LSE:RTO

Stock Analysis Report

Executive Summary

Rentokil Initial plc, through its subsidiaries, provides route-based services in North America, the United Kingdom, rest of Europe, Asia, the Pacific, and internationally.

Rewards

Trading at 16.8% below its fair value

Revenue is forecast to grow 4.32% per year

Became profitable this year

Risk Analysis

Earnings are forecast to decline by an average of -4.4% per year for the next 3 years

Has a high level of debt

Highly volatile share price over past 3 months

Large one-off items impacting financial results



Snowflake Analysis

Adequate balance sheet with limited growth.


Similar Companies

Share Price & News

How has Rentokil Initial's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: RTO's share price has been volatile over the past 3 months.


Market Performance


7 Day Return

-3.6%

RTO

1.6%

GB Commercial Services

5.9%

GB Market


1 Year Return

2.4%

RTO

-19.4%

GB Commercial Services

-22.7%

GB Market

Return vs Industry: RTO exceeded the UK Commercial Services industry which returned -13.7% over the past year.

Return vs Market: RTO exceeded the UK Market which returned -18.8% over the past year.


Shareholder returns

RTOIndustryMarket
7 Day-3.6%1.6%5.9%
30 Day-27.0%-31.9%-23.1%
90 Day-22.1%-35.1%-28.1%
1 Year3.7%2.4%-17.1%-19.4%-18.6%-22.7%
3 Year52.6%46.7%-17.3%-24.4%-13.4%-24.7%
5 Year185.0%164.5%-9.4%-22.6%1.3%-22.0%

Price Volatility Vs. Market

How volatile is Rentokil Initial's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Rentokil Initial undervalued compared to its fair value and its price relative to the market?

16.8%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: RTO (£3.62) is trading below our estimate of fair value (£4.35)

Significantly Below Fair Value: RTO is trading below fair value, but not by a significant amount.


Price To Earnings Ratio

PE vs Industry: RTO is poor value based on its PE Ratio (23.6x) compared to the Commercial Services industry average (11.5x).

PE vs Market: RTO is poor value based on its PE Ratio (23.6x) compared to the UK market (12.7x).


Price to Earnings Growth Ratio

PEG Ratio: RTO's earnings are forecast to decline next year, so we can't calculate its PEG ratio.


Price to Book Ratio

PB vs Industry: RTO is overvalued based on its PB Ratio (6.7x) compared to the GB Commercial Services industry average (1.4x).


Next Steps

Future Growth

How is Rentokil Initial forecast to perform in the next 1 to 3 years based on estimates from 12 analysts?

-4.4%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: RTO's earnings are forecast to decline over the next 3 years (-4.4% per year).

Earnings vs Market: RTO's earnings are forecast to decline over the next 3 years (-4.4% per year).

High Growth Earnings: RTO's earnings are forecast to decline over the next 3 years.

Revenue vs Market: RTO's revenue (4.3% per year) is forecast to grow faster than the UK market (2.7% per year).

High Growth Revenue: RTO's revenue (4.3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: RTO's Return on Equity is forecast to be high in 3 years time (22.6%)


Next Steps

Past Performance

How has Rentokil Initial performed over the past 5 years?

-3.2%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: RTO has a large one-off gain of £76.5M impacting its December 31 2019 financial results.

Growing Profit Margin: RTO became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: RTO's earnings have declined by -3.2% per year over the past 5 years.

Accelerating Growth: RTO has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: RTO has become profitable in the last year, making it difficult to compare its past year earnings growth to the Commercial Services industry (11.7%).


Return on Equity

High ROE: Whilst RTO's Return on Equity (28.31%) is high, this metric is skewed due to their high level of debt.


Next Steps

Financial Health

How is Rentokil Initial's financial position?


Financial Position Analysis

Short Term Liabilities: RTO's short term assets (£925.7M) exceed its short term liabilities (£915.8M).

Long Term Liabilities: RTO's short term assets (£925.7M) do not cover its long term liabilities (£1.5B).


Debt to Equity History and Analysis

Debt Level: RTO's debt to equity ratio (114.1%) is considered high.

Reducing Debt: RTO's debt to equity ratio has reduced from 978.6% to 114.1% over the past 5 years.

Debt Coverage: RTO's debt is well covered by operating cash flow (40.5%).

Interest Coverage: RTO's interest payments on its debt are well covered by EBIT (7.2x coverage).


Balance Sheet

Inventory Level: RTO has a high level of physical assets or inventory.

Debt Coverage by Assets: RTO's debt is not covered by short term assets (assets are 0.8x debt).


Next Steps

Dividend

What is Rentokil Initial's current dividend yield, its reliability and sustainability?

1.42%

Current Dividend Yield


Dividend Yield vs Market

Notable Dividend: RTO's dividend (1.42%) isn’t notable compared to the bottom 25% of dividend payers in the UK market (2.65%).

High Dividend: RTO's dividend (1.42%) is low compared to the top 25% of dividend payers in the UK market (7.27%).


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, RTO has been paying a dividend for less than 10 years.

Growing Dividend: RTO's dividend payments have increased, but the company has only paid a dividend for 8 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (33.6%), RTO's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: RTO's dividends in 3 years are forecast to be well covered by earnings (35.7% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

6.4yrs

Average management tenure


CEO

Andy Ransom (56yo)

6.42s

Tenure

UK£4,406,700

Compensation

Mr. Andrew M. Ransom, also known as Andy, has been the Chief Executive Officer of Rentokil Initial plc since October 1, 2013. Mr. Andy serves as Non-Executive Director and Senior Independent Director of Se ...


CEO Compensation Analysis

Compensation vs Market: Andy's total compensation ($USD5.47M) is above average for companies of similar size in the UK market ($USD3.53M).

Compensation vs Earnings: Andy's compensation has been consistent with company performance over the past year.


Leadership Team

NamePositionTenureCompensationOwnership
Andrew Ransom
CEO & Executive Director6.42yrsUK£4.41m0.085% £5.7m
Jeremy Townsend
CFO & Executive Director9.58yrsUK£2.71m0.040% £2.7m
Katharine Rycroft
Head of Investor Relationsno datano datano data
Daragh P. Fagan
Group General Counsel & Company Secretary6.5yrsno datano data
Malcolm Padley
Director of Corporate Communications14.17yrsno datano data
Gary Booker
Chief Marketing2.17yrsno datano data
Vanessa Evans
Group Human Resources Director4.17yrsno datano data
Stuart Ingall-Tombs
Chief Financial Officer of Europe5.42yrsno datano data
John Myers
Managing Director of North America6.42yrsno datano data
Phill Wood
Managing Director of UK & Rest of World6.42yrsno datano data

6.4yrs

Average Tenure

54yo

Average Age

Experienced Management: RTO's management team is seasoned and experienced (6.4 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Andrew Ransom
CEO & Executive Director6.42yrsUK£4.41m0.085% £5.7m
Jeremy Townsend
CFO & Executive Director9.58yrsUK£2.71m0.040% £2.7m
Ian Harley
Chairman of Rentokil Initial Pension Trustee Limited12.67yrsUK£30.00kno data
Richard Solomons
Independent Chairman0.83yrno data0.0014% £90.6k
Julie Southern
Non-Executive Director5.67yrsUK£75.00k0.00027% £18.0k
Linda Yueh
Non-Executive Director2.33yrsUK£60.00k0.000090% £6.0k
Angela Seymour-Jackson
Non-Executive Director8yrsUK£60.00k0.00057% £38.0k
John Pettigrew
Senior Independent Director0.83yrUK£60.00k0.00054% £36.0k

6.8yrs

Average Tenure

56yo

Average Age

Experienced Board: RTO's board of directors are considered experienced (6.8 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Rentokil Initial plc's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Rentokil Initial plc
  • Ticker: RTO
  • Exchange: LSE
  • Founded: 1903
  • Industry: Environmental and Facilities Services
  • Sector: Commercial Services
  • Market Cap: UK£6.665b
  • Shares outstanding: 1.84b
  • Website: https://www.rentokil-initial.com

Number of Employees


Location

  • Rentokil Initial plc
  • Riverbank
  • Meadows Business Park
  • Camberley
  • Surrey
  • GU17 9AB
  • United Kingdom

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
RTOLSE (London Stock Exchange)YesOrdinary SharesGBGBPMay 1992
RKLI.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDMay 1992
RTO1DB (Deutsche Boerse AG)YesOrdinary SharesDEEURMay 1992
RTOLBATS-CHIXE (BATS 'Chi-X Europe')YesOrdinary SharesGBGBPMay 1992
OXRTOSWX (SIX Swiss Exchange)YesOrdinary SharesCHGBPMay 1992
RTOK.YOTCPK (Pink Sheets LLC)SPONSORED ADRUSUSDSep 1995

Biography

Rentokil Initial plc, through its subsidiaries, provides route-based services in North America, the United Kingdom, rest of Europe, Asia, the Pacific, and internationally. It offers a range of pest control services from rodents to flying and crawling insects, as well as to other forms of wildlife management for commercial and residential customers. The company also provides hygiene services, including the provision and maintenance of products, such as air fresheners, sanitizers, feminine hygiene units, hand dryers, paper and linen towel dispensers, soap and hand sanitizer dispensers, toilet paper dispensers, and floor protection mats. In addition, it engages in the supply and laundering of workwear, uniforms, cleanroom uniforms, and protective equipment. Further, the company installs and services interior and exterior plant displays, flowers, replica foliage, Christmas decorations, and ambient scenting for commercial businesses; offers property care services consisting of damp proofing, property conservation, and woodworm and wood rot treatment; and provides a range of specialized deep cleaning, and specialist industrial cleaning and disinfection services, including the professional and discreet disinfection of areas that have been exposed to bio-hazardous situations, such as crime and trauma scenes, prison cells, void properties, emergency vehicles, and healthcare establishments. Additionally, it offers a range of healthcare waste management services comprising the collection, disposal, and recycling of hazardous and offensive waste produced by businesses and organizations associated with the provision of healthcare; and color-coded sharps disposal bins to deal with various types of waste. Rentokil Initial plc was founded in 1903 and is headquartered in Camberley, the United Kingdom. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/03/27 20:37
End of Day Share Price2020/03/27 00:00
Earnings2019/12/31
Annual Earnings2019/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.