Rentokil culls fail to halt slowing profits

24-08-2006

Pest control manufacturer Rentokil Initial saw its profits slow during the first half of its financial year despite efforts to curb its unprofitable business sectors, the firm has confirmed.

Although revenues increased by 10.5 per cent, operating profits fell by 9.7 per cent before amortisation in a widely-expected fall.

Meanwhile pre-tax profits for the six months to June 30th fell by 6.8 per cent, reflecting overall results which Rentokil Initial's chief executive, Doug Flynn, said were "in line with our expectations".

"We are giving much greater attention to productivity and process improvement. This will take us further to achieving our sequential goals of firstly restarting revenue growth, then stabilising and increasing profits and finally working towards margin expansion," Mr Flynn said.

He blamed difficult market conditions for the poorer performances of the company's washroom services division before predicting "broadly flat" performances in the next six months for the company's washroom services and textiles divisions.

Despite these problems, Mr Flynn predicted that the company would "return to modest profit growth" next year as a result of strategic decisions made during the last two years.

These largely involve selling off unprofitable divisions and placing greater emphasis on the company's pest control products, which brought Rentokil Initial prolonged growth during the 1980s and 1990s and had been the cause of its initial growth during the 1920s.

Investors responded negatively to today's results, with Rentokil Initial's share value dropping by 4.38 per cent in early morning trading.


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