Alan Brown, the new chief executive of Rentokil, rejected calls last night for the parcels and pest control group to be broken up, after the company issued another profits warning for its City Link business.

The company warned investors that it now expects its troubled parcel delivery unit to make a “significant full year loss,” far worse than previous guidance that it “may not trade better than breakeven”.

Analysts and shareholders have for some time called on the company to end its days as a conglomerate and sell underperforming business units, with the parcel delivery business the main target.

Mr Brown, however, said he had no plans to dispose of City Link, or any of the company’s other units, and had not been approached by interested parties.

“I’m increasingly of the view that the company is not a conglomerate,” he said, adding that there was value in Rentokil as a whole, with strong customer service and sales themes running through all its businesses.

Mr Brown has spent the weeks since his appointment getting to grips with City Link, which has struggled to integrate Target Express after it bought it two years ago, sparking a flurry of profit warnings.

City Link is now expected to report an operating loss of £16.9 million for the first quarter of 2008. First quarter revenues for the unit are down 11 per cent and the company now expects the unit to report a full-year loss of between £20 million and £70 million.

Mr Brown said that Rentokil had started a programme to get the business back on track, with a “significant level of profitability in three to five years”. He said the company would reduce its number of depots to cut costs.

Despite acknowledging that the company faced a “whole series of problems” Mr Brown said he was more excited than ever about the task in hand and that he saw “significant potential for improvement” in all parts of the business.

The company said all its other units were trading in line with expectations.

Analysts said the recovery of the parcels business was likely to take too long for many of the company’s larger shareholders, and that a sale of the unit was still likely.

Kevin Lapwood, an analyst at Seymour Pierce, said the only way management could restore value to the company in the next couple of years was to sell off units such as City Link and its pest control business.

He expects City Link to be sold next year and for the company to consist eventually of just its washroom and cleaning businesses. He doubted whether shareholders would give Mr Brown the three years he says he needs to turn the business around.

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

As well as Mr Brown, the former chief financial officer of ICI, joining Rentokil, ICI’s former chief executive, John McAdam, was named as chairman.

Investors, who have warmed to the new management team, shrugged off the warning, pushing Rentokil shares up 2½ to 97½

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