Wincanton results suppress calls for split


Wincanton is successfully shaking off talks of a break-up after delivering a solid set of financial results.

Total revenues grew just £800k year-over-year to £581.8m, but underlying EBITDA increased 4.8% to £33.0m. Profit before tax grew 48.3% to £30.1m.

The group said it had achieved its results through “balanced new wins, organic growth with existing customers and the exit of certain contracts which were not capable of being renewed at the appropriate operating margins.”

Further reports suggest Wincanton is receiving a pre-Brexit boost, as customers begin to stockpile reserves and seek out specialist advice ahead of the UK’s departure from the EU in March 2019.

Within the Retail & Consumer segment, revenues grew 7.1% to £357.7m. Organic volume growth came from customers such as IKEA, Wilko and Screwfix. It also completed new business wins with Roper Rhodes Bathrooms and secured renewals with Halfords, Loaf.com and Micheldever Tyres, although cessations from Tesco and Premier Foods dampened top line growth. Growth in underlying operating profit was less positive, at just 2.0%.

Within Industrial & Retail, revenues fell 9.3% as a result of certain contract losses, including with Britvic Transport. However, actions to reduce its cost base and exits from lower margin contracts helped improve underlying operating profit by 9.4%. This means the Industrial & Transport segment (5.2%) now has a stronger underling operating profit margin than Retail & Customer (4.3%), which is a reverse of the situation one year ago today.

In April, shareholder Gatemore Capital Management called on the company to break itself up, by selling one of its two divisions. It stated at the time that the company is “a sleeping giant whose intrinsic value is underestimated by the market”. At the time, market capitalization was around £280m and despite a share price rally in the middle of this year, market cap is back roughly at the same level now as it was six months ago.

Funding the pension scheme was another reason purportedly cited by Gatemore as a reason for selling one of its business segments. However, the deficit has reduced quite substantially over the past year, from £69.3m to £28.9m. Wincanton said, “the 2017 triennial valuation of the pension scheme has been finalised in the period, with an appropriate future funding plan agreed with the Scheme Trustee which allows the Group to move forward with confidence and certainty.”

CEO Adrian Colman’s remarks addressed investor concerns directly, stating “The strong underlying earnings per share growth of 8.0% and free cash flow generation highlights our continued ability to deliver predictable results and returns for all stakeholders. We look forward to making further strategic and operational progress to support long term returns for our stakeholders.”

Colman has so far shut down the talks of a split or a change in direction with its solid financial results, despite the fact that its market value hasn’t materially increased. Should the financial results tail off, Colman may come up against renewed opposition. 

Source: Transport Intelligence, November 8, 2018

Author: Andy Ralls

GSCi

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