REG - Rentokil Initial PLC - Final Results
06/03/2025 07:15
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RNS Number : 5858Z Rentokil Initial PLC 06 March 2025
2024 Preliminary Results
Results in line with revised guidance
North American review informs revised branch and brand strategy. Integration
on track for completion end 2026.
Financial Results Adjusted Results (AER) Statutory Results (AER)
£m 2024 2023 Change 2024 2023 Change
£m
£m
%
£m
£m
%
Revenue 5,436 5,375 1.1% 5,436 5,375 1.1%
EBITDA 1,177 1,228 (4.2%)
Operating Profit 834 898 (7.0%) 549 625 (12.1%)
Operating Profit margin 15.3% 16.7% (1.4ppt) 10.1% 11.6% (1.5ppt)
Profit before Tax 703 766 (8.1%) 405 493 (17.9%)
Free Cash Flow 410 500 (18.0%)
Basic EPS 21.25p 23.19p (8.4%) 12.17p 15.14p (19.6%)
Diluted EPS 21.19p 23.08p (8.2%) 12.14p 15.07p (19.5%)
Dividend Per Share 9.09p 8.68p 4.7% 9.09p 8.68p 4.7%
Net debt (3,208) (3,146) (2.0%) (3,208) (3,146) (2.0%)
Adjusted Results (CER)
Revenue 5,587 5,375 3.9%
Operating Profit 860 898 (4.2%)
Operating Profit margin 15.4% 16.7% (1.3ppt)
Profit before Tax 731 766 (4.6%)
Andy Ransom, Chief Executive of Rentokil Initial plc ("the Company"), said:
"2024 was a challenging year for the Group, with lower profits and margins,
delivered in line with our trading update in September. Good growth in the
International business (Organic Revenue growth 4.7%) was held back by the
performance in North America (Organic Revenue growth 1.5%).
"The Terminix integration is making good progress, with multiple important
milestones achieved, but executing it has clearly impacted our North American
business performance.
"The integration remains on track to be completed by the end of 2026.
Colleague and Customer retention across our NA business saw encouraging
improvements during 2024, and has also been trending positively at the newly
integrated branches.
"Our sales and marketing initiatives to drive organic growth require further
refinement to deliver the required improvements in overall lead generation and
sales conversion, which will be a key focus in 2025. To address this, our
revised branding strategy will see the national focus for the Rentokil and
Terminix brands supplemented by additional prominence for our nine main
regional brands. Alongside this, we will use insights from our promising
satellite branch pilot to optimise the branch network size. We now expect that
the end state branch network (including satellites) is likely to exceed 500
locations. Post integration we expect to generate both market beating growth
and considerable cost efficiencies, with North American margins exceeding 20%.
"We continue to benefit from our diversified, global footprint and resilient
business model, in addition to our sustained focus on customer service and
investment in people, technology and innovation. Present in c.90 countries and
with industry leading technology, we are a global leader in pest control and
the largest pest control operator in the US, which has demonstrated attractive
and sustained structural growth over time. With our enhanced scale, brand
portfolio and service offering, we remain confident in our ability post the
integration of Terminix to deliver sustained growth.
"We expect to achieve 2025 financial performance in line with market
expectations."
2024 Financial Highlights (Unless otherwise stated, all financials are
presented at constant exchange rates).
● Group Organic Revenue(1) Growth of 2.8%, with the International business up
4.7%.
● North America Organic Revenue growth of 1.5%, with 1.5% in Pest Control.
● Group Adjusted Operating Margin of 15.4%(2), impacted by North America margin
reduction to 17.1%.
● Group Adjusted PBT at AER of £703m, in line with revised guidance.
● Net debt to EBITDA at 2.9x as at 31 December 2024.
● Recommended final dividend 5.93p; total FY 24 dividend of 9.09p per share,
c.5% year on year increase.
2024 Strategic Highlights
● 2024 delivered continued progress with Terminix Integration
- First Terminix branch systems integration completed, covering 58 branches with
Revenues of $373m and c.1,000 service technicians. Over 250 branches in North
America now operate unified finance, HR, payroll, procurement, and sales
commission systems.
● 2024 North America RIGHT WAY 2 Growth Plan progress
- Colleague Retention +4.2% vs FY23 to 79.4%.
- Customer Retention at over 81% in Q4. FY24: 80.1% (FY23: 79.5%).
- Work continues on improving sales and marketing execution; leads and sales
conversion still lagging.
- First satellite branches opened in Q4: testing more local locations to drive
greater customer proximity.
● Integration strategy review complete. Integration remains on track to complete
by end of 2026
- Encouraging response from colleagues and customers in initial fully migrated
branches to pay plan and rerouting pilot. At these locations, customer
retention increasing on pre-migration levels, while colleague retention has
remained in line with pre-migration levels.
- Branch integration scheduled to restart in early H2; c.100% branches complete
by end 2026.
- Revised brand strategy: focus on 9 regional brands, plus national Rentokil and
Terminix brands.
- Revised branch strategy: end state branch network now envisaged of over 500,
including satellites.
- Significant 2024 additional investments to drive revenue - brand awareness,
lead generation, sales infrastructure - offer partial opportunity for
redeployment, allowing 2025 revised strategies to be funded.
- Post 2026, completion of integration is expected to deliver $100m cost
reduction versus 2024 levels of cost, with branch right-sizing and improved
route density significantly improving technician efficiency.
- Interrelationship of growth investments, inflationary increases and cost
synergies make net synergies too subjective to disaggregate and report on.
From 2027, completion of integration activities expected to deliver North
American margins exceeding 20% from faster organic growth and reduced costs.
Previous FY 26 Group margin target withdrawn.
● Continued momentum in bolt on M&A. 36 businesses with revenues of c.£140m
in the year prior to purchase acquired for £182m; strong pipeline of
opportunities for attractive bolt-on acquisitions being worked on.
2025 Outlook and Q1 current trading
● Despite Q1 year-to-date growth in North America having been held back
principally as a result of continued weak lead generation, we expect to
achieve FY 2025 results in line with market expectations.
● 2025 growth initiatives are fully funded within the inflation adjusted 2024
cost base, with reinvestments targeted to higher return activities including
the revised brand and branch strategy.
● FY 2025 Adjusted free cash flow conversion forecast at 80%, with modest
balance sheet deleveraging.
● FX movements are expected to have a headwind impact of $10m-$20m in 2025; US
dollar reporting to commence in 2025.
Re-presentation of financial information in US dollars
As announced in July 2024, the Group will change its presentation currency to
US dollars for reporting periods starting from 1 January 2025, as we believe
that this will provide better alignment of the reporting of performance with
business exposures.
For comparative purposes, the Group has today published historical financial
information re-presented in US dollars on its IR website
(www.rentokil-initial.com/investors). The selected unaudited information
included in the document has been derived from the consolidated financial
statements and accounting records of the Group for each of the years ended 31
December 2022, 31 December 2023 and 31 December 2024, and the six months ended
30 June 2024.
Enquiries:
Investors / Analysts: Peter Russell Rentokil Initial plc 07795 166506
Media: Malcolm Padley Rentokil Initial plc 07788 978199
A management presentation and Q&A for investors and analysts will be held
today, 6 March 2025 from 9.15am at the Leonardo Royal London St Paul's Hotel,
10 Godliman Street, London EC4V 5AJ. The event will also be available via a
live webcast. Dial-in details will be provided on the website
(https://www.rentokil-initial.com/investors.aspx). A recording will be made
available following the conclusion of the presentation.
Notes
1 Organic Revenue growth represents the growth in Revenue excluding the effect
of businesses acquired during the year. Acquired businesses are included in
organic measures in the year following acquisition, and the comparative period
is adjusted to include an estimated full year performance for growth
calculations (pro forma revenue)
2 Excludes costs to achieve which are one-off by nature
AER - actual exchange rates; CER - constant 2023 exchange rates
Non-IFRS measures - This statement includes certain financial performance
measures which are not measures defined under International Financial
Reporting Standards (IFRS). These measures include Adjusted Operating Profit,
Adjusted Profit Before Tax, Adjusted Profit After Tax, Adjusted EBITDA,
Adjusted Interest, Adjusted Earnings Per Share, Free Cash Flow, Adjusted Free
Cash Flow, Adjusted Free Cash Flow Conversion, Adjusted Effective Tax Rate and
Organic Revenue. Management believes these measures provide valuable
additional information for users of the financial statements to aid better
understanding of the underlying trading performance. Adjusted Operating
Profit, Adjusted Profit Before/After Tax and Adjusted EBITDA exclude certain
items that could distort the underlying trading performance of the business.
Revenue and Adjusted Operating Profit are presented at CER unless otherwise
stated. An explanation of all the above non-IFRS measures used along with
reconciliation to the nearest IFRS measures is provided in Use of Non-IFRS
measures on page 16-22.
Summary of financial performance (at CER)
Regional Performance
Revenue Adjusted Operating Profit
2024 2023 Change 2024 2023 Change
£m
£m
%
£m
£m
%
North America
Pest Control 3,236 3,201 1.1% 553 599 (7.5%)
Hygiene & Wellbeing 111 105 5.5% 20 18 7.4%
3,347 3,306 1.3% 573 617 (7.1%)
International
Pest Control 1,172 1,085 8.0% 241 231 4.5%
Hygiene & Wellbeing 820 753 8.8% 149 139 6.7%
France Workwear 237 221 7.1% 42 39 8.6%
2,229 2,059 8.2% 432 409 5.7%
Europe (incl. LATAM)
Pest Control 551 516 6.6% 128 124 3.3%
Hygiene & Wellbeing 364 344 5.9% 56 52 6.3%
France Workwear 237 221 7.1% 42 39 8.6%
1,152 1,081 6.5% 226 215 5.0%
UK & Sub-Saharan Africa
Pest Control 206 195 5.5% 54 51 5.5%
Hygiene & Wellbeing 231 195 18.5% 47 43 8.9%
437 390 12.0% 101 94 7.0%
Asia & MENAT
Pest Control 276 250 10.4% 36 34 5.4%
Hygiene & Wellbeing 92 89 3.0% 12 11 3.3%
368 339 8.4% 48 45 4.9%
Pacific
Pest Control 139 124 12.4% 23 22 7.7%
Hygiene & Wellbeing 133 125 6.2% 34 33 5.5%
272 249 9.3% 57 55 6.4%
Central 11 10 7.8% (138) (121) (14.1%)
Restructuring costs - - - (7) (7) 0.3%
Total at CER 5,587 5,375 3.9% 860 898 (4.2%)
Total at AER 5,436 5,375 1.1% 834 898 (7.0%)
Category Performance
Revenue Adjusted Operating Profit
2024 2023 Change 2024 2023 Change
£m
£m
%
£m
£m
%
Pest Control 4,408 4,286 2.9% 794 830 (4.2%)
Hygiene & Wellbeing 931 858 8.4% 169 157 6.8%
France Workwear 237 221 7.1% 42 39 8.6%
Central 11 10 7.8% (138) (121) (14.1%)
Restructuring costs - - - (7) (7) 0.3%
Total at CER 5,587 5,375 3.9% 860 898 (4.2%)
Total at AER 5,436 5,375 1.1% 834 898 (7.0%)
In order to help understand the underlying trading performance, unless
otherwise stated, figures below are presented at constant exchange rates.
Revenue
Group Revenue increased 3.9% to £5,587m. Group Organic Revenue grew 2.8%.
Group Revenue was up 1.1% to £5,436m at AER. Revenue growth in North America
was up 1.3% (Organic Revenue +1.5%). North America saw a 90bps
quarter-on-quarter improvement in regional Organic Revenue growth in Q4 (1.4%
in Q3, 2.3% in Q4). The International business drove Revenue up 8.2% for the
full year with a good contribution from all regions. Europe, the Group's
second largest region, was up by 6.5%; UK & Sub-Saharan Africa was up
12.0%; the Pacific was up 9.3%; and Asia & MENAT was up 8.4%.
Our Pest Control category grew Revenue by 2.9% (2.5% Organic) to £4,408m,
mainly from price increases. Hygiene & Wellbeing Revenue increased by 8.4%
(3.1% Organic) to £931m, led in general by resilient demand for washroom
services. Strong progression in both volume and price were reflected in the
contribution from our France Workwear business, with Revenue up by 7.1% to
£237m (7.1% Organic).
Revenue (£m at CER) H1 H2 Full Year
Group 2,756 2,831 5,587
North America 1,662 1,685 3,347
International 1,088 1,141 2,229
Organic Growth H1 H2 Full Year
Group 2.8% 2.8% 2.8%
North America 1.3% 1.8% 1.5%
International 5.2% 4.3% 4.7%
Profit
Adjusted Operating Profit reduced by 4.2% during the year to £860m, impacted
by the performance in North America. As stated in the Company's September
Trading Update, in North America there was a drop-through impact on profit
from below expected organic revenue growth and from significant in-year cost
investments to drive revenue, resulting in a 130bps decrease year on year in
Group Adjusted Operating Margin to 15.4%. Within business categories, Adjusted
Operating Margin for Pest Control was 18.0% (FY 23: 19.3%). Hygiene &
Wellbeing Adjusted Operating Margin was 18.1% (FY 23: 18.4%), and France
Workwear was 17.7% (FY 23: 17.5%).
Adjusted Profit before Tax (at AER) of £703m, which excludes one-off and
adjusting items and amortisation costs, decreased by 8.1%. Adjusted interest
of £138m at actual exchange rates was £3m lower year on year. One-off and
adjusting items (operating) at AER of £86m includes £59m (FY 23: £81m) of
integration costs related to the Terminix acquisition ("Costs to Achieve'')
and £9m (FY 23: £13m) of other M&A costs. Statutory Operating Profit at
AER was £549m (FY 23: £625m). Statutory profit before tax at AER was £405m
(FY 23: £493m).
Adjusted Operating Profit (£m at CER) H1 H2 Full Year
Group 455 405 860
North America 310 263 573
International 208 224 432
Adjusted Operating Profit Margin H1 H2 Full Year
Group 16.5% 14.3% 15.4%
North America 18.6% 15.6% 17.1%
International 19.1% 19.6% 19.3%
Cash (at AER)
Net cash flows from operating activities were £678m. Free Cash Flow of £410m
was £90m lower than in FY 23 due to reduced profitability. There was a £15m
outflow (FY 23: £11m) from one-off and adjusting items (non-cash).
The Group had a £105m working capital outflow in FY 24. Capital expenditure
of £215m was incurred in the period (FY 23: £211m). Lease payments of £145m
were down 4.0% reflecting the start of integration work on branch
restructuring.
Cash interest payments of £144m were £22m lower than in the prior year,
reflecting higher interest rates on investment income and lower swap payments
due to a weaker US dollar. Cash tax payments for the period were £87m, a
decrease of £13m compared with the corresponding period last year reflecting
lower profits in North America, combined with one-off tax refunds. Adjusted
Free Cash Flow Conversion was 80.0%, in line with guidance.
Cash spend on current and prior year acquisitions was £172m, dividend
payments were £229m and the cash impact of one-off and adjusting items was
£77m, largely related to Terminix integration costs.
Regional performance review
North America
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 3,260 -1.4% 3,347 1.3% 1.5%
Operating Profit 418 -14.5% 430 -12.2%
Adjusted Operating Profit 558 -9.5% 573 -7.1%
Adjusted Operating Margin 17.1% -1.6% 17.1% -1.6%
Organic Growth Q1 Q2 Q3 Q4 Full Year
North America 1.5% 1.0% 1.4% 2.3% 1.5%
North America Pest Control 1.5% 0.7% 1.4% 2.6% 1.5%
North America Pest Control Services 1.0% 1.5% 1.4% 1.5% 1.4%
North America includes Pest Control and Hygiene & Wellbeing.
North America Pest Services is Pest Control excluding products/distribution,
brand standards, lake and vector.
2024 Performance
Full year Revenue was up 1.3%, with Organic Revenue up 1.5%. There was an
improved end to the year with a 90bps quarter-on-quarter gain in regional
Organic Revenue growth in Q4 (1.4% in Q3, 2.3% in Q4), resulting in H2 Organic
Revenue growth of 1.8%, ahead of revised guidance of c.1%.
Adjusted Operating Profit of £573m, down 7.1%, reflects the combined impact
of below plan expectation revenue growth and from significant in year cost
investments to drive revenue. Consequently, despite continued good price
realisation, Adjusted Operating Margin in North America declined to 17.1%.
Operating Profit was £418m at AER.
We are seeing ongoing success with our recruiting, training and retention
initiatives. Total North America colleague retention increased to 79.4% (FY
23: 75.2%), driven by improvement in frontline technician roles (+4.3ppts to
76.0%) and sales roles (+6.4ppts to 72.8%), and in both new colleagues (0-12
months) and longer tenured (> 1yr) colleagues. As a result of the
improvement in new colleague retention, we have 100 more sellers entering 2025
in their second year versus their first year of sales in 2024. Since the date
of acquisition, retention at Terminix has grown from 62.4% to 76.3%, an
increase of 13.9ppts. Total customer retention in North America increased to
80.1% (FY 23: 79.5%). Following incremental improvement through the year,
there was a positive step change into year end with the three best months of
customer retention all recorded in Q4, each above 81%. Customer satisfaction
was also positive, with an improved overall Net Promoter Score of +53.3.
North American bolt-on M&A programme continued, with the purchase of 13
businesses with combined revenues of c.£69m in the year prior to purchase. We
continue to selectively pursue high quality M&A assets in the North
America region.
There was further progress on legacy termite warranty obligations, with total
open warranty claims reducing by 20% on the prior year and by 72% since 2019.
Total pending litigated cases reduced by 41% in 2024 as the Company continues
to resolve legacy claims.
Right Way 2: Our 2024 Plan to drive Enhanced Organic Growth
Through the year we have been optimising processes to increase overall lead
volume and improve lead quality. In March 2024, we launched the new 'Terminix
It' brand marketing campaign aimed at increasing awareness of our Terminix
brand and strengthening our top of funnel marketing. This delivered a
noticeable improvement in brand favourability - with unaided Terminix brand
awareness at its highest level since 2021. A key focus in 2024 has been
digital marketing, given the significance of the digital channel for new
customer acquisition in the residential and termite pest control markets. We
are particularly focused on our organic lead capability, including enhancing
the content on our websites to align with AI-generated search answers, in
order to improve our search engine ranking over time. However, there is still
significant work to be done to improve our lead generation.
We've made strong progress in securing five-star reviews from our customers,
which recognise high service levels and serve as a critical component of
Internet search visibility. Five-star reviews for Terminix increased by 150%
in the year to 44,000. In parallel, we have augmented our paid search
strategies to generate higher quality leads. This includes refining our
bidding strategy for critical search terms.
We have leveraged technician leads through our Trusted Advisor programme,
creating a complementary stream of lead generation. We continue to enhance our
approach with better data reporting, increased focus at a branch management
level and training for all new technicians as part of their on-boarding. The
participation rate for the Trusted Advisor programme increased from 40% at the
start of the year to 50% among Terminix technicians, and from c.57% to c.73%
among Rentokil technicians.
In 2025, we will deploy enhanced customer segmentation to effectively leverage
media channels and will integrate service demand forecasting by location into
our customer targeting. Once the sales team has sold the lead, it is important
that the technician completes the work order quickly. We delivered consistent
work order completion rates in 2024 of c.97%, and in 2025 are aiming to reach
98%.
We will continue to focus heavily on organic lead generation, as well as
improve our sales conversion and overall sales effectiveness, which will take
time to fully materialise. We invested significant additional sales and
marketing resources in 2024, which will continue into 2025. We believe we have
invested sufficient new resources to drive the enhanced level of organic
growth we are targeting, and during 2025 we will continue to monitor and
scrutinise the effectiveness of the 2024 investments, and where appropriate
reprioritise them to higher return activities, to optimise the return
opportunity on that investment.
2024 IT Systems Migration
The IT systems integration has proceeded to plan. Prior to the integration
period, the region had highly fragmented IT infrastructure with more than 70
systems and multiple vendors. We now have a single back office IT set-up in
place, and 'Best of Breed' branch systems have been selected and are being
delivered.
We harmonised the multiple business processes in H1, and in H2 started branch
systems and data migration. 58 branches, 987 service technicians, and $373
million in revenue were successfully transitioned onto the unified
Rentokil-Terminix systems platform. Including the heritage Rentokil network a
total of over 250 branches in North America now operate on our end-state IT
systems suite. The migration has increased the percentage of service
technicians using PestPac and the ServiceTrak app from c.40% at the start of
the year to c.49% by year-end. A structured approach ensures continued
progress and alignment with our strategic goals.
Employee feedback on the process to date has been positive, highlighting the
effectiveness of pre-migration preparation, training, communication, and
go-live support.
2024 Technician Rerouting and New Pay Plan Piloting
In Q4 2024 we commenced technician rerouting and piloting of our new sales and
service pay plans, initially covering nine branches encompassing over 250
technicians and c.40 sales colleagues. These rerouting and pay plans revision
efforts were executed to plan with minimal disruption to operations. At these
locations customer retention has increased on pre-migration levels. Colleague
retention has also remained strong, in line with pre-migration levels. The
second branch cluster of 41 branches with 1,000 technicians, has also recently
completed. This means that around 15 per cent of the Terminix branch network
has now been fully integrated.
Q1 2025 Terminix Integration review
As announced in October 2024, during the first quarter of 2025 we have been
reviewing the progress made to date with the integration and the priorities
for its next phase. The review has helped us to enhance our Right Way 2 growth
plan with respect to both our brand and branch strategies and our customer
retention and customer experience strategy, and to review the best way to
monitor ongoing cost saving opportunities.
The full branch integration process is planned to restart in early H2 2025.
Enhancing Customer Retention and Customer Experience Strategy
Our customer retention rates have been stable to slightly improved through the
course of the year. In 2024, we strengthened our account management teams,
added new senior customer experience experts and 40 new Customer Save team
members, and instated new retention strategies ranging from the acquisition of
more retainable customers and improving the first-year experience through to
minimising technician rotation and optimising complaints management. We are
also increasing our use of data to better understand and seek to address the
drivers of customer retention and churn.
Optimising Brand strategy: Our revised branding strategy will see the
maintenance of a national focus for the Rentokil and Terminix brands. However,
there will be an additional focus on our well-known regional brands, rather
than merging them over time with Terminix, giving us 9 regional core brands.
Smaller local brands will be co-branded or merged. This will allow us to
optimise the return opportunity we generate from our advertising spend and
increase the overall share of voice of our brands.
Optimising Branch strategy: In Q4 2024 we commenced the piloting of satellite
branches. Ten sites in key metro areas were active as at the end of 2024, and
we currently have 22 in operation. These smaller branches are fully branded
and operational but have a low cost to operate. They serve as localised hubs
with active facilities, staffed with sales, administrative, and customer
support teams.
While the pilot is still not complete, initial findings are positive, driving
digital leads and being recognised by search engines as local points of
presence that increase our digital footprint. Subject to continued progress
with this pilot, we believe a branch network combining larger, traditional
sites and smaller satellites will serve us well. Based on our current branch
network and mapping of an optimal footprint for lead generation, we currently
estimate that by the end of 2026 we will have a network of over 500 branches,
including satellite branches, versus our previous target of 400. In addition,
we have over 100 franchised owned and operated Terminix branches in the US.
A portion of current investment deployed during 2024 but not driving optimal
effectiveness and efficiency will be redirected to our enlarged brand and
branch strategies.
Cost savings and margin opportunity
We continued to achieve cost synergies in 2024, whilst also continuing our
significant investments behind salary and benefit harmonisation, safety,
innovation and IT, and we saw another year of inflation in the cost base.
During 2024 we made significant in-year sales and marketing investments
focused on driving revenue, including behind brand awareness, lead generation
and sales infrastructure. A portion of the investment behind these
opportunities is not driving optimal effectiveness and efficiency and in 2025
will be redirected to fund the new strategies we will be deploying in respect
of our enhanced brand strategy and our enlarged branch strategy.
During 2025 we expect further inflation but do not anticipate the need for
additional investments over those which were made in 2024.
Three years post the acquisition announcement of Terminix, and going forward
we will not report separately on net synergy delivery. Disaggregating
investments and inflationary cost increases from synergistic cost savings over
multiple years is now overly subjective.
We remain confident that, from the end of 2026, when we expect integration to
be complete, significant operational cost savings will be achieved, in line
with initial expectations of gross synergies. Branch integration and improved
route density will significantly improve technician efficiency. The post 2026
cost reduction is estimated as a $100m reduction from the 2024 spend level.
From 2027, we expect that delivery of these cost savings, together with an
improved organic growth rate post integration, will allow the North American
business to achieve operating profit margins above 20%. We are retiring the
previous Group Adjusted Operating Margin target of greater than 19% by 2026.
Total one-time integration costs to achieve (cash and non-cash) from the start
of the integration to the end of 2024 were $248m. The total remaining one-time
costs to achieve in 2025 to 2026 are expected to be c.$100m.
The North America leadership team has been significantly strengthened with recent appointments:
Alain Moffroid, Interim North America CEO, appointed Feb 2025. Alain was
appointed to the role in Q1 2025 after the announced departure of Brad
Paulsen. Alain is a highly experienced leader in the Company with twelve
years' experience leading residential and commercial pest control businesses,
together with 23 years with Unilever in senior leadership roles. As Group
Chief Commercial Officer Alain has been working closely with the North
American business on delivering their strategy focused on customer experience
and retention, digital and innovation programmes.
Aaron Coley, Chief Financial Officer, joined Dec 2024. Aaron brings over 25
years of financial experience to the role, including 14 years as CFO for
companies at various stages of transition. Most recently, he served as CFO for
a transportation and logistics company listed on Nasdaq.
International
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 2,165 5.1% 2,229 8.2% 4.7%
Operating Profit 339 -1.9% 346 +0.2%
Adjusted Operating Profit 420 2.9% 432 5.7%
Adjusted Operating Margin 19.4% -0.4% 19.3% -0.5%
Organic Growth Q1 Q2 Q3 Q4 Full Year
International 5.6% 4.9% 4.5% 4.1% 4.7%
Europe (incl. LATAM)
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 1,114 3.1% 1,152 6.5% 5.0%
Operating Profit 170 -6.2% 175 -3.9%
Adjusted Operating Profit 219 1.8% 226 5.0%
Adjusted Operating Margin 19.6% -0.3% 19.6% -0.3%
Organic Growth Q1 Q2 Q3 Q4 Full Year
Europe (incl. LATAM) 6.2% 5.3% 4.9% 4.0% 5.0%
The region enjoyed another good performance in 2024, driven by both volume and
pricing, and with a strong contribution from Pest Control and Workwear.
Revenue grew by 6.5% to £1,152m (5.0% Organic). Revenue growth in Pest
Control was 6.6%, supported by key markets including Germany, Benelux, Spain
and Italy. Hygiene & Wellbeing grew Revenue by 5.9% with softer
performance in Dental offset by strength in Specialist Hygiene and Ambius
where we continue to see significant opportunity. France Workwear delivered
another excellent year with Revenue up 7.1%.
Adjusted Operating Profit in the region grew by 5.0% to £226m, benefiting
from pricing discipline. Adjusted Operating Margin was down by 30bps to 19.6%.
In Europe, margin was stable, however there was a margin reduction in LATAM,
where adverse weather impacted the shipping fumigation business. Operating
Profit reduced by 6.2% to £170m at AER. Customer retention has remained
strong at 88.3% (FY 23: 88.4%.) A focus on sales retention, including
recruitment, onboarding and early days retention led to best-in-class
colleague retention rates of 90.4% (FY 23: 90.4%).
In Europe and LATAM, 12 business acquisitions (9 in Europe and 3 in LATAM)
were completed in total with revenues of £20m in the year prior to purchase.
UK & Sub-Saharan Africa
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 435 11.5% 437 12.0% 4.3%
Operating Profit 99 17.8% 100 18.2%
Adjusted Operating Profit 100 6.7% 101 7.0%
Adjusted Operating Margin 23.1% -1.0% 23.0% -1.1%
Organic Growth Q1 Q2 Q3 Q4 Full Year
UK & Sub-Saharan Africa 4.1% 6.1% 4.2% 2.9% 4.3%
Revenue for the region increased by 12.0% (4.3% Organic), with Pest Control
Revenue growth of 5.5% and Hygiene & Wellbeing Revenue growth of 18.5%.
Regional Adjusted Operating Profit increased by 7.0% to £101m. Operating
Profit was up 17.8% to £99m at AER. Adjusted Operating Margin decreased by
110bps to 23.0%, impacted largely by the acquisition of the lower margin
specialist hygiene company DCUK. The region delivered a price performance that
mitigated cost increases, alongside a consistently strong customer service
environment. Customer retention for the full year was roughly stable at 86.0%
(FY 23: 86.9%). Colleague retention was up strongly to 86.8% (FY 23: 83.3%).
2024 was the UK's biggest ever year for innovations. 39 solutions in total
were launched, ranging from new additions to our suite of smart monitoring
devices and non-toxic wasp traps through to new air scenting products with
patented technology.
Two business acquisitions were completed (both within the UK) with revenues of
£31m in the year prior to purchase.
Asia & MENAT
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 354 4.2% 368 8.4% 5.4%
Operating Profit 24 -26.9% 25 -23.2%
Adjusted Operating Profit 46 1.0% 48 4.9%
Adjusted Operating Margin 12.9% -0.4% 12.9% -0.4%
Organic Growth Q1 Q2 Q3 Q4 Full Year
Asia & MENAT 4.3% 5.2% 6.5% 5.5% 5.4%
Revenue rose by 8.4%, of which 5.4% was Organic. Pricing was complemented with
volume growth, as markets overall remained structurally supportive. The
performance was led by India and Indonesia, which both sustained high
single-digit organic growth. In India, good progress was made in integrating
the pest control company Hi-Care, acquired in the first half of the year. In
MENAT, regional conflict held back the final quarter performance in the
Lebanon market, but we are seeing a prompt recovery.
Adjusted Operating Profit in Asia & MENAT increased 4.9% to £48m and
Adjusted Operating Margin was down 40bps to 12.9% as a result of additional
growth investment. Operating Profit decreased by 26.9% to £24m at AER.
Customer retention increased to 80.7% (FY 23: 78.7%). Regional operations have
benefited from an increased colleague retention rate of 93.3% (FY 23: 92.0%).
The region acquired five businesses with total revenues in the year prior to
purchase of £12m.
Pacific
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 262 5.3% 272 9.3% 3.2%
Operating Profit 45 -3.3% 47 0.4%
Adjusted Operating Profit 55 2.5% 57 6.4%
Adjusted Operating Margin 21.1% -0.6% 21.1% -0.6%
Organic Growth Q1 Q2 Q3 Q4 Full Year
Pacific 7.3% 1.2% 0.6% 4.2% 3.2%
Revenue increased by 9.3% to £272m, with Organic Revenue growth of 3.2%. Pest
Control revenue growth was 12.4%, driven by sustained momentum in both
contract and jobbing work, despite weather related challenges affecting rural
and trackspray operations during the year. Hygiene & Wellbeing revenue
grew by 6.2%, with strong demand for Ambius' services continuing. Adjusted
Operating Profit in the Pacific was up by 6.4% to £57m, with an Adjusted
Operating Margin of 21.1%. Operating Profit decreased by 3.3% to £45m at AER.
Customer retention remained strong at 86.6% (FY23: 86.5%), while colleague
retention improved to 80.2% (FY23: 77.5%), with positive momentum observed in
the second half of the year. The region acquired four businesses with total
revenues in the year prior to purchase of £8m.
Category performance review
Pest Control
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 4,287 0.1% 4,408 2.9% 2.5%
Operating Profit 560 -13.7% 573 -11.6%
Adjusted Operating Profit 773 -6.7% 794 -4.2%
Adjusted Operating Margin 18.0% -1.3% 18.0% -1.3%
Organic Growth Q1 Q2 Q3 Q4 Full Year
Pest Control 2.7% 1.7% 2.3% 3.3% 2.5%
Our Pest Control business is the largest operator in both the US, the world's
biggest pest control market, and the world, with a presence in 88 countries.
The business sustained growth in the year, underpinned by the critical nature
of its services and with a strong contribution from the International
business. Overall Revenue was up by 2.9% (2.5% Organic) to £4,408m. Organic
Revenue growth in the International business of 5.3%, in line with our
medium-term range for Pest Control of between 4.5-6.5%, offset more modest
North America Organic Revenue growth of 1.5%. There was a drag from the North
America business on Adjusted Operating Profit, down by 4.2% to £794m,
resulting in an Adjusted Operating Margin for the Pest Control category of
18.0%. Operating Profit decreased by 13.7% to £560m at AER. Pest Control
represented 79% of Group Revenue and 79% of Group Adjusted Operating Profit.
We acquired 24 pest control businesses in the period, with revenues in the
year prior to acquisition of £90m.
Hygiene & Wellbeing
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 908 5.7% 931 8.4% 3.1%
Operating Profit 157 5.4% 161 8.0%
Adjusted Operating Profit 164 4.2% 169 6.8%
Adjusted Operating Margin 18.1% -0.3% 18.1% -0.3%
Organic Growth Q1 Q2 Q3 Q4 Full Year
Hygiene & Wellbeing 3.8% 5.0% 2.9% 1.0% 3.1%
Rentokil Initial offers a wide range of hygiene and wellbeing services. Inside
the washroom we provide hand hygiene (soaps and driers), air care, in-cubicle
(feminine hygiene units), no-touch products and digital hygiene services. In
addition to core washroom hygiene, we deliver specialist hygiene services such
as clinical waste management. We're also improving the customer experience
through premium scenting, plants, air quality monitoring and green walls.
Hygiene & Wellbeing Revenue increased by 8.4% to £931m. Organic Revenue
growth was 3.1%, Q4 organic growth was held back by 190bps quarter on quarter
owing to strong prior year comparatives from large projects in Ambius North
America and Covid-related credits in the UK. We see the main opportunities for
future growth in our Hygiene & Wellbeing category as being core washrooms,
premises hygiene, including air care, and enhanced environments. In 2024,
Organic Revenue growth in core washrooms was 3.1%, while organic growth in
premises and enhanced environments was 3.7%. Adjusted Operating Profit was up
by 6.8% to £169m, with Adjusted Operating Margin down 30bps to 18.1%.
Operating Profit was up 5.4% to £157m at AER. For FY24, Hygiene &
Wellbeing represented 17% of Group Revenue and 17% of Group Adjusted Operating
Profit.
We acquired 12 Hygiene and Wellbeing companies with revenues of c.£50m in the
year prior to purchase.
France Workwear
2024 AER 2024 CER Organic
AER
Growth
CER
Growth
Growth
£m
£m
Revenue 230 4.3% 237 7.1% 7.1%
Operating Profit 41 9.0% 42 12.0%
Adjusted Operating Profit 41 5.7% 42 8.6%
Adjusted Operating Margin 17.7% +0.2% 17.7% +0.2%
Organic Growth Q1 Q2 Q3 Q4 Full Year
France Workwear 7.7% 7.4% 7.4% 6.1% 7.1%
Strong new business sales performance, including account gains and upselling,
resulted in another strong contribution from our France Workwear business
where Revenue rose by 7.1% to £237m, all from organic growth. Inflation was
successfully mitigated with price increases. Adjusted Operating Profit growth
increased by 8.6%. Operating Profit was up 9.0% to £41m at AER. The business
has benefited from continued strong colleague retention rates.
Continued strength of Bolt-on M&A
We acquired 36 new businesses, comprising 24 in Pest Control and 12 in Hygiene
& Wellbeing for a total consideration of £182m, with total revenues of
£140m in the year prior to purchase. We added 13 new businesses in North
America during the period with £69m revenues acquired, 12 deals in Europe
inc. LATAM (revenues of £20m in the year prior to purchase), two deals in the
UK &SSA region (revenues of £31m in the year prior to purchase), five
deals in Asia and MENAT (revenues of £12m in the year prior to purchase) and
4 deals in the Pacific region (revenues of £8m in the year prior to
purchase).
M&A remains central to our strategy for growth. We will continue to seek
attractive bolt-on deals, both in Pest Control and Hygiene & Wellbeing, to
build density in existing and new markets. Our pipeline of prospects remains
strong and our current guidance on spend on M&A for FY 25 is c.$250m.
Employer of Choice (EOC)
Rentokil Initial is committed to being a world-class Employer of Choice, with
colleague safety and the attraction, recruitment and retention of the best
people from the widest possible pool of talent, being key business objectives
globally.
In 2024, colleague retention increased globally by 2.4ppts to 86.6%. Total
service technician retention for the Group was up 2.4ppts to 85.6%, while
total sales colleague retention was up 4.6ppt to 82.0%. All Regions except
Europe improved retention year on year, led by Asia at 93.3%. Europe
nevertheless also continued to record a world class retention rate at 92.3%.
Our North American region increased colleague retention by 4.2ppts. This has
been achieved through a wide-ranging programme including: the launch of a
retention dashboard and manager training; monitoring for potential issues
before escalation; additional mentoring resources; and an enhanced new hire
and onboarding experience.
Innovation and Technology
We lead our industry in the use of digital technologies in pest control, and
we are continuing to build upon this competitive advantage. Our smart
technology is providing more remote monitoring solutions and increased
transparency of data.
The digital Pest agenda moved further forward in 2024. An additional 127,000
PestConnect devices, which offer 24/7 monitoring, were installed in customers'
premises, and we now have a total of 500,000 devices installed. We have 13
countries where connected devices now account for more than 10% of the
commercial portfolio. In the UK, PestConnect accounts for c.20% of the
Company's commercial pest control contracted revenue. We continue to roll out
smarter solutions. Our new PestConnect Optix utilises AI and camera technology
to identify individual rodents. It's available in the UK with deployments in
the Netherlands, France, Spain and the Middle East underway.
In the year, North America also saw the launch of our proprietary EcoCatch fly
control solution for commercial customers, as well as the continued rollout of
our Lumnia LED flying insect control range.
Financial review
Central and regional overheads
Central and regional overheads of £138m (£137m at AER) were up £17m at CER
(£16m at AER) on the prior year (FY 23: £121m at CER and AER) predominantly
as a result of inflationary increases and increased IT investment.
Restructuring costs
With the exception of integration costs for significant acquisitions, the
Company reports restructuring costs within Adjusted Operating Profit. Costs
associated with significant acquisitions are reported as one-off and adjusting
items and excluded from Adjusted Operating Profit. Restructuring costs of £7m
(at CER and AER) were in line with the prior year (FY 23: £7m at CER and
AER). They consisted mainly of costs in respect of initiatives focused on our
North American transformation programme.
Interest (at AER)
Adjusted interest of £138m at actual exchange rates includes £98m of
annualised interest charges relating to financing of the Terminix transaction,
£24m of lease interest charges and a £46m offsetting reduction from the
impacts of hyperinflation and net interest received. In the year,
hyperinflation of £7m at AER was £4m lower than the prior year (FY 23:
£11m) due to devaluation of the Argentinian peso. Cash interest in FY 24 was
£144m (FY 23: £166m) reflecting higher interest rates on investment income
and lower swaps payments due to a weaker US dollar.
In Appendix 1 we have shown a summary P&L interest table demonstrating how
the components of our financing drive interest costs and incomes and the
expected range for 2025 at average exchange rates. Changes in variable
interest rates, exchange rates and CPI rates in hyper-inflationary economies
during 2025 will impact the reporting of interest costs for 2025.
Tax
The income tax charge for the period at actual exchange rates was £98m on the
reported profit before tax of £405m, giving an effective tax rate (ETR) of
24.2% (FY 23: 22.7%). The Group's ETR before amortisation of intangible assets
(excluding computer software), one-off and adjusting items and the net
interest adjustments for FY 24 was 23.8% (FY 23: 23.8%). This compares with a
blended rate of tax for the countries in which the Group operates of 25.3% (FY
23: 25.1%).
Net debt and cash flow
£m at actual exchange rates Year to Date
2024 FY 2023 FY Change
£m £m £m
Adjusted Operating Profit 834 898 (64)
Depreciation 308 300 8
Other 35 30 5
Adjusted EBITDA 1,177 1,228 (51)
One-off and adjusting items (non-cash) (15) (11) (4)
Working capital (105) (47) (58)
Movement on provisions (60) (56) (4)
Capex - additions (215) (211) (4)
Capex - disposals 4 14 (10)
Capital of lease payments and initial direct costs incurred (145) (151) 6
Interest (144) (166) 22
Tax (87) (100) 13
Free Cash Flow 410 500 (90)
Acquisitions (172) (242) 70
Disposal of companies and businesses - 19 (19)
Dividends (229) (201) (28)
Cash impact of one-off and adjusting items (77) (107) 30
Other - (6) 6
Debt related cash flows
Cash outflow on settlement of debt related foreign exchange forward contracts (9) (3) (6)
Net investment in term deposits (1) - (1)
Debt repayments (369) - (369)
Debt related cash flows (379) (3) (376)
Net decrease in cash and cash equivalents (447) (40) (407)
Cash and cash equivalents at the beginning of the year 832 879 (47)
Exchange losses on cash and cash equivalents (13) (7) (6)
Cash and cash equivalents at end of the financial year 372 832 (460)
Net decrease in cash and cash equivalents (447) (40) (407)
Debt related cash flows 379 3 376
IFRS 16 liability movement 4 3 1
Debt acquired (9) (1) (8)
Bond interest accrual (2) (1) (1)
Foreign exchange translation and other items 13 169 (156)
(Increase)/decrease in net debt (62) 133 (195)
Opening net debt (3,146) (3,279) 133
Closing net debt (3,208) (3,146) (62)
Funding
As at 31 December 2024, the Group had liquidity headroom of £1,196m,
including £799m ($1bn) of undrawn revolving credit facility, with a maturity
date of October 2028 and £40m ($50m) term loan facility maturing May 2025.
The net debt to EBITDA ratio was 2.9x at 31 December 2024 (31 December 2023:
2.8x). The net debt to Adjusted EBITDA ratio was 2.7x at 31 December 2024 (31
December 2023: 2.6x)
Dividend
The Board is recommending a final dividend in respect of 2024 of 5.93p per
share, payable to shareholders on the register at the close of business on 4
April 2025, to be paid on 14 May 2025. This equates to a full-year dividend of
9.09p per share, up 4.7% year on year, in line with the Company's progressive
dividend policy. The last day for DRIP elections is 22 April 2025.
Technical guidance update for FY 25
As the Group is moving to US Dollar reporting from 1 January 2025, technical
guidance is provided in the new reporting currency..
P&L
● Restructuring costs: $10m; and One offs and Adjusting items excl. Terminix:
c.$15m
● Terminix integration Costs to Achieve*: c.$55-65m
● P&L adjusted interest costs: c.$190m-$200m, incl. $5m-$10m of
hyperinflation (at AER)
● Estimated Adjusted Effective Tax Rate: 25%-26%
● Share of Profits from Associates: c.$8m-$10m
● Impact of FX within range of c.-$10 to -$20m**
● Intangibles amortisation: $190m-$200m
Cash
● One-off and adjusting items: c.$70m-$80m
● Working Capital: c.$75m-$85m outflow and provision payments of $80m-$90m
● Capex excluding right of use (ROU) asset lease payments: $300m-$310m
● Cash interest: c.$185m-$195m
● Cash tax payments: $140m-$150m
● Anticipated spend on M&A in 2025 of c.$250m
* Reported as one-off and adjusting items and excluded from Adjusted Operating
Profit and Adjusted PBTA;
** Based on maintenance of current FX rates
Appendix 1 - Adjusted Interest(1)
Amount Rate Fixed/Floating 2024 2025
AER
AER
'm
£m
$m
Bonds and swaps
EUR 400 0.95% Fixed - -
EUR 600 0.88% Fixed - -
EUR 600 0.50% Fixed - -
EUR 850 3.88% Fixed 15 19
EUR 600 4.38% Fixed 24 29
GBP 400 5.00% Fixed 20 26
Amortised Cost Fixed 2 2
Swaps 3.53% (avg) Fixed 44 43
Total 1,850 105 119
Term Loan
USD 700 5%-6% Float 32 10
Lease Interest Float 25 33
Other Interest Float 19 49
Total Other 44 82
Finance Cost(2) 181 212
Interest received (36) (13)
Hyper-Inflation (7) (6)
Finance Income(3) (43) (19)
Adjusted Interest 138 193
Adjusting items
Amortisation of discount on legacy provisions(2) 10 13
Gain on hedge accounting recognised in finance income/cost(3) 3 -
2024 average FX rate for £/€: 1.1818 and £/$: 1.2773
1. For a full reconciliation of statutory interest measures to adjusted
interest, please see non-IFRS measures section on page 16-22 below
2. 2024 Finance Costs totalled £197m. See note C8.
3. 2024 Finance Income totalled £(46)m See note C9.
Use of Non-IFRS Measures
Reconciliation of non-IFRS measures to the nearest IFRS measure
The Group uses a number of non-IFRS measures to present the financial
performance of the business. These are not measures as defined under IFRS, but
management believes that these measures provide valuable additional
information for users of the Financial Statements, in order to better
understand the underlying trading performance in the year from activities that
will contribute to future performance. The Group's internal strategic planning
process is also based on these measures and they are used for management
incentive purposes. They should be viewed as complements to, and not
replacements for, the comparable IFRS measures. Other companies may use
similarly labelled measures which are calculated differently from the way the
Group calculates them, which limits their usefulness as comparative measures.
Accordingly, investors should not place undue reliance on these non-IFRS
measures.
The following sets out an explanation and the reconciliation to the nearest
IFRS measure for each non-IFRS measure.
Constant exchange rates (CER)
Given the international nature of the Group's operations, foreign exchange
movements can have a significant impact on the reported results of the Group
when they are translated into sterling (the presentation currency of the
Group). In order to help understand the underlying trading performance of the
business, revenue and profit measures are often presented at constant exchange
rates. CER is calculated by translating current-year reported numbers at the
full-year average exchange rates for the prior year. It is used to give
management and other users of the accounts clearer comparability of underlying
trading performance against the prior period by removing the effects of
changes in foreign exchange rates. The major exchange rates used for 2024 are
£/$ 1.2773 (2023: 1.2441) and £/€ 1.1818 (2023: 1.1503). Comparisons are
with the year ended 31 December 2023 unless otherwise stated.
Organic Revenue Growth
Acquisitions are a core part of the Group's growth strategy. The Organic
Revenue Growth measures (absolute and percentage) are used to help investors
and management understand the underlying performance, positive or negative, of
the business, by identifying Organic Revenue Growth excluding the impact of
Acquired Revenue. This approach isolates changes in performance of the Group
that take place under the Company's stewardship, whether favourable or
unfavourable, and thereby reflects the potential benefits and risks associated
with owning and managing a professional services business.
Organic Revenue Growth is calculated based on year-over-year revenue growth at
CER to eliminate the effects of movements in foreign exchange rates.
Acquired Revenue represents a 12-month estimate of the increase in Group
revenue from each business acquired. Acquired Revenue is calculated as: (a)
the revenue from the acquisition date to the year end in the year of
acquisition in line with IFRS 3; and (b) the pre-acquisition revenues from 1
January up to the acquisition date in the year of acquisition. The
pre-acquisition revenue is based on the previously reported revenues of the
acquired entity and is considered to be an estimate.
In the year a business is acquired, all of its revenue reported under (a)
above is classified as non-organic growth. In the subsequent first full
financial year after acquisition, Organic Revenue Growth is calculated for
each acquisition as the reported revenue less Acquired Revenue.
At a Group level, calculating Organic Revenue Growth therefore involves
isolating and excluding from the total year-over-year revenue change: (i) the
impacts from foreign exchange rate changes; (ii) the growth in revenues that
have resulted from completed acquisitions in the current period; and (iii) the
estimate of pre-acquisition revenues from each business acquired. The sum of
(ii) and (iii) is equal to the total Acquired Revenues for all acquisitions.
The calculated Organic Revenue is expressed as a percentage of prior year
revenue. Prior year revenue is not 'pro-forma' adjusted in the calculation, as
any such estimated adjustments would have an immaterial impact.
If an acquisition is considered to be a material transaction, such as the
Terminix acquisition in October 2022, the above calculation is amended in
order to give a 'pro-forma' view of any Organic Revenue Growth for the full
financial year in the year of acquisition, as if the acquisition had been part
of the Group from the beginning of the prior year. The pro-forma calculation
is completed using pre-acquisition revenues to normalise current and prior
periods as shown in the table below. These revenue normalisations are
considered estimates, and ensure that the potentially larger Organic Revenue
Growth is measured over a denominator that includes the material acquisition.
The same adjustments are made to our North America and Pest Control segment
revenues for 2023 as a result of the material Terminix acquisition.
While management believes that the methodology used in the calculation of
Organic Revenue is representative of the performance of the Group, the
calculations may not be comparable with similarly labelled measures presented
by other publicly traded companies in similar or other industries.
North Europe UK & Asia & Pacific Central Total
America
(incl.
Sub-
MENAT
£m
and
£m
£m
LATAM)
Saharan
£m
regional
£m
Africa
£m
£m
2023 Revenue 3,306 1,081 390 339 249 10 5,375
2023 Revenue from closed business1 (45) - - - - - (45)
Normalised 2023 Revenue - base for Organic Revenue Growth percentage 3,261 1,081 390 339 249 10 5,330
Revenue from 2024 acquisitions (at 2023 CER)² 22 10 24 8 4 - 68
Revenue from 2023 acquisitions (at 2023 CER)³ 15 5 6 2 11 - 39
Organic Revenue Growth 2024 (at 2023 CER)(4) 49 56 17 19 8 1 150
2024 Exchange differences (87) (38) (2) (14) (10) - (151)
2024 Revenue (at AER) 3,260 1,114 435 354 262 11 5,436
Organic Revenue Growth % 1.5% 5.0% 4.3% 5.4% 3.2% 7.8% 2.8%
1. The adjustment removes revenue from 1 April 2023 to 31 December 2023 from
the Paragon distribution business closed with effect from 1 April 2024.
2. Revenue from completed acquisitions in the current period.
3. Revenue from each business acquired by the Group in the previous financial
year through to the 12-month anniversary of the Group's ownership.
4. Organic Revenue Growth includes Organic Revenue Growth for all entities in
the Group as at 31 December 2023.
North Europe UK & Asia & Pacific Central Total
America
(incl.
Sub-
MENAT
£m
and
£m
£m
LATAM)
Saharan
£m
regional
£m
Africa
£m
£m
2022 Revenue 1,849 941 365 321 227 11 3,714
Adjustment for Terminix pre-acquisition 2022 Revenue¹ 1,310 23 - - - - 1,333
Normalised 2022 Revenue - base for Organic Revenue Growth percentage 3,159 964 365 321 227 11 5,047
Revenue from 2023 acquisitions (at 2022 CER)² 33 7 15 6 14 - 75
Revenue from 2022 acquisitions (at 2022 CER)³ 25 27 1 7 4 - 64
Organic Revenue Growth 2023 (at 2022 CER)4 97 80 13 23 16 (1) 228
2023 Exchange differences (8) 3 (4) (18) (12) - (39)
2023 Revenue (at AER) 3,306 1,081 390 339 249 10 5,375
Organic Revenue Growth % 3.0% 8.3% 3.4% 7.1% 6.8% (4.4)% 4.5%
1. The adjustment brings in 2022 pre-acquisition revenue back to the first day
of the prior financial period for the acquired Terminix entities.
2. Revenue from completed acquisitions in the current period.
3. Revenue from each business acquired by the Group in the previous financial
year through to the 12-month anniversary of the Group's ownership.
4. Organic Revenue Growth includes Organic Revenue Growth for all entities in
the Group as at 31 December 2022.
Adjusted expenses and profit measures
Adjusted expenses and profit measures are used to give investors and
management a further understanding of the underlying profitability of the
business over time by stripping out income and expenses that can distort
results due to their size and nature. Adjusted profit measures are calculated
by adding the following items back to the equivalent IFRS profit measure:
● amortisation and impairment of intangible assets (excluding computer
software);
● one-off and adjusting items; and
● net interest adjustments.
Intangible assets (such as customer lists and brands) are recognised on
acquisition of businesses which, by their nature, can vary by size and amount
each year. Capitalisation of innovation-related development costs will also
vary from year to year. As a result, amortisation of intangibles is added back
to assist with understanding the underlying trading performance of the
business and to allow comparability across regions and categories (see table
on page 31).
One-off and adjusting items are significant expenses or income that will have
a distortive impact on the underlying profitability of the Group. Typical
examples are costs related to the acquisition of businesses, gain or loss on
disposal or closure of a business, material gains or losses on disposal of
fixed assets, adjustments to legacy environmental and legacy termite
liabilities, and payments or receipts as a result of legal disputes. An
analysis of one-off and adjusting items is set out below.
Net interest adjustments are other non-cash, or one-off and adjusting
accounting gains and losses, that can cause material fluctuations and distort
understanding of the performance of the business, such as amortisation of
discount on legacy provisions and gains and losses on hedge accounting.
Adjusted expenses are one-off and adjusting items, and Adjusted Interest.
Adjusted profit measures used are Adjusted Operating Profit, Adjusted Profit
Before and After Tax, and Adjusted EBITDA. Adjusted Earnings Per Share is also
reported, derived from Adjusted Profit After Tax.
One-off and adjusting items
An analysis of one-off and adjusting items is set out below.
One-off and adjusting items One-off and adjusting items One-off and adjusting items
cost/(income)
tax impact
cash (outflow)/inflow
£m
£m
£m
2022
Acquisition and integration costs 5 (2) (13)
Fees relating to Terminix acquisition 68 (4) (38)
Terminix integration costs 62 (14) (32)
UK pension scheme - return of surplus - - 22
Other 1 - 2
Total 136 (20) (59)
2023
Acquisition and integration costs 13 (2) (13)
Fees relating to Terminix acquisition 1 - (25)
Terminix integration costs 81 (21) (74)
Other 3 (1) 5
Total 98 (24) (107)
2024
Acquisition and integration costs 9 (3) (15)
Terminix integration costs 59 (15) (60)
Other 18 (5) (2)
Total 86 (23) (77)
Adjusted Interest
Adjusted Interest is calculated by adjusting the reported finance income and
costs by net interest adjustments (amortisation of discount on legacy
provisions, and foreign exchange and hedge accounting ineffectiveness).
2024 2023
AER
AER
£m
£m
Finance cost 197 189
Finance income (46) (48)
Add back:
Amortisation of discount on legacy provisions (10) (11)
Foreign exchange and hedge accounting ineffectiveness (3) 11
Adjusted Interest 138 141
Adjusted Operating Profit
Adjusted Operating Profit is calculated by adding back one-off and adjusting
items, and amortisation and impairment of intangible assets to operating
profit.
2024 2023
£m
£m
Operating profit 549 625
Add back:
One-off and adjusting items 86 98
Amortisation and impairment of intangible assets¹ 199 175
Adjusted Operating Profit (at AER) 834 898
Effect of foreign exchange 26 -
Adjusted Operating Profit (at CER) 860 898
1. Excluding computer software.
Adjusted Profit Before and After Tax
Adjusted Profit Before Tax is calculated by adding back net interest
adjustments, one-off and adjusting items, and amortisation and impairment of
intangible assets to profit before tax. Adjusted Profit After Tax is
calculated by adding back net interest adjustments, one-off and adjusting
items, amortisation and impairment of intangible assets, and the tax effect on
these adjustments to profit after tax.
2024
IFRS Net interest One-off Amortisation Non-IFRS
measures
adjustments
and
and
measures
£m
£m
adjusting
impairment of
£m
items
intangibles1
£m
£m
Profit before income tax 405 13 86 199 703 Adjusted Profit Before Tax
Income tax expense (98) (3) (23) (43) (167) Tax on Adjusted Profit
Profit for the period 307 10 63 156 536 Adjusted Profit After Tax
2023
IFRS Net interest One-off Amortisation Non-IFRS
measures
adjustments
and
and
measures
£m
£m
adjusting
impairment of
£m
items
intangibles1
£m
£m
Profit before income tax 493 - 98 175 766 Adjusted Profit Before Tax
Income tax expense (112) (2) (24) (44) (182) Tax on Adjusted Profit
Profit for the period 381 (2) 74 131 584 Adjusted Profit After Tax
1. Excluding computer software.
EBITDA and Adjusted EBITDA
EBITDA is calculated by adding back finance income, finance cost, share of
profit from associates net of tax, income tax expense, depreciation,
amortisation and impairment of intangible assets, and other non-cash expenses
to profit for the year. Adjusted EBITDA is calculated by adding back one-off
and adjusting items to EBITDA.
2024 2023
£m
£m
Profit for the period 307 381
Add back:
Finance income (46) (48)
Finance cost 197 189
Share of profit from associates net of tax (7) (9)
Income tax expense 98 112
Depreciation 308 300
Other non-cash expenses 35 30
Amortisation and impairment of intangible assets¹ 199 175
EBITDA 1,091 1,130
One-off and adjusting items 86 98
Adjusted EBITDA 1,177 1,228
1. Excluding computer software.
Adjusted 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, and is explained in Note 6 to the Financial Statements.
Adjusted Earnings Per Share is calculated by dividing adjusted profit from
continuing operations attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue and is shown below.
For Adjusted 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 are
explained in Note 6 to the Financial Statements.
2024 2023
£m
£m
Profit attributable to equity holders of the Company 307 381
Add back:
Net interest adjustments 13 -
One-off and adjusting items 86 98
Amortisation and impairment of intangibles1 199 175
Tax on above items2 (69) (70)
Adjusted profit attributable to equity holders of the Company 536 584
Weighted average number of ordinary shares in issue (million) 2,521 2,516
Adjustment for potentially dilutive shares (million) 7 11
Weighted average number of ordinary shares for diluted earnings per share 2,528 2,527
(million)
Basic Adjusted Earnings Per Share 21.25p 23.19p
Diluted Adjusted Earnings Per Share 21.19p 23.08p
1. Excluding computer software.
2. The tax effect on add-backs is as follows: one-off and adjusting items
£23m (2023: £24m); amortisation and impairment of intangibles £43m (2023:
£44m); and net interest adjustments £3m (2023: £2m).
Adjusted cash measures
The Group aims to generate sustainable cash flow in order to support its
acquisition programme and to fund dividend payments to shareholders.
Management considers that this is useful information for investors. Adjusted
cash measures in use are Free Cash Flow, Adjusted Free Cash Flow, and Adjusted
Free Cash Flow Conversion.
Free Cash Flow
Free Cash Flow is measured as net cash flows from operating activities,
adjusted for cash flows related to the purchase and sale of property, plant,
equipment and intangible assets, cash flows related to leased assets, cash
flows related to one-off and adjusting items, and dividends received from
associates. These items are considered by management to be non-discretionary,
as continued investment in these assets is required to support the day-to-day
operations of the business. Free Cash Flow is used by management for incentive
purposes and is a measure shared with and used by investors.
A reconciliation of net cash flows from operating activities in the
Consolidated Cash Flow Statement to Free Cash Flow is provided in the table
below.
2024 2023
£m
£m
Net cash flows from operating activities 678 737
Purchase of property, plant and equipment (171) (167)
Purchase of intangible assets (44) (44)
Capital element of lease payments and initial direct costs incurred (145) (151)
Proceeds from sale of property, plant, equipment and software 4 14
Cash impact of one-off and adjusting items 77 107
Dividends received from associates 11 4
Free Cash Flow 410 500
Adjusted Free Cash Flow and Adjusted Free Cash Flow Conversion
Adjusted Free Cash Flow Conversion is provided to demonstrate to investors the
proportion of Adjusted Profit After Tax that is converted to cash. It is
calculated by dividing Adjusted Free Cash Flow by Adjusted Profit After Tax,
expressed as a percentage. Adjusted Free Cash Flow is measured as Free Cash
Flow adjusted for product development additions and net investment hedge cash
interest through other comprehensive income. Product development additions are
adjusted due to their variable size and non-underlying nature. Net investment
hedge cash interest through other comprehensive income is adjusted because the
cash relates to an item that is not recognised in Adjusted Profit After Tax.
2024 2023
£m
£m
Free Cash Flow 410 500
Product development additions 9 10
Net investment hedge cash interest through Other Comprehensive Income 10 12
Adjusted Free Cash Flow (a) 429 522
Adjusted Profit After Tax (b) 536 584
Adjusted Free Cash Flow Conversion (a/b) 80.0% 89.4%
The nearest IFRS-based equivalent measure to Adjusted Free Cash Flow
Conversion would be Cash Conversion, which is shown in the table below to
provide a comparison in the calculation. Cash Conversion is calculated as net
cash flows from operating activities divided by profit attributable to equity
holders of the Company, expressed as a percentage. Management considers that
this is useful information for investors as it gives an indication of the
quality of profits, and ability of the Group to turn profits into cash flows.
2024 2023
£m
£m
Net cash flows from operating activities (a) 678 737
Profit attributable to equity holders of the Company (b) 307 381
Cash Conversion (a/b) 221.0% 193.4%
Adjusted Effective Tax Rate (Adjusted ETR)
Adjusted Effective Tax Rate is used to show investors and management the rate
of tax applied to the Group's Adjusted Profit Before Tax. The measure is
calculated by dividing Adjusted Income Tax Expense by Adjusted Profit Before
Tax, expressed as a percentage.
2024 2023
£m
£m
Income tax expense 98 112
Tax adjustments on:
Amortisation and impairment of intangible assets1 43 44
Net interest adjustments 3 2
One-off and adjusting items 23 24
Adjusted Income Tax Expense (a) 167 182
Adjusted Profit Before Tax (b) 703 766
Adjusted Effective Tax Rate (a/b) 23.8% 23.8%
1. Excluding computer software.
The Group's effective tax rate (ETR) for 2024 on reported profit before tax
was 24.2% (2023: 22.7%). The Group's Adjusted ETR before amortisation of
intangible assets (excluding computer software), one-off and adjusting items,
and the net interest adjustments for 2024 was 23.8% (2023: 23.8%). This
compares with a blended rate of tax for the countries in which the Group
operates of 25.3% (2023: 25.1%). The Group's low tax rate in 2024 is primarily
attributable to the recognition of deferred tax on losses of £9m (2023:
£3m).
The Group's tax charge and Adjusted ETR will be influenced by the global mix
and level of profits, changes in future tax rates and other tax legislation,
foreign exchange rates, the utilisation of brought-forward tax losses on which
no deferred tax asset has been recognised, the resolution of open issues with
various tax authorities, acquisitions and disposals.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December
Notes 2024 2023 2022
£m
£m
£m
Revenue 2 5,436 5,375 3,714
Operating expenses (4,831) (4,711) (3,373)
Net impairment losses on financial assets (56) (39) (24)
Operating profit 549 625 317
Finance income 4 46 48 49
Finance cost 3 (197) (189) (79)
Share of profit from associates net of tax 7 9 9
Profit before income tax 405 493 296
Income tax expense 5 (98) (112) (64)
Profit for the year 307 381 232
Profit for the year attributable to:
Equity holders of the Company 307 381 232
Non-controlling interests - - -
Other comprehensive income:
Items that are not reclassified subsequently to the income statement:
Remeasurement of net defined benefit liability - - 2
Items that may be reclassified subsequently to the income statement:
Net exchange adjustments offset in reserves 46 (352) (232)
Net (loss)/gain on net investment hedge (17) 109 (68)
Effective portion of changes in fair value of cash flow hedge 27 3 (6)
Cost of hedging (5) 9 (2)
Tax related to items taken to other comprehensive income (6) 6 11
Other comprehensive income for the year 45 (225) (295)
Total comprehensive income for the year 352 156 (63)
Total comprehensive income for the year attributable to:
Equity holders of the Company 352 156 (63)
Non-controlling interests - - -
All profit is from continuing operations.
Consolidated Balance Sheet
At 31 December
Notes 2024 2023
£m
£m
Assets
Non-current assets
Intangible assets 9 7,108 7,042
Property, plant and equipment 10 502 499
Right-of-use assets 461 452
Investments in associated undertakings 37 44
Other investments 21 21
Deferred tax assets 34 43
Contract costs 238 224
Retirement benefit assets 3 3
Trade and other receivables 57 45
Derivative financial instruments 6 57
8,467 8,430
Current assets
Other investments 2 1
Inventories 229 207
Trade and other receivables 909 880
Current tax assets 22 33
Derivative financial instruments - 14
Cash and cash equivalents 11 925 1,562
2,087 2,697
Liabilities
Current liabilities
Trade and other payables (1,118) (1,144)
Current tax liabilities (43) (48)
Provisions for liabilities and charges 17 (115) (94)
Bank and other short-term borrowings (1,166) (1,134)
Lease liabilities (130) (127)
Derivative financial instruments (3) (32)
(2,575) (2,579)
Net current (liabilities)/assets (488) 118
Non-current liabilities
Other payables (69) (71)
Bank and other long-term borrowings (2,498) (3,153)
Lease liabilities (315) (318)
Deferred tax liabilities (511) (517)
Retirement benefit obligations 16 (25) (28)
Provisions for liabilities and charges 17 (304) (357)
Derivative financial instruments (29) (16)
(3,751) (4,460)
Net assets 4,228 4,088
Equity
Capital and reserves attributable to the Company's equity holders
Share capital 18 25 25
Share premium 15 14
Other reserves 583 532
Retained earnings 3,606 3,518
4,229 4,089
Non-controlling interests (1) (1)
Total equity 4,228 4,088
Consolidated Statement of Changes in Equity
For the year ended 31 December
Attributable to equity holders of the Company
Share Share Other Retained Non- Total
capital
premium
reserves
earnings
controlling
equity
£m
£m
£m
£m
interests
£m
£m
At 1 January 2022 19 7 (1,927) 3,166 (1) 1,264
Profit for the year - - - 232 - 232
Other comprehensive income:
Net exchange adjustments offset in reserves - - (232) - - (232)
Net loss on net investment hedge - - (68) - - (68)
Net loss on cash flow hedge1 - - (6) - - (6)
Cost of hedging - - (2) - - (2)
Remeasurement of net defined benefit liability - - - 2 - 2
Tax related to items taken directly to other comprehensive income - - - 11 - 11
Total other comprehensive income for the year - - (308) 245 - (63)
Transactions with owners:
Shares issued in the year 6 - - - - 6
Merger relief on acquisition of Terminix Global Holdings, Inc. - - 3,014 - - 3,014
Gain on stock options - 2 - - - 2
Cost of issuing new shares - - (16) - - (16)
Dividends paid to equity shareholders - - - (122) - (122)
Cost of equity-settled share-based payment plans - - - 18 - 18
Tax related to items taken directly to equity - - - (2) - (2)
Movement in the carrying value of put options - - - (3) - (3)
At 31 December 2022 25 9 763 3,302 (1) 4,098
Adjustment on initial application of IFRS 17 - - - (1) - (1)
Adjusted balance as at 1 January 2023 25 9 763 3,301 (1) 4,097
Profit for the year - - - 381 - 381
Other comprehensive income:
Net exchange adjustments offset in reserves - - (352) - - (352)
Net gain on net investment hedge - - 109 - - 109
Net gain on cash flow hedge1 - - 3 - - 3
Cost of hedging - - 9 - - 9
Tax related to items taken directly to other comprehensive income - - - 6 - 6
Total other comprehensive income for the year - - (231) 387 - 156
Transactions with owners:
Gain on stock options - 5 - - - 5
Dividends paid to equity shareholders - - - (201) - (201)
Cost of equity-settled share-based payment plans - - - 27 - 27
Movement in the carrying value of put options - - - 4 - 4
At 31 December 2023 25 14 532 3,518 (1) 4,088
Profit for the year - - - 307 - 307
Other comprehensive income:
Net exchange adjustments offset in reserves - - 46 - - 46
Net loss on net investment hedge - - (17) - - (17)
Net gain on cash flow hedge1 - - 27 - - 27
Cost of hedging - - (5) - - (5)
Tax related to items taken directly to other comprehensive income - - - (6) - (6)
Total other comprehensive income for the year - - 51 301 - 352
Transactions with owners:
Gain on stock options - 1 - - - 1
Dividends paid to equity shareholders - - - (229) - (229)
Cost of equity-settled share-based payment plans - - - 20 - 20
Tax related to items taken directly to equity - - - (3) - (3)
Movement in the carrying value of put options - - - (1) - (1)
At 31 December 2024 25 15 583 3,606 (1) 4,228
1. £27m net gain (2023: £3m net gain; 2022: £6m net loss) on cash flow
hedge includes a £51m loss (2023: £28m loss; 2022: £137m gain) from the
effective portion of changes in fair value, offset by reclassification to the
cost of acquisition of £nil (2023: £nil; 2022: £118m loss) and a £78m gain
(2023: £31m gain; 2022: £25m loss) reclassification to the income statement
due to changes in foreign exchange rates.
Shares of £nil (2023: £nil; 2022: £nil) have been netted against retained
earnings. This represents 11.4m (2023: 13.0m; 2022: 19.6m) shares held by the
Rentokil Initial Employee Share Trust, which is not consolidated. The market
value of these shares at 31 December 2024 was £45m (2023: £57m; 2022:
£100m). Dividend income from, and voting rights on, the shares held by the
Trust have been waived.
Analysis of other reserves
Capital Merger Cash flow Translation Cost of Total
reduction
relief
hedge
reserve
hedging
£m
reserve
reserve
reserve
£m
£m
£m
£m
£m
At 1 January 2022 (1,723) - 9 (211) (2) (1,927)
Net exchange adjustments offset in reserves - - - (232) - (232)
Net loss on net investment hedge - - - (68) - (68)
Net loss on cash flow hedge1 - - (6) - - (6)
Cost of hedging - - - - (2) (2)
Total comprehensive income for the year - - (6) (300) (2) (308)
Transactions with owners:
Merger relief on acquisition of Terminix Global Holdings, Inc. - 3,014 - - - 3,014
Cost of issuing new shares - (16) - - - (16)
At 31 December 2022 (1,723) 2,998 3 (511) (4) 763
Net exchange adjustments offset in reserves - - - (352) - (352)
Net gain on net investment hedge - - - 109 - 109
Net gain on cash flow hedge1 - - 3 - - 3
Cost of hedging - - - - 9 9
Total comprehensive income for the year - - 3 (243) 9 (231)
At 31 December 2023 (1,723) 2,998 6 (754) 5 532
Net exchange adjustments offset in reserves - - - 46 - 46
Net loss on net investment hedge - - - (17) - (17)
Net gain on cash flow hedge1 - - 27 - - 27
Cost of hedging - - - - (5) (5)
Total comprehensive income for the year - - 27 29 (5) 51
At 31 December 2024 (1,723) 2,998 33 (725) - 583
1. £27m net gain (2023: £3m net gain; 2022: £6m net loss) on cash flow
hedge includes a £51m loss (2023: £28m loss; 2022: £137m gain) from the
effective portion of changes in fair value, offset by reclassification to the
cost of acquisition of £nil (2023: £nil; 2022: £118m loss) and a £78m gain
(2023: £31m gain; 2022: £25m loss) reclassification to the income statement
due to changes in foreign exchange rates.
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 excess of the fair value of shares issued to fund the acquisition of
Terminix over their par value gave rise to a new reserve called a Merger
Relief Reserve. Under section 612 of the Companies Act 2006, merger relief is
available if certain circumstances are met when a business is acquired by
issuing shares to replace already issued shares. This reserve is unrealised
(and therefore not distributable), but it may become realised at a later date,
for example on disposal of the investment to which it relates or on impairment
of that investment (which may occur after payment of a dividend by the
investment).
Consolidated Cash Flow Statement
For the year ended 31 December
Notes 2024 2023 2022
£m
£m
£m
Cash flows from operating activities
Operating profit 549 625 317
Adjustments for:
- Depreciation and impairment of property, plant and equipment 159 154 148
- Depreciation and impairment of leased assets 123 120 106
- Amortisation and impairment of intangible assets (excluding computer 199 175 118
software)
- Amortisation and impairment of computer software 26 26 22
- Other non-cash items 18 26 8
Changes in working capital (excluding the effects of acquisitions and exchange
differences on consolidation):
- Inventories (12) (15) (4)
- Contract costs (14) (19) (10)
- Trade and other receivables (38) (29) 5
- Trade and other payables and provisions (101) (60) 6
Interest received 36 25 13
Interest paid1 (180) (191) (52)
Income tax paid (87) (100) (77)
Net cash flows from operating activities 678 737 600
Cash flows from investing activities
Purchase of property, plant and equipment (171) (167) (153)
Purchase of intangible fixed assets (44) (44) (37)
Proceeds from sale of property, plant and equipment 4 14 5
Acquisition of companies and businesses, net of cash acquired 8 (172) (242) (1,018)
Disposal of companies and businesses - - 1
Disposal of investment in associate - 19 -
Dividends received from associates 11 4 4
Net change to cash flow from investment in term deposits (1) - 1
Net cash flows from investing activities (373) (416) (1,197)
Cash flows from financing activities
Dividends paid to equity shareholders 7 (229) (201) (122)
Capital element of lease payments (145) (157) (104)
Cost of issuing new shares - - (16)
Cash outflow on settlement of debt-related foreign exchange forward contracts (9) (3) 26
Proceeds from new debt - - 2,383
Debt repayments (369) - (844)
Net cash flows from financing activities (752) (361) 1,323
Net (decrease)/increase in cash and cash equivalents (447) (40) 726
Cash and cash equivalents at beginning of year 832 879 242
Exchange loss on cash and cash equivalents (13) (7) (89)
Cash and cash equivalents at end of the financial year 11 372 832 879
1. Interest paid includes the interest element of lease payments of £24m
(2023: £25m; 2022: £10m).
Notes to the financial statements
1. Changes in accounting policies
Except as described below, the accounting policies applied in these
Consolidated Financial Statements are the same as those applied in the Group's
Consolidated Financial Statements for the year ended 31 December 2023.
The Group has adopted the following new standards and amendments to standards,
including any consequential amendments to other standards, with effect from 1
January 2024:
● amendments to IAS 1 - Classification of liabilities as current or non-current
and non-current liabilities with covenants;
● amendments to IFRS 16 - Lease liability in sale and leaseback; and
● amendments to IAS 7 and IFRS 7 - Supplier finance arrangements.
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 2023.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2024 reporting periods, and have not been
adopted early by the Group.
● IFRS 18 - Presentation and disclosure in financial statements
IFRS 18 is effective for annual periods beginning on or after 1 January 2027
and will replace IAS 1 - Presentation of financial statements. It will
introduce new requirements that are intended to help to achieve comparability
of the financial performance of similar entities, and provide more relevant
information and transparency to users. Even though IFRS 18 will not impact the
recognition or measurement of items in the financial statements, its impacts
on presentation and disclosure are expected to be pervasive; in particular
those related to the statement of comprehensive income or loss, and providing
management-defined performance measures within the financial statements.
Management is currently assessing the detailed implications of applying the
new standard on the Group's consolidated financial statements.
2. Revenue recognition and operating segments
Revenue recognition
Revenue represents the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the Group expects to be
entitled. All revenue is considered revenue from contracts with customers as
defined by IFRS 15, including job work and sales of goods. Under IFRS 15,
revenue is recognised when a customer obtains control of goods or services in
line with identifiable performance obligations. In the majority of cases the
Group considers that the contracts it enters into are contracts for bundled
services which are accounted for as a single performance obligation.
Accordingly the majority of revenue across the Group is recognised on an
output basis evenly over the course of the contract because the customer
simultaneously receives and consumes the benefits provided by the Group's
performance as it performs. Job work is short-term contract revenue whereby
the period of service is typically less than one month in duration. The
performance obligations linked to this revenue type are individual to each job
due to their nature, with revenue being recognised at a point in time on
completion. Where consumables are supplied separately from the service
contract, revenue is recognised at the point the goods transfer.
The transaction price reported for all contracts is the price agreed in the
contract and there are no material elements of variable consideration,
financing component or non-cash consideration. The Group applies the practical
expedient in paragraph 121 of IFRS 15 and does not disclose information about
remaining performance obligations because the Group has a right to
consideration from customers in an amount that corresponds directly with the
value to the customer of the performance obligations completed to date.
Disaggregation of revenue into category, region and major type of revenue
stream is shown below under segmental reporting.
Contract costs
Contract costs are mainly incremental costs of obtaining contracts (primarily
sales commissions directly related to contracts obtained), and to a lesser
extent costs to fulfil contracts which are not within the scope of other
standards (mainly incremental costs of putting resources in place to fulfil
contracts).
It is anticipated that these costs are recoverable over the life of the
contract to which they relate. Accordingly, the Group capitalises them as
contract costs and amortises them over the expected life of the contracts.
Management takes a portfolio approach to recognising contract costs, and the
expected length of contracts across the Group and associated amortisation
periods are between three and seven years.
The contract costs recognised in the balance sheet at the period end amounted
to £238m (2023: £224m; 2022: £215m). The amount of amortisation recognised
in the period was £92m (2023: £121m; 2022: £39m) and impairment losses were
£nil (2023: £nil; 2022: £nil).
Applying the practical expedient in paragraph 94 of IFRS 15, the Group
recognises the incremental costs of obtaining contracts as an expense when
incurred if the amortisation period of the assets that the Group otherwise
would have recognised is one year or less.
Contract liabilities
Contract liabilities relate to advance consideration received from customers
where the performance obligations have yet to be satisfied. All opening
balances have subsequently been satisfied in the year. In most business
categories where revenue is recognised over time, customers are invoiced in
advance or simultaneously with performance obligations being satisfied.
Segment reporting
Segmental information has been presented in accordance with IFRS 8 Operating
Segments. The Group's operating segments are regions and this reflects the
internal management reporting structures and the way information is reviewed
by the chief operating decision maker (the Chief Executive). Each region is
headed by a Regional Managing Director who reports directly to the Chief
Executive and is a member of the Group's Executive Leadership Team responsible
for the review of Group performance. The businesses within each operating
segment operate in a number of different countries and sell services across
three business segments.
The LATAM region is combined with Europe in the Group's segment reporting. It
is the Group's smallest region and not considered reportable under the
quantitative thresholds in IFRS 8. It is combined with Europe as they are
similar with respect to economic characteristics, the nature of services
provided, the type of customers, methods used to provide services, and
language and cultural similarities.
Management and the Board also reviews regional data summarised into North
America and International, and these sub-totals are reflected in the relevant
Notes to the Consolidated Financial Statements.
Disaggregated revenue under IFRS 15 is the same as the segmental analysis
below. Restructuring costs, one-off and adjusting items, amortisation and
impairment of intangible assets (excluding computer software), and central and
regional costs are presented at a Group level as they are not targeted or
managed at reportable segment level. The basis of presentation is consistent
with the information reviewed by internal management.
Revenue and profit from continuing operations
Revenue Revenue Revenue Operating Operating Operating
2024
2023
2022
profit
profit
profit
£m
£m
£m
2024
2023
2022
£m
£m
£m
North America1
Pest Control 3,152 3,201 1,746 539 599 297
Hygiene & Wellbeing 108 105 103 19 18 18
Sub-total North America 3,260 3,306 1,849 558 617 315
International
Europe (incl. LATAM)
Pest Control 531 516 427 124 124 103
Hygiene & Wellbeing 353 344 322 54 52 53
France Workwear 230 221 192 41 39 31
1,114 1,081 941 219 215 187
UK & Sub-Saharan Africa
Pest Control 205 195 182 53 51 47
Hygiene & Wellbeing 230 195 183 47 43 48
435 390 365 100 94 95
Asia & MENAT
Pest Control 265 250 231 35 34 34
Hygiene & Wellbeing 89 89 90 11 11 11
354 339 321 46 45 45
Pacific
Pest Control 134 124 104 22 22 16
Hygiene & Wellbeing 128 125 123 33 33 32
262 249 227 55 55 48
Sub-total International 2,165 2,059 1,854 420 409 375
Total 5,425 5,365 3,703 978 1,026 690
Central and regional overheads2 11 10 11 (137) (121) (107)
Restructuring costs - - - (7) (7) (12)
Revenue and Adjusted Operating Profit 5,436 5,375 3,714 834 898 571
One-off and adjusting items (86) (98) (136)
Amortisation and impairment of intangible assets3 (199) (175) (118)
Operating profit 549 625 317
Finance income 46 48 49
Finance cost (197) (189) (79)
Share of profit from associates net of tax 7 9 9
Profit before income tax 405 493 296
1. During 2024, there were impairment losses recognised in North America
related to ROU assets of £nil (2023: £nil; 2022: £17m) and related to
property, plant and equipment of £nil (2023: £nil; 2022: £8m).
2. Central and regional overheads revenue relates to the wholesale of
metalwork and consumables, including hygiene and pest control products. It is
managed centrally rather than in any region.
3. Excluding computer software which is included in the segment operating
profit measure.
Other segment items included in the consolidated income statement are as
follows:
Amortisation and Amortisation and Amortisation and
impairment of
impairment of
impairment of
intangibles1
intangibles1
intangibles1
2024
2023
2022
£m
£m
£m
North America 114 118 59
International
Europe (incl. LATAM) 39 24 29
UK & Sub-Saharan Africa 6 8 -
Asia & MENAT 22 11 20
Pacific 8 6 4
Sub-total International 75 49 53
Central and regional 10 8 6
Total 199 175 118
Tax effect (43) (44) (25)
Total after tax effect 156 131 93
1. Excluding computer software.
3. Finance cost
2024 2023 2022
£m
£m
£m
Hedged interest payable on medium-term notes issued1 61 61 39
Interest payable on bank loans and overdrafts1 51 42 5
Interest payable on RCF1 1 3 1
Interest payable on foreign exchange swaps2 44 44 19
Interest payable on leases 24 25 10
Amortisation of discount on provisions 11 14 3
Foreign exchange loss on translation of foreign assets/liabilities 5 - -
Fair value loss on hedge ineffectiveness - - 2
Total finance cost 197 189 79
1. Interest expense on financial liabilities held at amortised cost.
2. Interest payable on foreign exchange swaps including coupon interest
payable for the year was £54m (2023: £55m). £10m has been reported in other
comprehensive income due to hedge accounting (2023: £12m).
4. Finance income
2024 2023 2022
£m
£m
£m
Bank interest received 36 25 5
Fair value gain on hedge ineffectiveness 3 1 22
Foreign exchange gain on translation of foreign assets/liabilities - 11 -
Hyperinflation accounting adjustment 7 11 22
Total finance income 46 48 49
5. Income tax expense
Analysis of charge in the year:
2024 2023 2022
£m
£m
£m
Current tax expense 89 94 76
Adjustment in respect of previous periods 5 (8) 2
Total current tax 94 86 78
Deferred tax expense/(credit) 11 30 (3)
Deferred tax adjustment in respect of previous periods (7) (4) (11)
Total deferred tax 4 26 (14)
Total income tax expense 98 112 64
The income tax expense for the period comprises both current and deferred tax.
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. Deferred tax is
determined using tax rates that are expected to apply when the timing
difference reverses based on tax rates which are enacted or substantively
enacted at the balance sheet date. Tax is recognised in the income statement,
except to the extent that it relates to items recognised in other
comprehensive income or equity. In this case the tax is also recognised in
other comprehensive income or equity as appropriate.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet date in the countries
where the Group's subsidiaries and associates operate and generate taxable
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 tax balances are not
discounted.
Deferred tax assets and liabilities are offset against each other when the
timing differences relate to income taxes levied by the same tax authority on
an entity or different entities which are part of a tax consolidation and
there would be the intention to settle on a net basis.
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. The amount of deferred tax assets recognised at
each balance sheet date is adjusted to reflect changes in management's
assessment of future taxable profits that will enable the tax losses to be
recovered. In recognising the deferred tax asset in respect of losses,
management has estimated the quantum of future taxable profits over the next
ten years as this is the period over which it is considered that profits can
be reasonably estimated.
A deferred tax asset of £41m has been recognised in respect of losses which
are expected to be utilised within 10 years (2023: £38m), of which £30m
(2023: £28m) relates to UK losses carried forward at 31 December 2024. This
amount has been calculated by estimating the future UK taxable profits,
against which the UK tax losses will be utilised, progressively risk-weighted,
and applying the tax rates (substantively enacted as at the balance sheet
date) applicable for each year. A deferred tax asset is now recognised on all
the UK tax losses (2023: £34m unrecognised).
The estimates of future profits are based on management's financial forecasts
which are used to support other aspects of the financial statements, such as
impairment testing. At the balance sheet date the Group had tax losses of
£242m (2023: £169m) on which no deferred tax asset is recognised because it
is not considered probable that future taxable profits will be available in
certain jurisdictions to be able to benefit from those tax losses. Of the
losses, £203m (2023: £95m) will expire at various dates between 2025 and
2045.
The cash tax paid for the year was £87m (2023: £100m). The decrease was
attributable to a reduction of cash tax payments in line with Group profits
and one off tax repayments received in 2024. The cash tax paid is expected to
increase in future periods in line with Group profits.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax
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 (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.
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 plans (LTIPs) to the extent that
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.
For the calculation of diluted earnings per share, 435,578 share options were
anti-dilutive and not included in the calculation of the dilutive effect as at
31 December 2024 (2023: 18,422; 2022: 1,290,294).
Details of the calculation of earnings per share are set out below:
2024 2023 2022
£m
£m
£m
Profit attributable to equity holders of the Company 307 381 232
Weighted average number of ordinary shares in issue (million) 2,521 2,516 2,002
Adjustment for potentially dilutive shares (million) 7 11 12
Weighted average number of ordinary shares for diluted earnings per share 2,528 2,527 2,014
(million)
Basic earnings per share 12.17p 15.14p 11.57p
Diluted earnings per share 12.14p 15.07p 11.51p
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.
2024 2023 2022
£m
£m
£m
2021 final dividend paid - 4.30p per share - - 80
2022 interim dividend paid - 2.40p per share - - 42
2022 final dividend paid - 5.15p per share - 131 -
2023 interim dividend paid - 2.75p per share - 70 -
2023 final dividend paid - 5.93p per share 149 - -
2024 interim dividend paid - 3.16p per share 80 - -
229 201 122
An interim dividend of 3.16p per share was paid on 16 September 2024 amounting
to £80m. A final dividend in respect of 2024 of 5.93p per share is to be
proposed at the Annual General Meeting on 7 May 2025.
The aggregate amount of the proposed dividend to be paid out of retained
earnings at 31 December 2024, but not recognised as a liability at year end,
is £150m (2023: £150m; 2022: £130m).
8. Business combinations
During the year the Group purchased 100% of the share capital or trade and
assets of 36 companies and businesses (2023: 41). The total consideration in
respect of these acquisitions was £182m (2023: £261m), and the cash outflow
from current and past period acquisitions net of cash acquired was £172m
(2023: £242m).
Goodwill on all acquisitions represents the synergies and other benefits
expected to be realised from integrating acquired businesses into the Group,
such as improved route density, expansion in use of best-in-class digital
tools and back office synergies. Details of goodwill and the fair value of net
assets acquired in the year are as follows:
2024 2023
£m
£m
Purchase consideration
- Cash paid 115 203
- Deferred and contingent consideration 67 58
Total purchase consideration 182 261
Fair value of net assets acquired (51) (88)
Goodwill from current-year acquisitions 131 173
Goodwill expected to be deductible for tax purposes 84 76
Deferred consideration of £35m and contingent consideration of £32m are
payable in respect of the above acquisitions (2023: £15m and £43m
respectively). Contingent consideration is payable based on a variety of
conditions, including revenue and profit targets being met. Amounts for both
deferred and contingent consideration are payable over the next five years.
The Group has recognised contingent and deferred consideration based on fair
value at the acquisition date. A range of outcomes for contingent
consideration payments cannot be estimated due to the variety of performance
conditions and the volume of businesses the Group acquires. During the year,
there were releases of contingent consideration liabilities not paid of £7m
(2023: £nil).
The fair values6 of assets and liabilities arising from acquisitions in the
year are as follows:
2024 2023
£m
£m
Non-current assets
- Intangible assets1 56 80
- Property, plant and equipment2 11 12
Current assets3 27 22
Current liabilities4 (23) (12)
Non-current liabilities5 (20) (14)
Net assets acquired 51 88
1. Includes £46m (2023: £69m) of customer lists and £10m (2023: £11m) of
other intangibles.
2. Includes £4m (2023: £1m) of ROU assets.
3. Includes cash acquired of £2m (2023: £8m), inventory of £11m (2023:
£2m), and trade and other receivables of £14m (2023: £12m).
4. Includes trade and other payables of £23m (2023: £10m).
5. Includes £9m of deferred tax liabilities relating to acquired intangibles
(2023: £12m), lease liabilities of £4m (2023: £1m), and other liabilities
of £7m (2023: £1m).
6. The fair values of assets and liabilities from acquisitions in the current
year will be finalised in the 2025 Financial Statements. These fair values are
provisional as the acquisition accounting has not yet been finalised,
primarily due to the proximity of many acquisitions to the year end.
The cash outflow from current and past acquisitions is as follows:
2024 2023
£m
£m
Total purchase consideration 182 261
Consideration payable in future periods (67) (58)
Purchase consideration paid in cash 115 203
Cash and cash equivalents in acquired companies and businesses (2) (8)
Cash outflow on current period acquisitions 113 195
Deferred and contingent consideration paid 59 47
Cash outflow on current and past acquisitions 172 242
From the dates of acquisition to 31 December 2024, new acquisitions
contributed £68m to revenue and £1m to operating profit (2023: £75m and
£10m respectively).
If the acquisitions had occurred on 1 January 2024, the revenue and operating
profit of the combined Group would have amounted to £5,492m and £551m
respectively (2023: £5,414m and £628m respectively).
9. Intangible assets
A breakdown of intangible assets is as shown below:
Goodwill Customer Indefinite-lived brands Other Product development Computer Total
£m
lists
£m
intangibles
£m
software
£m
£m
£m
£m
Cost
At 1 January 2023 5,165 1,473 1,185 81 55 206 8,165
Exchange differences (269) (70) (58) (5) - (3) (405)
Additions - - - - 10 34 44
Disposals/retirements (2) (15) - (12) - (8) (37)
Acquisition of companies and businesses 172 69 - 11 - - 252
Hyperinflationary adjustment 14 3 - 1 - - 18
At 31 December 2023 5,080 1,460 1,127 76 65 229 8,037
At 1 January 2024 5,080 1,460 1,127 76 65 229 8,037
Exchange differences 50 (13) 18 - - (1) 54
Additions - - - - 9 46 55
Disposals/retirements - (22) - (2) - (22) (46)
Acquisition of companies and businesses 113 37 - 10 - - 160
Hyperinflationary adjustment 10 4 - 1 - - 15
At 31 December 2024 5,253 1,466 1,145 85 74 252 8,275
Accumulated amortisation and impairment
At 1 January 2023 (65) (573) - (44) (37) (143) (862)
Exchange differences 12 26 - 2 - 3 43
Disposals/retirements 2 15 - 12 - 7 36
Hyperinflationary adjustment (10) (1) - - - - (11)
Impairment charge (3) (1) - - - - (4)
Amortisation charge - (155) - (9) (7) (26) (197)
At 31 December 2023 (64) (689) - (39) (44) (159) (995)
At 1 January 2024 (64) (689) - (39) (44) (159) (995)
Exchange differences 4 14 - - - 1 19
Disposals/retirements - 22 - 2 - 20 44
Hyperinflationary adjustment (8) (2) - - - - (10)
Impairment charge (28) - - - (2) - (30)
Amortisation charge - (152) - (9) (8) (26) (195)
At 31 December 2024 (96) (807) - (46) (54) (164) (1,167)
Net book value
At 1 January 2023 5,100 900 1,185 37 18 63 7,303
At 31 December 2023 5,016 771 1,127 37 21 70 7,042
At 31 December 2024 5,157 659 1,145 39 20 88 7,108
10. Property, plant and equipment
A breakdown of property, plant and equipment is shown below:
Land and Service contract equipment Other plant and Vehicles Total
buildings
£m
equipment
and office
£m
£m
£m
equipment
£m
Cost
At 1 January 2023 127 587 215 255 1,184
Exchange differences (7) (20) (5) (15) (47)
Additions 7 123 14 23 167
Disposals (9) (77) (9) (25) (120)
Acquisition of companies and businesses - 1 1 8 10
Hyperinflationary adjustment 4 - - 1 5
Reclassification from IFRS 16 ROU assets1 - - - 8 8
At 31 December 2023 122 614 216 255 1,207
At 1 January 2024 122 614 216 255 1,207
Exchange differences (3) (31) (8) (5) (47)
Additions 7 126 14 24 171
Disposals (4) (98) (16) (51) (169)
Acquisition of companies and businesses 1 1 - 5 7
Hyperinflationary adjustment 1 - - 1 2
Reclassification from IFRS 16 ROU assets1 - - - 8 8
At 31 December 2024 124 612 206 237 1,179
Accumulated depreciation and impairment
At 1 January 2023 (44) (356) (151) (138) (689)
Exchange differences 2 14 5 7 28
Disposals 4 75 8 22 109
Hyperinflationary adjustment (1) - - (1) (2)
Depreciation charge (5) (102) (15) (32) (154)
At 31 December 2023 (44) (369) (153) (142) (708)
At 1 January 2024 (44) (369) (153) (142) (708)
Exchange differences (1) 20 7 3 29
Disposals 3 96 16 46 161
Depreciation charge (5) (108) (14) (32) (159)
At 31 December 2024 (47) (361) (144) (125) (677)
Net book value
At 1 January 2023 83 231 64 117 495
At 31 December 2023 78 245 63 113 499
At 31 December 2024 77 251 62 112 502
1. Certain leased assets become owned assets at the end of their lease period
and are therefore reclassified from ROU assets.
11. Cash and cash equivalents
Cash and cash equivalents include cash in hand, short-term bank deposits 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.
Cash at bank and in hand includes £16m (2023: £15m) 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.
Cash at bank and in hand also includes £71m (2023: £70m) of cash held in
countries with foreign exchange regulations. This cash is repatriated to the
UK where possible, if not required for operational purposes in country.
Fair value is equal to carrying value for all cash and cash equivalents.
Gross amounts 2024 Gross amounts
£m
2023
£m
Cash at bank and in hand 796 1,080
Money market funds 24 153
Short-term bank deposits 105 329
Cash and cash equivalents in the Consolidated Balance Sheet 925 1,562
Bank overdraft (553) (730)
Cash and cash equivalents in the Consolidated Cash Flow Statement 372 832
12. Reconciliation of net changes in cash and cash equivalents to net debt
Reconciliation of net change in cash and cash equivalents to net debt:
Opening Cash Non-cash Non-cash Closing
2024
flows
(fair value changes,
(foreign exchange,
2024
£m
£m
accruals and
additions
£m
acquisitions)
and other)
£m
£m
Bank and other short-term borrowings (1,134) 602 (99) (535) (1,166)
Bank and other long-term borrowings (3,153) - - 655 (2,498)
Lease liabilities (445) 169 (146) (23) (445)
Other investments 1 1 - - 2
Fair value of debt-related derivatives 23 68 (7) (110) (26)
Gross debt (4,708) 840 (252) (13) (4,133)
Cash and cash equivalents in the Consolidated Balance Sheet 1,562 (637) - - 925
Net debt (3,146) 203 (252) (13) (3,208)
Opening Cash Non-cash Non-cash Closing
2023
flows
(fair value
(foreign
2023
£m
£m
changes,
exchange,
£m
accruals and
additions
acquisitions)
and other)
£m
£m
Bank and other short-term borrowings (1,345) 664 (106) (347) (1,134)
Bank and other long-term borrowings (3,574) - - 421 (3,153)
Lease liabilities (460) 182 (162) (5) (445)
Other investments 1 - - - 1
Fair value of debt-related derivatives (71) 39 (1) 56 23
Gross debt (5,449) 885 (269) 125 (4,708)
Cash and cash equivalents in the Consolidated Balance Sheet 2,170 (601) - (7) 1,562
Net debt (3,279) 284 (269) 118 (3,146)
13. 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; and
Level 3 - inputs for the asset or liability that are not based on observable market
data.
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
Listed bonds 1 Quoted market prices
Money market funds 1 Quoted market prices
Interest rate/currency swaps 2 Discounted cash flow based on market swap rates
Forward foreign exchange contracts 2 Forward exchange market rates
Borrowings not traded in active markets (term loans and uncommitted 2 Nominal value
facilities)
Money market deposits 2 Nominal value
Trade payables and receivables 2 Nominal value less estimated credit adjustments
Contingent consideration (including put option liability) 3 Discounted cash flow using WACC
14. 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 Drawn at Headroom Interest rate Facility Drawn at Headroom Interest rate
amount
year end
2024
at year end
amount
year end
2023
at year end
2024
2024
£m
2024
2023
2023
£m
2023
£m
£m
%
£m
£m
%
Current
$700m term loan due October 2025 559 559 - 5.18 - - - -
$50m term loan due May 2025 40 - 40 0.21 - - - -
Non-current
$700m term loan due October 2025 - - - - 550 550 - 5.94
$1.0bn RCF due October 2029 799 - 799 0.14 785 - 785 0.14
The RCF was undrawn throughout 2023 and 2024.
Medium-term notes and bond debt comprises:
Bond interest coupon Effective hedged interest rate Bond interest coupon Effective hedged interest rate
2024
2024
2023
2023
Current
€400m bond due November 2024 - - Fixed 0.950% Fixed 3.60%
Non-current
€500m bond due May 2026 Fixed 0.875% Fixed 2.66% Fixed 0.875% Fixed 2.80%
€850m bond due June 2027 Fixed 3.875% Fixed 4.95% Fixed 3.875% Fixed 5.01%
€600m bond due October 2028 Fixed 0.500% Fixed 2.12% Fixed 0.500% Fixed 2.23%
€600m bond due June 2030 Fixed 4.375% Fixed 4.58% Fixed 4.375% Fixed 4.48%
£400m bond due June 2032 Fixed 5.000% Fixed 5.19% Fixed 5.000% Fixed 5.20%
Average cost of bond debt at year-end rates 3.96% 3.97%
The effective hedged interest rate reflects the interest rate payable after
the impact of interest due from cross-currency swaps. The Group's hedging
strategy is to hold foreign currency debt in proportion to foreign currency
profit and cash flows, which are mainly in euro and US dollar. As a result,
the Group has swapped a portion of the bonds it has issued into US dollars,
thus increasing the effective hedged interest rate.
The Group considers the fair value of other current liabilities to be equal to
the carrying value.
16. Provisions for liabilities and charges
The Group has provisions for termite damage claims, self-insurance,
environmental, and other. Provisions are recognised when the Group has a
present 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.
Future cash flows relating to these obligations are discounted when the effect
is material. The effect of discounting environmental provisions and other
provisions is not considered to be material due to the low level of expected
future cash flows. Termite damage claim provisions and self-insurance
provisions are discounted, and the majority of these provisions are held in
the US. The discount rate used is based on US government bond rates, and was
4.48%-5.25% (2023: 3.88%-5.25%).
Termite damage claims Self- Environmental Other Total
£m
insurance
£m
£m
£m
£m
At 1 January 2023 321 165 16 12 514
Exchange differences (14) (8) (1) 1 (22)
Additional provisions 15 56 3 7 81
Used during the year (73) (44) (2) (7) (126)
Unused amounts reversed - (8) - (3) (11)
Acquisition of companies and businesses - - - 1 1
Unwinding of discount on provisions 11 3 - - 14
At 31 December 2023 260 164 16 11 451
At 1 January 2024 260 164 16 11 451
Exchange differences 3 1 - - 4
Additional provisions 20 98 1 8 127
Used during the year (68) (81) (3) (9) (161)
Unused amounts reversed (12) - (1) (2) (15)
Acquisition of companies and businesses - - - 2 2
Unwinding of discount on provisions 10 1 - - 11
At 31 December 2024 213 183 13 10 419
2024 2023
Total
Total
£m
£m
Analysed as follows:
Non-current 304 357
Current 115 94
Total 419 451
Termite damage claims
The Group holds provisions for termite damage claims covered by contractual
warranties. Termite damage claim provisions are subject to significant
assumptions and estimation uncertainty. The assumptions included in valuing
termite provisions are based on an estimate of the volume and value of future
claims (based on historical and forecast information), customer churn rates,
and discount rates. These provisions are expected to be substantially utilised
within the next 16 years at a declining rate. The trend of volume and value of
claims is monitored and reviewed over time (with the support of external
advisors) and as such the value of the provision is also likely to change.
The Group's provision relates to legacy claims (from the period prior to the
acquisition of Terminix), estimated at £197m (2023: £247m); and new customer
claims, estimated at £16m (2023: £13m). The sensitivity of the legacy claims
liability balance to changes in the inputs is illustrated as follows:
● Discount rate - The exposure to termite damage claims is largely based within
the United States, therefore measurement is based on a seven-year US bond
risk-free rate. During 2024, interest rates (and therefore discount rates)
have increased. Rates could move in either direction and management has
modelled that an increase/decrease of 50 bps in yields would decrease/increase
the provision by £5m (2023: £8m). Over the 12 months to 31 December 2024,
seven-year risk-free rate yields have increased 60 bps from 3.88% to 4.48%
(2023: decrease 15 bps).
● Claim value - Claim value forecasts have been based on the latest available
historical settled Terminix claims. Claims values are dependent on a range of
inputs including labour cost, materials costs (e.g. timber), whether a claim
becomes litigated or not, and specific circumstances including contributory
factors at the premises. Management has used an average of claim costs for the
last 12 months for each material category of claim, adjusted where necessary
to account for ageing of claims, to determine an estimate for costs per claim.
Recent fluctuations in input prices (e.g. timber prices) means that there is
potential for volatility in claim values and therefore future material changes
in provisions. Management has modelled that an increase/decrease of 5% in
claim values would increase/decrease the provision by £9m (2023: £15m). Over
the 12 months to 31 December 2024, as a result of accelerating the cleardown
of legacy longstanding claims and other macroeconomic factors, in-year costs
per claim rose by c.40% (2023: 32%). This is not representative of
management's expectations of future costs as ageing of claims, which drives an
increased cost per claim, has reduced significantly in recent months and is
expected to continue to improve.
● Claim rate - Management has estimated claim rates based on statistical
historical incurred claims. Data has been captured to establish incidence
curves that can be used to estimate likely future cash outflows. Changes in
rates of claim are largely outside the Group's control and may depend on
litigation trends within the US and other external factors, such as how often
customers move property and how well they maintain those properties; however,
management actions can prevent claims from becoming litigated and hence more
costly. These factors cause estimation uncertainty that could lead to material
changes in provision measurement. Management has modelled that an
increase/decrease of 5% in overall claim rates would increase/decrease the
provision by £9m (2023: £15m), accordingly. Over the 12 months to 31
December 2024, claim rates fell by c.24% (2023: fell 7%).
● Customer churn rate - If customers choose not to renew their contracts each
year, then the assurance warranty falls away. As such there is sensitivity to
the assumption on how many customers will churn out of the portfolio of
customers each year. Data has been captured and analysed to establish
incidence curves for customer churn, and forward-looking assumptions have been
made based on these curves. Changes in churn rates are subject to
macroeconomic factors and to the performance of the Group. A 1% movement in
customer churn rates, up or down, would change the provision by £7m down or
up (2023: £11m), accordingly. On average over the last 10 years churn rates
have moved by +/- c.2.0% per annum (2023: +/-1.8%).
Self-insurance
The Group purchases external insurance from a portfolio of international
insurers for its key insurable risks. In order to help mitigate the cost of
external insurance, the Group self-insures a level of cover on its major
insurance policies. Self-insurance provisions represent obligations for open
claims, and also incurred but not reported (IBNR) losses. External actuaries
are used to help management estimate the provisions held at the balance sheet
date. Due to the nature of the claims, the timing of utilisation of these
provisions is uncertain.
Environmental
The Group owns, or formerly owned, a number of properties in Europe and the US
where environmental contamination is being managed. These issues tend to be
complex to determine and resolve and may be material, although it is often not
possible to accurately predict future costs of management or remediation
reliably. Provisions are held where liability is probable and costs can be
reliably estimated. Contingent liabilities exist where the conditions for
recognising a provision under IAS 37 have not been met. The Group monitors
such properties to determine whether further provisions are necessary. The
provisions that have been recognised are expected to be substantially utilised
within the next five years.
Other
Other provisions principally comprise amounts required to cover obligations
arising and costs relating to disposed businesses and restructuring costs.
Other provisions also includes costs relating to onerous contracts and
property dilapidations settlements. Existing provisions are expected to be
substantially utilised within the next five years.
17. Share capital
During the year, 2,000,000 new shares were issued in relation to employee
share schemes.
2024 2023
£m
£m
Issued and fully paid
At 31 December 2024 - 2,524,539,885 shares (2023: 2,522,539,885) 25 25
18. Post balance sheet events
There have been no significant post balance sheet events affecting the Group
since 31 December 2024.
19. Legal statements
The financial information for the year ended 31 December 2024 contained in
this preliminary announcement has been approved by the Board and authorised
for release on 6 March 2025.
The financial information in this statement does not constitute the Company's
statutory accounts for the years ended 31 December 2024 or 2023. The financial
information for 2023 and 2024 is derived from the statutory accounts for 2023
(which have been delivered to the registrar of companies) and 2024 (which will
be delivered to the registrar of companies following the AGM in May 2025). The
auditors have reported on the 2023 and 2024 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 2024 are prepared in accordance with UK-adopted
International Accounting Standards and International Financial Reporting
Standards (IFRSs) as issued by the International Accounting Standards Board
(IASB). The accounting policies (that comply with IFRS) used by Rentokil
Initial plc ("the Group") are consistent with those set out in the 2023 Annual
Report. A full list of accounting policies will be presented in the 2024
Annual Report. For details of new accounting policies applicable to the Group
in 2024 and their impact please refer to Note 1.
20. 2024 Annual Report
Copies of the 2024 Annual Report will be sent to shareholders who have elected
to receive hard copies on or around 26 March 2024 and will also be available
from the Company's registered office by contacting the Company Secretariat
(secretariat@rentokil-initial.com) and at www.rentokil-initial.com in PDF
format.
21. Financial calendar
The Company's Annual General Meeting will be held at, and be broadcast from,
the Company's offices at Compass House, Manor Royal, Crawley, West Sussex,
RH10 9PY from 2pm on 7 May 2024. Shareholders should refer to the Notice of
Meeting and the Company's website at www.rentokil-initial.com/agm for further
information on the AGM.
22. Responsibility statements
The Directors consider that the Annual Report, which includes the Financial
Statements, complies with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority in respect of the requirement
to produce an annual financial report.
Each of the Directors, whose names and functions are set out in the 2024
Annual Report, confirms that, to the best of their knowledge:
● the Group Financial Statements, which have been prepared in accordance with
UK-adopted International Accounting Standards and International Reporting
Financial Standards as issued by the International Accounting Standards Board,
give a true and fair view of the assets, liabilities, financial position and
profit of the Group;
● the Company's Financial Statements, which have been prepared in accordance
with United Kingdom Accounting Standards, comprising FRS 101 'Reduced
Disclosure Framework', give a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
● the Annual Report includes a fair review of the development and performance of
the business and the position of the Group, together with a description of the
principal risks and uncertainties that it faces.
By Order of the Board
Andy Ransom
Chief Executive
6 March 2025
Cautionary statement
In order to utilise the 'safe harbour' provisions of the U.S. Private
Securities Litigation Reform Act of 1995 (the "PSLRA") and the general
doctrine of cautionary statements, Rentokil Initial plc ("the Company") is
providing the following cautionary statement: This communication contains
forward-looking statements within the meaning of the PSLRA. Forward-looking
statements can sometimes, but not always, be identified by the use of
forward-looking terms such as "believes," "expects," "may," "will," "shall,"
"should," "would," "could," "potential," "seeks," "aims," "projects,"
"predicts," "is optimistic," "intends," "plans," "estimates," "targets,"
"anticipates," "continues" or other comparable terms or negatives of these
terms and include statements regarding Rentokil Initial's intentions, beliefs
or current expectations concerning, amongst other things, the results of
operations of the Company and its consolidated entities ("Rentokil Initial" or
"the Group") (including preliminary results for the year ended 31 December
2024), financial condition, liquidity, prospects, growth, strategies and the
economic and business circumstances occurring from time to time in the
countries and markets in which Rentokil Initial operates. Forward-looking
statements are based upon current plans, estimates and expectations that are
subject to risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialise, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated or
anticipated by such forward-looking statements. The Company can give no
assurance that such plans, estimates or expectations will be achieved and
therefore, actual results may differ materially from any plans, estimates or
expectations in such forward-looking statements. Important factors that could
cause actual results to differ materially from such plans, estimates or
expectations include: the Group's ability to integrate acquisitions
successfully, or any unexpected costs or liabilities from the Group's
disposals; difficulties in integrating, streamlining and optimising our IT
systems, processes and technologies, including artificial intelligence
technologies; the Group's ability to attract, retain and develop key personnel
to lead the business; the availability of a suitably skilled and qualified
labour force to maintain the Group's business; cyber security breaches,
attacks and other similar incidents, as well as disruptions or failures in the
Group's IT systems or data security procedures and those of our third-party
service providers; weakening general economic conditions, including changes in
the global job market or decreased consumer confidence or spending levels,
especially as they may affect demand from the Group's customers; inflationary
pressures, such as increases in wages, fuel prices and other operating costs;
the Group's ability to implement its business strategies successfully,
including achieving its growth objectives; the Group's ability to retain
existing customers and attract new customers; the highly competitive nature of
the Group's industries; extraordinary events that impact the Group's ability
to service customers without interruption, including a loss of its third-party
distributors; the impact of environmental, social and governance ("ESG")
matters, including those related to climate change and sustainability, on the
Group's business, reputation, results of operations, financial condition
and/or prospects; supply chain issues, which may result in product shortages
or other disruptions to the Group's business; the Group's ability to protect
its intellectual property and other proprietary rights that are material to
the Group's business; the Group's reliance on third parties, including
third-party vendors for business process outsourcing initiatives, investment
counterparties, and franchisees, and the risk of any termination or disruption
of such relationships or counterparty default or litigation; any future
impairment charges, asset revaluations or downgrades; failure to comply with
the many laws and governmental regulations to which we are subject or the
implementation of any new or revised laws or regulations that alter the
environment in which we do business, as well as the costs to us of complying
with any such changes and the risk of related litigation; termite damage
claims and lawsuits related thereto and any associated impacts on the termite
provision; the Group's ability to comply with safety, health and environmental
policies, laws and regulations, including laws pertaining to the use of
pesticides; any actual or perceived failure to comply with stringent, complex
and evolving laws, rules, regulations and standards in many jurisdictions, as
well as contractual obligations, including data privacy and security, and any
litigation related to such actual or perceived failures; the identification of
material weaknesses in the Group's internal control over financial reporting
within the meaning of Section 404 of the Sarbanes-Oxley Act; changes in tax
laws and any unanticipated tax liabilities; adverse credit and financial
market events and conditions, which could, among other things, impede access
to or increase the cost of financing; the restrictions and limitations within
the agreements and instruments governing our indebtedness; a lowering or
withdrawal of the ratings, outlook or watch assigned to the Group's debt
securities by rating agencies; an increase in interest rates and the resulting
increase in the cost of servicing the Group's debt; and exchange rate
fluctuations and the impact on the Group's results or the foreign currency
value of the Company's ADSs and any dividends. The list of factors presented
here is representative and should not be considered to be a complete statement
of all potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realisation of forward-looking
statements. The Company cautions you not to place undue reliance on any of
these forward-looking statements as they are not guarantees of future
performance or outcomes and that actual performance and outcomes, including,
without limitation, the Group's actual results of operations, financial
condition and liquidity, and the development of new markets or market segments
in which the Group operates, may differ materially from those made in or
suggested by the forward-looking statements contained in this communication.
Except as required by law, Rentokil Initial assumes no obligation to update or
revise the information contained herein, which speaks only as of the date
hereof.
Additional information concerning these and other factors can be found in
Rentokil Initial's filings with the U.S. Securities and Exchange Commission
("SEC"), which may be obtained free of charge at the SEC's website, http://
www.sec.gov, and Rentokil Initial's Annual Reports, which may be obtained free
of charge from the Rentokil Initial website, https://www.rentokil-initial.com
No statement in this announcement is intended to be a profit forecast and no
statement in this announcement should be interpreted to mean that earnings per
share of Rentokil Initial for the current or future financial years would
necessarily match or exceed the historical published earnings per share of
Rentokil Initial.
This communication presents certain further non-IFRS measures, which should
not be viewed in isolation as alternatives to the equivalent IFRS measure,
rather they should be viewed as complements to, and read in conjunction with,
the equivalent IFRS measure. These include revenue and profit measures
presented at actual exchange rates ("AER" - IFRS) and constant full year 2023
exchange rates ("CER" - Non-GAAP). Non-IFRS measures include Adjusted
Operating Profit, Adjusted Profit Before Tax, Adjusted Profit After Tax,
Adjusted EBITDA, Adjusted Interest, Adjusted Earnings Per Share, Free Cash
Flow, Adjusted Free Cash Flow, Adjusted Free Cash Flow Conversion, Adjusted
Effective Tax rate and Organic Revenue. Adjusted Operating Profit represents
the performance of the continuing operations of the Group (including
acquisitions), and enables the users of the accounts to focus on the
performance of the businesses retained by the Group, and that will therefore
contribute to the future performance. Adjusted Operating Profit and Adjusted
profit before tax exclude certain items that could distort the underlying
trading performance. The Group's internal strategic planning process is also
based on these measures, and they are used for incentive purposes. These
measures may not be calculated in the same way as similarly named measures
reported by other companies.
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