Market Report: Rentokil's spending spree sparks profits upgrade buzz

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Rat-catcher Rentokil set tails wagging in the Square Mile as investors bet that a strong first quarter could lead to an upgrade for the group’s annual profits.

Revenues at the FTSE-250 pest control specialist’s continuing operations increased 11.8% to £468.1 million in the first few months of the year, with 2.8% of that growth created organically.

The rest was done through acquisitions — 12 to be precise — as the company continues on its spending spree to keep up the growth.

The pest control business in North America, where it recently spent $425 million (£296 million) on Steritech, was the standout performer, enjoying 6.4% organic growth.

House brokers Barclays and Bank of America Merrill Lynch said it was too early to hike full-year forecasts, but added this could happen if the organic growth continues. The shares were up 6p at 182.7p.

After a couple of days for the bulls, investors were counting their winnings and the FTSE 100 drifted off its highs for 2016, falling 15.72 points to 6389.63.

BT was among the losers, down 9.9p at 441.2p, as Jefferies cut the telecoms, broadband, mobiles and TV group’s rating to hold.

The broker, which has been a buyer since 2010, is worried the mobiles industry will become even more crowded, even if the O2-Three merger is blocked by regulators. It also suggested stricter regulation from Ofcom would hit Openreach, which may be forced to cut its prices.

GKN found itself on the winning side, 7.45p higher at 303.15p. Its Driveline driveshaft business fared well in the first quarter, but the going was tougher at its aerospace division, which is suffering from military spending cuts.

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Falling defence spending has hit GKN (Tim Wimborne/Reuters)

Among the mid-caps Moneysupermarket.com, the price comparison site behind the Epic Wolf advert, was off 1.4p at 320.5p despite hitting targets in the first quarter.

HSS Hire fell 1.75p to 81.75p as finance chief Steve Trowbridge downed tools after a disastrous year for the tool hire firm. Its value has shrunk by almost two thirds since last year’s float after two hefty profit warnings.

Murmurs of takeover interest in Gulf Keystone lifted the struggling Iraq-focused oil firm 0.42p to 5.65p. 

Jim Mellon’s tech investment vehicle FastForward Innovations continued to attract buyers, climbing 2p to new highs of 22p on encouraging signs from its Chinese online video platform Yooya.

Source Article from http://www.standard.co.uk/business/market-report-rentokil-s-spending-spree-sparks-profits-upgrade-buzz-a3229806.html

April 21, 2016 |
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