British parcels firm City Link is effectively “up for sale” after its parent company today admittedit would not return to profit this year as previously targeted.
City Link, one of the UK’s major domestic express parcels companies, is owned by RentokilInitial, a broad-based conglomerate with businesses ranging from pest control to cleaning services.The parcels firm has been struggling financially for several years but aimed to break even againthis year through a mix of cost savings and operational improvements.
Rentokil today released a Q3, 2012, trading update showing that City Link increased revenuesby 2.4 per cent to £76.2 million and managed to reduce its operating loss by 19.1 per cent to £5.5million. Over the first nine months of 2012, City Link increased revenues by 3.1 per cent to £225.7million and reduced its operating loss by 2.4 per cent to £24 million.
Alan Brown, Rentokil Initial CEO, stated: “City Link’s operational recovery continued duringQ3 with a 12 per cent year-on-year reduction in cost per delivery. Volume grew 15 per centand operating losses fell by 19 per cent year on year, though both were adversely impacted by lowerthan expected demand during the Olympics. We have also continued to see a reduction in revenue perconsignment as a result of adverse customer mix. The impact of this is now expected to resultin a small loss for Q4.”
However, he told reporters on a conference call that Rentokil is open to takeover offers forCity Link, although the priority remains on the company’s financial turnaround. “If an opportunitycame up which enabled us to exit we would look at that,” he was cited by Bloomberg as saying.
City Link managing director David Smith told investors that the company now expects to makean overall loss of £24 million this year but aimed to break even in 2013 by improving itsperformance, achieving higher prices and continuing to cut costs.
