There is an “industrial logic” to Wincanton merging with Eddie Stobart Logistics (ESL), Wincanton’s new chief executive James Wroath told analysts at the launch of the group’s latest half-year results.
Unveiling figures until 30 September, Wroath said there was a synergy between Wincanton and ESL, particularly in the transport services arena.
He added: "There is an industrial logic to us being combined with Eddie Stobart Logistics and that is particularly evident in the transport side of things where Stobart has a shared user network.
“We have some of that but our transport business is much more of a dedicated open book model where we manage assets on behalf of our customers, so putting the two things together at the right price and with the correct due diligence done is absolutely of interest to us.
"That is why we are looking at it and it would still be interesting to us even if the share price had not been suspended.”
Wincanton is currently carrying out due diligence on the troubled haulier after revealing its interest in a merger with ESL in September. It has until 27 November to make a bid or withdraw.
Last week Wincanton urged ESL shareholders not to consider the £55m bid from equity firm DBAY advisors, also announced last week, until auditor PWC's review of ESL’s finances are revealed.
Wincanton’s half-year results revealed a 5.3% fall in group pre-tax profits, year-on-year, to £28.5m and a 1.9% rise in group revenue to £592.9m in the same period. However underlying profit before tax climbed 9% to £26.3m, while net debt fell almost 40% to £14.8m compared to the same period a year ago.
Presenting the results, Tim Lawlor, Wincanton chief financial officer, said that while last year's revenue had been driven down “after exiting some contracts and changing the scope of some other contracts” the rise in revenue in the half year had been driven by a number of significant wins.
Within the retail and consumer division, revenue was boosted 5.8% to £378.3m by major new contracts secured in the second half of the year including deals with Weetabix, Sainsbury’s and the Co-op. Underlying profit jumped 7.8% to £17.9m in same the period.
More recent contract awards include a five-year contract with Morrisons and long-term renewals with clients William Sonoma, Cormar and Husqvarna.
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In the group’s industrial and construction division, revenue dropped 4.2% to £214.6m, which Lawlor attributed to the group’s decision to exit or reduce activity in low-margin contracts in the sector, which included deals with Britvic and Tarmac. Underlying profit was up 2.6% to £12.4m compared to the same period last year.
Recent wins for the industrial and construction arm include a fleet maintenance award that came with the group’s Morrisons contract win and a deal with a fuel distribution business which Wincanton declined to identify while in the process of transferring the firm’s in-house transport business to the group.
Renewals in the period included a five-year deal with Muller Milk and contract extensions with both Philips 66 and Ibstock.
Lawlor acknowledged that the group is facing market challenges in the industrial and transport sector, pointing to "a lot of talk about, for example, building products suppliers, who could be our customers, with profit challenges this year".
He added that the group is monitoring the situation and is ready to take action if necessary to any slow down in activity.
He also revealed that Pullman, Wincanton's fleet maintenance service, had suffered from falling volumes in its workshops, adding that although Pullman is a "small part of our transport division - it is being monitored closely".
Wroath, who formally took over from former CEO Adrian Colman in September, also announced a major review of the company under his leadership.
"I have started to review the opportunities facing the group as part of our wider strategy and look forward to updating the market in due course as we continue to take the business forward," he said.
