Rentokil CEO, chairman get their marching orders

Rentokil Initial Plc, the world's largest pest-control company, fired Chief Executive Officer Doug Flynn and Chairman Brian McGowan, three weeks after forecasting a drop in profit this year.

Alan Brown, former chief financial officer at Imperial Chemical Industries Plc, will replace Flynn, the London-based company said yesterday in a statement. John McAdam, ICI's past CEO, will take on the role of chairman.

McGowan and Flynn's exit follows a plunge in earnings at the City Link parcel delivery division that had been Rentokil's fastest-growing business. Profit will drop "significantly" after an "unacceptable performance" at the overnight courier unit, Flynn, who took the top job in 2005, said on Feb 28.

"Flynn's had to fall on his sword over the parcels business; he got caught out there," said Kevin Lapwood, an analyst at Seymour Pierce in London who's currently reviewing his "hold" rating on Rentokil. "With Brian McGowan, it's the end of the old guard."

Rentokil climbed as much as 25 percent to 91.1 pence in London and was trading at 90.1 pence as of 8:17 am local time. The stock has plunged 45 percent in the past year, paring the company's value to 1.32 billion pounds. The company was priced at 453 pence at the end of 1998.

The appointment of McAdam, 59, a graduate in chemical physics, with a Ph.D from Manchester University, and Brown, a 51-year-old chartered management accountant, increases the likelihood Rentokil will be broken up, analysts said. The two executives orchestrated the sale of ICI to Dutch rival

Akzo Nobel NV for $15.9 billion.

"It's a fairly sure sign we're going to see some disposals," Lapwood said.

"These new lads have a track record of rationalizing businesses. You're going to see some pretty radical disposals."

Rentokil warned in December that an anticipated surge in parcel-delivery volumes in the run up to Christmas had been later and weaker than predicted because of a "challenging" retail market. Flynn last month said the company later found that understaffing and management errors at City Link caused the unit to lose existing contracts and potential new business.

Pest control was Rentokil's first business. The company was founded in 1925 as a specialist in the control of woodworm and death-watch beetles.

Agencies

(China Daily 03/21/2008 page16)