Rentokil Initial plc (RTO) Q4 2025 Earnings Report, Transcript and Summary

Hello, and welcome to the Rentokil Full Year Results 2025. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Andy Ransom, Chief Executive, to begin. Please go ahead when you're ready.

Good morning, everyone, and welcome to our full year results presentation for 2025. After my opening remarks, Paul will provide a review of our financial performance. I will then focus on the execution of our plan in North America as well as providing a brief update on our International region, our categories and our adoption of AI. We'll then open the floor for your questions. And as usual, details of how to ask a question can be found on the web portal. 2025 has been a year of encouraging progress with group revenues increasing by 3.8% and with organic revenue growth of 2.6%. Our H2 performance was particularly encouraging with group revenues increasing by 4.5% and with organic revenue growth being 3.5%. My main focus for today, however, will be on North America, looking at our performance in 2025 and how we're building on that platform in 2026. This time last year, we set out our plan for growth in North America, and it has been a year of encouraging progress with our performance, particularly in the second half, improving significantly. Whilst we're not there yet where we want to be, organic growth reached 2.6% in the fourth quarter. This was underpinned by strong execution, rolling out our new marketing plan, investing in our regional brands, opening 150 small local branches through our satellite program and delivering $25 million of in-year cost savings through our efficiency program. Our International business also saw improving organic revenue growth of 3.4% in the second half. This combination of improved growth and cost efficiencies delivered adjusted operating profit growth of 5.4% and positions us well to deliver our plans for 20% net operating margins in North America next year. Now looking to 2026, we have clear plans in place to build on the progress made last year. Our focus continues to be on growth, where we plan to expand our multi-brand strategy, deploying around 30 regional and local brands instead of the 9 we had previously indicated, and we'll continue to increase our local presence, taking our network of small local branches to around 220. As I'll explain in a little more detail later on, the team in North America has also used the pause in integration to develop a simpler plan for the creation of a single unified field operation. On systems, we've developed a new branch data portal, meaning we can maintain our existing systems for longer. And on pay plans, we're taking a more simplified approach to harmonizing pay policy where, in essence, service colleagues joining us next year will join our new plan, whereas existing colleagues will be given the choice of the new plan or to be grandfathered in their existing plan. So this combination of maintaining more brands and their branches, continuing to use our existing branch systems, whilst also simplifying the pay plan process means less change at the front line and more focus on the customer and indeed on growth. Fueling this growth and supporting our 2027 financial targets is our efficiency program, and Paul will now take you through this in more detail along with the rest of the financials.

Thank you, Andy, and good morning, everyone. I will now walk you through our key financial highlights for 2025 and look at our regional performance in more detail before closing on cash flow and capital allocation. As a reminder, unless I state otherwise, all numbers are on a continuing operations basis following the sale of our France Workwear business, and any comparative performance is on a constant currency basis. Revenue was up 3.8% to $6.9 billion with organic revenue growth of 2.6%. Adjusted operating profit increased by 5.4% to just over $1 billion. This resulted in a group adjusted operating profit margin of 15.5%, a 30 basis point increase year-on-year. After an adjusted interest charge of $204 million, up $29 million due to the cost of additional bond debt issued in the year and an adjusted effective tax rate of 25.3%, adjusted basic EPS increased 2.4% to $0.2591. I have spoken previously about our focus on maximizing cash, and I'm particularly pleased with our free cash flow performance with 24.5% growth to $615 million and free cash flow conversion of 98%. This reflects disciplined working capital management and also some one-off benefits, including real estate sales. With the growth in profits and free cash flow and the proceeds from the sale of France Workwear, partly offset by an adverse foreign exchange impact of $181 million on year-end net debt, our leverage ratio improved to 2.6x, down from 2.9x a year ago and close to our target range of 2 to 2.5x. Reflecting this performance, the Board is recommending a full year dividend of $0.1239 per share, an increase of 3%, in line with our progressive dividend policy. Turning to North America. Revenue grew 3.2% to $4.3 billion with organic growth of 2.3%. Pest Control Services was up 1.1%, while Business Services grew 8.9%. I'll come back to talk about these performances in more detail shortly. Adjusted operating profit for the region was $749 million, up 5.1%, bringing our adjusted operating profit margin to 17.4%. This improvement reflects the early benefits of our cost efficiency program, which delivered $25 million of savings in the year. Operationally, we are seeing our strategic initiatives strengthen key KPIs with colleague retention up 2.8 percentage points to 82.2% and customer retention increasing to 80.5%. We also completed 12 bolt-on acquisitions in the region with combined revenues of approximately $27 million in the year prior to purchase. Looking at our performance in North America in more detail. Fourth quarter organic revenue growth in Pest Control Services improved to 2.6% from 1.8% in the third quarter and 0.1% in the first half. This sequential improvement demonstrates the results we're seeing from the strategic initiatives we put in place at the start of this year. Lead flow, a key metric to indicate future growth in our contract portfolio, grew over 7% across the second half of the year, driven by our revised sales and marketing strategy. This has included a shift towards a more targeted digital marketing approach with a bigger focus on driving organic leads and also increased investment in our regional brands to boost lead generation and brand awareness. The ongoing rollout of smaller local branches through the satellite program to bolster customer proximity and local presence is proving successful with branches with one of these localized hubs attached to it, generating more than double the lead flow of those without. We've also improved our execution by moving sales accountability directly back into the branches. In addition to winning new customers, we have retained more through a relentless focus on customer service, and we've been able to sustain strong pricing discipline through the year. Andy will talk more about these initiatives shortly and how we will continue to build into 2026. Turning to Business Services. We were pleased with fourth quarter organic growth of 7.8% against a strong prior year comparative, which included $6 million of emergency vector control revenue, which did not repeat in 2025. Across the year, Business Services organic revenue growth of almost 9% was supported by double-digit growth in both our distribution business and our brand standards business, with the latter benefiting from significant new business wins. Throughout the year, we have been executing against our plans to simplify the North American business, improving the efficiency of our cost base and creating fuel for growth. We are increasing discipline in our day-to-day operations with improvements in organizational design and simplification of processes. The streamlining of operations led to headcount reductions of over 500 roles by the end of 2025. We are also reducing cost in the business through outsourcing and moving non-core functions to lower-cost locations. This has allowed us to scale our back office operations more effectively while reducing our fixed cost base. To date, around 430 roles have successfully been offshored. We're using technology to automate manual processes and improve our overall efficiency while better leveraging the benefits of our purchasing scale through managing our third-party spend and consolidating spend with suppliers. As well as reducing costs, we continue to drive improvements in how we invest our sales and marketing spend to optimize ROI and have reallocated some $20 million of marketing spend away from suboptimal paid lead activity to higher efficiency channels and campaigns. We rapidly mobilized to deliver $25 million of savings in 2025, targeting the cost areas that were easiest to impact quickly. There remains very significant opportunities for us to create efficiency in our cost base. As we drive up efficiency in the business, we are also investing back in a targeted way to drive organic growth. In 2025, this has included incremental marketing investment and strategic initiatives such as the rollout of smaller local branches and enhancing our capabilities in areas from pricing to data insight. This is helping us to identify the levers to elevate performance and amplify the benefits of our strategic initiatives. Improving our data has been and will continue to be fundamental to our ability to optimize our marketing budgets to maximize our reach into available customer demand. We have already delivered a double-digit reduction in our cost per lead, and there is more to do. Balancing driving cost out with funding investments behind sustainable improvements in organic growth has been key to improving both top line growth and profit margin, and we will continue to balance this carefully as we progress towards our North America margin target of over 20% in 2027. Moving to our International business, which encompasses all regions outside North America. Revenue grew 4.8% to $2.6 billion with organic revenue up 3%. Organic revenue growth improved in the second half, up 3.4% compared to 2.6% in the first half. We saw our strongest performance in Europe, driven by healthy demand and solid pricing in Southern Europe, while growth in Asia was supported by the fast-growing economies of India and Indonesia. Adjusted operating profit increased 5.7% to $518 million, with margins increasing 20 basis points to 19.8%. The U.K. and Sub-Sahara Africa delivered double-digit growth, reflecting a strong revenue performance. Asia and MENAT also displayed margin resilience despite a backdrop of high wage inflation. Customer retention remained strong at 85.7%, and excellent colleague retention was seen throughout the year at 90.3%. We also completed 24 acquisitions in the region with combined annualized revenues of approximately $36 million. Turning now to central costs, which in the year were $191 million, up almost 7% and up 9% at actual rates with some 85% of our central costs in sterling. In addition to underlying inflation, this growth represents multiyear ongoing investments in proprietary technology, digital applications and AI capabilities to support colleague efficiency, customer satisfaction and to generate revenue. In 2026, we expect continued above inflation rates of growth in addition to an FX headwind. One-off and adjusting items, excluding termites, were $92 million in 2025, primarily incurred in North America as part of the overall cost efficiency program. Looking forward to 2026, we are expecting a similar level of spend. Moving now to the termite provision, which, across the year, we have increased by $201 million with an additional $122 million in the second half after the $79 million in half 1. The trends that we saw in the first half of the year have continued. These included an increase in the number of complex residential and commercial litigation claims compared to 2024, albeit at a lower level than at the time of acquisition. More detail on this is included in a slide in the appendix, and a continued increase in cost per claim as our proactive strategy to solve customer problems and reduce litigation continues. In addition, during the second half, we have resolved numerous large commercial legacy claims at a cost ahead of the historic average and increased the long-term inflation assumption in our provision model from 2% to 3.2% as a result of persistently high inflation in legal defense, housing and building materials costs. The cash cost of settling claims in 2025 was $95 million, and we expect a similar level of cash payments in 2026. Turning now to cash flow. We generated free cash flow from continuing operations of $615 million, representing an adjusted free cash flow conversion of 98%. This was ahead of our guidance of 80% and a further improvement from the half year. We reduced the working capital outflow by $67 million to an outflow of $59 million through our disciplined focus on debtor management and supplier harmonization, moving to more consistent credit terms across our supplier base. Although some of this improvement was one-off in nature, the underlying discipline remains, and we are focused on continuing to improve in this important area. Our overall free cash flow conversion also benefited from $20 million of real estate sales. Our gross CapEx of $196 million was in line with guidance, and we would expect a similar level of spend in 2026. Cash interest increased by $41 million to $222 million following our refinancing activities earlier in the year. Cash tax was $7 million lower at $100 million, mainly due to legislative changes in the U.S. Looking ahead, we continue to target a free cash flow conversion above 80%. Our strong operational cash generation, combined with strategic divestments, has allowed us to make progress in strengthening the balance sheet. Net debt at the end of the year was $3.65 billion compared to $4 billion at the start of the period. The key cash inflows in the year were $636 million of free cash flow and $391 million in net proceeds from the sale of our France Workwear business, which completed on the 30th of September 2025. Beyond the immediate cash influx, this disposal has simplified our International business, reduced our ongoing capital expenditure requirements and structurally improved our group cash conversion. We reinvested $121 million of cash in bolt-on M&A, which remains core to our growth strategy. This was less than originally planned with some slippage of deals into 2026. Our pipeline for 2026 remains strong, and we're targeting spend of around $200 million. The cash impact from one-off and adjusting items amounted to $100 million for the year. These costs were largely attributable to transformation costs in North America, which, combined with other cash one-off items, will be a further outflow of around $80 million to $85 million in 2026. Our closing net debt was impacted by $181 million adverse FX translation movement. Nonetheless, we are pleased to see progressive strengthening in our balance sheet with our net debt to adjusted EBITDA ratio reducing from 2.9x to 2.6x, bringing us close to our target range of 2 to 2.5x. Turning now to capital allocation, where our framework is built around 5 key priorities designed to balance growth, shareholder returns and financial resilience. Our primary focus is on organic investment as it drives the best ROI, deploying capital to support the long-term growth of our business. We will also continue to pursue targeted inorganic growth through bolt-on M&A. We have a strong track record of successfully integrating acquisitions to drive value creation, and we will remain selective and strategic in identifying opportunities that complement our existing portfolio, strengthen our market position and deliver long-term shareholder value. We remain committed to a progressive dividend policy, ensuring that dividends grow over time. Our approach reflects confidence in the underlying strength of our business and our ability to generate consistent cash flows while maintaining financial flexibility. We recognize the importance of returning excess capital to shareholders at the appropriate time. When we do have surplus capital beyond our reinvestment needs, we will evaluate opportunities to return it, always ensuring that such actions align with our broader financial strategy. Finally, we remain focused on maintaining a strong and resilient balance sheet. Overall, our capital allocation strategy is designed to strike the right balance between investing for the future, delivering long-term value to shareholders and maintaining financial strength. So in summary, we have delivered an in-line performance in 2025. We are encouraged by the clear signs that our revised North America strategy is working and the improvement in growth in the second half from our International businesses. Our focus on cash is improving our operational cash conversion and reducing leverage towards our target range. As we balance investing in sustainable organic growth and driving up the efficiency of the business, we remain firmly on track to achieve our $100 million cost reduction target and our goal of a North America margin above 20% in 2027. Although the first month of 2026 in the U.S. has seen some disruption from extreme weather, as we look forward, we have confidence in delivering in line with market expectations. Thank you. I will now hand you back to Andy.

Thank you, Paul. So over the next few minutes, I'm going to start by highlighting the strength of the pest control market, both in the U.S. and globally before diving into North America's performance. I'll then finish with brief updates on our international growth and emerging markets, on our 2 categories and on the good progress we are making with the use of generative AI across the business. As you can see, the global pest control market has demonstrated consistent, resilient growth, expanding from $15.4 billion a decade ago to an estimated $29 billion in 2025. This represents a robust 6.6% compound annual growth rate over the last 10 years. Looking ahead, the market forecast for growth in the pest control industry remains very healthy with a projected 6.2% CAGR through to 2035. This growth is driven by multiple consistent factors, including increasing urbanization and growing middle classes, which drive demand for professional pest services. Heightened demand for higher hygiene standards across all sectors and as you would expect, climate change are also contributing to a rise in pest activity, all combining to create a sustained need for our services. In Hygiene & Wellbeing, which accounted for 17% of group revenues in 2025, we are the leaders in an attractive global market, which is expected to grow at around 4% annually through to 2030. This is being driven by an aging global population and their increasing hygiene needs, social and demographic trends such as urbanization and increasing middle classes, so similar to pest control, a heightened focus on hygiene standards post the pandemic and greater environmental and regulatory compliance requirements. So we're operating in 2 very healthy global markets. Let's now get into the main focus of today's presentation, that's our plan for North America, where we're continuing on our journey to create an undisputed powerhouse in pest control. This is founded on a number of key themes. First, as I've just shown, we operate in an attractive noncyclical growth market with the U.S. accounting for approximately 50% of the world's pest control market and where we are now a leader for commercial, residential and termite services. Second, we are laser-focused on scale and on density. And this is not just about size. It's a fundamental understanding of how density unlocks significant economies of scale and efficiency opportunities. Third, we are building power brands like Terminix and other well-known regional brands such as Western Exterminator and Florida Pest Control, giving us strong brand equity in every city in the United States and, in turn, supporting other parts of the business' need for local digital leads, local sales, local pricing and recruitment. And finally, everything is powered by our proven, repeatable low-cost operating model, centered on being an employer of choice and maintaining an unwavering focus on customer service. Importantly, as you know, we are primarily a contract-based portfolio business with around 75% of Pest Control revenues in the U.S. being under contract. Now looking back, the integration of Terminix required 2 main thrusts: Firstly, to create a unified enterprise in the U.S.; and secondly, to create a single unified field operation. To date, at an enterprise level, we've successfully established a single leadership structure. We've completed the complex legal merger. We've aligned on our core back-office stack of systems, for example, for people management. We've introduced a single approach to procurement, and we've harmonized our management salary and benefit structure. Crucially, we've also made investments that will drive future performance. We've launched our first U.S. Pest Innovation Center, which is focused on residential pest control, termite and mosquitoes. We've placed an intense focus on being an employer of choice, making excellent progress in turning around colleague retention, particularly within Terminix. And we've also invested in new data and pricing capabilities. These are all important steps in unlocking the true long-term potential of the combined business. Now as you know, in 2024, we began pilot migrations to create a single unified field operation. And while these were very successful at delivering the expected cost synergies, and they did not negatively impact on the retention of our field-based colleagues, we did, however, experience a negative impact on our growth. The combination of fewer locations and a complex change agenda saw lower levels of inbound leads and some customers reacting negatively to the change in their technicians, eventually leading to lower customer retention in the migrated branches. Therefore, we made a decision to pause the full-scale migration throughout last year and to focus on returning the business to growth. This time last year, we outlined a new growth plan to address the root causes of the lead flow and customer retention reductions. And as you know, we saw encouraging signs of progress at the half year and again at Q3. And pleasingly, this has continued into the fourth quarter. The detailed plan that we set out in 2025 extended across a number of key areas, but was essentially focused on operational execution. For leads, we revised the marketing plan to add greater emphasis on organic leads on more local web content and on beginning to leverage AI optimization for local search. For 2025, we focused on 9 core regional brands alongside the Terminix brand, and a key part of the plan was to roll out our small branches under the satellite program to give us greater customer proximity. For sales, we moved ownership of field operations back into the branches, making the branch managers fully accountable for their local sales performance. This was coupled with a dedicated door-to-door pilot over the summer in around 25 territories. And as Paul has already highlighted, we also began driving business simplification, including the outsourcing of a number of key functional activities. Whilst this was all underway, our North America team has been working on plans to build on the successes of 2025 and to introduce a much simpler approach to branches, brands, systems and to pay. So let me provide a brief update. Our people, of course, are our greatest asset and our commitment to being an employer of choice is yielding excellent results. We've seen a 19% improvement in Terminix technician retention since the acquisition. And in 2025, North America colleague retention was up a further 2.8% to 82.2%. This is absolutely foundational to our future success. On the customer front, we delivered very encouraging improvements in customer satisfaction ratings, and we've continued our focus on the end-to-end customer experience, delivering a 0.4 percentage increase in customer retention now at 80.5%. And this will continue to be an area of maximum focus going forward. Our marketing focus shifted in 2025 to generate more organic leads through local brands and local content, where we optimize the content of around 1,200 individual web pages. And while only a very small part of the overall impact last year, we've also begun to leverage AI to optimize our local search presence so that when customers need pest control, Terminix is increasingly the AI cited domain to be shown in the search results. Critically, the successful rollout of our local network of new small branches under the successful satellite program brings us much closer to the neighborhoods where our target customers are living. By the end of last year, we had around 150 of these small branches open. In addition, our successful toe in the water with a dedicated door-to-door sales program in 25 territories last year will be expanded to around 40 territories this year. This local approach was reinforced with our focus on 9 regional and local brands alongside Terminix, which together drove a turnaround in residential lead flow, which was up 7.1% in the second half against the same period last year. As you've already heard from Paul, in addition to growth, efficiency was a big theme for 2025 and will continue to be so in 2026. Clearly, improving our marketing, our lead generation and our sales execution only matters if we're efficiently installing and subsequently billing our new customers. We continue to focus on increasing our speed to install rate. And in 2025, we introduced new KPIs to track the percentage of installs within 24 and 48 hours of signing. Overall, performance was good in '25, but this is another area where there is room for further improvement this year. By improving these operational performance areas, we have, in turn, improved our financial performance. Organic growth for Pest Control Services increased through the year, achieving 2.2% in H2 compared to 0.1% in the first half. This culminated in a strong fourth quarter, delivering organic growth of 2.6%. And importantly, the progress on contract revenue was particularly pleasing, up by 2.4% in Q4, alongside a healthy 5.6% increase in jobs. So an encouraging 2025 and one on which to build in 2026. Our brand strategy is a core lever for growth and the original plan focused primarily on both the core Terminix and Rentokil brands. The new plan outlined last year saw us add investment and focus on 9 highly recognized regional and local brands, which included the relaunch of their stand-alone websites and which delivered an encouraging increase in our inbound lead flow. And going forward, we will now invest in around 30 brands and support each of them with our best practice digital and marketing approaches. We'll have the Terminix brand as our national flagship, the 9 brands that we supported last year and a further 20 local and regional brands in key cities where their local brand equity is strong. Next, our focus is on the local branch network. And I've already highlighted the impact of the 2024 pilots and our pivot this time last year to focus on more branches. We've now added 150 small local branches, and the path forward is to continue that rollout, where we will open an additional 70 in 2026, taking our local network of branches to around 800 by the end of this year. This combination of keeping more local brands and their branches and by expanding our network of small branches as part of the satellite program gives us greater customer proximity and a stronger local brand presence. The most significant recent refinement to our plan involves our approach to data and branch systems harmonization. Our updated approach provides us with the immediate benefits of operational harmonization. We're launching Branch 360, which is a unified reporting and insight solution. It's been designed to provide a single pane of glass for our field leadership and our sales and marketing teams. By integrating data across our current branch infrastructure, this system-agnostic platform delivers consistent KPIs and daily accountability without being dependent on a single fully integrated back-end system. This ensures a standardized management experience across the entire organization regardless of the legacy platforms in place at the local level. Going forward, every branch manager will utilize a standardized performance interface that displays critical financial, operational, leads and sales metrics. Rather than requiring managers to manually extract and interpret data, Branch 360 will push actionable insights and reports directly to them on a daily basis. Finally, the team in North America has also developed a new approach for pay plans. The original plan required a branch-by-branch system harmonization to have been implemented before we could change the pay plans. Our new approach is to decouple pay plan implementation from systems harmonization. This year, we will harmonize branch manager pay, and then we'll focus on sales team pay in commercial pest control. This removes complexity and frustration of the different plans, and it's something that we expect to be well received. Finally, for our largest population, the technicians, we're taking a very pragmatic approach. New colleagues will be onboarded directly onto the new plan from 2027. However, we will give our current colleagues the choice to either opt into the new plan or to be grandfathered in their existing plan with no obligation to change. To conclude our dive into North America, we've continued to make good progress on employer of choice and on customer service. We've increased residential lead flow, underpinned by the rollout of 150 small local branches and our additional brands. This execution has led to an improved organic growth performance, which was particularly encouraging in the fourth quarter. Going forward, we're building on this growth platform with a focus on 30 brands and increasing the number of small local branches, which will continue to roll out at pace this year. And we now have a new simpler approach for branch data and systems and for pay plans. There is still a lot of work to be done, but clearly, we are seeing encouraging progress. So before we conclude and take any questions, a brief look at International and our categories as well as at generative AI, which I know will be of interest to you. As you saw earlier, our International businesses continue to operate in strong and resilient growth markets, with revenue in Pest Control up 5.4% in 2025 and increasing by 4% in Hygiene & Wellbeing. International growth markets delivered a solid financial performance with our revenue up 4.4% and profit up by 4.7%. Here, technology and innovation are our core competitive advantages. Our PestConnect deployment continues to progress well with around 100,000 additional devices installed in 2025, bringing our total to over 600,000. And in the Netherlands, for example, over 50% of our commercial pest control portfolio is now connected through technology. Our emerging markets continue to perform well, posting revenue growth of 6.2% and profit growth of 10.8%. And here, we are continuing to execute our cities of the future M&A strategy to capitalize on the development of the mega cities, which has resulted in 24 deals over the last 3 years and has secured leading market positions in key growth markets, including India and Indonesia, and this will be an outstanding platform for future long-term growth. I won't go into this slide in detail, but it's a summary of our overall Pest Control category performance globally and where organic revenue growth increased from 1.8% in the first half to 3.4% in the second. And similarly, in Hygiene & Wellbeing, which increased organic growth from 0.9% in the first half to 3.6% in the second and, as you can see, has delivered consistent revenue growth post pandemic. So this is my 50th and my last presentation to you. And looking ahead, if there's just one area in particular that I will be very excited to see develop, it's how the business adopts generative AI to enhance its productivity and efficiency as well as providing further service differentiation to our increasingly digital savvy customer base. Although clearly, it's still early days, we're making good progress. In 2025, we successfully launched Google Gemini AI to all 60,000 plus of our colleagues, and we had over 1 million users in just the first 6 months alone. On the service side, our innovations like PestConnect Optix, which was launched last year, uses AI to identify individual rodents from images sent from the field. And we've created our own in-house AI portal, lovingly named Rat-GPT, where over 100 dedicated AI agents are already in use or in development. The power of this focus on AI is perhaps best demonstrated by just a couple of brief examples of our Agentic AI solutions currently being piloted. Our prospect prioritization solution is a fully developed system, which uses multiple AI agents to analyze the wide range of leads that we receive. We receive Internet leads. We receive telephone leads, field-based leads, small leads, national account leads, jobs leads, contract leads, leads in high and low-density areas. And what this new agent will do is score each lead based on conversion likelihood, sales value and a range of other metrics, and then will nudge the salesperson to prioritize the best of the leads. Equally impactful is our on-the-go technician assistant. So if you can imagine a technician walking towards a customer site, this GenAI-powered tool will be speaking to the technician, giving them vital information; information about the site's history, the last infestation details, what the open recommendations are, what the bill payment status is and other important practical information. These are just 2 ways in which we are taking the power of AI and deploying it across the company. Clearly, there are many significant opportunities ahead of us, and we're really only just starting. So to wrap up, for the final time, I've included our RIGHT WAY scorecard in the appendix for you to read. But in short, as I prepare to hand over the baton to Mike, I personally feel very encouraged by the group's performance in 2025. Clearly, there is still much more to be done, but I'm very pleased to see our progress in North America, and I'm highly optimistic about the long-term prospects for the company where I will be cheering on from the sidelines in the future. Thank you very much. Paul and I will now be very happy to take your questions, and there will be a brief pause for the operator to line up any questions. Thank you.

[Operator Instructions] And our first question comes from Andy Grobler with BNP Paribas.

Just a couple from me, if I may. Firstly, in America and operationally, as the strategy moves to kind of more branches, more systems, more brands and so forth, how would you balance the cost of doing that against and the visibility that you need from a central perspective. Is there a risk that some of these branches become somewhat independent through that process? And then secondly, just in terms of cash costs with termite costs going up in '25 and looking to '26, what are your expectations going in the longer term for those -- both for those termite costs and for the one-off integration costs over the next 2, 3, 4 years?

Thanks, Andy. I'll take the first one and hand it to Paul for the second. Look, I don't think so is the answer to your question in terms of risk either on the cost side or indeed on the risk of loss of control of lots and lots of small branches. If I take the second limb of that first. The Branch 360 single pane of glass, in particular, is going to give us the best visibility that we've ever had at branch level. At the moment, if you're a branch manager, across our suite of branches, you've got to have about 42 different tabs if you want to complete the full suite of KPI metrics and measures. And going forward, every single branch is going to have the same desktop open with the same KPIs, metrics, measures, dashboards and push reports going to them centrally. So I actually think we're going to have better control, visibility and consistency across our branches than we've ever had. And many of the smaller branches opened under the satellite program are really an extension of the larger local branch. So they're run by the same branch managers. So I don't think there's any risk there at all of loss of control, quite the opposite, I think. In terms of cost, the smaller branches are relatively cheap, if I can use that word, relatively inexpensive. The costs have been included in our plans, in our budgets, in our forward look on our numbers. So not a significant increase. And the majority of the increased investment on the brand side is actually on organic search. So it's not so much on the paid search, which is quite expensive. It's on organic, supporting their independent websites, web pages, et cetera. So I think the increased cost is modest. It's all factored into our forward-looking numbers. And I think it's going to give us great, great transparency and consistency on the branch level. So Paul?

Look, on the cash side, I think the first thing that we should all remember is this is a very cash-generative business, and we've proven that in 2025. So we brought the leverage down. Cash conversion was at 98%, and we're going to keep pushing really hard on this. The working capital outflows were significantly lower in '25 than they were in 2024. In terms of the sort of one-off areas, the cost of the termite provision, $95 million in 2025 cash cost. We expect it will be about the same in 2026. Our strategy is to try and close off claims as quickly as we can, whether that's litigated claims or non-litigated claims. It's good to push them through, get them to resolution, and that's our plan so that we can put this behind us as quickly as possible. I can't tell you really exactly what the cash is going to be in '27 and 2028, how that will track down. Expectation is that it will track down because we are dealing with large complex claims now. That's what's put up the provision in the second half. And so we will see it ameliorating over time, but I can't tell you exactly the trajectory on that. In terms of the costs related to the transformation plan, the cost-out plan, we will continue to see those costs in 2026. I'm really pleased with how the plan has gone in 2025, how quickly we've managed to get cost out, but there's a lot more to do. The returns on this, obviously, though, are very, very good. So where we see an opportunity to take cost out of the business, yes, it will have a onetime cost for redundancies or restructuring, but we'll continue to pursue those. Thanks, Andy.

And just one further thing. Andy, thank you for however many years it's now been, and best of luck with whatever the future brings.

Appreciate it, Andy.

The next question comes from Suhasini Varanasi with Goldman Sachs.

A couple for me, please. I just want to get some more color on the door-to-door pilot that you implemented in 2025. In the places where you implemented it, is it possible to understand the proportion of new sales that came from this new channel versus your traditional or digital channels? That's the first one. And the second one, I think Business Services has been delivering very strong growth despite the headwinds in vector control services in 4Q. Just wanted to understand the drivers behind this and your expectations for 2026.

Thanks, Suhasini. The door-to-door program, we're pleased with it. It did not make a major contribution to the revenue performance, relatively modest, but we were pleased with it. It's our first toe in the water for door-to-door. And as I've said before, it's become a big channel. I still think we're learning on the job with this. And I'm on the record of saying in the past, I've always had a slight concern about door-to-door that the customer retention rate on door-to-door isn't as strong as it is where a customer has reached out to find us. And that's proven to be the case. So retention rates have been lower in the door-to-door business, but absolutely in line with what we modeled. So we put a big tick against the program in 2025 as a success, but as a pilot. And we've included, I'd say, a relatively modest ambition in 2026. We're moving up from 25 territories to about 40 territories. If it continues to go well, and I don't see why it wouldn't, in '26. It will obviously be up to Mike and the team, but I wouldn't be surprised to see that getting potentially materially bigger in '27. So not a big contributor. We don't break it out separately. More to come for in '26. Let's see how we get on. If it continues to go well, I think that could be a much more material potential opportunity in the future. Business Services, yes, it's had a really good year actually off a less good year in '24. So you've got a little bit of comp benefit, I would say, '25 on '24. Just a reminder what's in Business Services, half of Business Services or just over half of Business Services is our distribution business, our products distribution business, which is really quite different from everything else. Everything else is a contract portfolio services business. The products business is selling pest products and turf and ornamental products to the industry and to individual consumers. That is a very lumpy business. It can go in waves, and we've had a very strong finish to the year in that business. But it's a good business. It's a good, well-run, solid business. So I don't see -- I'd be surprised if it grows as strongly in '26 as it did in '25, but I would say it's a good performing business, and it's going nicely. The other businesses are contract portfolio businesses. They are Business Service operations. So we have brand standards, which looks after franchise properties and goes and checks if they are living up to the standards that the franchise owner has set. That's a good business, running very nicely. We've won some big new recent accounts. So I would expect that business to perform pretty well in '26. We've got our plants business, Ambius, which is a nice business, doesn't grow at the sort of rates that Pest Control does. So that's a slower growth business, and I'd expect that to be similar in '26. So look, I think it's had a great year, slightly flattered by a poor year in '24, but solid businesses, well run, and I don't see why they shouldn't make a decent contribution in '26, but perhaps not at the stellar growth rates we've seen in '25 would be my best view.

And the next question comes from Annelies Vermeulen with Morgan Stanley.

I had two questions, please. So firstly, on the rebranding of the retiring brands, I think you said a lot of those are one-branch businesses. So how many branches or brands does that involve? And what was the criteria for the decision on that segment specifically? Were there certain things that you look for in terms of signing those off? And then secondly, on the pay plans for the technicians, have you collected feedback on this from your existing technicians? And what was that based on? And if so, do you expect it to meaningfully continue to contribute to improving retention from here? And are there any additional costs associated with having to run 2 pay plans?

Thanks, Annelies. On the rebranding, those who've got a good and long memory will remember that we've got about 80 brands, give or take. So we're going to keep 30. So that means there's 50 -- I unfairly call them 1 horse towns. There are 50 brands. They're almost exclusively single city or single town brands. It doesn't mean to say we don't love them and like them, but it doesn't make economic sense to support those 50 individuals. So they are the 50 smallest. In aggregate, those 50 brands don't even represent 10% of the total revenues. So they will be retired quietly, slowly, gently over the next couple of years. And the criteria really was just based on scale. It's the ones that have got the least footprint, the smallest brands in small towns and smaller cities. And we tested brand equity as well. So we actually tried to work out how strong are these brands in the market. And the ones where we've got strong brand equity, we've retained and the ones where the brand equity is weak, we've taken a decision that it's better to migrate those to a strong brand equity local brand, whether that's Terminix or it might be one of the other 30. On the pay plans, no, look, there's not additional costs. There's the absence of some savings, but it's not material. And again, it's all fully costed in the plan. But as I said in the remarks, it's a very pragmatic decision. As I've explained several times over the last 2 or 3 years, we do have quite a distribution on a bell curve of pay for technicians and some have got legacy pay plans that look quite generous compared to the pay plans we've been operating across the business for some time now. And we've just taken a pragmatic decision that we will grandfather those. So if you want to stay on the pay plan that you're on because you like it, because you think it's generous, because you've worked out how to maximize your income, you can stay on it. So for the pay plan that we're moving to for the new people that joined from '27 onwards, we're essentially taking an existing pay plan that works quite well. We've modified it slightly. So there's absolutely no reason to believe it will be anything other than business as usual and a successful new pay plan. But it does mean we're running more than one pay plan for longer than we originally wanted. So there was some modest cost improvement originally planned to move to a single pay plan. We've foregone that saving. But as I say, relatively modest and included in our forward-looking plans.

Great. Thank you for the engagement, Andy. Best of luck.

Thank you. Cheers. Pleasure. .

And the next question comes from Bill Kirkness with Bernstein Societe Generale Group.

I have two questions, please. Firstly, as organic growth rehabilitates, I assume there's some market share gains happening. And if so, can you just talk about where you see those? Are they quite broad-based? Or are they sort of focused with the smaller peers or larger operators? And then secondly, you mentioned the weather impact in Jan. I just wonder if that's so material as to disrupt this sort of improving momentum we're seeing in North America pest or whether actually you've got enough self-help to drive ongoing improvements regardless of the adverse weather?

Thanks, Bill. Look, market share in pest control is a notoriously difficult endeavor, there's about 18,000 to 19,000 pest control companies in the United States, and we're operating across hundreds of cities. So in any particular town, any particular city, customers have got massive choice. Typically, they've got a choice of 10 to 20 local players. And so trying to work out when we improve where the share improvement is coming from and vice versa is really, really difficult. You can only really see in a live dynamic way, whether you're winning or losing share on the big national account piece. And that isn't really what's driving our improvement in organic growth. I'd say it's broad-based, and it's coming essentially from improvement in our operations in residential and termite, and it's across multiple towns and cities. So really difficult to say where we're winning or where we're winning from. But most of it, I would say, is local movement as such. On the weather, look, the way it works in our North American business, the way the entire industry works in North America is you only get paid and you only recognize revenue once you have done the work. So if you get a weather event, as we saw for a few days in January and you can't get your colleagues out on the road to do their routines. If you're not visiting that customer, then you're not billing that customer and that revenue doesn't happen. But that doesn't mean that revenue has gone. What that means is you work like crazy in the month of February to catch up the visits that you missed in the month of January. And clearly, that's what we will have been doing in February to try and catch up that work as much as possible. February weather, we thought was going to be a bit wobbly as well. At one point, there was a couple of snow days. But in actual fact, the weather in Feb turned out fine in the end. So we draw attention to it simply because it happened. It was material. It wasn't just one day. It was a few days down the Eastern Seaboard. But we will be working very hard to catch it up through February and into March. So we're not flagging a major issue, but clearly some softness in the month of January.

The next question comes from Nicole Manion with UBS.

One on the price and volume split in North America piece. There are a few mentions in the release about the robust pricing environment. I think that's actually sort of fairly consistent with what you said earlier in the year. But is there anything to call out here in terms of the pricing piece still accelerating or just holding at a similar level? And then secondly, sorry if I've missed this, I think you can sort of back it out from the numbers on branches that you have given in the release and the presentation. But could you sort of just confirm the total sort of branch base number as of the end of 2025 in North America?

Thanks, Nicole. So in terms of price and volume, we're still very encouraged by what we're seeing on price. We do manage to get inflation plus, which we've seen through the year. And as you've seen, the organic growth has been ticking up quarter by quarter. So we are continuing at a similar level on price and clearly doing better on volume. We're still losing a bit of volume if you look at that number that we printed in the fourth quarter, but it's improving sequentially. And in terms of the number of branches, well, we said that by the end of this year, we expect to get up to approximately 800, and that's going to include 220 of these sort of small local branches or satellite branches, which we're at 150 on. So the 70 delta is the change from 730-ish at the end of this year to 800-ish at the end of 2026.

Got it. All the best, Andy.

Appreciate it. Cheers, Nicole. Thanks.

And the next question comes from Jane Sparrow with JPMorgan.

Two questions, please. Just on the regional brands and the Terminix brand, it sounds like the improvement in lead generation is largely being driven by the reinvigorated regional brands. Can you perhaps comment on the main Terminix brand and how that is performing? And then secondly, of those branches where there's a high proportion of people sticking on the old plan, is there any noticeable divergence on KPIs on your new one pay scorecard versus the other branches where more people are on the new plan, please?

Jane. Yes. Look, the Terminix brand is doing well, but you're correct in your deduction that the regional brands must have done really well. They did do really well. Super pleased with the performance of quite a number of the 9 regional brands. And as I said in an earlier answer, a lot of that has come through really focusing on organic search performance, and that's what's given us the encouragement in part to go with the 30 brands. So that's excellent. But the big, big battleship brand, Terminix, is going well and has performed very nicely. We haven't seen as big percentage increases, but it is performing nicely. And there, we do things like market testing for brand recognition, unaided brand recognition. Can you name a pest control company in the United States? Can you name a pest control company that you would consider using if you had a pest control problem. And we've had a recent survey on that, and the data has come out very, very strong. It's a powerhouse brand, and it's got fantastic brand recognition. And so it's performing well, but we do support Terminix significantly with paid search as well as organic search. And over time, what we'll be looking to do, particularly as we get more into the AI generative search, we'll be looking to move further down the organic search for Terminix as well. So it's performing well, but a big part of the rebound in lead performance has come from those regional brands and the reason why we're supporting the 30 going forward. In the second question, that's way too early to say what that looks like in terms of branches with a high proportion of people on old pay plan, which is largely heritage Terminix brands and then performance of branches with people on newer pay plans. So it's too early to call that. What we have been doing, and Paul has made this observation a few times, we've been much more into the data than we've been before. We've got a Head of Data and Data Science. We've got a small data science team, actually not so small these days, analyzing data from branches and really trying to work out, well, where we've got fantastic performing branches versus poor performing branches, what are the factors that are contributing? Is it tenure? Is it pay? Is it geography? Is it commercial versus residential, all of those factors. And we're getting more insight into that, not ready to call it on that, but pay plan might be one element out of about a dozen, but there is no binary read across between old pay plan equals great performance, new pay plan doesn't. That doesn't exist. But the point of the question, what drives different branch level performances and what are those factors, that's really why we're super excited about the 360 single pane of glass. Mike and the team are going to have much better data over the next few years than we've certainly had for the last 2 or 3 years. But no correlation at this point to call out, Jane.

Okay. All the best for the future apart from the obvious foot front.

Yes. Well, I would say the same to you, Jane. I would say I hope Spurs don't get relegated, but I would be lying if I said that. So good luck, Jane.

[Operator Instructions] And our next question comes from Allen Wells with Jefferies.

Most have been answered, but just two quick ones. Firstly, Paul, just on the $100 million cost saving plan. Obviously, we've had lots of moving parts over the last 12 to 18 months with the change in brand strategy, less closures, more satellites, changing brands, changing remunerations. As we sit here today, could you maybe take a step back and simplify down how we should think about the maiden building blocks of the $100 million and what will be delivered in 2026? That's the first question. And then maybe just secondly, just following up on the remuneration plan and the allowing of grandfathering, et cetera. Obviously, we're a couple of years into this process now. And what drove the need to change that at this stage? What have you seen? What were staff telling you? And why now? That would be my question.

Thanks, Allen. So in terms of the cost plan, I'll happily take a step back and many of you will remember that we had our integration cost savings back in the day. That got a little bit difficult to track through. So when I came in, I said, take the 2024 cost base, there will still be inflation on that cost base, but we will take $100 million of that. And that's what we are tracking well against. So I've said that we've taken $25 million out of the cost base in 2025. We came sort of at that from a cold start. So most of the savings were manifested in the second half. So if you think about that, that means that on a run rate, it's more than double that, that we're achieving, we are investing back into the business. So whether it's the new capabilities we've talked about in pricing, in data, in many other areas of the business or the additional resources we're making available for marketing and for our additional branch network, that's all being funded. So it's a fuel for growth strategy, and we'll continue to do that. So we will tackle back-office costs, we'll tackle inefficiencies, we'll tackle spans and layers, all the normal opportunities that you would see in a very large-scale business to take cost out. There is significant opportunity. What we are doing is going after the right cost at the right time. Some we will leave a little because they might be a bit more disruptive to the business. So the focus at the moment has been on that back office cost, cost of finance of accounts payable, et cetera, et cetera, removing roles, offshoring roles, et cetera. But still lots to do, and we will get that $100 million out by the time we're reporting the 2027 results and to get the margin up to 20% plus. And look, in terms of the pay plans, the whole plan that we're coming up with in terms of how we simplify the go-forward integration is not to cause disruption. It's to settle people down. If there was some anxiety in technicians that perhaps they wouldn't like the new plan as much as their current plan, fine. They can just grandfather on to their current plan. We want people to get focused on doing their jobs well. We are an employer of choice in the industry, and that's the most important thing to make people go out and delight customers every day. And if there's something getting in the way of that, then we've removed that. So yes, that's our thinking.

And the next question comes from James Beard with Deutsche Bank.

I've got two, please. Firstly, you noted the improvement in residential leads in the second half. I was wondering if you could talk through the time that you expect those to convert over and how that improvement in resi leads is splits between contract and jobbing. And then secondly, going back on to pay plans, again, you said no change to residential sales staff pay plans in '26. When should we expect any sort of change to residential sales staff pay plans, please?

Thanks, James. '27 is the answer to the second question. Sorry, I should have said that. In terms of the time it takes from lead into sale into install is a really good question. I mean, that's a proper pest control question, James, that's really down in the weeds, but it's really, really important. Because if it's residential, if you've got a mouse running around your kitchen, when do you want that solved? You want it solved immediately. So the speed from which we can take a residential lead, and the same is true of termite. You've just discovered termites munching away in your basement or your cellar, you want that sorted quickly. And what we've seen is why I mentioned the new KPIs, operational KPIs in terms of how quickly are we getting from the lead to the sale to the install and it only becomes revenue when you do the install. We've got to get faster and we've got to get more consistent at that. So we are now getting a good proportion of the leads converted, sold and installed within 24 to 48 hours. And that's the sort of time window we are giving ourselves because if customers are having to wait 3 days for their mouse running around the kitchen to be dealt with or for the worry of the fact that termites are in their house, for many customers, that's too long. On the commercial side, time is much less critical. Commercial customers, that's fine. You can come next week, you can come next month unless they've got an emergency. So yes, look, it's a really, really key part of the business. And if we look through 2025, what we saw, particularly in the second half was a -- if you go at the top of the funnel and come down, really good improvements in the leads coming into the business. So MQLs, which we track on a daily basis. We look forward to that. At 4:00 every afternoon, we get a daily report on MQLs. Really good progress on SQLs. So what percentage of MQLs turn into sales-qualified leads. So that's gone really, really well. Really good progress on sales. So the marketing leads are good leads. They're turning into sales leads. The sales colleagues are selling and then it gets less good in terms of how many of those sales actually get converted into revenue. So that's the critical thing that the team are now working on is the next challenge as they work from the top of the funnel and they're working through down into the middle and into the bottom of the funnel. So that's why these KPIs of what percentage of sales are getting turned into activity with the customer is super critical. So good, good progress, and I think that's where Mike will have the team focused this year is improving the conversion of actual sales into -- turning into revenue. In terms of the split between contract and jobs, I have explained many, many times, we're a portfolio business, portfolio, meaning a book of contract revenues, roughly 75% of the U.S. For group level, we're more about 80-20. But at North America, U.S. pest, it's 75% contract portfolio, 25% jobs. Really good performance on jobs, over 5% organic growth in jobs in the fourth quarter and improving performance on contract portfolio. But it's that contract portfolio that we've got to get into consistent, healthy positive quarter-on-quarter improvement. We've seen some of that now, but we've got to build on that. It's only when we get that and back to the question we had a while ago about price versus volume. We've got to get that volume growth consistently back into the portfolio. It feels like it's coming. It feels like it's building, but that's where we need to push on in 2026 and into 2027. Only when we get that plus the jobs, will we get the business back into industry levels of growth and beyond. But I'm really confident the team are all over this. But good performance on jobs and an improving performance on contracts as well.

And all the best in the future, Andy.

Appreciate it. Cheers. Thank you.

[Operator Instructions] And our next question comes from James Rose with Barclays.

I've got a few on commercial, please. In the release, this has been flagged as a particular growth area. I wonder can you expand on your growth plans there? Secondly, is it right that commercial branches will be running on new systems, so slightly different ones to resi and termite branches? And then finally, how progressed are you in bringing some of the innovations and technology you have in the international and European business into the U.S. And what's the opportunity there?

Thanks, James. Yes, look, good question. Rentokil is the undisputed global leader in commercial pest control. The Terminix acquisition brought with it a big business in residential and termite. But Rentokil, which operates in, what, 88, 89 countries is globally renowned for its commercial pest control business. So we should be punching above our weight in commercial in the United States. And we're not yet where we need to be in commercial. I think in part because we've had so much focus on getting the resi business right and getting the termite business right. We've recently taken the decision to give independent leadership of the commercial business to one person. We've got an individual who probably knows more about commercial pest control than just about anyone on the planet. He's an export from the United Kingdom. So we've given it dedicated leadership. In terms of the plan for the business, improving customer retention has to be at the first part of that plan. We still don't have retention where it should be. Customer retention in commercial should be very high typically. It needs to be higher. It is going to be -- the commercial business will all be on PestPac, which is the core system that Rentokil has been using for 3 or 4 years now in the United States. So there won't be any great surprises or drama there. So that should be relatively straightforward. And you're absolutely right to raise the question of innovation. I was chatting to Mike the other day, and he's been introduced to some of the really cool innovations that we've got in pest control and commercial pest control, in particular. And we've got some really interesting ones coming in the pipeline over the next year or 2. But we have manifestly been weakest at deployment of commercial pest control innovation, in particular, our connected solutions in the United States. And we're going to fix that. That needs to be a key priority for 2026. We need to see the U.S. really starting to adopt and drive innovation. That's why the individual that's in charge of the business has been chosen in part because he's got great experience with that innovation. So look, I think it's an area we should be punching above our weight given our global position. The systems are relatively straightforward in the innovation agenda. It just needs execution now. We've got the products. We've got the services. We've got the technology. We just have to execute. And it's easy for me to say, particularly as I'm about to walk out the door and say, over to you, Mike. It is easy to say, but that's what we do around the world. So I'm confident we will do that in the United States. Super. Thank you very much, James. I'm looking at Heather across the table here. Are we done with the questions? No more questions. Unbelievable. Thank you all very much. I can't believe that is it. As I said earlier, that was my 50th set of results, and I think quite a good one to sign off on. It has been an immense privilege to be CEO of this company for the last few years. We've gone from a reasonably unstructured conglomerate to a pretty focused world #1 in our chosen industries, which is a pretty cool thing, I feel. And it's been, as I say, a great privilege to be here, but the success we've made in the last decade or so is absolutely down to the people in the organization. I've always said if we get the colleague strategy right in Rentokil Initial, everything else follows. And I think we have got a wonderful culture in this company. So I do want to pay tribute to the 60-odd thousand colleagues and all the ones that went before them in creating the brilliant company that it is. And believe it or not, I do want to thank you a lot. It's been great dealing with you for such a long time, doing my best to answer your questions. Will I miss it? I think I probably will a little bit, but I'll get over it. So thank you all for your interest in the company. It's been great getting to know many of you. And for the next few weeks, I really look forward to handing over to Mike. We're having a great transition. He's having a lot of fun getting to know all the people around the business, and I'm sure he's going to be a great success. And personally, I think the company is set fair for long-term value creation, which is, at the end of the day, what it's all about. So thank you all for your support of the company, your questions and in many cases, your friendship as well. So thank you all very much indeed.