Rentokil chief pledges 10% rise in dividends

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Rentokil Initial yesterday pledged that dividends would rise by 10 per cent a year for the "foreseeable" future as it pushed further into Continental Europe.

However, reporting interim results, the support services group's chief executive, James Wilde, who succeeded Sir Clive Thompson earlier this year, rejected the label of "Mr 10 per cent". Sir Clive was known as "Mr 20 per cent" for delivering earning per share growth of that magnitude for years.

He pointed out the company had been providing 10 per cent dividend growth since 1998. "It's a bit unnecessary," Mr Wilde said, referring to attempts to label him.

Pre-tax profits grew 7.4 per cent to £200.5m, for the six months to 30 June, ahead of expectations, helped by a jump in the security business, where profits were up by 11 per cent.

Mr Wilde said that during the first half, the US security business was busy because of concerns surrounding the Iraq war. American companies put on extra security while the war was on, leading to an 11 per cent jump in turnover for the division in that country.

The hygiene business, which provides services for business washrooms, as well as pest control, continued to be weaker than other divisions, with turnover here increasing at half the 5 per cent group rate. Mr Wilde said the UK hygiene business was a "concern" with sales down 2.5 per cent but it is going through a restructuring.

Group margins came in at over 18 per cent, ahead of peers, though analysts said the figure was on the decline and pricing pressure was evident.

Geoff Allum, analyst at Investec Securities, said: "Such high margins also leads to a concern that pricing pressure will bring lower margins and a need to find turnover growth in what are fairly mature markets. Margins have been coming down. Margins have declined each year since 1999."

In 1999 margins were 21.8 per cent, last year margins fell to 18.9 per cent. In the first half of the current year, margins fell again to 18.4 per cent.

Mr Wilde spelt out his strategy yesterday, which will see the company go further into Europe, especially its southern and eastern flanks, and add to its sales force, which is already 3,200 strong. Currently the UK accounts for 49 per cent of turnover, compared with 32 per cent from Continental Europe.

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