Once again, Rentokil Initial (RTO) has well and truly overshot its target for M&A spend. The pest control specialist shelled out £207m in the first half, pulling well ahead of its guideline figure of £150m for the year. It bought 24 companies in all, as well as establishing a joint venture with PCI, India’s largest pest control company. The acquisitions were primarily in pest control, accounting for 18 of the acquired companies despite management’s stated intention to build density in the hygiene business. Even with all the deal-making, net debt declined slightly compared with the first half of 2016.
Organic revenue growth has also been strong at 4.2 per cent, dragged up by pest control, which grew by 6.5 per cent on this measure. Overall, revenue was up 16 per cent at constant currency. Challenges have persisted in the French workwear business, where revenue was flat. Operating profit for the region fell 9 per cent to £19.5m.
Reported profit figures were flattered by £463m in profits from disposals, but growth was impressive on an underlying basis, too, with pre-tax profit up 12.5 per cent at fixed currencies to £126m.
Analysts at Peel Hunt are forecasting adjusted profit of £285m, giving EPS of 12.1p for the full year to the end of December 2017 (from £252m and 10.6p in 2016).
| RENTOKIL INITIAL (RTO) | ||||
| ORD PRICE: | 286.6p | MARKET VALUE: | £ 5.26bn | |
| TOUCH: | 286.5-286.6p | 12-MONTH HIGH: | 228p | LOW: 205p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 45p* | NET DEBT: | 123% | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 0.99 | 80.4 | 3.6 | 0.99 |
| 2017 | 1.23 | 593 | 31.6 | 1.14 |
| % change | +25 | +637 | +788 | +15 |
| Ex-div: | 12 Aug | |||
| Payment: | 13 Sep | |||
*Includes intangible assets of £1.2bn, or 65p a share Ex-div: 10 Aug Payment: 13 Aug | ||||
