Rentokil pursues mergers and acquisitions to spur further growth while trading remains in line with expectations

 
Courtney Goldsmith
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This undated photo shows a rat in the a
The rat catcher is increasing its M&A activity (Source: Getty)

Rentokil, the business services group best known for its pest control unit, said trading was in line with expectations in the first quarter of 2017 as it pursues more tie-ups in key markets.

The figures

In a trading update for the first quarter, the group said ongoing revenue increased 10 per cent, of which 3.1 per cent was organic growth and 6.9 per cent was from acquisitions.

Pest control grew by 19.1 per cent while hygiene revenues rose 3.7 per cent. In emerging and growth markets, revenue increased by 24.5 per cent and 12.6 per cent respectively, while business in manage for value markets grew 2.5 per cent.

Shares in the FTSE 100 firm edged down 1.5 per cent at 243.7p in late afternoon trading.

Why it's interesting

The group has acquired 12 businesses to date this year - 10 of which were in pest control, one in hygiene and one in property care.

The new acquisitions, which were mostly in emerging and growth markets, had combined annualised revenues of £101.7m in the 12 months immediately prior to acquisition.

Last month, the group announced a joint venture with PCI, India's largest pest control company, which operates around the country from 250 locations.

Read more: Rentokil expanding into the US market with $425m acquisition

In 2016, the firm acquired 41 companies for £107m. The combined annualised revenue of all those businesses was £124m.

What Rentokil said

Chief executive Andy Ransom said:

"We have made a good start to 2017. Pest control has performed well across the regions and we remain encouraged by the progress we are continuing to deliver in hygiene. We have been very active in M&A in the first three months of the year, reinforcing our strategy of acquiring high-quality pest control and hygiene businesses in emerging and growth markets. We are particularly pleased with our JV with PCI in India, which is an outstanding business in a country with significant growth potential for commercial and residential pest control services.

"We are confident that the company will deliver a performance in line with expectations for 2017."

Read more: Zest for pests: Rentokil Initial's profits creep up after 41 acquisitions

What analysts said

Christopher Bamberry, analyst at Peel Hunt, said: "The continuing mix shift within the portfolio towards the higher growth/higher margin pest control activities, which will be accelerated by the increased M&A capacity (2017 target: >£150m)... should compound profits growth at an increasing rate."

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