Rentokil Initial approves $200 million share buyback
Key Facts
Rentokil Initial's board approved a $200 million share buyback program, and the company said in its third-quarter trading update that it would begin soon. The program is expected to be completed by the announcement of its 2026 financial results, according to the company's statement issued on October 22. The approval falls within its capital allocation framework, which includes returning surplus capital to shareholders. The company said its balance sheet was strong and linked the decision to disciplined capital allocation and reducing leverage. The announcement, however, does not mean that purchases have already begun. The shares closed at $22.61 on October 26, according to EL7 data.
The decision came alongside the group's announcement that third-quarter revenue was $1.890 billion, up 4.0% on a constant-currency basis. Organic revenue growth was 3.4% for the period, the company said. In North America, pest control revenue recorded organic growth of 3.2%. International pest control services posted organic revenue growth of 5.7%, with contract revenue growth rising 7.8% and task-based revenue growth at 5.0%. The figures show variation across regions and activities, with higher growth in international services than in North American pest control. The company also reported that organic revenue growth in its North American business services segment was 9.6%, compared with 9.1% in the second quarter.
The company attributed growth in North American business services to seasonal demand for product distribution and new contracts in brand standards. In the region's pest control business, contract revenue growth rose to 3.1% in the third quarter from 2.3% in the second quarter. But task-based revenue growth slowed to 2.6% from 5.5% in the previous period. The chief executive said residential lead flow improved during the quarter, following weakness in July and August. The decline eased to about 1% in September, and the company attributed the improvement to digital marketing and better lead generation and conversion. The company added that customer retention in North America was 81.1%, compared with 80.9% a year earlier, while employee retention rose to 82.8% from 81.8%.
In international operations, organic revenue growth was 3.7% in the third quarter and rose to 4.7% excluding UK Property Services and DCUK. The company said the two units were affected by difficult trading conditions in the British property market. On operational technology, the number of PestConnect devices deployed in the United States exceeded 18,000 across more than 335 sites, following its launch in May 2026. The company is also continuing to pursue acquisitions, with the number of deals completed since the start of the year rising to 21 through the third quarter. The deals had annual revenue of about $36 million in the year before acquisition. The company expects to spend about $100 million on further acquisitions during 2026.
Capital allocation decisions also include the sale of SOLitude Lake Management to Bain Capital for $230 million. The company estimates net cash proceeds after tax at about $180 million and expects the deal to close in the fourth quarter of 2026. As part of its efforts to reduce leverage, the company said its ratio was 2.4 times on June 30, 2026. Its capital allocation framework targets net debt to adjusted earnings before interest, tax, depreciation and amortization of between 2.0 and 2.5 times. On earnings, Rentokil expects 2026 financial-year profit to be in line with current market expectations. Reuters reported on October 22 that the shares rose 7.2% after the third-quarter results and buyback announcement.
The disclosures also included the company's announcement that Chief Financial Officer Paul Edgecliffe-Johnson will leave his executive role and the board effective January 31, 2027, for family health reasons. He will remain a senior adviser to the company to ensure an orderly transition in financial leadership. The next disclosure milestone is the preliminary results announcement on February 25, 2027. This will be followed by the first-quarter trading update on April 22, 2027. Completion of the buyback program remains targeted by the announcement of the 2026 financial results, according to the timetable set out by the company.