Rentokil Initial PLC (RTO) 2023 Q2 法說會逐字稿

All right. Good morning, ladies and gentlemen. Thank you all for joining us here today in person and online. In a few moments, Stuart is going to provide you with details of our strong start to the year with the group financial and regional performances. I'll then come back to provide an update on our businesses and on our bolt-on M&A program. After that, I'll spend some time updating you on the very good progress that we've made in the first half on synergy delivery and the early stages of integration of our Rentokil and Terminix pest control operations in North America.

At group level, we delivered a strong operational and financial performance in the half. Revenue increased by 65.3% to GBP 2.7 billion with organic growth of 5.9%. Adjusted operating profit grew by 81.7% to GBP 434 million, and we delivered a group operating margin of 16.3%, which is an increase of 150 basis points. Through the acquisition program, we acquired 24 businesses with annualized revenues of GBP 79 million, predominantly in Pest Control. Diluted adjusted earnings per share grew by 20.7% to 11.4p. And we declared an interim dividend of 2.75p per share, which is an increase of 14.6%. Stuart's going to cover these results in more detail in a moment, but a strong start to the year.

And if we drop down a level, you can see strong underlying revenue growth was delivered across all of our regions and our categories. Just to highlight 2 or 3 areas. Our North American region, which accounts for 62% of group revenues, increased by 127%, reflecting the addition of Terminix. Organic revenue growth was 4.1% in the half and increased by 4.8% within our core North American commercial, residential and termite operations. And we'll come back to this in a few minutes. The Europe and Latin America region, which accounts for 20% of group revenues, delivered revenue growth of 18.7%, of which 11.1% was organic. And in our emerging markets of Asia and MENAT, we delivered revenue growth of almost 12% with 11.3% organic growth.

Now looking at the revenue performance through a category lens. As you can see there on the right-hand side of the chart, Pest Control, which accounted for 80% of group revenue in the first 6 months, grew by 91.5%, of which 5.6% was organic. Revenue in Hygiene &Wellbeing, excluding disinfection, increased by 7.2% and by 5.2% organically. While in France, our Workwear business also had an excellent half, growing revenues organically by 16.3%.

At our full year results, we spent some additional time to brief you on the outstanding opportunity in North America. And today, I'll provide you with an update on the very good progress being made. The colocation phase for our branch network is now very much up and running, with 64 branches in total exited to date, 44 of which were in the first half.

We've also focused on 2 preliminary integration pilots across 40 branches with multiple brands, pay plans and systems. These have been successfully integrated into 23 branches with around 700 colleagues now working together under a single brand, single operating system, single pay plan and a single set of service protocols. And I'll share with you more information on these 2 important parts of the plan in a few moments.

At the same time, colleague retention materially improved, with Terminix colleague retention now up by 5.3% since the deal closed in October and 3.9% improvement in the first half. So a particularly encouraging sign, as is customer retention in North America, which improved by 20 basis points in the first half, and also a 12% reduction in the total number of filed termite warranty claims.

We're firmly on track to achieve our net cost synergy targets, having delivered $37 million of P&L savings in the first half. By the end of this year, including the $13 million achieved last year, we will have delivered in total at least $73 million of the net cost synergies towards our target of at least $200 million. So an excellent first half. We're on track for the full integration program process, which starts next year.

I'll be back in a few minutes to give you a lot more detail on that. But for now, let me hand over to Stuart.

Thank you, Andy, and good morning, everyone. I'll run through the financial highlights of what's been an excellent first half. I'll start with the group level numbers, and then as usual, I'll move through the regions and then look at the balance sheet. Unless I state to the contrary, all numbers are at constant rates of exchange.

The business delivered strong top line momentum in H1. Revenue was up 65.3% to GBP 2.666 billion, benefiting from good underlying growth and, of course, the Terminix acquisition. Organic revenue, which excludes disinfection, was up 5.9%. This translates to an adjusted operating profit of GBP 434 million, a year-on-year increase of 81.7%. Adjusted PBT at AER was up 67.3% despite a GBP 6 million FX headwind in H1, contrasting with the circa GBP 10 million tailwind to which we indicated at the prelims.

The strong profit conversion from the higher revenues, in addition to Terminix synergies and IFRS accounting adjustments, has resulted in an improved group margin of 16.3%, a year-on-year 150 basis point improvement, and led to an improvement in EPS on a broader share base of 20.7%.

There are a number of moving parts to H1 margin, including in our Hygiene &Wellbeing category, which I'll discuss shortly. Free cash flow in H1 '23 resulting from the profit performance and was GBP 229 million. This represents 83% cash conversion, excluding the impact of one-off cash flows mostly related to the Terminix acquisition.

These factors, combined with the continued success of our bolt-on M&A program and the dividend payment, resulted in a pro forma net debt-to-adjusted EBITDA ratio at H1 2023 of circa 2.8x. This is circa 3.4x on an unadjusted basis, down from the circa 4.6x at the year-end. Based on our strong performance in H1 and our confidence of further progress in the remainder of the year, our Board has approved an interim dividend of 2.75p per share, a nearly 15% rise year-on-year and in line with our progressive dividend policy.

Looking now at our performance by region, starting with North America. Our core North American business grew by 127.3% in H1 2023, of which 4.1% was organic. This performance was delivered alongside the start of the Terminix integration pilot program. As discussed at Q1, it also reflected the impact of softer demand in the product distribution business due to destocking. However, we saw that demand bounce back strongly in June, and it's expected to normalize in H2.

In Pest Control services for commercial, residential and termite customers, the largest part of the North America business, organic revenue was up 4.8% in the first half despite some adverse impact from lower industry-wide lead flow from residential and termite customers. The H1 organic performance also reflected a strong continued contribution from price rises to offset the expected inflationary pressures.

Adjusted operating profit was up 163.2% and reflected the combined impact from stronger revenues and the Terminix acquisition. Adjusted operating margin increased 250 basis points to 18.5%. The uplift was enabled by a resilient underlying performance and driven by successful delivery on Terminix synergies that provided a net benefit of 190 basis points. We remain on track to achieve our North American margin target of circa 19.5% in the full year.

Despite the attention given to the Terminix transaction, we've had another excellent first half of bolt-on M&A in North America, acquiring 6 businesses with combined annualized revenues around GBP 37 million in the year prior to purchase. We're pleased to report further good progress on colleague retention, with Terminix colleague retention up by another 3.9 percentage points to 67.7%.

Let's take a look now at our progress on delivering the Terminix deal synergies. This table shows the latest status for the year. We're very pleased with what's been achieved so far. As you can see, we've delivered net cost synergies of $37 million in the first half. We expect to deliver an incremental $23 million of net synergies in the second half, taking the year-over-year value to $60 million. You'll recall that we already delivered $13 million of net synergies in the final quarter of last year. So adding that to the $60 million, by the end of the year, we will have delivered $73 million of cost synergies towards our target of at least $200 million.

Turning now to the European region. Driven by both pricing and resilient demand, revenue rose by 18.7%. Organic revenue was up 11.1% in Europe. There was a really good performance across the board here. All 3 business categories in Europe posted strong top line numbers. Pest Control revenue was up 30%, which included a strong contribution from our large markets like France and Benelux. Hygiene & Wellbeing was up 6.2%. And France Workwear continued its strong run, delivering growth of 16.3%.

Adjusted operating profit rose by 12.4%. Adjusted operating margin was 18.2%. That's a 100 basis point reduction year-on-year and is explained by 2 particular factors. Firstly, as expected, we saw a continued decline in COVID disinfection business that benefited the same period last year.

Secondly, there was a dilutive impact from M&A, about which we normally don't talk, but we did make 2 acquisitions in the region in Q4 2022: the acquisition of the Terminix business in Sweden and IPM in Israel, but due to their size, had an impact of about circa 30 basis points on the region's margin performance. Neither of these factors will have a material impact on margins in the second half of the year. We will be lapping very little disinfection revenue in H2. And as usual, our integration activities will improve margins on the 2 acquisitions as we deliver operating synergies.

Labor markets throughout the region remained tight in the first half. However, we've been very effective at managing pressures. Both sales and service colleague retention has been good, leading to a slightly raised level of colleague retention at 89.4%. The region completed late 8 acquisitions in the first half, with annualized revenues of GBP 7 million in the year prior to purchase.

Turning to the U.K. and sub-Saharan Africa. The region delivered a resilient trading performance amid a challenging macro backdrop and against strong prior year comparators. Revenue for the region increased by 6.7% with organic revenue up 3.9%. This was enabled by a positive contribution from both business categories: Pest Control revenue was up 10.4%; Hygiene & Wellbeing revenue was up 3.2%. This was achieved despite lapping COVID-boosted comparators in the medical waste business from the same period last year.

Regional adjusted operating profit was down by 1.1% to GBP 46 million, leading to a lower adjusted operating margin of 23.8%. The Pest Control category sustained strong margins. However, this was offset by COVID-related factors that adversely impacted Hygiene & Wellbeing in the current year, namely, the anticipated reduction of COVID disinfection and related services and the nonrepeat of U.K. COVID credit note releases. The impacts of these factors will be much reduced in H2.

Colleague retention has been strengthened, up to 83.7%, as we continue to invest in our people. The region continued to face well-publicized inflationary headwinds. However, significant cost increases have been well managed by our long-established pricing and margin management systems, processes and controls. Despite price increases, customer retention was stable at 86.7%.

Looking briefly now at Asia and MENAT. The region delivered another strong performance. Revenue increased by 11.9%, of which 11.3% was organic. Our largest markets in the region, Indonesia, Malaysia and Singapore, led the way. The subdued economic environment in Hong Kong continued to hold that market back slightly, but we did see signs of improvement in China as it lessened its strict COVID regime.

We continue to make good progress on price increases in a region where we've been historically less successful. Both volume and pricing helped deliver 6.4% growth in adjusted operating profit. Adjusted operating margin for the Asia and MENAT region was down slightly by 70 basis points to 13.4%, again, due to lapping COVID disinfection revenues. This headwind, again, will significantly reduce in H2.

Finally, turning to Pacific region, another excellent trading performance here. Regional revenue increased by 16.5%, of which 7.4% was organic. Pest Control was up 30.4%, with notable strength in commercial services. Hygiene & Wellbeing was up by 5.2%, and we've had good demand in the region for Ambius services. Regional adjusted operating profit was up by 22.3%, with an increase in adjusted operating margin of 110 basis points to 22.9%. And in the region, we acquired 5 businesses.

So that's a rundown of our regions, which, as you can see, performed very well overall in the first half. Across our geographies with the persistence of inflationary cost pressures, most notably wage inflation. But we've continued to be very successful in mitigating increases through pricing. I want to briefly step back and look at our margin develop in the first half, in particular, in Hygiene & Wellbeing.

I'd like to say a few words about the drivers to margin. You can see that year-on-year, reported margin in H1 moved down from 19.5% to 16.4%. This was due to a number of nonsystemic factors, the majority of which are not expected to repeat in the second half of the year. The largest headwind to the Hygiene margin in the period, roughly 160 basis points, came from the anticipated reduction in COVID disinfection and related revenues and the nonrepeat of U.K. credit note releases.

Similarly, another 80 basis points was due to the nonrepeat of COVID disinfection margin. A 50 basis point reduction was due to the transfer of management from North America Pest Control to the Ambius business. Of course, the impact of this is net neutral both to North America and group margin.

To put this in context, together, these headwinds amount to an aggregate value of GBP 12 million, just to size that for you. The H2 impact of these headwinds to Hygiene & Wellbeing margin is expected to be circa 100 basis points or about 1/3 of the H1 impact in H2. This is anticipated to be offset by underlying operational improvements, and that results in H2 margin forecast to be in excess of 19%. The confidence we've got in the resilience of our Hygiene & Wellbeing category as well as the progress in Pest Control means that we are reiterating our full year margin guidance of circa 16.5% for the group.

So let me now say a few words on cash flow and debt. Adjusted cash flow of GBP 401 million was up GBP 202 million on H1 2022. Higher trading profits resulted from organic and acquisitive growth. Adjusted EBITDA was GBP 602 million, up 72% from GBP 350 million. One-off and adjusting items totaled GBP 78 million, reflecting P&L items of GBP 46 million and a net GBP 32 million movement in one-off accruals since December 2022, in line with that which we presented at the preliminary results.

The movement on provisions of GBP 26 million included an outflow on the termite provision, which was in line with our expectations. Capital expenditure of GBP 102 million was incurred in the period, reflecting the inclusion of Terminix CapEx.

On the second cash flow slide, we see that the free cash flow was GBP 229 million. Cash interest payments of GBP 114 million were GBP 95 million higher than in the prior year, reflecting the payment in arrears of coupon interest on 2022 bonds issued in relation to the Terminix transaction, effectively a full year's interest in 1 Half. Cash tax payments for the period were GBP 58 million, an increase of GBP 26 million compared with the corresponding period last year, largely related to the inclusion of the Terminix trading results.

Cash spend in H1 on current and prior year acquisitions was GBP 175 million. Dividend payments were GBP 131 million. And the cash impact of one-off and adjusting items was GBP 78 million, again, largely related to the Terminix acquisition. Adjusted free cash flow was 83% for the first 6 months of the year. Our full year guidance for adjusted free cash flow conversion remains at between 80% and 90%.

So let's take a look at debt. As a reminder, we were active in the debt market in the first half of 2022 to finance the Terminix acquisition. We issued 3 bonds converting our short-term bridge facility into longer-term debt. These bonds, alongside the $700 million term loan, covered the cash consideration, transaction costs and Terminix debt. The most material movement seen on the slide is for FX translation. FX translation, other items of GBP 136 million is primarily due to the weakening of the dollar against sterling.

The overall change in net debt was GBP 26 million with a closing net debt of GBP 3.27 billion. As at the end of June, our pro forma net debt-to-adjusted EBITDA ratio was 2.8x. The unadjusted EBITDA ratio is 3.4x, and it's this that we expect to be approximately 3x by the end of 2023, one year ahead of schedule, reflecting the overall health of the business and the delivery of the deal synergies.

The group has no debt maturities until November 2024. Note that the interest rate on about 81% of group debt, including leases, is fixed and therefore not subject to rate volatility. And last month, S&P Global reaffirmed the group's BBB investment-grade rating.

Moving to technical guidance. On this slide, we update some technical guidance to help you with your models in relation to the full year. I'll let you read these in your own time, but we will draw your eye to a few items. On the P&L, we've updated deal-related costs to between GBP 80 million and GBP 100 million, which reflects the strong deal flow we delivered in the first half of the year.

Our new full year FX guidance reflects the strengthening of the pound against the dollar. This has moved considerably since the original guidance was issued in March and means at yesterday's prevailing rates, we now anticipate a headwind of between GBP 15 million and GBP 20 million.

In cash flow, given our rate of M&A in the first half and the strength of our pipeline, anticipated spend on M&A is increased from GBP 250 million to GBP 300 million. Note that our leverage guidance includes this increased M&A spend.

So overall, we've had a strong first half financial performance. 5.9% organic growth reflects growth in all regions and was achieved alongside our work on integrating Terminix. Despite the continuing evolution of our U.S. pest business, we expect to deliver organic revenue growth in North America broadly in line with our H1 performance in H2.

Our group margin continues to move forward, up by 150 basis points in the half. We've seen an uplift from synergy benefits, together with a stable underlying margin performance in pest and further margin improvement in French Workwear. In Hygiene &Wellbeing, we expect the margin headwind in H2 to be approximately 100 basis points or 1/3 of the H1 impact. We expect to fully offset this with underlying operational improvements, resulting in an H2 margin in excess of 19%.

The profit performance in the first half led to an improvement in EPS of 20.7%. And finally, with a good progress already made on cost synergies in H1, we're on track to deliver total synergies of $73 million by the end of the year.

And at this point, I'll hand back to Andy, who will take us through our ESG progress and the business category performance.

Thank you, Stuart. So over the next few minutes, I'm going to update you on the performance of our 3 businesses before turning to the exciting opportunities in North America Pest Control. However, let me start with a very brief update on our key ESG aspects of safety, people and the environment.

In my view, there is typically a strong correlation between a company's safety and its financial performance. And pleasingly, this was our safest ever start to a year with a world-class lost time accident rate of just 0.29, accompanied by the associated reduction in working days lost. As you can see on the right-hand side, this long-term commitment to safety means that fewer colleagues are suffering from slips, trips, falls and accidents and resulting in far fewer working days lost, with a working day loss rate around 51 days in 2008 falling to just 6.4 days in the first half.

Colleague retention is, of course, one of our most important nonfinancial metrics. And so it was particularly pleasing to see 6 straight months of improvement in retention, with the group colleague retention rate improving by 2.6% to 82%. These numbers have obviously been rebased now to include Terminix, and I'll come back to its retention performance shortly.

Taking action on the environment is important to all colleagues, customers and shareholders. And we have a clear plan to reduce the impact of our operations and services on the planet. We now have around 1,600 lower-emission vehicles in operation, including 100% electric and plug-in hybrids, as we move towards a full transition of our fleet on net-zero emissions by 2040.

We're also supporting our customers on their journeys towards net zero with products such as Lumnia, which reduce electricity consumption by our customers. Since their launch, the Lumnia units have delivered a proven reduction in CO2 of an impressive 53,000 tonnes. So good continued progress with our ESG agenda.

Let me turn now to Pest Control and our power brands of Rentokil and Terminix. In the first half, we delivered revenue growth of 91.5%, of which organic was 5.6%, in line with our medium-term target of 4.5% to 6.5%. We doubled profits to GBP 412 million and increased adjusted operating margins by 130 basis points to 19.2%.

As Stuart has just covered, North American Pest Control achieved organic growth revenue of 4.1%, with our core commercial, residential and termite operations delivering growth of 4.8%. This was achieved despite lower inbound lead flow from residential and termite customers in the second quarter, which mirrored digital search trends observed for much of the U.S. pest control industry as a whole.

During the quarter, our key focus was on margin expansion and on the successful integration pilot program. The impact of the pilots and our planned cessation of Terminix's unprofitable door-to-door sales operation in Canada reduced our first half organic performance by around 32 basis points. Overall, the numbers on this chart speak for themselves. This is a world-class business that's strongly positioned for future growth and with the magnificent Terminix opportunity ahead of us as well.

So turning now to digital and innovation. We lead our industry in the use of digital technologies, and this slide demonstrates that we're continuing to build that competitive advantage with around 319,000 PestConnect devices now in customer premises, and that's up by around 20% year-on-year. We now have 6 countries where connected devices account for more than 10% of the commercial portfolio, including our business in Netherlands, which is fast now approaching 30%.

PestConnect is typically sold on a 3-year contract basis. It delivers higher customer retention, and most importantly, it's extremely effective. We've got new research from our operations in the Netherlands and the U.K., which shows us that PestConnect can typically resolve rodent infestations twice as fast as traditional nonconnected pest control services.

At the heart of our PestConnect system has been our award-winning RADAR device, and that accounts for around 2/3 of connected units in customers' premises. Towards the end of this year, we'll be launching its replacement, which you can see on the screen, it's called RADAR X. It's a new dual-catch unit, and it comes with many enhancements for operational efficiency, but also for sustainability.

Clearly, our commitment to innovation is taking a further step forward in the coming months with the opening of our new dedicated Pest Control innovation center in Dallas. And that's going to focus on residential, on termite, on vector control and on sustainable fumigation as well as providing a training center for our U.S. sales and service teams. So Pest Control has had a strong first half, and we've got a lot happening in the digital and innovation space to continue to build our differentiation to drive organic sales and to make our operations more sustainable and more efficient.

Let me turn now to Hygiene & Wellbeing. In the first half, revenues increased by 7.2%, of which 5.2% was organic, very much in line with our medium-term target of between 4% and 6%. Organic revenue growth in core hygiene services, that's inside the washroom, grew by 6.1%, with enhanced environments, that's outside of the washroom, increasing by 5.8%. Premise hygiene delivered organic growth of around 1%, which reflects a reduction in services outside of the washroom, such as medical services, where the demand for COVID needle collections has obviously declined as the vaccination programs have been significantly scaled back.

Inside the washroom, we offer 2 ranges of high-quality product signature. That's our core range and premium range reflection, each with in-cubicle, out-of-cubicle and hand hygiene solutions. Around 120,000 signature units were installed in the first half, where we saw good progress in air care, with dispenser installs increasing by 11% and with hand drying unit sales also up by around 17% year-on-year.

As more employers try now to enhance their office environment to entice people back, we provide a range of services through the Ambius brand. And that includes plants, premium sensing, air quality monitoring and green walls. Revenue grew by 12.4% in the half, and the business secured its first global premium scenting agreement across 21 countries.

Turning now very briefly to French Workwear, which I'm pleased to say had a very good start to the year. Revenues increased by 16.3% to GBP 106 million, all of which was organic. Robust volumes were aided by ongoing market recovery in the hospitality sector and driven by strong new business sales and also by upselling. The business' performance was also supported by effective price progression in the half. Adjusted operating profits increased by 34.1% to GBP 18 million, translating to a step-up in adjusted operating margin of 220 basis points to 16.9%.

Turning now to acquisitions. In the first half, we acquired 24 businesses with annualized revenues of GBP 79 million for a total consideration of GBP 202 million. 19 of the deals were in Pest Control with annualized revenues of GBP 54 million. In Hygiene & Wellbeing, we acquired 5 businesses with annualized revenues of GBP 24 million, meaning that for the first time, we fully expect to exceed our medium-term target of adding around GBP 25 million of M&A revenues in Hygiene & Wellbeing annually.

The Europe and Latin America region completed 8 highly targeted city-based deals, whilst the Pacific region acquired 5 new businesses, including 2 investments into an exciting new area for us, which is rural or nonurban pest control, to support the New Zealand government's significant investment into its predator-free 2050 campaign.

The M&A program continues to deliver revenue and profit ahead of our returns criteria. And with a very strong pipeline, we're increasing our target spend by GBP 50 million to around GBP 300 million for the full year. So good progress in the half. And let me now move on to talk about delivering the Pest Control powerhouse.

Now this slide really underscores the close alignment of Terminix to our existing investment case. We're building scale in the world's largest pest control market, combining Rentokil's traditional strength in commercial with Terminix's strength in residential and termite, giving us not 1 but 2 power brands. We're adopting the same proven low-cost business model, and we're expanding access to Rentokil's innovations and digital capabilities.

Now you recognize this slide from our prelims in March. And as Stuart has just mentioned, net cost synergies in the first half came to $37 million, putting us firmly on track towards our full year target of $60 million of net synergies after investments. So let me now focus on SG&A, field operations and the investments in a little bit more detail and looking at the progress that we've made in the first half.

We've broken SG&A into 3 main parts. That's sales, procurement and support functions. And together, these account for around $150 million of cost synergies by 2025. In the first half, we've made very good progress, delivering $40 million of gross cost synergies. And in particular, these were delivered in procurement, where we've negotiated a new combined safety and PPE supplier, single travel provider, a single fleet management company as well as putting in place a number of improved supplier deals for pest control products, hardware and for IT.

Now let me move to field operations where we will fully utilize our shared integration experience in North America to deliver around $125 million of cost synergies by the end of 2025. In the first half, we exited 44 individual branch sites, taking the total number of properties exited since closing the deal to 64. And by the end of the second half, we would expect this to exceed $100 million. As each site closes, the colleagues of that branch move to share location of a nearby branch. So we now have around 1,000 colleagues working together closely and successfully in colocated branches.

Here, we've delivered $6 million of gross cost synergies in the first 6 months. But the branch colocation program is merely the first step towards full branch integration, which we start next year. To get us to the best possible position to be ready for those integrations, we've already undertaken 2 preliminary integration pilots involving 2 parts of the heritage Rentokil network with multiple properties, multiple systems, multiple brands.

In the first pilot, we had 19 properties, 425 colleagues and revenues to $65 million, operating across 4 different brands, 4 different operating systems, 4 different pay plans and 4 different sets of service protocols. The second pilot, a slightly larger area, 21 properties with 411 colleagues, revenues of $97 million, 5 brands, pay plans and sets of systems.

So what did we learn? Well, first, our approach to these pilot integrations showed that the detailed migration processes, whilst undoubtedly demanding, were successful, integrating 40 properties down to 23, delivering one consistent brand, one pay plan, one set of systems. Secondly, the combined branch headcount was reduced from 836 to 709, and this was achieved mainly through natural attrition.

Thirdly, whilst we saw an impact on organic performance, this was as expected and is fully expected to return to normal levels once the combined operations are fully bedded in. And fourthly, and most importantly, in both pilots, we delivered a margin expansion in the region of 5 percentage points.

So a really valuable set of colocations and integration pilots to learn from. And within each pilot, we take the lessons learned, we apply them to the next pilot. So with each pilot should be improving on the pilot before, such that when we finally do go live, we can minimize disruption to the business.

In the second half, we'll continue to run a series of pilots, all of which are designed to fully road test the branch operating model before we commence that full deployment next year. These include delivering a unified people management system, piloting a single pay plan for sales colleagues and technicians, testing technology applications, best-of-breed processes, which we'll be piloting and rolling out to users as each system becomes available.

And before we move any customer and contract data onto the new systems and process stack, we'll parallel run the systems to ensure the accuracy of data mapping. Only having thoroughly tested and piloted each element will we then move to the full first migration of the region early next year. Now we said in March that our aim is to move to around 400 larger branches by the end of 2025, each with typical revenues of between $8 million and $10 million, building local density and expanding net operating margins.

On the chart here, you can see some of the detail that sits behind this plan. Today, we have around 200 branches operating with revenues of less than $3 million, but we also have over 100 branches that are already operating above $8 million. And from this, we can clearly see that those branches with revenues of more than $8 million deliver net operating margins in the region of 10 percentage points higher than the branches with revenues of less than $3 million. Whilst we can see the strong correlation between branch scale and profitability, we've seen no discernible correlation in our data between branch size and organic growth rates.

To enable the success of the integration, we plan to make investments of around $75 million over the next 3 years into the future of the business in North America, and we made investments totaling $9 million in the first 6 months. During the half, we harmonized management pay. We've aligned on safety policy and operational equipment. We've invested in sales efficiency as well as into SOX and into legal compliance. We've also identified our new innovation center. We finalized the brand strategy, which will be implemented as part of the integration process from next year.

Now having provided the termites teach-in to you all last time, I'm not going to go through this slide in detail. But clearly, you can see that we've continued to make solid progress with total filed warranty claims reducing by 12% year-on-year and by 47% since 2019. As you know, key enablers of our success will be the Employer of Choice program and the IT deployment program, and both are making very good progress.

Over the last 6 months, our HR team has harmonized benefits and paid time off and supported the colocation and the pilot integration programs. And what's particularly pleasing from the first half is that as well as seeing a 2.6% increase in colleague retention across the Rentokil Initial Group as a whole, Terminix colleague retention increased by 3.9% in the first half, with retention in the critical frontline technician role improving for 6 consecutive months.

Since the deal closed in October last year, colleague retention in Terminix has increased by an impressive 5.3%. So as you can see on the chart, we're making excellent progress in colleague retention, and we've delivered on our commitment to best of breed. We're also moving at pace in technology with the North American IT organization appointed, a target IT operating model to enable branch colocations successfully completed and the 24 IT workstreams all up and running, all on track, as you can see on the chart.

So looking further ahead to the post integration period, our medium-term target is to deliver organic growth of 1.5x the pest control industry rate in America, and we'll get there by targeting the drivers set out on this chart. The first is enhanced customer retention, driven by outstanding service. And as I mentioned earlier, customer retention has increased by 20 basis points in the half. We also delivered strong tactical pricing in the first half. While innovation and digital, we've now started to introduce Rentokil's innovations into Terminix with Lumnia, and in particular, flying insect control unit being the first. And as I've just mentioned, our new U.S. innovation center will open later this year.

Customer penetration with the upselling of additional services is also an important part of the future plan. And in the first half, the Trusted Advisor program continued to be rolled out. Our plan is to complete this first in heritage Terminix and then across heritage Rentokil networks over the coming months. A new customer acquisition will be driven through strong brands and through our highly targeted sales and marketing activities.

So there you have it. In summary, in the first half, we've delivered a strong financial and operational performance with organic growth of almost 6%, margin expansion of 150 basis points, strong colleague retention, excellent M&A, and you can see all of that summarized on the chart. In North America Pest Control, we're now 9 months in post the deal. We remain on track. We're making good progress towards delivering the opportunities that we have to lead the pest control industry and to deliver the growth and margin expansion opportunities that are summarized on the screen.

So thank you very much indeed. We'll now take any questions. We'll start with questions in the room, and then if there are any additional questions from the online audience. Thank you.

It's James Rose from Barclays. I've got 2, please. The first, Europe was very, very strong. Maybe you could talk about the drivers behind that and perhaps the sustainability into the second half. And then second, from the pilot integrations you've done so far, what have been your main learnings and takeaways from those integrations which you would apply to future ones?

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(foreign language) Europe's had a strong -- I've got an online question about price versus volume, so I'll probably try and address that at the same time. I think Europe's had a really strong top line growth. They've been very effective at recovering inflation as well. So I think they probably got one of the stronger mixes of volume and price within the group. And so I think a big element of that performance, we think, will continue on in H2. It just depends a little bit on how quickly inflation comes off in Europe. But plenty of momentum operationally, running really well just about across every single market. So the region is running on gasoline.

Yes. And the only thing I'll add to that is, I mean, we shouldn't miss it, but the French Workwear business has had a super performance. And an element of that has been the recovery in the HORECA sector. So really, really strong bounce back. If you've been in Paris recently, you'll see how the tourists have all come back. So that is a nice contributor to an overall excellent performance.

If you drill down a level, we've also got really good colleague retention and really good customer retention. And so, at least, to me, before they knew happy, engaged colleagues deliver happy, engaged customers, which make it easier to sell our products and services. And I think you also see in Europe, it was a market that we replatformed the IT about 4 years ago. So we're getting the benefits of the changes we made some years ago.

On the pilots, I mean, one of the learnings so far, look, it's busy. It's crazy busy with the pilots. It's full on. I think we're delighted that the pilots have delivered the outcomes and the outputs that we expected. So we model all of this. So this isn't a big surprise to us. And it's coming -- both pilots have come in so far very much in line with what we were expecting the economics.

I think the reason we do pilots in the very first place is -- I used to work in the explosives industry, and believe it or not, I consider these pilots as controlled explosions you'll never see. So you don't want to go live with moving a lot of things and then discover that some things aren't working as well as you would want. And as I said a minute ago, pilot one, we should improve on that with pilot 2, and pilot 3 should improve on pilot 2.

The areas that we've got evidence of sort of sand in the gears, if you like, of friction are all the areas you'd absolutely expect. So when you have 2 different technicians and 2 different routes, if I'm in America with roots over here and bring them together, you are going to interrupt the customer relationship that a customer may have had with a Terminix technician or a Rentokil technician or a different branch Rentokil technician in the case of the pilots. And it's that change that that's what you've got to manage brilliantly. Because if I've been your technician for 10 years and I've never let you down and then we now switch from Stuart as your technician -- not that you would want that, don't you? But -- and Stuart lets you down, now I've just given you, the customer, a reason to, "I'm not so sure about this."

And then if you call up and say, "My technician missed my service today," and the call center response is a bit all over the place because the systems haven't plumbed in correctly. It's -- those are the sorts of things that we see, and that's why you get a little bit of a drag on organic growth. So it sounds a little perverse, but we're actually delighted when we see the evidence of those things going wrong because we know then, "Now we need to fix that."

So in the example I just gave, we had one of the pilots. We had some pretty -- poor core handling processes. And in the process, our core handlers moved from being really, really quick to take a call to actually way too long. That's a problem. So we fixed that for the next one, and it's those sorts of things. But it's entirely in what we would have expected.

It's James Beard at Numis. Two questions, please. Firstly, on North American organic revenue growth, you said that in H2, you expect that to be broadly in line with what you achieved in H1. Just wondering if you can talk through the moving parts there, given that you said that the products -- Pest Control products business should see a sort of bouncing back of demand in the second half after having a weak H1. And then the second question, which might well be interlinked to the first, was in terms of the sort of wider -- moving beyond the pilots next year into sort of wider branch integration. What is your expectation for the drag on organic revenue growth within North America in '24 as a result of that?

Yes. Well, I'll -- thanks, James. I'll attempt to answer that. The second one is particular crystal ball territory. In terms of -- so what do we see in Q2? Let's start there. What do we see in Q2? We did see, and you can pick this up from Google Analytics and indeed some of you did pick it up from Google Analytics, that there was reduced demand or reduced search activity across core pest control search terms in the second quarter. Not massive, but noticeable.

So the first question, as we look out to the second half is, well, where does that go in the second half? We've seen those trends before. I'm not calling anything particular about that. But if you get reduced search terms, that translates into reduced calls on the telephone, which translates -- unless you do something differently and decide to spend more money with Google, that will translate into lower volume. So that's essentially what we saw in the second quarter.

Our priority in the second quarter and will be in the second half is not to chase organic growth. Sure, we want to deliver great organic growth. Of course, we do. Our priority has to be the integration, has to be putting the network together. So we'll get to driving organic when we get to the other side of this, but much more important to me that we deliver the integration.

We've given the best view that we can for H2, and we've tried to take account of, okay, well, is that impact we score in the second quarter? Does that continue into the third? Well, let's assume it does a bit. Will we continue to pilot and will we get a little bit of friction on the pilots? Yes, let's assume we will. The distribution business, I mean, as we said, we had -- the first 4 months of the year were not good at all, and we called that in the first quarter, I mean, real destocking here.

I think what you saw is some customers stocking up in December, which is what the industry does because they offer year-end discounts. You saw some customers stocking out. And then the first quarter came, and people just said, "Boo-hoo, now I'm going to see how this all turns out." But we saw a very, very strong bounce back in the month of June. It was an absolute V in the second quarter, an absolutely V. So dropped like a stone and then bounced back like a stone -- like a rubber ball.

Talking to our people in the distribution business and their analysis of the industry, my understanding of the industry forecast for distribution looks more like 3%. We'd expect to beat that a little bit. So all within that same sort of guidance that we've given.

As for 2024, I mean, honestly, I think it's too early to call. As I just said, the purpose of doing the pilots is to reduce that friction and reduce that drag, as you put it. We'll do a lot more piloting in the fourth quarter. Hopefully, they will -- each one gets a bit better and a bit better and a bit better. The idea would be we don't see any drag at all. But the reality is every other time we've put branches together, you tend to see a little bit.

I'd be reluctant to put a number on it, James. I think when we come back in 6 months' time, we can tell you how we traded and how those pilots went in the second half and give you a better handle. But like I say, that really isn't our focus right now. Our focus is get this network built and get it built brilliantly, and then we can really enjoy the fruits of that labor after that.

Andy Grobler from BNP Paribas Exane. Three, if I may. Firstly, you talked about a bit of the drag in the U.S. from Canada and from the pilots, but you're still lagging Rollins by almost 3% in the quarter. Can you just talk through why that was the case?

Secondly, the pilots, you said you hope would get better as you went along. You've got a margin improvement of 5% from the first 2 pilots. If you kind of annualize that across the whole of the business, that's GBP 160 million.

I knew you'd want to do...

But it's GBP 160 million of net savings versus a target of GBP 123 million. Can you talk through the difference there? And then lastly, Brett has left the business. Why was that? Are there any implications from it?

Yes. I'll take the first and the third [string]. Do you mind? Look, on Rollins, it's not really my place to talk about a competitor there, but I've made the point a number of times. Rollins is a great company, and it's a well-run company. But Rollins doesn't have a slide deck that I just presented of all of the things that they have to be working on when they're running their business. So they don't have pilots to do. They don't have IT replatforming to do. They don't have pay plans to do. They don't have rebranding to do. We are furiously busy doing all of this.

Rollins is running a very, very good Pest Control business day in and day out. So I find it surprising that a large, well-run organization that doesn't have all of this stuff to do would be delivering a higher level of organic growth than we are at this moment in time, but not remotely surprising.

Did Rollins' rate of organic growth change in the second quarter from the first quarter? It looks like it did, and it looks like -- I'd expect Rollins. I don't know. But I would imagine that they've seen the same slight movement in the market that I just described that you can pick up by looking at Google Analytics. So I don't really think the read across the Rollins is necessarily a fair one. All I'm perfectly happy that you will do it. Certainly, if you give me Rollins' multiple, I'll definitely accept the comp. But I think it's totally understandable given the amount of work that we have to do and we are doing. Do you want to comment on margin?

Yes, sure. So Andy, you rightly do the maths. It's the maths that we can't help doing ourselves, obviously, when you see outputs like this. But we're just not counting our chickens. We don't actually have -- we didn't set out to do this with a margin target per se. We said, "All right. What's the optimum branch structure in this metropolitan area? What's the optimum span of control, organization structure, location of branches?" And so that 5% is very much an output rather than a number that we've targeted to.

So of course, we're delighted that it's proving out the model. That's great. The improvement that Andy talks to, because we haven't really got a target for that, is around the lack of friction, the lack of drag, the impact on organic growth. Can we narrow the gap in that area?

So look, if one could do the number of branches we're talking about consistently at these sorts of numbers and there was no reinvestment in the top line marketing, Google Search, whatever, then clearly, a bigger number would drop out. But we're not doing that math yet. We're just very rigorously going through the process, making sure it all adds up. And we -- that guidance we give remains our best estimate of the outcome. But clearly, we've said, at least, there is potential upside from the total GBP 200 million.

But right now, at least GBP 200 million is where our heads are at. And we're not putting pressure on ourselves to come up with a suboptimal structure that tries to beat that in the short term because we'll pay for that in the medium term where we'd fit them enough.

I think we've been asked the question before then. If there's an upside on the synergies, where do you think it might come from? And I've been quite clear that if there's an upside in the synergies. I think it's more likely to come from the field than the SG&A. And we've also been asked -- I'm asking myself questions. Now I'm not sure that's a good idea. We've also had been asked, "If you'd had upside, would you take that all to the bottom line? Or would you invest some of that in growth?"

And I've said, well, that's a high-class problem to have that we'll address in the future. But instinctively, I'd probably split the difference, and I'd probably take some of any overage and invest further in digital marketing in the consumer side of the business, and any other overage, we would take to the bottom line. But we're now talking about a hypothetical overage that we haven't delivered in.

On Brett, look, I think most people were actually surprised that I managed to convince Brett to come and work for me in the first place. You can interpret that any way you like. But Brett was a successful CEO of a public company, a global group company. And I'm absolutely delighted that he came and spent the time with us. I'm absolutely delighted. It was key to me that he was the bridge from pre the deal to post the deal. And it's a year now. By the time Brett goes later in the year, it will be a year that he will have been there.

Now I'm still delighted that he came, he spent the time. He's proved invaluable to be that bridge between Terminix and Rentokil. He's had a lovely opportunity to be a global group CEO, again, in private equity. I wish him well. I'd get on with him famously. I consider him a friend. He's worked furiously until the day that he's not there. So there's no story here. There's nothing to see here. And as I say, I'm just grateful that he was with us for the time we've had him and for the next few months. But no, there's just no story here.

The U.S. Pest Control business, think about how I set this up. The U.S. Pest Control business is run by John Myers, who's been running our U.S. Pest Control business for 15 years. John is an absolute veteran of the pest control industry. Brett had only been in the pest control industry for less than a year when we started here. So we set it up in a way that should this occur and Brett decides to move on, that the organization would be in a great place irrespective. So there's no story there.

Allen Wells from Jefferies. A couple for me. Just on the industry-wide lead slowdown. What do you think is behind that, Andy? Is that just consumer behavior, household income being squeezed? Or is that more pest demand-driven given weather, et cetera?

It won't surprise you, that's a question I've asked myself, my team, our advisers. Although I don't think we've got a strong view, and we'll always say that the rats don't read the FT, and they don't. So look, at the margin, I would imagine that if incomes are squeezed, there will be a certain element of the consumer that will go to Home Depot to do-it-yourself and buy bug spray rather than call out a pesty.

It is interesting. It's mainly -- we haven't seen it in commercial. So it's only in resi, it's only in termite and it's not huge. So it'd be a foolish thing, I think, on my part to call it some macroeconomic related. We've looked whether in a number of -- it sounds crazy. The world seems to be on fire at the moment. In a number of parts of the United States, they've had cooler temperatures in the second quarter, and the Northeastern parts could be something there. But I don't think we've seen enough to call anything there other than it was slightly down in the second quarter, and you get a read across there into leads.

Just to touch on online question, there's a question about early Q3, what we've seen so far, Andy.

Well, we don't normally talk about, and we haven't done -- I think first 2 weeks of July looked fine. I don't think that we saw a continuation, but that's not me saying whatever we saw in Q2 doesn't exist in Q3. It's too early to say, to be honest.

And just secondly on the Pest Control margins, obviously, up 130 bps. The Terminix synergies were 140, so some underlying decline there, which I think a decent part is going to be the M&A dilution. But on that, kind of let's just assume it's flattish, maybe slightly declining underlying. Is there just anything to read into that in terms of price kind of cost dynamics? I mean one would generally assume if we take Terminix out, I think most people had an underlying margin improvement in pest for Rentokil over the next couple of years. So just anything just to think about it.

I think if Terminix has a slight dilutive impact in the first half, actually, pre-synergies, so that's really the answer. Now, we're -- all of our analysis says that we're recovering price -- recovering cost inflation through price, and we're pretty comfortable with the -- I mean, M&A is dilutive, generally. Of course, it always is. We always -- we don't really talk about that because it's a constant sure. We've only called out in Europe because it's 2 markets that had quite a big impact. That's all. So...

And then just following on from that, the inflationary side. Obviously, just looking at fuel costs, et cetera, generally expected to ease in the second half. I mean how much of a benefit might that be? You won't quantify, but just...

Yes. Well, as you know, we price regularly, and it's -- customers are very sensitized to this. They're very prepared to accept a price increase that reflects cost inflation, people costs. You see double-digit wage increases in some markets. But trust me, as soon as that inflation comes off, the idea that we'll be able to benefit from upside, I think, it's not something we try to do, and we'll get it wrong on the downside in certain places as well. So we always try and target neutral around price, and I'd expect that to be the case.

This is Anvesh Agrawal from Morgan Stanley. Two questions, really. First, you said on the PestConnect, where the penetration is, what, 10% of the commercial customers. Just wondering, is there an opportunity in the residential side as well, maybe a trimmed down version, given residential is now a much bigger part of the business? And you had a target of 25% penetration historically. Is that just commercial or the overall pest business?

And second question really is technical on the working capital you've seen. Like your technical guidance says the outflow will be higher for the full year. What's driving that?

Thanks, Anvesh. Why don't I take the last one first. We -- there's just a very slight movement in the Terminix working capital. We got it slightly wrong when we were looking at it back in the early part of the year. So we just had to adjust our expectation on that, GBP 20 million. It's as simple as that.

On Connect, is there opportunity in resi? Let's just say opinion is divided on that question, Anvesh, which is why they shouldn't let me anywhere near innovation really. I'm not convinced there is, but my team are convinced that there's an opportunity. So rather than us argue about that, one of the things we will look at in that innovation center is, is there an opportunity in residential pest control. The reason I don't think is my view is if you're in your house, you're going to see the mouse before the technology is going to pick up the mouse.

But if you've got a huge industrial warehouse, the technology is going to pick up that before the person working on the forklift. And the second reason is the average dollar cost of a resi account is relatively small. And are you willing to pay me a premium to have further technology in your house to spot it? Perhaps.

My team are a much more expert pest controllers than me, believe that the cost of technology is coming down dramatically. We've just invested in a camera technology company. And interestingly, either -- I think I told you about that last time either, squirrel invading my loft recently. And maybe it was because of who I am, but the team ended up putting a small camera in the loft to try and identify where the little beastie was coming from.

So I think there are applications for resi, but think of it more as the commercial solution. The 25% target is in relation to commercial-only customers. That's where we are at the moment. But if there's a breakthrough in cost of technology, we'll continue to look as a -- for resi opportunity, but not yet.

Chris Bamberry, Peel Hunt. I was just wondering, with the rise in interest rates, are you seeing any change in the M&A landscape in terms of pricing or competition?

Thanks, Chris. I would say -- I mean, I've spent the last 5, 6 years, saying M&A prices went up and they plateaued and people would say, but they're still going up. No, no, no. They've plateaued. I think we've seen the first evidence that prices have come off on M&A in America, which is the hottest market in our business for acquisitions. And I say that in part because I think the cost of debt, your point, Chris, if we're bidding against Rollins, I don't think much changes.

But if we're bidding against private equity, you don't have synergies, and they have very high cost of debt. That is definitely crimping their style, to a degree. Whether you can measure that impact, it's a little bit early to say. But I would definitely say that we can see some evidence of amelioration in pricing in the U.S. Outside of the U.S., prices never got to the same heady heights as they did in the United States. It's a bit less obvious to pick there, but I think we can see a little bit of evidence here.

It's Dominic Edridge from Deutsche Bank. Just a couple for myself. Just on the branch network. Can you just discuss how that fits in with the branding strategy? Because obviously, the more brands you run, the more dissynergies potentially there are in the network. And just when you think about where margins are on a branch-by-branch basis, clearly, when you're in Atlanta, there's an awful lot more you can do on the synergy side by combining branches than, I think, I'm not sure if it's Boise, Idaho or wherever it is in Idaho. And since if you've got one branch in a location, clearly, there's a lot less you can actually do structurally there. So maybe could you just sort of elaborate on how that process has worked?

Yes. I think -- I mean, on the second one, the second bit, there's a little bit of what you said there, Dominic, in response to Andy's question, which is can we just take the number of branches and then bang X percent across the lot. And the reason is, well, no. I would say look in the Dakotas. On North Dakota, I think we've got one branch and Terminix has got one branch, and maybe we put them together, maybe we don't. But it isn't going to change our lives, whether we do it or we don't. So we do have a number of situations where the density just doesn't give you those sorts of results. But that's the exception rather than the rule.

The other point is, as I mentioned earlier, the fact that we've already got 100 branches today that are already above 8 million and already delivering significantly higher margins. So with those, we have to decide, okay, well, how much disruption do we want to a pretty highly performing branch that's already got good density, good margins and is already -- so we'll have to think, do we split that? And so we -- this is not a one size fits all. So the smaller ones won't give us those sorts of numbers. The dense ones, we have to think about slightly differently.

But look, we've already got the plan across the starting number pre the close of 650 to get to circa 400. We know exactly -- and we're not making this up as we go along, we know exactly what the plan is. We also know the phasing of the plan, where we're going to start and as we move forward. So it is -- trouble with averages is they're averages. This is a collection. Some of the branches are going to give us significantly better outcomes than the ones I've shared, but there are also quite a lot that will be on the smaller end. So in average, this is how we get to the numbers we get to.

Branding, I think, a really important part. Terminix is a power brand. It's got brilliant recognition in the consumer. You ask, can you name a pest control company? And they'll say Terminix. Can you name another one? Maybe Orkin. They won't name Rentokil in America. Rentokil is not well known. So we took a pretty simple decision for that. We will be Terminix for residential, for termite, for SMA. That's the high street, the pubs, restaurants, coffee shops. And we'll be Rentokil for big ticket commercial, where everyone knows us already.

So the challenge we will have is most residential customers aren't too worried if you don't give them a reason to be worried. So it's back to why the pilots are so important. If the technician turns up, if the service is on time in full, if the customers' problems are solved, if the company is easy to deal with when they've got a problem, they're not so worried about whether the technician's got a red T-shirt on or a green T-shirt or the trucks got Terminix, Liberty or Rentokil.

It's when we make that branding change in a town or a city, that's why we've got to be on it. So we have to explain it to our customers. You will see a change. Your technician maybe the same technician or not. This is what's happening. This is why there's nothing to worry about. Well, I talked about more pilots coming in, in the third, fourth quarter and into next year. That will be one of the key aspects that we address.

So it's one of those things. You're looking at it and say, well, that will be a bit of friction. That will be another one of those factors. But we then think about it on the other side and say, wow, what an opportunity we will have in the future when we've only got to support one brand, really, I mean, in terms of digital marketing and one power brand that everyone in America already knows the name of.

So this is why -- you're coming on a journey with us here. The next couple of years, you're going to have some bumps in the road as we go through this. The branding one, we've done it many, many times before on a local level, when we've done other acquisitions. We'll start by co-branding, so and so, part of the Rentokil-Terminix group, and then we'll flip it around, Terminix formerly, known as whatever.

It should be fine. There'll be a little bit of lumps and bumps, but that really is part of the excitement of this entire transaction when we get to the other side that we can support that one power brand with all of our marketing and the benefits that flow from it. So more to come on that in a few months' time. Next time we're back here, we'll be able to say how did some of those brand transitions go.

Sure. And just one on the -- just one on IT. I noticed that in the slide pack, you've said that some of the -- you sort of brought together the packages in both Terminix and Rentokil, Is there actually anyone running on the whole set as it were at the moment in terms of the new pilots to anyone? I was wondering because obviously it implies that, for instance, some of the legacy Rentokil businesses are also going to have to go through a transition on the IT side to get to using the legacy Terminix applications.

A fabulous question, and you sat about a foot from the global head of IT there. So I suggest you interrogate him when we finish. The big pilot that we're teeing up to in the next few months will be the first time that we put the entire stack to work. So you've called it absolutely brilliantly. The issue there is not -- does the technology work, because we're using it either in Terminix or we're using it in Rentokil. The issue will be the change required for an individual, and that's why we invest a lot of time, effort and money into change management. So look, that's why we did this big, we call, [MVP] pilot. We'll do that in the next few months. But no, at the moment, we don't have a material part of the business run on the entire stack, but we've got large parts on large parts.

Should we go with the online while people draw in breath? I'll deal with the first one. I think a lot of the rest has been dealt with. But can you confirm what your leverage target is going forward?

Yes. So we are targeting circa 3x by the end of this year on an unadjusted basis. And thereafter, we're targeting 2 to 2.5x in the medium term. That's comfortably consistent with the BBB investment-grade rating. And clearly, as we deliver the synergies, then EBITDA starts to motor, and we think we'll delever pretty quickly thereafter. But 2 to 2.5x, consistent with BBB and gives us the flexibility to do the M&A and the bolt-ons, that's an important part of the business model.

I think we've answered pretty much all of Suhasini's points. A question from [Louise Tora]. What is Rentokil's market share in each region where the company operates? I don't think we've disclosed the market share. But market positions in most of our markets, I think, are #1 or 2 in the markets that we operate across 90 countries.

Yes, I mean, market share is difficult to call because it depends whether you mean by city or by town. But the majority of our countries where we're #1 market share is probably in the 20% to 30% of the market, I would say. Yes.

And I think we've answered most of the subsequent questions.

Any more in the room before we call it a day? Going once. Thank you very much, everyone. Really appreciate it.

Thanks a lot.

Thank you.