Rentokil falls into profits trap

How many of us still teach about conglomerates when teaching the economics of business growth? Rentokil Initial is one of the few remaining genuine conglomerates in British business.

The business which started life as a glorified pest controller has diversified over the years and famously - under former CEO Clive Thomson - clung onto a target of growing by 20 per cent a year until a recent downgrading of expansion prospects.

The Rentokil group now includes business that range from pest control to catering, e-security, washroom hygiene and landscape gardening and conferencing - but a series of botched takeovers and restructuring costs seem to have done them no favours as profits have declined. The BBC reports that nderlying profits for the first half of the year fell 55% to £39.3m.

The Guardian reports on their current difficulties and the pressure for some of their businesses to be sold off to protect shareholder value. The City Link parcel delivery business looks to be under real pressure given the increasingly competitive environment and the impact of sharp increases in transportation costs.