Why Rentokil Initial Shares Are Diving Today

Author: Lekha Gupta | September 11, 2024 09:46am

Rentokil Initial plc (NYSE:RTO) shares are trading lower Wednesday after the company revised the guidance for the second half of FY24.

The company projects organic revenue growth for North America operations to be about 1% in the second half of 2024, with operating profit anticipated to be impacted by higher sales, service, and other costs.

During its first-half results announcement, Rentokil disclosed expecting North America organic revenue growth at the lower end of the 2% – 4% range for the year.

The revised growth forecast is estimated to have a £20 million impact on FY24 adjusted operating profit. The company sees FY24 North America adjusted operating profit margin to be 17.2% and group adjusted operating profit margin to be 15.5%.

Although there was positive momentum in North America sales activity at the end of the second quarter, trading in July and August was weaker than expected. Additionally, branch integration has caused some modest disruption to organic growth.

Rentokil anticipates an additional currency headwind of around £10 million, bringing the adjusted PBTA for FY24 to around £700 million.

Rentokil stated that they over-expanded sales and service resources due to lower-than-expected lead flow and sales growth.

The company projects increased overtime and higher spending on materials and consumables to reduce FY24 Group adjusted operating profit by approximately £50 million.

Overall, the company said that they are taking decisive steps to control costs post-peak season by optimizing inventory, managing technician workload and overtime, and aligning labor resources with demand.

Price Action: RTO shares are down 19% at $25.60 at the last check Wednesday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Posted In: RTO