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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Normally, when a firm posts a 53% increase in quarterly revenues it doesn’t result in its share price dropping by a third in a matter of days.
However, in the case of FTSE 100 pest control and hygiene business Rentokil (RTO), the increase marked a slowdown from the first half growth rate of 70% and was accompanied by a warning over sales and margins in the group’s key North American market.
Most of the jump in sales this year is due to the £4.5 billion acquisition of Terminix, including debt, in October 2022. Without Terminix, underlying growth in the third quarter was barely more than 4% due to sluggish demand in the wholesale channel for chemicals used for pest control and gardening.
Big deals involve big risks, whereas Rentokil usually sticks to smaller, bolt-on acquisitions, and not only is the jury still out on whether it overpaid for Terminix, there are also questions over the timing.
Rentokil shares have recovered, somewhat, but they are still down 18% year-to-date while US rival Rollins (ROL:NYSE) is up 15% this year and looks on course to make new all-time highs.
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The value of your investments can go down as well as up and you may get back less than you originally invested. We don't offer advice, so it's important you understand the risks, if you're unsure please consult a suitably qualified financial adviser. Tax treatment depends on your individual circumstances and rules may change. Past performance is not a guide to future performance and some investments need to be held for the long term.