Final Results

RNS Number : 0213W

Wincanton PLC

05 June 2008

 



For Immediate Release

5 June 2008

WINCANTON plc

Preliminary Announcement of Results

for the financial year ended 31 March 2008

'EXPANDING IN GROWING MARKETS'

	2008		2007		Change
	£m		£m
Revenue	2,164.7		1,933.1		+12.0%
Underlying operating profit	52.4		45.5		+15.2%
Net financing costs	(10.8)		(9.9)
Share of results of associates	0.2		-
Underlying profit before tax	41.8		35.6		+17.4%
Net other items (note)	(5.1)		(3.0)
Profit before tax	36.7		32.6
Underlying earnings per share	24.3p		21.0p		+15.7%
Basic earnings per share	21.0p		19.7p
Proposed final dividend	10.31p		9.29p
Full year dividend	14.91p		13.55p		+10.0%

Note: Underlying profit before tax and earnings per share are stated before net other items of £5.1m (2007: £3.0m), comprising exceptional restructuring costs of £4.5m (2007: £6.0m), exceptional property profits of £0.8m (2007: £6.2m), partial settlement of the PGN Logistics Ltd arbitration case £4.1m (2007: £nil) and amortisation of acquired intangibles of £5.5m (2007: £3.2m). Operating profit, including these items, amounted to £47.3m (2007: £42.5m) up 11.3%. Profit before tax, including these items, amounted to £36.7m (2007: £32.6m) up 12.6%.

FINANCIAL HIGHLIGHTS

• Underlying profit before tax up by 17.4%, to £41.8m

• Underlying earnings per share up by 15.7%, to 24.3p

• Full year dividend increase of 10.0% to 14.91p

• Free cash flow (after net capex) of £48.3m, ROCE of 50.1%

OPERATIONAL HIGHLIGHTS

• Continued expansion of sector and service portfolio, organically and through acquisition

• Creation of Emerging Solutions business unit to increase strategic focus on higher-growth opportunities

• Key management teams significantly strengthened in Mainland Europe and profit improvement plans being implemented

Graeme McFaull, Wincanton Group Chief Executive commented:

'Wincanton continues to expand organically and through acquisition, in growing markets. We are pleased to report another year of strong profit growth and cashflow generation building further on the Group's track record of generating value for shareholders.'

For further enquiries please contact:
Wincanton plc Graeme McFaull, Chief Executive	Tel: [phone] today, thereafter
Gerard Connell, Group Finance Director	Tel: [phone]
Buchanan Communications Ltd     Charles Ryland, Jeremy Garcia	Tel: [phone]

Chairman's Statement

The Group's success is driven by the quality and enthusiasm of our people, to whom I express my thanks and those of the directors.  

Wincanton focuses on the skills of its people, on operational excellence and on the highest standards of customer service. Sustaining performance in these key areas creates, over time, a highly-skilled and motivated workforce, an industry-leading reputation for service quality and many long-standing partnerships with blue-chip customers. It is these critical factors which underpin Wincanton's current performance and provide an excellent platform for continuing growth in the future.  

The year to 31 March 2008 was another year of strong profit growth for Wincanton.  The pre-tax underlying profit of £41.8m being reported represents an increase on the previous year of 17.4 per cent. This further double-digit percentage increase in pre-tax underlying profit builds on growth in the two previous financial years of 10.2 per cent and 9.5 per cent. Wincanton, through a combination of continuing momentum in existing businesses and a well-targeted and well-executed programme of acquisitions, is delivering high levels of growth in challenging markets.

Given these sustained levels of profit growth, your Board is recommending a higher rate of dividend increase than in previous years. The proposed full year dividend this year, of 14.91p per share, represents an increase of 10 per cent on last year's 13.55p per share. As a consequence of the 15.7 per cent increase being reported in underlying earnings this year, dividend cover improves from 1.5 times to 1.6 times, even with the substantial improvement in the rate of dividend growth being recommended.  

As Wincanton continues to grow it is reassuring to see our core people, performance and customer values remaining both fundamental to our existing operations and being rapidly assimilated into all our recent acquisitions. We welcomed three new businesses to the Group this year, Swales Haulage and Hanbury Davies in the UK & Ireland, and HeBo in Germany. Swales helps us to build further on our leading position in logistics services for the construction industry. Hanbury Davies represents a further expansion of our container management operations, a fast-growing area both in the market as a whole and for Wincanton. HeBo strengthens our leading position in logistics services to the high-tech industry in Germany.  Since the year end we have also announced the acquisition of PSHL, a UK-based business with a strong presence in time-critical spare part and procurement services for the defence and aerospace industries.  These are new industries for Wincanton which we believe offer exciting growth potential.  We welcome the employees of all these businesses to the Group.

Expansion into new sectors and new services, both organically and through acquisition, is changing and renewing the Group's portfolio of activities. We are seeing continuing opportunities in our existing activities, but also successfully supplementing these opportunities through development in newer industries and services, such as construction, home delivery, records management, recycling, container management and foodservice. These activities already represent some 20 per cent of the contract contribution, before central overheads, of our business in the UK & Ireland.  A number of these businesses have been transferred to a new business unit, Emerging Solutions, to ensure that these activities receive the appropriate level of operational and strategic focus and deliver their above-average growth potential for the Group.

The continuing strength of the Group's existing businesses and customer relationships was again confirmed by the fact that some 70 per cent of the new business won in the year in the UK & Ireland, and over 65 per cent of the new business won by the Group overall, was awarded by existing customers.  

Re-organisation of our management structures and the re-focusing of our strategic priorities have also been features of the year in Mainland Europe. Our operations in Germany are beginning to benefit from the tactical and strategic initiatives of our significantly strengthened management team.  Our activities in France and the Benelux countries have been formed into a new Western Europe business unit, and the senior team in this region has also been reinforced with highly-experienced recruits in key functions. In Central & Eastern Europe, our regional Managing Director has brought in new country heads in both Hungary and the Czech Republic.  

We have much still to do to deliver meaningful profit progress in Mainland Europe, but good management teams are in place and are implementing our profit improvement plans, our increased investment in marketing is clearly delivering higher brand awareness and the new business pipelines are beginning to offer grounds for encouragement.

We have set ourselves stretching objectives for the new financial year. Good progress is being made, particularly in the UK & Ireland, towards the delivery of our challenging new business targets. In respect of Mainland Europe we believe that further progress will be made and are encouraged, for example, by the strong action being taken to improve the performance of the German road network.  

We operate in highly competitive markets and the current economic outlook is uncertain, but we continue to have confidence in Wincanton's ability to build further on the achievements of recent years. Our objective is for 2008/09 to be another period of progress for the Group, confirming Wincanton's position as a European leader in its sector.

On 9 May 2008 a statement was released to The London Stock Exchange regarding a possible offer by Wincanton for TDG plc. The statement contained the following commitment: 'No offer will be made if due diligence does not confirm Wincanton's assumptions which indicate that a transaction would be substantially value-enhancing for Wincanton shareholders.' As at the date of our preliminary results announcement, 5 June, due diligence was continuing. A further announcement will be made in due course.

I will be retiring from the Board at this year's Annual General Meeting and I am delighted to announce my replacement by David Edmonds, who is currently the Senior Independent Director and has served on the Board since December 2004.  In addition we welcome Neil England, a non-executive director of ITE Group plc, The Eastern European Trust PLC and Silverstone Holdings Limited, who joined the Board on 3 June 2008 as a non- executive Director.

Wincanton has grown consistently, and well, since its demerger and listing on the London Stock Exchange in May 2001. It is a business which has transformed itself from its position as one of the smaller players in the UK to become one of the leading European operators of supply chain services. It is a business with the potential to sustain, and accelerate, this growth under the leadership of Graeme McFaull, with the support of David Edmonds and their Board colleagues. I know that this potential can and will be delivered and wish Graeme, David and colleagues continuing success in the years ahead.

Business Review

Introduction

We are pleased to be able to report to shareholders a further period of significant profit progress in the financial year to 31 March 2008.  

Our operations in the UK & Ireland delivered another excellent performance, reporting a 12.4 per cent increase in operating profit on the prior year, which was itself an 11.1 per cent increase on the previous financial period. These are strong levels of growth and continuing momentum which, given that the UK currently represents approximately 90 per cent of our consolidated operating profit, have continued to drive the performance of the Group overall.

In the UK & Ireland, we are growing well with existing customers, winning market share from our competitors and identifying and successfully entering new sectors and new service areas. Our customer portfolio is already well-diversified, but there are many sectors of the economy in which we are either not present or under-represented, and there are new service areas which offer growth potential as our customers' outsourcing requirements continue to expand. 

We see no shortage of opportunities for continuing growth in the UK & Ireland.

Our businesses in Mainland Europe reported a significant year-on-year percentage increase in operating profit, but profit remains unacceptably low in terms of both quantum and margin.

Tactical and strategic plans are in place, in each of our Mainland European business units, to improve this performance and to continue to make progress towards our margin improvement targets. The significantly strengthened management teams in our current core markets of France, Germany and Poland are implementing tactical plans to increase operating efficiencies and improve the profitability of our existing activities, and focusing our development resources on targeted customers in those market sectors identified by our strategy work as offering the best potential to accelerate our top-line growth.

We are encouraged by the actions being taken, and the progress being made, in these core markets. In the short-term, our profit performance bears the expense of our increased investment in marketing and business development and the higher employment costs of the expansion, reinforcement and renewal of our senior management teams. In the medium-term, we believe that the actions being taken, and these higher levels of investment will deliver our targeted levels of margin and profitability in Mainland Europe and broaden and further diversify the business and profit base of the Group.

Strategy

The European market is our core geographic focus, our home market. It is a market of 495 million consumers. It has a substantial manufacturing and retailing infrastructure and significant national, cross-border and international flows of raw materials, finished products and services. Many of the world's largest trade flows are intra-European movements in the consumer goods, industrial, high-tech, automotive, chemical and agricultural industries. It is business-critical trade flows such as these that Wincanton manages on behalf of customers.  Europe is a geographic market in which the Group is building a leading presence and which offers substantial opportunities for future growth.  

By focusing on both wider European coverage and strength in national markets, particularly in our current core markets of the UK, Germany, France and Poland, we are able to serve the requirements of our customers in Europe's key domestic economies and on a cross-border or Pan-European basis if required.

The Group's existing activities across Europe give a competitive advantage in an industry which remains fragmented, with large numbers of small operators and a very limited number of Pan-European or global service providers. We have more significant scale and a broader geographic reach than these small operators and a higher degree of customer focus, operational flexibility and service specialisation than the larger global groups in our sector.

We have a strong portfolio of customers across Europe, including long-standing relationships with many of the world's major retailers and manufacturers, and have a proven track record of growth with these customers.  Maintaining and enhancing supply chain efficiency is business-critical to our customers. We have successfully expanded our geographic presence without losing either the customer service ethos or the people culture which represent the core of our business offering.

Changes in legislation, strategy, technology and the economy lead to both tactical and strategic change in the supply chain needs of our customers. We continue to invest in our people, our services, our systems technology and our processes to ensure that we offer the innovation, operational excellence and value which deliver the solutions to meet these changing customer needs and enable us to compete successfully in our chosen markets.

Our strategy process identifies both opportunities with existing customers and services and the potential for growth with new customers in new sectors and new services. We have created a new business unit, Emerging Solutions, to ensure that a number of these new sectors and new services receive the operational and strategic focus that will help to deliver their full, above-average growth potential.

We serve a well-diversified customer base, deliver a wide range of business-critical solutions and offer a Pan-European presence which is already amongst the best in the sector. We have a clear vision and strategy which we believe will generate further value for shareholders by continuing to add value for customers. We see growth opportunities both in our existing portfolio of customers, sectors and services and in newly-targeted customers, sectors and services identified through our rigorous business development and strategy processes.

Our strong profit and cash flow performance gives us the financial capacity to take advantage of new opportunities. We actively consider opportunities to expand our portfolio of services and sector expertise, both organically and through acquisition. Acquisitions are also expected to contribute to the further strengthening and expansion of our geographic presence across Europe.

We look to the future with confidence.

2007/08 Summary

Consolidated results

Total revenue for the Group for the financial year was 12.0 per cent higher than the previous year, at £2,164.7m. Underlying operating profit increased by 15.2 per cent to £52.4m and accounting margin improved from 2.35 per cent to 2.42 per cent. Growth in underlying operating profit, adjusting for the contribution from acquisitions made in the current year, was 10.7 per cent.

Underlying operating profit is stated before exceptionals and amortisation of acquired intangibles.

Neither the rate of revenue growth nor headline accounting margin are amongst the Group's key financial performance measures due to the 'cost plus' or 'open book' nature of much of Wincanton's underlying business model. 

Our key financial measures are the net rate of growth in underlying operating profit, up 15.2 per cent in the year, free cashflow generation and return on capital.

Strong cashflow generation, based on our 'asset light' business model and a consequent high profit to cashflow conversion rate, has been a consistent feature of Wincanton's financial performance. We recorded a profit to free cashflow conversion rate of 92 per cent in the year to 31 March 2008 (159 per cent in the year to 31 March 2007) and a positive cash inflow of £48.3m after net capital expenditure. The year end return on capital employed was slightly lower, at 50.1 per cent, but remains at industry-leading levels.

The revenues of the Group increased in the year by £231.6m as a consequence of the acquisitions made plus new business wins, net of business losses. In the year, annualised new wins and renewals of £315m were achieved; £265m in the UK & Ireland and £50m in Mainland Europe. Although below last year's total of £395m, which was materially increased by the major gain, in the UK, of a 5-year exclusive contract with Somerfield, and, in Germany, by a renewal of a combined transport and warehousing contract for Zanders, this further year of significant growth confirms the continuing strength and resilience of our customer relationships, the quality and creativity of our new business proposals and our ability to continue to gain market share in challenging and competitive markets.  

This year, as is the case in most years, we have had ground to make up for both contract losses and a degree of fee pressure on certain renewals, but our very strong underlying new business momentum has nonetheless allowed the Group to make very encouraging net progress across a broad range of retailing and manufacturing customers.

UK & Ireland

Performance Highlights

Our operations in the UK & Ireland reported underlying operating profit of £47.2m, an increase of 12.4 per cent on the prior year, on revenue up 14.3 per cent to £1,388.7m.

2007/08 was another year of sustained high levels of activity in the UK & Ireland, with attractive growth opportunities successfully targeted and delivered in both our existing activities and our newer service and sector offerings.  

New Business

In newer activities such as home delivery, we saw business growth with major manufacturers and retailers including Hoover Candy and Homebase. Hoover Candy brings an average of 1,250 deliveries per week to our national home delivery network. In addition to our existing operations providing dedicated home delivery of Homebase's kitchens we now also provide warehousing for Homebase's bathroom products range at our shared-user site in Doncaster. In newer sectors, such as construction, we added significant new activity with CEMEX, an existing customer, and added substantial new business with customers such as Wavin, a leading European manufacturer of plastic and clay piping products, for whom we now operate their whole UK warehousing and transport operations.

Our increased focus in recent years on other newer sectors of activity, such as foodservice, also contributed positively to our new business and renewals momentum in the year, with a 10-year extension of our national network operations for Punch, and the addition of a new 3-year contract with Tragus, delivering 2.6 million cases per year through our network to its outlets such as Café Rouge and Bella Italia. We saw similar gains as a result of our successful targeting of drinks manufacturers, adding customers such as Beam Global to our existing customer base, a new contract involving co-packing and product rework in addition to national warehousing and distribution.

There were also interesting opportunities in other newer service areas. In recycling, we added a new contract with Argos, an existing customer, which we expect to operate in a similar fashion to the successful national fridge collection service we already manage for Comet. Starting in March 2008 we will be responsible for the collection of all electrical products returned to Argos's home delivery centres, delivering an anticipated 100,000 units per annum for processing and recycling at our Billingham site. Consilium, our consulting business, won advisory mandates from a wide range of both retailing and manufacturing companies, many of them not currently Wincanton customers, analysing strategic supply chain solutions in domestic markets and on a cross-border or Pan-European basis. In data records management, current rates of growth are expected to fill our recently-expanded new facility in London ahead of plan, and we are actively exploring opportunities to expand this business to give national coverage. 

Constantly challenging ourselves to also generate new business opportunities in our longer-standing sectors of activity saw significant new business in retailing, with customers such as Dunnes and Superquinn in Ireland and Sainsbury's in the UK, in automated warehousing with a substantial expansion of our business with Screwfix and with P & G, and in the expansion of our services to existing customers with a new 5-year co-packing contract with Nestlé Purina using robotic pickers and highly-automated packing technology. We were also pleased to see our commitment to industry-leading standards of health and safety and operational performance lead to contract renewals and extensions with major petroleum companies such as Shell, ConocoPhillips and ChevronTexaco. For ChevronTexaco, for example, we renewed our existing contract to manage a fleet of 255 drivers, providing a national 24/7 delivery service, from ten locations, distributing 3.2 bn litres of retail and commercial fuel per annum.

Mainland Europe

Performance Highlights

Underlying operating profit in the second half of the year was £3.1m, an encouraging increase on both the first half of this year and the corresponding period last year. On second half revenue of £414.1m, this represented an accounting margin of 0.8 per cent, compared to a margin of 0.6 per cent in the first half and 0.6 per cent in the corresponding period last year. This reported increase is after charging higher costs arising from increased marketing spend, which is successfully delivering marked improvements in brand awareness, and higher employment costs as a consequence of the renewing and strengthening of our senior management teams. This level of reported profitability and margin clearly remains some way below our targeted operating profit margin of 2 per cent. There are, however, encouraging signs that material progress in profitability can be delivered in Mainland Europe and that progress is being made towards this target.  

France accounts for around 16 per cent of our revenue in Mainland Europe and Poland for approximately  a further 8 per cent. Our French business delivered our target operating profit margin in the year and is capable of sustaining performance at this level. Our Polish business made good progress towards our margin target in the year but the regional results for Central & Eastern Europe as a whole were adversely affected by the start-up issues on a Hungarian contract referred to at the half year. With these issues now resolved we see the margin target being achievable for both Poland and the Central & Eastern European region as a whole.

Germany accounts for approximately 70 per cent of our revenue in Mainland Europe. Within Germany we have three principal areas of activity; our domestic road network, our intermodal business and our contract logistics operations. Our intermodal business and contract logistics activities in Germany are either already delivering our target margin or are making good progress towards it.  Although an important part of our overall service offering to customers, which links well with both our logistics and intermodal activities, in a way which few of our competitors can match, the road network, however, is currently loss-making on some £200m of revenue.  

Our key challenge, if we are to deliver our operating margin target in Mainland Europe, therefore lies in Germany, in our domestic road network.  

Within our German operations our major focus has been, and will continue to be, improving the performance of this domestic road network. Our new German management team has fundamentally re-assessed the operational performance, service offering and market performance of the network. They have identified, and begun to implement, plans to materially improve its profit performance over the next 18 - 24 months. The initial results from this action plan give cause for encouragement that further progress can and will be made in this critical area.  

New Business

Annualised revenue from new wins and renewals in Mainland Europe was £50m in the year to 31 March 2008, a lower level than in 2006/07 as a consequence of a lower level of renewals, down from £25m to £5m, and a reduced focus on new business development in Central & Eastern Europe pending stabilisation of the contract start-up issues in Hungary previously referred to. In the second half of the year, however, increasing brand awareness and the targeted efforts of our strengthened new business development teams have begun to deliver results and we have seen an increased flow of new tender opportunities. We would expect this increased flow to result in higher levels of new business wins as we enter the new financial year.

New wins and renewals were recorded in France with customers such as Christofle, EDF, Jardiland, and Velux. We were also awarded a major new contract with a multinational oil company to operate their new-build packaged lubricants warehouse which will be responsible for national distribution. In addition we recently signed a letter of intent with a large drinks company in respect of the transfer of their existing warehousing operation for beer products in Northern France. Our ability to pitch for, and win, new projects of this complexity gives grounds for optimism that our French business can compete, and win, in this highly competitive marketplace.

Our other principal operations in the Western Europe region are the international transport activities based in Holland. We believe that international transport flows will continue to grow faster than domestic movements and are expanding our hub capacity at our largest Dutch site, on the Dutch / German border, to provide the capacity to manage this expected growth. Our international transport activities overall have been strengthened by the recruitment of a new team, based at our German head office in Mannheim, to co-ordinate our current international flows more efficiently and strengthen our market offering in this area for the future. New business in international transport won in the year by our Dutch operations included the collection and distribution of commercial vehicle parts for MAN and a 5-year contract renewal with Thyssen Group for steel transportation to Kazakhstan.

Although more focused this year on stabilising and improving the performance of certain existing activities, our Central & Eastern European businesses nonetheless successfully renewed our contract with Numico for a further three years, gained sole supplier status for Electrolux in Poland at the expense of one of our competitors, gained a 3-year transport and warehousing contract for JohnsonDiversey, a new customer, and a 3-year contract for domestic warehousing and distribution in Poland for Rieber Foods, another new customer.

Our Central & Eastern European businesses are also seeing growing opportunity in international transport as the region proves increasingly popular both as a manufacturing centre and as a distribution hub for countries further to the East and South-East. A new customer in the year in international transport was Wrigley, for whom we now manage export flows to the Czech Republic, Slovakia, Serbia, Croatia and Montenegro.

In Germany, much of our new business in any financial period tends to be transactional rather than based on longer-term contracts, particularly in our road network and intermodal operations. In the road network, business gains and renewals included Europe-wide distribution of hazardous materials and chemicals for Julius Hoesch and domestic and European distribution for Lorenz Snackworld. Our intermodal business saw the development of a number of interesting opportunities in our container management operations which organise the movement of goods by sea, river and rail. Our network of container terminals on the Rhine, in particular, is an increasingly attractive strategic asset enabling us to offer environmentally-friendly barge-based container services to a wide range of industries. Within our contract logistics activities, our recognised leadership in certain key value-added sectors and services also delivered good opportunities for contract renewal and new business growth. Wins and renewals in the period included a contract to distribute ATMs to Germany, Benelux and Ireland for Wincor Nixdorf, a European transport operation for FujitsuSiemens delivering server racks to business datacentres and a contract with Ikon Office Solutions delivering and installing photocopiers.

Net financing costs

The net financing costs of the Group, at £10.8m, are higher than last year's £9.9m, substantially as a consequence of the higher prevailing levels of market interest. The average borrowing rate in the year was 6.7 per cent, an increase on last year's 5.0 per cent. Net financing costs were nonetheless covered 4.9 times by underlying operating profit.  

Exceptionals 

The net exceptional profit for the year of £0.4m was the result of net exceptional costs of £4.5m, offset by £0.8m of profit on the disposal of a surplus property in the UK and a £4.1m credit in respect of a preliminary court award in our favour in respect of the PGN arbitration proceedings that we have referred to in previous years.  

We would anticipate an additional credit, and cash receipt, as a consequence of finalisation of the PGN arbitration process. There is also the potential for further property disposals in the new financial year. 

Wincanton retains operational freehold properties on its balance sheet with a net book value of some £70m. These properties have not been subject to revaluation but their market values and operational importance to the business are reviewed on a regular basis.  

Of the principal exceptional costs in the year, £1.0m arose from the integration of our three acquisitions, a £3.0m cost was incurred in respect of the closure of our Wuppertal depot as part of the restructuring of our road network operations in the North Rhine Westphalia region in Germany, and a £4.2m cost was generated by further restructuring of our Dutch and French businesses, principally relating to the closure of a surplus site in the Orleans region.

Taxation

The Group's underlying accounting tax rate of 30.9 per cent is broadly consistent with prior years and gives rise to a charge of £11.7m.

The overall tax rate of 31.9 per cent (2007: 29.4 per cent) is marginally greater than the underlying rate due to the combination of capital profits, which continue to be offset by capital losses brought-forward, and the mix of tax treatments of the other exceptional costs and profits.

As a result of the reduced level of incremental pension contributions made in the year, as compared to previous years, the current tax cash rate has increased to 25.6 per cent from 4.6 per cent.

The Group's activities are across the UK and Europe where tax rates vary from 12.5 per cent to 38 per cent. With the combination of the reduction in the standard UK rate of corporation tax effective for 2008/09 and the availability of brought-forward unrecognised losses it is expected that the Group's overall rate of tax will reduce in future years.

Minority interest, earnings and dividend

The Group has a small number of activities in its Mainland European operations with a minority shareholding, the principal of which is Rhinecontainer BV in which there is a 25.8 per cent minority stake. The profits attributable to minorities in the year were £0.5m (£0.1m in 2006/07).

Underlying earnings per share of 24.3p were 15.7 per cent higher than the 21.0p reported last year.

A final dividend of 10.31p is proposed, to give a full year total of 14.91p, a 10 per cent increase on the 13.55p proposed and paid in respect of 2006/07. As in previous years, in which the compound annual rate of growth in the dividend has been 7.1 per cent, the dividend increase proposed represents a rate of increase significantly in excess of inflation.

The dividend cover for this proposed level of full year dividend is 1.63 times, an improvement on the prior year 1.55 times. Given Wincanton's track record of profit growth and cashflow generation, and our confidence in the Group's ability to continue building on this track record, these are considered to be appropriate and sustainable levels of dividend cover.

Cashflow and net debt

The Group recognises cash return on investment as a key performance measure and continues to focus on sustaining the high levels of free cashflow generation that have been a consistent feature of Wincanton's financial performance.

Cash inflow from operations of £77.2m, before exceptionals, capital expenditure, pension deficit payments and tax, was marginally below last year's £78.6m, principally as a consequence of a small working capital outflow. Free cashflow of £48.3m, after exceptionals and net capital expenditure, was lower than last year's £72.2m as a result of capital expenditure, unusually, being higher than depreciation and also offset by lower levels of asset disposals in the year.

Acquisitions in the year led to cash outflows of some £32.4m.

Capital expenditure is clearly a significant cashflow item for the Group, and considerable management focus is directed at whether to buy or 'operating lease' assets for use in supplying services to customers. Capital expenditure this year, at £42.9m, represents 130 per cent of depreciation (2006/07: 92 per cent) and was higher than in previous years.  In recent years capital expenditure has run below the level of the Group's depreciation charge. 

The year's expenditure was split as to £27.5m on expansion projects and £15.4m on the replacement of existing assets, compared to £22.5m and £7.0m respectively in the prior year. The higher levels of spend in 2007/08 are a consequence of the nature of the assets required for use in both new and existing contracts.  

Major projects in the year requiring on-balance sheet investment included the new co-packing activity for Nestlé, warehouse racking and fitting for new operations for Woolworths, Tragus and Screwfix and the replacement of specialist delivery vehicles as a consequence of the renewal of the contract for our national foodservice network for Punch. Principal expansion and replacement projects in Mainland Europe included the purchase of land for our new international transport hub being built on the Dutch / German border and warehouse fit-out projects in France.

Additional vehicle and plant operating lease commitments in the year related to £8.2m for expansion projects and £16.4m for replacements. These projects were for a diverse range of customers and activities, including new vehicles for the Gas & Petroleum, Construction and Home Delivery operations.

The Group's operating lease commitments in respect of land and buildings, which are determined to the first available break date after the sub-letting of properties surplus to requirements, are substantially offset by contractual commitments of customers, as are a significant proportion of the Group's commitments in respect of vehicles and plant.

All expansion, replacement and acquisition spend proposals are appraised using discounted cash flow models and are subject to authorisation at appropriate levels in the Group up to and including the main Board. The projected implementation timescale and returns on projects are subsequently scrutinised at the same level after the first operational year.  In excess of 90 per cent, by value approved, of the capital backchecks in the year either met or exceeded their projected rate of return.

The aforementioned cashflow items led to an increase in the Group's net debt to £104.5m at 31 March 2008 (31 March 2007: £65.8m). This is reported after deducting £26.5m of cash held in the Group's captive insurer (last year £27.4m) to cover the potential claims underwritten by that company. 

The Group continued to enjoy solid support in debt markets, with £210m of committed funds available from a banking syndicate of leading UK & Mainland European banks and $150m of 7 and 10-year funding raised from the US private placement market in late 2005 and subsequently swapped into floating rate sterling and euro liabilities. £162m of this total of £308m of committed facilities was undrawn at 31 March 2008.  The Group's banking facilities will require to be renewed by November 2010.  

The Group also has £25m of uncommitted money market facilities now in place which, together with the approximately £35m of overdraft facilities currently available, give further flexibility in the day-to-day management of the net 'drawn down' position.

The scale of the Group and the size of individual operations means that the working capital position can vary significantly over a monthly cycle. Flexibility of funding, based on an appropriate mix of committed and uncommitted facilities with a range of maturities, helps to reduce overall borrowing costs.

The Group has a mix of sterling and euro denominated bank debt and derivatives (to convert the US$ placement funds) which match the currencies of the Group's assets. Interest rate exposures have been limited first with a £15m floating to fixed swap and secondly by the purchase of a €100m 4.3 per cent cap and a £30m 6.3 per cent cap.

The central Treasury function monitors all currency and interest rate exposures and ensures appropriate hedge arrangements are in place. The Group operates sterling and euro 'pools' such that surplus cash is netted against overdrawn balances, to maximise the efficiency of short-term liquidity. No speculative trading is carried out and all financial instrument trades are designed to meet the operational needs of the business.

Return on capital employed

Return on capital employed is another of the Group's key performance measures. At 31 March 2008 year end return on capital employed remained very high, at 50.1 per cent, albeit at a slightly lower level to the prior year's 55.2 per cent. The Group's 'asset light' business model generally enables the Group to deliver significant growth without extensive utilisation of balance sheet capacity. 

Goodwill and intangibles 

The three acquisitions in the year gave rise to an additional £27.6m of goodwill and acquired intangibles. Acquired intangibles are being amortised over their useful lives of between 1 and 15 years and the charge of £5.5m is shown separately in the income statement.

Pensions

This key area for the Group continued to receive substantial management attention, not least in preparation for discussions with the pension fund trustees in respect of the triennial valuation as at 31 March 2008. We would expect the preliminary results of the valuation to be available in the second half of the new financial year, with discussions between the Group and the trustees being finalised either towards the end of the new financial year or early in the first half of the subsequent financial year.

The last triennial valuation in 2005 was finalised before the introduction of the new pensions regulatory regime. The key financial and demographic assumptions on which this valuation was based are expected to give rise to more detailed discussion between the trustees and the Group in respect of the 2008 valuation. In preparation for these discussions the Group is currently carrying out work in respect of critical areas such as scheme-specific mortality rates, investment strategy, and the potential for liability reduction exercises.

In volatile markets there have been significant variations within the year in both the accounting (IAS 19) and actuarial valuations of the pension fund's assets and liabilities. The accounting valuation has varied from an opening £72.1m deficit to a £2.3m deficit at the year end and has averaged approximately £35m through the year. As at 12 May, the latest practicable date before the announcement of the Group's preliminary results, the accounting deficit was estimated at some £40m.

There has been similar volatility in the actuarial valuation of the deficit. The actuarial deficit based on the 2005 assumptions, which, as noted above, are being actively reviewed by the Group, has been as low as £30m in June 2007, as high as £190m in March 2008 and at 12 May, as above, was estimated at £145m.

All deficit calculations exclude the effect of deferred tax, which at current rates would serve to reduce the gross deficits above by 28 per cent.

Risks

The Group has a well developed structure and set of processes for identifying and mitigating the key business risks it faces. These are described in detail in the Corporate governance report in the Annual Report and Accounts and certain of these key risks are also discussed elsewhere in this Business review.

The Group's ability to source new contracts, at an appropriate financial return for an acceptable level of risk, represents the principal area of commercial risk. Both new and existing contracts must then perform consistently within the demanding performance requirements of our customers. This is the Group's principal area of operational risk. As a service business delivering high levels of added-value to our customers, our principal human resources risk lies in the sourcing, motivation and retention of sufficient numbers of quality people to meet the demands of both our current business and our future growth.  

Wincanton's principal strategic risk is the requirement to continue to identify sufficient new areas of potential growth, both organically and through acquisition, to enable the Group to continue to build on its strong track record of profit growth and cash flow generation.

Consolidated income statement

for the year ended 31 March 2008

		2008 £m		2007 £m
	Note
Revenue	2	2,164.7		1,933.1
Underlying operating profit		52.4		45.5
Amortisation of acquired intangibles	2	(5.5)		(3.2)
Exceptional restructuring costs and income	3	(4.5)		(6.0)
Other exceptional income	3	4.9		6.2
Operating profit	3	47.3		42.5
Financing income	4	3.7		3.7
Financing cost	4	(14.5)		(13.6)
Net financing costs		(10.8)		(9.9)
Share of results of associates		0.2		-
Profit before tax		36.7		32.6
Income tax expense	5	(11.7)		(9.6)
Profit for the year		25.0		23.0
Attributable to
- equity shareholders of Wincanton plc		24.5		22.9
- minority interests		0.5		0.1
Profit for the year		25.0		23.0
Earnings per share
- basic	6	21.0p		19.7p
- diluted	6	20.6p		19.4p
Dividends paid in the year to equity shareholders of Wincanton plc (£m)	7	16.2		14.9

Consolidated statement of recognised income and expense

for the year ended 31 March 2008

		2008		2007
		£m		£m
Actuarial gains on defined benefit pension schemes (net of deferred tax)		43.6		9.4
Net foreign exchange gain on investment in foreign subsidiaries net of hedged items		1.0		-
Tax taken directly to equity		0.2		0.7
Net gain recognised directly in equity		44.8		10.1
Profit for the year		25.0		23.0
Total recognised income and expense for the year		69.8		33.1
Attributable to
- equity shareholders of Wincanton plc		69.3		33.0
- minority interests		0.5		0.1
Total recognised income and expense for the year		69.8		33.1

Consolidated balance sheet

at 31 March 2008

		2008		2007
		£m		£m
Non-current assets
Goodwill and intangible assets		142.7		113.2
Property, plant and equipment		231.0		211.4
Investments, including those equity accounted		0.8		0.6
Deferred tax assets		2.2		11.8
		376.7		337.0
Current assets
Inventories		9.4		8.2
Trade and other receivables		402.0		331.1
Cash and cash equivalents		67.4		60.9
		478.8		400.2
Current liabilities
Income tax payable		(8.6)		(4.4)
Borrowings		(10.0)		(1.6)
Trade and other payables		(520.2)		(444.1)
Employee benefits		(8.9)		(7.7)
Provisions		(19.2)		(20.1)
		(566.9)		(477.9)
Net current liabilities		(88.1)		(77.7)
Total assets less current liabilities		288.6		259.3
Non-current liabilities
Borrowings		(161.9)		(125.1)
Other payables		(1.4)		(5.0)
Employee benefits		(31.8)		(99.6)
Provisions		(39.6)		(42.0)
Deferred tax liabilities		(16.9)		(1.3)
		(251.6)		(273.0)
Net assets/(liabilities)		37.0		(13.7)
Equity
Issued share capital		12.1		12.0
Share premium		11.9		9.6
Merger reserve		3.5		3.5
Translation reserve		3.7		2.7
Retained earnings		5.4		(41.8)
Equity/(equity deficit) attributable to shareholders of Wincanton plc		36.6		(14.0)
Minority interest		0.4		0.3
Total equity/(equity deficit)		37.0		(13.7)

Consolidated statement of cash flows

for the year ended 31 March 2008

					2008		2007
					£m		£m
Operating activities
Profit before tax					36.7		32.6
Adjustments for
- depreciation and amortisation					38.6		35.1
- interest expense					10.8		9.9
- income from associates					(0.2)		-
- profit on sale of property, plant and equipment					(4.7)		(9.3)
- share-based payments fair value charges					2.7		1.6
Operating profit before changes in working capital and provisions					83.9		69.9
Increase in trade and other receivables					(30.8)		(10.3)
Increase in inventories					(0.5)		(0.4)
Increase in trade and other payables					30.2		15.0
Decrease in provisions					(7.0)		(3.1)
Decrease in employee benefits					(7.6)		(29.6)
Income taxes paid					(5.3)		(1.4)
Cash generated from operations					(21.0)		(29.8)
Cash flows from operating activities					62.9		40.1
Investing activities
Proceeds from sale of property, plant and equipment					18.1		32.2
Proceeds from sale of unlisted trade investments					-		0.1
Interest received					2.0		1.7
Acquisitions net of cash acquired and debt repaid on acquisition					(32.4)		(29.7)
Acquisition of property, plant and equipment					(42.9)		(29.5)
Cash flows from investing activities					(55.2)		(25.2)
Financing activities
Proceeds from the issue of share capital					2.3		3.1
Disposal of own shares on exercise of options					0.4		1.2
Own shares acquired					(7.9)		-
Increase in borrowings					30.1		13.4
Payment of finance lease liabilities					(1.1)		(1.6)
Dividends paid to minority interest in subsidiary undertakings					(0.4)		(0.1)
Equity dividends paid					(16.2)		(14.9)
Interest paid					(11.9)		(10.9)
Cash flows from financing activities					(4.7)		(9.8)
Net increase in cash and cash equivalents					3.0		5.1
Cash and cash equivalents at beginning of year					60.9		56.1
Effect of exchange rate fluctuations on cash held					3.5		(0.3)
Cash and cash equivalents at end of year					67.4		60.9
Represented by
- cash at bank and in hand					40.9		33.5
- restricted cash, being deposits held by the Group's captive insurer					26.5		27.4
					67.4		60.9

1     Accounting policies

The financial information set out in this preliminary announcement does not constitute Wincanton plc's statutory accounts for the years ended 31 March 2008 and 31 March 2007. Statutory accounts for the year ended 31 March 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies. The Auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

This preliminary announcement has been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB) and by the EU (Adopted IFRS).

2    Segment information

Segment information is presented in respect of the Group's geographical segments, being the primary segmentation format based on the Group's management and internal reporting structure. As the secondary segment is the business of providing contract logistics services which encompasses the entire scope of Wincanton's operations, no further segmental analysis is required.

The Group operates in two principal geographical areas, the UK & Ireland, and Mainland Europe. In presenting information on the basis of geographical segments, segment revenue and assets are based on the geographical location of the business operations. 

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 

Geographical segments

	UK & Ireland				Mainland Europe				Consolidated
	2008		2007		2008		2007		2008		2007
	£m		£m		£m		£m		£m		£m
Revenue1	1,388.7		1,214.5		776.0		718.6		2,164.7		1,933.1
Underlying operating profit by segment	47.2		42.0		5.2		3.5		52.4		45.5
Amortisation of acquired intangibles	(4.0)		(1.7)		(1.5)		(1.5)		(5.5)		(3.2)
Exceptional restructuring costs and income	2.7		(2.0)		(7.2)		(4.0)		(4.5)		(6.0)
Other exceptional income	0.8		5.8		4.1		0.4		4.9		6.2
Operating profit	46.7		44.1		0.6		(1.6)		47.3		42.5
Total assets	512.8		457.4		342.7		279.8		855.5		737.2
Total liabilities	(577.6)		(574.1)		(240.9)		(176.8)		(818.5)		(750.9)
Depreciation charges	(23.2)		(21.5)		(8.5)		(8.4)		(31.7)		(29.9)
Amortisation of software intangibles	(0.7)		(1.1)		(0.7)		(0.9)		(1.4)		(2.0)
Capital expenditure
- property, plant and equipment	33.1		20.3		7.8		8.3		40.9		28.6
- software intangibles	1.5		0.1		0.8		0.8		2.3		0.9

1 Revenue derived from sales to external parties only.

In addition to the above external revenue, there were intra-segment sales of £1.7m from UK & Ireland to Mainland Europe (2007: £1.6m) and £2.0m from Mainland Europe to UK & Ireland (2007: £1.4m). All such sales are priced on an arm's-length basis.

The investments in and profits of associated undertakings are all included in the Mainland Europe segment.

3    Operating profit

The Group's results are analysed as follows:

	2008						2007
	Underlying 1  £m		Amortisation of acquired intangibles and exceptionals £m		Total £m		Underlying 1  £m		Amortisation of acquired intangibles and exceptionals £m		Total £m
Revenue	2,164.7		-		2,164.7		1,933.1		-		1,933.1
Cost of sales	(2,074.6)		(3.3)		(2,077.9)		(1,850.2)		(3.9)		(1,854.1)
Gross profit	90.1		(3.3)		86.8		82.9		(3.9)		79.0
Administrative expenses	(37.7)		(1.8)		(39.5)		(37.4)		0.9		(36.5)
Operating profit	52.4		(5.1)		47.3		45.5		(3.0)		42.5

1 Underlying operating profit is stated before amortisation of acquired intangibles and if applicable, any impairment of goodwill and exceptionals.

	2008 £m		2007 £m
Operating profit before net financing costs is stated after charging:
Auditors' remuneration
Audit fees for statutory audit services
- parent company and consolidation	0.1		0.1
- subsidiary undertakings	0.6		0.6
Non-audit fees
- fees paid to the Auditors and their associates for tax advisory services	0.2		0.3
- fees paid to the Auditors and their associates for assurance services	0.1		0.1
- fees paid to the Auditors and their associates for other services	0.2		0.1
Depreciation and other impairment amounts written off property, plant and equipment
- owned	30.9		29.4
- leased	0.8		0.5
Amortisation and other amounts written off software intangibles	1.4		2.0
Operating lease rentals
- plant and equipment	51.2		43.3
- land and buildings	63.4		62.2

Exceptionals  Exceptional restructuring costs and income	2008 £m		2007 £m
Reorganisation of operating structures post-acquisition	(1.0)		(4.0)
Relocation of UK head office and business rationalisation 2	3.7		0.2
Closure and reorganisation of operations in France and Germany (2007: Spain and Germany)	(7.2)		(2.2)
	(4.5)		(6.0)
Other exceptional income
Property profits - sale of freehold land and buildings	0.8		6.2
Partial settlement of the PGN Logistics Ltd arbitration case	4.1		-
	4.9		6.2

2 Includes the profits on sale of the redundant UK head office sites.

Costs and incomes are included as exceptionals where they are non-recurring and where not to do so would distort the reported underlying profit performance of the Group.

  4    Net financing costs

Recognised in the income statement		2008 £m		2007 £m
Interest income		2.5		1.7
Expected return on defined benefit pension scheme assets		35.5		32.0
Interest on defined benefit pension scheme obligations		(34.3)		(30.0)
		3.7		3.7
Interest expense		(12.2)		(11.0)
Finance charges payable in respect of finance leases		(0.6)		(0.5)
Unwinding of discount on insurance and other provisions		(1.7)		(2.1)
		(14.5)		(13.6)
Net financing costs		(10.8)		(9.9)

The interest income relates primarily to the deposits held by the Group's captive insurer.

The expected return on assets and the interest on obligations in respect of the defined benefit pension scheme have been combined in the current year and the prior year restated accordingly.

Recognised in equity	2008 £m		2007 £m
Foreign currency translation differences for foreign operations	1.0		-
	1.0		-
Recognised in:
Translation reserve	1.0		-
	1.0		-

5    Income tax expense

	2008 £m		2007 £m
Recognised in the income statement
Current tax expense
Current year	8.7		1.5
Adjustments for prior years	0.7		(1.5)
	9.4		-
Deferred tax expense
Current year	3.7		8.8
Adjustments for prior years	(1.4)		0.8
	2.3		9.6
Total income tax expense in the income statement	11.7		9.6

Reconciliation of effective tax rate 

	2008 £m		2007 £m
Profit before tax	36.7		32.6
Income tax using the UK corporation tax rate of 30% (2007: 30%)	11.0		9.8
Effect of tax rates in foreign jurisdictions	(0.3)		-
Trading losses not recognised	2.5		1.9
Non-deductible expenditure	1.5		0.7
Capital profits offset by capital losses	(1.3)		(2.1)
Adjustments for prior years
- current tax	0.7		(1.5)
- deferred tax	(1.4)		0.8
Change in UK tax rate	(1.0)		-
Total tax charge for the year	11.7		9.6

Recognised in equity

	2008 £m		2007 £m
Tax taken directly to equity	0.2		0.7

6    Earnings per share

Earnings per share are calculated on the basis of earnings attributable to the equity shareholders of Wincanton plc of £24.5m (2007: £22.9m) and the weighted average of 116.9m (2007: 116.1m) shares which have been in issue throughout the year. The diluted earnings per share are calculated on the basis of an additional 2.1m (2007: 1.8m) shares deemed to be issued at £nil consideration under the Company's share option schemes. The weighted average number of ordinary shares for both basic and diluted earnings per share are calculated as follows:

Weighted average number of ordinary shares	2008 millions		2007 millions
Issued ordinary shares at the beginning of the year	117.2		114.9
Net effect of shares issued and purchased during the year	(0.3)		1.2
	116.9		116.1
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the year	116.9		116.1
Effect of share options on issue	2.1		1.8
	119.0		117.9

An alternative earnings per share number is set out below, being before amortisation of acquired intangibles and any goodwill impairment and exceptionals plus related tax, since the Directors consider that this provides further information on the underlying performance of the Group:

	2008		2007
	pence		pence
Underlying earnings per share
- basic	24.3		21.0
- diluted	23.9		20.7

Underlying earnings are determined as follows:

	2008 £m		2007 £m
Profit for the year attributable to equity shareholders of Wincanton plc	24.5		22.9
Exceptional restructuring costs and income	4.5		6.0
Other exceptional income	(4.9)		(6.2)
Amortisation of acquired intangibles	5.5		3.2
Tax on the above items	(1.2)		(1.5)
Underlying earnings	28.4		24.4

7    Dividends 

Under Adopted IFRS dividends are only provided in the financial statements when they become a liability of the Company. The dividends per ordinary share paid in the year are the interim for the current year, paid on 8 January 2008 and the final for the year ended 31 March 2007, paid on 10 August 2007.

These are detailed in the following table:

	2008 £m		2007 £m
Interim dividend of 4.60p (2007: 4.26p) paid in 2008 and 2007 respectively	5.3		5.0
Final dividend of 9.29p for 2007 (2006: 8.60p) paid in 2008 and 2007  respectively	10.9		9.9
Total dividend paid in the year	16.2		14.9

The final dividend proposed for the year ended 31 March 2008 is 10.31p, which if approved will be paid on 8 August 2008 to shareholders on the register on 11 July 2008, total £12.0m.

8    Acquisitions

Current year acquisitions

In November 2007 the Group acquired the entire share capital of Swales Haulage Ltd (Swales) for £4.5m in cash. Swales operates in the UK and provides contract logistics services to the building products and construction sector.

In January 2008 the Group acquired the entire share capital of Hanbury Davies Ltd (Hanbury Davies) for £25.0m in cash, of which up to £2.5m is deferred pending 'earn out' performance. Hanbury Davies operates in the UK providing container logistics services to customers that include major shipping lines and freight forwarders.

In March 2008 the Group acquired HeBo GmbH (HeBo) for €2.9m in cash, of which €0.5m is deferred pending 'earn out' performance. HeBo is a specialist provider of logistics services to the high-tech industry in the North Rhine - Westfalia region of Germany.

In the period since acquisition Swales contributed £0.1m, Hanbury Davies contributed £0.6m and HeBo contributed £25,000 of operating profit. If the acquisitions had occurred on the first date of the year it is estimated that the totals of Group underlying operating profit and revenue would have been approximately £55.5m and £2,222.2m respectively.

The acquisitions have given rise to values of goodwill of £2.4m, £12.0m and £1.5m for Swales, Hanbury Davies and HeBo respectively, being the difference between the cash consideration payable and the net assets acquired at fair value.

  The acquired net assets at acquisition are summarised in the combined table below ;

	Acquirees' book value		Fair value adjustments		Acquisition amounts
	£m		£m		£m
Intangible assets	0.1		11.6		11.7
Property, plant and equipment	9.0		(0.3)		8.7
Inventories	0.5		-		0.5
Trade and other receivables	14.8		(0.1)		14.7
Cash and cash equivalents	0.2		-		0.2
Income tax payable	(0.3)		(0.2)		(0.5)
Borrowings	(3.7)		-		(3.7)
Trade and other payables	(11.4)		-		(11.4)
Deferred tax liabilities	(0.8)		(3.5)		(4.3)
Net identifiable assets and liabilities	8.4		7.5		15.9
Goodwill on acquisition					15.9
Consideration payable including expenses of £0.6m					31.8
Cash acquired and debt repaid on acquisition					3.5
					35.3
Less deferred consideration					(2.9)
Net cash outflow					32.4

The fair value adjustments above are required to align the accounting policies of the acquired businesses with those of the Group. These adjustments can, if necessary, be amended for up to 12 months following acquisition. The total goodwill of £15.9m arising on the acquisitions reflects the strategic importance of broadening Wincanton's business offering in these growing sectors of the UK and German economies, the value of the management and workforce and some of the expected synergies to be gained as the acquired entities are fully integrated into the Group.

Prior year acquisitions

In October 2006 the Group acquired the entire share capital of RDL Holdings Limited (RDL) and Lane Group plc (Lane) for £29.5m and £0.7m in cash respectively, of which £5.0m of the former was deferred pending 'earn out' performance and has been paid in full in the current year. 

The acquisitions gave rise to values of goodwill of £11.5m and £7.4m for RDL and Lane respectively, being the difference between the cash consideration payable and the net assets acquired at fair value.

  The acquired net assets at acquisition are summarised in the combined table below:

	As reported at 31 March 2007
	Acquirees' book value		Fair value adjustments	Acquisition amounts
	£m		£m	£m
Intangible assets	-		28.2	28.2
Property, plant and equipment	3.8		0.3	4.1
Deferred tax assets	-		0.5	0.5
Inventories	0.4		-	0.4
Trade and other receivables	13.0		-	13.0
Cash and cash equivalents	2.3		-	2.3
Income tax payable	(0.4)		-	(0.4)
Borrowings	(6.8)		-	(6.8)
Trade and other payables	(17.0)		(0.5)	(17.5)
Provisions	(0.3)		(3.5)	(3.8)
Deferred tax liabilities	(0.1)		(8.6)	(8.7)
Net identifiable assets and liabilities	(5.1)		16.4	11.3
Goodwill on acquisition				18.9
Consideration payable including expenses of £1.3m				30.2
Cash acquired and debt repaid on acquisition				4.5
				34.7
Less deferred consideration				(5.0)
Net cash outflow				29.7

9    Capital employed

The Group defines capital employed as being net assets/(liabilities) adjusted for goodwill, acquired intangibles, debt, tax, employee benefits and insurance provisions, as set out in the table below:

	2008 £m		2007 £m
Net assets/(liabilities)	37.0		(13.7)
Goodwill and acquired intangibles	(139.3)		(110.2)
Debt	104.5		65.8
Tax	23.3		(6.1)
Employee benefits	40.7		107.3
Insurance provisions	38.3		39.4
Capital employed	104.5		82.5

Return on capital employed (ROCE) is calculated as underlying operating profit over capital employed.

  10    Free cash flow

The Group defines free cash flow as being EBITDA plus working capital and net capital expenditure flows, as set out in the table below:

	2008 £m		2007 £m
Operating profit	47.3		42.5
Depreciation and amortisation	38.6		35.1
Working capital (outflow)/inflow	(8.1)		1.2
Net capital expenditure	(29.5)		(6.6)
Free cash flow	48.3		72.2

 

END

 

 

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