TIDMDX.
RNS Number : 2303Z
DX (Group) PLC
17 September 2020
17 September 2020
AIM: DX.
DX (Group) plc
("DX" or "the Group" or "the Company")
A leading provider of delivery solutions,
including parcel freight, secure courier and logistics
services
Preliminary Results for the Period Ended 27 June 2020
Return to Adjusted Pre-tax Profit Marks Completion of First
Phase of Turnaround
Period Period Year Change
ended ended ended
27 June 27 June 30 June
2020 2020 2019
IAS17(1) IFRS16(1) IAS17 IAS17
---------------------------- --------------------- --------------------- --------------------- ---------------------
Revenue GBP329.3m GBP329.3m GBP322.5m + GBP6.8m
EBITDA(2) GBP4.4m GBP24.9m GBP3.3m +GBP1.1m
Underlying GBP2.2m GBP4.5m GBP0.2m +GBP2.0m
results from
operating
activities(2)
Reported results GBP0.7m GBP3.0m GBP(1.3)m +GBP2.0m
from operating
activities
Adjusted GBP1.8m GBP0.2m GBP(0.2)m +GBP2.0m
profit/(loss)
before
tax(2)
Profit /(loss) GBP0.3m GBP(1.3)m GBP(1.7)m +GBP2.0m
before tax
Adjusted
earnings/(loss)
per
share(2) 0.2p (0.1)p (0.2)p +0.4p
Basic
earnings/(loss)
per
share 0.0p (0.3)p (0.4)p +0.4p
Net GBP12.3m GBP12.3m GBP(1.3)m +GBP13.6m
cash/(debt)(2)
Cash flow from GBP16.9m GBP33.5m GBP3.2m +GBP13.7m
operating
activities
---------------------------- --------------------- --------------------- --------------------- ---------------------
Discussion of the results for the period ended 27 June 2020 is
on a comparable IAS 17 basis unless stated otherwise.
Financial Key Points
-- Revenue growth of 2% and first adjusted pre-tax profit since turnaround began
-- Continuing performance improvement at DX Freight division contributed to the turnaround
-- Net cash of GBP12.3m at 27 June 2020 was better than expected (2019: net debt of GBP1.3m)
-- Capital expenditure of GBP3.4m (2019: GBP3.5m), part of a
GBP10m investment programme in IT systems, the depot/service centre
network, and new operational parcel handling systems
Coronavirus Impact & Response
-- Group revenue fell by approximately a third immediately
post-lockdown, but volumes steadily recovered from April and are
now above levels anticipated pre-lockdown
-- Resources switched to busier areas of Group, with increased demand for B2C services
-- GBP10.4m of payments, principally VAT, deferred to preserve cash
-- Utilised Coronavirus Job Retention Scheme
Operational Key Points
-- DX Freight:
o revenue up 7% to GBP169.0m (2019: GBP158.6m) and EBITDA loss
down 85% to GBP1.2m (2019: GBP7.8m loss and 2018: loss of
GBP14.2m)
o achieved EBITDA profitability in H2 of GBP0.7m(H2 2019: loss
of GBP2.3m)
o Improved performance driven by expansion and enhancement of
1-Man service, and increased productivity and efficiency across the
division
-- DX Express:
o revenue of GBP160.3m (2019: GBP163.9m) and EBITDA of GBP23.3m
(2019: GBP26.2m), reflects completion of HMPO contract and
coronavirus impact in H2
o focus now on expansion of Secure Courier service, with
approximately 50% of available capacity filled and strong pipeline
of opportunities, boosted by launch of 'Estimated Time of Arrival'
technology in H2
-- Ronald Series to become Non-executive Chairman (from
Executive Chairman) at the forthcoming AGM, reflecting the
successful conclusion of the first phase of the Group's
turnaround
Outlook
-- The parcels market continues to grow strongly and we see the
opportunity for the Group to increase volumes and further expand
our margins
-- Trading in the first months of the new financial year is
ahead of the same period last year, and there is a healthy pipeline
of new business opportunities
Ronald Series, Chairman, commented:
"DX has made significant progress and the Company's return to
adjusted pre-tax profit, despite the challenges of the coronavirus
pandemic, marks the completion of the first phase of its
turnaround. These strong results were largely driven by the
improved performance of DX Freight, and reflects the hard work we
have put into this division over the past two years.
"The rapid response of our teams to the dramatic change in
trading conditions caused by the coronavirus lockdown was
excellent, and allowed DX to conserve cash and maintain operations
safely. Delivery volumes are now above levels anticipated
pre-lockdown.
"We have now established solid foundations upon which to move
into our growth phase. We believe that there are significant
opportunities for both divisions, and that we are in a strong
position to rebuild profitability, by improving efficiency,
productivity and margins.
"I have agreed with the Board that this would be an appropriate
time for me to step back from an executive chairmanship to
non-executive chairman, confident that we are well set for future
growth and increased profitability."
Lloyd Dunn, CEO, commented:
"The business has been transformed and revitalised under the
turnaround plan we put in place in early 2018. I would like to
thank everyone for their contribution to a successful outturn and
for their response to the unprecedented situation that we have
navigated over the last few months. I also extend my personal
thanks to Ron, who has elected to step down from his executive role
to become Non-executive Chairman at the Company's AGM. I am
delighted that we will continue to benefit from his valuable input
and experience as we continue with the next stage of DX's
turnaround."
Notes
(1) IFRS16 Lease was adopted on 1 July 2019 using the modified
retrospective, without restating prior year figures. As a result,
the discussion of results for the period to 27 June 2020 is based
on the previous standard IAS 17 Leases unless otherwise stated.
(2) The Group uses alternative performance measures ("APMs") to
measure performance. See notes 2 and 13 to the Financial Statements
and the Financial Review for details of APMs used, including
reconciliations of these APMs to IFRS reported measures.
From 1 July 2019 the Group changed its reporting periods from a
calendar basis to a '4-5-4 weekly' basis, which better reflects its
cost base and operations. The period to 27 June 2020 is
consequently from 1 July 2019 to 27 June 2020 (52 weeks less one
day), whereas the comparative annual period was from 1 July 2018 to
30 June 2019 (52 weeks plus one day).
The current year financial statements will be prepared for the
53 week period from 28 June 2020 to 3 July 2021. Future years will
be for either 52 weeks or occasionally 53 weeks in order to keep
the year-end date as close as possible to 30 June.
Enquiries:
DX (Group) plc T: 020 3178 6378
(c/o KTZ
Ronald Series, Executive Chairman Communications)
Lloyd Dunn, Chief Executive Officer
David Mulligan, Chief Financial Officer
finnCap (Nominated Adviser to DX) T: 020 7220 0500
Matt Goode/Simon Hicks/Kate Washington (Corporate
Finance)
Andrew Burdis (ECM)
Liberum (Joint broker to DX) T: 020 3100 2000
Robert Morton/Euan Brown/William Hall
KTZ Communications T: 020 3178 6378
Katie Tzouliadis
Dan Mahoney
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that DX made excellent progress in its
second full year of turnaround, despite the significant challenges
of the coronavirus pandemic that emerged in the second half of our
financial year. The Group's return to adjusted pre-tax profit
(adjusted for amortisation of acquired intangibles and share based
payments charge) at a time of crisis is all the more pleasing and
reflects on the high degree of commitment and effort from our teams
across the business.
We have now established very solid foundations from which to
move forwards. Our focus in the next phase of the Group's
development is on rebuilding profitability. This will be based on
volume growth and margin expansion, supported by continuing
efficiency and productivity improvements.
Financial Results
Results for the period ended 27 June 2020 is on a comparative
IAS17 basis unless stated otherwise.
Despite the impact of the coronavirus, DX returned to
profitability, delivering GBP1.8 million of adjusted pre-tax profit
(2019: loss of GBP0.2 million), its first full year adjusted
pre-tax profit since the turnaround began at the end of 2017. This
was generated on revenue that was up 2% year-on-year to GBP329.3
million (2019: GBP322.5 million). Operating cash flow was very
strong at GBP16.9 million (2019: GBP3.2 million) supported by
GBP10.4 million of agreed payment deferrals (mainly VAT), in
response to the coronavirus crisis. Notwithstanding these deferred
payments, the underlying cash performance was better than expected,
resulting in net cash at 27 June 2020 of GBP12.3 million (2019: net
debt of GBP1.3 million). This leaves the Group in a financially
sound position, with a strong level of liquidity and significant
headroom within its invoice discounting facility.
Coronavirus Crisis
The coronavirus and subsequent government measures to contain
its spread, including a nationwide 'lockdown' at the end of March,
tested the resilience and flexibility of our business. As an
essential service provider DX maintained its operations at all its
depots and service centres. At the same time, the safety and
welfare of our staff, partners and customers were our top priority,
and protective measures were put in place as rapidly as
possible.
The response of our teams to the dramatic change in trading
conditions was tremendous, and we were able to react swiftly with
great flexibility and resilience. Overall delivery volumes
initially fell by around a third and there was a shift in demand to
B2C services. We acted quickly to reallocate drivers and vehicles
to busier activities and routes, and reduced the use of
subcontractors to ensure that our own resources were fully
utilised. Even so, a number of employees were furloughed and we
made use of the Government's Coronavirus Job Retention Scheme. We
recognise the importance to the economy and to our Group of this
support. The vast majority of the furloughed employees have now
returned to work.
Since Easter, volumes have steadily recovered and they are now
above the levels we had anticipated before the lockdown. This
strong rebound was helped by remaining fully operational throughout
the period and continuing to provide customers with high levels of
service.
Performance Overview
The improving performance of DX Freight has been a key component
in restoring the Group to adjusted pre-tax profits. I am pleased to
highlight the strong progress that was made in this division over
the year. Revenue improved by 7% to GBP169.0 million (2019:
GBP158.6 million), and the EBITDA loss for the year was reduced by
85% to GBP1.2 million (2019: loss of GBP7.8 million). This
substantial advancement was mainly driven by the expansion and
improvements in productivity of our 1-Man service, and the division
achieved EBITDA profitability of GBP0.7 million in the second half
of the year (1H 2020: loss of GBP1.9 million).
As expected, results from DX Express were affected by the
cessation of the HMPO contract during the year, and revenue was
down 2% at GBP160.3 million (2019: GBP163.9 million), with EBITDA
at GBP23.3 million (2019: GBP26.9 million). Adjusting for the HMPO
contract, revenue was flat year-on-year despite the impact of the
coronavirus. In the summer, we went live with our new Estimated
Time of Arrival ("ETA") capability, which provides the end-customer
with a two-hour delivery window and the ability to re-schedule
deliveries. This investment in ETA brings the division up to the
mark in terms of the technology that this market demands, and will
underpin growth as we target the significant opportunities
available for a high quality service in the market for small
parcels.
Investment
During the financial year, we announced the commencement of a
GBP10 million capital investment programme over two years to
strengthen our IT systems, expand the network and deliver
operational equipment to handle the increasing volumes and improve
efficiency. Spending in the period to 27 June 2020 amounted to
GBP3.4 million (2019: GBP3.5 million), with an additional GBP1.5
million of our planned expenditure deferred after the onset of the
coronavirus crisis. However, we remain on track to complete our
GBP10 million programme and to invest the remaining sums during the
current financial year.
Dividend Policy
We are making good progress with restoring DX to longer term
sustainable profit and cash generation, and having returned the
Group to profitability, the Board will be reviewing the dividend
policy again. Our objective is to return to the dividend list as
soon as it is appropriate for us to do so and we will keep the
reinstatement of dividends under close review.
Our People
Our employees have shown significant commitment to our customers
and to the business over the course of the year, and in particular
in the months since the pandemic. The Board is hugely grateful, and
on behalf of the Directors, I would like to pay tribute to the
remarkable people we have at DX and their response to the
challenges created by the coronavirus outbreak.
THE BOARD
Now that the Group has successfully completed the first phase of
its turnaround and is on a very firm footing with clear growth
prospects ahead, I am confident that I can now relinquish my role
as Executive Chairman and continue as Non-executive Chairman. This
change is planned to take effect at the Group's forthcoming Annual
General Meeting. I look forward to continuing to work closely with
the Board and the Executive team in supporting the Group in its
next phase of development as we rebuild profitability.
Outlook and Opportunities
The overall parcels market for both DX Express and DX Freight
continues to grow strongly and we see the opportunity for the Group
to increase volumes ambitiously and to grow the EBITDA margin
significantly over the next three to five years. By utilising the
existing capacity across our two networks and further scaling up
this capacity, we are in a position to drive improvements in
efficiency and productivity and further expand our margins.
Trading in the first months of the new financial year is ahead
of the same period last year and we have a healthy pipeline of new
business opportunities. We believe that DX is well-positioned to
exploit these market opportunities and expect to make good progress
over the year, in line with our targets.
Ronald Series
Executive Chairman
Chief Executive Officer's Review
FIRST PHASE OF TURNAROUND COMPLETE
It has been another year of substantial progress. This has been
built on the structural and cultural changes we put in place over
the past two years, which centred on devolving responsibility and
accountability to depots and service centres, and establishing more
disciplined commercial processes. Those changes have helped to make
us operationally and commercially much stronger, underpinning the
year's performance.
Despite the impact of the coronavirus crisis in the second half
of the year, we have been able to continue with new initiatives and
investments. The further improvements we have made over the year
means that our customer proposition is now more compelling.
We have maintained consistently high service levels, introduced
new Estimated Time of Arrival ("ETA") capabilities and with our
strong portfolio of services, we can flex our offering to match our
customers' requirements.
The business is much more resilient as we continue to increase
the number of SME customers we serve and reduce our reliance on any
single customer or sector of the market.
We are growing in confidence and having delivered an adjusted
profit for the year, we now bring our focus to growing revenue and
expanding margins in the next phase of the turnaround.
Coronavirus Response
The impact of the UK lockdown was initially significant, with
revenue falling by around a third in a very short period of time.
The swift and decisive action from teams across the business meant
we quickly made locations safe to operate under the legal
frameworks and guidance provided by the Government. We undertook
risk assessments of those processes that were impacted and rapidly
developed safe delivery protocols and implemented safe methods of
working in both our warehouse and office environments, enabling us
to remain operational.
With the initial fall in demand we faced challenges to flex the
cost base. We switched resources to busier areas of the business,
where we saw an uptick in demand for B2C delivery services. In
addition, we made use of the Government's Coronavirus Job Retention
Scheme ("CJRS") and furloughed approximately 25% of our employees.
Jobs have been protected by the CJRS and affected employees
returned to the business between late April and August in line with
recovering volumes, and the vast majority are now back working in
the business. The steady recovery meant that we were able to trade
profitably through the lockdown period, and, by early summer,
overall volumes were back to pre-coronavirus levels, led by DX
Freight and followed by DX Express. Volumes have since exceeded
those expected pre-lockdown.
As well as our operational response to the coronavirus, we also
took steps to protect and preserve our cash resources. We made use
of the Government's VAT payments deferral scheme, which deferred
around GBP8.4 million of payments. We also agreed a three month
payment holiday totalling GBP2.0 million with certain suppliers.
Finally, the senior managers and Directors across the Group
sacrificed 20% of their salary for a short period, which helped
support the business through this turbulent time.
The coronavirus has affected us all but some more than others
and we pay tribute to those in the DX family who were badly
affected.
Divisional Review
DX Freight
DX Freight delivered another substantial improvement in its
performance with revenue increasing by 7% to GBP169.0 million
(2019: GBP158.6 million) and EBITDA losses reducing significantly
to GBP1.2 million (2019: loss of GBP7.8 million, 2018: loss of
GBP14.2 million). The strong revenue growth was driven in
particular by the expansion of the division's 1-Man service and the
increase in EBITDA was from improving performance across the
division. DX Freight was profitable through the second half of the
year, and reported EBITDA of GBP0.7 million for this period, which
was a remarkable performance given the impact of the lockdown.
In the second half, we extended the division's network, opening
a new depot at Ipswich. We also established a unit to assist with
the identification and return to customers of freight that has lost
its labels or delivery instructions. This has helped to reduce the
cost of claims and improved customer service. We also invested in
basic mechanisation at the Central Hub and at regional sortation
hubs, which has increased the network's capacity and throughput of
parcel freight and improved the efficiency of the sortation
process. We will continue to invest in operational systems to
underpin our ambitious revenue and margin targets for this
division.
The market for parcel freight is expanding and our strategy for
DX Freight is to grow market share and improve margins through
increased efficiency and productivity. As additional volumes do not
require a commensurate rise in fixed costs, there is a relatively
high operational gearing that boosts margins. Margin expansion will
be further achieved by extending the network of depots. This has
several beneficial effects: it reduces stem miles; improves our
ability to sell new business into the local area; enhances service
levels by being closer to our customers; and increases vehicle
productivity by enabling double delivery runs on certain
routes.
The market for freight of Irregular Dimensions and Weight
("IDW") is currently dominated by a small number of players. This
is because the need to provide national coverage together with the
increasing regulatory demands create relatively high barriers to
entry into this market. We believe that there is scope for the
division to significantly increase its market share and have
invested in a very capable sales force to deliver new business. We
have existing capacity, which is scalable by expanding the number
of depots in the network and by improving efficiencies, partly
through basic mechanisation.
We recently opened two new depots at Westbury and Oxford, and
plan to open a depot in Burnley in the coming weeks. A further
seven new depots are scheduled to be opened over the next three
years. The coronavirus pandemic has also stimulated demand for the
division's 2-Man and Logistics service and we have recently
appointed a new Sales Director to address the opportunities.
DX Express
The division's performance was impacted by the planned
completion of the contract with HMPO as well as by the coronavirus
crisis in the second half. As a result, revenue decreased to
GBP160.3 million (2019: GBP163.9 million), and EBITDA reduced to
GBP23.3 million (2019: GBP26.9 million). With the exit from the
HMPO contract completed in the second half, we have refocused our
capacity on the expansion of our Secure Courier service within the
growing parcels market. We have performed well, filling around 50%
of available capacity following the contract's cessation, and the
pipeline of opportunities for Secure Courier is significant.
An important milestone completed in the second half was the
launch of the division's ETA capability. This enables a 2-hour
delivery window, 'in-flight' re-scheduling options and keeps
customers informed of the progress of their delivery. This new
technology significantly strengthens the division's market
proposition and has opened up opportunities.
I am pleased to report that since March our Secure Courier
service has been supporting the national coronavirus effort by
handling medical specimens and collecting COVID-19 testing
kits.
Our strategy for DX Express is to develop it into a leading
parcel delivery service for SMEs and large national customers that
value a high-quality, next-day service. Embracing a culture of
accountability and responsibility, our service centres are able to
provide customers with a service that is typically more responsive
and flexible, and which feels more personal. Although the parcels
market is very competitive, it is seeing strong expansion from
increased on-line purchasing and we are confident in our ability to
develop the division's presence in this area.
We are currently planning to expand the network with a new
service centre in Glasgow, and, as with DX Freight, efficient
utilisation of capacity will help to drive margin expansion over
the longer term.
CENTRAL OVERHEAD
Central overheads for the year increased to GBP17.7 million
(2019: GBP15.8 million). The year-on-year rise was from planned
spending on additional IT resource to refresh and renew the Group's
IT systems and infrastructure. Technology is key to supporting our
growth initiatives and we expect central overheads to remain at
this level as we continue to invest in systems to increase
efficiency. I am pleased to report that we are already benefitting
from improved data management and reporting, and expect further
improvements as our technology upgrade programme continues.
Summary
Despite all the challenges, it has been another year of
significant progress and we are in a position to build upon the
hard work of the last three years and the sound foundations we have
created. We are excited by the market opportunities and look
forward to reporting on further progress.
I would like to finish by thanking everyone for their hard work
and commitment over the past year. I am proud of our achievements
and am looking forward to our next steps ahead in the coming
year.
Lloyd Dunn
Chief Executive Officer
FINANCIAL REVIEW
STATUTORY RESULTS
From 1 July 2019 the Group changed its reporting periods from a
calendar basis to a '4-5-4 weekly' basis, which better reflects its
cost base and operations. These financial statements were prepared
for the period 1 July 2019 to 27 June 2020. Future years will be
for either 52 weeks or occasionally 53 weeks in order to keep the
year-end date as close as possible to 30 June.
Revenue for the period to 27 June 2020 was GBP329.3 million
(2019: GBP322.5 million) and the loss before taxation, having
implemented IFRS16, was GBP1.3 million (2019: GBP1.7 million
comparative on IAS 17 basis). The loss per share was 0.3p (2019:
0.4p on IAS17 basis).
TRANSITION TO IFRS 16 'LEASES'
A key change to our financial reporting was the transition to
reporting property, vehicles leases and equipment. Previously, the
costs under these operating leases would have been expensed in the
income statement. These assets have been capitalised as at 1 July
2019 as right-of-use assets and are depreciated through the income
statement. On transition we have also recognised a discounted lease
liability, on which interest is charged to the income statement.
The impact on the income statement has meant that EBITDA has
significantly increased. The depreciation charge has also increased
significantly along with additional amounts being charged to
interest. Further details of the transition to IFRS 16 and its
impact are outlined in note 14 to the Financial Statements.
SUMMARY
Statutory results for the period ended 27 June 2020 are reported
on an IFRS 16 basis and the comparative is under IAS 17. However,
the results for the period to 27 June 2020 outlined below are on an
IAS17 basis unless stated otherwise in order to aid comparability
to the results for the prior year. Results for the 53 weeks ending
3 July 2021 will be presented on an IFRS 16 basis.
Revenue of GBP329.3 million was 2% ahead of prior year, and
reflects strong growth at DX Freight of GBP10.4 million to GBP169.0
million, driven by expansion of its 1-Man service despite the
impact of the coronavirus. This growth was offset by a small
reduction in revenue at DX Express of GBP3.6 million to GBP160.3
million, which resulted from the expected decline of revenue from
Document Exchange subscriptions, the loss of the HMPO contract and
the impact of the coronavirus offset in part by securing new
business.
Earnings before interest, tax, depreciation, amortisation and
exceptional items ("EBITDA") for the period to 27 June 2020 was
GBP4.4 million (2019: GBP3.3 million). The profit before tax was
GBP0.3 million (2019: loss before tax of GBP1.7 million).
Underlying operating profit was GBP2.2 million (2019: GBP0.2
million). Adjusted profit before tax was GBP1.8 million (2019: loss
of GBP0.2 million).
Net cash at 27 June 2020 was GBP12.3 million (2019: net debt of
GBP1.3 million), which was better than market forecasts, mostly
because of deferred VAT of GBP8.4 million and the agreed deferral
of other payments totalling GBP2.0 million. Operating cash flow was
GBP16.9 million (2019: GBP3.2 million) and the cash outflow from
capital expenditure was GBP3.3 million (2019: GBP3.4 million). It
is expected that the deferred payments will be made during the
current financial year, resulting in the Group being modestly cash
positive by the end of this financial year.
IFRS16 IAS17 IAS17
(1) (1) (1)
2020 2020 2019
GBPm GBPm GBPm
------------------------------------- ------ ----- -----
Revenue 329.3 329.3 322.5
--------------------------------------- ------ ----- -----
Earnings before interest, tax,
depreciation and amortisation
("EBITDA")(2) 24.9 4.4 3.3
Depreciation (20.0) (1.8) (2.2)
Amortisation of software and
development costs (0.4) (0.4) (0.9)
--------------------------------------- ------ ----- -----
Underlying operating profit(2) 4.5 2.2 0.2
Amortisation of acquired intangibles (0.3) (0.3) (0.3)
Share-based payments charge (1.2) (1.2) (1.2)
Reported profit/(loss) from
operating activities 3.0 0.7 (1.3)
Finance costs (4.3) (0.4) (0.4)
(Loss)/profit before tax (1.3) 0.3 (1.7)
--------------------------------------- ------ ----- -----
Tax (0.5) (0.5) (0.8)
--------------------------------------- ------ ----- -----
Loss for the year (1.8) (0.2) (2.5)
--------------------------------------- ------ ----- -----
Other comprehensive expense - - -
------------------------------------- ------ ----- -----
Total comprehensive expense
for the year (1.8) (0.2) (2.5)
--------------------------------------- ------ ----- -----
EPS - adjusted (pence)(2) (0.1) 0.2 (0.2)
--------------------------------------- ------ ----- -----
- basic (pence) (0.3) 0.0 (0.4)
--------------------------------------- ------ ----- -----
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures. As a
result, the discussion of results is based on an IAS 17 basis,
unless otherwise stated.
(2) See notes 2 and 13 to the Financial Statements and this
Financial Review for details of alternative performance measures
("APMs") used, including reconciliations of APMs to IFRS reported
measures.
Revenue by Segment
A breakdown of Group revenue is shown below and further
commentary on each division's performance is provided in the
Chairman's Statement and the Chief Executive Officer's Review.
2020 2019 Change
GBPm GBPm %
----------- ----- ----- ------
DX Express 160.3 163.9 -2%
DX Freight 169.0 158.6 +7%
Revenue 329.3 322.5 +2%
----------- ----- ----- ------
Segmental analysis
Segmental information shown on a statutory basis is shown in
note 6 to the financial information.
2020
--------------------------------------
DX DX
Express Freight Central Total
GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- --------- -------
Revenue 160.3 169.0 - 329.3
Costs before overheads (129.6) (165.3) - (294.9)
Profit/(loss) before overheads 30.7 3.7 - 34.4
Overheads (7.4) (4.9) (17.7) (30.0)
---------------------------------------- -------- -------- --------- -------
EBITDA 23.3 (1.2) (17.7) 4.4
---------------------------------------- -------- -------- --------- -------
Depreciation and amortisation - - (2.5) (2.5)
Share-based payments charge - - (1.2) (1.2)
Profit/(loss) from operating activities 23.3 (1.2) (21.4) 0.7
Finance costs - - (0.4) (0.4)
Profit/(loss) before tax 23.3 (1.2) (21.8) 0.3
Tax (expense)/credit - - (0.5) (0.5)
Profit/(loss) for the year 23.3 (1.2) (22.3) (0.2)
---------------------------------------- -------- -------- --------- -------
2019
--------------------------------------
DX DX
Express Freight Central Total
GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- --------- -------
Revenue 163.9 158.6 - 322.5
Costs before overheads (129.5) (161.7) - (291.2)
Profit/(loss) before overheads 34.4 (3.1) - 31.3
Overheads (7.5) (4.7) (15.8) (28.0)
---------------------------------------- -------- -------- --------- -------
EBITDA 26.9 (7.8) (15.8) 3.3
---------------------------------------- -------- -------- --------- -------
Depreciation and amortisation - - (3.4) (3.4)
Share-based payments charge - - (1.2) (1.2)
Profit/(loss) from operating activities 26.9 (7.8) (20.4) (1.3)
Finance costs - - (0.4) (0.4)
Profit/(loss) before tax 26.9 (7.8) (20.8) (1.7)
Tax (expense)/credit - - (0.8) (0.8)
Profit/(loss) for the year 26.9 (7.8) (21.6) (2.5)
---------------------------------------- -------- -------- --------- -------
Cash flow
2020 2019
GBPm GBPm
----------------------------------- ----- -----
EBITDA 4.4 3.3
Net change in working capital 13.3 (0.2)
Interest paid (0.4) (0.4)
Tax (paid)/received/ (0.4) 0.5
----------------------------------- ----- -----
Net cash from operating activities 16.9 3.2
----------------------------------- ----- -----
Cash flow from operating activities was GBP16.9 million, GBP13.7
million better than the prior year. This was partly as a result of
improved EBITDA, but mostly because of deferred VAT payments under
HMRC's VAT payments deferral scheme and other deferred payments
agreed with suppliers.
Working capital increased significantly by GBP13.3 million in
the year, mostly because of the deferred payments referred to
above. Other working capital movements included an expected GBP3.0
million decrease in DX Exchange deferred income, whilst DX
maintained its excellent performance on debtor days at 23 days
(2019: 25 days).
Interest paid was similar to the previous year, whilst tax paid
was in relation to the Group's Irish operations. There was a tax
rebate of GBP1.1 million in the previous year which more than
offset the Irish tax charge.
Net assets
Net assets increased by GBP1.0 million, reflecting the profit
for the year excluding the share-based payments charge.
2020 2019
GBPm GBPm
------------------------------ ------ ------
Non-current assets 43.7 43.0
Current assets excluding cash 35.1 43.2
Cash 12.3 1.8
Invoice discounting facility - (3.1)
Current liabilities excluding
debt (61.1) (56.3)
Non-current liabilities (5.4) (5.0)
Net assets 24.6 23.6
------------------------------ ------ ------
NET Cash/debt
Net cash at 27 June 2020 was better than expected at GBP12.3
million (2019 net debt of GBP1.3 million), reflecting the EBITDA
for the year, but also the significant deferred payments referred
to above.
The Group's only borrowing facility is a GBP20.0 million invoice
discounting facility. Drawings on the invoice discounting facility
at 30 June 2020 were GBPnil (2019: GBP3.1 million).
2020 2019
GBPm GBPm
----------------------------- ----- -----
Cash and cash equivalents 12.3 1.8
Invoice discounting facility - (3.1)
Net cash/(debt)(1) 12.3 (1.3)
----------------------------- ----- -----
(1) See notes 2 and 13 to the Financial Statements and this
Financial Review for details of APMs used, including
reconciliations of these APMs to IFRS reported measures.
Capital expenditure
Capital expenditure for the year was GBP3.4 million (2019:
GBP3.5 million). Capital expenditure consisted principally of
investment in IT equipment and development, operational equipment
and property improvements. In particular, the Group's finance
systems were upgraded during the year to the latest version of the
JD Edwards enterprise software and moved into a modern cloud-hosted
environment.
2020 2019
GBPm GBPm
----------------------------------- ----- -----
IT hardware and development
costs 1.2 1.1
Property costs 1.3 1.4
Operations and service development 0.9 1.0
Total capex 3.4 3.5
----------------------------------- ----- -----
adjusted profit and Earnings per share
Adjusted earnings per share (on an IAS 17 basis), which excludes
amortisation of acquired intangibles and share-based payments
charge, was 0.2p (2019: loss per share of 0.2p).
IFRS
16 IAS 17 IAS 17
2020 2020 2019
GBPm GBPm GBPm
------------------------------------- ----- ------ ------
Profit/(loss) from operating
activities 3.0 0.7 (1.3)
Add back/(deduct):
Amortisation of acquired intangibles 0.3 0.3 0.3
Share-based payments charge 1.2 1.2 1.2
Finance costs (4.3) (0.4) (0.4)
Adjusted profit/(loss) before
tax(1) 0.2 1.8 (0.2)
------------------------------------- ----- ------ ------
Tax (0.5) (0.5) (0.8)
------------------------------------- ----- ------ ------
Adjusted (loss)/profit after
tax(1) (0.3) 1.3 (1.0)
------------------------------------- ----- ------ ------
Adjusted (loss)/earnings per
share (pence) (1) (0.1) 0.2 (0.2)
------------------------------------- ----- ------ ------
Basic loss per share (pence) (0.3) 0.0 (0.4)
------------------------------------- ----- ------ ------
(1) See notes 2 and 13 to the Financial Statements and this
Financial Review for details of APMs used, including
reconciliations of these APMs to IFRS reported measures.
Dividends
In line with previous guidance, the Board will not be
recommending the payment of a dividend for this financial year.
David Mulligan
Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 27 June 2020
Period Year ended
ended 30 June
27 June 2019
2020(1)
-------- ----------
Total Total
Notes GBPm GBPm
---------------------------------------------------- ----- -------- ----------
Revenue 5 329.3 322.5
Operating costs 7 (326.3) (323.8)
---------------------------------------------------- ----- -------- ----------
Profit/(loss) from operating activities 3.0 (1.3)
---------------------------------------------------- ----- -------- ----------
Analysis of profit/(loss) from operating activities
Earnings before interest, tax, depreciation
and amortisation ("EBITDA") 24.9 3.3
Depreciation (20.0) (2.2)
Amortisation of software and development costs (0.4) (0.9)
Amortisation of acquired intangibles (0.3) (0.3)
Share-based payments charge (1.2) (1.2)
Profit/(loss) from operating activities 3.0 (1.3)
---------------------------------------------------- ----- -------- ----------
Finance costs 8 (4.3) (0.4)
Loss before tax (1.3) (1.7)
Tax expense (0.5) (0.8)
---------------------------------------------------- ----- -------- ----------
Loss for the year (1.8) (2.5)
---------------------------------------------------- ----- -------- ----------
Other comprehensive expense not subsequently
reclassified
Other comprehensive expense - -
---------------------------------------------------- ----- -------- ----------
Total comprehensive expense for the year (1.8) (2.5)
(Loss)/earnings per share (pence):
Basic (and diluted) 9 (0.3) (0.4)
Adjusted 9 0.1 (0.2)
---------------------------------------------------- ----- -------- ----------
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
13 to the consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 27 June 2020
27 June 30 June
2020(1) 2019
Notes GBPm GBPm
------------------------------- ----- -------- -------
Non-current assets
Property, plant and equipment 10.4 9.7
Right-of-use assets 14 80.2 -
Intangible assets and goodwill 31.0 31.0
Deferred tax assets 2.3 2.3
------------------------------- ----- -------- -------
Total non-current assets 123.9 43.0
------------------------------- ----- -------- -------
Current assets
Trade and other receivables 33.5 43.1
Current tax receivable 0.1 0.1
Cash and cash equivalents 12.3 1.8
Total current assets 45.9 45.0
------------------------------- ----- -------- -------
Total assets 169.8 88.0
------------------------------- ----- -------- -------
Equity
Share capital 5.7 5.7
Share premium 25.2 25.2
Translation reserve - -
Retained earnings (7.9) (7.3)
------------------------------- ----- -------- -------
Total equity 23.0 23.6
------------------------------- ----- -------- -------
Non-current liabilities
Provisions 5.0 5.0
Lease liabilities 68.3 -
------------------------------- ----- -------- -------
Total non-current liabilities 73.3 5.0
------------------------------- ----- -------- -------
Current liabilities
Current tax payable - -
Loans and borrowings 10 - 3.1
Trade and other payables 42.0 38.1
Lease liabilities 15.8 -
Deferred income 14.2 17.2
Provisions 1.5 1.0
Total current liabilities 73.5 59.4
------------------------------- ----- -------- -------
Total liabilities 146.8 64.4
------------------------------- ----- -------- -------
Total equity and liabilities 169.8 88.0
------------------------------- ----- -------- -------
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 27 June 2020
Share Share Translation Retained
capital premium reserve earnings Total
GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- -------- ----------- --------- -----
At 1 July 2018 5.7 25.2 - (6.0) 24.9
---------------------------------- -------- -------- ----------- --------- -----
Total comprehensive expense for
the year
Loss for the year - - - (2.5) (2.5)
Other comprehensive expense - - - - -
Total comprehensive expense for
the year - - - (2.5) (2.5)
---------------------------------- -------- -------- ----------- --------- -----
Transactions with owners of the
Company, recognised directly in
equity
Share-based payment transactions - - - 1.2 1.2
Total transactions with owners
of the Company - - - 1.2 1.2
---------------------------------- -------- -------- ----------- --------- -----
At 30 June 2019(1) 5.7 25.2 - (7.3) 23.6
---------------------------------- -------- -------- ----------- --------- -----
Total comprehensive expense for
the year
Loss for the year - - - (1.8) (1.8)
Other comprehensive expense - - - - -
Total comprehensive expense for
the year - - - (1.8) (1.8)
---------------------------------- -------- -------- ----------- --------- -----
Transactions with owners of the
Company, recognised directly in
equity
Share-based payment transactions - - - 1.2 1.2
Total transactions with owners
of the Company - - - 1.2 1.2
---------------------------------- -------- -------- ----------- --------- -----
At 27 June 2020 5.7 25.2 - (7.9) 23.0
---------------------------------- -------- -------- ----------- --------- -----
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 27 June 2020
Period
ended(1) Year ended
27 June 30 June
2020 2019
Notes GBPm GBPm
------------------------------------------------- ----- --------- ----------
Cash generated from operations 11 38.1 3.1
------------------------------------------------- ----- --------- ----------
Interest paid (4.2) (0.4)
Tax (paid)/received (0.4) 0.5
------------------------------------------------- ----- --------- ----------
Net cash generated from operating activities 33.5 3.2
------------------------------------------------- ----- --------- ----------
Cash flows from investing activities
Proceeds from sale of property, plant and -
equipment -
Acquisition of property, plant and equipment (2.7) (2.9)
Software and development expenditure (0.6) (0.5)
Net cash generated used in investing activities (3.3) (3.4)
------------------------------------------------- ----- --------- ----------
Net increase/(decrease) in cash before financing
activities 30.2 (0.2)
------------------------------------------------- ----- --------- ----------
Cash flows from financing activities
Movement on invoice discounting facility (3.1) -
Lease repayments (16.6) -
Net cash generated used in financing activities (19.7) -
------------------------------------------------- ----- --------- ----------
Net increase/(decrease) in cash and cash
equivalents 10.5 (0.2)
Cash and cash equivalents at beginning of
year 1.8 2.0
Effect of exchange rate fluctuations on -
cash held -
------------------------------------------------- ----- --------- ----------
Cash and cash equivalents at end of year 12.3 1.8
------------------------------------------------- ----- --------- ----------
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
NOTES TO THE FINANCIAL INFORMATION
1 General information
DX (Group) plc is incorporated in England and domiciled in the
United Kingdom. The address of its registered office is Ditton
Park, Riding Court Road, Datchet, Slough, SL3 9GL. The registered
number of the Company is 08696699.
2 Basis of preparation
This preliminary consolidated financial information has been
prepared in accordance with the International Financial Reporting
Standards (IFRS) and the IFRS Interpretations Committee (IFRIC)
interpretations as endorsed by the European Union (EU).
The financial information set out above does not constitute the
Company's statutory consolidated accounts for the period ended 27
June 2020 or the year ended 30 June 2019 but is derived from those
accounts. Statutory consolidated accounts for 2019 have been
delivered to the registrar of companies, and those for 2020 will be
delivered in due course. The auditor has reported on those
accounts; the reports for 2019 and 2020 were (i) unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The Group uses alternative performance measures ("APMs") to
measure performance. These APMs have been calculated consistently
on an IAS 17 basis to enable comparability from one year to the
next and the Directors believe that this information is important
for the shareholders as it allows them to understand the difference
between the reported results and the trading performance excluding
certain non-cash charges and items which are not expected to recur.
The Group presents EBITDA, adjusted PBT, adjusted (LPS)/EPS,
underlying operating profit/(loss) and net debt which are further
explained in note 13.
The financial statements have been prepared on a going concern
basis, which the Directors consider to be appropriate as they are
confident the Group and the Company will have sufficient funds to
continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements. This
is notwithstanding the Group's net current liabilities of GBP27.6
million as at 27 June 2020 and a loss for the period then ended of
GBP1.8 million. Included within the net liabilities is GBP14.2
million (2019: GBP17.2 million) of deferred income representing an
obligation to deliver a service but not a cash liability and
GBP15.8 million representing lease liabilities whose payment are
spread over the forthcoming year and not payable in the immediate
short-term.
The Directors have prepared cash flow forecasts for a period
from the date of approval of these financial statements up to 30
June 2023, comprising a base case and a severe but plausible
downside scenario in order to assess how any second wave of the
coronavirus could impact the Group. These indicate that, even
taking into account reasonably possible downsides, the Group will
have sufficient funds, through its invoice discounting facility
with a rolling three month notice period or similar alternative
sources of finance, to meet its liabilities as they fall due for
that period. While the invoice discounting facility is cancellable
by either party on a three month notice period, the Directors are
confident that it will remain available throughout the forecast
period. See note 10 for further information on the Group's
borrowing facilities.
The base case assumes that the recovery from the coronavirus
pandemic is complete by the end of the first quarter of the year
ending 30 June 2021 and that the Group achieves the expected levels
of new business and overall performance. Within the base case there
are contingencies to allow for a shortfall in the expected level of
performance. The severe but plausible downside case assumes that
the impact of any second wave will be similar to the first in terms
of length and severity but a repeat of the Government's Coronavirus
Job Retention Scheme would not be available. The Directors have
assumed that Group revenue will reduce by GBP11 million and EBITDA
by GBP6 million compared with the budgeted levels of performance in
the third quarter of the year. It is also assumed that steps would
be taken to protect the Group's financial position, such as
deferring capital expenditure, significantly reducing areas of
expenditure, such as use of subcontractors and travel and
accommodation costs, and that deferral of payments are agreed with
suppliers as necessary. In both scenarios, the Group has sufficient
liquidity and adequate headroom within its existing invoice
discounting facilities ("IDF") and will not need to renegotiate the
terms of the IDF. Consequently, the Directors are confident that
the Company will have sufficient funds to continue to meet
liabilities as they fall due for at least 12 months from the date
of approval of the financial statements and therefore have prepared
the financial statements on a going concern basis.
3 Significant accounting policies
The accounting policies applied in these condensed financial
statements are consistent with those set out in the annual report
and accounts for the year ended 30 June 2019, except as noted in
note 4 below for new standards adopted.
Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes certain estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial information, are considered to relate to:
Critical accounting estimate: Leases
In determining the lease liability in accordance with IFRS 16,
the incremental borrowing rate was estimated by management using
the risk free rate for differing tenors, adjusted for the Group's
risk premium determined with reference to its borrowing rate on the
invoice discounting facility, and an asset specific adjustment
relating to asset class. There is also judgement when determining
the length of the lease to be used in calculating the value of the
right-of-use asset and the lease liability based on management's
view as to whether a lease break clause will be exercised or
not.
The lease liability at 27 June 2020 was GBP84.1 million. A 1.0%
increase in the discount rate would lead to a reduction in the
lease liability of GBP2.5 million.
Critical accounting estimate: Provisions
The Group makes provisions to meet the cost of future property
and vehicle dilapidations at the end of a lease. The Group provides
for property provisions on a site by site basis due to the unique
nature and location of each site. Provision is made for the best
estimate of the expected dilapidations. Dilapidations are provided
for specific individual properties and vehicle leases where the
outflow of resources is probable and the amount of the obligation
can be reliably estimated.
The amount provided for property dilapidations at 27 June 2020
was GBP3.6 million (2019: GBP3.1 million) and represents
management's best estimate for amounts that could be payable for
leased properties at the end of the lease term. A 10% increase in
the estimation of a property's dilapidation costs would lead to a
GBP0.4 million increase in the provision as at 27 June 2020.
The amount provided for vehicle dilapidations at 27 June 2020
was GBP1.6m (2019: GBPnil) and represents management's best
estimate for amounts that could be payable for leased vehicles at
the end of the lease term. The amount has increased in the year
after experiencing an increase in vehicle dilapidation costs in the
period. A 10% increase in the estimation of a vehicles' repair cost
would lead to a GBP0.2 million increase in the provision as at 27
June 2020.
4 New accounting standards
New accounting standards adopted by the Group
The Group has adopted IFRS 16 'Leases' from 1 July 2019. IFRS 16
became effective in the year and has had a material impact on the
consolidated financial statements of the Group. The impact of
adoption of this standard and the key changes to the accounting
policies are disclosed above and in Note 14 to the consolidated
financial statements. IFRS 16 removes the distinction between
operating and finance leases. The adoption of IFRS 16 resulted in
the recognition on the balance sheet of assets and liabilities
relating to leases which are currently being accounted for as
operating leases. In addition, there was an increase in both
finance costs and depreciation, whilst a reduction in other
operating costs. A right-of-use asset and a corresponding liability
are recognised for all leases except for short-term leases and
leases of low value assets.
At the date of authorisation of these financial statements, the
following Standards and Amendments, which have not been applied in
these financial statements, were in issue but are either not yet
effective or have not yet been adopted by the EU:
-- IFRS 17 'Insurance Contracts';
-- Amendments to IFRS 3 'Business Combinations';
-- Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform;
-- Amendments to IAS 1, 'Presentation of financial statements',
and IAS 8, 'Accounting policies, changes in accounting estimates
and errors' - Definition of material; and
-- Amendments to the Conceptual framework
5 Revenue
In the following table, revenue is disaggregated by service. The
table also includes a reconciliation of the disaggregated revenue
with the Group's reportable segments (see note 6).
2020 2019
GBPm GBPm
---------------------------- ----- -----
DX Express:
* Secure Courier 112.1 113.0
- Exchange (including mail) 48.2 50.9
Total DX Express 160.3 163.9
---------------------------- ----- -----
DX Freight:
* 1-Man 112.4 98.6
- 2-Man and Logistics 56.6 60.0
Total DX Freight 169.0 158.6
---------------------------- ----- -----
Total revenue 329.3 322.5
---------------------------- ----- -----
6 Segment information
2020
--------------------------------------
DX DX
Express Freight Central Total
(Prepared under IFRS 16)(1) GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- --------- -------
Revenue 160.3 169.0 - 329.3
Costs before overheads (124.6) (150.3) - (274.9)
Profit before overheads 35.7 18.7 - 54.4
Overheads (7.4) (4.9) (17.2) (29.5)
---------------------------------------- -------- -------- --------- -------
EBITDA 28.3 13.8 (17.2) 24.9
---------------------------------------- -------- -------- --------- -------
Depreciation and amortisation - - (20.7) (20.7)
Share-based payments charge - - (1.2) (1.2)
Profit/(loss) from operating activities 28.3 13.8 (39.1) 3.0
Finance costs - - (4.3) (4.3)
Profit/(loss) before tax 28.3 13.8 (43.4) (1.3)
Tax expense - - (0.5) (0.5)
Profit/(loss) for the year 28.3 13.8 (43.9) (1.8)
---------------------------------------- -------- -------- --------- -------
2019
--------------------------------------
DX DX
Express Freight Central Total
(Prepared under IAS 17) GBPm GBPm GBPm GBPm
---------------------------------------- -------- -------- --------- -------
Revenue 163.9 158.6 - 322.5
Costs before overheads (129.5) (161.7) - (291.2)
Profit/(loss) before overheads 34.4 (3.1) - 31.3
Overheads (7.5) (4.7) (15.8) (28.0)
---------------------------------------- -------- -------- --------- -------
EBITDA 26.9 (7.8) (15.8) 3.3
---------------------------------------- -------- -------- --------- -------
Depreciation and amortisation - - (3.4) (3.4)
Share-based payments charge - - (1.2) (1.2)
Profit/(loss) from operating activities 26.9 (7.8) (20.4) (1.3)
Finance costs - - (0.4) (0.4)
Profit/(loss) before tax 26.9 (7.8) (20.8) (1.7)
Tax expense - - (0.8) (0.8)
Profit/(loss) for the year 26.9 (7.8) (21.6) (2.5)
---------------------------------------- -------- -------- --------- -------
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
The Board of Directors is considered to be the chief operating
decision-maker ("the CODM"). The CODM considers there to be two
separate reporting segments, DX Express and DX Freight. The
profitability of these two divisions is reviewed and managed
separately, with the exception of certain overheads which are
integrated across the two divisions. EBITDA of the two divisions is
shown above before any allocation of these central overheads
between DX Express and DX Freight. Central overheads comprise costs
relating to finance, legal, personnel, property, internal audit,
IT, procurement and administrative activities which cannot be
specifically allocated to an individual division.
The CODM considers that assets and liabilities are reviewed on a
Group basis therefore no segment information is provided for these
balances.
The CODM considers there to be only one material geographical
segment, being the British Isles.
The segmental information prepared on an IAS 17 basis for the
period ended 27 June 2020 is shown in the Financial Review to aid
comparability.
7 Operating costs
2020 2019
GBPm GBPm
-------------------------------------------------- ----- -----
Other external charges 205.2 200.7
Employee benefit expense 102.5 95.0
Depreciation of property, plant and equipment,
and right-of-use assets 20.1 2.2
Amortisation of intangible assets 0.6 1.2
Loss on disposal of property, plant and equipment 0.1 -
Operating lease rentals 0.9 24.7
Other operating income (3.1) -
Total operating costs 326.3 323.8
-------------------------------------------------- ----- -----
Other external charges represent operating costs which include
subcontractor charges, costs of temporary labour, vehicle operating
costs, short-term hire of temporary vehicles, and property
operating costs.
Coronavirus Job Retention Scheme grants of GBP3.1 million (2019:
GBPnil) are included in 'other operating income' above. There are
no unfulfilled conditions or other contingencies attaching to these
grants.
8 Finance costs
2020(1) 2019
GBPm GBPm
--------------------------------- ------- -----
Finance costs
Interest on bank loans and other 0.3 0.3
Amortisation of financing costs 0.1 0.1
Interest on lease liabilities 3.9 -
--------------------------------- ------- -----
Total finance costs 4.3 0.4
--------------------------------- ------- -----
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
9 Earnings per share
The calculation of basic loss per share at 27 June 2020 is based
on the loss after tax for the year and the weighted average number
of shares in issue.
Adjusted loss per share is calculated based on the loss after
tax, adjusted for certain non-cash charges and other items which
are not expected to recur. Adjusted (loss)/profit per share
represents an alternative performance measure. Further details
about the use of alternative performance measures are detailed in
notes 2 and 13 and the Financial Review.
Diluted loss per share is calculated based on the weighted
average number of shares in issue, adjusted for any potentially
dilutive share options issued under the Group's share option
programmes. Where there is an adjusted loss for the period, no
adjustment is made for share options issued under the Group's share
option programmes as these would reduce the loss per share.
2020(1) 2019
GBPm GBPm
-------------------------------------------- ------- -----
Loss for the period (1.8) (2.5)
Adjusted for:
* Amortisation of acquired intangibles 0.3 0.3
* Share-based payments charge 1.2 1.2
Adjusted loss for the period (0.3) (1.0)
-------------------------------------------- ------- -----
2020 2019
Number Number
(million) (million)
---------------------------------------------------- ---------- ----------
Weighted average number of Ordinary Shares in issue 573.7 573.7
Potentially dilutive share options - -
Weighted average number of diluted Ordinary Shares 573.7 573.7
---------------------------------------------------- ---------- ----------
2020 2019
p p
------------------------ ----- -----
Basic loss per share (0.3) (0.4)
Diluted loss per share (0.3) (0.4)
Adjusted loss per share (0.1) (0.2)
------------------------ ----- -----
These following instruments were not included in the calculation
of diluted earnings per share because to do so would have been
anti-dilutive.
2020 2019
Number Number
(million) (million)
----------------------------------- ---------- ----------
Potentially dilutive share options 0.7 0.7
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
10 Loans and borrowings
2020 2019
GBPm GBPm
----------------------------- ------ -----
Invoice discounting facility - 3.1
Total loans and borrowings - 3.1
----------------------------- ------ -----
The Group's only borrowing is a GBP20.0 million invoice
discounting facility. The facility is a rolling facility with three
months' notice by either party. The available balance is based on
90% of the outstanding trade receivables, adjusted to exclude
amounts billed in advance and old debt. The amount drawn on the
invoice discounting facility at 27 June 2020 was GBPnil (2019:
GBP3.1 million). Outstanding borrowings as at 30 June 2019 were
repaid in full during the period ended 27 June 2020.
Amounts due under the invoice discounting facility are secured
by means of a charge over trade receivables and over the general
assets of DX Network Services Limited.
11 Reconciliation of loss for the period to cash generated from operations
2020(1) 2019
GBPm GBPm
---------------------------------------------------------
Cash flows from operating activities
Loss for the year (1.8) (2.5)
Adjustments for:
* Depreciation 20.1 2.2
* Amortisation of intangible assets 0.6 1.2
* Net finance costs 4.3 0.4
* Tax expense 0.5 0.8
* Loss on disposal of property, plant and equipment 0.1 -
* Equity-settled share-based payment transactions 1.2 1.2
Net cash profit 25.0 3.3
--------------------------------------------------------- ------- -----
Changes in:
* Trade and other receivables 8.2 (1.2)
* Trade and other payables 6.3 1.5
* Deferred income (3.1) (1.6)
* Provisions 1.7 1.1
Net change in working capital 13.1 (0.2)
----------------------------------- ----- -----
Cash generated from operations 38.1 3.1
----------------------------------- ----- -----
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
12 Related party transactions
The nature of other related party transactions of the Group have
not changed from those described in the annual report and accounts
for the year ended 30 June 2019.
All transactions undertaken with related parties were undertaken
at arms' length and on normal commercial terms.
13 Alternative performance measures ("APMs")
The Group uses APMs to measure performance. These APMs are
applied consistently from one year to the next and the Directors
believe that this information is important for the shareholders as
it allows them to understand the difference between the reported
results and the trading performance excluding certain non-cash
charges and other items which are not expected to recur.
Various measures of performance and profitability are industry
standard and are used by shareholders and potential investors to
compare performance with industry peers. The Group presents EBITDA,
adjusted profit or loss before tax ("adjusted PBT/LBT"), adjusted
profit or loss per share ("adjusted EPS/LPS") and underlying
operating profit/(loss), which are calculated as the statutory
measures stated before amortisation of acquired intangibles, any
exceptional items and share-based payments charge, including
related tax where applicable. The Group adjusts for share-based
payments due to the one-off nature of the Recovery Awards in
driving the turnaround of the business in the short-term. The Group
also presents net debt, calculated as gross debt before debt issue
costs and net of cash. The reconciliations between these APMs and
the IFRS reported measures are shown in the locations detailed
below:
APM IFRS reported measure Location of reconciliation
-------------------- ---------------------------- --------------------------
Profit/(loss) from operating
EBITDA activities Financial Review
Adjusted PBT/LBT Profit or loss before tax Financial Review
Adjusted EPS/LPS Profit or loss per share Note 9
Underlying operating Profit/(loss) from operating
profit/(loss) activities Financial Review
Net cash/net debt Net cash/net debt Financial Review
-------------------- ---------------------------- --------------------------
(1) IFRS 16 was adopted on 1 July 2019 using the modified
retrospective approach, without restating prior year figures.
Information on the impact of adopting IFRS 16 is presented in note
14 to the consolidated financial statements.
14 IFRS 16 Adoption
The Group has previously prepared its financial statements in
accordance with IAS 17 'Leases' which classified leases into
operating leases or finance leases, and expensed operating lease
rentals within operating costs. IAS 17 was superseded by IFRS 16
'Leases' which is effective for periods beginning on or after 1
January 2019.
The Group has adopted IFRS 16 from 1 July 2019. IFRS 16
introduced a single, 'on balance sheet' accounting model for
lessees. As a result, the Group has recognised right-of-use assets
(representing its right to use the underlying assets) and lease
liabilities representing its obligation to make lease payments.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised as an adjustment at 1 July 2019 with no restatement
of comparative information. Comparative information continues to be
reported under IAS 17 and related interpretations.
The Group leases many assets, including properties, vehicles and
equipment. As a lessee, the Group previously classified leases as
operating or finance leases based on its assessment of whether the
lease transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, the Group recognises right--of--use
assets and lease liabilities for most leases.
The Group has elected not to recognise right--of--use assets and
lease liabilities for short-term leases and leases of low--value
assets. The Group continues to recognise the lease payments
associated with these leases as an expense on a straight-line basis
over the lease term.
The Group presents lease liabilities in current and non-current
liabilities in the statement of financial position. The Group
recognises a right--of--use asset and a lease liability at the
lease commencement date. The right--of--use asset is initially
measured at cost, and subsequently at cost less any accumulated
depreciation (straight line) and impairment losses, and adjusted
for remeasurement of the lease liability.
Lease Liability
The lease liability is initially measured at the present value
of the future lease payments as at the commencement date,
discounted using the Group's incremental borrowing rate. These
include future fixed lease rental payments, variable lease payments
that depend on an index or a rate (these are initially measured at
the index or rate as at the commencement date) and payments of
penalties for terminating the lease earlier, if the conditions
reflect the Group exercising an option to terminate the lease.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payments made.
It is re--measured when there is a lease extension, a change in
future lease payments or the Group changes its assessment of
whether it will exercise an extension or termination option.
The Group has applied judgement to determine the lease term for
some lease contracts that include renewal options. The assessment
of whether the Group is reasonably certain to exercise such options
impacts the lease term, which significantly affects the amount of
lease liabilities and right--of--use assets recognised.
Transition
Previously, the Group classified property leases and equipment
leases as operating leases under IAS 17. Leases are typically made
for fixed periods of time. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and
conditions. Some leases provide for additional rent payments that
are based on an index which is not yet known.
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments, discounted at the Group's incremental
borrowing rate as at 1 July 2019. Right--of--use assets are
measured at an amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that
lease recognised in the statement of financial position as at 30
June 2019. On transition, the Group's weighted average incremental
borrowing rate was estimated to be 4.5%.
The Group used the practical expedients when applying IFRS 16 to
leases previously classified as operating leases under IAS 17 on a
lease-by-lease basis:
-- Applied a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- Relied on its assessment of whether leases are onerous
applying IAS 37 'Provisions, Contingent Liabilities and Contingent
Assets' as at 30 June 2019 as an alternative to performing an
impairment review;
-- Applied the exemption not to recognise right--of--use assets
and liabilities for leases with less than 12 months of lease term
remaining;
-- Excluded initial direct costs from measuring the
right--of--use asset at the date of initial application; and
-- Used hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
Impact on transition
On transition to IFRS 16, the Group recognised right--of--use
assets and lease liabilities. There was no net impact on retained
earnings as the right-of-use assets were measured at an amount
equal to the lease liability, allowing for prepayments and
accruals. The impact on transition is summarised below:
1 July 2019
GBP000
--------------------------------- ------------
Right of use asset 80.0
Lease liabilities (82.6)
Prepayments (1.4)
Rent free accrual 2.8
Onerous lease provision 1.2
--------------------------------- ------------
Net impact on retained earnings -
--------------------------------- ------------
1 July 2019
GBPm
---------------------------------------------- ------------
Operating lease commitments disclosed at
30 June 2019 75.3
Difference between non-cancellable lease
term and lease term used to calculate the
IFRS 16 liability 19.9
Short term and small leases excluded (0.6)
Discounted using the lessee's incremental
borrowing rate as at 1 July 2019 (12.0)
---------------------------------------------- ------------
Lease liability recognised as at 1 July 2019 82.6
---------------------------------------------- ------------
Comprising:
Current lease liabilities 15.8
Non--current lease liabilities 66.8
-------------------------------- -----
Total lease liabilities 82.6
-------------------------------- -----
The carrying amount of the right--of--use assets are as
below:
27 June 2020 30 June 2019
Right-of-use assets GBPm GBPm
------------------------------- ------------- -------------
Properties 53.4 56.9
Plant, equipment and vehicles 26.8 23.1
Total right-of-use assets 80.2 80.0
------------------------------- ------------- -------------
Impact in the period
As a result of applying IFRS 16 the Group recognised GBP80.2
million of right--of--use assets and GBP84.1 million of lease
liabilities as at 27 June 2020. Also in relation to those leases
under IFRS 16, the Group has recognised depreciation and interest
costs, instead of operating lease expense. During the period ending
27 June 2020, the Group recognised GBP18.2 million of depreciation
charges and GBP3.9 million of interest costs from these leases.
The impact on the profit/(loss) for the period is summarised
below:
GBPm
--------------------------------------------- -------
Profit before tax before IFRS16 adjustments 0.3
Add back IAS17 rental charge 20.5
Depreciation charge on right-of-use assets (18.2)
Interest cost on lease liability (3.9)
Net impact on loss for the period (1.6)
--------------------------------------------- -------
Loss before tax (1.3)
--------------------------------------------- -------
Forward-looking statements
This announcement may include certain forward-looking
statements, beliefs or opinions, including statements with respect
to DX's business, financial condition and results of operations.
These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "plans", "anticipates", "targets", "aims",
"continues", "expects", "intends", "hopes", "may", "will", "would",
"could" or "should" or, in each case, their negative or other
various or comparable terminology. These statements are made by the
DX Directors in good faith based on the information available to
them at the date of this announcement and reflect the DX Directors'
beliefs and expectations. By their nature these statements involve
risk and uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future. A number of
factors could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking
statements, including, without limitation, developments in the
global economy, changes in UK government policies, spending and
procurement methodologies, and failure in health, safety or
environmental policies.
No representation or warranty is made that any of these
statements or forecasts will come to pass or that any forecast
results will be achieved. Forward-looking statements speak only as
at the date of this announcement and DX (Group) plc and its
advisers expressly disclaim any obligations or undertaking to
release any update of, or revisions to, any forward-looking
statements in this announcement. No statement in the announcement
is intended to be, or intended to be construed as, a profit
forecast or to be interpreted to mean that earnings per DX (Group)
plc share for the current or future financial years will
necessarily match or exceed the historical earnings. As a result,
you are cautioned not to place any undue reliance on such
forward-looking statements.
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