Rentokil Initial PLC (LSE:RTO) has kept its full-year guidance unchanged but said the difficult integration of its Terminix acquisition in North America will see 'synergies' deleted by two to three months.
Shares in the FTSE 100-listed pest controller jumped over 8% to 370.3p on Thursday morning.
The pest control company stated that the integration "continues to go well," but noted that as it plans to pilot new pay schemes and satellite branches, "there will be a review early in the New Year to assess elements of the programme, delaying the timing of synergy delivery".
For the third quarter, the FTSE 100 group reported flat revenues year on year, up 3.8% at constant exchange rates, with organic growth of 2.6%, softening from 2.8% in the first half.
Pest control, which contributed 80% of last year’s revenue, saw organic growth of 2.2%, consistent with the first half. North America recovered, with growth of 1.4% in the third quarter, up from 1.0% in the second quarter. Management had forecasted approximately 1% growth for the second half.
After a disappointing performance in North American digital lead flow in July and August, volumes "markedly" improved in the second half of September. However, for most of the quarter, there was a "slightly lower" sales close rate and a reduced average dollar value for those leads.
On the outlook, the company made no change to the 2024 guidance provided in last month's profit warning, adding that while the board sees opportunities for organic performance to improve in the rest of the year, North America guidance for the period remains for circa 1% growth.
North America adjusted operating profit margin is anticipated to be around 17.2% and for the group around 15.5%, meaning group adjusted pre-tax profit is expected to be circa £700 million.
For 2025, profit and margin will be affected by the timing of the delivery of those Terminix synergies, but the board said it "remains confident in the group's strategy and longer-term growth prospects".
Based on the 2025 net synergy guidance of US$55 million, analysts at Peel Hunt said they calculate that this equates to a delay of circa US$9-14 million.