Olympic Games hits City Link profit

City Link's profit and volumes suffered as it fell victim to lower than expected demand during the Olympic Games.

The parcel firm posted a turnover of £76.2m for the three months ending 30 September, a 2.4% increase on the same period in 2011. It is the first time City Link has reported year-on-year growth in the last five years, Managing Director Dave Smith said.

It made an adjusted operating loss of £5.5m in the third quarter, a 19.1% rise on Q3 2011 losses of £6.8m.

For the nine months ended 30 September, City Link's turnover was £225.7m, a rise of 3.1% on the same period last year.

Adjusted operating losses rose 2.4%  compared to the same nine month period in 2011. It saw a loss of £24m.

Alan Brown, chief executive of parent company Rentokil Initial, said: “City Link’s operational recovery continued during Q3 with a 12% year-on-year reduction in cost per delivery. Volume grew 15% and operating losses fell by 19% year-on-year, though both were adversely impacted by lower than expected demand during the Olympics.

“We have continued to see a reduction in revenue per consignment as a result of adverse customer mix. The impact of this is now expected to result in a small loss for Q4.”

Financial director Rob Peto told investors today (9 November) that City Link is looking to improve its volume mix as it moves into 2013 to boost turnover. He claimed City Link was "too reliant" on its domestic service, which account for 80% of its business. It hopes to expand its international operations in 2013, which currently form less than 5% of its volume mix.

MD Dave Smith said: "To get back to breaking even, the change of mix is important."

Smith also said it was aiming to add £30m of additional turnover next year through improving its customer and product mix. It is also looking to reduce costs by £10m after absorbing the volumes it plans to take in.

"We are looking at every single customer and ensuring we are making an effective and appropriate margin," Smith told investors.

Peto also revealed that the parcel carrier had won an unspecified number of contracts with tier one clients (identified as companies with £250m-plus annual turnover) throughout the year, including a B2C win during Q2.