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Protecting People. Enhancing Lives.
Reshaping
our business
Rentokil Initial plc
Annual Report 2021
to serve a changing world
The great
Hygiene reset
Expanding Hygiene to meet
new attitudes towards health,
hygiene and wellbeing
Digitally charged
Pest Control
PestConnect is leading the
strong execution of our
innovation strategy globally
Race to
protect people
2,000 colleagues
completed the Race to
Kigali to highlight the global
fight against malaria
B
The Financial Review on pages 144 to
149 forms part of the Strategic Report
The content of this Annual Report reflects the views, opinions and status of the Company as at 3 March 2022.
Ongoing Revenue (at CER)
W
£3,063.5m
+9.8%
Revenue (at AER)
£2,956.6m
+5.5%
Lost time accident (LTA)
W
0.38
-2.6%
Ongoing Operating Profit (at CER)
W
£458.7m
+19.5%
Profit before tax (at AER)
£325.1m
+41.5%
Total colleague retention
W
84.4%
-420bps
Free Cash Flow
W
£326.5m
107% cash flow conversion
2021 dividend payment
6.39p
Total client retention
W
85.3%
+80bps
Performance
W
KPIs, pages 24 to 27
Financial Statements
 Financial Review
 Consolidated Statement of Profit or
Lossand Other Comprehensive Income
 Consolidated Balance Sheet
 Consolidated Statement of Changes
inEquity
 Consolidated Cash Flow Statement
 Notes to the Financial Statements
 Related Undertakings
 Parent Company Balance Sheet
 Parent Company Statement of
Changes inEquity
 Notes to the Parent Company Accounts
Other Information
 Directors’ Report
 Additional Shareholder Information
 Glossary
Strategic Report
 Our Purpose and Ambition
 Achieving our Ambition
 Our Business at a Glance
 Q&A with Andy Ransom, Chief Executive
 Our ‘Big Six’ Challenges
 Reasons to Invest
 Key Performance Indicators
 Our Business Model
 Our Stakeholders
 Pest Control
 Hygiene
Protect & Enhance
 Responsible Business
Colleagues and culture
 Service and innovation for customers
 Environment
 Communities
Contents
Governance, trust and transparency
Non-financial information statement
 Section () statement
 Risks and Uncertainties
 Viability Statement
Corporate Governance
 Chairman’s Introduction to Governance
 Board of Directors
 Executive Leadership Team
 Corporate Governance Report
 Audit Committee Report
 Nomination Committee Report
 Directors’ Remuneration Report
 Independent Auditors’ Report
2021
AER £m
2021
CER £m
Use of metric
Ongoing Revenue 2,953.9 3,063.5 Performance of continuing operations of the Group (including acquisitions).
Excluding disposed or closed businesses. Presented at CER unless otherwise stated.
Revenue – disposed and closed businesses 2.7 2.7
Revenue 2,956.6 3,066.2
Ongoing Operating Profit 441.5 458.7 Performance of continuing operations of the Group (including acquisitions).
Excluding disposed or closed businesses. Presented at CER unless otherwise stated.
Ongoing Profit – disposed and closed businesses – –
Adjusted operating profit 441.5 458.7
One-off items and amortisation and impairment of intangible assets (95.0) (98.6)
Operating profit 346.5 360.1 Presented at CER unless otherwise stated.
Share of profit from associates before tax 8.1 8.9
Net adjusted interest payable and net interest adjustments
(29.5) (30.3)
Profit before tax 325.1 338.7
One-off items, net interest adjustments, and amortisation and
impairment of intangible assets
91.4 94.9
Adjusted Profit Before Tax 416.5 433.6 Excludes certain items that could distort the underlying trading performance.
Basic earnings per share 14.16p 14.77p
Basic adjusted earnings per share 18.07p 18.81p
Alternative Performance Measures
This Annual Report includes certain financial performance measures, summarised below, which are not GAAP measures as defined under International Financial Reporting Standards (IFRS).
These include Ongoing Revenue, Ongoing Operating Profit, Adjusted Profit Before Tax and Free Cash Flow. Management believes these measures provide valuable additional information for
users of the Financial Statements in order to understand the underlying trading performance.
An explanation of the measures used along with reconciliation to the nearest IFRS measure is provided in the Notes to the Accounts, Section E – Alternative Performance Measures on pages 193
to 199.

In 2021, we continued to succeed in supporting our
customers, strengthening our services and extending our
reach, while maintaining industry-leading safety standards
and minimising our environmental impact. Today, we are
global leaders in both pest control and hygiene, markets that
have grown in importance aspeople’s expectations of health
and hygiene have changed, perhaps forever, because of the
COVID-19 pandemic. Our Pest Control category has made
excellent progress this year, demonstrating a clear return to
growth, and in December, we announced our agreement to
acquire Terminix, creating what will be theclear No.1 player
in North America and globally.
In September, we announced the next evolution of our
RIGHT WAY plan from 1 January 2022: the creation of a new,
larger business, Hygiene & Wellbeing, combining our existing
Hygiene operations with our Ambius, Dental Hygiene and
Cleanroom operations; new Group medium-term targets;
anda revised regional structure. We believe this will create
abusiness fit to meet the changing needs of our customers.
We have an incredible team performing strongly right across
our organisation. Together, we’re confident about the future
and committed toachieving the demanding newfinancial
targets we’ve set ourselves for the medium term.
Andy Ransom
Chief Executive
B
Our Business at a Glance on page 16
B
Over the following 14 pages we talk
about our purpose and ambition
We are reshaping
our business to serve
a changing world
Features
Reshaping our business
Our reshaped categories and
agreement to acquire Terminix
are creating a business fit to
serve our customers
Pages 15 and 16
Great Hygiene reset
Our enlarged Hygiene &
Wellbeing business reflects
research-backed expectations
and growth opportunities
across the sector
Page 43
Digitally charged Pest Control
PestConnect is leading the
strong execution of our
innovation strategy globally
Page 38
Race to protect people
2,000 colleagues completed
the Race to Kigali to highlight
the global fight against malaria
Page 68
Rentokil Initial plc
Annual Report 2021
1
Corporate Governance Financial Statements Other InformationStrategic Report
A global leader
in an
outstanding
growth industry
Global pest control
market is worth
c.$22bn
87
countries
56
leading positions
Expected to continue
to grow at
4.5%–5%
per annum over the medium term
Pest Control
Our purpose and ambition
The combination of excellent Pest Control
structural growth drivers, our own organic
growth levers such as innovation, digital
technology and sustainability, and the
continuation of our M&A programme, both
in North America and in the major global
Cities of the Future, means that, over the
next five years and beyond, we can
continue to strengthen our already leading
position in the global pest control market.
We are growing organically, adding M&A
on top of this base, and enhancing net
operating margins through greater density.
Stuart Ingall-Tombs
Chief Financial Ocer
2
Rentokil Initial plc
Annual Report 2021
The global pest control market continues to expand in
the wake of the COVID-19 crisis, and remains an essential
service in protecting public health. The industry’s key
market drivers have not weakened since the pandemic,
with every market, in every region, increasing its per-
capita spend on pest control services and products. New
research shows that the most important factors influencing
the decision-making process of commercial customers
when selecting a pest control provider include service
reliability, innovation, digital solutions and sustainability,
allthemes that play to our strengths. Pest Control remains
our main platform for medium-term growth as we push
deeper into key markets, target higher-growth customer
sectors and enter key emerging cities for future growth.
Based on our past performance and our expectations for
the future, we announced at our Capital Markets Day in
September a new medium-term Organic Revenue growth
target for Pest Control of between 4.5% and 6.5% a year
from 2022.
B
Read more about Pest Control on pages 32 to 39
Rentokil Initial plc
Annual Report 2021
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Corporate Governance Financial Statements Other InformationStrategic Report
Inside the
washroom...
The pandemic has profoundly
changed attitudes and behaviour.
According to our 2021 survey into
attitudes and behaviours towards
hygiene:
Hygiene & Wellbeing
66%
of people say they
have changed their
hygiene behaviours
71%
of respondents are now
more fearful of the
spread of germs from
surfaces they touch
84%
of people who work
think it is important that
their employer prioritises
creating a safe and
hygienic workplace
Our purpose and ambition
B
Read more about our Global Hygiene
Reset survey on page 43
4
Rentokil Initial plc
Annual Report 2021
and
beyond...
In response to rising expectations
for hygiene standards around the
world, we have created our
Hygiene & Wellbeing category to
meet the future needs of our
customers – inside and outside
the washroom.
Initial Hygiene is a global leader
in hygiene services, with 22
market-leading positions, and
top-three positions in 38 of its
67 markets.
We oer a wide range of
high-quality washroom products
and services to meet the needs
of our customers across the three
main sectors of hand hygiene, air
hygiene and in-cubicle hygiene.
New proprietary research we
have commissioned from 20
markets internationally shows
thatthe benchmark of what
constitutes good hygiene is
nowset at a far higher level,
andthat the drivers of growth
have changed significantly
sincethe pandemic.
In 2021, we announced anew
medium-term Organic Revenue
growth target for Hygiene &
Wellbeing ofbetween 4% and
6%a year from 2022. We would
expect washroom services to
generate around 50% of that
growth through enhanced
washroom hygiene services,
suchas no-touch and digital
products, and for the other
50%to be generated from a
combination of premises hygiene
and enhanced environments
outside the washroom – such
asair-purification services – and
from extending our geographic
reach.
B
Read more about Hygiene on
pages 40 to 46
We believe our new
Hygiene & Wellbeing
category will create the
right business, at the right
time, to help our customers
keep their customers and
employees safe, in a less
safe world.
Andy Ransom
Chief Executive
Rentokil Initial plc
Annual Report 2021
5
Corporate Governance Financial Statements Other InformationStrategic Report
Rentokil Initial
Upweighting
our medium-term
growth targets
In February 2014, and for the first time in the
Company’s history, we put in place Group medium-
term targets for revenue, profit and cash. Having
consistently beaten these targets in each successive
year, we increased them in 2017.
Our performance against these targets from 2017
to 2021 has remained strong and, given the new
medium-term organic targets we have announced
both for Pest Control and for Hygiene & Wellbeing,
we are once again revising our medium-term targets
upwards, to reflect our confidence and ambition for
the future. These medium-term targets came into
force at the start of 2022.
B
Read more about our
financial performance
on pages 144 to 149
Our purpose and ambition
6
Rentokil Initial plc
Annual Report 2021
The charts below illustrate the substantial
value our operating model has created in
Pest Control since 2017 and demonstrate
our recovery from the impact of the
pandemic in 2020. The bar chart on the
leftshows that we have grown revenues
by46% to 2021, a CAGR of 9.9%. Looking
at operating profit growth (adjusted profit
before interest, tax and amortisation) on
the right-hand side, this has risen by £126m
since 2017, aCAGR of 10.7% to 2021.
The charts above illustrate the value created
in Hygiene & Wellbeing since 2017. The chart
on the left-hand side shows that we have
grown revenues by 48% to 2021, aCAGR of
10.2%. The bar chart on the right shows that
operating profit has increased by 90% since
2017 (including the contribution from
disinfection services) with a compound
annual growth rate of 17.4%.
Previous
targets
Ongoing Revenue
growth
Ongoing Operating
Profit
Free Cash Flow
Organic Revenue
growth
Substantial value creation FY2017 – FY2021
Substantial value creation FY2017 – FY2021
Group
3-4%
Pest Control
4-6%
Hygiene
2-3%
5-8%
c.
10%
c.
90%
cash conversion
6-9%
(of which M&A c.2%–5%)
10%+
c.
90%
cash conversion
New
targets
Group
4-5%
Pest Control
4.5-6.5%
Hygiene & Wellbeing
4-6%
0
500
2,000
1,500
1,000
2,500
2017 2018 2019 2020 2021
CAGR
9.9%
Ongoing revenue £m
1,400
1,547
1,711
1,722
2,040
CAGR
10.7%
APBITA
£m
0
50
300
200
100
350
250
150
400
2017 2018 2019 2020 2021
252
268
301
279
378
0
200
800
600
400
1,000
100
700
500
300
900
2017 2018 2019 2020 2021
CAGR
10.2%
Ongoing revenue £m
575
692
730
896
849
CAGR
17.4%
APBITA
£m
0
50
200
100
150
250
2017 2018 2019 2020 2021
90
118
127
195
171
Rentokil Initial plc
Annual Report 2021
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Corporate Governance Financial Statements Other InformationStrategic Report
Achieving our ambition through
Our
commitment
to customer
partnerships
8
Rentokil Initial plc
Annual Report 2021
Protecting people
Through our Hygiene services we play our
part by helping our customers protect their
customers, enabling them to operate safely in
a changing and challenging environment. In 2021
Initial Hygiene was appointed Specialist Hygiene
Services Partner of the Australian Open Tennis
Tournament and London’s The O2 arena.
Enhancing lives
As the world’s most popular music, entertainment
and leisure venue, The O2 arena welcomed
its first live audience in more than a year on
11 May 2021 for the BRIT Awards – part of the
government’s Event Research Programme.
Rentokil Initial was proud to be awarded a
Specialist Hygiene Services Partnership with
The O2, helping to provide enhanced health
and safety measures at the venue, including
installation of VIRUSKILLER
TM
air purification
technology, which is proven to kill 99.9999%
ofviruses, including Coronavirus¹.
B
Read more about
Air care on page 46
Product innovation
VIRUSKILLER
TM
is now being
soldto arange of customers
including carshowrooms,
hotels,oces, venues and UK
embassies. VIRUSKILLER
TM
kills
Coronavirus inthe air
1
, and unlike
traditional airpurifiers that can
‘trap’ airborneparticles and
microbes, VIRUSKILLER
TM
also
decontaminates the air, by not
only trapping but also killing
airborne viruses, bacteria
2
andfungi.
Live entertainment is a
trulyspecial and inimitable
experience. We want to assure
spectators that by partnering
with Rentokil Initial, we are
working hard to provide the
safest experience possible
forfans to enjoy the best live
entertainment has to oer.
Liana Mellotte
Director, Global Partnerships,
AEG Europe (operator of The O2)
1. When independently tested against Coronavirus DF2 (a surrogate
forCoronavirus), Adenovirus, Influenza and Polio, the unit was found
tokill 99.9999% of viruses on a single air pass.
2. When independently tested against reference bacteria (Klebsiella
pneumoniae, Mycobacterium tuberculosis, Staphylococcus aureus
subsp. Aureus, Streptococcus pneumoniae, Streptococcus pyogenes,
Escherichia coli), the unit was found to kill 99.9999% of bacteria on
asingle air pass.
Rentokil Initial plc
Annual Report 2021
9
Corporate Governance Financial Statements Other InformationStrategic Report
choice
Our commitment to
being a world-class
employer of
Achieving our ambition through
10
Rentokil Initial plc
Annual Report 2021
choice
Continuing our journey as an Employer of Choice
Rentokil Initial aims to be a world-class Employer of Choice
– attracting, training and retaining great people from the
widest possible pool of talent. In 2021, we ran a global
diversity, equality and inclusion initiative for approximately
1,000 managers and leaders. The programme featured two
elements: ‘Include’, focusing on how to foster an inclusive
environment; and ‘Decide’, looking at bias and how to
mitigate it. Feedback was very positive and we will roll
out the programme further in 2022.
Driving ongoing improvements in colleague retention is
keyto greater customer retention and we were pleased
thatretention across Sales and Service remained high
duringthe year, despite challenges from post-pandemic
employment shifts. Listening to colleagues is also part of our
culture, and in 2021 a record 91% of colleagues completed the
Your Voice Counts survey. Scores improved for many themes,
including Strategic Direction (+4% points), Collaboration
(+3% points), Line Manager Index (+3% points) and Diversity,
Equality and Inclusion (+3% points). The Equal Opportunities
question scored 10percentage points ahead of the global
high-performance norm of leading companies.
B
Read more about our colleagues and culture
on pages 51 to 54
Sustainability and innovation are at the
forefront. This is a global company that
feels like a family.
Rosa :)
Rentokil Initial plc
Annual Report 2021
11
Corporate Governance Financial Statements Other InformationStrategic Report
innovation
Leadership in
Rentokil has developed the
world’s leading digital pest control
platform, providing an unmatched
level of monitoring, reporting and
insight for our customers, who
face the risk of increased fines or
censure without eective pest
management and reporting.
digital
technology
Product innovation is second nature
to us. Among our many firsts in
recent years, we have been the first
to develop connected pest control
devices, the first to use carbon
dioxide in rodent control, and the
first to deploy LED lights for highly
eective and sustainable insect
control.
Innovation strengthens our
brandand cements our leadership
position in the pest control
industry,dierentiating us from
ourcompetitors, particularly in
thearea of digital technology, and
giving us a first-mover advantage.
It also helps us provide an enhanced
service to customers, target key
growth sectors (such as rodents),
enhance our ability to up-sell
additional products and service
lines, and retain customers. In
addition, it lowers our operating
costs and enhances our
sustainability credentials.
Read more at
rentokil-initial.com/our-services/
innovation
Achieving our ambition through
product
12
Rentokil Initial plc
Annual Report 2021
In 2021, we opened our new
Technology Centre in the UK
toprovide a dedicated home for
thetesting and validation of new
Initial Hygiene products. The facility
includes: environmental testing
(e.g.testing products at dierent
temperatures, humidity levels,
UVweathering, etc.); functional
testing (e.g. service time, tamper
resistance); and being able to carry
out thousands of repetitive tasks
toensure validation of sales and
marketing claims. The new sitewill
also serve as a Hygiene Innovation
and Product Development Centre
as the testing of new products and
services is phased in through 2022.
The building achieved a BREEAM
Excellent rating for sustainability
performance.
digital ecosystem
One of the key drivers of our growth
will be our digital ecosystem – the
combination of digital hand-held
devices, remote monitoring, online
portals and data analysis. It’s proven,
robust and secure; it’s responding to
customer needs; and it’s achieving
high levels of customer satisfaction.
Paul Donegan
Digital Innovation Director
science
Rentokil Initial plc
Annual Report 2021
13
Corporate Governance Financial Statements Other InformationStrategic Report
Achieving our ambition through
Value-creating
M&A and new
focus on Hygiene
M&A remains an important part of our growth strategy and our proven
acquisition model continues to create significant value for our shareholders,
building density and margin. We have the in-house capability to identify,
evaluate, execute and integrate acquisitions at pace.
Our M&A programme extends from North America to the rest of the world,
where we actively seek to build local density in the c.1,000 cities we are
already in – as well as targeting Cities of the Future that will deliver even
higher growth levels over future decades.
M&A strategy and opportunity
Pest Control
Since 2016, we have acquired 245 businesses,
mostlyin pest control with acquired revenues of
around £950m, and the pipeline of opportunities in
both Growth and Emerging markets remains strong
as we continue to execute a proven strategy:
A We have the network, know-how and proven
acquisition model – and with a deep
understanding of density
A Highly fragmented global pest control market,
andwe remain the buyer of choice – c.40,000
pest control companies globally with c.50% in
North America
A Through Cities of the Future (our focused M&A
programme in emerging markets), we expect to
grow at higher rates in key cities where faster
urban growth is driving demand for pest control
services. Developing a presence in these cities
gives us a stronger base for future growth over the
next 10–20 years as we benefit from faster growth
in these markets relative to more mature locations
A Target Internal Rate of Return (IRR): 12% in North
America and 13%–15% in the Rest of World
Hygiene & Wellbeing
We will apply the same proven, value-creating model
in Pest Control to our Hygiene & Wellbeing category,
with a focus on building our density across our cities
and supporting extension areas defined as part of
our growth plans, including air care, surface hygiene,
safety and digital monitoring.
A M&A creates value through city-based density
building. Deal economics are generally better –
prices and competition for target assets are lower
than in pest control
A Expertise and systems in place
A Proven ability to drive margins through density
building
A Significant global M&A pipeline is being built –
deal flow supported by an emerging pipeline
of c.80 targets
A From 2022, we will target £25m+ revenues
per annum over the next five years and target
IRRat 15%–20%
14
Rentokil Initial plc
Annual Report 2021
245
businesses acquired
since 2016
£950m
revenue acquired
through M&A
£495.5m
total consideration for M&A
in 2021
52
businesses acquired
in 2021
In December 2021, we announced an
agreement under which Rentokil Initial
willacquire Terminix Global Holdings Inc.
(Terminix), the most recognised brand
inUStermite and pest management
servicesand now a singularly focused
pestmanagement company, with a low
coststructure and strong balance sheet.
The combination, which is conditional
onregulatory and shareholder approvals,
isexpected to create significant value,
enhance long-term growth potential, be
highly cash generative and present a
compelling industrial logic, supported by:
Increased scale and leadership
in the global pest control market
A
Combined group will be the leading global
pest control company
A
c.4.9 million customers worldwide
A
Complementary strengths in North American
residential and termite sectors and global
commercial pest control
A
Well positioned in an attractive global industry
with estimated annual growth at 4.5%–5%+
over the medium term
A
Adding c.84% to our Pest Control business
in revenue
A
Significantly enhanced network and route
density
A complementary and synergistic
portfolio combination
A
Strong operational and cultural fit, creating
significant synergy opportunities
A
Complementary service lines and geographic
footprint
A
Our innovation and technology can be rolled
out to Terminix’s 2.9 million pest control
customers
A
Further differentiation from competition
through strong focus on people, customers
and ESG
A
Attractive synergy potential – at least $150m
(£113m) annual net cost synergies by the third
full year post completion
Substantially increased scale
inNorth America, providing an
enlarged platform for profitable
growth
A
The world’s largest pest control market –
highly competitive and fragmented, with
c.20,000 pest control companies
A
Creates the pest control leader in North
America and adds c.$2.0bn pest control
revenues
A
Additional scale will enable further investment
in people, service, quality, innovation, digital
technology & applications, and sustainability
A
New science and innovation centre planned
inthe US focused on termite and residential
pest control
An attractive financial profile
A
Balance sheet strength to support growth
A
Highly cash generative – combined pro forma
FY2021 Free Cash Flow of $0.7bn (£0.5bn)
A
Creates a larger and more diversified North
America business
A
Limited integration risk – both companies
have strong M&A track record
A
Ongoing commitment to strong,
complementary Hygiene & Wellbeing
business
A
Our medium-term target growth rates,
commitment to our current progressive
dividend policy, and investment grade
creditrating maintained
Acquisition of Terminix
1 3
4
2
Rentokil Initial plc
Annual Report 2021
15
Corporate Governance Financial Statements Other InformationStrategic Report
Our purpose
Our purpose is to protect people
and enhance lives, everywhere.
We protect people from
thedangers of pest-borne
disease and the risks of poor
hygiene. We enhance lives
withservices that protect
thehealth and wellbeing of
people and the reputation
ofourcustomers’ brands.
Rising standards of public health,
stricter food safety legislation
andthe need to comply with
workplace safety regulations
aredriving demand for our
service expertise.
As a business, we also create
value for our shareholders
through our economic success.
Our values
Three core values underpin
everything we do.
Service We are passionate about
delivering excellent customer
service to every customer,
ontime and as promised.
Relationships We value
long-lasting relationships with
our colleagues and customers
and keep them informed about
changes that affect them.
Welisten and act upon people’s
needs and concerns and are
honest and straightforward in
our conversations with them.
Teamwork Our business is all
about great teamwork – getting
it right, for our colleagues and
customers.
Our culture
Our culture is characterised as
customer focused, commercial,
diverse, down to earth and
innovative. We have highly
engaged colleagues, willing to
go the extra mile, and adrive
within the business to keep
improving, whether through
learning and development, the
roll-out of innovations or the
introduction of industry-leading
digital tools.
Our colleagues Our 46,000
colleagues work across 88
countries and six regions with
22% in North America, and 35%
in Asia, our two largest regions
by headcount.
Our RIGHT WAY plan
Our RIGHT WAY plan divides our
business into five geographic
regions and two core categories,
all operating on a low-cost,
single-country operating
structure. Since 2014,we have
consistently implemented
aneffective strategy at pace
andthis has delivered consistent
progress against ourfinancial
targets.
We are a strong and focused
business, operating in higher
growth markets, withimproving
levels of organic growth,
reduced capital intensity,
highlevels of cash generation,
and a proven and successful
M&Acapability.
Our Business at a Glance
Two strong businesses, one unifying culture
Rentokil Initial is a global leader in the provision of route-based services that protect people and enhance
lives. We operate in 88 countries around the world, in more than 90 of the world’s 100 leading cities – from
Los Angeles to Amsterdam, and Shanghai to Auckland. As of 1 January 2022, we operate in, and will report
on going forwards, two restructured business categories, Pest Control and Hygiene & Wellbeing (which
combines our existing Hygiene operations with our Ambius, Dental Hygiene and Cleanroom operations),
accounting for 67% and 28% of Ongoing Revenue respectively, with the remainder in France Workwear
which operates alongside as a standalone business. We employed around 46,000 people in 2021.
Pest Control Hygiene & Wellbeing
Initial Hygiene & Wellbeing offers a wide
range of services to meet today’s growing
expectations for hygiene, including our core
washroom services, specialist services in air
care and clinical-waste management, and
environment-enhancing services including
scenting, plants and air monitoring.
Countries operating in:
87
Market leader in:
56
Commercial customers with
access to myRentokil online
customer portal:
over 98%
Countries operating in:
67
Market leader in:
22
Subscription business
with multiple growth
levers:
c.90%
Ongoing Revenue at CER:
£2,040.2m
+18.5%
Ongoing Revenue at CER:
£848.6m
-5.3%
Ongoing Revenue at
AER: £1,953.7m
Ongoing Revenue at
AER: £829.9m
Rentokil Pest Control is the world’s leading
international commercial pest control
service provider, offering the highest levels
of risk management, reassurance and
responsiveness to customers.
28%67%
16
Rentokil Initial plc
Annual Report 2021
Ongoing Revenue
£m
North
America
Europe
(inc. Latin
America)
UK &
Sub-Saharan
Africa
Asia &
MENAT Pacific Total
Pest 1,215.5 360.7 176.1 200.0 87.9 2,040.2
Hygiene & Wellbeing 150.2 324.4 183.4 85.7 104.9 848.6
Workwear – 170.2 – – – 170.2
Total 1,365.7 855.3 359.5 285.7 192.8 3,063.5
1
Asia & MENAT
£285.7m
+8.5%
Pacific
£192.8m
+8.7%
North America
£1,365.7m
+14.1%
Europe (inc. Latin America)
£855.3m
+4.2%
UK & Sub-Saharan Africa
£359.5m
+9.8%
Ongoing Revenue by region at CER
Changes to our segmental structure from 1 January 2022
Old business structure
Pest Control
Hygiene
Protect & Enhance
Comprising:
– UK Property Care
– Ambius
– Dental Services
– France Workwear
Old regional structure
North America
Europe (inc. LATAM)
UK & Rest of World
(inc. Ireland & Baltics)
– Nordics, Poland, Caribbean
– Sub-Saharan Africa
– MENAT
Asia
Pacific
New business structure
Pest Control
Hygiene & Wellbeing
Workwear
1. Total includes £4.5m of central & regional overheads.
New regional structure
North America
Europe (inc. LATAM)
UK & Sub-Saharan Africa
(inc. Ireland & Baltics)
Asia & MENAT
Pacific
Rentokil Initial plc
Annual Report 2021
17
Corporate Governance Financial Statements Other InformationStrategic Report
The COVID-19 pandemic has
continued to impact the world
in2021. How has the Group
performed this year?
A
The Group’s performance overall has been
exceptional in my view. We have delivered
excellent growth, including a high level of
organic growth in our core businesses. We
have grown our profits at nearly 20% over the
last year as well as delivering a very high level
of cash conversion, and we have put that cash
to work including 52 acquisitions across the
world. Undoubtedly, the key to our success in
2021 has been the remarkable performance of
our colleagues around the world, in particular
our frontline colleagues, who have continued
to deliver for our customers, day in, day out,
despite the ongoing challenges that we have
all faced with respect to COVID-19.
At the height of the pandemic in 2020,
wewere able to pivot quickly into offering
additional services to customers in the
disinfection space, where our highly trained
colleagues would use their skills and highly
effective disinfection products to make places
of work and customer premises safe. In 2020,
these additional revenues represented £221m.
We said at the time these revenues would
decline as we moved into 2021 – as customers
no longer required the services, asother
competitors entered the space and asthe
price for disinfection services dropped.
Thishas indeed occurred and disinfection
revenues in 2021 were £104m lower than
theywere in 2020. Despite this significantly
lower contribution in 2021, we nonetheless
grew ourCompany revenue by almost 10%,
nearly 15% if weexclude the impact of
disinfection.
B
Find out more on pages 144 to 149
The right business at the right time to
meet the future needs of customers
Q&A with Andy Ransom, Chief Executive
We said we would come out
ofthe pandemic stronger and
more resilient, and we have.
Ourpeople delivered an
outstanding year, growing
revenue, profit and cash ahead
of our new medium-term growth
targets. We also entered into
atransaction which will make
usthe number one player in
North America, the world’s
largest pest control market.
Andy Ransom
Chief Executive
All the questions
inthis section
havebeen posed
by investors over
the past year.
18
Rentokil Initial plc
Annual Report 2021
Innovation is a core component
ofgrowth for the Group. Has the
pandemic caused any slowdown
ordelays to your programme?
A
Innovation in Rentokil Initial is more of a
philosophy, a state of mind rather than a
function or a department in the Company, and
in 2021 our people had to demonstrate a high
level of innovation, flexibility and creativity to
ensure that our customers received the very
best service notwithstanding the ongoing
challenges presented by the COVID-19 crisis.
During the year, we continued to make
excellent progress in connected technologies
and our PestConnect service offering went
from strength to strength, growing by 58%, or
87,000 additional units in the field despite a
global shortage of printed circuit boards and
chips. We also made excellent progress with
the deployment of recent innovations such
asLumnia (our LED illuminated light trap
whichuses less power than a conventional
bluelamp light trap and reduces carbon
emissions by 62%) where our sales were
upby65% in the year.
B
Find out more on pages 37 and 38 and
pages 55 to 57
The Company’s smaller, bolt-on M&A
strategy has worked very wellfor
theGroup over the last few years.
Your transaction to acquire Terminix
seems a clear departure from this.
Why this combination, andwhy now?
A
We have been explicitly targeting growth in the
highly attractive North America pest control
market for some years now. Approximately
50% of the world’s pest control market is in the
United States and it is a market that continues
to grow at around 4.5%–5% per annum. Over
the last few years, we have been highly
successful in building out our network of
city-based businesses in the US, and
increasing the density of our operations in
those cities, both by driving up our organic
growth but also by aseries of in-fill or bolt-on
acquisitions. To illustrate, in 2021 we executed
17 acquisitions in the US market. The
opportunity to join forces with Terminix – which
already enjoys a high level of city density
across over 300 locations in the country – was
simply too good to miss. Terminix is one of the
leading consumer brand names for residential
pest control and termite control in the United
States and is a highly complementary
operation to Rentokil, where we are the global
leader in commercial pestcontrol.
By bringing together these two businesses, we
believe we can become a clear global leader in
residential, termite and commercial pest
control, with each of us bringing our respective
strengths to the combined business. Rentokil
leads with technology andinnovation in
commercial pest control and has a global
presence in nearly 90 countries around the
world. Terminix has an outstanding US
business focused on residential and termites
and by uniting the companies with abest of
breed approach (by which I mean creating a
single management team from the best of both
companies and, for example, harmonising IT
systems and selecting the bestfrom both
businesses) we believe we canbecome a
genuine global leader in our industry.
B
Find out more on pages 15 and 145
The Company hosted an in-depth
Capital Markets Day in September
focusing on Hygiene & Wellbeing.
Does the Terminix transaction alter
your focus on the newly enlarged
category?
A
Not at all. The Capital Markets Day in
September gave us a platform to showcase
what a strong, attractive business and
opportunity we have in the broadened
Hygiene & Wellbeing category. As the world
begins to come to terms with a post-pandemic
environment, people are increasingly focused
on providing safe environments in their
buildings: whether that may be an office
where employers are looking to reassure their
employees that it is safe to return to work, or a
restaurant or hotel seeking to demonstrate to
their returning customers that their facilities
not only have clean surfaces but also that the
air in these buildings is clean and safe.
We already have a strong presence within
thewashroom – through our traditional
InitialWashroom service business, as well
asin our Ambius business – but we also see
strong opportunities to grow our hygiene
service offering both outside the washroom,
byfocusing on new opportunities such as air
and by also expanding in new geographies,
and in 2020 we entered 20 new countries
inHygiene around the world.
We indicated at the Capital Markets Day in
September that we believe we can grow this
category by4.0% to 6.0% each year and that
we plan toinvest further in the business,
bothin terms of innovation and product
development, butalso by investing in
acquisitions. We have said that we aim to
acquire £25m of additional revenues from new
businesses each year from 2022. The Terminix
deal in no way detracts from the opportunities
we see in Hygiene & Wellbeing, particularly
aswe see much of the opportunity in this
category as being in our existing geographies,
all of which are outside of the United States
(the Terminix business is over 90% within the
US). So, while our North America teams will
bevery busy forthe next two to three years
integrating ourrespective pest control
businesses in the US, our global teams will
befocused on the Hygiene & Wellbeing
opportunities in their markets as well as
ofcourse pursuing other pest control
opportunities across the world.
B
Find out more on pages 43 to 46
Sustainability has taken a big step
up the agenda for shareholders
inrecent years. Can you talk us
through your strategy here and
yourkey aims for the future?
A
In my 35 years in business, I have never seen
an issue rise to prominence so significantly, so
quickly and so comprehensively, as the urgent
need to take action to protect our planet.
At Rentokil Initial, not only are we committed
toplaying our role – and specifically we have
committed to achieving net zero emissions by
2040 because it is the right thing to do – but
we alsobelieve that by focusing on creating
sustainable products delivered through
sustainable operations from sustainable
premises, we can differentiate our service
offering from that of our competitors and
therefore it becomes good business, as well
as being the appropriate and right thing to do.
We also see that by leading our industry in
sustainability, we make ourselves a more
attractive employer of choice at a time when
the war for talent has never been more intense.
I am satisfied with the level of overall progress
we are making on the sustainability agenda, but
there is no hiding from the fact that we will all
need to move much faster, think moredeeply
and act more thoroughly in our responses to
this challenge, if we are to makethe progress
over the next few years that we all need.
B
Find out more on pages 49 to 72
Andy Ransom
Chief Executive
Rentokil Initial plc
Annual Report 2021
19
Corporate Governance Financial Statements Other InformationStrategic Report
Our ‘Big Six’ Challenges
Employer of Choice/retention
Our people are our biggest
competitive advantage and the key
to profitable growth. Our challenge
is to be an Employer of Choice and
to drive ongoing improvements in
colleague retention which in turn
leads to greater customer retention.
Key actions taken in 2021
A
Delivered the next phase in our long-term
Employer of Choice programme by rolling
out a new diversity, equality and inclusion
upskilling initiative to approximately 1,000
managers and leaders.
A
Colleague retention remained high at 84.4%,
although slightly behind 2020 levels, and
new job applications received through our
Careers portal increased by 52%. Our U+
(our online university) training usage saw
record highs, with 4.3m training content
views and 500 pieces of new training
content created.
Priorities for 2022
A
Deliver the next phase in our new diversity,
equality and inclusion programme to
managers across the Group.
A
Maintain a high level of U+ training, helping
colleagues to develop a lasting career with
the Company.
A
Focus on effective recruitment practices
and delivering even higher levels of
colleague retention.
B
Find out more about our colleagues
andculture on pages 51 to 54
Building our Hygiene business
Our challenge is to build our global
Hygiene business into a second
powerhouse alongside Pest Control.
In response to the pandemic and the
growing importance of hygiene, we
announced the expansion of the
category into a larger Hygiene &
Wellbeing business, from
1 January 2022.
Key actions taken in 2021
A Delivered 7.4% organic growth despite
ongoing challenges in a number of markets,
achieved through return to regular core
service provision and growth from product
and service initiatives, including our Rapid
Smart Hygiene range and air purification
offer, installing over 11,000 air purification
units into customer sites across 31 countries.
A Upweighted Organic Revenue growth target
for the new category (excluding disinfection)
to medium-term Organic Revenue growth
of4%–6% from 2022.
A Acquired four new businesses to build
density and achieved significant momentum
in building our global M&A pipeline, now
with c.80 attractive targets. From 2022,
wewill target £25m+ revenues p.a. over the
next five years, targeting IRRs at 15%–20%.
Priorities for 2022
A Executing our growth strategy within four
high-growth areas: inside the washroom,
digital leadership, international expansion
and outside the washroom.
7.4%
organic growth in 2021
B
Find out more on pages 40 to 46
Our strategic priorities
We regularly assess our strengths and weaknesses and examine the
opportunities and threats to our business going forward. In this section,
we give a brief overview of our ‘Big Six’ challenges, with links to further
details and financial metrics.
Scan to find out
more about our
VIRUSKILLER
TM
air
purification range
Driving Organic Revenue
growth in Pest Control
Our challenge is to drive sustainably
higher rates of organic growth
across the business, particularly
inour key North America market.
Key actions taken in 2021
A North America was our best performing
region in 2021, growing revenues by 24.3%,
8.9% Organic.
A Group Pest Control revenues grew by 18.6%,
(8.1% Organic), despite Australia, New
Zealand, Malaysia and Indonesia operations
being materially impacted by lockdowns.
A Revenues from data, product and service
innovations have continued to grow this
year. We increased our installation of
PestConnect units by 58% in 2021, with
235,000 units now in 13,000 customer
locations. By the end of the year, we had
sold more than 260,000 units of our
LumniaLED fly trap, with sales increasing
by65% in the year.
A Integration of pest control data into our
customer systems began in 2021, with
34customers across six customer portals
now benefiting from automatic access
toourdata from their sites.
Priorities for 2022
A Maintain growth in North America,
consolidating our position in Pest Control
through the completion and integration
ofour acquisition of Terminix, and initiation
of synergy cost savings programme.
A Continue to deploy product and service
innovations and digital applications,
including further roll-out of PestConnect
towards our targeted goal of 25% of
commercial customers by 2026.
A Ongoing development of sustainable,
non-toxic and humane pest solutions.
A Achieve higher medium-term target of
4.5%–6.5% Organic Revenue growth.
8.1%
organic growth in 2021
B
Find out more on pages 32 to 39
20
Rentokil Initial plc
Annual Report 2021
c.235,000
100
200
20202019
Annual growth of connected devices
2021
250
150
50
0
PestConnect device growth (000s)
M&A execution
Our challenge is to maintain a strong
pipeline of high-quality opportunities
andtointegrate acquisitions quickly
andeectively.
Key actions taken in 2021
A
Following a slowdown in M&A at the height
of the pandemic, our pipeline of deals
returned strongly, and we acquired 52 new
businesses in Pest Control and Hygiene
& Wellbeing.
A
Acquisition of the Middle East’s leading
independent pest control provider, Boecker
World Holding SAL, operating (including
with joint venture partners and associates)
across the UAE, KSA, Jordan, Kuwait,
Lebanon, Nigeria and Qatar, and
doublingthe scale of our operations
intheMiddle East.
A
Announcement in December of acquisition
of Terminix targeting the creation of the
global leader in Pest Control and the No.1
pest control company in North America.
A
New M&A revenue targets set for Hygiene
& Wellbeing from 2022 (as above).
Priorities for 2022
A
Pursue high-quality pest control companies
in Growth and Emerging markets, with
ongoing focus on building local density
inkey Cities of the Future.
A
Continue to build Hygiene & Wellbeing M&A
pipeline, acquiring attractive businesses
with a focus on higher growth extension
areas (e.g. air care and surface hygiene),
andachieving targeted £25m+ per annum
ofacquired revenues.
£495.5m
Total consideration for M&A assets in 2021
c.£250m
Target spend on M&A in 2022
Creating value through
product and service
innovations and digital
applications
Our challenge is to drive further
organic growth through product
andservice innovation and digital
applications.
Key actions taken in 2021
A
Delivered a 65% increase in installations
of Lumnia LED Insect Light Traps, totalling
over 260,000 (2020: 168,850).
A
Launched Eradico globally – our new fully
recyclable, single-solution rodent control
unit which addresses 57 different needs
and market requirements.
A
Unveiled development of Crawl Connect,
our new connected device for crawling
insects and RADAR X, our multi-catch
mouse control unit for better efficacy
andreduced servicing.
A
Became the first company to use data and
proprietary analysis tools, together with
third-party mapping, to assess resistance
torodenticide in rodents and therefore
target alternative, effective solutions.
A
Further development of our Rapid Smart
Hygiene range to enhance cost
effectiveness and scalability, with products
including taps, soap dispensers, toilet
sanitisers and cubicle availability lights.
Priorities for 2022
A
Continue to develop key sector products
with potential for non-toxic solutions.
A
Drive sales growth in Lumnia products
and further roll-out of PestConnect.
A
Complete technical sign off of Rapid Smart
range to align with PestConnect technology
and pilot products in the field, and
implement field trials of Crawl Connect.
A
Further evolve digital activity, leveraging
current and new technology.
A
Continue to actively market air purification
products and services in key markets,
todrive enhanced customer take up.
B
Find out more on pages 37 to 39
and page 45
Managing a
responsible business
Our challenge is to create a safe,
diverse and engaging workplace,
deliver customer service responsibly,
and support our communities and
environment eectively.
Progress against 2021 priorities
A
Delivered strong levels of colleague safety,
training and retention in 2021.
A
Commenced implementation of our plan
toachieve net zero emissions by the end
of2040: eight work streams underway and
country teams now executing their plans.
A
14.9% reduction in emissions intensity index
since 2019, good progress towards our
emissions target of 20% reduction by 2025
– we have begun to migrate our fleet,
with177 ultra-low emission vehicles and
renewable energy contracts introduced
forour properties around the world (Italy
isour first country operation to use 100%
renewable electricity).
A
2,000 colleagues from around the world
completed the Race to Kigali, our major
colleague-led initiative to support our
charity partner, Malaria No More.
Priorities for 2022
A
Maintain high levels of safety, training
and retention.
A
Deliver environment improvement plans
in all regions.
14.9%
improvement in carbon emissions
per £m revenue since 2019
Find out more on pages 49 to 71
rentokil-initial.com/responsible-delivery
Rentokil Initial plc
Annual Report 2021
21
Corporate Governance Financial Statements Other InformationStrategic Report
Share price (p)
Reasons to Invest
We believe that Rentokil Initial
represents a compelling, compounding
growth opportunity for investors
Rentokil Initial is a strong, global business with leading positions in structural growth
markets. We believe there are excellent opportunities to consolidate our positions in
existing markets, to enter new markets, and to lead the industry by investing in innovation
inproducts and services, alongside disciplined and accretive M&A. Our strategy, culture
ofoutperformance, and consistent, proven business model, allow us to achieve strong and
sustainable value for our shareholders. We see the following as principal reasons to invest.
We are a leader in our chosen,
structural growth markets
intwo major categories.
These generate high returns with
good opportunities for further growth.
Rentokil is the world’s leading
commercial pest control business,
which is our principal engine for
growth, and we believe our technical
expertise is unrivalled. Initial is the
largest hygiene services provider
inthe world, aiming to grow market
share by focusing on quality of service,
and drive management and back
oce synergies with other business
lines.
We are an Employer of
Choice, with a unique
culture that supports
sustainable growth.
As a service organisation, we
recognise that the commitment
and ability of our colleagues are
key to providing the highest levels
of service and a great customer
experience. So we aim to be an
Employer of Choice, acknowledging
and rewarding eort, and oering
career progression.
Our strong record of growing
revenue and profits generates
high returns, strong cash flow
and a strong credit rating.
Since February 2014, we have
implemented an eective and consistent
strategy – called our RIGHT WAY plan
– and this has brought consistent
progress towards our financial targets.
Find out more
Pest Control business on pages 32 to 39
Hygiene business on pages 40 to 46
Find out more
KPIs and their link to strategy on pages 24 to 27
Financial Review on pages 144 to149
Find out more
Our responsible business approach and how
we measure it on pages 58 to 65
rentokil-initial.com/responsible-delivery
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Dec
2016
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2017
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2018
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2020
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22
Rentokil Initial plc
Annual Report 2021
We have a fundamental
understanding of density.
This helps us consolidate our
positions in existing markets
andimprove margins, in part by
focusing on increasing the density
of our routes, whether through
organic activity or by acquisition.
Find out more
M&A in Pest Control on page 34
and in Hygiene on page45
Our consistent performance
allows reinvestment in
ourbusiness, helping
tocompound growth.
Our financial model creates
avirtuous circle, founded on
achieving organic growth while
conducting M&A to increase
ourdensity, which correlates
directly toimproved gross margins.
This, combined with our low-cost
operating model, brings strong
profitable growth and sustainable
free cash flow. We deploy this on
our financially disciplined M&A
programme and operational
investment, and into maintaining
our progressive dividend policy.
Find out more
Our Business Model on pages 28 and29
We see considerable
opportunities for
broadergrowth.
We see further growth
opportunities through entering
newmarkets, from increased
innovation in products and
services, and by deploying
digitalapplications.
Find out more
Global growth drivers for Pest Control
onpage 33 and Hygiene on page41
Scan to find
out more about
myRentokil
Rentokil Initial plc
Annual Report 2021
23
Corporate Governance Financial Statements Other InformationStrategic Report
Sales colleague retention
82.9%
-4.8% points
Working Days Lost (WDL) rate
8.71
-3.0% down on 2020
Key Performance Indicators
Very strong progress
Strong progress
Good progress Further work required Disappointing progress
Lost Time Accident (LTA) rate
0.38
-2.6% improvement on 2020
LTA rate defined as number of Lost Time Accidents per
100,000 standard working hours.
WDL rate defined as number of Working Days Lost as
aresult of LTAs per 100,000 standard working hours.
Defined as total Sales and Service colleagues retained
in year as a percentage of Sales and Service headcount
at start of year.
Link to strategy
A As a service organisation, our people make
our Company what it is.
A Our priority is ensuring everyone goes
home safe.
A Health and safety is the first agenda item in
all senior management meetings (including
Executive Leadership Team and Board).
Link to remuneration
A Both LTA and WDL rates are part of the
personal objectives of the Chief Executive
and have an impact on the level of annual
bonus achieved.
Commentary on performance
A
2021 was our best ever full-year
performance on LTA, and we delivered
world-class safety (LTA <1.0) in every region.
A
In WDL we delivered world-class safety
performance but were marginally behind
our ambitious target for 2021.
A
Very strong progress in deployment of our
Site Risk Assessment app in 2021, 2.2m
assessments were conducted using the
app, enhancing compliance and pre-job
safety for our colleagues.
A
Operating during the COVID-19 pandemic
represented additional challenges for our
frontline colleagues, navigating frequently
changing public health restrictions and very
different arrangements implemented by
governments across the world.
A
In 2021, there were no work-related fatalities
(2020: 1). However, regrettably, four people
died in incidents associated with our
activities including a pedestrian in South
Africa who unexpectedly ran across a
motorway in front of one of our vehicles, a
colleague who suffered a heart attack while
at work, and two colleagues who died in
road traffic accidents on the way to or from
work, in France and Thailand respectively.
Link to strategy
A We invest in training and development to
ensure that our colleagues’ expertise is
unrivalled.
A We recruit, appoint and promote on merit.
A We listen to our colleagues via Your Voice
Counts (YVC) surveys and act on feedback
to make improvements.
A By retaining our people, we also retain and
build deeper relationships with our
customers, which underpins our organic
growth.
Link to remuneration
A A Performance Share Plan (PSP)
performance measure and included in
annual bonus personal objectives.
Commentary on performance
A
Total colleague retention remained solid in
2021 at 84.4%, although 4.2% points lower
than the prior year.
A
This is a result of colleagues who joined the
business at the height of the pandemic and
employment uncertainty last year, leaving
the Company in 2021 as other sectors
recovered.
A
Service colleague retention fell by 4.5%
points to 82.4% and Sales colleague
retention fell by 4.8% points to 82.9%.
A
Total colleague retention has gone
backwards in all regions with the Pacific
seeing the biggest fall at -7.4% points for
overall colleague retention, driven by a
-15.8% points drop in Sales retention and
a-7.5% points drop in Service retention.
A
North America has also seen a decline
inallthree areas and Service Technician
retention has slipped below the 80% mark
for the rolling 12-month period, alongside
the Pacific and the UK.
A
Europe and Asia have maintained
anoutstanding colleague retention
performance with full-year results in the high
80s or 90s, which is especially pleasing
given the landscape of the ‘Big Resignation’.
2021 0.38
2020
2019
2018
2017
0.39
0.53
0.63
0.58
2021 8.71
2020
2019
2018
2017
8.46
10.99
14.77
11.65
2021 82.9
2020
2019
2018
2017
87.7
85.3
82.1
77.3
2021 82.4
2020
2019
2018
2017
86.9
86.1
85.1
76.0
Service colleague retention
82.4%
-4.5% points
Colleagues
Colleagues
Ensuring everyone goes home safe
Employer of Choice
24
Rentokil Initial plc
Annual Report 2021
State of Service (SoS)
92.9%
+3.5% points
Customer Voice Counts (CVC)
45.1
+7.1 point s
Defined as total number of service visits performed as a
percentage of total number of visits due.
Measured by the implementation of an average Net
Promoter Score across all branches, including in-year
acquisitions. CVC score represents the net balance of
those customers promoting our service, compared with
those neutral or not promoting.
1. Based on both telephone and digitalsurvey
channels.
2. Years prior to 2021 have been based on
telephone surveys only. 2020 has been
recalibrated to include both telephone and
digital survey channels (which was introduced
for the first time during the pandemic).
Link to strategy
A We are passionate about delivering
excellent service to every customer and
keeping our promises to them.
A Excellent service helps us retain customers
and build deeper relationships with them.
Commentary on performance
A
Group State of Service rose by 3.5% points
to 92.9% in 2021 (2020: 89.4%), with all
regions reporting higher scores on the prior
year. This reflects the return to more regular
service provision across our key categories
and regions as restrictions implemented as
a result of the COVID-19 crisis eased across
our markets and as temporary customer
suspensions and closures reduced.
A
North America was once again our highest
performing region at 97.2%, an increase of
0.7% points, closely followed by Europe at
96.4% (2020: 93.8%), Pacific at 96.0% (2020:
95.2%), UK & Rest of World at 93.6% (2020:
88.8%) and Asia at 91.2% (2020: 87.6%).
A
H2 2021 still saw disruption from public
health restrictions in a number of important
markets such as Australia, Malaysia,
Indonesia and New Zealand.
Link to strategy
A Our business model depends on servicing
the needs of our customers in line with
internal high standards and to levels agreed
in contracts. Strong performance on CVC is
linked to retention and sale of additional
services to customers. Measuring customer
satisfaction allows us to identify unhappy
customers, reduce customer attrition and
increase revenue, profit and cash.
Link to remuneration
A Improving Customer Voice Counts is one of
the performance conditions of the PSP,
which covers around 850 colleagues across
the Group.
Commentary on performance
A
Overall Net Promoter Score (NPS) for 2021
was 45.1 (all regions and categories), an
increase of 7.1 points on the prior year
butslightly down (-0.8 points) on 2019.
A
Calls to our customers in 2021 asked them
to rate us on five service elements:
technician, complaint handling, customer
contact, product quality and documentation.
A
Our category analysis shows that Pest
Control is our highest rated category, at
52.8 points (an increase of 3.0 points on
prior year), with most markets seeing
increases in scores with the exception of
North America (down 2.9 points) and UK,
Ireland and Baltics (down 0.6 points).
A
Initial Hygiene scored 43.7 points this year,
an increase of 20.1 points on 2020 and with
all regions achieving increases on the prior
year. Notable performances were delivered
from Europe (up 13.9 points) and Rest of
World (up 15.4 points).
A
Our Ambius businesses received a
CVC score of 52.7 points, an increase
of7.5points on the prior year.
A
Our lowest performing category was
Workwear, which received a negative CVC
score of -26.4 points. However, this was a
7.1 points improvement on 2020.
2021 92.9
2020
2019
2018
2017
89.4
97.2
97.9
97.8
2021 45.1
1
2020
2019
2018
2017
38.0
2
44.5
43.0
44.0
Customers
Customers
Delivering outstanding customer service
Keeping promises to customers
Rentokil Initial plc
Annual Report 2021
25
Corporate Governance Financial Statements Other InformationStrategic Report
Customers
Shareholders
Customer retention
85.3%
+0.8% points
Ongoing Revenue growth at CER
+9.8%
Defined as total portfolio value of customers retained as
a percentage of opening portfolio.
Defined as revenue growth at CER from the continuing
operations of the Group including acquisitions, after
removing the effect of disposed or closed businesses.
Revenue at AER
2021 2020 2019 2018 2017
2,956.6m
(+5.5%)
£2803.3m
(+3.7%)
£2,704.1m
(+9.8%)
£2,463.8m
(+2.5%)
£2,404.6m
(+10.9%)
Link to strategy
A Customer retention is crucial to our
long-term success.
A Benefits include: increased purchasing and
cross-selling; lower terminations; greater
willingness to accept price increases;
positive customer recommendations;
andastrengthened unique selling point.
Commentary on performance
A
Despite the ongoing COVID-19 pandemic,
overall customer retention increased by
0.8% points to 85.3% (2020: 84.5%).
A
In North America, we have seen little
change to customer termination rates,
whichremain within normal ranges.
Customer retention for the region rose
by1.2% points to 84.1%.
A
In Europe, customer retention rose by 0.8%
points to 87.5%.
A
Customer retention for UK and RoW fell very
slightly by 0.8% points to 85.5%; however,
customer reviews of our UK businesses
onTrustpilot.com have returned to
pre-pandemic ‘world-class’ levels.
A
Asia customer retention increased by 2.4%
points to 80.9%, despite ongoing pandemic
related challenges across the region.
A
In the Pacific, overall customer retention
forthe region remained ahead of our
expectations, at 89.0%, an increase
of2.2%points.
Link to strategy
A We aim to drive shareholder value through
driving higher revenues from our core Pest
Control and Hygiene businesses, and also
from our Protect & Enhance businesses,
supported by M&A investment.
Link to remuneration
A Revenue targets are one of the Company’s
performance elements of the annual bonus
which covers the Executive Directors and
managers across the Group and they have
an impact on the level of annual bonus
achieved.
Target and key activities Performance
Progress
in 2021
6% to 9% Ongoing Revenue
growth (of which M&A
is c.2%–5%)
9.8% growth in Ongoing Revenue, demonstrating the clear recovery
ofour core businesses despite continued challenges presented
bythe ongoing COVID-19 pandemic in a number of our markets.
Ongoing Revenue growth
inPestControl
18.6% growth in Pest Control, +8.1% Organic, delivered through further
improvements across all regions.
Supported by further
momentumin Hygiene
8.2% growth in core Hygiene, +7.4% Organic, aided by return to more
normalised levels of regular service provision as lockdown restrictions
eased across many of our markets.
Improved performance
fromProtect & Enhance
businesses, including
FranceWorkwear
5.6% growth in Protect & Enhance, +4.9% Organic, all four businesses
(France Workwear, Ambius, UK Property Care and Dental Hygiene
Services) returning to Organic growth.
Continued execution of M&A Outstanding M&A in 2021, with 52 acquisitions – 48 Pest Control
acquisitions and four in Hygiene & Wellbeing – in 25 countries and
allregions, including 17 in North America, for a total consideration
of£495.5m. Agreement announced in December 2021 to acquire
Terminix Global Holdings, Inc., significantly increasing our scale and
density, and enhancing our position in the US, the world’s largest
pestcontrol market.
Sustained progress in product
innovation and capability
Our proprietary, next generation pest control innovations continue
todifferentiate Rentokil and set new standards of performance in
support of our customers. Our pipeline of innovations remains strong
with 50 projects underway and 17 patent applications.
Ongoing development ofdigital
products and applications
PestConnect continues to provide our customers with a complete
remote pest detection solution and full traceability. Building on 2020’s
growing demand, 2021 has seen further roll-out with c.87,000 devices
installed – a 58% increase year on year – taking the total to c.235,000
units in c.13,000 sites.
2021 85.3
2020
2019
2018
2017
84.5
86.2
85.8
85.7
2021 9.8
2020
2019
2018
2017
5.9
8.6
12.3
13.9
Key Performance Indicators
continued
Retaining our customers
Driving higher revenue
Medium-term financial target: 6%–9% Ongoing Revenue growth (of which M&A is c.2%–5%)
Very strong progress
Strong progress
Good progress Further work required Disappointing progress
26
Rentokil Initial plc
Annual Report 2021
Shareholders
Shareholders
Ongoing Operating Profit growth at CER
+19.5%
Defined as operating profit at CER from the continuing
operations of the Group including acquisitions, after
removing the effect of disposed or closed businesses.
Adjusted Ongoing Operating Profit is an ‘adjusted’
measure and is presented before amortisation and
impairment of intangible assets (excluding computer
software) and one-off items.
Operating Profit at AER
2021 2020 2019 2018 2017
£346.5m
(+17.9%)
£293.8m
(+10.6%)
£265.6m
(+8.2%)
£245.5m
(-16.0%)
£292.4m
(+25.8%)
Target and key activities Performance
Progress
in 2021
Year-on-year improvement in
Ongoing Operating Profit
19.5% growth in Ongoing Operating Profit, reflecting growth in all major
reporting countries, regions and categories. Statutory profit before tax
up 41.5% to £325.1m (at AER).
Improvement in Net Operating
Margin
Net Operating Margin of 15.0% (at CER), a 120 basis points
improvement on 2020, reflecting stronger trading, higher service
levels and a continued significant focus on improving cash collections,
supported by £20.0m of revenue provision releases and £12.0m of bad
debt provision releases from the prior year.
Improvement in Net Operating
Margin inPestControl
Pest Control Net Operating Margin improvement of 210 basis points to
18.6% (at CER).
Improvement in Net Operating
Margin in Hygiene
Hygiene Net Operating Margin of 21.0%, a 250 basis points decline
on2020, reflecting lower contribution from emergency one-time
disinfection services during the year as COVID-19 restrictions eased.
Progress towards 18% North
America margin target
North America Net Operating Margin of 16.7%, reflecting incremental
return to more normalised trading, together with ongoing cost
initiatives and benefits from IT enabled Best of Breed programme. We
remain on track to achieve our 18% margin target by the end of 2022.
Above-the-line restructuring
costsmaintainedator
below £10m
Restructuring costs of £10.2m at CER (2020: £13.2m) consisted mainly
of costs associated with North America transformation programme,
together with integration costs of smaller acquisitions.
Free Cash Flow conversion
107.3%
Free Cash Flow is measured as net cash from
operatingactivities, adjusted for cash flows related
tothe purchase and sale of property, plant, equipment
and intangible fixed assets, and dividends received
fromassociates.
Target and key activities Performance
Progress
in 2021
Free Cash Flow conversion
target c.90%
Free Cash Flow conversion of 107.3% in 2021, ahead of target 90%
forsecond consecutive year. Increase principally driven by £57.5m
increase in Adjusted Operating Profit (at AER) offset by higher capex
and one-off items.
Net debt Cash spend on acquisitions of £463.1m and dividend payments of
£138.7m contributing to underlying increase in net debt of £288.9m.
Favourable FX and other items of £19.5m primarily due to the
strengthening of sterling against the euro and US dollar, leading to
increase in net debt of £269.4m and closing net debt of £1,284.7m.
Fully funded pension scheme The buy-out and wind-up of the Company’s pension plan will complete
in 2022. The Trustee agreed a pre-tax partial refund of surplus of £13m
paid in December 2020, with the balance of the refund of the surplus
of c.£18m expected to be paid on completion of the buy-out in Q4
2022.
S&P credit rating In December 2021, S&P affirmed the Group’s BBB rating. We remain
committed to maintaining a BBB investment grade rating and are
confident of doing so.
2021 19.5
2020
2019
2018
2017
5.5
10.4
13.6
14.8
2021 107.3
2020
2019
2018
2017
111.8
98.6
94.2
87.0
Link to strategy
A Our objective is to deliver sustainable profit
growth by growing Group revenues.
Link to remuneration
A Profit targets are one of the Company’s
performance elements of the annual bonus
which covers the Executive Directors and
managers across the Group and impacts
thelevel of annual bonus achieved.
Link to strategy
A We are a highly cash-generative business
and, after dividend and interest payments
have been made, we reinvest our cash into
the business for future growth through
people, technology and M&A.
Link to remuneration
A Free Cash Flow is a gateway target for the
annual bonus, which covers the Executive
Directors and managers across the Group.
Failure to meet this target results in no
bonus being payable regardless of how
wellthe Company performs against revenue
and profit targets.
Delivering sustainable Free Cash Flow
Medium-term financial target: Free Cash Flow conversion of c.90%
Achieving greater profitability
Medium-term financial target: Ongoing Operating Profit growth of 10%+
Rentokil Initial plc
Annual Report 2021
27
Corporate Governance Financial Statements Other InformationStrategic Report
Our Business Model
A cash-compounding subscription
model... with people at the top
Our people are at the heart of our business,
as we continue to protect public health and
ensure safe working environments around
the world. We help our people provide a
better service, this retains more customers,
to whom we sell additional services, to
ultimately create shareholder value.
Thanks to our colleagues’ unwavering
commitment and dedication to our
customers around the world, the wheel
keeps turning. We refer to the wheel – our
model – as the machine. Each spoke is
related to the others and measured
consistently at Group, business, country and
branch level. By focusing on consistently
executing our model, we continue to
succeed.
Due to our decentralised geographic
approach – our businesses are grouped into
five strong regions, with local-market
operations – our business model also provides
a natural resilience to fluctuations in market
dynamics in these individual markets, as well
as geopolitical and trade risks.
This simple decentralised approach features
single-country management teams operating
in 88 countries (with 90% of our revenues
derived from outside of the UK). Each country
team leads integrated, multi-local and
multi-service operations, using combined
back-office functions underpinned by shared
systems and processes, such as route
optimisation and measurement of customer
satisfaction. All follow the business model
shown above.
High retention,
recurring revenues
We are a subscription-based business,
servicing over a million customers, from
thelargest multinational pharmaceutical,
industrial and food production companies
to local shops, restaurants and homes.
Over 70% of revenues from customers are
protected by annual contract – c.64% of
Pest Control and c.90% of Hygiene &
Wellbeing, generating 90%+ Free Cash
Flow. In most regions we are able to
increase prices in line with inflation, while
retaining high levels of customer retention,
with rates c.85%
1
in both businesses.
70%+
of revenues from
customers are protected
by annual contract
Impact on
society
Employer
of Choice
Health
& safety
Great
service
Customer
retention
Organic
Revenue
growth
New
business
Price
Innovation
& digital
Density
Low-cost
model
Profit
growth
Cash
M&A
Dividend
Shareholder
value
Additional services
to customers
1. Five-year average
P
R
O
F
I
T
&
M
A
R
G
I
N
S
28
Rentokil Initial plc
Annual Report 2021
ESG
We have made a good start on our
journey to net zero by 2040. Vehicle
migration to ultra-low emissions fleet
isunderway with 177 vehicles, and
renewable energy contracts have
beenintroduced for our properties
around the world, with Italy our first
country operation to use 100% renewable
electricity. Approximately 750,000
fluorescent tubes have been removed
from the waste stream by using LED
lamps in our Lumnia LED fly units and
wehave also saved 10tonnes of plastic
by changes in our packaging.
People
In 2021, we received 68,900 applications
through the Careers Portal, an increase
of52% on last year and filling 12,200
vacancies. Career+ generated 15,000
applications via 64,000 social media job
shares. Our U+ online university saw 4.3m
training content views online and with
500new courses created in-house. Total
colleague retention in 2021 remained high,
at 84.4%.
World-class safety
We achieved high levels of colleague
safety in 2021, achieving our target Lost
Time Accident rate of 0.38 per 100,000
hours worked and with Working Days Lost
less than ninedays per 100,000 hours
worked. Wewere proud to have received a
Gold Award in 2021 from the Royal Society
for the Prevention of Accidents, one of the
most prestigious and recognised schemes
in the world with almost 2,000 entries
every year, nearly 50 countries and a
reach of over seven million employees.
Growth
Organic Revenue
We delivered an excellent revenue
performance in 2021, demonstrating a
clear recovery of our core businesses
during the year. Excluding disinfection
services, organic growth in our core
business was 7.5%, in excess of our
recently upweighted organic growth
guidance of 4%–5%.
Price
While our businesses have experienced
some inflationary pressures on their cost
base throughout the year, these have
largely been passed on through annual
price increases (APIs) to customers, in line
with normal policy.
Cash
We delivered excellent Free Cash Flow of
£326.5m (107.3% cash conversion) in 2021,
as a result of continued strength in customer
collections and no material escalation in bad
debts or major insolvencies.
M&A
2021 was an outstanding year for M&A.
We acquired 52 new businesses – 48
inPest Control and four in Hygiene &
Wellbeing in 25 countries, including 17
inNorth America, for a total consideration
of £495.5m.
Shareholder value
In 2021, we continued to deliver strong
returns for investors with our share price
rising by 15% and ahead of the FTSE 100
for the seventh consecutive year.
Reflecting thestrength of our performance
in 2021, we increased our interim dividend
by 38%(versus 2019), and recommended
a final dividend of 4.30p per share. This
equates to a full-year dividend of 6.39p
per share, an increase of 18.1% on the
prior year.
Capital allocation model & returns
Customers
Customer service
Our Trustpilot review scores remain very
strong. In 2021, customers rated us with
five stars for Rentokil (90% of 5.5k
customer reviews rated us as ‘excellent’)
and Initial (6.5k reviews, over 90%
‘excellent’). Customer retention rose
by0.8% points to 85.3%.
Profit & margins
Profitable growth
Ongoing Operating Profit rose by 19.5%
to £458.7m, reflecting growth across all
major reporting countries, regions and
categories. In the UK, 38% of contact with
pest control prospects and customers in
2021 was via our digital channels. Our
chatbots are becoming increasingly
popular, with 92% of sales enquiries
received via our chatbots coming from
new customers and with 56% of total
chatbot interactions coming outside of
‘normal working hours’.
Find out more
Responsible Business on page 58
Find out more
Our Stakeholders on page 30
Find out more
Responsible Business on page 51
Find out more
Business reviews on pages 32, 40 and 47
Rentokil Initial plc
Annual Report 2021
29
Corporate Governance Financial Statements Other InformationStrategic Report
Colleagues Customers
Our Stakeholders
Understanding expectations
Our business, its strategies, processes and our behaviour, are influenced by
the needs of our stakeholders. We recognise the importance of their views
and ensure we engage with them across the world to fully understand and
act upon their issues and concerns.
Our customers range from global food
producers to hotel chains, and industrial
goodsbusinesses and restaurants to
individual residential customers.
Key issues for stakeholder
A
Health, safety and sustainability
A
Expertise and service quality
A
Innovation
A
Digital portals
A
Transparency
A
Quality assurance and insights
A
Cost
A
Regulatory compliance
Why we engage
The Company’s purpose is to protect people
and enhance lives, and in a service industry
we succeed or fail by the quality ofthe service
we offer our customers.
Impact/value created
A
Brand value
A
Regulatory compliance (food safety,
healthand safety, etc.)
A
Sustainability
Methods of engagement
A
Management of ongoing customer
relationships
A
Customer satisfaction surveys/CVC (NPS)
A
Participation in industry forums and events,
such as the Global Food Safety Initiative
andthought leadership
A
Annual Report and industry-focused
publications
A
Websites
A
Innovation showcase, e.g. visits to our
dedicated research, development and
training facility, thePower Centre
A
Provision of training for customers’ staff
Measurements
We measure our impact by monitoring
ournetgain and portfolio development,
operating margin and density, and
opportunitypipeline. We also monitor
customer satisfaction and external ratings
andmeasurements, such as Trustpilot.
45.1
Customer Voice Counts (CVC) score
in 2021
c.130k
Customer Voice Counts respondents
in 2021
We have a broad range of stakeholders who
influence, or are affected by, our day-to-day
activities, and have varying needs and
expectations. Our aim at Rentokil Initial is to
develop and maintain positive and productive
relationships with them all.
As communicated in last year’s Annual Report,
we conducted a stakeholder-mapping exercise
in 2019 to ensure the groups we have identified
as key stakeholders remained appropriate.
There were no significant changes to the
Group’s businesses or operations which
merited a further review during 2020 or 2021,
and the key stakeholders, as set out opposite,
are the same as last year. Following the
acquisition of Terminix Global Holdings, Inc.,
which is due to complete in 2022 subject to
regulatory and shareholder approvals, we will
revisit this at the appropriate point given the
enhanced scale of our Group.
We also have other wider stakeholders, and
key partnerships or business relationships,
such as with the general public, government
and regulators, and industry bodies. We
consider the environment in relation to all our
key stakeholder groups but include it principally
as part of our consideration and engagement
with communities. We approach stakeholder
engagement at a Group, country and local
level, to ensure all stakeholder groups have
access to information about our business
andactivities, and can identify issues important
to them.
Our purpose, as set out on page 16, to protect
people and enhance lives, and our core values
of service, relationships and teamwork,
reaffirm the central importance of our
stakeholders to our business.
You can find details of how the Board receives
information from our stakeholder groups,
withexamples of the outcomes of this, in the
Corporate Governance Report, primarily on
pages 96 to 98. You can find more information
on our responsible business approach
onpages 49 to 72 and in our separate
Responsible Business Report for 2021
onourwebsite at rentokil-initial.com/
responsible-delivery.
Colleagues by region
North America 10,316
Europe 7,018
Latin America 2,368
UK & Rest of World 7,833
Asia 16,216
Pacific 2,280
Total 46,031
We employ around 46,000 colleagues in
88countries. Our colleagues are those who
are directly employed by us, which excludes
contractors.
Key issues for stakeholder
A
Health and safety
A
Training and career development
A
Tools to do the job
A
Wellbeing
A
Reward
A
Culture and values
A
Community support
Why we engage
We rely on the skills, experience and
commitment of our people to meet our
business goals.
Impact/value created
We aim to be a world-class Employer
ofChoice providing a safe working
environment and development opportunities.
A
Pay and benefits to colleagues
A
Training and development opportunities
Methods of engagement
All employees are provided with information
on matters of concern to them in their work,
through regular briefing meetings and internal
publications. To inform employees of the
economic and financial factors affecting our
business, regular updates are posted on our
intranet and engagement events are hosted
by individual businesses such as conferences,
town halls and senior executive updates,
which provide briefings on specific areas of
the business. Other methods include:
A
Your Voice Counts employee survey every
two years and periodic pulse surveys
A
Annual personal development reviews
andline manager training
A
The RIGHT WAY magazine published
online quarterly
A
Quarterly global internal update by
the Chief Executive
A
Speak Up ethics hotline
A
Works councils including an EU Forum
Measurements
We measure our impact by monitoring our
total headcount, diversity, the amount of new
online training content made available and
online learning views, the talent pipeline
ofgraduate schemes and apprenticeships,
and ourCore Culture Index (see page 51). We
also monitor external ratings, such as
Glassdoor.
84.4%
colleague retention,
down from 88.6% in 2020
30
Rentokil Initial plc
Annual Report 2021
Shareholders Communities Suppliers
Our communities are those who live in areas
where we work, such as local residents,
businesses, schools and charities.
Key issues for stakeholder
A
Jobs and investment
A
Contribution to public health and
safeenvironment
A
Environmental impact
Why we engage
We respect the communities in which we
operate and employ people, but we also
accept a wider responsibility to key
communities and environments around
the world.
Impact/value created
We partner with charities and community
initiatives in communities where we operate
and aim to minimise our environmental
impacts.
A
Tax paid
A
Charitable donations
A
Energy and fuel-derived emissions
(anegative impact which we reduce
oroffset wherepossible)
Methods of engagement
A
Employment of approximately 46,000
individuals
A
Sponsorship and colleague volunteering
A
Partnerships with schools, colleges
and universities
Measurements
We monitor our impact by measuring the
amount of charitable cash donations made
each year, our inclusion in ESG indices, and
our carbon emission ranking with the CDP.
More information can be found on our
responsible business priorities of the
environment on pages 58 to 65, and
communities on pages 66 to 69 in the
Responsible Business section.
£361,000
charitable donations in 2021
£200,000
raised by 2,000 colleagues
in the Race to Kigali for
Malaria No More UK
Our shareholders range from global
investment funds and institutions based
primarily in the UK, North America and Europe,
to small private investors, who are often
current or former employees.
Key issues for stakeholder
A
Growth in revenue (organic/M&A) and profit
A
Cash flow and returns, e.g. dividends
A
Brand and market leadership
A
Innovation and digital differentiation
A
Consistent execution of RIGHT WAY
strategy
A
Environmental, social and governance
(ESG) performance
Why we engage
Our investors are the owners of the business.
Continued access to capital is vital to our
long-term performance. We want our investors
andinvestment analysts to have astrong
understanding of our business, strategy
andperformance, and we want to understand
their priorities.
Impact/value created
We aim to generate long-term profitable
growth to help deliver value for our
shareholders.
A
Internal rate of return
A
Earnings per share
A
Compounding model
A
Dividends
A
Free Cash Flow
Methods of engagement
A
Institutional investor meetings
A
Capital Markets Days
A
Investor roadshows
A
Annual General Meeting
A
Correspondence with retail shareholders
A
Annual Report & Financial Statements
A
Corporate website
A
Results presentations
A
Our Responsible Business Report
Measurements
We measure our impact by monitoring our
share price and reviewing analyst notes on us.
41 %
of our total share register were represented
at investor meetings held in 2021
8
dedicated ESG sessions held
with investors in 2021
Our suppliers range from major manufacturers
of key products and consumables to our global
business, to suppliers of indirect goods and
services used to support our operations.
Products supplied include pest control bait,
paper, soaps and waste disposal units, while
indirect suppliers include technology services,
fleet vehicles and telecommunications.
Key issues for stakeholder
A
Long-term engagement and innovation
A
Control of price increases and delivery
ofcost savings
A
Continuous improvement approach
A
High standards of product quality and
service delivery
A
ESG matters, including human rights,
dataprotection and modern slavery
A
Minimum environmental standards and
improvement plans
Why we engage
Our major suppliers must share our corporate
standards and values as these strategic
partnerships deliver significantly more value
to our business and our customers than
short-term deals.
Impact/value created
A
Optimised supply chain from manufacturer
to end customer
A
Joint development of bespoke products
and service innovations
A
Efficient sourcing of proprietary products
from global and local suppliers
Methods of engagement
The global procurement team manages
therelationships with major suppliers, with
senior management involvement where
appropriate. We carry out comprehensive
audits of all critical suppliers, including factory
inspections, system reviews and ESG factors.
The supplier audit programme resumed in
2021following the pandemic, employing
acombination of in-house and third-party
auditors to overcome travel restrictions.
Measurements
We monitor our impact by measuring our
monthly On Time In Full (OTIF) delivery metrics,
lead times, quality complaints, annual revenue
development, product innovations and pricing
management. We also track the scores from
supplier audits, ESG accreditations and suppliers
completing our in-house training on modern
slavery awareness.
65%
increase of Lumnia LED
insect light traps devices
supplied in 2021 over 2020
Find out more
Our responsible business approach on pages 49 to 72
Section 172(1) statement on page 72
Board engagement with stakeholders on pages 96 to 98
Our Key Performance Indicators (which are grouped by
stakeholder) on pages 24 to 27
rentokil-initial.com/responsible-delivery
Rentokil Initial plc
Annual Report 2021
31
Corporate Governance Financial Statements Other InformationStrategic Report
Pest Control
Ongoing Revenue at CER
£2,020.0m +18.6%
Ongoing Operating Profit at CER
£375.8m +33.4%
Net Operating Margin at CER
18.6% +210bps
2021 2,020.0
2020
2019
2018
2017
1,703.9
1,696.4
1,528.8
1,365.0
2021 375.8
2020
2019
2018
2017
281.7
308.1
273.9
249.4
2021 18.6
2020
2019
2018
2017
16.5
18.2
17.9
18.3
Trading under the Rentokil brand, our pest control
specialists protect people and enhance lives by providing
pest control solutions that ensure public health and
protect the environment through energy efficient and
sustainable pest control services. We offer a complete
range of pest control services and solutions for commercial
and residential properties, from common pests such
as rodents, flies, stored product insects, biting insects
and birds to other kinds of wildlife. We have extensive
experience across a wide range of industries and use
both preventative and responsive strategies to enhance
protection for our customers through holistic, integrated
pest management programmes.
Our unique selling points
A Global leader – we are No.1 in 56 of our 87 markets
A Strong Employer of Choice programme – with
outstanding technical training, building expertise
andcareers
A Powerful brand – leading commercial pest control
brandin the world
A Core strength in attractive commercial sector
A Leaders in digital – connected devices, data, AI,
customerportal and apps
A Unmatched capabilities in innovation – with strong
pipeline of tools and expertise
A Disciplined M&A – highly fragmented market of
c.40,000companies, c.50% in North America
Note: 2020 revenue and margin numbers have been
adjusted as a result of prior year restatements.
See page 149 for more detail.
32
Rentokil Initial plc
Annual Report 2021
We are the world’s leading commercial
pestcontrol company with an unrivalled
global position in a resilient and non-cyclical
industry characterised by strong long-term
structural growth drivers, which we present
in global market drivers below.
OurPest Control business is a route-based
business where profit growth is driven
byafundamental understanding of the
importance of density. We have strengthened
our position as global leaders in pest control
through increased organic growth and by
establishing stronger market positions,
through the introduction of innovative
products and services, acquisitions to build
scale and density, and our determination to
be an Employer of Choice across our global
operations. The business has delivered a
seven-year CAGR of 14.4%.
The pest control market
andindustry
The global pest control market is an attractive,
non-cyclical market worth some c.$22.0bn
perannum and continues to grow at c.4.5%
to5% plus annually. Pest Control is a largely
non-discretionary and essential service and
our medium-term growth opportunities are
strengthened post COVID-19. We have
increased confidence in our powerful platform
for growth, with every market in every region
Across the globe, pest control
management continues to thrive
post crisis and is an essential
service protecting public health,
driven by increasing populations,
urbanisation, globalisation and
changing demographics and
standards, with every region
growing its per capita spend
onpest control driven by global
trends influencing increased
demand. Stricter regulations and
technology developments are
important factors contributing to
future pest management growth.
The global population is growing by
80 million people each year and is
forecast to reach 9.1 billion by 2050,
creating further demand from pest
proximity.
By 2050, 68% of the population will
live in urban areas, (versus 55% in
2018), where pest issues are most
prevalent.
160 million more people join the
middle classes every year, with
increasing hygiene standards
andlower pest tolerance.
By 2050, climate change is expected
to cause approximately 250,000
deaths each year from malnutrition,
malaria and other diseases.
Pest infestations cost businesses
c.£5.8bn each year (source: The
Rentokil Report 2015).
Global rat population set to increase
to 7bn and increasing demand
fornon-toxic solutions (source:
TheRentokil Report 2015).
More than 3.9 billion people in over
128 countries are at risk of contracting
dengue fever, with 96 million cases
estimated per year.
Increasing global convergence
andtransparency in global hygiene
standards, particularly in emerging
markets, is fuelling demand for pest
control services.
22% of facilities across the global
food chain have some record of
pestactivity at any given time which
carries significant reputational risk.
COVID-19 pandemic-driven trends
Growing population Urbanisation Rising middle classes
Pest brands people trust
Brands face a fundamental reordering
of priorities, with 53% of respondents
believing that trust in the company
that owns a brand is one of the most
important factors in the purchasing
decision (source: Edelman Trust
Barometer Report 2020).
Increased awareness
ofpestsasvectors
The pandemic has elevated
awareness of pest risks andthe
potential of virus and disease
transferto humans.
Increasing focus on sustainability
Customers are seeking safer pest
control through the use of lower toxic
solutions, including biological and
physical methods and better waste
management.
Rising demand for remote
monitoring solutions
Customers sought to minimise
physical interaction with service
providers during the pandemic,
requesting a variety of technology
and sensors for the remote monitoring
of pests. In addition, customers are
demanding increased transparency
ofdata from connected products
across their estate.
Climate change Rise of pest intolerance Rise of pests
Vector-borne diseases
Rising standards
Increasing business
pressure
increasing its per capita spend on pest control
products and services, leading us to set a new
organic growth target for our Pest Control
category of 4.5% to 6.5% p.a. over the medium
term from 2022.
The primary function of the professional
pestcontrol industry is to maintain hygienic
surroundings for customers which are free of
pests that could either damage commercial
interests and reputation or endanger public
health.
Pest control contracts typically specify
acertain level of preventative work be
undertaken, such as the number of visits to
customer premises, while reactive enquiries
for one-off jobs require quick and efficient
treatment for specific issues.
Competitors
The pest control market is highly fragmented
with an estimated 40,000 operators globally,
c.20,000 of which are in North America. Key
international competitors of Rentokil include
Orkin, Ecolab and Anticimex. Over the last 12
months there has been further M&A activity
across the sector with major players targeting
acquisitions in Growth and Emerging markets.
In addition, new technology solutions and
increased digital marketing are driving
inbound leads for national and smaller
independent operators.
In December 2021, we announced an
agreement under which Rentokil Initial will
acquire Terminix, to create the global leader in
pest control, and the leader in the pest control
business in North America. This transaction is
expected to complete in H2 of 2022.
Our customers
In 87 countries, businesses and homeowners
trust Rentokil to solve their pest problems
and prevent them from reoccurring. While
theresidential market is important to Rentokil,
commercial pest control services account
for75% of our total pest control revenue,
withresidential pest control representing
approximately 25% – over 85% of this coming
from the US and Australia. Our key commercial
customer sectors include food and beverage
processing, hospitality, facilities management,
offices and administrative, and logistics and
warehousing. On a per capita basis, both the
US and Australia have much larger residential
markets for pest control than in Europe,
primarily because of the presence of termites
and wooden housing. Industries are
increasingly adopting a ‘zero tolerance’
attitude towards pests to protect their
customers and reputations, and as a result,
we continue to set new standards for service
excellence through market-leading technical
training, innovation and digital tools.
Global market drivers
Rentokil Initial plc
Annual Report 2021
33
Corporate Governance Financial Statements Other InformationStrategic Report
Growth market characteristics
Overview of
performance in2021
Pest Control delivered a very strong
performance overall during the year,
withOngoing Revenue growth of 18.6% to
£2,020m (8.1% organic) aided by an excellent
performance from our North America business,
slightly offset by weaker performances from our
Australian, New Zealand, Malaysian and
Indonesian operations which were materially
impacted by lockdowns in H2. Despite some
labour shortages in H2 due to a number of
colleagues either off work with COVID-19 or
self-isolating, our Pest Control business in
North America was our best performing region,
growing revenues by 24.3% (8.9% organic).
Ongoing Revenue in our Growth and Emerging
markets grew by 19.2% and 14.5% respectively.
Ongoing Operating Profit increased by 33.4%
as the business returned to organic growth,
supported from releases of bad debt and
revenue provisions. Net operating margins
increased by 210 basis points to 18.6%.
Growth markets
These markets include North America, the
UKand Ireland, Pacific, Germany, Benelux
andthe Caribbean. They represent 87% of
total Pest Control Ongoing Revenue and 92%
of category Ongoing Operating Profit and
have delivered a five-year revenue CAGR of
11.6%. Our Pest Control operations in these
markets grew by 19.2% in 2021.
In North America we have seen good growth
in our residential Pest Control portfolio (which
represents 36% of our North America Pest
Control business), from acquisitions in 2020
and 2021, and continued marketing and sales
focus. Residential revenues grew by 31% in
2021, aided by a continuation of the working
from home business environment.
Our acquisition of Environmental Pest Service
(now part of Rentokil North America), which
completed at the end of December 2020, has
performed strongly and we are benefiting
from the business’ residential concentration
inthree important markets: Florida, Georgia
and North Carolina.
Our North America commercial Pest Control
business (64% of our Pest Control business)
grew by 21% in 2021, aided by good volumes
of work broadly across most markets, and
improvements in bird and mosquito work.
Ourdistribution business performed strongly
throughout the year and reflects the general
market recovery of the pest services sector
and the continued high demand for lawn,
golfand turf products.
Trading conditions in our UK businesses,
which were significantly impacted by
lockdowns in Q1 2021, improved significantly
from the second quarter and into H2 as a
result of continued progress with the UK’s
vaccination programme and subsequent
easing of restrictions. Building on last year’s
success, the roll-out ofour PestConnect
product and service continued at pace during
2021 as we installed more units across more
customer sites in the UK. Our digital
Connectstrategy now covers around 11% of
the UK portfolio, with some 86,000 devices
installed across 6,779 sites byDecember and
representing growth in sitenumbers of over
200% year-on-year.
Our Europe region has continued to
experience disruption from lockdowns and
intermittent restrictions throughout 2021.
Despite these ongoing challenges, our Pest
Control operations in Europe are
demonstrating good growth.
Overall Pest Control in the Pacific region
performed robustly despite intermittent
lockdowns in Australia and ongoing tight
restrictions in New Zealand. Pacific Pest Control
grew by 10.3% in the year with commercial Pest
Control performing particularly well. Caribbean
Pest Control grew by 7.7% despite the region
continuing to be impacted by lower tourism.
Emerging markets
We have a strong and rapidly growing position in
the markets of Asia, Latin America, MENAT and
Central America, which combined represent a
strong platform for delivering sustainable,
profitable growth. They represent 13.1% of Group
Ongoing Revenue and 8.5% of Group Ongoing
Operating Profit and have delivered a five-year
revenue CAGR of 17.4%.
Our Asia region has delivered an improving
performance in 2021 but real recovery has
been held back by difficult trading conditions
in Malaysia, Indonesia, Vietnam and Thailand
as a result of very restrictive lockdowns from
late Q2 and into H2. With fewer restrictions
and a higher vaccination rate, China has
performed considerably better, delivering
PestControl growth of 18.2%.
Cities of the Future is our focused M&A
programme in Emerging markets, where
higher growth in big cities in the region is
driving demand for pest control services.
Developing a Rentokil presence in these cities
gives us a stronger base for future growth over
the next 10–20 years as we benefit from faster
growth in these markets relative to more
mature locations.
Growth through M&A
Acquisitions are a core part of our Pest Control
growth strategy – they enable us to build
further scale and density, increase our
competitive positioning and improve our
ability to service customers. We have the
in-house capability to identify, evaluate and
execute acquisitions at pace and have built a
long track record of successful delivery. Our
model for value-creating M&A is structured
around the disciplined evaluation of targets,
execution of detailed integration programmes
and careful stewardship of new businesses
under our ownership.
In 2021, we acquired 48 pest control
companies building on our track record of
delivery. We acquired businesses in 24
countries including: Australia, Brazil, Chile,
China, Colombia, France, Lebanon, Norway,
Poland, Singapore, Spain, Taiwan, UAE and
the USA. Our pipeline of opportunities in both
Growth and Emerging markets is very strong
and we are confident of further delivery of
high-quality acquisitions in 2022.
Pest Control
North America is the world’s largest pest
control market representing c.50% of the
global market and estimated to be worth
c.$11bn. It is highly competitive and
fragmented, comprising five larger players
– Rollins, Terminix, Rentokil, Anticimex and
Ecolab – and more than 20,000 regional
orlocal independents. Commercial pest
control is the largest segment in North
America at c.45%, with residential
comprising c.35% and termites at c.20%.
Market trends include an improving
housing market and economy fuelling
termite and commercial pest control, and
rising demand for ant, bed bug and
mosquito control services.
Key market trends in Australia and New
Zealand are rising hygiene standards,
legislation and regulation, and free trade
agreements with China and India, which
will fuel export demands and impact the
pest and fumigation industry. Major players
here are Ecolab, Rollins and Anticimex.
Rentokil is a market leader in the UK,
Germany and Benelux, followed by a
number of businesses with scale to service
larger accounts and many other smaller
providers. Leading European operators
include Ecolab and Anticimex. Key value
drivers are sales capability, customer
retention, upselling additional service lines
easing technician productivity and
optimising business mix. Pest pressures
include biting insects, pigeons, rodents
and other small mammals. Main customer
segments are food manufacturing,
processing and retail, pharmaceutical,
industrial and manufacturing, hotels,
offices and residential.
34
Rentokil Initial plc
Annual Report 2021
Emerging market characteristics
WE ARE...
Our strategy for pest control M&A is
predicated on continuing to target acquisitions
in key markets to build density, targeting
acquisitions in new countries and in mega and
large cities where we have identified strong
growth potential.
Growing demand despite
current market volatility
Many positive macro-economic trends
continue to drive growth in the pest control
industry. While the economic landscape is
challenging and many customer groups have
been impacted by the pandemic, pest control
remains a critical service requirement for
bothcommercial and residential customers.
Inaddition, the pest control market continues
to consolidate, presenting strong M&A
opportunities for active industry participants.
Navigating the customer landscape to maximise
the opportunity in targeted growth and resilient
sectors, while protecting our position in more
vulnerable customer groups, will be critical as we
go forward. While our pest control offer is strong
and compelling, brand trust, differentiated
expert service delivery (including innovation),
and an increasing desire for digital customer
engagement solutions, are all areas in which
wewill continue to focus and invest.
These are fast-growing markets linked
toeconomic andsocial development.
Growing population, rising middle class
and increased government regulation on
hygiene and sanitation are fuelling growth.
Market trends include strict regulations on
food safety, health and the environment,
the use of extranets to provide pest control
monitoring and performance tracking for
customers, the use of mobile technologies
by pest control companies to enhance
service productivity anda rising customer
demand for eco-friendly services and
products.
The market is highly fragmented with
themajority of pest control companies
being made up of small, local businesses.
Rentokil is a market leader and the most
recognisable and trusted brand. Pest
pressures include termites, mosquitoes,
ants, cockroaches, rodents and flying
insects. Cockroaches, carriers of diseases
such assalmonella and gastroenteritis, are
high-risk pests in homes. Main customer
segments are food processing, food retail
chains, industrial and manufacturing, hotels
and resorts, and offices and residential.
A strong tech partner
Technology and innovation influencing
customer decision-making
We offer our commercial customers the latest in technology and pest
insights to deliver the most effective pest control solutions to keep
them pest free and protected. In 2021, we commissioned a global
survey, asking 3,000 respondents in 10 countries 15 questions,
focusing on the key factors influencing our commercial customers’
decision-making process when selecting and working with
apestcontrol provider and how important technology is as
partofthisprocess.
We focused on six key sectors: food processing and manufacturing;
food logistics and warehousing; food retail; non-food manufacturing;
hotels; and restaurants and leisure.
The survey allowed us to respond directly to customer requirements
and understand the importance they attribute to certain deciding
factors, including attitudes towards sustainability, technology and
competency. The majority of our commercial customers believe that
technology and innovation are important and are also helping them
tomeet their own sustainability goals.
74%
said the ability to
offer remote
monitoring of pests
is an important
deciding factor
75%
of respondents said
the ability to deliver
new innovations is
important when
selecting a pest
control provider
81%
believe their pest
control provider
should reduce
pesticides to support
their sustainability
agenda
45%
believe that
minimising the
amount of chemicals
used is one of the
top ways innovation
helps deliver better
pest control
Rentokil Initial plc
Annual Report 2021
35
Corporate Governance Financial Statements Other InformationStrategic Report
Our Pest Control strategy
Further growth by building on
our global leadership, through
further expansion in Growth
(particularly North America)
and Emerging markets,
bothorganically and through
M&A.
In North America, we will continue to leverage our
scale and build market share through a balanced
programme combining organic initiatives (including
new products and innovation, national accounts,
digital marketing, Employer of Choice and the
Best of Breed transformation programme) and
targeted M&A to build density.
We will also aim to further develop our expertise in
new pest control sectors such as vector control and
lake management.
Differentiation through our
innovation pipeline, with an
increasing focus on non-toxic
pest control solutions.
Our culture of constant innovation drives our
success, with science at the heart of our approach
by our experts in our global innovation centre.
Wehave invested c.£20m across the world in
PestControl R&D with 3,000 colleagues supporting
our innovation agenda, and with over 50 partners
working with us to deliver best quality solutions
atpace. 100% of our pipeline solutions are being
developed to have a positive impact on
environmental performance.
Since 2017, we have launched a significant number
of product innovations, including RapidPro
rodenticide, RADAR and Autogate rodent units,
fluorescent rodent tracking gel, Entotherm heat
treatment for bed bugs, Lumnia LED electronic fly
traps and Multi-Mouse Riddance products. We
were the first to deploy connected pest control,
LED insect light traps and to use CO in rodent
control.
Harness the digital
opportunity – using our digital
expertise, including web,
apps, portals and services to
lead digital pestcontrol.
Rentokil has developed the world’s leading
technology ‘ecosystem’ for pest control, providing
an unmatched level of 24/7 monitoring, reporting
and insight for commercial customers who face the
risk of increased fines and censure without
effective pest management and reporting. We have
also begun to integrate our data automatically into
customers’ own internal reporting platforms.
We have made a long-term commitment to our
digital ecosystem, developing multiple generations
of systems and software over the last decade. Our
technology infrastructure includes: connected pest
control devices, colleague and customer apps, our
myRentokil online customer portal, Command
Centre and data mining and trend analysis.
The No.1 brand in pest control. Rentokil is the leading commercial pest control
brand in the world. We continue to focus on
building this brand through our ongoing investment
in people, service, innovation, digital and
sustainability, and to support our customers across
multiple sectors, including: high-dependency
customers such as food suppliers; employee
locations such as offices and manufacturing
facilities; and guest locations such as leisure,
hotels, education and food and beverage.
Our aim is to be recognised as the world’s leading
expert provider of pest control – leading in
innovation, digital and sustainability.
Continued M&A strategy to
expand the city footprint
anddensity.
Acquisitions are a core part of our Pest Control
growth strategy – they enable us to build further
scale and density and increase our competitive
positioning. We have the in-house capability
toidentify, evaluate and execute acquisitions
atpace and have built a long track record of
successful delivery.
We maintain our Cities of the Future focus where
we expect to grow at higher levels in key urban
areas and we target 13%+ IRR in Growth markets
(12%+ in North America) and 15%+ IRR in Emerging
markets. Our pipeline of opportunities in both
Growth and Emerging markets remains strong and
we are confident of further delivery of high-quality
acquisitions in 2022.
Pest Control
Pest Control is our core business line and our main engine for growth. Our strategy forPest Control
remains oncourse as we transition from thepandemic toa post-COVID-19 world.
Key strategic themes
36
Rentokil Initial plc
Annual Report 2021
WE ARE...
product in 2021 with 87,000 units installed,
a58% year-on-year increase. Since launch,
wehave installed 235,000 PestConnect units
into 13,000 customer premises across the
world and we continue to expand our range of
connected devices. In H2 2021, the Company
set a new ambition for c.25% of its commercial
customers to be PestConnect customers
by2026.
In addition, we have now begun to integrate
our pest control data into the systems of our
customers. The first customer systems
integration began in 2021 with 34 customers
across six customer portals now with
automatic access to our pest control data for
their sites, in their own systems, in the same
format as their other KPIs. This automated
164,000 work orders in 2021.
Rentokil has developed the world’s leading
technology ‘ecosystem’ for pest control,
providing an unmatched level of 24/7
monitoring, reporting and insight for our
commercial customers who face the risk of
increased fines and censure without effective
pest management and reporting.
Pest Controlgrowth in
apost-pandemic world
Despite the continuing impact from the
COVID-19 pandemic in 2021, our core strategy
remains on course.
The key components to growth are:
A increasing brand marketing activity in all
markets with a brand recognised as the
leader in pest control;
A enhancing digital communication platforms
through the customer journey to engage
customers and convert opportunities;
A continuing our successful M&A strategy
toexpand and strengthen our footprint;
A owning the position of the world’s most
sustainable pest control service company;
A implementing differentiated innovation,
marketing and targeting activities built
onrobust data and insights; and
A expanding our digital pest control offer
andincreasing customer penetration.
On page 34 and over the following pages,
wewill provide more details about our four
keypillarsfor growth: brand strength and
engagement; M&A; digital infrastructure
andcapability; and innovation.
Brand strength
Rentokil is the leading commercial pest control
brand in the world and a leading commercial
brand in North America. Terminix, who we will
acquire in 2022 subject to regulatory and
shareholder approval, is the most recognised
brand for termite and pest management in the
US, performing c.50,000 customer visits each
day from 375 locations across 47 states.
We continue to focus on building this brand
through our ongoing investment in people,
service, innovation, digital and sustainability,
and to support our customers across multiple
sectors, including: high-dependency
customers such as food suppliers; employee
locations such as offices and manufacturing
facilities; and guest locations such as leisure,
hotels, education and food and beverage.
Ouraim is to be recognised as the world’s
leading expert provider of pest control –
leading in innovation, digital and sustainability.
We are driving our brand alignment efforts for
a unified, consistent global presence to build
trust and credibility, and effectively track and
measure our brand equity. This is through
central deployment of global campaigns
withsupporting toolkits for local activation
viaa wide range of communication channels
including online, social media, global and
national sales, third-party events and
webinars.
Digital infrastructure
andcapability
Digital innovation in pest control is necessary
to meet the needs of an evolving world.
Macrotrends are increasing demand for
digitalsolutions and these include demand
formore remote monitoring solutions.
PestConnect is the world’s most advanced
digital system for pest control. It provides
ourcustomers with a complete remote pest
detection solution and full traceability
24/7/365. We saw increased demand for the
We have made a long-term commitment to
ourdigital ecosystem, developing multiple
generations of systems and software over the
last decade. Today, we have a proven, robust,
scalable and secure global infrastructure in
place.
Since its launch in 2019, our connected
portfolio has grown by more than 4x and is
now c.10% of our portfolio. In addition, our
PestConnect Floor Plan app to manage
PestConnect at scale across customer sites
(providing technicians with paperless, on-site
real-time access to pest control products on
customer sites) is now available in 34 markets.
Our myRentokil online customer portal
provides secure 24/7 access to real-time
information that provides easy access to
documentation required for pest control,
including reviewing service recommendations
and responding to audits. Currently over
1 million customer sites are using myRentokil
in 46 countries, with over 98% of commercial
customers having access to myRentokil.
Pest experts
Innovation
Innovation is in our DNA. We have a strong track record of developing
award-winning solutions and services and have extended this to our
innovation in data-driven tech.
Regulatory and technical compliance
Our in-house teams of regulatory and analytical experts have extensive
industry-leading global experience navigating the regulatory, legislative
and safety requirements.
Global centre for science and innovation
Our Technology Centre in the UK (the Power Centre) is one of the pest
industry’s largest centres for innovation, science and technology training.
Our team of PhD scientists developing and testing innovative pest
control solutions are at the forefront of behaviour science and
observational research.
Training and skills
We have a strong culture of engagement and outstanding technical
training across our 20,000+ highly qualified and experienced
technicians.
Rentokil Initial plc
Annual Report 2021
37
Corporate Governance Financial Statements Other InformationStrategic Report
WE ARE...
10%
portfolio switched
to PestConnect
contracts
25%
target use of
PestConnect
by2026
40%
saving in
rodenticide use
Command Centre is our central information
hub containing data compiled from over 50
countries with over 20 billion records and
populated with historic and current data to
track pest trends and identify emerging risks.
A total of 15 million messages were sent or
received across our digital pest control
network every day in 2021, recorded on the
central Command Centre and stored on
Google Cloud Platform.
Innovation
Innovation is a core component of growth
andembedded within our cultural DNA, driven
by our goal to maintain our position as the
bestpest control company in the world. We
encourage and empower all our colleagues to
innovate with the desire to improve customer
service. We deploy innovation consistently,
targeted at key pest sectors and with potential
for new non-toxic and sustainable solutions,
which are increasingly becoming an important
Pest Control
Revolutionising
the pest industry
Our PestConnect intelligent pest monitoring range has grown four-fold
since launch in 2019, with 235,000 devices installed, and is now used
across c.10% of our commercial portfolio across a wide range of sectors.
Our UK sales strategy saw strong growth in 2021, with over 25% of new
contracts sold including PestConnect, and 70% signed on three-year
contracts. For our customers, using our intelligent technology allows
them to monitor pests in real-time, while also reducing reliance on
rodenticide by up to 40%, complementing their sustainability
programmes.
Find out more on page 37
Please scan me!
source of differentiation. Our core innovation
categories are stored product infestation,
rodents, and crawling and flying insects.
Rodents
Rodent control accounts for c.$2.4bn of the
global pest control market and continues to
grow at c.6.4% p.a. (source: Allied Analytics).
Recent new product innovations include
DualAutoGate Connect, Riddance Connect,
Rodent Ceiling Trap (a ceiling solution for
rodent control in gaps above ceilings and
which provides indicator alerts to a capture)
and our Multi-Mouse Riddance product (a
monitoring sensor that can be attached to
several live catch products for real-time
reporting, allowing for early technician
support).
In 2021, we launched Flexi Armour, a range
ofunique proprietary proofing solutions for
sealing gaps, cracks and crevices in and
around buildings. This range is being rolled
out across our markets globally with further
innovation due for the range in 2022. In 2021,
and after four years of development and
testing, we launched Eradico, our new Global
Bait Box. Find out more on page 39.
A connected version of the system, called
RADAR X, a next generation CO
2
connected
mouse riddance unit, is in our pipeline for
future launch.
Flying insects
We have sold c.260,000 Lumnia solutions
across 61 countries since launch in 2017, with
2021 accounting for 35% of the sales volume,
ayear-on-year growth of 65%. Lumnia is the
world’s first range of illuminated fly traps to
use patented LED lighting technology rather
than traditional fluorescent tubes.
Lumnia attracts, kills and encapsulates insects
hygienically – eliminating the risks of
contamination – and is suitable for a wide
38
Rentokil Initial plc
Annual Report 2021
WE ARE...
100%
made from recycled
polymer from scrappedcars
377 tonnes
of virgin plastic will be
diverted each year from our
supply chain diverted from
Rentokil Initial supply chain
range of internal environments. It is also more
environmentally friendly than traditional units,
reducing energy use and carbon emissions
byc.62%.
Our products include Lumnia Standard
(foroffices, shops, food retailers), Lumnia
Compact (a lower energy consumption unit
foruse in low risk areas) and Lumnia Ultimate
(which uses second generation lamps for
high-dependency customers). We have now
added to this range with Lumnia Colour
(offering customers a choice of coloured units
to match their interior décor) and Lumnia Slim.
In 2021, we launched our new Lumnia
Suspended model, designed to control flying
insects in high dependency locations. This
was approved for launch in 18 countries, with
all other markets available to launch in 2022.
Our future pipeline for launch includes our
new Lumnia Connect model, trialled during
2021, fitted with camera technology for better
risk management and greater audit trail
transparency, and Crawling Insect Connect,
which will be positioned in no-tolerance areas
in customer food processing sites to primarily
target moths and cockroaches.
Non-toxic solutions
Customer and regulatory requirements
areleading to an increasing demand for
innovative, non-toxic solutions in pest control.
Our aim is to become the leaders in
Continually
innovating
In 2021, we launched Eradico, our new Global Bait Box, an
innovative, single-solution, flexible, technology-enabled
rodent solution, which addresses 57 different needs and
market requirements. Eradico is made from 100% recycled
polymer, derived entirely from the plastic parts of scrapped
cars and is 100% recyclable at the end of its life.
Eradico will lead to a diversion of c.377 tonnes of virgin
plastic annually from the Rentokil Initial supply chain,
reducing our energy and CO
2
impact.
Eradico was a finalist in the prestigious Plastics Recycling
Awards Europe 2021, being recognised for innovation
driving the circular and sustainable use of plastics.
sustainable pest control and to do this we
need to find better ways to exclude, remove,
destroy and monitor pests with the lowest
possible impact on the environment. This
impact must be sustainable, taking into
account the impact of the hardware we use,
consumables required and cost of service
tothe environment. Sustainable innovations
are required both internally, where premises
require safer pest control from lower toxic
solutions using biological and physical
methods and lower waste management,
andexternally, where we need to develop
andpromote solutions and service cycles
toreduce our environmental footprint.
Wecontinue to expand and develop our
rangeofsustainable, non-toxic and humane
solutions across all pest types.
Global and national accounts
We have seen a strong performance this
yearfrom globally managed customers,
particularly in the logistics, property and
facilities management sector, with total
revenue across all categories remaining
strongat £111.3m for the full year. Our
relationships with key partners – including
Kerry Ingredients, Mondelez, Sodexo, ISS, JLL,
CBRE and a strategic online retailer – have
continued to develop in 2021 as we work
together in existing geographies and expand
into new ones.
Demand for our core services in pest control
rebounded particularly in the fourth quarter
ascustomers settled into their new normal
andreturned to seeking high-quality,
compliant and consistent services across
theirglobal estates. We continue to make
good progress with new account wins across
arange of customer sectors, including the
pharmaceutical industry, IT, food processing
and logistics, and our pipeline of new business
continues to grow.
Outlook
The Pest Control business is performing
inlinewith our expectations, resulting
fromorganic growth delivery and the flow
through of revenues from our excellent M&A
performance in 2021. Although we will have
tocontend with ongoing macro-economic
uncertainty, we expect Pest Control to deliver
good operational and financial progress in the
coming year.
In line with our M&A strategy we will continue
to pursue high-quality Pest Control
acquisitions around the world. We also expect
to complete our acquisition of Terminix in H2,
becoming the leading pest control company
inour largest market, North America.
Rentokil Initial plc
Annual Report 2021
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Corporate Governance Financial Statements Other InformationStrategic Report
Hygiene
At Rentokil Initial our Hygiene technicians provide hygiene
services to business environments to make them cleaner,
safer, healthier and more pleasant places in which to
operate. Establishing good hygiene practices throughout
an organisation reduces the risk of infection being passed
from person to person. As a result, fewer days are lost to
sickness, which translates directly into real cost savings
and increased productivity. Trading under the Initial brand,
we offer the widest range of washroom hygiene services,
including the provision and maintenance of products such
as air fresheners, sanitisers, feminine hygiene units, hand
dryers, paper and linen towel dispensers, soap dispensers,
toilet paper dispensers and floor protection mats. Our
two hygiene ranges, Signature and Reflection, offer a full
range of services and a consistent look and feel across
acustomer’s washroom.
Our unique selling points
A Global leader – No.1 in 22 of the 67 markets
(top 3 in38markets); 20 new markets in last two years
A Recognised and trusted hygiene brand
A Award-winning product range
A Digital, connected devices and data expertise
shared with Pest Control
A Operational focus – postcode and product density,
shared overhead
A Disciplined M&A – city-focused strategy building
geographic density
A Strong Employer of Choice programme –
outstanding engagement and training
Ongoing Revenue at CER
£673.4m -8.4%
Ongoing Operating Profit at CER
£141.2m -18.3%
Net Operating Margin at CER
21.0% -250bps
2021 673.4
2020
2019
2018
2017
735.0
538.8
512.0
413.0
2021 141.2
2020
2019
2018
2017
172.8
94.4
88.9
73.2
2021 21.0
2020
2019
2018
2017
23.5
17.5
17.4
17.7
40
Rentokil Initial plc
Annual Report 2021
Hygiene is a strong, complementary business
to Pest Control. Both businesses service the
same types of customer and share country
management, technology, infrastructure and
back-office services. They are route-based
businesses where profit growth is driven
bydeep understanding ofthe importance
ofdensity.
Initial Hygiene has an unrivalled global
position in core hygiene services – operating
in 67 markets and with 22 market-leading
positions (top three in 38). In addition, we have
entered into 20 new markets over the last two
years. Initial is the regional leader in Asia,
Pacific and the Caribbean, as well as the UK.
Margins are driven through postcode density
(the number of customers on a route), product
density (the number of products/service lines
in each customer premises), as well as shared
overheads with Pest Control (infrastructure
and back office) and M&A (building further
geographic density).
The megatrends in the hygiene sector – and
the importance of being able to prevent the
spread of diseases, germs and bacteria – are
fuelling demand for our services (see global
market drivers and pandemic-driven trends
below). Over the past seven years, our core
Hygiene business has delivered a CAGR of
6.9%, established a strong product range,
While the COVID-19 crisis has
brought the short-term impact of
lockdowns, it has also brought
what we believe will be a
longer-term change in attitudes
towards the importance and
perception of health, hygiene
and wellbeing, and hygiene has
moved from being viewed as a
basic commodity to an essential
service.
Initial Hygiene is a high-quality
business ideally positioned to
capitalise on new growth
opportunities as the growing
importance of hand, surface and
air hygiene, tighter regulation,
higher standards and increased
usage of hygiene products and
services rises around the world.
The global population is growing by
80 million p.a. and forecast to reach
9.1 billion by 2050, creating further
demand for hygiene services.
This generation is highly focused on
health and wellbeing and vocal about
its importance.
By 2050, 68% of the global population
will live in urban areas, (versus 55% in
2018), where hygiene and sanitation
issues are most prevalent.
160 million people join the middle
classes every year, with increasing
hygiene standard expectations and
agrowing health consciousness
afforded by more disposable income.
The air purification market is
expected to grow at a CAGR of
42%to 2025, to reach revenues
ofc.$90bn, with Asia Pacific the
fastest-growing region and
contributing 41% of market share.
This is particularly so in the food
industry, considered to pose greater
risks to public health than non-food
sectors.
Valued at $2.6bn in 2019 and
forecast to grow at a CAGR of 9.2%
to2026, this growth is driven by
increasing health consciousness
among consumers and rising
incomes.
COVID-19 pandemic-driven trends
Growing population
Rise of millennial
population
Urbanisation
Rising middle classes
Growth in air
purificationmarket
Increasing legislation
driving improved hygiene
standards
Growth in hand
sanitiser market
launched the myInitial customer portal for
enhanced customer insight and engagement
and has begun to acquire bolt-on businesses
to build scale and density. Hygiene’s five-year
average Net Operating Margin is 16.2%,
excluding disinfection services.
Hygiene is the new
PestControl
In September, we announced our intention
to create an enlarged category, Hygiene &
Wellbeing, in response to the pandemic
andincreasing importance of hygiene and
wellbeing services – creating the right
business at the right time to meet the future
needs of our customers. We firmly believe our
Hygiene business has the ability to become
the next Pest Control.
What gives us confidence are consistent
market growth drivers; a shared successful
operating model focused on people, services
and profit and a particular focus on density
economics; organic growth inside the
washroom; a shared commitment to innovation
and digital; organic growth outside the
washroom, in premises and wellbeing and
environment; and extending our footprint
organically and through M&A.
We have the operational model in place; a
global footprint and a large existing customer
base; we have a proven innovation capability
and digital expertise; and, most importantly,
we have highly motivated people and a great
Initial brand. Over the medium term from 2022
we have set ourselves a target to deliver
4%–6% organic growth on the enlarged
category (excluding disinfection).
Attractive and
growing market
Our Hygiene businesses operate in an
attractive industry offering strong growth
opportunities as expectations around
standards of hygiene have increased post
pandemic. Like Pest Control, Hygiene is an
essential, non-discretionary business and
webelieve its medium-term opportunities
areenhanced by rising demand for global
hygiene services.
Competitors
There are many routes to satisfy washroom
hygiene needs with competitors providing
awide range of supply solutions. Regional,
full-service companies provide service
solutions, either direct or via cleaning
companies/facility management,
differentiating on services, products and
coverage. In several markets, washroom
requirements can be met by facilities
management or cleaning companies directly.
Global market drivers
Brand trust and expertise
In this unprecedented period of
extreme uncertainty and conflicting
information, customers seek greater
reassurance than ever from service
providers, with brand trust being
paramount.
Sustainability
In addition to the need to offer
effective COVID-19 protection and
significantly enhanced hygiene
solutions, there is also a related and
underpinning requirement to ensure
that all solutions are delivered in the
most sustainable way possible.
Air hygiene
Increased sensitivities around air
filtering, air purification and air
quality monitoring driven by stricter
regulations and standards are
presenting significant new
opportunities for air hygiene.
Legislation
The speed of onset and global
spread of COVID-19 led to significant
local government and agency
response, along with rapidly
evolving guidelines. A period of
legislative changes is now expected.
Surface hygiene
COVID-19 has led to an explosion
ofsensitivity around microbe
transmission points and surfaces
being carriers of risk. This has led to
wide-scale surface disinfection and
significantly enhanced cleaning
regimes and protocols.
Social distancing
This is expected to continue in many
countries for the foreseeable future,
driving degrees of sustained or
permanent behavioural change.
Hand hygiene
Good hand hygiene has been
shown as one of the most basic yet
powerful ways in which individuals
can protect themselves from
COVID-19 and other similar
diseases.
Rentokil Initial plc
Annual Report 2021
41
Corporate Governance Financial Statements Other InformationStrategic Report
COVID-19 and its impact on
global hygiene standards
Since the start of the COVID-19 crisis, we
haveseen elevated standards for health and
hygiene, particularly in the workplace, and,
asa result, hygiene has arguably become one
of the most important business categories in
the world. Industry commentators believe this
heightened focus will not be a temporary blip,
rather a long-term change which will create
ongoing market opportunities from which
ourbusiness can benefit.
In addition to structural growth trends which
will support long-term growth of our Hygiene
category and which are essential for the
continued success and growth of our
business, our own commissioned research
study of 20,000 respondents in 20 key
markets (see page 43) has also identified new
trends, attitudes and behaviours towards
hygiene which are being compounded by
pandemic-driven factors.
Hygiene markets
Initial has a No.1 position in 22 countries,
aNo.2 position in 13, and leading regional
market positions in the Pacific, Asia, and
Caribbean and the UK. Characteristics of
theglobal hygiene market differ by country,
with regional variances based on social and
legislative standards. For example, in countries
such as the UK and Australia, where there
istight legislation and very high standards
surrounding the disposal of sanitary waste,
thefeminine hygiene market is particularly
important.
In Asia, air care and air quality are of
paramount importance to consumers, driving
high growth in this sector. In Europe, there is
astrong focus on textiles; for example, roller
towels and floor care, such as dust mats.
Indeveloping countries around the world,
where there is growing awareness concerning
sanitation, public health and hand wash
support is a key market sector.
Customers and
service culture
Our key Hygiene customer segments are
manufacturing, facilities management, offices
and administrative, hospitality, retail and
education. We achieve high customer
satisfaction levels and believe this is a key
competitive advantage. We have account
management processes in place for
contacting customers at least annually to
confirm service requirements are being met.
We use feedback from our Customer Voice
Counts surveys to improve service levels and
every detractor score is followed up with a call
from an account or branch manager to discuss
service improvements.
Overview of
performance in2021
Our core Hygiene business (excluding
disinfection) delivered a good performance
in2021, returning to organic growth and aided
by return to more normalised levels of regular
service provision.
As with Pest Control, our operations in
Australia, New Zealand, Indonesia and
Malaysia however, were held back by
significant challenges associated with ongoing
lockdowns and movement restrictions.
We have acquired three small Hygiene
businesses this year, with annualised revenues
in the year prior to acquisition of £2.0m. Our
M&A team continues to build a good pipeline
of high-quality hygiene assets, worth some
£80m.
In 2021, our core Hygiene business, excluding
disinfection, delivered an 8.2% increase in
Ongoing Revenue to £555.6m, 7.4% organic,
reflecting good performances in the UK,
Europe and Latin America.
The rapid deployment of disinfection services
across 60 countries enabled the Company to
generate £221.4m of revenues in 2020.
Customers who used our services (such as
offices, shops, schools, airports, emergency
vehicles and public transport) typically did so
to remain open during lockdown conditions.
As lockdown conditions have generally
reduced around the world and our core
services have returned, customer
requirements for emergency disinfection
services have significantly decreased and
therefore, revenue from disinfection services
has tapered in line with our expectations to
£117.8m (H1: £98.3m, H2: £19.5m), a decline of
£103.6m on 2020. We anticipate disinfection
revenues in 2022 of around £10m to £20m,
as services further unwind.
Hygiene Ongoing Revenue and Ongoing
Operating Profit fell by 8.4% and 18.3%
respectively in 2021. Net Operating Margins
also fell by 250 basis points to 21.0%,
reflecting reduced revenues from disinfection.
Regional performance
Hygiene operates across all five regions with
Ongoing Revenue in Europe accounting for
33% and UK and Sub-Saharan Africa 31%.
Pacific, Asia and North America are the
smallest and emerging regions by revenue,
accounting for 14%, 12% and 10% respectively.
In North America, Hygiene sales focus is now
directed primarily towards air disinfection,
including our VIRUSKILLER
TM
product.
Our overall performance in 2021 has also
beenpositively impacted by the recovery
ofour other commercial businesses: Brand
Standards, which was significantly impacted
in2020 by temporary customer closures in
thequick serve restaurant sector, returned
tomore regular trading with c.95% of
customers by the end of 2021.
Our Hygiene operations in Europe (excluding
disinfection) grew by 4.2% in 2021 with most
growth generated in H1 as we lapped the
impact from lockdowns in H1 2020. Sales
campaigns during the year have focused on
customers’ return to work, school and venues
and we have also expanded our product and
service range to include air hygiene. Full
recovery of our Hygiene operations remains
dependent on employee return to the office
and higher tourism, particularly in southern
Europe.
In 2021, we developed and launched our
Hygiene 360 proposition, which expands
ourservice offering outside of the traditional
washroom environment to include surface
andair hygiene solutions as a response to the
pandemic. To support its roll-out, we have
trained 100% of our Hygiene sales colleagues
to a single, consistent standard that enables
them to speak as experts in building a hygiene
offering with customers. To complement this,
we also developed, tested and commenced
deployment of our Hygiene Inspection Tool,
which guides sales people through a
professional site hygiene survey and provides
our customers with insight into the current
status of the hygiene programmes on their
premises.
Our UK Hygiene businesses performed
strongly throughout the year, achieving record
levels of revenue growth in our Medical
operations (up £21.3m) and record levels
ofprofitability in our Washroom Hygiene
business (up £24.2m), driven by strong organic
performances and the full-year performance
ofthe integrated Cannon Hygiene business.
In the Pacific, core service provision is
recovering well, although H2 saw some
weakening in service levels due to temporary
site closures. Portfolio growth has been
strong, however, with customers responding
positively to our Air Hygiene proposition (a
major source of growth) and our hand sanitiser
portfolio has largely been maintained.
In Asia, Hygiene continued to feel the impact
of the ongoing pandemic and lockdowns in
2021, with temporary customer suspensions
peaking at 7.9% in August but falling to 2.8%
by the year end as our markets recovered and
our ability to service customers improved.
Emergency disinfection services were broadly
similar in H1 and H2, providing a hedge to
disruption of regular core service provision.
Following the launch of VIRUSKILLER
TM
in H1,
the region has made good progress with its air
hygiene service offering, generating £1.6m in
revenues across Malaysia, Hong Kong,
Singapore and Indonesia.
Hygiene
42
Rentokil Initial plc
Annual Report 2021
Capitalising on an evolving
hygiene landscape
Our success in growing our Hygiene category
in a post-COVID world will be dependent on:
A being the experts in hygiene and wellbeing
– through service, product innovation and
sales capability;
A having a compelling proposition to capture
growth in each of the three key areas of
washroom, premises and environment;
A creating differentiated propositions, such
asour Rapid range of hygiene products;
A targeting sales growth in sectors less
impacted by the pandemic (e.g. logistics,
food, health and education);
A geographic expansion through organic
growth and M&A;
A replicating the proven, repeatable, low-cost
operating model that is Pest Control;
A investing in our brand in order to be
recognised in all our markets as the global
leader;
A leading sustainable provision of hygiene
and wellbeing services; and
A investing in digital infrastructure to capture
future opportunities.
Growth opportunities
We see four main opportunities for growth
forour Hygiene category. They are:
A Inside the Washroom – which are high-risk
areas for COVID-19 and other viruses.
Weoffer a complete range of innovative
products and services for creating safer
washrooms, particularly no-touch, to avoid
cross-infection.
A Digital leadership – we continue to develop
digital products for enhanced services
combined with greater reporting and insight
through customer portals and apps.
A International expansion – we plan to enter
new markets in both established and
Emerging markets.
A Outside the Washroom – expanding into
additional hand hygiene products and
services, surface hygiene and disinfection
services.
WE ARE...
66%
of people say they have
changed their hygiene
behaviours
71%
of respondents are now
more fearful of the spread
of germs via the surfaces
they touch
84%
of people who work think
it is important that their
employer prioritises
creating a safe and hygienic
workplace
72%
of people, when thinking
about indoor air quality, are
more concerned about the
spread of germs via the air
they breathe
47%
of people would leave
a public venue if it did
not appear to have
good hygiene measures
in place
Expanding outside
the washroom
The Global Hygiene Reset
In 2021, we commissioned a major survey in 20 key markets, with a total
of 20,000 respondents, to examine the impact of the COVID-19
pandemic on attitudes and behaviours towards hygiene and how it has
impacted on mental health and wellbeing, employee and organisational
expectations aswell as hygiene awareness.
Our research findings explored how people worldwide have adopted
stringent hygiene practices as a result ofthe pandemic to keep
themselves and others safe. Notonly have attitudes shifted, but so
have expectations. The benchmark of ‘good’ hygiene is far higher than
itused to be, and is expected to continue.
Please scan me!
The pandemic has profoundly changed attitudes and behaviours
Rentokil Initial plc
Annual Report 2021
43
Corporate Governance Financial Statements Other InformationStrategic Report
Our Hygiene & Wellbeing strategy
Our strategy is to deliver continued growth through a combination of strong operational focus and targeted
M&A to build city density. Central to this is the delivery of excellent customer service, product innovation,
service line extensions and improvements to productivity through digital products and applications.
Focus on operational
execution – build margins
through postcode and
product density.
With typical growth levels at c.GDP, our focus in our
core Hygiene business has been on operational
excellence. We aim to achieve this through the
commitment of our people and the respect we have
earned over the years for our brand and reputation.
Creating a high-quality customer service culture
andoffering the best product ranges and delivering
our services, on time and in full, is core to our value
proposition.
Margins are driven through postcode density (the
number of customers on a route), product density
(thenumber of products/service lines in each
customer premises), as well as shared overheads
withPest Control (infrastructure and back office)
andM&A (building further geographic density).
Analysis of our current footprint supported by the
right sales incentives and selling methods will drive
behaviours that will lead to improved density.
Offer a complete product
range to avoid cross-
infection Inside the
Washroom.
Washrooms are high-risk areas for viruses: they are
small spaces, with smooth surfaces and high levels
oftraffic. Our services Inside the Washroom provide
arange of innovative products for creating safer
environments, including hand hygiene (soaps and
dryers), air care (purification and scenting), in-cubicle
(feminine hygiene units), no-touch products and
digital hygiene services.
Customer sectors range from public sector (schools,
government buildings) and facilities management
through to hotels, bars and restaurants, industrials
and retail.
At our Capital Markets Day in 2021 we stated that
c.50% of our new 4%–6% medium-term organic
growth target would be delivered through the Inside
the Washroom sector.
Take our Hygiene services
everywhere – expanding
Outside the Washroom.
From a relatively low interest sector, hygiene is
nowone of the world’s most important, presenting
opportunities for us to expand Outside the Washroom
into high-growth areas.
Premises Hygiene – The COVID-19 pandemic is
creating greater customer need for premises hygiene
solutions as well as evolving societal expectations.
We provide products in multiple environments,
including offices, kitchens and reception areas,
leveraging our expertise into air purification,
disinfection, mats, hand sanitisers and dispensers,
and surface hygiene.
There is a growing requirement for mature markets
toimprove occupant experience in Enhanced
Environments (see page 46). Opportunities include
increasing global awareness of the health impact of
poor indoor air quality – exploiting opportunities such
as premium scenting; increasing regulation and focus
on sustainable waste management – leveraging our
core expertise for fast deployment into new markets
in response to the waste management requirement
created by the pandemic; and demand for healthy
buildings – focusing on plants, biophilic design and
large projects expertise to enhance public spaces.
Harness the digital
opportunity, developing
digital innovations to
address customer needs
and increase productivity.
The global smart washrooms market is estimated to
deliver an 11.5% CAGR to 2027, reaching a value of
some $6.5bn (source: Grand View Research, August
2020). We continue to develop digital products for
enhanced services combined with greater reporting
and insight. We believe the pandemic will provide a
springboard for increased digital hygiene services
and are taking our digital expertise from Pest Control
and expanding into Hygiene.
Increased regulations and the threat of fines and
reputational damage may prompt early take-up of
digital applications in hygiene, as it has done in pest
control. Our connected hygiene solutions currently
comprise digital taps and soap dispensers, hand wash
and footfall monitoring and air care. Our myInitial
online reporting platform provides transparency of
service, including signature capture, service history
and details, dates of visits and reporting facilities.
Geographic expansion
– through organic actions.
Our core Hygiene services currently operate in
67countries and we aim to increase the reach and
density of our footprint in new markets through
leveraging our brand and expertise, starting with core
hygiene service provision Inside the Washroom, and
then extending into Premises Hygiene and Enhanced
Environments.
Our strategy is to expand in five key areas – North &
Latin America, Europe, Middle East and North Africa,
building on our existing customer relationships and
routes in Pest Control and targeting North America,
using our existing Ambius and Pest Control
businesses.
Geographic expansion –
through targeted,
city-based M&A to build
density and grow profits.
Our M&A focus in Hygiene & Wellbeing is on building
city density and supporting extension areas that we
have defined as part of our growth plans. M&A in
Hygiene & Wellbeing has similar characteristics and
the same disciplined approach as Pest Control and
creates value through city-based density building.
The economics of hygiene M&A are generally better,
asset prices are cheaper than pest control and
competition for targets is less fierce.
We have the necessary expertise and systems in
place and a proven ability to drive margins through
density building. Momentum is growing as we build
asignificant global M&A pipeline, now with c.80
attractive targets. We will also be open to the
potential for larger transactions, should these become
available. From 2022, we will target £25m+ revenues
p.a. over the next five years, targeting IRR at
15%–20%.
Key strategic themes
Hygiene
44
Rentokil Initial plc
Annual Report 2021
WE ARE...
Our smartphone field service app,
ServiceTrak, also improves productivity and
leads to better colleague retention, higher
gross margins achieved through greater
service productivity and cost savings, and
more professional service delivery. Across 33
countries (2020: 30), our technicians used the
app to record 7.3 million service visits – for
example, start time, services performed,
customer recommendations, customer
signatures and end time. New for this year, we
have received over 1.63 million responses to
our digital customer satisfaction surveys, with
an average score of 4.88 out of 5 in Hygiene.
International expansion
We believe Hygiene has a strong growth
opportunity through M&A, replicating the
successful Pest Control model, which has
similar characteristics, and we have set
ourselves a target of generating £25m+
revenues per annum.
Inside the Washroom
Washrooms are potentially higher-risk areas
for COVID-19 and other viruses and no-touch
washrooms are the most effective way to
avoid cross-contamination, particularly within
cubicle settings. Toilet paper dispensers that
seal away paper until use, no-touch feminine
hygiene units and toilet seat cleaners all
prevent cross-contamination. Our Signature
Range of washroom products have
antimicrobial surfaces which helps reduce
cross-contamination, as do our no touch
auto-lift lids on bins and auto dispense of
paper towels and soaps. Air care quality is
alsoan important indicator of washroom
cleanliness, with air purification units providing
an ongoing method of removing potentially
harmful pathogens from the air. The greater
awareness of cubicle and washroom hygiene
is providing more opportunities for new
products and services for inside washrooms;
expanding into new services for existing
customers (e.g. Air Hygiene and Digital
Washrooms Hygiene); new sales channels
forexisting Washroom customers through
theuse of technology; satisfying demand for
new more sustainable services; and range
extensions. We are launching a new
Rapid>Smarthygiene high-end range of
washroom products in 2022 and further
innovation is planned in air purification for the
washroom.
Digital leadership
The COVID-19 pandemic has provided a
springboard for increased digital hygiene
services and we are taking our digital
expertise from Pest Control and expanding
itinto Hygiene. Increased standards and
regulations and the threat of fines and
reputational damage drove early take-up of
digital pest control services and we anticipate
the same trend will occur within Hygiene.
Digital products
In 2020, we launched our first range of digital
no-touch products, which includes taps, soap
dispensers, hand wash monitoring and cubicle
sanitisers. Digital monitoring of consumables
enables more efficient washroom operations
at lower cost, with a reduced environmental
impact and offering a better guest experience.
We are expanding our Rapid>Smart Hygiene
range into new customers and regions, with
customer trials currently under way in offices,
retail malls, airports, leisure facilities and
tourist attractions across five countries.
Digital sales and service tools
Our digital sales and service tools are also
increasing productivity and are being used to
build customer awareness of Initial’s multiple
product offerings. Our online Hygiene
customer portal, myInitial, is being developed
to highlight the full spectrum of Hygiene
solutions on its home page and is now used
in18 countries. In addition, we now track sales
leads per driver on a monthly basis and the
current average across the Hygiene category
is 1.89 leads per technician per month, up from
1.29 last year, with UK colleagues performing
particularly well, averaging 4.12 leads.
Our M&A focus in Hygiene is on building our
density across our cities and supporting
extension areas that we have defined as part
of our growth plans, including air care, surface
hygiene, safety and digital monitoring. The
Hygiene economics are generally better –
prices and competition for assets are lower
and we have a proven ability to drive margins
through density building.
While the pandemic has slowed M&A progress
again this year, we acquired four specialist
hygiene businesses in Australia and the USA.
The Boecker acquisition in the Middle East in
2021 has provided a further platform for new
hygiene service market growth with
operations in the Middle East including
Lebanon and United Arab Emirates.
Giving customers
information at
theirfingertips
myInitial is our bigger and better customer portal, enabling customers
in 18 countries to self-serve, accessing service visit reports and carrying
out a contract overview; and provides early warning signs ofissues,
logging of service requests and bespoke reporting.
It is making it easier for customers to do business with us, should
benefit customer retention and frees up people resource to focus
onthe right things.
Please scan me!
Rentokil Initial plc
Annual Report 2021
45
Corporate Governance Financial Statements Other InformationStrategic Report
WE ARE...
Outside the Washroom
From a relatively low interest sector, hygiene
has now become one of the world’s most
important, presenting opportunities for us
toexpand outside of the washroom into
high-growth areas including air care, air
enhancement and purification, sustainable
waste management, products and expertise
to enhance public spaces and buildings,
route-based service extensions (such as first
aid) and digital products and applications.
Expanding Hygiene into new areas such as
indoor air and surface hygiene for multiple
locations from offices to retail; specialist
hygiene services (such as medical waste
removal); new service lines; and the alignment
of hygiene with the importance of wellbeing.
Air care
Air care is a particular focus for the Group.
The global air care market is estimated to
reach revenues of more than $90bn by
2025and is expected to deliver a 42%
CAGRto 2025 (source: Arizton Advisory and
Intelligence, July 2020). There is no safe level
of airborne pollutants and, according to the
World Heath Organization, 68% of all diseases
are related to air pollution. Evidence showed
that COVID-19 is transmitted predominantly
through the air – by people talking and
breathing out large droplets and smaller
particles called aerosols. Therefore, efforts
areincreasing to prevent transmission by
improving ventilation or installing rigorously
tested air purifiers. Our current air care
product range features air purification, air
sterilisation and air scenting products. In 2020,
we launched two important new air filtration
products: Inspire Air72 and VIRUSKILLER
TM
AirPurifier. When independently tested
against Coronavirus DF2 (a surrogate for
Coronavirus), Adenovirus, Influenza and Polio,
VIRUSKILLER
TM
was found to kill 99.9999% of
viruses on a single air pass. To date we have
installed over 13,800 air purification units into
customer sites across 40 countries, generating
c.£9m of revenues.
We have been actively marketing
VIRUSKILLER
TM
across all regions in 2021, and
are seeing rising levels of customer interest
and particularly encouraging progress in Italy,
Spain, Hong Kong, Singapore and the UK.
VIRUSKILLER
TM
is now sold to a range of
customers including car showrooms, hotels,
offices, venues and UK embassies. Initial
Hygiene was appointed Specialist Hygiene
Services Partner of London’s The O2 arena,
with the installation of VIRUSKILLER
TM
central
to the agreement, and we successfully
installed the units in time for this year’s BRIT
Awards. As part of the agreement, we also
installed a range of washroom products and
services for visitors to the venue.
Enhanced Environments
The impact of the global pandemic has
catalysed a shift in global mindset where
health is a priority – not just avoiding being
sick, but proactively being well in a holistic
sense. The global corporate wellness market
is set to grow at 7% CAGR to 2028 (source:
Grandview research 2021) as people search
for a healthier lifestyle across work, home
andleisure. Our Enhanced Environments
businesses, (the non-washroom part of the
new Hygiene & Wellbeing category) improve
the occupant experience throughout
premises. They bring together Ambius plants
and scenting, Dental Hygiene and Cleanroom
services (which moved from Protect &
Enhance category on 1January 2022). Growth
opportunities include increased awareness of
the health impact of poor air quality, increasing
regulation and focus on sustainable waste
management and demand for healthy
buildings.
Outlook
Our newly enlarged Hygiene & Wellbeing
category has made a good start to the year
and we are seeing continuing momentum
incore service provision in our markets.
Although we will lap strong disinfection
revenues in H1 and will have to contend
withongoing macro-economic uncertainty,
weexpect Hygiene & Wellbeing to deliver
good progress in the coming year.
We have made good progress in building
a pipeline of attractive Hygiene acquisition
opportunities and remain committed
toacquiring annual revenues of £25m+
from2022.
Hygiene
Advanced air safety
Providing spectator safety at the Australian Open
As the Official Hygiene Partner of the Australian Open 2022,
Rentokil Initial installed 70 VIRUSKILLER
TM
air purifiers in
indoor spaces and 800 hand sanitisers and antibacterial wipe
stations around the tennis precinct. The best-in-class
VIRUSKILLER
TM
air purification technology deployed to
provider cleaner air for patrons is shown to kill 99.9999% of
Coronavirus in the air
1
and is an Australian-first for a major
international sporting event. More than just an air purifier,
VIRUSKILLER
TM
is also a filtration and decontamination device
that safely disinfects indoor air, providing real-time protection
from airborne viruses and bacteria.
2
1. When independently tested against Coronavirus DF2
(a surrogate for Coronavirus), Adenovirus, Influenza and Polio, the unit
was found to kill 99.9999% of viruses on a single air pass.
2. When independently tested against reference bacteria (Klebsiella
pneumoniae, Mycobacterium tuberculosis, Staphylococcus aureus subsp.
Aureus, Streptococcus pneumoniae, Streptococcus pyogenes, Escherichia coli),
the unit was found to kill 99.9999% of bacteria on asingle air pass.
46
Rentokil Initial plc
Annual Report 2021
Protect &
Enhance
The four businesses which were included in our Protect &
Enhance category in 2021 are Ambius (Global), Property Care
(UK), Dental Services (Germany and Sweden) and Workwear
(France). Ambius is the world’s leading commercial provider of
plants and scenting. The business installs and services flower
displays, replica foliage, Christmas decorations and ambient
scenting. It has No.1 or No.2 positions in 11 of its 17 countries.
OurUK Property Care business provides damp proofing,
property conservation, woodworm treatment and wood rot
treatment services. Our France Workwear business has a No.2
position in France and specialises in the supply and maintenance
of garments, such as workwear and PPE. These businesses within
Protect & Enhance have a high exposure to the food service and
hotel industries – for which we supply interior plants, ambient
scenting and workwear. Our Dental Services business operates
principally from two main hubs and specialises in the recycling
and disposal of dental waste.
Category restructure
In September 2021, we announced that in response to the
increasing importance of hygiene and wellbeing services, we are
expanding our Hygiene category with effect from 1 January 2022.
The enlarged category, called Hygiene & Wellbeing, comprises
our current Hygiene operations together with our Ambius,
Dental Hygiene and Cleanroom services operations. Property
Care will move to Pest Control and France Workwear will remain
astandalone business. Our Protect & Enhance category will
cease to be managed and reported as a separate category.
Ongoing Revenue at CER
£365.6m +5.6%
Ongoing Operating Profit at CER
£43.2m +36.8%
Net Operating Margin at CER
11.8% +270bps
2021 365.6
2020
2019
2018
2017
346.2
394.1
379.8
378.1
2021 43.2
2020
2019
2018
2017
31.6
46.0
44.1
40.3
2021 11.8
2020
2019
2018
2017
9.1
11.7
11.6
10.7
Rentokil Initial plc
Annual Report 2021
47
Corporate Governance Financial Statements Other InformationStrategic Report
Workwear
Approximately half of category revenue
isgenerated from our France Workwear
business, which specialises primarily in the
supply and laundering of workwear, uniforms,
cleanroom garments and personal protective
wear. The business generated Ongoing
Revenue growth of 1.9% to £178.1m, of which
1.9% was organic growth, reversing the
declines it experienced in 2020 caused
bytheimpact of COVID-19 lockdowns.
In France, lockdowns began to ease in May
2021 with fewer restrictions on restaurants
andas a result, we have seen an improving
performance from our Workwear business.
While this is encouraging, as-used volumes
(where the customer only pays for specific
garments laundered) are still behind
pre-COVID levels, impacted by ongoing
temporary customer suspensions in H1 and
reduced tourism in France in H2.
As previously noted, from 1 January 2022
France Workwear will be reported as a
standalone business and will be run separately
from our Hygiene operations in France, which
will now be reported within the new Hygiene &
Wellbeing category.
Overview of performance
in2021
Following a challenging 2020 for Protect &
Enhance, caused by significant disruption
fromthe COVID-19 crisis, 2021 has seen
considerable trading improvement across the
businesses as restrictions were eased across
most of our territories, offices once again
opened up, and the hospitality sector
welcomed back customers.
Our UK Property Care business also benefited
from the buoyant recovery in the residential
housing market which continued throughout
2021 and the partial recovery in the
commercial property sector.
Our Protect & Enhance category represents
11.9% of Group Ongoing Revenue and 7.7% of
Ongoing Operating Profit. In 2021, Ongoing
Revenue and Ongoing Operating Profit
increased by 5.6% and 36.8% respectively,
with all four businesses returning to organic
growth from Q2. Net Operating Margins rose
by 270 basis points to 11.8%.
Ambius
Ambius operates in 17 countries and has No.1
positions in eight of its markets (including in
the US, Canada, Australia and New Zealand).
Its product offering is broadly consistent
across the world and includes interior
landscaping, Christmas decorations and
premium scenting. The US business comprises
c.55% of total Ambius revenues. Key customer
segments are offices, facilities management,
hospitality, food and non-food retail, leisure,
healthcare and education.
Our products and services in Ambius have
astrong link with health and wellbeing, and
service quality, expertise and customer
retention metrics are high. Our strategic focus
is on higher-margin green (living) walls and
premium scenting, expanding and exploiting
international agreements and driving lead
generation through digital applications.
Our Ambius business performed well, growing
contract portfolio strongly in H2 as the
challenge to make office spaces suitably
appealing for employee return stimulated
demand for our products and services.
Operations returned to pre-pandemic trading
levels, delivering growth of 8.5% on the prior
year with Ongoing Revenue and Ongoing
Operating Profit increasing by 7.3% and 83.0%.
This reflects the discretionary nature ofits
products and services during the year.
Property Care
Our Property Care business is based in the
UK. Services include dry rot and woodworm
treatment and damp proofing. We have a
leading position in the industry and have
developed a strong operational capability
withcertified teams undertaking work in
commercial properties and social housing.
Thebusiness has an excellent reputation for
customer service and a loyal customer base.
Trading is directly impacted by the health
ofthe UK property market. The business
performed well in 2021, with revenues
benefiting from strong domestic customer
demand in the UK residential housing market
and signs of recovery in the commercial
property market, and with profits enhanced
bya number of systems, process, productivity
and pricing initiatives implemented in 2020.
While the business is relatively small, it
generated revenues of £24.1m in 2021.
Dental Services
Medentex is headquartered in Germany
andspecialises in the professional and
compliant recycling and disposal of dental
waste. It provides waste separating products
to customers in Germany, Netherlands,
Sweden, Norway, UK and the US. It is a small,
profitable business with revenues of £12.9m.
Protect & Enhance
WE ARE...
Creating award-winning
installations
The 2022 International Plantscape Awards were held in Florida in
January, and the US Ambius team brought home 17 awards, including
four Gold awards for client installations in 2021 in North America. The
awards are the premium industry awards, recognising outstanding
achievements in interior plantscape design, installation, creativity,
renovation and innovation. Ambius are experts in building the right
interior environment for businesses with growing operations in Europe
and North America, South Africa, Australia, New Zealand and Malaysia.
Please scan me!
48
Rentokil Initial plc
Annual Report 2021
Responsible Business
Q&A with Andy Ransom,
Chief Executive
Safety and people start every
management meeting in Rentokil
Initial, so how would you sum up
the progress in 2021?
A
This year we delivered a very high level
ofcolleague safety with a record low Lost
Time Accident rate of 0.38 per 100,000
hours worked and Working Days Lost of
8.71 – both at world-class standards and
this was reflected in the Company receiving
a Gold Award from the Royal Society for the
Prevention of Accidents.
Rentokil Initial is committed to being a
world-class Employer of Choice – attracting,
training and retaining great people from the
widest possible pool of talent.
In 2021, the Company deployed a global
diversity, equality and inclusion upskilling
initiative to 1,000 managers and leaders.
The programme featured two elements:
‘Include’ where sessions focused on how
tofoster an inclusive environment, and
‘Decide’ which focused on bias and how
tomitigate it. Feedback has been very
positive, and this upskilling programme
willroll out further in 2022.
Training colleagues, so that they are able
tobuild their career with us and deliver
abetter performance for customers, is a
very important part of our strategy and our
in-house ‘university’ U+ created more than
500 pieces of training content in the year
and colleagues undertook more than 4.3m
pieces of training content views.
Listening to colleagues is also part of our
culture and in 2021 our Your Voice Counts
A year ago, you announced the
Company’s ambition and plan to
achieve net zero carbon emissions
by 2040. How did year one go?
A
We made good progress in 2021 as we
began to implement our plan. Our eight
workstreams are underway and our country
teams have developed and begun to
execute their plans. We have a multi-local
operating model, and our environmental
ambitions will be delivered through the
same multi-local approach and teams.
Justto give one example, the availability
ofultra-low emission vehicles (ULEVs)
isdifferent by market, but from our
market-by-market analysis we can see
progress being made over the last 12
months in the supply chain, with 177
ULEVsnow in our fleet, particularly in
theUK and parts of Europe. This gives us
more confidence in the delivery of the
vehicle-based element of our 2040 target
(see Our ‘Big Six’ Challenges on page 20).
The most important part of our programme
to getright in 2021 was to engage with our
colleagues about our plan and goals, and
so I was particularly pleased to see the
response in our all-colleague survey that
85% of colleagues agreed that when asked
Are colleagues actively
encouraged to support charities
inRentokil Initial?
A
Yes, absolutely. I find it hugely engaging
toactively support charities – through my
own work with Street League and Malaria
No More UK – and I know colleagues
across the Rentokil Initial world do too.
That’s why we set up Rentokil Initial Cares,
using unclaimed dividends to match those
monies raised by colleagues and to support
charities and those in need in line with our
purpose of protecting people and
enhancing lives.
In 2021, around 2,000 colleagues
participated in a virtual team race, the
Raceto Kigali, to raise funds for malaria
eradication – it was our largest ever charity
event and the response from colleagues
was outstanding. We also supported many
local initiatives by colleagues in our
branches around the world. In addition, we
continue to support charities which protect
biodiversity and rainforests, and promote
public health in Asia (see pages 66 and 67).
I’d like to take this opportunity to thank all
Rentokil Initial colleagues who supported
their communities and charities in 2021.
Andy Ransom
Chief Executive
Putting our purpose into action
For Rentokil Initial, being a responsible and sustainable business means helping
colleagues to have safe and fulfilling work lives, supporting customers by developing
and delivering innovative products and services, and benefiting society and the
environment by acting in the most responsibly eective manner.
survey was completed by a record 91%
ofcolleagues. Scores were compared
withthe pre-pandemic 2019 survey and
showed improvements across many themes
including: Strategic Direction (+4%);
Collaboration (+3%); Line Manager Index
(+3%); and Diversity, Equality and Inclusion
(+3%), while the question about equal
opportunities was scored by colleagues at
10% above the global high-performance
norm of leading companies.
‘The Company is making the right decisions
to ensure we operate sustainably’ and with
just 3% disagreeing.
We remain 100% committed to our net zero
by 2040 target.
Rentokil Initial plc
Annual Report 2021
49
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Independent accreditation
We aim to positively engage and support all independent analysis of our
ESG activities and continue to receive high relative scores and ratings.
Environment
TCFD report see
pages 58 to 65
Service and
innovation for
customers
See pages
55 to 57
Targets
20%
target reduction in
kilogrammes of emissions
per £m of revenues by
2025. Net zero by 2040
Carbon eciency
14.9%
carbon emissions
reduction per £m of
revenue since 2019.
On track to meet target
Waste reduction
10tonnes
ofwaste packaging
removed from six
products including
RADAR units
Recycling
200,000+
Hygiene units refurbished
inFrance and Italy over
four years
Customer satisfaction
45.1
our Group-wide Net
Promoter Score of
customer satisfaction
– up by 7.1 on prior year
Trustpilot score
90%
5-star Trustpilot reviews
for Rentokil and Initial
– with c.12,000 reviews
and over 90% ‘excellent’
Website visitors
15.4%
increase in Pest market
web enquiries in 2021
compared with 2020 and
up 4.5% on total sessions
PestConnect
87,000
units installed in 2021,
a58% increase
Health and safety
0.38
Lost Time Accident Rate
in 2021 (0.39 in 2020)
Training
500+
pieces of training content
created in-house in 2021.
Record U+ usage – 4.3
million content views for
the year (3.2m in 2020)
Board diversity
37.5%
of Board members were
female; 25% of Rentokil
Initial’s Board is ethnically
diverse
Talent pipeline
52%
68,900 applications
through the Careers
Portal, up 52% on 2020.
12,200 vacancies filled.
330+ graduates in 2021
Charitable donations
£361,000
(2020: £184,000),
excludes donations
inkind
Community events
£200,000
raised by 2,000
colleagues in the Race to
Kigali for Malaria
No More UK
Pandemic support
£2.5m
worth of PPE donated to
hospitals in India in 2021
RI Cares donations
supported a wide range
of charities in 2021,
including Angels
Orphanage, Malaria No
More UK and Cool Earth
Dow Jones Sustainability
Index (DJSI)
4% improvement in our score to
69% (65% 2020 & 2019). DJSI
Europe and DJSI World members
Vigeo Eiris (VE)
3rd out of 103 companies in our
sector and 66th in the overall
assessment of all 4,963 companies
Carbon Disclosure Project
Improved positioning to C rating
(2020: D)
MSCI
AA ESG rating maintained
Open Corporation
10th out of their 100 leading
companies listing
ISS ESG
Prime rating (with a decile rank
of1indicating a high relative
ESGperformance) maintained
Sustainalytics
Low ESG Risk rating maintained
Highlights from 2021
Further information
Colleagues
and culture
See pages
51 to 54
Communities
See pages
66 to 69
Responsible business priorities
Our responsible business priorities are aligned with
those of our key stakeholders (see page 30) and
driven by the Chief Executive who has Board
accountability for responsible business delivery,
aswell as engagement with our wider stakeholder
groups.
Further details about our Board engagement can be
found in the section 172(1) statement on page 72 and
in the Corporate Governance Report on page 96.
Our responsible business priorities are: Colleagues
and culture, Service and innovation for customers,
Environment, and Communities. Governance and
transparency also continue to remain central to our
responsible business approach, as set out in the
Corporate Governance Report.
Additional information about ourpractices can be found on our responsible business website: rentokil-initial.com/responsible-delivery
Company policies: rentokil-initial.com/responsible-delivery/policies
Gender Pay Report: rentokil-initial.com/responsible-delivery/gender-pay-gap-report
Modern Slavery Statement: rentokil-initial.com/responsible-delivery/modern-slavery-statement
50
Rentokil Initial plc
Annual Report 2021
O
u
r
v
a
l
u
e
s
S
e
r
v
i
c
e
.
R
e
l
a
t
i
o
n
s
h
i
p
s
.
T
e
a
m
w
o
r
k
.
O
u
r
c
u
l
t
u
r
e
Our purpose
Protecting People.
Enhancing Lives.
A culture of high performance
Colleagues and culture
Rentokil Initial is committed to being a
world-class Employer of Choice. We employ
c.46,000 colleagues in 88 countries – an
increase from c.44,500 in 2020. Over four
years we have increased our headcount by
around 10,000 colleagues (average headcount
basis including agency colleagues).
Our culture themes
Cultural survey scores for 2021
Our culture model
Our culture model includes our
purpose and values, and five core
culture themes.
Customer focused
Firstly, we’re a service
company. We strive to
meet our customers’
needs and our people
go the extra mile to do
so. We work hard to
support our customers
and each other. When
things go wrong, we put
them right, fast.
Commercial
We employ and
incentivise smart people
to help the Company
grow by making good
decisions that benefit
ourcustomers. We
constantly seek out
newopportunities for
growth and ways to
workmore effectively.
Diverse
We want our workforce
to reflect the diverse
customers we serve.
Wevalue everyone’s
talents and abilities,
andstrive to attract,
recruit and retain the
best people from the
widest possible pool
oftalent.
Down to earth
We don’t like big egos.
People who succeed
withus are friendly,
comfortable in their own
skin, straightforward,
seek to improve, with
practical ideas and
experiences, and they
acknowledge the
contribution of others.
Innovative
We use the latest
advancements to build
aninnovation pipeline
that sets us apart from
the competition.
Weembrace digital
technologies that help
create new products and
make us moreefficient.
We measure our culture independently
within our all-colleague survey which takes
place every two years. Each of the five
cultural themes (outlined below) has
questions aligned, measured and an overall
score obtained which we monitor over time.
This was measured in 2017, 2019 and 2021
– providing insight into how the Company’s
culture has developed over time. Despite the
global pandemic, the scores for each of the
2021 culture survey
five themes remain strong – all within the 80%
to 90% score range. The strongest cultural
characteristic is ‘Diverse’ with a score of 86%
(see below).
Finally, we take an average of 12 core
questions to provide a Core Culture Index
score. The overall Core Culture Index score
for2021 was 81% (+1% versus 2019 and +2%
versus 2017) showing encouraging
survey-on-survey improvements.
Underpinning everything we do is our ‘One
Rentokil Initial’ culture. We have a one team
mentality with a common purpose and set of
values, focused on delivering a great customer
experience. As you can see below, our culture
is characterised as customer focused,
commercial, diverse, down to earth and
innovative.
Details of how the Board of Directors monitors
and assesses culture can be found in the
Corporate Governance Report onpage 81.
81%
The overall Core Culture
Index score for 2021
80% 81% 86% 80% 83%
Rentokil Initial plc
Annual Report 2021
51
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Nothing is more important in Rentokil Initial
than ensuring everyone goes home safe at the
end of their working day. Health and safety
(H&S) is the first item on the agenda at every
management meeting including the Executive
Leadership Team and Board meetings.
Our safety performance has improved
consistently – with our LTA rate improving from
2.06 in 2008 to 0.38 in 2021 – the lowest LTA
rate ever achieved by the Group.
Listening to the opinions of our colleagues will
always be an important part of our culture.
In 2021, we undertook Your Voice Counts
(YVC), a global, confidential survey providing
every colleague with the opportunity to give
feedback on workplace culture, leadership,
customer focus, development and line
manager performance.
With a record high response rate of 91%,
wemaintained high levels of colleague
engagement (80%) and colleague enablement
(83%), and 25 questions saw improvements in
their scores over pre-pandemic 2019 levels.
Strong improvements were made with
colleagues feeling informed about news
concerning the Company and the Company’s
overall strategic direction (both by +4%). We
were particularly proud to note our scores for
equal opportunities scored 10% higher than
the global high-performance norm of leading
companies. Areas of focus moving forward
include further recognition and greater
coaching by managers.
More than 3,000 senior leaders and local
managers received a dedicated report
toengage their teams with comparisons
toglobaland country norms, and
survey-on-survey trend and to take actions.
Our key health and safety initiatives in 2021
included:
A
Reviewing all Group Safety, Health and
Environment (SHE) policies, consolidating
information and creating an H&S policy
framework, including:
H&S policy statement
H&S management standard
H&S operational standards
H&S guidance documents
Regional/Country H&S management
systems
2021 results
A
Company has a clear sense of direction: +4%
A
My manager keeps me informed: +4%
A
Tools and equipment to do my job well: +4%
A
Collaboration: +3%
A
Line Manager Index: +3%
A
Treated with respect as an individual: +3%
My manager provides clear and
regular feedback on my
performance
My manager is good at
recognising my performance
when I do a good job
My manager coaches me in my
development
2015
62
69
74
70
68
75
71
73
78
79
76
75
2017 2019 2021
A
Site Risk Assessment (SRA) app: live now
and being rolled out across the Group.
2.2 million SRAs were completed in the
app in 2021.
The safety performance targets we set at the
end of the previous year were achieved in
2021 in relation to Lost Time Accidents and
was narrowly missed in relation to Working
Days Lost. Both maintained their world-class
standards. Regrettably, we had four non-work
related fatalities across the Group: three road
traffic accidents and one heart attack.
Key Performance Indicators 2021 2020 2019 2018 2017
Lost Time Accidents (LTA)¹ 0.38 0.39 0.53 0.63 0.58
Working Days Lost (WDL)² 8.71 8.46 10.99 14.77 11.65
1. The LTA rate is calculated as the number of Lost Time Accidents (injuries and illnesses) per 100,000 hours worked.
2. The WDL rate is calculated as the number of working days that colleagues could not work because ofLost Time Accidents (injuries and illnesses) per 100,000
hours worked.
Keeping our colleagues safe
Your Voice Counts
Key line manager behaviours over time
In 2015, “coaching from
my manager” scored 62.
It is now 73.
2008
LTA r
ate: 2.06
WDL rate: 50.84
2021
LTA r
ate: 0.38
WDL rate: 8.71
2014
Our LTA rate is <1
for the first time!
Note: all scores as versus YVC survey in 2019.
52
Rentokil Initial plc
Annual Report 2021
Diversity, equality and inclusion
Rentokil Initial is a diverse organisation by its
nature, operating in 88 countries and with
more than 40 languages.
We strive to ensure that our local businesses
reflect the countries, markets and
communities in which they operate and to
create an environment where everyone’s view
is heard, everyone’s contribution matters, and
everyone has equal opportunities to succeed.
Our new workplace strategy through to 2024
places even greater emphasis on wider
diversity where everyone, regardless of
gender identity, race, colour, nationality,
age,sexual orientation, physical ability or
background, can build a long-term career
withthe Company and reach their potential.
In support of this strategy, this year the
Company deployed a global diversity, equality
and inclusion (DE&I) upskilling initiative to
managers and leaders across the Company.
The programme featured two elements:
‘Include’, where sessions focused on how to
foster an inclusive environment, and ‘Decide’,
which focused on bias and how to mitigate it.
In 2021, c.1,000 leaders engaged in this
programme and, with highly positive feedback,
plans are in place to roll this out further in
2022, with the intention to ensure all line
managers have received the training.
In June 2021, we reviewed and updated our
Group Diversity, Equality & Inclusion Policy to
further strengthen our focus on equality. This
policy is published internally on our intranet
and externally on the Rentokil Initial corporate
website.
In addition to the new upskilling programme, our first
dedicated diversity survey was carried out in 2021
among 1,800 managers.
Key questions at or above the high-performance (HP)
company norm included:
A
My manager treats all colleagues fairly, regardless of
their backgrounds: 11% above HP norm
A
I am given opportunities to grow and develop inmy
current role: 8% above HP norm
A
I feel like I really belong at this company: 6%above
HPnorm
A
My opinions matter: 4% above HP norm
A
I am treated with respect as an individual: in line with
the HP norm at 91%
Age: Across most questions, scores were higher byage.
The average score for under 30s was 75% favourable
versus 87% favourable for colleagues intheir 50s.
Social mobility: Whether colleagues had been to
university or not, there were very similar scores for the
questions around ‘opportunities to grow and develop in
my current role’ and ‘equal opportunities’. The average
ofall questions for those with or without auniversity
education showed just 1% difference.
Fairness: 97% of colleagues responded favourably
orneutrally to the question ‘my manager treats all
colleagues fairly, regardless of their backgrounds’.
44th
Rentokil Initial was placed
44th in the first FTSE Women
Leaders Review in the FTSE
100 rankings for women on
boards and senior leadership
20%
of our senior leaders are
defined or self-identify as
people of colour which is
consistent with last year
(asat 31 December 2021)
29%
of our senior leaders
(Executive Leadership
Teamand their directreports)
are women(2020: 30%)
96%
in our 2021 Your Voice
Counts survey, stated
thatthey do not feel
wepreclude men and
women from having
equalopportunities to
succeed in Rentokil Initial
11,047
(24%)
colleagues are female
34,984
(76%)
colleagues are male
37.5%
of Board Directors are
female (50% in 2020)
DE&I in Rentokil Initial
Diversity survey
Rentokil Initial plc
Annual Report 2021
53
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
In 2021, our U+ courses were viewed
4.3 million times (3.2 million in 2020, a 34%
increase), and more than 500 new pieces
of learning content (videos, courses, etc.)
were created by our in-house content
development team.
This equates to an average of 107 content
views per colleague throughout 2021, up from
79 views per colleague in 2020 (an increase
of26%) with each colleague completing a
U+training course on average every two
working days during 2021.
Our investment in talent development is
showing strong returns, both for individuals
and the Company overall, with 82% of the
participants in our global talent pools prior
to2021 having been promoted to more
seniorroles since 2017. Our 2021 talent
poolsalready have a promotion rate of
48%despite participants only being in
theprogramme for less than a year.
With the outbreak of the COVID-19 pandemic
creating many challenges for our colleagues
and their families, in 2020 we established
aColleague Support Fund of c.£450,000
toaid those within the Group in countries
where government support schemes were
insufficient for the severe difficulties they
faced.
This was created using funds from RI Cares
together with a voluntary salary waiver by the
Chief Executive of 65% of his Q2 2020 salary
(having already waived 35% as part of the
Company’s response to the pandemic),
together with salary or Director’s fee waivers
by several of the Board and a number of senior
managers.
In 2021, the fund continued to be used to
support colleagues, principally in India,
Indonesia and Vietnam, taking the total
fundscommitted to around £375,000.
In 2021, the Company also shipped PPE
worthc.£2.5m to India to support the
COVID-19 relief effort – including coveralls,
face masks, gloves, hand soap and sanitiser
with dispensers. The PPE was sent to around
500 hospitals across the country.
Investing in our colleagues’ careers
Colleague Support Fund
The UK and India have always shared a very
close bond and benefited from enduring
economic cooperation. The global challenge of
the pandemic must be tackled on a united front if
we are ultimately going to control the spread of
this virus. It’s been so inspiring to see Rentokil
Initial immediately come forward to supply critical
PPE and sanitiser and help the people of India
through this unprecedented crisis.
Lord Bilimoria
CBI President
In 2021, we also took part in the UK
government’s Kickstart Scheme in our
corporate head office. The Kickstart Scheme is
aimed at people aged 16–24 who are currently
claiming Universal Credit and are at risk of
long-term unemployment. We had 12 people
join us for work experience as part of this
scheme. 50% of those who took part were
offered either permanent or contract roles
with Rentokil Initial on completing the scheme,
and a further 25% were able to find permanent
employment in other organisations as a result
of their placement and job experience with
Rentokil Initial.
During 2021, we have continued to provide
employment and development opportunities
to young people, employing over 350
apprentices and over 330 graduates across
our UK business.
4.3million
Views of U+ content in 2021,
up by 34%
£375,000
Funds used to support
colleagues to date, in particular
need of support due to the
pandemic
54
Rentokil Initial plc
Annual Report 2021
Innovation is an integral part of our culture.
New projects are mainly developed in-house,
either by our Science & Innovation team or as
a result of insights gained from our businesses
around the world. Other projects are initiated
as a collaboration with external partners
whobring their own specialised expertise
toaproject. Our partners engage with our
scientific and technical teams to turn ideas
intonew and exciting solutions to meet
customer needs now and in the future.
The Power Centre is our industry-leading centre for science and innovation. We focus
on four main areas: Non-toxic, Monitor and detection, Sustainable, and Digital.
Investing in a sustainable future
Leading in innovation and digital
Service and innovation for customers
We have an established system in place to
enable colleagues from across the business
toapproach our Marketing & Innovation (M&I)
team with innovative concept ideas. The M&I
team then works alongside these colleagues
to help bring promising proposals to life.
Currently, we have a pipeline of around 50
projects in process – all are sustainable,
non-toxic or digital.
Non-toxic
Biotechnology
Lures
Heat
Proofing/Exclusion
Monitor and
detection
Beam-break technology
Scent detection
Presence detection
Digital
Cameras
Remote management
Data
Sustainable
Recyclable material
Resistance testing
Lifetime use
Non-toxic
In commercial pest control the use of
chemicals is not our first thought. Before
anytreatment is considered we survey the
premises and consider barriers, such as
proofing and exclusion materials under doors
or in gaps next to pipes, that might solve the
pest problem. We then have a range of
non-toxic solutions, such as the use of heat
treatments, rather than traditional chemicals,
for the control of bed bugs and insects.
A 2021 saw the introduction of a new system
to track chemical usage across our
operations, now in place in 14 countries and
in the implementation stages in six more.
This will enable us to better understand the
chemicals we use most, and how best to
reduce the most environmentally damaging
of them.
A The new non-toxic Rat Riddance Connect
sits within our family of digitally connected
rodent control solutions for indoor pest
control. It is part of Rentokil’s award winning
PestConnect system, which includes
RADAR Connect, a further non-toxic rodent
control solution.
A We have also begun an exciting new
innovation project to bring to market a new
non-toxic rodent control unit with the outer
structure made from recycled polymer.
Throughout 2021, we took this from idea to
successful proof of concept, and signed a
10-year exclusive deal including licensing
and development agreements with a
third-party supplier. In 2022, we will focus
on testing and field trials.
This year, we submitted a new rodenticide
formulation for approval, containing 50%
reduced active ingredient. This would
substantially reduce the environmental
exposure to the main chemical used in rodent
control, which remains the largest sector of the
pest control business. We have also identified,
by working with a large customer in the UK,
how PestConnect can reduce the use of
rodenticide bait by up to 40%.
A Birds, such as gulls, geese, pigeons and
starlings, can spread disease with their
droppings, damage buildings and
equipment, create health and safety risks,
and give customers, staff and the general
public a bad impression of a business.
Launched in 2021, Rentokil Intelligent Bird
Scaring is an effective and non-toxic device
that has been designed to deter birds
without harm, 24/7, and can be controlled
and monitored remotely via a tablet or
smartphone app. The device has an
intelligent built-in listening system that
recognises different bird species and
identifies the best scare tool from a broad
range of sounds to deter each of them.
Rentokil Initial plc
Annual Report 2021
55
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Monitor and detection
PestConnect provides a real-time, early
warning system for the monitoring and control
of rodents. This digital connected pest
management system offers 24/7 effective
monitoring and fast control of rodent pests,
saving customers time and money dealing
with costly infestations. Our innovative system
uses non-toxic and highly targeted treatments
that help reduce the rodenticide impact on
wildlife.
PestConnect
As at the end of 2021, there were more
than235,000 PestConnect units installed
inc.13,000 sites across the globe (2020:
150,000+ units). This unit complies with the
Campaign for Responsible Rodenticide Use
(CRRU) and can enable customers to reduce
their use of rodenticide by up to 40%.
Sustainable
Rentokil Initial offers a range of services that
support our customers’ own sustainability
programmes. For instance:
Investing in a sustainable future
750,000
fluorescent tubes – which use
mercury – removed from the
waste stream, by using LED
lamps that last three years
(versus one year for the tubes)
62%
Lumnia LED lamps save up
to62% energy and emissions
compared with fluorescent bulb
tubes
A Following the successful launch of Lumnia,
the world’s first range of LED-based insect
control units, in 2021, Rentokil Initial
continued to build on this innovation with
the launch of Lumnia Suspended. This
ceiling-suspended unit is specially designed
for use in industrial facilities that have a
zero-tolerance requirement for pests, and
offers significantly reduced running and
energy cost savings compared with
traditional units. By the end of 2021, in total,
260,000+ Lumnia units had been sold since
launch in 2017 across 60+ countries.
In 2021, Rentokil and our partner, Vodafone,
began to pilot the use of rich media and AI
toenhance pest control services. This pilot
solution revolutionises the way we can monitor
and diagnose pest issues by directly tracking
rodent activity, uncovering behaviours
throughdata and analytics, and giving our
technicians a new level of insight.
We have a range of new connected devices
indevelopment including Crawl Connect
forcrawling insects and Lumnia Connect
forflying insects, plus new rodent devices.
A After successful trials last year, we were
pleased to launch Eradico in 2021, our first
global bait box and our first hardware
product made entirely from recycled
polymer, meaning we expect to use 377
tonnes less of virgin plastic each year in the
Rentokil Initial supply chain. This new bait
box meets all required local legislation and
has improved functionality over traditional
models. The single multi-functional unit
canbe used in a variety of locations and
climates and can be used as a connected or
non-connected unit. We were delighted to
see Eradico nominated as a finalist for the
Plastics Recycling Awards Europe 2021,
recognising the innovation in sustainability.
377tonnes
less of virgin plastic each year in
the Rentokil Initial supply chain
56
Rentokil Initial plc
Annual Report 2021
Digital
Rentokil Initial uses digital technology to
improve the colleague experience, enhance
services and reporting transparency for
customers, and improve operational efficiency.
Our workforce is enabled with smartphone
technology and a wide range of apps to
improve efficiency.
Continued investment
ServiceTrak – our smartphone field service
app improves productivity and leads to a more
professional service. This is available across
33 countries with our technicians using the
app to record over 7 million service visits in
2021 – for example, start time, services
performed, customer recommendations,
customer signatures and end time. In addition,
we have received over 1.6 million responses to
our digital customer satisfaction surveys, with
an average score of 4.88 out of 5 in Hygiene.
Customer Site Risk Assessment (SRA) app
– has been rolled out to 35 markets where
2.2million surveys were submitted in 2021.
This has enabled us to remove the use of
paper in our risk assessment process.
Command Centre – brings together the data
from our Internet of Things devices in the field
with c.15 million records processed each day.
Cloud-based data storage and our own
visualisation tools ensure that we can support
customers with the highest standard of pest
control data analysis.
Digital Hygiene – in 2021, manufacturing was
moved in-house to Dudley Industries in the UK
and design components changed to enable
abetter cost and scalability. The products
passed Wi-Fi security and CE approval for
Europe. Eight Digital Hygiene products will
now be aligning to the PestConnect-based
technology infrastructure in 2022.
Customer back office automation – we have
begun to take the next step in customer
management by integrating our myRentokil
system data automatically into customers’ own
systems. This is now live with 34 customers,
and successfully automated 164,000 work
orders in 2021.
New Technology Centre
In 2021, we launched a new Hygiene
Technology Centre in the UK, built to high
sustainability standards and achieving
aBREEAM excellence rating. The centre is
ahub for our Hygiene & Wellbeing product
development team and includes facilities
todevelop, test and validate our innovation
products. It includes warm and analytic
rooms,digital hygiene development and
testing, aswell as an archive and product
sample storage.
Our new digital floor plan app is
now live in 34 markets.
Rentokil Initial plc
Annual Report 2021
57
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
We are pleased to share our disclosures in
response to the recommendations of the
TCFD. One of our main priorities over the last
year was to commence the implementation,
embedding and tracking of progress against
our plan to achieve net zero by the end of
2040. This has included implementing
country-level operational-based environment
plans around our eight specialist workstreams.
Governance
The Rentokil Initial Board has responsibility
foroversight of the long-term climate change
strategy of the Group, including considering
climate-related issues, investments,
opportunities and risks.
In 2021, a Safety, Health and Environment
update was the first item on every Board
agenda. The Board held separate sessions
todiscuss and analyse different aspects of
ourapproach to the environment, including
aprogress update on Rentokil Initial’s journey
to net zero against the key milestones in our
transition plan. In addition, regional operating
plans, presented to the Board through the
year, included their environmental priorities
and actions.
Both the Audit Committee and the Board
received a paper outlining the accounting
considerations regarding climate change
Our Task Force on Climate-related Financial Disclosures (TCFD)
Our journey to net zero
Environment
Our journey to net zero emissions is not only the right thing to do for society, but it is also the right thing for our business. All of our stakeholders
support our environmental ambitions. Overthe last 10 years, we have met our targets for 10% (2011–15) and a further 20% (2016–19) carbon
efficiency improvements and, in 2020, we committed to achieving net zero emissions from our operations by the end of 2040. Our 2021 TCFD
report can be found over the following pages including governance, strategy, executing our strategy, risks, opportunities and metrics.
reporting, following a detailed review, across
the Group. During the year, the Board held an
innovation day that included new sustainable
products and also discussed the investment
and environmental criteria of the new
Technology Centre, opened in 2021.
Our Chief Executive (CEO) has overall
responsibility for environmental, social and
governance (ESG) matters and our
operationally focused response to the risks
and opportunities of climate change. However,
our Directors bring a variety of skills and
experience as set out on pages 84 and 85.
Responsibility for the delivery of our climate
change plans is integrated into roles and
responsibilities of senior managers, including:
marketing and innovation, supply chain, legal
and compliance, communications, and in
particular our country and regional managing
directors. The CEO’s monthly performance
reviews with each regional leadership team
includes progress against their ESG plans.
The Group’s Executive Leadership Team (ELT)
and Senior Leadership Forum (SLF) meetings
have Environment (following Safety and
People) on every agenda. The vehicle
emissions intensity for the 20 largest
operations have been presented to the ELT
and SLF monthly, for the last three years. This
tracks the vehicle fuel efficiency performance
for each country against the prior year, per
thousand litres of fuel used, per million of
revenue in local currency.
TCFD index
Governance
Describe the Board’s oversight of climate -related risks and opportunities. Risk Management, page 73; Governance, page 83 and 92;
Audit Committee Report, pages 104 and 106
Describe management’s role in assessing and managing climate -related
risks and opportunities.
Governance, page 92; Audit Committee Report, page 10;
Our ‘Big Six’ Challenges, page 21
Strategy
Describe the climate-related risks and opportunities the organisation has
identified.
TCFD, pages 62 to 64
Describe the impact of climate-related risks and opportunities on the
Organisation’s businesses, strategy and financial planning.
TCFD, pages 59 to 64; Risk Management, page 78;
Audit Committee Report, page 107
Describe the resilience of the Organisation’s strategy, taking into consideration
different climate-related scenarios.
Strategy, page 59; Executing our strategy, pages 60 to 64
Risk
management
Describe the Organisation’s processes for identifying and assessing
climate-related risks.
TCFD, pages 62 to 64; Risk Management, page 78
Describe the Organisation’s processes for managing climate-related risks. Risk Management, page 78; Governance, page 92;
Audit Committee Report, page 106; TCFD, pages 62 to 64;
Seeinfographics on pages 59 and 60
Describe how processes for identifying, assessing and managing climate-
related risks are integrated into the Organisation’s overall risk management.
Risk Management, pages 74 and 78
Metrics and
targets
Disclose the metrics used by the Organisation to assess climate related risks
and opportunities in line with its strategy and risk management process.
Metrics and targets, page 65
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions and the related risks.
Metrics and targets, page 65
Describe the targets used by the Organisation to manage climate-related
risks and opportunities and performance against targets.
Our transition to net zero, page 60; Our ‘Big Six’ Challenges,
page 21
Our Group Risk Committee considers the risk
framework, including key and emerging risks.
In 2020, the Committee assessed that the risk
profile had increased around climate-related
risks, including local extreme weather events
and potential changes to legislation. This led
to initial work being undertaken in 2021
around climate-related scenario analysis,
details on pages 62 to 64. This Committee
sitswithin our governance framework as set
out on page 90.
An Environment Action Plan Coordinating
Group, consisting of three members of the ELT
and specialists from the eight workstreams,
meet on a quarterly basis to review progress.
We have created working parties around some
of the key areas of our approach, including:
A
Sustainable Mobility Forum – sharing of
best practice, providing updates on electric
vehicle readiness and product deployment
strategies; and
A
Sustainable Plastics Forum – a
Company-wide body working to implement
plans to reduce the usage of virgin plastic
products throughout our business, it shares
ideas and knowledge both internally and
with suppliers.
Engagement with our key stakeholders,
particularly colleagues, customers, suppliers,
shareholders and analysts, about our
environmental plan, progress and targets
continued throughout 2021 and we welcome
opportunities to discuss and review.
58
Rentokil Initial plc
Annual Report 2021
Strategy
In 2020, we developed a business-wide
operational approach to environmental
sustainability and 2021 saw us begin to
execute against our new plan. This is fully
aligned with our business plan and
operations, has clear deliverables, and is one
of the ways in which we deliver with impact
our social purpose of Protecting People and
Enhancing Lives.
We believe that our goal to be at net zero
emissions from our operations by the end of
2040 is bold and stretching, given we operate
in 88 countries, including many Emerging
markets. We believe this will unlock a new
level of energy and innovation as we seek to
establish the Company as the leader in
environmental sustainability in its industry.
Our Environment Action Plan, which will be
delivered through our country operations, is
built on three pillars: Sustainable Solutions,
Sustainable Operations and Sustainable
Workplace; with eight workstreams
underpinning them, specific actions and
individual short to medium-term targets.
Our net zero plan is underpinned by
a robust commitment to stakeholder
engagement which will ensure, in
particular, that our colleagues are
involved, informed and given the
opportunity to put forward their
own ideas.
For the first time in 2021, questions
around our environment activities were
included in the Your Voice Counts
all-colleague survey, giving us a better
understanding of the views of our
colleagues on our commitments and
efforts towards our climate targets.
These questions found that, after the
first year of executing our plan, among
our colleagues:
85%
agreed that the Company delivers
products and services responsibly
and sustainably*
85%
agreed that the Company is
making the right decisions to
ensure we operate as an
environmentally friendly business*
78%
agreed the Company is committed
to reducing carbon emissions from
its operations*
* With just 3% disagreeing.
Executed
throughout
all global operations
Further activity specific
to individual territories
but all supporting the
overarching goal
Overarching
long-term goal
Rentokil Initial will have net zero carbon emissions
from its operations by the end of 2040
Sustainable
solutions
Sustainable
operations
Sustainable
workplace
Pacific
Asia
& MENAT
UK &
Sub-Saharan
Africa
Europe
(inc. Latin
America)
North
America
Individual local and regional activities
Properties
Culture
Chemicals
Consumables
Hardware Supply chain
Mobility
Waste
Three pillars of
specific global
actionand individual
short to medium-
termtargets
Eight workstreams
– managing risks and
opportunities with the
local operations
Creating value for
ourstakeholders:
Customers
Colleagues
Suppliers
and partners
Shareholders
Communities
Rentokil Initial plc
Annual Report 2021
59
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Executing our strategy
Our pathway to net zero by the end of 2040
includes a number of milestones along the
way. Key elements of the plan include our
transition to a low-emission fleet, the
reduction in our energy emissions through
thetransition to renewable property electricity,
and reduction in emissions from the use of
chemicals, each of which are underway,
andare detailed below.
Transitioning to an ultra-low emissions fleet
The implementation of our strategy to
transition our current fleet of internal
combustion engine (ICE) vehicles to ultra-low
emission vehicles (ULEVs) is gaining
momentum. We now have a range of ULEVs
across our fleet including electric vehicles
(EVs), plug-in hybrid EVs, non-plug-in hybrids,
e-motorbikes, hybrid motorbikes and e-trikes.
157 ULEVs were delivered in 2021 (total now
177), with our businesses in Europe and the UK
leading the way.
One of our key transitional risks is access to
suitable low emission vehicles. Battery electric
vehicles remain our primary focus, secondly
plug-in hybrids and then, where technology is
not readily available or not yet cost effective,
non-plug-in hybrid products will be used to
reduce our CO
2
emissions. We have also
considered the reputational transitional risk
ofnot having a more sustainable fleet.
Although the EV market has good product
coverage for cars, and increasingly small vans,
we anticipate from 2023 larger electric battery
vans will have better capability and we are also
looking at hydrogen vehicles as an alternative,
as they become viable. In 2021, we also
commenced a pilot of natural gas vehicles,
giving us further options for ULEV fleet
vehicles.
In addition to our transition to ULEVs, we have
a number of regional initiatives to implement
telematics on our vehicles, delivering major
benefits in vehicle emissions, driver behaviour
and route management. We have also
completed implementation of Solight boxes on
trucks, which provide a 15% weight reduction.
A
EV cars are becoming cost effective in
manymarkets
A
Small-mid size vans available in certain
regions; however, larger EVs have some
waytogo
A
Battery technology is continuing to improve
range in all segments
A
Charging infrastructure still requires major
development
A
Hydrogen being analysed (2025–2030)
A
Our immediate target is to achieve 10%
ULEV global fleet by 2025
A
To reach c.100% in the UK and EU by 2030
Renewable electricity for our properties
Our approach to reducing our emissions from
purchased electricity is to introduce green
energy or renewable tariffs for our owned
buildings, with the focus on our top 20
countries (accounting for over 85% of our
global electricity consumption). Three of these
operations have already begun to transition.
Italy is our first country to be 100% renewable.
In Australia, our main Sydney and Melbourne
branches use fully renewable electricity, and
our operation in the UK is at over 90%
renewable electricity. In countries where
renewable opportunities are extremely limited,
due to energy supply arrangements and/or
cost, our short-term focus is on reducing
energy consumption through on-site options
such as solar.
Illustration: our transition to net zero
2021 2025 2030
Other
25%
of commercial customers
with PestConnect
Sustainable operations
Mobility
Small-medium sized vehicles Larger vehicles
10%
of fleet ULEV
c.100%
of UK and Europe
fleet ULEV
Sustainable workplace
Properties
First country with fully
renewable electricity
Renewable electricity
in major markets
c.90%
of properties
renewable energy
Sustainable solutions
Fumigation
Increasing use of more
sustainable solutions
c.70%
reduction in CO
2
e
from fumigation
2040
Net zero
achieved
60
Rentokil Initial plc
Annual Report 2021
Uruguay
Entering the Pest Control market in 2019 and
adding Hygiene in 2020, our business in
Uruguay today has around 135 colleagues
servicing shipping, retail and healthcare
companies.
In 2021, the team launched a new electric
fleet of three-wheel vehicles plus two
four-wheeled light trucks representing
around 30% of their fleet. Not only will this
change see substantially reduced emissions
and maintenance costs compared to
motorcycles, but feedback from our
technicians has been excellent as they
expect to be more efficient; they can travel
comfortably in the rain and carry more
equipment with them.
The new fleet has been quite an attraction
inMontevideo, attracting much admiration
from passers-by!
Spotlight
As an example, this has been the approach we
have taken for our new buildings in the UK,
where our newly built Technology Centre uses
photovoltaic roof panels and, at our head
office in Crawley, we have introduced solar
panels on the roof as well as e-charging points
in the car park.
As well as focusing on energy efficiency at our
larger facilities, we are also prioritising energy
savings that we can make at a local level.
These include installation of LED lighting in
branches and warehouses, and new systems
to switch off lights, heating and air
conditioning, with motion sensors to switch off
automatically.
Our immediate target is to have 5–10 major
markets use 100% renewable electricity by
2025 and we currently estimate transitioning
c.90% of properties by 2030.
Reducing our use of chemicals
Included in our pathway to net zero is not
onlyour approach to reduce emissions
fromour properties and fleet, but also the
emissions from fumigation services provided
to customers. 2021 saw the introduction of
anewsystem to track our chemical usage
across our top 20 operating countries
(equating to 90% of Group Ongoing Revenue).
This greater analysis will enable us to target
reductions in those chemicals that have the
greatest environmental impact.
We currently estimate that, due to developing
new more sustainable solutions for use in
fumigation, we will have reduced emissions
from fumigation by 70% by 2030. We believe
we are leading the pest control industry in
targeting these alternatives, which are often
safer to use as well as less carbon-intensive.
See page 65 for further details.
Other initiatives
Reducing our waste
Rentokil Initial is committed to reducing its
environmental impact from waste and is
continuing to make steps in this area. All our
regions have begun to implement action plans
to reduce, recycle or reform waste materials
that would have previously been destined for
landfill.
In 2021, in North America we appointed a
single waste management provider to drive
improvements across our property portfolio.
There are now 136 locations covered with 18%
of overall waste reported. Total recycled
volumes have reached 71% in Europe,
including battery recycling reaching 50%.
We have also established a Sustainable
Plastics Forum to monitor our usage of virgin
plastics and initiate proposals to reduce our
consumption. Following suggestions by
colleagues on how to reduce our use of
product packaging, so far, we have reduced
our plastic packaging by 10 tonnes annually.
Inthe last, each individual RADAR pest control
unit would be packaged in plastic, but today
they are supplied in batches of 10 in a box.
In 2021, our France Workwear facilities made
strides in organising waste to minimise the
amount being sent to landfill, while increasing
our cooperation with our suppliers to ensure
sustainable waste treatment. Second-hand
textile items that still meet quality standards
are retained to be rented. Those garments,
along with flat linens, that cannot be retained
are recycled, making Rentokil Initial the only
company in the industry in France to achieve
this. In 2021, 435tonnes (96%) of textiles were
recycled.
Working with suppliers
In 2021, we established new standards to
apply to all our global suppliers, ensuring
theyall meet comprehensive requirements
foraccreditation, performance tracking and
sustainability improvement plans. Heading into
2022, we look to ensure that all of our critical
suppliers have environmental improvement
plans in place.
In addition to reducing our emissions and
waste produced by our operation, our
industry-leading centre for science and
innovation, the Power Centre, has 100%
ofprojects within the innovation pipeline
assustainable.
71%
Recycled volumes have reached
71% in Europe, including battery
recycling reaching 50%, and 43%
in the Pacific
10tonnes
We’ve reduced our plastic
packaging by 10 tonnes annually
200,000+
hygiene units refurbished over
the last four years in France and
Italy
Rentokil Initial plc
Annual Report 2021
61
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Climate-related risk
management
Climate-related risks are identified and
analysed by our operational and functional
teams. For example, our supply chain and
procurement teams identify risks relating
tothe resilience of supply and access to
materials, while our country and regulatory
teams identify risks related to new laws and
regulations, such as city-based low emission
zones and associated access charging for
commercial vehicles.
Risks and opportunities are discussed at the
relevant Boards – Category Boards for Pest
Control and Hygiene & Wellbeing, as well
asthe Executive Leadership Team, Audit
Committee, and the Board of Directors.
There are two broad areas of climate-related
risk:
1. Extreme local weather conditions,
presenting potential health and safety
hazards to our colleagues.
2. Legislation and changing expectations,
requiring the business to alter its methods
of operation.
Physical Climate Risk Assessment
This year, Rentokil Initial commissioned an
external specialist organisation Verisk
Maplecroft to conduct a Physical Climate Risk
Assessment as a pilot to help the Company
tounderstand the inherent risk profile, based
on two Metropolitan Statistical Areas (MSAs)
inNorth America (New York and Los Angeles),
as well as specific reviews of each of the 33
facility locations located within them.
Scenarios for each MSA
The study identified risks and how those risks
may manifest differently under emissions
scenarios: RCP2.6, RCP4.5 and RCP8.5.
TheseRCPs (Representative Concentration
Pathways) represent three potential
trajectories of global emissions set by the
IPCC. The pathways describe different climate
futures, based on how aggressively the world
moves to reduce emissions. The data provided
was broken down for each MSA and 33 facility
locations. See further details opposite.
The safety of our colleagues has always been
our first priority. Recognising these increased
local operational risks will ensure that our
colleagues always remain safe when carrying
out their roles. This pilot climate scenario
report is part of our work to gain a greater
understanding and consideration of climate
risks.
In addition to this external study, an internal
Climate Change report analysing the potential
risks to the wider Company was produced in
2021. This study found ‘minimal to moderate’
risk to the Company as an ongoing venture,
with any potential effects having little
disruption to our global operations.
The disaggregated ‘multi-local’ nature of
ouroperations makes it difficult for a single
climate event to pose a material threat to the
Company. Our two central warehouses (the
only locations nearing material value), in the
UK and Belgium, were determined not to be
atany major risk of environmental damage,
and emergency plans are in place should
anyunpredictable events occur.
The results reinforced the Company’s own
analysis that the risk to the wider business was
localised and unlikely to be material at a Group
level, with most properties and customer
bases not being at direct risk. It found that the
majority of risk, such as the increased threat
ofheat stress, would require the Company to
provide mitigations in support of colleagues
inthe field. We plan to build on this analysis in
future years (see mitigation case study below).
The study
This study adopted a data-driven approach to
identify and analyse the most material physical
climate risks facing our operations in the two
areas and how those risks may manifest
differently under three emissions scenarios
through to 2100. The physical risk survey was
conducted across 16 climate risk areas, both
acute and chronic.
Acute risks are typically high magnitude/
severity events that occur over a short period
of time, including:
A
Coastal flood hazard
A
Extratropical cyclone hazard
A
Flood hazard
A
Severe storm hazard
A
Tropical storm and cyclone hazard
A
Wildfire hazard
Chronic hazards are those that typically occur
over a prolonged period of time, including:
A
Climate change exposure
A
Cooling degree days (current and future
climate)
A
Drought hazard
A
Heating degree days (current and future
climate)
A
Heat stress (current and future climate)
A
Sea level rise
A
Water stress
Impact of climate change
Operating in 88 countries means we see the local impact of climate
change and extreme weather conditions in the communities in
which we operate. In 2021, this included:
Mitigating heat stress
The risk of extreme heat events is
projected to become more frequent and
intense under all emissions scenarios
(see page 63). We already operate in
parts of the world where extreme heat
iscommon at certain times of the year.
For instance, in the Middle East, during
the summer months, all field colleagues
are scheduled not to work outside
between noon and 2pm and training is
provided to all colleagues on staying
healthy during the summer (rehydrating,
sun protection, etc.). In Australia, we are
currently introducing workwear uniforms
made of lighter weight fabrics that have
specialist cooling technology.
Spotlight
January
Record breaking snow in Madrid, Spain,
bringing transport to a standstill. In Fiji,
Cyclone Ana hit just a month after Cyclone
Yasa had reached the islands. More than
10,000 people were forced to take refuge in
evacuation shelters.
February
Winter storms hit Texas, US, tragically leaving
210 casualties after the power grid failed.
March
Flooding in New South Wales, Australia,
leading to rivers and dams overflowing,
resulting in thousands being evacuated.
April
A tropical cyclone in Indonesia left 160
people dead, and another 22,000 displaced
after triggering landslides and flash floods.
June
A record breaking heat wave hit the
northwest coast of America – with outbreaks
of wildfires.
July
Flooding along the River Ahr in Germany
engulfed streets and homes.
August
Over a million homes in the southern US
were left without power after Hurricane Ida.
The storm travelled up the east coast,
leading to subway stations and roads being
flooded in New York.
December
Super Typhoon Rai in the Philippines and
Malaysia resulted in many of our colleagues’
homes being affected.
Our approach to risk management is covered
in more detail from page 73.
SHORT-TERM
CLIMATE RISK
MEDIUMTERM LONGTERM
62
Rentokil Initial plc
Annual Report 2021
Illustration: Los Angeles
Illustration: New York
In the Los Angeles–Long Beach–Anaheim
MSA, extreme heat events are projected to
become more frequent and intense under all
emissions scenarios. Wildfire risks are likely
to be amplified as higher temperatures,
longer heatwaves and shifting rainfall
patterns increase regional aridity. Larger and
more frequent wildfires have the potential to
affect larger areas. The greater risk is that of
increased heat stress, as a result of higher
In the New York–Newark–Jersey City MSA it
was found that under all emissions scenarios
annual precipitation is expected to increase,
as is the proportion falling in extreme
events. This will amplify localised flood risk,
with culverts, sewers and basements
becoming more prone to localised flash
flooding and therefore increasingly
hazardous. Increases in sea level in the
region (see chart) are projected to be among
Key risk issues
Implications for Rentokil Initial
operations Climate change outlook
Heat stress Increasing rates of heat stress
expose employees to health risks,
can lead to additional operational
costs, and may prompt regulatory
changes in the long term
Days on which extreme temperatures
occur are projected to almost double
under all scenarios by 2045
Drought Short-term aridity can compound
long-term trends such as
population rise that drive water
stress
Drought length falls under all
emissions scenarios, but heatwave
duration is projected to increase from
20.4 days to almost 85 days in 2045
under RCP8.5
Water stress Shortage of water supply can have
broader implications and long-term
trends such as population rise are
likely to drive greater water stress
Though not significant, drought
length is projected to decrease under
all emissions scenarios, but heatwave
duration could quadruple under
RCP8.5
temperature scenarios. The dangers posed
byunventilated work areas are already taken
into consideration when conducting health
and safety surveys before each job, due to
thenature of some pest control treatments.
Expanding this to include heat risk would be
possible within the existing health and safety
systems we have in place. The demands on
air-conditioning both for vehicles and
properties could rise.
the highest in the nation, suggesting densely
populated, low-lying coastal communities will
be increasingly vulnerable to coastal erosion
and inundation during high tides and storms.
Establishing systems and protocols to be put
in place in the event of a sudden increased
flood risk will likely become important in
maintaining safety standards heading into the
future, both in the New York MSA and other
regions that face increased precipitation or
As 2021 has clearly shown, the increased
temperature in already dry areas presents
aserious risk of local wildfire outbreaks
thatrepresent a significant threat to public
health including colleagues and customer
residences, while the associated smoke can
cause widespread and prolonged episodes
of poor air quality that can negatively impact
public health.
rising sea levels. These factors also present
a risk to the general ability to carry out our
services in the local areas, should water
levels rise sufficiently to disrupt or damage
local infrastructure in these areas.
Key risk issues
Implications for Rentokil Initial
operations Climate change outlook
Heat stress Increasing rates of heat stress
expose employees to health risks,
can lead to additional operational
costs, and may prompt regulatory
changes in the long term
Days on which extreme temperatures
occur are projected to almost double
under all scenarios by 2045
Water stress Shortage of water supply can have
broader implications and long-term
trends such as population rise are
likely to drive greater water stress
Though not significant, drought
length increases under all emissions
scenarios, as does heatwave
duration, suggesting water resources
could be placed under additional
strain
Coastal flood Coastal inundation can cause
significant damage to properties
and transport infrastructure
Sea level rise of up to 32cm by 2045
increases potential for more frequent
and severe coastal flooding
0
2020 2030 2040 2050 2060 2070 2080 2090 2100
20
40
60
80
100
120
RCP 2.6 Mean
RCP 4.5 Mean RCP 8.5 Mean
New York-Newark-Jersey City Sea Level Rise (in cm)
0
2020 2030 2040 2050 2060 2070 2080 2090 2100
10
20
30
40
50
60
70
RCP 2.6 Mean RCP 4.5 Mean RCP 8.5 Mean
Los Angeles-Long Beach-Anaheim Sea Level Rise (in cm)
SHORT-TERM
CLIMATE RISK
MEDIUMTERM LONGTERM
SHORT-TERM
CLIMATE RISK
MEDIUMTERM LONGTERM
Rentokil Initial plc
Annual Report 2021
63
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Financial impacts of climate-related risks
In 2021, both the Audit Committee and the
Board received a paper outlining the
accounting considerations regarding climate
change reporting, following a detailed review
across the Group. This included:
A
our current understanding of the impacts
ofclimate change;
A
the dynamic of the Rentokil Initial business
model presenting higher or lower impact
risks;
A
the applicable accounting standards; and
A
how we have tied these impacts to the
materiality of the business, its assets and
liabilities.
These findings were used to establish any
adjustments required and what reporting is
necessary in our Financial Statements for 2021
under a 1.5–2.0-degree celsius pathway.
In addition, each element of the Company’s
commitment to reach net zero by 2040 was
evaluated, to identify if any of these items
were expected to be materially impacted
inanegative or positive way by weather,
legislative, societal or revenue/cost changes.
Although our goal to reach a fully electric fleet
would represent a significant impact on cost
if undertaken fully in the short term, our
commitment to phase this transition in over
the next two decades enables us to take
advantage of new and improved technologies,
as well as falling costs for ultra-low emission
vehicles. Over this time frame, the cost is
nolonger deemed significant beyond the
standard existing replacement of vehicle
costs.
Overall, the conclusion of the review was that,
while there will undoubtedly be impacts on the
Company, the highly disaggregated nature
ofthe operations of the Group significantly
reduces the risk profile of the business to
impacts from weather-related changes.
We have considered the impact of climate
change on the Financial Statements and
wehave concluded that there is no material
impact. See Basis of Preparation on page 155.
The changes necessary to achieve net zero
will not have a materially adverse impact
onthe cash flows of the Group and indeed,
warmer climates may present some
opportunities. Societal and legislative
impactsare not felt to have a material
impacton any one segment.
B
For further details see Risks and
Uncertainties on pages 73 to 79 andour
viability statement on page 80.
Environmental legislation and changing
expectations of customers and society
Our Physical Climate Risk Assessment
identified the possibility of increased or
changed legislation around the effects of
climate change both in the fields of worker
safety and property maintenance. Rentokil
Initial will continue to monitor any such
changes to ensure we continue to remain fully
compliant with all local, regional and national
regulations. This risk is unlikely to be material
at a Group level.
Climate-related opportunities
This year, as part of our wider review of the
impacts of climate change we also looked at
the opportunities for our business.
Pests are more of a burden in warmer climates
and therefore, the impact of climate change is
a factor in the growth of pest management.
Warmer temperatures mean longer breeding
seasons and lower mortality rates during the
milder winters. Along with growing
urbanisation, this will drive more infestations.
More volatility in temperatures and
precipitation also has the potential to change
the pest mix and demand for pest control over
the medium to long term.
With market-leading positions in pest control,
hygiene and wellbeing around the globe,
Rentokil Initial can play an important role in
helping customers to mitigate the effects of
global warming on their businesses and on
public health.
244%
A statement by the WHO, using
predicted values for warmer
temperatures, forecasts a
potential increase in fly
populations of 244% by 2080
The tiger mosquito has been one
of the fastest-spreading animal
species over the last two
decades. This is the mosquito
that brought Chikungunya
disease to Italy in 2007.
The Company is already seeing the impact of
warmer temperatures. For instance, increased
survival rates of mosquitoes and other insects
in southern Europe, and rising concerns about
vector-borne diseases. In the US, we are also
seeing an increase in mosquito populations
being reported due to increasing amounts
ofstanding water following more severe
hurricanes and storms.
One of the best examples is the Asian tiger
mosquito. The native range of this mosquito
isthroughout the tropics of Southeast Asia,
the Pacific and Indian Ocean Islands, north
through China and Japan, and west to
Madagascar.
However, the tiger mosquito has been one of
the fastest-spreading animal species over the
last two decades. To date, it has spread to at
least 28 countries outside its native range
around the globe. This is the mosquito that
brought Chikungunya disease to Italy in 2007.
As with mosquitoes, flies thrive in warmer
climates. According to the WHO publication,
‘Public Health Significance of Urban Pests’,
climate change may have a significant
impacton fly populations. A statement by
theWHO, using predicted values for warmer
temperatures, forecasts a potential increase
infly populations of 244% by 2080, compared
with current levels. If this were to occur,
concomitant increases in fly-borne diseases
would be expected.
B
See Service and innovation for
customers on page 55 for further
information about our sustainable
innovations, designed to meet the needs
of our customers and their own
sustainability ambitions.
28+
To date it has spread to at least
28 countries outside its native
range around the globe
64
Rentokil Initial plc
Annual Report 2021
Fumigation-derived CO
2
emission
Several of our operations provide fumigation
services that use sulphuryl fluoride (SF) as
the fumigant.
Firstly, quarantine fumigation of items such
as machinery which are being shipped
internationally and where the use of SF
isspecified as a requirement by certain
destination countries to prevent the spread
of invasive pests, and secondly, for the
control of termites in buildings and other
pests, e.g. in food processing facilities.
CO
2
emissions from the use of SF were
792,744 tonnes in 2021 (2020: 814,700
tonnes¹; 2019: 548,449 tonnes; 2018:
363,339 tonnes; 2017: 481,390 tonnes).
Although a number of fumigation orders
scheduled to take place in 2020 were
delayed to 2021 as a result of COVID-19
restrictions, this year’s reduction was
delivered through transitioning away from
SFusage in our established markets and
those where local regulations and customer
demands make it possible.
The most notable success of this strategy
was reductions in SF usage of nearly 40% in
both France and Germany during 2021. This
was achieved principally through switching
away from fumigations to chemical-free heat
treatments. The Company continues to
target a 70% reduction in fumigation-related
CO
2
emission equivalents by the end of
2030 and the full transition to net zero by
2040.
1. Our 2020 reported figure has increased as
aresult of an acquisition where its usage had
not been included in the previously reported
2020 data.
Metrics and targets
For over 15 years, we have published our
emissions data and we continue to improve
the quality of our environmental reporting.
Tofurther improve and extend our reporting
we will be introducing a new technology
platform in 2022 to capture the wide range
ofsafety, health and environmental data.
The Company first set an emissions target
in2012 of a 10% reduction in our emissions
intensity index by 2016, which was achieved
in2015. Then using 2015 data as the baseline
it set a five-year emissions target to achieve
a20% reduction in this intensity index by the
end of 2020, which we achieved a year early.
In 2020, the Board set a new target to reduce
the emissions intensity index by a further 20%
by the end of 2025 (using 2019 data as the
baseline). As of the end of 2021 this index
hadreduced by 14.4% and, once the impact
ofour renewable contracts are included, this
increases to a 14.9% reduction, since 2019.
Ourabsolute emissions figures have increased
in 2021 reflecting the 52 acquisitions made
this year, which has contributed to an increase
in fuel usage. In addition, as our data capture
becomes more robust we have included
emissions from aviation fuel used in
large-scale vector control aircraft in the USA.
Our emissions are derived from the use of
energy in our properties and vehicles and
through the use of chemicals in fumigation
projects. Our absolute values of tonnes of CO
2
are reported using UK government conversion
factors for greenhouse gas reporting and
International Energy Agency conversion
factors for non-UK electricity.
The Task Force on Climate-related Financial
Disclosures (TCFD) recommendations set an
important framework for understanding and
analysing climate-related risks, and we are
committed to regular, transparent reporting
tohelp communicate and track our progress.
The information set out on pages 58 to 65 in
this Annual Report and Accounts 2021 aims
toprovide key climate-related information
andcross-references to where additional
information can be found. In this context,
wehave considered our ‘comply or explain’
obligation under the UK’s Financial Conduct
Authority’s Listing Rules, and confirm that we
have made disclosures consistent with the
TCFD recommendations.
Index of CO
2
emissions per £m revenue
Intensity indicator 2021 2020 2019 2018 2017
75.05 75.36 87.75 87.04 100
The index of CO
2
emissions is calculated as an index of kilogrammes per £m revenue on a constant
exchange rate (CER) basis, providing an accurate like-for-like performance comparison, removing the
variables of currency, divestments and acquisitions.
Absolute values of energy and fuel-derived emissions
– tonnes of CO
2
emissions
Type of scope 2021 2020 2019 2018 2017
Total Scope 1 184,438 170,655 176,599 160,024 164,745
Total Scope 2 15,622 15,581 17,289 16,604 17,638
Total Scope 3 48,289 43,262 44,094 40,270 39,916
Total outside scope 7,299 5,787 5,122 5,238 5,084
Total – all scopes and outside scope 255,648 235,285 243,104 222,136 227,383
Total Scope 2 market-based emission
reduction (1,292) 0 0 0 0
Total – all scopes and outside scopes
(once market-based emissions
deducted) 254,356 235,285 243,104 222,136 227,383
Scope 1 – emissions from our vehicles and the operation of our facilities, with the majority of emissions
derived from the use of petrol and diesel across our fleet, with a small amount of gas, fuel oil and LPG.
Forthe first time Scope 1 also includes emissions from aviation fuel used in large-scale vector control
aircraft in North America (covering 2019–2021).
Scope 2 – emissions are derived from the purchase of electricity, reported using location-based emission
factors. For the first time we are able to include reductions from our first renewable energy electricity
contracts. See page 60 for details.
Scope 3 – Transmission & Distribution (T&D) and Well to Tank (WTT). This year we have started a
programme which will begin to measure Scope 3 data in more detail and enhance future reporting.
See our Responsible Business Report for more details.
Total outside scope – biogenic emissions.
Total – all scopes and outside scopes – consolidation of all the above scopes with no emissions deducted
for renewables, to allow for direct comparisons across the five years.
Market-based emissions (deductions) – emissions deducted under the renewable electricity contracts
we have implemented in the UK, Italy and Australia.
UK and global energy consumption
In 2021, UK emissions accounted for 23,822 tonnes of CO
2
(2020: 25,056) representing 9.3% of
global emissions. Global energy consumption was 859,199 MWh with the UK representing 9.7%.
Total energy (MWh) Energy 2021 Energy 2020 Energy 2019
Source of energy Group
UK and
offshore Group
UK and
offshore Group
UK and
offshore
Scope 1 – energy consumed
from combustion of fuel or
theoperation of a facility 811,963 77,601 744,402 82,350 760,926 81,524
Scope 2 – energy consumed
resulting from the purchase
ofelectricity 47,236 5,377 47,366 4,194 51,522 4,438
Total 859,199 82,978 791,768 86,544 812,448 85,962
Total energy – includes all activities for which the Company is responsible, as detailed in Scope 1 and 2.
The energy consumption is calculated using electricity purchased (kWh) and fuel volumes converted to
kWh using the UK government GHG Conversion Factors for Company Reporting, presented in MWh.
Rentokil Initial plc
Annual Report 2021
65
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Communities
Living our values
Our approach to charitable and community
support is in line with our core social purpose
– to Protect People and Enhance Lives. We
also aim to make a meaningful contribution
tothe local economy and to support
communities in which we operate. In 2021,
wewere proud to see the ongoing efforts of
our colleagues, demonstrating our values and
culture in support of their local communities
and charities.
Rentokil Initial Cares is our charity and
community programme which works alongside
colleagues’ own efforts locally, as well as
national and global initiatives. It supports
charities and good causes which have
significant impact in many parts of the world,
such as protecting families from the threat of
malaria in Africa (see page 68, Malaria No
More UK) and reducing deforestation in the
Pacific and Africa (see page 67, Cool Earth).
This innovative programme was launched in
2019 and uses the Company’s unclaimed
shares and dividends to support our partner
charities with a network of local ambassadors
coordinating and championing the
programme.
Better Futures is our community health and
hygiene education programme in Asia. First
launched in 2013, to date more than 27,000
people have participated in its educational
events. In 2021, the Better Futures team,
whilecontinuing with their ongoing education
initiatives, chose to provide direct support
totwo orphanages in Bangalore, India. The
donation of £2,000 helped to provide food
and safety for the most vulnerable children
intheir community, while also assisting the
wider education programmes for women
colleagues were harmed during the floods,
many had their homes and vehicles damaged.
Our German team was quick to respond,
setting up an internal task force to ensure
thesafety of our colleagues.
Offers of support came from across the
business. We have also supported colleagues
in Asia who lost homes and possessions
following the Super Typhoon Rai and donated
PPE worth c.£2.5m to hospitals across India in
response to the COVID-19 crisis in the country.
andchildren that the orphanages undertake.
Additionally, support was given to a child
safety charity in Taiwan, a medical facility in
Thailand and a support centre for the disabled
in Indonesia among other areas.
Charitable cash donations in 2021 (including
matched donations) amounted to £361,000
(£184,000 in 2020) – this excludes the
provision of value-in-kind and management
time, as well as colleague-generated
donations and efforts, which have both been
particularly significant this year with the Race
to Kigali (see page 68) among other initiatives
that have been spearheaded by our
colleagues. Our Community Involvement
Policy sets out our principles for positive
engagement.
As well as supporting local, national and
international charities, Rentokil Initial also
supports colleagues and communities with
disaster relief. Like many across Europe,
wewere shocked at the devastation caused
by the local flooding that took place in and
around the river Rhine in 2021. While we
remain extremely grateful that none of our
Steptember
181 colleagues in Australia completed
41,081,291 steps and raised $35,000,
supporting people with cerebral palsy.
Hoddesdon Round Table Pedalo
Challenge
Intrepid colleague Steven Willis entered
the Guinness World Records by travelling
128 miles along the River Thames, in a
pedalo, for Mudlarks, a Hertford-based
charity which supports adults and young
people with learning disabilities.
The London Marathon
Three colleagues completed the London
Marathon in 2021, raising more than
£8,000 for Cool Earth, Malaria No More
UK and Get Kids Going.
Hometown Heroes
A month of activities by colleagues
in the US supporting their local
public sector workers. 96 teams of
colleagues supported more than
3,200 ‘Hometown Heroes’ with gift
packs and donated services.
27,000+
people since 2013 have participated
in Better Futures, our community
health and hygiene education
programme in Asia
£361,000
charitable cash donations in 2021
(including matched donations)
(£184,000 in 2020)
£2.5m
worth of PPE was donated to
hospitals across India in response
to the COVID-19 crisis
66
Rentokil Initial plc
Annual Report 2021
Our partnership with Cool Earth: Protecting biodiversity
Rentokil Initial partners with Cool
Earth, backing the people of
Wabumari in Papua New Guinea in
their fight against deforestation.
Supporting local and indigenous
people in their work to protect over
800 acres of rainforest, preventing
the release of the equivalent to
228,280 tonnes of carbon.
Supporting women in the community
to grow a sustainable income by
producing and selling coconut oil
atlocal markets.
Funding 20 beekeepers in
Mozambique to provide them with
technical skills for honey harvest and
a sustainable way of earning a living.
Supporting Cool Earth’s biodiversity
officers in Wabumari to help
community members keep an eye
onthe wildlife that shares their forest.
834 households received food
support in Cameroon. Much needed
health supplies were delivered
including 5,000 face masks, 500
sanitary pads and 5,000 bottles of
hand sanitiser. 300 children received
free malaria testing and instant
treatment.
24 handwash facility stations across
eight villages in Papua New Guinea
have been built with 2,649 people
having access to clean, drinking
water as well as COVID-19
information.
Work is underway to establish forest
conservation programme activities in
Papua New Guinea with training for
forest guides and research assistants
to set up forest health and carbon
plots to monitor and survey plants.
In Cameroon, 15 community
rainforest education and control
groups have been formed.
Ten community tree nurseries out
of a target of 20 have been
established so far.
Supporting communities in the
rainforests of Papua New Guinea
and Cameroon, the custodians of
over 42,000 hectares of rainforest,
20,224,222 trees and over 8 million
tonnes of carbon stores.
Community members in Cameroon
establishing cocoa and fruit tree
nurseries with new sustainable and
profitable agricultural techniques.
Rentokil Initial extends its community
support to back people in
Mozambique and Cameroon in their
efforts to halt deforestation.
Through its partnership with Cool
Earth, Rentokil Initial is working
towards the most urgent of the UN’s
Sustainable Development Goals.
Investing in sanitation projects,
providing community members in
Wabumari access to training and skill
building to build toilets and waste
systems that are resistant to flooding.
Funding the installation of seven
9,000 litre rainwater-harvesting tanks
to provide clean drinking water
during droughts.
2021 marks the fourth year that Rentokil
Initial has supported the climate change
charity, Cool Earth, working to protect
endangered rainforests. Since 2018, by
working with the local in-forest communities,
we have supported the protection of over
42,000 hectares of rainforest, consisting
of20,224,222 trees. We have supported
sanitation and water projects in Papua New
Guinea, established sustainable local
businesses in Mozambique and provided
medical supplies during the COVID-19 crisis
to communities in Cameroon.
2018
2019
2020
2021
Rentokil Initial plc
Annual Report 2021
67
Corporate Governance Financial Statements Other InformationStrategic Report
Responsible Business
continued
Making Malaria No More. Our largest fundraising event: Race to Kigali
Since 2010, Rentokil Initial has supported
Malaria No More UK in its mission to fight the
deadly global disease malaria, raising around
£500,000. This year, we were pleased to
undertake our biggest-ever charity event,
theRace to Kigali.
It was inspiring to see more than 2,000
colleagues from around the world, in teams
of20, join the Race to Kigali – covering the
distance from our UK HQ to Kigali, proposed
venue for the Commonwealth Heads of
Government Summit, from running and
walking to horse riding and rock climbing,
coming together, not only for a fantastic
cause, but to have some fun and engage
inabit of exercise.
The initiative raised more than £200,000
tohelp the ongoing fight against malaria,
including funding from the RI Cares fund,
making it our most successful fundraising
event. The funds raised will be used to
support awareness, prevention and treatment
programmes in Zambia and Kenya, as well as
the Draw the Line campaign, which works to
inspire young people to call on world leaders
to work to end the threat from malaria within
ageneration.
The RAISA
Indonesia
Tartan Outlaws
Scotland and Northern Ireland
Team MBIO INGWE
Philippines
The Mighty Turtle
Malaysia
Sole Survivors
North America
In it for the Buzz!!!
Scotland
68
Rentokil Initial plc
Annual Report 2021
Hall of Fame
Thank you to all our
104 amazing teams
GoFAR (Indonesia)
Turn Back Covid (Indonesia)
Skeptical Technical
ROW Kings of Kigali
The Rita Road Fit Fat
& Elderly Dream Team
UNCANNY WARRIORS!
Team MBIO INGWE
Hygiene Maniac
Tartan Outlaws
Red Hot Chilli Steppers10
Steps to Kigali
Teen Squad (Indonesia)
Colombia
Team Carpe Diem
The Speed Racers
In it for the Buzz!!!
Simply the Pest
Sydney Swifts
Aussies Against Mozzies
“The Road to No Malaria”
by Walking Heads
Kigali Wanderers
HR Hornets
KICKIN’ IT TO KIGALI
Dragonflies
Vikings Have More Fun
The Producers
NOsquitos
Mozzie Smashers
European Dream Team
Run to Afica
TrackersontheDOG
ON TIME IN FULL
Team Singapore
GREAT WALL-kers of CHINA
Pest Efforts
Not Fast, Just Furious
Globetrotters
Northern Walkers
ITHY_Walker
The Simon Mwago Striders
We need more bikers
Danish Dynamite
Sweden Red Viking
Europe Unlocked
Ren to kill Malaria
The Mighty Turtle
Northern Lights
The RAISA
MENAT Mirages
Don’t stop me now
Wonderful Indonesia
RNA Roadrunners
ROar
Brazil Vector Pest Busters III
Team IMBARAGA
#STAYHEALTHY
Athleticism Anonymous
9000km – So that’s 0006km
Downunder?
Sweden Green Walkers
Ready Steady Grow
TAIWAN NO. 1
Sole Survivors
Slow Patrol
Brazil Vector Pest Busters
Brazil Vector Pest Busters II
Twisted Blister
RIHK-Sales
RIHK – Alliance
Pirates of the Caribbean
I Love You 9000c
March4Health
Rentokil Racers
CR Liga Team
Healthy Hunter
The HR Globetrotters
Battleship Branch
HKPCOPS
Ticos Against Malaria
Love from the Heartland
Titans
Kita Boleh
Ini Kigali Lah!
Team HAKUNA MATATA
Azteca Runners
Musang King
RIHK – Finance
#LUASKAN KUASAMU
Sunda Empire
Mangu Power
HORE
Maya Runners
Mosquirix
Yogyakarta
Hyrule QA Warriors
Cikarang RICI
The Fab x5
RICO 515
Glutton
HR Power
ES The Roadrunner
Panda
Happy Feet
HR Team
Walkers
Turn Back Covid
Indonesia
9,000km – So that’s 000'6km Downunder?
New Zealand
Pirates of the Caribbean
Martinique
GREAT WALL-kers of CHINA
Hong Kong
In it for the Buzz!!!
Scotland
Rentokil Initial plc
Annual Report 2021
69
Corporate Governance Financial Statements Other InformationStrategic Report
A review of the process is provided to the
Audit Committee each year. The Internal
Auditteam also manages the confidential
independent whistleblowing reporting
channel, Speak Up (see page 110 of the Audit
Committee Report). The Chief Executive has
Board responsibility for our responsible
business approach, including climate-related
issues.
Information security
As with all organisations, the scale and
complexity of cyber attacks on the business
isincreasing, and we continue to identify,
monitor and mitigate the risk this presents (see
pages 77 and 78). Despite repeated attempted
attacks (including several serious attempts
in2021), the business has not had a material
breach in the last three years. In 2021, we
invested in the security tools and services
weneed to support the longer-term move to
hybrid and home working, as well as managing
the rising threat from malware (especially
ransomware), and increased the protection for
our online web presence and digital services.
Rentokil Initial holds the ISO 27001 Certificate
for Information Security Management, audited
by the British Standards Institution (BSI), for
the design, development and hosting of digital
pest control services for remote monitoring,
analysis and reporting for our global
customers.
We maintain our investment in IT security to
ensure the cyber resilience of systems and
services stays at an appropriate level, and
thatwe continually monitor and improve our
cyber resilience. We run penetration testing
exercises to test our detection and response
capability and an information security
awareness programme is helping reduce
security incidents. In 2021, this included
phishing simulation exercises over nine
separate campaigns to an audience of
approximately 13,500 colleagues per
simulation, as well as workshops and online
training packages. Improvements to our email
security capability were also extended to
enable our core user populations to identify
high-risk emails and improve technical
resilience to phishing attacks. Information
security training programmes run at least
annually for critical roles.
The IT security team briefs the Board directly
at least annually and whenever operations
security risk requires escalation, aswell as
reporting via the Group Risk Committee
quarterly. We also monitor external ratings
using the Assessment of Business Cyber Risk
framework provided by the US Chamber of
Commerce, and benchmark our cyber security
wherever possible. We want to ensure we are
doing the right things for our business and
customers to be able to operate securely and
safely. The Group has a cyber risk insurance
policy in place.
Data privacy
We have a global data protection compliance
programme based on the requirements of
theEU General Data Protection Regulation
(GDPR) and equivalent regulations globally.
We require all our businesses to sign and
abide by the terms of an inter-company data
Governance and policies
We ensure our responsible business
prioritiesare part of our overall governance
arrangements, the cornerstone of which is
theCode of Conduct (available in 16 local
languages and supported by training
programmes). The Code of Conduct sets
outafundamental commitment to comply
withall legal requirements that apply, and to
operate with high ethical standards. It outlines
responsibilities to colleagues, customers and
the business, and highlights our determination
to establish our values of service, relationships
and teamwork, and a culture of integrity,
everywhere within the business.
We have a rigorous policy framework for each
of our key sustainability priority areas. We
review policies periodically to ensure they
meet current best practice and legislative
needs and our technical and safety standards
and practices often exceed local regulatory
requirements. By establishing clear policies
and procedures in areas such as ethical
conduct, human rights, data security and
suppliers, and by reporting openly on our
progress, we can reduce risks to our business
and our customers.
Our Supplier Code is designed to ensure our
suppliers’ standards align with our Code of
Conduct. Available on our website in 18
languages, it outlines the standards and
controls we expect within their operations.
Since March 2019, we have required all
criticalsuppliers and major local suppliers
toacknowledge receipt of, and compliance
with,the Supplier Code. In 2021, it was
updated and re-issued to expand the remit of
the environmental section and include new
sections on quality of products or services,
zero tolerance on tax evasion and protecting
personal data. We inspect tangible aspects of
the Supplier Code, such as safety standards,
during periodic audits of critical and major
suppliers.
During the year we also launched a supplier
Speak Up service and encourage all supplier
employees or other stakeholders to report
genuine concerns over malpractice, illegal
acts or failures to comply with recognised
standards of ethical behaviour that they
observe at any point within our global supply
chain.
A full list of our key policies is available on our
website. We monitor our impact using the
performance metrics summarised overleaf and
shown in this Responsible Business section.
Management and compliance
Adherence to corporate policies and the Code
of Conduct is reinforced by an annual Letter of
Assurance, signed by senior management to
confirm that they personally, and those they
are responsible for, are aware of and
understand what is required of them, and have
complied with it. They must provide details of
any areas of non-compliance or uncertainty.
Monitored by the Company’s Group General
Counsel and Internal Audit team, adherence
issupported by mandatory training on the
U+learning platform.
transfer agreement that incorporates EU
standard model clauses. This demonstrates all
businesses take privacy seriously. Our Group
Data Protection Officer has established a
global privacy network and all countries have
assigned local privacy officers and/or privacy
champions to support the programme. We
provide them with support and guidance
through regular newsletters, meetings, training
and access to updated data protection
compliance resources. In addition, all local
privacy officers have been issued a
comprehensive Data Protection Handbook
touse in day-to-day compliance activities.
The main operational controls and compliance
framework are underpinned by tools, systems,
policies and processes. We implement privacy
and data-management considerations in
project and contract governance mechanisms.
A privacy notice is available in 19 languages
and over 50% of colleagues have completed
basic data protection training, made available
in 43 different languages. Since
implementation, wehave also provided
functional training for teams such as
marketing, HR, sales and IT, supplemented
bysupport and guidance from the network
ofc.60 local privacy officers and over 200
privacy champions.
The Group Data Protection Officer reports any
identified data protection risks, gaps and
requirements via the Group General Counsel
to the Group Risk Committee and the Audit
Committee as well as periodic update to the
Executive Leadership Team. We have created
measures to assess the compliance status
ofcountries and regions, based on data
protection programme activities and risk levels
associated with local regulatory requirements,
enforcement action and breaches.
Tax
Our tax strategy is aligned with our wider
business strategy, which we believe creates
aresponsible and sustainable tax strategy
thatwill enhance long-term shareholder value.
We will consider tax as part of every significant
business transaction. When considering tax
issues, we will always try to protect the
Group’s reputation and adhere to its Code
ofConduct. We aim to meet all our legal
obligations, filing all required tax returns
accurately and on time, and paying the correct
amount of tax when due. We aim to deal with
HMRC and other tax authorities in an open
and collaborative manner, aimed at reaching
agreement on tax issues in good time, and
minimising the risk of disputes arising. We will
not undertake transactions where the sole
purpose is to create a greater tax benefit than
that intended by the relevant legislation. We
aim to comply with both the spirit and letter of
the law on tax matters, and will not establish
companies in tax havens if there is no
substantive economic reason to do so.
We operate appropriate tax risk governance
processes, overseen by the Audit Committee
and the Board. Our tax strategy applies to all
Group business, sets out our approach to tax,
and can be found on our website. Our Board
reviews our tax strategy annually.
Governance, trust and transparency
Responsible Business
continued
70
Rentokil Initial plc
Annual Report 2021
Non-financial information statement
Below is an overview of our approach to environmental matters, colleagues, social matters, human rights, and anti-corruption and anti-bribery.
Youcan find further details throughout this Responsible Business section on pages 49 to 72. You will find details of our business model on pages
28 and 29, and our principal risks are on pages 74 to 79. Our key policies are published on our website at rentokil-initial.com/responsible-delivery.
Enabling THE RIGHT PEOPLE to do THE RIGHT THINGS in THE RIGHT WAY
Our approach and key policies
Outcomes of policies and
impacts of activities More information
Environmental matters
Our Code of Conduct states that all our colleagues must conduct their
work in a way that complies with environmental laws and minimises any
adverse effect on the environment. Our Environmental Policy sets out
ourcommitment to carrying out our business in an environmentally
responsible way.
14.9% reduction in the
emissions index since 2019.
We mitigate our carbon
emissions through our
partnership with Cool Earth.
See page 58
formore
information on
environmental
matters.
Colleagues
Our colleagues are at the heart of our business. Our Code of Conduct
setsout our Group standards and applies to everyone at Rentokil Initial.
Itincludes sections on health and safety, equality and fairness, human
rights and protecting personal information.
There is nothing more important in Rentokil Initial than ensuring everyone
goes home safe at the end of their working day. Our approach to making
sure this happens is set out in our Code of Conduct and our Health and
Safety Policy.
We aim to be an inclusive employer and have a wide range of policies,
including our Group Diversity, Equality & Inclusion Policy, Dignity at Work
andRights of Employees.
We aim to be an Employer
ofChoice and our c.46,000
colleagues are integral to
our business model (see
page 28).
0.38 Lost Time Accident
ratein 2021.
8.71 Working Days Lost
ratein 2021.
29% of our senior
management are female.
Colleagues are
one of our key
stakeholders,
as set out on
page 30.
Our colleagues
and culture are
described on
pages 51 to 54.
Social matters
Our purpose is to protect people and enhance lives and, as well as making
a meaningful contribution to the economy, we aim to support communities
where we operate. Our Community Involvement Policy sets out our
principles for positive engagement and our commitment to support
colleagues’ efforts to raise funds for good causes through a matched-
giving scheme. The Code of Conduct also contains a section on
respecting the world we work in.
£360,000 donated to charity
in 2021 (excludes donations
inkind).
Read more
about our
engagement
with the
communities
where we
operate on
page 66.
Respect for human rights
We support the rights of all people as set out in the Universal Declaration
of Human Rights. Our Human Rights Policy outlines the human rights
principles that reinforce colleagues’ expected behaviour in respecting
thehuman rights of colleagues and business partners. We may operate
incountries with potential human rights issues, but we would not tolerate
any connection with abuse.
As detailed in our Code of Conduct and our Supplier Code, we will employ
only individuals who are working of their own free will, and we have a zero
tolerance approach to child labour, bonded labour or other forms of slavery
in any part ofour business or their suppliers.
No human-rights violations
were identified in 2021.
We publish a Modern
Slavery Statement each
year, which is available
onour website.
Read more
about our Code
of Conduct and
Supplier Code
on page 70.
Anti-corruption and anti-bribery
We expect our colleagues to maintain the highest standards of conduct
and act with integrity at all times. Anti-bribery and corruption policy and
controls are addressed within the Code of Conduct and a separate
Anti-Bribery Policy, and these are reinforced by mandatory online training,
reviews and supplier audits, tracking registers, and our ethics reporting
system, Speak Up.
c.36,500 Core Corporate
Compliance training courses
were completed by
colleagues in 2021, with a
96% completion rate overall.
There were no fines,
penalties or settlements for
corruption reported in 2021.
Read about
ourBoard
overseeing
governance
andcompliance
on page 102.
B
The icons used above correspond to our stakeholder groups as set out on pages 30 and 31.
Colleagues Customers Shareholders Communities Suppliers
Rentokil Initial plc
Annual Report 2021
71
Corporate Governance Financial Statements Other InformationStrategic Report
Our responsible business
We are aware that there are potential
incidences where our impact can be negative
as well as positive; for example, as a result of
the chemicals we use and the greenhouse gas
emissions involved in providing services to
ourcustomers. We do not want the economic
value of our business to be at a high
environmental or societal cost. Our
environmental strategy focuses on the
operational risks and opportunities that we
have identified and is embedded within our
operating model as a multi-local, route-based
business. We have also published the key
activities to achieve net zero carbon emissions
from our operations by the end of 2040 and
are engaging with suppliers and developing
innovative technology as part of this.
Our reputation is paramount to the success of
our business, as we rely on the satisfaction of
our customers and the continued investment
ofshareholders. Our culture model includes
ourpurpose and values, along with our five
core culture themes: customer focused,
commercial, diverse, down to earth and
innovative. We continue to monitor our culture,
recognising the important role it plays in
underpinning the business’ sustainable
long-term success. We have a comprehensive
set of policies and procedures in place to
ensure high standards of professional business
conduct, including the adherence to our Code
of Conduct. We strive to act fairly between
shareholders of the Company at alltimes.
B
Read more about being
aresponsible business
A
Culture on pages 51 and 89 – details of our
culture model and how the Board monitors
culture and helps set the tone from the top
A
Our responsible business priorities on
pages 58 to 65 – details of our commitment
to acting responsibly, setting out our
environmental strategy and our focus on
service and innovation
A
Q&A with our Chief Executive on pages 18
and19 – answers to key questions about the
Group posed by investors in 2021
Pages 91 to 95 in the Corporate Governance
Report also form part of this statement, and is
incorporated by reference into the Strategic
Report. It sets out the Board’s activities and
principal decisions in 2021 and details the
Board’s consideration of the factors set out
insection 172(1) in making those decisions.
Our stakeholders
We identify our key stakeholders as
colleagues, customers, shareholders,
communities and suppliers. We consider
theenvironment to be strongly related to
communities and often consider them
together. However, we recognise that the
environment also affects our customers and
suppliers and is of increasing importance
toour colleagues and shareholders. In
discharging their section 172(1) duties,
theBoard has had regard to these key
stakeholders, although some factors may have
been more relevant than others. The Board
also gave appropriate regard to other factors
or interested parties relevant to each decision
being made where applicable; for example,
regulators, industry bodies and other
businessrelationships.
B
Read more about engaging
with stakeholders
A
Our stakeholders on page 30 – an overview
of our key stakeholders and how we
measure the impact of our engagement
A
Board engagement on pages 96 to 98 – the
approach taken by the Board to understand
and engage with our key stakeholders
A
Our responsible business priorities on
pages 51 to 54 and 66 to 69 – details of our
commitment to acting responsibly and the
impact on our colleagues and communities
Our strategic priorities
The Board aims to act in line with the
Company’s purpose of protecting people and
enhancing lives while creating long-term value
for our shareholders through our economic
success. The Board agenda is set to ensure
that key strategic priorities are considered
throughout the year and the Board reviews
and approves the long-term direction of the
business at its annual strategy day. Sufficient
information is provided by management to the
Board in order that it may make an informed
decision on any impact to stakeholders and
have appropriate regard to their interests.
Details of how our Board operates and the
way it reaches decisions, including the matters
discussed and debated during the year can be
found in the Corporate Governance Report.
When considering the needs of relevant
stakeholder groups, conflicting requirements
inevitably arise and we aim to make
judgements that serve the long-term interests
of the stakeholders. We acknowledge that
notevery decision the Board makes will
necessarily result in a positive outcome for
allstakeholders. However, by considering
keystakeholder groups and aligning our
activities with our strategic plan, as well as the
Company’s culture and values, we aim to act
fairly, transparently and in the best interests
ofthe Company over the long term.
In making their decisions and choices, and
insetting policies and strategy, our Directors
also consider any associated risks when
discharging their duties. Maintaining effective
systems of risk management and internal
control, reviewing and mitigating our principal
risks and identifying emerging risks all help
underpin the Group’s overall strategy and
allow the Board to have regard to factors that
could affect stakeholder relationships and
their impact on our long-term success.
B
Read more about strategic
decision making
A
Our ‘Big Six’ Challenges on pages 20 and 21
– an overview of our strategic priorities
A
Board focus in 2021 on pages 91 to 93 – an
overview of key areas considered by the
Board during the year and their outcomes
A
Principal decisions of the Board on pages
94 and 95 – detailed examples of the
principal decisions taken by the Board
during the year, the stakeholder
considerations and impacts
A
Risks and uncertainties on pages 73 to 79
– the approach to identifying and managing
the Group’s principal risks
s172(1) statement
The aim of section 172(1) of the Companies Act 2006 is to try to ensure a comprehensive understanding of a
company’s key relationships with a broad range of interested groups, such as employees, suppliers and customers,
and a proper consideration of external perspectives which will, ultimately, bring success over the long term.
Thisstatement intends to set out how our Board of Directors, both individually and collectively, have had regard
tothese factors when undertaking their duties during 2021.
Responsible Business
continued
72
Rentokil Initial plc
Annual Report 2021
Risks and Uncertainties
The Board relies on the assurances provided
through the periodic reports presented to the
Board and Audit Committee.
Using the process set out above, the Board
believes that it has undertaken a robust
assessment of the emerging and principal
risks which threaten the implementation of
thestrategy and the long-term viability of
theGroup and is satisfied that appropriate
mitigation plans are in place.
The Group’s business model remained broadly
the same in 2021 as in previous years. It
incorporates a number of elements that
moderate the risk profile of the Company.
A
Low capital intensity and high portfolio
retention rates: our categories exhibit strong
defensive qualities, as density and
efficiency gains are reflected in margin
growth.
A
Local market operations: the limited
dependency on cross-border flows of
people or products reduces the impact of
geopolitical risks, and foreign exchange risk
is muted since revenue is earned and costs
are incurred in local currency, and there is
natural resilience to fluctuations in market
dynamics in individual markets and
geopolitical and trade risks due to our local
market operations.
A
Clear and simple geographic model: our
decentralised model has single-country
management teams leading integrated
operations with combined back office
functions underpinned by shared systems.
Changes in risk profile of the
Company in 2021
The impact of COVID-19 on the economy
hasreduced as vaccination rates rise, and
governments’ desire to impose lockdowns
reduces.
While some sectors are still affected, and
sporadic local lockdowns occur, the overall
levels of service suspension have reduced
during 2021; however, we continue to monitor
the ongoing impact of COVID-19 within the
principal risks. The proposed acquisition
ofTerminix has been considered and
incorporated into our principal risks.
We continue to monitor existing and emerging
risks regularly in both the Audit Committee
(see pages 103 to 110) and the Group Risk
Committee (see page 90), and take mitigating
action as appropriate.
Areas where the risk profile of the business
has improved in 2021 include:
A
continuity of senior management in roles,
maintaining corporate knowledge and
experience;
Risk management approach
The Group’s overall risk management
approach, described here and on page 108
isdesigned to provide reasonable, but not
absolute, assurance at all levels of the Group
that risks are being properly identified and
effectively managed. This includes the
provision of appropriate mechanisms to
ensure that issues and concerns relating
torisk can be escalated up through the
organisation effectively and confidentially.
The Board has oversight of the Group’s
operations to ensure that internal controls
arein place and operating effectively. This is
achieved by reviewing the effectiveness of the
risk management processes and managing
the evolving risk environment as it approves
the Group’s overall strategy. Key components
of the Board risk management process are:
A
annual presentation and approval of risk
process by the Audit Committee;
A
review of Group Risk Committee minutes
bythe Audit Committee; and
A
annual presentation and approval of the
Group Strategy.
Management is responsible for effective
operation of the internal controls and
execution of the agreed risk mitigation plans.
Key components of the risk management
process by management are:
A
identification and management of risk
integrated into day-to-day operations by
local and regional operational management;
A
maintenance of a central risk register
periodically reviewed with changes tracked;
A
emerging risks and potential mitigations
reviewed at quarterly Group Risk Committee
meetings; and
A
deep dives on specific or emerging risks
atsenior management meetings.
The risk management process was
strengthened during 2021 by adding
additional review of the risk register, inclusion
of categories in the register and the
introduction of deep dive sessions on specific
or emerging risk topics at senior management
meetings, e.g.Demographics – Gen Z Rising,
Climate Change and Environmental
Sustainability andCyber Risk. An additional
Audit Committee meeting was added in May
each year.
The Board is satisfied that, through the
processes set out above, it is able to
effectively identify and manage risks. The
Board is further satisfied that the responsible
managers have the necessary skills and
expertise to ensure that the relevant risk
management process and control systems
arein place and fully operative.
A
continued roll-out of our target financial
andoperational systems across the globe,
combined with data analytics via our
Command Centre platform;
A
continued investment and standardisation
intechnical infrastructure to mitigate the risk
of a successful cyber attack;
A
continued strong cash flow giving financial
headroom to continue to acquire businesses
with good strategic fit;
A
performing a detailed risk assessment
seeking to clarify the impact of climate
change on our financial statements;
A
refreshed and simplified corporate policies
and improvement to compliance training
programme; and
A
regular monitoring and adjustment for
expected credit losses.
Areas where our risk profile has increased
in2021 include:
A
reduction in colleague retention and
increased time to recruit;
A
increasing and fluctuating inflationary
pressures;
A
increased volume of cyber attacks; and
A
integration risk in relation to
acquisitions – both effective execution
ofintegration plans and ensuring swift
ITintegration.
Identified risks
The principal risks most relevant to the Group
are described in the table on pages 75 to 79,
together with mitigating actions.
Full details of our financial risks can be found
in Note C1 on pages 181 and 182. The exact
financial impact of one or more of our principal
risks materialising will depend on the precise
operational impact of the risk, its interaction
with other risks and whether mitigating actions
are successful in reducing the overall financial
impact. The Group is exposed to other risks
and uncertainties related to environmental,
political, social, economic and employment
factors in the territories in which we operate.
Additional risks and uncertainties not
presently known to management or deemed
to be of lower materiality may, if they manifest
themselves, have an adverse impact on the
Group’s growth, profitability, cash flow and/or
net assets.
Managing risk and uncertainty
within our business
Accurate identification, assessment and management of key risks is
embedded in our processes and ensures appropriate actions to support
ourstrategic objectives.
Rentokil Initial plc
Annual Report 2021
73
Corporate Governance Financial Statements Other InformationStrategic Report
BoardAudit Committee
Emerging risk – Identification and escalation
Internal audits – Compliance verification
Group Risk Committee
Internal Audit function
Functional managementRegional management
Operational unit
Country management
Executive management
A
Oversight via Audit Committee and Board meetings
A
Approval of risk process annually
A
Review of Group Risk Committee minutes
A
Review of Group strategy annually
A
Coordinate risk identification, reporting and
governance activity via a central risk register
updated twice a year
A
Assessment and categorisation of risk
A
Group mitigating actions
A
Define/review Group policies and procedures
annually
A
Group Strategy definition annually
A
Monitoring via regional monthly performance
reviews
A
Consolidation and assessment of country risks
A
Regional mitigation actions
A
Regional operational priorities definition
A
Functional risk identification and assessment
A
Monthly performance review process
A
Review and assessment of local risks
A
Country level mitigating actions
A
Monitoring via monthly business unit reviews
A
Local risk identification as part of day-to-day
operations
A
Local mitigating actions as part of day-to-day
operations
Our risk management process
Risks and Uncertainties
continued
Strategic Financial Operational
People
Principal risks by category
A Failure to integrate acquisitions and
execute disposals from continuing
business
A Failure to develop products and
services that are tailored and relevant
to local markets and market conditions
Find out more on pages 12 to 16
A Failure to grow our business profitably
in a changing macro-economic
environment
A Failure to mitigate against financial
market risks
Find out more on page 144 to 149
A Breaches of laws or regulations
A Failure to ensure business continuity
incase of a material incident
A Fraud, financial crime and loss or
unintended release of personal data
A Safety, health and the environment
(SHE)
A Failure to deliver consistently high
levels of service to the satisfaction
ofour customers
Find out more on pages 24 to 27
74
Rentokil Initial plc
Annual Report 2021
Low Medium High Stable Increasing Decreasing
Principal risks
Failure to integrate acquisitions and execute disposals
fromcontinuing business
The Company has a strategy that includes growth by acquisition, and acquired 52 new
businesses in 2021. These companies need to be integrated quickly and efficiently
tominimise potential impact on the acquired business and the existing business.
Impact should the risk materialise
If the Company fails to successfully integrate acquisitions into its existing organisational
structures, fails to deliver the revenue and profit targets, or fails to deliver expected synergy
savings, the business may not achieve the expected financial and operational benefits which
may adversely impact growth, profitability and cash flow.
Business disposals also have to be managed efficiently to minimise risk to the businesses being
disposed and the residual business.
Mitigating actions
A
Integration plans considered by the Investment Committee as part of the acquisition approval
process. Integration activities and progress discussed during monthly performance reviews.
A
Dedicated project teams established for the largest acquisitions and demergers with clear
deliverables over three months, six months and one year. Project team in place for the proposed
acquisition of Terminix.
A
Tried and tested induction programme for the first 100 days for all acquisitions.
A
Continuity of management/leadership in acquired companies, where possible.
A
Use of transaction structures including deferred consideration to mitigate deal risk.
A
Group departments involved with acquisitions to drive integration plans and compliance with
Group standards, especially when entering new geographies.
A
Formal post-acquisition review of every acquisition by Investment Committee against original
business plan within 18–24 months; Board post-investment review of acquisitions in aggregate
every six months; Internal Audit review of acquisitions in new geographies within 12–18 months.
A
Board oversight of acquisitions involving new countries, new business lines, or above a defined
financial threshold.
Failure to develop products and services that are tailored
andrelevant to local markets and market conditions
We operate across markets that are at different stages in the economic cycle, at varying
stages of market development and have different levels of market attractiveness. We must be
sufficiently agile to develop and deliver products and services that meet local market needs.
Impact should the risk materialise
If we are not able to adapt to local business and consumer needs, our existing customers may
choose not to renew contracts, or seek reductions in prices. This negatively impacts our ability
to maintain or increase margins and cash flow.
Examples include:
A
We must adapt to changes to the regulatory environment that may ban certain products
orservice models from being used, such as permanent rodent baiting.
A
We need to respond to the expectations from customers and the wider populace for us
toreduce our own environmental impact and support our customers in reducing their
environmental impact.
A
We need to develop products that are networked and capable of being monitored in real time,
or react to competitor technology developments that are disruptive to the market.
Mitigating actions
A
Acquisition of targets with specific capabilities that address future changes inour markets.
A
Investment Committee to ensure targeted investment in innovation to meet market and
regulatory needs.
A
Category Boards for Pest Control and Hygiene & Wellbeing categories overseeing the roll-out
of innovations at pace across our regional businesses.
A
Continued investment in digital platforms tosupport Sales and Service frontline colleagues.
A
Group KPIs for innovation at a customer and colleague level to monitor progress.
A
Further develop our range of sustainable, non-toxic and humane pest control solutions.
Strategic
Changes 2021 versus 2020
A Additional resources provided to the US
tosupport integration and replatforming
A Terminix acquisition agreed
Performance measures to monitor risk
A Integration plans (30 days, 100 days, 1 year)
A Reviews of integration plans for specific
large acquisitions
A Post-acquisition review completions
A Post-investment review by the Board
ofaggregate performance of investment
inM&A
Changes 2021 versus 2020
A Introduction of Hygiene & Wellbeing
category
A Expanding into high-growth areas including
air care and route-based service extensions
A Increased penetration of digital
technologies on customer sites
A Growth in use of digital platforms by
customers
A Reorganisation of M&I function to ensure
focus on innovation
A Increased use of data analytics via our
Command Centre platform to provide
business insight
Performance measures to monitor risk
A Sales growth for key innovations
A Percentage of sales revenue from
innovation
A Number of sites with digital solutions
A Percentage of commercial customers
registered for digital platforms
A Percentage of colleagues utilising digital
applications
Overall risk level
Trend
Terminix transaction increases the scale
of this risk, but extensive mitigation plans
in place. Otherwise stable trend.
‘Big Six’ challenges
Overall risk level
Trend
No significant changes resulting
in a stable trend.
‘Big Six’ challenges
Find out more
– Our ‘Big Six’ Challenges on pages 20 and 21
W
Key Performance Indicators on pages 24 to 27
Rentokil Initial plc
Annual Report 2021
75
Corporate Governance Financial Statements Other InformationStrategic Report
Risks and Uncertainties
continued
Principal risks
Failure to grow our business profitably in a changing
macro-economic environment
The Company’s two core categories (Pest Control and Hygiene & Wellbeing since January
2022) operate in a global macro-economic environment that is subject to uncertainty and
volatility.
Impact should the risk materialise
Changes in the macro-economic environment could have a number of different impacts on the
ability of the business to grow profitably, to sustain recruitment and to deliver against targets.
Examples include:
A
Recession and economic slowdown in some of our key markets.
A
Ongoing impact of COVID-19 on some customer sectors and local lockdowns.
A
Low-growth economies with inherent cost inflation, where the Company has weak pricing
power may make it difficult to maintain profitability.
A
Growing market presence of multinational competitors may increase the cost of acquisitions
and drive down prices, impacting profitability.
A
Shift to greater proportion of key accounts in some markets may drive down prices and make
itdifficult to maintain profitability.
A
Political instability and civil unrest in some markets may cause localised revenue reductions.
A
Legislation (including climate change legislation), regulation or society expectation limits our
‘licence to operate’.
A
Inflationary pressures drive cost higher but uncertainty on the longevity of these increases;
customers may not accept price increases.
Mitigating actions
A
Regular review of our capital allocation model which is differentiated by line of business to
ensure that scarce resources are directed to countries and businesses with the most attractive
prospects.
A
Working with governments and regulators on implementation of new regulations.
A
Low-cost operating model, focused IT investment, incentives to deliver efficient operations
andback office process alignment and standardisation programme.
A
International Key Accounts team developing business with multinational customers to take
advantage of the unique global capabilities and new Hygiene & Wellbeing offerings.
A
A regionally focused defined pricing programme to drive profitability on existing portfolio,
buildinsight, and ensure profitable growth from new business and innovations.
A
Group Procurement team tasked to deliver economies of scale while ensuring robust supply
chain.
A
Regular monitoring and adjustment of expected credit losses to ensure appropriate levels
ofprovisioning.
A
Tools (e.g. Adobe Sign) to facilitate and automate contract execution and renewal on Group
standard terms and conditions.
Financial
Changes 2021 versus 2020
A North America business now accounts
for44.9% of Ongoing Revenue at CER,
upfrom 44%
A Further supply chain resilience through
expanding local supply chains
A Introduction of combined Hygiene &
Wellbeing category and additional
servicelines
A Regular review of inflation pressures
atalocal level
A Implementation of a comprehensive
Qualityof Earnings process
A Responsibility for monitoring pricing
decisions allocated to specific regional
colleagues
A Thematic audit review of debtors
includingexpected credit loss provisions
Performance measures to monitor risk
A Group Ongoing Revenue growth,
intotaland by category
W
A Group Organic Revenue growth,
intotalandby category
A Revenue contribution from acquisitions
A Group Ongoing Operating Profit
W
A Group Net Operating Margin
A Free Cash Flow conversion
W
A Net capital expenditure
A Customer retention
Overall risk level
Trend
Additional risk in relation to inflation has
been balanced by the reduced risk from
COVID-19 resulting in an overall stable
trend.
‘Big Six’ challenges
Failure to mitigate against financial market risks
Our business is exposed to foreign exchange risk, interest rate risk, liquidity risk, counterparty
risk and settlement risk.
Impact should the risk materialise
If any of the above risks materialise, this may have a negative impact on profitability, cash flow
and financial statements, and may negatively impact financial ratios and credit ratings,
impacting our ability to raise funds for acquisitions.
Mitigating actions
A
Financing policy in place to ensure that the Company has sufficient financial headroom to
finance operations and bolt-on acquisitions. Commitment to target credit rating of BBB.
A
Treasury policies that limit the use of foreign exchange and interest rate derivatives, set limits for
financial counterparty exposure, govern how financing is raised in bank and other debt capital
markets and provide rules around Treasury-related matters at operating company level.
A
Monthly Treasury Committee to report and monitor financial covenants and rating agency
metrics and compliance with Treasury policies.
A
Monitoring the impact of exchange rate movements on non-GBP profits and net debt.
A
Cash pooling and debt financing arrangement to match, as far as possible, currency availability/
demand across borders.
A
Revolving credit facility (RCF).
Changes 2021 versus 2020
A Updated Treasury policies
A External audit of Treasury function
completed
Performance measures to monitor risk
A Liquidity headroom at the year end of
£785m
A Counterparty ratings above A-
A Monthly reporting against ratings metrics
and financial covenants
A No unhedged foreign exchange positions
above £500k; fixed interest >50%; and
matching currency of net debt to underlying
profitability
A Monitoring of amounts outstanding against
counterparty credit limits
Overall risk level
Trend
No significant changes resulting
in a stable trend.
‘Big Six’ challenges
Low Medium High Stable Increasing Decreasing
76
Rentokil Initial plc
Annual Report 2021
Principal risks
Breaches of laws or regulations (including tax, competition
and anti-trust laws)
As a responsible company we aim to comply with all laws and regulations that apply to our
businesses across the globe.
Impact should the risk materialise
Failure to comply with local laws covering bribery and corruption, anti-competitive practice,
employment law, data privacy, health and safety, or financial and tax reporting requirements
may result in fines or withdrawal of licence to operate, which could adversely impact growth,
profitability and cash flow.
The Company operates across many different tax jurisdictions and is subject to periodic tax
audits which sometimes challenge the basis on which local tax has been calculated and/or
withheld. Successful challenges by local tax authorities may have an adverse impact on
profitability and cash flow.
Mitigating actions
A
Group Legal involvement in all acquisitions.
A
Tax strategy re-issued and approved by the Board annually.
A
All significant tax planning opportunities have to be pre-agreed with the Group Tax Director
and Chief Financial Officer with independent tax advice taken where necessary.
A
Regular review of tax exposures.
A
Group authority schedule in place and regularly reviewed.
A
Group and local policies in place and regularly reviewed.
A
Requirement to report breaches in controls and/or laws to the Group General Counsel and the
Director of Internal Audit & Risk. Follow-up by Group General Counsel of any significant
regulatory breach in any country.
A
Mandatory training on Code of Conduct and other core compliance topics, to instil a highly
principled culture of ethical behaviour, completion rates reported to senior management monthly.
A
All major business transactions or internal reorganisations are subject to a rigorous internal
and external review.
Failure to ensure business continuity in case
of a material incident
The business needs to have resilience to ensure business can continue if impacted
byexternal events, e.g. cyber attack, hurricane or terrorism.
Impact should the risk materialise
Failure to service our customers may affect our ability to retain those customers and damage
the Company’s reputation. This may negatively impact growth, profitability and cash flow.
Examples of incidents that could impact our ability to service customers include:
A
A significant cyber attack or IT failure which impacts our ability to plan efficient routing,
orabilityto invoice, and is not recovered quickly.
A
Fire, flood or climate event impacting our premises preventing goods from being available
to enable our technicians to service our customers.
A
Industrial action by colleagues.
Mitigating actions
A
All countries and units maintain and regularly review business continuity plans, with local plans
to service from alternative locations if required.
A
The majority of key data and applications are located in regional data centres with enhanced
backup capability.
A
Specific tools deployed to data centres to detect and prevent spreading of cyber attacks.
A
IT disaster recovery plans for regional data centres.
A
Data encryption and implementation of AirWatch on devices and mobile phones.
A
Ongoing user education awareness programmes.
A
Annual penetration testing on all systems to test external firewalls and address any identified
weaknesses.
A
Annual inspections of key sites by insurers, on a rotating basis, to identify potential risks.
A
Proactive engagement with union representatives.
Operational
Changes 2021 versus 2020
A Enhance audit issue reporting and
monitoring to drive timely resolution
ofissues identified, combined with the
introduction of a specific tool to record
andmanage internal audits
A Email reminders to senior colleagues for
mandatory online training completion
A Review and refresh of corporate policies to
include owners, review dates, location of
documents and a register to track changes
A Group authority schedule updated and
distributed
Performance measures to monitor risk
A Central monitoring of material litigation,
quarterly reporting from all countries
A Regular review of tax exposures and the
status of tax audits by the Audit Committee
A Completion rate for mandatory U+ training
modules, e.g. Code of Conduct and
competition law
A Monthly monitoring and reporting of audit
issues to executive management
Changes 2021 versus 2020
A Regular patching programme for all key
applications
A Deployment of anti-ransomware software
tothe data centres
A Enhanced colleague training programmes
A Additional resources added to the IT
security team
A Refreshed and reissued Procurement and
Stock & Warehouse Management Policies
A Wider use of automated IT software for
system data and settings, e.g. scanning tool
or risk assessment software
A New policy of isolating devices where
potential high-risk security alarms are
detected
Performance measures to monitor risk
A Number of serious IT incidents and time
taken to respond
A Major Incident Review actions
A Actions arising from IT security
self-assessments
A External testing and benchmarking of
our ITsecurity environment
A IT specific risk register focused on
assessing, monitoring and tracking IT
related risk
Overall risk level
Trend
Focus on policy refresh, compliance
training and increased visibility, and
reporting of audit issues has resulted
inadecreasing trend.
‘Big Six’ challenges
Overall risk level
Trend
As global incident volumes of cyber
attacks continue to trend upward wehave
assessed the trend for this risk
asincreasing.
‘Big Six’ challenges
Rentokil Initial plc
Annual Report 2021
77
Corporate Governance Financial Statements Other InformationStrategic Report
Risks and Uncertainties
continued
Principal risks
Fraud, financial crime and loss or unintended release
ofpersonal data
Collusion between individuals, both internal and external, could result in fraud if internal
controls are not in place and working effectively. The business holds personal data on
colleagues, some customers and suppliers: unintended loss or release of such data may result
in criminal sanctions.
Impact should the risk materialise
Loss of personal data of customers, suppliers or colleagues could, if significant, result in
regulatory intervention which may result in substantial fines and damage to the Company’s
reputation.
Theft of Company assets including property, customer or colleague information, or
misstatement of financial or other records via deliberate action by colleagues or third parties
may constitute fraud and result in financial loss to the business, damage to the Company’s
reputation and/or fines by regulators.
Mitigating actions
A
Ongoing programme to ensure all businesses are compliant with data privacy requirements.
A
Dedicated data privacy team, plus local privacy officers and privacy champions networks.
A
Mandatory online training by all senior colleagues for the Code of Conduct, preventing
anti-competitive practice, preventing bribery and corruption, securing information and
protecting privacy, avoiding conflicts of interest and preventing insider trading.
A
Roll-out of Corporate Criminal Offence policy and training.
A
Compliance with Code of Conduct and other key policies affirmed by the annual Letter
ofAssurance by all senior management.
A
Standardised financial control framework operating in all locations.
A
Confidential Speak Up hotline and email address, monitored and followed up by Internal Audit.
A
Significant frauds investigated by Internal Audit and lessons learned widely shared.
A
User security awareness guidance and policies refreshed and reissued.
A
Updated policies on devices and the provision of Citrix-only access combined with global
patching programmes.
A
Deployment of anti-ransomware to our data centres.
Safety, health and the environment (SHE)
The Company has an obligation to ensure that colleagues, customers and other stakeholders
remain safe, that the working environment is not detrimental to health and that we are aware
of and minimise any adverse impact on the environment.
Impact should the risk materialise
The Company operates in hazardous environments and situations, for example:
A
Use of poisons and fumigants in PestControl.
A
Driving to and working at customers’ premises.
A
Working at height.
A
Exposure to needlestick injury/bio-hazards from medical waste.
Non-compliance with internal policies or industry regulations could lead to personal injury,
substantial fines or penalties including withdrawal of licences to operate, and reputational damage.
Environmental risks may arise from former activities at sites currently operated by the Company
or acquired by the Company. Legislation and changing expectations, requiring the business to
alter its methods of operation.
Mitigating actions
A
Robust SHE policies supplemented by the SHE Golden Rules and technical policies address
higher risk and regulated activities.
A
SHE officers appointed in all jurisdictions, supported by dedicated central SHE team.
A
Mandatory training of all relevant colleagues in safe working practices.
A
Focus on implementation of Group fumigation standards in all new acquisitions.
A
SHE considered as the first item at all Board and senior management meetings; review
ofstandardised SHE KPIs.
A
Formal review of accidents and circulation of lessons learned (e.g. Safety Moments videos).
A
Strategy to further develop environmentally friendly approaches, e.g. lower pest control
chemical use, recycling of hygiene units, roll out use of electric vehicles, alternative fumigants.
Operational
Changes 2021 versus 2020
A Biannual review of key financial controls
with non-compliance tracked and monitored
A Inclusion of Corporate Criminal Offence
policy in annual Letter of Assurance
A Review and refresh of corporate policies
toinclude owners, review dates and a
register to track changes
A Email reminders to senior colleagues for
mandatory online training completion
A Colleague education programme on IT
general controls
A Refreshed and reissued Procurement and
Stock & Warehouse Management policies
A IT general controls project to ensure the
integrity of the data and processes
A Group-wide review of privileged access
tocritical IT applications
A Websites reviewed and cookies/banners
updated to ensure compliance with data
protection laws
Performance measures to monitor risk
A Completion rate for mandatory U+ training
modules
A Data privacy programme roll-out and
implementation
A Speak Up investigations and remediation
A Key financial controls pass rates
A Periodic review of IT access for critical
applications
Changes 2021 versus 2020
A Roll-out of digital site risk assessment
application which is either live or in pilot in
more than 40 markets
A Updated and simplified the Minimum
Fumigation Management Standards and
Minimum Operational Fumigation Standards
A Document for sub-contractors has been
incorporated into the Minimum Fumigation
Standards
Performance measures to monitor risk
A Lost Time Accident rate
W
A Working Days Lost rate
W
A Total emissions and emissions intensity
A Energy usage
A Compliance rates for mandatory U+ training
Overall risk level
Trend
No significant changes and enhanced
monitoring of system access resulting
inastable trend.
‘Big Six’ challenges
Overall risk level
Trend
No significant changes resulting
in a stable trend.
‘Big Six’ challenges
Low Medium High Stable Increasing Decreasing
78
Rentokil Initial plc
Annual Report 2021
Principal risks
Where to find further information
Failure to deliver consistently high levels of service to the
satisfaction of our customers
Our business model depends on servicing the needs of our customers in line with internal
high standards and to levels agreed in contracts.
Impact should the risk materialise
If our operatives are not sufficiently qualified, or do not have the right skills, or we fail to innovate
successfully, this may negatively impact our ability to acquire or retain customers, adversely
impacting growth, profitability and cash flow.
Industrial action in key operations could result in diminished customer service levels; if
prolonged, it could damage the Company’s reputation and ability to secure or renew contracts.
In markets where overall employment rates are high, and/or our business is growing fast
organically or via acquisition, we may have difficulty attracting and retaining key management
ofthe right capability and the right calibre of operational personnel.
Changes in the global job market following the COVID-19 pandemic, resulting in difficulty in
recruiting and retaining colleagues at all levels of the organisation, may impact our ability to
service our customers to the highest standards.
Major digital change programmes could disrupt our ability to deliver high levels of service to
ourcustomers.
Extreme weather could cause disruption to local operations and may impact colleague health
and safety.
Mitigating actions
A
HR development processes, including Employer of Choice programme.
A
Regular tracking of customer satisfaction and the perception by both customers and
non-customers of Rentokil Initial, benchmarked against competitors.
A
Dedicated Operations Excellence team to drive superior customer service and safe working
practices, and to establish key metrics, combined with a strong focus on safety by supervisors
and frontline staff.
A
Incentives for Sales and Service staff aligned closely with strategic priorities, based on
delivering improved customer service levels.
A
Oversight of key industrial relations matters by Group HR Director and regular review by the
Chief Executive for countries where industrial relations risk is elevated.
A
HR lead recruitment initiatives, including recruit ahead, benchmarked pay plans, global careers
and recruitment websites.
A
Regular review of major IT programmes by the Chief Information Officer and IT Investment
Committee to ensure sufficient allocation of resources with a quarterly IT risk meeting to ensure
oversight of IT transformation plans.
A
Local business continuity plans.
Operational
Changes 2021 versus 2020
A 34% increase in U+ learning
A Continued deployment of IT programmes
tofrontline colleagues
A Commence roll-out of the new diversity,
equality and inclusion programme to
leaders, managers and colleagues
A Completion of biannual Your Voice Counts
colleague survey
A Launch of Career+, our new internal job
referral platform
A Using remote and virtual hiring to recruit
candidates quickly and cost-effectively,
such as 100% virtual recruitment for our
2021 Corporate Graduate Scheme
A Embedding IT risk review process across
the regions to ensure delivery of digital
change programmes
Performance measures to monitor risk
A Sales and Service colleague retention
W
A The number of online training courses
beingdeveloped
A U+ learning views
A State of Service
W
A Customer satisfaction (Customer Voice
Counts)
W
A Customer retention
W
Overall risk level
Trend
Changes in the global job market have
resulted in reductions to colleague
retention and increased time to recruit,
resulting in an increasing trend.
‘Big Six’ challenges
Principal risk Key sections
Failure to integrate acquisitions and execute disposals from continuing
business
Our ‘Big Six’ Challenges, pages 20 and 21
Failure to develop products and services that are tailored and relevant
tolocal markets and market conditions
Innovation in Pest Control, pages 12 and 38
Our ‘Big Six’ Challenges, pages 20 and 21
Service and innovation for customers, page 55
Failure to grow our business profitably in a changing macro-economic
environment
Our Business Model, pages 28 and 29
Colleague and Shareholder KPIs, pages 24 to 27
M&A execution, pages 14 and 21
Our journey to net zero, page 58
Failure to mitigate against financial market risks Note C1 Financial risk management, pages 181 and 182
Breaches of laws or regulations (including tax, competition and
anti-trust laws)
Governance, trust and transparency, page 70
Failure to ensure business continuity in case of a material incident Information security, page 70
Fraud, financial crime and loss or unintended release of personal data Data privacy, page 70
Board monitoring and oversight, page 102
Our responsible business approach, pages 49 to 72
Safety, health and the environment (SHE) Key Performance Indicators, pages 24 to 27
Keeping our colleagues safe, page 52
Environment, page 58
Failure to deliver consistently high levels of service to the satisfaction
ofour customers
Service and innovation for customers, page 55
Colleague and Customer KPIs, pages 24 to 26
Rentokil Initial plc
Annual Report 2021
79
Corporate Governance Financial Statements Other InformationStrategic Report
Viability Statement
viability of the Group. The Directors have
taken account of the Group’s liquidity position
and the Group’s ability to raise finance and
deploy capital. The results consider the
availability and likely effectiveness of the
mitigating actions that could be taken to avoid
or reduce the impact or occurrence of the
identified underlying risks.
Mitigating actions that were identified as part
of the viability assessment in previous years
and which were found to be effective during
the pandemic, include securing additional
liquidity, deferring shareholder distributions,
pausing M&A activity, reducing planned
capital expenditure, use of recognised tax
payment deferral mechanisms and actively
managing the cost base of the Group. Should
these measures be insufficient then the Group
would consider raising equity; however, that
has not been required to date.
Although the review considered all the
emerging and principal risks identified by the
Group, the focus was also on how other global
events, like the COVID-19 pandemic, could
impact the Group’s future financial
performance and its cash generation under
different scenarios. As a result, severe but
plausible downside sensitivities were applied
to the three-year plan approved by the Board.
These were informed by the Group’s
experience during 2020.
The three-year plan is most sensitive to
thereduction in revenue due to customer
suspensions over extended durations. With
that in mind, the Directors have chosen
scenarios reflecting the principal risks to
stresstest the three year plan for the following
downside scenarios:
A
Revenue reduces by 30% against the
budget for six months of 2022. This scenario
is significantly worse than the customer
suspensions experienced during the first
half of 2020 that peaked at slightly below
30% for one month only.
Risks: failure to grow business profitably,
customer satisfaction, development of
services and products, business continuity
and M&A integration.
A
A prolonged downturn where revenue
reduces by 30% for each of the three years
in the model.
Risks: failure to grow business profitably,
customer satisfaction, development of
services and products, business continuity
and M&A integration.
A
A significant one-off charge of £200m either
in the form of a number of bank failures, the
break fee we would have to pay if we cancel
the Merger Agreement with Terminix under
certain circumstances, or as a result of a
major fine.
Risks: business continuity, financial markets,
fraud, financial crime, SHE, and breaches of
laws and regulations.
We have also considered two joint scenarios
of the above: 1) the six-month scenario and
bank losses; and 2) the three-year scenario
and bank losses. Reverse stress tests were
considered involving bank losses or fine of
>21% of Global Revenues (GDPR capped at 4%;
competition breach at 10%), or a 42% downturn
in Global Revenues for existing headroom to
In accordance with provision 31 of the
Corporate Governance Code, the Directors
have assessed the viability of the Group,
taking account of the Group’s current financial
position, the latest three year strategic plan,
and the potential impact of our principal risks
described on pages 75 to 79. Based on this
assessment, the Directors confirm that they
have a reasonable expectation that the Group
will be able to continue in operation and meet
its liabilities as they fall due over the period to
31 December 2024.
The business model of the Group is focused
on the delivery of services to customers
attheir premises. These are professional,
andoften highly technical services, where
customers have a need that we can help
resolve. While these ‘needs’ are subject to
some seasonality and macroeconomic cycles,
overall they are highly stable and growing
atGDP rates or faster. The drivers of this
growth are key to the Group’s prospects.
Population growth, growth of the ‘middle class’
and urbanisation around the world bring
growing numbers of humans closer together,
increasing the need for hygiene, as seen in
thepandemic, and for control of pests where
sources of food are more available. Finally,
while climate change will undoubtedly have
some adverse impacts on the Group, the
disaggregated nature of our services at
customer locations materially reduces
ourphysical risks. Finally, the change in
environment will likely bring upsides as pest
breeding seasons are longer, mortality rates
are lower and infestations are able to move
into markets where they historically could not
survive. Overall, the combination of business
model and macroeconomic factors suggests
that recent growth trends should continue
foreseeably in line with our medium-term
targets.
Period of assessment
Although the Directors have no reason to
believe that the Group will not be viable over
alonger time frame, because of the degree
ofuncertainty, the period over which the
Directors have a reasonable expectation as
tothe Group’s viability is the three-year period
to 31 December 2024. Having considered
whether the assessment period should be
extended, it is the view of the Directors that
athree-year period is still appropriate as it is
consistent with the historical periods in the
budgeting and strategic planning process.
Three years is also aligned with the typical
duration of both the customer and supplier
contract periods entered into by the Group.
Strategic planning process
The budget and longer-term plan have been
prepared in line with the Group’s strategy as
described in detail in the Strategic Report
(pages 1 to 79 and 144 to 149). The Board
reviews the Group’s performance monthly
anddepending on the external environment
and its potential impact on the Group’s latest
full-year forecast and strategic plan, will model
a number of scenarios.
Viability assessment
In making their assessment, the Directors have
considered the current position of the Group
and have undertaken a robust evaluation of
the principal risks, in particular the ones that
could impact on the liquidity, solvency and
be fully used. If we assumed no mitigating
activities as described above this would be
18% for three years.
The impact of the scenarios has been
modelled to test projected liquidity headroom
over the three-year viability period. In each
ofthe individual and joint scenarios the
Groupcontinues to retain sufficient liquidity
headroom with the mitigating actions it can
deploy. In the scenario of a significant one-off
charge of £200m, this could be managed
using ordinary liquidity management
processes.
In the three year period of the viability
statement, the Group has one debt maturity in
November 2024 when its €400m bond falls
due. As at 31 December 2021, the Group had
total undrawn committed facilities of £550m
and unrestricted cash, net of overdrafts of
£235m giving the Group combined headroom
of £785m.
In addition to its committed headroom the
Group also has a £200m accordion linked
toits revolving credit facility (RCF), a £1bn
Commercial Paper Programme and a number
of uncommitted, undrawn overdraft facilities
amounting to c.£80m.
Throughout 2021, the Group maintained its
long-term (BBB with a Stable outlook) and
short-term (A-2) credit ratings, which S&P
Global reaffirmed on 9 June 2021. In
September 2021, the Group amended its RCF
and took the opportunity to permanently
remove financial covenants from the facility.
Further, there are no covenants outside the
RCF facility.
The combination of a strong investment
gradecredit rating, the RCF banks’ willingness
to remove financial covenants, the flexibility
the Group has to make material reductions in
its cash outflows, which was demonstrated
during 2020, and the fact that the Group
hascontinued to generate cash provide the
Directors with confidence that the Group
could raise additional debt finance if required.
The geographical spread of the Group’s
operations helps minimise the risk of serious
business interruption. Furthermore, the Group
is not reliant on one particular group of clients
or sectors.
On 14 December 2021, the Group announced
that it had signed a definitive agreement to
acquire Terminix Global Holdings, Inc. subject
to regulatory clearance and approval by
shareholders of both companies. The deal
isanticipated to close during 2022. The
Directors have considered the fully funded
nature of the deal, the existing headroom
ofboth entities and the projected financial
performance of the combined entity and
haveconcluded that this transaction does
notchange the assessment of viability as
outlined above.
Based on this assessment and having carefully
considered the Group’s current standing,
debtservicing and the risks and uncertainties
referred to above, in line with the UK
Corporate Governance Code, the Directors
have a reasonable expectation that the Group
will be able to continue in operation and meet
itsliabilities as they fall due over the three-year
period ending 31 December 2024.
80
Rentokil Initial plc
Annual Report 2021
Corporate Governance
 Chairman’s Introduction to Governance
 Board of Directors
 Executive Leadership Team
 Corporate Governance Report
 Audit Committee Report
 Nomination Committee Report
 Directors’ Remuneration Report
 Independent Auditors’ Report
Rentokil Initial plc
Annual Report 2021
81
Corporate Governance Financial Statements Other InformationStrategic Report
Eective governance is about
the right behaviours, clarity of
thought and rigour in approach.
In 2021, the Board helped
reposition the business to apply
its purpose to exciting new
post-pandemic opportunities
inHygiene & Wellbeing and,
inthe Terminix deal, to deliver
for stakeholders at new scale
inNorth America.
Richard Solomons
Chairman
Dear Shareholder
As the effects of the COVID-19 pandemic
started to recede in 2021, Rentokil Initial has,
with the support of our colleagues, skilfully
navigated the ongoing uncertainties across
different parts of the world, such as global
supply chain shortages, growing challenges
inrecruiting and retaining frontline colleagues
and further lockdowns and restrictions in
some markets in our Asia and Pacific regions.
The Group continues to perform well and I am
pleased that the Board has been able to
recommend a final dividend of 4.30p for 2021.
The pandemic appears to have had a
considerable and ongoing impact on hygiene
attitudes and behaviours, and on customer
preferences. I attended our Capital Markets
Day in September 2021, where we set out why
we believe Hygiene is the new Pest Control,
presented our new Hygiene & Wellbeing
division, which from January 2022 pulls
together our many capabilities in this area,
andset out new medium-term performance
targets for the Group. We believe this updated
structure will be simpler for stakeholders and
drive greater opportunities for the business.
Itis also of course fully in line with our purpose
of protecting people and enhancing lives.
Board meetings continued to be held virtually
in the first half of the year, but I was delighted
to resume in-person meetings in June and for
our Board members to meet each other in
person again (remarkably, in Cathy Turner’s
case, for the first time after more than a year
on the Board).
As set out in this report, we reviewed our
Board calendar in early 2021 to ensure a broad
range of topics were covered, adding several
thought-provoking sessions across topics
frominternal operational risks and controls
onchemicals usage to sustainability, and
fromevaluating growth markets of the future
to responding to the impact of external
regulatory and societal shifts on our business
and workforce. Due to the ongoing
restrictions, management often still had to
present virtually, and while our hybrid-style
meetings work well we have also taken the
opportunity to reinforce our Board
engagement activities by individual Board
members joining a wider range of colleague
groups than previously managed.
The planned Board visit to North America,
originally due to take place in 2020, was once
again postponed, but we instead had a highly
successful visit to our French business in
November, combining it with our annual
in-depth strategic review. It is intended that
the Board will now visit North America in 2022.
A brief overview of key areas considered
issetout below with the following pages
providing more detail on our Board’s
composition, corporate governance
arrangements, processes and activities
during2021, together with our Board
Committee reports.
Chairman’s Introduction to Governance
37.5%
female
representation
on our Board
100%
attendance at
scheduled Board
meetings
4
additional Board
meetings
2
non-white ethnic
minority Board
members
4.30p
final dividend
1
additional Audit
Committee
meeting
82
Rentokil Initial plc
Annual Report 2021
Our RIGHT WAY plan
The Board considered the priorities of the
Group throughout the year, with particular
focus on the next evolution of our RIGHT WAY
plan. The Board was pleased to support a
range of changes, including the creation of a
Hygiene & Wellbeing category, designed to
make our business fit for the post-pandemic
future and ready to grasp the many organic
and M&A growth opportunities that our
markets will present. We considered how
bestto present this at our Capital Markets Day,
alongside a re-emphasis of the ongoing
strength of our leading global position in
pestcontrol and sharing our new Group
medium-term targets for revenue, profit
andcash.
Key topics on the Board agenda reflected
theongoing importance of service quality,
innovation and digital. Product innovation is
embedded in our business’ DNA and digital
will be one of the key drivers of future growth.
With this in mind, the Board held a special
innovation day in June with key members
ofour Marketing & Innovation team on this
critical area of differentiation from competitors.
Mergers and acquisitions
The Board was pleased to see the Group
return to its usual M&A pace in 2021,
completing a remarkable 52 deals in the year
across 25 countries globally, including four
new territories. The acquisition in August 2021
of Boecker World Holding SAL, a leading
operator in the Middle East, complements our
existing positions in the Gulf and elsewhere.
The Board held a special Cities of the Future
session in 2021, looking at target cities in
emerging markets anticipated to deliver higher
growth levels over the next few decades. Our
route-based businesses have customer and
product density at the heart of their success,
so continuing to prioritise our positions in the
fastest-growing urban areas of the future will
be key to delivering longer-term high
performance.
As a Board, a considerable amount of our time
and focus was spent evaluating the proposed
acquisition of Terminix Global Holdings, Inc.
(Terminix). It is clearly a very significant move
for the Company, and one which is firmly in
line with our declared growth strategy. The
combination of our strengths with those of
Terminix will improve our position enormously
in the world’s largest pest control market. We
considered the results of an extensive due
diligence process, which included my own trip
to meet with Terminix’s Chairman and CEO
inNorth America. The Board has conducted
periodic reviews of the competitive dynamic
inour key markets over a number of years.
After detailed advice and full consideration
ofthe strategic impact and opportunity this
transaction represents, as well as potential
risks, the Board was fully supportive and we
announced the signing of the Merger
Agreement in December.
The Board naturally remains highly engaged
on this critical transaction, actively overseeing
the intense management activity required over
the coming weeks and months. Full details will
be provided to shareholders in due course
with the provision of a Circular and Prospectus
ahead of a general meeting where we will
beseeking shareholder approval for the
acquisition (as well as equivalent SEC
documentation for Terminix’s shareholders
whose approval is also required). Following
receipt of shareholder approvals and the
necessary regulatory consents to complete
the transaction, the Board’s focus will quickly
shift to oversight of execution of the detailed
integration plans that are already under active
development, so that we can deliver on the
exciting, strategic opportunity that this
transaction represents.
Sustainability, culture and
engagement
We continue to consider, measure and report
on the environmental, social and governance
(ESG) aspects of our business. Our work
during 2021 has confirmed how strongly all
three elements are embedded across the
business, and how aligned many of their
objectives are with our purpose and
operational excellence agenda. From
world-beating safety practices and results, to
external recognition for efforts on diversity or
the quality and transparency of our external
reporting, the Board has been encouraged
by,and strongly supportive of, the focus and
drive in these important areas. They offer an
additional lens through which to assess the
quality of Rentokil Initial’s business and
management, and performance versus
competitors.
The biennial Your Voice Counts (YVC) global
employee engagement survey was conducted
during 2021 with a record 91% of our
colleagues providing responses. 25 out of 42
scores have improved since the last survey in
2019, with views on the Company’s overall
strategic direction and feeling informed about
Company news improving the most. As well as
being a purpose-driven, high-quality service
provider, we want to differentiate ourselves
asa world-class Employer of Choice, and it
was therefore pleasing to see that 82% of
colleagues are proud to work for Rentokil
Initial.
My Board colleagues and I held various
meetings with colleagues during 2021,
providing the opportunity to learn more about
working at Rentokil Initial and the business in
general. It has also allowed us to share some
of our knowledge and experience and this
seems to have been well received with
positive feedback. I look forward to continuing
with this engagement, with hopefully a few
more opportunities to meet with colleagues
inperson becoming available as travel
restrictions ease.
Succession planning
and diversity
During 2021, we welcomed Sarosh Mistry
tothe Board and it was a pleasure to finally
meet him in person in Paris in November.
Wecontinue to monitor the composition
anddiversity of the Board and it has been
impressive to see the steps being taken
throughout the business on diversity,
equalityand inclusion, including the launch
ofa global management training programme.
Paul Cochrane, Regional MD for the Asia
Region, is due to retire from the Company in
April, having been with Rentokil Initial since
1990, and Mark Gillespie, our Managing
Director of the Rest of World group of
countries, will take over from Paul. Daragh
Fagan, Group General Counsel and Company
Secretary, is also leaving at the end of March
to take up a new career in teaching. I am very
pleased to welcome Rachel Canham who will
be joining as Group General Counsel, and to
congratulate Catherine Stead who is being
promoted to take over as Company Secretary.
I would like to thank Paul and Daragh for their
contributions to the business and I look
forward to getting to know their successors
better as part of my ongoing engagement with
the senior management team.
I would like to thank all our shareholders for
their continuing support for the Company and
would encourage them to make use of the
remote facility being offered at our hybrid
AGM in May if they would like the opportunity
to engage with the Board. I look forward to
continuing the high calibre discussions with
my Board colleagues in 2022 as well as
working closely with Andy, Stuart and the
management team and I want to thank them
for all of their efforts in 2021. Finally, our
business is based on our colleagues and
Iwould like to thank them for their continued
commitment and professionalism which
helped deliver another outstanding year
forRentokil Initial.
Richard Solomons
Chairman
3 March 2022
Rentokil Initial plc
Annual Report 2021
83
Corporate Governance Financial Statements Other InformationStrategic Report
Board of Directors
Skills, experience and contribution
Richard brings to the Board deep operational and financial expertise
combined with a strong commercial and strategic development track
record. As former Chief Executive Officer of InterContinental Hotels
Group plc (IHG), and prior to that Chief Financial Officer, he has broad
experience of leading a successful multinational, as well as delivering
growth in North America and Greater China, and the effective use of
digital tools in service-led global businesses. These attributes enable
him to provide the necessary leadership to the Board and to contribute
insights relevant to many of the strategic priorities of the business,
aswell as experience from the key hospitality customer segment.
He is active, in parallel with the Executive Directors, in engaging with
investors to ensure that their views and perspectives are considered
within Board discussions.
Richard has a BA in Economics from the University of Manchester,
trained as a Chartered Accountant with KPMG, and has seven years’
investment banking experience in New York and London with Hill
Samuel. Until May 2020, Richard was the Senior Independent Director
of Aston Martin Lagonda Global Holdings plc.
Current external commitments
A
Member of the Board of Governors and the Finance Committee at the
University of Manchester
A
Chairman of the Board and the Advisory Committee, Hotelbeds
Group S.L.U. (Spain)
A
NED, Mandarin Oriental International Limited (Bermuda)
Skills, experience and contribution
Andy has led Rentokil Initial as Chief Executive since October 2013
and was responsible for the creation of the RIGHT WAY strategy.
Hebrings a focused operational management style, together with
abroad range of commercial and strategic skills gained in senior
executive positions and legal roles earlier in his career, including
several years inthe US and Canada. He has over 30 years’ experience
of creating value through mergers and acquisitions (M&A) around
theworld, at Rentokil Initial and ICI, and he has a strong record
ofengaging with stakeholders, from colleagues and customers
toinvestors, as well ascreating innovative partnerships with
not-for-profitorganisations.
He joined Rentokil Initial in 2008, as Executive Director of the global
Pest Control business, from ICI where he was part of the executive
management team with operational responsibility for ICI’s Regional
and Industrial Division, after holding various management positions
asGeneral Counsel and head of the M&A team since 1987. Andy is
agraduate of the University of Southampton (LLB) and a qualified
solicitor. Heis a patron of Malaria No More UK.
Current external commitments
A
Vice Chair of Street League
A
Senior Strategic Adviser – Business Services, Apax Partners LLP
Skills, experience and contribution
Stuart has extensive experience in senior operational and corporate
finance roles, gained at Group level and in key operational businesses
since joining Rentokil Initial in May 2007, as well as other leading
organisations. Most recently, he was CFO for North America, the
Company’s largest business, and before that spent several years
asGroup Financial Controller and Treasurer before four years as
Regional Finance Director for Europe, driving organisational change
and enhancing growth. A deep operational understanding of key
regional businesses, combined with experience at the corporate
centre, will enable Stuart to make a broad contribution to the
ongoingdevelopment and growth of the Group.
After qualifying as an accountant at Stoy Hayward, he worked for
organisations including Lex and RAC and joined Rentokil Initial in 2007
as Divisional Finance Director for the global Pest Control business.
Stuart has a degree in Politics and International Studies from the
University of Warwick and is a fellow of the Institute of Chartered
Accountants in England and Wales.
Current external commitments
None
Richard Solomons
Chairman
Appointed: March 2019 and
became Chairman
in May 2019
Andy Ransom
Chief Executive
Appointed: May 2008 and
became Chief Executive in
October 2013
Stuart Ingall-Tombs
Chief Financial Officer
Appointed: August 2020
Key
Audit Committee member
Nomination Committee member
Remuneration Committee member
Committee Chair
NED Non-Executive Director
SID Senior Independent Director
Skills, experience and contribution
Sarosh has extensive experience as a senior executive, driving
organicand inorganic growth in business-to-business services,
especially in North America. He has deep experience of building
businesses across the healthcare, retail, facilities management,
hospitality, financial services and consumer technology industries,
including innovation-led growth, service line extensions and new
country entries (including emerging markets in Latin America and
Asia). His executive experience has been in complex, geographically
dispersed and multi-site businesses operating globally.
Sarosh is Chairman of Sodexo’s North American services, which
include clinical technology in healthcare settings, SaaS-based digital
ecosystems and food-focused delivery. He is also CEO of Sodexo’s
global Home Care Services business and a member of the listed
group’s executive committee. Prior to joining Sodexo in 2011, he
worked in senior roles in major business-to-business and consumer
organisations Compass, Starbucks, Aramark and PepsiCo. Sarosh
hasa Bachelor’s degree from St John’s University, Minnesota,
andanMBA from the A. Gary Anderson Graduate School of
Management, California.
Current external commitments
A
Chairman, Sodexo North America and CEO,
Home Care Services Worldwide
A
Board Director, Didi Hirsch Mental Health Services
Sarosh Mistry
Non-Executive Director
Appointed: April 2021
Company Secretary
Daragh Fagan acts as secretary to the Board.
His biography can be found on page 86.
84
Rentokil Initial plc
Annual Report 2021
Skills, experience and contribution
John has a strong track record of developing and implementing global
strategies for profitable growth at National Grid, deep experience
ofrunning a major US business, a strong economic background and
engineering leadership experience. His skillset includes service
provision to a large commercial and residential customer base,
delivering world-class levels of safety performance and driving
transformational change in highly regulated environments. He also
hassignificant experience of M&A in both the UK and US. He has
broad experience of dealing with governments and regulators in
theUK and US, and leading development of ESG strategies where
hehas driven the introduction of National Grid’s first ever Responsible
Business Charter which launched in 2020, and led the company’s
Principal Partnership of COP26 in Glasgow.
John is Chief Executive of National Grid plc, a fellow of the Institute
ofEngineering and Technology, and a fellow of the Energy Institute.
He is a member of the UK government’s Inclusive Economy
Partnership, a member of the Edison Electric Institute Executive
Committee, a member of the Electric Power Research Institute Board
and sits on the President’s Committee of the CBI.
Current external commitments
A
Chief Executive, National Grid plc
John Pettigrew
Senior Independent Director
Appointed: January
2018 and became
Senior Independent
Director in May 2019
Board changes
in 2021 and 2022
Angela Seymour-Jackson stepped down
as a Non-Executive Director in May 2021.
Daragh Fagan will retire as Company
Secretary in March 2022 and will be
succeeded by Catherine Stead.
Skills, experience and contribution
Cathy is an experienced Non-Executive Director with significant
business leadership experience plus a deep knowledge of HR and
remuneration matters. Her executive career, at executive committee
level at Barclays PLC and Lloyds Banking Group PLC, has included
responsibility for strategy, investor relations, HR, corporate affairs,
legal, internal audit, brand and marketing. She brings deep experience
of leading international customer-focused businesses, operating in
complex, highly regulated industries and navigating highly challenging
environments such as the 2008 financial crisis.
Her earlier career was in consulting and manufacturing and included
roles with major audit and consultancy firms. Cathy graduated in
Economics from Lancaster University. Until May 2020, she was a
Non-Executive Director at Quilter plc. She is a partner at the senior
advisory organisation, Manchester Square Partners.
Current external commitments
A
NED and Chair of the Remuneration Committee, Aldermore Bank plc
A
NED and Chair of the Remuneration Committee, Spectris plc
A
NED, Motonovo Finance Limited
A
Trustee, Gurkha Welfare Trust
Cathy Turner
Non-Executive Director
Appointed: April 2020
Skills, experience and contribution
As an economist, corporate lawyer and financial broadcaster,
Lindabrings a diverse range of skills to the Board, including strong
commercial experience gained through her work in corporate law
andprevious non-executive positions, as well as deep insights into
theeconomic environments in the markets in which Rentokil Initial
operates, including key emerging and rapidly developing markets.
Linda has acted in various advisory roles, including for the World Bank
and the European Commission. Linda has obtained a BA at Yale;
Master’s at Harvard; Juris Doctorate at New York University; and
anMA and doctorate at Oxford. Linda is a fellow at St Edmund Hall,
Oxford University and Adjunct Professor of Economics at London
Business School as well as Visiting Professor at the London School
ofEconomics and Political Science (LSE). Linda is an Adviser to the
UKBoard of Trade and a member of the Independent Review Panel
onRing-fencing and Proprietary Trading.
Current external commitments
A
Trustee of Malaria No More UK and the Coutts Foundation
A
Chair of the Royal Commonwealth Society
A
Chair of The Schiehallion Fund Limited and Chair of the
Nomination Committee
A
SID and Chair of the Nomination and Remuneration Committee,
Fidelity China Special Situations plc
A
NED, SEGRO plc
Linda Yueh
Non-Executive Director
Appointed: November 2017
Skills, experience and contribution
Julie has extensive financial experience having had a long, successful
career in a number of commercially oriented finance and related roles,
working for some of the world’s best-known consumer brands. In her
non-executive career, she has extensive experience of leading audit
committees in companies undergoing rapid growth and change.
Through her various roles, Julie has also gained significant exposure
to commercial, legal, HR and operational challenges and
responsibilities.
She was Chief Commercial Officer of Virgin Atlantic Limited between
2010 and 2013, responsible for the commercial strategy of Virgin
Atlantic Airways and Virgin Holidays, having previously been Chief
Financial Officer of Virgin Atlantic Limited for 10 years. In addition,
Julie was previously Group Finance Director at Porsche Cars Great
Britain, and Finance and Operations Director at WH Smith – HJ
Chapman & Co. Ltd. She was previously a Non-Executive Director
ofStagecoach Group plc, Gategroup AG, Cineworld plc and DFS
Furniture plc. Julie is a Chartered Accountant, having trained
withPriceWaterhouse, and has a BA (Hons) in Economics from
Cambridge University.
Current external commitments
A
NED and Chair of the Audit Committee, NXP Semiconductors N.V.
(Netherlands)
A
SID and Chair of the Audit Committee, easyJet plc
A
NED and Chair of the Audit Committee, Ocado Group plc
Julie Southern
Non-Executive Director
Appointed: July 2014
Rentokil Initial plc
Annual Report 2021
85
Corporate Governance Financial Statements Other InformationStrategic Report
Gary Booker
Chief Marketing, Innovation
andStrategyOfficer
Appointed: January 2018
Role
As Chief Marketing, Innovation and Strategy
Officer, Gary has overall responsibility for
business strategy, brand, innovation, digital,
global account sales and global marketing
forcommercial and residential customers.
Skills and experience
Gary’s career includes former CEO and
General Manager positions as well as strategy
and innovation leadership roles for several
high-profile businesses, including Dixons
Carphone, where he was Chief Marketing
Officer and oversaw its Currys and PC World
brands; O2 (Telefónica) in the UK; and
Electronic Arts in San Francisco, where he
gained strong experience across mobile and
digital marketing. Prior to that, Gary held
senior roles at Dunlop Slazenger and Unipart.
Gary holds an MBA in Strategic Marketing and
a BSc (Hons) in Business Studies, Law and
Psychology.
Paul Cochrane
Managing Director, Asia
Appointed: March 2016
Role
Paul oversees our businesses throughout
the Asia region.
Skills and experience
Paul joined Rentokil Initial in 1990 as Branch
Manager of the Initial Hygiene business in
New Zealand. He later became Managing
Director of Rentokil Initial New Zealand & Fiji,
Managing Director of Ambius in the UK,
Managing Director of Initial Hygiene Pacific
(Australia, New Zealand and Fiji) and then
Senior Vice President of Rentokil Initial Asia
before becoming Regional Managing Director
for Asia. Paul has a diploma in Business from
the University of Auckland and a Trade
Certificate of Automotive Engineering
fromManukau Institute of Technology
inNewZealand.
Vanessa Evans
Group HR Director
Appointed: January 2016
Role
As Group HR Director, Vanessa leads a team
responsible for shaping and executing our
Employer of Choice strategy, ensuring that
wecan attract, recruit, train, engage, reward
and retain the talent we need to deliver on
ourbusiness strategy and results.
Skills and experience
Vanessa has had a successful career with
some of the world’s best-known consumer
brands. She brings valuable business
experience and expertise in human resources
management. She joined Rentokil Initial from
RSA Group plc where she was Group HR,
Communications and Customer Director.
Priorto that, Vanessa was Global HR Director
at Lego and Head of UK HR at GAP. She is a
Fellow of the Chartered Institute of Personnel
and Development and holds a BA (Hons) in
Geography from Bulmershe College,
University of Reading.
Chris Hunt
Group M&A Director
Appointed: July 2019
Role
Chris leads Rentokil Initial’s efforts to identify,
evaluate, negotiate and integrate acquisitions
and disposals, ensuring that the deals
addvalue.
Skills and experience
Chris joined Rentokil Initial in 2012 as Head
ofM&A and has completed more than 300
deals for the Group. Prior to joining Rentokil
Initial, Chris held various senior roles at
AstraZeneca plc, including Head of Finance
atAZ UK’s Marketing Company, Corporate
Strategy Director and Group M&A Director,
and prior to that was a Director at KPMG
Transaction Services. Chris has extensive
operational finance, business development
and corporate finance experience. He is
aChartered Accountant and sits on the
ICAEW’s Corporate Finance Faculty Board.
He holds aBA (Hons) in Accounting
and Computing from the University of Kent,
Canterbury.
Alain Moroid
Managing Director, Europe
Appointed: March 2016
Role
Alain oversees our businesses
throughout the Europe region.
Skills and experience
Alain joined Rentokil Initial in 2013 as
Managing Director, Pacific and became
Managing Director, Europe in September
2019. He joined from Unilever where he
heldanumber of senior roles across multiple
geographies. He has significant experience
inmarketing, sales and business development
acquired during 23 years withUnilever in
Europe, Asia and Pacific. Alain isadual
national Belgian/Australian andis fluent in
English, French and Dutch. Heholds an MSc
inBusiness from the Solvay Business School,
University of Brussels.
Daragh Fagan
Group General Counsel and
Company Secretary
Appointed: Group General Counsel in
September 2013 and became Company
Secretary in July 2014
Role
As Group General Counsel, Daragh has overall
responsibility for supporting the global growth
strategy of the Group and ensuring its legal
compliance. He also acts as Company
Secretary to the Board of Directors.
Skills and experience
Daragh is a qualified solicitor, having trained at
Herbert Smith, and has extensive experience
in major listed multinational corporations,
including those with significant businesses in
emerging markets. Daragh previously worked
at Thomson Reuters as General Counsel,
Europe & Asia, and General Counsel, EMEA
ofReuters Group plc. Before joining Reuters,
he spent 10 years working inthe oil and gas
industry for the Italian multinational Eni SpA.
Daragh has an MA (Hons) inHistory from
Cambridge University.
Executive Leadership Team
86
Rentokil Initial plc
Annual Report 2021
Executive Leadership Team
The Executive Leadership Team (ELT)
supports the Chief Executive in managing
the business at Group level, overseeing
safety, performance, operational plans
andactions, governance and risk
management. The ELT meets fortnightly
and the Regional Managing Directors
ofour Latin America and Rest of World
territories attend all meetings.
Andy Ransom and Stuart Ingall-Tombs
are also members of the ELT. Their
biographical information can be found
on page 84. The Chief Executive chairs
the ELT.
ELT changes in 2022
Paul Cochrane, Managing Director, Asia,
will retire at the end of March 2022 and
Mark Gillespie, currently Managing
Director for Rest of World, will succeed him
as Managing Director, Asia and MENAT.
Inaddition, Daragh Fagan will be retiring
as Group General Counsel and Company
Secretary at the end of March 2022.
Rachel Canham will join the ELT as Group
General Counsel in April 2022.
John Myers
Managing Director, NorthAmerica
Appointed: October 2013
Role
John oversees our businesses throughout
theNorth America region.
Skills and experience
John joined Rentokil Initial in 2008 as
President and Chief Executive of the
PestControl division in North America.
Previously, John held various senior
management rolesat Cintas Corporation.
Priorto that, hewasPresident and Chief
Executive at BioQuest LLC. John has a diverse
business background, with extensive sales,
marketing and business strategy experience.
He is a graduate of the University of Vermont
where he earned a Bachelor’s degree in
Business Administration. He also holds an
MBA from Mercer University in Atlanta.
Mark Purcell
Chief Information Officer
Appointed: April 2019
Role
Mark’s role is to ensure a ‘safe and secure first’
approach is applied to Rentokil Initial’s global
IT systems and infrastructure. With his team,
he works alongside the regional and functional
teams to ensure that the IT strategy and
investment is aligned to business priorities.
Skills and experience
Mark joined Rentokil Initial in 1988. He later
became Global IT Delivery Director, UK
Hygiene and Textiles IT Director, Pest Control
and Ambius Division IT Director, IT Director
forUK & Rest of World, and then CIO Europe,
before becoming Group CIO in April 2019.
Mark has significant experience in business
transformation, change management and
project/programme management, as well
asexpertise in M&A integration. Mark’s early
career was with the Civil Service where he
held an executive officer position in IT.
Brian Webb
Group Operations Excellence Director
Appointed: August 2019
Role
Brian is focused on driving technical and
operational improvements across the Group
alongside the leadership of the global
procurement function and supply chain
network.
Skills and experience
Brian joined Rentokil Initial in 2011 as Supply
Chain Director for Hygiene and Pest Control
and has gained additional responsibilities,
including Group Procurement, Workwear
Supply and European Operations over the
years. His career has included roles in
engineering, production management and
operations, mainly in the food and beverage
sector, with global companies such as
SABMiller, Mars Confectionery and Sara Lee.
Brian is a Chartered Engineer (CEng) with
anMSc in Engineering from Witwatersrand
University (South Africa) and an MBA from
Henley Management College (UK).
Andrew Stone
Managing Director, Pacific
Appointed: September 2019
Role
Andrew oversees our businesses
throughout the Pacific region.
Skills and experience
Andrew joined Rentokil Initial in 2013 as
Finance Director, Pacific, before becoming
Managing Director, Pacific in September 2019.
Previously, Andrew had held a numberof
senior finance and sales roles atUnilever
within Australasia. He has extensive
commercial, finance and supply chain
experience.
Andrew is a Certified Practising Accountant
and earned Bachelor degrees in Economics
and Law from Sydney University. Additionally,
he holds a Master’s of Management from
Macquarie Graduate School of Management
and a Master’s of Professional Accounting
from Southern Cross University.
Phill Wood
Managing Director, UK & Rest of World¹
Appointed: October 2013
Role
Phill oversees our businesses throughout
the UK & Rest of World region.
Skills and experience
Phill joined Rentokil Initial in 2006, holding
various senior Pest Control roles in Europe
before his appointment to lead the UK
businesses – Pest Control and Hygiene in
2009. Hebecame Managing Director of UK &
Rest of World in 2013. Prior to joining Rentokil
Initial, Phill held a number of top management
positions at Lex Services/RAC plc where
heserved for 15 years. Phill has extensive
commercial and business development
experience. He is a Chartered Management
Accountant and holds a BSc (Hons) in
Management Science from Loughborough
University.
1. Managing Director, UK & Sub-Saharan Africa
from 1 April 2022.
Rentokil Initial plc
Annual Report 2021
87
Corporate Governance Financial Statements Other InformationStrategic Report
Corporate Governance Report
Statement of compliance
The principal governance framework applying
to the Company is the UK Corporate
Governance Code, the latest edition of which
was published in July 2018 (the Code). The
Code is published by the Financial Reporting
Council (FRC) and the full text is available on
its website at frc.org.uk.
The Company has complied throughout 2021
with all the provisions in the Code other than
provision 36, which only became formally
compliant following the approval of our
Directors’ Remuneration Policy by
shareholders in May 2021, and provision 38.
Provision 36 relates to a formal policy for
post-employment shareholding requirements
while provision 38 relates to the pension
Board leadership
andcompany purpose
Long-term value
The Directors of the Company are set out
onpages 84 and 85.
Our business model is set out on page 28,
our strategic priorities are on pages 20 and
21, and our strategy by category can be found
on pages 36 and 44.
Principal risks are on pages 74 to 79.
A description of how these have been
considered by the Board throughout the year
is given on pages 91 to 95.
Purpose and culture
Our purpose and values are set out on page
16 and a summary of our culture is provided
on page 51. The Board’s ongoing monitoring
of the Company’s culture and values is
outlined on page 89.
Stakeholders
Our key stakeholders are set out in the
Strategic Report on pages 30 and 31. The
section 172(1) statement, setting out how the
Directors have had regard to stakeholders
when undertaking their duties, can be found
on page 72. Details of how the Board
understands the views of key stakeholders
are provided on pages 96 to 98.
Significant votes against a resolution
Two resolutions received less than 80%
support at our AGM held in May 2021. These
related to our new Directors’ Remuneration
Policy and an amendment to our Performance
Share Plan rules to mirror the proposals inthe
Policy. Full details can be found on pages 96
and 121.
Division of
responsibilities
Role and independence of Directors
At least half the Board, excluding the
Chairman, are considered independent.
Fulldetails are provided on page 100.
Board and Committee meetings
A table detailing the number of meetings
andDirector attendance for the Board and
the Audit, Nomination and Remuneration
Committee meetings held during 2021 can
befound on page 89.
Directors’ significant external commitments
Details of the Board’s current external
commitments are provided in their
biographies on pages 84 and 85. The Board’s
approach to external commitments and the
significant external appointments considered
during the year are on page 100.
Composition, succession
andevaluation
The Nomination Committee Report can
befound on pages 111 to 114.
Diversity and inclusion
Details of our diversity policy and key
measurements are contained in the
Responsible Business section on page 53.
The Board’s oversight of diversity and
inclusion, and details of the Board diversity
policy are provided in the Nomination
Committee Report on pages 113 and 114.
Director appointment and succession
planning
The Nomination Committee has responsibility
for ensuring the correct balance of skills,
experience and knowledge, and oversees
succession planning. Full details are provided
in the Nomination Committee Report on
pages 112 and 113.
Board evaluation
The Board, Board Committees and individual
Directors undertake a review annually.
Adescription of the process undertaken
during 2021 is provided in the Corporate
Governance Report on pages 101 and 102.
Audit, risk and
internalcontrol
The Audit Committee Report can be found
onpages 103 to 110.
Risk reporting
Our approach to risk management and
internal control is set out on pages 73 to 79,
along with the Group’s principal risks. The
Board’s oversight of risk management and
the internal control framework is set out on
page 102 and further details on risks and
controls are provided in the Audit Committee
Report on pages 108 and 109.
Other reporting requirements
The Board’s approach to ensure a fair,
balanced and understandable report is
provided on page 102. The going concern
statement can be found on page 214 and
theviability statement is on page 80.
The statement of Directors’ responsibilities
ison page 214.
contribution rates for Executive Directors.
Afull explanation is provided in the
Remuneration section below. Information on
how the Company has applied the principles
and complied with the supporting provisions
during the year can be found throughout the
Annual Report.
Details of where key information can be found
are provided below.
Remuneration
The Remuneration Committee Report can
befound on pages 115 to 136.
The current Directors’ Remuneration Policy
was approved by shareholders at our AGM
inMay 2021. Details of how the policy
wasapplied during 2021 and how the
Remuneration Committee has undertaken
itsduties can be found in the Directors’
Remuneration Report.
Provision 36 of the Code states that the
Remuneration Committee should develop
aformal policy for post-employment
shareholding requirements encompassing
both unvested and vested shares. As
communicated last year, while we had
several provisions already in place, a formal
post-employment policy was incorporated
aspart of our Directors’ Remuneration Policy
which was approved by shareholders at our
AGM in May 2021, and we are now operating
in compliance with this provision of the
Code.
Provision 38 of the Code states that the
pension contribution rates for Executive
Directors, or payments in lieu, should be
aligned with those available to the
workforce. With the adoption of our
Directors’ Remuneration Policy following our
AGM in May 2021 the pension entitlement for
new Executive Directors will now be in line
with the UK workforce, currently 3% of base
salary. However, our Chief Executive was
already in role at the time of the introduction
of the new Code, with a contract that entitled
him to a pension equal to 25% of his salary.
Despite the contractual obligations, as
previously communicated, the Remuneration
Committee reached an agreement whereby
the Chief Executive’s pension contribution
would be frozen at the 2019 amount and
willbe reduced to be in line with the wider
workforce by the end of 2022, when we will
be fully compliant with provision 38. This
phased reduction was communicated to
shareholders as part of the Directors’
Remuneration Policy engagement last year.
88
Rentokil Initial plc
Annual Report 2021
Board composition
The Board currently comprises a
Non-Executive Chairman, two Executive
Directors and five Non-Executive Directors
whose key responsibilities are set out on page
99. They are advised and supported by the
Group General Counsel & Company Secretary.
You can find full details of the Board members
who served during 2021, and in 2022 to the
date of this report, on pages 84 and 85.
Non-Executive Directors have regular
opportunities to meet members of the
executive management team (see page 97)
and also have an annual meeting with the
Chairman to allow discussion without
executive management present. A Nomination
Committee, comprising all the Independent
Non-Executive Directors and chaired by the
Chairman, is responsible for managing the
appointment process, to ensure a formal,
rigorous and transparent procedure for
appointing Directors.
Sarosh Mistry joined as a Non-Executive
Director on 1 April 2021 and we provided
details in our 2020 Annual Report of
therecruitment process undertaken. He
becameamember of the Nomination and
Remuneration Committees from his date
ofappointment. Angela Seymour-Jackson
stepped down as Non-Executive Director
following the conclusion of our AGM in May
2021 and Cathy Turner has succeeded her
asChair of the Remuneration Committee.
You can find further information on
appointment and succession planning in the
Nomination Committee Report on pages 112
and 113. The Board considers that it and its
Committees have an appropriate composition
to discharge their duties effectively and to
manage succession issues. The Board keeps
its membership, and that of its Committees,
under review, to ensure it maintains an
appropriate balance.
Values and culture
Our culture is characterised as customer
focused, commercial, diverse, down to earth
and innovative (see page 51 for more details).
Our longstanding values of service,
relationships and teamwork, and our culture
underpin our ambition to be a world-class
Employer of Choice. The Board regularly
monitors the status of these to ensure that our
culture is aligned with our business goals and
is right for our people and purpose. To monitor
this effectively, we have identified some key
metrics which the Board receives detailed
reports on twice a year as part of its update
onculture, progress on our Employer of
Choice agenda, and workforce engagement.
Focus this year was on recruitment and
retention as well as training and development,
diversity and inclusion, and information on
ourEmployer of Choice strategy for Gen Z
(seepage 93 for more details).
One of the key methods for both senior
management and the Board to monitor culture
is to analyse the results of the YVC colleague
survey which is carried out every second year
and which includes questions mapped to each
of the five core culture themes in our culture
model to provide a score and trend for each
ata Group, functional and regional level.
Wehave also identified 12 questions in the
survey to create a Core Culture Index. In 2021,
our Core Culture Index was 81%, a 1% increase
since the last survey in 2019. Full details can
be found on pages 51 and 52.
Examples of other ways that the Board
monitors and assesses culture include:
A
monitoring Sales and Service colleague
retention rates;
A
monitoring content and usage of the U+
online learning platform and other means
ofdelivering training and development;
A
the results of employee pulse surveys;
A
external views such as Glassdoor ratings;
and
A
mental health awareness and other
employee campaigns. In 2021, these
included management training on mental
health and wellbeing, and a pilot training
colleagues as Mental Health First Aiders.
The Audit Committee also monitors culture
through its oversight of:
A
confidential reporting via the Company’s
Speak Up facility; and
A
compliance failures, such as incidences
offraud.
The Board and its Committees consider other
methods of measurement throughout the year
as part of their ongoing engagement with
stakeholders as set out on page 96. Our
approach to investing in and rewarding our
colleagues can be found on pages 54 and 128.
The Board’s culture update twice a year also
includes an overview on the Company’s
approach to diversity, equality and inclusion,
alongside data which allows the Board to
monitor the Company’s progress in this area.
Further details on fostering a diverse and
inclusive culture can be found on pages 53
and 128.
Meetings and attendance
The Board met a total of 12 times during the
year. Of these, eight meetings were scheduled
meetings and the rest were additional
meetings, which were arranged due to
ongoing M&A activity. A Committee of the
Board met four times for scheduled meetings
in relation to the release of financial results
and trading updates. In addition, a Board
Transaction Committee was formed with
authority from the Board to approve elements
of the proposed Terminix acquisition. This
Committee met twice in December. The
membership and attendance at Board and
Committee meetings during 2021 is shown
below. Three Board meetings were held in
person with the rest being held virtually due
toongoing COVID-19 restrictions.
Sarosh Mistry was unable to join two
Committee meetings in December due to
aconflicting commitment which could not
berearranged. While we work hard to avoid
conflicts with the other commitments of Board
members, setting our calendar up to three
years in advance, it is sometimes impossible
toavoid, particularly with a new Non-Executive
Director. John Pettigrew was unable to attend
an additional Board meeting which was called
at short notice due to an existing commitment.
Where a Director is unable to attend a
meeting, they will still receive papers in
advance of the meeting and the Chairman or
Committee Chair would seek the individual’s
views ahead of the meeting and brief them on
the outcome. It is pleasing to note the ongoing
commitment demonstrated by our Board and
their high level of attendance. We believe that
all Directors have sufficient capacity to
perform their roles effectively (see more on
external commitments on page 100).
Board and Committee attendance in 2021
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Overall
attended
Scheduled Additional
Number of meetings held
Directors
Stuart Ingall-Tombs 8/8 4/4 – – – 100%
Sarosh Mistry
1
6/6 3/3 – 2/3 2/3 87%
John Pettigrew 8/8 3/4 5/5 4/4 – 95%
Andy Ransom 8/8 4/4 – – – 100%
Richard Solomons 8/8 4/4 – 4/4 – 100%
Julie Southern 8/8 4/4 5/5 4/4 4/4 100%
Cathy Turner 8/8 4/4 – 4/4 4/4 100%
Linda Yueh 8/8 4/4 5/5 4/4 4/4 100%
Former Directors who served for part of the year
Angela Seymour-Jackson
2
3/3 1/1 – 1/1 1/1 100%
1. Sarosh Mistry was appointed to the Board on 1 April 2021.
2. Angela Seymour-Jackson resigned from the Board on 12 May 2021.
Rentokil Initial plc
Annual Report 2021
89
Corporate Governance Financial Statements Other InformationStrategic Report
Corporate Governance Report
continued
Governance framework
Audit Committee
Provides effective financial governance
andoversees the Group’s financial and
narrative reporting, risk management
andinternal control environment, and
theexternal and internal audit process.
B
Find out more on pages 103 to 110
Nomination Committee
Ensures the correct balance, structure
andcomposition of the Board and its
Committees, and reviews Board and
executive succession planning, talent
programmes, and diversity and inclusion.
B
Find out more on pages 111 to 114
Remuneration Committee
Reviews and agrees with the Board the
remuneration framework, determines the
remuneration packages of the Executive
Directors and senior management, and
considers workforce remuneration
arrangements.
B
Find out more on pages 115 to 136
Disclosure Committee
Comprising the Chief Executive,
Chief Financial Officer, Group
Financial Controller and the
Group General Counsel,
itsupports the Board’s
responsibility for the accuracy
and timeliness of external
disclosures and compliance
with the Market Abuse
Regulation.
Treasury Committee
Comprising the Chief Financial
Officer and four other senior
functional executives, it reviews
and approves the capital
structure and financing
strategy, as well as risk
andcash management.
Group Risk Committee
Comprising the Chief Financial
Officer and six other functional
executives, it monitors the
internal control environment
and emerging external risks,
and reviews internal policies
and procedures for identifying,
assessing and reporting risks,
meeting quarterly. Details of its
discussions are reported to the
Audit Committee.
Investment Committee
Comprising the Chief Executive,
Chief Financial Officer, Group
Financial Controller and the
Group General Counsel,
itreviews and approves
investments below the
threshold requiring Board
approval, including M&A and
expenditure on property and
environmental remediation.
Italso conducts post-acquisition
reviews of completed M&A
transactions and reviews
material litigation quarterly.
The Board’s role is to set the strategy to create sustainable, long-term value for shareholders and other stakeholders. It governs
within a framework of prudent and effective controls that enable it to manage and assess risk. The Board strives to operate
inaconstructive, ethical and transparent manner at all times, and to set the tone for the rest of the business.
Matters reserved for the approval of the Board are set out in writing and reviewed annually.
They are available to view on our website.
The Board delegates the execution of the Company’s strategy and the day-to-day management of the business
totheChiefExecutive and the Executive Leadership Team (ELT). The Chief Executive cascades authority to the wider
managementteam through a documented Group Authority Schedule, which the Board reviews annually.
B
Q&A with our Chief Executive on page 18
B
Biographies on pages 84, 86 and 87
Operating under delegated authority by the Board to the Chief Executive and Chief Financial Officer, these Committees each have
specific remits and authority to approve decisions within set limits.
This governance framework provides the Board with confidence that the appropriate decisions are taken at the appropriate levels, and further
allows the Board to ensure it meets its obligations to our shareholders and other stakeholders. Our shareholders and other key stakeholders
canplay an important role in our governance framework. For details on how we engage with our shareholders, see pages 31 and 98.
The Board
Chief Executive and the Executive Leadership Team
Management Committees
Board Committees
B
Biographies on page 84
B
Key activities during 2021 on pages 91 to 93
B
Strategic priorities on page 20
INFORMING
INFORMING
INFORMING
REPORTING
REPORTING
REPORTING
90
Rentokil Initial plc
Annual Report 2021
B
The – icons used in this section correspond to Our 'Big Six' Challenges as set out on pages 20 and 21
Board activities in 2021
Board meeting discussions are structured
using a carefully tailored agenda that is agreed
in advance by the Chairman, in conjunction
with the Chief Executive and Company
Secretary. Each scheduled meeting starts with
areview of safety, health and environmental
performance. The Board also receives verbal
reports from the Chairs of our Board
Committees on the proceedings of those
meetings, including the key discussion points
and particular matters to bring to the Board’s
attention.
A typical Board meeting will comprise reports
on operational and financial performance,
legal and governance updates and one or two
detailed deep dives into areas of strategic
importance or areas of risk. Board meeting
agendas during 2021 included consideration
of the matters set outbelow.
These are non-exhaustive and detail the
breadth of oversight provided by the Board
inorder to discharge responsible leadership.
The Board recognises the value of
understanding the views of its stakeholders
and their importance in the ability to deliver
our strategy and purpose.
The Group’s key stakeholders and their
differing perspectives are taken into account
as part of the Board’s discussions. Detailed
examples of this in relation to key principal
decisions taken by the Board during the year
can be found on pages 94 and 95. More
information on the methods of engagement
isprovided on pages 96 to 98.
Board activities in 2021 Strategy
In addition to annual strategy away day
discussions, the Board monitors the Group’s
performance against the defined strategy
throughout the year. This includes updates by
the Chief Executive at each scheduled Board
meeting, performance management reports
from the Chief Financial Officer on financial
and non-financial KPIs, and conducting
regional business and functional reviews.
TheChief Executive’s update includes
anoverview of health and safety results,
operational business performance, investor
relations, M&A, competitor activity and people
matters. The ongoing impact of the COVID-19
pandemic was considered as part of these
updates, particularly in the earlier part of
theyear.
In June, the Board participated in an
innovation day at the Power Centre as detailed
below. As part of the discussion, theBoard
considered the proposed announcements and
key messages for the Capital Markets Day that
took place in September (see page 98), as well
as subsequently approving the proposed
adjustments to the Group’s medium-term
financial targets (see page 95).
In 2021, the Board undertook regional deep
dives with the management teams for North
America, Pacific and Asia. In November, the
Board visited the business in France and
discussed the performance and forward plan
for the Workwear, Hygiene and Pest
businesses in France with the country
management teams as well as a dedicated
session on sustainability and ESG in France
and an update on the Europe region.
As part of the overseas visit, in-depth strategy
sessions were held where the Board
considered the performance of the Group’s
businesses in 2021 and key growth
opportunities, including growth opportunities
in core Hygiene, outside the washroom and in
new geographies. Key risks were also noted,
including concerns about ongoing labour and
supply chain issues in some countries as a
result of the pandemic.
The presentations held over two days focused
on the medium-term strategic plan for the
Group and set out the next phase of our
RIGHT WAY plan, including from January
2022 a new regional structure (see page 17),
a new Hygiene & Wellbeing category
(see page 5), a new Group Leadership Forum
(see page 92) andnew higher financial targets
(see pages 7 and 95). One of our brokers,
Goldman Sachs, also joined to provide an
external perspective on the Company.
The Board considered opportunities to
drivefunctional excellence, reduce costs and
enhance productivity. The Board discussed
presentations from management during the
strategy sessions, including the opportunities
identified and the methodology being
considered, and approved the Group’s
strategy update.
Throughout the year, the Board considered
transformational M&A opportunities, receiving
presentations on potential acquisition cases
which culminated in the proposed acquisition
of Terminix as described on pages 15 and 94.
The Board receives regular reports that allow
it to assess culture within the Group, to ensure
it is aligned with strategy and the Group’s
purpose (see page 16).
The Board also reviews and approves any
customer and supplier contracts over an
agreed threshold.
Strategic deep dives
Innovation day
The Board took part in a visit to the
Power Centre, our science, innovation
and training academy in the UK, which
included a tour of the facilities and
presentations from senior management.
Presentations included a review of the
pest control landscape and digital
opportunities, as well as consideration of
our innovation and technology pipeline.
The second part of the agenda focused
on our Hygiene business, including
opportunities and core levers for growth.
As part of the presentations, the content
to be shared with investors at our Capital
Markets Day was reviewed (see page
98). The Board also toured our newly
extended and refurbished UK Head
Office, following a review of site
occupation and consolidation following
the COVID-19 pandemic.
Cities of the Future
In June, the Chief Marketing, Innovation and
Strategy Officer, Gary Booker, along with
two colleagues, presented a session on
future growth plans and bespoke analysis
undertaken to assess opportunities in the
Cities of the Future. This identified those
global urban centres, often in emerging
markets, that are forecast to grow and
develop at accelerated rates, and which
could underpin the future long-term growth
of the business. This project would help
prioritise future M&A activity and set out
therationale for the Group to develop its
presence in a more structured way. The
Board discussed and was supportive of this
approach to developing the strategy. More
details on Cities of the Future can be found
on page 14 and throughout the Strategic
Report.
‘Big Six’ challenges
Rentokil Initial plc
Annual Report 2021
91
Corporate Governance Financial Statements Other InformationStrategic Report
Corporate Governance Report
continued
Board activities in 2021 Safety, health and environment
Board activities in 2021 Governance and compliance
Similar to senior management meetings, the
first item on the agenda for each scheduled
Board meeting is a review of safety, health and
environmental performance. In this, the Board
receives updates from management on health
and safety performance, including KPIs, and
consider any serious incidents during the
period, including any root causes and any
actions or learnings as a result (see page 97
for an example). In the second half of the year,
the Board started to receive updates on the
SHE Leading Indicators which were
implemented in Q1 2021 to complement our
longstanding Lost Time Accident (LTA) and
Working Days Lost (WDL) KPIs (see page 24).
Three global indicators were introduced and
the regions selected an additional one to three
indicators that were key to their current SHE
programmes and level of SHE maturity.
Examples of indicators include fumigation
audits, and colleague training in our SHE
Golden Rules and technical standards (Pink
Notes) (see also our risk section on page 78).
Throughout 2021, the Board also considered
our broader sustainability strategy. At the
strategy day in November, a special session
was held on environmental, social and
The Board received recommendations from
the Nomination Committee on its composition
during the year, and the approvals for Director
changes given during 2021 are set out on
page 89. A Board evaluation process is also
undertaken annually as detailed on page 101.
The Board receives regular updates from the
Chief Executive on any changes to senior
management or the governance framework
which may impact how information is either
disseminated throughout the Group or flows
up to the Board. In 2021, the Board reviewed
the decision to replace the Senior Leadership
Forum (c.25 colleagues) with a new Group
Leadership Forum (c.80 colleagues) from
January 2022. It is hoped that the new Forum
will be an important enabler to drive the
broader, faster deployment of key initiatives.
The Chief Executive provides updates on
current M&A activity as part of his report to
theBoard at each meeting. He also regularly
provides updates on the status of the M&A
pipeline. The Board reviews transactions of
asufficient size that require Board approval
orwhich result in the Group operating in
anewterritory.
During 2021, the acquisition of Boecker World
Holding SAL completed (see page 95) and the
Board approved three other acquisitions (two
governance (ESG) matters which included a
review of the Group’s 20 key activities on our
journey to net zero (see page 58). The latest
corporate governance and climate-related
developments were considered, including the
new mandatory requirement to report under
the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations
(seepages 58 to 65 for our TCFD reporting)
and theimpact of investor guidance and
environmental pressure groups. The Board
considered a peer review for ESG and
discussed the internal progress on key
environmental priorities and challenges.
Asthe importance of environmental
sustainability continues to grow for all
stakeholders, this rapidly developing area will
continue to be an area of focus for the Board.
In December, the Board approved the
recommendations from the Audit Committee
on the approach to reporting the impact of
climate change in the Group’s financial
statements (see page 107 of the Audit
Committee Report for more information).
In May 2021, we held our first hybrid AGM,
albeit with a closed physical meeting due to
the ongoing UK government restrictions.
While the change in format did not result in an
increased attendance level as hoped, 78% of
our issued share capital voted at the meeting.
Having considered the options available, the
Board was supportive that the AGM in May
2022 will once again be held as a hybrid
meeting (see page 96).
The Board monitors governance procedures
and practices and has oversight of
forthcoming governance developments,
receiving two briefings a year from the
Company Secretary. In 2021, the Board and
Audit Committee considered the Department
for Business, Energy and Industrial Strategy
(BEIS) consultation, ‘Restoring trust in audit
due to the value and one due to it involving
entry into a new territory). The Board regularly
monitors its competitors and during the year
asignificant portion of the Board’s time was
spent considering the opportunity of a large
deal with Terminix.
As detailed on page 94, this culminated with
the announcement in December that the
Company would acquire Terminix in 2022,
subject to regulatory and shareholder
approvals.
and corporate governance’, and reviewed the
Company’s detailed consultation response
ahead of its submission. The Board also
reviewed the Group’s share dealing code in
light of the Financial Services Bill and the UK
leaving the EU, and approved the Company’s
Modern Slavery Statement and Gender Pay
Report, both of which are available on our
website.
The Group HR Director provides two updates
a year on workforce engagement, culture and
our Employer of Choice agenda. The update
for the second half of the year was provided in
early 2022 and included the results of the YVC
colleague survey (see page 52).
Twice a year, the Board undertakes a
post-investment review of acquisitions
inaggregate to assess the performance
ofthetotal investment in acquisitions which
completed in the prior 12–30 months,
including the delivery against business cases
and execution of integration plans. These
confirmed the ongoing rigour and aggregate
performance of the M&A strategy against
investment criteria and key metrics.
Board activities in 2021 Mergers and acquisitions (M&A)
Strategic deep dive
Chemicals update
Following a session on Operations
excellence in January (see page 93) the
Group Operations Excellence Director,
Brian Webb, presented a detailed
update on chemical usage within the
business to the Board at its meeting in
September 2021. The Board considered
the related hazards and the structures,
resources and control protocols within
the business to manage or mitigate
these risks (see risk section on page
78), and how they are ensuring
chemicals-related issues in safety
incidents are kept to very low levels.
‘Big Six’ challenges
‘Big Six’ challenges
‘Big Six’ challenges
92
Rentokil Initial plc
Annual Report 2021
The Chief Financial Officer updates the Board
on the financial performance of the Group at
each meeting. In the second half of 2021, a
new Group KPI report was also provided as
standard, which alongside financial KPIs also
provided strategic KPIs, including SHE,
Employer of Choice, sales and service metrics.
As part of the Board’s review and approval of
the annual operating plan which takes place
each year, in 2021 the Board requested a
detailed review of the Group’s weighted
average cost of capital (WACC). This was
provided by the Chief Financial Officer in
Juneand it was agreed that WACC would
bereviewed by the Board on an annual basis
in the future.
The Board considers the reporting of the
financial performance, approving financial
results and regulatory announcements during
the year. In December, the Board also
considered the correct approach for reporting
climate change risk in the financial statements
(see page 107).
The Board considers risk management and
internal controls effectiveness throughout the
year during its review of business strategy
andperformance, and during the regular
engagement and consultations with executive
management. The Board also gains assurance
that risks are being identified, effectively
managed and where possible mitigated from
the work of the Audit Committee. The Board
undertook a review of the effectiveness of the
Group’s risk management and internal controls
systems in 2021, which were found to be
effective.
Other areas of focus include an annual briefing
on IT security (which in 2021 was postponed
toearly 2022). This provided the Board with
oversight of the status of cyber resilience
across the Group, the progress made and
achievements completed during 2021, the
current threat landscape, and the high level
plans for the IT security team in 2022 to
address the current risk profile. The Board
alsoreceives quarterly summaries of ongoing
litigation within the Group, and in 2021
received an additional analysis of claims
experienced and themes over the period 2013
to 2021. Aggregate material claims exposure
at the end of 2021 was at its lowest level for
the period, after a successful focus on dispute
resolution and risk management.
The Group’s capital structure, including
financing needs and funding, as well as capital
allocation are considered throughout the year.
In 2021, the Board approved an update to the
Company’s £1,000m Euro-Commercial Paper
Programme.
Following consideration of the Group’s
dividend policy, the impact of the COVID-19
pandemic and the financial performance of
theGroup, the Board approved dividends
resuming in 2021, having suspended dividend
payments during 2020. The Board declared
aninterim dividend for 2021 of 2.09p and is
recommending a final dividend for 2021 of
4.30p per share. This equates to a full year
dividend of 6.39p per share, an increase of
18.1% compared to 2020.
The Board also considered and approved the
Company’s treasury policy and tax strategy.
The tax strategy was approved in November
2021 and is available on the Company’s
website.
Board activities in 2021 Financial management
Board activities in 2021 Risk monitoring and oversight
Strategic deep dive
Strategic deep dives
Competitor benchmarking
analysis
In July, the Board received a
presentation from the Group Financial
Controller on peer financial
benchmarking over a five-year period,
and the Board considered cash
generation, gross margins and market
variations. The Board discussed a
proposed action plan which had been
created to target certain improvements,
following similar discussions held at the
ELT, Finance Leadership Team and
Senior Leadership Forum meetings.
As part of the discussion, the Board
considered customer pricing and future
plans to undertake detailed customer
research. It was agreed that the
proposed actions should proceed
asplanned.
Risk horizon scanning
The Board received an externally facilitated
session with EY in May 2021, which
discussed strategic risks and opportunities
for the business, focusing especially on
climate change and generational shifts.
TheBoard discussed Generation Z (Gen Z),
the implications of the economic impacts
that this age group had experienced, and
how Rentokil Initial could ensure the
continued relevance ofits culture and
career opportunities for its future
workforce, particularly given the current
challenges of attracting and retaining
colleagues. The implications of climate
change were also considered. It was
agreed that a discussion of Gen Z should
be held at a forthcoming ELT meeting given
that it had not previously been discussed in
depth, unlike environmental and
sustainability issues. The key issues and
follow-up actions for senior management
were then fed back tothe Board at its
meeting in July. As well as considering how
to be an Employer of Choice for Gen Z, it
was agreed that Gen Z should be included
in the ongoing review ofthe risk register,
and the responses to colleague surveys
should be analysed in relation to age
cohorts to identify any important
differences (see page 53).
Operations excellence
In January 2021, the Group Operations
Excellence Director presented a session
ontechnical governance and the protocols
and structures in place to manage key
technical risk areas.
An overview of the Group’s technical
standards (Pink Notes) was provided along
with the training available. Chemical usage,
including fumigation, and its related risks
and environmental impact was discussed
andthe Board considered and was
comfortable with the level of technical
governance that is in place, although an
additional session was requested to allow
amore detailed discussion on chemical
usage (see page 92).
‘Big Six’ challenges
‘Big Six’ challenges
Rentokil Initial plc
Annual Report 2021
93
Corporate Governance Financial Statements Other InformationStrategic Report
Corporate Governance Report
continued
Principal decisions of the Board
We consider the principal decisions of the
Board to be those decisions it takes directly,
rather than delegated to management or a
Committee of the Board, unless considered
and approved in principle by the whole Board
first, and which may have a potentially material
impact on the Company’s strategy, a
stakeholder group or the long-term value
creation of the Company. We group the
Board’s principal decisions into the following
categories: financial results; capital allocation;
funding; strategy (including ESG strategy);
M&A activity; supplier and customer contracts;
Board changes; Company statements and
other matters reserved to the Board.
Within these categories, some matters are
considered less material or strategically
significant, such as the approval of the Board
governance manual (including changes to the
Group Authority Schedule), or the issue of new
shares to satisfy our executive share plan. An
overview of the Board’s activities during 2021
can be found on pages 91 to 93.
This contains details of the most materially
significant principal decisions made during the
year. In addition, examples are provided below
to illustrate how the Directors have had regard
to the matters set out in section 172(1)(a)–(f)
ofthe Companies Act 2006 when making
principal decisions in 2021 (these include
regard to key stakeholders, including
employees, communities and commercial
counterparties but are set out in full in the
keyopposite).
More information on the Board’s engagement
with stakeholders and the impacts on the
Board’s considerations during the year can be
found on pages 96 to 98. The section 172(1)
statement can be found on page 72.
Creating the global leader in pest control, hygiene and wellbeing
In the second half of the year, the Board spent considerable time considering the potential acquisition of Terminix Global Holdings, Inc. (Terminix),
atransformational combination which we believe will make Rentokil Initial the global leader in pest control, hygiene and wellbeing. The Board held
three additional meetings to consider the transaction, receiving detailed briefing notes and presentations from management and advisors. A Board
Transaction Committee was also formed which met twice in 2021.
Directors’ consideration of factors in accordance with section 172(1)
The acquisition is consistent with our strategy to continue acceleration of our business by building on our global leadership, through further
expansion in Growth markets from M&A, and delivering material density and other operational efficiencies to drive margin improvements.
It was also in the key market for the Company’s Pest Control services, North America. The combination is targeted to deliver substantial
value creation for shareholders from annualised pre-tax net cost synergies of at least US$150m (£113m) by the end of year three post
completion.
There is a strong cultural fit, with both companies recognising that trained, motivated and empowered colleagues are at the heart of the
business and that service delivery and customer care is paramount. The acquisition would result in an additional c.11,400 colleagues
joining the Group. The Board considered, among other things, current employee attrition rates in Terminix, retention costs and potential
synergies.
Upon completion, the combined Group will have c.4.9m customers. The additional scale and density would benefit customers by provision
of highly trained experts, providing additional services to existing customers, access for Terminix’s customers to innovation and digital
solutions and capitalising on the combined businesses’ shared strengths and expertise. Both companies share very similar visions for,
andcommitment to, their respective customers.
Terminix is headquartered in Memphis, Tennessee, and operates in 24 countries and territories, although with c.95% of its revenue in the
US. The combined Group will continue to provide job opportunities as well as supporting the communities in which it operates and helping
charitable causes through its people and community contributions. Our commitment to net zero emissions by 2040 and new, more
sustainable or non-toxic products will be not be affected by the acquisition and indeed it provides an opportunity to share collective
expertise in our journey towards a more environmentally friendly future.
Terminix has experienced weaker operational performance and increased exposure to customer claims in relation to termite services
inrecent years. The Board was able to obtain comfort from the detailed due diligence process undertaken that these issues had been
carefully assessed and understood and took these risks, and the opportunities they presented ifthe underlying problems were
successfully addressed, into account in their decision.
Due to the size of the transaction, both our shareholders and Terminix’s shareholders have the opportunity to vote on the acquisition
atgeneral meetings to be held later this year.
Outcome
The Boards of Directors of both Rentokil Initial and Terminix unanimously approved the transaction and resolved to recommend that their respective
shareholders vote in favour of it. The acquisition was announced to the market on 14 December 2021 as well as being communicated to all
colleagues. Since then, both businesses have actively engaged with their investors and customers and the transaction is anticipated to complete
inthe second half of 2022, subject to regulatory and shareholder approval.
Key to section 172(1) considerations
Long-term results
Our reputation
Colleagues
Communities and the environment
Fairness between our shareholders
Our business relationships
94
Rentokil Initial plc
Annual Report 2021
The next evolution of our RIGHT WAY plan
As set out on pages 6 and 7, the external medium-term Group financial targets were adjusted during 2021. This change was also accompanied by
revised regional and category structures. The Board considered the proposed changes as part of its review of the content for the Capital Markets
Day to be held in September.
Directors’ consideration of factors in accordance with section 172(1)
Medium-term targets were last revised in February 2017 and while performance against those targets has been strong, market feedback
was that they were believed to have become out of date given the Company’s performance. The external medium-term growth target for
Hygiene (excluding disinfection) had already been adjusted from 2%–3% to 4%–6% per annum at the half year for 2022 onwards and
would then apply to the larger Hygiene & Wellbeing category. Pest Control remains our main platform for medium-term growth.
The revised regional structure would realign the eclectic geographic mix of Rest of World businesses (Africa, Caribbean, Nordics and
MENAT) into more logical regions, creating a new Asia & MENAT region, while adding the Nordics businesses into the Europe region, and
the Caribbean businesses into Latin America. The UK & Ireland business would continue to manage the Sub-Saharan Africa businesses.
The regional structure changes would impact financial reporting but would not affect the colleagues who work there.
COVID-19 has changed both customer perceptions towards hygiene as a category and also customer needs themselves, in terms of
providing a safe and secure environment for their customers, employees and visitors. The Board considered how these changes might
provide an ongoing opportunity for us even after the pandemic’s direct impact has diminished.
Due to existing market expectation of our performance, it was understood that a failure to perform to these levels would be treated the
same way, with or without the targets. It was felt, however, that the timing was right to again demonstrate our ambition.
While the changes were not price-sensitive, it was agreed that a regulatory announcement should be released detailing the changes
toensure all shareholders were made aware of the changes at the same time.
Outcome
The Board approved the adjustments to the financial targets at its meeting in September and, on 28 September 2021, the Company published a
regulatory announcement setting out the changes, which were also communicated to investors at the Capital Markets Day held on the same day.
Atthe next Board meeting, the Chief Executive provided feedback from the event and the investor response to the amended targets (see page 98).
He also confirmed that a communication setting out the changes had been shared with colleagues and had been well received.
Entering new territories through strategic M&A
We acquired Boecker World Holding SAL (Boecker) in August 2021. Boecker is a leading pest control and environmental health business in the
Middle East, and has resulted in us entering into new territories in 2021 with the acquisition of a subsidiary in Lebanon, associated undertakings
inQatar and Nigeria and a franchise in Kuwait. Following multiple briefings and discussions, the Board approved entering into a share purchase
agreement in December 2020, received regular updates during 2021 and the transaction completed, following regulatory approvals, in August 2021.
Directors’ consideration of factors in accordance with section 172(1)
The acquisition expands our businesses across the Middle East and in Africa, in line with our strategy of focusing on important growth
Cities of the Future. Boecker is a leader in business-to-business environmental health services, including pest management, food safety
and germ control services and products, and generated revenues of c.£37m in the year prior to purchase. The transaction doubles the
scale of our operations in the Middle East, where we are already the market leader in pest control.
Boecker employs c.1,100 colleagues. Due diligence concluded that it was run very similarly to our businesses, with strong management
capabilities, excellent sales capability and strong customer relationships. The acquisition would enhance our existing presence in these
regions with opportunities to identify best of breed people and practices across the combined business.
We already had a joint venture partner in Saudi Arabia, Rezayat, where part of the Boecker business was located, and following discussions
we purchased their 40% interest ahead of completing the Boecker acquisition (see page 173). Separate meetings were held with joint
venture partners and/or management teams in Qatar and Nigeria as part of the due diligence process.
Boecker operates across the UAE, Saudi Arabia, Jordan, Kuwait, Lebanon, Nigeria and Qatar (including minority interests in joint ventures
and with associates), some of which were new territories for Rentokil Initial. The economic difficulties and social disturbance in the Middle
East were considered in detail, including the port explosion inBeirut, Lebanon in August 2020.
Consideration was given to expanding our presence in regions with a history of political risk and instability and where human rights issues
can be more prominent. It was felt, however, that there was an appropriate cultural fit and risks could be suitably mitigated.
The acquisition aligns with our strategy to identify opportunities for broader-based growth as we enter new markets and, along with our
strong track record of successful M&A integration, will benefit shareholders by contributing to a long-term return on their investment.
Outcome
The Board concluded that investments and growth in the Middle East continue to provide rewards that outweigh the risks. The combination was
transformational in terms of management capability, customer offerings, geographic reach and scale in the region and would benefit the Group
asa whole. Following the necessary regulatory approvals being received, we announced as part of our interim results an agreement to enter into
amerger and acquisition transaction with Boecker in July 2021 and the deal completed on 3 August 2021. The combined company has rebranded
as Rentokil Boecker. Further details of the transaction can be found in the Financial Review on page 145.
Rentokil Initial plc
Annual Report 2021
95
Corporate Governance Financial Statements Other InformationStrategic Report
Corporate Governance Report
continued
Stakeholder engagement
We ran a detailed stakeholder-mapping
exercise in 2019 to assess whether we had
correctly identified our key stakeholders.
Asthere have been no significant changes
tothe Group’s businesses or operations since,
the key stakeholder groups have remained
thesame. We set out information on our key
stakeholders on pages 30 and 31, including
their key issues and impacts, as well as how
ourbusinesses and management engage with
these groups. We will monitor this following the
acquisition of Terminix and determine whether
another review is appropriate at that stage.
The following two pages provide details
ofhow the Directors receive information
aboutour key stakeholders, alongside some
examples of engagement the Directors
undertook in 2021. You can find our section
172(1) statement, which describes how the
Board has regard to key stakeholders, on
page 72, with examples of principal decisions
taken in 2021 and the regard for stakeholders
in its considerations on pages 94 and 95.
In considering the Board’s engagement with
the Group’s workforce, we believe our existing
arrangements for workforce engagement are
as appropriate as the proposed methods set
out in the UK Corporate Governance Code.
Having regard to the size, distribution and
scale of our businesses and our dispersed,
global workforce, totalling approximately
46,000 people in 88 countries, we feel the
existing framework of local and regional
engagement tools, which flow up to the Board
and are supplemented with individual Director
engagement, remains effective.
Management reports to the Board regularly
onperformance measures such as colleague
retention, YVC survey results and Glassdoor
ratings. We expect each Non-Executive Director
to engage individually with a range of
colleagues, so they bring back their experiences
to discuss with the Board. They do this by visiting
technicians or customers, having discussions
with relevant management teams across
different regions or functions, adding visits to
local Rentokil Initial operations to their other
travel plans, or attending town hall sessions
ormanagement meetings.
We also identify ways for individual Board
members and the Board collectively to
engagewith target groups across the year.
Unfortunately, many direct Board engagement
opportunities planned for 2021 were again
affected by pandemic and associated
restrictions on meeting and travel, as was the
potential of our ‘ride-along’ opportunities to
meet customers. There were exceptions, such
as our Capital Markets Day, which we were able
to hold as an in-person event (see page 98), but
in the main, we were again restricted to virtual
events or normal business correspondence.
Wedid, however, increase the level of virtual
engagement in 2021, as promised last year.
The workforce engagement undertaken
allowed the Board to gain a deeper
understanding into how individual businesses
and functions operate, the approaches taken
by management and insight into our culture in
practice. Examples of some of the stakeholder
engagement in 2021 can be found on pages
97, 98 and 109.
2022 Annual General Meeting
The Board welcomes the opportunity to
enterinto dialogue with both private and
institutional shareholders at the Company’s
Annual General Meeting (AGM) and views
itasan opportunity to engage with all our
shareholders on the performance of the
business they own.
For the first time, we held a hybrid meeting
forour AGM in May 2021, although only the
Directors were able to attend the physical part
of the meeting due to government restrictions
as a result of the COVID-19 pandemic in force
at the time. Shareholders were able to join
virtually tolisten to the meeting, ask questions
and vote on the proposed resolutions. While
shareholder attendance was below previous
years, itis hoped that this will increase as this
type of meeting becomes more common
among companies and the technology
becomes more familiar. As we believe that
thistype of meeting makes engagement
withthe Board more accessible to a broader
range of shareholders, we have decided
onceagain to hold a hybrid meeting in 2022.
As approximately 35% of our shareholders are
now based in North America, the AGM will also
be held slightly later in the day to allow them
to join more easily should they wish to do so.
The 2022 AGM will be held at, and be
broadcast via live webcast from, the
Company’s offices at Compass House,
ManorRoyal, Crawley, West Sussex, RH10 9PY
from 3.00pm on 11 May 2022. While we hope
that there will be no government-imposed
restrictions on public gatherings or travel
which will prevent shareholders being
abletoattend in person, we will continue to
monitor the latest guidance and any updates
will be communicated via our website at
rentokil-initial.com/agm. The health and
safety of our shareholders and colleagues is
always our utmost priority, and we therefore
request that any shareholder who wishes to
attend undertake a lateral flow test on the
morning of the meeting and that no one
attends if they are experiencing any COVID-19
symptoms. Tea and coffee will be available
after the meeting, but no other catering will
beprovided. We continue to encourage our
shareholders to jointhe AGM safely and
securely via the live webcast, where they
willbeable to engage in all elements of the
meeting. Questions canalsobesubmitted
inadvance of the meeting by emailing
chairman@rentokil-initial.com.
A separate Notice of Meeting, containing both
an explanation of the items of special business
and full details of how to join the meeting
remotely, has been sent to shareholders
andisavailable on our website.
Statement on 2021 AGM
votes against
At the Company’s AGM held on 12 May 2021,
20% or more of votes were cast against the
resolution for the proposed Directors’
Remuneration Policy (resolution 2) and the
resolution for related amendments to the
Company’s Performance Share Plan (PSP)
rules (resolution 4). In the announcement
released immediately following the AGM,
theBoard noted the outcome and that a
significant majority of shares voted (77%)
werein favour of the Directors’ Remuneration
Policy, including 19out of our 20 largest
shareholders.
As detailed in the Company’s 2020 Annual
Report, we consulted at length with the
Company’s largest shareholders as well as
proxy advisors, Glass Lewis, the Investment
Association and ISS, on the proposals set out
in the Remuneration Policy. When considering
the proposed changes, the Board recognised
the sensitivities surrounding executive pay,
particularly in the economic context of the
COVID-19 pandemic. Subsequent to the
meeting, we received two letters from
investors explaining why they had not
supported the resolutions, with one citing
thatany increase in the size of awards under
ashort-term or long-term incentive scheme
should be accompanied by a corresponding
increase in performance expectations and the
other stating that the proposed increases in
potential opportunity were not considered
aligned to best practice. However, given the
level of support from our largest shareholders,
the Board remained of the view that the policy
changes were in the best interests of the
Company and its shareholders, and therefore
implemented the new Directors’ Remuneration
Policy without any further shareholder
engagement. The related amendments to the
Company’s PSP rules were also implemented
without any further changes. Details on how
the new policy has been implemented during
2021 can be found in the Directors’
Remuneration Report.
96
Rentokil Initial plc
Annual Report 2021
Information flow to the Board
A
Health and safety reports
A
Results of YVC colleague survey or other
pulse surveys
A
Regional deep dive presentations
A
Employer of Choice update provided
twicea year
A
Key management changes included
inevery CEO report
A
Monitoring external measures such
asGlassdoor
A
Notification of any awards won or other
external validation
A
Gender Pay Report
A
Ethical concerns reported via the
confidential reporting process Speak Up
Direct Board engagement
Directors attended various senior
management meetings throughout the year,
including Executive Leadership Team and
Senior Leadership Forum meetings. They
also attended other virtual colleague
meetings, including the Senior Leadership
Talent Pool, the Group Procurement Team
Meeting, the Category Board Meeting, the
Group Risk Committee, the IT Leadership
Team and other regional and departmental
discussions (see below and page 109 for
more details). Andy Ransom and Cathy
Turner also joined a virtual diversity, equality
and inclusion (DE&I) panel for International
Women’s Day where the Group’s DE&I
strategic plan was shared and an interactive
Q&A session was held. Due to the ongoing
pandemic, opportunities to meet with
colleagues during site visits were limited
andplanned ‘ride-alongs’ with technicians
and specialist once again were not able
totake place. Members of the senior
management team continue to present
totheBoard regularly (see pages 91 to 93).
Sharing experiences with aspiring leaders
On several occasions throughout the year,
members of the Board have joined regular
Senior Leadership Talent Pool sessions
inorder that the Board and the business can
benefit from two-way dialogue and learning.
A talent pool is a development programme
for individuals on the succession plan for big
leadership roles inthe Company. There are
39 colleagues on the current development
programme, from all regions, who were
nominated during the succession
planningprocess.
In May, the Chairman, Richard Solomons,
joined an online session with the Senior
Leadership Talent Pool covering a number
oftopics. Richard provided a presentation
on his career – lessons learned, mistakes
made – for the benefit of those with
aspirations to be the future senior leaders
ofour business. The ensuing Q&A session
brought a wide variety of questions for
Richard and topics included leadership,
learning from failure, disruption, managing
corporate blind spots, having productive
paranoia, customers, aiming high and
muchmore. Feedback from participants
waspositive, with the advice shared seen
asveryvaluable.
In the September session, Cathy Turner
joined the female members of the Talent
Pool for a well-received Q&A where she
talked about her career and answered
questions on overcoming career barriers,
her inspiration, the Board’s diversity,
equality and inclusion agenda, and career
advice for the female talent. Following
further questions from the group, Cathy
thenparticipated in a virtual networking
event, rotating through a series of smaller
groups in order that all participants had
theopportunity to meet with her.
For the December Talent Pool session,
Linda Yueh gave a presentation on the
global economic outlook and then took
questions from participants. The types
ofquestions received, for example what
todo about the ‘Great Resignation’, and
howto recruit and retain talent in the
currentenvironment, reflected the types
ofquestions our leaders would also be
considering at the moment.
Spotlight
Colleagues
Protecting our colleagues
The Board receives an update on health and
safety at each scheduled meeting, where
relevant KPIs and any major incidences are
considered.
In November 2021, the Board discussed
amajor incident where a colleague in India
had intentionally swallowed pesticide at
work. Following their recovery, the business
became aware that the intention to
self-harm was caused by a concern that the
Pest technician would lose their job due to
insufficient English literacy for their new
customer-facing role. As well as redeploying
the colleague to a more suitable role and
offering counselling, the business planned
to identify all technicians with literacy skill
gaps in India and ensure colleagues have
the necessary literacy skills required for
their role.
The Board discussed literacy levels in India
more broadly and it was agreed that these
should be looked atand further action taken
if needed. TheChief Executive informed the
Board atits meeting in December that,
following the discussion held, a literacy
training programme would be established
inIndia. English literacy assessments
commenced inDecember 2021 and will
cover approximately 4,500 technicians.
Aprogramme to deliver English language
courses over a period of 8–10 months
isbeing developed and it is intended
that,along with improving literacy skills,
thiswill raise confidence and improve
communication skills, help in the
understanding of official communication
and training, and facilitate better customer
engagement.
Spotlight
Rentokil Initial plc
Annual Report 2021
97
Corporate Governance Financial Statements Other InformationStrategic Report
Information flow to the Board
A
CEO report at each Board meeting
includes an investor relations update
A
Financial performance reports
A
Analyst notes circulated
A
Presentations on market perspectives by
the Company’s brokers
A
Strategy day market perspectives session
A
Capital Markets Day and feedback
Hygiene & Wellbeing – gauging investor views
In September 2021, we ran a Capital
Markets Day presentation ‘Hygiene:
TheNew Pest Control’ for investors
andanalysts in London. On the day, 44
investors attended in person alongside
representatives from our external auditors,
PwC, and various colleagues, including our
Chairman, Richard Solomons, and our
Senior Independent Director, John
Pettigrew. More than 100 investors also
followed proceedings virtually, along with
two of our Non-Executive Directors and
other colleagues.
The event offered a series of presentations
by senior executives and operational
management. The purpose of the day was
to provide greater insight into our Hygiene
business and its evolution into Hygiene &
Wellbeing in order to meet our customers’
future needs, with presentations on growth
opportunities outside the washroom (see
pages 43 to 46), as well as expansion of our
geographic footprint. Focus was also given
to our Pest Control business, including
innovations in digital technology and M&A
(see pages 36 to 39).
Feedback from shareholders following the
event was generally very positive, on both
the quality of the presenting team and the
event itself. Investors were reassured by the
new growth targets, and viewed the detail
provided in the supporting materials as
aclear demonstration of our grasp on the
next dimension of growth and the future
opportunities for the business. Analyst
feedback received commended the
business for its resilience, flexibility and
continued growth despite the pandemic
crisis. All feedback received was shared
with the Board at its next meeting.
Spotlight
Corporate Governance Report
continued
Addressing the big
issues in procurement
Virtual Global Procurement team
meetingsare held every two months
tobring together our procurement
managers and their teams from around the
world, typically with around 60 attendees
on each call. Our Non-Executive Directors
joined two of these calls during 2021. In
July, John Pettigrew heard from country
procurement managers and the team in
India discussed their humanitarian relief
effort in sending stocks of PPE, hand
sanitiser and dispensers to help during
thepandemic. John contributed to a
discussion on our initiative to train our
suppliers and raise their awareness of
thethreat of modern slavery.
At a meeting in September, Cathy Turner
was part of a briefing and discussion on
Group Procurement environmental
initiatives (see page 60) and attendees also
considered the new version of the Rentokil
Initial Supplier Code (see page 70).
Spotlight
Information flow to the Board
A
Regional deep dive presentations
A
Customer Voice Counts (CVC) scores
A
Strategy day review – especially product
pipeline and innovation
A
Material customer contracts requiring
Boardapproval
A
Monitoring external measures such
asTrustpilot
Information flow to the Board
A
Health, safety and environment updates
A
Regional deep dive presentations
A
Annual Report review
A
Responsible Business Report review
A
Updates on RI Cares (see page 54)
A
The RIGHT WAY magazine, which contains
lots of examples of community engagement
undertaken by the businesses and our
colleagues
Information flow to the Board
Principal engagement is undertaken by
operational management, especially the
central procurement and supply chain function
and national procurement managers, with the
Directors overseeing thisthrough:
A
Reviewing and approving major supplier
contracts
Direct Board engagement
Due to the highly dispersed nature of our
customer base, where the largest portfolio
customer represents significantly less than
1%of revenue, we do not feel that a high level
of direct Board engagement with customers
isnecessary. The Board often aims to meet
customers on overseas site visits and as part
of ‘ride-along’ sessions with our technicians
Direct Board engagement
The Board engages directly with shareholders
in a number of ways, including writing to
investors, calls or meetings held with the
Chairman and Remuneration Committee Chair,
consultation exercises and through
attendance at Preliminary and Interim Results
announcements, investor roadshows and
seminars, Capital Markets Days and our AGM.
Direct Board engagement
The Board continued to focus on our ESG
agenda throughout the year (see page 92),
and while the Board does not tend to engage
directly with communities, the pandemic
restrictions curtailed any potential
opportunities during 2021. We will keep
engagement levels under review and consider
whether there may be any suitable
engagement events for 2022.
A
Approving our Modern Slavery Statement
A
Reviewing payment practice reports for
ourtwo principal UK subsidiaries
Direct Board engagement
There was no direct engagement in 2021,
though Directors were present at Group
Procurement Management meetings (see
opposite). Due to the nature of the business,
we feel this to be a reasonable level
ofengagement.
both in the UK and abroad. Unfortunately,
John Pettigrew’s planned morning helping
service customers in the Greater Boston area,
USA, had to be cancelled due to ongoing
travel restrictions, and we arranged no other
such events, for the same reason. We hope
toresume this activity in 2022.
Fortunately, we were able to offer an in-person
Capital Markets Day event during the year (see
below). The Chairman also met with six of our
investors, representing approximately 25% of
our issued share capital. Following her
appointment as Remuneration Committee Chair,
Cathy Turner wrote to 18 of our key shareholders
to introduce herself and one accepted her offer
for a meeting. She briefed the Board on the
topics discussed at the next Board meeting.
Shareholders
Customers
Communities
Suppliers
98
Rentokil Initial plc
Annual Report 2021
Chair of the Board
Richard Solomons
Responsibilities
A
Leading and managing the Board
A
Setting the agenda, including discussing
issues of strategy, performance,
accountability and risk
A
Providing constructive challenge to
management
A
Setting clear expectations on culture,
values and behaviour
A
Ensuring effective communication with
shareholders and other stakeholders
A
Evaluating performance of the Board
andChief Executive
Chief Executive
Andy Ransom
Responsibilities
A
Recommending and executing strategies
and strategic priorities
A
Managing operational and financial
performance, including monthly performance
reviews with all regions, and identifying and
managing risks to achieving the strategy
A
With the Chief Financial Officer, explaining
performance to shareholders
A
Executive management capability and
development
A
Overall development of Group policies
and communicating the Company’s values
A
Responsible business (ESG) agenda
Chief Financial Ocer
Stuart Ingall-Tombs
Responsibilities
A
Supporting the Chief Executive in
developing and implementing strategy
A
Supporting the Chief Executive in
managing the operational and financial
performance of the Group
A
With the Chief Executive, explaining
performance to shareholders
A
Recommending appropriate financing,
treasury and distribution arrangements
The Board is responsible collectively for the governance of the Company, undertaking its duties using clear authority and reporting
governance structures as set out on page 90. There is clear division between executive and non-executive responsibilities which ensures
accountability and oversight. The roles of Chair of the Board and Chief Executive are separately held and their responsibilities are well
defined, set out in writing and regularly reviewed by the Board. The pro-forma appointment letters for a Non-Executive Director and the
Chair of the Board are available on our website.
Senior Independent Director
John Pettigrew
Responsibilities
A
Leading the Non-Executive Directors’
appraisal of the Chair of the Board
A
Working with the Chair of the Board
onBoard effectiveness
A
Providing an alternative channel of
communication for investors, primarily
oncorporate governance matters
A
Being a sounding board for the Chair
ofthe Board
A
Chairing the Nomination Committee
whenit is considering succession to
therole of Chair of the Board
Independent Non-Executive Directors
Sarosh Mistry, Julie Southern,
Cathy Turner, Linda Yueh
Responsibilities
A
Contributing independent challenge
andrigour
A
Assisting in developing the
Company’sstrategy
A
Ensuring the integrity of financial
information, controls and risk management
processes
A
Monitoring the performance of the Executive
Directors to agreed goals and objectives
A
Advising and being a sounding board
forExecutive Directors and ELT
A
Performing their Committee
responsibilities
Company Secretary
Daragh Fagan
Responsibilities
A
Assisting the Chair in developing the
Board calendar and agendas
A
Assisting the Chair and Senior
Independent Director in their evaluation
ofthe Board’s effectiveness
A
Advising the Board and its Committees
ongovernance matters and managing
effective corporate governance and
compliance arrangements for the Board
and the Group
A
Facilitating Board induction and
development programmes
A
Facilitating Board engagement with
thebusiness and key stakeholders
Division of responsibilities
Snapshot of our Board
Age of Directors
at 3 March 2022
45–54 37%
55–64 63%
Professional background
Directors’ tenure
at 3 March 2022
Executive Directors
Stuart Ingall-Tombs
Service length
1 year 6 month
s
A
ndy Ransom 13 years 10 month
s
N
on-Executive Directors
J
ohn Pettigrew
R
ichard Solomons
J
ulie Southern
Cathy Turner
Linda Yueh
4 years 2 month
s
7 years 7 month
s
3 yea
rs
1 year 11 month
s
4 years 4 month
s
Sarosh Mistry
11 month
s
Rentokil Initial plc
Annual Report 2021
99
Corporate Governance Financial Statements Other InformationStrategic Report
Independence of Boardmembers
We consider the independence of Directors upon their appointment,
and subsequently review this as part of the individual Director
performance evaluation process, to ensure all non-executive Board
members retain the necessary independence of judgement. They
continue to reflect this in their constructive challenges to the executive
team and senior management at Board and Committee meetings, and
during informal interaction outside those meetings.
The Board has determined all our Non-Executive Directors to be
independent and to have retained their independence of character
and judgement. In making this determination, the Board has taken into
account indicators of potential non-independence as set out in the
Code. No Director took part in the Board’s consideration of their own
independence. The Chairman was considered independent on his
appointment. You can find details of the Directors’ share interests
intheCompany in the Directors’ Remuneration Report on page 126.
No current Non-Executive Director has served on the Board for longer
than nine years. You can see the length of tenure for each Director on
page 99.
We consider and address any potential conflicts of interest before any
new external Board appointment. All potential conflicts are submitted
tothe Board for consideration and, as appropriate, authorisation in
accordance with our Articles of Association and the Companies Act
2006. We record these on a register of conflicts, which the Nomination
Committee also reviews in full annually. No material conflicts have been
declared. You can find further details of this process in the Nomination
Committee Report on page 114. In accordance with the Code, the
Directors are subject to annual re-election by shareholders and will,
therefore, be seeking re-election at the AGM in May 2022.
External commitments
All Directors may serve on a number of other boards, provided they can
demonstrate that this will not interfere with their time commitment to us,
nor represent a conflict of interest. The Board must approve any new
external appointment, considering the nature of the appointment and
the expected time commitment. We show the significant external
commitments of the Directors in their biographical information on pages
84 and 85.
We consider significant appointments, as referred to in Principle 15 of
the Code, to be either a role with a listed company or a role with a time
commitment equal to or greater than their time commitment with us.
Currently, Non-Executive Directors must commit to us at least 20 days
ayear, and the Chairman an average of two days a week. In 2021, the
Board approved the following significant external appointments, all of
which were non-executive, as it was felt that the appointments would
not affect the Director’s availability or effectiveness in carrying out their
responsibilities and duties as a Director at Rentokil Initial.
A
Richard Solomons’ appointment as Chair of the Board of Hotelbeds
Group S.L.U. in May 2021 (where he was already Advisory Committee
Chair)
A
Linda Yueh’s appointment as a Non-Executive Director to SEGRO plc
in May 2021
A
Richard Solomons’ appointment as a Non-Executive Director to
Mandarin Oriental International Ltd in November 2021
We monitor, in line with published investor guidance, the issue of Board
Directors becoming over-committed by taking on toomany potentially
onerous positions (sometimes referred to as ‘overboarding’), andthe
need to retain flexibility to deal with unforeseen events. The Chairman
typically attends all Committee meetings by invitation and
Non-Executive Directors often attend too, even where they are not
members of the relevant Committee. The fact that several of the
members of the Board hold multiple non-executive positions has
notpresented any difficulties in their ability to manage potentially
competing demands for their time.
In addition to published investor guidance, the Board considers a
Director’s time commitment in aggregate and takes into account
whether aNon-Executive Director holds any executive appointments.
All Directors have demonstrated high levels of availability and
responsiveness for the additional meetings held during 2021, as well
asdiscussions outside of meetings where these have been required.
Attendance was 99% for all scheduled and additional Board meetings in
2021, and it is pleasing to note the ongoing commitment demonstrated
by all Directors. Full attendance details can be found on page89.
Director induction and training
The Board ensures the Directors continue to provide suitable
leadership, through a regular performance-evaluation process, training
processes, governance briefings, Board succession planning and
annual re-election by shareholders. Following the appointment of any
new Director, the Chairman and Company Secretary make available
afull, formal and customised induction to the Company and the role
ofthe Board.
Sarosh Mistry joined the Board as a Non-Executive Director in April
2021. We provide all Non-Executive Directors with the following
materials on their appointment:
A
key Company policies, procedures and governance information,
including the Code of Conduct, Board Governance Manual and the
Group Authority Schedule;
A
details of the Group structure;
A
analysis of the Company’s key shareholders and share capital;
A
recent analyst notes;
A
the latest Annual Report and Responsible Business Report;
A
minutes and papers from the most recent Board and relevant
Committee meetings, including the most recent strategy meeting;
A
copies of the most recent Board and any relevant Committee
evaluation reports; and
A
guidance on the legal and regulatory responsibilities of a Director
inaUK publicly listed company.
Before and after their first Board meeting, a new Director will meet the
Chief Executive and the Chief Financial Officer, as well as other
members of the Executive Leadership Team and senior management.
They are also given access to external advisors (auditors, legal advisors
and brokers).
In April 2021, Sarosh Mistry met virtually with members of the Executive
Leadership Team including Vanessa Evans, Group HR Director, and
Gary Booker, Chief Marketing, Innovation and Strategy Officer. He also
held meetings with John Myers, the Regional Managing Director for
North America, and members of his senior management team.
Unfortunately, several planned in-person induction events had to be
postponed due to the ongoing restrictions caused by the COVID-19
pandemic.
New Directors also undertake the same online induction modules as
other new colleagues in our online learning and development platform
(U+), on key compliance subjects such as our Code of Conduct,
anti-bribery and corruption, competition law, information security and
privacy, insider information and conflicts of interest.
The induction process typically takes place over several months, and
new Directors complete a questionnaire after 12 to 18 months to provide
an opportunity for feedback, to review the effectiveness of the training,
to highlight areas for improvement and to identify any further
development needs.
We provide Directors with the opportunity to meet colleagues
(seeStakeholder engagement on page 96), although the COVID-19
pandemic continued to impact the opportunities for meetings in person
and the majority of meetings were once again held virtually. Directors
also receive additional briefings or training as required. We circulate
details of externally facilitated events and training to Directors regularly,
to allow them to participate in peer group discussion forums and
seminars related to the listed-company environment. We also share any
invitations received to attend Director events arranged by investors.
Corporate Governance Report
continued
100
Rentokil Initial plc
Annual Report 2021
Board evaluation
In line with best practice, we assess the performance and effectiveness of the Board, its Committees and individual Directors comprehensively each
year through a formal evaluation. As outlined in provision 21 of the UK Corporate Governance Code, we have adopted a three-year cycle of Board
evaluations. Following two years of internal reviews, we undertook an external evaluation in 2020, conducted by Christopher Saul from Christopher
Saul Associates. During 2021, the Board referred to the key areas identified by this review, and we provide an update on progress below.
2020 evaluation recommendations and progress made during 2021
Review Board agendas
andpapers
A Continue to evolve the quality of Board materials and agendas to facilitate discussions
A broader range of topics were considered in 2021, including technical governance and protocols around
handling of chemicals, an innovation day and a deep dive on emerging risks (see page 93).
Further emphasis was placed on pre-read materials to allow better use of discussion time in meetings.
A Review annual calendar to ensure key areas are reviewed in the course of the year
A full review of the Board and Committee calendar was carried out, adding a further Audit Committee
meeting in May and structuring the agendas to ensure effective coverage of priority topics across the year.
Review Board composition and
succession
A Recruit Non-Executive Director for appointment by mid-2021
Sarosh Mistry was appointed in April 2021.
A Continue to monitor Board composition as the business develops
Ongoing as part of the Nomination Committee’s agenda.
A Regular review of Executive Director and ELT succession plans and ensure Board familiarity with potential
succession candidates
The Nomination Committee received briefings on succession from the Group HR Director. Board
engagement events (see pages 97 and 98) helped increase familiarity.
Enhance Non-Executive
Directors’ engagement
withsenior management
andkey stakeholders
A Regular oversight of key non-financial KPIs
Strategic KPIs were added to the Chief Financial Officer’s update at Board meetings (see page 91) and
updates on SHE Leading Indicators were also provided (see page 92).
A Continue to enhance two-way Non-Executive Director and Board engagement with the business and key
stakeholders
Strategic deep dives held as part of the Board agenda (see pages 91 to 93) and increased level of virtual
colleague engagement events (see pages 96 to 98).
Enhance consideration
of risk
A Consider further discussion of risk mid-year, as well as December review of risk management processes and
reporting
Additional Audit Committee meeting was added and a dedicated Board discussion of two emerging risks
took place in May.
A targeted review of climate change risk and reporting took place in December (see page 107).
A Ensure key risk topics are covered in agendas
As detailed on pages 91 to 93, sessions were run on operations excellence and technical governance, on
emerging risks from climate change and Generation Z, on chemical hazards and safety protocols, and an
analysis of claims exposure.
During 2021, we once again undertook an internal review of the Board and Committees, facilitated using online, anonymised questionnaires.
The questions were largely consistent with those asked in 2019, to allow results to be compared, although they were updated to consider key
developments during the year and to assess the outcomes of the prior year’s review. The evaluation started in November, following the Board’s
overseas visit and strategy sessions, with the Chairman, Committee Chairs and Senior Independent Director reviewing findings ahead of a group
discussion at the Board and Committee meetings in February 2022.
The 2021 performance review showed strong progress on the actions identified in the 2020 review and noted a series of improvements in the depth
and range of Board discussions, as well as in the Board’s composition and in the effectiveness of its oversight. Following its review of the outcomes,
the Board agreed the following actions for 2022.
2021 evaluation recommendations Actions to be taken during 2022
Improve understanding of
USregulatory environment
andimplications, in the light
ofthe Terminix transaction
A Ensure effective oversight of the Terminix acquisition
A Deepen understanding of US regulatory requirements and related implications of the acquisition, with the
assistance of external advisors
Review Board and ELT
succession plans
A Develop succession plan for Audit Committee Chair
A Review Board composition in the light of the Terminix acquisition
A Regular review of Executive Director and ELT succession plans and ensure Board familiarity with potential
succession candidates
Monitor organisational
capacity
A Ensure effective oversight of potential organisational stretch from balancing the day-to-day needs of the
business with delivery of the Terminix acquisition and post-closing integration and synergies
Stakeholder engagement A Continue to develop ways to ensure effective engagement with the full range of key stakeholder groups,
building on progress in 2021
Rentokil Initial plc
Annual Report 2021
101
Corporate Governance Financial Statements Other InformationStrategic Report
Board review of risk management and internal control
The Board has overall responsibility for maintaining systems of risk
management and internal control that are fully effective and ensure
compliance with the UK Corporate Governance Code. The Board
delegates responsibility for risk management to the Audit Committee
where appropriate. You can find further details on the Board’s
responsibility for the risk management approach in the Audit Committee
Report on page 108.
The Group has an accounting manual and a set of key financial controls
that defines the requirements for internal controls around financial
reporting. These documents are regularly reviewed to ensure they are
current. Key financial controls are self assessed by all reporting units
twice annually and tested by the Internal Audit function in line with the
audit plan. Any identified issues are captured with resolutions and
tracked to completion with reported results subject to management
review and oversight. As part of the risk management process, the
Group maintains a central risk register, updated twice annually, which
includes categories to allow for identification of risks relating to the
financial reporting process. Any such risks and their mitigating actions
are reviewed as part of the regular management review process.
We consider risks in the context of long-term strategic and emerging
threats, and shorter-term risks to the completion of the annual operating
plan. The Board has also assessed the viability of the Group over a
period of three years, the potential impact of the principal risks and
stress-tested financial forecasts for severe but plausible scenarios,
andthe anticipated effectiveness of mitigating actions. The Board has
carried out an assessment of the emerging and principal risks facing the
Group, including those that would affect its business model and future
performance. You can find the principal risks identified in the Risks and
Uncertainties section on pages 74 to 79, along with the Company’s
viability statement on page 80. You can find details of briefings on
riskand control topics that were provided to the Board during 2021
on page 93.
The framework of risk management and internal control described
hereand in the Risks and Uncertainties section on pages 73 and 74 is
designed to manage and mitigate risk rather than eliminate the risk of
failure to achieve business objectives. In pursuing business objectives,
internal controls and risk management can provide only reasonable,
andnot absolute, assurance against material misstatement or loss.
We review its effectiveness through regular and transparent
management reporting, the governance processes and external and
internal assurance processes, and in the Audit Committee and Board’s
annual review of strategy andoperational risks. The Board has
conducted a review of the effectiveness of the system of internal control
for the year ended 31December 2021 and confirms that:
A
the Group has an ongoing process for identifying, evaluating and
managing the significant risks faced by the Group;
A
this process has been in place for the year under review and up to the
date of approval of the Annual Report and Financial Statements;
A
the Board reviews the process regularly; and
A
the process operates in accordance with the UK Corporate
Governance Code and the FRC Risk Management and Internal
Control Guidance.
Fair, balanced and understandable
The Directors’ statement on ‘fair, balanced and understandable’ can be
found on page 215. The requirement under the Code to provide a fair,
balanced and understandable assessment of the Company’s position
and prospects in its external reporting is considered throughout the
process of producing the Annual Report and Financial Statements.
Toprovide the information necessary to comply with this requirement,
the Board places particular reliance on the conclusions and
recommendations arising from the Audit Committee’s review of the
Annual Report and Financial Statements, further details of which can
befound on pages 106 and 107.
Find out more at rentokil-initial.com/investors
Full details of the AGM, including the 2022 Notice of Annual
General Meeting, can be found at rentokil-initial.com/agm
Corporate Governance Report
continued
Board Committee evaluation
As part of the annual evaluation process, we also used questionnaires
to assess the effectiveness of the performance and support provided by
and to the Board Committees. We confirmed that the operation of the
Board Committees remains effective and that the Committees are well
integrated into the Board decision-making processes. Each Committee
Chair oversaw the specific findings and agreement of action to be
taken, considering the overall Board findings where they were deemed
relevant to the Committee’s work. Further details are set out in each
Committee report on pages 110, 114 and 120.
Director evaluation
To evaluate the ongoing performance of the Directors, each
Non-Executive Director completes a self-evaluation questionnaire as
part of the annual review. Following completion, the Chairman meets
with each Non-Executive Director to discuss the outcomes. The
Chairman also has individual discussions throughout the year that
helpinform the review. In parallel, the Senior Independent Director
facilitates discussions with each Non-Executive Director to review the
Chair of theBoard’s performance during the year, without the Chairman
being present, and collates the anonymous responses. The Senior
Independent Director then provides the Chairman with feedback
onhisperformance prior to the Board meeting in February.
Executive Directors are subject to regular review and the Chief
Executive appraised the performance of the Chief Financial Officer as
part of the annual Group-wide performance evaluation of all colleagues.
The Chairman evaluates the performance of the Chief Executive as
partof the same process. The Remuneration Committee also reviews
Executive Director performance as part of its deliberations on bonus
payments.
The Nomination Committee and the Board take the outcome of
theseevaluation processes into account each year, to inform its
recommendation for Board members to be put forward for re-election
by shareholders. All Directors were deemed to be effective members of
the Board and are recommended for re-election at the Company’s AGM.
Monitoring and oversight
Policies
We have a strict Group-wide policy and procedure framework in place
to supplement local policies or legislation. The relevant functional
department head reviews the content and suitability of policies
periodically, and they are approved by the Chief Executive. The
cornerstone of this policy framework is the Code of Conduct. We set
outour key policies on page 71, and disclose full details of our policies
relating to ESG matters and their application in our Responsible
Business Report on our website, alongside other key policies. In
addition, we have a treasury policy to ensure the Group has sufficient
liquidity and to manage financial risk as outlined in Note C1 to the
Financial Statements on pages 181 and 182. In 2021, the Board reviewed
and approved the Company’s tax strategy, and we published it on our
website in compliance with the Finance Act 2016. You can find more
details on tax governance on page 70.
We have specific programmes to support implementing the Code of
Conduct and underlying policies, national laws and regulations, and
monitoring and reporting compliance with them. In some cases, we
have specialists who ensure we have set standards and comply with
them, for example in health and safety, IT security, legal, company
secretarial, data privacy, regulatory compliance, pensions and tax.
Morebroadly, we use e-learning training on our online learning and
development platform, U+, to ensure and track dissemination and
adoption across the Group. We provide clear guidelines for all
colleagues on how to seek further advice or report concerns and
operate a whistleblowing (Speak Up) facility. We monitor compliance
through an annual Letter of Assurance process covering all Group
senior management, through Internal Audit reporting on control
incidents, and by monitoring reports through our confidential Speak Up
reporting process. You can find further details in the Audit Committee
Report on page 110. The Group Risk Committee considers current and
emerging risks, reviews current arrangements and makes
recommendations for enhancements as appropriate.
102
Rentokil Initial plc
Annual Report 2021
Audit Committee Report
revise the remediation plan as necessary to complete the extra steps
required to achieve US SOX compliance. A detailed consideration of
BEIS’s audit reform proposals was conducted as part of the Company’s
consultation response and we will continue to monitor developments.
I am pleased to report that a smooth external auditor handover process
was completed in 2021 with the appointment of PwC, following
shareholder approval at our AGM in May 2021. PwC provided regular
updates on the transition and work undertaken, including a risk
assessment and preparatory work ahead of the half year. It was also
areflection of our culture that they noted very good collaboration
frommanagement in the process.
We continued to review cyber incidents and risk throughout the year.
While we do not believe we are being specifically targeted, in common
with the experience of many other businesses, we saw a notable
increase in the number and seriousness of cyber attacks in 2021, with
repeated distributed denial-of-service (DDoS) attacks, and attempted
ransomware incidents in Brazil and Italy. Our focus on cyber resilience
enabled us to keep pace with the complex, volatile threats faced, and
the attacks were detected and prevented before they were able to have
a material impact on the business. Clearly this is an area for heightened
vigilance in future, especially given the Company’s digital agenda.
The Committee receives regular updates on the control environment
from management and reviews any control incidents at each meeting.
Itis encouraging to see that the number of incidents remains relatively
low, with no increase in matters reported via our internal whistleblowing
process, Speak Up, during the COVID-19 pandemic. Nevertheless, some
significant control issues were experienced in the Group.
In the year, we considered an incidence of serious fraud by a former
manager in Australia, now the subject of ongoing litigation instigated
bythe Company, as well as referral to the police. Additional controls
toprevent recurrence have been put in place across our Australian
business, and lessons learned were shared more broadly with senior
management. We also considered two control incidents in North
America, a fraudulent attempt to change bank account details where
thepolicy for changing supplier bank details had not been followed
anda payroll file being processed incorrectly. Both incidences were
fullyinvestigated and processes have been updated and further training
undertaken where necessary. These incidents were not material to the
Group’s reporting.
We continue to monitor the effectiveness of the internal audit assurance
process. A planned independent external quality assessment was
carried out in 2021 by Deloitte to review the effectiveness of theInternal
Audit function. The findings of the review were highly positive across
allcriteria. We reviewed the report’s recommendations and action plan
and the findings mirrored the Committee’s view that Internal Audit is
professionally managed, operates to highly rigorous standards and
iswell-regarded across the business.
The work of the Audit Committee remains of critical importance, not just
in order to provide investors and other stakeholders with assurance of
reliable financial reporting but increasingly in the broader context of risk
resilience and ESG reporting. We have spent time this year evaluating
climate change risk, its consideration as part of the year-end audit
report and its disclosure in the 2021 Financial Statements. We also
increased the number of meetings we held to allow more time to
consider risk areas and the control environment ahead of the half year.
We plan to maintain this level of scheduled meetings in future and will
continue our focus on climate change risk in 2022 alongside other key
areas such as the consideration of IT risk, including oversight following
the implementation of an enhanced IT general controls framework.
Finally, we will be closely monitoring the impact of the Terminix
acquisition on the business and the preparations for future
SOX-compliant financial reporting.
Julie Southern
Chair of the Audit Committee
3 March 2022
Committee members:
A
Julie Southern (Chair)
A
John Pettigrew
A
Linda Yueh
Areas of focus in 2021
A Change of Group external auditor
A External review of Internal Audit function
A External regulatory developments
A Control incidents e.g. fraud and IT security
A Climate change risk and reporting
Areas of focus in 2022
A Accounting oversight of Terminix acquisition
A Review IT audit plans and general controls
A Monitor climate change reporting practice
A Monitor UK (BEIS) audit reform proposals
A US regulatory requirements
includingSOXcompliance
Dear Shareholder
I am pleased to present the report of the Audit Committee for the
financial year ended 31 December 2021, which sets out how we have
discharged our duties in accordance with the 2018 UK Corporate
Governance Code and describes key activities during theyear.
The ongoing impact of COVID-19 continues to create challenges,
although processes developed in 2020 were embedded in 2021 to
manage potential risks in our control environment, such as home
working and travel restrictions. The vast majority of both internal and
external audit work continued to be undertaken remotely, with a robust
audit process once again being effectively delivered in this manner.
During the year, we continued to monitor the changing regulatory
landscape and considered the impact of the potential introduction of
aUK Sarbanes-Oxley (SOX) style framework for the financial reporting
control environment. We conducted an external readiness assessment
for implementing the proposed further internal controls over financial
reporting (ICFR), along with IT control issues around the use of
technology. The assessment completed during 2021, identifying
improvements which would be required to achieve a full SOX standard
environment, particularly around IT general controls, providing a solid
foundation to build from. We defined a remediation plan, with high
priority actions completed during the year and others scheduled for
completion in 2022. As part of the Terminix integration planning, we will
Rentokil Initial plc
Annual Report 2021
103
Corporate Governance Financial Statements Other InformationStrategic Report
Audit Committee Report
continued
Role of the Audit Committee
The Audit Committee assists the Board in its oversight and monitoring
of financial reporting, risk management and internal controls. The Audit
Committee’s focus is to review and challenge in these areas both with
management and with internal and external auditors.
As is customary, the Audit Committee undertook a review of its terms
ofreference during 2021, and found that no changes were needed.
Theterms of reference were subsequently approved by the Board in
December and are available on our website. Due to the length and
complexity of the terms of reference, the Audit Committee also reviews
its activities on an annual basis to consider their alignment with each of
the duties and responsibilities of the Audit Committee as set out in the
terms of reference.
The Chair of the Audit Committee is available to meet with shareholders
if they would like to engage on any matters set out in this report and will
be available to answer questions at our AGM in May 2022.
Membership and attendance
Julie Southern, Chair of the Audit Committee, is a Chartered Accountant
and is considered to have relevant and recent financial experience.
John Pettigrew has extensive commercial and operational experience
inoverseeing the financial affairs of substantial business undertakings
and Linda Yueh has a strong economic and academic background with
considerable experience gained in advisory roles. The Audit Committee
as a whole is, therefore, considered to have competence relevant to the
sector in which the Company operates. Full biographical details of the
members of the Audit Committee are contained on pages 84 and 85.
AllAudit Committee members are independent Non-Executive
Directors. The Audit Committee did not find it necessary to seek
external advice during the year, other than through its usual dialogue
with the external auditor.
The Audit Committee met five times during the year with the members
attending all meetings. Four of these were scheduled meetings and in
response to the 2020 Board evaluation an additional meeting was held
in May 2021 to allow extra time for consideration of risk areas and the
control environment ahead of the half year. The Audit Committee
agreed that it should continue to hold this additional meeting in future
years. Full details of the attendance of the members during 2021 can
befound on page 89. Meetings of the Audit Committee are attended by
the Chair of the Board, the Chief Executive, the Chief Financial Officer,
the external auditor, the Director of Internal Audit & Risk, the Group
Financial Controller, the Company Secretary (who acts as secretary
tothe Audit Committee) and the Deputy Company Secretary.
The Audit Committee meets at least once per year separately with the
Company’s auditor and the Director of Internal Audit & Risk without
executive management present. In 2021, the Audit Committee held
private sessions with KPMG LLP (KPMG), as exiting auditor, in February
and with PwC and the Director of Internal Audit & Risk in December. The
Chair of the Audit Committee also meets periodically with the external
auditor and the Director of Internal Audit & Risk. The Chair of the Audit
Committee reports to the Board on the activity of the Audit Committee
and any matters of particular relevance in the conduct of its work.
Activities of the Audit Committee in 2021
In 2021, the Audit Committee considered the following key areas:
Matters considered Discussion and outcome Find out more
Financial reporting
Financial reporting The Committee reviewed the Annual Report and the Company’s Interim
andAnnual Financial Statements and received reports from both the Group
Financial Controller and the auditor on the significant financial reporting
judgements relating to each statement.
Financial reporting on page 106
Key accounting matters The Audit Committee considered key accounting matters, including Alternative
Performance Measures, bad debt provision, credit note provision and
acquisition accounting in relation to the Company’s financial results for 2020
and 2021.
Significant issues and
judgements on page 106
Other financial reporting
matters
The Audit Committee reviewed the going concern analysis, the viability
statement and the internal control statement for recommendation to the Board.
Other financial reporting matters
on page 107
Climate change reporting The Audit Committee considered climate change reporting in the 2021 Financial
Statements for recommendation to the Board in December.
Climate change reporting
onpage 107
External audit
2020 financial statements The Audit Committee received a report from KPMG on the results of the audit
ofthe 2020 Financial Statements, considering key judgements and risks.
Theletter of representation was also reviewed and recommended for approval
to the Board.
–
External audit transition Following a competitive audit tender undertaken in 2020, PwC were appointed
as external auditor at the AGM in May 2021. The Audit Committee reviewed and
approved the terms and scope of the audit engagement and reviewed the
status of the transition at its meeting in May.
External audit on page 108
Audit objectives No external audit evaluation was undertaken in the year due to the change in
external auditor. Instead, the Audit Committee focused on key objectives for
improvement in the Group audit and how best to get value out of the audit
feedback and effectiveness review process in the future.
Audit services on page 108
Audit strategy The Audit Committee considered the audit strategy for the 2021 audit, including
the key areas of focus, materiality levels, scope and coverage at its meeting
in July.
External audit on page 108
104
Rentokil Initial plc
Annual Report 2021
Matters considered Discussion and outcome Find out more
Internal controls and risk
Internal control framework The Audit Committee reviewed the effectiveness of the internal control
andriskmanagement framework.
Risk management and internal
control on page 108
Control environment The Audit Committee received and reviewed matters relating to the internal
control environment provided by the Director of Internal Audit & Risk and
reviewed the Group Risk Committee minutes.
Risk management and internal
control on page 108
Internal Audit
investigations
The Audit Committee reviewed the outcome of Internal Audit investigations,
including the most significant issues raised in Internal Audit reports, and
received updates on the status of resolution of issues raised.
Internal audit on page 110
Group risk The Audit Committee reviewed the Group risks and actions to enhance their
measurement, monitoring and mitigation actions, including approval of the
principal risks disclosed in the 2020 Annual Report and consideration of those
for the 2021 Annual Report.
Risks and Uncertainties
onpages 73 to 79
Financial controls PwC provided an overview of understanding and assessing key financial
controls, including IT general controls, as part of their Group Audit Plan,
aswellas reporting on their business process walkthroughs in the year.
TheAudit Committee also considered results from management’s internal
control self-assessment activities in July and November.
Risk management and internal
control on page 108
Internal Audit The Audit Committee received and reviewed the conclusions and themes
emerging from internal audit reviews conducted during the year and approved
the Internal Audit Plan for 2022 in conjunction with the Board’s strategic review
and operating plan for the year.
Internal audit on page 110
External review of Internal
Audit function
The Audit Committee reviewed the report prepared following the external
review of the Internal Audit function undertaken during the year.
Internal audit on page 110
Governance and compliance
Regional deep dives During 2021, the Audit Committee received presentations from the Regional
Finance Directors of the Pacific and Asia regions. These provided detail on
thefinancial reporting for each region and the control environment in their
businesses.
Other regional updates were
provided as part of the Board
agenda (see page 91)
Tax The Audit Committee considered and recommended the Group’s 2021 tax
strategy for approval at its meeting in November.
Our tax strategy can be
foundonour website
Litigation The Audit Committee reviewed reports of all material litigation and disputes
provided by the Group General Counsel at four of its meetings.
–
Disclosure Committee
oversight
The Audit Committee reviewed a report of the Disclosure Committee’s activities
during the year and its terms of reference.
Governance framework
onpage90
Letter of Assurance The Audit Committee considered a summary of the outcome of the annual
Letter of Assurance review noting any exceptions provided by the senior
country, regional and functional management and any actions proposed
asaresult of those returns.
Governance, trust and
transparency on page 70
Terms of reference The Audit Committee undertook its annual review of its terms of reference. These are available
onourwebsite
Performance review The Audit Committee undertook its annual review of the effectiveness of the
Committee.
Effectiveness review on
page 110
Payment practices The Audit Committee received an update on new requirements under the
Prompt Payment Code and payment practices in the UK, and noted the
payment practice reports for our two principal UK subsidiaries for H2 2020.
These are published
onlineatgov.uk
Non-audit services The Audit Committee updated the non-audit services policy to clarify
requirementsduring the transition period of the external auditor. Fees were
alsoconsidered and approved in relation to the proposed Terminix acquisition.
The policy is available
onourwebsite
Rentokil Initial plc
Annual Report 2021
105
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Audit Committee Report
continued
Financial reporting
The Audit Committee considered closely the judgements and decisions
taken by the management team in the preparation of the Financial
Statements for 2021. The sections below set out the significant issues
and judgements that were applied in the 2021 Annual Report, as well
asproviding additional details on other financial reporting matters
considered during the year. As part of the Committee’s review of the
2021 Annual Report at its meeting in February 2022, a report on
management procedures was produced for review which clearly
detailed responsibilities and the steps undertaken by management
toensure full compliance.
Significant issues and judgements
The Audit Committee has reviewed the following significant financial
reporting issues and judgements made during the preparation of the
Financial Statements with management and the auditor. The significant
areas of focus considered and actions taken are set out below. These
issues were discussed and reviewed by the Audit Committee during
2021, notably at the review of the interim results and at the review and
agreement of the audit plan for 2021, and as part of the year-end review
and approval process.
Significant matter Action taken
Acquisition accounting
The Group makes a large number of acquisitions each year, many of
which require the valuation of acquired intangible assets, including
brands, customer lists and goodwill. The calculations for valuing these
assets on acquisition are subject to significant judgement and
estimation about the future performance of the acquired business,
such as forecast customer termination rates, discount rates and
growth rates. None of these judgements and estimates are considered
to have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
The Group utilises the allowances for provisional accounting within the
standards where appropriate, and there is judgement required during
this period as to whether the adjustments relate to the pre- or
post-acquisition period.
At the year end, management provided the Audit Committee
witha summary of M&A activity in the preceding year, including
updates to provisional accounting as well as details of new
acquisitions. The Audit Committee reviewed the accounting
treatment of certain aspects of significant acquisitions, including
determination of the consideration paid, the identification and
valuation of acquired intangible assets and a review of provisional
opening balance sheets.
Climate change
The Group operates across many markets around the world and is
impacted by physical events caused by climate change and also
contributes to climate change through its carbon emissions. The
Group also has a net zero commitment for 2040 and this plan will
require operational changes in how we service our customers and
deal with the effects of climate change.
As part of its discussion of the audit strategy for 2021, the Audit
Committee considered climate change risk and its inclusion in the
year-end audit report at its meeting in July 2021. Climate change
risk was also considered as part of the review of Group risks in
November and, in December 2021, the Audit Committee received
apresentation from the Chief Financial Officer and the Group
Financial Controller outlining the accounting considerations and
climate change reporting in the Company’s Financial Statements
(see also page 107 on climate change reporting).
Tax provisions
The Group holds a number of provisions for tax contingencies in
relation to various claims and potential claims from tax authorities,
which require significant judgements and estimates in relation to
taxrisks. The complexity is increased as a result of the large number
oftax jurisdictions in which the Group operates, and the time taken
fortax matters to be agreed with the relevant authorities.
Management determines the provisions for uncertain tax positions
based on the relevant tax rules in each country, the status of
negotiations with tax authorities, its past experience including
external advice to support judgements where there was significant
uncertainty and the amounts involved where material. In respect
of transfer pricing across tax jurisdictions, the Group benchmarked
its approach using transfer pricing experts to ensure the risk of
breaching local tax authority requirements is minimised. The Audit
Committee reviewed the position at the half-year and year-end
balance sheet dates supported by papers from the Group Tax
Director, and is satisfied that the assumptions supporting the
valuations are appropriate and that the liabilities are reasonably
stated in the Financial Statements. Further details can be found
inNote A13 Current tax liabilities.
Credit note provisions
While many countries are beginning to live with COVID-19, lockdown
restrictions in certain jurisdictions through 2021 have resulted in
instances where businesses have been unable to perform a
proportion of planned service visits on customer premises and the
Group’s usual high levels of service have been impacted, although on
a far smaller scale than 2020. As a consequence, some customers
may potentially be entitled to credit notes against amounts invoiced.
Contrastingly, as the pandemic has eased in other jurisdictions we
have been able to catch up services and therefore some previously
raised credit note provisions have been unwound.
The Group has continued to review its service delivery data and credit
notes already issued in order to establish the quantum of credit notes
that need to be provided. The Finance teams have also established
apolicy across the affected countries for when and how unused
provisions can be unwound. This policy was reviewed by the Audit
Committee in July 2021, where the Audit Committee wanted to confirm
thatthe policy was consistent across affected markets and whether
the policy had been reviewed and was supported by the auditors.
106
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Significant matter Action taken
Goodwill impairment review
The Group carries material balances for goodwill and acquired
intangible assets, and due to the acquisition programme makes
material additions to these balances each year. Annual impairment
tests are based on value-in-use calculations which require significant
judgements in relation to the inputs used, including forecast growth
rates and discount rates. Management is required to perform annual
tests for impairment of goodwill balances and on other acquired
intangible assets when there are indicators of impairment.
Management reviewed all impairment tests for goodwill balances
over £2m using a centrally provided model. The intangible assets
were grouped into cash-generating units (CGUs) for the purpose of
assessing recoverable amounts, using cash flows based on the most
recent strategic plans, as amended for any significant changes since
their preparation. Cash flows were discounted using the internally
calculated country and category-specific discount rates. The Audit
Committee received a summary of the results of the review and,
although the total value of intangible assets is significant, was
satisfied that the outcome of the impairment review was adequately
disclosed in Note B2 Intangible assets. During the year, we upgraded
our goodwill impairment review process regarding more specific
weighted average cost of capital by country, a review of climate
change considerations on CGU cash flows and commentary around
the assumptions within the models.
Agent versus principal reporting
Target Specialty Products is a subsidiary pest control products
distribution business in North America. It is a business which serves
the Pest Management and Turf & Ornamental sectors and has grown
significantly in the last five years as it has taken on new revenue
streams, including products which are held as consignment stock and
sold from third party manufacturers. These products fall under the
consideration of agent versus principal judgements within IFRS 15.
Management has historically considered the business to act as
principal in these arrangements.
Over the last three years, our Target Specialty Products business in
North America has grown significantly and in 2021 we completed a
review of the revenue recognition policy within this revenue stream.
The region has a limited number of suppliers for whom we sell
products to end customers on a consignment stock basis and,
asaresult of the review, we have revised our judgement such that
weconsider ourselves to be agents of these suppliers rather than
principal and have therefore recognised only the commission
revenues earned rather than revenues charged to end customers. This
has led to a reduction in revenue recognition in 2021 (£22.8m at AER)
and a restatement which has reduced prior year revenues from our
North America Target distribution business by £20.2m (at AER). The
changes in revenue have no impact on reported profits in 2020 or in
2021 and, therefore, improve the 2021 margin of the North America
business by 20 basis points and the Group as a whole by 10 basis
points. The change was reviewed by the Audit Committee at its
meeting in February 2022.
Other financial reporting matters
Going concern and viability statements
At its meeting in February 2022, the Audit Committee considered the
Group’s ability to continue as a going concern, taking into account
budgets, borrowing facilities, timing of cash flows, and financial and
operational risk management before recommending to the Board that
itadopt the going concern basis of preparation for the 2021 Financial
Statements. At the same meeting, the Audit Committee also considered
the longer-term viability of the Company, reviewing the analysis from
management to support the viability statement in the 2021 Annual
Report. This included forecasts of future cash flows, stress-testing
scenarios and an analysis of other risks that could impact the viability
ofthe business over the three-year period 2022 to 2024 and how they
could be mitigated. The going concern statement for 2021 can be found
on page 214. The viability statement for 2021 can be found on page 80.
Fair, balanced and understandable reporting
The Audit Committee undertook a review of the 2021 Annual Report
ahead of its publication to consider whether it was fair, balanced and
understandable as required by the UK Corporate Governance Code.
TheCommittee received a report from management summarising the
process undertaken, which covered, but was not limited to, the following:
A
The Chairman and Chief Executive provide input and agree on key
elements to be included which set the tone and balance of the
Strategic Report.
A
All contributors to the Annual Report are made aware of the
requirement for content to be fair, balanced and understandable.
A
Regular review meetings are held with the appropriate senior
management to ensure consistency of the whole document.
A
Extensive review and verification processes are undertaken by the
appropriate departments and senior managers to ensure the
accuracy of the content.
A
Additional independent internal reviews are undertaken to ensure
that any perceived lack of clarity, balance or understanding in the
Annual Report is identified and addressed.
The Audit Committee was satisfied that the Annual Report did provide
afair, balanced and understandable assessment of the Company’s
position and prospects. The Board’s statement on fair, balanced and
understandable in relation to the 2021 Annual Report can be found on
page 214.
Climate change reporting
As previously described, the Audit Committee considered climate
change risk and its inclusion in the year-end audit report during the year.
The Company’s 2020 Annual Report was included in the sample for the
FRC’s thematic review of entities’ reporting on streamlined energy and
carbon reporting (SECR) disclosures. The FRC carried out a limited
scope review with no queries or questions being raised and the
Company was featured as an example of better disclosure in the review
when it was published in September 2021. However, it is increasingly
understood that climate change can affect a number of areas of financial
statements and the FRC included as one of its key disclosure
expectations in its annual review of corporate reporting for 2020/21 that
material climate change policies, risks and uncertainties discussed in
narrative reporting should also be appropriately considered and
disclosed in the financial statements.
Management, therefore, undertook a full review taking into account the
current understanding of the impact of climate change on our business
as a whole (see page 62), the dynamic of our business models and their
impact on the risk, and any applicable Accounting Standards. Analysis
was undertaken to link the expected risk levels and climate change
impacts to these Accounting Standards and a review of the balance
sheet, key revenue streams and impacts of the Group’s 2040 net zero
commitment was completed. As detailed on page 155, overall the
analysis demonstrated that the Group is not materially exposed to
Rentokil Initial plc
Annual Report 2021
107
Corporate Governance Financial Statements Other InformationStrategic Report
Audit Committee Report
continued
climate change events due to its disaggregated nature and it was,
therefore, proposed that only two areas should disclose climate change
impacts in the Financial Statements, with additional disclosure in the
basis of preparation section in the Notes to the Financial Statements
and the intangible asset impairment review process (see pages 155
and176). The Audit Committee considered the review and approach
proposed and recommended these to the Board of Directors, which
approved them at its meeting in December 2021.
External audit
Audit services
The auditor is appointed by shareholders to provide an opinion on the
Financial Statements and certain other disclosures prepared by the
Directors. KPMG acted as the auditor to the Group until their resignation
at our AGM in May 2021. Following shareholder approval, PwC was
appointed as auditor from this date and, having shadowed the 2020
audit process, have undertaken the audit of the Group’s Interim and
Annual Financial Statements for 2021. The Audit Committee is
responsible for oversight of the auditor, agreeing the audit strategy
andrelated work plan as well as approving their fees.
The auditor attends all meetings of the Audit Committee and, in 2021,
KPMG attended the meeting in February and PwC attended all
meetings during the year. During 2021, KPMG and PwC each met
separately with the Audit Committee once without executive
management present and met with the Audit Committee Chair
independently two and four times respectively. The main engagement
with the Audit Committee in 2021 has been the transition between
auditors and the audit and publication of Interim and Annual Financial
Statements, including the auditor’s scope and priorities approach and
key judgement areas.
Due to the change in external auditor, the Audit Committee did not
formally review the effectiveness of the auditor during 2021 as is
customary. The Committee did, however, review and agree six key
objectives for improving the Group audit at the May 2021 Audit
Committee meeting. The six targets had specific actions by year across
the first three years of the audit, to be formally reviewed annually at the
May Audit Committee meeting. The Audit Committee also considered
how best to get value out of the audit feedback and effectiveness
review process. PwC were involved in the discussions.
Audit-related and non-audit services
To safeguard the objectivity and independence of the auditor, the
Company has a policy on the engagement of the auditor’s services on
audit-related and non-audit services. The Audit Committee accepts that
certain work of a non-audit nature is best undertaken by the auditor.
The policy sets out the nature of services that are permitted and those
that are specifically prohibited. In general, permitted services would be
limited to matters that are closely related to the annual audit process or
where a detailed knowledge of the Group is advantageous. The auditor
is permitted to be engaged on a small number of specific non-audit or
additional services as set out in the policy subject to approval of the
Audit Committee.
The Audit Committee regularly reviews the amount and nature of
non-audit work performed by the auditor to ensure that the auditor’s
independence is not compromised. Any engagement fee on permitted
services in excess of £10,000 requires the approval of the Chair of the
Audit Committee and any engagement fee in excess of £250,000
requires the approval of the Audit Committee. The Chief Financial
Officer is authorised to approve an individual permitted service or
specific project below £10,000. The non-audit services policy was
reviewed in March 2021 in order to clarify the application of the policy
during a transition period between two external auditors, as occurred
in2021. A copy of the current policy on the provision of non-audit
services by the external auditors is available on our website.
Audit fees for the statutory audit for 2021 were £4.3m (2020: £3.2m).
Fees for audit-related assurance services and other non-audit services
incurred during the year amounted to £0.2m (2020: £0.1m). The ratio of
non-audit fees to statutory audit fees for the year was therefore 0.04:1
(2020: 0.03:1). The majority of the audit-related services were in relation
to non-statutory accounts audits and assurance services.
As part of the broader Board review and approval of professional
advisor fees in relation to the proposed acquisition of Terminix, the Audit
Committee considered and approved additional non-audit fees for the
proposed work to be undertaken by PwC in relation to the project.
Taking into account independence considerations for all professional
advisors, the Audit Committee concluded that to engage PwC for
certain elements of the work was in the best interest of the Company,
inpart due to potential linkages and knowledge from their position as
incumbent external auditor. Further details of the fees paid for audit
services, audit-related services and non-audit services can be found
inNote A8 to the Financial Statements on page 165.
Disclosure of information to the auditor
The Audit Committee monitors the process leading up to the
preparation of the Financial Statements, including the arrangements the
Company has in place for disclosing all relevant audit information to the
auditor. A formal confirmation on disclosure of information to the auditor
is provided in the Directors’ Report on page 214.
Tenure
PwC were appointed as our external auditor at our AGM in May 2021
following a formal audit tender undertaken during 2020. Neil Grimes is
the lead audit partner responsible for the Group audit. It is intended that
the next competitive tender process will be undertaken within the next
10 years in accordance with the UK Competition & Markets Authority
Order. The Company confirms its compliance with the provisions of the
UK Competition & Markets Authority Order regarding statutory audit
services for the financial period ended 31 December 2021.
Auditor independence and objectivity
The Audit Committee received confirmation from PwC that they were
independent and objective within the context of applicable professional
standards prior to their appointment by shareholders at the AGM in May
2021.
The Audit Committee considers annually the scope, fee, performance and
independence of the external auditor. In concluding that PwC should be
proposed for reappointment as auditor at the AGM in May 2022, the
Board and the Audit Committee took into account the need to ensure that
auditor independence was safeguarded. The Audit Committee received
confirmation from PwC that they remained independent and objective
within the context of applicable professional standards.
The Audit Committee considers that there are sufficient controls and
processes in place to ensure that the required level of independence of
the auditor is maintained and it is not believed that there is any material
risk of the Company’s auditor withdrawing from the market.
Risk management and internal control
The Group’s approach to managing risk and ensuring that an effective
internal control environment is maintained is set out in the Risks and
Uncertainties section on page 73. The Board’s statement on risk
management and internal control is set out in the Corporate
Governance Report on page 102. Independent reassurance of the
effectiveness of risk management and internal controls across the
Group is provided to the Chief Executive and the Board by Group
Internal Audit.
The identification and management of risk is fully integrated into the
development of the Group’s strategy and the day-to-day operational
execution of the strategy by the regions and business units. Ensuring
that risks are identified and managed effectively is a part of every
manager’s and supervisor’s job through leadership of the teams for
which they are responsible.
The Board has overall responsibility for the Group’s risk management
approach. This includes:
A
review and approval of the Group’s overall strategy, which includes
reviewing the risks that may prevent the Group from achieving its
objectives and ensuring that these risks are mitigated or managed
toan acceptable level;
A
regular reviews of business performance, including updates of the
risks that the business is facing, and challenging management to
obtain assurance that these risks are being effectively managed;
A
review of management’s approach to identifying and managing risk,
including approval of the Group Risk Register and recommending
enhancements;
A
evaluation of the effectiveness of internal controls, including financial,
operational and compliance controls;
A
oversight of the Group’s whistleblowing arrangements;
108
Rentokil Initial plc
Annual Report 2021
A
evaluation of the effectiveness of internal and external audit; and
A
delegation of authority to the Chief Executive and Chief Financial
Officer to make commitments on behalf of the Company.
Some of the above responsibilities are delegated to the Audit
Committee as previously described. The Audit Committee receives
regular reports from the Chief Financial Officer and the Director of
Internal Audit & Risk on financial controls and process improvement
programmes. These include:
A
an annual report on the overall status of the control environment in
the Group, including the results of testing and reports on identified
areas of weakness in controls;
A
action plans on control environment improvements and updates
ontheir implementation;
A
updates on control weaknesses and planned actions to prevent
are-ocurrence; and
A
periodic reports from regional and Group Finance executives,
andInternal Audit.
During 2021, the Audit Committee continued its practice of reviewing in
depth the risk and control environment in the main regional businesses,
as well as the Regional Finance Directors’ assessment of the quality and
priorities of the Finance function in the relevant part of the business.
Audit Committee members received presentations from the Regional
Finance Directors for the Asia and Pacific regions during the year. Other
regional updates were provided as part of the Board agenda. This
provides a high-level insight for the Audit Committee as well as an
opportunity to challenge key managers on potential risks. It further
supports the discussions that take place in the Nomination Committee
on talent and succession in the Finance function.
The number of control issues across the Group remains relatively low,
with those that do occur not resulting in a material impact on Group
performance. Nonetheless, significant control issues were experienced
including:
A
repeated unsuccessful DDoS attacks;
A
attempted ransomware incidents in Brazil and Italy;
A
an incidence of fraud in Australia;
A
an incidence of supplier bank change fraud in North America; and
A
an incorrect processing of a payroll file in North America.
In addition, the external readiness assessment for internal controls over
financial reporting (ICFR) completed during 2021 understandably
identified improvements which will be required to achieve a full
Sarbanes-Oxley (SOX)-standard environment, particularly around IT
general controls.
Operational controls examined by Internal Audit generally work well.
Testing of these controls during 2021 highlighted some issues regarding
retention of documentation for training records and subcontractors in
some countries. The introduction of a site risk assessment app during
2021 is making a positive impact on operational controls and this is
anticipated to further improve in 2022 as the app roll-out continues.
TheAudit Committee also receives a regular report of matters reported
via Speak Up, our internal whistleblowing process. There were 41
control incidents reported in 2021 (2020: 40). The nature of the matters
reported remains similar to previous years and principally relates to
employee and employment matters; with very few relating to fraudulent
activity, which remains at a very low level across the Group.
Our US business has faced several class action claims over the past two
to three years from colleagues and former colleagues (mainly but not only
those in acquired businesses) in California, for alleged wage and hour
violations (which cover overtime pay, provision of meal breaks, etc).
Thepay practice claims have typically been based in part on legacy
payplans that conflicted with current laws and regulations and gaps
inrecord-keeping. There are no such claims currently outstanding.
Moregenerally, the Group has now reached an eight-year low aggregate
exposure to material litigation claims, through improved operational
practices, greater rigour in compliance and a proactive approach to
dispute resolution. The Audit Committee regularly reviews the status
ofany larger claims and considered a review of themes in litigation over
the past eight years at its meeting in July.
A series of measures are being implemented in North America to
minimise the chance of recurrence of such employee class actions,
involving operational and functional leadership in the US as well as input
from Group function heads in HR, Legal and Internal Audit.
In response to a number of government commissioned reviews calling
for corporate reforms and the likelihood that a UK SOX equivalent may
be introduced soon, an external assessment on how to implement ICFR
in the UK was undertaken during 2021 with the findings shared with the
Audit Committee. The assessment included workstreams covering
culture, fraud framework, scoping, IT-readiness and two detailed pilot
process walkthroughs which included a deep dive on the IT controls
associated with those processes. The Audit Committee also considered
the BEIS consultation on audit reform, ‘Restoring trust in audit and
corporate governance’, and the Board reviewed the Company’s
response ahead of its submission in July 2021. We are still awaiting the
outcome of the BEIS consultation ahead of implementing a plan to
address the items raised. However, the work undertaken to date will
now form a strong basis for addressing the SOX requirements which will
result from completing the acquisition of Terminix in North America.
In 2021, the Audit Committee also undertook a review of the Company’s
activities and processes to identify, assess and manage the
opportunities and risks related to climate change as set out on page 62.
See pages 58 to 65 for further information on the Company’s journey to
net zero.
There is a Group Risk Committee composed of key functional senior
managers which considers the risk framework and key and emerging
risks. This Committee sits within our governance framework as set out
on page 90. Copies of the minutes of the Group Risk Committee are
provided to the Audit Committee and, in 2021, the Chair of the Audit
Committee also attended a Group Risk Committee meeting as part
ofthe Board’s colleague engagement programme (see below). Where
appropriate, items that are raised as significant or emerging issues by
the Group Risk Committee are reflected in adjustments to the control
environment.
Considering risk in detail
Our Group Risk Committee meets four times a year and, at
themeeting in October 2021, Julie Southern, Non-Executive
Director and Chair of the Audit Committee, joined the meeting
to engage with colleagues on the current and emerging risks
being considered. Items on the agenda for the two hour
meeting included a deep dive on IT risk presented by the
Global Head of Information Security and the Chief Information
Officer, a thematic review oflitigation risk and mitigation by
the Group General Counsel & Company Secretary, and a
detailed discussion on climate change risk and reporting,
including how this should be presented in the Financial
Statements of our 2021 Annual Report. Themeeting provided
Julie with the opportunity to observe the management
process when considering key risk areas, with sufficient time
to ask questions and debate approach. The discussion on
climate change was reflected in the final paper on climate
change reporting in the 2021 Financial Statements that was
submitted to the Audit Committee and Board for its
consideration and approval inDecember 2021.
Spotlight
Rentokil Initial plc
Annual Report 2021
109
Corporate Governance Financial Statements Other InformationStrategic Report
Audit Committee Report
continued
Internal audit
The Group has an operational Internal Audit team of six led by the
Director of Internal Audit & Risk. The Director of Internal Audit & Risk
reports to the Chief Financial Officer and has direct lines of
communication with the Chair of the Audit Committee, the Chief
Executive and the Chair of the Board, as well as to all operational and
functional leaders in the business. The Internal Audit team has since
2019 included one senior auditor focused specifically on the North
America business.
An independent external quality assessment (EQA) was undertaken
byDeloitte during 2021 in order to review the effectiveness of the
Internal Audit function. The outcome of the EQA was very positive
withthe function obtaining the highest rating attainable. Based on
feedback received, Deloitte found the Internal Audit function to be
aprofessionally run and experienced function with strong leadership,
which incorporates many aspects of good practice within its ways of
working, and has built a strong and productive relationship with the
businesses it has audited. Notwithstanding this, the review found that
there were aspects where the function could strengthen its practices
and identified continuous improvement opportunities to maximise
thevalue which the function can deliver through its existing operating
model. Within this context, Deloitte raised a number of opportunities
forongoing development and continuous improvement of the function.
The Audit Committee discussed the findings of the report at its meeting
in December and reviewed the action plan which had been developed
to address recommendations. Examples of outcomes include IT
resource being supplemented in 2022 to allow more IT audit work
andan additional resource being added to the Internal Audit team
inNorth America.
In 2021, Internal Audit implemented a specific tool, TeamMate, to assist
with audit planning, execution and issue tracking, as well as introducing
the concept of a grace period, a defined time period in the audit process
to address some of the issues raised which would then be reflected
inthe final audit opinion. Internal Audit continued to conduct in-depth
reviews of a broad range of business processes at business locations
across all regions. These included:
A
key financial controls;
A
entertainment and travel expenses;
A
authority schedules;
A
payroll;
A
IT general controls and IT corporate-level controls, including Payment
Card Industry Data Security Standard (PCI-DSS) compliance;
A
customer contract management;
A
stock and warehousing;
A
procurement;
A
operational effectiveness, including compliance with Group technical
standards;
A
business continuity management; and
A
compliance with the Code of Conduct and anti-corruption policy.
The 2021 Internal Audit Plan was approved by the Audit Committee
inDecember 2020. During 2021, approximately 90% of the audits
conducted as part of the Internal Audit programme were undertaken
remotely due to the ongoing COVID-19 pandemic. The common themes
arising from the internal audit work during 2021 were presented to the
Audit Committee in December 2021, together with recommendations
tosenior management to improve the controls across some processes.
The 2022 Internal Audit Plan has been designed to address the areas
that emerged in 2021, and to improve the process in several ways.
Theaudit scope has been tailored to address risks at a country level
with flexibility in the processes covered. The IT audit work plan has
been refreshed with input from the Chief Information Officer to target
specific areas of IT risk, and the use of data and analytics will increase
as part of the 2022 audits.
None of the failures identified in the control environment by Internal
Audit or any of the recommendations relating to individual audits
represented a systemic underlying issue, nonetheless an assessment
ofthe issues identified have resulted in a number of recommendations
for improvement, including refreshing both the procurement and
inventory policies, strengthening the IT general controls, completing
athematic audit in the SHE process and defining a plan for enhancing
data protection controls. The overall work of the Internal Audit function
is supportive of the Audit Committee’s and the Board’s view that the
financial and operational controls environment, set out on pages 108
and 109, is working adequately. The Board’s statement on the
effectiveness of risk management and internal control can be found
onpage 102.
Governance and compliance
The Audit Committee has responsibility for reviewing the Company’s
procedures for handling compliance with our Code of Conduct and
anti-bribery and corruption policy, and confidential reporting
(whistleblower) arrangements, known as Speak Up. The Code of
Conduct, a fundamental commitment to comply with all applicable legal
requirements and with high ethical standards, can be found on our
website. It clearly sets out how colleagues can seek advice and report
concerns about suspected ethical or legal misconduct policy violations.
The Company uses an international confidential Speak Up email
address and phone line to allow colleagues to report any suspected
wrongdoing internally to independent senior management at Group
level. Speak Up cases are monitored by Internal Audit and any potential
misconduct reported is formally investigated and appropriate action
taken, with the results of the investigation being reported back to the
whistleblower. The Director of Internal Audit & Risk provides regular
updates to the Audit Committee of any control incidents.
The Audit Committee also periodically reviews the communication
process in place throughout the Company regarding whistleblowing
and the use of Speak Up to ensure its effectiveness and to monitor our
colleagues’ understanding of the system.
The Audit Committee is informed of the outcome of the annual Letter of
Assurance process where senior management are required to confirm
compliance with key Group policies, including the Code of Conduct,
andthe dissemination of these policies to their respective country and
functional teams (see also Management and compliance on page 70).
The full list of exceptions reported during the process is shared with the
Audit Committee and any thematic issues raised are also shared with
the Executive Leadership Team.
Audit Committee eectiveness
During 2021, a review of effectiveness of the Audit Committee was
undertaken using internal questionnaires. This was conducted in
parallel to the Board evaluation detailed on page 101. The review
concluded that the Audit Committee continued to perform effectively
and had received sufficient, reliable and timely information from
management to enable it to fulfil its responsibilities.
The review also considered that strong progress had been made
in2021 in relation to review and discussion of risk processes, in the
quality of engagement with the Group Risk Committee and other
internal management groups. The transition of the external auditor
responsibilities to PwC was considered to have been smooth and
effective.
In 2022, the following focus areas were identified:
A
improve understanding of the US regulatory environment and
implications for the Group in light of the Terminix acquisition,
includingSOX compliance;
A
oversee the Terminix acquisition from an accounting and risk
management perspective;
A
review IT audit work plans and IT general controls;
A
monitor developments in climate change reporting; and
A
continue to monitor developments from the UK BEIS consultation
proposals for reform of audit and corporate governance.
Read the Audit Committee’s terms of reference at
rentokil-initial.com/investors/governance
Read our Policy on the Provision of Non-Audit Services by the
External Auditors at rentokil-initial.com/investors/governance
110
Rentokil Initial plc
Annual Report 2021
Nomination Committee Report
Dear Shareholder
I am pleased to present to you the report of the work undertaken
bytheNomination Committee in the year ended 31 December 2021.
TheNomination Committee holds an important role in ensuring the
appropriate framework is in place to maintain a high quality Board
andleadership team who can deliver against our purpose.
Sarosh Mistry, our first US-resident Non-Executive Director, joined the
Board on 1April 2021. Angela Seymour-Jackson stepped down from the
Board at the conclusion of our AGM in May 2021 and Cathy Turner
succeeded her as Chair of the Remuneration Committee. Details of the
work undertaken by Cathy in her new role can be found in the Directors’
Remuneration Report on page 115.
The Nomination Committee has as always continued to review
succession planning, both for Board and senior management
appointments, during the year. The Nomination Committee concluded
that appropriate succession plans continue to be in place but will of
course be monitoring this closely in light of any changes that may result
from the Terminix transaction.
The Nomination Committee’s key objective is to ensure that the
members of the Board have the appropriate balance of skills,
knowledge and experience to govern the Company in a professional,
ethical and transparent manner, and to ensure that the Board is rigorous
and effective in discharging its responsibilities. As part of the broader
Board evaluation review, the Nomination Committee is recommending
that all Directors be reappointed at our AGM in May 2022. Full details
can be found on pages 101 and 102.
The Nomination Committee undertook its annual review of the Board
Diversity Policy in December 2021 and did not recommend any material
changes. We have now made the policy available on our website and
continue to monitor our progress against it (see page 113). With changing
appointments on the Board, our Board diversity will always fluctuate.
This year, our female representation was reduced from 50% to 37.5%
female (still exceeding the target of 33% in our Board Diversity Policy)
following Angela Seymour-Jackson ceasing to be a Non-Executive
Director, while our representation of persons from an ethnic minority
has doubled from 12.5% to 25% with the appointment of Sarosh Mistry.
We have also disclosed the nationalities of our Directors and Executive
Leadership Team for the first time (see page 84 to 87). The Nomination
Committee also considers diversity in the context of the wider
workforce and additional information on this can be found on pages 53
and 113.
The Nomination Committee will continue to focus on succession
planning in 2022. The Nomination Committee will also be focusing on
plans, once the acquisition of Terminix completes, for putting in place
the appropriate management team for the combined North America
business and an expanded Board with the addition of a Non-Executive
Director from the Board of Terminix.
If you wish to discuss any aspect of the Committee’s activities, you can
contact me by email at chairman@rentokil-initial.com or I would
welcome any questions at our upcoming AGM in May.
Richard Solomons
Chair of the Nomination Committee
3 March 2022
Committee members:
A
Richard Solomons (Chair)
A
Sarosh Mistry
A
John Pettigrew
A
Julie Southern
A
Cathy Turner
A
Linda Yueh
Areas of focus in 2021
A Appointment of new Non-Executive Director
A Remuneration Committee Chair succession
A Senior management succession plans
A Improvements in the ethnic diversity in our
senior leadership population
Areas of focus in 2022
A Board succession planning, including Audit
Committee Chair succession and adding a
Terminix Director to the Board post-closing
A Diversity-related disclosures for listed companies
A Executive Director and senior management
succession planning and talent development
Rentokil Initial plc
Annual Report 2021
111
Corporate Governance Financial Statements Other InformationStrategic Report
Nomination Committee Report
continued
Role of the Nomination Committee
The Nomination Committee monitors the composition and balance of
the Board and of its Committees, identifying and recommending to the
Board the appointment of new Directors and Committee members and
ensuring they have the appropriate balance of skills, knowledge and
experience to govern the Company in a professional, ethical and
transparent manner. The Nomination Committee also oversees talent
and succession plans for senior leadership positions, overseeing the
development of a diverse pipeline for the future senior management
ofthe Group. It also plays an active role in setting and meeting diversity
objectives and strategies for the Company as a whole, and in monitoring
the impact of diversity initiatives. The full responsibilities of the
Committee are set out in its terms of reference which are available
onour website. These were last reviewed in December 2021.
Membership and attendance
All Non-Executive Directors are members of the Nomination Committee,
to ensure they can provide input and help determine the composition
ofthe Board. Richard Solomons is Chair of the Nomination Committee.
Last year, we agreed the Nomination Committee should meet at least
quarterly, and it met four times during the year. Members of the
Committee will also hold discussions as required outside the formal
meetings. You can find full details of members’ attendance during 2021
on page 89.
If any member cannot attend a meeting, the Nomination Committee
Chair will ask their views in advance and provide a briefing on outcomes
if appropriate. All Nomination Committee members are provided with
the papers and the minutes of the meeting, whether or not they attend.
The Chief Executive also normally attends meetings, especially to assist
with discussions of executive succession and talent programmes. The
Company Secretary is secretary of the Nomination Committee and the
Deputy Company Secretary attends all meetings. Daragh Fagan will
retire as Company Secretary at the end of March 2022 and will be
succeeded by Catherine Stead, who will also act as secretary to the
Nomination Committee.
Appointment process to the Board
The Nomination Committee is responsible for managing the
appointment process, to ensure a formal, rigorous and transparent
procedure for appointing Directors. For the Board to discharge its duties
and responsibilities effectively, it must comprise a diverse group of
individuals whose skills and experience have been gained in a variety
ofbackgrounds. Successful candidates must demonstrate integrity and
independence of mind, and must enhance the overall effectiveness
ofthe Board. The Committee considers appointments objectively,
regardless of gender, ethnicity or other personal characteristics,
andmakes them on merit. Pro-forma letters of appointment for
Non-Executive Directors and the Chair of the Board are available
onourwebsite. We support the process of appointing new Directors
tothe Board by using external recruitment consultants.
Non-Executive Director succession
Following a formal recruitment process undertaken in 2020, Sarosh
Mistry was appointed as a Non-Executive Director from 1 April 2021
andalso became a member of the Company’s Nomination and
Remuneration Committees from his date of appointment. We disclosed
full details of the recruitment process in our 2020 Annual Report, which
is available on our website. We undertook no new recruitment in 2021.
Julie Southern will have served as a Non-Executive Director for a period
of nine years in July 2023 and the Nomination Committee will focus on
the succession plans for her role during 2022.
Senior management succession planning and
talent development
Both the Nomination Committee and the Board recognise that strategic,
thoughtful and practical succession planning and talent development
iscritical to the long-term success of the Company. The Nomination
Committee looks to bring new energy, challenge and oversight to the
Board and to reflect the business strategy and operational goals in
appointments. The Board is ultimately responsible for succession
planning for Executive and Non-Executive Directors and senior
management, with the Nomination Committee overseeing and making
recommendations as required.
In the succession planning process, each leadership team role along
with other critical roles is evaluated against whether there are
successors ready now, ready in 1–2 years, or ready in 3–5+ years,
aswell as whether we have emergency cover for those roles in place.
For those identified as successors and included in a talent pool, we
carry out a robust development assessment and planning process
where we identify strengths and gaps using, among other things,
psychometric assessments, career conversations and a 360 degree
feedback assessment. We use the information from this to help create
really effective development plans as well as to inform the content of
the talent pool development sessions. During the succession planning
process, we also ask regions what their critical skills gaps are and we
use data from this conversation to inform our leadership and
development and talent priorities for the year.
Activities of the Nomination Committee in 2021
The Nomination Committee considered the following key areas during 2021 and early 2022:
Matters considered Discussion and outcome Find out more
Board succession Considered throughout the year. The Nomination Committee nominated Sarosh
Mistry for appointment.
See above and Board
composition on page 89
Senior management
succession
Executive Director and senior management succession was considered
throughout the year with a detailed briefing on talent and succession planning
being provided in February 2022.
See above for more information
Terms of reference The Nomination Committee reviewed its terms of reference in December 2021. Available to view on our website
Nomination Committee
effectiveness
The Nomination Committee undertook a review of its effectiveness. See effectiveness review
onpage 114
Director effectiveness A review of individual Directors’ performance was conducted, as part of the
Board evaluation process.
See page 102 for more
information
Diversity The Nomination Committee considered the Board diversity policy, including its
effectiveness.
See page 113 for more
information
Conflicts of interest The Nomination Committee reviewed potential conflicts of interest authorised by
the Board and the processes in place to ensure that they are properly considered.
See Managing conflicts
ofinterest on page 114
112
Rentokil Initial plc
Annual Report 2021
The Group HR Director usually presents a detailed update on the
Company’s talent strategy to the Nomination Committee in December
each year. In 2021, this was delayed to early 2022 to accommodate
theextended Board agenda required in December for the proposed
Terminix acquisition. The session reviewed the current succession
pipeline for key senior management roles, most notably the members
ofthe Executive Leadership Team (ELT) (see page 86) and other critical
roles, as well as wider talent development priorities. The Nomination
Committee considered the progress made towards the priorities for
2021, noting the highlights achieved as a result of increased focus in this
area. The Group HR Director also provided an overview of the global,
regional and fast-track talent pools, which have been established to
help identify successors for roles in our ELT and Senior Leadership
Forum (SLF), our top 25 senior management team, to improve the
succession pipeline for senior operational management, and to identify
and accelerate the development of fast-track talent. Emerging talent
was also considered for the first time in the 2021 succession plan,
allowing us to identify and ultimately develop our up-and-coming future
talent. Details of Board engagement with talent pools in 2021 can be
found on page 97.
As a result of our talent development and succession planning activity,
91% of ELT and senior-leadership roles now have a named near-term
successor, which is slightly down from 94% in 2020 following recent
appointments but still up compared to 84% in 2019. We continued to
conduct talent development modules virtually in 2021 due to ongoing
travel restrictions. This has allowed us to extend the reach and numbers
for our talent pools, with 275 of our high potential colleagues being
developed in 2021. We continually monitor the effectiveness of our
talent development and succession planning activity. Our investment in
talent development is showing strong returns, both for individuals and
the Company overall, with 82% of the participants in our global talent
pools prior to 2021 having been promoted to more senior roles since
2017. Our 2021 talent pools already have a promotion rate of 48%
despite participants only being in the programme for less than a year.
Fostering a diverse and inclusive culture
A key strategic aim of the Company is to be recognised as a world-class
Employer of Choice, which is able to attract, recruit and retain the best
people from the widest possible pool of talent. We are, therefore,
Board diversity objectives
Objectives Progress
A target of at least 33% female Directors by 2020, and to maintain this
thereafter.
37.5% of our Directors are female (2020: 50%).
Appoint at least one Board member from an ethnic minority
background by 2021.
This was achieved with the appointment of Linda Yueh in 2017
andexceeded with the appointment of Sarosh Mistry in 2021.
Commitment to a merit-based approach to Board composition within a
diverse and inclusive culture.
A rigorous process was undertaken for the recruitment of Sarosh
Mistry which concluded in 2021.
To work only with executive search firms that have signed up to the
Enhanced Voluntary Code of Conduct for Executive Search Firms on
gender diversity and best practice (Enhanced Code).
All executive search firms retained by the Company during 2021
forBoard appointments had signed up to the Enhanced Code.
To support the executive management of the Company in developing
and implementing appropriate policies, programmes and initiatives
designed to promote diversity at all levels of the organisation.
In 2021, our ELT and its direct reports (excluding colleagues in
administrative roles) were 29% female (2020: 30%). Approximately
24% of our colleagues are female. The Board receives two detailed
briefings on culture and our Employer of Choice agenda each year,
which address progress on diversity and inclusion. Global
management training rolled out in 2021.
To ensure that there is a pipeline of female executives within the
organisation who are qualified and capable of taking up senior
leadership positions.
Women comprise 40% of successors for ELT and SLF roles, up from
31% in 2020 and 26% in 2019. We were placed 44th in the first FTSE
Women Leaders Review for women on boards and in leadership in the
FTSE 100, published in February 2022.
Aim to ensure that there is appropriate and meaningful disclosure in
the Company’s Annual Report of Board composition, appointment
processes, and the policies and initiatives the Company has in place
and the steps it is taking to promote diversity, both at Board level and
across the Company.
The Nomination Committee reviews this each year.
committed to fostering a diverse and inclusive working environment for
all employees by, at all times, striving to be an organisation that values
everyone’s talents and abilities, and where diversity is encouraged.
In 2021, the Company rolled out a global diversity, equality and inclusion
upskilling initiative for all middle management and above. This
programme has been designed by the NeuroLeadership Institute (NLI)
in North America, and includes two separate four-week modules that
allleaders participate in: ‘Include’ and ‘Decide’. The ‘Include’ module
supports leaders in learning how to foster inclusive environments in
their team and the ‘Decide’ module equips leaders to learn about bias
and how to mitigate it. By the end of 2021, approximately 1,000 leaders
globally had participated in the programme and this roll-out will be
extended in 2022. Initial feedback has been very positive, with 89%
of direct reports to those leaders that have been through the pilot
reporting seeing positive behaviour change since their leader
participated in the programme. You can find more details in the
Responsible Business section on page 53, and our Group Diversity,
Equality & Inclusion Policy is available on our website.
The Board of Directors has adopted a Board diversity policy, which
itreviews and reports on annually, and which is also available on our
website. As part of its monitoring of gender, the Board reviews our
Gender Pay Report each year and we continue to have no material
gender pay gap between men and women (see page 128). The reports
are available to view on our website. The Board also considered the
FCA consultation on diversity-related disclosures by listed companies
in2021 and will continue to monitor developments.
Our Board diversity policy reaffirms our commitment to meeting and
maintaining the recommendations made in the Hampton-Alexander
Review on improving gender balance in FTSE leadership, which set
atarget of 33% female Board representation by 2020. We achieved
thistarget in 2017 and have maintained it since then. The new targets
and recommendations for the next five year phase set out in the
FTSEWomen Leaders Review (the successor phase to the
Hampton-Alexander Review) will be considered by the Nomination
Committee in 2022. We set out the objectives contained in our Board
diversity policy, and how we are meeting these, on page 113. In 2017,
wealso committed to achieving the aims set out in the Parker Review
foreach FTSE 100 Board to have at least one Director from an ethnic
Rentokil Initial plc
Annual Report 2021
113
Corporate Governance Financial Statements Other InformationStrategic Report
Nomination Committee Report
continued
minority background by 2021. Following the appointment of Sarosh
Mistry to the Board in 2021, we now have two Directors who are from
ethnic minority backgrounds.
More broadly, we have continued to focus on increasing the diversity
ofour senior management population across the business, with 29%
ofsenior roles in the business held by women. While we are aware that
currently our ELT only contains one female (9%), this will double to 18%
following the appointment of Rachel Canham as Group General Counsel
in April 2022. Encouragingly, we are growing our reputation as an
employer of choice for senior women whileensuring we are able to
attract diverse candidates from the widestpossible pool of talent, with
women comprising 44% of external hires to senior management
positions in the past 12 months.
As a global organisation, we also believe it is important to have a senior
management team that is representative of the markets we operate in,
and the customers we serve. To that end, we can report that 20% of
oursenior management roles are currently filled by individuals who
aredefined as ethnic minorities (2020: 21%). We believe that, if our
leadership is to reflect the diversity of the countries we operate in, our
target for ethnic diversity in our senior leadership population should be
at least 28%, and this will continue to be an area of focus for us. We can
also report that 18% of the participants in our current global talent pools
are defined as being of an ethnicity that is not White or European (2020:
24%), building us a growing pipeline of future leaders from ethnically
diverse backgrounds. We aim to remove bias from our recruitment
processes and to ensure we are attracting the best people from the
widest possible pool of talent. A summary of our culture and further
details on our colleagues are provided in the Responsible Business
section from page 51. You can find details on how the Directors monitor
culture on page 89.
Managing conflicts of interest
The Directors have a statutory duty to avoid a situation where they have,
or could have, a direct or indirect interest that conflicts or might possibly
conflict with the interests of the Company. The Board is permitted,
under powers from shareholders contained in the Articles of
Association, to authorise actual or potential conflicts of interest.
We have a procedure to deal with the situation where a Director has
aconflict of interest, and as part of the process the Board considers
each potential conflict situation on its merits. Since the procedure
wasintroduced, a number of potential situational conflicts arising
fromappointments on other boards, or through some other ongoing
relationship, have been authorised after review by the Board, none
ofwhich is subject to any specific limitation or condition. We have not
encountered any ‘transactional’ conflicts involving Directors that would
require a Director to be excluded from any part of the Board’s activities.
We maintain and review annually a register of authorisations granted
annually.
Under its terms of reference, the Nomination Committee is responsible
for reviewing the current schedule of authorisations with a view to
considering whether they remain appropriate or whether they should
berevoked or otherwise limited. They undertake this review annually
and also review the process for considering and authorising potential
conflicts of interest, and in 2021 concluded that no updates were
necessary. All authorisations given were considered to remain
appropriate and none were revoked or otherwise limited.
1. We define senior management as the members of our ELT and their direct
reports, excluding colleagues in administrative roles.
2. When the breakdown also includes any other directors of the Company’s
related undertakings, there are 51 females (25%) and 157 males (75%).
Board
Female 3 (37.5%)
Male 5 (62.5%)
Senior management
1, 2
Female 37 (29%)
Male 93 (71%)
Total workforce
Female 11,047 (24%)
Male 34,984 (76%)
Gender profile
at 31 December 2021
Read the Nomination Committee’s terms of reference at
rentokil-initial.com/investors/governance
Read our Group Diversity, Equality & Inclusion Policy at
rentokil-initial.com/responsible-delivery/policies
Read our Board Diversity Policy at
rentokil-initial.com/investors/governance
Nomination Committee eectiveness
The Board considers the annual Board evaluation, and its outcomes
andactions, at its meetings, and details of the process are therefore
disclosed in the Corporate Governance Report on page 101. The
Nomination Committee was considered as part of the broader Board
effectiveness review. The review concluded that, in terms of
composition, management of meetings, the quality of the content and
information provided to it, the Nomination Committee had operated
effectively in 2021.
In 2022, the Committee plans to continue its focus on Board and
executive succession, including the internal development pipeline
below the Executive Directors; review the composition of the Board
inthe light of the Terminix acquisition; execute the plan for Audit
Committee Chair succession; and monitor diversity-related disclosures
for listed companies.
114
Rentokil Initial plc
Annual Report 2021
Independent Auditors’ Report
to the members of Rentokil Initial plc
Report on the audit of the financialstatements
Opinion
In our opinion:
A
Rentokil Initial plc’s Group financial statements and Parent Company
financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2021 and of the Group’s profit and the Group’s
cash flows for the year then ended;
A
the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
A
the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and applicable
law); and
A
the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual
Report, which comprise: the Consolidated and Parent Company Balance
Sheets as at 31 December 2021; the Consolidated Statement of Profit or
Loss and Other Comprehensive Income, the Consolidated and Parent
Company Statements of Changes in Equity and the Consolidated Cash
Flow Statement for the year then ended; the Notes to the Group and
Parent Company financial statements, which include a description of the
significant accounting policies and the Related Undertakings. The
Financial Review, included within the financial statements, is considered
other information and is not covered by our opinion except as described
in the reporting on other information section of this report.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note A8, we have provided no non-audit
services to the Parent Company or its controlled undertakings in the
period under audit.
Our audit approach
Context
The context of our audit is set by 2021 being our first year as auditors of
the Group. As part of our audit transition, we shadowed the 2020 audit
undertaken by the predecessor auditor, reviewed the predecessor
auditors’ working papers and re-evaluated the predecessor auditor’s
conclusions in respect of key accounting judgements in the opening
balance sheet at 1 January 2021. We performed a review of the half year
financial information in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 and performed process
walkthroughs to understand and evaluate the key financial processes
and controls across the Group. We also performed early audit
procedures in advance of the year-end in the UK and in our in-scope
territories. These procedures served to inform the determination of our
final 2021 Group audit scope, areas of focus and audit approach.
Our areas of focus and audit approach were responsive to the
continuing impact of COVID-19 as certain territories were placed under
government restrictions at differing times over the audit. The impacts of,
and recovery from, the pandemic, both from a financial reporting
perspective and as it related to how we conducted our work largely
remotely, were continuously assessed throughout the audit.
As part of the audit, we inquired of management to understand and
evaluate the Group’s risk assessment process in relation to climate
change. We reviewed management’s paper which sets out their
assessment of climate change risk to the Group and the impact on the
financial statements. In evaluating the completeness of the risks
identified, we engaged our internal climate change experts to assist us
in reviewing management’s assessment and challenged management
on how they considered the potential financial impacts of the Group’s
net zero commitment in their assessment. We considered the principal
risk to relate to the assumptions made in the forecast prepared by
management and used in their assessment of the carrying value of
goodwill. In responding to the risks identified, we specifically
considered how climate change risk would impact these assumptions
including the future costs of the Group’s commitment to reach net zero
by 2040 and costs of compliance with current legal requirements. We
also read the disclosures in relation to climate change made in the
Responsible Business section of the Annual Report to ascertain whether
the disclosures are materially consistent with the financial statements
and our knowledge from our audit. Our responsibility over other
information is further described in the “reporting on other information”
section of this report.
Overview
Audit scope
A
We performed full scope audits at fourteen components across North
America, Europe, the UK & Rest of World, Asia and Pacific and specific
audit procedures at one component.
A
The territories where we conducted audit procedures, together with
work performed at corporate functions and at the Group level,
accounted for approximately: 80% of the Group’s revenue and 79% of
the Group’s adjusted profit before tax. The components in the US and
France comprise sub consolidations; in calculating these coverage
levels we have taken 100% coverage from the full scope audits
performed in these locations.
A
Certain Parent Company account balances were included in scope for
the audit of the consolidated financial statements. However, we
determined that the Parent Company did not require a full scope audit
of its complete financial information for the purposes of the audit of
the consolidated financial statements.
Key audit matters
A
Carrying value of goodwill (Group)
A
Acquisition accounting (Group)
A
Disclosure of pension liabilities (Group and Parent Company)
Materiality
A
Overall Group materiality: £21,000,000 based on 5% of the Group’s
adjusted profit before tax.
A
Overall Parent Company materiality: £32,000,000 based on 1% of
total assets.
A
Performance materiality: £15,750,000 (Group) and £24,000,000
(Parent Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Rentokil Initial plc
Annual Report 2021
137
Corporate Governance Financial Statements Other InformationStrategic Report
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter
Carrying value of goodwill (Group)
Refer to the Audit Committee Report and Note B2 in the financial
statements.
The Group recorded £1,844.2m of goodwill at 31 December 2021
(2020: £1,608.4m).
As required by IAS 36, management has performed its annual goodwill
impairment assessment on the Group’s cash generating units (CGUs).
The carrying value of goodwill is dependent on estimates of future
cash flows of the underlying CGUs which inherently involves significant
management estimation and there is a risk that if management does
not achieve these cash flow estimates it could give rise to impairment
charges.
The impairment assessment performed by management contains a
number of significant assumptions principally relating to short and long
term revenue growth, future profitability and discount rates. These
assessments also include the costs associated with the effects of
climate change, including the future costs of the Group’s commitment
to reach net zero by 2040 and costs of compliance with current legal
requirements.
No material impairment charge has been recorded in 2021.
We focused our work on the 8 CGUs where the headroom between
the value-in-use and the carrying value of the assets was lowest.
We obtained management’s value-in-use impairment models and we
tested the mathematical integrity. We validated the carrying amounts
of the net assets subject to impairment testing to the underlying
accounting records, making sure that there was appropriate
consistency between the assets and liabilities that were included in
management’s assessment and the related cash flows.
We utilised our in house valuation experts to evaluate the
appropriateness of the methodology used in the impairment models,
including challenging the discount rates, and we evaluated the
determination of the Group’s CGUs. We compared the cash flows used
in the impairment models to the Board approved budget and strategic
plan including the estimated costs associated with climate change. We
challenged the long term growth rates by corroborating to third party
sources and the short term revenue growth rates to third party industry
research and stress tested those assumptions. We benchmarked
implied multiples required to cover the carrying value of the net assets
of each CGU to recent trading multiples of competitors and transaction
multiples for recently acquired businesses by the Group and externally.
We also evaluated the historical accuracy of management’s budgeting
and forecasting and we compared the revenue growth and operating
profit margins to historical actuals and modelled their break even
points to assess whether further testing was required and whether
additional disclosures should be provided in the financial statements.
Further procedures focused on the India PCI CGU where headroom is
lower and more sensitive to changes in key assumptions; in particular
the long term growth rate, the discount rate and the terminal operating
margin. We obtained a bridge of the current operating margin to the
estimated terminal operating margin and tested management’s
assumptions to a number of sources including third party growth rates
where possible and comparable businesses within the Group.
We assessed the appropriateness of management’s decision to
provide additional disclosures about sensitivities in Note B2 of the
financial statements in relation to the India PCI CGU. More broadly, we
considered whether the disclosures in Note B2 complied with IAS 36.
Based on the procedures performed, we noted no material issues
arising from our work.
Acquisition accounting (Group)
Refer to the Audit Committee Report and Note B1 in the financial
statements.
In 2021, the Group acquired 52 businesses (2020: 23 businesses) for
total consideration of £313.7m (2020: £367.3m). Goodwill of £230.6m
(2020: £317.4m) and customer lists and other intangible assets totalling
£70.7m (2020: £56.9m) were recorded.
The valuation of the customer lists requires management estimation as
it is dependent on estimates of future cash flows, customer termination
rates and discount rates.
Based on our risk assessment, we focused our testing on the more
significant acquisitions and supplemented this with sample testing of
smaller acquisitions.
We utilised our in house valuation experts to evaluate the
appropriateness of the methodology used to value customer lists and
to test the appropriateness of the discount rates. We compared the
customer termination rates and future cash flows to historical data and
to the approved acquisition business cases and we performed
sensitivities on these estimates.
We considered the disclosures in Note B1 of the financial statements
and we are satisfied that these disclosures are appropriate. Based on
the procedures performed, we noted no material issues arising from
our work.
Independent Auditors’ Report
continued
138
Rentokil Initial plc
Annual Report 2021
Key audit matter How our audit addressed the key audit matter
Disclosure of pension liabilities (Group and Parent Company)
Refer to Note A10 in the financial statements and Note 7 in the Parent
Company financial statements.
At 31 December 2021, the UK Rentokil Initial 2015 Pension Scheme
(RIPS) has a surplus of £18.2m (2020: £18.2m), comprising defined
benefit obligations of £1,247.6m (2020: £1,369.3m) and plan assets of
£1,265.8m (2020: £1,387.5m). On 4 December 2018, the Group signed
an agreement with Pension Insurance Corporation plc (PIC) to take
over the payment of the liabilities in the scheme via a buy-in.
Estimating defined benefit obligations requires significant estimation.
Small changes in assumptions can have a material impact on the
financial statement disclosures. As a result of the buy-in, with the
exception of the surplus, there is no volatility associated with the
insurance policy asset as under IAS 19 its value is deemed to match the
scheme liabilities. However, there is a requirement to disclose the
gross defined benefit obligations and plan assets in the Notes to the
financial statements.
We reviewed the agreement with PIC and assessed the accounting
treatment for the buy-in arrangement for the RIPS. We utilised our
actuarial experts to assess whether the assumptions used in
calculating the RIPS defined benefit obligations were reasonable. Our
actuarial experts evaluated whether mortality assumptions, discount
rates and inflation rates were consistent with independently developed
ranges. We reconciled the member data to member numbers as per
the latest triennial valuation of the scheme.
Based on our procedures, we considered the accounting treatment to
be appropriate and management’s key assumptions to be within
reasonable ranges. We assessed the appropriateness of the
disclosures in Note A10 and Note 7 and considered them to be in
accordance with the requirements of IAS 19.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Parent
Company, the accounting processes and controls, and the industry in
which they operate.
We performed full scope audits in respect of fourteen components
across North America, Europe, the UK & Rest of World, Asia and Pacific.
Of these, we identified one financially significant component in the US
(part of the North America segment) and four material components in
the UK (part of the UK & Rest of World segment), France (part of the
Europe segment), Germany (part of the Europe segment), and Australia
(part of the Pacific segment). The remaining nine components were
included in Group audit scope to achieve appropriate audit coverage.
We also undertook specific audit procedures in Japan to ensure
sufficient coverage over the investments in associated undertakings
financial statement line item.
In establishing the overall approach to the Group audit, we determined
the type of work that needed to be performed by us, as the Group
engagement team, or by component auditors within PwC UK and from
other PwC network firms operating under our instruction. Where the
work was performed by component auditors, we determined the level of
involvement we needed to have in the audit work at those components
to be able to conclude whether sufficient appropriate audit evidence
had been obtained as a basis for our opinion on the consolidated
financial statements as a whole.
In addition to instructing and reviewing the reporting from our
component audit teams, we conducted file reviews for financially
significant and material components and participated in key meetings
with local management. We also had regular dialogue with component
teams throughout the year.
The Group consolidation, financial statement disclosures and corporate
functions were audited by the Group engagement team. This included
our work over taxation, goodwill, acquisition accounting and retirement
benefit obligations. Taken together, the components and corporate
functions where we conducted audit procedures accounted for 80% of
the Group’s revenue and 79% of the Group’s adjusted profit before tax.
The components in the US and France comprise sub consolidations; in
calculating these coverage levels we have taken 100% coverage from
the full scope audits performed in these locations. This provided the
evidence we needed for our opinion on the consolidated financial
statements taken as a whole. This was before considering the
contribution to our audit evidence from performing audit work at the
Group level, including disaggregated analytical review procedures,
which covered certain of the Group’s smaller and lower risk components
that were not directly included in our Group audit scope.
Our audit of the Parent Company financial statements was undertaken
in the UK and included substantive procedures over all material
balances and transactions.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Parent Company
Overall materiality £21,000,000 £32,000,000
How we determined it 5% of the Group’s adjusted profit before tax 1% of total assets
Rationale for
benchmark applied
The Group’s principal measure of performance is adjusted
profit before tax, which excludes one-off items,
amortisation and impairment of intangible assets
(excluding computer software) and net interest
adjustments, in order to give management and other users
of the Annual Report a clear understanding of the
underlying profitability of the business over time. We have
utilised this measure in determining our materiality as it is
the metric against which the performance of the Group is
most commonly assessed by management and reported
to shareholders.
Rentokil Initial plc is the ultimate Parent Company which
holds the Group’s investments. Therefore, the entity is not
in itself profit-oriented. The strength of the balance sheet
is the key measure of financial health that is important to
shareholders, since the primary concern for the Parent
Company is the payment of dividends. We therefore
consider total assets to be an appropriate benchmark.
Certain account balances were included in scope for the
audit of the consolidated financial statements and were
therefore audited to a materiality level set below overall
materiality established for the Group audit. However, we
determined that the Parent Company did not require a full
scope audit of its complete financial information for the
purposes of the audit of the Group financial statements.
Rentokil Initial plc
Annual Report 2021
139
Corporate Governance Financial Statements Other InformationStrategic Report
Independent Auditors’ Report
continued
For each component in the scope of our Group audit, we allocated a
materiality that is less than our overall Group materiality. The range of
materiality allocated across components was £1,350,000 to £17,100,000.
We use performance materiality to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use
performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% of overall materiality, amounting
to £15,750,000 for the Group financial statements and £24,000,000 for
the Parent Company financial statements.
In determining the performance materiality, we considered a number of
factors – the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls – and concluded that an amount at
the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £1,000,000 for both the
Group and Parent Company audits as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative
reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the
Parent Company’s ability to continue to adopt the going concern basis
of accounting included:
A
Evaluation of management’s base case and downside case scenarios,
understanding and evaluating the key assumptions;
A
Validation that the cash flow forecasts used to support management’s
impairment, going concern and viability assessments were consistent;
A
Assessment of the historical accuracy and reasonableness of
management’s forecasting;
A
Consideration of the Group’s available financing and debt maturity
profile;
A
Testing of the mathematical integrity of management’s liquidity
headroom, sensitivity and stress testing calculations;
A
Assessment of the reasonableness of management’s planned or
potential mitigating actions; and
A
Review of the related disclosures in the Annual Report.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and the Parent
Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for
issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the Group’s and the Parent
Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements (with the exception of the
Financial Review which is considered other information) and our
auditors’ report thereon. The directors are responsible for the other
information, which includes reporting based on the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations. Our
opinion on the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except to the
extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit,
the information given in the Strategic Report and Directors’ Report for
the year ended 31 December 2021 is consistent with the financial
statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the Group and Parent
Company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic Report and
Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the company’s compliance
with the provisions of the UK Corporate Governance Code specified for
our review. Our additional responsibilities with respect to the corporate
governance statement as other information are described in the
reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing material to
add or draw attention to in relation to:
A
The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
A
The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
140
Rentokil Initial plc
Annual Report 2021
A
The directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material
uncertainties to the Group’s and Parent Company’s ability to continue
to do so over a period of at least twelve months from the date of
approval of the financial statements;
A
The directors’ explanation as to their assessment of the Group’s and
Parent Company’s prospects, the period this assessment covers and
why the period is appropriate; and
A
The directors’ statement as to whether they have a reasonable
expectation that the company will be able to continue in operation
and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the Group was substantially less in scope than an audit and
only consisted of making inquiries and considering the directors’
process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance
Code; and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of the
Group and Parent Company and their environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
A
The directors’ statement that they consider the Annual Report, taken
as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and
Parent Company’s position, performance, business model and
strategy;
A
The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
A
The section of the Annual Report describing the work of the Audit
Committee.
We have nothing to report in respect of our responsibility to report when
the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision
of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities,
the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified
that the principal risks of non-compliance with laws and regulations
related to the UK Listing Rules, health and safety regulations, failure to
comply with UK and international tax regulations, adherence to data
protection requirements in the jurisdictions in which the Group operates
and holds data and compliance with anti-bribery and corruption
legislation in the jurisdictions in which the Group operates, and we
considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as
the Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to
manipulate the financial performance of the Group and management
bias in accounting estimates and judgements. The Group engagement
team shared this risk assessment with the component auditors so that
they could include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the Group
engagement team and/or component auditors included:
A
Discussions with management, Internal Audit and the Group’s legal
counsel, including consideration of known or suspected instances of
non-compliance with laws and regulation and fraud;
A
Evaluation of the effectiveness of management’s controls designed to
prevent and detect irregularities;
A
Identification and testing of significant manual journal entries;
A
Assessment of matters reported on the Group’s whistleblowing
helpline and the results of management’s investigation of such
matters;
A
Testing of assumptions and judgements made by management in
making significant accounting estimates; and
A
Reviewing financial statement disclosures and testing to supporting
documentation.
There are inherent limitations in the audit procedures described above.
We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for
testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable us to
draw a conclusion about the population from which the sample is
selected.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for and only for
the company’s members as a body in accordance with Chapter 3 of Part
16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
Rentokil Initial plc
Annual Report 2021
141
Corporate Governance Financial Statements Other InformationStrategic Report
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
A
we have not obtained all the information and explanations we require
for our audit; or
A
adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
A
certain disclosures of directors’ remuneration specified by law are not
made; or
A
the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were
appointed by the members on 12 April 2021 to audit the financial
statements for the year ended 31 December 2021 and subsequent
financial periods. This is therefore our first year of uninterrupted
engagement.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these financial statements will
form part of the ESEF-prepared annual financial report filed on the
National Storage Mechanism of the Financial Conduct Authority in
accordance with the ESEF Regulatory Technical Standard (ESEF RTS).
This auditors’ report provides no assurance over whether the annual
financial report will be prepared using the single electronic format
specified in the ESEF RTS.
Neil Grimes (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 March 2022
Independent Auditors’ Report
continued
142
Rentokil Initial plc
Annual Report 2021
Financial Statements
 Financial Review
 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
 Consolidated Balance Sheet
 Consolidated Statement of Changes
inEquity
 Consolidated Cash Flow Statement
 Notes to the Financial Statements
 Related Undertakings
 Parent Company Balance Sheet
 Parent Company Statement of Changes
inEquity
 Notes to the Parent Company Accounts
Rentokil Initial plc
Annual Report 2021
143
Corporate Governance Financial Statements Other InformationStrategic Report
Financial Review
Summary of financial performance (at CER)
Revenue (at CER)
The Group delivered an excellent revenue performance in 2021,
demonstrating strong momentum in our core businesses during the
year. Ongoing Revenue rose 9.8% to £3,063.5m, up 3.2% organic. Total
revenue grew by 5.5% to £2,956.6m at AER (up 9.4% at CER). Excluding
disinfection services, Organic growth in our core business was 7.5%,
inexcess of our recently up-weighted organic growth guidance of 4%
to5%. Our North America and UK & Rest of World regions delivered
double-digit revenue growth in 2021 (up 14.2% and 10.8% respectively),
aided by more favourable market conditions, as COVID-19-related
impacts on these markets eased, and despite the significantly reduced
contribution from disinfection services. Our Pacific operations have
alsorecovered well, with revenue growth of 8.7% despite intermittent
lockdowns in Australia and New Zealand impacting performance in H2.
Revenue growth in Europe and Asia (at 3.9% and 5.0% respectively),
while returning to year-on-year growth, was also impacted to some
extent by reintroduced lockdowns in a number of countries.
Pest Control delivered a very strong performance overall during the
year, with Ongoing Revenue growth of 18.6% to £2,020.0m (8.1%
organic) aided by an excellent performance from our North America
business, slightly offset by weaker performances from our Australia,
New Zealand, Malaysia and Indonesia operations which were materially
impacted by lockdowns in H2. Despite some labour shortages in H2,
due to a number of colleagues either off work with COVID-19 or
self-isolating, our Pest Control business in North America was our
best-performing region, growing revenues by 24.3%, 8.9% organic.
Ongoing Revenue in our Growth and Emerging markets grew by 19.2%
and 14.5% respectively.
Our core Hygiene business, excluding disinfection, delivered an 8.2%
increase in Ongoing Revenue to £555.6m (7.4% organic), reflecting
good performances in the UK, Europe and Latin America. Overall
Hygiene revenue declined by 8.4% to £673.4m, reflecting the
anticipated tapering of disinfection services, which reduced by £103.6m
to £117.8m. As with Pest Control, however, our operations in Australia,
New Zealand, Indonesia and Malaysia were held back by significant
challenges associated with ongoing lockdowns.
The rapid deployment of disinfection services across 60 countries
enabled the Company to generate £221.4m of revenues in the prior
year. Customers who used our services (such as offices, shops, schools,
airports, emergency vehicles and public transport) did so typically to
remain open during lockdown conditions. As lockdown conditions
generally eased around the world and our core services returned,
customer requirements for emergency disinfection services significantly
decreased, and therefore revenue from disinfection services has
tapered in line with our expectations to £117.8m (H1: £98.3m; H2:
£19.5m), a decline of £103.6m on 2020. We anticipate disinfection
revenues in 2022 of around £10m to £20m, as services further unwind.
Ongoing Revenue in our Protect & Enhance category rose 5.6% to
£365.6m (4.9% organic), with all four businesses (France Workwear,
Ambius, UK Property Care and Dental Waste Services) returning to
organic growth. Revenue at actual exchange rates grew by 2.8%
to£355.9m. In France, lockdowns began to ease in May with fewer
restrictions on restaurant operations and, as a result, we have seen
animproving performance from our Workwear business. While this
isencouraging, as-used volumes (where the customer only pays for
specific garments laundered) are still behind pre-COVID-19 levels,
impacted by ongoing temporary customer suspensions in H1 and
reduced tourism in France in H2.
Profit (at CER)
Ongoing Operating Profit rose by 19.5% to £458.7m (£441.5m at AER),
reflecting revenue growth across all major reporting countries, regions
and categories and the execution of our high service and innovation
and technology strategy. This resulted in a 120 basis points increase
inNet Operating Margins to 15.0%. Ongoing Operating Profit includes
restructuring costs of £10.2m at CER (2020: £13.2m), which consisted
mainly of costs in respect of initiatives focused on our North America
transformation programme, together with integration costs of smaller
acquisitions. During 2021, the return of our core service provision
allowed us to fully resume our high-quality service model. As part
ofthis,we have been able to catch up on service, debt and customer
satisfaction issues that had arisen during the early onset of the
The Group delivered
excellent revenue and
operating profit
performance in 2021,
demonstrating strong
momentum in our core
businesses during the year
and reflecting growth
across all major reporting
countries, regions and
categories.
Stuart Ingall-Tombs
Chief Financial Ocer
144
Rentokil Initial plc
Annual Report 2021
pandemic in 2020, resulting in the release of £20.0m of revenue
provisions and £12.0m of bad debt provisions taken in 2020, and
contributing a 100 basis points improvement to Net Operating Margins.
Adjusted profit before tax (at AER) of £416.5m (£433.6 m at CER), which
excludes the impact of one-off items (set out below), increased by 17.3%
and reflects growth in all regions and categories. Adjusted profit before
tax includes a £3.9m benefit from IAS 29 hyperinflation indexation from
our newly acquired Boecker subsidiary in Lebanon. Adjusted interest of
£33.1m at actual exchange rates was £4.0m lower than in the prior year,
due to the pay down of the €350m bond which matured in October
2021 but was paid in July 2021.
One-off items (operating) of £21.3m includes £13.8m of acquisition and
integration costs and £6.0m of professional fees relating to the Terminix
transaction.
Statutory profit before income tax from continuing operations at AER
was £325.1m, an increase of 41.5% (2020: £95.3m) on the prior year. In
addition to the margin improvements described above, the Group also
received the benefit of year-on-year gains in net finance costs due to
the non-repeat of the £28.4m cost of closing out an interest derivative
linked to US interest rates, and other fair value losses of £9.5m in 2020.
Cash (at AER)
The Company generated Free Cash Flow of £326.5m in 2021,
representing Free Cash Flow Conversion of 107.3%, well ahead of our
target of 90%. The increase was principally driven by a £57.5m increase
in Adjusted Operating Profit offset by higher capex and one-off items.
Cash spend on current and prior-year acquisitions in 2021 totalled
£463.1m, which contributed to the net decrease in cash and cash
equivalents of £295.0m.
We have continued to maintain a tight focus on working capital
management and have made significant progress in unwinding the
increased ledgers that resulted from the pandemic. Group ledgers at
the end of 2021 were c.10% lower than December 2020, despite organic
and M&A revenue growth.
Dividend policy
The Group adopts a progressive dividend policy with dividend
payments related to the level of Free Cash Flow available. The Group
aims to pay dividends twice a year and the level of each dividend is
decided by the Board. When determining the level of dividend each
year, the Board considers the following:
A
cash generation in the year;
A
future cash generation;
A
cash availability at the point of dividend;
A
profits available for distribution;
A
cash required to invest in capital; and
A
expenditure and acquisitions.
Given the strength of our performance in 2021 and our confidence for
2022, the Board is recommending a final dividend in respect of 2021 of
4.30p per share, payable to shareholders on the register at the close
ofbusiness on 8 April 2022, to be paid on 18 May 2022. This equates to
afull-year dividend of 6.39p per share, an increase of 18.1% compared
to2020. The last day for DRIP elections is 26 April 2022.
Funding
On 7 July 2021, the Company repaid the remaining €175.7m outstanding
under the €350m bond due 7 October 2021 using its par call option.
This repayment was funded using cash on the balance sheet following
the €600m bond issuance in October 2020. In September 2021 the
Company updated its revolving credit facility (RCF) to replace LIBOR
with risk free rates. At the same time, financial covenants were removed
from the RCF.
As at 31 December 2021, the Company had liquidity headroom in
excessof £780m, including £550m of undrawn RCF, with a maturity
dateof August 2025. Pro forma net debt to EBITDA ratio was 1.96x at
31December 2021 (30 June 2021: 1.67x). On 14 December 2021, the
Group announced that it had entered into a committed bridge facility
forup to $2.7bn with Barclays to support the acquisition of Terminix.
This facility was replaced on 25 February 2022 with a $700m three-year
term loan facility provided by 15 banks and a $2bn bridge facility
provided by eight banks. The Group has also amended, extended and
increased its RCF to $1bn. This amendment will take effect on or before
the acquisition of Terminix completes, at which point the maturity of the
RCF will be 2027 plus two one-year extension options. At the time of
announcement in December 2021, S&P affirmed the Group’s BBB rating.
We remain committed to maintaining a BBB investment grade rating and
are confident of doing so.
M&A
We have delivered further excellent execution of M&A in 2021, acquiring
52 new businesses in Pest Control, Hygiene and Protect & Enhance
(Ambius). While competition for high-quality assets in North America has
continued, the region still presents good opportunities to build density
and we have added 17 new businesses during the period. In addition to
acquisitions in Canada and the US, we have also made good progress
inbroadening our geographic presence with pest control and hygiene
purchases (including joint venture interests) in Australia, Brazil, Canada,
Chile, China, Colombia, France, Jordan, Italy, Kuwait, Lebanon, Lithuania,
Mexico, Nigeria, Norway, Poland, Qatar, Saudi Arabia, Singapore, Spain,
Sweden, Switzerland, Taiwan and UAE.
In July, we announced we had entered into a transaction with a leading
independent pest control provider in the Middle East, Boecker World
Holding SAL, operating (including with joint venture partners and
associates) across UAE, Saudi Arabia, Jordan, Kuwait, Lebanon, Nigeria
and Qatar. The business, which generated revenues of c.£37m in the
year prior to purchase, is a leader in B2B environmental health services
including Pest Management, Food Safety and Germ Control services
and products, and employs c.1,100 colleagues. The transaction doubles
the scale of our operations in the Middle East, where we are already the
market leader in pest control. The business has performed well since
acquisition and integration is proceeding in line with our expectations,
with the Lebanon management team responding proactively to the
country’s hyperinflationary challenges by addressing pricing, colleague
issues and customer relationships to deliver ongoing profitability and
sensible cash management actions.
In February 2022, we conducted our most recent half-yearly review
ofpost-investment performance, reviewing 48 acquisitions made
between 1 April 2019 and 30 September 2020 and covering £318m of
consideration. We are pleased with performance, with deals delivering
revenue and EBITA ahead of our expectations and aggregate returns
also ahead of our required IRR hurdle rates.
M&A remains central to our strategy for growth. We will continue to
seekattractive bolt-on deals, both in Pest Control and with an increased
focus on Hygiene & Wellbeing, to build density in existing markets,
pursue acquisitions in new markets and the major Cities of the Future,
and seek medium-sized transactions. Our pipeline of prospects remains
strong, and we anticipate expenditure on M&A in 2022 of around
£250m (excluding the acquisition of Terminix).
Acquisition of Terminix Global Holding, Inc.
On 14 December 2021, we announced that Rentokil Initial plc and
Terminix Global Holdings, Inc. (Terminix) had entered into a definitive
agreement under which Rentokil Initial will acquire Terminix for stock
and cash. The Transaction will bring together two complementary
businesses to create the global leader in both pest control and hygiene
& wellbeing, and the leader in the pest control business in North
America, the world’s largest pest control market.
The Transaction will combine two leading brands with a long cultural
heritage, outstanding talent and strong focus on people, customers
andESG. Upon completion, the Combined Group will have c.57,700
colleagues serving c.4.9m customers around the world from 790
locations. The enlarged business will have a strong platform for growth,
particularly in North America, and an attractive financial profile to
support future growth, including through acquisitions and continued
investment in innovation and technology. For the year ended
31December 2021, the Combined Group’s illustrative revenue would
have amounted to US$6.0bn
1
(£4.5bn), with EBITDA of US$1.3bn (£1.0bn)
and Free Cash Flow of US$0.7bn (£0.5bn).
1. GBP/USD rate of 1.3273 as per 10 December 2021 used to form Combined
Group financials. Calculated using Terminix financial results in accordance
with US GAAP and Rentokil Initial results in accordance with IFRS. Subject
to amendment by Rentokil Initial when stated in the Circular and Prospectus
and based on Rentokil Initial’s accounting policies.
Rentokil Initial plc
Annual Report 2021
145
Corporate Governance Financial Statements Other InformationStrategic Report
Financial Review
continued
The Combination is expected to create significant value, enhance
long-term growth potential, be highly cash generative and present
acompelling industrial logic, supported by:
A
increased scale and leadership in the global pest control market;
A
substantially increased scale in North America, providing an enlarged
platform for profitable growth;
A
a complementary and synergistic portfolio combination; and
A
an attractive financial profile.
The Combination is expected to generate material annual pre-tax net
cost synergies of at least US$150m (£113m) by the third full year post
completion. Run rate synergies are expected to accumulate c.30%,
c.80% and 100% in the first, second and third 12-month periods
respectively, post completion. In achieving these synergies, the
Combined Group expects to incur aggregate cash implementation
costsof approximately US$150m, half of which will be incurred in the
first 12 months post completion. The Transaction is expected to be
mid-teens percent accretive
2
to Rentokil Initial’s earnings per share in
the first full year post completion and, including at least $150m of net
cost synergies, to exceed the Company’s cost of capital by the third
fullyear following completion.
Regional performance (at CER)
North America – Organic Revenue growth (excluding disinfection)
up 8.9%, total Organic Revenue growth 1.6%
North America was our best-performing region in 2021, with revenue
growth driven by broad-based momentum in all businesses and an
incremental return to more normalised trading patterns.
We have seen good growth in our residential Pest Control portfolio
(which represents 36% of our North America Pest Control business),
from both 2020 and 2021 acquisitions and continued marketing and
sales focus. Residential revenues grew by 31% in 2021, aided by
acontinuation of the work from home business environment. Our
acquisition of Environmental Pest Service, which completed on
1January 2021, has performed strongly and we are benefiting from
thebusiness’ residential concentration in three important markets –
Florida, Georgia and North Carolina.
Our commercial Pest Control business (64% of our Pest Control
business) grew by 21% in 2021, aided by good volumes of work broadly
across most markets, and we are also seeing improvements in bird
andmosquito work. We anticipate continued improvement in the
hospitality sector as restrictions are expected to ease further in 2022.
Our distribution business performed strongly throughout the year and
reflects the general market recovery of the pest services sector and
thecontinued high demand for lawn, golf and turf products.
As outlined in our interim statement in July, revenues in H1 were
supported (primarily in Q1) by ongoing disinfection sales and, as
expected, these significantly tapered throughout the remainder of the
year as COVID-19-related market conditions improved. Sales from
disinfection amounted to £67.0m in 2021 (2020: £142.5m). Hygiene sales
focus is now directed primarily towards air disinfection, including our
VIRUSKILLER
TM
product. Our overall performance in 2021 has also
beenpositively impacted by the recovery of our other commercial
businesses: Brand Standards (which was significantly impacted in 2020
by temporary customer closures in the quick serve restaurant sector),
returned to more regular trading with c.95% of customers by the end of
the year and our Ambius operations returned to pre-pandemic trading
levels, delivering growth of 8.5% on the prior year.
Ongoing Revenue in North America grew by 14.2% to £1,375.0m (1.6%
organic). Revenues from total Pest Control (including Distribution and
Lake Management) increased by 24.3% to £1,224.4m (8.9% organic),
with Pest Services revenue increasing by 22.3% and reflecting good
demand from both Commercial and Residential customers. Total
revenues from disinfection in 2021 amounted to £67.0m (H1: £64.3m;
H2:£2.7m). Ongoing Operating Profit growth of 8.7% to £230.2m
reflects the significantly lower contribution from disinfection services.
We acquired 17 businesses in 2021 with combined annualised revenues
of c.£72m in the year prior to purchase.
We continue to make progress towards our 18% margin target in North
America with a 16.7% margin delivery for the full year. This is a result of
the continued incremental return to more normal levels of growth from
our core North American operations as described above, together with
ongoing cost initiatives and the benefits from our IT enabled Best of
Breed programme. The margin benefitted by 20 basis points from a
change in revenue recognition policy in our Target distribution business.
We remain on track to achieve our 18% margin target by the end
of2022.
Our IT re-platforming programme progressed well in 2021. We have now
successfully migrated our West, Central, Northeast and Southeast
operating regions from their respective legacy platforms to our new
service planning and customer management system. The consolidation
to one operating platform will enable significant improvement in process
standardisation, as well as the deployment of our digital products in
sales productivity and pricing, field service and scheduling optimisation,
and an enhanced customer service experience.
North America has experienced some inflationary pressures on its cost
base throughout the year but has substantially passed these increases
on through efficiencies and annual price increases (APIs) to customers,
in line with normal policy. The region has seen little change to customer
termination rates, which remain within normal ranges and in line with
2019. Although we are seeing signs in the US economy of wage
pressures, this has not had a broad impact on wages across our
operations. North America overall colleague retention has trended
down by c.5%, as new employees who joined the business at the height
of the pandemic in 2020 have left to seek alternative employment as
other sectors recovered, but remains above 80%. While overall ‘time to
fill’ vacancy rates for 2021 reduced by c.3 days on 2020, they trended
upwards in H2 reflecting a highly competitive labour market in certain
cities. A more targeted recruitment approach (by market, capacity and
vacancy percentage) and continued success with virtual hiring events
are yielding results and will help us navigate the challenges of the North
American labour market.
Europe – Organic Revenue growth (excluding disinfection) up 4.8%,
total Organic Revenue growth 2.0%
Our Europe region has continued to experience disruption from
lockdowns and intermittent restrictions throughout 2021. Despite these
challenges our core categories have performed well, with Pest Control
largely back to normal and experiencing good growth, and with Hygiene
and France Workwear recovering well. Throughout the year, we have
seen the number of customers who have either remained closed
reducing from c.10% in H1 to less than 1.0% in H2, with trading in most
countries returning to more normal levels. While we continue to
experience some interruptions from restrictions imposed during fourth
and fifth waves of the virus (notably the recent lockdown in the
Netherlands), the impact is more on COVID-19 infections in employees,
affecting colleague availability rather than on customer closures.
Ongoing Revenue growth in Pest Control grew by 11.8% in 2021,
impacted by continued lockdowns across parts of Europe and Latin
America and poor weather in Europe in Q2 and Q3 which delayed the
emergence of pests such as wasps and mosquitoes.
Our Hygiene operations (excluding disinfection) grew by 4.4% in 2021
with most growth generated in H1 as we lapped the impact from
lockdowns in H1 2020. Sales campaigns during the year have focused
on customers returning to work, school and venues and we have also
expanded our product and service range to include air hygiene. Full
recovery of our Hygiene operations remains dependent on employee
return to the office and higher tourism, particularly in southern Europe.
As expected, revenue from disinfection services in 2021 tapered
significantly throughout the year, with a small run rate of disinfection
work in the region due to end in Q1 2022.
Lockdowns began to ease in H2 across all markets resulting in an
improving performance from our France Workwear business, which
grew by 1.9% in 2021, but which was nevertheless impacted by
temporary customer suspensions of c.3.4% throughout the year. By
theend of the year, suspensions had fallen to near zero. The pandemic
has had different impacts on our France Workwear operations, with
Cleanrooms growing by 13%, Garments back to 2019 levels and Flat
Linen remaining some 32% behind 2019.
2. Earnings accretion is not a profit forecast.
146
Rentokil Initial plc
Annual Report 2021
Revenue has also been affected (to a much lesser extent) by a small fire
in a flat linen laundry inLes Clayes (in the western suburbs of Paris) with
no impact on overall profit as damages have been fully covered by
insurance.
Regional Ongoing Revenue, excluding disinfection, grew by 6.9% in
2021 to £721.9m (4.8% organic). Including disinfection, growth was 3.9%,
2.0% organic. Ongoing Operating Profit grew by 9.9% to £144.0m,
reflecting 13.9% growth in France and 41.2% improvement in southern
Europe and 30.9% growth in Latin America. Net Operating Margins for
the Europe region increased by 100 basis points to 19.2%. The region
acquired 12 businesses in 2021 – seven in Europe and five in Latin
America – with annualised revenues of c.£29m in the year prior
topurchase.
We have not seen any evidence of increased customer insolvencies
across Europe and Latin America in 2021, which still remain at lower
rates than in 2019. We continue to monitor this situation as government
support programmes have come to an end in Q4 2021 and Q1 2022.
Weare experiencing higher cost inflation than in previous years, mainly
in fuel, paper products and emerging pressure from inflation on wage
rates. We are nevertheless continuing to pass on APIs in line with
normal pricing policy to our Pest Control and Workwear customers,
while Hygiene has lagged a little due to variable demand for
consumables which are often included within a Hygiene contract.
Salesand service colleague retention rates continue to be very high
across the region at mid-90% levels, with both service and sales
colleagues trending slightly ahead of 2019.
UK & Rest of World – Organic Revenue growth (excluding
disinfection) up 10.7%, total Organic Revenue growth 7.7%
Trading conditions in our UK businesses, which were impacted by
lockdowns in Q1, improved significantly from the second quarter and
into H2 as a result of continued progress with the UK’s vaccination
programme and subsequent easing of restrictions. Recovery of our
Irishoperations is behind the UK, reflecting continuing government
restrictions; however, the trajectory of improvement is similar to that
experienced in the UK, albeit at an earlier stage. In the Rest of World
region, our Nordic, Sub-Saharan Africa and MENAT regions delivered
robust performances despite ongoing pandemic-related challenges,
while our Caribbean businesses continue to be negatively impacted
bydampened tourist demand. Despite ongoing macro-economic
challenges in Lebanon, the Boecker business, acquired in August,
isperforming well, with integration proceeding to plan.
A number of key actions undertaken in 2020 have aided performance
inthe UK this year. These include accelerating the pace of our service
differentiation, innovation and digital marketing programmes and
implementing a number of significant technology-enabled business
andcost programmes. Building on last year’s success, roll-out of
ourPestConnect product and service has continued at pace during
2021 aswe install more units across more customer sites in the UK.
Ourdigital Connect strategy now covers around 11% of the UK portfolio.
Our UK Hygiene businesses performed strongly throughout the year,
achieving record levels of revenue growth in our Medical operations
(up£21.3m) and record levels of profitability in our Washroom Hygiene
business (up £24.2m), driven by strong organic performances and the
full-year performance of the integrated Cannon Hygiene business.
Our Ambius business performed well, growing contract portfolio
strongly in H2 as the challenge to make offices spaces suitably
appealing for employee return stimulated demand for our products
andservices. UK Property Care also performed well, with revenues
benefiting from strong domestic customer demand in the UK residential
housing market and signs of recovery in the commercial property
market, and with profits enhanced by a number of systems, process,
productivity and pricing initiatives implemented in 2020.
Ongoing Revenue for the UK & RoW region increased by 10.8% to
£488.0m (7.7% organic), with UK and Ireland Pest Control and Hygiene
(excluding disinfection) growing by 6.2% and 19.6% respectively, and
RoW Pest Control and Hygiene operations (excluding disinfection)
growing by 19.1% and 7.5% respectively. Regional Ongoing Operating
Profit increased by 48.2% to £121.2m in 2021, reflecting stronger trading
and also supported by the release of £14m of provisions for bad debt
and revenue as a result of further improvement in service and cash
collections as it emerges from the pandemic. Net Operating Margins
rose by 620 basis points to 24.8%, 220 basis points of which can be
attributed to the provisions releases described above. The region
continues to be very acquisitive, with nine M&A transactions completed
in the year, with combined annualised revenues of c.£49m.
Regional cash performance has been strong in 2021, with debtor
daysoutstanding now at pre-pandemic levels and with no significant
escalation in bad debt or customer insolvencies. Customer reviews of
our UK businesses on Trustpilot.com have returned to pre-pandemic
‘world-class’ levels and customer retention reached a record high of
88.5% in H2 2021. In the UK, we have seen some inflationary increases
on both wages and certain products, both of which have been largely
mitigated through service restructures and customer price increases.
The UK employment market rebounded strongly in Q2, creating a
competitive employment environment. However, the strength and
diversity of our recruitment model, together with our well-established
award-winning internal training model, has enabled the UK business to
hire ahead of attrition, with service levels above pre-COVID-19 levels.
Asia – Organic Revenue growth (excluding disinfection) up 4.1%,
total Organic Revenue growth 4.7%
Our Asia region has delivered an improving performance in 2021 but
real recovery has been held back by difficult trading conditions in
Malaysia, Indonesia, Vietnam and Thailand as a result of very restrictive
lockdowns from late Q2 and into Q3. With fewer restrictions and a
higher vaccination rate, China has performed considerably better,
delivering revenue growth of 18.2%.
Both Pest Control and Hygiene continued to feel the impact of the
ongoing pandemic and lockdowns in 2021, with temporary customer
suspensions peaking at 7.9% in August but falling to 2.8% by the year
end, as our markets recovered and our ability to service customers
improved. Emergency disinfection services were broadly similar in
H1and H2, providing a hedge to disruption of regular core service
provision. Following the launch of VIRUSKILLER
TM
in H1, the region has
made good progress with its air hygiene service offering, generating
£1.6m in revenues in Malaysia, Hong Kong, Singapore and Indonesia.
Regional Ongoing Revenue rose by 5.0% to £254.0m (4.7% Organic).
Ongoing Operating Profit was flat on 2020 at £26.8m, reflecting the
impact of a £2.0m reduction in government support provided across
Asia markets in the second half. Net Operating Margins for the Asia
region declined by 50 basis points to 10.6%. Asia acquired five pest
control businesses during the year with annualised revenues in the
yearprior to purchase of c.£3.0m.
Annual price increases have been achievable for those customers who
are trading well although more difficult to pass through for customers
who are still facing challenging conditions from the COVID-19 crisis. The
region has seen some impact of bad debts and customer insolvencies
inIndonesia with an associated impact on profit of £1.3m. Colleague
retention has remained high, with retention at 87%. Both service
colleague retention and sales colleague retention continue to trend
ahead of pre-COVID 2019 levels.
Pacific – Organic Revenue growth (excluding disinfection) up 6.7%,
total Organic Revenue growth 6.3%
Our core businesses in the Pacific have delivered a much improved
performance in 2021, despite intermittent lockdowns in both Australia
and New Zealand impacting revenue, primarily in New Zealand which
has maintained a suppression strategy towards the COVID-19
pandemic. Our Australian operations have been more robust, reflecting
the easing of government restrictions despite the arrival of the Omicron
variant in November.
Demand for Pest Control services has been strong throughout the
year,particularly in commercial pest control and with bird control
workbuoyant. Residential work in the second half was slightly weaker
than in H1, reflecting customers deferring treatments during periods
oflockdown. In Hygiene, core service provision is recovering well,
although H2 saw some weakening in service levels due to temporary
site closures. Portfolio growth has been strong, however, with
customers responding positively to our relaunched air hygiene
proposition (a major source of growth) and our hand sanitiser portfolio
has largely been maintained. Our Ambius business performed well in
2021, particularly in H2, with portfolio growth above 10% as businesses
began to prepare for a return to offices.
Rentokil Initial plc
Annual Report 2021
147
Corporate Governance Financial Statements Other InformationStrategic Report
Ongoing Revenue in the Pacific grew by 8.7% to £192.8m (6.3% organic),
with growth in Pest Control of 10.3%, Hygiene (excluding disinfection)
growth of 8.7% and Ambius growth of 4.0%. Regional Ongoing
Operating Profit grew by 9.9% to £38.0m and Net Operating Margins
rose by 20 basis points to 19.7%. The region acquired six small Pest
Control businesses and three Hygiene businesses in 2021 with
annualised revenues in the year prior to purchase of c.£7.0m.
As with our other regions, bad debt from suspended portfolio customers
has been minimal to date, with no spikes in insolvencies despite
government subsidies scaling back. Overall customer retention for the
region remained ahead of our expectations. We are seeing some wage
inflation pressure amid rising demand for labour at all levels across the
region, but are confident of continuing to mitigate these through our
normal pricing policy. Colleague retention remained high at 80% for
2021, but was below our target for the year. Attracting and retaining
theright people across all categories to enable us to maintain service
excellence remains a key focus going forward.
Share of Profits from Associates
Our share of Profits from Associates (at AER) amounted to £8.1m (2020:
£8.3m) primarily relating to our 49% interest in our Japanese associate.
Central and regional overheads
Central and regional overheads of £91.3m (£90.8m at AER) were £2.2m
higher than prior year (2020: £89.1m at CER, £88.8m at AER), due to the
non-repeat of cost savings taken in response to the pandemic in 2020,
including salary waivers and cancellations of bonus schemes.
Restructuring costs
With the exception of integration costs for significant acquisitions, the
Company reports restructuring costs within adjusted operating profit.
Costs associated with significant acquisitions are reported as one-off
items and excluded from adjusted operating profit.
Restructuring costs of £10.2m (2020: £13.2m) consisted mainly of costs
in respect of initiatives focused on our North America transformation
programme, together with integration costs of smaller acquisitions.
AtAER, restructuring costs were £9.7m.
UK defined benefit pension scheme buy-out
In December 2018, the Company reached agreement for a bulk annuity
insurance buy-in for its UK Defined Benefit Pension Scheme (“the
Scheme”) with Pensions Insurance Corporation. The buy-out completed
on 24 February 2022 and individual policies are being issued to all
members of the Scheme. A 2020 High Court judgement ruled that
trustees of defined benefit schemes that provided Guaranteed
Minimum Pensions should revisit and, where necessary, top-up historic
cash equivalent transfer values paid since 1990. The Trustee has
identified and will make payments to affected members in 2022.
Oncethose payments have been made, the balance of pre-tax surplus,
anticipated to be c.£18m, is expected to be paid in Q4 2022 to the
Company. The Scheme will then be wound up.
Interest (at AER)
Adjusted interest of £33.1m was £4.0m lower than in the prior year, due
to a £2.2m saving from not drawing down on the RCF and commercial
paper programme and a £3.9 hyper inflation gain from the newly
acquired Lebanon business, offset by swap costs of £1.8m due to larger
cash balances held in the period between the raising of the 2028
€600m bond in October 2020 and the settling of the 2021 bond in July
2021. Cash interest was c.£4.6m below 2020 at £36.4m, mainly driven
by the early repayment of the c.€175.7m outstanding under the €350m
bond, offset by fees paid for the bridge facility for the acquisition of
Terminix. Statutory interest was £29.5m, £42.8m lower than 2020,
driven by the c.£26m cost of closing out an interest derivative linked
toUS interest rates in 2020, c.£8m of ineffective hedges charged to
theP&L in 2020, £4m of additional fair value charges from the part
repayment of the €350m 2021 bond in 2020 and a £4.0m saving
inadjusted interest.
The carrying value of derivative liabilities has decreased by c.£48.0m
inthe year since June 2020, driven by the settlement of an interest
derivative linked to US interest rates in August 2020, settlement of
interest accrued and strengthening of sterling against the US dollar
andeuro.
Tax
The income tax charge for the period at actual exchange rates was
£61.9m on the reported profit before tax of £325.1m, giving an effective
tax rate of 19%. After adjusting the reported profit before tax for the
amortisation and impairment of intangible assets (excluding computer
software), one-off items and net interest adjustments, the Adjusted
Effective Tax Rate for the period at AER was 19.4% (2020: 19.7%). This
compares with the group’s blended tax rate of 24% (2020: 24%) which
iscalculated based on Adjusted Profit Before Tax. The effective tax rate
for the year is lower due to prior year tax credits of £16.2m arising as
issues have become resolved, an increase in deferred tax assets of
£3.6m due to the upcoming increase in the UK corporate tax rate and
anincrease in the deferred tax asset recognised on tax losses of £2.8m.
In the medium term the Group’s Adjusted Effective Tax Rate is likely to
increase towards the blended tax rate which is expected to increase
to25% when the UK corporate tax rate increases to 25% in April 2023.
In December 2021 the OECD issued its interim report concerning the
implementation of the Global Anti-Base Erosion minimum tax of 15%
which is expected to apply from 2023. Nearly all of the Group’s profits
are already taxed at a rate in excess of 15% and therefore this is not
expected to have a significant impact on the Group’s Effective Tax Rate.
Going Concern
The Board continues to adopt the going concern basis in preparing the
accounts on the basis that the Group’s strong liquidity position and its
demonstrated ability to manage the level of capital expenditure, or
dividends or expenditure on bolt-on acquisitions are sufficient to meet
the Group’s forecast funding needs, including those modelled in a
severe but plausible downside case (see Directors’ Report on page214).
Net debt and cash flow
Operating Cash Flow of £432.3m for continuing operations was driven
by a £57.5m increase in Adjusted Operating Profit, offset by higher
capex and one-off items. For 2021, we are making a change to the
reporting of right-of-use asset cash flows to report non-cash
movements on right-of-use assets below Free Cash Flow. This ensures
that Operating Cash Flow and Free Cash Flow (alternative performance
measures) are not distorted by material asset acquisitions, notably
long-life property leases where there is no immediate cash impact.
Theoverall impact on Operating Cash Flow and Free Cash Flow is
£1.5mfavourable in 2021 (2020: £9.9m adverse). There is no impact
onoverall changes in net debt in 2020 or 2021.
Cash interest payments of £36.4m are £4.6m lower than in the prior
year. Cash tax payments for the period were £68.9m, an increase of
£4.5m compared with the corresponding period last year reflecting
theincrease in the Group’s profits.
This resulted in Free Cash Flow delivery of £326.5m (2020: £306.1m).
Cash spend on acquisitions of £463.1m and dividend payments of
£138.7m have contributed to an underlying increase in net debt of
£288.9m. Favourable foreign exchange translation and other items
of£19.5m is primarily due to the strengthening of sterling against
theeuro and US dollar. Overall, this led to an increase in net debt
of£269.4m and closing net debt of £1,284.7m.
Financial Review
continued
148
Rentokil Initial plc
Annual Report 2021
Net debt and cash flow
£m at actual exchange rates
Year to date
2021 FY
£m
2020 FY
£m
Change
£m
Adjusted operating profit 441.5 384.0 57.5
One-off items – operating (20.7) (7.7) (13.0)
Depreciation 223.6 228.8 (5.2)
Other
9.7
11.1 (1.4)
EBITDA 654.1 616.2 37.9
Working capital 23.4 20.2 3.2
Movement on provisions (4.6) 4.6 (9.2)
Capex – additions (159.9) (152.5) (7.4)
Capex – disposals 7.4 6.3 1.1
Capital element of lease payments and
initial direct costs incurred (88.1) (82.8) (5.3)
Operating cash flow 432.3 412.0 20.3
Interest (36.4) (41.0) 4.6
Tax (68.9) (64.4) (4.5)
Special pension contributions (0.5) (0.5) –
Free Cash Flow from continuing
operations 326.5 306.1 20.4
Acquisitions (463.1) (194.7) (268.4)
Disposal of companies and businesses – 2.2 (2.2)
Dividends (138.7) – (138.7)
Other 0.1 (2.6) 2.7
Debt related cash flows
Acquisition of shares from non-controlling
interest (9.4) – (9.4)
Cash outflow on settlement of debt
related foreign exchange forward
contracts (19.1) (23.7) 4.6
Net investment in term deposits 170.6 (170.5) 341.1
Proceeds from new debt 4.7 1,714.8 (1,710.1)
Debt repayments (166.6) (1,352.2) 1,185.6
Net debt related cash flows (19.8) 168.4 (188.2)
Net (decrease)/increase in cash and cash
equivalents (295.0) 279.4 (574.4)
Cash and cash equivalents at beginning
ofthe year 550.8 273.9 276.9
Exchange losses on cash and cash
equivalents (13.9) (2.5) (11.4)
Cash and cash equivalents at end of the
financial year 241.9 550.8 (308.9)
Net (decrease)/increase in cash and cash
equivalents (295.0) 279.4 (574.4)
Net debt related cash flows 19.8 (168.4) 188.2
IFRS 16 liability movement (1.5) 9.9 (11.4)
Net debt acquired (12.2) (7.1) (5.1)
Underlying (increase)/decrease in net debt (288.9) 113.8 (402.7)
Foreign exchange translation and other
items
19.5
(56.1) 75.6
(Increase)/decrease in net debt (269.4) 57.7 (327.1)
Opening net debt (1,015.3) (1,073.0) 57.7
Closing net debt (1,284.7) (1,015.3) (269.4)
Climate change
As part of the Company’s annual reporting for 2020, and continued this
year, we disclosed our governance, opportunities and strategies to
manage climate-related risks and the transition to a low-carbon future in
line with the Task Forceon Climate-related Financial Disclosures (TCFD)
published recommendations and also report against the Sustainability
Accounting Standards Board framework for our sector. Climate-related
risks are identified and analysed by our operational and functional
teams. Forexample, our country and regulatory teams identify risks
related tonew laws and regulations, such as city-based low emission
zones andassociated access charging for commercial vehicles as well
as localregulations on the use of pest control treatments in different
environments. Other risks relate to more extreme localised weather
anddisruption. We also identify risks to the upside – for example,
fromincreased pest pressure and pest migration to new territories
astemperatures increase. Our TCFD report can be found on pages 58
to65.
Prior-year restatements
In 2021, we restated the presentation of our French virtual pooling
facility for balances that did not meet the grossing up requirements and
should therefore have been presented net. Trade and other receivables
and bank and other short-term borrowings have also been restated to
reflect the reinstatement of a factoring arrangement in France which
had previously been considered to meet the requirements for
de-recognition.
Over the last three years, our Target Specialty Products business in
North America has grown significantly and in 2021 we completed a
review of the revenue recognition policy within this revenue stream.
Theregion has a limited number of suppliers for whom we sell products
to end customers on a consignment stock basis and as a result of the
review, we have revised our judgement such that we consider ourselves
to be agents of these suppliers rather than principal and have therefore
recognised only the commission revenues earned rather than revenues
charged to end customers. This has led to a reduction in revenue
recognition in 2021 (£22.8m at AER) and a restatement which has
reduced prior-year revenues from our North America Target distribution
business by £20.2m (at AER). The changes in revenue have no impact
on reported profits in 2020 or in 2021 and therefore, improve the 2021
margin of the North America business by 20 basis points and the Group
as a whole by 10 basis points.
Two further corrections were made to prior year comparatives.
IntheConsolidated Statement of Changes in Equity, the previous
presentation of ‘Net exchange adjustments offset in reserves’ has now
been presented as separate lines for ‘Net exchange adjustments offset
in reserves’ and ‘Net gain/loss on net investment hedge’. Prior-year
comparatives have been restated to reflect the new presentation.
In the Consolidated Cash Flow Statement, the net change from
investments in term deposits of £170.5m was restated to correct
theclassification from financing activities to investing activities.
Outlook
The business is performing in line with our expectations, resulting
fromorganic growth delivery and the flow through of revenues from
our excellent M&A performance in 2021. Although we will lap strong
disinfection revenues in H1 and will have tocontend with ongoing
macro-economic uncertainty, we expect the Group to deliver good
operational andfinancial progress in the coming year.
Stuart Ingall-Tombs
Chief Financial Officer
3 March 2022
Rentokil Initial plc
Annual Report 2021
149
Corporate Governance Financial Statements Other InformationStrategic Report
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 31 December
Notes
2021
£m
2020
1
£m
Revenue
1
A1 2,956.6 2,803.3
Operating expenses
1
A7 (2,610 . 1) (2,509.5)
Operating profit A1 346.5 293.8
Finance income C9 4.2 6.2
Finance cost C8 (33. 7) (78.5)
Share of profit from associates, net of tax of £4.0m (2020: £4.8m) B6 8 .1 8.3
Profit before income tax 325. 1 229.8
Income tax expense
2
A12 (61.9) (43.5)
Profit for the year (including profit from non-controlling interests of £nil (2020: £0.4m)) 263.2 186.3
Other comprehensive income:
Items that are not reclassified subsequently to the income statement:
Remeasurement of net defined benefit liability A10 0.9 (13. 1)
Tax related to items taken to other comprehensive income A14 2.0 3.9
Items that may be reclassified subsequently to the income statement:
Net exchange adjustments offset in reserves³ (17 . 7) (35.4)
Net gain/(loss) on net investment hedge³ 15.0 (17 .2)
Cost of hedging (1.5) (1.0)
Effective portion of changes in fair value of cash flow hedge 13.2 (4.9)
Other comprehensive income for the year 11.9 (67 . 7)
Total comprehensive income for the year (including profit from non-controlling interests of £nil
(2020:£0.4m)) 275. 1 118.6
Earnings per share attributable to the Company’s equity holders:
Basic A2 14. 16p 10. 03p
Diluted A2 14. 10p 9.98p
All profit is from continuing operations.
1. Revenue and Operating expenses have been restated in 2020 to reflect a correction in presentation in relation to certain sales contracts where the Group acts as agent. Both Revenue
and Operating expenses have been restated by £20.2m. For these contracts, revenue is presented on a net basis.
2. Taxation includes £50.1m (2020: £40.0m) in respect of overseas taxation.
3. Both net exchange adjustments offset in reserves and net gain/(loss) on net investment hedge have been restated in 2020 to reflect a correction to the presentation in other
comprehensive income. Previously this was presented as a net £52.6m loss classified as net exchange adjustments offset in reserves.
150
Rentokil Initial plc
Annual Report 2021
Consolidated Balance Sheet
At 31 December
Notes
2021
£m
2020
1,2
£m
Assets
Non-current assets
Intangible assets B2 2, 164.3 1,922. 1
Property, plant and equipment B3 398. 1 402. 7
Right-of-use assets B4 227 .5 217 .5
Investments in associated undertakings B6 2 9 .7 27 .2
Other investments C4 0.2 0.2
Deferred tax assets A14 41.6 3 7.7
Contract costs A1 75.0 67 .8
Retirement benefit assets A10 19.0 1 9.0
Other receivables A3 14.3 13. 1
Derivative financial instruments C5 9.8 3 7. 0
2,979.5 2, 744.3
Current assets
Other investments C4 1 .6 172.2
Inventories A4 135. 7 131.3
Trade and other receivables A3 526.9 56 9.6
Current tax assets 8.5 1 0.6
Derivative financial instruments C5 2.5 5 .6
Cash and cash equivalents C3 668.4 1,949.5
1,343.6 2,838.8
Liabilities
Current liabilities
Trade and other payables A5 (764.0) (925.0)
Current tax liabilities (60.5) (80. 0)
Provisions for liabilities and charges A6 (27 .0) (30. 1)
Bank and other short-term borrowings C2 (459.3) (1,591.5)
Lease liabilities B4 (77 .8) (72. 7)
Derivative financial instruments C5 (1.0) (3.5)
(1,389. 6) (2, 702.8)
Net current (liabilities)/assets (46.0) 136. 0
Non-current liabilities
Other payables A5 (71.5) (70.4)
Bank and other long-term borrowings C2 (1,256. 1) (1,337 .6)
Lease liabilities B4 (139.2) (141.8)
Deferred tax liabilities A14 (108. 1) (94. 7)
Retirement benefit obligations A10 (27 .3) (38.8)
Provisions for liabilities and charges A6 (33.9) (34. 1)
Derivative financial instruments C5 (33.5) (32.3)
(1,669 .6) (1, 749. 7)
Net assets 1,263.9 1, 130. 6
Equity
Capital and reserves attributable to the Company’s equity holders
Share capital D2 18.6 18.5
Share premium 6.8 6.8
Other reserves (1,927 .6) (1,926.2)
Retained earnings 3, 166.6 3,0 3 0.6
1,264.4 1, 129. 7
Non-controlling interests (0.5) 0. 9
Total equity 1,263.9 1, 130. 6
1. Both cash and cash equivalents and bank and other short-term borrowings have been restated in 2020 by reducing cash in hand and overdrafts by £276.1m to reflect the netted
position of the main and shadow bank accounts pool arrangement which were previously grossed up (Note C2 andC3).
2. Trade and other receivables and bank and other short-term borrowings have been restated in 2020 due to a correction of the recognition of an overseas factoring arrangement.
Bothhave been increased by £21.0m.
The Financial Statements on pages 150 to 205 were approved by the Board of Directors and were signed on its behalf by Andy Ransom and
Stuart Ingall-Tombs on 3 March 2022.
Andy Ransom Stuart Ingall-Tombs
Chief Executive Chief Financial Officer
Rentokil Initial plc
Annual Report 2021
151
Corporate Governance Financial Statements Other InformationStrategic Report
Consolidated Statement of Changes in Equity
For the year ended 31 December
Attributable to equity holders of the Company
Non-
controlling
interests
£m
Total
equity
£m
Share
capital
£m
Share
premium
£m
Other
reserves
1
£m
Retained
earnings
£m
At 1 January 2020 18.5 6.8 (1,867.7) 2,844. 1 0.6 1, 002.3
Profit for the year – – – 185.9 0.4 186.3
Other comprehensive income:
Net exchange adjustments offset in reserves
1
– – (35.4) – – (35.4)
Net loss on net investment hedge
1
– – (17.2) – – (17 .2)
Net loss on cash flow hedge
2
– – (4.9) – – (4.9)
Cost of hedging – – (1.0) – – (1.0)
Remeasurement of net defined benefit liability – – – (13. 1) – (13. 1)
Tax related to items taken directly to other comprehensive
income – – – 3.9 – 3.9
Total comprehensive income for the year – – (58.5) 176. 7 0. 4 118. 6
Transactions with owners:
Dividends paid to non-controlling interests – – – – (0 . 1) (0. 1)
Cost of equity-settled share-based payment plans – – – 5.5 – 5.5
Tax related to items taken directly to equity – – – 3.2 – 3.2
Movement in the carrying value of put options – – – 1 .1 – 1 .1
At 31 December 2020 18.5 6.8 (1,926.2) 3,0 3 0.6 0. 9 1, 130. 6
Profit for the year – – – 263.2 – 263.2
Other comprehensive income:
Net exchange adjustments offset in reserves – – (17.7) – – (17 . 7)
Net gain on net investment hedge – – 15.0 – – 15. 0
Net gain on cash flow hedge
2
– – 13.2 – – 13.2
Cost of hedging – – (1.5) – – (1.5)
Remeasurement of net defined benefit liability – – – 0. 9 – 0.9
Transfer between reserves – – (10.4) 10.4 – –
Tax related to items taken directly to other
comprehensiveincome – – – 2.0 – 2.0
Total comprehensive income for the year – – (1.4) 276.5 – 275. 1
Transactions with owners:
Shares issued in the year 0 .1 – – (0. 1) – –
Acquisition of non-controlling interests – – – (8.3) (1.3) (9.6)
Dividends paid to equity shareholders – – – (138. 7) (138. 7)
Dividends paid to non-controlling interests – – – – (0. 1) (0. 1)
Cost of equity-settled share-based payment plans – – – 9.8 – 9.8
Tax related to items taken directly to equity – – – 4.6 – 4 .6
Movement in the carrying value of put options – – – (7 .8) – (7 .8)
At 31 December 2021 18.6 6.8 (1,927.6) 3, 166.6 (0.5) 1,263.9
1. Both net exchange adjustments offset in reserves and net loss on net investment hedge have been restated in 2020 to reflect a correction to the presentation in other comprehensive
income. Previously this was presented as a net loss of £52.6m classified as net exchange adjustments offset in reserves.
2. £13.2m net gain on cash flow hedge includes £14.4m loss (2020: £15.1m gain) from the effective portion of changes in fair value offset by reclassification to the income statement of
£27.6m loss (2020: £20.0m gain) due to changes in foreign exchange rates.
Shares of £0.1m (2020: £0.1m) have been netted against retained earnings. This represents 9.4m (2020: 7.7m) shares held by the Rentokil Initial
Employee Share Trust. The market value of these shares at 31 December 2021 was £54.9m (2020: £39.0m). Dividend income from, and voting
rights on, the shares held by the Trust have been waived.
152
Rentokil Initial plc
Annual Report 2021
Analysis of other reserves
Capital
reduction
reserve
£m
Legal
reserve
£m
Cash flow
hedge
reserve
£m
Translation
reserve
1
£m
Cost of
hedging
£m
Total
£m
At 1 January 2020 (1, 722. 7) 10.4 0. 5 (155.9) – (1,867.7)
Net exchange adjustments offset in reserves
1
– – – (35.4) – (35.4)
Net loss on net investment hedge¹ – – – (17 .2) – (17.2)
Net loss on cash flow hedge² – – (4.9) – – (4.9)
Cost of hedging – – – – (1. 0) (1.0)
Total comprehensive income for the year – – (4.9) (52.6) (1.0) (58.5)
At 31 December 2020 (1, 722. 7) 10.4 (4.4) (208.5) (1.0) (1,926.2)
Net exchange adjustments offset in reserves – – – (17 . 7) – (17.7)
Net gain on net investment hedge – – – 15.0 – 15.0
Net gain on cash flow hedge² – – 13.2 – – 13.2
Transfer between reserves – (10.4) – – – (10.4)
Cost of hedging – – – – (1.5) (1.5)
Total comprehensive income for the year – (10.4) 13.2 (2. 7) (1.5) (1.4)
At 31 December 2021 (1, 722. 7) – 8.8 (211.2) (2.5) (1,927.6)
1. Both net exchange adjustments offset in reserves and net loss on net investment hedge have been restated in 2020 to reflect a correction to the presentation in other comprehensive
income. Previously this was presented as a net loss of £52.6m classified as net exchange adjustments offset in reserves.
2. £13.2m net gain on cash flow hedge includes £14.4m loss (2020: £15.1m gain) from the effective portion of changes in fair value offset by reclassification to the income statement of
£27.6m loss (2020: £20.0m gain) due to changes in foreign exchange rates.
The capital reduction reserve arose in 2005 as a result of the scheme of arrangement of Rentokil Initial 1927 plc, under section 425 of the
Companies Act 1985, to introduce a new holding company, Rentokil Initial plc, and the subsequent reduction in capital approved by the
HighCourt whereby the nominal value of each ordinary share was reduced from 100p to 1p.
The legal reserve represents amounts set aside in compliance with local laws in certain countries in which the Group operates. An assessment of
this reserve was completed during 2021 and determined that these amounts are no longer required to be set aside. £10.4m (2020: £nil) has been
transferred back to the retained earnings reserve.
Consolidated Statement of Changes in Equity
For the year ended 31 December continued
Rentokil Initial plc
Annual Report 2021
153
Corporate Governance Financial Statements Other InformationStrategic Report
Consolidated Cash Flow Statement
For the year ended 31 December
Notes
2021
£m
2020
1
£m
Cash flows from operating activities
Cash generated from operating activities C10 668.5 628.8
Interest received 5.2 7. 6
Interest paid
2
(41.6) (48.6)
Income tax paid A13 (68.9) (64.4)
Net cash flows from operating activities 563.2 523.4
Cash flows from investing activities
Purchase of property, plant and equipment (127 .8) (129.9)
Purchase of intangible fixed assets (32. 1) (22.6)
Proceeds from sale of property, plant and equipment 7. 4 6.3
Acquisition of companies and businesses, net of cash acquired B1 (463. 1) (194. 7)
Disposal of companies and businesses – 2.2
Dividends received from associates B6 3.9 11. 7
Net change to cash flow from investment in term deposits¹ 17 0.6 (170.5)
Net cash flows from investing activities (441. 1) (497 .5)
Cash flows from financing activities
Dividends paid to equity shareholders D1 (138. 7) –
Acquisition of shares from non-controlling interest (9.4) –
Capital element of lease payments (88.0) (85.4)
Cash outflow on settlement of debt-related foreign exchange forward contracts (19. 1) (23. 7)
Proceeds from new debt 4 .7 1, 714.8
Debt repayments (166.6) (1,352.2)
Net cash flows from financing activities (417 . 1) 253.5
Net (decrease)/increase in cash and cash equivalents (295.0) 279.4
Cash and cash equivalents at beginning of year 550.8 273.9
Exchange losses on cash and cash equivalents (13.9) (2.5)
Cash and cash equivalents at end of the financial year C3 241.9 550 .8
1. Net change to cash flow from investment in term deposits of £170.5m has been restated in 2020 to correct the classification from financing activities to investing activities.
2. Interest paid includes the interest element of lease payments of £6.1m (2020: £6.8m).
154
Rentokil Initial plc
Annual Report 2021
Notes to the Financial Statements
General accounting policies
Basis of preparation
These Consolidated Financial Statements have been prepared in accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The transition to UK-adopted
International Accounting Standards has no impact on recognition, measurement or disclosure in the period reported as a result of the change in
framework. The Consolidated Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of
certain financial assets and liabilities (including derivative instruments).
The Group uses a number of non-GAAP measures to present the financial performance of the business which are not defined under IFRS.
Anexplanation of these Alternative Performance Measures (APMs), along with reconciliation to the nearest equivalent IFRS measure, can be
found in Section E on page 193.
The Group has engaged in a detailed review of expected climate change impacts on the business and its assets and liabilities to establish any
adjustments required and what reporting is necessary in its Financial Statements for 2021 under a 1.5-2.0 degree pathway. The explanation below
of how this has been included in the Financial Statements should be read in conjunction with the climate change evaluation and risk assessment
on page 62 of the Responsible Business section.
This process has been completed to ensure material accuracy of the financial reporting and that disclosure of relevant information complies with
the requirements of IAS 1.
The process has involved a detailed review of material revenue segments, all balance sheet line items and each element of the Group’s
commitment to reach net zero by 2040, to identify if any of these items is expected to be materially impacted in a negative or positive way by
weather, legislative, societal or revenue/cost changes. The conclusions of this process have been reviewed and agreed by the Audit Committee
and Board on 9 December 2021.
The conclusion of the review was that, while there will undoubtedly be impacts on the Company, the highly disaggregated nature of the
operations of the Group significantly reduces the risk profile of the Group to impacts from weather-related changes. The changes necessary to
achieve net zero will not have a materially adverse impact on the cash flows of the Group and indeed, warmer climates may present some
opportunities as disclosed on page 58 to 65 of this report. Societal and legislative impacts are not considered to have a material impact on any
one segment such that we need to break out reporting in a different way to previous years. Judgements are not considered to be significant,
although clearly understanding of climate change is developing with time. The area with the most judgement is goodwill impairment testing and a
description is given in Note B2 of the incremental processes undertaken to assess the climate change impact on the valuations. Management
review has concluded that there is no material impact and that no further disclosure is required.
The Directors have prepared Board-approved cash flow forecasts that demonstrate that the Group has sufficient liquidity tomeet its obligations
as they fall due for the period of at least 12 months from the date of approval of these Financial Statements.
Additionally, the Directors have assessed severe but plausible downside scenarios. This downside scenario assumes a revenue decline of 30%
against base budget for six months, which is considerably worse than the Group’s actual performance in2020. Were the Group to need to access
additional funds it would be able to manage cash outflows through cost savings, adjusting the level of M&A activity and/or dividends paid which
are all within the Group’s control.
The Directors have therefore concluded that the Group will have sufficient liquidity to continue to meet its liabilities as they fall due for this period
and therefore have prepared the Financial Statements on a going concern basis (see the Directors’ Report on page 212).
Consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it (i) has power over the entity; (ii) is exposed or has rights
tovariable returns from its involvement with the entity; and (iii) has the ability to affect those returns through its power over the entity. The Group
reassesses whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of these three
elements of control.
The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the
date that control ceases. Inter-company transactions, balances, and gains and losses on transactions between Group companies are eliminated
on consolidation. When less than 100% of the issued share capital of a subsidiary is acquired, and the acquisition includes an option to purchase
the remaining share capital of the subsidiary, the anticipated acquisition method is applied where judged appropriate to do so. The judgement is
based on the risks and rewards associated with the option to purchase, meaning that no non-controlling interest is recognised. A liability is
carried on the balance sheet equal to the fair value of the option to purchase. This is revised to the fair value at each reporting date with
differences being recorded in equity.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and
other components of equity. Any resulting gain or loss is recognised in the income statement. Any interest retained in the former subsidiary is
measured at fair value when control is lost. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted
foras equity transactions.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests, which may cause the
non-controlling interests to have a deficit balance. Consideration in excess of net identifiable assets acquired in respect of non-controlling
interests in existing subsidiary undertakings is taken directly to reserves.
(b) Associates
Associates are those entities in which the Group has significant influence over the financial and operating policies, but not control. Significant
influence is usually presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.
Associates are accounted for using the equity method and are initially recognised at cost. The Group’s investment includes goodwill identified
onacquisition, net of any accumulated impairment losses. The Consolidated Financial Statements include the Group’s share of the total
comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences until the date
that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount is
Rentokil Initial plc
Annual Report 2021
155
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations
or made payments on behalf of an investee.
Gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Foreign currency translation
(a) Functional and presentation currency
Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (the functional currency). The Consolidated Financial Statements are presented in sterling, which is the functional
currency of Rentokil Initial plc.
(b) Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates; and
(iii) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other
currency instruments designated as hedges of such investments or deemed to be quasi-equity, are taken to other comprehensive income.
Whena foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at period-end exchange rates.
(c) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions, or from the translation of monetary assets and liabilities
denominated in foreign currencies at reporting period end exchange rates, are recognised under the appropriate heading in the income
statement; except when deferred in equity as qualifying net investment hedges or where certain intra-group loans are determined to be
quasi-equity (normally not expected to be repaid).
(d) Financial reporting in hyperinflationary economies
With effect from 3 August 2021 the Group purchased Boecker Public Health SAL, a company which has operations in Lebanon and uses the
Lebanese pound as its functional currency. The Lebanese economy was designated as hyperinflationary from September 2020. As a result,
application of IAS 29 Financial Reporting in Hyperinflationary Economies has been applied for the Lebanese subsidiary, from the date of
acquisition. The IAS 29 rules are applied as follows:
(i) adjustment of the income statement at the end of the reporting period using the change in general price index;
(ii) adjustment of historical cost non-monetary assets and liabilities for the change in purchasing power caused by inflation form the date of initial
recognition to the balance sheet date; and
(iii) adjustment of the income statement to reflect the impact of inflation and exchange rate movement on holding monetary assets and liabilities
in local currency.
The Consumer Price Index for Lebanon has been used for the relevant hyperinflationary adjustments. The index on the date of acquisition was
514.89 and at 31 December 2021 was 921.40.
Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the relevant instrument,
and derecognised when it ceases to be a party to such provisions. Note C5 on page 186 of these notes discusses accounting for financial
instruments.
Financial assets
The Group classifies its financial assets depending on the purpose for which the financial assets were acquired. At initial recognition the Group
carries out a solely payment of principal and interest (SPPI) test and a business model test to establish the classification and measurement of its
financial assets. Financial assets are classified in the following categories:
(a) Amortised cost
Financial assets under this classification are non-derivative financial assets held to collect the contractual cash flows until maturity and the
cashflows are SPPI. Assets measured at amortised cost include trade and other receivables, cash and cash equivalents (excluding money market
funds which are classified as FVTPL) and other investments.
(b) Fair value through other comprehensive income (FVTOCI)
These are non-derivative financial assets which can be for sale with cash flows that are SPPI. These assets are measured at fair value and
changes to market values are recognised in other comprehensive income. The Group has no assets classified under this category.
(c) Fair value through profit and loss (FVTPL)
Financial assets under this classification are assets that cannot be classified in any of the other categories. These assets are measured at fair
value and changes to market values are recognised in profit and loss.
Financial liabilities
All financial liabilities are stated at amortised cost using the effective interest rate method except for derivatives, which are classified as held
fortrading (except where they qualify for hedge accounting) and are held at fair value.
Financial liabilities held at amortised cost include trade payables, provisions, deferred consideration and borrowings.
156
Rentokil Initial plc
Annual Report 2021
Critical accounting estimates and judgements
Assumptions and estimation uncertainties
The Group makes estimates and assumptions concerning the future. Estimates and assumptions are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates and revisions to estimates are recognised prospectively.
Sensitivities to the estimates and assumptions are provided, where relevant, in the relevant notes to the Financial Statements. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are listed below (please refer to the notes for further detail):
A
impairment of goodwill: growth rate and discount rate assumptions and forecast cash flow estimates (Note B2);
A
income taxes: key assumptions about the likelihood and magnitude of outflows in relation to tax provisions; and
A
retirement benefits: key actuarial assumptions and estimates over future costs of winding up a scheme (Note A10).
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the
Financial Statements is included in the following notes:
A
IFRS 16 length of each lease: whether to include options to extend and/or termination options when calculating the lease liability (Note B4).
Standards, amendments and interpretations to published standards that are mandatorily eective for the current year
Except as described below, the accounting policies applied in these Financial Statements are the same as those applied in the Group’s
Consolidated Financial Statements for the year ended 31 December 2020.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other
standards, with effect from 1 January 2021:
A
Amendments to IFRS 16 Leases;
A
Amendments to IFRS 4 Insurance Contracts; and
A
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest Rate Benchmark Reform phase 2.
The application of these amendments has had no material impact on the disclosures of the amounts recognised in the Group’s Consolidated
Financial Statements. Consequently, no adjustment has been made to the comparative financial information at 31 December 2020.
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for
31December 2021 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not
expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
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157
Corporate Governance Financial Statements Other InformationStrategic Report
A. Operating
A1. Revenue recognition and operating segments
Revenue recognition
Revenue represents the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group
expects to be entitled. All revenue is considered revenue from contracts with customers as defined by IFRS 15, including job work and sales
ofgoods. Under IFRS 15, revenue is recognised when a customer obtains control of goods or services in line with identifiable performance
obligations. In the majority of cases the Group considers that the contracts it enters into are contracts for bundled services which are accounted
for as a single performance obligation. Accordingly the majority of revenue across the Group is recognised on an output basis evenly over the
course of the contract because the customer simultaneously receives and consumes the benefits provided by the Group’s performance as it
performs. Job work is short-term contract revenue whereby the period of service is typically less than one month in duration. The performance
obligations linked to this revenue type are individual to each job due to their nature, with revenue being recognised at a point in time on
completion. Where consumables are supplied separately from the service contract, revenue is recognised at the point the goods transfer.
The transaction price reported for all contracts is the price agreed in the contract and there are no material elements of variable consideration,
financing component or non-cash consideration. The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose
information about remaining performance obligations because the Group has a right to consideration from customers in an amount that
corresponds directly with the value to the customer of the performance obligations completed to date.
Disaggregation of revenue into category, region and major type of revenue stream is shown below under segmental reporting and in Section E
on page 193.
Performance obligations
Revenue recognised over time – contract service revenue
These are mainly full-service contracts, inclusive of equipment, maintenance and consumables as required. The inclusive service is treated
asasingle performance obligation.
A
Pest Control: the Group offers a range of services with by far the most common being general pest maintenance contracts. Under this type
ofcontract the Group promises to provide a pest control service for the duration of the contract. In order to fulfil this promise, equipment is
supplied (such as bait boxes) and a technician maintains and monitors the equipment at a set number of visits per year, plus any additional call-outs
as required; so there is a stand-ready element to the service as well as an ongoing service. The Group considers that this type of contract is a
bundled service as the goods and services are not distinct in the context of the contract; equipment is not supplied without the service.
A
Hygiene: the Group offers a similar type of service to Pest Control, providing washroom equipment, consumables and a technician to service the
washroom. This type of contract will include a set number of visits. Dispensers are replenished by the technician. Management considers that the
supply of goods and services are not distinct in the context of the contract. Dispensers and other equipment would not be supplied without
providing the full service; the equipment is controlled by the Group and ownership does not transfer to the customer.
A
Protect & Enhance: contracts in this business category mainly relate to Ambius (interior landscaping) and Workwear. In Ambius the major types of
contract are for supply and maintenance of interior plants. Maintenance is only offered for plants that were supplied by the Group and therefore
the services are not distinct in the context of the contract. The assets are positioned and situated by our technicians and the customer is not
permitted to relocate them. At the end of the contract any assets on the customer’s site are recovered. In Workwear the main type of contract is for
supply and laundering of garments for commercial organisations. Supply and laundry are not offered separately, therefore management considers
the services not to be distinct in the context of the contract. The service is treated as a bundle and a single performance obligation. Any equipment
remains under ownership and control of the Group.
Revenue recognised at a point in time – job work
These services are short term in nature and only an immaterial amount would straddle an accounting period end. There is usually only one
performance obligation with revenue recognised at the point of completion of the work.
A
Pest Control: an example of this type of revenue in the Pest Control category is bird-proofing which is a one-off installation that, depending onthe
size of the site, may take between a few days and several weeks to complete. There is a single performance obligation (to install bird-proofing) and
the customer is billed, and revenue recognised, at the end of the job.
A
Hygiene: this type of revenue is generated by our Specialist Hygiene team which performs specialist cleaning services such as graffiti removal,
deep cleaning of kitchens and washrooms, trauma cleaning, flood or fire damage cleaning, and during the pandemic has been providing specialist
deep cleaning and disinfection services. These are usually short-term jobs (under one week) and usually there is a single performance obligation
with revenue recognised on completion of the job.
A
Protect & Enhance: this type of revenue is generated in our Ambius and Property Care businesses and includes work such as Christmas
installations (trees and decorations), woodworm treatment and damp-proofing. There is usually a single performance obligation with revenue
recognised at a point in time. The value of this work is immaterial.
Revenue recognised at a point in time – sale of goods
Sale of products and consumables relates mainly to the pest distribution businesses which sell pest control products to retailers and the pest
control industry. In the Hygiene business there are some sales of consumables to customers. In all cases, revenue is recognised at the point in
time that ownership transfers to the customer.
The Group does not consider that any judgements were made that would have a significant impact on the amount or timing of revenue
recognised. The contracts in the business where revenue is recognised over time are repetitive and are based on short cycles that repeat many
times per year. Therefore, if revenue had been considered to be recognised at a point in time rather than over time, the in-year impact would be
immaterial.
The Group makes a charge against revenue for credit notes not yet issued at the balance sheet date.
Notes to the Financial Statements
continued
158
Rentokil Initial plc
Annual Report 2021
Contract costs
Contract costs are mainly incremental costs of obtaining contracts (primarily sales commissions directly related to contracts obtained), and to a
lesser extent costs to fulfil contracts which are not within the scope of other standards (mainly incremental costs of putting resources in place to
fulfil contracts).
It is anticipated that these costs are recoverable over the life of the contract to which they relate. Accordingly, the Group capitalises them as
contract costs and amortises them over the expected life of the contracts. Management takes a portfolio approach to recognising contract costs,
and the expected length of contracts across the Group and associated amortisation periods are between three and six years.
The contract costs recognised in the balance sheet at the period end amounted to £75.0m (2020: £67.8m). The amount of amortisation
recognised in the period was £30.4m (2020: £28.1m) and impairment losses were £nil (2020: £nil).
Applying the practical expedient in paragraph 94 of IFRS 15, the Group recognises the incremental costs of obtaining contracts as an expense
when incurred if the amortisation period of the assets that the Group otherwise would have recognised is one year or less.
Contract assets
Contract assets relate to the Group’s right to consideration for performance obligations satisfied but where the customer has yet to be invoiced.
The contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice
to the customer. All opening balances have been invoiced in the year.
Contract liabilities
Contract liabilities relate to advance consideration received from customers where the performance obligations have yet to be satisfied. All
opening balances have subsequently been satisfied in the year. In most business categories where revenue is recognised over time customers
are invoiced in advance or simultaneously with performance obligations being satisfied.
Segment reporting
Segmental information has been presented in accordance with IFRS 8 Operating Segments. Reporting segments reflect the internal management
reporting structures. Each segment is headed by a Regional Managing Director who reports directly to the Chief Executive and is a member of
the Group’s Executive Leadership Team responsible for the review of Group performance. The operating businesses within each segment report
to the Regional Managing Directors.
Disaggregated revenue under IFRS 15 is the same as the segmental analysis below. Restructuring costs and central and regional costs are
presented at a Group level as they are not targeted or managed at reportable segment level. The basis of presentation is consistent with the
information reviewed by internal management. Revenue and profit are from Ongoing operations which is defined and reconciled to the nearest
equivalent GAAP measure in Section E on page 193.
Revenue and profit from continuing operations
Revenue
2021
£m
Revenue
1,2
2020
£m
Operating
profit
2021
£m
Operating
profit
1
2020
£m
France 306.4 303.2 37.3 33.7
Benelux 95.9 96.7 29.3 27.9
Germany 113.9 120.6 36.6 42.1
Southern Europe 148.9 143.0 30.0 21.8
Latin America 63.1 57.7 7.0 5.5
Europe 728.2 721.2 140.2 131.0
UK & Ireland
1
313.4 283.2 83.1 48.1
Rest of World 169.7 157.3 36.9 33.7
UK & Rest of World 483.1 440.5 120.0 81.8
Asia 242.5 242.0 25.5 26.9
North America
2
1,299.1 1,203.9 217.6 211.9
Pacific 196.5 177.5 38.7 34.5
Central and regional overheads
1
4.5 4.3 (90.8) (89.1)
Restructuring costs – – (9.7) (13.2)
Ongoing operations at AER 2,953.9 2,789.4 441.5 383.8
Disposed businesses
3
2.7 13.9 – 0.2
Continuing operations at AER 2,956.6 2,803.3 441.5 384.0
One-off items – operating (20.7) (7.7)
Amortisation and impairment of intangible assets
4
(74.3) (82.5)
Operating profit 346.5 293.8
1. During the year internal management reporting structures changed and a small amount of revenue and profit previously reported under UK & Ireland is now reported under Central and
regional overheads.
2. Revenue has been restated in 2020 to reflect a correction in presentation in relation to certain sales contracts where the Group acts as agent (reduction in revenue of £20.2m). In these
contracts revenue is presented on a net basis.
3. Disposed businesses includes revenue of £2.7m (2020: £7.1m) from product sales by the Group to CWS-boco International GmbH.
4. Excluding computer software.
Revenue and operating profit relate to the main groups of business category and activity, as described on pages 32 to 48: Pest Control, Hygiene
and Protect & Enhance. Central and regional overheads represent corporate expenses that are not directly attributable to any reportable
segment.
Rentokil Initial plc
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159
Corporate Governance Financial Statements Other InformationStrategic Report
Revenue from external customers attributed to the UK amounted to £292.1m (2020: £260.0m), with overseas countries accounting for the balance
of £2,664.5m (2020: £2,543.3m). The only countries accounting for more than 10% of revenue from external customers are the US, totalling
£1,239.8m (2020: £1,152.8m), and France, totalling £306.4m (2020: £310.0m). No customer accounts for more than 10% of total revenue.
One-off items – operating
One-off
cost/(income)
2021
£m
One-off tax
impact
2021
£m
One-off cash
inflow/(outflow)
2021
£m
One-off
cost/(income)
2020
£m
One-off tax
impact
2020
£m
One-off cash
inflow/(outflow)
2020
£m
Acquisition and integration costs 13.3 (1.3) (12.1) 14.7 (3.0) (14.7)
Fees relating to Terminix transaction 6.0 – (6.0) – – –
Pension scheme closure in North America – – – (7.3) 2.0 –
UK Pension scheme – partial return of surplus – – – – – 8.5
Other 1.4 (0.4) (9.0) 0.3 (1.4) 3.9
Total 20.7 (1.7) (27.1) 7.7 (2.4) (2.3)
Analysis of revenue by business category
Revenue
2021
£m
Revenue
2020¹
£m
Pest Control 1,933.4 1,703.9
Hygiene 660.1 735.0
Protect & Enhance 355.9 346.2
Central and regional overheads 4.5 4.3
Disposed businesses 2.7 13.9
Total 2,956.6 2,803.3
1. Revenue has been restated in 2020 to reflect a correction in presentation in relation to certain sales contracts where the Group acts as agent (reduction in revenue of £20.2m). In these
contracts revenue is presented on a net basis.
Analysis of revenue by type
Revenue
2021
£m
Revenue
2020¹
£m
Recognised over time
Contract service revenue 2,009.6 1,877.8
Recognised at a point in time
Job work 639.5 651.5
Sales of goods 307.5 274.0
Total 2,956.6 2,803.3
1. Revenue has been restated in 2020 to reflect a correction in presentation in relation to certain sales contracts where the Group acts as agent (reduction in revenue of £20.2m). In these
contracts revenue is presented on a net basis.
Other segment items included in the consolidated income statement are as follows:
Amortisation and
impairment of
intangibles
1
2021
£m
Amortisation and
impairment of
intangibles
1
2020
£m
Europe 12.3 13.3
UK & Rest of World 12.8 12.4
Asia 4.6 15.1
North America 34.4 30.9
Pacific 3.9 3.6
Central and regional 6.3 7.2
Total 74.3 82.5
Tax ef fect (18.2) (17.5)
Total after tax effect 56.1 65.0
1. Excluding computer software.
A2. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax attributable to equity holders of the Company by the weighted average
number of shares in issue during the year, excluding those held in the Rentokil Initial Employee Share Trust (see note at the bottom of the
Consolidated Statement of Changes in Equity) which are treated as cancelled, and including share options for which all conditions have been met.
Adjusted earnings per share is earnings per share adjusted for the after-tax effects of one-off items (including the net gain on disposal of
businesses), amortisation and impairment of intangibles, and net interest adjustments. Adjusted profit and earnings per share measures are
explained further in Section E on page 193.
Notes to the Financial Statements
continued
160
Rentokil Initial plc
Annual Report 2021
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all potential dilutive ordinary
shares. The Group’s potentially dilutive ordinary shares relate to the contingent issuable shares under the Group’s long-term incentive plans
(LTIPs) to the extent that the performance conditions have been met at the end of the period. These share options are issued for nil consideration
toemployees if performance conditions are met.
Details of the adjusted earnings per share are set out below:
2021
£m
2020
£m
Profit from continuing operations attributable to equity holders of the Company 263.2 185.9
One-off items – operating 20.7 7.7
Amortisation and impairment of intangibles
1
74.3 82.5
Net interest adjustments (3.6) 35.2
Tax on above items
2
(18.9) (26.4)
Adjusted profit from continuing operations attributable to equity holders of the Company 335.7 284.9
Weighted average number of ordinary shares in issue (million) 1,858.1 1,853.2
Adjustment for potentially dilutive shares (million) 8.2 9.7
Weighted average number of ordinary shares for diluted earnings per share (million) 1,866.3 1,862.9
Basic earnings per share 14.16p 10.03p
Diluted earnings per share 14.10p 9.98p
Basic adjusted earnings per share 18.07p 15.37p
Diluted adjusted earnings per share 17.99p 15.29p
1. Excluding computer software.
2. One-off items – operating £1.7m (2020: £2.4m), amortisation and impairment of intangibles £18.2m (2020:£17.5m), netinterest adjustments £(1.0)m(2020: £6.5m).
A3. Trade and other receivables
The Group’s trade receivables are recognised at the transaction price less provision for impairment. They are generally due for settlement within
30 days and are therefore all classified as current. The amount of the provision for impairment is recognised inthe income statement and
movements on provisions for impaired trade receivables are recognised within operating expenses in the income statement. Amounts are
generally charged to the provision for impairment of trade receivables when there is no expectation of recovering additional cash.
Expected credit loss (ECL) calculations are performed quarterly and are used to calculate the provision. ECL calculations are a probability
weighted estimate of credit losses and are performed at country level. The Group applies the simplified method of applying lifetime ECLs to trade
receivables using an allowance matrix to measure the ECLs of trade receivables from its customers, which comprise customer portfolios across
several countries. Credit risk factors that are considered as part of ECL calculations may include, but are not limited to: payment history, customer
size, customer type (national/residential/commercial/government), age of debt, industry strength, economy, environmental factors such as climate
change and product or service provided.
There is limited concentration of credit risk with respect to trade receivables due to the Group’s customer base being large and diverse. The
amount of credit risk with respect to customers is represented by the carrying amount on the balance sheet. The Group policy is that credit
facilities for new customers are approved by designated managers at regional level. Credit limits are set with reference to trading history and
reports from credit rating agencies where they are available. Where this is not feasible the Group may request payment in advance of work being
carried out, or settlement by credit card on completion of the work. There are no trade receivables that would otherwise be past due or impaired
whose terms have been renegotiated.
2021
£m
2020
2
£m
Trade receivables 473.6 546.8
Less: provision for impairment of trade receivables (49.2) (61.4)
Trade receivables – net 424.4 485.4
Other receivables 62.5 48.8
Prepayments 35.4 29.3
Contract assets¹ 18.9 19.2
Total 541.2 582.7
Analysed as follows:
Non-current 14.3 13.1
Current 526.9 569.6
Total 541.2 582.7
1. Contract assets represents revenue that has been recognised for performance obligations satisfied but where the customer has yet to be invoiced. All opening balances have
subsequently been invoiced in the year. In most business categories our customers are invoiced in advance or simultaneously with performance obligations being satisfied.
Noprovision for impairment has been recognised against contract assets (2020: £nil).
2. Trade and other receivables and bank and other short-term borrowings have been restated in 2020 due to a correction of the recognition of an overseas factoring arrangement. Both
have been increased by £21.0m.
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Annual Report 2021
161
Corporate Governance Financial Statements Other InformationStrategic Report
Analysis of the Group’s provision for impairment of trade receivables is as follows:
2021
£m
2020
£m
At 1 January 61.4 28.4
Exchange differences (1.5) (0.1)
Additional provision 25.5 55.8
Receivables written off as uncollectable (19.3) (19.9)
Unused amounts reversed (16.9) (2.8)
At 31 December 49.2 61.4
The ageing of trade receivables and provision for impairment is as follows:
Trade
receivables
2021
£m
Provision for
impairment
2021
£m
Trade
receivables
2020¹
£m
Provision for
impairment
2020
£m
Not due 224.6 (2.0) 265.1 (1.0)
Overdue by less than 1 month 99.6 (1.6) 117.5 (2.3)
Overdue by between 1 and 3 months 65.8 (2.5) 69.9 (5.9)
Overdue by between 3 and 6 months 29.5 (4.4) 34.0 (10.5)
Overdue by between 6 and 12 months 23.2 (12.6) 33.5 (14.9)
Overdue by more than 12 months 30.9 (26.1) 26.8 (26.8)
At 31 December 473.6 (49.2) 546.8 (61.4)
The carrying amounts of the Group’s trade receivables are denominated in the following currencies:
2021
£m
2020¹
£m
Pound sterling 52.3 59.9
Euro 149.6 168.0
US dollar 132.5 177.4
Other currencies 139.2 141.5
Carrying value 473.6 546.8
1. Trade and other receivables and bank and other short-term borrowings have been restated in 2020 due to a correction of the recognition of an overseas factoring arrangement. Both
have been increased by £21.0m.
Fair value is considered to be equal to carrying value for all trade and other receivables.
A4. Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of
finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads
(based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price less applicable variable
selling expenses.
2021
£m
2020
£m
Raw materials 12.5 10.8
Work in progress 2.0 1.8
Finished goods 121.2 118.7
135.7 131.3
An inventory impairment charge of £16.3m was taken in 2021 (2020: £10.5m).
Notes to the Financial Statements
continued
162
Rentokil Initial plc
Annual Report 2021
A5. Trade and other payables
2021
£m
2020
£m
Trade payables 165.2 182.3
Social security and other taxes 72.2 84.2
Other payables 89.1 112.2
Accruals 253.7 216.9
Contract liabilities
1
166.3 159.3
Deferred consideration 14.0 177.7
Contingent consideration (including put option liability of £41.8m (2020: £34.3m)) 75.0 62.8
Total 835.5 995.4
Analysed as follows:
Other payables 18.0 23.4
Deferred consideration 1.3 0.9
Contingent consideration (including put option liability of £41.8m (2020: £34.3m)) 52.2 46.1
Total non-current portion 71.5 70.4
Current portion 764.0 925.0
Total 835.5 995.4
1. Contract liabilities represents customer invoices where performance obligations have not yet been satisfied. All opening balances have subsequently been satisfied in the year.
Inmostbusiness categories our customers are invoiced in advance or simultaneously with performance obligations being satisfied.
Put options are held following the acquisition of PCI in 2017 where the seller may require the Group to purchase the remaining shares ofthe
business in stages over a fixed term between 2023 and 2027. The put options are accounted for as an anticipated acquisition of the remaining
shares and no non-controlling interest is recognised. The Group recognised a put option liability for the anticipated acquisition of these shares
incontingent consideration, and any movements in the carrying value are recognised through equity.
The assumptions that are made in estimating the value of this put option liability are option price and discount rate. A 5% reduction in the
estimated option price would result in a £2.1m decrease in the liability, and a 1% decrease in the discount rate would result in a £1.3m increase
inthe liability. All gains and losses relating to the put options are recognised through equity.
Given the volume of acquisitions and the variety of inputs to the valuation of contingent consideration (depending on each transaction) there is
not considered to be any change in input that would have a material impact on the contingent consideration liability.
Other than the put options, there are no liabilities in the table above that bear interest and therefore the cash flows are equal to the carrying value
of the liabilities. Cash is due to flow between one and five years for all non-current liabilities and not beyond. Fair value is equal to carrying value
for all trade and other payables. There is no material difference between the fair value and carrying value for all trade and other payables.
The currency split of trade and other payables is as follows:
2021
£m
2020
£m
Pound sterling 164.8 154.4
Euro 198.1 205.6
US dollar 262.9 442.0
Other currencies 209.7 193.4
Carrying value 835.5 995.4
Rentokil Initial plc
Annual Report 2021
163
Corporate Governance Financial Statements Other InformationStrategic Report
A6. Provisions for liabilities and charges
The Group has environmental, self-insurance and other provisions. Provisions are recognised when the Group has a present obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount is capable of being reliably
estimated. If such an obligation is not capable of being reliably estimated it is classified as a contingent liability (Note D3).
Future cash flows relating to these obligations are discounted when the effect is material. This year the US is the only country where the effect
ofdiscounting is material. The discount rates used are based on government bond rates in the country of the cash flows, and were 0.9%
(2020:0.9%) for the US.
Judgement is required in determining the worldwide provision for environmental restoration. These provisions tend to be long term in nature
andthe use of an appropriate market discount rate and forecast future utilisation based upon management’s best estimate determines the level
of provision required at the balance sheet date. The phasing and actual cash spend may be different from the forecast on which the provision
isbased.
Environmental
£m
Self-
insurance
£m
Other
£m
Total
£m
At 1 January 2020 14.2 29.3 15.6 59.1
Exchange differences 0.7 (0.9) 0.3 0.1
Additional provisions 0.4 14.7 13.0 28.1
Used during the year (1.8) (10.7) (6.7) (19.2)
Unused amounts reversed – (0.2) (4.1) (4.3)
Acquisition of companies and businesses 0.1 – – 0.1
Unwinding of discount on provisions – 0.3 0.3
At 31 December 2020 13.6 32.5 18.1 64.2
At 1 January 2021 13.6 32.5 18.1 64.2
Exchange differences (0.7) 0.3 (0.6) (1.0)
Additional provisions – 17.8 6.5 24.3
Used during the year (2.4) (14.3) (9.6) (26.3)
Unused amounts reversed – (0.8) (1.8) (2.6)
Acquisition of companies and businesses – 1.7 0.3 2.0
Unwinding of discount on provisions – 0.3 – 0.3
At 31 December 2021 10.5 37.5 12.9 60.9
2021
Total
£m
2020
Total
£m
Analysed as follows:
Non-current 33.9 34.1
Current 27.0 30.1
Total 60.9 64.2
Environmental
The Group owns a number of properties in Europe and the US where there is land contamination. Provisions are held for the remediation of such
contamination. These provisions are expected to be substantially utilised within the next five years.
Self-insurance
The Group purchases external insurance from a portfolio of international insurers for its key insurable risks, mainly employee-related risks.
Self-insured deductibles within these insurance policies have changed over time due to external market conditions and scale of operations.
These provisions represent obligations for open claims and are estimated based on actuarial/management’s assessment at the balance sheet
date. The Group expects to continue self-insuring the same level of risks and estimates that 50% to 75% of claims should settle within the next
five years.
Other
Other provisions principally comprise amounts required to cover obligations arising and costs relating to disposed businesses and restructuring
costs. Other provisions also includes costs relating to properties the Group no longer occupies such as security, utilities and insurance. Existing
provisions are expected to be substantially utilised within the next five years.
Notes to the Financial Statements
continued
164
Rentokil Initial plc
Annual Report 2021
A7. Operating expenses by nature
Operating expenses from continuing operations include the following items:
Notes
2021
£m
2020¹
£m
Employee costs A9 1,404.9 1,304.9
Direct materials and services
1
586.0 583.5
Vehicle costs 146.4 133.9
Property costs 59.6 65.3
Depreciation and impairment of property, plant and equipment B3 128.4 132.3
Amortisation and impairment of intangible assets B2 91.1 101.0
One-off items – operating A1 20.7 7.7
Other operating expenses
2
173.0 180.9
Total operating expenses 2,610.1 2,509.5
1. Operating expenses have been restated in 2020 to reflect a correction in presentation in relation to certain sales contracts where the Group acts as agent (reduction in operating
expenses of £20.2m).
2. Other operating expenses includes professional fees, marketing costs, amortisation of contract assets and movements in bad debt provision.
A8. Audit services
2021
1,2
£m
2020
£m
Fees payable to the Company’s auditor for the audit of the Parent Company and Group accounts
1
1.5 0.9
Audit of accounts of subsidiaries of the Group
2
2.8 2.3
Audit-related assurance services 0.1 0.1
Other assurance services 0.1 –
Total audit and audit-related assurance services 4.5 3.3
1. Included in 2021 an amount of £0.3m payable to the Company’s previous auditor in respect of the 2020 audit.
2. Included in 2021 an amount of £0.2m payable to the Company’s new auditor in respect of the 2020 statutory audit in the Netherlands.
A9. Employee benefit expense
Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing, based on calculations of achievements of financial performance
targets and based on the best estimate of the obligation to employees related to personal performance criteria being achieved. A liability is
recognised where a contractual obligation exists or where past practice indicates that there is a constructive obligation to make such payments
inthe future.
Holiday pay
Paid holidays are regarded as an employee benefit and as such are charged to the income statement as the benefits are earned. An accrual
ismade at the balance sheet date to reflect the fair value of holidays earned but not yet taken.
Termination benefits
Termination benefits are payable when an employment is terminated before the normal retirement date, or whenever an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either:
terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination
benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date
are discounted to present value where the effect of discounting is material.
2021
£m
2020
£m
Wages and salaries
1
1,224.8 1141.2
Social security costs 137.5 128.8
Share-based payments 9.8 5.5
Pension costs:
– defined contribution plans 31.4 27.0
– defined benefit plans 1.4 2.4
1,404.9 1,304.9
1. Wages and salaries are disclosed net of any local government wage-related grants as disclosed in Note D5.
Monthly average number of people employed by the Group during the year:
2021
Number
2020
Number
Processing and service delivery 34,163 33,174
Sales and marketing 5,400 5,272
Administration and overheads 6,468 6,142
46,031 44,588
Rentokil Initial plc
Annual Report 2021
165
Corporate Governance Financial Statements Other InformationStrategic Report
Emoluments of the Directors of Rentokil Initial plc are detailed below. Further details are also given in the Directors’ Remuneration Report on
pages 115 to 136.
Highest paid
Director
2021
£000
Other
Directors
2021
£000
Highest paid
Director
2020
£000
Other
Directors
2020
£000
Aggregate emoluments excluding share options 2,661.2 1,444.0 867.3 575.6
Aggregate gains made by Directors on exercise of share options 916.3 370.6 – –
Aggregate amount receivable under long-term incentive schemes 3,340.0 145.9 3,187.9 1,325.6
Aggregate value of Company contributions to defined contribution pension schemes – – – –
6,917.5 1,960.5 4,055.2 1,901.2
2021
Number
2020
Number
Number of Directors accruing retirement benefits
– defined contribution schemes 2 3
– defined benefit schemes – –
Number of Directors exercising share options
1
2 2
Number of Directors receiving shares as part of long-term incentive schemes 2 3
1. The highest paid Director exercised 163,625 (2020: nil) share options during the year.
A10. Retirement benefit obligations
Apart from contributions to legally required social security state schemes, the Group operates a number of pension schemes around the world
covering many of its employees.
The principal pension scheme in the Group is the UK Rentokil Initial 2015 Pension Scheme (RIPS) which has a defined contribution section,
andanumber of defined benefit sections which are now closed to new entrants and future accrual of benefits. On 4 December 2018, the Group
signed an agreement with Pension Insurance Corporation plc (PIC) to take over the payment of the liabilities in the scheme via a buy-in, which
converted to a full buy-out on 24 February 2022.
A number of much smaller defined benefit and defined contribution schemes operate elsewhere which are also funded through payments
totrustee-administered funds or insurance companies.
Defined benefit schemes are reappraised annually by independent actuaries based upon actuarial assumptions. Judgement is required
indetermining these actuarial assumptions.
Defined benefit pension plans
A defined benefit pension plan is a plan that estimates the amount of future pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as years of service, compensation and age.
The asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the fair value of plan assets less the present
value of the defined benefit obligation at the balance sheet date. The Group determines the net interest on the net defined benefit asset for the
period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined
benefit asset. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present
value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality
corporate bonds that have a credit rating of at least AA, are denominated in the currency in which the benefits will be paid, and that have terms
tomaturity approximating to the terms of the related pension liability. The Group will recognise a pension surplus as an asset where there is an
unconditional right to a refund or where the Group has a right to reduce future pension contributions, taking into account the adverse effect of
any minimum funding requirements.
Current and past service costs, to the extent they have vested, and curtailments are recognised as charges or credits against operating profit in
the income statement. Interest income on the net defined benefit asset is recognised in finance income. Remeasurement gains and losses arising
from experience adjustments, return on plan assets and changes in actuarial assumptions are charged or credited to the Consolidated Statement
of Comprehensive Income.
Defined contribution pension plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity.
The Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual or voluntary basis. The Group has
no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Notes to the Financial Statements
continued
166
Rentokil Initial plc
Annual Report 2021
RIPS
The assets of the RIPS are legally separated from the Group. The Trustee of the RIPS is Rentokil Initial Pension Trustee Limited. The board
comprises five company-nominated directors and three member-nominated directors. The Trustee is required by law to act in the best interests
ofthe members and beneficiaries of the RIPS and is responsible for setting certain policies (e.g. investment, contribution and indexation policies)
of the scheme.
On 4 December 2018 the Trustee entered into a binding agreement with PIC to insure the liabilities of the RIPS, known as a buy-in. In December
2021 the final true-up premium was paid to PIC and on 24 February 2022 the insurance policy with PIC was transferred to the individual members
of the scheme. Accordingly in 2022 both the Scheme’s assets and liabilities have been reduced by the policy value (£1,238.6m).
There remains some uncertainty regarding the final surplus that will be available to the Group until Guaranteed Minimum Pension adjustments for
members who transferred out of the scheme have been settled and final scheme expenses have been paid. The remaining surplus recognised as
a retirement benefit asset is management’s estimate of the value that will be returned to the Group when wind-up of the scheme completes.
The defined benefit schemes of the RIPS are reappraised semi-annually by independent actuaries based upon actuarial assumptions in
accordance with IAS 19R requirements (including schemes which are insured under a buy-in contract). The assumptions used for the RIPS are
shown below:
31 December
2021
31 December
2020
Weighted average %
Discount rate 2.0% 1.4%
Future salary increases n/a n/a
Future pension increases 3.3% 3.0%
RPI inflation 3.4% 3.0%
CPI inflation 2.7% 2.3%
The defined benefit obligation includes benefits for current employees, former employees and current pensioners. Approximately 40% of the
liabilities are attributable to current and former employees and 60% to current pensioners. There have been no significant changes to the
membership of the scheme over the year. The scheme duration is an indicator of the weighted-average time until benefit payments are made.
Forthe RIPS as a whole, the duration is around 17 years.
The assets in the scheme consist of cash held in liquidity funds, and the fair value of the insurance policy. The fair value of the insurance policy
asset is deemed to be equal to the present value of the related obligations that it covers at the balance sheet date.
Risks
As noted above, the Trustee purchased an insurance policy that covers all retirement benefit obligations within the Scheme, thereby removing
exposure to the significant risks within the Scheme (including changes in bond yields, inflation and longevity). The Scheme’s insurer (PIC) is now
responsible for ensuring that there are sufficient assets to meet all future pension obligations, and is subject to EU solvency regulations. There
isno volatility associated with the insurance policy asset as under IAS 19 its value is deemed to match the Scheme liabilities. Asset volatility is
limited onlyto the assets remaining in the Scheme following this transaction which are expected to be returned to the Company on wind-up of
the Scheme. The surplus recognised of £18.2m is management’s estimate of the asset that will return to the Company on wind-up (subject to tax
at35%).
Mortality assumptions
The mortality assumptions are based on the recent actual mortality experience of Scheme members, and allow for expected future improvements
in mortality rates. The mortality tables used are:
A
98% of the SAPS S2 All base tables for male pensioners;
A
107% of the SAPS S2 All base tables for female pensioners;
A
108% of the SAPS S2 All base tables for male and female non-pensioners; and
A
96% of the SAPS S2 All base tables for male and female dependent pensioners.
Future improvements are made in line with CMI_2018 Core Projections with a long-term rate of future improvement of 1.25% p.a.
Sensitivity of significant assumptions
The purchase of an insurance policy to cover all future benefits means that the sensitivity of the balance sheet and income statement to key
assumptions is removed.
Rentokil Initial plc
Annual Report 2021
167
Corporate Governance Financial Statements Other InformationStrategic Report
Pension benefits
The movement in the net defined benefit obligation for all Group pension schemes over the accounting period is as follows:
Present value
of obligation
2021
£m
Fair value of
plan assets
2021
£m
Total
2021
£m
Present value
of obligation
2020
£m
Fair value of
plan assets
2020
£m
Total
2020
£m
At 1 January (1,481.1) 1,461.3 (19.8) (1,443.9) 1,443.8 (0.1)
Current service costs¹ (1.5) – (1.5) (1.6) – (1.6)
Past service costs¹ 0.9 – 0.9 7.1 – 7.1
Settlement gain 21.9 (20.7) 1.2 – – –
Administration expenses¹ (0.1) – (0.1) (0.1) – (0.1)
Interest on defined benefit obligation/asset¹ (20.7) 20.7 – (28.2) 28.7 0.5
Exchange difference 2.9 (1.7) 1.2 (0.1) (0.4) (0.5)
Total pension income/(expense) 3.4 (1.7) 1.7 (22.9) 28.3 5.4
Remeasurements:
– Remeasurement gain/(loss) on scheme assets – (77.8) (77.8) – 70.2 70.2
– Remeasurement gain/(loss) on obligation² 78.6 – 78.6 (83.3) – (83.3)
Transfers:
– Transferred on acquisition of business (0.3) – (0.3) – – –
Contributions:
– Employers (0.7) 8.3 7.6 (0.3) 0.5 0.2
– Participants (0.1) 0.1 – (0.2) 0.2 –
– Benefit payments 86.6 (85.0) 1.6 69.4 (68.7) 0.7
– Refund of surplus – – – – (13.0) (13.0)
– Administration costs 0.1 – 0.1 0.1 – 0.1
At 31 December (1,313.5) 1,305.2 (8.3) (1,481.1) 1,461.3 (19.8)
Retirement benefit obligation schemes³ (63.0) 35.7 (27.3) (110.6) 71.8 (38.8)
Retirement benefit asset schemes⁴ (1,250.5) 1,269.5 19.0 (1,370.5) 1,389.5 19.0
1. Service costs and administration expenses are charged to operating expenses, and interest cost and return on plan assets to finance cost and finance income.
2. The actuarial movement on the UK RIPS comprises remeasurement gain arising from changes in demographic assumptions of £2.7m (2020: gain of £16.1m), remeasurement gain arising
from changes in financial assumptions of £75.3m (2020: loss of £117.1m) and a remeasurement loss arising from experience of £0.5m (2020: gain of £25.0m).
3. Benefit plans in an obligation position include plans situated in Ireland, the UK, Martinique, Trinidad and Tobago, Norway, South Africa, Germany, Austria, France, Italy, SouthKorea,
Philippines, India, HongKong and Saudi Arabia.
4. Benefit plans in an asset position include plans situated in the UK, Barbados and Australia.
Included in the table above is a net defined benefit surplus in relation to the UK RIPS of £18.2m (2020: £18.2m) recognised as defined benefit
obligation of £1,247.6m (2020: £1,369.3m) and plan assets of £1,265.8m (2020: £1,387.5m). Of the £1,313.5m (2020: £1,481.1m) of obligations,
£17.0m(2020: £18.3m) is unfunded.
Total contributions payable to defined benefit pension schemes in 2022 are expected to be less than £1m.
The fair value of plan assets at the balance sheet date is analysed as follows:
2021
£m
2020
£m
Equity instruments 2.8 37.3
Debt instruments – unquoted 16.5 16.7
Insurance policies 1,238.6 1,343.6
Other 47.3 63.7
Total plan assets 1,305.2 1,461.3
Where available the fair values of assets are quoted prices (e.g. listed equity, sovereign debt and corporate bonds). In other cases the market
value as provided by the fund managers has been used in accordance with IFRS 13 Fair Value Measurement:
A
unquoted debt instruments (Level 2);
A
interest and inflation rate hedging instruments (Level 2); and
A
pooled investment funds (Level 3).
Other significant assets are valued based on observable market inputs. Insurance policies are valued at the present value of the related
obligations. Other assets primarily consist of cash.
The cumulative actuarial gain recognised in the Consolidated Statement of Comprehensive Income was £32.0m (2020: £31.2m).
Aremeasurement gain of £0.8m (2020: £13.1m loss) was recognised during the year.
Notes to the Financial Statements
continued
168
Rentokil Initial plc
Annual Report 2021
A11. Share-based payments
Share-based compensation
The Group operates one equity-settled share-based long-term incentive plan (LTIP). The economic cost of awarding shares and share options to
employees is recognised as an expense in the income statement, equivalent to the fair value of the benefit awarded. The fair value is determined
by reference to option pricing models, principally Monte Carlo and adjusted Black-Scholes models. The charge is recognised in the income
statement over the vesting period of the award. At each balance sheet date, the Group revises its estimate of the number of shares that vest or
options that are expected to become exercisable. Any revision to the original estimates is reflected in the income statement with a corresponding
adjustment to equity immediately to the extent it relates to past service, and the remainder over the rest of the vesting period.
Performance Share Plan
The Company introduced a share-based performance plan in 2006 for senior managers worldwide. The main features of the scheme are asfollows:
A
For awards made in 2018, one-third of the award is based on earnings per share (EPS) growth targets as outlined in the relevant year’s Directors’
Remuneration Report, and two-thirds of the award is based on total shareholder return (TSR) over the three-year performance period as explained
above.
A
For awards made in 2019, 50% of the award is based on TSR and 25% is based on EPS growth targets as explained above. The remaining 25%
isbased on performance against certain strategic and financial measures over the vesting period as set out in the relevant year’s Directors’
RemunerationReport.
A
For awards made in 2020, 60% of the award is based on TSR and 40% is based on performance against certain strategic and financial measures
over the vesting period as set out in the Directors’ Remuneration Report.
A
For awards made in 2021, 50% of the award is based on TSR and 50% is based on performance against certain strategic and financial measures
over the vesting period as set out in the Directors’ Remuneration Report.
A
The value of dividends paid during the vesting period is paid on the number of shares that ultimately vest in the form of additional shares.
Forawards that are nil-cost options, this is the value of dividends between grant and exercise.
The total net charge for the year relating to equity-settled share-based payment plans was £9.8m (2020: £5.5m).
A summary of the number of shares in active share option plans is shown below:
Year of
grant
Vesting
year
Share options outstanding Share options exercisable
Scheme
interest at
1 January
2021
Shares
awarded
during
2021
Shares
lapsed
during
2021
Shares
vested
during
2021
Shares
outstanding at
31 December
2021
Shares
exercisable
at 1 January
2021
Shares
vested
during
2021
Shares
exercised
during
2021
Shares
lapsed
during
2021
Shares
exercisable at
31 December
2021
2012 2015 – – – – – 179,519 – (10,968) – 168,551
2013 2016 – 12,073 – (12,073) – 1,085,178 12,073 (71,944) – 1,025,307
2014 2017 – 13,693 – (13,693) – 1,200,990 13,693 (26,613) – 1,188,070
2015 2018 – 15,831 – (15,831) – 1,398,235 15,831 (49,797) – 1,364,269
2016 2019 – 22,920 (15) (22,905) – 2,052,013 22,905 (131,521) (1,323) 1,942,074
2017 2020 – 19,720 (85) (19,635) – 1,784,890 19,635 (171,187) (7,720) 1,625,618
2018 2021 6,024,191 164,397 (1,066,488) (4,230,356) 891,744 – 4,230,356 (2,691,765) – 1,538,591
2019 2022 4,993,019 33,885 (250,755) – 4,776,149 – – – – –
2020 2023 3,561,710 754 (91,452) – 3,471,012 – – – – –
2021 2024 – 4,228,162 (90,489) – 4,137,673 – – – – –
Year of
grant
Vesting
year
Share options outstanding Share options exercisable
Scheme
interest at
1 January
2020
Shares
awarded
during
2020
Shares
lapsed
during
2020
Shares
vested
during
2020
Shares
outstanding at
31 December
2020
Shares
exercisable
at 1 January
2020
Shares
vested
during
2020
Shares
exercised
during
2020
Shares
lapsed
during
2020
Shares
exercisable at
31 December
2020
2012 2015 – – – – – 214,132 – (34,613) – 179,519
2013 2016 – – – – – 1,266,153 – (180,975) – 1,085,178
2014 2017 – – – – – 1,382,204 – (181,214) – 1,200,990
2015 2018 – – – – – 2,178,655 – (777,521) (2,899) 1,398,235
2016 2019 – – – – – 3,117,476 – (1,047,232) (18,231) 2,052,013
2017 2020 4,717,888 157,880 (528,405) (4,347,363) – – 4,347,363 (2,562,473) – 1,784,890
2018 2021 6,601,097 6,545 (324,013) (259,438) 6,024,191 – 259,438 (259,438) – –
2019 2022 5,326,306 – (333,287) – 4,993,019 – – – – –
2020 2023 – 3,561,710 – – 3,561,710 – – – – –
Rentokil Initial plc
Annual Report 2021
169
Corporate Governance Financial Statements Other InformationStrategic Report
The fair value of the 2021 awards made under the 2006 Performance Share Plan is charged to the income statement over the vesting period
based on values derived from a Monte Carlo model prepared by external remuneration consultants. This is a closed-form solution which takes
account of the correlation between share price performance and the likelihood of a TSR performance condition being met. For the shares
awarded in March 2021, the significant inputs into the model were a share price of 495.7p (2020: 536.8p), an expected share price volatility of
23.2% (2020: 22.0%), a median share price correlation between the companies in the comparator group of 91.0% (2020: 83.0%), and an expected
life commensurate with the three-year performance/vesting period. The share price volatility assumption is based on analysis of historical daily
share prices. As the awards are nil-cost (i.e. there is no exercise price), the assumed risk-free rate of return has minimal impact onthe fair value
ofthe awards. Similarly, as dividend equivalents are paid on the vesting portion of awards, the fair value of these awards is not reduced to reflect
dividends paid during the vesting period.
The fair value of awards granted during 2021 was £16.0m (2020: £14.1m) and the weighted average fair value per award granted during the year
was 371.7p. The weighted average share price for options exercised in the year was 505.6p and the weighted average contract term remaining on
shares unexercised at the year end was 450 days.
A12. Income tax expense
The income tax expense for the period comprises both current and deferred tax. Current tax expense represents the amount payable on this
year’s taxable profits and any adjustment relating to prior years. Taxable profits differ from accounting profits as some items of income or
expenditure are not taxable or deductible or may be taxable or deductible in a different accounting period. The current income tax charge is
calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group’s subsidiaries
and associates operate and generate taxable income.
Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future due to differences between accounting and tax
bases. Deferred tax is determined using tax rates that are expected to apply when the timing difference reverses based on tax rates which are
enacted or substantively enacted at the balance sheet date. Tax is recognised in the income statement, except to the extent that it relates to
items recognised in other comprehensive income or equity. In this case the tax is also recognised in other comprehensive income or equity as
appropriate.
Analysis of charge in the year:
2021
£m
2020
£m
UK corporation tax at 19.0% (2020: 19.0%) 9.5 8.8
Overseas taxation 47.8 60.9
Adjustment in respect of previous periods (3.3) (3.1)
Total current tax 54.0 66.6
Deferred tax (credit)/expense 20.8 (17.0)
Deferred tax adjustment in respect of previous periods (12.9) (6.1)
Total deferred tax 7. 9 (23.1)
Total income tax expense 61.9 43.5
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to
profits of the consolidated companies as follows:
2021
£m
2020
£m
Profit before income tax 325.1 229.8
Tax calculated at domestic tax rates applicable to profits in the respective countries 76.5 55.7
Adjustment in respect of previous periods (16.2) (9.2)
Expenses not deductible for tax purposes – one-off items 3.0 0.2
Expenses not deductible for tax purposes – other 3.2 1.9
Income not subject to tax (1.0) (1.3)
Impairment of goodwill – 3.2
Goodwill deductions and revaluation of intangible assets (2.4) (0.9)
Utilisation of previously unrecognised tax losses (0.6) (0.7)
Deferred tax recognised on losses (2.8) (2.1)
Losses not relieved 0.3 0.3
Deferred tax impact of change in tax rates (3.6) (8.9)
Provisions utilised for which no deferred tax assets were recognised (1.5) (1.4)
Overseas withholding tax suffered 0.7 0.7
Deferred tax on unremitted earnings 0.3 –
Local business taxes 1.0 1.8
Foreign exchange differences 0.5 0.7
US BEAT liability 4.8 3.1
Other (0.3) 0.4
Total tax expense 61.9 43.5
Notes to the Financial Statements
continued
170
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Annual Report 2021
The Group’s Effective Tax Rate (ETR) for 2021 on reported profit before income tax is 19.0% (2020: 18.9%). The Group’s ETR before amortisation of
intangible assets (excluding computer software), one-off items and the net interest adjustments for 2021 was 19.4% (2020: 19.7%). This compares
with a blended rate of tax for the countries in which the Group operates of 24% (2020: 24%). The Group’s low tax rate is primarily attributable to
net prior-year tax credits of £16.2m. Of this, £7.2m is due to a reduction in the Group’s uncertain tax provisions arising as a result of issues being
settled for less than the provision held or becoming statute barred during the year.
The Group’s tax charge and ETR will be influenced by the global mix and level of profits, changes in future tax rates and other tax legislation,
foreign exchange rates, the utilisation of brought-forward tax losses on which no deferred tax asset has been recognised, the resolution of open
issues with various tax authorities, acquisitions and disposals.
A tax credit of £2.2m has been recognised in other comprehensive income which relates to the tax effect of mark to market movements on
cross-currency and interest rate swaps recorded within other comprehensive income.
A13. Current tax liabilities
Tax liabilities are classified as current liabilities unless there is a right to defer the payment of the liability for at least one year after the balance
sheet date. As at 31 December 2021 all the Group’s tax liabilities have been classified as current as there is no legally enforceable right to defer
payment for more than 12 months.
Current tax assets and liabilities are offset only when there is a legally enforceable right to set off the asset and liability.
Where required by accounting standards, management establishes provisions for uncertain tax positions on the basis of amounts expected to be
paid to the tax authorities. The Group’s current tax liabilities reflect management’s best estimate of the future amounts of corporation tax that will
be settled.
The Group is subject to income taxes in numerous jurisdictions. There are various uncertainties relating to the determination of its tax liabilities
where the ultimate tax liability cannot be known until a resolution has been reached with the relevant tax authority, or the issue becomes time
barred. Issues can take many years to resolve and therefore assumptions on the likely outcome have to be made by management. Each country
and tax risk is considered separately when deciding whether it is appropriate to set up an uncertain tax provision. If risks are considered to be
linked, the Group will consider the tax treatment in aggregate where appropriate.
This assessment of uncertain tax positions is based on management’s interpretation of relevant tax rules and decided cases, external advice
obtained, the statute of limitations and the status of the negotiations and past experience with tax authorities. In evaluating whether a provision is
needed it is assumed that tax authorities have full knowledge of the facts and circumstances applicable to each issue.
Tax provisions can be built up over a number of years but in the year of resolution there could be adjustments to these provisions which could
have a material positive or negative impact on the tax charge for a particular year. The settlement of a significant issue could also have a material
impact on the amount of cash tax payable in any one year. Judgement is required in determining the worldwide provision for income taxes
particularly in relation to the pricing of intra-group goods and services as well as debt financing.
The majority of the tax provisions relate to transfer pricing exposures where the Group faces a number of risks in jurisdictions around the world,
and is subject to audits by tax authorities in the territories in which it operates. These tax audits have an uncertain outcome and can take several
years to resolve, which in some cases may be dependent on litigation. The actual outcome could vary from management’s estimates, but these
are updated at each reporting period in the light of the latest available information.
Total uncertain tax provisions (including interest thereon) amounted to £57.2m as at 31 December 2021 (2020: £64.6m). Included within this
amount is £11.5m (2020: £11.5m) in respect of interest arising on tax provisions which is included within other payables. These tax provisions relate
to multiple issues across the countries in which the Group operates. The net decrease in the provisions for the year is mainly attributable to issues
which have been settled in the year or have become statute barred.
Apart from transfer pricing exposures the largest single provision relates to a financing structure where the amount provided is £11.0m including
interest. This is a legacy issue going back to the years 2002 to 2004. The Group is fully provided for the potential tax and interest payable so
there is not expected to be an adverse impact on the income statement. It is unclear when this issue will be resolved and therefore the timing of
any payment is uncertain.
The cash tax paid for the year was £68.9m (2020: £64.4m), the increase being in line with the increased profits. The cash tax paid is expected to
increase in future periods as open issues are resolved although it is not possible to estimate the exact timing of tax cash flows.
A14. Deferred income tax
Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
Consolidated Financial Statements. The following temporary differences are not provided for: the initial recognition of goodwill; the initial
recognition of assets or liabilities in transactions other than a business combination that at the time of the transactions affect neither the
accounting nor taxable profit or loss; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred income tax is determined using tax rates (and laws) that have been enacted (or substantively enacted)
at the balance sheet date, and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is
settled. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset against each other when the timing differences relate to income taxes levied by the same tax
authority on an entity or different entities which are part of a tax consolidation and there would be the intention to settle on a net basis.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised. The amount of deferred tax assets recognised at each balance sheet date is adjusted to reflect changes in
management’s assessment of future taxable profits. In recognising the deferred tax asset in respect of losses, management has estimated the
quantum of future taxable profits applying a risk weighting to future profits to reflect the uncertainties.
Rentokil Initial plc
Annual Report 2021
171
Corporate Governance Financial Statements Other InformationStrategic Report
The movement on the deferred income tax account is as follows:
2021
£m
2020
£m
At 1 January (57.0) (81.5)
Exchange differences 1.7 (0.6)
Acquisition of companies and businesses (7.7) (5.1)
Credited to the income statement (7.9) 23.1
Credited to other comprehensive income (0.2) 3.9
Charged to equity 4.6 3.2
At 31 December (66.5) (57.0)
Deferred taxation has been presented on the balance sheet as follows:
Deferred tax asset within non-current assets 41.6 37.7
Deferred tax liability within non-current liabilities (108.1) (94.7)
(66.5) (57.0)
The major components of deferred tax assets and liabilities at the year end and their changes during the year (without taking into consideration
the offsetting of balances within the same tax jurisdiction) are as follows:
Customer
lists/
intangibles
£m
Accelerated
tax
depreciation
£m
Retirement
benefits
£m
Unremitted
earnings
from
subsidiaries
£m
Tax
losses
£m
Share-based
payments
£m
Other
1
£m
Total
£m
At 1 January 2020 72.6 42.0 4.5 4.2 (23.0) (8.3) (10.5) 81.5
Exchange differences (1.8) 1.4 – – – – 1.0 0.6
Recognised in income statement 0.3 0.4 (4.1) 0.1 5.5 2.1 (27.4) (23.1)
Recognised in other comprehensive income – – (3.9) – – – – (3.9)
Recognised in equity – – – – – (3.2) – (3.2)
Acquired in business combinations 5.1 – – – – – – 5.1
At 31 December 2020 76.2 43.8 (3.5) 4.3 (17.5) (9.4) (36.9) 57.0
At 1 January 2021 76.2 43.8 (3.5) 4.3 (17.5) (9.4) (36.9) 5 7.0
Exchange differences – (1.4) – – – – (0.3) (1.7)
Recognised in income statement 0.8 7.4 1.4 0.4 3.6 (0.8) (4.9) 7. 9
Recognised in other comprehensive income – – 0.2 – – – – 0.2
Recognised in equity – – – – – (4.6) – (4.6)
Acquired in business combinations 6.6 0.1 – – – – 1.0 7.7
At 31 December 2021 83.6 49.9 (1.9) 4.7 (13.9) (14.8) (41.1) 66.5
1. Included within other deferred tax assets/liabilities are bad debt provisions, other general provisions and IFRS 15 contract costs.
The UK corporate tax rate will increase from 19% to 25% with effect from 1 April 2023. This has resulted in an increase in the UK deferred tax asset
recognised of £3.1m.
A deferred tax asset of £13.9m has been recognised in respect of losses, of which £12.4m (2020: £16.0m) relates to UK losses carried forward at
31December 2021. This amount has been calculated by estimating the future UK taxable profits, against which the UK tax losses will be utilised,
and applying the tax rates (substantively enacted as at the balance sheet date) applicable for each year. Remaining UK tax losses of £40.6m
(2020: £47.5m) have not been recognised as at 31 December 2021 as it is not considered probable that future taxable profits will be available
against which the tax losses can be offset. The estimates of future profits are based on management’s financial forecasts which are used to
support other aspects of the financial statements such as impairment testing. At the balance sheet date the Group had tax losses of £81.6m
(2020: £105.0m) on which no deferred tax asset is recognised because it is not considered probable that future taxable profits will be available
incertain jurisdictions to be able to benefit from those tax losses. Of the losses, £8.3m (2020: £14.6m) will expire at various dates between 2022
and 2032.
In addition, the Group has UK capital losses carried forward of £276.3m (2020: £276.3m) on which no deferred tax asset is recognised. These
losses have no expiry date but management considers the future utilisation of these losses to be unlikely.
Dividends received from subsidiaries are largely exempt from UK taxation but may be subject to dividend withholding or other taxes levied by the
overseas tax jurisdictions in which the subsidiaries operate. A deferred tax liability of £4.7m (2020: £4.3m) has been recognised in respect of this
liability as it is anticipated that these profits will be distributed to the UK in the foreseeable future. At the balance sheet date there is no material
unprovided deferred tax liability were overseas earnings to be distributed to the UK.
Notes to the Financial Statements
continued
172
Rentokil Initial plc
Annual Report 2021
B. Investing
B1. Business combinations
All business combinations are accounted for using the purchase method (acquisition accounting) in accordance with IFRS 3 Business
Combinations. The cost of a business combination is the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or
assumed and equity instruments issued by the acquirer. The cost of a business combination is allocated at the acquisition date by recognising the
acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria at their fair values. The acquisition date is the
date on which the acquirer effectively obtains control of the acquiree.
An intangible asset is recognised if it meets the definition under IAS 38 Intangible Assets. The intangible assets arising on acquisition are
goodwill, customer lists and brands. Goodwill represents the synergies, workforce and other benefits expected as a result of combining the
respective businesses. Customer lists and brands are recognised at their fair value at the date of acquisition using an income-based approach,
which involves the use of assumptions including customer termination rates, profit margins, contributory asset charges and discount rates. The
use of these assumptions requires estimation in the valuation approach; however, it is not considered that these estimates carry a significant risk
of material adjustment.
At the date of acquisition, deferred and contingent consideration represents its fair value, with subsequent changes after the measurement
period being recognised in the Consolidated Statement of Profit or Loss. Costs directly attributable to business combinations are charged to the
income statement as incurred and presented as one-off items.
During the year the Group purchased 100% of the share capital or trade and assets of 52 companies and businesses. It also acquired the
remaining shares from a non-controlling interest which is recognised as an equity transaction rather than a business combination. The total
consideration in respect of these acquisitions was £313.7m and the cash outflow from current and past period acquisitions net of cash acquired,
was £463.1m.
Disclosures required by IFRS 3 Business Combinations are provided separately for those individual acquisitions that are considered to be
material, and in aggregate for individually immaterial acquisitions. An acquisition would generally be considered individually material if the impact
on the Group’s Ongoing Revenue and APBITA measures (on an annualised basis) is greater than 5%, or the impact on goodwill is greater than 10%
of the closing balance for the period. There were no individually material acquisitions in the year. An overview of the acquisitions in the year can
be found in the Financial Review on page 145.
Details of goodwill and the fair value of net assets acquired are as follows:
2021
£m
2020
£m
Purchase consideration
– Cash paid 273.1 156.9
– Deferred and contingent consideration 40.6 210.4
Total purchase consideration 313.7 367.3
Fair value of net assets acquired (83.1) (49.9)
Goodwill from current-year acquisitions 230.6 317.4
Deferred consideration of £12.6m and contingent consideration of £28.0m are payable in respect of the above acquisitions. Contingent
consideration is payable based on a variety of conditions including revenue and profit targets being met. Amounts for both deferred and
contingent consideration are payable over the next five years. The Group has recognised contingent and deferred consideration based on fair
value at the acquisition date. A range of outcomes for contingent consideration payments cannot be estimated due to the variety of performance
conditions and the volume of businesses the Group acquires. During the year there were releases of contingent consideration liabilities not paid
of £0.6m (2020: £1.6m).
The provisional fair values
1
of assets and liabilities arising from acquisitions in the year are as follows:
2021
£m
2020
£m
Non-current assets
– Intangible assets
2
70.7 56.9
– Property, plant and equipment
3
13.2 9.9
– Other non-current assets 1.7 –
Current assets
4
36.8 20.4
Current liabilities (25.4) (20.0)
Non-current liabilities
5
(13.9) (17.3)
Net assets acquired 83.1 49.9
1. The provisional fair values will be finalised in the 2022 Financial Statements. The fair values are provisional since the acquisition accounting has not yet been finalised, primarily due
tothe proximity of many acquisitions to the year end.
2. Includes £70.0m (2020: £56.8m) of customer lists and £0.7m (2020: £0.1m) of other intangibles.
3. Includes £1.8m (2020: £4.2m) of right-of-use assets.
4. Includes trade and other receivables of £27.9m (2020: £11.2m) which represents the gross and fair value of the assets acquired.
5. Includes £(7.6)m of deferred tax relating to acquired intangibles (2020: £(5.1)m).
Rentokil Initial plc
Annual Report 2021
173
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
The cash outflow from current and past acquisitions is as follows:
2021
£m
2020
£m
Total purchase consideration 313.7 367.3
Consideration payable in future periods (40.6) (210.4)
Purchase consideration paid in cash 273.1 156.9
Cash and cash equivalents in acquired companies and businesses (6.0) (6.1)
Cash outflow on current period acquisitions 267.1 150.8
Deferred consideration paid 196.0 43.9
Cash outflow on current and past acquisitions 463.1 194.7
From the dates of acquisition to 31 December 2021, these acquisitions contributed £49.9m to revenue and £7.0m to operating profit.
If the acquisitions had occurred on 1 January 2021, the revenue and operating profit of the Group would have amounted to £3,031.4m and
£356.8m respectively.
B2. Intangible assets
Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses, where applicable.
A breakdown of intangible assets is as shown below:
Goodwill
£m
Customer
lists
£m
Other
intangibles
£m
Product
development
£m
Computer
software
£m
Total
£m
Cost
At 1 January 2020 1,376.7 782.8 66.7 33.7 135.1 2,395.0
Exchange differences (45.2) (5.5) (0.7) – 0.5 (50.9)
Additions – – – 5.7 16.8 22.5
Disposals/retirements – (7.7) – – (7.4) (15.1)
Acquisition of companies and businesses
1
322.3 56.7 0.1 – – 379.1
Disposal of companies and businesses (0.4) (1.9) – – (0.2) (2.5)
At 31 December 2020 1,653.4 824.4 66.1 39.4 144.8 2,728.1
At 1 January 2021 1,653.4 824.4 66.1 39.4 144.8 2,728.1
Exchange differences 3.6 (13.3) 0.1 – (1.5) (11.1)
Additions – – 3.7 6.4 21.0 31.1
Disposals/retirements – (3.7) (3.4) – (0.8) (7.9)
Acquisition of companies and businesses
1
228.2 68.6 0.5 – 0.1 297.4
Hyperinflationary adjustment 3.2 – – – – 3.2
Disposal of companies and businesses – – – – (0.2) (0.2)
At 31 December 2021 1,888.4 876.0 67.0 45.8 163.4 3,040.6
Accumulated amortisation and impairment
At 1 January 2020 (34.2) (534.1) (42.9) (20.0) (90.4) (721.6)
Exchange differences (0.2) (0.3) 0.9 – (0.4) –
Disposals/retirements – 7.7 – – 6.8 14.5
Disposal of companies and businesses – 1.9 – – 0.2 2.1
Impairment charge (10.6) – – (0.5) (1.9) (13.0)
Amortisation charge – (60.5) (4.6) (6.3) (16.6) (88.0)
At 31 December 2020 (45.0) (585.3) (46.6) (26.8) (102.3) (806.0)
At 1 January 2021 (45.0) (585.3) (46.6) (26.8) (102.3) (806.0)
Exchange differences 1.0 10.5 (0.1) – 1.3 12.7
Disposals/retirements – 3.7 3.4 – 0.8 7.9
Disposal of companies and businesses – – – – 0.2 0.2
Impairment charge (0.2) – – (0.1) (1.4) (1.7)
Amortisation charge – (64.0) (4.7) (5.3) (15.4) (89.4)
At 31 December 2021 (44.2) (635.1) (48.0) (32.2) (116.8) (876.3)
Net book value
At 1 January 2020 1,342.5 248.7 23.8 13.7 44.7 1,673.4
At 31 December 2020 1,608.4 239.1 19.5 12.6 42.5 1,922.1
At 31 December 2021 1,844.2 240.9 19.0 13.6 46.6 2,164.3
1. Includes current-year acquisitions of £301.3m as well as adjustments to prior-year acquisitions within the measurement period.
174
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Annual Report 2021
The main categories of intangible assets are as follows:
Intangible assets – finite useful lives
Intangible assets with finite useful lives are initially measured at either cost or fair value and amortised on a straight-line basis over their useful
economic lives, which are reviewed on an annual basis. These assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may exceed its recoverable amount. The fair value attributable to intangible assets acquired
through a business combination is determined by discounting the expected future cash flows to be generated from that asset at the risk-adjusted
weighted average cost of capital for the Group. The residual values of intangible assets are assumed to be £nil.
The estimated useful economic lives of intangible assets are as follows:
Customer lists: 3 to 15 years
Other intangibles: 2 to 15 years
Product development: 2 to 5 years
Computer software: 3 to 5 years
The following are the main categories of intangible assets with finite useful lives:
(a) Customer lists
Customer lists are acquired as part of business combinations. No value is attributed to internally generated customer lists.
(b) Other intangibles
Other intangibles consists of brands and intellectual property. Brands are acquired as part of business combinations. No value is attributed to
internally generated brands as expenditure incurred to develop, maintain and renew brands internally is recognised as an expense in the period
incurred. Intellectual property costs are incurred in acquiring and maintaining patents and licences. These are recognised only if the cost can be
measured reliably, and they are expected to generate economic benefits beyond one year, in excess of their cost.
(c) Product development
Costs incurred in the design and testing of new or improved products are recognised as intangible assets only if the cost can be measured
reliably, and it is probable that the project will be a success considering its commercial and technological feasibility. Capitalised product
development expenditure is measured at cost less accumulated amortisation.
Other development expenditure and all research expenditure are recognised as an expense as incurred. This expense was £2.3m (2020: £1.6m).
Development costs recognised as an expense are never reclassified as an asset in a subsequent period. Development costs that have been
capitalised are amortised from the date the product is made available.
(d) Computer software
Costs that are directly associated with the production of identifiable and unique software products that are controlled by the Group (including
employee costs and external software development costs) are recognised as intangible assets if they are expected to generate economic
benefits beyond one year, in excess of their cost. Purchased computer software is initially recognised based on the costs incurred to acquire
andbring it into use.
Costs associated with maintaining computer software are recognised as an expense in the period in which they are incurred.
Intangible assets – indefinite useful lives
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
business at the date of acquisition. It is recognised as an intangible asset. Goodwill arising on the acquisition of an associate is included in
investments in associates.
A breakdown of goodwill by region is shown below:
2021
£m
2020
£m
France 9.1 9.6
Benelux 5.9 6.2
Germany 9.2 13.4
Southern Europe 35.8 32.3
Latin America 18.0 18.6
Europe 78.0 80.1
UK & Ireland 61.5 61.7
Rest of World 82.6 34.9
UK & Rest of World 144.1 96.6
Asia 125.1 125.3
North America
1
1,420.1 1,231.5
Pacific 76.9 74.9
Total 1,844.2 1,608.4
1. Includes £1,100.2m (2020: £996.0m) relating to the US Pest Control CGU.
Rentokil Initial plc
Annual Report 2021
175
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
Impairment tests for goodwill
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. For the purpose of impairment testing,
goodwill is allocated to cash-generating units (CGUs) identified according to country of operation and reportable business unit. The way in
whichCGUs are identified has not changed from prior periods. Newly acquired entities might be a single CGU until such time that they can
beintegrated. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
The recoverable amount of a CGU is determined based on the higher of value-in-use calculations using cash flow projections and fair value less
costs to sell if appropriate. The cash flow projections in year one are based on financial budgets approved by management, which are prepared
as part of the Group’s normal planning process. Cash flows for years two to five use management’s expectation of sales growth, operating costs
and margin, based on past experience and expectations regarding future performance and profitability for each CGU. Cash flows beyond the
five-year period are extrapolated using estimated long-term growth rates (LTGR).
Cash flow projections included in the impairment review models include management’s view of the impact of climate change, including costs
related to the effects of climate change, as well as the future costs of the Group’s commitment to reach net zero by 2040 and costs of compliance
with current legal requirements. The potential increased costs, less any benefits that may occur, to meet these commitments are not expected to
be material and therefore have resulted in no impairments during 2021.
For the Rentokil PCI CGU in India the assumptions made in estimating the value of the future cash flows are an LTGR of 4.0%, a pre-tax discount
rate of 12.6% and a terminal operating margin of 15.1%. The headroom for the Rentokil PCI CGU is £5.4m at 30 September 2021.
The table below shows the potential impairment created by a change in assumptions.
Sensitivity analysis
Rentokil PCI
Rate used
Impairment
£m
Assumption
Long-term growth rate – 1% decrease 4.0% 2.2
Terminal operating margin – 1% decrease 15.1% 0.4
Pre-tax discount rate – 1% increase 12.6% 4.5
The assumptions that would result in the recoverable amount equalling the carrying amount are LTGR of 3.3%, a pre-tax discount rate of 13.1% or a
terminal operating margin of 14.2%.
For all other goodwill balances it can be demonstrated that there is sufficient headroom in the recoverable amount of the CGU goodwill balances
based on the assumptions made, and there is not considered to be any reasonably likely scenario under which material impairment could be
expected to occur based on the testing performed.
The key assumptions used by individual CGUs for value-in-use calculations were:
2021 long-term
growth rate
1
2021 pre-tax
discount rate
2020 long-term
growth rate¹
2020 pre-tax
discount rate
France 1.6% 10.8–10.9% 1.7% 11.1–11.9%
Benelux 1.8% 7.3–10.2% 2.0% 10.7–11.7%
Germany 2.1% 10.6–10.8% 1.9–2.1% 10.3–11.1%
Southern Europe 1.3–1.9% 7.1–10.7% 1.5–1.8% 11.5–12.8%
Latin America 3.0–3.3% 11.6–15.4% 3.0–4.0% 13.0–18.5%
UK & Ireland 2.0% 6.5–7.0% 2.0% 9.4–11.8%
Rest of World 1.8–4.5% 8.0–11.6% 2.0–5.3% 9.4–12.1%
Asia 1.5–4.0% 8.2–12.6% 1.5–5.0% 10.0–13.9%
North America
2
2.0–2.2% 6.6–8.7% 1.2–2.3% 11.6–16.2%
Pacific 2.2–2.4% 9.3–10.7% 2.0-2.5% 12.8–13.3%
1. Source: www.imf.org.
2. Key assumptions used by the US Pest Control CGU were a long-term growth rate of 2.2% (2020: 2.3%) and a pre-tax discount rate of 7.7% (2020: 11.6%). For US Pest Control CGU the
recoverable amount exceeds the carrying amount by £2,120.8m (2020: £925.2m).
The growth rates used by individual CGUs are based on the LTGR predicted for the relevant sector and country in which a business operates.
They do not exceed the long-term average growth rate for that industry or country. The pre-tax discount rates are internally calculated weighted
average cost of capital for each category and country.
176
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Annual Report 2021
B3. Property, plant and equipment
Property, plant and equipment is stated at historic cost less depreciation with the exception of freehold land and assets under construction which
are not depreciated. Historic cost includes expenditure that is directly attributable to the acquisition of the items.
A breakdown of property, plant and equipment is shown below:
Land and
buildings
£m
Service contract
equipment
£m
Other plant and
equipment
£m
Vehicles
and office
equipment
£m
Total
£m
Cost
At 1 January 2020 84.1 485.3 169.6 185.3 924.3
Exchange differences 3.0 19.6 6.6 (0.4) 28.8
Additions 2.0 93.0 11.5 20.6 127.1
Disposals (1.8) (74.8) (1.8) (13.2) (91.6)
Acquisition of companies and businesses
1
– 0.4 0.3 4.9 5.6
Disposal of companies and businesses – – (0.1) (0.1) (0.2)
Reclassification from IFRS 16 ROU assets
2
– – – 3.3 3.3
At 31 December 2020 87.3 523.5 186.1 200.4 997.3
At 1 January 2021 87.3 523.5 186.1 200.4 997.3
Exchange differences (4.0) (26.5) (8.9) (4.9) (44.3)
Additions 2.7 93.8 12.8 18.8 128.1
Disposals (2.1) (73.4) (2.6) (17.5) (95.6)
Acquisition of companies and businesses
1
3.6 0.3 0.7 7.9 12.5
Disposal of companies and businesses – – – – –
Reclassification from IFRS 16 ROU assets
2
– – – 5.5 5.5
At 31 December 2021 87.5 517.7 188.1 210.2 1,003.5
Accumulated depreciation and impairment
At 1 January 2020 (27.1) (273.2) (116.7) (115.6) (532.6)
Exchange differences (1.1) (11.9) (4.7) (0.1) (17.8)
Disposals 1.1 73.4 1.6 11.9 88.0
Disposal of companies and businesses – – – 0.1 0.1
Impairment charge (0.1) (0.3) – – (0.4)
Depreciation charge (3.0) (97.6) (12.3) (19.0) (131.9)
At 31 December 2020 (30.2) (309.6) (132.1) (122.7) (594.6)
At 1 January (30.2) (309.6) (132.1) (122.7) (594.6)
Exchange differences 1.6 16.1 6.6 3.1 27.4
Disposals 0.5 72.2 2.2 15.3 90.2
Disposal of companies and businesses – – – – –
Impairment charge – – – – –
Depreciation charge (3.0) (92.4) (11.9) (21.1) (128.4)
At 31 December 2021 (31.1) (313.7) (135.2) (125.4) (605.4)
Net book value
At 1 January 2020 57.0 212.1 52.9 69.7 391.7
At 31 December 2020 57.1 213.9 54.0 77.7 402.7
At 31 December 2021 56.4 204.0 52.9 84.8 398.1
1. Includes current-year acquisitions of £11.4m as well as adjustments to prior-year acquisitions within the measurement period.
2. Certain leased assets become owned assets at the end of their lease period and are therefore reclassified from ROU assets (Note B4).
Depreciation of assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over
their estimated useful lives, as follows:
Freehold buildings: 50 to 100 years
Leasehold improvements: Shorter of the lease term or estimated useful life
Vehicles: 4 to 10 years
Plant and equipment (including service contract equipment): 3 to 10 years
Office equipment, furniture and fittings: 3 to 10 years
Residual values and useful lives of assets are reviewed annually and amended as necessary. Fixed assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the fixed asset may exceed its recoverable amount. There were £nil of
impairments in the year (2020: £0.4m).
When assets are sold, the gain or loss between sale proceeds and net book value is recognised in the income statement.
The category of service contract equipment represents the pool of assets used by the Group in delivering contracted services to customers.
Landand buildings comprise mainly factories and offices.
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Annual Report 2021
177
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
B4. Leases
The Group leases land and buildings, vehicles and other equipment. The lease durations vary from lease to lease according to the asset leased
and local practices. Some of the Group’s leases have extension and termination options attached to them. Lease extension options and lease
termination options are only included in the calculation of the lease liability if there is reasonable certainty that they will be exercised. Judgement
is required to determine the level of certainty.
The value of leases to which the Group is committed but have not yet commenced is not material.
A breakdown of the right-of-use (ROU) assets is shown below:
Land and
buildings
£m
Vehicles
£m
Other
equipment
£m
Total
£m
Net book value
At 1 January 2020 104.6 114.9 1.7 221.2
Exchange differences 0.7 (0.1) – 0.6
Additions 29.1 44.8 1.5 75.4
Disposals (2.4) – – (2.4)
Acquisition of companies and businesses
1
0.1 4.1 – 4.2
Disposal of companies and businesses – (0.1) – (0.1)
Impairment charge (1.4) – – (1.4)
Depreciation charge (35.5) (40.2) (1.0) (76.7)
Reclassification to property, plant and equipment
2
– (3.3) – (3.3)
At 31 December 2020 95.2 120.1 2.2 217.5
At 1 January 2021 95.2 120.1 2.2 217.5
Exchange differences (2.2) (1.5) – (3.7)
Additions 33.4 56.2 1.6 91.2
Disposals (0.8) (0.7) – (1.5)
Acquisition of companies and businesses
1
4.6 3.3 – 7.9
Disposal of companies and businesses – – – –
Impairment charge (0.1) – – (0.1)
Depreciation charge (36.9) (39.5) (1.9) (78.3)
Reclassification to property, plant and equipment
2
– (5.5) – (5.5)
At 31 December 2021 93.2 132.4 1.9 227.5
1. Includes current-year acquisitions of £1.8m as well as adjustments to prior-year acquisitions within the measurement period.
2. Certain leased assets become owned assets at the end of their lease period and are therefore reclassified to property, plant and equipment (Note B3).
Analysis of the Group’s lease liabilities is shown below:
2021
£m
2020
£m
Lease liabilities under IFRS 16
At 1 January 214.5 216.7
Exchange differences (4.1) 1.1
Cash outflow (94.1) (92.3)
Interest 6.1 6.8
Additions 89.4 75.5
Acquisition of companies and businesses 5.2 6.8
Disposal of companies and businesses – (0.1)
At 31 December 217.0 214.5
Analysed as follows:
Non-current 139.2 141.8
Current 77.8 72.7
Total 217.0 214.5
Lease liabilities analysed by currency:
2021
£m
2020
£m
Pound sterling 33.0 30.7
Euro 56.7 61.1
US dollar 89.1 76.9
Other currencies 38.2 45.8
At 31 December 217.0 214.5
178
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Annual Report 2021
Lease liabilities are payable as follows:
2021
£m
2020
£m
Lease liabilities under IFRS 16
Less than one year 80.4 79.8
Between one and five years 137.7 137.0
More than five years 13.3 16.5
Future minimum payments 231.4 233.3
Effect of discounting (14.4) (18.8)
Carrying value 217.0 214.5
Other lease costs not already described are set out below:
2021
£m
2020
£m
Expenses relating to short-term leases 12.3 11.5
Expenses relating to leases of low-value assets 6.1 5.1
Expenses relating to variable lease payments 1.2 0.2
At 31 December 19.6 16.8
The Group has no material arrangements where it acts as a lessor.
B5. Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
2021
£m
2020
£m
Property, plant and equipment 13.5 11.7
Intangible assets 1.2 1.2
Total 14.7 12.9
B6. Investments in associated undertakings
2021
£m
2020
£m
Interest in Nippon Calmic Limited 28.4 27.2
Interest in individually immaterial associated undertakings 1.3 –
At 31 December 29.7 27.2
Nippon Calmic Ltd
Nippon Calmic Ltd is an associated undertaking in Japan in which the Group has a 49% interest. The associate is unlisted and the investment
value is shown below.
2021
£m
2020
£m
At 1 January 27.2 29.7
Exchange differences (2.8) 0.9
Share of profit
1
8.0 8.3
Dividends received (3.9) (11.7)
At 31 December 28.5 27.2
1. Share of profit is net of tax of £4.0m (2020: £4.8m).
Assets
2021
£m
Liabilities
2021
£m
Revenue
2021
£m
Profit
2021
£m
Assets
2020
£m
Liabilities
2020
£m
Revenue
2020
£m
Profit
2020
£m
Nippon Calmic Ltd (49%) 53.2 (24.1) 51.9 8.0 55.1 (27.5) 56.3 8.3
Rentokil Initial plc
Annual Report 2021
179
Corporate Governance Financial Statements Other InformationStrategic Report
In addition to the interest in associates disclosed above, the Group also has interests in a number of individually immaterial associates that are
accounted for using the equity method.
2021
£m
2020
£m
At 1 January – –
Acquisition 1.1 –
Exchange differences – –
Share of profit 0.1 –
Dividends received – –
At 31 December 1.2 –
£0.1m (2020: £nil) relates to unrecognised share of losses related to associates.
Notes to the Financial Statements
continued
180
Rentokil Initial plc
Annual Report 2021
C. Financing
C1. Financial risk management
The Group’s central treasury function manages cash, borrows on behalf of the Group and provides finance to Group companies in their local
currencies. Treasury activity is governed by a Treasury Committee which is chaired by the Chief Financial Officer.
The main financial risks faced by the Group are set out below.
(a) Liquidity risk
The Group is committed to ensuring it has sufficient liquidity to meet its business needs, and appropriate reserves to cover operational
underperformance or dislocation in the financial markets. It is the Group’s policy to have headroom of unrestricted cash and available committed
facilities of at least £600m, and the Treasury Committee manages financing requirements and associated headroom at least 12 months forward.
Available commitments of £550m under the revolving credit facility (RCF) together with unrestricted cash of £235.3m gives the Group combined
headroom of £785.3m at31 December 2021 (2020: £1,266.3m).
The Group has a £550m RCF with 17 relationship banks (see Note C7 for details). During the year, the Group negotiated the permanent removal of
financial covenants from the RCF with all bank approval. In addition to this the Group also amended the RCF to comply with the move from LIBOR
to risk free rates. The Group has no other facility that references LIBOR. The Group is compliant with the terms and conditions of its debt facilities.
The Group targets an S&P Global (S&P) investment grade credit rating for debt issuance of BBB over the medium term. In line with S&P liquidity
ratio requirements, debt maturities are financed at least 12 months in advance using available cash or committed facilities, or by issuance of new
debt. Management maintains an active dialogue with S&P, as well as the Group’s relationship banks, to ensure that any changes to the Group’s
financing and acquisition strategies are understood. S&P affirmed the Group’s rating as BBB if the acquisition of Terminix Global Holdings, Inc.
goes ahead as announced.
In July 2021 the Group repaid the remaining €175.7m outstanding under the €350m bond due in October 2021 using the three months at par call
option. The Group has no debt maturities falling due in 2022.
All of the Group’s bonds issued under its EMTN Programme contain a coupon step-up which increases the coupon payable by 1.25% in the event
that the Group is downgraded to BB+ or below (sub-investment grade). The Group’s bonds may be called by their investors at par in the event of
achange of control of the Group. They may also be called within 120 days if the Group’s debt is downgraded below investment grade, or if the
rating is withdrawn and the rating agency confirms in writing, either publicly or to the Group or the Trustee, that the rating action occurred either
wholly or in part due to a change of control.
(b) Credit risk
The Group has no significant concentration of credit risk. Sales are typically low-value, high-volume, spreading the risk across a large number
ofcustomers and geographies. Policies are in place to ensure that credit sales are only made to customers with an appropriate credit history.
TheGroup operates in some territories where there is increased exposure to trade credit risks and in those territories the Group puts in place
appropriate measures to manage its credit risk exposure.
In order to protect the liquid assets and funding relationships of the Group, management aims to maintain banking relationships with
counterparties that carry a long-term credit rating of at least A-, or equivalent rating with one of the major credit rating agencies. In countries
where no banks are rated A- or above, balances are monitored monthly and kept to a minimum. In addition, funds held with all counterparties
aresubject to limits. All exposures are monitored and reported to the Treasury Committee each month. The Group also monitors the
creditworthiness of its lenders to ensure that commitments under its facilities are available as needed.
At 31 December 2021 the Group had a total of £10.7m of cash held on bank accounts with banks rated below A- by S&P (2020: £10.0m).
Thehighest concentration with any single bank rated below A- was £1.7m (2020: £1.8m).
(c) Market risk
Foreign exchange risk
The Group’s worldwide operations generate profits and cash flows in foreign currencies. Sales and purchases are typically denominated in the
currency of the country in which they are transacted, and the Group’s cross-border procurement is considered insignificant. Sterling procurement
and central costs mean that foreign currencies constitute more than 100% of Group adjusted operating profit at approximately 104%.
The Group’s primary exposure to foreign exchange risk is in relation to the translation of assets and liabilities, and the Group aims to hold debt in
currencies in proportion to its forecast foreign currency profits and investments. Foreign exchange derivatives are used to manage foreign
currency exposures inexcess of £0.5m (£5.0m for USD) that are not covered by debt or assets in the same (or another highly correlated) currency,
as long as it makes sense from an economic perspective to do so. The Treasury Committee monitors foreign exchange exposures on a monthly
basis. Dealing in foreign exchange products is controlled by dealing mandates approved by the Treasury Committee and all foreign exchange
transactions are covered by ISDAdocumentation.
The most significant foreign currency groups are US dollars and euros, which make up 41.5% and 34.8% of Group adjusted operating profit
respectively.
At 31 December 2021 the Group’s net debt was approximately 57% US dollar (2020: 48%), reflecting that it is the Group’s principal cash flow
exposure; and 45% euro (2020: 52%), with 2% net cash offset in other currencies. The translation of the interest element of euro and US dollar
debt provides a partial income statement offset to the translation of earnings.
The Group calculates the impact on the income statement and other comprehensive income of a 10% movement in foreign exchange rates.
TheGroup’s principal foreign currency exposure is the US dollar. For US dollars, a 10% movement in £/$ would result in a £19.4m increase/
decrease (2020: £17.8m) in adjusted operating profit, offset by a £1.6m decrease/increase (2020: £1.2m) in interest payable. A 10% movement in
£/€ would result in a £15.6m increase/decrease (2020: £15.6m) inadjusted operating profit, offset by a £1.0m decrease/increase (2020: £1.5m) in
interest payable.
Where possible, currency cash flows are used to settle liabilities in the same currency in preference to selling currency in the market.
Rentokil Initial plc
Annual Report 2021
181
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
Interest rate risk
The Group seeks to manage interest rate risk to ensure reasonable certainty of its interest charge while allowing an element of risk exposure
consistent with the variability of its cash flows. Interest rate risk is managed by the use of fixed interest debt and interest rate derivatives, which
are approved in advance by the Treasury Committee. The Group policy is to fix a minimum of 50% of its estimated future interest rate exposures
(excluding pensions) for a minimum period of 12 months forward. The Treasury Committee reviews this exposure monthly. During the year the
Group signed IBOR Fallback Protocols with the two banks that have provided interest rate hedges that reference LIBOR. The Group has no other
LIBOR-based exposures.
A hypothetical 1.0% increase in euro interest rates would reduce the market value of the Group’s bond liabilities by £61.9m at 31 December 2021
(2020: £79.8m). The income statement impact is £nil as changes in interest rates do not change the expected cash flows on the bonds.
The Group had outstanding bond debt issues at 31 December 2021 with a fair market value of £1,272.1m (2020: £1,537.3m). This exceeds the book
value of £1,253.7m (2020: £1,487.8m) as a result of reductions in interest rates in Europe. There are no circumstances where the Group would be
obliged to pay the fair market value. The Group could however decide to redeem some or all of its bonds early and the fair market value is
indicative of the price that would be required to do so.
(d) Capital risk
The Group is committed to maintaining a debt/equity structure that allows continued access to a broad range of financing sources and sufficient
flexibility to pursue commercial opportunities as they present themselves, without onerous financing terms and conditions. The Group’s policy is
to maintain a strong capital base so as to maintain investor, creditor and market confidence and to support the Group’s strategy. The Group uses
S&P’s ratings methodology for a BBB issuer to manage its capital risk. In the event that a ratings downgrade is likely net debt can be managed by
reducing or suspending dividends, M&A spend and capital expenditure. The Group would also consider raising additional equity to protect its
BBB rating.
(e) Treasury risk
The Group’s treasury activities are governed by a treasury policy, which is reviewed and approved by the Board on an annual basis. The treasury
policy covers all activities associated with managing the above risks. The policy requires that financial instruments are only utilised to manage
known financial exposures and speculative derivative contracts are not entered into. The treasury policy requires that treasury must approve
opening and closing of all bank accounts, and that funds transfers and other payments are only made in accordance with bank mandates.
To ensure an appropriate control environment exists in the treasury function, duties are segregated between front and back office teams. In
addition a number of controls are in place to protect against potential cyber security and other risks.
LIBOR reform
In September 2021 the Group updated its RCF such that it was compliant with the cessation of GBP LIBOR at the end of December 2021 and USD
LIBOR subsequent to that. The Group has also signed ISDA fallback agreements with its interest rate swap counterparties, which means that the
Group has no exposure to GBP or USD LIBOR going forward.
C2. Net debt
Closing net debt comprises:
Notes
2021
£m
2020¹
£m
Current
Cash and cash equivalents in the Consolidated Balance Sheet C3 668.4 1,949.5
Other investments C4 1.6 172.2
Fair value of debt-related derivatives 1.5 1.9
Bank and other short-term borrowings
2,3
(459.3) (1,591.5)
Lease liabilities B4 (77.8) (72.7)
Non-current
Fair value of debt-related derivatives (23.7) 4.7
Bank and other long-term borrowings
4
(1,256.2) (1,337.6)
Lease liabilities B4 (139.2) (141.8)
Total net debt (1,284.7) (1,015.3)
1. Both cash and cash equivalents and bank and other short-term borrowings have been restated in 2020 by reducing cash in hand and overdrafts by £276.1m to reflect the netted
position of the main and shadow bank accounts pool arrangement which were previously grossed up (Note C3).
2. Bank and other short-term borrowings consists of £nil bond debt (2020: £156.5m), £426.5m overdraft (2020: £1,398.7m), £29.7moverseas loans (2020:£31.9m) and £3.1m bond accruals
(2020: £4.5m).
3. Trade and other receivables and bank and other short-term borrowings have been restated in 2020 due to a correction of the recognition of an overseas factoring arrangement. Both
have been increased by £21.0m.
4. Bank and other long-term borrowings consists of £1,253.7m bond debt (2020: £1,331.3m) and £2.4m overseas loans (2020:£6.3m).
182
Rentokil Initial plc
Annual Report 2021
The currency split and cash flows of bank, other borrowings and debt-related derivatives are as follows:
2021
£m
2020
£m
Pound sterling 48.3 517.9
Euro 855.6 1,829.0
US dollar 783.3 530.7
Other currencies 50.5 44.9
Carrying value 1,737.7 2,922.5
Fair value component of derivatives and interest 9.0 57.5
Undiscounted value 1,746.7 2,980.0
Analysis of undiscounted cash flows of bank and other borrowings:
Less than one year 450.1 1,591.7
Between one and five years 787.4 393.8
Over five years 509.2 994.5
Future minimum payments 1,746.7 2,980.0
Reconciliation of net change in cash and cash equivalents to net debt:
Notes
Opening
2021
1,2
£m
Cash
flows
£m
Non-cash
(fair value
changes and
accruals)
£m
Non-cash
(foreign
exchange
and other)
£m
Closing
2021
£m
Bank and other short-term borrowings (1,591.5) 1,134.6 (11.0) 8.6 (459.3)
Bank and other long-term borrowings (1,337.6) 14.6 (12.0) 78.8 (1,256.2)
Lease liabilities B4 (214.5) 94.1 (6.1) (90.5) (217.0)
Other investments 172.2 (170.6) – – 1.6
Fair value of debt-related derivatives 6.6 31.4 (2.9) (57.3) (22.2)
Gross debt (2,964.8) 1,104.1 (32.0) (60.4) (1,953.1)
Cash and cash equivalents in the Consolidated Balance Sheet 1,949.5 (1,267.2) – (13.9) 668.4
Net debt (1,015.3) (163.1) (32.0) (74.3) (1,284.7)
Notes
Opening
2020
1,2
£m
Cash
flows
£m
Non-cash
(fair value
changes and
accruals)
£m
Non-cash
(foreign
exchange
and other)
£m
Closing
2020
£m
Bank and other short-term borrowings (668.1) (586.3) (21.1) (316.0) (1,591.5)
Bank and other long-term borrowings (1,059.3) (537.7) (1.3) 260.7 (1,337.6)
Lease liabilities B4 (216.7) 92.3 – (90.1) (214.5)
Other investments 1.8 170.5 – (0.1) 172.2
Fair value of debt-related derivatives (23.8) 30.3 (39.7) 39.8 6.6
Gross debt (1,966.1) (830.9) (62.1) (105.7) (2,964.8)
Cash and cash equivalents in the Consolidated Balance Sheet 893.1 1,058.9 – (2.5) 1,949.5
Net debt (1,073.0) 228.0 (62.1) (108.2) (1,015.3)
1. Both cash and cash equivalents and bank and other short-term borrowings have been restated in 2020 by reducing cash in hand and overdrafts by £276.1m to reflect the netted
position of the main and shadow bank accounts pool arrangement which were previously grossed up (Note C3).
2. Trade and other receivables and bank and other short-term borrowings have been restated in 2020 due to a correction of the recognition of an overseas factoring arrangement.
Bothhave been increased by £21.0m.
The foreign exchange gain on debt and derivatives amounted to £30.1m (2020: £15.5m loss). The gain primarily resulted from a weakening of
theeuro by 7 cents offset by a strengthening of the US dollar by 1 cent. Included within the net decrease in cash and cash equivalents is £19.1m
(2020: £4.2m) cash paid on debt-related foreign exchange forward contracts (which is included within financing activities in the Consolidated
Cash Flow Statement) and £nil (2020: £27.9m) settlement paid on the Synthetic Borrowing Unit (SBU), which was closed out in August 2020.
The total borrowings cash decrease of £1,149.2m includes £166.6m (2020: £1,352.2m) debt repayment (included in financing activities), £15.1m
(2020: £18.3m) settlement of interest accrued (included within operating activities) and £972.2m decrease (2020: £503.4m increase) in overdraft
offset by £4.7m proceeds from new debt (included in financing activities).
The derivatives cash decrease of £31.4m includes £19.1m (2020: £4.2m) of cash paid on debt-related foreign exchange swaps (included in
financing activities) and £12.4m (2020: £6.6m) interest paid (included in operating activities).
The cash outflow of £94.1m from leases liabilities includes £88.0m (2020: £85.4m) capital paid (included within financing activities) and £6.1m
(2020: £6.8m) interest paid (included in operating activities).
Rentokil Initial plc
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183
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
Fair value is equal to carrying value for all elements of net debt with the exception of bond debt which has a carrying value of £1,253.7m
(2020:£1,487.8m) and a fair value of £1,272.1m (2020: £1,537.3m).
The Group operates notional pooling arrangements whereby cash balances and overdrafts held within the same bank have a legal right of offset.
The following table shows the effect of offsetting in the balance sheet due to financial instruments subject to enforceable netting arrangements:
Notes
Gross amount
2021
£m
Gross amounts
set off in the
balance sheet
2021
£m
Net amounts
presented in the
balance sheet
2021
£m
Amount subject
to master netting
arrangement
2021
£m
Net amount
2021
£m
Financial assets
Cash and cash equivalents C3 668.4 – 668.4 (423.6) 244.8
Trade and other receivables A3 541.2 – 541.2 – 541.2
Other financial assets C4 1.8 – 1.8 – 1.8
Derivative financial instruments C6 12.3 – 12.3 (8.1) 4.2
Total 1,223.7 – 1,223.7 (431.7) 792.0
Financial liabilities
Trade and other payables A5 (835.5) – (835.5) – (835.5)
Provision for liabilities and charges A6 (60.9) – (60.9) – (60.9)
Borrowings C2 (1,715.4) – (1,715.4) 423.6 (1,291.8)
Lease liabilities B4 (217.0) – (217.0) – (217.0)
Derivative financial instruments C6 (34.5) – (34.5) 8.1 (26.4)
Total (2,863.3) – (2,863.3) 431.7 (2,431.6)
Notes
Gross amount
2020
£m
Gross amounts
set off in the
balance sheet
2020
£m
Net amounts
presented in the
balance sheet
2020
£m
Amount subject
to master netting
arrangement
2020
£m
Net amount
2020
£m
Financial assets
Cash and cash equivalents C3 1,949.5 – 1,949.5 (1,395.7) 553.8
Trade receivables A3 582.7 – 582.7 – 582.7
Other financial assets C4 172.4 – 172.4 – 172.4
Derivative financial instruments C6 42.6 – 42.6 (29.4) 13.2
Total 2,747.2 – 2,747.2 (1,425.1) 1,322.1
Financial liabilities
Trade and other payables A5 (995.4) – (995.4) – (995.4)
Provision for liabilities and charges A6 (64.2) – (64.2) – (64.2)
Borrowings C2 (2,929.1) – (2,929.1) 1,395.7 (1,533.4)
Lease liabilities B4 (214.5) – (214.5) – (214.5)
Derivative financial instruments C6 (35.8) – (35.8) 29.4 (6.4)
Total (4,239.0) – (4,239.0) 1,425.1 (2,813.9)
184
Rentokil Initial plc
Annual Report 2021
C3. Cash and cash equivalents
Cash and cash equivalents include cash in hand, short-term bank deposits and other short-term highly liquid investments with original maturities
of three months or less (and subject to insignificant changes in value). In the cash flow statement, cash and cash equivalents are shown net
ofbank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
Cash at bank and in hand includes £6.6m (2020: £6.7m) of restricted cash. This cash is held in respect of specific contracts and can only be
utilised in line with terms under the contractual arrangements.
Cash at bank and in hand also includes £65.5m (2020: £51.0m) of cash held in countries with foreign exchange regulations. This cash is
repatriated to the UK where possible, if not required for operational purposes in country.
Fair value is equal to carrying value for all cash and cash equivalents.
Gross amounts
£m
At 31 December 2021
Cash at bank and in hand 553.8
Money market funds 52.8
Short-term bank deposits 61.8
Cash and cash equivalents in the Consolidated Balance Sheet 668.4
Bank overdraft (426.5)
Cash and cash equivalents in the Consolidated Cash Flow Statement 241.9
At 31 December 2020
1
Cash at bank and in hand 1,560.3
Money market funds 383.1
Short-term bank deposits 6.1
Cash and cash equivalents in the Consolidated Balance Sheet 1,949.5
Bank overdraft (1,398.7)
Cash and cash equivalents in the Consolidated Cash Flow Statement 550.8
1. Both cash and cash equivalents and bank and other short-term borrowings have been restated in 2020 by reducing cash in hand and overdrafts by £276.1m to reflect the netted
position of the main and shadow bank accounts pool arrangement which were previously grossed up (Note C2).
Credit interest rates on bank balances range between 0.16% and 5.15% and debit interest rates range between (3.625)% and 12.25%.
As far as it is practical to do so, cash balances are held centrally and are used first to repay borrowings under the Group’s RCF before being
placed on deposit.
C4. Other investments
Other investments held at year end mainly comprised term deposits maturing in more than three months from the date that the deposit was
placed. The weighted average effective interest rate earned is 0.4% (2020: 0.2%) with £nil fixed for six months (2020: £170.6m) and £1.6m fixed
forone year (2020: £1.6m). Fair value is equal to carrying value for all other investments.
Financial assets are denominated in the following currencies:
2021
£m
2020
£m
Pound sterling 1.6 172.2
Other
1
0.2 0.2
1.8 172.4
Analysed as follows:
Current portion 1.6 172.2
Non-current portion
1
0.2 0.2
1.8 172.4
1. Includes a direct investment of £0.2m (2020: £0.2m) in a solar energy company in the US. This investment is classified as FVTPL.
Part of the £172.2m deposit held at 31 December 2020 was used in July 2021 to repay the remaining €175.7m outstanding under the
€350mbond.
None of the financial assets are either past due or impaired in 2021 (2020: none).
Rentokil Initial plc
Annual Report 2021
185
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
C5. Derivative financial instruments
Accounting for derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair
value at the balance sheet date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a
hedging instrument and, if so, the nature of the item being hedged. At the inception of the transaction the Group documents the relationship
between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
areused in hedging transactions are effective in offsetting changes in fair values of hedged items.
Certain financial instruments are not designated or do not qualify for hedge accounting. Typically the Group will not designate financial
instruments for hedge accounting where a perfect or near perfect offset is expected between the change in value of assets and liabilities.
Changes in the fair value of any derivative instruments in this category are immediately recognised in the income statement. Where financial
instruments are designated for hedge accounting they are designated as either fair value hedge, net investment hedge or cash flow hedge.
When designating cross-currency swaps, the cost of hedging has been excluded from the relationship and any movement in the fair value
relatedto the cost of hedging is deferred in equity and amortised over the life of the hedged item.
(a) Fair value hedge
These instruments are used to hedge exposure to changes in the fair value of recognised assets or liabilities. Changes in the fair value
ofderivatives that are designated and qualify as fair value hedges are recognised in the income statement, together with any changes in the
fairvalue of the hedged asset or liability that are attributable to the hedged risk. There were no fair value hedges as at the year end date.
(b) Net investment hedge
These instruments are used to hedge exposure on translation of net investments in foreign operations. Any gain or loss on the hedging
instrument related to the effective portion of the hedge is recognised in other comprehensive income; the gain or loss related to the ineffective
portion is recognised immediately in the income statement. In the event of disposal of a foreign operation, the gains and losses accumulated
inother comprehensive income are recycled through the income statement. All currencies are directly hedged therefore the hedge ratio
isconsidered to be 1:1.
The Group expects that the values of the hedged item and hedging instrument will move in opposite directions in response to movements in the
same hedged risk. Where there are sufficient levels of denominated net assets, the critical terms are deemed to match.
The following net investment hedges were in place at 31 December 2021:
US dollar net investment hedge relationship: $807.0m (2020: $601.5m) cross-currency swaps notional and $92.7m (2020: $80.4m) cross-currency
swaps future interest cash flows have been used to hedge $899.7m (2020: $681.9m) of the net assets of the US operating subsidiaries. The
movement in the cross-currency swaps due to changes in $/£ exchange rates are in the opposite direction of the changes due to $/£ in the
subsidiaries assets. As the critical terms match, their values will systematically change in the opposite direction of each other. Thus we consider
that this demonstrates the existence of an economic relationship.
Euro net investment hedge relationship: €551.8m (2020: €567.9m) bonds are used to hedge the net assets of the euro operating subsidiaries
totalling €551.8m (2020: €567.9m). The movement in the bonds due to changes in €/£ exchange rates are in the opposite direction of the
changes due to €/£ in the subsidiaries assets. As the critical terms match, their values will systematically change in the opposite direction of each
other. Thus we consider that this demonstrates the existence of an economic relationship.
Australian dollar (AUD) net investment hedge relationship: AUD9.1m (2020: AUD9.6m) overdraft is used to hedge AUD9.1m of the net assets of the
AUD denominated operating subsidiaries. The movement in the overdraft balance due to changes in AUD/GBP exchange rates are in the
opposite direction of the changes due to AUD/GBP in the subsidiaries assets. As the critical terms match, their values will systematically change
in the opposite direction of each other. Thus we consider that this demonstrates the existence of an economic relationship.
Japanese yen (JPY) net investment hedge relationship: JPY1.2bn (2020: JPY1.2bn) cross-currency swap is used to hedge JPY1.2bn of the net
assets of the Japanese associate. The movement in the cross-currency swaps due to changes in JPY/GBP exchange rates are in the opposite
direction of the changes due to JPY/GBP in the associate’s assets. As the critical terms match, their values will systematically change in the
opposite direction of each other. Thus we consider that this demonstrates the existence of an economic relationship.
During the year there was a gain of £1.7m (2020: £0.7m) relating to ineffectiveness of net investment in foreign entity hedges. The main source of
ineffectiveness of the net investment hedge is the off-market value of the cross-currency swaps used to hedge US dollar net assets at the hedge
designation date. Ineffectiveness due to changes in the counterparty credit risk was not material in the year and is expected to remain so due to
the Group’s policy of only using counterparties with a credit rating of A- and above.
For the year ended 31 December 2021, the amount in comprehensive income related to net investment hedge accounting was a gain of £15.0m
(2020: £17.2m loss).
The effect of the foreign currency related hedging instruments on the Group’s financial position and performance is shown in the table below:
Hedging instruments
2021
Currency
Carrying
amount at
year end date
£m
Notional
amount
£m
Maturity
date
Hedge
ratio
Change in
fair value of
outstanding
instrument
£m
Change in fair
value of
hedged item
£m
Ineffectiveness
£m
Weighted
average
foreign
exchange rate
for the year
Cross-currency swaps USD 1.6 596.4
November 2024
– October 2028
1:1 (15.6) (17.5) 1.9 1.296
Cross-currency swaps JPY 1.2 7.6 November 2022 1:1 0.7 0.7 – 134.326
Bonds EUR (462.7) (463.7)
November 2024
– October 2028 1:1 27.9 27.9 – 1.147
Overdraft AUD (4.9) (4.9) n/a 1:1 0.2 0.2 – 1.857
186
Rentokil Initial plc
Annual Report 2021
Hedging instruments
2020
Currency
Carrying
amount at
year end date
£m
Notional
amount
£m
Maturity
date
Hedge
ratio
Change in
fair value of
outstanding
instrument
£m
Change in fair
value of
hedged item
£m
Ineffectiveness
£m
Weighted
average
foreign
exchange rate
for the year
Cross-currency swaps USD 13.3 439.8 November 2024
– May 2026
1:1 8.2 7.8 0.4 1.268
Cross-currency swaps JPY 0.4 8.4 November 2022 1:1 0.4 0.4 – 134.326
Bonds EUR (506.4) (507.2) November 2024
– May 2026
1:1 (26.5) (26.5) – 1.152
Overdraft AUD (5.4) (5.4) n/a 1:1 (0.4) (0.4) – 1.857
Overdraft NZD (3.2) (3.2) n/a 1:1 (0.5) (0.5) – 2.014
FX swaps USD 1.2 41.9 January 2021 1:1 5.4 5.4 – 1.336
(c) Cash flow hedge
These instruments are used to hedge a highly probable forecast transaction, or a change in the cash flows of a recognised asset or liability. The
portion of the gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income.
Any ineffective portion is immediately recognised in the income statement. The gains or losses that are recognised in comprehensive income are
transferred to the income statement in the same period in which the hedged cash flows affect the income statement. In the event that the hedged
item occurs or is no longer expected to occur, accumulated gains or losses held in the cash flow hedge reserve are immediately recognised in the
income statement. In the event that the hedged item is expected to occur but no longer meets the requirements of hedge accounting,
accumulated gains or losses remain in other comprehensive income and are only recognised in the income statement when the forecast
transaction occurs or is no longer expected to occur. All cash flow hedge relationships are hedges of a foreign currency risk and all currencies
were directly hedged therefore the hedge ratio is considered to be 1:1.
Cash flow hedge accounting has been applied to derivatives (marked as ‘cash flow hedge’ in the table on page 188) in accordance with IFRS 9.
Where no hedge accounting has been applied, related derivatives have been marked as ‘non-hedge’.
The hedged item, a euro bond, creates an exposure to pay interest annually and the principal at maturity. By receiving the same amount at the
same dates through a cross-currency swap, this exposure is eliminated. Since the critical terms of the derivative and the hedged debt match (i.e.
matching currencies, payment dates and interest rate on the leg of the swap offsetting the bond), the change in value of the derivative, excluding
any basis risk, will be considered to completely offset the changes in the hedged cash flow.
Any ineffectiveness on the cash flow hedge is taken directly to finance costs. During the year there was a loss of £0.8m (2020: loss of £0.7m)
fromthose derivatives in a cash flow hedge relationship. The main source of ineffectiveness in the cash flow hedge is the off-market value of
thederivatives hedging the €400m bond maturing in 2024 at the inception of the hedge relationship. Ineffectiveness due to changes in the
counterparty credit risk was not material in the year and is expected to remain the same because the Group’s counterparties credit rating is A-
and above.
Cash flow hedge accounting has been applied to €340.0m (2020: €340.0m) of the €400m 2024 bond, €179.4m (2020: €179.4m) of the €500m
2026 bond and €175.0m (2020: nil) of the €600m 2028 bond. The cross-currency interest rate swaps are used as hedging instruments to hedge
the volatility in the £/€ exchange rate of the bonds. For the year ended 31 December 2021, the amount in comprehensive income related to cash
flow hedge accounting was a gain of £13.2m (2020: £4.9m loss).
The effect of the foreign currency related hedging instruments on the Group’s financial position and performance is shown in the table below:
Hedging instruments
2021
Currency
Carrying
amount at
year end
date
£m
Notional
amount
£m
Maturity
date
Hedge
ratio
Change in fair
value of
outstanding
instrument
£m
Cumulative
change in fair
value of
hedged item
£m
Ineffectiveness
£m
Weighted
average rate
for the year
Cross-currency swaps EUR (25.3) 694.5 November 2024
– October 2028
1:1 (23.8) (22.7) (1.1) 1.131
Hedging instruments
2020
Currency
Carrying
amount at
year end
date
£m
Notional
amount
£m
Maturity
date
Hedge
ratio
Change in fair
value of
outstanding
instrument
£m
Cumulative
change in fair
value of
hedged item
£m
Ineffectiveness
£m
Weighted
average rate
for the year
Cross-currency swaps EUR (8.3) 519.5 November 2024
– May 2026
1:1 7.8 (7.4) (0.4) 1.115
Amount in cash flow hedge reserves related to continuing hedges is a gain of £8.8m (2020: £4.4m loss), and the amount related to discontinued
hedges is £nil (2020: £nil).
Rentokil Initial plc
Annual Report 2021
187
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
C6. Fair value estimation
All financial instruments held at fair value are classified by reference to the source of inputs used to derive the fair value. The following hierarchy
is used:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices that are observable for the asset or liability either directly as prices or indirectly through modelling
based on prices; and
Level 3 – inputs for the asset or liability that are not based on observable market data.
Financial instrument
Hierarchy
level Valuation method
Financial assets traded in active markets 1 Current bid price
Financial liabilities traded in active markets 1 Current ask price
Listed bonds 1 Quoted market prices
Money market funds 1 Quoted market prices
Interest rate/currency swaps 2 Discounted cash flow based on market swap rates
Forward foreign exchange contracts 2 Forward exchange market rates
Metal hedging options and non-deliverable forwards 2 Discounted cash flow using quoted market prices and forward interest rates
Borrowings not traded in active markets (term loans
and uncommitted facilities)
2 Nominal value
Money market deposits 2 Nominal value
Trade payables and receivables 2 Nominal value less estimated credit adjustments
Provisions 2 Discounted cash flow using market bond rates
Contingent consideration (including put option liability) 3 Discounted cash flow using WACC
Trade payables and receivables was classified as level 3 in the prior year due to a misclassification. No other instruments have moved between
levels.
Fair value
assets
2021
£m
Fair value
liabilities
2021
£m
Fair value
assets
2020
£m
Fair value
liabilities
2020
£m
Interest rate swaps (level 2):
– non-hedge – (0.6) – (0.7)
– cash flow hedge – (25.3) – (8.3)
– net investment hedge 11.0 (8.2) 37.0 (23.3)
Foreign exchange swaps (level 2):
– non-hedge 1.3 (0.4) 4.2 (3.5)
– net investment hedge – – 1.2 –
Metal hedging options and non-deliverable forwards (level 2):
– non-hedge – – 0.2 –
12.3 (34.5) 42.6 (35.8)
Analysed as follows:
Current portion 2.5 (1.0) 5.6 (3.5)
Non-current portion 9.8 (33.5) 37.0 (32.3)
Derivative financial instruments 12.3 (34.5) 42.6 (35.8)
Contingent consideration (including put option liability) (level 3)
1
– (75.0) – (62.8)
Analysed as follows:
Current portion – (22.8) – (16.7)
Non-current portion – (52.2) – (46.1)
Other payables – (75.0) – (62.8)
1. Fair value liabilities have been restated in 2020 to correct the omission of contingent consideration.
The effective nominal value of foreign exchange swaps is £39.1m (2020: £192.6m) and foreign exchange forwards is £33.9m (2020: £nil).
Given the volume of acquisitions and the variety of inputs to the valuation of contingent consideration (depending on each transaction) there are
not considered to be any changes in input that would have a material impact on the contingent consideration liability.
Contingent
consideration
2021
£m
Contingent
consideration
2020
£m
At 1 January 62.8 66.4
Exchange differences (7.8) 5.1
Acquisitions 24.0 22.3
Payments (12.0) (29.9)
Revaluation of put option through equity 8.0 (1.1)
At 31 December 75.0 62.8
Fair value is equal to carrying value for all other trade and other payables.
188
Rentokil Initial plc
Annual Report 2021
The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis, into relevant maturity groupings based
on the remaining period to the contractual maturity date at the balance sheet date.
Less than
1 year
£m
Between
1 and 2 years
£m
Between
2 and 5 years
£m
Over
5 years
£m
Total
£m
At 31 December 2021
Cross-currency interest rate swaps:
– outflow (18.1) (13.8) (470.9) (158.2) (661.0)
– inflow 12.1 4.8 445.4 148.5 610.8
Interest rate swaps:
– outflow (7.7) (6.5) (6.2) – (20.4)
– inflow 2.1 3.4 4.0 – 9.5
Foreign exchange swaps:
– outflow (385.2) – – – (385.2)
– outflow 386.5 – – – 386.5
Foreign exchange forwards:
– outflow (33.9) – – – (33.9)
– inflow 34.1 – – – 34.1
Net inflow/(outflow) (10.1) (12.1) (27.7) (9.7) (59.6)
At 31 December 2020
Cross-currency interest rate swaps:
– outflow (13.2) (20.7) (322.6) (148.4) (504.9)
– inflow 4.3 11.6 313.7 161.7 491.3
Interest rate swaps:
– outflow (8.2) (8.2) (15.6) – (32.0)
– inflow 1.9 1.9 4.4 – 8.2
Foreign exchange swaps:
– outflow (619.9) – – – (619.9)
– inflow 619.4 – – – 619.4
Net outflow (15.7) (15.4) (20.1) 13.3 (37.9)
C7. Analysis of bank and bond debt
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are classified as current liabilities unless the Group
has a continuing right to defer settlement of the liability for at least 12 months after the balance sheet date.
The Group’s bank debt comprises:
Facility
amount
£m
Drawn at
year end
£m
Headroom
£m
Interest rate
at year end
%
Non-current
£550m RCF due August 2025 550.0 – 550.0 0.14
In September 2021 the Group amended its RCF to incorporate the switch from LIBOR to risk free rates. At the same time financial covenants were
permanently removed from the facility. The RCF was undrawn throughout 2021.
Medium-term notes and bond debt comprises:
Bond interest
coupon
Effective hedged
interest rate
Non-current
€400m bond due November 2024 Fixed 0.95% Fixed 3.08%
€500m bond due May 2026 Fixed 0.875% Fixed 1.54%
€600m bond due October 2028 Fixed 0.50% Fixed 1.08%
Average cost of bond debt at year-end rates 1.78%
The effective hedged interest rate reflects the interest rate payable after the impact of interest due from cross-currency swaps. The Group’s
hedging strategy is to hold foreign currency debt in proportion to foreign currency profit and cash flows, which are mainly in euro and US dollar.
As a result, the Group has swapped a portion of the bonds it has issued into US dollars, thus increasing the effective hedged interest rate.
The Group considers the fair value of other current liabilities to be equal to the carrying value.
Rentokil Initial plc
Annual Report 2021
189
Corporate Governance Financial Statements Other InformationStrategic Report
C8. Finance cost
Notes
2021
£m
2020
£m
Hedged interest payable on medium-term notes issued
1
9.5 15.6
Interest payable on bank loans and overdrafts
1
2.6 3.0
Interest payable on RCF
1
1.4 5.4
Interest payable on foreign exchange swaps
2
13.7 9.5
Interest payable on leases B4 6.1 6.8
Amortisation of discount on provisions 0.3 0.3
Fair value loss on hedge ineffectiveness 0.1 7.9
Fair value adjustment on debt repayment – 4.1
Fair value loss on other derivatives
3
– 25.9
Total finance cost 33.7 78.5
1. Interest expense on financial liabilities held at amortised cost.
2. Interest payable on foreign exchange swaps including coupon interest payable for the year was £17.4m. £3.7m has been reported in other comprehensive income due to hedge
accounting.
3. Fair value loss on other derivatives relates to $335m SBU entered into since February 2019 ($170m in February 2019 and $165m in July 2019) which did not qualify for hedge
accounting. The instrument provided an annual interest benefit of 1.9% of the outstanding principal and was closed out in August 2020 with a full-year loss of £26.2m excluding interest
accrued.
C9. Finance income
Notes
2021
£m
2020
£m
Bank interest received 0.8 2.3
Interest receivable on foreign exchange swaps 0.2 3.4
Hyperinflation accounting adjustment 3.2 –
Interest on net defined benefit asset A10 – 0.5
Total finance income 4.2 6.2
C10. Operating cash and Free Cash Flow
2021
£m
2020
£m
Operating profit 346.5 293.7
Adjustments for:
– Depreciation of property, plant and equipment 128.4 132.3
– Depreciation of leased assets 78.4 78.0
– Amortisation and impairment of intangible assets (excluding computer software) 74.3 82.5
– Amortisation and impairment of computer software 16.8 18.5
– Other non-cash items 5.8 (0.5)
Changes in working capital (excluding the effects of acquisitions and exchange differences on consolidation):
– Inventories (3.2) (23.3)
– Contract costs (4.8) (1.9)
– Trade and other receivables 58.8 (43.3)
– Contract assets (0.1) 2.4
– Trade and other payables and provisions (43.0) 78.2
– Contract liabilities 11.1 12.7
Cash generated from operating activities before special pension contributions 669.0 629.3
Special pension contributions (0.5) (0.5)
Cash generated from operating activities 668.5 628.8
Add back: special pension contributions 0.5 0.5
Purchase of property, plant and equipment (127.8) (129.9)
Purchase of intangible fixed assets (32.1) (22.6)
Capital element of lease payments and initial direct costs incurred (88.1) (82.8)
Proceeds from sale of property, plant and equipment 7.4 6.3
Dividends received from associates 3.9 11.7
432.3 412.0
Interest received 5.2 7.6
Interest paid (41.6) (48.6)
Income tax paid (68.9) (64.4)
Special pension contributions (0.5) (0.5)
Free Cash Flow from continuing operations 326.5 306.1
Notes to the Financial Statements
continued
190
Rentokil Initial plc
Annual Report 2021
D. Other
D1. Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s Financial Statements in the period in which the
dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
2021
£m
2020
£m
2020 final dividend paid – 5.41p per share 100.0 –
2021 interim dividend paid – 2.09p per share 38.7 –
138.7 –
An interim dividend of 2.09p per share was paid on 13 September 2021 amounting to £38.7m. A final dividend in respect of 2021 of 4.30p per
share is to be proposed at the Annual General Meeting on11 May 2022. The aggregate amount of the proposed dividend to be paid out of
retained earnings at 31 December 2021, but not recognised as a liability at year end, is £79.5m.
D2. Share capital
The Company’s share capital is made up of the shares that have been issued to its members, whether on, or subsequent to, its incorporation.
Atthe year end the Company’s issued share capital consisted of ordinary shares of 1p each, with one voting right per share, asdetailedbelow.
The Company does not have a limited amount of authorised capital.
During the year five million new shares were issued in relation to employee share schemes. The Company does not hold any shares in treasury.
2021
£m
2020
£m
Issued and fully paid
At 31 December – 1,859,332,965 shares (2020: 1,854,332,965) 18.6 18.5
D3. Contingent liabilities
The Group has contingent liabilities relating to guarantees in respect of leasehold properties, pensions, third parties, environmental issues,
taxand litigation. The possibility of any significant outflows in respect of these items is considered to be remote.
On 14 December 2021, the Group announced that it had signed a definitive agreement to acquire Terminix Global Holdings, Inc. subject to
regulatory clearance and approval by shareholders of both companies. The deal is anticipated to close during 2022 and total implied
consideration at the date of the announcement was estimated to be $6.7bn. The Group has a liability contingent upon successful completion of
the transaction in respect of professional fees. The undiscounted amount of the total payments that the Group could be required to make is
estimated to be up to £35m.
D4. Related party transactions
Subsidiaries
Related party transactions and outstanding balances between subsidiaries within the Group are eliminated in the preparation of the
ConsolidatedFinancial Statements and accordingly are not disclosed in this note.
Key management personnel
The Group’s strategy and policy are managed by the Executive Leadership Board (Executive Directors and senior management as shown
onpages 84 to 87). Their compensation and the compensation payable to the Non-Executive Directors is shown below:
2021
£m
2020
£m
Salaries and other short-term employee benefits 6.4 8.2
Post-employment benefits 0.5 0.3
Share-based payments 3.4 1.7
10.3 10.2
Joint ventures and associate entities
The Group participates in a number of joint ventures where it has control and therefore it consolidates these as subsidiaries in its Consolidated
Financial Statements. All transactions between these entities and the Group were transacted at arm’s length during the ordinary course of
business and have been eliminated on consolidation.
Nippon Calmic Ltd (49%) was an associate during 2020 and 2021 and its balances are disclosed in Note B6. Boecker Public Safety Services –
Qatar W.L.L. (24.5%) and Boecker Public Health Services (30%) became associate entities when they were acquired by the Group on 3 August
2021 and their balances are disclosed in Note B6. There are no significant transactions between associate entities and other Group companies.
Pension scheme
The Group bears some costs of administration and independent pension advice of the Rentokil Initial 2015 Pension Scheme. The total amount
ofcosts in the year ended 31 December 2021 was £nil (2020: £0.2m) of which £nil (2020: £0.2m) was recharged to the Scheme. At31December
2021, £nil (2020: £nil) remained outstanding.
Rentokil Initial plc
Annual Report 2021
191
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Notes to the Financial Statements
continued
D5. Government grants
In response to the global COVID-19 pandemic there were a number of government schemes made available providing wage subsidies for
companies that had to shut or scale down operations. The government schemes have different conditions attached to them depending on the
country in which they are available. The Group presents the grants by deducting from the related expense, which in this caseisthe employee
benefit expense. The Group received a total wage subsidy of £1.0m in 2021 (2020: £14.2m).
D6. Post balance sheet events
On 24 February 2022 the buy-out of the Rentokil Initial 2015 Pension Scheme completed when the insurance policy with PIC was transferred to
the individual members of the Scheme. Accordingly both the Scheme’s assets and liabilities have been reduced by the policy value (£1,238.6m).
There were no other significant post balance sheet events affecting the Group since 31 December 2021.
192
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E. Alternative Performance Measures
The Group uses a number of measures to present the financial performance of the business which are not GAAP measures as defined under
IFRS. Management believes these measures provide valuable additional information for users of the Financial Statements in order to better
understand the underlying trading performance in the year from activities and businesses that will contribute to future performance. The Group’s
internal strategic planning process is also based on these measures and they are used for incentive purposes. They should be viewed as
complements to, and not replacements for, the comparable GAAP measures.
Constant exchange rates (CER)
Given the international nature of the Group’s operations, foreign exchange movements can have a significant impact on the reported results
ofthe Group when they are translated into sterling (the functional currency of the Group). In order to help understand the underlying trading
performance of the business, revenue and profit measures are often presented at CER. CER is calculated by translating current-year reported
numbers at the full-year average exchange rates for the prior year,in order to give management and other users of the accounts better visibility
ofunderlying trading performance against the prior period. Themajor exchange rates used are £/$ FY 2021 1.3739 (FY 2020 1.2951) and £/€
FY2021 1.1617 (FY 2020 1.1315). Comparisons are with the year ended 31 December 2020 unless otherwise stated.
Ongoing Revenue and Ongoing Operating Profit
Ongoing Revenue and Ongoing Operating Profit represent the performance of the continuing operations of the Group (including acquisitions)
after removing the effect of disposed or closed businesses. Ongoing Operating Profit is an adjusted measure and is presented before
amortisation and impairment of intangible assets (excluding computer software), one-off items (see below) and gain or loss on disposal
ofbusinesses.
Ongoing measures enable the users of the accounts to focus on the performance of the businesses retained by the Group and that will therefore
contribute to future performance. Ongoing Revenue and Ongoing Operating Profit are presented at CER unless otherwise stated. A reconciliation
of Ongoing Revenue and Ongoing Operating Profit measures to the equivalent GAAP measure is provided in the following table and in the
segmental analysis in Note A1.
Adjusted profit and earnings per share measures
Adjusted profit measures are used to give management and other users of the accounts a clear understanding of the underlying profitability
ofthe business over time. Adjusted profit measures are calculated by adding the following items back to the equivalent GAAP profit measure:
A
amortisation and impairment of intangible assets (excluding computer software);
A
one-off items; and
A
net interest adjustments.
Intangible assets (excluding computer software) are recognised on acquisition of businesses and capitalisation of innovation-related
development costs which, by their nature, can vary by size and amount each year. As a result, amortisation of intangibles is added back to assist
with understanding the underlying trading performance ofthe business and to allow comparability across regions and categories.
One-off items are significant expenses or income that will have a distortive impact on the underlying profitability of the Group. Typical examples
are costs related to the acquisition of businesses (including aborted acquisitions), gain or loss on disposal or closure of a business, material gains
or losses on disposal of fixed assets, adjustments to legacy property-related provisions (environmental liabilities), and payments or receipts as
aresult of legal disputes.
Net interest adjustments are other non-cash accounting gains and losses that can cause material fluctuations and distort understanding of the
performance of the business, such as net interest on pension schemes and interest fair value adjustments. These adjustments are made to aid
year-on-year comparability.
Adjusted earnings per share is calculated by dividing adjusted profit from continuing operations attributable to equity holders of the Company
bythe weighted average number of ordinary shares in issue. Note A2 shows the adjustments made in arriving at adjusted profit from continuing
operations attributable to equity holders of the Company.
Rentokil Initial plc
Annual Report 2021
193
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Financial Statements
continued
A reconciliation of non-GAAP measures to the comparable GAAP equivalents is provided below at both AER and CER:
2021
AER
£m
2021
CER
£m
2020
£m
% change
AER CER
Ongoing Revenue 2,953.9 3,063.5 2,789.4 5.9 9.8
Revenue – disposed and closed businesses¹ 2.7 2.7 13.9 (80.4) (80.4)
Revenue 2,956.6 3,066.2 2,803.3 5.5 9.4
Ongoing Operating Profit 441.5 458.7 383.8 15.0 19.5
Operating profit – disposed and closed businesses – – 0.2 (109.6) (110.1)
Adjusted operating profit 441.5 458.7 384.0 15.0 19.5
One-off items (20.7) (21.3) (7.7) (170.2) (177.6)
Amortisation and impairment of intangible assets
2
(74.3) (77.3) (82.5) 9.9 6.4
Operating profit 346.5 360.1 293.8 17.9 22.6
Share of profit from associates (net of tax) 8.1 8.9 8.3 (1.7) 7.5
Net adjusted interest payable (33.1) (34.0) (37.1) 10.6 8.4
Net interest adjustments 3.6 3.7 (35.2) 110.2 110.5
Profit before tax 325.1 338.7 229.8 41.5 47.5
Net interest adjustments (3.6) (3.7) 35.2 (110.2) (110.5)
One-off items 20.7 21.3 7.7 170.2 177.6
Amortisation and impairment of intangible assets
2
74.3 77.3 82.5 (9.9) (6.4)
Adjusted Profit Before Tax 416.5 433.6 355.2 17.3 22.1
Basic earnings per share 14.16p 14.77p 10.03p 41.2 47.2
Basic adjusted earnings per share 18.07p 18.81p 15.37p 17.6 22.4
1. Includes revenue of £2.7m (2020: £7.1m) from product sales by the Group to CWS-boco International GmbH.
2. Excluding computer software.
Organic Revenue measures
Acquisitions are a core part of the Group’s growth strategy. Organic Revenue growth measures are used to help understand the underlying
performance of the Group. Organic Revenue growth represents the growth in Ongoing Revenue excluding the effect of businesses acquired
during the year. Acquired businesses are included in organic measures in the year following acquisition, and the comparative period is adjusted
to include an estimated full year performance for growth calculations (pro forma revenue).
Europe UK and RoW Asia North America Pacific
Central &
regional OH Total
£m % £m % £m % £m % £m % £m % £m %
2020 Ongoing Revenue 721.2 – 440.5 – 242.0 – 1,203.9 – 177.5 – 4.3 – 2,789.4 –
Pro forma revenue from 2020 and
2021acquisitions 14.0 1.9 13.6 3.1 0.6 0.3 151.8 12.6 4.1 2.4 – – 184.1 6.6
Organic Revenue growth 14.0 2.0 33.9 7.7 11.4 4.7 19.3 1.6 11.2 6.3 0.2 4.6 90.0 3.2
2021 Ongoing Revenue 749.2 3.9 488.0 10.8 254.0 5.0 1,375.0 14.2 192.8 8.7 4.5 4.6 3,063.5 9.8
Pest Control Hygiene
Protect &
Enhance
Central &
regional OH Total
£m % £m % £m % £m % £m %
2020 Ongoing Revenue 1,703.9 – 735.0 – 346.2 – 4.3 – 2,789.4 –
Pro forma revenue from 2020 and 2021 acquisitions 177.8 10.5 3.9 0.5 2.4 0.7 – – 184.1 6.6
Organic growth 138.3 8.1 (65.5) (8.9) 17.0 4.9 0.2 4.6 90.0 3.2
2021 Ongoing Revenue 2,020.0 18.6 673.4 (8.4) 365.6 5.6 4.5 4.6 3,063.5 9.8
194
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Regional analysis
Ongoing Revenue Ongoing Operating Profit
2021
Change from
FY 2020 2021
Change from
FY 2020
AER
£m
CER
£m
AER
%
CER
%
AER
£m
CER
£m
AER
%
CER
%
France 306.4 314.6 1.1 3.8 37.3 38.3 10.9 13.9
Benelux 95.9 98.5 (0.7) 1.9 29.3 30.1 5.1 7.9
Germany 113.9 116.9 (5.6) (3.1) 36.6 37.6 (13.1) (10.8)
Southern Europe 148.9 152.8 4.1 6.9 30.0 30.8 37.5 41.2
Latin America 63.1 66.4 9.3 15.0 7.0 7.2 27.4 30.9
Total Europe 728.2 749.2 1.0 3.9 140.2 144.0 7.1 9.9
UK & Ireland 313.4 314.0 10.6 10.9 83.1 83.3 73.1 73.3
Rest of World 169.7 174.0 7.9 10.6 36.9 37.9 9.2 12.5
UK & Rest of World 483.1 488.0 9.7 10.8 120.0 121.2 46.7 48.2
Asia 242.5 254.0 0.2 5.0 25.5 26.8 (5.1) (0.1)
North America 1,299.1 1,375.0 7.9 14.2 217.6 230.2 2.7 8.7
Pacific 196.5 192.8 10.7 8.7 38.7 38.0 12.0 9.9
Central and regional overheads 4.5 4.5 4.5 4.6 (90.8) (91.3) (2.0) (2.5)
Restructuring costs – – – – (9.7) (10.2) 26.7 22.4
Ongoing operations 2,953.9 3,063.5 5.9 9.8 441.5 458.7 15.0 19.5
Disposed businesses 2.7 2.7 (80.4) (80.4) – – (109.6) (110.1)
Continuing operations 2,956.6 3,066.2 5.5 9.4 441.5 458.7 15.0 19.5
Category analysis
Ongoing Revenue Ongoing Operating Profit
2021
Change from
FY 2020 2021
Change from
FY 2020
AER
£m
CER
£m
AER
%
CER
%
AER
£m
CER
£m
AER
%
CER
%
Pest Control 1,933.4 2,020.0 13.5 18.6 361.1 375.8 28.2 33.4
– Growth 1,681.1 1,754.4 14.2 19.2 330.7 343.7 28.4 33.5
– Emerging 252.3 265.6 8.8 14.5 30.4 32.1 25.7 32.4
Hygiene 660.1 673.4 (10.2) (8.4) 138.7 141.2 (19.7) (18.3)
– Core Hygiene 547.5 555.6 6.6 8.2
– Disinfection 112.6 117.8 (49.1) (46.8)
Protect & Enhance 355.9 365.6 2.8 5.6 42.2 43.2 33.6 36.8
Central and regional overheads 4.5 4.5 4.5 4.6 (90.8) (91.3) (2.0) (2.5)
Restructuring costs – – – – (9.7) (10.2) 26.7 22.4
Ongoing operations 2,953.9 3,063.5 5.9 9.8 441.5 458.7 15.0 19.5
Disposed businesses 2.7 2.7 (80.4) (80.4) – – (109.6) (110.1)
Continuing operations 2,956.6 3,066.2 5.5 9.4 441.5 458.7 15.0 19.5
Rentokil Initial plc
Annual Report 2021
195
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Notes to the Financial Statements
continued
Operating Margin
Operating Margin is calculated by dividing Ongoing Operating Profit by Ongoing Revenue, expressed as a percentage. Net operating margin by
region and category is shown in the tables below (on a trailing 12-month basis):
2021
%
2020
%
Variance
% points
France 12.2 11.1 1.1
Benelux 30.5 28.8 1.7
Germany 32.2 35.0 (2.8)
Southern Europe 20.2 15.3 4.9
Latin America 10.8 9.5 1.3
Total Europe 19.2 18.2 1.0
UK & Ireland 26.5 17.0 9.5
Rest of World 21.8 21.5 0.3
UK & Rest of World 24.8 18.6 6.2
Asia 10.6 11.1 (0.5)
North America 16.7 17.6 (0.9)
Pacific 19.7 19.5 0.2
Ongoing operations
1
15.0 13.8 1.2
Disposed businesses (0.7) 1.3 (2.0)
Continuing operations
1
15.0 13.7 1.3
2021
%
2020
%
Variance
% points
Pest Control 18.6 16.5 2.1
– Growth 19.6 17.5 2.1
– Emerging 12.1 10.4 1.7
Hygiene 21.0 23.5 (2.5)
Protect & Enhance 11.8 9.1 2.7
Ongoing operations
1
15.0 13.8 1.2
Disposed businesses (0.7) 1.3 (2.0)
Continuing operations
1
15.0 13.7 1.3
1. Operating Margin for ongoing operations and continuing operations is calculated after central and regional overheads and restructuring costs.
Adjusted interest
Adjusted interest is calculated by adjusting the reported finance income and costs by the net interest on pensions and interest fair value
adjustments.
2021
AER
£m
2020
AER
£m
Net finance costs 29.5 72.3
Net interest credit from pensions – 0.5
Finance costs from hedge accounting recognised in other comprehensive income 3.7 4.3
IFRS16 interest adjustment – (2.1)
Interest fair value adjustments (0.1) (37.9)
Adjusted interest 33.1 37.1
Free Cash Flow
The Group aims to generate sustainable cash flow (Free Cash Flow) in order to support its acquisition programme and to fund dividend payments
to shareholders. Free Cash Flow is measured as net cash from operating activities, adjusted for cash flows related to the purchase and sale of
property, plant, equipment and intangible fixed assets, cash flows related to leased assets and dividends received from associates. These items
are considered by management to be non-discretionary, as continued investment in these assets is required to support the day-to-day operations
of the business. A reconciliation ofFree Cash Flow from net cash from operating activities is provided in the table below:
2021
AER
£m
2020
AER
£m
Net cash from operating activities 563.2 523.4
Purchase of property, plant, equipment and intangible fixed assets (159.9) (152.5)
Capital element of lease payments and initial direct costs incurred (88.1) (82.8)
Proceeds from sale of property, plant, equipment and software 7.4 6.3
Dividends received from associates 3.9 11.7
Free Cash Flow 326.5 306.1
196
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Annual Report 2021
Free Cash Flow conversion
Free Cash Flow conversion is calculated by dividing Adjusted Free Cash Flow by Adjusted Profit from continuing operations attributable to equity
holders of the Company, expressed as a percentage. Adjusted Free Cash Flow is measured as Free Cash Flow adjusted for one-off items –
operating and product development additions.
2021
AER
£m
2020
AER
£m
Adjusted profit after tax from continuing operations attributable to equity holders of the Company 335.6 284.9
Free Cash Flow from continuing operations 326.5 306.1
One-off items – operating
1
27.1 6.7
Product development additions 6.4 5.7
Adjusted Free Cash Flow 360.0 318.5
Free Cash Flow conversion 107.3% 111.8%
1. A breakdown of one-off items – operating is shown in Note A1.
Eective Tax Rate
Effective Tax Rate is calculated by dividing adjusted income tax expense by adjusted profit before income tax, expressed as a percentage.
Themeasure is used by management to assess the rate of tax applied to the Group’s Adjusted Profit Before Tax from continuing operations.
Notes
2021
AER
£m
2021
CER
£m
2020
£m
Unadjusted income tax expense A12 61.9 64.4 43.5
Tax adjustments on:
Amortisation and impairment of intangible assets (excluding computer software) 18.2 18.9 17.5
One-off items – operating 1.7 1.8 2.4
Net interest adjustments (1.0) (1.0) 6.5
Adjusted income tax expense (a) 80.8 84.1 69.9
Adjusted profit before income tax (b) 416.5 433.6 355.2
Effective Tax Rate (a/b) 19.4% 19.4% 19.7%
New regional and category reporting structure
In response to the pandemic and increasing importance of hygiene and wellbeing services, in 2021 it was announced that the Hygiene category
would be expanded, creating a larger Hygiene & Wellbeing category from 1 January 2022. Following the formation of the new Hygiene &
Wellbeing category, Protect & Enhance will no longer be managed or reported as a category. France Workwear will remain as a standalone
business and will be reported separately. Other category changes include Ambius moving to Hygiene & Wellbeing, Property Care moving into
Pest Control and Dental Waste moving into Hygiene & Wellbeing.
At the same time, changes are being made to the regional structure, designed to provide clearer geographic links and aligned growth strategies,
as follows.
A
North America: Puerto Rico to join the Latin America region
A
Europe: to include Nordics and Poland, previously in UK & Rest of World region
A
UK & Sub-Saharan Africa: No change to UK, Ireland & Baltics. Sub-Saharan Africa remains in this region. Other Rest of World countries (MENAT and
Caribbean) move to other regions
A
Asia & MENAT: Enlarged region to include Asia and MENAT countries
A
Latin America: Continues to be reported under Europe region but now includes Caribbean (formerly in UK & Rest of World) and Puerto Rico
(formerly in North America)
A
Pacific: No change
The regional and category tables presented above are represented under the new structures on the following pages.
Rentokil Initial plc
Annual Report 2021
197
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Notes to the Financial Statements
continued
Organic Revenue measures
North America Europe
UK & Sub- Saharan
Africa Asia & MENAT Pacific
Central &
regional OH Total
£m % £m % £m % £m % £m % £m % £m %
2020 Ongoing Revenue 1,196.8 – 820.6 – 327.4 – 263.3 – 177.5 – 3.8 – 2,789.4 –
Pro forma revenue from 2020 and 2021
acquisitions 151.8 12.7 18.7 2.3 – – 9.5 3.6 4.1 2.4 – – 184.1 6.6
Organic Revenue growth 17.1 1.4 16.0 1.9 32.1 9.8 12.9 4.9 11.2 6.3 0.7 18.0 90.0 3.2
2021 Ongoing Revenue 1,365.7 14.1 855.3 4.2 359.5 9.8 285.7 8.5 192.8 8.7 4.5 18.0 3,063.5 9.8
Pest Control
Hygiene &
Wellbeing
France
Workwear
Central &
regional OH Total
£m % £m % £m % £m % £m %
2020 Ongoing Revenue 1,721.9 – 895.9 – 167.8 – 3.8 – 2,789.4 –
Pro forma revenue from 2020 and 2021 acquisitions 178.1 10.4 6.0 0.7 – – – – 184.1 6.6
Organic Revenue growth 140.2 8.1 (53.3) (6.0) 2.4 1.5 0.7 18.0 90.0 3.2
2021 Ongoing Revenue 2,040.2 18.5 848.6 (5.3) 170.2 1.5 4.5 18.0 3,063.5 9.8
Regional analysis
Ongoing Revenue Ongoing Operating Profit
2021
Change from
FY 2020 2021
Change from
FY 2020
AER
£m
CER
£m
AER
%
CER
%
AER
£m
CER
£m
AER
%
CER
%
North America 1,290.5 1,365.7 7.8 14.1 215.3 227.8 2.7 8.7
France 306.4 314.6 1.1 3.8 37.4 38.3 10.9 13.9
Benelux 95.9 98.5 (0.7) 1.9 29.3 30.1 5.1 7.9
Germany 113.9 116.9 (5.6) (3.1) 36.6 37.6 (13.1) (10.8)
Southern Europe 148.9 152.8 4.1 6.9 30.0 30.8 37.5 41.2
Nordics 72.0 72.4 4.8 5.3 13.3 13.5 4.7 5.9
Latin America & Caribbean 94.9 100.1 7.3 13.2 16.5 17.3 14.3 19.5
Total Europe 832.0 855.3 1.4 4.2 163.1 167.6 6.8 9.7
UK, Ireland & Baltics 318.4 319.2 10.3 10.6 84.7 84.8 70.8 71.1
Sub-Saharan Africa 40.7 40.3 4.8 3.8 10.0 10.0 5.5 5.8
UK & Sub-Saharan Africa 359.1 359.5 9.7 9.8 94.7 94.8 60.3 60.7
Asia & MENAT 271.3 285.7 3.0 8.5 36.2 38.2 1.7 7.3
Pacific 196.5 192.8 10.7 8.7 38.7 38.0 12.0 9.9
Central and regional overheads 4.5 4.5 18.0 18.0 (96.8) (97.5) (2.4) (3.1)
Restructuring costs – – – – (9.7) (10.2) 26.7 22.4
Ongoing operations 2,953.9 3,063.5 5.9 9.8 441.5 458.7 15.0 19.5
Disposed businesses 2.7 2.7 (80.4) (80.4) – – (109.6) (110.1)
Continuing operations 2,956.6 3,066.2 5.5 9.4 441.5 458.7 15.0 19.5
198
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Category analysis
Ongoing Revenue Ongoing Operating Profit
2021
Change from
FY 2020 2021
Change from
FY 2020
AER
£m
CER
£m
AER
%
CER
%
AER
£m
CER
£m
AER
%
CER
%
Pest Control 1,953.7 2,040.2 13.5 18.5 363.7 378.3 30.5 35.7
– Growth 1,711.4 1,784.6 14.3 19.2 334.9 347.9 29.4 34.4
– Emerging 242.3 255.6 8.1 14.0 28.8 30.4 45.3 53.2
Hygiene & Wellbeing 829.9 848.6 (7.4) (5.3) 167.3 170.6 (14.0) (12.3)
– Core Hygiene & Wellbeing 717.3 730.8 6.4 8.4
– Disinfection 112.6 117.8 (49.1) (46.8)
France Workwear 165.8 170.2 (1.2) 1.5 17.0 17.5 (6.6) (4.1)
Central and regional overheads 4.5 4.5 18.0 18.0 (96.8) (97.5) (2.4) (3.1)
Restructuring costs – – – – (9.7) (10.2) 26.7 22.4
Ongoing operations 2,953.9 3,063.5 5.9 9.8 441.5 458.7 15.0 19.5
Disposed businesses 2.7 2.7 (80.4) (80.4) – – (109.6) (110.1)
Continuing operations 2,956.6 3,066.2 5.5 9.4 441.5 458.7 15.0 19.5
Operating Margin
2021
%
2020
%
Variance
% points
North America 16.7 17.5 (0.8)
France 12.2 11.1 1.1
Benelux 30.5 28.8 1.7
Germany 32.2 35.0 (2.8)
Southern Europe 20.2 15.3 4.9
Nordics 18.6 18.5 0.1
Latin America & Caribbean 17.3 16.4 0.9
Total Europe 19.6 18.6 1.0
UK, Ireland & Baltics 26.6 17.2 9.4
Sub-Saharan Africa 24.8 24.3 0.5
UK & Sub-Saharan Africa 26.4 18.0 8.4
Asia & MENAT 13.4 13.5 (0.1)
Pacific 19.7 19.5 0.2
Ongoing operations
1
15.0 13.8 1.2
Disposed businesses (0.7) 1.3 (2.0)
Continuing operations
1
15.0 13.7 1.3
2021
%
2020
%
Variance
% points
Pest Control 18.5 16.2 2.3
– Growth 19.5 17.3 2.2
– Emerging 11.9 8.8 3.1
Hygiene & Wellbeing 20.1 21.7 (1.6)
France Workwear 10.3 10.9 (0.6)
Ongoing operations
1
15.0 13.8 1.2
Disposed businesses (0.7) 1.3 (2.0)
Continuing operations
1
15.0 13.7 1.3
1. Operating Margin for ongoing operations and continuing operations is calculated after central and regional overheads and restructuring costs.
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Related Undertakings
Subsidiaries and other associated undertakings at 31 December 2021
Subsidiaries:
Company name Share class
% held by
Group
companies
Australia
Unit A1, Lidcombe Business Park, 3-29 Birnie Avenue 2141 Australia
Cannon Hygiene Australia Pty Limited Ordinary 100%
Green Fingers Plant Hire Pty Limited Ordinary 100%
Knock Out Pest Control Pty Limited Ordinary 100%
Pest Away Australia Pty Limited Ordinary 100%
Rentokil Australia Pty Limited Ordinary 100%
Rentokil Initial Asia Pacific Pty Limited Ordinary 100%
Rentokil Initial Pty Limited Ordinary 100%
Rentokil Pest Control (QLD) Pty Limited Ordinary 100%
Rentokil Pest Holdings Pty Limited Ordinary 100%
Rentokil Pty Limited Ordinary 100%
Preference 100%
Austria
Brown-Boveri-Straße 8/2/8, 2351, Wiener Neudorf, Austria
Rentokil Initial GmbH Ordinary 100%
Bahamas
Corporate Services International, 308 East Bay Street, Nassau, PO Box
N-7527, Bahamas
Rentokil Initial (Bahamas) Limited Ordinary 100%
5th Terrace Centreville, PO Box N-1388 Nassau, New Providence,
Bahamas
Tropical Exterminators Limited Common 100%
Tropical Exterminators (Holdings) Limited Common 100%
Barbados
One Welches, Welches St Thomas, Barbados
Rentokil Initial (Barbados) Limited Ordinary 100%
Belgium
Brandekensweg 2, Schelle, 2627, Belgium
Initial Belux N.V.
3
Ordinary 100%
Ambius N.V. Ordinary 100%
Rentokil N.V. Ordinary 100%
Brazil
Carlos de Laet, 3.443 Street, Boqueirão, Curitiba, Paraná, 81650-040, Brazil
União Sul Controle de Pragas Ltda ME
3
Ordinary 100%
Estrado de Gabinal, 957, Bairro da Freguesia Rio de Janeiro, CEP
22760-151, Brazil
Asa Rio Saneamento Ambiental Limitada Ordinary 100%
Avenida Ceci 348 Predio Anexo, Tamboré, São Paulo, Brazil
Asseio Saneamento Ambiental Limitada Ordinary 100%
Rua Professor José Vieira de Mendonça, 770 Sala 308, Belo
Horizonte, Estado de Minas Gerais, Brazil
Ecovec Comércio e Licenciamento de
Tecnologias ltda
Ordinary 100%
Rua Marques Amorim, 99, Boa Vista, Pernambuco, Recife, CEP
50070-355, Brazil
F Genes & Cia Limitada Ordinary 100%
SHC/Norte, Comercio Local, Quadra 115, Bloco A, Loja 45 S Subsolo
49 S, Asa Norte, Brazil
MP – Saneamento Ambiental Limitada Ordinary 100%
Rua Vitor Valpirio, 789 Bairro Anchieta, Porto Alegre, Rio Grande Do
Sul, CEP 90200-230, Brazil
Multicontrole Controle De Pragas E Servicos
Ltda
Ordinary 100%
Company name Share class
% held by
Group
companies
Brunei
Unit D1 & D1-1 Block D, Bangunan Hj Lajim & Anak-anak, Kg Kiarong
Bandar Seri Begawan Brunei Darussalam, BE1318, Brunei Darussalam
Rentokil Initial (B) Sdn Bhd Ordinary 90%
Canada
3325 North Service Road, Burlington, ON L7N 3G2, Canada
Direct Line Sales Limited Class A 100%
Class B 100%
8699 Escarpment Way, Milton, ON L9T 0J5, Canada
Residex Canada Inc. Common 100%
Suite 900, 1959 Upper Water Street, Halifax, NS B3J 2X2, Canada
Rentokil Canada Corporation Class A 100%
Class B 100%
Chile
AV. EL SALTO 4001, of 91-92, Huechuraba, Santiago, Chile
Ingeclean S.A Ordinary 100%
San Martin, Los Ángeles, N° 399, Chile
Plaguisur Limitada
3
Ordinary 100%
Galvarino 8481, Bodega 3, Quilicura, Santiago, Chile
Comercializadora de Insumos y Servicios
Mauco Limitada
Social Rights 100%
El Trapiche No.1322, Galpón No.4, Codominio Pacific, Coquimbo, Chile
Control de Plagas Hidalgo Y Rodriguez
Limitada
Ordinary 100%
El Salto 4001, piso 9, Huechuraba, Santiago, Chile
Comercial e Industrial Premasec Limitada Social Rights 100%
Ingeniería en Sanitización S.A Ordinary 100%
Victor Uribe N° 2080, Quilicura, Santiago, Chile
Rentokil Initial Chile SpA Ordinary 100%
Colombia
Cr 42A 80B 07, Barranquilla, Colombia
Colplagas S.A.S
3
Ordinary 100%
Calle 135 #47-71, Bogota, 1019, Colombia
Continental De Fumigaciones S.A.S
3
Ordinary 100%
Calle 33, No 56 36 Bello, Antioquia, Colombia
Fumigax SAS Ordinary 100%
Calle 93# 11A – 28 office 303, Bogotá, Colombia
Rentokil Initial Colombia SAS Common 100%
Costa Rica
Avenida 18, calles 17 y 19, edificio 47, Barrio Luján, San José, Costa
Rica
Fumigadora Control Tecnico De Plagas S.A. Common 100%
Curaçao
Parke Comersial Korsow, A 24 Veeris, 102077, Curaçao
Chuchubi Pest Control N.V. Ordinary 100%
Czech Republic
Praha 2, Vyšehradská 1349/2, Prague, PSČ 12800, Czech Republic
Rentokil Initial s.r.o. Ordinary 100%
200
Rentokil Initial plc
Annual Report 2021
Company name Share class
% held by
Group
companies
Denmark
Paul Bergsøes Vej 22, 2600 Glostrup, Denmark
Rentokil Initial A/S Ordinary 100%
Dominican Republic
1125 Berkshire Blvd, Suite 150, Reading, PA 19610, United States
Oliver Exterminating Dominicana Corp. Common 100%
El Salvador
Avenida Calzada Guarda Barranco Urbanizacion, Lomas de Altamira,
#14 Pasaje Clarineros, Central America, El Salvador
Sagrip SA de C.V. Ordinary 100%
Estonia
Turi Str. 3/1, 11313, Tallinn, Estonia
Rentokil Oü Ordinary 100%
Eswatini
Umkhiwa House, Lot 195, Kal Grant Street, Mbabane, Eswatini
RI Swaziland (Pty) Limited Ordinary 100%
Fiji
Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji, GPO Box 200
Rentokil Initial Limited Ordinary 100%
Finland
Valuraudankuja 3, 00700 Helsinki, Finland
Rentokil Initial Oy Ordinary 100%
France
6 Rue Livio, 67100 Strasbourg, France
CAFI SAS Ordinary 100%
CAWE FTB Group SAS Ordinary 100%
13-27 avenue Jean Moulin, 93240 Stains, France
Ambius SAS Ordinary 100%
Rentokil Initial Environmental Services SAS Ordinary 100%
Rentokil Initial SAS Ordinary 100%
145 rue de Billancourt, 92100 Boulogne Billancourt, France
Initial Hygiene Services SAS Ordinary 100%
Initial SAS Ordinary 100%
Rentokil Initial Holdings (France) SA Ordinary 100%
SCI Gravigny Ordinary 100%
SCI Vargan Ordinary 100%
Z.A. des Quatre Chemins, BP 21, 95540 Mery-sur-Oise, France
Technivap SAS Ordinary 100%
French Guiana
PAE de Degrad des cannes, Remire-Montjoly, 97354, French Guiana
Rentokil Initial Guyane Sarl Ordinary 100%
Germany
Heuesch 1, 49808, Lingen, Germany
Seemann Schädlingsbekämpfung und
Holzschutz GmbH & Co.KG
3
Ordinary 100%
An der Ziegelei, 47 27383, Scheeßel-Westerholz, Germany
S & A Service und Anwendungstechnik
GmbH
Ordinary 100%
Company name Share class
% held by
Group
companies
Heuesch 1, 49808 Lingen (Ems), Germany
Rentokil Holdings GmbH Ordinary 100%
Rentokil Initial GmbH & Co. KG Ordinary 100%
Rentokil Initial Beteiligungs GmbH Ordinary 100%
Piderits Bleiche 11, 33689, Bielefeld, Germany
Medentex GmbH Ordinary 100%
Rentokil Dental GmbH Ordinary 100%
Ghana
43 Cashew Road, Okpoi, Accra, Ghana
Rentokil Initial (Ghana) Limited Ordinary 100%
Greece
7 Aristotelous Street, Tavros, Athens 177 78, Greece
Rentokil Initial Hellas EPE Ordinary 100%
Guadeloupe
131 ZA de Calbassier, Basse-Terre, 97100, Guadeloupe
SOS Guadeloupe Sarl
3
Ordinary 100%
7 Allée des Papillon, Dothemare, 97139 Abymes, Guadeloupe
Rentokil Initial Guadeloupe Sarl Ordinary 100%
Guatemala
9 Av. 39-97, Zona 8, Ciudad Guatemala, Guatemala
Servicios Agricolas Profesionales S.A. Ordinary 100%
Guernsey
PO Box 155, Mill Court, La Charroterie, St Peter Port, GY1 4ET,
Guernsey
Felcourt Insurance Company Limited Ordinary 100%
Guyana
Lot 8, Charles and Drysdale Streets, Charlestown, Georgetown,
Guyana
Rentokil Initial Guyana Limited Ordinary 100%
Honduras
Departamento de Cortes, San Pedro Sula, Honduras
Sagrip Honduras S.A. Nominative 100%
Hong Kong
23/F Westin Centre, 26 Hung To Rd, Kwun Tong, Hong Kong
Rentokil Hong Kong Investment Limited Ordinary 100%
Rentokil Initial Hong Kong Limited Ordinary 100%
India
2nd floor, Narayani, Ambabai Temple Compound, Aarey Road,
Goregaon (West), Mumbai 400104, India
Rentokil Initial Hygiene India Private Limited Ordinary 100%
Villa No. 3, Crescent Village, Candolim, Goa, 403515, India
PCI Pest Control Private Limited Ordinary 57%
2nd Floor, Narayani, Ambabai Temple Compound, Aarey Road,
Goregaon West, Mumbai Maharashtra, 400 104, India
Corporate Millennium Hygiene Solutions
Private Limited
Ordinary 100%
Rentokil Initial plc
Annual Report 2021
201
Corporate Governance Financial Statements Other InformationStrategic Report
Company name Share class
% held by
Group
companies
Indonesia
South Quarter Tower B, Lantai 21, Unit E,F,G,H. JI. R.A., Kartini Kav. 8,
RT. 010/RW. 004 Kel. Cilandak Barat, Kec Cilandak, Jakarta Selatan,
Indonesia
PT Calmic Indonesia Common 100%
PT Rentokil Indonesia Common 100%
Gedung JDC Lt.6, Jl. Gatot Subroto Kav. 53 Petamburan, Tanah Abang,
Jakarta, Pusat, Indonesia
PT Wesen Indonesia Ordinary 100%
Italy
Via Cavour 3-A-B-C, 40023 CALDERARA DI RENO (BO), Bologna, Italy
Gico Systems SRL
3
Ordinary 100%
Via Laurentina, km. 26, 500 157 a/c 00071 Pomezia, Italy
Rentokil Initial Italia SpA Ordinary 100%
Jamaica
39-41 Second Street, Newport West, Kingston 13, Jamaica
Rentokil Initial (Jamaica) Limited Ordinary 100%
Jordan
Amman, Jabal AlHussien, Al Lud Str. 37 – 1st floor, Jordan
Arena Public Health Co. Ordinary 100%
Kenya
Unit 5 Sameer Industrial Park, Road C, Off Enterprise Road Industrial
Area, Nairobi, Kenya
Rentokil Initial Kenya Limited Ordinary 100%
Lebanon
Adonis Building, Bechara el Khoury, Beirut, Lebanon
Boecker International (Offshore) SAL
3
Ordinary 100%
Boecker Public Health SAL
3
Ordinary 100%
Mazraa, Ras El Nabeh, Bechara El Khoury Street, Beirut, Lebanon
Boecker World Holding SAL
3
Ordinary 100%
Lesotho
Nio. 7 Arrival Centre Kofi Annan Road, Maseru, Lesotho, Maseru, 100,
Lesotho
Rentokil Initial (Pty) Limited Ordinary 100%
Libya
Janzour, Tripoli, Libya
Rentokil Delta Libya for Environmental
Protection JSCO
Ordinary 65%
Lithuania
Drobės g. 62, LT-45181, Kaunas, Lithuania
UAB Dezinfa Ordinary 100%
Luxembourg
Rue de la Chapelle 47, 4967 Clemency, Luxembourg
R-Control Désinfections SA Ordinary 100%
Rentokil Luxembourg Sàrl Ordinary 100%
Malawi
Plot No. LE 377, Patridge Avenue, Limbe, PO Box 5135, Malawi
Rentokil Initial Limited Ordinary 100%
Company name Share class
% held by
Group
companies
Malaysia
Level 8 Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46,
Petaling Jaya, 47301 Selangor Darul, Selangor, Malaysia
Rentokil Initial (M) Sdn Bhd Ordinary 100%
UFTC Sdn Bhd Ordinary 100%
Maldives
No. 6-A, Faamudheyrige Building, Orchid Magu, Repu, Malé, Maldives
Rentokil Initial Maldives (Pvt) Ltd
3
Preferential
Shares
60%
Martinique
Soudon, Le Lamentin 97232, Martinique
Rentokil Initial Martinique Sarl Ordinary 100%
Mexico
Juan Álvarez 482, Centro, 64000 Monterrey, N.L., Mexico
Balance Urbano Control de Plagas SA de CV Ordinary 100%
Mozambique
Avenida da Namaacha, kilometro 6, Residencial Mutateia, Cidade da
Matola, Mozambique
Rentokil Initial Mozambique Limitada Ordinary 100%
Netherlands
Impact 6, 6921 RZ Duiven, Netherlands
Ambius B.V. Ordinary 100%
Oude Middenweg 75, 2491 AC Den Haag, 1191 BN Ouderkerk, Den
Haag, Netherlands
BET Finance B.V. Ordinary 100%
BET (Properties) B.V. Ordinary 100%
Rentokil Initial International B.V. Ordinary 100%
Oude Middenweg 77, Ac Den Haag, NL-2491, Netherlands
UK Address: Compass House, Manor Royal, Crawley, RH10 8PY
Rentokil Initial Overseas (Holdings) B.V. Ordinary 100%
B.V. Rentokil Funding Ordinary 100%
Ravenswade 54-s, 3439 Nieuwengein, LD, Netherlands
Rentokil Initial B.V. Ordinary 100%
Frontstraat 1a, 5405 AK Uden, Netherlands
Holland Reconditionering B.V. Ordinary 100%
New Zealand
Level 1, 89 Carbine Road Mount Wellington, Auckland 1060, New
Zealand
Rentokil Initial Limited Ordinary 100%
Norway
Sanitetsveien 17, Skjetten, Lillestrøm, 2013, Norway
Nokas Skadedyrkontroll AS
3
Ordinary 100%
Skadedyrbutikken AS
3
Ordinary 100%
Sanitetsveien 17, Postboks 84, SKJETTEN 2026, Norway
Rentokil Initial Norge AS Ordinary 100%
People’s Republic of China
East 2nd Floor, No. 460 Wenyi West Road, Xihu District, China
Hangzhou Research Institute of Profume
Fumigation Co. Ltd.
3
Ordinary 80%
Room 103, Building 2, Yuzhongxili#42, Beijing, China
Rentokil Initial (China) Limited Ordinary 100%
Related Undertakings
continued
202
Rentokil Initial plc
Annual Report 2021
Company name Share class
% held by
Group
companies
Peru
Calle 23 Mza. Z-1 Lote 9 Villa El Salvador
Ingeclean Peru Sociedad Anonima Cerrada Ordinary 100%
Philippines
No. 73 Elisco Road, Bo, Kalawaan, Pasig City 1600, Philippines
Rentokil Initial (Philippines) Inc Ordinary 100%
Poland
Ul. Jana Pawla Woronicza, Nr 31, Lok. 78, 02-640 Warszawa, Poland
Rentokil Polska Sp. z.o.o. Ordinary 100%
Portugal
EN 115, Km 78,67, 2664-502, São Julião do Tojal, Portugal
Rentokil Initial Portugal – Serviços de
Protecção Ambiental Limitada
Ordinary 100%
Puerto Rico
1125 Berkshire Blvd, Suite 150, Reading, PA 19610, United States
Rentokil of Puerto Rico, Inc Common 100%
Republic of Ireland
Hazel House, Millennium Park, Naas, County Kildare W91P XP3,
Ireland
Cannon Hygiene International Limited Ordinary 100%
Initial Medical Services (Ireland) Limited Ordinary 100%
Rentokil Initial Holdings (Ireland) Limited Ordinary 100%
Rentokil Initial Limited Ordinary 100%
RTO Investments (Ireland) Limited Ordinary 100%
Saudi Arabia
Suleimaniyah, King Abdelaziz Road, Riyadh, Saudi Arabia
Boecker Public Health Saudia Company
Limited
3
Ordinary 100%
PO Box 30164, Office No. 401, 4th Floor, Al Tamimi Building, Al Khobar,
North Al Khobar 31952, Saudi Arabia
Rentokil Saudi Arabia Limited O.P.C
2
Ordinary 100%
Singapore
No. 16 & 18 Jalan Mesin, 368815, Singapore
Rentokil Initial Singapore Private Limited Ordinary 100%
Rentokil Initial Asia Pacific Management Pte
Limited
Ordinary 100%
Slovakia
Kopcianska 10, 851 01 Bratislava, Slovakia
Rentokil Initial s.r.o. Ordinary 100%
South Africa
2 Stignant Road, Claremont, Cape Town 7708, South Africa
Newshelf 1232 Pty Limited Preference 100%
Rentokil Initial (Dikapi) JV Pty Limited Ordinary 59%
Rentokil Initial (Proprietary) Limited Ordinary 100%
Unit D12 Connaught Park, Riley Road, Beaconvale, Parow 7000, South
Africa
Cannon Hygiene (SA) Proprietary Limited Ordinary 100%
South Korea
2nd Floor, Korea Disaster Relief Association, 371-19 Sinsu-Dong,
Mapo-Gu, Seoul 121-856, Republic of Korea
Rentokil Initial Korea Limited Common 100%
Company name Share class
% held by
Group
companies
Spain
Barrio Campo de Eiro 100 bajo, Pereira.Mos, 36419, Pontevedra, Spain
Officina De Tratamiento De Plagas S.L.
3
Ordinary 100%
Pol. Ind Uranzadi Parcela 1, 48950-ERANDIO, nave 4, Bilbao, Spain
Europea De Servicios E Higiene Euro
Servhi SA Ordinary 100%
Calle Mar Mediiterráneo 1, 28830 San Fernando de Henares (Madrid),
Spain
Initial Gaviota SAU Ordinary 100%
Rentokil Initial España S.A. Ordinary A 100%
Ordinary B 100%
Ordinary C 100%
C/ Mar Mediiterráneo 1 (entrada por Mar Adriático 28830-San,
Fernando de Henares (Madrid)), Spain
Tratamientos Medioambientales Hermo, S.L. Ordinary 100%
Sri Lanka
No. 307, Negombo Road, Peliyagoda, Sri Lanka
Rentokil Initial Ceylon (Private) Limited Ordinary 100%
Sweden
Avestagatan 61, 163 53 Spånga, Sweden
Ambius AB Ordinary 100%
Rent a Plant Interessenter AB Ordinary 100%
Rentokil AB Ordinary 100%
Sweden Recycling AB Ordinary 100%
Verkstadsvägen 3, 24534 Staffanstrop, Sweden
PreventiQ AB Ordinary 100%
Switzerland
Hauptstrasse 3, 4625 Oberbuchsiten, Oberbuchsiten, Switzerland
Rentokil Schweiz AG Ordinary 100%
Bertschenackerstrasse 15, 4104 Oberwil, Switzerland
Medentex GmbH Ordinary 100%
Taiwan
7F No.56 Lane 258, Rueiguang Rd, Neihu District, Taipei, 114 Taiwan,
Province of China
Initial Hygiene Co Limited Ordinary 100%
Rentokil Ding Sharn Co Limited Ordinary 100%
Tanzania
1st Floor, Opal Place, 77 Haile Selassie Road, Masaki, P.O. Box 79651,
Dar es Salaam, Tanzania
Initial Hygiene (T) Limited Ordinary 100%
Thailand
160 Vibhavadi Rangsit Road, Khwaeng Ratchadapisek, Khat Dindaeng,
10400, Thailand
Cannon Pest Management Co. Limited Ordinary 100%
Rentokil Initial (Thailand) Limited Ordinary 100%
Trinidad and Tobago
Field no. 82, KK-LL Aranguez South, Trinidad and Tobago
Rentokil Initial (Trinidad) Limited Ordinary 100%
Rentokil Initial plc
Annual Report 2021
203
Corporate Governance Financial Statements Other InformationStrategic Report
Company name Share class
% held by
Group
companies
Tunisia
Zone Industrielle route de Moknine, 5080 Teboulba, Tunisia
CAP Tunis Ordinary 100%
Turkey
1201, 1 Sokak No:2 K:3 D:301-302 Su Plaza Yenişehir, Konak, İzmir,
Turkey
Rentokil Initial Çevre Sağlığı Sistemleri
Ticaret ve Sanayi AŞ
Ordinary 100%
Uganda
Plot No 2012, Kalinabiri Road, Ntinda Kampala, Uganda
Rentokil Initial Uganda Limited Ordinary 100%
United Arab Emirates
Shop No.6, Jurf Industrial Zone 2, Ajman, United Arab Emirates
Al Muhtaref Pest Control LLC
3
Ordinary 100%
Office number 1403, PO Box 41999, TECOM, Al Barsha Heights, Dubai,
United Arab Emirates
Boecker Food Safety LLC
3
Ordinary 100%
Boecker Pest Control LLC
3
Ordinary 100%
Al Hall Industrial, Fujairah, United Arab Emirates
Boecker Pest Control LLC – Fujairah
3
Ordinary 100%
Al Shafar Tower 1, 14th floor, office No. 1404, TECOM, Al Barsha
Heights, Dubai, United Arab Emirates
Boecker Public Health Pest Control
3
Equipment Trading LLC
3
Ordinary 100%
Al Suhyeen, Rolla, Office 205, Sharjah, United Arab Emirates
Specialist Int. Pest Control LLC
3
Ordinary 100%
4th Floor, Suite No. 401, Oud Metha Office Building, Umm Hurair 2,
Dubai, UAE
National Pest Control LLC Ordinary 100%
Rentokil Initial Pest Control LLC Ordinary 100%
United Kingdom
Compass House, Manor Royal, Crawley, RH10 9PY
Anzak Landscapes Ltd Ordinary
100%
AW Limited Ordinary 100%
B.E.T. Building Services Limited Ordinary 100%
BET Environmental Services Ltd Ordinary 100%
BET (No.18) Limited Ordinary 100%
Deferred
Ordinary 100%
BET (No.68) Limited Ordinary 100%
BET Pension Trust Limited Ordinary 100%
BPS Offshore Services Limited
1
Ordinary 100%
Broadcast Relay Service (Overseas) Limited
1
Ordinary 100%
Castlefield House Limited Ordinary 100%
Chard Services Limited Ordinary 100%
CHL Legacy Limited
1
Ordinary
100%
Dudley Industries Limited Ordinary 100%
Enigma Laundries Limited Ordinary 100%
Enigma Services Group Limited Ordinary 100%
Enviro-Fresh Limited Ordinary 100%
Environmental Contract Services Limited
1
Ordinary 100%
Euroguard Technical Services Limited
1
Ordinary 100%
Grayston Central Services Limited Ordinary 100%
Hometrust Limited Ordinary 100%
Initial Limited Ordinary 100%
Initial Medical Services Limited
1
Ordinary 100%
Opel Transport & Trading Company Limited Ordinary 100%
Peter Cox Limited Ordinary-A 100%
Company name Share class
% held by
Group
companies
Plant Nominees Limited Ordinary 100%
Prokill (UK) Limited
1
Ordinary-A 100%
Ordinary-B 100%
Ordinary-C 100%
Ordinary-D 100%
Prokill Limited Ordinary-A 100%
Ordinary-B 100%
Ordinary-C 100%
Ordinary-D 100%
Rapid Washrooms Limited Ordinary-A 100%
Ordinary-B 100%
Ordinary-C 100%
Rentokil Dormant (No. 6) Limited Ordinary 100%
Rentokil Initial (1896) Limited Ordinary 100%
Rentokil Initial (1993) Limited
1
Ordinary 100%
6% Non-
Redeemable
Preference 100%
Rentokil Initial 1927 plc Ordinary
AUD
Redeemable
Preference
100%
100%
CAD
Redeemable
Preference 100%
CLP
Redeemable
Preference 100%
DKK
Redeemable
Preference 100%
EUR
Cumulative
Preference
(Non-
Redeemable) 100%
IDR
Redeemable
Preference 100%
NOK
Redeemable
Preference 100%
NZD
Redeemable
Preference 100%
USD
Redeemable
Preference 100%
Rentokil Initial Americas Limited
1
Ordinary 100%
Rentokil Initial Asia Pacific Limited
1
Ordinary 100%
Rentokil Initial Brazil Limited
1
Ordinary 100%
Rentokil Initial Finance Limited Ordinary 100%
Rentokil Initial Holdings Limited
1
Ordinary 100%
Rentokil Initial Investments Limited Ordinary 100%
Rentokil Initial Investments South Africa
1
Ordinary 100%
Rentokil Initial Pension Trustee Limited Ordinary 100%
Rentokil Initial Services Limited Ordinary 100%
Rentokil Initial UK Limited Ordinary 100%
Rentokil Insurance Limited Ordinary 100%
Rentokil Limited
1
Ordinary 100%
Rentokil Overseas Holdings Limited
1
Ordinary 100%
Rentokil Property Care Limited Ordinary 100%
Rentokil Property Holdings Limited
1
Ordinary 100%
RI Dormant No.18 Limited Ordinary 100%
RI Dormant No.20 Limited Ordinary 100%
Stratton House Leasing Limited Ordinary 100%
Target Express Holdings Limited Ordinary 100%
Target Express Limited Ordinary 100%
Related Undertakings
continued
204
Rentokil Initial plc
Annual Report 2021
Company name Share class
% held by
Group
companies
United Kingdom continued
Target Express Parcels Limited Ordinary 100%
TEB Cleaning Services Limited Ordinary 100%
The Ca’D’Oro, 45 Gordon Street, Glasgow, G1 3PE, UK
Industrial Clothing Services Limited Ordinary 100%
Convertible
Participating
Preference
100%
Pest Protection Services (East) Limited Ordinary 100%
Pest Protection Services (Scotland) Limited Ordinary-A 100%
RI Dormant No.12 Limited Ordinary 100%
Wise Property Care Limited Ordinary 100%
United States
5670 W. Cypress Street, Suite B, Tampa, Florida, 33607, United States
Environmental Pest Service Holdings, LLC Ordinary 100%
101 Emerson Road, Milford, New Hampshire, 03055, USA
J.P. Pest Services, LLC
3
Common 100%
Airborne Vector Control LLC
3
Common 100%
Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801,
United States
Rentokil Initial US Holdings, Inc.
3
Common 100%
Leto Holdings I, Inc.
3
Common 100%
Leto Holdings II, LLC
3
Common 100%
1201 Peachtree Street, NE Suite 1240, Atlanta, GA 30361, United States
Initial Contract Services LLC US$ Interests 100%
1125 Berkshire Blvd, Suite 150, Reading, PA 19610, United States
Advanced Pest Management Co, LLC Common 100%
Cygnet Enterprises, Inc (North Carolina) Common 100%
Cygnet Enterprises, Inc (Michigan) Common 100%
Cygnet Enterprises Northwest, Inc Common 100%
Cygnet Enterprises West, Inc Common 100%
Medentex LLC Common 100%
Mississippi Mosquito Control, LLC Interests 100%
Mosquito Control of Lafourche, LLC Interests 100%
Mosquito Control Services, L.L.C. Interests 100%
Mosquito Control Services of Florida, LLC Interests 100%
Mosquito Control Services of Georgia, LLC Interests 100%
Rentokil Initial Environmental Services LLC Interests 100%
Rentokil North America, Inc. Ordinary 100%
Rittiner Group, L.L.C. Interests 100%
Solitude Lake Management, LLC Common 100%
St. Charles Mosquito Control, L.L.C. Interests 100%
St. John Mosquito Control, L.L.C. Interests 100%
Terrebonne Mosquito Control, LLC Interests 100%
Vector Disease Acquisition, LLC Common 100%
Series A 100%
Series B 100%
Vector Disease Control International, LLC Common 100%
2540 Lawrenceville Hwy, Lawrenceville, GA 30044, United States
Asiatic Holdings LLC Ordinary 100%
Creative Plantings Inc Ordinary 100%
Steritech-Canada Inc. Common 100%
United Transport America LLC Interests 100%
Virginia Properties Inc Ordinary 100%
PO Box 4510, 10 Free Street, Portland, ME 04112, United States
Asiatic Investments, Inc. Ordinary 100%
Company name Share class
% held by
Group
companies
Uruguay
La Paz, 1227, Departamento de Montevideo, Uruguay
Livelux S.A. Ordinary 100%
Chana, 2033, Departmento de Montevideo, Uruguay
La Sanitaria S.A. Ordinary 100%
Vietnam
68 Hong Ha, Ward 2, Tan Binh District, Ho Chi Minh City, Vietnam
Rentokil Initial (Vietnam) Company Limited Ordinary 100%
Virgin Islands, British
Moore Stephens International Services (BVI) Limited, PO BOX 3186,
Road Town, Tortola, British Virgin Islands
Boecker International (BVI) Ltd
(in liquidation)
Ordinary 100%
Associated undertakings:
Company name Share class
% held by
Group
companies
France
41 Avenue de La Porte de Villiers, 92200 Neuilly-Sur-Seine, France
SCI Pierre Brossolette Ordinary 26.247%
Japan
Kyoritsu Seiyaku Building, 1-5-10 Kudan, Minami Chiyoda-Ku, Tokyo,
Japan
Nippon Calmic Limited Ordinary 49%
Nigeria
Old Ojo Road, Off Badagry Expressway, Agboju, Lagos, 359/361 ,
Nigeria
Boecker Public Health Services Limited
3
Ordinary 30%
Norway
Veverivegen 10, 2848 Skreia, Norway
Skadedyrkontrollen ØSt As
3
Ordinary 40%
Qatar
16 A Al Mana Business Tower, Doha, Qatar
Boecker Public Safety Services – Qatar
W.L.L.
3
Ordinary 24.5%
United Kingdom
Compass House, Manor Royal, Crawley, RH10 9PY
Hometrust Kitchens Limited Ordinary 25%
Torchsound Properties Limited
1
Ordinary 50%
1. As permitted by section 479A of the Companies Act 2006, the Company intends to take
advantage of the audit exemption in relation to the individual accounts of these
companies.
2. The percentage of shares held by Group companies remains unchanged in 2021 for all
companies except Rentokil Saudi Arabia Limited O.P.C where the shareholding
increased from 60% to 100%.
3. Acquired by the Group in 2021.
Rentokil Initial plc
Annual Report 2021
205
Corporate Governance Financial Statements Other InformationStrategic Report
Parent Company Balance Sheet
At 31 December
Notes
2021
£m
2020
£m
Non-current assets
Investments 4 289.6 283.1
Debtors – amounts falling due after more than one year 5 2,750.0 –
Deferred tax assets 6 14.9 25.5
Retirement benefit assets 7 18.2 18.2
Derivative financial instruments 8 9.8 37.0
3,082.5 363.8
Current assets
Debtors – amounts falling due within one year 5 23.9 2,520.4
Cash and cash equivalents 109.5 856.0
Derivative financial instruments 8 1.2 –
134.6 3,376.4
Current liabilities
Creditors – amounts falling due within one year 9 (804.0) (806.7)
Bank and other borrowings 10 (83.3) (475.1)
Derivative financial instruments 8 (0.6) –
(887.9) (1,281.8)
Net current (liabilities)/assets (753.3) 2,094.6
Non-current liabilities
Bank and other borrowings 10 (1,253.7) (1,331.3)
Deferred tax liabilities 6 (6.5) (6.4)
Derivative financial instruments 8 (33.5) (32.3)
(1,293.7) (1,370.0)
Net assets 1,035.5 1,088.4
Equity capital and reserves
Share capital 11 18.6 18.5
Share premium 12 6.8 6.8
Cash flow hedge reserve 8.8 –
Retained earnings 1,001.3 1,063.1
Total equity 1,035.5 1,088.4
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own Statement of Comprehensive
Income. The Company reported a profit for the year ended 31 December 2021 of £60.0m (2020: £29.6m).
The Financial Statements on pages 206 to 211 were approved by the Board of Directors and were signed on its behalf by Andy Ransom and
StuartIngall-Tombs on 3 March 2022.
Andy Ransom Stuart Ingall-Tombs
Chief Executive Chief Financial Officer
206
Rentokil Initial plc
Annual Report 2021
Parent Company Statement of Changes in Equity
For the year ended 31 December
Called up
share
capital
£m
Share
premium
account
£m
Cash flow
hedge
reserve
£m
Cost of
hedging
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2020 18.5 6.8 – – 1,035.5 1,060.8
Profit for the year – – – – 29.6 29.6
Other comprehensive income:
Remeasurement of net defined benefit asset – – – – (6.4) (6.4)
Net exchange adjustments offset in reserves – – – – (1.6) (1.6)
Movement on cash flow hedge – – – – (4.9) (4.9)
Tax related to items taken directly to other comprehensive income – – – – 2.2 2.2
Total comprehensive income for the year – – – – 18.9 18.9
Transactions with owners:
Share-based payments charged to profit and loss – – – – 2.7 2.7
Share-based payments debited to investments – – – – 2.8 2.8
Tax related to items taken directly to equity – – – – 3.2 3.2
At 31 December 2020 18.5 6.8 – – 1,063.1 1,088.4
Profit for the year – – – – 60.0 60.0
Other comprehensive income:
Remeasurement of net defined benefit asset – – – – (0.3) (0.3)
Cost of hedging – – – (1.5) – (1.5)
Transfer between reserves – – (4.4) – 4.4 –
Movement on cash flow hedge – – 13.2 – – 13.2
Total comprehensive income for the year – – 8.8 (1.5) 64.1 71.4
Transactions with owners:
Shares issued in the year 0.1 – – – (0.1) –
Dividends paid to equity shareholders – – – – (138.7) (138.7)
Share-based payments charged to profit and loss – – – – 3.3 3.3
Share-based payments debited to investments – – – – 6.5 6.5
Tax related to items taken directly to equity – – – – 4.6 4.6
At 31 December 2021 18.6 6.8 8.8 (1.5) 1,002.8 1,035.5
1. The closing 2020 cash flow hedge reserve balance of £4.4m was reclassified to its own reserve in the year to aid visibility.
Shares of £0.1m (2020: £0.1m) have been netted against retained earnings. This represents 9.4m (2020: 7.7m) shares held by the Rentokil Initial
Employee Share Trust. The market value of these shares at 31 December 2021 was £54.9m (2020: £39.0m). Dividend income from, and voting
rights on, the shares held by the Trust have been waived.
Rentokil Initial plc
Annual Report 2021
207
Corporate Governance Financial Statements Other InformationStrategic Report
Notes to the Parent Company Accounts
1. Accounting convention
These Financial Statements are prepared using the historical cost convention (as modified to include the revaluation of certain financial
instruments) and on a going concern basis, are prepared in accordance with Companies Act 2006 as applicable to companies using Financial
Reporting Standard 101 Reduced Disclosure Framework (FRS 101). Inpreparing these Financial Statements, the Company applies the recognition,
measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006
(‘Adopted IFRSs’), but makes amendments where necessary in order to comply with the Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has beentaken. The results of Rentokil Initial plc are included in the Consolidated Financial
Statements of Rentokil Initial plc which are presented onpages 150 to 205.
The Company has taken advantage of the following disclosure exemptions under FRS 101, all of which have equivalent disclosures included
intheConsolidated Financial Statements:
A
the requirements of paragraphs 45(b) and 46–52 of IFRS 2 Share-based Payment;
A
the requirements of paragraphs 62, B64(d), B64(e), B64(g), B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66 and B67
ofIFRS3Business Combinations;
A
the requirements of IFRS 7 Financial Instruments: Disclosures;
A
the requirements of paragraphs 91–99 of IFRS 13 Fair Value Measurement;
A
the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of: (i) paragraph 79(a)
(iv) of IAS 1; (ii) paragraph 73(e) of IAS 16 Property, Plant and Equipment; (iii) paragraph 118(e) of IAS 38 Intangible Assets; (iv) paragraphs 76and
79(d) of IAS 40 Investment Property; and (v) paragraph 50 of IAS 41 Agriculture;
A
the requirements of paragraphs 10(d), 10(f), 39(c) and 134–136 of IAS 1 Presentation of Financial Statements;
A
the requirements of IAS 7 Statement of Cash Flows;
A
the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
A
the requirements of paragraph 17 of IAS 24 Related Party Disclosures;
A
the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members ofagroup,
provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
A
the requirements of paragraphs 134(d)–134(f) and 135(c)–135(e) of IAS 36 Impairment of Assets.
2. Principal accounting policies
Judgements and key areas of estimation
The preparation of Financial Statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires
theCompany’s Directors to exercise judgement in applying the Company’s accounting policies. The areas where significant judgements and
estimates have been made in preparing the Financial Statements and their effect are disclosed in Note 3 and the Consolidated Financial
Statements.
Investments
Investments held as fixed assets are stated at cost less provision for any impairment. In the opinion of the Directors, the value of such investments
are not less than shown at the balance sheet date.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost (where
hedge accounting is not applied); any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
profit and loss account over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has a continuing right to defer settlement of the liability for at least 12 months
after the balance sheet date under its committed bank credit facility.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs
from its tax base, except for differences arising on:
A
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither
accounting nor taxable profit; and
A
investments in subsidiaries and jointly controlled entities where the Company is able to control the timing of the reversal of the difference and itis
probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax assets/liabilities are settled/recovered.
Financial instruments and risk management
The Company policy in respect of financial instruments and risk management is disclosed in Section C of the Notes to the Consolidated Financial
Statements. Disclosures have been made on financial instruments as required by the Companies Act 2006.
ECL calculations are performed annually for intercompany debtors and are a probability weighted estimate of credit losses based on the
Company’s historical credit loss experience adjusted for debt specific factors.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity.
208
Rentokil Initial plc
Annual Report 2021
Share-based compensation
The Company operates one equity-settled, share-based compensation plan. The economic cost of awarding shares and share options to
employees is recognised as an expense in the profit and loss account equivalent to the fair value of the benefit awarded. The fair value of
optionsover the Company’s shares awarded to employees of subsidiary companies is treated as a capital contribution, resulting in an increase
ininvestments. The fair value is determined by reference to option pricing models, principally Monte Carlo and adjusted Black-Scholes models.
The charge is recognised in the profit and loss account over the vesting period of the award. At each balance sheet date, the Company revises
itsestimate of the number of options that are expected to become exercisable. Any revision to the original estimates is reflected in the profit
andloss account with a corresponding adjustment to equity immediately to the extent it relates to past service and the remainder over the rest
ofthe vesting period.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Financial Statements in the period in which the dividends
are approved by the Company’s shareholders. Interim dividends are recognised when paid. See Note D1 of the Consolidated Financial
Statements for details of dividends proposed in the year.
3. Critical accounting estimates and judgements
The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based
onhistorical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Inthefuture, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are shown below (please refer to the
notes to the Consolidated Financial Statements for further detail). Sensitivities to the estimates and assumptions are provided, where relevant,
inthe relevant notes to the consolidated accounts.
A
retirement benefits: key actuarial assumptions and estimates over future costs of winding up the scheme (Note A10 and Note 7).
4. Investments
2021
£m
2020
£m
At 1 January 283.1 280.3
Share-based payments to employees of subsidiaries 6.5 2.8
At 31 December 289.6 283.1
The Company’s sole direct subsidiary undertaking is Rentokil Initial Holdings Limited. All other indirect subsidiary undertakings are listed on
pages200 to 205.
5. Debtors
2021
£m
2020
£m
Amounts falling due within one year:
Amounts owed by subsidiary undertakings (non-interest bearing loans repayable on demand) 20.2 60.4
Amounts owed by subsidiary undertakings (interest bearing loan with effective interest rate of 5%) – 2,457.9
Other debtors 3.7 2.1
23.9 2,520.4
Amounts falling due after more than one year:
Amounts owed by subsidiary undertakings (interest bearing loan with effective interest rate of 2.5%) 2,750.0 –
Amounts owed by subsidiary undertakings relates to an interest bearing loan that matures in July 2026 (2020: July 2021).
6. Deferred taxation
2021
£m
2020
£m
The deferred tax asset is made up as follows:
Tax losses – 16.0
Long-term incentive plan 14.9 9.5
14.9 25.5
The deferred tax liability is made up as follows:
Defined benefit pension scheme (6.5) (6.4)
(6.5) (6.4)
Rentokil Initial plc
Annual Report 2021
209
Corporate Governance Financial Statements Other InformationStrategic Report
7. Pension commitments
At 31 December 2021 the Rentokil Initial 2015 Pension Scheme (RIPS) pension asset amounted to £18.2m (2020: £18.2m). As there is no
contractual agreement or stated policy forcharging the net defined benefit cost of RIPS to participating entities, the net defined benefit cost
isrecognised fully by the Company. On 4 December 2018 the Trustee entered into a binding agreement with PIC to insure the liabilities of the
RIPS, known as a buy-in. In December 2021 the final true-up premium was paid to PIC and on 24 February 2022 the insurance policy with PIC was
transferred to the individual members of the Scheme. Accordingly in 2022 both the Scheme’s assets and liabilities have been reduced by the
policy value (£1,238.6m). For more information on pension commitments and the pension settlement, see Note A10 of the Consolidated Financial
Statements.
The movement in the net defined benefit asset for the RIPS over the accounting period is as follows:
Present value
of obligation
2021
£m
Fair value of
plan assets
2021
£m
Total
2021
£m
Present value
of obligation
2020
£m
Fair value of
plan assets
2020
£m
Total
2020
£m
At 1 January (1,369.3) 1,387.5 18.2 (1,333.3) 1,369.9 36.6
Interest on net defined benefit asset¹ (18.8) 19.1 0.3 (25.7) 26.7 1.0
Total pension income/(expense) (18.8) 19.1 0.3 (25.7) 26.7 1.0
Remeasurements:
– Remeasurement gain on scheme assets – (77.8) (77.8) – 69.6 69.6
– Remeasurement loss on obligation² 77.5 – 77.5 (76.0) – (76.0)
Contributions:
– Benefit payments 63.0 (63.0) – 65.7 (65.7) –
– Refund of surplus – – – (13.0) (13.0)
At 31 December (1,247.6) 1,265.8 18.2 (1,369.3) 1,387.5 18.2
1. Service costs, settlement and administration expenses are charged to operating expenses, and interest cost and return on plan assets to finance cost
andincome.
2. The remeasurement loss on the defined benefit obligation comprises remeasurement gain arising from changes in demographic assumptions of £2.2m
(2020:remeasurement gain of £16.1m), remeasurement gain arising from changes in financial assumptions of £75.3m (2020: loss of £117.1m) and remeasurement
loss arising from experience of £0.5m (2020: gain of £25.0m).
8. Derivative financial instruments
Fair value
assets
2021
£m
Fair value
assets
2020
£m
Fair value
liabilities
2021
£m
Fair value
liabilities
2020
£m
Interest rate swaps (level 2):
– non-hedge 11.0 37.0 (8.8) (24.0)
– cash flow hedge – – (25.3) (8.3)
11.0 37.0 (34.1) (32.3)
Analysed as follows:
Current portion 1.2 – (0.6) –
Non-current portion 9.8 37.0 (33.5) (32.3)
11.0 37.0 (34.1) (32.3)
Cash flow hedge accounting has been applied to derivatives (marked as ‘cash flow hedge’ in the table above) in accordance with IFRS 9. Where
no hedge accounting has been applied, related derivatives have been marked as ‘non-hedge’. Any ineffectiveness on the cash flow hedge is
taken directly to finance costs. During the year there was a loss of £0.8m (2020: £0.7m) from those derivatives relating to ineffectiveness in a cash
flow hedge relationship. Cash flow hedge accounting has beenapplied to €340.0m of the €400m 2024 bond, €179.4m of the €500m 2026 bond
and €175.0m of the €600m 2028 bond. The cross-currency interest rate swaps are used as hedging instruments to hedge the volatility in the £/€
exchange rate of the bonds. For the year ended 31 December 2021, the amount in comprehensive income related to cash flow hedge accounting
was a gain of £13.2m (2020: £4.9m loss).
9. Creditors
2021
£m
2020
£m
Amounts falling due within one year:
Amounts due to subsidiary undertakings (non-interest bearing loans repayable on demand) 795.2 796.5
Other creditors 8.8 10.2
804.0 806.7
Notes to the Parent Company Accounts
continued
210
Rentokil Initial plc
Annual Report 2021
10. Bank and other borrowings
2021
£m
2020
£m
Amounts falling due within one year 83.3 475.1
Amounts falling due after one year 1,253.7 1,331.3
Medium-term notes and bond debt comprises:
Bond interest
coupon
Effective hedged
interest rate
Non-current
€400m bond due November 2024 Fixed 0.95% Fixed 3.08%
€500m bond due May 2026 Fixed 0.875% Fixed 1.54%
€600m bond due October 2028 Fixed 0.50% Fixed 1.08%
Average cost of bond debt at year-end rates 1.78%
The Company bank debt comprises:
Facility
amount
£m
Drawn at
year end
£m
Headroom
£m
Interest rate at
year end
%
Non-current
£550m RCF due August 2025 550.0 – 550.0 0.14
11. Share capital
During the year five million new shares were issued in relation to employee share schemes.
2021
£m
2020
£m
Issued and fully paid:
At 31 December – 1,859,332,965 shares of 1p each (2020: 1,854,332,965) 18.6 18.5
12. Share premium
2021
£m
2020
£m
At 1 January and 31 December 6.8 6.8
13. Contingent liabilities
The Company has provided guarantees in respect of bank and other borrowings held by its subsidiary undertakings. In addition, there are
contingent liabilities in respect of litigation, pensions and tax, none of which are expected to give rise to any material outflow.
14. Audit services
Note A8 to the Consolidated Financial Statements provides details of the remuneration of the Company’s auditor for the Group.
15. Employees
The Company has 11 employees (2020: 11 employees). Details on employee costs are in Note D4 of the Consolidated Financial Statements.
Services for finance, taxation, treasury, legal, HR and IT are provided by Rentokil Initial 1927 plc and recharged to the Company. Information on
Directors’ emoluments, share and other interests, transactions and pension entitlements is included in the Directors’ Remuneration Report in this
Annual Report.
16. Share-based payments
Share-based payments for the financial period were £9.8m (2020: £5.5m) of which £3.3m (2020: £2.7m) was charged to the profit and loss
account and £6.5m (2020: £2.8m) was debited to investments. Share options relating to the Board of Directors are disclosed in the Directors’
Remuneration Report and detailed share-based payment disclosures are shown in Note A11 of the Consolidated Financial Statements.
17. Related party transactions
The Company has not undertaken any transactions with related parties during the year, other than transactions with wholly owned related parties
of Rentokil Initial plc. Such transactions are exempt from disclosure under FRS 101. There were no transactions with non-wholly owned related
parties of Rentokil Initial plc.
18. Post balance sheet events
On 24 February 2022 the buy-out of the Rentokil Initial 2015 Pension Scheme completed when the insurance policy with PIC was transferred to
the individual members of the Scheme. Accordingly both the Scheme’s assets and liabilities have been reduced by the policy value (£1,238.6m).
There were no other significant post balance sheet events affecting the Company since 31 December 2021.
Rentokil Initial plc
Annual Report 2021
211
Corporate Governance Financial Statements Other InformationStrategic Report
Directors’ Report
The Directors submit their report and audited Financial Statements
ofthe Company and the Group to the members of Rentokil Initial plc
(the Company) for the year ended 31 December 2021. Details of the
Directors of the Company during 2021 can be found on pages 84
and85.
The Corporate Governance Report for the year on pages 82 to 136
forms part of the Directors’ Report, together with the sections of the
Annual Report incorporated by reference.
The Company has chosen to disclose the following information in the
Strategic Report on pages 1 to 80 and 144 to 149:
A
particulars of any important events affecting the Company which have
occurred since the end of the financial year;
A
an indication of likely future developments in the business of the
Company;
A
an indication of the Company’s research and development activities
(digital technology and innovation solutions are referred to throughout
the Strategic Report but particularly on pages 12, 13, and 55 to 57);
A
details of our colleagues and human rights (Responsible Business,
pages 49 to 72);
A
engagement with colleagues, customers, suppliers and others (pages
30 and 96 to 98);
A
information on greenhouse gas emissions and energy use
(Responsible Business, pages 58 to 65); and
A
principal risks and uncertainties (Risks and Uncertainties, pages 73
to 79).
The Strategic Report and the Directors’ Report constitute the
management report as required under the Disclosure and
Transparency Rule 4.1.8R. Information to be disclosed under Listing
Rule 9.8.4 in relation to the allotment of shares for cash (Listing Rule
9.8.4(7)) and waiver of dividends (Listing Rule 9.8.4(12)) is set out on
page 213. No other paragraphs under Listing Rule 9.8.4 apply.
Company constitution
Rentokil Initial plc is a company incorporated in England and Wales,
with company number 5393279. The Company is a holding company
with limited trading in its own right and with subsidiary undertakings
in80 countries (the Group operates in 88 countries). The Company’s
related undertakings are listed on pages 200 to 205.
Articles of association
The articles of association set out the internal regulations of the
Company and cover such matters as the rights of shareholders, the
conduct of the Board and general meetings. The articles themselves
may be amended by special resolution of the shareholders (by atleast
75% of the votes cast by those voting in person or by proxy). Subject to
company law and the articles of association, the Directors may
exercise all the powers of the Company and may delegate authority to
committees, and day-to-day management and decision making to
individual Executive Directors. The articles of association are available
upon request and are displayed on our website at rentokil-initial.com.
Re-election of Directors and service contracts
In accordance with the articles of association, Directors can be
appointed by the Board and must be subsequently elected by
shareholders at a general meeting. In accordance with the articles of
association and the UK Corporate Governance Code 2018 (the Code),
Directors submit themselves for re-election annually. Directors can
beremoved, and their replacements appointed, by shareholders in
ageneral meeting.
Information on our Board of Directors, including their biographical
details, and changes during 2021, can be found in the Corporate
Governance Report on pages 84 and 85. All Board members will
seek re-election at the AGM in May 2022.
The notice periods given in service contracts are: Andy Ransom,
12months by either party; Stuart Ingall-Tombs, 12 months by either
party; and Richard Solomons, sixmonths by either party. A pro-forma
of the Non-Executive Directors’ letter of appointment is available on
our website along with the Chairman’s letter of appointment.
The appointment dates of the Board of Directors are set out below.
Director Date of appointment
Stuart Ingall-Tombs 15 August 2020
Sarosh Mistry 1 April 2021
John Pettigrew 1 January 2018
Andy Ransom 1 May 2008
Richard Solomons 1 March 2019
Julie Southern 21 July 2014
Cathy Turner 1 April 2020
Linda Yueh 1 November 2017
Directors’ powers
Under the articles of association, the Directors are responsible for the
management of the business of the Company and may exercise all the
powers of the Company subject to the provisions of relevant statutes
and the Company’s articles of association. For example, the articles
contain specific provisions and restrictions regarding the Company’s
power to borrow money. The articles of association also give power
tothe Board to appoint and replace Directors as detailed above.
Powers relating to the issuing of shares are also included in the
articles of association and such authorities are renewed by
shareholders each year at the AGM, as detailed on page 213.
Directors’ interests
The beneficial interests of the Directors, including the interests of any
connected persons, in the share capital of the Company are shown on
page 126. During the year, no Director had any material interest in any
contract of significance to the Group’s business.
Dividend
The Directors have recommended a final dividend of 4.30p per share
for the 52 weeks ended 31 December 2021. Payment of this dividend
is subject to shareholder approval at the 2022 AGM. Further
information on the Company’s dividend policy can be found on page
145 and the key dates for the final dividend can be found on page 216.
Share capital
The Company has a premium listing on the London Stock Exchange
and an over-the-counter American Depositary Receipt (ADR) listing
tofacilitate shareholding in the US. All ordinary shares carry the same
rights and no shareholder enjoys any preferential rights, regardless
ofthe size of their holding.
The Company’s share capital during the year consisted of ordinary
shares of 1p each. There were 1,859,332,965 shares in issue at
31December 2021, which represents 100% of the Company’s issued
share capital (2020: 1,854,332,965). Each ordinary share (other than
treasury shares, which have no voting rights) carries the right to vote
ata general meeting of the Company. The Company did not hold any
treasury shares between 31 December 2020 and 31 December 2021
and accordingly the Company did not sell any treasury shares. The
Company’s articles of association provide that, on a show of hands,
every member who is present in person or by proxy at a general
meeting of the Company shall have one vote. On a poll, every member
who is present in person or by proxy shall have one vote for every
share of which they are a holder.
212
Rentokil Initial plc
Annual Report 2021
The articles do not contain special control rights or restrictions
ontransfer or limitations on the holding of ordinary shares and no
requirements for the prior approval of any transfers. No person holds
securities in the Company carrying special rights with regard to control
of the Company. The Company is not aware of any agreements
between holders of securities that may result in restrictions on the
transfer of securities or on voting rights.
The Company is not directly or indirectly owned or controlled by
another corporation or by an individual and there are no arrangements
which may at a subsequent date result in a change in control of the
Company.
Authority for the Company to allot shares or grant rights to subscribe
for shares up to an aggregate nominal amount of £12,394,000 was
obtained at the AGM on 12 May 2021. The authority remains in force
and approval will be sought from shareholders at the 2022 AGM to
renew the authority for a further year.
During the year, a total of five million ordinary shares with an
aggregate nominal value of £50,000 were issued and allotted to
Computershare Nominees (Channel Islands) Limited, the account
nominee of Computershare Trustees (Jersey) Limited which acts
astrustee for the Rentokil Initial Employee Share Trust (the Trustee).
These shares were issued to satisfy awards that vested in 2021
underthe Company’s Performance Share Plan.
Details of the shares held by the Trustee are contained beneath the
Consolidated Statement of Changes in Equity table on page 152.
Asat31 December 2021, the Trustee holds on trust 0.51% of the issued
share capital of the Company to satisfy awards that vest under the
Company’s Performance Share Plan and Deferred Bonus Plan.
TheTrustee has agreed to waive any right to all dividend payments
onshares held by it, and the voting rights in relation to these shares
are exercised by the Trustee. The Trustee may vote or abstain from
voting with the shares or accept or reject any offer relating to the
shares, in any way it sees fit, without incurring any liability and
withoutbeing required to give reasons for its decision.
Repurchase of shares
Authority for the Company to make purchases of its own shares of
upto 185,900,000 shares was obtained at the AGM on 12 May 2021
and such authority will be valid until the 2022 AGM. No purchases
ofitsshares were made by the Company during 2021. The authority
isnormally renewed annually and approval will be sought from
shareholders at the 2022 AGM to renew the authority for a further
year.
Change of control provisions
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Company, such as some financial and
commercial agreements and employee long-term incentive or share
plans. None of these are deemed to be significant in terms of their
potential impact on the Group as a whole. A description of the Group’s
debt funding arrangements is set out in Note C7 to the Financial
Statements. Note C1 describes the change of control provisions
relating to the Group’s Euro Medium-Term Note Programme.
Substantial shareholders
The Company has been notified pursuant to the Disclosure Guidance
and Transparency Rules (DTR 5) that the following shareholders held,
or were beneficially interested in, 3% or more of the Company’s issued
share capital at 31 December 2021. The information provided below
was correct at the date of notification; however, this may not have
been within the current financial year. It should be noted that these
holdings are likely to have changed since the Company was notified.
However, notification of any change is not required until the next
notifiable threshold is crossed. In order to provide a more accurate
description of our substantial shareholders, we have also disclosed
our significant shareholders holding 3% or more of our issued share
capital as at 31 December 2021.
Substantial interest in share notifications received up to
31December 2021 pursuant to DTR 5
%
No. of ordinary
shares
Nature of
holding
Ameriprise Financial, Inc.¹ 9.99 182,682,307 Indirect
Majedie Asset Management Ltd 5.61 101,963,126 Indirect
T. Rowe Price International Ltd 5.16 95,136,762 Indirect
BlackRock, Inc. 5.05 93,128,464 Indirect
Schroders plc 4.91 89,878,920 Indirect
Invesco Ltd 4.89 89,477,118 Indirect
AXA S.A. 4.80 87,093,421 Indirect
The Capital Group Companies, Inc. 4.46 82,615,045 Indirect
1. Ameriprise Financial, Inc. includes Threadneedle Asset Management
Holdings Ltd.
Between 31 December 2021 and 3 March 2022, the Company was
notified of the following change to the above table in accordance with
DTR 5.
%
No. of ordinary
shares
Nature of
holding
T. Rowe Price International Ltd 4.92 91,554,981 Indirect
Significant shareholders as at 31 December 2021
%
No. of ordinary
shares
T. Rowe Price (Baltimore) 7.05 131,075,625
Columbia Threadneedle Investments (London) 6.54 121,611,128
Fidelity Investments (Boston) 4.98 92,567,148
BlackRock Investment Mgt – Index (San
Francisco) 3.40 63,215,366
Vanguard Group (Philadelphia) 3.36 62,550,897
Capital Research Global Investors (London) 3.33 61,850,092
BlackRock Investment Mgt – Index (London) 3.21 59,657,435
Royal London Asset Mgt (CIS) (Manchester) 3.07 56,993,273
Financial risk management
Details of financial risk management and the relevant policies and
certain exposures of the Company are disclosed in Note C1, on pages
181 and 182, of the Financial Statements.
Key contracts
The Group does not have any dominant customer or supplier
relationships.
Post balance sheet events
There was one significant post balance sheet event affecting the
Group since 31 December 2021. See Note D6 on page 192 for details.
Political donations
It is the Company’s policy not to make payments to political
organisations. The Company does, however, maintain a shareholder
authority to make payments of a political nature but does so only in
order to ensure that the Company has authority from shareholders for
the limited number of activities associated with the operation of the
business which might be caught by the broad definition of payments
Rentokil Initial plc
Annual Report 2021
213
Corporate Governance Financial Statements Other InformationStrategic Report
of a political nature contained within current legislation. There were
nopayments to political organisations during 2021 (2020: £nil).
Equal opportunities
The Company regards equality and fairness as a fundamental right
ofall of its colleagues. Every colleague is required to support the
Company to meet its commitment to provide equal opportunities in
employment and avoid unlawful discrimination. People with disabilities
should have full and fair consideration for all vacancies, and disability
is not seen to be an inhibitor to employment or career development.
Appropriate arrangements are made for the continued employment
and training, career development and promotion of disabled persons
employed by the Company. In the event of any colleague becoming
disabled while with the Company, their needs and abilities would be
assessed and, where possible, we would work to retain them and seek
to offer alternative employment to them if they were no longer able to
continue in their current role.
Engagement with employees, suppliers,
customers and others
We have approximately 46,000 colleagues in our workforce. We
consider our workforce to be those colleagues who are employed
directly by us, and we do not include contractors or agency workers
inthis group. We employ our colleagues directly wherever possible
inorder to invest in their training, to ensure their full understanding
and compliance with our policies, including health and safety
procedures, to allow them to build relationships with our customers
and to become more efficient. The number of contractors or agency
workers throughout the business is not sufficiently material to identify
and engage with them as a separate stakeholder group. However,
likeourcolleagues, our contractors and agency workers must
operateunder our Code of Conduct and we will engage with them
wherever practicable.
A summary of the methods we use to engage with our colleagues
(including UK employees), suppliers, customers and our other key
stakeholders, is provided on pages 30 and 31, while details of Board
engagement is provided throughout the Corporate Governance
Report, principally on pages 96 and 98. The section 172(1) statement
can be found on page 72 and details of principal decisions taken by
the Board during 2021 can be found on pages 94 and 95. Examples
ofhow the Board had regard for stakeholders in its decisions and the
effect of that regard are shown on pages 91 and 98. Over 750
managers and technical experts participate in our Performance Share
Plan (seepage 124). We do not currently offer an all employee share
scheme but will continue to keep this under review.
Branches
The Company, through various subsidiaries, has branches in several
different jurisdictions in which the business operates outside the UK.
Directors’ indemnity and insurance
The Directors are ultimately responsible for most aspects of the
Company’s business dealings. They can face significant personal
liability under criminal or civil law, or the UK Listing, Prospectus,
Disclosure Guidance and Transparency Rules, and can face a range of
penalties, including censure, fines and imprisonment. The Company
considers that it is in its best interests to protect individuals who serve
as Directors from the consequences of innocent error or omission,
since this enables the Company to continue to attract prudent,
appropriately qualified individuals to act as Directors.
The Company maintained at its expense a directors’ and officers’
liability insurance policy throughout the year to afford an indemnity
incertain circumstances for the benefit of Group personnel including,
as recommended by the Code, the Directors. This insurance cover
remains in place. The policy does not provide cover where the
Directoror officer has acted fraudulently or dishonestly.
In addition, the Company has granted indemnities in favour of
Directors, as permitted by sections 232 to 235 of the Companies Act
2006. In general terms, the indemnities protect Directors to the extent
permissible by law from all costs and expenses incurred in the defence
of any civil or criminal proceedings in which judgement is given in their
favour or the proceedings or otherwise disposed of without finding
fault or where there is a successful application to court for relief from
liability. The indemnity operates to the extent that the Director is not
able to recover the relevant amounts under the Company’s directors’
and officers’ liability insurance.
Related party transactions
Other than in respect of arrangements relating to the employment of
Directors, details of which are provided in the Directors’ Remuneration
Report, or as set out in Note D4 on page 191 of the Financial
Statements, which also provides details of transactions with joint
ventures and associate entities, there is no indebtedness owed to
orby the Company to any colleague or any other person considered
tobe a related party.
Disclosure of information to the auditor
The Directors confirm that, insofar as each of them is aware, there
isno relevant audit information (as defined by section 418(3) of the
Companies Act 2006) of which the Company’s auditor is unaware; and
each Director has taken all of the steps that should have been taken
toensure that they are each aware of any relevant audit information
(as defined by section 418(3) of the Companies Act 2006) and to
establish that the Company’s auditors are aware of that information.
Going concern
The Directors, having made enquiries as set out on page 155, consider
that the Company and the Group have adequate resources to continue
in operation for a period of at least 12 months from the date of
approval of these annual Financial Statements. For this reason, they
consider it appropriate to adopt the going concern basis in preparing
the Financial Statements.
Further details on the Group’s net debt, borrowing facilities and
financial risk management policies is provided in Section C Financing
of the Notes to the Financial Statements on pages 181 to 190.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, which
includes the Directors’ Remuneration Report and the Financial
Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law the Directors have prepared the
Group Financial Statements in accordance with UK-adopted
International Accounting Standards and the Company Financial
Statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 Reduced Disclosure Framework, and applicable
law).
Under company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of the profit
or loss of the Group and the Company for that period. In preparing the
Financial Statements, the Directors are required to:
A
select suitable accounting policies and then apply them consistently;
A
state whether for the Group and the Company, applicable
UK-adopted International Accounting Standards have been followed
for the Group Financial Statements, and United Kingdom Accounting
Standards comprising FRS 101 have been followed for the Company
Financial Statements, subject to any material departures disclosed
and explained in the Financial Statements;
A
make judgements and accounting estimates that are reasonable and
prudent; and
A
prepare the Financial Statements on the going concern basis unless it
is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are responsible for safeguarding the assets of the Group
and the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Directors’ Report
continued
214
Rentokil Initial plc
Annual Report 2021
The Directors are also responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and the
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the Financial Statements and the Directors’
Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report, which includes the
Directors’ Remuneration Report and the Financial Statements, taken
as a whole, is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Group’s and the
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in pages
84 and 85 of the Annual Report, confirms that, to the best of their
knowledge:
A
the Group Financial Statements, which have been prepared in
accordance with UK-adopted International Accounting Standards,
give a true and fair view of the assets, liabilities, financial position and
profit of the Group;
A
the Company’s Financial Statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising
FRS 101 Reduced Disclosure Framework, give a true and fair view of
the assets, liabilities, financial position and profit of the Company; and
A
the Annual Report includes a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it faces.
The Directors’ Report on pages 82 to 136 and pages 212 to 215 and
the Strategic Report on pages 1 to 80 and 144 to 149 were approved by
a duly authorised Committee of the Board of Directors and signed on
its behalf by Daragh Fagan, the Company Secretary, on 3 March 2022.
Daragh Fagan
Company Secretary
3 March 2022
Registered office:
Compass House, Manor Royal,
Crawley, West Sussex, RH10 9PY.
Registered in England and Wales No: 5393279
Rentokil Initial plc
Annual Report 2021
215
Corporate Governance Financial Statements Other InformationStrategic Report
Additional Shareholder Information
Registrar
The Company’s Registrar is Equiniti Limited (Equiniti or EQ). All
enquiries relating to the administration of shareholdings, dividends,
change of address and lost share certificates should be directed
toEquiniti. Information and advice can be found on its website.
Contacting Equiniti:
help.shareview.co.uk
0333 207 6581 (+44 (0)121 415 0077 if calling from outside the UK).
Lines are open 8.30am to 5.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales).
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA, UK.
Shareview Portfolio service
You can manage your shareholding online via Equiniti’s Shareview
Portfolio at shareview.co.uk. This allows shareholders to access a
range of information about their shareholdings on registers maintained
by Equiniti and includes shareholding details (such as name and
address), indicative share prices, recent balance changes and
dividend information.
Share dealing services
Equiniti offers shareholders a dealing service which allows you to buy
or sell Rentokil Initial plc shares.
shareview.co.uk
0371 384 2233 (+44 (0)121 415 7065 if calling from outside the UK).
Calls are charged at standard national and international rates. Please
note that both the internet share dealing and telephone share dealing
services are subject to commission charges. Full details can be found
on shareview.co.uk.
ShareGift
Shareholders with small holdings in shares, whose value makes them
uneconomical to sell, may wish to donate them to ShareGift (registered
charity no. 1052686).
For further information, contact:
sharegift.org
help@sharegift.org
+44 (0)20 7930 3737
ShareGift, PO Box 72253, London, SW1P 9LQ
Share price information and history
The current price of the Company’s shares can be found at
rentokil-initial.com/investors.
Mid-market price 31 March 1982 – 7.5375p*
* Adjusted for the 1983 bonus issue and the 1990, 1992 and 1997 share splits.
Mid-market price 31 December 2021 – 584p
2021 high/low – 636.2p /464.6p
Dividends
2021 final dividend
The Directors have recommended a final dividend of 4.30p per share,
for the 52 weeks ended 31 December 2021. Payment of this dividend
is subject to approval at the 2022 AGM. When taken with the interim
dividend of 2.09p paid on 13 September 2021 this gives a total
dividend of 6.39p (2020: 5.41p; asa result of COVID-19 no interim
dividend was paid for the year ended 31 December 2020 and only a
final dividend was paid).
Key dates relating to this dividend are given below.
Ex-dividend date Thursday 7 April 2022
Record date Friday 8 April 2022
Last day for DRIP elections Tuesday 26 April 2022
Annual General Meeting Wednesday 11 May 2022
Payment date Wednesday 18 May 2022
For further dividend information, please see page 145 or go to
rentokil-initial.com/investors.
Dividend payments
Please note that we no longer pay dividends by cheque. All dividend
payments are now credited directly into a shareholder’s UK bank or
building society account. Shareholders who historically received
dividends by cheque and have not yet completed a Dividend Mandate
Form will need to contact our Registrar to request a form for
completion (see above for contact details). For any shareholder who
has not submitted their dividend mandate by the deadline of 8 April
2022, cash will be held in an account and they will need to contact our
Registrar for the cash to be distributed to their UK bank or building
society account. If you do not have a UK bank or building society
account you may be able to arrange for payments to be converted and
paid in your local currency. Please contact our Registrar for more
information.
Dividend reinvestment plan (DRIP)
The Company has a DRIP provided by Equiniti Financial Services
Limited (Equiniti FS), which is a convenient, easy and cost-effective
way to build a shareholding by using cash dividends to buy additional
shares. Rather than having a bank account credited with a cash
dividend, Equiniti FS will use the dividends payable to DRIP
participants to purchase shares on your behalf in the market. Please
go to shareview.co.uk for further information.
Dividend history
Details of the Company’s dividend history can be found on our
websiteat rentokil-initial.com/investors.
American Depositary Receipt (ADR)
The Company has an ADR programme that trades on the
over-the-counter market in the United States. This is a sponsored
Level 1 ADR programme for which the Bank of New York Mellon acts
as depositary. Each ADR is equivalent to five Rentokil Initial plc
ordinary shares.
For enquiries relating to ADRs, please contact:
mybnymdr.com
shrrelations@cpushareownerservices.com
Freephone from the US: +1 888 269 2377
International calls: +1 201 680 6825
Regular mail:
BNY Mellon, PO Box 505000, Louisville, KY 40233-5000, USA
Overnight/certified/registered mail:
BNY Mellon, 462 South 4th Street, Suite 1600, Louisville, KY
40202, USA.
Exchange: OTC (over the counter)
Symbol: RTOKY
CUSIP: 760125104
Ratio (ADR: Ord) 1:5
216
Rentokil Initial plc
Annual Report 2021
Indirect owners of shares with
informationrights
Please note that beneficial owners of shares who have been
nominated by the registered holder of those shares to receive
information rights under section 146 of the Companies Act 2006
arerequired to direct all communications to the registered holder
oftheir shares rather than to Equiniti.
How to avoid share fraud
Reject cold calls: If you’ve been cold called with an offer to buy
orsellshares, the chances are it’s a high-risk investment or a scam.
You should treat the call with extreme caution. The safest thing to
doisto hang up.
Check the firm on the Financial Conduct Authority (FCA) register at
fca.org.uk/register. The Financial Services Register is a public record
of all the firms and individuals in the financial services industry that are
regulated by the FCA.
Get impartial advice: Think about getting impartial financial advice
before you hand over any money. Seek advice from someone
unconnected to the firm that has approached you.
If you suspect that you have been approached by fraudsters, please
tell the FCA using the share fraud reporting form at fca.org.uk/scams,
where you can find out more about investment scams. You can also
call the FCA Consumer Helpline on 0800 111 6768.
If you have lost money to investment fraud, you should report it to
Action Fraud on 0300 123 2040 or online at actionfraud.police.uk.
Find out more at fca.org.uk/scamsmart.
ALWAYS REMEMBER: If it seems too good to be true, it probably is!
Unsolicited mail
The Company is legally obliged to make its register of members
available to the public, subject to a proper purpose test. As a
consequence of this, some shareholders may receive unsolicited mail.
Shareholders wishing to limit the amount of such mail should contact
the Mailing Preference Service (MPS) at:
mpsonline.org.uk
+44 (0)20 7291 3310
MPS FREEPOST LON20771, London, W1E 0ZT
Annual General Meeting
The 2022 AGM will be held at, and be broadcast via live webcast from
the Company’s offices at Compass House, Manor Royal, Crawley, West
Sussex, RH10 9PY from 3.00pm on 11 May 2022 (see page 96 for more
information). The Notice of Meeting is available on our website.
Published information
If you would like to receive a hard copy of this Annual Report, please
contact the Company Secretariat at the Company’s registered office
below. A PDF copy of this report can also be downloaded from our
website.
As a responsible business we are tackling climate change by
committing to achieve net zero carbon emissions from our operations
by the end of 2040. We would urge our shareholders to take
advantage of the option to receive electronic communications from us
by signing up at shareview.co.uk. For each shareholder that elects to
go paperless we will make a donation to the UK charity Cool Earth to
support their efforts to tackle endangered rainforest degradation.
Registered office and headquarters
Rentokil Initial plc
Registered in England and Wales; Company Number: 5393279
Registered Office: Compass House, Manor Royal, Crawley, West
Sussex, RH10 9PY.
rentokil-initial.com
secretariat@rentokil-initial.com
+44 (0)1293 858000
Rentokil Initial plc
Annual Report 2021
217
Corporate Governance Financial Statements Other InformationStrategic Report
Glossary
AER Actual exchange rates
AGM Annual General Meeting
APBITA Adjusted profit before interest, tax and amortisation
APM Alternative Performance Measure
BEIS Department for Business, Energy and Industrial Strategy
Benelux Belgium, the Netherlands and Luxembourg
Board The Board of Directors of Rentokil Initial plc
CAGR Compound annual growth rate
CER Constant exchange rates
CGU Cash-generating unit
Company Rentokil Initial plc
CVC Customer Voice Counts
DBP Rentokil Initial plc Defined Bonus Plan
Director A Director of Rentokil Initial plc
EBITDA Earnings before interest, tax, depreciation and amortisation
ELT Executive Leadership Team
EMTN Euro Medium-Term Note
EPS Earnings per share
ESG Environmental, social and governance
ETR Effective Tax Rate
FRC Financial Reporting Council
FRS Financial Reporting Standards
GAAP Generally Accepted Accounting Practice
GDP Gross domestic product
Group Rentokil Initial plc and its subsidiaries
Growth and Emerging markets Rentokil Initial defined markets for Pest Control operations (see pages 34 and 35)
IAS International Accounting Standards
IFRS International Financial Reporting Standards
IRR Internal rate of return
ISDA International Swaps and Derivatives Association
KPI Key performance indicator
KSA Kingdom of Saudi Arabia
LIBOR London Interbank Offered Rate
LTA Lost time accident
M&A Mergers and acquisitions
MENAT Middle East, North Africa and Turkey
NED Non-Executive Director
NPS Net Promoter Score
Parent Company Rentokil Initial plc
PCI PCI Pest Control Private Ltd (trading as Rentokil PCI)
PPE Personal protective equipment
PSP Rentokil Initial plc Performance Share Plan
PwC PricewaterhouseCoopers LLP
RCF Revolving credit facility
RIPS Rentokil Initial 2015 Pension Scheme
ROU Right-of-use
SHE Safety, health and environment
SID Senior Independent Director
SLF Senior Leadership Forum
TCFD Task Force on Climate-related Financial Disclosures
TSR Total shareholder return
UAE United Arab Emirates
UK & RoW United Kingdom and Rest of World
WDL Working days lost
218
Rentokil Initial plc
Annual Report 2021
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Rentokil Initial plc
Annual Report 2021
219
Corporate Governance Financial Statements Other InformationStrategic Report
About us
Rentokil Initial provides services that protect people and enhance
lives.
We protect people from the dangers of pest-borne disease and the
risks of poor hygiene. We enhance lives with services that protect the
health and wellbeing of people, and the reputation of our customers’
brands.
Rentokil is the world’s leading commercial pest control services
provider. Initial is the world’s leading commercial hygiene services
provider. Ambius is the world’s leading commercial provider of plants
and scenting.
Our local service teams across the world cover over 90% of global
GDP in over 90 of the world’s 100 largest cities across North America,
Europe, UK & Rest of World, Asia and the Pacific. Operating in 88
countries, approximately 90% of our revenues are derived from
outside the UK.
We have over a million customers, from the largest multi-national
pharmaceutical, industrial and food production companies to local
shops, restaurants and homes. With high levels of customer service
and retention rates, we continue to build our global portfolio.
Find out more at rentokil-initial.com.
Cautionary statement This report 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 Guidance 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 2021 Annual Report 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 2021 Annual Report should
beconstrued asaprofitforecast.
Designed and produced by Friend www.friendstudio.com
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