Rentokil warns on 2004 profits; chairman steps down

LONDON (AFX) – Rentokil Initial PLC said profit before tax for 2004 will be substantially lower than both 2003 and the current market expectations for 2004.

At the same time it announced that Sir Clive Thompson has stepped down as chairman of the board and as a non-executive director.

He will be replaced by Brian McGowan, previously deputy chairman and the senior independent non-executive director.

Referring to 2004, the group said at constant average exchange rates for 2003, profit before tax should not be less than 350 mln stg.

The warning came as the group said trading in the first four months of 2004 had deteriorated further.

At constant average exchange rates for 2003 turnover from continuing operations increased by 3.0 pct whilst profit before tax fell by 6.2 pct.

It said operating cash flow has been good and in line with expectations.

Referring to the business environment, the group said trading in 2004 has been extremely disappointing, with increasingly difficult market conditions.

It highlighted accelerating pressure on pricing and gross margins; delays in achieving the expected levels of new business from the expanded sales force; slow progress in improving contract retention levels; a continued decline in UK Hygiene turnover, exacerbated by the additional related costs impacting on the margin; and increasing levels of terminations of major contracts in particular within UK Security Guarding and UK Facilities Management Services, as factors hampering performance.

Referring to its sectors, it said in Hygiene, Total Hygiene turnover grew by 1.8 pct. Hygiene Services turnover increased by 2.0 pct, although operating profit decreased by 10.2 pct.

Pest Control turnover increased by 1.1 pct with operating profit declining by 4.9 pct.

Security turnover increased by 3.6 pct and operating profit by 0.5 pct.

In facilities management, total turnover grew by 2.9 pct. Facilities Management Services turnover grew by 4.2 pct with flat operating profit.

Tropical Plants turnover declined by 3.7 pct with operating profit declining by 36.9 pct.

Conferencing turnover increased by 3.5 pct with operating profit declining by 6.1 pct.

In Parcels Delivery, turnover increased by 8.3 pct with a 2.1 pct growth in operating profit.

Operating profit from continuing operations, at constant average exchange rates for 2003, reduced by 7.0 pct.