Cost cuts lessen City Link pain

Rentokil Initial has said half-year losses at its troubled City Link delivery arm narrowed to £7 million

Rentokil Initial has said half-year losses at its troubled City Link delivery arm narrowed to £7 million after a cost-cutting drive.

The division, which posted a loss of £27.9 million in the same period a year earlier, has axed one-fifth of its staff and reduced depot numbers from 97 to 90 as part of an efficiency programme over the past year.

Across the group, which also has operations in textiles, washroom and pest control, profits rose 14.6% to £55.1 million.

This was due to favourable currency rates and Rentokil admitted it still had work to do after half-year revenues fell 2.2% to £1.26 billion and underlying profits declined 14.6%.

However, chief executive Alan Brown said he was pleased with the company's performance against measures such as improved customer service.

He plans to outline his strategy on sales and marketing initiatives later in the year.

In terms of the outlook for the rest of 2009, Mr Brown said he was confident of delivering improved profits in the third and fourth quarters.

Rentokil said a new UK management team had stabilised the pest control business after an improved second quarter performance.

Economic conditions impacted on the business in the UK, but Rentokil said the division had also been guilty of "inadequate focus" on customers and on competitor activity over an extended period of time.

A six-point turnaround programme has been put in place, with an emphasis on customer service and investment in training and development.