DX Services to cut costs
British mail delivery company DX Services PLC said it is to cut costs by scrapping less profitable areas of its business after first-half profit declined 8 pct, hurt by a depressed housing market.
DX Services, which each day delivers over one million items via a network of 4,500 mail exchanges, said it is to bring in new low-cost technology platforms to help it identify potentially more lucrative customers.
‘We’re not going to go out to fields with a box of materials for a farmer who’s way off the network. We’ve been looking at the top line. We’re going to re-incentivise our staff to look for profitable revenue,’ chief executive Paul Kehoe told AFX News.
The company is facing the threat of increased competition as rivals vie for a slice of Royal Mail’s near monopoly by poaching its biggest corporate customers ahead of impending market deregulation.
Germany’s Deutsche Post AG last year paid 5.5 bln eur (3.7 bln stg) for logistics group Exel, to gain a foothold in Britain, although Kehoe said there had as yet be no noticeable competitive impact from that deal.
He was speaking after DX Services revealed pre-tax profit fell to 10.2 mln stg in the six months to Dec 31 2005 from 11.1 mln. Sales declined 3 pct to 64.6 mln.
The company, spun off from the country’s biggest recruitment agency Hays PLC in Nov 2004, said revenues were depressed after clients within the financial services and property sectors pared spending.
With the UK Land Registry and solicitors providing it with a sizeable chunk of its turnover, the company was hurt last year by a downturn in the country’s housing market.
According to Land Registry figures just over 1 mln properties changed hands in 2005, nearly 9 pct down on the previous year.
High street banks have also been sending less mail, in addition to which revenues from delivering parcels for retailers has also been hurt by a consumer downturn.
Kehoe said trading in the year to date had been in line with previous expectations.
An interim dividend of 4.2 pence per share, up 5 pct, was proposed.
DX Services shares rose 1.5 pence to 306.75, by 10.15 am, valuing the company at 260 mln stg.
