Rentokil Initial (RTO) Investor Day 2018 summary

Market and strategic direction

• Global pest control market valued at $18bn, forecast to grow at 5% CAGR to ~$23bn by 2023; Vector Control adds a $3.1bn opportunity.

• Demand drivers include population growth, urbanization, climate change, rising pest pressure, food-safety regulation and higher expectations for pest-free environments.

• Pest control represented 64% of revenue and ~70% of profit; the portfolio was ~80% commercial and ~70% contracted. Pest and Hygiene share of revenue rose from 49% in 2013 to 83% in 2017.

• Operations spanned 73 markets, with #1 or #2 positions in 60; 10 new countries were entered over the prior five years.

• Strategy combines organic growth, retention, pricing, innovation, digital tools, route density, efficiency gains and disciplined M&A.

Operating model, people and productivity

• Recurring monitoring and prevention contracts provided visibility: 70% of annual revenue was known at the start of the year; Pest Control portfolio retention was 85.7% in 2017, with average customer tenure of seven years.

• Project 90 targets 90% retention; each additional 100 bps of retention was estimated to add 30 bps to in-year net margin. Project 365 targets 90% retention of short-term sales and service colleagues by 2020, with £10m annual savings estimated.

• Employer of Choice initiatives focus on hiring, training, engagement, reward and retention; over 85% of colleagues worked on the frontline.

• 2017 training included 680+ digital learning assets and 75,000 technical training days; company-wide colleague turnover was 14%.

• Route density, digital routing and technician tools improved Australia margins by 1%-2% over two years; Melbourne dense routes had a 1,500 bps gross-margin advantage over rural Victoria.

North America growth plan

• Targeting $1.5bn revenue and ~18% net operating margin by end-2020, from $1.1bn revenue and 13.6% margin in 2017.

• Plan assumes annual organic growth of 4%-6% and acquisition growth of 8%-10% through 2020, for a 12%-15% Pest Control growth target.

• Growth priorities include national accounts, growth sectors, Vector Control, targeted bolt-ons, Employer of Choice and Best of Breed programs for procurement, IT, back-office processes, branches and service productivity.

• North American Pest revenue exceeded $700m; 37 businesses were acquired in 2014-17, and six 2018 acquisitions added $33m annual revenue. Service footprint covered 90% of the U.S. population.

• Planned systems work included a single operating system, upgraded customer-service software, ServicePlus and ServiceTrak; benefits were expected to phase in through 2018-20, weighted toward 2020.