Rentokil Initial reports more stable North America performance

18th Apr 2024 07:10

(Sharecast News) - Rentokil Initial reported revenue of £1.27bn in a first quarter update on Thursday, making for a 0.9% increase at actual exchange rates, while at constant exchange rates, revenue advanced 4.9% to £1.29b.

The FTSE 100 company attributed 3.1% of that to organic revenue growth, driven by continued pricing momentum.

Notably, North America's growth performance had stabilised, with organic revenue up 1.5%.

Early initiatives of its 'RIGHT WAY 2' growth plan had been initiated, contributing to that growth.

In pest control, both overall and services for commercial, residential, and termite customers saw organic revenue increases of 1.5% and 1.0%, respectively.

Key performance indicators such as inbound digital lead flow and technician sales leads participation rates showed an improvement, with lead quality positively impacting sales conversion and return on marketing spend.

Customer retention remained stable at 79.5%, with successful pricing activities passing cost inflation to customers.

Additionally, Rentokil said its colleague retention in North America increased to 76.7%, with significant improvements in sales colleague roles.

A new compensation plan was launched to support continued improvement in sales colleague retention.

The group said its momentum extended beyond North America, with organic revenue growth sustained across all other regions.

Europe including Latin America saw growth of 6.2%, the UK and sub-Saharan Africa of 4.1%, Asia, the Middle East and North Africa of 4.3%, and the Pacific region of 7.3%.

Organic revenue growth was also seen across all categories, with pest control up 2.7%, hygiene and wellbeing by 3.8%, and France workwear by 7.7%.

In terms of integration, the Terminix integration plan had progressed, including completing corporate entity mergers and implementing new combined systems, facilitating integrated performance management.

Additionally, Rentokil said its bolt-on merger and acquisition programme continued to create value with eight deals in the period, contributing annuali[sed revenue of £45m, including the acquisition of HiCare Services, the second-largest pest control company in India.

Looking ahead, the group said it remained on track to meet expectations for the full 2024 financial year, including 2% to 4% organic revenue growth in North America, accompanied by modest margin progression, weighted towards the second half.

"We have made a positive overall start to 2024," said chief executive officer Andy Ransom.

"The group has performed well and our 'RIGHT WAY 2' plan has delivered a stabilising performance in North America."

Ransom said that with the key trading period for the business ahead, the board remained confident in delivering on its guidance of 2% to 4% organic revenue growth in the region.

"As the year proceeds, we look forward to continued progress, driven by our focus on North America growth and the Terminix integration plan, which is in the advanced stages of preparation for the first full branch integrations commencing mid-year."

At 0807 BST, shares in Rentokil Initial were down 3.33% at 432p.

Reporting by Josh White for Sharecast.com.