Rentokil boosted by overdue recovery of City Link

published 3 August 2012

Rentokil Initial, the laundry and pest control conglomerate, says its troubled courier division will turn a profit by the end of the year, while first half profits across the whole business have risen dramatically.

Profits before tax in the six months to the end of June came in at £46.6m, a 75% rise over the previous year at constant exchange rates. The company says this was due to a drop in one-off costs compared to the same period of 2011 and an £11.1m reduction in amortisation costs.

Perhaps a better guide to Rentokil's performance was revenue, which rose to £1.256bn in the second half, up 2.9% on 2011, or 1.3% on a like-for-like basis.

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Rentokil's bugbear has long been its courier service City Link, which reported revenues up 5.3% in the three months to the end of June, to £76m. The division is still losing money, £5.8m in the second quarter alone, but this is nearly 20% better than the second quarter performance of 2011 and Rentokil now says City Link will be profitable by the end of the fourth quarter.

Alan Brown, Chief Executive Officer of Rentokil Initial, said: "Organic growth has continued to progress year on year, despite challenging markets in Southern Europe and softening conditions in Northern Europe, including the UK.

"We anticipate that continued growth, coupled with further productivity improvement at City Link, will deliver year-on-year improvement in financial performance at constant exchange rates in Q3, and most notably in Q4 this year."

The market has taken him at his word, by 8:16 the stock had risen 7.2%.