Christopher Johnson: Rentokil Initial (RTO) saw its share price drop upon the news that a slowdown in its North American business would lead to a fall in profits.
Rentokil’s adjusted profit before tax and amortization is estimated to reach £700 million in 2024 down from heights of £766 million in 2023.
Revenues from North America account for over 50% of the group’s sales following the $6.7 billion acquisition of Terminix in 2021.
Yet, a spokesperson for the pest control giant conceded that North America sales still have a long way to go. The drop in share price erased more than £2bn from Rentokil’s market capitalization.
However, Morningstar is maintaining its fair value estimate for the company at 620p to factor in a restoration of organic growth that we believe will be at approximately 4% from 2025 onward.
In June, renowned activist investor Nelson Peltz, took a stake in the business, stating he would engage with the firm’s leadership on ideas and initiatives to improve shareholder value.
Rentokil is currently trading at £29.12 and will pay an interim dividend of 3.16p on September 16.
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