Subbies slashed as City Link plans come-back
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joanna.bourke@rbi.co.uk CITY LINK INTENDS to slash its use of subcontractors after claiming its reliance on them played a large part in the business falling £4m further into the red last year.
Parent company Rentokil Initial says it was disappointed by subsidiary City Link’s performance last year after the parcel delivery irm recorded an operating loss of £9.6m in 2010, compared to a £5.6m loss in 2009. Also, the parcels giant saw revenues fall 5% to £336m.
Subbies will bear the brunt of City Link’s re
covery plan, which includes increasing employed drivers to 75% from 50%, and reducing its reliance on ad-hoc subcontractors to less than 5%.
Rentokil says: “City Link’s overall performance was particularly disappointing. The main issue was that operational management of the business was poor, evidenced by high usage of subcontractors, inadequate contingency planning to deal with extreme conditions, and poor engagement in front-line planning.” Rentokil fell £10m short of its £70m costsaving target and blames this shortfall on “delays in delivery savings arising from the use of subcontractors at City Link” .
John Manners-Bell, research analyst at Trans
port Intelligence, says he is not convinced of the move away from subcontractors.
“You can’t say a subcontractor model is wrong because it tends to work for most express delivery irms, and I’m not sure increasing headcount will lead to a recovery. If you had a good management model in place, then you can make sure you have a quality pool of reliable subcontractors who can cope with peaks and troughs in the business. In City Link’s case I think the management has broken down rather than the subcontractor model,” he says.
A City Link subcontractor concurs: “As an owner-driver for City Link for seven years with an excellent record, someone then decided that the root of its losses seems to be money being paid to owner-drivers. Loyalty to the company is now zero, everyone is demoralised.” Manners-Bell adds that by switching to more full-time and in-house drivers, City Link may ind itself with increased overheads and too many employees when trading is quiet. “It may have been better for the company to look at its subcontractor terms and conditions more carefully, rather than abandon the model almost entirely,” he adds.
The recovery plan is being run by Alan Brown, Rentokil CEO, who assumed day-today management responsibility of City Link, after its MD Stuart Godman resigned in December. Brown says: “City Link’s operational ineficiencies are expected to be addressed by October 2011, but inancial delivery will be weak until then.”