Interim Results

RNS Number : 2820H

Rentokil Initial PLC

31 July 2019

This announcement contains inside information and the person responsible for making this announcement is

Daragh Fagan, Group General Counsel and Company Secretary.

2019 Interim Results

Strong first half performance: Organic Revenue growth of 4.2%, continued momentum in M&A and increased spend expectation for full year, divestment of our 17.8% stake in JV with Haniel

Results	H1 2019	Growth
£m	AER	AER	CER

Ongoing Revenue	1,289.9	10.7%	8.8%
Revenue	1,298.9	10.4%	8.5%
Ongoing Operating Profit	152.1	13.0%	11.6%
Operating Profit	125.5	15.4%	14.6%
Adjusted profit before tax	141.6	13.7%	12.4%
Profit before tax	113.8	3.7%	3.2%
Free Cash Flow	95.9
Adjusted EPS	5.99p	14.0%	12.9%
EPS	4.75p	1.3%	0.7%
Dividend per share	1.51p	15.2%

2019 Interim Highlights

●	Revenue, profit and cash in excess of medium-term targets: Ongoing Revenue up 8.8%, Organic Revenue up 4.2%, Ongoing Operating Profit up 11.6% and Free Cash Flow conversion of 93% (over last 12 months)
●	Strong Organic Revenue growth of 4.2% equals our highest growth rate in the first half for over a decade, despite wet weather in North America in Q2
●	11.4% Ongoing Revenue growth in Pest Control (4.8% Organic), driven by strong innovation and digital performance (H1 2018: 4.0% Organic)
●	6.5% Ongoing Revenue growth in Hygiene (4.3% Organic), reflecting very good results in UK, Europe and Pacific and ongoing contributions from acquisitions (H1 2018: 2.1% Organic)
●	0.4% pts improvement in Group Net Operating Margin at 11.9%, 0.5% pts improvement in North America Net Operating Margin at 12.1%
●	Free Cash Flow of £95.9m, a £22.9m increase on the prior year (H1 2018: £73.0m)
●	1.1% pts improvement in customer retention at 87.1% (1.8% pts improvement in Pest Control at 86.1%), 2.8% pts improvement in colleague retention at 87.0% (over the last 12 months)
●	Continuing strong M&A performance:
	o	17 businesses - 12 Pest Control, 5 Hygiene - acquired in Growth (9 deals) and Emerging (8 deals) markets with combined annualised revenues of c. £55m. Cash spend on current and prior year M&A of £120.9m
	o	7 pest control acquisitions in North America with c. $59m annualised revenues in H1 (vs Full Year 2018: c. $53m) including a Top 40 US pest control company, Active Pest Control, in Atlanta
	o	New city entries in Jordan (Amman) and Sri Lanka (Colombo)
	o	Given progress in H1 and ongoing strength of pipeline, M&A spend for FY 2019 now expected to exceed £250m
●	Sale of stake in JV with Haniel:
	o	Divestment of 17.8% interest in CWS-boco International GmbH to Haniel agreed on 30 July 2019 for cash consideration of €430m
	o	Carrying value of investment in JV at 30 June 2019 €290m, resulting in estimated profit on disposal of ~€140m
	o	Proceeds from the sale to initially reduce debt and then redeployed to support the Group's M&A programme
●	15.2% increase in interim dividend at 1.51p per share

Andy Ransom, CEO of Rentokil Initial plc, said:

"The business has performed very well in the first six months with strong Organic growth of 4.2%, driven by the expertise of our people, our continued leadership in technology and innovation, and further execution of high-quality acquisitions in Growth and Emerging markets.

"We have made 17 acquisitions in Pest Control and Hygiene - including a top-40 pest control business in the US and new market entries into Jordan and Sri Lanka. We are also delighted with the sale of our stake in the JV with Haniel, the proceeds from which we will use initially to reduce debt and then redeploy into further M&A to build scale and density. Our pipeline of M&A prospects remains strong and we now expect to spend over £250m on acquisitions during the year.

"I am very encouraged by our performance in H1 and confident of delivering further progress in the second half. Our guidance for the full year remains unchanged."

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Non-GAAP measures

This statement includes certain financial performance measures 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. 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, and enable the users of the accounts to focus on the performance of the businesses retained by the Group, and that will therefore contribute to the future performance. Ongoing Profit and Adjusted profit before tax exclude certain items that could distort the underlying trading performance. Ongoing Revenue and Ongoing Operating Profit are presented at CER unless otherwise stated. An explanation of the measures used along with reconciliation to the nearest IFRS measures is provided in Note 11 on page 24.

Joint ventures: the term 'joint venture' is used to describe the Company's relationship with Haniel, however our 17.8% interest in CWS-boco International GmbH is accounted for as an associate. The term is also used to describe the Company's 57% ownership of Rentokil PCI, however our interest in PCI has been consolidated in our Financial Statements.

IFRS 16 - Leases

The new leasing standard, IFRS 16, has been effective from 1 January 2019 and has been adopted from that date with no restatement of prior year comparatives required. This has resulted in a number of leases (largely vehicle and property leases) that were previously accounted for as operating leases (expensed as incurred) now being capitalised as Right of Use (ROU) Assets within fixed assets and depreciated over the lease term with a corresponding lease liability and interest charge.

The new standard has not had a material impact on either Adjusted profit before tax or the underlying net cash flows of the business but it has changed the presentation of the profit and loss account, the cash flow statement and the balance sheet as follows:

●	On transition, fixed assets and net debt have increased by £178.0m and £184.0m respectively.
●	The operating lease charge has been replaced with depreciation of the ROU assets and an interest charge on the corresponding lease liability.
●	In the first six months of the year this has increased Operating Profit by c. £1m (versus our guidance of £5m - £10m for the full year). This is offset by an increased interest charge of c. £3m. This is a non-cash change and is in excess of the operating profit benefit and the difference has therefore been added back when arriving at the Group's adjusted interest charge to aid year over year comparability.
●	The implementation of IFRS 16 does not impact underlying net cash flows but new leases will now be treated as capital expenditure, which has impacted the way depreciation, EBITDA and capex are reported in the net debt and cash flow statement on page 12. At the half year, depreciation on IFRS 16 ROU assets was £33m increasing EBITDA by the same amount which was largely offset by a £28m increase in capex and a £3m increase in interest.

Revenue

Ongoing Revenue, which excludes disposed businesses, increased by 8.8% in H1, with all regions contributing to growth. Organic Revenue growth of 4.2% is in excess of our medium-term financial target of 3% to 4% growth per annum. Acquisitions have performed well during the period, contributing 4.6% to Ongoing Revenue growth.

Ongoing Revenue in Pest Control grew by 11.4% during the first half (4.8% Organic) with good performances being delivered across both Growth and Emerging markets, which rose by 11.1% and 13.0% respectively. Hygiene reported increased revenues of 6.5%, up 4.3% on an Organic basis, aided by strong performances from our Pacific, UK and Europe operations and ongoing good contributions from the Cannon and CWS transactions. Ongoing Revenue in our Protect & Enhance businesses increased by 1.4%, all Organic, reflecting further improvement in our French Workwear business. This was partially offset however by our small Property Care business in the UK which continues to be impacted by challenging conditions in the UK housing market.

Total Revenue of £1,298.9m rose by 8.5% at constant exchange rates and by 10.4% at actual exchange rates, reflecting growth across all main regions and business categories.

Profit

Ongoing Operating Profit, which excludes the results of disposed businesses, increased by 11.6% in the first half to £151.8m, again reflecting growth across all five regions. Ongoing Operating Profit benefited by c. £1.0m from the implementation of IFRS 16 which was adopted from 1 January 2019. Restructuring costs amounted to £3.3m at CER (2018: £4.3m) consisting mainly of costs in respect of initiatives focused on driving operational efficiency across all regions.

Adjusted profit before tax at actual exchange rates of £141.6m, which excludes the impact of one-off items, increased by 13.7% on H1 2018, reflecting growth in all regions of operation. Adjusted interest costs were £0.7m higher than last year including c. £1.0m from the implementation of IFRS 16.

One-off items net to a credit of £9.8m (H1 2018: £2.6m credit) which includes a £17.6m credit in relation to the revised estimate of the cash surplus anticipated on the buy-out of the UK Defined Benefit Pension Scheme. This was offset by an increase in intangible asset amortisation of £7.9m as a result of the strong M&A programme, resulting in a 3.7% increase in profit before tax at actual exchange rates of £113.8m.

Cash (at AER)

Free Cash Flow increased by £22.9m to £95.9m, delivering Free Cash Flow Conversion of 93% for the last 12 months (H1 2018: 91%). The increase was principally driven by the annual cash dividend of £16.6m received from the JV with Haniel in H1 with the increase in Adjusted Operating Profit largely being offset by working capital outflows due to phasing. Depreciation and capital expenditure have both increased due to the implementation of IFRS 16 from the start of the year but they offset and the net impact was broadly cash neutral.

Cash spent on current and prior year acquisitions totalled £120.9m. Dividend payments amounted to £58.1m, a £7.9m, 15.7% increase on the prior year resulting in an underlying like for like increase in net debt of £83.1m to £1,236.6m. The adoption of IFRS 16 added £184.0m of lease obligations to net debt at 1 January 2019 and this, together with foreign exchange translation and other items, increased net debt by £205.3m, leaving an overall increase in net debt of £288.4m and closing net debt of £1,441.9m.

M&A

We have had another strong first half of M&A activity in 2019 with 17 acquisitions in Pest Control and Hygiene for a cash spend of £120.9m (including cash spent on prior year acquisitions) and the divestment of our 17.8% stake in our JV with Haniel.

During the period we acquired 12 pest control companies in Australia, Canada, Dominican Republic, Thailand, the UK and the US including the acquisition of Active Pest Control in Atlanta, Georgia. We also entered new markets in Jordan and Sri Lanka. In Hygiene we acquired five new businesses in Chile, Colombia, Indonesia, Malaysia and the UK. Combined annualised revenues in the year prior to purchase of the businesses acquired amounted to c. £55m.

In July 2017 the Group's Workwear and Hygiene assets principally in Germany and Benelux were transferred into a joint venture with Haniel for a cash consideration of €520m and a retained 17.8% share in the JV. On 30 July 2019 we agreed to sell our remaining stake in the JV to Haniel for a cash consideration of €430m. As at 30 June 2019 the carrying value of our investment in the JV was €290m, resulting in an estimated profit on disposal of ~€140m. There is no tax on the gain on disposal. Together with the initial consideration for transferring the businesses into the JV of c. €520m and dividends received since its formation of c. €29m, the transaction has realised a total cash return of c. €979m. The proceeds from the sale will be used initially to reduce debt and then redeployed to support to the Group's M&A programme.

Our recent acquisitions continue to perform at or above our required hurdle rates. Going forward we will continue to execute a differentiated and disciplined approach to capital investment and M&A, with clear IRR hurdles by business line. We will continue to seek further acquisition opportunities for the remainder of 2019 in both Pest Control and Hygiene and the pipeline of prospects remains strong. We have made a strong start to Q3, with a further three deals in the US and Latin America, and given the continued strength of our pipeline our anticipated spend on M&A in 2019 is now expected to be above £250m, compared to our previous guidance of £200m - £250m.

Discussions with the CMA continue in relation to our acquisitions in the UK of Cannon Hygiene and Mitie's Pest Control business. Further updates will be provided in due course.

Enquiries:

Investors / Analysts:	Katharine Rycroft	Rentokil Initial plc	01276 536585 / 07811 270734

Media:	Malcolm Padley	Rentokil Initial plc	07788 978 199

A presentation for investors and analysts will be held on Wednesday 31 July 2019 at 9.15am in the Sidney Suite Conference Room, 1st Floor, The Leonardo Royal Hotel, (formerly the Grange Tower Bridge Hotel), 45 Prescot Street, London E1 8GP. This will be available via a live audio web cast at www.rentokil-initial.com.

This announcement 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 announcement 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 announcement should be construed as a profit forecast.

REGIONAL PERFORMANCE

Due to the international nature of the Group, foreign exchange movements can have a significant impact on regional performance. In order to help understand the underlying trading performance, unless otherwise stated, percentage movements in Ongoing Revenue and Ongoing Operating Profit are presented at constant exchange rates.

In North America Ongoing Revenue grew by 9.6% to £482.8m in H1, of which 5.9% was growth through acquisition and 3.7% was Organic. Pest Control grew 10.3% (+3.9% Organic), an improving performance on the 2.5% increase in Organic growth in H1 2018, but held back by unusually wet weather conditions in certain parts of the country in the second quarter. Ongoing Operating Profit growth of 14.7% reflects the combined impact from higher revenues and acquisitions. Seven pest control businesses were acquired in the region in H1 - including Active Pest Control in Atlanta, one of the top 40 pest control companies in the US - with combined annualised revenues of c. $59m (c. £44m) in the year prior to purchase, and ahead of the c. $53m (c. £41m) revenues acquired for the whole of 2018.

Our stated ambition for our North American business is for it to become a $1.5bn revenue business by the end of 2020 and to deliver 18% Net Operating Margins by the end of 2021. The first half has seen further very good progress towards our revenue target as noted above, with ongoing revenue growth of 9.6% in H1 and acquisitions with combined annualised revenues of c. $59m. Given our progress in Organic growth and acquisitions in the first half we remain confident in achieving our $1.5bn revenue target in 2020.

Net Operating Margins in North America improved in the first half of 2019, rising by 50 basis points to 12.1%, supported by stronger organic growth, synergies from acquisitions beginning to flow through and savings in property and procurement from our Best of Breed cost savings programme, partially offset by a greater mix of lower margin product sales. The progress that we have made on margin delivery in H1 means that we are on track to deliver our 18% margin target by the end of 2021.

As we noted at the Preliminary results in February, in addition to operational leverage from increased density, a key dependency for delivery of this margin target is the re-platforming of our IT infrastructure. The key first step in our IT programme is creating a consistent platform across the country. In relation to this supporting infrastructure we will have all of the data from the business into the cloud during 2019 and the large majority of the business will be on a standard operating system by the end of 2019. Having data in one place and a consistent infrastructure delivers cost benefits in its own right through reduced back office costs and more effective management. It also critically allows us to deploy our Group applications across the North American region in the key areas of service, sales and customer communications. The implementation of these applications enables the delivery of Best of Breed margin benefits in 2020 and 2021 meaning that our journey to 18% margins by 2021 is weighted towards the end of this period.

Ongoing Revenue for Europe rose by 7.7% (+4.8% Organic), reflecting an excellent performance in Germany (+16.3%), continued strong growth in Southern Europe (+7.5%) and an improved performance in Benelux and France, which grew by 5.8% and 3.7% respectively. Latin America, which is reported within the Europe region, once again performed well with Ongoing Revenue growth of 20.6%. Ongoing Revenue from our European Hygiene operations grew by 6.3% (2.8% Organic), benefiting from strong performances across the region. Ongoing Revenue from our Pest Control businesses grew by 12.8%, reflecting a 5.1% uplift in growth from acquisitions and strong Organic growth of 7.7%, attributable to a particularly strong performance from our German operations. Ongoing Operating Profit for the Europe region grew by 8.6%, with strong growth in Southern Europe, Germany and Benelux. Net Operating Margins for the Europe region increased by 0.1% points to 18.0%. The region acquired four businesses in Latin America in the period, including two in Hygiene and two in Pest Control, with total combined annualised revenues of c. £4m in the year prior to purchase.

The UK and Rest of World region delivered an excellent performance during the period, with an overall increase in Ongoing Revenue of 10.0%, comprising acquisition growth of 5.5% and Organic Revenue growth of 4.5%. The region delivered continued growth from UK Pest Control and Hygiene, which grew organically by 6.5% and 8.4% respectively, with Pest Control benefiting from large contract wins and Hygiene benefiting from high levels of customer service, improved customer retention and one-off contracts. The otherwise good performance in the region was, however, dampened by UK Property Care which continues to experience weak market conditions. The Rest of World operations delivered good Ongoing Revenue growth of 8.3% with contributions across all of its regional clusters in the Nordics, Caribbean, Africa and MENAT. Overall Ongoing Operating Profit for the region grew by 7.3%, reflecting the higher revenues. Net Operating Margins for the UK & Rest of World region were 0.5% points lower at 18.9%, again impacted by profit decline in UK Property Care. In the first half the region acquired one hygiene and one pest control business with total acquired annualised revenues in the 12 months prior to acquisition of c. £1m.

The Asia region has once again performed well in the first half of 2019 with Ongoing Revenue increasing by 11.6% (+5.5% Organic Revenue growth) with both Pest Control and Hygiene trading well. Ongoing Operating Profit in the region grew by 11.9%. Net Operating Margins were in line with prior year at 10.2%. The region acquired two small pest control businesses in Thailand and Sri Lanka and two hygiene businesses in Indonesia and Malaysia with combined annualised revenues of £7m.

In the Pacific region Ongoing Revenue grew by 2.4%, (+1.9% organic), driven by solid performances across our core Pest Control and Hygiene categories. Our hygiene operations in Australia delivered a notably good performance in the period, reflecting the impact of new customer contracts won in 2018 and 2019, driven in part by stronger sales colleague retention. Ongoing Operating Profit in the region grew by 2.5%. Net Operating Margins were in line with prior year at 19.7%. The region acquired one small pest control company in Australia with annualised revenues of c. £0.4m in the year prior to acquisition.

Our share of Profits from Associates at AER amounted to £12.3m (2018: £12.2m), £8.0m (2018: £8.1m) relating to our joint venture with Haniel and £4.3m (2018: £4.1m) to our Japanese associate. Following the disposal of our remaining stake in the JV with Haniel in July 2019 there will be no further profit contributions from this business. For the 12 months ended 31 December 2018 the JV with Haniel contributed £16.9m of adjusted profit (£12.1m after integration costs, goodwill amortisation and tax).

STRATEGY UPDATE

Overview

Rentokil Initial plc is a strong, global business with leading positions in structural growth markets. We see excellent opportunities to consolidate our positions in existing markets, enter new markets and lead the industry through differentiated investment into product and service innovation and disciplined and accretive M&A. Our strategy, culture of outperformance and consistent business model allows us to deliver strong and sustainable value for our shareholders.

We believe that Rentokil Initial represents a compelling, compounding growth opportunity for investors and set out our investment case below:

●	A leader in our chosen, structural growth markets across three core categories;
●	Employer of Choice, unique culture and business model supports and rewards sustainable growth;
●	Strong track record of revenue and profit growth, high returns, strong cash flow and strong credit rating;
●	Consistency of performance allows reinvestment in our business to compound growth;
●	Fundamental understanding of density to consolidate our positions in existing markets; and,
●	Opportunity for broader based growth as we enter new markets, drive innovation in product and service innovation and deploy digital applications.

Transparent medium-term guidance

In February 2014 we articulated for the first time a series of medium-term financial targets for revenue, profit and cash. After consistent quarter-on-quarter delivery in excess of these financial targets, they were up-weighted in July 2017 to the following:

●	Ongoing Revenue growth of 5% to 8% - H1 2019: 8.8%
●	Organic Revenue growth of 3% to 4% - H1 2019: 4.2%
●	Ongoing Operating Profit growth of c.10% - H1 2019: 11.6%
●	Free Cash Flow Conversion of c.90% - H1 2019: 93% for the last 12 months

Employer of Choice

Service expertise is at the heart of our success and our challenge is to attract, develop and retain the right people able to deliver our promises to our customers. Our Employer of Choice programme, which aims to increase colleague retention, boost line manager capability and build expertise, thereby improving productivity and the services we offer, has made further good progress in the first six months of 2019. During the period we offered c. 800,000 training content and courses to our colleagues, a 10% increase on the first half of 2018. We also developed around 350 items of new training content including training videos to support innovation launches. We are proud to have world class colleague engagement and enablement and have seen further improvements in colleague retention during the period, with a 2.8% improvement year on year at 87%.

Customer service and retention

Our state of service metric remains well above our target 95% and our NPS customer satisfaction scores (measured by our Customer Voice Counts surveys) have strengthened further, with Pest Control CVC scores up 1.6 points and Hygiene CVC scores up 2.0 points during the period. This has led to a 1.1% year-on-year improvement in Group customer retention of 87.1% and a 1.8% improvement in Pest Control customer retention of 86.1%.

Pest Control

A non-cyclical and sustainable growth market

We have an unrivalled global position in the global pest control industry, which is resilient, non-cyclical and characterised by strong growth drivers. These include rising consumer expectations, growing middle classes, increasing workplace and food regulation, climate change, urbanisation and increasing pest pressures. The pest control market is expected to deliver a compound annual growth rate (CAGR) of around 5%¹. The total global pest control market is expected to reach $20bn in 2019.

^{1. Market Data Forecast: July 2018, Rentokil Market Data & Allied Market Research Report, Allied Market Research}

Pest Control accounts for 64% of our Ongoing Revenue and 69% of Ongoing Operating Profit and generated a Net Operating Margin of 16.5% in the first half of 2019. First half Ongoing Revenue and Ongoing Operating Profit grew by 11.4% and 11.5% respectively. Organic Revenue rose by 4.8% with growth through acquisition of 6.6%. The category has delivered a five-year revenue CAGR of 16.8%. Our strategy in Pest Control is to strengthen our position as global leaders through increased organic growth and by establishing stronger market positions particularly in Growth and Emerging markets, and through digital expertise, innovation and acquisitions.

Rentokil is the world's leading commercial pest control company. Our core USP's are:

●	We are the global leader in pest control, with number one positions in 50 markets;
●	We have a strong Employer of Choice programme and outstanding technical expertise;
●	Our powerful Rentokil brand is one of world's top 50² most valuable and recognisable brands;
●	Our core strength is in the attractive commercial sector;
●	We are clear industry leaders in digital technology and innovation.

^{2. Top 50 most valuable Commercial Services brands (Brand Finance Report 2017)}

Leaders in digital technology and innovation

Innovation - in service, in products and in digital applications - is a core component of growth for the business. We believe we are at the forefront of the industry in this regard and the opening of our Power Centre in 2017 has enhanced our capability and strengthened the expertise of our people to ensure we are ideally placed to deliver the best service for our customers and grow our business.

We see tangible, valuable and lasting benefits from our ongoing focus on innovation and this is because:

●	New and enhanced services differentiate us from our competitors and drive sales;
●	They improve our productivity and reduce costs;
●	More sophisticated pest control needs creates higher barriers to excellence;
●	They protect our position in our core markets, increasing retention and price;
●	Innovation allows us to respond directly to customer needs, for example, sustainability;
●	Innovation produces data which we can use to strengthen our capability in account management to increase customer retention;
●	We need to be able to adapt to a changing regulatory environment, for example, decreasing use of chemicals in pest control;
●	We apply our innovation capability into our core Hygiene business; and
●	Pests evolve and therefore so must we.

Service differentiation - Lumnia LED fly trap

Sales of our Lumnia LED fly trap range grew by 44% in the first half, with particularly strong sales in the UK, North America and Australia. Lumnia, which was created in 2017 following five years of working closely with experts in the LED industry, is the world's first range of illuminated fly traps to use patented LED lighting technology rather than traditional fluorescent tubes and is now being used in 42 markets around the world. Lumnia attracts, kills and encapsulates insects hygienically - eliminating the risks of contamination - and is suitable for a diversity of internal environments with the added benefit of a c. 60% reduction in energy savings versus traditional electronic fly killers. Our products include Lumnia Standard (offices, shops, food retailers) and Lumnia Ultimate (which uses second generation lamps for high-dependency customers). We have now added to this range with Lumnia Colour, which offers customers a choice of coloured units to match their interior décor. Further enhancements are planned for the second half of 2019 and 2020.

Service productivity and cost reduction - digital apps

We continue to see unprecedented levels of change from the impact of technology on our customers and our front-line and back office colleagues, and use IT to improve the quality and consistency of service delivery, drive innovation and reduce costs. Over the last 12 months we have deployed 20 process automation/robotics projects in the UK in sales, marketing, finance and HR to free up capacity and reduce costs. This has reduced transactional processing costs from 2.6% of gross revenue to 2.2% and we are now planning to extend our use of robotics across the Group.

We are also rolling out smartphones and apps across the Group, an example of which is ServiceTrak, our smartphone field service app used by around 7,000 technicians to record service visits in 33 countries - start time, services performed, customer recommendations, customer signatures and end time - and saving around £4m in costs that would have been incurred on replacing traditional PDAs. To further strengthen our capability we appointed this year a new Director for Digital Products and Operational Artificial Intelligence (AI), and a Group Director for Digital Innovation and Customer AI. In addition, working with a global technology leader, we are working on the development of a new AI route optimisation productivity tool capable of providing traffic updates by the millisecond and re-directing the technician's route accordingly. Also in development is a new AI tool to enhance our service capability in pest control. PestID is an image-based smartphone App which identifies a pest from a photograph taken by technician. Once identified, PestID will recommend the best tools to control the pest plus other important information such as operational safety reminders.

Protecting core markets - innovations in rodent control

Rodent control accounts for c. $2bn of the global pest control market and continues to grow at c. 4% p.a. In H1 2019 we launched a range of new remote monitoring products to enhance our proposition in this core market and generate speedy responses to infestation threats. Dual AutoGate Connect is a rat and mice remote monitoring and control unit which, on detecting the presence of a rodent in the unit, opens its 'gate' to provide access to bait and then sends an alert to our CommandCentre, and is a new extension to our range of Autogate products which have been developed in response to legal directives on certain uses of permanent baiting. Rat Riddance Connect is an innovative trap that is able to send immediate notification of a rat capture. Rodent Ceiling Trap is a ceiling solution for rodent control in gaps above ceilings and which provides indicator alerts to a capture. Finally, our Multi-Mouse Trap product is a monitoring sensor that can be attached to several live catch products for real-time reporting, allowing for early technician support.

Responding to customer needs - PestConnect, myRentokil and CommandCentre

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 and censure without effective pest management and reporting. This section focuses on three digital innovations - PestConnect, myRentokil and CommandCentre.

PestConnect, our award-winning remote monitoring system for rodents and the world's smartest mouse trap, provides our customers with a complete pest detection solution and full traceability. By the end of H1 2019 our connected devices were used in over 3,800 customer premises across 18 countries and this year has seen a 17% year-on-year increase in connected devices across the Group.

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 98% of our commercial customers use the portal and we have seen a 29% increase in usage of the portal year on year.

CommandCentre is our central information hub containing data compiled from over 40 countries with six billion records, populated with historic and current data to track pest trends and identify emerging risks. 14 million messages were sent or received across our digital pest control network in H1 2019, recorded on the central command centre and stored on the Google Cloud Platform.

This year saw the implementation of one of our biggest digital installations to date for a customer with a 73,000 square metre food production facility in Australia, a country in which food safety guidelines are strictly enforced and where customers face fines of up to 10% of their annual turnover for product recalls. More than 400 PestConnect units were installed in the facility across six major production buildings over a two-week period, delivering a new level of pest management service and significantly enhancing our service productivity. myRentokil data is available in real-time with CommandCentre, providing 24/7 Internet-of-Things monitoring and our colleagues have also been able to make additional product recommendations to the customer, such as Lumnia, which has resulted in 120 units being installed across the site.

Digital marketing - record levels of enquiries in H1

Our ongoing focus on delivering new content and localisation is driving greater levels of traffic to our websites across the Group. Following on from our success in 2018, which saw a record 21 million visits to our web estate (up five million on the previous year), we have seen a further record level of enquiries this year. Overall web Rentokil traffic grew by 47%, total visits reached nine million sessions (six million in H1 2018) and conversion of visits to direct enquires rose by 33% year on year. New online marketing campaigns are underway focused on how our leadership in technology and innovation helps our customers to 'stay one step ahead of pests' through industry-leading levels of monitoring, reporting and insight.

Vector control - building a world-class capability to combat new pest threats

Rentokil has offered mosquito and vector control services for many years, particularly in Asia where vector-borne diseases are a major threat to public health. Across the Group these services are growing at over 10% and last year generated c. $50m of revenues (principally in North America and Asia).

The threat to public health from mosquito-borne disease is significant and increasing as a result of climate change and urbanisation. Each year there are approximately 200 million cases of malaria and 390 million cases of dengue fever. A paper published in June of this year in Nature Microbology highlighted that dengue fever is likely to spread to parts of Asia, Europe, North America and Australia - areas that have historically been free of the life-threatening condition. Earlier this month the Brazilian Ministry of Health reported almost 1.2 million dengue cases in the first six months of 2019 - an increase of almost 600% from the 175,000 cases this time last year - reflecting increasing temperatures and a high volume of rainfall, as well as the emergence of a new strain of dengue fever from the Caribbean. In addition the European Centre for Disease Prevention and Control reported that as of 18 July 2019, six human West Nile virus infections had been reported in Greece and Romania.

Rentokil operates in the three distinct parts of the mosquito and vector control market: residential, commercial (where increasingly companies are acting with a duty of care towards their employees) and large-scale vector control. We estimate the mosquito and vector control market is now worth around $4.4bn and growing at 7% per annum. We are therefore focused on building our scale and capabilities in this high-growth area. Recent activities have included establishing a global centre for excellence in mosquito and vector control in the US to support our growing expertise in the field, and creating a mosquito laboratory at our Power Centre R&D facility in the UK in which we can study the behaviour of a colony of Aedes aegypti mosquitoes - the primary species responsible for transmitting viruses such as Zika, dengue, chikungunya and yellow fever - in order to find new solutions for their control.

In recent years we have significantly enhanced our capabilities in North America and Latin America through a number of key vector control acquisitions. Following the acquisitions of VDCI (the US's leading provider of municipal and commercial mosquito control), Mosquito Control Services in Louisiana and Multicontrole in Brazil in 2018, we acquired Ecovec in Brazil on 19 July this year. An internationally award winning spin-off from a Brazilian University, Ecovec specialises in the development of information products and services for the monitoring and control of vectors within the area of public health management. The business is able to monitor the presence of mosquitoes and analyse them in order to identify dangers to the public. Information is then used to focus vector control activities and raise public awareness. The business, created in 2002, has registered five patents and builds upon our credentials in the Brazil vector control market.

Mosquito and vector control will remain an important focus area for Rentokil as we build our scale and extend our capabilities. We are engaged in ongoing discussions with municipalities in Latin America, the US and other territories about using our expertise for their large-scale vector control requirements.

Initial Hygiene

Initial Hygiene is the leading hygiene services business in 19 of its 41 markets around the world with a number two position in 12 countries and a number three position in three markets. The hygiene services market offers good growth opportunities as organisations demand increasing standards of hygiene - hand hygiene, air hygiene, floor mats, in-cubical and professional feminine hygiene services. Mega trends driving industry growth include population growth and an ageing population, urbanisation, rising hygiene expectations, air quality, well-being accreditations, wellness at work and technology enablement. The global hygiene services market is valued at c. $22bn with growth broadly correlated to GDP. We typically expect to achieve annual Organic growth in Hygiene of between 2% and 3%.

Hygiene accounts for 22% of Ongoing Revenue and 23% of Ongoing Operating Profit and generated a Net Operating Margin of 16.4% in H1 2019. Ongoing Revenue and Ongoing Operating Profit in Hygiene grew by 6.5% and 8.6% respectively in H1 this year. Organic Revenue rose by a very encouraging 4.3% in H1, a considerably stronger performance than in the prior year (H1 2018: 2.1%) reflecting strong performances from France (up 4.0%), Australia (also up 4.0%) and the UK (up 8.4%). Growth from acquisition was 2.2%. Our hygiene business has delivered a five-year revenue CAGR of 9.6%.

Our strategy in Hygiene is to deliver continued growth through a combination of strong operational focus and targeted M&A to build city-density. At the heart of our strategy is the delivery of excellent customer service and product innovation. As with Pest Control, we can improve service productivity through digital products and applications.

Broad based operational improvements driving performance

A number of broad based operational improvements in product density, service quality and productivity, digital innovation, and building the sales funnel have driven growth in Hygiene in the first half of 2019.

Best in class products and density

Growth in Hygiene is driven by both post code density (servicing as many customers as possible in a tight geographic zone) and customer penetration (selling multiple service lines to each site). What we seek, therefore, is more customers on the route and more products on the washroom wall. Over the past few years we have made significant investments in developing new product lines and these include our high-end Reflection range, our mid-end Signature suite of products, Signature Colour, No-Touch products and Premium Scenting. We believe that we now have the best products in the market and this confidence in our range enables our sales force to sell more products. Further additions to our product lines introduced in H1 2019 include a new range of environmentally-friendly hand soaps and enhancements to our air care range including new aerosol fragrances. In addition, we are targeting new opportunities in waste management in response to ageing populations around the world.

Service quality and productivity

Initial Hygiene continues to receive a five-star review rating on Trustpilot for service quality from over 2,500 customer reviews.

The rental and cleaning of feminine hygiene units is one of the most frequent services we provide at Initial. In the UK our on-site liner service provision is now fully rolled out. This replaces traditional bin transfer and cleaning of the units within our depots as the service can be completed on our customer premises, reducing the amount of products we carry on our vans by c. 50% and increasing the number of customer visits that a service technician can make before having to return to their local depot. It also means our UK technicians can now stay out between two and three days before returning to branch.

Digital innovation

Our digital sales and service tools are also increasing productivity and are being utilised to build customer awareness of Initial's multiple product offerings. For example, our online Hygiene customer portal, myInitial, is being developed to highlight the full spectrum of Hygiene solutions on its home page.

Our smartphone field service app, ServiceTrak, is also improving productivity, the benefits of which include better colleague retention, higher gross margins achieved through greater service productivity and cost savings, and delivery of a more professional service to customers. Our technicians use the app to record service visits - for example, start time, services performed, customer recommendations, customer signatures and end time. The app is now being used in 23 countries which have resulted in a c. 50% decrease in the number of 'proof of service' emails requested to be sent and an 11% increase in the total number of sales leads submitted by technicians through the app (October 2018 - May 2019).

Building the sales funnel in Hygiene through digital channels

We focus on driving continuous improvements to our web estate around the world to increase customer traffic to our sites and generate new business leads. During the first half web traffic to Initial websites increased by 9% on the first half of 2018, and can be attributed to a number of successful, targeted cross sell, up sell and email campaigns to increase customer visits. As an illustration, one such campaign in the UK involved sending over 84,000 emails to target companies over 10 months, resulting in a 30% increase in sales target lists in the first quarter of 2019. Other highly effective campaigns include GoogleMyBusiness and Pay Per Click campaigns. In addition, by using digital tools such as Chatbox and Webchat, our sales representatives can free up more time to focus on sales activities.

Plans for H2 - extending our services to build product density and add premium ranges

We have been very encouraged by the momentum created in our Hygiene business over the past few years and are becoming increasingly confident in the growth opportunities afforded by the business, which we see as a core, complimentary business to Pest Control. In the second half of 2019 we will pilot new growth opportunities in Hygiene, such as air care, digital hygiene and other new services and products

The global air care market is estimated to be worth around $17bn and is expected to deliver a 10% CAGR over the next seven years. We aim to exploit opportunities as the market for air enhancement (such as scenting) and purification grows and have identified a number of preferred suppliers for air purification and enhancement products which we are now beginning to pilot in a number of markets. In addition, we are sharing our digital expertise gained in Pest Control with our Hygiene business and developing Internet-of-Things products including a connected soap dispenser to track usage and allow technicians to respond quickly to any dispenser issues and refilling requirements. Our first range of digital washroom products are currently in late stage development with anticipated launch towards the end of this year. Finally, we are pursuing other route-based extensions to our products and services including a First Aid service solution which we are piloting in Australia. This involves the provision of First Aid kits, defibrillators and eye wash solutions to customers.

Hygiene M&A

We have had a very good six months of M&A in our Hygiene category, with five deals completed this year versus a total of four acquisitions in the whole of 2018. The Cannon Hygiene business, now fully integrated in eight countries (with the exception of the UK business which remains separate pending final conclusion from the CMA Phase 2 Review) is performing well and to plan. We are building a strong position in emerging markets and during the half purchased businesses in Indonesia, Malaysia, Chile and Colombia.

Protect & Enhance

The four businesses included in this category are Workwear (France), Ambius (Global), Property Care (UK) and a very small Dental Services operation (Germany and Sweden). All are cash-generative businesses which share overheads with our Pest Control and Hygiene businesses. However, they operate in markets which typically offer lower opportunities for profitable growth. Combined, the businesses represent c. 8% of Ongoing Operating Profit and generate a Net Operating Margin of 8.9%.

Our Workwear operations in France specialise in the supply and laundering of workwear, uniforms, cleanroom garments and personal protective garments. After three years of declining profitability the business returned to profitable growth in 2018 and in H1 2019 the business continued to make good progress, focused on quality to drive sustainable growth. While conditions remain challenging, we continue to drive for improvements resulting in a 2.9% improvement in Ongoing Revenue and Ongoing Operating profit in line with last year. Progress this year includes the introduction of RFID for the tracking of garments and process optimisation is now underway with 190,000 garments RFID tagged and all laundries RFID compliant. Our first electric vehicles are in operation as part of a commitment to reduce emissions in Workwear by 30% over the next three years and good progress has been made towards recycling our used garments and flat linen (95% will be recycled by August equating to c. 450 tonnes a year). Our Employer of Choice programme has resulted in absence reducing by 0.4 points and much improved safety performance with the Lost Time Accident rate moving from 1.59 to 0.69. Customer terminations improved in H1 by 9% by volume.

Revenue for the remaining businesses in the Protect & Enhance category (Ambius, UK Property Care and Dental) declined by 0.2% with revenue growth in Ambius of 1.2% offset by a revenue decline of 7.3% in our UK Property Care business which continues to be impacted by the challenging UK property market. Profits for the other P&E businesses declined by £0.4m (9.6%) largely driven by the revenue decline in UK Property Care noted above.

FINANCIAL REVIEW

Central and regional overheads

Central and regional overheads of £42.1m at CER were £2.4m higher than prior year (2018: £39.7m) reflecting continued investment to support the Group's innovation and digital programme and the impact of increased LTIP costs given the improvement in the Company's share price.

Restructuring costs

With the exception of integration costs for significant acquisitions, the Company reports restructuring costs within operating profit. Costs associated with significant acquisitions are reported as one-off items and excluded from operating profit.

Restructuring costs of £3.3m at CER (2018: £4.3m) consisted mainly of costs in respect of initiatives focused on driving operational efficiency in all regions.

One-off items (at CER)

One-off items (Operating) were a net credit of £9.8m in the first half (2018: £2.6m credit). This includes a gain of £17.6m in respect of the UK Defined Benefit pension scheme buy-out process which is discussed in further detail below. The prior year included a one-off non-cash credit of £6.0m in respect of member option exercises in relation to the pension scheme.

Other one-off costs of £7.8m (2018: £2.6m net credit) primarily relate to the ongoing acquisition programme in North America and the acquisition, regulatory and integration costs of Cannon Hygiene Services and Mitie Pest Control.

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-in has been secured in contemplation of a full buy-out and winding up of the Scheme which is expected to complete in 2020. Good progress towards buy-out is being made and we now anticipate a pre-tax cash surplus of c. £40m (versus previous guidance of £20m to £40m) will be returned to the Company on completion in 2020. As a result, we have increased the estimated settlement amount that is expected to be returned to the company by £17.6m and this has been recorded as a gain within one-off items.

Interest (at AER)

Adjusted interest of £22.9m was £0.7m higher than in the prior year, including c. £1.0m from the adoption of IFRS 16. The adoption of IFRS 16 at the start of the year has increased the reported interest charge by c. £3m. This is a non-cash change and is in excess of the operating profit benefit from IFRS 16 of c. £1m. The difference of c. £2m has therefore been added back when arriving at the Group's adjusted interest charge to aid year-on-year comparability.

Tax

The income tax charge for the year at actual exchange rates was £25.8m on the reported profit before tax of £113.8m. After adjusting the reported profit before tax for the amortisation and impairment of intangible assets (excluding computer software), one-off items, including a pensions credit, the Adjusted Effective Tax Rate (ETR) for 2019 at AER was 22% (2018: 22%). This compares with a blended rate of tax for the countries in which the Group operates of 23% (2018: 22%).

Net debt and cash flow

£m at actual exchange rates	Year to Date
	H1 2019 £m	H1 2018 £m	Change £m

Adjusted Operating Profit	152.2	134.5	17.7
One-off items - operating	9.8	2.6	7.2
Depreciation	105.5	72.8	32.7
Other	3.5	0.8	2.7
EBITDA	271.0	210.7	60.3
Working capital	(27.8)	(14.0)	(13.8)
Movement on provisions	(4.0)	(7.0)	3.0
Capex - additions	(113.9)	(85.8)	(28.1)
Capex - disposals	1.7	1.4	0.3
Operating cash flow - continuing operations	127.0	105.3	21.7
Interest	(11.8)	(7.3)	(4.5)
Tax	(19.3)	(25.0)	5.7
Free Cash Flow - continuing operations	95.9	73.0	22.9
Acquisitions	(120.9)	(164.9)	44.0
Dividends	(58.1)	(50.2)	(7.9)
Underlying increase in net debt	(83.1)	(142.1)	59.0
Foreign exchange translation and other items	(21.3)	(21.3)	-
IFRS 16 lease obligations on transition	(184.0)	-	(184.0)
Increase in net debt	(288.4)	(163.4)	(125.0)
Opening net debt	(1,153.5)	(927.3)	(226.2)
Closing net debt	(1,441.9)	(1,090.7)	(351.2)

Operating cash inflow (£127.0m at AER for continuing operations) was £21.7m higher than in H1 2018 principally driven by the annual cash dividend of £16.6m received from the JV with Haniel. The increase in Adjusted Operating Profit was largely offset by working capital outflows due to phasing. Depreciation and capital expenditure have both increased due to the implementation of IFRS 16 from the start of the year but they offset and the net impact was broadly cash neutral.

Interest payments of £11.8m are £4.5m higher than in the prior year and tax payments decreased by £5.7m, both reflecting the phasing of payments versus the prior year. This resulted in Free Cash Flow from continuing operations of £95.9m, an increase of £22.9m on the prior year, delivering an adjusted Free Cash Flow conversion of 93% for the last 12 months.

Cash spent on acquisitions totalled £120.9m. Dividend payments amounted to £58.1m, a £7.9m, 15.7% increase on the prior year resulting in an underlying increase in net debt of £83.1m to £1,236.6m. The adoption of IFRS 16 added £184.0m of lease obligations to net debt at 01 January 2019 and this, together with foreign exchange translation and other items, increased net debt by £205.3m, leaving an overall increase in net debt of £288.4m and closing net debt of £1,441.9m.

Funding

On 15 May 2019 the Group issued a bond of €500m maturing on 30 May 2026 with a coupon of 0.875%. This will be used to refinance the €500m bond that matures in September 2019.

As at 30 June 2019 the Group had £911.1m of centrally held funds and available undrawn committed facilities. The ratio of net debt to EBITDA at 30 June 2018 was 2.6x, including the estimated full year impact of IFRS 16 (2.5x excluding IFRS 16) and reflects the timing of acquisition spend in H1. Adjusting for the anticipated €430m proceeds from the disposal of the 17.8% stake in the JV with Haniel the Net Debt to EBITDA ratio falls to 1.9x on a pro forma basis.

We remain committed to maintaining a BBB credit rating and, based on our expectations for the remainder of 2019, we are confident in doing so.

Going Concern

The Directors continue to adopt the going concern basis in preparing the accounts on the basis that the Group's strong liquidity position and ability to reduce capital expenditure or expenditure on bolt-on acquisitions are sufficient to meet the Group's forecast funding needs, including those modelled in a downside case.

Dividend

Following an encouraging performance in the first half of 2019, and in anticipation of further progress for the remainder of the year, the Board is declaring an interim dividend of 1.51p per share, a 15.2% increase on H1 2018, payable to shareholders on the register at the close of business on 9 August 2019, to be paid on 11 September 2019.

Brexit

We are a global business with c. 90% of revenues derived from outside the UK and with minimal cross-border trading. The global economic environment, and in particular the Brexit arrangements, continues to drive uncertainty with high levels of volatility in exchange and commodity markets and with international trading arrangements potentially subject to significant change. We continue to monitor the potential implications of geopolitical change on our trading and financing environment and in relation to Brexit we are taking short term measures to ensure we have access to adequate stock and equipment in both the UK and Europe in 2019. We remain of the view that the defensive nature of our core categories, combined with the geographic location and spread of our operations, place us in a relatively strong position to mitigate such risks going forward and to take advantage of any potential opportunities that the changes may bring.

Guidance for 2019 (at CER unless otherwise stated)

IFRS 16 is now expected to increase Ongoing Operating Profit by £3m and adjusted interest charge by £3m (previous guidance was between £5m and £10m) - with no overall impact on Adjusted profit before tax

The business is trading in line with our expectations and our guidance for 2019 (and 2020) remains otherwise unchanged apart from the following items.

Central costs are now expected to be £4m above prior year in line with the increase in H1, reflecting continued investment to support the Group's innovation and digital programme and the impact of increased LTIP costs given the improvement in the Company's share price.

P&L and cash interest costs in 2019 are now expected to be £4m lower than previously guided due to the recent successful refinancing of the €500m bond at lower interest rates (before adjustments for IFRS 16) and the lower levels of net debt following the sale of our share in the JV with Haniel in July 2019. The full year impact in 2020 is an anticipated reduction in interest costs compared to previous guidance for 2019 of around £14m.

Share of profits from associates in H2 is anticipated to be ~£7m lower than the prior year following the disposal of the Company's interest in the JV with Haniel noted above. The full year impact on 2020 is a reduction of £17m.

At the start of the year we guided to adverse movements in foreign exchange of c. £5m. Since this time, foreign exchange has been volatile with sterling weakening overall against both the Euro and US dollar. Whilst FX rates continue to fluctuate, if current rates were to be maintained for the balance of the year and throughout 2020, we now estimate it would have a positive impact of around £5m - £10m for 2019 and £10m - £15m in 2020.

Taking the above items into account, relative to our previous guidance we would expect expectations for 2019 to remain unchanged and expectations for 2020 to increase by c. £10m.

Consolidated statement of profit or loss and other comprehensive income

For the period ended 30 June

	Notes	6 months to 30 June 2019 £m	6 months to 30 June 2018¹ £m
Revenue	4	1,298.9	1,176.1
Operating profit		125.5	108.5
Finance income		2.0	15.2
Finance cost		(26.0)	(26.4)
Share of profit from associates, net of tax of £5.4m (2018: £5.2m)		12.3	12.2
Profit before income tax		113.8	109.5
Income tax expense²		(25.8)	(23.2)
Profit for the year attributable to the Company's equity holders (including non-controlling interests of £nil (2018: £0.1m))		88.0	86.3
Other comprehensive income:
Items that are not reclassified subsequently to the income statement:
Re-measurement of net defined benefit asset		(0.1)	37.7
Tax related to items taken to other comprehensive income		-	(8.1)
Items that may be reclassified subsequently to the income statement:
Net exchange adjustments offset in reserves		(2.8)	(4.1)
Other items		0.6	10.4
Total comprehensive income for the year (including non-controlling interests of £nil (2018: £0.1m))		85.7	122.2
Earnings per share attributable to the Company's equity holders:
Basic		4.75p	4.69p
Diluted		4.73p	4.66p

Non-GAAP measures
Operating profit		125.5	108.5
Adjusted for:
Amortisation and impairment of intangible assets (excluding computer software)	4	36.5	28.6
One-off items	4	(9.8)	(2.6)
Adjusted operating profit		152.2	134.5
Finance income		2.0	15.2
Finance cost		(26.0)	(26.4)
Share of profit from associates, net of tax of £5.4m (2018: £5.2m)		12.3	12.2
Add back:
Net interest credit from pensions		0.1	(4.0)
Interest fair value adjustments		(1.0)	(7.0)
IFRS 16 interest		2.0	-
Adjusted profit before income tax		141.6	124.5
Basic adjusted earnings per share attributable to the Company's equity holders		5.99p	5.25p

The weighted average number of ordinary shares in issue is 1,847m (HY 2018: 1,839m). For the diluted EPS calculation the adjustment for share options and LTIPs is 10.3m (HY 2018: 12.9m).

¹ The Group has applied IFRS 16 at 1 January 2019. Under the transition method chosen comparative information is not restated. See Note 3.

²Taxation includes £13.4m (HY 2018: £15.2m) in respect of overseas taxation.

Consolidated balance sheet

			At 30 June 2019	At 31 December 2018^{1, 2}
	Notes		£m	£m
Assets
Non-current assets
Intangible assets			1,597.5	1,509.1
Property, plant and equipment			612.5	436.9
Investments in associated undertakings			286.9	291.7
Other investments			0.2	0.2
Deferred tax assets			5.3	3.5
Contract costs			63.1	60.9
Retirement benefit assets		7	38.9	21.5
Other receivables			11.6	10.8
Derivative financial instruments		9	5.8	5.4
			2,621.8	2,340.0

Current assets
Other investments			3.0	2.5
Inventories			116.1	103.2
Trade and other receivables			542.1	485.7
Current tax assets			10.8	16.1
Derivative financial instruments		9	6.5	4.2
Cash and cash equivalents			449.4	129.8
			1,127.9	741.5

Liabilities
Current liabilities
Trade and other payables			(646.1)	(607.9)
Current tax liabilities			(66.4)	(70.7)
Provisions for other liabilities and charges			(23.4)	(28.7)
Bank and other short-term borrowings		8	(607.7)	(564.7)
Derivative financial instruments		9	(20.0)	(15.8)
			(1,363.6)	(1,287.8)

Net current liabilities			(235.7)	(546.3)

Non-current liabilities
Other payables³			(85.6)	(79.1)
Bank and other long-term borrowings		8	(1,261.9)	(700.9)
Deferred tax liabilities			(93.1)	(96.0)
Retirement benefit obligations		7	(26.2)	(26.2)
Provisions for other liabilities and charges			(40.7)	(42.5)
Derivative financial instruments		9	(19.9)	(16.4)
			(1,527.4)	(961.1)

Net assets			858.7	832.6

Equity
Capital and reserves attributable to the company's equity holders
Called up share capital			18.5	18.4
Share premium account			6.8	6.8
Other reserves			(1,826.4)	(1,824.2)
Retained profits			2,659.5	2,631.2
			858.4	832.2
Non-controlling interests			0.3	0.4
Total equity			858.7	832.6

¹ The Group has applied IFRS 16 at 1 January 2019. Under the transition method chosen comparative information is not restated. (See Note 3).

² Bank and other short/long-term borrowings have been restated at December 2018 to reflect the short-term nature of the September 2019 Euro bond at year end which was classified as long-term (See Note 2).

³ Non-current other payables includes £58.9m Put Option liability related to the PCI India acquisition (2018: £54.1m).

Consolidated statement of changes in equity

	Called up share capital	Share premium account	Other reserves	Retained earnings	Non- controlling interests	Total equity
	£m	£m	£m	£m	£m	£m
At 1 January 2018	18.4	6.8	(1,848.6)	2,782.3	0.3	959.2
Profit for the period	-	-	-	86.2	0.1	86.3
Other comprehensive income:
Net exchange adjustments offset in reserves	-	-	(4.1)	-	-	(4.1)
Remeasurement of net defined benefit asset	-	-	-	37.7	-	37.7
Effective portion of changes in fair value of cash flow hedge	-	-	10.4	-	-	10.4
Tax related to remeasurement of net defined benefit asset	-	-	-	(8.1)	-	(8.1)
Total comprehensive income for the period	-	-	6.3	115.8	0.1	122.2

Transactions with owners:
Dividends paid to equity shareholders	-	-	-	(50.2)	-	(50.2)
Cost of share options and long-term incentive plan	-	-	-	2.8	-	2.8
Movement in the carrying value of put options	-	-	-	(3.4)	-	(3.4)
At 30 June 2018	18.4	6.8	(1,842.3)	2,847.3	0.4	1,030.6

At 1 January 2019	18.4	6.8	(1,824.2)	2,631.2	0.4	832.6

Profit for the period	-	-	-	88.0	-	88.0
Other comprehensive income:
Net exchange adjustments offset in reserves	-	-	(2.8)	-	-	(2.8)
Remeasurement of net defined benefit asset	-	-		(0.1)	-	(0.1)
Effective portion of changes in fair value of cash flow hedge	-	-	0.6	-	-	0.6
Total comprehensive income for the period	-	-	(2.2)	87.9	-	85.7

Transactions with owners:
Shares issued in the year	0.1	-	-	-	-	0.1
Dividends paid to equity shareholders	-	-	-	(58.1)	-	(58.1)
Dividends paid to non-controlling interests	-	-	-	-	(0.1)	(0.1)
Cost of share options and long-term incentive plan	-	-	-	2.8	-	2.8
Movement in the carrying value of put options	-	-	-	(4.3)	-	(4.3)
At 30 June 2019	18.5	6.8	(1,826.4)	2,659.5	0.3	858.7

Shares of £0.1m (2018: £0.1m) have been netted against retained earnings. This represents 9.8m (HY 2018: 9.5m) shares held by the Rentokil Initial Employee Share Trust. The market value of these shares at 30 June 2019 was £38.7m (HY 2018: £32.7m). Dividend income from, and voting rights on, the shares held by the Trust have been waived.

Analysis of other reserves

	Capital reduction reserve	Legal reserve	Cash flow hedge reserve	Translation reserve	Total
	£m	£m	£m	£m	£m
At 1 January 2018	(1,722.7)	10.4	(8.5)	(127.8)	(1,848.6)

Net exchange adjustments offset in reserves	-	-	-	(4.1)	(4.1)
Effective portion of changes in fair value of cash flow hedge	-	-	10.4	-	10.4
Total comprehensive income for the period	-	-	10.4	(4.1)	6.3
At 30 June 2018	(1,722.7)	10.4	1.9	(131.9)	(1,842.3)

At 1 January 2019	(1,722.7)	10.4	1.0	(112.9)	(1,824.2)
Net exchange adjustments offset in reserves	-	-	-	(2.8)	(2.8)
Effective portion of changes in fair value of cash flow hedge	-	-	0.6	-	0.6
Total comprehensive income for the period	-	-	0.6	(2.8)	(2.2)
At 30 June 2019	(1,722.7)	10.4	1.6	(115.7)	(1,826.4)

Consolidated cash flow statement

		6 months to 30 June	6 months to 30 June
		2019	2018¹
	Notes	£m	£m
Profit for the period		88.0	86.3
Adjustments for:
- Tax		25.8	23.2
- Share of profit from associates		(12.3)	(12.2)
- Interest income		(2.0)	(15.2)
- Interest expense		26.0	26.4
Reversal of non-cash items:
- Depreciation and impairment of property, plant and equipment		99.1	63.2
- Amortisation and impairment of intangible assets²		36.5	28.6
- Amortisation of computer software		6.4	9.6
- Other non-cash items		(13.1)	0.8
Changes in working capital (excluding the effects of acquisitions and exchange differences on consolidation):
- Inventories		(9.8)	(12.1)
- Contract costs		(1.9)	(0.8)
- Trade and other receivables		(55.2)	(29.0)
- Accrued income		3.3	(12.4)
- Trade and other payables and provisions		22.4	15.8
- Deferred income		9.4	17.5
Cash generated from operating activities		222.6	189.7
Interest received		2.0	1.0
Interest paid³		(13.8)	(8.3)
Income tax paid		(19.3)	(25.0)
Net cash generated from operating activities		191.5	157.4

Cash flows from investing activities
Purchase of property, plant and equipment		(72.6)	(72.2)
Purchase of intangible fixed assets		(12.6)	(10.3)
Proceeds from sale of property, plant and equipment		1.7	1.4
Acquisition of companies and businesses, net of cash acquired	5	(120.8)	(164.9)
Dividends received from associates		16.6	-
Net cash flows from investing activities		(187.7)	(246.0)

Cash flows from financing activities
Dividends paid to equity shareholders		(58.1)	(50.2)
Capital element of lease payments		(40.1)	(7.0)
Cash outflow on settlement of debt related foreign exchange forward contracts		0.2	2.9
Proceeds from issue of debt		434.8	44.5
Net investment in term deposits		(0.5)	(0.9)
Net loan repayments		(17.0)	(44.3)
Net cash flows from financing activities		319.3	(55.0)

Net (decrease)/increase in cash and cash equivalents		323.1	(143.6)
Cash and cash equivalents at beginning of year		100.9	304.1
Exchange losses on cash and cash equivalents		5.1	(5.1)
Cash and cash equivalents at end of the financial period		429.1	155.4

¹ The Group has applied IFRS 16 at 1 January 2019. Under the transition method chosen comparative information is not restated. (See Note 3.)

² Excluding computer software.

³ Interest paid includes interest on finance lease payments of £4.0m (2018: £0.7m).

1. General information

The Company is a public limited company incorporated and domiciled in the UK with a listing on the London Stock Exchange. The address of its registered office is Rentokil Initial plc, Riverbank, Meadows Business Park, Blackwater, Camberley, Surrey, GU17 9AB.

The consolidated half-yearly financial information for the half-year to 30 June 2019 was approved for issue on 30 July 2019.

On page 75 of the Annual Report 2018 we set out the Group's approach to risk management and on pages 42 to 46 we define the principal risks that are most relevant to the Group. These risks are described in detail and have mitigating actions assigned to each of them. In our view the principal risks remain unchanged from those indicated in the Annual Report 2018 and actions continue to be taken to substantially mitigate the impact of such risks, should they materialise.

These interim financial results do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006, and should be read in conjunction with the Annual Report 2018. Those accounts have been reported upon by the Group's auditor and delivered to the registrar of companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

For all information relating to 2018 results please refer to the Annual Report 2018 which can be accessed here: http://www.rentokil-initial.com/investors/year-in-review.aspx

2. Basis of preparation

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the interim financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2018 except for the changes described in Note 3.

After reviewing Group cash balances, borrowing facilities and projected cash flows for the next 12 months, the directors believe the Group has adequate resources to continue operations for the foreseeable future and meet its obligations as they fall due. As disclosed in Note 8, the Group has a €500m Euro bond maturing in September 2019. The Group has refinanced this bond in advance with another €500m bond maturing in May 2026. In addition the Group has cash and undrawn committed facilities of over £900m at the 30 June 2019, including a committed £600m revolving credit facility maturing in August 2023. The Group continues to adopt the going concern basis in preparing the consolidated financial statements.

This is the first set of the Group's financial statements where IFRS 16 - Leases has been applied. Changes to significant accounting policies are described in Note 3.

The balance sheet and Note 8 have been restated to reflect the short-term nature of the September 2019 €500m Euro bond that was classified as long-term at the year end. Balances affected are shown below:

31 December 2018	As disclosed	September 2019 €500m bond	As restated
Bank and other short-term borrowings	115.7	449.0	564.7
Bank and other long-term borrowings	1,149.9	(449.0)	700.9
Total	1,265.6	-	1,265.6

3. Accounting policies

The preparation of the interim financial information for the half-year ended 30 June 2019 requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the statement. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the statement, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

Significant seasonal or cyclical variations in the Group's total revenues are not experienced during the financial year.

Changes in significant accounting policies

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2018. The changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2019.

3. Accounting policies (continued)

IFRS 16 Leases

The Group has adopted IFRS 16 Leases from 1 January 2019.

The effect of applying IFRS 16 Leases is the creation of a Right-Of-Use (ROU) asset, representing the rights to use the underlying asset, and a lease liability, representing the obligation to make lease payments, for leases longer than 12 months in duration. In addition, a monthly depreciation and interest charge for each lease is charged to the income statement replacing the operating lease charge that was previously charged to operating expenses.

The Group has applied IFRS 16 using the modified retrospective approach. Accordingly the comparative information presented for 2018 has not been restated. The details of the changes in accounting policies are disclosed below.

Under IFRS 16, a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. On transition to IFRS 16 the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases.

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16 the Group recognises ROU assets and lease liabilities for substantially all leases, however the Group has elected to apply the practical expedient not to recognise ROU assets and lease liabilities for some leases of low-value assets. The lease payments associated with these low value assets are recognised as an expense on a straight line basis over the lease term.

The ROU asset is initially measured at cost and subsequently at cost less accumulated depreciation and any impairment losses. The lease liability is initially measured at the present value of the total lease payments that are not already paid at commencement date, discounted using the incremental borrowing rate for each country.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by the lease payments. It is re-measured when there is a change in future lease payments arising from a change in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Group has applied judgement to determine the lease term for some lease contracts that contain renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which affects the amount of lease liabilities and ROU assets recognised.

- Impacts on transition

On transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the rate implicit in the lease or appropriate incremental borrowing rate as at 1 January 2019. ROU assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group used the practical expedient not to recognise ROU assets and liabilities for leases with less than 12 months of lease term remaining.

The impact on transition is summarised below. Please note these do not include amounts for leases that were previously accounted for as finance leases (1 January 2019: £41.7m).

	1 January 2019
ROU asset	178.0
Lease liability	(184.0)
Balance sheet adjustments to working capital	6.0

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using incremental borrowing rates at 1 January 2019. The average rate applied is 3.7%.

A reconciliation of closing operating lease commitments as at 31 December 2018 and transitional IFRS 16 lease liabilities is shown below:

	1 January 2019
Operating lease commitment at 31 December 2018	193.2
Exemption for low value assets	(0.5)
Exemption for leases with less than 12 months on the lease term at transition	(2.7)
Extension options reasonably certain to be exercised	8.9
Effect of discounting	(14.9)
Lease liability on transition	184.0

- Impacts for the period

The Group has reported a ROU asset of £173.2m in 'property, plant and equipment' and a lease liability of £173.0m in 'bank and other borrowings' at 30 June 2019 excluding amounts for leases that were previously accounted for as finance leases.

In relation to the leases under IFRS 16, the Group has recognised depreciation and interest costs instead of operating lease expenses. During the six months ended 30 June 2019 the Group recognised £32.6m of depreciation and £3.3m of interest costs for these leases. This excludes the depreciation and interest charged for leases previously accounted for as finance leases.

3. Accounting policies (continued)

Other changes in accounting policies

A number of other new standards are effective from 1 January 2019 but they do not have a material effect on the Group's financial statements.

The Group has adopted the following amendments to standards with effect from 1 January 2019:

- Annual Improvements to IFRSs - 2015-2017 cycle amendments to IFRS 3, IFRS 11, IAS 12, IAS 23

- Amendments to IAS 28 Investments in associates and joint ventures

- IFRIC 23 uncertainty over income tax treatments

- Amendments to IAS 19 Employee benefits

These standards have had no impact on the financial position or performance of the Group. Consequently, no adjustment has been made to the comparative financial information as at 31 December 2018 or 30 June 2018. The Group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.

4. Segmental information

Segmental information has been presented in accordance with IFRS 8 Operating Segments. Reporting segments reflect the internal management organisation and reporting structures. Each segment is headed by a Regional Managing Director who reports directly to the Chief Executive and is a member of the Company Executive Leadership Team responsible for the review of Group performance. The operating businesses within each segment report to the Regional Managing Directors.

Given the international nature of the Group, foreign exchange movements can have a significant impact on regional performance and as a result the segmental analysis is presented at constant currency rates. Restructuring costs and Central and Regional overheads are also presented centrally as they are not directly attributable to any reportable segment. 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 Note 11.

	Revenue 30 June 2019 £m	Revenue 30 June 2018¹ £m	Operating profit 30 June 2019 £m	Operating profit 30 June 2018¹ £m
France	155.4	149.9	22.2	22.3
Benelux	46.0	43.5	12.4	11.5
Germany	51.9	44.6	14.9	13.1
Southern Europe	67.4	62.6	10.3	8.1
Latin America	28.4	23.6	3.2	3.1
Europe	349.1	324.2	63.0	58.1
UK & Ireland	163.2	147.2	28.8	26.5
Rest of World	77.8	71.8	16.8	16.0
UK & Rest of World	241.0	219.0	45.6	42.5
Asia	113.4	101.6	11.6	10.3
North America	482.8	440.3	58.4	50.9
Pacific	94.7	92.6	18.6	18.2
Central and regional overheads	-	-	(42.1)	(39.7)
Restructuring costs	-	-	(3.3)	(4.3)
Ongoing operations at constant exchange rates	1,281.0	1,177.7	151.8	136.0
Disposed businesses^{2 3}	9.0	11.3	0.1	-
Continuing operations at constant exchange rates	1,290.0	1,189.0	151.9	136.0
Foreign exchange	8.9	(12.9)	0.3	(1.5)
Continuing operations at actual exchange rates	1,298.9	1,176.1	152.2	134.5
One-off items - operating			9.8	2.6
Amortisation of intangible assets ⁴			(36.5)	(28.6)
Operating profit			125.5	108.5

¹The Group has initially applied IFRS 16 at 1 January 2019. Under the transition method chosen comparative information is not restated. See Note 3.

²Disposed business for 2018 is restated for businesses disposed in 2019.

³Includes revenue of £5.5m (2018: £7.9m) from product sales by the Group to CWS-boco International GmbH.

⁴Excluding computer software.

One-off items

One-off items - operating of £9.8m (2018: £2.6m) includes a gain of £17.6m in respect of adjustments relating to the pension settlement on buy out of the UK RIPS. The prior year included a one-off non-cash credit of £6.0m in respect of member option exercises in relation to the pension scheme. Other one-off costs of £7.8m (2018: £3.4m) primarily relate to the ongoing acquisition programme in North America and the acquisition, regulatory and integration costs of Cannon Hygiene Services and Mitie Pest Control.

4. Segmental information (continued)

Amortisation and impairment of intangible assets

	Amortisation and impairment of intangibles¹	Amortisation and impairment of intangibles¹
	30 June 2019 £m	30 June 2018 £m
Europe	6.7	2.9
UK & Rest of World	5.4	5.5
Asia	2.7	1.5
North America	16.7	15.0
Pacific	2.0	1.6
Central and regional	2.6	2.4
Total at constant exchange rates	36.1	28.9
Foreign exchange	0.4	(0.3)
Total at actual exchange rates	36.5	28.6

¹Excluding computer software.

5. Business combinations

The Group purchased 100% of either the share capital or the trade and assets of 17 companies and businesses in the period.

The total consideration in respect of acquisitions in the current year was £120.3m. Details of goodwill and the fair value of net assets acquired are as follows:

	6 months to 30 June 2019	6 months to 30 June 2018
	£m	£m
Purchase consideration:
- Cash paid	102.1	148.8
- Deferred and contingent consideration	18.2	15.0
Total purchase consideration	120.3	163.8
Fair value of net assets acquired	(24.0)	(67.9)
Goodwill from current period acquisitions	96.3	95.9

Goodwill represents the synergies, workforce and other benefits expected as a result of combining the respective businesses.

Deferred consideration of £7.2m and contingent consideration of £11.0m is payable in respect of the above acquisitions. Contingent consideration is payable based on a variety of conditions including revenue and profit targets being met.

The provisional fair value of assets and liabilities arising from acquisitions in the period are shown below. The provisional fair values will be finalised in the 2019 financial statements. The fair values are provisional as the acquisition accounting has not yet been finalised, primarily due to the proximity of the acquisitions to the period end.

	6 months to 30 June 2019	6 months to 30 June 2018
	£m	£m
Non-current assets
- Intangible assets	19.3	54.9
- Property, plant and equipment	4.4	11.3
Current assets	6.2	20.7
Current liabilities	(4.6)	(15.3)
Non-current liabilities	(1.3)	(3.7)
Net assets acquired	24.0	67.9

From the dates of acquisition to 30 June 2019, these acquisitions contributed £18.2m to revenue and £3.7m to operating profit. If the acquisitions had occurred on 1 January 2019, the revenue and operating profit of the combined entity would have amounted to £1,301.1m and £124.6m respectively.

In relation to prior period acquisitions, there has been an adjustment to the provisional fair values resulting in an increase to goodwill of £29.8m.

In addition £19.5m was paid in respect of deferred and contingent consideration for prior year acquisitions resulting in the total cash outflow in the period from current and past period acquisitions, net of cash acquired, of £120.8m.

6. Dividends

	6 months to 30 June 2019	6 months to 30 June 2018	Year to 31 December 2018
	£m	£m	£m
2017 final dividend paid - 2.74p per share	-	50.2	50.2
2018 interim dividend paid - 1.311p per share	-	-	24.0
2018 final dividend paid - 3.16p per share	58.1	-	-
	58.1	50.2	74.2

The directors have declared an interim dividend of 1.51p per share amounting to £27.9m payable on 11 September 2019 to shareholders on the register at 9 August 2019. The Company has a progressive dividend policy and will consider the level of growth for 2019 based on the year-end results. These interim financial statements do not reflect this dividend payable.

7. Retirement benefit obligations

Apart from the legally required social security state schemes, the Group operates a number of pension schemes around the world covering many of its employees.

The principal scheme in the Group is the Rentokil Initial 2015 Pension Scheme in the United Kingdom ("the scheme"). It has a number of defined benefit sections which are all now closed to new members 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 is anticipated to convert to a full buy-out before the end of 2020. 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 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 Group achieved buy-in within the value of the assets held by the scheme and was not required to make any further contributions. While there are still some adjustments expected to the final price it is anticipated that there will be surplus assets when the scheme finally winds up in 2020. These assets are recognised as a retirement benefit asset. This asset has been recognised at management's estimate of the value of surplus that will be returned from the scheme to the Group (subject to tax at 35%). At 30 June 2019 the retirement benefit asset amounted to £38.1m (2018: £20.5m). The retirement benefit asset has increased by £17.6m of which £16.0m is due to adjustments to pension increases and £1.6m is due to other minor adjustments. It remains subject to certain estimates and assumptions made at the balance sheet date which could lead to the overall surplus available to change.

Other schemes currently in an accounting surplus position total £0.8m and other schemes currently in an accounting deficit position total £26.2m

8. Bank and other borrowings

	At 30 June 2019	At 31 December 2018¹
	£m	£m
Non-current
RCF and other bank borrowings	6.5	2.6
Bond debt	1,113.8	671.0
Lease liabilities	141.6	27.3
	1,261.9	700.9
Current
Bank overdrafts	20.3	28.9
Bank borrowings	45.0	65.5
Bond debt	447.7	449.0
Bond interest accruals	21.5	6.9
Lease liabilities	73.2	14.4
	607.7	564.7
Total bank and other borrowings	1,869.6	1,265.6

¹ Bond debt current/non-current have both been restated at December 2018 to reflect the short-term nature of the September 2019 €500m Euro bond at year end which was classified as long-term.

At 30 June 2019, the Group has a committed £600m revolving credit facility (RCF) which is available for cash drawings up to £600m. The maturity date is August 2023 with two one-year extension options. As at 30 June 2019 £nil (2018: £20.0m) was drawn.

On 15 May 2019 the Group issued a bond of €500m maturing on 30 May 2026 with a coupon of 0.875%. This will be used to refinance the €500m bond that matures in September 2019.

In addition the Group has a Term Loan of $50m, fully drawn at 30 June 2019 that fully matures in June 2020. The effective cost of borrowing on this facility is 2.17%.

8. Bank and other borrowings (continued)

Medium-term notes and bond debt comprises:

	Bond interest coupon	Effective hedged interest rate
Current
€500m bond due September 2019	Fixed 3.375%	Fixed 3.67%
Non-current
€350m bond due October 2021	Fixed 3.25%	Fixed 3.35%
€400m bond due November 2024	Fixed 0.95%	Fixed 3.07%
€500m bond due May 2026	Fixed 0.875%	Fixed 0.95%
£1.3m perpetual debentures	Fixed 5.00%	Fixed 5.00%
£0.3m perpetual debentures	Fixed 4.50%	Fixed 4.50%
Average cost of bond debt at period end rates		2.86%

The effective interest rate reflects the interest rate after the impact of cross currency interest rate swaps.

The carrying values and the fair values of the Group's non-current borrowings are shown in the table below. Fair values are based on cash flows discounted at the current market rates.

	Carrying amount	Carrying amount	Fair Value	Fair Value
	30 June 2019	31 December 2018	30 June 2019	31 December 2018
	£m	£m	£m	£m
Bank borrowings	6.5	2.6	6.5	2.6
€350m bond due October 2021	312.2	313.1	333.9	336.5
€400m bond due November 2024	355.8	356.9	366.5	349.9
€500 bond due May 2026	444.8	-	451.9	-
£1.6m perpetual debentures	1.0	1.0	1.7	1.7
Lease liabilities	141.6	27.3	141.6	27.3
	1,261.9	700.9	1,302.1	718.0

9. Derivative financial instruments

The Group uses derivative financial instruments in support of its hedging strategy which is to hold debt in proportion to the Group profit and cash flow which are mainly EUR and USD.

For all financial instruments held by the Group, those that are held at fair value are to be 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;

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
Long-term debt	1	Quoted market prices
Liquidity fund	1	Quoted market prices or dealer quotes for similar instruments
Interest rate/currency swaps	2	Market swap rates at the balance sheet date
Forward foreign exchange contracts	2	Forward exchange market rates at the balance sheet date
Borrowings not traded in active markets	2	Cash flows discounted at current market rates
Financial instruments not traded in active markets	2 or 3	Valuation assumptions based on market conditions at the balance sheet date
Trade payables and receivables	3	Nominal value less estimated credit adjustments
Other financial instruments	3	Variety of techniques including discounted cash flows

The Group holds all derivatives at fair value, using discounted cash flow models based on market rates that are observable; therefore all derivative financial instruments and available-for-sale assets held by the Group fall into Level 2. Contingent consideration payable on acquisitions by the Group falls into Level 3. No financial instruments have moved between levels in the period.

	Fair value assets	Fair value assets	Fair value liabilities	Fair Value liabilities
	30 June 2019	31 December 2018	30 June 2019	31 December 2018
	£m	£m	£m	£m
Interest rate swaps:
- non-hedge	-	4.5	(3.1)	(16.9)
- cash flow hedge	10.9	4.9	-	-
- net investment hedge	-	-	(34.7)	(14.2)
Foreign exchange swaps:
- non-hedge	1.4	0.2	(2.1)	(1.1)
	12.3	9.6	(39.9)	(32.2)
Analysed as follows:
Current portion	6.5	4.2	(20.0)	(15.8)
Non-current portion	5.8	5.4	(19.9)	(16.4)
	12.3	9.6	(39.9)	(32.2)

10. Events occurring after the balance sheet date

On 30 July 2019 we agreed to dispose of our remaining 17.8% share in CWS-boco International GmbH to Haniel for a cash consideration of €430m (subject to completion adjustments). As at 30 June 2019 the carrying value of the investment was £255.6m resulting in an anticipated profit on disposal of above £125m which will be recognised in the second half of the year.

11. Alternative performance measures

Definitions and reconciliation of non-GAAP measures to GAAP measures

The Group uses a number of measures to present the financial performance of the business that 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 understand the underlying trading 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 reporting currency of the Group). In order to help understand the underlying trading performance of the business, unless otherwise stated, percentage movements for revenue and profit measures are presented at constant exchange rates (CER). Constant exchange rates are calculated by retranslating 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 2018 1.3321 and £/€ FY 2018 1.1288. Comparisons are to the six months ended 30 June 2018 (H1 2018) 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 items including amortisation and impairment of intangible assets (excluding computer software), one-off items and net profit on disposal of businesses (see below for full details).

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 the 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 table below and in the segmental analysis in Note 4.

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:

●	Amortisation and impairment of intangible assets (excluding computer software)
●	One-off items (operating and associates) - including adjustments relating to the pension settlement on buy out of the UK RIPS
●	Net interest credit from pensions
●	Interest fair value adjustments
●	IFRS 16 interest adjustments

Intangible assets (excluding computer software) are recognised on the acquisition of businesses that, by their nature, can vary by size and amount each year. As a result, amortisation of intangibles is added back to assist with the understanding of 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 (vacant property and environmental liabilities), and payments or receipts as a result of legacy legal disputes. Similar adjustments where appropriate are also made to the share of profits from associates.

Other non-cash 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 are also adjusted.

The adoption of IFRS 16 at the start of the year has increased the reported interest charge. This is a non-cash change and is in excess of the operating profit benefit from IFRS 16. The difference has therefore been added back when arriving at the Group's adjusted measures to aid year-on-year comparability.

Adjusted earnings per share is calculated by dividing adjusted profit after tax from continuing operations attributable to equity holders of the Company by the weighted average number of ordinary shares in issue.

11. Alternative performance measures (continued)

A reconciliation of non-GAAP measures to the comparable GAAP equivalents is provided below at both AER and CER:

	H1 2019 AER £m	H1 2019 CER £m	H1 2018 AER £m	H1 2018 CER £m	% change
	H1 2019 AER £m	H1 2019 CER £m	H1 2018 AER £m	H1 2018 CER £m	AER	CER
Ongoing Revenue	1,289.9	1,281.0	1,164.8	1,177.7	10.7%	8.8%
Revenue - disposed and closed businesses	9.0	9.0	11.3	11.3	(20.2%)	(20.0%)
Revenue	1,298.9	1,290.0	1,176.1	1,189.0	10.4%	8.5%
Ongoing Operating Profit	152.1	151.8	134.5	136.0	13.0%	11.6%
Operating Profit - disposed and closed businesses	0.1	0.1	-	-	-	-
Adjusted Operating Profit	152.2	151.9	134.5	136.0	13.2%	11.7%
One-off items - Operating	9.8	9.8	2.6	2.6	269.0%	281.7%
Amortisation and impairment of intangible assets	(36.5)	(36.1)	(28.6)	(28.9)	(28.1%)	(25.0%)
Operating profit	125.5	125.6	108.5	109.7	15.4%	14.6%
Share of profit from associates (net of tax)	12.3	12.3	12.2	12.3	1.4%	0.1%
Net interest payable (excluding pensions/IFRS 16)	(22.9)	(22.8)	(22.2)	(22.5)	(3.4%)	(1.5%)
Net interest credit from pensions	(0.1)	(0.1)	4.0	4.0	(103.0%)	(103.0%)
Interest fair value adjustments	1.0	1.0	7.0	7.0	(86.3%)	(86.1%)
IFRS 16 interest	(2.0)	(2.0)	-	-	-	-
Profit before tax	113.8	114.0	109.5	110.5	3.7%	3.2%
Net interest credit from pensions	0.1	0.1	(4.0)	(4.0)	(103.0%)	(103.0%)
Interest fair value adjustments	(1.0)	(1.0)	(7.0)	(7.0)	(86.3%)	(86.1%)
IFRS 16 interest	2.0	2.0	-	-	-	-
One-off items - operating	(9.8)	(9.8)	(2.6)	(2.6)	269.0%	281.7%
Amortisation and impairment of intangible assets	36.5	36.1	28.6	28.9	(28.1%)	(25.0%)
Adjusted profit before tax	141.6	141.4	124.5	125.8	13.7%	12.4%
Basic earnings per share	4.75p	4.76p	4.69p	4.73p	1.3%	0.7%
Basic adjusted earnings per share	5.99p	5.98p	5.25p	5.30p	14.0%	12.9%

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		Total
	£m	%	£m	%	£m	%	£m	%	£m	%	£m	%
H1 2018 Ongoing Revenue (as reported)	324.2	-	219.0	-	101.6	-	440.3	-	92.6	-	1,177.7	-
Pro forma revenue from 2018 and 2019 acquisitions	9.4	2.9	12.1	5.5	6.2	6.1	25.9	5.9	0.5	0.5	54.1	4.6
Organic Revenue growth	15.5	4.8	9.9	4.5	5.6	5.5	16.6	3.7	1.6	1.9	49.2	4.2
H1 2019 Ongoing Revenue (as reported)	349.1	7.7	241.0	10.0	113.4	11.6	482.8	9.6	94.7	2.4	1,281.0	8.8

	Pest Control		Hygiene		Protect & Enhance		Total
	£m	%	£m	%	£m	%	£m	%
H1 2018 Ongoing Revenue (as reported)	734.1	-	260.2	-	183.4	-	1,177.7	-
Pro forma revenue from 2018 and 2019 acquisitions	48.2	6.6	5.8	2.2	0.1	-	54.1	4.6
Organic growth	35.5	4.8	11.2	4.3	2.5	1.4	49.2	4.2
H1 2019 Ongoing Revenue (as reported)	817.8	11.4	277.2	6.5	186.0	1.4	1,281.0	8.8

11. Alternative performance measures (continued)

Regional Analysis

	Ongoing Revenue				Ongoing Operating Profit
	H1 2019		Change from HY 2018		H1 2019		Change from HY 2018
	AER £m	CER £m	AER %	CER %	AER £m	CER £m	AER %	CER %
France	153.6	155.4	3.0	3.7	22.0	22.2	(0.9)	(0.3)
Benelux	45.5	46.0	5.2	5.8	12.3	12.4	7.0	7.7
Germany	51.4	51.9	15.9	16.3	14.7	14.9	13.3	13.5
Southern Europe	66.6	67.4	6.9	7.5	10.2	10.3	27.1	27.9
Latin America	27.8	28.4	16.3	20.6	3.0	3.2	(3.4)	3.5
Total Europe	344.9	349.1	6.8	7.7	62.2	63.0	7.6	8.6
UK & Ireland	163.0	163.2	10.8	10.9	28.4	28.8	7.1	8.8
Rest of World	76.8	77.8	6.7	8.3	16.7	16.8	4.3	4.8
UK & Rest of World	239.8	241.0	9.5	10.0	45.1	45.6	6.0	7.3
Asia	115.2	113.4	13.9	11.6	11.7	11.6	14.1	11.9
North America	496.8	482.8	15.8	9.6	60.1	58.4	21.2	14.7
Pacific	93.2	94.7	0.5	2.4	18.4	18.6	0.9	2.5
Central and regional overheads	-	-	-	-	(42.1)	(42.1)	(6.2)	(6.1)
Restructuring costs	-	-	-	-	(3.3)	(3.3)	20.6	22.7
Ongoing operations	1,289.9	1,281.0	10.7	8.8	152.1	151.8	13.0	11.6
Disposed businesses	9.0	9.0	(20.2)	(20.0)	0.1	0.1	-	-
Continuing operations	1,298.9	1,290.0	10.4	8.5	152.2	151.9	13.2	11.7

Category Analysis

	Ongoing Revenue				Ongoing Operating Profit
	H1 2019		Change from HY 2018		H1 2019		Change from HY 2018
	AER £m	CER £m	AER %	CER %	AER £m	CER £m	AER %	CER %
Pest Control	828.9	817.8	14.6	11.4	136.5	135.3	13.9	11.5
- Growth	708.4	698.0	14.7	11.1	120.5	119.4	14.6	12.0
- Emerging	120.5	119.8	13.7	13.0	16.0	15.9	9.3	7.9
Hygiene	275.7	277.2	6.2	6.5	45.2	45.4	8.4	8.6
Protect & Enhance	185.3	186.0	1.8	1.4	15.8	16.5	(6.4)	(2.0)
Central and regional overheads	-	-	-	-	(42.1)	(42.1)	(6.2)	(6.1)
Restructuring costs	-	-	-	-	(3.3)	(3.3)	20.6	22.7
Ongoing operations	1,289.9	1,281.0	10.7	8.8	152.1	151.8	13.0	11.6
Disposed businesses	9.0	9.0	(20.2)	(20.0)	0.1	0.1	-	-
Continuing operations	1,298.9	1,290.0	10.4	8.5	152.2	151.9	13.2	11.7

11. Alternative performance measures (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:

	H1 2019 %	H1 2018 %	Variance % points
France	14.3	14.9	(0.6)
Benelux	27.0	26.6	0.4
Germany	28.6	29.3	(0.7)
Southern Europe	15.3	12.9	2.4
Latin America	11.1	12.9	(1.8)
Total Europe	18.0	17.9	0.1
UK & Ireland	17.7	18.0	(0.3)
Rest of World	21.6	22.3	(0.7)
UK & Rest of World	18.9	19.4	(0.5)
Asia	10.2	10.2	-
North America	12.1	11.6	0.5
Pacific	19.7	19.7	-
Ongoing operations¹	11.9	11.5	0.4
Disposed businesses	1.6	(0.1)	1.7
Continuing operations¹	11.8	11.4	0.4

	H1 2019 %	H1 2018 %	Variance % points
Pest Control	16.5	16.5	-
- Growth	17.1	17.0	0.1
- Emerging	13.3	13.9	(0.6)
Hygiene	16.4	16.1	0.3
Protect & Enhance	8.9	9.2	(0.3)
Ongoing operations¹	11.9	11.5	0.4
Disposed businesses	1.6	(0.1)	1.7
Continuing operations¹	11.8	11.4	0.4

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 credit from pensions, interest fair value adjustments and IFRS 16 interest adjustments

	H1 2019 AER £m	H1 2018 AER £m
Net finance costs	(24.0)	(11.2)
Net interest credit from pensions	0.1	(4.0)
Interest fair value adjustments	(1.0)	(7.0)
IFRS 16 interest	2.0	-
Adjusted interest	(22.9)	(22.2)

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, 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:

	H1 2019 AER £m	H1 2018 AER £m
Net cash from operating activities	191.5	157.4
Purchase of property, plant, equipment and intangible fixed assets	(85.2)	(82.5)
Leased property, plant and equipment	(28.7)	(3.3)
Proceeds from sale of property, plant, equipment and software	1.7	1.4
Dividends received from associates	16.6	-
Free Cash Flow	95.9	73.0

11. Alternative performance measures (continued)

Adjusted Free Cash Flow Conversion

Adjusted Free Cash Flow Conversion is calculated by dividing Adjusted Profit from continuing operations attributable to equity holders of the Company (further adjusted for any post tax profits and one-offs from the CWS-boco International GmbH associate) by Adjusted Free Cash Flow, expressed as a percentage. Adjusted Free Cash Flow is measured as Free Cash Flow adjusted for one-off items - operating, product development additions and dividends received from the CWS-boco International GmbH associate.

	Six months ended		Twelve months ended
	H1 2019 AER £m	H1 2018 AER £m	H1 2019¹ AER £m	H1 2018¹ AER £m
Adjusted profit after tax from continuing operations attributable to equity holders of the Company	110.8	96.7	254.8	222.1
Share of profit of CWS-boco International GmbH associate (net of tax)	(8.0)	(8.1)	(12.0)	(9.4)
One-off items - associates	-	-	(4.8)	(7.0)
	102.8	88.6	238.0	205.7

Free Cash Flow from continuing operations	95.9	73.0	214.9	180.7
One-off items - operating²	7.8	3.4	26.6	2.5
Product development additions	2.3	2.0	5.5	4.7
Dividends received from CWS-boco International GmbH associate	(16.6)	-	(25.1)	-
	89.4	78.4	221.9	187.9
Adjusted Free Cash Flow conversion	87.0%	88.5%	93.2%	91.3%

¹Calculated on a 12-month trailing basis

²Excluding non-cash UK pension scheme one-off credit of £17.6m (2018: £6.0m)

Effective 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.

	H1 2019 AER £m	H1 2018 AER £m
Income tax expense	25.8	23.2
Tax adjustments on:
Amortisation and impairment of intangible assets (excluding computer software)	9.1	6.9
One-off items - operating	1.8	(0.3)
One-off items - pension	(6.2)	-
Net interest credit from pensions	-	(0.7)
Interest fair value adjustments	(0.2)	(1.3)
IFRS 16 interest	0.5	-
Adjusted income tax expense (a)	30.8	27.8
Adjusted profit before income tax (b)	141.6	124.5
Effective Tax Rate (a/b)	21.8%	22.3%

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

- the interim management report includes a fair review of the information required by:

· DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

· DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so

By Order of the Board

Andy Ransom

Chief Executive

30 July 2019

The directors of Rentokil Initial plc are listed in the Rentokil Initial plc Annual Report for 31 December 2018. A list of the current directors is maintained on the Rentokil Initial website: rentokil-initial.com

INDEPENDENT REVIEW REPORT TO RENTOKIL INITIAL PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 which comprises consolidated statement of profit or loss and other comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, analysis of other reserves, consolidated cash flow statement and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Michael Maloney

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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Interim Results

H1 2019

H1 2018

The weighted average number of ordinary shares in issue is 1,847m (HY 2018: 1,839m). For the diluted EPS calculation the adjustment for share options and LTIPs is 10.3m (HY 2018: 12.9m).

Assets

Non-current assets

Current assets

Trade and other receivables

Current tax assets

Derivative financial instruments

Cash and cash equivalents

Liabilities

Current liabilities

Bank and other short-term borrowings

Net current liabilities

Non-current liabilities

Other payables3

Bank and other long-term borrowings

Deferred tax liabilities

Retirement benefit obligations

Provisions for other liabilities and charges

Derivative financial instruments

Net assets

Equity

Capital and reserves attributable to the company's equity holders

Called up share capital

Share premium account

Other reserves

Retained profits

Non-controlling interests

Total equity

Called up share capital

Share premium account

At 1 January 2018

Profit for the period

Other comprehensive income:

Net exchange adjustments offset in reserves

Remeasurement of net defined benefit asset

Effective portion of changes in fair value of cash flow hedge

Tax related to remeasurement of net defined benefit asset

Total comprehensive income for the period

Transactions with owners:

Dividends paid to equity shareholders

Cost of share options and long-term incentive plan

Movement in the carrying value of put options

At 30 June 2018

At 1 January 2019

Profit for the period

Other comprehensive income:

Net exchange adjustments offset in reserves

Remeasurement of net defined benefit asset

Effective portion of changes in fair value of cash flow hedge

Total comprehensive income for the period

Transactions with owners:

Shares issued in the year

Dividends paid to equity shareholders

Dividends paid to non-controlling interests

Cost of share options and long-term incentive plan

Movement in the carrying value of put options

At 30 June 2019

Capital reduction reserve

Legal reserve

Cash flow hedge reserve

Translation reserve

Total

£m

£m

£m

£m

£m

At 1 January 2018

Net exchange adjustments offset in reserves

Effective portion of changes in fair value of cash flow hedge

Total comprehensive income for the period

At 30 June 2018

At 1 January 2019

Net exchange adjustments offset in reserves

Effective portion of changes in fair value of cash flow hedge

Total comprehensive income for the period

At 30 June 2019

Other payables³