Directors’ Deals: Bosses get the bug for Rentokil shares

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The UK has unwelcome visitors on the mind this autumn. After news of infestations in Paris, bed bug fever has gripped parts of the nation, with sightings reported on the Tube, in libraries and in retirement homes. This is grim for the general public, but it may put a spring in the step of Rentokil Initial, which is experiencing a jump in its bed bug business. 

Investor sentiment has remained resolutely negative, however, after the pest control giant published its third quarter trading update last month. The update was broadly positive: management reported organic revenue growth of 4.3 per cent and said the Terminix integration plan was progressing well, with cost savings firmly on track.

However, Rentokil noted a “softer demand environment” in North America which has made it harder to attract new residential customers. As a result, the region’s full-year performance is expected to be “marginally below” previous expectations.  

Investors — hyper-alert to execution problems after such a massive acquisition — were spooked and shares fell by almost 30 per cent. They have yet to rebound.

Rentokil bosses think they have spotted an opportunity, however. Chief executive Andy Ransom bought 45,700 shares for a total of £200,400. Meanwhile, chair Richard Solomons has bought 22,900 shares for roughly £100,000 and Caroline Ingall-Tombs — a person closely associated with chief financial officer Stuart Ingall-Tombs — has bought 22,904 shares for £100,200. 

In October, Ransom reassured investors that Rentokil was making “good progress on the transformation journey” and stressed the “significant value-enhancing benefits” of its acquisitions. 

However, analysts at Peel Hunt think that the “heavy lifting” involved in integrating Terminix’s field operations is only just getting started. The broker notes that Rentokil rivals such as Ecolab and Rollins are not experiencing declines in the North American market.

Major holder treasures gems miner’s shares

Gemfields sells brilliant red and green precious stones, but shareholders have largely seen the former colour on trading screens in recent months. Investors may have been disappointed by the lack of an interim dividend, while a dip in high-quality output has also hit the company. The shares have fallen from over 19p six months ago to 14p, reversing a positive run between October last year and April.

Gemfields pushed back an emerald auction previously expected to take place this month because of the “generally lower quality and quantity” of output at its Kagem mine in recent months. The most recent high quality emerald auction, in June, brought a record haul of almost $44mn (£36mn), at $166 per carat.

The first half still saw a dip in sales and profits, though — revenue fell by a fifth to $154mn and operating profit slumped by 58 per cent to $36.5mn. Chief executive Sean Gilbertson said after the interim results that the company was dealing with a “much higher cost base”. 

Gemfields also owns historic jeweller Fabergé, of egg fame. Although it held up better than the gem sales arm, sales were also weaker in the first half at $8.4mn. The miner remains in a net cash position despite the tougher conditions, albeit free cash flow in the first half was around a tenth of the $44mn seen in the first half of 2022. 

The shares have not enjoyed significant liquidity since coming back to the London market in 2020, and a buyback programme — worth a total of $10mn — won’t help this either. Major shareholder Assore, a company in which non-executive Patrick Sacco has a beneficial stake, has used some of that limited flow to buy 12.2mn shares, taking its stake up by one percentage point to 28.3 per cent.