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VOL. 132 | NO. 151 | Tuesday, August 1, 2017

Terminix Priority of ServiceMaster New CEO Nik Varty

By Bill Dries

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The new CEO of ServiceMaster Global Holdings Inc. said his first priority at the helm of the Memphis-based domestic and commercial services provider is to fix the company’s Terminix division.

NIK VARTY

Nik Varty also told investors and analysts on a Monday, July 31, earnings conference call for the second quarter that the ServiceMaster board’s decision to spin off its American Home Shield division was a “right and necessary step at this time.”

The spinoff was announced last Wednesday as the board also announced that Varty was the new CEO, replacing Rob Gillette.

And Varty confirmed Monday that the move of the company from its East Memphis headquarters to the new Downtown headquarters at Peabody Place is “on schedule” for the first quarter of 2018.

“I think the company completely understands where our problems are – where our issues are,” Varty said when specifically asked about problems and challenges at Terminix. “We still have a long way to go in fixing some of the fundamental issues so we can get to a consistent level.”

In some cases, service calls are taking longer, pointing to the need for more technicians and better training of technicians. Varty said his review of the division includes a move to get “the right people in the right positions” in running Terminix going forward.

ServiceMaster, which has seven brands, five of them grouped under “Franchise Services,” has been working to improve customer retention and better handling service calls at Terminix. The division is having the same challenges the TruGreen division of ServiceMaster faced before it was spun off. At one point, the company loaned a Terminix division leader to TruGreen to employ best practices from one to the other.

Varty is the fourth ServiceMaster CEO in six years, coming to Memphis from outside the ranks of the company, just as his two successors – Gillette and Hank Mullany – did.

Varty was a partner in NOWUS Capital of Denver most recently. Before that he was Americas president and vice president of mergers and acquisitions for WABCO – a global company that makes technology for commercial vehicles.

“I have extensive experience leading large organizations and driving profit and growth, including some service businesses,” Varty told those on the conference call Monday. “My first few days on the job confirm my belief in the strong potential of the ServiceMaster brand.”

ServiceMaster plans to complete the American Home Shield spinoff in the third quarter of 2018.

“The separation will better position both companies to focus on their unique business needs and market opportunities and grow according to their own distinct business strategies,” Varty said. “We believe it will enable investors to get value and invest in each business with greater clarity based on their individual merits and very attractive future growth prospects.”

For the second quarter, revenue at ServiceMaster increased by 8 percent from a year ago, led by 15 percent growth at AHS, which the company attributed to organic growth in that division as well as acquisitions of two home warranty businesses in late 2016.

ServiceMaster posted net income of $85 million, or 63 cents per share, compared to net income of $16 million for the second quarter of 2016, or 11 cents per share.

Terminix posted a 3 percent revenue increase from a year ago that was tempered by increased sales and marketing costs of $4 million and a $3 million hike in production labor costs from efforts to improve safety, customer service and retention.

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