2013 Performance & Strategic Review Andy Ransom, Chief Executive - PowerPoint PPT Presentation

2013 Performance & Strategic Review Andy Ransom, Chief Executive Jeremy Townsend, Chief Financial Officer 28 February 2014 1

This presentation 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 2 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 presentation should be construed as a profit forecast .

2013 Operating & Financial Review John McAdam, Chairman 3

2013 Operating & Financial Review Andy Ransom, Chief Executive 4

Agenda For Today Initial Facilities The Right Way - A Differentiated 2013 Operating & Financial Review Plan for Shareholder Value • Business Context • Deal Rationale • Operational & Financial • Our New Plan: The Right Way Highlights • Key Facts & Figures • Review of Regional Performance • Medium-Term Objectives • Balance Sheet & Funding • Group Financials • Use of Proceeds • Guidance for 2014 --Q&A-- 5

At constant exchange rates 2013 Financial Highlights • 2013 revenue, profit and cash performance in line with expectations • Revenue £2.3bn (+3.2%), reflecting contribution from Western acquisition: − Quarter on quarter improvement in organic growth in core businesses: +1.1% in Q4, +0.5% for the year • Adjusted operating profit £257.4m (+4.1%): − West region £117.5m (+14.8%), reflecting impact of Western acquisition with North America £37.2m (+25.3%), supported by 18.8% growth in UK & Ireland − Continued strong performance from Asia, with profits of £8.1m (+32.8%) − East region £183.5m (-2.1%) driven by weak performance in Benelux • Profit before tax £122.6m at AER (+13.8%); 2012 impacted by refinancing one-off • Operating cash flow £141.2m, down £53.6m due to working capital outflows and increased restructuring & capex costs • Further expansion of global pest control presence through acquisition of 19 bolt-ons with combined revenues of £19m • Recommended final dividend of 1.61p; full year dividend of 2.31p (10% increase year on year) Solid financial performance despite ongoing economic challenges 6

2013 Operating & Financial Review Jeremy Townsend, Chief Financial Officer 7

Financial Highlights (Continuing Operations) Q4 £ million FY 2013 2012 2013 2012 £m £m £m £m Revenue at CER 579.6 570.6 1.6% 2,297.6 2,226.7 3.2% Adjusted PBITA at CER 78.9 76.2 3.5% 257.4 247.3 4.1% Adjusted PBTA at CER 63.8 63.5 0.5% 204.1 203.3 0.4% Adjusted PBTA at AER 62.6 62.9 (0.5%) 206.2 203.3 1.4% Operating Cash Flow at AER 104.6 113.0 141.2 194.9 Adjusted EPS at AER 8.42p 8.24p 2.2% CER = constant exchange rates AER = actual exchange rates 8

At constant exchange rates West Region • Revenue +17.9% (+0.9% organic), profit +14.8%: % Group Revenue % Adj. PBITA 2 � Revenue and profit growth driven largely by North America through 2012 acquisition of Western Exterminator 31.4% 35.2% � UK & Ireland revenue adversely impacted by tough economic conditions however cost savings have enabled good profit growth � Low single-digit revenue and profit growth from Rest of World reflecting solid performances by East Africa, the Nordics and the Caribbean Q4 2013 FY 2013 Q4 FY � Marginal revenue decline in Europe reflecting ongoing economic challenges in Southern Europe and Holland Revenue £184.0m £721.1m 14.6% 17.9% � Prior-year acquisitions in Central and South America, Adj. PBITA 1 £34.0m £117.5m 15.0% 14.8% Middle East, North Africa and Turkey trading in line with expectations � Integrated operating model implemented across the region 1 before amortisation and impairment of intangible assets, underpinning net operating margins reorganisation costs and one-off items 2 % excludes divisional overheads 9

At constant exchange rates East Region % Group Revenue % Adj. PBITA 2 • Revenue -2.1% (-0.4% organic), profit -2.1%: � Continuation of difficult trading conditions in Europe 40.8% 54.7% � Benelux impacted by significant pricing pressure � Steady performance in workwear and hygiene in France supported by move to integrated operating model � Germany held back by impact of falling gold prices on Dental revenues � Pacific impacted by weak pest job sales Q4 2013 FY 2013 Q4 FY � Significant investment in restructuring programme during the Revenue £235.9m £937.5m (2.6%) (2.1%) year – now largely complete Adj. PBITA 1 £50.6m £183.5m (6.5%) (2.1%) 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes divisional overheads 10

At constant exchange rates Asia Region • Revenue +7.0% (+7.2% organic), profit +32.8%: � % Group Revenue Good performances from pest and hygiene categories, % Adj. PBITA 2 reflecting ongoing market development � Combined revenue growth of 37% from India, China and Vietnam � Mid-single digit revenue growth from Malaysia building on strong 2012 performance � Profit growth reflects the leverage from revenue growth combined with ongoing productivity improvements £ £ m m £ £ m m 1 before amortisation and impairment of intangible assets, reorganisation costs and one-off items 2 % excludes divisional overheads 11 11

At actual exchange rates Interest £ million FY 2013 FY 2012 Interest per Income Statement (60.0) (48.6) Net Debt 1,035 989 Average net debt 1,012 954 Average interest rate on bank/bond/finance/lease debt 5.9% 5.1% Interest on bonds/finance lease/RCF (61.6) (51.2) Gross debt 1,471 1,212 Average gross debt 1,342 1,111 Average interest rate on bank/bond/finance/lease debt 1 4.6% 4.6% 1 Average interest rates will fall below 4% in April following repayment of the €500m 2014 bonds 12

At actual exchange rates Operating Cash Flow £ million FY 2013 FY 2012 Adjusted PBITA 261.9 247.3 1 Profit on sale of fixed assets, Reorganisation costs and one-off items (63.7) (48.0) IFRS 2 etc. 2 Property, plant, vehicles Depreciation 205.2 197.1 Non-cash items 1 10.8 16.8 EBITDA 414.2 413.2 Working capital (34.6) (10.4) Movement on provisions (6.3) (4.5) Capex (238.3) (212.6) Fixed asset disposal proceeds 2 6.2 9.2 Operating cash flow – continuing operations 141.2 194.9 Operating cash flow – discontinued operations (23.0) (37.9) Operating cash flow 118.2 157.0 13

At actual exchange rates Free Cash Flow and Movement in Net Debt £ million FY 2013 FY 2012 Operating cash flow 118.2 157.0 Cash interest (51.2) (44.2) One-off items – financing - (31.4) Special pension contributions (13.6) (12.5) Financing - other 1.2 2.1 Cash tax (37.2) (35.6) Free cash flow 17.4 35.4 Acquisitions & Disposals (10.0) (82.8) Dividends (38.6) (36.2) FX and other (14.1) 13.1 Increase in net debt (45.3) (70.5) Opening net debt (989.5) (919.0) Closing net debt (1,034.8) (989.5) 14

2014 Guidance • Central and divisional overheads below £70m in 2014 (£10m reduction on 2013 H1 run-rate) • Interest cost £50m – reflecting benefit of 2012 and 2013 refinancing • Exchange rate volatility - c.£15m adverse impact to P&L from strengthening of Sterling • P&L impact of restructuring costs c.£20m • Adjusted effective tax rate 26% • Cash flow guidance including impact of Initial Facilities disposal: – Working capital outflow £15m to £25m – Net capex £205m to £215m – Cash impact of restructuring £30m lower in 2014 – Pension payments reduced to c.£3m per annum – to be paid into an ESCROW account – Interest and tax payments c.£5m higher reflecting phasing of bond interest payments – Impact of Initial Facilities disposal offset by City Link impact in 2014 versus 2013 • Significant improvement in free cash flow from lower working capital, capex and restructuring costs 15