Final Results

Rentokil Initial PLC 28 February 2001 RENTOKIL INITIAL plc PRELIMINARY RESULTS FOR THE YEAR TO 31 DECEMBER 2000 * Expectations met following second half growth in core turnover and core profits and completion of major restructuring programme. * Growth in core turnover in second half accelerated to 3.6% to give full year core turnover up 2.7% at £2067m. * Strong second half improvement in core profits over first half and slightly exceeding those of second half 1999. This improvement reduced decline in full year core profits to 2.7% at £413m. * Successful completion of major disposal programme of non core businesses, realising £619m (£604m net of all costs and adjustments). * Successful completion of all share offer for Ratin of approximately £1.4bn on an underlying one-for-one share basis. * Successful £1.3bn share buy back programme, resulting in 27.14% of share capital being repurchased at an average price of 167.5p. * Earnings per share of 11.71p (1999: 13.47p). * Full year dividend up 10.2% to 4.53p (1999: 4.11p). * 12 bolt-on acquisitions, including a leading German hygiene company and number two in US tropical plants market. * Investment in sales and marketing improvements and e-Business driven new products and productivity initiatives. * Recent major overhaul of management controls, budgetary systems, incentives and reporting procedures completed. Commenting on the results, Chief Executive, Sir Clive Thompson said: 'I am pleased that we have met expectations with a growth of core turnover, much improved core profits in the second half over those of the first, and in particular the completion of a year of massive restructuring. We have now achieved our aim of making the company leaner, more efficient and fitter to take advantage of the excellent opportunities in our markets. All this should lead to a strong growth in earnings per share in 2001.' CORPORATE RESTRUCTURING DISPOSALS We effectively completed the disposal of non core activities realising some £619m to date (£604m net of all costs and adjustments) from the sale of these businesses, thereby achieving our target of at least £600m. RATIN ACQUISITION We successfully completed the all share offer of Danish Investment Trust, Ratin for a total consideration of £1.4bn on an underlying, one-for-one share basis. Ratin owned 32% of Rentokil Initial. Many of the shares purchased in the share buy back derived from ex- Ratin shareholders. SHARE BUY BACK We repurchased 778 million shares (27.14% of the share capital as at March 2000) at a cost of £1.3bn; thereby exceeding our intention as announced in our 1999 Preliminary Results press statement to repurchase 25% of the share capital for approx £1.5bn. We were able to repurchase these shares at an average price of 167.5 pence per share, which represents outstanding value to our shareholders on the basis that share purchases by the company would remain earnings enhancing up to 272 pence per share on the basis of EPS in 2000. FOCUS AND BUNDLING To reflect the new concentration upon our core activities, our business was restructured in the second half into two service areas, Focus and Bundling. Focus services are our higher margin specialised services: Hygiene, Security, Pest Control, Tropical Plants, and niche services of Conferencing and Parcels Delivery. Regional Managing Directors were given sector responsibilities for individual specialised services. Bundling service is our Facilities Management activity, offering a multi- service proposition to large companies. New appointment was made of a Director of Multi-Services and Outsourcing to develop this business. MANAGEMENT Initiatives were continued during 2000 to improve sales personnel retention, sales productivity and client retention. e-Business developments are planned to generate savings and improvements in sales, administration, service and procurement. Greater management efficiency and focus will be achieved through the recent overhaul of management controls, reporting procedures, incentives, and budgetary systems worldwide. A number of key appointments were also made. Roger Payne has been appointed Finance Director. The Regional Managing Director who oversaw the disposals programme was appointed Acquisitions Director from the beginning of 2001. An e-Business Director was appointed with responsibility for driving developments across the company and a Procurement Director was appointed with the brief to centralise company procurement worldwide in order to utilise Internet and other procurement opportunities. TRADING The major restructuring of the business involving disposals of nearly a third of the Company's 1999 sales and a fifth of 1999 profits make it very difficult to compare the full year's results for turnover and profit for 2000 with those of 1999. We, therefore, concentrate our report on the results of the core activities representing the activities continuing into 2001. CORE ACTIVITIES As a result of bolt-on acquisitions and sales and marketing improvements, the rate of growth of turnover in our core services grew from 1.8% in the first half to 3.6% in the second half, producing an overall rate of growth of 2.7% for the full year to £2067m. Organic growth was held back by the availability of suitable personnel in US Security and by the unusually bad weather conditions in the final quarter in UK and some parts of Continental Europe. These delayed the start of new contracts and the completion of jobbing work into the New Year. January 2001 turnover at over 9% growth on January of the previous year reflects to some extent this carry-over. Second half profits exceeded expectations by being slightly higher than those of the second half of last year, which represents a very strong improvement in profits over the first half. However, due to first half trading, full year profits declined by 2.7% to £413.0m. BUSINESS SECTOR ANALYSIS Hygiene Turnover in Hygiene grew by 6.5% in the second half to £316.5m, helped by the acquisition of a German hygiene business, with profits slightly down to £96.6m in the second half representing a significant improvement over the decline in the first half. For the year turnover grew by 4.6% to £617.8m and profits declined by 4.1% to £181.5m representing a disappointing year in the U.K, but good growth in Continental Europe, Asia Pacific and in our much smaller North American business. Security In 2000, turnover grew by 3.1% to £475.5m, and profits declined by 7.8% to £47.4m. In the second half turnover grew by 1.8% to £242.5m and profits declined by 12.3% to £25.0m. This reduction in profitability was due largely to market conditions in North America, where a shortage of labour drove higher wage increases which, in a tight pricing environment, eroded margins. Pest Control Second half turnover grew by 3.4% to £99.1m and profits grew by 2.2% to £36.3m representing a flat performance in the U.K and continuing improvement in trading in Continental Europe, Asia Pacific and N.America. For the full year turnover grew by 4.5% to £194.5m and profits by 4.5% to £70.1m. Tropical Plants Turnover grew by 27.3% in the second half to £61.0m helped by the major U.S. bolt-on acquisition. Profits grew by 15.7% in the second half to £13.3m assisted by the benefits of this acquisition and very good full year results in Europe and Asia Pacific. For the full year turnover grew by 15.8% to £105.6m and profits by 7.4% to £21.8m. Conferencing In the second half turnover grew by 11.9% to £35.8m and profits by 7.8% but this growth was reduced to 2.3% with the implementation of FRS15 to leave profits at £13.1m. Full year turnover growth was strong at 11.9% to £67.9m with profits up by 7.1% to £25.7m. Parcels Delivery Full year turnover increased by 8.6% to £160.8m and profits declined by 7.0% to £27.9m due to first half problems. However, following its disappointing first half this business produced a major recovery in profits in the second half, with profit growth of 13.0% to £18.3m and turnover up by 8.6% to £90.8m. Facilities Management Following the launch of our Facilities Management business in the second half of 2000, we are progressing with the process of building relationships with sub-contractor partners and major buyers of outsourced services in the UK. This is generating the credibility to manage major Facilities Management contracts. We have won contracts in the second half of the year with a whole life value of £130m over 3.5 years. However, the impact of these will not be seen until 2001. As expected turnover and profit continued to decline in the second half by 6.2% to and 28.9% to £217.4m and £17.7m respectively, arising from the loss of low margin contracts in 1999 as reported in March last year. For the full year turnover declined by 6.2% to £445.3m and profits regressed by 29.3% to £35.7m. The necessary development work which has been undertaken since the launch of Facilities Management will, we believe, show positive results during the second half of 2001. Looking to the future, we are confident that this area represents an excellent opportunity for growth. GEOGRAPHICAL ANALYSIS UK Turnover for the year was down by 1.5% to £1,052.4m and profits down by 13.1% to £219.3m with sound performances in Security and Conferencing being offset by a flat performance in Pest Control, disappointing performances in Hygiene, Facilities Management and Parcels Delivery, in spite of the excellent second half results from Parcels Delivery. Continental Europe Turnover for the year grew by 7.0% to £590.6m and profits by 5.5% to £121.3m with good performances in Security, Pest Control, Tropical Plants and a much improved second half performance in Hygiene. North America Turnover for the year was up by 6.7% to £273.7m and profits down by 8.5% to £19.5m with an excellent performance in Tropical Plants and a good performance in Hygiene, being more than offset by a disappointing performance in Security. Asia Pacific and Africa Turnover for the year grew by 10.6% to £150.7m and profits by 14.2% to £50.0m, representing strong performances in Hygiene, Pest Control and Tropical Plants. BOLT-ON ACQUISITIONS Excluding Ratin, in 2000 we made 12 bolt-on acquisitions for £89m (including debt of £22m) principally during the second half of the year. These acquisitions are starting to make good contributions to both Tropical Plants and Hygiene after their successful integration into those businesses. CASH Operating cash flow, after capital investment, was £219m, dividends of £109m reducing it to £110m. Net debt increased by £874m from £89m at end 1999 to £963m at end 2000. This was largely due to the cash outflow from the share buy back being partly offset from the cash inflow from disposals. DIVIDEND The Board is recommending a final Dividend of 3.23p making a full year dividend of 4.53p up 10.2% on 1999 (4.11p). PROSPECTS FOR 2001 2000 was a year of massive structural change in the Company firstly with the disposal of 30% of turnover representing 20% of profits and 10% of the cash flow of the business in 1999; secondly, the all share offer for the Danish Investment Trust, Ratin which held 32% of the shares and thirdly, the share buy back of just over 27% of the stock, much of that stock derived from former Ratin shareholders. Inevitably these changes had a temporary adverse impact upon the trading performance of the remaining business. Looking at 2001 and beyond, the restructured Rentokil Initial is now leaner, more efficient and a more sharply focused business services company. The company now operates in six specialised service activities concentrating on the small and medium sized companies sector, and a facilities management activity concentrating its multi-service proposition to large companies. Rentokil Initial, therefore, now embraces both sectors of the growing support services market with highly cash generative, less cyclical businesses backed with the strong brands of Rentokil and Initial, and operating in all the major economies of Europe, North America and Asia Pacific. The opportunities for organic turnover growth are good in all activities and bolt-on acquisitional growth will be primarily concentrated on the Hygiene and Security sectors in Europe and North America. The continued investment in sales and marketing improvements and bolt-on acquisitions is targeted to lead to accelerating turnover growth. Greatly improved management focus and enhanced productivity derived from greater management effectiveness and improved systems, controls and procurement, albeit in a competitive pricing environment, are targeted to lead to a faster rate of growth in operating profit than turnover. The excellent cash generation from our businesses, if not fully utilised for bolt-on acquisitions, should lead to a reduction in borrowings. The Board expects that success of the above and additional benefits from a possible continuation of the share buy back programme, should lead to a strong growth in EPS in 2001. Issued for Rentokil Initial plc, Felcourt, East Grinstead, West Sussex Press Sir Clive Thompson, Chief Executive (01342) 833022 enquiries R C Payne, Finance Director SEGMENTAL ANALYSIS At 2000 average rates of exchange 6 months to 6 months to 31st 31st Year to 31st Year to 31st December 2000 December 1999 December 2000 December 1999 (restated) £m £m £m £m Business Analysis Turnover Core activities: Hygiene 316.5 297.1 617.8 590.6 Security 242.5 238.1 475.5 461.1 Pest Control 99.1 95.8 194.5 186.1 Tropical Plants 61.0 47.9 105.6 91.2 Conferencing 35.8 32.0 67.9 60.7 Parcels Delivery * 90.8 83.6 160.8 148.1 Facilities Management 217.4 231.8 445.3 474.9 Total core activities 1,063.1 1,026.3 2,067.4 2,012.7 Non core activities 138.6 516.3 566.5 1,018.5 At 2000 average rates 1,201.7 1,542.6 2,633.9 3,031.2 Exchange - 4.7 - 8.0 As reported 1,201.7 1,547.3 2,633.9 3,039.2 Profit Before Tax Core activities: Hygiene 96.6 97.8 181.5 189.3 Security 25.0 28.5 47.4 51.4 Pest Control 36.3 35.5 70.1 67.1 Tropical Plants 13.3 11.5 21.8 20.3 Conferencing 13.1 12.8 25.7 24.0 Parcels Delivery 18.3 16.2 27.9 30.0 Facilities Management 17.7 24.9 35.7 50.5 Interest 3.7 (3.4) 2.9 (8.2) Total core activities 224.0 223.8 413.0 424.4 Non core activities 0.7 64.7 18.7 111.8 Interest (inc. on sale proceeds) 10.7 (1.0) 14.0 (2.1) Total non core activities 11.4 63.7 32.7 109.7 Interest on share buy back (41.3) - (51.6) - Exceptional items (net - note 3) - - 7.0 - At 2000 average rates 194.1 287.5 401.1 534.1 Exchange - 2.0 - 7.0 As reported 194.1 289.5 401.1 541.1 * Included in United Kingdom and Parcels Delivery full year turnover, is £67.3m of turnover derived from franchisees. The 1999 full year figures (£56.2m) have been restated accordingly. At 2000 average rates of exchange 6 months 6 months Year to 31st Year to 31st to 31st to 31st December 2000 December 1999 December 2000 December 1999 (restated) £m £m £m £m Geographical Analysis Turnover Cove activities: United Kingdom * 531.8 541.5 1,052.4 1,067.9 Continental Europe 305.5 280.2 590.6 552.0 North America 148.3 134.3 273.7 256.6 Asia Pacific & Africa 77.5 70.3 150.7 136.2 Total Core Activities 1,063.1 1,026.3 2,067.4 2,012.7 Non core activities: United Kingdom 101.6 164.5 250.3 323.2 Continental Europe 28.1 62.8 92.6 121.6 North America 5.4 284.2 216.7 566.1 Asia Pacific & Africa 3.5 4.8 6.9 7.6 Total Non Core Activities 138.6 516.3 566.5 1,018.5 Total United Kingdom * 633.4 706.0 1,302.7 1,391.1 Continental Europe 333.6 343.0 683.2 673.6 North America 153.7 418.5 490.4 822.7 Asia Pacific & Africa 81.0 75.1 157.6 143.8 At 2000 average rates 1,201.7 1,542.6 2,633.9 3,031.2 Exchange - 4.7 - 8.0 As reported 1,201.7 1,547.3 2,633.9 3,039.2 Profit Before Tax Core activities: United Kingdom 115.5 132.4 219.3 252.5 Continental Europe 65.8 61.5 121.3 115.0 North America 11.3 10.9 19.5 21.3 Asia Pacific & Africa 27.7 22.4 50.0 43.8 Interest 3.7 (3.4) 2.9 (8.2) Total Core Activities 224.0 223.8 413.0 424.4 Non core activities: United Kingdom 1.4 17.9 4.1 33.3 Continental Europe - 13.2 1.9 19.3 North America (1.3) 32.4 11.5 57.5 Asia Pacific & Africa 0.6 1.2 1.2 1.7 Interest (inc. on sale proceeds) 10.7 (1.0) 14.0 (2.1) Total Non Core Activities 11.4 63.7 32.7 109.7 Total: United Kingdom 116.9 150.3 223.4 285.8 Continental Europe 65.8 74.7 123.2 134.3 North America 10.0 43.3 31.0 78.8 Asia Pacific & Africa 28.3 23.6 51.2 45.5 Interest 14.4 (4.4) 16.9 (10.3) 235.4 287.5 445.7 534.1 Interest on share buy back (41.3) - (51.6) - Exceptional items (net - note 3) - - 7.0 - At 2000 average rates 194.1 287.5 401.1 534.1 Exchange - 2.0 - 7.0 As reported 194.1 289.5 401.1 541.1 * Included in United Kingdom and Parcels Delivery full year turnover, is £67.3m of turnover derived from franchisees. The 1999 full year figures (£56.2m) have been restated accordingly. CONSOLIDATED PROFIT AND LOSS ACCOUNT Year to 31st December Year to 31st 2000 December 1999 (restated)* £m £m £m Turnover (including share of associates and franchisees) Continuing operations 2,040.0 Acquisitions 27.4 2,067.4 Discontinued operations 566.5 2,633.9 3,039.2 Less: Share of turnover of associates (all continuing) (21.5) (19.9) Turnover of franchisees (all continuing) (67.3) (56.2) Turnover 2,545.1 2,963.1 Cost of sales (2,047.9) (2,328.5) Gross profit 497.2 634.6 Administration expenses (65.2) (88.1) Operating profit Continuing operations before exceptional items 402.6 Exceptional items (note 3) (12.8) 389.8 Acquisitions 3.7 Continuing operations 393.5 Discontinued operations before exceptional items 18.7 Exceptional items (note 3) 19.8 Discontinued operations 38.5 Total operating profit 432.0 546.5 Share of profit of associates (all continuing) 3.8 4.6 435.8 551.1 Profit/loss on disposals (note 4) - - Profit on ordinary activities before interest 435.8 551.1 Interest payable (net) (34.7) (10.0) Profit on ordinary activities before taxation 401.1 541.1 Tax on profit on ordinary activities (114.3) (154.5) Profit on ordinary activities after taxation 286.8 386.6 Equity minority interests (1.2) (1.3) Profit for the financial year attributable to shareholders 285.6 385.3 Dividends (93.2) (117.6) Profit retained for the financial year 192.4 267.7 Basic earnings per 1p share 11.71p 13.47p Diluted earnings per 1p share 11.69p 13.43p Dividends per 1p share 4.53p 4.11p * 1999 has been restated to include £56.2m of turnover derived from franchisees. CONSOLIDATED BALANCE SHEET at 31st at 31st December 2000 December 1999 (restated) £m £m Fixed Assets Intangible assets 120.2 55.5 Tangible assets 561.7 885.3 Interest in associates 11.3 11.1 Other investments 146.5 23.4 839.7 975.3 Current assets Stocks 44.2 64.5 Debtors 489.7 591.4 Short term deposits and cash 271.1 353.7 805.0 1,009.6 Current liabilities due within one year Creditors (675.3) (770.0) Bank and other borrowings (312.2) (154.8) (987.5) (924.8) Net current (liabilities)/assets (182.5) 84.8 Total assets less current liabilities 657.2 1,060.1 Deferred liabilities due after one year Creditors (10.7) (14.3) Bank and other borrowings (921.7) (287.7) Provisions for liabilities and charges (246.7) (301.6) Net (liabilities)/assets (521.9) 456.5 Equity capital and reserves Called up share capital 20.8 28.7 Share premium account 36.7 35.7 Capital redemption reserve 7.9 - Other reserves 4.8 5.2 Profit and loss account (597.6) 382.0 Equity shareholders' funds (527.4) 451.0 Equity minority interests 5.5 4.9 Capital employed (521.9) 456.5 CONSOLIDATED CASH FLOW STATEMENT Year to 31st Year to 31st December 2000 December 1999 £m £m Operating activities Operating profit 432.0 546.5 Non cash exceptional items (7.0) - Depreciation charge 165.1 191.3 Net movement in working capital (12.6) (54.0) Net cash inflow from operating activities 577.5 683.8 Associates' dividends Dividends received from associates 1.5 1.0 Interest/Dividends Interest received 24.5 29.9 Interest paid (59.1) (40.6) Interest element of finance lease payments (2.7) (3.6) Dividends paid to minority interests (0.8) (0.8) Net cash outflow from returns on investment and servicing of finance (38.1) (15.1) Taxation Tax paid (136.9) (128.5) Capital Expenditure and financial investment Purchase of tangible fixed assets (214.3) (285.5) Less: financed by leases 8.1 18.1 (206.2) (267.4) Sale of tangible fixed assets 21.6 54.7 (184.6) (212.7) Purchase of own shares for employee share option schemes (2.0) (6.0) Net cash outflow for capital expenditure and financial investment (186.6) (218.7) Acquisitions and disposals Purchase of companies and businesses (103.4) (13.0) Less: net debt acquired 22.3 0.9 Net cash outflow on acquisitions (81.1) (12.1) Disposal of companies and businesses 605.4 - Less: - loan notes and deferred consideration (157.0) - - net debt disposed (10.2) - Net cash inflow on disposals 438.2 - Equity dividends paid Dividends paid to shareholders (109.1) (109.7) Net cash inflow Net cash inflow before use of liquid resources and financing 465.4 200.7 Management of liquid resources Movement in short term deposits with banks (4.5) (0.4) Financing Issue of ordinary share capital 1.0 3.1 Own shares purchased for share buy-back (1,303.8) - Net loan movement 649.7 11.3 Net finance lease movements (14.6) (13.8) Net cash (outflow)/inflow from financing (667.7) 0.6 Net cash (Decrease)/increase in net cash (206.8) 200.9 Reconciliation of movement in net debt Net debt at 1st January (88.8) (294.2) Cash flows (206.8) 200.9 Acquired with subsidiaries (22.3) (0.9) Movement in loans (649.7) (11.3) Movement in deposits 4.5 0.4 Net debt disposed with subsidiaries 10.2 - Movements in finance leases 6.5 (4.3) Exchange adjustments (16.4) 20.6 Net debt at 31st December 962.8 (88.8) SHAREHOLDERS' FUNDS MOVEMENTS Year to 31st Year to 31st December 2000 December 1999 (restated) £m £m Profit for the financial year attributable to shareholders 285.6 385.3 Dividends (93.2) (117.6) New share capital issued 1.0 3.1 Own shares purchased/cancelled (1,303.8) - Write off of Ratin investment (14.2) - Goodwill written back on disposed businesses 144.4 - Exchange adjustments 1.2 (2.7) Net movement in shareholders' funds (979.0) 268.1 Opening shareholders' funds * 451.6 183.5 Closing shareholders' funds (527.4) 451.6 * Originally £457.2m (1999: £189.1m) before prior year adjustment of £5.6m in respect of FRS 15. Notes 1. The profit and loss accounts and cash flow statements for the year to 31st December 2000 and 31st December 1999 have been translated at average rates of exchange for the relevant periods. Balance sheets have been translated at period end rates. 2. From the dates of acquisition to 31st December 2000, acquisitions contributed £27.4m to turnover, £3.7m to profit before interest and £2.2m to profit after interest 3. Exceptional items charged to operating profit comprise: £m Release of provision held against tax and legal actions against an overseas subsidiary 19.8 Write down of investment in own shares held by an ESOP trust (12.8) 7.0 4. The disposal programme announced by the company in August 1999 has been completed and the non core businesses disposed of are included as discontinued operations in the Profit and Loss account and as non core in the business analysis. The gross proceeds included in these Financial Statements amounted to £616.2m with costs of disposal paid amounting to £10.8m to leave net proceeds of £605.4m. The net assets of the businesses sold were £457.0m and the goodwill, previously written off to reserves, amounted to £144.4m. The difference between the net proceeds and net assets together with goodwill has produced a nil effect on the profit and loss account after accruing a further £4.0m for known or potential costs associated with the disposal programme. Included in the proceeds are £134m of convertible loan notes and £23m of other deferred consideration. A further £2.7m was received after the end of the year bringing the gross proceeds to £618.9m and the net proceeds, after total costs of disposal, to £604.1m. 5. The Company's recommended offer for Ratin A/S, a public listed Danish company, which held 919 million shares in Rentokil Initial plc, was declared wholly unconditional on 30th May 2000 and, with the implementation of compulsory acquisition procedures, the Company now owns 100% of Ratin's share capital. The total consideration was settled through the issue of 912m new shares and the payment of £14.2m in net cash for those shares held by former Ratin shareholders in excluded territories, together with associated costs (net of cash acquired). The ordinary shares in the Company held by Ratin were cancelled shortly after the passing of a special resolution at an Extraordinary General Meeting of the Company held on 25th August 2000. The value of such shares acquired has been written off against shareholders' funds and such shares have also been disregarded in calculating the earnings per share from the date they were acquired. 6. As of 31st December 2000, the Company had purchased 778m of its own shares in the market (representing 27.1% of the Company's issued share capital at 1st March 2000) under the authorities given by shareholders at the extraordinary general meetings held on 27th March, 9th May and 25th September 2000. These shares have been cancelled and their nominal value transferred to the capital redemption reserve on the balance sheet. These shares have been excluded in calculating the weighted average number of shares in issue after the date of their purchase by the Company. 7. Goodwill represents the excess of the fair value of the consideration paid over the fair value of net tangible assets acquired. Goodwill in respect of acquisitions made since 1st January 1998 is shown as an asset and (in accordance with FRS 10) each acquisition is assessed to determine the useful economic life of the business and the goodwill. Normally, it is considered that the goodwill relating to the acquisitions made by the company is an inseparable part of the total value of the relevant business and that such businesses, if properly managed, should grow in value over the years and hence neither the value of the business nor the goodwill have a measurable economic life. Where it is considered that the value of the business or its goodwill do have a measurable economic life, the goodwill will be amortised through the profit and loss account by equal annual instalments over such useful economic life. The potential economic lives of businesses and goodwill are reviewed annually and revised where appropriate. Where the useful economic life does not exceed 20 years, goodwill will be subject to an impairment review at the end of the year of acquisition and at any other time if the directors believe that an impairment may have occurred. Where the goodwill is assigned a useful economic life which is in excess of 20 years or is indefinite, the value of the businesses and goodwill are assessed for impairment against carrying values on an annual basis in accordance with FRS 11. Any impairment will be charged to the profit and loss account in the period in which it arises. The Directors have reviewed the acquisitions made in the 12 months to 31st December 2000 and determined that these businesses have indefinite useful lives and hence the goodwill is not being amortised. 8. Full year 1999 figures, as restated for FRS 15 and turnover derived from franchisees, are taken from the accounts filed with the Registrar of Companies. 9. The company has adopted Financial Reporting Standard 15 (Tangible Fixed Assets) in the period and assets which had previously been revalued have been restated at historical cost as a prior year adjustment and the prior period figures have been restated accordingly. The adjustment to fixed assets was £5.6m and the impact on the profit and loss account was immaterial. 10. Turnover for the period includes £21.5m (1999: £19.9m) and profit £3.8m (1999: £4.6m) in respect of the group's share of associates (principally Nippon Calmic Limited and Rezayat Sparrow Arabian Crane Hire Co Ltd). 11. Tax comprises UK Corporation Tax (less double taxation relief) £52.1m (1999: £82.6m) and overseas tax £62.2m (1999: £71.9m). 12. The financial information in this statement does not constitute statutory accounts within the meaning of s.240 of the Companies Act 1985. 13. Copies of the annual report will be dispatched to shareholders and will also be available from the company's registered office at Felcourt, East Grinstead, West Sussex, RH19 2JY. FINANCIAL CALENDAR * Final dividend to be paid on 8th June 2001 to shareholders on the register on 4th May 2001. * Report and Accounts expected to be despatched to shareholders in early April 2001. * Annual General Meeting at Draper's Hall, Throgmorton Avenue, London EC2N 2DQ on Thursday, 31st May 2001 at 10.30 a.m. SERVICES As one of the largest business services company in the world, with some 96,000 employees. Rentokil Initial provides a range of support services under the heading Focus which covers Specialised Services; Hygiene, Security, Pest Control, Tropical Plants and Niche Specialised Services; Conferencing and Parcels Delivery and Bundling which covers Cleaning, Catering, Hospital Services and Facilities Management. Specialised Services Hygiene An extensive range of high quality hygiene services including specialist washroom services providing soap dispensers, tampon dispensers and disposal, warm air dryers and roller towels. Textile services includes the design, manufacture, supply and rental of work garments and the supply of special floor mats. In addition linen is supplied and laundered for restaurants, hotels, hospitals and industry and roller towels and towel dispensers are provided and serviced. Security Effective security solutions are provided to meet clients' needs for personal safety and protection of property and contents. These can be met through the application of advanced technologies and well trained, skilled personnel. Pest Control Special emphasis is placed on health, safety and protection of the environment. Targeted research of pests provides effective and innovative solutions to pest control, which together with improved working practices, set higher standards of operational effectiveness and environmental care for the customer. Tropical Plants Interior landscaping services on a rental and maintenance or purchase and maintenance basis offers clients installations ranging from single specimens to trees and displays for the largest atrium, which enhance the working environment. Niche Specialised Services Conferencing Corporate and public sector clients are able to concentrate on their core activities whilst gaining maximum benefit from their conference and training investments provided through specialised conference and training facilities. Parcels Delivery Whether it is a time sensitive package or letter to a client, an urgent overnight deadline can be met together with exceptional service standards, by telephone order or via the Internet to all sectors of industry and commerce. An internet delivery service includes intranet tracking of parcels and digital images of signatures for proof of delivery. Bundling Facilities Management Facilities Management meets the growing demand for multi-services where a range of specialist services are provided through one point of contact. Contracts may include not only our specialised services, but also external sub-contracted services where required. Summary Across more than 40 countries including every major economy, the brands of Rentokil and Initial represent consistent quality service.

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