City Link losses blamed on management

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City Link parent Rentokil Initial has blamed the parcel carrier’s worsening losses on poor operational management.

The  carrier made an operating loss of £9.6m last year –  £4m worse than the corresponding loss in 2009 on sales which were five per cent down at £335.5m.

In its preliminary statement, Rentokil Initial said: “The principal issue was that operational management of the business was poor, evidenced by high usage of subcontractors, inadequate contingency planning to deal with extreme conditions and poor engagement of front line colleagues.

“Significant management change has taken place and a detailed operating plan is now being pursued which should deliver substantial operational improvement prior to the Christmas seasonal peak.”

Like other carriers City Link was hit by the snow in the run up to Christmas, and the group said this resulted in lower levels of productivity and higher delivery costs, with an estimated in year impact of £4m.

Rentokil Initial said the UK parcels industry continued to be competitive during 2010 with price cutting a continuing market dynamic. “However, pricing pressure softened slightly on 2009, with revenue per consignment declining by 3.3 per cent (2009: 4.5 per cent). Parcel volumes were down 1.8 per cent on 2009. Service levels throughout 2010 were generally above 98.5 per cent.”
Alan Brown, chief executive of Rentokil Initial, said: City Link’s operational inefficiencies are expected to be addressed by October 2011 but financial delivery will be weak until then.”

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