Rentokil profits supercharged by US expansion and Terminix takeover

Rentokil initial shares were the best-performing shares in the FTSE 100 on Thursday after the pest control company posted a bumper annual result, boosted by its US expansion.

The Crawley-based company reported its pre-tax profits soared by around two-thirds to £493m in 2023, mainly thanks to the $6.7bn acquisition of US pest control brand Terminix.

The acquisition, completed in October 2022, made Rentokil the world’s largest provider of pest control services and helped its overall turnover rise 45.8% to £5.4bn last year.

The trade was also boosted by strong organic revenue growth across all business categories: its workwear divisions in France achieved a 13.2 percent increase and its hygiene and wellness operations saw a 5.0 percent increase. 4 percent.

Rentokil said sales in the latter segment were boosted by high demand from shops, offices, schools and hospitality businesses, which helped offset the drop in revenue from Covid-related disinfection services.

Meanwhile, the group benefited from a better result in its property care business in the UK, despite interest rate increases causing a significant slowdown in the country’s property market.

Following this, Rentokil recommended a final dividend of 5.93 pence per share, raising its full-year dividend to 8.68 pence, an increase of 15 per cent on the previous year.

And its shares rose 18.2 per cent to 506.4 pence on Thursday afternoon, although its value remains slightly below the same point 12 months ago.

Andy Ransom, chief executive of Rentokil, said the company “achieved strong operational and financial performance”, supported by a “diversified global footprint and resilient business model”.

He added: “We have made great progress integrating Terminix to create a powerful business in the world’s largest pest control market.”

Rentokil now expects to realize about $325 million in pre-tax gross annual synergies from the Terminix merger by 2026, $50 million more than previously expected.

The group completed a further 40 acquisitions during 2023 and plans to spend around another £250m on acquisition deals this year.

eToro analyst Adam Vettese said: “It’s far from glamorous, but someone has to do it” may well be an argument for Rentokil Initial’s usefulness in the eyes of investors and, to be fair, it’s not so mistaken.

“The company has performed well, the synergies from the Terminix purchase have proven to be even more fruitful than initially expected and a good amount of cash has been set aside to continue expansion.”