Rentokil Initial (FTSE 100), the pest control company, has reported slightly better-than-expected performance in the US, as it continues to integrate Terminix, its North American business acquired in a £4.5 billion deal two years ago.
Rentokil shares, which are valued at £9.3billion on the London Stock Exchange and were warned of tough times in the US a little over a month earlier, rose sharply after the statement. The 8.8% rise in share prices, which is 30p higher at 371p was only a fraction of the recent losses.
Rentokil’s shares have plummeted to a five-year high this week. The stock traded at almost £5 before ‘s September warning. The stock was trading at nearly £5 before the September warning. Nelson Peltz is a US activist investor who has been a Rentokil board member since three weeks ago , despite only having a 2.26 percent stake.
Rentokil reported that its revenues, at constant exchange rates, grew 3.6% to £1.44bn in the third quarter. About three-quarters of this growth were on a comparable basis. It said that it was “continuing to progress well” in the integration of Terminix with its existing businesses and would meet analysts’ revised revenue and profit goals for the entire year.
Andy Ransom, veteran chief executive at Rentokil, has issued a mea-culpa. He said, “In North America we acknowledge the business has underperformed. We are focused on delivering operational improvements that are required.” “We are expanding initiatives to increase organic revenue and taking actions to mitigate cost overruns.”
Peel Hunt, a stockbroker, estimated that Rentokil revenues would rise marginally for the entire year to £5,39 billion, but adjusted pre-tax profit would drop to £700 from £766 millions.
Peel Hunt analyst Christopher Bamberry said: “Our view is that the risk of forecasts remaining on the downside due to the recent heavy lifting phase of Terminix branch integration and the need to revitalize sales growth.”
Rentokil, according to Stephen Rawlinson an independent analyst in the sector, is “still not where it needs to be and wants to be”.
Russ Mould said that the investment director of the stock trading platform AJ Bell was reassuring investors by stating: “Investors have been reassured because the full-year target remains unchanged, and the actions taken to boost the organic growth in North America, and bring back costs under control.”
He said that the trading update was only a “baby step in the right directions” and, with Peltz as a shareholder and his representative sitting on the board of directors, the pressure on Ransom’s management and Ransom “will likely remain acute”.
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