Wide-Moat Rentokil Initial's Inflation-Resistant Attributes on Display in First Half of 2022

Rentokil Initial’s strategy is sharply focused on the attainment and maintenance of market share leadership within the highly localised pest-control and hygiene service markets it competes in. The strategy aims to benefit from ever-improving unit costs offered by economies of density within each localised geography in which Rentokil Initial operates--via organic growth and a strong acquisition impetus aimed at rolling up pest-control and hygiene service markets, which remain substantially fragmented. To this end, Rentokil Initial has completed over 200 acquisitions since 2015--spending an average of GBP 330 million on mergers and acquisitions annually over 2015-20--focusing on acquisition targets that build geographic density of the group’s customers. Pest-control acquisitions remain Rentokil’s top M&A priority but tuck-in candidates for the hygiene segment are now also set to become a focus. The successful execution of the strategy has delivered a maintainable cost advantage for the pest-control business, which is the source of our wide economic moat for Rentokil Initial.