Rentokil dividend faces cut after fiasco at parcels arm

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The new management team - all ex-ICI men - parachuted on six weeks ago, also talked of a deeper malaise at the group, indicating its businesses do not have the right people in charge to improve operations.

Rentokil Initial today reported an 80% plunge in pre-tax profits to just £5 million in the first quarter.

City Link, which a year ago made up around 20% of the group's operating profits, went from £9.3 million in the black to a thumping £16.9 milion loss.

New chief executive Alan Brown warned City Link will continue to drag down the rest of the group for the rest of the year - analysts reckon the courier business will lose £37 million in 2007 - and warned that the dividend is in trouble.

"Our current annual dividend totalling 7.38p per share for 2007 is not supportable based on 2008 performance," said the man brought in to rescue Rentokil alongside his old ICI boss John McAdam who has arrived as chairman.

"The board will review the 2008 payout at the time of the interim results in August."

Brown, who with McAdam replaced Doug Flynn and Brian McGowan after the extent of the City Link fiasco was revealed, also warned of wider problems.

In his first quarterly statement to investors, Brown said: "We have struggled to implement major change programmes which has affected our ability to turn top line growth into profit."