City Link continues to prove headache for Rentokil with more losses

Efforts by Rentokil Initial to jumpstart the recovery of City Link were under more pressure yesterday following a fresh consignment of losses from the parcels arm.

The pest control and washrooms firm said City Link’s losses were nearly £25m in the first nine months of 2011, including £6.8m in the most recent quarter due to “extremely competitive” market conditions and the loss of business in a disastrous 2010. It is confident of an improved City Link performance in the current quarter but shares dropped 5 per cent as analysts expressed frustration at the pace of the turnaround.

Numis Securities analyst Mike Murphy said: “Given their wretched forecasting for this division, investors would be forgiven for waiting for the promised package to arrive.”

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Outside of City Link, trading in the quarter was broadly in line with expectations, although Rentokil downgraded forecasts for cost savings this year to between £50m and £55m, from £60m previously.

It admitted more work was needed on improving productivity at City Link but said revenues projections for the arm were much better for this quarter and 2012.

Rentokil said: “While the market remained extremely competitive, we are particularly encouraged by the strength of the new business pipeline.”