Rentokil shares surged 12% after the British pest control group reported strong 2025 results driven by North America growth, exceeding analyst forecasts.

The company's North America pest control services division swung from negative organic growth in Q1 to 2.6% in Q4, reversing the quarter's decline. Full-year 2025 revenue reached $6.91 billion, slightly ahead of the 2.3% consensus, while adjusted operating profit rose 5.4% to $1.07 billion, expanding margins to 15.5%. Free cash flow jumped 24.5% to $615 million, with conversion exceeding guidance.

Chief executive Andy Ransom highlighted 2025 as a year of encouraging progress, crediting strategic initiatives implemented from Q1. The International segment also performed well, with revenue up 4.8% at constant currency. However, Rentokil increased its termite damage provision by $201 million, raising the balance to $384 million, citing higher litigated claim rates and inflation assumptions.

Rentokil plans to retain approximately 30 brands in North America, stepping back from a consolidation plan. It will maintain both ERP systems while adding a unified business intelligence layer. The company reiterated a $100 million cost reduction target by 2027, with $25 million delivered in 2025, and aims for North America adjusted operating margins above 20% in 2027. A final dividend of 8.24 cents per share was recommended, raising the full-year payout to 12.39 cents. Mike Duffy will succeed Ransom as CEO.

Market reaction was swift, with analysts noting the North America margin expansion and cost reduction targets as key positives, though litigated claims remain a concern.