Rentokil Pest Control Investor Seminar/media/Files/R/Rentokil/... · Rentokil Pest Control Investor Seminar ... organic, price ... –Tighter regulation and enforcement eg food safety

Welcome

Rentokil Pest Control Investor Seminar 1 May 2015

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The Global Leader in Pest Control

This presentation 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 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 presentation should be construed as a profit forecast.

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3


Andy Ransom Chief Executive Rentokil Initial plc


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8.45 Rentokil: The Global Leader in Pest Control Andy Ransom

9.00 Delivering Expertise to The Frontline: The Rentokil Model Phill Wood

9.20 Growth Opportunity in North America John Myers

9.35 A Strong Brand around the World Stewart Power

9.50 Coffee

10.10 3 x Innovation Break-Out sessions

11.10 Rentokil around the World Andy Ransom

11.15 The Market Leader In Asia Paul Cochrane

11.30 Our Expansion into Latin America Alain van Lidth de Jeude

11.45 Leveraging Acquisitions Chris Hunt

11.55 Pest Control – A Financially Attractive Category Jeremy Townsend

12.05 Closing Comments and Q&A Andy Ransom & Team

12:25 Lunch


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Phill Wood Regional MD, UK and Rest of World Joined Rentokil Initial in 2006 and was appointed MD UK & ROW in 2013. Prior roles included Managing Director positions with Lex Service/RAC plc.

Strong Progress

Stewart Power Chief Marketing Officer Joined in 2006 as Marketing Director, Rentokil. Prior roles included directorships at RAC Business Solutions, Capita Group and was a management consultant with the Boston Consulting Group

Paul Cochrane Regional MD, Asia Joined Rentokil Initial in 1990 and was appointed MD Asia in 2013. Prior roles in the company included: Managing Director Initial Hygiene Pacific, Managing Director Ambius UK and Managing Director New Zealand & Fiji

John Myers Regional MD, North America Joined Rentokil Initial in 2008 as President, North America Pest Control division. Prior roles included Senior Vice President of Sales at Cintas Corporation as well as a number of operational and business development positions

Alain van Lidth de Jeude Managing Director, Benelux and Latin America Joined Rentokil Initial in 2001 and was appointed as MD Rentokil Pest Control Europe in 2006. Started Rentokil Latin America in 2012 and in charge of Rentokil Initial Benelux since 2014. Prior roles included: Belgian GIB Group: General Manager Quick Restaurants BV & Franchise Director Quick NV

Chris Hunt Group M&A Director Joined Rentokil Initial in 2012 as Group M&A Director. Prior roles included Corporate M&A Director at AstraZeneca plc and Director, KPMG Transaction Services

Today’s Speakers

Pest Control A Compelling Growth Industry

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Attractive category with high margins and good growth prospects

* TechNavio Analysis 2015

Term

ites

M

osq

uit

oes

Rats

An

ts

Flies

Bed Bugs

Wasps

Fleas

Spiders

Cockroaches

Ants

Snakes

Termites

Fleas

Pest Control Rats

Termites

Mosquitoes

Wasps

£10bn global industry 5.3% CAGR*

• £10bn industry, growing at a CAGR of 5.3% to 2019*

• Attractive business model – sets us apart from other industries – Revenue is typically on a contract recurring basis – for Rentokil 75% – Multiple portfolio levers – retention, upsell, organic, price – Ability to drive high margins through city-based density

• Proven, enduring category – came through the global recession well

• Faster growth with increasing economic activity – More housing, offices, hospitality

• Encouraging growth trends – Rising demand in nascent emerging markets with growing middle classes – Increasing intolerance towards pests – demand for higher hygiene standards – Global urbanisation – Tighter regulation and enforcement eg food safety and environment protection – Opportunities for consolidation in highly fragmented markets

Rentokil = Pest Control


• Unrivalled global leadership position – Most international across 60+ countries

• Strongest brand around the world, particularly important in Emerging

• Significant operational leverage – Proven, repeatable lean business model with best people, tools and training – On average, 63% of sales originate from digital channels

• Innovating at pace for future growth – Global Technical Centre delivering innovation pipeline that’s second to none

• Strong position in higher growth/higher margin segments – Best management information tools

• Highly cash generative and clear capital allocation strategy – Strong M&A capability and excellent leverage out of acquisitions – Driving profitable growth through density

• Opportunities to expand into adjacent services – Vector control, marine, agriculture

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Phill Wood Regional MD, UK & Rest of World Region

Delivering Expertise to The Frontline: The Rentokil Model

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Delivering The Rentokil Model Around the World Delivering Experience from UK to the Rest of World Region

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• A strong, growing business

• Developing the Rentokil model – Sales, Service & Technical Capability – Density and Productivity – Delivering Innovation to the front line – Delivered with Speed - our cloud-technology platform

Delivering into Rest of World Markets UK as the Lead Market in the Region

• A set of 20 smaller pest control markets – Generally market leader with good shares – Mostly in developing to mid-maturity markets – But also smaller mature markets (eg Ireland & Nordics)

• Benefit from leveraging capability in UK – Requires minimal overhead using cloud technology

Rentokil in the UK Founded in 1925

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Some things have changed substantially over the years…

While others have remained the same…

Customers continue to place heavy emphasis on technician & surveyor training & quality assessment, as well as a proactive management approach to identifying

& communicating pest control risks

Rentokil in the UK The UK Pest Control Market

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• £6 per head population – second highest spend on Pest Control per head in Europe

• Four major competitors of which only Rentokil & Ecolab are pure Pest plays

• Mitie & Cannon are Pest Businesses which also self deliver to their FM owners

• Rentokil is the clear market leader, with approx. 20% market share and the only truly self-delivering National player

• 10% of Market Local Authorities (est. 15% now provide no service – 2% in 2009)

• Large degree of fragmentation circa 42% small local operators

A total market of around £400m

Source: Rentokil +3rd Party Market Research

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mar

ket

Shar

e

Small Operators

Local Authorities

Medium-Sized Cos

Ecolab, Mitie & Cannon

Rentokil

42%

10%

7%

21%

20%

Rentokil in the UK Revenue & Profit Growth

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Historical Revenue & Profit trends:

• Revenue - Over the period from 2010 to 2014 we have grown revenue by 25% • Average annual revenue growth 6% over the period • 2014 includes acquisition of loss making Green Compliance pest business

• Profit - Over the period from 2010 to 2014 we have grown profits by 41% • Average annual profit growth 9% over the period

Cumulative Revenue Growth

The Rentokil Model Championed in the UK

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Investment in Sales & Technical Capability

Driving Sales Productivity

Driving Density One Service & Sales Team

Innovations to Drive Margin

30% of new sales from services under three years old

SPEED Cloud Technology to

engage across organisation and deliver tight control

Leveraging our Functions through The Country Model

The Rentokil Model Investment in Sales and Technical Capabilities

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Route 1 Main innovations launch method

to all FLCs – over 100 sessions per year for surveyors & virtual

sessions for technicians

Technical Academy Highly qualified technicians

(designed & delivered internally, but validated by the BPCA). 95% of our techs are L2 or above & 50% of the UK’s L4

technicians are at Rentokil

Sales Academy 3,000 technical training days p.a.

New starter & ongoing refreshers. Continued support

through monthly, quarterly & 6-monthly formal tests

Formal training programmes for all FLCs on a regular basis to equip them with the right skills and keep them up to date on products, competition, services & legislation

eLearning New for 2015 - used for Level 1 tech training + TPA (Technician

Performance Assessment) modules & seasonal pest training

The Rentokil Model Develop Leaders of the Future

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Formal, well-structured training & development through Aspiring Managers, Team Leader

Training & Living Leaders to help us develop existing & future Leaders, leading to 21

promotions in 2014 80%+ appointments internal

A formal graduate programme, with 59

graduates commencing in front line roles

Operationally experienced managers for the future

The Rentokil Model Sales Productivity With Focused Sales Management & Integrated Marketing

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A model geared around enquiry generation

Supporting Techs to Generate Leads

Brand & Local Community Support Structured & targeted PR

Route 1 Programme

• Leads per Sales head per day are up 23% from 2011 to 2014 driven by management focus and regular communications over G+

• Enquiries per head per day up 12% from 2011

• As a result local sales per head per day is trending to be up 73% from 2011 to 2014

The Rentokil Model Driving Density Through One Service Team

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• Revenue per technician – indexed forward from 2011 Levels – 11% growth over the period – 3% per annum CAGR over period

• Detailed focus through monthly management on all elements of productivity (e.g. visits per day) supported by speed tools to ensure minimisation of time not on customers sites

Using technology – consistent national training/qualification level & business scale to maximise time spent with customers and minimise travel

Speed Mapper app to maximise selling

time in a patch

Fast responses to customers

More effective use of time onsite

The Rentokil Model Using Innovation To Drive Margin

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G+ and our speed approach enabling us to launch an average of 3 new innovations per quarter:

• Innovations under three years old account for circa 30% of new sales

• A further 12 new services/offers between now & year end

Speed of execution – Pest Disinfection offer from concept to launch in ONE MONTH:

The Rentokil Model Speed - Cloud Technology to Engage Organisation and Deliver Tight Control

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Speed Central – mobile responsive online libraries of

relevant information for different roles

Timely, managed & controlled comms to everyone

Virtual support – videos, tutorials

Everyone has an android device

Standard survey, pricing & quoting tools everywhere

Automating as many processes as possible

• A 50% increase in the number of front line technicians being managed by local management

• Constant focus on eliminating processes steps via automation and by putting information in the hands of decision makers so that they can make informed decisions faster – without compromising control

• Largest G+/social media in Google world outside of Asia

The Rentokil Model Leverage of Business Functions Through Our Country Model

All support functions run as a Country Area team supporting

all UK based businesses

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Each support function has a standard operating model, marginally tailored

for each business

Standard reporting & KPIs/ performance metrics for each

support function

• Support functions consolidated for all businesses under single teams for Marketing, HR & Finance

• All businesses have direct responsible team members in each function

• Standardised policies, processes & reporting across all businesses allow larger spans of control & reduced headcount

Supporting Growth in Rest of World Markets Leveraging UK Capability To Deliver International Growth

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Market Revenue Profit Relative

Position Growth Growth Margin

Ireland 1 6% 7% H

Estonia 1 18% 23% H

Norway 2 11% 20% H

Turkey 1 15% 158% M

Jamaica 1 22% 83% M

Martinique 1 13% 62% M

Barbados 1 9% 100% M

Denmark 1 8% 16% M

Lithuania 1 8% 6% M

Kenya 1 5% 13% H

Finland 1 4% 11% H

Guyana 1 2% 104% H

South Africa 1 4% 5% H

Trinidad 1 3% 3% H

UAE 1 41% 61% L

Saudi Arabia 1 286% 76% L

Sweden 3 7% 25% L

Bahamas 1 - - M

Mozambique 1 - - L

Zambia 1 - - L

Total Rest of World 1 8% 14% H Es

tab

lish

ed R

ento

kil P

est

Bu

sin

esse

s N

ew in

20

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Delivering Growth in Rest of World

• All businesses in growth in 2014 – Contract and Job Revenue up – Improved profit margins in every business

• Will continue to drive growth potential – Leveraging UK capability and productivity models – Delivering innovation tailored to local markets – Lower cost base through Speed

The Rentokil Model Deploying Capability to RoW Markets Using Speed

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Run a virtual region with virtual business reviews

on a regular basis

Virtual regional support teams with regular reviews via hangout

Drive rate of new service launches to develop the

market

Transfer best practice in Sales & Marketing & provide

training/support to upgrade local Sales & Operational

capability

System rollouts

Consistent compliance & financial control

Standard marketing model everywhere

Share ideas that work & implement quickly

eg PR stories/support material/product incentives/school tours/Pestaurant

Route 1 Programme Virtual web management & new website rollout


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John Myers Regional MD, North America

The Growth Opportunity In North America

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The Quadrant Approach Our Strategic Approach for running the Pest Control Business

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• Our Emerging markets are the future; they are the building blocks to drive growth today and into the future

• The Growth markets represent those markets that are well-developed, but still have significant growth potential to drive our growth agenda

• The majority of our Global Pest Control revenue and profit come from the Growth quadrant

Quadrant Performance for Pest • Asia

• Latin America

• MENAT

• East Africa

• Fiji

• North America

• UK

• Germany

• France

• Nordics

• Pacific

• South Africa

• Caribbean

• Portugal

• Spain

• Greece

• Benelux

• Ireland

• Italy

Gro

wth

Po

ten

tial

Profit Contribution

11% of Rev 7% of Profit 32% of Growth




The North American Pest Control Market Rentokil Well-Placed for Growth in the World’s Biggest Pest Market

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Rentokil Number Three & Gaining Share Half the Worldwide Market

North America 4.8

Rollins 17% (incl Orkin)

Terminix 17%

Rentokil 5%

Ecolab 5%

Other 55%

• Only 45% provided by the Top 4 companies • Rentokil has grown significantly faster through a combination or organic growth and strategic acquisitions

• A large market that grew 3.5% in 2014 • Rentokil grew significantly faster at 6.2%

Half the Worldwide Market

Asia 1.4

LatAm 0.8

Mid East & N Africa 0.2

RoW 0.3

Europe 1.8

North America 5.0

Pacific 0.5

Source: Multiple Sources, Internal Estimates, Using Apr 2015 Exchange Rates to GBP

• Worldwide Market £10 bn

Rentokil Pest Control in the North American Market Our 10 Year History of Growth

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0

100

200

300

400

500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Revenue Growth %

+76% +12%

+18% +4%

+14% +8% +5% +24% +18% APBITA Growth %

$m

+90%

+26%

+51% +16%

+5% +6% +0%

+42%

+9%

Since acquisition of Presto-X in 2007 • Total Revenue Growth of 14.4% CAGR and Profit Growth of 20.2% CAGR

Revenue $

APBITA $

http://www.prestox.com/home.aspx

North American Acquisitions We Have A Clear Acquisition Model That Links Value To Strategy

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Rationale Strategy

The Residential Opportunity

• Two thirds of the North American opportunity is Residential/Termite

• The Residential market particularly benefits from absolute scale particularly in marketing efficiency

• Once regions achieve scale in commercial, then target bolt-on residential acquisitions


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Rationale Strategy


• Two thirds of the North American opportunity is Residential/Termite

• The Residential market particularly benefits from absolute scale particularly in marketing efficiency

• Once regions achieve scale in commercial, then target bolt-on residential acquisitions

Building Local Route Density

• Relative route density is a key determinant of operational success and profitability

• Bolt-on acquisitions provide a high level of synergy for sub-scale branches

• Prioritise acquisition efforts to sub-scale locations

• Standard process for acquiring and integrating new companies effectively and efficiently

Our Focus is Coverage for National Accounts and Building Local Density (Growth in Residential is a Secondary Benefit)

Driving Local Profitability Accelerate Profitability Through Local Density

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Local Market Share

Op

era

tin

g M

argi

ns*

Impact of Density on Branch Profitability

* Margins before Corporate Overhead


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M&A Activities

• Bolt on example

Local Organic Growth

Before After

Revenue $884,000 $1,463,000

Operating Margin*

$154,000 17%

$295,000 20%

Local Market Share

Op

era

tin

g M

argi

ns*




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M&A Activities

• Bolt on example


• Invest in Commercial Sales Reps to drive base scale in B2B pest control

• Up-sell and cross-sell the services needed by our customers

• Where attractive, expand into Residential market through local marketing activities – brand awareness, PR, PPC and SEO, events

Before After

Revenue $884,000 $1,463,000

Operating Margins*

$154,000 17%

$295,000 20%

Local Market Share

Op

era

tin

g M

argi

ns*



The North America Pest Business A portfolio of businesses delivering varying levels of profit performance

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• Operating Margins* 6.7%

Gro

wth

Po

ten

tial

Profit Contribution

• Our North American Pest branches are

a portfolio of locations delivering

different levels of revenue growth,

profit growth, and profit margins.

• We have a strong balance of Growth

and Protect and Enhance locations.

• As our businesses develop and achieve

greater scale and density, we are able

to maximize the profit margins we

deliver

Quadrant Impact on Margin • Operating Margins* 23.8%

• Operating Margins* 32.1%


Our focus is on


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Rationale Strategy


•Two thirds of the North American opportunity is Residential/Termite

•The Residential market particularly benefits from absolute scale particularly in marketing efficiency

•Once regions achieve scale in commercial, then target bolt-on residential acquisitions


•Relative route density is a key determinant of operational success and profitability

•Bolt-on acquisitions provide a high level of synergy for sub-scale branches

•Prioritise acquisition efforts to sub-scale locations

•Standard process for acquiring and integrating new companies effectively and efficiently

Coverage for National Accounts

•28% of the commercial pest control market is national accounts ($680m)

•Opportunity to leverage our international account relationships

•Extend our footprint through medium-sized, regional acquisitions

National Account Customers in the US Acquisitions Have Opened Up a $680m Market for Rentokil

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Under-represented in National Accounts But, Well-Placed for Growth

0%

2%

4%

6%

8%

10%

12%5.

4%

3.9%

7.8%

10.2

%

2.5%

Sources: Market data - G Curl Pest Control Industry 2012 report; based on 2014; Nat A/c Mkt

National Accounts Data filters: >25 premises and >500 employees

Share

• Only 4 companies can service national customers – Rentokil is one of them • We cover around 96% of the population and 49 of the top 50 markets in the US • Rentokil has 7.8% of the Commercial Market, but only 2.5% of the National Accounts Markets:

a $30m+ million opportunity

XX Top 50 cities by population

No Rentokil business coverage

Rentokil business coverage

Our focus is on


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Rationale Strategy


•Two thirds of the North American opportunity is Residential/Termite

•The Residential market particularly benefits from absolute scale particularly in marketing efficiency

•Once regions achieve scale in commercial, then target bolt-on residential acquisitions


•Relative route density is a key determinant of operational success and profitability

•Bolt-on acquisitions provide a high level of synergy for sub-scale branches

•Prioritise acquisition efforts to sub-scale locations

•Standard process for acquiring and integrating new companies effectively and efficiently

Coverage for National Accounts

•28% of the commercial pest control market is national accounts ($680m)

•Opportunity to leverage our international account relationships

•Extend our footprint through medium-sized, regional acquisitions

Our Focus is on Building Local Density and Coverage for National Accounts (Growth in Residential is a Secondary Benefit)

The North American Strategy for Profitable Growth A Clear and Consistent Strategy

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The Approach


• Invest in Commercial Sales Reps and B2B marketing support for targeted sectors

• Upsell a wider range of services and new innovations to our existing customers

• Investment in Brand Building for commercial, but especially in our residential markets

• Maintain our very high customer satisfaction rates to deliver high Customer Retention

The Rentokil Model


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The Approach






The National Accounts Opportunity

• Drive Awareness that there is now an alternative supplier in Rentokil

• Continue to invest in national accounts Capability (e.g. sales teams and operational excellence)

• Customer Segment Targeting particularly leveraging our links with international customers

The Rentokil Model


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The Approach










Target Growth for Route Density

• A clear focus on where to drive Route Density growth: top 50 Metro areas and sub-scale markets

• Restructure routes to improve Route Optimisation to deliver the route density and profitability

• Consider route density in our Pricing strategy (e.g. National Accounts)

The Rentokil Model


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The Approach














Accelerate Growth Through M&A

• Continue our Strategic Approach to Acquisitions: National Coverage, Building Route Density in our sub-scale markets, and Expanding our Residential Footprint

• Continue to Deliver Strong Returns on the companies we do buy through rigorous Due Diligence and well-developed Integration Plans

The Rentokil Model


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The Approach














Accelerate Growth Through M&A

• Continue our Strategic Approach to Acquisitions: National Coverage, Building Route Density in our sub-scale markets, and Expanding our Residential Footprint

• Continue to Deliver Strong Returns on the companies we do buy through rigorous Due Diligence and well-developed Integration Plans

The Rentokil Model

A strategy designed to deliver Strong Growth and Rising Margins


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Stewart Power Chief Marketing Officer

A Strong Brand Around The World

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Rentokil Around The World Strong Positions And Strong Brands

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Strong Market Positions Around the World Strong and Consistent Branding

Market Position

Number of Rentokil Markets

Mature Emerging Total

Number 1 16 31 47

Number 2 2 9 11

Number 3 3 2 5

Number 4/5 2 1 3

An Excellent Position But Need To Keep Building Brand Strength

Building Brand Strength Through Integrated Programmes Leveraging Local Development Around The World

46

Building Brand Awareness Building Brand Salience Building Brand Leadership

Multi-Channel Marketing (Key Focus on Digital) Service Innovation

Winning The Battle For Customers Online A Core Area Of Competence That We Leverage Around The World

47

30% pa growth in online visitors and accelerating conversion rates

63% of new business for Rentokil now originates from digital channels

J F M A M J J A S O N D

2010

2011

2012

2013

2014

Org

anic

Vis

ito

rs,

ren

toki

l.co

m s

ites

Customers come to us to look for answers to their pest problems

Brand Leadership Through Innovation Tangible Value of New Product Sales

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What Innovation delivers for us

Technical Leadership Supporting Our Brand Leadership Position

Rentokil has always been defined by its Innovation and Technical Leadership

• Innovative Products – Fast, effective and targeted treatments – Detection and monitoring

• Technical Leadership – Technical surveys by sales colleagues – The knowledge and insight of our Technicians

• Direct upsell opportunities

• Realising a higher price premium

• New opportunities to sell

• Something new to talk to customers about

Differentiating Through Our Innovation It’s How We Do It As Much As What We Deliver

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Understanding Animal Behaviour

Developing New Products and Service Offers

Developing & Testing Novel Interventions

Regulatory & Technical Compliance

Measuring Product Efficacy

Break-out Sessions (by badge colour dot)

Break-out Presenters Room Session 1

10.10–10.25 Session 2

10.30–10.45 Session 3

10.50-11.05

1) Insect Control

Savvas Othon Mark Reader

Harpley

2) Rodent Control

Nigel Cheeseright Berwyn Evans

Bartholomew

3) The Role of Information

Jacob Catsburg Stewart Power

Prescot


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52

Andy Ransom Chief Executive Rentokil Initial plc

Rentokil around the World 1 May 2015

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The Rentokil Family The Most International Pest Control Company Around The World

54 66 Territories covering 91% of world’s economy – Market Leader in 47

Rentokil Around The World Our Coverage Is A Differentiating Advantage

55

Highest Coverage of World Economy Company-Owned Business Model

Clear Market Leadership Through Our International Footprint

Pest Company Territories % World GDP Rentokil 66 91%

Ecolab 15 63%

Terminix 23 58%

Rollins/Orkin 34 54%

Anticimex 13 18%

• Our model is for company-owned businesses – We do not franchise (except four small, legacy franchises) – We JV by exception (Japan and Saudi Arabia)

• Ensures consistency in delivery & performance and higher earnings from international growth

• Rollins & Terminix franchise international ops – Rollins: 31 out of 34 markets franchised – Terminix: 21 out of 23 markets franchised

Growth From Emerging Markets A Major Contributor To The Category’s Growth

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• Asia

• Latin America

• MENAT

• East Africa

• Fiji

• North America

• UK

• Germany

• France

• Nordics

• Pacific

• South Africa

• Caribbean

• Portugal

• Spain

• Greece

• Benelux

• Ireland

• Italy

Gro

wth

Po

ten

tia

l

Profit Contribution

11% of Rev 32% of Growth




• 11% of revenue but 32% of growth

• Growth rate of 31%

• Organic Growth of 12%

• Benchmarked against weighted GDP growth of 6.4%

Performance: Emerging Quadrant

Quadrant Positioning – Pest

A major source of growth today while building the pest business of the future

Paul Cochrane Regional MD, Asia

The Market Leader In Asia

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2012 2013 2014 CAGR

Revenue (£m） 41.4 46.6 52.3

Growth % +11% +12% +12% +12%

Organic % +11% +13% +10% +12%

58

Rentokil In Asia Good Momentum and a Strong Platform to Leverage Growth

Sourcing: RI Internal database

A Strong Base To Build From 12 Countries 224 Service Locations 1,865 Technicians and 91 Field Biologists

The Asian Pest Control Market Growth Outperforms GDP

£3.5m, +30% £4.0m, +2%

£0.9m, +49%

£13m, + 8.3%

£11m , +8.4%

£5.8m, +15%

£6.1m , +34.9%

£1.3m, +10.4%

£1m, + 5%

£1.5m, +1%

2

2

3

£2.5m, +6.6%

Sourcing: RI Internal database 59

£2.2m, + 12.5%

Rentokil Position 1 2 3

2014 Revenue, 11-14 CAGR%

The market leader across Asia with strong positions in all markets

Key growth drivers

• Established Pest Control Market – Mind-set on Pest Control Service • Continuous density building via geographic/customer tier expansion, right sector mix • Differentiation from service review, translating into increased customer retention, from 84% in 2011 to 87% in 2014 • Building best technicians in the industry through various training and engagement programmes • Winning sales team, equipped with solid technical knowledge • Robust sales and marketing plan and execution

Sourcing: RI Internal database 60

Case Study from Malaysia Leverage Brand and Strong Positions In An Established Market (2011-14 CAGR 8.3%) pa)

1

2

3

2012 2013 2014

Others

Residential

Offices

Industrial And Manufacturing (NonFood)

Food Processing

Food & Beverage

Key Facts

• Population: 1.8Million (as of 2010) – largest population in Malaysia, with a high standard of living, lowest poverty rate

• The state of Selangor has the largest economy, making up 23% of the total GDP of Malaysia

• The most developed in Malaysia with good infrastructure

• Residential, Food processing, Industrial & Manufacturing sectors are the core growth drivers

61

Shah Alam

+9%

+22% £m

Case Study from Malaysia – Selangor Branch Selling Additional Services to Customers for Retention (87% in 2012 to 89% in 2014)

Rentokil In Asia Focus on Audited Industries (Primarily Food) and Brand Protection

Food & Beverage Service

+18% +28% +21% +19% +9% +9%

Sector Split

2012-14 CAGR

13% 8% 9% 6% 13% 8%

+16%

62

Industrial & Manufacturing

Food Processing

Chain Food Retailer

Hotels Residential Office

13%

Export Assurance

Food Legislation and Auditing

Brand Protection

Rising Middle Class

Drivers

Rentokil is trusted to provide assurance in food hygiene - a key issue in Asia

Rentokil In Asia Huge Opportunity for Growth in China & India Pest Control Markets

Sourcing: (1) Global Pest Control Services Market 2015-19, Technavio (2) RI Internal database, external desk research & market intelligence including interview local Pest Control Association 63

£ 231 m(2)

£0.17 / capita

(1.1% of US)

£ 4,950m(1)

£15.30 / capita Sabiha to validate

1,390 m

Population: 1.26bn

323m 1,260 m

£ 128 m(2)

£0.10 / capita

(0.7% of US)

CAGR 15%(2)

CAGR 3.5% CAGR 12%(2)

Population:

Pest Control Industry:

Spend / Capita:

Growth Rate

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1

• 230-300 million middle class (est 630m by 2022)(1,5)

• 127 cities with 1 million + population(1)

• Top Consumption Trends (2013)(2)

- Pay for safety, only 26% feel satisfied on food safety - Rapid increase in dining out - 10% pa growth in leisure & vacation travel

• Rising trend in the consumption of services (Health care/Financial/Property/Travel/Retail)

Sourcing: (1) Helen Wang, the China Dream (2) Ipsos, Key findings of China Middle Class Quality of Life (3) The Times of India, Oct/14 (4) Hitting the sweet pot, EY ((4)World Population Statistics (5) Mapping China’s Middleclass, June 2013, McKinsey (6) STR Global, Jan/15

• 160 million middle-class(3)(est. 200M/2020)(4)

• 53 cities with 1 million + population(6)

• Drive different consumption patterns - healthcare, education, recreation, personal products and services

• New sense of nationhood in India - Drawn from the aspiring middle classes in cities - Linked by commerce and technology - Rising standards of living and good government(4)

Factors Driving Growth in China and India Explosive Growth of Emerging Middle Class Driving Up Expectations for Hygiene


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Factors Driving Growth in China and India Professionalising of Food Industry Rapidly Driving Need for Pest Control 2

• 2nd Largest retail market after USA(1) World’s largest on-line retail market(5)

• 33,000 large food manufacturers (sales more than £550K)(2)

• Booming food service industries - eg Starbucks doubling to 3000 outlets by 2019(3)

• 5,000 Government Food Safety Initiatives since 2009(3)

- New standards for production environments & processes - Traceability and accountability through supply chain - Tough penalties enforced by a new China FDA

• Aggressive entry from International Audit Bodies

Sourcing: (1)(2) GAIN Report, USDA, Apr/2013, Dec/2014 (3) Food Safety in China, SSRC, Feb/2014; The power of China Retail 2013, Delloitte(4) Coffee chains brew robust future in China, FT, 12/14 (5) iResearch

• Online food ordering $800m and growing 20-30% pa

• The Indian food manufacturing industry accounts for(5)

- 32% of total Indian food market - 14% of manufacturing GDP, 13% of India’s exports and

6% of total industrial investment

• India’s food manufacturer sector 5th in the world in exports, production and consumption

• 37,000 food manufacturers

• New Food Safety Regulations driving quality and hygiene to make India more competitive in global market


Case Study from China Driving Profitable Growth Through Targeting Top Cities (2011-14 CAGR 34% pa)

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0

1

2

3

4

5

6

7

2012 2013 2014

+31%

+44%

+28%

£m

Key Growth Driver

• Target Top 18 city Cluster, sector mix focus to build density

• High performing sales force, supported with defined sales & marketing program

• Operation optimization & technician capability building as the differentiation to build customer relationships

• Industry Evolution – Strategic partnership with Key Accounts, Food Safety Compliance body and Pest Control Association

Sourcing: RI Internal database

67

Key Facts Of Shanghai Branch

• Focus on 3 city clusters, Shanghai/Hangzhou/Ningbo with population of 99M (as of 2013)(1)

• GDP per Capita – SH (US$14,845), Hangzhou/Ningbo (US$11,225)(1)

• City Cluster including No. 1 Commercial city in China, Industrial & Food Processing Development Zones

8% 14% 21% 32% 4%

0

1

2

2012 2013 2014

Others

Office/FM

Industrial

Hotel

Food Service

Food Retailer

Food Processing

+32%

+25%

£m

Sourcing: (1) China Census

Case Study from China – Shanghai Branch Focus on Density & Sector Mix To Drive Revenue And Margin Improvement

2

2

3

3%, 121

3%, 3,000

3%, 3,000

38%, 30

24%, 300

31%, 200

14%, 33 19%, 15-20

• Target top 5% of the 6700 pest control

service providers in 8 key countries

• Drive consolidation in established markets through bolt-on acquisitions in Malaysia, Indonesia, Singapore, Thailand & Hong Kong

• Acquire for footprint expansion and density building in China, India & Korea to establish lead positions

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Rentokil In Asia M&A Accelerates Growth While Increasing Profitability

Rentokil Position 1 2 3

Rentokil Share, No of Providers

Strong Pipeline, Dedicated & Experienced Regional M&A Team

• Momentum in organic revenue growth

• Accelerating further through M&A

• Geography & sector focus to build density and profitability

• Meeting needs of target customer - Integrated service offer - Service extensions & innovation

• Clearly targeted sales & marketing campaigns

• High-performing sales team

• Outstanding customer service measured by Net Promoter Score

• Technician capability building & engagement program

• Transforming operation model via digital devices

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Rentokil In Asia Strong Position, Good Momentum, Huge Opportunities & A Clear Plan

Differentiated Service Offer Differentiated Service Delivery Differentiated Business Strategy

Alain van Lidth de Jeude Regional MD, South America

Our Expansion into Latin America


70

Focus On Latin America South America, Central America and Mexico

71

Dynamic Population Economic Potential Maturing Pest Market

• 600m Population – Growing 1.2% pa (0.7% in Asia)

• Young population – 28% under 14 years (22% in Asia)

• Urbanised Population – 79% Urbanised – 52% in Asia, 75% in Europe

• $9,500 GDP / Capita – $36k in EU, $6k in Asia

• GDP growth 3-4% to 2016 – Long-term forecasts higher

• Significant growth in food, technology & manufacturing – Core sectors for pest control

• Professionalising pest industry – Supporting exports into US

• High pest burden – Mosquitoes (esp. Dengue risk) – Rodent control

• International businesses – Looking for same standards as North

America and Europe

A Key Region for Long-Term Growth and Supporting International Businesses

Pest Control In Latin America Principal Markets

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Latin America £840m Market (including Mexico and Central America)

Consolidating with the arrival of International Players

Latin America is becoming a key part of the world Pest Control market

• Rentokil (6 countries) – Brazil, Colombia, Chile – Mexico, Guatemala, El Salvador

• Ecolab (3 Counties) – Mexico, Brazil, Chile

• Rollins / Orkin (12 Countries – all franchises) – Brazil, Chile, Ecuador, Guatemala, Paraguay, Peru, Uruguay – Costa Rica, Guatemala, Honduras, Mexico, Panama

• Terminix (4 Countries – all franchises) – Brazil, Chile, Honduras, Mexico

Colombia £60m

Brazil £320m

Argentina £45m

Peru £40m

Chile £35m

Other S America

£80m

Central America

£70m

Mexico £200m

Rentokil In Latin America A City-based Strategy To Drive Profitability

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Our Strategy is a City Strategy Rather Than A Country Strategy

South America Highly Urbanised

City Country Millions of People

Sao Paolo* Brazil 20

Bueno Aires Argentina 13

Rio* Brazil 12

Lima Peru 9

Bogota * Colombia 9

Santiago* Chile 6

Belo Horizonte Brazil 5

Medelin * Colombia 4

Salvador Brazil 4

• 20% of South American population covered in top 10 cities alone

Route Density Delivers Cost Leadership

• Route density & optimisation for lowest cost – More time on customers’ sites and less in their vans – Faster and lower cost response for emergency call outs

• Benchmark is relative density vs competitors

• Cities provide the absolute density

• In control of operations

Entering New Markets What We Look For In An Acquisition

74

Quality in the Metrics Quality in the Business

A rigorous M&A process to deliver the right opportunities

• City coverage in target regions/countries – Absolute density and density relative to competition

• Quality of financial performance – Volume and revenue growth vs market growth – Profit level and cost management – Synergy potential – Impact of closing inappropriate/unethical contracts

• Quality of contract portfolio – Target sectors – Service Mix & Upsell Potential – Retention Rates

• Quality of management and colleagues – Fit with Rentokil culture and values – Looking for leaders who will stay with us – Capability to absorb bolt ons

Rentokil In Latin America Our Journey To Date

75

Market Entry: 2011 Acquisitions: 1 Market Position: 2

Mexico


Brazil


El Salvador


Colombia


Guatemala


Chile

Rentokil In Latin America Local Growth Supporting International Growth

76

Rentokil’s Added Value to Acquisitions Delivering Growth for Rentokil

M&A into Latin America is delivering enhanced organic growth while building a strong position

• Ultimately the opportunity to grow faster – Accelerating growth still further within fast growing markets

• Access to our world class capability – The strongest brand in the market – Proprietary products and innovation – IT systems, mobile technology and customer extranets – Training and structured know-how

• Access to international businesses – A brand trusted to deliver to international standards – Introductions and support for international businesses

• Joining a group where colleagues can grow – For front line colleagues as well as management

2011 2012 2013 2014 2015

Turnover (£'000) 856 4.036 7.237 20.145 26.760

Growth% - 371% 79% 178% 33%

Organic % - 6% 26% 23% 17%

Chris Hunt Group M&A Director

Our Track-Record Of Creating Leverage Through Acquisitions

77


Creating Leverage Through Acquisitions Recap On M&A Case Studies

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City Density (Asia)

• Acquiring quality competitors in target city clusters

• Blending capabilities

• Bolts-ons in established markets for route density

• Back office synergy

We buy platforms in new attractive markets, build density and capability or expand our existing country footprint

Market Entry (Latin America)

• Identify the right platform – Quality in the economics and in the business

• Cultural fit

• Former owners stay and flourish

• Improve performance through RI technology and financial discipline

National Density (US)

• Highest M&A focus

• Extend footprint with medium sized regional deals

• Bolt-ons build local scale & density

• Rentokil sales and service models

• Back office synergy

Creating Leverage Through Acquisitions Strong Track Record

79

4 3 8

3

7 8

10

3

3

4

1

1

2012 2013 2014 2015 YTDGro

wth

Po

ten

tial

Profit Contribution

Acquisitions: 18 Revenue: £26m Bahamas, Brazil (3), Chile (2), Colombia, El Salvador, French Guyana, Guatemala, India (2), Korea, Mozambique, Saudi Arabia, Singapore, Turkey, UAE

Acquisitions: 2 Revenue: £1m Spain, Portugal

Acquisitions: 7 Revenue: £9m Italy (5), Netherlands, Rep. of Ireland

Acquisitions: 28 Revenue: £145m North America (21), UK (2), Lithuania, Zambia, Norway, N. Ireland, Australia

Pest Acquisitions since 2012

55 Pest Acquisitions since 2012

We have the in-house capability to identify, evaluate and execute Acquisitions at Pace

Creating Leverage Through Acquisitions Our Model for Value Creation

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• Market position & Experience

• Scale & density

• Customer/segment relationships

• Reputation

• Profitability

• Business Ethics

• Role of management

• Secure key customers

• Revenue synergy potential: – Rentokil Sales & Service models – Proprietary products and services

• Cost synergy potential: – Service Productivity – Property – G&A

• Rentokil Technology

• Investment Committee Review – Pre & post DD

• Track integration activities

• Track progress vs business case

• Post deal review (1 year)

• Bi-annual review of business case vs. actuals by plc Board

Disciplined Evaluation Clear Integration Plan Governance Model

We understand where and how we Create Value and have a Proven Model to deliver it

Creating Leverage Through Acquisitions Financial Value Creation – Deals done vs Investment Case 2012 to H1 2014

81

Gro

wth

Po

ten

tial

Profit Contribution

% of total spend: 76% Target IRR: 15 - 20% Actual IRR: 20%

• All quadrants met or exceeded IRR targets

• Integration activities accelerated

• Most deal structures adjust for shortfalls so underpin IRR returns

Total Performance (n=33 deals)(1)

We expect to deliver ~£50m of value-adding acquisitions each year

Acquisitions: 10 Revenue: +4% EBITA: +2% % of total spend: 20%

Target IRR: 15% Actual IRR: 20%

Acquisitions: 16 Revenue: -- EBITA: +16%

Acquisitions: 2 Revenue: -14% EBITA: +8%

Acquisitions: 5 Revenue: -9% EBITA: -26%

% of total spend: 1% Target IRR: 25% + Actual IRR: 27%

% of total spend: 3% Target IRR: 20% + Actual IRR: 23%

(1) Pest deals completed from 2012 to H1 2014

Creating Leverage Through Acquisitions In Summary

82

1. We have a very strong track record and a good pipeline of opportunity

Proven Track Record Proven Integration Model Proven Value Creation

We understand where and how we Create Value and have a Proven Model to deliver it

14 12

23

6

IRR

20% 20%

27% 23%

2. We have the model to transfer our know-how to acquired businesses

3. Our acquisitions deliver real financial value

Jeremy Townsend Chief Financial Officer

Pest Control: A Financially Attractive Category

83


84

Pest Control – Further Potential For Margin Improvement Low Capital Intensity/High Cash Generation

World Number 1 for Commercial Pest Control

Market Leadership in 47 out of 66 markets

• Pest Control ongoing revenue +8.5% in 2014 (+12% in Q4)

• Category profit +8.4% in 2014 (+10% in Q4)

• Pest Control: 41% of group revenue and 44% of group profit

• Clear capital allocation strategy focused on pest acquisitions

• 23 acquisitions in 2014; 6 in Q1 2015

• Further potential for margin improvement: M&A and organic growth will increase margins particularly in NA & Asia

• High cash returns on capital employed (c25%): low capital requirement and high cash generation

2014 Revenue: £740m 2014 Op Profit: £140m

2014 Op Margin: 18.9%

Netherlands Germany

US

UK

Australia

Other

41% 44%

Group Pest

Pest control delivers strong returns on capital

% of Group profits

44%

85

Pest Control – High Revenue Growth And M&A Focus Increasing Exposure To Higher Growth Markets

We have increased our exposure to Pest Control & Emerging and Growth quadrants We have increased our exposure to Pest Control & Emerging and Growth quadrants

Andy Ransom Chief Executive

Rentokil Pest Control A Compelling Growth Story

86


Rentokil = Pest Control


• Unrivalled global leadership position – Most international across 60+ countries

• Strongest brand around the world, particularly important in Emerging

• Significant operational leverage – Proven, repeatable lean business model with best people, tools and training – On average, 63% of sales originate from digital channels

• Innovating at pace for future growth – Global Technical Centre delivering innovation pipeline that’s second to none

• Strong position in higher growth/higher margin segments – Best management information tools

• Highly cash generative and clear capital allocation strategy – Strong M&A capability and excellent leverage out of acquisitions – Driving profitable growth through density

• Opportunities to expand into adjacent services – Vector control, marine, agriculture

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Documents

Rentokil Pest Control Investor Seminar/media/Files/R/Rentokil/... · Rentokil Pest Control Investor Seminar ... organic, price ... –Tighter regulation and enforcement eg food safety