Rentokil warns over sales decline

Pest control-to-hygiene firm Rentokil Initial has admitted it faced "considerable" challenges in returning the business to health as it gave its fourth profits warning since December.

The firm said that full-year profits were now expected to be £35 million lower after seeing sales decline further in its troubled delivery arm City Link.

It reported a "small loss" in its textiles and washroom services business in the second quarter, while the group's pest control division has also suffered slower revenues in the UK and North America.

Shares in Rentokil plunged by 32% following the profits warning, which has cut expectations for underlying pre-tax profits to £116 million this year.

Rentokil chief executive Alan Brown, who was brought in to revive the business as part of a management overhaul in March, cautioned it could be three years before some of the group's businesses get back on track.

He blamed a series of "poorly executed" restructuring initiatives and acquisitions for the group's troubles. But he put faith in a plan to place improved customer service and operational efficiency at the heart of its recovery, with signs of progress at its City Link business.

There were also likely to be job reductions across the group as it seeks to cut costs, although Rentokil declined to provide details. Staff turnover of around 25% a year among front-line employees was likely to help make it relatively "painless" to trim its workforce, added the group.

Mr Brown said: "The challenges we face are considerable, but we are making progress on achieving our primary objective of delivering on customer service and focusing on operational excellence. I remain robust in my belief that this is the correct agenda to pursue and that Rentokil Initial has significant potential over the medium to long term."

Rentokil's textiles and washroom services arm saw performance deteriorate in the second quarter as it continues to struggle with customer service.

The division is unlikely to see profitability improve this year, according to Rentokil, while the Australian washroom business is also suffering and not set to recover until next year.