Alan Brown, the new chief executive of Rentokil Initial, vowed last night to retain City Link, the group’s troubled parcel delivery business, despite receiving “numerous offers,” even after the subsidiary’s poor performance forced the company to cut its dividend.

Mr Brown said the pest control to tropical plants conglomerate’s current dividend of 7.38p per share for 2007 would not be supportable, based on 2008’s performance and that there would “clearly be a substantial reduction.” The company’s board will meet in August to decide how much. His comments came after the company, which has been under new management since March, said that operating profit nearly halved to £28.7 million in the first quarter due to a £15.4 million loss at City Link.

Rentokil is struggling to turn around the parcels unit after the botched merger of City Link with Target Express, and gave warning in April of heavy losses for the quarter and the rest of the year.

Mr Brown revealed that he had received numerous offers to “take City Link off our hands” but that none of them had appealed to the company and it was not looking for a sale. “There is lots of private equity interested in everything that moves and doesn’t move,” he said. Mr Brown also hit out at those calling for the break up of the company, saying that he did not believe “any informed observer was advocating a break up”.

He said he was pleased with the progress the company was making at improving its customer service levels and he would spend the bank holiday in Australia trying to resolve such issues.

“We have broken the back of the operational problems but there is still a long route back,” he added.

“Our weakness is in functional capability and the bottom line is not satisfactory,” he added.

Mr Brown has a three to five-year programme to return the company to “significant profitability” and yesterday said that he and his team were dedicated to delivering a return to shareholders.First-quarter profits across the group were disappointing, coming in below analysts’ expectations.

Kevin Lapwood, an analyst at Seymour Pierce, said there was clearly never going to be any good news from the group’s first quarter and that its business model was “passed its time.”

“We knew about City Link but we’re disappointed with the rest of the divisions, which came in 10 per cent lower than we expected,” he said.

“They will get growth only if they acquire other businesses and I don’t think they have a mandate to do that. The only option is a partial break up.”

The company’s shares, however, closed up 2.12 per cent, or 2p, at 96½p, as results were not as bad as expected and because new management is starting to turn things around.

Rentokil’s new management team was offered nearly £100 million in bonuses should they turn around the ailing business over five years.

The team was responsible for improving the fortunes of ICI, the paint maker.

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