Preliminary Results

RNS Number : 3637N

Wincanton PLC

10 June 2010

 



For immediate release

10 June 2010

WINCANTON plc

Preliminary Announcement of Results

for the financial year ended 31 March 2010

"Resilience through recession, well-placed for recovery and growth"

	2010 £m	2009 £m	Change
Revenue	2,182.9	2,361.3	-7.6%
Underlying operating profit	54.6	59.6	-8.4%
Net financing costs	(19.9)	(18.3)
Underlying profit before tax	34.7	41.3	-16.0%
Net other items (note)	(31.7)	(21.3)
Profit before tax	3.0	20.0
Underlying earnings per share	20.9p	24.7p	-15.4%
Basic earnings per share	1.6p	11.6p
Proposed final dividend	10.08p	10.08p
Full year dividend	14.91p	14.91p	Maintained

Note:  Underlying profit before tax and earnings per share are stated before net other items of £31.7m (2009: £21.3m), comprising exceptional restructuring and other costs of £20.5m (2009: £23.1m), exceptional property profits of £nil (2009: £5.2m), partial settlement of the PGN Logistics Ltd arbitration case £nil (2009: £5.6m) and amortisation of acquired intangibles of £11.2m (2009: £9.0m).  Operating profit, including these items, amounted to £22.9m (2009: £38.3m) down 40.2%.  Profit before tax, including these items, amounted to £3.0m (2009: £20.0m) down 85.0%.

HIGHLIGHTS

·     A successful business model; strong growth pre-recession, resilience through recession

·     Underlying growth momentum in mainstream UK & Ireland businesses

·     Lower volumes due to recession affect certain new sectors and services, medium-term transformational opportunity remains

·     Exceptional costs and restructuring to eliminate German road transport losses

·     German restructuring now successfully implemented; solid base for future progress in Mainland Europe

·     Strong cash flow generation underpins maintenance of full-year dividend at 14.91p

·     A portfolio of businesses well-placed for recovery and growth

Graeme McFaull, Wincanton Group Chief Executive commented:

"Wincanton has produced a robust performance through the recession, proving the quality of its operations, the strength of its customer partnerships and the cash-generative nature of its business model.

We look to the future with confidence, with leading positions in growth markets and focused on driving returns from our significant investment in new sectors and services".

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

Tel: [phone]  today, thereafter Tel: [phone] Tel: [phone]

Chairman's Statement

2009/10 : ANOTHER RESILIENT PERFORMANCE

Wincanton has a blue-chip customer base, leading market positions and a cash-generative business model.  Its financial performance through the recession has proved the resilience of its operations, the breadth and diversity of its activities and the strength of its contract portfolio.  It is this profit and cash flow resilience, together with the growth potential of the Group's businesses as we look to the future, that has given the Board the confidence to maintain the full-year dividend at 14.91p.

Underlying operating profit of £54.6m, although an 8.4 per cent reduction on last year, is a creditable performance given the severity of the economic recession that we have experienced.  Underlying earnings before interest, tax and depreciation experienced a smaller, 3.8 per cent decline, to £93.2m although both our profit-to-cash flow conversion rates and returns on capital employed remained very high, at 153 per cent and 75.5 per cent respectively.

Wincanton invests in the skills of its people, in operational excellence and in the highest standards of customer service.  Sustaining focus on these key areas creates, over time, a highly-skilled and motivated workforce, an industry-leading reputation for service quality and long-standing partnerships with our customers.  My thanks, and those of the Directors, go to all the Group's employees, who have again demonstrated the commitment, expertise and enthusiasm which remain fundamental to the continuing success of Wincanton.

STRATEGY : THREE PLATFORMS FOR GROWTH

We have three areas of strategic focus. 

Our mainstream supply chain services activities in the UK remain strong and continue to demonstrate growth potential.  We would expect these activities to grow faster than underlying GDP. 

Our new sectors and services, of which there are currently seven, have all been set stretching targets of delivering £10m of annual profit contribution within the next five years.  These new sectors and services have the potential to transform the scale and profitability of our operations in the UK & Ireland. 

Our operations in Mainland Europe continue to offer geographic diversification for the Group and the opportunity to leverage customer relationships and sector expertise across borders.  The restructuring of our German road network is nearing completion and we now expect to have a stronger and more stable platform for growth, enabling us to focus both on those countries in which we have critical mass and the continuing expansion of our Pan-European freight management and forwarding operations.

We have invested heavily in recent years in restructuring our business, increasing capacity in some of our newer activities and expanding the range of our operations through infill acquisitions.  Our year-end net debt of £151.9m represents our substantive investment in these areas.  We are now highly focused on ensuring that this investment delivers the profit and cash flow returns that will see Wincanton continue to build on its strong pre-recession track record of earnings and dividend growth.

OUTLOOK : RECOVERY AND GROWTH

As we start the new financial year, our development pipeline is encouraging and customer volumes give grounds for cautious optimism.  We remain cautious about the economic outlook but are nonetheless targeting an improvement in underlying performance next year and a return to growth.  Through next year and into the medium term, we expect Wincanton's portfolio of activities in the UK & Ireland to benefit strongly from economic recovery and from the substantial investments made in recent years in new capacity and in new sectors and services.  We also anticipate a steady improvement in profitability in Mainland Europe.

The Board believes that the underlying strength of Wincanton has been demonstrated through the recession.  It gives us a platform on which we can build growth.

CHIEF EXECUTIVE OVERVIEW

THE STRATEGIC FOCUS : DELIVERING OUR GROWTH POTENTIAL

The Wincanton business has changed very substantially in the last three to five years, and even more so since our demerger nearly ten years ago.  Prior to the recession, as a result of these changes, the Group was delivering double-digit percentage increases in earnings and a dividend stream that had grown by approximately 8 per cent per annum on average.  Through the recession we have proved our resilience, continued to invest for the future and maintained our dividend payment to shareholders.  We now have a portfolio of activities which will again deliver strong growth for Wincanton in the coming years.

UK & IRELAND : A STRONG BASE AND TRANSFORMATIONAL OPPORTUNITY

Wincanton is one of the UK & Ireland's leading providers of supply chain services.  Operating profit of £48.4m on revenue of £1.3bn, although down by a little under 8 per cent, again confirms the strength and quality of our UK & Ireland operations.  There was some pricing pressure in our existing activities, albeit mitigated by continuing new business momentum, but much of the year-on-year movement is attributable to either the effect of investment in new capacity or the impact of recession on activity levels in some of our new sectors and services.

The key drivers of our growth in the UK & Ireland over time, which again provided a strong and stable base for the business in the year to 31^st March 2010, have been:

§ long-standing partnership with major customers; the average length of contractual relationship with our top 20 customers is approximately 12 years;

§ a track record of delivering operational excellence, innovation and value; 2009/10 was another excellent year of performance against contract requirements, with average warehouse productivity improving some 7 per cent year on year;

§ the ability to anticipate changing trends, developing new supply chain and business processing outsourcing solutions for our customers; approximately 65 per cent of contract gains in the year again came from existing customers;

§ industry-leading change management, project management and systems integration skills, which give customers the confidence to entrust us with the implementation of complex outsourcing processes;

§ a cash-generative business model which funds growth through leases, with volume risk and cost fluctuations substantially underwritten by customers; and

§ the determination to keep enhancing our portfolio of activities, successfully targeting and delivering growth opportunities in new sectors and services.

We expect all of these factors to continue to underpin and drive our growth in the future.

BUILDING ON THE STRONG BASE OF OUR MAINSTREAM ACTIVITIES

Our mainstream activities in the UK & Ireland consist of supply chain services for large retailers, manufacturers and industrial companies, principally related to fleet management, transport and warehousing activities.  Over time, new services have been added as our customers' requirements have continued to evolve, taking us into areas such as call centres, procurement, training and facilities management. 

There continues to be great opportunity for Wincanton to develop profitably from this strong base, as further evidenced by contract wins and renewals in the year to 31 March 2010: 

§ our leadership in the retail sector saw M&S award one of the largest contracts in the UK this year to Wincanton.  Best Buy also placed its confidence in Wincanton to support the delivery of its UK launch.  Other contract wins and renewals in the year included Superquinn (a leading Irish food retailer) and primary transport for ASDA in North East England.  Wincanton already operates for 9 out of the top 10 UK retailers, but only 12 out of the top 50.  There is substantial scope for further market share gains in the retail sector, with a very limited number of competitors able to match Wincanton's track record in both complex solution design and implementation and the operational excellence which assures consistently high levels of service post-implementation.

§ in vehicle and fleet management we are working with our customers to combine the benefits of the traditional shared user and dedicated models to deliver collaborative, sustainable transport solutions.  Wincanton has visibility and management control over a combined vehicle fleet in excess of 8,000 vehicles, giving the market-leading scale necessary to provide the service quality and reliability which are fundamental to customers.  Collaborative transport models have been successfully trialled in the year for both leading retailers and manufacturers, including shared resource for High Street retailers and load consolidation amongst manufacturers in different industries.  Customer wins and renewals in the year in vehicle and fleet management included WH Smith, GSK, Chevron and Air Products. 

§ as our relationships with customers broaden and develop we will seek to continue to expand our service offering, potentially taking us further into other areas of business process outsourcing.  We were already active in 2009/10 with customers including J Sainsbury, Argos, Homebase and Chevron in delivering services such as facilities management, cleaning, training, procurement and call centres and believe there will be profitable opportunity to consolidate and further develop our current services in such fields. 

§ other sector opportunities will also develop.  Our Pullman Fleet Services business, for example, one of the UK's leading independent vehicle maintenance and fleet management operations, is already actively exploring opportunities in the public sector. 

§ a joint venture has recently been established with Serco plc, targeting a number of public sector opportunities currently in the market.  We believe there to be very attractive potential for Wincanton in the public sector and indeed in other industry verticals in which we have not historically had a major presence.

The further development and enhancement of our activities in the UK & Ireland remains an area of significant growth potential for Wincanton.

TRANSFORMATIONAL POTENTIAL OF NEW SECTORS AND SERVICES

Where new service or sector opportunities are considered to have the potential to become significant new income streams in their own right, they become the focus of particular strategic challenge and operational focus. 

Development in these new areas is based on the leveraging of our existing core skills, often with our existing customer base.  The businesses are overseen within our Retail and Manufacturing business units in the UK, although generally with their own dedicated Managing Director, and are set separate targets for strategic purposes given their higher margin and growth profile. 

Each of the activities has been set a target of delivering £10m of annual profit contribution within five years.  Together in 2009/10, before central overhead allocation, they reported a profit contribution of £10.3m on revenue of £290.8m, with the result in the year impacted by losses in our shared user home delivery network prior to its closure and the costs of investment in increased capacity in records management, recycling and foodservice.

Against the background of our reported operating profit for the UK & Ireland of £48.4m in 2009/10, even if not all of the seven current activities meet their strategic target in full, these businesses clearly have the potential to transform the scale and profitability of the Group. 

No significant further investment is currently either planned, or anticipated to be required, to deliver against the strategic targets set for these areas.

The activities currently included within this strategic grouping, and some of the further significant developments in the year in each, are summarised below:

§ Foodservice : Investment in new facilities in the North West and the South East, development of the next generation of IT support systems and a transport solution based on Wincanton-designed specialist vehicles, have created an innovative new offering that brings a step change in the cost, efficiency and sustainability of supply chain services for major hotel, pub and restaurant groups.  A substantial 5-year contract award from one of the UK's fastest-growing restaurant groups provides the anchor customer for our new facility in the South East and the development pipeline over the next 18 months points to significant growth opportunity. 

§ Records Management: We have invested in new capacity in London, Dublin, Scotland and the South West for documents, boxes and media tapes and expect to have full national coverage within the next 18 - 24 months.  There are a limited number of competitors of national scale in the sector, and our facilities are at the forefront of security and fire suppression legislation.  Our new capacity is being filled ahead of expectations and we are well-placed to continue to benefit from the overall growth expected in the industry.  Wins and renewals in the year included Allied Irish Bank, Aviva, City of London Police, Friends Provident, Knight Frank and State Street.  In total, just under 40 new contracts were signed in 2009/10, and there is particular interest going forward in our recently expanded media tapes facilities.

§ Containers : By extending our services for customers back up the supply chain, from distribution centre to port, we are generating efficiency, visibility and service level improvements in the inbound supply chain of major manufacturers and retailers.  Over 370,000 containers are moved every year, by road and by rail, through our national network of port and inland container terminals.  New contract gains in the year included wins with existing customers such as Argos, Panasonic and Screwfix,  confirming the considerable potential for further market share gains.  These market share gains, particularly through the cross-selling of services into existing customers, combined with volume uplift through economic recovery in due course, will be the key drivers of growth in this activity.

§ Construction : Our business in the construction sector focuses on providing high quality and reliable service, on a national basis, to large building product manufacturers, housebuilding and infrastructure companies and builders' merchants.  Supply chain services for such customers have traditionally been either in-house or provided by a fragmented supplier base of small regional operators.  Our national network of sites and vehicles offers a collaborative, sustainable and cost-effective alternative not previously available to companies in the sector.  Contract wins and renewals were recorded in the year with Ibstock, Cemex and Speedy Hire, adding to our existing activities with groups such as Lafarge, St Gobain and Wavin.  This is another activity in which economic recovery should add further momentum to market share gains.

§ Home Delivery : Home delivery represents the UK's fastest-growing retail distribution channel.  Wincanton's services to customers in this sector include call centre operations, automated picking in e-fulfilment centres, two-man home delivery and installation and returns management.  Already operating for customers such as Comet and Homebase, the major contract award in the year to manage M&S's home delivery operations confirms the strength of Wincanton's service offering in the market place.  Now successfully implemented, including the integration of a new, leading-edge IT system, the contract is delivering significant cost and service level benefits to M&S. 

§ Defence : Fundamental supply chain changes are underway in the defence sector, as Government agencies are actively considering greater outsourcing and changes in procurement processes require major manufacturers to provide equipment on the basis of 'contracts for availability.  With an extensive track record of successful management of major procurement programmes, and a strong customer base amongst the leading sector manufacturers, Wincanton is extremely well-placed to benefit from these changes.  Major wins and renewals in the year included contracts with BAE Systems, AgustaWestland and the Aircraft Carrier Alliance, adding to existing operations for other groups such as Thales, General Dynamics, Rolls Royce and VT Group.  A further sign of progress in this area is the Framework Procurement Agreement now in place with BAE Systems making us a preferred logistics provider.

§ Recycling : Legislation increasingly places the responsibility for recycling waste onto retailers and manufacturers.  Our customers are facing major pressures to manage waste flows, whether paper & packaging from grocery retailers, white & brown goods from electrical retailers, or food waste from hotel & restaurant customers.  By combining collection, sortation and the recycling of waste materials, particularly electronic & electrical equipment through our own processing sites, Wincanton is helping customers to address this significant new challenge to their existing supply chains.

MAINLAND EUROPE : RESTRUCTURING AND RECOVERY

Mainland Europe reported operating profit of £6.2m on revenue of £856.5m in the financial year to 31 March 2010.

Our Mainland European strategy remains focused on:

§ offering national, cross-border and Pan-European services to our major customers.  The growing list of customers for which we operate on a multi-country basis includes Goodyear, Dow, Honeywell, GSK, Danone, Panasonic, InBev, Velux and Nutreco.  Multi-country relationships such as these not only offer opportunities for further growth but also, to differing degrees, help to secure important contracts in key national markets, not least in the UK & Ireland.

§ a common link between these customers, in addition to domestic warehousing and transport operations as further discussed below, is our growing expertise in international transport and freight management, whether by road, rail, river or sea. 

-     We are a market leader in the management of container traffic on the Rhine, with river-based activities also in France and Poland. 

-     We move goods by rail across Europe working either with partners, or, in Germany, through our in-house rail operations. 

-     We move goods by road on a Pan-European basis using a combination of our own managed activities in certain countries and partners in other countries in which we do not have a domestic presence. 

-     We offer customs clearance and freight forwarding services at a number of locations across Europe including Le Havre, Strasbourg, Rotterdam, Basle, Hamburg and Gdansk. 

-     Our Dutch business has developed a particular expertise in freight management and forwarding into the former Soviet republics in Central Asia, with extensive operations for the major structural steel companies such as Corus, Thyssen Krupp and Arcelor Mittal supporting the huge offshore oilfield investment programme in Kazakhstan. 

§ in addition to investing in this cross-border freight management expertise, we are continuing to develop critical mass in major economies such as Germany, France and Poland.  In each of these countries we have extensive domestic operations and are progressively building a track record, customer base and market reputation which will enable us to win and implement the complex warehousing and supply chain contracts that have for many years been at the profitable core of our UK & Ireland operations.

Wins, renewals and successful contract implementations in the period included those for customers such as Wincor Nixdorf, Honeywell and John Deere in Germany, Total, Daikin, Goodyear and Eprus in France, and Danone, Electrolux, Panasonic , Kraft Foods and AMICA in Poland.  We also have domestic operations in Holland, Hungary, the Czech Republic and Slovakia, either operating and winning new business independently, or helping to service Group customers on a regional basis.  Wins and renewals in the period included Provimi in Holland, and Henkel and BAT in Hungary.

A major objective for us in the year was the restructuring of the loss-making activities within our German road transport business, involving a reduction in headcount of some 400 employees, the closure of 5 sites and the substantial scaling back of activities at a further 4 locations.  This major programme of operational, customer and employee change was successfully delivered without disruption to our business or deterioration in service quality.  We now have a more profitable and significantly stronger business base in Germany.

With the restructuring of our German road activities now implemented, and with the negative effects of our surplus space issues in France progressively reducing, we are in a position to focus on growth opportunities for the future without diverting management and financial resource to deal with the legacy issues of the past.

Building a brand with high-quality credentials in a demanding service industry has not proved to be easy for us in Mainland Europe.  The volume impact of the recession has pushed us backwards rather than forwards in our efforts to deliver growth from a more stable, efficient operational base.  We continue to believe, nonetheless, that this growth can and will be delivered. 

We expect to make progress again in 2010/11 towards our margin targets for Mainland Europe.

FINANCIAL OVERVIEW : A STRONG TRACK RECORD AND A BUSINESS MODEL FOR GROWTH

BUSINESS MODEL AND KEY PERFORMANCE MEASURES

Profit momentum, cash generation and high returns on capital employed drive share price appreciation and the distribution of a sustainable and growing dividend stream.  These are therefore the Group's key measures and targets, facilitated by our asset-light business model.

§ Profit momentum : We are constantly re-evaluating the services, customers, sectors and geographies which make up Wincanton's portfolio of businesses.  We judge the progress being made by this portfolio, annually, on the basis of underlying profit performance and, over our rolling 5-year strategy periods, against the stretching targets we set for cumulative operating profit growth.

For the financial year to 31 March 2010 we are reporting a decline in underlying profit, principally related to the major recession in the economies in which we operate, but the underlying strength and diversity of our activities underpinned a solid operational and financial performance. 

Our strategy work looking forward supports our confidence that, over the next 5-year rolling strategy period, the Wincanton portfolio of activities has very significant growth potential.

§ Cash Generation and Return on Capital Employed : Much of the Group's growth is funded by leases underwritten by customer contracts, either in respect of vehicles or property.  Many of our activities take place at customer sites requiring only minimal capital commitments by Wincanton.

This asset-light approach to business expansion leads to good returns on individual projects and strong free cash flow generation for the Group overall.

Free cash flow of £83.5m, being EBITDA of £93.2m adjusted for working capital movements and net capital expenditure / disposal flows, represented a cash flow to underlying operating profit conversion rate of 153 per cent in the year.

Wincanton remains highly focused on sustaining and growing the high levels of free cash flow generation that have been a consistent feature of the Group's financial performance.  In the financial year to 31 March 2010, the majority, by value, of individual projects approved, are on track to either meet or exceed their projected rate of cash flow return. 

Year-end return on capital employed, at 75.5 per cent, also again confirmed Wincanton's ability to deliver strong results on an asset-light basis.

§ Dividend : The Group's asset-light business model and strong cash generation enables it both to fund its growth and deliver a sustainable, and growing, dividend stream.

Prior to the recession, the Wincanton dividend had grown by a compound annual growth rate of 8 per cent since the Group's demerger in 2001.  Through the recession, profit and cash flow resilience has given the Board the confidence to sustain the dividend at pre-recession levels. 

In the financial year to 31 March 2010, the Board's recommendation is that the full-year dividend should again be maintained at 14.91 pence per share.

2009/10 SUMMARY

Wincanton, on an underlying basis, reported EBITDA of £93.2m and operating profit of £54.6m on consolidated revenue of £2.2bn.  These results were respectively 3.8 per cent, 8.4 per cent and 7.6 per cent below our performance in 2008/09.  Group operating margin remained broadly unchanged at around 2.5 per cent. 

The profit-to-cash flow conversion rate remained high at 153 per cent.  Year end net debt was reduced from £176.4m last year to £151.9m as at 31 March 2010.

This represents a resilient performance at the EBITDA and operating profit levels and a cash flow performance that confirms the cash-generative strength of our business model.

The annualised revenue effect of new contract wins and renewals in the year totalled £280m, as compared to £250m in 2008/09.  Approximately 65 per cent of new wins were generated from our existing customer base.

This high level of business expansion with existing customers has been a feature of our performance for many years, confirming the strength and depth of our customer base, the operational excellence of our performance and the innovation that we bring to our customer relationships.  We help our customers to grow successfully and profitably and our business grows with theirs.

UK & IRELAND

The UK & Ireland businesses reported underlying operating profit of £48.4m on revenue of £1.3bn, and an operating margin of 3.7 per cent.  This represents reductions of 7.8 per cent and 8.9 per cent respectively on the results in the financial year to 31 March 2009.

The Manufacturing business unit makes up approximately 40 per cent of UK & Ireland revenue, Retail approximately 55 per cent and Pullman Fleet Services some 5 per cent.

Revenue

Some 50 per cent of the revenue reduction is accounted for by the transfer of our chilled consolidation activities, with the balance split broadly between our Manufacturing and Retail business units. 

Within Manufacturing, revenue from the full-year impact of contract gains with customers such as BP Gas, Marley, Procter & Gamble, Lafarge and BAE Systems offset the reduction in revenue from contracts either lost or from which we withdrew, and from contracts with two customers who went into administration in the period.  Revenue within the Manufacturing business unit is split equally between open and closed book, with closed book contracts generally more exposed to adverse movements in customer volumes. 

The contract base in the Retail business unit is made up of approximately 75 per cent open book contracts and 25 per cent closed book contracts.  Net new business was won in Retail in the year, with the overall revenue decline being attributable to factors such as the closure of our shared user home delivery operations and network reconfiguration decisions by certain grocery retail customers.

Within the Retail and Manufacturing business units our new sectors and services contributed revenue of £290.8m, an increase on the £255.2m reported in the prior year, with most activities seeing market share gains which together more than mitigated the effects of volume pressure in certain activities as a result of the economic downturn. 

Pullman Fleet Services, our market-leading vehicle maintenance and fleet management business, reported a slightly higher revenue performance this year than in 2008/09.

Operating profit

Generally speaking, our open book contract base, which represents approximately 60 per cent of our UK & Ireland business, generates a substantially fixed fee, rather than volume-related, profit stream.

Underlying operating profit of £48.4m reflects a generally strong performance with good new business wins continuing to provide profit momentum in challenging markets.  Most of the headline year-on-year reduction, from £52.5m in 2008/09, is accounted for within the Retail business unit, represented by a combination of the costs of empty space in certain shared user warehousing sites, last year's loss of Woolworths into administration, and lower results from certain of our new sectors and services. 

Within the overall UK & Ireland result, the profit contribution from the new sectors and services, before the allocation of central overhead, declined from £12.5m last year to £10.3m in 2009/10.  Consistent or growing levels of profitability in construction, containers and defence were more than offset in the year by a poor performance in our shared user home delivery network, subsequently closed, and the costs of increased capacity and / or new systems in foodservice, records management and recycling. 

Pullman Fleet Services returned to profit growth this year following a strong new business performance, particularly in the management of home delivery fleets for major retailers.

MAINLAND EUROPE

Revenue and underlying operating profit of £856.5m and £6.2m were respectively 5.4 per cent and 12.7 per cent lower than in the financial year to 31 March 2009 in headline terms, although the underlying reductions were higher once movements in sterling / euro exchange rates are taken into consideration.  Operating margin remained broadly unchanged at 0.7 per cent.

Given that most of our Mainland European businesses operate on a closed book basis, and that as a result profit contribution is more likely to be affected by changes in customer volumes, maintaining our headline margin is testament to the speed and effectiveness of the management action taken to offset the financial effects of operating in extremely difficult markets.

Revenue

Germany contributed a little under 70 per cent of the Group's revenue in Mainland Europe, with 23 per cent generated in Western Europe (France and Benelux) and the balance in Central & Eastern Europe. 

Revenue in the German business in 2009/10 was made up approximately as to 40 per cent from our road transport activities, 35 per cent from our intermodal activities on the Rhine and 25 per cent from contract logistics.  All areas reported similar rates of reduction in activity levels.  Western Europe experienced a slightly lower level of revenue decline, with growth in our international transport and freight management activities, particularly through our new hub on the Dutch / German border, offsetting the effects of reduced volumes within many of our warehousing operations.  Our Central & Eastern European activities also saw generally weaker volumes in their domestic operations, mitigated by new business opportunities in international transport and freight management.

Operating profit

Underlying operating profit in Germany was substantially unchanged on last year, with higher profitability in intermodal and contract logistics offset by increased losses in our road activities, pending implementation of the major restructuring programme which began to take effect in the final quarter. 

Both the intermodal and contract logistics activities generate profit contribution margins in line with those of the Group's activities in the UK & Ireland.  Successful completion of the road restructuring programme, the benefits of which we expect to be delivered through the first half of the new financial year, will give a more stable, profitable business base to the German operations.

In Western Europe, our contract logistics activities continue to suffer from the costs of under-utilised space.  Economic recession has clearly not assisted in this respect, given that market declines have led to competitor space becoming available at extremely aggressive prices.  Our transport business also reported reduced profitability, with good performances in domestic and international freight management, substantially based on sub-contracted transport, held back by losses in our remaining in-house fleet in France.  Western Europe overall recorded a small loss in the year.

Similar market trends were evident in Central & Eastern Europe, with highly competitive warehousing rates and lower customer volumes putting pressure on the space utilisation and profitability of our sites.  The region nonetheless returned to profit this year with new business wins adding further momentum to the benefits of recent restructuring and reorganisation.

NET FINANCING COSTS

Net financing costs, at £19.9m, were 8.7 per cent higher than last year, with a first half charge of £8.0m increasing to £11.9m in the second half as a consequence of the arrangement fees, higher margins and commitment fees on our new banking facilities.

Our financing costs can be analysed into cash items, essentially the interest paid on our loans, and non-cash items, which consisted substantially in 2009/10 of the non-cash charge calculated, in accordance with IAS 19, on our pension fund assets and liabilities.

As illustrated in the table below, cash interest payable actually reduced in the period, with the benefit of lower base rates only offset from November onwards by increased margins on our new facilities.  The largest negative swing in the year was the increase in our net pension charge from £1.2m in 2008/09 to £5.4m in 2009/10 principally as a result of lower notional returns on the pension fund assets based on their market value at 31 March 2009, which was significantly lower than at the comparable date in the prior year.  Amortisation of fees on our new banking facilities also increased our net financing costs.

The combination of higher margins and fees on our new banking facilities, together with the increase in our non-cash pension charge, outweighed the benefit of lower underlying interest rates.

	£m		£m
	2009/10		2008/09
Cash interest expense (net)	(11.6)		(14.5)
Arrangement fees amortisation	(1.4)		(0.8)
Pension financing item (net)	(5.4)		(1.2)
Other	(1.5)		(1.8)
	(19.9)		(18.3)

Financing costs, for the purpose of assessment of compliance with our banking covenants, are calculated on the basis of cash interest and exclude the non-cash items which made up approximately 40 per cent of our total net financing costs in 2009/10.

The average borrowing rate for the year on our core debt was 2.8 per cent.  On the assumption that base rates remain at current levels in our new financial year we would expect this rate to increase to approximately 3.6 per cent as a consequence of the full year effect of our new banking facilities.  We expect, however, that our non-cash pension charge will reduce over the same period as a result of a combination of the substantial increase in the market value of our pension fund assets and a reduction in corporate bond yields.  The latter reduces the notional cost of servicing pension fund liabilities, although under IAS 19 it also increases the size of the liability.

PRE-TAX PROFIT

Underlying pre-tax profit of £34.7m represents a 16 per cent reduction on the £41.3m reported in the financial year to 31 March 2009. 

TAXATION

The Group's underlying rate of tax remains at 29.4 per cent (2009: 30.9 per cent), giving a charge of £10.0m.  The rate largely reflects the standard rate of UK corporation tax of 28 per cent.

The overall rate of tax of 17.2 per cent (2009: 30.0 per cent) reflects the non-recognition of the tax effect of the exceptional restructuring charge in Germany, offset by release of a provision following agreement of certain past tax issues with HMRC.

The current year cash tax rate has reduced to 10.3 per cent (2009: 31.5 per cent), mainly as a result of the deductibility of the additional pension payments in the UK of approximately £12m.

The Group's activities across the UK and Europe are subject to effective tax rates varying from 12.5 per cent to 38 per cent, but are most affected by the UK rate of 28 per cent.  The Group's overall rate of tax is expected to remain at around the current level in future years, and will reduce as unrecognised tax losses, of which a significant element relate to our German operations, are progressively utilised.

EXCEPTIONALS

We reported exceptional restructuring and other costs of £3.8m at the half year to 30 September 2009, consisting of the final integration costs of £0.7m in respect of a company acquired in November 2008, and the £3.1m incurred in respect of the costs of closure of our shared user home delivery network. 

Two further reorganisation and restructuring projects were implemented in the second half.  A reorganisation of the senior management teams in our Retail and Manufacturing business units in the UK & Ireland gave rise to a charge of £1.8m.  We also announced at the half year, and have now successfully executed, a major restructuring of our German road activities.  A £14.9m charge was incurred in the second half in relation to this major programme.

The total exceptional charge in the year amounted to £20.5m.  We anticipate a net exceptional profit in the new financial year on the basis of two asset disposals currently being considered.

We currently expect no further net charges in respect of either recession-led restructuring costs in the UK & Ireland or further strategic re-organisation programmes in Mainland Europe.

MINORITY INTEREST, ASSOCIATES, EARNINGS AND DIVIDEND

The Group has a small number of activities in its Mainland European operations with a third party minority shareholding, principally Rhinecontainer BV in which there is a 25.8 per cent minority stake.  The profits attributable to these minorities increased slightly in the year, from £0.5m to £0.7m.

The Group holds a 20 per cent interest in a UK chilled consolidation business following the merger in March 2009 of its chilled consolidation activities with those of a competitor.  We have representation on the Board, agreed dividend distribution rights and pre-emption rights in respect of any sale of the business.  In these circumstances we believe it to be appropriate to report our share of the profit from this venture as part of our underlying operating profit, and therefore include it within the results reported above for our UK & Ireland operations.

Underlying earnings per share for the year were 15.4 per cent lower, at 20.9 pence per share, compared to last year's 24.7 pence per share.

It is proposed to maintain the full-year dividend at 14.91 pence.  Given the 4.83 pence per share distributed at the half year, the final dividend would be 10.08 pence on this basis. 

The dividend cover at this proposed level of full year dividend would reduce slightly from last year's 1.66 times to 1.40 times.  Given the profit and cash flow resilience of the Group through the recession, the cash generative nature of the Group's business model and its recovery and growth prospects, the Board nonetheless feels that it is appropriate to maintain the full-year dividend.

CAPITAL EXPENDITURE

Capital expenditure in the year totalled £32.8m, equivalent to approximately 85 per cent of depreciation.  This marks a return to more normal levels of expenditure following a number of years of higher investment, primarily in our new sectors and services.

£3.4m and £11.4m of this year's spend related to expansion and replacement capital, respectively, in our mainstream UK & Ireland activities.  Major projects included crane replacement in the automated warehouse run for GSK and new tankers for the Total lubricants operation.  Some £8.8m was invested in further expansion of our new sectors and services, particularly in respect of significant new capacity for our records management activities and in systems for the home delivery contract for M&S.  Expansion and replacement capital in our Mainland European activities accounted for £5.7m and £3.5m respectively.  The principal investment projects in Mainland Europe were  specialist warehouse fit-outs for two contract gains in France, with Millipore and Total.

Our investment programme in our new sectors and services is now substantially complete, with further spend in our new financial year only in relation to the capacity expansion in our foodservice and records management businesses.  We are, however, over the next two years, investing in a major programme to renew and enhance our operational and back office support systems. This is likely to result in capital expenditure at, or a little above, depreciation.

Thereafter, we expect to return to a more strongly cash-generative profile, with capital expenditure well within deprecation.

LEASING

Operating leases represent a key element in the funding of the Group's growth, and new vehicle leasing commitments of £20.4m were entered into in the year.  The principal new commitments entered into included new vehicles for Lafarge and M&S and replacements for our Total fuels and Musgrave operations.  For the purposes of investment appraisal a memorandum value is generally attributed to leased assets.

More than half of these commitments are underwritten by the new contracts also entered into with customers, generally on a  back-to-back basis.

Our banking agreements recognise that a substantial element of our leasing commitments are legally underwritten by our customers and, on this basis, allow us to deduct such leasing commitments from the calculation of fixed charge cover for covenant purposes.   

NET DEBT

Year-end net debt, at £151.9m, was £24.5m lower than the £176.4m reported at 31 March 2009.  The reduction reflects a continuing focus on cash flow and balance sheet management.

FINANCING AND COVENANTS

The Group concluded an agreement with its relationship banks in November 2009 to expand and extend its borrowing facilities for  a further 3-year period until November 2012.  A decision was taken at the same time to draw down a further tranche of our US private placement programme, with a 7-year maturity.  £270m has been committed to the Group under the banking facilities, and $35m, subsequently swapped back into sterling, under the private placement programme. 

Taking into account the existing balance of the drawn placement of $150m plus some small bilateral lines, the committed funding available to the Group totals approximately £405m.  In addition the Group has available up to a further £47m of uncommitted money market and overdraft facilities.

Wincanton takes a prudent view of what constitutes an appropriate level of headroom in terms of committed facilities and no reliance is placed on uncommitted lines to fund the Group's peak working capital requirements.  £176m of our committed facilities were undrawn at 31 March 2010.

As previously noted, extremely difficult conditions in credit markets led to higher arrangement fees and margins under our new facilities.

The Group maintains a variety of swap and cap instruments to give an appropriate level of protection of its interest rate position.  During the year to 31 March 2010 it had £15m of such arrangements in place, subsequently increased in April 2010 to cover some £70m of its borrowings for up to 5 years. 

Wincanton operates comfortably within the three financial ratio covenants agreed with the Group's bankers.  These ratios, calculated as defined in the loan agreement, and the Group's position at 31 March 2010 relative to these, are summarised in the table below:

	Covenant		At 31 March 2010
Adjusted net debt : EBITDA	<3.0 : 1		2.3 : 1
Adjusted net interest  : EBITDA	>3.5 : 1		7.3 : 1
Fixed charge cover	>1.4 : 1		1.7 : 1

The Group operates sterling and euro 'pools' such that whenever possible surplus cash is netted against overdrafts and drawn debt, subject to agreed minimum levels, to maximise the efficiency of short-term liquidity.  No speculative trading is authorised and all financial trades are designed to meet the operational needs of the business.

PENSIONS

The Group's total pension deficit, calculated on an IAS 19 basis, was £174.1m, or £132.0m net of deferred tax, at 31 March 2010 of which the principal Scheme amounted to £135.9m (£97.8m net).

Agreement was reached with the trustees of the principal Scheme, at the time of the last actuarial valuation in March 2008, to address the deficit over a recovery period of 14 years.  Additional annual cash payments of £12m, uplifted annually for inflation, are being made to the Scheme on this basis.

Given that deficit recovery payments are deductible for tax purposes, the net incremental cash cost to the Group reduces to approximately £8.6m per annum.

New investment advisers have been appointed by the trustees who are reviewing both the asset allocation profile of the Scheme and opportunities to limit the interest and inflation rate risks within our liabilities.

We are confident that Wincanton has the financial strength to resolve the issue of the pension fund deficit prudently and progressively over time without constraining its ability to fund either the Group's growth or its policy of dividend distribution to shareholders.

RISKS

The Group has a well developed structure and set of processes for identifying and mitigating the key business risks it faces.  These are described in detail in the Corporate governance statement in the Annual Report.

Consolidated income statement

for the year ended 31 march 2010

	Note	2010 £m	2009 £m
Revenue	2	2,182.9	2,361.3
Share of results of associates		0.7	0.1
Total underlying operating profit		54.6	59.6
Amortisation of acquired intangibles		(11.2)	(9.0)
Exceptional restructuring and other costs	3	(20.5)	(23.1)
Other exceptional income	3	-	10.8
Operating profit	3	22.9	38.3
Financing income	4	0.9	2.9
Financing cost	4	(20.8)	(21.2)
Net financing costs		(19.9)	(18.3)
Profit before tax		3.0	20.0
Income tax expense	5	(0.5)	(6.0)
Profit for the year		2.5	14.0
Attributable to
- Equity shareholders of wincanton plc		1.8	13.5
- Minority interests		0.7	0.5
Profit for the year		2.5	14.0
Earnings per share
- basic	6	1.6p	11.6p
- diluted	6	1.6p	11.6p
Dividends paid in the year to equity shareholders of wincanton plc (£m)	7	17.1	17.6

Consolidated statement of comprehensive income

For the year ended 31 March 2010

	Note	2010 £m	2009 £m
Profit for the year		2.5	14.0
Other comprehensive income
Actuarial losses on defined benefit pension schemes (net of deferred tax)		(54.6)	(63.4)
Net foreign exchange gain/(loss) on investment in foreign subsidiaries net of hedged items	4	0.9	(0.3)
Income tax relating to components of other comprehensive income	5	1.1	(2.5)
Other comprehensive expense for the year, net of income tax		(52.6)	(66.2)
Total comprehensive expense for the year		(50.1)	(52.2)
Attributable to
- equity shareholders of wincanton plc		(50.8)	(52.7)
- minority interests		0.7	0.5
Total comprehensive expense for the year		(50.1)	(52.2)

Consolidated balance sheet

at 31 march 2010

	Note	2010 £m	2009 restated £m
Non-current assets
Goodwill and intangible assets		189.5	204.1
Property, plant and equipment		237.7	249.1
Investments, including those equity accounted		15.0	15.3
Deferred tax assets		23.6	3.8
		465.8	472.3
Current assets
Inventories		9.3	8.9
Trade and other receivables		363.4	386.3
Cash and cash equivalents		96.8	48.3
		469.5	443.5
Current liabilities
Income tax payable		(6.6)	(11.9)
Borrowings		(15.4)	(12.2)
Trade and other payables		(533.6)	(520.9)
Employee benefits		(10.4)	(11.0)
Provisions		(26.5)	(24.9)
		(592.5)	(580.9)
Net current liabilities		(123.0)	(137.4)
Total assets less current liabilities		342.8	334.9
Non-current liabilities
Borrowings		(233.3)	(212.5)
Other payables		(1.4)	(1.5)
Employee benefits		(171.9)	(112.6)
Provisions		(32.1)	(37.0)
Deferred tax liabilities		(4.1)	(4.6)
		(442.8)	(368.2)
Net liabilities		(100.0)	(33.3)
Add back: pension deficit, net of deferred tax	11	132.0	89.6
Net assets before net pension deficit		32.0	56.3
Equity
Issued share capital		12.1	12.1
Share premium		12.2	12.2
Merger reserve		3.5	3.5
Translation reserve		4.3	3.4
Retained earnings		(132.6)	(65.1)
Equity deficit attributable to shareholders of wincanton plc		(100.5)	(33.9)
Minority interest		0.5	0.6
Total equity deficit		(100.0)	(33.3)

Consolidated statement of changes in equity

at 31 march 2010

						Retained earnings
	Note	Issued share capital £m	Share prem-ium £m	Merger reserve £m	Transl-ation reserve £m	IFRS 2 reserve £m	Own shares £m	Profit and loss £m	Total £m	Minority interests £m	Total (equity deficit)/ equity £m
Balance at 1 April 2008		12.1	11.9	3.5	3.7	5.9	(14.7)	14.2	36.6	0.4	37.0
Total comprehensive income/(expense)		-	-	-	(0.3)	-	-	(52.4)	(52.7)	0.5	(52.2)
Increase in IFRS 2 reserve		-	-	-	-	2.2	-	-	2.2	-	2.2
Shares issued		-	0.3	-	-	-	-	-	0.3	-	0.3
Own shares disposed of on exercise of options		-	-	-	-	-	0.3	(0.3)	-	-	-
Own shares acquired		-	-	-	-	-	(2.7)	-	(2.7)	-	(2.7)
Minority interest on acquisition		-	-	-	-	-	-	-	-	0.3	0.3
Dividends paid to shareholders	7	-	-	-	-	-	-	(17.6)	(17.6)	(0.6)	(18.2)
Balance at 31 March 2009		12.1	12.2	3.5	3.4	8.1	(17.1)	(56.1)	(33.9)	0.6	(33.3)
Balance at 1 April 2009		12.1	12.2	3.5	3.4	8.1	(17.1)	(56.1)	(33.9)	0.6	(33.3)
Total comprehensive income/(expense)		-	-	-	0.9	-	-	(51.7)	(50.8)	0.7	(50.1)
Increase in IFRS 2 reserve		-	-	-	-	3.3	-	-	3.3	-	3.3
Own shares disposed of on exercise of options		-	-	-	-	-	0.5	(0.5)	-	-	-
Own shares acquired		-	-	-	-	-	(2.0)	-	(2.0)	-	(2.0)
Dividends paid to shareholders	7	-	-	-	-	-	-	(17.1)	(17.1)	(0.8)	(17.9)
Balance at 31 March 2010		12.1	12.2	3.5	4.3	11.4	(18.6)	(125.4)	(100.5)	0.5	(100.0)

Consolidated statement of cash flows

for the year ended 31 march 2010

	2010 £m	2009 £m
Operating activities
Profit before tax	3.0	20.0
Adjustments for
- depreciation and amortisation	49.8	46.3
- interest expense	19.9	18.3
- share of results of associates	(0.7)	(0.1)
- gain on disposal of subsidiary	-	(14.4)
- loss/(profit) on sale of property, plant and equipment	0.1	(5.5)
- share-based payments fair value charges	3.3	2.2
Operating profit before changes in working capital and provisions	75.4	66.8
Decrease in trade and other receivables	19.6	55.0
(increase)/decrease in inventories	(0.5)	1.3
increase/(decrease) in trade and other payables	26.2	(44.3)
Decrease in provisions	(4.9)	(4.2)
Decrease in employee benefits	(21.4)	(11.6)
Income taxes paid	(3.7)	(5.5)
Cash generated from operations	15.3	(9.3)
Cash flows from operating activities	90.7	57.5
Investing activities
Proceeds from sale of property, plant and equipment	3.1	23.2
Interest received	0.9	2.8
Dividends received from associates	0.1	0.2
Acquisitions net of cash acquired and debt repaid on acquisition	(3.0)	(58.0)
Additions of property, plant and equipment	(32.8)	(52.6)
Cash flows from investing activities	(31.7)	(84.4)
Financing activities
Proceeds from the issue of share capital	-	0.3
Own shares acquired	(2.0)	(2.7)
Increase in borrowings	26.2	43.6
Payment of finance lease liabilities	(0.3)	(1.9)
Dividends paid to minority interest in subsidiary undertakings	(0.8)	(0.6)
Equity dividends paid	(17.1)	(17.6)
Interest paid	(15.8)	(16.4)
Cash flows from financing activities	(9.8)	4.7
Net increase/(decrease) in cash and cash equivalents	49.2	(22.2)
Cash and cash equivalents at beginning of year	48.3	67.4
Effect of exchange rate fluctuations on cash held	(0.7)	3.1
Cash and cash equivalents at end of year	96.8	48.3
Represented by
- cash at bank and in hand	72.6	23.4
- restricted cash, being deposits held by the group's captive insurer	24.2	24.9
	96.8	48.3

1.  Accounting policies

The financial information set out in this preliminary announcement does not constitute Wincanton plc's statutory accounts for the years ended 31 March 2010 and 31 March 2009.  Statutory accounts for the year ended 31 March 2010 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  Statutory accounts for the year ended 31 March 2009 have been delivered to the Registrar of Companies.  The Auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 

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

2. OPERATING SegmentS

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

		UK & Ireland		Mainland Europe		Consolidated
		2010 £m	2009 £m	2010 £m	2009 £m	2010 £m	2009 £m
Revenue from external customers1		1,326.4	1,455.5	856.5	905.8	2,182.9	2,361.3
Inter-segment revenues2		-	1.7	1.0	0.8	1.0	2.5
Depreciation		(27.4)	(25.8)	(9.8)	(9.7)	(37.2)	(35.5)
Amortisation of software intangibles		(0.5)	(0.7)	(0.9)	(1.1)	(1.4)	(1.8)
Share of results of associates		0.6	-	0.1	0.1	0.7	0.1
Reportable segment underlying operating profit3		48.4	52.5	6.2	7.1	54.6	59.6
Reportable segment assets4, 5		351.1	376.6	276.3	285.2	627.4	661.8
Other assets						307.9	254.0
Total Group assets						935.3	915.8
Investment in associates		14.2	14.4	0.4	0.5	14.6	14.9
Additions to reportable segment non-current assets
- property, plant and equipment		21.9	27.7	8.5	24.9	30.4	52.6
- goodwill and intangible assets		0.1	-	0.7	0.7	0.8	0.7
Reportable segment liabilities5		(360.6)	(337.4)	(194.5)	(210.6)	(555.1)	(548.0)
Other liabilities						(480.2)	(401.1)
Total Group liabilities						(1,035.3)	(949.1)

¹  Revenues are based on the geographic location of the business operations. Included in the UK & Ireland segment revenue is £1,280.8m (2009: £1,407.7m) in respect of customers based in the UK and in the Mainland Europe segment £566.1m (2009: £596.9m) in respect of customers based in Germany.

²  The Group accounts for inter-segment sales on commercial terms.

³  Underlying operating profit includes the share of results of associates and is stated before amortisation of acquired intangibles and any goodwill impairment and exceptionals.

⁴  Reportable segment assets includes non-current assets of £0.3m (2009: £0.8m) for the UK, £1.3m (2009: £1.3m) for Germany, and £1.7m (2009: £1.4m) for Mainland Europe overall.

⁵  Reportable segment assets and liabilities comprise total assets and total liabilities adjusted for goodwill, acquired intangibles, debt, tax, employee benefits and insurance provisions, such that the net of segment assets and liabilities is equal to the capital employed definition used by the Group in calculating return on capital employed. The reconciling other assets and other liabilities in the table above comprise, as applicable, the same adjusting items.

3. Operating profit

	2010			2009
	Underlying1 £m	Amortisation of acquired intangibles and exceptionals2 £m	Total £m	Underlying1 £m	Amortisation of acquired intangibles and exceptionals2 £m	Total £m
Revenue	2,182.9	-	2,182.9	2,361.3	-	2,361.3
Cost of sales	(2,100.0)	(20.5)	(2,120.5)	(2,273.9)	(9.3)	(2,283.2)
Gross profit	82.9	(20.5)	62.4	87.4	(9.3)	78.1
Administrative expenses	(29.0)	(11.2)	(40.2)	(27.9)	(12.0)	(39.9)
Share of results of associates	0.7	-	0.7	0.1	-	0.1
Operating profit	54.6	(31.7)	22.9	59.6	(21.3)	38.3

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

² Comprises the amortisation of acquired intangibles, exceptional restructuring and other costs and other exceptional income.

3. Operating profit (Continued)

		2010 £m	2009 £m
Operating profit before net financing costs is stated after charging:
Auditors' remuneration
Audit fees for statutory audit services
- parent company and consolidation		0.1	0.1
- subsidiary undertakings		0.7	0.7
Non-audit fees
- fees paid to the Auditors and their associates for tax advisory services		0.3	0.2
- fees paid to the Auditors and their associates for assurance services		0.1	0.1
- fees paid to the Auditors and their associates for other services		0.1	0.2
Depreciation and other impairment amounts written off property, plant and equipment
- owned		34.4	32.9
- leased		2.8	2.6
Amortisation and other amounts written off software intangibles		1.4	1.8
Operating lease rentals
- plant and equipment		45.2	54.3
- land and buildings		82.9	78.8

Exceptionals

		2010 £m	2009 £m
Exceptional restructuring and other costs
Costs of acquisitions and post acquisition reorganisation of operating structures		(0.7)	(3.0)
Closure and restructuring of operations
- UK & Ireland		(4.9)	(9.3)
- Mainland Europe		(14.9)	(8.7)
Under-recovery of amounts owing by Woolworths plc		-	(2.1)
		(20.5)	(23.1)
Other exceptional income
Property profits - sale of freehold land and buildings		-	5.2
Partial settlement of the PGN Logistics Ltd arbitration case		-	5.6
		-	10.8

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

4. Net financing costs

Recognised in the income statement

		2010 £m	2009 £m
Interest income		0.9	2.9
		0.9	2.9
Interest expense		(12.0)	(15.4)
Finance charges payable in respect of finance leases		(1.2)	(1.4)
Unwinding of discount on insurance and other provisions		(2.2)	(3.4)
Interest on defined benefit pension scheme obligations		(36.5)	(37.2)
Expected return on defined benefit pension scheme assets		31.1	36.0
		(20.8)	(21.4)
Less: finance costs capitalised		-	0.2
		(20.8)	(21.2)
Net financing costs		(19.9)	(18.3)

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

4. Net financing costs (CONTINUED)

Recognised in other comprehensive income

		2010 £m	2009 £m
Foreign currency translation differences for foreign operations		0.9	(0.3)
		0.9	(0.3)
Recognised in:
Translation reserve		0.9	(0.3)
		0.9	(0.3)

5. Income tax expense

Recognised in the income statement

		2010 £m	2009 £m
Current tax expense
Current year		4.0	6.2
Adjustments for prior years		(4.5)	0.1
		(0.5)	6.3
Deferred tax expense
Current year		1.1	(0.3)
Adjustments for prior years		(0.1)	-
		1.0	(0.3)
Total income tax expense		0.5	6.0
Reconciliation of effective tax rate
Profit before tax		3.0	20.0
Income tax using the UK corporation tax rate of 28% (2009: 28%)		0.8	5.6
Effect of tax rates in foreign jurisdictions		(0.6)	(0.3)
Trading losses not recognised		3.2	1.4
Non-deductible expenditure		1.2	0.5
Capital profits offset by capital losses		-	(1.3)
Other		0.5	-
Adjustments for prior years
- current tax		(4.5)	0.1
- deferred tax		(0.1)	-
Total tax charge for the year		0.5	6.0
Recognised in other comprehensive income
Actuarial losses on defined benefit pension schemes		21.3	24.8
Income tax relating to other components		1.1	(2.5)
		22.4	22.3

Income tax relating to other components includes £1.1m (2009: £(1.8)m) on foreign exchange movements. The prior years adjustment to current tax expense includes a credit of £4.7m (2009: £nil) arising from the agreement of the tax treatment of a long-running prior years item.

6. Earnings per share

Earnings per share are calculated on the basis of earnings attributable to the equity shareholders of Wincanton plc of £1.8m (2009: £13.5m) and the weighted average of 114.6m (2009: 116.0m) shares which have been in issue throughout the year. The diluted earnings per share are calculated on the basis of no additional shares (2009: 0.2m) 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:

		2010 millions	2009 millions
Weighted average number of ordinary shares
Issued ordinary shares at the beginning of the year		115.3	116.5
Net effect of shares issued and purchased during the year		(0.7)	(0.5)
		114.6	116.0
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the year		114.6	116.0
Effect of share options on issue		-	0.2
		114.6	116.2

6. Earnings per share (CONTINUED)

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

		2010 pence	2009 pence
Underlying earnings per share
- basic		20.9	24.7
- diluted		20.9	24.7

Underlying earnings are determined as follows:

		2010 £m	2009 £m
Profit for the year attributable to equity shareholders of Wincanton plc		1.8	13.5
Exceptional restructuring and other costs		20.5	23.1
Other exceptional income		-	(10.8)
Amortisation of acquired intangibles		11.2	9.0
Tax		(9.5)	(6.1)
Underlying earnings		24.0	28.7

7. Dividends

Under Adopted IFRS dividends are only provided in the financial statements when they become a liability of the Company. The dividends per ordinary share paid in the year are the interim for the current year, paid on 5 January 2010 and the final for the year ended 31 March 2009, paid on 7 August 2009.

These are detailed in the following table:

		2010 £m	2009 £m
Interim dividend of 4.83p (2009: 4.83p) paid in January 2010 and 2009 respectively		5.5	5.6
Final dividend of 10.08p for 2009 (2008: 10.31p) paid in August 2009 and 2008 respectively		11.6	12.0
Total dividend paid in the year		17.1	17.6

The final dividend proposed for the year ended 31 March 2010 is 10.08p, which if approved will be paid on 6 August 2010 to shareholders on the register on 9 July 2010,
total £11.5m.

8. Acquisitions

Current year acquisitions

There have been no acquisitions in the current year.

Prior year acquisitions

During the year ended 31 March 2009 the Group increased its shareholding in Wincanton Intermodal Kehl GmbH and Kehler Lagerhaus Verwaltung GmbH, from 50% to 51.15% for a nominal amount. The Group also acquired the entire share capital of Product Support (Holdings) Limited (PSHL), CEL Group Limited (CEL) and ELI-Transport GmbH and ELI-Lagerhaus GmbH (ELI). These entities were acquired for £14.7m, £17.8m and €12.7m in cash respectively, with up to a further £3.0m and €3.0m contingent pending the 'earn-out' performance of PSHL and ELI respectively and £4.5m contingent on revenue generated by CEL.

In accordance with IFRS 3 Business Combinations the Group has reviewed the provisional fair value adjustments during the year ended 31 March 2010. As a result amendments have been made and in line with IFRS 3 they have been reflected at the date of acquisition and the prior year balance sheet restated accordingly. These amendments are set out in the following acquisition table:

8. Acquisitions (CONTINUED)

		As reported at 31 March 2009
		Acquirees' book value £m	Fair value adjustments £m	Acquisition amounts £m	Revisions to fair value adjustments £m	Restated acquisition amounts £m
Intangible assets		0.1	34.3	34.4	-	34.4
Property, plant and equipment		9.2	(1.3)	7.9	-	7.9
Deferred tax assets		-	0.4	0.4	-	0.4
Inventories		0.5	-	0.5	-	0.5
Trade and other receivables		14.3	(0.7)	13.6	-	13.6
Cash and cash equivalents		9.4	-	9.4	-	9.4
Income tax payable		(0.5)	-	(0.5)	-	(0.5)
Borrowings		(21.4)	-	(21.4)	-	(21.4)
Trade and other payables		(12.7)	(0.3)	(13.0)	0.2	(12.8)
Employee benefits		(0.2)	(0.1)	(0.3)	-	(0.3)
Provisions		(0.1)	(1.3)	(1.4)	-	(1.4)
Deferred tax liabilities		(0.7)	(9.7)	(10.4)	-	(10.4)
Net identifiable assets and liabilities		(2.1)	21.3	19.2	0.2	19.4
Goodwill on acquisition				31.9	(5.0)	26.9
Minority interest on acquisition				(0.2)	-	(0.2)
Consideration payable, including expenses of £1.0m				50.9	(4.8)	46.1
Cash acquired and debt repaid on acquisition				12.0	-	12.0
				62.9	(4.8)	58.1
Less: contingent consideration				(7.8)	4.8	(3.0)
Net cash outflow				55.1	-	55.1

9. Capital employed

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

		2010 £m	2009 £m
Net liabilities		(100.0)	(33.3)
Goodwill and acquired intangibles		(187.5)	(201.9)
Debt		151.9	176.4
Tax		(12.9)	12.7
Employee benefits		182.3	123.6
Insurance provisions		38.5	36.2
Capital employed		72.3	113.7

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

10. Free cash flow

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

		2010 £m	2009 £m
Operating profit		22.9	38.3
Depreciation and amortisation		49.8	46.3
Working capital inflow		40.4	7.8
Net capital expenditure		(29.6)	(34.9)
Free cash flow		83.5	57.5

11. Net pension deficit

The Group is reporting net liabilities of £100.0m (2009: £33.3m) primarily due to the movement in the pension deficit of £42.4m net of deferred tax in the year. To provide greater visibility of the Group's underlying balance sheet position, net assets before the net pension deficit are also shown on the face of the balance sheet.

 

END

 

 

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