Investment: Rentokil misses target for first time in 13 years
Wednesday 03 March 1999
The rise falls just short of Rentokil's aim of raising its earnings per share by a fifth each year - a target the company had met so consistently it had earned Sir Clive Thompson, its chief executive, the nickname "Mr Twenty Per Cent".
Shares in Rentokil lost over 10 per cent of their value yesterday, dropping 48p to 400.75p. However, analysts said the fall was not the result of the company missing its target but was due to Rentokil reporting almost no turnover growth last year.
Sir Clive yesterday said the company had failed, even though an analysis of Rentokil's results showed that, allowing for exchange rate movements, the company's earnings per share had increased by 22 per cent.
Growth was also affected by the Asian crisis, with Rentokil's profits in the region falling 24 per cent last year. In the United States, profits increased by only 12 per cent after Rentokil decided to eliminate low- margin contracts and sell some of its resorts management division.
Sir Clive insisted that Rentokil would maintain 20 per cent earnings growth as a target, although it was unlikely to be met so consistently in the future. "If you achieve it 80 per cent of the time you're doing well," he said.
However, observers said Rentokil would have to concentrate on lifting its sales if it was to continue increasing its earnings. In the year to December, Rentokil's revenues increased by just 0.8 per cent to pounds 2.90bn. Even adjusting for exchange rate movements, the increase was no more than 3.4 per cent.
"If you buy into a company with no apparent turnover growth you're basically taking the future on trust from the management," one analyst said.
Sir Clive said Rentokil would seek to revive its top line growth by concentrating on sales and marketing. Meanwhile, the company is also investing in computer databases to make sure that it is selling a full range of services to all of its customers.
Sir Clive said that if the company could increase its turnover by 11 to 13 per cent a year it would have a good chance of hitting its target by making acquisitions and improving efficiency. "I've never seen a business that can't be improved and I include this business in that," he said. However, he suggested the company was unlikely to make another acquisition in the coming year because prices were too high.
For the time being, the City is taking Sir Clive at his word - brokers are forecasting pre-tax profits of around pounds 585m for the current year, which is an increase of 19 per cent. However, for Rentokil to justify its shares trading on a forward earnings multiple of 28, the company will have to start delivering turnover growth. That looks unlikely for the coming year, making the shares look high enough.
- 1 VMAs 2015: Was Nicki Minaj and Miley Cyrus' awkward acceptance put-down real or staged?
- 2 If you're not already angry about the migrant crisis, here's a history lesson to remind you why you really should be
- 3 Rules on 5p plastic bags likely to lead to arguments at the check-out
- 4 Chaos breaks out in courtroom as father attacks killer of three-year-old daughter
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
VMAs 2015: Was Nicki Minaj and Miley Cyrus' awkward acceptance put-down real or staged?
Bank Holiday Monday opening times: Are Tesco, Asda and other supermarkets open today?
The nine most warmongering countries in the world revealed
Isis releases graphic video showing four Shia 'spies' being burned alive in Anbar, Iraq
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
UN investigating British Government over human rights abuses caused by IDS welfare reforms
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...