Rentokil shares slide almost 20 per cent as demand weakens in North America
Pest control giant Rentokil’s share price slid 17 per cent on Thursday morning following a slow appetite from the North American residential market.
The FTSE 100 firm’s shares tumbled on market open from 443.30p to 398.60p, despite reporting a 6.7 per cent rise in group revenue for the first six months of the year to $3.5m (£2.6m), also reporting profit before tax growing almost ten per cent to $263m (£196m).
The firm‘s profit growth was driven by pricing growth staying intact ahead of inflation, and organic revenue increased by 4.2 per cent in the second quarter of this year.
The pest control company, which operates across 90 countries, said 93 per cent of its revenue comes from its top 20 markets and is not “adequately benefiting from our scale,” especially 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 and accounts for approximately 59 per cent of the group’s total revenue, and despite the North American division’s overall revenue up $995m (£745.8m) for the first half of this year, the 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 said there has been a notable “weakness in North America” towards the end of July.
The group said in the UK, its pest control business was held back by “more challenging trading conditions”, in particular by “softness in overall housing demand”, leading to its asbestos removal business suffering.
“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.