Core Insights - The article compares Rentokil Initial PLC (RTO) and UL Solutions Inc. (ULS) to determine which stock offers better value for investors [1] Group 1: Zacks Rank and Earnings Outlook - Rentokil Initial PLC has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while UL Solutions Inc. has a Zacks Rank of 3 (Hold) [3] - The Zacks Rank favors stocks with positive revisions to earnings estimates, suggesting RTO has an improving earnings outlook [3] Group 2: Valuation Metrics - RTO has a forward P/E ratio of 19.91, significantly lower than ULS's forward P/E of 28.45 [5] - RTO's PEG ratio is 2.71, while ULS's PEG ratio is much higher at 6.51, indicating RTO may be undervalued relative to its growth expectations [5] - RTO's P/B ratio stands at 3.01, compared to ULS's P/B of 12.09, further suggesting RTO is more attractively valued [6] Group 3: Value Grades - RTO has a Value grade of B, while ULS has a Value grade of C, indicating RTO is perceived as a better value investment [7] - The combination of Zacks Rank and Style Scores indicates that RTO is a more favorable option for value investors at this time [7]

Core Insights - Rentokil Initial, a UK-based global provider of pest control and hygiene services, has seen its stock decline 36% from 2021 highs, attracting the attention of activist investor Nelson Peltz and Trian Partners, who aim to enhance shareholder value [2][5] - The company has faced challenges integrating its $6.7 billion acquisition of Terminix, leading to a warning of weakness in the U.S. market and a subsequent 18% drop in share price [7][8] - Rentokil generates approximately 60% of its £5.3 billion revenue from North America, with its core pest control segment accounting for 80% of total revenue [8][9] Company Overview - Rentokil Initial operates globally, providing pest control, hygiene, and well-being services, with a comprehensive range of pest control solutions and hygiene products [1] - The company has a significant market share in pest control and has delivered a total return of 932% from 2011 to 2021, outperforming the UK FTSE 100 and S&P 500 [7] Activist Engagement - Trian Partners has a history of successfully engaging with UK companies to create shareholder value, having achieved an average return of 32.01% in previous campaigns compared to 9.79% for the MSCI EAFE Index [2][4] - Trian's strategy involves operational activism, focusing on enhancing earnings by optimizing management and shedding non-core businesses [4] Strategic Initiatives - Trian is expected to work collaboratively with Rentokil's management to improve value, potentially seeking board representation [3][5] - A shift of Rentokil's primary listing to the U.S. is considered a viable strategy to close the valuation gap, as the company currently trades at a discount compared to U.S. peers [9]

Focus North America However, a bigger share of the market is a double-edged sword, which can either upgrade a company's growth or drag it down. And right now, Rentokil Initial is at the wrong edge, with revenue growth of 3% in 2023 for the market, lower than the target rate of 3.5%. The number slowed down even more to 1.5% in the first quarter (Q1 2024). To fully contexualise why the North American revenue growth is a problem, consider two facts: For the full year 2023 and for Q1 2024, Rentokil Initial's ov ...

Group 1 - Activist investor Nelson Peltz's Trian Partners has acquired a "significant stake" in Rentokil Initial, making it a top 10 shareholder [3][7] - The investment in Rentokil follows Peltz's unsuccessful proxy fight with Walt Disney, where he and former CFO Jay Rasulo were not elected to the board [7] - Rentokil's American depositary receipts (ADRs) experienced a significant increase of nearly 14%, reaching $30.66 in late trading after Peltz's investment announcement [7] Group 2 - Rentokil's ADRs had previously dropped to their lowest level since the pandemic due to a "soft consumer demand environment" in North America, but have since recovered slightly [7] - The company has expressed openness to input from all shareholders, although it does not comment on specific investors' positions [3][7]

Nelson Peltz, founder and chief executive officer of Trian Fund Management, during the Future Investment Initiative (FII) Institute Priority Summit in Miami, Florida, on Thursday, March 30, 2023. Nelson Peltz's Trian Partners has amassed a significant stake in Terminix parent Rentokil and is seeking to engage with leadership on "ideas and initiatives to improve shareholder value," a spokesperson told CNBC Tuesday. Shares of the pest-control giant surged around 8% after hours on the news. It had a market cap ...

Core Insights - The Rentokil Terminix Innovation Center aims to enhance pest control technology and services, focusing on public health, safety, and environmental responsibility [1][3][6] - The center will serve as a collaborative hub for research and development, involving partnerships with academic institutions and industry experts [3][6] Company Overview - Rentokil Terminix is the leading provider of pest control services in North America, offering solutions for various pests including termites, bed bugs, and rodents [5][9] - The company is part of Rentokil Initial plc, a major global business services company [5] Innovation Center Features - The Innovation Center includes a built-in insectary, three independent laboratories, temperature-controlled environmental chambers, and a 50,000-square-foot warehouse [8] - It is designed for innovative testing, training, and advancements in pest control practices [6][8] Leadership Statements - The opening of the Innovation Center is seen as a significant milestone in the company's mission to protect people and the planet [3][9] - Leadership emphasizes a commitment to providing effective, safe, and sustainable pest control solutions [9]

Financial Data and Key Metrics Changes - Group revenue increased by 4.9% to £1.29 billion, with organic growth of 3.1% [3][24] - North America showed organic growth of 1.5%, while Europe achieved 6.2% organic growth [3][24] - The company reiterated its full-year organic growth target of 2% to 4% [6][24] Business Line Data and Key Metrics Changes - In North America, organic revenue in Pest Control rose by 1.5%, with core Pest Control services up by 1% [4][24] - The company reported a 2.7 percentage point increase in sales colleague retention [5][21] - The distribution business in North America accounted for approximately 7% of overall performance [49][50] Market Data and Key Metrics Changes - The UK and Sub-Saharan Africa region contributed 4.1% organic growth, while Asia and MENAT grew by 4.3% [3] - The Pacific region delivered organic growth of 7.3% [3] Company Strategy and Development Direction - The company is executing its RIGHT WAY 2 growth plan, which has begun to stabilize performance [21][24] - A focus on customer retention has been emphasized, with a new Head of Customer Experience appointed [17][63] - The company is pursuing a bolt-on M&A strategy, with eight acquisitions in the quarter, including HiCare in India [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the integration of Terminix, despite potential challenges [12][23] - The impact of Easter on performance was acknowledged, with March not meeting expectations [35][54] - Overall, management remains optimistic about revenue guidance and customer retention improvements [35][63] Other Important Information - The company plans to spend an incremental £25 million on marketing in North America, primarily in Q2 and Q3 [26][41] - The integration program is on track to realize $40 million in net synergy costs this year [23][24] Q&A Session Summary Question: How much of the £25 million marketing spend has been deployed? - Most of the £25 million will be spent in the second and third quarters, with a small portion allocated to the Terminix It campaign [27] Question: Are there concerns about branch integration during peak trading? - Management is cautious but confident that integration will not negatively impact growth or customer experience [11][12] Question: What were the organic growth trends in Q1? - March was weaker than expected, impacting overall organic growth [35] Question: What are the plans to improve customer retention in North America? - A focus on harmonizing sales incentives and improving customer experience is underway [40][63] Question: How significant is the HiCare acquisition in India? - While currently small, it strategically positions the company as a leader in a growing market [47][72] Question: What is the outlook for margins in the first half? - Margins are expected to be flat in H1, with modest improvement anticipated in H2 [59]

PROTECTING PEOPLE | ENHANCING LIVES | PRESERVING OUR PLANET • Good progress on the development of the operational technology stack. Q1 2024 | North America Cautionary statement | --- | --- | --- | --- | |-------------------------------------------------|------------------------------|---------------------------------------|-------------------------------------------| | | | | | | £1.29bn | +3.1% | +1.5% | +6.2% | | REVENUE GROWTH OF 4.9% | ORGANIC REVENUE GROWTH | NORTH AMERICA ORGANIC REVENUE GROWTH | EUROP ...

Building scale and advantage Rentokil Initial plc Annual Report 2023 Protecting People. Enhancing Lives. Preserving our Planet. Performance Revenue (at AER) £5,375m +44.7% 2022: £3,714m Revenue (at CER) W £5,414m +45.8% 2022: £3,714m Lost time accident(LTA) W 0.31 +20.5% 2022: 0.39 W KPIs, see pages 22 to 25 Strategic Report Proft before tax (at AER) £493m +66.9% 2022: £296m Adjusted Operating Proft (at CER) W £897m +57.0% 2022: £571m Total colleague retention1 W 84.2% +474bps 2022: 79.5% Financial Statemen ...

PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines the most significant risks to the company's business, operations, and financial performance [Risk Factors](index=6&type=section&id=D.%20Risk%20Factors) The company identifies material risks including acquisition integration, cybersecurity, termite claims, and a material weakness in internal controls - The company's growth strategy includes significant acquisition activity, having acquired **41 new businesses in 2023**, which presents substantial integration risks[33](index=33&type=chunk) - In 2023, the company encountered seven cybersecurity incidents, and while only one had an immaterial financial impact, this highlights the increasing prevalence of cyber threats[40](index=40&type=chunk) - The legacy Terminix business is subject to a significant number of damage claims related to its termite control services, which could **materially affect financial results**[69](index=69&type=chunk) - A **material weakness in internal control over financial reporting** was identified, stemming from a failure to design and maintain effective IT general controls[82](index=82&type=chunk)[84](index=84&type=chunk) - As of December 31, 2023, the company had approximately **£3.1 billion in aggregate outstanding indebtedness**, governed by agreements that contain restrictive covenants[90](index=90&type=chunk) [Information on the Company](index=19&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides an overview of the company's history, business operations, organizational structure, and physical assets [History and Development of the Company](index=19&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This subsection details key historical milestones, including the 1996 BET plc acquisition and the 2022 Terminix acquisition - The company became Rentokil Initial in 1996 after acquiring BET plc and significantly expanded its U.S. presence in 2022 by **acquiring Terminix Global Holdings, Inc**[97](index=97&type=chunk) [Property, Plants and Equipment](index=26&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) This subsection provides a geographical breakdown of the company's 1,933 owned and leased facilities across 77 countries Number of Facilities by Region (as of Dec 31, 2023) | Region | Number of Facilities | | :--- | :--- | | North America | 707 | | Europe (incl. LATAM) | 377 | | UK and Sub-Saharan Africa | 107 | | Asia and MENAT | 687 | | Pacific | 55 | | **Total** | **1,933** | [Operating and Financial Review and Prospects](index=26&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section notes the company's major R&D facilities and the opening of a new North American Innovation Centre in March 2024 - The company's major research and development facilities are located in the UK and the U.S., with a **new Rentokil Terminix North America Innovation Centre opened in March 2024**[119](index=119&type=chunk) [Directors, Senior Management and Employees](index=28&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, employee base, and share ownership structures Group Employees by Region | Region | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | North America | 21,965 | 21,309 | 10,316 | | Europe (incl. LATAM) | 12,959 | 11,451 | 9,386 | | UK & Sub-Saharan Africa | 5,703 | 4,889 | 7,833 | | Asia & MENAT | 19,609 | 18,457 | 16,216 | | Pacific | 2,695 | 2,486 | 2,280 | | **Total** | **62,931** | **58,592** | **46,031** | - Following a revision to the 2022 financial statements, the Remuneration Committee concluded that **no incentive compensation was erroneously awarded**, and therefore no recovery was required[163](index=163&type=chunk)[164](index=164&type=chunk) [Share Ownership](index=30&type=section&id=E.%20Share%20Ownership) This subsection provides detailed information on the shareholdings of the company's Directors and Executive Leadership Team as of March 2024 Directors' Share Interests (as of March 25, 2024) | Director | Number of ordinary shares | | :--- | :--- | | Richard Solomons | 84,900 | | Andy Ransom | 1,752,689 | | Stuart Ingall-Tombs | 195,408 | | David Frear | 8,125 | | Sally Johnson | 3,527 | | Sarosh Mistry | 1,850 | | John Pettigrew | 55,000 | | Julie Southern (as of May 10, 2023) | 9,891 | | Cathy Turner | 24,736 | | Linda Yueh | 1,590 | [Major Shareholders and Related Party Transactions](index=34&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section identifies the company's major shareholders, with The Capital Group Companies, Inc holding the largest declared interest Disclosed Major Shareholdings (as of Dec 31, 2023) | Shareholder | Interest (%) | | :--- | :--- | | The Capital Group Companies, Inc. | 5.12% | | GIC Private Limited | 3.01% | | The Goldman Sachs Group, Inc. | 2.50% | [Additional Information](index=37&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers material contracts, exchange controls, and taxation, including details on the Terminix acquisition financing - The acquisition of Terminix was financed in part by a **$700 million term facility** and the issuance of New Senior Notes with maturities from 2027 to 2032[187](index=187&type=chunk)[188](index=188&type=chunk)[193](index=193&type=chunk) - There are **no UK governmental laws restricting** the remittance of dividends to non-resident holders of ordinary shares or ADSs, subject to economic sanctions[199](index=199&type=chunk) [Description of Securities Other Than Equity Securities](index=47&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section details the fees payable by American Depositary Share (ADS) holders and reimbursements from the depositary to the company ADS Holder Fees and Charges | Category | Associated fee or charge | | :--- | :--- | | Issuances upon deposits of shares | Up to $5.00 per 100 ADSs | | Distributions (stock or cash) | Up to $0.05 per ADS | | Exercise of rights | Up to $5.00 per 100 ADSs | | Surrendering ADSs for cancellation | Up to $5.00 per 100 ADSs | | Depositary services fee (annual) | Up to $0.05 per ADS | - The company received or is due to receive approximately **$6.45 million** from the Depositary (BNY Mellon) for the year ended December 31, 2023[250](index=250&type=chunk) PART II [Controls and Procedures](index=49&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section reports that both disclosure controls and internal controls were not effective as of year-end 2023 due to a material weakness - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of December 31, 2023, due to a material weakness[256](index=256&type=chunk) - Management concluded that internal control over financial reporting was **not effective** due to a material weakness in IT general controls over user access and change management[258](index=258&type=chunk)[259](index=259&type=chunk) - The company **successfully remediated** a previously identified material weakness related to a lack of sufficient technical accounting resources[262](index=262&type=chunk)[263](index=263&type=chunk) [Corporate Governance and Other Matters](index=51&type=section&id=ITEM%2016.%20Corporate%20Governance%20and%20Other%20Matters) This part covers governance topics, including accountant fees, share repurchases, and differences between UK and NYSE governance standards Principal Accountant Fees (PricewaterhouseCoopers LLP) | Fee Type | 2023 (£ million) | 2022 (£ million) | | :--- | :--- | :--- | | Audit fees | 8 | 7 | | Audit-related fees | 3 | 2 | | Tax fees | — | — | | All other fees | — | 3 | | **Total** | **11** | **12** | - The company made **no repurchases of its own shares** during the year ended December 31, 2023, despite shareholder authorization[274](index=274&type=chunk) - As a foreign private issuer, the company follows the UK Corporate Governance Code, which has **significant differences from NYSE standards** for domestic companies[276](index=276&type=chunk)[280](index=280&type=chunk)[282](index=282&type=chunk) PART III [Financial Statements](index=58&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the audited consolidated financial statements for fiscal years 2021-2023 and the auditor's report [Report of Independent Registered Public Accounting Firm](index=59&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting - The auditor issued an **adverse opinion** on the Group's internal control over financial reporting as of December 31, 2023, because of a material weakness in IT general controls[305](index=305&type=chunk)[306](index=306&type=chunk) - **Critical Audit Matters** identified were the impairment assessment of goodwill (£5,016 million) and the valuation of the termite damage claims provision (£260 million)[312](index=312&type=chunk)[313](index=313&type=chunk)[316](index=316&type=chunk) [Consolidated Financial Statements](index=62&type=section&id=Consolidated%20Financial%20Statements) The financial statements show significant growth in 2023, with revenue reaching £5.4 billion and profit for the year rising to £381 million Consolidated Statement of Profit or Loss Highlights (in £m) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | 5,375 | 3,714 | 2,957 | | Operating profit | 625 | 317 | 347 | | Profit for the year | 381 | 232 | 263 | | Basic EPS (pence) | 15.14p | 11.57p | 14.16p | Consolidated Balance Sheet Highlights (in £m) | Metric | 2023 | 2022 (adjusted) | | :--- | :--- | :--- | | Total Non-current assets | 8,430 | 8,705 | | Total Current assets | 2,697 | 3,237 | | Total assets | 11,127 | 11,942 | | Total liabilities | (7,039) | (7,844) | | Total equity | 4,088 | 4,098 | Consolidated Cash Flow Highlights (in £m) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | 737 | 600 | 563 | | Net cash from investing activities | (416) | (1,197) | (441) | | Net cash from financing activities | (361) | 1,323 | (417) | | Net (decrease)/increase in cash | (40) | 726 | (295) | [Notes to the Consolidated Financial Statements](index=67&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail key accounting estimates, segment performance, business combinations, and the company's net debt position Revenue and Adjusted Operating Profit by Region (2023, in £m) | Region | Revenue | Adjusted Operating Profit | | :--- | :--- | :--- | | North America | 3,306 | 617 | | Europe (incl. LATAM) | 1,081 | 215 | | UK & Sub-Saharan Africa | 390 | 94 | | Asia & MENAT | 339 | 45 | | Pacific | 249 | 55 | - The provision for termite damage claims, a significant liability from the Terminix acquisition, stood at **£260 million** as of December 31, 2023[429](index=429&type=chunk)[431](index=431&type=chunk) - In 2023, the Group acquired **41 companies for a total consideration of £261 million**, adding £173 million in goodwill[503](index=503&type=chunk)[504](index=504&type=chunk) - As of December 31, 2023, the company's **net debt was £3,146 million**, a slight decrease from £3,279 million at year-end 2022[570](index=570&type=chunk)