Company: RKLIF
Filing Date: 2025-07-31
Form Type: 6-K
Source: 0001654954-25-008672
Chunk: 24

Company: RENTOKIL INITIAL PLC /FI
Filing Date: 2025-07-31
Form: 6-K
Chunk 24
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 subject to significant assumptions and estimation uncertainty. The assumptions included in valuing termite provisions are based on an estimate of the volume and value of future claims (based on historical and forecast information), customer churn rates and discount rates. These provisions are expected to be substantially utilised within the next 16 years at a declining rate. The trend of volume and value of claims is monitored and reviewed over time (with the support of external advisers) and as such the value of the provision is also likely to change.

The Group's provision relates to legacy claims (from the period prior to the acquisition of Terminix), estimated at $276m (2024: $246m) and new customer claims, estimated at $23m (2024: $20m). The sensitivity of the legacy liability balance to changes in the inputs is illustrated as follows:

| ● | Discount rate - The exposure to termite damage claims is largely    
 based within the United States, therefore measurement is based on a 
 seven-year US bond risk-free rate. During the period, interest      
 rates (and therefore discount rates) have decreased. Rates could    
 move in either direction and management has modelled that an        
 increase/decrease of 50bps in yields would decrease/increase the    
 provision by $7m (2024: $6m). Over the 6 months to 30 June 2025,    
 seven-year risk-free rate yields have decreased from 4.48% to       
 3.98%.                                                              |
| ● | Claim value - Claim value forecasts have been based on the latest   
 available historical settled Terminix claims. Claims values are     
 dependent on a range of inputs including labour cost, materials     
 costs (e.g. timber), whether a claim becomes litigated or not, and  
 specific circumstances including contributory factors at the        
 premises. Management has used an average of claim costs for the     
 last 12 months for non-litigated claims and 24 months for litigated 
 claims, adjusted where necessary to account for ageing of claims,   
 to determine an estimate for costs per claim. Recent fluctuations   
 in input prices (e.g. timber prices) means that there is potential  
 for volatility in claim values and therefore future material        
 changes in provisions. Management has modelled that an              
 increase/decrease of 5% in litigated claim values would             
 increase/decrease the provision by c.$5m (2024: $4m) and an         
 increase/decrease of 5% in non-litigated claim values would