Rentokil Initial (RTO) H1 2017 earnings summary

Executive summary

• Ongoing Revenue was £1,056.0m, up 16.0% at CER; Ongoing Operating Profit was £122.1m, up 13.0%, and organic growth accelerated to 4.2%.

• Portfolio focus shifted toward Pest Control and Hygiene, together representing 82% of revenue and 92% of operating profit.

• The Haniel JV completed on 30 June, helping reduce leverage; full-year expectations were unchanged and medium-term targets increased.

Financial highlights

• Adjusted profit before tax rose 12.5% at CER and 28.5% at AER; adjusted EPS was 5.36p, up 27.6% at AER.

• Reported PBT was £592.9m, including a £462.5m net profit on disposal of businesses; net profit attributable to equity holders was £579.6m.

• Free cash flow was £68.1m, up from £57.1m; operating cash flow was £93.9m versus £97.7m in H1 2016.

• Interim dividend increased 15.2% to 1.14p per share; £43.5m of dividends were paid in H1.

Outlook and guidance

• FY 2017 expectations were unchanged; minimum free cash flow guidance increased to £150m.

• Medium-term annual targets: Ongoing Revenue growth of 5–8%, Ongoing Profit growth of ~10%, and free cash flow conversion of 90%+.

• FY guidance included net capex of £210m–£220m, adjusted effective tax of ~22.5%, cash tax of £40m–£45m, and working-capital outflow of ~£10m.

• H2 M&A spend was expected to be ~£50m; North America ambition was a $1.5bn business with ~18% margins by end-2020.