28th Feb 2014 09:26
LONDON (Alliance News) - Rentokil Initial PLC said Friday revenue and profits rose for the full-year, in line with expectations - buoyed by a Western acquisition made in the US - and organic revenues rose as the firms restructuring efforts continued to pay off.
The firm, which offers services ranging from pest control to facilities management, said revenue rose 3.2% reaching GBP2.3 billion for the year to December 31, 2013, up on the GBP2.2 billion the previous year, which it says largely reflects the contribution from its acquisition of Western Exterminator.
The firm notes that the quarterly improvement in organic growth in its core business was up 1.1% in the fourth quarter and 0.5% for the full-year.
Rentokil bought US firm Western in September 2012 for USD98.6 million. Western operates mainly in California, but also has offices in Arizona and Nevada.
Pretax profit for the year jumped 13% to GBP122.6 million from GBP107.7 million, said the firm.
Adjusted operating profit also improved during the period, up to GBP257.4 million, a 4.1% rise on the GBP247.3 million reported last year. Within this reading, Rentokil said it saw good growth across its operating regions, lead by a 33% rise in profits from its continued strong performance in Asia to GBP8.1 million.
Rentokil said The West, its biggest region, reported a 15% rise in revenue to GBP117.5 million, reflecting the impact of the Western acquisition, with North America at GBP37.2 million, up 25.3%, supported by 18.8% growth in UK & Ireland, while the East region saw revenue retract 2.1% to GBP183.5 million, driven by weak performance in Benelux.
The FTSE 250-listed firm has recommended a final dividend of 1.61 pence with a full-year dividend of 2.31 pence, up 10% on last year.
Andy Ransom, Chief Executive Officer of Rentokil Initial said, "We have delivered a steady financial performance in 2013, despite ongoing economic challenges in Europe, rounding out the year with a solid fourth quarter in line with expectations. Though we see no immediate improvement in trading conditions in Europe (particularly the Benelux) in 2014 we expect to offset ongoing margin pressure with cost efficiencies and anticipate a material improvement in free cash flow as restructuring expenses and capex are reduced."
The company has been focusing on a restructuring plan in order to drive shareholder value over the medium term, Rentokil has continued with its restructuring efforts, which includes the goals of generating higher revenues, achieving sustainable growth and a greater cash conversion rate.
The new differentiated plan, 'Rentokil Initial Model,' forms part of the restructuring initiative, defined by the drive towards profitable growth. The business organisation is now comprised of five distinct regions: Europe, North America, Pacific, Asia and UK & Rest of World. The plan focuses on a support structure for the new regions, differentiated investment and growth strategies, and its three core categories of pest control, hygiene and workwear.
Announced in tandem with its results and renewed restructuring plan, Rentokil Friday said it has agreed the sale of its Initial Facilities business to Interserve PLC for a total cash consideration of GBP250 million. Completion, which is subject to the agreement of Interserve's shareholders at an EGM on March 17, is expected by the end of March 2014.
Adrian Ringrose, Chief Executive of Interserve, said, "We believe that this acquisition will deliver significant strategic progress in growing one of our core businesses and will make us a top three player by revenue in the UK facilities services market. The breadth and fit of the services we will now be able to offer, added to the advantages of increased scale and potential synergies, will create a compelling proposition, leaving us well placed for future growth."
The deal is expected to be earnings enhancing in the year to December 31 2014, said the firms, and "significantly" earnings enhancing in the following year.
Ransom said, "The transaction really is a 'win win win'. It is an excellent outcome for our colleagues and customers in Initial Facilities, represents a great opportunity for Interserve and it is the right deal for Rentokil Initial and its shareholders. This divestment, together with the sale of City Link in April 2013, allows us to focus on our core service categories of pest control, hygiene and workwear."
During 2013, the company expanded its global pest control presence with the acquisition of 19 bolt-ons in 2013 and early 2014 with combined revenues of GBP19 million, Rentokil said.
Looking ahead, Ransom said, "Our new strategy, with its differentiated plan to drive shareholder value, gives us confidence in making further operational and financial progress in the coming year."
Rentokil shares were trading down 0.7% at 125.6 pence per share Friday.
By Alice Attwood; [email protected]; @AliceAtAlliance
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Rentokil Initial