Back to rat-catching after delivering City Link result

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More proof that a bad business invariably beats good managers.

Rentokil boss Alan Brown has been grappling with City Link ever since he climbed into the cab of the rat-catching group in March 2008. “It’s turning the corner” was his catchphrase for the accident-prone parcel delivery wing – just before it reversed into another wall.
Well, at least it’s turned a corner now – right out of the Rentokil portfolio for the princely sum of £1, with more than £300m of writedowns and losses blasting out the exhaust.

For this, no one can blame Brown. City Link was what he described as his one “Premier League” problem when he was parachuted in from ICI to fix Rentokil. The big mistake was made by Brown’s predecessor, former advertising chief Doug Flynn, who splurged £210m on a rival to City Link called Target Express.

The idea was to put the two together. But the experience proved why some deals are much harder than they look. Both businesses delivered parcels, but that’s where the similarities ended – as Flynn found to his cost with the two profit warnings that cost him his job.
City Link, with its 70 depots, was a franchise business. So first, Rentokil had to bring the franchises in-house. Then it had to integrate 70 different computer systems with the ones just acquired from the 40 depot-strong Target Express. Getting them to talk to each other, said Brown, was like “the Tower of Babel”.

Worse followed. Not only were there far too many depots, but some were too small for the volume of consignments they needed to handle to make the acquisition work. Take Newcastle, where 75 trucks turned up at 8am every morning trying to collect 100 parcels each from a site “smaller than a football pitch”. Five years on, the number of depots is down to 63 and the perennially loss-making City Link is finally in shape to be sold – to Jon Moulton’s Better Capital.

A nominal £1 is no return for Brown’s efforts. But the alternative was an even bigger bill for closing City Link down. And at least he can now go back to the rat-catching.