Rentokil suffers more City Link woe

[TrueBlueTerrier]

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Efforts by Rentokil Initial to jumpstart the recovery of City Link are under more pressure following a fresh consignment of losses from the parcels arm.

The pest control and washrooms firm said City Link's losses were nearly £25 million in the first nine months of 2011, including £6.8 million in the most recent quarter due to "extremely competitive" market conditions and the loss of business in a disastrous 2010.

It is confident of an improved City Link performance in the current quarter but shares dropped 5% as analysts expressed frustration at the pace of the turnaround.

Numis Securities analyst Mike Murphy said: "Given their wretched forecasting for this division, investors would be forgiven for waiting for the promised package to arrive."

Outside of City Link, trading in the quarter was broadly in line with expectations, although Rentokil downgraded forecasts for cost savings this year to between £50 million and £55 million, from £60 million previously.

It admitted more work was needed on improving productivity at City Link but said revenues projections for the arm were much better for this quarter and 2012.

Rentokil said: "While the market remained extremely competitive, we are particularly encouraged by the strength of the new business pipeline and by the conversion of approximately £25 million of leads into new customers."

However, price cutting meant revenues per consignment declined by 3.5% in the third quarter and revenues dipped 8% to £74.4 million.

This was offset by profits growth in textiles and pest control, despite tough market conditions. Overall profits were 13.3% lower at £36 million in the quarter.

Investec Securities cut its full-year profits forecast by £10 million to £188 million following the trading update.

[DGP1]

If this tells us anything it is you can't just cut costs and hope the business will survive, everyone is trying to undercut everyone else which will only lead to most going bust and only 1 or 2 mega companies controlling all the business and them charging people even more.

[jaymarriott]

If they didn't treat thier staff like dirt and pay them peanuts, they'd get more out of them, I spent two years with them.

[DGP1]

If they didn't treat thier staff like dirt and pay them peanuts, they'd get more out of them, I spent two years with them.

I think you'll find that that is standard operating procedure for all the modern business 'leaders' ..........which is why we lag behind the countries that do treat their staff well (Germany springs to mind).