Rentokil Initial PLC (LSE:RTO) increased its dividend 18.1% to 6.39p after its annual profit rose thanks to strong pest control demand from businesses in North America after pandemic restrictions were loosened, which offset a reduction in hygiene revenues.
The FTSE 100 pest control and hygiene services provider reported £2.9bn of revenue, an increase of 5.9%, while adjusted pretax profit of £416.5mln was up 17.3%.
In statutory terms, pre-tax profit increased 41.5% to £325.1mln, while revenue increased 5.5% to just under £3bn.
Organic growth in the core business, excluding disinfection services, was 7.5%, exceeding the company's recently revised organic growth guidance of 4% to 5%.
A good performance in the UK, Europe, and Latin America contributed to an 8.2% increase in ongoing revenue to £555.6mln for the core hygiene business, excluding disinfection.
In contrast, hygiene revenue decreased by 8.4% to £673.4mln due to anticipated tapering of disinfection services which reduced by £103.6mln to £117.8mln.
Rentokil reported that its pest control segment saw ongoing revenue growth of 18.6% to £2bn, boosted by an "excellent" performance in North America. The performance of its Australia, New Zealand, Malaysia, and Indonesia operations, which were negatively affected by lockdowns in the second half, was slightly offset as a result
As COVID-19 related impacts on these markets eased and despite the significantly reduced contribution from disinfection services, revenue growth in North America and UK & Rest of World reached double digits, as they grew 14.2% and 10.8%, respectively.
Despite intermittent lockdowns in Australia and New Zealand, the Pacific operations also recovered well, with revenue growing by 8.7%. Despite healthy growth in Asia and Europe (at 3.9% and 5.0%, respectively), the company said lockdowns were still a factor in some countries.
Looking forward, the company is expecting a big boost from the acquisition of Terminix for $6.7bn in December, which it hopes will make it the market leader in the US and boost its financial profile.