The City Link parcel delivery business has become the albatross around the neck of Rentokil.
"We've got two stories," said Rentokil chief executive Alan Brown today. "We're seeing increasing momentum in our pest, hygiene, textiles and facilities management businesses but there's a big but: City Link has continued to disappoint."
An average 4% growth in revenues across the first four parts of Rentokil gave its board enough confidence to reinstitute the dividend for 2012, with a final payout of 1.33p. However, pre-tax profit last year fell 4.1% to £184.4 million, almost entirely because of a slump at the parcels business. Rentokil today wrote off £146 million at City Link, on top off a £95 million goodwill write down last year.
"There's a major issue with productivity," Brown said of City Link. "There's a gap of about 70p for every delivery we're making compared to that of the best in the business. That adds up to a lot of money on 50 million deliveries across Europe in a year."
He blamed the problem on the way Rentokil pays its subcontracted deliverers, who make up about 40% of its total. "We've tended to pay them for time spent, rather than deliveries made. Now we're moving to paying for work done," he said.
Brown added that the slow progress was due to "deep-seated management problems" and said: "It was difficult to sort out because there's not a lot of talent in this particular sector."
Brown appointed a new boss and finance director of CityLink from rival Parcelforce, and expects better results in the second half of this year.
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