Rentokil Initial NYSE: RTO reported higher first-half revenue, profit and free cash flow, while outlining a new operational plan centered on customer service, sales execution and business simplification as it seeks to improve growth in North America and across its international operations.
For the six months ended June 30, revenue increased 4.5% to $3.59 billion, including 3.6% organic growth on a constant-currency basis. Adjusted operating profit rose 6.6% to $556 million, lifting the operating margin by 30 basis points to 15.5%, Chief Financial Officer Paul Edgecliffe-Johnson said.
Earnings per share increased 8.3%, while free cash flow grew 12.8% and converted at 96% of adjusted operating profit. The company said it remains on track to achieve full-year cash conversion of more than 80%. Net leverage declined to 2.4 times, within its target range of two to 2.5 times and down from 2.8 times a year earlier.
Rentokil increased its interim dividend by 8% and maintained its outlook for full-year profit to be in line with current market expectations.
North America posts profit improvement, but commercial growth lags
North American revenue rose 4.2% to $2.20 billion, with organic revenue growth of 3.7%. Pest Control Services grew organically by 2.6%, while Business Services increased 10.6%. Operating profit in the region rose 10.2% to $393 million, and the operating margin improved by 1 percentage point to 17.9%.
Edgecliffe-Johnson said the company’s residential pest-control business performed well, supported by pricing, higher residential leads and improved customer retention. Residential leads increased 6% during the first half, with regional brands contributing strongly. Retention improved as auto-pay adoption rose and the company’s customer-saves team retained roughly one in three customer-value cases it handled.
However, the company said residential lead flow weakened toward the end of the second quarter and into July, primarily due to softer termite leads. Management said the softness was more pronounced in areas where housing markets have been under pressure, particularly in the Northeast.
Commercial pest-control growth was slower. While commercial leads rose 8%, conversion and retention declined year over year, partly due to increased losses among small and mid-sized accounts and the rationalization of parts of the legacy Terminix commercial customer base.
Chief Executive Mike said the company will separate its U.S. residential and commercial businesses, creating what he described as “single-threaded ownership and accountability” for each operation. He said the businesses have different customer needs, sales approaches and operational requirements, and that commercial operations need the same focus and resources that have been applied to residential operations over the past 18 months.
Cost savings fund further investment
Rentokil’s North American Pest Control Services margin approached 20% in the first half, up 1.4 percentage points since 2024. The improvement was supported by a transformation program that moved more than 1,100 roles to lower-cost locations, mainly in call centers and support functions, and eliminated more than 500 positions through redesigned processes and automation.
Those initiatives generated $45 million in gross savings during the first half, or $28 million after reinvestment. The company exited the period with an annualized gross-savings run rate of about $90 million and said it remains on track to meet its existing North American cost-savings objective.
Management said it sees additional efficiency opportunities across the group, including in international markets. Rentokil has begun outsourcing activity in the Pacific region and expects savings initiatives to provide funding for investment in U.S. growth from 2027 onward.
As a result of its intention to reinvest more heavily in North America, Rentokil withdrew its previous 2027 target for a 20% North American margin. Edgecliffe-Johnson said the target no longer aligned with the company’s strategy, though he emphasized that management still expects margins to improve over time through cost efficiencies and operating leverage.
International pest-control growth accelerates
International revenue increased 5% to $1.39 billion, with 3.5% organic growth in the first half. Organic growth accelerated to 4.2% in the second quarter, while international pest control grew 5.4% organically, compared with 2.8% in the first quarter.
Excluding the Rural and Track Spray businesses in the Pacific, which faced strong comparisons, international pest control grew 5.8% in the second quarter and 4.9% for the first half. Hygiene & Wellbeing organic growth was 2.6%.
International operating profit rose 4.3% to $266 million, producing a 19.1% margin. The company said performance was affected by tougher trading conditions in U.K. property services, while customer and colleague retention continued to improve.
CEO outlines simplification and service plan
Mike, who joined the company four months ago, said his field visits and business reviews have reinforced his view that Rentokil has strong brands, global reach, experienced frontline employees and differentiated technologies. But he said the company lacks consistent processes and standardization across its decentralized operations.
He identified three priorities:
- Customer focus: Standardize procedures, improve training and remove obstacles for frontline employees.
- Sales and operational excellence: Improve lead and pipeline management, account planning, sales tools and branch operating models.
- Business simplification: Reduce complexity across markets, service lines, systems and processes while focusing resources on core growth areas.
The company’s top 20 markets represented 93% of first-half profit. Management said it will review the full portfolio and operating model, assessing opportunities to focus on markets and categories where it can achieve industry-leading margins and returns. It did not announce specific disposals or market exits.
Mike said a recent process-mapping exercise at a U.S. branch identified 151 opportunities for improvement from lead generation through customer servicing. Immediate actions include adding lead coordinators to address backlogs and streamlining field-sales entry processes. He said longer-term operational changes could take up to two years, but the company expects to demonstrate progress along the way.
Rentokil also highlighted opportunities for PestConnect, its connected pest-control technology. Management said a U.S. pilot with a top-five grocery chain led to a broader deployment across that customer’s network and displaced a competitor at 40 locations that Rentokil had lost roughly a year earlier.
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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