Rentokil Initial PLC (RTO) 2021 Q2 法說會逐字稿

Good 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 first 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 of our categories of Pest Control, Hygiene and Protect and Enhance. There'll then be a Q&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 second quarter 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 first 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 million 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&A performance was also particularly strong. During the half, we acquired 24 companies, of which 17 were in the second quarter. And I'm also delighted to announce our agreement with Boecker 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 147.7 million include the 24 deals in the first half as well as Boecker 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&A, we are upweighting our full year acquisition spend target from around GBP 400 million to a range of between GBP 450 million and GBP 500 million.

So it's been an excellent first 6 months. Our core businesses have returned strongly. We've delivered on a big M&A agenda. And as you can see from today's statement, we would currently expect market expectations for the full year to increase by around GBP 10 million to GBP 15 million. In view of our performance in the first half of 2021 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 2019.

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 of 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 million.

Following spend on acquisitions in H1 and payment of the 2020 final dividend, our net debt-to-EBITDA ratio is 1.67x versus 1.6x 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% and 27.8%, respectively.

Revenues in H1 have also been supported by disinfection sales of GBP 64.3 million, 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&A in North America, purchasing 7 businesses in the first half with combined annualized revenues of just under GBP 30 million.

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 Ambius 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 onetime disinfection services tapering off as expected, Hygiene sales focus is increasingly being directed towards hand and air 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 250 basis points to 15.5% in H1. This is 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 2022.

Our IT replatforming program is proceeding well and according to plan. We migrated our West region to the nervous 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 replatforming 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 GBP 20 million in H1 and are expected to unwind in H2. Ongoing operating profit grew by 40% in H1, leading to a 380 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 GBP 12 million.

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-19 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 U.K. and Rest of World. Ongoing revenue grew by 11.2%, of which 10.6% was organic, with U.K. 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 U.K., 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 are around 5% to 7% higher than before the crisis. In addition and building on last year's success, rollout of our PestConnect product and service has continued at pace.

U.K. 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 Ambius benefiting from the easing 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 in net operating margins to 10.8%. We acquired one Pest Control business in Singapore in H1, with annualized revenues in the year prior to purchase of just over GBP 0.5 million.

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 continued to be impacted. However, disinfection sales, which remain at similar levels to Q1 and Q4 last year, are providing a hedged disruption to core service provision. We are actively promoting air hygiene across the region with the recent launch of VirusKiller being particularly well received in Hong Kong and Singapore, which combined generated around GBP 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-19 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 Ambius up 7.3%. Regional ongoing operating profit grew by 23.9%, 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 GBP 3 million. 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 GBP 261.3 million for continuing operations was GBP 88.1 million higher than in H1 2020, driven by a GBP 69.6 million increase in adjusted operating profit and a GBP 44.5 million improvement in working capital. Continuing free cash flow of GBP 222 million was GBP 78.5 million higher than last year, reflecting the increase in operating cash flow previously noted.

Cash interest of GBP 14.3 million was GBP 1.9 million lower than H1 2020. Cash tax increased by GBP 11.5 million, reflecting abnormally low tax payments in the first half of 2020 due to various deferred tax payments during the early part of the COVID-19 crisis.

Underlying net debt increased by GBP 139.1 million due to cash spend on acquisitions of GBP 261.1 million and dividend payments of GBP 100 million. Foreign exchange and other positive items of GBP 18.9 million 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 GBP 120.2 million and closing net debt of GBP 1.1 billion.

Turning now to the balance sheet. Our net debt-to-EBITDA ratio was 1.67x at 30th of June. On the 7th of July, we repaid the remaining EUR 175 million outstanding on the EUR 350 million bond due on 7th of October 2021. This was funded by the proceeds from the EUR 600 million bond issued in October 2020. Liquidity headroom was in excess of GBP 1 billion at 30th of June 2021, including GBP 550 million of undrawn RCF, which matures in August 2025. The group's credit rating remains at BBB with a stable outlook. And with net debt of just over GBP 1 billion, 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 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 GBP 30 million outflow guided to in March.

CapEx is likely to be some GBP 20 million below prior guidance at GBP 250 million to GBP 270 million, reflecting difficulties in obtaining vehicles due to global supply issues. Cash interest is expected to be around GBP 36 million, reflecting better cash generation in H1 and favorable foreign exchange.

Cash tax payments are expected to be some GBP 10 million below previous guidance of between GBP 65 million and GBP 75 million. Finally, given our excellent M&A performance in H1 and the strength of the pipeline for H2, we now anticipate full year expenditure on M&A to be in the region of GBP 450 million to GBP 500 million.

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-19 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 million to GBP 20 million in H2, and making a total of between GBP 110 million to GBP 120 million 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 GBP 15 million to GBP 20 million 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 GBP 10 million to GBP 15 million.

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&A in our core businesses.

So let me start with safety and our 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. So it's really pleasing to say 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. As a great example, on the slide you can see that in Asia, 470,000 site assessments were undertaken in the first 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 from the same period last year. The recruitment website indeed recently placed Rentokil Initial top of the ranking for graduate recruitment in the U.K. And we've launched Career+, that's our job referral platform. 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 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 third item on every internal meeting agenda. Of course, we know we've got a long way to go to reach net zero 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 analyze 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 U.K., around 30% of new cars ordered were electric vehicles. And just to underscore the progress we are making, it was excellent to see the Vigeo Eiris place Rentokil 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 hand soap and sanitizer worth over GBP 2.5 million, which our local operations then distributed to over 500 hospitals 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&A before we move to questions. We're 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&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, 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 8.5%, 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 second quarter with ongoing revenue growth of GBP 26.6 million supported by our strong M&A performance and 15.5% organic growth, whilst obviously lapping our weaker COVID impacted quarter 2 of last year.

Ongoing operating profits increased by 36.7% to GBP 170.3 million, 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&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 GBP 107 million or GBP 144 million if you include Boecker, which completes this coming Monday.

As I just said, Rentokil 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% of our U.K. Pest Control revenues for the last 2.5 years coming from our innovations.

So 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 center at a U.K.-based science center. At the Capital Markets Day on the 28th of September, we'll 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 rodent control unit. As a single global base station, it 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 Lumnia 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 board.

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 24/7 basis and with the alignment of this data through our command center or indeed directly to our customers by the myRentokil 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. So 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 and a top 3 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, we'll 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 of June 2019, you can also see that the core has now returned to its precrisis levels. This includes strong performances in Europe and the U.K. and Rest of World regions, which both increased ongoing revenues by around 11%, and the Pacific region that grew revenues by 14%.

Organic revenue growth increased by 9% in the first half. As with Pest Control, the second 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 98.3 million 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 million over the last 16 months. The second half of last year saw the peak of disinfection services with ongoing revenues of GBP 173.6 million, 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 GBP 10 million to GBP 20 million from disinfection services. In the meantime, of course, 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 of 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 for customer premise and also how we plan to expand that core washrooms category. On to 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 halves of 2020 and 2019, 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 VirusKiller and the Inspire Air unit, which generated revenues of over GBP 3 million. 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&A team will also be on hand in September to take you through the M&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 One Moorgate Place on the 28th of September.

Turning now to Protect and Enhance, which delivered ongoing revenue growth of 4.6% in the first half. Here, all 4 businesses, that's Workwear in France, Property Care in the U.K., Dental Hygiene services and Ambius, each delivered a return to profitable growth as the temporary closure of customer premises improved from around 5.5% at the start of the year to around 1% in June.

In Workwear, despite the pandemic's significant impact on the French economy, our Workwear business achieved a solid performance in the first half with ongoing revenues increasing by 4% to GBP 82 million and new customer agreements were up by 30% year-on-year, particularly in the industrial sector.

Of our smaller businesses in Protect and Enhance, I'm pleased to report that all 3 increased both revenues and profits as the half progressed, with Ambius, the larger of the 3 businesses increasing ongoing revenues in the second quarter by 16.8% with good contributions from North America, which was up by 17.3%, and from Europe, which was up by 7.1%.

Each of the 3 businesses has a clear growth opportunity. Ambius 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 U.K. 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&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 Boecker 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&A pipeline, we are upweighting our full year spend guidance from around GBP 400 million to between GBP 450 million and GBP 500 million. We have very strong performance in M&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 Boecker, this is a great pest control business with a superb leadership team. Their model could almost be straight out of the Rentokil 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. It's a great fit with Rentokil, and it makes us the clear #1 across the Middle East, which we see as a very attractive growth market.

So in summary, in the first 6 months, we delivered a strong overall performance with an excellent contribution from both organic growth and M&A. Ongoing revenue increased by 18.3% with strong contributions from Pest Control and Hygiene as the core business returned.

Ongoing operating profit grew by 55.4% and with growth across all markets and categories. Free cash flow was excellent with a cash conversion rate of 151%. And as I've mentioned, we continue to execute our highly targeted M&A program when 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 2019.

So with that, a Q&A with Stuart and myself will begin shortly at 10:00. 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.