Annual Report 2018

Rentokil Initial plc plc Initial Rentokil Protecting People Enhancing Lives... Annual Report 2018 Everywhere Annual Report 2018 About us Strong financial performance Rentokil Initial is a global leader in the provision of route-based services which Ongoing Revenue (at CER) protect people and enhance lives, everywhere. We operate in 90 of the world’s 100 leading cities – from Los Angeles to Amsterdam, and Singapore to Auckland. m Our core services are Pest Control and Hygiene and we offer a range of smaller £2,493.0 specialist services including Plants, Property Care and Workwear. We are a +13.2% multi-local business operating in 75 countries around the world, employing around 39,500 people in 2018. Organic Revenue growth What we do +3.7% Revenue (at AER) £2,472.3m +2.5% Ongoing Operating Profit (at CER) Pest Control Hygiene Protect & Enhance Pest Control as % Hygiene as % Protect & Enhance as % £333.6m of Group Revenue of Group Revenue of Group Revenue +13.3% Loss before income tax (at AER) 63% 22% 15% £114.1m -116.0% Free Cash Flow (at AER) £192.0m Where we are +94.2% cash conversion 2018 full year dividend 4.471p +15.2% Our RIGHT WAY plan Our RIGHT WAY plan divides our business into five geographic regions and three core categories, all operating on a low cost, single country operating structure. Since 2014 we have consistently implemented an effective strategy at pace and this has delivered consistent progress against our financial targets. North America UK & Rest of World Pacific We are now a stronger and more focused business, operating in higher growth Europe* Asia markets, with improving levels of organic *Includes our Latin America operations, managed and reported within our Europe region growth, reduced capital intensity and high levels of cash generation. The proceeds we received from our joint venture with Haniel give us greater Our purpose flexibility to invest in attractive M&A Our purpose is to protect people and enhance lives, everywhere. We protect people opportunities and new digital technology from the dangers of pest-borne disease and the risks of poor hygiene. We enhance lives and innovation solutions for our higher with services that protect the health and wellbeing of people and the reputation of our growth categories of Pest Control and customers’ brands. Hygiene, which in 2018 represented just over 89% of Ongoing Operating Profit. Rising standards of public health, stricter food safety legislation and the need to comply with workplace safety regulations are driving demand for our service expertise. Read more on pages 22 and 23 Strategic Report Corporate Governance Financial Statements Additional Information 1 Protecting People Contents Strategic Report Enhancing Lives... 2 Protecting people, enhancing lives... everywhere 12 Q&A with Andy Ransom, Chief Executive Everywhere 14 Our ‘big five’ challenges 15 2018 progress towards financial targets We have continued to execute our RIGHT WAY plan across our 16 Our brands and businesses regions of North America, Europe, UK & Rest of World, Asia and 18 Reasons to invest Pacific – all of which continue to provide excellent opportunities for 19 A snapshot of our year 20 Our markets sustainable and profitable growth. We continue to witness strong 22 Our business at a glance demand for our services everywhere we operate and our powerful 24 Our business model brand, outstanding customer service and proven operating model 26 Capital allocation model by category have delivered further operational and financial improvements across 28 Key performance indicators 30 Strategy in action the business in 2018. 40 Regional performance At the heart of our success are our people. We are determined 42 Risks and uncertainties 48 Corporate responsibility to be an Employer of Choice across our global operations, and to ensure our engaged and talented colleagues utilise their local market Corporate Governance knowledge, relationships and culture to apply our services to the 56 Q&A with John McAdam, Chairman 58 Board of Directors highest standards. 60 Executive Leadership Team 61 Corporate Governance Report Our single, most important aim at Rentokil Initial is to protect people 71 Audit Committee Report and enhance lives. We do this by providing essential pest control 77 Nomination Committee Report and hygiene services to protect our customers and keep them safe 81 Directors’ Remuneration Report in their living and working environments. We also support local 98 Independent Auditor’s Report communities and charities around the world, implement health and Financial Statements hygiene programmes in areas where the need for greater healthcare 104 Financial Review and education is most profound, and work hard to minimise our 108 Consolidated Statement of Profit or Loss impact on the environment. and Other Comprehensive Income 109 Consolidated Balance Sheet Over the next few pages we highlight a number of examples that 110 Consolidated Statement of Changes in Equity demonstrate how we have made a difference to customers and 111 Consolidated Cash Flow Statement communities around the world through the services we provide, 112 Notes to the Financial Statements and highlight some of the initiatives we are using to drive growth 154 Related undertakings in our business to deliver real value for our shareholders. 159 Five-year summary 160 Parent Company Balance Sheet On behalf of the Board, I would like to thank our shareholders and 161 Parent Company Statement of Changes customers for giving their continued support to Rentokil Initial and for in Equity 162 Notes to the Parent Company Accounts their ongoing trust and loyalty. This is a very exciting time for Rentokil Initial, both locally and globally, and we hope you will enjoy reading Additional Information our 2018 Annual Report. 167 Directors’ Report 170 Additional shareholder information JOHN McADAM 172 Glossary Chairman 27 February 2019 The Financial Review on pages 104 to 107 forms part of the Strategic Report. Alternative Performance Measures This Annual Report includes certain financial performance measures which are not GAAP measures as defined under International Financial Reporting Standards (IFRS). These include Ongoing Revenue, Ongoing Operating Profit, Adjusted Profit Before Tax and Free Cash Flow. Management believes these measures provide valuable additional information for users of the financial statements in order to understand the underlying trading performance. Ongoing Revenue and Ongoing Operating Profit measures represent the performance of the continuing operations of the Group (including acquisitions) after removing the effect of disposed or closed businesses. Ongoing Profit and Adjusted Profit Before Tax exclude certain items that could distort the underlying trading performance. Ongoing Revenue and Ongoing Operating Profit are presented at CER unless otherwise stated. An explanation of the measures used along with reconciliation to the nearest IFRS measures is provided in Section E. Alternative Financial Measures on pages 149 to 153. Visit our website at rentokil-initial.com Rentokil Initial plc Annual Report 2018 2 Protecting people, enhancing lives...everywhere “ North America The process to become a CFT gives me a lot of confidence in Our growing presence in the world’s largest the programme because of how pest control market provides us with excellent professionally my interview and opportunities to grow organically and through training were done. I've trained Increasing short-term many specialists in the past but retention through targeted acquisitions to build a pest control am amazed at how much faster powerhouse in this key growth region. my current trainee is progressing Project 365 because of the real world field Central to our strategy of being environment. There’s no barrier an Employer of Choice (EoC) to communication and I love is increasing sales and service that he feels like he can me ask colleague retention to 90%. anything. This programme is really Ensuring new recruits stay with teaching world-class service.” us beyond year one is a priority as it directly impacts customer BRIAN CARRINGTON service and retention. This year 90% Certified Field Trainer & Technician of the US population is covered Albany, New York we launched a Certified Field by our footprint Trainer (CFT) programme using our best field specialists to help new hires in their first 10 weeks gain Field Technician Training Certification and to mentor 14 them throughout their first year. new businesses were acquired last year Using scale to secure increasing share Leveraging innovation to combat in national accounts rising pest threats As the world’s largest commercial pest control provider we offer The US National Pest Association states that residential settings and customised, expert solutions for some of the world’s biggest hotels continue to be the top places where pest professionals are companies. Our service footprint covers 90% of the US population treating bed bugs. To combat these tiny pests Rentokil has developed and enables us to provide full service contracts to customers with a revolutionary new digital detection system that identifies the first multiple locations. While individual customer sites are serviced by signs of bed bug presence before a major infestation can take place. local teams, national accounts are managed by dedicated stewards Currently around 400 prototypes have been deployed in the first full ensuring all customer needs are met, from scheduling service visits scale field trial in St Louis, Missouri. It’s a

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