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Driver cost headwinds mitigated by the Company’s business model
Wincanton has reported its half year results for the six months ended 30 September 2021. Revenue increased 19.3% to £690.3 million as profit before tax increased 31.4% to £25.1 million. Revenue growth was 28.6% in H1, excluding businesses disposed of during FY 20/21.
The Company has delivered a strong set of results in the first half of the year with record levels of growth and positive contributions from all parts of the business. Importantly, it also made meaningful progress against its strategic priorities. It completed the acquisition of Cygnia and commenced operations at an automated facility in Rockingham, and this significantly strengthens the Company’s eCommerce proposition. Driver cost headwinds were mitigated by the Company’s business model, as less than 20.0% of Group revenue is closed book transport of, which price increases or exits have been agreed on c.90.0%.
The Digital & eFulfilment sector delivered exceptionally strong growth (revenue up 58.8% to £103.2 million) through a combination of strong volumes in eFulfilment and two-person home delivery and new business in omnichannel. The most significant element of new business revenue came from the first full six months of activity in its Waitrose CFC in West London which commenced in March 2021. Other revenue growth in this sector included contracts with new customers such as Dobbies, Snug Sofa and Saint-Gobain. The new acquisition, Cygnia, will be reported within the Digital & eFulfilment sector but only made a small contribution in the half year having been purchased in mid-September.
A revenue increase of 17.0% to £252.1 million within Grocery & Consumer was driven by increased activity, particularly with Grocery customers where volumes have remained buoyant, and new business revenue including a transport contract with Heineken.
The DIY market has remained strong through the first half of the year which, along with a full period of reporting revenue from new business commenced in FY20/21, resulted in a 29.1% revenue growth in General Merchandise to £193.2 million.
Public & Industrial revenue growth of 33.0% to £141.8 million was driven by public sector volume, most notably with HMRC (Inland Border Clearance Centres) and DfT (Covid-19 driver testing), in addition to a recovery within construction and energy networks following the impacts of the Covid-19 pandemic in the prior year period. The high levels of demand in the closed book construction and energy businesses, coupled with the driver shortage and increased costs of subcontracted drivers has led to a squeeze in margins which the Company is seeking to remediate through negotiations with customers. In one instance where it was unable to achieve a satisfactory renegotiation, the Company maintained financial discipline and chose to exit the contract and redeploy resources to a more profitable customer contract.
Looking ahead, the Group remains on track to deliver full year profits consistent with market expectations. The Board is encouraged by the sales pipeline and remains confident in the Group’s future growth opportunities.