Rentokil plans a review of its Terminax takeover amid growth concerns in the US
Rentokil’s CEO has outlined plans to boost disappointing performance in the US, where the group plans a review in the new year.
The Royal Rat Catcher was forced to issue a profit warning and cut jobs last month after a hiring spree ahead of the peak season left the company ‘over-resourced’ due to sluggish US trade.
It follows last year’s £5.1 billion takeover of Terminix, which made Rentokil the world’s largest pest group.
Rentokil became the world’s largest pest company when it bought Terminix last year
On Thursday, Rentokill announced it had achieved 1.4 percent growth in North America in the three months to September 30, meaning it was “underperforming”, boss Andy Ransom said.
Rentokil, which saw total revenues stable year-on-year at around £1.4 billion over the period, has previously told shareholders it is taking ‘decisive action’ to keep excess costs to a minimum.
But it has reiterated its belief in “the fundamental strength of North American business.”
Ransom said Thursday: “In North America, we recognize that the business has underperformed and we are focused on making the required operational improvements.
Boss Andy Ransom said US company ‘underperformed’
“We are expanding our initiatives to increase organic growth and we are taking action to limit cost overruns.”
He added that Crawley-based Rentokil would review the progress of its “integration activities” with the US group in the new year.
Ranson said: ‘(These include) testing new satellite branches and new technician and sales pay plans, in addition to assessing the effectiveness of our expanded growth initiatives.
“Following the integration, we remain strongly optimistic that our company will lead a highly resilient, growing market.”
This revision, Rentokil added, would result in the 2025 synergies being postponed by approximately two to three months.
Nevertheless, Rentokill reiterated full-year earnings expectations.
Rentokil shares rose 9.3 percent to 372.7p on Thursday morning, but has fallen almost 40 percent in the past year.
Rentokil’s US business has largely suffered from weak demand from wholesale customers, such as small pest control companies and landscaping companies.
The group plans an increased focus on customer retention as a means of ‘unlocking’ organic growth.
Adam Vettese, market analyst at investment platform eToro, said: “America is still proving to be a tough nut to crack for Rentokil.
“This adds to the news earlier this week that several lawsuits have been filed alleging securities fraud.
‘The bad news week has certainly had an impact on the share price, although some of these losses were offset this morning as the company reiterated its guidance.’
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