Rentokil slowed by City Link woes

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Pest control company Rentokil Initial has unveiled a further restructuring of its ailing City Link delivery operation

Rentokil Initial has unveiled a further restructuring of its ailing City Link operation after the delivery arm slumped to another loss.

The support services company will shut the operation’s head office in Camberley by April and move jobs to Heathrow, as well as launch investment in a new call centre, route optimisation and web programmes.

Rentokil described City Link’s 2010 performance as particularly disappointing as December’s severe weather added to ongoing operational failings. Losses in the final quarter reached £3.6 million and meant the deficit for the year widened to £9.6 million, from £5.6 million in 2009.

The new improvement programme will be in place by October but Rentokil warned of another disappointing financial performance from City Link until then.

The company said: “Significant management change has taken place and a detailed operating plan is now being pursued which should deliver substantial operational improvement prior to the Christmas seasonal peak.”

Despite the poor performance at City Link, Rentokil still announced that group-wide profits increased 15% to £192.3 million in 2010 while sales were down 1% to £2.5 billion. Rentokil chief executive Alan Brown said Rentokil was half way into a five-year turnaround plan that has, in most cases, shown successful structural change.

He reported strong profits growth in pest control and facilities services, with earnings up 10% and 21.6% respectively. City Link is currently being run by Mr Brown after its managing director Stuart Godman resigned by mutual consent in December.

The business has been restructured in recent months after it sold its Wednesbury hub and opened new centres in Warrington and Peterborough. Three depots were closed and a combined depot for post operations opened, bringing total depot numbers to 75.

But Rentokil admitted that it cut too many of City Link’s staff as part of its focus on cost cutting and it now plans to employ more drivers to reduce its dependency on more expensive sub-contractors. It will also appoint a customer care director as part of a drive to improve customer service and will launch a new service to allow customers to track the progress of their parcels online.

Rentokil said its pest control division was helped by an outbreak of bedbugs in cities including New York last year, while its UK business grew profits by 21%. Shares in Rentokil were down 8% following the release of the results, which were slightly below City profits expectations of £194.3 million.

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