Rentokil bullish despite profits falling by 50%

RENTOKIL Initial, the world's largest pest-control company, reported a major drop in interim profits yesterday but said its lengthy restructuring would finally yield a rise in the second half.

Profits dropped to 65.5 million in the six months to 30 June from 133m in the same period in 2006. Shares fell 1 per cent to 171.3p, with the figures coming in well below market expectations.

The fall in profits came from a major drop in orders from its struggling UK division, amid a major reorganisation after seven years of falling profitability.

Rentokil's chief executive, Doug Flynn, who aims to return to growth by 2008, sold two security units and is expanding more-profitable businesses such as parcel delivery and pest control.

Yesterday there were signs the restructure may be beginning to work.

Flynn said he was confident the company was now in a position to grow from the second half.

"We have halted the downward trend in profits, the tide has turned in the right direction. We are seeing customer-retention rates improving in the UK."

Flynn, who joined the company two years ago, sold its Electronic Security business for 595 million.

The company closed its linen-cleaning division last year after failing to find a buyer.

At the same time the company went on a small-scale acquisition spree, buying 50 companies for a total 96m, around half of which were from the fast-growing Asia-Pacific region.

Despite the fall in profits, the company's pest division, from which it began in the 1920s, had its busiest period for a decade, helped by the mess caused by the recent flooding.

Demand surged in July given the vast amount of floodwater and uncollected rubbish on the streets, which caused a major rise in the amount of rat infestations.