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Rentokil prophecies come true

In line with the forecast made at the Annual General Meeting in May, Rentokil failed to meet its hallowed 20% target for the first time this half year. The company's pre-tax profit results were announced this week.

Interim statement results of the six months resulted in a growth profit of 10.2% and earnings up per share up by 10.5%. Rentokil's shares, which until the end of last year had out performed the FTSE 100 index by more than 400% since 1990, have been the index's worst performer this year, falling more than 47%.

Overall, turnover growth being held back was attributed to contract losses in some specific low margin activities. Reductions in turnover and profit were seen in UK catering, hospital services, management services and cleaning, as well as US personnel.

The UK turnover was down 2.3% to £659m due to a range of reasons including low margin activities within the sectors above. Europe, however, showed an excellent growth of 15.7%; strong growth was shown in textile services and healthcare.
Business sectors in the company which have made a difference to the overall turnover are hygiene services which had a good increase of 6.8% and security services which produced a 7.7% growth in turnover.

Property services with its low margins in the UK of catering and management services fell by 12.2% to £144m.

The company has decided to review its 20% objective and Sir Clive Thompson, chief executive said their objective now is: "to substantially outperform the support services sector (as measured by total shareholder return) over the next 5 years - through a constant focus on core activities and a continual drive to improve the quality of service delivery, the quality of technical leadership, the quality of culture, the quality of management and the quality of earnings."

Julie Crisp

 

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