Pest control and hygiene business Rentokil Initial (RTO) reported another quarter of positive revenue growth both at the headline and underlying level.
Today's update included no steer on profits but does show revenue from the underlying business up 11.8% to £637.4m in the third quarter to 30 September 2018. Organic growth rose 4.1%, with acquisitions accounting for the rest (7.7%).
Organic growth would have been higher but for the effect of Hurricane Irma, which hit operations in Puerto Rico last year.
On a divisional basis, Pest Control, its biggest, registered 11.4% headline sales growth, 5.3% organic. This is important since this unit accounts for two-thirds (63%) of total sales and just under 70% of group operating profits.
Rentokil's Hygiene business (22% of sales, 23% of operating profit), showed better growth thanks to the recent acquisitions of Cannon in the UK and CWS in Italy. That helped divisional income jump 22%, although underlying growth was a modest 2.8%, suggesting building out this part of the business is needed.
The Protect & Enhance third leg of the company remains the laggard with revenue up just 0.7%, dragged back by UK Property Care.
Given the market's benign reaction to today's news (the shares have barely moved at 315.2p) it would seem that investors are unsure what to make of today's profit figures-lite update, even in spite of longer-run investment attractions.
The recent share price slump, inline with the wider market sell-off, and subsequent rally, has not helped near-term clarity. This will only add to the competition uncertainty recently raised by the UK's Competition and Markets Authority (CMA) over Rentokil's Cannon Hygiene acquisition.
Analyst sentiment is improving with US broker JPMorgan Cazenove, the last 'bear' on Rentokil, yesterday changing its advice on the stock to a more positivve tone, while also upping its share price target from 211p to 345p.
