- Sales and profit jump 46% and 57% respectively
- Synergies from integration of Terminix increased by $50 million
- Good trading momentum continued into 2024
Shares in Rentokil Initial (RTO) jumped 13% to 485p topping the FTSE leaderboard after the pest control and hygiene company said it expected higher cost savings from its $8 billion acquisition of Terminix.
Also pleasing investors was news that the company reached its net debt reduction target one year ahead of schedule.
The share price gain takes it into positive territory year to date and partially reverses steep losses in October 2023, when they dropped 30% after the company warned of a slowdown in the US.
HOW DID RENTOKIL PERFORM?
Revenue for the year to 31 December jumped 46% to £5.37 billion in constant currencies and adjusted operating profit grew 57% to £898 million.
Organic revenue grew 4.9% with strong performances across Europe, Asia, Pacific, UK, and Latin America.
Adjusted operating profit margin increased 1.2% to 16.6% driven by ‘strong price progression’ and good customer retention.
The full year dividend was increased by 15% to 8.68p per share.
Chief executive Andy Ransom commented: ‘The group overall delivered a good operational and financial performance in 2023, despite weaker growth in North America, achieving 4.9% organic revenue growth and 16.6% margin.
‘We have made strong progress in the integration of Terminix to create a powerhouse business in the world's largest pest control market. The combination with Terminix continues to create significant value and we have upgraded expectations for total gross cost synergies by $50m to $325m to be delivered by 2026.
CONTINUED MOMENTUM
The company said it expects good underlying trading momentum to continue supported by increased synergies from the Terminix integration which provides an additional $25 million to investment in sales and marketing.
This is anticipated to result in increasing organic growth in North America to between 2% and 4% for the full year and ‘modest’ margin progression.
The medium-term margin group margin target of 19% is expected to be achieved in 2026. The company said its pipeline of bolt-on acquisitions remains strong and it expects to invest £250 million in 2024.
Net debt to EBITDA (earnings before interest, tax, depreciation, and amortisation) reduced to 2.8 times at the end of December 2023 and the company expects further ‘modest’ deleveraging in 2024.
