UK: Rentokil beats forecasts despite further loss for City Link

A City Link delivery van

A City Link delivery van - Credit: Archant

PARCEL delivery firm City Link is still searching for a return to profit despite benefiting from the boom in online shopping, its owner said today.

The business, which is part of pest control and washrooms firm Rentokil Initial, recorded a loss of £2.4million for the final quarter of the year, having told the City last summer that it would be profitable by now.

This forecast was revised in November, with Rentokil today blaming weaker demand from higher margin small business customers for its failure to fully benefit from a pick-up in deliveries on behalf of major retailers.

Across 2012, City Link made a loss of £26.4m against £31.3m a year earlier but, overal, Rentokil posted a better-than-expected 10% rise in group profits to £191.1m.

After a number of false starts in recent years, Rentokil’s bid to revive City Link has benefited from a new management team’s push to improve driver productivity, supported by better route handling.

It said today that City Link’s costs per delivery fell by 13% over the year, while volumes were 17% higher.

The company warned that it planned price increases across its customer base this year and said efforts to retain more profitable smaller customers was a “key priority” for this year.

Most Read

Rentokil’s performance in textiles and hygiene was impacted by economic conditions in northern Europe, although revenues for the fourth quarter still rose 1.4% to £227.7m and profits by 2% to £41.4m.

A weak summer season failed to prevent the UK pest control business growing turnover by 2.4% last year, as part of a solid set of results overall.

The division is now the third largest pest control firm in North America after December’s deal to buy US firm Western Exterminator for 99.6m US dollars (£61.4m).

Rentokil, which was founded in 1924 by Imperial College London professor Harold Maxwell-Lefroy, has added 36 pest control offices in California, Arizona and Nevada, as well as a products division.

The acquisition was in line with Rentokil’s strategy, outlined last November, to target pest control firms in North America, the world’s largest pest control market, as well as in Latin America and the Middle East.

Investec analyst Gideon Adler said today’s results were ahead of City expectations for a profits figure of around £186 million.

He added: “Cost savings have come in ahead of expectations and management sound confident of maintaining momentum into 2013.”