No return to profit yet for City Link

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Parcel delivery firm City Link was still searching for a return to profit yesterday, despite benefiting from the boom in online shopping.

The business, which is part of pest control and washrooms firm Rentokil Initial, recorded a loss of £2.4m for the final quarter of the year, having told the City this summer that it would be profitable by now.

This forecast was revised in November, with Rentokil yesterday blaming weaker demand from higher margin small business customers for its failure to fully benefit from a pick-up in deliveries on behalf of major retailers.

Across 2012, City Link made a loss of £26.4m against £31.3m a year earlier but Rentokil’s shares were sharply higher yesterday after a better-than-expected 10 per cent rise in group profits to £191.1m.

After a number of false starts in recent years, Rentokil’s bid to revive City Link has benefited from a new management team’s push to improve driver productivity, supported by better route handling. It said that City Link’s costs per delivery fell by 13 per cent over the year, while volumes were 17 per cent higher.

The company warned that it planned price increases across its customer base this year and said efforts to retain more profitable smaller customers was a “key priority” for this year.

Rentokil’s performance in textiles and hygiene was impacted by economic conditions in northern Europe, although revenues for the fourth quarter still rose 1.4 per cent to £227.7m and profits by 2 per cent to £41.4m. A weak summer season failed to prevent the UK pest control business growing turnover by 2.4 per cent last year.