Rentokil set for buying spree

RENTOKIL boss Brian McGowan today dashed hopes for a break-up of the business by revealing plans to rebuild it from the bottom and launch its biggest acquisition spree for almost 10 years.

Slamming speculation of fire sales and share buybacks as 'silly-season media hype', McGowan unveiled proposals in a long-awaited strategic review to overhaul the group's culture and operating structure.

He plans to bring in a merger and acquisitions specialist to lead corporate activity and hand more responsibility to divisional managers at the same time as offering bigger incentives to the sales force.

He said: 'Talk of selling off businesses is a sideshow, as it would be of no benefit to shareholders. The real issue is how to get the operations going again, working more efficiently, working more effectively.'

But shares in the group plunged nearly 6%, or 9p, to 144p as investors hoping for buybacks registered their disappointment at the plans and reacted to another set of poor results.

Interim figures released today showed pre-tax profits dropped 10% to £180.4m on turnover of £1.2bn lion after a 40% tumble in operating profits at Rentokil's core hygiene and pest control arm in the UK.

One analyst said: 'After four months the profits were down 6%, at the half-year it's 10% and they've already said the full year will show a 14% drop. The business is slipping.'

McGowan prepared the City for the worst with a profit warning in May, when the group ousted former chairman Sir Clive Thompson - dubbed Mr 20% for his impressive earnings record.

Today, McGowan conceded the results were 'very disappointing' but insisted the basics of a revival were in place and that an improvement would be seen in the second half of next year.

In another dig at Thompson, he added: 'There has been an over-control at the centre of the group and a bureaucracy that has been stifling.'

Speculation had been growing that Rentokil could sell its conferencing and parcels delivery business to raise £550m and focus on its core pest control and security arms.

McGowan said Rentokil's strategy was unlikely to change when a new chief executive is brought in. 'He might have some ideas but the board might have a different one.'

The half-year dividend is being upped 10% to 6.71p.