Directors’ Deals: Rentokil share sales pay Ransom

Rentokil Initial has been riding high since it bought US pest control giant Terminix last October, making regular appearances on our list of shares hitting 52-week highs.

Last week, it told investors that revenue had jumped by a whopping 65 per cent to £1.24bn in the first quarter of 2023. While most of this was down to acquisitions, the underlying business also looks strong, with organic sales climbing 5.9 per cent. The company’s shares are up 17 per cent year-on-year.

Spotting an opportunity, chief executive Andy Ransom sold over 1mn shares on April 21 for a grand total of £6.34mn. This represented roughly 15 per cent of his total stake. For anyone who thinks they may smell a rat, the company stressed that this was the first time Ransom had sold any of his shareholding in the 15 years since becoming a director of Rentokil (apart from to pay income tax and national insurance), and that it would be used to fund a property purchase. He retains a beneficial holding of about 6mn ordinary shares.

It will take some time to assess the full impact of the Terminix acquisition, which cost Rentokil $6.7bn. However, it is clear that it has cemented the company’s position in the huge US pest control market, and management said its cost savings programme is “on track to meet full-year guidance”.

Business in Europe is also building, with the region delivering 10.5 per cent organic sales growth in the first quarter of 2023. The group’s French workwear division provided a welcome boost. Growth is slower closer to home, but the UK and Sub-Saharan Africa division still managed to increase organic sales by 4.3 per cent between January and March.

888 directors increase stakes

Like its customers, shareholders in gambling company 888 Holdings (888) have suffered the slings and arrows of outrageous fortune over the past three years.

Lockdowns proved lucrative for the company, whose share price soared fivefold from the onset of the pandemic to an all-time 494p in September 2021. Its decision to buy the international (non-US) business of bookie William Hill for £2.2bn was made at the peak of the market, and hasn’t gone down well with investors as asset prices have tumbled since.

Although it managed to chip around £200mn off the price by the time it got around to tapping investors for £500mn to help fund the deal last April, its share price had plunged to around 200p by then. The remainder of the deal was funded by debt, which also became more expensive.

As of the end of December, 888 was carrying net debt of £1.7bn, which equates to 5.6-times cash profits. Based on its 2022 results, it is currently paying an average interest rate of more than 8 per cent.

There has also been upheaval unrelated to the deal. Longstanding chief executive Itai Pazner departed in January after the company was forced to suspend VIP accounts in the Middle East for failing to meet anti-money laundering standards. Finance chief Yariv Dafna also agreed to step down by the end of this year.

The shares bottomed out at 51p this month (the week after William Hill was hit with a record fine for historic compliance breaches) and have been rallying since year-end results on April 14 showed progress with integrating the two businesses, with expected cost savings increasing by £50mn to £150mn. Investec analysts think perceptions of 888 Holdings’ shares have hit a “turning point”. So, too, do a couple of board members — executive chair Lord Mendelsohn bought £68,000-worth at 68p and non-executive Ori Shaked bought £200,000-worth at 78p.