Rentokil Initial Plc (LON:RTO) has announced its 2024 Preliminary Results.
| Financial Results | Adjusted Results (AER) | Statutory Results (AER) | |||||
| £m | 2024 £m | 2023 £m | Change % | 2024 £m | 2023 £m | Change % | |
| Revenue | 5,436 | 5,375 | 1.1% | 5,436 | 5,375 | 1.1% | |
| EBITDA | 1,177 | 1,228 | (4.2%) | ||||
| Operating Profit | 834 | 898 | (7.0%) | 549 | 625 | (12.1%) | |
| Operating Profit margin | 15.3% | 16.7% | (1.4ppt) | 10.1% | 11.6% | (1.5ppt) | |
| Profit before Tax | 703 | 766 | (8.1%) | 405 | 493 | (17.9%) | |
| Free Cash Flow | 410 | 500 | (18.0%) | ||||
| Basic EPS | 21.25p | 23.19p | (8.4%) | 12.17p | 15.14p | (19.6%) | |
| Diluted EPS | 21.19p | 23.08p | (8.2%) | 12.14p | 15.07p | (19.5%) | |
| Dividend Per Share | 9.09p | 8.68p | 4.7% | 9.09p | 8.68p | 4.7% | |
| Net debt | (3,208) | (3,146) | (2.0%) | (3,208) | (3,146) | (2.0%) | |
| Adjusted Results (CER) | |||||||
| Revenue | 5,587 | 5,375 | 3.9% | ||||
| Operating Profit | 860 | 898 | (4.2%) | ||||
| Operating Profit margin | 15.4% | 16.7% | (1.3ppt) | ||||
| Profit before Tax | 731 | 766 | (4.6%) | ||||
Andy Ransom, Chief Executive of Rentokil Initial plc, said:
“2024 was a challenging year for the Group, with lower profits and margins, delivered in line with our trading update in September. Good growth in the International business (Organic Revenue growth 4.7%) was held back by the performance in North America (Organic Revenue growth 1.5%).
“The Terminix integration is making good progress, with multiple important milestones achieved, but executing it has clearly impacted our North American business performance.
“The integration remains on track to be completed by the end of 2026. Colleague and Customer retention across our NA business saw encouraging improvements during 2024, and has also been trending positively at the newly integrated branches.
“Our sales and marketing initiatives to drive organic growth require further refinement to deliver the required improvements in overall lead generation and sales conversion, which will be a key focus in 2025. To address this, our revised branding strategy will see the national focus for the Rentokil and Terminix brands supplemented by additional prominence for our nine main regional brands. Alongside this, we will use insights from our promising satellite branch pilot to optimise the branch network size. We now expect that the end state branch network (including satellites) is likely to exceed 500 locations. Post integration we expect to generate both market beating growth and considerable cost efficiencies, with North American margins exceeding 20%.
“We continue to benefit from our diversified, global footprint and resilient business model, in addition to our sustained focus on customer service and investment in people, technology and innovation. Present in c.90 countries and with industry leading technology, we are a global leader in pest control and the largest pest control operator in the US, which has demonstrated attractive and sustained structural growth over time. With our enhanced scale, brand portfolio and service offering, we remain confident in our ability post the integration of Terminix to deliver sustained growth.
“We expect to achieve 2025 financial performance in line with market expectations.”
2024 Financial Highlights (Unless otherwise stated, all financials are presented at constant exchange rates).
| ● | Group Organic Revenue1 Growth of 2.8%, with the International business up 4.7%. |
| ● | North America Organic Revenue growth of 1.5%, with 1.5% in Pest Control. |
| ● | Group Adjusted Operating Margin of 15.4%2, impacted by North America margin reduction to 17.1%. |
| ● | Group Adjusted PBT at AER of £703m, in line with revised guidance. |
| ● | Net debt to EBITDA at 2.9x as at 31 December 2024. |
| ● | Recommended final dividend 5.93p; total FY 24 dividend of 9.09p per share, c.5% year on year increase. |
2024 Strategic Highlights
| ● | 2024 delivered continued progress with Terminix Integration | |
| – | First Terminix branch systems integration completed, covering 58 branches with Revenues of $373m and c.1,000 service technicians. Over 250 branches in North America now operate unified finance, HR, payroll, procurement, and sales commission systems. | |
| ● | 2024 North America RIGHT WAY 2 Growth Plan progress | |
| – | Colleague Retention +4.2% vs FY23 to 79.4%. | |
| – | Customer Retention at over 81% in Q4. FY24: 80.1% (FY23: 79.5%). | |
| – | Work continues on improving sales and marketing execution; leads and sales conversion still lagging. | |
| – | First satellite branches opened in Q4: testing more local locations to drive greater customer proximity. | |
| ● | Integration strategy review complete. Integration remains on track to complete by end of 2026 | |
| – | Encouraging response from colleagues and customers in initial fully migrated branches to pay plan and rerouting pilot. At these locations, customer retention increasing on pre-migration levels, while colleague retention has remained in line with pre-migration levels. | |
| – | Branch integration scheduled to restart in early H2; c.100% branches complete by end 2026. | |
| – | Revised brand strategy: focus on 9 regional brands, plus national Rentokil and Terminix brands. | |
| – | Revised branch strategy: end state branch network now envisaged of over 500, including satellites. | |
| – | Significant 2024 additional investments to drive revenue – brand awareness, lead generation, sales infrastructure – offer partial opportunity for redeployment, allowing 2025 revised strategies to be funded. | |
| – | Post 2026, completion of integration is expected to deliver $100m cost reduction versus 2024 levels of cost, with branch right-sizing and improved route density significantly improving technician efficiency. | |
| – | Interrelationship of growth investments, inflationary increases and cost synergies make net synergies too subjective to disaggregate and report on. From 2027, completion of integration activities expected to deliver North American margins exceeding 20% from faster organic growth and reduced costs. Previous FY 26 Group margin target withdrawn. | |
| ● | Continued momentum in bolt on M&A. 36 businesses with revenues of c.£140m in the year prior to purchase acquired for £182m; strong pipeline of opportunities for attractive bolt-on acquisitions being worked on. | |
2025 Outlook and Q1 current trading
| ● | Despite Q1 year-to-date growth in North America having been held back principally as a result of continued weak lead generation, we expect to achieve FY 2025 results in line with market expectations. |
| ● | 2025 growth initiatives are fully funded within the inflation adjusted 2024 cost base, with reinvestments targeted to higher return activities including the revised brand and branch strategy. |
| ● | FY 2025 Adjusted free cash flow conversion forecast at 80%, with modest balance sheet deleveraging. |
| ● | FX movements are expected to have a headwind impact of $10m-$20m in 2025; US dollar reporting to commence in 2025. |
Re-presentation of financial information in US dollars
As announced in July 2024, the Group will change its presentation currency to US dollars for reporting periods starting from 1 January 2025, as we believe that this will provide better alignment of the reporting of performance with business exposures.
For comparative purposes, the Group has today published historical financial information re-presented in US dollars on its IR website (www.rentokil-initial.com/investors). The selected unaudited information included in the document has been derived from the consolidated financial statements and accounting records of the Group for each of the years ended 31 December 2022, 31 December 2023 and 31 December 2024, and the six months ended 30 June 2024.
A management presentation and Q&A for investors and analysts will be held today, 6 March 2025 from 9.15am at the Leonardo Royal London St Paul’s Hotel, 10 Godliman Street, London EC4V 5AJ. The event will also be available via a live webcast. Dial-in details will be provided on the website (https://www.rentokil-initial.com/investors.aspx). A recording will be made available following the conclusion of the presentation.
Notes
1 Organic Revenue growth represents the growth in Revenue excluding the effect of businesses acquired during the year. Acquired businesses are included in organic measures in the year following acquisition, and the comparative period is adjusted to include an estimated full year performance for growth calculations (pro forma revenue)
2 Excludes costs to achieve which are one-off by nature
AER – actual exchange rates; CER – constant 2023 exchange rates
