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Highlights

  • Rentokil achieved a 4.0% YoY revenue growth in H1FY24, reaching GBP 2,756 million
  • Rentokil's net margin of 7.2% YoY in H1FY24 outperformed the industry median of 3.3%
  • The company forecasts the North American segment’s organic revenue to grow within the 2-4% range in H2FY24

Rentokil Initial PLC (LSE:RTO) is a UK-based company providing hygiene, pest control, and wellbeing services. It operates globally across the UK, Europe, North America, Asia, the Pacific, and other regions.

H1FY24 Financial Update

In the first half of the financial year 2024 (H1FY24), the group achieved a 4.0% YoY increase in revenue, reaching GBP 2,756 million, with organic revenue growth of 2.8% YoY. North America segment grew by 1.1% YoY, while Europe saw a 7.0% rise. Pest Control revenue rose 2.8% YoY, and Hygiene & Wellbeing grew by 9.3 YoY %. The French workwear business made a huge contribution with a 7.5% YoY revenue increase.

Adjusted operating profit for the period reached GBP 445 million, a 1.8% improvement compared to H1FY23. The growth was driven by topline performance and synergies from Terminix. The Adjusted operating margin increased slightly to 16.5%, while statutory operating profit grew 5.6% to GBP 321 million.

Additionally, in H1FY24, the company achieved a net margin of 7.2%, significantly outperforming the industry median of 3.3%, while its ROE of 4.7% slightly surpassed the 4.55% recorded in the prior corresponding period.

Recent Business Update

As per the company’s Q4FY24 trading update, North America’s organic revenue growth accelerated to 2.3%, up from 1.4% in Q3, driven by a 1.5% increase in Pest Control Services, supported by stronger inbound leads.

The group achieved an overall organic revenue growth of 3.0%. Full-year 2024 financial metrics were in line with the company’s guidance, and integration efforts proceeded as planned. Additionally, the company announced that North America CEO Brad Paulsen will step down, with a transition period lasting until April to ensure a smooth handover.

Company Outlook

The group is optimistic about the positive momentum in its U.S. pest control business during H1 and expects further improvement in H2. North America’s organic revenue is projected to grow within the 2-4% range, leaning toward the lower end.

A net revision of approximately USD 15 million (GBP 12 million) is expected in group adjusted operating profit, due to additional H2 growth investment. The adjusted operating margin is expected to be a little higher than FY23. Adjusted free cash flow conversion should remain between 80-90%, with modest balance sheet deleveraging expected.

Stock Performance

The stock has seen an increase of approximately 6.35% over the past month, but it has declined by about 14.80% over the last six months. Its 52-week low and high are GBX 336.30 and GBX 517.60, respectively, with the current trading price falling below the average of these 52-week high and low values. As of 11 February 2025, Rentokil Initial's last trading price was GBX 401.70.

Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference data for all price data, currency, technical indicators, support, and resistance levels is 11 February 2025. The reference data in this report has been partly sourced from EODHD/Others.