Preliminary Announcement of Results

RNS Number : 9208G

Wincanton PLC

13 June 2013

 



For immediate release

13 June 2013

WINCANTON plc

Preliminary Announcement of Results

for the financial year ended 31 March 2013

Wincanton plc ("Wincanton"), a leading provider of supply chain solutions in the UK and Ireland, today announces its preliminary results for the year to 31 March 2013.

	2013	2012	change
Revenue (£m)	1,086.8	1,202.8	-9.6%
Underlying EBITDA (£m)	63.7	60.9	+4.6%
Underlying operating profit (£m)	46.5	43.8	+6.2%
Underlying margin (%)	4.3%	3.6%	70 bps
Underlying profit before tax (£m)	32.1	28.8	+11.5%
Profit/(loss) before tax (£m)	24.8	(47.4)
Underlying EPS (pence)	20.4	16.9	+20.7%
Basic EPS (pence)	15.8	(89.3)
Net debt (£m)	107.6	114.5	-6.0%

Highlights

·       Underlying operating profit increased by 6.2% to £46.5m (2012: £43.8m)

·       Further progress in winning higher margin and technology supported contracts

·       Increase in operating margin from 3.6% to 4.3%

·       Successfully supported London 2012 Games as a key logistics provider

·       Delivered important start-up operations and ongoing services in particular for retail convenience store logistics

·       Solid performance on new business wins and renewals in tough market place

-     new customers include LOCOG and Tilda

-     new areas of work for existing customers including Morrisons, the NHS, CEMEX, Rolls Royce, Sainsbury's, BAE Systems and Valero

·       Net debt reduced by £6.9m to £107.6m (2012: £114.5m)

Note:  Underlying profit before tax and earnings per share are for continuing operations and are stated before net other items of £7.3m (2012: £76.2m), comprising amortisation of acquired intangibles of £7.3m (2012: £8.2m), closure and restructuring of operations and other costs of £nil (2012: £29.1m), onerous property provisions of £nil (2012: £34.1m) and exceptional loss on the disposal of Culina of £nil (2012: £4.8m).  Operating profit, including these items, amounted to £39.2m (2012: loss of £(32.4)m).  Profit before tax from continuing operations, including these items, amounted to £24.8m (2012: loss of £(47.4)m).

Eric Born, Wincanton Chief Executive commented:

"Wincanton has continued to build on its leading position in the UK and Ireland supply chain and logistics market in the year to 31 March 2013, with increased underlying operating profit, improved margin and good progress made against our strategic plan.

In addition to growing the business and broadening our offering we will continue to drive out further costs by improving the efficiency of our operating model across our three main asset pools of people, property and fleet. We believe further enhancements from these areas will maximise our operational performance and generate increased levels of free cash flow going forward."

For further enquiries please contact: Wincanton plc Eric Born, Chief Executive Adrian Colman, Group Finance Director Buchanan        Jeremy Garcia, Gabriella Clinkard

Tel: [phone] Tel: [phone] Tel: [phone]

Chairman's review

Introduction

The 2012/13 year has seen Wincanton deliver another solid performance. The business is now solely focused on its supply chain logistics operations in the UK and Ireland and recorded a clean  set of trading results. The UK and Ireland economies have been broadly flat over the last year resulting in continued competitive pressure in our marketplace. As our customers have moved to adapt their own business models to the economic conditions, they have retained a tight focus on their costs. We have responded to their needs by continuing to drive cost efficiencies and by offering bespoke services to deliver innovative solutions for them whilst driving value for the Group. We are pleased to have increased profitability through a blend of new contract momentum, continued cost focus and internal efficiency programmes.

Results

Revenue for 2012/13 of £1,086.8m represents a 9.6% decrease compared to £1,202.8m in 2011/12. This fall was expected due to the inclusion of the Foodservice business in the previous year and the loss of certain contracts in the prior year, together with the lower level of customer volumes through some business units. Pleasingly, despite the reduction in revenue, underlying operating profit has increased by 6.2% from £43.8m to £46.5m.  The result after tax improved from a loss of £102.4m, after exceptional costs of £68.0m and losses from discontinued operations of £61.8m, to a profit of £18.3m. Closing net debt reduced to £107.6m from £114.5m at the end of the previous year. The Group is focused on reducing net debt and improving its balance sheet position which also includes a significant pension scheme deficit of £148.7m (2011/12: £118.2m). The Board has therefore concluded that it is not appropriate to consider a dividend payment at this time.

People and Board

Our people are key to the excellent reputation for operational delivery that Wincanton continues to hold with its customers. They have remained focused on providing excellent service to our customers in an ever challenging commercial environment. I wish to thank all of our employees for their commitment and dedication to the business and our customers.

There have been a number of changes to the composition of the Board during the year. In July 2012 Neil England retired from the Board and David Radcliffe and Martin Sawkins joined the Board. Both bring significant experience from large business-to-business service organisations and have been significant contributors to the Board in this initial period. David brings strong sales and service insights as Chief Executive of corporate travel provider, Hogg Robinson Group plc and Martin has extensive experience of managing human capital in a large people based business as the HR Director of Rentokil Initial plc. In November 2012 Jon Kempster decided to leave the Group and in January 2013 Adrian Colman joined the Board as Group Finance Director. Adrian was previously Group Finance Director of Psion plc, through to its acquisition by Motorola Solutions, Inc. in October 2012.

Priorities and prospects

Wincanton now has a stable business platform that has delivered profit growth in the year. We have a high quality, blue-chip customer base and a dedicated workforce. In the coming year our focus will remain unchanged on operational delivery, customer retention and new contract wins to continue the momentum in trading performance that has been achieved this year. Cost reduction will also be a continuing focus, to maximise the opportunity from the Group's assets and to drive efficiency to support competitive terms for contract renewals.

The Board and senior management team are extremely focused on cash generation in order to both manage down the level of debt in the business and in meeting its pension obligations. 

Outlook

The Group has demonstrated the ability to increase profitability in a broadly flat economy. We intend to build on this improvement by maximising the efficiency of our assets and by continuing to add value to our customers by offering them innovative supply chain solutions which help them deal with the changes in their markets. Together with continued operational excellence we expect the Group to make further progress during the coming year.  

Chief Executive's review

Introduction

Over the past 12 months, we have continued to build our leading position in the UK and Ireland supply chain logistics market. Disposing of our Mainland European operations and the exit from the Foodservice business last year has allowed us to fully focus on developing our core UK and Ireland business, arresting the decline in underlying operating profit and generating new opportunities across a range of sectors. The economies of the UK and Ireland have been broadly flat in 2012/13 and hence our market place is competitive, however our new business wins and increase in underlying operating profit  demonstrate that we are making good progress.  We remain acutely focused on margin growth, cost reduction and cash flow generation to reduce the level of debt, and the management of the Group's pension deficit.  

Financial performance

The Group delivered revenue from its UK and Ireland operations of £1,086.8m in the year. This was lower than last year's revenue of £1,202.8m primarily due to the impact of certain operations that were insourced by customers in 2011/12, lower volumes of business through certain customers in the year and the revenues from the Foodservice business reported in the prior year through to its closure. The ongoing focus on cost reduction together with the delivery of higher value service offerings in the year, partially mitigated by the pressure on margins in contract renewal negotiations, enabled the Group to grow underlying operating profit from £43.8m in 2011/12 to £46.5m in 2012/13.

Delivering against our strategy

Our strategy has remained unchanged and progress against the three strategic pillars is described below.

Continue to drive improvements in our existing operations and service propositions

We continue to deliver excellent customer service across a wide range of industries and complex projects including, for the Aircraft Carrier Alliance (a partnership between BAE Systems, Babcock, Thales and the Ministry of Defence), the supply of a complex logistics management operation for the collection, storage and delivery to the shipyard of parts, components and subassemblies. We have handled and supplied over 12.5 million items, including a 120 tonne gas turbine assembly (the biggest in the world) with three more to follow.

During the year the Group secured a number of new contract wins across a diverse range of customers. Wins included new customers to the Group such as  LOCOG and Tilda and  new areas of work with existing customers including Morrisons, the NHS, CEMEX, Rolls Royce, Sainsbury's, BAE Systems and Valero.

We were especially delighted to support the London 2012 Games as a supplier of warehousing and logistics services. Our dedicated teams supplied and installed warehouse systems in two London logistics centres, and then handled millions of items from medal rostrums through to athlete's beds and sporting equipment.

Another important measure of success is through the retention of business at contract renewal and we were pleased to have renewed contracts within our core operations across all industry sectors.

Establish broader supply chain solutions

We have established broader supply chain solutions to unlock potential in our customers' supply chains and we continue to leverage our expertise, systems and infrastructure to add real value to their operations. During the year the Group had particular success in delivering start-up operations for customers incorporating Wincanton project management, process and systems design against tight deadlines. These value added solutions and consulting services enable Wincanton to provide value enhancing services to our customers and to generate improved returns for the Group.

We have made progress with offering broader 'supply chain solutions' in the year, in particular with the extensive technological developments inherent in the convenience store distribution centre solutions.  By increasing the 'value added' in our solutions we have both increased the return from such projects and also the depth of our relationships with our customers.

With Kiddicare, Wincanton was able to help the retailer navigate its way to building a store presence within 16 weeks of project conception.  With surety of supply a key requisite, Wincanton took responsibility for integration of online and offline sales, network design, stock allocation and store build to ensure a successful launch for Kiddicare.

With Morrisons we successfully opened their first convenience store distribution centre, utilising our systems solution. We also provided significant project management expertise to ensure the warehouse start-up and systems infrastructure was brought on stream in time for the launch of the service. Our strong partnership with Morrisons and reputation for delivery against tight deadlines will position us well to win other design, implementation and project management services for start-up projects which we would also expect to run and manage once operational.

Drive ongoing cost reductions

We continue to drive ongoing cost reductions across the organisation as evidenced by the improvement in our underlying operating margin from 3.6% in 2011/12 to 4.3% in 2012/13. This benefits our customers in terms of lowering their cost of operations in open book contracts and improves our margins in closed book contracts. Using the skills and experience we have in the business enables us to continue to improve efficiency of operations which also enhances our ability to retain business with customers.

Our people

A major strength in our business is our people who lead the way for the business to grow. On a daily basis, the intellect, diligence and innovative thinking of our teams is utilised to solve complex supply chain issues. None more so than in the on time delivery of complex operational start-ups for convenience store distribution centres for both Morrisons and Sainsbury's which successfully went live in the year.

The health and safety of our colleagues is of paramount importance. During the year the Group has continued to focus on training and education initiatives to enhance the safe working culture within the organisation. Programmes focusing on Manual Handling and Safer Vehicle Loading/Unloading have contributed to a reduction in the reported rates of incidents compared with the prior year and this will remain an ongoing area of focus.

In order to obtain greater understanding and insight into the challenges our customers face, we have recruited people with specific sector experience to strengthen our team and add insight and innovation to our propositions. We aim to nurture and grow the talent base in our organisation to help us develop new solutions and extend the scope of our operations with customers.  We established the Wincanton Academy this year to provide a development programme for our aspiring and junior managers to develop their skills and expertise around customer excellence, leadership and commercial finance.

Priorities for the coming year

In the coming year we will continue the work from this year to ensure we further improve our performance. We do not expect the economic environment in the UK and Ireland to offer any relief and as such we will focus on winning market share and capture customer opportunities through the development of supply chain solutions and the cross-selling of products and services.

In addition to growing the business and broadening our offering we will continue to drive out further costs by improving the efficiency of our operating model across our three main asset pools of people, property and fleet. We believe further enhancements from these areas and continued attention to detail will maximise our operational performance and generate increased levels of free cash flow going forward.

Financial review

Performance summary

	2013	2012
	£m	£m
Revenue	1,086.8	1,202.8
Underlying EBITDA	63.7	60.9
Underlying operating profit	46.5	43.8
Underlying margin (%)	4.3%	3.6%
Financing costs (net)	(14.4)	(15.0)
Underlying profit before tax	32.1	28.8
Amortisation of intangibles	(7.3)	(8.2)
Exceptionals	-	(68.0)
Profit/(loss) before tax	24.8	(47.4)

Underlying EPS (p)	20.4p	16.9p
Net debt	107.6	114.5

In the year ended 31 March 2013, Wincanton reported revenue of £1,086.8m (2012: £1,202.8m), which represents a reduction of 9.6 per cent. This reflects a combination of the impact of certain operations that were insourced by customers in 2011/12, lower activity levels of certain customers and the closure of Foodservice operations in the prior year. 

Underlying operating profit grew by 6.2 per cent to £46.5m (2012: £43.8m), providing an underlying operating profit margin of 4.3 per cent.  The underlying operating margin improved from 3.6 per cent in the prior year. The growth in underlying operating profit reflects the impact of improved operational efficiency and cost reductions together with the benefit of some initial sales of higher margin services. Additionally the benefits of both the closure of Foodservice and the recognition of the provision against onerous lease costs in 2011/12 improved profitability year on year. This improvement was partly offset by the lower levels of activity from certain customers, albeit the profit impact is more limited in relation to open book contracts, some degree of price erosion on certain contract renewals and the loss of the profit contribution from the Culina business disposed of in March 2012. In open book contracts, where costs incurred are related to the level of activity of the customer and are passed on to the customer, profits are less sensitive to volume changes in the short term as the Group will typically earn a management fee for this type of operation.

The Group reported nil exceptionals in the year, compared to net exceptionals of £68.0m in 2011/12, which included restructuring and site closures, plus recognition of onerous lease obligations.

Net financing costs were £14.4m (2012: £15.0m), £0.6m lower year on year.  Financing charges principally comprise interest payable on loans plus other financing items, £18.4m in total (2012: £20.1m) offset by a £4.0m (2012: £5.1m) net pension credit in respect of the financing item arising from the UK defined benefit schemes.

Profit before tax of £24.8m in 2012/13 compares to a loss before tax of £47.4m in the prior year. Tax in the year was a charge of £6.5m compared with a credit of £6.8m in the prior year. 

Underlying earnings per share of 20.4p represents an increase of 20.7 per cent from 16.9p in the prior year.  On an overall basis the earnings per share were 15.8p compared with a loss per share of 35.3p for continuing operations in 2011/12.

Trading

	2013					2012
	£m					£m
	Contract logistics	Specialist businesses		Total	Contract logistics		Specialist businesses		Total
Revenue	923.2	163.6	1,086.8		1,023.8		179.0	1,202.8
Underlying operating profit	38.0	8.5	46.5		34.6		9.2	43.8
Margin (%)	4.1%	5.2%	4.3%		3.4%		5.1%	3.6%

The Group's internal management structure aligns the Group under two sectors; Contract logistics which is a provider of supply chain logistics solutions and services and Specialist businesses of Containers, Wincanton Records Management and Pullman Fleet Services. This structure has been constant in the year and the segments disclosure remains aligned to these management responsibilities.

Contract logistics

The Contract logistics business reported revenues of £923.2m in the year, down 9.8 per cent on the £1,023.8m reported in the prior year. 

The split of Contract logistics activities by industry sector it serves is as follows:

	2013	2012
	£m	£m
Construction	106.8	97.4
FMCG	135.2	136.4
Retail grocery	236.4	259.3
Retail general merchandise	232.5	284.8
Tankers & bulk	122.9	129.8
Other	89.4	116.1
	923.2	1,023.8

Revenue reduced by 9.8 per cent in the year. This was driven by the closure of the loss making Foodservice operation in 2011/12 a reduction of £28.7m in that year and the impact of certain contract losses in 2011/12 in particular due to in-sourcing of operations by two retail customers. In the current year lower activity levels from some sectors also impacted revenue, in particular retail and construction, albeit that the new business start-up for Lafarge increased revenue overall in this sector.

Underlying operating profit for the year was £38.0m up 9.8 per cent on the £34.6m reported in 2011/12. The improvement in profitability reflects improved operational efficiency in the year from the lower revenue base, the closure of Foodservice in the prior year, initial sales of some higher margin services in the year and the benefit from the onerous lease provision made in 2011/12.  This was partially offset by the impact of pricing pressure on certain contract renewals and the loss of the profit contribution from the Culina business disposed of in March 2012.

New business start-ups successfully 'going live' in the year included bulk cement powder transport operations for Lafarge from their network of 6 plants nationwide, plus the storage of defence related power units for Rolls Royce which represents a widening of our customer base in this strategically important area.  

Other new start-ups included two new distribution warehouses supporting the convenience store offer of two existing retail customers, Morrisons and Sainsbury's. The first of these included our technology platforms and system solutions, the implementation of which represents a key part of our competitive proposition to win new business, especially in the retail market place.  These operational start-ups were delivered quickly, efficiently and on time.

During the year we were also successful in winning new volume both with new customers, for instance Smyths Toys, and also with existing customers, the latter demonstrating the benefit of our ability to leverage existing relationships within our broad customer base.

Within our shared user warehouse facilities we have been successful in securing work with both new and expanding customers across the Retail and FMCG sectors including B&Q, Premier Foods, Kiddicare, Furniture People and Ella's Kitchen. A number of these operations provide 'overspill' for customers where their operational facility is sized for near peak capacity but where the availability of our flexible shared user space allows short term fluctuations to be efficiently dealt with.  

Specialist businesses

The Specialist businesses segment of the Group comprises Container transport activities, Wincanton Records Management, which provides a full suite of document storage, and associated scanning and shredding services, and the vehicle maintenance and repair business Pullman Fleet Services. Revenue for this segment was £163.6m, a reduction of £15.4m or 8.6 per cent on the previous year of £179.0m. A tight focus on cost control and asset efficiency in this sector ensured that underlying operating profit margin was improved marginally to  5.2 per cent (2012: 5.1 per cent) and underlying operating profit of £8.5m was achieved compared to £9.2m in the previous year.

These Specialist businesses operate almost entirely under a closed book model. The revenue split is given below for information, however these are managed as one segment.

	2013	2012
	£m	£m
Containers	76.8	88.2
Pullman Fleet Services	67.7	72.2
Records Management	19.1	18.6
	163.6	179.0

The Container transport market continues to be weak in the UK with limited overall volume growth.  Factors such as increasing shipping line charges for UK delivery diverted volume to European ports and transport operators. A strong focus on reducing costs, maximising asset efficiency and increased fuel efficiency through driver training and the introduction of innovative 'on cab wind dam' technology has helped to maintain profit margins.

Pullman Fleet Services trading was solid in the year. The reduction in revenue was principally due to the loss of one significant contract in the year and the closure of one underperforming site however these did not contribute any material profits.

Records Management produced a strong performance, gaining new customers across existing and new sectors such as healthcare.

Net financing costs

	2013	2012
	£m	£m
Interest payable on loans/leases	16.6	19.3
Interest receivable	(0.6)	(0.4)
Net interest payable	16.0	18.9
Provisions discount unwinding	2.4	1.7
Pension financing item	(4.0)	(4.1)
Total	14.4	16.5

Net financing costs were £14.4m, £2.1m lower overall compared to the prior year charge of £16.5m including £1.5m for discontinued operations.  Financing costs related to the Group's debt of £16.6m compared to the prior year charge of £19.3m. The reduction primarily reflects a lower average debt in the year, following the disposal receipts collected part way through last year. 

Following the revision to IAS 19, which becomes effective for the Group for the year to 31 March 2014, the pension financing credit of £4.0m (2012: £4.1m) will be replaced with a net charge.  This change arises as the revised accounting standard requires the same discount rate, based on AA Corporate bonds, to be applied to both the assets and liabilities of the scheme rather than applying a future rate of return to the assets. The restatement of the year to 31 March 2013, which will be shown first in the Group's half year statement to 30 September 2013, is anticipated to show a £10.8m increase in financing charges with a corresponding credit in the Statement of Comprehensive Income within actuarial gains/losses. Additionally the revision to IAS 19 requires any administration expenses of the scheme which have been incorporated in the return on assets, to be taken as a charge in operating expenses which will result in a £1.2m reduction in operating profit matched by a corresponding reduction in net financing costs. 

Based on the above estimates the accounting impact on the reported results for the Group is summarised below.  This revision has no cash impact on the Group and has no impact on the Group's underlying valuation.

	As reported	Amended return on assets	Reclassified admin charges	Incorporating IAS 19 adjustment
	£m	£m	£m	£m
Operating profit	39.2	-	(1.2)	38.0
Net finance charges	(14.4)	(10.8)	1.2	(24.0)
Profit before tax	24.8	(10.8)	-	14.0
Basic EPS	15.8			8.7
Underlying EPS	20.4			13.3
Adjusted net debt: EBITDA covenant*	2.17			2.17

* Bank facility covenants will be unaffected by this change as they are calculated based on frozen GAAP

Taxation

The overall tax charge of £6.5m (2012: £6.8m credit) reflects the more normal taxable position of the Group in the year.

The effective tax charge on underlying profits has reduced to 26.5 per cent (2012: 29.5 per cent).  This reduction is largely a result of the drop in the main UK corporation tax rate from 26 per cent to 24 per cent, as offset by certain disallowable expenditure.  Whilst the main UK corporation tax rate will reduce further to 23 per cent in 2013/14 and is expected to ultimately trend to 20 per cent by 2015/16, the factors influencing the effective tax rate in 2012/13 are expected to remain reasonably constant, resulting in an effective tax rate continuing slightly above the headline UK rate for the foreseeable future.

The Group paid tax in the current year of some £0.3m primarily as a result of the utilisation of tax losses from earlier years and pension deficit recovery payments of £13.6m made in the period.  In the absence of further tax losses available for utilisation in future years, the Group expects to pay an increased amount of corporation tax in 2013/14.  However, the amount of tax paid will continue to be limited by pension deficit payments, reducing the cash tax rate from the main UK corporation tax rate above to approximately 20 per cent from 2.0 per cent in the current year.

Whilst the utilisation of losses in the year has reduced the deferred tax asset brought forward in respect of such losses, the total deferred tax asset carried forward at 31 March 2013 has increased to £32.9m (2012: £28.8m), primarily as a result of the increased pension deficit and the deferred tax asset thereon.

Profit after tax, earnings and dividend

The profit after tax reported for the Group for the year of £18.3m compares to a loss retained in 2011/12 of £(102.4)m which reflected the substantial exceptional costs incurred and losses from discontinued operations.

These retained earnings translate to a basic EPS of 15.8p (2012: overall (89.3)p and continuing  (35.3)p).  The Group reports an alternative, underlying EPS figure which excludes exceptionals and amortisation of acquired intangibles, this has increased year on year by 20.7 per cent to 20.4p from 16.9p. 

The Group has not declared or paid a dividend this year in line with its continuing objective to reduce net debt.

Financial position

The summary financial position of the Group is set out below;

	2013	2012
	£m	£m
Non-current assets	220.4	236.5
Net current liabilities (ex net debt)	(191.2)	(209.2)
Non-current liabilities (ex net debt / pensions)	(59.4)	(63.0)
Net debt / cash	(107.6)	(114.5)
Pensions deficit (gross)	(148.7)	(118.2)
Net liabilities	(286.5)	(268.4)

The  movement in the year of £(18.1)m is principally due to retained profit for the year of £18.3m and the actuarial movement in the pension deficit net of deferred tax of £(38.1)m which was primarily driven by the lower discount rate of 4.5% used to value the liabilities of the scheme compared to 5.0% at 31 March 2012.

Financing and covenants

The Group's committed facilities at the year end are £314m.   Headroom in committed facilities at 31 March 2013 was £110m.  The Group also has limited operating overdrafts which provide day-to-day flexibility and amount to a further £12m in uncommitted facilities. 

The Group refinanced its primary facilities in November 2011 improving both the maturity and diversification profile.  The main bank facility of £185m expires in November 2015, whereas the £75m from the Prudential/M&G UK Companies Financing Fund LP expires in 2021 with 4 equal repayments commencing in 2018. 

The Group's facilities also include the balance of the US Private Placement debt of £54m which expires in tranches in December 2015 and November 2016. A tranche of £55m was repaid in December 2012. A small element of the 2016 'shelf' facility of £1.7m was repaid in March 2013 to comply with the terms of the facility agreement post the European disposal transaction.

The Group maintains a mix of hedging instruments (swaps) to give an appropriate level of protection against changes in interest rates.  During the year £70m of debt was at fixed rates, and the balance at floating rates.

Wincanton operates comfortably within its banking covenants, as summarised in the table below:

Covenant	Ratio	At 31 March 2013
Adjusted net debt : EBITDA	<3.0:1	2.17
Interest cover	>3.5:1	4.5
Fixed charge cover	>1.4:1	1.8

Adjusted net debt to EBITDA moves to < 2.75:1 on 31 March 2014.

Net debt and cash flows

Group net debt at the year end was £107.6m (2012: £114.5m) a net year on year inflow of £6.9m.

The Group's cash flows can be summarised in the following table;

	2013	2012
	£m	£m
Underlying operating profit	46.5	43.8
Depreciation	17.2	17.1
EBITDA	63.7	60.9
Business disposals	-	43.6
Net capital expenditure	(4.6)	(28.5)
Net financing costs	(13.6)	(19.2)
Pension deficit payment	(13.6)	(13.1)
Provisions outflows	(18.0)	(3.2)
Working capital movement / other	(7.0)	(3.2)
Total	6.9	37.3

The Group's year end debt position is some £100m lower than the average debt position in intervening months. 

Average debt levels continued to fall year on year and were £201m compared to £271m in the prior year after accounting for the disposal proceeds received primarily in the second half of 2011/12.  The average borrowing rate on debt including all fees, but excluding the non-cash items of discounts unwinding and pension financing charges, is 7.3 per cent (6.6 per cent in 2011/12). The rate increase is predominantly attributable to the full year impact of the higher margin, longer tenor, M&G debt, offset in part by lower LIBOR rates and the lower margin on the refinanced bank facilities from November 2011.

As more fully detailed below the Group incurred cash outflows of some £11.1m on new and replacement fixed assets in the year offset by the inflows from asset sales.  During the year the Group disposed of a freehold site in Manchester plus a number of vehicles, which had been in use in the Foodservice operation, for £5.8m a level approximately equal to the net book value.

The cash outflows in respect of provisions represents the cash cost of restructuring charges from the prior year and onerous lease liabilities.  In 2011/12 the Group made provision for onerous property liabilities which were identified as having arisen due to the change in market conditions, a charge of £34.1m was recognised as a result adding to existing provisions. The cash outflows in respect of these liabilities in the next two years to 31 March 2015 are forecast to be in total, some £30.0m. Thereafter the annual payment reduces materially as these onerous leases expire.

Capital expenditure

Capital expenditure totalled £11.1m (2012: £30.4m). The year on year reduction reflects the inclusion in the prior year of the c.£14.3m of spend in respect of the Group's 'back office' systems development which was substantially complete that year and £7.8m in respect of the disposed businesses. 

Of the current year spend £7.1m was in respect of expansion projects including £1.4m for expansion at the Records Management facilities in Dublin and in other sites, £1.7m for warehouse fit out and £1.1m for the  upgrade of certain of the Group's IT assets.

In addition £4.0m was spent on replacement capital including £1.0m for IT infrastructure plus £0.6m on improvements to a customer specific end of production line / co-packaging facility.

Pensions

The Group operates a number of pension schemes in the UK and Ireland. 

Defined benefit schemes

The principal UK defined benefit scheme, which is closed to new entrants, had an IAS 19 deficit of £147.1m (2012: £116.9m) (£113.3m net of deferred tax) at the year end.  The deficit has increased primarily due to the decrease in the discount rate from 5.0 per cent to 4.5 per cent as the yield on corporate bonds has dropped. Each 0.1 per cent drop in the rate increases the liabilities of the scheme by 1.9 per cent, currently approximately £16m.

The increased liabilities of £891.0m (up from £773.9m) outweighed the growth in asset values in the scheme which rose by 13.2 per cent to £743.9m from £657.0m at the previous year end.

The triennial valuation as at 31 March 2011 was finalised with the Trustee in June 2012 with a technical provision basis deficit agreed of £189.5m, however it is recognised that the decline since in bond yields has further increased this deficit position. The additional cash contribution made in the current year to fund the deficit was £13.6m as part of the recovery period agreed with the Trustee. Going forward the payment has been agreed with the Trustee to increase by RPI each year and hence will be £14.0m in 2013/14.  This will continue for a further 9 years to 2022/23.

The approximate membership data split by key categories is as follows:

	2013	2012
Actives	1,360	1,600
Deferred	8,160	8,180
Pensioners	6,790	6,610
	16,310	16,390

Over recent years the Trustee has pursued a diversification of the investment portfolio as part of a de-risking strategy. A trigger mechanism is being used to reduce the return-seeking asset allocation as the funding level improves.  During the year both the overall market and the funding level have been impacted by the continuing low interest rate environment albeit offset by a credible investment performance. 

Defined contribution schemes

The Group's defined contribution schemes include the Retirement Savings Section and Pension Builder Plan in the UK and a separate similar local scheme in Ireland.  Active membership of these schemes was 3,650 (2012: 3,900) in the year and the income charge incurred of £7.9m (2012: £9.0m).  In 2013 these schemes will be augmented by a new 'auto enrolment' section in line with the Government's requirement to offer pension arrangements to all employees.  A further c. 10,000 employees will be eligible to join this part of the scheme.

Consolidated income statement

for the year ended 31 March 2013

	Note	2013 £m	2012 £m
Continuing operations:
Revenue	2	1,086.8	1,202.8
Share of results of associate		-	1.3
Underlying operating profit	2	46.5	43.8
Amortisation of acquired intangibles		(7.3)	(8.2)
Exceptional costs	3	-	(68.0)
Operating profit/(loss)	3	39.2	(32.4)
Financing income	4	4.6	5.5
Financing cost	4	(19.0)	(20.5)
Net financing costs	4	(14.4)	(15.0)
Profit/(loss) before tax		24.8	(47.4)
Income tax (expense)/credit	5	(6.5)	6.8
		18.3
Profit/(loss) for the period from continuing operations		18.3	(40.6)
Loss from discontinued operations		-	(61.8)
Profit/(loss) for the year		18.3	(102.4)
Attributable to
- equity shareholders of Wincanton plc		18.3	(102.8)
- minority interests - discontinued operations		-	0.4
Profit/(loss) for the year		18.3	(102.4)
Earnings/(loss) per share - basic
- continuing operations		15.8p	(35.3)p
- discontinued operations		-	(54.0)p
Total	6	15.8p	(89.3)p
Earnings/(loss) per share - diluted
- continuing operations		15.2p	(35.3)p
- discontinued operations		-	(54.0)p
Total	6	15.2p	(89.3)p

Consolidated statement of comprehensive income

for the year ended 31 March 2013

		2013 £m	2012 £m
Profit/(loss) for the year		18.3	(102.4)
Other comprehensive (expense)/income
Actuarial losses on defined benefit pension schemes, net of deferred tax		(38.1)	(50.0)
Net foreign exchange gain/(loss) on investment in foreign subsidiaries net of hedged items		0.4	(0.8)
Translation reserve relating to disposals transferred to the income statement		-	(4.4)
Effective portion of changes in fair value of cash flow hedges		(0.7)	(4.3)
Net change in fair value of cash flow hedges transferred to the income statement		1.4	1.5
Income tax relating to components of other comprehensive income		-	(0.8)
Other comprehensive expense for the year, net of income tax		(37.0)	(58.8)
Total comprehensive expense for the year		(18.7)	(161.2)
Attributable to
- equity shareholders of Wincanton plc		(18.7)	(161.6)
- minority interests - discontinued operations		-	0.4
Total comprehensive expense for the year		(18.7)	(161.2)

Consolidated balance sheet

at 31 March 2013

		2013 £m	2012 £m
Non-current assets
Goodwill and intangible assets		114.4	123.2
Property, plant and equipment		73.1	84.5
Deferred tax assets		32.9	28.8
		220.4	236.5
Current assets
Inventories		7.1	6.7
Trade and other receivables		144.6	158.9
Cash and cash equivalents		103.2	165.6
		254.9	331.2
Current liabilities
Income tax payable		(7.5)	(7.2)
Borrowings and other financial liabilities		(13.9)	(59.7)
Trade and other payables		(312.3)	(332.0)
Employee benefits		(0.3)	(0.8)
Provisions		(22.8)	(34.8)
		(356.8)	(434.5)
Net current liabilities		(101.9)	(103.3)
Total assets less current liabilities		118.5	133.2
Non-current liabilities
Borrowings and other financial liabilities		(196.9)	(220.4)
Employee benefits		(148.7)	(118.2)
Provisions		(58.4)	(61.9)
Deferred tax liabilities		(1.0)	(1.1)
		(405.0)	(401.6)
Net liabilities		(286.5)	(268.4)
Equity
Issued share capital		12.2	12.2
Share premium		12.8	12.8
Merger reserve		3.5	3.5
Hedging reserve		(3.6)	(4.3)
Translation reserve		0.4	-
Retained earnings		(311.8)	(292.6)
Total equity deficit		(286.5)	(268.4)

Consolidated statement of changes in equity

at 31 March 2013

							Retained earnings
		Issued share capital £m	Share premium £m	Merger reserve £m	Hedging reserve £m	Transla-tion reserve £m	IFRS 2 reserve £m	Own  shares £m	Profit and loss £m	Total £m	Minority interests £m	Total equity deficit £m
Balance at 1 April 2011		12.2	12.8	3.5	(1.5)	5.2	13.9	(18.7)	(134.9)	(107.5)	0.5	(107.0)
Total comprehensive  income		-	-	-	(2.8)	(5.2)	-	-	(153.6)	(161.6)	0.4	(161.2)
Minority interests relating to disposals		-	-	-	-	-	-	-	-	-	(0.5)	(0.5)
Increase in IFRS 2 reserve		-	-	-	-	-	0.7	-	-	0.7	-	0.7
Own shares disposed of on exercise of options		-	-	-	-	-	-	2.1	(2.1)	-	-	-
Dividends paid to shareholders		-	-	-	-	-	-	-	-	-	(0.4)	(0.4)
Balance at 31 March 2012		12.2	12.8	3.5	(4.3)	-	14.6	(16.6)	(290.6)	(268.4)	-	(268.4)
Balance at 1 April 2012		12.2	12.8	3.5	(4.3)	-	14.6	(16.6)	(290.6)	(268.4)	-	(268.4)
Total comprehensive income		-	-	-	0.7	0.4	-	-	(19.8)	(18.7)	-	(18.7)
Increase in IFRS 2 reserve		-	-	-	-	-	0.6	-	-	0.6	-	0.6
Own shares disposed of on exercise of options		-	-	-	-	-	-	1.3	(1.3)	-	-	-
Balance at 31 March 2013		12.2	12.8	3.5	(3.6)	0.4	15.2	(15.3)	(311.7)	(286.5)	-	(286.5)

Consolidated statement of cash flows

for the year ended 31 March 2013

	2013 £m	2012 £m
Operating activities
Profit/(loss) before tax	24.8	(47.4)
Adjustments for
- depreciation and amortisation	24.5	25.3
- write down of non-current assets	-	11.4
- interest expense	14.4	15.0
- share of results of associates	-	(1.3)
- net result of business disposals	-	4.8
- share-based payments fair value charges	0.6	0.7
	64.3	8.5
Decrease in trade and other receivables	14.5	46.7
(Increase)/decrease in inventories	(0.4)	1.9
Decrease in trade and other payables	(22.3)	(33.8)
(Decrease)/increase in provisions	(18.0)	44.3
Decrease in employee benefits before pension deficit payment	(0.7)	(6.4)
Income taxes paid	(0.3)	(0.5)
Cash generated from continuing operations before pension deficit payment	37.1	60.7
Pension deficit payment	(13.6)	(13.1)
Cash utilised from discontinued operations	-	(17.7)
Cash flows from operating activities	23.5	29.9
Investing activities
Proceeds from sale of property, plant and equipment	6.5	1.9
Net proceeds from business disposals	-	61.3
Interest received	0.6	0.2
Dividends received from associates	-	0.5
Additions of property, plant and equipment	(10.3)	(16.0)
Additions of computer software costs	(0.8)	(14.4)
Cash flows from investing activities	(4.0)	33.5
Financing activities
(Decrease)/increase in borrowings	(63.7)	36.0
Payment of finance lease liabilities	(4.0)	(1.4)
Dividends paid to minority interests in subsidiary undertakings	-	(0.4)
Interest paid	(14.2)	(19.4)
Cash flows from financing activities	(81.9)	14.8
Net (decrease)/increase in cash and cash equivalents	(62.4)	78.2
Cash and cash equivalents at beginning of year	165.6	88.3
Effect of exchange rate fluctuations on cash held	-	(0.9)
Cash and cash equivalents at end of year	103.2	165.6
Represented by
- cash at bank and in hand	88.2	148.7
- restricted cash, being deposits held by the Group's captive insurer	15.0	16.9
	103.2	165.6

 

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 2013 and 31 March 2012.  Statutory accounts for the year ended 31 March 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.  Statutory accounts for the year ended 31 March 2012 have been delivered to the Registrar of Companies.  The Auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

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 in the UK and Ireland. The Group manages its operations in two distinct operating segments: Contract logistics (the majority of activities including transport and warehousing for various market sectors including retail, manufacturing, defence and construction) and Specialist businesses (Pullman Fleet Services, Containers and Wincanton Records Management).

The results of the 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. Assets and liabilities are reviewed at a consolidated level only, therefore segmental information is not provided.

		Contract logistics		Specialist businesses		Consolidated
		2013 £m	2012 £m	2013 £m	2012 £m	2013 £m	2012 £m
Continuing operations
Revenue from external customers1		923.2	1,023.8	163.6	179.0	1,086.8	1,202.8
Depreciation		(12.6)	(13.6)	(2.5)	(3.4)	(15.1)	(17.0)
Amortisation of software intangibles		(2.1)	(0.1)	-	-	(2.1)	(0.1)
Share of results of associate2		-	1.3	-	-	-	1.3
Reportable segment underlying operating profit3		38.0	34.6	8.5	9.2	46.5	43.8
Other material non-cash items:
- write down of other non-current assets4		-	(11.4)	-	-	-	(11.4)
Total Group assets5						475.3	567.7
Additions to reportable segment non-current assets:
- property, plant and equipment		8.0	6.2	2.0	1.9	10.0	8.1
- computer software costs		0.8	14.4	-	-	0.8	14.4
Total Group liabilities						(761.8)	(836.1)

1     Included in segment revenue is £1,058.8m (2012: £1,170.5m) in respect of customers based in the UK .

2     The associate reported related to the Group's 20% investment in Culina Logistics Limited which was disposed of during the year ended 31 March 2012. This has been classified as a continuing operation.

3     Underlying operating profit includes the share of results of the associate and is stated before amortisation of acquired intangibles and exceptionals.

4     The prior year write down of other non-current assets comprised the write down of property plus plant and equipment to recoverable value.

5     Total Group assets include non-current assets of £215.6m (2012: £228.4m) in the UK.

3. Operating profit/(loss) from continuing operations

		2013 £m	2012 £m
The following items have been charged in arriving at operating profit/(loss) from continuing operations:
Auditor's remuneration
Audit fees for statutory audit services
- parent Company and consolidation		-	0.1
- subsidiary undertakings		0.2	0.2
Non-audit fees
- fees paid to the Auditor and its associates for tax advisory services		-	0.1
- fees paid to the Auditor and its associates for assurance services		0.1	0.1
- fees paid to the Auditor and its associates for other services		-	0.2
Depreciation and other amounts written off property, plant and equipment
- owned		15.1	26.7
- leased		-	1.7
Amortisation and other amounts written off software intangibles		2.1	0.1
Operating lease rentals
- plant and equipment		30.0	32.5
- land and buildings		36.9	37.7

Exceptionals

		2013 £m	2012 £m
Exceptional costs
Closure and restructuring of operations - UK & Ireland		-	(29.1)
Onerous property provisions		-	(34.1)
Disposal of investment in Culina Logistics Limited		-	(4.8)
		-	(68.0)

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.

Closure and restructuring of operations in the year ended 31 March 2012 related to the closure of the Foodservices business of £23.4m plus other restructuring costs in central support functions, including taking some accounts processing activity offshore, of £5.7m.

In addition onerous leases and other property related provisions of £34.1m were recognised in the year ended 31 March 2012 and lastly on 6 March 2012 the Group disposed of its investment in Culina Logistics Limited for a consideration of £11m, resulting in a loss on disposal of £4.8m.

4. Net financing costs

Recognised in the income statement - continuing operations

		2013 £m	2012 £m
Interest income		0.6	0.4
Expected return on defined benefit pension scheme assets		42.4	44.3
Interest on defined benefit pension scheme obligations		(38.4)	(39.2)
		4.6	5.5
Interest expense		(16.1)	(18.1)
Finance charges payable in respect of finance leases		(0.5)	(0.7)
Unwinding of discount on insurance and other provisions		(2.4)	(1.7)
		(19.0)	(20.5)
Net financing costs		(14.4)	(15.0)

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

Recognised in other comprehensive income - continuing operations

		2013 £m	2012 £m
Foreign currency translation differences for foreign operations		0.4	-
		0.4	-

The above amounts are recognised in the translation reserve.  In the prior year the net foreign exchange loss on investments in foreign subsidiaries net of hedged items related solely to operations classified as discontinued.

5. Income tax expense/(credit)

Recognised in the income statement - continuing operations

		2013 £m	2012 £m
Current tax expense/(credit)
Current year		0.3	0.3
Adjustments for prior years		0.2	(0.8)
		0.5	(0.5)
Deferred tax expense/(credit)
Current year		6.4	(6.1)
Adjustments for prior years		(0.4)	(0.2)
		6.0	(6.3)
Total income tax expense/(credit)		6.5	(6.8)

Reconciliation of effective tax rate		2013 £m	2012 £m
Profit/(loss) before tax		24.8	(47.4)
Income tax using the UK corporation tax rate of 24% (2012: 26%)		5.9	(12.3)
Effect of tax rates in foreign jurisdictions		(0.3)	(0.1)
Trading losses (utilised in the period)/not recognised		(0.6)	2.2
Non-deductible expenditure		1.6	1.0
Loss on disposal		-	1.2
Change in UK corporation tax rate		0.1	0.2
Other		-	2.0
Adjustments for prior years
- current tax		0.2	(0.8)
- deferred tax		(0.4)	(0.2)
Total tax expense/(credit) for the year		6.5	(6.8)
Recognised in other comprehensive income - continuing operations
Actuarial losses on defined benefit pension schemes		10.2	14.4
Income tax relating to foreign exchange movements		-	(0.8)
		10.2	13.6

The main UK Corporation tax rate reduced from 24% to 23% with effect from 1 April 2013. The closing UK deferred tax provision is calculated based on the rate of 23% which was substantively enacted at the balance sheet date.

6. Earnings/(loss) per share

Earnings/(loss) per share calculation is based on the earnings attributable to the equity shareholders of Wincanton plc of £18.3m (2012: £(102.8)m) and the weighted average of 115.8m (2012: 115.1m) shares which have been in issue throughout the year. The diluted earnings/(loss) per share calculation is based on there being 4.3m (2012: nil) additional 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/(loss) per share are calculated as follows:

		2013 millions	2012 millions
Weighted average number of ordinary shares (basic)
Issued ordinary shares at the beginning of the year		115.5	114.6
Net effect of shares issued and purchased during the year		0.3	0.5
		115.8	115.1
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the year		115.8	115.1
Effect of share options on issue		4.3	-
		120.1	115.1

An alternative earnings per share number is set out below, split between continuing and discontinued for the year ended 31 March 2012, being before amortisation of acquired intangibles and, where applicable, exceptionals plus related tax, since the Directors consider that this provides further information on the underlying performance of the Group:

			Total 2013 pence	Continuing operations 1 pence			Discontinued operations 1 pence	Total 2012 pence
Underlying earnings per share
- basic			20.4	16.9			2.7	19.6
- diluted			19.7	16.9			2.7	19.6

Underlying earnings are determined as follows:

	Total  2013 £m	Continuing operations £m	Discontinued operations £m	Total 2012 £m
Profit/(loss) for the year attributable to equity shareholders of Wincanton plc	18.3	(40.6)	(62.2)	(102.8)
Exceptional costs	-	68.0	-	68.0
Loss on disposal	-	-	63.0	63.0
Amortisation of acquired intangibles	7.3	8.2	1.4	9.6
Tax	(2.0)	(14.9)	(0.3)	(15.2)
Underlying earnings as previously reported	23.6	20.7	1.9	22.6
Reclassification of results of Culina Logistics Limited	-	(1.3)	1.3	-
Underlying earnings1	23.6	19.4	3.2	22.6

¹   For the purposes of defining underlying earnings and underlying earnings per share the share of results of the associate, being the investment in Culina Logistics Limited, which was sold in March 2012, has been reclassified as discontinued operations.

7. Movement in net debt

	At 1 April  2012 £m	Movement £m	At 31 March 2013 £m
Cash and cash equivalents	165.6	(62.4)	103.2
Borrowings and other financial liabilities	(280.1)	69.3	(210.8)
Net debt	(114.5)	6.9	(107.6)

The table above is presented as additional information to show the movement in net debt, defined as cash and cash equivalents less borrowings and other financial liabilities.

8. Provisions

			Insurance £m	Property £m		Other provisions £m		Total £m
At 1 April 2012			37.5	51.4		7.8		96.7
Effect of movement in foreign exchange			-	0.1		-		0.1
Provisions used during the year			(6.8)	(10.9)		(6.7)		(24.4)
Unwinding of discount			0.8	1.6		-		2.4
Provisions made during the year			6.4	-		-		6.4
At 31 March 2013			37.9	42.2		1.1		81.2
Current			11.3	10.4		1.1		22.8
Non-current			26.6	31.8		-		58.4
			37.9	42.2		1.1		81.2

The Group owns 100% of the share capital of a captive insurer which insures certain of the risks of the Group. The insurance provisions in the above table are held in respect of outstanding insurance claims, the majority of which are expected to be paid within one to seven years. The discount unwinding arises primarily on the employers' liability policy which is discounted over a period of seven years at a rate based on the Bank of England base rate.

The property provisions are determined on a site by site basis, as the best estimate of the expected costs of empty and under-utilised properties, including dilapidations. The provisions are utilised over the relevant lease term, with the majority expected to be utilised over the next three years. Where significant, amounts have been discounted at a rate based on the Group's cost of debt.

Other provisions include the unpaid element of any restructuring costs.

9. Employee benefits

Pension schemes

Employees of Wincanton participated in both funded and unfunded pension arrangements in the UK and Ireland during the year ended 31 March 2013 details of which are given below.

The principal Wincanton Scheme in the UK (the Scheme) is a funded arrangement which has three defined benefit sections and two defined contribution sections, called the Wincanton Retirement Savings Section and the Wincanton Pension Builder Plan. The employees of Wincanton Ireland Limited are eligible to participate in a separate funded defined contribution scheme. Assets of these pension arrangements are held in separate Trustee administered funds independent of Wincanton. The pension cost in relation to the defined benefit sections of the Scheme is assessed in accordance with the advice of a qualified actuary using the projected unit method.

The latest formal valuation of the Scheme was carried out as at 31 March 2011 by the Scheme actuary, Hymans Robertson. It was agreed between the Trustee and the Group in June 2012 and submitted to the Pension Regulator. As a result, the Group, in consultation with the Scheme actuary agreed to leave the terms of the additional cash contribution unchanged from that previously agreed. Accordingly the additional cash contribution the Group makes to the Scheme in order to address the past service deficit will increase by RPI each year. The contribution in the year was £13.6m (2012: £13.1m).

In the year commencing 1 April 2013 the Group contributions are expected to be approximately £24.7m, including an incremental cash contribution of £14.0m, increased by RPI as set out in the triennial valuation as at 31 March 2011.

Movements in the net pension obligations recognised:

		2013 £m	2012 £m
Opening deficit		(118.2)	(109.0)
Current service cost		(11.5)	(12.0)
Contributions       - normal		11.7	19.7
- additional		13.6	13.1
Net financing credit		4.0	4.1
Actuarial loss		(48.3)	(64.4)
Disposal of businesses		-	28.8
Effects of movements in foreign exchange		-	1.5
		(148.7)	(118.2)

The movement in the above net pension scheme obligations in the year was primarily the result of the change in the discount rate which has been offset by an increase in the market value of assets inclusive of the further additional cash contributions being made. The net pension scheme obligations, after taking into account the related deferred tax asset, are £114.5m (2012: £89.8m).

The principal actuarial assumptions for the Scheme and for the UK unfunded arrangement at the balance sheet date were as follows:

		2013 %	2012 %
Discount rate		4.50	5.00
Price inflation rate - RPI		3.25	3.15
Price inflation rate - CPI		2.25	2.15
Pensionable salaries rate		3.25	3.15
Rate of increase of pensions in payment and deferred pensions
- for service to 31 March 2006		3.10	3.00
- for service from 1 April 2006		2.35	2.30
Expected rate of return on plan assets (at 1 April)		6.46	7.25

For the majority of Scheme members increases in pensionable salaries are now capped at the same level as price inflation (RPI).

The assumptions used for mortality rates for members of these arrangements at the expected retirement age of 65 years are as follows:

		2013 Years	2012 Years
Male aged 65 today		20.5	20.3
Male aged 45 today		23.2	23.0
Female aged 65 today		22.7	22.5
Female aged 45 today		25.2	25.0

Sensitivity table

The sensitivity of the present value of the Scheme obligations to changes in the key actuarial assumptions are set out in the following table. The illustrations consider the result of only a single assumption changing with the others assumed unchanged, although in reality it is more likely that more than one assumption would change and potentially the results would offset each other. For example, a fall in interest rates will increase the Scheme obligations, but may also trigger an offsetting increase in market value of certain Scheme assets.

			Change in assumption	Impact on liability		Change in assumption		Impact on liability
Discount rate			+ 0.5%	- 8.1%		- 0.5%		+ 9.3%
Price inflation			+ 0.5%	+ 7.4%		- 0.5%		- 6.7%
Mortality rate			+ 1 year	+ 2.7%

10. Operating leases

The Group leases warehousing facilities, commercial vehicles and other logistics equipment for use in its operations. Typical lease periods for new warehouse rental contracts are between five and 15 years although older rental contracts are for longer periods with intervening break clauses. The average period for vehicles and equipment is four years. The amounts charged to the income statement in the current and prior years are given in note 3.

The total future minimum lease payments under non-cancellable operating leases are detailed in the following table:

		2013		2012
	Plant and equipment £m	Land and buildings £m	Plant and equipment £m	Land and buildings £m
Leases expiring in:
Less than 1 year	21.7	34.4	24.8	34.6
Between 1 and 5 years	37.6	88.0	33.1	93.3
More than 5 years	1.4	146.6	0.6	155.6
	60.7	269.0	58.5	283.5

Wherever possible these commitments are mitigated through contractual commitments from customers for whom the properties are occupied and/or vehicles and plant are rented. The degree of mitigation can be banded according to the nature of the contract between the Group and its customers. This includes 'back-to-back' leases which are fully underwritten by customers throughout the life of the lease and multi-user locations where, although there is no specific matching of lease and contract terms, there are varying degrees of contract backing and therefore mitigation is spread across a number of customers.

A summary of leases by customer contract type is shown in the following table:

		2013		2012
	Plant and equipment £m	Land and buildings £m	Plant and equipment £m	Land and buildings £m
Element of lease underwritten by customer contract	23.1	32.4	30.1	32.9
Element of lease where the period of the lease extends beyond the current maturity of the customer contract	15.4	27.8	9.9	23.4
Multi-user locations where mitigation is spread across a number of customers	20.1	148.5	15.8	138.6
Leases with limited or no mitigation	2.1	27.1	2.7	49.7
	60.7	235.8	58.5	244.6
Covered by property provision	-	33.2	-	38.9
	60.7	269.0	58.5	283.5

 

END

 

 

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