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Has the special bonus payment the Directors were once promised if they turned around Citylink and I think hit 120p a share expired now?
For a relatively small part of the business, Rentokil Initial's often troublesome courier service, City Link, does seem to soak up a disproportionate amount of attention, and that may be the case again on Friday when the group makes a trading update. The good news for shareholders, however, is that management seems to be getting a grip on the situation at last. Inter-dealer broker Tullett Prebon's interim management statement may be a downbeat affair, as the first half of the financial year saw a fall off in revenue. The silver lining was a statement about signs of a bit of a pick-up towards the end of the reporting period, so the focus will be on whether that trend continued into the third quarter.
Canaccord Genuity maintained a "sell" recommendation on business support services company Rentokil (RTO) with a target price of 72p. The broker expects organic growth to have slowed from the 1.3% reported in the first half of the year due to a deterioration in the trading backdrop of continental Europe. The broker also believes that the company's parcel delivery service CityLink will continue to see a fall in revenues and that the business will remain loss making.
Heavily indebted Rentokil Initial is working to spin-off its loss-making City Link business by the end of the year, according to reports in The Telegraph. City Link, its parcel delivery service has been a drain on the company for a number of years. However, this division turns over £88m a year and Rentokil is said to favour a management buyout. This would avoid the costs of closing it down. In the company's most recent market update in August, Chief Executive Alan Brown said City Link should be profitable by the end of the year. "City Link's recovery plan is progressing in line with expectations, both in terms of financial performance and underlying action plan. We expect losses to reduce further in Q3 and for the business to be profitable in Q4." As of June 30th 2012, the group had net debts of £960m (2011: £1024.6m) with operating cash flow of £20.8m (2011: £24.5m).
This issue could take off like a blocked drain
Rentokil Initial is set to become the third largest pest control firm in the US after it agreed a multi-million dollar deal to buy the Western Exterminator Company. The British firm said Western's 36 offices, located primarily in California and the adjacent states of Arizona and Nevada, would give it exposure to 46m people living in these states. Chief Executive Alan Brown said the deal enabled the company to compete more effectively in the US, particularly for customers looking for nationwide coverage in pest control or specialty chemical distribution capability. Rentokil will initially pay $99.6m, with a deferred consideration of up to $15m payable within 18 months. The tie-up will make the firm the third largest pest control company in the North American market with revenues of $330m in pest control services and $90m in speciality chemical products distribution. Over the last seven years Rentokil has substantially increased its footprint in the US through acquisitions that have seen revenues there grow from less than $30m to $420m.
Rentokil Initial, the laundry and pest control conglomerate, is to raise half a billion euros through a bond issue. The bonds will carry a coupon of 3.375% and will have a life-span of seven years. Application will be made for the bonds to be listed in the official list of the UK Listing Authority and to be admitted to trading on the London Stock Exchange. Jeremy Townsend, Chief Financial Officer of Rentokil Initial, said the issue "secures a significant element of our debt at a coupon of 3.375% and extends our maturity profile." Shares in Rentokil were little changed on the news, which was flagged in the company's interim results in August.
Peel Hunt upgrades Rentokil Initial from sell to hold, target price 75
Furthermore, the firm said the depot network continues to be consolidated with a reduction of three sites in the first half, while investment in improved scanning technology is being made to drive further quality. The company also successfully introduced customer care initiatives in the business, something it is now rolling out across the company. As a result, City Link's revenue for the half year was £149.5m, 3.5% higher compared to the same half the previous year, although adjusted operating loss for the six months was £18.5m, down 3.9% on the same period the previous year.
"City Link's recovery plan is progressing in line with expectations, both in terms of financial performance and underlying action plan," the group said. "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." So what has the company been doing to bring about this turnaround? Well, for a start it implemented a comprehensive recovery plan which targets productivity savings primarily through driver productivity, supported by route and round optimisation and a move to variable pay for owner drivers. There are also initiatives to reduce trunking, warehouse operations and back office costs. 'The plan is progressing on track', seems to be the message in Friday's results, already evidenced by the 18.3% reduction in the courier firm's second quarter losses to £5.8m. That said, there was an air of caution to the company's report, in which it said revenue in the division "only" increased by 3.5% in the first half, something it blamed on a change in customer mix, which limited the benefits of a 14% increase in volume compared to the prior year.
Is Rentokil finally set to return to the glory days of the nineties, when it used to regularly rack up rises in profits of more than twenty per cent? Investors certainly seem to think so, with shares rising sharply on the announcement of 75 per cent higher pre-tax profits for the half year. The results revealed the company's long-time bugbear, courier service City Link, finally showed signs of a longed-for recovery having been in the red since 2007, positing a 5.3% rise in revenues in the three months to the end of June, to £76m. That said, its troubles are by no means over yet. The division is still losing money, including £5.8m in the second quarter alone, and is still expecting to turn in a loss in the third quarter (Q3). Things are looking up after that though, with the firm targeting a return to profitability in the final three months of the year, although a full year divisional loss of between £17m and £20m is expected for the year as a whole.
Panmure Gordon upgrades Rentokil Initial from sell to hold, target price increased from 62p to 73p.
OUTLOOK FOR H2 Organic growth has continued to progress year on year, despite challenging markets in Southern Europe and softening conditions in Northern Europe, including the UK. City Link's recovery plan is progressing in line with expectations, both in terms of financial performance and underlying action plan. We expect losses to reduce further in Q3 and for the business to be profitable in Q4. Our Programme Olympic capability agenda is in full swing and is being supported by the establishment of a group Marketing & Innovation function. Though central costs will increase in the short term, this investment should accelerate growth in 2013 and beyond. 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.
Alan Brown, Chief Executive Officer of Rentokil Initial plc, 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. "City Link's recovery plan is progressing in line with expectations, both in terms of financial performance and underlying action plan. We expect losses to reduce further in Q3 and for the business to be profitable in Q4. "We are pleased to announce bolt-on acquisitions in Canada, the US, Brazil, Abu Dhabi and Dubai. Our pipeline of pest control acquisitions is improving in both quality and quantity. "Our Programme Olympic capability agenda is in full swing and is being supported by the establishment of a group Marketing & Innovation function. Though central costs will increase in the short term, this investment should accelerate growth in 2013 and beyond. "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."
First Half Highlights (at CER) § Group revenue +2.9% (+1.3%* organic) in challenging markets: Ø Asia +7.5%, Initial Facilities +3.7%*, City Link +3.5%, Textiles & Hygiene +3.3%, Pest Control +3.0%** Ø Acquisitions continue to perform well, contributing 2.1% (£27.1m) of revenue growth § City Link Q2 revenue up 5.3% on prior year, 18.3% reduction in Q2 operating loss. Recovery plan on track § Adjusted operating profit of £87.3m at AER with increased profits in Textiles & Hygiene £0.7m offset by increased central costs of £4.4m. Adjusted operating profit adversely impacted by £4.6m of foreign exchange § Profit before tax up 75.2% primarily due to a reduction in one-off and reorganisation costs of £5.4m and a reduction in amortisation of £11.1m § Cost savings of £22.1m; on track to exceed year end guidance of £50m for 2012 § Further expansion of pest control footprint: entry into South America and the Middle East, additional bolt-ons in Canada and the US
http://www.investegate.co.uk/Article.aspx?id=201208030700112187J
Rentokil is due to release its second-quarter results early in August and the market will be interested in just one thing – has City Link been sorted out? Rentokil’s other two main divisions – the pest control business and its textile hire and cleaning services division – are both robustly profitable. The rat-catching operation recently announced it was being welcomed back into Libya, where a contract to clean the nation’s cities of rats was interrupted by last year’s civil war. The full-year outlook for the group should be positive. The consensus view of analysts is that turnover will exceed last year’s 2.54bn pounds and the group should return to profit. “Shares in Rentokil Initial are not without risk and the troubles at City Link have left many investors bruised. If the parcels division remains a drag, the shares will continue to languish or could even fall further. But if the group’s plan succeeds and City Link is brought back out of loss, even just to break even, then Rentokil looks undervalued,” The Financial Mail on Sunday´s Midas column says. At 751⁄2p, the shares value the group at 1.37bn pounds or just under ten times forecast earnings. Despite the high-profile troubles, the group has been paying down debt, which now stands at just under 1bn pounds, and it signaled its confidence last year when it reinstated the dividend at 1.33p a share. The shares are a buy for the brave Midas concludes.
From what I can see from previous press articles and managerial statements. Citylink has been the weak link since atleast 2007 and has been lossmaking year on year. Wouldnt shareholders like to see them cut their loses and get rid of citylink? I do wonder if this company has its fingers in too many pies..
Was hopeing to hold out for quid plus but inneed of a cash call, so thats me outta here
on a day of bad news filtering through from the weekend, a drop of blue in the ocean of red, keep working at reducing overheads and gain a few more accounts at citylink, we may see the 100p in the future.
Jefferies upgrades from underperform to hold, target lifted from 68p to 77p.
Alan Brown, Chief Executive Officer of Rentokil Initial plc, said: "The momentum in sales growth generated during 2011 has continued into 2012, with further improvement in organic growth rates and strong performance from our recent acquisitions. Market conditions have generally remained challenging, especially in our Southern European businesses. However, Pest North America benefited from relatively mild weather. "City Link losses were higher than prior year but performance improved through the quarter as the new management team gained traction. We expect a significant improvement in year-on-year financial performance in the second half. Textiles & Hygiene had a strong start to the year with continued progress in the Benelux business supported by robust performances in France and Germany. The Pest Control Division has been more mixed, with strong performances in North America and UK Pest offset by weaker results in our operations in Southern Europe. Asia has performed well with strong momentum in Singapore, Indonesia and Malaysia coupled with continued progress in emerging markets. As indicated at the time of our 2011 results, central costs were higher than in the prior year reflecting increased investment in Programme Olympic. "Assuming economic conditions do not deteriorate further, we anticipate continued organic growth and that this, coupled with productivity improvement at City Link, will convert into a year-on-year improvement in financial performance in the second half of the year."
Q1 Highlights § Group revenue up 3.6%* in challenging trading conditions: Ø Asia +8.6%, Textiles & Hygiene +4.5%, Pest Control +3.7%, Initial Facilities +3.5%, City Link +1.7%, Ø Further improvement in organic growth trend +1.7%** in Q1 Ø Acquisitions continue to perform well contributing 2.4% of revenue growth § Adjusted operating profit down 6.7% or £2.5m at CER of which £2.6m central costs and £2.0m City Link with category gains from Pest Control, Textiles and Facilities Services § Profit before tax growth driven in part by a £2.1m increase in pension interest credit but offset by an adverse foreign exchange movement § Cash flow impacted by seasonality factors but expected to strengthen during the year
http://www.investegate.co.uk/Article.aspx?id=201205040700187189C
BRIEF-RESEARCH ALERT-Peel hunt raises Rentokil Initial target price 04 May 2012 08:40, updated 04 May 2012 08:41 May 4 (Reuters) – Rentokil Initial PLC: Peel hunt raises Rentokil Initial target price to 75P from 65P,