City Link will need to improve account management and customer service if it is to become profitable again, analysts said, following its sale to private equity investor Better Capital.
Experts said the carrier has a better chance of completing its turnaround programme without pressure from former parent Rentokil Initial after suffering five consecutive years of losses.
Frank Proud, director at Apex Insight, told MT: “Completing this turnaround in a more discreet environment of private equity ownership will probably come as a relief to [MD David] Smith and his team, being spared the public pressure to get the job done by every quarterly announcement.”
Mark O’Bornick, director at Analytiqa, said: “Better Capital will provide investment and fresh impetus to the revitalisation of City Link. However, the company needs to improve account management and customer service to ensure its long-term success.”
But Proud said he was unsure what will happen after Better Capital has achieved its aim of turning the company around. “Our question is not so much whether the turnaround can be executed but what happens afterwards. What exit is Better Capital likely to find when it has completed the fix?” he said.
Better backing
Better Capital, which is owned by UK private investor Jon Moulton, bought the parcel carrier for £1. The company said it “collectively thought it was a strong brand” and plans to invest £40m in its operations.
Last week, City Link revealed that it had cut first-quarter losses by more than a third ahead of the sale, posting an £8.1m loss (Q1 2012: £12.7m) in the first three months of 2013.
City Link MD David Smith said it will benefit from the certainty of funding from the Better Capital deal.
