Rentokil (RTO.L): Narrowing the gap: could this be the beginning?

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Rentokil (RTO.L): Narrowing the gap: could this be the beginning?

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28 Jul 2026 12:00:00 ET │ 15 pages

Rentokil (RTO.L)

Narrowing the gap: could this be the beginning?

CITI'S TAKE

Rollins has significantly outperformed Rentokil in terms of growth, margins

and cash conversion in recent years. Following Rollins’ Q2 warning we

wonder if this could be the turning point, with Rentokil finally narrowing this Buy

performance gap. Price (27 Jul 26 16:30) £4.27

Target price £5.75

Growth — It seems likely that RTO will also have suffered a softer May, but we think

that they should still be able to grind out a sequential improvement in organic NA Expected share price return 34.7%

revenue growth (pest control services) in Q2 of c3.1% as they recover from a low base Expected dividend yield 1.9%

with self-help, including new branches. Expected total return 36.6%

Margin — Given the modest sequential improvement in LFL revenue growth targeted Market Cap £10,786M

by Rentokil, it seems unlikely that they should suffer similar margin compression US$14,334M

from overstaffing. We estimate that ROL could be 400-500bps more profitable

than RTO NA, after overhead allocation. In this context, Rentokil’s goal to lift pre-

overhead EBITA margins in North America from 17% (2025) to 20%+ by 2027 (VA

consensus: 19.5%) seems realistic as they improve operational execution.

Price Performance

Consensus — Company provided 1H EBITA consensus is $555m, with an organic (RIC: RTO.L, BB: RTO LN)

revenue growth range of 2.6%-3.4% for North America Pest Control Services, from

2.8% in Q1 and 2.6% in Q4. This compares with Rollins’ 5.7%.

Management optionality — We don’t expect a strategy update this Thursday, and

believe RTO will simply reiterate their existing targets. But we think that new CEO