Rentokil Initial NYSE: RTO reported first-quarter group revenue of $1.7 billion, representing organic growth of 3.4% on a constant-currency basis, as the company pointed to continued momentum in North America and steady progress internationally.
Q1 revenue growth led by North America
Chief Financial Officer Paul Edgecliffe-Johnson said the company made “a good start to the year” during what he described as a seasonally quieter first quarter. North America delivered 3.9% organic growth, while the International business generated 2.8% organic growth.
In North America, revenue grew 4.5% to $995 million. Edgecliffe-Johnson highlighted improvements in Pest Control Services, where reported revenue grew 3.5%. Within that, one-off job revenue rose 6.1% and contract revenue increased 3.0%, which he noted was an improvement from the prior quarter’s 2.4% contract growth rate.
Edgecliffe-Johnson said Pest Control Services organic revenue growth was 2.8%, continuing what he called “steady quarter-by-quarter improvements” over the past year. He attributed the progress to ongoing efforts to optimize return on marketing spend, invest behind national and regional brands, and improve sales execution. He also said the pricing environment “remains robust with continued above-inflationary increases.”
He added that U.S. teams worked to recover from January’s extreme weather, saying employees “worked hard in February” and delivered customer service that helped the company recover workdays lost earlier in the quarter.
Business Services outperformance described as atypical
Rentokil’s North America Business Services segment posted organic growth of 12.7% in the quarter. Edgecliffe-Johnson said results benefited from pre-spring demand in product distribution, new customer wins in brand standards, and large contract wins in Lake Management.
When asked whether that pace could continue, Edgecliffe-Johnson said the 12.7% growth was “stronger… than I expected” and that he viewed it as “an aberration rather than the norm.” He said he did not expect Business Services to sustain that level of growth through the year, pointing to unusually strong demand in chemicals and distribution and the impact of specific wins in the quarter.
International results supported by pricing and volume growth
International revenue was $682 million in the first quarter, up 4.1%. Edgecliffe-Johnson said contract revenue grew 5.5%, while one-off job revenue was broadly flat.
Organic growth of 2.8% was supported by “good growth in Europe, Latin America, the U.K., and Sub-Saharan Africa,” which he said benefited from strong pricing and volume growth. That performance was partly offset by a 60-basis-point headwind from Greater Pacific due to tough comparatives in job-based rural and “track-based” business, as well as disruption in Middle East North Africa related to the Middle East conflict.
Pricing, volumes, and retention: management commentary
During the Q&A, Edgecliffe-Johnson described the recent improvement in North America pest control as the result of initiatives over the past 12 months, including efforts to increase lead volume and quality, improve conversion, and raise marketing ROI. He said, however, that volumes remain negative and that current growth is being driven primarily by pricing.
“We are improving our pricing capabilities, and that’s the driver of all the growth that we’re seeing at the moment,” he said, while noting the company’s longer-term aim is to improve volume performance by keeping more customers and increasing retention.
On lead generation, Edgecliffe-Johnson declined to provide quarterly figures, saying the company would continue to provide that detail at interim and full-year results. He said the company remained pleased with progress and that “nothing has changed” since prior commentary.
Edgecliffe-Johnson also addressed questions about inflation and fuel prices. He said fuel represents about 2% of the company’s cost base and noted the company has “quite a few levers to pull” to improve efficiency, including offshoring and restructuring initiatives. On potential supply chain stress tied to the Middle East conflict, he said the company holds “quite a lot of inventory in the supply chain” and that most supplies are not routed through the Strait of Hormuz, adding that it was “not something that currently is a concern.”
On retention metrics, Edgecliffe-Johnson said colleague retention was 82.6%, up 40 basis points from the end of December, and that customer retention was broadly flat year-over-year at 80.4%. He said customer retention was essentially stable on a 12-month rolling basis and noted that deliberate rationalization of less profitable commercial customers created a headwind, rather than changes on the residential side.
Integration update and leadership changes
Asked about integration progress, Edgecliffe-Johnson said there was “no change” from prior commentary. He pointed to the rollout of a “Branch 360 data layer” designed to help branch managers see data more simply, calling feedback “very well received.” He added that the company’s focus is now on business performance and suggested the company aims to “put the integration chapter behind us.”
Edgecliffe-Johnson also reiterated that Rentokil expects full-year performance “in line with market expectations.”
On leadership, he welcomed Thérèse Esperdy as the company’s new chair, effective Sept. 1, and noted that Mike Duffy joined as the new CEO last month. Edgecliffe-Johnson said Duffy will lead the half-year results presentation in July, when the company plans to provide a more detailed update on execution against the plan outlined in March.
Closing the call, Edgecliffe-Johnson said his ambition was for Rentokil to be “a nice, safe, boring stock,” adding that the quarter’s update reflected the company doing “what we said we’re gonna do.”
About Rentokil Initial NYSE: RTO
Rentokil Initial PLC is a global business services company specializing in pest control, hygiene and workwear services. Headquartered in Crawley, West Sussex, United Kingdom, the company delivers outsourced solutions designed to protect people, preserve assets and enhance workplaces for both commercial and residential customers.
Under the Rentokil Pest Control brand, the company offers services ranging from routine inspections and treatment of insects, rodents and birds to specialised programmes for food manufacturing and healthcare environments.
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