30th Jul 2026 10:11
(Alliance News) - Rentokil Initial PLC on Thursday said it plans to invest more in its North American business, and as a result "retire" a margin target, as performance in the unit fell short of expectations.
In response, shares in the Crawley, England-based pest control specialist sunk 16% to 370.60 pence each in London on Thursday, by far the worst performing stock on the FTSE 100 which was up 0.6%.
"Achieving our potential will require disciplined reinvestment primarily back into the North America business which we will fully self-fund through cost savings," said Chief Executive Mike Duffy, who took charge in March.
Organic revenue growth in the North America Pest Control Services business slowed to 2.4% in the second quarter from 2.8% in the first three months of 2026, well below the 3.0% mid-point of the 2.6% to 3.4% guidance range.
Residential revenue grew solidly through the half, but saw some weakness towards the bank end of the quarter. CEO Duffy said the weakness in residential has continued into July, although he still expects Rentokil to deliver 2026 profit in line with expectations.
For the group as a whole, revenue rose 6.7% to USD3.59 billion in the first half of 2026 from USD3.36 billion a year ago, or by 4.5% at constant currency.
Organic growth was 3.6% for the first half and improved to 3.8% in the second quarter from 3.4% in the first, despite the North American pest control shortfall.
This reflected an improved performance in its International business which reported organic growth of 3.5% in the first half, including an acceleration to 4.2% in the second quarter.
Basic earnings per share improved 8.3% to 13.50 US cents from 12.46c. The dividend was hiked 8.0% to 4.48c per share from 4.15c.
Group adjusted operating margin ticked up to 15.5% from 15.2% a year ago.
But CEO Duffy said the firm is "retiring" its North America margin target of 20% in 2027 to reflect the increased investment.
Duffy outlined three key priorities to "unlock" better performance at Rentokil, a focus on the customer, sales and operational excellence, and business simplification.
He called Rentokil an "overly complex" organisation offering a "clear opportunity to simplify the business." He sees further "significant" opportunities to optimise the cost base, applying initiatives in North America globally.
The company also flagged an additional provision for termite damage claims of USD47 million with the current estimate for a 2026 cash outflow of USD115 million to USD125 million.
By Jeremy Cutler, Alliance News reporter
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