Rentokil plans to review Terminax acquisition amid US growth struggles

Rentokil’s chief executive has outlined plans to improve disappointing results in the US, where the group is planning a review in the new year.

The Royal Rat Catcher was forced to issue a profit warning and make job cuts last month after a hiring spree ahead of the peak trading season left it “over-resourced” in the face of disappointing US trade.

This follows last year’s £5.1bn acquisition of Terminix, which made Rentokil the world’s largest pest group.

On Thursday, Rentokill revealed it had achieved 1.4 per cent growth in North America in the three months to September 30, meaning it had “underperformed”, boss Andy Ransom said.

Rentokil, whose total revenue was flat year-on-year at around £1.4bn during the period, has previously told shareholders it is taking “decisive action” to minimize cost overruns.

But it has reiterated its belief in “the fundamental strength of the business in North America.”

Ransom said on Thursday: ‘In North America, we recognize that the business has underperformed and we are focused on delivering the necessary operational improvements.

“We are expanding our initiatives to increase organic growth and are taking steps to mitigate cost overruns.”

He added that Crawley-based Rentokil would review the progress of its “integration activities” with the US group in the new year.

Ranson said: ‘(These include) piloting new satellite branches and new sales and technician pay plans, as well as evaluating the effectiveness of our expanded growth initiatives.

“Following the integration, we remain very optimistic that our business will lead a growing and highly resilient market.”

This revision, Rentokil added, would result in “2025 synergies being delayed by approximately two to three months.”

However, Rentokill reiterated full-year earnings expectations.

Rentokil Shares it soared 9.3 per cent on Thursday morning to 372.7p, but has fallen almost 40 per cent over the past year.

Rentokil’s US trade has been largely affected by weak demand from wholesale customers such as small pest control operators and landscaping companies.

The group is planning to focus more on customer retention as a means to “unlock” organic growth.

Adam Vettese, market analyst at investment platform eToro, said: “The US continues to prove to be a tough nut to crack for Rentokil.”

‘This follows news earlier this week that several lawsuits have been filed over allegations of securities fraud.

“The week’s bad news has certainly been reflected in the share price, although some of these losses have narrowed this morning as the company reiterated its guidance.”