2024-07-26 15:13:09 ET
Rentokil Initial plc (RTO)
Q2 2024 Results Conference Call
July 25, 2024 04:15 AM ET
Company Participants
Andrew Ransom - Chief Executive Officer
Stuart Ingall-Tombs - Chief Financial Officer
Bradley Paulsen - CEO of North America & Member of Management Board
Conference Call Participants
Suhasini Varanasi - Goldman Sachs
Annelies Vermeulen - Morgan Stanley
Allen Wells - Jefferies
Simona Sarli - Bank of America
James Beard - Deutsche Bank
Christopher Bamberry - Peel Hunt
Nicole Manion - UBS
Sylvia Barker - JPMorgan
James Rosenthal - Barclays
Presentation
Andrew Ransom
Well, good morning, ladies and gentlemen. In a few moments, Stuart is going to provide you with details of our good overall performance in the first half of 2024. I'll then come back. I'll provide a very brief update on each of our categories before we focus on North America, where we're making encouraging progress against our RIGHT WAY 2 growth plan with the core metrics now moving in the right direction and where we'll deep dive on our integration program, which is going extremely well. Brad Paulsen, our CEO for North America, will take you through a progress update on both of these important areas.
So to set the scene, let me just say a few words by covering the group highlights of the first half. Revenue increased by 4% to GBP 2.8 billion with top line growth in all regions, of which organic growth was 2.8%. Our Europe, U.K., Asia and Pacific regions are all delivering organic growth in the range of 4% to 6%, and they've all performed well in the first half.
In the first quarter, our North America Pest Control business delivered organic growth of 1%. And this has increased to 1.5% in the second quarter following the launch of our Terminix It marketing campaign and our RIGHT WAY 2 growth plan. We are pleased with the progress being made in colleague retention, the increase in brand awareness and branded search, inbound digital lead flow and the increase in the number of technicians submitting sales leads from existing customers.
Rebuilding our growth engine will take time, but we made good progress in the second quarter, and we expect to make further progress in the second half. Group adjusted operating profit grew by 4.7% to GBP 455 million. And we delivered a group margin of 16.5%, up by 10 basis points and in line with our guidance. Statutory profit before tax at actual exchange rate was GBP 253 million, an increase of 5.6% on the prior year.
Our bolt-on M&A program continues to create value with 23 acquisitions in the first half, generating annualized revenues in the year before acquisition of GBP 81 million. A leverage ratio of 2.8x puts us firmly on track towards further deleveraging towards our target range of between 2 and 2.5x as we committed at the time of the Terminix acquisition. So an encouraging overall group performance. And while we're mainly focused on North America growth and integration today, it is worth highlighting that the rest of the group continues to perform very well.
Four months ago at our prelim results, we set out our detailed plan to reinvigorate organic growth in our North America Pest Control business. We explained our model, which you can see on the slide there, with opportunities for growth from both existing and from new customers. To date, we've invested around $21 million of the $25 million we committed at the prelims. And that's gone into brand marketing, lead generation and into new sales and marketing talent. I'm pleased to say that whilst it's still early days, we can see green shoots now appearing, and our key growth KPIs are showing positive improvements.
We've delivered excellent continued progress on colleague retention, and it was particularly good to see an increase in sales colleague retention of almost 400 basis points since the beginning of the year. Our Terminix It brand campaign was launched in mid-March, and according to our latest data, has already been seen 685 million times and by 96 million people. This has delivered a very encouraging 29% increase in branded search for Terminix.
In April, we registered our first month of 2024 year-on-year inbound sales lead growth from new potential customers, and this continued through May and June. And more of our technicians are also submitting sales leads from existing customers with an increase in participation rate from around 50% in January to over 60% in June....
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Rentokil Initial plc (RTO) Q2 2024 Earnings Call Transcript