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Earnings Call: H1 2021

Jul 29, 2021

Speaker 1

Morning, ladies and gentlemen, and thank you all for joining us today. In a few moments, Stuart will provide you with details of our financial results for the 1st 6 months of 2021 and the performance of our regions. I'll then come back and provide an update on our operational model and the performance about categories of pest control, hygiene and protect and enhance. There will then be a Q and A session, details of which are in the RNS and on the website. I'm pleased to start by saying that there has been a clear recovery in our core businesses as economic conditions have continued to improve across most of our markets.

Ongoing revenue in the first half grew by 18.7% in pest control and by 9.3% in our core hygiene business, reflecting low levels of customer premises now in lockdown and strong organic growth delivery, particularly in the Q2 as we lapped a significantly COVID impacted Q2 in 2020. The COGS of our operating model turned smoothly with excellent performances in safety, people and service and in innovation, where the success of PestConnect continued growing by 32% in the half to now exceed 200,000 units in the field. The return of our core business is reflected in the strong growth performance in the first half with revenue from ongoing operations increasing by 18.3% at constant exchange rates. Organic revenue growth of 11.7% in the 1st 6 months was evenly spread across pest control and hygiene at 8.5% and 9%, respectively. Ongoing operating profit grew by 55.4%, while very strong free cash flow of GBP 220,000,000 was delivered in the half with an excellent cash conversion rate of 151%, supported by strong customer collections.

So a very positive set of numbers for the first half once again showing the strength of our core markets and businesses. And in addition, our M and A performance was also particularly strong. During the half, we acquired 24 companies, of which 17 were in the 2nd quarter. And I'm also delighted to announce our agreement with Oika World Holding, a leading pest control company in the Middle East. This is an outstanding business and has been one of our top targets for some time.

Annualized revenues of the acquired businesses of GBP 147,700,000 include the 24 deals in the first half as well as Boyka, but also EPS, a high quality Florida based pest control business that we acquired at the end of 2020 but paid for in January of this year. Given the strength of our performance in M and A. We are up weighting our full year acquisition spend target from around GBP 400,000,000 to a range of between GBP 450,000,000 GBP 500,000,000 So it's been an excellent 1st 6 months. Our core businesses have returned strongly. We've delivered on a big M and A agenda.

And as you can see from today's statement, we would currently expect market expectations the full year to increase by around £10,000,000 to £15,000,000 In view of our performance in the first half of twenty twenty one and our confidence for the second half, the Board is declaring an interim dividend payment of 2.09p that is a 38% increase on the first half of twenty nineteen. With that, I'll now hand over to Stuart to take you through the group financials and the regional performances in more detail. Thank you, Andy, and good morning, everyone. I will now run through the key financial highlights of what has been an excellent first half in a bit more detail. Unless I state to the contrary, all of the numbers are at constant rates and Exchange.

As Andy has just said, we grew ongoing revenue in H1 by 18.3% and ongoing operating profit by 55.4%. Customer collections have been strong in the first half, up 26% on the prior year with no material escalation in bad debts or major insolvencies, resulting in a very strong free cash flow of GBP 222,000,000 Following spend on acquisitions in H1 and payment of the 2020 final dividend, our net debt to EBITDA ratio is 1.67 times versus 1.6 times reported in December 2020. So based on a very strong H1 and our confidence of further progress in H2, the Board is declaring an interim dividend of 2.09p per share. Looking now at performance by region, starting with North America. North America was our best performing region in H1, growing revenues by 29.8%, that's 15.5% organic.

Total pest revenues rose by 24.8%, reflecting good demand from both commercial and residential customers, which increased by 23.2% 27.8%, respectively. Revenues in H1 have also been supported by disinfection sales of £64,300,000 with these significantly reducing in Q2 as COVID related market conditions have improved. Ongoing operating profit growth of 54.6% reflects revenue growth across all businesses and the contribution from disinfection. We've had a good half for M and A in North America, purchasing 7 businesses in the first half with combined annualized revenues of just under £30,000,000 Turning now to some comments on the trends we are seeing across our North America business. North America continues to be the least impacted of all our regions from the pandemic and all operations, including Brand Standards and Ambeus, returned to growth in H1.

Unsurprisingly, the continuation of the work from home business environment continues to support growth in residential pest control and commercial pest, which was more impacted in 2020 from customer suspensions, has seen good volumes of work across most markets, including in the recovering hotel and travel sectors. Our distribution business is generally a good barometer of the health of the overall pest control market, and the business has benefited from high demand for pest control products in H1 and also for lawn, golf and turf products. Finally, with sales from one time disinfection services tapering off as expected, hygiene sales focus is increasingly being directed towards hand and and disinfection and purification products. An update now on our progress towards our 18% margin target. We continue to make progress towards 18% margins in North America, growing this by 2 50 basis points to 15.5% in H1.

This is as a result of the recovery of our core businesses, together with cost savings and the benefits from our IT enabled best of breed program as well as the further contribution from disinfection, albeit at lower margins than in 2020 as volumes and prices unwind. We continue to expect margins to be within the range of 16.5% to 17% for the full year 2021, leaving us on track to deliver our 18% margin target by the end of We migrated our West region to the new service planning and management system at the end of 2020, began the migration of our Southeast and central operations in H1 and plan to transfer the Northeast operations onto the system at the end of this year. We are seeing encouraging improvements in customer service, field service and sales productivity and better management of customer payments. Moving now to our IT replatforming program chart. You will recognize this chart as an update on how we are progressing.

And as I did at the prelims, I will leave you to read the detail after the call. But in summary, the replatforming is focused on delivering a standard modern technology platform to support an efficient and unified operating model across our entire North America business. You can see by the green bars that we made good progress in 2020 and the blue bars indicate that we are on track to largely complete the re platforming by the end of this year. Turning now to the European region. Ongoing revenue rose by 9.5% in H1, of which 7.6% was organic, reflecting a much improved performance in France, Southern Europe, Germany and Latin America.

Pest Control revenues grew by 10.1%, while core hygiene excluding disinfection rose by 10.6%. Revenues from disinfection sales amounted to £20,000,000 in H1 and are expected to unwind in H2. Ongoing operating profit grew by 40% in H1, leading to a 3 80 basis points improvement in margins to 17.6%. We acquired 9 businesses across the region in H1, 7 in Europe and 2 in Latin America with annualized revenues of around £12,000,000 Looking now at trends and market conditions in Europe. Conditions have been mixed in Europe and Latin America as a result of the ongoing COVID-nineteen pandemic.

And while trading is returning to more normal levels, full recovery remains dependent on country specific reopening plans, the pace of tourism return, especially in Southern Europe and employee return to the office. Pest Control has performed well, although slightly held back by lockdowns and also a delayed start to the flying insect season in Q2. Core hygiene service provision is recovering, but is not yet back to full strength because of delays in larger countries and customer caution on consumable volumes. In France, lockdowns began to ease in May with fewer restrictions on restaurants, cafes and bars. And as a result, we have seen an improving performance in workwear.

While this is encouraging, as used volumes where customers only pay for Specific garments laundered are still behind pre COVID levels, but are expected to improve in H2 as restrictions hopefully ease further. Turning now to the UK and Rest of World. Ongoing revenue grew by 11.2%, of which 10.6% was organic, with UK and Ireland Pest and Hygiene, excluding disinfection, growing by 5.2% and 14.7%, respectively. And rest of world pest and hygiene operations, again excluding disinfection, growing by 10.9% and 1.3%. Regional ongoing operating profit increased by 50.8% in H1, reflecting much improved revenues.

Net operating margins improved by 650 basis points to 24.9%. Trading conditions in the UK, which was severely impacted by lockdowns in Q1, rebounded strongly in Q2, reflecting the country's successful vaccination program and subsequent easing of restrictions. In addition to improving market conditions, a number of growth initiatives taken in 2020 also contributed to the strength of our performance in H1, including an acceleration of service differentiation, innovation, digital marketing and technology enabled business and cost programs. As a result, performance has been very encouraging in both pest control and core hygiene, which includes our washrooms, medical and specialist hygiene operations. Pest control volumes have returned to pre pandemic levels and new customer inquiries around 5% to 7% higher than before the prices.

In addition and building on last year's success, rollout of our Pest Connect product and service has continued at pace. UK Property Care and Ambius both returned to growth in H1 with Property Care benefiting from strong residential customer demand and signs of recovery in the commercial property market and with Ambeus benefiting from the union of government restrictions, but with demand still dampened by continued closures of major office spaces. Now looking at Asia. Despite significant country differences across the region, overall performance has been robust in H1. Regional ongoing revenue rose by 7.4% in H1, of which 7.1% was organic, with ongoing operating profit increasing by 14.6% and resulting in a 70 basis points improvement and net operating margins to 10.8%.

We acquired 1 pest control business in Singapore in H1 with annualized revenues in the year prior to purchase of just over £500,000 Turning now to market conditions. Real recovery in Asia is being held back by rising COVID cases in key markets, including Malaysia and Indonesia. However, performance is notably stronger in countries which are benefiting from greater progress in vaccination programs such as China. Both pest control and hygiene continue to be impacted. However, disinfection sales, which remain at similar levels to Q1 and Q4 last year, of providing a hedge disruption to core service provision.

We are actively promoting air hygiene across the region with the recent launch of Virus being particularly well received in Hong Kong and Singapore, which combined generated around £550,000 of revenues in Q2. In the Pacific, our operations in Australia and New Zealand have performed very well, aided by successful containment of COVID-nineteen in 2020 and despite intermittent lockdowns in Australia this year. Fiji, however, continues to be impacted by the suspension of all flights to and from the country and its associated impact on tourism. Pacific revenue grew by 12.9%, that's 11.8% organic, with pest control up 11.3%, hygiene excluding disinfection up 14% and Ambeus up 7.3%. Regional ongoing operating profit grew by 20 3.9% and net operating margins rose by 180 basis points to 20.6%.

We acquired 3 small pest control and 2 hygiene businesses in Australia in H1 with revenues of around £3,000,000 Demand for pest services, including residential, commercial, bird control and fumigation have been strong in H1, While the recent mouse plague in Australia has had a devastating impact on the farming community in New South Wales, it has not had a material impact on our business. In hygiene, core service provision is recovering well, and we are also seeing demand for hand sanitizer continue to trend ahead of pre COVID levels and a growing dialogue in air quality that we will leverage going forward as more people return to their offices. Operating cash flow of £261,300,000 for continuing operations was £88,100,000 higher than in H1 2020, driven by a £69,600,000 increase in adjusted operating profit and a GBP 44,500,000 improvement in working capital. Continuing free cash flow of GBP 222,000,000 was £78,500,000 higher than last year, reflecting the increase in operating cash flow previously noted. Cash interest of £14,300,000 was £1,900,000 lower than H1 2020.

Cash tax increased by £11,500,000 reflecting abnormally low tax payments in the first half of twenty twenty due to various deferred tax payments during the early part of the COVID-nineteen crisis. Underlying net debt increased £139,100,000 due to cash spend on acquisitions of £261,100,000 and dividend payments of £100,000,000 foreign exchange and other positive items of £18,900,000 are primarily due to the strengthening of sterling against the euro and dollar. Overall, these factors have led to an increase in net debt of £120,200,000 and closing net debt of £1,100,000,000 Turning now to the balance sheet. Our net debt to EBITDA ratio was 1.67 times at 30th June. On the 7th July, we repaid the remaining €175,000,000 outstanding on the €350,000,000 bond due on 7th October 2021.

This was funded by the proceeds from the €600,000,000 bond issued in October 2020. Liquidity headroom was in excess of GBP 1,000,000,000 at 30th June 2021, including GBP 550,000,000 of undrawn RCF, which matures in August 2025. The group's credit rating remains at BBB with stable outlook. And with net debt of just over £1,000,000,000 our balance sheet fully supports our capital allocation model of compounding revenue, profit and cash flow growth. Some numbers now for your models in relation to H2.

I'll let you read these in your own time, but we'll point to a couple of changes on previous guidance. We now anticipate and cash conversion of at least 90% in 2021 based on the strength of our performance in H1. This also affects working capital now expected to be neutral to a slight inflow in 2021 and a significant improvement on the £30,000,000 outflow guided to in March. CapEx is likely to be some £20,000,000 below prior guidance at £250,000,000 to £270,000,000 reflecting difficulties in obtaining vehicles due to global supply issues. Cash interest is expected to be around £36,000,000 reflecting better cash generation in H1 and favorable foreign exchange.

Cash tax payments are expected to be some £10,000,000 below previous guidance between £65,000,000 £75,000,000 Finally, given our excellent M and A performance in H1 and the strength of the pipeline for H2, we now anticipate full year expenditure on M and A to be in the region of GBP 450,000,000 to GBP 500,000,000 So before I hand over to Andy some comments on our expected outlook for H2. Assuming global trading conditions continue to improve and are not adversely impacted by rising cases of new COVID-nineteen variants around the world. We continue to expect our pest control hygiene and protect and enhance categories to demonstrate further operational and financial progress. Onetime disinfection services are expected to progressively unwind in quarters 3 and 4, contributing revenues of some GBP 10,000,000 to GBP 20,000,000 in H2 and making a total of between £110,000,000 to £120,000,000 for the year. Foreign exchange continues to impact the presentation of our numbers and remains volatile with sterling strengthening versus the euro and U.

S. Dollar. At current rates, this would have an estimated £15,000,000 to £20,000,000 negative impact on our profits in 2021. So therefore no change to the guidance we gave you back in March. Taking all of the above into account, we expect consensus adjusted pretax profit for the full year to increase by between £10,000,000 to £15,000,000 So I will leave you with a slide summarizing our key achievements in H1 and hand you back to Andy to continue with the rest of the presentation.

Andy? Thanks, Stuart. So then, starting as always with our right way strategy. This is what internally we call our machine as it describes all of the various cogs and components of our engine for successfully compounding our organic and acquisition growth and converting these revenues into cash. We then reinvest the vast majority of that cash back into the machine in the form of investments into people and training, into technology and innovation and of course into further M and A in our core businesses.

So let me start with safety and employer of choice agenda. From the PLC Board meeting down through the organization to region, country and branch meetings. Safety is always the first item on every meeting agenda. It's really pleasing to see that we've made dramatic improvements over the last few years and that our safety performance remains at world class standards. But of course, one accident is one too many.

And during the half, we took our expertise in digital technology to drive for even higher standards. Our new site risk assessment app ensures that colleagues only enter a customer's premises having first undertaken a thorough safety evaluation of the site. The great example on the slide you can see that in Asia 470,000 site assessments were undertaken in the 1st 6 months, and there were just 3 accidents in the half across 16,500 colleagues. Around some of our markets, the war for talent, particularly frontline colleagues, has certainly increased over the last 6 months. Fortunately for us, our commitment to employer of choice and market leading recruitment practices have delivered colleague retention levels, which have remained in line with historical averages, and we've achieved a sustained performance in recruitment.

75% of our recruitment takes place in America and across Asia. And in both markets, we've seen our time to hire and our vacancy fill rates remaining very strong. Our expectation is that these tight labor markets will likely improve as government support schemes, particularly in the U. S. Come to an end.

In the meantime, we are now delivering record traffic to our Careers portal, up by over 300% in the first half on the same period last year. The recruitment website indeed recently placed Rent A Kill Initial, top of the ranking for graduate recruitment in the UK. And we've launched Careers Plus, that's our job referral platform. So to date, there have been over 20,000 social media posts of our job vacancies by colleagues. And in some markets in Asia, up to 92% of new hires in June were filled through these employee referrals with an associated 40% reduction in the time to hire.

On diversity and inclusion, the company is continuing to make very good progress. We undertook a diversity survey of colleagues in June and in response to the important question, are there equal opportunities for people to have a successful career at this company? We scored 3 percentage points above the world class norm of high performing companies. Also during the first half, we launched a new program, which all of our global management population will undertake over the next 18 months, giving them the insight and support to create an even more diverse and inclusive culture across the group. After Safety and Employer of Choice, the environment is now the 3rd item on every internal meeting agenda.

Of course, we know we've got a long way to go to reach net 0 and to achieve our other environmental aims. But the response from colleagues and customers to our new environmental goals and program has been very positive. It's not only the right thing to do, but it also supports new business and it builds our employer brand for prospective new hires. With around 20,000 vehicles in our fleet, this is obviously one of our most important areas of focus. We analyzed the availability of low carbon vehicles by country, which gives us a RAG status.

And it's really encouraging to see more and more of our countries moving into the green zone, where we are now increasingly confident that we can deploy electric vehicles that meet the needs of the business and at a cost effective price. As you can see, by the end of the first half, in the UK, around 30% of new cars ordered for electric vehicles. And just to underscore the progress we are making, it was excellent to see the GEO IRIS place Rent A Kill initial first out of 103 companies in Business Services in their latest ESG analysis. Turning to the S in ESG. I'm sure that everyone saw the terrible scenes from India at the height of their COVID crisis earlier this year, and we were proud to play our part by sending 288 pallets of PPE as well as and soap and sanitizer worth over GBP 2,500,000 which our local operations then distributed to over 500 across India.

So from safety to diversity and from environment to crisis aid, I hope that this underlines our values and culture as a responsible purpose driven organization. So let me now cover our categories and then M and A before we move to questions. And starting, of course, with the world's greatest pest control company. Here, we have a powerful business. We're the global leader in pest control with 54 market leading positions.

We have a clear city based strategy. We have a world famous brand based on proven expertise and we are the clear leaders in our industry in digital technology and we are unmatched in innovation. We also have a highly disciplined and successful global M and A program. And this outstanding business operates in a robust global market, which is set to grow by a CAGR of around 5% through to 2025 as we see no let up in the main growth drivers of growing middle classes, urbanization, in climate change and increasing standards and legislation. In the first half, as you can see on the left of the slide, we reestablished our pre COVID growth trajectory in pest control, resulting in our pest control business being 20% larger than it was 2 years ago.

Since 2015, the business has in fact delivered a revenue CAGR of over 15%, and this continued in the first half with ongoing revenues in Pest Control increasing by 18.7% with strong performances from North America, up by nearly 25% Asia, up by 13.3% and both Europe and the Pacific region delivering growth over 10%. Organic revenue growth in Pest Control increased by 8 0.5% with emerging markets delivering an increase of 12.8% and our growth markets of 7.9%. In addition to strong regional performances, our expansion in pest control continued to be supported by growth in our global customer accounts, particularly FM, where we generated new revenue in over 20 countries from each of our 4 largest international customers. Clearly, there was a marked change in the 2nd quarter with ongoing revenue growth of 26.6 percent supported by our strong M and A performance and 15.5 percent organic growth, whilst obviously lapping our weaker COVID impacted quarter 2 of last year. Ongoing operating profits increased by 36.7 percent to GBP 170,300,000 with first half margins increasing to 17.5%, up from 15.2% in 2020 and from 16.8% in 2019.

Rounding off our first half performance in Pest Control, Our M and A program delivered 21 acquisitions in cities including New York, Lyon, Memphis and in Singapore. We also made our first entry into the Canary Islands. The program delivered total annualized revenues, including the EPS acquisition of £107,000,000 or £144,000,000 if you include BOICA, which completes this coming Monday. As I just said, Rent A Kill is the undisputed leader in both digital technology and innovation in the pest control industry. And we use this to differentiate our products and services and in turn, obviously, therefore, to drive sales.

We use it to enhance our service and in turn support customer retention, but we also use it to improve our productivity and lower our costs, while at the same time building our sustainability credentials, which as I mentioned earlier, is of particular importance to our colleagues and our customers. And as you can see there on the right of the chart, this is being translated into financial performance with around 30 and of our UK pest control revenues for the last two and a half years coming from our innovations. Innovation is an important part of our success and on the screen is just a small selection of our recent innovation for the flowing from the Power Centre, that's a UK based science centre. At the Capital Markets Day on the 28th September, will provide you with a more detailed update and give you a first look at some exciting new innovations that will be heading into the hands of our sales teams in the coming months. A great example of how we differentiate our products and services is the new Eradico ROSENT Control Unit.

As a single global bait station that replaces over 20 different local solutions, Eradico's robust design has to withstand climate extremes from minus 25 degrees C in the Nordics to around 50 degrees C in the Gulf. It's also made from recyclable polymer and so it's 100% recyclable at the end of its long life. Sustainability is also at the heart of our alumina units, the first range to use LED lights to attract flying insects. Not only are they highly effective, but they also reduce energy usage and carbon emissions for our customers by about 70%. Available in 60 markets and with a series of range extensions to meet the needs of different customer sectors, we've now sold over 200,000 units of this highly innovative unit.

Now I'm not going to go into detail about PestConnect today as we'll provide a thorough update and demonstration at the Capital Markets Day. But the success of this system continues with over 200,000 units now in the field. That's another 32% up in the first half. That number would in fact have been even higher, but for the global shortage in printed circuit boards. Once the units have been configured and set up in the field by our expert technicians, they provide remote monitoring for instant alerts and a fast identification of customer problems, giving our customers access to data and reporting whenever they need it on a 20 fourseven basis.

And with the alignment of this data through our command center or indeed directly to our customers via the MyRentToKil online portal. This is a proven robust digital platform that is taking the protection of customers' facilities and the mitigation of risk to a new level and it's now available in 28 countries. The Pest Control is making great progress and we will provide a further update in September. So turning now to initial hygiene, which, as you can see, became the official hygiene partner to the O2, that's Europe's largest live performance venue, ahead of its return to business and in time for the BRIT Awards earlier this year. In hygiene, we're the global leader with market leading positions in 22 countries in a top three position in 38 markets.

And the business shares many of the same qualities as pest control. This is a high quality business and of course will benefit from the significantly changing attitude and higher expectations for hand, Air and Surface Hygiene as a result of the pandemic. I'm very pleased with the performance of our hygiene category in the first half with the return to growth of our core hygiene services, which increased ongoing revenue by 9.3%. Looking at the period since 30th June 2019, you can also see that the core has now returned to its pre prices levels. This includes strong performances in Europe and the UK and Rest of World regions, which both increased ongoing revenues by around 11% in the Pacific region that grew revenues by 14%.

Organic revenue growth increased by 9 then in the first half. As with Pest Control, the 2nd quarter saw strong growth with ongoing revenue up by 29.2%. This was supported as the half progressed with the level of hygiene customer premises in temporary suspension continuing to improve, reducing to below 4% in June in comparison to over 30% at the peak in April 2020. In addition to the core hygiene services, disinfection services generated ongoing revenues of GBP 98,300,000 in the first half and that's a very creditable performance. At our prelims, I noted that we expected volumes and prices to naturally unwind in disinfection services as lockdowns and crisis conditions abate.

And as that tide goes out, so we would expect our core hygiene services to increasingly return as individual markets reopen. And this indeed is what has happened over the first half. Disinfection Services have been a great success story for the company and has served its purpose brilliantly. We identified the opportunity in March of 2020, learning from the crisis situation in China. We launched in 60 markets within a month at the height of the initial crisis, and we won substantial new business.

And in the process, we created additional work for our 7,000 colleagues involved. Very few companies were able to move with our agility during the crisis, let alone to create a new global service line for the pandemic, which has generated revenues of over GBP 320,000,000 over the last 16 months. The second half of last year saw the peak of disinfection services with ongoing revenues of £173,600,000 typically to customers who needed to keep their premises open during lockdown conditions such as distribution companies, supermarkets, food production companies. Today, I am genuinely pleased to say that the customer need for disinfection services has significantly reduced as crisis conditions have abated. And we would expect the second half of this year to deliver revenues in the region of £10,000,000 to £20,000,000 from disinfection services.

In the meantime, of course, our core pest control and hygiene revenues have returned strongly. As I highlighted earlier this year, given the ongoing importance of good hygiene in our lives, we anticipate that from 2022, The medium term growth potential of our core hygiene business will be very similar to pest control, so around 4% to 6% on an ongoing basis. We'll bring this to life for you at the Capital Markets Day on the 28th September, where we'll share with you where we see the opportunities for future growth. Firstly, in our core washrooms business, where at the CMD, we will set out in detail what we sell and to which types of customers, our dual density model in hygiene for driving margins with both route based density and increasing service lines that customer promise and also how we plan to expand that core washrooms category. Onto this large core washrooms business, we see good opportunities to add new products and new services, which we will use to upsell to existing customers, particularly in the areas of air hygiene and digital washrooms.

No touch products will be an essential part of the range post COVID. And in the first half, demand increased by 20% against both the first half of twenty twenty and twenty nineteen, demonstrating this clear change in customer preference. Clearly, demand for our hygiene services is no longer confined to inside the washroom itself. And at the Capital Markets Day, we will outline the new opportunities, including expanding hygiene services such as air hygiene into multiple new locations from offices and reception areas to retail and leisure. We will share the development of our specialist hygiene services and the growing importance of the well-being agenda.

Encouragingly in the first half, we sold over 17,000 air purification units, including the new Virus Killer and the Inspire air unit, which generated revenues of over £3,000,000 Having launched in 20 new markets in 2020 with our disinfection service, during the first half, the markets began to move away from disinfection and into core services. And again at the CMD, we'll update you on our progress and outline our ambition for these new markets. And as you'd expect, the M and A team will also be on hand in September to take you through the M and A model for Hygiene. Where are we targeting? What's the pipeline looking like?

What are the IRR hurdle rates? And assuming that we can meet in person and indeed only if we can meet in person in order to do this justice, then the Capital Markets Day will take place at 1 Moorgate Place on the 28th September. Turning now to Protect and Enhance, which delivered ongoing revenue growth of 4.6% in the first half. Here, all four businesses, that's Workwear in France, Property Care in the UK, Dental Hygiene Services and Ambius, each delivered a return to profitable growth as the temporary closure of customer premises improved from around 5.5 percent at the start of the year to around 1% in June. In Workwear, despite the pandemic significant impact on the French economy.

Our Workwear business achieved a solid performance in the first half with ongoing revenues increasing by 4% to £82,000,000 and new customer agreements were up by 30% year on year, particularly in the industrial sector. Of our smaller businesses in Protect and Enhance, pleased to report that all three increased both revenues and profits as the half progressed with Ambeus, the larger of the three businesses, increasing ongoing revenues in the 2nd quarter by 16.8% with good contributions from North America, which was up by 17.3 percent and from Europe, which was up by 7.1%. Each of the three businesses has a clear growth opportunity. AmbiS is at the heart of the health and well-being agenda, offering its plants and scenting to support the returning customers in retail, leisure and offices, but also the longer term changes in requirements for healthier and more hygienic places to work. Property Care is providing building preservation services in a very buoyant UK Property Market and Dental Hygiene is supporting dentists with the compliance and safe disposal of amalgam and other dental waste streams as we all now make the necessary appointments that we missed over the last 16 months.

So turning now to M and A. It's been an excellent 6 months. We acquired EPS, the 15th largest pest control company in the U. S. At the very end of 2020, which we paid for in January and the business is already performing well.

We delivered 24 acquisitions in the first half, including 17 in the second quarter with 21 deals in pest control. We have an agreement with Boika World Holding in the Middle East, that's one of our top targets, which we expect to close that deal on Monday. And given the strength of our M and A pipeline, we are up weighting our full year spend guidance from around £400,000,000 to between £450,000,000 £500,000,000 We have very strong performance in M and A, which continues to meet our expectations and to deliver in line with or indeed above our targeted return criteria. Now for those of you who don't know Boyka, this is a great pest control business with a superb leadership team. Their model could almost be straight out of the Rent A Kill playbook with a great people agenda, high quality customer service, strong technical expertise and proven growth credentials.

They operate right across the Middle East, but also in Nigeria and in Ghana, the great fit with Rentokil and it makes us the clear number one across the Middle East, which we see as a very attractive growth market. Then in summary, in the 1st 6 months, we delivered a strong overall performance with an excellent contribution from both organic growth and M and A. Ongoing revenue increased by 18.3 percent with strong contributions from Pest Control and Hygiene as the core business returns. Ongoing operating profit grew by 55.4 percent with growth across all markets and categories. Free cash flow was excellent with a cash conversion rate of 151%.

And as I mentioned, we continue to execute our highly targeted M and A program and we have a strong pipeline in place for the second half. In view of our performance in the first half and our confidence for the second half, The Board is declaring an interim dividend payment of 2.09p per share, a 38% increase on the first half of twenty nineteen. So with that, a Q and A with Stuart and myself will begin shortly at 10 o'clock. You've just about got enough time to grab a quick cup of coffee. If you'd like to ask a question, please do join the conference call and the details are there in front of you on the screen.

Thank you.

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