Interim Results

RNS Number : 5481H

Wincanton PLC

06 November 2008

 



For immediate release

6 November 2008

WINCANTON plc

Half Year Results

for the six months to 30 September 2008 (unaudited)

'Infill acquisitions continue to complement organic growth'

	2008     £m		2007     £m		% increase
Revenue	1,199.2		1,030.2		16.4%
Underlying operating profit	30.5		25.5		19.6%
Net financing costs	(9.2)		(5.4)
Share of results of associates	0.1		0.1
Underlying profit before tax	21.4		20.2		5.9%
Net other items (note)	(9.4)		1.9
Profit before tax	12.0		22.1
Underlying earnings per share	12.7p		11.7p		8.5%
Basic earnings per share	5.2p		13.1p
Proposed interim dividend per share	4.83p		4.60p		5.0%

Note: Underlying profit before tax and earnings per share are stated before net other items of £(9.4)m (2007: £1.9m), comprising exceptional restructuring costs of £6.4m (2007: £nil), exceptional income of £1.1m (2007: £4.5m) and amortisation of acquired intangibles of £4.1m (2007: £2.6m). Operating profit, including these items, amounted to £21.1m (2007: £27.4m) down 23%. Profit before tax, including these items, amounted to £12.0m (2007: £22.1m), down 46%.

FINANCIAL HIGHLIGHTS

• 19.6% growth in underlying operating profit, to £30.5m, and 8.5% growth in underlying earnings per share, to 12.7p per share

• Continuing improvement in Mainland European margin, to approximately 1.0%, Mainland Europe now some 15% of underlying Group operating profit

• 5.0% increase in interim dividend to 4.83p per share

OPERATIONAL HIGHLIGHTS

• Core UK business of open-book contracts performing well; gives strong, resilient profit base to Group performance

• Performance improvement initiatives in German road network delivering benefits ahead of forecast

• Last year's infill acquisitions successfully integrated; two deals announced to date this year and a further transaction announced today

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

'Our results for the half year confirm both the strength and resilience of our well-diversified portfolio of activities and the quality of our long-term customer partnerships.

We continue to see attractive opportunities to accelerate our growth through infill acquisitions.'

  For further enquiries please contact:

Wincanton

Graeme McFaull, Chief Executive 

Gerard Connell, Group Finance Director         [phone]

Buchanan Communications    

Charles Ryland / Jeremy Garcia                       [phone]

Half Year Review

for the six months to 30 September 2008

Introduction

Wincanton is growing well in expanding markets. We have developed a broadly-diversified portfolio of customers, sectors, services and geographies. The continuing organic growth momentum from this portfolio is being enhanced and accelerated through a programme of infill acquisitions. These acquisitions have been made at attractive profit multiples and have been rapidly and successfully integrated.  

Our business is based on long-term partnerships with our customers. The supply chain and business process services which we provide are critical to the operational resilience, customer service and financial performance of these customers. In times of growth, we work with them to deliver higher volumes through their supply chains to meet the exacting demands of their marketplaces. In more challenging times, we work even more closely with them to deliver enhanced productivity, greater efficiency and a lower cost base, without compromising their customer service requirements.

The need to reduce costs in more challenging times has, in the past, delivered incremental opportunity for Wincanton as customers have sought to improve efficiency by outsourcing both more of their business and, in some instances, new areas of their business.

Our results for the half year to 30 September 2008 reflect both the quality of our portfolio of businesses and the strength of our long-term customer partnerships. The outlook for the Group gives cause for confidence, both for the second half of this financial year, and as we begin to progress the many opportunities already in the development pipeline for 2009/10. Although the current economic environment creates shorter-term uncertainty, we believe that Wincanton can continue to build on its strong track record of delivering profit and dividend growth for shareholders.

UK & Ireland

Our operations in the UK & Ireland reported operating profit of £26.0m, an increase of 11.1 per cent on last year's £23.4m, on revenue up 10.8 per cent, to £740.8m.

In addition to the annualised benefit of new business wins last year with customers such as Comet, Dunnes Stores, Sainsbury's and Wavin, the first half saw a number of new wins coming onstream, including contract gains with Neal's Yard, Marley, Baring Asset Management and Thierry's Wine.  

Our recent acquisitions in container management and aerospace & defence logistics contributed well, helping offset both the contribution lost from two automated warehouses that came to the end of their contract term and a degree of operational inefficiency as a result of the transfer of existing customer volumes between shared-user sites.

Our UK operations consist substantially of open-book contracts, with long-standing customers. The income from such contracts is generated largely by fixed management fees and their profitability is not materially affected either by reductions in customer volumes or volatility in the price of key cost items such as fuel. All the costs of operating these contracts are recovered from our customers. These open-book contracts therefore give a strong, defensive core to our UK business and provide a stable and resilient base to our overall financial performance.

Certain of the new sectors and service areas which we have been developing, such as home delivery, construction and recycling, are more sensitive to shorter-term volume changes and we did begin to see signs of reduced volumes as the second quarter of the financial year progressed.  Rapid action was therefore taken to reduce our cost base accordingly.

In all these areas, we also expect the effect of lower volumes to be mitigated by new business opportunities from market share gains and renewed customer focus on the benefits of outsourcing.  

In container management, for example, overall market volumes have been lower in recent months, but the financial effect of these reduced volumes has been offset by leveraging the freight management expertise of the acquired business across the existing Wincanton customer base. In construction, we are handling significantly lower volumes for our major customers, but recent contract wins with customers such as Marley and Lafarge confirm that the current economic environment will create new outsourcing opportunities in this sector. Volume pressures remain, as do margin pressures in areas such as lower recyclate prices in our recycling operations, but we continue to have confidence in the medium and longer-term growth prospects of these newer activities.

The successful integration of our acquisition in the defence & aerospace sector is further confirmation of the increasing diversity of our range of sector and service offerings. The incremental skills and expertise brought into the Group in spares logistics, in co-packing and in specialist pack design and manufacture, add further to our developing focus on factory and production logistics. The acquisition also introduced Wincanton to a substantial new customer base of blue-chip groups including AgustaWestland, BAE Systems and General Dynamics with whom encouraging dialogue is already in progress. We see many opportunities for future growth in this sector both in the UK & Ireland and also, potentially, across Mainland Europe.

The acquisition of CEL Group, which is also being announced today, represents a significant consolidation of our presence in container transport and freight management, making us the UK market leader in a sector which we believe to have very attractive long-term growth prospects. CEL, which is being acquired for an initial £19.5m, fits extremely well with the Hanbury Davies business acquired in January 2008. CEL reported operating profit of £3.8m and EBITDA of £6.2m, on revenue of £60.7m, in its most recent financial year.

Mainland Europe

Our operations in Mainland Europe reported another period of improved performance, more than doubling last year's reported operating profit of £2.1m and contributing approximately 15 per cent of underlying Group operating profit in the first half. Underlying operating profit of £4.5m on revenue up 27 per cent to £458.4m, represented a margin of approximately 1.0 per cent. We therefore continue to make progress towards the previously-announced margin target of 2 per cent for our Mainland European businesses. This progress is reported net of another significant investment in overhead costs in the first half as a result of the further strengthening of our management teams and our continuing investment in marketing and brand awareness programmes.  

The performance improvement was particularly marked in our German road network. The network accounts for nearly 40 per cent of our German revenue and some 27 per cent of our revenue in Mainland Europe. Whilst the network remains loss-making, and therefore materially lowers the overall margin reported in Mainland Europe, the first half result represented a significant improvement on the prior year. The wide range of initiatives identified and being successfully implemented by our new German management team is producing encouraging results. We are successfully addressing both the performance of the limited number of depots which remain loss-making, and whose losses materially affect reported profit, and the overall efficiency of the network. Our objective remains for the network to be achieving a running rate of break-even by the end of the current financial year.  

Unprofitable depots are being restructured, replaced or closed. Our Wuppertal depot, for example, was closed during the first half and its volumes successfully transferred to sites in Duisburg and Cologne. The current Cologne facility will be replaced by a better-located new site in the second half of the year. Plans are also under development to improve performance in other loss-making depots, with a particular focus on Duisburg, Mannheim and Berlin. Productivity and pricing are now being more consistently measured and improved across the network, and the stronger new central team has also been focusing on depot manager performance to ensure that initiatives are properly and consistently implemented at local level.

In addition to the profit improvement being delivered by these shorter-term tactical initiatives, the strategic plan for the German road network includes strengthening our presence in certain key regions, either through acquisition or partnership. The first of these transactions was announced recently, with the acquisition of the Koblenz-based ELI-Transport for an initial consideration of up to €12.5m. In its most recent financial year, ELI reported operating profit of €1.8m and EBITDA of €2.0m on revenue of €20.5m.

Our two other business areas in Germany, intermodal and contract logistics, both reported good profit performances in the first half. Our intermodal business, a market leader in container freight management on the Rhine, is progressively expanding its activities in rail containers and freight management. A strategic initiative is currently underway to assess the opportunity to leverage more fully the sea, river and rail expertise of our German operations across the other countries in which the Group is active, including the co-ordination of our various freight forwarding and customs clearance activities in the UK, France, Holland and Poland. The intermodal business, which already exceeds our 2 per cent margin target for Mainland Europe, represented approximately 40 per cent of our German revenue in the first half.  

Our contract logistics activities, which accounted for some 22 per cent of German revenue and are also already performing in line with our margin targets, are currently focused principally on the chemicals, automotive, paper and high-tech sectors. Under a new business development director, and in conjunction with the Group business development team, we have been reviewing growth opportunities across the wider market and are confident that we can deliver increased momentum from the significant levels of continuing investment in our business development function in Germany.

Contract gains and renewals in Germany in the first half, across all business areas, included new or extended business with customers such as BorgWarner, Dow, Opel, SCA and Wincor-Nixdorf. 

The key challenge in our French operations, which represented approximately 15 per cent of Mainland European revenue in the first half, is to build a more flexible and resilient business base by progressively exiting currently under-utilised and expensive warehousing locations and accelerating the rate of new contract gains. Plans are being implemented for business transition to new sites in Toulouse and Lyon, the leases on our substantial operations in Orléans reach their normal expiry date in June 2010, and we have already sub-let spare capacity in the Paris area.  

At the same time we have been bringing onstream a growing number of new, dedicated sites in respect of which the Group is either not assuming unmatched underlying lease liabilities, or seeking to mitigate its exposure to such liabilities. New business in the period included significant volume expansion with Mr. Bricolage, an existing customer, a new site near Lyon for Blédina, the Danone baby food subsidiary, a new facility for InBev in Armentières, a new operation for Isover, a St Gobain subsidiary, near Angers, and the 3-year renewal and transfer to a new site near Lyon for Daikin, another existing customer. An increased focus on providing transport and freight management services, building on our current core skills of warehousing and project management, is also delivering new business opportunities.

Whilst the profit performance of our French business may remain volatile, as we progressively exit our legacy lease obligations over the next 18 - 24 months, we are encouraged by the improving brand awareness of Wincanton, the increasing flow of new business opportunities and our growing track record of successful project implementations.

Our Benelux operations, now managed jointly with France under a Managing Director for Western Europe, delivered an improved profit performance relative to last year but currently remain below our margin target. The principal focus of these activities historically has been international transport and freight management, principally within Europe but also with activities in oilfield-related forwarding into Central Asian countries such as Kazakhstan.

We see growing opportunity in international transport and freight management and have strengthened our central development teams to target and co-ordinate new business in these activities across the Group. A substantial investment in a new cross-docking hub on the Dutch / German border will come onstream before the end of the current financial year. We are confident that the substantially increased capacity of the new facility will add further momentum to our Pan-European transport management activities. Contract wins and renewals delivered in the first half included new or expanded business with customers such as Thyssen, BASF, Nippon Express, Parker Hannifin, Akzo Nobel and ArcelorMittal.

Signs of progress were less clear in the financial performance in Central & Eastern Europe, which again reported a small loss, on revenue which represented some 10 per cent of the Mainland European total.  Poland, currently the most important market for us in the region, remained profitable, albeit down on last year and below our target margin. Lost volume at two warehousing locations has yet to be fully replaced and lower volumes at a large automotive customer also affected profit performance. We are seeing a good flow of new potential opportunities as we go into the second half, particularly in domestic and international transport, but pricing pressure is expected to continue.

The overall results for Central & Eastern Europe bear the cost of significant investment in strengthening our management teams at both national and regional levels. We are continuing to invest in our development and operational capabilities in Hungary, Slovakia and in the Czech Republic, all of which reported small losses in the period. It is clearly important that our new business pipeline and regional profit performance should progressively reflect the benefit of this significant investment.

Financial Performance

Underlying operating profit for the Group, at £30.5m, represented a 19.6 per cent increase, on revenue up 16.4 per cent to £1,199.2m.  

Increased financing costs, up from £5.4m to £9.2m, reflect the effect of higher levels of average debt, as a result of both acquisitions and some pressure in the first half on working capital. Approximately £1m of the increase relative to last year is due to a reduction in the net IAS 19 pension financing credit.  

Underlying profit before tax, of £21.4m, was 5.9 per cent up on prior year, with underlying earnings per share increasing at the higher rate of 8.5 per cent, principally as a consequence of a reduction in the UK corporate tax rate.

Net exceptional costs of £5.3m included the integration costs of recent acquisitions, costs incurred in the UK & Ireland to reduce headcount to reflect lower levels of activity in certain of our businesses, restructuring initiatives to improve the performance of our German operations, and the costs of our consideration of a possible bid for TDG plc. These exceptional costs were offset by the sale of a surplus property in the UK.

Further property sales are possible in the second half, as is the receipt of further monies from the arbitration process involving our PGN joint venture.  

Cash flow and net debt

Net debt of £153.9m at 30 September 2008 was higher than the net debt of £104.5m reported at the year-end, principally as a result of a £30.0m outflow in respect of infill acquisitions and a £10.7m increase in working capital.  

The committed funding of the Group consists of a £210m revolving credit facility with a syndicate of relationship banks, maturing in November 2010, and a US private placement facility of approximately £90m with final maturity in 2015.

The increase in working capital in the period includes an increase of some £4m in the amount owed by Uniq plc under the terms of a long-term contract agreed with our former parent prior to demerger in May 2001. This contract will expire on 31 March 2009. A total of £13m is now owed to Wincanton by Uniq plc as a consequence of a dispute in relation to this contract. An initial court hearing has ruled in Wincanton's favour in the dispute and the result of a further appeal by Uniq plc is expected shortly. Wincanton will continue to vigorously pursue both the legal process and the anticipated cash awards in its favour.  

Capital expenditure of £23m, representing approximately 125 per cent of first half depreciation, was also higher than usual. This was primarily as a consequence of capacity expansion in both records management and recycling in the UK & Ireland, and the development of our new international transport hub in Holland which is currently being financed on balance sheet.

Pensions 

Discussions are in progress with the trustees of the Group's pension fund in respect of the assumptions to be used to assess the funding position of the Group's pension liabilities in relation to the triennial valuation as at 31 March 2008. The previous valuation took place before the introduction of the new pensions regulatory scheme and both the trustees and the Group recognise the importance of re-assessment of the assumptions proposed by the scheme actuary in 2005.

A further update on the progress of these discussions and the Group's subsequent proposals to address the likely funding deficit, which will be formulated and presented to the trustees for their consideration in due course, will be given on or before the date of the announcement of our results for the current financial year. The Group expects its proposals to trustees to recognise, inter alia, the relative immaturity of its pension fund liabilities, which have an average duration in excess of 20 years. 

Dividend

The Board has declared an interim dividend of 4.83p per share, an increase of 5.0 per cent on last year's dividend of 4.60p. This will be paid on 6 January 2009 to shareholders on the register at 5 December 2008.  

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 2008.  

Outlook

Given the substantially contract-based nature of our UK & Ireland operations, we have good visibility of our expected performance through the second half of the financial year. We have noted volume weakness in certain of our newer activities, which are generally smaller operations, but see opportunities to mitigate this weakness through contract gains, the cost base restructuring already implemented and other potential actions which are currently the subject of detailed review. In terms of contract gains, certain projects which are well-progressed in the development pipeline, if successfully delivered, would give good momentum also into 2009/10.

Our Mainland European operations are potentially more volume-sensitive than our UK & Ireland businesses, but currently continue to perform well. Actions already taken to improve our own efficiency and productivity are expected to deliver further improvements in the second half. Our overhead base in Mainland Europe will be regularly reviewed and re-assessed, if necessary, relative to our views of the economic outlook and the growth prospects for these businesses.

As confirmed in our pre-close statement, although the current economic environment confirms the appropriateness of a note of caution, we continue to anticipate that the Group's financial performance for the year to 31 March 2009 will be in line with management expectations.

Wincanton is well-positioned in markets with attractive growth potential, having significantly strengthened and diversified our portfolio of businesses in recent years. We are expanding our range of services, both into new areas of the supply chain and new areas of business process outsourcing, and successfully targeting and developing a presence in new sectors of the economy. We are consolidating our presence in our current core geographic markets of the UK & Ireland, Germany, France and Poland, and are actively reviewing potential entry strategies for new markets.  

We see continuing opportunity to generate value for shareholders, both through the organic development of our existing portfolio and through infill acquisitions and joint ventures.

David Edmonds

Chairman

5 November 2008

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 2008 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 2008. The above Statement of Directors' responsibilities was approved by the Board on 5 November 2008.

  Consolidated income statement

for the six months to 30 September 2008 (unaudited)

	Note	Six months to 30 Sept  2008		Six months to  30 Sept  2007		Year  ended 31 March  2008
		£m		£m		£m
Revenue	2	1,199.2		1,030.2		2,164.7
Underlying operating profit	2	30.5		25.5		52.4
Amortisation of acquired intangibles	2	(4.1)		(2.6)		(5.5)
Exceptional restructuring costs	3	(6.4)		-		(4.5)
Exceptional income	3	1.1		4.5		4.9
Operating profit		21.1		27.4		47.3
Financing income	4	0.9		1.9		3.7
Financing costs	4	(10.1)		(7.3)		(14.5)
Net financing costs		(9.2)		(5.4)		(10.8)
Share of results of associates		0.1		0.1		0.2
Profit before tax		12.0		22.1		36.7
Income tax expense	5	(5.6)		(6.6)		(11.7)
Profit for the period		6.4		15.5		25.0
Attributable to
- equity shareholders of Wincanton plc		6.0		15.3		24.5
- minority interests		0.4		0.2		0.5
Profit for the period		6.4		15.5		25.0
Earnings per share	6
- basic		5.2p		13.1p		21.0p
- diluted		5.1p		12.8p		20.6p
Dividend declared and paid in the period (£m)	7	12.0		10.9		16.2

All operations in the above financial periods were continuing.

The dividend per share proposed in respect of the above period is 4.83p (2007: 4.60p).

  Consolidated statement of recognised income and expense

for the six months to 30 September 2008 (unaudited)

	Six months to 30 Sept  2008		Six months to 30 Sept  2007		Year  ended 31 March  2008
	£m		£m		£m
Actuarial gains on defined benefit pension schemes (net of deferred tax)	-		-		43.6
Net foreign exchange gain on investments in foreign subsidiaries net of hedged items	0.9		0.2		1.0
Tax taken directly to equity	-		-		0.2
Net gain recognised directly in equity	0.9		0.2		44.8
Profit for the period	6.4		15.5		25.0
Total recognised income and expense for the period	7.3		15.7		69.8
Attributable to
- equity shareholders of Wincanton plc	6.9		15.5		69.3
- minority interests	0.4		0.2		0.5
Total recognised income and expense for the period	7.3		15.7		69.8

  Consolidated balance sheet

at 30 September 2008 (unaudited)

	Note	30 Sept  2008		30 Sept  2007		31 March  2008
		£m		£m		£m
Non-current assets
Goodwill and intangible assets	10	173.2		112.8		142.7
Property, plant and equipment	8	235.0		207.8		231.0
Investments, including those equity accounted		0.8		0.7		0.8
Deferred tax assets		2.4		9.4		2.2
		411.4		330.7		376.7
Current assets
Inventories		10.1		8.1		9.4
Trade and other receivables		414.2		365.2		402.0
Cash and cash equivalents	9	51.3		67.8		67.4
		475.6		441.1		478.8
Current liabilities
Income tax payable		(8.0)		(7.2)		(8.6)
Borrowings	9	(13.1)		(1.7)		(10.0)
Trade and other payables		(525.3)		(477.2)		(520.2)
Employee benefits		(8.7)		(6.9)		(8.9)
Provisions		(18.2)		(19.5)		(19.2)
		(573.3)		(512.5)		(566.9)
Net current liabilities		(97.7)		(71.4)		(88.1)
Total assets less current liabilities		313.7		259.3		288.6
Non-current liabilities
Borrowings	9	(192.1)		(128.1)		(161.9)
Other payables		(1.0)		(1.1)		(1.4)
Employee benefits		(24.9)		(95.1)		(31.8)
Provisions		(36.2)		(41.6)		(39.6)
Deferred tax liabilities		(25.6)		(1.3)		(16.9)
		(279.8)		(267.2)		(251.6)
Net assets/(liabilities)		33.9		(7.9)		37.0
Equity
Issued share capital		12.1		12.0		12.1
Share premium		12.2		9.8		11.9
Merger reserve		3.5		3.5		3.5
Translation reserve		4.6		2.9		3.7
Retained earnings		1.1		(36.4)		5.4
Equity/(equity deficit) attributable to shareholders of Wincanton plc		33.5		(8.2)		36.6
Minority interest		0.4		0.3		0.4
Total equity/(equity deficit)		33.9		(7.9)		37.0

Consolidated statement of cash flows

for the six months to 30 September 2008 (unaudited)

		Six months to 30 Sept  2008		Six months to 30 Sept  2007		Year  ended 31 March  2008
		£m		£m		£m
Operating activities
Profit before tax		12.0		22.1		36.7
Adjustments for
- depreciation and amortisation		22.6		18.6		38.6
- interest expense		9.2		5.4		10.8
- income from associates		(0.1)		(0.1)		(0.2)
- profit on sale of property, plant and equipment		(1.2)		(1.0)		(4.7)
- share-based payments fair value charges		1.7		1.0		2.7
Operating profit before changes in working capital and provisions		44.2		46.0		83.9
Increase in trade and other receivables		(5.1)		(29.4)		(30.8)
(Increase)/decrease in inventories		(0.5)		0.1		(0.5)
Increase in trade and other payables		1.3		26.5		30.2
Decrease in provisions		(6.4)		(2.5)		(7.0)
Decrease in employee benefits		(8.0)		(5.3)		(7.6)
Income taxes paid		(3.6)		(1.4)		(5.3)
Cash generated from operations		(22.3)		(12.0)		(21.0)
Cash flows from operating activities		21.9		34.0		62.9
Investing activities
Proceeds from sale of property, plant and equipment		3.5		4.0		18.1
Interest received		0.6		0.9		2.0
Acquisitions net of cash acquired and debt repaid on acquisition		(30.0)		(1.6)		(32.4)
Acquisition of property, plant and equipment		(23.2)		(13.3)		(42.9)
Cash flows from investing activities		(49.1)		(10.0)		(55.2)
Financing activities
Proceeds from the issue of share capital		0.3		0.2		2.3
Disposal of own shares on exercise of options		-		-		0.4
Own shares acquired		-		-		(7.9)
Increase in borrowings		33.4		0.1		30.1
Payment of finance lease liabilities		(1.5)		(0.5)		(1.1)
Dividends paid to minority interest in subsidiary undertakings		(0.4)		(0.2)		(0.4)
Equity dividends paid		(12.0)		(10.9)		(16.2)
Interest paid		(8.9)		(6.6)		(11.9)
Cash flows from financing activities		10.9		(17.9)		(4.7)
Net (decrease)/ increase in cash and cash equivalents		(16.3)		6.1		3.0
Cash and cash equivalents at beginning of the period		67.4		60.9		60.9
Effect of exchange rate fluctuations on cash held		0.2		0.8		3.5
Cash and cash equivalents at end of period		51.3		67.8		67.4
Represented by
- cash at bank and in hand		22.1		37.6		40.9
- restricted cash, being deposits held by the Group's captive insurer		29.2		30.2		26.5
		51.3		67.8		67.4

  Notes to the consolidated half year financial statements

for the six months to 30 September 2008 (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 2008 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 adopted by the Group and applied and disclosed in its consolidated financial statements for the year ended 31 March 2008. These policies are in accordance with IFRS as adopted by the EU (Adopted IFRS) with the exception of the adoption of IFRIC 14, IAS 19 'The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'. Whilst IFRIC 14 has not been endorsed by the EU at 30 September 2008, endorsement is expected by the end of the year to 31 March 2009 and therefore this interpretation has been adopted early in these consolidated half year financial statements.  This has not had a material impact on the Group's results or financial position.  

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 2008. The comparative figures for the year ended 31 March 2008 have been extracted from those accounts but do not comprise the full statutory accounts for that financial year. Except for the 31 March 2008 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 20.

The consolidated financial statements for the year ended 31 March 2008 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 2008.

The Half Year Report, which includes the consolidated half year financial statements, was approved by the Board on 5 November 2008.  

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 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.

Segment results include 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 2008 (unaudited)

2    Segment information (continued)

	UK & Ireland			Mainland Europe			Consolidated
	Six months to  30 Sept 2008	Six months to  30 Sept 2007	Year ended 31 March 2008	Six months to 30 Sept 2008	Six months to  30 Sept 2007	Year ended 31 March 2008	Six months to 30 Sept 2008	Six months to  30 Sept 2007	Year ended 31  March 2008
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue*	740.8	668.3	1,388.7	458.4	361.9	776.0	1,199.2	1,030.2	2,164.7
Underlying operating profit by segment	26.0	23.4	47.2	4.5	2.1	5.2	30.5	25.5	52.4
Amortisation of acquired intangibles	(3.3)	(1.8)	(4.0)	(0.8)	(0.8)	(1.5)	(4.1)	(2.6)	(5.5)
Exceptional restructuring costs	(5.1)	-	2.7	(1.3)	-	(7.2)	(6.4)	-	(4.5)
Exceptional income	1.1	0.8	0.8	-	3.7	4.1	1.1	4.5	4.9
Operating profit	18.7	22.4	46.7	2.4	5.0	0.6	21.1	27.4	47.3

* Revenue derived from sales to external parties only.

3    Exceptionals

	Six months to  30 Sept 2008 £m		Six months to 30 Sept 2007 £m		Year  ended  31 March 2008 £m
Exceptional restructuring costs
Reorganisation of operating structures post-acquisition	(0.5)		-		(1.0)
Closure of operations and business restructuring in the UK and Germany	(4.7)		-		(7.2)
Cost of abortive acquisition project	(1.2)		-		-
Profit on sale of redundant UK head office post-relocation	-		-		3.7
	(6.4)		-		(4.5)
Exceptional income
Property profits - sale of freehold land and buildings	1.1		0.8		0.8
Partial settlement of the PGN Logistics Ltd arbitration case	-		3.7		4.1
	1.1		4.5		4.9

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2008 (unaudited)

4    Net financing costs

	Six months to  30 Sept 2008 £m		Six months to 30 Sept 2007 £m		Year  ended  31 March 2008 £m
Interest income	0.9		1.3		2.5
Expected return on defined benefit pension scheme assets	-		17.7		35.5
Interest on defined benefit pension scheme obligations	-		(17.1)		(34.3)
	0.9		1.9		3.7
Interest expense	(7.7)		(5.8)		(12.2)
Finance charges payable in respect of finance leases	(0.5)		(0.2)		(0.6)
Interest on defined benefit pension scheme obligations	(18.6)		-		-
Expected return on defined benefit pension scheme assets	18.0		-		-
Unwinding of discount on insurance and other provisions	(1.3)		(1.3)		(1.7)
	(10.1)		(7.3)		(14.5)
Net financing costs	(9.2)		(5.4)		(10.8)

5    Income tax expense

	Six months to 30 Sept  2008		Six months  to 30 Sept  2007		Year  ended 31 March  2008
	£m		£m		£m
Current tax expense
Current year	3.1		4.3		8.7
Adjustments for prior years	(0.2)		(0.1)		0.7
	2.9		4.2		9.4
Deferred tax expense
Current year	2.7		2.4		3.7
Adjustments for prior years	-		-		(1.4)
	2.7		2.4		2.3
Total income tax expense in the income statement	5.6		6.6		11.7

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.  The current year deferred tax expense includes £1.6m (2007: £nil) related to the withdrawal of IBAs.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2008 (unaudited)

6    Earnings per share

Earnings per share are calculated on the basis of earnings attributable to the equity shareholders of Wincanton plc of £6.0m (2007: £15.3m) and the weighted average of 116.5m (2007:117.2m) shares which have been in issue throughout the period. The diluted earnings per share are calculated on the basis of an additional 0.5m (2007: 2.3m) 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 2008 millions		Six months to  30 Sept  2007 millions		Year ended 31 March 2008 millions
Issued ordinary shares at the beginning of the period	116.5		116.1		117.2
Net effect of shares issued and purchased during the period	-		1.1		(0.3)
	116.5		117.2		116.9
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the period	116.5		117.2		116.9
Effect of share options in issue but not exercised	0.5		2.3		2.1
	117.0		119.5		119.0

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:  

	Six months to  30 Sept 2008 pence		Six months to  30 Sept  2007 pence		Year ended 31 March 2008 pence
Underlying earnings per share
- basic	12.7		11.7		24.3
- diluted	12.6		11.5		23.9

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2008 (unaudited)

6    Earnings per share (continued)

Underlying earnings are determined as follows:

	Six months to  30 Sept 2008  £m		Six months to  30 Sept  2007 £m		Year ended 31 March 2008 £m
Profit for the period attributable to equity shareholders of Wincanton plc	6.0		15.3		24.5
Exceptional restructuring costs (note 3)	6.4		-		4.5
Exceptional income (note 3)	(1.1)		(4.5)		(4.9)
Amortisation of acquired intangibles	4.1		2.6		5.5
Tax on the above items	(2.2)		0.3		(1.2)
Tax related to withdrawal of IBAs (note 5)	1.6		-		-
Underlying earnings	14.8		13.7		28.4

7    Dividends

An interim dividend is proposed of 4.83p per share to be paid on 6 January 2009 to shareholders on the register on 5 December 2008.  

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 £5.6m (2007: Interim £5.3m). In August 2008 the final dividend of 10.31p per share was paid to shareholders, a total of £12.0m.

8     Property, plant and equipment

Acquisitions and disposals

During the half year to 30 September 2008 the Group acquired assets with a cost of £20.5m (2007: £12.4m).

Assets with a carrying amount of £2.3m were disposed of during the half year ended 30 September 2008 (2007: £3.0m).

Capital commitments

At 30 September 2008 the Group had entered into contracts to purchase property, plant and equipment for £23.6m (2007: £16.6m); delivery is expected in the second half of the year to 31 March 2009.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2008 (unaudited)

9    Analysis of net debt

	30 Sept  2008 £m		30 Sept  2007 £m		31 March  2008 £m
Cash and cash equivalents
Cash at bank and in hand	22.1		37.6		40.9
Restricted cash, being deposits held by the Group's captive insurer	29.2		30.2		26.5
	51.3		67.8		67.4
Borrowings
Current
Bank loans and overdrafts	(11.7)		(1.0)		(8.5)
Finance lease liabilities	(1.4)		(0.7)		(1.5)
	(13.1)		(1.7)		(10.0)
Non-current
US$ private placement	(98.8)		(88.7)		(98.6)
Bank loans	(82.2)		(36.9)		(50.8)
Finance lease liabilities	(11.1)		(2.5)		(12.5)
	(192.1)		(128.1)		(161.9)
Total net debt	(153.9)		(62.0)		(104.5)

10 Acquisitions

Current year acquisitions

In April 2008, the Group increased its shareholdings in two joint ventures, Wincanton Intermodal Kehl GmbH and Co-KG and Kehler Lagerhaus Verwaltung GmbH, from 50% to 51.15% for a nominal amount, resulting in these entities being accounted for as subsidiaries.

In May 2008 the Group acquired the entire share capital of Product Support Holdings Ltd (PSHL) for £17.7m in cash, of which up to £3.0m is deferred pending 'earn out' performance. PSHL provides logistics solutions to the defence and aerospace sectors, primarily in the UK.  This acquisition gave rise to goodwill of £13.1m.

In the period since acquisition PSHL contributed £1.3m of operating profit. If the acquisition had occurred on the first date of the period it is estimated that the totals of Group underlying operating profit and revenue would have been approximately £30.9m and £1,202.8m respectively.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2008 (unaudited)

10 Acquisitions (continued)

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

	Acquirees' book value		Fair value adjustments		Acquisition amounts
	£m		£m		£m
Intangible assets	-		21.6		21.6
Property, plant and equipment	0.9		-		0.9
Deferred tax assets	0.1		0.1		0.2
Inventories	0.2		-		0.2
Trade and other receivables	5.4		(0.5)		4.9
Cash and cash equivalents	1.6		-		1.6
Income tax payable	(0.1)		-		(0.1)
Borrowings	(14.4)		-		(14.4)
Trade and other payables	(3.3)		-		(3.3)
Employee benefits	(0.1)		(0.2)		(0.3)
Provisions	(0.1)		(0.5)		(0.6)
Deferred tax liabilities	-		(6.0)		(6.0)
Net identifiable assets and liabilities	(9.8)		14.5		4.7
Goodwill on acquisition					13.1
Minority interest on acquisition					(0.1)
Consideration payable including expenses of £0.4m					17.7
Cash acquired and debt repaid on acquisition					12.8
					30.5
Less deferred consideration					(3.0)
Net cash outflow					27.5

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 £13.1m arising on the acquisitions reflects the strategic importance of broadening Wincanton's business offering and the value of the management and workforce.

  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 2008 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 2008 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

5 November 2008

Shareholder information

Shares traded ex-dividend	3 December 2008
Record date for interim dividend 1	5 December 2008
Interim dividend paid	6 January 2009
Preliminary announcement of full year results and dividend	June 2009
Annual General Meeting	July 2009
Announcement of half year results and dividend	November 2009

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
BN99 6DA

 

END

 

 

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