Rentokil Initial: Catalyst rich trail to North American success. Re-instate with Buy rating.

Research evidence excerpt

Rentokil Initial: Catalyst rich trail to North American success. Re-instate with Buy rating.

Focus area 2: Group portfolio review

Whilst Rentokil has slimmed down its reporting into a digestible construct, the group

remains complex in terms of the range of capabilities and geographies in which it

operates. As discussed further below, Rentokil has 335 subsidiary and associate

undertaking vs 113 in 2010. Therefore, we review the portfolio below.:

North American Pest Control Business Services

• North American Pest Control Business Services: Since the 2025 interim results,

Rentokil has split the revenues (but not profits) generated by its Business Services

grouping within Pest Control. This in turn is an amalgam of businesses covering

Product & Chemical Distribution (which does provide the group with some

purchasing synergy), Ambius (plants), SOLitude (lake management), VDCI (public

sector mosquito vector control) and Steritech (food hygiene and brand standards

auditing) – see Exhibit 31.

Exhibit 31: North America Pest Control revenue split

%

Source: Company data

BofA GLOBAL RESEARCH

• Lower margin and potentially non-core: Across this range of services, we don’t

see compelling evidence of clear synergy in all cases and wonder whether Rentokil

could consider slimming down this portion of the portfolio, release capital and

potentially de-lever more quickly. As shown in Exhibit 32 we estimate core Pest

Control margins would be 120bps higher at 18.6% versus blended 17.4%.

Exhibit 32: Pest Control Business Services is likely a c10-12% EBIT margin business

$ million

North America Pest Control 2025 $m

Pest Control Services 3501

Distribution 324

Other Businesses Services 324

Revenue 4148

Pest Control Services 650

Distribution 24

Other Businesses Services 45

EBIT 720

EBIT margin