Wincanton reports solid H1 with increases in revenue and profits 05 November 2014

Boosted by continued strong volume performance in the Construction sector

Wincanton has reported its half year results for the six months ended 30 September 2014. Revenue increased by 1.6% to £550.9 million, as underlying operating profit increased by 2.9% to £24.9 million (2013: £24.2 million). The results represent another solid half of operational and financial performance, as the Company continues to focus on contract renewals and contract wins with existing and new customers. A successful refinancing has also provided a strong financial platform to meet expectations for the current financial year.

Profit before tax of £12.7 million compares to £9.7 million in the prior year. Tax in the year was a charge of £3.0 million compared with £2.3 million in the prior year. The result after tax improved by 31.1% from £7.4 million to £9.7 million, due to the increase in operating profits and lower financing charges resulting from a combination of reduced average debt levels  (down from £175.0 million to £141.0 million), reduced fees following the refinancing concluded in the period and a lower pension financing charge.

The Contract logistics business reported revenues of £464.1 million in the period, up 0.5% on the £461.8 million reported in the same period in the prior year. The revenue increase was driven primarily by a continued strong volume performance in the Construction sector and FMCG sector offset by some volume reductions in Tankers & bulk. Within retail categories growth in grocery revenues from convenience store activities and strong household and DIY volumes were offset due to the impact of site closures as retailers reshaped their networks. Underlying operating profit for the period was £20.9 million, up 6.1% on the £19.7 million reported last year. The improvement in profitability reflects the continuing drive to improve operational efficiency and minimise costs together with the impact on mix from the change in the revenue profile.  In the six month period to 30 September the business successfully concluded a number of important renewals and extensions of services with key customers. New business wins included a three year agreement for transport logistics with Howdens, the building products group, and a three year agreement with Halo Foods. The Group also successfully renewed business with long standing customers such as General Dynamics, Waitrose wines and spirits, adidas, Total and Britvic during the period.

The Specialist businesses segment of the Group comprises Container transport activities, Records Management and the vehicle maintenance and repair business Pullman. These Specialist businesses operate almost entirely under a closed book model. Revenue for this segment was £86.8 million, an increase of £6.4 million or 8.0% on the equivalent six month period last year, with all business units reporting growth. Pullman growth was driven by the impact of the new business won to manage elements of the Asda home shopping and Argos HGV fleets in the second half of the prior year. The Group's performance on the Asda contract has resulted in it winning an increased share of the Asda home shopping fleet going forward. Underlying operating profit margin decreased to 4.6% (2013: 5.6%) and underlying operating profit was £4.0 million compared to £4.5 million in the equivalent period last year. The decrease in operating profit primarily reflects additional investment in Pullman in the period to deal with growth together with some margin pressure on renewals. Additionally in Records Management the business has invested in new business development resources in the half and in the prior year the business benefited from some higher margin non recurring projects.

Looking ahead, the Company is confident that it remains on track to meet its expectations in the current financial year.  In the first half there were continued improvements in volume in the Construction sector which correlate to the improvements in the UK macro economic outlook.  However in other key sub sectors within the Group, such as in retail and tankers & bulk, the Group has seen volume reductions and continues to experience margin pressure on renewals in the highly competitive market place in which it operates.