Rentokil reports good progress

PEST control firm Rentokil Initial hailed a return to profit at its troubled City Link delivery arm for the first time in more than two years.

Problems at the parcels business compounded by a dire economic backdrop prompted a slew of profit warnings from Rentokil but the division posted an operating profit of 2.7m for the final quarter of 2009.

While City Link was loss-making for the year as a whole, management have taken drastic action to cut 54m in costs - slashing staff by nearly a fifth to below 5,500 and cutting its vehicle fleet by a third.

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City Link tried to expand too quickly through acquisitions and buying up former franchises, but unsettled customers by centralising account handling processes and was hit by the credit crunch in 2007.

Following an overhaul of the business - including a well-received move to restore client handling to depots - the group is seeing far higher levels of customer satisfaction despite disruption from recent heavy snow.

However revenues for 2009 were 7.5 per cent down despite the return to profit amid fierce competition and lower demand due to the recession.

The other underperforming divisions in the group, its washrooms and pest control businesses in Australia and the UK, also showed "good progress", Rentokil added

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Across the overall group, underlying pre-tax profits rose 30 per cent to 166.5m as the group earmarked another 75m in cost savings for 2010. Revenues fell 2.2 per cent to 2.53bn.

Chief executive Alan Brown - part of a team of former ICI bosses drafted in to revive Rentokil - said he saw "no easing" in economic conditions across most markets this year but was aiming for "modest growth".

"Above all in 2010 we intend to lay the foundation for profitable growth in 2011 and beyond," Mr Brown added.

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