Rentokil looks to recover lost profits after disposal of City Link
FACILITIES management group Rentokil Initial, former owner of Coventry-based logistics group City Link, as said it is looking to an improvement in the business following a difficult first half which saw pre-tax profits dip almost 20%.
The company disposed of the loss-making City Link operation in April in a deal which saw the business acquired by venture capitalist Jon Moulton’s Better Capital for a token £1.
The parcel deliveries business recorded an operating loss of £26.4m for 2012, although this represented a 15.7% improvement on 2011.
In its interim results announcement today, the group confirmed that while half year revenue had increased slightly – up 3.7% to £1,140.8m (2012: £1,099.9m) – pre-tax profits for the six months had dipped 19.5% to £50.3m (2012: £62.5m).
It said City Link had incurred trading losses prior to disposal of £14.2m (H1 2012: £19.7m). A one-off loss on disposal was incurred of £39m of which £30m related to a non-cash write down of assets.
Despite disposal, the group has retained certain parent company guarantees, including approximately £20m relating to leasehold properties. It said these were expected to reduce significantly over the next three years and in the event that any of these guarantees were called the group would seek to mitigate its liability through finding an alternative tenant.
Commenting on the first half performance, Alan Brown, Rentokil Initial CEO, said: “The business has performed strongly during Q2 despite adverse weather in Central and Eastern US and economic pressures in France and the Netherlands in particular.
“The introduction of our Integrated Country Operating Model is delivering cost and implementation benefits. The integration of Western Exterminator is proceeding to plan. Our major innovations in Hygiene and Workwear are being rolled out during Q3.
“While we remain mindful of continuing challenging market conditions in Europe, we expect the momentum achieved in Q2 to be maintained in the second half.”