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Rentokil Initial said its parcel-delivery business City Link made an operating loss of £16.9 million in the first quarter of 2008.

The company said the loss reflected the difficulties in integrating City Link franchises and the Target Express acquisition with the core City Link business.

Rentokil chief executive Alan Brown warned the division would make a "significant loss" this year compared to a profit of £10.2 million a year ago.

"The return of City Link to its former levels of profitability is likely to take some time," said Mr Brown.

The performance from the company's other five divisions had been in line with expectations, the company said.

Rentokil did not give a timeframe for when the unit may return to profitability.

According to Mr Brown, the package-delivery division has problems with its network of hubs and depots, whereby parcels are shuttled up from London to Coventry to be sorted out.

"It is clearly suboptimal in a national network to bring a large volume of traffic up from London and the south east up to Coventry, only to bring it back again," Mr Brown said.

Shares in the company fell four per cent in early trading, losing 3.5p to 91.5p.