British cleaning-to-pest control firm Rentokil Initial is talking to Libya's new leaders about resuming a contract to kill rats after a rise in rodents on the streets of the capital Tripoli.
“I think the rats have certainly thrived in the environment since we have been away,” Rentokil Chief Executive Alan Brown told reporters.
Rentokil, which posted disappointing first-quarter results on Friday, cut short its 28 million euro ($36.8 million) pest control contract and withdrew from Libya last year during the civil unrest.
The company is now in talks to resume the deal and recover the money it is owed.
“I think we did a terrific job when we were there and they (rats) were really unleashed on the population when we withdrew. It seems the authorities are keen to get us back,” Brown said.
The group, which served the Tripoli, Misrata and Benghazi and took a hit of just under 5 million pounds ($8.1 million) when it suspended its operations, has already resumed its commercial pest control business there.
Adjusted pretax profit for the three months to March disappointed analysts, falling 4 percent at actual exchange rates to 26.3 million pounds, with losses at its struggling City Link parcels unit widening to 12.7 million.
At constant exchange rates adjusted pretax profit rose 1.1 percent. Rentokil said it expected the group to make a year-on-year financial improvement in the second half, assuming economic conditions did not deteriorate further.
Shares fell 4.8 percent to 82.45 pence by 11:43 SA time.
Panmure Gordon analysts retained their sell rating.
OLYMPIC HEADACHE
Rentokil, which offers services from hiring work uniforms and plants to catering and security, said operating profit rose 10 percent in its largest business, textiles and hygiene, helped by strong trading in Benelux, France and Germany.
Pest control profit fell 4.4 percent as North America and the UK failed to offset weak conditions across Southern Europe, which had also affected its cleaning business, forcing it to scale back its Spanish operations for fear of not being paid.
Rentokil CEO Brown said despite its continued losses, City Link had shown signs of improvement under the guidance of a new management team, and that the business will be “pretty close to break even” for the second half of the year in total. The unit has dragged on group profit for over four years.
Brown added that Britain's 2012 Olympic Games is likely to cause it further headaches and “significant additional costs” for up to eight weeks as its parcel vans battle with restricted access to London's streets and more traffic.
The group said that the market for bolt-on acquisitions was good and that it was likely to add to it facilities management and pest control businesses by the half year.
In March, Rentokil posted a 6 percent drop in profit for 2011, in line with market forecasts and also reinstated its dividend for the first time since 2008. - Reuters