ii view: Rentokil speeds up US growth

First-quarter trading update to 31 March

• Total revenue up 4.3% to £1.68 billion
• Group-wide organic revenues up 3.4%
• North American organic revenues up 3.9%

Chief executive Mike Duffy said:

"We have made a good start to the year in a seasonally quieter first quarter, with continued momentum in North America and solid progress across our International businesses.

"In my first four weeks as CEO, I have been impressed with the depth of passion and pride that our people have in delivering exceptional customer service, and I am excited by the opportunity to unlock the potential of the Group.

"While geopolitical events, as previously noted, continue to create some uncertainty, the progress we report today gives us confidence in delivering a full year performance in line with market expectations."

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ii round-up:

Rentokil Initial (LSE:RTO) today detailed an acceleration in sales growth at its core North American business, with the pest control and washroom services provider maintaining annual forecasts for 2026 despite war in the Middle East.

First-quarter North America organic sales (stripped of acquisitions) rose 3.9% from a year ago, accelerating from growth of 3.6% in Q4 and 3.4% in Q3. The US generated just over three-fifths of all sales in 2025.

Shares in the FTSE 100 company fell 2% in UK trading having come into this latest news up by around a half over the last year. That’s comfortably ahead of a near 30% gain for the FTSE 100 index over that time. US headquartered hygiene chemicals maker and fellow pest control services firm Ecolab Inc (NYSE:ECL) is up a more modest 15% over the last year. 

Rentokil is today the biggest provider of pest control services across North America, a position which follows troubled trading in the aftermath of its $6.7 billion acquisition of US rival Terminix in 2022.

Management action to improve performance after the acquisition have included establishing door-to-door sales and the rollout of satellite offices across the USA.

Pest control performance for North America during this latest quarter was aided by robust price increases and a good recovery of weather-related disruption seen across the US in January.

Organic sales for the remaining international business rose 2.8% year-over-year, slowing from growth of 3.4% in the prior quarter, hindered by tough Asia comparatives and the war in the Middle East. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging a fair value target price of 550p per share.  

ii view:

Started in 1925, the group today employs around 63,000 people. As well as Rentokil itself for pest control, its two other brands are Initial for washroom services and Ambius for plant care services. Headquartered in Crawley, pest control generated most sales in 2025 at 83% with hygiene and wellbeing the balance.  

For investors, some hinderance from the war in the Middle East has been seen. Demand can be vulnerable to the weather as seen in the early part of 2026 in the US. Large company acquisitions such as that for Terminix are not without risk and can be problematic, while potentially higher inflation due to soaring energy prices could bump up Rentokil’s wage bill.  

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More favourably, initiatives focused on the company's North America pest control business appear to be bearing fruit. Ongoing bolt-on acquisitions included India’s second-largest pest control company in 2024. The previous sale of the group’s workwear division does simplify the business, allowing an increased focus on pest control, while a forecast dividend yield of around 2% is not to be overlooked.  

On balance, and while risks remain, exposure to relatively non-sensitive services such as pest control could help maintain positive momentum.  

Positives: 

• Diversity in both business type and geographical location
• Hygiene is a largely non-discretionary and an essential service

Negatives:

• The weather can influence performance
• Currency movements can impact

The average rating of stock market analysts:

Buy