Rentokil Initial (LSE:RTO), the pest control and hygiene services group, reported organic revenue growth of 3.6% for the six months to 30 June, with the pace accelerating to 3.8% in the second quarter.
Adjusted operating profit rose 6.6%, helped by 10.2% growth in North America, lifting the group's adjusted operating margin by 0.3 percentage points to 15.5%.
Free cash flow reached $318m, up 12.8%, with conversion of 96%, keeping the company on track for its full-year guidance of above 80%.
Net debt to adjusted EBITDA fell to 2.4 times, inside the company's 2 to 2.5 times target range for the first time since its Terminix acquisition. The board raised the interim dividend by 8% to 4.48 cents per share.
North America pest control revenue grew 2.6% in the half, with solid residential growth offset by slower commercial performance, particularly in national accounts, while business services revenue jumped 10.6% on seasonal demand and new brand-standards wins.
The company took an additional $47m provision for termite damage claims, lifting the closing provision to $392m, and estimates 2026 cash outflow on claims of $115m to $125m.
Chief executive Mike Duffy, who joined four months ago, said the group has "a strong right to win" but is "not yet delivering on our growth potential", pointing to customer focus, operational standardisation and business simplification as priorities.
Rentokil is retiring its previous target of a 20% North America margin by 2027, choosing instead to prioritise volume growth, funded through cost savings including a North America efficiency programme now running at an annualised $90m gross savings rate.
The company flagged "some weakness" in North America residential lead flow toward the end of the second quarter and into July, but said it still expects full-year profit in line with current market expectations.
Rentokil will set out more detailed plans at its full-year results in February 2027.
News Intelligence what this means for the company
Rentokil reported solid first-half results—3.6% organic revenue growth and 6.6% adjusted operating profit growth—and maintained full-year guidance despite flagging softer North America residential lead flow toward the end of Q2 and into July. New CEO Mike Duffy is pivoting strategy away from a 20% North America margin target by 2027 in favour of volume growth funded by a $90m annualised efficiency programme, signalling a reset of near-term expectations rather than a crisis.
The company's balance sheet has strengthened—net debt to adjusted EBITDA fell to 2.4x, inside its 2–2.5x target for the first time since the Terminix acquisition—and cash conversion remains robust at 96%. However, the lead flow weakness and strategic pivot away from margin expansion targets suggest growth headwinds in North America, Rentokil's largest profit driver, are real enough to warrant a repricing of near-term earnings momentum.
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