Rentokil Initial Plc (RTO) Chief Executive Officer Alan Brown said there’s scope to narrow the service provider’s focus to pest-control and facilities management once an overhaul is completed and financial markets recover.
Management’s focus is centered on improving profit and efficiency for now, yet the company remains open to takeover offers for parcel-delivery business City Link, Brown told reporters on a call.
Selling units would be turning the clock back on Rentokil’s emergence in its current form in the mid-1990s following the purchase of BET Plc, which created the world’s largest business services company with interests spanning tropical plants for offices and dryrot treatments.
“It really depends a lot on market conditions and demand for the other assets that are not so close to the core,” said Brown, the former finance chief of Imperial Chemical Industries. “If an opportunity came up to streamline our portfolio for the group as a whole we would do that, but for the moment our key objective is to pursue our operational excellence program.”
Brown is in the midst of a struggle to restore City Link to break-even point. It’s slated to generate a 25 million-pound ($39 million) loss this year compared with an earlier prediction of a 20 million-pound loss. The revamp of the unit is “broadly on track,” he said.
The parcel business is generally seeing growth driven by double-digit increases in Internet shopping although profitability is hampered by a large number of competitors. Measures are in place to target smaller customers where there is better pricing, Brown said. The company previously focused on medium and larger business customers.
Rentokil fell as much as 4.8 percent and was trading at 86.05 pence in London at 10:52 a.m., valuing the business at 1.53 billion pounds.
Christmas at City Link
Volumes at City Link continued to be “quite strong” through the end of October and beginning of November, Brown said, ahead of the seasonal surge leading up to Christmas.
Brown said other operations are also suffering from weakened economies in the U.K. and across Europe. The company put in place a 50 million-pound cost-cutting program for 2012 to counteract those conditions, and Brown said management may achieve 55 million pounds in savings this year. A similar initiative will be on the agenda for next year too, he said, declining to give an outlook for 2013 performance.
Rentokil maintains an interest in acquisitions after buying Western Exterminator in the U.S. to give the pest-control business coast-to-coast U.S. coverage. The deal has yet to complete. Brown said more deals in the six to nine month time frame are being looked at and pest control is a key opportunity for external growth.
Rentokil today reported a 9.9 percent increase in pre-tax profit to 36.3 million pounds, on a 1.6 percent drop in sales to 626.7 million pounds.
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