Rentokil Initial Aktie

Good morning, ladies and gentlemen, and welcome to Rentokil Initial Plc Third Quarter 2026 Trading Update. [Operator Instructions] I would like to remind all participants that this call is being recorded.

I will now hand it over to Mike Duffy, Chief Executive Officer, for his opening remarks. Please go ahead.

Thank you. Good morning, everyone, and welcome to our third quarter conference call. To begin, I'm going to cover the key highlights and then hand over to Paul to discuss the results in more detail. I will then close with an update on progress against our strategy to build the platform for sustainable organic growth.

Overall, it was a solid quarter. I am encouraged by the progress we have made executing against our priorities of customer focus, sales and operational excellence, and business simplification. Where we have taken action, we are seeing results. In North America, we delivered an encouraging performance by optimizing our marketing spend, prioritizing the highest converting lead channels, and improving service quality.

In our International business, Pest delivered another strong quarter of organic growth, close to 6%, as our focus on excellent client service, targeted account management, and connected solutions continues to pay dividends. As I've said before, our first priority is to restore North America to market levels of organic growth, which will include investing in training, sales capabilities, and our separated Residential and Commercial businesses. These investments will be fully funded through savings across our international business and group central costs. Over the last few months, I have been working closely with my leadership team to finalize these investment and savings plans. We will provide more detail at our full year results in February.

Finally, we are moving fast on business simplification with our divestment of SOLitude. The disposal proceeds will further reduce our leverage. And as a result, the Board has approved a $200 million share buyback program. Before I hand over to Paul to discuss trading, I wanted to say a few words about our leadership announcement this morning. Paul has taken the decision to retire from full-time executive life for family health reasons. He retires on January 31, and we are pleased that he will stay on as a senior adviser, ensuring a smooth transition to a new permanent CFO.

Paul has been a great partner, helping me get up to speed with the business. And during his time at Rentokil, he has had a significant impact improving our financial discipline and strategic focus. The Board, myself, and the entire leadership team are sad to see him retire, but also fully understand and support his decision to prioritize his family. The search process for a new permanent CFO is underway. If it is not complete by February 1 of next year, Sarah Sergeant will step up from her current role as Group Financial Controller to become interim CFO.

With that, let me hand over to Paul to discuss trading.

Thank you, Mike, and good morning, everyone. Before we begin, I'd like to draw your attention to the usual cautionary statement contained in our trading update, which also applies to this call. Unless otherwise stated, all figures are in U.S. dollars, and any comparative performance is on a constant currency basis. Starting with group. Revenue was $1.9 billion, representing 3.4% organic growth. North America delivered a 3.2% organic growth and international 3.7%.

Looking at North America in more detail, Pest Control services revenue growth was 2.7%. Contract growth was 3.1%, an improvement from the second quarter. Weaker lead flow early in the third quarter resulted in a lower jobbing performance at 2.6%. Organic growth was 2.4%, with the pricing environment remaining robust. Residential performance across core pest control and termite were solid, while pleasingly, Commercial National Accounts, which is approximately 1/3 of our Commercial business, saw improved growth driven by better service quality and continued PestConnect adoption. The drag from rationalizing our heritage Terminix Commercial client portfolio is now largely past.

After seeing a mid- to high single-digit decline for July and August, Residential lead flow moderated towards a 1% decline for the month of September. North America Business Services continued to deliver strong revenue growth, up 9.6% organically, driven by ongoing momentum in our product distribution business and continued strength from new client wins in brand standards. We continue to anticipate growth to moderate towards mid-single digits. I'm pleased to note that both customer and colleague retentions continue to improve year-over-year. We saw progress in Residential customer retention, and Commercial retention stabilized in the quarter.

Moving on now to our International business, where revenue was up 5% and organic growth was 3.7%, or 4.7% excluding our 2 businesses serving the U.K. property market, which continues to be challenging. International Pest Control organic growth strengthened to 5.7%. Growth was broad-based across regions, and it's pleasing to see some markets, including the U.K., our largest international pest market, sustaining high single-digit organic contract growth despite tough economic backdrops. International Hygiene & Wellbeing organic growth was 0.7%, significantly impacted by weak trading in our DCUK asbestos removal business. Excluding DCUK, organic growth was 2.6%. Overall, as Mike said, it was a solid quarter. We've also made good progress with our cost savings program in North America, and we expect to deliver full year profit in line with current market expectations.

Moving on now to capital allocation, where I have consistently emphasized our disciplined returns-focused approach. Our first priority is to invest in the business, both organically and inorganically, then pay a progressive dividend, and finally, return surplus capital while maintaining a strong balance sheet with a target leverage ratio of 2x to 2.5x. We were back inside that range for the first time since the Terminix acquisition at the half year stage. And with the sale of SOLitude, we will continue to delever through the remainder of the year. The Board has therefore approved a $200 million share buyback program, which will start shortly.

Finally, before I hand back to Mike, as this will be my last results conference call for Rentokil Initial, I want to thank all of you who have supported us during a period of heightened change. I'm committed to ensuring a seamless transition, and I'm pleased that we have the caliber of talent on the finance bench of Sarah Sergeant, who will step up if required to be interim CFO as of the 1st of February next year. Sarah is a chartered accountant with a long track record of success across multiple senior finance leadership roles, primarily at Compass Group. Prior to Rentokil, she was Group CFO for a small listed U.K. business. I'm looking forward to continuing to work with Mike and the wider executive leadership team on an advisory basis. My conviction in the long-term opportunity to drive value creation has only grown since I've joined the business in late 2024, and I'm pleased to remain part of the team working to unlock that opportunity.

Let me now hand it back to Mike.

Thank you, Paul. Let me start by spending a few minutes on the consumer search environment. The start of the third quarter saw a reduced total Google search activity, which we flagged in July as we also saw weakness in our lead flow. We took action and saw results with our lead flow improving sequentially through the quarter. We shifted our marketing mix towards our highest yielding channels and improved year-over-year conversion in nearly all our channels through self-help actions. As Paul referenced, this self-help improved our Residential lead flow decline to just 1% for the month of September.

We are being agile and adaptive. Where the environment is changing, we are understanding those changes and responding. With LLMs, we are moving into a world of increasing transparency where local reputation and service matters. We will win by continuing to elevate our service quality and by deepening customer relationships to become their trusted adviser. These models draw on the broader web, not just Google, so we're strengthening our signal across the sources they trust, reengaging affiliate channels like Yelp and the Better Business Bureau, and producing hyperlocal content where it moves the needle. Our scale provides us the capabilities and the resources required to win locally.

We're also front-footed on AI agents. Terminix.com already lets you price, schedule, and pay in minutes, and our call center is being trained to win when an AI agent calls on a customer's behalf. Looking ahead, we are developing capabilities to push live pricing and scheduling availability into a format AI agents can interact with and expect implementation in early 2027.

Before I move on, let me reiterate what I said before. AI search is currently a very small share of our mix, and whether we're dealing with a human or an AI agent, immediate availability, speed to install, and service quality are what matters most. And that is exactly why we are focused on our 3 priorities of elevating our customer focus, delivering sales and operational excellence, and simplifying the business.

Turning now to some highlights on executing those priorities. In North America, we have made good progress over the last few months, taking steps to separate Residential and Commercial and promoting 2 pest industry veterans to lead those businesses. We will continue to work towards a full functional separation to drive greater operational focus, transparency, and accountability for those businesses, reflecting the distinct needs and expectations of each customer group.

In the third quarter, we implemented multiple self-help actions to drive sales excellence and improved conversion. These included shortening connection times to customer service agents through process improvements for call and chat journeys. We are also reducing friction in the online selling experience and implementing SMS and e-mail nudges for abandoned cart recoveries.

And in Atlanta, we have stood up our test and learn pilot this month to start working towards a standardized branch operating model, a model based on demonstrated best practices from within our network. The opportunity from consistently executing a standardized playbook is significant as demonstrated by the top 1/3 of our branches delivering above-market growth. This pilot takes learnings from our best performers captured earlier in the year and puts them into practice. It will run into the first quarter next year, leaving time to start phased implementations ahead of the next peak season. The objective is to define how best to organize people, define processes, and utilize tools in a branch to ensure that our people in the field are equipped to execute with excellence.

In closing, we delivered a solid quarter, and the buyback announced today demonstrates the Board's confidence in the strength of our business model. We've made tangible progress to advance our strategy since we set out our 3 strategic priorities back in July to build the platform for sustainable organic growth. The goal is not to reinvent Rentokil, it's about applying the existing strengths of the group with greater consistency, and the reward for driving consistency will be substantial.

We operate in an attractive industry, growing mid-single digit with multiple long-term tailwinds, where we have leading market positions with a strong right to win. Over the past 2 years, where we have taken action, we've seen results backed by great people and strong brands.

And finally, talking to great people, I want to thank our 65,000 colleagues around the world who come to work every day with 2 simple goals, keep each other safe and take care of our customers, and they do so with my thanks and appreciation.

Let me now hand it back to the operator. We will pause for a moment to line up the questions. Thank you.

[Operator Instructions] We will take our first question from Andy Grobler with BNPP.

Two from me, if I may. Firstly, just in terms of the full separation of the Commercial and Residential activities in the U.S. Can you just talk us through what is involved in that process? And to what extent that is a physical separation rather than a business line separation? And on the same theme, to what extent are your other businesses across the group, whether that be Ambius or Hygiene, fully integrated and whether there is physical or business line separation that can be managed over time if you so choose to do so?

And then secondly, just on PestConnect, you talked about the rollout in the U.S. gaining traction and lots of demand. What are your expectations for the number of units that could be rolled out over a next 12-, 18-month process? And how would that compare to the opportunity and success you've had in rolling that out in the U.K.?

Andy, I'll start with the PestConnect, and if you want to take the separation, but I'm happy to do so. I think my internal expectations for PestConnect are probably higher than others. But we've had tremendous response from current customers as well as potential customers. And it is a solution that has proven very well in International, and the U.S. team internally has done a great job embracing the technology. Our customers have responded very well. It gives them peace of mind as they think about some of the compliance requirements, for example, from FDA, if you're in food.

And we know internally, with PestConnect, as we've seen in our other markets, it's a very sticky solution, and it drives retention. So we're excited about the rollout in the U.S. The reps and the account execs have been very excited with the training and the listen and learns we've done. So we're excited about the prospects.

And Andy, in terms of the separation, so what we're making sure of here is that Residential gets exactly what it needs to perform ultimately and Commercial does as well. So we're not having to compromise on slightly different business needs, whether that's around sales, training, or any other component of the business, because they are a bit different. If you think the rest of our business outside of North America is really a commercial business. And we know what retention that should run at. And we know that we're running at a significantly lower retention in the U.S. So we know there's a big opportunity for us there.

If we look more broadly across our businesses around the rest of the world, there isn't really a physical separation issue if we were to decide to make further progress, whether it's on any other part of the portfolio. It's how integrated into our systems environment they are. So we've spoken about that a bit before. All of our businesses sit on the Rentokil systems. So if we wanted to exit anything further, we need to take a bit of time to stand up a separate system, which will make it easier to sell them. But it's not a physical issue per se. Thanks, Andy.

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

I have a few questions as well, please. So given the shift in the customer acquisition model that you've referenced and the shifting digital landscape, you've mentioned more technician-led self-generated leads. Is that where incremental investment will go? Or put differently, is the mix of investment in terms of marketing and advertising and so on shifting as this technological change also shifts?

And then secondly, as part of that, given everything we're seeing in recent months on the technology side, could you talk a little bit about how your larger brands have been performing versus your regional and local brands more recently? And if you've seen any notable changes there between those?

Thanks, Annelies. On the customer acquisition model, I think it certainly predates when I got here. We've been working on getting the marketing mix model right. And I think we continue to find ways to reallocate the dollars as appropriate, which I talked about before. In terms of investments, that's still work in process. So I'm not going to comment on where we think we're going to invest. But certainly, equipping our front line, as I mentioned, the learnings in the pilot or we hope to learn, equipping our front line with what they need to execute with excellence is certainly on top of our list.

In terms of how we see the brand performance, as you know, Terminix brand is #1 for unaided brand awareness, and it continues to be a strong brand. It's a brand people know and trust, and we continue to leverage that. And our regional brands, regional and local, they had been neglected in the past, but I think with the pivot back to our 30-brand strategy, we've seen good strength with our regional brands out in the market. I don't know, Paul, anything you want to add?

Thanks, Annelies.

And your next question comes from the line of Suhasini Varanasi with Goldman Sachs.

Just a couple for me, please. You indicated that organic growth improved through the quarter. So is it possible to provide a bit more color on growth in September and October versus the 2.4% average seen in the third quarter. Do you think that the momentum that you've seen over third quarter can continue over the next few quarters, because it feels like a lot of the changes that have driven the improvement feel a bit structural? Just some color there would be helpful. The second one, you've provided some detail on how the Commercial customer saves team pilot exceeded expectations. What kind of improvement in retention rates do you see, please?

Let me start and then I'll hand it over to Paul. I think like I said before, I'm encouraged by the progress we've made since setting out our priorities in July to build the platform for sustainable organic growth through customer focus, sales and operational excellence and business simplification. And as I talked about in July, we're on a journey, but where we have taken action, we've seen results. And the team has done a great job stabilizing the business and returning to growth, and we've got to keep building on that hard work. We still have a lot of wood to chop, as they say in the U.S., but like I said, I'm encouraged by the progress we've made.

And on the specific questions as to the leads, we talked about at the interims that we'd seen, in June and into July, some weakness in the leads environment. And then as I said in my prepared remarks earlier, we saw a mid- to high single-digit decline for July and August and then September was significantly better, and we've seen that progress in the just few weeks trading into October. So we are encouraged by that. There's a lot of work, as Mike said, that has been done over the last few years to improve our marketing capabilities, our digital marketing capabilities, and we've got some great people working with us.

And in terms of the customer saves team and the broader work that we're doing on Commercial retention, we've spoken before about how this is an opportunity for us and a real focus, we should have a very high level of retention in our Commercial business and it wasn't at the same level and it still isn't as around the rest of the group. Customer saves team, that's helped, as has the installation of PestConnect. And we've also lapped now the headwind that we were seeing from exiting the Copesan weaker clients. So that seems to be on a better path now. So we have high hopes there. That should be averaging us up, and it hasn't been. So a lot of opportunity in that area. But thanks, Suhasini.

And our next question comes from the line of Will Kirkness with Bernstein.

I just had 2 questions, please. Firstly, if we look at that contracted number within Pest Control services at 3.1%, if that's organic plus M&A, I guess, with pricing that might imply that volumes are still negative. So I was just wondering if you had a view on or if you could help us with what performances within the contract book and how you feel about that moving into positive trends?

And then secondly, just with regard to cost savings and thinking about full year results earlier next year, how far through in terms of U.S. cost savings and perhaps more importantly, the International cost savings to fund the U.S. investments do you think you'll be before then?

Thanks, Will. Yes. So you're right. What we're pleased about is that the pricing environment continues to be very good. We talked about inflation pricing. And we talked before about the sophisticated way that we go about this. It's hyper-personalized and data-driven, so it's not that everybody gets a blanket price increase. There's a lot of factors that come into play. And pricing has been a big part of our performance uplift in the last few years, but volume is still negative, so that is still an opportunity for us, no doubt.

And in terms of the cost savings, look, it's never about 1 person. There's a broad team that's been working on this across the business. And Mike, I think it's been very clear that we will be taking cost out of the international business. And now that it's moved under the leadership of Phill, it's easier for him to look at all the costs and where they overlap and say, well, actually, we can do that differently. And I've spoken before about the fact that our costs at the group level have been going up very significantly for some years, and there's a big opportunity for us to address that and move that back to where it should be. And we are working at pace and very comprehensively against that. So we'll see that continue to deliver and fund the investment the business needs to make into North America. Thanks, Will.

Our next question comes from the line of Tim Ramskill with Bank of America.

I have 3 questions, please. So pretty big picture, but there's obviously a prevailing wisdom that the market here grows in North America at 6%, but clearly, the dynamics across the larger players we can observe isn't quite as strong as that. So just interested in your thoughts as to whether there's anything changing with regards to that kind of long-term growth trajectory?

Second question is around North American margins. Obviously, you had the kind of reset of expectations in H1. But as it stands today, consensus expects to see the change in margin in '27 -- '26, which seems quite ambitious given the plan for investment back into growth. So just interested in your thoughts as to whether that's feasible or not?

And then I know you've touched a couple of times already on some of the commercial dynamics. But I guess, again, at Q2, H1, you were talking about how Commercial has shifted from being a boost to overall growth to a drag. I just wondered if you could comment on the differential in growth performance between Resi and Commercial in Q3, please?

Yes. Thanks, Tim. Let me start and then I'll hand over to Paul. I think the U.S. is no different than International. It's a structurally growing and attractive market. I think the industry fundamentals are still strong. It's got a good TAM. It's a good CAGR like you mentioned, characterized by the high market fragmentation. The tailwinds include climate change, the urbanization, a growing middle class.

I was in the food industry. It's a heightened food safety and compliance requirements, especially obviously in Commercial, and that's where our PestConnect solution plays really well. Because it gives people peace of mind that if they get a surprise visit from the FDA, at least it's one less thing they have to worry about. So to your question on the market growth for the long term, I think it's still very structurally growing and attractive.

Yes. And look, Tim, I guess, I would say a couple of things. You've heard me talk before about our terciles. Our top branches are growing well ahead of that market growth you talk about. And there's no specific advantage that those branches have. So there is a very big opportunity for us to go to that market level and then beyond it. And I think what we're focused on is getting first back to that level and then going beyond it. I mean if you think about what our U.K. business did, nearly 10% organic growth in the shape of the U.K. economy, and that was after a similar performance earlier in the year. That this business can grow extremely fast.

Obviously, we've got a lot of proving to do to get it to that point. But we are going to invest appropriately to make sure we've got the competencies, skills and all the tools that are needed to get up to that level of performance. So that's why we've said that for 2027, we've stepped back from that 20% margin target. There's a lot of opportunity for margins to accrete and they clearly will as we add more and more revenue onto a cost base that can support a much bigger business, but we're just not focusing on that in 2027. It's investing back in with the savings that I've talked about that we will generate in the International business and costs to continue to drive up growth. And then the margin will come over time.

And then in terms of Commercial versus Resi. I think this is the story that I've talked about before. Commercial should be structurally a higher retention business, and that does make it easier to have high levels of OG, because you haven't got the same drag from clients cycling off. That's where we need to get to. It is still a drag for us. And so it's better than it was. So we're pleased with the quick results from the changes we've been making. And as Mike said, this is what we see across the business. When we see something and we get at it, we see a sharp response. And that's really encouraging. That's everything I've seen over the last few years. As we diagnose a patient and start to give it medicine, it recovers. But there's still a lot more work for us to do, as Mike said, a lot more wood to be chopped, and that's the journey we are on. Thank you, Tim.

I think, Paul, you and I first spoke 20 years ago. So I genuinely wish you the very best of luck in your retirement.

Thank you very much, Tim. I appreciate that. That has been a great 20 years.

Our next question comes from the line of Ollie Davies with Rothschild & Co Redburn.

Just a couple from me. So firstly, just a question on the 30-brand strategy. Given the LLMs are favoring more local brands, do you still plan to consolidate the tail? Or is there now sort of a better reason to potentially relook at that and keep them? And then secondly, you talked about the macro, particularly housing impacting termite lead flow in Q2. So can you just talk about how that progressed through the quarter versus, I guess, more normal resi?

Yes. I'll start on the brand strategy and if you want to take the lead. I don't think we've said we were going to consolidate to 10. I think we said we were going to consolidate to 30. We'll pause here and see what it makes sense going forward. As I talked about earlier, the regional power brands are actually holding up very well. And to your point around local people, at the end of the day, they want a brand they know and trust. And I think we got to look at that through that lens, especially given some of the dynamics you referenced.

Yes. Look, absolutely. I mean, I think that 30 is truly brands. Beyond that, we do have some names that might only be on one branch. So it's a bit hard to say that's truly a brand. I mean, a brand has to mean something, has to have a promise, has to have a proposition, et cetera. So I think that isolating the 30 and saying that this gives us enough coverage across the United States market to build out and invest behind through promotions, et cetera, that's the right level. And we're really pleased we've got those great 30 brands.

And in terms of the dynamics that drive the market, we've said before, this is really a nondiscretionary spend item for the vast majority of households. So this isn't linked so much to sort of consumer sentiment, but in the termite business, it is more correlated with housing starts and housing moves. So we did call out some weakness, particularly in the Northeast in the second quarter, and that has continued to be a drag into the third quarter, but it is correlated to housing rather than the general consumer. Yes. Thanks, Ollie.

Our next question comes from the line of James Beard with Deutsche Bank.

Just one from me. On going back to digital lead flow. How material now is AI, LLM search as a sort of proportion of your lead flow? And to what extent has that changed over the last 3 to 6 months?

This is Mike. It still represents a small portion of our lead flow. And like I said, we're reacting and adapting quickly and shifting our media strategy accordingly. So reestablishing those relationships with key affiliates like Yelp, Consumer Affairs, Better Business Bureau, BBB, developing FAQ layers to optimize the LLM extraction, adding hyperlocal content and imagery for the Google profiles and local web pages. So we're doing, the team is doing a great job adapting and responding to these shifts, and we're certainly encouraged by the progress we've made. And like Paul said, where we have taken action, we've seen results, and that here in the LLM and the marketing space is no different than operationally.

Thanks, James. Did you have another question? Or did they cover it?

That was it.

Our next question comes from the line of James Rose with Barclays.

Just one for me. It's on your residential termite and smaller commercial subscription business. For you and the industry, what does new customer pricing look like versus existing customer pricing? Is it a fairly flat structure across the book? Or do you have a backlog of long-standing customers who are paying quite significantly higher pricing?

I'll let Paul jump in. We don't discuss pricing, obviously, with customers. And I think new customers, there's a number of variables that go into pricing new services. So it's not a one-size-fits-all. But like I said, there's a number of variables that go into our pricing engine.

Thanks, James. I think one of the opportunities we've talked about before is to cross-sell more products to customers. So as they come in, then they might take a -- well, they might start with a job and then we will say, well, it actually makes sense for you to be working on a contract with us. And then we'll say, well, would you like us to also deal with mosquitoes, because your neighbor has a mosquito problem. So you likely have a mosquito problem, et cetera, et cetera. And then, initially, we're looking after pest control, not termite. So we'd like to sell them the termite services et cetera, et cetera, et cetera.

So we can build over time a stronger relationship as a trusted adviser to our clients. And they want that, because it's easier to deal with one provider than multiple providers. And so our long-standing customers do tend to be the most valuable ones. And that links back to what Mike has talked about before, #1 priority is excellent customer service and doing that, keeping those customers happy. They'll then refer more customers to us and the lifetime value of that customer continues to increase, and that's what we're very focused on. Thank you, James.

Our next question comes from the line of Jane Sparrow with JPMorgan.

Two questions, please. The first one, just returning to the improved trend in lead generation in September. I appreciate you've taken a lot of action. Those are paying off, but just wondered if there's also any improvement in the underlying market maybe due to monthly weather variability or anything to call out on prior year comps, really just anything that you'd call out beyond the actions that you have taken?

And then the second question is just on capital allocation. I appreciate leverage has come down. It's still relatively elevated and you also have the additional obligations on the legacy termite provisions, which is effectively debt. So I just wondered how much debate there was around the deployment of those SOLitude proceeds on a buyback rather than reducing leverage or retaining the firepower for future pest M&A perhaps?

Yes. Thanks, Jane. I'll start with the lead generation. Look, my background, I come from retail background, where we've got great data from Nielsen, IRI, et cetera, on category performance, channel performance, et cetera. We don't have that type of data in this industry. So it's not great. I think what we've seen in October has been consistent with what we saw in September. So I think, as you said, where we've taken action, we've seen results, but I wish I had better causation, correlation in terms of data to market performance, but we just don't.

Yes. And look, in terms of capital allocation, I think you know the algorithm that I work to, Jane. And that's very consistent. Our first priority is always to invest into the business, and Mike has talked about the areas where we will continue to invest to drive organic growth. Then we will buy businesses. And this year, we think we'll probably spend about $100 million on that. And we are focused on strong strategically relevant businesses in strategically relevant markets to bring in. And this year, $100 million is sufficient for the opportunities we see there.

We'll reduce debt down when we see a need. But if you think about the 2.4x that we were at the half year, well, seasonally, we do tend to delever more in the second half. And about half a turn on that 2.4x is the IFRS 16 capitalized leases. So if you take that out, we would be sub-2x. And yes, we do have a continued cash need on the Terminix provision, which we've spoken about before. No real change on that, obviously, given this is just a quarter. But we're very comfortable with returning the proceeds from SOLitude. This business should be highly cash generative. And we've spoken before about our ambition is to grow revenues against a consistent cost base so we can accrete margins, generate surplus cash, return that to shareholders and drive mid-teens EPS growth, and this business should be perfectly capable of doing that on a sustained period. That's the algorithm. That's what we're working towards. Thanks, Jane.

Our next question comes from the line of Allen Wells with Jefferies.

A couple from me, please. Firstly, just circling back on the lead gen side, you obviously saw lead gen fall from 6% to 7% down to negative in the quarter. But can you just talk us through the lag effect on how lead gen flows into growth, because growth has obviously held up quite well. So is there an expectation that, that could still impact as we go into Q4, that lead gen has come down?

And then specifically with lead gen down, but growth stable, can you just maybe kind of the building blocks of what the offsets are? I'm guessing it's higher conversion on the leads that you are getting? Or is there something else that's keeping growth up. You obviously did mention higher retention there. That's the first question. Secondly, on that aggressive shift to kind of AI, at least in the narrative that we're hearing since May, June time, you've clearly taken action. So would it be fair to assume that you've accelerated or increased some of the investments required in the second half? And if so, how does that actually change or impact the magnitude of the overall investment plan? Or is it just kind of timing and allocation versus where we were at the start of the year?

And then finally, just on the pricing, you flagged good pricing dynamics. There's obviously a higher narrative around how AI may impact pricing at an industry level with kind of increased transparency, the use of agents. I just wonder if you can maybe just give us your thoughts on how AI impacts longer-term pricing within the industry, particularly for premium price players?

I think there's a lot here to unpack. So I'll start and then ham and egg it here with Paul. I think on the lead gen and lag effect, there's 2 different things on the leads. One is contract and one is jobs. Jobs are more immediate. In terms of revenue recognition and contract, obviously, there is a lag there as you think about the initial and the recurring services. So it's hard to answer that cleanly without understanding the mix of the jobs versus contracts. So there is some lag on growth.

In terms of what's driving our improvements, we are focused on conversion. So we've done a lot of stuff to create a more frictionless experience for customers in the customer journey, whether it's through our call centers and the IVR, to speed to lead, speed to install, and are shifting and reallocating dollars to those higher-converting channels. So we're doing a lot of things from a self-help perspective to drive conversion and control the things we can control.

In terms of AI and the investments, we're shifting dollars. So this hasn't been an incremental investment for marketing spend. So we're reallocating dollars across our marketing mix to make sure that we're allocating dollars to the channels that have the highest returns. And in terms of pricing, I think at the end of the day, this is not a commodity service. So you're inviting somebody into your home. That's very intimate. And at least I know how it works in my house, and we're not just going to take anybody to show up and come into our home. You have to have a comfort with the technician that you can leave him or her in your house, invite them into personal spaces, et cetera.

So brands and local reputation matters, service consistency matters and technician reputation matters. So I don't think -- from my perspective, it's not a race to the bottom on price. Again, it's not a commodity service. It's an intimate service that when you invite somebody in your home, you want to know and go with the brand you trust and you know. I don't know, Paul, anything?

Yes. The only thing I'd add, Allen, is if you think about the conversations we've had over the last few years about marketing spend, when I came into the business in 2024, there had been a lot of money that has been badly spent and hadn't delivered revenue for us. So we've been reallocating that really understanding the competencies that this business needs in the digital search environment. It isn't just about throwing more money to get more leads. It doesn't work that way. You can't just buy leads. You need to make sure that you are presenting your proposition to AI in the optimal way, so that you show up well as they look to make the best recommendations to the user of the AI.

And we understand that well. We've got very strong marketers who know exactly what to do with content and what the different LLMs will look for across the Internet. And so we've been reorientating ourselves to stand up well against that. And it's more doing that than just throwing more dollars at it. So it's a fundamental understanding. And that's where the scale players are going to win, because we can do that. If you're just a small local operator, you can't really change things. Sometimes there's a slight lag effect as we look and see what's happening and then we make the required changes. But the scale player always wins in the long term. Thank you, Allen.

Our next question comes from the line of Nicole Manion with UBS.

Just one, I think, for me. I appreciate you've already said quite a lot about Commercial, but obviously it does seem as though there's been an improvement already in Q3 from some of the initiatives you outlined a few months ago. Is there any more sort of detail you can give on the specific drivers of this? Is there an impact from sort of the separation and the hiring of new operations managers already in there that you feel like you can speak to? Or is it more about some of the other self-help measures around customer saves and so on?

Thanks, Nicole. I think the separation is new. So that was announced in September. And while we'd love to say that was the catalyst, that wasn't the catalyst. I think it's going back to some of the basics, frankly, on Commercial and really focusing on service quality, showing up when we said we would show up. I think PestConnect is starting to build momentum and give our sales reps confidence and getting them back on the balls of their feet versus standing on their heels. So they're being more -- as you win, win gives you confidence, confidence creates momentum.

And I think as they see these wins, because we do have a strong right to win in this space, it is a core competency of ours outside the U.S., and we've leveraged a lot of those best practices and disciplines. Like as I said, PestConnect has done really well. So I think it's just our guys getting back on the balls of their feet, doing what we say we would do, and showing up on time and performing the service that we said we would do, and that's creating a lot of the momentum.

Thanks, Nicole.

Great. Just a quick sort of follow-up there, if that's okay. Just around the separation, I was meaning more around kind of the sort of the separate operations managers. Would it be fair to say then, based on what you've just said that, that's still mostly ahead of you in terms of that kind of hiring process and finding those people?

Yes, that's part of -- as we look at our investment thesis for next year, that's still within that scope. That's correct. So we haven't done that.

Thanks for the clarification. And yes, all the best as well, Paul.

Thank you, Nicole. I appreciate it.

There are no further questions. I will now hand it back to Heather Wood to address the written questions. Heather?

Yes. So we've had some written questions come in. Paul, I'll give this one to you because I think you covered it in your prepared remarks. So Residential lead flow recovery saw a 1% decline in September after the weaker July and August. What were the declines in those 2 months?

Thank you, Heather, and thank you for whoever sent in that question. Look, as I've said, it has improved across the quarter sequentially. So we saw a mid- to high single-digit decline for July and August. We're not quantifying it precisely, but that sort of gives you the indication. And what we've seen in September with that negative 1 is broadly continued through month to date in October. So if there's any variation, we'll talk about that in February at the full year's, but that's what we're currently seeing. So no more quantification we can provide today.

Thanks, Paul. Then another question, Mike, on the Residential and Commercial split. Question about when will it be complete? Does it create duplicated costs? And will it require incremental investment?

Good question. Thank you. I think we're working through the incremental investment piece. Obviously, our goal is not to add redundant costs, and to run a cost-efficient model where we can. But Mona and Mac, who are two industry veterans with more than 40 years combined between them, one grew up on the Terminix side of the business, one on the Rentokil. They're working through the process now and understanding where, how and when to make the right investments or splits.

Thanks, Mike. Then a question on the contract revenue improvement in North America pest control services, which was 3.1% in Q3. Just a question about how much of that improvement came from the improvement in the Commercial National Accounts and how much from Resi?

Thank you for the question. As you can imagine, we can't split out every component of our improvements, and frankly, we sort of don't want to give any more information, because it's a bit commercially sensitive. So those have both been drivers of the improvement, but I'm not going to split it out with any more specificity. But thank you for the question.

And then one last one on the pilot. We've obviously identified the 150 improvement opportunities. A very specific question on which 3 to 5 will have the greatest financial impact and what determines whether they will be rolled out nationally?

Which 3 to 5 of the 150? That's why you do a pilot. I think we're doing 2 things. We're looking at the customer journey, and we're also looking at the operating model. So as we go through the pilot, we're taking learnings and best practices. I know Paul has talked about it a lot, and I think I mentioned it earlier. We have a number of branches, especially the upper third, top tercile, that are performing above market from an OG, from a growth perspective. So learning from them and what they do well, and repackaging it, if you will, and piloting it in these sites in Atlanta.

That's, like I said, why you do a pilot, see what works, what's scalable. And certainly, there will be things we can do immediately and I know the team is already doing things immediately, for example, on Residential, looking at pre and post calls to make sure they're done consistently from the techs with the consumer. So there's a number of things I'm sure that we'll be able to roll out immediately at scale and some other things that will probably be more of a phased implementation. But it's not rocket science. It's hard work. It's detailed work. But it's work that I've done in my past. And I think as you get after it -- and people are excited about the pilot across the network, because they're looking for opportunities to improve as well. So they're anxious to see what learnings come out that can be replicated. So a lot to learn over the next 12 weeks.

Great. Thanks, Mike. That's the end of the written questions. So I will hand it back to you to close up the call.

Yes, I'll close. First, thank you, Paul. Paul, over the last 7 months, has been very patient with me as I've asked him 1,000 questions a day, and I appreciate it. So he's been a great partner and a great asset to the company for the last 2 years. So I know he will be missed, but family takes priority. So we all support that decision.

Turning to the business. I'll end where I started. I'm encouraged by the progress we've made since setting out our priorities in July to build the platform for sustainable organic growth through customer focus through sales and operational excellence and by simplifying the business. Our goal is not to reinvent Rentokil, but to take the many strengths of the company and apply them consistently across the group.

And as I mentioned, we're on a journey. So where we have taken action, we've seen results. The team has done a great job stabilizing the business and returning to growth, and we need to build on that hard work. As I said, we still have wood to chop, but I am encouraged by the progress and how adaptive and resilient this organization is. So I appreciate everybody's time. Thank you. For those who wanted to enjoy the sun, it's nice to see it out today. I don't know if it's staying tomorrow, though. But thank you, everybody.

Thanks, everybody.

Good morning, ladies and gentlemen, and thank you for joining us. It's a pleasure to be with you. I look forward to speaking with many of you in the coming days ahead. In a few moments, Paul will provide you with details on our financial performance for the 6 months ending June 30. I'll then come back to provide my first impressions and priorities for growth before taking questions.

Please note to ask a question today, you will need to dial the separate conference call number shown on our website or at the end of this presentation. I want to first thank our 65,000 colleagues we have at Rentokil that come to work every day with 2 simple goals: keep each other safe and take care of our customers, and they do so to the best of their abilities. Our frontline truly are heroes and make me proud to be wearing the same jersey.

For half 1, the main headlines of an encouraging set of results are good financial performance with further progress on revenue and profit and strong free cash flow conversion. We are pleased with the acceleration of international growth in the second quarter with 5.4% organic growth in pest control, and I was particularly pleased to see customer retention improved by almost 1% in the half. In the U.S., the team has worked hard and made good progress over the last 18 months.

We have made the right pivots from the original integration strategy towards more brands, more branches and smarter digital marketing. And it was reassuring to see residential revenues continue to grow in the first half. We now need to give our commercial business similar focus and investments to drive comparable results. Since joining 4 months ago, I've spent much of my time in the field with our frontline and our customers.

From these interactions, it is clear we have a strong right to win and possess many of the components necessary for doing so. I'll come back and share my initial thoughts on our growth plan and how disciplined prioritization and execution against increased customer focus, sales and operational excellence and complexity reduction will drive organic growth.

To support us in both creating and delivering our growth plan, we have made 2 excellent additions to the team. Rafa is joining us on Monday to lead our business in North America, and Famous Rhodes had joined as Chief Marketing Officer for North America. In addition, we will appoint a Group Transformation Officer, a new member of my leadership team to drive our program forward.

Critical to our success will be enabling our frontline. They are our brand, and we need to make it easier for them to deliver on our brand promise and do what they do best, taking care of customers. Today, I am more excited and confident about our future than I was on day 1. I've seen what is working, best practices that can be reapplied globally and our opportunities for improvement.

Our task is to build on our strong foundations, standardizing, simplifying and scaling what we do best. The type of work I know very well from my previous roles, and it is what I'll return to talk about. Now let me hand it over to Paul to take you through the financials. Paul?

Thank you, Mike, and good morning, everyone. Before I begin, I'd like to draw your attention to the usual cautionary statement contained at the beginning of this presentation, which also applies to this call.

I will now walk you through our key financial highlights for the first half. Unless otherwise stated, all figures are in U.S. dollars and on an adjusted basis. Any comparative performance is on a constant currency basis. Half year revenue was up 4.5% to $3.589 billion with organic revenue growth of 3.6%.

Operating profit was $556 million, an increase of 6.6% with 10.2% growth in North America and 4.3% growth in International. Central costs were up 16.9% due to underlying inflation and ongoing investment in digital solutions and technology. I expect this growth to moderate in the second half with a full year growth rate in the low double digits. This resulted in an operating profit margin of 15.5%, up 30 basis points. After slightly higher interest costs and a tax rate of 25.7%, we delivered earnings per share growth of 8.3%.

We've continued to improve free cash flow with 12.8% growth and 96% conversion, benefiting from disciplined working capital management and tight control of capital expenditures. We remain on track to deliver our guidance of greater than 80% cash conversion for the full year. Leverage stands at 2.4x, down 0.4x from this point last year and within our target range of 2 to 2.5x for the first time since we acquired Terminix in 2022.

In line with our progressive dividend policy, we've increased the interim dividend by 8%. When I consider our financial performance overall, when compared against this time last year, we have improved across the board. There's still more to do, but I'm encouraged by our progress.

Turning to North America. Revenue increased 4.2% to $2.197 billion. Organic revenue growth improved to 3.7% with 2.6% growth from Pest Control Services and 10.6% growth in Business Services. As a reminder, consistent with commentary at quarter 1, we continue to expect organic revenue growth in Business Services to moderate in the second half.

Operating profit was $393 million, growing 10.2% with 1 percentage point of margin improvement to 17.9%, which reflected continued strong progress on our cost efficiency programs.

We made good progress delivering on our strategic initiatives. We have already achieved our smaller local branch full year rollout target of 70 new locations and managers are now able to access Branch 360, our proprietary data hub, improving speed and clarity of decision-making. Finally, I'm pleased to see that both customer and colleague retention continues to improve year-on-year. Looking at Pest Control Services, which continues to benefit from a robust pricing environment.

The chart on the left-hand side shows how far the business has progressed in a short period of time, benefiting from the actions we've taken to improve performance. Our residential business is performing well, delivering a solid growth rate in the first half. This was offset by slower growth in commercial, particularly in quarter 2. Looking a bit deeper at residential, core pest control accelerated through the half, slightly moderated by a slowdown in termite revenues in quarter 2.

Residential leads grew 6%. And in line with our strategy, regional brands, in particular, drove strong lead growth. Looking forward, we've seen some weakness in North America residential lead flow towards the end of the second quarter and into July. Residential retention improved, helped by rising Autopay penetration and continued good performance from our customer sales team, which is achieving a roughly 1 in 3 success rate in customer value retained.

Moving on to commercial, which grew more slowly through the half. Our commercial leads had good growth at 8%, but more is needed to improve conversion and retention, which declined year-on-year with moderately increased customer losses in small and midsized accounts, partly driven by the rationalization of our heritage Terminix commercial business we had spoken about earlier this year. We're accelerating several initiatives here to improve growth, which Mike will speak to in greater detail later. Looking more closely at North American margins.

We provided additional disclosure to show the margins for both Pest Control Services and Business Services. Business Services has delivered strong revenue growth over the past 2 years, led by our lower-margin product distribution business. So this has a negative mix effect on total North America margins. In Pest Control Services, we've delivered good margin progression, up 1.4% since 2024 and close to 20% as of the first half.

This improvement has been driven by our transformation program with over 1,100 roles offshore to lower-cost locations, primarily in our call center and support functions and over 500 roles eliminated through redesigned processes and automation. These actions delivered gross savings of $45 million in the half with net savings of $28 million after reinvestments. We exited the half with a gross savings run rate of around $90 million annualized, leaving us well on track to deliver against our original target.

But this is only the beginning, and we see material additional cost efficiency opportunities across the group, which we started to address earlier this year with some outsourcing activity in the Pacific. Taking our successful playbook from North America, we expect to generate significant fuel for growth, self-funding reinvestment in 2027 and beyond, particularly to drive accelerated performance in the U.S.

With this additional resource redeployment to North America as well as the stronger-than-anticipated performance from margin-dilutive business services, we are retiring our 2027 20% margin target for North America as it is no longer in line with our strategy.

In the last 18 months, we've made various investments ranging from the optimization of our digital marketing spend, more brands, more branches and investments in customer service and in retention, which have already produced tangible positive outcomes such as lead growth and pricing improvements and will continue to help us by enabling our branch managers to make faster and better informed decisions.

Moving to our international business, where we drove revenue up 5% to $1.392 billion. Organic revenue growth was 3.5% in the half with quarter 2 improving to 4.2%. Operating profit was $266 million, growing 4.3% with 19.1% margin. Pest Control delivered an improved sequential performance of 5.4% organic revenue growth in quarter 2, up from 2.8% in quarter 1. Performance was strong across the region, held back by strong comparatives in Rural & Track Spray in the Pacific and tougher trading conditions for property services in the U.K. Excluding these businesses, International pest grew 5.8% in quarter 2 and 4.9% in the first half. Hygiene and Wellbeing growth was more modest at 2.6%.

International colleague and customer retention, which is already high, continued to increase year-on-year.

Turning now to cash flow. Overall, continued disciplined working capital management and tight controls of capital expenditures delivered a strong performance with 96% conversion, up slightly from last year's 93%. After a strong first half, we remain on track to achieve our guidance of at least 80% cash conversion for the full year.

Turning to look at cash and leverage. Strong operational cash generation has allowed us to make continued progress in strengthening the balance sheet with our leverage ratio reducing to 2.4x and net debt reducing by $75 million. Running through some of the key uses of free cash flow. The cash impact from one-off and adjusting items was $70 million in the half, largely attributable to North America transformation costs.

We are increasing our full year guidance to $110 million to $120 million, reflecting additional costs in the first half for international transformation. We reinvested $39 million in bolt-on M&A, acquiring 14 businesses generating $26 million of revenue in the year prior to acquisition. We are reducing our full year forecast for M&A spend to $120 million as we continue to target accretive M&A focused on our core growth engines.

We added $44 million to the legacy termite provision in the half. As a reminder, the calculation of the provision is mechanistic, reflecting experienced near-term trends over the last 12 to 24 months. The additional provision was primarily driven by us experiencing an increased claim cost in some non-litigated claims we settled in the period, which requires us to assume a higher future average cost for such claims going forward.

Based on these current trends, we've also increased our cash outflow guidance for the utilization of the provision to a range of $115 million to $125 million for the year. Turning to capital allocation. Our primary focus is to invest in organic growth as it drives the best return on investment, deploying capital to support long-term growth and drive operational efficiencies. We will also continue to pursue inorganic growth through targeted M&A.

We will remain selective and strategic in identifying opportunities, which are focused on our core growth engines. 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. And we do -- when we do have surplus capital beyond our reinvestment needs, we will evaluate opportunities to return it while maintaining a strong balance sheet, targeting 2 to 2.5x leverage. So in summary, we have delivered continued progress on organic revenue growth as our strategic initiatives are working, delivering improved growth in North America Residential Pest Control services.

Commercial requires incremental focus, which Mike will speak to shortly. We're pleased with the performance improvements in international Pest Control. We're on track to deliver our 2027 cost savings in North America and see material further efficiency opportunities globally to unlock fuel for growth, allowing incremental redeployment of resource to North America.

We remain focused on growing margins over time. Finally, I'm pleased with our cash performance, which puts us back in our target leverage range. Overall, there's no change to our outlook. We continue to expect full year profit in line with current market expectations.

Thank you. I will now hand you back to Mike.

Thank you, Paul. 4 months in as CEO, and I'm already feeling at home in the world of pest and washrooms. I've been getting under the hood of the business, going on ride alongs with salespeople and technicians, visiting over 20 field locations, meeting with many customers and undertaking deep-dive business reviews across all our markets and functions. I frequently work from one of our U.S. branches and getting a ground level firsthand operational view of the business has been invaluable.

What I have seen gives me conviction in our right to win. We operate in a structurally attractive industry with category-defining brands like Rentokil and Initial, powerful regional brands such as Terminix and well-known local brands like Florida Pest Control and Western Pest. We have a highly experienced, long-tenured and proud frontline organization with long-standing customer relationships.

We have national coverage in many countries and are the only truly global pest and washroom business. And we benefit from differentiated capabilities and connected technologies, capabilities that create strategic, sticky customer relationships. We have solid foundations and the potential is very clear to see. Our goal is not to reinvent Rentokil, but to take the many strengths of the company and reapply them consistently across the group, organized to fully leverage scale and drive functional excellence and become a truly great service company.

I want to take a moment and share my philosophy on what makes a world-class service company. It's a philosophy I've been sharing in town halls across the company in my first few months. Being a world-class service company comes down to 2 simple principles: enabling the front line and delivering customer service excellence.

First, it's about the front line and how we, as leaders, set them up for success. We do so by establishing clear expectations, providing the right resources and training, removing barriers, empowering decision-making and celebrating wins. Recognition is a powerful tool and a key driver of engagement. Second and equally important is the customer.

Our goal is to win at the 2 most important moments of truth. Do we show up when promised and do we do the job expected? If we can say yes to those 2 moments of truth, we earn the right to come back tomorrow and do it again. For service companies like us, delivering customer service excellence is our product. Like any product, it requires continuous improvement and investment, which is an opportunity for us in both pest and washrooms. From my initial observations, it's clear to me that we currently lack the consistency and standardization required to be truly efficient and effective.

Our people are engaged, but are operationally oriented and focused on getting through today's task list. We have not enabled our sales force with the tools, training and resources required to drive outsized organic growth. We're not setting our front line up for success. As I said previous, setting them up for success includes giving them the necessary training, removing barriers and empowering decision-making. And we are too complex.

Our complexity is inhibiting our ability to realize scale economies while diluting focus on our core customers and core business. Key to building a high-performing organization will be to make the business simpler and improve execution. Our 3 main priorities to drive organic growth are: first, customer focus. By making the customer the simple single center of focus, we will improve the customer experience.

Second, sales and operational excellence, implementing tools to enable the sales force to be more effective, combined with defining operating models; and third, business simplification, removing complexity to create a leaner, more agile organization focused on core growth markets and business lines. Moving to our first core priority, customer focus. Our frontline engages with customers every single day. No one else does. I don't, group doesn't.

The front line is our brand and are the reason customers stay. When they are engaged and feel valued, they go the extra mile to delight our customers and become trusted advisers. But today, we can make that hard for them. Insufficient training, shifting priorities and duplicative systems get in their way. We need to make it easier for them and standardize operating procedures so they can do what they do best, take care of our customers.

Customers want to do business with people they like and trust. Building trust requires executing service delivery, winning at those moments of truth and solving customers' most pressing problems. Doing so often requires innovative solutions and products. PestConnect is a great example of an innovative solution that solves customers' problems, which I saw firsthand in one of my ride alongs.

While I was prepping with our technician to get ready for the day, he received an alert on his phone that a PestConnect system was triggered at one of his customers. We used the app on his phone to pinpoint the exact location of the trap, one of many PestConnect systems the customer had. Sure enough, it had done its job. We let the facility manager know. He was unaware there was an issue, but was very appreciative that we proactively resolved it.

We then reset the trap and went to our next appointment. It was a powerful example of how our technology helps solve customers' issues before they know it's a problem. We recently ran a successful pilot in the U.S. with a top 5 grocery chain, leveraging PestConnect and are now deploying PestConnect across their entire network, displacing a competitor who had won 40 locations from us just a year ago. Powerful impact with even more prospects now in the pipeline.

Our second priority is sales and operational excellence. We have to sharpen our sales execution capabilities and deliver sales excellence. From proactive lead and pipeline management to account planning, performance management and growing share of wallet, we have opportunities to define what excellence looks like and drive execution. To deliver excellence, we also need to define a standard branch operating system, a system with a common heartbeat and rhythm across the network that creates a scalable sales and delivery model, improving technician performance.

Earlier this month, I met with a cross-functional team at one of our U.S. branches. During those 2 days, we discussed what was working and what wasn't, including how 1/3 of our branches were delivering above-market growth. We then mapped our entire end-to-end process from lead generation to servicing the customer and identified 151 opportunities to improve.

151 opportunities may seem intimidating or surprising, but I was excited because we were getting to the root cause of our issues and identifying opportunities to improve. To date, we have been addressing the symptoms leading to poor execution and placing temporary band-ids on them. This level of detail will allow us to attack the root causes in order to eradicate the issues.

This is exactly the approach I've used in previous roles to deliver step change improvements in performance. True operational excellence means knowing exactly what your network is engineered to do and having the discipline to cut out the noise. It's the hard, gritty operational work many companies ignore that it's exactly what unlocks scale performance.

At Gillette, we were one of the worst customer product partners to our key retailers, such as Walmart and Tesco as measured by customer service. We undertook a similar exercise and followed the life of an order and process mapped the entire journey. The path to excellence was not a straight line nor without challenges. It took us 2 years to reach and fully sustain top-tier performance, but we got there. And we have improved so much that Walmart added us to their strategic supply chain council. We took a similar approach to sales while I was at Cardinal Health.

We were losing share to a competitor and performed a sales diagnostic to understand why. Sales excellence relies on 3 core levers: sales strategy, sales execution and sales performance. All 3 must be in place to achieve top performance. Our diagnostic highlighted areas we needed to improve and the effort took time, but we reversed the share losses to grow at twice the market. I continue to use and refine these playbooks at subsequent companies.

We will benefit from the same approach on our journey to excellence and have begun a detailed sales diagnostic in the U.S. As an initial step, reflecting the different customer and operational needs, we will separate our U.S. residential and commercial businesses and create single-threaded ownership and accountability across each.

As you heard from Paul, we put a significant focus on returning residential to growth. We now need to give our commercial business the focus and resources it needs to return to sustainable growth. Our third priority area is business simplification. We are not leveraging our scale and are diluting focus and resources away from our core business. We have a decentralized operating model with a long tail of countries, service lines, systems and processes. We are too complex and fragmented.

Our top 20 markets accounted for 93% of profit in half 1. The balance of profit comes from viable businesses, businesses that are very good at what they do with excellent people. We will be reviewing our entire portfolio and evaluating our current operating model, simplifying to focus our resources on high-growth markets and categories where we can deliver industry-leading operating margins and returns. As Paul has already covered by becoming more efficient, we will target cost efficiencies to reinvest back into the business, providing fuel for growth.

To summarize, we have a strong foundation and a right to win with leading brands, global scale and local expertise. We are moving to a leaner, simpler and more effective organization focused on the customer, sales and operational excellence and business simplification. We will enable the frontline becoming a trusted adviser to our customers, standardizing processes and scaling the best of what we do. The potential is very clear to see.

Our goal is not to reinvent Rentokil, but to take the many strengths of the company and apply them consistently across the group, organized to fully leverage scale and drive functional excellence and become a truly great service company.

With the right focus and investment across our core priorities, we have the people, the brands and the scale to deliver sustainable organic growth, improve margins and free cash flow and deliver on the clear opportunity for value creation. Let me now hand it back to the operator. Paul and I will be very happy to take any questions. We'll pause here for a moment to line up any questions. Thank you.

[Operator Instructions]

Our first question today comes from the line of Andy Grobler from BNP Paribas.

I've got lots of questions, but I'll keep it to 2. Firstly, just on the kind of restructuring and reorganization program in the U.S. You gave an example there at Gillette it's taking 2 years to get back on to the right track. Is that the kind of time line we should think about for the North American business that there's at least another couple of years ahead of us of restructuring and change before you're back up to market levels of growth and profitability? And then secondly, just in terms -- again, on restructuring, you talked about looking across the whole of the portfolio to see -- to ensure that the right for Rentokil. What specifically are you looking at and looking for? And what kind of level of portfolio change in management do you expect over the next couple of years?

Well, thank you, Sam. Thank you, Andy. Andy, let me -- I will answer the questions. Before I answer, let me just reiterate something I said at the end of the beginning. My focus is on returning this story 100-year-old company back to market levels of organic growth and with cost efficiencies and operating leverage, improve the margins over time. By focusing on the customer and delivering sales excellence and operational excellence and simplifying the business, we will. We have the people, the brands and the scale to do so. That I am confident of.

In terms of restructuring in the U.S. and the similarities to Gillette, it takes people and process. And when you have a people and process business, it takes -- it could take 2 years, but we should have steady progress along the way. It's not necessarily going to be a straight line, like I said before, but we should be able to show that steady progress throughout the journey.

And then in terms of looking across the portfolio, I think the cost savings work to date has opened the team's eyes to the art of what is possible, given them confidence that there's more opportunity and more to do, not only in North America, but across group and international as well. And that's where our focus will be attacking the opportunities around the group to be more efficient, effective and providing that fuel for growth. Paul, anything else from?

No. I mean, I think, Andy, you've seen that in North America, we've taken out sort of 1,100 roles from high-cost labor location and moving it to -- move them to lower-cost locations and that we're eliminating 500 roles. and that's principally in our back office.

So as we look for efficiencies, we'll be trying to do the same. It's a well-established playbook that many companies around the world have done. And in terms of the portfolio overall and the components of it, as Mike referenced, our top 20 markets make 93% of our profit. So we're just trying to simplify. And if there's anything further to say on that, then we will come out and let you know at the appropriate time. But thanks for the questions, Andy.

Our next question comes from the line of Will Kirkness from Bernstein.

Two questions, please. I appreciate you're retiring that margin guide for North America. But I guess 20% doesn't sound unreasonable growth should drive margins. So I just wondered if you could give us a framework to think about kind of the future margin potential. And then secondly, I wondered if you could give us any color on the small local stores, kind of how they contributed to growth and what the margin profile is and how we should think about the ramp there?

Yes. Let me start. I think, Will, like I said, on the margin target, look, the work to date has opened the team's eyes to the art of what is possible and there's more to do. There's more to do not only in North America, but across group and across international, and that's where our focus will be.

We'll look to reinvest back into growth where we can. But trust that through those cost efficiencies and operating leverage, we will improve the margins over time. And Paul, do you want to talk about.

Yes. So in terms of what were previously known as the satellites, but now are small local stores, we've rolled out another 70 of them, which is in line with what we said we'd do for 2026. It doesn't mean that there won't be more to come.

We're continuing to evaluate all of the 220 that we've added and looking at locations and learning from it. So we may do more in due course. We're really pleased with the growth that we're seeing in the locations where we have added a satellite, we can see a clear improvement in leads that we get in those locations. So the strategy works. And maybe we'll do more in due course. And thanks for the questions, Will.

Yes, that's right. Sorry, Will, I missed the back half of your question, but that's right. I think we've had success with what we've rolled out, but that doesn't mean we have opportunity to optimize what we have rolled out and look at further expansion of the program.

Our next question comes from Annelies Vermeulen from Morgan Stanley.

Term and the strategy and how you're going to get there. But just on the comments on the weaker lead flow at the end of Q2 and into July, can we unpack that a little bit in terms of what you think is driving that? And are there any actions you're taking more immediately to drive that forward into your peak season? And then just also on the lower M&A spend target for this year, is that that you're seeing less availability of targets at decent multiples? Or is it that your cash spend focus is being redeployed elsewhere in the near term?

Yes. Thanks. I'll start and then ask Paul to work in. I think as we said in RNS, the residential lead flow was up 6% for the first half, but we did experience the weakness towards the back half of Q2, which continued into July. I would say the primary driver has been softness in termite leads with no definitive pattern apart from over-indexing in the geographies where the housing market has been under pressure.

But I would say that into, I think, where you were going, we have plenty of opportunities internally to improve execution to drive organic growth. And I'm not accepting that the market conditions is a reason for not doing so. So some of the opportunities identified during that process mapping I referenced earlier a couple of weeks ago are now within scope of our sales and operational excellence initiatives.

For example, maximizing other sources of leads, especially from our technicians, our trusted advisers improving lead conversion. We need to continue to reduce the friction in the new customer onboarding process, especially in initial inspections and appointment scheduling. But that process mapping exercise did identify 2 quick wins that we've implemented.

One is adding lead coordinators to help manage the backlog. And then second is streamlining our field sales entry process. And I would say, finally, our new CMO, Famous Rhodes, has already -- he's jumped in with both feet and already identified some opportunities to reduce attrition in our current lead process. In terms of the lower M&A spend, I think it's more around the targets, and we're being smarter about the targets we go after and the IRR. It's not an issue about cash at all.

Our next question comes from Nicole Manion from UBS.

The first one, just to come back to the North America Services organic growth. Can you drill down a little bit more into the timing and impact of your actions, which have been designed to help growth and then the timing and magnitude of the impact from the weaker environment and the lead flow that you're now seeing?

Obviously opened essentially all of the branches you planned for the year, for example, and many of the prior ones you'd assume would be maturing plus the regional and local brands as well. Is there any sort of volume sort of per branch trend you can speak to? Have these measures not had the impact you'd hoped for?

Or is it something else in the environment? And then a second one on the branches, you've signaled that you think you need a single operating model. Obviously, a lot's happened with branches over the last year or so? You've opened the smaller ones, and you've talked about having a single dashboard, but maybe not the same systems. So can you clarify what you think is actually sort of changing there in terms of the branch plan looking forward?

I think on the North American performance, I think, look, no one is more disappointed with some of the numbers in the North American team. I don't think we can ask for more effort. They've been working tirelessly in triaging in the residential side of the business for the last 18 months, reversing decisions that were made at the outset of the merger and addressing symptoms of poor performance.

Now that we've begun to stabilize, we need to pull up and define our road map for returning to sustained profitable growth, and that's what I talked about in terms of the sales and operational excellence. We also have to move into a focus on commercial. So residential is performing much better, but commercial is lagging. And I think separating the 2 and provided single-threaded ownership and accountability to the residential channel and the commercial channel will certainly help us in terms of where can we invest for growth, where do we have to simplify and where do we have to drive accountability.

And in terms, Nicole, of your question around the operating model and the opportunities there. I mean you'll have heard me say before that we have a wide variance of performance across our estate and our tertile.

So our top tertile branches, as Mike said earlier, continue to grow well ahead of the market. And our bottom tertile are really holding us back. And this is because we don't have a standardized operating model, one run-your-day model that every branch can deploy.

So we have some excellent leaders in our branches, and they have excellent results, and we have some weaker leaders and we've been addressing that. But there's still more to do there so that it is standardized and it's easier for our branch managers to go out to win every day. So that's what we'll be focused on there. Thank you, Nicole.

Our next question comes from Suhasini Varanasi from Goldman Sachs.

I have a couple as well, please.

Can you help us understand the scale of the slowdown that was seen at the end of 2Q and the early trends in 3Q? Was it still growth? Was it just a little bit softer than the 2.4% that you printed in 2Q? Just some color there would be helpful.

And sorry, just to go back to one of the previous questions. Is it possible to share some color on the time frame that you have set yourself to implement some of the changes, the biggest changes that you have identified during the process mapping, maybe to implement the standardized model and maybe some internal time frame that you have set yourself to see visible changes to the organic growth in North America?

Yes. Thank you. I think the first question, I think, around the slowdown in growth. Like I said, for the half, our residential lead flow was up 6% and the weakness in the back half and which has continued into July is primarily due to the softness in termite leads. And I think we've over-indexed in geographies where the housing market has been under pressure within the U.S., particularly in the Northeast.

I think we do have continued opportunities in execution to drive organic growth, and that's where we're focused, what we can control internally. And I think the time frame for the changes that we're in the process now of creating that integrated road map based on opportunities that we identified with the field. We're going to be implementing quick wins as we go. I think I mentioned 2 of them, the lead coordinator and streamlining our field sales entry process. They may not be elegant solutions today because we want to plug some holes, but we are going to work to make sure we codify it and get it in place so we can scale. But I think these -- some of the longer process opportunities it could take up to 2 years, but that doesn't mean that we're going to wait for 2 years to see the progress. It's going to be steady progress as we go. But it's going to be systemic and sustainable certainly when we get there.

Our next question comes from Oliver Davies from Rothschild & Co.

So a few from me. Just on lead flow, are you able to quantify the sort of resi lead decline that you've seen in the back half of June and July? And then also, I guess, your largest competitor talked about opposite trends to what you saw at the end of the quarter. So just wondering have your thoughts of if anything has changed in the competitive landscape? And then secondly, how should we think about where the additional investment in the U.S. will go?

Is it kind of simply more smaller branches and investment behind regional brands? Or do you think there's any other area where you can invest to drive lead flow?

I think it's a good question. I think if I maybe combine a couple of them in terms of the regional brands. I think our regional brands are actually doing well. We've had a lot of strength in the strategy of reinvesting back into our regional brands is working. So we're encouraged by that. I think from a competitive standpoint, it is a big market. It is -- we've got a lot of opportunity to improve execution and grow organically.

So I think all competitors, whether big or small, continue to compete as they always have. So I haven't seen it any better or any worse. I think, like I said, we've got to focus on what we can control. And right now, that's a lot of the execution opportunities.

And Oli, in terms of the lead flow, I mean it can be spotty, but some days are stronger than others. And so we're not sort of calling out exactly what we saw this in the month because we saw it coming through in June. We haven't finished July yet. So not putting an exact number on it. And it tends to be more in our national brands than in our regional brands.

So we're still trying to understand that pattern. And as Mike said, it's more orientated towards the termite side, which could be the housing market and in different parts of the country. So we're just calling it out as a bit of color as to what we've seen most recently. Thank you, Oli.

Our next question comes from Tim Ramskill from Bank of America.

A few questions from me. I mean, maybe as a starting point, it feels as if the dialogue in recent times has obviously been very focused on how the residential integration of the 2 businesses was incorrectly delivered and hence, retain more branches, retain more brands, et cetera.

Can you just kind of give us the same kind of diagnosis as to how the commercial business was impacted by the integration? And therefore, again, what missteps might have been taken and what needs to change? And then I guess, pulling away from the margin target, we can see how well that's been taken by the market this morning. So -- and there's nothing numbers-wise in the forward-looking discussion on the call today.

So would I be right in thinking that you still made very good progress in margins in the first half in North America. So that was to continue, you wouldn't be 1 million miles away from 19% margins. But it seems as if you're going to invest in North America funded by savings, centrally savings internationally. Does that, therefore, mean that by the time we get to sort of late '27 into '28, actually, the group level margins are going to be probably similar to what most people expect today? Or what might I be missing?

And then the third question is just going back to the point around simplification. Is this likely to be any market exits? Or are these all likely to be opportunities to release capital and actually make disposals where proceeds are generated?

Thanks, Tim. And because I've been around a little bit longer, I think I'll sort of take the question around what wasn't do incorrectly delivered with the integration and then come on and talk about the margin, et cetera.

I think what we've focused our attention over the last 18 months is getting the residential business growing strongly, and it is. We really haven't seen a slowdown in that non-termite pest business in North America. So we're very encouraged by what we've delivered there.

We did integrate a lot of branches back in the day, change systems, et cetera. And we also spent a lot of time focusing on residential and -- and that has led to a decline in performance in commercial.

In conjunction with that, the Terminix commercial book of business that we bought was a bit mixed, and I've spoken about that before as well that we've been cycling out of some of the poorer quality contracts there, which has hurt our retention. So we'll continue to do that.

The focus on resi and commercial as 2 separate business streams with different customers, different needs, different go-to-market strategies, different sales, et cetera, will, I think, allow us to address the needs of commercial much more effectively. And I think that will have a pretty rapid effect. In terms of the margin target, look, I don't disagree with what you're saying.

We are very focused on taking cost out and putting it back behind growth. And I think with what we've achieved in short order in North America, we've demonstrated that we can do this very well, and we will do that across the group, and that will drive further growth, and it will drive higher margins.

So I don't disagree with your hypothesis that the expectations that people had sort of out a couple of years will be achieved or exceeded as we take more and more cost out and drive growth higher and higher.

There'll just be in North America in 2027, a bit of a sort of dislocation as we put more fuel into the engine, and it will take a while before it ramps up in terms of the revenue that we get from that. So it's quite sort of technical almost saying that's not -- that margin target is no longer appropriate. We are very focused on margin, and it will continue to accrete. And in terms of the simplification program and what we'll do across the business, -- we have exited in recent years a couple of very small markets where we've gone into because we saw an opportunity.

It hasn't manifested. So we've just closed that business down. But these are really they're rounding errors. If we have other rounding errors, then we'll get out of those. Otherwise, if there's a market that we're in and we say we don't want to be in any longer, then we'll dispose of it. And if we do, then we'll come and tell you about it. So nothing to say on that today. But hopefully, that clarifies. And thanks very much for the questions, Tim.

Our next question comes from James Rose of Barclays.

I've got 2, please. I mean a lot of the focus is on North America, of course, getting that back to growth in line with the market. But if I look across to international, I mean, the organic growth there, it's sort of been below what you define market growth as for quite a while.

I mean would you also aspire to see the international growth improve to market type levels, call that 5% or 6% plus? And then secondly, I appreciate your thoughts on how important you see PestConnect and connected devices as part of the drive within commercial. Just conscious that you've got 2 larger peers who are pushing that quite meaningfully. I appreciate your thoughts there.

Yes. I think international, you're spot on. I think our focus is to return to market levels of organic growth. And I think in addition to the cost savings and efficiencies we've talked about, we're also looking at investment opportunities in leveraging or using some of those cost savings to redirect back into the business to grow.

So we're looking at the international with the same intensity, certainly as North America. I'm sorry, I didn't get your -- the comment on PestConnect entirely or the question, but I will say, I think it has got a lot of potential in the U.S.

My background experience in food manufacturing, grocery and pharmaceuticals this is the type of solution these -- I certainly would have been looking for in my roles previous. And I think given the top 5 grocer, the tremendous success we had with the pilot and winning back the 40 stores that we've lost for them just under a year ago and some of the discussions we've had with other large retail type companies that are in our pipeline, I think there's exciting opportunities for us.

And James, just to add on the -- your question around the international business. If you look at the international pest, then I mean, in quarter 2, we are up at 5.4% growth. And if you exclude Rural & Track Spray, which are our more lumpy businesses that we were lapping some tough comparables last year where there was just some very large pieces of business there. We're up at nearly 6% growth. So there's a big opportunity there in that pest business internationally, and we'll continue to focus on it. And thanks for the questions, James.

Our next question comes from Allen Wells from Jefferies.

A few for me, please. Just following up on a few questions from earlier. You had GBP 100 million cost savings target. It looks like you delivered about GBP 90 million of that annualized already. So it feels like that's at least running in line, if not slightly ahead of expectations and we look at that U.S. margins being pretty solid in the first half. Could you maybe quantify and expand on where the additional savings will come from?

And specifically, like how much more you think you can get out of the U.S. versus that international opportunity? Because the comments suggested that maybe this was a bit more going to lean on the international side. That's my first question.

And then secondly, obviously, the removal of the margin targets, investing more savings into growth. Can you maybe just talk about when we think about the reinvestment to drive growth, is any of that going into kind of more digital lead generation, which was obviously a focus back at the early part of the turnaround?

Or is this more just about reinvesting in service delivery, the front line, so digital versus delivery? And then the very final question, just would be interesting in the North American growth, just how you look at the kind of jobbing versus recurring revenue activity, how the mix has shifted over or moved over the second quarter, please?

Yes. Let me start, and I'll ask Phil or Paul to jump in. In terms of our cost savings target, there's still room to go in North America, and we know that. And I think as we get better, frankly, in the process mapping work I described earlier and delivering on customer service excellence, we're going to find opportunities to take waste out of the system, waste and time, and that will lead to cost efficiencies -- and then where we have the right return, we'll certainly invest back in the business, whether that's digital, service delivery, I think that's premature to say, but we'll be looking for those investment opportunities.

And then in terms of group and international, I think, like I said before, the success North America has had on a number -- with a number of initiatives has really opened the eyes for people that, hey, there's opportunities in the rest of the world. We've started some of this work in the Pacific, but there's certainly more to do across the other markets and regions.

And in terms of your question, Allen, on reinvestment and is this going back into, say, digital marketing. It's actually a broader range of capabilities that we're investing -- we're planning to invest in as we go forward. We did relook last year, as you'll remember, at our digital marketing, and we moved more of our spend into organic rather than paid search and --

and that was the right strategy and continues to be the right strategy. It's just putting more and more money to try and buy keywords. It doesn't work in the market today. So it's not that we're saying that we're just going to be buying more keywords. This is more about looking at the fundamental competencies in the business and investing behind that.

And in terms of your question about jobbing or recurring, we're continuing to see progress in jobbing. In the recurring side of the business, I think we've spoken about the fact that we're doing well on price, but we still need to get back to solid volume growth, and that's where a lot of the attention is going to be put over the coming years. So there's a big opportunity there. But thanks for the question, Allen.

Our next question comes from Jane Sparrow from JPMorgan.

Two questions, please. Firstly, just on the abandoning of the 20% margin target because you want to focus on volume growth, but you continue to price above inflation. So perhaps can you comment on whether the pricing strategy is the right strategy to drive improved volume growth?

And then secondly, just on commercial, large customers versus SMEs. I appreciate there was some business you've actively been exiting the impact of retention. But ex that, could you talk about trends in retention and growth across large commercial versus SMEs, please?

Thanks, Jane. I will -- let me start on the commercial side, and then I'll turn it over to Paul on the margin and pricing. I think the -- we've seen strength in retention and commercial on both segments, but that doesn't mean we don't have opportunities, especially in the SMB space.

So I think as we split or separate residential and commercial, what we'll find is opportunities to invest resources and focus in maybe some of the underpenetrated segments of the commercial market that we just -- we haven't focused on, frankly, over the last 18 months. So I think we'll see opportunities in both.

I mean the national -- the PestConnect, as I described earlier, plays very well with our national accounts. But then I think with the SMBs, it's a different strategy and different approach as we go to market. And that's where we're going to really explore opportunities to invest to restore growth.

And in terms of the question around price and how that plays into volume, Jane, we have done really well on price in the last year or so. We brought in a new leader for price, new capabilities, built new models. And we do run a lot of A/B testing to see what happens if we apply different levels of pricing. And we're almost at the level of quite personalized pricing now.

So this isn't just having a blanket price increase that goes everywhere. We have seen in the core pest business in North America, which, as I've said, has been actually performing really well. We've seen retention increase there. So that is a very good sign. What we're not getting enough of is new customers. And really that plays into what Mike has been talking about around the need for sales excellence.

So pricing is good, retention is improving and improving. We need to see that in commercial as well. And then we need to add new customers through having a better and better trained sales force. So work to do, but the pricing strategy is a highlight for us. So thank you for those questions, Jane.

Our next question comes from James Beard from Deutsche Bank.

A couple of questions from me, please. Just going back to North America Commercial again. Can you just talk to the trends that you saw during Q2 in the national account space, which you cited as being a driver of the weaker growth within the North American business during that quarter?

And then secondly, on marketing, you've previously spoken about piloting or about a year ago, you spoke about piloting door-to-door marketing. Just wondering how that has played out over the last 12 months and how much investment you've put into digital -- into door-to-door during this peak season?

I think let me start and then if Paul wants to add in. I think the North America commercial, the trends in Q2, I'd say national accounts stabilized, is what I would say in terms of the performance.

I think like I said, the recent win we had in winning back 40 stores certainly is -- will be a boost to the team. And I think PestConnect is going to -- has a lot of potential as we go forward. From marketing, from piloting door-to-door, I think -- look, I think that's an area of opportunity for us.

So as we go forward, we have feet on the street now with some partners, but I think it's an area for us to further explore as we move along.

And our next question comes from Tom Callan from Investec.

Unfortunately, we're not receiving any audio from Tom's line. So moving on.

We next have a follow-up from Andy Grobler from BNP Paribas.

Just one follow-up, if that's okay. Just as you make plans for this restructuring and all the cost cutting, can you talk about the cash cost of doing this over the next 2 or 3 years or however long you think this is going to take?

Yes, very good. Let me -- so Tom, I think you had some of the same microphone problems I had at the beginning of the call, but let me flip that over to Paul.

Yes. Thanks, Andy. So in terms of the cash cost of the simplification, it will slightly depend on what savings we make and where. So the cost to value delivered in North America tends to be lower than it is in some other territories just due to labor law there. So people tend to be on longer contracts and there can be higher levels of severance if you are losing jobs in some parts of the world than it is in North America.

So we will have to work through that. The corollary of that, of course, is that the return on this is extremely strong. So if it's, say, a 1-year employment cost to remove that degree of cost, then you permanently have that cost out of the business. So it's a very strong return on investment. And as you know, we've been very focused on driving up free cash conversion in the business. And I'm pleased with what we're doing there around working capital and looking at the capital needs of the business.

So we have made a lot of progress on that. And we'll continue to focus on it to ensure this business is as cash generative as it can be. So hopefully, that helps, Andy.

I just wondered in terms of guidance range, there's a bit of lack of numbers in that answer. Is there anything more that we can build into our expectations for the next couple of years as you go through this process?

Well, I mean, it really depends on the pace at which we are able to remove costs in the international business. And there's still work to be done on that. As I said, we've made progress in Pacific, and we will have to look at the rest of the business and see what we want to do and when.

So as soon as I've got a number that I can give you to put into your model, I will oblige. But I can't be more precise than that right now, I'm afraid, Andy.

And there are no further verbal questions on the line. So I'd like to turn it to questions from the webcast.

So we have 3 questions from the webcast from Chris Bamberry at Peel Hunt. I'll do these one by one, then you don't have to scribble them down. So what are the key risks and challenges in segmenting residential and commercial?

It's a good question. I think it's -- it will always come down to talent from the challenges and making sure we have the right talent, but I think there's a lot more opportunity than risk. We're asking people, if I'm a branch manager or a region director managing both today, I have two systems I'm in. I have two pay plans.

I have 2 different requirements of my tech in terms of compliance and training. There's a lot of differences between residential and commercial. And I think splitting them and providing focus is going to drive the opportunities we see.

Thanks, Mike. Second question on portfolio simplification. So could you give us some more flavor on the criteria that determine whether a business is retained or exited? And how much of the revenue and profit is currently potentially up for disposal?

On the first question, I think like we said, we're going to review our entire portfolio and evaluate our current operating model. So we're going to simplify to focus resources on the high-growth markets and categories where we can deliver industry-leading operating margins and returns.

And I would say some of the characteristics of what attracts us to a market or a business is certainly the TAM, our right to win, the overall materiality to the group and can we get operational savings. So does density drive a low-cost model, a low-cost model that drives improvements in margin and quite frankly, customer experience. I don't know, Paul, if there's anything you want to add?

Good.

Great. And this last question is probably a different flavor of questions we've already had. So let's see if there's anything to add. But given the commentary around the performance of the U.S. commercial business, it sounds more like a Rentokil issue than a market one. Is that correct? And what actions are you taking to improve performance?

I think we have -- it's our opportunity. I think one of the things we've proven is where we focus, we win. We see that in the North America residential numbers. We also -- safety.

We don't talk about safety on this call, but our safety scores are amongst the best I've seen in my career, and that's because the organization focuses on that. And I think our opportunity to refocus on commercial and provide -- and have the same emphasis and investments and resources behind that channel. Sam, anything else on the phone?

I confirm there's no further questions from the phone.

Well, let me close and close where I started. The potential, hopefully, it's very clear to see. Our goal is not to reinvent Rentokil, but to take the many strengths of the company and apply them consistently across the group. We will organize to leverage scale and drive functional excellence and return to becoming a truly great service company.

And some of the reasons, as I think about it, are reasons to believe, like I just said, when we focus, we win. And we have opportunities to focus to drive performance. We're not going to reinvent Rentokil, but the 3 priorities we described earlier are here to accelerate growth and close the gap to market. We'll self-fund growth investment and grow margins and cash over time.

There's plenty of opportunity for us to take the learnings from North America and continue to apply them in North America, but to bring them across the group and international.

So with the right focus and investment against those core priorities, we have the people, the brands and the scale to deliver sustainable organic growth, improve margins and free cash flow that I am confident of. So thank you for joining us today and looking forward to talking to many of you in the days to come and weeks to come. Thank you.

Good morning, everyone, and thank you for joining us on today's Rentokil Q1 Trading Update. My name is Drew, and I'll be the operator on the call today. [Operator Instructions] With that, it's my pleasure to hand over to Paul Edgecliffe-Johnson to begin. Please go ahead when you're ready.

Thanks, Drew. Good morning, everyone, and welcome to our first quarter conference call. Before we begin, I'd like to draw your attention to the usual cautionary statement contained in our trading update, which also applies to this call. I'll start by making some brief remarks on trading, and then I'll be happy to take your questions. As we only reported on performance and strategy last month, today's announcement is a short update on revenue performance in the first quarter. As a reminder, all commentary is on a constant currency basis, unless otherwise stated. So we made a good start to the year with group revenue of $1.7 billion, representing organic growth of 3.4%. This is driven by continued momentum in North America, which delivered 3.9% organic growth and a solid performance for international, which saw 2.8% organic growth.

Looking in more detail now at North America, where revenue grew 4.5% to $995 million. Pest Control Services delivered revenue growth of 3.5%, including 6.1% from one-off job revenue and 3.0% from contract revenue, an improvement from the previous quarter's 2.4% contract revenue growth. Pest Control Services organic revenue growth of 2.8% continued the steady quarter-by-quarter improvements we've seen over the past year as we execute our strategy to optimize the ROI from our marketing spend, invest behind our strong national and regional brands and improve our sales execution. The pricing environment remains robust with continued above inflationary increases. Overall, as we flagged back in March, our teams across the U.S. worked hard in February, delivering excellent customer service to recover workdays lost due to January's extreme weather.

Business Services delivered strong organic growth, up 12.7%, helped by pre-spring demand in product distribution, new customer wins in brand standards and some large contract wins in lake management. Colleague retention of 82.6% increased 40 basis points compared to the position at the end of December. Customer retention was broadly flat on last year at 80.4%. Moving to our international business. Revenue was $682 million for the first quarter, up 4.1%. Contract revenue grew 5.5% and one-off job revenue was broadly flat. Organic growth of 2.8% was supported by good growth in Europe, Latin America, the U.K. and Sub-Saharan Africa, benefiting from strong pricing and volume growth.

This was offset by a 60 basis point headwind from organic revenue declines in Asia Pacific due to tough comparatives in our job-based rural and Trackspray business and Middle East, North Africa, impacted by the Middle East conflict. So in summary, we've delivered a good start to the year during our seasonally quieter first quarter, driven by continued momentum in North America and solid progress across our international business. We remain on track to deliver a full year performance in line with market expectations. I'll also take this opportunity to welcome Thérèse Esperdy as Rentokil's new Chair effective from the 1st of September this year.

For more details on Thérèse and her appointment, please see the announcement released yesterday. Finally, as you all know, last month, we welcomed Mike Duffy as our new CEO. Mike will be leading the half year results presentation in July when we will be giving you a more detailed update on the progress we're making executing against the plans we set out in March. And with that, I will now hand back through to you for Q&A.

[Operator Instructions] Our first question today comes from Suhasini Varanasi from Goldman Sachs.

Just a couple from me, please. On the core pest services growth in North America, we've obviously seen a very steady improvement in recent quarters. Just wanted to help us understand how you expect the improvement for the next few quarters, please? Are there anything -- is there anything on comps, et cetera, that we should be worried about over 2Q, 3Q? And the second question is on Business Services. It's been pretty strong in the last 3 quarters. Can you help us understand the drivers behind this and whether this can continue into the rest of the year?

Thanks, Suhasini. So look, I mean, in terms of the growth that we're seeing on the [indiscernible] side first, this is a combination of all the efforts that we've been putting into the business really over the last 12 months or so. So the strategic pivots that I talked about my first call near 15 months back. And driving up the number of leads that we've got, improving our conversion, improving our marketing ROI, et cetera, et cetera, is all helping us grow. But it is a grind-up story. We are improving our pricing capabilities, and that's the driver of all the growth that we're seeing at the moment. Volumes are still negative, in line with what we saw in second half of last year.

So the strategy for 2026 is to try and improve our volume performance, keep more customers, increase retention and still hold on to that pricing. There's no big things that I would call out in the quarters to come in terms of lapping tougher comparatives. There's always a few puts and takes, but there's nothing that is that material. In terms of the Business Services segment, yes, I mean, 12.7% is stronger growth than I expected to see in the first quarter. And we had a very strong second half as well. But I do think that this is an aberration rather than the norm. I don't expect to see this level of growth from that business segment. I think we've just seen some particularly strong demand in chemicals and distribution.

And in the first quarter, as I mentioned, we had some brand standards win in our Steritech business and a large job in light management. So those have all driven it. But I think it will revert back to a normal level of growth as we go through the year.

Our next question comes from Annelies Vermeulen from Morgan Stanley.

I have 2 questions, please. So firstly, you've made comments about the focus on volumes and so on. In previous quarters, you've given some color on lead generation. So could you perhaps comment on how that trended in Q1 relative to Q4 and the second half of last year? And then secondly, just a follow-up on pricing. I appreciate it's early days, but given what oil prices are doing, concerns on inflation going up and so on, are you already beginning to push higher price increases with customers? And would you expect pricing to accelerate through the rest of this year relative to the levels that you've seen in Q1 '26? And perhaps if you could talk about how that ties into this focus on retention, how you'll balance that with continuing to want to improve volumes?

Thanks, Annelies. So in terms of lead generation, I'm not going to every quarter put out the numbers. We'll continue to pull it out at the interims and the full year. But I think it's just a bit too [indiscernible] in every single quarter. No change there. We're still pleased with what we're seeing. All the work that we've done to improve our marketing capabilities and to improve both the number of leads and the quality of leads is continuing to drive business for us. So we're pleased with that, but nothing has changed in the last sort of 42 days since I talked about the full year. In terms of pricing, as I've spoken about before, our pricing capabilities are much better now.

The fact that inflation is going to be driven up by oil price increases. It doesn't really change our pricing strategy for the residential business. On the commercial business, we'll have to see what happens there, whether there's any scope in markets around the world for price surcharges. That would be something we would consider, but there's no decisions on and it's subject to the contracts that we have with customers around the world. So we will continue to do as we always do, making sure that we offer excellent service and excellent value, and we'll look at the competitive environment, what everybody else is doing and what's sort of fair in the circumstances. But nothing that I expect to have a big impact on the numbers this year. And so yes, I think that's the main message. Nothing is going to have a big impact on the numbers this year.

Our next question today comes from Andy Grobler from BNP Paribas.

Two for me as well, if I may. Firstly, just kind of following up on fuel price increases and the potential for some inventory shortages. How much inventory do you have in the system? And are you seeing any signs of stress resulting from the conflict in the Middle East? And then secondly, a bit [indiscernible], I'm afraid, but just in terms of exit rate in March and to what extent all of that was impacted by the weather?

Thanks, Andy. So yes, I mean, clearly, we do spend a reasonable amount on fuel in the business, but it is only 2% of our cost base. And as I've spoken about before, there's a lot that we are doing to the cost base around the world in terms of offshoring and restructuring and driving improvements in efficiency. So we have got quite a few levers to pull there. So we'll have to see how long the fuel price increase remains with us. I don't expect it to be a material number for us in the context of 72% of our cost base. And in terms of inventory, we do actually have quite a lot of inventory in the supply chain and the majority of our supplies were not coming through the [indiscernible] though coming other routes.

So we're not as impacted as perhaps some businesses might be. So that's not something that currently is a concern to me. In terms of exit rate, so January obviously was impacted, and we had a lot of work to do by our technicians to get around to our customers in February and March to recover that work, and they worked fantastically hard as they always do. And we're able to get back and get all the jobs covered and that's how we delivered the numbers that we have delivered today. So it's a little difficult to look through that and look at the March exit rate. So there's nothing that I can see in the numbers that tells me anything different in March from the earlier months. But if there was, it would be quite hard to see through the noise, but we're pleased with the quarter.

Our next question comes from Nicole Manion from UBS.

Just 2 questions from me, please. Firstly, just on the customer retention side, progress there perhaps a bit more muted than you've seen for the colleague retention. Can you talk through some of the drivers of that, maybe on the commercial side compared to in resi in the U.S.? And then secondly, just on any branch openings year-to-date, I think it's 70 or so smaller branches you're aiming to open through the year. Have there been any more open through sort of Q1? Kind of where are you tracking towards that target?

Thank you, Nicole. So yes, I mean, we were pleased with the -- with both customer retention and colleague retention actually. Colleague retention is clearly a fair bit up from where it was at quarter 1 of last year, and that's progressed through. So it's all the efforts that we're making to look after our colleagues is paying off, and that's a super important part of our business model. And so we're pleased with that. In terms of customer retention, I mean, it's basically flat on where it was last year. And remember, these are -- we report on a 12-month rolling basis. So no real differences there. We spoke previously about the rationalization that we're doing on some of our commercial customers to take out customers that aren't as profitable -- commercial customers that aren't as profitable.

And that is a little bit of a headwind. And you're seeing that coming through in the slight decrease from the quarter 4 number that we reported there. So it's not on the residential side, it's driven by that commercial side, which was deliberate. And in terms of branch opening, yes, as you know, we've got another 70 branches that we are opening during the course of this year and making good progress with that. So I'm not going to give a quarter-by-quarter rundown of the branch count and I don't think that's particularly helpful, but it's all on track. We're pleased with the progress. And so yes, overall, we're continuing to do exactly what we said we would.

[Operator Instructions] Our next question comes from Allen Wells from Jefferies.

Two quick ones from me, if I may. Firstly, you talked a little bit about the job in versus recurring activity within North America Pest Control the full year numbers. I think the job in activity was a bit stronger. I just wondered if you could provide a bit of an update in terms of how Q1 played out and the progress you made on recurring revenue improvement there? That's my first question. And then secondly, I appreciate it's only been 40-odd days since the last update. But just in terms of the branch integration that was paused last year and restarting, maybe you could just provide a kind of update and reminder on how to think about the kind of timing and shape of progress here as we move through 2026.

Thanks, Allen. So yes, I mean, as I said, in terms of the pest control services growth that we saw overall that 3.5% that was 6.1% from one-off job revenue and 3% from contract revenue, which is an improvement from the previous quarter's 2.4% contract revenue growth. So that's important. If you look at how we're growing that, it's still all price. So we're seeing the same sort of volume declines that we saw in the second half of last year. That's a continued focus for us and an area of opportunity, but we're pleased with the pricing that we're getting. And job revenue does move around a bit quarter-by-quarter, but we're pleased with the 6.1% increase that we saw there. In terms of what we're doing around integration, I think I spoke about that quite extensively 42 days ago and no change from that.

We're rolling out our branch 360 data layer, which allows all our branch managers to see data more simply. And that's been very well received. That's out and a lot of branches now and pleased with the progress on that. And really nothing further to say. I wouldn't anticipate that we'll be saying a lot more about integration per se. Our focus is on driving the performance of the business. And that's sort of a new chapter for us, if you like, as we put the integration chapter behind us. But thanks very much Allen.

With that we have no further questions in the queue at this time. So that does conclude the Q&A portion of today's call. I'll now hand back over to Paul for some closing remarks.

Thank you very much, Drew, and thank you, everyone, for dialing in and listening. And as I said when I started at Rentokil that my ambition was to make Rentokil a nice safe boring stock where we do what we said we're going to do. And hopefully, this morning's results show that we are on track. And we look forward to talking with you again for the half year in July. So we'll speak to you then. Thanks very much, everybody. Bye for now.

Thank you for joining. That concludes today's call. You may now disconnect your lines.

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.

Good morning, everyone, and welcome to the Rentokil Q3 Trading Update Call. My name is Rita, and I will be coordinating your call today. [Operator Instructions].

I will now hand you over to your host, Andy Ransom, Chief Executive Officer at Rentokil, to begin. So, please go ahead, Andy.

Thank you very much. Good morning, everyone. And before we begin, as always, can I just draw your attention to the usual cautionary statement contained in our trading update this morning as it also applies to this call. I'm going to start off with some brief opening remarks, and then Paul and I will be pleased to take any questions.

We're encouraged by our performance in the third quarter as the overall positive trends that we described at our interim results have continued into the second half of the year and leave us on track to deliver our 2025 results in line with market expectations.

For the 3 months to the 30th of September, group revenue was $1.8 billion, representing year-on-year growth of 4.6%. Organic revenue grew 3.4%, with an improvement in North America to 3.4%, and organic growth across our international businesses of 3.3%.

Looking at our performance in North America in more detail. Pest Control Services organic growth was 1.8%, which compares favorably to the 0.3% seen in the second quarter. North America Business Services organic revenue growth was particularly strong in the third quarter, up 11.9%.

Back in March, we discussed how we were evolving our North America strategy to drive enhanced lead generation and a lower cost per lead. This was a comprehensive overhaul of how we were growing the business, informed by our learnings in 2024. And this revised strategy included raising the bar on improving colleague retention and driving up customer retention, enhancing our digital marketing to realize the benefits from better organic lead generation and higher quality, lower cost paid for leads, and evolved satellite branch strategy to improve customer proximity and local search visibility, and moving our sales operating model back under the branch managers to drive more accountability and visibility of results.

At the half year stage, this plan showed early signs of yielding results with the improvements that we saw in lead flow in June. And it's pleasing to see that this improved performance has continued. Following the lead flow growth in June, we delivered year-on-year growth in lead flow throughout the third quarter as we focused on improving organic leads and on better targeted lower cost paid leads.

We also now reported 11 consecutive quarters of improving colleague retention. And importantly, our customer retention rate has nudged up again from the half year stage to 80.9%, where investment in the customer sales team, in particular, is having an impact. The rollout of satellite branches is on track with 139 in operation, delivering improved lead generation through a stronger local presence together with higher volume, higher rated customer reviews, and we continue to target opening 150 satellite branches this year.

Finally, the door-to-door pilot continued in 25 sales territories, and we're encouraged by the results, and we're planning an expansion of this pilot in 2026.

Standing back, you'll remember that we talked about our core challenge and core opportunity to sustainably improve our North American organic revenue growth, being shifting the contract portfolio into consistent and healthy growth through customer retention, through pricing and through winning new customer contracts. So we are pleased to see that improvement in customer retention. We also continue to deliver on pricing discipline, achieving price increases a little above the rate of inflation. And combined with the higher volume of new leads, we did see an improvement in contract portfolio net gain performance during the quarter.

For a business driving value through a contract portfolio, it's this quarterly sequential improvement which will, over time, translate into stronger top line growth. The focus now is about taking the learnings from these actions and planning for 2026 as we hit Q4, which is a seasonally quieter quarter. We've also noted for Q4 that 2024 benefited from one-off emergency mosquito control work driven by an exceptional hurricane season last year. And this is not currently expected to repeat, impacting Q4 organic growth by about 60 basis points, albeit in dollar terms, it's actually very small in the context of the U.S. business as a whole.

Turning now to our International businesses, which obviously we now report excluding France Workwear with the sale completed at the end of the third quarter. International revenue grew by 4.6% with organic growth of 3.3%. Europe sustained strong growth from the first half into the third quarter, particularly in the Southern European markets of Spain, Portugal and Greece. The U.K. also saw growth improve with continued strong performance in our core Pest Control and Plants businesses, and an improved performance in the lower-growth Property Services business.

Growth in the Pacific region, though, remains below the average for International. Good growth in core Pest Control and Ambius was offset by adverse weather impacts on our rural and track spray businesses. In terms of category performance, Pest Control organic revenue growth for the group was 3.4%, driven by good momentum in North America. Hygiene & Wellbeing grew by 3% organically, an improvement from the 0.9% in the first half as market conditions improved in the Pacific and in the U.K., in Sub-Saharan Africa regions, which returned to growth in the quarter.

On M&A, we completed 3 deals in the quarter, taking the total number of deals completed this year to 21, and representing annualized revenue in the year before acquisition of around $39 million. We were pleased to complete the France Workwear sale with the receipt of $397 million of initial cash proceeds. As a result of ongoing cash generation and the disposal proceeds, net debt at the end of the quarter was $3.9 billion.

Looking forward, our outlook for the remainder of the year remains unchanged. Current trading is in line with our expectations. And we expect to deliver financial results for the full year, in line with market expectations. Beyond 2025, our cost efficiency initiatives remain on track to deliver the $100 million cost reduction by the end of 2026, and to achieve an operating margin in North America above 20% post 2026.

In summary, the third quarter demonstrates a continuation of the positive momentum we began to see in the first half of the year. The International business is performing solidly and they are encouraging, but still early signs that the revised strategy we're implementing to improve sales execution and to evolve our digital marketing capabilities are beginning to have a positive impact in North America.

So with that, let me hand back to the operator to manage the Q&A. Thank you.

[Operator Instructions] First question we have comes from Annelies Vermeulen with Morgan Stanley.

I have 3 questions, please. So firstly, Andy, you mentioned net gain in contracting portfolio, improvement in performance in Q3. Could you talk a little bit about jobbing versus contracting growth? Did you see growth in both elements in the quarter? Or was one stronger than the other?

And then secondly, sort of related, if you could comment on the performance of resi versus commercial versus termites. Again, was there anything or any one area that drove more of an improvement in the quarter relative to another?

And then lastly, just putting it all together, you've spoken about improved lead flow, improved customer retention, the customer saves program, et cetera. So when we think about this improvement in the growth and the step-up versus Q2, could you talk a little bit about your sense of how much of the improvement in the growth is both in new customers and how much of it is the improvement you think in customer saves and customer retention?

Thanks, Annelies. We can probably do an hour just attempting to answer that question, which I promise I won't. But there's a lot in there. I'll try and give you a little bit of color. Look, as you correctly identified, getting the business into positive, healthy, consistent net gain in the portfolio is what we need to see in the business to get the sorts of levels of organic growth that this business is capable of. So it was really pleasing to see that improvement in net gain.

And just to remind colleagues on the line, the business -- most of the questions I'm sure will be about North America, but the business in the U.S. is approximately 75% of the revenues under contract and 25% is jobbing. And so as I said at the half year, I'm not overly concerned about the jobbing side of the business. We can always produce jobs in the business. What we have to do is to get that healthy positive net gain back into the business, and we have to get volume growth back into the business.

Without giving you specific data, jobbing was pretty good in the third quarter. As I said, don't worry too much about jobbing. But we did see -- so jobbing was above the average rate of growth that we've shown you there. But the net gain was the best we've had in the business for a little while, and it was encouraging to see that. What we now need to see is can we continue net gain in the portfolio into the fourth quarter and into the first quarter? Or does it revert to net loss. So that's the key thing that I'm looking for in the business. But the answer is we saw good jobbing, but we also saw an improvement in the portfolio.

The resi, termite, commercial, we actually saw improvements in all of those. Termite had not been great in Q2, from memory, and H1. So termite performed better in the third quarter. But resi was also encouraging, and that's important to see in the business as well. Commercial was steady.

Lead flow, yes, look, I think it's important that we get revenue growth both from our existing customer base. But the critical thing here is we have to find new customers and new customers to add into the contract portfolio base. Typically, with your existing customers, your opportunity is to keep them longer. Your opportunity is to upsell more services to them and your opportunity is to price to them. That's the role that the existing customers play in revenue growth. But it's the new customers that we have to infill into the portfolio. So again, without giving you numbers, we were encouraged in the third quarter by what we saw, but we are a long way from where we need to be.

So if you just do the math quickly, we've got price above the rate of inflation, but we grew 1.8%. So you can do the math yourself. That tells you we've still got a level of volume decline, but the decline was an improved rate of decline, if I'm clear on that. It was better than it has been, but we need to see that move into positive territory. That's why we're really saying this is early days here. We are pleased. We're not satisfied, and we're not complacent because we got a lot to do. But it's the positive momentum we've seen in net gain in the portfolio, which is what we are looking for and what we'll be pushing to see what we can do in the off quarters in the quiet season.

Your next question comes from Will Kirkness with Bernstein Societe Generale Group.

I've got 2 questions, please. Firstly, on pricing and your initiatives there. What's the balance between lowering price to take share? And then any price reductions you're having to put in because of the customer saves initiative versus pushing through price increases? And then secondly, I know it's just a trading statement, but I wondered if you could talk about progress on levers to improve free cash flow.

Thanks, Will. I'll hand those both to Paul, I think.

Thanks, Andy, and thanks, Will. So on pricing, really what we're seeing here, and we talk about pricing being a little better than inflation is better pricing strategy. We have a new pricing lead in North America, and we are using the data that we have in the business better to identify where opportunities are. This isn't just a vanilla approach that you ask everybody to pay a little more. It's more sophisticated where there are pockets of opportunities where we can see different types of customers, different market types, and then deploying different pricing strategies against different customers. So it's sophisticated.

There is more to go with it. We will continue to roll that out. And we're pleased with the performance in these states at the moment. And in terms of price promotion and trying to win volume on the back of reduced pricing, you will always have a component of that business, but that's not what has been driving the percentage there.

In terms of the levers to drive free cash flow, you've heard me speak before about how important I think this is in the business. And there's an opportunity in working capital to drive that. There's also an opportunity in our capital expenditure and to make sure that we are getting the best returns on capital from what's being deployed. So we're pulling all those levers. I quoted the net debt number at the end of the period, and we'll come back obviously at the full year and I'll talk about the cash flow in more detail. We're making progress, and the machine is definitely moving. So look forward to talking more about that in March with the full year results.

We now have Suhasini Varanasi with Goldman Sachs on the line.

I have 3, please. Clearly, you have seen a very good improvement in growth. Can you maybe discuss the expectations into the next quarter? I appreciate that you have a potential drag of 60 bps from the mosquito business. But given the underlying improvement that you saw in the third quarter, is there any reason to believe that the growth will not be at least as good as third quarter in the next one?

And the second one is on 2026. It's just not on financials, but given the success that you have seen on door-to-door, satellite branches, et cetera, can you maybe share some initial thoughts on how you're thinking about investments going into '26 and the plans for funding around that?

And the third one, you previously stated your margin target for more than 20% beyond 2026. Can you maybe just remind us about the building blocks that will get you there, starting with the top line?

Thanks, Suhasini. I'll take the first two and then hand over to Paul for the third one. And Paul, when we get to -- Paul and I are not in the same place. You are a little bit -- sound quality wasn't great. So I don't know whether you can get a bit closer to the mic or there's nothing we can do, but we will press on.

In terms of your first question, growth in the fourth quarter, I mean, I've discovered, to my pain, that making forecast predictions about organic growth in the business is probably not a good use of my time or yours. It's been difficult for us to be precise with this in recent quarters. I'm not going to do that. I'll make a few sort of general observations.

Are we pleased with what we're seeing on lead flow and the improved way that we're going about getting both organic search and also the new approach to pay? Yes, we are. We said that at the half year. We were asked at the half year, are you sure it's not just the weather that you're seeing? Are you sure it's actually having an impact? And we said, look, I can't rule out that weather is part of it, but it is having an impact. We are doing things, we are changing things, and we are seeing positive results from those things. And I expect that to continue.

What does that translate to when we're in the winter, in the off-season, a little bit more challenging to say. You've picked up on the 60 bps drag coming from the mosquito work relating to last year's mega hurricane season. So that is a factor. But look, as I said in answer to Annelies' question, what we are looking for is can we see momentum in the portfolio. And the portfolio, and I'm sure you all get this, if we sell a contract for $1,200, then we get $100 of that income each month for the next 12 months. If we sell a job for $1,200, we get $1,200 of income in the month in which we sell the job. So it's the building of the portfolio that gives you the momentum to take into next year. So there's no reason to assume that the fundamentals that we're seeing in the business change in the fourth quarter. But that said, it is the off-season, we do have that drag. So let us see.

In terms of the door-to-door and the satellite, I mean, the honest answer is we're off to America next week with the Board, and then we've got the American team coming to London 3, 4 weeks after that. That's when we will do the budget in a month's time. And 2 core questions, and there's plenty of other core questions, but 2 core questions that we'll be asking and answering in the budget process is how many more satellites do we want to open.

What we're seeing in the satellites is really encouraging data coming off the satellites that we opened 12 and 9 months ago. So there is a maturity to these satellites. There is a period of optimization of the satellites. You've got to get enough 5-star reviews in the satellite area. So it's a thing that builds. So I think it's very likely that we will take a decision to add more satellites next year. And it could be material. I don't know. I mean it could be a decent number. We simply haven't done the math on that and worked through it. There's a limit to how many satellites and how many cities you believe you can optimize these in. So we'll answer that very much in the next month or so. And so by the time we come back and talk to you with the prelims, we'll have the answer to that question.

Similarly, door-to-door, we deliberately characterize door-to-door through this summer as a pilot. We're pleased we did it in 25 territories. I think it's highly likely that we will do that in more territories next year. And on the door-to-door program, that does not require an investment. That does not require a headline investment, but it is a different model. You're essentially -- the door-to-door model is you're engaging a third party. It's their sales force typically that do the door-to-door selling on your behalf, with your brand, with your service proposition, and you pay them for successful results. That's how it works.

So it's not like you hire another 100 people in the sales force, you do it through a third party. So it's a slightly different impact on the P&L, but it doesn't represent an investment as such, but it might have a different shape in the P&L. But again, we'll have a much clearer idea exactly what plan we're going to put into place. And we have to fix the plan for 2026 by the end of 2025. It's locked and loaded. So by the time we talk to you next, we'll be able to tell you how many sales territories we're going after in '26. I'm sure it will be more than the '25.

Over to you, Paul, on the margins.

Thanks, Andy. And I'll try and speak up and hopefully, you can hear me a little more clearly. So it's the same story, as I talked about at the prelims back in March and the interims in August. But as we look at the business and we look at what we had historically talked about as our integration savings, we will take the 2024 cost base, and after 2026, we will have been able to have taken out $100 million of cost from that cost base. There will, of course, be inflation in the cost base, but that should give everybody a good indicator of where we think the numbers will be on the cost side for 2027.

And then the margin piece, getting to 20%, that is our intention. Obviously, it does require growth in the business through the balance of this year and into next year and in 2027. But that is what we're targeting for. We think targets like that is important, and we can see a clear line of sight to it. Of course, nothing is ever done until it's done, but that is what we are shooting to.

Our next question comes from Oliver Davies with Rothschild & Co.

Just one for me. I guess, would you be able to give us an update on the Terminix integration, how the commercial branches integration has gone this year, and then the plan for 2026 in terms of residential branches and also the changes to technician pay plans?

Thanks, Oliver. Yes, it's a fair question. We haven't said an awful lot. It's a Q3 trading update, so we can't cover everything in detail. How would I describe it? Look, I'm pleased with where we are. We've restarted commercial, as we said we would. We're focusing on the easier end of the spectrum. So we're focusing on commercial-only branches, and we're focusing on those that need to go through a Pest Pack to Pest Pack conversion. So branches that are already on a version of the end design software Pest Pack. So easier to do. We've got those underway. They've started well. No issues to report. So happy with that, and we'll continue with that into next year.

If we look back at the integrations done prior to the pause that we put in at the beginning of the year, what we saw was excellent delivery of the cost savings and the margin improvement, but we saw a less than satisfactory performance in lead flow and in customer retention. So we put together a very detailed action plan to say, okay, what are the things that we need to do differently to make sure that future integrations have both the benefit of the cost out, but also we don't see the impact on lead flow. And as you recall, the satellite strategy was in part in response to that issue, but also on customer retention.

So we're still working through that plan. Some of that goes into systems and system redesign. Some of it goes into process, some of it goes into change management. So we're making, I would say, steady progress on the further integration, but this is a fence that we're not going to rush, and we don't need to rush. It's one that we've got to get right. What we are really focused on, though, Paul has just talked about the overall cost out. Some of that cost will come from branch integration, but we found a lot of other opportunities as well, which is why we're confident we'll get the $100 million, and we'll get to the 20% margin.

But as you said in your question, Oliver, integration involves a lot of stuff, right? It's not just systems integration. It's not just branch and physical location. It's pay plan, it's branding, it's route optimization. There's a lot of other things that go into that. And I'm feeling pretty good on the other parts of integration. So I think the pay plan discussions that I was in 2 weeks ago -- Paul and I were in 2 weeks ago in New York, happy with how they're coming along, and we'll take a decision as to how we roll that out for 2026 quite shortly in the budget process. We've made some good progress on branding.

So look, it's a complex story. We're taking our time. We have restarted. We're satisfied with what we've seen on the restart and the commercial. The finer detail of exactly what it will look like in 2026, et cetera, that's still to be worked through, through the budget process. And again, we'll give an update with the prelims.

The next question comes from James Rose with Barclays.

I've just got one, please. It's on reinvestments, and I appreciate your high-level thoughts there. When would it make sense to increase spend in marketing and sales, for example? And related to that, I mean, the 20% margin target you've got, I assume that assumes turn to volume growth at some point. Is that deliverable, do you think, within the same envelope of marketing spend as it is now? Or does it assume some expansion and some reinvestment over time?

Thanks, James. I mean I'll take that. And Paul, if you violently disagree with my answer or you've got a better one, pile in after me. Look, I think it's an interesting question. Marketing, in particular -- I mean sales and marketing, but marketing in particular, is always a challenge to work out. And I think Paul famously quoted the quote that with marketing spend, half of it is wasted. The problem is you never know which half. And marketing spend is notoriously difficult to work out. Are you getting the returns on investment that you demand? And we're getting much, much better at that. We're getting much better insight on where we're spending our money and what returns we're getting. We're getting better at data. And Paul has mentioned, we've hired a data specialist.

So in terms of can we see where the dollars are going? Can we see what we're getting for the dollars? Can we see what sorts of returns we're getting from different channels, not just digital, but other channels, we are getting better, and that's really, really good. Therefore, implicit in that is if you get to the point that you are rock solid confident that an additional dollar above your plan invested in a particular channel or a particular approach is going to give you a really good return. And you can debate, is it going to give you jobs? Or is it going to give you contracts? Is it going to give you an in-year return? Or is it going to give you a return over the lifetime of the contracts. But if you can see that additional dollar, then you've got choices to make. Would you invest more additional dollars to get more additional growth.

And to be fair, look, we haven't done the budget for next year. And these are the sorts of questions that we will work through in a real environment with the team, let's look at all of the channels and how do we think much like we've just talked about in terms of the satellites and the door-to-door, we'll be working through that.

As we sit here, we don't -- there's not big bold assumptions around the $100 million that Paul has just talked us through and the post-2026 margin. Yes, that does require some growth. It requires growth. Whether it requires volume growth or just total growth, I'm not sure. Frankly, it's sensitive to volume versus total growth. It does require growth, but we're on a trajectory to get us there. So hence, I know there's a degree of -- we'll believe it when we see it, which is fine. But we have a plan to get to the margin. Need some growth, but not stratospheric growth. So I can't give you an answer to could you envisage spending more in marketing? And the answer is, if we can see demonstrable returns from the channels and we're getting much better at this, we absolutely reserve the right to do that. We'll figure that out in the budget, but that shouldn't detract from the ability to deliver the 20% margin target post '26.

We now have Nicole Manion with UBS on the line.

Two questions from me, please. They are follow-ups on some of the previous ones. So sorry if there's some familiar ground. Firstly, on the pay and retention side, just based on your previous answer, Andy, is it fair to say that within the overall colleague retention number for North America, technician retention is also still going up? And are you still in the pilot or discussion phase for pay for most technicians? Or are there some cases where you've already made changes, I guess, with some of the new joiners, perhaps their pay structure maybe reflects more of what it is you're intending to move towards for everyone? Or is that not the case?

And then secondly, I appreciate you've touched quite a bit on satellite branches. Maybe just one more specific question there. You've got obviously a decent sample size now from the past 9 months or so. Can you comment on how you think they're working, maybe especially those that have been live for longer and just essentially whether you think they're meeting what your initial expectations of what you thought they could do were?

Thanks, Nicole. Yes, absolutely. On the first one on colleague retention, yes, we continue to see improvement in colleague retention in North America, in the United States Pest Control, and particularly in the technician side. And I was looking at the data yesterday. I don't know whether I should be celebrating this or not, but North America has now got off the bottom run in our internal ladder of colleague retention. And sorry to say, but the Pacific region is on the bottom. Pacific hasn't got worse. North America has got better. So it's no longer worst in group, and I've been sort of rubbing their noses in it for some time that they're bottom of the pile.

They're no longer bottom of the pile. So that is really, really encouraging. And I've said this many, many times. If you've got a business like ours and people are not turning up to work, either because they're just not turning up to work or you've got horrible churn in the sales force or in the service force, it's a very difficult business to run. This is a necessary but not sufficient condition for growth and success. So I couldn't be happier that the retention rates have improved 11 quarters in a row. And almost, we're not at the group average yet in the States, but we're not so far off it. So yes, it is coming through tax as well.

It's a very good point actually because to be honest, we haven't rolled out the universal pay plans either on sales or service yet. I can't remember the precise figure, Nicole. I think it's about 10% of the total North America team is on the new plan. It's something like that. So it's not the new pay that is driving up retention. So it's a really interesting observation. You're quite right, we have changed pay plans for all new joiners, for example, in sales, and we made some changes to the fixed versus variable, which has had an impact on sales colleagues. But the pay for service colleagues, we've not adjusted that yet. So as per the answer to, I forget whose question it was a little bit earlier, we will be locking our views on that in the budget season to adjust the pay plans.

And it is possible that we might go back to integration. We might go faster on the pay plan in '26. We were originally rolling out the new pay plan branch by branch, integration by integration. It's possible that we go faster on the sales pay plan, and we may go faster on the service pay plan, decision yet to be taken. But really, really pleased on what we're seeing in colleague retention across the board in the U.S.

On the satellites, yes, what we're seeing, just to sort of remind people why we're doing the satellites, in the first 12 months post acquisition, we shut down a lot of sites, and we went to co-location of branches. And in the first 12, 18, more so only 12, 15 months or so, we didn't really see much of an impact on our search performance in the areas where we had shut physical locations. But then we did. There was a lag on it, and then we saw the drop. So in part what we've been doing is putting some of the satellites, many of the satellites in areas where we used to have a physical location, where customers used to look for us.

But rather than just put the satellites exactly where the old branch used to be, we've taken the opportunity to put those satellites in more affluent neighborhoods. It's a fact that our services are easier to sell to wealthier individuals if you're talking about the residential or termite business. And therefore, putting our physical markers, putting our pin locators, putting our small satellite branches in areas which are more affluent makes it more likely that you're going to find the customers or they're going to find us that want to buy our services and are happy to pay our prices for the services that we provide. So that's what we've been doing.

In the first few months of opening a satellite, you don't see an awful lot of activity, because the big search engines don't recognize. If you do a search, pest control near me, for the first few months, maybe the quarter, maybe 2 quarters, it won't be picked up. It has to mature. It has to optimize. And the way you optimize it is you've got to get customer reviews. So what we do is we allocate the customers from the mother branch, from the closest physical large branch. We allocate the logical customers that are in the vicinity of the satellite, say to the customer, your new branch is 123 High Street. It used to be somewhere else.

And then we ask our technicians -- when they have happy customer experiences, we ask the customers, are you happy to give us a review? And once you've got about 10 reviews, the big search engines will pick you up. So when you do search for pest control near me, after a while, you will start getting hits on their web pages. And so it does take a bit of time to mature. We thought it would and it has.

So the lead flow that we're getting through on the satellite branches that we opened a year ago and 9 months ago is actually looking really good now. That gives us the confidence to say, well, the ones that we opened 6 months ago and 3 months ago will continue to mature and continue to improve. And the ones that we opened in Q4 this year, and I'm sure into Q1 and Q2 next year will start delivering fruit the back end of next year and into 2027. So that's how they work. They do work. They are working. They work well. But it's just one strand of an overall multifaceted term marketing, sales and operational strategy.

And the work that's going in from the team into organic search generally is actually way more important than just the satellites. The changes that the big search engines have made through AI and AI-generated search, that's having a profound impact. I'm sure you'll notice it as you search now and you get AI mode and you get all of the other changes that the answer to the question you search on the Internet is now an AI-generated answer. So we have to optimize the content on our web pages to be content that is responsive to the same narrative that the AI engine is going to give you.

So the stuff that you put on your web pages needs to change. And we've made really good improvements there and significant investment in bolstering our organic search. So for me, satellites are important. It addresses a particular issue that we caused ourselves, I suppose. But the broader search and organic search program is actually more significant, more important.

The next question on the phone line comes from Allen Wells of Jefferies.

Andy, just 2 quick ones from me. Apologies if I missed this in the comments earlier, but could you just maybe comment a little bit about the shape of both the North American organic growth and the lead generation as you move through the quarter? I guess I'm kind of looking for like exit rates for Q3. You helpfully gave some lead generation numbers, which I think were up 6 and a bit percent in June. So just any comments on how that trend has carried on sequentially through the quarter?

And then the second question, do we need to be mindful of anything on the higher growth in business services in U.S. Pest, which is obviously slightly lower margin. and the nonrepeat of the Vector Control, which again, I'm not sure if that's also slightly higher margin. Anything we just need to be mindful of on the second half margins in North America from the impact from that? Or is it too small and won't really be noticeable?

Yes. Thanks, Allen. Yes, look, you'll understand we're not going to be drawn into a sort of month-by-month blow by blow. We showed the progression in the interims really for one main reason, it was showing -- it wasn't so much the 6.6% improvement in June, although that was clearly a high point note that everyone picked up on, obviously. What the real importance of that was to show that we were moving from a dark place of negative year-on-year lead flow all the way through the first quarter, and it improved and it improved and it improved. And we finally broke through the line, if you like, in June into positive territory.

So it wasn't so much focused on the 6.6%. It was focused on the fact that we've moved out of negative into positive territory. We were positive in each month throughout the third quarter. I'm not going to give you a real commentary. August wasn't as good as September. August had 1 fewer trading day. September had one more trading day, pick the bones out of that. We were pleased -- let me just put it that way, we were pleased with the search performance in each month across the month.

And of course, the thing that you've got to get also, which is difficult if you're not seeing the data. Paul and I see the data every single day without exception. We see the daily data on lead flow across the United States business. Because to a degree, it depends, well, how much money did you spend in August of last year or September of last year on paid search? And what was the weather like on August 15 last year, why search volume up 10%, and on the 12th, it's down 3%. So it's very, I would say, volatile. It moves about a lot based on other factors.

So I could tell you, but I wouldn't really tell you much. I think the important point is the stuff that we are doing is having an effect. And that's really the message we want to get across. This is not coincidental. This is not a weather phenomenon. So we are satisfied, we're pleased with what we're seeing on lead flow. But again, don't forget, it is now the off-season. We're into winter. And so it depends what the winter looks like.

High-growth business services, I mean, you're absolutely right to call out Business Services. Roughly half of Business Services is our Products Distribution business. Products Distribution business is a 6%, 7% margin business. give or take, something like that. And it had a really powerful third quarter. And I don't think you can assume, and please don't assume that the levels of organic growth that we've seen in the Business Services business in the third quarter will continue at those levels. I think business is going well, performing nicely. But one of my old bosses used to say, in business, it's pretty rare to throw six sixes, by which he means it's quite unusual for everything to go right in a particular period.

Well, in the third quarter, I think we threw six sixes in Business Services. I think everything -- all of the businesses there, we've got Distribution, we've got our Lake Management, we've got our Brand Standards business, we've got our Vector Control business, and we've got our Ambius Plants business. They all performed well in the third quarter. So I don't think you can read that level of growth, please don't into the fourth quarter. And you're right to call out that the margins on Distribution and some of the margins on Vector are lower than the average for North America. But that's all wrapped up in the comments we've made, which is, look, we expect to deliver full year 2025 in line with market expectations, and that's where we are.

Our final question from the phone lines comes from Carl Raynsford with Berenberg.

Just 2 clarification questions from me, please. Firstly, apologies if this is basic, but I just wanted to understand your commentary around being a little better. And so first is the improvement, was that across North America? Or were you just referring to the contracted portfolio? And second, in my head, net gain suggests that you've won more than you've lost basically, which suggests positive volume, but as you say, the math suggests negative volume. So I'm probably misunderstanding something there. So it would be helpful if you were able to clarify that calculation, if you could please.

And the second question -- I'm sorry, this is the second question. I'll do both at once, if that's okay. But just a clarification on the North American growth. You note jobbing was above 1.8% reported, so that implies contracts had to be below that. But you also say there's been sequential growth. So would you be able to clarify the Q1 and Q2 numbers for contracted growth, so that I can contextualize that comment, please? From what I'm aware of, you only gave sort of minus 0.2% for H1. Any information on both of that would be very helpful.

Sure, Carl. I'll try and I'll probably fail to answer your Q1, Q2 question, just as a spoiler. Look, net gain, so let me try and break it down for you very quickly. Again, we're only talking here all the questions this morning and I get it have been about North America or United States Pest Control. Fine. That's what we're talking about. That's the kernel of what we're addressing here. Roughly 75% of the revenues, revenues are not sales, revenues come from the contract portfolio. So on January 1, we start with a book of business under contract. And if nothing else changes, that's the revenue that we will generate from that book of business during the calendar year.

But things do change. So to get net gain or net loss, there are basically 3 things that happen in your portfolio. Number one is customer retention. So if you keep more customers throughout the year by value as opposed to by volume. But if you keep more customers by value than you did in the prior year, you're going to improve the value of the contract base by that. So going from 80% to close to 81% retention, but with an ambition over the next few years to get to 85% is one of the ways in which we drive up the revenue coming from the portfolio. So the first thing you can do to improve your net gain, your contract portfolio, the revenue that's under contract is to improve your customer retention.

The second thing you can do is to give price increases, which we do on an annual basis, typically on the anniversary of the contract, to those customers under contract. So those are 2 pluses, if you like. If you can get retention up, that's a plus. If it goes down, that's a minus.

Pricing, if you put price increases up, that's a plus. If you give price discounts to hold on to a contract, to an earlier question, that's a negative. Then the third leg of the stool is new business, and that's the critical bit, and that's where lead flow comes into. So that is about selling contracts. And that's why the difference between net gain and revenue is quite an important one.

I know we're in danger of entering master class level pest control now. But the example I gave earlier, Carl, around if I sell a contract for $1,200 and I sell that in July, I'll get 6 x $100 revenue in the second half of the year, and then I'll get 6 x $100 revenue in the first half of the following year. But if I sell a job, I'll get $1,200, if that's the equivalent example.

So net gain is how are we performing in the period? Is the body of business under contracts larger than it was the last time we looked at it. And for me, I've been running the business a long time, it's the key leading indicator that tells you whether you've got momentum in the business, because if you can keep your retention moving up, if you can keep your price levels healthy, and then you can add more business than you lose, you've got to outsell your termination. So we measure the percentage of new contract sales as a percentage of the portfolio is a critical measure for us. If you outsell your terms, then you'll get the business into net gain. And if you get the business into net gain, that sets you up for next year, provided you can keep the momentum going in the portfolio.

So I know it's a bit of -- we always talk about the concept, it's a complex concept. It's not the same as revenue. Revenue is what the portfolio generates in a particular period. So all of the comments that I gave on that were about the U.S. Pest Control, to be honest. We still do have -- on a volume basis, we've still got a leak in the bucket. So price increases above the rate of inflation, organic growth of 1.8%. By definition, we've got a slight -- well, we've got a leak in the bucket in terms of overall revenue performance coming from pest control in the United States. But it's improving.

And that's what I said earlier, we've got to get -- if we can get net gain, net gain always gets worse in Q4 and Q1, because it's the off-season. It's the quiet season. If we can improve our net gain performance in Q4 and Q1, that sets us up really well for an improved performance in Q2 and Q3 next year. But we've got to do it first. So without really unpacking the numbers into another level of detail, I can't really do more than that in this morning's call, but happy to try and answer questions offline.

Just the other on the North American -- I know you said you can't answer Q1, Q2. So was the comment you're making really against the H1 number, the contracted side?

Yes. Because without going quarter-by-quarter and deep into the portfolio and so on. And I don't have the numbers in my head, I'm honest. But we saw improvement in net gain, and the second quarter was better than the first. The third quarter was better than the second and -- sorry, go on.

I'm referring to the sort of jobbing versus contracted organic growth, 1.8%. So I'm just saying you're basically implying contracted was worse at 1.8%. But you mentioned that was sort of an acceleration, the sequential growth from Q2. So that was sort of the second question just around that split really. Are you getting -- the Q2 number presumably was lower than sort of what I thought, to be honest, in that case.

I can. I don't know what you thought, so I can't answer that. But I probably have done as much damage to your question as I possibly can, honestly.

No, I'll take it offline with you. I appreciate that.

Did we have any questions online that we need to pick up?

We have a question from the webcast from James. Following the big increase in the legacy termite provision in the first half was in large part driven by a step-up in cost per claim, can you provide any insight into trends in cost per claim during Q3?

I'm going to keep that one really simple. No. We tend to do balance sheet items at the half year, and we'll pick that up with the prelims.

Were there any other questions online?

No, Andy. We're all out. We're all good online.

In that case, I would like to conclude the -- no more questions on the phone line. So I'd like to close the question-and-answer session here and hand it back to Andy for some final closing comments.

My final closing comments. Thank you. Thank you very much for attending today. Thank you for your questions. Thank you for your interest in the company, as always. And we look forward to hopefully making progress in the fourth quarter and updating you on that with the prelims early next year. Thanks very much, everyone.