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
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
Lane Del Rey performing on the Pyramid Stage at Glastonbury 2014
people... but none of them helped me get a record deal, insists Lana Del Rey
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
Arts and Entertainment
British author Howard Jacobson has been long-listed for the Man Booker Prize
Life and Style
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Louis van Gaal watches over Nani
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
New Real Madrid signing James Rodríguez with club president Florentino Perez
transfersColombian World Cup star completes £63m move to Spain
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

Business Analyst - Banking - Scotland - £380-£480

£380 - £480 per day: Orgtel: Business Analyst - Banking - Edinburgh - £380 - ...

Risk Analyst - (Multi Asset class) £70k - £80k

£70000 - £80000 per annum: Harrington Starr: My client is a leading financial ...

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn