Q4 2020 Acquisitions and Trading Update

8 January 2021

Rentokil Initial plc - Q4 2020 Acquisitions and Trading Update

A very strong end to the year for M&A in our key North America pest control market with continued strong trading boosted by momentum in disinfection services

Rentokil Initial plc (FTSE: RTO, "the Company") announces today the acquisition of Environmental Pest Service ('EPS'), a full-service, commercial and residential pest control company based in Tampa, Florida. 

EPS was ranked 15^th in the PCT Magazine 2020 Top 100 listing of leading US pest control companies and generated annualised revenues of c.$82m (£60m) in 2020.  EPS employs c.640 people (of which 386 are in service roles) in 30 branches across four separate regions: East Florida; West Florida; North Georgia; and North Carolina.  It has two brand names, Arrow Environmental and Bug Out. 

In addition to the acquisition of EPS, we have acquired a further eight high quality pest control companies in North America in Q4, with combined annualised revenues of c.$62m (c.£48m) in 2020. 

Total acquisitions in 2020

For the full year ended 31 December 2020, we have acquired 23 new businesses, with annualised revenues of over £150m, for a cash spend of c.£180m (of which c.£150m was in H2).  This excludes the consideration for EPS which was paid at the beginning of January 2021. 

Announcement of Preliminary Results and Updated Guidance for 2020

Rentokil Initial plc will announce its 2020 Preliminary results on Thursday, 4 March.  In our Q3 Trading Statement last October, we indicated that despite continued uncertainty across our business as a result of the ongoing pandemic, we were hopeful of being able to maintain the momentum we had seen in Q3 into the fourth quarter which would result in an outcome for the full year at least in line with expectations.  Trading across both our Hygiene and Pest Control categories has continued to be strong in Q4 - primarily reflecting continued strong sales from one-off disinfection services - and we now expect the final outcome for the year to be slightly above the top end of the range of current market expectations for Adjusted PBTA*.

We are looking to the future with confidence. However, while global vaccination programmes offer hope that we will see an end to the pandemic, the financial outlook for 2021 inevitably remains uncertain, in particular with limited visibility on the sustainability of one-off disinfection services, the recent strengthening of sterling, and the undetermined impacts arising from recently rising cases of COVID-19 globally and new and prolonged country lockdowns. We look forward to providing a further update with our full year results on 4 March.

Andy Ransom, Chief Executive of Rentokil Initial plc, said:

"Despite the impact of COVID-19 on our business in 2020, we have exited the year in a strong position, with the trading momentum of Q3 continuing throughout Q4 and with an excellent overall delivery of M&A, which significantly accelerated as the year drew to a close.  We have gained approximately 2000 new colleagues from acquisitions in 2020, and I am delighted to welcome them all to Rentokil Initial.       

"I am also very pleased to announce our acquisition of Environmental Pest Service.  EPS is a high-quality company of significant scale with a strong reputation for service delivery and technical ability, and with a culture which will make an excellent fit with our own.  This acquisition is very much in line with our strategy to acquire pest control businesses that build customer density and add to our scale in key local markets - by acquiring EPS we can immediately add density, provide improved customer service, and provide incremental revenue to several of our sub-scale existing Rentokil locations on the Florida Gulf Coast, as well as build on our existing presence in north eastern Florida, metro Atlanta and North Carolina." 

* Our Company-compiled current range of analyst forecasts for Adjusted PBTA for 2020 is £292m to £337m.