UK pest management journalist Frances McKim takes a look at the financial position of the industry’s key global players.
After a long hard winter with a mix of Covid restrictions in place throughout Europe and North America, the vaccination program is progressing well with restrictions now being gently eased.
As UK-based pest management journalist Frances McKim explores, this is potentially good news for the retail, catering and hotel industries.
The resilience of the pest industry is clearly reflected in the financial results of the world’s largest pest management companies. Number one in the world is Rentokil who was quick o the mark and launched new disinfection services across 60 countries in just four weeks. The hygiene sector grew 36.8% during the year, accounting for £744m (26%) of ongoing revenue. Pest control on the other hand grew only 1% to £1,752m with ongoing revenue accounting for 62% of the business, a 2% decrease on 2019. This was generated in 82 markets, in 54 of which Rentokil claims to be the number one. Rentokil’s ongoing revenue increased some 6.3% to £2,846m and ongoing overall profit increased 5.4% to £388m in 2020.
For Rentokil globally, the North American pest control market is by far the most significant, accounting for 58% of global revenue, with the Pacific region (which includes Australia and New Zealand) accounting for less than 5%. However, this is very much in line with the value of the worldwide pest control market (Figure 1). Commercial pest control services account for 80% of total pest control revenue, with residential pest control representing approximately 20%, of which over 75% comes from the US and Australia.
Rollins looking to grow
Whilst Rentokil is the world’s number one pest control operation, Rollins (Orkin) is not far behind. It commands the top spot in the US but has a smaller global footprint, with foreign operations in 2020 accounting for approximately 7% of revenue (8% in 2019).
However it now has a significant presence in the UK, as it does in Australia, having acquired Melbourne-based Adams Pest Control in July 2020, alongside its previous purchases of Allpest, Murray Pest Control, Scientific Pest Management and Statewide Pest Control. As is the case with Rentokil, Rollins’ 2020 revenues rose 7.2% to US$2.161b compared to US$2.015b for the prior year.
Judging by commentary from Matt Turek, Divisional President of Orkin International, further additions seem likely. “We are actively engaged in the acquisition market throughout Australia,” he said. “In spite of the pandemic and state lockdowns we continue to work with acquisition candidates that we feel t our model and culture.”
The remaining global player with a strong presence in Australia is Anticimex, which is headquartered in Stockholm, Sweden and trading under the brand name of Flick.
The company’s 2019 annual report revealed that the Pacific region, covering Australia and New Zealand, represents close to a fth of group revenue, with Australia accounting for approximately 85% of revenue within the region. Anticimex is present in more than 60 locations across Australia and New Zealand. Interestingly, Anticimex is soon expected to take the business public on the Stockholm stock market.
Mergers and acquisitions to take off
As to the future, all three of these global players have growth plans with the mergers and acquisitions (M&A) route the quickest and most selective. Paul Giannamore, managing director of M&A specialist the Potomac Company, estimates that the combined global spend on acquisitions of these three companies in 2019 amounted to US$1,257m with 2020 activity forecasted to exceed this.
As Mr Giannamore explained, “2020 started as a strong year for M&A, then the pandemic hit which brought the market to a standstill… deals on the cusp of being finalised were simply abandoned.
“In March of 2020, I thought the jig was up and this consolidation bubble had finally burst. But in spectacular fashion, the coronavirus pandemic elicited an unimaginable scal and monetary response from governments which has further propped up asset prices. Potomac has the largest sell-side M&A pipeline we’ve ever had and I won’t be surprised to see over US$2b in global pest control transaction volume in 2021.” Good news if you are an owner thinking of selling your business.