DX hopes ‘take-all’ proves a winner
DX Services, the business mail group, said it was well- positioned to take advantage of full deregulation of the mail sector as it reported flat preliminary results for its first year since demerging from Hays, the recruitment company.
The company expected to launch in November a “take-all” service that will collect all mail. At present, users have to post items to non-business customers separately, via the Royal Mail.
There was little explanation for the resignation of Peter Brougham, chief executive, in mid-August but it was understood that some shareholders had been unhappy about the group’s strategy.
However, Mr Brougham, who will serve until a replacement is appointed, said he did not expect a significant change of strategy after his departure. “It’s not a dictatorship – it’s a very open company. We’re doing the right things.”
Group revenue fell from Pounds 131.9m to Pounds 131.1m and pre-tax profit was Pounds 20.1m, after a Pounds 6.5m for exceptionals and goodwill write-offs, compared with Pounds 32.7m in 2004. However, last year’s figure did not include interest, as this was paid by Hays.
Operating profit on a comparable basis with DX’s 2004 earnings was down to Pounds 30.8m from Pounds 32.7m.
A proposed dividend of 8.5p would take the year’s total to 12.5p on earnings per share of 14.5p.
Another 11 companies have received standard mail licences similar to that held by DX but Mr Brougham said he did not expect a directly competing network, at least in the short term.
DX had almost a fifth of the next-day, early-morning business delivery market, he said, which the company estimated to be worth Pounds 500m.
The group’s fledgling mail services drew revenues of Pounds 5m and moved from making a loss in the first half to breaking even in the second.
The company will carry out a 10 per cent share buy-back and is aiming to keep debt in the Pounds 75m to Pounds 100m range. Its shares were down 3 3/4p at 352 1/4p yesterday.
FT Comment
*Fears of the effect of competition after full deregulation in January might have been overplayed but it remains unknown, as does DX’s ability to capitalise on new opportunities. Mail got off to a shaky start, although the outlook for 2006 is more positive. The “take-all” service could also provide a boost. However, uncertainty is compounded by themanagement question and sluggish growth. Forwardp/e ratios are in the14 to 15 range, which look overvalued, at least in the short term.
