27th Feb 2015 12:49
LONDON (Alliance News) - Rentokil Initial PLC on Friday said its pretax profit increased in 2014 despite lower revenue as its cost-cutting measures improved its profit margins over the year.
Pretax profit for the FTSE 250-listed business services company rose to GBP163.2 million in 2014, compared to GBP112.2 million in 2013. Revenue slipped to GBP1.74 billion from GBP1.79 billion last year but this was offset by a decline in its operating expenses, which fell to GBP1.54 billion from GBP1.63 billion last year.
Rentokil said it will pay a final dividend of 1.82 pence per share, bringing its total dividend to 2.59 pence, up 12% year-on-year.
"This time last year we set out our new differentiated strategy and introduced medium-term targets for mid-single digit revenue growth, high-single digit profit growth and a significant improvement in cash generation," said Rentokil Chief Executive Officer Andy Ransom.
"We have implemented our strategy with pace, and one year on we have delivered ongoing revenue growth of 3.6%, ongoing profit growth of 6.5% and a GBP93 million improvement in free cash flow. I am encouraged by our performance in 2014 and by the progress we are making towards these targets," said Ransom.
Shares in Rentokil were up 1.2% to 131.1 pence on Friday.
Rentokil said constant currency revenue in its North American business grew 6.6% for the year, boosted by 8.4% revenue growth in the fourth quarter on the back of acquisitions. At actual currency rates, North American revenue grew 1.4%. Growth was held back in the region in the first half by adverse weather conditions, but recovered in the second half, the company said. Operating profit in the region was pushed higher by acquisitions and by back office and property cost cutting, which boosted margins.
Europe revenue rose 0.7% in the year, with 2.3% growth in Germany and 0.3% growth in France. Latin America, which is managed via Rentokil's European business, tripled revenue over the year, all at constant currencies. But at actual currencies, Europe revenue fell 4.5%, dragged back by declines in its French, German and Benelux region operations.
Operating profit in Europe fell by 3.7% in constant currencies, down 8.7% in actual currencies, due to the performance of its hygiene and workwear business in the Benelux region, which suffered from the continued impact of poor service levels in 2013 and difficult economic conditions which resulted in contract terminations and pricing pressures.
Rentokil said its outlook for its European business is mixed. Its German, Belgian and Italian businesses are seeing more positive trading conditions, and it expects progress in these segments in 2015. But the outlook for its Dutch and French businesses is more uncertain, given challenging economic conditions and competitive markets.
UK and Rest of World revenue rose 5.4%, or 1.1% at constant currencies, as the division was boosted by increased pest control work in the UK, though margins were held back by national contract wins with large multi-premise clients and the integration of the previously loss-making Green Compliance business, which it acquired in December 2013. It expects an improvement in UK profit margins in 2015 as new contracts and acquisitions mature.
The Rest of World operations posted solid revenue growth, Rentokil said, driven by the Middle East and the Caribbean, but this was offset by lower revenue in South Africa due to industrial action in the mining sector and pricing pressures.
Asia revenue grew 2% in constant currencies, down 6.1% in actual currencies, with robust performances in its pest control and hygiene divisions and combined constant currency revenue growth of 29% from its India, China and Vietnam operations.
By Sam Unsted; [email protected]; @SamUAtAlliance
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