With growth shooting way ahead of the economy, the express delivery industry has gained much attention in recent years, no more so than in late February when one of the leading UK operators DX Group floated on the Alternative Investment Market (AIM) in London.

The IPO of the Buckinghamshire based company based raised over £200 million, making it one of the largest flotations in recent years on the AIM. With early trading of the shares fluctuating between 125p and 130p, the company is valued in excess of £250 million.

The firm’s intentions in going public are reported to be two-fold – clearing debt and investing in existing services. The first aim is evidently important from closer inspection of the company’s finances. Net interest and finance costs on debt climbed to over £30 million in 2012 and 2013, with the indirect result that the company hasn’t reported a pre-tax profit in the last five years.

Where the company might choose to invest is a more interesting question. Mintel’s forthcoming Courier and Express Delivery UK 2014  report projects that the market in the UK will expand by some 38% over the next five years, with the majority of growth being driven by increasing business-to-consumer (B2C) revenues.

DX made a significant move to build its B2C revenues in 2012, when it acquired Nightfreight, and the sale of its B2B Business Direct operation to ByBox in November 2013 was a further demonstration of its focus on balancing its mix of revenues and capitalising on increased demand from growing online retail sales in the UK.

One theme of Mintel’s research into the market is the identified need for operators to invest in accessible consumer-facing systems that will offer B2C customers more flexibility in when and how they receive a delivery.

Investment in the industry often takes the form of expanding the physical network, by expanding and improving distribution operations. However, to keep pace with competitors, such as DPD, who have invested in ever-improving services that can pin delivery down to as short as a 15-minute window, investment in front-end systems is thought to be key to securing future market share.

This is more apparent as households, rather than businesses, are increasingly the end recipients of deliveries. Mintel estimates that retail and consumer goods, as an end-use sector for express delivery services, represented 39% of the market in 2013. The same sector represented just 23% five years ago.

Convenience is replacing speed as the primary concern of end-users in the market and investment, in an industry where margins are squeezed tight, must bear this in mind.

For more information on Mintel’s Industrial & B2B report series please visit:  http://www.mintel.com/mintel-industrial-and-b2b-reports

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