British parcels operator City Link reduced its operating losses in the second quarter and firsthalf of 2009 thanks to continued cost-cutting, it was disclosed today. A new managing director has
also been appointed to continue the operator’s rationalisation strategy.City Link saw Q2 revenues drop back by 14.5% to £82.1 million (€95 million) while itshalf-year revenues were down by 12.6% at £167.1 million (€193.5 million). But it succeeded inreducing last year’s operating losses significantly, with the Q2 adjusted operating loss down 93%at £0.9 million and the half-year loss down 75% to £7 million.
The improvement has been achieved through successful anticipation of lower parcel volumes andflexing the delivery cost base accordingly, together with tight control of overhead costs, parentcompany Rentokil Initial plc said in its Q2 results released today.
City Link’s H1 parcels volumes were down 10.2% on H1 2008 and revenue per consignment (RPC)weakened 3.8% year-on-year. The lower revenues were a mix of customers already lost in the firsthalf of last year and lower trading levels by existing customers, Rentokil Initial said.
But it stressed that City Link’s customer base still remained “broadly consistent” withrecent quarters despite the highly competitive market. Customer service levels remainedconsistently above 98.5% over the last six months and the programme to restore customer handlingback to depots was completed ahead of schedule.
City Link continued to reduce operating costs in recent months. Delivery vehicle fleetnumbers are now over a third lower than this time last year, total employee numbers have fallen by22% since the end of H1 2008, and the number of depots has been reduced from 97 to 90. At the sametime, productivity has been improved by the successful roll-out of new hand-held scanners and anupgraded route scheduling tool.
Looking ahead, Rentokil Initial CEO Alan Brown said the revised full-year loss for City Linkwould be no more than £12 million instead of the previously expected £20 million. The parcelscompany aimed to save £40 million this year in total, would rationalise the network to 81 depots byend-2009 and downscale further to 74 locations by end-2010, and was considering moving from two toone single national hub in Q2, 2010, he disclosed.
Meanwhile, sales and marketing director Stuart Godman has been appointed managing director atCity Link in place of Petar Cvetkovic who will leave the company at the start of September. In astatement, Cvetkovic, in the post for the past 18 months, said he was proud of the turnaroundachieved and said City Link was now performing extremely well in many areas. Both managers joinedCity Link in late 2006 with the acquisition of Target Express where Cvetkovic had been CEO.
Rentokil CEO Alan Brown praised Cvetkovic’s “immense” contribution to City Link’s turnaroundover the last 18 months, and highlighted Godman’s experience and excellent customer relationships. “ He is well placed to develop and implement a growth strategy that will leverage the strongoperational platform currently being built within City Link.”
During the first half of 2009, City Link opened a new 50,000 sq ft depot at Durham innorthern England, a new 37,000 sq ft depot at Norwich in eastern England and a 27,500 sq ft depotin Kidderminster in central England, It has also ordered 300 Mercedes Sprinter vans to replaceolder vehicles. Moreover, City Link won several new contracts in recent months. The Birminghamdepot won two contracts worth a combined £2.5 million while the Bicester depot won a £360,000contract.
