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Despite the depot openings, positive news flow and trading update the SP remains nearly 10% lower than the start of the year.
Those that read my posts will know that have some nagging doubts about the expansion especially in B2C volume business. That little voice in my head is getting louder. Its a business that relies on the human resource and currently there are about 450 vacancies on the website. 100 Plus driver vacancies. We can view that one way that business is going well or is it a sign of high staff turnover or possibly over trading. I don't know, certainly warehousing staff would be a high staff turnover business. But drivers are the most important resource and they are short, not only that there is a huge nationwide shortage of drivers. So that is concern...... it must be impossible to provide that super duper service with that many vacancies and also to adequately manage the expansion programme. It may only be a temporary problem but as a business owner myself I can see how hard that would be to manage.
I was planning on seeing this play out fully invested, but I may consider reducing my holding especially if some opportunity presents itself. If there weren't successful industry veterans at the helm and the safety blanket of freight I"d be .....Thinking a bit more.
It looks like no further director buys as we are presumably in the closed period now. So it looks like like radio silence from D X and me as well as I need a break. Really looking to the results now and if there are any trading updates of the first three months of this financial year given with the results and any director buys after results release.
Enjoyed the positive contributions from the regular posters and hope you all enjoy the rest of the summer . Ports
Fair enough Ports. Take it easy.
Enjoy the remainder of the 'summer' and thank you very much for your guidance Ports. I've learned a lot from contributors like your good self. I hope I come across your posts in the not too distant future. All the best.
Ports (if you’re still around) - nothing wrong with your expressing a cautious view - there are always two sides to any investment decision.
Regarding directors’ buys, there’s still plenty of time for more of these before the next close period, which I don't think starts until a month before the results in late September, though the directors are already fairly heavily invested, so perhaps in any event there’s not much scope for further purchases. However, we can still hope for more buys from the likes of Lombard, Schroders etc, though I suspect Gatemore are, if anything, planning to sell down further.
Regarding driver vacancies, I would guesstimate that there are around 700 drivers at the company’s 70-odd locations (out of a total of 5,500 employees in the company as a whole). Even if the business were not growing, there’d be a certain level of employee turnover, so the number of vacancies will obviously never be zero, and might never go down below, say, 20 or 30. However, with a rapidly growing business, you’d expect an abnormally large number of driver vacancies for a while.
So if, as you say, there are 100 or so driver vacancies, that’s about 1 in 7. But where the new recruits are replacing existing drivers who are working their notice periods, there’d be no hiatus. Where this is not the case, eg they are additional posts created by expansion of the business, and where other employed drivers are unable or unwilling to provide cover in the meantime (despite being able to coin it in with all the overtime!), I imagine the company may have no alternative but to use agency drivers, which is obviously not ideal.
However, we can take comfort from the 2020 accounts where they comment on this issue as follows: “DX has resources specifically focused on recruiting suitably qualified drivers, and the current level of vacancies is not impeding the business’ ability to operate”. And there was no mention of any particular problem in this area in the recent update.
All in all, I still think the current SP undervalues DX by up to a third (and if this state of affairs continues, I think we could well see things “play out”, as you put it, sooner than any of us expected…).
For a few more hours P.
I thought the closed period was 30 days before the half year and 60 days before the final results. Perhaps I'm wrong in that.
You make very valid and well thought out points fully understood appreciated by me. All carriers have a substantial number of vacancies whether employed, self employed/franchise etc. That's good as it proves the business is there but it also proves it is a scarce resource. Overtime is of course an option although although that is heavily regulated for drivers. I take your point on agency drivers if you can get them, the trouble with that is the added agency costs makes it expensive which eat in to an already low margin business. There is also now a shortage of commercial vehicles with prices increasing so its a good job DX bought their 300 a while ago. For me it all adds up to inflationary pressure so I generally expect prices from carriers to increase. Not so good for my business but OK for DX.
From the report DX were obviously aware of it but there is a possibility that this is turning into a bigger problem than many anticipated.
We're all the same side though, hoping the DX directors deliver on their strategy. Best ... Ports
Ports – thanks for your response.
In about 2016, I think, the closed period changed to 30 days in all cases, including preliminary announcement of finals. However, most directors still seem to observe 60 days: perhaps they’re not all aware of the change, or they’re just playing it extra safe.
It was indeed an inspired decision by DX to expand their fleet when they did, and cements their reputation for being on the ball.
I agree margins could now be coming under a bit of pressure from higher input costs, but I’d expect that to be offset by improved efficiency all round, high operational gearing realised through strong sales growth, and the company's ability to increase its own prices to some extent, so overall I would expect margins to increase over time. Once again, we won’t know the exact position until at least the next update - it seems a long wait...but don’t let that spoil your break!!