Final Results
03/10/2023 07:00
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RNS Number : 4402O DX (Group) PLC 03 October 2023
AIM: DX.
DX (Group) plc
("DX" or "the Group" or "the Company")
A leading provider of delivery solutions,
including parcel freight, secure courier and logistics services
Final audited results for the 52 weeks ended 1 July 2023
Another year of strong growth - well-positioned for further progress
Financial Highlights
52 weeks to 52 weeks to Change
1 July 2023 2 July 2022
Revenue £471.2m £428.2m +10%
EBITDA(1) £60.2m £50.3m +20%
Adjusted profit from operating activities(1) £31.4m £24.9m +26%
Reported profit from operating activities £30.0m £22.1m +36%
Adjusted profit before tax(1) £26.8m £20.2m +33%
Statutory profit before tax £25.4m £17.4m +46%
Adjusted earnings per share 4.1p 2.9p +41%
Basic earnings per share 3.9p 2.4p +63%
Net cash(1) £37.6m £27.0m +39%
Cash flow from operating activities £54.9m £36.5m +50%
· Revenue up 10%, driven by strong performances at both DX Freight and
DX Express
· Group operating margin(1) up to 6.7% (2022: 5.8%); target remains
7.5% -10.0%
· Capital investment of £10.9m (2022: £6.2m) in depot network
expansion, parcel handling equipment, electric vehicles ("EVs") and IT
· Net cash up 39% to £37.6m (2022: £27.0m)
· Reported basic earnings per share up 63% to 3.9p (2022: 2.4p)
· Proposed final dividend of 1.0p per share, giving a total of 1.5p per
share for FY23 (2022: nil)
Operational Highlights
· DX Freight:
- Revenue up 10% to £282.8m (2022: £256.9m) and operating profit up
22% to £37.8m (2022: £31.1m)
- Divisional operating margin up to 13.4% (2022: 12.1%), driven by
further improvements in productivity and operational efficiency
- Strong customer retention levels and significant new customer wins
supported by continued achievement of high levels of customer service
- Two new depots opened at Paisley and West Bromwich, and two depots
expanded at Plymouth and Heathrow
- Secured 15 new sites from the Administrators of Tuffnells Parcels
Express in June 2023 - a major development for the Group, with benefits for DX
Express as well as DX Freight
o Over 700 former Tuffnells customers added; and over 350 former Tuffnells
employees have joined DX
· DX Express:
- Revenue up 10% to £188.4m (2022: £171.3m) and operating profit up
22% to £17.7m (2022: £14.5m)
- Divisional operating margin increased to 9.4% (2022: 8.4%), driven
by healthy levels of new business in Parcels, which outweighed expected
revenue erosion at Document Exchange
- Continued investment in IT platform to enhance customer experience
- Five new depots were opened at Basildon, Plymouth, Haydock,
Bracknell and Deeside
· Overheads:
- Overheads as a percentage of revenue increased slightly to 5.5%
(2022: 5.1%, excluding the exceptional items). This reflected improvements to
IT infrastructure, Board changes and legal costs
Outlook
· Q1 FY24 trading was in line with management expectations
· Final year of three-year c.£20-25m investment programme to be
completed in FY24 together with the construction of a new regional hub in
Nottingham for c.£12m
o Supports achievement of growth plans and margin targets
· DX expected to make further progress underpinned by a strong balance
sheet
Paul Ibbetson, Chief Executive Officer of DX (Group) plc, commented:
"The Group has delivered another strong performance, above our original
expectations. Both divisions contributed increased revenue, margin and profit,
which supported our return to the dividend list.
"The financial strength of the business, with its strong cash generation and
balance sheet, has been key to our ongoing success, enabling us to continue to
invest significantly in both divisions. We have invested across all areas of
operations - including the depot network, parcel handling equipment, electric
vehicle fleet and IT - and this will continue in the new financial year.
"We are mindful of the current economic headwinds, however, given the strong
platform that we have established and the encouraging levels of new business
that we have secured in the opening months of the new financial year, we look
forward to another year of further progress."
Notes
1 See notes 2 and 18 to the Financial Statements for details of
alternative performance measures ("APMs") used, which are non-IFRS measures.
The notes include details of where reconciliations of APMs to IFRS reported
measures can be found.
Enquiries:
DX (Group) plc www.dxdelivery.com (http://www.dxdelivery.com)
Paul Ibbetson, Chief Executive Officer T : 020 3178 6378
David Mulligan, Chief Financial Officer (c/o KTZ Communications)
Liberum (Nominated Advisor and Joint Broker to DX) T: 020 3100 2000
Nick How
Panmure Gordon (UK) Limited (Joint Broker to DX) T: 020 7886 2500
Tom Scrivens/Sam Elder (Corporate Broking)
James Sinclair-Ford (Corporate Advisory)
KTZ Communications T: 020 3178 6378
Katie Tzouliadis/Robert Morton
About DX (Group) plc:
DX is a well-established provider of a wide range of delivery services to both
business and residential addresses across the UK and Ireland. First
established in 1975 as a Document Exchange service to the legal sector, DX now
provides one of the widest ranges of overnight delivery services in the
market, as well as logistics services. Items that DX transports range from
confidential documents and valuable packages to large, awkward-to-handle
freight, unsuitable for automated conveyor.
DX Freight comprises DX 1-Man, DX 2-Man and Logistics. The Division
specialises in the delivery of irregular dimension and weight freight ("IDW").
DX Express comprises DX Parcels and DX Exchange and Mail. The Division
specialises in the express delivery of parcels and documents.
CHAIRMAN'S STATEMENT
DX CONTINUES TO MAKE VERY STRONG PROGRESS
Introduction
I am pleased to deliver my first full year statement since my appointment as
Chairman in November 2022. The Group has continued to perform very well, and
financial results for the year are above original management expectations.
This has been driven by our continued focus on growing revenue, profit margin
and cash generation.
Group operating profit margin (adjusted operating profit divided by revenue)
rose to 6.7% against 5.8% in the prior year, making further good progress
towards our goal of achieving a Group operating margin in the range of
7.5%-10%. Both DX Freight and DX Express contributed to the Group's strong
performance, each division increasing revenue and profitability.
Results were again helped by improvements to operational efficiency and
productivity, and underpinned by the significant attention we pay to
maintaining and improving our high customer service levels.
In line with our three-year capital expenditure programme, we invested £10.9
million across the Group, expanding the depot network, adding handling
equipment, enlarging our electric vehicle ("EV") fleet and improving IT
systems and infrastructure. This £10.9 million investment, which followed
last year's £6.2 million investment, marked the second year of the programme,
which is expected to total around £25 million once completed.
Alongside this, two other strategically important transactions were agreed,
which will support future growth. Just before the financial year end in June
2023, after discussions with the Administrators of Tuffnells Parcels Express
Limited ("Tuffnells"), we took over 15 sites previously operated by Tuffnells.
In the same month, we also agreed the acquisition of a site for a major new
Regional Hub near Nottingham, which will serve the East Midlands area. The
site acquisition completed in August, and we estimate the cost of development
will be approximately £12 million, which includes the cost of the land.
Construction of the new hub is scheduled for completion in the last quarter of
this financial year. These exciting developments move our growth strategy on
significantly.
Financial Results
Revenue for the 52 weeks ended 1 July 2023 increased by 10% to £471.2 million
(2022: £428.1 million), and adjusted pre-tax profit rose by 33% to £26.8
million (2022: £20.2 million). Adjusted earnings per share was up by 41% to
4.1p (2022: 2.9p). Statutory profit before taxation increased by 46% to £25.4
million (2022: £17.4 million) and statutory earnings per share increased by
63% to 3.9p (2022: 2.4p).
The Group continued to generate high levels of cash and its financial position
remains very strong. Net cash generated by operating activities increased by
50% to £54.9 million (2022: £36.5 million) and net cash at the year end was
39% higher year-on-year at £37.6 million (2 July 2022: £27.0 million). The
Group retains a strong level of liquidity, including significant headroom
within its invoice discounting facility, which was undrawn during the
financial year. The facility was renewed in March 2023.
Capital Allocation and Dividend Policy
The Group's capital allocation policy, outlined in last year's Annual Report,
has provided the framework for the ongoing investment in the business,
recommencement of dividend payments and the £12 million strategic investment
in a new hub for DX Freight in Nottingham, as well as the investment in the
former Tuffnells depots. It will continue to underpin the Group's investment
decisions and ensure the efficient and appropriate use of DX's capital
resources to deliver the Company's long-term growth strategy and thereby
maximise shareholder value.
Final dividend
The Board recommenced dividend payments during the financial year, with an
interim dividend of 0.5p per share, paid on 31 March 2023. It is now pleased
to propose a final dividend of 1.0p per share (2022: nil). This takes the
total dividend for the year to 1.5p per share in line with the Company's
dividend policy (2022: nil).
The final dividend will be paid on 7 December 2023 to shareholders on the
register on 17 November 2023, subject to shareholder approval at the
forthcoming Annual General Meeting ("AGM") on 23 November 2023.
As previously outlined, dividends are anticipated to be paid in a ratio of
approximately one-third interim dividend: two-thirds final dividend. It is
also anticipated that annual dividends will be covered between two and three
times by adjusted earnings per share.
Net settlement of share options
During the year, the Company took the decision to reduce the number of
Ordinary Shares to be issued in respect of the exercise of options under the
Performance Share Plan 2017 (the "PSP"), by a factor equal to the tax
liability that arises in connection with any exercise.
The exercise of options became an entitlement to receive a reduced number of
Ordinary Shares (the "Adjusted Award") and a cash amount (the "Cash Amount")
equal to the value of the number of Ordinary Shares by which the options are
reduced. The Company ensured that the Cash Amount was paid directly to HMRC to
discharge the tax liability that arises as a result of the exercise. As a
result, £8.3 million was expended in the year on the net settlement of
options being exercised.
Corporate Governance
Shares readmitted to AIM
As previously reported, the Company's shares were suspended from trading on
AIM on 4 January 2022 and readmitted to trading on 19 October 2022.
Readmission followed the satisfactory completion of an Inquiry and
Investigation, which centred on an allegation of bribery, and subsequent
measures to strengthen the Group's corporate governance and to ensure that we
meet the highest standards of corporate and individual conduct. These remain
priorities and training regarding the Group's compliance policies and
procedures will be refreshed annually.
Settlement of claim
On 10 February 2023, the Company received a claim from Tuffnells in relation
to confidential information being obtained by DX in the past, which related to
the Inquiry and Investigation mentioned above. We reached a full and final
confidential settlement with Tuffnells, as reported on 7 June 2023. The
settlement brought the claim to a satisfactory conclusion and was without any
admission of liability.
Performance Overview
DX Freight, which specialises in the overnight delivery of IDW items,
delivered another year of strong growth. Revenue increased by 10% to £282.8
million (2022: £256.9 million) and operating profit rose by 22% to £37.8
million (2022: £31.1 million), helped by further improvements in productivity
and operational efficiency. Operating margin increased to 13.4% (2022: 12.1%).
This was mainly driven by further expansion of our 1-Man service, where
revenue grew by 13% year-on-year. Our continuing focus on high levels of
customer service led to a significant number of new customer wins as well as
supporting customer retention.
DX Express, which specialises in the next-day delivery of time-sensitive,
mission-critical and higher-value items, benefitted from a strong performance
in Parcels, which more than offset the expected revenue reduction at Document
Exchange. DX Express revenue increased 10% to £188.4 million (2022: £171.3
million), with 16% growth in Parcels revenue, fully offsetting the 11%
decrease in revenue from Exchange & Mail services. Operating profit
increased by 22% to £17.7 million (2022: £14.5 million) and operating margin
increased to 9.4% (2022: 8.5%), which mainly reflected operational leverage
and productivity improvements.
Environmental, Social and Governance
Following the publication of the Group's Carbon Reduction Plan in December
2022, we have made additional disclosures in this financial year's Annual
Report and Accounts. They cover the Company's reporting obligations under
the Task Force on Climate-related Financial Disclosures ("TCFD") regime. In
particular, details have been published of the Company's risk assessment with
respect to transitioning to becoming a net-zero business under the TCFD
recommendations.
This is a major step forward and further advances our approach to
environmental matters. We have also set some ambitious goals for the business,
including a target of reducing our carbon footprint by 20% by 2035. We remain
fully committed to doing our part in helping the transport sector in the UK
meet its net-zero target by 2050. I am confident that we can manage this
transition while continuing to successfully grow our business over the medium
term.
Our People
The Group's strong results could not have been delivered without the hard work
of colleagues. In particular, they have helped to ensure that DX continues to
deliver consistently high levels of service to customers. On behalf of the
Board, I would like to thank everyone within DX for their commitment and
tremendous efforts over the past year and also to thank all our customers,
suppliers, subcontractors, and all other stakeholders for their continued
support of DX. Recently over 350 new colleagues from the former Tuffnells
business have joined us, and we welcome them to the Group. We have a very
talented and experienced team, one of the best in the industry, and look
forward to further success in the current financial year and beyond.
Board changes
There were a number of Board changes over the financial year. On 31 January
2023, Paul Ibbetson, Managing Director of DX Freight, was appointed as Chief
Executive Officer. Paul joined DX in November 2017 as a senior member of the
incoming turnaround team and has over 25 years' senior experience in the
freight, parcels and logistics sectors. He led the DX Freight division and was
instrumental in its transformation to profitability, cash generation and
growth from its prior position of substantial losses.
I was appointed as Chairman on 15 November 2022 with the retirement of Ron
Series, Executive Chairman. I have over 25 years' commercial and financial
experience, which has included co-founding and managing private equity fund,
Caird Capital LLP, and working for Bank of Scotland Corporate as Head of
Integrated Finance. I am also a member of the Institute of Chartered
Accountants of Scotland and a Non-executive Director of Genuit Group plc and
of Chaffin Holdings Limited.
Two independent Non-executive Directors, Jon Kempster and Mike Russell, were
appointed to the Board on 12 July 2022. Both are highly experienced executives
with senior financial and commercial experience.
Lloyd Dunn resigned as Chief Executive Officer on 6 September 2022, and
Non-executive Directors, Liad Meidar and Russell Black, left the Board on 19
October 2022.
On 2 October 2023, Alison O'Connor was appointed as an independent
Non-executive Director. Alison is Chief People Officer of Arriva plc
("Arriva"), which is part of Deutsche Bahn AG, and has extensive experience on
all aspects of human resources and related organisational planning and
development.
Proposed Offer by H.I.G.
On 11 September 2023, the Company announced that it had received a non-binding
and conditional proposal from H.I.G. European Capital Partners LLP ("H.I.G.")
regarding a possible all cash offer for the Company at a price of 48.5p per DX
share (the "Proposal"). The Proposal is subject to the satisfaction or waiver
by H.I.G. of a number of pre-conditions, including the completion of
satisfactory due diligence. There can be no certainty that an offer will be
made nor as to the terms on which any offer might be made.
Outlook and Opportunities
We are encouraged by the progress the Group has made over the past financial
year and, in particular, by the strong profit and margin growth at both DX
Freight and DX Express, which has been underpinned by our focus on high levels
of customer service.
The agreement to take over 15 former Tuffnells depots and the new
relationships we have established with former customers of Tuffnells since it
entered into administration is a major development for the Group. The process
of optimising the depot network and absorbing these new depots is well under
way, with six sites now reopened.
We expect to make further progress in the current financial year. This will be
supported by our disciplined allocation of capital, which is prioritising
ongoing investment in the business to support growth, including our strategic
investment in the new regional hub at Nottingham.
The business has secured strong levels of new business in the first quarter of
the current financial year and has a good pipeline of opportunities. It is
also in a strong financial position, with healthy levels of net cash and good
cash flows. While we are conscious of the current economic headwinds, the
Board remains encouraged about growth prospects for the Group in the current
financial year and beyond.
Mark Hammond
Non-executive Chairman
Chief Executive Officer's Review
Strong growth underpinned by high customer service levels
We delivered another strong set of results in FY23, with Group revenue up 10%
to £471.2 million (2022: £428.2 million) and Group adjusted operating profit
up 26% to £31.4 million (2022: £24.9 million). Operating margins increased
to 6.7% from 5.8% the previous year, which is in line with our target to
achieve operating margins of 7.5%-10% in the next two years.
This performance was delivered in a more stable trading environment than the
prior year when we contended with driver and warehouse staff shortages. While
trading challenges remained, cost pressures eased over the year, and the
progress the Group made demonstrates its resilience and ability to adapt and
take advantage of market opportunities.
Results reflect, in particular, the strength of our 1-Man business, growth in
our Parcels business and the operational leverage across the Group. The
Group's overall performance was also underpinned by our high levels of
customer service, which remained strong throughout the period.
The parcel and freight markets continue on their long-term growth trajectory.
There has been some recent softening in demand from customers with
consumer-facing businesses, although this has been more than offset by robust
demand in business-to-business markets. While recognising the current economic
headwinds, we remain confident of achieving further progress over the current
financial year and will continue to invest in the business in line with growth
plans and our capital allocation policy.
Capital Investment
We invested a total of £10.9 million (2022: £6.2 million) over the financial
year, with this investment focused on our depot network, equipment and IT
infrastructure. It marked the second year of our three-year capital investment
programme. A further £9.0 million of investment of this programme is
earmarked for the new financial year.
In addition to this major investment programme, we will invest £12.0 million
in a new regional hub for DX Freight in Nottingham, and spend a further £2.0
million on EVs to support our longer-term partnership with IKEA. In June 2023,
we agreed the purchase of a former Tuffnells site in Ipswich for £1.0
million. As a result of all these additional investments, we expect capital
expenditure in the current financial year to total around £25 million.
Our agreement with the Administrators of Tuffnells to take over 15 sites has
accelerated our growth plans and will result in a stronger network. These
sites will help us to service 700 or so former Tuffnells' customers for whom
we were able to provide continuity of delivery services after the business
collapsed. These customers are now trading on mutually-agreeable commercial
terms. Over 350 former employees of Tuffnells have also joined us over the
past three months and this, combined with other developments, provide us with
significant opportunities for our 1-Man, 2-Man and Parcels businesses.
We are now focused on the integration and reopening of the former Tuffnells
depots and have already made a good start, with six depots now integrated and
fully operational. Alongside this, in August 2023, we opened a new depot at
Norwich for DX Express and over the remainder of the 2023 calendar year, we
plan to open a dedicated DX Express depot at Preston in Lancashire, and a new
super-site at Middleton in Manchester for our 2-Man activities. Over the next
18 months, we will be further optimising the depot network.
Divisional Review
DX Freight
Revenue at the DX Freight division increased by 10% to £282.8 million (2022:
£256.9 million) and operating profit grew even more strongly, rising by 22%
to £37.8 million (2022: £31.1 million). As a result, the division's
operating margin expanded to 13.4% (2022: 12.1%).
DX Freight continued to cement its market position in the IDW market, with
these strong results mainly driven by our 1-Man service. 1-Man revenue
increased by 11% to £220.6 million (2022: £195.5 million), benefitting from
market growth, price increases and its strong sales force, which secured very
good levels of new business.
Revenue for 2-Man/Logistics services was broadly constant, up 1% to £62.2
million (2022: £61.4 million), which reflected some softening of demand from
consumer-facing customers.
The division's overall performance also benefitted from productivity and
efficiency gains and the changes made in the previous financial year to
address market-wide disruption to the supply of drivers and warehouse labour
and customers' supply chain issues. We continued to maintain a strong focus on
high customer service levels across the division, which also helped to
underpin the strong rise in profit.
In FY23, we invested £1.5 million in EVs and in FY24 we are committed to a
further £2 million investment in the EV fleet. Both investments are in
support of our longer-term partnership with IKEA, and will increase the fleet
to 65 electric vans in total.
We expanded the delivery network to support divisional growth, opening two new
depots at Paisley in Scotland and West Bromwich in the West Midlands, and
expanded capacity at our existing depots in Plymouth and Heathrow by moving DX
Express' activities to new premises in each case. We also improved staff
facilities at a number of depots and at the division's Central Hub.
Network expansion has not only increased our capacity, but also enhanced our
already strong market position in the IDW market. There are few operators in
this market with the capability of offering a reliable, next-day service on a
nationwide basis, backed by high service levels. Network expansion has helped
to drive operational efficiencies and improvements to service levels through
reduced stem mileage and greater proximity to customers. The environmental
benefits should not be overlooked too.
At the end of the financial year in June 2023, we secured additional new IDW
business following Tuffnells entering into administration. This new business
gained from former Tuffnells customers will benefit the current financial
year. We estimate that DX's current market share in IDW is now around 25%,
making DX the clear market leader.
The growth strategy for DX Freight remains unchanged. We see scope for further
growth in 1-Man services and will continue to seek new business opportunities
and expand market share in IDW, a growth segment of the parcel market.
Additional volumes will help to drive productivity improvements and enhanced
margins through operational leverage of the network. We estimate that the
market for parcel freight is expanding at approximately 5% per annum over the
medium term, albeit this may slow in the near term due to the current economic
headwinds.
There are growth opportunities for 2-Man/Logistics, and we are now focusing
more closely on this business to drive it forward. We intend to grow
2-Man/Logistics services by broadening its customer base, and have committed
additional sales and operational resources to support our growth objectives.
We have also created five 2-Man super-sites, which now operate separately from
the 1-Man network.
DX Express
Revenue at DX Express increased by 10% to £188.4 million (2022:
£171.3million). This result reflected the strong growth of the Parcels
service, which increased revenue by 16% to £156.4 million (2022: £135.3
million), supported by healthy levels of new business. Growth in Parcels more
than offset expected revenue decline at Exchange & Mail, which decreased
by 11% to £32.0 million (2022: £36.0 million). Profit from operating
activities increased by 22% to £17.7 million (2022: £14.5 million), and the
operating margin expanded to 9.4% (2022: 8.5%), benefitting from operational
leverage. This was in line with our expectations and is a significant
improvement on the prior financial year.
We continued to expand DX Express' depot network and opened five new depots,
at Basildon, Plymouth, Haydock, Bracknell and Deeside. As with DX Freight,
this is helping to drive improvements in operational efficiency and, by being
closer to customers, the division is also able to provide an enhanced level of
service.
Document Exchange remains a very important service for the delivery of
documents in the legal sector, with our pre-9.00am. dedicated delivery service
being a valued component of the service. We are seeking to leverage this
unrivalled post-5.00pm collection and pre-9.00am delivery network by
broadening the range of sectors served. In particular, we see relevant
opportunities in high-street retail and veterinary services.
We continued to invest in the division's IT platform to simplify and modernise
it, and around 50% of the division's activity is now managed on the division's
new tracking application. This has enhanced the consumer experience to include
point-of-delivery information and photographic evidence. It also provides
improved management information to support timely decision-making. We expect
to complete the transition of the division's Parcels activity onto the new
application over the remainder of this calendar year.
The depots recently secured from the Tuffnells' Administrators will also
benefit DX Express. Once operational, the additional depot in Stafford and the
hub facility in Nuneaton will also provide vital sortation capacity for the
longer-term growth of the division. We expect these new depots will become
operational by the end of this calendar year.
The market for small parcels is very large and we estimate that its
longer-term growth is around 10% per annum, driven by the ongoing shift to
online buying. Our current market share in Parcels is very modest at 1%-2%,
and whilst recognising that it is a very competitive market, we believe there
is a significant opportunity for DX Express. Our strategy is to build on the
division's historic strength in documents and small packets, and continue to
diversify the division's revenues by expanding the Parcels activity to SMEs
and large national customers that value a high-quality, next-day service.
Divisions Supported by Central Teams
Central overheads for the year (including the share-based payments charge)
increased in absolute terms to £25.5 million (2022: £21.9 million, excluding
exceptional items). As a percentage of revenue, central overheads increased to
5.5% (2022: 5.1%). The year-on-year rise reflected the cost of the Board
changes during the year, improvements made to the Group's IT infrastructure,
and the legal costs of the dispute with Tuffnells. The settlement with
Tuffnells has been included within central overheads in order to not distort
divisional operating profit margins. We expect central overheads to remain
broadly flat in absolute terms and to fall as a proportion of revenue as the
Group grows.
Environmental, Social and Governance
In December 2022, we published our Carbon Reduction Plan, which outlined the
steps we plan to take to reduce the carbon footprint of the business. At the
heart of this is the decarbonisation of our vehicle fleet.
This year, DX has come under the requirements of the TCFD and there are
further disclosures in the Annual Report regarding the physical and transition
risks to DX's journey to Net Zero. We have set an ambitious goal of reducing
our carbon footprint by 20% by 2035 based on the current technology available
to us. We will revise our goals as new technology becomes available to us in
the medium term.
We have further electrified the vehicle fleet this year, committing investment
of £3.0 million to add a further 53 vehicles in support of our longer-term
partnership with IKEA. Other developments included a further £0.5 million
investment in LED lighting at DX depots.
We have taken a significant step forward this year with the implementation of
reporting under TCFD and we are increasingly engaging with our customers
around ESG disclosures, as we are a key element of their supply chains. We are
also engaging with our own suppliers in order to understand their commitments
to reducing their own carbon footprints.
Summary
It has been another strong year of progress for DX, with both divisions
growing their revenue and profit, and expanding operating margins. We have
underpinned this growth with further investment in our depot network, IT, EVs
and parcel handling equipment, and maintaining our strong focus on high levels
of customer service.
DX Freight has continued to grow; it is now the clear market leader in the IDW
market and there remains a considerable opportunity to expand both this
service and our 2-Man/Logistics offering. Growth at DX Express has been driven
by our Parcels business and we are confident that we can continue to expand
and develop it. We also see opportunities to extend the Document Exchange
business into other sectors where its unique service has relevance and offers
value.
Like the rest of our sector, we are facing the challenges presented by a
slowing economy, including softer demand from consumer-facing customers.
However, we have well-established networks, an experienced management team and
a very strong financial position, which underpins our ability to invest in our
core markets. We remain excited by our market opportunities, and look forward
to reporting on further progress over the course of the coming year.
Paul Ibbetson
Chief Executive Officer
FINANCIAL REVIEW
STRONG PROFITS UNDERPINNED BY GROWTH IN REVENUE, EXPANDING MARGINS AND HEALTHY
CASH GENERATION SUPPORTED BY INCREASING LEVELS OF INVESTMENT
Statutory results
The Group reports on a '4-5-4 weekly' basis, which means that the middle month
in each quarter constitutes a five-week trading period. The Board believes
that this reporting cycle best reflects the Group's cost base and operations.
These Financial Statements are for the period 3 July 2022 to 1 July 2023, i.e.
a 52-week period. Future years will be for 52 weeks or occasionally 53 weeks
in order to keep the financial year-end date as close as possible to 30 June.
Revenue generated in the year to 1 July 2023 was £471.2 million (2022:
£428.2 million) and profit before taxation was £25.4 million (2022: £17.4
million). Basic earnings per share was 3.9p (2022: 2.4p).
Summary
Revenue of £471.2 million was 10% ahead of the prior financial year, and
reflects strong growth at DX Freight, where revenue increased by £25.9
million to £282.8 million, driven by expansion of its 1-Man service. There
was also growth at DX Express of £17.1 million to £188.4 million, driven by
the increasing success of its Parcels service, which more than offset the
decline at Exchange & Mail.
Earnings before interest, tax, depreciation, amortisation and exceptional
items ("EBITDA"(1)) for the year was £60.2 million (2022: £50.3 million).
Adjusted operating profit increased to £31.4 million (2022: £24.9 million).
Adjusted profit before tax increased to £26.8 million (2022: £20.2 million).
Net cash at 1 July 2023 increased to £37.6 million (2022: £27.0 million).
Operating cash flow was £54.9 million (2022: £36.5 million) and the cash
outflow from capital expenditure was £10.9 million (2022: £6.2 million).
2023 2022
£m £m
Revenue 471.2 428.2
EBITDA(1) 60.2 50.3
Depreciation (27.9) (24.4)
Amortisation of software and development costs (0.6) (0.6)
Share-based payments charge - SAYE award shares (0.3) (0.4)
Adjusted operating profit(1) 31.4 24.9
Exceptional items - (1.6)
Share-based payments charge - PSP award shares (1.4) (1.2)
Reported profit from operating activities 30.0 22.1
Net finance costs (4.6) (4.7)
Profit before tax 25.4 17.4
Tax (2.6) (3.4)
Profit for the year 22.8 14.0
Other comprehensive expense - -
Total comprehensive income for the year 22.8 14.0
EPS - adjusted (pence)(1) 4.1 2.9
- basic (pence) 3.9 2.4
- diluted (pence) 3.8 2.3
Operating profit margin(2) 6.7% 5.8%
1 See notes 2 and 18 to the Financial Statements for
details of APMs used, which are non-IFRS measures. The notes include details
of where reconciliations of APMs to IFRS reported measures can be found.
2 Operating profit margin is calculated by dividing
adjusted operating profit by revenue.
Revenue by segment
A breakdown of Group revenue is shown below and commentary on each division's
performance is provided in the Chairman's Statement and the Group Operational
Review.
2023 2022 Change
£m £m %
DX Express 188.4 171.3 10.0%
DX Freight 282.8 256.9 10.1%
Revenue 471.2 428.2 10.0%
Cash flow
2023 2022
£m £m
EBITDA(1) 60.2 50.3
Loss on disposal - 0.3
Movement in working capital 1.6 (6.9)
Exceptional items - (1.6)
Interest paid (5.1) (4.7)
Tax paid (1.8) (0.9)
Net cash from operating activities 54.9 36.5
Cash flow from operating activities was £54.9 million compared with £36.5
million in the previous year. The previous year included the repayment of
£6.0 million of deferred VAT and other payments which were originally
deferred in the 2020 financial year.
Working capital increased by £1.6 million in the year (2022: reduced by £6.9
million). The working capital movement returned to normal in 2023 following
the large, deferred payments referred to above made in the previous year.
Working capital movements included a reduction of £0.5 million, compared with
a reduction of £1.2 million in the previous year, related to Exchange &
Mail deferred income.
No exceptional items arose in 2023. In the previous financial year, the Group
incurred £1.6 million of legal and advisory costs on the investigation of and
inquiry into the corporate governance matter.
Interest paid was slightly higher than in the previous financial year,
reflecting an increase in interest on lease payments, linked to a rise in
right-of-use assets. Tax paid was in relation to instalments on account for UK
corporation tax and to the Group's Irish operations.
Net assets
Net assets increased by £13.2 million to £68.6 million (2022: £55.4
million), reflecting the profit for the year excluding the share-based
payments charge.
1 July 2023 2 July 2022
£m £m
Non-current assets 166.4 145.3
Current assets excluding cash 47.8 44.6
Cash and cash equivalents 37.6 27.0
Current liabilities excluding debt (81.6) (74.9)
Non-current liabilities (101.6) (86.6)
Net assets 68.6 55.4
Net Cash
Net cash at 1 July 2023 was better than expected at £37.6 million (2022:
£27.0 million), reflecting the profit for the year, a net cash inflow on
working capital, and £10.9 million of capital expenditure.
The Group's only borrowing facility is a £20.0 million invoice discounting
facility with Barclays Bank plc, which was renewed during the year. Drawings
on the invoice discounting facility at 1 July 2023 were £nil (2022: £nil)
and it was undrawn throughout the year.
1 July 2023 2 July 2022
£m £m
Cash and cash equivalents 37.6 27.0
Net cash(1) 37.6 27.0
1 See notes 2 and 18 to the Financial Statements for
details of APMs used, which are non-IFRS measures. The notes include details
of where reconciliations of APMs to IFRS reported measures can be found.
Capital expenditure
Capital expenditure for the year was £10.9 million (2022: £6.2 million).
Capital expenditure consisted principally of investment in IT equipment and
development, operational equipment including EVs, leasehold improvements at
new depots and property improvements.
2023 2022
£m £m
IT hardware and development costs 2.1 1.9
Property costs 6.2 3.2
Operations and service development 2.6 1.1
Total capex 10.9 6.2
Deferred taxation
As a consequence of the improving results and a reforecasting of business
plans, DX is confident of future taxable profits. Under IAS 12, 'Income
Taxes', a deferred tax asset is recognised for deductible temporary
differences and unused tax losses (tax credits) carried forward, to the extent
that it is probable that future taxable profits will be available.
Management considers that DX is eligible to recognise the deferred tax asset
on losses carried forward. In the current year, this has resulted in a
deferred tax asset at 1 July 2023 of £3.7 million (2022: £5.5 million).
Expected utilisation of losses in the year along with other timing differences
resulted in a deferred tax charge of £1.8 million (2022: deferred tax charge
of £2.0 million) being recognised in the income statement.
Adjusted profit and Earnings per share
Adjusted earnings per share, which excludes amortisation of acquired
intangibles, exceptional items, and share-based payment charge, was 4.1p
(2022: 2.9p).
2023 2022
£m £m
Profit from operating activities 30.0 22.1
Add back:
- Exceptional items - 1.6
- Share-based payments charge 1.4 1.2
Adjusted profit from operating activities 31.4 24.9
- Net finance costs (4.6) (4.7)
Adjusted profit before tax 26.8 20.2
Tax (2.6) (3.4)
Adjusted profit after tax 24.2 16.8
Adjusted earnings per share (pence) 4.1 2.9
Basic earnings per share (pence) 3.9 2.4
Dividends
The Board recommenced dividend payments during the financial year, with the
payment of an interim dividend of 0.5p per share on 31 March 2023. It is now
pleased to propose a final dividend of 1.0p per share (2022: nil). This takes
the total dividend for the year to 1.5p per share in line with the Company's
dividend policy (2022: nil).
The final dividend will be paid on 7 December 2023 to shareholders on the
register on 17 November 2023, subject to shareholder approval at the
forthcoming AGM on 23 November 2023.
As previously outlined, dividends are anticipated to be paid in a ratio of
approximately one-third interim dividend: two-thirds final dividend. It is
also anticipated that annual dividends will be covered between two-three times
by adjusted earnings per share.
David Mulligan
Chief Financial Officer
Consolidated statement of comprehensive income
for the YEAR ENDED 1 JULY 2023
Year Year
ended ended
1 July 2 July
2023 2022
Notes £m £m
Revenue 5 471.2 428.2
Operating costs 7 (441.2) (406.1)
Profit from operating activities 30.0 22.1
Analysis of profit from operating activities
Earnings before interest, tax, depreciation, amortisation and share-based 60.2 50.3
payments ("EBITDA"(1))
Depreciation 7 (27.9) (24.4)
Amortisation of software and development costs 7 (0.6) (0.6)
Exceptional items 8 - (1.6)
Share-based payments charge relating to SAYE (0.3) (0.4)
Share-based payments charge relating to PSP (1.4) (1.2)
Profit from operating activities 30.0 22.1
Finance income 9 0.5 -
Finance costs 9 (5.1) (4.7)
Profit before tax 25.4 17.4
Tax expense 10 (2.6) (3.4)
Profit for the year 22.8 14.0
Other comprehensive income/(expense) not subsequently reclassified
Other comprehensive income/(expense) - -
Total comprehensive income for the year 22.8 14.0
Earnings per share (pence):
Basic 12 3.9 2.4
Diluted 12 3.8 2.2
1 See notes 2 and 18 to the Financial Statements for details of APMs used,
which are non-IFRS measures. The notes include details of where
reconciliations of APMs to IFRS reported measures can be found.
Consolidated statement of financial position
as at 1 JULY 2023
Notes 1 July 2 July
2023 2022
£m £m
Non-current assets
Property, plant and equipment 20.5 14.5
Right-of-use assets 11 111.2 94.2
Intangible assets and goodwill 31.0 31.1
Deferred tax assets 14 3.7 5.5
Total non-current assets 166.4 145.3
Current assets
Trade and other receivables 47.2 44.6
Current tax receivable 0.6 -
Cash and cash equivalents 37.6 27.0
Total current assets 85.4 71.6
Total assets 251.8 216.9
Equity
Share capital 6.0 5.7
Share premium 25.2 25.2
Retained earnings 37.4 24.5
Total equity 68.6 55.4
Non-current liabilities
Provisions 7.1 7.0
Lease liabilities 15 94.5 79.6
Total non-current liabilities 1,016.6 86.6
Current liabilities
Trade and other payables 46.0 40.7
Current tax payable - 0.4
Lease liabilities 15 23.6 20.7
Deferred income 9.7 10.2
Provisions 2.3 2.9
Total current liabilities 81.6 74.9
Total liabilities 183.2 161.5
Total equity and liabilities 251.8 216.9
Consolidated statement of changes in equity
for the YEAR ENDED 1 JULY 2023
Share Share Retained earnings Total
capital premium £m £m
£m £m
At 3 July 2021 5.7 25.2 8.9 39.8
Total comprehensive income for the year
Profit for the year - - 14.0 14.0
Total comprehensive income for the year - - 14.0 14.0
Transactions with owners of the Company, recognised directly in equity
Share-based payment transactions - - 1.6 1.6
Total transactions with owners of the Company - - 1.6 1.6
At 2 July 2022 5.7 25.2 24.5 55.4
Total comprehensive income for the year
Profit for the year - - 22.8 22.8
Total comprehensive income for the year - - 22.8 22.8
Transactions with owners of the Company, recognised directly in equity
Equity dividends paid - - (3.0) (3.0)
Share-based payment transactions - - 1.7 1.7
Exercise of share options 0.3 - (8.6) (8.3)
Total transactions with owners of the Company 0.3 - (9.9) (9.6)
At 1 July 2023 6.0 25.2 37.4 68.6
Consolidated statement of cash flows
for the YEAR ENDED 1 JULY 2023
Notes Year ended Year
1 July ended
2023 2 July
£m 2022
£m
Cash flow from operating activities
Profit for the year 22.8 14.0
Adjustments for:
- Depreciation 7 27.9 24.4
- Amortisation of intangible assets 7 0.6 0.6
- Interest receivable 9 (0.5) -
- Interest payable 9 5.1 4.7
- Tax expense 10 2.6 3.4
- Loss on disposal of intangible assets - 0.3
- Equity-settled share-based payment transactions 1.7 1.6
Net cash profit 60.2 49.0
Changes in:
- Trade and other receivables (2.6) (4.7)
- Trade and other payables 5.2 (3.1)
- Deferred income (0.5) (1.2)
- Provisions (0.5) 2.1
Net change in working capital 1.6 (6.9)
Net cash generated from operations 61.8 42.1
Interest paid (5.1) (4.7)
Tax paid (1.8) (0.9)
Net cash generated from operating activities 54.9 36.5
Cash flows from investing activities
Interest received 0.5 -
Acquisition of property, plant and equipment (10.4) (5.6)
Software and development expenditure (0.5) (0.6)
Net cash used in investing activities (10.4) (6.2)
Net increase in cash before financing activities 44.5 30.3
Cash flows from financing activities
Lease repayments - capital element (22.6) (20.1)
Share options exercise costs paid (8.6) -
Equity dividends paid (3.0) -
Issue of shares 0.3 -
Net cash used in financing activities (33.9) (20.1)
Net increase in cash and cash equivalents 10.6 10.2
Cash and cash equivalents at beginning of year 27.0 16.8
Cash and cash equivalents at end of year 37.6 27.0
Notes to the financial statements
for the YEAR ENDED 1 JULY 2023
1 Reporting entity
The principal activity of DX (Group) plc ("the Company") and its subsidiaries
(together, "the Group" or "DX") is the provision of delivery solutions,
including parcel, freight, secure courier and logistics services. The Company
is incorporated and domiciled under the applicable law of England and Wales.
The address of its registered office is: Ditton Park, Riding Court Road,
Datchet, Slough, SL3 9GL. The Company is a public company limited by shares
and its registered number is 08696699.
2 Basis of preparation
This preliminary consolidated financial information has been prepared in
accordance with UK-adopted International Accounting Standards. They were
authorised for issue by the Board of Directors on 2 October 2023.
The financial information set out above does not constitute the Company's
statutory consolidated accounts for the period ended 1 July 2023 or the year
ended 2 July 2022 but is derived from those accounts. Statutory consolidated
accounts for 2022 have been delivered to the registrar of companies, and those
for 2023 will be delivered following the Company's AGM. The auditor has
reported on those accounts; the reports for 2022 and 2023 were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
The Group uses alternative performance measures ("APMs") to measure
performance. These APMs have been calculated consistently to enable
comparability from one year to the next and the Directors believe that this
information is important for the shareholders as it allows them to understand
the difference between the reported results and the trading performance
excluding certain non-cash charges and items which are not expected to recur.
These measures are not defined by International Financial Reporting Standards
("IFRS") and therefore may not be directly comparable to similar measures
adopted by other companies. These APMs should be considered in addition to,
and are not intended to be a substitute for, or superior to, IFRS measures but
provide useful information on the performance of the group and underlying
trends. The Group presents EBITDA, adjusted operating profit, adjusted PBT,
adjusted EPS, and net cash which are further explained in note 18.
Going concern
The Financial Statements have been prepared on a going concern basis, which
the Directors consider to be appropriate as they are confident the Group and
the Company will have sufficient funds to continue to meet its liabilities as
they fall due for at least 12 months from the date of approval of the
financial statements.
The Directors have prepared cash flow forecasts for a period from the date of
approval of these Financial Statements up to 28 June 2025 under two different
scenarios.
The base case assumes that the Group achieves its budgeted levels of new
business and overall performance in the year to 29 June 2024 and then
maintains its positive momentum in the following year. For the period from the
year end to the date of this report, the Company has performed in line or
better than its forecasts. This gives the Board confidence that the Company
will continue to meet its forecasts.
The Directors also carried out a reverse stress test that calculates the
losses that would be required to exhaust its cash reserves. The results of
this test were that the Group's profit from operating activities would have to
be at least £32.0 million per year worse than the base case to require any
use of the invoice discounting facility. The Directors regard such an outcome
as highly implausible given the Group's recent results and prospects. There
would also be a range of mitigating actions the Directors would take to reduce
the impact of such a large fall in the Group's performance.
The base case and the reverse stress test indicate that the Group will have
sufficient funds to meet its liabilities as they fall due for that period.
This is made up of the Group's net cash which stood at £37.6 million at the
2023 year end (2022: £27.0 million), and access to a £20 million invoice
discounting facility. While the invoice discounting facility is cancellable by
either party on a three-month notice period, the Directors are confident that
it will remain available throughout the forecast period. It is noted that
neither the base case nor the reverse stress test relies on the invoice
discounting facility being available. See note 13 for further information on
the Group's borrowing facilities.
Consequently, the Directors are confident that the Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of the financial statements and
therefore have prepared the financial statements on a going concern basis.
3 Significant accounting policies
The accounting policies applied in these unaudited condensed Financial
Statements are consistent with those set out in the annual report and accounts
for the year ended 2 July 2022, except as noted in note 4 below for new
standards adopted.
4 New accounting standards
New accounting standards adopted by the Group
The following new or amended standards became effective for the financial
year; none of which had a significant effect on the Group:
· Amendments to IAS 16, 'Property, Plant and Equipment-Proceeds before
Intended Use';
· Annual improvements to IFRS Standards 2018-2020;
· Amendments to IFRS 3, 'Reference to the Conceptual Framework';
· Amendments to IAS 37, 'Onerous Contracts - Cost of Fulfilling a
Contract';
· International Tax Reform - Pillar Two Model Rules (Amendments to IAS
12) - application of the exception and disclosure of that fact
New accounting standards in issue but not yet effective
At the date of authorisation of these financial statements, the following
standards and amendments, which have not been applied in these financial
statements, were in issue but are either not yet effective or have not yet
been adopted by the UK:
· IFRS 17, 'Insurance Contracts';
· Amendments to IFRS 17;
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12);
· Initial Application of IFRS 17 and IFRS 9 - Comparative Information
(Amendment to IFRS 17);
· Definition of Accounting Estimates (Amendments to IAS 8);
· International Tax Reform - Pillar Two Model Rules (Amendments to IAS
12) - other disclosure.
The Directors do not expect that the adoption of the changes to standards
listed above will have a material impact on the Group.
5 Revenue
In the following table, revenue is disaggregated by service. The table also
includes a reconciliation of the disaggregated revenue with the Group's
reportable segments (see note 6).
2023 2022
£m £m
DX Freight:
- 1-Man 220.6 195.5
- 2-Man & Logistics 62.2 61.4
Total DX Freight 282.8 256.9
DX Express:
- Parcels 156.4 135.3
- Exchange & Mail 32.0 36.0
Total DX Express 188.4 171.3
Total revenue 471.2 428.2
Revenue is recognised at a point in time for all services with the exception
of Document Exchange, which is recognised over time.
Deferred income shown on the Consolidated Statement of Financial Position will
be recognised as revenue within 12 months.
6 Segment information
2023
DX DX
Freight Express Central Total
£m £m £m £m
Revenue 282.8 188.4 - 471.2
Costs before overheads (218.4) (155.6) - (374.0)
Profit before overheads 64.4 32.8 - 97.2
Overheads (6.9) (8.1) (22.0) (37.0)
EBITDA 57.5 24.7 (22.0) 60.2
Depreciation and amortisation (19.7) (7.0) (1.8) (28.5)
Share-based payments charge - - (1.7) (1.7)
Profit/(loss) from operating activities 37.8 17.7 (25.5) 30.0
Finance income - - 0.5 0.5
Finance costs - - (5.1) (5.1)
Profit/(loss) before tax 37.8 17.7 (30.1) 25.4
Tax expense - - (2.6) (2.6)
Profit/(loss) for the year 37.8 17.7 (32.7) 22.8
2022
DX DX
Freight Express Central Total
£m £m £m £m
Revenue 256.9 171.3 - 428.2
Costs before overheads (202.9) (142.4) - (345.3)
Profit before overheads 54.0 28.9 - 82.9
Overheads (6.2) (7.9) (18.5) (32.6)
EBITDA 47.8 21.0 (18.5) 50.3
Depreciation and amortisation (16.7) (6.5) (1.8) (25.0)
Exceptional items - - (1.6) (1.6)
Share-based payments charge - - (1.6) (1.6)
Profit/(loss) from operating activities 31.1 14.5 (23.5) 22.1
Finance costs - - (4.7) (4.7)
Profit/(loss) before tax 31.1 14.5 (28.2) 17.4
Tax expense - - (3.4) (3.4)
Profit/(loss) for the year 31.1 14.5 (31.6) 14.0
The Executive Directors are considered to be the chief operating decision
maker ("the CODM"). The CODM considers there to be two separate operating
segments, DX Freight and DX Express, which are also reporting segments. The
profitability of these two divisions is reviewed and managed separately, with
the exception of certain overheads which are integrated across the two
divisions. Profit from operating activities of the two divisions is shown
above before any allocation of these central overheads between DX Freight and
DX Express. Central overheads comprise costs relating to finance, legal,
personnel, property, internal audit, IT, procurement and administrative
activities which cannot be specifically allocated to an individual division.
The CODM considers that assets and liabilities are reviewed on a Group basis,
therefore, no segment information is provided for these balances. The CODM
considers there to be only one material geographical segment, being the
British Isles.
7 Operating costs
2023 2022
£m £m
Direct costs 316.0 291.2
Indirect costs 58.0 54.1
Overheads 37.0 32.6
Depreciation and amortisation 28.5 25.0
Exceptional items - 1.6
Share-based payments charge 1.7 1.6
Total operating costs 441.2 406.1
Direct costs are variable costs linked to the volume of parcels and freight
collected and delivered and include the costs of driver and warehouse staff,
vehicle consumable costs, subcontractor drivers and agency labour. Indirect
costs are related to the cost of running the depot network and include
depot-based staff, property-based running costs and compliance costs.
Overheads are the cost of Group and divisional management, and central support
functions. Depreciation and amortisation relate to right-of-use vehicle and
property assets as well as intangible and tangible fixed assets.
The following items have been charged/(credited) within operating costs:
2023 2022
£m £m
Employee benefit expense) 141.0 125.0
Depreciation of property, plant and equipment 4.4 3.4
Depreciation of right-of-use assets 23.5 21.0
Amortisation of intangible assets 0.6 0.6
Loss on disposal of intangible assets - 0.3
Short-term and low-value leases 1.1 1.4
8 Exceptional items
2023 2022
£m £m
Exceptional items - 1.6
In the 2022 financial year, the Group incurred £1.6 million of legal and
advisory costs on the investigation of and inquiry into a corporate governance
matter. The costs of this one-off event were charged as exceptional items to
not distort to the Group's underlying costs.
9 Net finance costs
2023 2022
£m £m
Finance income
Interest receivable 0.5 -
Total finance income 0.5 -
Finance costs
Interest on lease liabilities (5.1) (4.7)
Total finance costs (5.1) (4.7)
Net finance costs (4.6) (4.7)
10 Tax expense
(a) Analysis of charge in year
2023 2022
£m £m
Current tax
United Kingdom corporation tax:
Current year (0.2) (0.6)
Adjustments in respect of prior periods - (0.2)
Total United Kingdom corporation tax (0.2) (0.8)
Overseas taxation (0.6) (0.6)
Total current tax (0.8) (1.4)
Deferred tax
Current year (2.6) (2.6)
Recognition of previously unrecognised deferred tax asset - 0.6
Adjustments in respect of prior periods 0.5 -
Changes in tax rates 0.3 -
Total deferred tax (1.8) (2.0)
Total tax (2.6) (3.4)
(b) Factors affecting the tax expense for year
The tax expense for the year differs from the expected amount that would arise
using the weighted average rate of corporation tax in the UK for each year.
The differences are explained below:
2023 2022
£m £m
Profit before tax 25.4 17.4
Tax @ 20.5% / 19% (5.2) (3.3)
UK taxable losses utilised - 0.1
Adjustments in respect of prior years 0.6 (0.1)
Effect of different tax rates 0.4 0.3
Non-deductible expenditure (0.5) (0.4)
Corporation tax relief on share options exercised 2.1 -
Tax (expense)/credit (2.6) (3.4)
(c) Factors that may affect future tax charges
Changes to UK corporation tax rates were enacted as part of The Finance (No.2)
Act 2021, which received Royal Assent on 10 June 2021. The main rate increased
from 19% to 25% on 1 April 2023. Deferred tax assets and liabilities have
been calculated in accordance with the enacted rates. Tax losses carried
forward and available to the Group as at 1 July 2023 totalled £12.7 million
(2022: £19.1 million).
11 Right-of-use assets
Property Non-property Total
£m £m £m
Cost
At 4 July 2021 62.9 32.5 95.4
Additions 15.3 4.5 19.8
Depreciation (10.5) (10.5) (21.0)
Net book value as at 2 July 2022 67.7 26.5 94.2
Additions 22.3 18.2 40.5
Depreciation (11.9) (11.6) (23.5)
Net book value as at 1 July 2023 78.1 33.1 111.2
12 Earnings per share
The calculation of basic earnings per share at 1 July 2023 is based on the
profit after tax for the year and the weighted average number of shares in
issue.
Adjusted earnings per share is calculated based on the profit after tax,
adjusted for certain non-cash charges and other items which are not expected
to recur. The Group does not adjust for share-based payments relating to the
Save As You Earn ("SAYE") scheme. Adjusted earnings per share represents an
APM. Further details about the use of APMs are detailed in notes 2 and 18.
Diluted earnings per share is calculated based on the weighted average number
of shares in issue, adjusted for any potentially dilutive share options issued
under the Group's share option programmes. Where there is an adjusted loss for
the period, no adjustment is made for share options issued under the Group's
share option programmes as these would reduce the loss per share.
2023 2022
£m £m
Profit for the year 22.8 14.0
Adjusted for:
- Share-based payments charge relating to PSP 1.4 1.2
- Exceptional items - 1.6
Adjusted profit for the year 24.2 16.8
2023 2022
Number Number
(million) (million)
Weighted average number of Ordinary Shares in issue 588.6 573.7
Potentially dilutive share options 13.0 71.5
Weighted average number of diluted Ordinary Shares 601.6 645.2
2023 2022
p P
Basic earnings per share 3.9 2.4
Diluted earnings per share 3.8 2.2
Adjusted earnings per share 4.1 2.9
2023 2022
Number Number
(million) (million)
Potentially dilutive share options 13.0 71.5
13 Loans and borrowings
The Group has access to a £20.0 million invoice discounting facility with
Barclays Bank plc. The facility is a rolling facility with three months'
notice by either party. The available balance is based on 90% of the
outstanding trade receivables, adjusted to exclude amounts billed in advance
and old debt. The amount drawn on the invoice discounting facility at 1 July
2023 was £nil (2022: £nil). No amounts were drawn on the invoice discount
facility during the year to 1 July 2023 (2022: £nil).
Amounts due under the invoice discounting facility are secured by means of a
charge over trade receivables and over the general assets of DX Network
Services Limited.
14 Deferred tax assets
£m
At 4 July 2021 7.5
Credited to the income statement (2.0)
At 2 July 2022 5.5
At 3 July 2022 5.5
Charged to the income statement (1.8)
At 1 July 2023 3.7
The deferred tax asset is made up as follows:
2023 2022
£m £m
Capital allowances 0.1 1.0
Other temporary differences 0.4 0.4
Trading losses 3.2 4.1
3.7 5.5
The main rate for corporation tax increased from 19% to 25% from 1 April 2023.
The deferred tax asset is expected to be utilised by 30 June 2024, therefore a
rate of 25% has been used to determine the deferred tax asset balance.
The unrecognised deferred tax assets of the Group at 1 July 2023 total £0.2
million (2022: £0.5 million) consisting of unused tax losses. There are no
unrecognised deferred tax assets for the Company at 1 July 2023 (2022: £nil).
15 Lease liabilities
Leases typically consist of leases for premises, vehicles and equipment such
to support operations and to help service the Group's customers. Leases of
land and buildings are usually subject to rent reviews at specified intervals
and provide for the lessees to pay all insurance, maintenance and repair
costs.
2023 2022
Maturity analysis - contractual undiscounted cash flows £m £m
Less than one year 28.5 25.5
One to five years 75.4 67.2
More than five years 35.0 28.3
Total undiscounted lease liabilities at year end 138.9 121.0
2023 2022
£m £m
Current
Lease liabilities 23.6 20.7
Non-current
Lease liabilities 94.5 79.6
Lease liabilities included in the statement of financial position at year end 118.1 100.3
16 Dividends
2023 2022 2023 2022
Pence per share Pence per share £m £m
£m
Amounts recognised as distributions to shareholders in the year/
Interim dividend of current financial year 0.5 - 3.0 -
Proposed final dividend at financial year end 1.0 - 6.0 -
The proposed final dividend was approved by the Board on 2 October 2023 and is
subject to shareholders' approval at the Annual General Meeting. If approved,
it will be paid on 7 December 2023 to shareholders on the register as at 17
November 2023. No amount for the proposed final dividend has been recognised
at the balance sheet date.
17 Related party transactions
The following transactions were carried out with connected parties:
Key management personnel
Key management comprises the Executive Directors and the Non-executive
Directors of the Group. The key management compensation is as follows:
2023 2022
£000 £000
Salaries, fees and other short-term employee benefits 1,537 1,056
Pension contributions 12 -
Social security costs 1,264 721
Share-based payments 317 815
3,130 2,592
Sales and purchases of goods and services
There were no related party transactions relating to the sales and purchases
of goods and services to disclose.
18 Alternative performance measures ("APMs")
The Group uses APMs to measure performance. These APMs are applied
consistently from one year to the next and the Directors believe that this
information is important for the shareholders as it allows them to understand
the difference between the reported results and the trading performance
excluding certain non-cash charges and other items which are not expected to
recur. These measures are not defined by IFRS and therefore may not be
directly comparable to similar measures adopted by other companies. These
alternative performance measures should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS measures but provide
useful information on the performance of the Group and underlying trends.
Various measures of performance and profitability are industry standard and
are used by shareholders and potential investors to compare performance with
industry peers.
The Group presents EBITDA, adjusted profit before tax ("adjusted PBT"),
adjusted profit per share ("adjusted EPS") and adjusted profit from operating
activities, which are calculated as the statutory measures stated before
amortisation of acquired intangibles, any exceptional items and share-based
payments charge relating to the PSP scheme, including related tax where
applicable. The Group adjusts for share-based payments due to the one-off
nature of the Recovery Awards in driving the turnaround of the business in the
short term. The Group does not adjust for share-based payments relating to the
SAYE scheme. The Group also presents net cash/net debt, calculated as gross
debt before debt issue costs and net of cash. The reconciliations between
these APMs and the IFRS reported measures are shown in the locations detailed
below:
APM IFRS reported measure Location of reconciliation
EBITDA Profit from operating activities Financial Review
Adjusted PBT Profit before tax Financial Review
Adjusted EPS Profit per share Note 22
Adjusted profit from operating activities Profit from operating activities Financial Review
Adjusted operating profit margin Profit from operating activities Financial Review
Net cash/net debt Cash and cash equivalents/loans and borrowings Financial Review
19 Events subsequent to the period event
On 11 September 2023 the Company announced that it had received a non-binding
and conditional proposal from H.I.G. European Capital Partners LLP ("H.I.G.")
regarding a possible all cash offer for the Company at a price of 48.5p per DX
share (the "Proposal"). The Proposal is subject to the satisfaction or waiver
by H.I.G. of a number of pre-conditions, including the completion of
satisfactory due diligence. There can be no certainty that an offer will be
made nor as to the terms on which any offer might be made.
Forward-looking statements
This announcement may include certain forward-looking statements, beliefs or
opinions, including statements with respect to DX's business, financial
condition and results of operations. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "anticipates", "targets", "aims",
"continues", "expects", "intends", "hopes", "may", "will", "would", "could" or
"should" or, in each case, their negative or other various or comparable
terminology. These statements are made by the DX Directors in good faith based
on the information available to them at the date of this announcement and
reflect the DX Directors' beliefs and expectations. By their nature, these
statements involve risk and uncertainty because they relate to events and
depend on circumstances that may or may not occur in the future. A number of
factors could cause actual results and developments to differ materially from
those expressed or implied by the forward-looking statements, including,
without limitation, developments in the global economy, changes in UK
government policies, spending and procurement methodologies, and failure in
health, safety or environmental policies.
No representation or warranty is made that any of these statements or
forecasts will come to pass or that any forecast results will be achieved.
Forward-looking statements speak only as at the date of this announcement and
DX (Group) plc and its advisers expressly disclaim any obligations or
undertaking to release any update of, or revisions to, any forward-looking
statements in this announcement. No statement in the announcement is intended
to be, or intended to be construed as, a profit forecast or to be interpreted
to mean that earnings per DX (Group) plc share for the current or future
financial years will necessarily match or exceed the historical earnings. As a
result, you are cautioned not to place any undue reliance on such
forward-looking statements.
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