Free share tips posted weekly! This week’s free share tip is DX Group (DX).

The recent weakness in the share price of logistics and courier company DX Group has presented investors with an opportunity to buy into a rapidly growing company at what we believe to be a sensible price.  The company had been due to announce its annual results for the year to 3 July on 12 October, but these have been delayed due to issues at the group’s auditor, Grant Thornton.  Internal resource issues at Grant Thornton are said to be the problem, with the result that the auditor cannot meet the original audit timetable.  The delay has seemingly caused some concerns to investors with the share price dropping back from the level of 36p reached at the end of August.  DX Group has been keen to point out that results for the year in question are expected to be in line with previous guidance and Grant Thornton have not identified any material issues during the audit which could cause this to change.  With trading in the current financial year also in line with expectations it appears that the recent fall in the share price has been overdone.

DX Group was originally set up as a Document Exchange service to the legal sector.  This allowed confidential legal documents to be sent between law firms directly without recourse to the postal service where any document losses could be serious.  The company has developed over the years and it is now a well-established provider of a wide range of delivery services to both business and residential addresses in the UK and Ireland.   The company operates through two divisions, DX Freight and DX Express.  DX Freight specialises in the delivery of larger and heavier items, including those of irregular dimensions, whilst DX Express provides express delivery services of parcels and documents.

In the most recent trading update, issued on 19 July the company stated that trading had continued to be strong and, following this announcement, we raised our forecast of adjusted pre-tax profits for the year to 3 July 2021 to £11.5m, for earnings per share of 1.9p.  In the current financial year, these figures could increase to £16m and 2.7p respectively, helped by the opening of more new depots.  Net cash at the year end was £16.8m and given the prospects for growth we rate the shares a BUY.

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