Rentokil Initial plc

Half year revenue was $3.589 billion, up 4.5%, with organic revenue growth of 3.6%. Operating profit was $556 million, up 6.6%, and operating margin was 15.5%, up 30 basis points. Earnings per share grew 8.3%; free cash flow conversion was 96%, versus 93% last year. North America revenue rose 4.2% to $2.197 billion, operating profit increased 10.2% to $393 million, and margin improved to 17.9%. International revenue increased 5.0% to $1.392 billion, operating profit rose 4.3% to $266 million, and margin was 19.1%. For the full year, management said it remains on track for greater than 80% cash conversion and expects full year profit in line with current market expectations, with no change to outlook. Central costs were up 16.9% and are expected to moderate in the second half, with full-year growth in the low double digits. The company increased the interim dividend by 8%.

Michael Duffy framed the quarter as proof that the business has a strong “right to win,” but said the company is too complex and not yet consistently organized to convert that into full organic growth. He emphasized three priorities: customer focus, sales and operational excellence, and business simplification, and said the goal is to make the frontline easier to support and enable more consistent execution. His tone was confident but candid, especially on North America, where he said the team needs to shift from triaging integration issues to building a more sustainable growth plan.

Paul Edgecliffe-Johnson highlighted the hard numbers: revenue of $3.589 billion, operating profit of $556 million, 15.5% margin, EPS growth of 8.3%, and free cash flow conversion of 96%. In North America, margin reached 17.9%, helped by over 1,100 roles moved offshore and over 500 roles eliminated through process redesign and automation; those actions produced $45 million of gross savings in the half and $28 million net after reinvestment, with a gross savings run rate of around $90 million annualized. He also noted leverage at 2.4x, net debt down $75 million, one-off and adjusting items cash impact of $70 million in the half, full-year guidance of $110 million to $120 million for those items, reduced full-year M&A spend to $120 million, and increased termite provision cash outflow guidance to $115 million to $125 million.

Analysts focused heavily on the U.S. restructuring plan, including how long it may take and whether the North America commercial business was mishandled during integration. Management said the turnaround could take about 2 years in parts of the business, but progress should be steady along the way, and they stressed that residential and commercial need separate focus, systems and accountability. Questions also pushed on the weaker residential lead flow in late Q2 and July; management attributed that mostly to softer termite leads and some housing-market pressure in certain geographies, while saying there are still internal fixes to improve conversion and onboarding. On M&A and simplification, management said lower M&A spend reflects being more selective on targets and IRR, not a cash constraint, and that any portfolio exits would be selectively disclosed if they occur.