Rentokil was sold because of concerns both over management and the deteriorating outlook for its UK parcels business, which reduced the fair value of the stock.
Rentokil was purchased as we now believe we are close to the trough in the company's profits and cash flows, as it restructures and revitalises itself. The CEO has been in place 18 months, during which time he has divested non-core and sub-scale businesses and re-invested strongly in the "priority" businesses of rat-catching, textile and washroom services and electronic security. This heavy investment phase is nearing its conclusion and should enable the company to begin to regain its momentum in these businesses and grow profits again after several years of decline. The company has strong positions in defensive markets and maintains a healthy dividend, currently yielding over 4.5%. Having re-focused on strengthened "priority" businesses, we see free cash flow growth and a 20% total return.
| Sedol |
Type |
Price |
Date |
| B082RF1 |
Sell |
£ 0.82 |
29/02/2008 |
| B082RF1 |
Buy |
£ 1.487 |
08/11/2006 |
| B082RF1 |
Buy |
£ 1.545 |
25/10/2006 |
| B082RF1 |
Buy |
£ 1.483 |
18/05/2006 |
| B082RF1 |
Buy |
£ 1.59 |
05/05/2006 |
|
