MIDAS SHARE TIPS: Invest in parcels expert DX Group if you want to make a packet

Around four billion parcels are delivered in the UK each year. The market, which received a boost during the pandemic, continues to thrive, with businesses and individuals spending more than £10 billion annually to have goods sent straight to their doorstep.

Most packages are relatively small and simple – food, dresses and fripperies. But many items are more difficult to handle: bulky items such as tires or pieces of piping, heavy household items such as sofas and dishwashers, or items that require extra security such as jewelry, medicines or confidential papers.

That’s true DX group coming into its own. The company was founded in the 1970s as a courier with an edge, delivering papers to lawyers and courthouses before 9 a.m. every day and collecting documents after 5 p.m. Business was booming and the company was growing steadily – until email became part of commercial life and volumes started to decline.

The company tried to pick up the slack by moving into new areas, especially transporting cumbersome goods, but trouble came fast and fast and by 2017 DX was on the verge of collapse.

New management was parachuted in, a turnaround ensued and by 2020 DX was profitable and making progress.

But the group soon hit another bump when rival Tufnells launched a corporate espionage case against DX, alleging that the staff conspired to secure confidential information belonging to their arch-rival.

The case was finally settled in early June this year, just a week before Tufnells went into administration.

Details have never been disclosed, but the amounts involved are considered small and very few employees are involved.

Nevertheless, the case cast a long shadow over DX. Bills were delayed, shares were suspended for months, and most board members, including the chairman and CEO, left the company. Today, however, the outlook is robust and the stock should go far at 32 pence.

The new boss Paul Ibbetson is a plain speaking Yorkshireman, who has worked in the delivery industry for over 30 years and has a history of turning around troubled businesses. Recruited to DX in 2017, he helped orchestrate the company’s recovery, was not involved in the espionage saga, and was recruited to the top job in January of this year.

The first signs under his leadership are encouraging. The group’s financial year ends on 1 July and a trade update from last week showed good progress, with sales expected to increase 10 per cent on the previous year to £470 million and a 40 per cent increase in cash to £38 million.

The espionage story, gruesome as it was, had little impact on the company itself, which has built a reputation for efficiency and service, qualities Ibbetson sees as fundamental to future success. Crucially, Ibbetson took swift action to capitalize on Tufnell’s unfortunate demise by acquiring 15 of the company’s locations, which will now be incorporated into the DX estate. The move should accelerate the growth of the entire company.

The delivery of unwieldy packages is a profession in itself. Tufnells had significant market share and DX is catching up, with demand for its services rising by some 25 percent in recent weeks.

Brokers expect profits to rise 31 per cent to £26.5 million for the just-closed year, with further strong growth in 2024 and beyond.

After a multi-year hiatus, DX has also reintroduced dividends, at 1.5p for 2023, rising to 1.7p next year and 2p for 2025.

DX also retains its specialist courier business and a thriving logistics business, which helps a variety of retailers, including Ikea, deliver products.

Traded on: GOAL Ticker: DX Contact: dxdelivery.com or 0333 241 1624

Midas verdict: DX was once synonymous with legal deliveries, so much so that lawyers still talk about “DXing” their papers. The company has had a turbulent few years, but the outlook is positive. Ibbetson knows what he’s doing, the collapse of Tufnells has fueled demand for DX supplies and at 32 pence the stock is undervalued, while the dividend adds even more spice. To buy.