Member Info for portswigger

Eventually DX tell us what we already know and we having been saying for months.

Confirmation that the arrogance that DX had towards the corporate governance issue and that it was essentially a storm in a tea cup has been proved wrong. Negligence of the highest order.

Obvious now that the problem is serious enough that no auditor will touch them. I don't think there is much chance of the AIM will grant any form of extension if there is no prospect of them being able to appoint an auditor.

The RNS tells us the bare minimum and they talk in terms of a forced delisting by the AIM which means the OTC for us all. If it does go to that it really means that the major shareholders have not been able to agree a strategy in the last four or five months and I'd expect the II's to jump ship on the OTC.

Whether there is an alternative strategy and plan in place we can only guess but the next update
will not be far away.

Sister... it's nice to read a post from you with a valid opinion. I would agree that the OTC is not a good result and there may well be some real difficulties behind the scenes with the major shareholders. We know DX have breached rule 18 and there has been no notice of any sanction from the AIM. Does that mean there hasn't been one or DX haven't bothered to tell us. If it's the latter they may have asked for an extension and again not bothered to tell us. You can only view three months of silence as very worrying.

If you step back for a moment, this is now about self interest. Are the self interests of the major shareholders at this moment in time aligned. I think not. I don't think Lloyd is bothered either way as long as he retains his seat at the top of the table.It is quite possible that Gatemore have thought twice about their involvement in DX and now want to sever that connection, the others to.

It's quite a problem and it will be interesting to see how they try to solve it.

I only think a forced delist becomes probable if the institutional investors and Lloyd can't find agreement. None of the directors have felt the need to resign at the moment which is a positive. I take your point that the BOD interests are aligned with ours, however that can easily change as the BOD being in control have plenty of options to feather their own nests to the exclusion of private investors at any time. The lack of transparency over the last five months or so really shows a complete disregard of it's private investors.

I wasn't aware that Directors could be disqualified for breaching deadlines. I know they can be for breaching law and that is something GT hinted at. I personally think there is a legal aspect to the CG enquiry which is having to run a time consuming due process which means it is not possible to appoint a new auditor whilst it is ongoing. Unfortunately, completion will probably be after the horse has bolted.

I don't think anything that has happened in the last five months can be taken as a positive. The opening of the new depots has always been signposted.I really can't see how we can put a positive spin on silence.

It's just over two months until the shares will be forcibly delisted from the AIM.

Despite Pianista's optimism there is in my opinion no chance of getting a full audit done it that time.
If they go for a voluntary delist they will have to call a general meeting giving shareholders 14 days notice, 75% need to vote in favour and then they need to give the AIM 20 days notice of cancellation.

So by mid May or so they will have to tell us something or we can deduce what is going to happen.

I don't think any shareholders really thought the shares would be suspended for now four months or so and counting. I know I certainly didn't. I think we can deduce that the corporate governance issue was far more serious than they were letting on and in my view has a serious legal aspect to it that is still ongoing.

So what's been going on in the last four months.

a)The decision makers have decided on a strategy but won't tell us until the last minute.

b) No auditors have been appointed and there is still no real agreement so far as to a strategy going forward.

I personally think the shares will trade on the OTC for a period and the II's will sort something out between them as it seems to me that the larger shareholders still want to drive the business forward in some form. We've been waiting for four months.. another three weeks won't make a lot of difference.

FJ, According to DX's own estimation Dx and Tuffnells both have around 15% of the 1 man freight market so I wouldn't have thought that would be a problem.According to DX, Wincanton have 20% of 2 Man freight market and DX 4%.

P. I have once and it is complicated but the main issue is low liquidity. I can't see how that it is an attractive proposition to anyone.

ATPM. Tuffnels does make sense as it has a similar market share as DX in freight. Smiths news hold 75% of Tuffnells and Smiths news has a very good overnight delivery operation which would be of interest to someone.

Express division will always worry me. To much competition, to low margins. Evri formerly Hermes are making great strides and also expanding into what would be considered the IDW market. I really don't know why they presevere with this as I can't see how they continue to grow this division without substantial investment. £119m in parcels and £40m in Exchange last year and in my view its quite obviously exchange that generates the greatest operating profit although DX won't tell us.

ATPM.Absolutely. If this ends up as a forced delist by the Aim it begs the question what have the directors been doing the last four months. It will be an abject failure of the directors to come up with any form of strategy. Lloyds declared strategy of being the best is hardly going to be achieved by trading on the OTC which is a backward step. If they do trade on the OTC I think it will be for a relatively short time whilst another strategy is put in place. For me they are between a rock and a hard place. Perhaps raising funds to change the legal status of the company and the big picture further funding to grow the business. Its a slow process from cash generation organically which is why I think M&A is in the picture.

ATPM, that's my point. Any change in the legal status needs shareholder approval, the senior execs are not in control.

I think it will be larger figure than that. I think Gatemore and Lloyd owning 30% together can come to some agreement but I can't really see the smaller institutional shareholders being interested in that strategy. Why would they. ?

CFD's are traded on the OTC. If Dx delists and retains it's PLC status then it's shares can be traded on the OTC therefore I don't see a problem. I'm no authority though.

P. If that is the case I can only imagine the funding comes from within the existing set up. I'd be surprised if any externals would be interested without any audited financials to go through for 2021 or interims. Dx still have an unproven business model and have only just reached PBT not to mention the difficulties in the financial markets. Externals would also have severe doubts about the integrity of the DX directors after GT's comments.

ATPM. I presume you are talking about dealings with people within DX.

Due to current shareholder levels it will be the institutional investors who decide ultimately what happens to DX. Not Lloyd and his team.

It really is astounding that there has been no communication from DX about it's breach of AIM rule 18 or any sanction that has been applied by the AIM. Despite the fanfare of Meidars appointment investor communication has got worse and indicative of the latest disregard by the board for its private investors. I'm hopeful of a coherent strategy moving forward but something just doesn't feel right.

Absolutely. Although the Exchange and Parcels business has been separated as per the unaudited results. Express Turnover was flat 2020 and 2021 and yet operating profit reduced from 22m to 12m. Exchange was severely restricted during covid and replaced with parcels business which is patently nothing like as profitable. Regular readers of my posts will be sick and tired of me banging on about my concerns of courier in express because I just can't see how they can make any real money in that.

If DX want to get where they want to be they really only have two options. Organically where they need substantial cash or M&A whatever the legal status of the company. It wouldn't surprise me though if there is a complete change of strategy. We can take comfort that the protagonists are still in place.

Pianista, It's interesting to get your view.

“Things are often never as good as when seemingly good news is released”.

I didn't mean that specifically in relation to DX and more of a general point. Nothing to do with Results. More in the context of DX's rather flippant and dismissive statement to GT's concerns. Their implication is that there is nothing to worry about. Any potential auditor would have read that letter and raised more than an eyebrow or two. The fact that they have not appointed an auditor in two and half months of negotiation says it all. There obviously is something to worry about. !

I'll bet to differ on the timings re the corporate governance issue... but that's Ok.

I can't see why they wouldn't release interims. There is nothing to lose regardless of how trading is.

I think if Lloyd and all the institutional shareholders were on the same page on any future strategy you would be looking at well over 60% of shareholders agreeing to it there. I think getting the extra 10% -15% would be relatively easy.

I personally think a sale is miles away. The margins aren't there, the courier business in express is contracting in a expanding market as per the last update, a relatively small logistical footprint with plenty of capital required to increase market share. Who'd be interested in that at the current valuation plus a premium ?

Well, I have to admire Pianista's positive spin on all this and I like most shareholders hope that view is right. I think the facts though tell a different story.

I think anyone who is experienced in investing in the stock market will appreciate that things are often never as good as when seemingly good news is released and can often be worse than when bad news is released.

We should remember that this Corporate Governance issue has been going on for well over nine months and the investigation has not been completed despite being ongoing for nearly five months. Thats plenty of time for a legal investigation to be concluded.

Meidar was appointed to a fanfare of improved transparency and bringing a speedy conclusion to the outstanding issues. Neither happened. Indeed GT resigned a month and a half after Meidar was appointed. I don't think Gatemore misled us with their comments, I think that DX had not made the seriousness of the situation known to all its shareholders.

2.5 months of negotiation with an auditor have not resulted in anything as far as we know. That's plenty of time for an auditor to do all the background work etc. There is quite obviously a problem.

Interims have in recent years been in early March but so far nothing.

No rebuttal of GT's very serious points raised.

Pianista's point on the Aim is a fair one but rules are there to be followed and I do think there will be a forced delist if DX don't produce the goods in time but I'm inclined to think an extension would be granted if applied for and a voluntary delist is far more probable than a forced delist.

The above is not to say this will work out badly for shareholders, I could be wrong and we may get an RNS soon but in my view silence is very rarely a good sign where the stock market is concerned.

I think I have begun to expect silence now and will be quite shocked if we get a RNS shortly.

If they had asked for an AIM extension, I think they would have asked by now and we'd have news of an auditor appointment.If this is close to being in place it's another poor example of investor communication by not telling us.

I think a delist will happen now either forced or voluntarily if the majority of shareholders vote for it at a general meeting.( if one is called)

The question is what happens then.

Do they retain the legal status of a PLC or change the status of the company. I don't know. Many things could be going on in the boardroom between the board and the institutional shareholders. There may be complete cohesion ( Lloyd is still there and other members of the board) and it's taking some time to sort it all out or there is no real cohesion and discussions are taking some time). DX were talking about M& A in the December RNS so I wonder if there are discussions in that direction or possibly a reverse takeover. I still can't really come to convincing conclusion as to what the best option is to realise the value but then it's not my decision.

I suppose what I mean is that I don't think it was ever in the plans to change the legal status of the company until January this year... perhaps when they got an inkling of GT resigning and got a handle on the seriousness of the issue. I think the Dx directors all thought the issue would be sorted well before now and they would have other auditors in place. Their reply to GT's accusations was pretty dismissive and lacked any real concern. The silence of the last two months is really telling.!!

The institutional Investors are calling the shots so it depends on what they want to do. They see the value so it is how do they unlock the value considering the current situation.We've heard nothing so in my view no decision has been made. It may well be that they the corporate G investigation is completed soon, auditor appointed, extension given and we get away with a few months more suspension. Then after Meidars review there is a revision of the capital allocation/shareholder returns policy ... dividends, share buy backs which would go some way to satisfy a few demands.

Failing that what is the next best option for the institutional shareholders and a backed MBO would seem to me to the best option to me currently.All the institution's would want the current management team in place. There are lots of ways to fund/administer that and we can't predict what that would be. Yes Pianista it wouldn't surprise me if they set up another company to acquire DX that could at some point be floated. I think a lot depends on the institutional investors, if they are all onboard I think it is relatively straightforward process what ever they do... if there is a split between them then it really becomes a very difficult situation, that might go someway to explain the current silence.

I can't see a better option. Perhaps others would like to expand on their views.

I'm a bit baffled by the talk of the status of the company in 2017 and why it wasn't set up as private. The company was a plc in 2017 and in financial trouble following accounting irregularities. Gatemore were instrumental in the fund raise at the time, instigating the board changes and bringing in the current incumbents in including Lloyd. They bought in an experienced team who were familiar with each and who have done a great job in turning round the business. I don't believe there was any planned strategy to take it private and I don't think anyone would voluntarily take it private just after turnaround and just a they start making a reasonable profit. There is substantial growth opportunities but it needs substantial capital to achieve their stated expansion plans.They are in a hole and an MBO seems the best option. If they do, the interesting thing will be how and who funds it.

Interesting Views. I don't blame GT in the slightest. It is DX's responsibility to communicate with it's shareholders. Don't forget DX told us the day the AR was due to be published at the AGM that it couldn't be done. Auditors don't just drop things on companies with no notice.GT made very strong points and DX haven't provided any defence as Pianista states. The complete failure to appoint another Auditor in over two months of negotiations as far as we know says it all. The problems lie completely at DX's door.

For those that haven't It might be advantageous to read the RNS's issued September/October 2017.