Rentokil Initial half-year results 2026: cash improves as US reset deepens

Rentokil Initial has delivered a financially solid first half, with higher revenue, profit and free cash flow alongside a welcome reduction in leverage.

The more important development, however, is Chief Executive Mike Duffy's strategic reset after four months in the role. The group will simplify its sprawling operations, sharpen its customer focus and reinvest cost savings into North America.

That could support better organic growth over time, but shareholders are being asked to accept a trade-off. Rentokil has retired its target for a 20% North America margin in 2027, while recent weakness in residential lead flow provides a reminder that the turnaround is not yet complete.

Rentokil's key half-year figures

Metric	H1 2026	H1 2025	Change
Revenue	$3,589 million	$3,364 million	6.7%
Organic revenue growth	3.6%	Not disclosed	-
Adjusted operating profit	$556 million	$511 million	8.8% reported
Adjusted operating margin	15.5%	15.2%	0.3 percentage points
Statutory operating profit	$349 million	$304 million	14.8%
Adjusted basic EPS	13.50 cents	12.46 cents	8.3%
Free cash flow	$318 million	$282 million	12.8%
Net debt	$3,575 million	$4,220 million	Reduced by $645 million
Net debt to adjusted EBITDA	2.4 times	2.8 times	Improved
Interim dividend	4.48 cents	4.15 cents	8.0%

Organic revenue growth means growth excluding acquisitions, disposals and foreign exchange movements. It is useful here because Rentokil regularly acquires smaller businesses.

Group organic revenue growth improved from 3.4% in the first quarter to 3.8% in the second. Adjusted operating profit rose 6.6% at constant currency, while the adjusted margin increased to 15.5%.

The statutory numbers were also stronger. Statutory operating profit rose 14.8% to $349 million and statutory profit before tax increased 21.8% to $263 million.

North America remains the main challenge

North America generated revenue of $2,197 million, up 4.2% at constant currency, with organic growth of 3.7%.

That sounds respectable, but the detail explains why management is intensifying its work in the region. North America organic growth slowed from 3.9% in the first quarter to 3.6% in the second.

Pest Control Services, which includes the core residential and commercial operations, delivered organic growth of 2.6%. Its second-quarter growth slowed to 2.4%, from 2.8% in the first quarter.

Residential revenue grew solidly across the half and lead flow increased 6%. However, termite revenue slowed in the second quarter, while commercial performance was weaker, particularly among National Accounts customers. Rentokil also reported weaker residential lead flow towards the end of the second quarter and into July.

Business Services performed considerably better, producing organic growth of 10.6%. The downside is that this is a lower-margin operation, so its faster growth diluted the overall North America margin.

The region still delivered adjusted operating profit growth of 10.2% at constant currency, with its adjusted margin rising one percentage point to 17.9%.

The new strategy prioritises growth over short-term margin

Duffy has set three priorities: improve the customer experience, standardise sales and branch operations, and simplify the business.

There is a clear logic to the simplification push. Rentokil operates across 90 countries, yet its top 20 countries produce 93% of operating profit. Management believes resources are spread too widely across markets, service lines and systems.

In North America, Rentokil has completed the planned opening of 70 additional smaller branches for 2026. It is also separating leadership of its US residential and commercial businesses, establishing a regional head office and training centre in Dallas, and strengthening commercial leadership.

The Branch 360 platform has been rolled out to give branch managers a consolidated view of performance data. Rentokil has also deployed more than 12,000 PestConnect monitoring devices across 245 US customer sites.

These actions follow the initiatives discussed in Rentokil Initial's first-quarter 2026 update.

The strategic shift matters because management is now explicitly prioritising volume growth over short-term margin expansion. Rentokil has therefore retired its target for a 20% North America margin in 2027.

That is arguably the most significant negative in the announcement. Cost savings are progressing, but more of those savings will be reinvested rather than immediately appearing as higher margins.

Cost savings and cash flow provide room to invest

Rentokil generated $45 million of cumulative gross savings in North America during the first half. After reinvestment, net savings were $28 million, while the annualised gross savings run rate reached approximately $90 million.

North America transformation costs were $38 million, with a further approximately $32 million expected during 2026. International transformation costs added another $9 million in the half.

The reassuring point is that cash generation remains strong. Free cash flow rose 12.8% to $318 million, giving free cash flow conversion of 96%. Management continues to expect full-year conversion above 80%.

Net debt fell to $3,575 million and leverage declined to 2.4 times adjusted EBITDA. This puts Rentokil within its target range of two to 2.5 times for the first time since the Terminix acquisition.

Liquidity headroom stood at $2.5 billion, including $1 billion of undrawn revolving credit facilities. That provides financial flexibility for reinvestment and bolt-on acquisitions.

Rentokil completed 14 acquisitions for $37 million during the half and now expects total 2026 acquisition spending of around $120 million.

International growth accelerated

International organic revenue growth improved from 2.7% in the first quarter to 4.2% in the second, producing first-half growth of 3.5%.

The improvement was led by International Pest Control, where second-quarter organic growth reached 5.4%. Rentokil reported good volumes and a supportive demand and pricing environment across the UK, Southern Europe, Indonesia and India.

International adjusted operating profit rose 4.3% at constant currency to $266 million. The adjusted operating margin slipped by 0.1 percentage points to 19.1%, so revenue growth did not translate into margin expansion.

Customer retention increased to 86.1%, compared with 85.2% a year earlier. North America customer retention also improved slightly to 80.7%, while colleague retention rose to 82.7% from 80.7%.

Termite claims remain a material cash cost

Rentokil recorded an additional $47 million provision for termite damage claims. After $46 million of cash settlements during the half, the closing provision stood at $392 million, compared with $384 million at the end of 2025.

The group currently expects a 2026 cash outflow of $115 million to $125 million relating primarily to legacy termite payments.

This remains an important drag on cash that might otherwise be used for debt reduction, acquisitions or shareholder returns. It also contributes to the sizeable gap between Rentokil's adjusted and statutory profit figures.

What investors should watch next

Full-year guidance is unchanged, with Rentokil expecting 2026 profit in line with current market expectations. The actual level of market expectations was not disclosed.

The 8% increase in the interim dividend to 4.48 cents per share signals confidence in cash generation. The sterling amount will be announced on 27 August 2026, so it is not yet disclosed.

The first-half results show improving profit, cash flow and leverage, but the investment case now rests more heavily on execution. Management must turn higher lead flow into stronger sales, revive commercial growth in North America and prove that reinvesting cost savings can sustainably lift organic growth.

More detailed plans are due with the full-year results in February 2027. Until then, the key measures are North America Pest Control Services growth, residential lead trends, commercial retention and the balance between reinvestment and margin progress.

Investors can follow the company's future updates on the Rentokil Initial PLC share page and review the original company announcement.