Rentokil Initial, the support services and pest control group, today issued its third profit warning this year as its troubled parcel delivery business reported a worse-than-expected loss.

Rentokil said today that City Link was now expected to report a full-year loss after stating in February, at the time of its second profit warning, that the parcel delivery group would break even.

The company, which is being run by new management, said that problems with the division during the fourth quarter had run into the first three months of the year, resulting in a £16.9 million loss compared with a £10.2 million profit last year.

Rentokil has been attempting to integrate City Link into Target Express, the company it acquired in 2006.

However, Alan Brown, the chief executive of Rentokil, said: “The return of City Link to its former levels of profitability is likely to take some time.

"I believe this can be achieved by developing integrated information systems, by optimising our hub and depot network and by capitalising on the growth of the UK parcels market.

“I’m not going to give a prediction on when we get back into profitability. I don’t have any anticipated date for that. There are a lot of structural issues which need to be addressed."

Rentokil surprised the City this year when it gave its second profit warning in a little over two months, resulting in both Brian McGowan, the chairman, and Doug Flynn, the chief executive, being ousted.

As well as Mr Brown, former chief financial officer of Imperial Chemical Industries (ICI), joining Rentokil, ICI's former chief executive, John McAdam was named chairman.

Last year City Link reported £417.1 million in revenue and a £19.4 million profit. This contributes towards Rentokil Initial’s overall revenue of £2.2 billion and profit of £252.4 million.

Rentokil said that the first-quarter performance from its remaining five divisions — Textiles and Washroom Services, Pest Control, Ambius, Facilities Services and Asia Pacific — had remained in line with expectations.

The group will give a full first-quarter update on May 2.

In early morning trading, shares in Rentokil rose 1.25p to 96.25p.

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