REG - Rentokil Initial PLC - Q1 Trading Update

Rentokil InitialAnnouncement

21/04/2022 07:00

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RNS Number : 8171I  Rentokil Initial PLC  21 April 2022

 
 

 

 

21 April 2022

RENTOKIL INITIAL PLC (RTO)

FIRST QUARTER TRADING UPDATE

2022 has started well, with the strong momentum from 2021 continuing into Q1,
and with progress across all business categories and regions

 

 

 (£m)                                                                     Q1 2022  Growth
                                                                          AER      AER    CER
 Ongoing Revenue                                                          721.6    1.8%   1.8%
 Revenue                                                                  722.0    1.8%   1.8%
 Excluding disinfection
 Ongoing Revenue(1)                                                       713.4    12.2%  12.3%
 Revenue                                                                  713.9    12.1%  12.2%

 

Summary (at CER)

 ●    Organic growth, excluding disinfection, of 8.0% (Ongoing Revenue +12.3%)
 ●    Input cost inflation entirely recovered by price increases
 ●    Terminix acquisition progressing well and remains on track to complete in the
      second half of 2022, with a target completion date towards the end of the
      third quarter
 ●    Business performing well and in line with our expectations

 

Revenue growth (at CER)

Pest Control delivered organic growth of 5.5% in Q1 (Ongoing Revenue +11.2%)
with all regions in positive growth.   Ongoing Revenue in our Growth and
Emerging markets grew by 10.9% and 13.6% respectively.  North America Pest
Control, our largest pest control business, demonstrated further strong
momentum, growing Ongoing Revenue by 11.2% (Organic +5.0%), driven by both
residential and commercial revenue growth. Hygiene & Wellbeing, excluding
disinfection, grew organically by 12.9% (Ongoing Revenue +14.2%), reflecting
growth in all regions including Asia, despite the continued impact of the
pandemic in a number of countries.  Trading conditions in our France Workwear
business have continued to improve in Q1, resulting in organic growth of
14.7%.

Group Ongoing Revenue, excluding disinfection, grew by 12.3%; 8.0% organic(2)
and 4.3% from acquisitions.  Including disinfection, Group organic growth was
-2.0%.  As highlighted in our Preliminary results in March, we are lapping
strong disinfection revenues of £95.3m from H1 2021.  Disinfection revenues
amounted to £8.2m in Q1, a decline of £64.5m on the prior year.  We
reiterate our guidance for disinfection revenues for the full year 2022 to be
within the range of £10m to £20m, vs. £116.0m last year.

Pricing for inflation

Like all companies, we have experienced inflationary increases on our cost
base in Q1, such as labour, fuel, consumables and paper.  As anticipated, we
have continued to successfully mitigate the impact on margins of these via
annual price increases (APIs), in line with normal practice.  Total price
increases achieved in Q1 have entirely offset input cost inflation in the
quarter and we remain confident that we will be able to continue to counter
rising inflation through APIs during the course of the year.
 

Operational progress

Customer retention in Q1 was robust at 85.3%, in line with full year 2021.
Colleague retention (on a rolling 12-month basis) was also strong, with
Service Colleague retention at similar levels to the full year 2021 at 81.8%,
and Sales Colleague retention improving slightly versus the previous year at
83.5%.

M&A

We acquired 11 businesses in Q1 - 10 in Pest Control and one in Hygiene &
Wellbeing - in Chile, Colombia, Hong Kong, Poland, Malaysia, New Zealand and
the US, with combined annualised revenues in the year prior to acquisition of
c.£20m.  We continue to build on the strength of our attractive M&A
pipeline of both Pest Control and Hygiene & Wellbeing opportunities,  and
remain confident in our targeted spend of around £250m for 2022.

Acquisition of Terminix Global Holdings, Inc. (Terminix)

We announced on 15 March that the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 had expired, thereby
completing the necessary antitrust process in the US.  A number of other
conditions remain to be satisfied, including obtaining approval by the
Company's and Terminix's shareholders, and the registration of the Company
ADSs with the U.S. Securities and Exchange Commission and their listing on the
New York Stock Exchange.  With good progress being made on satisfying the
remaining conditions, both parties continue to be on track to complete the
transaction in the second half of 2022, with a target completion date towards
the end of the third quarter.

Impact from geopolitical events

The Company has no operations in, or exposure to, Russia or Ukraine and has
not been directly impacted by the war in Ukraine.  During the quarter, the
Company donated £100,000 from the Rentokil Initial Cares charity fund to
UNICEF, which is helping to provide critical services including water and
sanitation, immunisation and healthcare, to children and families displaced
across Ukraine and in neighbouring countries.

Outlook

The business is performing well and in line with our expectations resulting
from organic growth delivery and the flow through of revenues from our M&A
programme in 2021. Although we will lap strong disinfection revenues in H1 and
will have to contend with ongoing macro-economic uncertainty, we continue to
expect the Group to deliver good operational and financial progress in the
coming year.

Commenting on today's announcement Andy Ransom, Chief Executive, said:

"I am very pleased with our performance in Q1, and the continued growth
momentum achieved in our core Pest Control and Hygiene & Wellbeing
businesses.  We remain confident in delivering further operational and
financial progress in 2022.

 

"We are making excellent progress with the acquisition of Terminix. With the
US competition condition being satisfied in March, and with integration
planning progressing well, we are focused on completing the remaining
conditions to closing the deal and we remain on track to complete the
transaction in the second half of 2022, with a target completion date towards
the end of the third quarter."

 

 

Enquiries:

 

 Investors / Analysts:  Katharine Rycroft  Rentokil Initial plc    07811 270734

 Media:                 Malcolm Padley     Rentokil Initial plc    07788 978199
                        Richard Mountain   FTI                     07909 684466

(1)Ongoing Revenue represents the performance of the continuing operations of
the Group (including acquisitions) after removing the effect of disposed or
closed businesses.

 

(2)Organic Revenue represents the growth in Ongoing 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.

 

AER - actual exchange rates; CER - constant 2021 exchange rates

 

This announcement contains statements that are, or may be, forward-looking
regarding the Group's financial position and results, business strategy, plans
and objectives.  Such statements involve risk and uncertainty because they
relate to future events and circumstances and there are accordingly a number
of factors which might cause actual results and performance to differ
materially from those expressed or implied by such statements. Forward-looking
statements speak only as of the date they are made and no representation or
warranty, whether expressed or implied, is given in relation to them,
including as to their completeness or accuracy or the basis on which they were
prepared. Other than in accordance with the Company's legal or regulatory
obligations (including under the Listing Rules and the Disclosure Guidance and
Transparency Rules), the Company does not undertake any obligation to update
or revise publicly any forward-looking statement, whether as a result of new
information, future events or otherwise. Information contained in this
announcement relating to the Company or its share price, or the yield on its
shares, should not be relied upon as an indicator of future performance.
Nothing in this announcement should be construed as a profit forecast.

 

Additional Information About The Proposed Transaction And Where To Find It

 

In connection with the proposed transaction between Rentokil Initial plc
("Rentokil") and Terminix Global Holdings, Inc. ("Terminix"), Rentokil will
file with the U.S. Securities and Exchange Commission (the "SEC") a
registration statement on Form F-4, which will include a proxy statement of
Terminix that also constitutes a prospectus of Rentokil. Each of Rentokil and
Terminix will also file other relevant documents in connection with the
proposed transaction. The definitive proxy statement/prospectus will be sent
to the shareholders of Terminix. Rentokil will also file a shareholder proxy
circular in connection with the proposed transaction with applicable
securities regulators in the United Kingdom and the shareholder proxy circular
will be sent to Rentokil's shareholders. This communication is not a
substitute for any registration statement, proxy statement/prospectus or other
documents Rentokil and/or Terminix may file with the SEC in connection with
the proposed transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS,
INVESTORS, STOCKHOLDERS AND SHAREHOLDERS OF TERMINIX AND RENTOKIL ARE URGED TO
READ CAREFULLY AND IN THEIR ENTIRETY THE PROXY STATEMENT/PROSPECTUS AND
SHAREHOLDER PROXY CIRCULAR, AS APPLICABLE, AND ANY OTHER RELEVANT DOCUMENTS
THAT ARE FILED OR WILL BE FILED WITH THE SEC OR APPLICABLE SECURITIES
REGULATORS IN THE UNITED KINGDOM, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO
THESE DOCUMENTS, IN CONNECTION WITH THE PROPOSED TRANSACTION WHEN THEY BECOME
AVAILABLE, AS THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT
TERMINIX, RENTOKIL, THE PROPOSED TRANSACTION AND RELATED MATTERS. The
registration statement and proxy statement/prospectus and other documents
filed by Rentokil and Terminix with the SEC, when filed, will be available
free of charge at the SEC's website at www.sec.gov. In addition, investors and
shareholders will be able to obtain free copies of the proxy
statement/prospectus and other documents filed with the SEC by Terminix online
at investors.terminix.com, upon written request delivered to Terminix at 150
Peabody Pl., Memphis, TN 38103, USA, Attention: Corporate Secretary, or by
calling Terminix's Corporate Secretary's Office by telephone at +1
901-597-1400 or by email at deidre.richardson@terminix.com, and will be able
to obtain free copies of the registration statement, proxy
statement/prospectus, shareholder proxy circular and other documents which
will be filed with the SEC and applicable securities regulators in the United
Kingdom by Rentokil online at https://www.rentokil-initial.com, upon written
request delivered to Rentokil at Compass House, Manor Royal, Crawley, West
Sussex, RH10 9PY, England, Attention: Katharine Rycroft, or by calling
Rentokil by telephone at +44 (0) 7811 270734 or by email at
katharine.rycroft@rentokil-initial.com.  The information included on, or
accessible through, Rentokil's or Terminix's website is not incorporated by
reference into this communication.

 

This communication is for informational purposes only and is not intended to,
and shall not, constitute an offer to sell or buy or the solicitation of an
offer to sell or buy any securities, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to appropriate registration or qualification under the
securities laws of any such jurisdiction.  No offering of securities shall be
made except by means of a prospectus meeting the requirements of Section 10 of
the U.S. Securities Act of 1933, as amended.

 

Participants in the Solicitation of Proxies

 

This communication is not a solicitation of proxies in connection with the
proposed transaction.  However, under SEC rules, Terminix, Rentokil, and
certain of their respective directors, executive officers and other members of
the management and employees may be deemed to be participants in the
solicitation of proxies in connection with the proposed transaction.
Information about Terminix's directors and executive officers may be found on
its website at corporate.terminix.com/responsibility/corporate-governance and
in its 2021 Annual Report on Form 10-K filed with the SEC on March 1, 2022,
available at investors.terminix.com and www.sec.gov.  Information about
Rentokil's directors and executive officers may be found on its website at
https://www.rentokil-initial.com and in its 2021 Annual Report filed with
applicable securities regulators in the United Kingdom on March 30, 2022,
available on its website at https://www.rentokil-initial.com.  The
information included on, or accessible through, Rentokil's or Terminix's
website is not incorporated by reference into this communication.  These
documents can be obtained free of charge from the sources indicated above.
Additional information regarding the interests of such potential participants
in the solicitation of proxies in connection with the proposed transaction
will be included in the proxy statement/prospectus and shareholder proxy
circular and other relevant materials filed with the SEC and applicable
securities regulators in the United Kingdom when they become available.

 

Information Regarding Forward-Looking Statements

 

This communication contains forward-looking statements as that term is defined
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can sometimes 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, but not all forward-looking statements include
such identifying words.  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 materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such forward-looking
statements.  We 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: a condition to
the closing of the proposed transaction may not be satisfied; the occurrence
of any event that can give rise to termination of the proposed transaction;
Rentokil is unable to achieve the synergies and value creation contemplated by
the proposed transaction; Rentokil is unable to promptly and effectively
integrate Terminix's businesses; management's time and attention is diverted
on transaction related issues; disruption from the proposed transaction makes
it more difficult to maintain business, contractual and operational
relationships; the credit ratings of Rentokil declines following the proposed
transaction; legal proceedings are instituted against Terminix or Rentokil;
Terminix or Rentokil is unable to retain or hire key personnel; the
announcement or the consummation of the proposed acquisition has a negative
effect on the market price of the capital stock of Terminix or Rentokil or on
Terminix's or Rentokil's operating results; evolving legal, regulatory and tax
regimes; changes in economic, financial, political and regulatory conditions,
in the United Kingdom, the United States and elsewhere, and other factors that
contribute to uncertainty and volatility, natural and man-made disasters,
civil unrest, pandemics (e.g., the coronavirus (COVID-19) pandemic (the
"COVID-19 pandemic")), geopolitical uncertainty, and conditions that may
result from legislative, regulatory, trade and policy changes associated with
the current or subsequent U.S. or U.K. administration; the ability of Rentokil
or Terminix to successfully recover from a disaster or other business
continuity problem due to a hurricane, flood, earthquake, terrorist attack,
war, pandemic, security breach, cyber-attack, power loss, telecommunications
failure or other natural or man-made event, including the ability to function
remotely during long-term disruptions such as the COVID-19 pandemic; the
impact of public health crises, such as pandemics (including the COVID-19
pandemic) and epidemics and any related company or governmental policies and
actions to protect the health and safety of individuals or governmental
policies or actions to maintain the functioning of national or global
economies and markets, including any quarantine, "shelter in place," "stay at
home," workforce reduction, social distancing, shut down or similar actions
and policies; actions by third parties, including government agencies; the
risk that disruptions from the proposed transaction will harm Rentokil's or
Terminix's business, including current plans and operations; certain
restrictions during the pendency of the acquisition that may impact Rentokil's
or Terminix's ability to pursue certain business opportunities or strategic
transactions; Rentokil's or Terminix's ability to meet expectations regarding
the accounting and tax treatments of the proposed transaction ; the risks and
uncertainties discussed in the "Risks and Uncertainties" section in Rentokil's
reports available on the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on its website at
https://www.rentokil-initial.com (information included on or accessible
through Rentokil's website is not incorporated by reference into this
communication); and the risks and uncertainties discussed in the "Risk
Factors" and "Information Regarding Forward-Looking Statements" sections in
Terminix's reports filed with the SEC. These risks, as well as other risks
associated with the proposed transaction, will be more fully discussed in the
proxy statement/prospectus and shareholder proxy circular. While the list of
factors presented here is, and the list of factors to be presented in proxy
statement/prospectus and shareholder proxy circular will be, considered
representative, no such list should be considered to be a complete statement
of all potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realization of forward-looking
statements. We caution 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, our actual results of operations, financial condition and
liquidity, and the development of new markets or market segments in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this communication.  Except as
required by law, neither Rentokil nor Terminix assumes any obligation to
update or revise the information contained herein, which speaks only as of the
date hereof.

 

 

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