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Rentokil Initial PLC RTO INTERIM MANAGEMENT STATEMENT - Q3

  Rentokil Initial PLC (RTO) - INTERIM MANAGEMENT STATEMENT - Q3

RNS Number : 7151Q
Rentokil Initial PLC
09 November 2012








RENTOKIL INITIAL PLC (RTO)

INTERIM MANAGEMENT STATEMENT

9 November 2012



Results (£m)               Q3 2012     Growth      YTD 2012     Growth
                                 AER   AER     CER        AER   AER    CER
Revenue                        626.7  (1.6%)    2.2%  1,883.1  (0.1%)   2.7%
Adjusted operating profit^1     61.4  (3.6%)    3.9%    148.7  (5.2%)   1.2%
Adjusted profit before tax^1    53.2    0.2%    7.4%    126.7    0.1%   7.3%
Profit before tax               36.3    0.8%    9.9%     82.9   26.2%  39.2%
Operating cash flow^2           44.6 (21.1%) (11.4%)     65.4 (19.3%) (7.8%)



Q3 Highlights (at CER)

§ Group revenue +2.2% (+0.2%* organic) in softening European markets: 

Ø Asia +4.2%, Initial Facilities +5.3%*, City Link +2.4%, Pest Control  +2.1%, 
Textiles & Hygiene +1.3%

Ø Acquisitions performing well, contributing 2.3% (£14.7m) of revenue growth

§ City Link revenue +2.4%, 19.1%  reduction in operating loss. Recovery  plan 
remains on track but Q3 financial performance impacted by adverse customer mix
and volume decline during the Olympics

§ Adjusted operating  profit up  3.9%, with  improvement in  City Link  partly 
offset by increased central investment in marketing, innovation and capability
development

§  Profit  before  tax  up  9.9%,  39.2%  year  to  date  reflecting   reduced 
amortisation and interest

§ Cost savings of £37.2m year to date; expect to exceed £50m target for 2012

§ Acquisition  of  Western Exterminator  Pest  Control for  $114.6m  positions 
Rentokil as third largest player in key US market - completion expected in Q4

* excluding Initial Facilities Spain, where the business is being scaled  down 
to reduce financial exposure and has impacted group performance by 0.3%



Alan Brown, Chief Executive Officer of Rentokil Initial plc, said:



"Challenging conditions across  Europe, including the  UK, have limited  group 
revenue growth in  Q3. Outside  Europe our businesses  are considerably  more 
buoyant.



"City Link's operational recovery continued during Q3 with a 12%  year-on-year 
reduction in cost per delivery. Volume grew 15% and operating losses fell  by 
19% year on year, though both  were adversely impacted by lower than  expected 
demand during  the Olympics.  We have  also continued  to see  a reduction  in 
revenue per consignment as  a result of adverse  customer mix. The impact  of 
this is now expected to result in a small loss for Q4. 



"We continue to invest strongly in capability and in market position. We  are 
optimistic about  both our  innovation and  our acquisition  pipeline,  though 
cautious  in   respect  of   trading.  Nevertheless   we  anticipate   further 
year-on-year improvement in profit performance  at constant exchange rates  in 
Q4."



Financial position and funding update



Operating cash flow of £44.6m was £10.9m  lower than Q3 2011 primarily due  to 
the phasing of working  capital. Net debt at  30 September was  £943.2m.The 
Company raised a new  seven-year €500m bond paying  3.375% in September  2012. 
This provides financing forthe acquisition of Western Exterminator, our  2013 
maturities, and partially finances the €500m March 2014 bond.In October 2012
the Company repurchased its  £75m bond with potential  first maturity in  2013 
for its fair  value of £104m,  representing an exceptional  cash loss of  £29m 
which will be recognised in Q4. A further loss of £2m was crystallised on the
related hedge accounted interest rate swaps at the same time. There have  been 
no further changes in the financial position of the group in the period  since 
30 June 2012.The group intends to refinance the remainder of the €500m March
2014 bond in the coming months.



AER - actual exchange rates; CER - constant 2011 exchange rates

^1 before amortisation and impairment of intangibles (excluding computer
software), reorganisation costs and one-off items

^2 cash flow before interest, tax, acquisitions, disposals and foreign
exchange adjustments



Financial Summary

£million                           Third Quarter            Year to Date
                                2012   2011   change    2012    2011   change
Continuing Operations^1

At 2011 constant exchange rates^2
Revenue                         649.0  635.2     2.2%  1,931.6 1,881.2    2.7%
Adjusted operating profit^3      65.8   63.3     3.9%    157.7   155.8    1.2%
Reorganisation costs and       (12.7)  (6.2) (104.8%)   (27.4)  (26.3)  (4.2%)
one-off items^4
Amortisation and impairment of  (4.8) (10.9)    56.0%   (17.4)  (34.6)   49.7%
intangible assets
Operating profit                 48.3   46.2     4.5%    112.9    94.9   19.0%
Share of profit from              1.2    1.0    20.0%      3.7     3.3   12.1%
associates (net of tax)
Net interest payable           (10.5) (11.7)    10.3%   (26.8)  (33.7)   20.5%
Profit before tax                39.0   35.5     9.9%     89.8    64.5   39.2%
Adjusted profit before tax^3     56.5   52.6     7.4%    134.6   125.4    7.3%
Operating cash flow^5            49.6   56.0  (11.4%)     73.7    79.9  (7.8%)
Continuing Operations^1

At actual exchange rates
Revenue                         626.7  637.0   (1.6%)  1,883.1 1,885.9  (0.1%)
Adjusted operating profit^3      61.4   63.7   (3.6%)    148.7   156.9  (5.2%)
Reorganisation costs and       (12.1)  (6.3)  (92.1%)   (26.7)  (26.4)  (1.1%)
one-off items^4
Amortisation and impairment of  (4.8) (10.8)    55.6%   (17.1)  (34.5)   50.4%
intangible assets
Operating profit                 44.5   46.6   (4.5%)    104.9    96.0    9.3%
Share of profit from              1.3    1.0    30.0%      3.8     3.3   15.2%
associates (net of tax)
Net interest payable            (9.5) (11.6)    18.1%   (25.8)  (33.6)   23.2%
Profit before tax                36.3   36.0     0.8%     82.9    65.7   26.2%
Adjusted profit before tax^3     53.2   53.1     0.2%    126.7   126.6    0.1%
Operating cash flow^5            44.6   56.5  (21.1%)     65.4    81.0 (19.3%)
                                    

                                    



^1 all figures are for continuing operations and are unaudited

^2 results at constant exchange rates have been translated at the full year
average exchange rates for the year ended 31 

 December 2011. £/$ average rates: Q3 2012 1.5829; FY 2011 1.6057, £/€
average rates: Q3 2012 1.2307; FY 2011 1.1532

^3 before  amortisation  and  impairment of  intangibles  (excluding  computer 
software), reorganisation costs and one-off items

^4 see Appendix 2 for further details

^5 cash  flow  before  interest,  tax,  acquisitions,  disposals  and  foreign 
exchange adjustments



This announcement contains  statements that  are, or  may be,  forward-looking 
regarding the group's financial position and results, business strategy, plans
and objectives. Such  statements involve  risk and  uncertainty because  they 
relate to future events and circumstances  and there are accordingly a  number 
of factors  which  might  cause  actual  results  and  performance  to  differ 
materially from those expressed or implied by such statements. Forward-looking
statements speak only as of  the date they are  made and no representation  or 
warranty, whether  expressed  or  implied,  is  given  in  relation  to  them, 
including as to their completeness or accuracy or the basis on which they were
prepared. Other  than in  accordance with  the Company's  legal or  regulatory 
obligations  (including  under  the  Listing  Rules  and  the  Disclosure  and 
Transparency Rules), the Company does  not undertake any obligation to  update 
or revise publicly any forward-looking statement,  whether as a result of  new 
information,  future  events  or  otherwise.  Information  contained  in  this 
announcement relating to the Company or its  share price, or the yield on  its 
shares, should  not be  relied upon  as an  indicator of  future  performance. 
Nothing in this announcement should be construed as a profit forecast.





Enquiries:



Investors / Analysts enquiries:

Katharine Rycroft, Head of Investor Relations
Rentokil Initial plc01293 858 166



Media enquiries:

Malcolm Padley, Corporate
CommunicationsRentokil Initial
plc07788 978 199

Kate Holgate, Catriona
McDermottBrunswick
Group020 7404 5959





City Link Investor Seminar - The Grange Tower Bridge Hotel, 45 Prescot Street,
London E1 8GP



Rentokil Initial  plc is  today hosting  an Investor  Seminar focused  on  the 
group's City Link operations. The event will include presentations on the  UK 
domestic  parcels  market,  City  Link's  growth  initiatives,  strategy   and 
capability development.  David Smith,  Managing Director,  will confirm  that 
current trading  is in  line with  the  comments made  in today's  Q3  trading 
update.



The majority of the presentations will be web cast live and will be  available 
on the Rentokil Initial web site. The  day will begin with a brief update  on 
Q3 which will commence at 8.45am. The full web cast will be available  after 
the event.



                                                                   Appendix 1

                                      

                             Divisional Analysis



3 months to 30 September 2012

           £million             3 months to                                

                              30 September Change from Change from Q3 Organic
                                                Q3 2011           2011  growth
                                       2012
                                       AER         AER            CER     CER
Revenue
Textiles & Hygiene                    212.7      (5.8%)           1.3%  (0.3%)
Pest Control                          187.0      (1.5%)           2.1%    0.6%
Asia                                   24.6        3.4%           4.2%    6.1%
City Link                              76.2        2.4%           2.4%    2.4%
Initial Facilities                    146.1        2.9%           3.7%  (2.8%)
Segmental revenue                     646.6      (1.4%)           2.3%  (0.1%)
Intra group trading                  (19.9)      (4.7%)         (6.8%)
At actual exchange rates              626.7      (1.6%)
Exchange                               22.3
At constant exchange rates            649.0                       2.2%  (0.1%)
Adjusted operating profit
Textiles & Hygiene                     34.9      (6.9%)           0.8%    0.8%
Pest Control                           36.5      (0.3%)           4.4%    3.0%
Asia                                    1.6      100.0%          88.9%   88.9%
City Link                             (5.5)       19.1%          19.1%   19.1%
Initial Facilities                      6.9        3.0%           4.5%    5.6%
Central Costs                        (13.0)     (17.1%)        (16.2%) (17.4%)
Segmental profit                       61.4      (3.6%)           3.9%    3.2%
Reorganisation costs and             (12.1)     (92.1%)       (104.8%)
one-off items
Amortisation of intangible            (4.8)       55.6%          56.0%
assets^1
At actual exchange rates               44.5      (4.5%)
Exchange                                3.8
At constant exchange rates             48.3                       4.5%    3.2%

^1 excluding computer software





9 months to 30 September 2012

            £million               9 months to                             

                                 30 September Change from Change from Organic
                                                  YTD 2011    YTD 2011  growth
                                          2012
                                          AER         AER         CER     CER
Revenue
Textiles & Hygiene                       657.6      (2.6%)        2.7%    0.9%
Pest Control                             544.5      (0.2%)        2.6%    0.9%
Asia                                      73.2        5.9%        6.4%    7.7%
City Link                                225.7        3.1%        3.1%    3.1%
Initial Facilities                       441.1        1.9%        2.5%  (3.0%)
Segmental revenue                      1,942.1           -        2.8%    0.5%
Intra group trading                     (59.0)      (5.5%)      (6.4%)
At actual exchange rates               1,883.1      (0.1%)
Exchange                                  48.5
At constant exchange rates             1,931.6                    2.7%    0.5%
Adjusted operating profit
Textiles & Hygiene                        99.2      (1.9%)        3.9%    4.1%
Pest Control                              88.5      (3.4%)        1.0%    0.1%
Asia                                       4.0       42.9%       46.4%   46.4%
City Link                               (24.0)        2.4%        2.4%    2.4%
Initial Facilities                        19.2        7.3%        7.8%    6.2%
Central Costs                           (38.2)     (19.7%)     (19.4%) (19.7%)
Segmental profit                         148.7      (5.2%)        1.2%    0.6%
Reorganisation costs and one-off        (26.7)      (1.1%)      (4.2%)
items
Amortisation of intangible              (17.1)       50.4%       49.7%
assets^1
At actual exchange rates                 104.9        9.3%
Exchange                                   8.0
At constant exchange rates               112.9                   19.0%    0.6%

^1 excluding computer software

                                                                             

                                                                    Appendix 2

                                                                             

                              Category Analysis



3 months to 30 September 2012

     £million        3 months to                                           

                   30 September  Change from Q3  Change from Q3       Organic
                                            2011            2011        growth
                            2012
                            AER             AER             CER           CER
Revenue
Pest Control               146.1            1.7%            4.7%          3.3%
Hygiene                    125.9          (6.7%)          (1.5%)        (1.5%)
Textiles                   102.4          (7.2%)            2.0%          2.3%
Interior Plants             31.7          (1.6%)            0.9%        (1.3%)
Facilities Services        142.8            3.3%            4.2%        (2.6%)
Parcel Delivery             76.2            2.4%            2.4%          2.4%
Other                       21.5          (3.6%)            0.4%       (15.3%)
Total                      646.6          (1.4%)            2.3%        (0.1%)
Adjusted operating
profit
Pest Control                33.4            0.3%            4.5%          2.7%
Hygiene                     26.7          (6.0%)            0.4%          0.4%
Textiles                    18.1          (3.7%)            5.4%          5.4%
Interior Plants              2.5            8.7%           13.0%          8.1%
Facilities Services          5.2         (17.5%)         (18.8%)       (19.8%)
Parcel Delivery            (5.5)           19.1%           19.1%         19.1%
Other                     (19.0)          (2.2)%          (2.7)%        (1.0%)
Total                       61.4          (3.6%)            3.9%          3.2%





9 months to 30 September 2012

        £million           9 months to                                     

                         30 September Change from YTD Change from YTD Organic
                                                  2011            2011  growth
                                  2012
                                  AER             AER             CER     CER
Revenue
Pest Control                     420.4            3.2%            5.2%    3.6%
Hygiene                          384.7          (4.1%)          (0.1%)  (0.3%)
Textiles                         314.5          (4.4%)            2.7%    2.9%
Interior Plants                   96.1          (0.1%)            1.5%  (1.9%)
Facilities Services              430.6            1.9%            2.5%  (3.0%)
Parcel Delivery                  225.7            3.1%            3.1%    3.1%
Other                             70.1            5.1%            8.4%  (7.9%)
Total                          1,942.1               -            2.8%    0.5%
Adjusted operating profit
Pest Control                      84.2          (1.8%)            1.5%    0.5%
Hygiene                           75.2          (4.0%)            0.8%    0.6%
Textiles                          48.1            2.6%           10.1%   10.0%
Interior Plants                    6.3           10.5%           16.1%    8.5%
Facilities Services               16.9          (1.2%)          (1.7%)  (3.5%)
Parcel Delivery                 (24.0)            2.4%            2.4%    2.4%
Other                           (58.0)         (11.1%)         (11.3%)  (9.9%)
Total                            148.7          (5.2%)            1.2%    0.6%

                                                                    Appendix 3



              ANNUAL CONTRACT PORTFOLIO - CONTINUING BUSINESSES



3 Months to 30 September 2012

                             New                                                       30.9.12
                                                                                                  at
        £m at            Business Terminations/ Net Price Acquisitions/(Disposals)          actual
        constant                 /    Reductions Increases                                  exchange
        2011      1.7.12 Additions                                                  30.9.12

exchange rates
Textiles &         775.2      20.4        (18.7)       2.4                    (0.1)   779.2    740.0
Hygiene
Pest Control       583.0      21.1        (22.1)       1.9                      5.6   589.5    573.1
Asia                81.6       5.3         (3.6)       0.2                        -    83.5     83.0
Initial            517.8      13.5        (27.3)       0.4                      7.7   512.1    509.2
Facilities
TOTAL            1,957.6      60.3        (71.7)       4.9                     13.2 1,964.3  1,905.3



9 Months to 30 September 2012

                             New                                                      30.9.12
                                                                                                 at
        £m at            Business Terminations Net Price Acquisitions/(Disposals)          actual
        constant                 / / Reductions Increases                                  exchange
        2011      1.1.12 Additions                                                 30.9.12

exchange rates
Textiles &         760.6      69.8       (63.2)      12.5                    (0.5)   779.2    740.0
Hygiene
Pest Control       576.7      65.7       (69.1)       8.4                      7.8   589.5    573.1
Asia                77.6      16.2       (10.9)       0.6                        -    83.5     83.0
Initial            518.1      58.0       (73.6)       1.9                      7.7   512.1    509.2
Facilities
TOTAL            1,933.0     209.7      (216.8)      23.4                     15.0 1,964.3  1,905.3



Notes



Contract portfolio definition: Customer contracts are usually either "fixed
price", "as-used" (based on volume) or mixed contracts. Contract portfolio is
the measure of the annualised value of these customer contracts.



Contract portfolio valuation: The contract portfolio value is typically
recorded as the annual value from the customer contract. However, in some
cases - especially "as-used" (based on volume) and mixed contracts - estimates
are required in order to derive the contract portfolio value. The key points
in respect of valuation are:



"As-used" contracts: These are more typical in Textiles and Hygiene and
Catering, where elements of the contract are often variable and based on
usage. Valuation is based on historic data (where available) or forecast
values.



Income annualisation: In some instances, where for example the underlying
contract systems cannot value portfolio or there is a significant "as-used"
element, the portfolio valuation is calculated using an invoice annualisation
method.



Inter-company: The contract portfolio figures include an element of
inter-company revenue.



Job work and extras: Many of the contracts within the contract portfolio
include ad hoc and/or repeat job work and extras. These values are excluded
from the contract portfolio.



Rebates: The contract portfolio value is gross of customer rebates. These
are considered as a normal part of trading and are therefore not removed from
the portfolio valuation.



New business/Additions: Represents new contractual arrangements in the period
with a new or existing customers and additional business added to existing
contracts.



Terminations/Reductions: Represents the cessation or reduction in value of an
existing customer contract or the complete cessation of business with a
customer.



Net Price Increases: Represents the net change in portfolio value as a result
of price increase and decreases.



Acquisitions/Disposals: Represents the net value of customer contracts added
or lost as a result of businesses acquired or disposed in the period. Also
includes the net volume related changes for the textiles businesses, where it
is common practice for customers to increase or decrease service volumes
according to their daily operational requirements.



Retention rates: Retention rates are calculated on total terminations
(terminations and reductions).

                                                                             

                                                                    Appendix 4



Reorganisation costs and one-off items



                           3 months to  3 months to  9 months to  9 months to

                          30 September 30 September 30 September 30 September

                                   2012         2011         2012         2011
                                    £m           £m           £m           £m
Textiles & Hygiene                (8.7)        (1.8)       (14.2)        (6.1)
Pest Control                      (1.1)        (1.0)        (1.7)        (7.6)
Asia                                0.3        (0.3)          0.3        (0.7)
City Link                         (0.4)        (0.5)        (1.6)        (4.2)
Initial Facilities                (2.2)        (1.8)        (7.1)        (4.9)
Central Costs                     (0.6)        (1.0)        (3.1)        (2.9)
At constant exchange rates       (12.7)        (6.4)       (27.4)       (26.4)
Exchange                            0.6          0.1          0.7            -
At actual exchange rates         (12.1)        (6.3)       (26.7)       (26.4)



Net reorganisation costs and one-off items amounted to £27.4m (2011:  £26.4m). 
£25.1m  (2011:  £21.5m)  of  these  relate  directly  to  the  group's   major 
reorganisation program, including Olympic,  and consists mainly of  redundancy 
costs, consultancy and  plant and office  closure costs net  of the profit  on 
sale of certain properties.



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


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