Rentokil expects City Link to deliver at last

[TrueBlueTerrier]

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Parcels business City Link has consistently delivered a hefty loss to the doorstop of Rentokil Initial for the past four years. Today Alan Brown, Rentokil chief executive, claimed the long wait for its turnaround was over.

“We expect a significant improvement in year-on-year financial performance [at City Link] in the second half,” said Brown. Not quite yet, though: Rentokil’s small 1.1% rise in adjusted pre-tax profit to £26.3 million for the three months to April was again hamstrung by still-widening losses at City Link, up 19% to £12.7 million for the quarter.

Brown has blamed City Link’s problems on productivity: unlike rivals, the FTSE 250 firm has traditionally paid its subcontracted deliverers for time spent, rather than deliveries made. Brown has also complained about personnel in the industry, saying “there’s not a lot of talent in this particular sector”. But last year he appointed a new boss and finance director of City Link from rival Parcelforce, and today Brown said: “Performance improved through the quarter as the new management team gained traction.”

The City, however, wasn’t as easily impressed: the shares slipped 4%, or 3.5p, to 83.1p. That’s despite Rentokil’s largest business, textiles and hygiene, posting an 8% rise in operating profit, thanks mainly to strong trading in France, Germany and Benelux.

Elsewhere, more pest-control work in the UK and north America wasn’t enough to stop a 4.4% decline in operating profit at the division to £18.9 million.

Rentokil blamed the decline on slow business in southern Europe. If the debt crisis is making rat control unaffordable, Greece and its fellow struggling nations may have worse problems to come.

[DGP1]

Brown has also complained about personnel in the industry, saying “there’s not a lot of talent in this particular sector”.

But most of them are in management

[Straight4ward]

Brown rather proves his own point about the quality of personnel throughout the industry.

Clearly it starts at the top; as an exercise in how to de-motivate your staff this takes some beating.

If I was a CityLink employee I’d be feeling mightily undervalued right now.