No Pain, No Gain: Rentokil has yet to prove it can clean up the mess
Saturday 18 November 2006
Shares of Rentokil Initial have been a disappointing investment for the No Pain, No Gain portfolio. Although they have not slipped into the red since their recruitment in the summer of 2004, they have lagged behind the stock market and even suffered the indignity of relegation from the Footsie blue chip index.
I had hoped that by now the pest control to washroom services group, created in flamboyant style by the controversial Sir Clive Thompson, would be well on its way to recovering from the difficulties that provoked its fall from grace. But it is taking a long time to get the group motoring along the recovery road and there would appear to be little hope of progress until next year. Even this modest expectation must be cloaked in caution.
Last week it produced another set of uninspiring figures. Although income continues to grow, Rentokil is failing to translate it into profits and the pre-tax figure in the third quarter fell 3.6 per cent to £51.2m. With the French washroom business under the shadow of what could be a long running and costly competition investigation, it is not surprising that shares fell perilously close to the portfolio's 143p buying price. Then break up stories swirled around and they jumped to 155p before, at the time of writing, settling near 153p.
Since Doug Flynn was drafted in to revitalise the sprawling business, Rentokil has been reshaping. It has sold off bits and pieces, added small bolt-ons and flexed its muscles by acquiring more substantial operations. Now, following an investment presentation, there is a distinct impression it could be near to more disposals. One story is that the significant electronic security division could soon be sold; other deals could follow.
If such stock market thoughts represent Flynn's thinking, then a slimmed down, but more cost conscious and hopefully more profitable, Rentokil could emerge more quickly than had hitherto been expected.
Although progress has, on the surface, been rather slow, it is clear that Flynn has a tough task. As he says, the group was "organised on a rather eclectic mix of business activities and regional territories".
For years, under Sir Clive, Rentokil was a stock market darling with a Ballyhooed 20 per cent earnings per share growth record. Then cracks appeared. The shares offer a tantalising yield of near 5 per cent. But such a return will not offer much comfort to long term shareholders whose capital has declined alarmingly. Not so long ago the shares were around 500p - a level they will not recapture, even with a bid, in the foreseeable future.
The portfolio's other Footsie constituent, brewer Scottish & Newcastle, continues to make headway but cannot resist spraying a little caution around. Although the current year is unfolding as expected, it is worried about next year's smoking ban in England and Wales and weakness in France, where it has a substantial influence. In addition there is a "depressed consumer environment" on the home front. To counter increasing overheads, the only survivor of the once all-powerful "big six" of the British beerage will indulge in a new round of economies next year. It is already deeply involved in a £60m cost cutting exercise.
Scottish also offers a strong dividend yield and its shares are, as far as the portfolio is concerned, comfortably in the money. They are near 550p although they were once much higher.
The group remains a robust player but in my view it is takeover possibilities that make its shares such an attractive two-way bet. The world-wide brewing industry continues to consolidate and Scottish looks a prime bid candidate.
Georgica, in terms of size, is far removed from the Footsie. After touching 162p, its shares have slumped to 125p as tentative takeover talks ended and trading at its ten pin bowling centres and snooker clubs suffered from the hot summery weather, the World Cup and Scotland's smoking ban. The group made a £356,000 loss in its first nine months against an £819,000 profit for the same period the previous year. Property sales, however, pushed it back into the black.
Georgica expects to realise "substantial shareholder value" next year, an ambition that produced the take over approaches. I expect the ten pin and cue sports businesses to be sold or floated separately or, perhaps, off-loaded in bits and pieces. So far, the group has not lived up to its early promise.
- 1 What happens to your body when you give up sugar?
- 2 Have sex with your iPad thanks to the new sex toy no-one asked for
- 3 The 'sex selfie stick' lets you FaceTime the inside of a vagina
- 4 Why you're almost certainly more like your father than your mother
- 5 Westboro Baptist Church couldn't picket Leonard Nimoy's funeral because they didn't know where it was
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
Nigel Farage promises Ukip will not 'stigmatise' would-be migrants – and says he wants 'everyone to speak the same language'
Ex-head of MI6: 'We shouldn't kid ourselves that Russia is on a path to democracy'
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
iJobs Money & Business
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads