Rentokil(RTO) - 2023 Q4 - Annual Report

Revenue Growth - Rentokil Initial achieved a revenue of £4,321 million at constant exchange rates (CER), reflecting a growth of 60.6%[31] - The company reported a 4.9% organic revenue growth and a 16.6% margin for the year, despite facing significant inflation and macroeconomic challenges[38] - North America revenue increased by 78.7% to £3,306 million at actual exchange rates (AER), while the UK & Sub-Saharan Africa region saw a 6.6% increase to £390 million AER[22] - The Hygiene & Wellbeing segment generated £858 million in revenue at AER, marking a growth of 5.4%[33] - The France Workwear segment reported a revenue of £221 million at AER, reflecting a growth of 15.3%[34] - Organic Revenue Growth in Pest Control was 4.5% in 2023, with North America experiencing a growth of 3.5% due to a softer consumer market[107] - Organic Revenue Growth in North America was 3.1%, with Pest Control services growing by 3.5% due to a softer consumer market in the second half of the year[178] - Organic revenue growth in Europe, the company's second-largest region, was reported at 9.2%[57] - Statutory Revenue increased by 44.7% to £5,375 million at AER, with organic revenue growth of 4.9%[175] Integration and Synergies - The integration of Terminix resulted in $69 million in pre-tax net cost synergies, exceeding the target of $60 million, with a revised total gross synergy target of $325 million by 2026[38] - The company has reduced its branch network by 97 locations, achieving approximately 50% of its target property synergies from the Terminix integration[50] - The integration of Terminix has resulted in an 8.1 percentage point increase in colleague retention since the deal closed[56] - The company achieved $69 million in net cost synergies in 2023, surpassing the target of $60 million, with a goal of reaching $225 million in annual pre-tax net P&L cost synergies by the end of 2026[113] - The company plans to implement a phased route and branch integration across seven regions in the US, starting mid-2024[54] Operational Efficiency and Innovation - The company plans to enhance operational excellence and leverage the Terminix integration to drive future growth[48] - The company is committed to innovation, with ongoing investments in research and development to meet evolving customer expectations[49] - The company has a pipeline of over 75 innovation investment projects aimed at driving growth and productivity[67] - The company operates four global innovation centers, focusing on sustainable and effective pest control solutions[196] Financial Performance - The company achieved a compound annual growth rate (CAGR) of 13.3% in revenue and 16.2% in adjusted operating profit from 2014 to 2023[62] - Adjusted Operating Profit rose by 57.0% to £897 million at CER, and by 57.1% to £898 million at AER, with Statutory Operating Profit up 96.9% to £625 million at AER[182] - Free Cash Flow grew by 33.7%, reflecting strong cash management and integration activities[186] - Adjusted Free Cash Flow Conversion was 89.4%, slightly down from 91.8% in 2022, but ahead of guidance for the sixth consecutive year[191] - The expected free cash flow conversion target for FY 2025 is at least 90%[53] Customer Satisfaction and Retention - Customer satisfaction in Terminix was strong, with a Net Promoter Score of 64.9, reflecting a 1.5% increase in 2023[115] - Customer retention remained broadly flat at 82.3%, with a slight improvement of 0.2 percentage points in North America[177] - The Customer Voice Counts (CVC) score for 2023 was 50.8, a slight decrease of 0.1 points from the prior year[169] - The myRentokil self-service customer portal saw a 35% increase in user sessions, with 300,000 registered users[131] Sustainability Goals - The company aims to achieve net zero carbon emissions from its operations by the end of 2040[68] - The company aims for net zero carbon emissions from operations by the end of 2040, with a 16% improvement in carbon efficiency achieved in the last five years[137] - The fleet now comprises approximately 8% ultra-low emissions vehicles in the UK and Europe, and 1,484 hybrid vehicles worldwide[138] - In Latin America, overall fuel usage per visit reduced by 4.3%, with a significant reduction of 14.3% in the Caribbean[146] - The Bahamas achieved a 40% reduction in CO2 emissions while increasing fumigation revenues by 37%[150] Future Outlook - Rentokil Initial aims for over 5% organic revenue growth per annum in the medium term, driven by upselling and effective pricing strategies[48] - Group medium-term targets for revenue growth are set at a minimum of 5.0%, with specific targets for Pest Control (4.5–6.5%), Hygiene & Wellbeing (4.0–6.0%), and Workwear (3.0–4.0%) [53] - The company plans to invest an additional $25 million in 2024 to enhance marketing and sales initiatives in North America[111] - The global pest control market is valued at approximately $26 billion and is expected to grow at a rate of 5-6% annually, reaching around $33 billion by 2028[203] - The hygiene and wellbeing market, particularly washroom services, is estimated at $55 billion, with a forecasted CAGR of 4-5% through 2028[204]