Wincanton hasn’t had it all its own way of late. A resurgent Eddie Stobart wrestled a Cemex contract valued at £15m off it, and MT revealed earlier this month that Britvic had re-awarded its entire transport requirement to Eddie Stobart after the first year of a five-year deal with Wincanton.
Gatemore Capital Management, which successfully campaigned against DX Group’s senior management team last year, acquired shares in Wincanton and began calling for a break-up of the group in April.
But that’s the nature of business, and a Halfords renewal, Pernod Ricard extension, new customer wins with Wickes and Thales, and the expansion of a partnership with Ikea to provide a two-person home delivery service in London and the South East in the past year, have cheered investors.
Wincanton announced a full year dividend of 9.9p at its results announcement last week - a clear sign of confidence at the business - and speaking to MT chief executive Adrian Colman pointed out that the group’s organic growth, at nearly 5%, “was the highest rate in years”.
Wincanton's share price at £2.75 has continued its climb since the dark days of 2012, when trades were being done for less than a pound.
As flagged in its interim results, Wincanton also performed the necessary but painful restructuring of its Industrial and Transport division (the remainder of what the 3PL does outside retail and consumer) in its latest trading period, the year ending 31 March 2018.
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This was recorded as an £8.2m exceptional charge relating to redundancies and ‘associated property costs’.
“Most of the exceptional cost was to do with headcount. Predominately back office and support functions,” said Colman, adding the business had also looked at vehicle capacity across the fleet. “We have a well planned renewal cycle, so we could deal with the asset side of things [through this].”
Within Industrial and Transport, construction has been a bright spot and despite the UK’s prolonged winter performed well, growing in the period.
However, Colman added that Industrial and Transport was a “more challenging market place in terms of competitive price-points”.
“We flagged in our first half [results] that we didn’t execute as perfectly as we would have liked to have done,” he said, highlighting general haulage and container transport as areas where due to their price-sensitive, almost commoditised nature, Wincanton had suffered.
“So we needed to take some remedial action to get the performance back to where we wanted it to be. That was a combination of capacity realignment. We reduced a bit of our fixed capability so we could be more flexible in our cost base.”
With the hard decisions taken, Colman told MT the company would look to play to its strengthens in the coming year.
“We’ll redeploy assets where we think we have a point of differentiation. So construction with the mechanical offload crane equipment… we think we’re really good at that, and have a strong and substantial market position.
“We will likely do a bit more ready-mix then say curtain-side haulage. But that’s on a contract by contract basis rather than saying we don’t want to do that anymore,” Colman said.
A key focus will remain multi-channel general merchandise including the DIY and home delivery and construction sectors. “Growth characteristics in those continue to be good in the medium term in the UK and we have strong market position in these areas,” he said.
Headline figures for the year to 31 March 2018
Turnover up 4.8% to £1.17bn (2017: £1.12bn)
Underlying operating profit up 1.5% to £52.9m (£52.1m)
Pre-tax profit down 16.5% to £37.9m (£45.4m)
Net debt £29.5m (£24.3m)
Industrial and Transport – turnover £480.2m (2017: £468.8m); margin 4.8% (2017: 5.6%)
Retail & Consumer – turnover £691.7m (2017: £649.3m); margin 4.3% (2017: 4%).
