7th Mar 2024 12:33
(Alliance News) - Shares in Rentokil Initial PLC leapt on Thursday as annual results topped expectations, and it outlined plans to boost its flagging North American business.
Shares in Rentokil soared 17% to 501.00 pence each in London on Thursday. The stock remains down 3.5% in the last 12 months, however.
The Crawley, West Sussex-based pest control and hygiene firm said pretax profit rose 67% to GBP493 million in 2023 from GBP296 million in 2022, with earnings per share climbing by 31% to 15.14 pence from 11.57p.
Revenue increased by 45% to GBP5.38 billion from GBP3.71 billion, while the dividend was boosted by 15% to 8.68p per share from 7.55p.
Jefferies said that, on an adjusted basis, pretax profit of GBP766 million was 2% ahead of market consensus.
Rentokil disclosed organic revenue growth of 4.9%, supported by strong performances in Europe, Asia, Pacific, UK and Latin America.
North America organic revenue growth was 3.1% with an adjusted operating margin of 18.7%, improved by 160 basis points.
In October, Rentokil had lowered guidance for adjusted operating margin range in North America to 18.5% to 19.0% from 19.5% before.
Rentokil on Thursday highlighted good organic revenue growth across all business categories, up 4.5% in Pest Control, 4.8% in Hygiene and Wellbeing and 13.2% in France Workwear.
The company raised its expectations for annual pre-tax synergies from the Terminix integration by a further USD50 million to around USD325 million.
The enlarged plan is scheduled to be completed in 2026 with net synergies of USD40 million in 2024, USD65 million in 2025 and USD38 million in 2026.
Jefferies noted the synergies of USD69 million were ahead of its expectations of USD60 million, with total net synergies now expected at USD225 million from USD200 million, although it pointed out completion of integration was pushed back a year to 2026.
In December 2021, Rentokil bought Terminix, a market leader in termite control in North America, in a USD6.7 billion deal that created the biggest pest control provider in the world.
Rentokil also announced its 'The Right Way 2 Plan', a strategy aimed at reinvigorating organic growth in North America.
This covers three main areas - improving retention of sales staff to to improve sales conversion, investing in a brand strategy to reinforce awareness and boosting marketing resources.
Chief Executive Andy Ransom said he expects "good underlying trading momentum," in 2024, with "modest North America margin progression."
By Jeremy Cutler, Alliance News reporter
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