Despite the impact of Covid-19, Rentokil (RTO) kept its revenue flat at £1.3bn in the six months to 30 June. Disruption to pest control due to business shutdowns and weaker demand for property and workwear services was offset by increased appetite for its cleaning expertise – this includes providing hand sanitisers, deep cleaning and disinfection risk assessments.
Hygiene sales rose by 11 per cent at constant currencies during the first half, to £293m, with £49m coming from its disinfection services during the pandemic. Asserting that it has a “strategic hand to play that is stronger than before”, the group aims to enter 20 new markets by the end of the year.
Yet Covid-19 did hit the bottom line. ‘Ongoing’ operating profit dipped by 9 per cent due to a £23m increase in provisions for bad debt and £9m spent on purchasing personal protective equipment (PPE).
Net debt has ticked up by 3 per cent from the December year-end to £1.1bn, equivalent to 1.9 times cash profits, although free cash flow surged by half year on year to £144m. Net debt could go up further as Rentokil resumes acquisition activity – it plans to spend at least £100m on acquisitions in the second half of the year. While there was no interim dividend, the group has signalled a final payout could be on the cards.
Consensus forecast adjusted pre-tax profit for 2020 is £266m, with EPS of 12.4p, down from £341m and 14.3p in 2019.
| RENTOKIL (RTO) | ||||
| ORD PRICE: | 548p | MARKET VALUE: | £10.1bn | |
| TOUCH: | 548-549p | 12-MONTH HIGH: | 575p | LOW: 289p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 42 | |
| NET ASSET VALUE: | 58p* | NET DEBT: | 103% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 1.30 | 114 | 4.75 | 1.51 |
| 2020 | 1.29 | 61.8 | 2.54 | nil |
| % change | -1 | -46 | -47 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes £1.8bn in intangible assets, or 96p a share | ||||
