Losses escalated at major British parcels company City Link in the first quarter of this yeardue to customer losses, lower prices and higher operating costs but the firm is making “strong
progress” with its latest restructuring plans, according to parent company Rentokil Initial.City Link, one of Britain’s leading B2B parcel companies, saw its operating loss more thandouble to £10.7 million from £4.4 million in Q1, 2010, while its revenues declined by 13.4% to£72.3 million, Rentokil Initial announced as part of its first-quarter group results.
The operation was impacted by lower customer volumes in Q1 and by additional costs incurred inJanuary in order to recover from the heavy snow conditions in late December. Parcel volumes weredown 10% on the prior year as a result of customer losses in 2010 and a weaker economic climate,the group stated. But it added: “Customer retention in Q1 was good and the pipeline of new businessopportunities is promising.”
The UK parcels industry remained “extremely competitive” into 2011 with price-cutting acontinuing market dynamic, resulting in a 3.5% fall in the company’s revenue per consignment.Service levels in Q1 were generally above 99%, apart from in January, when service levels wereimpacted following the period of heavy snow in the run up to Christmas.
Alan Brown, Chief Executive Officer of Rentokil Initial plc, commented: “The UK parcels marketwas particularly challenging during Q1. City Link will continue to deliver poor financialperformance in Q2, but I anticipate an improvement in Q3 based on strong operational progress sinceFebruary, plus major improvements in information technology and customer care. Together, these aredriving a differentiated position for City Link in the UK market. This has resulted in a promisingnew business pipeline which is anticipated to come on stream in late Q2 and early Q3.”
City Link has made “strong progress” in addressing the operational weakness that impacted the2010 results, Rentokil Initial said. A detailed operating plan for all parts of the business hadbeen established to address the operating cost base, customer care agenda and IT. The usage ofsubcontractors had fallen and further decreases were planned for Q2. “The business is well placedto deliver the planned operating improvements ahead of the peak Christmas trading period,” thegroup added.
