Three things you need to know as the UK financial markets open, from Tony Cross.
#1. US division continues to weigh on performance at Rentokil
Rentokil Initial LON:RTO has published a trading update this morning noting good performance at a group-wide level, but trading activity in North America has been lower than anticipated. The key driver here appears to have been overly ambitious target setting by management which has driven costs beyond the uptick in realised sales. As such this is set to have a c. £50m impact on FY24 adjusted operating profits.
Currency headwinds off the back of a stronger Pound are also set to incur a £10m hit resulting in full year pre-tax profit forecasts of £700m. This follows the company’s previous downgrading of annual guidance back in July.
#2. Rightmove rejects REA bid as opportunistic
Following last week’s news that Australian competitor REA was considering a bid for Rightmove LON:RMV, the terms have now been announced with a cash and shares bid that would imply a value of 698p per share. That’s a 26% premium to the “undisturbed closing price” of Rightmove the day before news initially broke but management have pushed back, deeming the offer opportunistic, undervaluing the company and its future prospects.
#3. Dunelm full year sales up fractionally, margin improvement impressive
Dunelm LON:DNLM has full year numbers out today with total sales up 4.1% whilst gross margins have improved by 170 bps. Pre-tax profits are up by 6.6%, now above £200m, and the full year dividend will total 43.5p per share. This all comes against the ongoing uncertain economic backdrop with management noting they still aren’t seeing a meaningful change in consumer habits, although the start to FY25 is reported as having been ‘solid’.