(Alliance News) - Rentokil Initial PLC shares slid on Thursday as it warned that tricky market conditions in North America mean its full-year outturn in the region will be worse than expected.
Rentokil shares tumbled 15% to 506.20 pence each in London on Thursday morning, the worst FTSE 100 performer.
The pest control and hygiene firm said group revenue in the third-quarter surged 53% on-year to GBP1.38 billion from GBP901 million. At constant currency, revenue was 60% higher.
Its top-line got a boost from acquisitions, including Terminix, a USD6.7 billion deal it sealed around this time last year.
"Delivery of the Terminix integration plan has progressed well in the third quarter and the cost synergy programme is on track to meet full year guidance of USD60 million of pretax net [profit and loss] synergies. In the period we completed several important initiatives, including moving all of our 22,000 US colleagues onto the same Human Capital Management and payroll system. We remain confident in the significant benefits of the combination with Terminix and are on course with our integration plans," Rentokil said.
"The group has completed 31 bolt-on acquisitions in the nine months to the end of September with annualised revenues of [around GBP86 million]. In the third quarter we completed 7 deals - 6 in Pest Control and 1 in Hygiene & Wellbeing, with annualised revenues of [around GBP7 million]. This includes highly targeted acquisitions to support expansion in growth 'Cities of the Future', including those in Indonesia, China and Brazil. We continue to execute on a substantial pipeline of additional, high-quality opportunities."
In North America, Rentokil said it achieved 2.2% organic revenue growth, while the Europe region, which includes Latin America but not the UK, saw 9.5% growth.
In the UK & Sub Saharan Africa division, organic revenue growth totalled 5.2%. In the Asia, Middle East, North Africa, and Turkey region, organic growth amounted to 8.9%. Finally, in the Pacific division, organic revenue growth amounted to 7.6%.
North America was the organic growth laggard for Rentokil, and the company said the outlook there is tricky.
"In North America, we remain mindful of the macroeconomic backdrop. Near-term market uncertainty means that the region's full year performance is anticipated to be marginally below our previous expectations," it cautioned.
It now predicts a North America adjusted operating margin range of 18.5% to 19.0%, lowered from its 19.5% expectation.
At group level, however, it maintained its adjusted operating margin guide of 16.5%.
"Overall, we expect to achieve good growth in the group in the remainder of 2023. We continue to believe that the benefit of our diversified portfolio and strong H1 performance will enable us to deliver group results broadly in line with current expectations. Our sustained focus on managing inflationary pressures means we remain on track to meet our full year guidance," Rentokil explained.
By Eric Cunha, Alliance News news editor
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Rentokil Initial (RTO)