City Link loss hampers Rentokil’s performance
Rentokil Initial saw company profits slip for the first half of 2011, as its courier arm City Link continues to make losses. The delivery firm made an operating loss of £17.8m for H1 – £13.1m worse than the corresponding loss made in 2010 on a £22.6m (13.5%) drop in revenue.
This left parent company Rentokil – widely known for its pest-control services – reporting a H1 profit before tax figure of £29.7m – a 3.9% drop compared to last year.
City Link said its operation was impacted by lower volumes as a result of customer losses in 2010 – with parcel volumes for H1 down by 9.9%.
Furthermore, the company incurred additional costs in January in order to recover from heavy snow in late December.
A City Link statement said: “The UK parcels industry continues to be extremely competitive in 2011 and trading conditions remain challenging. Price cutting is a continuing market dynamic and our revenue per consignment declined by 4%.
“The pipeline of new business opportunities remains promising and while it has grown in size since Q1, the timing of conversion into sales is unpredictable.”
In its financial report, Rentokil labelled City Link’s performance as “unsatisfactory”, however, the business “is on track to deliver substantial improvement in capability by October.”
Alan Brown, CEO, Rentokil Initial, said: “City Link has made considerable progress in operational and customer care systems and although its financial performance remains unsatisfactory, trading has been stable since February.
“I am encouraged by our strong operational progress and the new business pipeline, the combination of which should lead to improved year-on-year performance in Q4 though the full impact of our initiatives is unlikely to be felt this year.”
The courier firm said it had made “good progress” recruiting employed drivers which represented 67% of all routes run at the end of H1. This has reduced the company’s reliance on subcontractors.
It added that the implementation of a depot blueprint will provide a consistent approach to its operations across the network, which will result in further cost savings.
In June 2011, Rentokil announced the appointments of David Smith as managing director and Robert Peto as finance director of City Link. Both join the business later this year from Royal Mail Group.
