ServiceMaster Earnings Slip

The company continues to place much of the responsibility for the declining performance on the shoulders of its “recently acquired landscape businesses,” and it noted that operating income in the Consumer and Commercial Services division that includes the TruGreen companies fell 11 percent for the quarter. This decrease reflects “the integration issues in the landscape operations and higher fuel and other labor-related costs in most of its business units. TruGreen-ChemLawn … reported modest revenue increases reflecting higher customer counts, increased productivity and price increases with slightly reduced profitability resulting from higher labor-related costs.”

“We are beginning to see some improvement in the operations of our landscape business,” noted C. William Pollard, ServiceMaster chairman and CEO. “The leadership and major organizational changes have been implemented. The system conversion issues should be behind us by year-end. During this transition period, management has kept a focus on customer service and we continue to see good sales growth.”

The last few months have included numerous personnel moves within the organization, particularly as some of the individuals who sold their companies to ServiceMaster have been demoted, resigned or let go by the company. “The company has implemented organizational changes in this business which it believes has strengthened leadership at all levels and increased integration with the lawn care business,” according to the release. “The commercial sales forces of the two organizations have been combined to provide a stronger, more coordinated approach to growing the commercial customer base. The integration will also support the launch of landscape services to large residential customers.” Introducing landscape services to the hundreds of thousands of TruGreen-ChemLawn customers seems like an obvious move, however the company focused its acquisition attention on landscape companies focused on the commercial market.

“The integration of our lawn care business with our landscape business has added proven operational leadership at both divisional and regional levels,” Pollard added. “This also will provide improved focus and direction to the implementation of a new service offering involving landscape services to our large residential lawn care customer base. It will enhance our sales effort for a combined lawn care and landscape offering to our growing commercial customer base. Bringing these two businesses together into one organization is taking more time than we anticipated, but it is the right step for the future.”

Meanwhile, the company’s statement noted that TruGreen LandCare has enjoyed “strong revenue growth” in excess of 10 percent in areas of both internal growth and acquisitions, but profits have been pulled down due to integration, labor and fuel costs.