UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 6-K
__________________
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For
the month of October 2024
Commission File Number: 001-41524
___________________________________
Rentokil Initial plc
(Registrant’s name)
___________________________________
Compass House
Manor Royal
Crawley
West Sussex RH10 9PY
United Kingdom
(Address of principal executive office)
_____________________________________
Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form
40-F ☐
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1): ☐
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7): ☐
|
Q3
Trading Update dated 17 October 2024
|
|
17 October 2024
RENTOKIL INITIAL PLC - THIRD QUARTER TRADING UPDATE
Rentokil Initial plc ("the Group"), today issues a Trading Update
for the three months of the 2024 financial year covering the period
1 July 2024 to 30 September 2024.
|
|
AER1
|
CER
|
||||
|
|
Q3 2024
£m
|
Q3 2023
£m
|
Change
|
Q3 2024
£m
|
Q3 2023
£m
|
Change
|
|
Revenue
|
1,382
|
1,382
|
0.0%
|
1,444
|
1,394
|
3.6%
|
Unless otherwise stated, financials relate to Q3 2024 and are
stated at constant exchange rates.
●
Group Revenue
growth of 3.6% with Organic Revenue growth of 2.6%, including
continued strength in Europe, UK and Asia
●
North America
Organic Revenue growth of 1.4% and North America Pest Control
Organic Revenue growth of 1.4%
●
Action plans to
increase North America organic growth and rebalance the cost base
have been strengthened since the September Trading
Update
●
The Terminix
integration continues to go well. After a busy period in Q4 when we
will be piloting new pay plans and new satellite branches, there
will be a review early in the New Year to assess elements of the
programme, delaying the timing of synergy delivery by about 2 to 3
months while the review is completed
●
FY 24 revenue and
margin guidance unchanged
●
BBB (stable) rating
reaffirmed by Fitch Ratings. Year-end leverage expected to be
unchanged at 2.8x
Andy Ransom, Chief Executive of Rentokil Initial plc,
said:
"The Group delivered Organic Revenue growth of 2.6% in Q3,
with strength in the International business2.
In North America, we recognise the business has underperformed and
we are focused on delivering the operational improvements required.
We are expanding our initiatives to increase organic growth and we
are taking action to mitigate cost overruns.
"The Terminix integration continues to progress well and we have a
full programme of activity for the remainder of 2024. In the New
Year, we will review the early results of new Q4 integration
activities, including the piloting of new satellite branches, and
new technician and sales pay plans, in addition to assessing the
effectiveness of our expanded growth initiatives. Post integration,
we remain strongly optimistic that our business will lead a highly
resilient, growing market."
North America Business
Q3 Performance
●
Organic Revenue
growth was 1.4% (1.3% year to date). Both Pest Control and Pest
Control Services for residential, termite and commercial customers
were up 1.4%.
●
North America
customer retention slightly increased in the period to 79.9%. Our
pricing activities continued to be successful in passing cost
inflation to our customers.
●
After disappointing
inbound digital lead flow in July and August, lead volume markedly
improved in the second half of September. This was offset
throughout Q3 by a slightly lower sales close rate and average
dollar value for these leads.
●
North America
colleague retention increased further to 78.5% (30 June 2024:
77.8%), with improvement in both sales roles (up 0.4ppts to 70.6%)
and service roles (up 1ppt to 75.3%).
●
The North American
leadership team has been strengthened, with a new Chief Marketing
Officer and Chief Operating Officer appointed. The North America
Chief Financial Officer left the business and the role is being
covered on an interim basis by a senior finance colleague from
within the Group, pending the appointment of a full time
successor.
Growth Initiatives
We are implementing our Right Way 2 plan to increase organic
growth. We continue to enhance our sales and marketing approach,
and are giving greater focus to customer retention as another
important element to unlocking growth.
●
Organic search
leads. Whilst we have seen a recent positive improvement in digital
inbound lead flow, this is coming from our paid search activities
supporting the Terminix brand in particular. In Q4, we are looking
to deliver improved leads for a number of our other important
brands, while also increasing lead generation from our organic
search initiatives.
●
Satellite branches.
From Q4 2024, we will be piloting the opening of at least 10 new
satellite branches in key metro areas, to assess the value of a
physical presence to the visibility and digital presence of our
brands and services.
●
High performance
culture. There will be increased focus and accountability on
executing the selling "basics": speeding up response times to the
leads that we generate ("speed to lead"), improving the likelihood
of conversion; increasing the average number of sales proposals per
day; increasing managers' engagement with sellers; and driving
increased sales forecast accountability.
●
Customer experience
and retention. We're driving continued improvements at all phases
of the customer experience, from onboarding to renewal, supported
by an analytics upgrade to gain better insights into behavioural
data. We are adding three senior leaders in the customer experience
space, in addition to the 40 team members that have been added to
the dedicated Customer Saves team.
Cost Base
As stated at our September Trading Update, we expanded resources in
the North America business ahead of the peak season to deliver our
planned growth. With lower volumes than planned, the business has
been faced with the challenge of lower density that will continue
until organic growth improves. Given our elevated workforce costs
this year, we have more tightly managed overtime and labour as we
entered the off season. Since the September Trading Update there
has been a reduction in our sales, service and G&A headcount of
c.250 (c.$22m of annualised cost), in addition to normal ongoing
seasonal headcount adjustments.
Material and consumable costs in the North America business have
been higher than expected, partly due to inflation. There was also
an impact from a new ordering process for Terminix branches and a
weaker termite season that resulted in elevated inventory. To help
mitigate some of these effects, strict ordering controls at Branch
Manager and Regional Director levels have now been implemented.
Some additional cost due to inflation is expected to persist (c.$7m
on an annualised basis). C.$10m of material and consumable costs
are expected to unwind during Q4 2024 and next year.
Terminix Integration
The integration programme proceeded to plan in Q3. Systems and data
were migrated for another 28 branches with combined revenues of
$136m (a total to the end of Q3 of 36 branches with revenue of
$172m). At these locations, there was minimal disruption to
operations, with customer retention stable and colleague retention
remaining strong. We also migrated Terminix National Account
customers to the common systems platform, ensuring consistent
service delivery and streamlined account management for our key
customers. Lessons learned from migrations have been incorporated
into our Integration Playbook, designed to ensure continuous
improvement and efficient execution of future
migrations.
We are now in a very busy and important period for the integration.
Systems migration will continue for approximately 23 more branches
with a total revenue of c.$130m. For the first time we also
commence rerouting and piloting of our new sales and service pay
plans, to initially cover 8 branches encompassing over 250
technicians and about 40 sales colleagues. As we embark on this
phase, we take confidence from our rigorous planning and the
Group's extensive experience of branch integration.
This past year our company has experienced significant change
activities as we have implemented our integration and Right Way 2
Growth strategies. While we remain confident that these strategies
will lead to a stronger, faster growing organisation, during Q1
2025 we will review our optimal branch network footprint, which
will be informed by the early results of the new satellite branches
that will be opened during Q4 2024. We will also review the
effectiveness of the new technician and sales pay plans. The review
will result in 2025 synergies being pushed out by approximately 2
to 3 months and we will update the market on this review at the
Preliminary Results in March.
North American Pest Control Market
The North American pest control market, representing around half of
the global market for pest control services, remains an extremely
important and exciting market, which we estimate continues to grow
at around 4.8% p.a. (CAGR 2024 - 2028)3.
Whilst focused on the integration of Terminix and Right Way 2
growth plan, we remain strongly optimistic that post integration
our business will lead a highly resilient, growth
market.
Regional and Category Performance
Good momentum in Organic Revenue growth was sustained in Q3 in the
Group's other regions:
International
business (Group excluding North America): +4.4% (+5.0% year to
date)
●
Europe inc. LATAM:
+4.7% (+5.4% year to date)
●
UK & Sub
Saharan Africa: +4.2% (+4.8% year to date)
●
Asia & MENAT:
+6.5% (+5.4% year to date)
●
Pacific: +0.6%
(+2.9% year to date). Our rural pest control was impacted by
adverse weather and there was deferral of jobs in track spray weed
control operations
Organic
Revenue growth across all categories:
●
Pest Control +2.2%
(+2.2% year to date)
●
Hygiene &
Wellbeing +2.9% (+3.9% year to date). Good underlying performance
in the UK and Europe, held back by Australia, which lapped strong
prior year comparatives, and the non-repeat of credit note releases
in the UK in the prior-year
●
France Workwear
+7.4% (+7.5% year to date), delivering another strong
quarter
M&A
●
The Group's bolt-on
M&A programme continued to create value with 5 deals,
delivering annualised revenue in the year before acquisition of
£39m. M&A spend for the full year is now expected to be
c.£200m.
Balance Sheet
●
BBB (stable) rating
reaffirmed by Fitch Ratings, which post-dates and reflects the
information provided in the September Trading Update. The Company
is also BBB (stable) rated by S&P Global.
Board
●
As previously
announced, Mr Brian Baldwin, the Head of Research of Trian Fund
Management, L.P., has joined the Board as a Non-Executive
Director.
●
The Board has also
started the process to appoint at least one further Non-Executive
Director with specific experience in US network-based services
industries and/or business-to-consumer digital
marketing.
Outlook
●
There is no change
to the 2024 guidance provided at the September Trading Update.
Whilst we see opportunities for organic performance to improve in
H2 2024, our North America guidance for the period remains c.1%. FY
2024 North America Adjusted Operating Profit margin is anticipated
to be c.17.2% and Group Adjusted Operating Profit margin to be
c.15.5%. FY 2024 Group Adjusted PBTA is expected to be
c.£700m.
●
The Group's Net
Debt to EBITDA leverage is expected to be unchanged at c.2.8x at
year end.
●
FY 2025 profit and
margin will be affected by the timing of synergy delivery, expected
to be pushed out by approximately 2 to 3 months as a result of the
Q1 2025 integration review period.
●
The Board remains
confident in the Group's strategy and longer-term growth prospects.
Notwithstanding the near-term headwinds, the long-term market
opportunity remains attractive and we are confident that Rentokil
Initial is very well positioned to capture this
growth.
Conference call details
Today, 17 October at 9:00 am BST, Rentokil Initial Chief Executive,
Andy Ransom and Chief Financial Officer, Stuart Ingall-Tombs will
host a 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 9:00 am call: To join via teleconference use conference ID
6018644 with one of the dial-in options below. An audio webcast is
accessible at https://events.q4inc.com/attendee/316615478.
For the 1:00 pm call: To join via teleconference use conference ID
9089361 with one of the dial-in options below. An audio webcast is
accessible at https://events.q4inc.com/attendee/761600364.
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
Enquiries:
Investors / Analysts: Peter Russell, Rentokil Initial plc, + 44
7795 166506
Media: Malcolm Padley, Rentokil Initial plc, +44 7788
978199
Notes
1AER -
actual exchange rates; CER - constant 2023 exchange
rates
2Group
excluding North America and centrally managed supply chain
revenue
3Speciality
Consultants, 2024
Summary of financial performance (at CER)
Regional Performance
|
|
Revenue
|
Organic
Revenue
growth
|
||
|
|
Q3
2024
£m
|
Q3
2023
£m
|
Change
%
|
Q3
2024
%
|
|
|
|
|
|
|
|
North America
|
875
|
868
|
0.8%
|
1.4%
|
|
Pest Control
|
851
|
846
|
0.6%
|
1.4%
|
|
Hygiene & Wellbeing
|
24
|
22
|
7.9%
|
3.4%
|
|
|
|
|
|
|
|
Europe (inc LATAM)
|
293
|
275
|
6.6%
|
4.7%
|
|
Pest Control
|
141
|
134
|
5.8%
|
3.9%
|
|
Hygiene & Wellbeing
|
91
|
85
|
7.4%
|
4.1%
|
|
France Workwear
|
61
|
56
|
7.4%
|
7.4%
|
|
|
|
|
|
|
|
UK & Sub Saharan Africa
|
112
|
99
|
12.6%
|
4.2%
|
|
Pest Control
|
53
|
49
|
6.5%
|
6.5%
|
|
Hygiene & Wellbeing
|
59
|
50
|
18.7%
|
2.0%
|
|
|
|
|
|
|
|
Asia & MENAT
|
95
|
86
|
9.9%
|
6.5%
|
|
Pest Control
|
72
|
64
|
12.1%
|
7.6%
|
|
Hygiene & Wellbeing
|
23
|
22
|
3.7%
|
3.6%
|
|
|
|
|
|
|
|
Pacific
|
66
|
63
|
6.1%
|
0.6%
|
|
Pest Control
|
33
|
31
|
7.9%
|
0.7%
|
|
Hygiene & Wellbeing
|
33
|
32
|
4.5%
|
0.4%
|
|
|
|
|
|
|
|
International
|
566
|
523
|
8.2%
|
4.4%
|
|
Pest Control
|
299
|
278
|
7.6%
|
4.8%
|
|
Hygiene & Wellbeing
|
206
|
189
|
9.4%
|
2.8%
|
|
France Workwear
|
61
|
56
|
7.4%
|
7.4%
|
|
|
|
|
|
|
|
Central
|
3
|
3
|
18.5%
|
18.5%
|
|
Total at CER
|
1,444
|
1,394
|
3.6%
|
2.6%
|
|
Total at AER
|
1,382
|
1,382
|
0.0%
|
|
Category Performance
|
|
Revenue
|
Organic
Revenue
growth
|
||
|
|
Q3
2024
£m
|
Q3
2023
£m
|
Change
%
|
Q3
2024
%
|
|
|
|
|
|
|
|
Pest Control
|
1,150
|
1,124
|
2.3%
|
2.2%
|
|
Hygiene & Wellbeing
|
230
|
211
|
9.3%
|
2.9%
|
|
France Workwear
|
61
|
56
|
7.4%
|
7.4%
|
|
Central
|
3
|
3
|
18.5%
|
18.5%
|
|
Total at CER
|
1,444
|
1,394
|
3.6%
|
2.6%
|
|
Total at AER
|
1,382
|
1,382
|
0.0%
|
|
Summary of financial performance (at AER)
Regional Performance
|
|
Revenue
|
||
|
|
Q3
2024
£m
|
Q3
2023
£m
|
Change
%
|
|
|
|
|
|
|
North America
|
834
|
861
|
(3.2%)
|
|
Pest Control
|
811
|
839
|
(3.3%)
|
|
Hygiene & Wellbeing
|
23
|
22
|
3.5%
|
|
|
|
|
|
|
Europe (inc LATAM)
|
281
|
273
|
3.0%
|
|
Pest Control
|
135
|
133
|
1.3%
|
|
Hygiene & Wellbeing
|
87
|
84
|
4.3%
|
|
France Workwear
|
59
|
56
|
4.9%
|
|
|
|
|
|
|
UK & Sub Saharan Africa
|
111
|
99
|
12.4%
|
|
Pest Control
|
52
|
49
|
6.2%
|
|
Hygiene & Wellbeing
|
59
|
50
|
18.6%
|
|
|
|
|
|
|
Asia & MENAT
|
89
|
85
|
5.0%
|
|
Pest Control
|
67
|
63
|
6.5%
|
|
Hygiene & Wellbeing
|
22
|
22
|
0.6%
|
|
|
|
|
|
|
Pacific
|
64
|
61
|
4.3%
|
|
Pest Control
|
32
|
30
|
6.0%
|
|
Hygiene & Wellbeing
|
32
|
31
|
2.7%
|
|
|
|
|
|
|
International
|
545
|
518
|
5.3%
|
|
Pest Control
|
286
|
275
|
3.9%
|
|
Hygiene & Wellbeing
|
200
|
187
|
7.4%
|
|
France Workwear
|
59
|
56
|
4.9%
|
|
|
|
|
|
|
Central
|
3
|
3
|
18.5%
|
|
Total at AER
|
1,382
|
1,382
|
0.0%
|
Category Performance
|
|
Revenue
|
||
|
|
Q3
2024
£m
|
Q3
2023
£m
|
Change
%
|
|
|
|
|
|
|
Pest Control
|
1,097
|
1,114
|
(1.6%)
|
|
Hygiene & Wellbeing
|
223
|
209
|
7.0%
|
|
France Workwear
|
59
|
56
|
4.9%
|
|
Central
|
3
|
3
|
18.5%
|
|
Total at AER
|
1,382
|
1,382
|
0.0%
|
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. 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.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
Date:
17 October 2024
|
RENTOKIL INITIAL PLC
|
|
|
/s/
Rachel Canham
|
|
|
Name:
Rachel Canham
|
|
|
Title:
Group General Counsel and Company Secretary
|
|
|
|