" class="no-js "lang="en-US"> Wealth Club: Rentokil - Terminix Deal Truly Transformational
Friday, March 29, 2024

Wealth Club: Rentokil – Terminix Deal Truly Transformational

 

Rentokil, a leading pest control specialist, has recently unveiled its impressive full year financial results for 2022. The company experienced a notable 6.6% growth in organic revenue, alongside a significant 22.7% increase in adjusted operating profit. Furthermore, the operating margin rose by 45 basis points to reach 15.4%, with the group aiming for margins above 19.0% by the end of the financial year 2025. Additionally, Rentokil reported excellent progress in the integration of Terminix, raising its cost synergy guidance from £150 million to at least £200 million.

Charlie Huggins, Head of Equities at Wealth Club comments, “This is a solid performance from Rentokil. Encouraging early progress on the Terminix acquisition has led to increased cost saving targets. This underpins group expectations to grow revenues and profit margins strongly over the next few years, despite the gloomy economic environment.

Rentokil ought to be better placed than most to weather an economic downturn. Rats need dealing with, no matter what’s happening to inflation or the economy. Add this to a large slug of recurring revenue from long term contracts and it adds up to a resilient business with decent pricing power.

The Terminix acquisition is truly transformational. It establishes Rentokil as the leading Pest Control business in North America, the world’s largest Pest Control market. Moreover, the deal should open up substantial cost savings. If all goes to plan this should allow Rentokil to deliver significant margin growth over the next few years, even if costs like labour and fuel keep rising.

However, transformational deals like this always carry risk. Rentokil has a fine track record of integrating acquisitions, but it has never swallowed a deal as large as this one. Terminix’s performance prior to the acquisition left a lot to be desired and the need to improve its operations and align its culture with that of Rentokil adds further complexity.

As always, there are no free lunches. Rentokil’s acquisition of Terminix could bring substantial rewards, but it will need to execute flawlessly to realise the full benefits. The early signs are encouraging. But, with investors in an unforgiving mood following the Silicon Valley Bank collapse, there is little room for error.”

People In This Post

Companies In This Post

  1. Marco Santos to Become CEO of GFT Technologies SE Read more
  2. PayPal Plans to Appoint Carmine Di Sibio to Board of Directors  Read more
  3. Yapily Named a Supplier on Crown Commercial Service’s Open Banking DPS Framework Read more
  4. allpay Appointed as Official Supplier on Crown Commercial Service’s Open Banking and Fund Administration & Disbursement Services Dynamic Purchasing Systems Read more
  5. Oliver Wyman Announces Mariya Rosberg as Americas Head of Banking and Financial Services Practice Read more