City Link cuts losses and plans new services

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A strong fourth quarter performance helped City Link cut its losses by almost 16 per cent for the year on sales up 4.8 per cent. The company now plans to expand its range of products with international and postal services.

City Link lost £31.3m in 2011 and last year management launched a comprehensive recovery plan. By the fourth quarter of 2012, the quarterly operating loss had been reduced from 2011’s £6.7m to £2.4m. As a result, the operating loss for the year fell to £24.6m.

The improvement has been driven by productivity savings and cost reductions. While revenue was up 4.8 per cent, this has been driven primarily from growth in online shopping in 2012.

Parent company Rentokil Initial said this has skewed the business’s customer mix towards the larger, but lower margin, Tier 1 customers leading to an overall decline in revenue per consignment of ten per cent.

“While new business was in line with expectations, declines in the smaller, higher margin Tier 2 B2B business was disappointing. A focus on further improvements in account management and customer service is underway to better meet customer requirements and drive retention.”

Productivity savings led to the direct cost per consignment falling by 13 per cent.

“While we have been pleased with the cost savings and the growth in Tier 1 business, the disappointing performance of higher-margin smaller customers has meant that financial performance in the year was behind our initial expectations,” the group said.

City Link expects the B2C market to continue to grow while the B2B market remains more susceptible to economic conditions.

“Focus for 2013 will be on improving service and account management for all customers with a particular emphasis on Tier 2 and Tier 3 customer retention. Price increases will be implemented across our customer base reflecting our value in the market.”

Rentokil Initial reported group sales of £2.61bn, up 2.8 per cent on 2011. Adjusted operating profit rose 5.1 per cent to £236.1m.



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