Profits at Rentokil fell dramatically in 2008 with the UK pest control business singled out as delivering a disappointing financial performance.
Rentokil Initial Plc, the world’s largest pest-control provider, has announced disappointing results for the year ended 31 December 2008. All divisions, other than facilities services, posted year on year declines, says the company.
Group operating profit dropped 61% to £82.1 million and profit before tax for continuing operations fell 84% to just £22.8 million, compared to £142 million in 2007. When discontinued operations are included the final profit before tax was £21.4 million (£658.5 million in 2007).
The pest control division delivered a strong performance in mainland Europe and North America but the UK continued to prove challenging with divisional operating profits held back principally by the poor performance of the UK business. UK pest control revenue fell 2.0% in the year; 10.5% in the fourth quarter. The business experienced a significant downturn in sales enquiries from the end of the second quarter right through the second half of the year.
Given the uncertain economic environment, cash generation is receiving high priority and this is one of the reasons the board says it has decided not to pay a final dividend for 2008.
Rentokil Initial appointed a new leadership team in 2008. This team concluded that overall performance had been undermined by major operational weaknesses. These include lack of focus on customer service and insufficient focus on operational excellence.
Five ‘turnaround’ businesses are identified as critical to future success. These are the City Link parcel delivery unit, and the washrooms and pest control units in Britain and Australia where, says the company, the focus has been on improving service.
In the recent Pest article ‘Boom or Bust’, personal service and attention to detail were identified as significant factors in helping pest control businesses survive the recession. These attributes were felt to be more often associated with smaller regional or locally-based companies adding weight to the rumour within the UK industry that the large national companies have identified these small local businesses as one of their prime business threats.
For a PDF of the Rentokil 2008 year end results click here.