- First-half profit tops consensus
- Positive US underlying growth
- Full-year outlook confirmed
Shares in pest control and hygiene group Rentokil Initial (RTO) jumped 11% to top the FTSE 100 leader board as the firm revealed better-than-expected first-half profit and organic growth momentum in North America.
The shares have been under a cloud over the last nine months, falling around 20%, after the company reported weaker US trading and some disruption to organic growth from branch integration.
Chief executive Andy Ransom commented: ‘Our sales and marketing initiatives in North America are starting to have an impact, with organic revenue growth of 1.4% in the second quarter up from 0.7% in the first quarter.
‘We are refocusing our marketing budget towards driving organic lead flow and we are seeing encouraging results.’
SOLID FIRST HALF
Group revenue increased 3% to $3.4 billion in the six months to June with the international business contributing growth of 5.1%. Adjusted pre-tax profit including discontinued operations fell 7.5% to $444 million, slightly above consensus analyst expectations of $439 million.
North American progress continued with residential and termite lead flow growing in June for the first time this year, up 6.6%. The company said it was also encouraged by early results from its door-to-door pilot scheme which started in the second quarter.
The North American bolt-on acquisition programme continued with the purchase of eight businesses with a combined revenue of $18 million in the year-to-date
In relation to the Terminix acquisition, the company said it intends to re-start integration of mainly commercial branches in the second half. Rentokil reaffirmed cost reduction expectations of circa $100 million and a target operating margin in North America of over 20% post 2026.
REAFFIRMED GUIDANCE
Rentokil said current trading was in line with expectations and it continued to expect to deliver full-year results in line with market estimates.
Analysts at Jefferies noted current consensus forecasts call for revenue of $7.3 billion, including 2.5% organic growth, and adjusted pre-tax profit of $922 million.
