City Link parent Rentokil Initial is optimistic the troubled parcel carrier is on the road to recovery despite its latest results showing losses increased in the first three months of the year.

In his statement to the market, Rentokil Initial CEO Alan Brown, says City Link losses were higher than the previous year but that performance of the business improved through the first quarter as its new management team started to implement their plans. Brown adds: "We expect a significant improvement in year-on-year financial performance in the second half [of 2012]."

City Link posted a £12.7m loss for the three months up to 31 March, an 18.7% increase in losses compared to Q1 2011. One-off losses linked to the reorganisation of the business totalled £1.9m. At £73.5m, turnover at City Link rose 1.7% from the same three months a year ago.

The losses come on top of a £31.3m operating loss in 2011 and the recruitment of a new management team led by former Royal Mail chief customer officer David Smith. A three-year strategy to turn the business around, launched in March , will see it streamline its depot network to around 60 by 2013.

To that end, City Link reveals it is to merge operations at two depots in Chelmsford, Essex, into a new state-of-the-art facility in the town. The new 72,000ft² depot in Atholl Road is twice the size of the existing Chelmsford operations combined, and is large enough to offer dedicated parking for trunking vehicles.

Mark O'Bornick, director of research and analysis at Analytiqa, says the results were expected and that the new management team hadn't been in long enough yet to be judged: "They have to be given some time to introduce new ideas and concepts. The company line is that they are progressing well and giving them until the second half of the year is fair enough."

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