Core Viewpoint - The analysis indicates that Rentokil Initial PLC (RTO) is a more attractive option for value investors compared to UL Solutions Inc. (ULS), based on various valuation metrics and rankings [4][9]. Valuation Metrics - RTO holds a Value grade of B, while ULS has a Value grade of C, indicating RTO is perceived as more undervalued [3]. - RTO has a P/B ratio of 3.13, significantly lower than ULS's P/B ratio of 12.32, suggesting RTO is more favorably valued in terms of its book value [6]. - The forward P/E ratio for RTO is 20.68, compared to ULS's forward P/E of 28.99, further indicating RTO's relative undervaluation [8]. Earnings Outlook - RTO has a Zacks Rank of 2 (Buy), reflecting positive revisions to its earnings estimates, while ULS has a Zacks Rank of 3 (Hold), suggesting a less favorable earnings outlook [7]. - RTO's PEG ratio is 2.81, which is more favorable than ULS's PEG ratio of 6.63, indicating RTO's expected earnings growth is more reasonably priced [8]. Investment Recommendation - Given the combination of RTO's superior Zacks Rank, better Value grade, and more favorable valuation metrics, it is positioned as the better choice for value investors at this time [9].

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 ...

Revenue Growth - Rentokil Initial achieved a revenue of £4,321 million at constant exchange rates (CER), reflecting a growth of 60.6%[31] - The company reported a 4.9% organic revenue growth and a 16.6% margin for the year, despite facing significant inflation and macroeconomic challenges[38] - North America revenue increased by 78.7% to £3,306 million at actual exchange rates (AER), while the UK & Sub-Saharan Africa region saw a 6.6% increase to £390 million AER[22] - The Hygiene & Wellbeing segment generated £858 million in revenue at AER, marking a growth of 5.4%[33] - The France Workwear segment reported a revenue of £221 million at AER, reflecting a growth of 15.3%[34] - Organic Revenue Growth in Pest Control was 4.5% in 2023, with North America experiencing a growth of 3.5% due to a softer consumer market[107] - Organic Revenue Growth in North America was 3.1%, with Pest Control services growing by 3.5% due to a softer consumer market in the second half of the year[178] - Organic revenue growth in Europe, the company's second-largest region, was reported at 9.2%[57] - Statutory Revenue increased by 44.7% to £5,375 million at AER, with organic revenue growth of 4.9%[175] Integration and Synergies - The integration of Terminix resulted in $69 million in pre-tax net cost synergies, exceeding the target of $60 million, with a revised total gross synergy target of $325 million by 2026[38] - The company has reduced its branch network by 97 locations, achieving approximately 50% of its target property synergies from the Terminix integration[50] - The integration of Terminix has resulted in an 8.1 percentage point increase in colleague retention since the deal closed[56] - The company achieved $69 million in net cost synergies in 2023, surpassing the target of $60 million, with a goal of reaching $225 million in annual pre-tax net P&L cost synergies by the end of 2026[113] - The company plans to implement a phased route and branch integration across seven regions in the US, starting mid-2024[54] Operational Efficiency and Innovation - The company plans to enhance operational excellence and leverage the Terminix integration to drive future growth[48] - The company is committed to innovation, with ongoing investments in research and development to meet evolving customer expectations[49] - The company has a pipeline of over 75 innovation investment projects aimed at driving growth and productivity[67] - The company operates four global innovation centers, focusing on sustainable and effective pest control solutions[196] Financial Performance - The company achieved a compound annual growth rate (CAGR) of 13.3% in revenue and 16.2% in adjusted operating profit from 2014 to 2023[62] - Adjusted Operating Profit rose by 57.0% to £897 million at CER, and by 57.1% to £898 million at AER, with Statutory Operating Profit up 96.9% to £625 million at AER[182] - Free Cash Flow grew by 33.7%, reflecting strong cash management and integration activities[186] - Adjusted Free Cash Flow Conversion was 89.4%, slightly down from 91.8% in 2022, but ahead of guidance for the sixth consecutive year[191] - The expected free cash flow conversion target for FY 2025 is at least 90%[53] Customer Satisfaction and Retention - Customer satisfaction in Terminix was strong, with a Net Promoter Score of 64.9, reflecting a 1.5% increase in 2023[115] - Customer retention remained broadly flat at 82.3%, with a slight improvement of 0.2 percentage points in North America[177] - The Customer Voice Counts (CVC) score for 2023 was 50.8, a slight decrease of 0.1 points from the prior year[169] - The myRentokil self-service customer portal saw a 35% increase in user sessions, with 300,000 registered users[131] Sustainability Goals - The company aims to achieve net zero carbon emissions from its operations by the end of 2040[68] - The company aims for net zero carbon emissions from operations by the end of 2040, with a 16% improvement in carbon efficiency achieved in the last five years[137] - The fleet now comprises approximately 8% ultra-low emissions vehicles in the UK and Europe, and 1,484 hybrid vehicles worldwide[138] - In Latin America, overall fuel usage per visit reduced by 4.3%, with a significant reduction of 14.3% in the Caribbean[146] - The Bahamas achieved a 40% reduction in CO2 emissions while increasing fumigation revenues by 37%[150] Future Outlook - Rentokil Initial aims for over 5% organic revenue growth per annum in the medium term, driven by upselling and effective pricing strategies[48] - Group medium-term targets for revenue growth are set at a minimum of 5.0%, with specific targets for Pest Control (4.5–6.5%), Hygiene & Wellbeing (4.0–6.0%), and Workwear (3.0–4.0%) [53] - The company plans to invest an additional $25 million in 2024 to enhance marketing and sales initiatives in North America[111] - The global pest control market is valued at approximately $26 billion and is expected to grow at a rate of 5-6% annually, reaching around $33 billion by 2028[203] - The hygiene and wellbeing market, particularly washroom services, is estimated at $55 billion, with a forecasted CAGR of 4-5% through 2028[204]