City Link losses continue to hurt parent firm Rentokil

Losses have continued in the third quarter for UK express delivery company City Link, but its parent Rentokil Initial said today it was expecting the situation to improve “significantly” in the final quarter. In the quarter, City LInk made a £6.8m operating loss adjusted for exchange rate changes, compared to a £1.3m loss in the same quarter in 2010, as revenues slipped 7.9% year-on-year to £74.4m.

In the year to date, the company has seen an 11.7% year-on-year fall in its revenues, to £218.9m.

The slump has come as the result of City Link losing major customers in 2010, with a resulting 5.5% decline in volumes in the third quarter compared to the equivalent last year. Price pressures in the competitive UK parcels market has also been impacting on Q3 revenues, with revenue per consignment down 3.5% year-on-year.

City Link’s results have pulled down Rentokil’s own results, the company known for its pest control services saw its overall profits for the third quarter down 13.3% to £36m, while overall revenues were virtually flat on £630.7m.

Pipeline

Rentokil, which appointed ex-Royal Mail chief customer officer Dave Smith as managing director and former Parcelforce finance director Robert Peto as finance director for City Link back in June, insisted operational improvements were now in place at the express firm ahead of the Christmas surge.

Said it has a £50m pipeline of potential leads, and has turned about £25m of leads into new business that should start to benefit fourth quarter results.

However, City LInk’s parent said despite “strong” service levels, there was still further progress required on productivity at the Coventry-based express firm.

Rentokil has reduced its own forecast for the full year based on the need for more productivity progress needed at City Link.

Alan Brown, the chief executive at Rentokil Initial, said today: “Revenue projections for City Link have improved significantly for Q4 and 2012, and we anticipate the financial performance of the business will also improve in Q4, assuming no repetition of the very unusual weather conditions in Q4 2010.

“The new business pipeline for 2012 is very strong, and our operational excellence initiatives in Customer Care, service and contingency planning are in place, though more progress needs to be made on productivity.”