13th Feb 2023 11:25
(Alliance News) - DX Group PLC shares dropped on Monday, after it confirmed that a legal claim was lodged by a rival logistics company last week.
Shares in the Buckinghamshire, England-based logistics company were down 7.0% to 27.67 pence each in London on Monday morning. The stock remains up 13% over the past 12 months.
DX Group confirmed it received a legal claim from Sheffield-based logistics company Tuffnell Parcels Express in relation to confidential competitor information being obtained by DX in the past.
The statement followed a story in the Sunday Times about an "extraordinary corporate espionage claim lodged in the High Court".
The newspaper said a traffic clerk at a London warehouse was asked to leak confidential corporate information to a rival in exchange for a GBP50 payment from a delivery driver.
https://www.thetimes.co.uk/article/50-bribes-and-a-man-named-pat-corporate-spying-row-erupts-at-dx-group-gtr8ll0jr
Russ Mould, AJ Bell investment director, said "industrial espionage has rarely sounded more prosaic, although the consequences for delivery and logistics firm DX, if the claims from Sheffield-based rival Tuffnells are proven at the High Court, could be anything but."
DX on Monday explained the claim was subject to a corporate governance inquiry and internal investigation by DX, which it had disclosed back in September of last year.
At the time, DX said it planned to "draw a line under past events" and name three independent non-executive directors to its audit & risk committee. It also pledged to appoint a 'big four' professional services firm to review its compliance policies and procedures.
In November 2021, DX announced its plans for an internal investigation. In February 2022, Grant Thornton resigned as its auditor, citing concerns about the findings of the corporate governance probe.
DX said the probe found that "confidential competitor information" was obtained, in exchange for an offer of payment.
"As such, the investigation concluded that there may have been a breach of the Bribery Act 2010 by the employees concerned and that remedial work was required by the group to improve compliance procedures and to mitigate the risk of potential future incidents," DX explained.
At a corporate governance level, DX found that there were efforts to stifle the investigation and some of the employees found to have potentially engaged in bribery were not properly punished.
On Monday, DX Group said: "The group intends to defend its position robustly and will respond to the claim in due course."
Investment bank Liberum said, as the Tuffnells claim was the subject of the lengthy corporate governance inquiry and investigation that was concluded in September 2022, it believes that "nothing has been revealed that has not already been investigated by the group".
"DX has stated that it intends to defend its position robustly. There is no impact on our investment case, with DX offering sustained double-digit earnings per share growth and strong cash generation for a June 2023E price-earnings ratio of 8.9x (fully diluted), equity free cash flow yield of 11.7% and dividend yield of 5.0%," it said.
AJ Bell's Mould, however, said DX "desperately" needs to move on from the scandal and "continue to capitalise on the progress it made during the pandemic when there was a sizeable increase in demand for parcel deliveries.
"Previously the company had a chequered history as a listed firm, littered with profit warnings and dividend cuts, so it is important to clean up this mess as soon as it can."
DX Group said it will report interim results for the 26 weeks ended December 31 on February 27.
By Heather Rydings, Alliance News senior economics reporter
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