Rentokil hit by textile disappointment
Services group Rentokil Initial dealt a blow to recovery hopes today by reducing profits expectations at its biggest division.
Rentokil blamed tough trading conditions for the disappointment at its textiles and washroom services arm, as profits for the division in the second half of 2006 are now likely to be flat on the first six months.
The company also announced an overall 10% fall in operating profits to £138.5m (€204.3m) for the six months to June 30, but stuck by previous expectations that it would return to modest profits growth in 2007.
Restructuring efforts by Rentokil, led by chief executive Doug Flynn, have included the closure of its linen and workwear business earlier this year and the sale of its manned guarding businesses.
The company, which also has operations covering pest control, facilities services and tropical plants, also said it was reviewing the number of sites from which it operates – a move expected to result in the merger or closure of locations.
Shares fell more than 4% as investors reacted to the disappointing forecast for textiles and washroom services.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “While investors will appreciate that the major restructuring of the business which Rentokil has recently undertaken takes time to generate results, Rentokil shares have been on a downward trajectory since the late 1990s and investor patience continues to be tested.”
