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I wouldn’t mind betting the current SP weakness will stimulate some PDMR buying. That will be the best indicator of what management think of the (over)reaction to the results.
Thanks Parcelman. It's good to get insight from within the game.
It seems to me then that Dx have much more opportunity for continued growth in Freight and yet DX are focussing more on growth in B2C with the announcement of the 8 new depots for express. I like the business plan in relation to devolved accountability and sales but at the end of the day b2c is very price driven. So effectively they are expanding into a market where margins are tight. It seems to me that their strategy in express is to provide an essentially better, quicker and more efficient service than anyone else. I'd also be interested in your comments as to why DX don't currently have a great european offering certainly for people lke me in B2C. They dont have the might and infrastructure of someone like DHL but partnership opportunities with the likes of EMS and GLS I might have thought were a possibility. Perhaps they just want to focus on Uk and Ireland.
Thanks for your insight Portswigger. I agree the freight growth is good but there are reasons behind this. The main carriers have been actively looking to reduce the freight they carry as it does not go through their automated hubs and as such there is a cost in sorting these items for them. The main carriers now all surcharge these items where as in the past they did not. If you look at the parcel freight market there are less carriers that are competing for this business with DX, I would suggest only really companies like Tuffnells and Arrow Express actively want this type of business which could explain some of the reasons behind the growth in this area. DX should be able to target Tuffnells business based on their previous ownership. Hopefully the SP will recover in the next few weeks back to the mid 30's before moving over 40p by year end.
Thanks for your imput parcelsman. I think most of the takeovers you talk about happend 4/5 years a go and parcel delivery requirements have increased substantially since then with the continued rise of on -line transactions. There seems to be plenty of business for everyone. I speak as user of all these companies and they all have their good points. DPD for me in terms of cost and relaibility have been the best for Europe deliveries of what I do. UPS, parcelforce and DHL for UK are all pretty good for UK and our Fed Ex driver admitted that Fed Ex focus is primarily the American market. DHL made a mistake in my view rebranding UKmail to DHL Parcel UK. Its different service to DHL, different drop off points and it's just confusing to me as end user.
So why do I use Dx.. Firstly I have to support my investment. Secondly I really like the way they they devolve responsibility and accountability to regional teams and hubs. I remember trying to negotiate a contract with DHL a couple of years ago. They wouldn't send anyone out to me and I had to deal with some central sales base in Derby I think and theyproceeded in sending me a contract with all sorts of financial info and estimated fuel charges when I would have rather have just has a rep visit me.Enough of my story.
Back to figures. Dx freight results are astounding given the lockdown and how it has affected business.
My view on dividends.
Personally. I think it is on the cards.. they must be thinking about it if profitability is maintained.
Sale of Dx - Maybe/ Maybe not .I don't know but the people at the top will have have an exit strategy.
Hi PM. I would not have thought so, don't forget there is deffered tax (£11m i think) included in this set of results to be repaid through to early 2022, can't see div being brought in until after that time if it is to be reintroduced. Silver lining for the forseeable could be the PSP benefits so it would be in the interest of those included in the scheme to maintain an S P of at least 40p , first vested date being dec '21. ATB
Yes I would agree, more likely to sell to a private equity than a buy out by one of the major players at this time. It's frustrating that the share price has dropped again this morning. I guess my idea of a quick buck has gone for the time being and I will be here for the long haul now. Does anyone have any thoughts on whether or not DX are likely to pay a dividend in the near future or do you think that this is still sometime away?
Parcels - always good to get the views of those who work in the industry. Re possible sale of DX, I've always thought a sale to private equity was the most likely outcome, though the last time management did a turnaround, they sold Tuffnells to Smiths News, the news wholesaler.
Thanks for all your insights, really good to get a balanced approach to these things.
For me, to see this sort of growth from a heavy loss making position and from an area in 'B2B' that is largely due to come back online within the next few weeks/months as lockdown eases gives me great encouragement.
Parcels - thanks, that is great insight. The results didn’t disappoint me though. Don't think there is a direct comparison between high growth at a company already very profitable for several years and one being transformed from non profit-making. In other words, there is an argument that it is too early to judge DX using that yardstick. The end of the second half of the financial year will help I believe to see a bigger picture. CEO view -
“Trading in the second half is significantly ahead of the same period last year, in line with our expectations”.
Not saying who is right or wrong here but offering up an alternative perspective.
I think the viability of DX being taken over by one of the big players at this stage is small. If you look at those big players DHL has not long taken over UK Mail and is still integrating them into its business, they also had all the pain of trying to integrate Securicor years ago which didn't end well. The same can be said of Fed Ex who are integrating TNT into theirs. UPS purchased Lynx 16 years ago to get a UK network so that satisfies there need as they are still more focussed on international. DPD have grown organically by huge amounts in the last 10 years and wouldn't need to purchase a rival. Hermes are the other carrier with large growth over the last 10 years based mainly around the 2 - 5 day delivery model. They have aspirations to move into the Express market so that maybe an option. The other interesting one is Yodel. They have typically made annual losses of around £30 million year in year out but I believe they have broke even this year. This has for years been a tax write off for the Barclay brothers but with one of them passing away recently and the other one well into his 80's it will be interesting to see how they progress. I personally don't see DX being sold for at least 2 - 3 years but that is just my view from working in parcels.
Port, valid points. Also I should think DX has had its work cut out over the last 3 years reorganising the company to come back from the dead, improving productivity and laying the foundations for long-term growth.
Parcelsman,
I think there is come validity to what you say. Dx have been a b2B business so it's not really comparing like with like if we compare financials against logistics companies that are primarily b2c. Dx freight is growing and eight planned new depots for express show they see growth in B2C.
I send 3k to 5K parcels per year to domestic customers and it's only in the last three months that DX have had any proactive exposure to people like me.
Parcel man thanks for your comments. What’s your opinion on the viability of DX being consumed by a bigger player or even a reverse takeover of a competitor. Maybe the real growth has been limited by capacity & logistics to which they are addressing at pace. Consolidation of computer systems etc seems to be almost complete. I think they have laid out a solid foundation. I believe they have acted with sustainable growth in mind. The management team are Pro’s at this. As the saying goes, never invest in a new management team from a different industry. These guys know there stuff.
Hi All, I am new to all of this but did decide late last year to invest in DX. My reasons for this were the fact that the results from the new management team were starting to take effect and having worked in parcels for over 25 years with the major companies in this sector I felt all the timings were coming together for some serious gains and whilst that still might be the case I do feel the results today are not as good as I would have expected. The company I work for who are one of the main players in the UK market and have just posted a year on year growth of over £500 million (over 40% growth) with profits to match. Therefore you do have to say that DX's growth of just over 7% overall and actually a 5% reduction in their express volumes still leave a lot of work to do. I think the fact that other carriers are reporting record levels of growth could have affected the share price today. DX's problem still lies in the fact the majority of their business is B2B when all the growth in this sector is in the B2C market.
https://motortransport.co.uk/blog/2021/03/02/dx-freight-drives-recovery-at-dx-group-with-significant-new-business-wins/
Repression, have faith, this makes no sense at all. Still think this is a medium term takeover. It was not that long along that Menzies & DX nearly joined. DX in a much better place now.
"Is there likely to be a levelling off of parcel delivery?" (ismalia)
Doesn't seem to be affecting RMG's SP.
Port, the SP had already come off its highs in the upper 30s, down to lower 30's, based on slightly negative comments in the previous update about a "quiet January", so I don't think today's impressive results and optimistic outlook were signposted actually.
Today's RNS should have allayed any concerns - so I do find today's drop difficult to fathom.
I think I'll look away and come back in a few months' time...
R, I feel for you and I guess many people feel the same. Everything is so uncertain, new president in the USA, GB in huge amount of debt, Crytpo Circus, conflict between USA and China, etc etc and Covid threat in the background. There is so much uncertainty and I'm not suprised you feel that way. I do to. Market uncertainty is set to continue for a good while yet so you have to do what is right for you. As for me I just invest in what I consider solid companies and just ride out the storm.
Nothing seems to be working for me at the moment, nothing seems to be able to gain any traction. I feel the whole tech sector getting ahead of itself over in America is casting a huge cloud over the entire market. They keep going on about UK shares being cheap but when America sneezes we get a cold and valuations go out the window. I'm stopped out of this today, got stops set on all my other shares and don't feel I want to buy anything else at the moment.
Is there likely to be a levelling off of parcel delivery as and when lockdown is lifted and we are all able to go shopping again?
Well P. Dark Arts are always in play especially on the AIM. Mm's have to provide a market, liquidity etc. They know there are traders and investors who have shares with different timescale and return objectives. The over riding objective though is to make money. Not only for us but them as well. We all knew what was coming, it was sign posted so if it was going to rise it will have done so well before now on the update which I think it did slightly from memory. I can't remember many shares that have increased on the production of good figures when it was well known what was coming. If it was that easy we'd all be millionaires many times over. Just my opinion.
Port, so you put it down to the "dark arts" of the MMs.
P,
I think alot of holders were probably expecting SP growth knowing good results were coming but in my experience it never happens. The market makers know that and never fail to disappoint.
The update couldn't really be any better, in terms of results and outlook.
So presumably NOTHING would have made today's sellers keep holding.
In which case, I'm curious as to why today's sellers waited for the update before selling.
Probably best not to try and rationalise short-term gyrations!