Rentokil says recovery may take 5 years
Services group Rentokil Initial on Friday warned its recovery could take up to five years after first-half profits plunged over 50 percent as difficult economic conditions hamper turnaround plans.
Dave Clark Five singer Mike Smith diesNew Chief Executive Alan Brown told reporters on a conference call he would be "surprised and delighted" if the group recovered fully within three years and said the firm was likely to need a "five year agenda" to be back to its best.
Rentokil, whose businesses range from rat catching to tropical plant hire, is still suffering from the poor integration of acquisitions and misguided cost-cutting plans by previous management.
Rentokil posted adjusted pretax profit for the six months to end June of 39.3 million pounds as revenue rose 4.8 percent to 1.12 billion pounds.
Last month the company issued its fourth profit warning in eight months and said profit before tax, goodwill and one-off items was likely to be 35 million pounds for the full year, down from analysts' previous consensus forecast for 151 million.
Shares in Rentokil have underperformed the UK support services sector by 25 percent since the turn of the year, and were 5.8 percent lower at 69-1/2 pence by 9.48 a.m.
The company has come under recent pressure to break itself up, but Brown said he believed Rentokil can "deliver shareholder value without breaking up the business".
Trading in Rentokil's textiles and washroom businesses deteriorated in the second quarter, while pest control also saw signs of a slowdown in the UK and United States, Rentokil said in Friday's statement.
The group's City Link courier service remained a big loss maker, with first half losses at 27.9 million pounds compared with a profit of 21.1 million the year-ago period. City Link made a loss of 13.4 million in the fourth quarter of 2007.
Rentokil's net debt currently stands at 1.1 billion pounds and the company said it has "adequate" headroom until early 2010. However, some analysts believe the firm may need to go to the market for additional funds before too long.
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