DX Group’s new management team said last week that its turnaround strategy was gathering pace at the embattled business.
With a pre-tax loss before exceptional items of £9m (2016: £500,000 loss) and a cash call for £4m from investors to allow it to deliver its vision for the reborn group, its clear there’s no time to dawdle.
Under CEO Lloyd Dunn, DX is placing its hopes for a comeback on empowering its managers, expanding its network and separating its freight and express businesses, the antithesis of the OneDx integration championed by the ousted former executive team.
So strongly does Dunn and his new team feel about separating the business, returning the business to something akin to when DX the mail, courier and network logistics firm purchased Nightfreight in 2014, that the majority of £5.1m of exceptional items in its latest accounts are to do with exactly this.
DX Freight, previously Nightfreight, includes the one and two-man delivering services and DX Logistics. It is, according to Dunn, the immediate area of concern due to its “current severe underperformance”.
Margins at the division have declined since 2015 and it generated a £18.3m loss during the last financial year. For the six months to 31 December 2017, the latest reporting period, that EBITA loss was £10.9m.
It’s not all bad. Division revenue increased by 15% year on year to £67.4m in the six month period thanks to the expansion of the operator’s IKEA contract, and last year’s Avon UK deal was a boon. However, the division remains reliant for two-thirds of its revenue on its DX 1-Man service where revenues fell. Its smaller two-man service also struggled.
DX said it has already completed some of the fundamental steps required to turn DX Freight around, with new organisational and management structures in place. Operations have been reorganised into five (previously three) regions, new pricing agreed and the two-man service is to be integrated with DX Logistics.
DX Express, the business’s other division, comprises a private members B2B mail and parcel delivery network, Exchange, which serves the legal, financial and pubic sectors; Secure, its B2C delivery service; and its courier and mail operations.
Revenue here was 6% down year-on-year in the six month period at £79.2m. Here the operator is managing a gradual decline in its Exchange business as evermore documents are moved electronically rather than physically.
Despite this, the division is profitable adding £27.5m of EBITDA in the last financial year and £7.5m in the six month period ending 31 December 2017.
Dunn and his team intend to separate Exchange from Secure and Courier, in essence to reinforce the exclusivity of the Exchange network and improve customer service and innovation.
This in turn, DX believes, will allow it to optimise operations at its Secure and Courier business. Part of this will see a change to the current regional structure to create four regions (currently three) all headed by a regional director. IT will be consolidated across the two businesses over time.
It feels a long way from the enthusiasm of 2014 when former DX boss Petar Cvetkovic said of the union: "Together, we can build a sustainable business to compete more effectively in the courier and network distribution market.
“We are now capable of delivering everything from a letter to a complete bedroom suite with king size bed - including the assembly and installation - through our two-man “white glove” premium delivery service,” he said.
Current boss Dunn remains bullish though. “DX is a sleeping giant – if we keep our focus and momentum, DX will once again be a force to be reckoned with,” he said last week.
