Shares in Rentokil Initial lost ground on Thursday as the support services group cautioned over progress in its long-awaited recovery and revealed a 6.8 per cent fall in first-half profit.

The group said its textiles and washroom services division would fall short of forecasts and stagnate in the second half of the year because of tough trading conditions in Europe and the loss of UK customers from the closure of its linen and workwear business.

Doug Flynn, chief executive, said managers at the washroom division - which generates almost a third of group revenues - were "probably a little optimistic about the underlying market and we have to recalibrate how we operate".

But he insisted the recovery was on course with the group set to deliver "modest" profit growth in 2007.

"We have still got a lot to do over the next six months but as far as I'm concerned we are on track," he said. "There is no point in beating up the guys who are doing it [the turnround] if there is nothing else that can realistically be done.

"Maybe we could have been more radical with the portfolio but we can still do that," added Mr Flynn. "We cannot discuss portfolio changes because it would be a disaster commercially."

The group has been undergoing a radical restructuring programme, which has seen it sell its conferencing and manned guarding businesses, while tackling chronic underinvestment at its core businesses.

Mr Flynn has been seeking to improve turnover but the group has struggled to maintain its market share and margins.

Group operating profit was down by 9.7 per cent, with weaker performance at five of the group's seven divisions, which provide services ranging from rat-catching to supplying tropical plants.

Robert Morton, analyst at Investec, said: "They are a long way down the track of restructuring but it appears they are still finding life quite a struggle."

Underlying sales growth fell from 4.7 per cent in the first quarter to 1.9 per cent in the second quarter.

Turnover from continuing operations increased from £917.1m to £1.02bn in the six months to June 30.

Pre-tax profit fell from £109.6m to £102.1m. Earnings per share were 4.09p (4.39p). The board maintained an interim dividend of 2.13p per share.

Shares in Rentokil fell 7¼p to close at 152¼p on Thursday

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