Rentokil to sell UK workwear arm

Rentokil Initial today said it planned to sell off part of its UK hygiene business as it braced itself for another tough year of trading.

The proposed disposal of the loss-making linen and workwear operation will allow the group’s textile operations to better focus on washroom services.

Executive chairman Brian McGowan announced the move alongside a warning that trading figures at the group were unlikely to show an immediate improvement.

In the ten months to October 31, Rentokil said profits declined 11.9% to £293.9m (€419.4m), with expectations for a further deterioration in the first half of next year. That will lead to a weaker result in 2005, the group said.

Rentokil recently carried out a review of its operations but ruled out a full-scale break-up of the services group after Mr McGowan pinpointed the need to get businesses working more “efficiently and effectively”.

However, he said today there was no “quick-fix solution” to Rentokil’s problems, which have already resulted in a number of management changes and the identification of a “stifling and bureaucratic culture” at the company.

Mr McGowan added: “We are certain that we are taking the right actions to return the company to future sustainable growth.”

As part of the changes, Rentokil has looked to re-invest in sales, service and marketing, as well as increase the pace of acquisition activity.

In hygiene services, today’s figures showed a small rise in turnover to £638.7m (€911.5m), with operating profits down 14.7% to £144.2m (€205.8m).

The security division also suffered a fall in profits – down 7.3% at £43.3m (€61.8m) – while figures for facilities management slipped 14% to £55m (€78.5m).

Rentokil, which provides services in 40 countries, said it still expected to post annual underlying pre-tax profits of not less than £350m (€499.5m) – compared with £408.5m (€582.9m) a year earlier.

However, it added the overall result was likely to be hit by around £5m (€7.1m) of negative currency movements and one-off charges totalling £35m (€49.9m).

As well as the planned disposal of the UK linen and workwear operation, Rentokil said it would look at options relating to its loss-making German hospital textiles business.