City Link failing to deliver for Rentokil

Pest controller is held back as parcels arm has 'major issue with productivity'

The City Link parcel delivery business has become the albatross around the neck of Rentokil Initial– and even the Queen's pest controller is struggling to neutralise it.

"We've got two stories," said Alan Brown, Rentokil's chief executive, yesterday. "We're seeing increasing momentum in our pest, hygiene, textiles and facilities management businesses but there's a big but: City Link has continued to disappoint."

An average 4 per cent growth in revenues across the first four parts of Rentokil gave its board enough confidence to reinstate the dividend for 2012, with a final payout of 1.33p. However, pre-tax profit last year fell 4.1 per cent to £184.4m, almost entirely because of a slump at the parcels business. Rentokil yesterday wrote off £146m at City Link, on top off a £95m goodwill writedown last year.

"There's a major issue with productivity," Mr Brown said of City Link. "There's a gap of about 70p for every delivery we're making compared to that of the best in the business. That adds up to a lot of money on 50 million deliveries across Europe in a year."

He blamed the problem on the way Rentokil pays its subcontracted deliverers, who make up about 40 per cent of its total. "We've tended to pay them for time spent, rather than deliveries made. Now we're moving to paying for work done," he said.

Putting the slow progress down to "deep-seated management problems", he added: "It was difficult to sort out because there's not a lot of talent in this particular sector."

Mr Brown appointed a new boss and finance director of City Link from rival Parcelforce, and expects better results in the second half of this year. He dismissed talk of selling the division, saying: "We're quite committed to fixing it."

Rentokil's rat-catching business still hopes to return to doing business in Libya soon. The company spent the two years before 2011's revolution working on a major contract for Colonel Gaddafi to rid rats from the streets of Tripoli and Benghazi.

"We're having good discussions with the authorities there, and I hope we're able to progressively raise our presence in Libya again," said Mr Brown. "The rats had a field day when we were out of the country – there is an epidemic there that needs to be resolved. But we don't want to move in until we are sure we can get paid."

Rentokil is also planning on expanding throughout the Middle East, particularly Dubai, Abu Dhabi and Saudi Arabia, and Mr Brown said he hoped to do so via acquisitions.

Over the past three years when a dividend was not paid, Rentokil bought a string of businesses, including pest control companies National Britannia Turkey and Tetengo, a major bedbug killer in Mexico.

Shares in Rentokil plunged 6 per cent or 4.45p to 76p as analysts digested the latest setback in City Link's turnaround plan and slashed forecasts.

Investec cut its profits forecast for the group in the current financial year by £20m to £200m, and by £25m to £225m the year after.

Suggested Topics
Sport
Raheem Sterling and Luis Suarez celebrate during Liverpool's game with Norwich
football Another hurdle is out of the way for Brendan Rodgers' side
Life & Style
The writer, Gerda Saunders, with her mother, who also suffered with dementia before her death
healthGerda Saunders on the most formidable effect of her dementia
Sport
Manchester United manager David Moyes looks on during his side's defeat to Everton
footballBaines and Mirallas score against United as Everton keep alive hopes of a top-four finish
News
With its new studios in Paris, Dailymotion has reinforced its position as Europe’s most-visited website
mediaEuropean rival Dailymotion certainly thinks so
VIDEO
Arts & Entertainment
The original design with Charles' face clearly visible, which is on display around the capital
arts + ents The ad shows Prince Charles attired for his coronation in a crown and fur mantle with his mouth covered by a criss-cross of white duct tape
Arts & Entertainment
‘Self-Portrait Worshipping Christ’ (c943-57) by St Dunstan
books How British artists perfected the art of the self-portrait
Sport
Luis Suarez celebrates after scoring in Liverpool's 3-2 win over Norwich
Football Vine shows Suarez writhing in pain before launching counter attack
News
People White House officials refuse to make comment on 275,000 signatures that want Justin Bieber's US visa revoked
News
Sir Cliff Richard is to release his hundredth album at age 72
PEOPLE
Sport
Lukas Podolski celebrates one of his two goals in Arsenal's win over Hull
football
Arts & Entertainment
Quentin Tarantino, director
film
News
The speeding train nearly hit this US politican during a lecture on rail safety
news As the saying goes, you have to practice what you preach
Sport
Mercedes Formula One driver Lewis Hamilton of Britain (front) drives ahead of Red Bull Formula One driver Daniel Ricciardo of Australia during the Chinese F1 Grand Prix at the Shanghai International circuit
sport
Arts & Entertainment
Billie Jean King, who won the women’s Wimbledon title in 1967, when the first colour pictures were broadcast
tv
News
Snow has no plans to step back or reduce his workload
mediaIt's 25 years since Jon Snow first presented Channel 4 News, and his drive shows no sign of diminishing
Life & Style
food + drinkWhat’s not to like?
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
Ben Stokes: 'Punching lockers isn't way forward'

Ben Stokes: 'Punching lockers isn't way forward'

The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
Mark Johnston: First £1 million jackpot spurs him on

Mark Johnston: First £1 million jackpot spurs him on

The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit