Rentokil Initial Earnings: Further Terminix Synergy Benefits To Eventuate; Lifting FVE 5% to GBX 580

Wide-moat Rentokil Initial’s performance remained strong in late 2022. Consequently, its delivery of full-year 2022 adjusted revenue of GBP 3.52 billion and adjusted operating profit of GBP 542 million—representing year-on-year increases of 19% and 23%, respectively—provided us with little surprise and aligned broadly with our full-year estimates. The closure of the transformative Terminix acquisition in late 2022 was the major driver of the sizable year-on-year earnings uplift. Still, robust organic revenue growth and Rentokil’s tuck-in acquisition programme also contributed. Healthy price increases, which successfully insulated profit margins from elevated cost inflation in the period, also featured. With inflation pressures kept at bay, Rentokil’s group EBIT margin widened by 45 basis points year on year to 15.4%, as organic and acquisitive revenue growth drove improved service route density once again in 2022.