City Link improves service amid weaker market demand

City Link is on the road to recovery with improved customer service but faces the challenge of weakening demand in the British express and parcels market, according to its parent group.

City Link, whose operating profits dropped 44 pct last year and then turned into a Q1, 2008 loss due to poor integration of Target Express and management errors, has embarked on a seven-point recovery plan focused on better customer service, more centralised operating control and a network review.

In a recent trading update, parent Rentokil Initial said that implementation of the recovery plan had had a positive impact on City Link’s service performance. “Customer relationships have improved, attrition has slowed and overall service levels have been restored to a very high level – now consistently above 98.5 pct,” it commented.

But it warned: “Despite the service improvement, the revenue trend has weakened as the quarter progressed. This was not due to customer losses but is indicative of weakening demand generally.” The company had indentified “substantial” cost saving opportunities which should produce improvements within 12 -18 months, but which would not improve 2008 results.

Rentokil chairman Alan Brown was cited as saying that City Link was likely to make a loss in the GBP 40 – 45 million range this year and would hopefully break even in 2009.

Rentokil saw its share price slump dramatically after issuing a fourth profit warning for this year, and highlighting serious problems in six of its seven diverse operating divisions.

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