Troubled Coventry firm City Link sold for £1

[dutchman]

Coventry parcel delivery firm City Link has been sold for just £1 – after the company reported five years of ‘substantial losses’.



Pest control and washrooms company Rentokil Initial has offloaded the struggling business to restructuring specialist Better Capital.

Bosses at the firm announced the deal yesterday even though they claimed the business has ‘now turned the corner’.

City Link has been based at Siskin Parkway West in Baginton, since 2006 after Rentokil acquired it as part of a takeover of Target Express.

The firm - sponsors of Coventry City for the past three seasons- reported losses of £31million in 2011 and £26m last year, with the first three months of this year seeing a reduced loss of £8.1m.

Despite the boom in internet shopping, City Link has been impacted by weaker demand from higher margin small business customers.

Better Capital, whose other recent investments have included fashion business Jaeger and double-glazing firm Everest, will invest £40m in City Link in a bid to complete the turnaround.

Chief executive Alan Brown said City Link, which will continue to be run by its existing management team, had found a “very committed investor” in Better Capital.

Despite progress over the last two quarters, he said it was the right time to offload the business so Rentokil can focus on its operations in pest control, hygiene and workwear.

Mr Brown added: “I believe City Link has now turned the corner after five years of substantial losses.

“There is strong growth in the B2C parcels market, it now has a great management team and we have found a very committed investor in Better Capital.

“From Rentokil Initial’s perspective, we have decided to divest of City Link at this stage of the turnaround so that we can concentrate on our core international service businesses in pest control, hygiene and workwear.

“The sale positions Rentokil Initial as a stronger and more focused group.”

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.

City Link’s costs per delivery fell by 13 per cent during 2012, while volumes were 17 per cent higher.

Managing director of City Link Dave Smith said: “This is great news for our customers and our colleagues. We will all benefit from the expertise of Better in business turnaround and from the certainty of funding the deal provides.”

Rentokil’s shares opened 7 per cent higher yesterday.