REG - Rentokil Initial PLC - Preliminary Results 31.12.14 <Origin Href="QuoteRef">RTO.L</Origin> - Part 4

Rentokil InitialAnnouncement

27/02/2015 07:01

- Part 4: For the preceding part double click  ID:nRSa0302Gc 

statement. 
 
14. Provisions for other liabilities and charges 
 
                                                                                                          
                                          Vacantproperties  Environmental  Selfinsurance  Other   Total   
                                          £m                £m             £m             £m      £m      
 At 1 January 2013                        46.3              17.4           18.9           15.8    98.4    
 Exchange differences                     ---               0.2            (0.2)          0.2     0.2     
 Additional provisions                    14.0              1.0            7.0            25.5    47.5    
 Disposal of companies and businesses     ---               -              -              (1.2)   (1.2)   
 Unused amounts reversed                  (7.3)             (1.5)          (2.1)          (1.4)   (12.3)  
 Unwinding of discount on provisions      0.5               0.2            -              -       0.7     
 Used during the year                     (9.9)             (1.2)          (3.6)          (25.7)  (40.4)  
 At 31 December 2013                      43.6              16.1           20.0           13.2    92.9    
                                                                                                          
 At 1 January 2014                        43.6              16.1           20.0           13.2    92.9    
 Exchange differences                     -                 (0.5)          0.8            (0.4)   (0.1)   
 Additional provisions                    9.0               0.6            6.2            11.7    27.5    
 Acquisition of companies and businesses  -                 -              -              0.6     0.6     
 Unused amounts reversed                  (5.0)             -              (1.7)          (2.2)   (8.9)   
 Unwinding of discount on provisions      0.9               0.2            -              -       1.1     
 Used during the period                   (9.8)             (1.2)          (5.3)          (12.5)  (28.8)  
 At 31 December 2014                      38.7              15.2           20.0           10.4    84.3    
                                                                                                          
 
 
 Provisions analysed as follows:                    
                                        2014  2013  
                                        £m    £m    
                                                    
 Non-current portion                    59.8  62.9  
 Current portion                        24.5  30.0  
                                        84.3  92.9  
 
 
Vacant properties 
 
The group has a number of vacant and sub-let leasehold properties, with the majority of the head leases expiring before
2020. Provision has been made for the residual lease commitments together with other outgoings, after taking into account
existing sub-tenant arrangements and assumptions relating to later periods of vacancy. 
 
The total future minimum sub-lease payments expected to be received under non-cancellable sub-leases at 31 December 2014 is
£4.0m (2013: £4.9m). 
 
On 24 December 2014 the City Link business, which was sold by the group to Better Capital LLP in 2013, was placed into
administration.  Under the terms of the sale of the City Link business, the group retained certain guarantees against five
leasehold properties occupied by City Link.  The estimated cost of settling this obligation is £5.0m and a provision has
been made for this amount.  The group also has the benefit of a first ranking fixed charge over the first £5.0m of City
Link's receivables.  This asset has been recognised in other receivables. 
 
Environmental 
 
The group owns a number of properties in the UK, Europe and the USA where there is land contamination and provisions are
held for the remediation of such contamination.  These provisions are expected to be substantially utilised within the next
ten years. 
 
Self insurance 
 
The group purchases external insurance from a portfolio of international insurers for its key insurable risks. The group
has historically self-insured its risks but during the latter part of 2008, other than for third party motor liability and
workers compensation in the USA and the global property damage/business interruption, this practice was stopped and these
became fully covered in the insurance market. Provision is still held for self-insured past cover primarily in relation to
workers compensation and third party motor liability. For the continuing self-insured programmes, individual claims are met
in full by the group up to agreed self-insured limits in order to limit volatility in claims. The calculated cost of
self-insurance claims, based on an actuarial assessment of claims incurred at the balance sheet date, is accumulated as
claims provisions. 
 
Other 
 
Other provisions principally comprise amounts required to cover obligations arising, warranties given, restructuring costs
and costs relating to disposed businesses together with amounts set aside to cover certain legal and regulatory claims. 
These provisions are expected to be substantially utilised within the next five years. 
 
15. Share capital 
 
                                                                              2014  2013  
                                                                              £m    £m    
 Authorised4,100,000,000 ordinary shares of 1p each                           41.0  41.0  
                                                                                          
 Issued and fully paid                                                                    
 At 1 January and 31 December - 1,822,832,965 shares (2013: 1,817,498,329)    18.2  18.2  
 
 
16. Reconciliation of net increase/(decrease) in cash and cash equivalents to net debt 
 
                                                         2014  2013    
                                                         £m    £m      
 Net increase/(decrease) in cash and cash equivalents    65.1  (78.4)  
 Movement on finance leases                                                    (1.2)      (2.3)      
 Movement on other investments                                                 (240.7)    292.1      
 Movement on loans                                                             389.5      (240.4)    
 Increase in debt resulting from cash flows                    212.7   (29.0)  
 Foreign exchange translation and other items                                  47.1       (17.0)     
 Other non-cash items                                                          -          0.7        
 Movement on net debt in the period                                            259.8      (45.3)     
                                                                                                     
 Opening net debt                                                              (1,034.8)  (989.5)    
 Closing net debt                                                              (775.0)    (1,034.8)  
                                                                                                           
 
 
 Closing net debt comprises:                                                                                
 Cash and cash equivalents                                                              197.1    143.8      
 Other investments1                                                                     51.4     292.1      
 Fair value of debt related derivatives                                                 (16.3)   (4.0)      
 Bank and other short-term borrowings                                                   (31.1)   (444.2)    
 Bank and other long-term borrowings                                                    (976.1)  (1,022.5)  
 Total net debt                                                                         (775.0)  (1,034.8)  
 1 other investments include term bank deposits maturing in more than 3 months        
 
 
The group's interest rate swaps and foreign currency derivatives were included within net debt for the first time in 2013.
This better reflects the underlying nature of these contracts. 
 
17.  Operating and free cash flow 
 
                                                        2014   2013     
                                                        £m     £m       
 Cash generated from operating activities               347.0  335.4    
 Add back: special pension contribution                        1.0      13.6     
                                                               348.0    349.0    
 Purchase of property, plant and equipment                     (173.1)  (201.1)  
 Purchase of intangible fixed assets                                             (12.0)  (27.6)  
 Leased property, plant and equipment                                            (9.3)   (10.3)  
 Proceeds from sale of property, plant and equipment           6.3      6.3      
 Proceeds from sale of investment property                     6.8      -        
 Dividends received from associates                                              1.7     1.9     
 Operating cash flow                                                             168.4   118.2   
 Interest received                                                               10.9    10.6    
 Interest paid                                                                   (59.6)  (60.9)  
 Interest element of finance lease payments                                      (0.8)   (0.9)   
 Income tax paid                                               (30.1)   (37.2)   
 Special pension contributions                                 (1.0)    (13.6)   
 Disposal of available-for-sale investments                    -        1.2      
 Free cash flow                                                                  87.8    17.4    
                                                                                                     
 
 
18. Business combinations 
 
During the year the group purchased 100% of the share capital or the trade and assets of 30 smaller companies and
businesses in the period.  The total consideration in respect of acquisitions was £76.8m and the cash outflow from current
and past period acquisitions, net of cash acquired was £68.1m. 
 
From the dates of acquisition to 31 December 2014, these acquisitions contributed £31.7m to revenue and £5.4m to operating
profit. If the acquisitions had occurred on 1 January 2014, the revenue and operating profit of the group would have
amounted to £1,773.2m and £237.5m respectively. 
 
 Details of goodwill and the fair value of net assets acquired are as follows:                                                                                                                                                                                                                                                                                                                                     
                                                                                                                                                                                                                                                                                                                                                                                                                     2014  2013  
                                                                                                                                                                                                                                                                                                                                                                                                                     £m    £m    
 Purchase consideration:                                                                                                                                                                                                                                                                                                                                                                                                         
 - Cash paid                                                                                                                                                                                                                                                                                                                                                                                                         63.9  7.4   
 - Businesses exchanged                                                                                                                                                                                                                                                                                                                                                                                              -     3.5   
 - Deferred and contingent consideration                                                                                                                                                                                                                                                                                                                                                                             12.9  2.4   
 Total purchase consideration                                                                                                                                                                                                                                                                                                                                                                                        76.8  13.3  
 Fair value of net assets acquired                                                                                                                                                                                                                                                                                                                                                             (44.4)  (10.1)  
 Goodwill from current period acquisitions                                                                                                                                                                                                                                                                                                                                                                           32.4  3.2   
                                                                                                                                                                                                                                                                                                                                                                                                                           
 Goodwill represents the synergies, workforce and other benefits expected as a result of combining the respective businesses. None of the goodwill recognised is expected to be deductible for tax purposes.                                                                                                                                                                                   
 Contingent consideration from current year acquisitions up to a maximum of £8.3m is payable over the next four years based on earn out conditions on revenue, profit and customer retention. Deferred consideration from current year acquisitions of £5.0m is payable over the next four years. The group incurred acquisition related costs of £1.5m in respect of the above acquisitions.  
 
 
 The provisional fair value1 of assets and liabilities arising from acquisitions in the period:                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                                                                                                                                        2014   2013   
                                                                                                                                                                                                                                                                                                                                                                                        £m     £m     
 Non-current assets                                                                                                                                                                                                                                                                                                                                                                                   
 - Intangible assets                                                                                                                                                                                                                                                                                                                                                                    39.9   7.7    
 - Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                        4.8    3.0    
 Current assets2