Sept 11 (Askume) – Rentokil Initial (RTO.L) warned on Wednesday that annual profit would fall due to weaker-than-expected sales in its biggest market, North America, sending the British pest control company’s shares down as much as 20%.
This is the third warning of weak North American trade in the past year.
In a conference call with analysts and investors, Chief Executive Andy Ransom expressed disappointment with the execution of the group’s strategy to boost revenue growth launched in March. However, he expressed confidence in the plan and would not make any changes.
The company’s shares have fallen by almost a third since the first warning in North America last October, falling 20% to 380 pence by 0800 GMT. The stock is one of the largest investors in the FTSE 100 index (.FTSE)Was the biggest loser.
Rentokil, which generated about 60% of its revenue from North America last year, said it would cut an unspecified number of U.S. staff to cope with rising costs.
Rentokil Initial now expects full-year adjusted pre-tax profit of about 700 million pounds ($916 million), compared with the 766 million pounds it reported last year.
Analysts at RBC Capital Markets had expected pre-tax profits of around £777 million.
Although North American sales were weaker than expected in July and August, organic revenue growth is now expected to increase by about 1% in the second half of the year.
The company expected revenue growth to be at the lower end of the 2-4% growth range.
Rentokil Initial, which acquired US rival Terminix in 2021 , is working to integrate its operations and said on Wednesday the deal had caused modest headway to organic growth.
Since issuing its first profit warning in October 2023 , the pest control company has seen around £5.4 billion wiped from its market value.
“The profit warning will raise further questions about management control and visibility in the industry,” Jefferies analyst Alan Wells said in a note.
The company has also increased marketing spending to attract more North American customers.
Activist investor Nelson Peltz’s Trian Fund Management has taken a stake in the company and expressed interest in discussing “ideas and initiatives” in June.
Rentokil Initial and rival Rollins combined have about half of the US pest control market, and the acquisition of Terminix makes Rentokil Initial a bigger player.
($1 = 0.7642 British pounds)
