Dynex Capital, Inc. Annual Report 2023

FY2023 Annual Report · Dynex Capital, Inc.

Loading PDF…

Delivering
service
eXcellence

Annual Report and Accounts 2023

(

)

Our purpose
Established in 1975, DX is
a market leader in the delivery
of mail, parcels, pallets and
freight via our UK and Ireland
collection and delivery networks.

DX’s purpose is to deliver our customers’ promises. Our customers rely on DX to be
an integral part of their own service experience. So DX’s approach is straightforward
and no nonsense. We seek to provide an excellent service at great value to our customers.
Our goal is to deliver exactly to our customers’ requirements, whether via a next-day,
scheduled or tracked, secure service, and provide assurance through proof of delivery.

Read more on pages 20 to 23

Strategic ReportGovernance ReportFinancial Statements14

Strategic Framework

As we focus on growth and margin expansion, and with the right organisational
structure now in place, we have revised the strategic objectives to drive the next
phase of growth and to widen margins across the business as well as meeting
the Group’s ESG obligations. The goal remains the same; to deliver long-term
sustainable profit and positive cash generation.

Strategic objective

Detailed objectives

Progress during 2023

Objectives for 2024

Continually develop capacity
within an optimal network

> Develop network capacity and optimise utilisation to facilitate

> Major upgrade of capacity and facilities at DX Freight Central Hub.

> Bring 15 ex-Tuffnells sites into operation,

growth over next three years.

> Five sortation super-sites created for 2-Man service separate from

> Develop productivity to open up market opportunities and reduce

1-Man depots.

stem mileage.

> New DX Freight depots opened in Paisley and West Bromwich,

> Establish regional sortation hubs to improve productivity.

with expansion at Heathrow and Plymouth.

Improve margins across both
DX Freight and DX Express

> DX Freight operating margin to hold above 12% over cycle.

> Both divisions expanded operating margins in FY23.

> Look to expand margins further and

> DX Express to grow operating margins to >10%.

> Target of achieving Group operating margin after overheads

of 7.5%-10% within two years.

Develop a clear plan and goals
for achieving Net Zero as a
Company by 2050

> Following publication of the Group’s Carbon Reduction Plan
in December 2022 the next stage is to publish clear goals
and objectives under the TCFD regulations.

> Support these goals with tangible action and progress.

Embed local responsibility and
accountability in the DNA of DX

> Local General Managers supported by Sales and

Operations Managers.

> Continued to strengthen management team through the

> Continue to strengthen and develop

appointment of new General Managers and Regional Directors.

> Link reward to quantitative and qualitative performance.

> 63 managers’ rewards linked to achievement of local

Invest in Sales and
Commercial capabilities

> Local customer service relationships.

> Recruit additional top-quality sales resources.

> Divisional commercial teams to approve all new business.

> Leverage strong portfolio of services to provide customers with

flexible service to match their requirements. Continued development
of customer confidence in, and recognition of, the DX brand.

Invest in IT systems and network
equipment improvements

> Improve commercial and sales tools.

> Improve quality of management information.

> Improve utilisation of our data.

> Develop functionality of operational systems.

> Renew IT infrastructure.

> New DX Express depots opened in Basildon, Plymouth, Bracknell,

Haydock and Deeside.

> 15 ex-Tuffnells sites secured including three regional sortation hubs,

accelerating development of overall network.

> £6.2 million invested in new sites and improvements to the existing

depot network.

including two sites for DX Express.

> New depots planned for DX Express at

Norwich and Preston, and for DX Freight

at Middleton and Thirsk.

> Construction of a £12 million regional

hub for DX Freight at Nottingham.

> Plan to exit seven existing sites to optimise

the network over next 18 months.

> DX Freight significantly increased operating margin in 2023

achieving 13.4%.

> DX Express operating margin increased to 9.4%.

> Group operating profit margin increased to 6.7% from 5.8%.

move within the target range of 7.5%-10.0%

with continued focus on operational

efficiency and the addition of profitable

new business.

> Carbon Reduction Plan published in December 2022.

> £1.5 million invested in the year into electric vehicles and £0.5 million into

> Further develop the Carbon Reduction

Plan to introduce a wider suite of targets.

LED lighting to improve energy efficiency, demonstrating action taken.

> Further investment in electric vehicles

> Ability for subcontractors to buy electric vehicles through DX supply

and LED lighting improvements.

chain launched during the year.

> Invested in 2-Man Sales team within DX Freight to support the growth

> Further invest in DX’s commercial system

performance targets.

of this service line.

> Continued to expand usage of Document Exchange Portal.

> Broadened number of liveried vehicles with subcontractors branded

‘Working in Partnership’ with DX, which raises the profile of DX brand

on the road.

> £2.1 million invested in IT infrastructure and systems,

including new handheld scanning devices for depots.

> Continued investment in the modernisation and upgrade

of key systems to replace legacy ones.

management team, aiming for around

100 managers to succeed in achieving

local performance targets.

to improve management information and

to support customer service.

> Further £2.0 million of planned investment

in IT systems.

Improve operational efficiency

> Ensure right balance of fleet vehicles to optimise delivery capability.

> 201 new delivery vehicles, 167 trailers and 33 Fork Lift Trucks (“FLTs”)

> £1.4 million earmarked for further

> Improve hub, trunking and delivery productivity.

deployed during the year. The overall fleet grew 14% in the year.

> £1.0 million invested in operational improvements including new

cages and basic sorting mechanisation.

investment in operational capacity

and parcel handling equipment.

> Investment in cages and stillages

to support growth of the business.

DX (Group) plc Annual Report and Accounts 202315

Continually develop capacity

within an optimal network

Strategic objective

Detailed objectives

Progress during 2023

Objectives for 2024

> Develop network capacity and optimise utilisation to facilitate

> Major upgrade of capacity and facilities at DX Freight Central Hub.

> Bring 15 ex-Tuffnells sites into operation,

growth over next three years.

stem mileage.

> Develop productivity to open up market opportunities and reduce

1-Man depots.

> Establish regional sortation hubs to improve productivity.

with expansion at Heathrow and Plymouth.

> New DX Freight depots opened in Paisley and West Bromwich,

> Five sortation super-sites created for 2-Man service separate from

> New DX Express depots opened in Basildon, Plymouth, Bracknell,

Haydock and Deeside.

> 15 ex-Tuffnells sites secured including three regional sortation hubs,

accelerating development of overall network.

> £6.2 million invested in new sites and improvements to the existing

depot network.

including two sites for DX Express.

> New depots planned for DX Express at

Norwich and Preston, and for DX Freight
at Middleton and Thirsk.

> Construction of a £12 million regional
hub for DX Freight at Nottingham.

> Plan to exit seven existing sites to optimise

the network over next 18 months.

> DX Freight operating margin to hold above 12% over cycle.

> Both divisions expanded operating margins in FY23.

> Look to expand margins further and

> DX Freight significantly increased operating margin in 2023

achieving 13.4%.

> DX Express operating margin increased to 9.4%.

> Group operating profit margin increased to 6.7% from 5.8%.

move within the target range of 7.5%-10.0%
with continued focus on operational
efficiency and the addition of profitable
new business.

> Carbon Reduction Plan published in December 2022.

> £1.5 million invested in the year into electric vehicles and £0.5 million into
LED lighting to improve energy efficiency, demonstrating action taken.

> Ability for subcontractors to buy electric vehicles through DX supply

> Further develop the Carbon Reduction

Plan to introduce a wider suite of targets.

> Further investment in electric vehicles

and LED lighting improvements.

chain launched during the year.

> Continued to strengthen management team through the

> Continue to strengthen and develop

> Link reward to quantitative and qualitative performance.

> 63 managers’ rewards linked to achievement of local

> Local customer service relationships.

performance targets.

appointment of new General Managers and Regional Directors.

> Invested in 2-Man Sales team within DX Freight to support the growth

of this service line.

> Continued to expand usage of Document Exchange Portal.

> Broadened number of liveried vehicles with subcontractors branded
‘Working in Partnership’ with DX, which raises the profile of DX brand
on the road.

> £2.1 million invested in IT infrastructure and systems,
including new handheld scanning devices for depots.

> Continued investment in the modernisation and upgrade

of key systems to replace legacy ones.

management team, aiming for around
100 managers to succeed in achieving
local performance targets.

> Further invest in DX’s commercial system
to improve management information and
to support customer service.

> Further £2.0 million of planned investment

in IT systems.

> Ensure right balance of fleet vehicles to optimise delivery capability.

> 201 new delivery vehicles, 167 trailers and 33 Fork Lift Trucks (“FLTs”)

> £1.4 million earmarked for further

deployed during the year. The overall fleet grew 14% in the year.

> £1.0 million invested in operational improvements including new

cages and basic sorting mechanisation.

investment in operational capacity
and parcel handling equipment.

> Investment in cages and stillages
to support growth of the business.

Improve margins across both

DX Freight and DX Express

> DX Express to grow operating margins to >10%.

> Target of achieving Group operating margin after overheads

of 7.5%-10% within two years.

Develop a clear plan and goals

for achieving Net Zero as a

> Following publication of the Group’s Carbon Reduction Plan

in December 2022 the next stage is to publish clear goals

and objectives under the TCFD regulations.

Company by 2050

> Support these goals with tangible action and progress.

Embed local responsibility and

accountability in the DNA of DX

> Local General Managers supported by Sales and

Operations Managers.

Invest in Sales and

Commercial capabilities

> Recruit additional top-quality sales resources.

> Divisional commercial teams to approve all new business.

> Leverage strong portfolio of services to provide customers with

flexible service to match their requirements. Continued development

of customer confidence in, and recognition of, the DX brand.

Invest in IT systems and network

equipment improvements

> Improve commercial and sales tools.

> Improve quality of management information.

> Improve utilisation of our data.

> Develop functionality of operational systems.

> Renew IT infrastructure.

Improve operational efficiency

> Improve hub, trunking and delivery productivity.

Strategic ReportGovernance ReportFinancial Statements16

Chief Executive Officer’s Review

Strong growth
underpinned by high
customer service levels

Introduction
We delivered another strong set of
results in FY23, with Group revenue
up 10% to £471.2 million (2022:
£428.2 million) and Group adjusted
operating profit up 26% to £31.4 million
(2022: £24.9 million). Operating margins
increased to 6.7% from 5.8% the previous
year, which is in line with our target to
achieve operating margins of 7.5%-10%
in the next two years.

This performance was delivered in a
more stable trading environment than
the prior year when we contended with
driver and warehouse staff shortages.
While trading challenges remained, cost
pressures eased over the year, and the
progress the Group made demonstrates
its resilience and ability to adapt and
take advantage of market opportunities.

Results reflect, in particular, the strength
of our 1-Man business, growth in our
Parcels business and the operational
leverage across the Group. The Group’s
overall performance was also
underpinned by our high levels of
customer service, which remained strong
throughout the period.

The parcel and freight markets continue
on their long-term growth trajectory.
There has been some recent softening
in demand from customers with
consumer-facing businesses, although
this has been more than offset by
robust demand in B2B markets.
While recognising the current economic
headwinds, we remain confident of
achieving further progress over the
current financial year and will continue to
invest in the business in line with growth
plans and our Capital Allocation Policy.

Capital Investment
We invested a total of £10.9 million
(2022: £6.2 million) over the financial
year, with this investment focused on
our depot network, equipment and IT
infrastructure. It marked the second
year of our three-year capital investment
programme. A further £9.0 million
of investment of this programme is
earmarked for the new financial year.

In addition to this major investment
programme, we will invest £12.0 million
in a new regional hub for DX Freight
in Nottingham, and spend a further
£2.0 million on electric vehicles to
support our longer-term partnership
with IKEA. In June 2023, we agreed the
purchase of a former Tuffnells site in
Ipswich for £1.0 million. As a result of
all these additional investments, we
expect capital expenditure in the current
financial year to total around £25 million.

Our agreement with the Administrators
of Tuffnells to take over 15 sites has
accelerated our growth plans and will
result in a stronger network. These sites
will help us to service 700 or so former
Tuffnells’ customers for whom we were
able to provide continuity of delivery
services after the business collapsed.
These customers are now trading on
mutually-agreeable commercial terms.
Over 350 former employees of Tuffnells
have also joined us over the past three
months and this, combined with other
developments, provide us with
significant opportunities for our 1-Man,
2-Man and Parcels businesses.

We are now focused on the integration
and reopening of the former Tuffnells
depots and have already made a good
start, with six depots now integrated
and fully operational. Alongside this, in
August 2023, we opened a new depot
at Norwich for DX Express and over the
remainder of the 2023 calendar year,
we plan to open a dedicated DX Express
depot at Preston in Lancashire, and
a new super-site at Middleton in
Manchester for our 2-Man activities.
Over the next 18 months, we will be
further optimising the depot network.

Divisional Review
DX Freight
Revenue at the DX Freight division
increased by 10% to £282.8 million
(2022: £256.9 million) and operating
profit grew even more strongly, rising by
22% to £37.8 million (2022: £31.1 million).
As a result, the division’s operating
margin expanded to 13.4% (2022: 12.1%).

DX Freight continued to cement its
market position in the IDW market,
with these strong results mainly driven
by our 1-Man service. 1-Man revenue
increased by 11% to £220.6 million (2022:
£195.5 million), benefitting from market
growth, price increases and its strong

DX (Group) plc Annual Report and Accounts 2023
17

“Results reflect the strength of our 1-Man
business, growth in our Parcels business
and operational leverage across the Group.”

Paul Ibbetson
Chief Executive Officer

sales force, which secured very good
levels of new business.

Revenue for 2-Man/Logistics services
was broadly constant, up 1% to £62.2
million (2022: £61.4 million), which
reflected some softening of demand
from consumer-facing customers.

The division’s overall performance
also benefitted from productivity and
efficiency gains and the changes made
in the previous financial year to address
market-wide disruption to the supply
of drivers and warehouse labour
and customers’ supply chain issues.
We continued to maintain a strong focus
on high customer service levels across
the division, which also helped to
underpin the strong rise in profit.

In FY23, we invested £1.5 million in
electric vehicles and in FY24, we are
committed to a further £2 million
investment in the electric vehicle fleet.
Both investments are in support of
our longer-term partnership with IKEA,
and will increase the fleet to 65 electric
vans in total.

We expanded the delivery network to
support divisional growth, opening two
new depots at Paisley in Scotland and
West Bromwich in the West Midlands,
and expanded capacity at our existing
depots in Plymouth and Heathrow by
moving DX Express’ activities to new
premises in each case. We also improved
staff facilities at a number of depots and
at the division’s Central Hub.

Network expansion has not only
increased our capacity, but also
enhanced our already strong market
position in the IDW market. There are
few operators in this market with the
capability of offering a reliable, next-day
service on a nationwide basis, backed by
high service levels. Network expansion
has helped to drive operational
efficiencies and improvements to service
levels through reduced stem mileage
and greater proximity to customers.
The environmental benefits should
not be overlooked too.

At the end of the financial year in June
2023, we secured additional new IDW
business following Tuffnells entering into
administration. This new business gained
from former Tuffnells customers will
benefit the current financial year.

We estimate that DX’s current market
share in IDW is now around 25%,
making DX the clear market leader.

The growth strategy for DX Freight
remains unchanged. We see scope
for further growth in 1-Man services
and will continue to seek new business
opportunities and expand market share
in IDW, a growth segment of the parcel
market. Additional volumes will help to
drive productivity improvements and
enhanced margins through operational
leverage of the network. We estimate
that the market for parcel freight is
expanding at approximately 5% per
annum over the medium term, albeit
this may slow in the near term due to
the current economic headwinds.

There are growth opportunities for
2-Man/Logistics, and we are now
focusing more closely on this business
to drive it forward. We intend to grow
2-Man/Logistics services by broadening
its customer base, and have committed
additional sales and operational
resources to support our growth
objectives. We have also created five
2-Man super-sites, which now operate
separately from the 1-Man network.

Strategic ReportGovernance ReportFinancial Statements18

Chief Executive Officer’s Review continued

DX Express
Revenue at DX Express increased by 10%
to £188.4 million (2022: £171.3million).
This result reflected the strong growth
of the Parcels service, which increased
revenue by 16% to £156.4 million
(2022: £135.3 million), supported by
healthy levels of new business. Growth
in Parcels more than offset expected
revenue decline at Exchange & Mail,
which decreased by 11% to £32.0 million
(2022: £36.0 million). Profit from
operating activities increased by 22%
to £17.7 million (2022: £14.5 million),
and the operating margin expanded
to 9.4% (2022: 8.5%), benefitting from
operational leverage. This was in line
with our expectations and is a significant
improvement on the prior financial year.

We continued to expand DX Express’
depot network and opened five new
depots, at Basildon, Plymouth, Haydock,
Bracknell and Deeside. As with DX
Freight, this is helping to drive
improvements in operational efficiency
and, by being closer to customers, the
division is also able to provide an
enhanced level of service.

Document Exchange remains a very
important service for the delivery of
documents in the legal sector, with
our pre-9.00am dedicated delivery
service being a valued component of
the service. We are seeking to leverage
this unrivalled post-5.00pm collection
and pre-9.00am delivery network
by broadening the range of sectors
served. In particular, we see relevant
opportunities in high-street retail and
veterinary services.

We continued to invest in the division’s
IT platform to simplify and modernise it,
and around 50% of the division’s activity
is now managed on the division’s new
tracking application. This has enhanced
the consumer experience to include
point-of-delivery information and
photographic evidence. It also provides
improved management information to
support timely decision-making. We
expect to complete the transition of the
division’s Parcels activity onto the new
application over the remainder of this
calendar year.

The depots recently secured from the
Tuffnells’ Administrators will also benefit
DX Express. Once operational, the
additional depot in Stafford and the hub
facility in Nuneaton will also provide vital
sortation capacity for the longer-term
growth of the division. We expect these
new depots will become operational by
the end of this calendar year.

The market for small parcels is very large
and we estimate that its longer-term
growth is around 10% per annum, driven
by the ongoing shift to online buying.
Our current market share in Parcels is
very modest at 1%-2%, and whilst
recognising that it is a very competitive
market, we believe there is a significant
opportunity for DX Express. Our
strategy is to build on the division’s
historic strength in documents and small
packets, and continue to diversify the
division’s revenues by expanding the
Parcels activity to SMEs and large
national customers that value a high-
quality, next-day service.

DX (Group) plc Annual Report and Accounts 202319

Revenue

£471.2m

(2022: £428.2m, 2021: £382.1m)

2023

2022

2021

£471.2m

£428.2m

£382.1m

Group Adjusted Operating Profit1

£31.4m

(2022: £24.9m, 2021: £16.5m)

2023

2022

2021

£31.4m

£24.9m

£16.5m

1 See notes 3 and 35 to the Financial Statements
for details of APMs used, which are non-IFRS
measures. The notes include details of where
reconciliations of APMs to IFRS reported
measures can be found.

Capital Investment

£10.9m

(2022: £6.2m)

2023

2022

2021
0

£10.9m

£6.2m

Divisions Supported by Central Teams
Central overheads for the year (including
the share-based payments charge)
increased in absolute terms to £25.5
million (2022: £21.9 million, excluding
exceptional items). As a percentage of
revenue, central overheads increased to
5.5% (2022: 5.1%). The year-on-year rise
reflected the cost of the Board changes
during the year, improvements made to
the Group’s IT infrastructure, and the
legal costs of the dispute with Tuffnells.
The settlement with Tuffnells has been
included within central overheads in
order to not distort divisional operating
profit margins. We expect central
overheads to remain broadly flat in
absolute terms and to fall as a proportion
of revenue as the Group grows.

Environmental, Social and Governance
In December 2022, we published our
Carbon Reduction Plan, which outlined
the steps we plan to take to reduce the
carbon footprint of the business. At the
heart of this is the decarbonisation of
our vehicle fleet.

This year, DX has come under the
requirements of the TCFD and there are
further disclosures in the Annual Report
regarding the physical and transition
risks to DX’s journey to Net Zero. We
have set an ambitious goal of reducing
our carbon footprint by 20% by 2035
based on the current technology
available to us. We will revise our goals
as new technology becomes available
to us in the medium term.

We have further electrified the vehicle
fleet this year, committing investment of
£3.0 million to add a further 53 vehicles
in support of our longer-term partnership
with IKEA. Other developments included
a further £0.5 million investment in LED
lighting at DX depots.

We have taken a significant step forward
this year with the implementation of
reporting under TCFD and we are

increasingly engaging with our
customers around ESG disclosures,
as we are a key element of their supply
chains. We are also engaging with our
own suppliers in order to understand
their commitments to reducing their
own carbon footprints.

Summary
It has been another strong year of
progress for DX, with both divisions
growing their revenue and profit, and
expanding operating margins. We have
underpinned this growth with further
investment in our depot network, IT,
electric vehicles and parcel handling
equipment, and maintaining our strong
focus on high levels of customer service.

DX Freight has continued to grow; it is
now the clear market leader in the IDW
market and there remains a considerable
opportunity to expand both this service
and our 2-Man/Logistics offering.
Growth at DX Express has been driven
by our Parcels business and we are
confident that we can continue to
expand and develop it. We also see
opportunities to extend the Document
Exchange business into other sectors
where its unique service has relevance
and offers value.

Like the rest of our sector, we are facing
the challenges presented by a slowing
economy, including softer demand from
consumer-facing customers. However,
we have well-established networks,
an experienced management team
and a very strong financial position,
which underpins our ability to invest
in our core markets. We remain excited
by our market opportunities, and look
forward to reporting on further progress
over the course of the coming year.

Paul Ibbetson
Chief Executive Officer

Strategic ReportGovernance ReportFinancial Statements20

Operational Review

DX Freight review

Specialists in irregular dimension and weight items

Market Trends
The freight and logistics sectors continue
to see growth and the long-term trend
continues in an upward trajectory.
However, the current cost-of-living crisis
has seen volumes reduce slightly from
peak COVID lockdown periods, largely
in the B2C sector.

In early June 2023, the IDW sub-sector,
which comprises only a few national
operators, was severely disrupted when
Tuffnells, a direct competitor, entered
administration. This had a significant
impact in the marketplace, leaving former
Tuffnells customers without a carrier.
DX was well positioned to provide
continuity of service and went on to
agree commercial terms with some 700
former Tuffnells customers. As a result of
Tuffnells’ demise, we were also able to
take on 15 of their sites and are now in
the process of reopening them. We
believe that DX is now the clear market
leader in IDW, with an estimated 25%
market share and continuing to grow.

Performance
Financial
The DX Freight division improved its
performance, continuing the strong
progress it has made over recent years.

Revenue increased by 10% to £282.8
million (2022: £256.9 million), with
operating profit 22% higher at £37.8
million (2022: £31.1 million); as a result,
the division’s operating profit margin rose
to 13.4% from 12.1%. These encouraging
results were helped by additional new
business wins and increased business
from the existing customer base, as well
as the benefits of operational gearing
and recent investments.

1-Man services led the strong
performance, with revenue increasing by
13% year-on-year to £220.6 million (2022:
£195.5 million) while 2-Man/Logistics
revenue was more modestly ahead at
£62.2 million (2022: £61.4 million).

Operational
Management changes
Following Paul Ibbetson’s appointment
as Chief Executive Officer of the Group,
the division’s senior leadership team was
reorganised in early 2023.

The single role of Managing Director of
DX Freight – Paul’s previous position –
was separated into two. The decision
to create these new roles reflected
the significant growth of the division
over recent years and the expansion
opportunities ahead for 1-Man, 2-Man/
Logistics.

Graham Hollingdrake, previously
DX Freight Operations Director, was
appointed as Managing Director of 1-Man
and 2-Man, and Ian Bolton, previously
Director of Logistics was appointed as
Managing Director of Logistics.

Depot expansion
Over the year, we continued to invest
significantly in the depot network serving
the division. We opened two new depots
in Slough and Warrington and completed
a major refurbishment at our Central Hub
in Willenhall. We also completed or
commenced depot upgrade programmes
at Bristol, Bury, Exeter, Gretna, Heathrow,
Middlesbrough and Plymouth.

To support growth at 2-Man/Logistics,
we established five 2-Man super-sites that
are strategically located across the UK.

Our investment in the depot network has
created additional capacity, improved
operational efficiencies, and reduced
stem mileage (and thereby carbon
emissions). Importantly, it also means
that we are closer to our customers,
enabling us to provide a very responsive
and personalised service.

Looking ahead, DX Freight’s ongoing
growth will be supported with the
opening of depots in four new locations:
Andover, Leighton Buzzard, Lockerbie
and Haydock, the latter also being a new
Regional Hub. We have also recently
moved our Newport depot to a larger

and improved location. This will be
followed by similar moves for seven
existing depots: Bristol, Northampton
(both of which will be larger Regional
Hubs), Leeds, Sheffield, Dewsbury,
Carnforth and Crawley, and a freehold
property at Ipswich. The larger and
enhanced sites form part of the
agreement to take over 15 depots
following the Tuffnells collapse. In late
June, DX Freight also announced the
proposed development of a major new
Regional Hub in the East Midlands,
planned to open in summer 2024.
The proposed new hub, which will
include a new depot serving the local
area, is expected to cost approximately
£12 million, including land acquisition,
and will be funded from DX’s existing
cash resources.

Service
Our localised Customer Service teams
remain a key differentiator when
retaining customers and attracting new
customers. We continue to build strong
working relationships with our customers
and aim to ‘go the extra mile’ to resolve
issues. Our approach to customer
service stands in contrast to competitor
models that use call centres, which tend
to provide a much more impersonal and
less effective service experience.

Fleet and Technology
We made significant investments in
our fleet and in technology over the year.
We expanded our electric vehicle fleet
to 65 vehicles to support our logistics
partnership with IKEA.

We also renewed our estate of driver
and warehouse scanners across the
DX Freight network, adding new and
enhanced capabilities. This is an ongoing
focus. In addition, maintenance and
buffer stock control was taken in-house,
enabling us to manage scanner stocks –
both in depots and centrally – more
effectively. Depots now have full suites
of devices, including spares, to manage
operations and deliveries.

DX (Group) plc Annual Report and Accounts 202321

CASE STUDY

DX Freight’s 1-Man UK-wide, next-day
delivery capability is the key differentiator
for Harrison & Clough

Harrison & Clough is a leading Yorkshire-based
distributor of quality fasteners and fixings, and
a member of the Dormole group of companies.
Harrison & Clough has a single aim: to make its
customers’ life as simple as possible by ensuring
stock availability, a next-day delivery service,
and market-leading customer service.

experienced issues with damages, the DX team noticed
this and helped us introduce better packaging to reduce
the damage rate. Our consignments can be heavy and
bulky, yet DX always manage to provide a friendly and
professional service. We now have excellent working
relationships with a wide variety of DX personnel, which
has led to open dialogue and a valuable partnership.”

Harrison & Clough have been working in partnership
with DX Freight 1-Man for nearly five years. They
moved to DX when their incumbent carrier went into
administration. DX delivers both Harrison & Clough’s
parcels and pallets. Due to the challenging nature of their
B2B deliveries, which can sometimes be heavy and bulky,
they needed a specialist IDW carrier and DX Freight
1-Man provided the perfect solution.

DX move in excess of 88,000 consignments per annum,
and over 430,000 items delivering a service level
exceeding 99% first time success rate. DX has continued
to grow their footprint within this sector and also carry
for ForgeFix which is also part of the Dormole Group.

Angela Crighton, Operations Director of Harrison &
Clough commented “The main reason we went with DX
was their UK wide next-day delivery capability. From day
one, they were flexible in their approach to working with
us and took a keen interest in getting to know both our
business and our product profile. In the past, we had

“The main reason we went
with DX was their UK wide
next-day delivery capability. Our
consignments can be heavy and
bulky, yet DX always manage to
provide a friendly and professional
service. We now have excellent
working relationships with a wide
variety of DX personnel, which
has led to a valuable partnership.”

Angela Crighton
Operations Director
Harrison & Clough

Items delivered by DX Freight

36m

New 2-Man super-sites

Overall investment

£4.7m

Strategic ReportGovernance ReportFinancial Statements22

Operational Review

DX Express review

Specialists in secure delivery

Market Trends
The small parcels market is substantial
and is expected to continue growing.
In the year under review this market
experienced a more difficult period,
with the cost-of-living crisis leading
to some sectors of the B2C market,
particularly e-commerce, becoming
more competitive. However, the B2B
market was more resilient.

We are clearly not immune to market
cycles, but our positioning, expertise,
sector exposure and commitment to
consistent high service levels through a
secure network has enabled us to grow
strongly and we believe, increase our
share of the overall market.

We will continue to focus on
strengthening our relationships with
existing customers and expanding our
growing customer base amongst both
SMEs and larger national customers.
We will continue to focus on our quality
over quantity model, rather than the
lower rate, volume end of the retail small
parcels sector, this eliminates risk and
exposure to volatile markets. Although
the small parcels market is very
competitive, we believe that our
differentiated approach will enable
us to continue to deliver strong growth
over the short, medium and long term.

Performance
Financial
DX Express performed well in the period,
achieving good margin growth on
revenue and profit, which were well
ahead of the previous year.

Divisional revenue increased by 10%
to £188.4 million (2022: £171.3 million)
with operating profit 22% higher at
£17.7 million (2022: £14.5 million).
This performance has been driven by
continued expansion of our Parcels
activity, offset by the expected attrition
in revenue at Exchange & Mail. Operating
margin increased to 9.4% (2022: 8.5%),
helped by the strong performance
in Parcels.

Parcel revenue grew by 16% to
£156.4 million (2022: £135.3 million)
while revenue from Document Exchange
and Mail reduced by 11% to £32.0 million
(2022: £36.0 million), in line with
our expectations.

Operational
Depot expansion
As with DX Freight, we continued to
invest significantly in the division’s depot
network to support its future growth.
We opened five new depots in Basildon,
Bracknell, Plymouth, Shrewsbury and
Swindon, all of which replaced smaller
existing depots in these areas. We also
opened a new regional hub and depot
in Warrington. These openings have
improved the efficiency of the network
and helped to improve our service levels.
We made further investment in vehicles,
mechanisation, courier handheld devices
and IT systems.

Looking ahead, during the new financial
year, we will continue to invest in our
depot network to increase capacity, and
further improve efficiency and service
levels. This will see us replace and add
new locations to our network footprint
which will not only increase capacity but
will get us closer to our customers to in
turn support service levels and improve
efficiency. In this financial year we will
open three depots in new locations,
Deeside, Stafford and Preston, in
addition to moving to a larger and
improved depot in Norwich. Alongside
the new depot openings, an additional
hub will be opened in Nuneaton to again
support volume growth and ensure that
our trunking operation develops in an
efficient manner.

Other initiatives
While our Exchange & Mail business
continued to see revenue attrition,
the general move to electronic
communications continued. Nevertheless,
the Exchange Portal, which we launched
in the second half of the previous year,
has been well received and has enabled
us to start cross selling the broader
range of DX Express services to our

existing Document Exchange members.
We are also exploring other ways to
improve the profitability of this business,
including a new service, DX Secure
Premium. This is a premium B2B service
with a pre-9.00am delivery and post-
5.00pm collection service options, and is
specifically aimed at the financial, retail
and wholesale sectors.

We will invest further in mechanisation,
as well as an initiative to enable our
master subcontractors to raise their
service provision, with access to flexible
electric vehicle options, telematics, fuel
cards and DX livery on their vehicles.

Another strategic initiative of the year
will see the completion of the single
operating system implementation for our
Parcel customers, significantly improving
customer interface and experience but
also simplifying operational process and
helping to improve compliance.

Items delivered by DX Express

56m

Growth of Parcels

16%

Overall investment

£1.6m

DX (Group) plc Annual Report and Accounts 202323

CASE STUDY

DX partners with Timpson Group
to ensure their UK wide stores receive
daily stock and orders

Timpson Group was established in 1903 and is now one
of the UK’s leading retail service providers, with high
street brands such as Timpson, Max Spielmann, Snappy
Snaps and Johnsons the Cleaners as part of the Group.

DX is proud to have been working in partnership with
Timpson for over two decades, delivering over 25,000
items per week to their 2,000 stores across the UK on a
next-day basis. Timpson rely on DX for timely and secure
delivery of stock items, stationery and customer orders
every working day. DX also supports Timpson Group’s
Max Spielmann passport verification service, with onward
delivery of every passport application they process.
An efficient and secure customer returns, repairs and
home delivery service for the entire Group is also
provided by DX.

Alan Foster, Operations Manager for Max Spielmann
commented “For us, customer satisfaction is everything.
As a prominent retail and service-based business,
timely and efficient delivery forms the backbone of our
operations. Our reputation is built on offering ‘great
service’, which relies on promptness and the reliability
of our services, so it is crucial to align ourselves with
partners who share our commitment to excellence.

“Having worked with DX extensively, we can confidently
say they stand out in their delivery services. One metric
that particularly underscores their expertise is their
first-time delivery success rate, an impressive 98.8%. This
figure is not just a number for us; it reflects the seamless
experiences of countless customers and the countless
challenges adeptly managed to achieve this rate.

“The consistency and reliability they bring to the table
have been instrumental in our decision to choose them
as our preferred courier partner. In an industry rife
with unpredictabilities, DX has consistently showcased
a commitment to professionalism and efficiency.
Their customer service team are very attentive and
are quick to address any queries or issues.”

“Having worked with DX
extensively, we can confidently
say they stand out in their
delivery services. One metric
that particularly underscores their
expertise is their first-time delivery
success rate, an impressive 98.8%.
The consistency and reliability
they bring to the table have been
instrumental in our decision to
choose them as our preferred
courier partner.”

Alan Foster
Operations Manager
Max Spielmann

Strategic ReportGovernance ReportFinancial Statements24

Environment, Social and Governance

Corporate responsibility
– our ESG focus

The Group recognises the importance of, and is committed to,
working towards the UK’s goal of net-zero greenhouse gas (“GHG”)
emissions by 2050 and also understands its responsibilities towards
its employees, customers, suppliers, the recipients of its deliveries
and the wider communities in which it operates.

With the Group now firmly on a growth path, we are increasing our
focus on ESG issues. This year has seen a major step forward with the
publication of the Group’s Carbon Reduction Plan and the first disclosures
under the TCFD regulations, which have applied to the Group for the first
time this year.

1. Managing and reducing our environmental impact

The Group remains committed to
reducing our environmental impact
with significant steps taken through
the reporting year to deliver progress
in this area. We recognise that the
logistics sector contributes a significant
volume of emissions to the atmosphere
associated with vehicle movements.
DX is committed to achieving Net Zero
by 2050 and reducing our overall
environmental footprint. During the
reporting year we published our
inaugural Carbon Reduction Plan in
accordance with the UK Government’s
PPN 06/21 requirement. The plan can be
found at dxdelivery.com under the CSR
link. In this section we highlight some of
our activities through the year that
support our journey to Net Zero.

The Group uses the framework of the
international environmental management
standard ISO 14001 (certified at two
locations) to underpin our approach
to setting objectives and targets for
improvement against our significant
environmental aspects. In FY23 we
reconstituted our Environmental
Committee and created a separate
‘TCFD Group’, each forum providing
the opportunity to engage key senior
stakeholders on environmental issues.
Specifically, the focus in FY23 has been
on our journey to Net Zero, improving
our reporting capabilities and developing
the road map to Net Zero. We aim to
publish this road map alongside our
FY23 PPN 06/21 Carbon Reduction Plan
by the end of 2023.

The Group tracks environmental
performance monthly where data
permits and collates annually any
remaining data sources. This information
is used to calculate Scope 1, 2 and 3
carbon footprint in CO2e (carbon dioxide
equivalent) utilising BEIS 2023
conversion factors or supplier specific
data. The data collected is for the year
ended 1 July 2023, DX’s financial year,
with a financial control boundary utilised
when considering carbon. In FY23 the
boundary included 98 service centres,
hubs and administrative sites, with
additions to the estate through the year
increasing the physical property
footprint by 10.5%.

DX (Group) plc Annual Report and Accounts 202325

FY22

BEIS 2022

Units

kWh

5,172,991

FY21 – Base year

BEIS 2021

Units

kWh

5,952,212

2021/22
tCO2e

944
161

2021/22
tCO2e

1,090
187

2022/23
tCO2e

633
105

Conversion factors

FY23

BEIS 2023

Scope

Units

kWh

3,462,991

Estate^
Total gas (kWh)
WTT gas
Total electricity (kWh)

– Location based

Total electricity (kWh)

– Market based^^

Electricity T&D
Electricity WTT
(generation)^^

Electricity WTT T&D

1
3

2
3

3
3

1
Heating oil (litre)^^^
WTT heating oil
3
Fugitive emissions (f-gas) 1

Fleet Vehicles

DX operated fleet diesel

(litres)
WTT diesel
FLT LPG (litre)^^^^
WTT LPG

Business travel

Company car and

allowance mileage
claims (litre)*

Fuel – People (company

cars/allowance
drivers/fuel receipts)
diesel WTT

Total

Additional carbon
disclosures not
included in above total

Flights (KM)
Trains (KM)
Hotels (nights)**

Additional KPIs

1
3
1

3
3
3

Recycling percentage***
Landfill percentage

Intensity ratios

Revenue £million
tCO2e per £million revenue
tCO2e per m2 estate

footprint (depot/offices)

9,727,583 9,727,583

2,014

8,209,830 8,209,830

1,588

8,058,143

1,711

–

14,810

152,558

–

1,574
174

446
39

37.6
7.9
1

–

29,877

307,016

–

–
145

380
35

75.9
15.8
–

–

15,002

154,371

–

12,849,998 135,002,076

32,280 12,300,944 130,327,649

31,464 12,640,000 134,110,400

26,396

191,702

7,851
41.1
4.9

70,360

504,650

7,502
109.6
12.9

70,360

504,650

–
151

446
39

38
7.9
–

31,756
7,709
109.6
12.9

405,140 4,256,404

1,018

495,171 5,252,280

1,267

527,877

5,600,775

1,326

248

302

322

152,793,314

44,014

149,774,417

44,001

154,380,551

44,906

65,261
39,929
5,366

61%
1.18%

471.17

14.86
1.42
57.5

36,434
38,782
5,760

7.05
1.72
79.98

2,470
17,273
3,624

0.45
7.67
53.51

57%
2.40%

427.18

93.41

0.21

63%
3.40%

382.4

103

117

Notes: Further expansion on Scope 3 reporting is available within our additional carbon disclosures published on our website.
^

Estate energy includes estimation where invoices do not cover a complete year or are not available. Non-staffed exchange locations where we do not receive
utility invoices directly are not included within our energy disclosure (basic lighting/heating). An update to FY22 data resulted in a corrective reduction in
reported electricity and gas consumption to reflect credits and double counting corrections, this was not possible for FY21 as such this will be slightly lower
than the following years.

^^ DX signed a REGO backed electricity supply in April 2023, as such a market based zero emission factor has been used for the relevant months electricity

consumption. Market based Scope 2 carbon (excluding WTT electricity generation) is utilised within the SECR table totals.

^^^ Heating oil data for FY21 retrospectively included in FY23.
^^^^ LPG not reported for FY21; FY22 value utilised to fill gap.
*
** Supplier CO2e values for hotel stays.
*** Includes off site waste segregation where data is available through our waste contractors.

Company car and car allowance mileage claims cannot be split; assumed diesel for conversion factor.

Strategic ReportGovernance ReportFinancial Statements

Environment, Social and Governance continued

tCO2e per £million revenue

FY23

FY22

FY21

95.3

103.0

117.0

Progress Towards Net Zero by 2050
The transportation and delivery of parcels
contributes to the greatest element at
89% of DX’s traditional Scope 1 and 2
carbon footprint (including Scope 3 Well
to tank (“WTT”). Our work during FY23
to expand Scope 3 reporting to align with
the UK Government’s PPN 06/21 Carbon
Reduction Plan requirements has
enabled a greater resolution and
understanding of the Group’s carbon
footprint. This has identified the use of
master subcontractors (category 4 –
Upstream transport and distribution) as a
significant emission source. Addressing
vehicle emissions from fuel combustion,
whether directly operated by the
business or through our partners, remains
the biggest challenge and opportunity
for decarbonising the business.

Overall our traditional Streamlined
Energy and Carbon Reporting (“SECR”)
carbon footprint has increased slightly
this year. This can be attributed to the
following influences: worsening emission
factors for carbon sources, increases in
diesel consumption within our fleet, and
an estate electricity increase as the
footprint expanded. There are positives
to be taken including the ongoing
migration to electric forklift trucks, the
reduced reliance on heating oil, the
expansion of the electric vehicle (“EV”)
fleet and commencement of a 100%
renewable electricity supply.

Through our Environmental Committee
we are developing a road map to Net
Zero, exploring the possibilities across
our estate to reduce emission but also
tackling fleet emissions through
electrification and low carbon fuel
alternatives. We aim to publish this
during the remainder of 2023 alongside
our forthcoming PPN 06/21 Carbon
Reduction Plan.

master subcontractors (Scope 3,
category 4 – Upstream transport and
distribution) for final-mile deliveries
and trunking. Both divisions cater for
different markets which see a significant
variance in the type and weight of items
being delivered from tractor tyres and
lampposts to parcels, letters, and high
value items. The fuel-related emissions
reported predominantly relate to DX
Freight and the vehicles directly utilised
by the business.

reaching a fully EV final-mile delivery fleet
by 2025 for this contract.

We continue to invest in maintaining one
of the youngest fleets in the industry
with 201 vehicles delivered into the
business in the last year. The average
fleet age is 2.4 years, and in maintaining
a young fleet we not only protect
operational aspects of the business but
ensure vehicles are operating efficiently,
helping to control pollution levels.

This year fleet diesel consumption
(products) increased by 4.5%. A key
factor in this increase was the change
in trunking routes; during the year we
enhanced trunking capacity for running
into additional regional hubs. While this
has increased trunking mileage by
approximately 16.5%, operationally this
provides capacity for the business to
meet our customers’ needs effectively
and ensures depots can operate safely
with the volume of deliveries. During the
year we also consolidated our 2-Man
operations. The opening of two super-
sites allowed a reduction in locations,
moving from 40 to 18. While this provided
focus for 2-Man operations this has
increased the geographic coverage of
each region and the associated collection
and delivery mileage. This fuel increase
and operational change was coupled with
a 12% increase in fleet vehicles in FY23
compared to the prior year. Group
revenue increased by 10.3% compared to
FY22; this was linked to fuel surcharges
and price increases. Normalised against
revenue we observed a drop in fleet fuel
per million pound revenue of 5%. This
highlights that we were able to utilise less
diesel to generate each million pound of
revenue. However, because this is largely
linked to price changes, at a per item level
performance has reduced with item
counts down by 2.3% to 91.7 million,
and litres per item delivered rising from
0.13 in FY22 to 0.14 litres of diesel in FY23.
We continue to address fleet emissions,
with the expansion of the depot
network allowing for regional and route
optimisation which helps to reduce stem
mileage and the associated carbon
footprint. In addition, the following
activities were undertaken.

In 2021 we removed traditional internal
combustion only engines (“ICE”) and
hybrid models from the company car list.
Instead, we have focused on Plugin
Hybrid (“PHEV”) and Battery Electric
Vehicles (“BEV”). At the time of
reporting these lower emission vehicles
represent 49% of the car fleet, with
an additional 61 vehicles currently
on order for delivery within 2023 to
replace existing ICE/Hybrid vehicles
as leases renew.

Within our DX Express business, we
are actively engaging suppliers to
reduce collection and delivery carbon
emissions. During the reporting year
we announced a strategic partnership
with Silva Brothers Limited (“SBL”) to
introduce EVs within our London region.
Since implementation 39,863 miles
have been completed eliminating
12.7 tCO2e over nine months. We are
actively engaging suppliers to review
opportunities to expand the utilisation
of EV and other low carbon solutions
within DX Express network.

We acknowledge that there are currently
barriers including the availability of
charging infrastructure and the entry price
point for EV delivery solutions. To further
support our master subcontractors and
challenge the barriers to newer cleaner or
zero emission vehicles we announced our
‘Van in a box’ scheme. This is aimed at
introducing our partners to a preferred
supplier that can support them delivering
a DX compliant vehicle while overcoming
the entry point barriers that currently
restrict master subcontractors from
modernising their fleets.

Property
The business’ property portfolio
expanded by ten sites and 20,066m2
during the reporting year. This growth
improves our customer experience,
service offering and also allows for the
reduction in delivery stem miles as we
optimise regional coverage.

Fleet
DX operates two distinctive business
models with our DX Freight division
utilising primarily PAYE drivers within the
DX operated and leased delivery fleet,
while our DX Express division utilises

During the year DX announced a further
investment of £3 million to support the
transition of our IKEA final-mile delivery
vehicles to EV. The business has
committed to supporting IKEA in
achieving their 100% zero-emission goal
for home delivery, with an aim of DX

DX (Group) plc Annual Report and Accounts 202327

CASE STUDY

DX Freight Warrington

We replaced 98 lighting units with LED and sensor-controlled options.
This included the replacement of warehouse and yard high energy
sodium fittings with modern LED alternatives. This provided a
significant improvement to the lighting conditions while reducing
baseload energy consumption. Working with our installation partner,
a wireless warehouse solution was installed capable of monitoring
lighting levels and movement before dimming the lighting under
certain conditions and turning off when not required.

We ran an internal communications campaign
utilising newsletters, posters and stickers to
remind colleagues to turn off lights and
equipment when it’s no longer needed.

Reduction in electricity

31,700kWh

Eliminated CO2

8.7tCO2e

Stats cover a year-on-year comparison over 158 days since
completion in March 2023, and includes a change from DX Express
to DX Freight services.

Overall property energy consumption
(kWh) reported including electricity, gas
and heating oil during FY23 decreased by
2.5% compared to FY22 to 13,343,131 kWh
while the estates associated footprint
decreased 23% to 2,572 tCO2e. The
decrease in energy was largely as a result
of a 33% reduction in the reported gas
consumption across the estate. We
anticipate an element of this is linked to
prior utility bill estimation which we
addressed in FY23 through a major meter
read activity across the estate, which has
reduced the reliance on estimated invoices.
The purchase of heating oil reduced by
50% largely influenced by the removal of
oil heating at our Warrington DX Freight
depot with electricity utilised instead.

Overall there was an 18% increase in
electricity consumption during the year
(1,517 MWh), largely as a result of the
growth in the business footprint with the
opening of ten additional sites. BEIS
carbon conversion factors intensified for
electricity this year further compounding
the growth in our estate. We also
expanded our EV infrastructure both
within the company car fleet, IKEA
final-mile delivery fleet and express
master subcontractors. This growth in low
carbon delivery solutions is transitioning
delivering miles away from carbon
intensive diesel to low carbon electricity.

We expect electricity consumption to
continue to increase as the number of
EVs increase, we are however committed
to reducing this and being more efficient
with the energy we purchase. In addition,
in April 2023 we sourced a renewable
electricity supply backed by Renewable
Energy Guarantees of Origin (“REGOs”).
The implementation for part of the
reporting year has significantly improved
our estate footprint through the
utilisation of a zero carbon market based
emission factor.

Building on this the Group has committed
to utilising energy more efficiently and
during the year worked on the following
activities. In addition to ESOS, we
completed internal energy surveys across
our estate to identify and prioritise lighting
efficiency opportunities and at some
locations installed point source heating
controls to improve efficiency. We invested
£0.5 million to update lighting during
depot refurbishments and completed 16
LED upgrade projects across the estate
which improved the efficiency of over
1,400 fittings through the installation of
LED’s and sensor controls.

Strategic ReportGovernance ReportFinancial Statements28

Environment, Social and Governance continued

Scope 3 Progress
Through the reporting year our wider
carbon footprint has increased as we
expanded monitoring to include
additional Scope 3 data sources.
Specifically, the inclusion of Scope 3,
category 1 – Purchased goods and
services, and the pro-rata of category 7
– Employee commuting, to the entire
workforce has increased the Scope 3
footprint by 20,000 tCO2e compared
to last year. It should be noted that
purchased goods and services is
calculated using a spend based
methodology utilising the UK
Government’s ‘indirect emissions from
supply chain’ conversion factors.
Through early supplier engagement
we have identified this approach
significantly overestimates carbon
relating to real-estate management
expenses, rent and fees. To overcome
this, we have created a conversion factor
based on limited information obtained
from our supply chain to date as an
interim solution. We aim to engage,
at a minimum, the top 25 suppliers
during FY24 and have already begun
the process of engaging technology
partners to support our carbon reporting
journey, with specific focus on improving
the Scope 3 purchased goods and
services spend based values and
data integrity.

The Group signed a new renewable
electricity contract backed by REGOs
which commenced in April 2023.
This supply allows for a market-based
emission factor of zero to be applied to
three months consumption. This reduces
Scope 2 emissions by 441 tCO2e, with
further emission reductions expected
through the remainder of this contract
into FY24.

We still have Scope 3 categories 8-15 to
investigate to determine their relevance.
We do not anticipate these having a
significant carbon footprint. Further
carbon information will be published
at the end of 2023 as we develop our
reporting capabilities, capture the
remaining data, and improve reporting
methodologies.

DX carbon footprint FY23

27.4%

123,974

tCO2e

71.3%

KEY

Scope 1
Scope 2 – Market based
Scope 3

DX carbon footprint FY23

e
2
O
e
C
2
O
t
C
t

Scope 1
Scope 1
Scope 2 – Location based
Scope 2 – Location based
Scope 2 – Market based
Scope 2 – Market based
Scope 3
Scope 3
Total
Total
Scope 3 breakdown
Scope 3 breakdown
Category 1 – Purchased goods
and services
Category 1 – Purchased goods
and services
Category 2 – Capital goods
Category 2 – Capital goods
Category 3 – Fuel- and energy-
related activities
Category 3 – Fuel- and energy-
Category 4 – Upstream
related activities
transportation and distribution
Category 4 – Upstream
Category 5 – Waste generated
transportation and distribution
in operations
Category 5 – Waste generated
in operations
Category 6 – Business travel
Category 6 – Business travel
Category 7 –
Employee commuting
Category 7 –
Category 8 –
Employee commuting
Upstream leased assets
Category 8 –
Category 9 – Downstream
Upstream leased assets
transportation and distribution
Category 9 – Downstream
Category 10 – Processing of
transportation and distribution
sold products
Category 10 – Processing of
Category 11 – Use of
sold products
sold products
Category 11 – Use of
Category 12 – End-of-life
sold products
treatment of sold products
Category 12 – End-of-life
Category 13 – Downstream
treatment of sold products
leased assets
Category 13 – Downstream
leased assets
Category 14 – Franchises
Category 14 – Franchises
Category 15 – Investments
Category 15 – Investments

1.3%

34,011

2,014

2,014
1,574

1,574

10,428

18,182

48,737

10,738

219

219
74

0
0

0
10

10
0

0
0

27.4%

1.3%

1.3%
71.3%

71.3%

88,389

123,974

Percentage of total Scope 3
Percentage of total Scope 3
11.8%

11.8%
0.0%

0.0%
20.6%

20.6%
55.1%

55.1%
0.2%

0.2%
0.1%

0.1%
12.1%

12.1%
0.0%

0.0%
0.0%

0.0%

DX (Group) plc Annual Report and Accounts 202329

2. Social

Our Employees
We aim to maintain an environment
where employees feel valued and
appreciated.
Staff engagement at all levels is a priority
for us. We aim to ensure communication
and engagement through local, regional
and Group-wide initiatives, with the
Operating Boards of our two divisions
(DX Freight and DX Express) involved.
Senior management participate in
regular calls, meetings and conferences
to ensure cohesive engagement
throughout the Group, and to raise
awareness of the financial and economic
factors affecting the Group’s
performance. Regular news bulletins are
also distributed throughout the Group,
and our in-house magazine, which is
produced bi-annually, carries an in-depth
mixture of business and employee news.
During the months when the in-house
magazine is not sent out, we send a
monthly electronic version of it to all
employees.

We have in place equality and diversity
training. The aim of this is to ensure that
recruitment, career development and
promotion are based entirely on the
ability and performance of an individual.
We have also updated and circulated
our Bullying and Harassment Policy to
ensure that everyone is clear on what is
appropriate behaviour and the actions

that will be taken should any
inappropriate behaviour be identified.
Coupled with this was the rollout of
mandatory anti-fraud and compliance
training to ensure all employees
understand their role and responsibility
for ethical business practices.

Training and development are an integral
part of our vision for the future, and
most higher-level positions within the
Group are internal promotions, as we
seek to promote a culture where hard
work and skill is valued, nurtured and
recognised. During the last 12 months we
have achieved 248 internal promotions.

All regulatory and compliance training
is delivered through our Learning
Management System, which enables us
to monitor the rate of uptake on modules
and provide support when required.
This system also acts as a central
location for all policy and procedure
documents, enabling all our employees
to have easy access to any information
they may require when they need it.

We have identified succession lines
across the Group and those individuals
are working together to achieve a
recognised Chartered Management
Institute (“CMI”) qualification in
Leadership and Management. In this way,
we aim to ensure that we have correctly

trained employees to make the step
into more senior roles as and when
they become available.

We have a free employee assistance
programme in place called ‘weCare’ that
offers counselling, medical assistance,
and advice services, including some
financial advice, which, with the current
cost of living crisis, is especially relevant.
The service also provides 24/7 access to
doctors for all our employees and their
immediate families at no charge. Within
this package there is also an online app
called ‘myStrength’ which provides all
employees with guidance on how to
achieve good mental health. We provide
a variety of pension schemes, which
support our employees to plan
financially for their future. We have
launched an employee benefits platform
in partnership with Aon, the financial
services firm. This offers all our
employees the opportunity to receive
substantial discounts on high street
shopping.

Strategic ReportGovernance ReportFinancial Statements30

Environment, Social and Governance continued

Our evolving workplace safety journey
Our commitment to the safety of all
colleagues is at the heart of the business
and critical to our success and growth
strategy.

We know our colleagues are our most
important asset. Our continual
improvement journey has a clear
objective to prevent accidents and
injuries at work. Safety is a collective
responsibility at DX and only with the
right mind set and attitude can we work
together to reduce risks for our people,
our partners and our customers. Safety
is an ongoing journey at DX, and we
strive to continually improve.

Our risk-based safety management
programme has evolved through
ongoing engagement with stakeholders
to ensure that we apply a customer
centric approach to the way we reduce
risks. At DX, safety is all about actively
listening to our stakeholders and making
the right choices in our risk management
approach so that those choices work
effectively and result in high levels of
engagement across the Group.

DX maintains a dedicated team of
Regional Health and Safety Advisors,
who provide hands-on help, advice and
technical expertise for our network of
depots, support centres and hubs.
Safety committees are in place at our
major Hub locations and are chaired by
the respective Health and Safety Advisor
to provide a route for active consultation
and dialogue with colleagues.

Our bespoke safety training platform,
which we call the DX Safety Academy,
is designed to bring to life our Safe
Systems of Work for colleagues and
deliver key meaningful messages on how
to avoid common accidents and injuries.
This year over 8,000 safety training
courses have been completed through
our Safety Academy, and uptake
continues to improve year-on-year.
In addition to the Safety Academy, we
provide Managers Safety Awareness
Training to our leaders, an in-house
developed training course aimed at
giving our managers the awareness,
tools and knowledge to support our
continual improvement journey.

Our internally-developed Risk
Review Audit Programme has again
demonstrated improved results year-on-
year with enhanced scores across all our
divisions this year and remains an

effective tool to proactively reduce risks
and target those risks that are more
likely to result in serious accidents.
The Risk Review is a collaborative
process that is performed at every
trading location on an annual basis to
benchmark performance and highlight
improvement opportunities.

Our safety behavioural campaign, which
we call Take 5, is a targeted approach
to tackle our top five risks and top five
behaviours for each risk that leads to
accidents. Training courses have been
developed to engage our Team Leaders
in positively re-enforcing the behavioural
programme and helping to change
attitudes and prevent shortcuts. We will
be launching a major upgrade to our
Take 5 campaign in the next year and
remain committed to this simple format
to tackle behavioural change.

Measurement and analysis remain key
to success, and we use leading and
lagging indicators to measure safety
performance across our business. This
year we are pleased to see a significant
improvement both on the absolute
number of more serious accidents, and
our corresponding Accident Incident
Rate (“AIR”) and Accident Frequency
Rate (“AFR”).

Number
of minor
accidents

Number of
RIDDOR
accidents

Total
accidents

Lost time
from
accidents
(Days)

AIR

AFR

FY23

FY22

Change

590

576

+2.4

-18.2

626

620

+1.0

1,194

714

0.34

1,353

1,026

0.49

-11.8

-30.4

-30.6

AIR = Number of RIDDOR accidents/number of
employees over the reporting period X 100,000.
AFR = Number of RIDDOR accidents/total hours
worked over the reporting period X 100,000.
RIDDOR accident = Injuries resulting in more than
seven days absence and classified as major injuries.
Note that hours worked and employees includes
PAYE and agency workers over the reporting period.

This year we have achieved an 18%
reduction in the overall number of
RIDDOR accidents and a 12% reduction
in lost time resulting from all accidents.

This was achieved despite a significantly
increased headcount relating to full time
equivalent employees and hours worked
which has meant a 30% reduction in our
AIR and 31% reduction in our AFR.

We remain confident that our safety
strategy is delivering meaningful results
for our colleagues, and we continue to
improve and mature in this regard.

Road Safety
Use of the UK road network is an integral
part of the Group’s operations and
driving is a key element in many of our
employee’s daily routine, whether it is
commercial driving, company car or
grey-fleet driving. Substantial mileage is
covered most days of the week by many
of the Group’s employees. This presents
potential risk, with driving the most
dangerous work activity that most
people undertake.

We are committed to the highest
standards of road safety, and our
Road-Risk Management Policy was
reviewed in July 2023. This policy
provides guidance for our managers and
drivers in identifying and evaluating
potential risks and implementing
solutions to reduce any identified risk to
its lowest practicably attainable level.

Twice a year, we hold a Fleet
Management Road-Risk Management
Seminar, with audiences consisting of
the Executive Team, Regional Directors,
General Managers and operating centre
licence holders, namely Transport
Managers. The Seminar is a forum for the
discussion of fleet management, road
safety, fleet and driver compliance, and
current and future legislation changes.

We work with The Royal Society for
the Prevention of Accidents (“ROSPA”)
to deliver training and qualifications to
our drivers. In addition, we are working
closely with Logistics UK to deliver
our Driver Certificate of Professional
Competence (“DCPC”) and Certificate
of Professional Competence in Road
Haulage (CPC qualification), which is
focused more on road safety. Refresher
training on this qualification is an integral
part of the Traffic Commissioner’s
criteria and as such we are investing
in these courses for our Transport
Managers.

We recognise the importance of direct
depot management support for road
safety, driver and fleet compliance,

DX (Group) plc Annual Report and Accounts 202331

CASE STUDY

Further electrification of DX fleet

Following the initial £750,000 EVs programme
with IKEA as featured in last year’s Annual Report,
DX announced a further £3 million investment into
this programme.

Again, these additional vehicles are used exclusively
for the Group’s delivery and logistics partnership with
IKEA, the home furnishings retailer. The current IKEA
electric fleet totals 65 vehicles, which will increase to
c.120 over the next 12 months. IKEA has been a DX
customer for over seven years and uses the Group’s
2-Man/Logistics in support of its online and retail
operations. DX is also IKEA’s largest provider of
2-Man home delivery services in the UK.

During the last 12 months, the DX Express division
launched a strategic initiative with SBL that will
initiate the use of EVs for its London parcel deliveries.
DX Express has worked with SBL as one of its ‘final-
mile’ delivery partners for parcels since 2021, and
this electrification programme marks an evolution
of this strong working relationship.

This first phase launched with an initial 20 EVs, liveried
with DX branding, for use in Central London. The EVs
support the DX Express growing Parcels operation,
which provides secure, next-day deliveries. The initial
electric fleet is anticipated to deliver approximately
750,000 parcels in its first full year
of operation.

12 months ago, DX announced the abolition of ICE
vehicles from the company car list with only PHEV
or full EV options available. To date 50% of the current
235 vehicles have been migrated across to either PHEV
or EV. It is envisaged the migration programme will
be completed within the next 12 months, as existing
leases expire.

All the above initiatives evidence the latest steps in
the Group’s plans to increase the use of EVs within
its overall fleet.

Strategic ReportGovernance ReportFinancial Statements32

Environment, Social and Governance continued

vehicle maintenance and repairs,
telematics, licensing, accident
management and driver behaviour. As
the Group has grown, we have increased
the number of Regional Transport
Managers (“RTMs”) within the Fleet
team. Our RTMs provide professional
guidance to depot staff in all matters
concerning fleet compliance and road
safety, with each RTM allocated a
number of depots for which they are
responsible. The RTMs are widely located
across mainland UK to allow for
immediate and effective on-site
interaction and direct support to the
depot management team at very short
notice as and when required.

Our online management systems,
including licence checking, tachograph
analysis and telemetry reporting, allows
us to review driver behaviour using data
to conduct in-depth risk analysis, and
to reward defensive driving technique
and identify where driving standards
may be lacking. We implement driving
assessments and additional on-road
driver training accordingly. Telematics
management training is ongoing with a
focus on achieving improvements in the
seven KPIs we use to monitor driving
behaviours, namely ‘green band’
driving, harsh braking, cornering and
acceleration, over-revving, speeding
and engine idling.

Our focus remains on driver safety and
driver competence through both DCPC
and driver training. Our RTMs, who are
qualified as assessors through our
training partner TTC Continuum,
are an integral part of our road-risk
management programme. They are also
members of the Logistics UK Freight
Councils, which provides us with insights
into future legislation and new training
measures, including road-safety
initiatives.

High-risk drivers and drivers of concern
are identified through our online
management reporting suites, which are
available to the Fleet team. Our online
management systems allow for Group-
wide, regional risk analysis to be
established through accurate
information and reporting of trends and
concerns at all levels, including to
individual driver level. This also enables
a more targeted approach to on-road
training and refresher programmes,
which are implemented across the
Group. In addition, the introduction
of a Driver Behaviour Policy which
affords both the driver and manager
information, via our Company Intranet
portal, available to all our staff, on
current legislation, the legal penalties
of non-compliance and the Company’s
stance on what is expected of a
professional driver, be that commercial,
company car or grey-fleet, has been a
further measure undertaken in the
improvement of road-risk.

Even with the global delay of the delivery
of new vehicles into the UK, due in part
to the shortage of microchips, parts and
labour, we have taken delivery of several
new vehicles and trailers during this
period, with 201 new vehicles, 167 trailers
and 33 FLTs, 31 of which are electric.
As a result, the average age of our entire
leased fleet is now: vehicles 2.42 years,
trailers 3.77 years and FLTs 2.82 years.

We continue to trial new technology to
further improve driver safety standards.
This technology has been shown to help
reduce incidents and improve safety by
promoting higher driving standards and
identifying areas in which more work is
required. Refresher training and driving
assessments remain key elements of our
driver safety measures.

We have invested in fitting state-of-the-
art camera systems in all our MAN TGE
3.5t vans, MAN TGL 7.5t trucks and MAN
TGX tractor units. These camera systems
provide real-time video and analytics
and constitute the next-generation
approach to coaching, training, accident
reduction and improved driving
standards. All the live data is safely
stored on a UK-based, secure system
with full GDPR compliance, providing
invaluable trend analysis to support
higher safety standards, better driving
habits and a reduction in accidents.
The camera system can initiate alerts,
either audibly or by haptic sensors, to
let drivers know that they need to focus
their attention on the road or a specific
area of risk, keeping them safe and
ensuring compliance. The camera
systems have the added benefit of
mitigating risk following an incident.
It is widely reported that 87% of all
road accidents are preventable.

We have increased our fully electric fleet
from the first 12 Maxus e DELIVER 9’s,
which were operational to support our
IKEA, contract to 65. Working closely
with IKEA, DX has taken the first step in
moving away from conventional fuel-
powered commercial vans towards a
more sustainable fleet. The Maxus e
DELIVER 9 gives an operational range
of around 219 miles. We have made the
decision to upgrade the EV vans to give
an increased carrying capacity of 1,162kg.
The vehicles are fully equipped with
GeoTab’s telemetry system, giving
full visibility of vehicle, battery and driver
performance whilst being operated.

Our road safety initiative has proven
valuable with the engagement of the
Group’s drivers as we continue to seek
employee comments and feedback as
part of our ongoing process. This is
critical in sustaining our approach to
road safety.

Our ‘Driver of the Year’ Awards was a
remarkable success again, with the three
recipients readily deserving their awards
along with the congratulations of the
Board and senior managers alike. These
individuals set a fitting example to the
other members of our commercial
driving team.

Our Contribution to Society
Along with continuing to support
Hospice UK by using our Apprenticeship
Levy to fund four apprenticeships we are
also supporting Roundabout.

Roundabout is a charity that supports
homeless youths in South Yorkshire. One
employee of Roundabout will be trained
in the fundraising qualification.

We continue to champion both the
Save the Children’s Christmas Jumper
Day and the Macmillan Coffee Morning,
and to encourage local charitable and
volunteering initiatives in all the
communities in which we operate.
Many of our employees set up their
own individual fundraising and
volunteering efforts.

DX (Group) plc Annual Report and Accounts 202333

3. ESG governance

The Board has ultimate responsibility for
the Group’s ESG strategy and policies.
The Group’s approach to corporate
governance is covered in greater details
on pages 49 to 67. At the heart of the
Group’s ESG strategy is the commitment
to Net Zero and meeting obligations to
reduce its carbon footprint. The first step
in this journey was the publication of a
Carbon Reduction Plan in December
2022 and this report provides greater

disclosure as required under the TCFD
regulations of the Group’s approach to
managing environmental risks and the
potential impact on the business.

The Chief Financial Officer, David
Mulligan, has the responsibility of leading
an Environmental Committee of leaders
from across the business to progress
matters and report to the Board. This
committee includes representatives

from the DX Freight and DX Express
Operating Boards, the Group’s Health &
Safety Manager, the Fleet & Compliance
Director, the Head of Legal & Company
Secretary, and the Environmental
Manager. The Audit & Risk Committee
also has oversight of ESG matters as
part of its risk remit.

Strategic ReportGovernance ReportFinancial Statements34

TCFD Disclosures

Introduction
The year ending 1 July 2023 is the
inaugural year that DX’s falls under
the UK’s new climate-related financial
disclosures requirements influenced by
the TCFD. Historically climate-related
risks and opportunities have been limited
to fleet decarbonisation as previously
reported within the Annual Report.
In preparation for the required risk
management changes, in early 2023,
we began developing internal knowledge
covering the TCFD recommendations
through the TCFD hubs e-learning
portal. Facilitated by DX’s environmental
function and sponsored by David
Mulligan (CFO) the dedicated ‘TCFD
Group’ has been established comprising
leaders from across the business
representing a variety of key functions.
This group has the responsibility of
identifying relevant climate-related risks
and opportunities on an annual basis.
The output is reported through the
existing Audit & Risk Committee to the
Board where overall responsibility for
DX’s approach to risk management sits.

Methodology
In the period leading up to this report
our TCFD Group participated in a
workshop aimed at introducing business
leaders to the new and enhanced
requirements to assess and report the
risks and opportunities posed by climate
change. A scenario analysis review
covering physical and transitional risks
concluded the exercises. A qualitative
approach was taken during our inaugural
session to identify material risks and
opportunities for inclusion within
our Annual Report. In future years
we will look to provide quantitative
figures to illustrate the perceived risks
and opportunities.

We utilised publicly available climate
scenarios by the Network for Greening
the Financial System (“NGFS”, 2023),
Climate analytics (2022) and IIASA
(2022). Specifically, the ‘orderly Net Zero
2050’ and ‘hot house world, current
policies’ scenarios have been used as
suggested within the UK Government’s
reporting guidance, covering a 1.5°C
scenario and a current trajectory where
limited activity within existing policies
will lead to a 3°C+ increase in warming
across the globe if ambitious policies
are not introduced.

Scenario – Net Zero 2050
An ambitious transitional risk focused
scenario which assumes an immediate
and smooth policy transition to deliver
stringent climate policies and significant
advancements in technology which
deliver the country’s decarbonisation
journey by 2050. This scenario limits
global warming to 1.5°C by the turn of
the century and will see the UK reach
Net Zero by 2050. Limited physical
impacts in the short term are offset by
the challenging transitional risks and
opportunities. Overall, acting now, is
predicted to be easier than reacting to
the impacts of climate change in the
future.

Expedited and more stringent tail pipe
emission reforms will see vehicle and
geographical restrictions aimed at
eliminating tail pipe emissions.

The implementation of a carbon tax
across industry would place a significant
cost against carbon intensive delivery
methods. This will drive a transition to
lower carbon solutions; while technology
advancements will be swift, selecting the
correct solution could pose investment
risks where solutions have unintended
consequences or are quickly replaced by
better solutions.

We expect customers’ ESG
requirements, and specifically carbon-
related requirements, to form a key
element of commercial contracts, as
they look to decarbonise and partner
with organisations that can support their
own stringent environmental
requirements.

Scenario – Current Policies
A scenario where only policies currently
announced are implemented. No
additional control measures in the form
of policy are introduced; technology
advancement and speed of innovation
lags behind the more ambitious Net Zero
2050 scenario. As a result, the country
fails to implement changes and
continues to emit carbon in significant
volumes, contributing further to climate
change. It is predicted that global
warming will increase by 3°C by the end
of the century. We identified higher
temperatures may not have a significant
impact on energy consumption as
warmer winters balance the increased
summer energy demand for cooling.
However, it is expected that increasing
temperatures will negatively impact

worker productivity, working conditions,
absence and colleague behaviour.

While wind speeds are predicted to drop
across the year, during the winter months
this drop is not observed. There is the
potential for reduced high sided vehicle
restrictions on exposed routes, although
this is unlikely to have a significant
impact on the business. It may, however,
negatively impact the UK’s wind power
generation facilities, meaning carbon
alternatives are required.

An increase in precipitation across the
country could lead to localised flooding
along delivery routes and at depots.
Potential issues which will need to be
considered within contingency planning
to provide resilience to the predicted
increase in extreme weather events.

Time Horizon
We focused on the period to 2050 as
this provided sufficient time to cover the
UK’s existing vehicle decarbonisation
strategy, and enough time to see
physical impacts within the scenarios.
We define our time horizon as short term
up to 2030, medium term to 2040 and
long term to 2050.

The table opposite summarises the
key climate change related risks and
opportunities identified during the
inaugural TCFD session. These focus
primarily on transitional risk, however
physical and various time horizons were
covered when assessing the two
scenarios. As our experience in applying
the TCFD recommendations develops
we anticipate future enhancements to
this reporting. KPIs and targets will be
developed and monitored during FY24.

Scenario References
NGFS, 2023. Scenarios Portal.
Available at: www.ngfs.net/
ngfs-scenarios-portal

Climate Analytics, 2022. Climate
Impact Explorer. Available at:
https://climate-impact-explorer.
climateanalytics.org

IIASA, 2022. NGFS Phase 3
Scenario Explorer. Available at:
https://data.ene.iiasa.ac.at/ngfs

DX (Group) plc Annual Report and Accounts 202335

Policy

Expected risk/
opportunity

As a mechanism to curb GHG emissions a carbon tax is implemented on business to drive
efficiency and a transition to a low carbon economy. In addition to the taxation, we expect
the transitional costs to be high resulting from the swift changes.

Scenario risk rating

Net Zero 2050 (Medium)

Very likely

Current Policies (Low)

Not expected

Likelihood

Horizon

Financial/operational
implications

Expected to only impact the Net Zero 2050 scenario from 2025 onwards, however this impact will
be felt across the short, medium and long term.

It is expected carbon taxation will cost
between £110-£220 per tonne in the short to
medium term up to 2040, however a significant
increase towards 2050 approaching £770/t as
the Net Zero 2050 deadlines approach.
Ultimately this would impact service costs and/
or profitability should the burden not be
managed.

As a result of conforming to current policies
and a lack of additional carbon tax in this
scenario we foresee no additional financial
implications.

Current control
measures

DX is committed to Net Zero by 2050 which will require investment in decarbonisation. It is likely
that within the Current Policies scenario existing decarbonisation investment will continue at a
steady pace.

In FY23 we installed or upgraded over 1,600 light fittings to LED or sensor controls to reduce
unnecessary energy consumption.

DX signed a REGO-backed renewable electricity contract in April 2023.

Future mitigation
measures

Future control measures will be required within the Net Zero 2050 scenario. Additional capital
expenditure and operating expenditure will be required to expedite decarbonisation to reduce the
tax burden. There could be future opportunities to engage key partners and customers to expand
the rollout of low carbon delivery solutions.

Targets or KPIs to
measure position
against risk

Develop the road map to deliver our existing Net Zero by 2050 commitment and relevant interim
targets/KPIs. This will be completed during FY24.

Business energy and carbon footprint (see SECR statement on page 25)

Net Zero by 2050 progress

Strategic ReportGovernance ReportFinancial Statements36

TCFD Disclosures continued

Policy

Expected risk/
opportunity

With existing bans on tail pipe emissions, expanding ULEZs (Ultra Low Emission Zones) and
Clean Air Zones (“CAZs”), it is expected in the medium to long term these restrictions will expand.
This creates risk to the delivery solutions implemented directly and indirectly by the business.

Scenario risk rating

Net Zero 2050 (High)

Current Policies (Medium)

Likelihood

Horizon

Financial/operational
implications

Very likely

Likely

The UK has policies in place to transition away from tailpipe emissions for new cars/vans by
2030-35. There is uncertainty relating to HGV decarbonisation by 2040 within the Current Policies
scenario. However, it would be expected in a Net Zero 2050 scenario HGV decarbonisation would
be achieved and delivered. Multiple ULEZs/CAZs are proposed for key cities across the UK in the
short term and over the medium term; in any scenario we expect this to be expanded.

We anticipate high financial cost in having
to transition the existing fleet towards zero
emission vehicles at a quicker pace than is
currently planned within the UK Government’s
current policies. Not selecting the right solution
could give rise to high risk and costs associated
with ineffective solutions being retired early.
It is expected in this scenario technology will
advance considerably.

It is likely that master subcontractors may
struggle to adapt at the pace required within
this scenario. This could have financial/
operational impacts to DX depending on
any mitigation measures taken.

The expansion of ULEZs/CAZs shouldn’t
have a significant financial impact on the
business in the short to medium term as newer
fleet vehicles can be relocated to mitigate
these restrictions.

The current tail pipe emission requirements
will be implemented into existing fleet
renewals closer to policy implementation
dates. There is a premium for this, however
we do not foresee this being a significant risk
at present.

Current control
measures

The Group in FY23 announced a total of £3.75 million to support the fleet electrification for our
logistics contract with IKEA. Additional EVs have been introduced to some of our London delivery
routes through our final mile delivery partner.

Through Logistics UK the Fleet and Compliance Director is the vice chair of the London Freight
Council. This forum enables the business to be at the forefront of upcoming policies and engaged
with the UK Government in the London area where innovation is often trialled.

In FY23 we announced our ‘Van in a Box’ initiative, aimed at helping couriers overcome the barriers
to low carbon delivery vehicles.

Since 2021 the business has removed ICE vehicles from the company car policy in favour of PHEV
and BEV alternatives during lease renewals.

Future mitigation
measures

DX will continue to monitor tail pipe emission bans along with ULEZs/CAZs, where required.
A short-term mitigation measure will include the relocation of compliant vehicles into regions
where restrictions are in place.

Taking into consideration lease cycles, the business will track vehicle renewals and consider the
demand for EV/low emission vehicles during renewals.

Across our estate we will investigate options to install EV and low carbon fuel infrastructure.

Targets or KPIs to
measure position
against risk

Number of EVs as a percentage of fleet total

Electric delivery miles by DX Freight and DX Express

ULEZ/CAZ locations/announcements

DX (Group) plc Annual Report and Accounts 202337

Market

Expected risk/
opportunity

Customer and consumer awareness is changing; with a growing focus on ESG it will be crucial for
organisations to take proactive measures to maintain contracts. If DX falls behind the industry
standard, we could see customers move to ‘greener’ competitors.

Scenario risk rating

Net Zero 2050 (High)

Current Policies (Medium)

Likelihood

Horizon

Financial/operational
implications

Current control
measures

Future mitigation
measures

Targets or KPIs to
measure position
against risk

Very likely

Likely

ESG performance is already a growing risk within the Current Policies scenario for key accounts
through tender processes and ESG scorecards. It is expected within the short to medium term this
will continue to increase in priority across both scenarios with greater emphasis within the Net Zero
2050 scenario over the short term.

We expect the financial risk to be an
exponential growth on the current customer
requirements. Led by the supply chain and
consumer pressures, many customers will
implement a sustainable supply chain. This
would place contracts at risk should DX not set
and follow a clear strategy to decarbonise at a
similar pace to competitors.

Revenue generated from DX’s top ten
customers within key divisions with clear
statements on carbon/Net Zero is c.£80 million
per year. Failing to reduce the carbon footprint
of the delivery services provided could see
these organisations in the short to medium
term look for alternative delivery partners.

In 2022, the Group appointed an Environmental Manager to support the delivery of environmental
initiatives and progress carbon footprinting capabilities. Since 2022, we have expanded our carbon
monitoring to key Scope 3 categories. Our inaugural Carbon Reduction Plan in alignment with the
UK Government’s PPN 06/21 requirements was released, and we developed a carbon footprint
metric per item delivered by division.

Create and publish a clear road map to decarbonisation and Net Zero by 2050.

Continue to deliver decarbonisation projects.

Develop clear public communications covering DX’s environmental strategy and targets.

Track the number of customer enquiries regarding carbon

Reduce carbon footprint per item delivered KPI (specific target to be developed during FY24)

Strategic ReportGovernance ReportFinancial Statements38

TCFD Disclosures continued

Physical – Temperatures

Expected risk/
opportunity

Temperatures will increase by 1.5°C-3°C by the turn of the century. While we expect limited impact
on energy consumption as warmer winters balance the increased cooling demands during the
summer, we predict negative impacts for our colleagues during the summertime resulting from
increased working temperature which is likely to affect productivity, behaviour and attendance.

Scenario risk rating

Net Zero 2050 (Low)

Current Policies (Medium)

Likelihood

Horizon

Financial/operational
implications

Likely

Very likely

In the short term temperatures should not have a significant impact on the Group. It will take many
years of the Current Policies scenario before these impacts become significantly detrimental.
Realistically we expect this to be a long-term challenge.

Through mitigation actions taken in this
scenario, temperature increases will be limited
in comparison to the Current Policies scenario.
This will in effect limit the financial impacts
associated with the drop in worker productivity
linking to heat stress, absenteeism and
colleague behaviour, all personnel impacts
which could reduce operational efficiency, and
lead to increased costs if not managed.

If temperatures continue to increase we expect
little impact on labour productivity with only
a small drop of 0.1 percentage point by 2050.
Though based on current experiences, we
would expect an increase in absenteeism and
behavioural issues which could lead to a drop
in efficiency and increased recruitment costs.

DX’s temperature sensitive deliveries for
the pharmaceutical/health service will be at
greater risk due to restrictions on temperature
limits for deliveries. It could mean that
deliveries have to be held within DX’s
temperature-controlled facility or alternative
investments/measures taken to facilitate
these deliveries.

Current control
measures

Future mitigation
measures

Targets or KPIs to
measure position
against risk

DX has a temperature-controlled holding facility for pharmaceuticals.

The business continues to provide additional benefits to colleagues to promote the organisation
as a good place to work.

DX will need to review working conditions and task risk assessments to ensure worker welfare is
not compromised.

Track average and maximum temperatures

DX (Group) plc Annual Report and Accounts 202339

Expected risk/
opportunity

Reputational/Market – Opportunity

Creating low carbon delivery solutions, though decarbonisation and registered offsets.

Scenario risk rating

Net Zero 2050

Likely

Current Policies

Possible

Likelihood

Horizon

Financial/operational
implications

This is a short to medium-term opportunity present in both scenarios, however with a likely greater
benefit should the business act upon within a Current Policies scenario. This is because it is
expected all suppliers in a Net Zero 2050 scenario will be offering these solutions thereby making
it less of a unique selling point compared to providing these services under a Current Policies
scenario.

It is likely with the advancement in technology
within the Net Zero 2050 scenario the ability to
deliver low carbon solutions will be easier and
less cost prohibitive. However, the potential
reputational/market benefits (i.e. greater
market share) will also reduce as this becomes
industry norm.

Delivering a cutting-edge solution would be
prohibitively expensive based on current EV
infrastructure innovation expected within the
Current Policies scenario. Alternatives such
as Hydrotreated Vegetable Oil (“HVO”)
could play a role in significantly reducing
the Group’s carbon footprint. With a +10%
premium it would cost approximately £1 million
to transition the business’ existing two bulk
fuel stores to low carbon HVO per year. This
would reduce the Group’s carbon footprint by
approximately 19,684 tCO2e. Offsetting would
likely cost a similar amount for the business
footprint, however, provide no evidence of
reducing emissions at source where possible.

Current control
measures

Future mitigation
measures

Targets or KPIs to
measure position
against risk

£3.75 million announced in FY23 to invest into electrifying the fleet for our IKEA logistics contract.

Transition of several London delivery routes to EV within DX Express.

£0.5 million invested in FY23 into LED/sensor-controlled lighting.

External verification of the business’ carbon footprint.

Create and publish a clear road map to decarbonisation and Net Zero by 2050.

Investigate certified offset opportunities to provide carbon neutral deliveries.

Carbon footprint per item delivered KPI targets to be outlined during 2023 Net Zero
road map workstream

Strategic ReportGovernance ReportFinancial Statements40

Key Performance Indicators

DX uses KPIs to assess the development and underlying business performance
of the Group. These KPIs are reviewed periodically to ensure that they remain
appropriate and meaningful measures of the Group’s performance.

Statutory measures

Revenue

£471.2m

Reported PBT

£25.4m

Reported EPS

3.9p

(2022: £428.2m, 2021: £382.1m)

(2022: £17.4m, 2021: £10.6m)

(2022: 2.4p, 2021: 2.7p)

2023

2022

2021

£471.2m

2023

£25.4m

£428.2m

2022

£17.4m

£382.1m

2021

£10.6m

2023

2022

2021

3.9p

2.4p

2.7p

Net Cash Generated
from Operating Activities

£54.9m

(2022: £36.5m, 2021: £28.1m)

2023

2022

2021

£54.9m

£36.5m

£28.1m

DX (Group) plc Annual Report and Accounts 202341

Alternative performance measures

Group Adjusted Operating Profit1

Adjusted PBT1

£31.4m

£26.8m

Net Cash1

£37.6m

(2022: £24.9m, 2021: £16.5m)

(2022: £20.2m, 2021: £12.0m)

(2022: £27.0m, 2021: £16.8m)

2023

2022

2021

£31.4m

£24.9m

£16.5m

2023

2022

2021

£12.0m

£26.8m

£20.2m

2023

2022

2021

£37.6m

£27.0m

£16.8m

1 See notes 3 and 35 to the Financial Statements for details of APMs used, which are non-IFRS measures. The notes include details of where reconciliations of APMs

to IFRS reported measures can be found.

DX Freight Operating Profit

DX Express Operating Profit

Central Overheads

£37.8m

(2022: £31.1m)

£17.7m

(2022: £14.5m)

£25.5m

(2022: £23.5m)

Strategic ReportGovernance ReportFinancial Statements42

Financial Review

Strong profits underpinned by growth
in revenue, expanding margins and
healthy cash generation supported
by increasing levels of investment

Statutory Results
The Group reports on a ‘4-5-4 weekly’
basis, which means that the middle
month in each quarter constitutes a
five-week trading period. The Board
believes that this reporting cycle best
reflects the Group’s cost base and
operations.

These Financial Statements are for the
period 3 July 2022 to 1 July 2023, i.e. a
52-week period. Future years will be for
52 weeks or occasionally 53 weeks in
order to keep the financial year-end date
as close as possible to 30 June.

Revenue generated in the year to 1 July
2023 was £471.2 million (2022: £428.2
million) and the profit before taxation
was £25.4 million (2022: £17.4 million).
Basic earnings per share was 3.9p
(2022: 2.4p).

Revenue

EBITDA1
Depreciation
Amortisation of software and development costs
Share-based payments charge – SAYE award shares

Adjusted operating profit1
Exceptional items
Share-based payments charge – PSP award shares

Reported profit from operating activities
Net finance costs

Profit before tax

Tax

Profit for the year

Other comprehensive expense

Total comprehensive income for the year

EPS – adjusted (pence)1
– basic (pence)
– diluted (pence)

Operating profit margin2

2023
£m

471.2

60.2
(27.9)
(0.6)
(0.3)

31.4
–
(1.4)

30.0
(4.6)

25.4

(2.6)

22.8

–

22.8

4.1
3.9
3.8

6.7%

2022
£m

428.2

50.3
(24.4)
(0.6)
(0.4)

24.9
(1.6)
(1.2)

22.1
(4.7)

17.4

(3.4)

14.0

–

14.0

2.9
2.4
2.3

5.8%

1 See notes 3 and 35 to the Financial Statements for details to the Financial Statements for details of

APMs used, which are non-IFRS measures. The notes include details of where reconciliations of APMs
to IFRS reported measures can be found.

2 Operating profit margin is calculated by dividing adjusted operating profit by revenue.

Summary
Revenue of £471.2 million was 10% ahead
of the prior financial year, and reflects
strong growth at DX Freight, where
revenue increased by £25.9 million to
£282.8 million, driven by expansion of its
1-Man service. There was also growth at
DX Express of £17.1 million to £188.4
million, driven by the increasing success
of its Parcels service, which more than
offset the decline at Exchange & Mail.

Earnings before interest, tax,
depreciation, amortisation and
exceptional items (“EBITDA”1)
for the year was £60.2 million
(2022: £50.3 million).

Adjusted operating profit increased
to £31.4 million (2022: £24.9 million).
Adjusted profit before tax increased
to £26.8 million (2022: £20.2 million).
Net cash at 1 July 2023 increased
to £37.6 million (2022: £27.0 million).
Operating cash flow was £54.9 million
(2022: £36.5 million) and the cash
outflow from capital expenditure
was £10.9 million (2022: £6.2 million).

DX (Group) plc Annual Report and Accounts 202343

“The total dividend for the year is 1.5p
per share in line with expectations.”

David Mulligan
Chief Financial Officer

Revenue by Segment

DX Express
DX Freight

Revenue

Cash Flow

EBITDA1
Loss on disposal
Movement in working capital
Exceptional items
Interest paid
Tax paid

Net cash from operating activities

Net Assets

Non-current assets
Current assets excluding cash
Cash and cash equivalents
Current liabilities excluding debt
Non-current liabilities

Net assets

2023
£m

188.4
282.8

471.2

2022
£m

171.3
256.9

428.2

Change
%

10.0%
10.1%

10.0%

2023
£m

60.2
–
1.6
–
(5.1)
(1.8)

54.9

2022
£m

50.3
0.3
(6.9)
(1.6)
(4.7)
(0.9)

36.5

1 July 2023
£m

2 July 2022
£m

166.4
47.8
37.6
(81.6)
(101.6)

68.6

145.3
44.6
27.0
(74.9)
(86.6)

55.4

Revenue by Segment
A breakdown of Group revenue is shown
opposite and commentary on each
division’s performance is provided in
the Chairman’s Statement and the
Group Operational Review.

Cash Flow
Cash flow from operating activities
was £54.9 million compared with
£36.5 million in the previous year. The
previous year included the repayment of
£6.0 million of deferred VAT and other
payments which were originally deferred
in the 2020 financial year.

Working capital increased by
£1.6 million in the year (2022: reduced
by £6.9 million). The working capital
movement returned to normal in 2023
following the large, deferred payments
referred to above made in the previous
year. Working capital movements
included a reduction of £0.5 million,
compared with a reduction of
£1.2 million in the previous year, related
to Exchange & Mail deferred income.

No exceptional items arose in 2023.
In the previous financial year, the Group
incurred £1.6 million of legal and
advisory costs on the investigation
of and inquiry into the corporate
governance matter.

Interest paid was slightly higher than in
the previous financial year, reflecting an
increase in interest on lease payments,
linked to a rise in right-of-use assets.
Tax paid was in relation to instalments
on account for UK corporation tax and
the Group’s Irish operations.

Net Assets
Net assets increased by £13.2 million
to £68.6 million (2022: £55.4 million),
reflecting the profit for the year
excluding the share-based payments
charge.

Strategic ReportGovernance ReportFinancial Statements44

Financial Review continued

Net Cash
Net cash at 1 July 2023 was better than
expected at £37.6 million (2022: £27.0
million), reflecting the profit for the year,
a net cash inflow on working capital, and
£10.9 million of capital expenditure.

The Group’s only borrowing facility is a
£20.0 million invoice discounting facility
with Barclays Bank plc, which was
renewed during the year. Drawings on
the invoice discounting facility at 1 July
2023 were £nil (2022: £nil) and it was
undrawn throughout the year.

Capital Expenditure
Capital expenditure for the year
was £10.9 million (2022: £6.2 million).
Capital expenditure consisted
principally of investment in IT equipment
and development, operational
equipment including EVs, leasehold
improvements at new depots and
property improvements.

Deferred Taxation
As a consequence of the improving
results and a reforecasting of business
plans, DX is confident of future taxable
profits. Under IAS 12, ‘Income Taxes’,
a deferred tax asset is recognised
for deductible temporary differences
and unused tax losses (tax credits)
carried forward, to the extent that
it is probable that future taxable profits
will be available.

Management considers that DX is eligible
to recognise the deferred tax asset on
losses carried forward. In the current
year, this has resulted in a deferred
tax asset at 1 July 2023 of £3.7 million
(2022: £5.5 million). Expected utilisation
of losses in the year along with other
timing differences resulted in a deferred
tax charge of £1.8 million (2022: deferred
tax charge of £2.0 million) being
recognised in the income statement.

Adjusted Profit and Earnings per Share
Adjusted earnings per share, which
excludes amortisation of acquired
intangibles, exceptional items and
share-based payment charge, was 4.1p
(2022: 2.9p).

Net Cash

Cash and cash equivalents

Net cash1

1 July 2023
£m

2 July 2022
£m

37.6

27.0

1 See notes 3 and 35 to the Financial Statements for details of APMs used, which are non-IFRS measures.
The notes include details of where reconciliations of APMs to IFRS reported measures can be found.

Capital Expenditure

IT hardware and development costs
Property costs
Operations and service development

Total capex

Adjusted Profit and Earnings per Share

Profit from operating activities
Add back:
– Exceptional items
– Share-based payments charge

Adjusted profit from operating activities

– Net finance costs

Adjusted profit before tax

Tax

Adjusted profit after tax

Adjusted earnings per share (pence)

Basic earnings per share (pence)

2023
£m

2.1
6.2
2.6

10.9

2023
£m

30.0

–
1.4

31.4

(4.6)

26.8

(2.6)

24.2

4.1

3.9

2022
£m

1.9
3.2
1.1

6.2

2022
£m

22.1

1.6
1.2

24.9

(4.7)

20.2

(3.4)

16.8

2.9

2.4

Dividends
The Board recommenced dividend
payments during the financial year, with
the payment of an interim dividend of
0.5p per share on 31 March 2023. It is
now pleased to propose a final dividend
of 1.0p per share (2022: nil). This takes
the total dividend for the year to 1.5p per
share in line with the Company’s
dividend policy (2022: nil).

shareholder approval at the forthcoming
AGM on 23 November 2023.

The final dividend will be paid on
7 December 2023 to shareholders on the
register on 17 November 2023, subject to

David Mulligan
Chief Financial Officer

DX (Group) plc Annual Report and Accounts 202345

Principal Risks and Uncertainties

Risk management – how we identify,
evaluate and mitigate risks

The Board has overall responsibility
for DX’s approach to risk management
and its system of internal controls to
safeguard the Group’s assets and
shareholders’ interests. The risk
management process and systems of
internal controls are designed to identify
the main risks that the Group faces in
delivering its strategy, and to ensure
that appropriate controls, policies and
procedures are in place to minimise
these risks to the Group.

As with any business, DX is exposed to
a number of risks and uncertainties at
any given time. Managing these risks
appropriately is key to the delivery of
DX’s overall strategy.

The Group maintains a risk management
register, which is reviewed and discussed
every six months by the Operating
Boards of the DX Freight and DX Express
divisions. It is also reviewed at least
every six months, and more frequently
as appropriate, by the Audit & Risk
Committee. The Committee then
updates the Board.

In the last year, the Board oversaw the
update of a number of compliance
policies and procedures following the
conclusion of the corporate governance
inquiry and investigation with the aim of
ensuring the Group has policies that
reflect current best practice. Coupled
with this was the rollout of mandatory

anti-fraud and compliance training to
ensure all employees understand their
role and responsibility for ethical
business practices. This training is to be
refreshed annually to ensure the Group’s
commitment to the highest standards of
business practice are clear and high
standards are maintained.

The Audit & Risk Committee also
undertook a more comprehensive review
of the Group’s risk register to ensure that
the risks identified were appropriately
evaluated and that control measures
were in place to manage the risks
identified.

Our risk management framework

The Board believes that in order to identify and consider all risks, it is vital that we hear from our
employees. Those employees are able to feed their risk concerns, by function, to the executive leadership
team, who, after moderation by them, can either raise them for consideration by the Audit & Risk
Committee by inclusion in the leadership team’s own risk register or in their presentations to the
Committee. Our ‘bottom up’ approach is best illustrated in this way:

Employees

Executive leadership team

Nomination
Committee

Audit & Risk
Committee

TCFD Group

Remuneration
Committee

Board of Directors

Strategic ReportGovernance ReportFinancial Statements46

Principal Risks and Uncertainties continued

The Board has identified the following principal risks and uncertainties to the Group’s successful performance and delivery
of its strategy:

Risk

Impact

Mitigation

Movement

Market Risk

Letter and
parcel volumes
in the UK

Price Risk

The parcel
market in which
DX operates
is highly
competitive

Operational Risk

IT systems are
critical to DX’s
business
operations

Confidential and
sensitive items

The market for letters is in long-term structural
decline, which, in particular, affects the Document
Exchange service. If the decline of letter volumes
in the UK is at a faster rate than forecast or the
growth in parcel volumes is lower than DX
forecasts (or DX fails to maintain or increase its
share of the parcel markets in which it operates),
there may be a material adverse effect on DX’s
operations and future financial condition. Risks
from a pandemic relate to the potential impact on
our customers’ business and general business
confidence.

DX seeks to win business in new
sectors and develop new services,
recognising the general move to
digital and electronic alternatives.

Revenue from Document Exchange is
a reducing share of the overall Group
revenue so the impact of this risk is
reducing over time.

The parcels market is highly competitive and
DX may be adversely affected by aggressive
pricing strategies.

Any material failure in DX’s IT applications,
systems, certain key suppliers and infrastructure
may lead to operational and systems disruptions,
with an adverse effect on DX’s operations,
financial condition and future prospects. While its
software is being updated, DX’s operational
effectiveness could be impaired if its existing
bespoke software failed.

DX Express collects, sorts and delivers a range
of confidential and sensitive letters and parcels
for a variety of customers, including government
departments, local authorities and examination
boards. If confidential consignments were to be
misplaced, the reputation and brand of DX may
be adversely affected. If a high-profile incident of
this nature arose, existing or potential customers
may be unwilling to use DX for the delivery of
confidential or sensitive items.

DX provides high levels of customer
service at prices that offer customers
best value. It also seeks to maintain
strong relationships with major
customers and develop new service
attributes, such as real-time delivery
vehicle tracking, in response to
customer needs.

DX has a business continuity plan in
the event of IT systems failure and
ongoing investment is being made to
continuously enhance its capability.
Further protections are in place to
protect DX’s systems against attacks.
These protections are to a level
acceptable to government
departments. Prior to new systems
going live, DX conducts significant
testing in non-live environments.

All DX Express staff are fully vetted.
All parcels processed through our
secure network are tracked from
end to end.

Driver certificate
of professional
competence
(“CPC”)

The DX network requires the use of 7.5t vehicles,
which must be driven by CPC-qualified drivers.
A shortage of such drivers would impact the
ability of DX to operate its network and this could
have a material adverse effect on DX’s results of
operations, financial condition and prospects.

DX has resources specifically focused
on recruiting and training suitably
qualified drivers. DX’s recruitment and
retention polices, and its ethical values
seek to ensure that DX remains a
great place to work. The ‘Warehouse
to Wheels’ initiative seeks to train
warehouse staff to become qualified,
professional drivers.

DX (Group) plc Annual Report and Accounts 202347

Risk change

Increasing

Decreasing

No change

Risk

Impact

Mitigation

Movement

Operational Risk

Loss of major
operating site

The loss of a major sortation hub could
compromise the operation of the business and
impact on customer service and may lead to the
loss of business.

Decarbonisation
of fleet and
transition to
Net Zero

The transition to Net Zero as a business will
involve the greater use of EVs. Moving away from
diesel fuelled combustion engines needs to be
carefully managed as customers may choose to
do business with companies with ‘greener’ fleets.
The demand for electric may also outstrip supply.

The business is reducing reliance on
the networks’ central hubs. As the
business grows, the importance of
regional sortation hubs reduces the
reliance on these central hubs and
allows the risk to be spread and
managed.

DX will continue to work closely with
its chosen vehicle suppliers to ensure
that appropriate vehicles are available
to meet our operational requirements.
The introduction of the first EVs is the
first step in the Group’s transition to
Net Zero.

Compliance Risk

Standards
and regulatory
compliance

DX holds several standards and regulatory
accreditations, including ISO 27001 Information
Security Management and Cyber Essentials Plus.
Maintenance of these standards is required to be
able to provide services to public sector bodies
and other key markets. If DX were to lose these
accreditations it would put major contracts at risk
and jeopardise existing and future revenues.

DX trains staff in accordance with
these standards and performs internal
assessments to ensure the required
processes and standards are
maintained. DX is also subject to
external audits of our compliance
with these standards.

Fleet compliance is central to meeting our
operator licence (“O licence”) obligations, which
allows DX to operate its delivery and trunking
fleet. Loss of O licences would significantly
impact DX’s ability to operate.

The safety of our employees, agency labour and
suppliers is of paramount importance.
Compliance with regulations and development of
a positive health and safety culture is key to
achieving this. There is a risk of serious injury or
fatality if safe practices are not adhered to.

Compliance with the management of personal
information under GDPR laws and regulations is
critical as the business controls and processes
personal data as part of its delivery services.

Regular maintenance and inspection
of vehicles and audit of compliance
with regulations.

Regular risk reviews of operations,
a dedicated team of safety
professionals, and targeted training
seeks to engage employees to work
safely and avoid injury. We have also
invested in appropriate measures
to protect our employees to ensure
that they are able to operate safely
and in line with UK Government
guidance and regulations in the light
of the coronavirus pandemic.

Appropriate processes have been
designed to manage and control
personal data in the Group’s
possession and to ensure it is deleted
in line with data retention policies.

Strategic ReportGovernance ReportFinancial Statements48

s172 Statement

Each Director is required by law (s172 of the Companies Act 2006) to act in
the way they consider, in good faith, would be most likely to promote the success
of the Company for the benefit of its shareholders as a whole, and in doing so
the Directors must have regard to other factors (the “s172 Matters”).

This is the Company’s fourth s172
Statement. Here, we summarise our
activities, explain how the Company
has considered the s172 Matters and
engaged in constructive dialogue with
employees, suppliers, customers and
others; and has had regard to employee
interests, the need to foster the
Company’s business relationships with
suppliers, customers and others, and the
effect of that consideration, including
on the principal decisions taken by the
Company during the financial year.
We also signpost where more detail
can be found on the s172 Matters in
this Annual Report and Accounts.

The Directors have access to advice
through the Company Secretary and,
if requested, external advisers, and the
Directors are satisfied that they have
complied with these requirements.

During the year, the Board reviews
corporate governance issues as part
of its regular meetings. The Company
announced the conclusion of the
corporate governance investigation and
inquiry on 20 September 2022 and an
update on the improvement actions is
given in the Audit & Risk Committee
Report on pages 57 to 58.

The Likely Consequences of
Any Decision in the Long Term
The Directors understand the business
and the evolving environment in
which we operate, including global
environmental, health and economic
influences which impact the UK. Based
on the Company’s Mission (shown on
the inside front cover of this report) the
strategy set by the Board is intended
to strengthen our position as a leading
freight and courier business, while
keeping safety and social responsibility
fundamental to our business approach.
While the nature of parcel and freight
delivery is a short-term activity, for key
decisions with long-term consequences,
including the locations of new depots,
IT investments and key senior
appointments, appropriate diligence
and debate are undertaken before
arriving at such decisions. A recent
example of a strategic decision with

long-term consequences is the
announcement in June 2023 of the
Company’s £12 million investment in the
freehold acquisition and development
of a new regional hub near Nottingham,
which is expected to be operational from
the summer of 2024.

The Interests of the Company’s
Employees
Our employees are interested in issues
such as opportunities for development
and progression, working arrangements,
sharing ideas, diversity and inclusion,
and compensation and benefits, and we
have developed various communication
channels to help meet their needs.
During the year we have continued
to expand our equality and diversity
training with high levels of uptake and
overall compliance. Promotion and
career development are based entirely
on the ability and performance of
the individual.

Our leadership team is approachable
and has regular visits at depots and
other sites. Our engagement with our
employees is discussed in more detail
in the Our Employees section of our
Corporate Responsibility Report on
page 29. We have a strong track record
of promoting talent from within the
Company, and training and development
is an important part of our DNA.

The Need to Foster and Manage
the Company’s Business Relationships
with its Suppliers, Customers and
Other Stakeholders
We aim to build long-term partnerships
and a collaborative approach with
our customers and business partners.
Local customer service colleagues who
understand our customers’ needs and
can develop a relationship over time
are instrumental in delivering our high
quality service. Our engagement with
our suppliers, customers and other
stakeholders is discussed in more detail
under Customer Proposition on pages 10
to 11, in the case studies on pages 21 and
23 and in the Governance Report on
pages 54 to 56. We encourage regular
and open dialogue with all stakeholders.

The Impact of the Company’s
Operations on the Community
and the Environment
Our commitment to address matters
of concern in the communities in which
we operate and the wider environmental
concerns are discussed in more detail
in our Governance Report on pages
54 to 56 and in the case study on fleet
electrification on page 31. We recognise
that ESG matters are becoming
increasingly central to investment
decisions and we are evolving our
approach to environmental reporting
as we meet our obligations under the
TCFD disclosure requirements.

The Desirability of the Company
Maintaining a Reputation for High
Standards of Business Conduct
Our reputation remains vital to our
continued success and our approach
to business conduct is identified in our
Mission and Approach to ESG and
discussed in our Governance Report
on pages 54 to 56. An update on our
corporate governance improvement
actions is given in the Audit & Risk
Committee Report on pages 57 to 58.

The Need to Act Fairly as Between
Members of the Company
We address this area in more detail in the
Chairman’s Introduction to Corporate
Governance and the Governance Report
on pages 54 to 56. Our approach to
remuneration aligns the interest of the
Executive Directors with that of the
shareholders. Our approach is to attract
and retain the best possible people who
have the capacity and drive to meet the
Company’s strategic and financial
objectives. To attract and retain the
Executive Directors, we offer them a
base salary that is fair, reasonable and
affordable for the Company. They are
incentivised to deliver growth of the
business through a discretionary annual
bonus scheme, which rewards the
Executive Directors based on achieving
financial targets as well as certain
qualitative measures, and through
longer-term incentives under the
Performance Share Plan, which was
introduced in December 2017 to create
and protect long-term shareholder value.

DX (Group) plc Annual Report and Accounts 202349

Governance
Report

In this section

Governance Report (49 to 67)

Chairman’s Introduction to
Corporate Governance

Board of Directors

Governance Report

Audit & Risk Committee Report

Directors’ Remuneration Report

Directors’ Report

Strategic ReportGovernance ReportFinancial Statements50

Chairman’s Introduction to Corporate Governance

Dear Shareholder,

I am pleased to introduce the Group’s corporate governance report for 2023.
As Non-executive Chairman I am responsible for ensuring that the Group
maintains high standards of corporate governance, including reviewing the
corporate governance structure of the Board and Board Committees to ensure
they remain appropriate to the size and complexity of the Group as the
business grows and evolves.

I lead the Board of Directors and have primary responsibility to provide
the necessary leadership, input and guidance to the Company and the Board
in driving the business to a level of sustainable profitability that creates
long-term shareholder value. I also have responsibility for shaping the Board
agenda to ensure it focuses on the important strategic, operational, financial
and ESG matters.

I am satisfied that the current Board (which has been updated with the addition
of one further independent Non-executive Director) has the appropriate blend
of skills, capabilities and experience to deal with the challenges faced by the
business. Industry knowledge, supported by financial experience, is particularly
important for the Company as it maintains its focus on strong governance
controls and developing economic uncertainty, and our Board has a depth
of necessary experience to help shape DX’s response to these challenges.

Following the external review of the Company’s compliance policies,
procedures and training materials last year, the Board and the Audit & Risk
Committee have both exercised close oversight of Company’s updated
compliance framework to ensure that it has been fully adopted and understood
by management and employees, and that it continues to reflect current
best practice.

In meeting the requirement to follow a recognised corporate governance code,
the Board continues to adopt the Quoted Companies Alliance Corporate
Governance Code (the “QCA Code”). The QCA Code supports the Group’s
approach to managing risks and transparent communications with
stakeholders, and DX is committed to full compliance with the QCA Code
principles. Where appropriate, this corporate governance statement and report
have been prepared to comment on the application of the QCA Code’s
principles and to address the disclosure requirements recommended by it.

“I am satisfied that the
current Board has the
appropriate blend of
skills, capabilities and
experience to deal with
the challenges faced
by the business.”

DX (Group) plc Annual Report and Accounts 202351

A detailed explanation of how the Group addresses the QCA Code’s ten principles is available on our website at dxdelivery.com
under Investors/Governance.

During the year we have reviewed the terms of reference for the Audit & Risk, Remuneration and Nomination Committees, and
each of those Committees’ terms of reference are published on our website. We have also reviewed and updated the delegations
of authority and the list of matters specifically reserved for decision by the full Board.

There have been a number of changes to the composition of the Board and the Board Committees during the financial year,
and these are outlined in the Governance Report on page 54.

We also recognise the growing importance of disclosures with regard to ESG matters and, in particular, the decarbonisation
of the DX fleet (Principle 3). We are making this a priority of DX; we have published a Carbon Reduction Plan, improving the
information disclosed and adopting the approach recommended by the TCFD.

Mark Hammond
Non-executive Chairman

Strategic ReportGovernance ReportFinancial Statements52

Board of Directors

Our Board is critical to the ongoing success of the business and comprises
two Executive Directors and four Non-executive Directors, including
the Non-executive Chairman. The composition of the Board is structured
to ensure that no one individual can dominate decision making.

Name and Title

Mark Hammond
Non-executive Chairman

Paul Ibbetson
Chief Executive Officer

David Mulligan
Chief Financial Officer

Date of Appointment

15 November 2022

31 January 2023

9 April 2018

Experience and Skills

Mark has over 25 years’ commercial
and financial experience across
finance, investment and commerce
and has been a member of the
Institute of Chartered Accountants
of Scotland since 1991. He was
co-founder and manager
of a private equity fund, Caird
Capital LLP, having previously
worked for Bank of Scotland
Corporate as Head of Integrated
Finance. He was previously a
Non-executive Director of Tuffnells
Parcels Express Limited until its
successful sale to Connect Group
plc, and a Non-executive Director of
David Lloyd Leisure Group Limited,
a leading European fitness business.

Paul Ibbetson has over 30 years’
experience in the transportation
industry. He joined DX Freight in
November 2017 and was appointed
Chief Executive Officer on
31 January 2023. Before joining
DX, he was Operations Director of
Tuffnells Parcels Express Limited
and has also held senior operational
and commercial roles at both Target
Express and Business Post.

David has over 25 years of
experience in senior financial
positions in a number of listed
companies and joined DX in
April 2018. Prior to joining DX,
David was CFO at Hornby plc,
where he was involved in delivering
the restructuring and turnaround
of the business. A major part of
his career was at Morgan Sindall
Group plc, the construction and
regeneration group, which he
joined in 1997. He became CFO in
2004, a position he held until his
departure in 2013. David qualified
as a chartered accountant with
Ernst & Young in 1995.

Other Appointments

Mark is currently a Non-executive
Director of Genuit Group plc, the
listed provider of sustainable water
and climate management solutions
for the built environment and a
Non-executive Director of Chaffin
Holdings Limited, which provides
arboricultural services.

None

Committees

–

DX (Group) plc Annual Report and Accounts 202353

Committee
Membership Key

Nomination Committee

Remuneration Committee

Audit & Risk Committee

Committee Chair

Jon Kempster
Non-executive and Senior
Independent Director

Mike Russell
Non-executive Director

Alison O’Connor
Non-executive Director

12 July 2022

2 October 2023

Jon is the Senior Independent
Director and Chairman of the Audit
& Risk Committee. He has over
30 years’ senior financial and
commercial experience, including
as Group Finance Director of
industry-leading FTSE-listed
companies across a number of
sectors, including logistics, retail,
and manufacturing. Most recently,
he was Finance Director of Frasers
Group plc, the retail group and,
before that, Group Finance
Director of Wincanton plc,
the logistics provider.

Alison is Chief People Officer
of Arriva plc (“Arriva”), which is
part of Deutsche Bahn AG and
one of Europe’s largest passenger
transport providers. Having joined
Arriva in 2001, she now advises the
Board on all aspects of human
resources and related organisational
planning and development. She is a
Member of the Arriva Management
Board and the Investment & Risk
Committee. She also participates in
a number of Arriva sub-committees,
including the Environment, Health &
Safety Committee. Prior to Arriva,
Alison worked for 15 years in senior
HR roles at The Boots Company plc.

Mike is Chairman of the
Remuneration Committee and
Chairman of the Nomination
Committee. He has over 35 years’
experience in leadership and
financial roles with major
companies. During his executive
career, he was Chief Executive of
Prize Food Group plc, the food
production group, Group Finance
Director of Nurdin and Peacock plc,
the food wholesaler, and Finance
Director of Asda Stores Limited, the
supermarket subsidiary of Asda
Group plc. He has significant
experience of the logistics industry,
having been a Non-executive
Director of Clipper Group plc, the
retail logistics firm, for almost ten
years. During this time, he was
Chair of the Audit and Risk
Committee and the Remuneration
Committee and a member of the
Nomination Committee.

Jon is currently Non-executive
Director of Norman Broadbent plc
and Serinus Energy plc. He is
also a Trustee of the Delta plc
pension plan.

None

Strategic ReportGovernance ReportFinancial Statements

Governance Report

The Board is responsible for ensuring the highest standards of corporate governance and for promoting the long-term
success of DX.

The Board
The roles of the Chairman and Chief Executive Officer are separate, with each having clearly defined duties and responsibilities.

The Chairman provides leadership to the Board. He is responsible for chairing the Board meetings, for setting the agenda for the
Board meetings (in consultation with the Chief Executive Officer and other Directors), and for ensuring that the Board has
sufficient time to discuss issues on the agenda, especially those relating to strategy. The Chairman is also responsible for ensuring
that the Directors receive all the necessary information and reports, as well as for ensuring the market and regulators are kept
appraised in a timely manner of any material events and developments. Along with the Chief Executive Officer, the Chairman
also ensures that the appropriate standards of corporate governance are effectively communicated and adhered to throughout
the Group.

The Chief Executive Officer is responsible for leadership of the DX management and its employees on a day-to-day basis.
In conjunction with the Operating Boards of the DX Freight and DX Express divisions, the Chief Executive Officer is responsible
for the implementation of Board decisions.

During the financial year, Mike Russell and Jon Kempster joined the Board on 12 July 2022. Lloyd Dunn resigned from the Board
on 6 September 2022, Liad Meidar and Russell Black left the Board on 19 October 2022, and Ronald Series resigned from the
Board on 14 November 2022. Mark Hammond joined the Board as Executive Chairman on 15 November 2022 becoming Non-
executive Chairman on 1 February 2023, following the appointment of Paul Ibbetson to the Board as Chief Executive Officer
on 31 January 2023. As at the date of this Annual Report, the Board comprised the Non-executive Chairman (Mark Hammond),
two Executive Directors (Paul Ibbetson and David Mulligan) and three Non-executive Directors (Mike Russell, Jon Kempster
and Alison O’Connor).

Details of each Director’s background and experience can be found on pages 52 to 53. The Board’s mix of skills and business
experience is important to the Company at this stage of its development and ensures an informed review and debate of
performance and strategy. It is noted that the Board has completed the appointment process of a third independent Non-
executive Director. Each Director is responsible for keeping their skills up to date and relevant to being a director of a listed
company. In particular, Board briefings from the major professional advisory firms are a useful and informative source of
information to ensure that the Directors are kept up to date with the latest regulation and compliance requirements.

The Board continues to have strict control over key areas of expenditure. For example, the threshold for approving unbudgeted
capital expenditure by the full Board is £50,000 and £100,000 for budgeted capital expenditure, and the approval of all senior
appointments or salary changes with a base salary above £100,000 is reserved to the Remuneration Committee. This helps to
ensure a high level of diligence in key capital and people decisions.

Internal Controls and Risk Management
DX has in place a system of internal financial controls commensurate with its current size and activities.

The Board has overall responsibility for DX’s system of internal control to safeguard the Company’s assets and shareholders’
interests. The risk management process and systems of internal controls are designed to identify the main risks that the Group
faces in delivering its strategy and growth plan, and to ensure that appropriate policies and procedures are in place to minimise
these risks to the Group, including the establishment of appropriate business continuity planning arrangements. The Company
maintains a risk management register which is reviewed and discussed every six months with the Operating Boards and the Audit
& Risk Committee (as further detailed on pages 57 to 58).

The Board has reviewed the effectiveness of the system of internal control for the year ended 1 July 2023 and up to the date of
the signing of the Annual Report and Accounts. The corporate governance matter was concluded and reported on in detail in
last year’s annual report. An update on improvement actions is reported in the Audit & Risk Committee Report on pages 57 to 58.

The Board recognises that an essential part of its responsibility is the effective safeguarding of assets, the proper recognition
of liabilities and the accurate reporting of results. The Group has a comprehensive system for regular reporting to the Board.
This includes monthly management accounts, functional reports and an annual planning and budgeting system. The financial
reporting system compares results against budget and against the prior year, and the Board reviews its forecasts for the financial
year on a regular basis.

During the year, the Board reviewed and updated its formal policy of authorisation setting out matters which require its approval,
and certain authorities which are delegated to the Executive Directors and members of the Operating Board.

Independence
Mark Hammond, Mike Russell and Jon Kempster are considered the three Independent Non-executive Directors in meeting
the requirements of the QCA Code. The Non-executive Directors provide a suitable balance between the Executive and the
independent Directors.

DX (Group) plc Annual Report and Accounts 202355

Role of the Board
The Board meets regularly as part of the process of continuing the restoration of the Company to long-term growth and
profitability. Directors are supplied with a comprehensive Board pack before all Board meetings, which includes the agenda,
previous minutes, detailed financial information, an Action List maintained by the Company Secretary and all other supporting
papers necessary to have a fully informed discussion. The Board ensures that the necessary decisions are being implemented
and the necessary investment is being made to achieve DX’s strategic priorities.

A full copy of the schedule of matters reserved for the Board is available on dxdelivery.com, under Investors/About DX under the
Publications tab.

Day-to-day operational and financial management is delegated to DX’s Operating Boards. The Operating Boards meet on a
divisional basis in order to ensure a greater involvement of senior management in both divisions, whilst ensuring that each
division is kept up to date on the activities of, and issues facing, the other division by the sharing of minutes and formal and
informal discussions between the Managing Directors of both divisions. The Operating Boards meet monthly and both divisions
and key functions provide the Board with detailed monthly reports.

Operation of the Board
There were a number of changes to the Board’s composition during the year. The Board meets regularly and there were nine
scheduled Board meetings during the financial year. Any specific actions arising during meetings, as agreed by the Board, are
followed up and reviewed at subsequent Board meetings to ensure their completion. The Board also keeps in close contact
between formal meetings and will conduct ad hoc meetings as required. If a Director is unable to attend a Board meeting, the
Chairman will canvass his views in advance and ensure that the Director is promptly advised of the outcome of the matters under
discussion.

Board

Audit & Risk Committee Remuneration Committee

Nomination Committee

Number of meetings

Attendance:
Lloyd Dunn1
Ronald Series2
David Mulligan
Paul Ibbetson3
Mark Hammond4
Jon Kempster5
Mike Russell5
Russell Black6
Liad Meidar7

0/0
2/2
9/9
5/5
7/7
9/9
7/9
1/1
1/1

–
1/1
–
–
–
9/9
8/9
1/1
0/1

–
–
–
–
–
9/9
9/9
1/1
–

–
–
–
–
–
3/3
3/3
–
–

Lloyd Dunn resigned from the Board on 6 September 2022.

1
2 Ron Series was Non-executive Chairman from the start of the year until 6 September 2022, and Executive Chairman from 6 September 2022 until 14 November 2022,

when he retired from the Board.

Each Director receives induction training on appointment, including visits to principal sites and meetings with operational
management, and all Directors have access to independent legal advice on request.

All Directors act in what they consider in good faith to be the best interests of the Company, consistent with their statutory
duties, notably s172 of the Companies Act.

The business at each scheduled Board meeting includes regular reports from the Chief Executive Officer and the Chief Financial
Officer covering business performance, markets and competition, health and safety, and investor and analyst updates, as well
as progress against strategic objectives and capital expenditure projects. The Board also considers reports and in-person
presentations from functional heads from across the business. Board meetings were held at different Group locations in order
to review local operations.

Board Committees
The Board has delegated certain responsibilities to the Nomination Committee, the Audit & Risk Committee and the
Remuneration Committee. Each Committee operates according to its own terms of reference (available at dxdelivery.com
under Investors/About DX under the Publications tab).

Strategic ReportGovernance ReportFinancial Statements56

Governance Report continued

Audit & Risk Committee
The current members of the Audit & Risk Committee are Jon Kempster (Chairman), Mike Russell and Alison O’Connor.
The Audit & Risk Committee has primary responsibility for monitoring the quality of internal controls, ensuring that the
financial performance of DX is properly measured, ensuring the integrity of the financial statements, reporting and reviewing
reports from DX’s internal auditor relating to accounting and internal controls, and monitoring the quality and independence
of the external audit, in all cases having due regard to the interests of shareholders. Further information on the Committee
is set out in the relevant report on pages 57 to 58.

Remuneration Committee
The current members of the Remuneration Committee are Mike Russell (Chairman), Jon Kempster and Alison O’Connor.
The Remuneration Committee determines remuneration for the Executive Directors and senior managers in the Group.
Further information on the work of the Committee is set out in the Directors’ Remuneration Report on pages 59 to 61.

Nomination Committee
The current members of the Nomination Committee are Mike Russell (Chairman), Jon Kempster and Alison O’Connor.
The Nomination Committee recommends the appointment of Directors and is responsible for succession planning.
During this financial year the Nomination Committee met as a full Board on each occasion to consider and approve the
appointments of the new Chairman, new Chief Executive Officer, and to consider the nomination of a third Non-executive
Director. The third Non-executive Director, Alison O’Connor, was appointed on 2 October 2023.

Investor Relations
DX places a great deal of importance on communication with all shareholders. There is regular dialogue with institutional
shareholders throughout the year and formal presentations after the interim and preliminary results. During the year to 1 July
2023, and following restoration of the Company’s shares, presentations were made to institutional investors in relation to the
Group’s growth plans, progress against its strategic goals, and operational and financial performance.

The Board encourages dialogue between the Directors and investors, and the Directors are available at each Annual General
Meeting (“AGM”) to hear the views of all shareholders and to answer any questions about the business generally and about
the resolutions proposed.

The principal methods of communication with private investors remain the Annual Report and Accounts, the interim statements
and DX’s website (www.dxdelivery.com). The website includes a DX Investor Centre that is viewed as an efficient and cost-
effective way to communicate widely with all shareholders, and DX’s financial reports, publications and press releases can be
viewed here together with corporate governance information, key dates in the financial year, and news about DX, its services
and issues affecting the industry.

The Board also received shareholder feedback during the course of the year from finnCap (DX’s Nominated Adviser up to 12 May
2023 and Joint Broker) and from Liberum (DX’s Nominated Adviser from 12 May 2023 and Joint Broker).

Culture
Critical to delivery of growth of the business is ensuring we have the right culture in the business. At the heart of the plan is local
responsibility and accountability for the performance of each depot, and a commitment to deliver the changes to the business
to return it to longer-term, sustainable profitability. We are also committed to the highest standards of corporate and individual
conduct. The Board and senior management help to support and reinforce this culture through their own personal behaviour
and commitment, by being highly visible in the business, by making timely and informed decisions and by adopting an attitude
of continuous improvement.

Strategy
A description of the Group’s strategy can be found in the section on Strategic Objectives on pages 14 to 15. An overview of the
business model for DX Freight and DX Express is on pages 12 to 13.

DX (Group) plc Annual Report and Accounts 2023Audit & Risk Committee Report

Dear Shareholder,

This report gives an overview of how the Audit & Risk Committee (“ARCo”)
functioned in the period from the last Annual Report in November 2022, an
insight into the Committee’s activities since then, and its role in ensuring the
integrity of the Group’s published financial information, and ensuring the
effectiveness of its risk management, controls and related processes.

Corporate Governance Matter
The Inquiry and Investigation into the corporate governance matter was
completed and the conclusions were reported on 20 September 2022. The
matter was reported on in detail in last year’s Annual Report. At that time the
Board committed to a number of key initiatives to ensure that all appropriate
improvements to its processes were made, not least so that any future internal
investigations are completed in full and to appropriate timescales.

I am pleased to report that those key initiatives have been completed.
A comprehensive set of revised compliance policies and procedures are now
in place that reflect current best practice and mandatory training materials
have been issued and implemented across the Group to all employees. We are
able to monitor the uptake of this training through our Learning Management
System. The Group’s approach to fraud risk assessment and awareness has
been strengthened and the annual refresh of this assessment is due to be
completed in the coming quarter.

It is great that the Executive Management Team, headed by newly promoted
Paul Ibbetson alongside David Mulligan, have embraced the desire to promote
best working practices at every opportunity and to personally endorse the
recommendations that arose from the Inquiry.

The final action outstanding was the appointment of a third independent
Non-executive Director. The recruitment process has completed and we
announced the appointment of Alison O’Connor on 2 October 2023.

Committee Structure
The membership of the Committee is three independent Non-executive
Directors. From 3 July to 12 July 2022 the Committee comprised Ronald Series
as Chairman, Liad Meidar and Russell Black. From 12 July 2022 to 1 October 2022
the Committee comprised Jon Kempster as the Chairman and Mike Russell as
its other member. Alison O’Connor joined the committee on 2 October 2023.
The Committee members have been appointed with the aim of providing
the range of financial and commercial expertise necessary to meet its
responsibilities. The Board is confident that the collective experience of
the Audit & Risk Committee members enables them to function as an
effective Committee.

Meetings
The Committee had ten meetings during the year. The attendance by members
is on page 55. I report to the Board, as a separate agenda item, on the activity
of the Committee and matters of relevance and the Board receives copies of
the Committee minutes. Attendance at meetings of the Committee by non-
members is by invitation and at the discretion of the Committee. The Chairman,
Chief Executive Officer and Chief Financial Officer, regularly attend the
meetings, while the Director of Security, Risk & Audit, the internal audit team,
Head of Health & Safety, IT Director, and Fleet Compliance Director are invited
to attend some meetings of the Committee. There is a standing invite to the
external auditor to attend all meetings.

Roles and Responsibilities
The main duties of the Audit & Risk Committee are reviewed annually and are
set out in its terms of reference, which are available under the Publications tab
at dxdelivery.com under Investors/About DX.

“A comprehensive
set of revised
compliance policies
and procedures are
now in place that reflect
current best practice.”

Strategic ReportGovernance ReportFinancial Statements58

Audit & Risk Committee Report continued

During the financial year, Committee discussions included the following key items:

> Monitoring completion of key initiatives following conclusion of the corporate governance matter;

> Committee governance;

> Review of 2022 Annual Report;

> External audit plan and strategy for 2023 Annual Report;

> An update of the compliance policies and procedures, including Anti-Fraud, Anti-Bribery & Corruption, Conflicts of Interest,

Whistleblowing, Code of Conduct, Gifts & Hospitality, and the Fraud Response Plan;

> Modern Slavery Policy and statement;

> Review of the Group risk register;

> Cyber security and the Information Security Management System;

> Health and safety; and

> Fleet risk, maintaining a modern fleet of vehicles and the O licences to operate.

Areas of focus
During the year ended 1 July 2023, the Committee focused on the following areas:

> Addressing the key actions following the corporate governance matter;

> Risk management and assurance;

> Cyber security; and

> Assessing the continued independence of the external auditors.

Security, Risk & Audit
The Group’s internal audit function is overseen by the Director of Security, Risk & Audit and ordinarily reports independently
three times a year to the Committee. In the 2023 financial year, this level of reporting was as expected as the membership
of the Committee was more settled.

Whistleblowing
The Group’s Whistleblowing Policy & Procedure was updated during the year and encourages and protects legitimate
whistleblowing. An independent third-party whistleblowing helpline number, secure web portal and mobile app allows
employees to report concerns about improper conduct. All contacts are treated confidentially and anonymously if preferred.
All whistleblowing is reported to the Chairman of the Audit & Risk Committee and a small number of matters were considered
by the Committee, none of which needed any external legal advice.

Non-Audit Services
PKF Littlejohn LLP has not undertaken any non-audit services for the Company or its subsidiaries.

KPMG LLP are retained as the Company’s tax advisers.

External Auditor
To ensure the auditor’s independence and objectivity, the Committee annually reviews DX’s relationship with the auditor.
Following the review in 2023, DX concluded that it has an objective and professional relationship with PKF Littlejohn LLP and
that there are sufficient controls and processes in place to ensure the required level of independence. In addition, the auditor
is required to review and confirm its independence to the Audit & Risk Committee on a regular basis.

Given the situation outlined above the Committee is recommending PKF Littlejohn LLP’s reappointment as DX’s auditor.

Audit Process
PKF Littlejohn LLP prepares an audit plan which sets out the scope of and approach to the audit, significant risks and other areas
to be targeted. This plan is reviewed and agreed in advance by the Audit & Risk Committee. Following its review, the auditor
presents its findings to the Audit & Risk Committee for discussion.

Committee effectiveness
The members of the Committee receive regular opportunities for training to ensure their knowledge is both current and best
practice. This enables the Committee to meet its objectives and responsibilities. Each year the Committee undertakes a review
of the annual work plan and procedures with the Company Secretary.

Jon Kempster
Chairman of the Audit & Risk Committee

DX (Group) plc Annual Report and Accounts 2023Directors’ Remuneration Report
(including the Remuneration Committee Report)

Dear Shareholder,

Chairman’s Annual Statement
Although there have been changes within the Board over the past year, DX’s
approach to remuneration remains consistent and seeks to align the interests
of the Executive Directors with the shareholders. Our approach is to attract,
develop and retain the best possible people who have the capacity and drive
to meet the Company’s strategic and financial objectives. To attract and retain
the Executive Directors, we offer them base salaries that are fair, reasonable
and affordable for the Company. They are incentivised to deliver growth of
the business through a discretionary annual bonus scheme, which rewards the
Executive Directors based on achieving an annual financial target as well as
certain qualitative measures, and through longer-term incentives under the
Performance Share Plan which was introduced in December 2017 to create
and protect long-term shareholder value.

The main change within the Executive Management Team during the 2023
financial year was the appointment of Paul Ibbetson as the Chief Executive
Officer on 31 January 2023 following the resignation of Lloyd Dunn on
6 September 2022. During the period between Lloyd’s resignation and
Paul’s appointment, our Company Chairman (firstly Ron Series and then
Mark Hammond) served as Executive Chairman on an interim basis.

Report from the Remuneration Committee
The Board has delegated certain responsibilities for Executive Directors’
remuneration to the Remuneration Committee. This report is written with the
intention of meeting the disclosure recommendations of the QCA Code and is
not intended to comply with the requirements of Schedule 8 of the Statutory
Instrument 2008/410.

For the period from the start of the financial year to 12 July 2022, the
Committee was chaired by Russell Black, with Ronald Series and Liad Meidar
as its other members. Since 12 July 2022 to the date of this report, the
Remuneration Committee has been chaired by Mike Russell, with Jon Kempster,
Russell Black (up until his leaving the Board on 19 October 2022) and Alison
O’Connor (from 2 October 2023) being its other members. Any other
attendees are at the invitation of the Committee Chairman only and may
include the Company Chairman, the Chief Executive Officer, and the
Chief Financial Officer. The Remuneration Committee meets according
to DX’s requirements. There were nine meetings held in the financial year.
The Remuneration Committee determines the remuneration packages for the
Chairman, the Executive Directors, and senior managers, and also any major
remuneration plans or policies for the Group. This includes implementation of
the Group’s share incentive plans. The Committee’s role is to ensure that the
principles of the Company’s Remuneration Policy are aligned with the business
strategy and promote long-term shareholder value.

The Committee’s terms of reference are reviewed each year. Full terms
of reference for the Committee are published and are available on
investors.dxdelivery.com under About DX/Publications.

The Committee also receives advice and assistance, when required, from FIT
Remuneration Consultants LLP, its external remuneration adviser.

The main items of business considered by the Remuneration Committee during
the financial year included:

> Remuneration packages for the newly-appointed Chairman and Chief

Executive Officer;

> Exercise and settlement of share options under the Performance Share Plan

2017 (“PSP”);

> Awards to Executive Directors and senior managers under the PSP; and

> Salary and annual bonus for Executive Directors and other senior managers.

“DX’s approach seeks
to align the interests
of the Executive
Directors with
the shareholders.”

Strategic ReportGovernance ReportFinancial Statements60

Directors’ Remuneration Report continued
(including the Remuneration Committee Report)

Executive Directors’ Service Contracts and Termination Policy
Executive Directors hold a service agreement with an indefinite term and a fixed maximum termination period of 12 months for
the Chief Executive Officer and six months for the Chief Financial Officer. The Company’s policy on the setting of notice periods
under the Executive Directors’ service agreements is in line with external market trends and is reviewed by role to protect the
Company’s knowledge and operations.

The base salaries for the Executive Directors were reviewed during the year and given the overall growth and performance
of the business it was decided that from 1 September 2023 the Chief Financial Officer’s base salary will increase from £247,500
to £260,000. This represents a 5% increase and is in line with the range of increases for employees for financial year 2024.

From 31 January 2023, the Chief Executive Officer’s base salary was £290,000 and it has been agreed that this will be increased
on the anniversary of his appointment to £305,000. The Company intends to align the salary review dates to September each
year from 2024.

The base annual salaries for the Executive Directors for the 52 weeks to 29 June 2024 will be as follows (representing anticipated
increases during the year as explained above):

Paul Ibbetson (Chief Executive Officer)

David Mulligan (Chief Financial Officer)

2024
£000

296

257

2023
£000

290

246

%
Change

The Chief Executive Officer and Chief Financial Officer are eligible to participate in a discretionary annual bonus scheme, should
one be put in place for any given year, with the potential to receive bonus payments of up to a maximum of 100% of salary in the
case of the Chief Executive Officer and 50% of salary for the Chief Financial Officer. Any bonus payments are at the discretion
of the Board and subject to such conditions, including profit and key performance indicator (“KPI”) targets, as the Board may
determine.

Company Chairman and Non-executive Directors
Non-executive Directors have letters of appointment, each with a term of three years (subject to re-election at the AGM) and a
notice period of three months. Following their appointment on 12 July 2022, Jon Kempster received total fees of £50,000 per
annum, £44,000 as a base fee and an additional £6,000 as Chairman of the Audit & Risk Committee; Mike Russell also received
total fees of £50,000 per annum, £44,000 as a base fee and an additional £6,000 for chairing the Remuneration Committee.
The base fees for the Non-executive Directors were reviewed during the year and it was decided that from 1 September 2023
the base fees will increase from £44,000 to £46,000 per annum.

The Company Chairman has a notice period of six months. Mark Hammond received £300,000 per annum from his appointment
as Executive Chairman on 15 November 2022. On the appointment of a new Chief Executive Officer, he reverted to a non-
executive position as Chairman and his annual fee was adjusted to £120,000 per annum from 1 February 2023.

The annual fees for the Non-executive Directors for the 52 weeks to 29 June 2024 will be as follows (representing anticipated
increases during the year as explained above):

Mark Hammond (Chairman)1
Jon Kempster
Mike Russell

2024
£000

120
52
52

2023
£000

120
49
49

%
change

n/a
4
4

1 Mark Hammond was an Executive Director from 15 November 2022 until 31 January 2023 after which he reverted to Non-executive Chairman.

Pay for all other employees is based upon external market rates, job role, internal comparators and business impact. Both DX’s
financial and operational performance and each person’s personal performance are also taken into account when setting salaries.

DX (Group) plc Annual Report and Accounts 202361

Directors’ Interests in Shares
The Directors who held office at 1 July 2023, including Persons Closely Associated (“PCA”), had the following interests in the
shares of the Company:

Mark Hammond
Paul Ibbetson
David Mulligan

Total shares
owned plus
vested
options

700,000
3,826,041
4,251,873

Ordinary
Shares
owned
outright

700,000
3,826,041
4,251,873

% of issued
share capital

Vested but not
exercised

Unvested but
subject to
performance

Unvested and
not subject to
performance

0.12
0.63
0.70

–
–
–

–
6,447,385
3,223,692

36,976
71,832
71,832

Options

Paul Ibbetson
On 15 November 2022 Paul Ibbetson exercised 6,649,754 share options at an exercise price of 1.0p under the PSP. The Company
elected to reduce the number of Ordinary Shares to be issued in respect of the exercise equal to the tax liability that arises in
connection with the exercise, known as net settlement. Accordingly, Paul received 3,398,499 Ordinary Shares and a cash amount
to settle the tax liability.

On 4 January 2023 Paul Ibbetson exercised 346,429 share options at an exercise price of 1.0p under the PSP. The Company
elected to cash settle all the options and accordingly Paul received an amount totalling £91,804. On the same day Paul, in respect
of tax planning, sold a total of 61,500 Ordinary Shares of 1.0p each at an average price of 28.225p per Ordinary Share.

David Mulligan
On 28 November 2022, David Mulligan exercised 3,324,877 share options at an exercise price of 1.0p under the PSP. The
Company elected to net settle the options. Accordingly, David received 1,694,407 Ordinary Shares and a cash amount to settle
the tax liability.

On 4 January 2023, David exercised 173,215 share options at an exercise price of 1.0p under the PSP. The Company elected
to net settle the options. Accordingly, David received 88,525 ordinary shares and a cash amount to settle the tax liability.

Total Single Figure of Remuneration for Directors
The table below sets out a single figure for the total remuneration received by each Director for the year ended 1 July 2023 and
the prior year.

Year ended 1 July 2023

Year ended
2 July 2022

Basic salary
and fees
£000

Allowances
£000

Benefits
£000

Bonus
£000

Lloyd Dunn1

Ronald Series2

David Mulligan

Paul Ibbetson3

Mark Hammond4

Jon Kempster5

Mike Russell5

Russell Black6

Liad Meidar7

Paul Goodson8

Ian Gray8

Total

246

121

120

–

750

–

Compensation
for loss
of office
£000

387

150

–

Vested
awards
under
PSP

£000

355

191

–

Total
£000

806

421

399

357

120

–

Total
£000

442

113

321

–

120

–

210

548

687

2,240

1,056

Lloyd Dunn resigned from the Board on 6 September 2022.

1
2 Ron Series was Non-executive Chairman from the start of the year until 6 September 2022, and Executive Chairman from 6 September 2022 until 14 November 2022,

when he retired from the Board.

3 Paul Ibbetson joined the Board on 31 January 2023.
4 Mark Hammond joined the Board on 15 November 2022.
5 Jon Kempster and Mike Russell both joined the Board on 12 July 2022.
6 Russell Black left the Board on 19 October 2022.
7 Liad Meidar was appointed to the Board on 13 December 2021. He resigned from the Board on 19 October 2022.
8 Paul Goodson and Ian Gray resigned from the Board on 1 February 2022.

Strategic ReportGovernance ReportFinancial Statements62

Directors’ Remuneration Report continued
(including the Remuneration Committee Report)

Allowances comprise a car allowance for Lloyd Dunn and David Mulligan. For Paul Ibbetson they comprise a car allowance,
car benefit and a pension contribution.

Bonus targets in the 2023 financial year relating to profits from operating activities and qualitative measures were attained
at levels leading to a bonus payable to Paul Ibbetson of £120,000 and to David Mulligan of £90,000.

The amount included for vested awards under the PSP are for those awards that vested on 21 December 2022 (after the
12-month holding period following the second testing date on 21 December 2021). As described overleaf, this was an incremental
vesting of 3.0% of Recovery Awards held. On the date of vesting the PSP awards were valued at 27p per award, which was the
closing share price on that day less the 1p option price. There are no amounts included within the prior year comparative for
vesting of awards under the PSP.

In the prior year, Ian Gray and Paul Goodson received fees of £30,000 and £21,000 respectively over and above their normal fees
for the additional work they undertook on the corporate governance Investigation and Inquiry.

Executive Directors’ External Appointments
No Executive Director has an external appointment.

Relative Importance of Spend on Pay
The following table shows the Company’s actual spend on pay (for all employees) relative to dividends and retained profit.

Staff costs
Dividends
Profit before tax

2023
£m

£141.0
£9.0
£25.4

2022
£m

£125.0
£nil
£17.4

Change
£m

£16.0
£9.0
£8.0

Share Plans
Performance Share Plan 2017 (“PSP”)
The PSP has been designed to provide an appropriate incentive for the management team at DX to deliver a financial turnaround
of the Company. The initial awards (“Recovery Awards”) were made during the year to 30 June 2018. The PSP is established as a
share plan under which awards of shares, the vesting of which is subject to performance conditions, can be made to selected
employees of the Company, including the Executive Directors.

PSP Performance Conditions
Recovery Awards are subject to a Share Price performance measure as follows, with the targets being measured on testing dates
at each of 3, 4, 5 and 6 years after the awards were granted on 21 December 2017 (following the Amendments to the PSP in 2023
described below):

3-4-5-6 Year Share Price target

% of Recovery Award that vests

Less than 12.5p

12.5p

Between 12.5p and 40p

40p

25%

Pro-rata on straight-line basis between 25% and 100%

100%

Awards for which the Share Price target is attained at any test date will vest 12 months later (being the fourth, fifth, sixth and
seventh anniversaries of the award date) provided that the participant is still a Director or employee of the Group at that time.
Share Price is measured as a 30-day average prior to the relevant testing date.

A summary of the average share price for Recovery Awards achieved on each testing date so far is shown below.

Testing date

First – 21 December 2020

Second – 21 December 2021

Third – 21 December 2022

Average
share
price

% of Recovery
Award that
vested/will
vest

24.6

25.8

26.8

58.1

3.0

2.9

DX (Group) plc Annual Report and Accounts 202363

Amendments to the PSP in 2021: extended retention period to December 2025
During the year ended 3 July 2021, following consultation with the Company’s major shareholders, the PSP was amended with
the aim of retaining the participants in the plan for a further four years from the first vesting date of December 2021 by amending
the PSP agreement so as to introduce a further three-year period of retention (the “Retention Period”) for each tranche of
Recovery Awards following their anticipated vesting in December 2021 and December 2022. In consideration of this Retention
Period, the Company will pay the Employers’ National Insurance Contribution (“NIC”) liability for a share price up to 40p and not
seek reimbursement as permitted under the previous arrangements. The maximum amount payable by the Company pursuant to
this Amendment is approximately £5.4 million. Should a participant leave within the Retention Period, the NIC paid by the
Company will be clawed back from the participant.

For any gain above 40p, the participants will bear the obligation for the payment of NICs when the awards are exercised.

The Company also confirmed that as and when it introduces a regular long-term incentive plan (“LTIP”), participants in the PSP
will not benefit from the vesting of any LTIP awards until after the expiry of the Retention Period.

Amendments to the PSP in 2023: further testing date December 2023
During the last financial year, following consultation with the Company’s major shareholders, an amendment was made to the
performance condition of the PSP, which introduced a further testing date of 21 December 2023, with the objective of retaining
and fairly rewarding the 36 participants in the PSP for a further year. The original third and final testing date for the PSP was on
21 December 2022 and the amendment therefore extends the performance condition and adds a further measurement date
on 21 December 2023. Considering the close proximity of the date of restoration of the Company’s Ordinary Shares to trading
on AIM on 19 October 2022 and the third testing date for the PSP under the plan on 21 December 2022, the amendment created
additional time for the continued strong trading by the Group and its positive outlook to be recognised in a fair market price.
The amendment also provided the further benefit of enabling DX to defer the implementation of a replacement LTIP for a year
and will help to retain and motivate the senior managers in the PSP.

2023 further recovery awards
On 3 March 2023 the Company granted additional Recovery Awards under the PSP to 28 existing participants and to 18 new
participants together totalling 14,599,937 options over Ordinary Shares. These awards included a grant of 1,000,000 options
over Ordinary Shares to David Mulligan, Chief Financial Officer. These Recovery Awards have an exercise price of 1.0p per
Ordinary Share and are subject to continued employment and share price targets. In a modification of the performance condition
to existing awards, the threshold share price vesting target was set at 30p per Ordinary Share with the target for maximum
vesting of 40p per Ordinary Share.

On 5 April 2023, Paul Ibbetson, Chief Executive Officer received an additional Recovery Award of 2,000,000 options over
Ordinary Shares of 1.0p each in the Company granted under the PSP with the same performance condition as outlined
in the preceding paragraph.

PSP – additional terms
PSP awards are made in one of two forms: a nominal cost option, where a participant can decide when to exercise his/her
award over Ordinary Shares in the Company during a limited period of time after it has vested; or a conditional award, where
a participant will receive shares on the vesting of their award. No awards will be granted after the tenth anniversary of the
15 December 2017 General Meeting.

An award in the form of an option will normally remain exercisable until the tenth anniversary of the date of grant. All dealings
in shares to be acquired from the PSP shall only be by arrangement with the Company’s nominated broker. An award will lapse
upon a participant leaving the employment of the Group, subject to normal good leaver provisions. In the event of a change of
control of the Company, all awards may vest early to the extent that the performance conditions have, in the opinion of the
Remuneration Committee, been satisfied at that time.

The Company retains a power to reduce the potential vesting of unvested awards (including to zero) (often referred to as
“malus”) or to recoup the value of previously vested awards from a participant within three years of the date of vesting if it
considers it appropriate to do so (often referred to as “clawback”).

The total number of shares over which all awards are granted will not exceed 15% of the issued share capital of the Company
from time to time (and as further diluted by the awards under the PSP).

Restricted share awards
Restricted Share Awards made to Russell Black and Paul Goodson on 21 December 2017 vested on 21 December 2020 and
were exercisable from that date. Russell Black and Paul Goodson exercised their Restricted Share Awards on 15 November 2022.
The awards counted towards the overall 15% of issued share capital from time to time available for such awards under the PSP.
No Restricted Share Awards remained outstanding as at 1 July 2023.

Strategic ReportGovernance ReportFinancial Statements64

Directors’ Remuneration Report continued
(including the Remuneration Committee Report)

PSP share awards
At 1 July 2023, the vested awards to Directors but not yet exercised under the PSP were as follows:

PSP Awards

Paul Ibbetson
David Mulligan

Number of
awards vested
at 2 July 2022

6,649,754
3,324,877

Number of
awards vested
during

the year

Number of
awards
exercised
during the
year

Number of
awards vested
at 1 July 2023

346,429
173,215

(6,996,183)
(3,498,042)

–
–

The details of the awards exercised during the year are shown above under the Directors’ Interests in Shares section of this
report. On the date of vesting of the PSP awards their value was 27p per award, which was the share price on that day less the
1.0p option price.

PSP awards outstanding
At 1 July 2023, outstanding awards to Directors under the PSP were as follows:

PSP Awards

Paul Ibbetson
David Mulligan

Outstanding at
2 July 2022

Number of
awards vested

New awards
during the
year

Outstanding at
1 July 2023

4,793,871
2,396,907

(346,429)
(173,215)

2,000,000
1,000,000

6,447,442
3,223,692

The details of the new awards made during the year and their performance conditions are shown under the Performance Share
Plan 2017 section of this report.

Save As You Earn (“SAYE”)
On 28 January 2021 the Group launched an all-employee SAYE scheme to encourage share ownership amongst employees.
The option price was set at 25.82p.

On 7 March 2023 the Group launched a further SAYE scheme to all eligible employees. The option price was set at 24.34p and
the number of shares subject to option that were issued was 5,235,563.

At 1 July 2023, outstanding awards to Directors under the SAYE scheme were as follows:

SAYE awards

Mark Hammond
Paul Ibbetson
David Mulligan

2021 scheme

2023 scheme

Total
outstanding at
1 July 2023

–
34,856
34,856

36,976
36,976
36,976

36,976
71,832
71,832

See note 30 to the Financial Statements for details of the total number of outstanding awards under the schemes.

Mike Russell
Chairman of the Remuneration Committee

DX (Group) plc Annual Report and Accounts 202365

Directors’ Report

The names and biographical details of the Directors currently serving on the Board are set out on pages 52 to 53.

The Directors who served during the year were as follows:

> Ronald Series (resigned 14 November 2022)

> Lloyd Dunn (resigned 6 September 2022)

> David Mulligan

> Russell Black (left the Board 19 October 2022)

> Liad Meidar (resigned 19 October 2022)

> Mike Russell (appointed 12 July 2022)

> Jon Kempster (appointed 12 July 2022)

> Mark Hammond (appointed 15 November 2022)

> Paul Ibbetson (appointed 31 January 2023)

The Company’s approach to the appointment and replacement of Directors is governed by its Articles and all relevant legislation,
and takes into consideration any recommendations of the QCA Code.

The Company’s Articles require that all Directors should be subject to election by shareholders at the first AGM following their
appointment and that one-third of the Directors (or the number nearest to but not less than one-third) retire by rotation at each
AGM, with each Director also being subject to re-election at intervals of not more than three years. The Board has the power to
appoint additional Directors or to fill a casual vacancy amongst the Directors. Any Director so appointed by the Board holds office
only until the next AGM and may then offer himself/herself for election by the shareholders. Mike Russell and Jon Kempster will
retire by rotation and offer themselves for re-election at the 2023 AGM.

The powers of the Directors are determined by the Articles, the Companies Act 2006 and other relevant legislation. At the 2022
AGM, the Directors were authorised to issue and allot shares, to disapply the statutory pre-emption rights and to buy back shares.
This authority remains in place until the conclusion of the 2023 AGM. It will be proposed at the 2023 AGM that the Directors will
be granted a new authority to allot shares, to disapply pre-emption rights and to buy back shares. The Company may by ordinary
resolution declare dividends not exceeding the amount recommended by the Board.

Results and Dividends
The results for the year ended 1 July 2023 are shown on page 74. The Group’s profit for the year after tax was £22.8 million (2022:
£14.0 million). The Board recommenced dividend payments during the financial year, with the payment of an interim dividend of
0.5p per share on 31 March 2023. A final dividend is proposed of 1.0p per share (2022: nil). This takes the total dividend for the
year to 1.5p per share in line with expectations (2022: nil). The final dividend will be paid on 7 December 2023 to shareholders on
the register on 17 November 2023, subject to shareholder approval at the forthcoming AGM on 23 November 2023.

Principal Activities, Risks and Review of the Business
The Group’s continuing activities are the provision of a wide range of specialist delivery services to both business and residential
addresses across the UK and Ireland. The Group operates through two divisions, DX Freight and DX Express. The principal activity
of the Company is that of a holding company.

The Strategic Report set out on pages 1 to 48 provides a fair review of the Group’s business for the year ended 1 July 2023. It also
explains the Group’s customer proposition, the business model and the strategic objectives of the Group, its progress against
those objectives, its competition and the markets in which it operates, the approach to ESG matters, the principal risks and
uncertainties it faces, the Group’s financial position, KPIs and likely future developments of the business.

The Group’s activities expose it to a variety of financial risks. Notes 3 and 29 to the Financial Statements describe the Group’s
exposure to such risks, including the policies in place for financial risk management.

Going Concern
The Group has prepared trading and cash flow forecasts for a period of two years, which have been reviewed and approved by
the Board. The forecasts included a base case and a reverse stress test scenario. Further details on these forecasts can be found
in note 2 to the Financial Statements.

The Group also has in place a £20.0 million invoice discounting facility provided by Barclays Bank plc, which was not drawn at the
year end. This facility was renewed during the financial year. As at the date of this report, the invoice discounting facility remains
undrawn. Interest is charged at Bank of England Base Rate plus 1.95%.

On the basis of these forecasts and the invoice discounting facility, and after a detailed review of trading, financial position,
assessing the impact of any potential material disruption to the business and cash flow models, the Directors have a reasonable
expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future.
For these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Strategic ReportGovernance ReportFinancial Statements66

Directors’ Report continued

Corporate Governance
The Board is fully committed to high standards of corporate governance. Details relating to the Company’s compliance
with the QCA Code for the financial year and a description of the Company’s management and reporting structure are
given in the Governance Report pages 57 to 58 and Directors’ Remuneration Report on page 59.

Anti-bribery and Corruption
DX does not tolerate bribery or corruption, and has a written Anti-Bribery & Corruption Policy in place. Our policy was revised
and updated during the year and the Gifts & Hospitality Procedure was also revised. Training is provided to set the clear
expectation that employees must act professionally and with integrity in all business dealings and they are required to complete
the gift register.

During the 2023 financial year the Group strengthened its compliance policies and procedures following the corporate
governance matter, which was addressed in the previous financial year. The Board engaged with a ‘Big Four’ professional
services firm to assist with the review and improvement of the Company’s compliance policies and procedures and to develop
training material. This training material has now been rolled out across the Group and will be refreshed on an annual basis.
This was to ensure that the Company’s compliance framework reflected current best practice and that it is well understood
by management and employees.

Whistleblowing
DX has a written Whistleblowing Policy & Procedure which encourages employees, contractors and suppliers to report any
concerns they may have that the practices of DX or individuals are wrongful or contravene any applicable laws or regulations.
This approach is supported by an externally-managed confidential whistleblowing phone line and email/online channels,
with reports sent to the Chairman of the Audit & Risk Committee, to ensure an open and ethical culture for the benefit of
our employees, customers and other stakeholders.

Modern Slavery
DX’s Modern Slavery Statement for the current financial year can be found on www.dxdelivery.com. DX also has in place a
Supplier Code of Conduct requiring all suppliers and business partners to adhere to the Modern Slavery Act 2015 and to conduct
business in accordance with the standards of conduct acceptable to DX.

Environment, Social and Governance (“ESG”)
Information on ESG matters is set out on pages 24 to 33. Other matters covered under ESG include disclosures on
DX’s environmental policies (including details of the Group’s greenhouse gas emissions as required to be disclosed under
the Companies Act 2006 and the new Streamlined Energy and Carbon Reporting (“SECR”) requirements) and under Social,
policies and approaches on how we keep our employees safe and how we seek to recruit, retain, reward and incentivise them.
Further details can also be found on the DX website, www.dxdelivery.com.

Disabled Employees
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the
Group continues, and that adjustments or training are provided as appropriate. It is the policy of the Group that the training,
career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Notifiable Interests
The Company has been notified of direct and indirect interests in voting rights equal to or exceeding 3% of the Ordinary Share
capital of the Company as set out in the table below.

Shareholder

Gatemore Capital Management LLP
Hargreave Hale Limited
Lloyd Dunn
Lombard Odier Investment Managers
Schroder Investment Management
Stancroft Trust

Per shareholder register as at 28 September 2023.

28 September 2023

Percentage
holding

Number of
shares

18.97% 114,753,538
14.88% 90,000,000
76,361,454
12.62%
55,817,908
9.23%
3.31% 20,000,000
3.06% 18,500,000

DX (Group) plc Annual Report and Accounts 202367

Share Capital
Details of the Company’s share capital are set out in note 20 to the Financial Statements. As at the date of this report the
Company’s issued share capital consists of 604,900,491 Ordinary Shares with a nominal value of £0.01 each. All shares rank equally
and are fully paid. No person holds shares carrying special rights with regard to the control of the Company. Each share carries the
right to one vote at general meetings of the Company and no right to fixed income. The Company has no treasury shares.

Directors’ Interests
The number of Ordinary Shares of the Company in which the Directors are beneficially interested and their dealings in the shares
of the Company during the financial year are set out in the Directors’ Remuneration Report on page 61.

Director Indemnities and Insurance
In accordance with the Companies Act 2006 and the Company’s Articles, the Company has purchased Directors’ and Officers’
liability insurance, which remains in place at the date of this report. The Company reviews its insurance policies on an annual basis
in order to satisfy itself that its level of cover remains adequate.

Amendment to Company’s Articles
The Company may alter its Articles by special resolution passed at a general meeting.

Donations
A total of £nil of charitable donations were made in the year ended 1 July 2023 (2022: £nil).

No payments were made to any political parties (2022: £nil).

Disclosure of Information to Auditor
In the case of each person who was a Director of the Company at the time this Directors’ Report was approved confirm that,
so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director
has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and
to establish that the Company’s auditor is aware of that information.

Statement of Directors’ Responsibilities in Respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in
accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under
that law, the Directors have prepared the Group and parent Company financial statements in accordance with UK-adopted
international accounting standards. Under company law the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of affairs of the Group and the parent Company and of the profit or
loss of the Group and the parent Company for that period. In preparing these financial statements, the Directors are required to:

> Select suitable accounting policies and then apply them consistently;

> Make judgements and accounting estimates that are reasonable and prudent;

> State whether applicable UK-adopted international accounting standards have been followed, subject to any material

departures disclosed and explained in the financial statements; and

> Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the

parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and
parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent
Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and the parent Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Company is compliant
with AIM Rule 26 regarding the Company’s website. See dxdelivery.com, under Investors/AIM Rule 26.

By order of the Board

Mark Hammond
Non-executive Chairman
2 October 2023

Strategic ReportGovernance ReportFinancial Statements68

Financial
Statements

In this section

Financial Statements (68 to 104)

Independent Auditor’s Report

Consolidated Statement
of Comprehensive Income

Consolidated Statement
of Financial Position

Company Statement of Financial Position

Consolidated Statement
of Changes in Equity

Company Statement of Changes in Equity 78

Consolidated Statement of Cash Flows

Company Statement of Cash Flows

Notes to the Financial Statements

DX (Group) plc Annual Report and Accounts 202369

Independent Auditor’s Report
to the members of DX (Group) plc

Opinion
We have audited the financial statements of DX (Group) plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the
year ended 1 July 2023 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent
Company Statement of Financial Position, the Consolidated and Parent Company Statement of Changes in Equity, the
Consolidated and Parent Company Statement of Cash Flows and notes to the financial statements, including significant
accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-
adopted international accounting standards and as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.

In our opinion:

> the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 1 July

2023 and of the group’s profit for the year then ended;

> the group financial statements have been properly prepared in accordance with UK-adopted international accounting

standards;

> the parent company financial statements have been properly prepared in accordance with UK-adopted international

accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and

> the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent
company’s ability to continue to adopt the going concern basis of accounting included:

> obtaining the group cash flow forecast and assessing the reasonableness of underlying assumptions, including forecast levels
of expenditure and revenue used in preparing these forecasts. To assess the reasonableness and timings of the cash inflows
and outflows, we used our knowledge of the business and compared the forecasts to the directors’ approved budgets and
challenged the inputs used;

> assessing whether a liquidity shortfall arises at any point during management’s assessment;

> comparing forecast sales with recent historical financial information to consider accuracy of forecasting;

> verifying cash balances used in the forecast close to the date of sign off of these financial statements;

> performing sensitivity analysis thereon and evaluating potential mitigating factors that could be actioned by management;

and

> assessing the appropriateness of the going concern disclosures included in the financial statements against the requirements

of the relevant auditing standards.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s or parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.

Strategic ReportGovernance ReportFinancial Statements
70

Independent Auditor’s Report continued
to the members of DX (Group) plc

Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
At the planning stage materiality is used to determine the financial statement areas that are included within the scope of our audit.

Materiality for the group financial statements as a whole was £1,800,000 (FY22: £1,720,000) with performance materiality set
at £1,250,000 (FY22: £1,032,000), being 70% (FY22: 60%) of group materiality. We have chosen to apply 70% for the purposes
of the performance materiality calculation as this is our third third year as auditors and we have not identified any material errors
or adjustments in prior periods. Materiality for the financial statements as a whole was based upon 0.4% (FY22: 0.4%) of the
group’s revenues.

In determining the basis for materiality, we considered the Key Performance Indicators (“KPIs”) used in the Annual Report and
Accounts. We consider revenue to be the primary measure used by the shareholders in assessing the performance of the group
which drives profitability within the group and is expected to provide the most stable measure year on year. The percentage
applied to this benchmark has been selected to bring into scope all significant classes of transactions, account balances and
disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the reported
profit were appropriately considered.

We agreed with the Audit & Risk Committee that we would report all individual audit differences identified for the group during
the course of our audit in excess of £90,000 (FY22: £86,000) together with any other audit misstatements below that threshold
that we believe warrant reporting on qualitative grounds.

Materiality applied to the parent company’s financial statements was £520,000 (FY22: £340,000) with performance materiality
set at £364,000 (FY22: £200,000), being 70% (FY22: 60%) of the parent company’s materiality (same rationale as group above
with respect to percentage allocation).

The benchmark for materiality of the parent company was 1% (FY22: 0.7%) of the company’s gross assets. We consider gross
assets to be the primary measure used by the shareholders in assessing the performance of the parent company. The percentage
applied to this benchmark has been selected to bring into scope all significant classes of transactions, account balances and
disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the reported
profit were appropriately considered.

We agreed with the Audit & Risk Committee that we would report all individual audit differences identified for the parent
company during the course of our audit in excess of £26,000 (FY22: £17,000) together with any other audit misstatements
below that threshold that we believe warrant reporting on qualitative grounds.

Our approach to the audit
In designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at areas involving significant accounting estimates and judgements by the directors, such as assessment
of goodwill impairment, the valuation of the dilapidations provision, and the value of the deferred tax asset.

Of the group’s three components, including the parent company, two were subject to full scope audits for group purposes.
The component not subject to full scope audit was audited based on specified procedures. The parent company was audited
separately to the materiality level noted above. The work on the reporting components and the audit of the parent company
was performed by the group audit team.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

DX (Group) plc Annual Report and Accounts 2023
71

Key Audit Matter

Revenue Recognition

We identified recognition of revenue as one of the
most significant assessed risks of material misstatement
due to fraud.

Under International Standard on Auditing (UK) 240
‘The Auditor’s Responsibilities Relating to Fraud in an
Audit of Financial Statements’, there is a presumption
that there are risks of fraud in revenue recognition.

The group has a number of revenue streams which
include performance obligations recognised at both
a point in time and over time.

We assessed the risk of fraud to be greatest in the
final week of the year, where there is an increased risk
of manipulation of the timing or quantum of revenue.
This could lead to revenue being inappropriately
recognised in the year rather than being deferred.

There is also an associated risk relating
to the completeness of deferred revenue.

How our scope addressed this matter

Our audit work in this area included:

> updating our understanding of the information system and
related controls relevant to each material income stream;

> evaluating the appropriateness of the information system and
the effectiveness of the design and implementation of the
related controls;

> testing operating and automated controls over both DX Freight
and DX Express revenue, being key revenue streams disclosed
in the financial statements;

> substantive transactional testing of income recognised in the
financial statements, including deferred income balances
recognised at the year end;

> testing a sample of subscription revenue to underlying

contracts and ensuring revenue has been correctly deferred
based on cash receipts and contractual terms;

> reconciling cash received to revenue recognised in the period
to ensure completeness of income recorded in the accounting
period; and

> reviewing post-year end receipts to ensure completeness

of income recorded in the accounting period.

Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion
on the group and parent company financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

> the information given in the strategic report and the directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

> the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:

> adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or

> the parent company financial statements are not in agreement with the accounting records and returns; or

> certain disclosures of directors’ remuneration specified by law are not made; or

> we have not received all the information and explanations we require for our audit.

Strategic ReportGovernance ReportFinancial Statements
72

Independent Auditor’s Report continued
to the members of DX (Group) plc

Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group
and parent company financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

In preparing the group and parent company financial statements, the directors are responsible for assessing the group and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to
cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below:

> We updated our understanding of the group and parent company and the sector in which they operate to identify laws
and regulations that could reasonably be expected to have a direct effect on the financial statements. We updated our
understanding in this regard through discussions with management and industry research.

> We determined the principal laws and regulations relevant to the group and parent company in this regard to be those

arising from:
− Companies Act 2006 and Companies Act 2014 (Ireland)
− Bribery Act 2010
− UK adopted international accounting standards
− Local tax legislation

> We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance

by the group and parent company with those laws and regulations. These procedures included, but were not limited to:
− holding discussions with the senior management team and the Audit & Risk Committee and considering any known or

suspected instances of non-compliance with laws and regulations or fraud;

− assessing the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud

risk areas to be management override of controls;

− testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible

irregularities and fraud;

− challenging the judgements and estimates made by management to identify any areas of possible bias; and
− reviewing minutes from board meetings of those charged with governance to identify any instances of non-compliance

with laws and regulations.

> We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override of controls and the presumed risk of fraud
through revenue recognition, that there was the potential for management bias in relation to areas of key judgement and
estimation being the impairment of goodwill, deferred taxation and dilapidations provision. We addressed this by challenging
the assumptions and judgements made by management when auditing those key accounting estimates.

> As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit

procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of
bias; and evaluating the business rationale of any significant transactions that appeared unusual or outside the normal course
of business.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we
will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

DX (Group) plc Annual Report and Accounts 2023
73

Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.

Joseph Archer (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP,
Statutory Auditor,
15 Westferry Circus
Canary Wharf
London E14 4HD
2 October 2023

Strategic ReportGovernance ReportFinancial Statements74

Consolidated Statement of Comprehensive Income
For the year ended 1 July 2023

Revenue
Operating costs

Profit from operating activities

Analysis of profit from operating activities
Earnings before interest, tax, depreciation, amortisation and share-based payments

(“EBITDA”1)
Depreciation
Amortisation of software and development costs
Exceptional items
Share-based payments charge relating to SAYE
Share-based payments charge relating to PSP

Profit from operating activities

Finance income
Finance costs

Profit before tax
Tax (expense)/credit

Profit for the year

Other comprehensive income/(expense) not subsequently reclassified
Other comprehensive income/(expense)

Total comprehensive income for the year

Earnings per share (pence):
Basic
Diluted

Notes

5
7

Year ended
1 July 2023

£m

Year ended
2 July 2022

£m

471.2
(441.2)

30.0

428.2
(406.1)

22.1

7
7
10

11
11

22
22

60.2
(27.9)
(0.6)
–
(0.3)
(1.4)

30.0

0.5
(5.1)

25.4
(2.6)

22.8

–

22.8

3.9
3.8

50.3
(24.4)
(0.6)
(1.6)
(0.4)
(1.2)

22.1

–
(4.7)

17.4
(3.4)

14.0

–

14.0

2.4
2.2

1 See notes 3 and 35 to the Financial Statements for details of alternative performance measures (“APMs”) used, which are non-IFRS measures. The notes include

details of where reconciliations of APMs to IFRS reported measures can be found.

The notes on pages 80 to 104 form part of these Financial Statements.

DX (Group) plc Annual Report and Accounts 2023Consolidated Statement of Financial Position
As at 1 July 2023

Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets and goodwill
Deferred tax assets

Total non-current assets

Current assets
Trade and other receivables
Current tax receivable
Cash and cash equivalents

Total current assets

Total assets

Equity
Share capital
Share premium
Retained earnings

Total equity

Non-current liabilities
Provisions
Lease liabilities

Total non-current liabilities

Current liabilities
Trade and other payables
Current tax payable
Lease liabilities
Deferred income
Provisions

Total current liabilities

Total liabilities

Total equity and liabilities

Notes

1 July 2023
£m

2 July 2022
£m

14
17
15
25

20
21
21

24
26

26
27
24

20.5
111.2
31.0
3.7

166.4

47.2
0.6
37.6

85.4

251.8

6.0
25.2
37.4

68.6

7.1
94.5

101.6

46.0
–
23.6
9.7
2.3

81.6

183.2

251.8

14.5
94.2
31.1
5.5

145.3

44.6
–
27.0

71.6

216.9

5.7
25.2
24.5

55.4

7.0
79.6

86.6

40.7
0.4
20.7
10.2
2.9

74.9

161.5

216.9

The Financial Statements were approved by the Board of Directors on 2 October 2023 and signed on its behalf by:

Mark Hammond
Non-executive Chairman

David Mulligan
Chief Financial Officer

The notes on pages 80 to 104 form part of these Financial Statements.

Company registered number 08696699.

Strategic ReportGovernance ReportFinancial Statements

Company Statement of Financial Position
For the year ended 1 July 2023

Non-current assets
Investments

Total non-current assets

Current assets
Trade and other receivables
Current tax receivable

Total current assets

Total assets

Equity
Share capital
Share premium
Retained earnings

Total equity

Non-current liabilities
Loans from Group companies

Total non-current liabilities

Current liabilities
Current tax payable

Total current liabilities

Total liabilities

Total equity and liabilities

Notes

1 July 2023
£m

2 July 2022
£m

20
21
21

30.0

28.0
1.8

29.8

59.8

6.0
25.2
23.6

54.8

5.0

–

5.0

59.8

30.0

18.5
–

18.5

48.5

5.7
25.2
17.3

48.2

–

0.3

48.5

The profit for the year attributable to the Company, after a share-based payments charge of £1.4 million (2022: £1.6 million),
was £16.5 million (2022: £1.1 million loss).

The Financial Statements were approved by the Board of Directors on 2 October 2023 and signed on its behalf by:

Mark Hammond
Non-executive Chairman

David Mulligan
Chief Financial Officer

The notes on pages 80 to 104 form part of these Financial Statements.

Company registered number 08696699

DX (Group) plc Annual Report and Accounts 2023

Consolidated Statement of Changes in Equity
As at 1 July 2023

At 3 July 2021

Total comprehensive income for the year
Profit for the year

Total comprehensive income for the year

Transactions with owners of the Company, recognised

directly in equity

Share-based payment transactions

Total transactions with owners of the Company

At 2 July 2022

Total comprehensive income for the year
Profit for the year

Total comprehensive income for the year

Transactions with owners of the Company, recognised

directly in equity
Equity dividends paid
Share-based payment charges
Exercise of share options

Total transactions with owners of the Company

At 1 July 2023

Notes

Share capital
£m

Share premium
£m

5.7

25.2

–

5.7

25.2

–

–
–
0.3

0.3

6.0

–

–
–
–

–

25.2

Retained
earnings
£m

8.9

14.0

1.6

24.5

22.8

(3.0)
1.7
(8.6)

(9.9)

37.4

The notes on pages 80 to 104 form part of these Financial Statements.

Total
£m

39.8

14.0

1.6

55.4

22.8

(3.0)
1.7
(8.3)

(9.6)

68.6

Strategic ReportGovernance ReportFinancial Statements78

Company Statement of Changes in Equity
For the year ended 1 July 2023

At 3 July 2021

Total comprehensive expense for the year
Loss for the year

Total comprehensive expense for the year

Transactions with owners of the Company, recognised

directly in equity

Share-based payment transactions

Total transactions with owners of the Company

At 2 July 2022

Total comprehensive income for the year
Profit for the year

Total comprehensive income for the year

Transactions with owners of the Company, recognised

directly in equity
Equity dividends paid
Share-based payment transactions
Exercise of share options

Total transactions with owners of the Company

At 1 July 2023

Notes

Share capital
£m

Share premium
£m

5.7

25.2

Retained
earnings
£m

16.8

–

5.7

25.2

–

–
–
0.3

0.3

6.0

–

–
–
–

–

25.2

(1.1)

1.6

17.3

16.5

(3.0)
1.4
(8.6)

(10.2)

23.6

Total
£m

47.7

(1.1)

1.6

48.2

16.5

(3.0)
1.4
(8.3)

(9.9)

54.8

The notes on pages 80 to 104 form part of these Financial Statements.

DX (Group) plc Annual Report and Accounts 2023

Consolidated Statement of Cash Flows
As at 1 July 2023

Cash flows from operating activities
Profit for the year
Adjustments for:
– Depreciation
– Amortisation of intangible assets
– Interest receivable
– Interest payable
– Tax expense
– Loss on disposal of intangible assets
– Equity-settled share-based payment transactions

Net cash profit

Changes in:
– Trade and other receivables
– Trade and other payables
– Deferred income
– Provisions

Net change in working capital

Cash generated from operations

Interest paid
Tax paid

Net cash generated from operating activities

Cash flows from investing activities
Interest received
Acquisition of property, plant and equipment
Software and development expenditure

Net cash used in investing activities

Net increase in cash before financing activities

Cash flows from financing activities
Lease repayments – capital element
Share options exercise costs paid
Equity dividends paid
Issue of shares

Net cash used in financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Year ended
1 July 2023
£m

Year ended
2 July 2022
£m

Notes

22.8

27.9
0.6
(0.5)
5.1
2.6
–
1.7

60.2

(2.6)
5.2
(0.5)
(0.5)

1.6

61.8

(5.1)
(1.8)

54.9

0.5
(10.4)
(0.5)

(10.4)

44.5

(22.6)
(8.6)
(3.0)
0.3

(33.9)

10.6
27.0

37.6

14.0

24.4
0.6
–
4.7
3.4
0.3
1.6

49.0

(4.7)
(3.1)
(1.2)
2.1

(6.9)

42.1

(4.7)
(0.9)

36.5

–
(5.6)
(0.6)

(6.2)

30.3

(20.1)
–
–
–

(20.1)

10.2
16.8

27.0

7
7
11
11
12

Company Statement of Cash Flows
As at 1 July 2023

The Company has not presented a Statement of Cash Flows as it does not have a bank account; therefore all balances are £nil.
See note 28 for a reconciliation of profit for the year to cash generated from operations.

The notes on pages 80 to 104 form part of these Financial Statements.

Strategic ReportGovernance ReportFinancial Statements80

Notes to the Financial Statements
For the year ended 1 July 2023

1 Reporting entity
The principal activity of DX (Group) plc (“the Company”) and its subsidiaries (together, “the Group” or “DX”) is the provision of
delivery solutions, including parcel, freight, secure courier and logistics services. The Company is incorporated and domiciled
under the applicable law of England and Wales. The address of its registered office is: Ditton Park, Riding Court Road, Datchet,
Slough, SL3 9GL. The Company is a public company limited by shares and its registered number is 08696699.

2 Basis of preparation
Statement of compliance
The consolidated and Company financial statements have been prepared and approved by the Directors in accordance with
UK-adopted international accounting standards (“IASs”).

The Consolidated Financial Statements were authorised for issue by the Board of Directors on 2 October 2023.

Judgements and estimates
The preparation of financial information to conform with IASs requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount,
event or actions, actual amounts ultimately may differ from those estimates. Further details on judgements and estimates are
disclosed in note 3.

Going concern
The Financial Statements have been prepared on a going concern basis, which the Directors consider to be appropriate as they
are confident the Group and the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least
12 months from the date of approval of the financial statements.

The Directors have prepared cash flow forecasts for a period from the date of approval of these Financial Statements up to
28 June 2025 under two different scenarios.

The base case assumes that the Group achieves its budgeted levels of new business and overall performance in the year to
29 June 2024 and then maintains its positive momentum in the following year. For the period from the year end to the date of
this report, the Company has performed in line or better than its forecasts. This gives the Board confidence that the Company
will continue to meet its forecasts.

The Directors also carried out a reverse stress test that calculates the losses that would be required to exhaust its cash reserves.
The results of this test were that the Group’s profit from operating activities would have to be at least £32.0 million per year
worse than the base case to require any use of the invoice discounting facility. The Directors regard such an outcome as highly
implausible given the Group’s recent results and prospects. There would also be a range of mitigating actions the Directors would
take to reduce the impact of such a large fall in the Group’s performance.

The base case and the reverse stress test indicate that the Group will have sufficient funds to meet its liabilities as they fall due
for that period. This is made up of the Group’s net cash which stood at £37.6 million at the 2023 year end (2022: £27.0 million),
and access to a £20 million invoice discounting facility. While the invoice discounting facility is cancellable by either party on a
three-month notice period, the Directors are confident that it will remain available throughout the forecast period. It is noted that
neither the base case nor the reverse stress test relies on the invoice discounting facility being available. See note 23 for further
information on the Group’s borrowing facilities.

Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial
statements on a going concern basis.

3 Significant accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and
the preceding year unless otherwise stated.

The Financial Statements have been prepared under the historical cost convention.

Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own profit
and loss account.

DX (Group) plc Annual Report and Accounts 202381

The Group uses alternative performance measures (“APMs”) to measure performance. These APMs have been calculated
consistently to enable comparability from one year to the next and the Directors believe that this information is important for the
shareholders as it allows them to understand the difference between the reported results and the trading performance excluding
certain non-cash charges and items which are not expected to recur. These measures are not defined by International Financial
Reporting Standards (“IFRS”) and therefore may not be directly comparable to similar measures adopted by other companies.
These APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measures but
provide useful information on the performance of the Group and underlying trends. The Group presents EBITDA, adjusted
operating profit, adjusted PBT, adjusted EPS, and net cash which are further explained in note 35.

The consolidated financial information is presented in sterling and, unless otherwise stated, has been rounded to the nearest
£0.1 million (£m).

Basis of consolidation
The financial information comprises a consolidation of the financial information of DX (Group) plc and all its subsidiaries. The
financial year ends of all entities in the Group are coterminous. The Group reports on a ‘4-5-4 weekly’ basis, which reflects its cost
base and operations. These Financial Statements were prepared for the period 3 July 2022 to 1 July 2023 and cover a 52-week
period. Future years will be for either 52 weeks or occasionally 53 weeks in order to keep the year-end date as close as possible
to 30 June. The Company has opted to apply Section 390 (3) of the Companies Act 2006. This permits the Company to end its
financial year on 1 July 2023 (2022: 2 July 2022) as it is not more than 7 days after or before the end of the year dated 30 June
2023 (2022: 30 June 2022).

Subsidiaries are all entities over which the Group has control over the entity, which is when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee
generally accompanying a shareholding of more than half of the voting rights. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated except to the extent they provide evidence of impairment of the asset transferred.

Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker (“the CODM”). The CODM, who is responsible for allocating resources and assessing performance of operating segments,
has been identified as the Executive Directors.

Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated financial information is presented in sterling,
which is the functional and presentation currency of the Company and all of the subsidiaries based in the United Kingdom. The
functional currency of the Group’s Irish subsidiary is the euro.

(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that
are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was
determined. Any exchange differences arising from this translation of foreign operations are reported as an item of other
comprehensive income and accumulated in the translation reserve.

Revenue
Revenue represents the value of sales, apportioned over the period to which it relates after excluding trade discounts, value added
tax and similar sales-related taxes.

Document Exchange subscription income, which is invoiced in advance based on an expected level of usage, is deferred and
recognised as revenue over the period of time in which the related performance obligation is satisfied. Deferred subscription
income is included in the statement of financial position as deferred income within current liabilities. Supplementary membership
charges may be raised retrospectively if usage is significantly higher than expected.

Revenue in respect of all other services (1-Man, 2-Man/Logistics, Parcels and Mail) is recognised at a point in time, on delivery
of the service to which it relates, thus, satisfying the respective performance obligation.

Strategic ReportGovernance ReportFinancial Statements82

Notes to the Financial Statements continued
For the year ended 1 July 2023

3 Significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at historic purchase cost less accumulated depreciation. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at the following annual rates in order to write off each asset on a systematic basis:

Land
Freehold buildings
Leasehold improvements
Plant, machinery and other equipment

nil
2%-2.5%
4%-20%
10%-33%

The assets’ residual values and useful lives are reviewed and adjusted if appropriate at each statement of financial position date.

Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on
goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating
to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. When there is a change to the composition
of the cash-generating units within the Group, goodwill is reallocated within the cash-generating units affected.

(b) Other intangible assets
Other intangible assets are stated at historic purchase cost less accumulated amortisation. Cost includes the original purchase
price of the asset and the costs attributable to implementing the expenditure for its intended use. Third-party development costs
are capitalised when the relevant criteria are met.

Amortisation is provided at the following annual rates in order to write off each asset on a systematic basis:

Goodwill
Software and development costs
Acquired intangibles

nil
20%-33%
20%-50%

(c) Impairment of non-financial assets
Assets that have an indefinite life, such as goodwill, are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. An impairment loss is recognised in the income statement when the asset’s carrying
value exceeds its recoverable amount. Its recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use.

Investments
Investments are held at historic cost less any adjustments to their ongoing value in use.

Trade and other receivables
Trade receivables are recognised initially at fair value, which is deemed to be the transaction price, and subsequently at
amortised cost, less provision for impairment. To calculate the provision the Group applies the IFRS 9 simplified approach to
measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected
credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing.

The expected loss rates are based on the Group’s historical credit losses experienced. The historical loss rates are then adjusted
to reflect current and forward-looking information, any known legal and specific economic factors, including the credit
worthiness and ability of the customer to settle the receivable.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised
in the income statement within operating costs. When a trade receivable is uncollectable, it is written off against the allowance
account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating costs
in the income statement.

Other receivables are non-interest-bearing and are recognised initially at fair value and subsequently at amortised cost.

DX (Group) plc Annual Report and Accounts 2023

Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.

Interest paid is treated as an operating cash flow.

Trade and other payables
Trade payables are obligations to pay for goods and services that have been acquired in the commercial operations of the Group.
Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as
non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit
or loss over the period of the borrowings using the effective interest method. Fair value is calculated based on the present value
of future principal and interest cash flows, discounted at the market rate of interest at the measurement date.

Leases
The Group recognises right-of-use assets (representing its right to use the underlying assets) and lease liabilities (representing
its obligation to make lease payments).

Right-of-use assets
The Group leases many assets, including properties, vehicles and equipment. Under IFRS 16, the Group recognises right-of-use
assets and lease liabilities for most leases. The Group elected not to recognise right-of-use assets and lease liabilities for short-
term leases and leases of low-value assets. The Group continues to recognise the lease payments associated with these leases as
an expense on a straight-line basis over the lease term.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, comprising the initial measurement of the lease liability adjusted for any lease payments made at or before the
commencement date, lease incentives received and initial direct costs. Subsequently, the right-of-use asset is valued at cost less
any accumulated depreciation (straight-line) and impairment losses, and adjusted for remeasurement of the lease liability.

Right-of-use assets are presented within non-current assets in the Consolidated Statement of Financial Position.

Lease liability
The lease liability is initially measured at the present value of the future lease payments as at the commencement date,
discounted using the Group’s incremental borrowing rate when the interest rate implicit in the lease is not readily determinable.
These include future fixed lease rental payments, variable lease payments that depend on an index or a rate (these are initially
measured at the index or rate as at the commencement date) and payments of penalties for terminating the lease earlier, if the
conditions reflect the Group exercising an option to terminate the lease.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is
remeasured when there is a lease extension, a change in future lease payments or the Group changes its assessment of whether
it will exercise an extension or termination option.

The Group presents lease liabilities in current and non-current liabilities in the Consolidated Statement of Financial Position.

The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The
assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly
affects the amount of lease liabilities and right-of-use assets recognised.

Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can
be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation.

Strategic ReportGovernance ReportFinancial Statements84

Notes to the Financial Statements continued
For the year ended 1 July 2023

3 Significant accounting policies continued
Taxation
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that
it relates to items recognised directly in other comprehensive income or in equity. In this case the tax is also recognised directly
in other comprehensive income or in equity.

Current taxation
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
by the statement of financial position date. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.

Deferred taxation
Deferred tax is recognised using the statement of financial position liability method, on temporary differences arising between
the tax base of assets and liabilities and their carrying amount in the Financial Statements. The following temporary differences
are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that have been enacted or
substantively enacted by the statement of financial position date and are expected to apply when the related deferred tax asset
is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that the temporary differences and brought-forward
taxable losses can be utilised. The carrying amount of deferred tax assets is reviewed at each statement of financial position date.

Deferred tax assets and liabilities are offset against each other when there is a legally enforceable right to set off current assets
against current liabilities and it is the intention to settle these on a net basis.

Pension costs
The Group operates a number of defined contribution pension schemes. The assets of the schemes are held separately from
those of the Group in independently administered funds. The amount charged to the income statement in respect of pension
costs and other post-retirement benefits is the contributions payable for the year. Differences between contributions payable for
the year and contributions actually paid are shown as amounts either payable or receivable in the statement of financial position.

Share-based payment transactions
The fair value on the grant date of share-based payment awards granted to employees is recognised as an employee expense,
with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards.
The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date. As the awards are
equity-settled, they have no market-related performance conditions that require consideration. For share-based payment awards
with non-vesting conditions, the fair value on the grant date of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and actual outcomes.

Although the Group has accounted for the awards as equity-settled, it can elect to settle some of the awards in cash.
The payment for settlements in cash are treated as a deduction from equity.

The Performance Share Plan (“PSP”) agreement also includes a further three-year period of retention for each participant from
the vesting of the Recovery Awards. In consideration of this retention period, the Company will pay the Employers’ National
Insurance Contribution (“NIC”) liability for a share price up to 40p. The cost, treated as a provision under IAS 37, ‘Provisions,
Contingent Liabilities and Contingent Assets’, is recognised from the date of the change in February 2021 through to the end of
the relevant retention period. Should a participant leave within the retention period, the NIC paid by the Company will be clawed
back from the participant.

Exceptional items
From time to time, the Group treats certain items which are considered to be one-off and not representative of the underlying
trading of the Group as exceptional in nature.

The Directors apply judgement in assessing the particular items, which by virtue of their scale and nature should be classified as
exceptional items. The Directors consider that separate disclosure of these items is relevant to an understanding of the Group’s
financial performance.

DX (Group) plc Annual Report and Accounts 202385

Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. While preparing the financial
statements, no judgements have been made in the process of applying the Group’s accounting policies, other than those
involving estimations.

The Group makes certain estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The areas where assumptions and estimates are significant to the consolidated financial
information, are considered to relate to are as follows.

Critical accounting estimate: Provisions
The Group makes provisions to meet the cost of future property and vehicle dilapidations at the end of a lease. The Group
provides for property provisions on a site-by-site basis due to the unique nature and location of each site. Provision is made for
the best estimate of the expected dilapidations. Dilapidations are provided for specific individual properties and vehicle leases
where the outflow of resources is probable and the amount of the obligation can be reliably estimated.

The amount provided for property dilapidations at 1 July 2023 was £6.5 million (2022: £6.5 million) and represents management’s
best estimate for amounts that could be payable for leased properties at the end of the lease term. A 10% increase in the
estimated cost per square foot of a property’s dilapidation costs would lead to a £0.6 million increase in the provision as at
1 July 2023.

The amount provided for vehicle dilapidations at 1 July 2023 was £2.3 million (2022: £1.7 million) and represents management’s
best estimate for amounts that could be payable for leased vehicles at the end of the lease term. A 10% increase in the estimation
of a repair cost per vehicle would lead to a £0.2 million increase in the provision as at 1 July 2023.

Critical accounting estimate: Goodwill
The Group’s goodwill has a carrying value of £30 million, which is allocated between the two cash-generating units, DX Express
(£20 million) and DX Freight (£10 million). As discussed in note 15, the Group carries out annual impairment testing of each
cash-generating unit.

Key estimates used in the calculation are the revenue growth rate over the next four years (DX Express 9%, DX Freight 13%), DX
Express operating profit growth rate (3%), the growth rate after the next four years (1.7%) and the discount rate (9%). The testing
did not identify any impairment. The most sensitive assumption was the operating profit growth rate for DX Express where an
annual decline of worse than 2% over the next three years would result in an impairment. The Directors expect the operating
profit growth to continue.

Critical accounting estimate: Deferred tax
The Group has recognised a deferred tax asset for deductible temporary differences and unused tax losses (tax credits) carried
forward, to the extent that it is probable that future taxable profits will be available to utilise those deductions.

Given forecasts of future profitability, management consider that it is appropriate to recognise the deferred tax asset on losses
carried forward. In the current year, this has resulted in a deferred tax asset at 1 July 2023 of £3.7 million (2022: £5.5 million).
A reduction in the future profitability of the Group without it making losses over the next five years would lead to a delay in the
recovery of the deferred tax asset at 1 July 2023 but not diminish its value given enacted rates of taxation.

Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (principally interest rate risk), credit risk and liquidity risk.
The policy for each of the above risks is described in more detail below.

Market risk
The Group finances its operations through a mixture of equity capital and invoice discount facilities (“IDF”). The Group’s interest
rate risk arises from its IDF under which lending is issued at variable rates, which therefore, exposes the Group to cash flow
interest rate risk. As the Group only has short-term borrowings, it is able to minimise its exposure to cash flow interest risk by
managing levels of debt on a daily basis.

The Group is exposed to a negligible element of foreign exchange risk, with only a limited number of supplies from abroad and
the majority of revenue generated in the UK.

Credit risk
The Group’s principal current assets are cash deposits, cash and accounts receivable. The credit risk associated with cash is
limited. The principal credit risk arises from non-recovery of trade receivables. In order to manage credit risk, limits are set for
customers based on a combination of payment history and third-party credit references. Credit limits are reviewed by the credit
controller on a regular basis in conjunction with debt ageing and collection history.

Strategic ReportGovernance ReportFinancial Statements86

Notes to the Financial Statements continued
For the year ended 1 July 2023

3 Significant accounting policies continued
Financial risk factors continued
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash
safely and profitably. Short-term flexibility is achieved by the use of the IDF.

Capital risk management
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return
to shareholders through optimising the debt and equity balance. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 23, cash and cash equivalents, and equity attributable to equity holders of the parent
comprising issued capital, reserves and retained earnings as disclosed in notes 20 and 21, and the statement of changes in equity.
In order to maintain or adjust the capital structure, the Group may issue new shares, raise new borrowings or sell assets to reduce
debt. The Group’s capital is not restricted.

4 New accounting standards
New accounting standards adopted by the Group
The following new or amended standards became effective for the financial year; none of which had a significant effect
on the Group:

> Amendments to IAS 16, ‘Property, Plant and Equipment-Proceeds before Intended Use’;

> Annual improvements to IFRS Standards 2018-2020;

> Amendments to IFRS 3, ‘Reference to the Conceptual Framework’;

> Amendments to IAS 37, ‘Onerous Contracts – Cost of Fulfilling a Contract’;

> International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12) – application of the exception and disclosure

of that fact.

New accounting standards in issue but not yet effective
At the date of authorisation of these financial statements, the following standards and amendments, which have not been applied
in these financial statements, were in issue but are either not yet effective or have not yet been adopted by the UK:

> IFRS 17, ‘Insurance Contracts’;

> Amendments to IFRS 17;

> Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

> Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12);

> Initial Application of IFRS 17 and IFRS 9 – Comparative Information (Amendment to IFRS 17);

> Definition of Accounting Estimates (Amendments to IAS 8);

> International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12) – other disclosure.

The Directors do not expect that the adoption of the changes to standards listed above will have a material impact on the Group.

5 Revenue
In the following table, revenue is disaggregated by service. The table also includes a reconciliation of the disaggregated revenue
with the Group’s reportable segments (see note 6).

DX Freight:
– 1-Man
– 2-Man/Logistics

Total DX Freight

DX Express:
– Parcels
– Exchange & Mail

Total DX Express

Total revenue

2023
£m

220.6
62.2

282.8

156.4
32.0

188.4

2022
£m

195.5
61.4

256.9

135.3
36.0

171.3

471.2

428.2

Revenue is recognised at a point in time for all services with the exception of Document Exchange, which is recognised over time.
Further details are given in note 3.

DX (Group) plc Annual Report and Accounts 202387

Revenue-related assets are shown in note 18 as trade receivables and accrued income. Deferred income shown on the
Consolidated Statement of Financial Position will be recognised as revenue within 12 months. Accrued income represents
amounts for which the performance obligations have been satisfied but not invoiced at the reporting date.

6 Segment information

Revenue
Costs before overheads

Profit before overheads
Overheads

EBITDA

Depreciation and amortisation
Share-based payments charge

Profit/(loss) from operating activities
Finance income
Finance costs

Profit/(loss) before tax
Tax expense

Profit/(loss) for the year

Revenue
Costs before overheads

Profit before overheads
Overheads

EBITDA

Depreciation and amortisation
Exceptional items
Share-based payments charge

Profit/(loss) from operating activities
Finance costs

Profit/(loss) before tax
Tax expense

Profit/(loss) for the year

DX Freight
£m

DX Express
£m

Central
£m

2023

282.8
(218.4)

64.4
(6.9)

57.5

(19.7)
–

37.8
–
–

37.8
–

37.8

188.4
(155.6)

32.8
(8.1)

24.7

(7.0)
–

17.7
–
–

17.7
–

17.7

–
–

–
(22.0)

(22.0)

(1.8)
(1.7)

(25.5)
0.5
(5.1)

(30.1)
(2.6)

(32.7)

DX Freight
£m

DX Express
£m

Central
£m

2022

256.9
(202.9)

171.3
(142.4)

54.0
(6.2)

47.8

(16.7)
–
–

31.1
–

31.1

28.9
(7.9)

21.0

(6.5)
–
–

14.5
–

14.5

–
–

–
(18.5)

(18.5)

(1.8)
(1.6)
(1.6)

(23.5)
(4.7)

(28.2)
(3.4)

(31.6)

Total
£m

471.2
(374.0)

97.2
(37.0)

60.2

(28.5)
(1.7)

30.0
0.5
(5.1)

25.4
(2.6)

22.8

Total
£m

428.2
(345.3)

82.9
(32.6)

50.3

(25.0)
(1.6)
(1.6)

22.1
(4.7)

17.4
(3.4)

14.0

The Executive Directors are considered to be the CODM. The CODM considers there to be two separate operating segments,
DX Freight and DX Express, which are also reporting segments. The profitability of these two divisions is reviewed and managed
separately, with the exception of certain overheads which are integrated across the two divisions. Profit from operating activities
of the two divisions is shown above before any allocation of these central overheads between DX Freight and DX Express. Central
overheads comprise costs relating to finance, legal, personnel, property, internal audit, IT, procurement and administrative
activities which cannot be specifically allocated to an individual division.

The CODM considers that assets and liabilities are reviewed on a Group basis, therefore, no segment information is provided
for these balances.

The CODM considers there to be only one material geographical segment, being the British Isles.

Strategic ReportGovernance ReportFinancial Statements88

Notes to the Financial Statements continued
For the year ended 1 July 2023

7 Operating costs

Direct costs
Indirect costs
Overheads
Depreciation and amortisation
Exceptional items
Share-based payments charge

Total operating costs

2023
£m

316.0
58.0
37.0
28.5
–
1.7

441.2

2022
£m

291.2
54.1
32.6
25.0
1.6
1.6

406.1

Direct costs are variable costs linked to the volume of parcels and freight collected and delivered and include the costs of driver
and warehouse staff, vehicle consumable costs, subcontractor drivers and agency labour. Indirect costs are related to the cost of
running the depot network and include depot-based staff, property-based running costs and compliance costs. Overheads are
the cost of Group and divisional management, and central support functions. Depreciation and amortisation relate to right-of-use
vehicle and property assets as well as intangible and tangible fixed assets.

The following items have been charged/(credited) within operating costs:

Employee benefit expense
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets
Short-term and low-value leases

Amounts charged by the Group’s auditor are as follows:

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation

Total audit fees

Other services:
– tax services
– other

Total non-audit fees

Total fees

Note

9
14
17
15

2023
£m

141.0
4.4
23.5
0.6
–
–
1.1

2023
£000

145

240

–
–

–

2022
£m

125.0
3.4
21.0
0.6
–
0.3
1.4

2022
£000

120

200

–
–

–

240

200

Fees payable to PKF Littlejohn LLP in respect of 2023 and their associates for non-audit services to the Company are disclosed
on a consolidated basis, and therefore, no separate disclosure for DX (Group) plc on an individual basis is required. Fees payable
to auditors in respect of 2022 as disclosed above were payable to PKF Littlejohn LLP.

8 Directors’ emoluments
Total remuneration

Emoluments

Amounts accrued under money purchase pension schemes

Pension benefits

Highest paid Director

Emoluments

2023
£m

2.2

2023
£m

–

2023
£m

0.8

2022
£m

1.1

2022
£m

–

2022
£m

0.4

DX (Group) plc Annual Report and Accounts 202389

See the Directors’ Remuneration Report sections titled Total Single Figure of Remuneration for Directors and Share Plans on
page 61 (which form part of these Financial Statements), and note 34 for further details of Directors’ emoluments, including
transactions with Directors. The number of Directors to whom retirement benefits accrued in respect of qualifying services
is one Director (2022: one Director).

9 Employees
Employee benefit expense

Wages and salaries
Social security costs
Other pension costs

Share-based payment transactions

Average number of persons employed (including Executive Directors)

DX Express
DX Freight
Central support services

10 Exceptional items

Exceptional items

2023
£m

125.6
10.9
2.8

139.3

1.7

141.0

2023
Number

1,259
2,932
189

4,380

2022
£m

111.2
9.7
2.5

123.4

1.6

125.0

2022
Number

1,211
2,626
189

4,026

2023
£m

–

2022
£m

1.6

In the 2022 financial year, the Group incurred £1.6 million of legal and advisory costs on the investigation of and inquiry into a
corporate governance matter. The costs of this one-off event were charged as exceptional items to not distort to the Group’s
underlying costs.

11 Net finance costs

Finance income

Interest receivable

Total finance income

Finance costs
Interest on lease liabilities

Total finance costs

Net finance costs

2023
£m

0.5

(5.1)

(4.6)

2022
£m

–

(4.7)

Strategic ReportGovernance ReportFinancial Statements

Notes to the Financial Statements continued
For the year ended 1 July 2023

12 Tax (expense)/credit
(a) Analysis of charge in year

Current tax
United Kingdom corporation tax:
Current year
Adjustments in respect of prior periods

Total United Kingdom corporation tax
Overseas taxation

Total current tax

Deferred tax
Current year
Recognition of previously unrecognised deferred tax asset
Adjustments in respect of prior periods
Changes in tax rates

Total deferred tax

Total tax

2023
£m

(0.2)
–

(0.2)
(0.6)

(0.8)

(2.6)
–
0.5
0.3

(1.8)

(2.6)

2022
£m

(0.6)
(0.2)

(0.8)
(0.6)

(1.4)

(2.6)
0.6
–
–

(2.0)

(3.4)

(b) Factors affecting the tax expense for year
The tax expense for the year differs from the expected amount that would arise using the weighted average rate of corporation
tax in the UK for each year. The differences are explained below:

Profit before tax

Tax @ 20.5%/19%
UK taxable losses utilised
Adjustments in respect of prior years
Effect of different tax rates
Non-deductible expenditure
Corporation tax relief on share options exercised

Tax (expense)/credit

2023
£m

25.4

(5.2)
–
0.6
0.4
(0.5)
2.1

(2.6)

2022
£m

17.4

(3.3)
0.1
(0.1)
0.3
(0.4)
–

(3.4)

(c) Factors that may affect future tax charges
Changes to UK corporation tax rates were enacted as part of The Finance (No.2) Act 2021, which received Royal Assent on
10 June 2021. The main rate increased from 19% to 25% on 1 April 2023. Deferred tax assets and liabilities have been calculated in
accordance with the enacted rates. Tax losses carried forward and available to the Group as at 1 July 2023 totalled £12.7 million
(2022: £19.1 million).

13 Profit attributable to the Company
The profit for the year attributable to the Company, after a share-based payments charge of £1.4 million (2022: £1.6 million),
was £16.5 million (2022: £1.1 million loss).

DX (Group) plc Annual Report and Accounts 202314 Property, plant and equipment

Freehold land
and buildings
£m

Leasehold
improvements
£m

Plant and
equipment
£m

Cost
At 4 July 2021
Additions
Disposals

At 2 July 2022

At 3 July 2022
Additions

At 1 July 2023

Depreciation
At 4 July 2021
Charge for the year
Disposals

At 2 July 2022

At 3 July 2022
Charge for the year
Disposals

At 1 July 2023

Net book value
At 1 July 2023

At 2 July 2022

The cost of land not being depreciated is £0.6 million (2022: £0.6 million).

15 Intangible assets and goodwill

Cost
At 4 July 2021
Additions
Disposals

At 2 July 2022

At 3 July 2022
Additions
Disposals

At 1 July 2023

Amortisation and impairment
At 4 July 2021
Charge for the year
Impairment
Disposals

At 2 July 2022

At 3 July 2022
Charge for the year
Impairment
Disposals

At 1 July 2023

Net book value
At 1 July 2023

At 2 July 2022

5.0
–
–

5.0

5.0
–

5.0

2.6
0.1
–

2.7

2.7
0.1
–

2.8

2.2

2.3

12.1
3.2
–

15.3

15.3
6.1

21.4

5.9
1.6
–

7.5

7.5
2.0
–

9.5

11.9

7.8

18.8
2.4
(8.4)

12.8

12.8
4.3

17.1

15.1
1.7
(8.4)

8.4

8.4
2.3
–

10.7

6.4

4.4

Goodwill
£m

Software and
development
costs
£m

Customer
relationships
£m

191.5
–
–

191.5

191.5
–
–

191.5

161.5
–
–
–

161.5

161.5
–
–
–

161.5

30.0

2.8
0.6
(0.5)

2.9

2.9
0.5
–

3.4

1.4
0.6
–
(0.2)

1.8

1.8
0.6
–
–

2.4

1.0

1.1

9.1
–
–

9.1

9.1
–
(9.1)

–

9.1
–
–
–

9.1

9.1
–
–
(9.1)

–

Total
£m

35.9
5.6
(8.4)

33.1

33.1
10.4

43.5

23.6
3.4
(8.4)

18.6

18.6
4.4
–

23.0

20.5

14.5

Total
£m

203.4
0.6
(0.5)

203.5

203.5
0.5
(9.1)

194.9

172.0
0.6
–
(0.2)

172.4

172.4
0.6
–
(9.1)

163.9

31.0

31.1

Strategic ReportGovernance ReportFinancial Statements92

Notes to the Financial Statements continued
For the year ended 1 July 2023

15 Intangible assets and goodwill continued
Management has identified two cash-generating units within the Group, DX Freight and DX Express. Goodwill has an indefinite
useful life and each cash-generating unit is subject to annual impairment testing. The carrying value of goodwill at the year end
was £20 million for DX Express (2022: £20 million) and £10 million for DX Freight (2022: £10 million). The key assumptions used
in this calculation are shown below.

Period on which management approved forecasts are based
DX Express revenue growth rate
DX Express operating profit growth rate
Growth rate applied beyond approved forecast period
Discount rate

2023

2022

Three years
9%
3%
1.7%
9.0%

Three years
9%
9%
1.7%
11.1%

The cash flow projections are based on the budget approved by the Board for the forthcoming financial year and subsequent
two years. Cash flows beyond these 36 months are extrapolated with reference to historical trends, expected developments,
and using forecasts for the estimated growth rates, not exceeding the long-term growth rate stated above. The discount rate
represents the Group’s estimated weighted average cost of capital. Increases in the value of leases have led to a decrease in
the discount rate compared to 2022.

Forecasts assume that there is a continued decline in the market for the Document Exchange, but this is mitigated by growth
in Parcels’ volumes for DX Express. The overall revenue growth for DX Express in the near term is forecast to be 9% based on
the recent rate of securing new business. The ongoing improving performance of the DX Freight division assumes a short-term
growth rate of revenue of 13% as well as margin expansion based on the continued improvement in the business. In the longer
term, the Directors consider that the appropriate growth rate to use is that issued by the Office of Budget Responsibility for the
UK economy as a whole. There is substantial headroom in the value in use calculations: a negative long-term growth rate of up
to 2.5% or a discount rate of up to 12.5% would not result in any impairment. The key estimate is the short-term growth rate for
DX Express over the next three years; an annual decline of up to 2% in operating profit would not result in an impairment.
Given the current trajectory of the business, the Directors expect the operating profit in DX Express to continue to grow.

16 Investments

Company

Cost
At 4 July 2021
Additions
Disposals

At 2 July 2022

At 3 July 2022
Additions
Disposals

At 1 July 2023

Provisions
At 4 July 2021
Impairment reversal

At 2 July 2022

At 3 July 2022
Impairment

At 1 July 2023

Net book value
At 1 July 2023

At 2 July 2022

Shares in Group
companies
£m

30.1
–
(0.1)

30.0

30.0
–
–

30.0

0.1
(0.1)

–

–
–

–

30.0

At 1 July 2023, DX (Group) plc owned, directly or indirectly, 100% of each class of issued shares of the following companies.
All directly and indirectly owned companies form part of the consolidated results.

DX (Group) plc Annual Report and Accounts 2023
93

Directly owned:

DX Services Limited

Indirectly owned:

Principal activity

Intermediate holding company

DX Network Services Limited
DX Network Services Ireland Limited (registered and operates in the Republic of Ireland)

Parcel freight and mail services
Parcel freight and mail services

The above companies are registered and operate in England and Wales unless otherwise stated.

The registered office of all of the above companies is the same as that of the Company, with the exception of DX Network
Services Ireland Limited, which has a registered office of Unit 6B, Northern Cross Business Park, Finglas, Dublin 11.

DX (Group) plc has provided the necessary guarantees under section 479A of the Companies Act 2006 entitling DX Services
Limited to an audit exemption for the year ended 1 July 2023.

17 Right-of-use assets

Cost
At 4 July 2021
Additions
Depreciation

Net book value as at 2 July 2022

Additions
Depreciation

Net book value as at 1 July 2023

18 Trade and other receivables

Trade receivables
Other receivables
Prepayments
Accrued income
Amounts owed by subsidiary undertakings

Property
£m

Non-property
£m

62.9
15.3
(10.5)

67.7

22.3
(11.9)

78.1

32.5
4.5
(10.5)

26.5

18.2
(11.6)

33.1

Group

Company

2023
£m

30.3
2.9
4.4
9.6
–

47.2

2022
£m

28.6
3.2
4.5
8.3
–

44.6

2023
£m

–
–
–
–
28.0

28.0

Total
£m

95.4
19.8
(21.0)

94.2

40.5
(23.5)

111.2

2022
£m

–
–
–
–
18.5

18.5

Other receivables include £1.6 million (2022: £2.1 million) of collateral for a letter of credit issued to the benefit of the
Group’s insurers.

Trade receivables are shown net of a provision for impairment losses of £0.3 million (2022: £0.4 million). The gross trade
receivables at the year end were £30.6 million (2022: £29.0 million). The movement in the allowance for impairment losses
was as follows:

At 3 July 2022
Impairment losses released
Amounts written off as irrecoverable

At 1 July 2023

2023
£m

0.4
(0.1)
–

0.3

2022
£m

0.8
(0.4)
–

0.4

Impairment losses are recorded against trade receivables unless it’s considered that no recovery of the amount owing is possible;
at that point the amounts considered irrecoverable are written off against the trade receivables directly.

Strategic ReportGovernance ReportFinancial Statements
94

Notes to the Financial Statements continued
For the year ended 1 July 2023

18 Trade and other receivables continued
The ageing of gross trade receivables at the statement of financial position date and the provision for impairment losses was
as follows:

2023

2022

Gross trade
receivables
£m

Provision for
impairment
losses
£m

Net total
£m

Gross trade
receivables
£m

Provision for
impairment
losses
£m

29.7
0.6
0.2
0.1

30.6

(0.3)
–
–
–

(0.3)

29.4
0.6
0.2
0.1

30.3

27.7
0.5
0.5
0.3

29.0

(0.2)
–
(0.1)
(0.1)

(0.4)

Net total
£m

27.5
0.5
0.4
0.2

28.6

2022
£m

–

2022
£000

5,737

Shares
£m

5,737

5,737
312

6,049

Group

Company

2023
£m

37.6

2023
Number
(000)

2022
£m

27.0

2023
£000

2023
£m

–

2022
Number
(000)

604,879

6,049

573,682

Number of
shares (000)

573,682

573,682
31,197

604,879

Current
Past due 1-30 days
Past due 31-90 days
Past due more than 90 days

19 Cash and cash equivalents

Cash at bank and in hand

20 Share capital
Allotted, called up and fully paid

Group and Company

Ordinary Shares of £0.01 each

The movement in the share capital is set out below:

At 4 July 2021 and 2 July 2022

At 3 July 2022
Share options exercised

At 1 July 2023

21 Share premium and reserves

Group

At 4 July 2021
Profit for the year
Share-based payment transactions

At 2 July 2022

At 3 July 2022
Profit for the year
Share-based payment transactions
Dividend paid
Other comprehensive expense

At 1 July 2023

Company

At 4 July 2021
Profit for the year
Share-based payment transactions

At 2 July 2022

At 3 July 2022
Profit for the year
Share-based payment transactions
Dividend paid
Other comprehensive expense

At 1 July 2023

Share premium
£m

Retained
earnings
£m

25.2
–
–

25.2

25.2
–
–
–
–

25.2

8.9
14.0
1.6

24.5

24.5
22.8
1.7
(3.0)
(8.6)

37.4

Share premium
£m

Retained
earnings
£m

25.2
–
–

25.2

25.2
–
–
–
–

25.2

16.8
(1.1)
1.6

17.3

17.3
16.5
1.4
(3.0)
(8.6)

23.6

DX (Group) plc Annual Report and Accounts 202395

22 Earnings per share
The calculation of basic earnings per share at 1 July 2023 is based on the profit after tax for the year and the weighted average
number of shares in issue.

Adjusted earnings per share is calculated based on the profit after tax, adjusted for certain non-cash charges and other items
which are not expected to recur. The Group does not adjust for share-based payments relating to the Save As You Earn (“SAYE”)
scheme. Adjusted earnings per share represents an APM. Further details about the use of APMs are detailed in notes 3 and 35.

Diluted earnings per share is calculated based on the weighted average number of shares in issue, adjusted for any potentially
dilutive share options issued under the Group’s share option programmes. Where there is an adjusted loss for the period,
no adjustment is made for share options issued under the Group’s share option programmes as these would reduce the loss
per share.

Profit for the year
Adjusted for:
– Share-based payments charge relating to PSP
– Exceptional items

Adjusted profit for the year

Weighted average number of Ordinary Shares in issue
Potentially dilutive share options

Weighted average number of diluted Ordinary Shares

Basic earnings per share
Diluted earnings per share
Adjusted earnings per share

Potentially dilutive share options

2023
£m

22.8

1.4
–

24.2

2022
£m

14.0

1.2
1.6

16.8

2023 Number
(million)

2022 Number
(million)

588.6
13.0

601.6

2023
p

3.9
3.8
4.1

573.7
71.5

645.2

2022
p

2.4
2.2
2.9

2023 Number
(million)

2022 Number
(million)

13.0

71.5

23 Loans and borrowings
The Group has access to a £20.0 million invoice discounting facility with Barclays Bank plc. The facility is a rolling facility with
three months’ notice by either party. The available balance is based on 90% of the outstanding trade receivables, adjusted to
exclude amounts billed in advance and old debt. The amount drawn on the invoice discounting facility at 1 July 2023 was £nil
(2022: £nil). No amounts were drawn on the invoice discount facility during the year to 1 July 2023 (2022: £nil).

Amounts due under the invoice discounting facility are secured by means of a charge over trade receivables and over the general
assets of DX Network Services Limited.

Strategic ReportGovernance ReportFinancial Statements
96

Notes to the Financial Statements continued
For the year ended 1 July 2023

24 Provisions

At 3 July 2021
Charged to income statement
Utilised

At 2 July 2022

At 3 July 2022
Charged to income statement
Utilised

At 1 July 2023

Current
Non-current

Property
dilapidation
costs
£m

Vehicle
dilapidation
costs
£m

Other provisions
£m

5.7
0.9
(0.1)

6.5

6.5
0.2
(0.2)

6.5

1.3
0.6
(0.2)

1.7

1.7
0.7
(0.1)

2.3

0.8
1.0
(0.1)

1.7

1.7
0.6
(1.7)

0.6

2023
£m

2.3
7.1

9.4

Total
£m

7.8
2.5
(0.4)

9.9

9.9
1.5
(2.0)

9.4

2022
£m

2.9
7.0

9.9

As disclosed in the accounting policies, in determining provisions management uses judgement with reference to historical
data and specifically identified factors, to determine the amount and timing of outflows, and thus, the provision required.

Other provisions include management’s judgement of settlement costs for ongoing legal matters and the Employers’ NIC
on the PSP.

Provisions are expected to be utilised over the period to June 2039.

25 Deferred tax assets

At 4 July 2021
Charged to the income statement

At 2 July 2022

At 3 July 2022
Charged to the income statement

At 1 July 2023

The deferred tax asset is made up as follows:

Capital allowances
Other temporary differences
Trading losses

Group
£m

Company
£m

7.5
(2.0)

5.5

5.5
(1.8)

3.7

Company

2023
£m

–
–
–

–

–
–

–

–
–

–

2022
£m

–
–
–

–

Group

2023
£m

0.1
0.4
3.2

3.7

2022
£m

1.0
0.4
4.1

5.5

The main rate for corporation tax increased from 19% to 25% from 1 April 2023. The deferred tax asset is expected to be utilised
by 30 June 2024, therefore a rate of 25% has been used to determine the deferred tax asset balance.

The unrecognised deferred tax assets of the Group at 1 July 2023 total £0.2 million (2022: £0.5 million) consisting of unused tax
losses. There are no unrecognised deferred tax assets for the Company at 1 July 2023 (2022: £nil).

DX (Group) plc Annual Report and Accounts 2023
97

26 Lease liabilities
Leases typically consist of leases for premises, vehicles and equipment such to support operations and to help service the
Group’s customers. Leases of land and buildings are usually subject to rent reviews at specified intervals and provide for
the lessees to pay all insurance, maintenance and repair costs.

Maturity analysis – contractual undiscounted cash flows

Less than one year
One to five years
More than five years

Total undiscounted lease liabilities at year end

Current
Lease liabilities
Non-current
Lease liabilities

Lease liabilities included in the statement of financial position at year end

2023
£m

28.5
75.4
35.0

138.9

2023
£m

23.6

94.5

118.1

2022
£m

25.5
67.2
28.3

121.0

2022
£m

20.7

79.6

100.3

Details of the maturity analysis of discounted liabilities recognised in the Group’s statement of financial position are in note 29
‘Financial instruments’.

27 Trade and other payables, and deferred income

Trade payables
Social security and other taxes
Other payables
Accruals

Total trade and other payables

Group

2023
£m

19.8
10.4
2.7
13.1

46.0

2022
£m

16.1
8.0
2.0
14.6

40.7

Trade and other payables are amounts all due within one year.

Deferred income, disclosed on the face of the Consolidated Statement of Financial Position, relates to Document Exchange
subscriptions invoiced in advance. As at 1 July 2023, the total deferred income was £9.7 million (2022: £10.2 million).

28 Reconciliation of parent company profit to cash generated from operations

Cash flows from operating activities
Profit/(loss) for the year
Adjustments for:
– Net finance costs
– Tax (credit)/expense
– Dividends received
– Exercise of share options
– Equity-settled share-based payment transactions

Net cash (loss)/profit

Changes in:
– Trade and other receivables
– Trade and other payables
Net change in net assets

Cash generated from operations

Company

2023
£m

16.5

0.8
(1.8)
(14.8)
(8.6)
1.4

(6.5)

(11.3)
4.8
(6.5)

–

2022
£m

(1.1)

–
0.2
–
–
1.6

0.7

(0.7)
–
(0.7)

–

Strategic ReportGovernance ReportFinancial Statements98

Notes to the Financial Statements continued
For the year ended 1 July 2023

29 Financial instruments
Financial instruments utilised by the Group during the year ended 1 July 2023 and the year ended 2 July 2022, together
with information regarding the methods and assumptions used to calculate fair values, can be summarised as follows:

Current assets and liabilities
Financial instruments included within current assets and liabilities (excluding cash and borrowings) are generally short term
in nature, and accordingly, their fair values approximate to their book values.

Borrowings and cash
The carrying values of cash and short-term borrowings approximate to their fair values because of the short-term maturity
of these instruments. Cash and cash equivalents are shown in note 19. Details of the Group’s invoice discount facility are shown
in note 23.

Fair values of financial assets and liabilities
The fair value of all financial assets and liabilities is considered to be equal to the carrying values of these items due to their
short-term nature. Cash is held with counterparties with a Moody’s short-term credit rating of P-1.

Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified
in the Group’s Consolidated Statement of Cash Flows as cash flows from financing activities.

Lease liabilities

3 July 2022
£m

Cash flow
£m

100.3

(27.7)

4 July 2022
£m

Cash flow
£m

100.6

(24.8)

Non-cash movements

Interest
£m

5.1

Additions
£m

40.5

Non-cash movements

Interest
£m

4.7

Additions
£m

19.8

Disposals
£m

1 July 2023
£m

(0.1)

118.1

Disposals
£m

2 July 2022
£m

–

100.3

The following represent the key financial risks resulting from the Group’s use of financial instruments:

> Credit risk;

> Liquidity risk; and

> Market risk including interest rate and currency risks.

Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers and investment securities. The maximum exposure
to credit risk is the amount of the receivables balance shown in note 18.

The Group’s credit risk is also influenced by general macroeconomic conditions. The Group does not have any significant
concentration risk in respect of trade receivable balances at the reporting date with receivables spread across a wide range of
clients and sectors. The Group manages its exposure to credit risk through the application of its credit risk management policies
which checks the creditworthiness of potential customers, assessed through reports from credit agencies, and the trading terms
agreed with each customer. In some cases, deposits are held by the Group to reduce the credit exposure.

The expected credit losses on trade receivables are estimated using a provision matrix by reference to past experience of losses
and by monitoring the debtor’s current financial position, taking into account factors that are specific to customers, general
economic conditions and an assessment of both the current as well as the forecast direction of economic conditions at the
reporting date.

The ageing of trade receivables and the movement in the allowance for impairment losses at the year end are shown in note 18.

No interest is charged on the trade receivables outstanding balance. Trade receivables overdue are provided for based on
estimated irrecoverable amounts. Included in the Group’s trade receivable balance are debtors with a carrying amount of
£0.9 million (2022: £1.2 million) which are past due at the year-end date.

DX (Group) plc Annual Report and Accounts 202399

Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group has prepared
detailed cash flow projections, and thus, the Directors believe that the Group is able to meet its obligations as they fall due.
The Group aims to manage liquidity by ensuring that it will always have sufficient financial headroom to meet its liabilities
when they are due, under both normal and disrupted scenarios.

The maturity analysis of financial liabilities at the balance sheet date was as follows.

Less than one year
One to five years
More than five years

Total financial liabilities

2023

2022

Trade and other
payables

Lease payables

Trade and other
payables

Lease payables

32.9
–
–

32.9

23.6
63.7
30.8

118.1

26.1
–
–

26.1

20.7
54.6
25.0

100.3

Trade and other payables are amounts due within 60 days or less from the date of invoice so their maturity is relatively short dated.

Liquidity is provided through cash balances and the invoice discounting facility. The Group monitors cash balances daily and
prepares weekly short-term and quarterly medium-term cash forecasts, which are used to assess the Group’s expected cash
requirements and compare with the facilities available to the Group. Key risks to liquidity and cash balances are a downturn
in parcel volumes or a reduction in profitability of the Group.

Parcel volumes and quality of consignment revenue are monitored daily to identify any deterioration in trading conditions,
enabling the Group to address them promptly. Overdue trade receivables are reported weekly and monitored on a daily basis
by the credit control team. The Group does not have any derivative or non-derivative financial liabilities with the exception of
trade and other payables, borrowings under the invoice discounting facility and lease liabilities. Trade and other payables are
non-interest bearing, and therefore, have no weighted average effective interest rates. Lease liabilities are carried at the present
value of the minimum lease payments. Trade and other payables are due to be settled in the Group’s normal operating cycle.

Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will impact the Group’s
revenue or the carrying amount of its financial instruments. The objective of market risk management is to achieve a level
of market risk that is within acceptable parameters as set out in the Group risk management framework.

Interest rate risk
The Group is not exposed to significant interest rate risk as it does not have any long-term, interest-bearing financial liabilities.
A 1% increase or reduction in the interest rate applicable to the Group’s borrowings would have had a £nil (2022: £nil) impact
on the profit for the year.

Currency risk
The majority of the Group’s operations are carried out in the UK and Ireland and the Group has a low level of exposure
to currency risk on sales and purchases. The Group’s policy is not to hedge foreign currency transactions. £4.9 million
(2022: £2.3 million) of net financial assets and liabilities at the statement of financial position date were denominated
in euros. All other net financial assets and liabilities were denominated in sterling. A 10% strengthening of sterling against
the euro at 1 July 2023 would have reduced equity and profit by £0.4 million (2022: £0.2 million).

Strategic ReportGovernance ReportFinancial Statements
100

Notes to the Financial Statements continued
For the year ended 1 July 2023

30 Employee benefits
Pension commitments
The Group operates defined contribution pension schemes for all qualifying employees. The assets of the schemes are in
managed funds and are, therefore, held separately from the assets of the Group.

The total cost charged to income of £2.8 million (2022: £2.5 million) represents contributions payable to these schemes by the
Group at rates specified in the rules of the schemes.

Contributions amounting to £0.7 million (2022: £0.5 million) were payable to the schemes at 1 July 2023 and are included in trade
and other payables.

Share-based payments
At 1 July 2023, the Group had the following share-based payment arrangements:

Performance Share Plan 2017 (“PSP”) and Restricted Share Awards
In the year ended 30 June 2018, the Group established two equity-settled share option programmes that entitle key
management to purchase shares in the Group at £0.01 on vested options. The programmes consist of Recovery Awards under
the PSP as well as Restricted Share Awards.

The vesting conditions of the Recovery Awards are share price targets along with continued employment. Share price targets of
12.5p and of 40p result in 25% and 100% respectively of the Recovery Awards to vest, and a pro-rata straight-line basis between
12.5p and 40p vests accordingly.

The share price targets were tested on 21 December 2020, 21 December 2021 and 21 December 2022. On each occasion the
share price measurement was based on the 30-day average share price prior to the test date. Achievement of a share price
measurement on a later test date which is greater than the achieved measurement on a previous test date will result in additional
vesting of the Recovery Award in accordance with the share price targets.

On 17 November 2022, 5 million share options were granted with an additional testing date of 21 December 2023.

On 8 December 2022, an additional testing date of 21 December 2023 was added to the PSP. This applies to 11.2 million shares
unvested share options.

On 3 March 2023 and 5 April 2023 further grants were made totalling 17.5 million share options. These had modified share price
targets with vesting on a pro-rata straight-line basis between 30p and 40p.

In addition to the share price targets stated above, the Remuneration Committee must determine that any performance
condition has been satisfied to allow any vesting of Recovery Awards on any occasion. Recovery Awards for which the share
price target is attained at any test date will vest 12 months later.

The vesting condition of the Restricted Share Awards was continued service as a Director for three years from the issue date.

Measurement of fair values
The fair values of the PSP are measured using the Black-Scholes model as the basis of valuation. Expected volatility is based on
the historic volatility of the DX Group and the AIM market of the London Stock Exchange measured over the contractual period
of the options.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans issued
in the current and prior year were as follows:

Recovery Awards

Options issues
Fair value at grant
Share price at grant date
Exercise price
Expected volatility
Expected term
Expected dividend yield
Risk-free interest rate (based on government bonds)

5 April 2023

3 March 2023

8 December
2022

17 November
2022

1 September
2021

2,000,000
14.93p
28.75p
1.0p
56.68%
1.8 years
0%
3.76%

15,499,937
14.93p
30.50p
1.0p
56.68%
1.8 years
0%
3.76%

11,202,525
14.65p
27.75p
1.0p
67.55%
2.04 years
0%
3.38%

5,000,000
21.12p
26.50p
1.0p
77.22%
1.51 years
0%
3.17%

220,000
7.3p
36.00p
1.0p
50%
0.7 years
0%
0.7%

DX (Group) plc Annual Report and Accounts 2023101

The number and weighted average exercise price of options under the PSP and Restricted Share Awards are as follows:

Exercise
price per
share

At 3 July 2022

Exercised

Lapsed

Granted

At 1 July 2023

Number of Share Options

Grant date

PSP Recovery Awards – final testing date
21 December 2022. Target price 12.5p
(25% vesting) to 40p (100% vesting)

Granted prior to 3 July 2021
1 September 2021

PSP Recovery Awards – final testing date
21 December 2023. Target price 12.5p
(25% vesting) to 40p (100% vesting)

Granted prior to 3 July 2021

1 September 2021

17 November 2022

PSP Recovery Awards – final testing date
21 December 2023. Target price 30p
(0% vesting) to 40p (100% vesting)

13 March 2023

5 April 2023

1.0p
1.0p

88,045,187
140,921

(60,591,816) (25,795,545)
–

(134,501)

88,186,108

(60,726,317) (25,795,545)

1.0p

11,123,446

79,079

–

11,202,525

–

–
–

–

1,657,826
6,420

1,664,246

11,123,446

79,079

5,000,000

16,202,525

15,499,937

2,000,000

17,499,937

–

Restricted Share Awards

1.0p

1,669,330

(1,669,330)

Total

101,057,963 (62,395,647) (25,795,545) 22,499,937

35,366,708

The weighted average share price on exercise was 28.6p. At 1 July 2023, 36,328 options were exercisable. The impact on the
income statement is a non-cash share-based payment charge of £1.4 million (2022: £1.2 million).

Save As You Earn (“SAYE”) schemes
2021 scheme
On 28 January 2021, the Group launched an all-employee SAYE scheme to encourage share ownership amongst employees. The
option price was set at 25.82p and the number of shares subject to option was 9,063,910. The impact on the income statement is
a non-cash share-based payment charge of £0.2 million (2022: £0.4 million). Over 250 employees are participating in the scheme.

The number and weighted average exercise price of options under the SAYE scheme are as follows:

Outstanding at the start of the year
Granted during the year
Lapsed/opted out during the year
Outstanding at the end of the year
Exercisable at the end of the year

2023

2022

Weighted
average
exercise price

25.82p
25.82p
25.82p

Number of
options

6,188,460
–
(1,376,147)
4,812,313
–

8,524,626
–
(2,336,166)
6,188,460
–

2023 scheme
On 3 April 2023, the Group launched an all-employee SAYE scheme to encourage share ownership amongst employees.
The option price was set at 24.34p and the number of shares subject to option was 5,235,563. The impact on the income
statement is a non-cash share-based payment charge of £0.1 million, over 250 employees are participating in the scheme.

The fair value of the options at the date of grant was determined using a Black-Scholes model as the basis of valuation.
The expected volatility is based on the historic volatility of the DX Group measured over the contractual period of the options.

Strategic ReportGovernance ReportFinancial Statements102

Notes to the Financial Statements continued
For the year ended 1 July 2023

30 Employee benefits continued
2023 scheme continued
The inputs used in the measurement of the fair values at grant date of the SAYE scheme issued in the prior year were as follows:

SAYE scheme

Options issued
Fair value at grant
Share price at grant date
Exercise price
Expected volatility
Expected term
Expected dividend yield
Risk-free interest rate (based on government bonds)

3 April 2023

5,235,563
11.04p
29.75p
24.34p
56.67%
3.33 years
5.04%
3.38%

The number and weighted average exercise price of options under the SAYE scheme are as follows:

Outstanding at the start of the year
Granted during the year
Lapsed/opted out during the year
Outstanding at the end of the year
Exercisable at the end of the year

2023

2022

Weighted
average
exercise price

Number of
options

24.34p
24.34p
24.34p

–
5,235,563
(264,003)
4,971,560
–

–
–
–
–
–

The total expense recognised for the year and the total liabilities recognised at the end of the year arising from share-based
payments are as follows:

Total employee benefit expense recognised for share-based payments

31 Dividends

Amounts recognised as distributions to shareholders in the year
– Interim dividend of current financial year
– Proposed final dividend at financial year end

2023
£m

1.7

2022
£m

1.6

2023

2022

£m

3.0
6.0

Pence per

0.5
1.0

£m

–
–

Pence per

–
–

The proposed final dividend was approved by the Board on 2 October 2023 and is subject to shareholders’ approval at the
Annual General Meeting. If approved, it will be paid on 7 December 2023 to shareholders on the register as at 17 November 2023.
No amount for the proposed final dividend has been recognised at the balance sheet date.

32 Commitments
Capital
As at the date of the Consolidated Statement of Financial Position, the Group had capital expenditure contracted but not
provided for as follows:

Leasehold improvements
Plant and equipment
Software and development

Total

33 Contingencies
There were no contingent liabilities as at 1 July 2023 (2022: £nil).

2023
£m

1.4
0.2
1.9

3.5

2022
£m

1.8
1.5
0.1

3.4

DX (Group) plc Annual Report and Accounts 2023103

34 Related parties
The following transactions were carried out with connected parties:

Key management personnel
Key management comprises the Executive Directors and the Non-executive Directors of the Group. The key management
compensation is as follows:

Salaries, fees and other short-term employee benefits
Pension contributions
Social security costs
Share-based payments

2023
£000

1,537
12
1,264
317

3,130

2022
£000

1,056
–
721
815

2,592

Sales and purchases of goods and services
There were no related party transactions relating to the sales and purchases of goods and services to disclose.

35 Alternative performance measures (“APMs”)
The Group uses APMs to measure performance. These APMs are applied consistently from one year to the next and the Directors
believe that this information is important for the shareholders as it allows them to understand the difference between the
reported results and the trading performance excluding certain non-cash charges and other items which are not expected to
recur. These measures are not defined by IFRS and therefore may not be directly comparable to similar measures adopted by
other companies. These APMs should be considered in addition to, and are not intended to be a substitute for, or superior to,
IFRS measures but provide useful information on the performance of the Group and underlying trends. Various measures of
performance and profitability are industry standard and are used by shareholders and potential investors to compare
performance with industry peers.

The Group presents EBITDA, adjusted profit before tax (“adjusted PBT”), adjusted profit per share (“adjusted EPS”) and adjusted
profit from operating activities, which are calculated as the statutory measures stated before amortisation of acquired
intangibles, any exceptional items and share-based payments charge relating to the PSP scheme, including related tax where
applicable. The Group adjusts for share-based payments due to the one-off nature of the Recovery Awards in driving the
turnaround of the business in the short term. The Group does not adjust for share-based payments relating to the SAYE scheme.
The Group also presents net cash/net debt, calculated as gross debt before debt issue costs and net of cash. The reconciliations
between these APMs and the IFRS reported measures are shown in the locations detailed below:

APM

IFRS reported measure

Location of reconciliation

Page

EBITDA
Adjusted PBT
Adjusted EPS
Adjusted profit from operating activities
Adjusted operating profit margin
Net cash/net debt

Profit from operating activities
Profit before tax
Profit per share
Profit from operating activities
Profit from operating activities
Cash and cash equivalents/loans and borrowings

Financial Review
Financial Review
Note 22
Financial Review
Financial Review
Financial Review

42
44
95
42
42
44

Strategic ReportGovernance ReportFinancial Statements
104

Notes to the Financial Statements continued
For the year ended 1 July 2023

36 Leases
The Group recognises right-of-use assets (representing its right to use the underlying assets) and lease liabilities representing
its obligation to make lease payments. Details of the right-of use assets are shown in note 17 and details of the lease liabilities
are shown in note 26. The maturity analysis of lease liabilities is also shown in note 26.

Further details of the accounting policy for leases can be found in note 3, ‘Significant accounting policies’.

Impact in the year
The impact on the profit for the year ended 1 July 2023 and 2 July 2022 is summarised below:

Depreciation charge on right-of-use assets
Interest cost on lease liability
Operating lease rentals on short-term and low-value leases

Total lease costs for the year

The amounts charged to the income statement due to the practical expedients taken are shown below:

1 July 2023
£m

2 July 2022
£m

23.5
5.1
1.1

29.7

21.0
4.7
1.4

27.1

Expense relating to short-term leases
Expense relating to low-value leases

The total cash outflow for leases is as follows:

Lease repayments – capital element
Interest paid

Total cash outflow for leases

2023

2022

Property
£m

Plant and
equipment
£m

Property
£m

Plant and
equipment
£m

0.5
–

0.5

–
0.6

0.6

0.6
–

0.6

–
0.8

0.8

1 July 2023
£m

2 July 2022
£m

22.6
5.1

27.7

20.1
4.7

24.8

37 Events subsequent to the period event
On 11 September 2023 the Company announced that it had received a nonbinding and conditional proposal from H.I.G.
European Capital Partners LLP (“H.I.G.”) regarding a possible all cash offer for the Company at a price of 48.5p per DX share
(the “Proposal”). The Proposal is subject to the satisfaction or waiver by H.I.G. of a number of pre-conditions, including the
completion of satisfactory due diligence. There can be no certainty that an offer will be made nor as to the terms on which
any offer might be made.

DX (Group) plc Annual Report and Accounts 2023

Printed on FSC certified paper, sourced from
sustainable forestry.

(

)

DX (Group) plc
Ditton Park
Riding Court Road
Datchet
Slough
SL3 9GL

DX Document Exchange Address:
DX1 Ditton Park