THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE
RELEASE
11 September 2024
Trading Update
Rentokil Initial plc ("the Group") provides the
following update on current trading and the outlook for FY
24.
·
North America Organic Revenue growth now anticipated to be
c.1% in H2 24
·
North America operating profit also being impacted by higher
sales, service and other costs
· FY
24 North America Adjusted Operating Profit margin* now anticipated
to be c.17.2% and Group Adjusted Operating Profit margin* to be
c.15.5%
·
Rest of Group continues to perform well
· At
current exchange rates, additional FY 24 currency headwind of
c.£10m
· FY
24 Group Adjusted PBTA now expected to be c.£700m
*Presented at constant exchange rates
North America
organic growth
While we saw some positive momentum in North
America sales activity at the end of the second quarter, the
trading performance in July and August was lower than anticipated.
There has also been some modest disruption to organic growth from
branch integration. We now expect H2 24 Organic Revenue growth in
North America of c.1%.
The estimated drop through impact of the revised
North America growth expectation on FY 24 Adjusted Operating Profit
is c.£20m.
North America
operations
To position Rentokil to deliver our planned
growth through the peak season, both sales and service resource was
expanded. As a result of lower than expected lead flow and sales
growth, the operation was over-resourced in both sales and service.
Increased weekend working to drive additional revenue also resulted
in an increase in overtime expenditure. In addition, spend on
materials and consumables is higher than expected.
The aggregate impact of these cost items on FY
24 Group Adjusted Operating Profit is anticipated to be
c.£50m.
Foreign
currency
Since the Interim Results, Sterling has
strengthened against the US Dollar, and hyper-inflation has eased
in a number of markets. If rates remain at current levels to year
end, this will result in an additional headwind of c.£10m to FY 24
Adjusted PBTA.
Right Way 2
Plan
Our immediate focus is on the Right Way 2 plan
to improve revenue growth, through increased lead flow, sales
conversion and customer retention. We are taking decisive action to
mitigate the cost over-runs as we exit the peak season, managing
inventory more effectively, managing technician workload and
overtime, and will right-size labour resources for the volume
opportunity.
We continue to believe in the fundamental
strength of the North America business. The substantial structural
growth opportunities, enhanced by the benefits of the Terminix
transaction, means the value creation opportunity remains intact,
albeit taking longer to realise than anticipated.
Conference Call
details
Today, 11 September at 8:00 am BST, Rentokil
Initial Chief Executive, Andy Ransom and Chief Financial Officer,
Stuart Ingall-Tombs will host a 30‐minute conference call for
analysts and investors. There will be an additional conference call
for US audiences at 1:00 pm BST. A replay will be made available on
the Company website.
For the 8:00 am
call
To join via teleconference use conference ID
82879 with one of the dial-in options below. An audio webcast will
be accessible at
https://events.q4inc.com/attendee/377474167.
For the 1:00 pm
call
To join via teleconference use conference ID
43099 with one of the dial-in options below. An audio webcast will
be accessible at
https://events.q4inc.com/attendee/749955350.
UK: +44 20 3481 4247
France: +33 1 73 02 31 36
Germany: +49 69 589964217
Sweden: +46 8 505 246 90
Singapore: +65 3159 1234
USA: +1 (646) 307 1963
Additional international access conference
numbers can be found at
https://registrations.events/directory/international/itfs.html
Rentokil Initial will announce third quarter
results for the period ended 30 September 2024 on 17 October
2024.
The person responsible for making this
announcement is Rachel Canham, Group General Counsel
and Company Secretary, Rentokil Initial
plc.
Enquiries: Investors / Analysts: Peter
Russell, Rentokil Initial plc, + 44 7795 166506
Media: Malcolm Padley, Rentokil Initial plc, +44
7788 978199
Cautionary
statement
In order, among other things, 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
Group's ability to attract, retain and develop key personnel to
lead the Group's 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 its third-party service providers;
inflationary pressures, such as increases in wages, fuel prices and
other operating costs; 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; 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 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 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; the
identification of a material weakness 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.
The Company makes no guarantee that trends in
the management of termite damage claims will continue.
Additionally, the Company makes no guarantee that its operational
improvement plans will mitigate against or reduce the number of
termite damage claims (litigated and non-litigated) against the
Company nor that these plans will reduce the ongoing cost to
resolve such claims.
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 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 Growth, One-off and adjusting items, Adjusted
Operating Profit and Adjusted PBTA. Definitions for these measures
can be found in note 14 of the financial statements in the Interim
Results. 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.
