In 2013, Andy Ransom was appointed CEO of Rentokil Initial plc (LON:RTO). This analysis aims first to contrast CEO compensation with other large companies. Next, we’ll consider growth that the business demonstrates. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
How Does Andy Ransom’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Rentokil Initial plc has a market cap of UK£8.5b, and reported total annual CEO compensation of UK£4.6m for the year to December 2019. That’s below the compensation, last year. We think total compensation is more important but we note that the CEO salary is lower, at UK£765k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over UK£6.4b, we found that their median CEO total compensation was UK£4.0m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Rentokil Initial stands. On an industry level, roughly 55% of total compensation represents salary and 45% is other remuneration. It’s interesting to note that Rentokil Initial allocates a smaller portion of compensation to salary in comparison to the broader industry.
So Andy Ransom receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at Rentokil Initial has changed over time.
Is Rentokil Initial plc Growing?
Rentokil Initial plc has reduced its earnings per share by an average of 60% a year, over the last three years (measured with a line of best fit). Its revenue is up 9.8% over last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.
Has Rentokil Initial plc Been A Good Investment?
Boasting a total shareholder return of 91% over three years, Rentokil Initial plc has done well by shareholders. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.
Andy Ransom is paid around the same as most CEOs of large companies.
We’re not seeing great strides in earnings per share, but the company has clearly pleased some investors, given the returns over the last three years. So we can’t see a reason to suggest the pay is inappropriate. Shifting gears from CEO pay for a second, we’ve spotted 4 warning signs for Rentokil Initial you should be aware of, and 1 of them shouldn’t be ignored.
If you want to buy a stock that is better than Rentokil Initial, this free list of high return, low debt companies is a great place to look.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.