City Link cuts losses as recovery plan takes off

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City Link’s recovery plan is on track to show material improvements in the third quarter of the year, parent company Initial Rentokil said in its half year report.

Sales at City Link were up 3.5 per cent at £149.5m in the first half. The operating loss of £18.5m was an 3.9 per cent improvement on the second quarter of last year.

Rentokil Initial chief Alan Brown said: “We expect losses to reduce further in Q3 and for the business to be profitable in Q4.”

A new management team began implementation of the recovery plan in the first half targeting productivity savings primarily through driver productivity, supported by route and round optimisation and a move to variable pay for owner drivers. There are also initiatives to reduce trunking, warehouse operations and back office costs.

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“Implementation is on track, with substantial productivity improvements being delivered as roll-out progresses. Hub and line haul efficiencies have improved during the period with a full route re-design scheduled for completion in Q3. The depot network continues to be consolidated with a reduction of three sites in the first half. Investment in improved scanning technology is being made to drive further quality improvement,” the group said.

Traffic volume has increased by 14 per cent on the prior year, but change in customer mix led to revenue increasing by only 3.5 per cent in the first half.

Rentokil Initial saw operating profit fall 6.3 per cent to £87.3m on sales up 0.6 per cent to £1.26bn.

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