Rentokil Initial plc

Good morning, ladies and gentlemen. Thank you all for joining us today. In a few moments, Stuart's going to provide you with details of our overall performance in 2023 and our technical guidance for 2024. I'll then come back to provide a very brief update on each of our categories before we focus today on North America. Here, I'll start by taking you through our organic growth model and our analysis of what happened in the second half. Brad Paulson, our recently appointed CEO for North America, who I'm delighted joins us here in person, will then go through our Right Way 2 growth plan. I'll then wrap up with a brief update on the excellent progress that we're making towards integration, and then we'll take questions. So to set the scene, let me just say a few words by covering the highlights for the year. In 2023, we delivered a good overall group performance with revenue increasing by 45.8% to £5.4 billion, of which organic growth was 4.9%. Adjusted operating profits grew by 57% to 897 million pounds, and we delivered a group margin of 16.6%, which was an increase of 120 basis points. Adjusted EBITDA for the year was 1.2 billion pounds. Our bolt-on M&A continued to create value with 41 deals, delivering annualized revenues in the year before acquisition of around £106 million. Our cash conversion was at the higher end of our 80% to 90% target at 89%, and we reached a 2.8 times net debt to EBITDA ratio one year ahead of our plan. So a good overall group performance. As you can see, we continue to make very good progress against the vast majority of our targets, and even in the case of organic growth, where we experienced a more challenging second half in North America, we nonetheless delivered organic growth of 4.9% against our medium-term target of 5% plus. The group is performing very well overall, and we've got a plan in place to reinvigorate growth in North America. As I just mentioned, our second half organic revenue performance in North America was below our expectations at 2% and at 3.5% for the full year. At the heart of this was a reduction in inbound sales leads contributed to by a range of factors, including the performance of our own digital marketing channels, the impact of our ongoing integration activities, increasing spend by a number of competitors, and a softer consumer market. And I'll come on to explain this in greater detail shortly. Having analyzed our organic growth performance in the second half, we've created a detailed plan and we've put in place a very talented and experienced sales and marketing leadership team ahead of this year's pest season. We're calling this our RightWay2 growth plan, and it aims to enhance our performance across all aspects of organic growth in North America, from both new and existing customers, and in particular, to increase our inbound lead flow. We're investing for growth with around $25 million being put to work to support our growth ambitions with investments into the team, into sales leads from technicians, and into our digital channels. This also includes our first advertising campaign to exploit Terminix's position as the most recognized pest control brand in the United States. Whilst we've got a very clear action plan and we're beginning to execute that now, it will take some time to get the business to the levels of organic growth that we expect. And as such, we're expecting organic growth in North America to be between 2% and 4% in 2024, with around 2% expected in the first quarter. Touching very briefly on the excellent progress we're making on the integration, we've now completed phase one and we've exceeded our 2023 synergy target by $9 million. Our branch co-locations are going very well with around 100 fewer branch properties and with a further 75 or so to be exited this year. And we've announced today that we're increasing our gross synergy target by $50 million to around $325 million. We're investing $25 million of that into sales and marketing, which results in our total net synergy target increasing from $200 million to around $225 million. We're also extending the branch integration phase into 2026 to de-risk the program and to deliver these greater synergies. As a reminder, our original plan was to deliver net cost synergies of $150 million by the end of 2025. And our latest plan takes us to $187 million by that point, and then on to the $225 million by the end of 26. So a good overall performance, a plan in place to reinvigorate organic growth in North America, and an increase in our gross synergy target of $50 million. So with that, let me hand over to Stu.

Thank you, Andy, and good morning, everyone. I'll run through the financial highlights of what has been another good year. I'll start with the group level numbers and then as usual, I'll move through the regions and then look at cash and the balance sheet. Unless I state to the contrary, all numbers are at constant rates of exchange. The business delivered a good top-line performance in the year. Revenue was up 45.8% to £5.4 billion. Organic revenue was up 4.9%, supported by performances in Europe, Asia-Pacific and the UK and Latam. This translates to an adjusted operating profit of £897 million, a year-on-year increase of 57%. Free cash flow in the year of £500 million, up 34% on 2023, flows from the good profit performance. This represents about 89.4% adjusted free cash flow conversion. It's inclusive of legacy termite warranty claims, but excludes the impact of one-off cash flows mostly related to the Terminix transaction. These factors, combined with the continued success of our bolt-on M&A programme and the dividend payment, resulted in a net debt to adjusted EBITDA ratio at year-end of 2.8 times, achieving our target below three times one year ahead of our initial guidance. Excluding one-offs, we achieved just under 2.6 times, so only just in excess of our medium-term target of 2 to 2.5 times. At AER, diluted EPS, diluted adjusted EPS was up 8.8% to 23.08 pence. But at CER, diluted adjusted EPS was actually up 12.9%. Based on a good four-year performance, the board has recommended a final dividend for the year of 5.93 pence per share to bring the total dividend for 2023 to 8.68 pence per share, a 15% rise year-on-year and in line with our progressive dividend policy. So looking now at our performance by region, starting with North America. Our North American business grew revenues by 79.2% in the year, of which 3.1% was organic. This was achieved alongside significant progress in the Terminix integration. Organic revenue growth in pest control was 3.1% and 3.5% for pest control services for our commercial, residential and termite customers. This result was below our expectations, largely owing to lower new business lead generation in H2. As anticipated, the weaker Q3 2023 growth performance continued into the low season of Q4 at 1.2% for pest services. However, Q1 2024 is expected to be at about 2%. We expect full-year organic revenue growth in North America to be in the range of 2% to 4%. We've put in a plan, Right Way 2, to reinvigorate organic growth in North America, and Andy and Brad will take you through this later in the presentation. Adjusted operating profit in North America was up 95.9% to £618 million, reflecting the combined impact of higher revenues and the Terminix acquisition. Strong price realisation continued to successfully offset expected inflationary pressures. Adjusted operating margins were up 160 basis points year-on-year to 18.7%. we've continued to make good progress in colleague retention in the region. Total retention, including Terminix, was up by more than five percentage points. Total customer retention in North America increased slightly to 79.5%. Despite the attention given to the Terminix transaction, we've had another good year for Bolton M&A in North America, acquiring 13 businesses with combined annualized revenues of around £46 million in the year prior to purchase. The next slide takes a look at the strong progress in North American margins. To look at the underlying margin improvement here, we've used the pro forma baseline in 2022 of 16.3%, including the annualised standalone Terminix margin of 14.7% we disclosed at the 2022 prelims. On this basis, we see that North American margin has increased by 240 basis points in the year. This progress was driven by two key factors. Firstly, trading activities, including growth and density improvements, contributed about 100 basis points of margin. Secondly, synergies delivered $56 million, that's about £45 million, adding about 140 basis points to margin. And you can also see that once we exclude the distribution business, adjusted operating margins are already in excess of 20%. We expect modest North American margin progression in 2024, with improvement weighted towards H2, owing to the region's expected organic growth trajectory and additional investment in sales and marketing. Turning now to the European region, a really strong performance across the board here, driven by both effective price increases and good demand. Revenue rose by 14.6%, passing £1 billion, a significant milestone. Organic revenue growth was 9.2%. All three businesses in Europe posted strong numbers. Pest control revenue is up 21.8%. Hygiene and wellbeing grew by 5.8%. France workwear, which continued to exceed pre-COVID performance levels and was supported by new business sales, was up 13.2%. Adjusted operating profit rose by 12.5%. In Europe, as expected, short-term H1 margin pressure reversed in H2. The H1 impact and hyperinflation in Argentina saw a slight reduction in the adjusted operating margin for the year to 19.5%. While inflationary pressures have persisted throughout the period in Europe and most of LATAM, we've been successful at protecting margins with pass-through pricing. Customer retention has remained strong and the region has delivered some really impressive numbers in colleague retention, now over 90%. There was a total of 11 business acquisitions made last year, with annualised revenues of around £12 million in the year prior to purchase. Turning to the UK and sub-Saharan Africa, the region delivered good results against a difficult macro backdrop. Revenue was up 7.9%, with organic growth of 3.5%. Within this, pest control was up 8%. Hygiene and wellbeing increased 7.7% despite lapping COVID-boosted comparators in the medical waste business. There was a good contribution from the recently acquired urban planters business, which supplies plants to retail properties, offices and restaurants. This was accompanied by an improved performance year on year in the UK property care business, despite the property market slowdown. Regional adjusted operating profit was down slightly by 0.5% to £95 million, with a margin reduction to 24.1%. As previously stated, margin performance in the first half of the year was affected by the anticipated reduction in COVID disinfection and related services, such as needle and PPE disposal and the non-repeat of UK COVID credit note releases. However, as expected, these factors mostly fell away in H2. Inflationary pressures have been significant, but the region's long-established pricing and margin management controls have delivered a price performance that mitigates these cost increases. These price increases have been delivered alongside an improved customer retention rate. Colleague retention was also up strongly. The region completed two business acquisitions in the year with annualized revenues of about £18 million. Looking now at Asia and MENA, the year saw a good performance led by the region's largest markets, India, Indonesia, Malaysia and Singapore. Markets overall remained structurally supportive and there was a more positive contribution from China. regional revenues rose by 11.2 percent of which 10.2 was organic adjusted operating profit in asia increased by 4 to 47 million pounds and adjusted operating margin was down 100 basis points to 13.1 percent affected by the anticipated reduction in covid disinfection revenues customer retention was slightly down in the prior year while colleague retention was considerably improved the region acquired seven businesses with total annualized revenues of around eight million pounds And finally, turning to the Pacific region, another strong trading performance here. Regional revenue increased by 15%, of which 6.8% was organic. Pest control was up 25.2%, with notable strength in commercial services. Hygiene and wellbeing was up 6.4%. We've had continued good demand in the region for Ambius services. Regional adjusted operating profit was up 19.8%, with an increase in adjusted operating margin of 90 basis points to 21.7%. The customer retention rate remained strong and colleague retention in the region showed a marked improvement. The region acquired eight businesses with total annualised revenues of around £22 million. So that's a rundown of our regions, which as you can see have performed well overall in the year and evidence the benefit of our group's worldwide presence. The next slide looks at our group margin development through 2023. Overall group adjusted operating margin increased by 120 basis points. Execution on our strategy, densifying routes and products, M&A, optimising overheads and leveraging technology, as well as active cost management, continues to effectively support margin expansion. Our overall trading performance contributed a net 90 basis points, and in the first full year of the Terminix integration, Synergy Delivery added 100 basis points to group margin. As can be seen from the chart on the right-hand side, that's more than offset the 70 basis point pro forma underlying impact of the inherited lower margin Terminix business. across our geographies with the persistence of inflationary cost pressures, most notably wage inflation. But we continue to be very successful and remain focused on our ability to mitigate increases through pricing. In line with the updated integration timetable about which Andy will speak in a moment, the medium-term group margin target of greater than 19% is now expected to be achieved in 2026. Now looking at our cash performance, adjusted EBITDA was £1.28 billion, up 43% year-on-year. Non-cash, one-off and adjusting items represent Terminix-related one-time share incentive schemes and asset impairments. The working capital outflow was largely attributable to growth, and the movements in provisions relate to termite warranty claim settlements, which were at the expected levels. Net capital expenditure of £197 million was incurred in the period, reflecting growth and the inclusion of Terminix capital expenditure. Lease payments were up by 45.2%, reflecting a full year of Terminix. Cash interest payments of £166 million were £127 million higher than in the prior year, reflecting the timing of interest charge payments related to the financing of the Terminix transaction, with phasing as described at the interims and to be repeated each year. The increase in cash tax payments reflects higher profits. Free cash flow over £500 million was £126 million higher than in full year 2022. This resulted in adjusted free cash flow conversion of 89.4% at the upper range of our guidance. There was a £242 million cash spend on acquisitions in the year. Dividends account for £200 million of cash spend and the £107 million cash impact of one-off and adjusting items largely related to Terminex. Net debt reduced by $133 million to $3.146 billion. This resulted in net debt to EBITDA ratio of 2.8 times at the year end, achieving our target of below 3 times one year ahead of schedule. And that included a marginal benefit from US dollar FX rates at year end. Note that excluding integration costs to achieve, leverage would have been less than 2.6 times. Our next debt maturity is a 400 million euro bond due in November. About 81% of the group's interest costs are fixed, providing good visibility in a volatile rate environment. In July 2023, S&P Global reaffirmed the group's BBB investment grade rating, and in October 2023, the group received a second BBB rating from Fitch. Moving to technical guidance. On this slide, we update some technical guidance to help you with your models in relation to the full year. I'll let you read these in your own time, but we'll draw your eyes to a few items. On the P&L, we expect Terminix integration costs to be between $90 to $100 million. Interest is expected to be the range of $135 to $145. That's net of a non-cash hyperinflation credit of $10 to $15 million. Our full-year FX guidance reflects the strengthening of the pound against the dollar. We anticipate a headwind of between £25 and £35 million, which appears to be already largely reflected in market consensus forecasts. And as shown on the side, please do note the impact on 2024 of the planned closure of our Paragon distribution business in North America. As already stated, due to the uplifted expected synergies, we expect to achieve a group margin of greater than 19% in 2026. At this point, I'll hand back to Andy, who will take us through the business category performance.

Thank you, Stuart. Excuse me. All right, I want to give the North America section as much time as possible this morning, so in the interest of time, I'm going to turn the pages on our usual employer of choice and business categories at some pace. But I'm delighted at the excellent progress being made, and I'll be obviously happy to take questions later. Our tried and tested operating model continues to perform very well and if we start with employer of choice you can see that colleague retention has improved globally by 4.7% with all regions improving and that equates to around 1,900 more colleagues choosing to stay and therefore fewer roles needing to be recruited for. North America increased colleague retention by 5% in the year. And that's really great progress. And I'll come back to that later. You know how important safety is in our company. And in 2023, we delivered further improvements on our world-class safety standards. And we were again recognized by ROSPA with their prestigious Gold Award for the sixth year running. Customer service levels were high. Customer satisfaction, which we measure at branch level using the Net Promoter Score, is now approaching world-class levels in many parts of the group, including, indeed, in Terminix. In ESG, we've made continued good progress on emissions in 2023, and we're again ranked amongst the leaders in our sector, something that's very important to us, as I know it is for all of our stakeholders. If I turn now to pest control, the global market remains very healthy, with independent market analysts forecasting growth of around 5% to 6% per annum through to 2028, which, given our global footprint in around 90 countries, we're ideally positioned to exploit. Indeed, our focus here has delivered revenue and profit CAGRs of over 20% since 2015. And last year, our global pest control business continued its growth journey to around £4.3 billion of revenue, organic growth of 4.5%, and we delivered margin expansion of 70 basis points. Now, for those of you who operate in US dollars, you can see on the chart here the scale of our global pest control business, where we are the number one in all regions around the world with $5.4 billion of revenue and profits of just over $1 billion. Now, as you know, innovation in pest control is very important to our customers. It's a key growth driver. So let me just give you a few examples of why Rent-A-Kill is the global leader in innovation. We now have over 350,000 Internet of Things PestConnect units operating in our customers' premises, and that's an increase of around 23% year-on-year. We're launching EcoCatch, and that's our new proprietary outdoor fly control solution, which in our Innovation Center test was 60% more effective at catching flies than the current market-leading fly trap. And we've got Lumnia. Lumnia is for indoor flying insect control, and we've sold around 445,000 units since its launch in 2017. And we're now developing the next generation devices using cameras and AI-based technology. These are just three examples of our innovations that differentiate Rent-a-Kill from the competition, and each of these will start to be rolled out in North America this year. Moving on to pest control's sister category of hygiene and well-being, here we operate in a resilient market which we're expecting to grow by around 4-5% through to 2028. Since 2015, this business has delivered revenue and profit CAGRs of 6.5% and 8.1% respectively. And during the year, the business delivered revenue growth of 7.8%, of which 4.8% was organic, profits grew by 4.1%, and full year margins were 18.4%. Our core services inside the washroom delivered organic growth of 4.5% last year, and we continued to develop new products which support the increase in the number of service lines per premise which increased over the last 12 months from 1.83 to 1.92. Outside of the washroom, we delivered organic growth of 5.3%, with increased focus on wellbeing services such as air and surface hygiene, scenting and plants. Whilst M&A in hygiene and wellbeing performed well in 2023 with seven deals, delivering annualised revenues of £30 million, and that's ahead of our medium-term target to deliver annualised revenues from acquisitions of at least £25 million. In France, our workwear business benefited from excellent colleague and customer retention and delivered revenue growth of 13.2%, adjusted operating profit grew by 23.6%, and the business delivered margins of 17.5%, which were the highest for at least a decade. Turning to our bolt-on M&A program, we delivered 41 deals in 23 with annualized revenues of £106 million. And our M&A program continues to perform well at or above our required hurdle rates. And we've got a good pipeline in place for 2024. And our current view of M&A spend this year is around £250 million. So a good overall performance, and now let's move the focus to North America. Clearly, we're disappointed with organic growth delivery in the second half. I'm now going to take a few minutes to explain to you how our organic growth model works, both the elements that underperformed in 2023, but also the elements that performed well. Brad will then take you through the plan to reinvigorate growth in a little bit more detail. So let me start with the market, the US pest control market. That's the world's largest pest control market, and it represents around half of global pest control demand. Based on our internal estimates, we believe that the US pest control market grew by around 4% in 2023. And whilst this is around a one percentage point reduction against the historical average of around 5%, the current consensus of third-party commentators calls for a return to average growth rates of around the 5% mark in the period to 2028. And as we think about future growth in the US pest control market, it is perhaps worth noting that third-party estimates suggest that in residential and termite, the unserved market is nearly seven times that of the current served market. So this represents a significant potential future growth opportunity to expand the size of the market. So here's our model for organic growth in pest control, and it starts at the top with strong colleague retention and expertise in our frontline techs and in our sales colleagues. You then have sources of organic growth coming from existing customers, and they're running down the left-hand side of the chart there, and sources of organic growth coming from new customers, and they're running down the right of the chart. In short, happy, engaged, well-trained, experienced technicians will deliver a high quality service to our customers, which then, over time, drives up customer retention. happy customers are accepting of our annual price increases, but they're also willing to purchase additional services from us with our frontline technicians making recommendations to our customers and submitting those as sales leads to then be sold by the sales team. Once the sales team has sold the lead, it's important that the technician gets the work order completed quickly as an urgent response is often very important to our customers. As I'll explain in a moment, revenue from existing customers was not our issue in 23. That said, it's nonetheless clear that we've got an outstanding opportunity to generate improved growth from our very large existing customer base. So what about the right-hand side of the chart, new customers? Growth from new customers was undoubtedly weaker in the second half of last year, primarily because of lower inbound sales leads in residential and termite and in our high street business customers. And why was that? Well, our analysis is that there was not a single major cause, but rather a range of contributing factors collectively impacting on our execution. As I've mentioned, growth in the market was down, reflecting the tougher economic environment. The performance of our own digital marketing channels was disappointing at a time when our marketing and sales leadership teams were undergoing considerable change. Whilst our service technician retention showed excellent improvement, our frontline sales colleague retention was flat year on year, and in Terminix, it remains well below where we need it to be. At the same time, some of our competitors were increasing their spend in digital channels. And in addition, we were clearly very focused on the integration program, perhaps more than the external market. So we've analyzed each part of that model that I just showed you. And let me put a little bit more meat on the bones before I hand to Brad to take you through the right way to growth plan. So let's go back to the model. Was our low growth caused by colleague retention? Well, no, it wasn't. In fact, colleague retention was up by 5 percentage points in North America last year. And since the deal closed, we've delivered an impressive 8 percentage point improvement in Terminix technician retention. In 2024, as Brad will come on to highlight, there'll be no letting up on our focus on this, but we will have a far greater emphasis now being put on sales colleague retention. On the right hand side, our key customer service metric of state of service remains strong in 23, as was customer satisfaction, where Terminex's net promoter score of 65 is truly excellent. And indeed, this improved by one and a half points last year. Continuing around the model, our pricing remained tightly managed in North America, where we successfully covered cost inflation with increases to our prices. Overall, our technician lead performance in 23 was fine. In fact, it was slightly up on 2022. And we deployed the new trusted advisor program in Terminix. But here again, we believe that we've got a significant opportunity to improve in this space going forward. Last year in the United Kingdom, 88% of technicians submitted successful leads, whereas in North America, it was just around 50%. So turning now to new customers. Terminex is the best known pest control brand in North America. It leads on both top of mind and unaided brand awareness. So whilst awareness of the Terminex brand is excellent, it is fair to say that we haven't yet invested in the Terminex brand, particularly in terms of the top of funnel marketing, as we've been very focused on the foundation phase of our integration. There's clearly, clearly a great opportunity here. Brad will outline the plan shortly to start to leverage this market-leading pest control brand from 2024. Looking at the right-hand side, as I mentioned earlier, the part of the model that is scored in red is new customer acquisition, where inbound sales leads were down by around 2% to 3% in the second half. I went through the contributing factors earlier, including the performance of our own channels and increased spend by competitors. But with a good understanding of this, we've now created the right way to growth plan. Once we get leads in from technicians or inbound leads from marketing, there's a funnel through to the sales team. So how effective were the sales teams at selling those leads? Well, the short answer is they did a decent job at converting leads into sales with a sales conversion rate that was effectively in line with 22. But in my view, perhaps this could also have been better given that our sales colleagues had fewer leads to work on. So clearly, improving our sales colleague retention will be an important part of the plan. Once a sales lead has been sold, it's passed to the techs to complete the work order. As I mentioned earlier, the time between order and installation is critical. Completion rates remained high throughout the year. And whilst we do see good opportunities to achieve yet further productivity, this was also not an issue for us in 2023. So I've taken you through the model for organic growth. I've outlined the range of factors which influence the lower organic growth performance. in 23 and I hope that I've also started to demonstrate the range of opportunities that we're focusing on in 24 and beyond. But all of this comes down to execution, execution of the plan. And to ensure that execution, as you can see on the screen, we're starting the 2024 pest season with a highly talented, experienced, and fully staffed senior sales and marketing team in place. Leading that team is our new CEO for North America, and that's Brad. And with that, I'm going to hand it over to Brad.

Thank you, Andy, and good morning, everyone. Since joining the Renick Hill team in mid-December, I have been incredibly impressed with our team's commitment to our colleague and customer success, and I'm excited to represent our North America team today. You've just heard a summary of 2023, and everyone understands our organic sales growth was below expectations in the second half of last year. As a team, we are laser-focused on our plan to return our business to faster-than-market growth levels. To accomplish this, we will use our Right Way to Grow framework, which we expect to deliver a world-class service experience to our existing customers, while executing several key actions to increase our growth performance from new customers. Up first is Employer of Choice, an area we view as both a strength and differentiator for our team in the market. We believe strongly that our colleagues are the foundation to our success and will continue to invest in their training and development through our RTX University and RTX Way programs while also simplifying automating daily field tasks through the planned launch of over 60 enhancements to our field handheld devices. At the same time, we do recognize we have an opportunity to improve our sales colleague retention. As a point of reference, our legacy Rent-A-Kill business has historically delivered sales colleague retention at nearly an 80% rate, while our Terminex business has struggled with rates below 60%, particularly for colleagues with less than six months of service time. In 2024, we will address this opportunity by standardizing our talent acquisition and onboarding processes, while also modifying our new sales colleague compensation plans to better fit the required training and ramp up timeline for a new sales colleague. Our expectation is that over time, our Terminex sales colleague retention will reach 80%, which we believe will have a positive impact on our sales conversion rates. Next is our focus on delivering a world-class service experience. We feel we offer a differentiated experience and attribute much of that to our talented and trained service technicians. As I mentioned earlier, we will continue to invest in our technicians' skills and credentials through tiered and vertical specific certification programs. We will also double down on our efforts to mine available data to identify which parts of our customer experience have room for improvement. Our aim is to provide a frictionless experience for our customers and have targeted 2024 improvement opportunities in our existing billing, scheduling, and issue resolution processes. Addressing our recent digital marketing and customer acquisition challenges is one of our most critical 2024 execution priorities. To do this, we have developed a two-part plan that begins with increased investment in our Terminex brand. Starting this month, we will launch a new targeted campaign for our Terminex brand that reinforces our expertise and dependability through our new tagline, Terminexit. We believe the campaign's fun yet functional messaging will strengthen our top of funnel marketing efforts and help position Terminex as the first brand residential customers think of when they require pest control services. We also have plans in place to increase awareness and strengthen our Renickel brand, specifically with our commercial and national account customers. The second half of our two-part plan is reigniting our customer acquisition engine. Our execution plan to accomplish this is multifaceted, beginning with a fully staffed team of experienced and capable marketing and sales colleagues. While this proved to be A challenge particularly for the second half of 2023, our 2024 team is fully staffed and includes a terrific blend of internal and external talent that has a proven track record of connecting with customers and delivering results. Our most recent leader additions include our new digital marketing, residential marketing, and sales leaders, which all bring deep expertise and experience to their respective leadership roles. Next, we recently transitioned to new creative and media agency partners. We are confident we'll help improve the effectiveness and return on our marketing and search spend. And the final piece to our plan is the opportunity for improved bottom of the funnel initiative execution. This includes increasing the productivity of our own media and digital platforms, plus implementing plans to drive more efficient customer and geographic targeting. So, to get leads flowing from new customers, we're making our first investments in the powerful Terminex brand and funding the key marketing, sales, and digital experience initiatives we believe are necessary to return our business to historical growth levels. Okay, before we proceed, I'd like to take a moment so we may play a short video that highlights our new Terminex brand campaign. Please start the video.

When pests invade our customer space, they don't just need them out, they need them out fast. While competitors only focus on bugs, at Terminix, we focus on people. So we go above and beyond to put pest stress to rest. The moment customers reach out, we're on the job. And the second we start, bugs know they're finished. We do more because we care more. With the speed to take on anything and the heart to back it up, we protect what matters most. Because when pests show up, so do we. Spider problem? Well, Terminix it. Ant problem? We'll Terminix it. Rodents, wasps, termites, you know we'll Terminix it. With a new campaign from coast to coast. Let's Terminix it.

Well, like I said, we are all excited about this campaign and are looking forward to its launch this month. The next component of our Right Way to Grow plan is sales conversion. We consider this an area where we have performed okay, but believe we still have an opportunity to deliver material year-over-year improvement. Much of that improvement will be driven from the expected increased sales colleague retention we discussed earlier. In addition to that initiative, our new sales leadership is focused on reengineering our internal processes to decrease the amount of time between initial customer inquiry, site inspection, and ultimately sales completion. An equally important part of our Right Way to Grow plan is pricing execution. As Andy mentioned earlier, we have proven that our pricing practices are effective as we consistently mitigate the impacts of inflation on our business. That being said, with large, nationally scaled residential and commercial business segments, it is imperative that we use all available tools and technology to constantly evolve our pricing practices to deliver value to our customers for the services we offer. A key component of this will be the increased use of data and AI to deliver more market and segment specific pricing, while also seeking to eliminate any process inefficiencies from our existing processes. I'm also excited for the bundling and promotional plans we have planned for 2024, as both represent nice growth opportunities that we believe will appeal to our customers. We are eager to see our pricing practices evolve in 2024 and are confident we have the appropriate plans to once again offset any inflationary impacts on our business. The final two areas of our Right Way to Grow plan are customer penetration and technician productivity. Earlier, you heard about our trusted advisor program, which we all view as a significant opportunity to drive additional sales leads from existing customers. Today around half of our technicians in North America generate leads from our existing customer base, which is far below the experience in other countries in rent-a-kill initial. In 2024, we have already added an accomplished operations leader from our UK business with his singular focus being to develop the right process and tools to deliver over time the same trusted advisor participation rates and revenue generation realized in our top performing countries. Finally, Technician productivity remains a top priority. Two key actions in motion for 2024 include improved route productivity and on-time arrival initiatives through our Best Fit Routing Program and the launch of our Customer Service Quality Program that we expect will drive continuous improvement in our service experience while also being a great training and development tool for our field colleagues. In closing, I am proud of the progress our North America team continues to make as we come together as one team. I'm also confident we have the right team and the right growth plan focused on colleague retention, reestablishing our sales and marketing excellence, strong pricing discipline, and improved trusted advisor program execution. I believe our team is up to the challenge to execute this growth plan, and I am excited about our opportunity to deliver improved organic sales performance in 2024. Thank you for your time today, and I'll hand it back to Andy.

Thank you, Brad. I'm going to conclude with a few comments on the excellent progress we're making on the integration. You've all heard me talk about how we're bringing together businesses to create a pest control powerhouse in North America. We are the number one pest control company in commercial, in residential, in termite. It's a business with scale and density. It's got an outstanding branch and root network across the entire United States of America. This is a business with multiple drivers of revenue growth from our millions of existing customers and from new customers alike. and in addition the integration of the two businesses will deliver significant cost synergies and long-term growth opportunities as you can see on the screen for 2023 we set a net synergy target for the year of 60 million dollars i'm delighted to report we exceeded that delivering 69 million dollars in the year in total to date we've delivered gross synergies of 104 million dollars, we've made 22 million dollars of investments and we've delivered net synergies of 82 million dollars. We've now completed phase one of the integration program, and this slide covers just a few of the many activities and achievements that our disciplined approach to this integration has delivered. And just to pick out a few, we've streamlined and unified the organization to create a single Rent-a-Kill Terminix team. We've delivered a single payroll and benefits system for all 22,000 colleagues. We've moved 10,500 colleagues onto Workday, so all of our colleagues are now on a single people management system. And that change was crucial to aligning our people management processes, but will also enable the future harmonization of pay plans. And we've successfully reduced the branch property network by around 100 branches. Importantly, during this phase, our branch integration playbook has continued to be tested and refined, having undertaken integration pilots as well as successfully migrating 10 standalone acquisitions onto our IT platform. So the foundations for future success have been laid, and we've now entered phase two of the integration plan, which is the local planning phase ahead of full branch integration. Now we've got seven large regional pest control markets in the United States and each integration will be executed over approximately 10 months from planning to completion of the rerouting. The first six months will be used to develop specific local plans for the branches being integrated based on the playbook. This then delivers the integration of branch systems and the migration of data. For the following three months, we evaluate before then undertaking the final part of the process, which is the rerouting and the harmonization of tech pay. Only having completed the detailed planning phase, we then move on to phase three, which is the first full branch integration, which will begin this coming summer. Our first market will reduce the number of branches from 76 to around 50, and it will increase the average revenue per branch by around $2.5 million. As we move through this third phase, we expect the integration process to become more standardized, as the Terminix branches are all using the same systems and processes. In 2026, we reach phase four. This will mark the completion of the branch integration program and the delivery of our new synergy target. Importantly, post the integration, our ambition remains to deliver organic revenue growth in pest control services of one and a half times the North American market over the medium term. At the very heart of our integration is a commitment to best-in-class technologies, systems, and processes. And whilst this is an extremely important part of the overall story, it's perhaps not the easiest to communicate. So we've produced this short video to bring the IT program to life for you.

As pioneers of pest control, Renekil and Terminex are two brands with a proud history of innovation, revolutionizing not just their products, but how they service their customers. Now, with the integration of these brands under one roof, we're entering an entirely new era of innovation, a digital era, and we're already seeing results. so what's been done so far well our digital teams have already ensured that the talented personnel working across both companies are well connected well supported and have all the infrastructure in place to begin working together at speed these foundations are ready for full integration but what does this mean for customers and what does it mean for growth Well, for one, it means an improved experience for our Renekil and Terminex customers. With the introduction of digital channels, Renekil and Terminex customers now have a 24-7 self-service option, allowing them to find rapid solutions to simple problems related to everything from billing, appointments, and more. As a result, our call center operatives, the backbone of our customer service, now have more time for those complex calls that need a human touch. They also have more tools at their disposal. With a CRM encompassing the entire organization, over 650 Renekil colleagues are now equipped with a 360 degree customer profile, full case management and guided workflows that drive consistency, cost efficiency and first time fixes. And we're not just stopping here. We're equipping colleagues across the entire organization, including those in the field. our sales colleagues are now being equipped with the field sales app the only tool they need to generate proposals finalize sales on location and capture payment we are also empowering our service technicians to become trusted advisors to their customers with the trusted advisor app providing them with a simple guided digital checklist that allows them to identify customer needs and solutions whilst already on site saving the customer and our business time With a dedication to cultivating high quality data, we are now able to store and access both companies from our big data platform. The command center then provides key decision makers across Renekil and Terminex with a rich understanding of actionable data for both colleagues and customers. This has also opened the door for us to start exploring the opportunities AI can bring. We've already completed a private AI cloud setup and have identified four priority use cases, including lead conversion, renewals, dynamic pricing, and client retention that are showing promising results. And soon, we'll have finalized our AI blueprint, gathered baseline metrics for AI performance, and began designing data models to bring all of this to life. Our IT teams have made excellent progress managing the major complexities of this integration program and have built a framework in which two titans of pest control can integrate and continue to innovate together. There is a lot of work still to go, but we've partnered with the best in class companies such as Google, Workday and Salesforce to complete the planning stage. We will be ready for integration and all of the exciting opportunities this will bring.

Right, so excellent progress in technology, as I was saying. Now, I know a lot of you here today are now termite experts. After my teaching last year, I'm pleased to say, as you can see on the chart, we've made good continued year-on-year progress in 2023 to address the historical termite warranties. So before I wrap up for questions, here's a summary of our plan for synergy delivery through to 2026. We've increased the gross energy target by $50 million. We've increased our investments in sales and marketing by $25 million, and therefore expect to deliver net cost synergies of around $225 million by the end of 2026. In summary, last year was a good year for us, a good overall performance, organic growth around 5%, margins up 120 basis points, cash conversion of 89%. We've reduced our net debt to EBITDA ratio to 2.8. We've beat our synergy target. And we go into the 2024 PES season with a fully resourced senior sales and marketing team ready to execute the right way to plan to reinvigorate growth in North America. So with that, thank you very much. We'll now take any questions. We'll start with questions in the room, and then we'll take additional questions from the audience online.

Good morning. Suhasini from Goldman Sachs. I have three, please. The incremental investments in sales and marketing, $25 million, when should we expect the benefit from this plan to drive improvement in organic growth? Is it Q2, or is it more second-half-weighted? And have you already started the new investments as of January, or is it yet to start? second one what's your plan for the distribution business in north america please it's been dilutive to both growth and margins in 2023 do you really need to be in this business And the third one, on slide 27, you've mentioned that while overall pest control growth organic has been 4.5%, North America organic growth has only been 3%. Maybe Terminix has been a bit diluted here. So can you maybe talk about what's happened historically and what gives you the confidence to target 1.5 times the pest control market growth in this region in the future? Thank you.

Thanks very much. Sales and marketing spend, where you spend your dollars and where you put your focus is a pretty competitively sensitive subject. I hope you won't be surprised or disappointed if I'm not going to give you a lot of detail as to where we're spending the money. We've spent a lot of time working on the plan, creating the plan, planning the plan. And pest control is a seasonal business. The season in North America typically starts in March, second half of March. Depends when that big yellow thing in the sky comes out. And if it's a hot early spring, that's great. The season starts early. So it's really been geared up to put us in a good place to hit the season. in a much stronger place than we've been previously. A little bit difficult to predict the future in terms of how is it going to unfold. We've already said, we wouldn't normally, but this is a topic of great interest, I understand. We've already said we expect around 2% for the first quarter. We've had two months of the first quarter, so we can see broadly where we're tracking. More than that, I can't really say. It does depend a little bit on the season. It does depend how impactful our campaigns are. But the spend, I'll give you a slight bit more detail. To drive your performance through your digital channels, you've got two modes here. You've got your organic and you've got your paid. And we're working on both. So organic is, as you all know this, I know, but organic is when you do, let's say, a Google search or any other search engine search, the first few that come up are paid ads, and then the next lot that come up are organic. So you've got to work on both of them, and you should assume that we're putting quite a bit of focus into both, as indeed the top of final marketing is the ad campaign. Distribution, do we really need to be in it? That's an interesting way of asking the question, I suppose. Do we really need to be in any business? The distribution business gives us vertical integration. It means that we can get a large volume of chemicals, pest control supplies into our business with the benefit of a lower price than we would otherwise buy externally in the market. It is a much lower margin business. All distribution businesses are much lower margin than service businesses, typically. We review the portfolio with the board every year. Every year we look at those sorts of questions. Should we be in this? Is there an opportunity not to be? We don't have to be in that business. We choose to be at the moment. We'll keep it under review, is all I'll say. Your third question, I think, was sort of really, I guess, at the heart of, well, maybe rephrase it, what gives us the confidence that we can do one and a half times the market? It's really that dartboard chart that I labored, and I appreciate I did labor it, but growth comes from quite a number of different sources in our market and in our business. By being really, really good in all of those areas, and also by being substantially bigger with better density than all of our competitors, it's the combination of execution excellence and our market position that gives us that confidence. We do it in other markets. You know, you've seen some of the performances coming out of Europe. You've seen some of the performances coming out of the other markets. But I know I'll bore for Britain on this one, but that model of great colleague retention feeds great customer retention if you've got both of those in place and you've got the most innovative business in the industry, more innovation, more new things to excite customers about. That's a winning hand. So I'm very confident we'll get there, but we've got to get to the other side of this thing called integration before we can start delivering on that. Thanks.

Hi, it's James Rose from Barclays. I've got two, please. It seems like the pilots are largely complete now. Could you tell us what you've learned incrementally from them, and are there any tweaks to the integration program since the last time you updated us? And then, secondly, on the higher growth synergy target announced today, where has the confidence come from to increase that target? So far, you've done a lot of preparation, but you haven't done an actual regional integration just yet.

All right, James. We've done a lot of pilots. I mean, that video of IT, I mean, I know it all looks simple and straightforward. That is a hell of a lot of work in there. And every one of those items, whether it's the handheld that goes to the tech, whether it's the customer service system, interface with the customer. So everything you've seen there has had to be piloted, tested, and retested. I don't know that we ever really stopped piloting. One of the learnings, you asked one of the learnings, one of the learnings is, I wish the following statement wasn't true, but all branches are not equal. They come with their nuances. They come with their idiosyncrasies. So every branch, you think you've got it all, And then you'll say, oh, I didn't realize that branch did something a little bit differently than the previous branch. So there's always going to be an element of tailoring the integration. That's why we do this long planning phase, to make sure that we've got it all. I wouldn't say we've fully piloted out, but I think we've tested and tested and tested lots and lots of things. In terms of other learnings, I think in the earlier pilots, the importance, and this is why I say after a while, they sort of become cookie-cutter. And once you've done the first one, that will be the most challenging. The second one should be a bit easier. The third one should be... Once you're getting down to doing 50, 60, I won't say they're going to be easy, but they should become much more cookie-cutter. I think having what we're calling a pit crew, it's sort of taken from a Formula One type, you know, the car comes in and everyone knows exactly what they're doing. So... As we do the full integration come middle of the year, those integrations will not be, you know, here's the playbook and good luck, you know, boys and girls. It's here's the playbook and here is a team that will be with you through that process. So having the hands-on pit crew to take the branches through the process. to having dedicated customer service lines. So if we do screw up in a customer, the customer calls up and says, where's my technician? Where's my service? It doesn't go into our call center. It will go into a dedicated customer service rep who knows all about what's going on in that particular branch. So I think there's some real practical learnings. On the synergy piece... Sorry, James. Just repeat your question. I was off then. I was fine. Yeah, thanks. Where's the confidence? We've always had a very, very, very detailed plan. We keep that plan up to date. We track it every single day, but we're tracking it every single week. We have fortnightly reviews of the programme. And we make sure that all of our colleagues who own a piece of that synergy pie update their assumptions regularly. So what have we learned? Why is it okay? It was a bit more in procurement than we assumed. Okay, we can add to that. There's a bit less here. So it's really just been informed by our experience and the progress that we're making. You saw we delivered ahead of plan this year. It would be wrong to suggest that we found a rich new seam of gold that we hadn't identified. It's more that we can see now the evidence that we know what we can get out. And it's coming from both the SG&A and the branch network. It's coming from both. Thanks. Questions for the CFO, surely?

Hi, it's Andy Grobler from BNP Paribas. So one for Stuart to start with and then two on North America. Just in terms of the central cost for 2023, that came in below, I think, expectations. Can you just talk through the drivers last year and then what you think will drive the increase in 2024? And then on to North America. When you talked about colleague retention, clearly it's much lower still at Terminix. Can you split out a bit between those new joiners, the people that have been there for six months, don't like it and leave, what the difference is? And then I guess explain why when you're treating people the same, paying them the same, there's such a difference between those legacy Rentacle people and the legacy Terminix people. And then onto branch integration. As we go through that during the year, from your experience, as you go through that process, what is the impact on growth? Do you get one, two, three months, or whatever it may be, where focus is just elsewhere and growth rates slow down? And then how long does it take to come back? Thank you.

Yeah, so central overheads, there's three or four things going on in there. Firstly, we had a couple of short-term credits that we just got in 2023 that won't recur. Sorry, I don't think my mic's gone off. Kevin? So we had a couple of non-recurring credits. We also, you know, you can imagine as we were looking at Q3 Evolve, We weren't particularly enjoying the growth rate that we were seeing there. And we're a very operational, responsive business. And the cry goes up in Rent-A-Kill initial. And we've got a fabulous team across the globe. We've got a fabulous central team. So we really nailed down in the second half of H2 to make sure that we could deliver our undertakings to the market. And you see from the results, we absolutely did. So we've got a couple of things going on there in 2023. And then 2024, what you've got is the annualization of investment. So some of the investments we're making to deliver the acquisition are actually being born at the center. Global workday system, for instance. Identity management, which in this IT security world we all live in is absolutely critical. So we're making investments there. And then we've got a bunch of compliance stuff, so SOCs in particular. we bear a full year of that in 2024. So there's a chunk of investment that's actually happening in the centre that's related to Terminix, but that sits in central overheads. And then you've got the, well, let's assume we deliver our undertaking, so you've got a more normal level of cost in 2024 than we had in 2023. So there's a number of interacting elements to that, Andy. Can I just ask, what were the benefits? Just insurance benefit we got, a slight listing benefit that we got. So nothing that would sort of raise its head, but when you do the bridge, it's one or two million on those sorts of things. So it's nothing remarkable, honestly.

Right, Andy's second question is in two parts. Do we see a difference between the tenure of levers in 0 to 6, 6 to 12 newcomers versus people who have been a while, and why do we see a difference between heritage, rent-a-kill, heritage, Terminix, if people are paid the same amount to do the same job? And the first part is a really good question, and it's not a rent-a-kill factor, it's a global phenomena that you can ask any big company and ask their HRD, they all see the same phenomena, that We struggle. The world is struggling. Once you've hired someone, hiring them is the first challenge. Can you find the right people? They don't stay as long as they used to. So the nought to six, we really laser focus. We have every single branch, thousands of branches around the world, every single branch is monitoring that 0 to 6 and 6 to 12, because to your implied point, if you can get someone through the first 12 months, then we tend to hold them for quite a long time. So part of the answer to the question is, well, in tight labor markets, do you always hire the best candidates, or are you hiring the available candidates? So we put a real emphasis on the quality of finding great candidates. The next thing is trying to create a world class first day experience. And people tend to leave pretty early if when you join a company, it isn't a great experience in the first few weeks. So we've worked on things like that. We do things like Friday afternoon calls. It's one of my theories that people leave an employer over the weekend. They've had a bad week. They go home. They kick the cat and don't come back to work on Monday. And so if you can reach out to people on a Friday and say, how was your week? And can we do anything to improve it? So we're really, really focusing on that nought to six, because it is where our biggest challenge is, absolutely. To the second part about Terminix and Rentacle, well, that's kind of the point to a degree. We haven't harmonized pay yet. That's still to come. We haven't harmonized pay for sales colleagues, and we haven't harmonized pay for technicians. That's part of the investment that we're making, and it's part of what happens when we start to integrate branches. So you've got that. But sort of linking it to the first point of the question, the... Sales pay plans for Terminix colleagues really makes it quite difficult to get through the first six months. We make it, in my view, in Brad's view, and he's come in and looked at this and said, we need to help our sales colleagues through the first six months because the pay plan doesn't do us any favours in that regard. So I think it's one of the changes that Brad will be implementing fairly soon is to... moderate how we structured early new joiners in sales. And that's a key thing. If we can fix that quickly, then we will start to see the changes. So I don't think, you know, part of it is we've got different pay different. We've harmonized the benefits, but we haven't harmonized the pay. Part of it is this historical legacy of When do we start paying you a salary? When do you go on to a full commission basis? It's a really detailed subject. We can have a chat over a coffee if you want. Branch integration impact on organic growth. Probably not going to like the answer I'm going to give you, but the answer is it depends. It just depends. We've done many, many integrations over the years where we've seen zero impact on organic growth. Absolutely none. And that's clearly what we'll be targeting and trying to do. But we've also seen impacts of integrations where we've seen a few percentage points of organic growth. Why? What's the issue? Why do you see any impact at all? Well, the only reason you'd see impact is if you do a poor job of making the change with your customers. I'm your technician. Andy, you know me. You like me, hopefully. I've been looking after you for some time. And then we're going to switch it around because the only way you get synergies out of the network is you've got to reroute. I went into America and then we've got to reroute. Then you tighten the roots and therefore we're going to have to make some changes. So Stuart's now going to be your technician going forward. If we don't do a good job of that handover experience as I come out and Stuart comes in, then we've given the customer a reason to think, okay, maybe I'll look around. So that's the pinch point in the integration. You've got to get that. Got to communicate to customers. Got to give them a great experience. And the vast number of times, the customers are absolutely fine. They're absolutely fine. It's only if we do a poor job of that. And that's why it's so much in the detail and so much in the planning. That's the answer.

Hey, thank you. It's Ian Zafino from Oppenheimer. Can you guys maybe just touch upon the competitive environment you're seeing in North America? You know, when you kind of look at your share, you know, maybe who are you donating share to? Is it mom and pops? Is it larger players? You know, if you look at the larger players, they're growing quite rapidly. And then, you know, when you think about kind of your self-help plan, how does that work challenging, let's just say, a mom and pop versus a larger player? And maybe where is that all targeted at? Thanks.

Thanks. I don't know whether I like the phrase or don't like the phrase donating share. It's certainly not something that I've ever considered doing. The competitive landscape in North America, A, it's a very competitive marketplace. Always has been, always will be. I started this 15 years ago. consolidating the marketplace by going and doing acquisitions. 15 years ago, the estimate was there were 19,000 pest control companies in the United States. 15 years of consolidation, the estimate is there's 19,000 pest control companies in North America. There's just a lot. And they are mom and pop. They are local. make the point, don't think of us as a multinational. Think of us as a multi-local. So you win and lose market share locally. Yes, there is a national account piece to our business. Of course there is. But that isn't really the story here. It's locally. So you've sort of put your finger on it. For us to be successful or not successful, we've got to win in hundreds and hundreds of cities in the United States. But the great thing is we've got the best footprint of any competitor in the United States. And when we finish this, our local position will be fantastic. Terminex is the best-known brand in pest control in those cities. It already is before we start to invest it and turbocharge it and put emphasis behind it. But you're absolutely right. At one level, you've got to have a local plan as well as the central marketing plan. And so the main area you would see, I would say, is in reviews. Google reviews or whatever, Angie's List reviews and So it's really, really important that in every one of those local cities, when we get happy customers who've had a good experience, if we can encourage them to leave us a nice five-star review. Those five-star reviews are what win you a lot of local business against the mom and pops. And they can do it as well. And so you're absolutely right. You've got to have the central marketing piece with the... the overarching brand, but this thing only works if you get it right in hundreds and hundreds of cities, which is why it requires a lot of focus, but we have to have local content as well. I don't honestly think the competitive rivalry has changed in any sense. It's not like you lose a big piece of market share. You're losing... you know, $1,000 customers in towns and cities, and you're winning $1,000 customers in towns and cities. And that's why, you know, the concept of seeding share or losing shares is a little bit difficult one to sort of work with. It's not like one big competitors coming in and hoovering up a big chunk of your business that doesn't, you know, you don't win or lose share like that. It's lots and lots and lots of small accounts. That's why we've got to get the marketing. And that's why we have the local marketing plan to support the national one. Sure.

Good morning. It's Nicole Mannion from UBS. Just one question, please. Could you run us through the definition of organic growth that you've used in full year 2023, and if that's been the same as what was used in H1, and then how it compares to previous years? I know there's that helpful detail in the release today, but if you could just run us through that, that would be great. Thanks.

Yeah, I'll just take that one. Hi, Nicole. So for everything excluding the Terminix transaction, the definition of organic growth has not changed for many years in Rent-A-Kill Initial. So that's the first thing to say. We made the decision to take a slightly different approach with Terminix because Generally speaking, we don't use the pro forma revenue base for a business that we've acquired as part of the organic growth calculation. But for Terminix, we really wanted a very pure like-for-like calculation because that's what we believe would be most representative to the market. So you put these two businesses together. If we'd held them throughout that period for the full year, what would that like-for-like growth be? And so we adjusted our policy ever so slightly for Terminix. That meant in 2023, we took a slight hit against what our standard approach would have been for 2023 for the group aggregate calculation of organic growth. It only applies in the first year of the calculation. And in 2024, all falls away, all standard back to usual. So we made an exception. four terminics within that calculation, but that was really so you got a very pure like-for-like view of the world, Nicole.

Hello, it's Dominic Hedrich from Deutsche Bank. Three for myself. Firstly, just on the net debt sort of strategy or the leverage strategy, obviously I think net debt was down by around 100 million net this year. Are you happy with that tenner in terms of the year-on-year declines? I know you put up the dividend. Obviously, you've still got the M&A in there. Is that sort of the level of deleveraging that you're... I'm happy with, and I suppose along with that I suspect the net debt to EBITDA, a lot of the driver of the decline in that is going to be the EBITDA rather than the level of net debt, as it were, if that's correct. And then two other things. I know that you mentioned around about better colleague retention in North America. I think during the numbers, if you look at the branch managers at Terminix, I think there's been about 18% churn there since you closed the deal. That seems quite high. Is that a level which you're surprised about or something which just happens to a voluntary level? And then the last question is just on the delayed integration. What's the best way of thinking about that? Do you feel there's too much stress on the business to perform to the level that you want it to if you'd kept to the original plan and that growth would have been even lower this year if you had kept to that or if you just maybe just talk through a little bit about your thoughts there. Thanks so much.

Yeah, so I'll start with deleverage. You're absolutely right that most of the deleverage is coming from the DAR element rather than the debt. So I'm very content with the way that's worked. It's coming inside our guidance. We've got a little bit of benefit at the year end because average earnings at a slightly higher dollar rate, a lower dollar rate than the year end net debt. So we got sort of 20 basis points of improvement, 0.2 of a turn, something like that, but modest. Very happy with the trajectory. You're right, when we put our business plan together, we've reflected that progressive dividend policy. We've reflected headroom for M&A. In the short term, the additional element is that circa $100 million of... cost to achieve that we're bearing in 2024. So if you sort of add together the cost to achieve and the modest margin increment in the US, then I expect our deleveraging is probably not going to be the same trajectory in 2024 as it was in 2023. But once we get through the cost to achieve, we start to achieve the synergy delivery, then I expect that curve to start going down pretty quickly, 25 into 26. But entirely in line with our plans, very comfortable with it and actually delighted with the outcome.

I'm going to confess, I genuinely don't know what data you're looking at to make that quote. And again, maybe it's one for coffee, but the retention... branch managers terminates is extremely high. So I'm not quite sure what you're looking at, and I'm slightly puzzled. So there's some nonsense being written recently that maybe it was in there, but I don't recognise that at all. It's very high. So not an issue at all. Quite the opposite. It's fantastic. On the integration, look, I think, you know... I've been doing large deals my entire career. That's what I've spent 35 years doing. It doesn't make me an expert, but it makes me someone with a lot of experience. And I've always said we will take as much time as we need to do the executions and to execute the plan well. So we're really thoughtful. We're really careful. We don't rush things, and I've always said to the teams, if in doubt, delay. If in doubt, delay. We never hit the go live button if we're not ready. So there's an element of this is just, hey, it's big. I mean, I showed you on the video the complexity in the IT space. This is large, this is complex, this will take time. So I don't actually, in my head, I don't consider it a delay. I just consider it a re-phasing based out of, okay, well, the synergies are going to be bigger, We're going after more. What have we learned through the process so far? Where are we in the journey? Yes, this should take us a bit longer. An element of that, of course, we're not running the business to please the share price. I mean, that isn't the way we think, and maybe we should, but isn't the way I think. I run the business in the best way that I know how. But clearly, we are conscious of the fact that we saw an impact on organic growth. Clearly, some of that was because we had become internally focused, in my view. Clearly, some of it has a little bit of impact on some of the integration, pilots, et cetera. So pacing it in a slightly longer way I think does give us a better opportunity to get more business as usual organic growth at the same time as delivering the execution on the integration. You know, it's not like, okay, let's better change the plan because, you know, we need to change the way we run the business. It's just more realistic from where we are given what we've still got to do. But, you know, my philosophy has always been we start when you're ready, we'll take as long as it needs to take, not because we've given a previous date to the market. So hopefully that gives you some insight. confidence that it's a business-driven decision. But it does give us something, and it does take a little bit more time to do it. Therefore, we're going to have more businesses in the business-as-usual phase at the same time rather than having more business in the transformation phase. We've got two guys in the front here with very sore arms that we've got to get to.

Thanks. Oliver Goldie from USS. Andy, just one question. You're following your description about the importance of local share and the local battle. When we think about that, your wheel, the red bit here on sales and marketing that a lot of this presentation has been about, was the challenge you faced there and therefore the response you're going to give, was that more at certain localities? Or was it broadly across the whole country?

Yeah. Well, let me put it this way. If it was in certain localities, I wouldn't tell you. But it wasn't really. It was more broadly based. So there will be, inevitably, with hundreds of city-based branches, a stack ranked them so i know exactly who the best performing and i know where the worst performing but generally speaking did we see a drop off in lead flow across the board we did was it worse in some cities and towns than others yes was that market related was it competitive related was it was it us related yes all of the above so i don't i don't think you know it's not all in One region is more broadly based. And we did see it in resi, in termite and in SME commercial in that order. So worse in resi, then termite and then SME, as we said last time we talked on the subject. And that's entirely logical as well, because if you run a pub and you're looking for a pest controller, you find the pest controller in exactly the same way as you would as a residential customer. So it's the same channel which is impacted. Thanks.

Alan from Jefferies. Just a few small ones from me now, please. Is there any way you can spit out resi versus commercial in that growth number? I mean, I think we all kind of understand the narrative around the resi side, but I'd expect this is a bigger commercial to have held up maybe a bit better. Anything there you can say would be interesting. Secondly, actually just a weather question. Mindfully, you've kind of talked about Q1 being weak again. a two-ish percent, but it feels like North America, generally been pretty mild winter, would expect that pest season to probably creep a bit more into early March than late March. No tailwind from that, just whatever comments you can make there would be great. Staff side, obviously lots of comments around, the questions around the new joiners and keeping them well incentivized, but within that new incentive plan, are the best performers from Terminix Is their pay plan equally as attractive as it was before? Are they disadvantaged? How do you balance the books? That would be a question. And then maybe finally, just provisions and termite and stuff. I didn't see it and I didn't get through it, but was there any benefit in the VBA number for 23 from termite provision releases? And any comments around 24?

I'll take the last one first. No, there isn't. Those numbers aren't flattered at all. And the provision is running. Pretty much exactly as we expected it now. Volumes are slightly lower. Cost to close slightly higher. But that's because we've got a plan to accelerate the most difficult cases. So actually, we're delighted with the operational progress we've made in closing, dealing with that legacy termite provision. And financially, it nets to about line ball to where we expected it to be.

I'm not sure I can give a lot more detail. On the commercial, I think... I think I'm right in saying, and I'm just giving you a batting order, residential most impacted, termite next, SME commercial next, and then big-ticket commercial least impacted. So I think your assumption is correct. But even within there, don't forget, Terminex had a chunk of commercial business, and the Terminex commercial business – hasn't performed as well as the rent-a-kill, but we're transitioning that all into rent-a-kill. Rent-a-kill, as you know, is the global leader in commercial pest control. So there's some movement of that piece of portfolio, which I'd say probably would have taken the average down a little bit on the performance of our commercial business. But commercial is still holding up well, but we can still do better. Weather, frankly, I don't know. I've read similar reports, and the guys have said, yeah, look, if the weather forecast is what it seems, then it looks like it should be a decent season. So we've been sat here from previous years, and we've been talking about polar vortexes in January and February, and we have had dreadful rain. Warm, yes, but rain, and that's not been great. But I think, generally speaking... I don't know that it's a major factor yet, but nobody's calling a negative factor on the weather. On the pay plan, well, don't forget, again, as I said, we haven't implemented the pay plan. There seem to be some people that think they know more about the pay plan than I do, and we haven't even decided the final detail of the pay plan. I've described this in the past, there's a bell curve of distribution here, depending on which way your bell curve is round. On the one side of the bell curve, we have got a number, quite a number, a significant number of colleagues whose pay needs to be improved. It absolutely has to be. It's a historical issue. It's been there forever. And it's the cause of the higher churn rate, if you like, in technicians in particular. So the investment that we're talking about and we'll be making over the next few years, a big chunk of that is to address that left-hand side, if I've drawn the bell curve that way. On the other side, there's a much smaller number, much fewer technicians who have very high pay. We have to move to a world where people who are doing similar jobs get similar pay. We just have to. It's the only fair way to do it. It's not right to do it any other way. But we need to do that carefully. We need to do that thoughtfully. We need not to change these things radically. We need to think about, well, what sort of transition period and what sort of impact. But it's not the same saying your most highly paid technicians are your best or most productive. They may be that best and most productive, or they may be they've been there a long period of time and they've got a very lucrative route. There's a whole bunch of reasons. So you're right. Will there be a number of technicians when we get to the final design of the pay plan and implement it who will be less happy? Yeah, there will be some. Will there be a bigger number who are much happier? Yes, which is why we're doing it. But we will end up with a single pay plan that works for the vast majority of our people. So we made similar changes in Rent-A-Kill North America several years ago. And at some point, you've just got to make the change. I think it's net good news, but within net good news, there will be some unhappy souls, I'm sure, but we're trying to keep that to the minimum. But don't forget the synergies that we'll be delivering. A big chunk of that is because we need fewer people to run the routes. So we do need to lose some colleagues at some point over the next two to three years. Okay, yeah, we'll take this as the last in the room for now, and then we'll move to online.

So, Chris, both you and Rollins have mentioned increased sales marketing spent by competitors. I suspect everybody's just spending a bit more in a softer market, but any additional flavor you could give on that would be appreciated. Thank you.

Yeah. I'm not sure there's more I can say. We have our plan and we know exactly where we're planning to spend it. We know what search terms, what markets, what regions, what campaigns. We know how we're trying to drive up organic as well. I have no clue what competitor A, competitor B, or competitor C is doing, but they will have their own plans as well, precisely as we head into the season. Yeah, I think you might be right that, you know, In a slightly weaker market, people have upped their spend, and it's not just companies that you've named. Others have done it as well. It's back to the earlier question at the back of the room. It is a local thing, so people will be taking their local decisions, which search terms they want to go after. There's not much more I can add to it, because then we're trying to predict the future. And there is search terms, as I'm sure you're familiar, in paid search, you're really talking auctions. So if I decide to go after term A, because I think that's going to be the most important term in market B, and someone else thinks exactly the same, well, the cost to get up to the top of the leaderboard on that goes up, which is why you never talk about what terms you're going to go after. So probably, to a degree, I think you answered your own question there. I think it is people pushing for more inbound lead flow in a slightly softer market.

Online, so I'll take a couple of funding ones first and then a price one just to give Andy a little bit of a break. Well, maybe that too. Could I ask what your funding plans are going forward, particularly with respect to your projected M&A plans? That's from Matt Artemis. We put in our guidance circa 250 million of bolt-on M&A. As you can see, that's affordable from free cash flow. That would be our plan for 2024, just as it has been our plan for 23, 22. going back into the distant past. So, yeah, we'll continue to fund bolt-on M&A from free cash flow. And as you've seen with our net debt to EBITDA well under control, we're pretty comfortable with that. Would you consider issuing a USD denominated bond given your business exposure? That's from Yin Wu at Invesco. Yeah, absolutely. We are looking to refinance our Euro bond in November. It is probable we'll do that in the U.S. market and just raise very straightforward U.S. dollars. And that's the reason we got the second rating in 2023, so that you need two ratings to raise money on the debt capital markets in the U.S. So those are the two funding ones. Michael Hoffman has got three questions, two for you, one for me, Andy. What's the status of your seasonal hiring and expectation of employee and customer retention in 2024 relative to 23? What's the expectation of incremental margins in North America and sales leads from technicians? How many of these are recurring and what percentage of existing customers buy more than one service? So I'll deal with the margin question. Look, as we've said, we expect margins to modestly accrete in 2024. If you look at our performance in 2023 and our miss to our guidance arising out of the organic growth rate, the organic growth rate hit us quite hard versus those targets. We think it was probably circa 40 basis points of margin was that downgraded organic growth performance and so naturally with a range of two to four percent we're pretty cautious about margin guidance in 2024 so modestly accrete and with relatively you know if you look at that two to four range and we're saying we're going to be at two percent in q1 we're not going to get a lot of margin accretion if any in h1 so that's the way to think about incremental margins in north america seasonal hiring and leads, Andy?

Yes, seasonal hiring. I mean, it's very early doors, isn't it? We're only into whatever it is, the first week of March. The only data I have, Michael, hi, by the way, early morning for you. The only data I've got, first off, the historical metric that Rentakill has always used is actually colleague retention. The historical metric that Terminix always used was churn rate and are you fully staffed. So we still look at both of those. The data I've seen suggests that the improvements that we saw and I've talked about this morning in terms of North America and Terminix colleague retention technicians has continued in the start of this year. So we've not seen it get any worse it's continued to improve I don't have a number and then the looking at it through the other lens in terms of are we fully staffed Terminix has always run a model of how many branches are not staffed to the level that they want to be and again all I can say is that as we sit here In early March, that is at an improved level versus the same period last year. So it's fine. It's improved on where it was last year. But you never get to fully staffed in pest control. You just never get to 100% having every person in every role every time. I would say gently improving trajectory would be my answer, given I've only seen very high-level data.

The technician leads one time or contract?

Yeah, it is a good question. The tech leads, if you do tech leads versus what comes via the web, Go back to first principles. Our business is a portfolio business, which roughly speaking in North America, 70% of our revenue is under contract. 30% of our revenue is one-time jobbing. So roughly 70% contract. Technicians are calling on existing customers. So technicians are calling on that 70% of the revenue. That's our installed customer base. So technician leads, typically, you're trying to sell an additional service that we can add to your contract. Occasionally, we'll sell you a one-time job. Customer, you've got mosquitoes. We'd like to add it to your service. Would you like that? Yes, great. That's gone into contract. I don't want to add it to my contract, but I want a mosquito service this month. That goes into jobs. So on the left-hand side of the model, I say tech leads typically feed into contract revenue. On the right-hand side, it's much more variable. Customer has pest problem, urgent pest problem, doesn't have pest control provider, got a wasp nest. I want it sorted now. That will typically be a job, or it will start life as a job. Ambition then is when the customer buys the job, we will try to convince them actually a better solution for them is to move to a contract, a year-round protection plan. So even if it starts life as a job, we're hoping to convert it into a contract. But specific to tech leads, tech leads are for existing customers, and they typically feed into your contractual base rather than one-time job.

Thank you. And then I think just a couple more questions, and I think we'll probably wind it up. Firstly, from Sylvia Barker at JPMorgan. Hi, Sylvia. I'll take this one. How does the 2% to 4% North American growth guidance split price and volume? And then I think we finished with one from... Paul Sylvia at Lazard, Paul Sylvia Clinton. Is there a structural reason, longer term, why Rollins would be able to grow organically faster than you in North America pest control? So I'll leave you to finish up with that. But I'll take that. Sylvia, 2% to 4%, it's a range. We are consistent in our position that we will recover cost inflation through price, and clearly, cost inflation is lower in North America than it is in most other places. So that will be a declining element of the mix relative to 2023 and 2022. But we don't forecast inflation. We'll take it as we go. I've explained many times that we price on a monthly basis and we'll reflect on pricing to reflect the cost inflation we're seeing in front of us at that moment. So clearly within that mix, volume growth is going to be modest. But I think that's something you can easily infer.

Andy? The answer to the question is no. But I might give you a bit more than that. Is there any reason why Rollins or any other of our lovely competitors in North America have a structural growth advantage over us? No, absolutely not. Rollins is a fabulous company. I genuinely mean that. I think they're a great company. I've admired them as a competitor for years. They basically have the same model operating in the same market. colleague retention great service customer retention selling additional services to their to their happy engaged customers and they're in national account SME commercial residential and termite in exactly the same market as we are the differences I've gone through today we're considerably bigger than them We believe that we're the innovators in pest control. We think that gives us an edge. And I haven't mentioned today, we're opening our brand new innovation center in Dallas, Texas in about four weeks' time. We're excited about that. But no, there's absolutely no reason for that. And I've already shared why I think structurally over the next few years, you will see rent-a-kill terminics in North America emerge as a powerhouse in that wonderful market in the United States. With that, thank you all. I appreciate we've gone a bit long, but we had a lot to cover and a lot of questions that needed to be asked and some misinformation out there that needed to be dealt with as well. So I hope you appreciate we've gone long, but that was for very good reasons. Thank you all for coming. See you next time. Thanks very much.