27 February 2020 PRELIMINARY FINANCIAL RESULTS FOR BOND INVESTORS 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 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 . 2
27 February 2020 FINANCIAL REVIEW JEREMY TOWNSEND, CFO BENTE SALT, GROUP TREASURER 3
2019 Full Year Highlights 8.6% Ongoing Revenue Growth at CER. Strongest Organic Revenue North America FY revenues of over £1,000m. growth for 15+ years. 4.5% Ongoing Revenue ahead of medium-term target (5%-8%). Organic Revenue Growth (2018: 3.7%). Good growth in Pest and 10.8% Hygiene. Pest Control Ongoing Revenue Growth of 10.8%; 4.9% organic growth (2018: 4.8%). Hygiene Ongoing Revenue Growth of 5.8%; 4.3% organic growth (2018: 2.8%). 4
2019 Full Year Highlights 10.5% Ongoing Profit Growth at CER. Ongoing Profit Growth Group margins +20bp, North America +50bp. ahead of medium-term £250.7m target (c.10%). Free Cash flow conversion Free Cash Flow - £58.7m ahead of 2018. ahead of c.90% target. 98.6% cash conversion. Customer retention: +30 c.£30m basis points. Pension buy-in with PIC agreed. c. £30m (pre-tax) cash to be returned to the company. 5
2019 Full Year Highlights 41 41 acquisitions in 2019. Outstanding execution of Delivering £137m annualised revenues. Total cash spend of £316.5m. M&A. 30 Capital allocation focused on Pest and Hygiene; Growth and Emerging 30 acquisitions in Pest Control. markets. £126m annualised revenues. M&A pipeline remains €430m very strong. Divestment of 17.8% share of Haniel JV. In addition to the €520m received in 2017. 6
Outlook The company has performed strongly in 2019 with a combination of organic and acquisitive growth. We are confident of delivering further operational and financial progress in 2020. The new decade presents clear opportunities The new decade presents clear opportunities for sustainable profitable growth. for sustainable profitable growth. 7
Financial Highlights FY 2019 £ million Δ Δ Revenue 8.6% AER CER AER CER £2,644.5m Ongoing Revenue* 2,676.2 2,644.5 9.9% 8.6% Ongoing Operating Profit* 368.1 365.5 11.3% 10.5% Profit 10.5% Net Operating Margins 13.8% 0.2% £365.5m Adjusted PBTA 340.9 338.3 10.7% 9.8% Free Cash Flow 250.7 Cash 98.6% £250.7m Adjusted EPS 14.43p 14.27p 10.4% 9.2% cash conversion** over last 12 months Dividend 5.15p 15.2% *Ongoing Revenue and Ongoing Operating Profit exclude the results of disposed businesses. Ongoing Operating Profit and Adjusted PBTA exclude certain items that could distort the underlying trading performance. **Adjusted cash flow conversion on a trailing 12-month basis 8
Strong Financial Progress A track record of delivery Strong and sustainable Ongoing Revenue growth: Ongoing Operating Profit growth delivery of Free Cash Flow, 5%–8%, 3%-4% Organic (CER) c.10% (CER) c.90% conversion** (AER) £m £m £m 5.0% 260 120% 380.0 5 YR 2600 4.5% CAGR 240 5 YR 11.7% 100% 4.0% CAGR 330.0 2400 12.8% 220 Organic 3.5% 5 YR 80% CAGR 200 2200 3.0% 3.5% 280.0 2.5% 180 60% 2000 2.0% 230.0 160 40% 1800 1.5% 140 1.0% 180.0 20% 1600 120 0.5% 1400 0.0% 130.0 100 0% Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Yr to Dec June Dec June Dec June Dec June Dec Dec June Dec June Dec June Dec June Dec Dec June Dec June Dec June Dec June Dec 2015 2016 2016 2017 2017 2018 2018 2019 2019 2015 2016 2016 2017 2017 2018 2018 2019 2019 2015 2016 2016 2017 2017 2018 2018 2019 2019 +8.6% growth in Ongoing Revenue, +10.5% growth in Free Cash Flow of £250.7m, 98.6% cash conversion over last 12 months +4.5% Organic Ongoing Operating Profit *Ongoing Revenue and Ongoing Operating Profit exclude the results of disposed businesses. Ongoing Operating Profit and Adjusted PBTA exclude certain items that could distort the underlying trading performance. Charts calculated on a 12-month trailing basis. **Adjusted cash flow conversion on a trailing 12-month basis 9
Operating Cash Flow £ million 2019 2018 @AER 2019 Free Cash Flow performance benefiting from £36.1m increase in Adjusted Operating Profit 365.4 329.3 Adjusted Operating Profit One-off items – Operating (14.6) (22.2) Depreciation 219.8 147.1 Depreciation and capex both Other 1 26.1 17.0 increased due to IFRS 16 but offset each other, with a broadly neutral EBITDA 596.7 471.2 net impact Working capital (7.0) 6.6 Operating cash inflow £59.6m higher than in 2018, driven by Movement on provisions (4.0) (10.8) £36.1m increase in Adjusted Capex (242.6) (183.5) Operating Profit and an increase in dividends received from divested Operating Cash Flow – continuing operations 343.1 283.5 stake in the Haniel JV 1 Profit on sale of fixed assets, IFRS 2, dividend from associate, etc. 2 Property, plant, vehicles 10
Free Cash Flow & Movement in Net Debt £ million 2019 2018 @AER Interest payments of £48.1m are £2.8m higher than the prior year due Operating Cash Flow – continuing 343.1 283.5 to the impact of IFRS 16 and tax Cash interest (48.1) (45.3) payments decreased by £1.9m Cash tax (43.2) (45.1) reflecting the phasing of payments Special pension contributions (1.1) (1.1) Free Cash Flow increased by £58.7m in Free Cash Flow – continuing 250.7 192.0 the year, delivering a Free Cash Flow Acquisitions conversion of 98.6% over the last 12 (316.5) (298.4) months Disposals 391.9 (3.1) Dividends (85.8) (74.2) Adoption of IFRS 16 has added £184.0m of lease obligations to net Underlying decrease in Net Debt 240.3 (183.7) debt at 1 January 2019, together with FX and other 24.2 (42.5) foreign exchange translation and other IFRS 16 lease obligations (184.0) - items, led to an overall decrease in net debt of £80.5m and closing net debt Decrease in Net Debt 80.5 (226.2) of £1,073.0m Opening Net Debt (1,153.5) (927.3) Closing Net Debt (1,073.0) (1,153.5) 11
Balance Sheet Balance Sheet • Net debt at 31 Dec 2019: £1,073.0m, a decrease of £80.5m on Dec 2018, despite the impact of additional lease liabilities from IFRS 16 of £184m • £737m of centrally held funds and available undrawn committed facilities • Net debt to EBITDA ratio of 1.8x at 31 Dec 2019 (including full year impact of IFRS 16), 1.7x excluding IFRS • €430m proceeds from sale of 17.8% stake in Haniel JV used to pay down debt and support additional funding of Group M&A programme • €500m bond issued in May 2019 at coupon of 0.875% and maturing in May 2026. Proceeds used to refinance €500m bond that matured in September 2019. Average cost of net debt in 2019 of 3.42% • Group’s RCF extended in August to 2024. Following the September bond refinancing, RCF reduced by £50m to £550m • Credit rating remains at BBB Stable Outlook 12
2019 Summary +8.6% growth in Ongoing Revenue (vs target 5% to 8%) +4.5% Organic growth (vs. target 3% to 4%) – highest level in 15 years +10.5% increase in Ongoing Operating Profit (vs. target 10%) £250.7m Free Cash Flow, 98.6% conversion over last 12 months Sale of minority stake in Haniel JV for proceeds of €430m have been used to reduce debt and support Group M&A programme 41 businesses acquired in 2019 with £137m annualised revenues for cash spend of £316.5m Balance sheet remains robust Good progress towards buy-out of pension scheme – anticipate a pre- tax cash surplus of £30m to be returned to the Company in 2020 +15.2% increase in 2019 dividend at 5.15p per share A strong performance in 2019, with a combination of above-target organic growth A strong performance in 2019, with a combination of above-target organic growth and disciplined execution of M&A and disciplined execution of M&A 13
27 February 2020 CREDIT HIGHLIGHTS 14
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