Rentokil shares have plunged in early trading this morning after the firm issued a profit warning for the year.
The pest-control firm said it would take a £80m hit to its operating profit after expanding its US workforce to meet peak season demand, which fell short of expectations.
The Crawley-based company, which is listed in London and operates across 80 different countries, said demand for its services in the US was lower than expected over the usually-busy summer months.
The pest control giant also expanded its sales and service teams ahead of peak season but lower-than-anticipated lead flow, and sales growth left the company overstaffed.
Along with higher overtime and material costs, this is expected to knock £50m off its operating profit for the year.
It said profit before tax for the year was now projected to come in at around £700m.
Additionally, Rentokil said its organic growth in North America was slower than expected, which is expected to reduce its adjusted operating profit for 2024 by a further £20m.
In a statement published to the London Stock Exchange on Wednesday morning, the company said: “Our immediate focus is on the Right Way 2 plan to improve revenue growth, through increased lead flow, sales conversion and customer retention.
“We are taking decisive action to mitigate the cost over-runs as we exit the peak season, managing inventory more effectively, managing technician workload and overtime, and will right-size labour resources for the volume opportunity.
“We continue to believe in the fundamental strength of the North American business.
“The substantial structural growth opportunities, enhanced by the benefits of the Terminix transaction, means the value creation opportunity remains intact, albeit taking longer to realise than anticipated.”
Rentokil has been struggling financially since it was acquired by American rival Terminix in 2022, in a $6.7bn deal. It issued a profit warning in October as demand in North America faltered.
However in its July it flagged “stronger” sales in its North American pest business, where it has pumped in around $50m (£38.8m) in investment to drive growth.