Contract Win For DX Fails to Mask Wider Headaches
31st March 2017
The logistics division of DX, the independent parcels, mail and logistics operator,has won a major contract worth in excess of £10m per annum providing bespoke logistic services for Avon UK, the leading beauty company.
The contract, which is now underway, was awarded after a lengthy competitive tender process and is for an initial 3-year term. The win underpins management’s existing expectations of the Company’s performance in the current financial year. The company says that Avon will benefit from DX’s integrated capability, which will provide for an enhanced customer service experience.
The win is highly unlikely to hide the issues within the wider DX Group, which has been under pressure after issuing profit warnings in recent times.The share price has dropped by 90% as a result. Some investors have called for changes at the company, which has also today announced it is in talks to merge with the distribution arm of John Menzies, with the transaction due to complete in the summer. Reports say that Menzies wishes to concentrate on airport services in the future.
In a scathing comment on the deal, Gatemore’s Liad Meidar, which owns 11% of DX Group, said: “On the surface, the proposed combination of DX Group and John Menzies’ Distribution division looks like a bad deal for DX shareholders and a face-saving exercise for the DX board. We are highly suspicious about the timing of the announcement and the board’s motivations around it. They have already destroyed 90% of DX’s market value. Now they are further compromising shareholders by announcing a deal with so many loose ends and suspending trading on the shares indefinitely. It seems like an egregious case of the board front-running the EGM and force-feeding a deal which is not in the best interest of shareholders.”