INSIGHTS

• Rentokil Initial is a global company with leading market positions and recognisable brands
• Approximately 65% of revenues are contributed by its Pest Control business, with the remainder coming from its Hygiene & Wellbeing (20-25%) and France Workwear (10-15%) operations
• New products developed by Rentokil Initial are more environmentally friendly

Rentokil Initial traces its origins back to the 1910s when Harold Maxwell-Lefroy, a Professor of Entomology at Imperial College in London, was asked to study ways of exterminating the deathwatch beetles in Westminster Hall. He developed the first fluid for controlling these beetles and a successful business idea was born. In 1924, Professor Maxwell-Lefroy wanted to name his timber treatment fluid, Entokil – a combination of the Greek word ‘entomon’ meaning insect and the English word ‘kill’. The Board of Trade in Britain rejected this name so it was changed to Rentokil and a trademark was registered.

Today, Rentokil Initial is headquartered outside of London and is listed on the London Stock Exchange. The company has three core business segments – Pest Control, Health & Wellbeing and France Workwear, which are all well positioned as life returns to normal following the COVID-19 pandemic. Predictable earnings growth is supplemented with many acquisitions of other businesses.

Pest Control

Rentokil Initial operates the world’s largest pest control business. It has a presence in almost 90 different countries and holds either #1 or #2 positions in around three quarters of these markets. The global pest control market is estimated at US$22 billion and grows at approximately 5% per year, faster than world GDP growth. North America is the most important region for pest control, representing over half of the global market.

Various trends will support a continued expansion of the pest control market and Rentokil Initial’s business over the long term.

Hygiene & Wellbeing

Rentokil Initial also helps organisations to manage hygiene risk and create healthier, safer workspaces for staff and visitors. Its Hygiene & Wellbeing business provides and maintains products such as soap and hand sanitiser dispensers, hand dryers, air purifiers and feminine hygiene units for use in commercial bathrooms.

Last year, Rentokil Initial commissioned a global survey (20,000 respondents across 20 countries) focusing on the impact of COVID-19 on people’s attitudes towards hygiene and their wellbeing. Over 95% of respondents said they have changed their behaviours as a result of the pandemic and 48% of respondents would never return to a public venue that appeared not to have good hygiene standards.

This fundamental change in people’s attitudes towards cleanliness is favourable for Rentokil Initial.

France Workwear

France Workwear specialises in the supply and laundering of uniforms and protective equipment, supporting some of the largest hospitality and industrial organisations in France to ensure their staff have appropriate workwear.

M&A supplements organic growth

Rentokil Initial’s existing business has a relatively low risk profile and enjoys stable growth of 4–5% per annum. Highly fragmented pest control and hygiene industries provide the company with plenty of opportunities to supplement this predictable organic growth with acquisitions of other businesses, which adds a further 2–5% growth each year.

Rentokil Initial spent over £300 million to purchase 52 small businesses in 2021 (48 pest control and 4 hygiene) and has earmarked £250 million for further small acquisitions this year. It is also in the process of acquiring Terminix Global Holdings (the second largest pest control business in the United States) for approximately US$6.7 billion. This transaction is expected to complete later in 2022 and make Rentokil Initial the #1 player in the ‘crown jewel’ of North America.

New innovations are focused on sustainability

Rentokil Initial uses digital technology and new innovations to gain advantages over its competitors and reduce its costs. Through its R&D centres of excellence, the company has more than 50 new products in its development pipeline, most of which are more environmentally friendly than traditional pest control and hygiene solutions. Rentokil Initial has received high sustainability ratings from numerous independent assessment providers such as MSCI (AA rating) and Sustainalytics (low risk rating).

Summary

Rentokil Initial is a world-leading pest control and hygiene company. Its performance and growth are underpinned by supportive trends (including a growing middle class, urbanisation and a greater emphasis on hygiene standards) as well as its active and disciplined acquisition strategy.

Technological progress and new product innovations also make it increasingly difficult for smaller competitors to keep up, meaning Rentokil Initial can continue to buy small businesses in what is a highly fragmented market.