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Hard work pays off at Rentokil

RESULTS: Restructuring efforts at pest control and laundry specialist, Rentokil, are paying off - but that progress is beginning to look priced-in

Adjust for various exceptionals, including a £51.8m restructuring charge, and Rentokil's (RTO) underlying pre-tax profit rose 3.6 per cent in 2012 to £191.1m. That helped the pest control group's shares rise over 10 per cent on the day these figures appeared and prompted chief financial officer, Jeremy Townsend, to remark that "all the hard work is starting to pay off".

IC TIP: Hold at 100p

Despite a tough economic backdrop, the textiles and hygiene business grew sales 2.5 per cent to £905m in 2012, while adjusted operating profit rose 2.5 per cent to £143.2m. Management expects the division's outlook in the eurozone to remain challenging in 2013, but thinks sales and marketing initiatives should help ease. Meanwhile, pest control grew revenue 2.8 per cent to £773.4m and adjusted operating profit rose 3.6 per cent to £135.2m. The unit saw an especially robust performance in North America, where sales rose 10.3 per cent, and should also benefit from December's £57.1m acquisition of Western Exterminator in the US. Courier operation City Link, meanwhile, remains loss-making - but that loss fell £4.9m to £26.4m and its sales grew 4.8 per cent.

Broker Espirito Santo expects adjusted pre-tax profit of £200.2m for 2013, giving adjusted EPS of 8.2p (from 7.71p in 2012).

RENTOKIL INITIAL (RTO)

ORD PRICE:100pMARKET VALUE:£1.8bn
TOUCH:100-100.1p12-MONTH HIGH:102pLOW: 69p
DIVIDEND YIELD:2.1%PE RATIO:35
NET ASSET VALUE:*NET DEBT:£990m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20082.4123.00.760.65
20092.5365.02.63nil
20102.5014.5-1.29nil
20112.54-50.5-3.841.33
20122.5582.72.832.10
% change---+58

Ex-div: 17 Apr

Payment: 21 May

*Negative equity shareholders' funds