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Rentokil profit disappoints
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March 1, 2000: 10:04 a.m. ET
Global support services leader posts 10% rise in FY99 profit; shares slump
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LONDON (CNNfn) - Rentokil Initial, the world's largest business-services provider, posted a 10.2 percent rise in 1999 net profit Wednesday, only for its shares to tumble 12 percent to a four-year low as investors judged that underlying growth in profit fell short of analysts' expectations.
U.K.-based Rentokil (RTO) has expanded from its roots as a pest control company to become the world's largest business-services provider, offering personnel, security, cleaning and transport services with a global staff of 130,000.
The company said net income rose to 385.3 million pounds ($616 million) last year from 349.6 million a year earlier. Pre-tax earnings rose 10.3 percent to 541.1 million pounds.
However, excluding a 17.6 million-pound one-time credit, profit would have undershot the consensus among analysts polled by Reuters. The credit was the result of the company writing back profit that had previously been set aside in an over-cautious provision.
Rentokil shares reversed an early climb to plunge to 180 pence, cutting the company's market capitalization by 1 billion pounds to 5.1 billion.
The stock had already fallen out of favor with investors and was the worst performer last year on the blue-chip FTSE 100 index. The company last year abandoned the earnings growth target that it had met consistently for more than a decade: Chief Executive Clive Thompson had made the company famous for achieving increases in earnings per share of at least 20 percent a year.
The company said Wednesday it would spend 1.5 billion pounds buying back 25 percent of its shares, following a disposal of non-core assets. Rentokil also said it would make an all-stock offer for Ratin, the Danish holding company which currently has a 32.1 percent stake in Rentokil, in an effort to improve liquidity in the company's stock.
Sales last year climbed 2.9 percent to 2.98 billion pounds, boosted by strong performances in continental Europe and Asia, though revenues in its domestic market fell 1 percent. Transport and hygiene services posted the strongest earnings growth. The company said it expected profits to grow at a similar pace to 1999 this year. 
-- from staff and wire reports
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Rentokil Initial
Ratin
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