Rentokil’s postal business fails to deliver

Rentokil’s core pest control business helped it beat analysts’ expectations with profits of £191 million last year, despite further losses at its parcel delivery arm.

Its City Link postal business benefited from the boom in online shopping but still racked up losses of £26.4m against £31.3m a year earlier.

The group blamed 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. Rentokil has been trying to revive City Link for a number of years and a recent productivity drive by a new management team has succeeded in cutting costs per delivery fell by 13 per cent.

However, analysts remained sceptical that Rentokil could get City Link to break even this year, as planned.

But the wider group saw pre-tax profits grow 3.6 per cent, or 10.1 per cent on a constant currency basis, as its US pest control business grew through acquisition and opened more offices.

It also achieved £59m of cost savings in 2012 through a combination of restructuring, procurement, service productivity and back office rationalisation, £9m more than it targeted.

Chief executive Alan Brown said the firm finished the year strongly, with profits up 15.9 per cent in the final quarter.

“These results were broad based, with every division improving both revenue and profit,” he added.