Rentokil backs FY outlook, hails improving performance in NA

(Sharecast News) - Rentokil Initial backed its full-year outlook on Thursday as it hailed a "solid" first half, in line with expectations, and an improving performance in North America. In the six months to 30 June, adjusted pre-tax profit fell 7.8% to $418m and adjusted operating profit declined 4.5% from the same period a year earlier to $511m. This was driven mainly by reduced profitability in North America, where adjusted operating profit dropped 7.3% to $356m.

Group revenue rose 3.1% to $3.36bn. Rentokil said group organic revenue grew 1.6%. Revenue growth in North America was 2%, while the international business performed well, with revenue up 5.1% in the first half and growth across the region.

Chief executive Andy Ransom said: "Our sales and marketing initiatives in North America are starting to have an impact, with organic revenue growth of 1.4% in the second quarter up from 0.7% in the first quarter. We are refocusing our marketing budget towards driving organic lead flow and we are seeing encouraging results, including from our satellite branches, where we now have 100 in operation.

"While it is still early, we are encouraged with our progress, with residential and termite lead flow growing in June for the first time this year, up 6.6%. We are also encouraged by the early results that we are seeing from the door to door pilot that we started in the second quarter."

Random said current trading is in line with expectations and the company's outlook for the remainder of the year remains unchanged.

"We expect to deliver FY25 results in line with market expectations," he said.

At 1158 BST, the shares were 10.7% at 383.84p.

Steve Clayton, head of equity funds at Hargreaves Lansdown, said: "Rentokil Initial investors heaved a sigh of relief this morning when the group announced reassuring trading for the half year and reiterated their expectations for the remainder of the year.

"Having fallen from around the 600p level two years ago, they have been trading around the 350p level in recent weeks, so Rentokil Investors could have been forgiven for feeling like the rats were getting the better treatment.

"Today's news that there are signs of improvement in trading at the group's key US Pest division was enough to rally spirits, with investors pushing the stock as much as 12% higher."