REG - Rentokil Initial PLC - Trading Update

Rentokil InitialAnnouncement

11/09/2024 07:00

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RNS Number : 6621D  Rentokil Initial PLC  11 September 2024

 

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
(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.

 

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