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Rentokil Initial Plc (GB:RTO)
LSE:RTO

Rentokil Initial (RTO) AI Stock Analysis

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Rentokil Initial

(LSE:RTO)

Rating:68Neutral
Price Target:
390.00p
▲(9.09%Upside)
Rentokil Initial is bolstered by strong financial performance and strategic corporate events, suggesting confidence and alignment with long-term growth strategies. However, valuation concerns and challenges in North American operations present risks. Continued focus on growth and operational improvements could enhance future prospects.
Positive Factors
International Business
The international business is solid with 4.7% organic growth and a 19.3% adjusted operating margin.
Leadership
The appointment of two new Non-Executive Directors adds leadership experience in multi-site B2B and B2C companies, enhancing the Board's expertise.
Valuation
The shares look 'cheap' compared to history and other 'Quality' names in the sector and closest peer Rollins, at 18x 2025e P/E.
Negative Factors
Integration Challenges
Uncertainties from the large integration of Terminix to manage alongside the group's plan to reinvigorate US organic growth cannot rule out further downside risk to estimates through 2025.
Leadership Changes
There has been significant churn at the top of the organization, with key executives like the group CFO and CEO of North America leaving within the past year.
Organic Growth Challenges
Management has noted that inbound customer leads have not improved, hindering organic growth recovery.

Rentokil Initial (RTO) vs. iShares MSCI United Kingdom ETF (EWC)

Rentokil Initial Business Overview & Revenue Model

Company DescriptionRentokil Initial plc, together with 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 for rodents, and flying and crawling insects, as well as 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 soap and hand sanitizer dispensers, hand dryers, air care and purification, cubicle and surface sanitizers, feminine hygiene units, 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 specialist cleaning services, such as graffiti removal deep cleaning of kitchens and washrooms, trauma cleaning, and flood or fire damage cleaning, as well as 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 Crawley, the United Kingdom.
How the Company Makes MoneyRentokil Initial generates revenue primarily through its pest control and hygiene services. The pest control segment provides solutions for the prevention and control of pests, including rodents, insects, and other wildlife, to commercial and residential customers. This segment is a major revenue driver, with recurring service contracts ensuring a steady income stream. The hygiene services division offers washroom and hygiene solutions, such as hand sanitizers, air fresheners, and sanitary waste disposal services. This division also operates on a contract basis, providing consistent revenue. Additionally, the company offers workwear services, supplying and laundering uniforms and protective clothing for various industries. Rentokil Initial's earnings are further bolstered by strategic acquisitions and partnerships, which expand its market reach and service capabilities, enhancing its competitive edge in delivering essential services globally.

Rentokil Initial Earnings Call Summary

Earnings Call Date:Mar 06, 2025
(Q4-2024)
|
% Change Since: -6.30%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant international growth and improvements in customer and colleague retention. However, North American operations faced challenges with low organic growth and weak lead flow, impacting overall performance. The decline in operating profit and the need for better investment strategies were notable concerns.
Q4-2024 Updates
Positive Updates
International Revenue Growth
The International business delivered revenue growth of 8.2%, with organic revenue contributing 4.7%. Pest Control organic growth in International markets was strong at 5.3%.
Customer and Colleague Retention
Customer retention improved by 60 basis points to over 81% in each month of Q4 2024, and colleague retention increased by 4.2% in North America, with Terminix colleague retention up by 13.9% since integration began.
Record High Customer Satisfaction
In 2024, an increase in Net Promoter Score and improved customer satisfaction levels were achieved, with customer retention rising by 50 basis points.
Successful Integration Efforts
The integration process is progressing well, with over 250 branches now operating on unified systems, and 15% of the Terminix branch network fully integrated.
Negative Updates
North American Organic Growth Challenges
North America underperformed with only 1.3% growth, and organic growth in North American Pest Control was a mere 1.5%.
Decline in Operating Profit
Adjusted operating profit decreased by 7.1% to GBP 860 million, with a corresponding margin reduction of 130 basis points.
Weak Lead Flow and Sales Challenges
Ongoing weak lead flow and sales conversion issues persisted, particularly affecting Q1 2025 performance expectations.
Impact of Inflation and Investment Ineffectiveness
Investment efforts in 2024 did not drive optimal effectiveness, leading to a need to redirect funds in 2025.
Company Guidance
The call highlighted several key financial metrics and strategic goals for Rentokil Initial in 2024 and plans for 2025. The company reported a revenue of GBP 5.6 billion for 2024, indicating a 3.9% growth, with an organic revenue increase of 2.8%. The International segment saw an 8.2% revenue increase, largely driven by strong pest control growth of 5.3%. Notably, customer retention improved to over 80%, and colleague retention rose by 2.4%. In North America, the business underperformed with only 1.3% growth, but operational adjustments are underway including the integration of 58 branch systems and the opening of 10 satellite branches. For 2025, Rentokil aims to enhance lead generation, sales conversion, and expand its branch network to over 500 locations. The company expects operating profit margins in North America to exceed 20% by 2027, supported by cost synergies and strategic marketing efforts. Free cash flow for 2024 was GBP 410 million, with a cash conversion rate of 80%, and the company is focused on maintaining a strong balance sheet with a net debt-to-EBITDA ratio of 2.9x. Rentokil also plans to continue its progressive dividend policy with a proposed final dividend of 5.93 pence per share.

Rentokil Initial Financial Statement Overview

Summary
Income Statement
Balance Sheet
Cash Flow
Breakdown
TTMDec 2023Dec 2022Dec 2021Dec 2020Dec 2019
Income StatementTotal Revenue
5.41B5.38B3.71B2.95B2.79B2.68B
Gross Profit
784.00M1.50B977.00M714.80M653.00M577.20M
EBIT
759.00M766.00M317.00M346.50M293.80M265.60M
EBITDA
998.00M1.16B747.00M676.80M586.50M687.40M
Net Income Common Stockholders
392.00M381.00M232.00M263.00M186.00M283.80M
Balance SheetCash, Cash Equivalents and Short-Term Investments
1.56B1.56B2.09B597.90M2.34B309.60M
Total Assets
11.13B11.13B11.92B4.32B5.84B3.39B
Total Debt
4.73B4.73B5.40B1.93B3.40B1.36B
Net Debt
3.17B3.17B3.31B1.34B1.23B1.05B
Total Liabilities
7.04B7.04B7.82B3.06B4.71B2.39B
Stockholders Equity
4.09B4.09B4.10B1.26B1.13B1.00B
Cash FlowFree Cash Flow
523.00M526.00M410.00M403.30M391.70M292.00M
Operating Cash Flow
716.00M737.00M600.00M563.20M544.20M462.90M
Investing Cash Flow
-325.00M-416.00M-1.20B-441.10M-327.00M-61.10M
Financing Cash Flow
-376.00M-361.00M1.32B-417.10M62.20M-221.30M

Rentokil Initial Technical Analysis

Technical Analysis Sentiment
Positive
Last Price357.50
Price Trends
50DMA
345.34
Positive
100DMA
359.22
Negative
200DMA
374.71
Negative
Market Momentum
MACD
1.73
Positive
RSI
56.91
Neutral
STOCH
27.63
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:RTO, the sentiment is Positive. The current price of 357.5 is above the 20-day moving average (MA) of 352.07, above the 50-day MA of 345.34, and below the 200-day MA of 374.71, indicating a neutral trend. The MACD of 1.73 indicates Positive momentum. The RSI at 56.91 is Neutral, neither overbought nor oversold. The STOCH value of 27.63 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:RTO.

Rentokil Initial Risk Analysis

Rentokil Initial disclosed 27 risk factors in its most recent earnings report. Rentokil Initial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Rentokil Initial Peers Comparison

Overall Rating
UnderperformOutperform
Sector (66)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
80
Outperform
£7.50B22.1225.35%3.29%1.94%16.26%
GBJSG
78
Outperform
£603.83M17.2312.12%2.74%10.34%33.59%
GBMTO
77
Outperform
£1.75B17.4823.48%2.99%15.25%25.57%
GBSRP
72
Outperform
£1.96B46.314.71%2.17%-0.68%-78.93%
GBRTO
68
Neutral
£8.81B28.787.38%2.58%1.13%-19.48%
GBRST
68
Neutral
£340.94M27.245.32%2.15%-0.65%
66
Neutral
$4.49B12.345.40%248.65%4.13%-12.33%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
GB:RTO
Rentokil Initial
357.50
-48.00
-11.84%
GB:ITRK
Intertek
4,786.00
152.83
3.30%
GB:JSG
Johnson Service
148.00
-7.12
-4.59%
GB:MTO
Mitie Group plc
143.20
30.86
27.47%
GB:RST
Restore
253.50
-10.51
-3.98%
GB:SRP
Serco Group plc
193.10
25.33
15.10%

Rentokil Initial Corporate Events

Other
Rentokil Initial Director Invests in Company Shares
Positive
Jun 3, 2025

Rentokil Initial plc announced that Sally Johnson, a Non-Executive Director, purchased 3,567 ordinary shares of the company at a price of £3.5085 per share on June 2, 2025. This transaction, conducted on the London Stock Exchange, reflects a personal investment by a key managerial figure, potentially signaling confidence in the company’s future performance.

The most recent analyst rating on (GB:RTO) stock is a Buy with a £6.40 price target. To see the full list of analyst forecasts on Rentokil Initial stock, see the GB:RTO Stock Forecast page.

M&A TransactionsBusiness Operations and Strategy
Rentokil Initial to Sell France Workwear Business to H.I.G. Capital
Positive
May 28, 2025

Rentokil Initial plc has announced the intended sale of its France Workwear business to H.I.G. Capital for approximately €410 million, with completion expected in Q4 2025. This move allows Rentokil Initial to streamline its operations, focusing more on its core pest control and hygiene & wellbeing sectors, enhancing capital efficiency, and improving cash flow. The transaction aligns with the company’s strategy to concentrate on high-growth markets and reduce capital expenditure, while the proceeds will be used for corporate purposes including deleveraging and investment in growth opportunities.

The most recent analyst rating on (GB:RTO) stock is a Buy with a £6.40 price target. To see the full list of analyst forecasts on Rentokil Initial stock, see the GB:RTO Stock Forecast page.

DividendsBusiness Operations and Strategy
Rentokil Initial CEO Increases Stake through Dividend Reinvestment
Positive
May 19, 2025

Rentokil Initial plc announced that its CEO, Andy Ransom, acquired 17,753 ordinary shares through the company’s Dividend Reinvestment Plan, with each share priced at £3.4706. This transaction, conducted on the London Stock Exchange, reflects a significant investment by a key executive, potentially indicating confidence in the company’s future performance and stability.

The most recent analyst rating on (GB:RTO) stock is a Buy with a £6.40 price target. To see the full list of analyst forecasts on Rentokil Initial stock, see the GB:RTO Stock Forecast page.

Executive/Board ChangesShareholder Meetings
Rentokil Initial AGM 2025: Resolutions Passed Amid Shareholder Engagement
Neutral
May 7, 2025

Rentokil Initial PLC held its Annual General Meeting (AGM) on May 7, 2025, where all proposed resolutions were passed. Notably, the re-election of Richard Solomons as a director saw over 20% opposition, prompting the board to engage further with shareholders. The successful passing of resolutions, including those related to director appointments and financial matters, reflects the company’s ongoing commitment to governance and shareholder engagement.

Executive/Board ChangesBusiness Operations and Strategy
Rentokil Initial Strengthens Board with New Non-Executive Directors
Positive
May 7, 2025

Rentokil Initial has announced the appointment of two new Non-Executive Directors, Leanne Sheraton and Sam Mitchell, effective June 1, 2025. These appointments aim to enhance the company’s board with extensive experience in marketing, brand development, and leadership in North American multi-site businesses. The changes are expected to support Rentokil Initial’s strategic plans, particularly in North America, as the company continues to focus on growth and customer acquisition. Additionally, two current Non-Executive Directors, Linda Yueh and Sarosh Mistry, will be stepping down from the board.

Executive/Board ChangesBusiness Operations and Strategy
Rentokil Initial CEO Andy Ransom to Retire by 2026
Neutral
May 7, 2025

Rentokil Initial plc announced the upcoming retirement of its Chief Executive, Andy Ransom, by the 2026 AGM. Ransom, who has served as CEO for 12 years, has been pivotal in establishing the company as a global leader in pest control. The board, led by Chair Richard Solomons, has initiated the search for a successor. The company is currently prioritizing the turnaround of its underperforming North American business, while maintaining its focus on global market expansion. Ransom will continue to lead these efforts until a new CEO is appointed.

Private Placements and FinancingBusiness Operations and Strategy
Rentokil Initial Issues $1.25 Billion in Notes to Enhance Financial Flexibility
Positive
Apr 28, 2025

Rentokil Initial has announced the issuance of $750 million in 5.000% Notes due 2030 and $500 million in 5.625% Notes due 2035 through its subsidiary, Rentokil Terminix Funding, LLC. The proceeds will be used to repay a term loan maturing in October 2025 and for general corporate purposes, enhancing the company’s financial flexibility and potentially strengthening its market position.

Business Operations and StrategyRegulatory Filings and Compliance
Rentokil Initial PLC Announces Change in Shareholding Structure
Neutral
Apr 17, 2025

Rentokil Initial PLC has announced a change in the nature of its holdings due to security lending, with GIC Private Limited crossing a threshold of 6.341478% in voting rights. This adjustment reflects a strategic maneuver in the company’s shareholding structure, potentially impacting its market dynamics and stakeholder interests.

Business Operations and StrategyFinancial Disclosures
Rentokil Initial Reports Modest Q1 Growth Amid Strategic Expansion
Positive
Apr 17, 2025

Rentokil Initial PLC reported a modest revenue growth of 1.5% in the first quarter of 2025, with organic revenue growth at 1.8%. Despite challenges in North America due to subdued lead flow, the company remains optimistic about long-term growth, supported by its global reach and diverse customer base. The company is enhancing its growth initiatives through digital lead generation and expanding its satellite branches, while also launching a door-to-door sales program. Internationally, the company saw stronger growth, particularly in Europe, Asia, and the Pacific regions.

Business Operations and StrategyRegulatory Filings and Compliance
Rentokil Initial Sees Change in Major Shareholdings
Neutral
Apr 9, 2025

Rentokil Initial PLC has been notified of a change in major shareholdings by Independent Franchise Partners, LLP, which now holds 5% of the voting rights in the company. This acquisition of voting rights may influence Rentokil Initial’s shareholder dynamics and potentially impact its strategic decisions, reflecting the ongoing interest and investment in the company’s operations.

Other
Rentokil Initial Announces Significant Share Purchase by Associated Trust
Positive
Mar 14, 2025

Rentokil Initial plc announced a transaction involving the purchase of 1,750 American Depositary Shares by the Trustees of the David John Frear Revocable Trust, a person closely associated with David Frear, a Non-Executive Director. This transaction, conducted on the New York Stock Exchange, underscores the trust’s confidence in the company’s market position and potential growth, reflecting positively on Rentokil Initial’s operational outlook.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.