Rentokil on alert for an acquisition

RENTOKIL Initial, the business services group, yesterday said that it was on the look-out for a substantial acquisition after once again reaching its target of 20 per cent earnings and profits growth in 1997.

Sir Clive Thompson, the group's chief executive said: "Now the acquisition of BET has been integrated we have the management

management capacity to consider other opportunities. We also have the finances, generating pounds 200m of cash per annum which means we will paying off our debts within two years."

Analysts believe that Rentokil has ISS, the Scandinavian services group, in its sights. Rentokil is also believed to have run a slide rule over Compass, the catering group. However the recent rise in its share price, which saw the group burst into the FTSE 100 yesterday, makes an imminent bid increasingly unlikely.

Sir Clive said he has more than pounds 400m to spend and was interested in expanding Rentokil's hygiene, personnel and property services divisions through acquisitions in North America and Europe.

The economic turmoil in Asia took its toll on Rentokil's business in the region, causing profits to slip by 0.6 per cent to pounds 56.9m, and the group is now unlikely to seek acquisitions in the area.

Asked if Rentokil can sustain the 20 per cent growth rate that has been the hallmark of its performance over the last 16 years, Sir Clive said: "I believe we can beat this target for the next three or four years at least. If we can't, it will not be for want of trying.

Rentokil announced a 31 per cent rise in profits to pounds 417m despite the impact of the strong pound. The company also said it would pay a full- year dividend of 3.06p, up from 2.53p in 1996. Nevertheless the results disappointed the market and the shares slipped 5p to 308p.

Investment column, page 26