The year of the rat may prove auspicious for Rentokil Initial (RTO) if its 2019 performance is anything to go by. Last year saw the group achieve its highest rate of organic revenue growth for 15 years, accelerating from 3.8 per cent in 2018 to 4.5 per cent.
Pest control is the mainstay of the business, accounting for around two-thirds of ‘ongoing’ revenue and operating profit, which excludes the impact of disposals. Moving beyond the basic bait box, Rentokil has been investing in high-tech pest control solutions. Adjusted operating profit from the division rose 12 per cent on a constant currency basis to £310m.
North American ongoing revenue increased by 11 per cent to just over $1bn (£769m) and the group is confident it will hit its $1.5bn target in 2020. The 14.2 per cent net operating profit margin is some way off the 18 per cent it wants to achieve by the end of 2021, but Rentokil says ongoing digital upgrades will accelerate margin expansion closer to the time.
Buying up smaller players increases the density of its network and improves efficiency. Rentokil spent £317m on 41 acquisitions last year, including 30 in pest control. It is guiding to a total M&A spend of £250m this year.
Peel Hunt expects adjusted pre-tax profit of £362.5m and EPS of 15.2p in 2020, up from £339m and 14.3p in 2019.
| RENTOKIL INITIAL (RTO) | ||||
| ORD PRICE: | 507p | MARKET VALUE: | £9.4bn | |
| TOUCH: | 507-508p | 12-MONTH HIGH: | 512p | LOW: 339p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 54.0p* | NET DEBT: | 105%** | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.76 | 159 | 6.8 | 2.93 |
| 2016 | 2.17 | 209 | 9.2 | 3.37 |
| 2017 | 2.41 | 714 | 37.2 | 3.88 |
| 2018 | 2.47 | -114 | -5.3 | 4.47 |
| 2019 | 2.71 | 339 | 15.3 | 5.15 |
| % change | +10 | - | - | +15 |
| Ex Div: | 09-Apr | |||
| Payment: | 20-May | |||
| *Includes intangible assets of £1.7bn or 90.2p per share | ||||
| **Includes lease liabilities of £217m | ||||
