REG - DX (Group) PLC - Final Results
08/11/2021 07:05
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RNS Number : 5713R DX (Group) PLC 08 November 2021
8 November 2021
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 Unaudited results for the 53 weeks ended 3 July 2021
Very strong results
Group is well-positioned and further progress is expected
Financial Key Points
53 weeks to 52 weeks to Change
3 July 2021 27 June 2020
Unaudited Audited
Revenue £382.1m £329.3m +16%
EBITDA(1) £38.6m £24.9m +55%
Underlying profit from operating activities(1) £16.5m £4.5m +266%
Reported profit from operating activities £15.1m £3.0m +403%
Adjusted profit before tax(1) £12.0m £0.2m +6000%
Statutory profit /(loss) before tax £10.6m £(1.3)m +£11.9m
Adjusted earnings/(loss) per share 2.0p (0.1)p +2.1p
Basic earnings/(loss) per share 2.7p (0.3)p +3.0p
Net cash(1,2) £16.8m £12.3m +37%
Cash flow from operating activities £28.1m £33.5m - £5.4m
· 16% revenue growth primarily driven by very strong performance at DX
Freight
· Group EBIT margin(1) increased to 4.4% (2020: 1.2%); longer-term
target remains 7.5% - 10.0%
· First full year statutory PBT achieved, in line with turnaround plans
· Capital investment of £6.0m (2020: £3.4m) in depot network
expansion, equipment and IT
· £0.6m of coronavirus-related furlough payments in respect of
2020/2021 repaid
Operational Key Points
· DX Freight:
- Revenue up 32% to £223.0m (2020: £169.0m) and operating profit of
£22.9m (2020: loss of £0.6m)
- Divisional operating margin increased to 10.3% (2020: (0.4%)),
reflecting higher volumes, operational leverage and efficiency improvements
- Focus on customer service supported new business wins and customer
retention
- Three new depots were opened, at Oxford, Westbury and Burnley, and
three depots upgraded, at Glasgow, Heathrow and Hoddesdon
· DX Express:
- Revenue of £159.1m (2020: £160.3m) and operating profit of £12.4m
(2020: £22.9m)
- Division was significantly impacted by coronavirus restrictions,
including further national lockdowns, which affected its Legal and High-street
activities
- Very strong wins in Parcels offset cessation of HMPO contract in Q4
FY 2020
- Separation of Document Exchange and Parcels delivery network
completed
- Pilot of new Digital Portal for Exchange members launched, enabling
secure digital file sharing and easy access to Parcels service
- Three new depots were opened, at Glasgow, Rotherham and
Middlesbrough, with Grimsby moving to larger premises
Outlook
· Three-year capital investment programme costing £20m - £25m
launched to support growth
· Reinstatement of the dividend will be considered as soon as
appropriate and alongside capital allocation plans
· Although there are ongoing trading challenges, including HGV driver
shortages and global supply chain disruptions, the Board remains confident of
further progress and DX continues to win new business and increase its market
share
Lloyd Dunn, CEO of DX (Group) plc, commented:
"Results are significantly ahead of our original expectations, and we have
achieved a key milestone of full year statutory pre-tax profits, in line with
our turnaround plans set in 2018.
"DX Freight fuelled this excellent performance while DX Express was
significantly impacted by coronavirus restrictions, which affected our Legal
and High-street activities in particular, although the division's Parcels
operations grew significantly.
"Despite the ongoing challenges, including driver shortages and global supply
chain disruptions, we remain confident of further progress over the new
financial year. We have now launched a second major capital investment
programme of between £20m-£25m to be invested over the next three years to
support our growth plans. We believe DX remains well-placed to continue to
increase its market share."
Notes
(1) See notes 2 and 17 to the Financial Statements for details of
alternative performance measures ("APMs") used, and details of where
reconciliations of APMs to IFRS reported measures can be found.
(2) The cash balance included agreed coronavirus-related deferred payments
of £6.0 million (2020: £10.4 million); thereby, net underlying cash was
£10.8 million (2020: net underlying cash £1.9 million).
Enquiries:
DX (Group) plc www.dxdelivery.com
Lloyd Dunn, Chief Executive Officer T: 020 3178 6378
David Mulligan, Chief Financial Officer (c/o KTZ Communications)
finnCap (Nominated Advisor and Joint Broker to DX) T: 020 7220 0500
Matt Goode/Simon Hicks (Corporate Finance)
Andrew Burdis/Charlotte Sutcliffe (Corporate Broking)
Liberum (Joint Broker to DX) T: 020 3100 2000
Robert Morton/Nick How/William Hall
KTZ Communications T: 020 3178 6378
Katie Tzouliadis/Dan Mahoney
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 conveyors.
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.
The information communicated in this announcement contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) No.
596/2014.
CHAIRMAN'S STATEMENT
STRONG OPERATIONAL AND FINANCIAL PROGRESS
Introduction
Last year's full year results marked the completion of the first phase of DX's
turnaround with the Group's return to adjusted pre-tax profit. We reported at
the time that the business was in a strong position to increase sales and
rebuild profitability by focusing on efficiency, productivity and margins. I
am now very pleased to announce annual results that are significantly ahead of
our original expectations and also ahead of revised market expectations.
Despite the challenges that the coronavirus pandemic presented for certain
segments of our business, we made very strong operational and financial
progress over the financial year, with significant increases in both revenue
and profitability. Growth was primarily driven by the DX Freight division,
which outperformed management objectives for the year. DX Express's
performance was significantly impacted by the second national lockdown;
however, it made very strong progress in its Parcels activity.
The Group's excellent results are underpinned by our continuing focus on high
customer service levels and the initiatives we took to improve efficiencies
and productivity. Our focus remains on rebuilding profitability and moving
Group EBIT margins towards our target of 7.5-10%, which is approximately
double the adjusted operating profit margin of 4.4% achieved in these results.
We have also launched a major new capital investment programme to further
expand our depot network and support our growth plans. We remain confident of
further progress over the new financial year.
Financial Results
Revenue for the 53 weeks ended 3 July 2021 increased by 16% to £382.1 million
(2020: £329.3 million), adjusted pre-tax profit showed a marked improvement,
rising to £12.0 million (2020: £0.2 million), and adjusted earnings per
share recovered to 2.0p (2020: loss of 0.1p). The statutory profit before
taxation was £10.6 million (2020: loss £1.3 million) and earnings per share
was 2.7p (2020: loss 0.3p).
Net cash generated by operating activities was very strong at £28.1 million
(2020: £33.5 million). At the financial year end, £6.0 million (2020: £10.4
million) of agreed coronavirus-related payment deferrals (mainly VAT) were
outstanding, and these will be repaid over the next few months. A total of
£4.4 million of payment deferrals were repaid in the financial year.
In light of the Group's strengthening performance and financial position
during the year, we also took the decision to repay the £0.6 million of
Government furlough payments received in support of the 2020/21 financial
year.
The Group's financial position remains strong, with net cash at the year end
of £16.8 million (27 June 2020: £12.3 million), a rise of 37%. The net
cash balance at the year end included agreed coronavirus-related deferred
payments of £6.0 million (2020: £10.4 million). Excluding this, underlying
net cash was £10.8 million (2020: underlying net cash £1.9 million).
The Group continues to retain a strong level of liquidity and has significant
headroom within its invoice discounting facility.
Capital allocation and dividend policy
During the financial year, we invested £5.9 million in the business (2020:
£3.4 million), completing the £10 million capital investment programme
launched in the prior financial year. The investment was focused on expanding
the depot network, upgrading operational equipment, and strengthening our IT
systems. We are now embarking on a second, larger investment programme, which
we expect to amount to between £20 million and £25 million. This will be
invested broadly evenly over the next three years, and will support our
ambitious growth plans for the Group. The focus of the investment will remain
on the depot network, parcel-handling equipment, and IT infrastructure. Over
the next two years, we plan to accelerate depot openings by adding 15 new a
across the business.
In addition, we believe that there are opportunities for us to acquire
strategic sites in key locations and to increase our hub sortation capacity.
In the current market, we also believe that there may be acquisition
opportunities, and will consider appropriate opportunities as they become
available.
The Board continues to keep under review the reinstatement of a dividend as
part of its overall approach to capital allocation. Now that DX has returned
to statutory pre-tax profit and the turnaround has established solid
foundations for ongoing profitable growth and cash generation, the Board will
review growth plans during the current financial year, and confirm its
dividend policy as part of the overall capital allocation policy. Our
intention is to make a return to the dividend lists as soon as it is
appropriate and prudent to do so.
Performance Overview
The coronavirus pandemic had significantly less of an impact on trading than
in the previous financial year. As in the prior year, we remained fully
operational as an essential service provider, and those parts of our business
exposed to B2C markets benefited from the rise in online shopping. The main
adverse impact of the pandemic environment was felt by the DX Express
division.
DX Freight, which specialises in the delivery of irregular dimension and
weight ("IDW") items, continued its strong growth momentum, with revenue up by
32% to £223.0 million (2020: £169.0 million). This was primarily fuelled by
46% revenue growth at our 1-Man service and our continued focus on customer
service levels, which helped to support new customer wins and customer
retention. Operating profit for the year increased by £23.5 million to £22.9
million (2020: loss of £0.6 million), benefiting from increased volumes, and
productivity and efficiency improvements. Operating margins recovered to 10.3%
(2020: (0.4)%).
DX Express, which specialises in the next-day delivery of time-sensitive,
mission-critical and higher-value items, was adversely affected by the impact
of the coronavirus pandemic and the second national lockdown. This hit the
division's activities for Legal and High Street customers in particular. Taken
together with the cessation of the HMPO contract in the last quarter of the
previous financial year, it meant that the division's mix of revenue was very
different compared to the prior year, and that the DX Exchange network in
particular was underutilised. Strong new business in Parcels meant that
revenue was down only 1% at £159.1 million (2020: £160.3 million). However,
operating profit decreased to £12.4 million (2020: £22.9 million). We took
the strategic step during the year of separating the DX Exchange delivery
network from the Parcels network. Although DX Exchange accounts for an
increasingly smaller proportion of revenue, it nonetheless remains an
important service that we provide, and the stand-alone network now in place
will better support this offering. We recently piloted a new portal for our DX
Exchange members, enabling secure digital sharing of fully-encrypted files,
with data hosted in the UK. The new portal enhances our service to our members
and is included in their membership. The portal will also enable members to
send physical documents and parcels by creating despatch labels for secure
delivery to business and residential addresses across the UK, as well as to
other DX Exchange members. Plans are also under way to introduce an
international express offering to members in 2022, via the portal, working
alongside a global delivery partner.
Environmental, Social and Governance
We plan to publish our carbon reduction plan during 2022. This will be a key
step forward for the Group, and brings together a number of initiatives,
already under way, into a coordinated programme that will guide our approach
over the coming five years. We are fully committed to fulfilling our part in
helping the transport sector and the UK meet its net zero target by 2050. I
have every confidence we can manage this transition while continuing to grow
the business into the medium term.
Our People
In a year when the pandemic continued to dominate both professional and home
lives, our employees have worked very hard to deliver a consistently high
level of customer service, and have shown great commitment to customers and
colleagues alike. On behalf of the Board, I would like to acknowledge
everyone's hard work and efforts in the face of these extra challenges, and to
thank all our staff and subcontractors. We have a very talented team, and
look forward to further successes in the new financial year ahead.
Outlook and Opportunities
DX made strong progress over the financial year, and the parcels market for
both DX Express and DX Freight continues to grow. We remain focused on
increasing our market share, and at the same time, we intend to increase the
Group's EBIT margin significantly over the next three years. As we utilise
existing capacity across our networks, scale capacity through new depot
openings, and invest in parcel handling equipment, we expect to drive
efficiency and productivity improvement through the business, which will
underpin margin expansion. Margin growth will also be assisted by operational
leverage. We have a very healthy pipeline of new business opportunities, which
helps to support our confidence that DX remains in a very good position to
achieve its growth objectives for the current financial year. Reflecting
this confidence, we have launched our second major capital expenditure
programme, which will invest around £20 to £25 million in the business over
the next three years.
In recent months new challenges have emerged and the macro-economic
environment has become more volatile. As well as recent shortages of HGV
drivers and other logistics industry workers, the disruption to global supply
chains has led to a number of customers experiencing stock shortages. We
have implemented a number of self-help measures to address pressures, and
there are some early signs that issues are beginning to resolve themselves.
Despite these additional challenges, DX continues to win new business and to
increase market share, and we believe that the Company remains well-positioned
to exploit market opportunities and to make progress over the financial year
in line with our targets.
Ronald Series
Chairman
Chief Executive's Review
GROWTH phase PROGRESSING WELL
We made substantial progress over the past financial year, and while our
longer-term objective for the Group is to deliver an adjusted operating
margins of 7.5-10%, we restored Group margin to 4.4% from 1.4% in the prior
financial year. This is a substantial step forward and has been built on the
foundations we put in place since starting the turnaround of the Group in
2018. The Group's commercial and operational processes are significantly
stronger now, and the management structure put in place in 2018 continues to
go from strength to strength.
The year was not without its challenges. The coronavirus pandemic continued to
adversely impact certain areas of our business, and we experienced local
disruption at times due to staff illness or isolation requirements. However,
the Group has been resilient and adapted to the challenges and we have
continued to implement our strategic growth initiatives. I would like to thank
everyone for their hard work and dedication in dealing with the challenges of
the last year. Their efforts and contributions have supported these very
strong results.
The parcel and freight markets are growing at 10%+ per annum, and we believe
that there is a substantial opportunity for us to expand and increase our
market share. To support our growth ambitions, we have launched a major new
capital investment programme worth £20 million to £25 million over the next
three years. This will be targeted across depots, equipment and IT. The
expansion of our delivery networks is central to our growth plans. We have
opened or upgraded 12 depots over the financial year, and now plan to increase
the capacity of our networks by up to a third over the next two years, adding
15 new depots across both divisions and upgrading nine existing depots. As
well as increasing our capacity, this will improve the service we provide to
our customers by becoming increasingly local to their business. It will also
drive greater efficiency and productivity by reducing the delivery distances
we have to travel.
Coronavirus Pandemic
The lessons learnt from the first national lockdown were invaluable, and our
response to the ongoing coronavirus crisis over the year as a whole was not on
the scale of the previous financial year. Only a few of our employees were on
furlough in the period, and this was largely at the start of the financial
year. Accordingly, we took the decision in May 2021 to repay the £0.6 million
we had claimed under the Government's Coronavirus Job Retention Scheme in
respect of the financial year to 3 July 2021. From March 2021, we also started
VAT repayments, having made use of the Government's VAT payment deferral
scheme in the prior financial year, 2019/20. At its peak, around £9.4 million
of VAT payments were deferred. Approximately £6.0 million of deferred VAT
remained outstanding at the financial year end, which will be fully repaid by
February 2022.
We continued to ensure that we operated in a safe manner, keeping risk
assessments and our operating protocols up to date as guidance changed. We
continue to remain vigilant so that we can respond effectively to any local
outbreaks.
The coronavirus has affected everyone in the DX family at some point and those
who have lost loved ones are in our thoughts.
Divisional Review
DX Freight
DX Freight performed very strongly with revenue increasing by 32% to £223.0
million (2020: £169.0 million) and the division moving robustly into profit,
generating £22.9 million of operating profit (2020: operating loss of £0.6
million). This strong growth was driven by the expansion of the division's
1-Man service, which increased revenue by 46% to £164.2 million (2020:
£112.4 million). Revenue at 2-Man & Logistics services grew by 4%, and
generated a higher profit contribution than last year. This reflected
productivity improvements as well as its broader customer base. The division's
operating margin was 10.3% (2020: (0.4)%), helped by the operational leverage
benefits that flowed through from increased volumes. Higher delivery
productivity and parcel sortation efficiencies also supported the improvement
in margins.
We expanded the division's depot network during the year, opening three new
depots at Oxford, Westbury and Burnley, enlarging the Glasgow site, completing
a major refurbishment at Hoddesdon, and installing new docks at our sites in
Heathrow and Glasgow. A total of £2.4 million was invested in this major
capex programme. This has helped to support the almost 50% increase in 1-Man
volumes and generated further customer service improvements. In addition, we
invested £0.5 million in parcel-handling equipment and upgraded scanning
devices, which has further improved efficiency and productivity. Since the
year end, we have opened a depot at Dewsbury, and we are planning to open a
further seven new depots and substantially upgrade five existing sites in the
next two years to support the division's growth plans.
DX Freight has strengthened its market position from a year ago, capitalising
on a growing market, its improved service levels and our very capable sales
force. The irregular dimension and weight ("IDW") market remains dominated by
a small number of players. This is because the need to provide national
coverage and increasing regulatory demands create relatively high barriers to
entry. The division has recently benefitted from a major competitor drawing
back from certain parts of the IDW market. We have taken advantage of this,
securing new IDW business as well as additional parcel volumes. The increase
in volumes has improved efficiency and productivity through greater delivery
densities and improved utilisation of existing capacity. The high operational
leverage has led to a significant recovery in the division's margins, as
additional volumes do not require a commensurate rise in fixed costs.
We estimate that the market for parcel freight is expanding at approximately
10% per annum, with Brexit driving some of this growth as businesses
increasingly 'on-shore' their supply chains in reaction to the frictions of
cross-border trading and the impact of coronavirus pandemic. Our growth of 32%
compares favourably with the overall parcel freight marketplace, and our
strategy for DX 1-Man is to continue to expand its market share and to improve
margins by increasing efficiency and productivity. As we have previously
outlined, opening new depots has several beneficial effects: it reduces stem
miles; improves our ability to win new business in the local area; enhances
service levels by being closer to our customers; and increases vehicle
productivity by enabling double delivery runs on certain routes. There are
growth opportunities for the 2-Man & Logistics business, boosted by the
trend towards outsourcing, and we intend to focus on appropriate opportunities
as demand for value-added delivery services continues. As the division grows,
we also expect to further improve operating margins.
DX Express
DX Express' performance was impacted by the coronavirus-related second
national lockdown, which affected its Legal and High Street customers in
particular, changing the revenue mix. The level of new business secured was
very encouraging. It substantially offset both the reduction in volume
following the cessation of the HMPO contract at the end of the previous
financial year and the impact on DX Exchange of lower levels of legal
activity. In total, divisional revenue decreased slightly to £159.1 million
(2020: £160.3 million), and operating profit reduced to £12.4 million (2020:
£22.9 million). The reduction in operating profit reflected the change in
revenue mix and the sub-optimal utilisation of the DX Exchange network.
Excluding HMPO volumes from comparatives, underlying Parcels' revenue grew by
29% year-on-year. Total Parcels revenue grew by 6% to £118.8 million (2020:
£112.1 million), while revenue from Exchange & Mail services decreased by
16% to £40.3 million (2020: £48.2 million). This largely accounted for the
significant contraction in the division's operating margin to 7.8% (2020:
14.3%).
We made a key operational change towards the end of the financial year and
separated the Exchange & Mail delivery network from the Parcels network.
This was to ensure that we more easily maintain our pre-9am delivery service
for our DX Exchange members, which had been adversely impacted by the
integration into the Parcels delivery network some years ago. The separation
will also free up capacity within the Parcels network to allow for planned
growth. These changes coupled with the launch of the division's Estimated Time
of Arrival ("ETA") capability in the previous financial year means the
division has a much stronger market proposition as it focuses on the
significant opportunities in the parcels market, which is growing at around
10% per annum.
In an exciting development, we piloted a new online Exchange Portal that
allows digital documents to be shared securely. This service complements the
physical collection and delivery of documents, and will give members the
choice of how they wish to have their documents delivered. The enhanced
service is offered as part of customers' membership fees.
We opened three new depots at Glasgow, Rotherham and Middlesbrough during the
year, supporting growth plans, and relocated our depot at Grimsby to larger
premises. Since the year end, depots have been opened at Luton and Verwood. We
are currently planning to add seven new depots and complete four major
upgrades to existing sites over the next two years. This will increase our
network capacity by around a third, and will drive the recovery of the
division's operating margins as we increase critical mass and improve
efficiencies and delivery productivity in the same way we have at DX Freight.
Our growth strategy for DX Express is focused on developing it as a leading
parcel delivery service for SMEs and large national customers that value a
high-quality, next-day service. At the heart of this approach is our local
customer service proposition. We believe that our local presence means that
our customer service is typically more responsive and flexible and feels more
personal. We also believe that proximity to customers generates closer
relationships over the long term, and provides an important point of
differentiation in the marketplace.
The parcels market is large and growing strongly, driven by the increase in
online buying. It is presenting plenty of new opportunities, albeit the market
is very competitive with a large number of providers. However, we are
confident that our differentiated approach puts us in a good position to grow
the division's presence in this part of the market as we continue to build a
profitable, high-quality, service-orientated parcels delivery service.
Divisions Supported by Central Teams
Central overheads for the year (including the share-based payments charge)
increased in absolute terms to £20.2 million (2020: £19.3 million), although
reduced as a percentage of revenue to 5.3% (2020: 5.9%). The year-on-year rise
reflected four main factors: higher performance-related bonuses; increased
spending on the Group's IT systems and infrastructure; higher branding costs
as we launched a scheme for our subcontractors to carry the DX livery on their
vehicles; and a slightly increased share-based payments charge following the
launch of the SAYE scheme. As the Group grows, we do not expect central
overheads to increase proportionately.
Environmental, Social and Governance
Next year we will publish our carbon reduction plan, which will outline the
steps we plan to take to reduce the carbon footprint of the business. At the
heart of this will be the decarbonisation of our vehicle fleet. While we are
very much reliant on vehicle manufacturers to produce electric vehicles with
the range and capacity to deal with the nature of the freight and parcel
traffic we carry, we are working closely with them and expect to begin the
electrification of our fleet within the next 12 months. In the medium-to-long
term, the potential transition of our trunking vehicles to hydrogen awaits a
national infrastructure to refuel such vehicles.
In the meantime, we expect regulation to change in the near future and that DX
will come under the requirements of the Taskforce for Climate-related
Financial Disclosures ("TCFD"). In anticipation of this, we are taking the
preparatory steps to meet TCFD requirements. We expect that it will take up to
two years before we are fully compliant. We have already made progress with
changes to the way we operate, including using telematics to improve fuel
consumption, renewing the fleet so we have the most up to date, fuel-efficient
vehicles and installing LED lighting across the estate. Further details of our
approach can be found in the ESG section of this report.
Summary
It has been a very successful year for DX and we have taken a major step
forward in returning the business to long-term, sustainable profits growth and
cash generation. Our hard work has seen DX Freight's operating margin rebound
closer to where it should be in the long term. DX Express was disrupted by the
coronavirus crisis, but we are investing in the network and growing its
next-day parcel delivery services while supporting its traditional Document
Exchange business, built around the delivery of documents. Like the rest of
the sector, we are facing the challenges presented by the disruption to global
supply chains and the squeeze on driver and warehouse resources. Nonetheless,
we are excited by the market opportunities we see and have ambitious growth
plans for the next five years. These will be supported by our recently
launched £20 to £25 million capital investment programme. We continue to win
market share, and I look forward to reporting on further progress over the
course of the coming year.
Lloyd Dunn
Chief Executive Officer
FINANCIAL REVIEW
STRONG RETURN TO PROFITABILITY SUPPORTED BY POSITIVE CASH GENERATION
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 28 June 2020 to 3 July 2021,
i.e. a 53-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 3 July 2021 was £382.1 million (2020:
£329.3 million) and the profit before taxation was £10.6 million (2020: loss
of £1.3 million). The earnings per share was 2.7p (2020: loss of 0.3p).
Summary
Revenue of £382.1 million was 16% ahead of the prior financial year, and
again reflects strong growth at DX Freight, where revenue increased by £54.0
million to £223.0 million, driven by expansion of its 1-Man service. This
growth was slightly offset by a small reduction in revenue at DX Express of
£1.2 million to £159.1 million, which resulted from the expected decline of
revenue from DX Exchange subscriptions, the cessation of the HMPO contract and
the impact of the coronavirus, offset in large part by securing new business
for Parcels .
Earnings before interest, tax, depreciation, amortisation and exceptional
items ("EBITDA") for the year was £38.6 million (2020: £24.9 million).
Adjusted operating profit increased to £16.5 million (2020: £4.5 million).
Adjusted profit before tax increased to £12.0 million (2020: £0.2 million).
Net cash at 3 July 2021 increased to £16.8 million (2020: £12.3 million),
which included deferred VAT of £6.0 million repayable under the Government's
new payment scheme by January 2022. Operating cash flow was £28.1 million
(2020: £33.5 million) and the cash outflow from capital expenditure was £5.9
million (2020: £3.3 million).
2021 2020
£m £m
Revenue 382.1 329.3
Earnings before interest, tax, depreciation, amortisation and share-based 38.6 24.9
payments ("EBITDA")(1)
Depreciation (21.5) (20.0)
Amortisation of software and development costs (0.4) (0.4)
Share-based payment charge - SAYE (0.2) -
Adjusted operating profit(1) 16.5 4.5
Amortisation of acquired intangibles (0.2) (0.3)
Share-based payments charge - Award shares (1.2) (1.2)
Reported profit/(loss) from operating activities 15.1 3.0
Finance costs (4.5) (4.3)
Profit/(loss) before tax 10.6 (1.3)
Tax 4.8 (0.5)
Profit/(loss) for the year 15.4 (1.8)
Other comprehensive expense - -
Total comprehensive income/(expense) for the year 15.4 (1.8)
EPS - adjusted (pence)(1) 2.0 (0.1)
- basic (pence) 2.7 (0.3)
- diluted (pence) 2.3 (0.3)
Adjusted operating profit margin(2) 4.4% 1.4%
(1 )See notes 2 and 17 to the Financial Statements for
details of alternative performance measures ("APMs") used, and details of
where reconciliations of APMs to IFRS reported measures can be found.
(2 )Adjusted operating profit margin is calculated by
dividing adjusted operating profit by revenue.
Revenue by Segment
A breakdown of Group revenue is shown below and further commentary on each
division's performance is provided in the Chairman's Statement and the Chief
Executive Officer's Review.
2021 2020 Change
£m £m %
DX Express 159.1 160.3 -1%
DX Freight 223.0 169.0 +32%
Revenue 382.1 329.3 +16%
Cash flow
2021 2020
£m £m
EBITDA 38.6 24.9
Loss on disposal 0.8 0.1
Movement in working capital excluding deferred payments (1.7) 2.7
Movement in working capital relating to deferred payments (4.4) 10.4
Interest paid (4.6) (4.2)
Tax (paid) (0.6) (0.4)
Net cash from operating activities 28.1 33.5
Cash flow from operating activities was £28.1 million, which included the
repayment of £4.4 million of VAT and other payments. These payments had been
deferred in the prior year.
Working capital decreased by £6.0 million in the year, partly because of the
deferred payments referred to above. Other working capital movements included
an expected £2.8 million decrease in DX Exchange deferred income, and a net
decrease in trade debtors and creditors.
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 the Group's Irish operations.
Net assets
Net assets increased by £16.8 million to £39.8 million (2020: £23.0
million), reflecting the profit for the year excluding the share-based
payments charge.
3 July 2021 27 June 2020
£m £m
Non-current assets 146.6 123.9
Current assets excluding cash 44.5 33.6
Cash 16.8 12.3
Invoice discounting facility - -
Current liabilities excluding debt (81.0) (73.5)
Non-current liabilities (87.1) (73.3)
Net assets 39.8 23.0
NET Cash
Net cash at 3 July 2021 was better than expected at £16.8 million (2020:
£12.3 million), reflecting the profit for the year, a net cash outflow on
working capital, £5.9 million of capital expenditure, and the repayments of
£4.4 million of deferred VAT payments referred to above.
The Group's only borrowing facility is a £20.0 million invoice discounting
facility. This is a new facility put in place during the year with Barclays
Bank plc. Drawings on the invoice discounting facility at 3 July 2021 were
£nil (2020: £nil).
3 July 2021 27 June 2020
£m £m
Cash and cash equivalents 16.8 12.3
Loans and borrowings - -
Net cash(1) 16.8 12.3
1 See notes 2 and 17 to the Financial Statements for details of alternative
performance measures ("APMs") used, and details of where reconciliations of
APMs to IFRS reported measures can be found.
Capital expenditure
Capital expenditure for the year was £6.0 million (2020: £3.4 million).
Capital expenditure consisted principally of investment in IT equipment and
development, operational equipment, leasehold improvements at new depots and
property improvements.
2021 2020
£m £m
IT hardware and development costs 1.8 1.2
Property costs 3.2 1.3
Operations and service development 1.0 0.9
Total capex 6.0 3.4
DEFERRED TAXATION
As a consequence of the improving results and a reforecasting of the
three-year business plan, DX is now 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 3 July 2021 of £7.5 million (2020: £2.3 million) with a credit
to the income statement of £5.5 million being recognised.
adjusted profit and Earnings per share
Adjusted earnings per share, which excludes amortisation of acquired
intangibles, share-based payments charge and one-off impact of recognising
deferred tax on historic losses, was 2.0p (2020: loss per share of 0.1p).
2021 2020
£m £m
Profit from operating activities 15.1 3.0
Add back:
- Amortisation of acquired intangibles 0.2 0.3
- Share-based payments charge 1.2 1.2
Adjusted profit from operating activities 16.5 4.5
- Finance costs (4.5) (4.3)
Adjusted profit before tax 12.0 0.2
Tax 4.8 (0.5)
Adjusted profit after tax 16.8 (0.3)
Adjusted earnings/(loss) per share (pence) 2.0 (0.1)
Basic earnings/(loss) per share (pence) 2.7 (0.3)
Dividends
In line with previous guidance, the Board will not be recommending the payment
of a dividend for the year ended 3 July 2021.
David Mulligan
Chief Financial Officer
UNAUDITED Consolidated statement of comprehensive income
for the YEAR ENDED 3 JULY 2021
Year Year
ended ended
3 July 27 June
2021 2020
Unaudited Audited
Notes £m £m
Revenue 5 382.1 329.3
Operating costs 7 (367.0) (326.3)
Profit from operating activities 15.1 3.0
Analysis of profit from operating activities
Earnings before interest, tax, depreciation, amortisation and share-based 38.6 24.9
payments ("EBITDA")
Depreciation (21.5) (20.0)
Amortisation of software and development costs (0.4) (0.4)
Amortisation of acquired intangibles (0.2) (0.3)
Share-based payments charge (1.4) (1.2)
Profit from operating activities 15.1 3.0
Finance costs 8 (4.5) (4.3)
Profit/(loss) before tax 10.6 (1.3)
Tax credit/(expense) 9 4.8 (0.5)
Profit/(loss) for the year 15.4 (1.8)
Other comprehensive income/(expense) not subsequently reclassified
Other comprehensive income/(expense) - -
Total comprehensive income/(expense) for the year 15.4 (1.8)
Earnings/(loss) per share (pence):
Basic 11 2.7 (0.3)
Diluted 2.3 (0.3)
UNAUDITED Consolidated statement of financial position
as at 3 JULY 2021
Notes 3 July 27 June 2020
2021 Audited
Unaudited £m
£m
Non-current assets
Property, plant and equipment 12.3 10.4
Right-of-use assets 10 95.4 80.2
Intangible assets and goodwill 31.4 31.0
Deferred tax assets 13 7.5 2.3
Total non-current assets 146.6 123.9
Current assets
Trade and other receivables 44.4 33.5
Current tax receivable 0.1 0.1
Cash and cash equivalents 16.8 12.3
Total current assets 61.3 45.9
Total assets 207.9 169.8
Equity
Share capital 5.7 5.7
Share premium 25.2 25.2
Translation reserve - -
Retained earnings 8.9 (7.9)
Total equity 39.8 23.0
Non-current liabilities
Provisions 5.8 5.0
Lease liabilities 14 81.3 68.3
Total non-current liabilities 87.1 73.3
Current liabilities
Trade and other payables 48.3 42.0
Lease liabilities 14 19.3 15.8
Deferred income 11.4 14.2
Provisions 2.0 1.5
Total current liabilities 81.0 73.5
Total liabilities 168.1 146.8
Total equity and liabilities 207.9 169.8
UNAUDITED Consolidated statement of changes in equity
for the YEAR ENDED 3 JULY 2021
Share Share Translation reserve Retained earnings Total
capital premium £m £m £m
£m £m
At 1 July 2019 (audited) 5.7 25.2 - (7.3) 23.6
Total comprehensive expense for the year
Loss for the year - - - (1.8) (1.8)
Other comprehensive expense - - - - -
Total comprehensive expense for the year - - - (1.8) (1.8)
Transactions with owners of the Company, recognised directly in equity
Share-based payment transactions - - - 1.2 1.2
Total transactions with owners of the Company - - - 1.2 1.2
At 27 June 2020 (audited) 5.7 25.2 - (7.9) 23.0
Total comprehensive expense for the year
Profit for the year - - - 15.4 15.4
Other comprehensive expense - - - - -
Total comprehensive expense for the year - - - 15.4 15.4
Transactions with owners of the Company, recognised directly in equity
Share-based payment transactions - - - 1.4 1.4
Total transactions with owners of the Company - - - 1.4 1.4
At 3 July 2021 (unaudited) 5.7 25.2 - 8.9 39.8
UNAUDITED Consolidated statement of cash flows
for the YEAR ENDED 3 JULY 2021
Notes Year ended3 July Year ended
2021 27 June 2020
Unaudited Audited
£m £m
Cash generated from operations 15 33.3 38.1
Interest paid (4.6) (4.2)
Tax paid (0.6) (0.4)
Net cash generated from operating activities 28.1 33.5
Cash flows from investing activities
Acquisition of property, plant and equipment (5.1) (2.7)
Software and development expenditure (0.8) (0.6)
Net cash used in investing activities (5.9) (3.3)
Net increase in cash before financing activities 22.2 30.2
Cash flows from financing activities
Movement on invoice discounting facility - (3.1)
Lease repayments (17.7) (16.6)
Net cash used in financing activities (17.7) (19.7)
Net increase in cash and cash equivalents 4.5 10.5
Cash and cash equivalents at beginning of year 12.3 1.8
Effect of exchange rate fluctuations on cash held - -
Cash and cash equivalents at end of year 16.8 12.3
Notes to the UNAUDITED financial statements
for the YEAR ENDED 3 JULY 2021
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 unaudited consolidated financial information has been
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006. They were authorised for
issue by the Board of Directors on 7 November 2021.
The financial information set out above does not constitute the Company's
statutory consolidated accounts for the period ended 3 July 2021. Statutory
consolidated accounts for 2020 have been delivered to the registrar of
companies. The statutory accounts are subject to completion of the audit and
may change before approval of the Annual Report. Statutory accounts for the
period ended 3 July 2021 will be delivered to the registrar of companies
following the Company's annual general meeting.
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.
The Group presents EBITDA, adjusted operating profit, adjusted PBT, adjusted
EPS, and net debt which are further explained in note 17.
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. This is notwithstanding the Group's net current
liabilities of £19.7 million as at 3 July 2021 (2020: £27.6 million).
Included within the net liabilities is £11.4 million (2020: £14.2 million)
of deferred income representing an obligation to deliver a service but not a
cash liability and £19.3 million (2020: £15.8 million) representing lease
liabilities whose payments are spread over the forthcoming year and not
payable in the immediate short-term.
The Directors have prepared cash flow forecasts for a period from the date of
approval of these financial statements up to 30 June 2023 under two different
scenarios.
The base case assumes that the impact from the latest national lockdown is now
in the past and that the Group achieves the expected levels of new business
and overall performance.
The severe but plausible downside case assumes that there will be a further
wave of disruption in January and February 2022 similar to the first lockdown
from March through June 2020 in terms of severity but without any support from
an extension to the Government's Coronavirus Job Retention Scheme. The
Directors have assumed that Group revenue will reduce by £15 million and
profit from operating activities by £9 million compared with the base case.
The base case and the severe but plausible case indicate that the Group will
have sufficient funds to meet its liabilities as they fall due for that
period. This is made up the Group's net cash which stood at £16.8 million
at the year-end (2020: £12.3 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 severe but plausible downside case relies on the
invoice discounting facility being available. See note 12 for further
information on the Group's borrowing facilities
The Directors also carried out a reverse stress test that calculates the
losses that would be required to exhaust its borrowing facilities. The
results of this test were that the Group's PBT would have to be at least
£30.0 million per year worse than the base case to require full 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 precipitous fall in the Group's performance.
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 27 June 2020, except as noted in note 4 below for new
standards adopted.
Leases
The Group recognises right-of-use assets (representing its right to use the
underlying assets) and lease liabilities (representing its obligation to make
lease payments).
The Group has taken advantage of the amendment to IFRS 16 issued in May 2020,
'Covid-19-Related Rent Concessions' and the subsequent amendment to IFRS 16 in
May 2021, 'COVID-19-Related Rent Concessions beyond 30 June 2021'. The
amendment permits lessees, as a practical expedient, not to assess whether
particular rent concessions occurring as a direct consequence of the
coronavirus pandemic are lease modifications and instead to account for those
rent concessions as if they are not lease modifications. There is no material
impact on the profit for the year as a result of this amendment.
Right-of-use assets
The Group leases many assets, including properties, vehicles and equipment.
Under IFRS 16, the Group recognises right‐of‐use assets and lease
liabilities for most leases. The Group elected not to recognise
right‐of‐use assets and lease liabilities for short-term leases and leases
of low‐value assets. The Group continues to recognise the lease payments
associated with these leases as an expense on a straight-line basis over the
lease term.
The Group recognises a right‐of‐use asset and a lease liability at the
lease commencement date. The right‐of‐use asset is initially measured at
cost, comprising the initial measurement of the lease liability adjusted for
any lease payments made at or before the commencement date, lease incentives
received and initial direct costs. Subsequently, the right-of-use asset is
valued at cost less any accumulated depreciation (straight-line) and
impairment losses, and adjusted for remeasurement of the lease liability.
Right-of-use assets are presented within non-current assets in the
Consolidated Statement of Financial Position.
Lease liability
The lease liability is initially measured at the present value of the future
lease payments as at the commencement date, discounted using the Group's
incremental borrowing rate when the interest rate implicit in the lease is not
readily determinable. These include future fixed lease rental payments,
variable lease payments that depend on an index or a rate (these are initially
measured at the index or rate as at the commencement date) and payments of
penalties for terminating the lease earlier, if the conditions reflect the
Group exercising an option to terminate the lease.
The lease liability is subsequently increased by the interest cost on the
lease liability and decreased by lease payments made. It is remeasured when
there is a lease extension, a change in future lease payments or the Group
changes its assessment of whether it will exercise an extension or termination
option.
The Group presents lease liabilities in current and non-current liabilities in
the Consolidated Statement of Financial Position.
The Group has applied judgement to determine the lease term for some lease
contracts that include renewal options. The assessment of whether the Group is
reasonably certain to exercise such options impacts the lease term, which
significantly affects the amount of lease liabilities and right‐of‐use
assets recognised.
Share-based payment transactions
The fair value on the grant date of share-based payment awards granted to
employees is recognised as an employee expense, with a corresponding increase
in equity, over the period that the employees become unconditionally entitled
to the awards. The amount recognised as an expense is adjusted to reflect the
number of awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately recognised
as an expense is based on the number of awards that meet the related service
and non-market performance conditions at the vesting date. As the awards are
equity settled they have no market-related performance conditions that require
consideration. For share-based payment awards with non-vesting conditions, the
fair value on the grant date of the share-based payment is measured to reflect
such conditions and there is no true-up for differences between expected and
actual outcomes.
The Performance Share Plan agreement also includes a further three-year period
of retention for each participant from the vesting of the recovery awards. In
consideration of this retention period, the Company will pay the Employers'
National Insurance Contribution ("NIC") liability for a share price up to 40p.
The cost, treated as a provision under IAS 37, 'Provisions, Contingent
Liabilities and Contingent Assets', will be recognised from the date of the
change in February 2021 through to the end of the relevant retention period.
Should a participant leave within the retention period, the NIC paid by the
Company will be clawed back from the participant.
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 IFRS 9, IAS 39 and IFRS 7, IFRS 4 and IFRS 16,
'Interest Rate Benchmark Reform-Phase 2'; and
· Amendments to IFRS 16, 'COVID-19-Related Rent Concessions beyond 30
June 2021'.
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 3, 'Reference to the Conceptual Framework';
· Amendments to IAS 1, 'Classification of Liabilities as Current or
Non-current' and 'Deferral of Effective Date';
· Amendments to IAS 37, 'Onerous Contracts-Cost of Fulfilling a
Contract;
· Amendments to IAS 16, 'Property, Plant and Equipment-Proceeds before
Intended Use';
· Amendments to IAS 8, 'Definition of Accounting Estimates';
· Amendments to IAS 12, 'Deferred Tax related to Assets and Liabilities
arising from a Single Transaction';
· Amendments to IFRS 4, 'Extension of the Temporary Exemption from
applying IFRS 9'; and
· Annual improvements to IFRS Standards 2018-2020.
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).
2021 2020
Unaudited Audited
£m £m
DX Freight:
- 1-Man 164.2 112.4
- 2-Man & Logistics 58.8 56.6
Total DX Freight 223.0 169.0
DX Express:
- Parcels 118.8 112.1
- Exchange & Mail 40.3 48.2
Total DX Express 159.1 160.3
Total revenue 382.1 329.3
Revenue is recognised at a point in time for all services with the exception
of DX Exchange, which is recognised over time.
6 Segment information
2021 Unaudited
DX DX
Freight Express Central Total
£m £m £m £m
Revenue 223.0 159.1 - 382.1
Costs before overheads (179.5) (131.8) - (311.3)
Profit before overheads 43.5 27.3 - 70.8
Overheads (5.5) (8.5) (18.2) (32.2)
EBITDA 38.0 18.8 (18.2) 38.6
Depreciation and amortisation (15.1) (6.4) (0.6) (22.1)
Share-based payments charge - - (1.4) (1.4)
Profit/(loss) from operating activities 22.9 12.4 (20.2) 15.1
Finance costs - - (4.5) (4.5)
Profit/(loss) before tax 22.9 12.4 (24.7) 10.6
Tax credit/(expense) - - 4.8 4.8
Profit/(loss) for the year 22.9 12.4 (19.9) 15.4
2020 Audited
DX DX
Freight Express Central Total
£m £m £m £m
Revenue 169.0 160.3 - 329.3
Costs before overheads (150.3) (124.6) - (274.9)
Profit before overheads 18.7 35.7 - 54.4
Overheads (4.9) (7.4) (17.2) (29.5)
EBITDA 13.8 28.3 (17.2) 24.9
Depreciation and amortisation (14.4) (5.4) (0.9) (20.7)
Share-based payments charge - - (1.2) (1.2)
Profit/(loss) from operating activities (0.6) 22.9 (19.3) 3.0
Finance costs - - (4.3) (4.3)
Profit/(loss) before tax (0.6) 22.9 (23.6) (1.3)
Tax expense - - (0.5) (0.5)
Profit/(loss) for the year (0.6) 22.9 (24.1) (1.8)
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
2021 2020
Unaudited Audited
£m £m
Direct costs 258.5 226.7
Indirect costs 52.8 48.2
Overheads 32.2 29.5
Depreciation and amortisation 22.1 20.7
Share-based payments charge 1.4 1.2
Total operating costs 367.0 326.3
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 relates 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:
2021 2020
Unaudited Audited
£m £m
Employee benefit expense 111.3 102.5
Depreciation of property, plant and equipment, and right-of-use assets 21.5 20.1
Amortisation of intangible assets 0.6 0.6
Loss on disposal of property, plant and equipment 0.8 0.1
Short-term and low-value leases 1.0 0.9
Other operating income - (3.1)
Coronavirus Job Retention Scheme grants of £nil (2020: £3.1 million) are
included in 'other operating income' above. There are no unfulfilled
conditions or other contingencies attaching to these grants.
8 Finance costs
2021 2020
Unaudited Audited
£m £m
Finance costs
Interest on bank loans and other 0.2 0.3
Amortisation of financing costs - 0.1
Interest on lease liabilities 4.3 3.9
Total finance costs 4.5 4.3
9 Tax credit/(expense)
(a) Analysis of charge in year
2021 2020
Unaudited Audited
£m £m
Current tax
United Kingdom corporation tax:
Current year - -
Adjustments in respect of prior periods - 0.1
Total United Kingdom corporation tax - 0.1
Overseas taxation (0.5) (0.6)
Total current tax (0.5) (0.5)
Deferred tax
Current year (0.3) (0.3)
Recognition of previously unrecognised deferred tax asset 5.5 -
Adjustments in respect of prior periods 0.1 0.3
Changes in tax rates - -
Total deferred tax 5.3 -
Total tax 4.8 (0.5)
(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:
2021 2020
Unaudited Audited
£m £m
Profit/(loss) before tax 10.6 (1.3)
Tax (expense)/credit at the standard rate of UK corporation tax of 19% (2020: (2.0) 0.2
19%)
Factors affecting charge for year:
- UK taxable losses carried forward 1.1 (1.1)
- Adjustments in respect of prior years 0.1 0.1
- Effect of different tax rates 0.1 0.3
- Recognition of deferred tax on prior trading losses 5.5 -
Tax credit/(expense) 4.8 (0.5)
(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 will
remain at 19% before increasing to 25% from 1 April 2023. Deferred tax
assets and liabilities have been calculated in accordance with the enacted
rates.
10 Right-of-use assets
Non-property Total
Property £m £m
£m
Cost
At 1 July 2019 (audited) - - -
Recognised on transition to IFRS 16 56.9 23.1 80.0
Additions 6.2 12.3 18.5
Depreciation (9.6) (8.6) (18.2)
Disposals (0.1) - (0.1)
Net book value as at 27 June 2020 (audited) 53.4 26.8 80.2
Additions 20.5 15.3 35.8
Disposals (1.0) (0.5) (1.5)
Depreciation (10.0) (9.1) (19.1)
Net book value as at 3 July 2021 (unaudited) 62.9 32.5 95.4
11 Earnings per share
The calculation of basic earnings per share at 3 July 2021 is based on the
profit after tax for the year and the weighted average number of shares in
issue.
Adjusted earnings/(loss) per share is calculated based on the profit/(loss)
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 recently introduced SAYE scheme. Adjusted earnings/(loss) per share
represents an alternative performance measure. Further details about the use
of alternative performance measures are detailed in notes 2 and 17.
Diluted earnings/(loss) 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.
2021 2020
Unaudited Audited
£m £m
Profit/(loss) for the year 15.4 (1.8)
Adjusted for:
- Amortisation of acquired intangibles 0.2 0.3
- Share-based payments charge 1.2 1.2
- Impact of recognition of deferred tax on historic losses (5.5) -
Adjusted profit/(loss) for the year 11.3 (0.3)
2021 2020
Unaudited Audited
Number Number
(million) (million)
Weighted average number of Ordinary Shares in issue 573.7 573.7
Potentially dilutive share options - -
Weighted average number of diluted Ordinary Shares 573.7 573.7
2021 2020
Unaudited Audited
p p
Basic earnings/(loss) per share 2.7 (0.3)
Diluted earnings/(loss) per share 2.3 (0.3)
Adjusted earnings/(loss) per share 2.0 (0.1)
2021 2020
Unaudited Audited
Number Number
(million) (million)
Potentially dilutive share options 92.2 0.7
12 Loans and borrowings
The Group's only borrowing is a £20.0 million invoice discounting facility
which was put in place during the year 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 3 July 2021 was £nil (2020: £nil). No
amounts were drawn on the invoice discount facility during the year to 3 July
2021 (2020: £3.1 million of drawings were repaid).
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.
13 Deferred tax assets
£m
At 1 July 2019 (audited) 2.3
Credited to the income statement -
At 27 June 2020 (audited) 2.3
At 28 June 2020 2.3
Credited to the income statement 5.2
At 3 July 2021 (unaudited) 7.5
The deferred tax asset is made up as follows:
2021 2020
Unaudited Audited
£m £m
Intangible assets - (0.1)
Capital allowances 1.6 2.2
Other temporary differences 0.4 0.2
Trading losses 5.5 -
7.5 2.3
The main rate for corporation tax is set to increase to 25% from 1 April 2023.
The deferred tax asset is expected to be utilised by 30 June 2024, therefore,
a blended rate of 22% has been used to determine the deferred tax asset
balance.
The unrecognised deferred tax assets of the Group at 3 July 2021 total £0.4
million (2020: £6.2 million) consisting of unused tax losses. There are no
unrecognised deferred tax assets for the Company at 3 July 2021 (2020: £nil).
14 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.
Maturity analysis - contractual undiscounted cash flows 2021 2020
Unaudited Audited
£m £m
Less than one year 23.3 19.1
One to five years 66.7 54.2
More than five years 30.6 25.0
Total undiscounted lease liabilities at 3 July 120.6 98.3
2021 2020
Unaudited Audited
£m £m
Current
Lease liabilities 19.3 15.8
Non-current
Lease liabilities 81.3 68.3
Lease liabilities included in the statement of financial position at 3 July 100.6 84.1
15 Reconciliation of profit for the year to cash generated from operations
2021 2020
Unaudited Audited
£m £m
Cash flows from operating activities
Profit/(loss) for the year 15.4 (1.8)
Adjustments for:
- Depreciation 21.5 20.1
- Amortisation of intangible assets 0.6 0.6
- Net finance costs 4.5 4.3
- Tax expense (4.8) 0.5
- Loss on disposal of property, plant and equipment 0.8 0.1
- Equity-settled share-based payment transactions 1.4 1.2
Net cash profit 39.4 25.0
Changes in:
- Trade and other receivables (10.9) 8.2
- Trade and other payables 6.3 6.3
- Deferred income (2.8) (3.1)
- Provisions 1.3 1.7
Net change in working capital (6.1) 13.1
Cash generated from operations 33.3 38.1
16 Related party transactions
Under IAS24, 'Related Party Disclosures' the definition of key management has
been reconsidered. Key management now comprises the Executive Directors and
the Non-executive Directors of the Group, where previously the Statutory
Directors of DX Network Services Limited were included. Social security costs
are also now included, where previously they were omitted. The comparative has
been restated to reflect the reduced number of people now included within the
definition. The key management compensation is as follows:
2021 Restated Previously
Unaudited 2020 reported
£000 Unaudited 2020
£000 Audited
£000
Salaries, fees and other short-term employee benefits 1,061 883 1,594
Pension contributions 8 20 71
Social security costs 383 122 -
Share based payments 842 870 1,030
2,294 1,895 2,695
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.
17 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. 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 or loss before tax ('adjusted
PBT/LBT'), adjusted profit or loss per share ('adjusted EPS/LPS') 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, 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 recently
introduced 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/(loss) from operating activities Financial Review
Adjusted PBT/LBT Profit or loss before tax Financial Review
Adjusted EPS/LPS Profit or loss per share Note 11
Adjusted profit from operating activities Profit/(loss) from operating activities Financial Review
Adjusted operating profit margin Profit/(loss) from operating activities Financial Review
Net cash/net debt Cash and cash equivalents/loans and borrowings Financial Review
18 Leases
The Group recognises right-of-use assets (representing its right to use the
underlying assets) and lease liabilities representing its obligation to make
lease payments. Details of the right-of use assets are shown in note 10 and
details of the lease liabilities are shown in note 14. The maturity analysis
of lease liabilities is also shown in note 14.
Further details of the accounting policy for leases can be found in note 3,
'Significant accounting policies'.
Impact in the year
The impact on the profit/(loss) for the year ended 3 July 2021 and 27 June
2020 is summarised below:
3 July 2021 27 June 2020
Unaudited Audited
£m £m
Depreciation charge on right-of-use assets 19.1 18.2
Interest cost on lease liability 4.3 3.9
Operating lease rentals on short-term and low-value leases 1.0 0.9
Total lease costs for the year 24.4 23.0
The amounts charged to the income statement due to the practical expedients
taken are shown below:
2021 Unaudited 2020 Audited
Property Plant and equipment Property Plant and equipment
£m £m £m £m
Expense relating to short-term leases 0.5 0.1 0.4 0.3
Expense relating to low-value leases - 0.4 - 0.2
0.5 0.5 0.4 0.5
The total cash outflow for leases is as follows:
3 July 2021 27 June 2020
Unaudited Audited
£m £m
Lease repayments 17.7 16.6
Interest paid 4.3 3.9
Total cash outflow for leases 22.0 20.5
19 Events subsequent to the period event
There were no events subsequent to the period end requiring disclosure (2020:
no events).
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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