Blow for Rentokil as profit target is missed

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The Independent Online
SIR CLIVE THOMPSON'S reputation took a knock yesterday when Rentokil, the support services group he runs, failed to meet its 20 per cent profit growth target for the first time in 13 years.

The news is a blow for Sir Clive, whose record for consistently meeting the target had earned him the nickname "Mister Twenty Per Cent" in the City.

In the six months to June, Rentokil reported earnings per share of 5.63p, up 18.8 per cent on the same period of the previous year. It is the first time since 1984 that the company has failed to meet the 20 per cent benchmark at either the interim or the full-year stage.

Sir Clive pointed out that, excluding the effects of the strong pound, earnings per share would have been up 25.5 per cent, ahead of target.

"We aim to achieve 20 per cent growth bar nothing and we've failed," he said. Investors reacted by pushing Rentokil shares down 15p to 365p.

The shortfall was largely the result of the economic turmoil in Asia, where devaluation of several currencies contributed to a 20 per cent drop in profits from the region. In North America, profits were flat after Rentokil sold two businesses and made a decision to pull out of low-margin contracts.

Sir Clive said he would continue to impose the 20 per cent target.

"I think I would probably sleep a lot easier without it. But then it's probably a good thing for shareholders that I lose some sleep," he said.

He added that Rentokil continues to look at potential acquisitions even though it did not need them to continue growth.

Sir Clive, who took over as President of the Confederation of British Industry last month, said the effects of the minimum wage and the European Working Time Directive, which limits the number of hours employees can work, would increase costs by about pounds 10m. "We will pass some of this on to our customers and ... and a certain amount we will have to absorb," he said.

Investment column, page 17