Friday 30th Sep 2016 - Logistics Manager

DX moves to boost performance

DX group is investing in IT and sales to boost performance as it responds to declining revenue and profits.

Group sales fell 3.2 per cent to £287.9 million last year, mainly as a result of higher than anticipated decline in DX Exchange revenue and the cessation of low margin contracts in Logistics.

However, the decline was partially offset by double-digit volume growth in DX’s Courier and Secure services.

Underlying operating profit for the year to 30th June 2016 was £11.9m – down from £27.2m in 2015. However, exceptional items amounted to £92.1m including two non-cash items totalling £88.8 million.

As a result, the reported loss before tax was £82.7m, against a profit of £24.8m in 2015.

CEO Petar Cvetkovic said: “It has been a challenging year, with the specific trading pressures we reported in the second quarter of the year having a substantial impact on profitability. Our focus has been on responding to these pressures while also driving forward our ‘OneDX’ programme and further improvements to our already high levels of customer service.”

He said that the group’s largest activity, Parcels and freight, delivered a better revenue performance than the prior year, helped by strong growth in the Courier service.

“However revenues at our Mail and packets operation contracted, with higher than expected levels of volume attrition at DX Exchange significantly impacting Group profitability. While Logistics saw revenue decrease after exiting low margin contracts, it won a major contract with IKEA which we expect to grow further.

“Profitability in the first half of the year was, as we reported, additionally hit by a shortage of suitably qualified drivers. This shortage is an industry wide issue and stems from new legislation requiring drivers operating goods vehicles of over 3.5 tonnes to obtain a Certificate of Professional Competence (“CPC”) qualification. The shortage caused both an increase in driver costs, with agency drivers being used, and an additional rise in delivery costs as, in the absence of CPC-qualified drivers, smaller transit vans were used in place of goods vehicles to maintain customer service. While the temporary additional costs have been removed, on-going driver costs are much higher, reflecting the shortages across the industry.

“We highlighted the slow conversion of the new business pipeline in the parcels operation in the second quarter of the year, which impacted Group profitability. Since then we have invested further in our sales capability, restructuring the teams. The sales pipeline at the close of the financial year is above the level of the prior year and we are also focused on cross-selling opportunities across our services.”

“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. While there are still uncertainties ahead as we await the outcome of the HMPO tender process and our planning appeal, we have confidence that our business transformation plans will deliver long term benefits.”