets - 285.9 285.9 - (45.2) (45.2)
- Actuarial gain/(loss) on obligation2 (264.6) - (264.6) 82.4 - 82.4
- Transfers to disposal group held-for-sale 4.6 (3.2) 1.4 (0.3) - (0.3)
Contributions:
- Employers (0.5) 1.5 1.0 (0.7) 1.6 0.9
- Participants - 0.1 0.1 - 0.1 0.1
- Benefit payments 60.2 (58.8) 1.4 64.0 (63.0) 1.0
- Administration costs 1.3 - 1.3 2.7 - 2.7
At 31 December (1,486.2) 1,728.0 241.8 (1,232.0) 1,444.9 212.9
Retirement benefit obligation schemes3 (52.9) 22.0 (30.9) (45.8) 21.7 (24.1)
Retirement benefit asset schemes4 (1,433.3) 1,706.0 272.7 (1,186.2) 1,423.2 237.0
1 service costs, settlement and administration expenses are charged to operating expenses, and interest cost and
return on plan assets to net interest credit from pensions
2 the actuarial movement on the UK RIPS scheme comprises actuarial loss arising from changes in demographic
assumptions of £18.5m (2015: £nil), actuarial loss arising from changes in financial assumptions of £238.1m (2015:
actuarial gain £64.6m) and actuarial losses arising from experience of £2.2m (2015: £18.1m gain)
3 benefit plans in an obligation position include plans situated in Ireland, UK, Martinique, Trinidad, Norway, South
Africa, Germany, Austria, France, Italy, Korea, Philippines, and Hong Kong
4 benefit plans in an asset position include plans situated in UK, Australia and Barbados
Included in the table above is a defined benefit obligation of £1,431.0m (2015:£1,186.2m) and plan assets of £1,703.0m
(2015: £1,423.2m) in relation to the UK RIPS scheme.
Of the £1,486.2 (2015: £1,232.0m) of obligations, £18.6m (2015: £13.1m) is unfunded.
Total contributions payable to defined benefit pension schemes in 2017 are expected to be between £1-2m.
The fair value of plan assets at the balance sheet date is analysed as follows:
2016£m 2015£m
Equity instruments 234.7 290.1
Debt instruments - quoted 1,466.4 982.9
Debt instruments - unquoted 11.4 10.4
Interest and inflation rate hedging instruments - 22.8
Property 0.3 0.4
Other 15.2 138.3
Total plan assets 1,728.0 1,444.9
15. Provisions for other liabilities and charges
Vacant property, environmental, self-insurance and other provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle
the obligation, and the amount is capable of being reliably estimated. If such an obligation is not capable of being
reliably estimated it is classified as a contingent liability.
When the effect of the time value of money is material, provision amounts are calculated on the present value of the
expenditure expected to be required to settle the obligation. The present value is calculated using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the liability. The rates used are
between 0.3% and 0.5% (2015: between 0.9% and 1.4%) for the UK, 0.5% (2015: 0.5%) for Europe and 2.3% (2015: 2.2%) for the
US.
Significant judgement is required in determining the worldwide provision for vacant properties and environmental
restoration. These provisions tend to be long-term in nature and the use of an appropriate market discount rate and
forecast future utilisation based upon management's best estimate determines the level of provision required at the balance
sheet date. The phasing and actual cash spend may be different from the forecast on which the provision is based.
Vacant Environmental Self- Other 2016 2015
properties £m insurance £m Total Total
£m £m £m £m
At 1 January 27.6 14.8 22.5 16.5 81.4 84.3
Exchange differences - 2.6 3.5 1.7 7.8 -
Additional provisions 0.8 0.5 16.5 12.0 29.8 24.8
Used during the year (5.1) (2.1) (15.0) (15.1) (37.3) (27.8)
Unused amounts reversed (3.1) (0.5) (2.6) (1.9) (8.1) (5.6)
Acquisition of companies and businesses - - - - - 5.2
Unwinding of discount on provisions 0.2 0.1 - - 0.3 0.5
Transferred to disposal group held-for-sale - - - (3.4) (3.4) -
At 31 December 20.4 15.4 24.9 9.8 70.5 81.4
Analysed as follows:
Non-current 55.2 60.8
Current 15.3 20.6
Vacant properties
The Group has a number of vacant and sub-let leasehold properties, with the majority of the head leases expiring before
2020. Provision has been made for the residual lease commitments together with other outgoings, after taking into account
existing sub-tenant arrangements and assumptions relating to later periods of vacancy.
The total future minimum sub-lease payments expected to be received under non-cancellable sub-leases at 31 December 2016 is
£1.1m (2015: £1.5m).
Environmental
The Group owns a number of properties in Europe and the US where there is land contamination and provisions are held for
the remediation of such contamination. These provisions are expected to be substantially utilised within the next eight
years.
Self-insurance
Since 2008 the Group purchases external insurance from a portfolio of international insurers for its key insurable risks,
but prior to this the Group self-insured its risks. Provision is still held for self-insured past cover, primarily in
relation to third party motor vehicle and employee liability. For the continuing self-insured programmes, individual claims
are met in full by the Group up to agreed self-insured limits in order to limit volatility in claims. The calculated cost
of self-insurance claims is based on an actuarial assessment of claims incurred at the balance sheet date and is
accumulated as claims provisions.
Other
Other provisions principally comprise amounts required to cover obligations arising, costs relating to disposed businesses
and restructuring costs. Existing provisions are expected to be substantially utilised within the next five years.
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