30th Jul 2020 10:31
(Alliance News) - Rentokil Initial PLC on Thursday said its profit dropped sharply in the first half of 2020 but it is now expecting to post modestly better annual results than anticipated.
The Surrey-headquartered pest control company reported a GBP61.8 million pretax profit, down 46% from GBP113.8 million the year before.
Revenue fell 0.8% to GBP1.29 billion from GBP1.30 billion. On top of which, finance income fell to GBP100.5 million from GBP125.5 million while finance costs reduced to GBP46.4 million from GBP26.0 million.
No interim dividend was declared for the period, though it expects to propose an annual dividend should trading meet expectations in the second half.
The company withdrew its guidance in March in response to the Covid-19 pandemic.
"Since then, we have traded resiliently in H1 with the sequential trend through Q2 encouraging. Some significant uncertainties remain, in particular with regard to how the demand for our services will unfold as more countries emerge from lockdown and as businesses deal with the economic reality post Covid-19, and this therefore makes providing specific guidance for 2020 and beyond difficult at this time," said Rentokil.
Nonetheless, it is predicting its annual outcome "to be moderately better than anticipated".
This includes "further progress" in terms of second half revenue, though this would be hurt by a second wave. Cost savings in the second half are expected to shrink to GBP35 million from GBP87 million in the first.
Rentokil increased its bad debts provision in the first half by GBP23 million, and expects to increase it again by another GBP15 million in the second. Finally, based on current exchange rares, it expects a minimal foreign exchange impact on its 2020 profit versus a GBP10 million to GBP15 million hit previous guided.
Working capital outflow for 2020 is expected to be between GBP10 million and GBP20 million, net capital expenditure is forecast at GBP225 million to GBP235 million and cash interest is predicted a around GBP40 million. It restored its original guidance for cash tax payments to between GBP50 million and GBP60 million.
Mergers and acquisitions expenditure is predicted to exceed GBP100 million in the second half.
Chief Executive Andy Ransom said: "Our Pest Control operations have been steady and reliable, supporting our customers through the crisis and into restart. Our Hygiene business, which was more impacted by customer shutdowns, has moved from being considered a low interest (but nonetheless required service) to arguably one of the world's most important business categories. We are now expanding our Hygiene category into new countries as well as launching additional services. Further, Hygiene disinfection services are playing a vital role for customers as part of the restart period.
"While it is impossible to predict the future development of the Covid-19 pandemic, or its economic impact, ours is a high quality and resilient business and we are entering the second half of 2020 with positive momentum."
Shares in Rentokil were up 2.2% at 560.20 pence in London on Thursday.
By Anna Farley; [email protected]
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