Rentokil Initial plc

And welcome to the Rent-A-Kill Q3 Trading Update call. My name is Rika and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing star followed by number one on your telephone keypad. If you change your mind, please press star followed by the number two. Otherwise, you do have the option to submit a question via the Q&A tab above the slide on the webcast. Thank you. I will now hand you over to your host, Andy Ransom, Chief Executive Officer at Rent-A-Kill to begin. So please go ahead, Andy.

Thank you very much. Morning, everyone. And before we begin, as always, can I just draw your attention to the usual cautionary statement contained in our trading update this morning, as it also applies to this call. I'm going to start off with some brief opening remarks, and then Paul and I will be pleased to take any questions. We're encouraged by our performance in the third quarter as the overall positive trends that we described at our interim results have continued into the second half of the year and leave us on track to deliver 2025 results in line with market expectations. For the three months to the 30th of September, group revenue was $1.8 billion, representing year-on-year growth of 4.6%. Organic revenue grew 3.4%, with an improvement in North America to 3.4%, and organic growth across our international businesses of 3.3%. Looking at our performance in North America in more detail, pest control services organic growth was 1.8%, which compares favourably to the 0.3% seen in the second quarter. North America Business Services organic revenue growth was particularly strong in the third quarter, up 11.9%. Back in March, we discussed how we were evolving our North America strategy to drive enhanced lead generation and a lower cost per lead. This was a comprehensive overhaul of how we were growing the business, informed by our learnings in 2024. And this revised strategy included raising the bar on improving colleague retention and driving up customer retention, Enhancing our digital marketing to realize the benefits from better organic lead generation and higher quality, lower cost paid for leads. An evolved satellite branch strategy to improve customer proximity and local search visibility. And moving our sales operating model back under the branch manager's to drive more accountability and visibility of results. At the half year stage, this plan showed early signs of yielding results with the improvements that we saw in lead flow in June. And it's pleasing to see that this improved performance has continued. Following the lead flow growth in June, we delivered year on year growth in lead flow throughout the third quarter as we focused on improving organic leads and on better targeted lower cost paid leads. We also now reported 11 consecutive quarters of improving colleague retention. And importantly, our customer retention rate has nudged up again from the half year stage to 80.9%, where investment in the customer sales team in particular is having an impact. The rollout of satellite branches is on track with 139 in operation, delivering improved lead generation through a stronger local presence together with higher volume, higher rated customer reviews. And we continue to target opening 150 satellite branches this year. Finally, the door-to-door pilot continued in 25 sales territories and we're encouraged by the results and we're planning an expansion of this pilot in 2026. Standing back, you'll remember that we talked about our core challenge and core opportunity to sustainably improve our North American organic revenue growth, being shifting the contract portfolio into consistent and healthy growth through customer retention, through pricing and through winning new customer contracts. So we are pleased to see that improvement in customer retention. We also continue to deliver on pricing discipline, achieving price increases a little above the rate of inflation. And combined with the higher volume of new leads, we did see an improvement in contract portfolio net gain performance during the quarter. For a business driving value through a contract portfolio, it's this quarterly sequential improvement which will over time translate into stronger top line growth. The focus now is about taking the learnings from these actions and planning for 2026 as we hit Q4, which is a seasonally quieter quarter. We've also noted for Q4 that 2024 benefited from one-off emergency mosquito control work. driven by an exceptional hurricane season last year. And this is not currently expected to repeat, impacting Q4 organic growth by about 60 basis points, albeit in dollar terms, it's actually very small in the context of the US business as a whole. Turning now to our international businesses, which obviously we now report excluding France Workwear, with the sale completed at the end of the third quarter. International revenue grew by 4.6% with organic growth of 3.3%. Europe sustained strong growth from the first half into the third quarter, particularly in the Southern European markets of Spain, Portugal, and Greece. The UK also saw growth improve with continued strong performance in our core pest control and plants businesses, and then improved performance in the lower growth property services business. Growth in the Pacific region though remains below the average for international. Good growth in core pest control and ambience was offset by adverse weather impacts on our rural and tract spray businesses. In terms of category performance, pest control organic revenue growth for the group was 3.4% driven by good momentum in North America. Hygiene and wellbeing grew by 3% organically an improvement from the 0.9% in the first half as market conditions improved in the Pacific and in the UK and sub-Saharan Africa regions, which returned to growth in the quarter. On M&A, we completed three deals in the quarter, taking the total number of deals completed this year to 21 and representing annualized revenue in the year before acquisition of around $39 million. We were pleased to complete the France workwear sale with a receipt of $397 million of initial cash proceeds. As a result of ongoing cash generation and the disposal proceeds, net debt at the end of the quarter was $3.9 billion. Looking forward, our outlook for the remainder of the year remains unchanged. Current trading is in line with our expectations and we expect to deliver financial results for the full year in line with market expectations. Beyond 2025, our cost efficiency initiatives remain on track to deliver the $100 million cost reduction by the end of 2026 and to achieve an operating margin in North America above 20% post-2026. In summary, the third quarter demonstrates a continuation of the positive momentum we began to see in the first half of the year. The international business is performing solidly and there are encouraging but still early signs that the revised strategy we're implementing to improve sales execution and to evolve our digital marketing capabilities are beginning to have a positive impact in North America. So with that, let me hand back to the operator to manage the Q&A. Thank you.

Thank you, Andy. We will now begin the question and answer session. And if you would like to ask a question and you have dialed it on the phone line, please press star followed by number one on your telephone keypad now. If you change your mind, please press star followed by the number two to remove yourself from the queue. And for those of you who have joined on the webcast today, can register a written question in the Q&A tab above the slides. The first question we have comes from Annelies Vermaelen with Morgan Stanley. You may proceed with your question.