City Link’s Christmas collapse brought no cheer. Jon Moulton, whose firm, Better Capital, owned the next-day courier business, gives his take on the ultimately doomed turnaround.
It’s been a very difficult start to 2015. My firm, having invested £40m, expects to recover £20m from the insolvency of City Link. Many people lost their jobs.
Its suppliers suffered bad debts. And it all happened at Christmas. Misery. We, at Better Capital, were demonised for trying to rescue a business and failing. I got to face a very predictable media onslaught, which was conducted with no great concern for accuracy.
The facts were that Better Capital paid £1 for a business, which had defeated its previous owner, Rentokil, and cost them in the hundreds of millions. It could have been better managed, but it was not badly managed in Better Capital’s ownership.
The big issue was lousy pricing in a fiercely competitive market, with customers such as Amazon having their own operations too. City Link lacked any competitive edge to prosper in the teeth of decreasing pricing. Our main error was to underestimate the competitive landscape.
We tried every route out of the continuing and growing losses: sale in whole or in part; cost reduction including a creditors’ voluntary arrangement. But, it became very clear that even injecting large amounts of fresh capital would only delay failure. Sadly, that conclusion was in late December and a Christmas failure became inevitable.
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