Major British parcels carrier City Link dropped further into the red in the first half of this yearbut is hoping for better business this autumn thanks to cost savings and new customer initiatives.
The operator made an adjusted operating loss of £17.8 million in the first half-year comparedto £4.7 million in the first half of 2010, with a Q2 operating loss of £7.1 million compared to theprevious year’s £0.3 million, parent group Rentokil Initial announced in its interim results toJune 30, 2011.
City Link saw its revenues slump by 13.5 per cent to £144.5 million between January and June2010, including a 13.6 per cent decline in the April – June second quarter. Volumes dropped 9.9 percent in the first half-year. Business was impacted by lower volumes as a result of customer lossesin 2010 and additional costs incurred in January in order to recover from heavy snow in lateDecember.
Group CEO Alan Brown, currently heading the parcels business on an interim basis, said: “CityLink has made considerable progress in operational and customer care systems and although itsfinancial performance remains unsatisfactory, trading has been stable since February.” He added:“In City Link, I am encouraged by our strong operational progress and the new business pipeline,the combination of which should lead to improved year-on-year performance in Q4 though the fullimpact of our initiatives is unlikely to be felt this year.”
“The UK parcels industry continues to be extremely competitive in 2011 and trading conditionsremain challenging. Price cutting is a continuing market dynamic and our revenue per consignmentdeclined by 4.0 per cent,” the group commented. More positively, the group said that City Link’s H1service levels were generally above 99 per cent, apart from in January, when service was impactedfollowing the period of heavy snow in the run up to Christmas.
Outlining the latest status of the City Link turnaround, Rentokil Initial said that theparcels firm had targeted profitable growth in the four key areas of healthcare, technology, mediaand retail/online. It had now stabilised its customer base and was developing new customerinitiatives. City Link is on track to deliver an Estimated Time of Arrival (“ETA”) offering tocustomers in Q3 and successfully delivered the ‘My City Link’ initiative to customers in Q2.
In addition, good progress had been made in recruiting employed drivers, who now represent 67per cent of all routes operated, in order to reduce reliance on subcontractors. The target of 75per cent employed drivers would be reached before the end of Q3.
The implementation of a depot blueprint will provide a consistent approach to operationsacross the network and further cost savings, the group said. The head office in Camberley wasclosed in Q1 and the business support centre in Newton is scheduled for closure in October withcombined annualised savings of £1.2m. In future, all sites will be primarily operational withadministration functions being co-located.
The company is also working on contingency planning for periods of peak trading as well asdevelopment of early warning systems and pre-determined guidelines for dealing with severedisruption (such as those experienced at the end of 2010). City Link will gain new management laterthis year with the arrival of David Smith as Managing Director and Robert Peto as Finance Director,both joining from Royal Mail.
