- Volume growth and price rises drive sales
- Bolt-on acquisitions continue to add value
- Game-changing Terminix deal on track
Hygiene and pest control firm Rentokil Initial (RTO) said it had seen ‘excellent momentum’ in the first half with strong revenue growth and pricing fully offsetting inflation.
Investors responded positively, sending the shares up more than 3% to 519p, their highest level since early May.
ORGANIC GROWTH
Ongoing revenues for the group, excluding disinfection, rose 12% on a constant currency basis to £1.56 billion with like-for-like sales up 7.3% thanks to increased demand and higher prices.
The firm is excluding disinfection services as they represented a one-off boost to income during the Covid pandemic and revenues are now tailing off as trading normalises.
Pest control revenues increased 12.1% to £1.05 billion, driven by 5.6% organic growth, price rises and ‘good work volumes’, especially in emerging markets.
Hygiene and Wellbeing revenues rose by 10.8% to £378 million, with almost all of the increase due to organic growth, higher prices and higher workloads.
The French Workwear business chipped in with £91.6 million of revenues, an increase of 16%, as business returned to pre-Covid levels.
Rentokil continued with its strategy of making bolt-on acquisitions with 31 deals in the first half, 26 in pest control and five in hygiene, for an outlay of around £160 million.
The firm still has ‘a good pipeline’ of high-quality deals and expects its full year spending on M&A (mergers and acquisition) to hit £250 million.
Meanwhile, the $6.7 billion cash and shares acquisition of US pest-control rival Terminix, announced last December, has passed the US anti-trust process and is due to complete by the end of the third quarter as expected.
DEFENSIVE QUALITIES
In line with the firm’s progressive payout policy, the interim dividend was increased by 15% to 2.4p per share to reflect not just the strong first half but also the board’s confidence for the second half.
‘We're delivering on our priorities: continued outstanding customer service and investment in innovation and digital, sustained high levels of customer and colleague retention, excellent progress on integration planning for the Terminix transaction, as well as strong delivery on our pipeline of other quality M&A opportunities’, said chief executive Andy Ransom.
Looking to the full year and a potential slowdown in the world economy, Ransom observed that: ‘As a global operation that benefits from highly defensive product and service lines, the company is well placed to navigate macro-economic and geopolitical volatility’.
