Profits slump at Rentokil

Rentokil, the pest control-to-washroom services group, announced a second profit warning in as many months yesterday.

Shares in the company fell nearly 30% to 75.1p - their lowest level for 16 years. By lunchtime, they were down 24% at 79.8p. Rentokil’s future in the FTSE 100 index looks uncertain following the collapse in shares.

Furthermore, the group has been hit by problems in its City Link express parcels delivery business, which was behind the last profits warning in December.

Rentokil’s chief executive, Doug Flynn, said City Link’s performance was ‘unacceptable’. Although actions are in place to turn the business round, he warned that this would take time to come through. Although the rest of the group is doing well, the City Link performance means that 2008 results will be ‘significantly lower than the pervious year.

Mr Flynn’s 3 years with Rentokil looks in doubt following the profit warning, he was appointed in 2005 to rescue the fortunes of the company.

Analysts were appalled by the profit warning and said it could well lead to a takeover bid for the group.

Michael Cooke, City Link’s boss, was ousted 2 weeks ago. Robert Morton of Investec said Rentokil clearly has a long haul to rebuild credibility which is in tatters.

Rentokil was established in the 1920s to initially sell a new rat poison.

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