Rentokil Initial Rallies as Dividend Is Lifted by 58%

LONDON -- The shares of Rentokil Initial (LSE: RTO  ) have rallied 10.5% to 100 pence as of 10 a.m. EDT after the FTSE 250 midcap lifted its annual dividend by 58%. Rentokil announced a 2.1 pence per-share payout for 2012, compared with a 1.33 pence per-share dividend declared this time last year.

The 58% advance reflected the fact that Rentokil's 2011 payout was its first dividend since 2008. The company, which provides services as diverse as parcel deliveries, rat catching, and office plant watering, had previously scrapped its dividend for three years as operational troubles, high debts, and the recession all took their toll.

Today's dividend development accompanied full-year results that showed sales steady at 2.5 billion pounds and adjusted profit before tax up 4% to 191 million pounds. Rentokil said it had enjoyed a "strong" finish to 2012, with fourth-quarter profit up 11% to 64 million pounds.

Alan Brown, Rentokil's chief executive, said:

These results were broad based, with every division improving both revenue and profit. Furthermore, we increased organic revenue growth by 1.3% from negative 0.5% to positive 0.8% (excluding Initial Facilities Spain) despite difficult market conditions for our largest businesses. ... While we remain mindful of continuing tough conditions across many of our markets, the operational changes we made during the year, together with the acquisition of Western Exterminator in December, give us confidence that 2013 will see us sustain the momentum we achieved in the final quarter of 2012.

Based on today's results, Rentokil's shares trade at 12 times earnings and offer a dividend yield of 2.2%. Of course, whether that valuation, today's results, and the wider prospects for office plant watering all combine to make Rentokil's shares a buy remains your decision.

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