REG - Rentokil Initial PLC - Final Results <Origin Href="QuoteRef">RTO.L</Origin> - Part 3
25/02/2016 07:10
- Part 3: For the preceding part double click ID:nRSY0826Qb
Other1 Total UK RIPS Other1 Total
2015 2015 2015 2014£m 2014£m 2014£m
£m £m £m
Equity instruments 288.1 2.0 290.1 352.2 2.1 354.3
Debt instruments - quoted 982.9 - 982.9 930.3 - 930.3
Debt instruments - unquoted - 10.4 10.4 - 11.0 11.0
Interest and inflation rate hedging instruments 22.8 - 22.8 122.5 - 122.5
Property - 0.4 0.4 - 0.4 0.4
Other 129.4 8.9 138.3 106.1 8.0 114.1
Total plan assets 1,423.2 21.7 1,444.9 1,511.1 21.5 1,532.6
1 other retirement benefit plans are predominantly made up of defined benefit plans situated in Australia, Belgium, France,
Germany, Ireland and Norway.
13. Retirement benefit obligations (continued)
The amounts recognised in the income statement are as follows:
UK RIPS Other1 Total UK RIPS Other1 Total
2015 2015 2015 2014£m 2014£m 2014
£m £m £m £m
Current service cost - 0.6 0.6 0.6 0.8 1.4
Past service cost - - - (0.6) (0.3) (0.9)
Settlement credit (0.8) - (0.8) (0.1) - (0.1)
Administration expenses 2.7 - 2.7 1.7 - 1.7
Total operating costs 1.9 0.6 2.5 1.6 0.5 2.1
Interest on net defined benefit (asset)2/liability (6.5) 0.4 (6.1) (3.1) 0.6 (2.5)
Total pension (income)/expense (4.6) 1.0 (3.6) (1.5) 1.1 (0.4)
1 other retirement benefit plans are predominantly made up of defined benefit plans situated in Australia, Belgium, France,
Germany, Ireland and Norway.
2 Interest cost and return on plan assets are charged to net interest credit from pensions
14. Provisions for other liabilities and charges
Vacant Environmental Self- Other 2015 2014
properties £m insurance £m Total Total
£m £m £m £m
At 1 January 38.7 15.2 20.0 10.4 84.3 92.9
Exchange differences - (0.4) 0.7 (0.3) - (0.1)
Additional provisions 1.6 2.4 9.7 11.1 24.8 27.5
Used during the year (8.5) (2.1) (9.6) (7.6) (27.8) (28.8)
Unused amounts reversed (4.6) (0.4) (0.5) (0.1) (5.6) (8.9)
Acquisition of companies and businesses - - 2.2 3.0 5.2 0.6
Unwinding of discount on provisions 0.4 0.1 - - 0.5 1.1
At 31 December 27.6 14.8 22.5 16.5 81.4 84.3
Analysed as follows:
Non-current 60.8 59.8
Current 20.6 24.5
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 2015 is
£1.5m (2014: £1.3m).
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 ten
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 workers compensation (US). 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, warranties given and costs relating to
disposed businesses and restructuring costs. These provisions are expected to be substantially utilised within the next
five years. The above provisions have been discounted where appropriate using discount rates of between 0.9% and 1.4%
(2014: between 0.7% and 1.3%) for the UK, 0.5% (2014: 0.6%) for Europe and 2.2% (2014: 2.2%) for the US.
15. Share capital
2015 2014
£m £m
Authorised
4,100,000,000 ordinary shares of 1p each 41.0 41.0
Issued and fully paid
At 31 December - 1,822,832,965 shares (2014: 1,822,832,965) 18.2 18.2
16. Reconciliation of net increase/(decrease) in cash and cash equivalents to net debt
2015 2014
£m £m
Net (decrease)/increase in cash and cash equivalents (88.0) 65.1
Movement on finance leases 0.1 (1.2)
Movement on other investments 47.8 (240.7)
Movement on loans (232.5) 389.5
(Increase)/decrease in debt resulting from cash flows (272.6) 212.7
Foreign exchange translation and other items 21.0 47.1
Movement on net debt in the year (251.6) 259.8
Opening net debt (775.0) (1,034.8)
Closing net debt (1,026.6) (775.0)
17. Operating cash and free cash flow
2015£m 2014
£m
Profit for the year 124.3 261.5
Adjustments for:
- Profit on sale of discontinued operations excluding costs of disposal net of tax £nil (2014: £0.4m) - (145.6)
- Tax 34.7 37.1
- Share of profit from associates (4.7) (3.9)
- Net interest credit from pensions (6.1) (2.5)
- Interest income (10.2) (10.9)
- Interest expense 49.8 56.2
- Depreciation and impairment of property, plant and equipment 162.3 175.7
- Amortisation and impairment of intangible assets (excluding computer software) 31.8 21.2
- Amortisation and impairment of computer software 10.4 13.0
- Other non-cash items 8.6 (1.5)
Changes in working capital (excluding the effects of acquisitions and exchange differences on consolidation):
- Inventories 2.0 1.6
- Trade and other receivables (4.8) (19.9)
- Trade and other payables and provisions (5.8) (34.0)
Cash generated from operating activities before special pension contributions 392.3 348.0
Special pension contributions (0.9) (1.0)
Cash generated from operating activities 391.4 347.0
Add back: special pension contributions 0.9 1.0
392.3 348.0
Purchase of property, plant and equipment (159.2) (173.1)
Purchase of intangible fixed assets (13.1) (12.0)
Leased property, plant and equipment (9.0) (9.3)
Proceeds from sale of property, plant and equipment 6.7 6.3
Proceeds from sale of investment properties - 6.8
Dividends received from associates 2.1 1.7
Operating cash flow1 219.8 168.4
Interest received 10.2 10.9
Interest paid (53.7) (59.6)
Interest element of finance lease payments (0.7) (0.8)
Income tax paid (27.9) (30.1)
Special pension contributions (0.9) (1.0)
Free cash flow 146.8 87.8
Add back: Free cash flow - discontinued operations 0.9 41.1
Free cash flow from continuing operations 147.7 128.9
1Operating cash flow includes discontinued operations of £(0.9)m (2014: £(41.1)m)
18. Business combinations
During October 2015 the group acquired 100% of the share capital of Steritech, an independent pest control business and
market leader in the provision of brand standards auditing services. The acquisition strengthened the group's position as
the third largest pest control business in both the US and Canada. The group also purchased during the year 100% of the
share capital or trade and assets of 22 other smaller companies and businesses. The total consideration in respect of all
acquisitions was £386.0m and the cash outflow from current and past period acquisitions, net of cash acquired, was
£369.2m.
From the dates of acquisition to 31 December 2015, these acquisitions contributed £51.3m to revenue and £8.8m to operating
profit.
If the acquisitions had occurred on 1 January 2015 the revenue and operating profit of the group would have amounted to
£1,865.7m and £204.0m respectively (as reported: £1,759.0m and £187.8m)
Details of goodwill and the fair value of net assets acquired are as follows:
Steritech 2015 Other 2015 Total 2015 Total 2014
£m £m £m £m
Purchase consideration:
- Cash paid 272.1 87.9 360.0 63.9
- Deferred and contingent consideration 5.7 20.3 26.0 12.9
Total purchase consideration 277.8 108.2 386.0 76.8
Fair value of net assets acquired (49.0) (31.3) (80.3) (44.4)
Goodwill from current year acquisitions 228.8 76.9 305.7 32.4
Goodwill represents the synergies, workforce and other benefits expected as a result of combining the respective
businesses.
Deferred consideration of £10.7m (Steritech £5.7m) is payable over the next 5 years in respect of the above acquisitions.
Contingent consideration of £15.1m (Steritech £nil) is payable over the next 5 years based on a variety of conditions
including revenue and profit. The group incurred acquisition related costs of £3.0m in respect of the above acquisitions.
The group has included the contingent and deferred consideration based on the fair value of the consideration at the
acquisition date.
The provisional fair value1 of assets and liabilities arising from acquisitions in the year are as follows:
Steritech 2015 Other 2015 Total 2015 Total 2014
£m £m £m £m
Non-current assets
- Intangible assets2 79.0 28.8 107.8 39.9
- Property, plant and equipment 0.6 5.3 5.9 4.8
Current assets3 14.9 4.8 19.7 17.7
Current liabilities (15.1) (3.8) (18.9) (8.7)
Non-current liabilities4 (30.4) (3.8) (34.2) (9.3)
Net assets acquired 49.0 31.3 80.3 44.4
1 the provisional fair values will be finalised in the 2016 financial statements. The fair values are provisional since
the acquisition accounting has not yet been finalised as a result of the proximity of many acquisitions to the year end
2 includes £96.2m (2014: £38.4m) of customer lists and relationships and £11.6m (2014: £1.5m) of other intangibles
3 includes trade and other receivables of £18.6m (2014: £10.4m) which represents the gross and fair value of the assets
acquired
4 includes (£31.0m) of deferred tax relating to acquired intangibles (2014: £7.6m)
18. Business combinations (continued)
The cash outflow from current and past acquisitions are as follows:
Steritech 2015 Other 2015 Total 2015 Total 2014
£m £m £m £m
Total purchase consideration 277.8 108.2 386.0 76.8
Consideration payable in future periods (5.7) (20.3) (26.0) (12.9)
Purchase consideration paid in cash 272.1 87.9 360.0 63.9
Cash and cash equivalents in acquired companies and businesses (0.2) 0.1 (0.1) (3.7)
Cash outflow on current period acquisitions 271.9 88.0 359.9 60.2
Deferred consideration paid - 9.3 9.3 7.9
Cash outflow on current and past acquisitions 271.9 97.3 369.2 68.1
19. Related party transactions
Nippon Calmic Ltd (49%) was an associate during 2015 and 2014. There are no significant transactions between Nippon Calmic
Ltd and other group companies.
The group bears the costs of administration and independent pension advice of the Rentokil Initial 2015 Pension Scheme. The
total amount of costs in the year ended 31 December 2015 was £2.5m (2014: £2.1m) of which £0.2m (2014: £0.4m) was recharged
to the scheme.
20. Events occurring after the balance sheet date
There were no significant post balance sheet events affecting the group since 31 December 2015.
21. Legal statements
The financial information for the year ended 31 December 2015 contained in this preliminary announcement was approved by
the Board on 25 February 2016.
The financial information in this statement does not constitute the company's statutory accounts for the years ended 31
December 2015 or 2014. The financial information for 2014 and 2015 is derived from the statutory accounts for 2014 (which
have been delivered to the registrar of companies) and 2015 (which will be delivered to the registrar of companies and
issued to shareholders in March 2016). The auditors have reported on the 2014 and 2015 accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
The statutory accounts for 2015 are prepared in accordance with International Financial Reporting Standards ("IFRS") as
adopted for use in the European Union. The accounting policies (that comply with IFRS) used by Rentokil Initial plc ("the
group") are consistent with those set out in the 2014 Annual Report. A full list of policies will be presented in the 2015
Annual Report. For details of new policies applicable to the group in 2015 and their impact please refer to Note 1.
22. 2015 Annual Report
Copies of the 2015 Annual Report will be sent to shareholders who have elected to receive hard copies on 8 April 2016 and
will also be available from the company's registered office at Riverbank, Meadows Business Park, Blackwater, Camberley,
Surrey, GU17 9AB and atwww.rentokil-initial.com in PDF format.
23. Financial calendar
The Annual General Meeting will be held at the Hilton Hotel (Ascot Suite), Gatwick Airport, South Terminal, Crawley, West
Sussex, RH6 0LL on Wednesday 11 May 2016 at 12 noon.
This information is provided by RNS
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