Rentokil Initial plc

Well, good morning, ladies and gentlemen. In a few moments, Stuart's going to provide you with details of our good overall performance in the first half of 2024. I'll then come back. I'll provide a very brief update on each of our categories before we focus on North America, where we're making encouraging progress against our Right Way 2 growth plan with the core metrics now moving in the right direction and where we'll deep dive on our integration programme which is going extremely well. Brad Paulson, our CEO for North America, will take you through a progress update on both of these important areas. So to set the scene, let me just say a few words by covering the group highlights of the first half. Revenue increased by 4% to £2.8 billion, with top-line growth in all regions, of which organic growth was 2.8%. Our Europe, UK, Asia and Pacific regions are all delivering organic growth in the range of 4% to 6%, and they've all performed well in the first half. In the first quarter, our North America pest control business delivered organic growth of 1%, and this has increased to 1.5% in the second quarter, following the launch of our Term and Exit marketing campaign and our Right Way 2 growth plans. We're pleased with the progress being made in colleague retention, the increase in brand awareness and branded search, inbound digital lead flow, and the increase in the number of technicians submitting sales leads from existing customers. Rebuilding our growth engine will take time, but we made good progress in the second quarter and we expect to make further progress in the second half. Group adjusted operating profit grew by 4.7% to £455 million and we delivered a group margin of 16.5% up by 10 basis points and in line with our guidance. Statutory profit before tax at actual exchange rates was £253 million, an increase of 5.6% on the prior year. Our bolt-on M&A programme continues to create value with 23 acquisitions in the first half, generating annualised revenues in the year before acquisition of £81 million. A leverage ratio of 2.8 times puts us firmly on track towards further deleveraging towards our target range of between 2 and 2.5 times as we committed at the time of the Terminix acquisition. So an encouraging overall group performance And while we're mainly focused on North America growth and integration today, it is worth highlighting that the rest of the group continues to perform very well. Four months ago at our prelim results, we set out our detailed plan to reinvigorate organic growth in our North America pest control business. We explained our model, which you can see on the slide there, with opportunities for growth from both existing and from new customers. To date, we've invested around $21 million of the $25 million we committed at the prelims, and that's gone into brand marketing, lead generation, and into new sales and marketing talent. I'm pleased to say that whilst it's still early days, we can see green shoots now appearing, and our key growth KPIs are showing positive improvements. We've delivered excellent continued progress on colleague retention and it was particularly good to see an increase in sales colleague retention of almost 400 basis points since the beginning of the year. Our term and exit brand campaign was launched in mid-March and according to our latest data has already been seen 685 million times and by 96 million people. This has delivered a very encouraging 29% increase in branded search for Terminix. In April, we registered our first month of 2024 year-on-year inbound sales lead growth from new potential customers, and this continued through May and June. And more of our technicians are also submitting sales leads from existing customers with an increase in participation rate from around 50% in January to to over 60% in June. Our underlying progress in the second quarter gives us the confidence to extend these investments with an additional $25 million committed to growth initiatives funded from growth synergies, with around $15 million of that being spent in the second half. But we'll also shift more of our focus onto the long-term need to improve the customer retention rate, particularly with our residential and termite customers. So we're confident that the investments that we're making are the right ones for growing our underlying contract portfolio to support not just the second half, but also to lay the foundations for long-term growth. Touching briefly on the excellent progress we're making on the integration. In the first half, we completed phase two of the integration, which included the detailed preparation of the branch integration program. The first integrations then began on schedule in June and July. Today, our end state systems and processes are live and they're working well in the first nine branches that have been integrated with 160 technicians serving both commercial and residential customers and with combined annual revenues of around $37 million. when you include the rent-a-kill technicians who are already using our new end-state PestPak system, and now the first Terminix colleagues are also using the system as part of the first branch integrations, it's now being used by over 40% of our technicians in the US and will be being used by over half of our US techs by the end of this year. And we're firmly on track to achieve our gross cost synergy target of $325 million, having delivered an additional $58 million of gross savings in the first half. The additional H2 investments in our RightWay2 growth strategy of $25 million takes our total planned investments over the course of the integration to around $125 million, and therefore we now expect total net synergies to be over $200 million. So a positive overall group performance, green shoots coming through in North America as we execute the right way to growth plan and excellent progress on the integration program, which remains firmly on track. With that, let me hand over to Stuart.

Thank you, Andy, and good morning, everyone. I'll run through the financial highlights of what's been a good first half overall. I'll start with the group level numbers and then as usual, I'll move through the regions and then look at the balance sheet. Unless I state the contrary, all numbers are at constant rates of exchange. The business delivered a good top line performance in the first half. Revenue is up 4% to 2.76 billion and statutory revenue up 1.3% to 2.7 billion. organic revenue was up 2.8%. This translates to an adjusted operating profit of £455 million, a year-on-year increase of 4.7%, and margin was up 10 basis points. Free cash flow was £172 million, and cash conversion was 62.2%. This half-year phenomenon was a result of timing of customer and supplier payments around the half-year, and we expect cash conversion to return to 80% to 90% for the full year. These factors, combined with the continued success of our Bolton M&A programme and the dividend payment, resulted in a net debt to EBITDA ratio of 2.8 times on 30 June, on track for full year expectations. Based on a good performance in H1 and our confidence of further progress in the remainder of the year, the Board has approved an interim dividend of 3.16 pence, a 14.9% rise year-on-year and in line with our progressive dividend policy. So looking now at our performance by region, starting with North America, the North American business grew by 1.1%, of which 1.3% was organic. Pest Control Services also recorded organic revenue growth of 1.3% for the half year. However, in Pest Control Services, we saw an encouraging 50 basis point improvement between the two quarters, as well as positive movement in a number of key leading indicators that Andy and Brad will speak to shortly. The pest control category overall was up 1.1%, with a drag from the products distribution business. This was affected by customer inventory loading in 2023, creating very strong prior year comparatives. Adjusted operating profit in the region was up 1.8%, and operating margin was up 10 basis points year-on-year to 18.6%, with a benefit from synergy delivery partly offset by our $21 million additional investment in marketing in the half. Note that excluding the product distribution business, our margin was 20% flat. Customer retention was stable at 79.8%, and we've seen further strong progress on colleague retention. Total North America colleague retention, including Terminix, improved 2.6 percentage points to 77.8%, driven by improvement in retention of both technician and sales colleague roles. Terminix colleague retention was up strongly by more than three percentage points to 73.1%. Despite the attention given to the Terminix transaction, we've had another good period for Bolton M&A, acquiring nine businesses with estimated total annualised revenues of around £22 million in the year prior to purchase. The quarter-on-quarter financial improvement in pest control services indicates that we're beginning to see benefit from our Rightway 2 growth plan. We're making an additional $25 million investment in customer acquisition and retention to help deliver our growth opportunities, of which $15 million will be spent in H2. The Terminix integration has also made strong progress, with the first branch integrations well underway and $22 million of net cost synergies delivered in the region in H1. Turning now to the European region, another period of strong performance across the board here. Driven by both effective price increases and resilience in overall demand, revenue rose by 7%. Organic revenue growth was 5.8%. All three business categories posted strong numbers. Pest control revenue was up 8% with a strong double-digit organic revenue contribution from larger markets like Germany, Italy and Benelux. Hygiene and well-being grew revenue by 5.2%. supported by an improved performance in the specialist hygiene and cleanroom businesses. France workwear revenue was up 7.5% with continued pricing progression. Adjusted operating profit rose by 9.1% and operating margin increased by 40 basis points to 18.9%. This was underpinned by the core hygiene business and also in cleanroom where higher volumes at good margins led to improved overhead recovery. While inflationary pressures remain, we've been successful at protecting margins with pass-through pricing. Customer retention has remained strong at 88.5% and colleague retention rates have also continued to be excellent up to 90.7% and touching on historical highs. Eight business acquisitions were completed in the period with estimated annualised revenues of £13 million in the year prior to purchase. Turning to the UK and sub-Saharan Africa, we delivered a strong trading performance. Revenue increased by 13.2% with a positive contribution from both business categories with pest control up 5.2% and hygiene and well-being up 21.4%. Adjusted operating profit increased by 9.3% and operating margin slightly decreased by 90 basis points to 23%, largely due to short-term dilution from bolt-on M&A activity. The main margin performance has been underpinned by the UK's service performance reaching an all-time high, reflected in an excellent net promoter score, which also sustained a Strong customer retention rate and colleague retention in the region is up 84.4%, up 1.1 percentage points. We completed one business acquisition in the year with estimated annualised revenues of £30 million in the year prior to purchase. Looking now at Ayesha and Menat on the left-hand side of the slide, regional revenues rose by 7.5%, of which 4.7% was organic, supported by good contract growth and effective pricing. Pest control and some of our key markets such as India and Indonesia led the way. Adjusted operating profit increased by 1.7%. Additional growth investments in Singapore and Hong Kong meant that adjusted operating margin for the period was down slightly to 13%. Customer retention was strongly up and regional operations have continued to benefit from an excellent colleague retention rate of 93.5%. We acquired three businesses with estimated annualised revenues in the year prior to purchase of £11 million. And finally, the Pacific region, another double-digit top-line performance here, with revenue increasing by 10.4%, of which 4.1% was organic. Pest control was up 12.6%, with notable strength in commercial. Hygiene and wellbeing was up 8.1%, with continued strong demand in the region for our ambience business. Regional adjusted operating profit was up 5%. The first half operating margin was slightly impacted by phasing in rural pest control. The customer retention rate remained strong and colleague retention improved by 1.6 percentage points. We acquired two businesses with estimated annualised revenues in the year prior to purchase of £5 million. Group margin was up 10 basis points, underpinned by our continued execution on strategic initiatives. These include the densification of routes and products, optimisation of overhead costs and leveraging technology and innovation along with active cost-based management. Integration activities have positively impacted margins from completed M&A initiatives brought in at lower than group margins. Gross synergies from the Terminix integration contributed 170 basis points to group margin, and there was 100 basis points reduction from investments, including 60 basis points from the additional marketing investment. Group cash flow, higher trading profits came from organic and acquisitive growth, partly offset by FX. The group did have a £97 million working capital outflow in the first six months of the year. This resulted from a slightly softer debt performance and improved supply payment processing right at the end of H1, and these are expected to revert to previous guidance in the second half and not have an impact on the four-year cash outlook. As a consequence, four-year 24 guidance for working capital and cash generation remain unchanged. The cash interest payments increased by £10 million year-on-year. Cash tax payments totaled £31 million, a decrease of £27 million year-on-year. That's attributable to some prior year one-off tax payments and H1 2024 one-off US tax refunds, mainly related to the Terminix acquisition. The cash spent on acquisitions was £76 million, while dividend payments were £149 million. Note that for some of our bonds, we pay a full year of cash interest in H1 versus a P&L charge across the year, reducing cash conversion in the first half by about 10 percentage points. Our full year of 24 guidance that I said for adjusted free cash flow remains at 80% to 90%. The group's net debt to EBITDA ratio remains stable at 2.8 times. The group maintains a liquidity headroom of approximately £1.5 billion today. which includes an undrawn revolving credit facility of a billion dollars set to mature in October 2028. Around 81% of the group's debt is at fixed interest rate. The group has a 400 million euro bond maturing in November this year, and with the current level of headroom, we've got good optionality around the timing of the refinancing. Before looking at our technical guidance, I want to share our plans to change our presentation currency. We've used pound sterling since the inception of the group. However, the US now represents about 60% of group revenue and two-thirds of group profit, which can result in significant reporting volatility from FX movement. We therefore plan to change our presentation currency to United States dollars for all reporting periods starting from 1st January 2025. We commenced a project to this end in the second half of last year that would allow us to do this. We will provide... U.S. dollar comparatives for key financial statements and support for modeling from the annual results reporting in 2025. Our U.S. business has never been more significant to the group, operationally and strategically. We acknowledge the market debate around listing for companies such as Rent-A-Kill. Our board will continue to keep the group's listing under review. However, at the current time, we are strongly focused on driving up organic revenue growth through the Right Way 2 plan and successfully integrating Terminix. Moving to technical guidance, on this slide, we give estimates to help you with your models in relation to the full year. Most remain unchanged with some updates. On the P&L, we expect Terminix integration costs to achieve to come in about 10 million lower than previously guided. The adjusted effective tax rate is expected to be lower in the range of 24% to 25%. Anticipated spend on M&A is revised to between 200 and 250 million pounds. Our full-year FX guidance reflects the strengthening of the pound against the dollar, and we now anticipate a headwind of between £30 million to £40 million. We expect this increased FX headwind to be offset by further operational progress. We do expect a net $15 million or about £12 million revision to group adjusted operating profit in the full year, which reflects, amongst other things, the additional growth investment in H2. And at that point, I will hand back to Andy.

Thank you Stuart I want to give the North America section here 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 category sections at pace I'm delighted with the excellent progress that we're making and obviously happy to take detailed questions later Our tried and tested operating model continues to perform very well, and as you can see, we've continued to make good progress in colleague safety and in sustainability. We've also made progress in colleague recruitment, and in particular, in colleague retention, where in the year to June, our global colleague retention rate has increased by an excellent 4.2% to almost 86%, and by 1.7% year to date. In our Europe and Asia regions, we've achieved an outstanding retention rate for our service technicians of over 90%. And in a moment, Brad will discuss the very good progress we're now making in North America. Turning to our business categories and starting with pest control. In pest control, we operate a simple, repeatable model in a global market. that is underpinned by structural growth drivers, including urbanisation, the growing middle classes, population growth, climate change, and increased regulatory pressure, particularly in food safety. As you can see on this chart, according to the latest industry reports since 2018, whilst North America, which by the way accounts for around 50% of today's global pest market, has increased spend per capita on pest control by an impressive 24%. Spend on pest control continues to grow significantly faster in the emerging markets of Asia and in India and China in particular, where the equivalent per capita growth rates are 170% and 468% respectively. And this is very much in line with our long-term M&A strategy of building our presence in those cities of the future. And indeed, in the first half, we acquired the second largest pest control company in India, securing our leading position in that very important future growth market. Looking at our global pest control business, in the first half, we delivered revenue growth of 2.8%, of which 2.2% was organic. With our global pest control business now having first half revenues of around 2.2%, and having an impressive 10-year revenue CAGR of almost 19%. Pest control profits in the first half increased by 2.2% to £421 million, with margins remaining stable at 19.2%. While, of course, we added the additional investment for growth in North America. The business has delivered a 10-year profit CAGR of over 20%. Turning to hygiene and well-being, in the first half we delivered revenue growth of 9.6%, of which 4.8% was organic growth. We acquired seven excellent companies with annualised revenues in the year prior to purchase of £45 million, exceeding our full medium-term guidance of £25 million. Since 2014, this high-quality sister business to pest control has delivered a revenue CAGR of 6.3%. During the first half, profits in hygiene and wellbeing grew by 14.3% to £77 million, and margins increased by 80 basis points to 17.2%. This is an attractive business category with similar route-based operating model to pest control, as shared country management teams, shared functional support, and other shared overheads, and over the last 10 years has delivered a profit CAGR of 8%. In the first half, our initial workwear business in France delivered a strong performance with revenue growth of 7.5% to £116 million, all of which was organic. Adjusted operating profit grew by 9.4% and increased margins by 30 basis points to 17.2%, the highest since 2015. With the Olympic and Paralympic Games starting this week, our workwear business will be playing its part, supplying and cleaning staff uniforms as well as flat linen and towels to many people visiting Paris this summer. Turning to our Bolton M&A programme, we operate in highly fragmented markets and since 2018 we've acquired 284 businesses around the globe. mostly building our position in the highly attractive pest control market, and with acquired revenues of around £909 million. For your reference, we've broken this down into the pie charts that you can see on the right-hand side there. The opportunity in M&A remains significant, and in the first half we delivered 23 bolt-on deals with annualised revenues of £81 million for a consideration of £112 million. In North America, we delivered nine small tuck-in deals, including the acquisition of Exceptional, which has a presence in 12 states, and it's our entry into the wildlife control and exclusion business, something that neither Rentakill nor Terminex has previously offered. So good continued progress. The pipeline is in good shape, and our current view of M&A spend this year is around 200 to 250 million pounds. Based on our most recent analysis, our ongoing M&A program continues to perform at or above our hurdle rates and well above our WAC. So a good overall performance from our businesses around the world. So now let's move our focus to North America. I'm just going to say a few words this morning and then I'm going to hand it over to Brad. In the first half, we spent $21 million of the additional $25 million committed at the prelims. And we spent that on digital search, on enhanced web content, the optimization of our social platforms, our brand advertising campaign, and our brand partnership program, as well as investing in the sales and marketing teams. With our North American business having around 75% of its revenues under customer contract, it's important to note that the investments will benefit the Terminix brand, not just this year, but for the years to come. I'm very encouraged by the initial progress, and as I mentioned earlier, we're now seeing the green shoots coming through with good progress against the core growth KPIs. Right way to growth program continues in the second half with the announcement of additional investment of $25 million, $15 million of which will be spent in the second half, and which will be spent on digital marketing, extending the brand campaign, and adding additional new area sales managers, and importantly on a series of customer retention initiatives, which Brad will touch on shortly. We'll fund this investment for growth from growth synergies, and we're expecting to see continued improvements in our growth metrics over the coming quarters. So lots of focus on growth across the business, but at the same time, the business has made excellent progress on the integration. Execution of our plan in the second quarter was very successful in preparing the business for the first branch integrations and in launching those which are now underway and they're going well. We're building the foundations for long-term sustainable growth and we're making good progress. Now let me hand over to Brad who'll firstly provide an update on growth. and then move on to the integration program. Over to you, Brad.