Rentokil shares dive after pest control giant warns on profits
11 September 2024, 10:54
The Crawley-based company also suggested that it would reduce staffing levels after overspending.
Shares in pest control giant Rentokil have dived after it downgraded its sales and profit expectations following slower-than-expected activity, and revealed plans to scale back its workforce in the US.
The Crawley-based company, which is listed on the London Stock Exchange and is the world’s largest pest control firm, said it was hoping to cut costs after overspending.
The firm told investors that its sales performance in July and August was lower than anticipated.
This affected its biggest market in North America, where the company now expects organic revenue growth of about 1% over the second half of 2024.
It also expects to take a roughly £80 million hit to annual operating profits as a result of slower sales, higher business costs and the impact of foreign currency movements.
Rentokil said it was planning to “right-size labour resources” for the volume of work, indicating it will reduce staffing levels to meet the level of demand.
It is understood that this will impact sales roles in the US with the firm not replacing as many staff who leave, as it moves away from the peak summer season for pest control.
Rentokil employs about 22,000 people in the US and some 63,000 globally, including sales consultants and its pest control technicians.
Rentokil shares dropped by more than 17% in early trading.
The business was boosted in June after activist investor Nelson Peltz built a significant stake, making it among the top 10 shareholders in the firm.
His investment company, Trian Partners, said it wanted to “discuss ideas and initiatives to improve shareholder value”, indicating that it could steer changes for Rentokil.
But Wednesday’s update came as a disappointment to investors, with the firm also revising its profit expectations.
It said it was forecasting its group adjusted pre-tax profit to be around £700 million for the full year.
Rentokil said it had expanded its resources in recent months because of expectations of higher levels of service and sales during its peak season.
However, this led to it being over-resourced, while increased spending on staff overtime and materials also drove up business costs.
Rentokil said it was taking “decisive action” to mitigate overspending as it exits the peak season, including managing stock more effectively and managing its technicians’ workload and overtime.
