Profits leapt by more than 20% in Rentokils UK pest control business in 2010, with city analysts describing the whole pest control services division as one of the companys bright spots.
Announcing the Rentokil Initial PLC preliminary results for the year ended 31 December 2010 last Friday (8 February), chairman, John McAdam, said that there had been good profit improvements in pest control, in the Asia Pacific business and in facilities services; all underpinned by a strong cost saving programme which had seen £60 million of cost savings in the year.
Overall the pest control division’s adjusted operating profit was up almost 10% at £98m on a slightly lower turnover. Some of the improvement was attributed to the outbreak of bedbugs in cities, including New York, last year. The facilities division also performed well with profits up over 20% to £25.9 million.
However Rentokil is not out of the woods just yet. Chief executive officer Alan Brown accused former management at the company’s City Link parcel delivery unit of “losing the plot”. Turnover at City Link fell by 5 % and operating losses widened from £5.6 million to £9.6 million.
In addition Mr Brown also blamed a combination of “difficult market conditions” and “weak management” for a dire performance at its Benelux textiles and hygiene business. However it was a goodwill impairment hit of £95 million at City Link that was the main reason for a 78% slump in pre-tax profits to £14.5 million.
After adjustment for one off items, goodwill and impairment costs however, the underlying profit trend was up, with adjusted profit before tax showing a 15% improvement at £192.3 million.
John McAdam, Adam Brown and executive director Andy Ransom joined Rentokil in 2008 with plans for a five-year turnaround. They took day-to-day control of City Link in December, after Stuart Godman, City Link”s managing director, left by “mutual agreement” and expect to have addressed City Link’s operational inefficiencies by October 2011. A recovery plan is also in place for the Benelux business.
Shares fell 8% on the news.