BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Equities

Rentokil shares rise on stronger profits

Posted on February 27, 2015

Rentokil pest technician Glyn Hughes removes equipment from his van©Bloomberg

Rentokil Initial shares rose to a four-and-a-half-year high on Friday as strong demand for its pest control services combined with cost measures to drive pre-tax profit up 58.4 per cent.

The company unveiled a series of innovative products, including a trap for small vertebrates that sends a text when it catches a creature and an infrared-activated poison dispenser as it seeks to stimulate further growth in its mature markets, where competition is intense.

    Shares in Rentokil jumped 4.4 per cent to 135.3p in London.

    “I feel like we’ve had a pretty good year all in all,” said Andy Ransom, chief executive.

    The company is looking to expand in emerging markets where warm, humid weather is conducive to rapid rodent breeding and termite outbreaks.

    The sector has been boosted by strong growth in global bedbug outbreaks, as a result of warmer weather and rising global travel.

    The FTSE 250 company is targeting Latin America, where revenue jumped 308 per cent, and Asia, with revenue up 29.1 per cent in India, China and Vietnam combined. Mr Ransom said these regions have large pest populations but limited extermination services, providing ample growth potential.

    The company accelerated its merger and acquisition programme, in which it acquired 30 businesses with combined revenues of £66m in 2014, including purchases in Chile, Colombia, India, Mozambique, Korea, Brazil, Brunei, and Singapore.

    Revenue climbed 2.7 per cent to £1.74bn and the company slashed net debt to £260m, a 15-year low, as its costly restructuring continues at a more muted pace.

    In North America, Rentokil increased sales by 6.6 per cent and hopes to fatten sales further through the launch of its “CageConnect” product, a trap for small vertebrates such as skunks, squirrels and raccoons that alerts the operator by SMS when triggered.

    The hygiene division performed less well, with operating profit down 11 per cent to £93.9m.

    Trade in Europe proved challenging, with operating profit down 8.7 per cent, although Mr Ransom said poor growth in the eurozone was not to blame, and the infrared mouse traps should help growth recover when launched.

    ”Rats don’t read the Financial Times . . . If you’ve ever had a rat running around your kitchen you don’t say, ‘let’s wait until the economy picks up’. It’s a very defensive industry, a very reactive industry,” he said.

    Robert Plant, analyst at Morgan Stanley, highlighted that beneath the acquisitions, organic growth was “fairly low compared to other parts of the sector” at 1.2 per cent in 2014.

    “Long term we remain concerned that the core businesses operate in mature markets whose margins may be eroded by greater competition,” he said.