By James Davey
LONDON (Reuters) - Pest control to parcel delivery firm Rentokil Initial
"Our operational agenda has been in full flow during Q3 and continues to deliver to expectation on service, capability, cost and especially cash," said Chief Executive Alan Brown on Friday.
"We anticipate a further quarter of good delivery in Q4 despite few signs of economic recovery in our major markets."
Rentokil, whose businesses also include cleaning and the hiring out of uniforms and tropical plants, brought in Brown and John McAdam -- who together led a turnaround at British chemicals group ICI -- as CEO and chairman last year.
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The pair are trying to reverse years of underperformance and botched acquisitions by improving customer service, operational efficiency and cutting costs.
Shares in Rentokil have more than doubled over the last year outperforming the DJ Stoxx European industrial goods and services sector index <.SXNP> by 65 percent.
But the stock was down 5.36 percent at 106 pence at 10:05 a.m. as investors booked profits.
"It would be tempting to believe that the lower losses in parcels mark a change of fortunes for Rentokil and the share price is certainly reflecting this. However, the outlook for the group is still uncertain," said Seymour Pierce analyst Kevin Lapwood.
The support services company, which issued a string of profit warnings in 2007 and 2008, said its profit before tax and one-off items was 49.6 million pounds in the three months to September 30.
This was ahead of analysts' consensus forecast of about 46 million pounds and compares with 16.6 million pounds in the same period last year.
Brown told reporters the outcome was driven by good progress in fixing the firm's problem businesses, particularly its City Link parcels delivery operation, and no provisions for bad debt in the period.
Revenue fell 3.2 percent at constant currencies to 622.6 million pounds, the same percentage fall as the second quarter, but was up 3.6 percent at actual exchange rates. Some 70 percent of Rentokil's earnings stream is in euros.
City Link made a loss of 1.3 million pounds in the third quarter.
Brown forecast it would make a full year operating loss of 7 million pounds, better than previous guidance of a loss of 12 million pounds.
He estimated City Link would get a 1 million to 2 million pounds profit boost from the recent strike at Royal Mail and forecast the business would be profitable in the fourth quarter and throughout 2010.
(Editing by Hans Peters)
