DX reports preliminary results for FY2016
Annual revenue was down from £297.5m in 2015 to £287.9m. EBITDA took a big drop from £33.7m to £18.0m and the adjusted profit before tax and exceptional items was down from £26.7m to £11.5m.
The balance sheet had exceptional (non-recurring) items of £92.1m, which included “goodwill impairment” of £88.4m – which DX described as a “non-cash charge which reflected challenging industry conditions and profit decline”.
The upshot was a reported loss before tax of £82.7m, compared to a profit of £24.8m in 2015.
Commenting on the results, DX Group’s Chief Executive Officer 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.
“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.”
In his “Trading Overview” in the financial statement, DX Group’s Chairman Bob Holt said that the group’s profitability had been “substantially impacted” by three major factors.
According to Holt: “The most significant of these was an increase, above that expected, in volume erosion at the DX Exchange operation, our bespoke secure document handling service. As we have highlighted previously, this business is subject to e-substitution and has a largely fixed cost base. Nonetheless, it remains an important, cost-effective service to both public and private sector companies, especially for the legal, financial and healthcare sectors.
“In May, we acquired the trade and assets of a Scottish counterpart, The Legal Post (Scotland) Limited and First Post Limited, and, following the lifting of an order by the Competition and Markets Authority in early September, we are now combining these assets within our own operations in Scotland, which will enhance customer service and generate savings.
“The major cost base pressure in the first half arose from a shortage of drivers certified with a Certificate of Professional Competence (“CPC”). As well as having a direct cost impact, it also materially affected operational efficiencies and so further increased the Group’s overall costs of delivery. We have addressed and stabilised these issues although driver costs have risen nonetheless. This reflects the sector-wide shortage of CPC-qualified drivers – an issue our industry trade bodies continue to highlight.”
The company added that its plans to develop a major new UK distribution hub in the West Midlands were disrupted when, in mid-May 2016, the local authority declined the planning application. However, DX Group is that it is appealing this decision whilst also considering suitable alternative sites.
Meanwhile, Ian Pain has decided to step down from his role as Chief Financial Officer and will be leaving the Company at the end of October.