Andy Ransom has been the CEO of Rentokil Initial plc (LON:RTO) since 2013, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Rentokil Initial pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Andy Ransom Compare With Other Companies In The Industry?
At the time of writing, our data shows that Rentokil Initial plc has a market capitalization of UK£10.0b, and reported total annual CEO compensation of UK£4.6m for the year to December 2019. Notably, that's a decrease of 8.1% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at UK£765k.
On comparing similar companies in the industry with market capitalizations above UK£6.1b, we found that the median total CEO compensation was UK£4.1m. This suggests that Rentokil Initial remunerates its CEO largely in line with the industry average. What's more, Andy Ransom holds UK£8.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 56% of total compensation represents salary and 44% 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. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Rentokil Initial plc's Growth
Over the last three years, Rentokil Initial plc has shrunk its earnings per share by 29% per year. Its revenue is up 4.3% over the last year.
Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, 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?
We think that the total shareholder return of 87%, over three years, would leave most Rentokil Initial plc shareholders smiling. 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.
As previously discussed, Andy is compensated close to the median for companies of its size, and which belong to the same industry. This doesn't look good when you see that EPS growth over the last three years has been negative. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We wouldn't say CEO compensation is too high, but shareholders might think performance needs to be improved before paying any more.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for Rentokil Initial that investors should be aware of in a dynamic business environment.
Switching gears from Rentokil Initial, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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.
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