REG - Rentokil Initial PLC - Q1 Trading Update

Rentokil InitialAnnouncement

18/04/2024 07:00

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RNS Number : 0473L  Rentokil Initial PLC  18 April 2024

 

18 April 2024

RENTOKIL INITIAL PLC

FIRST QUARTER TRADING UPDATE

POSITIVE OVERALL START

 

Rentokil Initial plc ("the Group"), today issues a Trading Update for the
first three months of the 2024 financial year covering the period 1 January
2024 to 31 March 2024.

 

           AER(1)                    CER
           Q1 2024  Q1 2023  Change  Q1 2024  Q1 2023  Change

           £m       £m       %       £m       £m       %

 Revenue   1,270    1,259    0.9%    1,294    1,233    4.9%

 

Unless otherwise stated, figures related to the first quarter and are stated
at constant exchange rates.

 

 

Andy Ransom, Chief Executive of Rentokil Initial plc, said:

"We have made a positive overall start to 2024. The Group has performed well
and our RIGHT WAY 2 plan has delivered a stabilising performance in North
America. With the key trading period for the business ahead of us, we remain
confident in delivering on our guidance of 2-4% Organic Revenue growth in the
region.

"As the year proceeds, we look forward to continued progress, driven by our
focus on North America growth and the Terminix integration plan, which is in
the advanced stages of preparation for the first full branch integrations
commencing mid-year."

 

·        Group Revenue up 4.9%, of which 3.1% was Organic Revenue
growth. Continued pricing momentum.

·        North America growth performance has stabilised with Organic
Revenue up 1.5%. Early initiatives of RIGHT WAY 2 growth plan underway.

-      Organic Revenue in Pest Control overall up 1.5% and Pest Control
services for commercial, residential and termite customers up 1.0%.

-      Inbound digital lead flow performance was similar to Q4, with an
improvement in lead quality, which had a positive impact on our sales
conversion and return on marketing spend. We are encouraged by increased lead
flows in the first two weeks of April.

-      Technician sales leads participation rates improved by 8ppts from
February to March.

-      Customer retention was stable at 79.5%, and our pricing activities
were successful in passing cost inflation to our customers.

-      North America colleague retention increased further to 76.7% (31
December 2023: 75.2%), with the largest improvement in sales colleague roles
(up 2.7ppts to 69.1%). We launched a new compensation plan for our new
Terminix sales colleagues to support the continued improvement in sales
colleague retention.

-      New 'Terminix It' multi-channel advertising and marketing campaign
launched in late Q1 to build brand awareness and preference with key customer
segments, and set to ramp up in the peak season.

·        Good momentum in Organic Revenue growth was sustained in all
other regions: +6.2% in Europe inc. LATAM, the Group's second largest region;
+4.1% in UK & Sub Saharan Africa; +4.3% in Asia & MENAT; and +7.3% in
Pacific.

·        Organic Revenue growth across all categories: Pest Control up
2.7%, Hygiene & Wellbeing up 3.8%, and France Workwear up 7.7%.

·        Terminix integration plan saw further progress towards full
branch integration starting mid-year.

-      Completion of the merger of the Rentokil and Terminix legal
entities into Rentokil North America, Inc. with all employees, customers and
suppliers now contracted to the same legal entity. The legal combination is a
critical enabler of future integration activities, which will allow for shared
use of resources and the harmonisation of operating standards and pay plans.

-      Go live of the new combined general ledger and internal reporting
systems, facilitating integrated performance management, and continued
progress on the development of the operational technology stack.

·        The Group's bolt-on M&A programme continued to create
value with 8 deals, delivering annualised revenue in the year before
acquisition of £45m. This includes the acquisition of HiCare Services Private
Limited, the second largest pest control company in India. We remain confident
in our targeted spend of c.£250m in 2024.

·        The Group is on track to deliver on expectations for FY 2024,
including 2-4% Organic Revenue growth in North America, accompanied by modest
margin progression, which we continue to expect to be weighted towards H2.

 

Summary of financial performance (at CER)

 

Regional Performance

                                                                  Organic Revenue growth

                               Revenue
                               Q1 2024 £m   Q1 2023 £m            Q1

                                                         Change   2024

                                                         %        %

 North America                 761          743          2.3      1.5
    Pest Control               739          721          2.4      1.5
    Hygiene & Wellbeing        22           22           0.8      0.6

 Europe (inc LATAM)            274          256          7.4      6.2
    Pest Control               130          120          8.6      6.5
    Hygiene & Wellbeing        87           83           5.5      4.7
    France Workwear            57           53           7.7      7.7

 UK & Sub Saharan Africa       103          92           12.3     4.1
    Pest Control               50           48           4.1      4.1
    Hygiene & Wellbeing        53           44           21.2     4.1

 Asia & MENAT                  86           81           5.7      4.3
    Pest Control               63           59           6.7      5.4
    Hygiene & Wellbeing        23           22           3.2      1.4

 Pacific                       67           58           14.4     7.3
    Pest Control               34           28           20.1     9.9
    Hygiene & Wellbeing        33           30           9.1      5.0

 Central                       3            3            (0.3)    (0.3)
 Total at CER                  1,294        1,233        4.9      3.1
 Total at AER                  1,270        1,259        0.9

 

Category Performance

                                                             Organic Revenue growth

                          Revenue
                          Q1 2024 £m   Q1 2023 £m            Q1

                                                    Change   2024

                                                    %        %

 Pest Control             1,016        976          4.0      2.7
 Hygiene & Wellbeing      218          201          8.7      3.8
 France Workwear          57           53           7.7      7.7
 Central                  3            3            (0.3)    (0.3)
 Total at CER             1,294        1,233        4.9      3.1
 Total at AER             1,270        1,259        0.9

 

 

The Company will host a webcast and teleconference at 9:30 a.m. BST to discuss
the results. The audio webcast and accompanying presentation materials will be
accessible via the IR section of the Company's website
(www.rentokil-initial.com/investors). To ask questions, please join via the
teleconference with conference ID 1097846 on one of the dial-in options below,
with additional international access numbers found at
https://registrations.events/directory/international/itfs.html. A replay will
be available on the Company website after the call.

 

UK: +44 20 3481 4247

USA: +1 (646) 307 1963

 

Rentokil Initial intends to publish its 2024 Interim Results on 25 July 2024.

 

 

Enquiries:

 

Investors / Analysts: Peter Russell, Rentokil Initial plc, + 44 7795 166506

Media: Malcolm Padley, Rentokil Initial plc, +44 7788 978199

 

 

Notes

 

(1)AER - actual exchange rates; CER - constant 2023 exchange rates

 

 

 

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), 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 the
Group's IT systems, processes and technologies; the availability of a suitably
skilled and qualified labour force to maintain the Group's business; the
Group's ability to attract, retain and develop key personnel to lead the
business; 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; inflationary pressures, such as increases in wages, fuel prices and
other operating costs; supply chain issues, which may result in product
shortages or other disruptions to the Group's business; 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; 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; 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 its third-party
service providers; extraordinary events that impact the Group's ability to
service customers without interruption, including a loss of its third-party
distributors; 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; 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; any future impairment charges, asset
revaluations or downgrades; failure to comply with the many laws and
governmental regulations to which the Group is subject or the implementation
of any new or revised laws or regulations that alter the environment in which
the Group does business, as well as the costs to the Group of complying with
any such changes; 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; 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 measures presented at
actual exchange rates ("AER" - IFRS) and constant full year 2023 exchange
rates ("CER" - Non-IFRS). Non-IFRS measures presented also include Organic
Revenue. Definitions for these measures can be found in the Group's 2023
Annual Report on Page 63. 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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