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Rentokil Initial shares tumbled 20 per cent on Wednesday after the world’s largest pest control company warned that a slowdown at its key North American business would hit profits.
The plunge wiped more than £2bn from Rentokil’s market value. The London-listed company said that adjusted profits before tax and amortisation this year would be about £700mn, lower than the £776mn that analysts expected and the £766mn it made last year.
The warning is the latest stemming from the US, which accounts for more than half the company’s sales following its $6.7bn acquisition of Terminix in 2021.
It is also a blow to activist investor Nelson Peltz, whose Trian Partners disclosed a stake in the company in June, saying it would seek ways of improving “shareholder value”.
The troubles at the North American business would shave about £50mn from Rentokil’s adjusted operating earnings, the company said.
Disappointing sales during its “peak season” in North America left its operations with higher costs, Rentokil said. Revenue growth in the region in the second half of the year would now be about 1 per cent, it added.
The company also pinned some of the blame for the profit shortfall on the strength of the pound against the dollar.
Rentokil’s acquisition of Terminix, which is headquartered in Memphis, initially sent the UK group’s shares higher as investors cheered the promise of expansion in one of the world’s biggest pest control markets.
However, the deal has failed to meet expectations as US households have cut spending.
“While we saw some positive momentum in North America sales activity at the end of the second quarter, the trading performance in July and August was lower than anticipated,” Rentokil said on Wednesday.
Its other businesses were performing well, the group added.
