Rentokil Initial highlights 'challenging' year as profits fall

(Sharecast News) - Rentokil Initial reported a drop in full-year profit on Thursday, citing a "challenging" year and a weaker performance in North America. Full-year group adjusted pre-tax profit fell 8.1% to £703m on revenue of £5.4bn, up 1.1% on the previous year.

Adjusted operating profit fell 4.2% during the year to £860m, impacted by the company's performance in North America. Rentokil said that as stated in its trading update in September, in North America there was a drop-through impact on profit from weaker-than-expected organic revenue growth and from significant in-year cost investments to drive revenue.

This resulted in a 130 basis points drop year-on-year in group adjusted operating margin to 15.4%.

Chief executive Andy Ransom said: "2024 was a challenging year for the group, with lower profits and margins, delivered in line with our trading update in September. Good growth in the international business (organic revenue growth 4.7%) was held back by the performance in North America (organic revenue growth 1.5%).

"Our sales and marketing initiatives to drive organic growth require further refinement to deliver the required improvements in overall lead generation and sales conversion, which will be a key focus in 2025. To address this, our revised branding strategy will see the national focus for the Rentokil and Terminix brands supplemented by additional prominence for our nine main regional brands.

"Alongside this, we will use insights from our promising satellite branch pilot to optimise the branch network size. We now expect that the end state branch network (including satellites) is likely to exceed 500 locations. Post integration we expect to generate both market beating growth and considerable cost efficiencies, with North American margins exceeding 20%."

Rentokil said it was still on track to achieve FY 2025 results in line with market expectations, despite first-quarter year-to-date growth in North America having been held back, mainly due to continued weak lead generation.