Shareholders Will Most Likely Find Rentokil Initial plc's (LON:RTO) CEO Compensation Acceptable

By
Simply Wall St
Published
May 05, 2021
LSE:RTO
Source: Shutterstock

Despite strong share price growth of 56% for Rentokil Initial plc (LON:RTO) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 12 May 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Rentokil Initial

How Does Total Compensation For Andy Ransom Compare With Other Companies In The Industry?

According to our data, Rentokil Initial plc has a market capitalization of UK£9.0b, and paid its CEO total annual compensation worth UK£4.1m over the year to December 2020. We note that's a small decrease of 4.1% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£656k.

In comparison with other companies in the industry with market capitalizations over UK£5.7b , the reported median total CEO compensation was UK£4.1m. So it looks like Rentokil Initial compensates Andy Ransom in line with the median for the industry. What's more, Andy Ransom holds UK£7.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary UK£656k UK£765k 16%
Other UK£3.4m UK£3.5m 84%
Total CompensationUK£4.1m UK£4.2m100%

On an industry level, around 65% of total compensation represents salary and 35% is other remuneration. Rentokil Initial sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
LSE:RTO CEO Compensation May 6th 2021

Rentokil Initial plc's Growth

Rentokil Initial plc has reduced its earnings per share by 35% a year over the last three years. Its revenue is up 4.0% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Rentokil Initial plc Been A Good Investment?

Boasting a total shareholder return of 56% 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.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 2 warning signs for Rentokil Initial (1 can't be ignored!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

When trading Rentokil Initial or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.