Rentokil(RTO) - 2022 Q4 - Annual Report

Revenue Growth - Rentokil Initial achieved a total revenue of £3,714 million at AER, reflecting a growth of 38.2%[26] - The company reported a pest control revenue of £2,516 million at CER, which is a 29.0% increase[26] - The North America segment reported a revenue of £1,675 million, up 29.7%[16] - North America revenues grew by 37.7% (at CER) and 52.0% (at AER), benefiting from 5.3% organic growth and M&A, including Terminix[127] - Group Pest Control revenues increased by 29.0% (at CER) and 38.2% (at AER), driven by resilient demand and effective price progression[127] - Revenue growth was 19.1% at constant exchange rates (CER) and 25.6% at actual exchange rates (AER), driven by strong topline momentum and M&A activities, including the Terminix transaction[160] - Organic Revenue in North America grew by 5.7%, with total Revenue up 29.7% due to the Terminix acquisition[175] Integration and Synergies - The integration of Terminix is expected to create at least $200 million in pre-tax net P&L cost synergies by the end of 2025[55] - Annual pre-tax net P&L cost synergies are expected to reach at least $200 million by the end of 2025, up from a previous estimate of $150 million[64] - The integration plan aims to reduce the number of branches from over 600 to approximately 400, enhancing route density and operational efficiency[64] - The integration process includes unifying employee terms, harmonizing IT systems, and converging go-to-market strategies, with a focus on branch and route consolidation[67] - The company aims to achieve at least $200 million in annual pre-tax net P&L cost synergies by the end of 2025 from the integration of Terminix[126] Financial Targets - Rentokil Initial has set a target for group organic revenue growth of at least 5.0% for 2023[19] - The company aims for a free cash flow conversion target of at least 90% by FY 2025[19] - The adjusted operating margin target for the group is set at approximately 19.0% by FY 2025[19] - The company has a strong record of revenue and profit growth, with a medium-term financial target of 6-9% revenue growth at constant exchange rates[81] Customer and Employee Metrics - The company has a total of approximately 4.9 million customers worldwide, including 2.9 million from Terminix[33][35] - Colleague retention remained high at 82.6%, although slightly behind 2021 levels[126] - Overall customer retention remained flat year on year at 85.4%[160] - Customer retention in Europe increased by 1.0 percentage points to 88.5%, while Asia saw a slight increase of 0.5 percentage points to 81.3%[160] Innovation and Development - The company plans to open a new science and innovation center in the US in 2023, focusing on termite and residential pest control[48] - An innovation center will be opened in the US to support residential and termite pest control operations, emphasizing sustainability and net zero carbon emissions by 2040[71] - The pipeline of innovations includes approximately 50 projects and 17 patent applications in progress, enhancing the company's competitive edge[161] - The company completed its largest training and development festival for colleagues, with over 150 sessions and more than 4,000 attendees[96][97] - The company has completed over 1.5 million pieces of U+ training and rolled out more than 500 new pieces of learning content to enhance employee development[78] Sustainability Initiatives - Rentokil Initial is committed to a 70% reduction in emissions from fumigations by 2030[51] - The company achieved a 12.5% reduction in its five-year emissions index and is on track for a 20% reduction by 2025[138] - The company is investing in air care products, including the new Aeramax Pro 3 air purifier introduced in Europe[205] - The global roll-out of Luna Dry and Luna Mini Dry products has commenced, featuring advanced brushless motor technology and HEPA 13 filters[205] - The company is extending its clean air and wellbeing portfolio into air quality monitoring with pilots conducted in Asia and Europe[205] Market Position and Strategy - Rentokil Initial is the market leader in North America for commercial, residential, and termite pest control, with expectations to grow at 1.5 times above market rates in the medium term[66] - The company plans to selectively acquire high-quality assets in other geographies and in Hygiene & Wellbeing, while slightly reducing M&A ambitions in North America due to the ongoing integration[69] - The Pest Control business, including Terminix, focuses on organic growth and acquisitions to strengthen market positions and density[208] Product Performance - The installation of PestConnect units increased by 24% in 2022, with 290,000 units now installed across 16,000 connected customer sites[127] - Sales of the Lumnia LED fly trap reached 357,000 units, with an 8% increase in sales during the year[127] - The Pest Control self-service portal is operational in 50 countries, supporting 1.2 million customer sites[204] - PestConnect has 290,000 units in operation, an increase of 30,000 units in the six months to December 2022, across 16,000 sites[204] - The Lumnia LED insect light traps are now available in over 60 countries, with a partner app being developed in collaboration with Vodafone and Google[205]