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.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Call The Midwife: Miranda Hart as Chummy
tvCall the Midwife Christmas Special
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
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

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there