Thursday 9 November 2006

Transcription

1 Thursday 9 November 2006

2 Introduction Doug Flynn

3 Programme 10:15 11:15 Textiles and Washroom Services 11:15 11:30 Break 11:30 12:15 Asia Pacific 12:15 12:50 City Link 12:50 14:00 Business showcase lunch 14:00 15:00 Pest Control 15:00 16:00 Business showcase drinks reception

4 Textiles & Washroom Services Henry Chandler Hervé Robert Floris van Eekert Stephen Booth

5 Objectives Give an overview of the European Textiles and Washroom services division Provide high-level insights into market challenges and opportunities Update on how we re addressing the challenges and maximising the opportunities 5

6 European Textiles & Washrooms Services Covers 18 Countries & 8,500 Employees 6

7 Five Key Countries Account For Over 80% Of Revenues 100% Other Belgium Germany Netherlands Austria Italy Spain UK France 0 Revenue split by country 7

8 Across The Countries, Four Main Services Provided Textile and washroom services Garment Washroom Flat linen Mats Rental and cleaning of workwear for a wide range of customer types and applications, such as: Overalls for manufacturing companies Protective equipment for hazardous environments (e.g. smelting plant) Corporate identity wear for services companies (e.g. banks) Provision, rental and servicing of washroom products for employees and/or customers, such as: Linen hand towels which are collected and washed on a regular basis Air fresheners that automatically dispense Sanitary bins for feminine hygiene products Flat linen rental and cleaning services, primarily for hospitals and hospitality, such as: Bed sheets for hotels Table cloths for restaurants Linen for hospital beds Napkins for catering companies Floor protection and dust reduction products provided on a rental basis, such as: Hotel welcome mats at front door Industrial mats with dust attraction properties 8

9 Within Each Service Are A Number Of Sub-services Textile and washroom services Garment Washroom Flat linen Mats Consumables Towel roll Soap dispenser Other dispensers / vending Air freshener Sanitary disposal Sanitiser 9

10 The mix of services varies by market, with hospital business only present in France & Belgium Textile and Washroom revenue 100% Hospital Flat Linen Flat Linen Washroom and mats Hospital Flat Linen Washroom and mats Washroom and mats 40 Washroom and mats Washroom and mats Garments 20 Garments Garments Garments 0 France Netherlands Belgium UK Germany* *Germany excludes Hospital as currently exiting this business 10

11 We have strong positions in most key markets Estimated share of market revenues (2005) 100% 80 Other HTS Anett RLD Other Other Other Davis OCS Other Initial Elis Vendor Womitex Lavans HTS Blycolin Berendsen Aneca Mireille Mewa Elis HTS Initial PHS Larose Dressline Initial Alsco Berendsen Bardusch DBL Mewa Initial Initial HTS 0 France Netherlands Belgium UK Germany

12 We have strong positions in most key markets France Netherlands UK Germany Belgium Garments #2 #2 n/a #6 #1 Washroom #2 #1 #2 #4 #1 Flat linen #2 #3 n/a n/a #1 Mats #2 #1 #2 #7 #1 12

13 Margins vary by product line Garments Washroom Flat linen Mats 13

14 Number of market trends occurring across countries, leading to both opportunities & challenges Challenges Market trends Opportunities Shift of manufacturing to low cost countries Intermediation in washroom services Price pressure continuing for major accounts Growth of garment market for services customers Increased comfort and outsourcing in Washroom Pricing in niche markets 14

15 Garment market split between services & manufacturing customers 100% Split by garment market by industry (excludes hospitals) HORECA* Services Manufacturing 0 *HORECA hotels, restaurants, catering Germany Netherlands Belgium France 15

16 Garments historic shift of manufacturing to low cost countries expected to continue Change in manufacturing workforce (02-05) 0% Belgium France Germany -2.7 Netherlands Share of workforce 28% 30% 45% 24% 16

17 Washroom indirect channel important part of the market, particularly in France with cleaning companies % share of indirect channel in washroom market 30-40% 15-20% 10-15% 10-15% France Germany Netherlands Belgium 17

18 Growth opportunity from under penetrated services workwear market % of workforce wearing / renting uniforms 60-70% % renting % wearing 25-35% 25-35% 5-15% Manufacturing Services Example: France 18

19 Opportunity From Increased Comfort & Outsourcing In Washroom Services Washroom services France Netherlands UK Germany Belgium Average service lines today (in/out-sourced) 4-5 ~ Level of outsourcing Low High High Medium Medium 19

20 As well as responding to market trends, we continue to review opportunities to improve performance Market trends Challenges Opportunities Shift of Manufacturing to low cost countries Disintermediation in washroom services Price pressure continuing for major accounts Growth of garment market for Services customers Increased comfort and outsourcing in Washroom Pricing in niche markets Opportunities to improve performance Increase revenue per customer Services per customer Spend per service Reduce cost per customer Distribution cost Processing cost SG&A Drive customer advocacy New acquisitions Customer retention 20

21 Textiles & Washroom Services France Hervé Robert

22 Market Profile French Washroom and Textile Services Market (2005 ) Total = 1.5bn 100% m Other HTS Anett RLD 257m Other Anett RLD HTS 515m Other Anett RLD 112m Other Anett HTS 60 Initial Initial Initial Initial Elis Elis Elis Elis Workwear Washrooms Flat linen Mats & other Source: internal estimates

23 Business Profile 2005 revenue 211m By service By customer Garments 51% Large flat 10% Industrial 34% Hospitals 20% Washroom 16% Speciality hospital 3% Retail 24% Tertiary 7% Mats 7% Other 2% Hospitality 15% Small flat 11% 75,000 customers 3,600 staff 49 service centres 7 million garments barcoded

24 National Coverage Population Density/Potential Number Of Users Of BTB Services

25 Brie-Comte-Robert

26 Laundry Processing

27 Portfolio Development New business Additions/ reductions Terminations % of Portfolio Customer retention very stable, termination rate 6% (17 year customer lifetime) New business weakening slightly Additions/reductions to existing accounts helped initially by 35 hour week but declining over time as function of decrease in industrial employment

28 Business Reorganisation From the start of the year, the industrial division was restructured away from a geographical organisation to a functional "core process" organisation Business winning and keeping Processing Service and delivery

29 Business Reorganisation - Aims More coherent approach to plant investment and capacity utilisation through national processing director More active and professional sales management - new sales director recruited Reinforced national accounts team Streamlined network admin structure More harmonisation in application of company policies

30 Business Reorganisation - Issues Benefits difficult to realise in current market conditions Textile rental market has a lot of inertia - results of changes will take time to come through (new business sales, revitalised marketing etc) Union action and pressure Aggressive competition basing its strategy on price-cutting

31 Challenges Market conditions - delocalisation of industrial employment - low growth of French economy Price pressure - over capacity in market Ability to increase prices in line with cost inflation Need to innovate and differentiate from competition, in particular through IT content and market understanding Pursue optimisation of capacity utilisation throughout service network

32 Opportunities for Growth Washroom Synergies and geographical coverage from integration of Rentokil healthcare with the BTB hygiene business Highest margin of service range Potential for growth Hospital Long-term major growth potential Leading edge offering (IT and internet content) Industrial Newly organised and increased salesforce, headed by new sales director IT innovation needs to be maintained and pursued

33 European Washroom Integration Floris van Eekert

34 The Starting Point W T WT Washroom services Textiles services Joint services W W W W W W WT WT W T T W T W W T W W W T

35 Today W T WT Washroom services Textiles services Joint services W W W W W W WT WT WT T WT WT WT WT W WT

36 What Was The Problem? Inefficient structure Revenue growth slowing Profits declining Solution Integrate washroom businesses Combine with textiles operations where we have them Y-on-Y revenue growth Y-on-Y profit growth %

37 Key Objectives Of Integration Introduce full range of washroom services to all markets Washroom services concept selling services rather than products Introduce mats to all markets Improve service performance Increase geographic coverage Potential to seek opportunities for garments

38 Issues Faced During Integration Legal issues IT conversion Social issues (works council, trade unions) Management changes where needed

39 Progress To Date Integration completed in most countries: Austria Denmark Finland Ireland Italy Norway Portugal Spain Sweden Switzerland Actual level of integration costs ± 700K legal fees ± 690K redundancy costs Stopped after partial integration Size of business Complexity of integration Lengthy legal procedures in Germany No substantial cost savings so far due to only partial integrated businesses in France / Germany

40 Achievements Introduce full range of washroom services in all markets Washroom services concept Full rental concept introduced and offered now in all countries Example of France, cross selling outside Paris 110% 100% Mats sales account for 15% of original services and trend is increasing Complementary products (cross selling) account for 40% on the original services 0% Former Initial Former Rentokil Original services/products

41 Achievements Introduce mats to all markets (cross sell) Acquisitions made in Finland and Sweden Mats introduction excluding the acquisitions account for 4.5% of turnover in the NordSip countries Improve service performance PDAs for all service drivers as proof of delivery in Norway, Denmark and Finland Customer Satisfaction Survey web-based in Belgium, Netherlands, France, Denmark, other countries to follow From manual planning system to IT based planning tools in France, Germany, Spain and Austria

42 Achievements Increase geographic coverage Germany, increase of coverage of the country based upon a 75 mins drive radius

43 Achievements Potential to seek opportunities for garments First garments customer won in Italy in conjunction with French business Supermarket chain with 8 supermarkets and potential for 20 more in 2007 Start-up of garments offering in Switzerland with the collaboration of the Germany business

44 Washroom Summary Decline in revenue has stopped trend is improving Q1 Q1 (1.7%) Q2 Q2 (0.2%) Q3 Q3 +0.8% Q4 Q % Decline in profit trend is improving Q1 Q1 (9.2%) Q2 Q2 (4.2%) Q3 Q3 (4.0%) Q4 Q4 expected to be flat Washroom margin 2006 (1.9%) stabilizing cost base with increase of revenue will improve margin

45 UK Washroom Stephen Booth

46 Initial Washroom Solutions UK The UK Washroom Marketplace The Business Drivers Update on UK turnaround Future growth

47 The UK Washroom Marketplace Total size is estimated at 500 million, 55% outsourced valued at c 280 million Highly consolidated market, Initial and PHS have 69% of the outsourced market Market growth estimate 3% due to: economic stability growth in outsourcing legislation and social awareness increased building Source: UBS Q Series: Facilities Management Investor research June 2006

48 Market Conditions A few major market players 3 national players who have 82% of the market Low entry barriers Increases capacity and results in a lack of pricing power Commodity market Lack of service differentiation, market competes on price High level of customer switching Customers dissatisfied with service base decisions on price and frequently switch suppliers, retention is an industry wide issue

49 UK Washroom Business Drivers RANGE SELLING & CUSTOMER RETENTION TARGET NEW BUSINESSS FOR DENSITY PROFIT UNIT OPERATING COST SERVICE DELIVERY

50 Business Drivers All activities must have a positive impact on our key drivers, if not we question why we are doing it Target New Customers Target New Customers Customer Retention & Cross Selling Customer Retention & Cross Selling Unit Operating Costs Unit Operating Costs Service Delivery Service Delivery

51 UK Washrooms Platform for Growth To create a platform to grow the UK Washrooms business Exit unprofitable product lines Linen and Workwear Build one Washroom business Re-engineer for efficiency

52 Exit Linen & Workwear Announcement on 25 January 2006 Customers Migrate 17,000 customer contracts to new providers Operations Reduce service centres from 55 to 35 Reduce plants from 12 to 3 Workforce Downscale workforce by 1,500 Period to May 2006 Hi Care Clean Room

53 UK Washroom Business Drivers RANGE SELLING & CUSTOMER RETENTION TARGET NEW BUSINESSS FOR DENSITY PROFIT UNIT OPERATING COST SERVICE DELIVERY

54 Service Delivery Issues Service delivery managed from two incompatible operating systems Lack of service delivery measurement Lack of performance measure of customer service Actions Establishing an inbound customer contact centre Q Two service delivery operating systems migrated to one Q Ability to measure service delivery at service centre level and customer level Q Enhanced service scheduling system - H2 2007

55 Unit Operating Cost Issues Lack of understanding of the impact of unit cost System support to enable unit cost efficiencies All functions performed at service centre level Actions Service efficiency Reduce Service Centres from 35 to 22 Q and to 20 by Q Route efficiency Driver effectiveness Multi-service vehicles Further benefits of enhanced technology during 2007

56 Unit Operating Cost Processing centres reduced from 12 to 3, although legacy site and equipment New plant infrastructure in place by Q Back Office Operating Unit Cost Operating model changed from service centre to centralised shared service centre

57 UK Washroom Changing the model Admin Manage Head Office Manage Multi Service Centre Sales Sales Admin Service Service Sales / Service Territories Central Customer Handling & Back Office

58 Customer Retention & Range Selling Issues Low level of retention and acceptance as industry norm Only 1.2 services taken per customer Lack of managed communication to customer base Actions Introduction of centralised customer service - Q Introduction of customer account management to top three tiers of customer base - Q Introduction of customer service delivery reports - Q Introduction of tele-account management to our lower contract value customers - Q Ability to segment customers for range selling - Q1 2007

59 New Customers for Density Issues Lack of direction to sales force Focus on new business Single route to market Technology to support sales management Actions Greater customer and market insight from Q Sales and service territories co-ordinated from Q Increase focus on propositions to customer segments, including the launch of bundled solutions from Q Lead generation and campaign management through enhanced sales management systems, post Oracle implementation Q2 2007

60 UK Washroom Business Objectives for Growth Target New Customers Business growth greater than market growth in target geographic areas Customer Retention & Cross Selling Customer retention rate to be over 90% All customers to take at least 3 services Unit Operating Costs Maintain the lowest operating cost in our industry Service Delivery To be recognised as the number one service provider in the industry