- The group remains in acquisitive mode
- The resumption of dividends
Rentokil Initial (RTO) demonstrated some of the defensive characteristics of a utility through 2020. The pest control and hygiene group grew sales by 6.3 per cent through the year, while increasing adjusted earnings by 7.8 per cent.
The one-off challenge posed by the pandemic may have accelerated growth across the group’s business units. Rentokil launched new disinfection services in 60 countries across the globe, with sales gaining through the course of the year. In all, the Hygiene business recorded 36.8 per cent revenue growth.
We should not be too surprised; ratcatchers probably did a roaring trade back in 1665. Yet the turmoil did not slow the group’s expansion plans. Indeed, it acquired 23 businesses over the year despite the second-quarter lockdown.
Even with the acquisition spree, net debt as a proportion of cash profits fell from 1.8 to a multiple of 1.6 over the year, and management reinstated a final dividend of 5.41p. Greater attention to hygiene practices and strategies will endure long after the worst of the pandemic is over. Buy.
Last IC view: Buy, 527p, 12 Aug 2020
| RENTOKIL INITIAL (RTO) | ||||
| ORD PRICE: | 473p | MARKET VALUE: | £8.75bn | |
| TOUCH: | 473-474p | 12-MONTH HIGH: | 579p | LOW: 289p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 47 | |
| NET ASSET VALUE: | 61p* | NET DEBT: | 104% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 2.17 | 209 | 9.20 | 3.37 |
| 2017 | 2.41 | 714 | 37.2 | 3.88 |
| 2018 | 2.47 | -114 | -5.30 | 4.47 |
| 2019 | 2.71 | 339 | 15.3 | nil |
| 2020 | 2.82 | 230 | 10.0 | 5.41 |
| % change | +4 | -32 | -34 | - |
| Ex-div: | 8 Apr | |||
| Payment: | 19 May | |||
| *Includes intangible assets of £1.92bn, or 104p a share | ||||
