Woes of the Urban Rat-catcher

Thu, 28 Feb 2008 11:40:16 GMT

A short time ago Cityblogger was the unfortunate victim of a small infestation in his attic, something he would obviously prefer wasn’t common knowledge among his esteemed city colleagues. Unfortunately Tiddles, who cowers behind the sofa at the sight of a money spider, wasn’t of much assistance so Cityblogger was forced call in the hired help.

The midnight scurrying across the ceiling was possibly squirrels, according to the thin streak of a pest control officer who looked like he spent so much time with his work that it had begun to affect his DNA. But in the end Cityblogger’s squatters turned out to be more of the Ratatouille variety.

However, despite the fact that in the urban jungle one is never more than ten feet away from Roland Rat and his compadres, it seems that rodent hunting isn’t enough to keep Rentokil in rude health. Shares in the troubled support services outfit slumped 27 per cent this morning after it issued its second profit warning in two months. This helped push the FTSE100 down 1 per cent to 6,011, albeit still above the crucial 6,000 mark.

It seems that the problem isn’t its pest control division which, along with the company’s thrilling textile and washroom services businesses, is relatively healthy, but its ailing City Link courier side. Rentokil says the division has been hit by weaker business to consumer spending and that its improvement plan has so far been relatively ineffectual. Chief executive Doug Flynn called City Link’s performance “unacceptable”. However, he admits that the future profitability of the business in 2008 is “unclear” and that it may not even reach break even this year. Oh dear.

The fact is that Rentokil has been a basket case for some time. The mini-conglomerate has also been struggling against margin pressure and competition in its textile division for the past few years. And with analysts busy cutting forecasts, and chairman Brian McGowan on his way out, at these share price levels it’s possible the company could now be a takeover target.

Xstrata was also on the losing team this morning, although not quite as spectacularly as Rentokil, with shares down 3 per cent after Vale’s bid looked on the verge of collapse.

Fortunately the banking sector held its end up, with RBS’ results beating City forecasts. Although write-downs from the bank’s exposure to the credit crunch rose to £2.1bn, operating profits bounced 9 per cent to £10.3bn and the dividend was also hiked by 10 per cent.

And as for Cityblogger’s attic, it is all eerily quiet now on the Western front. Farewell, Roland…

del.icio.us Tags: cityblogger,city blogger,rentokil,xstrata,rbs,roland rat,ftse100,equity markets

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Witty in the city

Mon, 08 Oct 2007 15:25:14 GMT

Politicians, Cityblogger observes, don’t need the gym to get fit. They simply go on the Today Programme on Radio 4 and have the blazes boxed out of them by Messieurs Humphrys and Sturton et al live on air. What a beautiful way for us listeners to wake up of a morning. Ah…politicians’ pitiful wails beats birdsong any day...

Secretary of State for Justice Jack Straw was on the receiving end of a very cross Edward Sturton this morning, who seemed bitterly disappointed not to be casting his vote soon now after Gordon Brown cancelled the election (either that or a researcher had mislaid his Weetabix). Congratulations David Buik of Cantor Index for predicting, as we blogged here on Friday, just that! Mr Buik said we probably wouldn’t see an election until at the earliest next Spring and perhaps not for two years.

On Today Mr Straw claimed the about-face “isn’t damaging to the prime minister” and that when the political history is written about the Brown era “there wouldn’t be even half a paragraph devoted to this”. Mmm…! But true, the City barely shrugged its shoulders, with the FTSE fairly stagnant today. We’ll have to wait and see what effect - if any - the Pre-Budget statement tomorrow has on the markets.

Of more interest - besides the gloomy news that lots of City jobs may fall by the wayside this year (thanks for that Monday morning pick-me-up, the Centre for Economic and Business Research!) is the announcement of a successor to JP Garnier at GlaxoSmithKline. Andrew Witty, currently President of the GSK’s European Pharmaceuticals division, will seize the reins as chief executive from the end of May next year when JP retires.

Not an awful lot is known about Witty in the City, to excuse the unfortunate rhyme, admit Cityblogger‘s sources. Kevin Wilson, analyst at Citigroup, damned the poor chap with faint praise, saying the succession was “a minor positive” for GSK but noting “it will be interesting to see how much change takes place, and how fast, once he is in the post next year.”

Certainly, JP hasn’t always been terribly popular - witness the outcry a few years ago about his remuneration. But he is generally viewed as having done a good job at Glaxo, which claims to have one of the best drug pipelines in the industry. In fact, Jeremy Batstone-Carr at Charles Stanley reckons Glaxo’s shares fell slightly today because the City will be sad to see JP go.

True, Glaxo’s shares could do with a dose of Lucozade following safety fears over diabetes drug Avandia, so Mr Witty should have his time cut-out in the new job. Mr Batstone-Carr speculates that he could hit the mergers and acquisitions trail to off-set the coming drug patent expiry orgy that will kick in in the coming years, but given most of the sector is facing similar problems he could instead break the company up into its separate therapeutic divisions. Although considering Witty is a "company man" investors might assume he has too many sacred cows to be able to facilitate this. Only time will tell!

The inside word from the City: Management changes

Woes of the Urban Rat-catcher

Witty in the city