UK parcels operator City Link returned to the black in the final quarter of 2009 for the firsttime in nearly two years after heavy cost-cutting, helping parent group Rentokil Initial to
increase profits last year.In the October-December 2009 quarter, City Link increased revenues by 3.8% to £100.9 millionwhile its adjusted operating result improved to a small profit of £2.7 million from a £4 millionloss in Q4, 2008.
For 2009 as a whole, the parcels company saw revenues drop 7.5% to £353.1 million while itsoperating loss was reduced dramatically by 87% to £5.6 million from £43.5 million in 2008.
The results improvement was driven by cost savings of £54 million in 2009, with the number ofdepots cut from 97 to 84 by year-end. Vehicle fleet numbers were reduced by a third and totalemployee numbers were cut by 16% to below 5,500, Rentokil Initial stated in its 2009 results.
City Link’s full-year revenue decline was due to difficult economic conditions, pricingcompetition and the full year effect of poor service in 2008. Volumes were down 3.1% on 2008 andrevenue per consignment (RPC) weakened by 4.5% on the prior year. However, Q4 revenue was 19%higher than Q3 reflecting the seasonal sales uplift, and 3.8% ahead of Q4 2008, with particularlystrong growth in the B2C business.
Rentokil Initial CEO Alan Brown played down the prospect of selling the parcel company, theFinancial Times reported. “If someone comes to us and puts a large amount of money on the table, I’d be running to grab it pretty quickly,” he commented. “But who’s going to buy it (City Link)?”
In its 2009 results, Rentokil Initial said: “City Link’s customer base has been broadlyconsistent throughout the year although many are trading at lower levels. The market has beenextremely competitive during 2009 with severe price cutting by competitors in order to drivevolumes through their networks.” But customer service remained consistently above the 98.5% targetand the restoration of customer call handling at depots was completed early in the year.
The successful roll-out of new hand-held scanners and an upgraded route scheduling tool hasunderpinned improved productivity and customer service, Rentokil Initial said. The functionality ofthe new scanners has been expanded to allow delivery drivers to capture real-time customers’ doorand parcel images.
City Link will focus on further cost reductions of some £25 million this year through itsongoing depot and hub rationalisation programme. It is due to migrate from two national hubs to oneby the end of H1, 2010.
The Rentokil Initial group, which covers a wide range of industries and businesses, had revenuesof £2.5 billion in 2009, down 2.2% at constant exchange rates, but its adjusted pre-tax profit rose29.8% to £166.5 million.
