Services group Rentokil Initial dealt a blow to recovery hopes by reducing profits expectations at its biggest division.
Rentokil yesterday blamed tough trading conditions for the disappointment at its textiles and washroom services arm, as profits for the division in the second half of 2006 are now likely to be flat.
The company also announced an overall ten per cent fall in operating profits to £138.5 million for the six months to June 30, but stuck by previous expectations that it would return to modest profits growth in 2007.
Pretax profit from continuing operations was £112.1 million as revenue grew 10.5 per cent to £1.01 billion.
Restructuring efforts by Rentokil - led by chief executive Doug Flynn - have included the closure of its linen and workwear business earlier this year and the sale of its manned guarding businesses. The company, which also has operations covering pest control, facilities services and tropical plants, said it was reviewing the number of sites from which it operates - a move expected to result in the merger or closure of locations.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: "While investors will appreciate that the major restruc-turing of the business which Rentokil has recently under-taken takes time to generate results, Rentokil shares have been on a downward trajectory since the late 1990s. It's testing shareholders' patience."
Rentokil said achievements included progress in acquiring City Link franchises to create a fully integrated parcels business.
Half-year revenues for the arm increased 42 per cent to £81.8 million while operating profits were 10.5 per cent higher at £13.7 million.
Among other divisions, profits in textiles and wash-room services fell 19 per cent to £55.3 million, while pest control improved its return by five per cent to £33.4 million. Profits were lower at tropical plants, electronic security and facilities services.
Overall, Mr Flynn said the company had taken steps in the right direction.