Rentokil favours MBO for City Link

Heavily indebted Rentokil Initial is working to spin-off its loss-making City Link business by the end of the year, according to reports in The Telegraph.

City Link, its parcel delivery service has been a drain on the company for a number of years. However, this division turns over £88m a year and Rentokil is said to favour a management buyout. This would avoid the costs of closing it down.

In the company's most recent market update in August, Chief Executive Alan Brown said City Link should be profitable by the end of the year.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

"City Link's recovery plan is progressing in line with expectations, both in terms of financial performance and underlying action plan. We expect losses to reduce further in Q3 and for the business to be profitable in Q4."

As of June 30th 2012, the group had net debts of £960m (2011: £1024.6m) with operating cash flow of £20.8m (2011: £24.5m).

CM