Rentokil Initial (RTO) Investor update summary

Transaction and structure

• 10 Workwear and Hygiene businesses across Benelux, Germany and Central & Eastern Europe generated €328m revenue and €53m APBITA for the 12 months to 30 June 2016; valuation was 15.2x APBITA.

• Consideration was €520m cash and an ~18% JV stake; a fixed €19m annual dividend is payable for five years, with exit options after a three-year lock-up, extending into year five.

• The JV combines pro forma revenue of ~€1.1bn and APBITA/profit of ~€130m; completion was targeted for mid-2017, subject to EU competition clearance.

• Options cover Haniel’s Italy and Ireland Hygiene businesses, with combined annual revenue of ~€50m; other businesses in Italy and Ireland remain outside the JV.

Financial impact

• Proceeds were expected to reduce net debt/EBITDA from 2.5x to ~2.0x pro forma as at 30 June 2016 and lower annual interest costs by ~£7m.

• Pro forma adjusted EPS was 8.1p versus 8.5p; EPS was expected to be marginally diluted after completion, offset by £5m lower overheads run-rate by end-2017, ~£7m lower interest costs and a £13m pro forma JV profit share.

• Estimated disposal profit was ~€540m on estimated net assets of ~€265m; one-off transaction costs were estimated at ~£20m.

• Long-term leverage target remained 2.0x–2.2x net debt/EBITDA, with a commitment to a triple-B credit rating.

Strategic implications and retained operations

• Pro forma, over 70% of revenue was expected from Growth and Emerging markets, with ~60% from Pest Control and ~20% from Hygiene; Pest Control and Hygiene together were expected to represent ~80% of revenue and profit.

• 2017 bolt-on acquisition spend guidance rose to £100m, with investment focused particularly on Pest Control while Hygiene opportunities were also pursued.

• Global Hygiene operations were expected to remain in over 30 countries, with ~£320m revenue post-completion; France’s Workwear and Hygiene businesses were retained.

• Pest Control, Plants, Specialist Hygiene, Premium Scenting, Medical, Dental and other European operations remained outside the JV.