1st Aug 2014 07:39
LONDON (Alliance News) - Rentokil Initial PLC said Friday that it has retained its outlook for the full-year as it reported a second-quarter jump in pretax profit on recent acquisitions and organic growth but a decline in revenue as the company continues to face challenging trading conditions in Europe.
The pest control to facilities management company said pretax profit in the second quarter came in 58% higher on the comparative quarter to GBP47.5 million from GBP30.1 million. Revenue for the period was GBP442.1 million, 3.3% lower than the GBP457.4 million reported last year.
In its interim results for the six months to June 30, 2104, Rentokil said half-year revenue was down 4.5% at actual exchange rates to GBP854.4 million from GBP894.3 million while pretax profit rose 38.9% to GBP66.8 million from GBP48.1 million last year.
The FTSE 250-listed company has increased its interim dividend by 10% for the half-year to 0.77 pence per share from the 0.70 pence per share paid last year.
During the half-year the company said central and divisional overheads decreased by GBP5.4 million, reflecting the implementation of a programme designed to reduce annual central and divisional overheads by GBP10 million in 2014. Rentokil's strategy to reduce restructuring costs fared well; net reorganisation costs and one-off items (operating) at actual exchange rates in the first-half came in at GBP2.3 million, compared to GBP20.5 million in 2013, with GBP3.1 million of these related directly to the group's major reorganisation programme and consisted mainly of redundancy costs, consultancy and plant and office closure costs, compared to GBP19.1 million last year.
In its European region, while ongoing revenue was up 1.4% for the period, trading conditions remained challenging with revenue growth in Germany and France of 1.2% and 1.3%, respectively, offset by a 2.6% decline in Benelux revenues. Profit in the region declined by 3.3%, due to the performance in Benelux which continued to be impacted by poor service levels in 2013 and ongoing economic conditions, resulting in contract terminations and pricing pressure, said Rentokil.
Faring better, the Asia region saw revenue up 6.1% in the first-half with Pest Control and Hygiene divisions performing well and North America ongoing revenue was 5.0% in the period, driven primarily by the continuing acquisition programme though organic revenue was offset in part by adverse weather conditions on the East and West coast.
In the UK & Rest of the World division, ongoing revenue was up 4.5% in the half-year; the region delivered continued growth from UK pest and hygiene categories, and increased pest control job work in particular, said the company. The Rest of World operations delivered good revenue growth, although offset somewhat by lower revenue in South Africa, which was impacted by industrial action within customer businesses in the mining sector. Profit for the division grew 4.2% in the half-year.
Turning to the company's merger and acquisition activity, Rentokil said that the integration of all acquisitions is progressing well. In North America the firm has expanded its presence with the purchase of six pest bolt-ons in Indiana, Connecticut, Virginia, West Virginia, Mississippi and Washington. In addition, the compay has also acquired businesses in India, Mozambique, the Netherlands, the Republic of Ireland, Spain and Italy.
Rentokil has now completed the acquisition of Bestway, a pest control, hygiene and business services company based in Chile. The company said combined annual revenues of the above businesses totalled GBP34.7 million in the 12 months immediately prior to acquisition.
In May the company said pretax profit in its first quarter 2014 was ahead of the same period in 2013, but said revenue was held back by lower revenues from its Protect and Enhance business, particularity in Benelux, as expected.
Commenting on the half-year results Andy Ransom, CEO of Rentokil Initial said that the company's new strategy is on track, with revenue, profit and cash performance in line with expectations during the period. "Revenue growth was particularly strong in our Pest Control category reflecting good growth in our Emerging and Growth quadrants, supported by improved organic performance and a number of pest control acquisitions. As expected, challenging trading conditions persist in our European businesses," said Ransom.
The CEO attributes the half-year profit rise to Rentokil's more effective businesses and reduced overheads, noting that this has been achieved despite a decline in Benelux profits. "With the actions we are taking to implement our strategy at pace, to drive improved revenue, profit and cash performance, we remain confident in making further progress for the remainder of the year; our outlook for the year remains unchanged," he added.
Shares in Rentokil Initial were Friday trading 1.3% lower at 117.00 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
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