"The heavy lifting phase of the strategy has effectively been completed," says Rentokil Initial (RTO) chief executive Andy Ransom. The pest control and hygiene group is now 18 months into its 'right way' strategy, designed to reduce debt and focus on higher-growth markets, and it is beginning to bear fruit. By the end of the first half the group managed to reduce its large debt pile by £45m, compared with £775m at the close of 2014. While the strong pound dampened the group's reported profits, buoyant pest control markets in North America and the emerging economies helped drive constant currency pre-tax profits up by 16 per cent.
The group's core pest control operations generated 9.6 per cent revenue growth, half of which was organic. Unsurprisingly, gains were strongest among the group's 'emerging' and 'growth' divisions, where revenue increased by 17.5 per cent and 9.2 per cent, respectively, on a constant currency basis. However, this was partly offset by weaker performances in France, where adjusted operating profits fell by a quarter, and Rentokil's Europe-focused workwear business. The next phase of the group's strategy will involve focusing more on higher-quality workwear products in order to drive margins up.
Broker Investec Securities expects adjusted EPS of 8.4p this year, up from 8.1p in 2014.
RENTOKIL INITIAL (RTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 144p | MARKET VALUE: | £2.6bn | |
| TOUCH: | 143.5-144p | 12-MONTH HIGH: | 154p | LOW: 111p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 8p* | NET DEBT: | £730m | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 854 | 66.8 | 2.9 | 0.77 |
| 2015 | 855 | 70.2 | 3.1 | 0.87 |
| % change | +0.1 | +5 | +7 | +13 |
Ex-div: 13 Aug Payment: 16 Sep *Includes intangible assets of £434m, or 24p a share | ||||
