Rentokil Initial burdened by City Link losses
Continuing losses at UK courier firm City Link hampered the financial performance of its parent company Rentokil Initial during Q1 2011, the company said. Rentokil Initial’s adjusted profit before tax was down 10.1% (or £3m) for the quarter – with performance heavily impacted by City Link’s Q1 operating loss of £10.7m.
The courier’s performance was £6.3m worse than the corresponding loss in 2010, with a reduction in revenue of £11.2m (13.4%).
Alan Brown, CEO of Rentokil Initial, stated that City Link’s performance is unlikely to improve until Q3.
He said: “The UK parcels market was particularly challenging during Q1. City Link will continue to deliver poor financial performance in Q2, but I anticipate an improvement in Q3 based on strong operational progress since February, plus major improvements in information technology and customer care.
“Together, these are driving a differentiated position for City Link in the UK market. This has resulted in a promising new business pipeline which is anticipated to come on stream in late Q2 and early Q3.”
The company said that results were impacted by “lower customer volumes in Q1” and by additional costs incurred in January “in order to recover from the heavy snow conditions in late December”.
Over the period, City Link saw a drop in parcel volumes by 10% compared to 2010 levels.
A Rentokil Initial statement said: “Customer retention in Q1 was good and the pipeline of new business opportunities is promising. The UK parcels industry continues to be extremely competitive into 2011 with price cutting a continuing market dynamic and our revenue per consignment declined by 3.5%.
“Strong progress has been made in addressing the operational weakness that impacted the 2010 results. A detailed operating plan for all parts of the business has been established to address the operating cost base, customer care agenda and IT. The usage of subcontractors is decreasing with further decreases planned for Q2, and a detailed contingency plan to deal with extreme conditions is being communicated to major customers. The business is well placed to deliver the planned operating improvements ahead of the peak Christmas trading period.”
