Half Year Results

RNS Number : 8220R

Wincanton PLC

10 November 2011

 



For immediate release

10 November 2011

WINCANTON plc

Half Year Results

for the six months to 30 September 2011 (unaudited)

	2011        £m		2010        £m		% change
Revenue
- continuing	625.4		680.8
- discontinued	415.6		421.5
	1,041.0		1,102.3		-5.6%
Underlying operating profit 1
- continuing	22.3		25.1
- discontinued	4.3		1.7
	26.6		26.8		-0.7%
Net financing costs
- continuing	(8.1)		(8.0)
- discontinued	(0.9)		(0.9)
	(9.0)		(8.9)		-1.1%
Underlying profit before tax
- continuing	14.2		17.1
- discontinued	3.4		0.8
	17.6		17.9		-1.7%
Net other items 2
- continuing	(27.8)		0.7
- discontinued	(65.3)		(6.9)
	(93.1)		(6.2)
Profit before tax
- continuing	(13.6)		17.8
- discontinued	(61.9)		(6.1)
	(75.5)		11.7
Underlying earnings per share 2            - continuing	9.0p		10.5p
- discontinued	1.7p		0.4p
Basic (loss)/earnings per share            - continuing	(9.0)p		10.9p
- discontinued	(54.8)p		(4.8)p
Proposed interim dividend per share	Nil		4.83p

¹      Underlying operating profit is the total underlying operating profit of Group companies including share of results of associates.

²      Underlying profit before tax and earnings per share are stated before net other items of £(93.1)m (2010: £(6.2)m), comprising exceptional restructuring and other costs of £(23.7)m (2010: £(8.6)m), other exceptional income of £nil (2010: £7.9m), amortisation of acquired intangibles of £(5.0)m (2010: £(5.5)m) and losses on disposal of businesses of £(64.4)m (2010: £nil).  Operating (loss)/profit, including these items, amounted to £(66.5)m loss (2010: £20.6m profit).  (Loss)/profit before tax, including these items, amounted to £(75.5)m loss (2010: £11.7m profit).

FINANCIAL AND OPERATIONAL HIGHLIGHTS

·           Underlying UK & Ireland operating profit margin stable at 3.6%

·           Action taken to withdraw from loss making Foodservice activities

·           Annualised contract wins and renewals secured totalling £135m

·           Disposed of Mainland European businesses

Commenting on the results, Eric Born, Wincanton Chief Executive, said:

"We have made good progress in the execution of the structural aspects of our strategy to exit from Mainland Europe and to improve shareholder value.  We are now well positioned to focus on the operational aspects of our strategy and to build on our reputation for service excellence in our core UK & Ireland market.  Through the delivery of operational efficiencies and contract wins we expect to continue to build on the strong, underlying profitability of our UK & Ireland business."

For further enquiries please contact:

Wincanton

Eric Born, Chief Executive

Jon Kempster, Group Finance Director                                                [phone]

Buchanan Communications                                                        

Charles Ryland / Jeremy Garcia                                                            [phone]

Half Year Review

for the six months to 30 September 2011

Introduction

The Group's transformation from a pan-European supply chain solution provider to a lean, agile UK & Ireland focused business is well underway and considerable progress has already been made. Our strategy is to achieve a clear leadership position in the UK & Ireland market based on our expertise in solution design and our proven operational capabilities in warehousing, multi-modal transport and specialist services across a broad range of market sectors such as retail, defence, consumer goods, construction, milk and energy.

The major variances in the UK & Ireland half year's performance have been within our Foodservice business (£2.2m adverse year on year) and as a result of the disposal of Recycling in August 2010 (£1.1m adverse).  We made good progress in winning and renewing business, but these positive steps have been offset by  reduced volumes in the Container logistics sector and by two retail customers going into administration.

We are progressing as expected with the structural elements of our strategy, which will allow all resources to focus on operational delivery, further business improvement and profitable growth in the continuing UK & Ireland business. Our focus is on operational efficiency and cost savings and over the next six months we will reduce and realign our support functions to meet the future needs of the organisation.

Wincanton supports its customers at every stage of their supply chain development, providing innovative solutions and efficient execution. We aim to capitalise on the opportunities presented by our changing markets, building on our strong customer relationships in established sectors and developing additional markets such as the public sector, where we can leverage our skills in new areas.

We are on track to restore sustainable profit growth in the medium term. In July 2011 we completed the sale of the Netherlands business and in August 2011 we completed the sales of the German Road operations and of the businesses in Central & Eastern Europe. We also announced the proposed sale of our remaining Mainland European operations to Rhenus AG & Co. K.G. This transaction is scheduled to complete later this year subject to the General Meeting convened on 21 November 2011 and the satisfactory completion of the EU competition filing.  We are undertaking a phased withdrawal from our Foodservice business, which has been loss making for some time. On completion of these two remaining steps, we will have successfully exited from all of the sub-scale or underperforming areas of our business which we identified as part of our strategic review.

An increasingly healthy new business pipeline and a flow of wins and renewals valued at c. £135m in the period reflect continuing demand for our services in the continuing UK & Ireland market. Retailers and manufacturers are increasingly seeking to engage Wincanton on areas where value is added over and above what can be done in-house, reflecting the breadth and depth of our expertise. Specific examples of this are collaborative transport solutions, e-fulfilment services to support multi-channel retailing and shared user warehousing backed by leading edge systems. New opportunities in the form of first time outsourcing, where we can leverage our scale, infrastructure and expertise are arising due to pressures in the market.

Earnings in our Container logistics business were impacted by lower volumes as a result of a drop in imports from the Far East. However here, we are continuing to win market share which will position us favourably when the volumes in this sector improve.

Lastly we are well advanced in discussions with our banking syndicate on the renewal of our debt facilities (which expire in November 2012).  We are also in discussion with the Trustees of Wincanton plc defined benefit pension scheme and expect to have the triennial actuarial funding valuation finalised in the first half of 2012.

UK & Ireland - continuing operations

	2011	2010
Revenue	£625.4m	£680.8m
Underlying operating profit	£22.3m	£25.1m
Margin	3.6%	3.7%

Overall the UK & Ireland business has performed satisfactorily in a difficult market. Important wins in the period include a new contract with Lafarge for bulk and bagged cement, seasonal warehousing for Tesco, our appointment by Sainsbury's as sole provider of Port to DC container services, a fleet defect management contract with Asda and records management contracts with Swiss Post Solutions and Tigress Productions.  We also set up a significant retail distribution operation on behalf of SuperGroup.

We have recently strengthened the management team with the appointment of Guy Elliott as Managing Director, to head up operations in the contract logistics business.  Guy has over 20 years experience in the third party logistics industry most recently at DHL.  Our open book contracts, which account for approximately 60% of revenue and are primarily with the major retailers, continue to provide a stable profit stream and resilience to volume fluctuations. In the closed book portfolio which accounts for approximately 40% of revenue, we have renewed significant contracts in the period with Heinz, Nestle Purina, MOD aviation fuels, Procter & Gamble and Müller. 

The greatest challenge in terms of achieving profitable growth lies in areas of the contract logistics business such as the traditional retail and consumer goods contracts and the more mature milk and fuel tanker operations. At the extreme, the basic open book warehouse contract is a commodity service and margins have declined year on year. While these services continue to be an important part of our business mix we will focus on driving margin improvements by adding value through additional services, streamlining our customers' supply chains or providing systems capabilities that will help them manage challenges presented by multi-channel retailing.

Mainland Europe - discontinued operations

	2011	2010
Revenue	£415.6m	£421.5m
Underlying operating profit	£4.3m	£1.7m
Margin	1.0%	0.4%

As a result of both the completed and ongoing disposal processes, the Mainland Europe business has been disclosed as discontinued.  The performance reflects the restructuring of the German Road Network undertaken in 2010 and the cost reduction exercise undertaken last year in France. These improvements which the Group invested in over the last two years have enabled the disposals to progress and the closing of the last transaction, expected by the end of 2011, will see us having completely withdrawn from Mainland Europe.

Profit and loss summary

Continuing operations

Revenue for the six months was £625.4m (2010: £680.8m) down 8.1% against last year.  Underlying operating profit was £22.3m representing a decrease of £(2.8)m compared with last year.  Overall margins at 3.6% are broadly consistent with the equivalent six months last year (2010: 3.7%) and the 3.5% for the full year ended March 2011.

Net financing charges were £8.1m compared with £8.0m last year.  The charge in the period includes amortised arrangement fees of £1.5m and an IAS 19 pension net financing credit of £2.6m compared with the previous half year of £1.1m and £1.0m respectively.  Excluding these fees and the pension item the overall effective interest rate on the average debt is approximately 6%.

Underlying profit before tax is £14.2m compared with £17.1m last year which translates into an underlying EPS of 9.0p (2010: 10.5p).

Discontinued operations

Revenue for the six months was £415.6m (2010: £421.5m), down 1.4% against last year.  Underlying operating profit was £4.3m, representing an increase of £2.6m compared with the equivalent six months last year.  Margins at 1.0% improved against the 0.4% in the first six months last year and were above the 0.7% for the full year ended March 2011. Net financing charges were consistent at £0.9m.

Underlying profit before tax was £3.4m compared with £0.8m last year.

The exceptional charge incurred in the period is £88.1m and is comprised of two items.  Primarily £64.4m for losses arising on the two completed European sales plus the impairment of the carrying value of net assets of the outstanding disposal.  Secondly a £23.7m charge for the costs of the phased exit from the Foodservice business including asset write downs and onerous contract provisions made.

The total operating result for the period after exceptionals (as above) and amortisation of acquired intangibles of £5.0m (2010: £5.5m) is a loss of £(66.5)m (2010: £20.6m profit).  After net financing charges of £9.0m (2010: £8.9m) the profit before tax for the year is a loss of £(75.5)m (2010: £11.7m profit).

Balance Sheet and Cash Flow

Net debt of £177.6m at 30 September 2011 compares to £151.8m at 31 March 2011 and £159.6m at 30 September 2010.

The cash flow in the six months benefited from net proceeds of £24.7m arising from the sales of the German Road operations and of the Central & East European and Netherlands businesses.  The net proceeds from the remaining European disposal of c. £34.0m are expected on completion in the second half of the year.

Other key cash flows in the period to 30 September include, outflows in respect of capital expenditure, working capital and prior year exceptional charges.  Capital expenditure of £22.3m compared with £14.1m in the same period last year, the largest element being £10.0m in respect of the Group's investment in the new back office solution, which is expected to complete in the second half with a final c. £6m outflow.  The working capital balances within the remaining Mainland European businesses were  greater than at the last reporting period and this, together with the impact of the completed disposals, led to a £26.8m outflow.  Furthermore in the UK the cash pressures on both customers and suppliers has led to a £11.4m working capital outflow in the period.  Lastly certain of the provisions made within exceptionals at the year end have, as expected, been paid in the period, an outflow of c. £4m. Similarly provisions made at the half year for Foodservice will be cash outflows partially in the second half and partially in future years.

Reduction in the average net debt levels is a priority for the Group.  Average net debt levels have increased in the last year as the investment in IT and the general underlying performance of the Group has been challenging.  However the disposals, once completed, will reduce the average debt levels and we expect to achieve an average level including reporting period ends of c. £230m by year end (previously c. £270m).

The IAS 19 pension deficit at the end of September 2011 was £95.2m (continuing £68.1m, discontinued £27.1m) compared with £165.1m (continuing £135.4m, discontinued £29.7m) last year and £109.0m (continuing £80.3m, discontinued £28.7m) at the year end.

Dividend

As part of our efforts to retain cash, and following the announcement of the suspension of the dividend at the year end, no interim dividend has been declared (2010: 4.83p per share).

Risks

The key risks and uncertainties facing Wincanton in the second half of the current financial year have not changed materially from those outlined in the Annual Report for the year ended 31 March 2011.  The principal commercial and operational risks are the Group's ability to source new contracts, at an appropriate financial return for an acceptable level of risk, and subsequent performance of new and existing contracts. The average net debt level and the refinancing together with achieving a long term sustainable capital structure remain a priority as the Group starts to focus on the strategic growth opportunities of the UK & Ireland business following the successful completion of the restructuring and transition processes.

Outlook

The Group will soon be a focused UK & Ireland business which is better able to drive the initiatives necessary to ensure a return to a profitable growth. It is encouraging to see further contract wins that will assist the Group in the years to come and we expect the Group to trade satisfactorily in the second half.   Whilst the challenge is undoubtedly greater against a deteriorating economic backdrop, the actions underway throughout the Group will enable us to take advantage of any upturn in the market. 

Statement of Directors' responsibilities

The Board confirms to the best of their knowledge: 

·      that the consolidated half year financial statements for the six months to 30 September 2011 have been prepared in accordance with IAS 34 'Interim Financial Reporting' amended in accordance to changes in IAS 1 'Presentation of Financial Statements', as adopted by the EU; and 

·      that the Half Year Report includes a fair review of the information required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period and their impact on the consolidated half year financial statements; a description of the principal risks and uncertainties for the remainder of the current financial year; and the disclosure requirements in respect of material related party transactions.

The composition of the Board of Directors has not changed since the publication of the Annual Report in June 2011 apart from the retirement of Dr Walter Hasselkus on 21 July 2011.

The above Statement of Directors' responsibilities was approved by the Board on 9 November 2011.

Consolidated income statement

for the six months to 30 September 2011 (unaudited)

	Note		Six months to 30 Sept 2011 £m		Six months to 30 Sept 2010 restated1 £m	Year ended 31 March 2011 restated1 £m
Continuing operations:
Revenue		2	625.4		680.8		1,328.3
Share of results of associates			0.7		0.7		1.2
Total underlying operating profit		2	22.3		25.1		46.7
Amortisation of acquired intangibles			(4.1)		(4.0)		(8.1)
Exceptional restructuring and other costs		3	(23.7)		(3.2)		(25.3)
Other exceptional income		3	-		7.9		7.0
Operating (loss)/profit			(5.5)		25.8		20.3
Financing income		4	2.7		1.2		2.1
Financing cost		4	(10.8)		(9.2)		(18.8)
Net financing costs			(8.1)		(8.0)		(16.7)
(Loss)/profit before tax from continuing operations			(13.6)		17.8		3.6
Income tax credit /(expense)		5	3.3		(5.3)		0.6
(Loss)/profit for the period from continuing operations			(10.3)		12.5		4.2
Loss from discontinued operations		6	(62.7)		(5.3)		(29.1)
(Loss)/profit for the period			(73.0)		7.2		(24.9)
Attributable to
- equity shareholders of Wincanton plc			(73.3)		7.0		(25.3)
- minority interests - discontinued operations			0.3		0.2		0.4
(Loss)/profit for the period			(73.0)		7.2		(24.9)
(Loss)/earnings per share - basic and diluted
- continuing operations		8	(9.0)p		10.9p		3.7p
- discontinued operations			(54.8)p		(4.8)p		(25.8)p
- Total			(63.8)p		6.1p		(22.1)p
Dividend declared and paid in the period (£m)		9	-		11.5		17.0

The Directors do not recommend the payment of a dividend in respect of the above period (2010: 4.83p).

¹      Comparatives have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6.

Consolidated statement of comprehensive income

for the six months to 30 September 2011 (unaudited)

	Six months to 30 Sept 2011		Six months to 30 Sept 2010			Year ended 31 March 2011
	£m		£m			£m
(Loss)/profit for the period		(73.0)		7.2		(24.9)
Other comprehensive income
Actuarial gains on defined benefit pension schemes, net of deferred tax		-		-		33.4
Net foreign exchange gain on investment in foreign subsidiaries net of hedged items		0.6		-		0.9
Translation reserve relating to disposals transferred to profit or loss		(2.8)		-		-
Effective portion of changes in fair value of cashflow hedged items		(4.2)		-		(1.6)
Net change in fair value of cashflow hedges transferred to profit or loss		0.8		-		0.1
Income tax relating to components of other comprehensive income		-		(1.3)		(0.4)
Other comprehensive (expense)/income for the period, net of income tax		(5.6)		(1.3)		32.4
Total comprehensive (expense)/income for the period		(78.6)		5.9		7.5
Attributable to
- equity shareholders of Wincanton plc		(78.9)		5.7		7.1
- minority interests - discontinued operations		0.3		0.2		0.4
Total comprehensive (expense)/income for the period		(78.6)		5.9		7.5

   Consolidated balance sheet

    at 30 September 2011 (unaudited)

		30 Sept 2011		30 Sept 2010		31 March 2011
Note		£m		£m		£m
Non-current assets
Goodwill and intangible assets		122.9		188.1		157.4
Property, plant and equipment	10	92.7		211.9		208.6
Investments, including those equity accounted		15.8		15.3		15.7
Deferred tax assets		10.7		20.7		9.6
		242.1		436.0		391.3
Current assets
Assets held for sale	11	179.3		-		-
Inventories		7.2		10.1		10.3
Trade and other receivables		204.7		396.8		368.5
Cash and cash equivalents	12	29.5		40.3		88.3
		420.7		447.2		467.1
Current liabilities
Income tax payable		(6.6)		(9.5)		(7.4)
Borrowings and other financial liabilities	12	(8.0)		(9.3)		(11.1)
Trade and other payables		(352.3)		(546.9)		(544.0)
Employee benefits		(0.6)		(9.1)		(10.2)
Provisions		(23.8)		(20.5)		(22.6)
Liabilities held for sale	11	(145.8)		-		-
		(537.1)		(595.3)		(595.3)
Net current liabilities		(116.4)		(148.1)		(128.2)
Total assets less current liabilities		125.7		287.9		263.1
Non-current liabilities
Borrowings and other financial liabilities	12	(203.6)		(190.6)		(229.0)
Other payables		-		(1.2)		(1.0)
Employee benefits		(68.1)		(162.9)		(106.8)
Provisions		(38.6)		(32.2)		(31.3)
Deferred tax liabilities		(1.0)		(4.1)		(2.0)
		(311.3)		(391.0)		(370.1)
Net liabilities		(185.6)		(103.1)		(107.0)
Add back: pension deficit, net of deferred tax		75.7		129.0		86.4
Net (liabilities)/assets before net pension deficit		(109.9)		25.9		(20.6)
Equity
Issued share capital		12.2		12.1		12.2
Share premium		12.8		12.8		12.8
Merger reserve		3.5		3.5		3.5
Translation reserve		3.0		4.3		5.2
Hedging reserve		(4.9)		-		(1.5)
Retained earnings		(212.8)		(136.3)		(139.7)
Equity deficit attributable to shareholders of Wincanton plc		(186.2)		(103.6)		(107.5)
Minority interest		0.6		0.5		0.5
Total equity deficit		(185.6)		(103.1)		(107.0)

Consolidated statement of changes in equity

at 30 September 2011 (unaudited)

	Issued share  capital	Share premium	Merger reserve	Hedging reserve	Translation reserve	Retained earnings	Total	Minority interest	Total equity deficit
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2011	12.2	12.8	3.5	(1.5)	5.2	(139.7)	(107.5)	0.5	(107.0)
Total comprehensive expense	-	-	-	(3.4)	(2.2)	(73.3)	(78.9)	0.3	(78.6)
Increase in IFRS 2 reserve	-	-	-	-	-	0.2	0.2	-	0.2
Dividends paid to shareholders	-	-	-	-	-	-	-	(0.2)	(0.2)
Balance at 30 September 2011	12.2	12.8	3.5	(4.9)	3.0	(212.8)	(186.2)	0.6	(185.6)
Balance at 1 April 2010	12.1	12.2	3.5	-	4.3	(132.6)	(100.5)	0.5	(100.0)
Total comprehensive income	-	-	-	-	-	5.7	5.7	0.2	5.9
Increase in IFRS 2 reserve	-	-	-	-	-	2.4	2.4	-	2.4
Shares issued	-	0.6	-	-	-	-	0.6	-	0.6
Own shares acquired	-	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Dividends paid to shareholders	-	-	-	-	-	(11.5)	(11.5)	(0.2)	(11.7)
Balance at 30 September 2010	12.1	12.8	3.5	-	4.3	(136.3)	(103.6)	0.5	(103.1)
Balance at 1 April 2010	12.1	12.2	3.5	-	4.3	(132.6)	(100.5)	0.5	(100.0)
Total comprehensive income	-	-	-	(1.5)	0.9	7.7	7.1	0.4	7.5
Increase in IFRS 2 reserve	-	-	-	-	-	2.5	2.5	-	2.5
Shares issued	0.1	0.6	-	-	-	-	0.7	-	0.7
Own shares acquired	-	-	-	-	-	(0.3)	(0.3)	-	(0.3)
Dividends paid to shareholders	-	-	-	-	-	(17.0)	(17.0)	(0.4)	(17.4)
Balance at 31 March 2011	12.2	12.8	3.5	(1.5)	5.2	(139.7)	(107.5)	0.5	(107.0)

Consolidated statement of cash flows

for the six months to 30 September 2011 (unaudited)

Note		Six months to 30 Sept 2011 £m	Six months to 30 Sept 2010 restated 1 £m				Year   ended   31 March       2011   restated 1     £m
Operating activities
(Loss)/profit before tax		(13.6)		17.8		3.6
Adjustments for
- depreciation and amortisation		13.3		15.8		30.5
- other write downs of non current assets	2	9.3		-		19.7
- interest expense		8.1		8.0		16.7
- share of results of associates		(0.7)		(0.7)		(1.2)
- net result of business disposals		-		(7.9)		(7.0)
- share-based payments fair value charges		0.2		2.4		2.5
		16.6		35.4		64.8
Decrease/(increase) in trade and other receivables		1.0		(42.0)		(6.0)
Decrease/(increase) in inventories		1.3		(0.9)		(0.9)
(Decrease)/increase in trade and other payables		(13.9)		25.8		14.5
Increase/(decrease) in provisions		10.6		(2.3)		(2.5)
Decrease in employee benefits		(9.9)		(6.5)		(13.4)
Income taxes received		1.1		2.4		-
Cash generated from continuing operations		6.8		11.9		56.5
Cash (utilised)/generated from discontinued operations		(22.2)		(4.5)		0.4
Cash flows from operating activities		(15.4)		7.4		56.9
Investing activities
Proceeds from sale of property, plant and equipment		0.9		3.9		6.8
Net proceeds from business disposals	7	23.1		10.6		10.6
Interest received		0.2		0.3		0.2
Dividends received from associates		-		0.3		0.4
Additions of property, plant and equipment		(11.4)		(10.8)		(24.9)
Additions of computer software costs		(10.9)		(3.3)		(19.9)
Cash flows from investing activities		1.9		1.0		(26.8)
Financing activities
Proceeds from the issue of share capital		-		0.6		0.7
Own shares acquired		-		(0.3)		(0.3)
Decrease in borrowings		(21.3)		(38.9)		(4.6)
Payment of finance lease liabilities		(1.7)		(4.5)		(2.0)
Dividends paid to minority interest in subsidiary undertakings		(0.2)		(0.2)		(0.4)
Equity dividends paid		-		(11.5)		(17.0)
Interest paid		(10.7)		(9.4)		(14.9)
Cash flows from financing activities		(33.9)		(64.2)		(38.5)
Net decrease in cash and cash equivalents		(47.4)		(55.8)		(8.4)
Cash and cash equivalents at beginning of the period		88.3		96.8		96.8
Effect of exchange rate fluctuations on cash held		(0.3)		(0.7)		(0.1)
Cash and cash equivalents at end of period		40.6		40.3		88.3
Represented by
- cash at bank and in hand		10.4		18.0		68.4
- restricted cash, being deposits held by the Group's captive insurer		19.1		22.3		19.9
Cash and cash equivalents as shown on the balance sheet		29.5		40.3		88.3
- cash at bank and in hand - classified as asset held for sale		11.1		-		-
		40.6		40.3		88.3

¹      Comparatives relating to cashflows from operating activities have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6

Notes to the consolidated half year financial statements

for the six months to 30 September 2011 (unaudited)

1    Basis of preparation and Statement of compliance

Wincanton plc (the 'Company') is a company incorporated in the UK.  The consolidated half year financial statements of the Company for the six months to 30 September 2011 comprise the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities.

These consolidated half year financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting.  As required by the Disclosure and Transparency Rules of the Financial Services Authority, the half year financial statements have been prepared on the basis of the accounting policies adopted by the Group and applied and disclosed in its consolidated financial statements for the year ended 31 March 2011.  In addition the following standards or interpretations are effective for accounting periods commencing after 31 March 2011 and have been applied, where applicable, in these consolidated half year financial statements; IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, IFRIC 14 IAS 19 (Amendment) - The Limit on Defined Benefit Assets, Minimum Funding Requirements and their Interaction, IAS 24 Related Party Disclosures (revised 2009).  Adoption of these standards has not had a significant effect on the consolidated results or financial position of the Group.  These policies are in accordance with IFRS as adopted by the EU (Adopted IFRS).

These consolidated half year financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements for the year ended 31 March 2011.  The comparative figures for the year ended 31 March 2011 have been extracted from those accounts but do not comprise the full statutory accounts for that financial year.  The comparative figures relating to the Income statement and cashflows from operating activities have been restated to reflect the operations in Mainland Europe as a discontinued operation.  Except for the 31 March 2011 comparatives that have not been restated, the financial information set out herein is unaudited but has been reviewed by the auditors and their report to the Company is set out on page 22.

The consolidated financial statements for the year ended 31 March 2011 have been reported on by the Group's auditor; delivered to the Registrar of Companies; and are available upon request from the Company's registered office at Methuen Park, Chippenham, Wiltshire SN14 0WT or at www.wincanton.co.uk.  The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The preparation of these consolidated half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.  In preparing these consolidated half year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key areas of estimation were the same as those that applied to the consolidated financial statements for the year ended 31 March 2011 with the addition of the estimation of the recoverable value of the assets held for sale.

The consolidated half year financial statements have been prepared on a going concern basis, which assumes the Group will be able to meet its liabilities as they fall due for the foreseeable future. The Directors have prepared cash flow forecasts on the basis of which they expect that the Group will continue as a going concern.

The Group is reporting net liabilities of £185.6m (31 March 2011: net liabilities of £107.0m) due primarily to the inclusion of the pension deficit and the impact of the disposal of the Mainland Europe businesses. To provide greater visibility of the Group's underlying balance sheet position, net (liabilities)/assets before the net pension deficit are also shown on the face of the balance sheet. This presentation is consistent with the financial statements for the year ended 31 March 2011.

The Half Year Report, which includes the consolidated half year financial statements, was approved by the Board on 9 November 2011. 

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

2    Operating segments

Wincanton plc provides contract logistics services.  The Group manages its operations in two geographic operating segments, comprising United Kingdom & Ireland and Mainland Europe.  The results of these two operating segments are regularly reviewed by the Board to allocate resources to these segments and to assess their performance. The Group evaluates performance of the operating segments on the basis of underlying operating profit.  As a result of the Group's disposals in July 2011 of the Netherlands, and in August 2011 of the Central & Eastern Europe businesses and the German Road operations, plus the anticipated disposal of the remaining Mainland European operations as announced on 15 August 2011 the results for this segment are presented as discontinued operations in both the current period and prior period comparatives.

	UK & Ireland				Mainland Europe				Consolidated
	Six months to 30 Sept 2011	Six months to 30 Sept 2010	Year ended 31 March 2011	Six months to 30 Sept 2011		Six months to 30 Sept 2010	Year ended 31 March 2011	Six months to 30 Sept 2011	Six months to 30 Sept 2010	Year ended  31 March 2011
	£m	£m	£m	£m		£m	£m	£m	£m	£m
Revenues from external customers	625.4	680.8	1,328.3	415.6		421.5	852.1	1,041.0	1,102.3	2,180.4
Inter-segment revenues	-	-	-	0.6		0.5	0.7	0.6	0.5	0.7
Depreciation	(9.0)	(11.6)	(22.3)	(5.1)		(4.5)	(9.6)	(14.1)	(16.1)	(31.9)
Amortisation of software intangibles	(0.2)	(0.1)	(0.1)	(0.4)		(0.7)	(1.4)	(0.6)	(0.8)	(1.5)
Share of results of associates	0.7	0.7	1.2	0.1		-	-	0.8	0.7	1.2
Reportable segment underlying operating profit 1	22.3	25.2	46.8	4.3		1.6	6.2	26.6	26.8	53.0
Other material non-cash items:
- Impairment of goodwill and acquired intangibles	-	-	-	(15.6)		-	(22.5)	(15.6)	-	(22.5)
- write down of other non current assets 2	(9.3)	-	(19.7)	-		-	-	(9.3)	-	(19.7)

¹      Underlying operating profit includes the share of results of associates and is stated before amortisation of acquired intangibles, any impairment of goodwill and acquired intangibles, and exceptionals.  The underlying operating profit shown above includes allocation of group central costs as reported for management information purposes.  Of these costs £nil (2010: £0.1m, March 2011: £0.1m) has been identified as being unable to be allocated to Mainland Europe in the future and are therefore excluded from the amounts reported as discontinued operations.

²      The write down of other non-current assets comprises, in the current period, the write down of property, plant and equipment used in the Foodservice business to its recoverable value.  In the year ended 31 March 2011, the write down related to the back office IT project.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

3    Exceptionals

	Six months to 30 Sept 2011 £m		Six months to 30 Sept 2010 restated1 £m			Year ended 31 March 2011 restated1 £m
Exceptional restructuring and other costs
Closure and restructuring of operations
- UK & Ireland		(23.7)		-		(4.7)
Provision for aged non trading receivable 2		-		(3.2)		(0.9)
Write down of back office project		-		-		(19.7)
		(23.7)		(3.2)		(25.3)
Other exceptional income
Disposal of Recycling business		-		7.9		7.0
		-		7.9		7.0

¹      Comparatives have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6

²      Provision made as a result of concerns over the ability of the other party to settle the amount due

4      Net financing costs

	Six  months to   30 Sept    2011   £m		Six    months to   30 Sept    2010   restated1   £m			Year ended 31 March 2011 restated1 £m
Interest income		0.1		0.2		0.2
Expected return on defined benefit pension scheme assets		22.2		20.9		41.7
Interest on defined benefit pension scheme obligations		(19.6)		(19.9)		(39.8)
		2.7		1.2		2.1
Interest expense		(9.5)		(7.9)		(17.1)
Finance charges payable in respect of finance leases		(0.4)		(0.6)		(1.0)
Unwinding of discount on insurance and other provisions		(0.9)		(0.7)		(0.7)
		(10.8)		(9.2)		(18.8)
Net financing costs		(8.1)		(8.0)		(16.7)

¹      Comparatives have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

5      Income tax expense

	Six months to 30 Sept 2011 £m		Six months to 30 Sept 2010 restated1 £m		Year ended 31 March 2011 restated1 £m
Current tax expense
Current year	0.1		2.6		0.9
Adjustments for prior years	-		-		(0.7)
	0.1		2.6		0.2
Deferred tax (credit)/expense
Current year	(3.4)		2.7		0.2
Adjustments for prior years	-		-		(1.0)
	(3.4)		2.7		(0.8)
Total income tax (credit)/expense in the income statement	(3.3)		5.3		(0.6)

 

¹      Comparatives have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6

In accordance with IAS 34 the tax expense recognised in the income statement for the half year is calculated on the basis of the estimated effective full year tax rate. 

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

 

6      Discontinued operations

On 9 June 2011 the Group announced the sale of its German Road operations and businesses in Central & Eastern Europe to companies in the Raben group ("Raben").  On the same day it also announced the sale of its logistics business in The Netherlands to JCL Transport und Logistik GmbH ("JCL"). Both these deals have been completed in the half year to 30 September 2011, JCL on 29 July 2011 and Raben on 31 August 2011.

On 15 August 2011 the Group announced that it had signed a conditional agreement for the disposal of its remaining operations in Mainland Europe to Rhenus AG & Co. KG ("Rhenus") via the disposal of its Mainland Europe holding company plus subsidiaries.  This sale is expected to be completed in the third quarter of this year assuming shareholder approval and competition clearances are achieved.  The associated assets and liabilities have been reclassified as at 30 September 2011 and shown as held for sale on the balance sheet (see note 11).

The results for the businesses sold in the half year ended 30 September 2011 have been included in discontinued operations in the Group's Consolidated income statement for the period up to the above dates of completion for each sale.  The results for the businesses to be sold to Rhenus have also been included in discontinued operations for the entire 6 month period and the comparatives shown below also include the results of all these businesses:

	Six months ended 30 Sept 2011		Six months ended 30 Sept 2010		Year ended 31 March 2011
	£m		£m		£m
Revenue	415.6		421.5		852.1
Operating expenses before exceptionals	(411.3)		(419.8)		(845.8)
Underlying operating profit before tax	4.3		1.7		6.3
Impairment of goodwill and acquired intangibles	-		-		(22.5)
Amortisation of acquired intangibles	(0.9)		(1.5)		(3.0)
Exceptional restructuring and other costs	-		(5.4)		(8.4)
Operating profit/(loss) before tax	3.4		(5.2)		(27.6)
Net financing costs	(0.9)		(0.9)		(1.9)
Profit/(loss) before tax	2.5		(6.1)		(29.5)
Income tax (expense)/credit	(0.8)		0.8		0.4
Profit/(loss) after tax on discontinued operations for the period	1.7		(5.3)		(29.1)
Loss on disposal of discontinued operations	(64.4)		-		-
Income tax on loss on disposal	-		-		-
Total loss arising from discontinued operations	(62.7)		(5.3)		(29.1)

For the year ended 31 March 2011 there was an impairment charge of £22.5m recognised against the goodwill and acquired intangibles allocated to the Western Europe CGU.

The loss on disposal of discontinued operations includes the loss incurred on the JCL and Raben disposals of £48.8m, see note 7, and the anticipated loss of £15.6m on the Rhenus disposal.

During the period to 30 September 2011, discontinued operations contributed to a net outflow of £22.2m (2010: £4.5m outflow) to the Group's net operating cash flows, a £16.9m inflow to investing activities (2010: £9.3m outflow) and a £2.3m inflow to financing activities (2010: £8.2m inflow).

Of the loss from discontinued operations of £62.7m (2010: £5.3m), an amount of £63.0m (2010: £5.5m) is attributable to the equity shareholders of Wincanton plc.  Of the (loss)/profit from continuing operations of £(10.3)m (2010: £12.5m), an amount of £(10.3)m (2010: £12.5m) is attributable to the equity shareholders of Wincanton plc.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

 

7      Disposal of business

On 29 July 2011, the Group completed the sale of its Netherlands based logistics business to JCL for €6.5m, before disposal costs. On 31 August 2011, the Group completed the sale of its German Road operations and businesses in Central & Eastern Europe to Raben for €25m, before disposal costs and working capital adjustments. The impact on the results of the Group of these disposals is disclosed in note 6. On completion the net assets of the businesses, the consideration and the loss on disposal were as follows:

£m
Goodwill and intangible assets	6.9
Property, plant and equipment	54.9
Income tax receivable	0.2
Inventories	0.4
Trade and other receivables	53.2
Cash and cash equivalents	3.3
Borrowings and other financial liabilities	(1.7)
Trade and other payables	(39.6)
Employee benefits	(1.3)
Net assets disposed	76.3
Less net consideration received	(24.7)
Release from Translation reserve	(2.8)
Loss on disposal	48.8
Net cash inflow arising on disposal:
Initial consideration	27.8
Disposal costs	(3.1)
Net consideration received	24.7
Less net cash disposed of with the business	(1.6)
Net cash inflow for the period	23.1

8      (Loss)/earnings per share

(Loss)/earnings per share are calculated on the basis of (loss)/earnings attributable to the equity shareholders of Wincanton plc of £73.3m loss (2010: £7.0m profit) and the weighted average of 114.9m (2010: 114.2m) shares which have been in issue throughout the period.  The diluted (loss)/earnings per share are calculated on the basis of no additional shares (2010: 0.1m) deemed to be issued at £nil consideration under the Company's share option schemes.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

8          (Loss)/earnings per share (continued)

The weighted average number of ordinary shares for both basic and diluted (loss)/earnings per share are calculated as follows:

Weighted average number of ordinary shares	Six months to 30 Sept 2011 millions		Six  months to 30 Sept 2010 millions		Year ended 31 March 2011 millions
Issued ordinary shares at the beginning of the period	114.6		114.3		114.3
Net effect of shares issued and purchased during the period	0.3		(0.1)		0.1
	114.9		114.2		114.4
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at the end of the period	114.9		114.2		114.4
Effect of share options in issue but not exercised	-		0.1		-
	114.9		114.3		114.4

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

 

	Six months to 30 Sept 2011  pence		Six  months to 30 Sept 2010 restated1 pence		Year ended 31 March 2011 restated1 pence
Underlying earnings per share - continuing operations
- basic	9.0		10.5		19.6
- diluted	9.0		10.5		19.6
Underlying earnings per share - discontinued operations
- basic	1.7		0.4		1.6
- diluted	1.7		0.4		1.6

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

 

8          (Loss)/earnings per share (continued)

Underlying earnings are determined as follows:

	Six months to 30 Sept 2011 £m		Six  months to 30 Sept 2010 restated1 £m		Year ended 31 March 2011 restated1 £m
Continuing operations:
(Loss)/profit for the period attributable to equity shareholders of Wincanton plc	(73.3)		7.0		(25.3)
Discontinued operations excluding amounts attributable to minority interests	63.0		5.5		29.5
Exceptional restructuring and other costs (note 3)	23.7		3.2		25.3
Other exceptional income (note 3)	-		(7.9)		(7.0)
Amortisation of acquired intangibles	4.1		4.0		8.1
Tax on the above items	(7.2)		0.2		(8.2)
Underlying earnings - continuing operations	10.3		12.0		22.4
Discontinued operations:
Discontinued operations excluding amounts attributable to minority interests	(63.0)		(5.5)		(29.5)
Loss on disposal of discontinued operations	64.4		-		-
Impairment of goodwill and acquired intangibles	-		-		22.5
Exceptional restructuring and other costs	-		5.4		8.4
Amortisation of acquired intangibles	0.9		1.5		3.0
Tax on the above items	(0.3)		(0.9)		(2.6)
Underlying earnings - discontinued operations	2.0		0.5		1.8

¹      Comparatives have been restated to reflect the operations in Mainland Europe as a discontinued operation as shown in note 6

9          Dividends

The Directors do not recommend the payment of a dividend in respect of the half year ended 30 September 2011.

Under Adopted IFRS dividends are only provided in the financial statements when they are declared and become a liability of the Company.  The total of the interim dividend paid in the prior year was £5.5m.  No final dividend was paid in August 2011, in the prior year £11.5m was paid.

 

10         Property, plant and equipment

Additions and disposals

During the half year to 30 September 2011 the Group acquired assets with a cost of £10.7m (2010: £11.0m).

Assets with a carrying amount of £0.5m were disposed of during the half year ended 30 September 2011 (2010: £3.9m).  Assets with a carrying value of £9.3m have been written off during the half year ended 30 September 2011 relating to the Foodservice business. 

Capital commitments

At 30 September 2011 the Group had entered into contracts to purchase property, plant and equipment for £3.4m (2010: £12.0m); delivery is expected in the second half of the year to 31 March 2012.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

11         Assets and liabilities held for sale

As at 30 September 2011, the assets and liabilities relating to the businesses to be sold to Rhenus are classified as held for sale prior to the anticipated completion of the disposal in the third quarter of the year ended 31 March 2012.

		£m
Non current assets:
Goodwill		10.5
Other intangible assets		5.7
Property, plant and equipment		46.8
Investments, including those equity accounted		0.8
Deferred tax asset		2.2
Current assets:
Inventories		1.4
Trade and other receivables		100.8
Cash and cash equivalents		11.1
Total assets held for sale		179.3
Current liabilities:
Income tax payable		(1.7)
Borrowings		(2.5)
Trade and other payables		(102.1)
Employee benefits		(7.3)
Provisions		(0.2)
Non current liabilities:
Borrowings		(4.1)
Trade and other payables		(1.0)
Employee benefits		(25.0)
Provisions		(1.0)
Deferred tax liabilities		(0.9)
Total liabilities held for sale		(145.8)
Net assets and liabilities held for sale		33.5

At 31 March 2011 and 30 September 2010 no assets and liabilities were classified as held for sale as the criteria to treat them as such had not been met.

Notes to the consolidated half year financial statements (continued)

for the six months to 30 September 2011 (unaudited)

12         Analysis of net debt

	30 Sept 2011 £m		30 Sept 2010 £m		31 March 2011 £m
Cash and cash equivalents
Cash at bank and in hand	10.4		18.0		68.4
Restricted cash, being deposits held by the Group's captive insurer	19.1		22.3		19.9
	29.5		40.3		88.3
Cash at bank and in hand - classified as asset held for sale	11.1		-		-
	40.6		40.3		88.3
Borrowings
Current
Bank loans and overdrafts	(0.5)		(1.3)		(6.5)
Finance lease liabilities	(6.0)		(8.0)		(4.4)
Other financial liabilities	(1.5)		-		(0.2)
	(8.0)		(9.3)		(11.1)
Bank loans and overdrafts - classified as liabilities held for sale	(2.5)		-		-
	(10.5)		(9.3)		(11.1)
Non-current
US$ private placement	(120.7)		(127.7)		(128.6)
Bank loans	(78.5)		(59.9)		(95.0)
Finance lease liabilities	(0.8)		(3.0)		(4.1)
Other financial liabilities	(3.6)		-		(1.3)
	(203.6)		(190.6)		(229.0)
Bank loans and overdrafts - classified as liabilities held for sale	(4.1)		-		-
	(207.7)		(190.6)		(229.0)
Net debt - as shown on the balance sheet	(182.1)		(159.6)		(151.8)
Net debt - classified as assets and liabilities held for sale	4.5		-		-
Total net debt	(177.6)		(159.6)		(151.8)

 

Independent review report to Wincanton plc

Introduction

We have been engaged by the Company to review the consolidated half year financial statements in the Half Year Report for the six months to 30 September 2011 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related explanatory notes.  We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the consolidated half year financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA").  Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Half Year Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Year Report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The consolidated half year financial statements included in this Half Year Report have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the consolidated half year financial statements in the Half Year Report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated half year financial statements in the Half Year Report for the six months to 30 September 2011 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

A Campbell-Orde

for and on behalf of KPMG Audit Plc
Chartered Accountants 

100 Temple Street

Bristol

BS1 6AG

9 November 2011

Shareholder information

Preliminary announcement of full year results	June 2012
Annual General Meeting	July 2012
Announcement of half year results	November 2012

Shareholders' enquiries

All administrative enquiries relating to shareholdings should, in the first instance, be directed to the Registrar at the following address:

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

Telephone: [phone]   Fax: [phone]

Text phone: [phone]

Web queries: www.investorcentre.co.uk/contactus

 

END

 

 

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