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Highlights:
Rentokil Initial maintains full-year guidance despite a profit warning last month, reporting stable revenues in Q3.
Revenues for the three months ending September 30 remained unchanged year-on-year at £1.38 billion, with organic growth improving by 2.6%.
The North American market faced challenges, but lead volumes improved in late September, prompting operational adjustments to drive organic growth.
Pest control services group Rentokil Initial (LSE:RTO) has confirmed its full-year guidance following a profit warning issued last month, as the company reported steady performance in the third quarter. For the three months ending September 30, revenues remained unchanged year-on-year at £1.38 billion. However, when adjusted for constant exchange rates, revenues would have increased by 3.6%.
On an organic basis, the company's top line improved by 2.6%, driven by strong growth in Europe (+4.7%), the UK and Sub-Saharan Africa (+4.2%), as well as Asia and MENAT (+6.5%). This growth offset more modest performance in North America, which saw an increase of only 1.4% following a subdued summer period.
In discussing the North American market, Rentokil Initial acknowledged challenges such as disappointing inbound digital lead flow in July and August. However, the company reported a marked improvement in lead volume during the second half of September. This positive development was somewhat mitigated by a lower sales close rate and a decline in the average dollar value of leads throughout the third quarter.
To address these issues, Rentokil Initial has intensified its initiatives in North America to enhance organic growth and rebalance the cost structure. Chief executive Andy Ransom stated, "In North America, we recognise the business has underperformed, and we are focused on delivering the operational improvements required."
The company indicated that it anticipates organic revenue growth of approximately 1% in North America for the second half of the year. It also reaffirmed its adjusted profit before tax and amortization target of £700 million, representing a decline of £66 million from the previous year. The ongoing focus on operational enhancements and growth strategies is aimed at stabilizing and improving performance across all markets.
