- Third-quarter sales miss forecasts
- Costs running above budget
- Shares slump to new year-low
For investors in pest control and hygiene group Rentokil (RTO) this will be a day to forget after the firm released an unscheduled trading update warning profits would be lower than expected due to lower sales and higher costs.
The shares were roiled, dropping 85p or almost 18% to a new 12-month low of 390p marking their lowest level since the pandemic.
SALES WEAKER THAN ESTIMATED
Today’s announcement that North American organic revenue growth would be below forecasts, while operating profit would be impacted by cost overruns, comes less than three months after the firm lowered its guidance with its first-half earnings report in July.
The firm said while it saw ‘some positive momentum’ in North American sales – which make up around 60% of group revenue – towards the end of the second quarter, trading in July and August was below expectations.
In addition, there was ‘some modest disruption’ to organic growth from branch integration which was not what investors wanted to hear.
Adding to the negative mood, the firm said a weaker dollar and weaker inflation in some markets meant it was likely there would be an additional £10 million headwind to full-year pre-tax profits.
TAKEOVER TARGET
Today’s collapse in the share price could reignite takeover talk after press reports circulated in July of interest from Philip Jansen, the former chief executive of BT Group (BT.A).
Jansen has allegedly been in talks with private equity funds with a view to taking over Rentokil, replacing Andy Ransom as chief executive and using the UK firm as an acquisition vehicle.
Press reports also suggested if successful Jansen would look to re-list Rentokil in the US, where it does the majority of its business, in order to obtain a higher rating for the shares.
