RENTOKIL INITIAL (RTO) SHARES: 2025 PERFORMANCE IN UK, KEY DRIVERS, MILESTONES AND RISKS —'26 OUTLOOK

How did Rentokil Initial perform in 2025?

Rentokil Initial plc (LSE: RTO), a global leader in pest control and hygiene services, saw a year of moderated but resilient performance in 2025, as macroeconomic headwinds and post-acquisition integration shaped the company’s trajectory. The firm continued integrating Terminix, a transformative acquisition completed in 2022, while navigating inflationary pressures and shifting operational costs. Despite challenges, Rentokil Initial posted steady revenue growth, bolstered by robust demand across core offerings in the hygiene and environmental services sectors.

RTO shares, which had faced downward pressure in late 2023 due to investor concerns around debt and integration risks from the Terminix acquisition, showed signs of stabilisation in 2025. The UK market witnessed modest appreciation in the stock price, with investor sentiment cautiously optimistic on medium-term growth prospects. By Q4 2025, Rentokil Initial had managed to sustain EBITDA margin improvements and modest organic growth, particularly outside the U.S. region.

Here’s a more detailed breakdown of Rentokil Initial’s key 2025 performance highlights:

• Revenue: Approx. £5.6 billion, supported by pricing adjustments and recurring contract-based income streams.
• Adjusted EPS: Slightly ahead of mid-year forecasts, helped by effective cost management.
• Free Cash Flow: Positive and growing, used sensibly to reduce post-acquisition debt and fund capital investments.
• Dividend Policy: Maintained progressive dividend policy, supported by stable cash generation.
• Share Performance: RTO shares climbed approximately 8–10% over the calendar year, recovering from 2023 lows but remaining well below pre-acquisition peaks.

The full-year results demonstrated Rentokil's resilience amid post-COVID normalisation, tighter global monetary policy, and de-risking in their North American business operations. Management emphasised investment in digital platforms—such as predictive pest detection and route optimisation—to drive efficiency and customer satisfaction going forward.

The broader UK market context also played a role. With inflation gradually subsiding and interest rates stabilising, investor appetite for defensive growth stocks like Rentokil began to return cautiously through H2 2025. As such, rental and hygiene servicing businesses that offered recurring revenues and were less cyclical by nature drew increased fund interest.

What were the key drivers in 2025?

Rentokil Initial’s 2025 performance was shaped by a combination of strategic, operational, and macroeconomic factors. The firm's ongoing focus remained on optimising the Terminix integration, streamlining digital operations, and maintaining steady growth across hygiene and pest control verticals. Several pivotal drivers either bolstered or weighed on Rentokil Initial’s momentum throughout 2025.

1. Post-Acquisition Integration Progress

The integration of Terminix continued to define Rentokil’s strategic landscape. By mid-2025, Rentokil reported capturing significant synergy benefits across technology, procurement, and operational areas. Management confirmed more than £120 million in run-rate cost synergies, ahead of their original schedule. However, cultural alignment and churn in U.S. personnel presented ongoing HR and operational challenges. A key objective for Rentokil was retaining commercial clients and maintaining service-quality benchmarks throughout the transition.

2. Strong Demand Across Commercial Hygiene

Rentokil’s commercial hygiene division remained a critical growth engine, particularly across Europe and Asia-Pacific. High demand for workplace sanitation and compliance-based cleaning solutions, particularly in retail, hospitality, healthcare, and food processing sectors, helped to drive recurring revenues. This division benefitted from structural post-pandemic shifts in workplace and sanitation expectations, leading to stronger contract renewals and favourable margins.

3. Inflation Management and Operational Efficiency

Like many UK-listed businesses, Rentokil faced elevated operational costs driven by wage inflation, fleet maintenance, and supply chain disruptions. However, through targeted procurement strategies and investment in AI-led logistics optimisation, the firm managed to preserve margins. Fuel hedging and route planning improvements also enabled more predictable cost management across the fleet-heavy service model.

4. Digital Investments and Customer Platforms

In 2025, Rentokil completed major deployment of its digital service interface, allowing clients greater visibility and control over pest control and washroom maintenance services. In addition, predictive service analytics and IoT sensors at client sites enhanced client touchpoints and promoted retention. The company’s innovation hubs in Luton and Saint-Priest (France) showed promising pipeline technologies for further automation by 2026 and beyond.

5. US Market Headwinds and Currency Effects

The largest headwind in 2025 stemmed from North America, which, post-Terminx, now represents over 40% of group revenues. A weaker U.S. dollar and slower-than-expected rebound in Terminix legacy performance dampened topline growth. Currency translation effects shaved around 3-4% from reported revenue. However, UK and European operations remained resilient, offering partial buffer from foreign exchange fluctuation risks.

6. ESG Focus and Regulatory Compliance

Sustainability remained central to Rentokil Initial’s brand equity. In 2025, the company published its third annual ESG progress report, highlighting reductions in CO₂ emissions per service mile and increased use of biodegradable pest control chemicals. Compliance with UK environmental standards and EU regulations continued at pace, keeping the company in good standing with institutional ESG funds.

What are the 2026 risks and opportunities?

As Rentokil Initial moves into 2026, investors are closely watching for a range of signals that could shape the company’s trajectory in the near and long term. While the company enters the year with several favourable tailwinds, including digital innovation momentum and hygiene-sector stickiness, numerous strategic and macroeconomic risks remain.

Potential Upside Drivers in 2026

• Accelerated Synergy Realisation: Successful completion of remaining Terminix integration tasks could yield stronger EBITDA gains and further operating leverage in North America.
• Expansion in Growth Markets: Emerging markets in Asia and Middle East present meaningful revenue opportunities for hygiene services, especially as COVID-19 norms institutionalise around contract servicing.
• Technology Innovation: Continued rollout of digital platforms, AI-supported pest detection, and customer self-service portals may increase cross-sell and client retention metrics.
• EPS Recovery: If forex conditions stabilise and U.S. business strengthens materially, earnings surprise to the upside is plausible during late 2026 earnings season.
• Dividend Growth: Assuming cash flow sustainability, Rentokil may resume a more aggressive dividend progression strategy, appealing to income-focused investors.

Key Risks to Monitor

• North American Execution Risks: Further underperformance in the Terminix segment, or customer attrition due to cultural integration lapses, remains the most dominant risk going forward.
• FX Volatility: Persistent weakness in GBP/USD or EUR/GBP markets could distort reported figures and hinder international earnings visibility.
• Economic Slowdown: If recessionary pressures return to the United States or European Union, Rentokil’s non-essential business lines may be exposed to contract postponements or cancellations.
• Labour Market Tightness: Difficulty in retaining skilled technicians and route service representatives could limit capacity utilisation and drag down margins.
• Regulatory Scrutiny: Tighter future controls on pesticide formulations or fleet standards in the UK and EU could necessitate capital-intensive compliance spending.

Strategic Watchpoints for Investors

1. Q1 and Q2 2026 Earnings: Early half-year indicators will be crucial in determining whether Rentokil’s transformation efforts in North America are turning the corner. Positive EPS momentum could be an early signal for broader sentiment shift.

2. Dividend Policy Clarity: Updates on the dividend trajectory will influence retail and institutional dividend-growth investors alike. A return to pre-acquisition capital distribution levels could boost long-term share price support.

3. ESG Developments: Continued leadership in low-impact chemicals and fleet decarbonisation strategies will be valued by ESG funds, which continue to significantly influence FTSE 100 constituents.

4. M&A Strategy: Any hints of smaller bolt-on acquisitions or joint ventures in underpenetrated markets could open up valuable optionality for future growth that remains less dependent on the U.S. cycle.

5. Structural Margin Expansion: Investors will want to track whether cost-efficiency measures and legacy system consolidations are generating tangible, scalable margin improvements that can persist beyond 2026.

In sum, while 2025 has laid a stabilising foundation, Rentokil Initial’s success in 2026 will depend on execution finesse, macro condition normalisation, and investor confidence that value creation via Terminix is within reach.