Rentokil posts growth as more mergers eyed

by Nathaniel Melican, City, University of London

Brief: Write a 400-word story about Rentokil’s mid-year results for 2018. Information on this article is based on actual documents, statements, and data, which were accurate as of 12 November 2018. Submitted for the Reporting Business module at City, University of London.

Rentokil Initial PLC announced increased earnings for the first half of the year, despite spin-offs and the extended winter in North America hitting its revenues adversely, and as it looks to continue its acquisition spree for the rest of the year.

Ongoing revenue in the first six months grew 10.5 percent to £1.167 billion, while ongoing operating profit grew 10.7 percent to £134.5 million.

These compare performance excluding divestments, specifically its hygiene and workwear business throughout much of Europe, which it passed on to its joint venture with Germany’s Haniel, and the sale of eight laundries in France to textile hygiene specialists RLD.

Actual revenue reflecting these changes stood at £1.176 billion while operating profit was £108.5 million—down 4.7 and 24.6 percent, respectively. The company announced a dividend of 1.311p per share, up 15 percent.

Rentokil’s stock dipped nearly one percent to 339.30p apiece at the day’s close.

Andy Ransom, the company’s chief executive, remained upbeat of the company’s performance.

“I am pleased with our performance in the first half, with revenue, profit and cash all in excess of our medium-term targets. Pest Control has performed well, despite a late start to the pest season in North America,” Ransom said.

The company’s pest control business, which accounts for 63 percent of its revenues, had profits of £123.1 million, up nine percent. Its hygiene arm made £42.3 million in profit, while its other businesses posted a combined £16.4 million, aided greatly by its French workwear operations turning profitable after diminishing profits in the past three years.

Ransom said mergers and acquisitions remain a key strategy for growth in Rentokil’s bid to build up density in its markets, particularly in Asia, where it wants to build a stronger presence, and in North America, which it sees as the largest market for pest control, comprising 50 percent of the estimated $18 billion global market.

The company has a £250 million war chest for acquisitions this year and has spent £164.9 million so far. It has identified 200 companies for acquisition in the future.

“We continue to see a full pipeline of value-enhancing acquisition opportunities going forward,” Ransom said.#####