Interim Results
Wincanton PLC
08 November 2007
For immediate release 8 November 2007
WINCANTON plc
Half Year Results
for the six months to 30 September 2007 (unaudited)
'Focusing on continued growth'
2007 2006 % increase
£m £m
Revenue 1,030.2 931.8 10.6%
======= ======
Underlying operating profit 25.5 21.4 19.2%
Net financing costs (5.4) (4.4)
Share of results of associates 0.1 -
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Underlying profit before tax 20.2 17.0 18.8%
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Net other items (note) 1.9 (1.9)
Profit before tax 22.1 15.1
Underlying earnings per share 11.7p 10.1p 15.8%
Basic earnings per share 13.1p 8.8p
Proposed interim dividend per share 4.60p 4.26p 8.0%
Note: Underlying profit before tax and earnings per share are stated before net
other items of £1.9m (2006: £(1.9)m), comprising exceptional restructuring costs
of £nil (2006: £1.8m), exceptional income of £4.5m (2006: £0.7m) and
amortisation of acquired intangibles of £2.6m (2006: £0.8m). Operating profit,
including these items, amounted to £27.4m (2006: £19.5m) up 40.5%. Profit before
tax, including these items, amounted to £22.1m (2006: £15.1m), up 46.4%.
FINANCIAL HIGHLIGHTS
• Underlying operating profit up 19.2% to £25.5m
• Underlying earnings per share up 15.8% to 11.7p
• Dividend growth again significantly in excess of inflation at 8.0%
OPERATIONAL HIGHLIGHTS
• Business development momentum in the UK remains strong; very high
levels of new contract start-ups successfully delivered.
• Continuing investment in Mainland European businesses in people,
systems and marketing; development pipeline beginning to build and profit
improvement plans on track.
• Recent acquisitions performing well; further infills under active
review.
Commenting on the results, Graeme McFaull, Wincanton Chief Executive, said:
'We are successfully targeting growth opportunities in our focus markets, both
organically and through infill acquisitions.
We remain encouraged by this further period of strong profit and cash flow
performance and by the new business momentum being sustained, or developing,
across all of our operations.
We expect the full year to be another year of strategic and operational progress
for Wincanton.'
For further enquiries please contact:
Wincanton
Graeme McFaull, Chief Executive ) +44 (0) 1249 710000
Gerard Connell, Group Finance Director )
Buchanan Communications
Charles Ryland / Jeremy Garcia +44 (0) 207 466 5000
Half Year Review
for the six months to 30 September 2007
Introduction
We are successfully targeting growth opportunities in our focus markets, both
organically and through infill acquisitions.
Our track record of organic growth is built upon our commitment to long-term
relationships with our customers, the ability to develop new solutions to
address their changing supply chain needs, and the project management skills and
operational excellence that ensure the successful implementation of these new
solutions. The first half has seen a record number of operational start-ups, all
delivered for customers on time and to budget. More than 40 successful project
implementations have seen in excess of 3 million sq ft of additional warehousing
space seamlessly commissioned for customers across Europe.
Infill acquisitions, at reasonably-priced entry multiples, continue to
complement this organic growth and accelerate our overall rate of profit
progress. Our two most recent acquisitions in the UK, which expanded our home
delivery activities and gave us a strong position in the construction sector,
have been rapidly integrated and delivered good operational and financial
performances in the first half.
A further small infill acquisition in the UK construction sector is today being
separately announced. A number of further such opportunities remain under active
review, both in the UK and Mainland Europe.
Our UK & Ireland activities again reported a double-digit percentage increase in
underlying operating profit. The first half result of £23.4m represented a net
17.0 per cent increase on the prior year, with a limited number of contract
losses and pricing pressure on certain renewals more than offset by very strong
new business momentum and the benefit of successful acquisition integration. Our
operations in Mainland Europe also reported an improved performance, with
underlying operating profit increasing from £1.4m to £2.1m. Some margin pressure
remains in our transport activities as a consequence of a continuing shortage of
sub-contractor capacity, but the elimination of our Spanish losses allowed
profit progress to be made even after significant additional business
development and marketing investment and the further strengthening of our
management teams in a number of countries.
Another period of strong profit and cash flow performance, building further on
Wincanton's successful track record since demerger, has again enabled the Board
to recommend a dividend increase significantly in excess of inflation. The Board
has declared an interim dividend of 4.60p, an increase of 8.0 per cent on last
year's dividend of 4.26p.
UK & Ireland
Growth in new services, expansion into new sectors and strong continuing
momentum within our existing customer portfolio resulted in another period of
excellent performance in the UK & Ireland.
Both last year's acquisitions, which were made early in the second half of the
financial year, contributed well. The home delivery business was rapidly
integrated, operational standards were materially improved and a significant new
customer, Hoover Candy, will shortly be added to the network. Our construction
acquisition benefited from higher volumes from existing customers such as Cemex
and Ibstock and is also successfully generating contract gains, including a
significant win with a major new customer, confirmed shortly after the period
end.
Our recycling business had a very active first half, with the new WEEE Directive
finally going live on 1 July. Our new WEEE plant is fully operational and
initial volumes being processed by the plant are encouraging. Our
fridge-recycling plant is also seeing the benefit of higher volumes, as local
authorities, waste management companies and producer compliance schemes award
integrated contracts to manage the disposal of all white goods and WEEE
materials. Interesting opportunities are beginning to emerge, in addition to the
physical handling of the flows, to advise customers on the overall management of
their recycling responsibilities under the new legislation.
We are also pleased with encouraging signs of early progress in our new joint
venture with Kerry Logistics. Discussions are under way with customers, in both
the UK and Mainland Europe, and we expect to be able to announce our first major
business win early in the second half. The new contract, with a UK retailer,
will cover pre-consolidation warehousing in China, shipping from Asia, and
distribution and transportation to all UK stores.
Good progress was made in most areas of our existing UK & Ireland operations,
with only our chilled consolidation activities reporting lower year-on-year
profits as a result of lower volumes being processed by the network and a
contract lost in the prior year. Pullman Fleet Services delivered higher profits
after a disappointing year last year. Our food service business benefited from
the major renewal with Punch, a 5-year extension of our contract to manage the
order processing and physical distribution of food products to their managed
estate across the UK. A new customer, Tragus, was added to the food service
operations in the first half. A 3-year contract will see Wincanton managing an
additional 2.6 million cases and 30,000 deliveries each year through the network
to Tragus outlets including Cafe Rouge and Bella Italia. In addition to growing
our food service portfolio we have been expanding further in the drinks sector
with a new warehousing, distribution and co-packing contract for E. & J. Gallo.
Other growth opportunities included new collaborative solutions implemented for
existing customers such as Pernod Ricard and Mattel, the expansion of our
transport management operations for Unilever and an extension of our business
with Procter & Gamble, with a contract awarded to Wincanton to manage their
Northern Service Centre in Skelmersdale. Wincanton already manages Procter &
Gamble's Southern Service Centre in West Thurrock.
Other gains with existing customers saw us add the warehousing of bathroom
products to our kitchen home delivery operations for Homebase, a new
e-fulfilment and multi-channel retailing centre for Woolworths, successfully
implemented in only 16 weeks, and a significant expansion of the scale and scope
of the activities managed for Dunnes Stores in Ireland. Having progressively
taken over a number of facilities from other logistics providers to Dunnes, we
now operate 500,000 sq ft of space across four sites, processing some 8 million
cases per annum of boxed and hanging garments. Also in Ireland we renewed our
existing Superquinn contract for a further two years. The Wincanton Retail
Solutions team has, in addition, been supporting Superquinn with its store
refurbishment programme. This team has also been working with Marks & Spencer in
the UK in respect of its major store refurbishment programme, building on an
existing contract to manage all of Marks & Spencer's shop-fitting requirements
in the UK.
Other renewals included four major contract extensions in the fuel and gas
sector, with ConocoPhillips, Esso, Total and Shell Gas, confirming our ability
to sustain the highest levels of quality assurance and industry-leading health
and safety standards which are so critical in the petroleum sector.
Business gains in the period with new customers included a 3-year transport
management contract awarded to Wincanton by adidas UK and a 7-year contract to
manage a new 320,000 sq ft facility in Milton Keynes for Jenks, the grocery and
pharmacy brands broker.
Mainland Europe
We have continued to invest in people, processes, systems, business development
and marketing to strengthen our platform for growth across Mainland Europe, in
accordance with our profit improvement plan. We remain confident that more
significant growth can be delivered from these operations, which provide the
Group with the operational presence to serve the supply chain requirements of
its customers on a national, regional and Pan-European basis.
We believe there to be attractive opportunities for future growth for Wincanton,
both in our current focus markets of France, Germany and Poland and, in due
course, from an enhanced presence in other markets. Current profitability
continues to be held back by the cost of under-utilised space, particularly in
France and Germany, but we are generally encouraged by both progress on this
shorter-term issue and indications of the higher levels of new business momentum
that will be required to deliver more substantial profit improvement in the
medium term and beyond.
Our continuing investment in strengthening our management teams has seen the
appointments of new managing directors in several countries, a new regional
managing director for our operations in France and the Benelux countries, and
increased and improved resource in a number of support functions such as
finance, IT and business development. Our investment in raising brand awareness
has funded trade press advertising in key markets, an active programme of
conference sponsorship and stands at major trade fairs in Paris, Munich and
Shanghai. Our investment in processes and systems is consolidating the progress
already made in customer account planning disciplines, project management and
operational excellence. We are also developing the next generation of
warehousing and transport management software.
Our German operations reported a very good performance in our intermodal and
container management activities and steady progress in our contract logistics
portfolio. Overall performance continues to be held back, however, by
disappointing results at several of the depots in our road transport network.
New business wins in our intermodal operations included gains with German
Pellets, CMA CGM and Van Donge & de Roo. For German Pellets, for example, we are
organising bulk barge and coaster transports, principally to Belgium and the
Netherlands and also managing the handling and storage products for two
manufacturing facilities in Southern Germany. For CMA CGM we are handling some
16,000 containers per annum through our Mannheim terminal and also managing
container movements by rail between Mannheim and Le Havre. Our high-tech
operations added new business with NCR, Wincor Nixdorf and Diebold, amongst
others, and we expanded our contract logistics activities elsewhere with
customers such as Dow and M-Real. For Dow, for example, we added the management
of new activities in Italy and Romania to our existing Pan-European operation.
Our road operations combine both warehousing activities on certain sites and a
national network of cross-docking facilities which allow us to offer next-day
delivery across Germany. Good progress was made in certain areas of these
activities, including new wins with Exxon Mobil, Plastal, a major supplier of
engineered plastics to the automotive industry, and Lorenz, a leading snack food
manufacturer. The Exxon Mobil win in particular will bring significant volume to
our Duisburg site, one of the currently under-utilised warehouses which has been
hindering our ability to make more significant profit progress. Action plans are
being implemented to address the performance of the remaining under-utilised
sites.
Our strategic review of the German market has also identified a number of
potentially attractive infill acquisition targets, several of which are
currently being actively reviewed.
We are pleased with the progress being made by our enlarged French business in
the building of a more substantial pipeline of development opportunities.
Under-utilised space at certain sites, as in Germany, prevents more substantive
short-term profit progress, but we are encouraged by the early signs of enhanced
new business momentum. Contract gains in the period included wins with EDF
Energies Nouvelles, HSS and Mister Gooddeal, Jardiland and Total. For EDF
Energies Nouvelles we are managing the warehousing of a new range of solar
panels in our Toulouse facility and organising transport flows throughout the
South of France and into Spain. For HSS and Mister Gooddeal, both parts of the
Bertelsmann Group and leaders in e-commerce and internet shopping in France, we
have successfully taken over both the running of their in-house warehousing
operations and also expanded an existing Wincanton warehouse in Caudebec,
including an investment in automation to handle the high levels of growth in
this fast-expanding sector. The addition of Jardiland to our growing customer
base in DIY retailing will secure additional volume for one of our sites with
spare capacity in the Orleans area. More investment, and time, will be required
to accelerate the improvement of Wincanton's brand awareness in France, but
contract wins such as these, together with our growing pipeline of new business
opportunities, give us confidence that a sizeable and profitable operation can
be built successfully in this important focus market.
In Central & Eastern Europe we have resolved the contractual issues relating to
the project start-ups in Hungary last year that have had an adverse effect upon
our financial performance. We are now again able to concentrate our efforts,
having also reinforced our management resource across the region, on taking
profitable advantage of the many opportunities for new business in these
fast-growing economies. Wins and renewals in the period included a 2-year
extension of our warehousing and distribution contract with Leroy Merlin and new
wins to manage the warehousing and distribution requirements of OBI in Poland
and also national distribution for Electrolux in Poland. We were awarded a new
3-year contract with JohnsonDiversey, a 5-year contract with Rieber Food and new
transport management operations, both nationally and internationally, for Kraft
Foods, Kingspan and Cussons. High rates of wage inflation and labour shortages
in certain areas are creating operational challenges, but our reputation for the
quality and reliability of our service performance is of increasing importance
in the generation of new business opportunities.
Our international transport hub, at s'Heerenberg on the Dutch/German border,
successfully brought on-stream a major Pan-European contract for the
consolidation and delivery of automotive components into Pininfarina in Northern
Italy. Good new business wins were also recorded with Akzo Nobel and Ciba-Geigy.
A project to significantly expand the capacity of this hub is now under way,
with our new facility expected to be operational from the middle of next year.
We believe there to be attractive growth potential for Wincanton in the
management and operation of international transport flows and this is another
area in which we have been strengthening our management resource for the future.
Work to establish the potential in Mainland Europe for some of our higher growth
activities in the UK has led to us to focus, initially, on Consilium, our
consultancy business. Consilium has developed rapidly and profitably in the UK
and is making good early progress in extending the scope of its operations
outside of the UK. The first half, for example, saw projects successfully
completed for a Scandinavian brewer and food importer and also a European supply
chain review for a major international brewer.
Financial review
Group turnover, at £1,030.2m, was 10.6 per cent higher than for the same period
last year. Underlying operating profit, at £25.5m, was 19.2 per cent ahead of
last year.
In a strong first half, the UK & Ireland delivered a 17.0 per cent increase in
underlying operating profit, to £23.4m, on turnover up by 16.2 per cent to
£668.3m. Underlying operating profit in Mainland Europe increased from £1.4m to
£2.1m on turnover broadly unchanged at £361.9m.
Exceptional income of £4.5m has been generated in the first half. £3.7m of this
is derived from the expected receipt of a monetary award in respect of
arbitration proceedings. A joint venture, 50 per cent owned by Wincanton, has
been seeking compensation for the early termination of a contract. Final
resolution of these arbitration proceedings, which may lead to further monies
being awarded to the joint venture, is expected in the final quarter of the
current financial year. The balance of the exceptional profit, £0.8m, was the
result of the sale of a UK property which had become surplus to operational
requirements. We expect to review possible restructuring options in respect of
certain areas of our activities in the second half, which may lead to
exceptional costs being incurred.
Net financing costs increased from £4.4m to £5.4m, giving underlying profit
before tax, including associates, of £20.2m, up 18.8 per cent. An underlying tax
charge of 31 per cent and minority interest charge of £0.2m produced underlying
earnings of £13.7m, a 17.1 per cent increase on last year. Underlying earnings
per share increased at the slightly lower rate of 15.8 per cent, to 11.7p per
share, as a consequence of an increase of approximately 1.9m shares in the
Group's average issued share capital through the exercise of share options.
As a result of another period of good cash flow generation, net debt, at £62.0m,
was down both compared to the year end and the first half last year. The
compensation monies referred to above were received following the period end.
Dividend
The Board has declared an interim dividend of 4.60p, an increase of 8.0 per cent
on last year's dividend of 4.26p. This will be paid on 8 January 2008 to
shareholders on the register at 7 December 2007.
Risks
The key risks and uncertainties facing Wincanton in the second half of the
current financial year have not changed from those outlined in the Annual Report
for the year ended 31 March 2007.
Outlook
We expect to see the encouraging momentum of our UK & Ireland business continue
into the second half. The improved first half performance in Mainland Europe is
also expected to be sustained in the second half, although the costs of empty
space will continue to limit the speed of profit progress.
The second half will again be a very active period for new project
implementations, including a new 650,000 sq ft multi-temperature site for
Sainsbury's in Northampton and an additional 500,000 sq ft of warehousing for an
automotive customer in Germany.
We expect the full year to be another year of operational and strategic progress
for Wincanton, with attractive opportunities for further development, both
organically and through acquisition.
Wincanton is well-placed, with leading positions in fragmented markets, to build
further on its strong track record of consistent profit growth and cash flow
generation.
Board change
I am pleased to announce that David Edmonds, currently the Senior Independent
Director, has agreed to become Chairman following my retirement from the Board
at the next Annual General meeting. David will become Deputy Chairman with
immediate effect.
David Malpas
Chairman
7 November 2007
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 2007 have been prepared in accordance with IAS 34
'Interim Financial Reporting' 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 Board of Directors has remained unchanged since the publication of the
Annual Report in June 2007. The above Statement of Directors' responsibilities
was approved by the Board on 7 November 2007.
Consolidated income statement
for the six months to 30 September 2007 (unaudited)
Note Six months to Six months to Year
30 Sept 30 Sept ended
2007 2006 31 March
2007
£m £m £m
Revenue 2 1,030.2 931.8 1,933.1
======= ======= =======
Underlying operating profit 2 25.5 21.4 45.5
------------------------------- ----- ------- ------- -------
Amortisation of acquired
intangibles 2 (2.6) (0.8) (3.2)
Exceptional restructuring costs 3 - (1.8) (6.0)
Exceptional income 3 4.5 0.7 6.2
------------------------------- ----- ------- ------- -------
Operating profit 27.4 19.5 42.5
Financing income 4 1.9 1.7 3.7
Financing cost 4 (7.3) (6.1) (13.6)
------------------------------- ----- ------- ------- -------
Net financing costs (5.4) (4.4) (9.9)
------------------------------- ----- ------- ------- -------
Share of results of associates 0.1 - -
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Profit before tax 22.1 15.1 32.6
Income tax expense 5 (6.6) (5.0) (9.6)
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Profit for the period 15.5 10.1 23.0
======= ======= =======
Attributable to
- equity shareholders of
Wincanton plc 15.3 10.1 22.9
- minority interests 0.2 - 0.1
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Profit for the period 15.5 10.1 23.0
======= ======= =======
Earnings per share 6
- basic 13.1p 8.8p 19.7p
- diluted 12.8p 8.6p 19.4p
Dividend declared and paid in
the period (£m) 7 10.9 9.9 14.9
======= ======= =======
All operations in the above financial periods were continuing.
The dividend per share proposed in respect of the above period is 4.60p (2006:
4.26p).
Consolidated statement of recognised income and expense
for the six months to 30 September 2007 (unaudited)
Six months to Six months to Year
30 Sept 30 Sept ended
2007 2006 31 March
2007
£m £m £m
Actuarial gains on defined benefit
pension schemes (net of deferred tax) - 14.9 9.4
Net foreign exchange gain/(loss) on
investments in foreign subsidiaries net
of hedge instruments 0.2 (0.8) -
Tax taken directly to equity - - 0.7
------- ------- -------
Net gain recognised directly in equity 0.2 14.1 10.1
Profit for the period 15.5 10.1 23.0
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Total recognised income and expense for
the period 15.7 24.2 33.1
======= ======= =======
Attributable to
- equity shareholders of Wincanton plc 15.5 24.2 33.0
- minority interests 0.2 - 0.1
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Total recognised income and expense for
the period 15.7 24.2 33.1
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Consolidated balance sheet
at 30 September 2007 (unaudited)
Note 30 Sept 30 Sept 31 March
2007 2006 2007
£m £m £m
Non-current assets
Goodwill and intangible assets 112.8 68.8 113.2
Property, plant and equipment 8 207.8 226.7 211.4
Investments 0.7 0.6 0.6
Deferred tax assets 9.4 21.9 11.8
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330.7 318.0 337.0
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Current assets
Inventories 8.1 7.6 8.2
Trade and other receivables 365.2 330.8 331.1
Cash and cash equivalents 9 67.8 50.6 60.9
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441.1 389.0 400.2
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Current liabilities
Income tax payable (7.2) (5.2) (4.4)
Borrowings 9 (1.7) (16.3) (1.6)
Trade and other payables (477.2) (419.5) (444.1)
Employee benefits (6.9) (6.4) (7.7)
Provisions (19.5) (17.5) (20.1)
------- ------- -------
(512.5) (464.9) (477.9)
------- ------- -------
Net current liabilities (71.4) (75.9) (77.7)
------- ------- -------
Total assets less current liabilities 259.3 242.1 259.3
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Non-current liabilities
Borrowings 9 (128.1) (120.0) (125.1)
Other payables (1.1) (1.0) (5.0)
Employee benefits (95.1) (95.7) (99.6)
Provisions (41.6) (44.5) (42.0)
Deferred tax liabilities (1.3) (1.1) (1.3)
------- ------- -------
(267.2) (262.3) (273.0)
------- ------- -------
Net liabilities (7.9) (20.2) (13.7)
======= ======= =======
Equity
Issued share capital 12.0 12.0 12.0
Share premium 9.8 8.5 9.6
Merger reserve 3.5 3.5 3.5
Translation reserve 2.9 1.9 2.7
Retained earnings (36.4) (46.4) (41.8)
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Equity deficit attributable to
shareholders of Wincanton plc (8.2) (20.5) (14.0)
Minority interest 0.3 0.3 0.3
------- ------- -------
Total equity deficit (7.9) (20.2) (13.7)
======= ======= =======
Consolidated statement of cash flows
for the six months to 30 September 2007 (unaudited)
Six months to Six months to Year
30 Sept 30 Sept ended
2007 2006 31 March
2007
£m £m £m
Operating activities
Profit before tax 22.1 15.1 32.6
Adjustments for
- depreciation and amortisation 18.6 17.1 35.1
- interest expense 5.4 4.4 9.9
- share of results of associates (0.1) - -
- profit on sale of property, plant and
equipment (1.0) (0.7) (9.3)
- share-based payments fair value
charges 1.0 0.7 1.6
------- ------- -------
Operating profit before changes in
working capital and provisions 46.0 36.6 69.9
Increase in trade and other receivables (29.4) (23.7) (10.3)
Decrease/(increase) in inventories 0.1 (0.3) (0.4)
Increase in trade and other payables 26.5 12.2 15.0
(Decrease)/increase in provisions (2.5) 1.5 (3.1)
Decrease in employee benefits (5.3) (28.2) (29.6)
Income taxes paid (1.4) (1.3) (1.4)
------- ------- -------
Cash generated from operations (12.0) (39.8) (29.8)
------- ------- -------
Cash flows from operating activities 34.0 (3.2) 40.1
======= ======= =======
Investing activities
Proceeds from sale of property, plant
and equipment 4.0 3.8 32.2
Proceeds from sale of unlisted trade
investments - 0.1 0.1
Interest received 0.9 0.7 1.7
Acquisitions net of cash acquired and
debt repaid on acquisition (1.6) - (29.7)
Acquisition of property, plant and
equipment (13.3) (16.7) (29.5)
------- ------- -------
Cash flows from investing activities (10.0) (12.1) (25.2)
======= ======= =======
Financing activities
Proceeds from the issue of share
capital 0.2 2.2 3.1
Disposal of own shares on exercise of
options - 0.3 1.2
Increase in borrowings 0.1 22.3 13.4
Payment of finance lease liabilities (0.5) (0.3) (1.6)
Dividends paid to minority interest in
subsidiary undertakings (0.2) - (0.1)
Equity dividends paid (10.9) (9.9) (14.9)
Interest paid (6.6) (4.4) (10.9)
------- ------- -------
Cash flows from financing activities (17.9) 10.2 (9.8)
======= ======= =======
Net increase/(decrease) in cash and
cash equivalents 6.1 (5.1) 5.1
Cash and cash equivalents at beginning
of the period 60.9 56.1 56.1
Effect of exchange rate fluctuations on
cash held 0.8 (0.4) (0.3)
------- ------- -------
Cash and cash equivalents at end of
period 67.8 50.6 60.9
======= ======= =======
Represented by
- cash at bank and in hand 37.6 21.3 33.5
- restricted cash, being deposits held
by the Group's captive insurer 30.2 29.3 27.4
------- ------- -------
67.8 50.6 60.9
======= ======= =======
Notes to the consolidated half year financial statements
for the six months to 30 September 2007 (unaudited)
1 Basis of preparation and Statement of compliance
Wincanton plc (the 'Company') is a UK company incorporated in England and Wales.
The consolidated half year financial statements of the Company for the six
months to 30 September 2007 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 adopted by the EU, and
on the basis of the accounting policies applied by the Group in its consolidated
financial statements for the year ended 31 March 2007, which are in accordance
with IFRS as adopted by the EU (Adopted IFRS). There have not been any
significant changes to Adopted IFRS since 31 March 2007 which give rise to any
changes to the Group's accounting policies.
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 2007. The comparative figures for the year ended 31 March 2007 have been
extracted from those accounts but do not comprise the full statutory accounts
for that financial year. Except for the 31 March 2007 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 2007 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 237
(2) or (3) of the Companies Act 1985.
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 2007.
The Half Year Report was approved by the Board on 7 November 2007.
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
contract logistics services which encompasses the entire scope of Wincanton's
operations, no further segment 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 is based on the geographical location of the business
operations.
Underlying operating profit by segment includes items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2007 (unaudited)
2 Segment information (continued)
UK & Ireland Mainland Europe Consolidated
Six Six Year Six Six Year Six Six Year
months months ended months months ended months months ended
to to 31 to to 31 to to 31
30 Sept 30 Sept March 30 Sept 30 Sept March 30 Sept 30 Sept March
2007 2006 2007 2007 2006 2007 2007 2006 2007
£m £m £m £m £m £m £m £m £m
Revenue* 668.3 575.1 1,214.5 361.9 356.7 718.6 1,030.2 931.8 1,933.1
======= ======= ======= ======= ======= ====== ======= ======= =======
Underlying
operating
profit by
segment 23.4 20.0 42.0 2.1 1.4 3.5 25.5 21.4 45.5
Amortisation ======= ====== ======= ======= ======= ====== ======= ======= =======
of acquired
intangibles (1.8) - (1.7) (0.8) (0.8) (1.5) (2.6) (0.8) (3.2)
Exceptional
restructuring
costs - - (2.0) - (1.8) (4.0) - (1.8) (6.0)
Exceptional
income 0.8 0.7 5.8 3.7 - 0.4 4.5 0.7 6.2
Operating ------- ------- ------- ------- ------- ------ ------- ------- -------
profit
22.4 20.7 44.1 5.0 (1.2) (1.6) 27.4 19.5 42.5
======= ======= ======= ======= ======= ====== ======= ======= =======
* Revenue derived from sales to external parties only.
3 Exceptionals
Six months to Six months to Year
30 Sept 2007 30 Sept 2006 ended
£m £m 31 March 2007
£m
Exceptional restructuring costs
Reorganisation of operating
structures - (0.2) (4.0)
post-acquisition
Relocation of UK head office and
business rationalisation - - 0.2
Closure and reorganisation of
operations - (1.6) (2.2)
(2006 : Spain) -------- -------- --------
- (1.8) (6.0)
======== ======== ========
Exceptional income
Property profits - sale of freehold
land 0.8 0.7 6.2
and buildings
Partial settlement of the PGN
Logistics 3.7 - -
Ltd arbitration case -------- -------- --------
4.5 0.7 6.2
======== ======== ========
The arbitration involving PGN Logistics Ltd, a jointly owned entity of the
Group, has been successfully concluded and a partial settlement awarded of
£27.4m, which was received after the period end. The Group's 50% share of this
expected receipt has been utilised to settle various amounts receivable and
reimburse certain accrued costs. The balance of the £13.7m receivable by the
Group, as its share of the £27.4m, has given rise to the above exceptional
income.
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2007 (unaudited)
4 Net financing costs
Six months to Six months to Year
30 Sept 2007 30 Sept 2006 ended
£m £m 31 March 2007
£m
Interest income 1.3 0.7 1.7
Expected return on defined benefit
pension scheme assets 17.7 16.1 32.0
Interest on defined benefit pension
scheme obligations (17.1) (15.1) (30.0)
-------- -------- --------
1.9 1.7 3.7
======== ======== ========
Interest expense (5.8) (4.7) (11.0)
Finance charges payable in respect
of (0.2) (0.2) (0.5)
finance leases
Unwinding of discount on insurance
and (1.3) (1.2) (2.1)
other provisions -------- -------- --------
(7.3) (6.1) (13.6)
Less finance costs capitalised - - -
-------- -------- --------
(7.3) (6.1) (13.6)
======== ======== ========
Net financing costs (5.4) (4.4) (9.9)
======== ======== ========
5 Income tax expense
Six months to Six months to Year
30 Sept 30 Sept ended
2007 2006 31 March
2007
£m £m £m
Current tax expense
Current year 4.3 0.7 1.5
Adjustments for prior years (0.1) - (1.5)
------- ------ --------
4.2 0.7 -
======= ====== ========
Deferred tax expense
Current year 2.4 4.3 8.8
Adjustments for prior years - - 0.8
------- ------ --------
2.4 4.3 9.6
======= ====== ========
Total income tax expense in the income
statement 6.6 5.0 9.6
======= ====== ========
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 2007 (unaudited)
6 Earnings per share
Earnings per share are calculated on the basis of earnings attributable to the
equity shareholders of Wincanton plc of £15.3m (2006: £10.1m) and the weighted
average of 117.2m (2006:115.3m) shares which have been in issue throughout the
period. The diluted earnings per share are calculated on the basis of an
additional 2.3m (2006: 2.0m) shares deemed to have been 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 Six months to Six months to Year ended 31
shares March 2007
30 Sept 2007 30 Sept millions
millions
2006
millions
Issued ordinary
shares at the
beginning of the
period 116.1 114.9 114.9
Net effect of
shares issued
during the period 1.1 0.4 1.2
-------- ------- -------
117.2 115.3 116.1
======== ======= =======
Weighted average number of ordinary
shares (diluted)
Weighted average
number of ordinary
shares at the end
of the period 117.2 115.3 116.1
Effect of share
options in issue
but not exercised 2.3 2.0 1.8
-------- ------- -------
119.5 117.3 117.9
======== ======= =======
An alternative earnings per share number is shown below, being before
exceptionals, amortisation of acquired intangibles and related tax, since the
Directors consider that this provides further information on the underlying
performance of the Group.
Six months to Six months to Year ended 31
March 2007
30 Sept 2007 30 Sept pence
pence
2006
pence
Underlying earnings per share
- basic 11.7 10.1 21.0
- diluted 11.5 10.0 20.7
======== ======= =======
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2007 (unaudited)
6 Earnings per share (continued)
Underlying earnings are determined as follows:
Six months to Six months to Year ended 31
March 2007
30 Sept 2007 30 Sept £m
£m 2006
£m
Profit for the
period attributable
to equity
shareholders of
Wincanton plc 15.3 10.1 22.9
Exceptional
restructuring costs
(note 3) - 1.8 6.0
Exceptional income
(note 3) (4.5) (0.7) (6.2)
Amortisation of
acquired
intangibles 2.6 0.8 3.2
Tax on the above
items 0.3 (0.3) (1.5)
-------- ------- -------
Underlying earnings 13.7 11.7 24.4
======== ======= =======
7 Dividends
An interim dividend is proposed of 4.60p per share to be paid on 8 January 2008
to shareholders on the register on 7 December 2007.
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 £5.4m (2006: Interim £5.0m). In August 2007
the final dividend of 9.29p per share was paid to shareholders, a total of
£10.9m.
8 Property, plant and equipment
Acquisitions and disposals
During the half year to 30 September 2007 the Group acquired assets with a cost
of £12.4m (2006: £15.1m).
Assets with a carrying amount of £3.0m were disposed of during the half year
ended 30 September 2007 (2006: £3.0m)
Capital commitments
At 30 September 2007 the Group had entered into contracts to purchase property,
plant and equipment for £16.6m (2006: £5.5m); delivery is expected in the second
half of the year to 31 March 2008.
Notes to the consolidated half year financial statements (continued)
for the six months to 30 September 2007 (unaudited)
9 Analysis of net debt
30 Sept 30 Sept 31 March
2007 2006 2007
£m £m £m
Cash and cash equivalents
Cash at bank and in hand 37.6 21.3 33.5
Restricted cash, being deposits held by the
Group's captive insurer 30.2 29.3 27.4
------- ------- -------
67.8 50.6 60.9
------- ------- -------
Borrowings
=== ===
Current
=== ===
Bank loans and overdrafts (1.0) (15.2) (1.0)
Finance lease liabilities (0.7) (1.1) (0.6)
------- ------- -------
(1.7) (16.3) (1.6)
------- ------- -------
Non-current
===
US$ private placement (88.7) (86.4) (86.7)
Bank loans (36.9) (29.7) (35.3)
Finance lease liabilities (2.5) (3.9) (3.1)
------- ------- -------
(128.1) (120.0) (125.1)
------- ------- -------
Total net debt (62.0) (85.7) (65.8)
======= ======= =======
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
2007 which comprises the consolidated income statement, the consolidated balance
sheet, the consolidated statement of recognised income and expense, 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 2007 are not prepared, in all material respects,
in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
KPMG Audit Plc
Chartered Accountants
100 Temple Street
Bristol
BS1 6AG
7 November 2007
Shareholder information
Shares traded ex-dividend 5 December 2007
Record date for interim dividend 1 7 December 2007
Interim dividend paid 8 January 2008
Preliminary announcement of full year results June 2008
Annual General Meeting July 2008
Half year results and dividend announced November 2008
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:
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN15 8AH
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