Rentokil Initial, the pest control giant, recently saw a sharp drop in its shares by 19% after warning of lower profits due to weaker demand for termite extermination services in North America. The company, which acquired Terminix in a $6.7bn deal in 2021, now expects adjusted profits to fall below analysts’ expectations of £776m, with revenue growth in North America to be around 1% in the second half of 2024.
The company admitted to over-resourcing its operations in North America, leading to lower sales leads and growth during the peak summer season. CEO Andrew Ransom highlighted the termite business as a particularly weak area that needs improvement, despite launching a new advertising campaign earlier in the year.
Termites, which cause $2bn in subterranean damage annually in the US, have been a challenge for Rentokil. The profit warning comes as activist investor Nelson Peltz’s Trian Partners acquired a stake in the company, with rumors of a potential bid from former BT chief executive Philip Jansen.
Despite the setbacks, Rentokil remains confident in the strength of its North American business, where the US comprises more than half of the global pest control market. The company’s struggles in North America underscore the challenges of integrating a major acquisition and effectively managing operations in a competitive market.
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