Rentokil Initial Exterminates Significant Cost Pressures in First Half of 2022; Shares Fairly Valued

Rentokil Initial is comfortably navigating the global spike in inflation that has proven both substantial and persistent in 2022 to date. While direct costs, in particular fuel and wage costs, increased significantly in the first half of 2022, robust price increases have fully offset any negative impact to margins, as we’d anticipated. First-half 2022 group operating margin strengthened to 14.9%, up from 14.3% in the prior year, highlighting the inherently inflation-resistant nature of Rentokil’s global pest control and hygiene services franchise. We make no change to our GBX 535 fair value estimate. While Rentokil Initial is our preferred pest control exposure, we see little upside with the stock trading at a slim 3% discount to our valuation.