Rentokil full-year profits boosted by pest control division

Rentokil posted a jump in full-year profits and revenue on Thursday following a particularly strong performance from its pest control business.

Adjusted pre-tax profit for 2021 rose 22.1% to £416.5m, with ongoing revenue up 9.8% at £2.9bn. On a statutory basis, pre-tax profit was up 41.5% at £325.1m, with revenue 5.5% higher at just under £3bn.

Rentokil highlighted a particularly strong performance from the pest control segment, which saw ongoing revenue growth of 18.6% to £2bn, boosted by an "excellent" performance form the North America business. This was slightly offset by weaker performances from its Australia, New Zealand, Malaysia and Indonesia operations, which were dented by lockdowns in the second half.

The core hygiene business, excluding disinfection, delivered an 8.2% increase in ongoing revenue to £555.6m, reflecting good performances in the UK, Europe and Latin America. Overall hygiene revenue declined by 8.4% to £673.4m, however, reflecting the anticipated tapering of disinfection services.

Chief executive Andy Ransom said: "We have had an outstanding year for M&A in 2021 and have acquired 52 high quality businesses in 25 countries - including 17 deals in our key North America market. Our total cash consideration for acquisitions this year amounts to £463.1m, in line with our up-weighted guidance given at the interim results in July.

"In December we announced the acquisition of Terminix, which will deliver multiple density-building opportunities in North America as well as cost synergies of at least $150m. We have made a good start with the development of our integration plan and the initial US antitrust regulatory process is underway."

At 0940 GMT, the shares were down 5.8% at 492.80p.

Steve Clayton, fund Manager at HL Select, said the numbers were a shade better on earnings, but weaker on revenues than analysts' expectations.

"We hold Rentokil in our HL Select UK Growth Shares fund because of the visibility of growth that it offers," he said. "These results showed the core Pest division boosting revenues by 18.6%. The group is now seeing revenues from disinfection fall away rapidly in its Hygiene division as the impact of the pandemic fades, but the rapid expansion, both organic and through multiple bolt-on acquisitions is offsetting this.

"2022 should see the completion of the acquisition of Terminix, Rentokil’s largest deal for many years, which should offer substantial revenue and cost synergies, with around 15% earnings enhancement expected in FY23."