Royal Mail rival warns on profits

One of the companies taking on Royal Mail in the newly-liberalised postal market issued a profits warning today after a slump at a key business.

DX Services, which specialises in delivering time-critical documents for banks, estate agents and lawyers, said first half operating profits would be down 12% on a like-for-like basis on the previous year.

Iver, Buckinghamshire-based DX said that a slowdown in the property market and operational changes in the financial sector had hit its core documents business which should report revenues of around £41 million in the last six months of 2005, down from £42.9 million in the same period in 2004.

Fewer people were using DX to send parcels and delivering post in its bulk mail business was proving more costly than expected, it added.

We can still take on Royal Mail, says DX
Daily Telegraph (UK), Sec. City, p 030 01-07-2006
By BY RUSSELL HOTTEN
THE chief executive of the postal group DX Services, Paul Kehoe, insisted the company remained in a strong position to take market share from Royal Mail despite warning yesterday that his business would miss profit targets.

Shares in DX fell 16pc after it said rising costs in its two main divisions meant sales would be lower than last year, and the gloomy trading environment was set to continue.

DX, spun out of Hays in 2004, is one of 14 companies given licences by the postal regulator, Postcomm, to challenge Royal Mail's dominance. The liberalisation came into effect on January 1.

Mr Kehoe said: "I am naturally disappointed … to report profits will be worse than previously anticipated. However, I am confident the strategies in place will result in an improved performance.''

Mr Kehoe, appointed in November after the sudden departure of Peter Brougham last summer, said the firm had been hit by a "general slowdown in the property market and operational changes in the financial services sector''.

DX's Document Exchange division specialises in time-critical mail for banks, estate agents and lawyers. Revenues in the past six months are now expected to be around pounds 41m, down from pounds 42.9m for the same period in 2004.

Revenues at DX's Parcels arm are expected to remain at last year's levels, pounds 21m, but profits will be down because of rising costs, the company said. The division's customers include Tesco and Vision Express.

Mike Murphy, an analyst at Panmure Gordon, said the delivery of mail was proving more costly than expected for DX, so it contributed only 5pc to 10pc of revenues, not the expected 25pc to 50pc.

The shares closed down 56p at 289p.

Private mail firm blames slowdown in housing market for profit fall
The Guardian, Sec. Financial Pages, p 22 01-07-2006
By Jill Treanor

One of the private firms set up to rival the Royal Mail suffered one of the biggest falls on the stock market yesterday after it blamed a slowdown in the property market for a 12% fall in its interim profits.

DX Services, spun out of Hays in 2004, also admitted that payoffs to two executives who left last year – former chief executive Peter Brougham and ex-finance director Michael-John Saunders – and the cost of hiring a new chief executive would amount to pounds 1m. The shares lost 17% or 58p to 287p.

The Buckinghamshire-based company warned the City it expected its profits for the six months to the end of December to be 12% lower year on year when they are announced in March. It blamed a downturn in business in its Document Exchange operation, which delivers documents for lawyers involved in house sales, as well as a fall in demand for parcel delivery.

Paul Kehoe, the new chief executive, admitted that the statement was not a good way to start his relationship with the City. Seven weeks into his new role, he said: "Don't shoot the messenger."

Other competitors to Royal Mail are also suffering. Last month Business Post announced the departure of Paul Carvell, its chief executive, after two profits warnings.

Mr Kehoe said that he intended to focus the business on the Document Exchange operation, which is a kind of drop-off box system for lawyers, rather than try to compete with Royal Mail. "If we try to pretend to be Royal Mail we'll lose money," he said.

The vans used to take the mail to lawyers would stick to routes used for those deliveries and no longer be diverted into new post code areas to deliver other things such as parcels. He also admitted that he had "parked" a plan to introduce its own postage stamps.

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