Key Takeaways:
Rentokil Initial PLC shares plunged 17% to 368 pence after the pest-control company abandoned a key North America margin target amid weakening residential demand.
"We are not yet delivering on our growth potential, leaving significant opportunities to improve," Mike Duffy, chief executive officer at Rentokil, said.
First-half revenue rose 6.7% to $3.6 billion, with organic growth of 3.6%. Adjusted operating profit increased 6.6% at constant currencies to $556 million, while the margin improved 0.3 percentage points to 15.5%.
The company retired its target for North America's operating margin to reach 20% in 2027, as Duffy prioritizes investment and volume growth over short-term margin expansion. Rentokil maintained its outlook for 2026 profit to meet market expectations.
North American organic revenue growth slowed to 3.6% in the second quarter from 3.9% in the first, with core pest-control services easing to 2.4%. Residential customer leads softened toward the end of the quarter and into July, the company said.
Duffy, who joined four months ago, plans to simplify operations across 90 countries, standardize the branch network and reinvest cost savings in North America.
Free cash flow rose 13% to $318 million, helping net debt fall to $3.6 billion from $4.2 billion. Rentokil recorded a further $47 million provision for termite damage claims, bringing its 2026 cash outflow estimate to $115 million to $125 million. The interim dividend increased 8% to 4.48 cents a share.
The 17% decline signals a severe loss of investor confidence in Rentokil's North American growth strategy. Investors will watch the company's third-quarter trading update for signs of stabilization in residential demand and progress on Duffy's operational overhaul.
This article is for informational purposes only and does not constitute investment advice.
