Closure of Activity
Rentokil Initial PLC
25 January 2006
25 January 2006
Closure of Loss-Making Linen and Workwear Services
Rentokil Initial plc (the 'Company') today announced the closure of the
loss-making UK Linen and Workwear operations of Initial Hygiene UK, in order to
focus on its market-leading UK Washroom and Dustmat business. Having explored
thoroughly all options for exiting the loss-making operations, the Company has
regretfully concluded that these operations will be closed on 30 April 2006.
A full consultative process with customers and affected employees will begin
immediately, in an effort to ensure continuity of service with alternative
suppliers and to minimise the potential redundancies resulting from the closure.
The Linen and Workwear operations currently employ some 2,000 people across
the UK and up to 1,700 positions could be made redundant. An employee
consultation process will be undertaken and the Company will make all efforts to
minimise redundancies including considering alternative employment within the
Rentokil Initial Group. No final decisions as to numbers of redundancies will be
made until the conclusion of the collective and individual consultation
processes.
Rentokil Initial plc announced in November 2004 that it had taken the decision
to exit the loss-making Linen and Workwear elements of Initial Hygiene UK. The
UK Linen and Workwear business has been significantly underinvested, is based on
an inefficient distribution structure and historically has pursued a flawed
commercial strategy. The Company will continue to develop its UK Washroom and
Dustmat business, Washroom Solutions UK, which has a strong and profitable
market position. To that end, management started the complex and lengthy process
of separating the plant and delivery mechanisms relating to Linen and Workwear
from the activities being retained. This separation was finally completed in
December 2005.
In parallel with the operational separation, the Company explored in detail how
best to structure an exit and so stem increasing losses, while protecting the
value of the on-going UK Washroom and Dustmat business. In particular, the
Company examined whether it was possible to sell the business to one or more
third parties while ensuring an orderly and controlled transfer of customer
contracts. However, the serious risk of regulatory intervention and the
consequent uncertainty in terms of timing, costs and eventual exit, has led the
Board reluctantly to conclude that a third party sale is not feasible and that
closure is the only viable option.
Customers of the UK Linen and Workwear services have been notified of the
decision today and the Company will provide comprehensive support to them in
sourcing alternative supply.
The UK Linen and Workwear activities' 2004 turnover was £55 million with
operating losses of £5 million. In 2005, turnover is broadly similar with
operating losses of circa £9 million. An exceptional asset impairment charge of
£28 million was reported in the first half of 2005 and further reorganisation
costs of £4 million have been incurred in the second half. At the half year it
was announced that total one-off exit costs were expected to be in the range of
£40-45 million (in addition to operating losses to the point of exit). The
impact of closing rather than selling this activity is expected to increase
these costs to £45-50 million. Included in this amount is £13-18 million of
cash costs to be incurred in the first half of 2006. These will be
significantly offset by the sale of surplus property and other assets during
2006 and 2007.
Doug Flynn, Chief Executive of Rentokil Initial plc, said:
'Our UK Linen and Workwear activities have sustained considerable losses for
several years and the need to exit this operation has been clear for some time.
It is always a difficult decision to close an operation, especially one that
employs so many people. We are committed to doing all we can to minimise the
level of redundancies and to support all our employees and customers affected by
the closure.
'Today's announcement does not impact our Linen and Workwear operations in
continental Europe where we have built up a number of profitable and growing
businesses. In the UK our focus is now on delivering the opportunity we have in
washrooms and dustmats by improving efficiency and service to our customers.'
Enquiries
Rentokil Initial plc +44 (0) 1342 833022
Charles Grimaldi, Corporate Affairs Director
Brunswick Group LLP +44 (0) 20 7404 5959
John Sunnucks
Kate Holgate
Jon Rhodes
Notes for Editors:
Rentokil Initial plc is one of the largest business services companies in the
world, operating in all the major economies of Europe, North America, Asia
Pacific and Africa. The company has some 90,000 employees providing a range of
support services in over 40 countries.
The UK Hygiene business has traditionally provided four services: linen,
workwear, washroom, and dustmats. The business services UK customers through a
nationwide network comprising 12 plants and 35 dedicated service centres and
employs around 4,000 people. Key customer groups include hospitality,
educational, retail and office based businesses.
Following the closure of the Linen and Workwear operations the business will
trade as Initial Washroom Solutions, focused on providing innovative washroom
management services featuring exclusive products for hand drying and washing,
air care, sanitary disposal and washroom sanitisation. Dustmats will be provided
on a rental basis. Additional services will include the provision of a
specialist high care and clean room laundry operation servicing industries such
as pharmaceutical companies and food manufacturers.
Rentokil Initial plc, Felcourt, East Grinstead, West Sussex RH19 2JY
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