Rentokil plunges 20% on profits warning

SHARES IN Rentokil Initial, the pest control and business services group led by Sir Clive Thompson, slumped by a fifth yesterday after the group warned that profits this year would undershoot market expectations by a wide margin.

Sir Clive, known as Mr Twenty Per Cent for his pledge to grow earnings by 20 per cent each year, told shareholders at Rentokil's annual meeting yesterday that profits were only likely to rise by 10 to15 per cent this year. Analysts had been pencilling in profits growth of 15 to 20 per cent.

The shock announcement sent Rentokil shares tumbling by 70.5p to 291p and increased speculation that the group could be forced into another big takeover deal to restore its fortunes. Sir Clive's last major deal was the pounds 2.2bn acquisition of BET in 1996.

Rentokil failed to meet its growth target in 1998 for the first time in 13 years as profits came in at pounds 490m - a rise of 17.6 per cent.

Since the announcement of its preliminary results in early March, Rentokil shares have fallen by 27 per cent and have underperformed the FTSE All- Share index by 32 per cent. Since the start of this year the shares have retreated by 35 per cent.

Sir Clive, who is also president of the Confederation of British Industry, admitted yesterday that he had failed to manage the market's expectations adequately.

"The very fact that I felt the need to make my statement demonstrates the difference between the market's expectations and how we see ourselves performing."

But he said he felt no pressure to mount another blockbuster bid. "We paid pounds 2.2bn for BET, and if the right business came along of a similar size we would look at it.We have the ability and the financial firepower to take on another big business. But we won't allow allow that to burn a hole in our pockets. If it is a choice between achieving short-term growth targets and making a risky acquisition, then I for one would say we should sacrifice the short-term targets."

At the time of Rentokil's 1998 results Sir Clive said: "The board expects further good growth in 1999."

Analysts had been forecasting sales growth this year of 6 to 8 per cent, which would have been sufficient to generate a 15 to 20 per cent increase in profits and earnings per share.

But Sir Clive said that, based on first-quarter trading, sales growth for the year would be below that level, even though revenues were running ahead of last year's pounds 2.9bn. "We felt we needed to inform the market that its expectations were too high," he added.

Since the BET takeover, Rentokil has introduced a number of initiatives to lift revenues, such as improved sales training and management and an upgraded customer database, but turnover has not risen as quickly as had been expected.

Sir Clive said that the average Rentokil customer typically bought between one and two of its services, which range from hygiene and personnel services, to pest control, property and transport.

The company's long-term target is to get the average customer to buy between five and eight Rentokil services.

Analysts had been pencilling in profits this year of around pounds 580m. The forecasts are now for a 12 per cent increase in earnings, producing pre- tax profits of around pounds 550m in 1999.

PROMOTED VIDEO
News
people
News
Justin Bieber performing in Paris earlier this year
people
Arts and Entertainment
Martin Freeman and Lauren O'Neil in Jamie Lloyd's Richard III
theatreReview: The monarch's malign magnetism and diabolic effrontery aren’t felt
Arts and Entertainment
'Molecular Man +1+1+1' by Jonathan Borofsky at Yorkshire Sculpture park
tv
News
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
Extras
indybest
News
people'She is unstoppable', says Jean Paul Gaultier at Paris show
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Alexis Sanchez and apparently his barber Carlos Moles in Barcelona today
football
Arts and Entertainment
Miley Cyrus has her magic LSD brain stolen in this crazy video produced with The Flaming Lips
video
Arts and Entertainment
In his own words: Oscar Wilde in 1882
theatreNew play by the Oscar Wilde's grandson reveals what the Irish wit said at his trials - and what they reveal about the man
News
people
Arts and Entertainment
Unless films such as Guardians of the Galaxy, pictured, can buck the trend, this summer could be the first in 13 years that not a single Hollywood blockbuster takes $300m
filmWith US films earning record-breaking amounts at the Chinese box office, Hollywood is more than happy to take its lead from its new-found Asian audience
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compliance Officer - Trading Firm - London

£55000 - £65000 per annum + excellent package & bonus expectations: Real Staff...

Senior Compliance Executive - Top Bank - London

£80000 - £90000 per annum + competitive: Real Staffing: A highly successful Co...

AVP Regulatory Affairs, Global Bank, London

£40000 - £50000 per annum + highly competitive package: Real Staffing: An oppo...

VP Operational Compliance - Global Bank

Highly competitive: Real Staffing: VP - Operational Compliance - Global BankA ...

Day In a Page

The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil