DX Group delivered an improved performance in the second half of its trading year, but this wasn't enough to offset the damage done earlier on, the operator said today.
In the company’s preliminary results for the year ended 30 June 2016, DX Group CEO Petar Cvetkovic described a “challenging year”, which saw the operator hit by £92.1m of exceptional items, resulting in a pre-tax loss of £82.7m (2015: £24.8m profit).
The exceptional items included a one-off goodwill impairment of £88.4m relating to its previous ownership, and also costs relating to its proposed new hub in the West Midlands.
Planning permission for the hub has been refused and DX Group is currently appealing the decision.
Turnover for the period fell 2.6% to £287.9m (2015: £297.5m), while adjusted pre-tax profit was £11.5m (2015: £26.7m). The company has proposed a 1.5p per share dividend subject to shareholder approval.
Challenging first half
An unexpectedly sharp fall in volumes at its secure document handling division DX Exchange (down more than 10% in the full year), due in part to a reduction in legal aid funding and the ongoing migration in the sector to e-services was given as the largest, single negative factor affecting the company's first half performance.
In May, DX’s management moved to mitigate this with the purchase of The Legal Post and First Post in Scotland, which will provide the division with UK-wide coverage once complete. The deal remains under investigation by the Competition Markets Authority, but appears to be back on track after an announcement last week.
The major pressure on its cost base in the same period was a shortage of Driver CPC qualified drivers – DX told Motortransport.co.uk earlier this year that this had been so acute it had had to leave 7.5-tonne vehicles parked up and “cover them with Sprinters, which adds cost to the business”.
In its results statement, DX group said that as well as having a direct cost impact, the shortage had also affected its operational efficiency increasing the cost of delivery. It said that while it had addressed and stabilised the issue - it has a warehouse to wheels scheme in place - driver costs have risen nonetheless.
Parcels and freight delivers better performance
DX’s largest activity, parcels and freight, delivered a better revenue performance than in the previous year. Revenue was up 3.4% to £159.3m and accounted for more than 55% of total group revenue.
Mail and packets saw a 2.2% drop in revenue to £113.8m. It accounts for just less than 40% of total group revenue.
DX Logistics, which provides customers with a fleet outsourcing service, saw a significant drop in revenue after the end of several low margin contracts. Revenue shrunk 45% year-on-year from £27m in the period to £14.8m. Logistics accounts for 5.1% of total group revenue.
However, a contract with Ikea to support its operations in London and the Midlands has proved a success and is expected to grow in scale.
The operator said its DX Parcel Exchange, launched in the period, had been well received by customers.
DX Group said it was also awaiting the outcome of a tender with the Post Office, expected to be known by the end of November.
“We continue to take positive steps to address the group’s performance and to support this we are making further targeted investment in IT and sales.
“We have confidence that our business transformation plans will deliver long term benefits,” said Cvetkovic.
- After 10 years in the role, chief financial officer Ian Pain is stepping down and will leave the company at the end of October, DX said. Daljit Basi, finance director, has succeeded him with immediate effect and joined the DX board.