Sir Clive Thompson, the founder of the pest control to tropical plants group Rentokil Initial, was ousted as chairman yesterday after a disastrous profits warning from the company.
The dramatic removal of Sir Clive came just five weeks after he made £9.25m by cashing in five million Rentokil shares or 70 per cent of his personal holding in the company.
Sir Clive has been replaced as chairman by the man who instigated and orchestrated his ousting, Brian McGowan, the 1980s corporate raider who helped create the Williams conglomerate. Mr McGowan said: "Sir Clive's presence, his dominance, was so all-pervading that to change the culture, the style, the emphasis of the business was impossible. We decided we needed to liberate the company from its past. We have had four years of drift. This business has gone nowhere. We had to decide who to blame and we chose Sir Clive."
The removal of Sir Clive coincided with a warning that profits would be 15 per cent down on last year. Analysts had been forecasting profits of about £408m but Rentokil said that, based on the first four months' trading, it expected them to be £350m. The shares fell 14 per cent to close down 24p at 151.5p, valuing Rentokil at £2.75bn.
Sir Clive was made chief executive of Rentokil in 1983 and chairman in 2003. He became famous as Mr 20 per cent after his pledge to increase earnings per share by 20 per cent a year. He lost his title in 1999 when Rentokil warned it would miss the target for the first time in 13 years and since then its earnings has continued to decline. He will receive a pay-off worth £455,000 made up of a year's salary and company perks. But it is his share dealings so close to the announcement of a fresh profits warning that will attract the most attention.
On 13 April, Sir Clive sold one tranche of 4 million shares at 185.3p and another 1 million shares at 183.7p, raising £9.25m and leaving him with 2 million ordinary shares. He also has a further 6 million share options that are currently worthless. The share sales were signed off by Rentokil's administration director Paul Griffiths. Sir Clive defended his share dealings and insisted he had resigned from Rentokil because of a split with the board over the group's future strategy. He said he favoured handing cash back to shareholders and making certain disposals while the board favoured investing for organic growth. "It was a difference of opinion over the strategic direction of the company. These things often occur. When the management and the chairman have differing views over the way the company should go forward, and the board favours the management view then it's inconceivable for the chairman to remain."
Sir Clive said the sale was made to diversify his share portfolio, having become uncomfortable holding so much of his personal wealth in a company over which he no longer had operational control. "The company issued its prelims at the end of February. They confirmed them in the annual report that was sent out to shareholders in early April. I had no more information than the company had when it sent out the annual report," Sir Clive said.
"The reason I sold on 13 April was that it was in the new tax year and also it was a year since I had stepped down from being chief executive. I had always intended to diversify my portfolio. At that date the company had no reason to believe it would not hit market expectations."
Mr McGowan has instituted a review of recent share dealings by directors. But company sources said that as far as he could tell, normal procedures had been followed and there were no indications that anything unusual or irregular had taken place. Company rules prevent directors dealing in shares three weeks before a trading update.
Mr McGowan said the directors felt that under Sir Clive the business was being run to hit short-term City expectations of profits at the expense of longer-term investment in training and improved service standards. He said he had "absolute confidence" in the chief executive James Wilde, but added that Rentokil had to make £350m profit this year and better that next year or "we are all dead".
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