TIDMWIN
RNS Number : 1897M
Wincanton PLC
20 May 2022
20 May 2022
LEI: 213800Z5WTW8QKOHWQ82
Wincanton plc
Preliminary announcement of results for the financial year ended
31 March 2022
Wincanton delivers strong growth with profits ahead of
pre-pandemic levels
Wincanton plc ('Wincanton' or the 'Group'), a leading supply
chain partner for UK business, today announces its preliminary
results for the year ended 31 March 2022.
Key financial measures
2021 (Restated)(1)
2022 Change
---------------------------------------- -------- -------------------- --------
Revenue (GBPm) 1,421.4 1,221.9 16.3%
Underlying EBITDA (GBPm)(2) 108.3 95.2 13.8%
Underlying profit before tax (GBPm)(2) 58.1 47.2 23.1%
Underlying basic EPS(2) 40.8p 32.0p 27.5%
Free cash flow (GBPm) 54.0 43.8 23.3%
Net cash (GBPm)(2) 3.7 11.9
Dividend per share 12.0p 10.35p
Statutory results
---------------------------------------- -------- -------------------- --------
Profit before tax (GBPm) 54.8 46.2 18.6%
Basic EPS 38.6p 31.5p 22.5%
Financial highlights
-- Full year revenue up 16.3% to GBP1,421.4m; 19.4% organic
revenue growth excluding disposals and Cygnia Logistics acquisition
in September 2021
-- Underlying profit before tax up 23.1% to GBP58.1m (2021:
GBP47.2m), an increase of 10.0% on pre-pandemic levels (2020:
GBP52.8m)
-- Inflationary headwinds mitigated by management actions on
costs and contract mix; less than 30% of Group revenue from closed
book contracts
-- Strong cash focus maintained; closing net cash of GBP3.7m
(2021: net cash of GBP11.9m); free cash flow generated from
operating activities offset by acquisition spend
-- Final dividend of 8.0p recommended (2021: 7.5p), taking full
year dividend to 12.0p per share (2021: 10.35p)
Operational highlights
-- Growth achieved across all four sectors:
o eFulfilment proposition strengthened by successful integration
of Cygnia Logistics and investment in automation and innovation in
Nuneaton and The WEB, Rockingham
o Public & Industrial boosted by contract wins and renewals
with HMRC, DHSC and Defra, and growth in defence through new work
with BAE Systems and Alstom
o Grocery & Consumer saw record volumes, while General
Merchandise operations strengthened by automation and robotics
solutions for the Kingfisher Group including Screwfix
-- Positive progress on recruitment: fast-track driver training
scheme, increased investment in apprenticeships and creation of
labour campus to improve retention and operational
effectiveness
-- Achieved carbon neutrality for premium home delivery
services; working towards new targets for Wincanton-owned
non-transport operations by 2025
Outlook
-- Wincanton is well positioned to maintain its positive
performance across its chosen markets, driven by ongoing investment
in the business and continued progress against our strategy
-- While the Group remains mindful about the macro-economic
headwinds and the potential impact on consumer sentiment, there is
good momentum in the new business pipeline and we are confident in
the future growth opportunities across all four of our sectors and
in our continued ability to deliver our strategy successfully
James Wroath, Chief Executive Officer, said:
"Wincanton has delivered another strong set of results, with
growth across all four sectors leading to a substantial increase in
revenue and profit ahead of pre-pandemic levels. The core
foundation sectors of Grocery & Consumer and General
Merchandise continue to be a source of strength for the Group, and
we have made significant progress in our focused growth markets of
Public & Industrial and eFulfilment.
We have invested behind our strategy, particularly in eCommerce
with the successful integration of Cygnia Logistics and the
eFulfilment capacity created at The WEB, Rockingham. We continue to
develop automation solutions and robotic technologies to create
supply chains that are efficient, agile and resilient. This
approach, coupled with Wincanton's longstanding reputation for high
quality service delivery enabled us to secure a number of
high-profile new contracts and extensions.
I want to thank all our people who have driven this performance
through their relentless attention on delivering for our customers
in what were often challenging operating conditions. While mindful
about the macro-economic headwinds facing our sector, we are
confident in the growth opportunities we have ahead of us and in
our continued ability to deliver our strategy successfully."
Capital Markets Event - July 2022
On Thursday 7 July 2022, Wincanton will host an in-person
Capital Markets Event for sell-side analysts and institutional
investors focused on the Group's eFulfilment sector. The event will
include guided tours of Wincanton's eFulfilment facility The WEB,
Rockingham in Northampton, and one of the nearby Cygnia facilities.
No update on current trading will be provided, nor any material
information disclosed.
Should you wish to attend the event, please contact
wincanton@headlandconsultancy.com for further information.
For further enquiries please contact:
Wincanton plc Tel: 01249 710 000
James Wroath, Chief Executive Officer
James Clarke, Interim Chief Financial
Officer
Headland Tel: 0203 805 4822
Susanna Voyle
Henry Wallers
Analyst presentation and conference call:
A presentation for analysts will be held at 09:30am today,
Friday 20 May 2022. The presentation will be followed immediately
by a Q&A conference call for analysts with James Wroath and
James Clarke.
The webcast can be found at:
https://webcasting.brrmedia.co.uk/broadcast/627e2edc81ae755c56ba276c
For those wishing to ask a question in the Q&A, please dial
into the call using the following details:
Phone Number +44 (0)330 165 4012
Confirmation Code: 6069200
The presentation and Q&A will be made available to watch on
demand shortly after it finishes. This will be hosted on
Wincanton's website:
https://www.wincanton.co.uk/investors/results-reports-and-presentations/
Notes
(1) Certain comparatives have been restated due to a required
change in accounting policy which has resulted in costs previously
capitalised now presented as a non-underlying expense within net
operating profit, as explained in Note 1 to the accompanying
financial statements.
(2) The section on Alternative Performance Measures (APMs) below
and Note 2 to the accompanying financial statements provide further
information on underlying measures, including definitions and a
reconciliation of APMs to statutory measures.
Group performance overview
Financial performance for the year ended 31 March 2022 was
excellent, with revenue increasing 16.3% versus last year and
importantly also up by 18.3% on pre-pandemic levels (2020:
GBP1,201.2m). Retail volumes remained strong and we saw the benefit
of new contract wins, particularly in our key strategic growth
markets: eCommerce, Public sector, and Infrastructure.
Underlying profit before tax increased by 23.1% against last
year and was up 10.0% on pre-pandemic levels (2020: GBP52.8m),
demonstrating the Group's positive momentum. We are in attractive
markets with widening opportunities. Our performance was good
despite inflationary pressures experienced this year together with
the lag effect of price renegotiations with customers. We remain
vigilant to respond to future market conditions as necessary.
Our service levels remain excellent, and Wincanton's reputation
and track record for delivering at scale for customers continues to
be industry-leading. Notwithstanding the well-publicised challenges
around driver and warehouse resource availability in our industry
during the year, we worked closely with our customers to mitigate
these issues and kept the country moving, clothed, fed, and of
course supplied with essential Covid-19 tests and personal
protective equipment (PPE) during the pandemic.
Our industry leading safety programme remains a clear priority
for Wincanton. This year we outperformed our Group Lost Time
Incident Frequency Rate performance indicator target, which was
0.37 for the year, by achieving 0.33 (2021: 0.32).
Sector performance
eFulfilment
Our three major sub-markets within eFulfilment all made major
strides forward in the year. Overall revenue has grown to over
GBP220m this year from GBP115m in the year ended 31 March 2020. In
two-person home delivery, volumes continued to accelerate and will
be further boosted by a three year contract extension with Loaf
starting in June 2022. In omnichannel, the ramp-up of our 'dark
store' operations for Waitrose & Partners has driven further
growth alongside wins including Dobbies Garden Centres. Finally, in
high-volume eFulfilment we made major investments with the
acquisition of Cygnia and the new facility The WEB, Rockingham, to
significantly increase our scale and presence in this high-growth
market.
Automation and robotics are central to our strategy to drive
service enhancement and efficiency in this sector. The WEB,
Rockingham, is our new highly automated facility, and during the
year further investments in robotic technology in our Nuneaton and
Cygnia operations have been made. The demand from the market for
later cut-off times and lower cost to serve will provide
opportunities and deliver attractive returns and growth in the
coming years.
The announcement of our contract with The White Company is a
milestone for Wincanton. They are a premium omnichannel retailer
who have recognised the huge benefit our approach will afford them,
and they will be a cornerstone customer in Rockingham. The
acquisition of Cygnia further diversifies our portfolio, and we are
delighted to welcome brands such as Molton Brown, Feelunique,
Moonpig, BrewDog and Whittard of Chelsea to our customer base.
Brands such as these, allied to Wincanton's significant retail
logistics reputation, are already leading to exciting growth
opportunities with new customers.
End-to-end capabilities are essential in eFulfilment, so it was
pleasing to have onboarded new customers such as Wickes and City
Plumbing Supplies onto our carrier management services platform.
These customers, when added to the Cygnia volumes, increase our
scale and buying power significantly in this critical area.
Further new business with DFS in our two-person home delivery
network, an extension of this service for Wickes and the award of
IKEA's new Dartford distribution centre further demonstrate
Wincanton's strength and reputation in this growth sector.
Public & Industrial
Our Public & Industrial sector has gone from strength to
strength. Revenue was up 15.7% on a pandemic-impacted year, and
importantly was up 6% on the year ended 31 March 2020 as
construction volumes were more consistent and the full year effect
of our HMRC contract was realised.
We continued to build on our relationship with the public sector
and in particular our inland border operations for the UK
Government. We secured an additional contract with the Department
for Environment, Food and Rural Affairs (Defra) and expanded the
number of Inland Border Clearance facilities. We also continued our
support operations for the national pandemic response, shipping
over one billion Covid-19 tests throughout the UK and managing the
storage of PPE.
The recovery in volumes in our construction business brought
operational and commercial challenges, with demand uneven and
resources stretched, particularly for mechanical-offload vehicles.
We successfully concluded price renegotiations with many customers,
passing through the impact of wage inflation. Our discipline on
re-tendering, pricing and margins has resulted in some lost
business but our offering remains well positioned in the
market.
Finally, we secured long-term extensions to our key
relationships in the defence and infrastructure markets with BAE
Systems and Alstom.
Grocery & Consumer
Our Grocery & Consumer sector continued to perform well
throughout the year despite challenges with drivers and high levels
of Covid-19 absence. Record volumes were again delivered, often
twice: once from our consumer goods warehouses to retailers; and
again when we picked and delivered them from supermarket
distribution centres into stores.
As a result, revenue was up 15.8% year on year, despite the
previous year already seeing strong pandemic-driven volumes.
Additional transport business was awarded by Asda in the North West
and important renewals were secured with Co-op, Nestlé Purina and
La Doria. However, some lost business illustrates the necessity to
continue working on growth opportunities in the sector for which we
have a healthy pipeline.
General Merchandise
The General Merchandise sector continued to support new and
existing customers through a period of increased volumes as the
pandemic and lockdowns focused customer demand on life at home.
Consequently, revenue was 18.6% higher versus last year and over
32.5% against the year ended 31 March 2020.
We completed automation and robotics projects in two of our
Kingfisher distribution centres, increasing throughput and reducing
reliance on people as the labour market tightened. We also opened a
new dedicated location for the Kingfisher Group, as well as
launching an operation for them in The WEB, Rockingham.
Notably, we entered the apparel market this year with a
five-year Primark contract for the provision of transport services.
Wincanton will make more than 50,000 deliveries to 191 stores
across the UK each year and deliver significant operational
efficiencies to the supply chain.
Finally, we also commenced a toys and games warehouse and
transport operation for MGA Entertainment, further broadening our
General Merchandise offering.
Group Operations
The power of the structural reorganisation implemented in 2020
was evident this year, most obviously in the success of the team
delivering a 'One Wincanton' operations approach across our
sectors.
In Group Transport, an industry leading transport management
system was implemented, allowing us to increase visibility of our
transport operations across the business for the benefit of both
our customers and our haulier partners. This exciting initiative
lays a firm foundation for driving further efficiencies and
synergies from our transport networks and is a differentiator in
the marketplace. Winsight Powered by ORTEC provides the Group with
a substantial opportunity to sell Transport Control Tower services
(4PL) to the market. In this technology-led business model,
ownership or management of the assets becomes an additional
consideration for the Group rather than the core offer.
The Group Transport team also led the recruitment of over 480
new drivers in the year, working across our four sectors and with
the UK Government to attract people to the industry and to
Wincanton.
Group Operations co-ordinates and leads on the automation and
robotics activities described in this report, and we continue to
build capability and expertise via a growing team of IT experts and
engineers, ensuring we lead the market in this area.
Furthermore, the team provides class leading capability in
continuous improvement, start-ups, fleet operations and compliance
which are critical to both our own and our customers' operations.
In response to labour and skill shortages, we also developed and
launched an innovative 'labour campus' model in the year, hiring
Wincanton permanent colleagues and deploying them flexibly during
periods of peak activity in geographies where we have multiple
operations.
Outlook
The Group is well positioned to maintain its positive
performance across its chosen markets, driven by ongoing investment
in the business and continuing progress in delivering our strategy.
We remain focused on delivering sustainable, profitable growth over
the long-term which is underpinned by a relentless focus on
customer service. Our healthy cashflow enables continued investment
in our people, innovations and distributions to shareholders.
Whilst we are mindful about the macro-economic headwinds and the
potential impact on consumer sentiment, there is good momentum in
the new business pipeline and we remain confident in the future
growth opportunities across all four of our sectors and in our
continued ability to deliver our strategy successfully.
Market environment
The current economic environment, driver shortages, Covid-19,
inflation and the war in Ukraine have all created additional
pressures on the supply chain. The Board has been shocked and
saddened by Russia's invasion of Ukraine in February 2022 and
ongoing events in the region. In response to the conflict and the
economic sanctions placed on Russia, we have reviewed our own
supply chains and procurement channels and remain mindful of the
ongoing geo-political and macro-economic uncertainties. Management
continues to closely monitor key suppliers, though we remain
confident that our supply channels are robust.
Retail markets have stabilised in recent months following the
relaxation of Covid-19 restrictions although there has been a
significant impact from the pandemic with high levels of staff
absence across all sectors. The stop-start pattern of lockdowns
through 2020 and 2021 has made comparison of our financial results
more challenging, with significant swings between H1 and H2.
Wincanton is largely protected from the recent increases in fuel
prices through the fuel price escalation clauses built into many of
our contracts with customers and, with 72% of revenue derived from
open book contracts, the Group is navigating the current
inflationary environment well and does not consider it a
significant risk.
The Wincanton Way, our ESG strategy
The Group continues to build on our ESG commitments and
strategy. From an environmental performance perspective, although
our growth led to increased carbon emissions, our carbon intensity
ratio decreased again year-on-year. Our strategy makes explicit
environmental commitments both for the long term, net-zero carbon
emissions by 2040, and for the near-term, delivering our commitment
to a carbon neutral two-person home delivery business this year.
Additionally, we announced this year that our own non-transport
operations will be carbon neutral by 2025. Meanwhile, we made good
progress towards our target of doubling our recycling from residual
waste by 2025.
Engagement with our colleagues remains a critical ingredient to
our success. Throughout the pandemic we ran shorter pulse surveys
followed by our full bi-annual survey in the summer. Areas of
strength remain in 'Safety', 'Meaningful Work' and 'Peer
Relationships'. Communication is an area for improvement: this has
been partially addressed with the roll-out of our Group wide
intranet, 'MyPlace' in April 2022. This enables every colleague to
have immediate access to information such as Company news and job
vacancies. New questions were added to the survey last year on
inclusion, the results of which were encouraging with 8 out of 10
of our colleagues recognising our efforts towards creating a better
culture in this area.
There is scope to improve our ethnic diversity across the
business. We are one of the first signatories of the CBI's Change
the Race: Ratio Charter showing our commitment to improving our
representation of ethnic minority groups. Alongside this external
pledge, we have spent time with groups across our business to
understand some of the perceived barriers to attracting talent from
such backgrounds and identifying opportunities to improve.
Education of all our line managers is key to this, starting at the
very top.
We are also seeking to improve our support for under-represented
groups and in the past year we have introduced practical
initiatives into employment including ex-offenders and ex-service
personnel, as well as offering work experience opportunities to
those with physical or learning disabilities.
Our culture remains focused on health, safety and wellbeing;
learning and development; diversity and inclusion; and colleague
engagement. Our sites actively work with their communities,
fundraising for local schemes.
Our graduate group, the Wincantoneers, raised GBP13,000 for the
Prince's Trust which has been matched by the Group, and they were a
runner-up for the 'Shoot for the Stars Award'. We use initiatives
such as a funding match to encourage further involvement in social
engagement and most recently the Group matched colleagues' local
fundraising totals for victims of the Ukraine conflict.
For governance, we have continued to build on our Code of
Conduct, strengthening our awareness programmes around 'Speaking
Up', 'Modern Slavery', 'Data Protection' and 'Anti-Bribery and
Corruption'. Our governance framework is embedded within the
business and has been supplemented this year with an ESG Committee
with our CEO as Chair.
Delivering on our strategy
The Executive Management Team and Board remain focused on
Wincanton's vision: 'Great people delivering sustainable supply
chain value'.
We deliver this through the continued development of our people,
alongside technology enabled products for our chosen markets.
We have a clear market strategy. Grocery, consumer, non-food
retail markets, building materials, fuel and gases and bulk food
markets form the foundation of our business, providing scale as
well as demonstrating capability in the highest pace supply chain
environments. We are optimistic about our sales pipeline across all
of these markets.
Meanwhile, we have made key moves in the markets we have
identified as key strategic growth opportunities, being eCommerce,
public sector and infrastructure.
We acquired Cygnia, a specialist in multichannel fulfilment with
expertise spanning the full breadth of their customers'
requirements, including high-volume order fulfilment, returns and
carrier management services. Cygnia has approximately 700
colleagues across three sites. The acquisition boosts our
reputation in the market and broadens our customer base. Cygnia's
shared-user model does expose us to more risk with volumes than our
more traditional open-book dedicated retail contracts. This year's
peak season did highlight this, with trading softer than expected;
however, we remain convinced that it will be a driver of
longer-term growth in eCommerce. Furthermore, as our first
acquisition in over ten years it paves the way for further
selective bolt-on opportunities.
We have also invested in property specifically for eFulfilment.
Critically, however, we have done so alongside automation and
robotics deployment. We see a clear opportunity in the market for a
pureplay logistics provider to offer customers efficient, scalable
services to drive the growth of their businesses. In doing so, we
believe there will be opportunities for increased Wincanton
margins.
The Group continues to invest in supply chain innovation enabled
by our W2 Labs programme; digital solutions to support people
recruitment, asset tracking and warehouse performance management
are all in extended pilots. In Nuneaton, we deployed our first
Autonomous Mobile Robots (AMRs) in combination with glove
technology to improve speed, accuracy and safety for Neal's Yard
Remedies. Further deployment of AMRs across our warehousing
businesses is ongoing.
Wincanton's presence in public sector logistics has increased
significantly, delivering solutions to HMRC, Defra, Department for
Transport (DfT) and Department of Health & Social Care (DHSC)
that are underpinned by scalable IT systems.
Finally, Winsight Supply Chain Integrator (WSCI), our major
infrastructure product designed for EDF, is live and is attracting
substantial interest from similar large-scale projects.
Financial review
Financial performance for the year ended 31 March 2022 was
strong, with revenue increasing 16.3% versus last year and
importantly also up by 18.3% on pre-pandemic levels (2020:
GBP1,201.2m). Revenue increased across all four sectors and we saw
the benefit of new contract wins, particularly in our key strategic
growth markets: eCommerce; public sector; and infrastructure.
Underlying profit before tax increased by 23.1% against last
year's Covid-19 affected result and was up 10.0% on pre-pandemic
levels (2020: GBP52.8m), demonstrating the Group's positive
momentum.
Positive cashflow performance is reflected in net cash of
GBP3.7m (2021: net cash GBP11.9m) notwithstanding the acquisition
of Cygnia for GBP27.6m in September 2021. The net pension asset has
increased to GBP114.5m (2021: GBP48.2m) with net assets at GBP63.6m
(2021: net liabilities GBP1.7m). We have also successfully renewed
our revolving credit facility (RCF) for a further four years until
March 2026 and extended the commitment to GBP175.0m.
The key financial aspects are outlined below with the results
presented on an underlying basis, excluding non-underlying items,
to provide a better understanding of the underlying performance.
Reconciliations to statutory numbers are set out in the Alternative
Performance Measures section at the end of this review and Note 2
to the accompanying financial statements which also includes
details of the items reported as non-underlying in the current and
prior year.
Financial performance summary
2021
2022 (Restated)(1)
GBPm GBPm Change
------------------------------------------- ------- -------------- -------
Revenue 1,421.4 1,221.9 16.3%
----------------------------------------------- ------- -------------- -------
Underlying EBITDA(2) 108.3 95.2 13.8%
----------------------------------------------- ------- -------------- -------
Underlying EBITDA margin (%)(2) 7.6% 7.8% (20bps)
Net financing costs (6.6) (4.6) 43.5%
----------------------------------------------- ------- -------------- -------
Underlying profit before tax(2) 58.1 47.2 23.1%
Underlying profit before tax margin (%)(2) 4.1% 3.9% 20bps
Non-underlying items(3) (3.3) (1.0)
----------------------------------------------- ------- -------------- -------
Profit before tax 54.8 46.2 18.6%
Income tax (6.9) (7.1)
----------------------------------------------- ------- -------------- -------
Profit after tax 47.9 39.1 22.5%
----------------------------------------------- ------- -------------- -------
Underlying EPS 40.8p 32.0p 27.5%
Basic EPS 38.6p 31.5p 22.5%
Closing net cash (GBPm) 3.7 11.9 (8.2)
Dividend per share 12.00p 10.35p
----------------------------------------------- ------- -------------- -------
1 Certain comparatives have been restated due to a required
change in accounting policy which has resulted in costs previously
capitalised now presented as a non-underlying expense within net
operating profit, as explained in Note 1 to the accompanying
financial statements.
2 The section on Alternative Performance Measures (APMs) below
and Note 2 to the accompanying financial statements provide further
information on these underlying measures, including definitions and
a reconciliation of APMs to statutory measures.
3 Details of items reported as non-underlying in the current and
prior year are included in the section headed non-underlying items
below and in Note 2 to the accompanying financial statements.
Revenue for the year ended 31 March 2022 was at its highest
level since the 2011 Group restructuring, increasing over the prior
year by GBP199.5m to GBP1,421.4m despite lost revenue following the
disposal of the Specialist Services businesses (Containers and
Pullman Fleet Services) in the prior year. Compared to the year
ended 31 March 2020, revenue increased 18.3%; this reflects the
excellent trading across all four sectors. Growth came from
increased volumes and new contracts as well as renewals and
extensions with existing customers. The Group also benefited from
the full year impact of a number of the new contracts such as the
Waitrose & Partners 'dark store', Dobbies Garden Centres and
HMRC Inland Border Clearance facilities which commenced late in the
previous year. Growth was particularly strong in the eFulfilment
sector from two-person home deliveries, omnichannel and high-volume
eFulfilment.
The Group's underlying profit before tax also saw significant
growth of 23.1%, increasing by GBP10.9m to GBP58.1m, with growth of
10.0% against the year ended 31 March 2020. The underlying profit
margin has strengthened to 4.1% (2021: 3.9%). This is despite
headwinds in labour and fuel costs, and other inflationary
pressures, which are mostly mitigated by our business model and
strategy. Revenue from open book contracts which provide protection
from price increases was 72% (2021: 69%) of our total revenue.
Furthermore, for the majority of our closed book contracts,
contract renegotiations have been completed in the year with price
increases agreed at an average of 15%. In addition, our driver
training programmes have enrolled over 480 colleagues to become
future drivers in our business and this both ensures a good
pipeline of future drivers as well as reducing the reliance on more
expensive agency labour.
Statutory profit before tax of GBP54.8m (2021: GBP46.2m as
restated) is impacted by non-underlying costs primarily reflecting
cloud computing configuration and customisation costs now expensed
as a result of changes in accounting guidance and
acquisition-related costs. Non-underlying credits include the
release of a historic warranty provision and consequential gains on
business and asset disposals. Profit after tax for the year on a
statutory basis increased to GBP47.9m (2021: GBP39.1m as restated),
an increase of 22.5%.
Underlying EPS, which excludes earnings from non-underlying
items, increased by 27.5% to 40.8p (2021: 32.0p), reflecting
increased profits and the benefit of a lower effective tax rate.
Basic EPS increased by 22.5% to 38.6p (2021: 31.5p as
restated).
Acquisition of Cygnia Logistics
On 10 September 2021, the Group acquired Cygnia Logistics, a
specialist in multichannel fulfilment with expertise spanning the
full breadth of their customers' requirements, including
high-volume order fulfilment, returns and carrier management
services. The Group paid consideration of GBP23.9m for the business
including the repayment of borrowings acquired and there was a
further GBP3.7m of cash outflow in respect of working capital
acquired and capital expenditure incurred after the lockbox date.
The accounting for the acquisition has been finalised and further
details can be found in Note 11 to the accompanying financial
statements.
Cygnia contributed GBP22.6m to revenue in the period since
acquisition in September 2021 and, alongside our existing automated
facilities, has resulted in significant new business wins. Customer
retention has been strong, with Wincanton re-securing over 95% of
Cygnia's existing customers at contract renewal.
Systems investment
We have successfully implemented phase one of a new
enterprise-wide finance and HR system, Oracle Cloud, across the
business, on time and on budget. The new system, together with the
standardised processes and controls to support it, are being
embedded. We are moving into phase two of the project, which is to
rationalise and insource payroll operations across the business and
is scheduled to be completed in 2022. Following new accounting
guidance (an IFRS Interpretations Committee agenda decision), the
costs of this project can no longer be capitalised and costs
incurred in the year have been expensed as a non-underlying charge
of GBP4.1m. To complete this project over the next 12 months, a
similar cost to this year is expected to be incurred.
Sector revenue
2022 2021 Change
GBPm GBPm %
-------------------- -------- ------- --------
eFulfilment 223.2 144.4 54.6%
Public & Industrial 284.2 245.6 15.7%
Grocery & Consumer 517.6 447.0 15.8%
General Merchandise 396.4 334.3 18.6%
Ongoing operations 1,421.4 1,171.3 21.4%
--------------------- -------- ------- --------
Disposed businesses - 50.6 (100.0)%
--------------------- -------- ------- --------
Total 1,421.4 1,221.9 16.3%
--------------------- -------- ------- --------
eFulfilment was our fastest growing sector for the second
successive year, reflecting the strong demand for its services from
retail markets. Organic growth was 38.9% reflecting both new
business wins as well as the full year impact of contract wins in
the previous year which included the Waitrose & Partners 'dark
store'. Our investment into The WEB, Rockingham, an automated
facility, also provided further growth capacity where we commenced
operations with Lakeland, Snug and Saint-Gobain. In time the
recently secured contract with The White Company will transition to
this facility. The acquisition of Cygnia delivered additional
revenue to the sector of GBP22.6m. This was slightly down on our
expectation reflecting some softening in consumer online demand
during the final quarter although the sales pipeline has presented
some good prospects for continued growth.
The Public & Industrial sector saw full year revenue growth
of 15.7% and importantly grew against pre-pandemic levels. The
recovery seen during the second half of the previous year continued
within the construction and energy markets. The strategy to
increase our public sector business saw the full year impact of our
HMRC Inland Border Clearance facility contract and we were
successful in securing a new contract with Defra (border checks and
clearance of imported plants and animals) where mobilisation
commenced towards the end of the year. We also started a new
contract to receive, sort and store PPE on behalf of the UK
Government, which was facilitated through our innovative shared
warehousing platform, OneVAST warehouse. Finally, we also expanded
our relationship with BAE Systems through an additional site at
Linwood.
Both Grocery & Consumer and General Merchandise sectors have
seen similar levels of strong growth in the year reflecting the
largely strong consumer demand for our customers' products as well
as contract expansion and new business wins. We continue to support
the growth of the Kingfisher Group and opened a further
distribution centre in Daresbury, welcoming 400 new colleagues to
Wincanton. We also won new work with MGA Entertainment and Primark
and benefited from the full year revenues of Heineken and
Kelkay.
The mix of open to closed book business continues to be a focus
as we seek to balance the relative risks and opportunities
presented from each sector. With strong growth across all four
sectors the mix of business remained fairly consistent with revenue
from open book contracts increasing slightly to 72% (2021:
69%).
Net financing costs
2022 2021 Change
GBPm GBPm GBPm
-------------------------------------------------- ------ ----- ------
Interest income - 0.1 (0.1)
Interest on the net defined benefit pension asset 1.1 2.3 (1.2)
Interest expense (2.1) (2.8) 0.7
Unwinding of discount on provisions (0.4) (0.4) -
Interest on lease liabilities (5.2) (3.8) (1.4)
-------------------------------------------------- ------ ----- ------
Net financing costs (6.6) (4.6) (2.0)
-------------------------------------------------- ------ ----- ------
Net financing costs were GBP6.6m (2021: GBP4.6m), GBP2.0m higher
year on year. The largest proportion of this relates to interest on
lease liabilities which reflects a higher proportion of leased
assets acquired for new contracts.
Bank interest payable on loans of GBP2.1m (2021: GBP2.8m)
includes commitment fees and arrangement fees of GBP0.7m (2021:
GBP1.5m).
Non-cash net interest income of GBP1.1m (2021: GBP2.3m) relates
to the net defined benefit pension asset. The discount rate applied
in calculating the interest decreased from 2.3% to 2.0%, reducing
the net position from GBP2.3m to GBP1.1m in the current year.
Taxation
2022 2021 Change
GBPm GBPm GBPm
--------------------------------------------------- ----- ----- --------
Underlying profit before tax(1) 58.1 47.2 10.9
--------------------------------------------------- ----- ----- --------
Underlying tax charge (7.5) (7.5) -
Non-underlying tax 0.6 0.4 0.2
--------------------------------------------------- ----- ----- --------
Tax charge as reported (6.9) (7.1) 0.2
--------------------------------------------------- ----- ----- --------
Effective tax rate on underlying profit before tax 12.9% 15.9% (300bps)
--------------------------------------------------- ----- ----- --------
1 Refer to the Alternative Performance Measures section at the
end of this review and Note 2 to the accompanying financial
statements.
The underlying tax charge of GBP7.5m (2021: GBP7.5m) represents
an underlying effective tax rate (ETR) of 12.9% (2021: 15.9%) on
underlying profit before tax and is stated before net tax credits
of GBP0.6m (2021: GBP0.4m) in respect of non-underlying items.
Corporation tax paid in the year was GBP3.3m (2021: GBP5.7m).
The ETR is lower than the statutory rate of 19.0%, in part due
to the introduction of super capital allowances of 130% on
qualifying assets which will remain effective until 31 March 2023.
The benefit of this deduction has reduced underlying tax by GBP1.4m
resulting from the permanent deduction of 30% on qualifying capital
spend and has reduced the tax paid in the year by GBP5.2m. In
addition, the Group has optimised the use of tax losses and will
accelerate tax payments to benefit from the change in tax rates
from 19% to 25% from 1 April 2023.
In line with the increase in the corporation tax rate to 25%
from 1 April 2023, the rate at which deferred tax is calculated has
increased. Net deferred tax at the end of the year is a liability
of GBP16.9m (2021: GBP1.6m) which mainly comprises deferred tax
liabilities related to the net pension assets, partially offset by
deferred tax assets arising on tax losses carried forward and the
tax treatment of IFRS 16 leases. As the movement in deferred tax
liability related to the net pension asset is reported through
other comprehensive income it does not impact the profit and loss
tax charge.
Profit after tax and earnings per share
Underlying profit before tax for the year increased by 23.1% to
GBP58.1m (2021: GBP47.2m as restated) due to the increased revenue
as outlined above. There was also a smaller contribution to
underlying profits resulting from improved margins across the
Group, following the implementation of cost control measures and
contract renegotiations completed in the year. This increase was
partially offset by increased net financing costs, principally due
to higher interest payable on leases and less interest income on
the defined benefit pension surplus.
Underlying profit after tax for the year is GBP50.6m (2021:
GBP39.7m). The increase of 27.5% reflects the increase in
underlying profit before tax as well as the reduction in the
underlying effective tax rate from 15.9% to 12.9% as explained
above.
Profit after tax for the year on a statutory basis increased to
GBP47.9m (2021: GBP39.1m as restated), an increase of 22.5%. This
reflects increases in non-underlying costs primarily relating to
cloud computing configuration and customisation costs now expensed
as a result of changes in accounting guidance and
acquisition-related costs. Non-underlying credits include the
release of a historic warranty provision and consequential gains on
business and asset disposals.
Underlying EPS, which excludes earnings from non-underlying
items, increased by 27.5% to 40.8p (2021: 32.0p). Basic EPS
increased by 22.5% to 38.6p (2021: 31.5p as restated).
The calculation of these EPS measures is set out in Note 5 to
the accompanying financial statements. The weighted average number
of shares used in the calculation of basic EPS is impacted by
shares issued and purchased during the year related to share
options, and for diluted EPS, by share options in issue not yet
exercised.
Dividends and dividend policy
2022 2021
pence pence
----------------- ------ ------
Interim 4.00 2.85
Final (proposed) 8.00 7.50
----------------- ------ ------
Total 12.00 10.35
----------------- ------ ------
In setting the dividend the Board considers a range of factors,
including the Group's strategy (including downside sensitivities),
the current and projected level of distributable reserves and
projected cash flows, including cash payments to the pension scheme
and deferred payment arrangements.
The Board is proposing a final dividend of 8.0p (2021: 7.5p),
which, together with the interim dividend of 4.0p per share (2021:
2.85p per share), will result in a total dividend per share for
2022 of 12.0p (2021: 10.35p). This brings the total dividend back
above pre-pandemic levels and broadly tracks the improvement in
underlying earnings. The proposed final dividend is subject to
approval by shareholders at the Annual General Meeting on 12 July
2022 and if approved by shareholders, will be paid on 5 August 2022
to shareholders on the register on 15 July 2022. The estimated
final dividend amount to be paid is GBP10m and in accordance with
Adopted IFRS has not been included as a liability in these
statements.
Dividend payments in the year of GBP14.3m (2021: GBP3.5m)
comprised the final 2021 dividend and the 2022 interim dividend
(2021: interim 2021 dividend only).
Financial position
The summary financial position of the Group is set out
below:
2021
2022 Restated(1) Change
GBPm GBPm GBPm
----------------------------------------------------------------------- -------- ------------ -------
Non-current assets (excluding pension assets) 325.6 235.1 90.5
Net current liabilities (excluding net cash) (156.2) (158.0) 1.9
Non-current liabilities (excluding pension liabilities and borrowings) (224.0) (138.9) (85.1)
Net cash (excluding lease liabilities) 3.7 11.9 (8.2)
Net pension asset (excluding deferred tax) 114.5 48.2 66.3
----------------------------------------------------------------------- -------- ------------ -------
Net assets 63.6 (1.7) 65.3
----------------------------------------------------------------------- -------- ------------ -------
(1) The comparative for non-current assets has been restated
following a required change in accounting policy as explained in
Note 1 to the accompanying financial statements.
The increase in net assets of GBP65.3m since 31 March 2021
relates primarily to the positive movement on the net pension asset
which has increased to GBP114.5m (2021: GBP48.2m), an increase of
GBP66.3m. The pension movement is primarily due to the impact of
external market factors as explained in the Pension section
below.
The increase in both non-current assets and non-current
liabilities during the year reflects significant new leases for
property and other assets, including those acquired with Cygnia,
with right-of-use (ROU) assets being offset by increased lease
liabilities. Movements in non-current assets also include goodwill
recognised on the business combination, with non-current
liabilities reflecting increased borrowings and deferred tax
liabilities, mainly related to the net pension asset.
Revenue growth and good cash management have led to the Group
reporting a net cash position of GBP3.7m at 31 March 2022 (2021:
GBP11.9m net cash), despite reporting a net debt position at the
end of H1 of GBP16.4m, shortly after completion of the Cygnia
acquisition. The prior year cash position included the benefit of
significant temporary cash protection measures including the
deferral of VAT, corporation tax and pension recovery payments and
the Coronavirus Job Retention Scheme (CJRS), which were repaid
during the second half of the prior year.
Cash flow and net debt/cash
Net cash at 31 March 2022 was GBP3.7m (2021: net cash GBP11.9m),
reflecting a net cash outflow of GBP8.2m over the intervening 12
months. Free cash flow, defined as the movement in net debt/cash
before acquisitions, pension payments, dividends and the purchase
of own shares, was an inflow of GBP54.0m (2021: GBP43.8m
inflow).
2021
2022 (Restated)(1) Change
GBPm GBPm GBPm
-------------------------------------- ------ -------------- ------
Underlying EBITDA(2) 108.3 95.2 13.1
Working capital 6.0 3.0 3.0
Tax (3.3) (5.7) 2.4
Net interest (8.3) (6.3) (2.0)
Other items (2.7) (2.2) (0.5)
Repayment of obligations under leases (37.7) (35.1) (2.6)
Capital expenditure (11.2) (9.6) (1.6)
Proceeds from asset disposals 2.9 4.5 (1.6)
Free cash flow 54.0 43.8 10.2
Pension payments (18.5) (18.3) (0.2)
Dividends (14.3) (3.5) (10.8)
Own shares acquired (1.8) - (1.8)
Acquisition:
- Consideration (23.9) - (23.9)
- Additional net assets acquired (3.7) - (3.7)
(Decrease)/increase in net cash (8.2) 22.0 (30.2)
-------------------------------------- ------ -------------- ------
1 Certain comparatives have been restated due to a required
change in accounting policy which has resulted in costs previously
capitalised now presented as a non-underlying expense within net
operating profit, as explained in Note 1 to the accompanying
financial statements.
2 Refer to the Alternative Performance Measures section at the
end of this review and Note 2 to the accompanying financial
statements.
Working capital movement in the year resulted in an inflow of
GBP6.0m (2021: inflow of GBP3.0m) driven mainly by good cash
management, the mix of revenue growth from both new and existing
customers on favourable terms, and a timing difference on payables
supporting growth.
The Group paid cash tax in the year of GBP3.3m, benefiting from
enhanced capital allowances together with tax deductions received
on pension contributions. Additional tax of GBP3.9m was paid in
April 2022 as a consequence of group tax losses being deferred
until future years to benefit from the higher rate of tax 25% from
1 April 2023.
Net interest includes arrangements fees of GBP1.4m paid on
completion of the Group successfully renegotiating its revolving
credit facility. During H2, additional drawdowns were made against
the Group's revolving credit facility principally to fund the
Cygnia acquisition and support cashflows associated with the peak
period for the foundation markets.
The Group manages capital expenditure tightly as demonstrated
during the pandemic period. This year it has made significant
investment in the upgrade and replacement of assets where
appropriate. Capital expenditure increased to GBP11.2m (2021:
GBP9.6m) supporting growth through investment in automation and
innovation in Nuneaton and The WEB, Rockingham; the prior year has
been restated to reflect the change in accounting policy around
cloud computing implementation costs.
Net proceeds from asset disposals of GBP2.9m relates to the
disposal of a number of specialist vehicles in the year and
includes the proceeds of assets recorded as held for sale at 31
March 2021. In the prior year, the net proceeds of GBP4.5m
primarily relate to the disposal of sundry vehicles.
Other items of GBP2.7m (2021: GBP2.2m) comprise non-cash items
relating to net movements on provisions and share-based payment
charges in the year. It also includes cash costs relating to the
upgrade of our finance and HR systems that have been expensed in
line with our revised accounting policy around cloud computing
implementation costs and acquisition-related expenses, offset by
contingent consideration from the disposal of our Specialist
Services businesses in the prior year.
The cash contributions to fund the pension deficit in the
current year to 31 March 2022 were GBP19.2m (31 March 2021:
GBP18.9m) less administration costs of GBP0.7m (2021: GBP0.7m). The
Group expects to contribute GBP20.7m to the pension scheme in the
next financial year.
Equity dividends of GBP14.3m (2021: GBP3.5m) were paid in the
year, reflecting the return to the Group's progressive dividend
policy. The interim cash dividend paid in the second half was
GBP4.9m (2021: GBP3.5m). As noted above, the recommended final
dividend for the year ended 31 March 2022 will result in an
estimated cash outflow of GBP10.0m in the first half of the year
ended 31 March 2023.
The Group acquired 500,000 of its own shares (2021: nil) during
the year for a total payment of GBP1.8m (2021: nil) to provide
shares for the Employee Benefit Trust in respect of its long term
incentive plan commitments.
The acquisition of Cygnia in September 2021 resulted in a net
cash outflow of GBP27.6m as described above.
Financing and covenants
The Group has a GBP175.0m (2021: GBP141.2m) committed RCF which
has been renegotiated during the year and matures in March 2026.
The headroom in these committed facilities in addition to net cash
of GBP3.7m at 31 March 2022 was GBP150.0m (2021: GBP132.2m). The
Group also has a Receivables Purchase Facility (RPF) and operating
overdrafts which provide day to day flexibility, amounting to a
further capacity of up to GBP50m and GBP7.5m respectively in
uncommitted facilities. At 31 March 2022, utilisation of the
Group's non-recourse RPF was GBP4.1m (2021: GBP7.1m).
Wincanton operates comfortably within its banking covenants, as
summarised in the table below:
Covenant Ratio At 31 March 2022 At 31 March 2021
------------------- -------- ---------------- ----------------
Leverage ratio <3.0:1* 0.7 0.3
Interest cover >3.5:1 38.8 29.2
Fixed charge cover >1.4:1 2.7 2.8
------------------- -------- ---------------- ----------------
* Leverage ratio was <2.75:1 under previous RCF agreement
The calculation of these covenants and reconciliations to
reported numbers are included in Note 10 to the accompanying
financial statements.
Pensions
The Group operates a number of pension arrangements in the UK
and Ireland.
Defined benefit arrangements
The Wincanton plc Pension Scheme (the Scheme) includes defined
benefit sections which were closed to future accrual on 31 March
2014.
The Group has reported an IAS 19 net asset of GBP114.5m
(GBP85.9m net of deferred tax) at 31 March 2022 (2021:
GBP48.2m).
GBPm 31 March 2022 30 September 2021 At 31 March 2021
------------------ ------------- ----------------- ----------------
Assets 1,208.3 1,256.4 1,211.9
Liabilities (1,093.8) (1,188.8) (1,163.7)
------------------ ------------- ----------------- ----------------
Net pension asset 114.5 67.6 48.2
------------------ ------------- ----------------- ----------------
Discount rate (%) 2.7% 2.0% 2.0%
------------------ ------------- ----------------- ----------------
The movement in the net defined benefit asset in the year was
primarily the result of the impact of external market factors.
Scheme liabilities are calculated using a discount rate based on
high quality corporate bond yields while Scheme assets are hedged
against movements in gilt yields. Credit spreads on corporate bonds
increased due to market uncertainty resulting in a reduction in the
liabilities, which was not matched with a corresponding fall in the
value of assets as at 31 March 2022.
The deficit funding contribution in the year, net of expenses,
was GBP18.5m (2021: GBP18.3m).
The estimated actuarial deficit on a technical provision basis
has reduced to GBP37m at 31 March 2022, compared to GBP67m at 31
March 2021. At 31 March 2022, the Scheme's investments were split
between 19% in return-seeking assets and 81% in defensive assets.
The inflation and interest rate risks facing the Scheme are hedged
to mitigate the quantum of any future movements in the actuarial
valuation.
The sensitivities of the present value of the Scheme obligations
to changes in the key actuarial assumptions have been assessed; an
increase of 0.25% in the discount rate has been estimated to
further reduce the liability by GBP41m and reduce the assets by
GBP52m, a net reduction in the net asset of GBP11m.
Defined contribution arrangements
The Group's defined contribution arrangements include the
Retirement Savings Section, including the Auto Enrolment section,
and the Pension Builder Plan in the UK, Cygnia contributions to a
Master trust and a separate similar local scheme in Ireland. The
charge incurred for these arrangements total GBP36.7m (2021:
GBP34.0m).
Contingent liabilities
From time to time, the Group is notified of legal claims in
respect of work carried out and the potential exposure can be
material. Where management believes we are in a strong position to
defend these claims and the likelihood of an outflow of economic
benefit is not probable, no provision is made.
The Group has received notification of a potential claim from a
former customer and is in the early stages of defending this claim.
At this time, the Group considers that it is not probable that any
claim will result in an outflow of economic benefit. The Group is
actively seeking further information to substantiate the
allegations made. Given the early stage of the legal and commercial
process it is not practicable to make an estimate of the potential
financial impact. In parallel, the Group continues to work with its
insurance providers to confirm coverage if required.
Going concern
The financial statements have been prepared on a going concern
basis. Having considered the ability of the Company and the Group
to operate within its existing facilities and meet its debt
covenants, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future.
In determining whether the financial statements can be prepared
on a going concern basis, the Directors considered the Group's
business activities, together with the principal risks and
uncertainties likely to affect its future performance and position.
The review also included the financial position of the Group, its
cash flows, and adherence to its banking covenants.
The Board considered the following key uncertainties in
considering the Group's future:
-- a deterioration in trading performance together with unplanned working capital outflows
-- further waves of the Covid-19 pandemic and its impact on trading
-- a decline in current market conditions, including the impact
of further increases in inflation and increased competition,
resulting in lower Group revenues and profits
The Board has also considered a base case and a severe but
plausible downside case. In both scenarios, the Group has adequate
headroom in existing bank facilities to meet its liabilities as
they fall due, and it complies with the financial covenants under
its committed borrowing facilities throughout the forecast
period.
The forecasts on which the going concern assessment is based
have also been subject to sensitivity analysis and stress testing
to assess the impact of the above uncertainties. The Directors also
reviewed the potential mitigation actions that could be taken in
the event that revenues are worse than expected, to ensure that
operating profit and cash flows are protected.
The Directors have considered the impact of climate related
matters on the Group's going concern assessment, and do not expect
this to have a significant impact on the going concern assessment
throughout the forecast period to 30 September 2023.
Further details are provided in Note 1 'Accounting policies' in
the accompanying financial statements.
Alternative Performance Measures
The Alternative Performance Measures (APMs) or underlying
results reported in this announcement represent statutory measures
adjusted for items which management considers could distort the
understanding of performance and comparability year on year.
APMs are used by the Board to assess the Group's performance and
are applied consistently from one period to the next. They
therefore provide additional useful information for shareholders on
the underlying performance and position of the Group but should not
be viewed in isolation. Additionally, underlying profit before tax
is used in determining annual bonus payments and underlying EPS is
used as a key performance indicator for most awards under the Long
Term Incentive Plan (LTIP) share incentive scheme. These measures
are not defined by IFRS and are not intended to be a substitute for
IFRS measures. Wincanton's underlying measures may not be
comparable to similarly titled measures used by other
companies.
The Group presents underlying EBITDA, operating profit, profit
before tax and EPS which are calculated as the statutory measures
stated before non-underlying items. These are items which the
Directors consider separate disclosure would assist both in a
better understanding of the financial performance achieved and in
making projections of future results. A balanced approach to both
gains and losses is applied, to be both consistent and clear in the
accounting and disclosure of such items.
The Group identifies items as non-underlying based on the
following principles:
-- items that are significant in nature. The event or
transaction is clearly unrelated to, or only incidentally related
to, the trading activities of the Group or the event or transaction
would not reasonably be expected to recur in the foreseeable
future; and/or
-- items that are significant in size. The event is considered
significant in size and therefore distorts the underlying
results
In addition, the Group will always disclose the items below as
'non-underlying items':
-- amortisation charges relating to acquired intangible assets
-- profits or losses arising on the disposal of continuing or discontinued operations
-- adjustments to amounts previously reported as non-underlying
-- the tax impact of non-underlying items
Further details of underlying results and the definition of
non-underlying items can be found in Note 2 to the accompanying
financial statements.
EBITDA refers to earnings (operating profit) before interest,
tax, depreciation of property, plant and equipment and right-of-use
assets and amortisation of finite-lived intangible assets. This
measure also excludes the impact of impairment of non-current
assets.
Other APMs used which relate to cash flow are net debt/cash and
free cash flow. Net debt/cash is the sum of cash and bank balances,
bank loans and overdrafts and other financial liabilities excluding
lease liabilities. Note 7 to the accompanying financial statements
provides a breakdown of net debt/cash for the current and prior
year. Free cash flow is defined as the movement in net debt/cash
before acquisitions, pension payments, dividends and purchase of
own shares.
The table below reconciles the APMs to the statutory reported
measures.
2022 2021
-------------------------------- ------------------------------------- ------------------------------------------
Non-underlying
Non-underlying items Statutory
Underlying items Statutory Underlying (Restated)(1) (Restated)(1)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ---------- -------------- --------- ---------- -------------- --------------
Revenue 1,421.4 - 1,421.4 1,221.9 - 1,221.9
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
EBITDA 108.3 (2.7) 105.6 95.2 0.6 95.8
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
EBITDA margin (%) 7.6% - 7.4% 7.8% - 7.8%
Depreciation, amortisation and
impairments (43.6) (0.6) (44.2) (43.4) (1.6) (45.0)
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
Operating profit 64.7 (3.3) 61.4 51.8 (1.0) 50.8
Net financing costs (6.6) - (6.6) (4.6) - (4.6)
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
Profit before tax 58.1 (3.3) 54.8 47.2 (1.0) 46.2
Income tax (7.5) 0.6 (6.9) (7.5) 0.4 (7.1)
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
Profit after tax 50.6 (2.7) 47.9 39.7 (0.6) 39.1
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
Earnings per share(2) 40.8p 38.6p 32.0p 31.5p
Dividend per share 12.00p 12.00p 10.35p 10.35p
Net cash excluding lease
liabilities 3.7 3.7 11.9 11.9
--------------------------------- ---------- -------------- --------- ---------- -------------- --------------
1 Comparatives have been restated following a required change in
accounting policy as explained in Note 1 to the accompanying
financial statements.
2 Refer to Notes 2 and 5 to the accompanying financial
statements.
Non-underlying items
2021
2022 (Restated)(1) Change
GBPm GBPm GBPm
-------------------------------------------------- ---- ------- ---------------- --------
Cloud computing configuration and customisation
costs(1) (4.1) (2.2) (1.9)
Acquisition-related costs (1.0) 0.2 (1.2)
Amortisation of acquired intangibles (0.6) - (0.6)
Release of warranty provision 1.0 - 1.0
Gain on disposal of businesses 0.9 0.4 0.5
Net profit on disposal of assets and
freehold property 0.5 1.3 (0.8)
Pension Scheme - Guaranteed Minimum
Pension (GMP) - (0.7) 0.7
-------------------------------------------------------- ------- ---------------- --------
(3.3) (1.0) (2.2)
------------------------------------------------------- ------- ---------------- --------
1Certain comparatives have been restated due to a required
change in accounting policy which has resulted in costs previously
capitalised now presented as a non-underlying expense within net
operating profit, as explained in Note 1 to the accompanying
financial statements.
The Group has reviewed and clarified its policy on
non-underlying items during the year and seeks to take a balanced
approach to both gains and losses, to be both consistent and clear
in the accounting and disclosure of such items.
Cloud computing configuration and customisation costs relate to
a major systems implementation which has gone live during the year.
These costs have been expensed following a revised accounting
policy implemented in accordance with updated accounting guidance.
They have been presented as a non-underlying item as they are not
reflective of underlying performance. Comparatives have been
restated to reflect the change of accounting policy, with GBP2.2m
previously capitalised now being expensed.
The Group has incurred acquisition-related costs, professional
fees and integration costs of GBP1.0m related to the acquisition of
Cygnia, which have been recognised as an expense as required by
accounting standards. In the prior year, a balance related to
estimated costs of aborted M&A activities was released
following the conclusion of these bids.
The Group has released the value of a potential claim under a
historic warranty provision now considered to be remote and has
recognised a gain of GBP0.9m arising from contingent consideration
recognised on the Group's disposal of its Containers business in
October 2020. Further gains which relate to the disposal in the
year of a number of specialist vehicles that were not required for
ongoing operations have also been treated as non-underlying.
Cautionary statement
This announcement has been prepared to provide the Company's
shareholders with a fair review of the business of the Group and a
description of the principal risks and uncertainties facing it. It
may not be relied upon by anyone, including the Company's
shareholders, for any other purpose. This announcement contains
forward-looking statements that are subject to risk factors
including the economic and business circumstances occurring from
time to time in countries and markets in which the Group operates
and risk factors associated with the Group's broad industry
sectors. By their nature, forward-looking statements involve a
number of risks, uncertainties and assumptions because they relate
to events and/or depend on circumstances that may or may not occur
in the future and could cause actual results and outcomes to differ
materially from those expressed in or implied by the
forward-looking statements. Forward-looking statements in this
announcement include, but are not limited to, statements about the
Group's future financial and operational performance, management's
ability to successfully execute the new strategy, and the ability
of the Group and its industry sectors generally to respond to the
effects and aftermath of the Covid-19 pandemic. No assurance can be
given that the forward-looking statements in this announcement will
be realised. Statements about the Directors' expectations, beliefs,
hopes, plans, intentions and strategies are inherently subject to
change and they are based on expectations and assumptions as to
future events, circumstances and other factors which are in some
cases outside the Group's control. Actual results could differ
materially from the Group's current expectations. It is believed
that the expectations set out in these forward-looking statements
are reasonable but they may be affected by a wide range of
variables which could cause actual results or trends to differ
materially.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MARCH 2022
2022 2021
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Non-underlying Total
Underlying Non-underlying Total Underlying (Restated)(1) (Restated)(1)
Note GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Revenue 1,421.4 - 1,421.4 1,221.9 - 1,221.9
Net operating costs (1,356.7) (3.3) (1,360.0) (1,170.2) (1.0) (1,171.2)
Share of results of joint
venture - - - 0.1 - 0.1
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Operating profit 64.7 (3.3) 61.4 51.8 (1.0) 50.8
Financing income 3 1.1 - 1.1 2.4 - 2.4
Financing cost 3 (7.7) - (7.7) (7.0) - (7.0)
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Profit/(loss) before tax 58.1 (3.3) 54.8 47.2 (1.0) 46.2
Income tax expense 4 (7.5) 0.6 (6.9) (7.5) 0.4 (7.1)
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Profit/(loss) attributable
to equity shareholders of
Wincanton plc 50.6 (2.7) 47.9 39.7 (0.6) 39.1
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
Earnings per share
- basic 5 40.8p 38.6p 32.0p 31.5p
- diluted 5 40.3p 38.2p 31.7p 31.2p
--------------------------- ---- ---------- -------------- --------- ---------- -------------- --------------
1 Certain comparatives have been restated due to a required
change in accounting policy as explained in Note 1 'Accounting
policies'.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2022
2021
2022 (Restated)(1)
Note GBPm GBPm
---------------------------------------------------------------------------------------- ---- ------ --------------
Profit for the year 47.9 39.1
---------------------------------------------------------------------------------------- ---- ------ --------------
Other comprehensive income/(loss)
Items which will not subsequently be reclassified to the income statement
Remeasurements of net defined benefit asset 9 47.6 (65.3)
Deferred tax relating to items that will not subsequently be reclassified to profit or
loss 4 (14.7) 12.4
---------------------------------------------------------------------------------------- ---- ------ --------------
32.9 (52.9)
Items which are or may subsequently be reclassified to the income statement
Net foreign exchange loss on investment in foreign subsidiaries (0.1) (0.2)
Other comprehensive income/(loss) for the year, net of income tax 32.8 (53.1)
---------------------------------------------------------------------------------------- ---- ------ --------------
Total comprehensive income/(loss) attributable to equity shareholders of Wincanton plc 80.7 (14.0)
---------------------------------------------------------------------------------------- ---- ------ --------------
1 Certain comparatives have been restated due to a required
change in accounting policy as explained in Note 1 'Accounting
policies'.
CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2022
2021
2022 (Restated)(1)
Note GBPm GBPm
---------------------------------------------- ---- ------- ---------------
Non-current assets
Goodwill and intangible assets 110.7 84.6
Property, plant, equipment and vehicles 25.9 21.0
Right-of-use assets 189.0 129.3
Investments, including those equity accounted - 0.2
Employee benefits 9 117.0 50.8
---------------------------------------------- ---- ------- ---------------
442.6 285.9
---------------------------------------------- ---- ------- ---------------
Current assets
Inventories 2.6 1.4
Trade and other receivables 207.4 190.2
Income tax receivable - 0.6
Cash at bank and in hand 7 28.7 30.6
---------------------------------------------- ---- ------- ---------------
238.7 222.8
Assets classified as held for sale - 0.9
---------------------------------------------- ---- ------- ---------------
238.7 223.7
---------------------------------------------- ---- ------- ---------------
Current liabilities
Income tax payable (3.3) -
Borrowings and other financial liabilities 7 - (9.7)
Lease liabilities (26.6) (32.3)
Trade and other payables (323.6) (303.7)
Provisions 8 (12.7) (15.1)
---------------------------------------------- ---- ------- ---------------
(366.2) (360.8)
---------------------------------------------- ---- ------- ---------------
Net current liabilities (127.5) (137.1)
---------------------------------------------- ---- ------- ---------------
Total assets less current liabilities 315.1 148.8
---------------------------------------------- ---- ------- ---------------
Non-current liabilities
Borrowings and other financial liabilities 7 (25.0) (9.0)
Lease liabilities (176.5) (113.4)
Employee benefits 9 (2.5) (2.6)
Provisions 8 (30.6) (23.9)
Deferred tax liabilities (16.9) (1.6)
(251.5) (150.5)
---------------------------------------------- ---- ------- ---------------
Net assets/(liabilities) 63.6 (1.7)
---------------------------------------------- ---- ------- ---------------
Equity
Issued share capital 12.5 12.5
Share premium 12.9 12.9
Merger reserve 3.5 3.5
Translation reserve (0.5) (0.4)
Own shares (2.2) (1.0)
Retained profits/(losses) 37.4 (29.2)
---------------------------------------------- ---- ------- ---------------
Total equity/(deficit) 63.6 (1.7)
---------------------------------------------- ---- ------- ---------------
(1) Certain comparatives have been restated due to a required
change in accounting policy as explained in Note 1 'Accounting
policies'.
These financial statements were approved by the Board of
Directors on 19 May 2022 and were signed on their behalf by:
James Wroath
Chief Executive Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2022
Issued Total
share Share Merger Translation Own Retained (losses)/ equity/
capital premium reserve reserve shares earnings (deficit)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Balance at 1 April 2020 12.5 12.9 3.5 (0.2) (1.5) (12.5) 14.7
Profit for the year
(restated) - - - - - 39.1 39.1
Other comprehensive loss - - - (0.2) - (52.9) (53.1)
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Total comprehensive loss
(restated) - - - (0.2) - (13.8) (14.0)
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Share based payment
transactions - - - - 0.5 0.1 0.6
Current tax on share based
payment transactions
(note 4) - - - - - 0.5 0.5
Dividends paid to
shareholders (note 6) - - - - - (3.5) (3.5)
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Balance at 31 March 2021
(restated) 12.5 12.9 3.5 (0.4) (1.0) (29.2) (1.7)
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Balance as at 1 April 2021 12.5 12.9 3.5 (0.4) (1.0) (29.2) (1.7)
Profit for the year - - - - - 47.9 47.9
Other comprehensive
(loss)/income - - - (0.1) - 32.9 32.8
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Total comprehensive
(loss)/income - - - (0.1) - 80.8 80.7
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Share based payment
transactions - - - - (1.2) (0.3) (1.5)
Current tax on share based
payment transactions
(note 4) - - - - - 0.3 0.3
Deferred tax on share
based payment
transactions (note 4) - - - - - 0.1 0.1
Dividends paid to
shareholders (note 6) - - - - - (14.3) (14.3)
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Balance at 31 March 2022 12.5 12.9 3.5 (0.5) (2.2) 37.4 63.6
-------------------------- -------- -------- -------- ----------- ------- -------------------------- ----------
Certain comparatives have been restated due to a required change
in accounting policy as explained in Note 1 'Accounting
policies'.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2022
2021
2022 (Restated)(1)
Note GBPm GBPm
---------------------------------------------------------------- ---- ------ --------------
Operating activities
Profit before tax 54.8 46.2
Adjustments for
- depreciation and amortisation 43.8 41.1
- research and development expenditure credit (0.6) (1.0)
- net financing costs 3 6.6 4.6
- impairments 0.4 2.3
- profit on disposal of property, plant, equipment and vehicles (0.1) (0.7)
- gain on derecognition of lease liabilities 1.2 -
- profit on disposal of businesses (0.9) (0.4)
- share of results of joint venture - (0.1)
- write down of trade investment - 0.1
- share based payment transactions 0.3 0.6
---------------------------------------------------------------- ---- ------ --------------
105.5 92.7
Decrease/(increase) in trade and other receivables (7.9) (64.8)
(Increase)/decrease in inventories (1.1) 0.6
Increase in trade and other payables 15.9 66.5
Decrease in provisions (1.7) (0.3)
Increase in employee benefits before pension deficit payment 0.9 1.5
Income taxes paid (3.3) (5.7)
---------------------------------------------------------------- ---- ------ --------------
Cash generated before pension deficit payment 108.3 90.5
Pension deficit payment 9 (18.5) (18.3)
---------------------------------------------------------------- ---- ------ --------------
Cash flows from operating activities 89.8 72.2
---------------------------------------------------------------- ---- ------ --------------
Investing activities
Proceeds from sale of property, plant and equipment 2.9 4.5
Purchase of business, net of cash acquired 11 (13.6) -
Net cash outflow from disposal of businesses - (0.2)
Interest received - 0.1
Additions of property, plant and equipment (10.7) (8.2)
Additions of computer software (0.5) (1.4)
---------------------------------------------------------------- ---- ------ --------------
Cash flows from investing activities (21.9) (5.2)
---------------------------------------------------------------- ---- ------ --------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
2021
2022 (Restated)(1)
Note GBPm GBPm
--------------------------------------------------------------- ----- ------- ----------------
Financing activities
Increase/(decrease) in borrowings 7 9.9 (62.0)
Repayment of borrowings acquired 11 (14.0) -
Own shares acquired (1.8) -
Payment of lease liabilities (37.7) (35.1)
Equity dividends paid 6 (14.3) (3.5)
Interest paid on borrowings (3.1) (2.6)
Interest paid on lease liabilities (5.2) (3.8)
--------------------------------------------------------------- ----- ------- ----------------
Cash flows from financing activities (66.2) (107.0)
--------------------------------------------------------------- ----- ------- ----------------
Net increase/(decrease) in cash and cash equivalents 1.7 (40.0)
Cash and cash equivalents at beginning of the year 27.0 67.0
--------------------------------------------------------------- ----- ------- ----------------
Cash and cash equivalents at end of the year 28.7 27.0
--------------------------------------------------------------- ----- ------- ----------------
Represented by:
- cash at bank and in hand 28.7 30.6
- bank overdrafts - (3.6)
28.7 27.0
--------------------------------------------------------------- ----- ------- ----------------
1 Certain comparatives have been restated due to a required change in accounting policy as
explained in Note 1 'Accounting policies'.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2022 and 31 March 2021. Statutory
accounts for the year ended 31 March 2022 will be delivered to the
Registrar of Companies following the Company's Annual General
Meeting. The Auditor has reported on those accounts; their report
was unqualified, did not draw attention by way of emphasis, and did
not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006. Statutory accounts for the year ended 31 March
2021 have been delivered to the Registrar of Companies. The Auditor
has reported on those accounts; their report was unqualified, did
draw attention by way of emphasis to going concern, and did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
The financial information contained in this results announcement
has been prepared on the basis of the accounting policies set out
in the statutory financial statements for the year ended 31 March
2022. Whilst the financial information included in this
announcement has been computed in accordance with the recognition
and measurement requirements of UK-adopted international accounting
standards (Adopted IFRS), as applicable to companies reporting
under those standards, this announcement does not itself contain
sufficient disclosures to comply with Adopted IFRS.
Standards, amendments and interpretations effective or adopted
in the year
The following standards and amendments became effective in the
year or were available for early adoption but did not have a
material impact on the consolidated financial statements:
-- Interest Rate Benchmark Reform Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16; and
-- Amendments to IFRS 16 Leases: Covid-19 Related Rent Concessions.
Prior year restatement
Change in accounting policy - Software-as-a-Service (SaaS)
arrangements
Following the IFRS Interpretations Committee (IFRIC) agenda
decision published in April 2021, the Group has reviewed its
accounting policy regarding the configuration and customisation
costs incurred when implementing a SaaS arrangement. These costs
were previously capitalised, but the accounting policy has been
changed to expense these costs given the latest IFRIC guidance.
The Group's revised policy aligns with the IFRIC agenda decision
whereby:
-- in SaaS arrangements where the Group controls the underlying
software, configuration and customisation costs are capitalised as
part of bringing the identified intangible asset into use
-- where the Group does not control the underlying software, but
the related configuration and customisation costs are not distinct
from access to the software, these costs are expensed over the SaaS
contract term
-- in all other circumstances, configuration and customisation
costs are recognised as an expense as incurred, except in the
limited instances where these costs result in a separately
identifiable intangible asset.
During the previous financial year, the Group commenced the
implementation of a new cloud based ERP and Human Resources system,
and at 31 March 2021, costs of GBP2.2m had been capitalised. The
above change in accounting policy has been applied retrospectively
and results in a prior period restatement to the 31 March 2021
primary statements, to recognise these costs as a non-underlying
expense within net operating expense. No costs had been incurred
prior to 1 April 2020 and as such there was no impact to the
balance sheet as at 31 March 2020, hence a balance sheet at that
date has not been presented.
The effect on the 31 March 2021 balance sheet is a reduction in
both intangible assets and retained earnings of GBP2.2m. The effect
on the 31 March 2021 cash flow statement is a decrease in cash
flows from operating activities of GBP2.2m, and a corresponding
reduction in cash outflows due to investing activities of
GBP2.2m.
Going concern
The Directors have concluded that it is reasonable to adopt a
going concern basis in preparing the financial statements. In
adopting the going concern basis, the Directors have considered
Wincanton's business activities, together with factors likely to
affect its future development and performance, as well as
Wincanton's principal risks and uncertainties.
The adoption of the going concern basis is based on an
expectation that the Group will have adequate resources to continue
in operational existence for at least 12 months from the signing of
the annual financial statements. For the purpose of this going
concern assessment, the Directors have considered an 18 month
period from the balance sheet date, aligned with the business
forecasting outlook period, to 30 September 2023. The Group has
reported a profit before tax of GBP54.8m for the year ended 31
March 2022 (2021: GBP46.2m as restated), net current liabilities of
GBP127.5m (2021: GBP137.1m) and net assets of GBP63.6m (2021: net
liabilities GBP1.7m as restated).
The Group's committed facilities at 31 March 2022 comprise a
syndicated Revolving Credit Facility (RCF) of GBP175.0m, which
matures in March 2026. The Group had GBP150.0m undrawn amounts
against the RCF facility as at 31 March 2022. The RCF requires the
Group to comply with the following three financial covenants at 30
September and 31 March each financial year:
-- leverage ratio: Consolidated total net borrowings of no more
than 3.0 times consolidated EBITDA for the preceding 12 month
period
-- interest cover: Consolidated EBITDA for the preceding 12
month period is not less than 3.5 times higher than consolidated
net finance charges for the preceding 12 month period
-- fixed charge cover: Consolidated EBITDA plus operating lease
costs for the preceding 12 month period is not less than 1.4 times
higher than consolidated net finance charges plus operating lease
costs for the preceding 12 month period.
See Note 10 for the covenant assessment as at 31 March 2022
which shows we have significant headroom across all of the
covenants.
In arriving at the conclusion on going concern, the Directors
have given due consideration to whether the funding and liquidity
resources above are sufficient to accommodate the principal risks
and uncertainties faced by the Group.
The Directors have reviewed the financial forecasts across a
range of scenarios. Wincanton has modelled a base case based on
revenue and profit run rates at the end of March 2022 that forms
the basis of the budget for the year ended 31 March 2023 and three
year plan.
The severe but plausible downside case assumes a deterioration
in trading performance, with a 10% reduction in profit before tax
resulting primarily from a reduction in budgeted trading from a
major customer. This scenario also assumes a deterioration in
working capital performance compared to the base case as a result
of delayed cash receipts, as well as a further material unplanned
cash outflow linked to a general commercial dispute. On top of
these downsides, an adverse working capital outflow was assumed to
occur in the year ended 31 March 2023 to simulate the timing impact
of a high inflationary environment on cash collection within our
open book contracts, where receipts are normally collected in
arrears.
These downsides would be partly offset by the application of
further mitigating actions to the extent they are under
management's control, including deferrals of capital and other
discretionary expenditure, as well as management bonus payment
deferral and claiming against insurance cover to offset any
commercial dispute.
In both scenarios, the Group has sufficient liquidity and
adequate headroom in the committed facilities set out above to meet
its liabilities as they fall due throughout the forecast period and
the Group complies with the financial covenants under the RCF at 30
September and 31 March throughout the forecast period.
The Group has carried out reverse stress tests against the
downside case to determine the performance levels that would result
in a breach of covenants. For a breach in covenants to occur during
the relevant period, the Group would need to experience a sustained
drop in EBITDA (-50%) versus the downside case throughout the
period. The Directors do not consider this scenario to be plausible
given the ability of the Group to continue its operations through
the recent pandemic, the customer contract security within the
Group and the buoyant nature of many of the markets within which
the Group operates.
Our assessment of the developments in Ukraine and the broader
region is that they are not likely to give rise to a material
financial impact on the Group, since the Group does not have any
operations outside of the United Kingdom and Ireland. As a result,
aside from the modelling of higher costs resulting from a rising
inflationary environment, it has not been deemed necessary to
include any further impact of the war in Ukraine within our
forecasts.
The Directors have also considered the impact of climate related
matters on the Group's going concern assessment and do not expect
this to have a significant impact on the going concern assessment
throughout the forecast period.
Since performing their assessment, there have been no subsequent
changes in facts and circumstances relevant to the Directors'
assessment of going concern.
Operating segments
Operating segments are identified on the basis of information
that is provided to the Chief Executive Officer (CEO) to allocate
capital and resources and to assess performance. The CEO is a
member of the Executive Management Team and the Board, and is the
Group's Chief Operating Decision-Maker. The Group is structured as
a single operating segment with one segment manager who reports to
the CEO.
2. Alternative performance measures (APMs)
The alternative performance measures (APMs) or underlying
results reported in this preliminary announcement represent
statutory measures adjusted for items which management consider
could distort the understanding of performance and comparability
year on year.
APMs are used by the Board to assess the Group's performance and
are applied consistently from one period to the next. They
therefore provide additional useful information for shareholders on
the underlying performance and position of the Group but should not
be viewed in isolation. Additionally, underlying profit before tax
is used in determining Annual Bonus payments and underlying EPS is
used as a key performance indicator for most awards under the LTIP
share incentive scheme. These measures are not defined by IFRS and
are not intended to be a substitute for IFRS measures. Wincanton's
underlying measures may not be comparable to similarly titled
measures used by other companies.
The Group presents underlying EBITDA, operating profit, profit
before tax and EPS which are calculated as the statutory measures
stated before non-underlying items. These are items which the
Directors consider separate disclosure would assist both in a
better understanding of the financial performance achieved and in
making projections of future results. A balanced approach to both
gains and losses is applied, to be both consistent and clear in the
accounting and disclosure of such items.
The Group identifies items as non-underlying based on the
following principles:
-- items that are significant in nature. The event or
transaction is clearly unrelated to, or only incidentally related
to, the trading activities of the Group or the event or transaction
would not reasonably be expected to recur in the foreseeable
future; and/or
-- items that are significant in size. The event is considered
significant in size and therefore distorts the underlying
results.
In addition, the Group will always disclose the items below as
'non-underlying items' for the following reasons:
-- amortisation charges relating to acquired intangible assets.
This relates to an acquisition event and therefore irregular in
nature. The intangible assets identified are primarily customer
contracts and relationships which are not recognised other than
through an acquisition. In order for the profitability of the
contracts acquired to be treated consistently with those of the
existing business, the amortisation charges are presented as
non-underlying
-- profits or losses arising on the disposal of continuing or
discontinued operations. These items are by their nature irregular.
There are likely to be gross impacts that are material even if the
net impact is not
-- adjustments to amounts previously reported as non-underlying.
Where an amount has been initially presented as non-underlying any
adjustment to this amount is also reported as non-underlying
-- the tax impact of non-underlying items. The tax impact may
not be material on an item, however it is appropriate for the tax
treatment to follow the treatment of the item as
non-underlying.
EBITDA refers to earnings (operating profit) before interest,
tax, depreciation of property, plant and equipment and right-of-use
assets and amortisation of finite-lived intangible assets. This
measure also excludes the impact of impairment of non-current
assets.
Other APMs used are net debt/cash and free cash flow, which
relate to liquidity. Net debt/cash is the sum of cash and bank
balances, bank loans and overdrafts and other financial liabilities
excluding lease liabilities. Free cash flow is defined as the
movement in net debt before acquisitions, pension payments,
dividends and purchase of own shares.
A reconciliation between statutory IFRS operating profit and
underlying operating profit is given below. Details of underlying
EPS can be found in Note 5.
2022 2021
Non-
underlying
Non- (Restated) Total
Underlying underlying Total Underlying 1 (Restated)(1)
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 1,421.4 - 1,421.4 1,221.9 - 1,221.9
Cost of sales (1,339.5) - (1,339.5) (1,149.3) - (1,149.3)
------------------------------ ---------- ----------- --------- ---------- ----------- --------------
Gross profit 81.9 - 81.9 72.6 - 72.6
Other income and gains on
disposal of assets 4.1 1.4 5.5 0.8 1.7 2.5
Administrative expenses (21.3) (4.7) (26.0) (21.7) (2.7) (24.4)
Share of results of associate - - - 0.1 - 0.1
------------------------------ ---------- ----------- --------- ---------- ----------- --------------
Operating profit 64.7 (3.3) 61.4 51.8 (1.0) 50.8
------------------------------ ---------- ----------- --------- ---------- ----------- --------------
1 Comparatives have been restated due to a required change in
accounting policy as explained in Note 1 'Accounting policies'.
Non-underlying items
Non-underlying items are as follows:
2021
2022 (Restated)(1)
GBPm GBPm
Cloud computing configuration and customisation costs (4.1) (2.2)
Acquisition related costs (1.0) 0.2
Amortisation of acquired intangibles (0.6) -
Release of warranty provision 1.0 -
Gain on disposal of businesses 0.9 0.4
Net profit on disposal of assets including freehold
property 0.5 1.3
Pension Scheme - Guaranteed Minimum Pension (GMP) - (0.7)
------------------------------------------------------ ----- ---------------
(3.3) (1.0)
------------------------------------------------------ ----- ---------------
1 Comparatives have been restated due to a required change in
accounting policy as explained in Note 1 'Accounting policies'.
a) Cloud computing configuration and customisation costs
Following the IFRS Interpretation Committee agenda decision
published in April 2021, the Group has revised its accounting
policy regarding the customisation and configuration costs incurred
when implementing a SaaS software arrangement.
The Group is currently undertaking a major systems
implementation for new cloud computing software, resulting in costs
of GBP4.1m being recognised as an expense. In addition, GBP2.2m of
implementation costs were incurred in the year to 31 March 2021 and
comparatives have been restated as detailed in Note 1. The first
phase of the implementation has gone live and was achieved on time
and to budget. To complete this project over the next twelve
months, a similar cost to this year is expected to be incurred
which will be treated as a non-underlying cost.
Due to the size and nature of these costs they are presented as
a non-underlying item as they are not reflective of underlying
performance.
b) Acquisition related costs
As part of the acquisition of Cygnia, the Group has incurred
acquisition related costs, professional fees and integration costs
of GBP1.0m which have been recognised as an expense as required by
IFRS 3 Business combinations.
In the prior year, a balance related to estimated costs of
aborted M&A activities was released following the conclusion of
these bids.
c) Amortisation of acquired intangibles
As part of the acquisition of Cygnia the Group has recorded
finite-life intangible assets identified as part of the purchase
price allocation accounting in line with IFRS 3 Business
combinations (see Note 11). The amortisation of these finite-life
intangibles is presented in non-underlying with a total expense in
the period of GBP0.6m.
d) Release of warranty provision
The Group has released the value of a potential claim under a
historic warranty provision, dating back to 2015, as any outflow of
economic benefits is now considered to be remote. As the original
provision was recognised as a non-underlying item, the write-back
has been recognised in a consistent manner.
e) Gain on disposal of businesses
In the year ended 31 March 2022, GBP0.9m of contingent
consideration was recognised related to the Group's disposal of its
Containers business in October 2020, which has been recognised as
non-underlying consistent with the presentation of the profit on
disposal recognised in the prior year. The contract terms allow for
further sums to be received until January 2024.
During the year ended 31 March 2021, the Group disposed of its
Containers business for consideration comprising cash plus
contingent consideration based on volumes associated with one
contract, and the Group also disposed of its Pullman Fleet Services
business. A profit on disposal of GBP0.4m was recognised in the
prior year on the disposal of these two businesses.
f) Net profit on disposal of assets including freehold
properties
Profits and losses arising on the disposal of significant assets
are considered non-underlying as these transactions are only
incidentally related to, the trading activities of the Group.
During the current and prior year the Group disposed of a number of
specialist vehicles that were not required for ongoing operations.
A profit on disposal of GBP0.5m has been recognised in the year
(2021: GBP0.8m).
In addition, in the prior year, GBP0.5m of transition costs were
released following completion of the disposal of two freehold
properties.
g) Pension Scheme - Guaranteed Minimum Pension (GMP)
A past service cost of GBP0.7m was recognised in the prior year
as an estimate of the impact of equalising historic pension
benefits for men and women, and this was accounted for as a
non-underlying item. This followed the judgement of the High Court
of Justice of England and Wales issued In November 2020.
3. Net financing costs
2022 2021
Note GBPm GBPm
-------------------------------------------- ---- ----- -----
Interest income - 0.1
Interest on the net defined benefit pension 9 1.1 2.3
-------------------------------------------- ---- ----- -----
1.1 2.4
-------------------------------------------- ---- ----- -----
Interest expense (2.1) (2.8)
Interest on lease liabilities (5.2) (3.8)
Unwinding of discount on provisions 8 (0.4) (0.4)
(7.7) (7.0)
-------------------------------------------- ---- ----- -----
Net financing costs (6.6) (4.6)
-------------------------------------------- ---- ----- -----
4. Income tax expense
Recognised in the income statement
2022 2021
GBPm GBPm
---------------------------- ----- -----
Current tax expense
Current year 3.5 5.0
Adjustments for prior years 4.5 (1.1)
---------------------------- ----- -----
8.0 3.9
---------------------------- ----- -----
Deferred tax expense
Current year 3.8 3.6
Adjustments for prior years (4.9) (0.4)
---------------------------- ----- -----
(1.1) 3.2
---------------------------- ----- -----
Total income tax expense 6.9 7.1
---------------------------- ----- -----
Reconciliation of total income tax expense
2022 2021
GBPm GBPm
---------------------------------------------------------------- ----- -----
Profit before tax 54.8 48.4
---------------------------------------------------------------- ----- -----
Income tax using the UK corporation tax rate of 19% (2019: 19%) 10.4 9.2
Non-deductible expenditure 0.1 0.2
Prior year research and development tax credits - (0.2)
Non-taxable income included in non-underlying items - (0.6)
Tax incentives - super capital allowances (1.4) -
Change in UK corporation tax rate (1.8) -
Adjustments for prior years
- current tax 4.5 (1.1)
- deferred tax (4.9) (0.4)
---------------------------------------------------------------- ----- -----
Total tax expense for the year 6.9 7.1
---------------------------------------------------------------- ----- -----
Recognised in other comprehensive income
2022 2021
GBPm GBPm
--------------------------------------------------------------------------- ----- ------
Items which will not subsequently be reclassified to the income statement:
Remeasurements of defined benefit pension liability 11.8 (12.4)
Impact of change in UK corporation tax rate 2.9 -
--------------------------------------------------------------------------- ----- ------
Total recognised in other comprehensive income 14.7 (12.4)
--------------------------------------------------------------------------- ----- ------
Recognised directly in equity
2022 2021
GBPm GBPm
------------------------------------------------- ----- -----
Current tax on share based payment transactions (0.3) -
Deferred tax on share based payment transactions (0.1) (0.5)
------------------------------------------------- ----- -----
(0.4) (0.5)
------------------------------------------------- ----- -----
The main UK corporation tax rate remained at 19% (2021: 19%).
The Finance Bill 2021 increases the corporation tax rate to 25% as
from 1 April 2023. This Bill was substantively enacted on 24 May
2021 and therefore has been incorporated into the deferred tax
balance at 31 March 2022.
The Group maintains an immaterial provision against tax risks,
which is included within income tax payable.
The total tax expense above includes a tax credit on
non-underlying items of GBP0.6m (2021: GBP0.4m).
5. Earnings per share
The basic earnings per share of 38.6p (2021: 31.5p as restated)
is calculated based on the profit attributable to the equity
shareholders of Wincanton plc of GBP48.0m (2021: GBP39.1m as
restated) and the weighted average shares in issue excluding those
held within an Employee Benefit Trust throughout the year as
calculated below of 124.1m (2021: 124.0m). The diluted earnings per
share calculation is based on there being 1.4m (2021: 1.4m)
additional shares deemed to be issued at GBPnil consideration under
the Company's share option schemes.
2022 2021
millions millions
------------------------------------------------------------------- --------- ---------
Weighted average number of Ordinary Shares (basic)
Issued Ordinary Shares at the beginning of the year(1) 124.0 123.9
Net effect of shares issued and purchased during the year 0.1 0.1
------------------------------------------------------------------- --------- ---------
124.1 124.0
------------------------------------------------------------------- --------- ---------
Weighted average number of Ordinary Shares (diluted)
Weighted average number of Ordinary Shares for the year (as above) 124.1 124.0
Effect of share options in issue 1.4 1.4
------------------------------------------------------------------- --------- ---------
125.5 125.4
------------------------------------------------------------------- --------- ---------
1 The number of shares excludes 0.7m Ordinary Shares (2020:
0.6m) being the weighted average number of the Company's own shares
held within an Employee Benefit Trust.
An alternative earnings per share measure is set out below,
being earnings before non-underlying items, including exceptional
items, amortisation of acquired intangibles and related tax where
applicable, since the Directors consider that this provides further
information on the underlying performance of the Group:
2022 2021
pence pence
------------------------------ ------ ------
Underlying earnings per share
- basic 40.8 32.0
- diluted 40.3 31.7
------------------------------ ------ ------
Underlying earnings are determined as follows:
2021
2022 (Restated)(1)
Note GBPm GBPm
------------------------------------------------------------------------- ---- ------ --------------
Profit for the year attributable to equity shareholders of Wincanton plc 47.9 41.3
Non-underlying items 3 3.3 (1.2)
Tax impact of non-underlying items (0.6) (0.4)
------------------------------------------------------------------------- ---- ------ --------------
Underlying earnings 50.6 39.7
------------------------------------------------------------------------- ---- ------ --------------
1 The comparatives have been restated due to a change in
accounting policy as explained in Note 1 'Accounting policies'.
Underlying earnings and underlying earnings per share for the
year ended 31 March 2021 include the results of the Containers and
Pullman Fleet Services businesses, which were sold during that
year.
6. Dividend
Dividends paid in the year comprise:
2022 2021
GBPm GBPm
----------------------------------------------------------------------------------- ----- -----
Final dividend for the year ended 31 March 2021 of 7.5p per share (2020: GBPnil) 9.4 -
Interim dividend for the year ended 31 March 2022 of 4.00p per share (2020: 2.85p) 4.9 3.5
----------------------------------------------------------------------------------- ----- -----
14.3 3.5
----------------------------------------------------------------------------------- ----- -----
The Directors are proposing a final dividend of 8.0p per share
for the year ended 31 March 2022 (2021: 7.5p) which, if approved by
shareholders, will be paid on 5 August 2022 to shareholders on the
register on 15 July 2022, an estimated total of GBP10m. The
proposed final dividend is subject to approval by shareholders at
the Annual General Meeting on 12 July 2022 and in accordance with
accounting standards has not been included as a liability in these
financial statements.
The Employee Benefit Trust has waived the right to receive
dividends in respect of the shares it holds.
7. Analysis of changes in net debt
31 March 2021 Cash flow Non-cash movements 31 March 2022
GBPm GBPm GBPm GBPm
-------------------------------------------------------- ------------- --------- ------------------ -------------
Bank loans and overdrafts (15.1) (9.9) - (25.0)
-------------------------------------------------------- ------------- --------- ------------------ -------------
Financial liabilities arising from financing activities (15.1) (9.9) - (25.0)
Cash at bank and in hand 30.6 (1.9) - 28.7
Bank overdrafts classed as cash equivalents (3.6) 3.6 - -
-------------------------------------------------------- ------------- --------- ------------------ -------------
Net cash excluding lease liabilities 11.9 (8.2) - 3.7
Lease liabilities (145.7) 42.9 (100.3) (203.1)
-------------------------------------------------------- ------------- --------- ------------------ -------------
Net debt including lease liabilities (133.8) 34.7 (100.3) (199.4)
-------------------------------------------------------- ------------- --------- ------------------ -------------
8. Provisions
Insurance Property Other provisions Total
Note GBPm GBPm GBPm GBPm
------------------------------------ ---- ---------- --------- ---------------- ------
At 1 April 2021 24.6 9.4 5.0 39.0
Created 9.8 3.2 2.2 15.2
Acquired with business combinations 11 - 4.2 0.6 4.8
Utilised (5.4) (2.0) (0.3) (7.7)
Released (5.1) (0.2) (3.1) (8.4)
Unwinding of discount 3 0.2 0.2 - 0.4
------------------------------------ ---- ---------- --------- ---------------- ------
At 31 March 2022 24.1 14.8 4.4 43.3
------------------------------------ ---- ---------- --------- ---------------- ------
Current 7.0 2.6 3.1 12.7
Non-current 17.1 12.2 1.3 30.6
------------------------------------ ---- ---------- --------- ---------------- ------
24.1 14.8 4.4 43.3
------------------------------------ ---- ---------- --------- ---------------- ------
The Group owns 100% of the share capital of an insurance company
which insures certain risks of the Group. The insurance provisions
in the above table are held in respect of outstanding insurance
claims, the majority of which are expected to be paid within one to
seven years. Provisions are released when the obligation no longer
exists or there is a reduction in management's estimate of the
liability. The discount unwinding arises primarily on the
employers' liability policy which is discounted over a period of
seven years at a rate based on the Group's assessment of a
risk-free rate. The Group provides standby letters of credit to the
fronting insurer for employers' liability and motor third party
claims totalling GBP19.7m (2021: GBP18.6m).
The property provisions are determined on a site by site basis
and comprise primarily provisions for dilapidations. Dilapidation
provisions comprise dilapidation estimates made in the normal
course of business. Provisions are released when the obligation no
longer exists or there is a reduction in the estimate. There
remains a small level of onerous lease provisions relating to short
term leases which are utilised over the relevant lease term, with
the majority expected to be utilised over the next year. The
dilapidations provisions are expected to be utilised at the end of
the lease term. Estimated costs have been discounted at a rate
based on the Group's assessment of a risk-free rate, with any
estimated income being discounted at a rate reflecting an
appropriate level of risk.
Other provisions include the estimated costs of the warranties
and indemnities provided on disposal of businesses, together with
the provision for sundry claims and settlements where the outcome
is uncertain.
9. Employee benefits
Pension schemes
Employees of Wincanton participated in funded pension
arrangements in the UK and Ireland during the year ended 31 March
2022, details of which are given below.
The principal Wincanton Scheme in the UK (the Scheme) is a
funded arrangement which has two defined benefit sections and two
defined contribution sections, called the Wincanton Retirement
Savings Section and the Wincanton Pension Builder Plan. The
employees of Wincanton Ireland Limited are eligible to participate
in a separate defined contribution scheme. Assets of these pension
arrangements are held in separate Trustee administered funds
independent of Wincanton.
Triennial valuation
The latest formal valuation of the Scheme was carried out as at
31 March 2020 by the Scheme actuary, Hymans Robertson, and was
agreed with the Trustee in September 2020. The annual deficit
funding contributions were agreed at GBP18.9m per annum from 1
April 2020 increasing in line with the Retail Prices Index over the
four years to March 2024, followed by GBP25.0m per annum from April
2024 increasing annually in line with the Retail Prices Index to
March 2027. Since the last triennial valuation as at 31 March 2020,
additional protection has been provided to the Scheme in the form
of a letter of credit of GBP3.0m increasing by GBP3.0m each year to
a maximum balance of GBP9.0m. At 31 March 2022 the letter of credit
provided totals GBP9.0m (2021:GBP6.0m).The annual deficit funding
contributions payable from April 2024 will be reduced by GBP3.0m if
a further letter of credit or similar is provided.
The agreement is also subject to other provisions agreed with
the Trustee, being:
-- additional contributions become payable if distributions to
shareholders (dividends and share buy-backs) grow year on year in
excess of 10%. The matching will only be in relation to the
distribution amounts above the threshold and are calculated at 50%
of the excess or 100% of any distribution growth above 15%.
-- additional contribution payments become payable in the event
of severe adverse Scheme investment performance where the actual
deficit in the Scheme exceeds an agreed threshold above the
expected deficit at the end of two consecutive six month reporting
periods.
-- a one-off payment to the Scheme of GBP6.0m in any year if
both the underlying profit after tax is lower than the level of
profit after tax reported in the 2017/18 financial year and the
dividend payout ratio increases to over 40% of profit after
tax.
As with the previous agreement, it has been agreed that certain
administration expenses would be paid directly by the Group and
deducted from the deficit funding contributions. The expenses,
which amount to GBP0.7m (2021: GBP0.7m) are not included in the
contributions below.
Contributions
The deficit funding contribution in the year, net of the above
expenses was GBP18.5m (2021: GBP18.3m). In addition, other
administration costs of the Scheme were borne directly by the Group
totalling GBP0.9m (2021: GBP0.8m).
In the financial year commencing 1 April 2022, the Group is
expecting to make deficit funding contributions of GBP20.1m being
the annual deficit contribution of GBP20.7m less certain
administration expenses mentioned above. In addition, other
administration costs of the Scheme will be borne directly by the
Group; these are expected to total GBP0.9m.
Net defined benefit asset
The assets and liabilities of the defined benefit sections of
the Group are calculated in accordance with IAS 19 Employee
Benefits (Revised) and are set out in the tables below.
The calculations under IAS 19 are based on actuarial assumptions
which are the best estimates chosen from a range of possible
assumptions about the long term future which, unless by chance,
will not necessarily be borne out in practice. The fair value of
the assets, which are not intended to be realised in the short
term, may be subject to significant change before they are
realised, and the present value of the liabilities are derived from
cash flow projections over long periods and are thus inherently
uncertain.
2022 2021
GBPm GBPm
------------------------------------------------------ --------- ---------
Present value of unfunded defined benefit obligations (2.5) (2.6)
Present value of funded defined benefit obligations (1,091.3) (1,161.1)
Fair value of Scheme assets 1,208.3 1,211.9
------------------------------------------------------ --------- ---------
Net defined benefit asset 114.5 48.2
------------------------------------------------------ --------- ---------
The movement in the net defined benefit asset in the year was
primarily the result of the impact of external market factors.
Scheme liabilities are calculated using a discount rate based on
high quality corporate bond yields while Scheme assets are hedged
against movements in gilt yields. Credit spreads on corporate bonds
increased due to market uncertainty resulting in a reduction in the
liabilities, which has not been matched with a corresponding fall
in assets as at 31 March 2022.
The net defined benefit asset, after taking into account the
related deferred tax liability, is GBP85.9m (2021: GBP39.1m).
Deferred tax is recognised at 25% (2021: 19%) as the Group expects
the surplus to reduce over timer rather than obtained as a refund
of the surplus on winding up.
Movements in the present value of the net defined benefit
liability
Net Unfunded Total net
Assets Obligations asset arrangements asset
31 March 2022 GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------------- ------- ----------- ------ ------------- ---------
Opening position 1,211.9 (1,161.1) 50.8 (2.6) 48.2
Included in the income statement:
Administration costs (1.7) - (1.7) - (1.7)
Interest on the net defined benefit asset 24.1 (23.0) 1.1 - 1.1
Cash:
Employer contributions 19.3 - 19.3 - 19.3
Benefits paid (34.6) 34.6 - - -
Included in other comprehensive income:
Changes in financial assumptions - 79.0 79.0 0.1 79.1
Changes in demographic assumptions - 2.8 2.8 - 2.8
Experience adjustments - (23.6) (23.6) - (23.6)
Return on assets excluding amounts included in net
financing costs (10.7) - (10.7) - (10.7)
------------------------------------------------------------ ------- ----------- ------ ------------- ---------
Closing defined benefit asset 1,208.3 (1,091.3) 117.0 (2.5) 114.5
------------------------------------------------------------ ------- ----------- ------ ------------- ---------
Actuarial assumptions
The principal actuarial assumptions for the Scheme and for the
UK unfunded arrangement at the balance sheet date were as
follows:
2022 2021
% %
--------------------------------------------- --------- ---------
Discount rate 2.70 2.00
Price inflation rate - RPI 3.85 3.40
Price inflation rate - CPI 3.25 2.80
Rate of increase of pensions in deferment(1) 2.50-3.25 2.50-2.80
Rate of increase of pensions in payment (1) 2.20-3.65 2.05-3.30
--------------------------------------------- --------- ---------
1 A range of assumed rates exist due to the application of
annual caps and floors to certain elements of service.
On 25 November 2020, the government and UK Statistics Authority
published their joint consultation response on RPI reform,
confirming their intention to align RPI calculation to that already
in use for the calculation of CPIH (including housing) with effect
from 2030. As a result, the Group has reduced the post-2030 gap
between RPI and CPI to nil, effectively assuming RPI will be
aligned with CPI post-2030, resulting in a single weighted average
RPI-CPI gap of 0.6% p.a. at 31 March 2022 (2021: 0.60%).
The assumptions used for mortality rates for members of these
arrangements at the expected retirement age of 65 years are as
follows:
2022 2021
Years Years
--------------------- ------ ------
Male aged 65 today 20.7 20.7
Male aged 45 today 22.1 22.0
Female aged 65 today 23.1 23.0
Female aged 45 today 25.5 25.5
--------------------- ------ ------
Sensitivity table
The sensitivities of the present value of the Scheme obligations
to changes in the key actuarial assumptions are set out in the
following table. The illustrations consider the result of only a
single assumption changing with the others assumed unchanged and
includes the impact of the interest rate and inflation rate
hedging. In reality it is more likely that more than one assumption
would change and potentially the results would offset each other;
for example, a fall in interest rates will increase the Scheme
obligations, but may also trigger an offsetting increase in market
value of certain Scheme assets.
(Increase)/decrease Increase/(decrease)
Change in in liability in assets
assumption GBPm GBPm
---------------------- ----------- ------------------- -------------------
Discount rate +0.25% 41.0 (52.0)
Credit spread +0.25% 41.0 (8.0)
Price inflation - RPI +0.25% (47.0) 10.0
Mortality rate + 1 year 51.0 -
---------------------- ----------- ------------------- -------------------
Defined contribution schemes
The total expense relating to the Group's defined contribution
schemes in the current year was GBP36.7m (2021: GBP34.0m).
10. Financial Covenants
The Group's committed facilities at 31 March 2022 comprise a
syndicated RCF of GBP175.0m, agreed in March 2022 and maturing in
March 2026. The RCF requires the Group to comply with three
financial covenants at 30 September and 31 March each financial
year and the Group operates comfortably within these covenants:
Covenant Calculation Ratio 2022 2021
------------------- --------------------------------------------------------------------------- -------- ---- ----
Leverage ratio Consolidated net borrowings(A)/Consolidated EBITDA (B) <3.0:1* 0.7 0.3
Interest cover Consolidated EBITDA (B)/Consolidated net finance charges (C) >3.5:1 38.8 29.2
Consolidated EBITDA (B) plus operating lease costs (D) /Consolidated net
finance charges (C)
Fixed charge cover plus operating lease costs (D) >1.4:1 2.7 2.8
------------------- --------------------------------------------------------------------------- -------- ---- ----
* Leverage ratio was <2.75:1 under the previous RCF
agreement.
A reconciliation of these terms to the reported amounts is as
follows:
At 31 March 2022 At 31 March 2021
------------------------------------------------------- ---------------- ----------------
Reported net cash (3.7) (11.9)
Finance lease liability under IAS 17 15.6 1.3
Cash held by captive insurer 9.2 6.8
Guarantees provided 25.9 22.9
-------------------------------------------------------- ---------------- ----------------
Consolidated net borrowings for covenant reporting (A) 47.0 19.1
-------------------------------------------------------- ---------------- ----------------
At 31 March 2022 At 31 March 2021
----------------------------------------------- ---------------- ----------------
Underlying operating profit 64.7 51.8
Depreciation, amortisation and impairments 43.6 43.4
------------------------------------------------ ---------------- ----------------
Underlying EBITDA 108.3 95.2
Adjustment to frozen GAAP (IFRS 16 to IAS 17) (42.9) (37.8)
Share based payment charges 0.5 0.9
Consolidated EBITDA for covenant reporting (B) 65.9 58.3
------------------------------------------------ ---------------- ----------------
At 31 March 2022 At 31 March 2021
---------------------------------------------------- ---------------- ----------------
Net interest payable 6.6 4.6
Adjustment to frozen GAAP (remove IFRS 16 interest) (5.2) (3.7)
RPF interest (0.2) (0.3)
Arrangement fees (0.2) (0.5)
Interest on net defined benefit asset 1.1 2.3
Other discount unwinding (0.4) (0.4)
----------------------------------------------------- ---------------- ----------------
Covenant net finance charges (C) 1.7 2.0
----------------------------------------------------- ---------------- ----------------
At 31 March 2022 At 31 March 2021
------------------------------------------------- ---------------- ----------------
Operating lease costs for covenant reporting (D) 35.9 29.6
-------------------------------------------------- ---------------- ----------------
11. Business combinations
On 10 September 2021, the Group acquired 100% of the equity
shares in Caledonia Bidco Limited and its subsidiaries which
include Cygnia Logistics Limited (Cygnia). Cygnia is a specialist
mid-market eCommerce and multichannel eFulfilment provider with
expertise spanning the full breadth of their customers'
requirements, including high volume order fulfilment, returns and
carrier management services. The acquisition is in line with the
Group's strategic focus on eCommerce and provides access to
exciting new growth opportunities in the mid-market sector.
The acquisition has been accounted for as a business combination
using the acquisition method of accounting in accordance with IFRS
3 Business Combinations and consequently the Cygnia assets
acquired, and liabilities assumed, have been recorded by the Group
at fair value, with an excess purchase price over the fair value of
the identifiable assets and liabilities being recognised as
goodwill.
The fair values assigned to the Cygnia business combination at
the acquisition date are:
Fair value
GBPm
------------------------------------------------------ ----------
Tangible assets 3.7
Right-of-use assets 31.1
Intangible assets 7.2
Inventories 0.1
Trade and other receivables 7.1
Cash and cash equivalents 2.4
Trade and other payables (4.2)
Deferred tax liability (1.9)
Financial liabilities - interest bearing borrowings (14.0)
Provisions (5.6)
Lease liabilities (30.2)
------------------------------------------------------- ----------
Fair value of net liabilities acquired (4.3)
------------------------------------------------------- ----------
Purchase consideration:
Cash paid 16.0
Amounts eligible for repayment upon settlement of
acquired liabilities (0.3)
------------------------------------------------------- ----------
Total purchase consideration 15.7
------------------------------------------------------- ----------
Excess of purchase consideration over net liabilities
acquired 20.0
------------------------------------------------------- ----------
The estimated fair value and useful lives of intangible assets
as at the acquisition date are as follows:
Useful
Fair value lives
GBPm years
----------------------------------- ---------- ------
Customer-related intangible assets 4.8 7
Cygnia trade name 2.0 5
Software 0.4 3
----------------------------------- ---------- ------
The fair value attributed to intangible assets was GBP7.2m and
primarily represents existing customer relationships and contracts.
These were fair valued using the excess earnings method, which uses
a number of estimates regarding the amount and timing of future
cash flows. The key assumptions in the cash flows are forecasted
revenue, customer attrition rate and forecast profit margins. In
accordance with the Group's policy on impairment assessments per
Note 1, the assets were assessed for impairment at the year
end.
Goodwill amounting to GBP20.0m was recognised on acquisition and
is underpinned by a number of elements, which individually could
not be quantified. Most significant amongst these is the premium
attributable to a pre-existing, well-positioned business in the
eCommerce and multichannel eFulfilment markets with a highly
skilled workforce and established reputation. Goodwill is not
expected to be deductible for tax purposes.
Total acquisition related costs of GBP1.0m have been incurred by
the Group, which include advisory, legal, integration and other
professional fees. These costs are presented within non-underlying
expenses (see Note 2).
Cygnia's results have been consolidated into the Group's results
from 10 September 2021. For the period from acquisition to 31 March
2022, Cygnia's revenue was GBP22.6m and contributed an operating
loss of GBP0.3m to Group profit. If the acquisition had taken
effect at the beginning of the reporting period in which the
acquisition occurred (1 April 2021) the total revenues of the
combined Group for the year would have been GBP1,434.9m and an
operating profit of GBP60.5m. This information does not purport to
represent the results of the combined Group that actually would
have occurred had the acquisition taken place on 1 April 2021 and
should not be taken to be representative of future results.
In addition to the cash purchase consideration paid of GBP16.0m
above, the Group immediately settled Cygnia's interest-bearing
borrowings and amounts due to a debt factoring company of GBP11.8m
and GBP2.2m respectively and acquired cash of GBP2.4m. Purchase
consideration of GBP1.7m was paid into escrow to cover certain
indemnities provided by the seller. The Group's best estimate of
the amounts to be recovered from the seller is GBP0.3m.
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END
FR SFIEDUEESEFI
(END) Dow Jones Newswires
May 20, 2022 02:01 ET (06:01 GMT)
Wincanton (LSE:WIN)
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