Half Year Results

RNS Number : 9902V

Wincanton PLC

11 November 2010

 



For immediate release

11 November 2010

WINCANTON plc

Half Year Results

for the six months to 30 September 2010 (unaudited)

"Building a foundation for future profitable growth"

	2010        £m		2009        £m		% change
Revenue	1,102.3		1,079.9		2.1%
Underlying operating profit 1	26.8		26.0		3.1%
Net financing costs	(8.9)		(8.0)
Underlying profit before tax 2	17.9		18.0		(0.6)%
Net other items 2	(6.2)		(9.1)
Profit before tax	11.7		8.9
Underlying earnings per share 2	10.9p		10.8p		0.9%
Basic earnings per share	6.1p		5.2p		17.3%
Proposed interim dividend per share	4.83p		4.83p		-

¹ Underlying operating profit is the total underlying operating profit of Group companies including share of results of associates.

² Underlying profit before tax and earnings per share are stated before net other items of £(6.2)m (2009: £(9.1)m), comprising exceptional restructuring and other costs of £8.6m (2009: £3.8m), other exceptional income of £7.9m (2009: £nil) and amortisation of acquired intangibles of £5.5m (2009: £5.3m).  Operating profit, including these items, amounted to £20.6m (2009: £16.9m) up 22%.  Profit before tax, including these items, amounted to £11.7m (2009: £8.9m), up 31%.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

·           Good pipeline of contract wins in the period for commencement in 2011

·           Continuing robust performance in the UK & Ireland businesses

·           German business benefits from the Road network restructuring, offset by a weak performance in France

·           New sectors and services continue to progress with overall operating profits up to £7.5m from £4.2m

·           Interim dividend maintained at 4.83p per share

Commenting on the results, Graeme McFaull, Wincanton Chief Executive, said:

"I am pleased with the overall performance in challenging market conditions.  Momentum in our new business pipeline is building and we have secured gains in the period across all areas of the Group. 

The core UK & Ireland business demonstrated a robust performance and the new sectors and services have continued to progress well.

In Mainland Europe progress achieved in our German business following the restructuring is encouraging, but this is offset in the first half by a poor performance in our French business.

For the current year we expect the Group to continue to trade in line with management expectations.  Looking ahead, we face increased pressure on costs and will take the necessary actions to ensure that the Group builds a foundation for future profitable growth."

For further enquiries please contact:

Wincanton

Graeme McFaull, Chief Executive

Jon Kempster, Group Finance Director                                                [phone]

Buchanan Communications                                                        

Charles Ryland / Jeremy Garcia                                                            [phone]

Half Year Review

for the six months to 30 September 2010

Introduction

The Group continues to demonstrate its core strength in delivering solutions to its wide customer base across the entire logistics and transport offering.  We have made further progress in our six newer sectors and services which help the Group increase its diversity of offer and over time to improve margins.

The UK & Ireland business performed robustly with a good set of contract wins and contract renewals.  Within the UK & Ireland the new sectors and services have continued to progress well.

Mainland Europe provides the Group access to a significant market opportunity.  The German operations have reacted well to the restructuring efforts.  The operations in Poland and the other Eastern European countries continue to progress, whilst the French operation has been loss making in the period.

We continue to see opportunities arising in the drive to reduce cost in the public sector and for our expertise to be deployed in this area.  Our relationship with Serco continues to strengthen this view and although timescales remain uncertain, we are committing the resource required to take advantage of these opportunities as they arise.

We employ some 28,000 people across the Group and are very appreciative of their efforts in delivering this performance.

UK & Ireland

	2010	2009
Revenue	£680.8m	£663.4m
Underlying operating profit	£25.2m	£24.4m
Margin	3.7%	3.7%

Overall the UK & Ireland business has performed well.  Revenue has increased by 2.6% to £680.8m from £663.4m and operating profit has increased by 3.3% to £25.2m from £24.4m.

Within our Retail business revenue increased to £384.0m from £365.6m in 2009.  We have seen the new business previously reported as won with M&S and Best Buy starting to contribute, together with significant renewals in the period with Superquinn and Topaz.  In addition, the Containers business, which is managed within Retail, saw new business start to contribute with B&Q and APL Logistics.  Overall the net business wins contributed £15m to the increase in revenue.

Our core Retail business remains an important focus for the Group.  The levels of activity in the sector remain consistent and our customers continue to optimise their distribution assets and networks and tightly control their levels of inventory.  We are optimistic that our performance on the High Street will improve in the near term supported by some contract wins for 2011, and as such we are seeing opportunities to work more closely with our customers in tendering for new business or extending and renewing existing contracts.

Our Manufacturing business saw revenues decrease to £259.1m from £265.1m in 2009.  New business contributed an additional £6.2m with our Defence business contributing £5.2m of this increase.  Within the period key renewals were achieved with St Gobain, Monier, Weinerberger and Ibstock in our Construction business and with Miller Brands, adidas, Nestlé Purina, Proctor & Gamble, together with an extension of the Shell Gas contract and the addition of Speedyhire as a new customer in the core manufacturing sector.  These renewals secured our market leading status in our chosen sectors and will secure c. £250m of revenue over their duration.

Against this the loss of sales from contract losses together with contract shrinkage, saw a net decrease in revenue of £12.2m.  The Manufacturing business includes our Defence, Construction and Records Management businesses, which have had a solid first half.  The core manufacturing customer base continues to seek out cost saving initiatives which provide us with opportunities, however competition remains tough and margins are constantly challenged.

Pullman Fleet Services had a good first half with revenue increasing £4.8m to £37.2m.  Revenue increased with Tesco.com and Sainsbury's online.  Pullman has proven to be an extremely strong partner in the supermarket home delivery business in ensuring their fleets of vehicles are efficiently managed.

The new sectors and services businesses comprise Foodservice, Construction, Defence, Containers, Home Delivery and Records Management.  We previously included the Recycling business which was sold in the period.

These businesses provide their customers with focused offerings.  We have seen further progress in the six months to September 2010 with underlying operating profits, before allocation of central overhead, of £7.5m compared to £4.2m in the six month period last year.  Revenue was £155.4m in the six months to September 2010 compared to £132.4m in the same period last year, an increase of 17.4%.  Both operating profit and revenue for these activities are included in the UK & Ireland segment detailed above.

As expected Foodservice was loss making in the period as we opened new sites and invested in new IT systems in order to take on additional business which has been won for 2011.  We expect this business to be profitable next year with additional contract wins and better utilisation of the new site at Hoddesdon already secured for next year.

The Construction business has enjoyed a slightly better economic environment with profits ahead of the same six month period last year.  The outlook for the construction industry remains uncertain.  We, however, have a strong base and will continue to work closely with customers to target cost saving initiatives in order to retain and win new business.  The increase in consolidation centres to service construction sites in central London is a good example of this.

The Defence business delivered a strong performance and is ahead of last year.  We continue to make progress in establishing our scale and expertise in the sector.  The impact of the recent strategic defence review may impact some of our customers over time, but we feel we offer many opportunities to assist in cost saving efforts and see the review as being positive for us in the medium term.

Containers performed strongly as the business recovered from the downturn in activity levels during the recession.  The volume increase has been achieved with minimal increases in overhead.  The outlook for the second half is mixed with a strong run up to Christmas expected, but we anticipate that the nervousness in the economy generally will negatively impact transactional volumes in 2011.

Home Delivery has seen a significant improvement from its loss making position last year to break even.  The dedicated delivery strategy is working well and volumes are picking up ahead of Christmas, and we anticipate the business may become profitable in the second half.

The Records Management business has been resilient through the last couple of years and profits continue to improve as utilisation rates improve.  We have diversified our customer base to include the charity sector and have secured a major contract with a large investment bank for computer back-up tapes in our new media storage facility.  This business is expected to continue its strong performance for the foreseeable future.

Mainland Europe

	2010	2009
Revenue	£421.5m	£416.5m
Underlying operating profit	£1.6m	£1.6m
Margin	0.4%	0.4%

The German business contributed 67% of the segment revenue, Western European 23% and Central and Eastern European 10%.

Our European businesses had mixed fortunes in the six months to September 2010.  The Road network restructuring, which was commenced last year in Germany is now substantially complete and the German business has performed well with an improvement in underlying operating profit.  This, however, has been offset by a disappointing performance in Western Europe, especially France.

Overall the German business has performed well with a solid performance from the Intermodal and the Contract Logistics divisions.  The Road network improved significantly and with a better than expected economic backdrop in Germany we are confident the business will continue to perform well.

The French business invested in a start-up with a new customer which will be profitable in the second half.  This, together with over-capacity in the industry, and a weak economic backdrop meant the overall profitability was lower than expected.  We do not see any significant improvement from the external market in the short term and hence have started to prioritise and implement the alternative actions available to bring the business back to break-even.

The Central and Eastern European business performed well in the six months and this business, although relatively quite small, provides the Group with growth opportunities in the short to medium term.

Profit and loss summary

Revenue for the six months was £1,102.3m which compared to £1,079.9m up 2.1% against last year.  Underlying operating profit was £26.8m an increase of £0.8m compared to the six months last year.  Overall margins at 2.4% are consistent with the six months last year and slightly below the 2.5% for the full year ended March 2010.

Overall Group operating costs are expected to increase in the short term as we invest in our IT infrastructure and have seen other significant costs start to increase.  The challenge is to mitigate this through increased efficiency initiatives and, where possible, to recover these from customers over time.

Net financing charges were £8.9m compared to £8.0m.  The six months to September 2010 represent the first full six months under the new financing arrangements, completed in November 2009.  The charge in the period includes amortised arrangement fees of £1.1m and a small IAS 19 pension net financing credit of £0.3m compared to a charge in the comparable six months last year of £2.6m.  Excluding these fees and the pension item the overall effective interest rate on the average debt is approximately 6% compared to around 2% previously.

Underlying profit before tax is £17.9m compared to £18.0m last year which translates into an underlying EPS of 10.9p (2009: 10.8p) with the taxation charge and minority interest marginally improved.

Exceptional items within the period amount to a net charge of £0.7m.  The profit on the sale of the Recycling business of £7.9m is offset by a loss on disposal of a 50% holding in a loss making German jointly controlled entity, part of the Road network, of £5.4m and a provision of £3.2m set against an aged non trading receivable balance.  This long overdue item continues to be the subject of a protracted commercial dispute.  We remain fully confident of our case as to the amount due and will continue to pursue the other party vigorously.  However our concerns as to the ability of the other party to settle the amount due have given rise to the need to now provide for the balance.

Cash flow and net debt

Net debt of £159.6m at 30 September 2010 compares to £151.9m at 31 March 2010 and £166.3m at 30 September 2009.

The cash flow in the six months benefited from the proceeds of £17.5m arising from the sale of the Recycling business.  Offsetting this inflow was the c. £5m cash outflow in respect of the disposal of the Group's investment in a German jointly controlled entity, a loss making part of the Road network.  In addition the cash outflows arose in the period in respect of provisions established at 31 March 2010 for the restructuring in Germany.

The net working capital outflow compared to an inflow in the same period last year, as our customers have sought to maximise terms in this economic environment.  We will continue to resist such pressures, whilst the net working capital balances move to a more sustainable level in the short to medium term for the Group.

Cash outflows in respect of capital expenditure in the period totalled £14.1m, as compared to £16.2m in the comparable period last year.  A key component of these outflows was £2.7m in respect of the Group's investment in a new back office solution, a significant capital expenditure expected of £45m to be incurred over the next 2 years.  The initial £4.1m investment in the software required was incurred in the year ended 31 March 2010.

Other major capital investments included £1.5m for a new warehouse fit out for a French pharmaceutical customer, £2.2m for the new Foodservice site in South East England and £1.2m for racking and associated fit out in the Records Management operations near London and in Scotland.

Reduction in the average net debt levels is a priority for the Group.  Average net debt levels have remained stable through the last two years at approximately £260m.  This is set against the investment programme necessary to support the growth aspirations of the Group, the annual contribution to the pension scheme and the dividend payable to shareholders, which together are significant sums.

Dividend

The Board has declared an interim dividend of 4.83p per share, maintaining the dividend declared for the six months to September last year.  This will be paid to shareholders on 11 January 2011 who are on the register at 10 December 2010.

Risks

The key risks and uncertainties facing Wincanton in the second half of the current financial year have not changed materially from those outlined in the Annual Report for the year ended 31 March 2010.  The principal commercial and operational risks are the Group's ability to source new contracts, at an appropriate financial return for an acceptable level of risk, and subsequent performance of new and existing contracts. The principal strategic risk is the requirement to continue to identify sufficient new areas of potential growth.

Outlook

The Group has had a successful six month period in securing new business for 2011/12.  Among the many renewals and extensions to existing contracts we have secured additional business with Sainsbury's, Marks & Spencer and Superquinn.  Across Mainland Europe we have won new business with a variety of new customers including Goodyear Dunlop in Germany, Coca Cola and Velux in Poland, and Zodiac in France.

The Group continues to trade satisfactorily.  The UK & Ireland operations remain the stable and profitable core to the Group and it is encouraging to see further contract wins that will assist the Group in the years to come.  The restructuring in Germany has been successful in commencing an improvement in the profitability of that business.  It is however disappointing to report an unsatisfactory performance in France but action is underway to address this. 

Whilst the economic outlook remains uncertain, we expect the Group to continue to trade in line with management expectations.  Looking ahead, we expect to be a net winner of contracts and whilst this will be partially offset by increased costs, we anticipate this will lead to modest profit growth.

Statement of Directors' responsibilities

The Board confirms to the best of their knowledge: 

·      that the consolidated half year financial statements for the six months to 30 September 2010 have been prepared in accordance with IAS 34 'Interim Financial Reporting' amended in accordance to changes in IAS 1 'Presentation of Financial Statements', as adopted by the EU; and 

·      that the Half Year Report includes a fair review of the information required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period and their impact on the consolidated half year financial statements; a description of the principal risks and uncertainties for the remainder of the current financial year; and the disclosure requirements in respect of material related party transactions.

The composition of the Board of Directors has changed since the publication of the Annual Report in June 2010.  GD Connell and N Sullivan resigned from the Board on 21 June 2010 and 26 July 2010 respectively.  J Kempster and E Born were appointed as Executive Directors on 22 July 2010 and 1 October 2010 respectively. 

The above Statement of Directors' responsibilities was approved by the Board on 10 November 2010.

Consolidated income statement

for the six months to 30 September 2010 (unaudited)

	Note	Six months to 30 Sept 2010 £m		Six months to 30 Sept 2009 £m		Year ended 31 March 2010 £m
Revenue	2	1,102.3		1,079.9		2,182.9
Share of results of associates		0.7		0.5		0.7
Total underlying operating profit	2	26.8		26.0		54.6
Amortisation of acquired intangibles		(5.5)		(5.3)		(11.2)
Exceptional restructuring and other costs	3	(8.6)		(3.8)		(20.5)
Other exceptional income	3	7.9		-		-
Operating profit		20.6		16.9		22.9
Financing income	4	0.6		0.4		0.9
Financing cost	4	(9.5)		(8.4)		(20.8)
Net financing costs		(8.9)		(8.0)		(19.9)
Profit before tax		11.7		8.9		3.0
Income tax expense	5	(4.5)		(2.6)		(0.5)
Profit for the period		7.2		6.3		2.5
Attributable to
- equity shareholders of Wincanton plc		7.0		6.0		1.8
- minority interests		0.2		0.3		0.7
Profit for the period		7.2		6.3		2.5
Earnings per share
- basic	6	6.1p		5.2p		1.6p
- diluted	6	6.1p		5.2p		1.6p
Dividend declared and paid in the period (£m)	7	11.5		11.6		17.1

All operations in the above financial periods were continuing.

The dividend per share proposed in respect of the above period is 4.83p (2009: 4.83p).

Consolidated statement of comprehensive income

for the six months to 30 September 2010 (unaudited)

	Six months to 30 Sept 2010		Six months to 30 Sept 2009		Year ended 31 March 2010
	£m		£m		£m
Profit for the period	7.2		6.3		2.5
Other comprehensive income
Actuarial losses on defined benefit pension schemes (net of deferred tax)	-		-		(54.6)
Net foreign exchange gain on investment in foreign subsidiaries net of hedged items	-		1.2		0.9
Income tax relating to components of other comprehensive income	(1.3)		-		1.1
Other comprehensive income for the period, net of income tax	(1.3)		1.2		(52.6)
Total comprehensive income/(expense) for the period	5.9		7.5		(50.1)
Attributable to
- equity shareholders of Wincanton plc	5.7		7.2		(50.8)
- minority interests	0.2		0.3		0.7
Total comprehensive income/(expense) for the period	5.9		7.5		(50.1)

Consolidated balance sheet

at 30 September 2010 (unaudited)

	Note	30 Sept 2010		30 Sept 2009		31 March 2010
		£m		£m		£m
Non-current assets
Goodwill and intangible assets		188.1		203.1		193.6
Property, plant and equipment	8	211.9		246.1		233.6
Investments, including those equity accounted		15.3		15.0		15.0
Deferred tax assets		20.7		2.2		23.6
		436.0		466.4		465.8
Current assets
Inventories		10.1		8.5		9.3
Trade and other receivables		396.8		359.3		363.4
Cash and cash equivalents	9	40.3		50.5		96.8
		447.2		418.3		469.5
Current liabilities
Income tax payable		(9.5)		(10.9)		(6.6)
Borrowings	9	(9.3)		(12.8)		(15.4)
Trade and other payables		(546.9)		(518.5)		(533.6)
Employee benefits		(9.1)		(9.4)		(10.4)
Provisions		(20.5)		(11.9)		(26.5)
		(595.3)		(563.5)		(592.5)
Net current liabilities		(148.1)		(145.2)		(123.0)
Total assets less current liabilities		287.9		321.2		342.8
Non-current liabilities
Borrowings	9	(190.6)		(204.0)		(233.3)
Other payables		(1.2)		(1.3)		(1.4)
Employee benefits		(162.9)		(103.4)		(171.9)
Provisions		(32.2)		(47.6)		(32.1)
Deferred tax liabilities		(4.1)		(4.3)		(4.1)
		(391.0)		(360.6)		(442.8)
Net liabilities		(103.1)		(39.4)		(100.0)
Add back: pension deficit, net of deferred tax		129.0		80.4		132.0
Net assets before net pension deficit		25.9		41.0		32.0
Equity
Issued share capital		12.1		12.1		12.1
Share premium		12.8		12.2		12.2
Merger reserve		3.5		3.5		3.5
Translation reserve		4.3		4.6		4.3
Retained earnings		(136.3)		(72.4)		(132.6)
Equity deficit attributable to shareholders of Wincanton plc		(103.6)		(40.0)		(100.5)
Minority interest		0.5		0.6		0.5
Total equity deficit		(103.1)		(39.4)		(100.0)

Consolidated statement of changes in equity

at 30 September 2010 (unaudited)

	Issued share  capital	Share premium	Merger reserve	Translation reserve	Retained earnings	Total	Minority interest	Total equity deficit
	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2010	12.1	12.2	3.5	4.3	(132.6)	(100.5)	0.5	(100.0)
Total comprehensive income	-	-	-	-	5.7	5.7	0.2	5.9
Increase in IFRS 2 reserve	-	-	-	-	2.4	2.4	-	2.4
Shares issues	-	0.6	-	-	-	0.6	-	0.6
Own shares acquired	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Dividends paid to shareholders	-	-	-	-	(11.5)	(11.5)	(0.2)	(11.7)
Balance at 30 September 2010	12.1	12.8	3.5	4.3	(136.3)	(103.6)	0.5	(103.1)
Balance at 1 April 2009	12.1	12.2	3.5	3.4	(65.1)	(33.9)	0.6	(33.3)
Total comprehensive income	-	-	-	1.2	6.0	7.2	0.3	7.5
Decrease in IFRS 2 reserve	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Own shares acquired	-	-	-	-	(1.4)	(1.4)	-	(1.4)
Dividends paid to shareholders	-	-	-	-	(11.6)	(11.6)	(0.3)	(11.9)
Balance at 30 September 2009	12.1	12.2	3.5	4.6	(72.4)	(40.0)	0.6	(39.4)
Balance at 1 April 2009	12.1	12.2	3.5	3.4	(65.1)	(33.9)	0.6	(33.3)
Total comprehensive income/(expense)	-	-	-	0.9	(51.7)	(50.8)	0.7	(50.1)
Increase in IFRS 2 reserve	-	-	-	-	3.3	3.3	-	3.3
Own shares acquired	-	-	-	-	(2.0)	(2.0)	-	(2.0)
Dividends paid to shareholders	-	-	-	-	(17.1)	(17.1)	(0.8)	(17.9)
Balance at 31 March 2010	12.1	12.2	3.5	4.3	(132.6)	(100.5)	0.5	(100.0)

Consolidated statement of cash flows

for the six months to 30 September 2010 (unaudited)

	Six months to 30 Sept 2010			Six months to 30 Sept 2009				Year ended 31 March 2010
			£m		£m			£m
Operating activities
Profit before tax			11.7		8.9			3.0
Adjustments for
- depreciation and amortisation			22.4		24.0			49.8
- interest expense			8.9		8.0			19.9
- share of results of associates			(0.7)		(0.5)			(0.7)
- net result of business disposals			(2.5)		-			-
- (profit)/loss on sale of property, plant and equipment			-		(0.1)			0.1
- share-based payments fair value charges/(credit)			2.4		(0.3)			3.3
Operating profit before changes in working capital and provisions			42.2		40.0			75.4
(Increase)/decrease in trade and other receivables			(39.8)		27.1			19.6
(Increase)/decrease in inventories			(0.9)		0.3			(0.5)
Increase/(decrease) in trade and other payables			20.9		(0.5)			26.2
Decrease in provisions			(6.4)		(3.1)			(4.9)
Decrease in employee benefits			(8.8)		(13.0)			(21.4)
Income taxes received/(paid)			0.2		(2.3)			(3.7)
Cash generated from operations			(34.8)		8.5			15.3
Cash flows from operating activities			7.4		48.5			90.7
Investing activities
Proceeds from sale of property, plant and equipment			3.9		1.2			3.1
Net proceeds from business disposals			10.6		-			-
Interest received			0.3		0.1			0.9
Dividends received from associates			0.3		-			0.1
Acquisitions net of cash acquired and debt repaid on acquisition			-		(3.0)			(3.0)
Additions of property, plant and equipment			(10.8)		(15.1)			(27.9)
Additions of computer software costs			(3.3)		(1.1)			(4.9)
Cash flows from investing activities			1.0		(17.9)			(31.7)
Financing activities
Proceeds from the issue of share capital			0.6		-			-
Own shares acquired			(0.3)		(1.4)			(2.0)
(Decrease)/increase in borrowings			(38.9)		(5.6)			26.2
Payment of finance lease liabilities			(4.5)		(2.6)			(0.3)
Dividends paid to minority interest in subsidiary undertakings			(0.2)		(0.3)			(0.8)
Equity dividends paid			(11.5)		(11.6)			(17.1)
Interest paid			(9.4)		(6.9)			(15.8)
Cash flows from financing activities			(64.2)		(28.4)			(9.8)
Net (decrease)/increase in cash and cash equivalents			(55.8)		2.2			49.2
Cash and cash equivalents at beginning of the period			96.8		48.3			48.3
Effect of exchange rate fluctuations on cash held			(0.7)		-			(0.7)
Cash and cash equivalents at end of period			40.3		50.5			96.8
Represented by
- cash at bank and in hand			18.0		26.0			72.6
- restricted cash, being deposits held by the Group's captive insurer			22.3		24.5			24.2
			40.3		50.5			96.8

Notes to the consolidated half year financial statements

for the six months to 30 September 2010 (unaudited)

1    Basis of preparation and Statement of compliance

Wincanton plc (the 'Company') is a company incorporated in the UK.  The consolidated half year financial statements of the Company for the six months to 30 September 2010 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities.

These consolidated half year financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting.  As required by the Disclosure and Transparency Rules of the Financial Services Authority, the half year financial statements have been prepared on the basis of the accounting policies adopted by the Group and applied and disclosed in its consolidated financial statements for the year ended 31 March 2010.  In addition the following standards are effective for accounting periods commencing after 31 March 2010 and have been applied, where applicable, in these consolidated half year financial statements; IFRS 3, Business Combinations (Revised), IAS 27, Consolidated and Separate Financial Statements (Amendment) and IAS 17, Leases (Amendment).  Adoption of these standards has not had a significant effect, with the exception of changes to disclosures, on the consolidated results or financial position of the Group.  These policies are in accordance with IFRS as adopted by the EU (Adopted IFRS).

These consolidated half year financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements for the year ended 31 March 2010.  The comparative figures for the year ended 31 March 2010 have been extracted from those accounts but do not comprise the full statutory accounts for that financial year.  Except for the 31 March 2010 comparatives the financial information set out herein is unaudited but has been reviewed by the auditors and their report to the Company is set out on page 18.

The consolidated financial statements for the year ended 31 March 2010 have been reported on by the Group's auditors; delivered to the Registrar of Companies; and are available upon request from the Company's registered office at Methuen Park, Chippenham, Wiltshire SN14 0WT or at www.wincanton.co.uk.  The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The preparation of these consolidated half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.  In preparing these consolidated half year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key areas of estimation were the same as those that applied to the consolidated financial statements for the year ended 31 March 2010.

The consolidated half year financial statements have been prepared on a going concern basis, which assumes the Group will be able to meet its liabilities as they fall due for the foreseeable future. The Directors have prepared cash flow forecasts on the basis of which they expect that the Group will continue as a going concern.

The Group is reporting net liabilities of £103.1m (31 March 2010: net liabilities of £100.0m) due primarily to the inclusion of the pension deficit. To provide greater visibility of the Group's underlying balance sheet position, net assets before the net pension deficit are also shown on the face of the balance sheet. This presentation is consistent with the financial statements for the year ended 31 March 2010.

The Half Year Report, which includes the consolidated half year financial statements, was approved by the Board on 10 November 2010. 

2    Operating segments

Wincanton plc provides contract logistics services.  The Group manages its operations in two geographic operating segments, comprised of United Kingdom & Ireland and Mainland Europe.  The results of these two operating segments are regularly reviewed by the Board to allocate resources to these segments and to assess their performance. The Group evaluates performance of the operating segments on the basis of underlying operating profit.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2010 (unaudited)

2    Operating segments (continued)

	UK & Ireland				Mainland Europe				Consolidated
	Six months to 30 Sept 2010	Six months to 30 Sept 2009	Year ended 31 March 2010	Six months to 30 Sept 2010		Six months to 30 Sept 2009	Year ended 31 March 2010	Six months to 30 Sept 2010	Six months to 30 Sept 2009	Year ended  31 March 2010
	£m	£m	£m	£m		£m	£m	£m	£m	£m
Revenues from external customers	680.8	663.4	1,326.4	421.5		416.5	856.5	1,102.3	1,079.9	2,182.9
Inter-segment revenues	-	-	-	0.5		0.6	1.0	0.5	0.6	1.0
Depreciation	(11.6)	(13.0)	(27.4)	(4.5)		(4.9)	(9.8)	(16.1)	(17.9)	(37.2)
Amortisation of software intangibles	(0.1)	(0.2)	(0.5)	(0.7)		(0.6)	(0.9)	(0.8)	(0.8)	(1.4)
Share of results of associates	0.7	0.5	0.6	-		-	0.1	0.7	0.5	0.7
Reportable segment underlying operating profit 1	25.2	24.4	48.4	1.6		1.6	6.2	26.8	26.0	54.6

¹ Underlying operating profit includes the share of results of associates and is stated before amortisation of acquired intangibles and any goodwill impairment and exceptionals.

3    Exceptionals

	Six months to 30 Sept 2010 £m		Six months to 30 Sept 2009 £m			Year ended 31 March 2010 £m
Exceptional restructuring and other costs
Costs of acquisitions and post acquisition reorganisation of operating structures		-		(0.7)		(0.7)
Closure and restructuring of operations
- UK & Ireland		-		(3.1)		(4.9)
- Mainland Europe		(5.4)		-		(14.9)
Provision for aged non trading receivable 1		(3.2)		-		-
		(8.6)		(3.8)		(20.5)
Other exceptional income
Disposal of Recycling business		7.9		-		-
		7.9		-		-

¹ Provision made as a result of concerns over the ability of the other party to settle the amount due.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2010 (unaudited)

 

4      Net financing costs

	Six months to 30 Sept 2010 £m			Six months to 30 Sept 2009 £m		Year ended 31 March 2010 £m
Interest income		0.3		0.4		0.9
Expected return on defined benefit pension scheme assets		20.9		-		-
Interest on defined benefit pension scheme obligations		(20.6)		-		-
		0.6		0.4		0.9
Interest expense		(8.2)		(4.2)		(12.0)
Finance charges payable in respect of finance leases		(0.6)		(0.5)		(1.2)
Unwinding of discount on insurance and other provisions		(0.7)		(1.1)		(2.2)
Expected return on defined benefit pension scheme assets		-		15.6		31.1
Interest on defined benefit pension scheme obligations		-		(18.2)		(36.5)
		(9.5)		(8.4)		(20.8)
Net financing costs		(8.9)		(8.0)		(19.9)

 

5      Income tax expense

	Six  months  to 30 Sept 2010 £m		Six  months  to 30 Sept 2009 £m		Year ended 31 March 2010 £m
Current tax expense
Current year	2.6		1.6		4.0
Adjustments for prior years	0.1		(0.3)		(4.5)
	2.7		1.3		(0.5)
Deferred tax expense
Current year	1.8		1.3		1.1
Adjustment for prior years	-		-		(0.1)
	1.8		1.3		1.0
Total income tax expense in the income statement	4.5		2.6		0.5

 

In accordance with IAS 34 the tax expense recognised in the income statement for the half year is calculated on the basis of the estimated effective full year tax rate. 

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2010 (unaudited)

 

6          Earnings per share

Earnings per share are calculated on the basis of earnings attributable to the equity shareholders of Wincanton plc of £7.0m (2009: £6.0m) and the weighted average of 114.2m (2009: 114.6m) shares which have been in issue throughout the period.  The diluted earnings per share are calculated on the basis of an additional 0.1m (2009: nil) 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	Six months to  30 Sept 2010 millions		Six  months to 30 Sept 2009 millions		Year ended 31 March 2010 millions
Issued ordinary shares at the beginning of the period	114.3		115.3		115.3
Net effect of shares issued and purchased during the period	(0.1)		(0.7)		(0.7)
	114.2		114.6		114.6
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the period	114.2		114.6		114.6
Effect of share options in issue but not exercised	0.1		-		-
	114.3		114.6		114.6

 

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

 

	Six months  to  30 Sept 2010 pence		Six months to  30 Sept 2009 pence		Year ended 31 March 2010 Pence
Underlying earnings per share
- basic	10.9		10.8		20.9
- diluted	10.9		10.8		20.9

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2010 (unaudited)

 

6          Earnings per share (continued)

 

Underlying earnings are determined as follows:

	Six months  to 30 Sept 2010 £m		Six months to  30 Sept 2009 £m		Year ended 31 March 2010 £m
Profit for the period attributable to equity shareholders of Wincanton plc	7.0		6.0		1.8
Exceptional restructuring and other costs (note 3)	8.6		3.8		20.5
Other exceptional income (note 3)	(7.9)		-		-
Amortisation of acquired intangibles	5.5		5.3		11.2
Tax on the above items	(0.7)		(2.7)		(9.5)
Underlying earnings	12.5		12.4		24.0

7          Dividends

An interim dividend is proposed of 4.83p per share to be paid on 11 January 2011 to shareholders on the register on 10 December 2010. 

Under Adopted IFRS dividends are only provided in the financial statements when they are declared and become a liability of the Company.  The total of the interim dividend is expected to be £5.5m (2009: £5.5m).  In August 2010 the final dividend of 10.08p per share was paid to shareholders, a total of £11.5m (2009: £11.6m).

 

8          Property, plant and equipment

Additions and disposals

During the half year to 30 September 2010 the Group acquired assets with a cost of £11.0m (2009: £15.2m).

Assets with a carrying amount of £3.9m were disposed of during the half year ended 30 September 2010 (2009: £1.1m).  In addition assets with a carrying value of £8.1m were disposed of as part of the sale of the Recycling business.

Capital commitments

At 30 September 2010 the Group had entered into contracts to purchase property, plant and equipment for £12.0m (2009: £6.4m); delivery is expected in the second half of the year to 31 March 2011.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2010 (unaudited)

9          Analysis of net debt

	30 Sept 2010 £m		30 Sept 2009 £m		31 March 2010 £m
Cash and cash equivalents
Cash at bank and in hand	18.0		26.0		72.6
Restricted cash, being deposits held by the Group's captive insurer	22.3		24.5		24.2
	40.3		50.5		96.8
Borrowings
Current
Bank loans and overdrafts	(1.3)		(10.0)		(8.9)
Finance lease liabilities	(8.0)		(2.8)		(6.5)
	(9.3)		(12.8)		(15.4)
Non-current
US$ private placement	(127.7)		(111.9)		(130.8)
Bank loans	(59.9)		(81.0)		(93.5)
Finance lease liabilities	(3.0)		(11.1)		(9.0)
	(190.6)		(204.0)		(233.3)
Total net debt	(159.6)		(166.3)		(151.9)

 

Independent review report to Wincanton plc

Introduction

We have been engaged by the Company to review the consolidated half year financial statements in the Half Year Report for the six months to 30 September 2010 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes.  We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated half year financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA").  Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Half Year Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Year Report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The consolidated half year financial statements included in this Half Year Report have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the consolidated half year financial statements in the Half Year Report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated half year financial statements in the Half Year Report for the six months to 30 September 2010 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Virginia Stevens

for and on behalf of KPMG Audit Plc
Chartered Accountants 

100 Temple Street

Bristol

BS1 6AG

10 November 2010

Shareholder information

Shares traded ex-dividend	8 December 2010
Record date for interim dividend 1	10 December 2010
Interim dividend paid	11 January 2011
Preliminary announcement of full year results and dividend	June 2011
Annual General Meeting	July 2011
Announcement of half year results and dividend	November 2011

¹ Shareholders on the register at this date will receive the dividend.

Shareholders' enquiries

All administrative enquiries relating to shareholdings should, in the first instance, be directed to the Registrar at the following address:

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

Telephone: [phone]   Fax: [phone]

Text phone: [phone]

Web queries: www.investorcentre.co.uk/contactus

 

END

 

 

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