- Rentokil’s share price has fallen by more than a quarter in the last year
In charge: Andy Ransom is the CEO of Rentokil
Rentokil shares fell on Thursday as investors feared intense competition with its main US rival could dent hopes of building the world’s largest pest control company.
Revenue rose 0.9 percent to £1.27 billion in the first three months of 2024, as “Continued price momentum” helped boost organic growth by 3.1 percent.
Rentokil said it achieved a “stabilizing performance” in North America, where it earns about 60 percent of sales, with organic revenue growing 1.5 percent, just shy of forecasts of 2 percent.
It added that its Terminix integration plan had progressed, following the US acquisition in 2022, having completed mergers of corporate entities, implemented new combined systems and facilitated integrated performance management.
But Rentokil Shares They were down 2.86 per cent or 12.80 pence at 434.10 pence on Thursday, having fallen more than 27 per cent in the last year.
Analysts at Peel Hunt said: ‘Questions remain over Rentokil’s underperformance against its main competitor, Rollins.
‘Historically, Rentokil has traded at a substantial discount to Rollins, and this has widened recently due to a number of factors, including the wider spread between leverage and [return on capital employed]and the loss of market share for Rollins in North America.
Mark Crouch, analyst at eToro, added: “Following the completion of what was a groundbreaking acquisition of US pest control company Terminix in late 2022, Rentokil has since faced challenges in managing the transition efficiently and , upon closer inspection, the company has struggled with marketing, new business sales, employee turnover, and integration into the US, all of which have been well below expectations.
But Crouch said Rentokil’s management’s “past performance” will give investors confidence that the company will “realize its potential and live up to its title as the world’s largest pest control company.”
Similarly, Peel Hunt said “short-term risks are offset by long-term opportunities” and maintained its hold rating on Rentokil shares with a 454p price target.
Revenue: Rentokil saw revenue rise 0.9% to £1.27bn in the first three months of 2024
Elsewhere, Europe and Latin America saw 6.2 percent growth during the quarter, while the United Kingdom and sub-Saharan Africa each achieved 4.1 percent growth.
Asia, the Middle East and North Africa showed growth of 4.3 percent, while the Pacific region grew 7.3 percent.
Organic revenue growth was seen across all categories: pest control increased 2.7 percent, hygiene and wellness increased 3.8 percent and workwear in France increased 7.7 percent. hundred.
The group said its M&A program continued to create value, with eight deals in the period delivering annualized revenue of £45m.
This included the acquisition of HiCare Services, India’s second largest pest control company.
Looking ahead, Rentokil said it remained on track to meet expectations for full fiscal 2024, including organic revenue growth of 2 to 4 percent in North America, accompanied by modest margin progression, weighted toward the second semester.
Andy Ransom, CEO of Rentokil, said: “We have made an overall positive start to 2024. The Group has performed well and our Right Way 2 plan has achieved stabilizing performance in North America.
“As the year progresses, we expect to continue making progress, driven by our focus on North American growth and Terminix’s integration plan, which is in advanced stages of preparation for the first full branch integrations that will begin around mid year”.