Final Results
Wincanton PLC
08 June 2005
8 June 2005
WINCANTON plc
Preliminary Announcement of Results
for the financial year ended 31 March 2005
'STRONG EARNINGS GROWTH AND FURTHER DEBT REDUCTION'
2005 2004 Change
£m £m
Turnover 1,725.9 1,680.5 +2.7%
Adjusted Operating Profit 44.5 43.2 +3.0%
Interest (9.5) (12.6)
Adjusted Profit before tax 35.0 30.6 +14.4%
Adjustments (Note) 0.2 (8.2)
Profit before tax 35.2 22.4
Adjusted Basic earnings per share 17.5p 16.0p +9.4%
Basic earnings per share 18.4p 9.6p
Final Dividend 7.74p 7.08p
Full Year Dividend 11.40p 10.56p +8.0%
Note: Operating profit, profit before tax and earnings per share have been
adjusted to exclude pension credit (+£4.0m), exceptional items
(-£1.8m) and goodwill amortisation (-£2.0m).
HIGHLIGHTS
• Operationally, a year of sound performance on both new and existing
contracts
• Financially, near double-digit growth in adjusted earnings and a
further reduction in net debt, to £53m
• High levels of business development activity across the Group, £250m
of wins and renewals in the year
• Consolidating our position as a European leader
Commenting on the results and outlook, Paul Bateman, Wincanton's Chief
Executive, said:
'A year of strong earnings growth and sound operational performance has seen us
consolidate our position as a European leader.
Our new business development teams remain very active as we begin the new
financial year and we have confidence in the Group's ability to build further on
the significant achievements of recent years.'
For further enquiries please contact:
Wincanton plc
Paul Bateman, Chief Executive Tel: 020 7466 5000 today, thereafter
Gerard Connell, Group Finance Director Tel: 01249 710741
Charles Carr, Group Communications Director
Buchanan Communications Ltd Tel: 020 7466 5000
Charles Ryland, Jeremy Garcia
WINCANTON plc
PRELIMINARY ANNOUNCEMENT
Year ended 31 March 2005
Chairman's statement
The year to 31 March 2005 produced good new business wins and successful
contract start-ups, confirming Wincanton's position as one of Europe's leading
supply chain management companies. Financially, 14.4 per cent growth in
adjusted pre-tax profit and 9.4 per cent growth in adjusted earnings per share
represents an excellent result. A full year dividend of 11.40p per share is
proposed, giving an 8 per cent increase on the dividend paid last year.
Our strategy of combining strength in national markets with a pan-European
presence addresses the needs of our expanding customer base and is successfully
generating opportunities for incremental growth. We benefit from a balanced
and well-diversified customer base, including many of Europe's leading
manufacturers and retailers, and are gaining share in a fragmented market. The
outlook for the Group gives us continuing confidence.
Our financial performance is generating significant cashflow which has funded a
growing dividend for shareholders. It has also given us the balance sheet
strength to be able to take advantage of new opportunities and drive our growth
strategy.
In the year under review, our business in the UK and Ireland was again the major
contributor to the profit and cashflow of the Group. High levels of new
business activity in the retail sector were a feature, as in previous years, but
we also saw renewed progress with manufacturing customers. We were particularly
pleased to be awarded a substantial 10-year contract for a new automated
warehouse for GlaxoSmithKline. Adding a new facility to our existing portfolio
of contracts in this area consolidates Wincanton's market leadership in the
design, build and operation of these highly complex projects.
Developing our range of value-added services continues to be of importance to
us. Further investment has been approved to expand capacity in both our
recycling and data records management businesses, two fast-growing areas.
Consilium, our consultancy operation, grew profitably in the year. Pullman
Fleet Services again grew well. Contract gains in both reverse and in-bound
logistics confirmed the potential in other new services. Expansion
opportunities in areas such as these will add further momentum to our business
development activities.
Building momentum in Continental Europe remains a key area of focus. Good new
business wins were registered in the year, for both national and cross-border
operations, and awareness of our capabilities is growing. Further steps were
taken to re-shape some of our operations to create a more profitable platform
for future growth. There were business losses in certain areas which held back
overall progress, but we remain confident that our operations in Continental
Europe will generate significant profit and cashflow for the Group.
We continue to invest to ensure that we deliver a uniformly high-quality service
for customers across all countries. We will consolidate our position in certain
sectors and geographic markets through in-fill acquisitions, when such
opportunities arise, and were pleased to welcome in the year the employees of
midiData, a business acquired in January. This acquisition, operating
principally in Germany, but which also has operations in the UK and the
Netherlands, makes us a market leader in the hi-tech sector. Its integration is
progressing according to plan. We expect there to be other such opportunities
in the future.
An unfortunate occurrence, which we announced in February, but which did not
affect our financial performance in the year under review, concerned PGN, a
jointly-owned entity acquired as part of the P&O Trans European transaction.
PGN's sole customer chose to repudiate an important continuing contract. This
action is now going to arbitration, with claims and counter-claims, and will
take time to resolve. This puts pressure on our ability to make operating
profit progress in the year to 31st March 2006, although the significant
minority interest charge reduces the effect on earnings. The nature of this
contract and the circumstances giving rise to the arbitration process are
unusual and do not give cause for concern in respect of any other operations.
The company has recently moved to a new head office in Chippenham, affording
better access to the motorway network, to airports and to Central London, and
offering significantly improved facilities for our workforce.
I will be standing down as Chairman of Wincanton at this year's Annual General
meeting and will be succeeded by David Malpas, who has been the senior
non-executive Director of the company since its listing. Wincanton has made
very significant progress in the four years since its demerger. Our UK &
Ireland business is performing at record levels and our Continental European
operations are taking a clearer shape. We are a recognised industry leader.
This is therefore a good time to hand over.
I would like to take the opportunity to offer the thanks of the Board to all our
employees for the commitment and professionalism which, in the company's short
life to date as an independent entity, has successfully delivered both strategic
change and strong growth. Over this period the senior management team has
performed extremely well, integrating a major acquisition without losing
customer focus and without any loss of organic growth momentum. It has been a
pleasure to work with such an excellent group of Board colleagues over the last
four years.
Our new business development teams remain very active as we begin the new
financial year and we have confidence in the Group's ability to build further on
the significant achievements of recent years. Our objective is for 2005/06 to
be another period of earnings growth and strategic progress, confirming
Wincanton's position as a leader in its sector.
I am sure that Wincanton will enjoy continuing success under David's
chairmanship and the strong management of our executives.
WINCANTON plc
PRELIMINARY ANNOUNCEMENT
Year ended 31 March 2005
Operating and Financial Report
Our Strategy
Wincanton's stated strategy on demerger in May 2001 was to continue to grow our
UK operations whilst seeking opportunities to develop into Continental Europe.
Following a period of strong organic growth in the UK, a major acquisition in
December 2002 delivered strategic step change, strengthening Wincanton's
position as a market leader in the UK and bringing the benefits of both a
geographic presence across Europe and a well-diversified and complementary
customer base.
The acquisition transformed the Group's scale financially, operationally and
geographically, enhancing our ability to support the growth strategies and
changing supply chain requirements of our customers.
Since the acquisition, significant progress has been made in respect of our
integration and implementation objectives. We have achieved double the level of
cost savings originally targeted. Focus on working capital and control of
capital expenditure has generated strong cashflow, reducing net debt from
£147.7m at 31 March 2003 to £53.0m at 31 March 2005. New business momentum has
been successfully restored and there are encouraging signs of opportunities to
leverage the strengths of the Group's customer and skill base both within and
across national borders.
Through the acquisition, its successful integration, and the continuing organic
growth of our existing operations, Wincanton has successfully transformed itself
into one of the leading supply chain management companies in Europe. The
European Union is a market of 455 million consumers. It has a substantial
manufacturing and retailing infrastructure and significant national,
cross-border and international flows of raw materials, finished products and
services. This is a market in which we have a leading presence and which offers
continuing growth opportunities for the future.
Our markets remain under-developed in many areas. Wincanton's presence across
Europe is a competitive advantage in an industry which remains fragmented, with
large numbers of small operators and a very limited number of Pan-European
service providers. Many customers wish to consolidate their supply chain
requirements with a smaller number of service providers. There are
opportunities to continue to expand our service offering and the range of our
value-added activities. Changes in legislation, strategy, technology and the
economy lead to both tactical and strategic change in the supply chain
requirements of our customers. We expect our strategy, which is designed to
ensure that we benefit from changes such as these, to continue to add value for
both customers and shareholders.
We will continue to invest in our people, our services, our systems and our
processes to ensure that our competitive advantages are reinforced. In addition
to positioning ourselves for faster organic growth, we will consider
opportunities for acquisition where businesses are found to complement our
existing activities and reinforce our leading industry positions.
2004/05 Summary
The financial year to 31 March 2005 was a year of further progress, both
operationally and financially. In a busy and successful year across Europe for
our operational and business development teams, we delivered double-digit growth
in adjusted pre-tax profit and near double-digit growth in adjusted earnings.
A further considerable reduction in net debt confirmed the strong cashflow
potential of the business and its asset base.
The year was not without its difficulties and challenges but we continued to
reinforce our market position and create a stronger platform for industry
leadership and sustainable growth.
Acquisition activity by competitors and further sector consolidation, both
potential and actual, was again a feature. We monitor and review developments
in our sector with interest and work aggressively to take advantage of customer
uncertainty about competitors.
UK & Ireland : Performance Highlights
Our businesses in the UK & Ireland reported £19.1m of adjusted operating profit
in the second half, an increase of 5.5 per cent on the same period last year and
a 4.4 per cent increase on the £18.3m reported in the first six months of this
financial year, to give a full year adjusted operating profit of £37.4m. The
full year adjusted operating profit for 2004/05, on turnover up 5.4 per cent to
£1,097.8m represented a margin on turnover of 3.4 per cent.
Encouraging progress was made in all areas of the business. We benefited from
customer growth, in both the retail and manufacturing sectors, and by winning
business from our competitors.
Amongst the general retailers, we commenced the implementation of a new
automated warehouse for Matalan and a transport optimisation project for Argos,
for whom we are also currently commissioning a new warehouse at Corby. Our
business with B&Q expanded in both transport and warehousing, including a new
warehouse operation in Coventry. We were awarded a seasonal goods warehouse by
Focus, adding to the existing warehouse in Tamworth. Our strong performance
track record with another leading retailer, Comet, for whom we successfully
manage a distribution centre in Westbury, led to the award of a three-year
contract to run another centre in Harlow. In addition, we were awarded our
second home delivery operation for Comet.
The grocery retail sector also continued to provide opportunities for growth.
Another warehouse in Daventry successfully commenced operations to manage
Tesco's growing non-food activities. A new contractual relationship was
established with Morrisons to renew and extend sites previously managed for
Safeway. Volumes of bonded wines and spirits, managed for Waitrose at our
Greenford site, expanded further following Waitrose's acquisition of a number of
ex-Safeway stores. We also re-opened a site for Somerfield in Scotland to
handle the company's distribution requirements following its acquisition of a
number of stores from Safeway. Progress with Sainsbury included a seasonal
warehousing operation and consultancy work on transport planning and
optimisation. There were also discussions with several leading Continental
European retailers who are aware of our leading position in the grocery retail
sector in the UK and who we believe may provide opportunities for us in the
future.
With respect to our newer services for retailers, a reverse logistics operation
was established for Index, the catalogue retailer, our in-bound logistics
capability led to new business with Homebase and our in-store fittings operation
for Marks & Spencer continued to make progress.
There was good progress within our manufacturing customer base, which consists
principally of leading international companies in the fast-moving consumer goods
sector.
Our national transport contract for Heinz was renewed for a further five years,
as was a bonded warehouse and transport contract for Pernod Ricard. Another
successful contract extension, this time until 2007, was agreed in respect of
the automated warehouse operated for Britvic. The scope of our activity at the
Lutterworth site has also been extended to cover transport management.
GlaxoSmithKline is another customer with whom business was both renewed and
extended in the year. A new 10-year contract, believed to be the largest
awarded in the logistics industry this year, builds on our long-term
relationship with GlaxoSmithKline, consolidating and extending the contract term
in respect of the existing automated warehousing operation near Gloucester, and
specifying the design and operation of a new automated distribution centre in
Cheshire. This major contract award confirms Wincanton's pre-eminence in the
design, build and operation of automated warehouses.
Other customers with whom we expanded business in the year include De
Longhi-Kenwood, Twyfords and Unilever UK Foods.
Following a strategic review of our chilled consolidation network, steps were
taken to reduce the assets employed in this sector through the closure of a
facility in Milton Keynes. The network previously served the needs of food
manufacturers, but had seen significant volume reduction in recent years
following a change in the supply chain policies of the grocery retailers.
Following a loss in the previous financial year, the chilled consolidation
operations reported a positive financial performance, before exceptionals, in
2004/05 and this is set to continue into the new financial year.
Services provided to our industrial customer base tend to focus on the provision
of raw materials and ingredients, at the beginning of the supply chain, and
waste management and recycling, at the end of the supply chain.
We have a strong presence in the bulk handling of products such as milk, food
ingredients, petroleum and gases. Contract renewals and extensions in these
areas included a three-year renewal with First Milk and a five-year extension to
our contract to manage Statoil's national distribution requirements in Ireland.
As part of the new contract, Wincanton will become Statoil's sole logistics
contractor and will also take responsibility for route planning and network
optimisation.
At the end of the supply chain, we operate a recycling plant in Billingham
handling the waste management needs of local authorities, manufacturers and
retailers. We also have CFC de-gassing and re-packaging capabilities in a
facility in Widnes. Further investment is planned at the Billingham site to
ensure that we are able to meet the growing recycling responsibilities of our
retail customer base across a broader range of electrical goods.
Activity in the year included a contract to clear 40,000 fridges from a site in
Trafford Park and an expansion of our national contract with Comet for the
disposal of their electrical returns. We also ran a pilot scheme for a number
of leading retailers to assist in their preparation for the implementation of
the Waste Electrical and Electronic Equipment Directive. This new directive
will create significant recycling obligations on both retailers and
manufacturers. We are investing to develop our service offering in this field
and believe ourselves to be well positioned given our nationwide transport
network, our in-house processing facilities and our strong relationships with
major retailers and manufacturers. Recycling, in its broadest sense, is a
growing business opportunity for Wincanton.
Our portfolio of businesses in the UK & Ireland also includes data records
management activities in London, the Midlands and Dublin, and Pullman Fleet
Services, which offers vehicle maintenance and engineering services through the
largest independent national network of workshops and road-side support
activities.
Pullman Fleet Services produced another strong performance, reporting good
increases in turnover, operating profit and margin in the year. Geographic
coverage was further strengthened through the acquisition of a business based
near Warrington which has since been successfully integrated. Pullman works for
Wincanton, Wincanton's customers and competitors, and third parties. We are
confident that its operations offer scope for further growth.
The data records management operations grew turnover, operating profit and
margin in the year. Expansion of space in London and Dublin is planned for next
year, including a large new purpose-built facility within easy reach of the
City. We intend, over time, to give this business national coverage and the
extension of the operation to a facility in the Midlands represents a first step
in this direction. We believe that this market offers good potential for
further growth.
Continental Europe: Performance Highlights
A year of further change and restructuring saw our Continental European
operations report both turnover and operating profit in line with last year.
2004/05 operating profit of £7.1m, on turnover of £628.1m, represented a margin
of 1.1 per cent. Good new business wins were achieved, offset by contract
losses and pricing pressure on renewals in competitive markets.
The German businesses were again profitable in the year. Our intermodal freight
forwarding operations on the Rhine benefited from higher volumes and grew profit
during the year. Business wins included a new intermodal solution for Lafarge
for the supply of raw materials into its roof tile production facilities. The
environmentally friendly solution meets Lafarge's stringent production
scheduling requirements and also takes a quarter of a million tons of freight a
year off the road.
Market conditions within the German road network remained competitive. Both
pricing pressure on retained business and lower volumes, particularly in the
automotive industry, had a negative effect upon financial performance. The
introduction of motorway tolls had no material short-term effect upon
performance. We remain committed to the road network, which guarantees
overnight distribution across Germany from 41 depots, and its important role
within our German service offering. Further investment is planned next year to
expand the capacity of our key hub location in Eisenach.
Good contract logistics wins with customers such as Goodyear-Dunlop, Honeywell,
Ford, Volvo and Johnson Diversey give grounds for encouragement that our
significant infrastructure in Germany is also beginning to generate
opportunities for higher value-added services. The project for Honeywell's
Environmental and Combustion Controls business, for example, at a new facility
in Heilbronn, includes warehouse management and the management of inbound
traffic flows from production sites in Germany, Hungary, the Netherlands and the
Czech Republic. The project is part of Honeywell's strategy to serve the
European market via a reduced number of regional warehouses. For Ford,
Wincanton has taken on inbound transportation for production, collecting
components from around 40 suppliers across Germany via our road network,
consolidating these deliveries into truckloads at our logistics terminals in
Eisenach and Chemnitz and scheduling nightly services into Ford's original
distribution centre in Cologne.
We expanded our German operations in the year with the acquisition of midiData,
giving us market leadership in the hi-tech sector. The integration of this
business into our existing network is progressing well.
Our operations in Central Europe remained highly active in terms of new business
development, but financial performance was held back by lower volumes with a
major electronics company and the subsequent loss of this contract. Successes
in the year included a new warehousing and distribution operation for a major
petroleum company building on existing business with this customer in Germany,
contract gains with Numico in Poland and the Czech Republic, renewal of our
national distribution operation for BAT in Hungary and the delivery of a
regional warehousing operation for a leading baby food manufacturer.
Wincanton's Budapest warehouse now acts as an inbound centre for this customer's
production facilities in Europe for distribution onwards into markets in Central
Eastern Europe, South Eastern Europe and the Far East.
Our activities in France, Spain and the Benelux countries had a year of mixed
fortunes. In France we continued to make good progress in developing our
warehousing and distribution operations in Strasbourg but closed a site near
Paris operating principally in international groupage. Our Strasbourg
operations have been consistently profitable since acquisition and continue to
grow. A new European central warehouse was opened in Strasbourg in the year for
Viking, an Austrian manufacturer of gardening tools which is a member of the
Stihl Group. Already handling direct deliveries throughout Germany, France and
Austria it is intended that the facility will ultimately manage direct
deliveries into 15 different countries. There was also restructuring in the
year in Spain to reduce the scale of our international groupage activities there
and create a more focussed operation as a platform for profitable development.
We closed one of our four sites and re-located our administrative functions to
Barcelona. We expect to see increased opportunities in Spain in the future.
Our Dutch operations reported an improved profit performance and good new wins
with customers such as Mitsubishi Motors and Nedcar. We expect material profit
improvement in this group of countries next year, not least as a result of the
site closures in France and Spain.
Recent events at PGN, the jointly-owned entity whose results are reported within
our Continental European operations, are summarised in the Chairman's statement.
We believe that the restructuring of our operations in Continental Europe is
substantially complete. Accelerating new business win momentum is now our key
area of focus and investment is being increased in both business development and
marketing. Our geographic presence compares favourably to our competitors, our
name is becoming better-established and we are beginning to see customer
relationships in one country being successfully expanded across national
borders.
An improvement in underlying levels of economic activity will bring faster
progress in due course, but our programme of significant and rapid change has
already delivered tangible financial and operational benefits and given us a
stronger platform on which we can continue to build with confidence for the
future.
Wincanton Group: Consolidated Results
Consolidated Group turnover of £1,725.9m was marginally higher than in 2003/04.
Adjusted operating profit increased by 3.0 per cent to £44.5m and margin on
turnover remained at approximately 2.6 per cent. Our businesses in the UK and
Ireland represented 64 per cent of Group turnover and 84 per cent of Group
adjusted operating profit.
Annualised turnover from new business wins and contract renewals totalled £209m
in the UK & Ireland and £41m in Continental Europe, giving a Group total of
£250m, compared to last year's £194m.
Approximately 85 per cent of the annualised turnover from new wins in the period
came from existing customers. This compares to last year's 65 per cent, and
confirms again the importance of strong customer relationships and a diversified
sector portfolio to both Wincanton's current performance and its future growth
potential.
Interest Costs
The interest charge of £9.5m, £3.1m less than the 2003/04 charge of £12.6m,
reflects a lower level of average debt and a reduction in our borrowing rate
following a re-negotiation of certain aspects of our banking facilities. The
interest rate payable on that part of the Group's borrowings at 31 March 2005
was 0.65 per cent over LIBOR.
Interest cover in the year (calculated including pension credit in accordance
with our banking covenants) was 5.1 times.
Exceptional Items
Net exceptional items totalled £1.8m in the year, consisting of £9.4m of
exceptional costs and an off-setting £7.6m gain. The exceptional gain of £7.6m
was generated by the sale and leaseback of certain trailer assets.
Exceptional costs totalling £9.4m related to further restructuring of certain
operations in the UK & Ireland and Continental Europe.
In the UK & Ireland, £1.7m of costs were incurred in respect of the closure of
the Milton Keynes site within our chilled consolidation network, and £2.6m of
costs related principally to the move to our new head office location in
Chippenham. We expect further costs in relation to the head office move in 2005
/06.
In Continental Europe the costs of closing two operations, one outside Paris,
the other near Valencia, came to £3.1m and a £2.0m charge was incurred for
post-acquisition integration of the midiData business.
Taxation
A pre-exceptional tax charge of £12.7m gives an accounting rate of tax for the
year of 34.3 per cent. The post-exceptional tax rate was 30.3 per cent.
Wincanton operates in jurisdictions across Europe, with corporate tax rates that
range from 12.5% to 40.0%. Brought forward trading losses in certain countries
may lead in due course to a further reduction in the Group's accounting rate of
tax.
Minority Interests, Earnings and Dividends
The minority interest charge of £3.5m consists of the profit attributable to
various partners who share ownership of certain of our activities. The
principal such entity, PGN, is referred to in the Chairman's statement. Other
minority interests include a 25.8 per cent holding in Rhinecontainer, two
partner companies which manage 6 of the 41 sites in our German road network and
another partner in one of our German intermodal sites at Worms.
Adjusted earnings per share of 17.5p represent a 9.4 per cent increase on last
year's 16.0p.
The Board proposes a final dividend of 7.74p which, together with the interim
dividend announced at the half year, gives a total dividend for 2004/05 of
11.40p per share. 11.40p per share represents an 8.0 per cent increase on the
full year dividend for 2003/04.
The dividend, with earnings calculated on the same basis as interest cover
above, is covered 1.8 times.
Cashflow and Net Debt
Adjusted EBITDA (being adjusted operating profit plus depreciation) totalled
£79.5m in the year. This inflow, less the movement in working capital of £(1.1)
m and adjustments of £(5.4)m for pension credit and exceptional items, gave rise
to a net cash inflow from operating activities of £73.0m.
The effect of PGN on the movement in working capital is a £10.2m year-on-year
outflow due to unpaid trade debtors at 31 March 2005.
Gross capital expenditure of £34.4m was higher than in recent years, at
approximately 98 per cent of the £35.0m charge for depreciation. The principal
items giving rise to this higher level of capital expenditure were the first
phase of investment in the new automated facility for GlaxoSmithKline and £9.5m
in respect of our new head office building. This investment is being held on
the balance sheet pending review of alternative financing options.
Gross capital expenditure was offset by £20.0m of asset sales in the year. An
exercise to re-finance some 660 trailers from our total UK fleet of
approximately 1,700 trailers generated £13.3m of the total.
Other cash movements in the year included the £7.8m purchase of midiData in
January, the receipt of £7.8m relating to the settlement of completion accounts
discussions in respect of our December 2002 acquisition of Trans European and an
outlay of £8.5m to purchase 3.5 million shares for our Employee Benefit Trust.
The net effect of these and other cashflow movements was a reduction in our
year-end net debt from £75.3m at 31 March 2004 to £53.0m at 31 March 2005. The
31 March 2005 position is net of £33.5m of cash held within our captive
insurance company to fund future potential insurance claims (£31.7m at 31 March
2004).
The Group has available, at 31 March 2005, £200m of committed bank facilities.
£85m of this total is available as an amortising term loan with final repayment
due in December 2007. The £115m balance of the total facility is available as a
revolving credit facility with a final maturity of December 2009. In addition
to these committed facilities the Group has available a range of overdraft and
leasing facilities. Through the year these borrowings are drawn approximately
half in sterling and half in euros. Swaps, with a remaining maturity of 11
months have been entered into to fix the base rate in respect of £30m and €74m
of these borrowings.
The interest rate and foreign exchange positions of the Group are subject to
regular review. No speculative trading is entered into and all activities of
the treasury function are designed to support the Group's commercial operations.
Return on Capital Employed
Capital employed at 31 March 2005 was £135.8m, of which 42 per cent related to
our UK & Ireland operations and 58 per cent to Continental Europe. The return
on capital employed, at 32.8 per cent, represents an increase on last year's
28.9 per cent. This rate of return continues to compare favourably with the
returns of our peer group.
Goodwill
Balance sheet goodwill of £42.2m consists principally of £32.2m in respect of
our Trans European acquisition, with the balance of the carrying value relating
to last year's acquisition of a majority shareholding in Rhinecontainer BV and
this year's acquisition of the midiData business.
Pensions
The Group continues to monitor closely the appropriateness of its pension policy
and funding approach on the basis of actuarial advice. Both policy and funding
approach will be reviewed in detail following the results of the triennial
valuation as at 31 March 2005. These results are expected towards the end of
the calendar year.
Note 24 to the accounts shows that the UK pension scheme accounting shortfall,
calculated on an FRS 17 basis, was £52.1m at 31 March 2005 (£48.1m at 31 March
2004), net of deferred tax.
As in previous years, operating profit and earning figures are adjusted to
exclude the £4m release to profit from our SSAP 24 balance sheet provision.
This adjustment will no longer be required following adoption of IFRS in the
financial year to 31 March 2006.
International Financial Reporting Standards (IFRS)
The Group's results for the year to 31 March 2006, including the interim results
to 30 September 2005, will be presented in accordance with the new IFRS
requirements. The principal differences to our adjusted results as declared in
accordance with UK GAAP are expected to be in respect of the methods of
accounting for items such as pensions, share options, joint ventures and certain
property leases. These adjustments are not expected to affect operating
cashflow.
IFRS implementation continues to be reviewed with the Group's auditors, but we
currently estimate that the new requirements are likely to reduce our adjusted
earnings for 2005/06, in comparison with our budget which has initially been
prepared in accordance with UK GAAP, by approximately 6 per cent.
Consolidated profit and loss account
for the year ended 31 March 2005
Before Exceptional
exceptional items
items (note 4) Total Total*
2005 2005 2005 2004
Note £m £m £m £m
Turnover 2,3 1,725.9 - 1,725.9 1,680.5
Operating profit before pension credit
and goodwill amortisation 2,3 44.5 (9.4) 35.1 33.2
Pension credit 4.0 - 4.0 4.0
Goodwill amortisation (2.0) - (2.0) (2.2)
Operating profit 46.5 (9.4) 37.1 35.0
Profit on sale of trailer assets 4 - 7.6 7.6 -
Profit on ordinary activities before 46.5 (1.8) 44.7 35.0
interest
Net interest payable and similar 6 (9.5) - (9.5) (12.6)
charges
Profit on ordinary activities before 5 37.0 (1.8) 35.2 22.4
taxation
Tax on profit on ordinary activities 7 (12.7) 2.0 (10.7) (8.5)
Profit on ordinary activities after 24.3 0.2 24.5 13.9
taxation
Equity minority interests (3.5) - (3.5) (2.8)
Profit for the financial year 20.8 0.2 21.0 11.1
Dividends 8 (12.9) - (12.9) (12.3)
Retained profit/(loss) for the year 7.9 0.2 8.1 (1.2)
Earnings per share 9
- basic 18.4p 9.6p
- diluted 18.2p 9.6p
Earnings per share before exceptional
items and goodwill amortisation 9
- basic 19.9p 18.4p
- diluted 19.7p 18.3p
Earnings per share before exceptional
items, goodwill amortisation and
excluding pension credit 9
- basic 17.5p 16.0p
- diluted 17.3p 15.8p
*The operating profit before pension credit and goodwill amortisation for 2004
of £33.2m is stated after charging £10.0m of operating exceptional items against
the pre-exceptional operating profit of £43.2m, as set out in note 3.
All operations in both years were continuing.
Balance sheets
at 31 March 2005
Group Company
2005 2004 2005 2004
Note £m £m £m £m
Fixed assets
Intangible assets 10 42.2 38.3 - -
Tangible assets 241.5 247.3 - -
Investments 0.5 0.6 56.5 11.5
284.2 286.2 56.5 11.5
Current assets
Stocks 6.1 5.5 - -
Debtors 302.3 258.1 104.3 134.5
Cash at bank and in hand 63.1 55.5 0.2 1.5
371.5 319.1 104.5 136.0
Creditors: amounts falling due within one (411.8) (372.5) (12.2) (23.8)
year
Net current (liabilities)/assets (40.3) (53.4) 92.3 112.2
Total assets less current liabilities 243.9 232.8 148.8 123.7
Creditors: amounts falling due after more (115.3) (109.8) (102.9) (100.2)
than one year
Provisions for liabilities and charges (101.0) (97.4) - -
Net assets 27.6 25.6 45.9 23.5
Capital and reserves
Called up share capital 11.7 11.6 11.7 11.6
Share premium account 4.4 1.9 4.4 1.9
Merger reserve 3.5 3.5 - -
Profit and loss account 9.7 (0.8) 38.3 10.0
Own shares held by employee benefit trust (8.5) - (8.5) -
Equity shareholders' funds 20.8 16.2 45.9 23.5
Equity minority interests 6.8 9.4 - -
27.6 25.6 45.9 23.5
Consolidated cash flow statement
for the year ended 31 March 2005
2005 2004
Note £m £m
Cash inflow from operating activities 12 73.0 105.3
Returns on investments and servicing of finance 13 (13.6) (10.5)
Taxation (3.9) (9.1)
Capital expenditure 13 (14.4) (4.1)
Acquisition and disposal of businesses 13 1.1 (0.7)
Equity dividends paid (12.3) (11.8)
Cash inflow before use of liquid resources and financing 29.9 69.1
Management of liquid resources 13 (1.8) (10.0)
Financing 13 (23.3) (50.1)
Increase in cash in year 4.8 9.0
Reconciliation of net cash flow to movement in net debt
for the year ended 31 March 2005
2005 2004
Note £m £m
Increase in cash in year 4.8 9.0
Decrease in debt and lease financing 17.4 51.8
Increase in liquid resources 1.8 10.0
Change in net debt resulting from cash 24.0 70.8
flows
New finance leases - (0.2)
Exchange movement (1.7) 1.8
Movement in net debt in year 22.3 72.4
Net debt at beginning of year (75.3) (147.7)
Net debt at end of year 14 (53.0) (75.3)
Consolidated statement of total recognised gains and losses
for the year ended 31 March 2005
2005 2004
£m £m
Profit for the financial year 21.0 11.1
Net exchange adjustments arising on foreign currency investments and
related borrowings 2.4 (1.3)
Total recognised gains and losses relating to the financial year 23.4 9.8
Reconciliation of movements in equity shareholders' funds
for the year ended 31 March 2005
Group Company
2005 2004 2005 2004
£m £m £m £m
Profit for the financial year 21.0 11.1 41.0 14.5
Dividends (12.9) (12.3) (12.9) (12.3)
Retained profit/(loss) for the year 8.1 (1.2) 28.1 2.2
Other recognised gains and losses 2.4 (1.3) 0.2 0.8
Issue of share capital 2.6 1.7 2.6 1.7
Own shares held by employee benefit trust (8.5) - (8.5) -
Net movements in equity shareholders' funds 4.6 (0.8) 22.4 4.7
Opening equity shareholders' funds 16.2 17.0 23.5 18.8
Closing equity shareholders' funds 20.8 16.2 45.9 23.5
Notes to the accounts
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 2005
and 31 March 2004. Statutory accounts for the year ended 31 March 2005 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. Statutory accounts for the year ended 31 March 2004 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 237 (2) or (3) of the Companies Act 1985.
Basis of preparation
The financial information has been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
Basis of consolidation
The consolidated financial information of the Group includes the financial
information of the Company and its subsidiary undertakings made up to 31 March
2005. Subsidiary undertakings include all entities over which dominant control
is exercised.
When the Company acquired the Wincanton Group of companies upon demerger from
the former parent in May 2001, the changes in Group structure were accounted for
using the principles of merger accounting. Businesses acquired or disposed of
since then have been accounted for using acquisition accounting principles from
or up to the date control passed.
Goodwill
Purchased goodwill (representing the excess of the fair value of the
consideration and associated costs over the fair value of the separable net
assets acquired) arising on consolidation in respect of acquisitions since 1
April 1998 is capitalised and amortised to £nil by equal annual instalments over
the estimated useful life of 20 years.
Purchased goodwill on acquisitions prior to 1 April 1998, previously written off
to reserves is, on subsequent disposal of the acquired business, written back
through the profit and loss account as part of the profit or loss on disposal.
Investments in subsidiary undertakings are stated at cost less provision for any
impairment in value.
Notes to the accounts (continued)
2 Segmental information
By geographical area of origin: Turnover Operating Profit
2005 2004 2005 2004
£m £m £m £m
UK & Ireland 1,097.8 1,041.3 37.4 36.1
Continental Europe 628.1 639.2 7.1 7.1
1,725.9 1,680.5 44.5 43.2
Pension credit 4.0 4.0
Goodwill amortisation (2.0) (2.2)
Operating profit before exceptional operating costs 46.5 45.0
Exceptional operating costs (note 4) (9.4) (10.0)
Operating profit 37.1 35.0
Profit on sale of trailer assets 7.6 -
Profit on ordinary activities before interest 44.7 35.0
UK & Ireland 43.3 31.1
Continental Europe 1.4 3.9
Turnover arises from the sole activity of supply chain management and by
destination is not materially different than by origin.
The pension credit adjusted in the analyses above is the variation credit to the
regular cost arising under SSAP24 'Accounting for Pension Costs'.
Operating profit after pension credit, goodwill amortisation and exceptional
operating costs includes the Group's share of the operating results of
associates of £0.2m (2004:£nil).
Profit on ordinary activities before interest is split by geographical segment
after charging £5.7m (2004:£3.2m) of goodwill amortisation and exceptional
operating costs to Continental Europe and all of the other items above to UK &
Ireland.
Net Assets
2005 2004
£m £m
UK & Ireland 57.0 73.1
Continental Europe 78.8 76.3
Trading capital employed 135.8 149.4
Non-operating net liabilities (108.2) (123.8)
Net assets 27.6 25.6
Non-operating net liabilities comprise goodwill, net debt, taxation and dividend
liabilities and pension and insurance provisions.
Notes to the accounts (continued)
3 Operating profit
The Group's results are analysed as follows:
2005 2004
Before Before
operating Operating operating Operating
exceptional exceptional exceptional exceptional
items items Total items items Total
£m £m £m £m £m £m
Turnover 1,725.9 - 1,725.9 1,680.5 - 1,680.5
Cost of sales (1,640.7) (6.7) (1,647.4) (1,603.0) (5.8) (1,608.8)
Gross profit 85.2 (6.7) 78.5 77.5 (5.8) 71.7
Administrative expenses (38.7) (2.7) (41.4) (32.5) (4.2) (36.7)
Operating profit 46.5 (9.4) 37.1 45.0 (10.0) 35.0
Pension credit (4.0) - (4.0) (4.0) - (4.0)
Goodwill amortisation 2.0 - 2.0 2.2 - 2.2
Operating profit before pension
credit and goodwill amortisation 44.5 (9.4) 35.1 43.2 (10.0) 33.2
4 Exceptional items
2005 2004
£m £m
Operating exceptional items
Reorganisation of operating structure post acquisition (2.0) (10.0)
Relocation of UK head office and UK rationalisation (2.6) -
Closure of operations in Spain, France and UK (4.8) -
(9.4) (10.0)
Non-operating exceptional items
Profit on sale of trailer assets 7.6 -
(1.8) (10.0)
The tax effect of the net exceptional items is a credit of £2.0m (2004 : £2.1m).
Notes to the accounts (continued)
5 Profit on ordinary activities before taxation
2005 2004
£m £m
Profit on ordinary activities before taxation is stated after charging:
Auditors' remuneration:
- Group fees for statutory audit services (including £0.1m re. the Company) 0.6 0.6
- fees paid to the Auditors and their associates for tax advisory services 0.2 0.3
- fees paid to the Auditors and their associates for other services 0.1 0.1
Depreciation and other amounts written off tangible assets:
- owned 33.0 35.8
- leased 2.0 2.5
Amortisation of goodwill 2.0 2.2
Operating lease rentals
- plant and machinery 41.2 36.4
- land and buildings 44.2 41.4
6 Net interest payable and similar charges
2005 2004
£m £m
Interest receivable 2.6 1.4
Interest payable on bank loans and overdrafts (9.8) (11.2)
Finance charges payable in respect of finance leases (0.2) (0.2)
Unwinding of discounted insurance, German pension and other provisions (2.5) (2.6)
(9.9) (12.6)
Less finance costs capitalised 0.4 -
(9.5) (12.6)
The interest receivable relates primarily to the cash deposits held by the
Group's captive insurance company. The finance costs capitalised were
determined at the Group's applicable borrowing rate.
Notes to the accounts (continued)
7 Taxation
Pre-exceptional Exceptional
items items
2005 2005 2005 2004
£m £m £m £m
UK corporation tax
Current tax on income for the year 7.6 (1.5) 6.1 0.7
Adjustments in respect of prior years 1.0 - 1.0 (1.3)
8.6 (1.5) 7.1 (0.6)
Foreign tax
Current tax on income for the year 2.4 (0.5) 1.9 1.7
Adjustments in respect of prior years - - - -
2.4 (0.5) 1.9 1.7
Total current tax 11.0 (2.0) 9.0 1.1
Deferred tax
Current year 3.2 - 3.2 6.6
Adjustments in respect of prior years (1.5) - (1.5) 0.8
1.7 - 1.7 7.4
Tax on profit on ordinary activities 12.7 (2.0) 10.7 8.5
The following table reconciles the tax charge at the UK standard rate to the
actual tax charge :
2005 2004
£m £m
Profit on ordinary activities before taxation 35.2 22.4
Tax charge at UK standard rate (30%) 10.6 6.7
Permanent differences - overseas profits at higher rates 0.2 0.3
- overseas profits at lower rates (1.0) (0.4)
- losses not utilised 2.6 2.2
- disallowable expenditure 1.1 0.2
- non-taxable proceeds (2.3) -
Temporary differences - movement on accelerated capital allowances (0.6) (0.1)
- other (2.6) (6.5)
Adjustments in respect of prior years 1.0 (1.3)
Current tax charge for the year 9.0 1.1
The Group's pre-exceptional tax rate is expected to fall in the future as a
result of the reduction in corporate tax rates in certain European countries,
favourable movements in the profit mix and the potential utilisation of brought
forward losses.
Notes to the accounts (continued)
8 Dividends
2005 2004
£m £m
Equity shares:
Interim dividend paid 4.2 4.0
Final dividend proposed 8.7 8.3
12.9 12.3
A final dividend of 7.74p per share is proposed to be paid on 12 August 2005 to
shareholders on the register at 15 July 2005. An interim dividend of 3.66p per
share was paid on 12 January 2005 to shareholders on the register at 10
December 2004.
9 Earnings per share
Earnings per share are calculated on the basis of earnings of £21.0m (2004:
£11.1m) and the weighted average of 114.3m (2004: 115.3m) shares which have been
in issue throughout the year. The diluted earnings per share are calculated on
the basis of an additional 1.2m (2004: 0.8m) shares deemed to be issued at £nil
consideration under the Company's share option schemes.
Two further adjusted earnings per share numbers are shown, being earnings before
exceptional items, goodwill amortisation and related tax, and earnings before
exceptional items, goodwill amortisation, pension credit and related tax, since
the Directors consider that they provide further information on the underlying
performance of the Group. Adjusted earnings are as follows:
2005 2005 2004 2004
2002
EPS p £m EPS p £m
Profit for the financial year 18.4 21.0 9.6 11.1
Goodwill amortisation 1.7 2.0 1.9 2.2
Exceptional items 1.5 1.8 8.7 10.0
Tax on exceptional items (note 7) (1.7) (2.0) (1.8) (2.1)
Earnings before exceptional items, goodwill amortisation
and related tax 19.9 22.8 18.4 21.2
Pension credit (3.4) (4.0) (3.5) (4.0)
Tax on pension credit 1.0 1.2 1.1 1.2
Earnings before exceptional items, goodwill amortisation,
pension credit and related tax 17.5 20.0 16.0 18.4
Notes to the accounts (continued)
10 Intangible assets
Goodwill
Cost £m
At beginning of year 40.8
Exchange adjustment 0.5
Adjustment re. Trans European (note 11) (1.8)
Additions (note 11) 7.2
At end of year 46.7
Amortisation
At beginning of year 2.5
Charge for year 2.0
At end of year 4.5
Net book value
At 31 March 2005 42.2
At 31 March 2004 38.3
Notes to the accounts (continued)
11 Acquisitions
In January 2005 the Group acquired specialist high-tech logistics provider
midiData for approximately £7.8m in cash. The operating results since
acquisition are not material in the context of the Group such as to warrant
separate disclosure. The goodwill value remains subject to change pending the
finalisation of first, the ongoing completion discussions with the vendor and,
secondly the fair values of the net assets acquired.
The book values of the identifiable assets and liabilities acquired and their
provisional fair value to the Group are set out below:
Revaluation and
accounting policy
midiData alignment
book value Fair value
£m £m £m
Tangible fixed assets 1.2 0.3 1.5
Working capital 0.2 (0.2) -
Net cash 1.6 - 1.6
Taxation (0.5) - (0.5)
Pensions and other provisions including deferred taxation (1.3) (0.2) (1.5)
Net assets 1.2 (0.1) 1.1
Goodwill (note 10) 7.2
8.3
Satisfied by:
Payment to vendor 7.8
Costs and incidental settlement items 0.5
8.3
The book values of the non-sterling assets and liabilities acquired, which are
denominated in euro, have been translated using the exchange rate at the date of
acquisition (£1 : €1.448).
The fair value adjustments above are required to align the accounting policies
of the acquired business with those of the Group and to revalue certain pension
liabilities. These adjustments remain provisional as, in line with standard
accounting practice, they can be amended for up to 12 months following
acquisition.
As reported previously, on 31 December 2002 the Group acquired Trans European on
a debt-free basis for £152.5m in cash plus £5.9m of costs and other incidental
settlement items. The completion discussions with the vendor were concluded in
July 2004 and a settlement of £7.8m received. After accounting for the amounts
anticipated in the 31 March 2004 balance sheet, a reduction of £1.8m has been
made to the amount of goodwill arising on the acquisition (note 10).
Notes to the accounts (continued)
12 Reconciliation of operating profit to operating cash flows
2005 2004
£m £m
Operating profit 37.1 35.0
Depreciation and amortisation 37.0 40.5
(Increase)/decrease in stocks (0.1) 0.3
(Increase)/decrease in debtors (37.3) 23.5
Increase in creditors 37.1 6.8
Decrease in provisions (0.8) (0.8)
Net cash inflow from operating activities 73.0 105.3
The operating cash flows include an outflow of £4.4m (2004 : £7.8m) in respect
of exceptional costs.
13 Analysis of cash flows
2005 2005 2004 2004
£m £m £m £m
Returns on investments and servicing of finance
Interest received 2.2 1.4
Interest paid (9.3) (11.0)
Interest element of finance lease rental payments (0.2) (0.2)
Dividends paid to minority interests in subsidiary (6.3) (0.7)
undertakings
(13.6) (10.5)
Capital expenditure
Purchase of tangible assets (34.4) (20.9)
Sale of tangible assets 20.0 16.8
(14.4) (4.1)
Acquisition and disposal of businesses (note 11)
Trans European completion settlement 7.8 -
Purchase of Rhinecontainer BV - (3.3)
Purchase of midiData (8.3) -
Cash acquired 1.6 0.3
Disposal of non-core business - 2.3
1.1 (0.7)
Management of liquid resources
Increase in cash deposits held by the captive insurer (1.8) (10.0)
(1.8) (10.0)
Financing
Decrease in borrowings (16.5) (50.6)
Capital element of finance lease rental payments (0.9) (1.2)
Issue of share capital 2.6 1.7
Purchase of own shares (8.5) -
(23.3) (50.1)
Notes to the accounts (continued)
14 Analysis of net debt
At Other
beginning Cash flow non-cash Exchange At end of
of year Acquisition changes movement year
£m £m £m £m £m £m
Cash at bank and in hand 23.8 3.2 1.6 - 1.0 29.6
Cash deposits held by the captive 31.7 1.8 - - - 33.5
insurer
55.5 5.0 1.6 - 1.0 63.1
Debt due within one year (22.1) 16.6 - - - (5.5)
Debt due after one year (105.6) (0.1) - 0.5 (2.7) (107.9)
Finance leases (3.1) 0.9 - (0.5) - (2.7)
Total (75.3) 22.4 1.6 - (1.7) (53.0)
During the year a further finance lease liability of £0.5m of the acquired
business has been recognised.
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