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DX Group – another profit warning, from 100p IPO to sub 10p in less than 3 years…

By Steve Moore | Tuesday 7 February 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

I previously cautioned on parcels, mail and logistics group DX (DX.) with the shares at 30p HERE and 16p HERE. Hopefully the warnings were heeded as a “Trading update” announcement currently sees the shares 60% lower, heading towards 7p.

This is with the announcement noting continuing pricing pressure, margin erosion with “the expected growth in higher margin revenue from our DX Courier and Freight activities has not come through” and “the integration of five sites into one… has experienced some short term operational issues”.

The net result, unsurprisingly, is that anticipated “profits for the year will be significantly below current market forecasts, with net debt consequently higher than expected”. Additionally, there is a decision “not to pay any dividends for the foreseeable future”.

It does seek to mitigate that “material new contracts are now being implemented and the company's pipeline of new business opportunities is robust”, but also “has commenced a wide-ranging review of the company's operations with a view to driving revenues and improving its financial performance”.

Hmmm. The latter suggests current uncertainty as to what to do to get out of the mess here and I thus presently remain of the view that this is uninvestable.

I also note that it only IPO’d at 100p per share less than three years ago – with CEO Petar Cvetkovic then stating “we are delighted to launch as a public company today, and are particularly pleased with the strong show of support from institutional investors which is testament to our future prospects”!

If it was testament to the future prospects, the ‘institutional investors’ don’t know what they’re doing! Are they also thanking Zeus Capital for bringing this to the market?

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