Shares in logistics and parcel delivery firm DX Group (DX.) soared by 10% to 25.4p after its latest trading update revealed it was ‘on track to perform materially better than current market expectations’.

The company reported in September that trading in the first few months of the current financial year was ahead of the same period last year, since when it has continued with better than expected volumes and higher margins in the DX Freight business.

Notably, the firm said it had seen ‘no sign yet of an adverse impact from the second national lockdown’. Instead, net new business was described as ‘encouraging’ across both divisions and it has a healthy pipeline of new business.

The firm has invested in its delivery network to support growth, with new depots opened in Burnley, Oxford and Westbury, and another depot and two service centres set to open later in the year.

Chief executive Lloyd Dunn commented: ‘We are building on the foundations we laid down over the past three years and continue to focus on improving productivity.’ As part of the £10 million ongoing investment programme it is also spending more on parcel handling equipment and its IT systems.

DX is expected to be a big beneficiary of the structural shift by consumers to shopping online especially with Black Friday about to start and the Christmas holiday period just around the corner.

FinnCap analyst Guy Hewett says: ‘With volumes better than expected and margins improving DX is on track to perform materially better than market expectations and we have, consequently, upgraded FY 2021 earnings per share estimates by 29% and FY 2022 by 15%, driven by stronger assumptions in DX Freight.

‘We have also raised our free cash flow-based target price from 29p to 33p and reiterate our view that the group is in a strong position to rebuild profitability by winning new business and improving efficiency, productivity and margins.’

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Issue Date: 26 Nov 2020