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FinanceRentokil shares slide nearly 20% on weak North American demand
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Rentokil Initial's share price fell 17% on Thursday morning, dropping from 443.30p to 398.60p, after the pest control giant reported weakening demand in its critical North American residential market. Despite a 6.7% rise in group revenue to $3.5m for the first half of the year and a nearly 10% increase in profit before tax to $263m, investor sentiment soured due to slowing momentum in North America, which accounts for 59% of total revenue. The company, which acquired US rival Terminix in 2022, acknowledged it is not adequately benefiting from its scale. CEO Mike Duffy noted a 'weakness in North America' toward the end of July and said the firm is focusing on driving volume growth over short-term margin expansion. In the UK, the business faced 'challenging trading conditions' due to soft housing demand, impacting its asbestos removal operations.
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Pest control giant Rentokil's share price fell 17% on Thursday morning, driven by weakening demand in the North American residential market.
The FTSE 100 firm's shares dropped sharply at market open from 443.30p to 398.60p, despite reporting a 6.7% rise in group revenue for the first six months of the year to $3.5 million (£2.6 million). Profit before tax also grew nearly 10% to $263 million (£196 million).
Profit growth was supported by pricing growth remaining ahead of inflation, while organic revenue increased by 4.2% in the second quarter of this year.
The pest control company, which operates across 90 countries, noted that 93% of its revenue comes from its top 20 markets. However, it stated that it is not "adequately benefiting from our scale," particularly in the North American market, following its multi-billion-pound acquisition of rival US pest control firm Terminix in 2022.
'Challenging Trading Conditions' in the UK
The North American market is critical to Rentokil, accounting for approximately 59% of the group's total revenue. Although the North American division's overall revenue rose to $995 million (£745.8 million) in the first half of this year, momentum is now slowing.
Chief Executive Mike Duffy said the firm is "not delivering on our growth potential in many of the markets we operate in, nor adequately benefiting from our scale," and noted a "weakness in North America" toward the end of July.
In the UK, the group said its pest control business was held back by "more challenging trading conditions," particularly "softness in overall housing demand," which has also affected its asbestos removal business.
"Our focus is driving volume growth over short-term margin expansion, and this targeted redeployment of resources will enable us, over time, to accelerate organic growth, improve margins and free cash flow and deliver on the clear opportunity for shareholder value creation," Duffy said.
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City AMWestern
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Rentokil shares slide nearly 20% on weak North American demand