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(Sharecast News) - Rentokil Initial tumbled on Thursday after the pest control firm ditched its margin target for North America and said it had seen some weakness in residential lead flow in the region towards the end of the second quarter and into July.
The company said it was "retiring" its NA margin target of 20% in 2027 as it focuses on "driving volume growth over short-term margin expansion".
"I am confident through this targeted redeployment we will, over time, accelerate organic growth and improve margins," said chief executive Mike Duffy.
In the six months to the end of June, group revenue rose 6.7% to $3.6bn, up 4.5% at constant currency, with 3.6% organic revenue growth. Revenue from North America was up 4.3%, or 4.2% at constant currency, with 3.7% organic growth.
The international segment saw revenue grow 10.7%, or 50% at constant currency.
Rentokil said group adjusted operating profit rose 8.8% to $556m, with 10.4% growth in North America and 9.9% growth in International.
CEO Duffy highlighted the importance of simplifying the business. "We have an overly complex operating model, spanning 90 countries and multiple service lines, that does not prioritise our highest opportunity markets and business lines sufficiently. We must also further optimise the cost base to improve margins and generate fuel for growth," he said.
"Underpinning these priorities will be enabling our frontline. They are our brand and when they are engaged and feel valued, they go the extra mile. We need to make it easier for them to do what they do best - take care of our customers.
"We have started to progress these priorities with a focus on North America where we have strengthened the leadership team, taken steps to establish a regional head office and training centre, and begun to standardise the operating model to include the planned segmentation of Commercial and Residential."
Duffy said Rentokil had seen some weakness in North America residential lead flow towards the end of Q2 and into July, but the company still expects to deliver FY 2026 profit in line with current market expectations.
At 1006 BST, the shares were down 17% at 367.69p.
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