20th Apr 2016 10:30
LONDON (Alliance News) - Rentokil Initial PLC on Wednesday said its pest control operations had a strong first quarter, boosted by the big acquisitions it made in North America last year and by robust organic growth.
The FTSE 250-listed group, which has pest control, workwear and hygiene divisions, said total first quarter revenue hit GBP472.0 million, with GBP468.1 million of that from its ongoing operations. Revenue from ongoing operations grew 12% year-on-year in the quarter at constant currencies, with 2.8% of this growth organic and the balance driven by acquisitions.
Shares in Rentokil were up 2.6% to 181.20 pence late morning Wednesday, one of the best performers in the FTSE 250.
Pest control, where Rentokil had been focused much of its acquisitive attention, was the star performer in the quarter. Overall, organic growth for the pest control business was 6.4%.
Rentokil substantially increased its North American pest control presence in 2015 when it paid USD425.0 million to buy The Steritech Group Inc, a Charlotte, North Carolina-based pest control company. Rentokil on Wednesday said the integration of that business is going well.
That deal followed Rentokil making 12 bolt-on pest control acquisitions in the first half of 2015. This trend continued in January 2016, when Rentokil acquired four further pest control businesses, two of which are based in North America.
The Steritech deal made Rentokil's North American arm its largest revenue contributor and was part of a push by the group to build scale for its pest control arm in the US market, allowing it to cut head office costs, get better procurement terms, and boost its geographical coverage.
Organic revenue growth for the North American pest control arm hit 6.4% in the first quarter, but total revenue increased 54% thanks to the Steritech deal.
"I am encouraged by our performance in the first three months of this year, in particular by the rate of organic growth in our North America Pest Control operations and the ongoing Steritech integration," said Rentokil Chief Executive Andy Ransom.
Rentokil said its hygiene business, which supplies hand dryers and paper towel dispensers, saw organic growth of 2.3% in the first quarter.
On a regional basis, Rentokil said the majority of its operations performed well in the quarter, though it said conditions remain tough in Europe, particularly in France. In 2015, Rentokil's workwear arm, which supplies uniforms and protective equipment, was hit by weakness in France and the Benelux region. No further detail was provided on the workwear business in Wednesday's trading update.
"We remain confident that the business will deliver a performance in line with our expectations for 2016," Ransom added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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