Dx (group) Share Discussion Threads

[skinny] 02/3/2016 08:24

FWIW - Cantor Fitzgerald Hold 19.88 26.00 23.00 Reiterates

[my retirement fund] 01/3/2016 22:51

Managed behaviour seems to have bee akin to spivs here imo

[kmann] 01/3/2016 22:24

All looks positive then, earnings, organic growth, new hub, and 2.5p divi.

Price might rise on divi confirmation. Too late to buy by then imo.

[speedsgh] 01/3/2016 16:10

I suppose the question is whether yesterday's results were a one-off kitchen sink job or whether it is the thin end of the wedge with more of the same to come in future?

[kmann] 29/2/2016 21:56

They seem confident and determined to divi out cash. They also sound confident going forward. Mmm

[topvest] 29/2/2016 19:46

Enjoy...it may be the last 2.5p dividend this company can pay. Its main business which generates most of the historical profits is fighting technological obsolescence....it won't win!

[freddie ferret] 29/2/2016 17:37

2.5p divi for the full year, nice! :)

[speedsgh] 29/2/2016 17:36

Notice of General Meeting for Proposed Capital Reduction -

Background to and reasons for the Capital Reduction
The shares of the Company were admitted to the London Stock Exchange’s AIM market on 27 February 2014. Prior to Admission, the Acquisition created a significant goodwill balance of £188.4 million as reported in the Company’s consolidated accounts for the years ended 30 June 2014 and 30 June 2015.

As announced today in connection with the publication of the Company’s consolidated interim results for the six months ended 31 December 2015, and against the backdrop of challenging industry conditions and the decline in profit, the Company has conducted an impairment review of this goodwill. On completion of this review, the carrying value of goodwill has been revised to £100 million and, accordingly, a goodwill impairment of approximately £88.4 million has been recognised in the interim accounts.

Following the above revision to the carrying value, the Company’s distributable reserves will be in deficit to the amount of approximately £100.3 million.

When the Company issued new shares for the purposes of the Admission, it did so at a significant premium to the nominal value of the Ordinary Shares. This share premium comprises a non-distributable reserve for the purposes of the Act which as at 31 December 2015 had a balance of £181.4 million.

The Company is not permitted to pay any dividends unless it has distributable reserves. The share premium account only has limited applications and, accordingly, the Company is proposing to cancel in full the sum standing to the amount of the share premium account in order to create distributable reserves, which will enable the Company to make dividend payments to Shareholders consistent with the Company’s dividend policy as set out in the Admission Document. On completion of the Capital Reduction, the Company’s share premium account will be reduced to nil and the amount of distributable reserves will be approximately £81.1 million.

The Capital Reduction
Pursuant to section 641(1)(b) of the Act, a company may, with the sanction of a special resolution and the confirmation of the Court, reduce or cancel its existing share capital (including by way of the reduction or cancellation of its share premium account).

In seeking the Court’s approval of the Capital Reduction, the Court will need to be satisfied that the interests of the creditors (including contingent creditors) of the Company, whose debts remain outstanding on the date on which the Court Order is registered, are protected and that in relation to such creditors the Company can show that there is no real likelihood that the Capital Reduction would result in the Company being unable to discharge their debt or claims when they fall due. Sometimes the Court will seek or accept forms of express creditor protection such as seeking the consent of the Company’s creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company, or not to distribute reserves arising upon the Capital Reduction until such creditors have been discharged. The Company is not proposing to offer any of these forms of protection as it is satisfied that it can show that there is no real likelihood that the Capital Reduction would result in the Company being unable to discharge a creditor’s debt or claim when it falls due.

The Company intends that an application will be made for the Court to approve the Capital Reduction as soon as reasonably practicable after the General Meeting provided that the Resolution has been passed. It is anticipated that the initial directions hearing in relation to the Capital Reduction will take
place on 11 April 2016, with the final Court Hearing taking place on 20 April 2016, at which Shareholders and creditors are entitled to appear, and the Capital Reduction becoming effective on or around 20 April 2016, following the necessary registration of the Court Order at Companies House.

Shareholders should note that whilst the reserves arising from the Capital Reduction are distributable, the Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The Company will be able to apply in due course the distributable reserves arising from the Capital Reduction, in accordance with Part 23 of the Act and subject to the terms of any undertakings required by the Court as explained above, towards the payment of a dividend in line with the Company’s dividend policy.

In view of the Court’s considerations in giving its approval and in consultation with professional advisors, the Board has undertaken a thorough and extensive review of the Company’s liabilities (including contingent liabilities). The Board considers that the Company will be able to satisfy the Court that, as at the date on which the Court Order relating to the Capital Reduction becomes effective, the Company’s creditors will be sufficiently protected.

[eezymunny] 29/2/2016 17:17

I think the company spells it out for you "The second half of the financial year includes the key customer subscription renewal periods, in particular for Government and Legal sectors, and the Board will be monitoring this period for signs of improvement in any of these factors"

So, for example, if the Land Registry decides to ditch DX Exchange and use e-mail, and all the conveyancing solicitors do the same, and that is repeated across other lines, DX Exchange becomes loss-making very quickly. They then have a huge and largely fixed cost base (4000+ high st leases?) to dismantle. It could get quite ugly "driven by e-substitution, reductions in public sector expenditure under budgetary pressures and consolidation of the legal sector, DX Exchange revenues have seen a marked reduction in the last 18 months".

I have no idea what the outcome will be here but just think you're deceiving yourself if you think current year profits/divis are a reliable guide to the future. Things may pan out OK but I'd certainly want to see directors buying in size before believing that that was the likeliest outcome.

[kmann] 29/2/2016 12:12

Board commitment to full year dividend of 2.5p per share. I'll buy when this stabilizes or if drops lower.

Nice recovery/sector play. Looks like they dumped a lot of bad news too.

[joe say] 29/2/2016 12:03

goodwill impairment charge taken and yet the directors still see the long term growth rate as 2.6%

mmmmm - maybe that's a 'broadly 2.6%'

[aleman] 29/2/2016 10:57

EezyMunny - I'm aware of the problem. Do you think the directors aren't when they set the dividend? The fact that they have set the interim and proposed the final at the same level as indicated last year suggests that things are broadly on track. Granted, they could be just cynically buying time for themselves the best way they think the market will accept it. I'm prepared to accept what they say about trading until it becomes obvious that what they are saying is incorrect. I do not see that yet. Usually, with companies that go bust, you can see that what directors say and what the numbers say diverge. I'm not seeing that recently, although one might argue that is what was happening at the float. Of course we know that companies don't issue optimistic interpretations when they are floating at the top of their business cycle. (Sarcasm directed at directors of floating companies - not at you.)

[tuftymatt] 29/2/2016 10:09

What a mess this has been in the two years since it floated.

This "Jam tomorrow" report reminds me of the City Link figures when read in the RTO results a few years back.

Without spending millions to turn around their IT and compete in the parcel market they are going to struggle. Doddle looks to be in a bit of trouble so working with them, who already work with DPD, looks to offer limited reward IMHO.

[speedsgh] 29/2/2016 09:52

"Despite the current headwinds to the business, and with much to do still in the seasonally important second half, the Board anticipates that the Company will trade over the full year BROADLY in line with its expectations."

Hmm. How broad is 'broadly'? Having gone through the interims, it sounds like there is greater chance of underperformance than overperformance against expectations. Aimho.

[speedsgh] 29/2/2016 09:48

"DX Exchange experienced a significant decline in revenues during the 2008-2010 period, reflecting the global credit crisis, and was then relatively stable for a sustained period thereafter. However, driven by e-substitution, reductions in public sector expenditure under budgetary pressures and consolidation of the legal sector, DX Exchange revenues have seen a marked reduction in the last 18 months. In the period under review, DX Exchange revenue declined by 10.5%, compared to a 4% decline in the same period in 2014. The second half of the financial year includes the key customer subscription renewal periods, in particular for Government and Legal sectors, and the Board will be monitoring this period for signs of improvement in any of these factors."

"Generally, pricing pressures in the packets market remains high."

[eezymunny] 29/2/2016 09:44

I've done the sums on here before Aleman. If membership keeps declining at DX Exchange (and that looks more likely than not IMO) then the whole group becomes heavily loss-making fairly quickly. Clearly there's an option to close down DX Exchange and just keep the remaining parts but the current level of EBITDA collapses very quickly if DX Exchange collapses. It's simply not sensible IMO to look at historic numbers. You need to think about what is going on at DX Exchange and what that means for the FUTURE. It's tricky and risky IMO. My prediction is that renewals for Exchange are poor and they decide to close it FWIW. Quite where that leaves things is almost impossible to predict.

[speedsgh] 29/2/2016 09:44

Interim dividend subject to capital reduction? Not sure of the importance of this yet but look forward to seeing the circular on the proposed capital reduction.

"An interim dividend of 1.0p per share is proposed (2014: 2.0p). This is scheduled to be payable in May 2016 to shareholders, subject to a proposed capital reduction to increase distributable reserves following the goodwill impairment, which requires shareholder and court approvals.

Full details of the proposed capital reduction and notice of a General Meeting are expected to be published shortly in a circular to shareholders. Once shareholder approval for the proposed capital reduction has been granted, final Court submissions will be filed, with confirmation and registration expected by the end of April 2016. A further announcement with full details of record, ex-dividend and payment dates for the interim dividend will be made shortly thereafter."

[aleman] 29/2/2016 09:38

But they are already trading at a discount of about 50-80% to other companies that earn EBITDA similar to their reduced level. The market seems to pricing in about a 2 in 3 chance of these going bust. I think that is probably too much. Given the management are still paying a dividend, albeit reduced, they clearly don't see the company's existence as under threat. It is still generating enough cash to pay a dividend while they sort things out. I wonder how many analysts will be saying there is a 2 in 3 chance of them going bust when they adjust forcasts?

[salpara111] 29/2/2016 08:53

Not the update I was looking for in order to take a stake.
It is a very leveraged business and they are having to cut loss making contracts but dont seem to be able to replace them with profitable ones which means big losses due to the high fixed cost nature of the business.

[eezymunny] 29/2/2016 08:37

The key though IMO is, in their own words "The decline in DX Exchange volumes did not readily translate into cost reductions due to the fixed cost nature of collection and delivery activity that is maintained across DX Exchange sites"

If that business continues to decline it has the potential to become heavily loss-making IMO. We'll have to wait to see what the renewals are like in H2.

[aleman] 29/2/2016 08:17

Profit and earnings are misleading in situations like this. EBITDA looks to be headed for about £20m or so. Current price is only about 2 x. Remarkably it was only about 1.5 x recently. Market cap should be more like £60-£80m or 30-40p, and that would still be a modest price unless things deteriorate further. Interims have no new scares I can see but says there are new contracts. Price should rise 50% rather than fall. Stockmarket doing its usual, though.

[speedsgh] 23/2/2016 07:55

Notice of Results -

DX, the leading independent parcels, mail and logistics operator, will report results for the half year ended 31 December 2015 on 29 February 2016.

[mynumber] 23/2/2016 01:13

Update next Monday