- Quarterly sales growth sluggish
- Results weighted to second half
- Shares erase recent rally
Pest control and hygiene firm Rentokil (RTO) underwhelmed investors with its first-quarter trading update despite a more stable performance in its key North American market.
The shares eased 13p or 3% to 433p, taking them to the bottom of the FTSE 100 leader board and eradicating almost all the gains since it published its full-year results in early March.
SLOW AND STEADY
Revenue for the first three months of the year rose 0.9% on a headline basis to £1.27 billion and 4.9% on a constant exchange rate basis led by a 3.1% ‘organic’ increase including price rises.
In terms of the separate businesses, organic revenues were up 2.7% in pest control, 3.8% in hygiene & wellbeing and up 7.7% in France Workwear.
The firm said customer retention was stable at 79.5%, and it was successful in passing cost inflation on to customers.
North American revenue was up 1.5% on an organic basis, while in Europe and Latin America, the group’s second-largest markets, sales were up 6.2%.
In the UK and Sub-Saharan Africa, revenues rose 4.1%, while in Asia they were up 4.3% and in the Pacific region they were up 7.3% during the quarter.
SECOND-HALF WEIGHTING
The acquired Terminix business has now been legally merged with Rentokil’s North American operations, which means they can share resources and operating systems, and a new 'Terminix It' marketing campaign was launched during the quarter.
Meanwhile, the group made eight small bolt-on acquisitions which together delivered annualised revenue in the year before acquisition of £45 million and Rentokil is sticking with its targeted spend of around £250 million this year.
The group confirmed its forecasts for the full year of 2% to 4% organic revenue growth in North America, accompanied by ‘modest’ margin progression, but said it expected its results to be weighted towards the second half which the market typically takes as ‘maybe they will, maybe they won’t’.
