Good morning, ladies and gentlemen. Welcome to our conference call for Rentokil Initial's Trading Update for the 3 months to the 30th of September. This call is scheduled for 45 minutes. And now let me hand it over to CEO, Andy Ransom. Please go ahead, Andy.

Thank you, and good morning, everyone. I'm here with Stuart, and in a few minutes, we'll be pleased to take any questions. But first, let me just say a few words covering the third quarter and importantly, the actions that we've been taking following the September trading update. In the third quarter, the group delivered total revenue growth of 3.6%, of which organic revenue growth was 2.6%. There was good momentum sustained in the group's international regions, which in aggregate, delivered organic growth of 4.4% in the third quarter with Europe delivering organic growth of 4.7% and the Asia and MENA region delivering organic growth of 6.5%. Year-to-date, our international businesses outside of North America, have delivered a combined organic growth rate of 5%. Turning now to North America, where in the third quarter, overall, we delivered organic revenue growth of 1.4%, with North America Pest Control also up by 1.4%. Clearly, we were very disappointed to announce in September that the business was underperforming our expectations. And since then, we've put in place a focused action plan on a number of fronts. Firstly, in our operations, we've taken decisive action to mitigate cost overruns. Given our elevated workforce costs this year, we've reduced our sales and service headcount in addition to the normal ongoing off-season headcount reductions. Over the last few weeks, we've removed around 250 roles from service sales and back office functions with an annualized cost saving of around $22 million. We've been tightly managing overtime and labor as we've entered the off season. And as we said in September, material and consumable costs in the North American business have been higher than expected, partly due to inflation. There was also an impact from a new ordering process for Terminix branches and a weaker termite season that…

[Operator Instructions] Your first question comes from the line of Simona Sarli from Bank of America. Your next question comes from the line of Suhasini Varanasi from Goldman Sachs.

Just a couple for me, please. So it's interesting to see the launch of the satellite branches in Q4. If these work and revenues do improve, can you maybe share some color on how many more you can launch in [ 2024 ], and maybe 100 more, a couple of hundreds more and the costs associated with that. The second one is on the appointment of the Chief Marketing Officer, Chief Operating Officer in North America, can you maybe share some details on who they are, their background, please?

Thanks, Suhasini. Look, on the satellite branches, and so back up one. To drive organic search volumes from the Internet, you need three things in place, all right? You need high-quality content on your websites of which we have lots, hundreds and hundreds of web pages, and we're working hard to refresh and update those. Google has made another change to its algorithm using generative search so it's important that the content of our web pages aligns with Google's most recent algorithm. The second is the importance of 5-star Google reviews. And we've had a massive improvement in 5-star Google reviews across our master brands in the last few months. The third factor in local search and organic search is the location of your facilities. And so what we're doing here is reflecting on the fact that we have got a lot of facilities across North America, but many of those facilities are not in the prime real estate. They're not in the biggest urban areas, the metro areas, and some of them are a little bit further away from dense population. So what we're piloting here is initially in the fourth quarter, we said at least 10, and certainly will be at least 10. They're in prime real estate metro areas. And we'll be putting in real facilities, real offices, with real people answering phones, moving some staff from our other branches. The technicians will still live locally as they do servicing customers locally. And we're hoping that we will see a positive response to that to drive an improvement in local organic search. So the reason we're piloting it, if we were so certain so saying that this would work 100% in all of the cities, then I'll be able to give you a proper answer to how…

We'll reopen the line for Simona Sarli from Bank of America.

So I have a couple of them. First of all, you have been mentioning that there is some cost overrun, but you're managing to contain some of that. What is the total amount of this cost overrun and how much you will be recovering overall next year? Also, of the incremental net synergies that were initially expected for 2025. Can you remind us what is the amount? And also how conservative is your expectation that this will be pushed out only by 2 to 3 months? And lastly, if you can kindly provide an update on PestPac. So in July, you mentioned that 40% of North America colleagues were already using PestPac. How much progress did you make since then? And how much of this 40% is actually Terminix versus Rentokil colleagues?

Yes. So thanks, Simona, apologies. You asked a number of questions there about costs, what does that mean for 2025 synergies. So I'll try and sort of respond in the round, I think. So first thing, we haven't given guidance on 2025. We don't -- we never have at this time of the year given the North America performance we've seen, it certainly wouldn't be prudent to start now. But there are a number of moving pieces, and I'll try to give some color on that. Firstly, of course, we've got the organic growth trajectory, the impact of the integration, both positive and negative. So once we're through the other side, we'd expect growth to improve, but as we've said many times, as we're going through an integration, we get a short-term disruption. So key concern, of course, is the lower route density we're experiencing due to our volume decline and its impact on gross margins and through the integration where customer churn can be slightly elevated. Clearly, that's a concern, too. So we've got a few moving parts there. You referenced synergies. Look, so what did we say previously? We've said $65 million we gave that guidance at the prelims. But then at the interims, we said that of the additional $25 million marketing investment, marketing and customer care investment. In the second half, $10 million of that would flow through into 2025. So you've got a net there of $55 million is where we stand. I'm not really in a position right now to say quite what that looks like in 2025 because, of course, the point of the 2- to 3-month review is to determine what that future trajectory might look like. But there's the sort of the polls around which you can [ have that ] but clearly, there's an impact as we will be delaying. And most of those 2025 synergies are operational synergies so Q4 was always going to be higher than Q1. So it's a Q4 that you lose rather than a relatively low modest Q1. And then, yes, the review of the cost base, we've said we're finding about $22 million of cost reductions through FTE, the 250 heads that we've already done and about $10 million, we think, over Q4 and into 2025 should flow back. So of that GBP 50 million overrun, we've identified about $33 million that will come back the other way. But there's other items moving around as well. I've already referenced the density point from organic growth. There's other moving pieces. We've got small acquisitions, relative growth rate of the product business, which obviously impacts margin and rebuild of bonus provisions and those sorts of things as well. So quite a lot of moving pieces there. Not really ready to give guidance on 2025, but hopefully, there's enough information there that you've got some points around which you can think.

Simona, you said how conservative is the 2- to 3-month period, don't really know. I mean, I don't see -- I don't think it's either aggressive, nor conservative, I suppose, that's our estimate. We'll know a fair bit on the pay plans, I think, during the fourth quarter. We get some incident reaction. As we launch those pay plans, we'll get -- we'll do some feedback questionnaires with the colleagues do they like it, do they not like it? Are we hitting the spot with that? I think in terms of the satellite branches, so we just talked about that, that will take a little bit longer to see how effective that is and whether they're working to plan. So we're probably going to need that January, February. And then we're updating the market numbers at the first week of March, I think the [ pro 11 ], so we're certainly going to need that period in the first couple of months of next year to see what are we learning from that. . I think it makes absolute -- I think of all the change we've put through to the business in the last year or 2, I think it makes absolute sense to take that moment of reflection and review and then start and push on as we go into second quarter. So absolutely no reason to believe it will be longer than the 2 to 3 months that we're calling. But equally, I don't think we're calling it 2 to 3 months and actually think it's 1 month. I think we're going to need all of that time to review those changes that we're making. Your detailed question on the percentage of people on PestPac is not in my head at the moment. That is a detailed…

And...

Go on if you have a follow-on.

So I was wondering also like on the engineering customer retention that you have indicated decreasing its holding. If you can split it a little bit between Rentokil and Terminix. Are you seeing a similar improvement between the two?

No, I'm not that split. And just to be clear, that figure is a slight improvement. We're talking about 0.1%, I think, up from the previous quarter. That's not good enough, Simona. I'm not -- we're not putting the champagne on ice on customer retention at all. That's why we've invested the 40 extra people in heads. That's why we've got 3 senior people across this. We are looking at this with a laser focus on an end-to-end in the customer experience because we've got opportunities to improve that right across the piece. I don't have the split between Rentokil and Terminix in my head. But as a general rule, as I've shared before, the customer retention with residential is always the weakest. It doesn't matter what country, it doesn't matter what brand, what business, it's always the weakest. So that's the area that we have to focus on most acutely. Residential customers who took out the service when they had a problem, who signed up to a contract when they had a problem, who no longer have a problem and therefore, in their minds decide that they no longer need the service. That's our biggest challenge. So trying to convince people that the value of the service when they're no longer seeing the ants in the kitchen or the mosquitoes in the yard that caused them to book us in the first place. But I don't have the split. And again, we'll update more with the prelims.

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

I have three please. So just firstly, on the synergy review in the new year. Could you comment on the timing? I appreciate there's a lot going on in Q4 with the branch integrations and pay plans, et cetera. But do you think the review can be truly representative, given you're basing it on sort of that quarter in the low season? And equally, how straightforward would it be to speed up if you make the integration again into Q2 once the review is done? Or do you think it's more likely that you wait until you get past the peak season later in the year to ramp it up again? Then secondly, on the satellite branches, it sounds like this is part of how you're thinking about lead generation. At the last update, I think you mentioned that the group was a little over reliant on paid search and cost of leads. Is this a way of addressing that? And again, with the review, do you think that, that is enough time to see whether those are successful? I don't know how quickly you'd expect to see an uplift from opening those satellites? And then just lastly, very briefly, to the extent that you can comment on it, have you seen much impact to parts of the business from the elevated hurricane activity in the U.S., particularly through early October. Any comment you can give there?

Thanks, Annelies. I think great question. Great two questions. The first couple there related to say how much you're going to learn. Of course, if I knew that, I wouldn't need to do the pilot size but I think we'll know enough to see whether it's working. Is it part of your question, is the satellite branch part of the overall organic search strategy? Yes, it's part of it. Unashamedly, yes, it's part of it. And being local, as I said the answer to my first question, you got to get three things right. The web content, the 5-star review and the location of your facilities. I'm hopeful that we will see enough evidence that, that is an important part or it isn't. And we'll -- all I can do is tell you, we'll update you when we know whether we'll have the definitive answer, and back to the very first question, therefore, how many satellites might you need? I don't know. We're going to know the definitive answer, but I'm hopeful that we will know enough to give you an educated answer to the question as opposed to a guessed answer to the question when we next speak. In terms of the -- are we slowing down and then can we speed back up? Just to be clear, we're not stopping. We're not suspending. There will be a wall of activity, an immense wall of activity that goes on through the first quarter. And I know I've never really done a good enough job of explaining what this integration is all about. But there is a massive amount of preconditioning of data cleansing of training of all manner of things that have to go on to get a branch ready for integration. So we're not going to stop --…

The next question is from the line of Sylvia Barker, JPMorgan.

Two questions, please. Firstly, on growth. So can you just confirm Pest Services was about 1.4%, which is very similar to the previous quarter. And possibly a little bit slower if we take into account the comps from last year. But how do you -- what are you monitoring now in terms of kind of data for Q4, and what you're seeing on the distribution side and on the services side. Secondly, just around cost -- so we've talked about the synergies. I guess the review show whether you actually reduced the scope of the integration to any degree if you think that you needed more of these branches for the organic search, et cetera. But on the cost side, so where are you now on kind of the marketing -- digital marketing spend, could that -- would that need to go up again? Or do you think that you're there? And then any additional costs around hiring your four traditional heads senior leaders? And also, do you need to maybe pay up more in incentives to any of the colleagues? Is there any -- should we think as we think about kind of what's the level of earnings for next year, even if you're not guiding on that yet, kind of what are the moving parts to consider around costs? And then finally, on the refinancing, Stuart, would you be able to just update us on kind of where that is? What the additional costs from that might be into next year?

Thanks, Sylvia. Let me have a go. I'll dive into the middle of it and come back to you, Stuart. On the cost piece, we're not saying anything different on the digital marketing budget at this point in time to that what we've said before. So those with long memories, we originally put an additional $25 million into 2024. We then subsequently increased that to $50 million, of which $40 million would be spent in 2024, and $10 million going into the run rate of 2025. So we haven't changed that. And your question is, might we, could we? Yes, we could, I suppose, but we haven't. And we're putting together budgets for next year even as we speak. But at the moment, we're not calling any material change to that number. Let me remind us what the component parts of that $50 million included. It included a big investment into the brands, top of funnel marketing, brand marketing for the first time for a couple of years, if not more, in the Terminix brand that will continue. That was effective, raising top-of-mind awareness for the Terminix brand so that continues. The additional heads is included. So any additional cost of the sales team is included overall in the investment. So that's not -- and you don't need to add an additional 40 heads. That hasn't changed from anything we've said previously. In terms of the three additional heads, there might be some additional cost there around the margin. I talked about three senior heads that wasn't originally in the plan. But so there's a little incremental investment there. Sorry, you did ask a question about incentives, which I've lost the plot on, sorry. So I'm going to have to skip that one. Stuart, do you want to cover -- and you can come back and ask me what that incentive point was, Sylvia apologies.

It was are you having to pay more to your new people in essence, do you have to incentivize people to a greater degree?

No, we haven't made any changes to the incentive plans at all through 2024. I have, of course, talked about the planned piloted changes to the pay plans more generally for technicians and for sales, which we'll be piloting in the fourth quarter, which I've talked at many, many times before, which in the main will result in lower paid colleagues getting higher pay and some people at the very high end on technicians getting a lower pay over time. But other than that, there's been no changes specifically this year. And at the moment, other than the planned pipeline changes I've talked about, I've got nothing to add to that. Why don't you Stuart take refinancing, and I'll come back and address Sylvia's question on growth.

Yes, sure. So we've got a EUR 400 million bond that matures on the 22nd of November. I think the swap rate is about 3.2%. We are retiring that out of cash, so we're not refinancing this year. We've got plenty of cash sitting on the balance sheet, so we're making ourselves slightly more efficient. So we'll probably be in the market Q2 of next year, I would imagine, because we've got the $700 million term loan that needs refinancing next year. And obviously, rates will be what they are, it will be in Q2 next year, but those are -- no news this year, apart from retiring that bond.

Yes. And not so much additional color on the growth, 1.4% for Pest Control, 1.4% for North America in total. What are we monitoring on a daily basis? Well, what are we monitoring? On a daily basis, we are monitoring lead flow. So we're monitoring inbound lead flow from paid search. We're monitoring inbound lead flow into the websites from organic search. We're monitoring technician leads from our field force on a daily basis. We are monitoring the sales close rate, that's the rate at which sales people sell those leads. We're monitoring the average dollar value of those leads as they come in. We don't have daily visibility yet of customer retention. We have daily visibility of customer cancels, which is a different thing because when a customer cancels, you still have the opportunity to save it, hence, the investment in the sales team. We should have daily visibility of customer retention, I'm hoping between now and the end of the year. So I think it's one of the bigger changes heritage Rentokil colleagues such as myself, whereas historically, we typically didn't really need to look at data much more than once a month and data was highly predictable on the commercial side of the business. On the residential side in the termite, it's much less predictable, as I've said many times. So we've moved the organization to that daily tracking, daily visibility. I'd like to get off daily, if I'm honest, because it's a bit we're not retail. We're not a supermarket. I'd like to get it to be more of a weekly cadence and the predictability of the numbers has got better, and that's the plan over the coming weeks and months. There's not much of a story on distribution. Distribution's been quite lumpy as it tends to be in that business. Business is performing reasonably well, but it is a seasonal business and then we have -- we're coming to a season now where the manufacturers of chemical products for pest control and lawn and ornamental will start doing what they call the early order program. So we'll see how that goes. We have it every year, but basically, the suppliers offer discounts to customers to buy that product this year so they can get it in this year's numbers. So we'll see what the early order program looks like this year, but no significant story on distribution.

Your next question is from the line of Rory McKenzie from UBS.

It's Rory here with two questions on behalf of Nicole. Firstly, now that you're about to pilot the new pay plans in the 8 branches, can you give more detail on what those pay structures look like and how they compare to the legacy plans? And then secondly, following up on Annelies' question about what you learned from the Q1 review. I wanted to ask about the branch network. I think you'll be up to 59 branches migrated by the end of Q4, and then you have the 10 new satellite branches. Can you just talk about how that's spread geographically? Is that all focused in specific states or regions? Just trying to think about if in the Q1 review, you'll be able to assess a kind of fully transitioned model in any local areas or whether it's more about the national portfolio of branches overall?

Yes. Thanks, Rory. Yes, very good question. I'll deal with the second one first. So in terms of the 59, 60, whatever it is, branches by the end of the year, those are all in one region. They are all geographically in one region. And the pay plans that we will be piloting will be piloted in that region. The 8 branches is a subset of the 59 branches. So yes, increasingly, we'll be able to answer the question that you just posed, which is okay, now you've done the systems, now you've done the pay plan, now you've done branding. What are you -- what is the -- what does the post world look like in that region? I'm not sure we'll be able to answer that question fully at the time of the prelims. But yes, so we're not gone scattergun with these branches. They're all in the same geographical region, and that's where we'll be piloting the pay plans. As to the satellite, no, they're not in the same region. They are in a selection of prime metro cities around the United States, which we've selected, handpicked, if you like, deliberately because we're testing something different there. We're testing to see if you have a physical location closer to dense and affluent potential consumers, does that drive up a better local presence than having branches elsewhere. So that's a different theory we're testing there, Rory, that I'm sure I haven't got the list in front of me, wouldn't tell you if I did. But I'm sure there'll be at least one, if not two, in the region that we've integrated the systems. On the pay structure, I think it's fairer to tell the colleagues the details of the pay structure before we tell the analysts to be…

Thanks for answering the unasked third question.

I think we've got time for one more question, please.

And your final question comes from the line of James Rose from Barclays.

Just one for me. Coming back on to customer retention, which is creeping upwards, but there's still a way to go. Could you run us through what's been done so far to improve the service levels and processes across Terminix? And the second part of that is, do you think it's not necessarily possible to address service levels processes until we get through the branch integrations? Do we think about it being a fairly long time scale to walk up that customer retention rate as you go through the integrations?

Yes. Thanks, James. Very good question as a small, I must say. The honest answer is, you said one question so I could do an [indiscernible] on this one and I'll try not to. Look, customer retention, you've got to track the customer life cycle journey from the very first point in time when a customer touches our website or phones a call center all the way through to the very end of that life cycle when the customer says, I'd like to terminate. And through that journey, there are multiple, multiple, multiple touch points. Every time they call us and want to change their appointment, every time they call us and want to query a bill, every time they want to book an additional service, every time we want to tell them, we can't turn up this afternoon because something's happened. So in terms of process, we are looking at that end-to-end process because there are so many opportunities, which is why I put 3 people across this. Why three people? Because there's big chunks of this process. I mean it is the end-to-end customer experience. So there is a ton of things that we can do to impact positively the customer experience. And over time, we believe they will have a positive impact on customer retention. Some of that will relate to systems. So some of that has to be post integration and some of it relates to process. And again, some of that process has changed post integration, but a bunch of it's changed pre-integration. So I think it's a great question to finish on because for me, it's arguably the single biggest most important thing we've got to get right, hence, the investments that we're seeing and hence, the focus we're putting on it. If you…