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Market report: Parcels firm DX delivers blow to City as profit alert sends it plunging

08 Feb 2017, 15:40

http://www.standard.co.uk/business/mark ... 60316.html

When parcel service DX Group floated on AIM in 2014, four months after Royal Mail’s IPO delivered big returns for the City, investors had pound signs in their eyes.

Here was a chance to replicate Royal Mail’s market success at the smaller end of the market. How wrong they were.

While Royal Mail is still trading a third higher than its controversial offer price — many claimed the Government under-priced the privatisation — DX Group is now worth less than a tenth of the 100p listing price even after bouncing on its market debut.

The troubles facing the delivery service and tracking firm, chaired by Mears chairman Bob Holt, were laid bare today as it issued a dire profit warning that caused the shares to plummet 10.79p, some 60%, to just 7.21p.

The float raised more than £200 million. DX Group now has a market value of just £14 million.

The trading update revealed challenging conditions had hampered the business, especially in its courier and freight arms, which generate higher margins.

It said profits for the year will be “significantly below current market forecasts, with net debt consequently higher than expected”.

It also said it would now not be paying dividends “for the foreseeable future” and said it had launched a review of its operations to improve performance.

Numis, one of the company’s brokers, took the axe to its forecasts, predicting that underlying earnings for the year will now be below £9 million, having previously expected £18 million.

DX’s plunge stood out in a rising market as the FTSE 100 gained 41.51 points to 7213.66. Miners and house-builders, buoyed by Bellway’s update, drove the index higher.

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