Rentokil's profits tumble after £95m City Link hit
Saturday 19 February 2011
The chief executive of Rentokil, the pest control to property services group, has accused former management at City Link of "losing the plot", as its parcel delivery unit caused a sharp drop in profits last year.
In addition to City Link, Alan Brown also blamed a combination of "difficult market conditions" and "weak management" for a dire performance at its Benelux textiles and hygiene business. These two divisions dragged down group revenues by 1.4 per cent to £2.5bn for the year to 31 December. However, it was a goodwill impairment hit of £95m at City Link that was the main reason for a 78 per cent slump in Rentokil's pre-tax profits to £14.5m.
Mr Brown – who along with chairman John McAdam and executive director Andy Ransom joined Rentokil in 2008 with plans for a five-year turnaround – took day-to-day control of City Link in December, after Stuart Godman, City Link's managing director, left by "mutual agreement".
While City Link was hit by December's snow, Mr Brown said: "They [City Link's previous management] lost the plot in terms of operational management. We had become too dependent on sub-contractors." He said the group would reduce its reliance on "ad hoc subcontractors" to below 5 per cent.
Mr Brown expects to have addressed City Link's problems by October 2011, but said "financial delivery will be weak until then". Processes at its Benelux unit have improved but the recovery plan is in its early stages, he added.
Rentokil's pest control business delivered profit growth of 10 per cent in 2010, while its facilities services arm grew 22 per cent and its Asia Pacific division was up 40 per cent.
Mssrs Brown, McAdam and Ransom were in line to earn nearly £95m in share bonuses over five years had they hit a series of share prices targets between 120p and 280p. Rentokil shares closed at 92.5p yesterday. The company passed on a final dividend.
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